-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BLGPEJ7HlYGH8/7YWTHQxYYbeorAOoGnVol6vhcJrOrJOhmUwWy1GETxn79uyoHY OVRkqiT9uP5nO/0wdxSipQ== 0000893750-01-000082.txt : 20010208 0000893750-01-000082.hdr.sgml : 20010208 ACCESSION NUMBER: 0000893750-01-000082 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010123 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20010207 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOVNANIAN ENTERPRISES INC CENTRAL INDEX KEY: 0000357294 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 221851059 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-08551 FILM NUMBER: 1527608 BUSINESS ADDRESS: STREET 1: 10 HWY 35 STREET 2: PO BOX 500 CITY: RED BANK STATE: NJ ZIP: 07701 BUSINESS PHONE: 7327477800 MAIL ADDRESS: STREET 1: 10 HWY 35 PO BOX 500 STREET 2: 10 HWY 35 PO BOX 500 CITY: RED BANK STATE: NJ ZIP: 07701 8-K 1 0001.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): January 23, 2001 HOVNANIAN ENTERPRISES, INC. --------------------------- (Exact Name of registrant specified in its charter) Delaware 1-8551 22-1851059 --------- ------ ------------ (State or other Jurisdiction (Commission File Number) (I.R.S. Employer of Incorporation) Identification No.) 10 Highway 35, P.O. Box 500 Red Bank, New Jersey 07701 (Address of principal executive offices) ---------------------------------------- Registrant's telephone number: (732) 747-7800 Item 2. Acquisition or Disposition of Assets ------------------------------------ On January 23, 2001, Hovnanian Enterprises, Inc., a Delaware corporation ("Hovnanian" or the "Registrant"), completed its acquisition of Washington Homes, Inc., a Maryland corporation ("WHI"). The total equity value of Hovnanian's acquisition of WHI was approximately $94.8 million, paid 40% in cash and the balance in Hovnanian Class A common stock, in accordance with the Agreement and Plan of Merger among Hovnanian, WHI Holding Co., Inc. and WHI (the "Merger Agreement"). Hovnanian also refinanced the outstanding debt of WHI under Hovnanian's $375 million revolving credit agreement. A copy of the Merger Agreement is incorporated by reference herein to Annex I of the Joint Proxy Statement/Prospectus contained in Hovnanian's Registration Statement on Form S-4 (File No. 333-52090). A copy of the press release, dated January 24, 2001, is attached as an exhibit hereto and incorporated herein by reference. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits ------------------------------------------------------------------ (a) Financial Statements of Business Acquired. Condensed consolidated financial statements of Washington Homes, Inc. and its consolidated subsidiaries as of October 31, 2000 and for the three months then ended are incorporated by reference herein to Washington Homes, Inc.'s quarterly report for the period ended October 31, 2000 on Form 10-Q (Commission File No. 001-07643). Consolidated financial statements of Washington Homes, Inc. and its consolidated subsidiaries as of July 31, 2000 and July 31, 1999 and for the years then ended are incorporated by reference herein to Washington Homes, Inc.'s annual report for the fiscal year ended July 31, 2000 on Form 10-K (Commission File No. 001-07643). (b) Pro Forma Financial Information. The following pro forma consolidated financial statements of Hovnanian Enterprises, Inc. ("Hovnanian") give effect to the merger of Washington Homes, Inc. ("Washington Homes") and Hovnanian using the purchase method of accounting. The pro forma consolidated financial statements are based on the historical audited consolidated financial statements of Hovnanian, audited Washington Homes consolidated financial statements at July 31, 2000, and unaudited Washington Homes consolidated financial statements at October 31, 1999 and 2000. The pro forma consolidated financial statements are based on the estimates and assumptions set forth in the notes, including Hovnanian management's estimates of the value of the tangible and intangible assets acquired. These estimates and assumptions are preliminary and have been made solely for the purpose of developing the pro forma information. Under the terms of the merger agreement, Washington Homes' shareholders received the equivalent of 1.39 shares of Hovnanian Class A Common shares or $10.08 in cash for each of the 8,334,461 shares of Washington Homes, subject to certain adjustments. The 531,500 stock options held by employees of Washington Homes were converted to Hovnanian options with a similar aggregate implied value. Of this amount 391,250 employee stock options were vested as of the merger date and the fair value of these options are included as a component of purchase price. Additionally, the 109,000 vested stock options held by non-employees of Washington Homes were purchased by Hovnanian for the difference of $10.08 and their respective exercise prices. These pro forma consolidated financial statements are based on the actual consideration as elected by the Washington Homes' shareholders and in accordance with the agreement, of approximately 45% cash and 55% Hovnanian shares. Accordingly, the total purchase price was approximately $86.6 million, based on Hovnanian's closing share price of $7 1/16 on August 25, 2000. The pro forma consolidated balance sheet assumes that the merger took place on October 31, 2000. The pro forma consolidated statements of income for the year ended October 31, 2000 assumes that the merger took place as of November 1, 1999. The unaudited pro forma consolidated financial statements, are presented for illustrative purposes only and are not indicative of the consolidated financial position or results of operations of future periods that actually would have been realized had Hovnanian and Washington Homes been a consolidated company during the specified periods. The pro forma consolidated financial statements, including the notes thereto, are qualified in their entirety by reference to, and should be read in conjunction with, the historical consolidated financial statements of (i) Hovnanian as filed in its Form 10-K for the year ended October 31, 2000 and (ii) Washington Homes as filed in its Form 10-K for the year ended July 31, 2000, and its Form 10Q for the three months ended October 31, 2000. HOVNANIAN ENTERPRISES INC. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEETS OCTOBER 31, 2000 UNAUDITED (In Thousands)
Pro Forma Adjustments Pro Forma Hovnanian Washington Increase October 31, Enterprises, Inc. Homes,Inc. (Decrease) 2000 ----------------- ----------- ---------- ------------- Assets Homebuilding: Cash and cash equivalents $ 40,131 $ 10,876 $ (1)(2) $ 51,007 Inventories 614,983 132,907 747,890 Property, plant and equipment - net 35,594 674 36,268 Senior rentals 10,276 10,276 Other 101,087 14,731 6,609 (1)(3)(4) 122,427 ------------------------------------------- ----------- Total homebuilding 802,071 159,188 6,609 967,868 Financial services 67,127 2,889 70,016 Collateralized mortgage financing 4,343 4,343 ------------------------------------------- ----------- Total assets $ 873,541 $ 162,077 $ 6,609 $ 1,042,227 =========================================== =========== Liabilities and stockholders' equity Homebuilding: Nonrecourse land mortgages $ 18,166 $ 2,584 $ 20,750 Accounts payable and other liabilities 82,205 30,244 8,050 (4) 120,499 Customers' deposits 31,475 3,158 34,633 Nonrecourse mortgages secured by operating properties 3,554 3,554 ------------------------------------------- ----------- Total homebuilding 135,400 35,986 8,050 179,436 Financial services 58,564 428 58,992 Collateralized mortgage financing 3,007 3,007 Notes payable 409,139 37,114 39,481 (2) 485,734 Income taxes payable 4,072 587 (73)(1)(3)(4) 4,586 ------------------------------------------- ----------- Total liabilities 610,182 74,115 47,458 731,755 ------------------------------------------- ----------- Stockholders' equity: Common Stock Class A 173 82 (18)(1)(4) 237 Common Stock Class B 79 79 Paid in capital 46,086 36,530 10,858 (1)(4)(11) 93,474 Retained earnings 246,420 51,392 (51,392)(3)(4) 246,420 Deferred compensation 307 (646)(4)(11) (339) Treasury stock (29,399) (349) 349 (4) (29,399) ------------------------------------------- -------- Total stockholders' equity 263,359 87,962 (40,849) 310,472 ------------------------------------------- --------- Total liabilities and stockholders' equity $ 873,541 $ 162,077 $ 6,609 $ 1,042,227 =========================================== ==========
HOVNANIAN ENTERPRISES, INC. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME YEAR ENDED OCTOBER 31, 2000 UNAUDITED (In Thousands Except Per Share Data)
(5) Pro Forma Adjustments Year Ended Hovnanian Washington Increase October 31, Enterprises, Inc. Homes,Inc (Decrease) 2000 ----------------- ---------- ----------- ------------- Revenues: Homebuilding: Sale of homes $ 1,105,466 $ 467,524 $ 1,572,990 Land sales and other revenues 13,017 4,793 17,810 ------------------------------------------------ ------------- Total homebuilding 1,118,483 472,317 1,590,800 Financial services 18,855 9,285 28,140 Collateralized mortgage financing 469 469 ------------------------------------------------ ------------- Total revenues 1,137,807 481,602 1,619,409 ------------------------------------------------ ------------- Expenses: Homebuilding: Cost of sales 882,711 401,000 (192)(6) 1,283,519 Selling, general & administration 104,771 40,565 (1,058)(7)(11) 144,278 Inventory impairment loss 1,791 1,791 ------------------------------------------------ ------------- Total homebuilding 989,273 441,565 (1,250) 1,429,588 Financial services 19,334 5,369 24,703 Collateralized mortgage financing 416 416 Corporate general and administration 33,309 33,309 Interest 34,956 9,421 1,468(9)(12) 45,845 Other operations 8,701 519 3,250(8)(12) 12,470 ----------------------------------------------------------- ------------- Total expenses 1,085,989 456,874 3,468 1,546,331 ----------------------------------------------------------- ------------- Income before income taxes 51,818 24,728 (3,468) 73,078 Income taxes 18,655 9,655 (754)(10) 27,556 ----------------------------------------------------------- ------------- Net income $ 33,163 $ 15,07 $ (2,714) $ 45,522 ===========================================---------------- ============= Earnings per share: Basic $ 1.51 $ 1.61 Weighted shares outstanding 21,933 (13) 28,286 Diluted $ 1.50 $ 1.59 Weighted shares outstanding 22,043 (13) 28,720
Hovnanian Enterprises, Inc. Notes to Unaudited Pro Forma Consolidated Financial Statements (In Thousands Except Per Share Data) (1) Adjustment reflects the components of its purchase price. Under the terms of the transaction, Hovnanian exchanged 1.39 shares of Hovnanian Class A Common shares for approximately 4,570,600 Washington Homes shares and paid $10.08 in cash for approximately 3,763,800 shares of Washington Homes. These pro forma consolidated financial statements are based on the actual consideration as elected by Washington Homes' shareholders and in accordance with the agreement, of approximately 45% cash and 55% Hovnanian shares as noted above. The aggregate purchase price is estimated to be approximately $11.7 million higher than the fair value of assets acquired less liabilities assumed at October 31, 2000. The 531,500 stock options held by employees of Washington Homes were converted to 738,785 Hovnanian options with a similar aggregate implied value. Of the Washington Homes stock options 390,000 employees' stock options were vested as of the balance sheet date and the fair value of these options are included as a component of purchase price. Additionally, the 109,000 vested stock options held by non-employees of Washington Homes were purchased by Hovnanian for the difference of $10.08 and their respective exercise prices. Accordingly, the total purchase price was estimated to be approximately $86.6 million, based on Hovnanian's closing share price of $7 1/16 on August 25, 2000. The following table summarizes the calculation of the purchase price at October 31, 2000: (Dollars in thousands) ---------- Merger consideration - Cash (including non-employee stock options) $ 38,481 - Hovnanian Class A shares 44,869 - Fair Value of Vested Hovnanian Options 2,243 Transaction costs 1,000 ---------- Total purchase price $ 86,593 ========== (2) Adjustment reflects the following anticipated transactions: . Draw on Hovnanian existing credit facility $ 76,595 ========== . Anticipated funding of the cash portion of the purchase price (including transaction costs of $1,000) $ (39,481) . Repayment of existing Washington Homes notes payable (37,114) ---------- $ 76,595 ========== The net effect of the above transaction results in an increase in the notes payable of the combined company in the amount of $39,481. (3) Adjustment reflects the write-off of approximately $.1 million of financing costs in connection with the retirement of certain Washington Homes indebtedness, as described in Note (2) above. (4) Adjustment reflects the elimination of the Washington Homes stockholders' equity, the elimination of Washington Homes goodwill amounting to approximately $8.2 million, and the accrual of approximately $8.1 million Washington Homes related merger expenses. (5) As Washington Homes has a calendar year end of July 31, the pro forma results of operations for the year ended October 31, 2000 are based upon the quarterly historical results of operations of Washington Homes as previously filed, conformed to Hovnanian's fiscal year end and Hovnanian's financial statement presentation as follows: Washington Homes, Inc. Pro Forma Results of Operations for the Year Ended October 31, 2000 Previously Reported Periods
--------------------------------------------------- Less:three Add: three Months Year Ended months Ended Ended July 31, 2000 October 31,1999 October 1, 2000 ------------- ----------------- ----------------- Revenues: Homebuilding: Sale of Homes $459,278 $ 85,889 $102,201 Land Sales & Other Revenues 10,473 1,534 2,304 --------------------------------------------------- Total Homebuilding 469,751 87,423 104,505 Financial Services Collateralized Mortgage Financing ----------------------------------------------------- Total Revenues 469,751 87,423 104,505 ----------------------------------------------------- Expenses: Homebuilding: Cost of Sales 375,014 69,190 82,318 Selling, General & Administration 62,752 12,033 15,140 Inventory Impairment Loss ---------------------------------------------------- Total Homebuilding 437,766 81,223 97,458 Financial Services Collateralized Mortgage Financing Corporate General & Administration Interest 7,224 1,752 1,848 Other Operations 751 166 199 ----------------------------------------------------- Total Expenses 445,741 83,141 99,505 ---------------------------------------------------- Income Before Income Taxes 24,010 4,282 5,000 Income Taxes 9,391 1,655 1,919 ---------------------------------------------------- Net Income $ 14,619 $ 2,627 $ 3,081 ====================================================
Pro Forma Year Ended Reclassification Year Ended October 31, 2000 Adjustments October 31, 2000 ---------------- ----------------- ---------------- Revenues: Homebuilding: Sale of Homes $475,590 (8,066) $467,524 Land Sales & Other Revenues 11,243 (6,450) 4,793 -------------------------------------------- --------- Total Homebuilding 486,833 (14,516) 472,317 Financial Services 9,285 9,285 Collateralized Mortgage Financing ------------------------------------------------------ Total Revenues 486,833 (5,231) 481,602 ------------------------------------------------------ Expenses: Homebuilding: Cost of Sales 338,142 12,858 401,000 Selling, General & Administration 65,859 (25,294) 40,565 Inventory Impairment Loss ------------------------------------------------------ Total Homebuilding 454,001 (12,436) 441,565 Financial Services 5,369 5,369 Collateralized Mortgage Financing Corporate General & Administration Interest 7,320 2,101 9,421 Other Operations 784 (265) 519 ------------------------------------------------------ Total Expenses 462,105 (5,231) 456,874 ------------------------------------------------------ Income Before Income Taxes 24,728 24,728 Income Taxes 9,655 9,655 ------------------------------------------------------ Net Income $ 15,073 $ 15,073 ======================================================
(6) Adjustment reflects a reduction in cost of sales due to different procedures for estimating warranty accruals at Hovnanian. The change in procedures reduces Washington Homes cost of sales $.2 million for the year ended October 31, 2000. (7) Adjustment reflects a reduction in general and administrative expenses. In connection with the merger, Hovnanian management believes that it will realize cost savings related to the elimination of professional fees and other costs associated with the operation of Washington Homes as a public independent company, including legal, audit and tax fees, annual report preparation and printing costs and stock registration and filing fees aggregating $.9 million for the year ended October 31, 2000. In addition, Washington Homes had incurred $.8 million of related merger costs which are also being eliminated from general and administrative expenses for the year ended October 31, 2000. (8) Represents additional goodwill expense for the allocation of the purchase price as if the merger occurred on November 1, 1999 aggregating approximately $3.7 million for the year ended October 31, 2000. (9) Represents additional interest expense, including interest amortized as homes are delivered, on the draw on the Hovnanian existing credit facility at an interest rate of 8.32% aggregating approximately $2.3 million for the year ended October 31, 2000. (10) Represents the net decrease to income tax expense for adjustments to amortization of certain deferred tax assets, reductions in costs of sales and general and administrative expenses, and for the additional interest expense incurred which is partially offset by the elimination of Washington Homes financing costs, the total of which aggregated approximately $.8 million for the year ended October 31, 2000. (11) Stock options to purchase Washington Homes stock held by the employees of Washington Homes have been converted to Hovnanian options with a similar implied value. The fair value of vested options converted of approximately $2.2 million at October 31, 2000 have been included as part of the purchase price. The unvested portion of converted options for which a post acquisition service period is required to vest has been valued at their intrinsic value of approximately $.3 million at October 31, 2000 and included as a deferred compensation cost, a component of shareholder equity, and will be amortized over the remaining vesting period. Amortization expense was approximately $.5 million for the year ended October 31, 2000. (12) Adjustment reflects the elimination of amortization of financing costs in conjunction with the retirement of certain Washington Homes indebtedness aggregating approximately $.9 million for the year ended October 31, 2000. (13) Basic earnings per share are computed based upon the weighted average number of Common Stock Class A and Class B shares outstanding during the period. Diluted earnings per share are computed based upon the increased number of Common Stock Class A shares that would be outstanding assuming the exercise of dilutive Common Stock Class A stock options. The increase in Common Stock Class A shares issued in connection with the merger was 6,353,000 shares. The diluted shares include an additional 324,000 shares calculated under the treasury stock method. (c) Exhibits. Exhibit 2.1 Agreement and Plan of Merger, dated as of August 28, 2000, among Hovnanian Enterprises, Inc. ("Hovnanian"), WHI Holding Co., Inc. and Washington Homes, Inc. (included as Annex I to the Joint Proxy Statement/Prospectus contained in Hovnanian's Registration Statement on Form S-4 (File No. 333-52090)). Exhibit 99.1 Press Release dated January 24, 2001. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. HOVNANIAN ENTERPRISES, INC. --------------------------- (Registrant) By: /s/ Peter S. Reinhart --------------------- Name: Peter S. Reinhart Title: Senior Vice President General Counsel Date: February 7, 2001 INDEX TO EXHIBITS Exhibit Number Exhibit -------------- ------- Exhibit 2.1 Agreement and Plan of Merger, dated as of August 28, 2000, among Hovnanian Enterprises, Inc. ("Hovnanian"), WHI Holding Co., Inc. and Washington Homes, Inc. (included as Annex I to the Joint Proxy Statement/Prospectus contained in Hovnanian's Registration Statement on Form S-4 (File No. 333-52090)). Exhibit 99.1 Press Release dated January 24, 2001. EX-99.1 2 0002.txt Exhibit 99.1 HOVNANIAN ENTERPRISES, INC. News Release _______________________________________________________________________________ Contact: At the Company At The Financial Relations Board Kevin C. Hake Amy F. Glynn, CFA Vice President, Finance 675 Third Avenue and Treasurer 212-661-8030 732-747-7800 _______________________________________________________________________________ HOVNANIAN ENTERPRISES AND WASHINGTON HOMES COMPLETE MERGER RED BANK, NJ, January 24, 2001 -- Hovnanian Enterprises, Inc. (ASE: HOV) and Washington Homes, Inc. (formerly NYSE: WHI) announced that, having received shareholder approvals, they closed on their merger on January 23. As a result, Washington Homes, Inc. has been merged with and into a wholly owned subsidiary of Hovnanian. Washington Homes, Inc. is no longer listed as a separate company on the NYSE effective as of the close of trading yesterday. Hovnanian is now expected to rank among the top- ten homebuilders in the United States, with total assets approaching $1.0 billion. Fiscal 2001 revenue is expected to climb more than 40% to approximately $1.65 billion and deliveries are anticipated to exceed 6,700 homes. The merger resulted in the issuance of an additional 6.4 million Hovnanian common shares, boosting shareholders' equity above $300 million and adding significant liquidity for shareholders by increasing the publicly-held float almost 50%. "With the merger completed, we can now focus on achieving the many benefits the combination of our two companies will allow," said Kevork S. Hovnanian, Chairman and Founder of Hovnanian Enterprises, Inc. "This combination is a perfect fit with our strategy of having a dominant presence in a handful of select markets. It greatly enhances the Company's market position in Metro-Washington D.C. and North Carolina, adds depth to our management team, increases our market capitalization, and further diversifies our earnings," he added. "Our increased size and focused market concentration will provide powers and economies of scale that should lead to superior returns for our shareholders." Subsequent to the merger, Hovnanian Enterprises, Inc. will maintain its current position as the largest builder in New Jersey and will become the second- largest builder in Metro-Washington, D.C. and the largest builder in North Carolina. In addition, Hovnanian will continue to have a significant presence in Dallas, Texas and Southern California, will be a top-five builder in Nashville, Tennessee and the market leader in Huntsville, Alabama and the Gulf Coast of Mississippi. "We are extremely pleased to join together with the Hovnanian organization," said Geaton A. DeCesaris, Jr., former President and CEO of Washington Homes, Inc. "The merger has achieved our objective of providing greater liquidity for our shareholders and it will give all of our associates in the combined Company a more advantageous environment in which to flourish," said Mr. DeCesaris, who is now the President of Homebuilding Operations and Chief Operating Officer for Hovnanian Enterprises. "The growth prospects and increased market presence for the Company have improved the opportunities for our combined teams in North Carolina and Washington D.C.," he added. "We plan to implement our extensive training and career development programs to cover our new associates," commented Ara K. Hovnanian, President and CEO of the combined Company. A joint team has already developed an integration plan to build on the market strength the Company has gained in North Carolina and Metro-Washington, D.C. The plan includes leveraging the most powerful local brands and national purchasing contracts, combining redundant offices, eliminating duplicate design centers and consolidating sales and marketing efforts wherever possible. "We are finding additional synergies as we implement our integration plan," noted Mr. Hovnanian. "Washington Homes is expected to add between $.05 to $.10 per share to this year's earnings," said Ara Hovnanian. "Year to date, we have already delivered or sold more than 60% of the Company's projected fiscal 2001 deliveries. We are confident that we will meet or exceed analyst estimates of approximately $1.80 per share for fiscal 2001, representing a 20% increase from our record performance in fiscal 2000," he said. "Our earnings estimates are prior to the effect of any special charges related to the merger that will be taken in the first quarter ending January 31st, 2001," Mr. Hovnanian added. The total equity value of the merger consideration was $94.8 million, paid 40% in cash and the balance in Hovnanian Class A common shares, in accordance with the terms of the Agreement and Plan of Merger. Approximately 4.6 million of the 8.3 million outstanding Washington Homes shares were converted into Hovnanian shares. Hovnanian also refinanced the outstanding debt of Washington Homes under the Company's $375 million revolving credit agreement, as anticipated. Washington Homes shareholders who elected to receive all cash as consideration for their shares or who failed to properly deliver an election form by the announced deadline will receive $10.08 in cash for each share of Washington Homes stock. Washington Homes shareholders who elected to receive all stock as consideration will receive, as a result of pro-ration, 1.0287 shares of Hovnanian Class A common stock and $2.62 in cash for each share of Washington Homes stock. "Most of our communities continue to experience strong demand," Ara Hovnanian noted. "The increasingly difficult environment for regulatory approvals in nearly all areas of the country has kept the supply of new housing from meeting demand in many of our markets. This gives us confidence that the housing market will support our business plan, even if there is a moderate downturn in job creation," he said. "With the addition of Washington Homes, Hovnanian now controls more than 40,000 lots in attractive locations. Over 70% of these lots are controlled under rolling option contracts. The merger will also allow us to continue to apply our standardized processes and operating strategies across a wider universe, in order to further enhance our returns," he concluded. Hovnanian Enterprises, Inc. designs, constructs and markets single-family homes, townhomes and condominiums in planned residential communities in New Jersey, North Carolina, Pennsylvania, Virginia, Maryland, New York, California, Texas, Tennessee, Alabama and Mississippi in the United States, and in Poland. Note: All statements in this Press Release that are not historical facts should be considered as "forward-looking statements" within the meaning of the Private Securities Litigation Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. Such risks, uncertainties and other factors include, but are not limited to, changes in general economic conditions, fluctuations in interest rates, increases in raw materials and labor costs, levels of competition and other factors described in detail in the Company's Form 10-K for the year ended October 31, 1999. -----END PRIVACY-ENHANCED MESSAGE-----