SEC Comment Letter for HOVNANIAN ENTERPRISES INC (HOV, HOVNP, HOVVB) (CIK 0000357294) (HOV) — May 30, 2008
HOVNANIAN ENTERPRISES INC (HOV, HOVNP, HOVVB) (CIK 0000357294)
Date: May 30, 2008 · CIK: 0000357294 · Accession: 0000000000-08-027479
AI Filing Summary & Sentiment
Referenced dates: May 23, 2008
Letter
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549-7010 DIVISION OF CORPORATION FINANCE May 30, 2008 Via U.S. mail and facsimile Mr. J. Larry Sorsby Chief Financial Officer Hovnanian Enterprises, Inc. 110 West Front Street, P.O. Box 500, Red Bank, New Jersey 07701
RE: Form 10-K for the year ended October 31, 2007 Form 10-Q for the quarter ended January 31, 2008 Form 8-K filed on May 5, 2008 File No. 1-8551
Dear Mr. Sorsby:
We have reviewed your response letter dated May 23, 2008 and have the following additional comments. If you disagree with our comment, we will consider your explanation as to why our comment is inapplicable or a revision is unnecessary. Please be as detailed as nece ssary in your explanation.
Please understand that the purpose of our re view process is to assist you in your compliance with the applicable disclosure requirements and to enhance the overall disclosure in your filing. We look forward to working with you in these respects. We welcome any questions you may have about our comments or on any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter.
FORM 10-K FOR THE YEAR ENDED OCTOBER 31, 2007
General
1. Where a comment below requests additional disclosures or other revisions to be made, please show us in your supplemental response what the revisions will look like. These revisions should be included in your future filings.
Mr. J. Larry Sorsby May 30, 2008 Page 2 of 3
Management’s Discussion and Analysis, page 18
2. We note your response to prior comment 2. We urge you to continue to find ways to provide additional quantitative disclosures th at conveys to investors the current and ongoing risks related to the rec overability of your homebuild ing assets as well as the risk that additional charges may need to be recorded. We believe that it is important to provide investors with information to he lp them evaluate the current assumptions underlying your impairment assessment rela tive to your current market conditions and your peers to enable them to attempt to assess the likelihood of potential future impairments.
We note the additional disclosures you propos e to provide. We urge you to consider whether additional detailed and quantitative disclosures can be provided to achieve the above stated purpose. For example, as previously suggested, if you have significant amounts of inventory for which you determine the fair value is close to your book value, please consider how you can constructively convey the potential risk associated with these inventory amounts. Please also consider whether additional disclosures at the segment level would be more meaningful, specifically:
- Show contract cancellations in dollar amount, by segment and comparatively for each period (page 29); - Show option walk away information on a comparative basis for each period presented (page 32); - Show impairments information on a comparative basis for each period presented (page 32); - Show impairments of joint venture inve stments on a comparative basis for each period presented (page 32);
Capital Resources and Liquidity, page 21
3. We note your response to prior comment 5. Your proposed disclosu re states that you expect to generate cash flow from oper ations in excess of $300 million as you limit investments in new communities and delay further investment in current communities. Given your net cash provide d by operating activities was $15.9 million for the quarter ended January 31, 2008, please consider expanding your disclosure to further advise how you arrived at this exp ectation. If your expectation is based on any projected improvements in the market or in any particular segment, please consider disclosing to this e ffect. We again remind you th at Item 303(A)(1) an (2) of Regulation S-K states that you should discuss known trends or any known demands, commitments, events or uncertainties that wi ll result in or that are reasonably likely to impact your liquidity in any material way as well as any material changes in the mix or relative cost of your capital resources.
Mr. J. Larry Sorsby May 30, 2008 Page 3 of 3 4. We note your response to prior comment 8. In a similar manner to your response, please disclose the terms of the fixed char ge ratio covenant and whether you are in compliance. Your disclosure should clarif y, if true, that noncompliance with this covenant would not permit the lenders to accelerate the loans if not cured within applicable grace periods; however, noncomplia nce with this covenant would restrict certain payments, including dividends, and al so would restrict your ability to incur additional indebtedness. You should al so address the potential impact on your liquidity and capital resources of bei ng restricted from incurring additional indebtedness in the event that you are not in compliance with this covenant.
FORM 10-Q FOR THE QUARTER ENDED JANUARY 31, 2008
General
5. Please address the above comments in your interim filings as well.
FORM 8-K FILED ON MAY 5, 2008
6. We note that you determined cash flow is a non-GAAP financial measure. Please present the most directly comparable fina ncial measure calculated and presented in accordance with GAAP, which you disclose to be cash flow from operating activities. Please also provide a reconc iliation of this non-GAAP financial measure to the most directly comparable financial measure cal culated and presented in accordance with GAAP. Refer to Item 100(a) of Regulation G.
* * * *
Please respond to these comments with in 10 business days, or tell us when you will provide us with a response. Please pr ovide us with a supplemental response letter that keys your responses to our comment s and provides any requested supplemental information. Detailed letters greatly facilitate our review. Please file your supplemental response on EDGAR as a correspondence file . Please understand that we may have additional comments after reviewin g your responses to our comments.
If you have any questions regarding these comments, please direct them to Nudrat Salik, Staff Accountant, at ( 202) 551-3692 or, in her absence, to the undersigned at (202) 551-3689.
S i n c e r e l y ,
John Hartz Senior Assistant Chief Accountant
Show Raw Text
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE
Mail Stop 7010
May 30, 2008
Via U.S. mail and facsimile
Mr. J. Larry Sorsby
Chief Financial Officer
Hovnanian Enterprises, Inc.
110 West Front Street, P.O. Box 500,
Red Bank, New Jersey 07701
RE: Form 10-K for the year ended October 31, 2007
Form 10-Q for the quarter ended January 31, 2008
Form 8-K filed on May 5, 2008
File No. 1-8551
Dear Mr. Sorsby:
We have reviewed your response letter dated May 23, 2008 and have the
following additional comments. If you disagree with our comment, we will consider your explanation as to why our comment is inapplicable or a revision is unnecessary. Please be as detailed as nece ssary in your explanation.
Please understand that the purpose of our re view process is to assist you in your
compliance with the applicable disclosure requirements and to enhance the overall
disclosure in your filing. We look forward to working with you in these respects. We
welcome any questions you may have about our comments or on any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter.
FORM 10-K FOR THE YEAR ENDED OCTOBER 31, 2007
General
1. Where a comment below requests additional disclosures or other revisions to be
made, please show us in your supplemental response what the revisions will look like.
These revisions should be included in your future filings.
Mr. J. Larry Sorsby
May 30, 2008
Page 2 of 3
Management’s Discussion and Analysis, page 18
2. We note your response to prior comment 2. We urge you to continue to find ways to
provide additional quantitative disclosures th at conveys to investors the current and
ongoing risks related to the rec overability of your homebuild ing assets as well as the
risk that additional charges may need to be recorded. We believe that it is important
to provide investors with information to he lp them evaluate the current assumptions
underlying your impairment assessment rela tive to your current market conditions
and your peers to enable them to attempt to assess the likelihood of potential future
impairments.
We note the additional disclosures you propos e to provide. We urge you to consider
whether additional detailed and quantitative disclosures can be provided to achieve the above stated purpose. For example, as previously suggested, if you have
significant amounts of inventory for which you determine the fair value is close to
your book value, please consider how you can constructively convey the potential
risk associated with these inventory amounts. Please also consider whether additional
disclosures at the segment level would be more meaningful, specifically:
- Show contract cancellations in dollar amount, by segment and comparatively for
each period (page 29);
- Show option walk away information on a comparative basis for each period
presented (page 32);
- Show impairments information on a comparative basis for each period presented (page 32);
- Show impairments of joint venture inve stments on a comparative basis for each
period presented (page 32);
Capital Resources and Liquidity, page 21
3. We note your response to prior comment 5. Your proposed disclosu re states that you
expect to generate cash flow from oper ations in excess of $300 million as you limit
investments in new communities and delay further investment in current communities. Given your net cash provide d by operating activities was $15.9 million
for the quarter ended January 31, 2008, please consider expanding your disclosure to
further advise how you arrived at this exp ectation. If your expectation is based on
any projected improvements in the market or in any particular segment, please
consider disclosing to this e ffect. We again remind you th at Item 303(A)(1) an (2) of
Regulation S-K states that you should discuss known trends or any known demands,
commitments, events or uncertainties that wi ll result in or that are reasonably likely to
impact your liquidity in any material way as well as any material changes in the mix
or relative cost of your capital resources.
Mr. J. Larry Sorsby
May 30, 2008
Page 3 of 3
4. We note your response to prior comment 8. In a similar manner to your response,
please disclose the terms of the fixed char ge ratio covenant and whether you are in
compliance. Your disclosure should clarif y, if true, that noncompliance with this
covenant would not permit the lenders to accelerate the loans if not cured within
applicable grace periods; however, noncomplia nce with this covenant would restrict
certain payments, including dividends, and al so would restrict your ability to incur
additional indebtedness. You should al so address the potential impact on your
liquidity and capital resources of bei ng restricted from incurring additional
indebtedness in the event that you are not in compliance with this covenant.
FORM 10-Q FOR THE QUARTER ENDED JANUARY 31, 2008
General
5. Please address the above comments in your interim filings as well.
FORM 8-K FILED ON MAY 5, 2008
6. We note that you determined cash flow is a non-GAAP financial measure. Please present the most directly comparable fina ncial measure calculated and presented in
accordance with GAAP, which you disclose to be cash flow from operating activities.
Please also provide a reconc iliation of this non-GAAP financial measure to the most
directly comparable financial measure cal culated and presented in accordance with
GAAP. Refer to Item 100(a) of Regulation G.
* * * *
Please respond to these comments with in 10 business days, or tell us when you
will provide us with a response. Please pr ovide us with a supplemental response letter
that keys your responses to our comment s and provides any requested supplemental
information. Detailed letters greatly facilitate our review. Please file your supplemental
response on EDGAR as a correspondence file . Please understand that we may have
additional comments after reviewin g your responses to our comments.
If you have any questions regarding these comments, please direct them to Nudrat
Salik, Staff Accountant, at ( 202) 551-3692 or, in her absence, to the undersigned at (202)
551-3689.
S i n c e r e l y ,
John Hartz
Senior Assistant Chief Accountant