Good morning and thank you for joining us today for Hovnanian Enterprises Fiscal 2016 Fourth Quarter Earnings Conference Call. An archive of the webcast will be available after the completion of the call and will 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. The slides are available on the investors page of the Company’s website at www.khov.com. Those listeners who would like to follow along should log on to the website at this time. Before we begin, I would like to turn the call over to Jeff O’Keefe, Vice President of Investor Relations. Jeff, please go ahead. Jeff O’Keefe: Thank you, Esther and thank you all for participating in this morning’s call to review the results for our fourth quarter, which ended October 31, 2016. 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 provisions 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 statements related to Company’s goals and expectations with respect to its financial results for future financial periods. Although we believe that our plans, intentions and expectations reflected and/or suggested by such forward-looking statements are reasonable, we can give no assurance that such plans, intentions or…

Thanks very much Jeff. I am going to start by comparing our full year results to our guidance then review some of our operating results for the fourth quarter. Larry is going to follow me discussing many items including our liquidity position in a little more detail. On Slide 3, we show the most recent guidance we gave for the full year and how it compares to our actual results. We met or exceeded each of the guidance metrics we provided on our third quarter conference call. Our total revenues were $2.8 billion right in the middle of our guidance and an improvement of 28% versus 2015. Our gross margin was 16.9%, which was closer to the high-end of our guidance. In addition our SG&A as a percentage of total revenues was 9.2% which was closer to the lower end of our guidance and was 250 basis points better than the 11.7% we’ve reported last year. Our adjusted EBITDA of $231 million exceeded the upper end of our guidance and was up 54% versus the $154 million we achieved last year. Our pre-tax profit before land related charges and loss on extinguishment of debt was $39 million for all of fiscal 2016 that exceeded the top end our guidance and compares favorably to the pretax loss we reported to 2015 on the same basis. Being fully transparent during fiscal 2016 our instances of construction defects continued to decline. Because of the improvements in our construction defect trends our actuarial analysis of insurance reserves indicated that we are over reserved for construction defects. Therefore we recorded a reduction in our insurance reserves resulting in a $9 million reduction of SG&A expenses. Nonetheless even excluding this benefit we would have still been within the range of our SG&A and our pretax profit…

Thanks Ara, given Toll's announcement earlier this week regarding their charge for stucco, let me start with a discussion about our stucco experience. Over the past fifteen years we have had stucco repair cost in excess of $60 million. As a result a number of years ago we took many steps to ensure stucco was properly installed on our homes and actually discontinued it’s use in many markets including New Jersey and Pennsylvania where a majority of our stucco repairs originated. Therefore we do not expect to record any significant additional reserves for stucco related claims in the future. On Slide 13, we provide an update on Houston. Despite the fact that we've had two years of significantly lower oil prices our Houston operations continue to post solid results. As a matter of fact 2016 was the most profitable year ever for our Houston Division. During the fourth quarter of 2016, we saw the absolute number of net contracts in Houston increase by 19% year-over-year and net contracts per community increased 32% year-over-year to 6.7, which was the highest level for fourth quarter net contracts per community over the past four years. There are three things that set our Houston operations apart from many of the builders we compete against in that market. Number one with an average home price on homes delivered of approximately 300,000 we focus on a lower average price point. Number two we do not build in any of the highly competitive master plan communities. And number three we have less exposure to communities in the energy corridor in Houston than our peers. Despite another solid profitable year, for Houston operations we remain cautious about the impact of the lower oil prices on the Houston economy. We continue to keep a close eye on the market…

[Operator Instructions] Our first question comes from the line of Megan McGrath with MKM Partners. Your line is now open.

Hi, good morning. Thanks for taking my questions. I wanted to follow up a little bit on some of your comments early on around the three reasons that you saw some gross margin pressure this year. The second reason was an increase in incentives that you had to match. So curious if you could give us some detail on that. Was that broad-based or were there particular reasons there were you saw your competitors being a little more aggressive? The follow-up there is on the land cost. When you think about the mix to that 2013 and 2014 land, is that vintage of everything that you have. So is that going to get better next, stay the same or get a little bit worse. Thanks.

Regarding the incentives, it is really very situational. Certainly two areas come to mind, The Silicon Valley area got a little frothy with everyone and I think the market moved a bit ahead of itself. So we have seen some increase in incentives there as well as some locations in Southern California, so those are two that certainly come to mind. Regarding the ratios of the higher priced land in 2013 and 2014, we expect that the deliveries from those purchases will be fewer as a percentage of our business next year in 2018.

And I think it will improve slightly in 2017 as well. So think it is beginning to diminish.

Great thanks.

Our next question comes from the line of Nishu Sood with Deutsche Bank. Your line is now open.

Hey this is actually Tim on for Nishu. So I just want to dig a bit in to the November trends. So looking at the monthly cadence that you guys provided, thank you, that’s always very helpful. It seems that community count has actually fallen, just extrapolating a bit almost like by 6% from the end of 4Q to November. That’s obviously on the wholly owned side. We know that trend is trending down. I just wanted to dig a bit in to how did the JV communities and absorptions perform in November and then as well as what you guys expect for this mix of JV verse wholly owns community count going to 2017 and 2018. Thank you.

I mean I think we’ve given you some pretty good insights that the JV community count is going to grow in 2018 as compared to 2017 because we’ve converted a dozen communities. We initially planned as a wholly owned to JV. So the JV community count is growing. I don’t have the numbers in front of me, but I don’t think there’s that materially of difference in absorption pace for JV communities versus wholly owned. We may publish that data later today on our website so you can actually see it. But I don’t recall it off the top of my head.

And while Larry is saying it – our JV count of active selling communities is growing, again, we’re not talking about a significant number. We’re up in the 20s. So relative to the overall is sphere, it’s growing quite a bit given that we had 10 last year, but it’s still not a huge number. We generally reserve those for the larger more significant transactions.

All right, understood. Just to follow-up on your commentary that the JV absorption should be similar to wholly owned absorption, it looks like in 4Q 2016 JV absorptions fell almost 50% year-over-year while wholly owns were up about a 10%. I just wanted to understand. I know that last quarter you commented that a lot of startup JVs will be slower absorbing a bit they open up, but when…

We had several that for one reason or another in the joint ventures either were just about to open models or in another one we had held off because sales had gotten too far ahead and we’re just turning on sales again. So that’s part…

What I’m really trying to say is there’s no logical reason if we had our joint venture communities at the same average point in community life as our wholly owned that there would be a material difference in absorptions, so you really shouldn’t kind of factor that in to your model.

Yes. That’s exactly what I was looking for. Thank you.

You bet.

Our next question comes from the line of Sam McGovern with Credit Suisse. Your line is now open.

Hey guys, thanks for taking my questions. Just on the order and backlog figures, how much of the year-over-year decline is driven by the exit of markets in the last year. Should I just use the contrast per community figure that you guys gave on Slide 9 or do you guys have an apples to apples figure?

Jeff or Brad have– go ahead. Brad O’Connor: We give a footnote in our communities under development table that shows you how much of the backlog decline is from Minneapolis and Raleigh. Minneapolis was down 64 homes. And Raleigh was down 67 homes.

Yes.

Okay, great. And then just looking forward, do you guys have any plans for any new land banking agreements for newly identified lots or will the focus be mostly on the JVs?

Yes. Brad O’Connor: As we look at potential new acquisitions of land it is something that we consider doing. It’s not like we have something teed up that there’s going to be significant land banking activity in a single transaction. But as we used land banking activity back in the bull market run in the mid 2000s, we’ve continued to use them currently, so we may do a land banking action from time to time, but we do not anticipate at this time any significant – if we do it at all of land banking land that we currently own.

I mean in general, with new acquisitions, we obviously with smaller dollar amounts, we typically are doing them unfinanced on any basis on our balance sheet. For larger transactions, we look at joint ventures. We looked at new land banking transactions, not on existing but new acquisitions. And finally we also are utilizing non-recourse financing from commercial banks as well. So we look at all of those. And it’s always situational.

Okay, great. Thank you so much. I’ll pass it along.

Our next question comes from the line of Alan Ratner with Zelman. Your line is now open.

Hey guys, good morning. Nice job on the SG&A and cash flow improvements for the year. First question on Houston, pretty impressive results there. Just curious with the absorptions where they are right now and it being your largest market, are you actually having success either reducing incentives or pushing prices in that market or is it still pretty competitive even though the absorption numbers are healthy? And then I have a follow-up. Thank you.

I would say again it is community specific. I mean there are communities in Houston that we’ve had to do some incentives and some concessions. There’s been communities that, given what’s happened to land values in Houston that we’ve walked away from our option deposits or renegotiated them but we have a very astute management team in Houston that continues to, in our belief be one of the better performers in that market. And they too have been surprised by the strength of our activity in Houston, both last quarter and frankly for the entire year. We begin to certainly think that the oil price collapse would have some kind of adverse effect on us during fiscal 2016 and frankly the opposite has occurred in the last couple of quarters much to our surprise. So we continue to be nimble, continue to make appropriate adjustments. But I certainly wouldn’t say that there’s been any significant margin pressure in Houston, certainly has happened from certain communities.

Thank you for that, Larry. And my second question on the DTA, you guys have obviously taken a lot of steps to preserve that and make sure that there’s no risk there. Just curious with the discussion of corporate tax reform potentially diluting the longer-term MPD of that DTA, does that change your thinking as far as potential recapitalization, debt for equity, anything like that, things that you’ve kind of stayed clear from in the past to preserve the value of the DTA and if you’ve got any thought in general about what in the corporate tax reform and potentially not being able to deduct interest expense, how that might factor in to the plans on the balance sheet going forward.

Yes. I think it’s premature to draw any conclusions till we see what the new administration is able to actually pass. I mean clearly if tax rates go down, our ability to fully utilize the entire DTA, we’d have to do the calculations, but my gut reaction is that it may be difficult to fully utilize the DTA that’s there. Whether that’s in turn, causes us to make any other kind of tactical or strategic decisions regarding our capital structure, it’s just premature for us to comment on.

But overall we’d be pleased to have a lower tax rate which certainly would improve our projections for net income. So there are obviously positives.

Got it. Thanks and good luck.

Thank you, welcome.

Our next question comes from the line of Susan Berliner with JPMorgan. Your line is now open.

Hi, thank you and congratulations.

Thanks, Susan.

Thanks.

So I guess with regards to your guidance, can you help us frame out like your community count, how it should progress throughout 2017 and 2018 just directionally? I mean I know it’s down but can you give us any sort of a magnitude and are you in thinking about absorption paces continuing to increase in your projections?

Yes. Our projections never take in to account any improvements in market conditions. So we’re not assuming anything other than current absorption pace, current home prices when we gave our directional guidance for 2017 and 2018 for that matter. If there was any improvements in market conditions, there would be upside to the direction that I previously discussed. We’ve not publicly projected community count in the past, so I’m not in a position to project it now, but clearly it’s down. It might trend a bit further down before it begins to recover in 2018.

But overall and we’ve shown this slide on pervious quarterly calls. We are still well below absorptions per community on an normalized basis. If you exclude the boom years of 2004 and 2005 absorptions were still significantly higher than what we’re experiencing now. Now, we don’t fill that into our guidance and projections for next year. But at some point the millennials continue the trend of finally getting back in to the marketplace, we expect – and mortgage qualifications get back to normal, we expect absorptions per community will start getting back to historical norms which would be a very helpful thing.

Great. And my second question had to do with your cash came in significantly stronger than we had anticipated. And I was wondering if there was anything else in there. I know you had a little land sales but not much. And if you could also give us any color on what your RP capacity for unsecured bonds is.

I don’t think there’s any unusual and the cash was just normal deliveries in the fourth quarter quick cash from operations. So I’m not sure why our number came in higher than your expectations but nothing unusual about it. So when you’re asking about restricted payments, is there some particular you’re focused on.

I’m just wondering the capacity, your ability to buy unsecured bonds in the market how big is it.

I don’t think there’s any limitation on our ability to repurchase bonds in the open market. Our reluctance to choose that is that we don’t really want to see our community count decline even further. So we had to reduce our land spend in fiscal 2016 as compared to 2015 because we were so focused on paying off debt. And now that we’ve really created some additional liquidity we want to reinvest it back in to the business and grow our community count once again.

Great. Thanks very much.

[Operator Instructions] Our next question comes from the line of Alex Barron with Housing Research. Your line is now open.

Yes, thank you. I guess one of the biggest changes since the election is the interest rates have gone up and I was kind of wondering if you could address that topic, how you guys are expecting to cope with that or at what time do buyers typically lock in rates, those kind of things.

Overall we’ve seen the selling environment remain very solid. So there are always two schools of thought and I don’t particularly subscribe to either of them. Some people say as rates go up people will finally get off the sidelines and jump in to the markets, and others say it will scare people, but I mean overall affordability is still at very, very good levels compared to historical norms. So I think rates would have to go up quite a bit and quite rapidly to really cause any concerns in the marketplace. The country, if you remember, produced more homes back in 1981 with 18% mortgage rates and we’re produced last year. The difference is obviously that buyers are going to have to adjust what they can buy. Right now it’s an amazing time because people could buy more house than many ever dreamed would be possible given the low rates. As rates go up, somebody needs shelter, somebody is getting married, having children, relocating, whatever it might be, they may have to reduce their goals from a 3,000 square foot home to a 2,600 square foot home. But if there’s a net increase in household, they’ve got to live somewhere and in the long run that’s how the market copes with interest rate changes.

Yes. The only thing I would add is that similar to the run that the stock market has had upward since the election, I think the only reason that interest rates were up is that the bond market has also or the mortgage market is also optimistic that the economy is going to improve and although less people qualified today as interest rates incrementally increase, the economy will improve and people can get better paying jobs, I think it’s actually going to be healthy for the housing industry in the intermediate term. And in the short-term it gets people off the fence that were maybe not going to buy and now they’re going to buy because their fearful that rates are going to go up.

Okay. That’s helpful. As far as are you guys doing anything on the incentive front like buying down rates? So what point and time in the buying cycle do people lock down the rates?

We generally allow our divisions to decide what type of incentive they want to offer. I know there are a couple of instances where they decided they wanted to buy down rates. Other times they want to give free options and upgrades or a discount on them. And other times they want to up the amount toward closing costs. We really leave that to the division.

And actually to the consumer, we’ll offer a la carte even before rates went up. It would be a la carte, do you want to apply the incentive to the rate buydown? That’s fine with us. You want to apply it to closing costs, that’s okay with us. You want to apply it to option, that’s okay with us. It’s what’s suits the needs of the individual consumer in many of our markets as well.

Okay. Thanks, best of luck.

Thank you.

Thanks.

Our next question comes from the line of Steve Salemy with BNP. Your line is now open.

Hi, thank you. A very quick question. I noticed the senior amortizing notes and unsecured notes balance looks like it dropped by about $20 million or so. I was curious if you had repurchased any of those funds during the current quarter and if you did, if you have any other intents potentially to continue to look at those throughout next year.

I think those are what we refer to as exchangeable notes and we took the residual proceeds of the H2 transaction that we did in early September. There was a little bit excess cash. We used that to repurchase the roughly $20 million that you’re speaking of. Although our primary focus is going to be on investing the – on land and other things from time to time we may look at bonds as well. But our primary focus used capital to [indiscernible].

Okay, great. Thank you very much for clarifying.

Yep.

And our last question last question comes from James with Citi. Your line is now open.

Hi, this is actually Maneesha Shrivastava on for James. I just had a quick question. Just to get a sense of what consolidated home building revenues might be next year bringing into account and your comments on incentive. Could you give us a sense of what you are looking at the ASP in fiscal 2017, would you expect a significantly slower growth rate relative to this year?

I think the only thing you can do, because we’re not giving out specific ASP guidance nor consolidated revenue guidance. We gave you pretty good hints on direction of total deliveries. And if I was sitting in your seat trying to put a model together, the only assumptions you can kind of make is take what our recent quarter was or what our average sales price and backlog, whatever you want to do. And if you want to apply some kind of growth rate to that, make your own assumptions but we’re not factoring in on our own projections any market improvements but obviously if mix changes community by community or in the aggregate it could have an impact up or down.

Great. Thank you.

At this time I’m showing no further questions. I would like to turn the call back over to Ara for any closing remarks.

Thanks. Well we were pleased that we are able to meet or exceed our guidance. But we know we still have a long way to go and we’re working hard to produce even better results in the coming years. Thank you very much.

This concludes our conference call for today. Thank you all for participating and have a nice day. All parties may now disconnect.