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
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
5
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.
