UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10Q
[ X ] Quarterly report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For quarterly period ended JANUARY 31, 2001 or
[ ] Transition report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Commission file number 1-8551
Hovnanian Enterprises, Inc.
(Exact name of registrant as specified in its charter)
Delaware 22-1851059
(State or other jurisdiction or (I.R.S. Employer
incorporation or organization) Identification No.)
l0 Highway 35, P.O. Box 500, Red Bank, N. J. 07701
(Address of principal executive offices)
732-747-7800
(Registrant's telephone number, including area code)
Same
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (l) has filed all reports
required to be filed by Sections l3 or l5(d) of the Securities Exchange Act of
l934 during the preceding l2 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. 20,087,921 Class A Common
Shares and 7,586,396 Class B Common Shares were outstanding as of March 9,
2001.
HOVNANIAN ENTERPRISES, INC.
FORM 10Q
INDEX
PAGE NUMBER
PART I. Financial Information
Item l. Consolidated Financial Statements:
Consolidated Balance Sheets at January 31,
2001 (unaudited) and October 31, 2000 3
Consolidated Statements of Income for the three
months ended January 31, 2001 and 2000
(unaudited) 5
Consolidated Statements of Stockholders' Equity
for the three months ended January 31, 2001
(unaudited) 6
Consolidated Statements of Cash Flows for
the three months ended January 31, 2001
and 2000 (unaudited) 7
Notes to Consolidated Financial
Statements (unaudited) 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 14
Item 4. Submission of Matters to a Vote of Security
Holders 23
PART II. Other Information
Item 6(a). Exhibit 10 - Registration Rights Agreement and
Employment Agreement (Geaton A. DeCesaris, Jr.)
Item 6(b). Exhibit 10 - Restated By Laws of Hovnanian
Enterprises, Inc.
Item 6(c). Reports on Form 8K filed during the quarter for
which this report is filed 23
Signatures 24
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
(unaudited)
January 31, October 31,
ASSETS 2001 2000
----------- -----------
Homebuilding:
Cash and cash equivalents....................... $ 33,408 $ 40,131
----------- -----------
Inventories - At the lower of cost or fair
value:
Sold and unsold homes and lots under
development.................................. 672,310 525,116
Land and land options held for future
development or sale......................... 92,802 89,867
----------- -----------
Total Inventories........................... 765,112 614,983
----------- -----------
Receivables, deposits, and notes................ 54,927 36,190
----------- -----------
Property, plant, and equipment - net............ 35,414 35,594
----------- -----------
Senior Residential rental properties - net...... 10,179 10,276
----------- -----------
Prepaid expenses and other assets............... 88,884 64,897
----------- -----------
Total Homebuilding.......................... 987,924 802,071
----------- -----------
Financial Services:
Cash and cash equivalents....................... 2,684 3,122
Mortgage loans held for sale.................... 42,857 61,860
Other assets.................................... 1,617 2,145
----------- -----------
Total Financial Services.................... 47,158 67,127
----------- -----------
Collateralized Mortgage Financing:
Collateral for bonds payable.................... 4,000 4,145
Other assets.................................... 192 198
----------- -----------
Total Collateralized Mortgage Financing..... 4,192 4,343
----------- -----------
Income Taxes Receivable - Including deferred tax
benefits........................................ 1,291
----------- -----------
Total Assets...................................... $1,040,565 $873,541
=========== ===========
See notes to consolidated financial statements.
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
(unaudited)
January 31, October 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 2001 2000
----------- -----------
Homebuilding:
Nonrecourse land mortgages........................ $ 16,402 $ 18,166
Accounts payable and other liabilities............ 95,836 82,205
Customers' deposits............................... 35,930 31,475
Nonrecourse mortgages secured by operating
properties...................................... 3,529 3,554
----------- -----------
Total Homebuilding............................ 151,697 135,400
----------- -----------
Financial Services:
Accounts payable and other liabilities............ 1,591 2,078
Mortgage warehouse line of credit................. 38,041 56,486
----------- -----------
Total Financial Services...................... 39,632 58,564
----------- ----------
Collateralized Mortgage Financing:
Bonds collateralized by mortgages receivable...... 2,878 3,007
----------- -----------
Total Collateralized Mortgage Financing....... 2,878 3,007
----------- -----------
Notes Payable:
Revolving credit agreement........................ 119,775
Senior notes...................................... 296,518 296,430
Subordinated notes................................ 100,000 100,000
Accrued interest.................................. 11,074 12,709
----------- -----------
Total Notes Payable........................... 527,367 409,139
----------- -----------
Income Taxes Payable................................ 4,072
----------- -----------
Total Liabilities............................. 721,574 610,182
----------- -----------
Stockholders' Equity:
Preferred Stock,$.01 par value-authorized 100,000
shares; none issued
Common Stock,Class A,$.01 par value-authorized
87,000,000 shares; issued 23,820,893 shares
(including 3,736,921 shares in January 2001
and October 2000 held in Treasury)............. 237 173
Common Stock,Class B,$.01 par value-authorized
13,000,000 shares; issued 7,932,219 shares
(including 345,874 shares held in Treasury)..... 79 79
Paid in Capital................................... 94,930 46,086
Retained Earnings................................. 253,343 246,420
Deferred Compensation............................. (266)
Treasury Stock - at cost.......................... (29,332) (29,399)
----------- -----------
Total Stockholders' Equity.................... 318,991 263,359
----------- -----------
Total Liabilities and Stockholders' Equity.......... $1,040,565 $873,541
=========== ===========
See notes to consolidated financial statements.
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Data)
(unaudited)
Three Months Ended
January 31,
-------------------
2001 2000
--------- ---------
Revenues:
Homebuilding:
Sale of homes...................... $283,405 $250,118
Land sales and other revenues...... 5,086 2,065
--------- ---------
Total Homebuilding............... 288,491 252,183
Financial Services................... 5,440 4,851
Collateralized Mortgage Financing.... 98 115
--------- ---------
Total Revenues................... 294,029 257,149
--------- ---------
Expenses:
Homebuilding:
Cost of sales...................... 226,576 205,503
Selling, general and administrative 28,225 24,928
Inventory impairment loss.......... 174
--------- ---------
Total Homebuilding............... 254,975 230,431
Financial Services................... 3,697 5,305
Collateralized Mortgage Financing.... 83 98
Corporate General and Administration. 9,878 6,874
Interest............................. 9,505 7,868
Other Operations..................... 1,851 1,797
Restructuring Charges................ 2,480
--------- ---------
Total Expenses................... 282,469 252,373
--------- ---------
Income Before Income Taxes............. 11,560 4,776
--------- ---------
State and Federal Income Taxes:
State................................ 399 155
Federal.............................. 4,238 1,169
--------- ---------
Total Taxes........................ 4,637 1,324
--------- ---------
Net Income............................. $ 6,923 $ 3,452
========= =========
Per Share Data:
Basic:
Income per common share.............. $ 0.31 $ 0.15
Weighted average number of common
shares outstanding................. 22,286 22,327
Assuming dilution:
Income per common share.............. $ 0.30 $ 0.15
Weighted average number of common
shares outstanding................. 22,732 22,413
See notes to consolidated financial statements.
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars In Thousands)
A Common Stock B Common Stock
------------------- -------------------
Shares Shares
Issued and Issued and Paid-In Retained Deferred Treasury
Outstanding Amount Outstanding Amount Capital Earnings Comp Stock Total
----------- ------ ----------- ------ ------- -------- -------- -------- --------
Balance, October 31, 2000. 13,572,448 $173 7,633,029 $79 $46,086 $246,420 $ $(29,399) $263,359
Acquisitions............. 6,352,900 64 48,161 48,225
Sale of common stock
under employee stock
option plan............ 65,000 367 367
Stock bonus plan......... 46,940 316 316
Conversion of Class B to
Class A Common Stock.... 46,684 (46,684)
Deferred compensation..... (266) (266)
Treasury stock purchases
adjustment............. 67 67
Net Income................ 6,923 6,923
----------- ------ ----------- ------ ------- -------- -------- -------- --------
Balance, January 31, 2001 20,083,972 $237 7,586,345 $79 $94,930 $253,343 $ (266) $(29,332) $318,991
(unaudited) =========== ====== =========== ====== ======= ======== ======== ======== ========
See notes to consolidated financial statements.
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(unaudited)
Three Months Ended
January 31,
---------------------
2001 2000
---------- ----------
Cash Flows From Operating Activities:
Net Income.......................................... $ 6,923 $ 3,452
Adjustments to reconcile net income to net cash
Provided by (used in) operating activities:
Depreciation.................................... 1,965 1,591
Amortization of goodwill........................ 669
(Gain) on sale and retirement of property
and assets.................................... (40) (209)
Deferred income taxes........................... 145 (281)
Impairment losses............................... 174
Decrease (increase) in assets:
Mortgage notes receivable..................... 19,205 11,116
Receivables, prepaids and other assets........ (22,211) (13,091)
Inventories................................... (9,514) (34,275)
Increase (decrease) in liabilities:
State and Federal income taxes................ (544) (2,778)
Customers' deposits........................... 932 5,395
Interest and other accrued liabilities........ (7,587) (5,833)
Post development completion costs............. 1,964 993
Accounts payable.............................. (6,642) (1,907)
---------- ----------
Net cash used in operating activities....... (14,561) (35,827)
---------- ----------
Cash Flows From Investing Activities:
Net proceeds from sale of property and assets....... 7 318
Purchase of property, equipment and other
fixed assets...................................... (1,073) (8,997)
Acquisition of homebuilding companies............... (36,936) (119)
Investment in and advances to unconsolidated
affiliates........................................ (12) (1)
---------- ----------
Net cash used in investing activities....... (38,014) (8,799)
---------- ----------
Cash Flows From Financing Activities:
Proceeds from mortgages and notes................... 480,328 336,378
Principal payments on mortgages and notes........... (435,664) (298,263)
Purchase of treasury stock.......................... 67 (1,176)
Proceeds from sale of stock......................... 683
---------- ----------
Net cash provided by financing
activities................................ 45,414 36,939
---------- ----------
Net (Decrease) In Cash and Cash Equivalents........... (7,161) (7,687)
Cash and Cash Equivalents and Balance, Beginning
Of Period........................................... 43,253 19,365
---------- ----------
Cash and Cash Equivalent and Balance, End Of Period... $ 36,092 $ 11,678
========== ==========
See notes to consolidated financial statements.
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
1. The consolidated financial statements, except for the October 31,
2000 consolidated balance sheet, have been prepared without audit. In the
opinion of management, all adjustments for interim periods presented have been
made, which include only normal recurring accruals and deferrals necessary for
a fair presentation of consolidated financial position, results of operations,
and changes in cash flows. The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates and these differences could have a significant impact on the
financial statements. Results for the interim periods are not necessarily
indicative of the results which might be expected for a full year.
2. Interest costs incurred, expensed and capitalized were:
Three Months Ended
January 31,
-------------------
2001 2000
-------- --------
(Dollars in Thousands)
Interest Capitalized at
Beginning of Period......... $ 25,694 $ 21,966
Plus Acquired Entity Interest. 3,604
Plus Interest Incurred(1)(3).. 11,572 8,023
Less Interest Expensed(3)..... 9,505 7,868
-------- --------
Interest Capitalized at
End of Period(2)(3)......... $ 31,365 $ 22,121
======== ========
(1) Data does not include interest incurred by our mortgage and finance
subsidiaries.
(2) Data does not include a reduction for depreciation.
(3) Represents acquisition interest for construction, land and development
costs which is charged to interest expense when homes are delivered and
when land is not under active development.
3. Homebuilding accumulated depreciation at January 31, 2001 and
October 31, 2000 amounted to $24,868,000 and $22,164,000, respectively.
Senior residential rental property accumulated depreciation at January 31,
2001 and October 31, 2000 amounted to $2,393,000 and $2,294,000, respectively.
4. In accordance with "Financial Accounting Standards No. 121 ("FAS
121") "Accounting for the Impairment of Long Lived Assets and for Long Lived
Assets to Be Disposed of", we record impairment losses on inventories related
to communities under development when events and circumstances indicate that
they may be impaired and the undiscounted cash flows estimated to be generated
by those assets are less than their related carrying amounts. In addition,
from time to time, we will write off certain residential land options
including approval, engineering and capitalized interest costs for land
management decided not to purchase. We wrote off such costs in the amount of
$63,000 in New Jersey and $111,000 in Metro D. C. during the three months
ended January 31, 2001. Residential inventory FAS 121 impairment losses and
option write offs are reported in the Consolidated Statements of Income as
"Homebuilding-Inventory Impairment Loss."
5. We are involved from time to time in litigation arising in the
ordinary course of business, none of which is expected to have a material
adverse effect on us. As of January 31, 2001 and October 31, 2000,
respectively, we are obligated under various performance letters of credit
amounting to $5,452,000 and $4,284,000.
6. Our credit facility was amended as of February 22, 2000. Pursuant
to the Amendment, our credit line increased to $375,000,000 and was extended
through July 2003. Interest is payable monthly and at various rates of either
the prime rate plus .25% or Libor plus 1.70%.
7. On January 23, 2001 we merged with Washington Homes, Inc. for a
total purchase price of $87.4 million, of which $38.5 million was paid in cash
and 6,352,900 shares of our Class A Common Stock were issued. At the date of
acquisition we loaned Washington Homes, Inc. approximately $57,000,000 to pay
off their third party debt.
The merger with Washington Homes, Inc. was accounted for as a purchase
with the results of operations of the merged entity included in our
consolidated financial statements as of the date of the merger. The purchase
price was allocated based on estimated fair value at the date of the merger.
Such allocation is preliminary and is pending management's assessment of the
deferred tax assets and liabilities acquired. An intangible asset equal to
the excess purchase price over the fair value of the net assets of $12,794,000
is recorded in prepaid expenses and other assets on the consolidated balance
sheet. This amount is being amortized on a straight line basis over a period
of ten years.
The following unaudited pro forma financial data for the three months
ended January 31, 2001 and 2000 has been prepared as if the merger with
Washington Homes, Inc. on January 23, 2001 had occurred on November 1, 1999.
Unaudited pro forma financial data is presented for information purposes only
and may not be indicative of the actual amounts of the Company had the events
occurred on the dates listed above, nor does it purport to represent future
periods (in thousands).
Three Months Ended January 31,
------------------------------
2001 2000
----------- -----------
Revenues.................................... $363,767 $350,452
Expenses.................................... 351,704 342,774
Income Taxes................................ 4,095 2,568
----------- -----------
Net Income.................................. $ 7,968 $ 5,110
=========== ===========
Diluted Net Income Per Common Share......... $ 0.28 $ 0.18
=========== ===========
8. Restructuring Charges - Restructuring charges are estimated expenses
associated with the merger of our operations with those of Washington Homes,
Inc. as a result of the merger on January 23, 2001. Under our merger plan,
administration offices in Maryland, Virginia, and North Carolina will be
either closed, relocated, or combined. The merger of administration offices
is expected to be completed by July 31, 2001. Expenses were accrued for
salaries, severance and outplacement costs for the involuntary termination of
associates, costs to close and/or relocate existing administrative offices,
and lost rent and leasehold improvements. We estimate that approximately 58
associates will be terminated. We have accrued approximately $1.7 million to
cover termination and related costs. Associates being terminated are
primarily administrative. In addition, we accrued approximately $0.8 million
to cover closing and/or relocating various administrative offices in these
three states. At January 31, 2001 no costs have been charged against the
above accrued liabilities.
9. Hovnanian Enterprises, Inc., the parent company (the "Parent") is
the issuer of publicly traded common stock. One of its wholly owned
subsidiaries, K. Hovnanian Enterprises, Inc., (the "Subsidiary Issuer") was
the issuer of certain Senior Notes on May 4, 1999 and October 2, 2000.
The Subsidiary Issuer acts as a finance and management entity that as of
January 31, 2001 had issued and outstanding approximately $100,000,000
subordinated notes, $300,000,000 senior notes, and a revolving credit
agreement with an outstanding balance of $119,775,000. The subordinated
notes, senior notes, and the revolving credit agreement are fully and
unconditionally guaranteed by the Parent.
Each of the wholly owned subsidiaries of the Parent (collectively the
"Guarantor Subsidiaries"), with the exception of four subsidiaries formerly
engaged in the issuance of collateralized mortgage obligations, a mortgage
lending subsidiary, a subsidiary holding and licensing the "K. Hovnanian"
trade name, and a subsidiary engaged in homebuilding activity in Poland
(collectively the "Non-guarantor Subsidiaries"), have guaranteed fully and
unconditionally, on a joint and several basis, the obligation to pay principal
and interest under the senior notes and the revolving credit agreement of the
Subsidiary Issuer.
In lieu of providing separate audited financial statements for the
Guarantor Subsidiaries we have included the accompanying consolidated
condensed financial statements. Management does not believe that separate
financial statements of the Guarantor Subsidiaries are material to investors.
Therefore, separate financial statements and other disclosures concerning the
Guarantor Subsidiaries are not presented.
The following consolidating condensed financial information present the
results of operations, financial position, and cash flows of (i) the Parent,
(ii) the Subsidiary Issuer, (iii) the Guarantor Subsidiaries of the Parent,
(iv) the Non-guarantor Subsidiaries of the Parent, and (v) the eliminations to
arrive at the information for Hovnanian Enterprises, Inc. on a consolidated
basis.
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
CONSOLIDATING CONDENSED BALANCE SHEET
JANUARY 31, 2001
(Thousands of Dollars)
Guarantor Non-
Subsidiary Subsid- Guarantor Elimin- Consol-
Parent Issuer iaries Subsidiaries ations idated
-------- ---------- ---------- ------------ ---------- ----------
ASSETS
Homebuilding.......................$ 9 $ 54,400 $ 924,715 $ 8,800 $ $ 987,924
Financial Services and CMO......... 888 50,462 51,350
Income Taxes (Payables)Receivables. (3,951) (4,257) 11,559 (2,060) 1,291
Investments in and amounts due to
and from consolidated
subsidiaries..................... 322,933 484,274 (748,000) 3,434 (62,641)
-------- ---------- ---------- ------------ ---------- ----------
Total Assets.......................$318,991 $ 534,417 $ 189,162 $ 60,636 $ (62,641) $1,040,565
======== ========== ========== ============ ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Homebuilding.......................$ $ 6,902 $ 144,003 $ 792 $ $ 151,697
Financial Services and CMO......... 355 42,155 42,510
Notes Payable...................... 527,308 59 527,367
Stockholders' Equity............... 318,991 207 44,745 17,689 (62,641) 318,991
-------- ----------- ---------- ------------ ---------- ----------
Total Liabilities and Stockholders'
Equity...........................$318,991 $ 534,417 $ 189,162 $ 60,636 $ (62,641) $1,040,565
======== ========== ========== ============ ========== ==========
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING CONDENSED BALANCE SHEET
OCTOBER 31, 2000
(Thousands of Dollars)
Guarantor Non-
Subsidiary Subsid- Guarantor Elimin- Consol-
Parent Issuer iaries Subsidiaries ations idated
-------- ---------- ---------- ------------ ---------- ----------
Assets
Homebuilding.......................$ (63) $ 76,648 $ 717,484 $ 8,002 $ $ 802,071
Financial Services and CMO......... 994 70,476 71,470
Income Taxes (Payables)Receivables. (4,585) (5,873) 12,567 (2,109)
Investments in and amounts due to
and from consolidated
subsidiaries..................... 268,007 353,115 (473,872) 577 (147,827)
-------- ---------- ---------- ------------ ---------- ----------
Total Assets.......................$263,359 $ 423,890 $ 257,173 $ 76,946 $(147,827) $ 873,541
======== ========== ========== ============ ========== ==========
Liabilities
Homebuilding.......................$ $ 11,533 $ 122,807 $ 1,060 $ $ 135,400
Financial Services and CMO......... 457 61,114 61,571
Notes Payable...................... 409,041 98 409,139
Income Taxes Payable............... 4,072 4,072
Stockholders' Equity............... 263,359 3,316 129,739 14,772 (147,827) 263,359
-------- ---------- ---------- ------------ ---------- ----------
Total Liabilities and Stockholders'
Equity...........................$263,359 $ 423,890 $ 257,173 $ 76,946 $(147,827) $ 873,541
======== ========== ========== ============ ========== ==========
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED JANUARY 31, 2001
(Thousands of Dollars)
Guarantor Non-
Subsidiary Subsid- Guarantor Elimin- Consol-
Parent Issuer iaries Subsidiaries ations idated
------- ---------- ---------- ------------ ---------- ----------
Revenues:
Homebuilding.....................$ $ 65 $ 287,122 $ 7,516 $ (6,212) $ 288,491
Financial Services and CMO....... 2,018 3,520 5,538
Intercompany Charges............. 30,410 (1,954) (28,456)
Equity In Pretax Income of
Consolidated Subsidiaries...... 11,560 (11,560)
------- ---------- ---------- ------------ ---------- ----------
Total Revenues................ 11,560 30,475 287,186 11,036 (46,228) 294,029
------- ---------- ---------- ------------ ---------- ----------
Expenses:
Homebuilding..................... 29,913 283,926 1,254 (36,404) 278,689
Financial Services and CMO....... 1,288 2,589 (97) 3,780
------- ---------- ---------- ------------ ---------- ----------
Total Expenses................. 29,913 285,214 3,843 (36,501) 282,469
------- ---------- ---------- ------------ ---------- ----------
Income Before Income Taxes......... 11,560 562 1,972 7,193 (9,727) 11,560
State and Federal Income Taxes..... 4,637 352 70 2,814 (3,236) 4,637
------- ---------- ---------- ------------ ---------- ----------
Net Income.........................$ 6,923 $ 210 $ 1,902 $ 4,379 $ (6,491) $ 6,923
======= ========== ========== ============ ========== ==========
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED JANUARY 31, 2000
(Thousands of Dollars)
Guarantor Non-
Subsidiary Subsid- Guarantor Elimin- Consol-
Parent Issuer iaries Subsidiaries ations idated
------- ---------- ---------- ------------ ---------- ----------
Revenues:
Homebuilding.....................$ $ 154 $ 251,406 $ 2,092 $ (1,469) $ 252,183
Financial Services and CMO....... 1,750 3,216 4,966
Intercompany Charges............. 23,046 2,448 (25,494)
Equity In Pretax Income of
Consolidated Subsidiaries...... 4,776 (4,776)
------- ---------- ---------- ------------ ---------- ----------
Total Revenues................. 4,776 23,200 255,604 5,308 (31,739) 257,149
------- ---------- ---------- ------------ ---------- ----------
Expenses:
Homebuilding..................... 23,058 241,375 454 (17,917) 246,970
Financial Services and CMO....... 1,374 4,188 (159) 5,403
------- ---------- ---------- ------------ ---------- ----------
Total Expenses................. 23,058 242,749 4,642 (18,076) 252,373
------- ---------- ---------- ------------ ---------- ----------
Income Before Income Taxes......... 4,776 142 12,855 666 (13,663) 4,776
State and Federal Income Taxes..... 1,324 35 4,166 230 (4,431) 1,324
------- ---------- ---------- ------------ ---------- ----------
Net Income.........................$ 3,452 $ 107 $ 8,689 $ 436 $ (9,232) $ 3,452
======= ========== ========== ============ ========== ==========
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED JANUARY 31, 2001
(Thousands of Dollars)
Guarantor Non-
Subsidiary Subsid- Guarantor Elimin- Consol-
Parent Issuer iaries Subsidiaries ations idated
-------- --------- ---------- ------------ ---------- ----------
Cash Flows From Operating Activities:
Net Income.........................$ 6,923 $ 210 $ 1,902 $ 4,379 $ (6,491) $ 6,923
Adjustments to reconcile net income
to net cash provided by
(used in) operating activities... 93,226 35,300 (173,139) 16,639 6,491 (21,483)
-------- --------- ---------- ------------ ---------- ----------
Net Cash Provided By (Used In)
Operating Activities........... 100,149 35,510 (171,237) 21,018 (14,560)
Net Cash Provided by (Used In)
Investing Activities............... (45,218) (17,819) 25,023 (38,014)
Net Cash Provided By(Used In)
Financing Activities............... 67 119,863 (55,942) (18,574) 45,414
Intercompany Investing and Financing
Activities - Net..................... (54,926) (161,569) 219,352 (2,857)
-------- --------- ---------- ------------ ---------- ----------
Net Increase (Decrease) In Cash and
Cash Equivalents................... 72 (24,015) 17,196 (413) (7,160)
Cash and Cash Equivalents Balance,
Beginning of Period................ (63) 17,629 22,506 3,181 43,253
-------- --------- ---------- ------------ ---------- ----------
Cash and Cash Equivalents Balance,
End of Period......................$ 9 $ (6,386) $ 39,702 $ 2,768 $ $ 36,093
======== ========= ========== ============ ========== ==========
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED JANUARY 31, 2000
(Thousands of Dollars)
Guarantor Non-
Subsidiary Subsid- Guarantor Elimin- Consol-
Parent Issuer iaries Subsidiaries ations idated
-------- --------- ---------- ------------ ---------- ----------
Cash Flows From Operating Activities:
Net Income.........................$ 3,452 $ 107 $ 8,689 $ 436 $ (9,232) $ 3,452
Adjustments to reconcile net income
to net cash provided by
(used in) operating activities... 16,257 170 (80,276) 15,338 9,232 (39,279)
-------- --------- ---------- ------------ ---------- ----------
Net Cash Provided By (Used In)
Operating Activities........... 19,709 277 (71,587) 15,774 (35,827)
Net Cash Provided by (Used In)
Investing Activities............... (8,327) (470) (2) (8,799)
Net Cash Provided By(Used In)
Financing Activities............... (1,176) 48,350 2,552 (12,787) 36,939
Intercompany Investing and Financing
Activities - Net..................... (18,487) (34,743) 33,067 (2,883)
-------- --------- ---------- ------------ ---------- ----------
Net Increase (Decrease) In Cash and
Cash Equivalents................... 46 5,557 (13,392) 102 (7,687)
Cash and Cash Equivalents Balance,
Beginning of Period................ 46 (5,395) 24,608 106 19,365
-------- --------- ---------- ------------ ---------- ----------
Cash and Cash Equivalents Balance,
End of Period......................$ 92 $ 162 $ 11,216 $ 208 $ $ 11,678
======== ========= ========== ============ ========== ==========
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
Our cash uses during the three months ended January 31, 2001 were for
operating expenses, seasonal increases in housing inventories, construction,
income taxes, interest, and the merger with Washington Homes, Inc. We
provided for our cash requirements from housing and land sales, the revolving
credit facility, financial service revenues, and other revenues. We believe
that these sources of cash are sufficient to finance our working capital
requirements and other needs.
In March 2000 the Board of Directors increased the stock repurchase
program to purchase up to 4 million shares of Class A Common Stock. This
authorization expired on December 31, 2000 and is in the process of being
revised. As of January 31, 2001, 3,391,047 shares were repurchased under this
program.
Our homebuilding bank borrowings are made pursuant to a revolving credit
agreement (the "Agreement") that provides a revolving credit line of up to
$375,000,000 (the "Revolving Credit Facility") through July 2003. Interest is
payable monthly and at various rates of either the prime rate plus .25% or
Libor plus 1.70%. We believe that we will be able either to extend the
Agreement beyond July 2003 or negotiate a replacement facility, but there can
be no assurance of such extension or replacement facility. We are currently
in compliance and intend to maintain compliance with the covenants under the
Agreement. As of January 31, 2001, borrowings under the Agreement were
$119,775,000.
The subordinated indebtedness issued by us and outstanding as of January
31, 2001 was $100,000,000 9 3/4% Subordinated Notes due June 2005. The senior
indebtedness issued by us and outstanding as of January 31, 2001 was
$150,000,000 10 1/2% Senior Notes due October 2007 and $150,000,000 9 1/8%
Senior Notes due May 2009.
Our mortgage banking subsidiary borrows under a bank warehousing
arrangement. Other finance subsidiaries formerly borrowed from a multi-
builder owned financial corporation and a builder owned financial corporation
to finance mortgage backed securities, but in fiscal 1988 decided to cease
further borrowing from multi-builder and builder owned financial corporations.
These non-recourse borrowings have been generally secured by mortgage loans
originated by one of our subsidiaries. As of January 31, 2001, the aggregate
principal amount of all such borrowings was $38,041,000.
Total inventory increased $150,129,000 during the three months ended
January 31, 2001. The increase in inventory was primarily due to the merger
with Washington Homes, Inc. In addition inventory levels increased in most of
our housing markets. Substantially all homes under construction or completed
and included in inventory at January 31, 2001 are expected to be closed during
the next twelve months. Most inventory completed or under development is
financed through our line of credit, and senior and subordinated indebtedness.
The following table summarizes housing lots included in our total residential
real estate:
Active Contracted Active Proposed Grand Total
Active Selling Not Lots Developable Lots
Communities Lots Delivered Available Lots Available
----------- ------- ---------- --------- ----------- -----------
January 31, 2001:
Northeast Region.. 28 4,598 1,201 3,397 10,569 13,966
North Carolina.... 65 5,117 570 4,547 2,351 6,898
Metro D.C......... 37 3,306 788 2,518 4,965 7,483
California........ 13 1,909 227 1,682 576 2,258
Texas............. 40 1,543 280 1,263 684 1,947
Mid South......... 21 1,631 106 1,525 160 1,685
Other............. 1 138 58 80 2,374 2,454
----------- ------- ---------- ---------- ---------- -----------
205 18,242 3,230 15,012 21,679 36,691
=========== ======= ========== ========== ========== ===========
Owned.......... 8,244 2,742 5,502 4,177 9,679
Optioned....... 9,998 488 9,510 17,502 27,012
------- ---------- ---------- ---------- -----------
Total........ 18,242 3,230 15,012 21,679 36,691
======= ========== ========== ========== ===========
Active Contracted Active Proposed Grand Total
Active Selling Not Lots Developable Lots
Communities Lots Delivered Available Lots Available
----------- ------- ---------- --------- ----------- -----------
October 31, 2000:
Northeast Region.. 28 4,941 1,149 3,792 11,016 14,808
North Carolina.... 29 2,331 215 2,116 400 2,516
Metro D.C......... 6 708 215 493 4,875 5,368
California........ 12 2,015 151 1,864 576 2,440
Texas............. 44 1,628 282 1,346 752 2,098
Other............. 1 186 84 102 2,374 2,476
----------- ------- ---------- ---------- ---------- -----------
120 11,809 2,096 9,713 19,993 29,706
=========== ======= ========== ========== ========== ===========
Owned.......... 6,236 1,963 4,273 3,776 8,049
Optioned....... 5,573 133 5,440 16,217 21,657
------- ---------- ---------- ---------- -----------
Total........ 11,809 2,096 9,713 19,993 29,706
======= ========== ========== ========== ===========
The following table summarizes our started or completed unsold homes and
models:
January 31, October 31,
2001 2000
----------------------- -----------------------
Unsold Unsold
Homes Models Total Homes Models Total
------ ------ ----- ------ ------ -----
Northeast Region.... 119 59 178 133 48 181
North Carolina...... 216 54 270 102 31 133
Metro D.C........... 87 37 124 6 7 13
California.......... 98 22 120 136 32 168
Texas............... 238 9 247 238 8 246
Mid South........... 73 23 96 -- -- --
Other.............. 40 -- 40 58 -- 58
------ ------ ----- ------ ------ -----
Total 871 204 1,075 673 126 799
====== ====== ===== ====== ====== =====
Financial Services - Mortgage loans held for sale consist of residential
mortgages receivable of which $42,546,000 and $61,549,000 at January 31, 2001
and October 31, 2000, respectively, are being temporarily warehoused and
awaiting sale in the secondary mortgage market. The balance of such mortgages
is being held as an investment by us. We may incur risk with respect to
mortgages that are delinquent, but only to the extent the losses are not
covered by mortgage insurance or resale value of the house. Historically, we
have incurred minimal credit losses. Collateral Mortgage Financing -
Collateral for bonds payable consist of collateralized mortgages receivable
which are pledged against non-recourse collateralized mortgage obligations.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JANUARY 31, 2001 COMPARED TO
THE THREE MONTHS ENDED JANUARY 31, 2000
Our operations consist primarily of residential housing development and
sales in our Northeast Region (comprising of New Jersey, southern New York
state and eastern Pennsylvania), North Carolina, Metro D.C. (northern Virginia
and Maryland), southern California, Texas, the Mid-south (Tennessee, Alabama,
and Mississippi), and Poland. Our Mid-south operations are the result of the
merger with Washington Homes, Inc. In addition, we provide financial services
to our homebuilding customers.
Important indicators of the future results are recently signed contracts
and home contract backlog for future deliveries. Our sales contracts and
homes in contract backlog (using base sales prices) by market area are set
forth below:
Sales Contracts for the
Three Months Ended Contract Backlog
January 31, as of January 31,
----------------------- --------------------
2001 2000 2001 2000
--------- --------- --------- ---------
(Dollars in Thousands)
Northeast Region:
Dollars............. $125,433 $109,040 $327,437 $284,240
Homes............... 479 422 1,201 1,086
North Carolina:
Dollars............. $ 41,651 $ 26,892 $102,786 $ 44,081
Homes............... 233 144 570 213
Metro D.C.:
Dollars............. $ 32,009 $ 13,449 $193,098 $ 32,144
Homes............... 130 52 786 136
California:
Dollars............. $ 65,547 $ 23,839 $ 82,106 $ 33,217
Homes............... 182 93 227 128
Texas:
Dollars............. $ 37,177 $ 39,830 $ 62,754 $ 42,951
Homes............... 175 202 280 204
Mid South:
Dollars............. $ 3,806 -- $ 17,037 --
Homes............... 29 -- 106 --
Other:
Dollars............. $ 857 $ 4,193 $ 10,011 $ 9,276
Homes............... 22 50 60 76
Totals:
Dollars............. $306,480 $217,243 $795,229 $445,909
Homes............... 1,250 963 3,230 1,843
During February 2001 we signed an additional 949 contracts compared to 359 in
the same month last year. The February 2001 contracts along with our contract
backlog at January 31, 2001 and deliveries for the three months ended January
31, 2001 amount to approximately 75% of our planned deliveries for fiscal
2001.
Total Revenues:
Revenues for the three months ended January 31, 2001 increased $36.9
million or 14.3%, compared to the same period last year. This was the result
of a $33.3 million increase in revenues from the sale of homes, a $3.0 million
increase in land sales and other homebuilding revenues, and a $0.6 million
increase in financial service revenues.
Homebuilding:
Revenues from the sale of homes increased $33.3 million or 13.3% during
the three months ended January 31, 2001, compared to the same period last
year. Revenues from sales of homes are recorded at the time each home is
delivered and title and possession have been transferred to the buyer.
Information on homes delivered by market area is set forth below:
Three Months Ended
January 31,
-------------------
2001 2000
--------- --------
(Dollars in Thousands)
Northeast Region:
Housing Revenues..... $123,626 $127,252
Homes Delivered...... 427 461
North Carolina:
Housing Revenues..... $ 31,798 $ 27,370
Homes Delivered...... 180 138
Metro D.C.:
Housing Revenues..... $ 36,691 $ 15,845
Homes Delivered...... 162 65
California:
Housing Revenues..... $ 44,314 $ 25,636
Homes Delivered...... 106 94
Texas:
Housing Revenues..... $ 37,810 $ 49,215
Homes Delivered...... 177 259
Mid South:
Housing Revenues..... $ 3,077 --
Homes Delivered...... 22 --
Other:
Housing Revenues..... $ 6,089 $ 4,800
Homes Delivered...... 48 24
Totals:
Housing Revenues..... $283,405 $250,118
Homes Delivered...... 1,122 1,041
The increase in the number of homes delivered and related revenues was
due to an increase of three communities in the Metro D. C. market, an increase
in the average home price in California, and the merger with Washington Homes,
Inc. These increases were partially offset by decreases in the Northeast
Region and Texas. The decrease in the Northeast Region was due to the timing
of scheduled deliveries. The decrease in deliveries in Texas was due to the
change in their fiscal year end when we acquired them October 31, 1999. Texas
historically reported strong deliveries in their fourth quarter, which were
represented in our first quarter ended January 31, 2000.
Cost of sales includes expenses for housing and land and lot sales. A
breakout of such expenses for housing sales and housing gross margin is set
forth below:
Three Months Ended
January 31,
-------------------
2001 2000
-------- --------
(Dollars in Thousands)
Sale of Homes................ $283,405 $250,118
Cost of Sales................ 223,675 204,710
-------- --------
Housing Gross Margin......... $ 59,730 $ 45,408
======== ========
Gross Margin Percentage...... 21.1% 18.2%
Cost of Sales expenses as a percentage of home sales revenues are
presented below:
Three Months Ended
January 31,
-------------------
2001 2000
-------- --------
Sale of Homes................ 100.0% 100.0%
-------- --------
Cost of Sales:
Housing, land &
development costs.... 70.8% 73.4%
Commissions............ 2.2% 2.3%
Financing concessions.. 0.9% 0.9%
Overheads.............. 5.0% 5.2%
-------- --------
Total Cost of Sales.......... 78.9% 81.8%
-------- --------
Gross Margin................. 21.1% 18.2%
======== ========
We sell a variety of home types in various local communities, each
yielding a different gross margin. As a result, depending on the mix of both
communities and of home types delivered, consolidated quarterly gross margin
will fluctuate up or down and may not be representative of the consolidated
gross margin for the year. In addition, gross margin percentages are higher
in the Northeast Region compared to our other markets. For the three months
ended January 31, 2001 our gross margin percentage increased 2.9% compared to
the same period last year. This can be attributed to improved profitability
in the Northeast Region and increased sales prices in California.
Selling, general, and administrative expenses as a percentage of total
homebuilding revenues, decreased to 9.8% for the three months ended January
31, 2001 from 9.9% for the prior year three months. Such expenses increased
$3.3 million during the three months ended January 31, 2001 compared to the
same period last year. The dollar increase in selling, general and
administrative is primarily due to increased advertising and selling costs in
California due to the addition of five new communities, increases in
administrative costs in our Northeast Region, and the addition of Washington
Homes, Inc.
Land Sales and Other Revenues:
Land sales and other revenues consist primarily of land and lot sales.
A breakout of land and lot sales is set forth below:
Three Months Ended
January 31,
------------------
2001 2000
-------- --------
Land and Lot Sales................ $ 3,166 $ 934
Cost of Sales..................... 2,901 793
-------- --------
Land and Lot Sales Gross Margin... 265 141
Interest Expense.................. 233 191
-------- --------
Land and Lot Sales Profit (Loss)
Before Tax...................... $ 32 $ (50)
======== ========
Land and lot sales are incidental to our residential housing operations
and are expected to continue in the future but may significantly fluctuate up
or down.
Financial Services
Financial services consist primarily of originating mortgages from our
homebuyers, selling such mortgages in the secondary market, and title
insurance activities. For the three months ended January 31, 2001 financial
services provided a $1.7 million profit before taxes compared to a loss of
$0.5 million in 2000. This increase is primarily due to a change in
management, reduced costs, and increased mortgage loan amounts. In addition
to our wholly-owned mortgage facility, customers obtained mortgages from our
mortgage joint ventures in our Texas and Washington Homes divisions.
Collateralized Mortgage Financing
In the years prior to February 29, 1988 we pledged mortgage loans
originated by our mortgage banking subsidiaries against our collateralized
mortgage obligations ("CMO's"). Subsequently we discontinued our CMO program.
As a result, CMO operations are diminishing as pledged loans are decreasing
through principal amortization and loan payoffs, and related bonds are
reduced. In recent years, as a result of bonds becoming callable, we have
also sold a portion of our CMO pledged mortgages.
Corporate General and Administrative
Corporate general and administrative expenses include the operations at
our headquarters in Red Bank, New Jersey. Such expenses include our executive
offices, information services, human resources, corporate accounting,
training, treasury, process redesign, internal audit, and administration of
insurance, quality, and safety. As a percentage of total revenues such
expenses increased to 3.4% for the three months ended January 31, 2001 from
2.7% for the prior year three months. Corporate general and administrative
expenses increased $3.0 million during the three months ended January 31, 2001
compared to the same period last year. Increases in corporate general and
administrative expenses are primarily attributed to less process redesign
costs associated with SAP capitalized during the three months ended January
31, 2001 compared to the same period last year, our new enterprise wide fully
integrated software package, increased depreciation resulting from capitalized
process redesign costs in prior years, and increased bonus accruals based upon
increased return on equity. Process redesign costs are capitalized in
accordance with SOP 98-1 "Accounting For the Cost of Computer Software
Development For or Obtained for Internal Use".
Interest
Interest expense includes housing, and land and lot interest. Interest
expense is broken down as follows:
Three Months Ended
January 31,
------------------
2001 2000
-------- --------
Sale of Homes.............. $ 9,272 $ 7,677
Land and Lot Sales......... 233 191
-------- --------
Total...................... $ 9,505 $ 7,868
======== ========
Housing interest as a percentage of sale of homes revenues slightly
increased to 3.3% for the three months ended January 31, 2001 compared to 3.1%
for the three months ended January 31, 2000.
Other Operations
Other operations consist primarily of miscellaneous residential housing
operations expenses, investment property operations, amortization of senior
and subordinated note issuance expenses, earnout payments from homebuilding
company acquisitions, amortization of goodwill, and corporate owned life
insurance loan interest.
Restructuring Charges
Restructuring charges are estimated expenses associated with the
integration of our operations with those of Washington Homes, Inc. These
expenses are salaries, severance and outplacement costs for the termination of
associates, and costs to close and relocate existing administrative offices,
and lost rent and leasehold improvements.
Total Taxes
Total taxes as a percentage of income before taxes amounted to
approximately 40.1% and 27.7% for the three months ended January 31, 2001 and
2000, respectively. The increase in this percentage from 2000 to 2001 is
primarily attributed to an increased effective federal income tax rate. The
increased effective rate is due primarily to higher amounts of expenses in
2001 not deductible for federal taxes and a reduced effect of our senior
rental tax credits. Although the credits are the same in 2001 and 2000, they
reduce our effective tax rate less when pretax profits are higher. Deferred
federal and state income tax assets primarily represent the deferred tax
benefits arising from temporary differences between book and tax income which
will be recognized in future years as an offset against future taxable income.
If for some reason the combination of future years income (or loss) combined
with the reversal of the timing differences results in a loss, such losses can
be carried back to prior years to recover the deferred tax assets. As a
result, management is confident such deferred tax assets are recoverable
regardless of future income.
Inflation
Inflation has a long-term effect on us because increasing costs of land,
materials, and labor result in increasing sale prices of our homes. In
general, these price increases have been commensurate with the general rate of
inflation in our housing markets and have not had a significant adverse effect
on the sale of our homes. A significant risk faced by the housing industry
generally is that rising house costs, including land and interest costs, will
substantially outpace increases in the income of potential purchasers. In
recent years, in the price ranges in which our homes sell, we have not found
this risk to be a significant problem.
Inflation has a lesser short-term effect on us because we generally
negotiate fixed price contracts with our subcontractors and material suppliers
for the construction of our homes. These prices usually are applicable for a
specified number of residential buildings or for a time period of between four
to twelve months. Construction costs for residential buildings represent
approximately 57% of our homebuilding cost of sales.
Merger With Washington Homes, Inc.
On January 23, 2001 we merged with Washington Homes, Inc. for a total
purchase price of $87.4 million, of which $37.9 was paid in cash and 6,352,900
shares of our Class A common stock were issued. The addition of Washington
Homes operations for slightly more than three full quarters is expected to
increase revenues more than 40% in fiscal 2001 from fiscal 2000.
Safe Harbor Statement
Certain statements contained in this Form 10-Q 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 and market conditions
. Changes in interest rates and the availability of mortgage financing
. Changes in costs and availability of material, supplies and labor
. General competitive conditions
. The availability of capital
. The ability to successfully effect acquisitions
These risks, uncertainties, and other factors are described in detail in
Item 1 and 2 Business and Properties in our Form 10-K for the year ended
October 31, 2000.
Item 4. Submission of Matters to a Vote of Security Holders
We held our annual stockholders meeting on March 8, 2001 at 10:30 a.m.
in the Board Room of the American Stock Exchange, 13th floor, 86 Trinity
Place, New York, New York. The following matters were voted at the meeting:
. Election of all Directors to hold office until the next Annual
Meeting of Stockholders. The elected Directors were:
.. Kevork S. Hovnanian
.. Ara K. Hovnanian
.. Paul W. Buchanan
.. Geaton A. DeCesaris, Jr.
.. Arthur Greenbaum
.. Desmond P. McDonald
.. Peter S. Reinhart
.. John J. Robbins
.. J. Larry Sorsby
.. Stephen D. Weinroth
. Ratification of selection of Ernst & Young, LLP as certified
independent accountants for fiscal year ending October 31, 2001.
.. Votes For Class A 11,871,112 Class B 72,836,990
.. Votes Against Class A 13,652 Class B 617,160
.. Abstain Class A 6,247 Class B 7,730
Item 6c. Reports on Form 8-K.
(i) 8-K filed on December 15, 2000 which was to file the press
release dated December 14, 2000 relating to fourth quarter
numbers.
(ii) 8-K filed on February 7, 2001 which was to announce completion
of the Washington Homes, Inc. merger on January 23, 2001.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of l934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HOVNANIAN ENTERPRISES, INC.
(Registrant)
DATE: March 16, 2001 /S/J. LARRY SORSBY
J. Larry Sorsby,
Executive Vice President and
Chief Financial Officer
DATE: March 16, 2001 /S/PAUL W. BUCHANAN
Paul W. Buchanan,
Senior Vice President
Corporate Controller