-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BRg9xtY4928VaoeUGVvcv8D3oj6Bl59YWpY0iON9LQJBQRZCcjO0vGe4gZj+G6Sh NnQOUWv3bRPf/xtnYTdxNw== 0000928385-98-000323.txt : 19980225 0000928385-98-000323.hdr.sgml : 19980225 ACCESSION NUMBER: 0000928385-98-000323 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19980224 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: NVR INC CENTRAL INDEX KEY: 0000906163 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 541394360 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 001-12378 FILM NUMBER: 98548264 BUSINESS ADDRESS: STREET 1: 7601 LEWISVILLE RD STREET 2: STE 300 CITY: MCLEAN STATE: VA ZIP: 22102 BUSINESS PHONE: 7037612000 MAIL ADDRESS: STREET 1: 7601 LEWINSVILLE RD CITY: MCLEAN STATE: VA ZIP: 22102 10-Q/A 1 AMENDMENT #1 TO THE FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QA (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____ Commission file number 1-12378 NVR, Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Virginia 54-1394360 -------- ---------- (State or other jurisdiction of (IRS employer identification incorporation or organization) number) 7601 Lewinsville Road, Suite 300 McLean, Virginia 22102 (703) 761-2000 - -------------------------------------------------------------------------------- (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) (Not Applicable) - -------------------------------------------------------------------------------- (Former name, former address, and former fiscal year if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No_____ ------ As of July 18, 1997 there were 11,717,000 total shares of common stock outstanding. APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15 (d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes X No ______ ------ NVR, INC. FORM 10-QA INDEX ================================================================================
Page ---- PART I FINANCIAL INFORMATION - ------ Item 1. NVR, Inc. Consolidated Financial Statements ------------------------------------------- Consolidated Balance Sheets at June 30, 1997 (unaudited) and December 31, 1996.......................................... 4 Consolidated Statements of Income for the Three Months Ended June 30, 1997 (unaudited) and June 30, 1996 (unaudited) and the Six Months Ended June 30, 1997 (unaudited) and June 30, 1996 (unaudited).................................. 6 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1997 (unaudited) and June 30, 1996 (unaudited)...................................... 7 Notes to Consolidated Financial Statements..................... 8 NVR Homes, Inc. Consolidated Financial Statements ---------------------------------------------------------------- Consolidated Balance Sheets at June 30, 1997 (unaudited) and December 31, 1996.......................................... 10 Consolidated Statements of Income for the Three Months Ended June 30, 1997 (unaudited) and June 30, 1996 (unaudited) and the Six Months Ended June 30, 1997 (unaudited) and June 30, 1996 (unaudited).................................. 11 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1997 (unaudited) and June 30, 1996 (unaudited)...................................... 12 Notes to Consolidated Financial Statements..................... 13 NVR Financial Services, Inc. Consolidated Financial Statements --------------------------------------------------------------- Consolidated Balance Sheets at June 30, 1997 (unaudited) and December 31, 1996.......................................... 14 Consolidated Statements of Income for the Three Months Ended June 30, 1997 (unaudited) and June 30, 1996 (unaudited) and the Six Months Ended June 30, 1997 (unaudited) and June 30, 1996 (unaudited).................................. 15 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1997 (unaudited) and June 30, 1996 (unaudited)...................................... 16 Notes to Consolidated Financial Statements..................... 17
2 NVR, INC. FORM 10-QA INDEX-CONTINUED ================================================================================
Page ---- RVN, Inc. Financial Statements ------------------------------ Balance Sheets at June 30, 1997 (unaudited) and December 31, 1996.......................................... 18 Statements of Income for the Three Months Ended June 30, 1997 (unaudited) and June 30, 1996 (unaudited) and the Six Months Ended June 30, 1997 (unaudited) and June 30, 1996 (unaudited).................................. 18 Statements of Cash Flows for the Six Months Ended June 30, 1997 (unaudited) and June 30, 1996 (unaudited)...................................... 19 Notes to Financial Statements.................................. 20 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................ 21 PART II OTHER INFORMATION - ------- Item 4. Submission of Matters to a Vote of Security Holders............ 29 Item 6. Exhibits and Reports on Form 8-K............................... 29 Exhibit Index.................................................. 30 Signature...................................................... 31
3 PART I ------ ITEM 1. - ------- NVR, INC. Consolidated Balance Sheets (dollars in thousands, except share data)
JUNE 30, 1997 DECEMBER 31, 1996 ------------- ----------------- ASSETS (unaudited) HOMEBUILDING: Cash and cash equivalents $ 41,174 $ 71,533 Receivables 8,470 2,927 Inventory: Lots and housing units, covered under sales agreements with customers 153,644 126,456 Unsold lots and housing units 35,267 37,940 Manufacturing materials and other 5,836 7,297 -------- -------- 194,747 171,693 Property, plant and equipment, net 17,275 17,916 Reorganization value in excess of amounts allocable to identifiable assets, net 72,592 75,818 Contract land deposits 36,612 36,383 Other assets 21,773 21,008 -------- -------- 392,643 397,278 -------- -------- FINANCIAL SERVICES: Cash and cash equivalents 4,549 3,247 Mortgage loans held for sale, net 106,937 75,735 Mortgage servicing rights, net 2,070 6,309 Property equipment, net 622 917 Reorganization value in excess of amounts allocable to identifiable assets, net 12,244 12,788 Other assets 3,620 4,891 -------- -------- 130,042 103,887 -------- -------- TOTAL ASSETS $522,685 $501,165 ======== ========
See notes to consolidated financial statements. 4 NVR, INC. Consolidated Balance Sheets (dollars in thousands, except share data)
JUNE 30, 1997 DECEMBER 31, 1996 ------------- ----------------- (UNAUDITED) LIABILITIES AND SHAREHOLDERS' EQUITY HOMEBUILDING: Accounts payable $ 58,407 $ 54,894 Accrued expenses and other liabilities 85,174 85,260 Notes payable 83 86 Other term debt 14,028 14,043 Senior notes 120,000 120,000 -------- -------- 277,692 274,283 -------- -------- FINANCIAL SERVICES: Accounts payable and other liabilities 8,147 7,409 Notes payable 99,023 67,463 -------- -------- 107,170 74,872 -------- -------- Total liabilities 384,862 349,155 -------- -------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Common stock, $0.01 par value; 60,000,000 shares authorized 19,938,540 and 19,881,515 shares issued as of June 30, 1997 and December 31, 1996, respectively 199 199 Paid-in-capital 155,844 157,842 Retained earnings 61,904 47,098 Less treasury stock at cost 8,221,540 and 6,307,108 shares at June 30, 1997 and December 31, 1996, respectively (80,124) (53,129) -------- -------- Total shareholders' equity 137,823 152,010 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $522,685 $501,165 ======== ========
See notes to consolidated financial statements. 5 NVR, INC. Consolidated Statements of Income (dollars in thousands, except per share data) (unaudited)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, ----------------------------- --------------------------- 1997 1996 1997 1996 -------------- ------------- ------------- ------------ HOMEBUILDING: Revenues $ 281,437 $ 283,532 $ 520,424 $ 483,767 Other income 258 120 767 525 Cost of sales (242,809) (245,357) (450,278) (419,202) Selling, general and administrative (17,222) (16,116) (33,316) (30,165) Amortization of reorganization value in excess of amounts allocable to identifiable assets (1,613) (1,761) (3,226) (3,522) ------------- ------------ ------------ ----------- Operating income 20,051 20,418 34,371 31,403 Interest expense (4,264) (4,240) (8,321) (8,400) ------------- ------------ ------------ ----------- Homebuilding income 15,787 16,178 26,050 23,003 ------------- ------------ ------------ ----------- FINANCIAL SERVICES: Mortgage banking fees 6,698 6,819 11,820 12,818 Interest income 1,280 1,241 2,363 2,404 Other income 108 (2) 161 1 General and administrative (5,737) (6,108) (10,766) (11,930) Amortization of reorganization value in excess of amounts allocable to identifiable assets (272) (272) (544) (544) Interest expense (869) (525) (1,259) (1,029) ------------- ------------ ------------ ----------- Operating income 1,208 1,153 1,775 1,720 TOTAL SEGMENT INCOME 16,995 17,331 27,825 24,723 Income tax expense (7,952) (8,561) (13,019) (12,213) ------------- ------------ ------------ ----------- NET INCOME $ 9,043 $ 8,770 $ 14,806 $ 12,510 ============= ============ ============ =========== EARNINGS PER SHARE $ 0.71 $ 0.54 $ 1.13 $ 0.77 ============= ============= ============ ===========
See notes to consolidated financial statements. 6 NVR, INC. Consolidated Statements of Cash Flows (dollars in thousands, except share data) (unaudited)
SIX MONTHS ENDED JUNE 30, --------------------------------- 1997 1996 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 14,806 $ 12,510 Adjustments to reconcile net income to net cash used by operating activities: Depreciation and amortization 6,552 7,368 Interest accrued and added to bond principal - 395 Mortgage loans closed (646,951) (611,023) Proceeds from sales of mortgage loans 618,062 603,937 Gain on sale of mortgage servicing rights (1,143) - Gain on sale of loans (6,507) (7,119) Net change in assets and liabilities: Increase in inventories (23,054) (30,577) Increase in receivables (4,930) (1,971) Increase in accounts payable and accrued expenses 3,646 2,879 Other, net (1,246) (1,053) --------- --------- Net cash used by operating activities (40,765) (24,654) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Increase in funds held by trustee (347) (1,374) Proceeds from sales of mortgage-backed securities 14,419 17,814 Purchase of property, plant and equipment (1,131) (2,026) Principal payments on mortgage-backed securities 1,896 11,569 Proceeds from sales of mortgage servicing rights 9,184 8,150 Purchases of mortgage servicing rights - (112) Other, net 654 1,483 --------- --------- Net cash provided by investing activities 24,675 35,504 --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Redemption of bonds (15,416) (27,562) Net borrowings under notes payable 31,442 16,776 Purchases of treasury stock (29,401) (8,551) Other, net 408 89 --------- --------- Net cash used by financing activities (12,967) (19,248) Net decrease in cash (29,057) (8,398) Cash, beginning of the period 74,780 55,567 --------- --------- Cash, end of period $ 45,723 $ 47,169 ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Interest paid during the period $ 10,113 $ 12,324 ========= ========= Income taxes paid, net of refunds $ 9,799 $ 12,112 ========= =========
See notes to consolidated financial statements. 7 NVR, INC. Notes to Consolidated Financial Statements (dollars in thousands, except share data) 1. BASIS OF PRESENTATION The accompanying unaudited, consolidated financial statements include the accounts of NVR, Inc. ("NVR" or the "Company") and its subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. The statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Because the accompanying condensed financial statements do not include all of the information and footnotes required by generally accepted accounting principles, they should be read in conjunction with the financial statements and notes thereto included in the Company's 1996 Annual Report on Form 10-K. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six month period ended June 30, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. 2. ADOPTION OF NEW ACCOUNTING PRINCIPLE During the quarter ended March 31, 1997, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. Such adoption did not have a material impact on the Company's financial condition or results of operations. See Management's Discussion and Analysis of Financial Condition and Results of Operations beginning on page 24 for a discussion of SFAS No. 128, Earnings per Share. 3. SHAREHOLDERS' EQUITY A summary of changes in shareholders' equity is presented below:
COMMON PAID-IN RETAINED TREASURY STOCK CAPITAL EARNINGS STOCK ------ --------- -------- --------- BALANCE, DECEMBER 31, 1996 $ 199 $ 157,842 $ 47,098 $ (53,129) Net income - - 14,806 - Option activity - 408 - - Treasury stock purchases - - - (29,401) Performance share activity - (2,406) - 2,406 ------ --------- -------- --------- BALANCE, JUNE 30, 1997 $ 199 $ 155,844 $ 61,904 $ (80,124) ====== ========= ======== =========
During the six months ended June 30, 1997, the Company repurchased approximately 2,087,000 shares of its common stock at an aggregate purchase price of $29,401. Approximately 172,000 of those shares were reissued from the treasury during February 1997 in satisfaction of an employee benefit liability accrued at December 31, 1996. The average cost basis for the shares reissued from the treasury was $13.97 per share. In addition, 60,512 options were exercised during the first half of 1997, with NVR realizing approximately $408 in aggregate equity proceeds. 8 NVR, INC. Notes to Consolidated Financial Statements (dollars in thousands, except share data) 4. DEBT In June 1997, the NVR Homes, Inc. amended and restated its working capital revolving credit facility (the "Facility") for a three year term expiring on May 31, 2000 under an agreement with a syndicate of financial institutions. The Facility continues to provide for borrowings up to $60,000. The amended Facility resulted in a more favorable borrowing rate and a reduction in certain fees. The other terms and conditions are substantially the same as those under the facility in effect at December 31, 1996. In June 1997, NVR Mortgage Finance, Inc. ("NVR Finance") renewed its mortgage warehouse facility for two years. The available borrowing limit remained at $105,000. The other terms and conditions are substantially the same as those in effect at December 31, 1996. During the quarter ended March 31, 1997, NVR Finance entered into an additional annually renewable, uncommitted gestation mortgage-backed security repurchase agreement (the "Repo Facility"). The maximum amount available under the Repo Facility is $45,000, bringing NVR's total available borrowings under all such similar agreements to $145,000. Amounts outstanding under the Repo Facility accrue interest at various rates tied to the federal funds rate, depending on the type of collateral, and are collateralized by gestation mortgage-backed securities. The covenants under the Repo Facility are consistent with NVR Finance's mortgage warehouse credit facility. 9 NVR HOMES, INC. Consolidated Balance Sheets (dollars in thousands, except share data)
JUNE 30, 1997 DECEMBER 31, 1996 ------------- ----------------- ASSETS (unaudited) Cash and cash equivalents $ 41,153 $ 71,471 Receivables 8,894 3,247 Inventory: Lots and housing units, covered under sales agreements with customers 153,644 126,456 Unsold lots and housing units 35,267 37,940 Manufacturing materials and other 5,836 7,297 ----------- ------------- 194,747 171,693 Property, plant and equipment, net 9,895 10,272 Reorganization value in excess of amounts allocable to identifiable assets, net 72,592 75,818 Contract land deposits 36,612 36,383 Other assets 18,802 18,058 ----------- ------------- TOTAL ASSETS $ 382,695 $ 386,942 =========== ============= LIABILITIES AND SHAREHOLDER'S EQUITY Accounts payable $ 57,794 $ 54,325 Accrued expenses and other liabilities 64,404 75,451 Advances from affiliates, net 103,045 107,896 Other term debt 5,745 5,859 ---------- ------------- TOTAL LIABILITIES 230,988 243,531 SHAREHOLDER'S EQUITY: Common stock, $0.01 par value; 100 shares authorized; 100 shares issued and outstanding - - Additional paid-in capital 94,688 94,688 Retained earnings 57,019 48,723 ---------- ------------- Total shareholder's equity 151,707 143,411 ---------- ------------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 382,695 $ 386,942 ========== =============
See notes to consolidated financial statements. 10 NVR HOMES, INC. Consolidated Statements of Income (dollars in thousands) (unaudited)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, ----------------------------- --------------------------- 1997 1996 1997 1996 -------------- ------------- ------------- ------------ REVENUES: Revenues $281,437 $283,532 $520,424 $483,767 Other income 248 115 757 514 -------- -------- -------- -------- Total Revenues 281,685 283,647 521,181 484,281 EXPENSES: Cost of sales 242,809 245,357 450,278 419,202 Interest expense-external 462 500 795 928 Interest expense-affiliates 3,669 3,669 7,338 7,338 Selling, general and administrative 22,619 16,093 42,976 30,064 Amortization of reorganization value in excess of amounts allocable to identifiable assets 1,613 1,761 3,226 3,522 -------- -------- -------- -------- Total expenses 271,172 267,380 504,613 461,054 Income before income tax expense 10,513 16,267 16,568 23,227 Income tax expense (5,249) (7,905) (8,272) (11,288) -------- -------- -------- -------- NET INCOME $ 5,264 $ 8,362 $ 8,296 $ 11,939 ======== ======== ======== ========
See notes to the consolidated financial statements. 11 NVR HOMES, INC. Consolidated Statements of Cash Flows (dollars in thousands) (unaudited)
SIX MONTHS SIX MONTHS ENDED ENDED JUNE 30, 1997 JUNE 30, 1996 -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 8,296 $ 11,939 Adjustments to reconcile net income to net cash used by operating activities: Depreciation and amortization 4,670 4,819 Net change in assets and liabilities: Increase in inventories (23,054) (30,577) Increase in receivables (5,647) (3,053) (Decrease) increase in accounts payable and accrued liabilities (7,578) 502 Other, net (1,063) (1,247) -------- -------- Net cash used by operating activities (24,376) (17,617) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant & equipment (1,010) (1,714) Proceeds from sale of property, plant & equipment 33 27 -------- -------- Net cash used by investing activities (977) (1,687) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase (decrease) in advances from affiliates (4,851) 8,418 Principal repayments of term debt (114) (105) Net borrowings (repayments) under credit lines and other notes payable - 1,000 -------- -------- Net cash provided (used by) financing activities (4,965) 9,313 -------- -------- Net decrease in cash (30,318) (9,991) Cash, beginning of the period 71,471 51,911 -------- -------- Cash, end of period $ 41,153 $ 41,920 ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Interest paid during the period $ 8,077 $ 8,137 ======== ======== Taxes paid during the period (net of refunds) $ 17,929 $ 16,282 ======== ========
See notes to consolidated financial statements. 12 NVR HOMES, INC. Notes to Consolidated Financial Statements (dollars in thousands) 1. BASIS OF PRESENTATION The accompanying unaudited, consolidated financial statements include the accounts of NVR Homes, Inc. ("Homes" or the "Company") and its subsidiaries. Homes is a wholly owned subsidiary of NVR, Inc. ("NVR"). Homes conducts all of NVR's homebuilding operations. The statements are provided pursuant to Homes' status as a guarantor of NVR's 11% Senior Notes due 2003 (the "Senior Notes"). Intercompany accounts and transactions have been eliminated in consolidation. The statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six month period ended June 30, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. 2. ADOPTION OF NEW ACCOUNTING PRINCIPLE During the quarter ended March 31, 1997, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. Such adoption did not have a material impact on the Company's financial condition or results of operations. 3. DEBT In June 1997, the Company amended and restated its working capital revolving credit facility (the "Facility") for a three year term expiring on May 31, 2000 under an agreement with a syndicate of financial institutions. The Facility continues to provide for borrowings up to $60,000. The amended Facility resulted in a more favorable borrowing rate and a reduction in certain fees. The other terms and conditions are substantially the same as those under the facility in effect at December 31, 1996. 13 NVR FINANCIAL SERVICES, INC. Consolidated Balance Sheets (dollars in thousands, except share data)
JUNE 30, DECEMBER 31, 1997 1996 ----------- ------------ (unaudited) ASSETS FINANCIAL SERVICES: Cash and cash equivalents $ 4,549 $ 3,247 Receivables 2,742 3,596 Mortgage loans held for sale, net 106,937 75,735 Property and equipment, net 622 917 Real estate acquired through foreclosure 207 538 Mortgage servicing rights, net 2,070 6,309 Reorganization value in excess of amount allocable to identifiable assets, net 12,244 12,788 Other assets 661 753 -------- -------- 130,032 103,883 LIMITED-PURPOSE FINANCING SUBSIDIARIES: Mortgage-backed securities, net 22,537 37,294 Funds held by trustee 904 557 Receivables 474 548 Other assets 237 840 -------- -------- 24,152 39,239 -------- -------- TOTAL ASSETS $154,184 $143,122 ======== ======== LIABILITIES AND SHAREHOLDER'S EQUITY FINANCIAL SERVICES: Accounts payable $ 5,498 $ 3,480 Accrued expenses and other liabilities 3,077 4,286 Due to affiliates 1,377 1,173 Notes payable 99,023 67,463 -------- -------- 108,975 76,402 LIMITED-PURPOSE FINANCING SUBSIDIARIES: Accrued expenses and other liabilities 1,026 771 Bonds payable, net 23,116 38,464 -------- -------- 24,142 39,235 -------- -------- TOTAL LIABILITIES 133,117 115,637 COMMITMENTS AND CONTINGENCIES SHAREHOLDER'S EQUITY: Common stock, $1 par value, 1,000 shares authorized; 100 shares issued and outstanding - - Additional paid-in capital 21,682 28,711 Retained deficit (615) (1,226) -------- -------- Total shareholder's equity 21,067 27,485 -------- -------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $154,184 $143,122 ======== ========
See notes to consolidated financial statements. 14 NVR FINANCIAL SERVICES, INC. Consolidated Statements of Income (dollars in thousands) (unaudited)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, ----------------------------- --------------------------- 1997 1996 1997 1996 -------------- ------------- ------------- ------------ FINANCIAL SERVICES: Interest income $1,280 $ 1,242 $ 2,363 $ 2,404 Gain on sales of mortgage loans 3,415 3,859 6,507 7,119 Servicing fees 511 1,348 1,226 2,807 Gain on sale of servicing 1,143 - 1,143 - Title fees 1,629 1,612 2,944 2,892 Other, net 107 (1) 157 - ------ ------- ------- ------- Total revenues 8,085 8,060 14,340 15,222 Interest expense-external 869 525 1,259 1,029 Interest expense-affiliates 84 89 412 224 General and administrative 5,621 5,595 10,493 10,888 Amortization of mortgage servicing rights 116 513 273 1,042 Amortization of reorganization value in excess of amounts allocable to identifiable assets 272 272 544 544 ------ ------- ------- ------- Total expenses 6,962 6,994 12,981 13,727 ------ ------- ------- ------- Operating income 1,123 1,066 1,359 1,495 LIMITED-PURPOSE FINANCING SUBSIDIARIES: Interest income 574 1,995 1,170 4,147 Interest expense (625) (1,854) (1,170) (3,959) Other, net 52 (143) 4 (187) ------ ------- ------- ------- Operating income 1 (2) 4 1 TOTAL OPERATING INCOME 1,124 1,064 1,363 1,496 Income tax expense (618) (514) (752) (964) ------ ------- ------- ------- NET INCOME $ 506 $ 550 $ 611 $ 532 ====== ======= ======= =======
See notes to consolidated financial statements. 15 NVR FINANCIAL SERVICES, INC. Consolidated Statements of Cash Flows (dollars in thousands) (unaudited)
SIX MONTHS SIX MONTHS ENDED ENDED JUNE 30, 1997 JUNE 30, 1996 -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 611 $ 532 Adjustments to reconcile net income to net cash used in operating activities: Accretion of net discount on mortgage-backed securities (70) (114) Amortization 1,015 1,619 Gain on sales of loans (6,507) (7,119) Mortgage loans closed (646,951) (611,023) Proceeds from sales of mortgage loans 618,062 603,937 (Gain) loss on sales of mortgage servicing rights (1,143) - Interest accrued and added to bond principal - 395 Other, net 1,243 177 --------- --------- Net cash used in operating activities (33,740) (11,596) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Increase in funds held by trustee (347) (1,374) Principal payments on mortgage- backed securities 1,896 11,569 Proceeds from sales of mortgage- backed securities 14,419 17,814 Purchases of office facilities and equipment (50) (76) Proceeds from sales of mortgage servicing rights 9,184 8,150 Purchases of mortgage servicing rights - (112) Other, net 621 1,455 --------- --------- Net cash provided by investing activities 25,723 37,426 --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase in notes payable 31,560 15,884 Redemption of bonds (15,416) (27,562) Return of capital/dividend to parent (7,029) (12,779) Change in due to affiliates 204 220 --------- --------- Net cash provided by (used in) financing activities 9,319 (24,237) --------- --------- Net increase in cash 1,302 1,593 Cash, beginning of period 3,247 3,656 --------- --------- Cash, end of period $ 4,549 $ 5,249 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid during the period $ 2,628 $ 4,667 ========= ========= Taxes paid during the period, net of refunds $ 1,189 $ 387 ========= =========
See notes to consolidated financial statements. 16 NVR FINANCIAL SERVICES, INC. Notes to Consolidated Financial Statements (dollars in thousands) 1. BASIS OF PRESENTATION The accompanying unaudited, consolidated financial statements include the accounts of NVR Financial Services, Inc. ("NVRFS" or the "Company") and its subsidiaries. NVRFS is a wholly owned subsidiary of NVR, Inc. ("NVR"). NVRFS, through its subsidiaries, conducts all of NVR's mortgage banking operations. The statements are provided pursuant to NVRFS' status as a guarantor of NVR's 11% Senior Notes due 2003 (the "Senior Notes"). Intercompany accounts and transactions have been eliminated in consolidation. The statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six month period ended June 30, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. 2. ADOPTION OF NEW ACCOUNTING PRINCIPLE During the quarter ended March 31, 1997, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. Such adoption did not have a material impact on the Company's financial condition or results of operations. 3. SHAREHOLDER'S EQUITY A summary of changes in shareholder's equity is presented below:
ADDITIONAL COMMON PAID-IN RETAINED TOTAL STOCK CAPITAL DEFICIT EQUITY ------ --------- -------- ------ BALANCE, DECEMBER 31, 1996 $ - $ 28,711 $ (1,226) $ 27,485 Return of capital - (7,029) - (7,029) Net income $ - - 611 611 ------ --------- -------- -------- BALANCE, JUNE 30, 1997 - $ 21,682 $ (615) $ 21,067 ====== ========= ======== ========
4. DEBT In June 1997, NVR Mortgage Finance, Inc. ("NVR Finance"), a wholly owned subsidiary of NVRFS, renewed its mortgage warehouse facility for two years. The available borrowing limit remained at $105,000. The other terms and conditions are substantially the same as those in effect at December 31, 1996. During the quarter ended March 31, 1997, NVR Finance entered into an additional annually renewable, uncommitted gestation mortgage-backed security repurchase agreement (the "Repo Facility"). The maximum amount available under the Repo Facility is $45,000, bringing NVRFS's total available borrowings under all such similar agreements to $145,000. Amounts outstanding under the Repo Facility accrue interest at various rates tied to the federal funds rate, depending on the type of collateral, and are collateralized by gestation mortgage-backed securities. The covenants under the Repo Facility are consistent with NVR Finance's mortgage warehouse credit facility. 17 RVN, INC. Balance Sheets (dollars in thousands, except share data)
JUNE 30, DECEMBER 31, 1997 1996 ----------- ------------ (unaudited) ASSETS Cash and cash equivalents $ 21 $ 62 Royalty receivable 2,194 1,441 ----------- ------------ TOTAL ASSETS $ 2,215 $ 1,503 =========== ============ LIABILITIES AND SHAREHOLDER'S EQUITY Accounts payable and accrued expenses $ 761 $ 530 COMMITMENTS AND CONTINGENCIES SHAREHOLDER'S EQUITY: Common stock, $1 par value; 3,000 shares authorized; 1,000 shares issued and outstanding 1 1 Additional paid-in capital 64 64 Retained earnings 1,389 908 ----------- ------------ Total shareholder's equity 1,454 973 ----------- ------------ TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 2,215 $ 1,503 =========== ============
RVN, INC. Statements of Income (dollars in thousands) (unaudited)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, ---------------------------- -------------------------- 1997 1996 1997 1996 -------------- ----------- ------------- ---------- REVENUES: Royalty revenue $ 5,362 $ - $ 9,910 $ - Other income 1 - 4 - -------------- ----------- ------------- ---------- Total revenues 5,363 - 9,914 - EXPENSES: General and administrative 6 - 20 - -------------- ----------- ------------- ---------- Income before income tax 5,357 - 9,894 - Income tax expense (1,868) - (3,456) - -------------- ----------- ------------- ---------- NET INCOME $ 3,489 $ - $ 6,438 $ - ============== =========== ============= ==========
See notes to financial statements. 18 RVN, INC. Statements of Cash Flows (dollars in thousands) (unaudited)
SIX MONTHS SIX MONTHS ENDED ENDED JUNE 30, 1997 JUNE 30, 1996 -------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 6,438 $ - Adjustments to reconcile net income to net cash provided by (used in) operating activities: Increase in royalty receivables (753) - Increase in accounts payable and accrued liabilities 231 - ------------- ------------- Net cash provided by operating activities 5,916 - ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Dividend to parent (5,957) - ------------- ------------- Net cash used by financing activities (5,957) - ------------- ------------- Net increase (decrease) in cash (41) - Cash, beginning of period 62 - ------------- ------------- Cash, end of period $ 21 $ - ============= ============= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid during the period $ - $ - ============= ============= Taxes paid during the period, net of refunds $ 3,200 $ - ============= =============
See notes to financial statements. 19 RVN, INC. Notes to Financial Statements (dollars in thousands) 1. BASIS OF PRESENTATION The accompanying unaudited financial statements include the accounts of RVN, Inc. ("RVN" or the "Company"). RVN is a wholly owned subsidiary of NVR, Inc. ("NVR"). The statements are provided pursuant to RVN's status as a guarantor of NVR's 11% Senior Notes due 2003 (the "Senior Notes"). The statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six month period ended June 30, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. NVR capitalized RVN on October 1, 1996. As such, there is no financial information to report for the quarter or year to date period ended June 30, 1996. 2. ADOPTION OF NEW ACCOUNTING PRINCIPLE During the quarter ended March 31, 1997, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. Such adoption did not have a material impact on the Company's financial condition or results of operations. 3. SHAREHOLDER'S EQUITY A summary of changes in Shareholder's equity is presented below:
ADDITIONAL COMMON PAID-IN RETAINED STOCK CAPITAL EARNINGS ------ ---------- --------- BALANCE, DECEMBER 31, 1996 $ 1 $ 64 $ 908 Net income - - 6,438 Dividend to parent - - (5,957) ------ ---------- -------- BALANCE, JUNE 30, 1997 $ 1 $ 64 $ 1,389 ====== ========== ========
20 ITEM 2. - ------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS (dollars in thousands, except per share amounts) FORWARD-LOOKING STATEMENTS Some of the statements in this Form 10-QA, as well as statements made by the Company in periodic press releases, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such risk factors include, but are not limited to, general economic and business conditions, interest rate changes, competition, the availability and cost of land and other raw materials used by the Company in its homebuilding operations, shortages of labor, weather related slow downs, building moratoria, governmental regulation, the ability of the Company to integrate any acquired business, certain conditions in financial markets and other factors over which the Company has little or no control. NVR, INC. CONSOLIDATED - ---------------------- RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996 NVR, Inc. ("NVR" or the "Company") is a holding company that operates in two business segments: homebuilding and financial services. Holding company general and administrative expenses are fully allocated to the homebuilding and financial services segments in the information presented below. HOMEBUILDING SEGMENT THREE MONTHS ENDED JUNE 30, 1997 AND 1996 During the second quarter of 1997, homebuilding operations generated revenues of $281,437 compared to revenues of $283,532 in the second quarter of 1996. The change in revenues is primarily due to a 4.0% decrease in the number of homes settled from 1,556 in 1996 to 1,494 in 1997, offset by a 3.1% increase in the average settlement price from $181.3 in 1996 to $187.0 in 1997. The decrease in settlements was due to a lower level of unit backlog at March 31, 1997 as compared to the prior March 31. New orders of 2,041 during the second quarter of 1997 were 13.3% higher than the 1,801 new orders generated during the prior 1996 period. The increase in new orders is attributable to the Company's operations outside the Baltimore and Washington markets. Gross profit margins in the second quarter of 1997 increased to 13.7% compared to 13.5% for the second quarter of 1996. The increase in gross profit margins was due in part to decreased costs as a result of the milder winter weather conditions in NVR's principal markets during the first quarter of 1997 as compared to the first quarter of 1996, and to the Company's continued focus on controlling construction costs. SG&A expenses for the second quarter of 1997 increased $1,106 as compared to the same 1996 period, and as a percentage of revenues increased 0.4%. The increase in SG&A was primarily due to increased costs attributable to market expansion undertaken within the last two years, and to increased selling and marketing expenses caused by more competitive market conditions in certain of the Company's markets. 21 Backlog units and dollars were 3,143 and $601,276, respectively, at June 30, 1997 compared to 3,101 and $563,948, respectively, at June 30, 1996. The increase in backlog dollars is primarily due to the 1.4% increase in backlog units, coupled with a 4% increase in average selling prices during the six months ended June 30, 1997 as compared to the six months ended June 30, 1996. The Company believes that earnings before interest, taxes, depreciation and amortization ("EBITDA") provides a meaningful comparison of operating performance of the homebuilding segment because it excludes the amortization of certain intangible assets. Although the Company believes the calculation is helpful in understanding the performance of the homebuilding segment, EBITDA should not be considered a substitute for net income or cash flow as indicators of the Company's financial performance or its ability to generate liquidity. CALCULATION OF EBITDA:
THREE MONTHS ENDED JUNE 30, -------------------------------- 1997 1996 --------------- ------------- Operating income $ 20,051 $ 20,418 Depreciation 861 685 Amortization of excess reorganization value 1,613 1,761 -------------- ------------- HOMEBUILDING EBITDA $ 22,525 $ 22,864 ============== ============= % OF HOMEBUILDING REVENUES 8.0% 8.1%
Homebuilding EBITDA in the second quarter of 1997 was $339 or 1.5% lower than in the second quarter of 1996, and as a percentage of revenue decreased from 8.1% to 8.0%. FINANCIAL SERVICES SEGMENT THREE MONTHS ENDED JUNE 30, 1997 AND 1996 The financial services segment generated operating income of $1,208 for the three months ended June 30, 1997 compared to operating income of $1,153 during the same period in 1996. Loan closings were $349,253 and $321,795 during the respective quarters ending June 30, 1997 and 1996, representing an increase of 9%. This result was achieved despite the continued price competition in the mortgage banking market. Mortgage banking fees had a net decrease of $121, representing a 2% decrease when comparing the respective quarters of June 30, 1997 and 1996. Mortgage banking fees in 1997 have been impacted by the higher deferral of loan origination income associated with increased loan inventory. The results have also been impacted by the lower servicing fee income resulting from the decrease in the servicing portfolio, partially offset by the higher gain on sale of servicing rights. A summary of mortgage banking fees for the three month period ended June 30, 1997 and 1996 is noted below:
MORTGAGE BANKING FEES: 1997 1996 ------- ------ Net gain on sale of loans $ 3,415 $ 3,859 Servicing 511 1,348 Title services 1,629 1,612 Gain on sale of servicing rights 1,143 - ------- ------- $ 6,698 $ 6,819 ======= =======
Effective during the second quarter of 1997, the mortgage banking operations sold the remaining portion of its core mortgage servicing portfolio. The sale of the core mortgage servicing portfolio and the ongoing sale of servicing rights on a flow basis are the result of the concentration of the mortgage banking operations on the primary business of providing mortgage finance and related services to NVR and other 22 homebuyers. The total servicing portfolio at June 30, 1997 was $189,616 compared with $1,338,256 at June 30, 1996. HOMEBUILDING SEGMENT SIX MONTHS ENDED JUNE 30, 1997 AND 1996 During the first six months of 1997, homebuilding operations generated revenues of $520,424 compared to revenues of $483,767 in the first six months of 1996. The increase in revenues was primarily due to a 5.4% increase in the number of homes settled from 2,663 in 1996 to 2,809 in 1997, and to a 1.9% increase in the average settlement price from $180.8 in 1996 to $184.3 in 1997. New orders increased by 5.9% to 3,486 for the six months ended June 30, 1997 compared with 3,293 for the six months ended June 30, 1996. The increase in new orders is primarily attributable to the Company's operations outside the Baltimore and Washington markets. Gross profit margins for the first six months of 1997 increased to 13.5% compared to 13.3% for the six months ended June 30, 1996. The increase in gross profit margins was primarily due to decreased costs as a result of the milder winter weather conditions in NVR's principal markets during the first quarter of 1997 as compared to the first quarter of 1996, and to the Company's continued focus on controlling construction costs. SG&A expenses for 1997 increased $3,151 as compared to the same 1996 period, and as a percentage of revenues increased 0.2%. The increase in SG&A was primarily due to increased costs attributable to market expansion undertaken within the last two years, increased revenues as noted above, and to increased selling and marketing expenses caused by more competitive market conditions in certain of the Company's markets. CALCULATION OF HOMEBUILDING EBITDA:
SIX MONTHS ENDED JUNE 30, ------------------------------ 1997 1996 ---------- ---------- Operating income $ 34,371 $ 31,403 Depreciation 1,691 1,403 Amortization of excess reorganization value 3,226 3,522 ----------- ---------- HOMEBUILDING EBITDA $ 39,288 $ 36,328 =========== ========== % OF HOMEBUILDING REVENUES 7.5% 7.5%
Homebuilding EBITDA for the first six months of 1997 was $2,960 or 8.1% higher than the first six months of 1996, but as a percentage of revenues was unchanged at 7.5%. FINANCIAL SERVICES SEGMENT SIX MONTHS ENDED JUNE 30, 1997 AND 1996 The financial services segment generated operating income of $1,775 for the six months ended June 30, 1997 compared to operating income of $1,720 during the same period in 1996. Loan closings were $646,951 and $611,023 during the respective first halves of 1997 and 1996, representing an increase of 6%. Mortgage banking fees had a net decrease of $998, representing an 8% decrease when comparing the respective first halves of 1997 and 1996. Mortgage banking fees in 1997 have been impacted by the higher deferral of loan origination income associated with increased loan inventory. The results have also been impacted by the lower servicing fee income resulting from the decrease in the servicing portfolio, 23 partially offset by the higher gain on sale of servicing rights. A summary of mortgage banking fees is noted below:
MORTGAGE BANKING FEES: 1997 1996 -------- -------- Net gain on sale of loans $ 6,507 $ 7,119 Servicing 1,226 2,807 Title services 2,944 2,892 Gain on sale of servicing rights 1,143 - -------- -------- $ 11,820 $ 12,818 ======== ========
Effective during the second quarter of 1997, the mortgage banking operations sold the remaining portion of its core mortgage servicing portfolio. The sale of the core mortgage servicing portfolio and the ongoing sale of servicing rights on a flow basis are the result of the concentration of the mortgage banking operations on the primary business of providing mortgage finance and related services to NVR and other homebuyers. PENDING ADOPTION OF NEW ACCOUNTING PRINCIPLE In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings per Share. SFAS No. 128 supersedes APB Opinion No. 15, Earnings per Share ("Opinion No. 15"), and requires the calculation and dual presentation of Basic and Diluted earnings per share ("EPS"), replacing the measures of Primary and Fully- diluted EPS as reported under Opinion No. 15. SFAS No. 128 is effective for financial statements issued for periods ending after December 15, 1997; earlier application is not permitted. Accordingly, EPS for the periods presented on the accompanying statements of income are calculated under the guidance of Opinion No. 15. Under SFAS No. 128, EPS data would have been as follows:
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, --------------------------- ------------------------- 1997 1996 1997 1996 ------------- ------------ ------------ ----------- BASIC EPS $ 0.77 $ 0.58 $ 1.21 $ 0.82 DILUTED EPS $ 0.71 $ 0.56 $ 1.12 $ 0.79
LIQUIDITY AND CAPITAL RESOURCES NVR's homebuilding segment generally provides for its working capital cash requirements using cash generated from operations and a short-term credit facility. The homebuilding segment has available a $60,000 Working Capital Revolving Credit facility (the "facility") to fund its working capital needs, under which no amounts were outstanding at June 30, 1997. NVR's financial services segment provides for its mortgage origination and other operating activities using cash generated from operations as well as various short-term credit facilities. NVR Mortgage Finance, Inc. ("NVR Finance") has available a $105,000 mortgage warehouse facility to fund its mortgage origination activities, under which $90,348 was outstanding at June 30, 1997. During March 1997, NVR Finance entered into an annually renewable, uncommitted gestation mortgage-backed security repurchase agreement (the "Repo Facility"). The maximum amount available 24 under the Repo Facility is $45,000, bringing NVR's total available borrowings under all such similar agreements to $145,000. Amounts outstanding under the Repo Facility accrue interest at various rates tied to the federal funds rate, depending on the type of collateral and are collateralized by gestation mortgage-backed securities. The covenants under the Repo Facility are consistent with NVR Finance's mortgage warehouse credit facility. There was $8,675 outstanding under all existing repurchase agreements at June 30, 1997. The Company believes that internally generated cash and borrowings available under credit facilities will be sufficient to satisfy near and long term cash requirements for working capital in both its homebuilding and mortgage banking operations. OTHER ELEMENTS IMPACTING LIQUIDITY During the six months ended June 30, 1997, the Company repurchased approximately 2,087,000 shares of its common stock at an aggregate purchase price of $29,401. The Company may, from time to time, repurchase additional shares of its common stock, pursuant to repurchase authorizations by the Board of Directors and subject to the restrictions contained within the Company's debt agreements. NVR HOMES, INC. CONSOLIDATED - ---------------------------- RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996 NVR Homes, Inc. ("Homes" or the "Company") is a wholly owned subsidiary of NVR, Inc. ("NVR"). Homes conducts all of NVR's homebuilding operations. THREE MONTHS ENDED JUNE 30, 1997 AND 1996 During the second quarter of 1997, Homes generated revenues of $281,437 compared to revenues of $283,532 in the second quarter of 1996. The change in revenues is primarily due to a 4.0% decrease in the number of homes settled from 1,556 in 1996 to 1,494 in 1997, offset by a 3.1% increase in the average settlement price from $181.3 in 1996 to $187.0 in 1997. The decrease in settlements was due to a lower level of unit backlog at March 31, 1997 as compared to the prior March 31. New orders of 2,041 during the second quarter of 1997 were 13.3% higher than the 1,801 new orders generated during the prior 1996 period. The increase in new orders is attributable to the Company's operations outside the Baltimore and Washington markets. Gross profit margins in the second quarter of 1997 increased to 13.7% compared to 13.5% for the second quarter of 1996. The increase in gross profit margins was due in part to decreased costs as a result of the milder winter weather conditions in the Company's principal markets during the first quarter of 1997 as compared to the first quarter of 1996, and to the Company's continued focus on controlling construction costs. SG&A expenses for the second quarter of 1997 increased $6,526 as compared to the same 1996 period, and as a percentage of revenues increased to 8.0% in the 1997 quarter from 5.7% in the 1996 quarter. The increase in SG&A was partially due to increased costs attributable to market expansion undertaken within the last two years, and to increased selling and marketing expenses caused by more competitive market conditions in certain of the Company's markets. Further, beginning on October 1, 1996, Homes incurs royalty expenses for use of the Ryan Homes and NVHomes tradenames based on a percentage of settlement revenues. The tradenames are owned by RVN, Inc., a subsidiary of NVR. During the quarter ended June 30, 1997, Homes incurred royalty expenses totaling $5,362. Backlog units and dollars were 3,143 and $601,276, respectively, at June 30, 1997 compared to 3,101 and $563,948, respectively, at June 30, 1996. The increase in backlog dollars is primarily due to the 25 1.4% increase in backlog units, coupled with a 4% increase in average selling prices during the six months ended June 30, 1997 as compared to the six months ended June 30, 1996. SIX MONTHS ENDED JUNE 30, 1997 AND 1996 During the first six months of 1997, homebuilding operations generated revenues of $520,424 compared to revenues of $483,767 in the first six months of 1996. The increase in revenues was primarily due to a 5.4% increase in the number of homes settled from 2,663 in 1996 to 2,809 in 1997, and to a 1.9% increase in the average settlement price from $180.8 in 1996 to $184.3 in 1997. New orders increased by 5.9% to 3,486 for the six months ended June 30, 1997 compared with 3,293 for the six months ended June 30, 1996. The increase in new orders is primarily attributable to the Company's operations outside the Baltimore and Washington markets. Gross profit margins for the first six months of 1997 increased to 13.5% compared to 13.3% for the six months ended June 30, 1996. The increase in gross profit margins was primarily due to decreased costs as a result of the milder winter weather conditions in the Company's principal markets during the first quarter of 1997 as compared to the first quarter of 1996, and to the Company's continued focus on controlling construction costs. SG&A expenses for 1997 increased $12,912 as compared to the same 1996 period, and as a percentage of revenues increased to 8.3% in 1997 from 6.2% in 1996. The increase in SG&A was partially due to increased costs attributable to market expansion undertaken within the last two years, increased revenues as noted above, and to increased selling and marketing expenses caused by more competitive market conditions in certain of the Company's markets. The increase is also due to royalty expenses incurred for use of the Ryan Homes and NVHomes tradenames as explained above. During the six months ended June 30, 1997, Homes incurred royalty expenses totaling $9,910. LIQUIDITY AND CAPITAL RESOURCES Homes generally provides for its working capital cash requirements using cash generated from operations and a short-term credit facility. The Company has available a $60,000 Working Capital Revolving Credit agreement to fund its working capital needs, under which no amounts were outstanding at June 30, 1997. The Company believes that internally generated cash and borrowings available under credit facilities will be sufficient to satisfy near and long term cash requirements for working capital in its homebuilding operations. NVR FINANCIAL SERVICES, INC. CONSOLIDATED - ----------------------------------------- RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996 THREE MONTHS ENDED JUNE 30, 1997 AND 1996 NVR Financial Services, Inc. ("NVRFS" or the "Company") is a wholly owned subsidiary of NVR, Inc. ("NVR"). NVRFS, through its subsidiaries, conducts all of NVR's mortgage banking operations. NVRFS generated operating income of $1,124 for the three months ended June 30, 1997 compared to operating income of $1,064 during the same period in 1996. Loan closings were $349,253 and 26 $321,795 during the respective quarters ending June 30, 1997 and 1996, representing an increase of 9%. This result was achieved despite the continued price competition in the mortgage banking market. Mortgage banking fees had a net decrease of $121, representing a 2% decrease when comparing the respective quarters of June 30, 1997 and 1996. Mortgage banking fees in 1997 have been impacted by the higher deferral of loan origination income associated with increased loan inventory. The results have also been impacted by the lower servicing fee income resulting from the decrease in the servicing portfolio, partially offset by the higher gain on sale of servicing rights. A summary of mortgage banking fees for the three month period ended June 30, 1997 and 1996 is noted below:
MORTGAGE BANKING FEES: 1997 1996 ------- ------- Net gain on sale of loans $ 3,415 $ 3,859 Servicing 511 1,348 Title services 1,629 1,612 Gain on sale of servicing rights 1,143 - ------- ------- $ 6,698 $ 6,819 ======= =======
Also affecting operating income was a reduction in the expenses relating to the amortization of mortgage servicing rights due to the reduction in the servicing portfolio as discussed below, and an increase in interest expense that was related to the increased loan closing activity. Effective during the second quarter of 1997, NVRFS sold the remaining portion of its core mortgage servicing portfolio. The sale of the core mortgage servicing portfolio and the ongoing sale of servicing rights on a flow basis are the result of the concentration of the mortgage banking operations on the primary business of providing mortgage finance and related services to NVR and other homebuyers. The total servicing portfolio at June 30, 1997 was $189,616 compared with $1,338,256 at June 30, 1996. SIX MONTHS ENDED JUNE 30, 1997 AND 1996 NVRFS generated operating income of $1,363 for the six months ended June 30, 1997 compared to operating income of $1,496 during the same period in 1996. Loan closings were $646,951 and $611,023 during the respective first halves of 1997 and 1996, representing an increase of 6%. Mortgage banking fees had a net decrease of $998, representing an 8% decrease when comparing the respective first halves of 1997 and 1996. Mortgage banking fees in 1997 have been impacted by the higher deferral of loan origination income associated with increased loan inventory. The results have also been impacted by the lower servicing fee income resulting from the decrease in the servicing portfolio, partially offset by the higher gain on sale of servicing rights. A summary of mortgage banking fees is noted below:
MORTGAGE BANKING FEES: 1997 1996 -------- -------- Net gain on sale of loans $ 6,507 $ 7,119 Servicing 1,226 2,807 Title services 2,944 2,892 Gain on sale of servicing rights 1,143 - -------- -------- $ 11,820 $ 12,818 ======== ========
General and administrative expenses in the current period decreased $395 as compared to the prior period quarter. The decrease was attributable to the reduction in the servicing portfolio in the third quarter of 1996, resulting in lower servicing administrative expenses in the current period, and to improvement in the efficiency of the mortgage banking operations. Further, expenses related to the amortization of 27 mortgage servicing rights decreased $769 as compared to the prior period also due to the servicing portfolio reduction. Effective during the second quarter of 1997, NVRFS sold the remaining portion of its core mortgage servicing portfolio. The sale of the core mortgage servicing portfolio and the ongoing sale of servicing rights on a flow basis are the result of the concentration of the mortgage banking operations on the primary business of providing mortgage finance and related services to NVR and other homebuyers. LIQUIDITY AND CAPITAL RESOURCES NVRFS provides for its mortgage origination and other operating activities using cash generated from operations as well as various short-term credit facilities. NVR Mortgage Finance, Inc. ("NVR Finance") has available a $105,000 mortgage warehouse facility to fund its mortgage origination activities, under which $90,348 was outstanding at June 30, 1997. During March 1997, NVR Finance entered into an annually renewable, uncommitted gestation mortgage-backed security repurchase agreement (the "Repo Facility"). The maximum amount available under the Repo Facility is $45,000, bringing NVRFS's total available borrowings under all such similar agreements to $145,000. Amounts outstanding under the Repo Facility accrue interest at various rates tied to the federal funds rate, depending on the type of collateral and are collateralized by gestation mortgage-backed securities. The covenants under the Repo Facility are consistent with NVR Finance's mortgage warehouse credit facility. There was $8,675 outstanding under all existing repurchase agreements at June 30, 1997. The Company believes that internally generated cash and borrowings available under credit facilities will be sufficient to satisfy near and long term cash requirements for working capital in its mortgage banking operations. RVN, INC. - --------- RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 1997 AND 1996 On October 1, 1996, NVR, Inc. ("NVR") capitalized RVN, Inc. ("RVN"), a Delaware holding company, with $65 in cash and the Ryan Homes and NVHomes tradenames (the "Tradenames"). Under a royalty agreement entered into on October 1, 1996 with NVR Homes, Inc. ("Homes"), NVR's homebuilding subsidiary, RVN earns royalty fees based on a percentage of settlement revenue for allowing Homes to use the Tradenames to market homes. RVN earns 100% of its revenue from Homes. RVN earned royalty revenues of $5,362 and $9,910 during the quarter ended June 30, 1997 and the six months ended June 30, 1997, respectively, and has no significant other income or general and administrative expenses. 28 LIQUIDITY AND CAPITAL RESOURCES RVN provides for its working capital cash requirements using cash generated solely from operations. As shown in RVN's statement of cash flows for the period ended June 30, 1997, cash generated from operations is primarily distributed to NVR. Insofar as Homes' ability to make royalty payments is not impaired, the Company believes that internally generated cash will be sufficient to satisfy its near and long term cash requirements. PART II ------- ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------- NVR held its Annual Meeting of Shareholders on May 6, 1997. Two matters were voted upon at the Annual Meeting:
VOTES WITHHELD AUTHORITY MATTER FOR TO VOTE ---------------------------------------------- ---------- -------------------------- 1. Election of three directors to serve three year terms: C. Scott Bartlett, Jr. 11,917,412 26,049 William A. Moran 11,881,648 61,813 Richard H. Norair, Sr. 11,916,948 26,513 VOTES VOTES NOT FOR AGAINST ABSTENTIONS VOTED ---------- -------- ----------- ------ 2. Ratification of appointment of KPMG Peat Marwick LLP as independent auditors for NVR 11,918,207 4,574 20,680 457,983
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ------- a. 11. Computation of Earnings per Share. b. 27. Financial Data Schedule. c. The Company did not file any reports on Form 8-K during the quarter ended June 30, 1997. 29 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION PAGE - ------- ------------- ---- 11 Computation of Earnings per Share 32 27 Financial Data Schedule 33 30 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. February 24, 1998 NVR, Inc. By: /s/ Paul C. Saville ------------------- Paul C. Saville Senior Vice President Finance, Chief Financial Officer, and Treasurer 31
EX-11 2 EXHIBIT 11 EXHIBIT 11 NVR, INC. Computation of Earnings Per Share (amounts in thousands, except per share amounts)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, -------------------------- ------------------------- 1997 1996 1997 1996 ---------- ---------- ---------- ---------- 1. Net income $ 9,043 $ 8,770 $ 14,806 $ 12,510 ========== ========== ========== ========== 2. Weighted average number of shares outstanding 11,796 15,198 12,239 15,240 3. Shares issuable upon exercise of dilutive options, warrants and subscriptions outstanding during period, based on average market price 904 1,176 913 908 ---------- ---------- ---------- ---------- 4. Shares issuable upon exercise of dilutive options, warrants and subscriptions outstanding during period, based on higher of average or end of period market price 1,030 1,176 1,089 908 ---------- ---------- ---------- ---------- 5. Weighted average number of shares and share equivalents outstanding (2 + 3) 12,700 16,374 13,152 16,148 ========== ========== ========== ========== 6. Weighted average number of shares outstanding assuming full dilution (2 + 4) 12,826 16,374 13,328 16,148 ========== ========== ========== ========== 7. Earnings per share and share equivalents (1/5) $ 0.71 $ 0.54 $ 1.13 $ 0.77 ========== ========== ========== ========== 8. Earnings per share, assuming full dilution (1/6) $ 0.71 $ 0.54 $ 1.11 $ 0.77 ========== ========== ========== ==========
32
EX-27 3 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NVR INC.'S CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN FORM 10-Q FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000906163 NVR, INC. 1,000 U.S. DOLLARS 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 1 45,723 0 8,470 0 194,747 0 17,897 0 522,685 0 120,000 0 0 156,043 (18,220) 522,685 520,424 535,535 450,278 494,360 3,770 0 9,580 27,825 13,019 14,806 0 0 0 14,806 1.13 1.11 Item represents the non-cash amortization of excess reorganization value.
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