EX-99.2 3 0003.txt UNAUDITED PRO FORMA Exhibit Number Exhibit -------------- ------- 99.2 UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS Unaudited Pro Forma Consolidated Financial Statements of Hovnanian Enterprises, Inc. The following pro forma consolidated financial statements of Hovnanian Enterprises, Inc. ("Hovnanian") give effect to the proposed 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 unaudited historical consolidated financial statements of Hovnanian and Washington Homes. 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 will receive the equivalent of 1.39 shares of Hovnanian Class A Common shares or $10.08 in cash for each of the 7,780,961 shares of Washington Homes, subject to certain adjustments. The 1,094,000 stock options held by employees of Washington Homes will be converted to Hovnanian options with a similar aggregate implied value. Of this amount 920,000 employee stock options are 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 will be purchased by Hovnanian for the difference of $10.08 and their respective exercise prices. Accordingly, the total purchase price is estimated to be approximately $84.0 million, based on Hovnanian's closing share price of $7 1/16 on August 25, 2000. The agreement includes provisions that limit the maximum amount of cash to 50% of the total consideration, with the balance, not to exceed 60%, paid in Hovnanian shares. The Hovnanian price per share on the day the transaction closes will ultimately be utilized to determine the actual acquisition cost of Washington Homes. In these pro forma consolidated financial statements, Hovnanian management has assumed that 50% of the consideration will be paid in cash and the balance in Hovnanian shares. The pro forma consolidated balance sheet assumes that the merger took place on July 31, 2000. The pro forma consolidated statements of income for the year ended October 31, 1999 and the nine months ended July 31, 2000 assumes that the merger took place as of November 1, 1998. Additionally, the supplemental pro forma statement of income for the twelve months ended July 31, 2000 assumes the merger took place on August 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 Hovnanian as filed in its (i) Form 10-K for the year ended October 31, 1999 and (ii) Form 10-Q for the nine months ended July 31, 2000 and the historical financial statements of Washington Homes as of and for the three years ended July 31, 2000, including the notes thereto, as filed by Washington Homes on its Form 8-K on September 20, 2000. HOVNANIAN ENTERPRISES INC. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JULY 31, 2000 UNAUDITED (In Thousands)
Pro Forma Pro Forma Adjustments Hovnanian Washington Increase Pro Forma Enterprises, Inc. Homes, Inc. (Decrease) July 31, 2000 ----------------- ----------- ---------- ------------- Assets Homebuilding: Cash and cash equivalents $ 19,268 $ 14,317 $ (1)(2) $ 33,585 Inventories 616,426 130,573 1,292 (1) 748,291 Property, plant and equipment - net 34,553 34,553 Senior rentals 10,372 10,372 Other 103,135 21,681 152 (1)(3) 124,968 ------------------------------------------- ----------- Total homebuilding 783,754 166,571 1,444 951,769 Financial services 48,928 1,987 50,915 Collateralized mortgage financing 4,561 4,561 Income taxes receivable 4,275 (2,977) (443)(1) 855 ------------------------------------------- ----------- Total assets $ 841,518 $ 165,581 $ 1,001 $ 1,008,100 =========================================== =========== Liabilities and stockholders' equity Homebuilding: Nonrecourse land mortgages $ 12,609 $ 2,314 $ 14,923 Accounts payable and other liabilities 73,640 42,675 116,315 Customers' deposits 37,149 2,923 40,072 Nonrecourse mortgages secured by operating properties 3,577 3,577 ------------------------------------------- ----------- Total homebuilding 126,975 47,912 174,887 Financial services 41,942 705 42,647 Collateralized mortgage financing 3,147 3,147 Notes payable 423,057 34,009 $ 39,233 (2) 496,299 ------------------------------------------- ----------- Total liabilities 595,121 82,626 39,233 716,980 ------------------------------------------- ----------- Stockholders' equity: Common Stock Class A 172 78 (23)(1)(4) 227 Common Stock Class B 79 79 Paid in capital 45,862 34,566 10,837 (1)(4)(12) 91,265 Retained earnings 228,258 48,311 (48,311)(3)(4) 228,258 Deferred compensation (735)(12) (735) Treasury stock (27,974) (27,974) ------------------------------------------- ----------- Total stockholders' equity 246,397 82,955 (38,232) 291,120 ------------------------------------------- ----------- Total liabilities and stockholders' equity $ 841,518 $ 165,581 $ 1,001 $ 1,008,100 =========================================== ===========
HOVNANIAN ENTERPRISES, INC. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME YEAR ENDED OCTOBER 31, 1999 UNAUDITED (In Thousands Except Per Share Data)
(5) Pro Forma Pro Forma Pro Forma Adjustments Year Hovnanian Washington Increase Ended Enterprises, Inc. Homes, Inc (Decrease) October 31, 1999 ----------------- ---------- ----------- ---------------- Revenues: Homebuilding: Sale of homes $908,553 $371,873 $1,280,426 Land sales and other revenues 17,409 5,525 22,934 ----------------------------------------------- --------------- Total homebuilding 925,962 377,398 1,303,360 Financial services 20,239 3,630 23,869 Collateralized mortgage financing 519 519 ----------------------------------------------- --------------- Total revenues 946,720 381,028 1,327,748 ----------------------------------------------- --------------- Expenses: Homebuilding: Cost of sales 730,025 306,475 $ 5,034 (7) 1,041,534 Selling, general and administration 81,396 41,209 (590) (6) (12) 122,015 Inventory impairment loss 2,091 2,091 ----------------------------------------------- --------------- Total homebuilding 813,512 347,684 4,444 1,165,640 Financial services 19,195 3,479 22,674 Collateralized mortgage financing 504 504 Corporate general and administration 28,652 28,652 Interest 30,343 9,330 1,516 (8) (13) 41,189 Other operations 3,897 976 1,468 (9) (13) 6,341 ---------------------------------------------- --------------- Total expenses 896,103 361,469 7,428 1,265,000 ---------------------------------------------- --------------- Income before taxes and extraordinary loss 50,617 19,559 (7,428) 62,748 Income taxes 19,674 7,553 (2,028) (9) 25,199 Extraordinary loss (868) (868) ---------------------------------------------- --------------- Net income $ 30,075 $ 12,006 $(5,400) $ 36,681 ============================================== =============== Earnings per share: Basic $ 1.41 (11) $1.36 Weighted shares outstanding 21,404 (1)(14) 26,924 Diluted $ 1.39 (11) $ 1.31 Weighted shares outstanding 21,612 (1)(14) 28,009
HOVNANIAN ENTERPRISES, INC. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME NINE MONTHS ENDED JULY 31, 2000 UNAUDITED (In Thousands Except Per Share Data)
(5) Pro Forma Pro Forma Pro Forma Adjustments Nine Months Hovnanian Washington Increase Ended Enterprises, Inc. Homes, Inc (Decrease) July 31, 2000 ----------------- ---------- ----------- ------------- Revenues: Homebuilding: Sale of homes $ 763,177 $ 373,389 $ 1,136,566 Land sales and other revenues 7,651 4,113 11,764 ------------------------------------------- ------------- Total homebuilding 770,828 377,502 1,148,330 Financial services 12,859 4,826 17,685 Collateralized mortgage financing 332 332 ------------------------------------------- ------------- Total revenues 784,019 382,328 1,166,347 ------------------------------------------- ------------- Expenses: Homebuilding: Cost of sales 614,574 308,948 $ 3,776 (7) 927,298 Selling, general & administration 76,495 41,674 (464) (6) (12) 117,705 Inventory impairment loss 1,517 1,517 ------------------------------------------- ------------- Total homebuilding 692,586 350,622 3,312 1,046,520 Financial services 13,999 4,099 18,098 Collateralized mortgage financing 283 283 Corporate general and administration 24,361 24,361 Interest 24,256 7,205 1,728 (8) (13) 33,189 Other operations 6,048 674 1,379 (9) (13) 8,101 ------------------------------------------- ------------- Total expenses 761,533 362,600 6,419 1,130,552 ------------------------------------------- ------------- Income before income taxes 22,486 19,728 (6,419) 35,795 Income taxes 7,485 7,736 (1,788) (9) 13,433 ------------------------------------------- ------------- Net income $ 15,001 $ 11,992 $ (4,631) $ 22,362 =========================================== ============= Earnings per share: Basic $ .68 (11) $ .81 Weighted shares outstanding 22,089 (1)(14) 27,609 Diluted $ .68 (11) $ .79 Weighted shares outstanding 22,158 (1)(14) 28,344
HOVNANIAN ENTERPRISES, INC. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME TWELVE MONTHS ENDED JULY 31, 2000 UNAUDITED (In Thousands Except Per Share Data)
(10) Hovnanian (5) Enterprises, Inc. Washington Homes, Pro Forma Pro Forma Twelve Months Inc. Twelve Adjustments Twelve Months Ended Months Ended Increase Ended July 31, 2000 July 31, 2000 (Decrease) July 31, 2000 ------------- ------------- ---------- ------------- Revenues: Homebuilding: Sale of homes $ 1,050,636 $ 459,278 $ 1,509,914 Land sales and other revenues 13,613 4,858 18,471 ------------------------------------------------------ ------------ Total homebuilding 1,064,249 464,136 1,528,385 Financial services 17,670 5,615 23,285 Collateralized mortgage financing 529 529 ------------------------------------------------------ ------------ Total revenues 1,082,448 469,751 1,552,199 ------------------------------------------------------ ------------ Expenses: Homebuilding: Cost of sales 850,018 378,857 $ 3,067 (7) 1,231,942 Selling, general and administration 101,431 51,697 (651) (6)(12) 152,477 Inventory impairment loss 1,975 1,975 ----------------------------------------------------- ------------ Total homebuilding 953,424 430,554 2,416 1,386,394 Financial services 18,836 4,971 23,807 Collateralized mortgage financing 446 446 Corporate general and administration 32,144 32,144 Interest 33,362 9,317 1,512 (8)(13) 44,191 Other operations 7,850 899 906 (9)(13) 9,655 ------------------------------------------------------ ------------ Total expenses 1,046,062 445,741 4,834 1,496,637 ------------------------------------------------------ ------------ Income before income taxes 36,386 24,010 (4,834) 55,562 Income taxes 12,500 9,391 (1,212) (9) 20,679 ------------------------------------------------------ ------------ Net income $ 23,886 $ 14,619 $ (3,622) $ 34,883 ====================================================== ============ Earnings per share: Basic $ 1.08 (11) $ 1.27 Weighted shares outstanding 22,015 (1)(14) 27,535 Diluted $ 1.08 (11) 1.23 Weighted shares outstanding 22,135 (1)(14) $ 28,371
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 Enterprises, Inc. ("Hovnanian") will effectively exchange 1.39 shares of Hovnanian Class A Common shares or pay $10.08 in cash for each share of Washington Homes, Inc. ("Washington Homes"), subject to certain adjustments. The 1,094,000 stock options held by employees of Washington Homes are converted to Hovnanian options with a similar aggregate implied value. Of this amount 920,000 employees' stock options are 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 are purchased by Hovnanian for the difference of $10.08 and their respective exercise prices. Accordingly, the total purchase price is estimated to be approximately $84.0 million, based on Hovnanian's closing share price of $7 1/16 on August 25, 2000. The agreement includes provisions that limit the maximum amount of cash to 50% of the total consideration, with the balance not to exceed 60%, paid in Hovnanian shares. In these pro forma consolidated financial statements, Hovnanian management has assumed that 50% of the consideration will be paid in cash and the balance in Hovnanian shares (resulting in 5,519,746 Class A Common shares being issued at a par value per share of $.01). The aggregate purchase price approximates the fair value of assets acquired less liabilities assumed. The following table summarizes the calculation of the purchase price at July 31, 2000:
(Dollars in thousands) ---------- Merger consideration - Cash (including non-employee stock options) $ 38,983 - Hovnanian Class A shares 38,983 - Fair Value of Vested Hovnanian Options 5,739 Transaction costs 250 ---------- Total purchase price $ 83,955 ==========
(2) Adjustment reflects the anticipated funding of the cash portion of the purchase price as well as a repayment of the approximately $34.0 million of existing Washington Homes debt and a draw of $39.2 million on the existing Hovnanian credit facility. (3) Adjustment reflects the write-off of approximately $.3 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. (5) As Washington Homes has a calendar year end of July 31, the pro forma results of operations for the year ended October 31, 1999 and nine months ended July 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, 1999 Previously Reported Periods
----------------------------------------------------- Less: three Add: three Months Year Ended months Ended Ended July 31, 1999 October 31, 1998 October 1, 1999 ------------- ----------------- ----------------- Revenues: Homebuilding: Sale of Homes $353,729 $67,745 $85,889 Land Sales & Other Revenues 9,004 1,383 1,534 ----------------------------------------------------- Total Homebuilding 362,733 69,128 87,423 Financial Services Collateralized Mortgage Financing ----------------------------------------------------- Total Revenues 362,733 69,128 87,423 ----------------------------------------------------- Expenses: Homebuilding: Cost of Sales 290,934 55,867 69,190 Selling, General & Administration 46,671 9,371 12,033 Inventory Impairment Loss ----------------------------------------------------- Total Homebuilding 337,605 65,238 81,223 Financial Services Collateralized Mortgage Financing Corporate General & Administration Interest 7,356 1,716 1,752 Other Operations 418 97 166 ----------------------------------------------------- Total Expenses 345,379 67,051 83,141 ----------------------------------------------------- Income Before Income Taxes 17,354 2,077 4,282 Income Taxes 6,706 808 1,655 ----------------------------------------------------- Net Income $ 10,648 $ 1,269 $ 2,627 ===================================================== ----------------------------------------------------- Pro Forma Year Ended Reclassification Year Ended October 31, 1999 Adjustments October 31, 1999 ---------------- ----------------- ---------------- Revenues: Homebuilding: Sale of Homes $371,873 $371,873 Land Sales & Other Revenues 9,155 (3,630) 5,525 ------------------------------------------------------ Total Homebuilding 381,028 (3,630) 377,398 Financial Services 3,630 3,630 Collateralized Mortgage Financing ------------------------------------------------------ Total Revenues 381,028 381,028 ------------------------------------------------------ Expenses: Homebuilding: Cost of Sales 304,257 2,218 306,475 Selling, General & Administration 49,333 (8,124) 41,209 Inventory Impairment Loss ------------------------------------------------------ Total Homebuilding 353,590 (5,906) 347,684 Financial Services 3,479 3,479 Collateralized Mortgage Financing Corporate General & Administration Interest 7,392 1,938 9,330 Other Operations 487 489 976 ------------------------------------------------------ Total Expenses 361,469 361,469 ------------------------------------------------------ Income Before Income Taxes 19,559 19,559 Income Taxes 7,553 7,553 ------------------------------------------------------ Net Income $ 12,006 $ 12,006 ======================================================
Washington Homes, Inc. Pro Forma Results of Operations for the Nine Months Ended July 31, 2000 Previously Reported Periods
----------------------------------------------------------- Less: three months Year Ended Ended Nine Months Ended July 31, 2000 October 31, 1999 July 31, 2000 ------------- ----------------------- ----------------- Revenues: Homebuilding: Sale of Homes $459,278 $85,889 $373,389 Land Sales & Other Revenues 10,473 1,534 8,939 ----------------------------------------------------------- Total Homebuilding 469,751 87,423 382,328 Financial Services Collaterized Mortgage Financing ----------------------------------------------------------- Total Revenues 469,751 87,423 382,328 ----------------------------------------------------------- Expenses: Homebuilding: Cost of Sales 375,014 69,190 305,824 Selling, General & Administration 62,752 12,033 50,719 Inventory Impairment Loss ----------------------------------------------------------- Total Homebuilding 437,766 81,223 356,543 Financial Services Collaterized Mortgage Financing Corporate General & Administration Interest 7,224 1,752 5,472 Other Operations 751 166 585 ----------------------------------------------------------- Total Expenses 445,741 83,141 362,600 ----------------------------------------------------------- Income Before Income Taxes 24,010 4,282 19,728 Income Taxes 9,391 1,655 7,736 ----------------------------------------------------------- Net Income $ 14,619 $ 2,627 $ 11,992 =========================================================== ----------------------------------------------------------- Pro Forma Reclassification Nine Months Ended Adjustments July 31, 2000 ----------------- ----------------- Revenues: Homebuilding: Sale of Homes $373,389 Land Sales & Other Revenues (4,826) 4,113 ------------------------------------- Total Homebuilding (4,826) 377,502 Financial Services 4,826 4,826 Collaterized Mortgage Financing ------------------------------------- Total Revenues 382,328 ------------------------------------- Expenses: Homebuilding: Cost of Sales 3,124 308,948 Selling, General & Administration (9,045) 41,674 Inventory Impairment Loss ------------------------------------- Total Homebuilding (5,921) 350,622 Financial Services 4,099 4,099 Collaterized Mortgage Financing Corporate General & Administration Interest 1,733 7,205 Other Operations 89 674 ------------------------------------- Total Expenses 362,600 ------------------------------------- Income Before Income Taxes 19,728 Income Taxes 7,736 ------------------------------------- Net Income $ 11,992 =====================================
Washington Homes, Inc. Pro Forma Results of Operations for the Twelve Months Ended July 31, 2000 Previously Reported -------------------
Pro Forma Twelve Months Twelve Ended Reclassification Months Ended July 31, 2000 Adjustments July 31, 2000 ------------- ---------------- ------------- Revenues: Homebuilding: Sale of Homes $ 459,278 $ 459,278 Land Sales & Other Revenues 10,473 $ (5,615) 4,858 --------------------------------------------------- Total Homebuilding 469,751 (5,615) 464,136 Financial Services 5,615 5,615 Collaterized Mortgage Financing --------------------------------------------------- Total Revenues 469,751 469,751 --------------------------------------------------- Expenses: Homebuilding: Cost of Sales 375,014 3,843 378,857 Selling, General & Administration 62,752 (11,055) 51,697 Inventory Impairment Loss --------------------------------------------------- Total Homebuilding 437,766 (7,212) 430,554 Financial Services 4,971 4,971 Collaterized Mortgage Financing Corporate General & Administration Interest 7,224 2,093 9,317 Other Operations 751 148 899 --------------------------------------------------- Total Expenses 445,741 445,741 --------------------------------------------------- Income Before Income Taxes 24,010 24,010 Income Taxes 9,391 9,391 --------------------------------------------------- Net Income $ 14,619 $ 14,619 ===================================================
(6) 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 $.8 million, $.7 million and $.9 million for the year ended October 31, 1999, for the nine months ended July 31, 2000 and for the twelve months ended July 31, 2000, respectively. (7) Represents additional cost of sales for the allocation of the purchase price to homebuilding inventories sold during the period, as if the merger occurred on November 1, 1998 aggregating approximately $5.0 million, $3.8 million and $3.1 million for the year ended October 31, 1999, for the nine months ended July 31, 2000 and for the twelve months ended July 31, 2000, respectively. (8) 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 $2.1 million, $2.3 million and $2.2 million for the year ended October 31, 1999, for the nine months ended July 31, 2000 and for the twelve months ended July 31, 2000, respectively. (9) Represents net increases to income tax expense for adjustments to amortization of certain deferred tax assets, reductions in general and administrative expenses, and for the elimination of financing costs partially offset by additional interest expense incurred calculated at Hovnanian's effective tax rate aggregating approximately $2.0 million, $1.8 million and $1.2 million for the year ended October 31, 1999, for the nine months ended July 31, 2000 and for the twelve months ended July 31, 2000, respectively. (10) The supplemental pro forma statement of operations is based upon the Hovnanian's quarterly historical results of operations as previously filed, as follows: Pro Forma Results of Operations for the Twelve Months Ended July 31, 2000
Previously Reported Nine Three Months Twelve Months Months Ended Ended October Ended July 31, 2000 31, 1999 July 31, 2000 ------------- -------- ------------- Revenues: Homebuilding: Sale of Homes $ 763,177 $ 287,459 $ 1,050,636 Land Sales & Other Revenues 7,651 5,962 13,613 --------------------------------------------------------- Total Homebuilding 770,828 293,421 1,064,249 Financial Services 12,859 4,811 17,670 Collaterized Mortgage Financing 332 197 529 --------------------------------------------------------- Total Revenues 784,019 298,429 1,082,448 Expenses: Homebuilding: Cost of Sales 614,574 235,444 850,018 Selling, General & Administration 76,495 24,936 101,431 Inventory Impairment Loss 1,517 458 1,975 --------------------------------------------------------- Total Homebuilding 692,586 260,838 953,424 Financial Services 13,999 4,837 18,836 Collaterized Mortgage Financing 283 163 446 Corporate General & Administration 24,361 7,783 32,144 Interest 24,256 9,106 33,362 Other Operations 6,048 1,802 7,850 --------------------------------------------------------- Total Expenses 761,533 284,529 1,046,062 --------------------------------------------------------- Income Before Income Taxes 22,486 13,900 36,386 Income Taxes 7,485 5,015 12,500 --------------------------------------------------------- Net Income $ 15,001 $ 8,885 $ 23,886 =========================================================
(11) If the shareholders of Washington Homes elect to receive the maximum amount of Hovnanian stock as transaction consideration (60%), then the pro forma financial statements would be adjusted as follows: Pro Forma Statement of Operations
Nine Months Twelve Year Ended Ended Months Ended October 31, 1999 July 31, 2000 July 31, 2000 ---------------- ------------- ------------- Net Income $36,944 $22,663 $35,181 Basic Earnings Per Share $ 1.32 $ .79 $ 1.23 Diluted Earnings Per Share $ 1.27 $ .77 $ 1.20
Pro Forma Balance Sheet at July 31, 2000 Total Liabilities $709,926 Shareholders Equity $297,989 (12) 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 $5.7 million has 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 $.7 million and included as a deferred compensation cost, a component of shareholder equity, and will be amortized over the remaining vesting period. Amortization aggregating approximately $.3 million, $.2 million and $.3 million for the year ended October 31, 1999, for the nine months ended July 31, 2000 and for the twelve months ended July 31, 2000, respectively. (13) Adjustment reflects the elimination of amortization of financing costs in conjunction with the retirement of certain Washington Homes indebtedness aggregating approximately $1.0 million, $.6 million and $.8 million for the year ended October 31, 1999, for the nine months ended July 31, 2000 and for the twelve months ended July 31, 2000, respectively. (14) 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 (including the issuance of 5,519,746 Class A shares in connection with the merger) that would be outstanding assuming the exercise of dilutive Common Stock Class A stock options under the treasury stock method as shown below:
Pro Forma Pro Forma Pro Forma Year Ended Nine Months Ended Twelve Months Ended October 31, 1999 July 31, 2000 July 31, 2000 ---------------- ------------- ------------- Weighted Average Common Stock Class A and Class B Shares - Basic 26, 924 27,609 27,535 Common Stock Class A Stock Options 1,085 735 836 Weighted Average Common Stock Class A and Class B ---------------------------------------------------------------------- Shares - Diluted 28,009 28,344 28,371 ======================================================================