EX-99.1 2 v090636_ex99-1.htm
Ex - 99.1
 
NVR, INC. ANNOUNCES THIRD QUARTER RESULTS

FOR IMMEDIATE RELEASE 
Contact: Dan Malzahn
Office:    (703) 956-4204
 
RESTON, Va., Oct. 19 /PRNewswire-FirstCall/ -- NVR, Inc. (Amex: NVR), one of the nation's largest homebuilding and mortgage banking companies, announced that diluted earnings per share for its third quarter ended September 30, 2007 decreased 22% and net income decreased 30% when compared to the 2006 third quarter. Net income for the 2007 third quarter was $91,113,000, $15.26 per diluted share, compared to net income of $129,333,000, $19.63 per diluted share, for the same period of 2006. The third quarter results were negatively impacted by land deposit impairments of approximately $96,500,000. These impairments lowered gross margins by 760 basis points and reduced diluted EPS by $9.88. Consolidated revenues for the third quarter of 2007 totaled $1,292,088,000, a 17% decrease from $1,553,411,000 for the comparable 2006 quarter. Due to the continued earnings decline resulting from the deterioration in market conditions and our expectation that market conditions will not improve in the near term, the Company determined that it is improbable that it will achieve the performance metric related to approximately 411,000 outstanding stock options. This determination resulted in the reversal of approximately $31,500,000 ($3.05 per diluted share) of pre-tax stock-based compensation costs recognized prior to the 2007 third quarter.
 
For the nine months ended September 30, 2007, consolidated revenues were $3,701,945,000, 18% lower than the $4,506,994,000 reported for the same period of 2006. Net income for the nine months ended September 30, 2007 was $266,681,000, a decrease of 41% when compared to the nine months ended September 30, 2006. Earnings per diluted share for the nine months ended September 30, 2007 was $42.25, a decrease of 37% from $67.23 per diluted share for the comparable period of 2006.
 
Homebuilding
New orders in the third quarter of 2007 increased 12% to 2,660 units, when compared to 2,378 units in the third quarter of 2006. The Company attributed this year over year new order growth, in part, to a weak 2006 third quarter. New order activity slowed significantly in August and September due to tightening in the credit markets. The average new order price in the third quarter of 2007 decreased 9% to $330,100 when compared to $362,500 in the third quarter of 2006. The cancellation rate in the quarter ended September 30, 2007 was 27% compared to 27% in the third quarter of 2006 and 16% in the second quarter of 2007. The Washington, D.C. cancellation rate in the quarter was 44% compared to 39% in the third quarter of 2006 and 21% in the second quarter of 2007.
 
Settlements decreased in the third quarter of 2007 to 3,476 units, 10% less than the same period of 2006. Homebuilding revenues for the three months ended September 30, 2007 totaled $1,270,471,000, 17% lower than the year earlier period. Income before tax from the homebuilding segment totaled $129,000,000 in the 2007 third quarter, a decrease of 34% when compared to the third quarter of the previous year. Gross profit margins decreased to 14.4% in the 2007 third quarter compared to 19.0% for the same period in 2006. The decline in gross profit margins is due to the previously mentioned land deposit impairments and continued pricing pressures. The Company's backlog of homes sold but not settled at the end of the 2007 quarter decreased on a unit basis by 4% to 7,071 units and 14% on a dollar basis to $2,695,591,000 when compared to the same period last year.
 
 
Mortgage Banking
Mortgage closed loan production of $793,749,000 for the three months ended September 30, 2007 was 20% lower than the same period last year. Operating income for the mortgage banking operations during the third quarter of 2007 decreased 3% to $16,814,000, when compared to $17,291,000 reported for the same period of 2006.
 
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. 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 variations thereof or comparable terminology, or by discussion of strategies, each of which involves risks and uncertainties. All statements other than those of historical facts included herein, including those regarding market trends, NVR's financial position, business strategy, the outcome of pending litigation, projected plans and objectives of management for future operations, are forward-looking statements. 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, 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, 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 moratoria, governmental regulation, the ability of NVR to integrate any acquired business, fluctuation and volatility of stock and other financial markets and other factors over which NVR has little or no control. The Company has no obligation to update such forward-looking statements.
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NVR, Inc.
Consolidated Statements of Income
(in thousands, except per share data)
(Unaudited)

   
Three Months Ended September 30,
  
Nine Months Ended September 30,
  
   
2007
 
2006
 
2007
 
2006
  
                   
Homebuilding:
                  
  Revenues
  
$
1,270,471
  
$
1,528,964
  
$
3,642,721
  
$
4,435,503
  
  Other income
    
4,209
    
3,238
    
16,425
    
8,248
  
  Cost of sales
    
(1,087,399
)
  
(1,238,671
)
  
(3,002,746
)
  
(3,403,893
)
  Selling, general and administrative
    
(54,906
)
  
(95,574
)
  
(253,510
)
  
(329,131
)
    Operating income
    
132,375
    
197,957
    
402,890
    
710,727
  
  Interest expense
    
(3,375
)
  
(3,141
)
  
(9,995
)
  
(14,773
)
    Homebuilding income
    
129,000
    
194,816
    
392,895
    
695,954
  
                           
Mortgage Banking:
                          
  Mortgage banking fees
    
21,617
    
24,447
    
59,224
    
71,491
  
  Interest income
    
1,078
    
1,986
    
3,415
    
5,236
  
  Other income
    
320
    
403
    
780
    
1,017
  
  General and administrative
    
(6,001
)
  
(8,847
)
  
(24,278
)
  
(27,867
)
  Interest expense
    
(200
)
  
(698
)
  
(513
)
  
(2,619
)
    Mortgage banking income
    
16,814
    
17,291
    
38,628
    
47,258
  
                           
Income before taxes
    
145,814
    
212,107
    
431,523
    
743,212
  
                           
    Income tax expense
    
(54,701
)
  
(82,774
)
  
(164,842
)
  
(290,967
)
                           
Net income
  
$
91,113
  
$
129,333
  
$
266,681
  
$
452,245
  
                           
                           
Basic earnings per share
  
$
17.25
  
$
22.59
  
$
48.35
  
$
79.60
  
                           
Diluted earnings per share
  
$
15.26
  
$
19.63
  
$
42.25
  
$
67.23
  
                           
Basic average shares outstanding
    
5,283
    
5,725
    
5,516
    
5,682
  
                           
Diluted average shares outstanding
    
5,969
    
6,588
    
6,312
    
6,727
  

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NVR, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)

   
September 30, 2007
  
December 31, 2006
  
   
(unaudited)
      
           
ASSETS
          
           
Homebuilding:
          
    Cash and cash equivalents
  
$
314,364
  
$
551,738
  
    Receivables
    
17,666
    
12,213
  
    Inventory:
              
      Lots and housing units, covered under
              
       sales agreements with customers
    
878,541
    
667,100
  
      Unsold lots and housing units
    
93,940
    
58,248
  
      Manufacturing materials and other
    
6,916
    
8,268
  
     
979,397
    
733,616
  
               
    Contract land deposits
    
237,868
    
402,170
  
    Assets not owned, consolidated
             
      per FIN 46R
    
203,782
    
276,419
  
    Property, plant and equipment, net
    
34,582
    
40,430
  
    Reorganization value in excess of amounts
              
      allocable to identifiable assets, net
    
41,580
    
41,580
  
    Goodwill and other indefinite and definite
              
      life intangibles, net
    
11,816
    
11,936
  
    Other assets
    
252,617
    
207,468
  
               
     
2,093,672
    
2,277,570
  
               
Mortgage Banking:
              
    Cash and cash equivalents
    
2,827
    
4,381
  
    Mortgage loans held for sale, net
    
137,749
    
178,444
  
    Property and equipment, net
    
941
    
1,168
  
    Reorganization value in excess of amounts
              
      allocable to identifiable assets, net
    
7,347
    
7,347
  
    Other assets
    
4,138
    
4,898
  
               
     
153,002
    
196,238
  
               
    Total assets
  
$
2,246,674
  
$
2,473,808
  

 (Continued)
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NVR, Inc.
Consolidated Balance Sheets (Continued)
(in thousands, except share and per share data)

   
September 30, 2007
  
December 31, 2006
  
   
(unaudited)
      
           
LIABILITIES AND SHAREHOLDERS’ EQUITY
          
           
Homebuilding:
          
    Accounts payable
  
$
266,362
  
$
273,936
  
    Accrued expenses and other liabilities
    
244,534
    
265,223
  
    Liabilities related to assets not owned,
              
      consolidated per FIN 46R
    
179,487
    
244,805
  
    Customer deposits
    
174,324
    
165,354
  
    Other term debt
    
2,888
    
3,080
  
    Senior notes
    
200,000
    
200,000
  
     
1,067,595
    
1,152,398
  
Mortgage Banking:
              
    Accounts payable and other liabilities
    
15,354
    
15,784
  
    Notes payable
    
111,647
    
153,552
  
     
127,001
    
169,336
  
               
    Total liabilities
    
1,194,596
    
1,321,734
  
               
    Commitments and contingencies
              
               
    Shareholders’ equity:
              
    Common stock, $0.01 par value; 60,000,000 shares
              
      authorized; 20,592,640 shares issued for both
              
      September 30, 2007 and December 31, 2006
    
206
    
206
  
    Additional paid-in capital
    
653,996
    
585,438
  
    Deferred compensation trust - 516,044 and
             
      547,911 shares of NVR, Inc. common stock for
              
      September 30, 2007 and December 31, 2006,
             
      respectively
    
(75,616
)
  
(80,491
)
    Deferred compensation liability
    
75,616
    
80,491
  
    Retained earnings
    
3,462,721
    
3,196,040
  
    Less treasury stock at cost - 15,457,040 and
             
      15,075,113 shares for September 30, 2007 and
             
    December 31, 2006, respectively
    
(3,064,845
)
  
(2,629,610
)
    Total shareholders’ equity
    
1,052,078
    
1,152,074
  
    Total liabilities and shareholders’
             
      equity
  
$
2,246,674
  
$
2,473,808
  
 
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NVR, Inc.
Operating Activity
(unaudited)
(dollars in thousands)

   
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
  
   
2007
  
2006
  
2007
  
2006
  
                   
Homebuilding data:
                  
  New orders (units)
                  
    Mid Atlantic (1)
    
1,061
    
1,128
    
4,785
    
4,740
  
    North East (2)
    
260
    
264
    
1,022
    
1,119
  
    Mid East (3)
    
667
    
482
    
2,620
    
2,489
  
    South East (4)
    
672
    
504
    
1,895
    
1,867
  
      Total
    
2,660
    
2,378
    
10,322
    
10,215
  
                           
  Average new order price
  
$
330.1
  
$
362.5
  
$
358.4
  
$
380.6
  
                           
  Settlements (units)
                          
    Mid Atlantic (1)
    
1,656
    
1,791
    
4,728
    
5,511
  
    North East (2)
    
345
    
441
    
918
    
1,197
  
    Mid East (3)
    
936
    
966
    
2,347
    
2,606
  
    South East (4)
    
539
    
656
    
1,646
    
1,823
  
      Total
    
3,476
    
3,854
    
9,639
    
11,137
  
                           
  Average settlement price
  
$
365.1
  
$
396.3
  
$
377.5
  
$
397.7
  
                           
  Backlog (units)
                          
    Mid Atlantic (1)
                
3,722
    
4,203
  
    North East (2)
                
644
    
706
  
    Mid East (3)
                
1,547
    
1,484
  
    South East (4)
                
1,158
    
995
  
      Total
                
7,071
    
7,388
  
                           
  Average backlog price
              
$
381.2
  
$
424.0
  
                           
  Community count (average)
    
506
    
609
    
517
    
602
  
  Lots controlled at end of period
                
79,700
    
98,000
  
                           
Mortgage banking data:
                          
  Loan closings
  
$
793,749
  
$
986,677
  
$
2,358,218
  
$
2,846,920
  
  Capture rate
    
84
%
  
86
%
  
85
%
  
86
%
                           
Common stock information:
                          
  Shares outstanding at end of period
                
5,135,600
    
5,644,915
  
  Weighted average basic shares outstanding
    
5,283,000
    
5,725,000
    
5,516,000
    
5,682,000
  
  Weighted average diluted shares outstanding
   
5,969,000
    
6,588,000
    
6,312,000
    
6,727,000
  
  Number of shares repurchased
    
479,088
    
127,085
    
784,788
    
288,941
  
  Aggregate cost of shares repurchased
  
$
297,859
  
$
62,469
  
$
507,472
  
$
183,286
  
(1)  
Virginia, West Virginia, Maryland, and Delaware 
(2)  
New Jersey and eastern Pennsylvania
(3)  
Kentucky, Michigan, New York, Ohio and western Pennsylvania
(4)  
North Carolina, South Carolina and Tennessee
 
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