SEC Filing | NVR, Inc.

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, 1999 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 21, 1999 there were 10,805,365 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 ___ No ___

NVR, Inc. FORM 10-Q INDEX ================================================================= Page ---- PART I FINANCIAL INFORMATION ------ ITEM 1. NVR, Inc. Condensed Consolidated Financial Statements ----------------------------------------------------- Condensed Consolidated BalancE Sheets at March 31, 1999 (unaudited) and December 31, 1998............................ 3 Condensed Consolidated Statements of Income for the Three Months Ended March 31, 1999 (unaudited) and March 31, 1998 (unaudited)................................... 5 Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1999 (unaudited) and March 31, 1998 (unaudited)................................... 6 Notes to Condensed Consolidated Financial Statements......................................... 7 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.......................... 9 PART II Other information ------- ITEM 1. Legal Proceeding.............................................. 14 ITEM 6. Exhibits and Reports on Form 8-K.............................. 14 Exhibit Index................................................. 14 Signature..................................................... 14

PART I ------ Item 1. - ------- NVR, Inc. Condensed Consolidated Balance Sheets (dollars in thousands, except share data) March 31, 1999 December 31, 1998 -------------- ----------------- ASSETS (unaudited) Homebuilding: Cash and cash equivalents $ 93,694 $ 59,118 Receivables 9,380 1,515 Inventory: Lots and housing units, covered under sales agreements with customers 243,467 236,447 Unsold lots and housing units 38,296 45,478 Manufacturing materials and other 4,303 6,713 -------- -------- 286,066 288,638 Property, plant and equipment, net 10,637 16,663 Reorganization value in excess of amounts allocable to identifiable assets, net 58,521 60,062 Goodwill, net 9,386 9,659 Contract land deposits 41,593 40,699 Other assets 41,731 41,301 -------- -------- 551,008 517,655 -------- -------- Mortgage Banking: Cash and cash equivalents 9,851 9,386 Mortgage loans held for sale, net 243,979 178,695 Mortgage servicing rights, net 3,588 3,680 Property and equipment,net 2,601 934 Reorganization value in excess of amounts allocable to identifiable assets, net 10,339 10,611 Goodwill, net 3,010 - Other assets 3,648 3,398 -------- -------- 277,016 206,704 -------- -------- Total assets $828,024 $724,359 ======== ======== (Continued) See notes to consolidated financial statements. 3

NVR, Inc. Condensed Consolidated Balance Sheets (Continued) (dollars in thousands, except share data) March 31, 1999 December 31, 1998 --------------- ------------------ (unaudited) LIABILITIES AND SHAREHOLDERS' EQUITY Homebuilding: Accounts payable $ 83,272 $ 88,272 Accrued expenses and other liabilities 112,802 103,683 Customer deposits 40,262 34,639 Notes payable 3,915 4,054 Other term debt 5,387 5,434 Senior notes 145,000 145,000 --------- --------- 390,638 381,082 --------- --------- Mortgage Banking: Accounts payable and other liabilities 16,033 11,709 Notes payable 229,299 165,849 --------- --------- 245,332 177,558 --------- --------- Total liabilities 635,970 558,640 --------- --------- Commitments and contingencies Shareholders' equity: Common stock, $0.01 par value; 60,000,000 shares authorized; 20,561,539 and 20,190,971 shares issued as of March 31, 1999 and December 31, 1998, respectively 203 202 Paid-in-capital 180,191 174,173 Retained earnings 158,690 132,683 Less treasury stock at cost- 9,691,971 and 9,805,132 shares at March 31, 1999 and December 31, 1998, respectively (147,030) (141,339) --------- --------- Total shareholders' equity 192,054 165,719 --------- --------- Total liabilities and shareholders' equity $ 828,024 $ 724,359 ========= ========= See notes to consolidated financial statements. 4

NVR, Inc. Condensed Consolidated Statements of Income (dollars in thousands, except per share data) (unaudited) Three Months Ended Three Months Ended March 31, 1999 March 31,1998 ------------------- ------------------- Homebuilding: Revenues $ 429,687 $ 291,547 Other income 489 155 Cost of sales (356,544) (247,956) Selling, general and administrative (28,223) (19,965) Amortization of reorganization value in excess of amounts allocable to identifiable assets/goodwill (1,813) (1,886) --------- --------- Operating income 43,596 21,895 Interest expense (3,381) (4,153) --------- --------- Homebuilding income 40,215 17,742 --------- --------- Mortgage Banking: Mortgage banking fees 13,522 7,687 Interest income 2,751 1,855 Other income 94 222 General and administrative (9,322) (5,583) Amortization of reorganization value in excess of amounts allocable to identifiable assets/goodwill (360) (272) Interest expense (1,671) (1,491) --------- --------- Operating income 5,014 2,418 --------- --------- Total segment income 45,229 20,160 Income tax expense (19,222) (9,300) --------- --------- Net income $ 26,007 $ 10,860 ========= ========= Basic earnings per share $ 2.38 $ 0.95 ========= ========= Diluted earnings per share $ 2.02 $ 0.81 ========= ========= See notes to consolidated financial statements. 5

NVR, Inc. Condensed Consolidated Statements of Cash Flows (dollars in thousands) (unaudited) Three Months Ended Three Months Ended March 31, 1999 March 31, 1998 --------------- -------------- Cash flows from operating activities: Net income $ 26,007 $ 10,860 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 3,207 3,450 Mortgage loans closed (779,406) (578,334) Proceeds from sales of mortgage loans 788,743 526,271 Gain on sale of loans (10,922) (5,701) Net change in assets and liabilities, net of acquisition: Decrease (increase) in inventories 2,572 (21,842) Increase in receivables (9,054) (1,249) Increase in accounts payable and accrued expenses 20,426 9,451 Other, net 4,911 (1,719) --------- --------- Net cash provided (used) by operating activities 46,484 (58,813) --------- --------- Cash flows from investing activities: Proceeds from sales of mortgage-backed securities - 474 Business acquisition, net of cash acquired (3,697) - Purchase of property, plant and equipment (1,137) (932) Principal payments on mortgage-backed securities 830 1,152 Proceeds from sales of mortgage servicing rights, net 11,144 2,984 Other, net 4,237 (466) --------- --------- Net cash provided by investing activities 11,377 3,212 --------- --------- Cash flows from financing activities: Decrease in other term debt (47) (49) Redemption of bonds - (476) Net borrowings (repayments) under notes payable (12,775) 49,664 Purchase of treasury stock (10,992) - Other, net 994 15 --------- --------- Net cash provided (used) by financing activities (22,820) 49,154 --------- --------- Net increase (decrease) in cash and cash equivalents 35,041 (6,447) Cash and cash equivalents, beginning of the period 68,504 45,725 --------- --------- Cash and cash equivalents, end of period $ 103,545 $ 39,278 ========= ========= Supplemental disclosures of cash flow information: Interest paid during the period $ 2,279 $ 2,122 ========= ========= Income taxes paid, net of refunds $ 3,642 $ 1,752 ========= ========= See notes to consolidated financial statements. 6

NVR, Inc. Notes to Condensed Consolidated Financial Statements (dollars in thousands, except per share and share data) 1. Basis of Presentation The accompanying unaudited, condensed 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, consolidated 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 1998 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 three month period ended March 31, 1999 are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. For the quarters ended March 31, 1999 and 1998, comprehensive income equaled net income; therefore, a separate statement of comprehensive income is not included in the accompanying financial statements. 2. Shareholders' Equity A summary of changes in shareholders' equity is presented below: Common Paid-In Retained Treasury Stock Capital Earnings Stock ------ --------- --------- ----------- Balance, December 31, 1998 $202 $174,173 $132,683 $(141,339) Net income - - 26,007 - Purchase of common stock for treasury - - - (10,992) Option activity 1 993 - - Tax benefit from stock-based compensation activity - 6,168 - - Performance share activity - (1,143) - 5,301 ---- -------- -------- --------- Balance, March 31, 1999 $203 $180,191 $158,690 $(147,030) ==== ======== ======== ========= Approximately 365,000 shares were reissued from the treasury during January 1999 in satisfaction of benefits earned and expensed in 1998 under an equity-based employee benefit plan. The average cost basis for the shares reissued from the treasury was $14.52 per share. In addition, approximately 423,000 options were exercised during the first quarter of 1999, with NVR realizing approximately $994 in aggregate equity proceeds. 7

NVR, Inc. Notes to Condensed Consolidated Financial Statements (dollars in thousands, except per share and share data) 3. Business Acquisition On March 4, 1999, NVR Mortgage Acquisition, Inc. ("NVRMA"), a wholly owned subsidiary of NVR Mortgage Finance, Inc. ("NVR Finance"), NVR's wholly owned mortgage banking subsidiary, purchased all of the outstanding capital stock of First Republic Mortgage Corporation ("First Republic") for approximately $5,300 in cash. First Republic, based in Rockville, Maryland, is a leading mortgage lender in the Baltimore and Washington Metropolitan area. NVRMA accounted for this acquisition using the purchase method, and the operations of the acquired business have been included in NVR's consolidated financial statements for the first quarter of 1999 beginning on the date of the acquisition. Goodwill of approximately $3,100 that was generated pursuant to the purchase transaction will be amortized using the straight-line method over 5 years. 4. Debt In January 1999, NVR Finance amended its mortgage warehouse facility to increase the available borrowing limit to $203,000, of which $178,000 is committed. The other terms and conditions are substantially the same as those in effect at December 31, 1998. In addition, First Republic has entered into a separate revolving short-term borrowing facility with a lender not party to the NVR Finance warehouse agreement comprised of a $60,000 committed line of credit that bears interest at 1.75% to 2.00% above LIBOR. 5. Segment Disclosures NVR operates in two business segments: homebuilding and mortgage banking. Corporate general and administrative expenses are fully allocated to the homebuilding and mortgage banking segments in the information presented below. For the Three Months Ended March 31, 1999 - ----------------------------------------- Homebuilding Mortgage Banking Totals ------------ ---------------- -------- Revenues from external customers $429,687 $ 13,522 $443,209 (a) Segment profit 42,028 5,374 47,402 (b) Segment assets 483,101 263,667 746,768 (b) (a) Total amounts for the reportable segments equal the respective amounts for the consolidated enterprise. (b) The following reconciles segment profit and segment assets to the respective amounts for the consolidated enterprise: Segment profit $ 42,028 $ 5,374 $ 47,402 Less: amortization of excess reorganization value and goodwill (1,813) (360) (2,173) -------- -------- -------- Consolidated income before income taxes $ 40,215 $ 5,014 $ 45,229 ======== ======== ======== Segment assets $483,101 $263,667 $746,768 Add: Excess reorganization value and goodwill 67,907 13,349 81,256 -------- -------- -------- Total consolidated assets $551,008 $277,016 $828,024 ======== ======== ======== 8

Item 2. - ------- Management's Discussion and Analysis of Financial Condition and Results of Operations (dollars in thousands, except per share and share data) Forward-Looking Statements Some of the statements in this Form 10-Q, 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. 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 of historical facts included herein, including those regarding market trends, the Company's financial position, business strategy, projected plans, objectives of management for future operations and certain statements regarding the Company's Year 2000 readiness, 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 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 (on both a national and regional level), 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, technological problems encountered with Year 2000 issues, certain conditions in financial markets and other factors over which the Company has little or no control. Results of Operations for the Three Months Ended March 31, 1999 and 1998 NVR, Inc. ("NVR" or the "Company") operates in two business segments: homebuilding and mortgage banking. Corporate general and administrative expenses are fully allocated to the homebuilding and mortgage banking segments in the information presented below. Homebuilding Segment Three Months Ended March 31, 1999 and 1998 During the first quarter of 1999, homebuilding operations generated revenues of $429,687 compared to revenues of $291,547 in the first quarter of 1998. The change in revenues was due primarily to a 36% increase in the number of homes settled from 1,543 units in 1998 to 2,098 units in 1999, and to an 8% increase in the average selling price from $188.3 in 1998 to $204.2 in 1999. The increase in settlements is a direct result of the substantially higher backlog at the beginning of the 1999 quarter as compared to the beginning of the same 1998 quarter. The increase in the average selling price is attributable to price increases in certain of the Company's markets and to single family detached units representing a larger percentage of the total units settled in the current period as compared to the prior year period. New orders of 2,541 during the first quarter of 1999 increased 12% compared with the 2,262 new orders generated during the same 1998 period. The increase in new orders was predominantly the result of increased sales in markets outside the Washington/Baltimore area. Gross profit margins in the first quarter of 1999 increased to 17.0% as compared to 15.0% for the quarter ended March 31, 1998. The increase in gross margins was due to continuing favorable market 9

conditions which provided the Company the opportunity to increase selling prices in certain of its markets. In addition, these favorable market conditions have enabled the Company to increase the sales pace per community which allows the Company to better leverage its fixed costs. Selling, general and administrative ("SG&A") expenses for the first quarter of 1999 increased $8,258 from the first quarter of 1998, but as a percentage of revenues, decreased from 6.8% in 1998 to 6.6% in the first quarter of 1999. A substantial portion of the increase in SG&A dollars is due to a net quarter to quarter increase of approximately $4,200 for a non-cash charge related to the 1994 Management Incentive Plan (the "Plan"), a variable stock plan adopted by the Board of Directors (the "Board") pursuant to the Company's 1993 Plan of Reorganization (see below for a description of the Plan). The increase in SG&A dollars is also attributable to the aforementioned increase in revenues. Excluding the $4,200 non-cash charge related to the Plan, SG&A expenses as a percentage of revenues decreased to 5.6% in the first quarter of 1999. This percentage decrease is primarily attributable to the improved operating efficiencies resulting from continuing favorable market conditions as explained above and the overall larger revenue base. The Company's executive officers and certain other key management personnel participate in the Plan. Under the Plan document, the final one-third of the 1,095,200 total shares granted under the Plan are eligible to vest in calendar year 1999 if certain full year earnings targets for 1999 are met or exceeded. Pursuant to the Plan, the approximately 365,000 shares eligible for vesting in 1999 may vest at a date earlier than December 31, 1999 if the 1999 full-year earnings targets specified in the Plan are met or exceeded prior to December 31, 1999. The compensation cost recognized in the Company's results of operations for 1999 relative to the Plan will depend on the market value of NVR common stock on the vesting determination date. Compensation cost recognized in the first quarter of 1999 is based on the closing price of NVR common Stock as reported by the American Stock Exchange on March 31, 1999. Backlog units and dollars were 5,016 and $1,060,724, respectively, at March 31, 1999 compared to 3,914 and $782,690, respectively, at March 31, 1998. The increase in backlog units and dollars is primarily attributable to a 19% increase in new orders for the six month period ended March 31, 1999 compared to the same 1998 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, ----------------------------- 1999 1998 ---------- --------- Operating income $43,596 $21,895 Depreciation 746 936 Amortization of excess reorganization value/goodwill 1,813 1,886 Other non-cash items 4,158 - ------- ------- Homebuilding EBITDA $50,313 $24,717 ======= ======= % of Homebuilding revenues 11.7% 8.5% ======= ======= Homebuilding EBITDA in the first quarter of 1999 was $25,596 higher than in the first quarter of 1998, and as a percentage of homebuilding revenues, increased from 8.5% to 11.7%. 10

Mortgage Banking Segment Three Months Ended March 31, 1999 and 1998 The mortgage banking segment generated operating income of $5,014 for the three months ended March 31, 1999 compared to operating income of $2,418 during the same period in 1998. Loan closings were $779,406 and $578,334 during the respective quarters ended March 31, 1999 and 1998, representing an increase of 35%. Mortgage banking fees had a net increase of $5,835, representing a 76% increase when comparing the respective quarters of March 31, 1999 and 1998. The increase can be attributed to the higher gain on sale of loans resulting from the significant increase in loan closings, which is partially attributable to the additional loan closings from the acquisition of First Republic Mortgage Corporation ("First Republic") as discussed below. A summary of mortgage banking fees is noted below: Mortgage Banking Fees: 1999 1998 ------- ------- Net gain on sale of loans $10,922 $5,701 Servicing 234 192 Title services 2,366 1,794 ------- ------ $13,522 $7,687 ======= ====== Recent Accounting Pronouncements The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 requires all derivatives to be recognized as either assets or liabilities on the balance sheet and be measured at fair value. Depending on the hedge designation, changes in such fair value will be recognized in either other comprehensive income or current earnings on the income statement. SFAS No. 133 is effective for fiscal years beginning after June 15, 1999, and is applicable to interim periods in the initial year of adoption. At the present time, the Company cannot determine the impact that SFAS No. 133 will have on its financial statements upon adoption on January 1, 2000, as such impact will be determined based on loans held in inventory and forward mortgage delivery contracts outstanding at the date of adoption. Business Acquisition On March 4, 1999, NVR Mortgage Acquisition, Inc. ("NVRMA"), a wholly owned subsidiary of NVR Mortgage Finance, Inc. ("NVR Finance"), NVR's wholly owned mortgage banking subsidiary, purchased all of the outstanding capital stock of First Republic for approximately $5,300 in cash. First Republic, based in Rockville, Maryland, is a leading mortgage lender in the Baltimore and Washington Metropolitan area. NVRMA accounted for this acquisition using the purchase method, and the operations of the acquired business have been included in NVR's consolidated financial statements for the first quarter of 1999 beginning on the date of the acquisition. Goodwill of approximately $3,100 that was generated pursuant to the purchase transaction will be amortized using the straight-line method over 5 years. Year 2000 Issue The Year 2000 Issue is the risk that computer programs using two-digit date fields will fail to properly recognize the year 2000, with the result being business interruptions due to computer 11

system failures by the Company's software or hardware or that of government entities, service providers and vendors. With the assistance of a consulting firm, the Company has completed its assessment of exposure to Year 2000 Issues and has developed a detailed plan to remediate areas of exposure in both its homebuilding and mortgage banking segments, as discussed below. The Company has substantially completed its remediation and testing efforts on its core homebuilding systems and believes that these systems are now Year 2000 compliant. The total Year 2000 Issue costs for the homebuilding systems were approximately $400, all of which was expensed during 1998. The mortgage banking segment utilizes the following four core systems to operate its business: Loan Origination; Secondary Marketing; Servicing; and Settlement Services. During 1997 a decision was made to replace the existing Loan Origination system to obtain greater operating efficiencies. The existing system is not Year 2000 compliant. The Company has purchased a new commercially available software package for Loan Origination processing which has been certified to be Year 2000 compliant by the vendor. The Company has tested the system and believes that it is Year 2000 compliant. The Company has developed a detailed rollout plan and started implementation in February 1999 into its mortgage branches. The new system is expected to be deployed in each branch by the end of the third quarter of 1999. The total cost of this project is estimated to be $3,700, of which the Company has expended $2,300 to date. The Company has upgraded the existing Secondary Marketing system to the Year 2000 compliant version of the vendor's software, and based on testing conducted during 1998, the Company believes this system to be Year 2000 compliant. The Servicing and Settlement Services Systems are also purchased software packages which the vendors have indicated are both Year 2000 compliant. The Company has completed testing on the Settlement Services and Servicing Systems and believes that these systems are Year 2000 compliant. The total cost of updating and testing these systems was approximately $125, the majority of which was expensed in the fourth quarter of 1998. The Company initiated formal communications with its significant suppliers and service providers during 1998 to determine the extent to which the Company may be vulnerable to their failure to correct their own Year 2000 Issues and is continuing those communications during 1999. To the extent that responses to Year 2000 readiness are unsatisfactory, the Company will attempt to identity alternative suppliers and service providers who have demonstrated Year 2000 readiness. As a normal course of business, the Company seeks to maintain multiple suppliers where possible. The Company cannot be assured that it will be successful in finding such alternative suppliers, service providers and contractors or, if it is successful in finding such alternative suppliers, service providers and contractors, that it will be able to do so at comparable prices. In the event that any of the Company's significant suppliers or service providers do not successfully and timely achieve Year 2000 compliance, and the Company is unable to replace them at comparable prices, the Company's business or operations could be adversely affected. The Company is currently assessing its mechanical systems (e.g., phones, HVAC, etc.) which employ embedded chip technology. Based on its continuing assessment, the Company does not estimate a significant expense will be incurred to make any non-compliant systems Year 2000 compliant. The Company presently believes that upon remediation of its business software and hardware applications, the Year 2000 Issue will not present a material adverse risk to the Company's future consolidated results of operations, liquidity, and capital resources. However, if such remediation is not completed in a timely manner or the level of timely compliance by key 12

suppliers or service providers is not sufficient, the Year 2000 Issue could have a material impact on the Company's operations including, but not limited to, delays in homebuilding and mortgage products resulting in loss of revenues, increased operating costs, loss of customers or suppliers, or other significant disruptions to the Company's business. In addition, widespread disruptions in the national or international economy, including, for example, disruptions affecting financial markets, commercial and investment banks, governmental agencies, utility services, such as heat, lights, power and telephones, and transportation systems could also have an adverse impact on the Company. The likelihood and effects of such disruptions are not determinable at this time. The Company will evaluate the necessity for contingency planning during 1999 as it implements and tests its Loan Origination System and if communications with significant suppliers and service providers indicate that the Company may be vulnerable to their failure to correct their own Year 2000 Issues. This evaluation will continue throughout 1999. Liquidity and Capital Resources The Company has $255,000 available for issuance under a shelf registration statement filed with the Securities and Exchange Commission on January 20, 1998. The shelf registration statement was declared effective on February 27, 1998 and provides that securities may be offered from time to time in one or more series and in the form of senior or subordinated debt. NVR's homebuilding segment generally provides for its working capital cash requirements using cash generated from operations and a short-term unsecured working capital revolving credit facility (the "Facility"). The Facility expires on May 31, 2001. The Facility provides for borrowings of up to $100,000 of which $60,000 is currently committed. Under terms of the Facility, an additional $10,000 uncommitted overline is available to the Company on a limited basis. Up to approximately $24,000 of the Facility is currently available for issuance in the form of letters of credit of which $12,862 was outstanding at March 31, 1999. There were no direct borrowings outstanding under the Facility as of March 31, 1999. NVR's mortgage banking segment provides for its mortgage origination and other operating activities using cash generated from operations as well as various short-term credit facilities. NVR Finance and its subsidiaries have available mortgage warehouse facilities with an aggregate available borrowing limit of $263,000, of which $238,000 is committed, to fund its mortgage origination activities. There was $212,520 outstanding under these facilities at March 31, 1999. NVR Finance also currently has available an aggregate of $150,000 of borrowing capacity in various uncommitted gestation and repurchase agreements. There was an aggregate of $16,330 outstanding under such gestation and repurchase agreements at March 31, 1999. 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 three months ended March 31, 1999, the Company repurchased approximately 252,000 shares of its common stock at an aggregate purchase price of $10,992. 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. 13

Part II ------- Item 1. Legal Proceeding - ------- During April 1999, NVR was served with a lawsuit filed in the United States District Court in Baltimore by a group of homeowners who purchased homes in a community in Howard County, Maryland. The suit alleges violation of certain Federal environmental laws, as well as State consumer protection and nuisance statutes relating to the alleged failure of NVR to disclose to its purchasers that their homes were built on a site formerly used as an unlicensed landfill. The developer of the property and another homebuilder are also named as defendants in the action. The plaintiffs are seeking injunctive relief and damages of approximately $75,000,000. The Company believes the claims to be without merit and intends to vigorously defend the case. Accordingly, the income statement for the three months ended March 31, 1999, included in the accompanying financial statements to this Quarterly Report on Form 10-Q does not include a loss contingency related to this lawsuit. Item 6. Exhibits and Reports on Form 8-K - ------- a. 11. Computation of Earnings per Share. b. Financial Data Schedule c. The Company did not file any reports on Form 8-K during the quarter ended March 31, 1999. Exhibit Index Exhibit Number Description Page - ------ ----------- ---- 11 Computation of Earnings per Share 15 27 Financial Data Schedule 16 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 29, 1999 NVR, Inc. By: /s/ Paul C. Saville ----------------------- Paul C. Saville Senior Vice President Finance and Chief Financial Officer 14

Exhibit 11 NVR, Inc. Computation of Earnings Per Share (amounts in thousands, except per share amounts) Three Months Ended March 31, ---------------------------- 1999 1998 ---------- ------------ 1. Net income $26,007 $10,860 ======= ======= 2. Average number of shares outstanding 10,945 11,453 3. Shares issuable upon exercise of dilutive options outstanding during period, based on average market price 1,930 2,034 ------- ------- 4. Average number of shares and share equivalents outstanding (2 + 3) 12,875 13,487 ======= ======= 5. Basic earnings per share $ 2.38 $ 0.95 ======= ======= 6. Diluted earnings per share $ 2.02 $ 0.81 ======= ======= 15

5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NVR, INC.'S CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 103,545 0 9,386 0 286,066 0 13,238 0 828,024 0 145,000 0 0 180,394 11,660 828,024 429,687 446,543 356,544 394,089 2,173

0 5,052 45,229 19,222 26,007 0 0 0 26,007 2.38 2.02 ITEM REPRESENTS THE NON-CASH AMORTIZATION OF EXCESS REORGANIZATION VALUE AND GOOD WILL.