UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 April 16, 1997, there were 11,850,654 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-Q
INDEX
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Page
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PART I FINANCIAL INFORMATION
- ------
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets at March 31, 1997
(unaudited) and December 31, 1996................................ 3
Consolidated Statements of Income for the Three
Months Ended March 31, 1997 (unaudited) and
March 31, 1996 (unaudited)....................................... 5
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1997 (unaudited) and
March 31, 1996 (unaudited)....................................... 6
Notes to Consolidated Financial Statements....................... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................. 9
PART II OTHER INFORMATION
- -------
Item 6. Exhibits and Reports on Form 8-K................................. 11
Signature........................................................ 12
2
PART I
------
Item 1.
- -------
NVR, Inc.
Consolidated Balance Sheets
(dollars in thousands, except share data)
March 31, 1997 December 31, 1996
-------------- -----------------
ASSETS (unaudited)
Homebuilding:
Cash and cash equivalents $ 53,299 $ 71,533
Receivables 5,902 2,927
Inventory:
Lots and housing units, covered under
sales agreements with customers 127,866 126,456
Unsold lots and housing units 38,013 37,940
Manufacturing materials and other 4,848 7,297
-------- --------
170,727 171,693
Property, plant and equipment, net 17,734 17,916
Reorganization value in excess of amounts
allocable to identifiable assets, net 74,205 75,818
Contract land deposits 36,310 36,383
Other assets 21,131 21,008
-------- --------
379,308 397,278
-------- --------
Financial Services:
Cash and cash equivalents 3,960 3,247
Mortgage loans held for sale, net 91,510 75,735
Mortgage servicing rights, net 6,266 6,309
Property and equipment, net 738 917
Reorganization value in excess of amounts
allocable to identifiable assets, net 12,516 12,788
Other assets 4,535 4,891
-------- --------
119,525 103,887
-------- --------
Total assets $498,833 $501,165
-------- --------
See notes to consolidated financial statements.
3
NVR, Inc.
Consolidated Balance Sheets
(dollars in thousands, except share data)
March 31, 1997 December 31, 1996
-------------- -----------------
(unaudited)
LIABILITIES AND SHAREHOLDERS'
EQUITY
Homebuilding:
Accounts payable $ 50,346 $ 54,894
Accrued expenses and other liabilities 85,528 85,260
Notes payable 85 86
Other term debt 14,036 14,043
Senior notes 120,000 120,000
-------- --------
269,995 274,283
-------- --------
Financial Services:
Accounts payable and other liabilities 7,211 7,409
Notes payable 86,955 67,463
-------- --------
94,166 74,872
-------- --------
Total liabilities 364,161 349,155
-------- --------
Commitments and contingencies
Shareholders' equity:
Common stock, $0.01 par value; 60,000,000
shares authorized; 19,934,130 and 19,881,515
shares issued as of March 31, 1997 and
December 31, 1996, respectively 199 199
Paid-in-capital 155,810 157,842
Retained earnings 52,861 47,098
Less treasury stock at cost- 7,812,810 and
6,307,108 at March 31, 1997 and
December 31, 1996, respectively (74,198) (53,129)
-------- --------
Total shareholders' equity 134,672 152,010
-------- --------
Total liabilities and shareholders'
equity $498,833 $501,165
-------- --------
See notes to consolidated financial statements.
4
NVR, Inc.
Consolidated Statements of Income
(dollars in thousands, except per share data)
(unaudited)
Three Months Ended Three Months Ended
March 31, 1997 March 31,1996
------------------- -------------------
Homebuilding:
Revenues $ 238,987 $ 200,235
Other income 509 405
Cost of sales (207,469) (173,845)
Selling, general and administrative (16,094) (14,049)
Amortization of reorganization value
in excess of amounts allocable to
identifiable assets (1,613) (1,761)
--------- ---------
Operating income 14,320 10,985
Interest expense (4,057) (4,160)
--------- ---------
Homebuilding income 10,263 6,825
--------- ---------
Financial Services:
Mortgage banking fees 5,122 5,999
Interest income 1,083 1,163
Other income 53 3
General and administrative (5,029) (5,822)
Amortization of reorganization value
in excess of amounts allocable to
identifiable assets (272) (272)
Interest expense (390) (504)
--------- ---------
Operating income 567 567
--------- ---------
Total segment income 10,830 7,392
Income tax expense (5,067) (3,652)
--------- ---------
Net income $ 5,763 $ 3,740
--------- ---------
Earnings per share $ 0.42 $ 0.24
--------- ---------
See notes to consolidated financial statements.
5
NVR, Inc.
Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
------------------ ------------------
Cash flows from operating activities:
Net income $ 5,763 $ 3,740
Adjustments to reconcile net income to
net cash used by operating activities:
Depreciation and amortization 3,286 3,748
Interest accrued and added to bond principal - 346
Mortgage loans closed (297,698) (289,228)
Proceeds from sales of mortgage loans 282,630 302,564
Gain on sale of loans (3,092) (3,260)
Net change in assets and liabilities:
Decrease/(increase) in inventories 966 (19,336)
Decrease/(increase) in receivables (2,663) 500
Decrease in accounts payable and accrued expenses (4,634) (5,278)
Other, net - (1,650)
--------- ---------
Net cash used by operating activities (15,442) (7,854)
--------- ---------
Cash flows from investing activities:
Proceeds from sales of mortgage-backed securities 6,910 -
Purchase of property, plant and equipment (684) (901)
Principal payments on mortgage-backed securities 1,013 5,529
Proceeds from sales of mortgage servicing rights 2,102 5,442
Purchases of mortgage servicing rights - (85)
Other, net (712) (2,500)
--------- ---------
Net cash provided by investing activities 8,629 7,485
--------- ---------
Cash flows from financing activities:
Decrease in other term debt (57) (52)
Redemption of bonds (7,042) (3,622)
Net borrowings (repayments) under notes payable 19,492 (6,382)
Purchase of treasury stock (23,475) -
Other, net 374 89
--------- ---------
Net cash used by financing activities (10,708) (9,967)
--------- ---------
Net decrease in cash (17,521) (10,336)
Cash, beginning of the period 74,780 55,567
--------- ---------
Cash, end of period $ 57,259 $ 45,231
--------- ---------
Supplemental disclosures of cash flow information:
Interest paid during the period $ 1,387 $ 2,443
--------- ---------
Income taxes paid, net of refunds $ 161 $ 4,354
--------- ---------
See notes to consolidated financial statements.
6
NVR, Inc.
Notes to Consolidated Financial Statements
(dollars in thousands, except per share and 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. 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 three
month period ended March 31, 1997 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1997.
2. Adoption of New Accounting Principles
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 on page 10 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 - - 5,763 -
Option activity - 374 - -
Treasury Stock purchases - - - (23,475)
Performance share activity - (2,406) - 2,406
------ -------- ------- --------
Balance, March 31, 1997 $199 $155,810 $52,861 $(74,198)
------ -------- ------- --------
During the quarter ended March 31, 1997, the Company repurchased
approximately 1,678,000 shares of its common stock at an aggregate purchase
price of $23,475. 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
7
NVR, Inc.
Notes to Consolidated Financial Statements
(dollars in thousands, except per share and share data)
was $13.97 per share. Subsequent to March 31, 1997, the Company repurchased an
additional 272,600 shares at an aggregate purchase price of $4,058. In addition,
56,112 options were exercised during the first quarter of 1997, with NVR
realizing approximately $374 in aggregate equity proceeds.
4. Debt
During the quarter ended March 31, 1997, NVR Mortgage Finance, Inc. ("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.
8
Item 2.
- -------
NVR, Inc.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
(dollars in thousands, except per share and share data)
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 March 31, 1997 and 1996
During the first quarter of 1997, homebuilding operations generated
revenues of $238,987 compared to revenues of $200,235 in the first quarter of
1996. The change in revenues was due primarily to an 18.8% increase in the
number of homes settled from 1,107 units in 1996 to 1,315 units in 1997. The
increase in settlements is attributed to the mild winter weather that was
experienced in most of the Company's markets in the current year quarter as
compared to the prior year quarter. New orders for the 1997 period of 1,445
were comparable to the 1,492 new orders generated in the first quarter ended
March 31, 1996.
Gross profit margins were 13.2% in each of the quarters ended March 31,
1997 and 1996. SG&A expenses for the first quarter of 1997 increased $2,045
from the first quarter of 1996, but as a percentage of revenues, decreased to
6.7% in 1997 from 7.0% in 1996. The increase in SG&A dollars is due primarily
to the increase in revenues noted above.
Backlog units and dollars were 2,596 and $496,993, respectively, at March
31, 1997 compared to 2,856 and $519,704, respectively, at March 31, 1996. The
decrease in backlog units and dollars is primarily attributable to the 18.8%
increase in the number of homes settled in the current quarter as compared to
the same 1996 period.
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 Homebuilding EBITDA:
Three months Ended March 31,
------------------------------
1997 1996
-------------- --------------
Operating income $14,320 $10,985
Depreciation 830 718
Amortization of excess reorganization
value 1,613 1,761
------- -------
Homebuilding EBITDA $16,763 $13,464
------- -------
% of Homebuilding revenues 7.0% 6.7%
------- -------
Homebuilding EBITDA in the first quarter of 1997 was $3,299 higher than in
the first quarter of 1996, and, as a percentage of homebuilding revenues,
increased from 6.7% to 7.0%.
9
Financial Services Segment
Three Months Ended March 31, 1997 and 1996
The financial services segment generated operating income of $567 for each
of the three months ended March 31, 1997 and 1996. Loan closings were $297,698
and $289,228 during the respective quarters ended March 31, 1997 and 1996,
representing an increase of 3%.
Mortgage banking fees decreased $877, or 15%, when comparing the respective
quarters of March 31, 1997 and 1996. This decrease is attributed to the lower
servicing fee income resulting from the decrease in the servicing portfolio. The
total servicing portfolio at March 31, 1997 was $570,955 compared with
$1,385,580 at March 31, 1996. A summary of mortgage banking fees is noted
below:
Mortgage Banking Fees: 1997 1996
------- -------
Net gain on sale of loans $3,092 $3,260
Servicing 715 1,459
Title services 1,315 1,280
------ ------
$5,122 $5,999
------ ------
Subsequent to March 31, 1997, the mortgage banking operations began
the sale of its remaining mortgage servicing portfolio. The sale of the
remaining 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's 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 first quarters of 1997
and 1996 presented on the accompanying statements of income are calculated under
the guidance of Opinion No. 15.
Under SFAS No. 128, Basic EPS would have been $0.45 and $0.24 per share for
the quarters ended March 31, 1997 and 1996, respectively. Diluted EPS would
have been $0.42 and $0.23 per share for the same respective quarters.
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 agreement to fund its working capital needs, under which no
amounts were borrowed during the first quarter of 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") is currently engaged in discussions to renew its mortgage warehouse
facility, which expires in the second quarter of 1997, and expects to have a new
agreement in place prior to the original agreement's expiration date.
10
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.
The Company believes that internally generated cash and borrowings
available under credit facilities will be sufficient to satisfy near term cash
requirements for working capital in both its homebuilding and mortgage banking
operations.
Other Elements Impacting Liquidity
During the quarter ended March 31, 1997, the Company repurchased
approximately 1,678,000 shares of its common stock at an aggregate purchase
price of $23,475. 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. Subsequent to March 31, 1997, the Company repurchased an additional
272,600 shares at an aggregate purchase price of $4,058.
Part II
-------
Item 6. Exhibits and Reports on Form 8-K
--------
(a) 11. Computation of Earnings per Share.
(b) The Company did not file any reports on Form 8-K for the
quarter ended March 31, 1997.
11
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.
April 24, 1997 NVR, Inc.
By: /s/ Paul C. Saville
-------------------
Paul C. Saville
Senior Vice President Finance and
Chief Financial Officer
12
Exhibit 11
NVR, Inc.
Computation of Earnings Per Share
(amounts in thousands, except per share amounts)
Three Months Ended March 31,
----------------------------
1997 1996
------- -------
1. Net income $ 5,763 $ 3,740
------- -------
2. Average number of shares outstanding 12,688 15,281
3. Shares issuable upon exercise of
dilutive options, warrants and
subscriptions outstanding during
period, based on average market price 927 115
------- -------
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 1,143 115
------- -------
5. Average number of shares and share
equivalents outstanding (2 + 3) 13,615 15,396
------- -------
6. Average number of shares outstanding
assuming full dilution (2 + 4) 13,831 15,396
------- -------
7. Net income per share and share
equivalents (1/5) $ 0.42 $ 0.24
------- -------
8. Net income per share assuming
full dilution (1/6) $ 0.42 $ 0.24
------- -------
5
0000906163
NVR, INC.
1,000
U.S. DOLLARS
3-MOS
DEC-31-1997
JAN-01-1997
MAR-31-1997
1
57,259
0
5,902
0
170,727
0
18,472
0
498,833
0
120,000
0
0
156,009
(21,337)
498,833
238,987
245,754
207,469
228,592
1,885
0
4,447
10,830
5,067
5,763
0
0
0
5,763
0.42
0.42
Item represents the non-cash amortization of excess reorganization value.
