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NVR, Inc. Announces a 31% Increase in Earnings Per Share

RESTON, Va., July 20 /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 second quarter ended June 30, 2006 increased 31% and net income increased 14% when compared to the 2005 second quarter. Net income for the 2006 second quarter was $190,352,000, $28.08 per diluted share, compared to net income of $167,649,000, $21.42 per diluted share, for the same period of 2005. Consolidated revenues for the second quarter of 2006 totaled $1,748,928,000, a 37% increase from $1,277,689,000 for the comparable 2005 quarter.

                                 Homebuilding

New orders in the second quarter of 2006 decreased 13% to 4,204 units, when compared to 4,829 units in the second quarter of 2005. The cancellation rate in the quarter ended June 30, 2006 was 13% compared to 8% in the second quarter of 2005 and 17% in the first quarter of 2006. New orders in the Washington and Baltimore markets declined 27% and 24%, respectively, in the second quarter when compared with the year earlier quarter. The cancellation rate in Washington was 21% in the quarter, an improvement from 26% in the first quarter of 2006, but higher than the 8% cancellation rate in the second quarter of 2005. The cancellation rate in Baltimore was 14% in the quarter compared to 17% in the first quarter of 2006 and 8% in the second quarter of 2005. The average sales price of total new orders in the second quarter of 2006 declined 6% from the second quarter of 2005. The decline is the result of a shift of new orders into lower priced markets in the North and South regions and a 13% decline in average order price in the Washington market as compared to 2005.

Settlements increased in the second quarter of 2006 to 4,297 units, 26% more than the same period of 2005. Homebuilding revenues for the three months ended June 30, 2006 totaled $1,722,797,000, 37% higher than the year earlier period. Income before tax from the homebuilding segment totaled $295,592,000, an increase of 12% when compared to the second quarter of the previous year. Gross profit margins decreased to 24.3% in the 2006 second quarter compared to 27.8% for the same period in 2005. Gross margins were negatively impacted by land deposit write-downs of approximately $26,000,000, primarily in the Washington market. These write-downs lowered gross margins by 151 basis points and reduced diluted earnings per share by $2.34 for the quarter. The Company's backlog of homes sold but not settled at the end of the 2006 quarter decreased on a unit basis by 7% to 8,864 units and 6% on a dollar basis to $3,798,214,000 when compared to the same period last year.

For the six months ended June 30, 2006, consolidated revenues were $2,953,583,000, 32% higher than the $2,231,121,000 reported for the same period of 2005. Net income for the six months ended June 30, 2006 was $322,912,000, an increase of 13% when compared to the six months ended June 30, 2005. Earnings per diluted share for the six months ended June 30, 2006 was $47.54, an increase of 33% from $35.68 per diluted share for the comparable period of 2005.

                               Mortgage Banking

Mortgage closed loan production of $1,123,461,000 for the three months ended June 30, 2006 was 31% higher than the same period last year. Operating income contributed by the mortgage banking operations during the second quarter of 2006 increased 29% to $17,486,000, when compared to $13,510,000 reported for the same period of 2005.

                                   Outlook

The Company expects gross margins in the second half of 2006 to continue to be negatively impacted by pricing pressure in many of its markets. The Company updated its full year 2006 guidance on net income to approximately $690,000,000. Full year net income expectations include an after tax expense of approximately $36,000,000 for the implementation of SFAS 123R, Share Based Payment.

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, 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, 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.



                                  NVR, Inc.
                      Consolidated Statements of Income
                    (in thousands, except per share data)
                                 (Unaudited)

                                 Three Months Ended       Six Months Ended
                                     June 30,                 June 30,
                                 2006        2005         2006       2005

    Homebuilding:
       Revenues               $1,722,797  $1,257,248  $2,906,539  $2,196,500
       Other income                2,634         874       5,010       2,933
       Cost of sales          (1,304,183)   (907,284) (2,165,222) (1,586,831)
       Selling, general and
        administrative          (119,551)    (84,235)   (233,557)   (156,650)
            Operating income     301,697     266,603     512,770     455,952
       Interest expense           (6,105)     (3,006)    (11,632)     (5,930)
            Homebuilding income  295,592     263,597     501,138     450,022

    Mortgage Banking:
       Mortgage banking fees      26,131      20,441      47,044      34,621
       Interest income             1,791         868       3,250       1,784
       Other income                  383         372         614         587
       General and administrative (9,852)     (7,893)    (19,020)    (14,529)
       Interest expense             (967)       (278)     (1,921)       (453)
            Mortgage banking
             income               17,486      13,510      29,967      22,010

    Income before taxes          313,078     277,107     531,105     472,032

            Income tax expense  (122,726)   (109,458)   (208,193)   (186,453)

    Net income                  $190,352    $167,649    $322,912    $285,579


    Basic earnings per share      $33.27      $26.31      $57.06      $43.84

    Diluted earnings per share    $28.08      $21.42      $47.54      $35.68

    Basic average shares
     outstanding                   5,722       6,372       5,659       6,515

    Diluted average shares
     outstanding                   6,779       7,825       6,792       8,004



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

                                                      June 30,    December 31,
                                                       2006          2005
                                                    (unaudited)
    ASSETS

    Homebuilding:
          Cash and cash equivalents                   $172,845      $170,090
          Receivables                                   19,172        40,562
          Inventory:
            Lots and housing units, covered under
             sales agreements with customers           947,688       723,657
            Unsold lots and housing units               61,619        60,419
            Manufacturing materials and other            8,722         9,899
                                                     1,018,029       793,975

          Contract land deposits                       575,637       549,160
          Assets not owned, consolidated
           per FIN 46R                                 262,184       275,306
          Property, plant and equipment, net            34,738        31,096
          Reorganization value in excess of amounts
           allocable to identifiable assets, net        41,580        41,580
          Goodwill and other indefinite and definite
           life intangibles, net                        11,998        12,061
          Other assets                                 176,566       142,851
                                                     2,312,749     2,056,681

    Mortgage Banking:
          Cash and cash equivalents                      3,123         7,436
          Mortgage loans held for sale, net            200,251       193,932
          Property and equipment, net                    1,366         1,003
          Reorganization value in excess of amounts
           allocable to identifiable assets, net         7,347         7,347
          Other assets                                   2,990         3,189
                                                       215,077       212,907

          Total assets                              $2,527,826    $2,269,588


    LIABILITIES AND SHAREHOLDERS' EQUITY

    Homebuilding:
          Accounts payable                            $319,281      $262,086
          Accrued expenses and other liabilities       374,668       369,176
          Liabilities related to assets not owned,
           consolidated per FIN 46R                    203,107       215,284
          Customer deposits                            246,967       256,837
          Other term debt                                3,200         3,325
          Notes payable                                      -       103,000
          Senior notes                                 200,000       200,000
                                                     1,347,223     1,409,708
    Mortgage Banking:
          Accounts payable and other liabilities        12,208        25,902
          Notes payable                                168,188       156,816
                                                       180,396       182,718

          Total liabilities                          1,527,619     1,592,426

          Commitments and contingencies

          Shareholders' equity:
          Common stock, $0.01 par value; 60,000,000
           shares authorized; 20,592,640 shares issued
           for both June 30, 2006 and
           December 31, 2005                               206           206
          Additional paid-in capital                   546,709       473,886
          Deferred compensation trust -- 548,414 and
           547,697 shares of NVR, Inc. common stock
           for June 30, 2006 and December 31, 2005,
           respectively                                (79,783)      (76,303)
          Deferred compensation liability               79,783        76,303
          Retained earnings                          2,931,540     2,608,628
          Less treasury stock at cost -- 14,841,701
           and 14,964,482 shares for June 30, 2006
           and December 31, 2005, respectively      (2,478,248)   (2,405,558)
          Total shareholders' equity                 1,000,207       677,162
          Total liabilities and shareholders'
           equity                                   $2,527,826    $2,269,588



                                  NVR, Inc.
                              Operating Activity
                                 (unaudited)
                            (dollars in thousands)

                                    Three Months Ended     Six Months Ended
                                         June 30,              June 30,
                                     2006        2005       2006        2005

    Homebuilding data:
        New orders (units)
            Washington (1)            981       1,348      1,786       2,259
            Baltimore (2)             460         603        918       1,030
            North (3)               1,779       1,942      3,370       3,255
            South (4)                 984         936      1,763       1,597
              Total                 4,204       4,829      7,837       8,141

        Average new order price    $384.7      $408.1     $386.0      $405.4

        Settlements (units)
            Washington (1)          1,074         977      1,819       1,606
            Baltimore (2)             566         317      1,031         658
            North (3)               1,801       1,379      2,939       2,398
            South (4)                 856         743      1,494       1,369
              Total                 4,297       3,416      7,283       6,031

        Average settlement price   $400.3      $366.8     $398.5      $363.2

        Backlog (units)
            Washington (1)                                 2,716       3,206
            Baltimore (2)                                    960       1,188
            North (3)                                      3,498       3,606
            South (4)                                      1,690       1,554
              Total                                        8,864       9,554

        Average backlog price                             $428.5      $421.0

        Community count (average)     618         504        598         493
        Lots controlled at end of
         period                                          104,000      97,000

    Mortgage banking data:
        Loan closings          $1,123,461    $857,821 $1,860,243  $1,472,313
        Capture rate                  87%         88%        86%         88%

    Common stock information:
        Shares outstanding at
         end of period                                 5,750,939   6,345,446
        Weighted average basic
         shares outstanding     5,722,000   6,372,000  5,659,000   6,515,000
        Weighted average diluted
         shares outstanding     6,779,000   7,825,000  6,792,000   8,004,000
        Number of shares
         repurchased                    -     190,700    161,856     506,150
        Aggregate cost of
         shares repurchased            $-    $146,910   $120,817    $395,316

         (1)  Washington, D.C. metropolitan area and adjacent counties in
              Maryland, Virginia and West Virginia
         (2)  Baltimore, MD metropolitan area and adjacent counties in
              Pennsylvania
         (3)  Delaware, Maryland Eastern Shore, New Jersey, New York, Ohio,
              Pennsylvania, Michigan, and Kentucky
         (4)  North Carolina, South Carolina, Tennessee and Richmond, VA
SOURCE  NVR, Inc.
    -0-                             07/20/2006
    /CONTACT:  Dan Malzahn of NVR, Inc., +1-703-956-4204/
    /Web site:  http://www.nvrinc.com /
    (NVR)

CO:  NVR, Inc.
ST:  Virginia
IN:  CST FIN
SU:  ERN ERP

AR-JV
-- DCTH004 --
7054 07/20/2006 08:58 EDT http://www.prnewswire.com