WASHINGTON HOMES, INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WHI)") else Response.Write("(NYSE: WHI)") end if %>
1802 Brightseat Road, 6th Floor
Landover, MD 20785-4235
(301) 772-8900

UNION CITY, Ca., September 11, 1996/FOOLWIRE/ --- Washington Homes reported Q4 and year end results late last week. Revenues for Q4 were down slightly from $64.5 million to $62.9 million (-2.6%). Net earnings dropped to $2 million or $0.26 per share versus $2.4 million or $0.30 per share a year ago. Their net earnings for the year were $3.7 million versus $5 million for the previous year which is $0.47 per share versus $0.64 per share last year. $723,000 of their FY 1995 earnings came from land sales which was about $0.09 per share. Their revenues also decreased by 4.6% to $175 million from $183 million a year ago. Their tangible book value is about $51 million or about $6.40 per share.

Their deliveries were 377 units, down 11% from 423 units a year ago. Washington accounted for 61% of their total volume of deliveries and Washington was down 21% where North Carolina was actually up in Q4 by about 7%. They saw a decline of about 6% in their net new orders and, again, Washington accounted for about 58% of the total.

Deliveries for the year were 1087, down 7% from 1167 a year ago. Washington accounted for 62% of their total deliveries and Washington is where they took their biggest blow, down 21% on their deliveries. But, their Westminster operations in North Carolina was actually up 32% year over year on deliveries. So, net orders were flat year over year at 1127 versus 1124 and the value of the net new orders was about the same at $175 million versus $174 million last year. Washington accounted for 58% of their new orders, down approximately 11%. Westminster Homes in Raleigh and Greensboro actually increased by 16% for the year to account for about 40% of their business.

Their sales backlog fell to 601 units valued at $97.6 million versus 561 units valued at $91.1 million. Washington again accounted for 63% of their backlog versus 24% in North Carolina. For the year, 66% of revenues came out of Washington, down about 18%. North Carolina, on the dollar volume, was up about 40%.

Their gross profit margins were down slightly, 20% versus 19.8% year over year. Their SG&A in the aggregate increased about $400,000 and it increased about 0.7% as a percentage of revenue year over year. The increase in SG&A is primarily attributable to the expansion in new markets without the offsetting settlements to go with that increased SG&A. Their interest and finance expenses increased by $200,000 due to increased inventory and debt levels. They continue to monitor their debt levels very carefully and they look to take advantage of all the capital sources in the marketplace. They are currently looking at a program to finance their models.

The Washington market is still suffering from slow growth. It is highly competitive. This market, as they have discussed in the past, their goal is to get Washington to 50% of their business and that is by increasing outside business. Their North Carolina operation showed, again, a very successful year with deliveries up 31%. Both of these markets, Greensboro and Raleigh, have showed an increase in backlogs and they are expecting a slight improvement in performance for 1997 as they continue to see a growing market there and a market that they have been able to enjoy good results out of.

This past year they opened above Charlotte and Nashville and Pittsburgh. They didn't get sales or deliveries until primarily in Q4. They did not get enough deliveries to offset the SG&A that they have experienced in those markets.

Their Homebuyer's Mortgage division increased the loans closed from 325 to 360 year over year and they opened up for operation and saw loans close in North Carolina in the last quarter of the year. Homebuyer's accounted for only 34% of their Washington market this year. Their goal was to get to 60% and they also want to make sure they have Homebuyer's open in all of their markets, which means Nashville and Pittsburgh are the only cities where they are not currently active with their mortgage operation.

Their title company, Homebuyer's Title, opened new locations in both Maryland and Virginia and they settled close to 600 units this past year in their title company and generated about $130,000 in fees that is shown in other income.

The Design Showcase which they have opened this Spring in Maryland is currently serving their customers there. They are looking to provide additional revenues by increased options and also they think it gives them a competitive advantage and improves customer satisfaction. Thusfar they have had a favorable response from the design center and look to expand this concept to all of their markets in the future.

The company has adopted a more aggressive position relative to pricing and margin levels in their Washington market. Results have been favorable thusfar where they adopted this program. Back in May and June they looked at each of their communities throughout the Washington market, analyzed their pricing and position versus competitors and have adjusted their pricing and have taken their focus from gross profit margin to inventory turnover. They have seen great sales for June, July and August in the Washington market. The sales have not only surpassed last year, but have surpassed the last couple of years. So they are very pleased with their results although, in the future, they will probably see their overall gross profit margin decline slightly.

In the Washington market they have sold off or moved through about 1000 of their lots. Although they have increased their overall lot inventory from 7000 to 8000 year over year, their Washington inventory has actually declined by about 1000 lots. That has primarily been due to their focus on increasing inventory or lots in other markets and decreasing their exposure in Washington.

Their land department continues to develop approximately 50% of all of their deliveries in all of their markets. Of course, in Nashville and Pittsburgh they are not doing any development. But in other markets such as Greensboro, they are doing close to 100% of the development. Overall, that gives them a 50% ratio of land development that they do in house.

They are getting ready to kick off an aggressive Fall marketing campaign which will be an Oktoberfest that runs for 5 weeks. And they are tying a cruise for their sales reps to that promotion, they can win through the Fall.

In terms of capital availability, they still have over $51 million in credit lines with two senior banks -- First Union and Signet -- and have approximately $27 million available now.

Washington Homes has developed a detailed business plan which is referred to as their "Vision 2000" which basically says that by the year 2000 they expect to grow to one of the top 25-30 home builders in the country. There are several strategies they will employ to achieve this vision. One includes geographical diversification which calls for 50% to come from their core Washington market and 50% from other markets including the ones they are in today, plus they will need to add one or two new markets by 1998 to achieve that.

They will continue to expand their ancillary businesses in their current markets as well as additional markets. They look to shore up their management team by adding Human Resources and keeping pace with advances in technology. The company has adequate capital as a result of the reduction of land inventory. They are currently working on strategic alliances with major suppliers. They have successful homebuilding operations in all of their current markets.

They feel that the implementation of all of these strategies will enhance overall stockholder value. They are disappointed with their fiscal 1996 results. They have experienced declines in Washington. They focus on gross profit margins and have refocused their attention on inventory turnover. They have been able to reduce their land positions and they look to continue to do that. They expect the 3 new operations to contribute about 200 units to their 1997 results. With this continued focus, they feel confident that they will meet their Vision 2000 goals.

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