1
Exhibit 99.2
NHP INCORPORATED
PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
As of April 1, 1996, the registrant acquired all of the issued and
outstanding shares of WMF Holdings, Ltd., the owner of the Washington Mortgage
Financial Group, Ltd., from Commonwealth Overseas Trading Company Limited
("Commonwealth") for purchase consideration of approximately $21 million in the
form of $16.8 million in cash and 210,000 shares of NHP Incorporated common
stock. A portion of the purchase consideration was utilized to repay debt owed
to a principal shareholder of Commonwealth.
The following unaudited pro forma combined condensed financial statements
have been prepared by the registrant from its historical consolidated financial
statements and from the historical consolidated financial statements of WMF
Holdings, Ltd., which are included in this Current Report on Form 8-K/A as
Exhibit 99.1. The unaudited pro forma combined condensed statements of
operations reflect adjustments as if the transaction had occurred on January 1,
1995. The unaudited pro forma combined condensed balance sheet reflects
adjustments as if the transaction had occurred on March 31, 1996. The pro forma
adjustments described in the accompanying notes are based upon preliminary
estimates and certain assumptions that the registrant believes are reasonable in
the circumstances, pending receipt of final appraisals of certain assets and
resolution of certain other items. The Company does not believe that any changes
in estimates will be material to the pro forma financial statements.
The unaudited pro forma combined condensed financial statements are not
necessarily indicative of what the financial position or results of operations
actually would have been if the transaction had occurred on the applicable dates
indicated. Moreover, they are not intended to be indicative of future results of
operations or financial position. The unaudited pro forma combined condensed
financial statements should be read in conjunction with the historical
consolidated financial statements of the registrant and the related notes
thereto which are included in the registrant's Annual Report on Form 10-K for
the year ended December 31, 1995 and Quarterly Report on Form 10-Q for the
period ended March 31, 1996. The unaudited pro forma combined condensed
financial statements should also be read in conjunction with the historical
financial statements of WMF Holdings, Ltd., which are included in this Current
Report on Form 8-K/A as Exhibit 99.1.
2
NHP INCORPORATED
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
(Dollars in thousands, except per share amounts)
Three Months Ended March 31, 1996
------------------------------------------------
NHP WMF Pro forma Pro forma
Incorporated Holdings Adjustments Combined
------------ -------- ----------- ---------
REVENUES
Property management
services $13,283 $ - $ - $13,283
Mortgage banking
services revenue - 5,966 - 5,966
Mortgage banking services
interest income - 862 - 862
On-site personnel, general
and administrative
reimbursement 30,532 - - 30,532
Administrative and
reporting fees 942 - - 942
Buyers Access fees 646 - - 646
Tax credit investment fees 131 - - 131
Insurance advisory services 271 - - 271
------- ------- -------- -------
Total revenue 45,805 6,828 - 52,633
EXPENSES
Salaries and benefits
On-site employees 29,875 - - 29,875
Off-site employees 6,019 2,771 - 8,790
Other general and
administrative 3,101 1,368 - 4,469
Costs charged to the Real
Estate Companies 657 - - 657
Amortization of purchased
management contracts 879 - - 879
Amortization of acquired
servicing - 471 390 (a) 861
Depreciation and amortization 194 81 206 (b) 468
(13) (b)
Interest related to mortgage
banking services - 307 - 307
Provision for possible loan
servicing losses - 285 - 285
------- ------- -------- -------
Total expenses 40,725 5,283 583 46,591
------- ------- -------- -------
Operating income 5,080 1,545 (583) 6,042
Interest expense, net (409) - (379) (c) (788)
------- ------- -------- -------
Income from continuing
operations before income
taxes 4,671 1,545 (962) 5,254
Benefit (provision) for
income taxes (1,868) (840) 524 (d) (2,184)
------- ------- -------- -------
Income from continuing
operations $ 2,803 $ 705 $ (438) $ 3,070
======= ======= ======== =======
Income per common share
from continuing operations $ .22 $ .24
======= =======
Weighted average shares
and equivalents outstanding
(in thousands) 12,563 210 12,773
======= ======== =======
EBITDA (e) $ 6,301 $ 2,097 $ - $ 8,398
======= ======= ======== =======
See accompanying notes.
3
NHP INCORPORATED
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
(Dollars in thousands, except per share amounts)
Three Months Ended March 31, 1996
------------------------------------------------
NHP WMF Pro forma Pro forma
Incorporated Holdings Adjustments Combined
------------ -------- ----------- ---------
REVENUES
Property management services $ 48,336 $ - $ - $ 48,336
Mortgage banking services
revenue - 18,708 - 18,708
Mortgage banking services
interest income - 3,291 - 3,291
On-site personnel, general
and administrative
reimbursement 117,249 - - 117,249
Administrative and
reporting fees 4,148 - - 4,148
Buyers Access fees 2,631 - - 2,631
Tax credit investment fees 1,234 - - 1,234
Insurance advisory services 1,076 - - 1,076
-------- ------- ------- --------
Total revenue 174,674 21,999 - 196,673
EXPENSES
Salaries and benefits
On-site employees 113,100 - - 113,100
Off-site employees 22,371 9,208 - 31,579
Other general and
administrative 11,899 5,153 - 17,052
Costs charged to the Real
Estate Companies 4,149 - - 4,149
Amortization of purchased
management contracts 3,076 - - 3,076
Amortization of acquired
servicing - 2,096 1,560 (a) 3,656
Depreciation and amortization 727 273 823 (b) 1,770
(53)(b)
Interest related to mortgage
banking services - 2,144 - 2,144
Provision for possible loan
servicing losses - 856 - 856
Other non-recurring expenses 45 692 - 737
-------- ------- ------- --------
Total expenses 155,367 20,422 2,330 178,119
-------- ------- ------- --------
Operating income 19,307 1,577 (2,330) 18,554
Interest expense, net (5,496) - (1,517)(c) (7,013)
-------- ------- ------- --------
Income from continuing
operations before
income taxes 13,811 1,577 (3,847) 11,541
Benefit (provision) for
income taxes 17,802 (800) 1,379(d) 18,381
-------- ------- ------- --------
Income from continuing
operations $ 31,613 $ 777 $(2,468) $ 29,922
======== ======= ======= ========
Income per common share
from continuing
operations $ 3.27 $ 3.03
======== ========
Weighted average shares
and equivalents
outstanding (in thousands) 9,645 210 9,855
======== ======= ======= ========
EBITDA (e) $ 23,110 $ 3,946 $ - $ 27,056
======== ======= ======= ========
See accompanying notes.
4
NHP INCORPORATED
PRO FORMA COMBINED CONDENSED BALANCE SHEET
(UNAUDITED)
(Dollars in thousands, except per share amounts)
Three Months Ended March 31, 1996
------------------------------------------------
NHP WMF Pro forma Pro forma
Incorporated Holdings Adjustments Combined
------------ -------- ----------- ---------
ASSETS
Cash and cash equivalents $ 18,428 $ 6,358 $(16,800)(k) $ 7,986
Receivables, substantially
all from related parties 14,450 - - 14,450
On-site cost reimbursements
receivable, substantially
all from related parties 4,104 - - 4,104
Mortgage loans held for sale,
pledged - 14,437 - 14,437
Principal, interest and other
servicing advances - 3,720 - 3,720
Other current assets 273 990 - 1,263
Current portion of net deferred
tax asset 6,038 - - 6,038
-------- -------- -------- --------
Total current assets 43,293 25,505 (16,800) 51,998
Purchased management contracts 37,701 - - 37,701
Acquired servicing rights - 8,477 10,923 (f) 19,400
Property and equipment 1,990 887 (266)(f) 2,611
Capitalized software 1,989 - - 1,989
Mortgage-backed securities - 3,889 62 (f) 3,951
Due from affiliates - 600 (600)(f) -
Deferred costs and other 3,864 899 - 4,763
Goodwill - 439 (439)(g) 5,844
1,972 (h)
3,872 (i)
Net deferred tax asset 12,725 - (3,872)(i) 8,853
-------- -------- -------- --------
$101,562 $ 40,696 $ (5,148) $137,110
======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current portion of long-term
debt $ 654 $ 1,317 $ - $ 1,971
Warehouse lines of credit - 13,981 - 13,981
Accounts payable 3,874 169 500 (j) 4,543
Accrued expenses 7,401 5,239 - 12,640
Accrued On-site salaries
and benefits 4,104 - - 4,104
Deferred revenues 2,759 - - 2,759
Other current liabilities - 1,877 - 1,877
-------- -------- -------- --------
Total current liabilities 18,792 22,583 500 41,875
Notes payable to banks 37,000 - - 37,000
Servicing acquisition line
of credit - 5,130 - 5,130
Notes payable - other 880 5,000 (5,000)(l) 880
Other long-term liabilities 2,933 3,555 - 6,488
-------- -------- -------- --------
Total liabilities 59,605 36,268 (4,500) 91,373
Shareholders' Equity:
Common stock 123 - 2 (n) 125
Additional paid-in capital 126,293 2,682 (2,682)(m) 130,071
3,778 (n)
Accumulated earnings (deficit) (84,459) 1,746 (1,746)(m) (84,459)
-------- -------- -------- --------
Total shareholders' equity 41,957 4,428 (648) 45,737
-------- -------- -------- --------
$101,562 $ 40,696 $ (5,148) $137,110
======== ======== ======== ========
See accompanying notes.
5
NHP INCORPORATED
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
The following adjustments give pro forma effect to the transaction, certain
reclassifications were made to conform to the Company's presentation:
(a) Record amortization on increased value of servicing rights.
(b) Record net increase in goodwill amortization and decrease in depreciation
expense.
(c) Record interest expense of additional debt incurred for the acquisition.
(d) Record benefit of additional expenses and adjust tax provision to the
Company's effective tax rate of 40%.
(e) EBITDA consists of income from continuing operations before non-operating
interest, income taxes, depreciation and amortization. EBITDA is included
because it is widely used in the industry as a measure of a company's
operational performance but should not be construed as an alternative either (i)
to income from continuing operations (determined in accordance with generally
accepted accounting principles) as a measure of profitability or (ii) to cash
flows from operating activities (determined in accordance with generally
accepted accounting principles). EBITDA does not take into account the Company's
debt service requirements and other commitments and, accordingly, is not
necessarily indicative of amounts that may be available for discretionary uses.
(f) Adjust receivables, servicing rights, fixed assets and mortgage-backed
securities based on estimated fair value, pending receipt of final appraisal of
certain assets and resolution of certain other items.
(g) Eliminate goodwill from previous acquisition.
(h) Record goodwill for the amount of excess purchase price over net asset
acquired.
(i) Record goodwill and deferred tax liability for the tax effect of the
difference between the book and tax basis of the net assets acquired.
(j) Accrue additional estimated transaction costs.
(k) Record payment of cash portion of acquisition price.
(l) Record repayment of notes to a principal shareholder of Commonwealth
Overseas Trading Company Limited.
(m) Eliminate WMF Holdings, Ltd. equity accounts.
(n) Record issuance of 210,000 shares of NHP Incorporated stock as a portion of
the purchase price. For the purpose of recording the transaction, the Company's
shares were valued at $18 per share, in accordance with methods prescribed by
generally accepted accounting principles.