Good morning and thank you for joining us today for Hovnanian Enterprises Fiscal 2015 Fourth Quarter and Year End Earnings Conference Call. An archive of the webcast will be available after the completion of the call and run for 12 months. This conference is being recorded for rebroadcast and all participants are currently in a listen-only mode. Management will make some opening remarks about the fourth quarter results and then open up the line for questions. The Company will also be webcasting a slide presentation along with the opening comments from management. Those slides are available on the Investors' page of the Company's Web site at www.khov.com. Those listeners who would like to follow along should log on to the Web site at this time. Before we begin, I would like to turn the call over to Jeff O'Keefe, Vice President-Investor Relations. Jeff, please go ahead.

Thank you, operator, and thank you all for participating in this morning's call to review the results of our fourth quarter and year ended October 31, 2015. All statements in this conference call that are not historical facts should be considered as forward-looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such forward-looking statements include but are not limited to the statements related to the Company's goals and expectations with respect to its financial results for the current or future period, including total revenues and adjusted pre-tax profit. Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved. By their nature, forward-looking statements speak only as of the date they’re made, are not guarantees of future performance or results and are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. Therefore, actual results could differ materially and adversely from those forward looking statements as a result of a variety of factors. Such risks, uncertainties and other factors include, but are not limited to, changes in general and local economic, industry and business conditions and impacts of the sustained homebuilding downturn; adverse weather and other environmental conditions and natural disasters; levels of indebtedness and restrictions on the Company's operations and activities imposed by the agreements governing the Company's outstanding indebtedness; the Company's sources of liquidity; changes in credit ratings; changes in market conditions and…

Thanks, Jeff. We’re pleased that we’ve exceeded our guidance for gross margin, SG&A ratios and pretax profit for the fourth quarter of fiscal ’15, it is a great ending to the year and a precursor of better performance ahead. I’d like to review a few of the key metrics for the quarter and let me get started with net contracts which can be found on Slide number 3. On the left hand side we show the dollar amount of net contracts including unconsolidated joint ventures increased 29% while the number of net contracts we signed increased 21%. If you look at consolidated net contracts without the joint ventures as we’ve done on the right hand side, we had a 22% increase in dollars and 18% increase in the number of net contracts. On Slide 4, our net contracts per community including our unconsolidated joint ventures increased from 6.4 to 7.1 during the fourth quarter up 11% while consolidated net contracts per community increased 8%. On top of that, our community count increased by 9% during the fourth quarter. Combination of more communities selling at a better pace yielded from solid results for us. Slide 5, shows on the left side, that the dollar amount of our contract backlog including unconsolidated joint ventures increased 49% to $1.35 billion while the number of homes in backlog increased 33%. Consolidated net contract backlog shown on the right increased 42% to $1.2 billion at the end of the fourth quarter compared to $856 million at quarter end last year. At the end of fourth quarter our consolidated backlog units increased from 2,229 to 2,905, up 30% year-over-year. This 42% increase in consolidated backlog dollars combined with the recent strength in sales trends bodes well for expected revenues and profitability growth during 2016. Turning to…

Thanks, Ara. We were pleased that we exceeded our fourth quarter guidance for gross margin profitability and lower SG&A expense ratio. However our total revenues fell a bit short of our guidance. This was driven by two factors, a 3% miss and the miss of actual deliveries been skewed more towards lower priced homes than we expected. Similar to the comments you've heard from some of our peers, the delivery miss was caused by construction delays in several of our markets. This resulted in our fourth quarter total revenues being $52 million less than our guidance of $745 million. Turning now to Slide 11. We show that dollar amount of our net contract including unconsolidated joint ventures per month for each of the past 12 months. Most recent month is shown in blue, the same for the previous year is shown in yellow and we use green arrows pointed up to indicate an increase and down red arrows to indicate a decrease. Our recent sales trends have been strong, 11 of the past 12 months have increased. More recently the results have been even stronger. The dollar value of our net contracts for the past eight months increased 27% year-over-year when you include unconsolidated joint ventures and increased 20% year-over-year on a consolidated basis. The year-over-year increases in our sales results should lead to dramatically improving revenue in fiscal 2016. While Slide 11 shows the dollar amount of net contracts, Slide 12 shows the number of monthly net contracts per unit. For seven of the last eight months our year-over-year monthly comparisons have been positive. On Slide 13 we show our net contract results restacked as if we had a September quarter end so that we could compare our results to nine of our public peers who report a September…

Thanks, Larry. I was pleased we exceeded our fourth quarter guidance and profitability even without the extra boost from reserves. If you move on to liquidity, we're comfortable with our position at year end and given the steps that Larry outlined to enhanced our liquidity position, I'm confident that we can remain within our target range of cash even if we don’t refinance our bonds maturing in January and May of 2016. I want to elaborate on our inventory for a moment by taking a look at our longer term trends in our inventory levels. Slide 25 shows quarterly inventory levels going back to 2008. Because of the financial constraints that we had in the great recession, we had less capital to spend on land and therefore near the bottom of the cycle we were less aggressive on investing in land than some of our peers. As a result many of our peers have been able to recover much more quickly and achieved improved levels of profitability sooner than we have. This is apparent when you look at the lack of growth we had in our inventory from the fourth quarter '09 through the third quarter of 2012. During this time our inventory was relative stable as we didn't have sufficient capital to grow our inventory levels. That changed recently as you can see by the 71% increase in inventory on the right hand portion of the slide. If you turn to Slide 26, you can see that even more clearly. Since the fourth quarter of fiscal '12 we've increased from -- our inventories from $891 million to $1.5 billion, up 71%. Since much of our inventory investment is in raw land it takes time to obtain the final permits, grade the land, install the utilities and build the streets.…

Thank you. The Company will now answer questions, so that everyone has an opportunity to ask questions. Participants will be limited to one question and a follow up. After which they will have to get back into the queue to ask another questions. At this time, we will open the call to questions [Operator Instructions]. Our first question comes from the line of Sam McGovern from Credit Suisse.

If we can go back to Slide 23, where you guys laid up liquidity levers. I was hoping you guys could discuss a little bit more about your plans going forward. I mean how much more additional land banking should we expect, whether that land banking are shifting in focus from raising liquidity towards investing in new lands and how much more additional JVs non-recourse [indiscernible] and model of sales lease back should we expect?

We currently have all those levels available and I think we’ve done the two significant transactions with DW as well as with GSO and that covers our needs pretty much through the May liquidity or the May bonds that are maturing. But as we look at new land transactions going forward, I think we will probably do more of that in the form of either getting project specific debt, getting land banking or getting joint ventures in place until such time as the high yield market for CCC issuer such as ourselves becomes available at a reasonable price.

Just want to add also one other comment and that’s, this huge growth in inventory levels that we’ve experienced, we’re not projecting to continue that kind of pace going forward. We really have digested the big growth, we’ve got a lot of land under development right now. So we expect a lot more modest growth in inventories as we reap what we’ve already invested and that means a lot less demand on our capital needs.

And then as we -- as you guys sort of see the effect of the two land banking transactions that you guys recently announced. If we look back at the slides from the last quarter where you guys laid out your expectations for the future and the upside, downside of base cases. Is it -- what should we expect the impact that it has, just lower inventory, lower debt and lower gross margins, what other impacts should we running through on our model?

When we land bank an asset that we had already owned, which is what we pretty much announced with respect to DW and what our significant portion of the GSO land banking arrangement is, it doesn't flow through gross margins at all, it flows through -- the impact flows through interest expense. So that would be the first thing you need to think through. Obviously we've paid off as bunch of debt by not refinancing the debt that came due in October and the debt that's going to come due in January. If we don't refinance debt we'll be paying off a lot of debt, so we'll be getting rid of that interest expense and replacing it with interest expense with respect to these land banks. You had more to your question, so ask it again.

If there were other impacts on that model beyond those levels?

I mean, it would temporarily reduce numbers as we took that off of our balance sheet and then it comes back on our balance sheet on a just-in-time basis, we take down to finish a lot. So it's just a timing difference.

Thank you. And our next question comes from the line of Nishu Sood from Deutsche Bank.

Thanks and following up on the implications to gross margin that's very helpful Larry, the description of that impact flowing through interest expense, as opposed to gross margins. Your guidance for '16 implies flattish gross margins against this year, given that the land banking is not going to be a drag on the gross margins, what's going into that assumption? Its sounds like from that the pricing trend and the lower spec and decent demand and it sounds like a conservative assumption given those favorable tailwind, so I was just wondering if you could walk us through why you are only forecasting a flat year-over-year given? And then I see the harvest analogy that Ara was using as well, why only flat given all those tailwinds?

I mean, the margin projection for all of '16 is not dissimilar with what we had for all of '15. It would be the first thing that I would point out and we still -- it’s built from bottoms up, we didn’t even take back community basis in each of our business units based on current absorption prices, current construction cost, current sales prices and that's kind of the range that we're comfortable with right now, if the market continues to improve, obviously there could be some upside to our margins.

And only other additional point is as Larry described, when we land bank existing assets, it flows through interest not gross margin, but on our normal basis as we do land banking and we do anticipate returning to our normal land banking process which is that we close simultaneous over the land banker, actually closes first, that does flow through gross margin and in general we'll do a little more land banking probably, if we don't refinance than we would have, so that's all factored into the gross margins as well.

Second question on the average selling prices, the ASP in the fourth quarter was a little lower than we would have expected given the selling ASP. Larry you mentioned that similar to other builders, higher priced homes with longer delivery cycles are the ones that have been more prone to delays. So, if that's the main driver for -- ASP is coming in a bit lower than expected, should we expect a [multiple speakers].

No, no, no, let me back you up. I made that comments specifically with respect to the Houston marketplace, not the overall markets that we're in.

Got it. Okay, then if you could help us understand the lag in ASPs versus your order prices and how we should expect that to flow as we head into 2016, please.

I mean, if you look at the average price and contract backlog at quarter end -- end of the year including joint ventures is $433,000 on a consolidated basis it’s $418,000. I mean that's probably your best indication of what's going to be happening to average sales prices in future quarters.

Thank you. And our next question comes from the line of Michael Rehaut from JP Morgan.

First question I had is just on the -- more of like I guess a modeling question, but related to Larry, your comments around through the more recent land banking arrangements. The interest expense amortization, I think this year came in fiscal '15 around 2.9 % of revenue. Given some of the perhaps changes in mix as it relates to the land banking, but also obviously you have revenue growth anticipated. Can you give us a sense of, from a range or from a dollar, absolute dollar perspective, what you expect the interest expense amortization to come in for ‘16?

I think right now the best assumption would be to just use what it's kind of been running at. That varies depending on the mix of communities that are delivering and how long those homes take to build, et cetera. So the best we can do is look at our historical run rate for cost of sales interest.

So, when you say what it's been running at are you talking about on a dollar basis or on a percent of revenue basis?

More on a percentage basis.

Okay, and then just on, going back to the gross margins for a moment and I know you were kind of been talking about this in the last question or two, but you know again just want to kind of make sure I'm understanding things at least from a conceptual standpoint. You mentioned that you know in the upcoming year you're going to be selling some communities out of Natomas which you mentioned were higher, above average margins. You also -- you know obviously highlighted the land that's starting to come through, that you're harvesting, that was more developed land owned which is also typically a higher gross margin type product. So with those types of positive mixes occurring, what's offsetting that -- you're still looking at the midpoint of the range pre interest for it to be a similar gross margin. Are there other areas of geography that are offsetting some of those benefits? Is it again the labor expense that continues to impact? Anything conceptually in terms of just, you know you've highlighted those positive drivers, but what's the offset to that?

Some of its just mix, Mike. Again we do a very diligent detailed bottoms up budgeting process community by community and you know the mix of geographies the mix of communities and product types within a geography can impact those types of things as, Ara mentioned as we do a little bit more land banking on a traditional basis that could have an impact. So there is a whole bunch of things that goes into it. We are encouraged with the market trends that we've seen recently, you can see it in our orders. We’re very pleased with what we've reported for the October quarter, we're pleased how we've stacked up against our peers when we restacked for September quarter and we were pleased with the November orders that we reported as well and again if that trend kind of continues, I think there might be the potential to also increase prices at a community level that could have some positive impact on margins and/or in construction cost and we gave you our best estimate of what those margins would be taking in [technical difficulty] current conditions into account.

Again you know we have seen construction costs increases as everyone has, so we’ve tried to factor that in, we have a different mix of land banking, we're trying to factor that in just a -- and new land purchases. So we're trying to factor all of those in and give you the best guidance we can at this early stage.

We appreciate that and those comments do make sense. I guess just lastly and I'm glad you brought up the October-November order trends which were obviously very-very solid. Any color around that in terms of and I apologize I don't have the slides right in front of me, I'm presuming that you had a solid improvement in sales pace, driving the overall order growth and so if I'm right on that assumption you know what do you feel that might be driving that, are there sort of regions that are doing a little bit better than let's say your fourth -- your fiscal fourth quarter, with [ph] already may be promotions or timing related to community opening, any sense of those stronger trends in the last couple of months?

Well, first of all the stronger trends are really pretty dispersed geographically. I can't say that we felt any particularly weak areas in terms of better sales pace. It’s been feeling pretty good and we didn't have any special promotions going on recent. So I’d attribute this is just a -- obviously we've got some new land positions and part of the growth as we mentioned was from growth in communities, part of it was from an increased pace for community, we've got some good locations, got some new designs out there and the market's getting -- feels like it’s getting a little bit better than it was in the first half of 2015.

And Mike to specifically answer your question on contracts per community. For each of the last five months through November they have been up year-over-year. So that's just an encouraging sign that the overall market, we're not in a fabulous time of the year for sales, but it's just an encouraging sign that maybe the spring selling [ph] market is going to be good too. Obviously we didn't factor any improvement in that into our projections, but it just feels a little bit better the last five months or so.

Thank you. And our next question comes from line of Alan Ratner from Zelman & Associates.

I was hoping that -- sorry, just one more question on the land bank here. So my understanding is the 300 million that you've got committed on the land bank, part of that is the land value that's on your books in terms of what you're committing and then part of that is future development cost of that land, so some of that's going to be coming cash on the door and some of that's more in the form of cash savings I guess if you will. So do you have the breakout of that in terms of the land that you're committing, how much cash is actually going to be coming in a door in the first quarter?

No, I don't have that handy.

Should we assume that's likely roughly 50/50 in terms of that breakout?

No, it's not.

Much higher in terms of cash in the door?

Yes.

Okay and then second question on the Houston improvement in November, would you say that that's a market wide trend or do you feel like that's more a function of the repositioning of your communities more towards the lower price points and the non-energy corridor?

Yes, I mean, that's not a repositioning, that's been our strategy all along in terms of lower price points and lack of focus on the -- as much focus as somewhere appears on energy course, so that’s not a shift. So we didn't do anything different in November than what we did in August, September and October. So hopefully it's a market wide phenomena but to be perfectly candid I don't know the answer to that. The answer seems to perceive what our peers are saying about the month of November. I mean it's very fresh news but we were pleased to see that trend kind of reverse what we saw in the previous three months.

Great that's encouraging, if I can just sneak in one more just on your typical cash flow seasonality, you have to go back to the last couple of years. Generally used up cash in the first half of the year you're building your backlog for the spring and then you generate some cash in the back half, so should we expect that seasonality to be any different given your debt maturities are front half loaded, are you going to kind of change your land spending to kind of more even flow that, to ensure that you've got enough liquidities for the year to build up that?

I think we're going to continue to bust [ph] the land parcels, we may do more of it via land banking, the new parcels not the stuff at home. So that when you look at it will appear from a factual perspective I guess as well that we're using less cash but we're controlling the same amount of land, is that makes sense to you?

Got it, that's help. I appreciate that. Thanks and good luck.

Thank you. And our next question comes from the line of Susan Berliner from JPMorgan.

Just following up on that last question, I guess with regard to the land spend for ’16, so Larry, it's clearly coming down from ’15 for what you guys own, any help there, how we could model that?

I am sorry it's coming down from what?

From the land spend that you did in 15, you said you're going to be doing a little bit more from land banking, so how we adjust our the model for land spend next year?

I don't know how to give you great granularity on that one, as Ara said we're not trying to grow inventories, so that's one of the issues that when we still growing inventory quite a bit, it's much more modest growth in order to hit our business plans and we gave you that in pretty granularity last quarterly call when we put out the illustrative scenarios. So you can kind of look back at that and just see that that inventory growth was slowing significantly and then kind of leveling off. But it's hard for me to tell you precisely what's going to happen in terms of land spending, it'll be a little bit lower because we're doing more in land banking and that's about the only thing I can tell you right now.

Okay and then I guess with regards to guidance for ’16, I guess, how are you thinking about the various markets, specifically what do you thinking for Houston for ’16 because a couple of your peers have definitely noticed some cautious comments regarding ’16, and then if you can just go over your other markets what you were seeing and you know your expectations for ’16?

I’ll tackle Houston and then I’ll turn it over to Ara to make some broader comments on the rest of our markets, but I mean Houston for us has been really hanging in there. We're not expecting Houston to grow in 2016, it might shrink a little bit and that's kind of what's factored into our numbers, but everywhere else is going to grow significantly more, so as a percentage of revenue, as a percentage of earnings Houston is going to be a much smaller percent in ’16 as compare to ’15 for us.

And just overall as I mentioned earlier, I think we're seeing pretty much across the board strength in our markets around the country, it’s clearly a little hotter in the Bay Area and maybe Southeast Florida is particularly hot as well, which is not a huge market for us, but the Bay area has been a particularly large market. I should mention we've got a number of new models and communities coming up in Southeast Florida so, while it historically has not been a big area, we anticipate it playing a much larger role for us. But overall the market has been just very-very solid, I guess maybe I'd add that we continue to see the DC market be just a little bit sluggish and my guess is that some of the sequestering is just having an impact on the job market there. So, we haven't seen the robust recovery there that we would have been expecting and that's within there in prior recoveries.

And if I could speak one other thing with the collateral coverage on the bonds, Larry, should we just assume it will be in your 10-Q this time?

It's actually another slider [ph] in the appendix. So, it'll be all there, they're all there.

Thank you. And our next question comes from the line of James Finnerty from Citi.

Just a couple of quick questions, on the liquidity front, historically you have the range of 170 million to 245 million and then your third quarter slides, I guess, you have modeled out that cash would somewhere north of 200 million by year end '16. Should we assume that would be the case for '16?

Well, I think our target range remains unchanged. So, that 200 million was just within the range is how we modeled it, when we put those numbers out last quarter.

Okay, and then in terms of the profit guidance for the full year, it's -- should we assume that you'll be profitable each quarter during the year or it's [multiple speakers].

We’ll not able to give the granularity quarter-by-quarters, it’s a significantly improved year overall. But we are not giving quarterly guidance at this time.

And then on the, just on the non-recourse funding, is there any limit to how much non-recourse funding you can do?

No.

Thank you. [Operator Instructions] Our next question comes from the line of Petr Grishchenko from Imperial Capital.

My questions have already been answered, but if you can just elaborate some more, I guess on the mechanics of the GSO and DW transactions, like what's the embedded cost of capital there?

I'm sorry can you repeat it?

Can you just elaborate on the GSO transactions, what's the embedded cost of capital, like? I'm not sure what's the cost of financing?

We're under confidentiality agreement both with GSO and DW and frankly on any of our land banking, so I can't share with you what that is.

Well any direction, I mean at least you're raising capital to, pay down your kind of finance maturities?

Higher -- it's higher than the debt we paid off.

And we've again baked in those costs into our guidance. It's still baked in.

Thank you. And our next question comes from the line of Alex Barron from Housing Research.

Was hoping you could share with us your thoughts on, it seems like the FED [ph] seems more ready to raise interest rates I guess potentially later this month. So just kind of your approach to, if that happens, what do you expect to happen and -- to mortgage rates and your approach to -- if rates start to go higher -- I guess, how you would approach that and whether you are expect to increase your exposure to the entry level as time goes by?

First of all, I think it's reasonable to assume any movement, it's not going to be draconian with interest rates and it's, frankly it's not clear how much the short term interest rate increase is going to affect long-term mortgage rates at the moment, but notwithstanding that point, obviously all of our communities offer a multitude of model types. Currently in this very -- and at different price points, currently in this environment customers are gravitating towards most of our larger models. My -- and on top of that we're seeing quite a bit of options and upgrades, I think it's reasonable to assume that as interest rates increase they might select a slightly smaller model than the largest model, which are very popular right now. We are pretty much gross margin neutral on most of our models. So, we make in terms of percentages a pretty similar and consistent gross margin on our smaller models and medium models and larger models. So, we don't think it will have a great impact. We do make a little better gross margin, not dramatically but a little better gross margin on our options and upgrades so perhaps there might be a slight impact if that’s disproportionately where the changes come from. But overall, at this time, we’re not expecting huge changes and therefore I wouldn’t expect to see a huge shift in either of those factors.

I would also say that the FED rate is a very short-term rate and the mortgage rates fluctuate up and down multiple times during the day much less over a month or six months. So I think the anticipated FED rate increase is probably already built into mortgage rates already. And frankly if the FED continues to increase rates which is probably more along, Alex where you’re comment maybe coming from, I think that’s going to be an indication that the U.S. economy is doing better and I think that will give consumers the confidence to go out and buy houses and so, although it’s incrementally harder to qualify them. If we had a lot more people wanting to buy house because that they’re doing better in their jobs and earning more and more confident in U.S. economy, I think that would really bode well for our industry and our company specifically.

Thank you. And that concludes our question-and-answer session for today. I would like to turn the conference back over to Ara Hovnanian for any closing comments.

Thank you. Again we’re pleased to report some good results and based on our backlog and the sales base, we certainly believe that our better results from this last quarter were just a precursor of better performance ahead, and we look forward to sharing those with you in upcoming quarters. Thank you very much.