21.	Financial Information of Subsidiary Issuer and Subsidiary Guarantors

Hovnanian Enterprises, Inc., the parent company (the “Parent”), is the issuer of publicly traded common stock and preferred stock, which is represented by depository shares. One of its wholly owned subsidiaries, K. Hovnanian Enterprises, Inc. (the “Subsidiary Issuer”), acts as a finance entity that, as of April 30, 2016, had issued and outstanding $992.0 million of senior secured notes ($982.1 million, net of discount), $607.6 million senior notes and $10.5 million senior amortizing notes and $75.7 million senior exchangeable notes (issued as components of our 6.0% Exchangeable Note Units). The senior secured notes, senior notes, senior amortizing notes and senior exchangeable notes are fully and unconditionally guaranteed by the Parent.

In addition to the Parent, each of the wholly owned subsidiaries of the Parent other than the Subsidiary Issuer (collectively, “Guarantor Subsidiaries”), with the exception of our home mortgage subsidiaries, certain of our title insurance subsidiaries, joint ventures, subsidiaries holding interests in our joint ventures and our foreign subsidiary (collectively, the “Nonguarantor Subsidiaries”), have guaranteed fully and unconditionally, on a joint and several basis, the obligations of the Subsidiary Issuer to pay principal and interest under the senior secured notes (other than the 2021 Notes), senior notes, senior exchangeable notes and senior amortizing notes. The Guarantor Subsidiaries are directly or indirectly 100% owned subsidiaries of the Parent. The 2021 Notes are guaranteed by the Guarantor Subsidiaries and the members of the Secured Group (see Note 11).

The senior unsecured notes (except for the 7.0% Senior Notes due 2019 (the “2019 Notes”) and the 8.0% Senior Notes due 2019), senior amortizing notes and senior exchangeable notes have been registered under the Securities Act of 1933, as amended (the “Act”). The 2019 Notes, the 8.0% Senior Notes due 2019, the 2020 Secured Notes and the 2021 Notes (see Note 11) are not, pursuant to the indentures under which such notes were issued, required to be registered under the Act. The Condensed Consolidating Financial Statements presented below are in respect of our registered notes only and not the 2019 Notes, the 8.0% Senior Notes due 2019, the 2020 Secured Notes or the 2021 Notes (however, the Guarantor Subsidiaries for the 2019 Notes, the 8.0% Senior Notes due 2019 and the 2020 Secured Notes are the same as those represented by the accompanying Condensed Consolidating Financial Statements). In lieu of providing separate financial statements for the Guarantor Subsidiaries of our registered notes, we have included the accompanying Condensed Consolidating Financial Statements. Therefore, separate financial statements and other disclosures concerning such Guarantor Subsidiaries are not presented.

The following Condensed Consolidating Financial Statements present the results of operations, financial position and cash flows of (i) the Parent, (ii) the Subsidiary Issuer, (iii) the Guarantor Subsidiaries, (iv) the Nonguarantor Subsidiaries and (v) the eliminations to arrive at the information for Hovnanian Enterprises, Inc. on a consolidated basis.

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING BALANCE SHEET

APRIL 30, 2016

(In Thousands)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries		Nonguarantor Subsidiaries		Eliminations			Consolidated
ASSETS:
Homebuilding		$-			$102,903			$1,474,850		$486,093		$-			$2,063,846
Financial services								14,937		145,775					160,712
Income taxes receivable		140,353			(73,884	)		227,575		25					294,069
Intercompany receivable					1,522,624					28,208		(1,550,832	)		-
Investments in and amounts due from consolidated subsidiaries								414,580				(414,580	)		-
Total assets		$140,353			$1,551,643			$2,131,942		$660,101		$(1,965,412	)		$2,518,627

LIABILITIES AND EQUITY:
Homebuilding		$2,823			$73			$640,813		$125,561		$-			$769,270
Financial services								14,580		122,126					136,706
Notes payable					1,760,690			4,030		253					1,764,973
Intercompany payable		174,877						1,375,955				(1,550,832	)		-
Amounts due to consolidated subsidiaries		114,975			26,059							(141,034	)		-
Stockholders’ (deficit) equity		(152,322	)		(235,179	)		96,564		412,161		(273,546	)		(152,322	)
Total liabilities and equity		$140,353			$1,551,643			$2,131,942		$660,101		$(1,965,412	)		$2,518,627

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING BALANCE SHEET

OCTOBER 31, 2015

(In Thousands)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries		Nonguarantor Subsidiaries		Eliminations			Consolidated
ASSETS:
Homebuilding		$-			$230,358			$1,553,811		$367,869		$-			$2,152,038
Financial services								15,680		144,301					159,981
Income taxes receivable		128,176			(89,212	)		251,293		22					290,279
Intercompany receivable					1,575,712					58,280		(1,633,992	)		-
Investments in and amounts due from consolidated subsidiaries					1,013			383,032				(384,045	)		-
Total assets		$128,176			$1,717,871			$2,203,816		$570,472		$(2,018,037	)		$2,602,298

LIABILITIES AND EQUITY:
Homebuilding		$3,076			$87			$588,854		$65,947		$-			$657,964
Financial services								15,677		121,106					136,783
Notes payable					1,933,119			2,132		384					1,935,635
Intercompany payable		180,681						1,453,311				(1,633,992	)		-
Amounts due to consolidated subsidiaries		72,503										(72,503	)		-
Stockholders’ (deficit) equity		(128,084	)		(215,335	)		143,842		383,035		(311,542	)		(128,084	)
Total liabilities and equity		$128,176			$1,717,871			$2,203,816		$570,472		$(2,018,037	)		$2,602,298

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

THREE MONTHS ENDED APRIL 30, 2016

(In Thousands)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Homebuilding		$-			$-			$523,418			$114,302			$-			$637,720
Financial services								2,676			14,327						17,003
Intercompany charges					26,567									(26,567	)		-
Total revenues		-			26,567			526,094			128,629			(26,567	)		654,723

Expenses:
Homebuilding		(343	)		33,396			525,553			102,757						661,363
Financial services								1,823			7,795						9,618
Intercompany charges								25,838			729			(26,567	)		-
Total expenses		(343	)		33,396			553,214			111,281			(26,567	)		670,981
(Loss) income from unconsolidated joint ventures								7			(1,353	)					(1,346	)
(Loss) income before income taxes		343			(6,829	)		(27,113	)		15,995			-			(17,604	)
State and federal income tax (benefit) provision		(4,885	)		(8,410	)		4,152									(9,143	)
Equity in (loss) income of consolidated subsidiaries		(13,689	)		(13,562	)		15,995						11,256			-
Net (loss) income		$(8,461	)		$(11,981	)		$(15,270	)		$15,995			$11,256			$(8,461	)

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

THREE MONTHS ENDED APRIL 30, 2015

(In Thousands)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries		Eliminations			Consolidated
Revenues:
Homebuilding		$-			$-			$390,898			$65,594		$-			$456,492
Financial services								1,935			10,522					12,457
Intercompany charges					31,873						66		(31,939	)		-
Total revenues		-			31,873			392,833			76,182		(31,939	)		468,949

Expenses:
Homebuilding		3,082			38,387			392,535			58,384					492,388
Financial services		20						1,556			5,932					7,508
Intercompany charges								31,939					(31,939	)		-
Total expenses		3,102			38,387			426,030			64,316		(31,939	)		499,896
Income from unconsolidated joint ventures											1,466					1,466
(Loss) income before income taxes		(3,102	)		(6,514	)		(33,197	)		13,332		-			(29,481	)
State and federal income tax benefit		(5,906	)					(4,016	)							(9,922	)
Equity in (loss) income of consolidated subsidiaries		(22,363	)		(13,558	)		13,332					22,589			-
Net (loss) income		$(19,559	)		$(20,072	)		$(15,849	)		$13,332		$22,589			$(19,559	)

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

SIX MONTHS ENDED APRIL 30, 2016

(In Thousands)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Homebuilding		$-			$-			$998,328			$196,771			$-			$1,195,099
Financial services								4,921			30,308						35,229
Intercompany charges					61,107									(61,107	)		-
Total revenues		-			61,107			1,003,249			227,079			(61,107	)		1,230,328

Expenses:
Homebuilding		1,597			69,207			992,173			177,490						1,240,467
Financial services								3,447			14,386						17,833
Intercompany charges								60,301			806			(61,107	)		-
Total expenses		1,597			69,207			1,055,921			192,682			(61,107	)		1,258,300
(Loss) income from unconsolidated joint ventures								23			(2,849	)					(2,826	)
(Loss) income before income taxes		(1,597	)		(8,100	)		(52,649	)		31,548			-			(30,798	)
State and federal income tax (benefit) provision		(19,435	)		(15,328	)		28,599									(6,164	)
Equity in (loss) income of consolidated subsidiaries		(42,472	)		(27,072	)		31,548						37,996			-
Net (loss) income		$(24,634	)		$(19,844	)		$(49,700	)		$31,548			$37,996			$(24,634	)

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

SIX MONTHS ENDED APRIL 30, 2015

(In Thousands)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries		Eliminations			Consolidated
Revenues:
Homebuilding		$-			$-			$756,087			$134,997		$-			$891,084
Financial services								3,768			19,811					23,579
Intercompany charges					60,385								(60,385	)		-
Total revenues		-			60,385			759,855			154,808		(60,385	)		914,663

Expenses:
Homebuilding		6,793			76,215			750,044			118,865					951,917
Financial services		88						3,129			11,608					14,825
Intercompany charges								60,321			64		(60,385	)		-
Total expenses		6,881			76,215			813,494			130,537		(60,385	)		966,742
Income (loss) from unconsolidated joint ventures								(14	)		2,932					2,918
(Loss) income before income taxes		(6,881	)		(15,830	)		(53,653	)		27,203		-			(49,161	)
State and federal income tax (benefit) provision		(18,192	)					2,966								(15,226	)
Equity in (loss) income of consolidated subsidiaries		(45,246	)		(26,364	)		27,203					44,407			-
Net (loss) income		$(33,935	)		$(42,194	)		$(29,416	)		$27,203		$44,407			$(33,935	)

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED APRIL 30, 2016

(In Thousands)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net (loss) income		$(24,634	)		$(19,844	)		$(49,700	)		$31,548			$37,996			$(24,634	)
Adjustments to reconcile net (loss) income to net cash used in operating activities		(12,034	)		22,078			120,711			(99,312	)		(37,996	)		(6,553	)
Net cash (used in) provided by operating activities		(36,668	)		2,234			71,011			(67,764	)		-			(31,187	)
Cash flows from investing activities:
Proceeds from sale of property and assets								94			21						115
Purchase of property, equipment & other fixed assets and acquisitions								(1,620	)		(31	)					(1,651	)
Increase in restricted cash related to mortgage company											(204	)					(204	)
Decrease in restricted cash related to letters of credit					325												325
Investments in and advances to unconsolidated joint ventures					(130	)		(990	)		(15,623	)					(16,743	)
Distributions of capital from unconsolidated joint ventures					(186	)		1,087			4,164						5,065
Intercompany investing activities					80,160									(80,160	)		-
Net cash (used in) provided by investing activities		-			80,169			(1,429	)		(11,673	)		(80,160	)		(13,093	)
Cash flows from financing activities:
Net payments related to mortgages and notes								(13,649	)		(5,490	)					(19,139	)
Net proceeds from model sale leaseback financing programs								3,179			(1,960	)					1,219
Net proceeds from land bank financing programs								90,425			24,048						114,473
Payments related to senior notes and senior amortizing notes					(175,040	)											(175,040	)
Borrowings from revolving credit facility					3,000												3,000
Net proceeds related to mortgage warehouse lines of credit											257						257
Deferred financing costs from land bank financing programs and note issuances								(3,380	)		(1,201	)					(4,581	)
Intercompany financing activities		36,668						(146,900	)		30,072			80,160			-
Net cash (used in) provided by financing activities		36,668			(172,040	)		(70,325	)		45,726			80,160			(79,811	)
Net decrease in cash		-			(89,637	)		(743	)		(33,711	)		-			(124,091	)
Cash and cash equivalents balance, beginning of period					199,318			(4,800	)		59,227						253,745
Cash and cash equivalents balance, end of period		$-			$109,681			$(5,543	)		$25,516			$-			$129,654

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED APRIL 30, 2015

(In Thousands)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net (loss) income		$(33,935	)		$(42,194	)		$(29,416	)		$27,203			$44,407			$(33,935	)
Adjustments to reconcile net (loss) income to net cash used in operating activities		(7,989	)		18,740			(101,623	)		(86,915	)		(44,407	)		(222,194	)
Net cash used in operating activities		(41,924	)		(23,454	)		(131,039	)		(59,712	)		-			(256,129	)
Cash flows from investing activities:
Proceeds from sale of property and assets								952			31						983
Purchase of property, equipment & other fixed assets and acquisitions								(1,172	)								(1,172	)
Decrease in restricted cash related to mortgage company											1,645						1,645
Investments in and advances to unconsolidated joint ventures					81			146			(15,766	)					(15,539	)
Distributions of capital from unconsolidated joint ventures					(33	)		339			7,039						7,345
Intercompany investing activities					(165,853	)								165,853			-
Net cash (used in) provided by investing activities		-			(165,805	)		265			(7,051	)		165,853			(6,738	)
Cash flows from financing activities:
Net proceeds from mortgages and notes								6,336			8,375						14,711
Net proceeds from model sale leaseback financing programs								11,746			1,595						13,341
Net payments related to land bank financing programs								(9,124	)		(3,879	)					(13,003	)
Proceeds from senior notes					250,000												250,000
Net proceeds related to mortgage warehouse lines of credit											6,047						6,047
Deferred financing costs from land bank financing programs and note issuances					(4,627	)		(1,016	)		(850	)					(6,493	)

Principal payments and debt repurchases					(2,062	)											(2,062	)
Intercompany financing activities		41,924						124,498			(569	)		(165,853	)		-
Net cash provided by (used in) financing activities		41,924			243,311			132,440			10,719			(165,853	)		262,541
Net (decrease) increase in cash and cash equivalents		-			54,052			1,666			(56,044	)		-			(326	)
Cash and cash equivalents balance, beginning of period					159,508			(4,726	)		107,116						261,898
Cash and cash equivalents balance, end of period		$-			$213,560			$(3,060	)		$51,072			$-			$261,572