SEC Comment Letter for HOVNANIAN ENTERPRISES INC (HOV, HOVNP, HOVVB) (CIK 0000357294) (HOV) — Mar 9, 2009
HOVNANIAN ENTERPRISES INC (HOV, HOVNP, HOVVB) (CIK 0000357294)
Date: March 9, 2009 · CIK: 0000357294 · Accession: 0000000000-09-012038
AI Filing Summary & Sentiment
File numbers found in text: 001-08551
Letter
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549-7010 DIVISION OF CORPORATION FINANCE Mail Stop 7010 March 9, 2009 Via U.S. mail and facsimile Mr. Ara K. Hovnanian President and Chief Executive Officer Hovnanian Enterprises, Inc. 110 West Front Street P.O. Box 500 Red Bank, NJ 07701 RE: Form 10-K for the fiscal year ended Oc tober 31, 2008 Definitive Proxy Statement on Form 14A filed February 4, 2009 File No. 001-08551
Dear Mr. Hovnanian: We have reviewed your response letter da ted February 20, 2009 and have the following additional comments. If you disagree with any comments, we will consider your explanation as to why the comment is inapplicable or a revisi on is unnecessary. Please be as detailed as necessary in your explanation. Please understand that the purpose of our re view process is to assist you in your compliance with the applicable disclosure requir ements 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 aspe ct 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, 2008
Consolidated Financial Statements
Note 8 – Mortgages and No tes Payable, page F-18 1. We note your response to comment 3 from our le tter dated February 9, 2009 that you do not consider the minimum net worth and liquidity level covenants associat ed with your Master Repurchase Agreement to be material. We also note that you intend to delete certain disclosures about your history of compliance with these requirem ents. We believe that the
Mr. Ara K. Hovnanian March 9, 2009 Page 2 disclosures you have historically provided concerning your compliance with Master Repurchase Agreement covenants are helpful to investors and if such information may have qualitative materiality, we st rongly request that you consid er including the disclosures identified in your response letter. 2. We note that your Senior Secured, Seni or and Senior Subordinated Notes do contain restrictive covenants that limit your ability to incur additional debt, pay dividends and make distributions on common and preferred stock, re purchase senior and senior subordinated notes, make other restricted payments, make investments, sell certain assets, incur liens, consolidate, merge, sell or otherwise dispose of all or substantially all of its assets and enter into certain transactions with a ffiliates. It is unclear to us why you believe that your lack of compliance with the restrictive covenant would not be material information in your public filings. In future filings, please include the re quirement, a description of the restrictions and your actual fixed charge coverage ratio at each reporting date. Such disclosures should be included so long as you are not in compliance, or there remains a reasonable probability that you will, or may not be in compliance.
PROXY STATEMENT FILED APRIL 3, 2008
Compensation Discussion and Analysis, page 11
3. We note your response to prior comment 9. We understand that options are granted in an amount that is necessary to ensure that ex ecutives’ total compensation falls within the median range of the Peer Group. However, with regard to “c omparable financial performance”, please clarify for us how financial performance is measured and what the financial performance is compared to. For example, do you compare your financial performance with that of other companies in the Peer Group, and then award options as part of an overall compensation package that is similar in amount to the Peer Group companies with similar performance? If so, what is the basis or measure for this comparison?
* * * * Please respond to these comments within 10 business days. Please provide us with a response letter that keys your responses to our comments and provides any requested information. Detailed letters greatly facilitate our review. Please furnish your response on EDGAR as a correspondence file. Please unders tand that we may have additional comments after reviewing your responses to our comments.
Mr. Ara K. Hovnanian March 9, 2009 Page 3 You may contact Errol Sanderson, Financia l Analyst, at (202) 551-3746 or, in his absence, Pamela Long, Assistant Director, at (202) 551-3760 if you have any questions regarding legal matters. Please contact Lisa Haynes, St aff Accountant, at ( 202) 551-3424 or, in her absence, the undersigned at (202) 551-3689 if you have questions regarding comments on the financial statements and related matters.
S i n c e r e l y , John Hartz Senior Assistant Chief Accountant
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE
Mail Stop 7010
March 9, 2009
Via U.S. mail and facsimile
Mr. Ara K. Hovnanian President and Chief Executive Officer Hovnanian Enterprises, Inc.
110 West Front Street
P.O. Box 500 Red Bank, NJ 07701
RE: Form 10-K for the fiscal year ended Oc tober 31, 2008
Definitive Proxy Statement on Form 14A filed February 4, 2009
File No. 001-08551
Dear Mr. Hovnanian: We have reviewed your response letter da ted February 20, 2009 and have the following
additional comments. If you disagree with any comments, we will consider your explanation as to why the comment is inapplicable or a revisi on is unnecessary. Please be as detailed as
necessary in your explanation. Please understand that the purpose of our re view process is to assist you in your
compliance with the applicable disclosure requir ements 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 aspe ct 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, 2008
Consolidated Financial Statements
Note 8 – Mortgages and No tes Payable, page F-18
1. We note your response to comment 3 from our le tter dated February 9, 2009 that you do not
consider the minimum net worth and liquidity level covenants associat ed with your Master
Repurchase Agreement to be material. We also note that you intend to delete certain
disclosures about your history of compliance with these requirem ents. We believe that the
Mr. Ara K. Hovnanian
March 9, 2009
Page 2
disclosures you have historically provided concerning your compliance with Master
Repurchase Agreement covenants are helpful to investors and if such information may have
qualitative materiality, we st rongly request that you consid er including the disclosures
identified in your response letter.
2. We note that your Senior Secured, Seni or and Senior Subordinated Notes do contain
restrictive covenants that limit your ability to incur additional debt, pay dividends and make
distributions on common and preferred stock, re purchase senior and senior subordinated
notes, make other restricted payments, make investments, sell certain assets, incur liens,
consolidate, merge, sell or otherwise dispose of all or substantially all of its assets and enter
into certain transactions with a ffiliates. It is unclear to us why you believe that your lack of
compliance with the restrictive covenant would not be material information in your public
filings. In future filings, please include the re quirement, a description of the restrictions and
your actual fixed charge coverage ratio at each reporting date. Such disclosures should be
included so long as you are not in compliance, or there remains a reasonable probability that
you will, or may not be in compliance.
PROXY STATEMENT FILED APRIL 3, 2008
Compensation Discussion and Analysis, page 11
3. We note your response to prior comment 9. We understand that options are granted in an
amount that is necessary to ensure that ex ecutives’ total compensation falls within the
median range of the Peer Group. However, with regard to “c omparable financial
performance”, please clarify for us how financial performance is measured and what the financial performance is compared to. For example, do you compare your financial
performance with that of other companies in the Peer Group, and then award options as part
of an overall compensation package that is similar in amount to the Peer Group companies with similar performance? If so, what is the basis or measure for this comparison?
* * * *
Please respond to these comments within 10 business days. Please provide us with a response letter that keys your responses to our comments and provides any requested
information. Detailed letters greatly facilitate our review. Please furnish your response on
EDGAR as a correspondence file. Please unders tand that we may have additional comments
after reviewing your responses to our comments.
Mr. Ara K. Hovnanian
March 9, 2009 Page 3
You may contact Errol Sanderson, Financia l Analyst, at (202) 551-3746 or, in his
absence, Pamela Long, Assistant Director, at (202) 551-3760 if you have any questions regarding
legal matters. Please contact Lisa Haynes, St aff Accountant, at ( 202) 551-3424 or, in her
absence, the undersigned at (202) 551-3689 if you have questions regarding comments on the
financial statements and related matters.
S i n c e r e l y , John Hartz Senior Assistant Chief Accountant