EX-99.1 2 q42018exhibit991earnin.htm EXHIBIT 99.1 Document

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Exhibit 99.1
NVR, INC. ANNOUNCES FOURTH QUARTER AND FULL YEAR RESULTS
January 25, 2019, Reston, VA—NVR, Inc. (NYSE: NVR), one of the nation’s largest homebuilding and mortgage banking companies, announced net income for its fourth quarter ended December 31, 2018 of $232,158,000, or $58.57 per diluted share. Net income and diluted earnings per share for the fourth quarter ended December 31, 2018 increased 86% and 103%, respectively, when compared to 2017 fourth quarter net income of $124,619,000, or $28.88 per diluted share. Consolidated revenues for the fourth quarter of 2018 totaled $1,994,548,000, a 10% increase from $1,816,336,000 in the fourth quarter of 2017.
For the year ended December 31, 2018, consolidated revenues were $7,163,674,000, a 14% increase from $6,305,840,000 reported for 2017. Net income for the year ended December 31, 2018 was $797,197,000, an increase of 48% when compared to the year ended December 31, 2017. Diluted earnings per share for the year ended December 31, 2018 was $194.80, an increase of 54% from $126.77 per diluted share for 2017.
Net income and diluted earnings per share were favorably impacted by a reduction in the Company's effective tax rate. The effective tax rates for the fourth quarter and year ended December 31, 2018 were 16.3% and 16.9%, respectively, compared to 52.3% and 36.5% for the fourth quarter and year ended December 31, 2017, respectively.  The lower effective tax rate in 2018 resulted primarily from the enactment of the Tax Cuts and Jobs Act in December 2017, which had the following impacts on comparability between periods:
•Reduction in the Company’s federal statutory tax rate from 35% to 21% in 2018.
•Remeasurement of the Company's deferred tax assets in the fourth quarter of 2017, which resulted in a charge of $62,702,000 in that quarter.
Additionally, the effective tax rates for the fourth quarter and year ended December 31, 2018 were favorably impacted by the recognition of an income tax benefit related to excess tax benefits from stock option exercises totaling $18,870,000 and $77,478,000, respectively. For the fourth quarter and year ended December 31, 2017, the income tax benefit related to excess tax benefits from stock option exercises totaled $13,960,000 and $58,681,000, respectively.
Homebuilding
New orders in the fourth quarter of 2018 decreased by 11% to 3,841 units, when compared to 4,306 units in the fourth quarter of 2017. The average sales price of new orders in the fourth quarter of 2018 was $376,100, a decrease of 1% when compared with the fourth quarter of 2017. Settlements increased in the fourth quarter of 2018 to 5,186 units, which was 12% higher than the fourth quarter of 2017. The Company’s backlog of homes sold but not settled as of December 31, 2018 decreased on a unit basis by 2% to 8,365 units and decreased on a dollar basis by 4% to $3,152,873,000 when compared to December 31, 2017.
Homebuilding revenues in the fourth quarter of 2018 totaled $1,954,403,000, 10% higher than the year earlier period. Gross profit margin in the fourth quarter of 2018 decreased to 18.6%, compared to 19.3% in the fourth quarter of 2017. Income before tax from the homebuilding segment totaled $255,074,000 in the fourth quarter of 2018, an increase of 5% when compared to the fourth quarter of 2017.
New orders for the year ended December 31, 2018 increased by 4% to 18,281 units, when compared to 17,608 units in 2017. Settlements increased 16% year over year to 18,447 units in 2018 from 15,961 units in 2017. Homebuilding revenues for the year ended December 31, 2018 totaled $7,004,304,000, which was 13% higher than 2017. Gross profit margin for the year ended December 31, 2018 was 18.7%, compared to 19.2% in 2017.
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Income before tax for the homebuilding segment for the year ended December 31, 2018 was $871,106,000, a 12% increase when compared to 2017.
Mortgage Banking
Mortgage closed loan production in the fourth quarter of 2018 totaled $1,356,430,000, an increase of 10% when compared to the fourth quarter of 2017. Income before tax from the mortgage banking segment totaled $22,364,000 in the fourth quarter of 2018, an increase of 15% when compared to $19,518,000 in the fourth quarter of 2017.
Mortgage closed loan production for the year ended December 31, 2018 increased 14% to $4,829,406,000. Income before tax from the mortgage banking segment for the year ended December 31, 2018 increased 26% to $88,626,000 from $70,541,000 in 2017.
About NVR
NVR, Inc. operates in two business segments: homebuilding and mortgage banking. The homebuilding segment sells and builds homes under the Ryan Homes, NVHomes and Heartland Homes trade names, and operates in thirty-two metropolitan areas in fourteen states and Washington, D.C. For more information about NVR, Inc. and its brands, see www.nvrinc.com, www.ryanhomes.com, www.nvhomes.com and www.heartlandluxuryhomes.com.
Some of the statements in this release made by the Company constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Certain, but not necessarily all, of such forward-looking statements can be identified by the use of forward-looking terminology, such as “believes,” “expects,” “may,” “will,” “should” or “anticipates” or the negative thereof or other comparable terminology. All statements other than of historical facts are forward-looking statements. Forward-looking statements contained in this document may include those regarding market trends, NVR’s financial position, business strategy, the outcome of pending litigation, investigations or similar contingencies, projected plans and objectives of management for future operations. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance of NVR to be materially different from future results, performance or achievements expressed or implied by the forward-looking statements. Such risk factors include, but are not limited to the following: general economic and business conditions (on both a national and regional level); interest rate changes; access to suitable financing by NVR and NVR’s customers; increased regulation in the mortgage banking industry; the ability of our mortgage banking subsidiary to sell loans it originates into the secondary market; competition; the availability and cost of land and other raw materials used by NVR in its homebuilding operations; shortages of labor; weather related slow-downs; building moratoriums; governmental regulation; fluctuation and volatility of stock and other financial markets; mortgage financing availability; and other factors over which NVR has little or no control. NVR undertakes no obligation to update such forward-looking statements except as required by law.
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NVR, Inc.
Consolidated Statements of Income
(in thousands, except per share data)

Three Months Ended December 31,Twelve Months Ended December 31,
2018201720182017
(Unaudited) (Unaudited) (Unaudited) 
Homebuilding:
Revenues$1,954,403 $1,781,494 $7,004,304 $6,175,521 
Other income4,858 2,272 11,839 6,536 
Cost of sales(1,590,735)(1,438,307)(5,692,127)(4,990,378)
Selling, general and administrative(107,438)(97,662)(428,874)(392,272)
Operating income261,088 247,797 895,142 799,407 
Interest expense(6,014)(5,997)(24,036)(23,037)
Homebuilding income255,074 241,800 871,106 776,370 
Mortgage Banking:
Mortgage banking fees40,145 34,842 159,370 130,319 
Interest income3,223 2,682 11,593 7,850 
Other income722 650 2,546 2,048 
General and administrative(21,467)(18,338)(83,838)(68,528)
Interest expense(259)(318)(1,045)(1,148)
Mortgage banking income22,364 19,518 88,626 70,541 
Income before taxes277,438 261,318 959,732 846,911 
Income tax expense(45,280)(136,699)(162,535)(309,390)
Net income$232,158 $124,619 $797,197 $537,521 
Basic earnings per share$64.46 $33.39 $219.58 $144.00 
Diluted earnings per share$58.57 $28.88 $194.80 $126.77 
Basic weighted average shares outstanding3,601 3,732 3,631 3,733 
Diluted weighted average shares outstanding3,964 4,315 4,092 4,240 

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NVR, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
December 31, 2018December 31, 2017
(Unaudited) 
ASSETS
Homebuilding:
Cash and cash equivalents$688,783 $645,087 
Restricted cash16,982 19,438 
Receivables18,641 20,026 
Inventory:
Lots and housing units, covered under sales agreements with customers1,076,904 1,046,094 
Unsold lots and housing units115,631 148,620 
Land under development38,857 34,212 
Building materials and other21,718 17,273 
1,253,110 1,246,199 
Contract land deposits, net396,177 370,429 
Property, plant and equipment, net42,234 43,191 
Reorganization value in excess of amounts allocable to identifiable assets, net41,580 41,580 
Deferred tax assets, net112,333 111,953 
Other assets71,671 86,977 
2,641,511 2,584,880 
Mortgage Banking:
Cash and cash equivalents23,092 21,707 
Restricted cash3,071 2,256 
Mortgage loans held for sale, net458,324 352,489 
Property and equipment, net6,510 6,327 
Reorganization value in excess of amounts allocable to identifiable assets, net7,347 7,347 
Other assets26,078 14,273 
524,422 404,399 
Total assets$3,165,933 $2,989,279 
LIABILITIES AND SHAREHOLDERS' EQUITY
Homebuilding:
Accounts payable$244,496 $261,973 
Accrued expenses and other liabilities332,871 341,891 
Customer deposits138,246 150,033 
Senior notes597,681 597,066 
1,313,294 1,350,963 
Mortgage Banking:
Accounts payable and other liabilities44,077 32,824 
44,077 32,824 
Total liabilities1,357,371 1,383,787 
Commitments and contingencies
Shareholders' equity:
Common stock, $0.01 par value; 60,000,000 shares authorized; 20,555,330 shares issued as of both December 31, 2018 and December 31, 2017 206 206 
Additional paid-in capital1,820,223 1,644,197 
Deferred compensation trust – 107,340 and 108,640 shares of NVR, Inc. common stock as of December 31, 2018 and December 31, 2017, respectively (16,937)(17,383)
Deferred compensation liability16,937 17,383 
Retained earnings7,031,333 6,231,940 
Less treasury stock at cost – 16,977,499 and 16,864,324 shares as of December 31, 2018 and December 31, 2017, respectively (7,043,200)(6,270,851)
Total shareholders' equity1,808,562 1,605,492 
Total liabilities and shareholders' equity$3,165,933 $2,989,279 
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NVR, Inc.
Operating Activity
(dollars in thousands)
(Unaudited)
Three Months Ended December 31,Twelve Months Ended December 31,
2018201720182017
Homebuilding data:
New orders (units)
Mid Atlantic (1)
1,865 2,153 8,906 8,654 
North East (2)
245 296 1,296 1,362 
Mid East (3)
914 953 4,314 4,171 
South East (4)
817 904 3,765 3,421 
Total
3,841 4,306 18,281 17,608 
Average new order price
$376.1 $380.8 $376.3 $383.2 
Settlements (units)
Mid Atlantic (1)
2,520 2,289 8,982 7,971 
North East (2)
393 358 1,415 1,288 
Mid East (3)
1,271 1,079 4,406 3,772 
South East (4)
1,002 904 3,644 2,930 
Total
5,186 4,630 18,447 15,961 
Average settlement price
$376.8 $384.7 $379.7 $386.9 
Backlog (units)
Mid Atlantic (1)
4,148 4,224 
North East (2)
563 682 
Mid East (3)
1,806 1,898 
South East (4)
1,848 1,727 
Total
8,365 8,531 
Average backlog price
$376.9 $384.2 
New order cancellation rate
17%  14%  15%  14%  
Community count (average)
463 484 477 485 
Lots controlled at end of period
99,700 88,700 
Mortgage banking data:
Loan closings
$1,356,430 $1,229,695 $4,829,406 $4,229,507 
Capture rate
88%  88%  88%  88%  
Common stock information:
Shares outstanding at end of period
3,577,831 3,691,006 
Number of shares repurchased
78,591 56,128 300,815 166,520 
Aggregate cost of shares repurchased
$188,765 $191,967 $846,134 $422,166 

(1) Maryland, Virginia, West Virginia, Delaware and Washington, D.C.
(2) New Jersey and Eastern Pennsylvania
(3) New York, Ohio, Western Pennsylvania, Indiana and Illinois
(4) North Carolina, South Carolina, Tennessee and Florida
Investor Relations Contact:
Curt McKay
(703) 956-4058
ir@nvrinc.com



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