13.

Per Share Calculations

Basic earnings per share is computed by dividing net income (loss) (the “numerator”) by the weighted-average number of common shares outstanding, adjusted for nonvested shares of restricted stock (the “denominator”) for the period. Computing diluted earnings per share is similar to computing basic earnings per share, except that the denominator is increased to include the dilutive effects of options and nonvested shares of restricted stock, and common shares issuable upon exchange of our Senior Exchangeable Notes issued as part of our

6.0%

Exchangeable Note Units (which matured and were fully paid in

December 2017).

Any options that have an exercise price greater than the average market price are considered to be anti-dilutive and are excluded from the diluted earnings per share calculation.

All outstanding nonvested shares that contain nonforfeitable rights to dividends or dividend equivalents that participate in undistributed earnings with common stock are considered participating securities and are included in computing earnings per share pursuant to the

two

-class method. The

two

-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating securities according to dividends or dividend equivalents and participation rights in undistributed earnings in periods when we have net income. The Company’s restricted common stock (“nonvested shares”) are considered participating securities.

Basic and diluted earnings per share for the periods presented below were calculated as follows:

	Year Ended October 31,
(In thousands, except per share data)	2018		2017		2016

Numerator:
Net earnings (loss) attributable to Hovnanian	$4,520		$(332,193	)	$(2,819	)
Less: undistributed earnings allocated to nonvested shares	(159	)	-		-
Numerator for basic earnings per share	$4,361		$(332,193	)	$(2,819	)
Plus: undistributed earnings allocated to nonvested shares	159		-		-
Less: undistributed earnings reallocated to nonvested shares	(159	)	-		-
Numerator for diluted earnings per share	$4,361		$(332,193	)	$(2,819	)
Denominator:
Denominator for basic earnings per share	148,515		147,703		147,451
Effect of dilutive securities:
Share-based payments	3,271		-		-
Denominator for diluted earnings per share – weighted-average shares outstanding	151,786		147,703		147,451
Basic earnings (loss) per share	$0.03		$(2.25	)	$(0.02	)
Diluted earnings (loss) per share	$0.03		$(2.25	)	$(0.02	)

Incremental shares attributed to nonvested stock and outstanding options to purchase common stock of

2.7

million and

4.4

million for the years ended

October 31, 2017

and

2016

respectively, were excluded from the computation of diluted earnings per share because we had a net loss for the period, and any incremental shares would

not

be dilutive. For the year ended

October 31, 2018,

0.8

million shares of common stock issuable upon the exchange of our senior exchangeable notes (which were issued in fiscal

2012

), were excluded from the computation of diluted earnings per share because they were anti-dilutive. Also, for the years ended

October 31, 2017

and

2016,

10.0

million and

14.6

million shares, respectively, of common stock issuable upon the exchange of our senior exchangeable notes were excluded from the computation of diluted earnings per share because we had a net loss for the period.

In addition, shares related to out-of-the money stock options that could potentially dilute basic earnings per share in the future that were

not

included in the computation of diluted earnings per share were

5.4

million,

4.6

million and

7.3

million for the years ended

October 31, 2018,

2017

and

2016,

respectively, because to do so would have been anti-dilutive for the periods presented.