1 unchanged sentence
Our Class A common stock is traded on the New York Stock Exchange under the symbol “HOV”
−Removed: and was held by 292 stockholders of record at December 10, 2021. There is no established public trading market for our Class B Common Stock, which was held by 180 stockholders of record at December 10, 2021.
−Removed: If a shareholder desires to sell shares of Class B Common Stock (other than to Permitted Transferees (as defined in the Company’s amended Certificate of Incorporation)), such stock must be converted into shares of Class A Common Stock at a one to one conversion rate. 
+Added: and was held by 305 stockholders of record at December 13, 2022. There is no established public trading market for our Class B common stock, which was held by 168 stockholders of record at December 13, 2022.
+Added: If a stockholder desires to sell shares of Class B common stock (other than to Permitted Transferees (as defined in the Company’s amended Certificate of Incorporation)), such stock must be converted into shares of Class A common stock at a one-to-one conversion rate. 
Recent Sales of Unregistered Equity Securities
Issuer Purchases of Equity Securities
−Removed: No shares of our Class A Common Stock or Class B Common Stock were purchased by or on behalf of the Company or any affiliated purchaser during the fiscal fourth quarter of 2021.
−Removed: The maximum number of shares that may yet be purchased under the Company’s repurchase plans or programs is 22 thousand.
−Removed: ITEM 6 Reserved
+Added: The table below sets forth information regarding repurchases by the Company of its common stock during the periods indicated: 
+Added: Total Number of Shares Purchased
+Added: Average Price Paid Per Share
+Added: Total Number of Shares Purchased of Part of Publicly Announced Plans or Program (1)
+Added: Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans
+Added: August 1, 2022 through August 31, 2022
+Added: September 1, 2022 through September 30, 2022
+Added: October 1, 2022 through October 31, 2022
+Added: (1) On September 1, 2022, our Board of Directors terminated our prior repurchase program and authorized a new program for the repurchase of up to $50.0 million of our Class A common stock.
+Added: Under the new repurchase program, repurchases may be made from time to time in open market transactions, in privately negotiated transactions or otherwise.
+Added: The timing and the actual dollar amount repurchased will depend on a variety of factors, including legal requirements, future tax implications, price and economic and market conditions.
+Added: The repurchase program may be changed, suspended or discontinued at any time and does not have a specified expiration date.
+Added: Performance Graph
+Added: The following graph compares the five-year cumulative total return of our Class A common stock with the Dow Jones U.S.
+Added: Home Construction Index and the Dow Jones U.S.
+Added: Total Market Index.
+Added: The graph assumes $100 invested on October 31, 2017 in our Class A common stock, the Dow Jones U.S.
+Added: Home Construction Index and the Dow Jones U.S.
+Added: Total Market Index, and the reinvestment of all dividends.
+Added: The stock price performance shown on the following graph is not necessarily indicative of future stock performance.
+Added: Standard & Poor's Financial Services, LLC, a division of The McGraw-Hill Companies Inc.
+Added: Hovnanian Enterprises, Inc.
+Added: S&P Homebuilding
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
5 unchanged sentences
refer to HEI and its consolidated subsidiaries and should be understood to reflect the consolidated business of HEI’s subsidiaries).
+Added: Historically, the Company had seven reportable segments consisting of six homebuilding segments (Northeast, Mid-Atlantic, Midwest, Southeast, Southwest and West) and a financial services segment.
+Added: During the fourth quarter of fiscal 2022, we reevaluated our reportable segments as a result of changes in the business and our management thereof.
+Added: In particular, we considered the fact that, since our segments were last established, the Company had exited the Minnesota, North Carolina and Tampa markets and is currently in the process of exiting the Chicago market.
+Added: Applying the principles set forth under ASC 280, including that our business trends are reflective of economic conditions in markets with general geographic proximity, we realigned our homebuilding operating segments and determined that, in addition to our financial services segment, we now have three reportable homebuilding segments comprised of (1) Northeast, (2) Southeast and (3) West, as noted below.
+Added: All prior period amounts related to the segment change have been retrospectively reclassified to conform to the new presentation.
Key Performance Indicators
13 unchanged sentences
Contract cancellation rates as a percentage of backlog is calculated by dividing the number of cancelled contracts in the period by the contract backlog at the beginning of the period.
−Removed: Cancellation rates as compared to prior periods can be an indicator of market strength or weakness.   
+Added: Cancellation rates as compared to prior periods can be an indicator of market strength or weakness.
Market Conditions and Operating Results
The demand for new and existing homes is dependent on a variety of demographic and economic factors, including job and wage growth, household formation, consumer confidence, mortgage financing, interest rates, inflation and overall housing affordability.
−Removed: In general, at the start of fiscal year 2020, factors including rising levels of household formation, a constrained supply of new and used homes, wage growth, strong employment conditions and mortgage rates that continue to be low by historical standards were contributing to improving conditions for new home sales.
−Removed: In March 2020, as a result of the initial impact of COVID-19, we experienced adverse business conditions, including a slowdown in customer traffic and sales pace and an increase in cancellations.
−Removed: However, beginning in May 2020, the homebuilding market rapidly improved, due to what we believe is a combination of factors including low interest rates, low inventory levels of existing homes and a general desire for more indoor and outdoor space.
−Removed: During the third quarter and continuing through the fourth quarter of fiscal 2020, we returned to our normal activities with respect to land purchases, land development and resuming the construction of unsold homes.
−Removed: As a result, our operating metrics improved significantly in fiscal 2020 as compared to fiscal 2019, and improved even further in fiscal 2021, as described below.
−Removed: Our cash position allowed us to spend $698.3 million on land purchases and land development and to repurchase $180.9 million of senior secured notes during fiscal 2021, and still have total liquidity of $380.9 million, including $246.0 million of homebuilding cash and cash equivalents as of October 31, 2021 and $125.0 million of borrowing capacity under our senior secured revolving credit facility as of October 31, 2021. 
−Removed: Additional results for the year ended October 31, 2021 were as follows:
−Removed: For the year ended October 31, 2021, sale of homes revenues increased 18.7% as compared to the prior year, as a result of a 9.1% increase in deliveries, from the sustained strong homebuilding market and high demand for new home construction that began in fiscal 2020, along with an increase in average sales price.
−Removed: Gross margin percentage increased from 14.7% for the year ended October 31, 2020 to 18.6% for the year ended October 31, 2021, and gross margin percentage, before cost of sales interest expense and land charges, increased from 18.4% for the year ended October 31, 2020 to 21.8% for the year ended October 31, 2021.
−Removed: The increases were primarily due to increases in home prices in virtually all of our markets during fiscal 2021 as a result of the strong housing market.
−Removed: Selling, general and administrative costs (including corporate general and administrative expenses) increased $34.8 million for the year ended October 31, 2021 as compared to the prior year.
−Removed: The increase was primarily attributed to a change in volume of our unconsolidated joint venture deliveries, and an increase in compensation expense.
−Removed: The increase in compensation expense was mostly attributed to our long-term incentive programs now forecasted to achieve above target metrics as a result of improved operating results and our higher stock price.
−Removed: Despite the increase in dollars, as a percentage of total revenue, such costs decreased to 9.9% for the year ended October 31, 2021 compared to 10.3% for the year ended October 31, 2020.
−Removed: Pre-tax income increased to $189.9 million for the year ended October 31, 2021 from pre-tax income of $55.4 million for the year ended October 31, 2020.
−Removed: Net income increased to $607.8 million for the year ended October 31, 2021 (which includes the benefit from the reduction in our deferred tax asset valuation allowance) from net income of $50.9 million for the year ended October 31, 2020.
−Removed: Earnings per share, basic and diluted, increased to $87.50 and $85.86, respectively, for the year ended October 31, 2021, including the benefit from the reduction in our deferred tax asset valuation allowance, compared to earnings per share, basic and diluted of $7.48 and $7.03, respectively, for the year ended October 31, 2020.
−Removed: Net contracts per average active selling community increased to 55.3 for the year ended October 31, 2021 compared to 54.3 in the prior year.
−Removed: This strong absorption pace resulted in our average active selling communities at October 31, 2021 decreasing by 14.8% compared to 
−Removed: October 31, 2020.
−Removed: Net contracts decreased 13.4% for the year ended October 31, 2021, compared to the prior year, as a result of the decrease in average active selling communities.
−Removed: Contract backlog decreased from 3,402 homes at October 31, 2020 to 3,247 homes at October 31, 2021.
−Removed: However, the dollar value of contract backlog increased to $1.6 billion in connection with the increase in home prices discussed above, representing a 15.4% increase in dollar value compared to the prior year.
−Removed:    
−Removed: Despite the overall improvement during fiscal 2021, labor and material shortages that were initially due to the COVID-19 pandemic have worsened and continued despite resumption of pre-pandemic levels of economic activity while the full magnitude and duration of the COVID-19 pandemic and its effects remain unknown.
−Removed: We may experience material declines in our net contracts, deliveries, revenues, cash flow and/or profitability during fiscal 2022 and beyond, compared to the corresponding prior-year periods.
−Removed: In addition, if conditions in the overall housing market or in a specific market worsen in the future beyond our current expectations, if future changes in our business strategy significantly affect any key assumptions used in our projections of future cash flows, or if there are material changes in any of the other items we consider in assessing recoverability, we may recognize charges in future periods for inventory impairments related to our current inventory assets or other reorganization activities.
−Removed: Any such charges could be material to our consolidated financial statements.
−Removed:      
−Removed: Critical Accounting Policies
−Removed: Management believes that the following critical accounting policies require its most significant judgments and estimates used in the preparation of the consolidated financial statements:
−Removed: Income Recognition from Mortgage Loans - Our Financial Services segment originates mortgages, primarily for our homebuilding customers.
−Removed: We use mandatory investor commitments and forward sales of mortgage backed securities (“MBS”) to hedge our mortgage-related interest rate exposure on agency and government loans.
−Removed: We elected the fair value option for our mortgage loans held for sale in accordance with Accounting Standards Codification (“ASC”) 825, “Financial Instruments,”
−Removed: which permits us to measure our loans held for sale at fair value.
−Removed: Management believes that the election of the fair value option for loans held for sale improves financial reporting by mitigating volatility in reported earnings caused by measuring the fair value of the loans and the derivative instruments used to economically hedge them without having to apply complex hedge accounting provisions.
−Removed: Substantially all of the mortgage loans originated are sold within a short period of time in the secondary mortgage market on a servicing released, nonrecourse basis, although the Company remains liable for certain limited representations, such as fraud, and warranties related to loan sales. Mortgage investors could seek to have us buy back loans or compensate them for losses incurred on mortgages we have sold based on claims that we breached our limited representations and warranties. We have established reserves for probable losses.
−Removed: While we believe these reserves are adequate for known losses and projected repurchase requests, given the volatility in the mortgage industry and the uncertainty regarding the ultimate resolution of these claims, if either actual repurchases or the losses incurred resolving those repurchases exceed our expectations, additional expense may be incurred.  
−Removed: Inventories - Inventories consist of land, land development, home construction costs, capitalized interest, construction overhead and property taxes.
−Removed: Construction costs are accumulated during the period of construction and charged to cost of sales under specific identification methods.
−Removed: Land, land development and common facility costs are allocated based on buildable acres to product types within each community, then charged to cost of sales equally based upon the number of homes to be constructed in each product type.
−Removed: We record inventories in our consolidated balance sheets at cost unless the inventory is determined to be impaired, in which case the inventory is written down to its fair value.
−Removed: Our inventories consist of the following three components:
−Removed: (1) sold and unsold homes and lots under development, which includes all construction, land, capitalized interest and land development costs related to started homes and land under development in our active communities;
−Removed: (2) land and land options held for future development or sale, which includes all costs related to land in our communities in planning or mothballed communities;
−Removed: and (3) consolidated inventory not owned, which includes all costs related to variable interest entities and other options, which consists primarily of model homes financed with an investor and inventory related to land banking arrangements accounted for as financings.
−Removed:    
−Removed: We decide to mothball (or stop development on) certain communities when we determine that the current performance does not justify further investment at the time.
−Removed: When we decide to mothball a community, the inventory is reclassified on our Consolidated Balance Sheets from “Sold and unsold homes and lots under development”
−Removed: to “Land and land options held for future development or sale.”
−Removed: As of October 31, 2021, the net book value associated with our 6 mothballed communities was $4.3 million, net of impairment charges recorded in prior periods of $57.5 million.
−Removed: We regularly review communities to determine if mothballing is appropriate. During fiscal 2021, we did not mothball any additional communities, but we sold four previously mothballed communities and we re-activated two previously mothballed communities and portions of two previously mothballed communities.
−Removed: We sell and lease back certain of our model homes with the right to participate in the potential profit when each home is sold to a third party at the end of the respective lease.
−Removed: As a result of our continued involvement, for accounting purposes in accordance with ASC 606-10-55-68, these sale and leaseback transactions are considered a financing rather than a sale.
−Removed: Therefore, for purposes of our Consolidated Balance Sheets, at October 31, 2021, inventory of $32.5 million was recorded to “Consolidated inventory not owned,”
−Removed: with a corresponding amount of $31.5 million recorded to “Liabilities from inventory not owned.”
−Removed:    
−Removed: We have land banking arrangements, whereby we sell our land parcels to the land banker and they provide us an option to purchase back finished lots on a quarterly basis.
−Removed: Because of our options to repurchase these parcels, for accounting purposes, in accordance with ASC 606-10-55-70, these transactions are considered financings rather than sales.
−Removed: For purposes of our Consolidated Balance Sheets, at October 31, 2021, inventory of $66.2 million was recorded as “Consolidated inventory not owned,”
−Removed: with a corresponding amount of $31.3 million recorded to “Liabilities from inventory not owned”
−Removed: for the amount of net cash received from the transactions.
−Removed: The recoverability of inventories and other long-lived assets is assessed in accordance with the provisions of ASC 360-10, “Property, Plant and Equipment −
−Removed: Overall”
−Removed: (“ASC 360-10”).
−Removed: ASC 360-10 requires long-lived assets, including inventories, held for development to be evaluated for impairment based on undiscounted future cash flows of the assets at the lowest level for which there are identifiable cash flows.
−Removed: As such, we evaluate inventories for impairment at the individual community level, the lowest level of discrete cash flows that we measure.
−Removed: We evaluate inventories of communities under development and held for future development for impairment when indicators of potential impairment are present.
−Removed: Indicators of impairment include, but are not limited to, decreases in local housing market values, decreases in gross margins or sales absorption rates, decreases in net sales prices (base sales price net of sales incentives), or actual or projected operating or cash flow losses.
−Removed: The assessment of communities for indication of impairment is performed quarterly.
−Removed: As part of this process, we prepare detailed budgets for all of our communities at least semi-annually and identify those communities with a projected operating loss. For those communities with projected losses, we estimate the remaining undiscounted future cash flows and compare those to the carrying value of the community, to determine if the carrying value of the asset is recoverable.
−Removed: The projected operating profits, losses, or cash flows of each community can be significantly impacted by our estimates of the following:
−Removed: future base selling prices;
−Removed: future home sales incentives;
−Removed: future home construction and land development costs;
−Removed: future sales absorption pace and cancellation rates.
−Removed: These estimates are dependent upon specific market conditions for each community.
−Removed: While we consider available information to determine what we believe to be our best estimates as of the end of a quarterly reporting period, these estimates are subject to change in future reporting periods as facts and circumstances change.
−Removed: Local market-specific conditions that may impact our estimates for a community include:
−Removed: the intensity of competition within a market, including available home sales prices and home sales incentives offered by our competitors;
−Removed: the current sales absorption pace for both our communities and competitor communities;
−Removed: community specific attributes, such as location, availability of lots in the market, desirability and uniqueness of our community, and the size and style of homes currently being offered;
−Removed: potential for alternative product offerings to respond to local market conditions;
−Removed: changes by management in the sales strategy of the community;
−Removed: current local market economic and demographic conditions and related trends of forecasts;
−Removed: existing home inventory supplies, including foreclosures and short sales.
−Removed: These and other local market-specific conditions that may be present are considered by management in preparing projection assumptions for each community.
−Removed: The sales objectives can differ between our communities, even within a given market.
−Removed: For example, facts and circumstances in a given community may lead us to price our homes with the objective of yielding a higher sales absorption pace, while facts and circumstances in another community may lead us to price our homes to minimize deterioration in our gross margins, although it may result in a slower sales absorption pace.
−Removed: In addition, the key assumptions included in our estimate of future undiscounted cash flows may be interrelated.
−Removed: For example, a decrease in estimated base sales price or an increase in homes sales incentives may result in a corresponding increase in sales absorption pace.
−Removed: Additionally, a decrease in the average sales price of homes to be sold and closed in future reporting periods for one community that has not been generating what management believes to be an adequate sales absorption pace may impact the estimated cash flow assumptions of a nearby community.
−Removed: Changes in our key assumptions, including estimated construction and development costs, absorption pace and selling strategies, could materially impact future cash flow and fair-value estimates.
−Removed: Due to the number of possible scenarios that would result from various changes in these factors, we do not believe it is possible to develop a sensitivity analysis with a level of precision that would be meaningful to an investor.
−Removed:    
−Removed: If the undiscounted cash flows are more than the carrying value of the community, then the carrying amount is recoverable, and no impairment adjustment is required.
−Removed: However, if the undiscounted cash flows are less than the carrying amount, then the community is deemed impaired and is written down to its fair value.
−Removed: We determine the estimated fair value of each community by determining the present value of its estimated future cash flows at a discount rate commensurate with the risk of the respective community, or in limited circumstances, prices for land in recent comparable sale transactions, market analysis studies, which include the estimated price a willing buyer would pay for the land (other than in a forced liquidation sale), and recent bona fide offers received from outside third parties. Our discount rates used for all impairments recorded from October 31, 2019 to October 31, 2021 ranged from 17.3% to 19.3%.
−Removed: The estimated future cash flow assumptions are virtually the same for both our recoverability and fair value assessments.
−Removed: Should the estimates or expectations used in determining estimated cash flows or fair value, including discount rates, decrease or differ from current estimates in the future, we may be required to recognize additional impairments related to current and future communities.
−Removed: The impairment of a community is allocated to each lot on a relative fair value basis.
−Removed: From time to time, we write off deposits and approval, engineering and capitalized interest costs when we determine that it is no longer probable that we will exercise options to buy land in specific locations or when we redesign communities and/or abandon certain engineering costs.
−Removed: In deciding not to exercise a land option, we take into consideration changes in market conditions, the timing of required land takedowns, the willingness of land sellers to modify terms of the land option contract (including timing of land takedowns), and the availability and best use of our capital, among other factors.
−Removed: The write-off is recorded in the period it is deemed not probable that the optioned property will be acquired.
−Removed: In certain instances, we have been able to recover deposits and other pre-acquisition costs that were previously written off.
−Removed: These recoveries have not been significant in comparison to the total costs written off.
−Removed: Inventories held for sale are land parcels ready for sale in their current condition, where we have decided not to build homes but are instead actively marketing for sale.
−Removed: These land parcels represented $2.0 million of our total inventories at  October 31, 2020, and are reported at the lower of carrying amount or fair value less costs to sell.
−Removed: There were no inventories held for sale at October 31, 2021.
−Removed: In determining fair value for land held for sale, management considers, among other things, prices for land in recent comparable sale transactions, market analysis studies, which include the estimated price a willing buyer would pay for the land (other than in a forced liquidation sale) and recent bona fide offers received from outside third parties.
−Removed: Unconsolidated Homebuilding and Land Development Joint Ventures - Investments in unconsolidated homebuilding and land development joint ventures are accounted for under the equity method of accounting.
−Removed: Under the equity method, we recognize our proportionate share of earnings and losses earned by the joint venture upon the delivery of lots or homes to third parties.
−Removed: Our ownership interests in the joint ventures vary but our voting interests are generally 50% or less.
−Removed: In determining whether or not we must consolidate joint ventures where we are the managing member of the joint venture, we assess whether the other partners have specific rights to overcome the presumption of control by us as the manager of the joint venture.
−Removed: In most cases, the presumption is overcome because the joint venture agreements require that both partners agree on establishing the significant operating and capital decisions of the partnership, including budgets, in the ordinary course of business.
−Removed: The evaluation of whether or not we control a venture can require significant judgment.
−Removed: In accordance with ASC 323-10, “Investments - Equity Method and Joint Ventures –
−Removed: Overall,”
−Removed: we assess our investments in unconsolidated joint ventures for recoverability, and if it is determined that a loss in value of the investment below its carrying amount is other than temporary, we write down the investment to its fair value.
−Removed: We evaluate our equity investments for impairment based on the joint venture’s projected cash flows.
−Removed: This process requires significant management judgment and estimates.
−Removed: During fiscal 2021 and 2020, we did not write down any of our unconsolidated joint venture investments.
−Removed: Warranty Costs and Construction Defect Reserves 
−Removed: - We accrue for warranty costs that are covered under our existing general liability and construction defect policy as part of our general liability insurance deductible.
−Removed: This accrual is expensed as selling, general, and administrative costs. For homes delivered in fiscal 2021 and 2020, our deductible under our general liability insurance was a $20 million aggregate for construction defect and warranty claims. For bodily injury claims, our deductible per occurrence in fiscal 2021 and 2020 was $0.25 million, up to a $5 million limit. Our aggregate retention for construction defect, warranty and bodily injury claims was $20 million for fiscal 2021 and 2020. We do not have a deductible on our worker's compensation insurance.
−Removed: Reserves for estimated losses for construction defects, warranty and bodily injury claims have been established using the assistance of a third-party actuary.
−Removed: We engage a third-party actuary that uses our historical warranty and construction defect data to assist our management in estimating our unpaid claims, claim adjustment expenses and incurred but not reported claims reserves for the risks that we are assuming under the general liability and construction defect programs.
−Removed: The estimates include provisions for inflation, claims handling and legal fees.
−Removed: These estimates are subject to a high degree of variability due to uncertainties such as trends in construction defect claims relative to our markets and the types of products we build, claim settlement patterns, insurance industry practices and legal interpretations, among others.
−Removed: Because of the high degree of judgment required in determining these estimated liability amounts, actual future costs could differ significantly from our currently estimated amounts.
−Removed: In addition, we establish a warranty accrual for lower cost-related issues to cover home repairs, community amenities and land development infrastructure that are not covered under our general liability and construction defect policy.
−Removed: We accrue an estimate for these warranty costs as part of cost of sales at the time each home is closed and title and possession have been transferred to the homebuyer.
−Removed: See Note 16 to the Consolidated Financial Statements for additional information on the amount of warranty costs recognized in cost of goods sold and administrative expenses.
−Removed: Deferred Income Taxes - Deferred income taxes are provided for temporary differences between amounts recorded for financial reporting and for income tax purposes.
−Removed: If the combination of future years’
−Removed: income (or loss) combined with the reversal of the timing differences results in a loss, such losses can be carried forward to future years to recover the deferred tax assets.
−Removed: The Company evaluates all significant available positive and negative evidence, including the existence of losses in recent years and its forecast of future taxable income, in assessing the need for a valuation allowance.
−Removed: The underlying assumptions the Company uses in forecasting future taxable income require significant judgment and take into account the Company's recent performance.
−Removed: The ultimate realization of deferred tax assets is dependent on the generation of future taxable income during the periods in which temporary differences or carry-forwards are deductible or creditable.
−Removed: A valuation allowance is provided to offset deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
−Removed: In evaluating the exposures associated with our various tax filing positions, we recognize tax liabilities in accordance with ASC 740-10, for more likely than not exposures. We re-evaluate the exposures associated with our tax positions on a quarterly basis. This evaluation is based on factors such as changes in facts or circumstances, changes in tax law, new audit activity by taxing authorities, and effectively settled issues. Determining whether an uncertain tax position is effectively settled requires judgment. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision. A number of years may elapse before a particular matter for which we have established a liability is audited and fully resolved or clarified. We adjust our liability for unrecognized tax benefits and income tax provision in the period in which an uncertain tax position is effectively settled, or the statute of limitations expires for the relevant taxing authority to examine the tax position or when more information becomes available.
−Removed: Due to the complexity of some of these uncertainties, the ultimate resolution may result in a liability that is materially different from our current estimate. Any such changes will be reflected as increases or decreases to income tax expense in the period in which they are determined.
−Removed: Recent Accounting Pronouncements
−Removed: See Note 3 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
−Removed: Capital Resources and Liquidity
−Removed: Our operations consist primarily of residential housing development and sales in the Northeast (New Jersey and Pennsylvania), the Mid-Atlantic (Delaware, Maryland, Virginia, Washington D.C.
−Removed: and West Virginia), the Midwest (Illinois and Ohio), the Southeast (Florida, Georgia and South Carolina), the Southwest (Arizona and Texas) and the West (California). In addition, we provide certain financial services to our homebuilding customers.
−Removed: We have historically funded our homebuilding and financial services operations with cash flows from operating activities, borrowings under our credit facilities, the issuance of new debt and equity securities and other financing activities.
−Removed: Due to covenant restrictions in our debt instruments, we are currently limited primarily in the amount of secured debt we can incur that does not qualify as refinancing indebtedness, even if market conditions, including then-current market available interest rates (in recent years, we have not been able to access the traditional capital and bank lending markets at competitive interest rates due to our highly leveraged capital structure), would otherwise be favorable, which could also impact our ability to grow our business. 
−Removed: Operating, Investing and Financing Activities –
−Removed: Our total liquidity at October 31, 2021 was $380.9 million, including $246.0 million in homebuilding cash and cash equivalents and $125.0 million of borrowing capacity under our senior secured revolving credit facility, after using $180.9 million for the full redemption of our 10.0% Senior Secured Notes due 2022 in the third quarter of fiscal 2021 and our 10.5% Senior Secured Notes due 2024 in the fourth quarter of fiscal 2021.
−Removed: This was above our target liquidity range of $170.0 to $245.0 million.
−Removed: The unprecedented public health and governmental efforts to contain the COVID-19 pandemic have created significant uncertainty as to general economic and housing market conditions for fiscal 2022 and beyond.
−Removed: We believe that these sources of cash together with available borrowings on our senior secured revolving credit facility will be sufficient through fiscal 2022 to finance our working capital requirements. 
−Removed: We spent $698.3 million on land and land development during fiscal 2021.
−Removed: After considering this land and land development and all other operating activities, including revenue received from deliveries, we had $210.2 million in cash provided from operations.
−Removed: During fiscal 2021, cash provided by investing activities was $9.0 million, primarily due to distributions from existing unconsolidated joint ventures, partially offset by an investment in a new unconsolidated joint venture.
−Removed: Cash used in financing activities was $217.3 million during fiscal 2021, which was primarily due to the full redemption of certain of our senior secured debt, as described above, along with net payments for nonrecourse mortgage financings, partially offset by net proceeds on our mortgage warehouse lines of credit. We intend to continue to use nonrecourse mortgage financings, model sale leaseback, joint ventures, and, subject to covenant restrictions in our debt instruments, land banking programs as our business needs dictate.
−Removed: Our cash uses during the years ended October 31, 2021 and 2020 were for operating expenses, land purchases, land deposits, land development, construction spending, state income taxes, interest payments, financing transaction costs, debt repurchases, litigation matters and investments in unconsolidated joint ventures. During these periods, we provided for our cash requirements from available cash on hand, housing and land sales, financing transactions, model sale leasebacks, land banking transactions, unconsolidated joint ventures, financial service revenues and other revenues.
−Removed: Our net income (loss) historically does not approximate cash flow from operating activities.
−Removed: The difference between net income (loss) and cash flow from operating activities is primarily caused by changes in inventory levels together with changes in receivables, prepaid and other assets, mortgage loans held for sale, interest and other accrued liabilities, deferred income taxes, accounts payable and other liabilities, noncash charges relating to depreciation and stock compensation awards and impairment losses for inventory.
−Removed: When we are expanding our operations, inventory levels, prepaids and other assets increase causing cash flow from operating activities to decrease.
−Removed: Certain liabilities also increase as operations expand and partially offset the negative effect on cash flow from operations caused by the increase in inventory levels, prepaids and other assets.
−Removed: Similarly, as our mortgage operations expand, net income from these operations increases, but for cash flow purposes net income is partially offset by the net change in mortgage assets and liabilities.
−Removed: The opposite is true as our investment in new land purchases and development of new communities decrease, causing us to generate positive cash flow from operations. 
−Removed: See “Inventory Activities”
−Removed: below for a detailed discussion of our inventory position.
−Removed: Debt Transactions
−Removed: Senior notes and credit facilities balances as of October 31, 2021 and October 31, 2020, were as follows:
−Removed: (In thousands)
−Removed: Senior Secured Notes:
−Removed: 10.0% Senior Secured Notes due July 15, 2022
−Removed: 10.5% Senior Secured Notes due July 15, 2024
−Removed: 10.0% Senior Secured 1.75 Lien Notes due November 15, 2025
−Removed: 7.75% Senior Secured 1.125 Lien Notes due February 15, 2026
−Removed: 10.5% Senior Secured 1.25 Lien Notes due February 15, 2026
−Removed: 11.25% Senior Secured 1.5 Lien Notes due February 15, 2026
−Removed: Total Senior Secured Notes
−Removed: Senior Notes:
−Removed: 8.0% Senior Notes due November 1, 2027 (1)
−Removed: 13.5% Senior Notes due February 1, 2026
−Removed: 5.0% Senior Notes due February 1, 2040
−Removed: Total Senior Notes
−Removed: Senior Unsecured Term Loan Credit Facility due February 1, 2027
−Removed: Senior Secured 1.75 Lien Term Loan Credit Facility due January 31, 2028
−Removed: Senior Secured Revolving Credit Facility (2)
−Removed: Subtotal notes payable
−Removed: Net (discounts) premiums
−Removed: Net debt issuance costs
−Removed: Total notes payable, net of discounts, premiums and debt issuance costs
−Removed: (1) $26.0 million of 8.0% Senior Notes due 2027 (the "8.0% 2027 Notes") are owned by a wholly-owned consolidated subsidiary of HEI.
−Removed: Therefore, in accordance with GAAP, such notes are not reflected on the Consolidated Balance Sheets of HEI.
−Removed: On November 1, 2019, the maturity of the 8.0% 2027 Notes was extended to November 1, 2027.
−Removed: (2) At October 31, 2021, provides for up to $125.0 million in aggregate amount of senior secured first lien revolving loans.
−Removed: Availability thereunder will terminate on December 28, 2022.
−Removed: Except for K.
−Removed: Hovnanian, the issuer of the notes and borrower under the Credit Facilities (as defined below), our home mortgage subsidiaries, certain of our title insurance subsidiaries, joint ventures and subsidiaries holding interests in our joint ventures, we and each of our subsidiaries are guarantors of the Credit Facilities, the senior secured notes and senior notes outstanding at October 31, 2021 (except for the 8.0% 2027 Notes which are not guaranteed by K.
−Removed: Hovnanian at Sunrise Trail III, LLC, a wholly-owned subsidiary of the Company) (collectively, the “Notes Guarantors”).
−Removed: The credit agreements governing the Credit Facilities and the indentures governing the senior secured and senior notes (together, the “Debt Instruments”) outstanding at October 31, 2021 do not contain any financial maintenance covenants, but do contain restrictive covenants that limit, among other things, the ability of HEI and certain of its subsidiaries, including K.
−Removed: Hovnanian, to incur additional indebtedness (other than non-recourse indebtedness, certain permitted indebtedness and refinancing indebtedness), pay dividends and make distributions on common and preferred stock, repay certain indebtedness prior to its respective stated maturity, repurchase (including through exchanges) common and preferred stock, make other restricted payments (including investments), sell certain assets (including in certain land banking transactions), incur liens, consolidate, merge, sell or otherwise dispose of all or substantially all of their assets and enter into certain transactions with affiliates.
−Removed: The Debt Instruments also contain customary events of default which would permit the lenders or holders thereof to exercise remedies with respect to the collateral (as applicable), declare the loans made under the Unsecured Term Loan Facility (defined below) (the “Unsecured Term Loans”), loans made under the Secured Term Loan Facility (defined below) (the “Secured Term Loans”) and loans made under the Secured Credit Agreement (as defined below) (the “Secured Revolving Loans”) or notes to be immediately due and payable if not cured within applicable grace periods, including the failure to make timely payments on the Unsecured Term Loans, Secured Term Loans, Secured Revolving Loans or notes or other material indebtedness, cross default to other material indebtedness, the failure to comply with agreements and covenants and specified events of bankruptcy and insolvency, with respect to the Unsecured Term Loans, Secured Term Loans and Secured Revolving Loans, material inaccuracy of representations and warranties and with respect to the Unsecured Term Loans, Secured Term Loans and Secured Revolving Loans, a change of control, and, with respect to the Secured Term Loans, Secured Revolving Loans and senior secured notes, the failure of the documents granting security for the obligations under the secured Debt Instruments to be in full force and effect, and the failure of the liens on any material portion of the collateral securing the obligations under the secured Debt Instruments to be valid and perfected.
−Removed: As of October 31, 2021, we believe we were in compliance with the covenants of the Debt Instruments.
−Removed: If our consolidated fixed charge coverage ratio is less than 2.0 to 1.0, as defined in the applicable Debt Instrument, we are restricted from making certain payments and dividends (in such case our secured debt leverage ratio must also be less than 4.0 to 1.0), and from incurring indebtedness other than certain permitted indebtedness, refinancing indebtedness and nonrecourse indebtedness.
−Removed: As of October 31, 2021, as a result of our improved operating results, our fixed coverage ratio is above 2.0 to 1.0 and our secured debt leverage ratio is below 4.0 to 1.0, therefore we are no longer restricted from paying dividends.
−Removed: As such, on December 3, 2021, our Board of Directors authorized a dividend payment to preferred shareholders of record on January 1, 2022 and which will be paid on January 15, 2022.
−Removed: Under the terms of our Debt Instruments, we have the right to make certain redemptions and prepayments and, depending on market conditions, our strategic priorities and covenant restrictions, may do so from time to time.
−Removed: We also continue to actively analyze and evaluate our capital structure and explore transactions to simplify our capital structure and to strengthen our balance sheet, including those that reduce leverage, interest rates and/or extend maturities, and will seek to do so with the right opportunity.
−Removed: We may also continue to make debt purchases and/or exchanges for debt or equity from time to time through tender offers, exchange offers, redemptions, open market purchases, private transactions, or otherwise, or seek to raise additional debt or equity capital, depending on market conditions and covenant restrictions.
−Removed: Any liquidity-enhancing or other capital raising or refinancing transaction will depend on identifying counterparties, negotiation of documentation and applicable closing conditions and any required approvals.
−Removed: Due to covenant restrictions in our Debt Instruments, we are currently limited in the amount of debt we can incur that does not qualify as refinancing indebtedness, even if market conditions, including then-current market available interest rates (in recent years, we have not been able to access the traditional capital and bank lending markets at competitive interest rates due to our highly leveraged capital structure), would otherwise be favorable, which could also impact our ability to grow our business.
−Removed: See Note 9 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for a further discussion of K.
−Removed: Hovnanian’s Credit Facilities, senior secured notes and senior notes, including information with respect to the collateral securing our Debt Instruments.
−Removed: Mortgages and Notes Payable
−Removed: We have nonrecourse mortgage loans for certain communities totaling $125.1 million and $135.1 million (net of debt issuance costs) at October 31, 2021 and October 31, 2020, respectively, which are secured by the related real property, including any improvements, with an aggregate book value of $448.5 million and $368.1 million, respectively.
−Removed: The weighted-average interest rate on these obligations was 4.4% and 6.4% at October 31, 2021 and October 31, 2020, respectively, and the mortgage loan payments on each community primarily correspond to home deliveries.
−Removed:     
−Removed: Our wholly owned mortgage banking subsidiary, K.
−Removed: Hovnanian American Mortgage, LLC (“K.
−Removed: Hovnanian Mortgage”), originates mortgage loans primarily from the sale of our homes.
−Removed: Such mortgage loans and related servicing rights are sold in the secondary mortgage market within a short period of time.
−Removed: In certain instances, we retain the servicing rights for a small amount of loans.
−Removed: Hovnanian Mortgage finances the origination of mortgage loans through various master repurchase agreements, which are recorded in “Financial services”
−Removed: liabilities on the Consolidated Balance Sheets.
−Removed: The loans are secured by the mortgages held for sale and are repaid when we sell the underlying mortgage loans to permanent investors. As of October 31, 2021 and 2020, we had an aggregate of $134.9 million and $87.2 million, respectively, outstanding under several of K.
−Removed: Hovnanian Mortgage’s short-term borrowing facilities.
−Removed:    
−Removed:  See Note 8 to the Consolidated Financial Statements for a discussion of these agreements and facilities.
−Removed: On July 3, 2001, our Board of Directors authorized a stock repurchase program to purchase up to 0.2 million shares of Class A Common Stock.
−Removed: We did not repurchase any shares under this program during fiscal 2021 or 2020.
−Removed: As of October 31, 2021, the maximum number of shares of Class A Common Stock that may yet be purchased under this program is 22 thousand.
−Removed: (See Part II, Item 5 for information on equity purchases).  
−Removed: On July 12, 2005, we issued 5,600 shares of 7.625% Series A Preferred Stock, with a liquidation preference of $25,000 per share.
−Removed: Dividends on the Series A Preferred Stock are not cumulative and are payable at an annual rate of 7.625%.
−Removed: The Series A Preferred Stock is not convertible into the Company’s common stock and is redeemable in whole or in part at our option at the liquidation preference of the shares.
−Removed: The Series A Preferred Stock is traded as depositary shares, with each depositary share representing 1/1000th of a share of Series A Preferred Stock.
−Removed: The depositary shares are listed on the NASDAQ Global Market under the symbol “HOVNP.”
−Removed: In fiscal 2021, 2020 and 2019, we did not make any dividend payments on the Series A Preferred Stock as a result of covenant restrictions in our debt instruments.
−Removed: We have never paid a cash dividend to common stockholders.
−Removed: Due to our improved operating results, as of October 31, 2021 we are no longer restricted from making dividend payments under our debt instruments.
−Removed: On December 3, 2021, our Board of Directors authorized a dividend payment of $2.7 million to preferred shareholders of record on January 1, 2022 and which will be paid on January 15, 2022.
−Removed: On October 31, 2019, in connection with the issuance of the 7.75% Senior Secured 1.25 Lien Notes due 2026, we issued and sold an aggregate of 178,427 shares of Class A Common Stock, par value $0.01 per share (and associated Preferred Stock Purchase Rights), to the purchasers of such Notes for an aggregate purchase price of $1,784.27.
−Removed: The issuance was exempt from registration under Section 4(a)(2) of the Securities Act of 1933.
−Removed: Unconsolidated Joint Ventures  
−Removed: As discussed in Note 20 –
−Removed: Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements, we have investments in unconsolidated joint ventures in various markets where our homebuilding operations are located.
−Removed: Our unconsolidated joint ventures had total combined assets of $611.8 million at October 31, 2021 and $540.2 million at October 31, 2020.
−Removed: Our investments in unconsolidated joint ventures totaled $60.9 million at October 31, 2021 and $103.2 million at October 31, 2020.
−Removed: As of October 31, 2021 and 2020, our unconsolidated joint ventures had outstanding debt totaling $74.0 and $117.2 million, respectively, under separate construction loan agreements with different third-party lenders and affiliates of certain investment partners to finance their respective land development activities, with the outstanding debt secured by the corresponding underlying property and related project assets and non-recourse to us.
−Removed: While we and our unconsolidated joint venture partners provide certain guarantees and indemnities to the lender, we do not have a guaranty or any other obligation to repay our outstanding debt or to support the value of the collateral underlying the outstanding debt.
−Removed: We do not believe that our existing exposure under our guaranty and indemnity obligations related to the outstanding debt is material to our consolidated financial statements.
−Removed: See also Note 19 –
−Removed: Variable Interest Entities in the Notes to Consolidated Financial Statements.
−Removed: We determined that none of our joint ventures at October 31, 2021 and 2020 were a variable interest entity.
−Removed: All our unconsolidated joint ventures were accounted for under the equity method because we did not have a controlling financial interest.
−Removed: Inventory Activities
−Removed: Total inventory, excluding consolidated inventory not owned, increased $142.0 million during the year ended October 31, 2021, from October 31, 2020. Total inventory, excluding consolidated inventory not owned, increased in the Northeast by $35.9 million, in the Midwest by $2.9 million, in the Southeast by $41.9 million and in the Southwest by $91.0 million.
−Removed: These increases were partially offset by decreases in the Mid-Atlantic of $5.0 million and in the West of $24.7 million.
−Removed: These inventory fluctuations were primarily attributable to new land purchases and land development, partially offset by home deliveries and land sales during the period.
−Removed: During the year ended October 31, 2021, we had aggregate impairments in the amount of $2.0 million. We wrote-off costs in the aggregate amount of $1.6 million during the year ended October 31, 2021 related to land options that expired or that we terminated, as the communities’
−Removed: forecasted profitability was not projected to produce adequate returns on investment commensurate with the risk. In the last few years, we have been able to acquire new land parcels at prices that we believe will generate reasonable returns under current homebuilding market conditions.
−Removed: This trend may not continue in either the near or the long term. Substantially all homes under construction or completed and included in inventory at October 31, 2021 are expected to be closed during the next six to nine months.  
−Removed: Consolidated inventory not owned decreased $83.5 million.
−Removed: Consolidated inventory not owned consists of options related to land banking and model financing transactions that were added to our Consolidated Balance Sheets in accordance with US GAAP. The decrease from October 31, 2020 to October 31, 2021 was primarily due to a decrease in land banking transactions along with a decrease in the sale and leaseback of certain model homes during the period.
−Removed: We have land banking arrangements, whereby we sell land parcels to the land bankers and they provide us an option to purchase back finished lots on a predetermined schedule. Because of our options to repurchase these parcels, for accounting purposes in accordance with ASC 606-10-55-70, these transactions are considered a financing rather than a sale. For purposes of our Consolidated Balance Sheet, at October 31, 2021, inventory of $66.2 million was recorded to “Consolidated inventory not owned,”
−Removed: with a corresponding amount of $31.3 million (net of debt issuance costs) recorded to “Liabilities from inventory not owned”
−Removed: for the amount of net cash received from the transactions.
−Removed: In addition, we sell and lease back certain of our model homes with the right to participate in the potential profit when each home is sold to a third party at the end of the respective lease. As a result of our continued involvement, for accounting purposes in accordance with ASC 606-10-55-68, these sale and leaseback transactions are considered a financing rather than a sale. Therefore, for purposes of our Consolidated Balance Sheet, at October 31, 2021, inventory of $32.5 million was recorded to “Consolidated inventory not owned,”
−Removed: with a corresponding amount of $31.5 million (net of debt issuance costs) recorded to “Liabilities from inventory not owned”
−Removed: for the amount of net cash received from the transactions.
−Removed: When possible, we option property for development prior to acquisition.
−Removed: By optioning property, we are only subject to the loss of the cost of the option and predevelopment costs if we choose not to exercise the option.
−Removed: As a result, our commitment for major land acquisitions is reduced.
−Removed: The costs associated with optioned properties are included in “Land and land options held for future development or sale”
−Removed: on the Consolidated Balance Sheets.
−Removed: Also included in “Land and land options held for future development or sale” are amounts associated with inventory in mothballed communities. We mothball (or stop development on) certain communities when we determine the current performance does not justify further investment at the time. That is, we believe we will generate higher returns if we decide against spending money to improve land today and save the raw land until such time as the markets improve or we determine to sell the property. As of October 31, 2021, we had mothballed land in 6 communities. The book value associated with these communities at October 31, 2021 was $4.3 million, which was net of impairment charges recorded in prior periods of $57.5 million. We continually review communities to determine if mothballing is appropriate.
−Removed: During fiscal 2021, we did not mothball any additional communities, but we sold four 
−Removed: previously mothballed communities and we re-activated two previously mothballed communities and portions of two previously mothballed communities.
−Removed: Inventories held for sale, which are land parcels where we have decided not to build homes, and are actively marketing the land for sale, represented $2.0 million of our total inventories held for sale at October 31, 2020 and are reported at the lower of carrying amount or fair value less costs to sell.
−Removed: There were no inventories held for sale at October 31, 2021. In determining fair value for land held for sale, management considers, among other things, prices for land in recent comparable sale transactions, market analysis studies, which include the estimated price a willing buyer would pay for the land (other than in a forced liquidation sale) and recent bona fide offers received from outside third parties.
−Removed: In the ordinary course of business, we enter into land and lot option purchase contracts in order to procure land or lots for the construction of homes.
−Removed: Lot option contracts enable us to control significant lot positions with a minimal capital investment and substantially reduce the risks associated with land ownership and development.
−Removed: At October 31, 2021, we had total cash deposits of $100.1 million to purchase land and lots with a total purchase price of $1.5 billion.
−Removed: Our financial exposure is generally limited to forfeiture of the nonrefundable deposits, letters of credit and other nonrefundable amounts incurred.
−Removed: We have no material third-party guarantees.
−Removed: The following tables summarize home sites included in our total residential real estate. 
−Removed: October 31, 2021:
−Removed: Consolidated total
−Removed: Unconsolidated joint ventures
−Removed: Construction to permanent financing lots
−Removed: Consolidated total
−Removed: Lots controlled by unconsolidated joint ventures
−Removed: October 31, 2020:
−Removed: Consolidated total
−Removed: Unconsolidated joint ventures
−Removed: Construction to permanent financing lots
−Removed: Consolidated total
−Removed: Lots controlled by unconsolidated joint ventures
−Removed: The following table summarizes our started or completed unsold homes and models, excluding unconsolidated joint ventures, in active and substantially completed communities.
−Removed: The decrease in the total homes from October 31, 2020 to October 31, 2021 was primarily due to the increase in net contracts absorption pace during fiscal 2021. 
−Removed: October 31, 2021
−Removed: October 31, 2020
−Removed: Started or completed unsold homes and models per active selling communities(1)
−Removed: Active selling communities (which are communities that are open for sale with ten or more home sites available) were 124  and 116  at October 31, 2021 and 2020, respectively.
−Removed: This r atio does not include substantially completed communities, which are communities with less than ten home sites available. 
−Removed: Other Balance Sheet Activities
−Removed: Investments in and advances to unconsolidated joint ventures decreased $42.3 million during the fiscal year ended October 31, 2021 compared to October 31, 2020.
−Removed: The decrease was primarily due to partnership distributions during the period, along with our purchase of the remaining equity interest in one of our unconsolidated joint ventures in the third quarter of fiscal 2021.
−Removed: As a result of this transaction, we took control of four communities, including three active communities.
−Removed: The previously unconsolidated joint venture was subsequently dissolved.
−Removed: Additionally, in the fourth quarter of fiscal 2021 we acquired the remaining assets and liabilities from one of our unconsolidated joint ventures which was disolved during the period, resulting in the write-off of our investment.
−Removed: These decreases were partially offset by an increase due to our entry into two new unconsolidated joint ventures during the first half of fiscal 2021.
−Removed: As of October 31, 2021 and October 31, 2020, we had investments in nine and ten unconsolidated homebuilding joint ventures, respectively, and one unconsolidated land development joint venture for both periods.
−Removed: We have no guarantees associated with our unconsolidated joint ventures, other than guarantees limited only to performance and completion of development, environmental indemnification and standard warranty and representation against fraud, misrepresentation and similar actions, including a voluntary bankruptcy.
−Removed: Receivables, deposits and notes, net increased $6.2 million from October 31, 2020 to $39.9 million at October 31, 2021. The increase was primarily due to the timing of home closings, along with increased escrow and municipal deposits during the period, partially offset by a receivable for a settlement which was received in the third quarter of fiscal 2021.
+Added: From early January 2022, 30-year mortgage rates increased rapidly from 3.2% to 7.1% at the end of October 2022.
+Added: While these rates are still low by historical standards, the quick and sharp increase in rates, along with high levels of inflation and general uncertainty and fear that the United States is headed towards an economic recession, started to have a negative impact on our net contracts and net contracts per average active selling community for the year ended October 31, 2022, particularly in the second half of the fiscal year.
+Added: Currently, many buyers have temporarily paused their home purchase decisions amid such uncertainty.
+Added: Despite the slowdown in net contracts during the second half of fiscal 2022, our revenues, gross margin percentage and pretax profit results showed strong improvement over the prior year through October 31, 2022.
+Added: The current market environment will make it hard for that trend to continue and it is difficult to predict the impact that increased mortgage rates and other factors will have on our future results, or how strongly our business will be adversely impacted.
+Added: We expect further pressure on our results from higher wages due to inflation and supply constraints in the labor market, as well as increased advertising spending, and less favorable margins on the mortgage rates we offer customers in order to attract buyers.
+Added: Our cash position allowed us to spend $759.3 million on land purchases and land development and to early retire $100 million principal amount of senior secured notes during fiscal 2022, and still have total liquidity of $457.3 million, including $326.2 million of homebuilding cash and cash equivalents and $125.0 million of borrowing capacity under our senior secured revolving credit facility as of October 31, 2022. 
+Added: Additional information on our results for the year ended October 31, 2022 were as follows:
+Added: For the year ended October 31, 2022, sale of homes revenues increased 6.2% as compared to the prior year, primarily due to a 19.0% increase in average sales price, partially offset by a 10.7% decrease in homes delivered.
+Added: The decrease in deliveries in fiscal 2022 was primarily the result of a 2.4% reduction in community count as well as the slowdown in net contracts in the second half of the year.
+Added: Homebuilding gross margin percentage increased from 18.6% for the year ended October 31, 2021 to 21.5% for the year ended October 31, 2022, and homebuilding gross margin percentage, before cost of sales interest expense and land charges, increased from 21.8% for the year ended October 31, 2021 to 25.0% for the year ended October 31, 2022.
+Added: The increases were primarily due to increases in home prices in virtually all of our markets during fiscal 2022, along with the mix of communities delivering compared to the prior year.
+Added: Selling, general and administrative expenses (including corporate general and administrative) increased $19.6 million for the year ended October 31, 2022 as compared to the prior year.
+Added: The increase was primarily due to an increase in compensation expense as a result of an increase in headcount and bonuses related to market conditions and company performance.
+Added: In addition, we had an increase in insurance costs as a result of an increase in premiums to obtain insurance, along with additional reserves for construction defect claims.
+Added: Despite the increase in dollars, as a percentage of total revenue, such costs remained relatively flat at 10.1% for the year ended October 31, 2022 compared to 9.9% for the year ended October 31, 2021.
+Added: Income before income taxes increased to $319.8 million for the year ended October 31, 2022 from $189.9 million for the year ended October 31, 2021.
+Added: Net income decreased to $225.5 million for the year ended October 31, 2022 from $607.8 million (which included a $468.6 million benefit from a reduction in our deferred tax asset valuation allowance) for the year ended October 31, 2021.
+Added: Earnings per share, basic and diluted, decreased to $30.31 and $29.00, respectively, for the year ended October 31, 2022, compared to earnings per share, basic and diluted of $87.50 and $85.86, respectively, for the year ended October 31, 2021, driven by the prior year reduction of our deferred tax asset valuation allowance.
+Added: Net contracts decreased 25.7% for the year ended October 31, 2022, compared to the prior year, as sales pace slowed significantly during the third and fourth quarters of fiscal 2022, due to an overall slow-down in home demand across the industry, primarily from the impact of the rise in interest rates during that time. 
+Added: Net contracts per average active selling community decreased to 39.6 for the year ended October 31, 2022 compared to 55.3 in the prior year.
+Added: The decrease was due to the decrease in net contracts discussed above.  
+Added: Active selling communities decreased slightly to 121 at October 31, 2022 compared 124 to October 31, 2021.
+Added: Our total lots controlled increased to 31,518 at October 31, 2022 compared to 30,874 at October 31, 2021.
+Added: However, given the slowdown in home sales, we are currently being more cautious about new land acquisitions and our lots controlled declined from the July 31, 2022 to October 31, 2022.
+Added: Contract backlog decreased from 3,247 homes at October 31, 2021 to 2,186 homes at October 31, 2022, and the dollar value of contract backlog decreased to $1.3 billion, a 22.6% decrease in dollar value compared to the prior year.
+Added: The decreases were primarily attributed to a decrease in customer traffic and sales pace and an increase in cancellations due to current market uncertainty from buyers.
   
−Removed: Prepaid expenses and other assets were as follows as of:
−Removed: (In thousands)
−Removed: Dollar Change
−Removed: Prepaid insurance
−Removed: Prepaid project costs
−Removed: Other prepaids
−Removed: Lease right of use asset
−Removed: Prepaid insurance decreased slightly due to the timing of premium payments.
−Removed: These costs are amortized over the life of the associated insurance policy, which can be one to three years.
−Removed: Prepaid project costs consist of community specific expenditures that are used over the life of the community. Such prepaids are expensed as homes are delivered. The decrease in prepaid project costs was primarily related to the close-out of communities during the fiscal year, along with the write-off of prepaid costs related to a land sale in the Midwest, partially offset by prepaid project costs for new communities during the fiscal year.
−Removed: Other prepaids increased primarily due to increased prepaid commissions and property taxes during the period.
−Removed: Lease right of use asset represents the net present value of our operating leases which, in accordance with ASC 842, are required to be recorded as an asset on our Consolidated Balance Sheets.
−Removed: See Note 4 to the Consolidated Financial Statements for further information.
−Removed: Financial services assets consist primarily of residential mortgages receivable held for sale of which $149.2 million and $101.8 million at October 31, 2021 and 2020, respectively, were being temporarily warehoused and are awaiting sale in the secondary mortgage market. The increase in mortgage loans held for sale from October 31, 2020 was primarily related to an increase in the volume of loans originated during the fourth quarter of fiscal 2021 compared to the fourth quarter of fiscal 2020, along with an increase in the average loan value.
−Removed: Deferred tax assets, net, was $425.7 million at October 31, 2021, and zero at October 31, 2020, due to the full reversal of our federal valuation allowance and the reversal of a portion of our state valuation allowance in the second quarter of fiscal 2021.
−Removed: Nonrecourse mortgages secured by inventory decreased to $125.1 million at October 31, 2021, from $135.1 million at October 31, 2020.
−Removed: The decrease was primarily due to the payment of existing mortgages, partially offset by additional loan borrowings on existing mortgages along with new mortgages for communities in most of our segments obtained during fiscal 2021.
−Removed: Accounts payable and other liabilities are as follows as of:
−Removed: (In thousands)
−Removed: Dollar Change
−Removed: Accounts payable
−Removed: Lease liability
−Removed: Accrued expenses
−Removed: Accrued compensation
−Removed: Other liabilities
−Removed: The increase in accounts payable was primarily due to an increase in construction spending, corresponding to the increase in deliveries in the fourth quarter of fiscal 2021 as compared to the fourth quarter of fiscal 2020.
−Removed: Reserves increased due to new accruals primarily for warranty and construction defect claims, partially offset by claim payments during the period. Lease liability represents the net present value of our minimum lease obligations, which as discussed above, are required to be recorded on our Consolidated Balance Sheets in accordance with ASC 842.
−Removed: Accrued expenses increased primarily due to an accrual for a sales reward program, along with an increase in accrued property taxes.
−Removed: The increase in accrued compensation was primarily due to expenses associated with our 2019 LTIP plan based on the increase in our stock price during fiscal 2021, along with increased company profitability in fiscal 2021 as compared to fiscal 2020, which resulted in higher bonuses.
−Removed: Other liabilities increased primarily due to deferred payroll tax withholdings during the period.
−Removed: Customers’
−Removed: deposits increased $20.0 million from October 31, 2020 to $68.3 million at October 31, 2021.
−Removed: The increase was primarily related to the increase in the dollar value of our backlog, associated with price increases in fiscal 2021, along with an increase due to the consolidation of one of our previously unconsolidated joint ventures during fiscal 2021, which has open for sale communities.
−Removed: Liabilities from inventory not owned decreased $68.4 million to $62.8 million at October 31, 2021.
−Removed: The decrease was due to a decrease in land banking transactions during the period, along with a decrease in the sale and leaseback of certain model homes, both of which are accounted for as financing transactions as described above.
−Removed: Accrued interest decreased $7.4 million to $28.2 million at October 31, 2021.
−Removed: The decrease was primarily due to the redemption of our 10.0% Senior Secured Notes due 2022 and 10.5% Senior Secured Notes due 2024 during the period, partially offset by new accruals during the period.
−Removed: Financial Services liabilities increased $63.2 million from $119.0 million at October 31, 2020, to $182.2 million at October 31, 2021.
−Removed: The increase was primarily due to the increase in amounts outstanding under our mortgage warehouse lines of credit, and directly correlated to the increase in the volume of mortgage loans held for sale during the year.
Results of Operations
7 unchanged sentences
Total revenues percent change
−Removed: Sale of homes revenues increased $421.7 million, or 18.7%, for the year ended October 31, 2021, increased $302.3 million, or 15.5%, for the year ended October 31, 2020, and increased $43.5 million, or 2.3%, for the year ended October 31, 2019 as compared to the same period of the prior year.
−Removed: The increased revenues in fiscal 2021 were primarily due to the number of home deliveries increasing 9.1%, and the average price per home increasing to $430,966 in fiscal 2021 from $396,065 in fiscal 2020.
+Added: Homebuilding:
+Added: Sale of Homes
+Added: Sale of homes revenues increased $166.7 million, or 6.2%, for the year ended October 31, 2022, increased $421.7 million, or 18.7%, for the year ended October 31, 2021, and increased $302.3 million, or 15.5%, for the year ended October 31, 2020 in each case as compared to the prior fiscal year.
+Added: The increased revenues in fiscal 2022 were primarily due to the average sales price per home increasing to $512,902 in fiscal 2022 from $430,966 in fiscal 2021, partially offset by a 10.7% decrease in homes delivered.
+Added: The decrease in deliveries in fiscal 2022 was primarily the result of a 2.4% reduction in community count, as well as the impact of the decrease in contracts per community in the last half of fiscal 2022.
+Added: The increased revenues in fiscal 2021 were primarily due to the number of home deliveries increasing 9.1%, and the average sales price per home increasing to $430,966 in fiscal 2021 from $396,065 in fiscal 2020.
The increase in deliveries in fiscal 2021 was primarily due to increased demand for new home construction during fiscal 2021.
−Removed: The increased revenues in fiscal 2020 were primarily due to the number of home deliveries increasing 15.0%, and the average price per home increasing to $396,065 in fiscal 2020 from $394,194 in fiscal 2019.
+Added: The increased revenues in fiscal 2020 were primarily due to the number of home deliveries increasing 15.0%, and the average sales price per home increasing to $396,065 in fiscal 2020 from $394,194 in fiscal 2019.
The increase in deliveries in fiscal 2020 was primarily due to the increased demand for new home construction during the latter half of fiscal 2020.
−Removed: The increased revenues in fiscal 2019 were primarily due to the number of home deliveries increasing 2.0% and the average price per home increasing to $394,194 in fiscal 2019 from $393,280 in fiscal 2018.
−Removed: The increase in deliveries in fiscal 2019 was primarily due to the result of an increase in community count in fiscal 2019 as compared to fiscal 2018 of 14.6%.
−Removed: The increase in average price in fiscal 2021 and 2020 was primarily due to price increases in most of our communities as a result of a sustained surge in demand for new homes, which started in May 2020.
−Removed: The increase in average price for fiscal 2019 was primarily the result of geographic and community mix of our deliveries.
+Added: The increase in average sales price in fiscal 2022, 2021 and 2020 was primarily due to price increases in most of our communities as a result of a sustained surge in demand for new homes, which started in May 2020 and continued through the end of the second quarter of fiscal 2022.
+Added: However, since the third quarter of fiscal 2022 we have experienced softening demand.
For further detail on changes in segment revenues see “Homebuilding Operations by Segment”
below. Land sales are ancillary to our homebuilding operations and are expected to continue in the future but may significantly fluctuate up or down.
−Removed: For further detail on land sales and other revenue, see the section titled “Land Sales and Other Revenues”
−Removed: Information on homes delivered by segment is set forth below:
−Removed: (Housing Revenue in thousands)
−Removed: Housing revenues
−Removed: Homes delivered
−Removed: Average price
−Removed: Mid-Atlantic:
−Removed: Housing revenues
−Removed: Homes delivered
−Removed: Average price
−Removed: Housing revenues
−Removed: Homes delivered
−Removed: Average price
−Removed: Housing revenues
−Removed: Homes delivered
−Removed: Average price
−Removed: Housing revenues
−Removed: Homes delivered
−Removed: Average price
−Removed: Housing revenues
−Removed: Homes delivered
−Removed: Average price
+Added: For further detail on land sales and other revenues, see the section titled “Homebuilding:
+Added: Land Sales and Other Revenues”
+Added: Information on the sale of homes is set forth in the table below:
+Added: (Dollars in thousands, except average sales price)
Consolidated total:
1 unchanged sentence
Homes delivered
−Removed: Average price
+Added: Average sales price
Unconsolidated joint ventures:(1)
1 unchanged sentence
Homes delivered
−Removed: Average price
−Removed: (1) Represents housing revenue and home deliveries for our unconsolidated homebuilding joint ventures for the period.
+Added: Average sales price
+Added: (1) Represents housing revenues and home deliveries for our unconsolidated homebuilding joint ventures for the period.
We provide this data as a supplement to our consolidated results as an indicator of the volume managed in our unconsolidated joint ventures.
See Note 20 to the Consolidated Financial Statements for a further discussion of our joint ventures.
−Removed: The increase in housing revenues during the year ended October 31, 2021, as compared to the year ended October 31, 2020, was primarily attributed to our increased deliveries, from the sustained strong homebuilding market and high demand for new home construction we saw begin in fiscal 2020, and by the increase in average sales price.
−Removed: Housing revenues in fiscal 2021 increased 18.7% on a combined basis across all of our homebuilding segments, and average sales price increased by 8.8% in all such segments combined, excluding unconsolidated joint ventures.
−Removed: In our homebuilding segments, homes delivered increased in fiscal 2021 as compared to fiscal 2020 by 12.5%, 6.3%, 9.9%, 13.3% and 16.1% in the Mid-Atlantic, Midwest, Southeast, Southwest and West, respectively, partially offset by a 42.2% decrease in the Northeast. Overall in fiscal 2021 as compared to fiscal 2020, homes delivered increased 9.1% across all our segments, excluding unconsolidated joint ventures.
−Removed: The increase in housing revenues during the year ended October 31, 2020, as compared to the year ended October 31, 2019, was primarily attributed to our increased deliveries, from the strong homebuilding market and high demand for new home construction, and by the increase in average sales price.
−Removed: Housing revenues in fiscal 2020 increased 15.5% on a combined basis across all of our homebuilding segments, and average sales price increased by 0.5% in all such segments combined, excluding unconsolidated joint ventures.
−Removed: In our homebuilding segments, homes delivered increased in fiscal 2020 as compared to fiscal 2019 by 81.3%, 15.8%, 6.9%, 0.6%, 19.7% and 6.3% in the Northeast, Mid-Atlantic, Midwest, Southeast, Southwest and West, respectively.
−Removed: Overall in fiscal 2020 as compared to fiscal 2019, homes delivered increased 15.0% across all of our segments, excluding unconsolidated joint ventures.  
−Removed: Quarterly housing revenues and net sales contracts by segment, excluding unconsolidated joint ventures, for the years ended October 31, 2021, 2020 and 2019 are set forth below (net contracts are defined as new contracts executed during the period for the purchase of homes, less cancellations of contracts in the same period):
−Removed: Quarter Ended
−Removed: (In thousands)
−Removed: Housing revenues:
−Removed: Consolidated total
−Removed: Sales contracts (net of cancellations):
−Removed: Consolidated total
−Removed: Quarter Ended
−Removed: (In thousands)
−Removed: Housing revenues:
−Removed: Consolidated total
−Removed: Sales contracts (net of cancellations):
−Removed: Consolidated total
−Removed: Quarter Ended
−Removed: (In thousands)
−Removed: Housing revenues:
−Removed: Consolidated total
−Removed: Sales contracts (net of cancellations):
−Removed: Consolidated total
−Removed: Contracts per average active selling community in fiscal 2021 were 55.3 compared to 54.3 in fiscal 2020.
−Removed: Our reported level of sales contracts (net of cancellations) was positively impacted by an increase in the pace of sales in all of the Company’s segments during fiscal 2021. Cancellation rates represent the number of cancelled contracts in the quarter divided by the number of gross sales contracts executed in the quarter.
−Removed: For comparison, the following are historical cancellation rates, excluding unconsolidated joint ventures:
−Removed: Another common and meaningful way to analyze our cancellation trends is to compare the number of contract cancellations as a percentage of the beginning backlog.
−Removed: The following table provides this historical comparison, excluding unconsolidated joint ventures.
−Removed: Most cancellations occur within the legal rescission period, which varies by state but is generally less than two weeks after the signing of the contract.
−Removed: Cancellations also occur as a result of a buyer's failure to qualify for a mortgage, which generally occurs during the first few weeks after signing. As shown in the tables above, contract cancellations over the past several years have been within what we believe to be a normal range, with fiscal 2021 cancellation rates, in particular, being below historical norms as a result of the strong market conditions.
−Removed: Fiscal 2020 had varying cancellation rates due to the COVID-19 pandemic and its effects.
−Removed: Market conditions and any possible further impacts from COVID-19 remain uncertain, and it is difficult to predict what cancellation rates will be in the future.
−Removed: An important indicator of our future results is recently signed contracts and our home contract backlog for future deliveries.
−Removed: Our consolidated contract backlog, excluding unconsolidated joint ventures, by segment is set forth below:
−Removed: (Dollars in thousands)
−Removed: Total contract backlog
−Removed: Number of homes
−Removed: Mid-Atlantic:
−Removed: Total contract backlog
−Removed: Number of homes
−Removed: Total contract backlog
−Removed: Number of homes
−Removed: Total contract backlog
−Removed: Number of homes
−Removed: Total contract backlog
−Removed: Number of homes
−Removed: Total contract backlog
−Removed: Number of homes
−Removed: Total consolidated contract backlog
−Removed: Number of homes
−Removed: Contract backlog as of October 31, 2019 excludes 29 homes that were sold to one of our joint ventures at the time of the joint venture formation.
−Removed: Reflects the reclassification of 14 homes and $7.4 million of contract backlog as of October 31, 2021 from unconsolidated joint ventures to the consolidated Mid-Atlantic segment.
−Removed: This is related to our acquisition of the remaining assets and liabilities from one of our unconsolidated joint ventures which was dissolved during the fourth quarter of fiscal 2021.
−Removed: Contract backlog dollars increased 15.4% as of October 31, 2021 compared to October 31, 2020, and the number of homes in backlog decreased 4.6% for the same period.
−Removed: The increase in backlog dollars was driven by a 20.9% increase in the average price of the homes in backlog for the year ended October 31, 2021 compared to the prior fiscal year.
−Removed: In the month of November 2021, excluding unconsolidated joint ventures, we signed an additional 467 net contracts amounting to $239.7 million in contract value.
−Removed: Total cost of sales on our Consolidated Statements of Operations includes expenses for consolidated housing and land and lot sales, including inventory impairment loss and land option write-offs (defined as “land charges”
+Added: Homebuilding:
+Added: Land Sales and Other Revenues
+Added: Land sales and other revenues decreased $7.2 million for the year ended October 31, 2022 compared to the prior year and increased $7.7 million for the year ended October 31, 2021 compared to the prior year.
+Added: Although we budget land sales, they are often dependent upon receiving approvals and entitlements, the timing of which can be uncertain. As a result, projecting the amount and timing of land sales is difficult.
+Added: There were five land sales during the year ended October 31, 2022, compared to 11 in the prior year, resulting in an $9.2 million decrease in land sales revenue.
+Added: There were 11 land sales in the year ended October 31, 2021, compared to seven in the year ended October 31, 2020, resulting in a $8.5 million increase in land sales revenue.
+Added: Other revenues primarily include income from contract cancellations where the deposit has been forfeited due to contract terminations, which was not significant for any period.
+Added: Homebuilding:
+Added: Cost of Sales
+Added: Cost of sales includes expenses for consolidated housing and land and lot sales, including inventory impairment and land option write-offs (defined as “land charges”
in the tables below).
−Removed: A breakout of such expenses for housing sales and homebuilding gross margin is set forth below.
+Added: A breakout of such expenses for homebuilding and land and lot sales and the gross margins for each is set forth below.
Homebuilding gross margin before cost of sales interest expense and land charges is a non-GAAP financial measure.
−Removed: This measure should not be considered as an alternative to homebuilding gross margin determined in accordance with GAAP as an indicator of operating performance.
+Added: This measure should not be considered as an alternative to homebuilding gross margin determined in accordance with U.S.
+Added: GAAP as an indicator of operating performance.
Management believes this non-GAAP measure enables investors to better understand our operating performance.
This measure is also useful internally, helping management evaluate our operating results on a consolidated basis and relative to other companies in our industry.
−Removed: In particular, the magnitude and volatility of land charges for the Company, and for other homebuilders, have been significant and, as such, have made financial analysis of our industry more difficult.
+Added: In particular, the magnitude and volatility of land charges for the Company, and for other homebuilders, have been significant and, as such, have made comparable financial analysis of our industry more difficult.
Homebuilding metrics excluding land charges, as well as interest amortized to cost of sales, and other similar presentations prepared by analysts and other companies are frequently used to assist investors in understanding and comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies’
−Removed: respective level of impairments and levels of debt.
+Added: respective level of impairments and debt.
(Dollars in thousands)
8 unchanged sentences
Homebuilding gross margin percentage, after cost of sales interest expense, before land charges
−Removed: Cost of sales expenses as a percentage of consolidated home sales revenues are presented below:
+Added: Cost of sales as a percentage of consolidated home sales revenues are presented below:
Sale of homes
9 unchanged sentences
Total homebuilding gross margin percentage increased to 21.5% for the year ended October 31, 2022 compared to 18.6% for the prior year.
−Removed: This increase was primarily due to increases in home prices across virtually all our operating segments, along with the mix of communities delivering compared to the prior year.
+Added: Total homebuilding gross margin percentage, before cost of sales interest expense and land charges increased to 25.0% for the year ended October 31, 2022 compared to 21.8% for the prior year.
Total homebuilding gross margin percentage increased to 18.6% for the year ended October 31, 2021 compared to 14.7% for the prior year.
−Removed: This increase was primarily due to the mix of communities delivering compared to the prior year, along with increases in home prices during the latter half of fiscal 2020 in virtually all of our markets.
−Removed: Reflected as inventory impairment loss and land option write-offs in cost of sales (“land charges”), we have written off or written down certain inventories totaling $3.6 million, $8.8 million and $6.3 million during the years ended October 31, 2021, 2020 and 2019, respectively, to their estimated fair value.
−Removed: See Note 12 to the Consolidated Financial Statements for an additional discussion.
−Removed: During the years ended October 31, 2021, 2020 and 2019, we wrote off residential land options and approval and engineering costs totaling $1.6 million, $6.8 million and $3.6 million, respectively, which are included in the total land charges mentioned above.
−Removed: Option, approval and engineering costs are written off when a community’s pro forma profitability is not projected to produce adequate returns on the investment commensurate with the risk and when we believe it is probable we will cancel the option, or when a community is redesigned, engineering costs related to the initial design are written off.
−Removed: Such write-offs were located in all segments in fiscal 2021, 2020 and 2019.
−Removed: The inventory impairments amounted to $2.0 million, $2.0 million and $2.7 million for the years ended October 31, 2021, 2020 and 2019, respectively.
−Removed: It is difficult to predict impairment levels, and should it become necessary or desirable to have additional land sales, lower prices, or should the estimates or expectations used in determining estimated cash flows or fair value decrease or differ from current estimates in the future, we may need to recognize additional impairments.
−Removed: Below is a breakdown of our lot option walk-aways and impairments by segment for fiscal 2021.
+Added: Total homebuilding gross margin percentage, before cost of sales interest expense and land charges increased to 21.8% for the year ended October 31, 2021 compared to 18.4% for the prior year.
+Added: The increases in gross margins were primarily due to increases in home sales prices across virtually all of our geographic markets, along with the mix of communities delivering compared to the prior year.
+Added: Land and lot sale expenses and gross margins are set forth below:
+Added: (In thousands)
+Added: Land and lot sales
+Added: Cost of sales, excluding interest
+Added: Land and lot sales gross margin, excluding interest
+Added: Land and lot sales interest expense
+Added: Land and lot sales gross margin, including interest
+Added: Land sales are ancillary to our residential homebuilding operations and are expected to continue in the future but may significantly fluctuate up or down. 
+Added: Homebuilding:
+Added: Inventory Impairments and Land Option Write-offs
+Added: Inventory impairments and land option write-offs reflects certain inventories we have either written off or written down to their estimated fair value totaling $14.1 million, $3.6 million and $8.8 million in expense for the years ended October 31, 2022, 2021 and 2020, respectively.
+Added: During the years ended October 31, 2022, 2021 and 2020, we wrote off residential land option, approval and engineering costs totaling $5.7 million, $1.6 million and $6.8 million, respectively.
+Added: Land option, approval and engineering costs are written off when a community’s pro forma profitability is not projected to produce an adequate return on investment commensurate with the risk.
+Added: If we determine an adequate return is not probable, we cancel the option, or when a community is redesigned, we write off the engineering costs related to the initial design.
+Added: Such write-offs occurred across each of our segments in fiscal 2022, 2021 and 2020.
+Added: Inventory impairments amounted to $8.4 million, $2.0 million and $2.0 million for the years ended October 31, 2022, 2021 and 2020, respectively.
+Added: It is difficult to predict future impairments, but if conditions in the overall housing market or a specific geographic market worsen in the future beyond our current expectations, there are future changes in our business strategy that significantly affect the key assumptions used in our projections of future cash flows, and/or there are material changes in any other items we consider in assessing recoverability, we may need to recognize additional inventory impairments and any such charges could be material.
In fiscal 2022, we walked away from 18.5% of all the lots we controlled under option contracts.
6 unchanged sentences
Represents carrying value, net of prior period impairments, if any, at the time of recording the applicable period’s impairments.
−Removed: Land Sales and Other Revenues
−Removed: Land sales and other revenues consist primarily of land and lot sales.
−Removed: A breakout of land and lot sales is set forth below:
−Removed: (In thousands)
−Removed: Land and lot sales
−Removed: Cost of sales, excluding interest
−Removed: Land and lot sales gross margin, excluding interest
−Removed: Land and lot sales interest expense
−Removed: Land and lot sales gross margin, including interest
−Removed: Land sales are ancillary to our residential homebuilding operations and are expected to continue in the future but may significantly fluctuate up or down. Although we budget land sales, they are often dependent upon receiving approvals and entitlements, the timing of which can be uncertain. As a result, projecting the amount and timing of land sales is difficult.
−Removed: There were 11 land sales during the year ended October 31, 2021, compared to seven in the prior year, resulting in an $8.5 million increase in land sales revenue.
−Removed: There were seven land sales in the year ended October 31, 2020, compared to six in the year ended October 31, 2019, resulting in a $7.7 million increase in land sales revenue.
−Removed: Land sales and other revenues increased $7.7 million for the year ended October 31, 2021 compared to the prior year and increased $6.6 million for the year ended October 31, 2020 compared to the prior year.
−Removed: Other revenues include income from contract cancellations where the deposit has been forfeited due to contract terminations, interest income, cash discounts and miscellaneous one-time receipts.
−Removed: The increase from fiscal 2020 to fiscal 2021 and from fiscal 2019 to fiscal 2020 was mainly due to the fluctuations in land sales revenue noted above.
−Removed: Homebuilding Selling, General and Administrative
−Removed: Homebuilding selling, general and administrative (“SGA”) expenses increased $8.6 million to $169.9 million for the year ended October 31, 2021 as compared to the year ended October 31, 2020.
−Removed: The increase was primarily attributed to a change in volume of our unconsolidated joint venture deliveries, and an increase in compensation expense.
−Removed: The increase in compensation expense was mostly attributed to our long-term incentive programs now forecasted to achieve above target metrics as a result of improved operating results and our higher stock price.
−Removed: SGA expenses decreased $5.5 million to $161.3 million for the year ended October 31, 2020 as compared to the year ended October 31, 2019. The decrease was primarily attributed to lower selling overhead and advertising costs, as a result of the reduction of our community count and a reduced need for advertising as home sales improved.
+Added: Homebuilding:
+Added: Selling, General and Administrative
+Added: Homebuilding selling, general and administrative (“SGA”) expenses increased $23.6 million to $193.5 million for the year ended October 31, 2022 compared to the year ended October 31, 2021.
+Added: The increase was due to an increase in total compensation expense as a result of an increase in headcount and bonuses related to positive overall market conditions and specific company performance.
+Added: In addition, insurance costs increased as a result of higher premiums to obtain insurance during fiscal 2022, along with additional reserves for construction defect claims during fiscal 2022.
+Added: SGA expenses increased $8.6 million to $169.9 million for the year ended October 31, 2021 as compared to the year ended October 31, 2020.
+Added: The increase was primarily attributed to a decrease in volume of our unconsolidated joint venture deliveries, and an increase in compensation expense.
+Added: The increase is related to the decrease in volume of our unconsolidated joint venture deliveries because we receive a payment for each delivery by our unconsolidated joint ventures intended to offset our SGA expenses incurred to manage the joint ventures.
+Added: The increase in compensation expense was mostly attributed to our long-term incentive programs that forecasted to achieve above target metrics as a result of improved operating results and a higher stock price.
+Added: Homebuilding:
+Added: Key Performance Indicators
+Added: Net Contracts Per Average Active Selling Community
+Added: Net contracts per average active selling community in fiscal 2022 were 39.6 compared to 55.3 in fiscal 2021, a 28.4% decrease in sales pace per community.
+Added: Our reported level of sales contracts (net of cancellations) was impacted by a decrease in the pace of sales primarily in the West segment during fiscal 2022.
+Added: As noted above, the current level of demand for new homes is significantly lower due to high levels of inflation, a sharp increase in mortgage rates and concerns about an economic recession. 
+Added: Contract Cancellation Rates
+Added: The following table provides historical quarterly cancellation rates, which represents the number of cancelled contracts in the quarter divided by the number of gross sales contracts executed in the quarter, excluding unconsolidated joint ventures:
+Added: The following table provides quarterly contract cancellations as a percentage of the beginning backlog, excluding unconsolidated joint ventures:
+Added: Most cancellations occur within the legal rescission period, which varies by state but is generally less than two weeks after the signing of the contract.
+Added: Cancellations also occur as a result of a buyer’s failure to qualify for a mortgage, which generally occurs during the first few weeks after signing.
+Added: As shown in the tables above, contract cancellations over the past several years have been within what we believe to be a normal range, with fiscal 2021 and the first half of fiscal 2022 cancellation rates, in particular, being below historical norms as a result of strong market conditions.
+Added: Fiscal 2020 had varying cancellation rates due to the COVID-19 pandemic and its effects.
+Added: During the third and fourth quarters of fiscal 2022, due to the sharp decline in gross sales and an increase in cancellations, our cancellation rate as a percentage of gross sales increased significantly to 27% and 41%, respectively, which is higher than our historical normal range.
+Added: Despite the increase in cancellations, due to our solid backlog position, our cancellation rate as a percentage of beginning backlog for the fourth quarter of fiscal 2022 was 13%, which is in line with our historical normal range.
+Added: Market conditions remain uncertain and it is difficult to predict what cancellation rates will be in the future.
+Added: Contract Backlog
+Added: Our consolidated contract backlog, excluding unconsolidated joint ventures, by segment is set forth below:
+Added: (Dollars in thousands)
+Added: Total contract backlog
+Added: Number of homes
+Added: Total contract backlog
+Added: Number of homes
+Added: Total contract backlog
+Added: Number of homes
+Added: Total consolidated contract backlog
+Added: Number of homes
+Added: Reflects the reclassification of 14 homes and $7.4 million of contract backlog as of October 31, 2021 from unconsolidated joint ventures to the consolidated Northeast segment.
+Added: This is related to our acquisition of the remaining assets and liabilities from one of our unconsolidated joint ventures which was dissolved during the fourth quarter of fiscal 2021.
+Added: Contract backlog dollars decreased 22.6% as of October 31, 2022 compared to October 31, 2021, and the number of homes in backlog decreased 32.7% for the same period.
+Added: The decrease in backlog dollars and number of homes for the year ended October 31, 2022 compared to the prior fiscal year was driven by the slower sales environment in the second half of fiscal 2022.
Homebuilding Operations by Segment
−Removed: Financial information relating to the Company’s operations was as follows:
−Removed: Segment Analysis (Dollars in thousands, except average sales price)
+Added: Financial information relating to our homebuilding operations by segment was as follows:
Years Ended October 31,
−Removed: Homebuilding revenue
−Removed: Income before income taxes
−Removed: Homes delivered
−Removed: Average sales price
+Added: (Dollars in thousands, except average sales price)
Homebuilding revenue
3 unchanged sentences
Homebuilding revenue
−Removed: Income (loss) before income taxes
−Removed: Homes delivered
−Removed: Average sales price
−Removed: Homebuilding revenue
−Removed: Income (loss) before income taxes
−Removed: Homes delivered
−Removed: Average sales price
−Removed: Homebuilding revenue
Income before income taxes
5 unchanged sentences
Average sales price
−Removed: Homebuilding Results by Segment 
+Added: The increase in housing revenues during the year ended October 31, 2022, as compared to the year ended October 31, 2021, was primarily attributed to the increase in average sales price.
+Added: Housing revenues in fiscal 2022 increased 6.2% on a combined basis across all of our homebuilding segments, and average sales price increased by 19.0% in all such segments combined, excluding unconsolidated joint ventures.
+Added: Overall, in fiscal 2022 as compared to fiscal 2021, homes delivered decreased 10.7% across all our segments, excluding unconsolidated joint ventures.
+Added: Homes delivered decreased in fiscal 2022 as compared to fiscal 2021 by 20.8% in the West, partially offset by a 3.9% and 8.0% increase in the Northeast and Southeast, respectively. 
+Added: The increase in housing revenues during the year ended October 31, 2021, as compared to the year ended October 31, 2020, was primarily attributed to our increased deliveries, from the sustained strong homebuilding market and high demand for new home construction we saw begin in fiscal 2020, and by the increase in average sales price.
+Added: Housing revenues in fiscal 2021 increased 18.7% on a combined basis across all of our homebuilding segments, and average sales price increased by 8.8% in all such segments combined, excluding unconsolidated joint ventures.
+Added: Overall, in fiscal 2021 as compared to fiscal 2020, homes delivered increased 9.1% across all our segments, excluding unconsolidated joint ventures.
+Added: Homes delivered increased in fiscal 2021 as compared to fiscal 2020 by 9.9% and 14.2% in the Southeast and West, respectively, partially offset by a 0.4% decrease in the Northeast. 
+Added: Homebuilding Results by Segment
Northeast –
−Removed: Homebuilding revenues decreased 25.8% in fiscal 2021 compared to fiscal 2020 primarily due to a 42.2% decrease in homes delivered and a $14.2 million decrease in land sales and other revenue, partially offset by a 38.2% increase in average sales price.
+Added: Homebuilding revenues increased 24.6% in fiscal 2022 compared to fiscal 2021 primarily due to a 3.9% increase in homes delivered and a 20.3% increase in average sales price.
The increase in average sales price was mainly the result of price increases in certain communities.
−Removed: Income before income taxes decreased $7.4 million to $22.9 million, which was mainly due to the decrease in homebuilding revenues discussed above, a $1.6 million increase in selling, general and administrative costs and a $7.4 million decrease in income from unconsolidated joint ventures, partially offset by an increase in gross margin percentage before interest expense for fiscal 2021 compared to fiscal 2020. 
−Removed: Homebuilding revenues increased 54.4% in fiscal 2020 compared to fiscal 2019 primarily due to an 81.3% increase in homes delivered and a $9.0 million increase in land sales and other revenue, partially offset by a 17.1% decrease in average selling price.
−Removed: The decrease in average sales price was the result of new communities delivering smaller single family homes, townhomes and affordable-housing homes in mid to higher-end submarkets of the segment in fiscal 2020 compared to some communities delivering in fiscal 2019 that had higher priced, single family homes in higher-end submarkets of the segment that are no longer delivering.
−Removed: Also impacting the decrease in average sales price was an increase in pricing concessions and a decrease in location premiums in certain communities. 
−Removed: Income before income taxes increased $9.4 million to $30.4 million, which was mainly due to the increase in homebuilding revenues discussed above, a $0.5 million decrease in selling, general and administrative costs and a slight increase in gross margin percentage before interest expense for fiscal 2020 compared to fiscal 2019.
−Removed: This increase was partially offset by an $8.2 million decrease in income from unconsolidated joint ventures for fiscal 2020 compared to fiscal 2019.
−Removed: Mid-Atlantic –
−Removed: Homebuilding revenues increased 15.4% in fiscal 2021 compared to fiscal 2020 primarily due to a 12.5% increase in homes delivered and a 2.8% increase in average sales price.
−Removed: The increase in average sales price was the result of new communities delivering higher priced, larger single family homes and townhomes in higher-end submarkets of the segment in fiscal 2021 compared to some communities delivering in fiscal 2020 that had lower priced, smaller single family homes and townhomes in lower-end submarkets of the segment that are no longer delivering. Also impacting the increase in the average sales price was price increases in certain communities.
−Removed: Income before income taxes increased $27.0 million to $61.6 million, mainly due to the increase in homebuilding revenues discussed above, a $0.6 million decrease in selling, general and administrative costs and an increase in gross margin percentage before interest expense for fiscal 2021 compared to fiscal 2020.
−Removed: Homebuilding revenues increased 13.0% in fiscal 2020 compared to fiscal 2019 primarily due to a 15.8% increase in homes delivered, partially offset by a 2.5% decrease in average sales price.
−Removed: The decrease in average sales price was the result of new communities delivering lower priced, smaller single family homes and townhomes in lower-end submarkets of the segment in fiscal 2020 compared to some communities delivering in fiscal 2019 that had higher priced, larger single family homes and townhomes in higher-end submarkets of the segment that are no longer delivering.
−Removed: Income before income taxes increased $20.2 million to $34.6 million, mainly due to the increase in homebuilding revenues discussed above, a $2.0 million decrease in selling, general and administrative costs, a $0.8 million decrease in inventory impairment loss and land option write-offs and an increase in gross margin percentage before interest expense for fiscal 2020 compared to fiscal 2019.
−Removed: Midwest –
−Removed: Homebuilding revenues increased 16.4% in fiscal 2021 compared to fiscal 2020 primarily due to a 6.3% increase in homes delivered, a 3.7% increase in average sales price and a $13.9 million increase in land sales and other revenue.
+Added: Income before income taxes increased $74.5 million to $177.4 million, which was mainly due to the increase in homebuilding revenues discussed above, a $9.7 million increase in income from unconsolidated joint ventures, and an increase in gross margin percentage, before cost of sales interest expense for fiscal 2022 compared to fiscal 2021. 
+Added: Homebuilding revenues increased 6.0% in fiscal 2021 compared to fiscal 2020 primarily due to a 6.7% increase in average sales price, partially offset by a 0.4% decrease in homes delivered.
The increase in average sales price was mainly the result of price increases in certain communities.
−Removed: Income before income taxes was $18.4 million in fiscal 2021, an improvement of $20.2 million compared to a loss before income taxes of $1.8 million in fiscal 2020. The increase was primarily due to the increase in homebuilding revenues discussed above, a $3.5 million decrease in selling, general and administrative costs and a $5.5 million decrease in inventory impairment loss and land option write-offs, while gross margin percentage before interest expense was flat for fiscal 2021 compared to fiscal 2020.
−Removed: Homebuilding revenues increased 10.4% in fiscal 2020 compared to fiscal 2019 primarily due to a 6.9% increase in homes delivered and a 3.5% increase in average sales price.
−Removed: The increase in average sales price was the result of new communities delivering higher priced, larger single family homes and townhomes in higher-end submarkets of the segment in fiscal 2020 compared to some communities delivering in fiscal 2019 that had lower priced, smaller single family homes in lower-end submarkets of the segment that are no longer delivering.
−Removed: Loss before income taxes increased $1.2 million to a loss of $1.8 million in fiscal 2020 compared to fiscal 2019. The increase was primarily due to a $3.2 million increase in inventory impairment loss and land option write-offs, while gross margin percentage before interest expense was flat for fiscal 2020 compared to fiscal 2019.
+Added: Income before income taxes increased $39.8 million to $102.9 million, which was mainly due to the increase in homebuilding revenues discussed above, a $2.5 million decrease in SGA, a $6.7 million decrease in inventory impairments and land option write offs, and an increase in gross margin percentage, before cost of sales interest expense for fiscal 2021 compared to fiscal 2020. 
Southeast –
+Added: Homebuilding revenues increased 13.4% in fiscal 2022 compared to fiscal 2021 primarily due to an 8.0% increase in homes delivered and an 8.5% increase in average sales price.
+Added: The increase in average sales price was the result of new communities delivering higher priced, larger single-family homes in higher-end submarkets of the segment in fiscal 2022 compared to some communities delivering in fiscal 2021 that had lower priced, smaller single family homes in higher-end submarkets of the segment that are no longer delivering. Also impacting the increase in average sales price was price increases in certain communities.
+Added: Income before income taxes increased $42.4 million to $60.2 million in fiscal 2022 compared to fiscal 2021, mainly due to the increase in homebuilding revenue discussed above, a $14.3 million increase in income from unconsolidated joint ventures and an increase in gross margin percentage, before cost of sales interest expense for fiscal 2022 compared to fiscal 2021.
Homebuilding revenues increased 22.7% in fiscal 2021 compared to fiscal 2020 primarily due to a 9.9% increase in homes delivered, an 8.2% increase in average sales price and a $9.1 million increase in land sales and other revenue. The increase in average sales price was the result of new communities delivering higher priced, larger single-family homes in higher-end submarkets of the segment in fiscal 2021 compared to some communities delivering in fiscal 2020 that had lower priced, smaller single family homes and townhomes in lower-end submarkets of the segment that are no longer delivering. Also impacting the increase in average sales price was price increases in certain communities.
−Removed: Income before income taxes increased $16.4 million to $17.8 million in fiscal 2021 compared to fiscal 2020, mainly due to the increase in homebuilding revenue discussed above, a $1.2 million increase in income from unconsolidated joint ventures and an increase in gross margin percentage before interest expense for fiscal 2021 compared to fiscal 2020.
−Removed: Homebuilding revenues increased 5.7% in fiscal 2020 compared to fiscal 2019 primarily due to a 0.6% increase in homes delivered and a 5.1% increase in average sales price.
−Removed: The increase in average sales price was the result of new communities delivering higher priced, larger single family homes in higher-end submarkets of the segment in fiscal 2020 compared to some communities delivering in fiscal 2019 that had lower priced, smaller single family homes in lower-end submarkets of the segment that are no longer delivering. Also impacting the increase in average sales price was price increases and higher location premium revenue in certain communities.
−Removed: Income before income taxes of $1.4 million in fiscal 2020 represented an $11.4 million improvement from the prior year due to the increase in homebuilding revenue discussed above, a $3.9 million decrease in selling, general and administrative costs and an increase in gross margin percentage before interest expense for fiscal 2020 compared to fiscal 2019.
−Removed: Southwest –
−Removed: Homebuilding revenues increased 21.4% in fiscal 2021 compared to fiscal 2020 primarily due to a 13.3% increase in homes delivered and a 7.1% increase in average sales price.
−Removed: The increase in the average sales price was due to price increases in certain communities.
−Removed: Income before income taxes increased $47.7 million to $115.8 million in fiscal 2021 mainly due to the increase in homebuilding revenues discussed above, a $0.4 million decrease in inventory impairment loss and land option write-offs and an increase in gross margin percentage before interest expense for fiscal 2021 compared to fiscal 2020.
−Removed: Homebuilding revenues increased 18.2% in fiscal 2020 compared to fiscal 2019 primarily due to a 19.7% increase in homes delivered, while average sales price was essentially flat with a 1.0% decrease in fiscal 2020 compared to the prior year.
−Removed: Income before income taxes increased $34.7 million to $68.2 million in fiscal 2020 mainly due to the increase in homebuilding revenues discussed above and an increase in gross margin percentage before interest expense for fiscal 2020 compared to fiscal 2019.
+Added: Income before income taxes increased $16.4 million to $17.8 million in fiscal 2021 compared to fiscal 2020, mainly due to the increase in homebuilding revenue discussed above, a $1.2 million increase in income from unconsolidated joint ventures and an increase in gross margin percentage, before cost of sales interest expense for fiscal 2021 compared to fiscal 2020.
West –
−Removed: Homebuilding revenues increased 35.6% in fiscal 2021 compared to fiscal 2020 primarily due to a 16.1% increase in homes delivered and a 16.8% increase in average sales price.
−Removed: The increase in average sales price was the result of new communities delivering higher priced, larger single family homes in higher-end submarkets of the segment in fiscal 2021 compared to some communities delivering in fiscal 2020 that had lower priced, smaller single family homes in lower-end submarkets of the segment that are no longer delivering.
−Removed: Also impacting the increase in average sales price was price increases in certain communities. 
−Removed: Income before income taxes increased $66.1 million to $82.5 million in fiscal 2021 compared to the prior year mainly due to the increase in homebuilding revenues discussed above and an increase in gross margin percentage before interest expense for fiscal 2021 compared to the prior year, partially offset by a $1.3 million increase in inventory impairment loss and land option write-offs.
−Removed: Homebuilding revenues increased 11.1% in fiscal 2020 compared to fiscal 2019 primarily due to a 6.3% increase in homes delivered and a 4.5% increase in average sales price.
−Removed: The increase in average sales price was the result of new communities delivering higher priced, larger single family homes in higher-end submarkets of the segment in fiscal 2020 compared to some communities delivering in fiscal 2019 that had lower priced, smaller single family homes in lower-end submarkets of the segment that are no longer delivering.
−Removed: Also impacting the increase in average sales price was price increases in certain communities. 
−Removed: Income before income taxes decreased $23.6 million to $16.4 million in fiscal 2020 compared to the prior year due mainly to a significant decrease in gross margin percentage before interest expense, partly as a result of increases in estimated land development costs in some of our communities in the segment.
+Added: Homebuilding revenues decreased 6.1% in fiscal 2022 compared to fiscal 2021 primarily due to a 20.8% decrease in homes delivered, partially offset by a 18.5% increase in average sales price.
+Added: The increase in average sales price was mainly the result of price increases in certain communities. 
+Added: Income before income taxes increased $9.2 million to $207.5 million in fiscal 2022 compared to the prior year mainly due to an increase in gross margin percentage, before cost of sales interest expense for fiscal 2022 compared to the prior year, partially offset by a $10.9 million increase in inventory impairments and land option write-offs.
+Added: Homebuilding revenues increased 26.9% in fiscal 2021 compared to fiscal 2020 primarily due to a 14.2% increase in homes delivered and an 11.1% increase in average sales price.
+Added: The increase in average sales price was the result of new communities delivering higher priced, larger single family homes in higher-end submarkets of the segment in fiscal 2021 compared to some communities delivering in fiscal 2020 that had lower priced, smaller single-family homes in lower-end submarkets of the segment that are no longer delivering.
+Added: Also impacting the increase in average sales price was price increases in certain communities.
+Added: Income before income taxes increased $113.7 million to $198.3 million in fiscal 2021 compared to the prior year mainly due to the increase in homebuilding revenues discussed above and an increase in gross margin, percentage before cost of sales interest expense for fiscal 2021 compared to the prior year, partially offset by a $0.9 million increase in inventory impairments and land option write-offs.
Financial Services
Financial services consist primarily of originating mortgages from our home buyers, selling such mortgages in the secondary market, and title insurance activities.
−Removed: We use mandatory investor commitments and forward sales of MBS to hedge our mortgage-related interest rate exposure on agency and government loans.
+Added: We use mandatory investor commitments and forward sales of mortgage-backed securities ("MBS") to hedge our mortgage-related interest rate exposure on agency and government loans.
These instruments involve, to varying degrees, elements of credit and interest rate risk.
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The remaining 1.1%, 0.7% and 1.1% of our loan originations represent loans which exceed conforming conventions.
−Removed: Profits and losses relating to the sale of mortgage loans are recognized when legal control passes to the buyer of the mortgage and the sales price is collected.
−Removed: During the years ended October 31, 2021, 2020 and 2019, financial services provided a $37.6 million, $32.1 million and $17.6 million pretax profit, respectively.
−Removed: In fiscal 2021 and 2020, financial services pretax profit increased $5.5 million and $14.5 million, respectively, from the respective prior year primarily due to the increase in homebuilding deliveries and an increase in the average price of the loans settled. Also impacting the increase in fiscal 2021 and 2020 was the increase in the basis point spread between the loans originated and the implied rate from the sale of the loans.
−Removed: In the market areas served by our wholly owned mortgage banking subsidiaries, 68.3%, 69.3%, and 70.9% of our noncash home buyers obtained mortgages originated by these subsidiaries during the years ended October 31, 2021, 2020 and 2019, respectively.
+Added: Realized gains and losses relating to the sale of mortgage loans are recognized when control passes to the buyer of the mortgage.
+Added: During the years ended October 31, 2022, 2021 and 2020, financial services provided $19.1 million, $37.6 million and $32.1 million of income before income taxes, respectively.
+Added: In fiscal 2022, financial services income before income taxes decreased $18.5 million from the prior year primarily due to the decrease in homebuilding deliveries and a decrease in the basis point spread between the loans originated and the implied rate from our sale of the loans.
+Added: In fiscal 2021, financial services income before income taxes increased $5.5 million from the prior year due to the increase in homebuilding deliveries and an increase in the average price of the loans settled. Also impacting the increase in fiscal 2021 was the increase in the basis point spread between the loans originated and the implied rate from the sale of the loans.
+Added: In the markets served by our wholly owned mortgage banking subsidiaries, 58.8%, 68.3% and 69.3% of our noncash home buyers obtained mortgages originated by these subsidiaries during the years ended October 31, 2022, 2021 and 2020, respectively.
Corporate General and Administrative
Corporate general and administrative expenses include the operations at our headquarters in New Jersey.
−Removed: These expenses include payroll, stock compensation, legal expenses, rent and facility costs and other costs associated with our executive offices, information services, human resources, corporate accounting, training, treasury, process redesign, internal audit, national and digital marketing, construction services and administration of insurance, quality and safety.
−Removed: Corporate general and administrative expenses increased $26.1 million for the year ended October 31, 2021 compared to the year ended October 31, 2020 and increased $14.2 million for the year ended October 31, 2020 compared to the year ended October 31, 2019.
−Removed: The increase in expense for fiscal 2021 was mainly due to the increase in total variable compensation expenses related to performance based compensation attributable to improved profitability and to the grants of phantom stock awards under our 2019 LTIP.
−Removed: The Company's phantom shares issued under the 2019 LTIP are classified as liabilities under the applicable accounting guidance, which requires remeasurement of the awards at each reporting period and consequently, has resulted in additional expense in fiscal 2021 as a result of movement in our stock price during the fiscal year.
−Removed: Had equity-classified shares been utilized for the 2019 LTIP, there would not have been additional expense recognized related to the movement in our stock price.
−Removed: The increase in expense for fiscal 2020 was mainly due to an increase in stock compensation expense, primarily attributed to our long-term incentive plans achieving above target metrics for the plan years 2018 and 2019 as a result of fiscal year 2020 profit.
−Removed: Also contributing to the increase in expense for fiscal 2020 were additional costs pertaining to software licenses and support fees for cybersecurity and monitoring services.
+Added: These expenses include payroll, stock compensation, facility costs and rent and other costs associated with our executive offices, legal expenses, information services, human resources, corporate accounting, training, treasury, process redesign, internal audit, national and digital marketing, construction services and administration of insurance, quality and safety.
+Added: Corporate general and administrative expenses decreased $4.1 million for the year ended October 31, 2022 compared to the year ended October 31, 2021 and increased $26.1 million for the year ended October 31, 2021 compared to the year ended October 31, 2020.
+Added: The decrease in expense for fiscal 2022 was primarily due to decreases in compensation expense, mainly related to the grants of phantom stock awards under our 2019 long-term incentive plan ("2019 LTIP"), for which expense is impacted by the change in our stock price each period.
+Added: The Company's phantom shares issued under the 2019 LTIP are classified as liabilities under the applicable accounting guidance, which requires remeasurement of the awards at each reporting period.
+Added: During fiscal 2022, the Company experienced a significant decrease in our stock price.
+Added: As a result, the remeasurement generated a reduction in compensation expense.
+Added: Conversely during fiscal 2021, the Company experienced a significant increase in our stock price.
+Added: As a result, the remeasurement generated an increase in compensation expense for fiscal 2021 as compared to fiscal 2020.
+Added: Had equity-classified shares been utilized for the 2019 LTIP, there would not have been an expense recognized related to the movement in our stock price in fiscal 2021.
+Added: The increase in expense in fiscal 2021 was further impacted by increases in total variable compensation expenses related to performance-based compensation attributable to improved profitability.
Other Interest
−Removed: Other interest decreased $26.1 million to $77.7 million for the year ended October 31, 2021 compared to October 31, 2020, and increased $13.7 million to $103.8 million for the year ended October 31, 2020 compared to October 31, 2019.
−Removed: Our assets that qualify for interest capitalization (inventory under development) are less than our debt, and therefore a portion of interest not covered by qualifying assets must be directly expensed. In fiscal 2021, the decrease was primarily due to a decrease in nonrecourse mortgages, inventory financing arrangements and total notes payable as compared to the prior fiscal year. In fiscal 2020, the increase was because we incurred more interest from our third-party inventory financing during fiscal 2020, and as a result of the financing transactions we completed in the fourth quarter of fiscal 2019 and the first quarter of fiscal 2020. 
−Removed: (Loss) Gain on Extinguishment of Debt
−Removed: On July 30, 2021, the Company redeemed in full all $111.2 million aggregate principal amount of its 10.0% Senior Secured Notes due 2022.
+Added: Other interest decreased $30.4 million to $47.3 million for the year ended October 31, 2022 compared to the year ended October 31, 2021 and decreased $26.1 million to $77.7 million for the year ended October 31, 2021 compared to the year ended October 31, 2020. Our assets that qualify for interest capitalization (inventory under development) are less than our debt, and therefore the portion of interest not covered by qualifying assets is directly expensed.
+Added: In fiscal 2022, other interest decreased as a result of redeeming $100.0 million in principal of our debt (as discussed below) and having less debt in excess of inventory due to an increase in our qualifying assets during the period.
+Added: In fiscal 2021, the decrease was primarily due to a decrease in interest on nonrecourse mortgages, inventory financing arrangements and total notes payable as compared to the prior fiscal year.  
+Added: (Loss) Gain on Extinguishment of Debt, Net
+Added: On April 29, 2022, we redeemed $100.0 million aggregate principal amount of the 7.75% Senior Secured 1.125 Lien Notes due 2026.
+Added: The aggregate purchase price for this redemption was $105.5 million, which included accrued and unpaid interest and which was funded with cash on hand.
+Added: This redemption resulted in a loss on extinguishment of debt of $6.8 million for the year ended October 31, 2022, net of the write-off of unamortized discounts, financing costs and fees.
+Added: On July 30, 2021, we redeemed in full all $111.2 million aggregate principal amount of the 10.0% Senior Secured Notes due 2022.
The aggregate purchase price for this redemption was $111.7 million, which included accrued and unpaid interest.
−Removed: This redemption resulted in a loss on extinguishment of debt of $0.3 million for the year ended October 31, 2021, net of the write-off of unamortized financing costs and fees.
−Removed: The loss from the redemption is included in the Consolidated Statement of Operations as "Loss on extinguishment of debt".
−Removed: On August 2, 2021, the Company redeemed in full all $69.7 million aggregate principal amount of its 10.5% Senior Secured Notes due 2024.
+Added: This redemption resulted in a loss on extinguishment of debt of $0.3 million for the year ended October 31, 2021, net of the write-off of unamortized discounts, financing costs and fees.
+Added: On August 2, 2021, we redeemed in full all $69.7 million aggregate principal amount of our 10.5% Senior Secured Notes due 2024.
The aggregate purchase price for this redemption was $71.9 million, which included accrued and unpaid interest.
This redemption resulted in a loss on extinguishment of debt of $3.4 million for the year ended October 31, 2021, net of the write-off of unamortized discounts, financing costs and fees.
−Removed: The loss from the redemption is included in the Consolidated Statement of Operations as "Loss on extinguishment of debt".
−Removed: On December 10, 2019, K.
−Removed: Hovnanian entered into a credit agreement providing for $81.5 million of senior secured 1.75 lien term loans in exchange for $163.0 million of senior unsecured term loans.
−Removed: On December 10, 2019, K.
−Removed: Hovnanian also issued $158.5 million of 10.0% Senior Secured 1.75 Lien Notes due 2025 in exchange for $23.2 million of 10.0% Senior Secured Notes due 2022 and $141.7 million 10.5% Senior Secured Notes due 2024.
−Removed: These transactions were accounted for in accordance with ASC 470-60, resulting in a net gain on extinguishment of debt of $9.2 million.
−Removed: During the year ended October 31, 2020, the Company repurchased in open market transactions $25.5 million aggregate principal amount of 10.0% Senior Secured Notes due 2022.
−Removed: The aggregate purchase price for these repurchases was $21.4 million, which included accrued and unpaid interest.
−Removed: These repurchases resulted in a gain on extinguishment of debt of $4.1 million for the year ended October 31, 2020, net of the write-off of unamortized financing costs and fees.
−Removed: The gains from the repurchases are included in the Consolidated Statement of Operations as "Gain (loss) on extinguishment of debt".
−Removed: As a result of the financing transactions we consummated on October 31, 2019 and discussed under Note 9 to the Consolidated Financial Statements, we incurred a $42.4 million loss on extinguishment of debt, a majority of which was non-cash.
Income from Unconsolidated Joint Ventures
Income from unconsolidated joint ventures consists of our share of the earnings or losses of our joint ventures.
−Removed: Income from unconsolidated joint ventures decreased $7.8 million for the year ended October 31, 2021 from income of $16.6 million for the year ended October 31, 2020 to income of $8.8 million and decreased $12.3 million for the year ended October 31, 2020 from income of $28.9 million for the year ended October 31, 2019 to income of $16.6 million.
−Removed: In both cases, the decreases were primarily due to the recognition of our share of income from certain of our joint ventures delivering fewer homes in fiscal 2021 compared to fiscal 2020 and in fiscal 2020 as compared to fiscal 2019.
−Removed: Also impacting the decrease in fiscal 2020 was income recorded in the first quarter of fiscal 2019 related to the return of capital from an unconsolidated joint venture for which we had previously written-off our investment. 
−Removed: The total benefit for the year ended October 31, 2021 was $418.0 million.
−Removed: The benefit was primarily due to the reversal of a substantial portion of our valuation allowance previously recorded against our deferred tax assets.
−Removed: The total income tax expense of $4.5 million and $2.4 million for the years ended October 31, 2020 and 2019, respectively, was primarily related to state tax expense from income generated in states where we do not have net operating loss ("NOL") carryforwards to offset the current year income. In addition, the expense for the year ended October 31, 2020 was also related to state tax expense from the impact of a cancellation of debt income recorded for tax purposes but not for GAAP purposes, creating a permanent difference.
−Removed: Deferred federal and state income tax assets ("DTAs") primarily represent the deferred tax benefits arising from NOL carryforwards and temporary differences between book and tax income which will be recognized in future years as an offset against future taxable income.
+Added: Income from unconsolidated joint ventures increased $20.2 million for the year ended October 31, 2022 from income of $8.8 million for the year ended October 31, 2021 to income of $29.0 million and decreased $7.8 million for the year ended October 31, 2021 from income of $16.6 million for the year ended October 31, 2020 to income of $8.8 million.
+Added: The increase in fiscal 2022 was primarily due to the recognition of our share of income from two of our unconsolidated joint ventures based on the joint venture partner achieving certain return hurdles, in compliance with the joint venture agreement, and as a result, the Company was able to recognize a higher share of the unconsolidated joint venture’s income.
+Added: The decrease in fiscal 2021 was primarily due to the recognition of our share of income from certain of our joint ventures delivering fewer homes in fiscal 2021 compared to fiscal 2020.
+Added: The total income tax expense for the year ended October 31, 2022 was $94.3 million. 
+Added: The expense was primarily due to federal and state tax expense recorded as a result of our income before income taxes.
+Added: The federal tax expense is not paid in cash as it is offset by the use of our existing net operating loss (“NOL”) carryforwards.
+Added: The total income tax benefit for the year ended October 31, 2021 was $418.0 million.
+Added: The benefit was primarily due to the reversal of a substantial portion of our valuation allowance previously recorded against our deferred tax assets (“DTAs”).
+Added: The total income tax expense of $4.5 million for the year ended October 31, 2020 was primarily related to state tax expense from income generated in states where we do not have NOL carryforwards to offset the current year income. In addition, the expense for the year ended October 31, 2020 was primarily related to state tax expense from the impact of a cancellation of debt income recorded for tax purposes but not for U.S.
+Added: GAAP purposes, creating a permanent difference.
+Added: Deferred federal and state income tax assets primarily represent the deferred tax benefits arising from NOL carryforwards and temporary differences between book and tax income which will be recognized in future years as an offset against future taxable income.
If the combination of future years’
3 unchanged sentences
As of October 31, 2022, we considered all available positive and negative evidence to determine whether, based on the weight of that evidence, our valuation allowance for our DTAs was appropriate in accordance with ASC 740.
−Removed: Based on our analysis, we determined that the current valuation allowance for deferred taxes of $101.6 million as of October 31, 2021, which partially reserves for our state DTAs, is appropriate.
+Added: Based on our analysis, we determined that the current valuation allowance for deferred taxes was $95.7 million as of October 31, 2022.
See Note 11 to the Consolidated Financial Statements for further information.
+Added: Deferred tax assets, net, of $344.8 million at October 31, 2022 decreased $80.9 million from October 31, 2021, due to the utilization of our DTAs to offset tax expense on taxable income during fiscal 2022.
Contractual Obligations
4 unchanged sentences
Operating leases (5)
−Removed: Total contractual obligations exclude our accrual for uncertain tax positions of $0.8 million recorded for financial reporting purposes as of October 31, 2021 because we were unable to make reasonable estimates as to the period of cash settlement with the respective taxing authorities.
−Removed: Represents our senior secured and unsecured term loan credit facilities, senior secured and senior notes and other notes payable and $585.4 million of related interest payments for the life of such debt.
−Removed: Does not include $125.1 million of nonrecourse mortgages secured by inventory.
+Added: Total contractual obligations exclude our accrual for uncertain tax positions of $0.3 million recorded for financial reporting purposes as of October 31, 2022 because we were unable to make reasonable estimates as to the period of cash settlement with the respective taxing authorities.
+Added: Represents our senior secured and unsecured term loan credit facilities, senior secured and senior notes and other notes payable and $441.8 million of related interest payments for the life of such debt.
+Added: Does not include $144.8 million of nonrecourse mortgages secured by inventory.
These mortgages have various maturities spread over the next two to three years and are paid off as homes are delivered.
2 unchanged sentences
Also does not include our $125.0 million Secured Credit Facility under which there were no borrowings outstanding as of October 31, 2022.
−Removed: We had outstanding letters of credit and performance bonds of $9.3 million and $223.8 million, respectively, at October 31, 2021, related principally to our obligations to local governments to construct roads and other improvements in various developments.
−Removed: We do not believe that any such letters of credit or bonds are likely to be drawn upon.  
−Removed: The annual rate of inflation in the United States hit 6.2% in October 2021, the highest in more than three decades, as measured by the Consumer Price Index (CPI).
−Removed: Inflation has a long-term effect, because increasing costs of land, materials and labor result in increasing sale prices of our homes. In general, these
−Removed: price increases have been commensurate with the general rate of inflation in our housing markets and have not had a significant adverse effect on the sale of our homes. A significant risk faced by the housing industry generally is that rising house construction costs, including land and interest costs, will substantially outpace increases in the income of potential purchasers and therefore limit our ability to raise home sale prices, which may result in lower gross margins.
−Removed: Inflation has a lesser short-term effect, because we generally negotiate fixed price contracts with many, but not all, of our subcontractors and material suppliers for the construction of our homes. These prices usually are applicable for a specified number of residential buildings or for a time period of between three to twelve months. Construction costs for residential buildings represent approximately 53.7% of our homebuilding cost of sales for fiscal 2021.
+Added: (5)             
+Added: Lease payments exclude $13.7 million of legally binding minimum lease payments for office leases signed but not yet commenced as of October 31, 2022.
+Added: We had outstanding letters of credit and performance bonds of $6.0 million and $234.9 million, respectively, at October 31, 2022, related primarily to our obligations to local governments to construct roads and other improvements in various developments.
+Added: We do not believe that any such letters of credit or performance bonds are likely to be drawn upon.  
+Added: Capital Resources and Liquidity
+Added: Our total liquidity at October 31, 2022 was $457.3 million, including $326.2 million in homebuilding cash and cash equivalents and $125.0 million of borrowing capacity under our senior secured revolving credit facility.
+Added: This was above our target liquidity range of $170.0 to $245.0 million.
+Added: We believe that our cash on hand together with available borrowings on our senior secured revolving credit facility will be sufficient through fiscal 2023 to finance our working capital requirements.
+Added: We have historically funded our homebuilding and financial services operations with cash flows from operating activities, borrowings under our credit facilities, the issuance of new debt and equity securities and other financing activities.
+Added: We may not be able to obtain desired financing even if market conditions, including then-current market available interest rates (in recent years, we have not been able to access the traditional capital and bank lending markets at competitive interest rates due to our highly leveraged capital structure), would otherwise be favorable, which could also impact our ability to grow our business. 
+Added: Operating, Investing and Financing Cash Flow Activities
+Added: We spent $759.3 million on land and land development during fiscal 2022, along with $105.5 million for the $100.0 million partial redemption of our 7.75% Senior Secured 1.125 Lien Notes due 2026.
+Added: After considering this land and land development spending, debt payment and all other operating activities, including revenue received from deliveries, we had $89.5 million in cash provided from operations.
+Added: During fiscal 2022, cash used in investing activities was $2.2 million, primarily due to the acquisition of certain fixed assets, partially offset by distributions of capital from existing unconsolidated joint ventures.
+Added: Cash used in financing activities was $16.5 million during fiscal 2022, which in addition to the $100.0 million debt redemption mentioned above, was due primarily to net payments related to our mortgage warehouse lines of credit, repurchases of common stock, and the payment of preferred dividends, partially offset by net proceeds from nonrecourse mortgage financings, land banking and model sale leaseback financings during the period.
+Added: We intend to continue to use nonrecourse mortgages, model sale leasebacks, joint ventures, and, subject to covenant restrictions in our debt instruments, land banking programs as our business needs dictate.
+Added: Our cash uses during the years ended October 31, 2022 and 2021 were for operating expenses, land purchases, land deposits, land development, construction spending, debt payments, state income taxes, interest payments, preferred dividend payments, financing transaction costs, debt and equity repurchases, litigation matters and investments in unconsolidated joint ventures. During these periods, we provided for our cash requirements from available cash on hand, housing and land sales, financing transactions, model sale leasebacks, land banking transactions, unconsolidated joint ventures, financial service revenues and other revenues.
+Added: Our net income (loss) historically does not approximate cash flow from operating activities.
+Added: The difference between net income (loss) and cash flow from operating activities is primarily caused by changes in inventory levels together with changes in receivables, prepaid expenses and other assets, mortgage loans held for sale, accrued interest, deferred income taxes, accounts payable and other liabilities, and noncash charges relating to depreciation, stock compensation and impairments.
+Added: When we are expanding our operations, inventory levels, prepaid expenses and other assets increase causing cash flow from operating activities to decrease.
+Added: Certain liabilities also increase as operations expand and partially offset the negative effect on cash flow from operations caused by the increase in inventory, prepaid expenses and other assets.
+Added: Similarly, as our mortgage operations expand, net income from these operations increases, but for cash flow purposes, net income is partially offset by the net change in mortgage assets and liabilities.
+Added: The opposite is true as our investment in new land purchases and development of new communities decrease, causing us to generate positive cash flow from operations. 
+Added: See “Inventories”
+Added: below for a detailed discussion of our inventory position.
+Added: Debt Transactions
+Added: Senior notes and credit facilities balances as of October 31, 2022 and October 31, 2021, were as follows:
+Added: (In thousands)
+Added: Senior Secured Notes
+Added: Senior Unsecured Term Loan Credit Facility due February 1, 2027
+Added: Senior Secured 1.75 Lien Term Loan Credit Facility due January 31, 2028
+Added: Senior Secured Revolving Credit Facility (1)
+Added: Net (discounts), premiums and unamortized debt issuance costs
+Added: Total senior notes and credit facilities, net of discounts, premiums and unamortized debt issuance costs
+Added: (1) At October 31, 2022, provides for up to $125.0 million in aggregate amount of senior secured first lien revolving loans.
+Added: In the fourth quarter of fiscal 2022, we amended our Secured Credit Facility, which amendments became effective in the first quarter of fiscal 2023.
+Added: As amended, the revolving loans thereunder have a maturity of June 30, 2024 and borrowings bear interest, at K.
+Added: Hovnanian ’
+Added: s option, at either (i) a term secured overnight financing rate (subject to a floor of 1.00%) plus an applicable margin of 4.50% or (ii) an alternate base rate plus an applicable margin of 3.50%.
+Added: In addition, K.
+Added: Hovnanian will pay an unused commitment fee on the undrawn revolving commitments at a rate of 1.00% per annum.
+Added: Except for K.
+Added: Hovnanian, the issuer of the notes and borrower under the Credit Facilities (as defined below), our home mortgage subsidiaries, certain of our title insurance subsidiaries, joint ventures and subsidiaries holding interests in our joint ventures, we and each of our subsidiaries are guarantors of the Credit Facilities, the senior secured notes and senior notes outstanding at October 31, 2022 (except for the 8.0% Senior Notes due 2027 which are not guaranteed by K.
+Added: Hovnanian at Sunrise Trail III, LLC, a wholly-owned subsidiary of the Company) (collectively, the “Notes Guarantors”).
+Added: The credit agreements governing the Credit Facilities and the indentures governing the senior secured and senior notes (together, the “Debt Instruments”) outstanding at October 31, 2022 do not contain any financial maintenance covenants, but do contain restrictive covenants that limit, among other things, the ability of HEI and certain of its subsidiaries, including K.
+Added: Hovnanian, to incur additional indebtedness, pay dividends and make distributions on common and preferred stock, repay/repurchase certain indebtedness prior to its respective stated maturity, repurchase (including through exchanges) common and preferred stock, make other restricted payments (including investments), sell certain assets (including in certain land banking transactions), incur liens, consolidate, merge, sell or otherwise dispose of all or substantially all of their assets and enter into certain transactions with affiliates.
+Added: The Debt Instruments also contain customary events of default which would permit the lenders or holders thereof to exercise remedies with respect to the collateral (as applicable), declare the loans made under the Unsecured Term Loan Facility (defined below) (the “Unsecured Term Loans”), loans made under the Secured Term Loan Facility (defined below) (the “Secured Term Loans”) and loans made under the Secured Credit Agreement (as defined below) (the “Secured Revolving Loans”) or notes to be immediately due and payable if not cured within applicable grace periods, including the failure to make timely payments on the Unsecured Term Loans, Secured Term Loans, Secured Revolving Loans or notes or other material indebtedness, cross default to other material indebtedness, the failure to comply with agreements and covenants and specified events of bankruptcy and insolvency, with respect to the Unsecured Term Loans, Secured Term Loans and Secured Revolving Loans, material inaccuracy of representations and warranties and with respect to the Unsecured Term Loans, Secured Term Loans and Secured Revolving Loans, a change of control, and, with respect to the Secured Term Loans, Secured Revolving Loans and senior secured notes, the failure of the documents granting security for the obligations under the secured Debt Instruments to be in full force and effect, and the failure of the liens on any material portion of the collateral securing the obligations under the secured Debt Instruments to be valid and perfected.
+Added: As of October 31, 2022, we believe we were in compliance with the covenants of the Debt Instruments.
+Added: If our consolidated fixed charge coverage ratio is less than 2.0 to 1.0, as defined in the applicable Debt Instrument, we are restricted from making certain payments, including dividends (in each such case, our secured debt leverage ratio must also be less than 4.0 to 1.0), and from incurring indebtedness other than certain permitted indebtedness and nonrecourse indebtedness.
+Added: Beginning as of October 31, 2021, as a result of our improved operating results, our fixed coverage ratio was above 2.0 to 1.0 and our secured debt leverage ratio was below 4.0 to 1.0, therefore we were no longer restricted from paying dividends.
+Added: As such, we made dividend payments of $2.7 million to preferred shareholders in each quarter of fiscal 2022.
+Added: As discussed above, market conditions remain uncertain and it is difficult to predict how strongly our business will be adversely impacted or if and when we may be restricted under our Debt Instruments from continuing to pay dividends on our preferred stock.
+Added: Under the terms of our Debt Instruments, we have the right to make certain redemptions and prepayments and, depending on market conditions, our strategic priorities and covenant restrictions, may do so from time to time (for example, we redeemed $100 million aggregate principal amount of our senior secured notes during the second quarter of fiscal 2022).
+Added: We also continue to actively analyze and evaluate our capital structure and explore transactions to simplify our capital structure and to strengthen our balance sheet, including those that reduce leverage, interest rates and/or extend maturities, and will seek to do so with the right opportunity.
+Added: We may also continue to make debt or equity purchases and/or exchanges from time to time through tender offers, exchange offers, redemptions, open market purchases, private transactions, or otherwise, or seek to raise additional debt or equity capital, depending on market conditions and covenant restrictions.
+Added: Any liquidity-enhancing or other capital raising or refinancing transaction will depend on identifying counterparties, negotiation of documentation and applicable closing conditions and any required approvals.
+Added: Due to covenant restrictions in our Debt Instruments, we are currently limited in the amount of debt we can incur, even if market conditions, including then-current market available interest rates (in recent years, we have not been able to access the traditional capital and bank lending markets at competitive interest rates due to our highly leveraged capital structure), would otherwise be favorable, which could also impact our ability to grow our business.
+Added: See Note 9 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for a further discussion of K.
+Added: Hovnanian’s Credit Facilities, senior secured notes and senior notes, including information with respect to the collateral securing our Debt Instruments.
+Added: Mortgages and Notes Payable
+Added: We have nonrecourse mortgage loans for certain communities totaling $144.8 million and $125.1 million, net of debt issuance costs, at October 31, 2022 and October 31, 2021, respectively, which are secured by the related real property, including any improvements, with an aggregate book value of $418.9 million and $448.5 million, respectively.
+Added: The weighted-average interest rate on these obligations was 6.7% and 4.4% at October 31, 2022 and October 31, 2021, respectively, and the mortgage loan payments on each community primarily correspond to home deliveries.
+Added:     
+Added: Our wholly owned mortgage banking subsidiary, K.
+Added: Hovnanian American Mortgage, LLC (“K.
+Added: Hovnanian Mortgage”), originates mortgage loans primarily from the sale of our homes.
+Added: Such mortgage loans and related servicing rights are generally sold in the secondary mortgage market within a short period of time.
+Added: In certain instances, we retain the servicing rights for a small amount of loans.
+Added: Hovnanian Mortgage finances the origination of mortgage loans through various master repurchase agreements, which are recorded in “Financial services”
+Added: liabilities on the Consolidated Balance Sheets.
+Added: The loans are secured by the mortgages held for sale and are repaid when we sell the underlying mortgage loans to permanent investors. As of October 31, 2022 and 2021, we had an aggregate of $94.3 million and $134.9 million, respectively, outstanding under several of K.
+Added: Hovnanian Mortgage’s short-term borrowing facilities.
+Added:    
+Added:  See Note 8 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for a further discussion of these agreements and facilities.
+Added: On September 1, 2022, our Board of Directors terminated our prior repurchase program and authorized a new program for the repurchase of up to $50.0 million of our Class A common stock.
+Added: Under the new repurchase program, repurchases may be made from time to time in open market transactions, in privately negotiated transactions or otherwise.
+Added: The timing and the actual dollar amount repurchased will depend on a variety of factors, including legal requirements, price, future tax implications and economic and market conditions.
+Added: The repurchase program may be changed, suspended or discontinued at any time and does not have a specified expiration date.
+Added: During the year ended October 31, 2022, we repurchased 312,471 shares, with a market value of $12.2 million, or $39.12 per share, which were added to treasury stock.
+Added: There were no shares purchased during the year ended October 31, 2021 or 2020. As of October 31, 2022, $37.8 million of our Class A common stock is available to repurchase under our share repurchase program.
+Added: (See Part II, Item 5 for information on equity purchases).  
+Added: On July 12, 2005, we issued 5,600 shares of 7.625% Series A preferred stock, with a liquidation preference of $25,000 per share.
+Added: Dividends on the Series A preferred stock are not cumulative and are payable at an annual rate of 7.625%.
+Added: The Series A preferred stock is not convertible into the Company’s common stock and is redeemable in whole or in part at our option at the liquidation preference of the shares.
+Added: The Series A preferred stock is traded as depositary shares, with each depositary share representing 1/1000th of a share of Series A preferred stock.
+Added: The depositary shares are listed on the NASDAQ Global Market under the symbol “HOVNP.”
+Added: In fiscal 2022 we paid dividends of $10.7 million in the aggregate on the Series A preferred stock.
+Added: In fiscal 2021 and 2020, we did not pay any dividends on the Series A preferred stock due to covenant restrictions in our debt instruments.
+Added: Unconsolidated Joint Ventures  
+Added: We have investments in unconsolidated joint ventures in various markets where our homebuilding operations are located.
+Added: As of October 31, 2022 and 2021, we had investments in six and nine unconsolidated homebuilding joint ventures, respectively, and one unconsolidated land development joint venture for both periods.
+Added: Our unconsolidated joint ventures had total combined assets of $615.2 million and $611.8 million at October 31, 2022 and 2021, respectively.
+Added: Our investments in unconsolidated joint ventures totaled $74.9 million and $60.9 million at October 31, 2022 and 2021, respectively.
+Added: The increase in investments of $14.0 million during fiscal 2022 was primarily due to income recorded from one of our unconsolidated joint ventures, partially offset by partner distributions.
+Added: As of October 31, 2022 and 2021, our unconsolidated joint ventures had outstanding debt totaling $34.9 and $74.0 million, respectively, under separate construction loan agreements with different third-party lenders and affiliates of certain investment partners to finance land development activities.
+Added: The outstanding debt is secured by the underlying property and related project assets and is non-recourse to us.
+Added: Although we and our unconsolidated joint venture partners provide certain guarantees and indemnities to the lender, we do not have a guaranty or any other obligation to repay the outstanding debt or to support the value of the collateral underlying the outstanding debt.
+Added: Our guarantees are limited to performance and completion of development activities, environmental indemnification and standard warranty and representation against fraud, misrepresentation and similar actions, including a voluntary bankruptcy.
+Added: We do not believe that our existing exposure under our guaranty and indemnity obligations related to the outstanding debt is material.
+Added: We determined that none of our joint ventures were a variable interest entity.
+Added: All our unconsolidated joint ventures were accounted for under the equity method because we did not have a controlling financial interest.
+Added: See Notes 19 and 20 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for further discussion of joint ventures and variable interest entities.
+Added: Total inventory, excluding consolidated inventory not owned, increased $55.0 million during the year ended October 31, 2022, from October 31, 2021. Total inventory, excluding consolidated inventory not owned, increased in the Northeast by $25.2 million, in the Southeast by $1.1 million and in the West by $28.7 million.
+Added: These inventory fluctuations were primarily attributable to new land purchases and land development, partially offset by home deliveries and land sales during the period.
+Added: In the last few years, we have been able to acquire new land parcels at prices that we believe will generate reasonable returns under current homebuilding market conditions.
+Added: This trend may not continue in either the near or the long term. Substantially all homes under construction or completed and included in inventory at October 31, 2022 are expected to be closed during the next six to nine months.  
+Added: Consolidated inventory not owned, which consists of options related to land banking and model financing, increased $209.9 million during fiscal 2022. The increase was primarily due to an increase in land banking transactions along with an increase in the sale and leaseback of certain model homes during the period.
+Added: We have land banking arrangements, whereby we sell land parcels to land bankers and they provide us an option to purchase back finished lots on a predetermined schedule. Because of our options to repurchase these parcels, for accounting purposes in accordance with ASC 606, these transactions are considered a financing rather than a sale.
+Added: Our Consolidated Balance Sheet, at October 31, 2022, included inventory of $260.1 million recorded to “Consolidated inventory not owned,”
+Added: with a corresponding amount of $151.3 million (net of debt issuance costs) recorded to “Liabilities from inventory not owned”
+Added: for the amount of net cash received from the transactions.
+Added: In addition, we sell and lease back certain of our model homes with the right to participate in the potential profit when each home is sold to a third-party at the end of the respective lease. As a result of our continued involvement, for accounting purposes in accordance with ASC 606, these sale and leaseback transactions are considered a financing rather than a sale. Therefore, our Consolidated Balance Sheet, at October 31, 2022, included inventory of $48.5 million recorded to “Consolidated inventory not owned,”
+Added: with a corresponding amount of $51.2 million (net of debt issuance costs) recorded to “Liabilities from inventory not owned”
+Added: for the amount of net cash received from sale and leaseback transactions.
+Added: In the ordinary course of business, we enter into land and lot option purchase contracts in order to procure land or lots for the construction of homes.
+Added: Lot option contracts enable us to control significant lot positions with a minimal capital investment and substantially reduce the risks associated with land ownership and development.
+Added: At October 31, 2022, we had total cash deposits of $180.8 million to purchase land and lots with a total purchase price of $1.9 billion.
+Added: Our financial exposure is generally limited to forfeiture of the nonrefundable deposits, letters of credit and other nonrefundable amounts incurred.
+Added: We have no material third-party guarantees.
+Added: The following tables summarize home sites included in our total residential real estate:
+Added: October 31, 2022:
+Added: Consolidated total
+Added: Unconsolidated joint ventures (1)
+Added: Construction to permanent financing lots
+Added: Consolidated total
+Added: Lots controlled by unconsolidated joint ventures
+Added: October 31, 2021:
+Added: Consolidated total
+Added: Unconsolidated joint ventures (1)
+Added: Construction to permanent financing lots
+Added: Consolidated total
+Added: Lots controlled by unconsolidated joint ventures
+Added: (1) Represents active communities and home sites for our unconsolidated homebuilding joint ventures for the period.
+Added: We provide this data as a supplement to our consolidated results as an indicator of the volume managed in our unconsolidated joint ventures.
+Added: See Note 20 to the Consolidated Financial Statements for a further discussion of our unconsolidated joint ventures.
+Added: The following table summarizes our started or completed unsold homes and models, excluding unconsolidated joint ventures, in active and substantially completed communities.
+Added: The increase in unsold homes was primarily due to a conscious effort to increase our number of started unsold homes per community to provide buyers the opportunity to close quickly, and to lock in a lower mortgage rate, thereby making our homes more affordable and creating certainty as mortgage rates continued to rise through fiscal 2022.
+Added: October 31, 2022
+Added: October 31, 2021
+Added: Started or completed unsold homes and models per active selling communities(1)
+Added: Active selling communities (which are communities that are open for sale with ten or more home sites available) were 121 and 124 at October 31, 2022 and 2021, respectively.
+Added: This r atio does not include substantially completed communities, which are communities with less than ten home sites available. 
+Added: Financial Services Assets and Liabilities 
+Added: Financial services assets consist primarily of residential mortgage receivables held for sale of which $108.6 million and $149.2 million at October 31, 2022 and 2021, respectively, were being temporarily warehoused and are awaiting sale in the secondary mortgage market. The decrease in mortgage loans held for sale from October 31, 2021 was primarily related to a decrease in the volume of loans originated during the fourth quarter of fiscal 2022 compared to the fourth quarter of fiscal 2021, slightly offset by an increase in the average loan value.
+Added: Financial Services liabilities decreased $46.6 million from $182.2 million at October 31, 2021, to $135.6 million at October 31, 2022.
+Added: The decrease was primarily due to the decrease in amounts outstanding under our mortgage warehouse lines of credit, and directly correlated to the decrease in the volume of mortgage loans held for sale during the year.
+Added: The annual rate of inflation in the United States hit 7.7% in October 2022, nearly the highest in more than three decades, as measured by the Consumer Price Index ("CPI").
+Added: Inflation has a long-term effect, because increasing costs of land, materials and labor results in increasing the sale prices of our homes.
+Added: Historically, these price increases have been commensurate with the general rate of inflation in our housing markets and have not had a significant adverse effect on the sale of our homes.
+Added: A significant risk faced by the housing industry generally is that rising house construction costs, including land and interest costs, could substantially outpace increases in the income of potential purchasers and therefore limit our ability to raise home sale prices, which may result in lower gross margins.
+Added: Inflation has a lesser short-term effect, because we generally negotiate fixed-price contracts with many, but not all, of our subcontractors and material suppliers for the construction of our homes.
+Added: These prices usually are applicable for a specified number of residential buildings or for a time period of between three to 12 months.
+Added: Construction costs for residential buildings represented approximately 57.4% of our homebuilding cost of sales for fiscal year 2022.
+Added: For the second half of fiscal year 2022, continued elevated inflation created economic uncertainty that led to a quick and sharp rise in interest rates, which in turn increased mortgage rates, and adversely impacted our home sales.
+Added: Critical Accounting Policies
+Added: Management believes that the following critical accounting policies require its most significant judgments and estimates used in the preparation of the Consolidated Financial Statements:
+Added: Inventories - Inventories consist of land, land development, home construction costs, capitalized interest, construction overhead and property taxes.
+Added: Construction costs are accumulated during the period of construction and charged to cost of sales under the specific identification method.
+Added: Land, land development and common facility costs are allocated based on buildable acres to product types within each community, then charged to cost of sales equally based upon the number of homes to be constructed in each product type.
+Added: We record inventories on our Consolidated Balance Sheets at cost unless the inventory is determined to be impaired, in which case the inventory is written down to its fair value.
+Added: Our inventories consist of the following three components:
+Added: (1) sold and unsold homes and lots under development, which includes all construction, land, capitalized interest and land development costs related to started homes and land under development in our active communities;
+Added: (2) land and land options held for future development or sale, which includes all costs related to land in our communities in planning or mothballed communities;
+Added: and (3) consolidated inventory not owned, which consists of model homes financed with an investor and inventory related to land banking arrangements accounted for as financings.
+Added:    
+Added: We decide to mothball (or stop development on) certain communities when we determine that the current performance does not justify further investment at the time.
+Added: When we decide to mothball a community, the inventory is reclassified on our Consolidated Balance Sheets from “Sold and unsold homes and lots under development”
+Added: to “Land and land options held for future development or sale.”
+Added: We regularly review communities to determine if mothballing is appropriate.
+Added: We sell and lease back certain of our model homes with the right to participate in the potential profit when each home is sold to a third-party at the end of the respective lease.
+Added: As a result of our continued involvement, for accounting purposes in accordance with ASC 606, these sale and leaseback transactions are considered a financing rather than a sale.
+Added:    
+Added: We have land banking arrangements, whereby we sell our land parcels to the land banker and they provide us an option to purchase back finished lots on a predetermined basis, or quarterly schedule.
+Added: Because of our options to repurchase these parcels, for accounting purposes, in accordance with ASC 606, these transactions are considered financings rather than sales.
+Added: The recoverability of inventories and other long-lived assets is assessed in accordance with ASC 360, “Property, Plant and Equipment.”
+Added: ASC 360 requires long-lived assets, including inventories, held for development to be evaluated for impairment based on undiscounted future cash flows of the assets at the lowest level for which there are identifiable cash flows.
+Added: We evaluate impairment at the individual community level, which is the lowest level of discrete cash flows that are available.
+Added: We evaluate inventories of communities under development and held for future development for impairment when indicators of potential impairment are present.
+Added: Indicators of impairment include, but are not limited to, decreases in local housing market values, decreases in gross margins or sales absorption rates, decreases in net sales prices (base sales price, net of sales incentives), and/or actual or projected operating or cash flow losses.
+Added: The assessment of communities for indication of impairment is performed quarterly.
+Added: As part of this process, we prepare detailed budgets for all of our communities at least semi-annually and identify those communities with a projected operating loss. For those communities with projected losses, we estimate the remaining undiscounted future cash flows and compare those to the carrying value of the community, to determine if the carrying value of the asset is recoverable.
+Added: The projected operating profits, losses, or cash flows of each community can be significantly impacted by our estimates of the following:
+Added: future base selling prices;
+Added: future home sales incentives;
+Added: future home construction and land development costs;
+Added: future sales absorption pace and cancellation rates.
+Added: These estimates are dependent upon specific market conditions for each community.
+Added: While we consider available information to determine what we believe to be our best estimates as of the end of a quarterly reporting period, these estimates are subject to change in future reporting periods as facts and circumstances change.
+Added: Local market-specific conditions that may impact our estimates for a community include:
+Added: the intensity of competition within a market, including available home sales prices and home sales incentives offered by our competitors;
+Added: the current sales absorption pace for both our communities and competitor communities;
+Added: community specific attributes, such as location, availability of lots in the market, desirability and uniqueness of our community, and the size and style of homes currently being offered;
+Added: potential for alternative product offerings to respond to local market conditions;
+Added: changes by management in the sales strategy of the community;
+Added: current local market economic and demographic conditions and related trends of forecasts;
+Added: existing home inventory supplies, including foreclosures and short sales.
+Added: These and other local market-specific conditions that may be present are considered by management in preparing projection assumptions for each community.
+Added: The sales objectives can differ between our communities, even within a given market.
+Added: For example, facts and circumstances in a given community may lead us to price our homes with the objective of yielding a higher sales absorption pace, while facts and circumstances in another community may lead us to price our homes to minimize deterioration in our gross margins, although it may result in a slower sales absorption pace.
+Added: In addition, the key assumptions included in our estimate of future undiscounted cash flows may be interrelated.
+Added: For example, a decrease in estimated base sales price or an increase in homes sales incentives may result in a corresponding increase in sales absorption pace.
+Added: Additionally, a decrease in the average sales price of homes to be sold and closed in future reporting periods for one community that has not been generating what management believes to be an adequate sales absorption pace may impact the estimated cash flow assumptions of a nearby community.
+Added: Changes in our key assumptions, including estimated construction and development costs, sales absorption pace and selling strategies, could materially impact future cash flow and fair-value estimates.
+Added: Due to the number of scenarios that would result from various changes in these factors, we do not believe it is possible to develop a sensitivity analysis with a level of precision that would be meaningful to an investor.
+Added:    
+Added: If the undiscounted cash flows are more than the carrying value of the community, then the carrying amount is recoverable, and no impairment is recorded.
+Added: However, if the undiscounted cash flows are less than the carrying amount, then the community is deemed impaired and is written down to its fair value.
+Added: We determine the estimated fair value of each community by calculating the present value of its estimated future cash flows at a discount rate commensurate with the risk of the respective community, or in limited circumstances, prices for land in recent comparable sale transactions, market analysis studies, which include the estimated price a willing buyer would pay for the land (other than in a forced liquidation sale), and recent bona fide offers received from outside third parties.
+Added: The estimated future cash flow assumptions are virtually the same for both our recoverability and fair value assessments.
+Added: Should the estimates or expectations used in determining estimated cash flows or fair value, including discount rates, decrease or differ from current estimates in the future, we may be required to recognize additional impairments related to current and future communities.
+Added: The impairment of a community is allocated to each lot on a relative fair value basis.
+Added: From time to time, we write off deposits, engineering and capitalized interest costs when we determine that it is no longer probable that we will exercise options to buy land in specific locations or when we redesign communities and/or abandon certain engineering costs.
+Added: In deciding not to exercise a land option, we take into consideration changes in market conditions, the timing of required land takedowns, the willingness of land sellers to modify terms of the land option contract (including timing of land takedowns), and the availability and best use of our capital, among other factors.
+Added: The write-off is recorded in the period it is deemed not probable that the optioned property will be acquired.
+Added: Inventories held for sale are land parcels ready for sale in their current condition, where we have decided not to build homes but are instead actively marketing the land.
+Added: Land held for sale is recorded at the lower of carrying amount or fair value less costs to sell.
+Added: In determining fair value for land held for sale, management considers, among other things, prices for land in recent comparable sale transactions, market analysis studies, which include the estimated price a willing buyer would pay for the land (other than in a forced liquidation sale) and recent bona fide offers received from third parties.
+Added: Unconsolidated Homebuilding and Land Development Joint Ventures - Investments in unconsolidated homebuilding and land development joint ventures are accounted for under the equity method of accounting.
+Added: Under the equity method, we recognize our proportionate share of earnings and losses earned by the joint venture upon the delivery of lots or homes to third parties.
+Added: Our ownership interests in the joint ventures vary but our voting interests are generally 50% or less.
+Added: In determining whether or not we must consolidate joint ventures where we are the managing member of the joint venture, we assess whether the other partners have specific rights to overcome the presumption of control by us as the manager of the joint venture.
+Added: In most cases, the presumption is overcome because the joint venture agreements require that both partners agree on establishing the significant operating and capital decisions of the partnership, including budgets, in the ordinary course of business.
+Added: The evaluation of whether or not we control a joint venture can require significant judgment.
+Added: In accordance with ASC 323, “Investments - Equity Method and Joint Ventures,”
+Added: we assess our investments in unconsolidated joint ventures for recoverability, and if it is determined that a loss in value of the investment below its carrying amount is other than temporary, we write down the investment to its fair value.
+Added: We evaluate our equity investments for impairment based on the joint venture’s projected cash flows.
+Added: Warranty Costs and Construction Defect Reserves 
+Added: - We accrue for warranty costs that are covered under our existing general liability and construction defect policy as part of our general liability insurance deductible.
+Added: This accrual is expensed as selling, general, and administrative costs.
+Added: Our insurance coverage generally includes deductibles either in the aggregate or on a per-claim basis, with the exception of workers’
+Added: compensation insurance, which does not have a deductible.
+Added: Reserves for estimated losses for construction defects, warranty and bodily injury claims have been established using the assistance of a third-party actuary.
+Added: The third-party actuary uses our historical warranty and construction defect data to assist our management in estimating our unpaid claims, claim adjustment expenses and incurred but not reported claims reserves for the risks that we are assuming under the general liability and construction defect programs.
+Added: The estimates include provisions for inflation, claims handling and legal fees.
+Added: These estimates are subject to a high degree of variability due to uncertainties such as trends in construction defect claims relative to our markets and the types of products we build, claim settlement patterns, insurance industry practices and legal interpretations, among others.
+Added: Because of the high degree of judgment required in determining these estimated liability amounts, actual future costs could differ significantly from our currently estimated amounts.
+Added: In addition, we establish a warranty accrual for lower cost-related issues to cover home repairs, community amenities and land development infrastructure that are not covered under our general liability and construction defect policy.
+Added: We accrue an estimate for these warranty costs as part of cost of sales at the time each home is closed and title and possession have been transferred to the homebuyer.
+Added: Deferred Income Taxes - Deferred income taxes are provided for temporary differences between amounts recorded for financial reporting and for income tax purposes.
+Added: If the combination of future years’
+Added: income (or loss) combined with the reversal of the timing differences results in a loss, such losses can be carried forward to future years to recover the deferred tax assets.
+Added: The Company evaluates all significant available positive and negative evidence, including the existence of losses in recent years and its forecast of future taxable income, in assessing the need for a valuation allowance.
+Added: The underlying assumptions the Company uses in forecasting future taxable income require significant judgment and consideration of the Company's recent performance.
+Added: The ultimate realization of deferred tax assets is dependent on the generation of future taxable income during the periods in which temporary differences or carry-forwards are deductible or creditable.
+Added: A valuation allowance is provided to offset deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
+Added: In evaluating the exposures associated with our various tax filing positions, we recognize tax liabilities in accordance with ASC 740, for more likely than not exposures. We re-evaluate the exposures associated with our tax positions on a quarterly basis. This evaluation is based on factors such as changes in facts or circumstances, changes in tax law, new audit activity by taxing authorities and effectively settled issues. Determining whether an uncertain tax position is effectively settled requires judgment. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision. A number of years may elapse before a particular matter for which we have established a liability is audited and fully resolved or clarified. We adjust our liability for unrecognized tax benefits and income tax provision in the period in which an uncertain tax position is effectively settled, or the statute of limitations expires for the relevant taxing authority to examine the tax position or when more information becomes available.
+Added: Due to the complexity of some of these uncertainties, the ultimate resolution may result in a liability that is materially different from our current estimate. Any such changes will be reflected as increases or decreases to income tax expense in the period in which they are determined.
+Added: Recent Accounting Pronouncements
+Added: See Note 3 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
Safe Harbor Statement 
10 unchanged sentences
Changes in general and local economic, industry and business conditions and impacts of a significant homebuilding downturn;
−Removed: Shortages in, and price fluctuations of, raw materials and labor, including due to changes in trade policies, including the imposition of tariffs and duties on homebuilding materials and products and related trade disputes with and retaliatory measures taken by other countries;
−Removed: The outbreak and spread of COVID-19 and the measures that governments, agencies, law enforcement and/or health authorities implement to address it;
+Added: Shortages in, and price fluctuations of, raw materials and labor, including due to geopolitical events, changes in trade policies, including the imposition of tariffs and duties on homebuilding materials and products, and related trade disputes with, and retaliatory measures taken by other countries;
+Added: Fluctuations in interest rates and the availability of mortgage financing; 
Adverse weather and other environmental conditions and natural disasters;
4 unchanged sentences
Increases in cancellations of agreements of sale;
−Removed: Fluctuations in interest rates and the availability of mortgage financing; 
+Added: Increases in inflation;
Changes in tax laws affecting the after-tax costs of owning a home; 
11 unchanged sentences
Significant influence of the Company’s controlling stockholders;
−Removed: Availability of net operating loss carryforwards;
+Added: Availability of net operating loss carryforwards; 
Loss of key management personnel or failure to attract qualified personnel;
+Added: The outbreak and spread of COVID-19 and the measures that governments, agencies, law enforcement and/or health authorities implement to address it, as well as continuing macroeconomic effects of the pandemic.
    
4 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.