Good morning and thank you for joining us today for Hovnanian Enterprises Fiscal 2017 Third Quarter Earnings Conference Call. An archive of the website will be available after the completion of the call and run for 12-months. This conference call is being recorded for rebroadcast and all participants are currently in a listen-only mode. Management will make some opening remarks about the third 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. These 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, Investor Relations. Jeff, please go ahead.

Thank you, Candace and thank you all for participating in this morning's call to review the results for our third quarter, which ended July 31, 2017. All statements in this conference call that are not historical facts should be considered as forward-looking statements within the meanings 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 the 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 expectations will be achieved. By their nature, forward-looking statements speak only as of the date they are 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 others are described in detail on the sections entitled Risk Factors and Management’s Discussion and Analysis, particularly the portion of MD&A entitled Safe Harbor statement in our Annual Report on Form 10-K for the fiscal year ended October 31, 2016 and subsequent filings with the Securities and Exchange Commission. Except as otherwise required by applicable securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason. Joining me today from the company are Ara Hovnanian, Chairman, President and Chief Executive Officer; Larry Sorsby, Executive Vice President and CFO; Brad O'Connor, Vice President, Chief Accounting Officer and Controller; and David Bachstetter, Vice President, Finance and Treasurer. I’ll now turn the call over to Ara. Ara, go ahead.

Thanks, Jeff. I am going to review the operating results for the third quarter and discuss our current sales environment. Larry will follow me with a little more detail and discuss a few other items, including our liquidity position, as well as the impact the loss on extinguishment from debt had on our deferred tax asset. Third quarter operating results were in line with our earlier guidance. For many quarters, we discussed the impact of exiting four underperforming markets and temporarily reducing our land spend while paying off $320 million of maturing debt last year. Those actions led to a decrease in our community count which in turn impacted contracts, deliveries and revenues throughout the fiscal '17. Fortunately, the overall housing market continues to gain strength. Contracts per community continue to increase each quarter which is illustrated by the 12% increase we saw in this most recent quarter or third quarter. In fact, our contracts per community have increased so much that despite the community count reduction I've mentioned a moment ago, we've had more total monthly sales in four of the last five months compared to the same period last year and that includes the recent month of August. Obviously most of the new sales will deliver in future quarters. On Slide 4, we show total consolidated revenues in gray, and joint venture revenues in blue, and as we've also discussed previously, we've been more active in joint ventures over the last year. Including joint venture revenues our revenues declined 12% and 4% for our most recent quarter and year-to-date respectively. We converted 17 communities to joint venture since the third quarter of fiscal '16. Turning to Slide 5, you can see in the upper left hand portion of the slide that our adjusted gross margin was just slightly…

Thanks Ara. If you turn to Slide 15, I’m going to provide an update on Houston. I’ll start with a view of our performance for the most recent quarter, and then update you on the impact of Hurricane Harvey. Despite the fact that we have had over two years of significantly lower oil prices, our Houston operations continue to post solid results. Here we show contracts per community for the trailing 12 months ended July 31, for the current period and the same period for the prior three years. As you can see, the 27.3 contracts per community per year for the current period is the highest on the graph. During the third quarter of 2017, we had 6.8 contracts per community in Houston compared to 6.9 contracts per community in last year's third quarter. As I've said on prior calls, there are three things that set our Houston operations apart from many of the builders we compete against in that market. Number one, we focus on a lower average price point. Our average home prices in Houston delivered for the third quarter of 2017 in Houston was approximately 303,000 which is lower than most of our competitors. Number two, we do not build in any of the highly competitive master planned communities. And number three, we have less exposure to communities in the energy headquarter in Houston than many of our peers. Much of our success in Houston has to do with the quality of our local Houston management team. Despite continued success for our Houston operations, we will keep a close eye on the market and we're prepared to take appropriate actions should circumstances change. Now let me update you on what's going on in Houston with respect to the impact from Hurricane Harvey. The first day the…

Thanks Larry. We started the call by pointing out the impact of our declining community count and the effect on our most recent results. Despite the decrease in community count, the total number of contracts for four of the past five months was greater this year than for the same months last year. This demonstrates the growing strength of the housing market as it continues its journey towards normal and bodes well for our future performance. These kinds of improvements will lessen the impact of a declining community count on our operations. It also allows us to increase our operating leverage because we get the benefits of those extra deliveries as we said before without having to add much if any additional SG&A. Certainly it’s a helpful step towards improving our operating efficiencies and profitability. There’ll be an even greater impact on our future results once we begin to sequentially grow community count in the second half of next year. These additional communities when combined with more contracts per community should allow us to grow our revenues even further and we should see more profits flow through the bottom line. I look forward to reporting these improved results in future quarters. Thanks very much this concludes our formal comments. And I would like to open it up for question.

[Operator Instructions] And our first question comes from Arjun Chandar of JPMorgan. Your line is now open.

First wanted to drill down a little bit more on land spend. Can you talk a little bit more about your thoughts heading into the end of the fiscal year, you’re at 440 through the first nine months, do you expect land spend in fiscal 2017 to be higher than fiscal 2016. And you mentioned the strong absorption numbers, to what extent are you concerned that if the right land opportunities do not present themselves over the next three to six months that it will become more challenging to increase community count sequentially in the second half of fiscal 2018.

Yes, I think - we have the capital to increase our land spend in 2017 more than 2016. We continue to expect to do that, but at the same time we’re going to remain disciplined to make sure that all new land deals meet our underwriting criteria. I think we’re seeing opportunities in most of our markets throughout the country and we have been very busy in land committee. So I think we’ll be able to achieve our goals.

Our strategy is a widely diversified product array. The challenges to that it's harder to execute on high-end low-end townhouse singles et cetera. The positive to that is we can really look at every opportunity in a marketplace whether it's an active adult or townhouse or single-family, a low-end, high-end an overall as Larry is pointing out we’ve definitely seen opportunities out in the market.

And then just as a follow-up regarding Houston, can you give us a sense and I know maybe a little early to quantify and I appreciate that, you’re not giving formal guidance for Q4 in anticipation of the deferral of deliveries. But on a percentage basis how should we think about the number of deliveries that can potentially be deferred into fiscal 2018 from Q4 of 2017?

Yes, it is unquantifiable at this point. Houston is a little less than 25% of our overall company. So we just don't know what the impact on construction is going to be. So I really can't give you any guidance beyond what we've done now is tell you we’re confident there's going to be some delays. Having said that, we have a very impressive Houston management team and they are scrambling as hard as they can to try to make sure that construction schedules continue to be met. It’s just unquantifiable at this time.

And our next question comes from of Megan McGrath of MKM Partners. Your line is now open.

I guess first of all maybe a big picture question on the community count and absorption. You note in your one chart that we’re still well below that 44 pace. Just curious is there a limit now you’ve been growing your absorption pace pretty fast is that labor shortages across the country. Could we even get to that 44 given the current restrain or how should we think about sort of the ability to keep growing that absorption pace?

I mean as you know Megan, we’ve been around for almost 60 years and we’ve certainly seen a lot of these cycles. If we grew from the current pace to 44 next quarter that would be a challenge for anyone in any part of the market. The reality is that the market is going to slowly get to normal. Frankly, the market will get to over normal, I mean at the peak of the market – and for multiple years our absorption was well over the 44 that’s the non boom, non-bust year. So clearly it would be a challenge if we did it instantly. The plans are not to do it instantly and if there is sufficient demand and we’re not able to get the labor to build them, the homebuilders will do what everybody does in economics 101 and will let the market balance by raising pricing would help us in that way. But I fully expect eventually the market will get to a normal pace it’s not what we budget but we fully expect that will happen over time.

And then I guess maybe if you could give more color kind of geographically it’s a little hard to see the trends of that community count the market envisioned like that. So maybe highlight any particular areas of strength or any markets that are showing any weakness would be great?

Sure, overall both Southern and Northern California are certainly strong. Houston and Dallas remains strong. Our Houston operations just been particularly amazing in light of what's happened in oil over the last couple of years. We see a stronger Virginia market although the Maryland side has been a little softer and the Chicago market has been a little softer. So those are the ones from the top of my head that kind of standout above or below in terms of the overall market.

Thank you. And our next question comes from Sam McGovern of Credit Suisse. Your line is now open.

I’m glad to hear the damage was fairly limited and your team members are safe. With regard to the longer term impact, how do we think about what the magnitude and potential duration of the impact would be to labor and material increases?

It's just so hard to quantify obviously first of all it just - the floods have just receded so this is really new and it's hard to quantify how labor will be affected. Clearly there's going to be a strain on labor and there are hundred thousand homes that are damaged throughout Houston. And there’ll be a lot of people focused on cleaning up and doing some kind of damage repair on many of those homes so I'd say it's just very early. The positive is that we haven't heard of any people wanting to cancel. Interestingly they’ve actually sold new homes already in fact the day after the storm passed we started selling homes, so that's all positive. And in theory some people that were affected some of the hundred thousand homes that did have floods may decide that they'd rather find a new community which generally is at higher elevations and less prone to flooding. So there should be some positive long-term impacts from that perspective clearly short-term they’ll be a strain on the labor supply and it's just impossible to quantify at this early right now. I mean it’s only been a few days it just too hard.

And with regard to Slide 22 that the liquidity levers always very helpful to have that sort of reminder. I was hoping with regard to the individual levers that you guys have there, if you guys could give us some indication in terms of how much availability you guys have under each of those levers?

It’s not a specific amount, is not really on newly identified communities there is not in any limit and I'd say in general there have been more land bankers coming into the marketplace then we had a year ago and certainly more than two years ago. Really we've been doing a little less of it just because we've had so much excess cash over the last few quarters. Larry will describe in a moment maybe the limitations, only one land that we already own but frankly we don't really have plans to land bank land we already own. Similarly, we’re just seeing in general more interest in doing joint ventures going forward. I think a lot of investors see us as a housing industry still early in the cycle compared - obviously not if you count years although compared to last cycle which is 15 years you could still say it's early. But in regard to how many homes are being produced can compare to historical norms. We’re way under compared to demographic household formations we’re way under and compared to new demographic projections which count on the Millennials are finally coming into the marketplace we’re way under. So people just feel good about those opportunities. And the last one I’ll talk about is nonrecourse project specific loans we don't really have a limit on new properties and there are more and more banks willing to get into that marketplace that’s my quick comment but Larry you want to give a little more detail.

Just on the land banking as Ara said we have no limits on land banking newly identified land parcels we’ve not previously owned with respect to land banking something that's currently on our balance sheet we’re limited to no more than 10 million a quarter or in the aggregate $50 million if we don't use it in a particular quarter. And with respect to the nonrecourse financing on new properties although we’re not limited we do have to put the debt financing on within 90 days of acquiring the land.

And our next question comes from James Finnerty of Citi. Your line is now open.

Just on the insurance front, just so we can understand how does that typically work if you have a claim and what the timeframe for actually getting funds from insurance companies…?

You’re talking about like a flood insurance claim is that what you’re focusing on.

Yes - flood damage to inventory that you have not yet sold.

I mean we would just notify the carrier of the claim and within a relatively short period of time they think it's a pretty straightforward process shouldn't take longer than 30 days or so.

But again we just want to emphasize we just did not have much physical damage in Houston obviously nobody knows yet what's going to happen in Florida, but by comparison we deliver a couple of thousand homes in Texas. We deliver a few hundred homes in Florida so our exposure is dramatically lesser there.

And then maybe on the community count you’re guiding for quarter-over-quarter growth in the second half of next year these events give similar guidance last quarter. So going into year-end in the first half of next year - should we think about community count declining slightly by low single digits so we can gets some help monthly on community count?

I mean I don't think we’re going to give you any specific guidance there the trends has been slightly down it's a difficult number to give an absolute projection on because as you sell faster like we've been doing – you sell through communities and that can affect the number of remaining communities. So the pace continues to strengthen it could change that number we have delays and open communities could affect that number. But if I’m sitting in your chair I think you can generally look kind of what the trends have been and the guidance that we've given you is that the trend is going to stabilize and begin to go up in the second half of next year.

Just one last question in terms of the insecure you’re financing you stated that you're looking and you’re going to do once appropriate is there a timeframe where you feel you need to or would like to do it by like a sort of July of next year or is it – sort of any color that will be helpful?

Closer and closer to maturity obviously there is more of an urgency to deal with it but we don't feel that there's a pressing need to do something and until the timing is appropriate and the terms are appropriate at this stage.

I mean overall our recent issues our trading very well, we feel very confident about our future performance coming up so we’re just not feeling the urgent pressure to do something right at this moment.

[Operator Instructions] And our next question comes from Sean Monahan of Duane Park. Your line is now open.

Just seemed curious in terms of past floods I know Houston had some 500-year floods over the past four years. What have you seen in terms of price increases from different labor trends?

I don’t think we've seen a flood in Houston in the last 20 years that has anything close to the impact this particular flood. I think it’s unprecedented historically but in past floods we've been able to come through at fairly unscathed. We've seen some delays and some cost pressures but I don't think that's a good indication of what this flood impact is going to be.

Now I will say this we give a bit of latitude to our divisions to decide whether they’d prefer to be more spec home oriented or advance order oriented. It just so happened that our Houston division prefers not to have a big backlog but to do more of their sales from spec homes. So the benefit of that in this particular case is that they are not locked on sales price while construction costs could be rising and they do have an opportunity to consider home price increases if they do find their construction costs go up to greatly. So that typically what happens - again it's just too early to know what those impacts are going to be. There are so many dynamics in each market and each time it's hard to predict.

And I guess my last question, if you look at where we are in terms of average sales price increases for the whole space over the last couple of years. Where do you think we’re kind of topping out or do you guys still think you have the ability to raise home prices as much you have given affordability factors?

Well it's a good question and I'll answer it in numerous ways. First, the important thing is to look at the affordability index and that measures the average family income compared to the cost of the monthly payment costs of median home price. That is still quite affordable - generally across the country obviously different markets are different, Silicon Valley at the moment is more unaffordable as are some of the hotspots may be along the coasts. But generally speaking, the national affordability index is better than it has been for many, many of the years over the last two decades. But the other important thing to remember, just so happens I started my personal career right before the 1981 mortgage rate increases. Mortgage rate then hit 18%, and I say that because that affected affordability more than home prices. What we witnessed then, and I think we may witness either with home price increases or with mortgage rate increases, is that people will shift over time their expectations into homes. At that time, we were selling a lot of townhouses because that's as home prices went up and these mortgage rates in that case went up, that’s what was affordable. And since the primary market for home purchases is shelter as opposed to a discretionary purchase, people will buy what they can afford to buy, or they'll move further out. In every one of our communities, we offer more than one model type. People will have a choice of a home that might be 1500 square feet all the way up to a home that might be 2500 square feet. As prices go up, they may have to set their expectations on a slightly smaller home or perhaps fewer upgrades, perhaps a European cabinet may not be affordable for them. But if they need to change their home, they’re growing a family, they’ve started a new household, whatever that reason might be or they want to downsize from much larger home because their children have left, then they will make a purchase, they may just have to adjust what they purchase. And that's what we've seen historically over time as different events and prices and rates occur in the marketplace.

And our next question comes from Lee Brading of Wells Fargo. Your line is now open.

You guys clearly alluded on, as you highlight the improvement on the contracts per community. I’m looking at the supply, I was wondering if you can drill down a little bit more, maybe on the geographic mix or operationally is where I’m trying to get. Is there something you guys are doing differently or just happens to be the market, something at the local level that you're doing to the drive the improvement in net absorptions.

I mean, we’re obviously focused on absorptions, but it's clearly just a sign that the market is strengthening. I just want to point out again that it is definitely strengthening. We've seen it quarter after quarter our absorptions been going up for many, many quarters now, but we’re still not at normal. So we think there's still a lot more upside room. And that's just reflective largely of the marketplace. We are focused in general on inventory turnover and keeping sales going and pace per community going is part of that overall formula.

One other thing that we embarked upon beginning of this year was a very comprehensive new sales training program. And I think some of the increased absorptions we’re beginning to see some payoff from that comprehensive national sales training program that we’re putting into place. But I agree with Ara that the majority of the improvement is related to the markets just warming up.

And then the mothballed lots, I was wondering if you could talk about the opportunity there, or kind of the status of where those stand.

As we pointed out, our largest segment of mothballed losses on the West Coast. And that’s somewhat helpful because that’s been a pretty strong market. So we’ve got a fairly good history of bringing the mothballed lots into production and being active. We’re continuing to do that really almost every quarter you're seeing that number going down as we either bring them into production which is most often the case or in some cases we’ll sell some mothballed lots to someone else.

Yes, 2,900 of our mothballed lots are in California and we only have 3,700 total mothballed lots. So the vast majority of them are in California and we've been as Ara said on mothballing pretty regularly every quarter.

And our next question comes from James Finnerty of Citi. Your line is now open.

Just a follow up on the insurance just to make sure I understand it. With the properties that have been damaged by wind in Houston and potentially in Florida, is that also covered by insurance? And is there a deductible associated with that?

Yes and yes.

And then just on cash and liquidity, heading into your ends I know there is a lot of moving pieces should we expect liquidity to go up like it typically would in the fourth quarter or is it too hard to predict given all the impacts from the hurricane?

I’d say the latter is the issue. I mean we just don’t know how many deliveries we’re going to get so it’s a really hard to predict cash balance when you're not confident in the number of deliveries you’re going to get.

But typically we’ll go up in the fourth quarter absent…

Typically it would, yes, typically it would yes.

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

Thank you. We're continuing to work hard. We're bracing for the hurricane in Florida. We’re obviously concerned about our associates there and that's what we have first and foremost on our mind as the storm is coming. The market is continuing to strengthen overall obviously it helps to have some tailwinds and we’re feeling the effects of it. We’re seeing it in sales now which is the lead indicator versus deliveries which is a lagging indicator. We look forward to reporting some good results as this market continues to climb back to normal. Thanks very much.

Ladies and gentlemen this does conclude our conference call for today. Thank you all for participating and have a nice day. All parties may now disconnect.