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 September 30, 1996
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.
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(Exact name of registrant as specified in its charter)
Virginia 54-1394360
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(State or other jurisdiction of (IRS employer identification
incorporation or organization) number)
7601 Lewinsville Road, Suite 300
McLean, Virginia 22102
(703) 761-2000
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(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
(Not Applicable)
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(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 October 25, 1996 there were 14,708,429 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
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NVR, INC.
FORM 10-Q
INDEX
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Page
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PART I FINANCIAL INFORMATION
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Item 1. Consolidated Financial Statements
Consolidated Balance Sheets at September 30, 1996 (unaudited)
and December 31, 1995........................................ 3
Consolidated Statements of Operations for the
Three Months Ended September 30, 1996 (unaudited)
and September 30, 1995 (unaudited) and the
Nine Months Ended September 30, 1996 (unaudited)
and September 30, 1995 (unaudited)............................ 5
Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 1996 (unaudited) and
September 30, 1995 (unaudited)................................ 6
Notes to Consolidated Financial Statements.................... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 10
PART II OTHER INFORMATION
- -------
Item 6. Exhibits and Reports on Form 8-K.............................. 15
2
PART I
------
ITEM 1.
NVR, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------ -----------------
(UNAUDITED)
ASSETS
HOMEBUILDING:
Cash and cash equivalents $ 69,597 $ 51,911
Receivables 17,351 7,894
Inventory:
Lots and housing units, covered under
sales agreements with customers 126,435 116,140
Unsold lots and housing units 31,688 33,399
Manufacturing materials and other 5,494 5,174
----------- ----------
163,617 154,713
Property, plant and equipment, net 17,486 16,882
Reorganization value in excess of amounts
allocable to identifiable assets, net 84,584 89,867
Other assets 50,760 47,308
----------- -----------
403,395 368,575
---------- ------------
FINANCIAL SERVICES:
Cash and cash equivalents 4,043 3,656
Mortgage loans held for sale, net 90,152 96,311
Mortgage servicing rights, net 6,343 18,017
Property and equipment, net 1,098 1,708
Reorganization value in excess of amounts
allocable to identifiable assets, net 13,060 13,877
Other assets 13,711 10,452
----------- ----------
128,407 144,021
----------- ----------
LIMITED-PURPOSE FINANCING SUBSIDIARIES:
Mortgage-backed securities, net 50,657 94,403
Funds held by trustee 2,269 2,534
Other assets 2,855 4,338
----------- ----------
55,781 101,275
---------- ---------
TOTAL ASSETS $ 587,583 $ 613,871
---------- ---------
---------- ---------
See notes to consolidated financial statements.
3
NVR, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------ -----------------
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS'
EQUITY
HOMEBUILDING:
Accounts payable $ 52,633 $ 49,679
Accrued expenses and other liabilities 94,504 88,943
Notes payable 90 93
Other term debt 14,050 14,025
Senior notes 120,000 120,000
--------- ---------
281,277 272,740
--------- ---------
FINANCIAL SERVICES:
Accounts payable and other liabilities 6,801 7,501
Notes payable 87,113 87,177
--------- ---------
93,914 94,678
--------- ---------
LIMITED-PURPOSE FINANCING SUBSIDIARIES:
Accrued expenses and other liabilities 1,518 1,724
Bonds payable 54,149 98,549
--------- ---------
55,667 100,273
--------- ---------
Total liabilities 430,858 467,691
--------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $0.01 par value; 60,000,000
shares authorized; 19,880,635 and 18,384,083
shares issued as of September 30, 1996 and
December 31, 1995, respectively 199 184
Additional paid-in-capital 155,596 144,072
Retained earnings 42,101 21,626
Less treasury stock at cost 5,172,189
and 3,170,721 shares at September 30, 1996
and December 31, 1995 respectively (41,171) (19,702)
--------- ---------
Total shareholders' equity 156,725 146,180
--------- ---------
Total liabilities and shareholders'
equity $587,583 $613,871
--------- ---------
--------- ---------
See notes to consolidated financial statements.
4
NVR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------- -------------------
1996 1995 1996 1995
------ ------ ------ ------
HOMEBUILDING:
Revenues $312,658 $256,110 $796,425 $607,501
Other income 238 251 763 1,228
Cost of sales (270,375) (221,115) (689,577) (523,975)
Selling, general and
administrative (20,687) (17,490) (50,852) (42,567)
Amortization of reorganization
value in excess of amounts
allocable to identifiable assets (1,761) (1,761) (5,283) (5,283)
------- ------- ------- -------
Operating income 20,073 15,995 51,476 36,904
Interest expense (4,136) (4,402) (12,536) (12,906)
------- ------- ------- -------
Homebuilding income 15,937 11,593 38,940 23,998
------- ------- ------- -------
FINANCIAL SERVICES:
Mortgage banking fees 6,225 7,146 19,043 16,797
Interest income 1,632 1,518 4,036 3,301
General and administrative (6,407) (7,520) (18,337) (17,701)
Amortization of reorganization
value in excess of amounts
allocable to identifiable assets (272) (272) (816) (816)
Interest expense (772) (743) (1,801) (1,342)
------- ------- ------- -------
Operating income 406 129 2,125 239
LIMITED-PURPOSE FINANCING SUBSIDIARIES:
Operating income 10 14 11 36
------- ------- ------- -------
TOTAL SEGMENT INCOME 16,353 11,736 41,076 24,273
Income tax expense (8,079) (5,873) (20,292) (12,661)
------- ------- ------- -------
Income before extraordinary gain 8,274 5,863 20,784 11,612
Extraordinary gain: (net of tax
expense of $645 for the nine
months ended September 30, 1995) -- -- -- 927
------- ------- ------- -------
NET INCOME $8,274 $5,863 $20,784 $12,539
------- ------- ------- -------
------- ------- ------- -------
EARNINGS PER SHARE:
Income before extraordinary gain $ 0.59 $ 0.38 $ 1.37 $ 0.75
Extraordinary gain -- -- -- 0.06
------- ------- ------- -------
Earnings per share $0.59 $0.38 $1.37 $0.81
------- ------- ------- -------
------- ------- ------- -------
See notes to consolidated financial statements.
5
NVR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1996 1995
---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $20,784 $12,539
Adjustments to reconcile net income to
net cash provided (used) by operating
activities:
Extraordinary gain--extinguishment of debt -- (1,572)
Depreciation and amortization 9,236 10,867
Interest accrued and added to bond principal 446 1,674
Mortgage loans closed (949,918) (760,092)
Proceeds from sales of mortgage loans 960,537 715,004
(Gain) loss on sale of mortgage servicing rights 1,104 (2,895)
Gain on sale of loans (11,531) (4,812)
Net change in assets and liabilities:
Increase in inventories (8,904) (63,799)
Decrease (increase) in receivables** 308 (1,612)
Increase in accounts payable and
accrued expenses 7,745 16,292
Other, net (3,917) (7,811)
--------- ---------
Net cash provided (used) by operating activities 25,890 (86,217)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in marketable securities -- 5,000
Decrease (increase) in funds held by trustee 265 (1,008)
Proceeds from sales of mortgage-backed securities 32,722 1,069
Purchase of property, plant and equipment (2,890) (2,770)
Principal payments on mortgage-backed securities 14,002 12,648
Proceeds from sales of mortgage servicing rights 12,316 6,781
Purchases of mortgage servicing rights (112) (9,995)
Other, net 1,771 390
--------- ---------
Net cash provided by investing activities 58,074 12,115
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of bonds (45,800) (13,497)
Net borrowings under notes payable (226) 75,343
Purchases of treasury stock (23,179) (871)
Repurchase of Senior Notes -- (12,962)
Other 3,314 84
--------- ---------
Net cash provided (used) by financing activities (65,891) 48,097
Net increase (decrease) in cash 18,073 (26,005)
Cash, beginning of the period 55,567 71,476
--------- ---------
Cash, end of period $73,640 $45,471
--------- ---------
--------- ---------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid during the period $15,996 $16,006
--------- ---------
--------- ---------
Income taxes paid, net of refunds $22,362 $13,586
--------- ---------
--------- ---------
** See Note 3 to the financial statements for an explanation of the non-cash
increase to equity from the accrual of warrant proceeds.
See notes to consolidated financial statements.
6
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 1995 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
nine month period ended September 30, 1996 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1996.
2. ADOPTION OF NEW ACCOUNTING PRINCIPLE
During the quarter ended March 31, 1996, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 121, ACCOUNTING FOR THE IMPAIRMENT
OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. SFAS No. 121
requires that long-lived assets and certain identifiable intangibles be reviewed
for impairment whenever events or changes in circumstances based on future
expected cash flows indicate that the carrying amount may not be recoverable.
Such adoption did not have a material impact on the Company's financial
condition or results of operations.
3. SHAREHOLDERS' EQUITY
A summary of changes in Shareholders' equity is presented below:
ADDITIONAL
COMMON PAID-IN RETAINED TREASURY
STOCK CAPITAL EARNINGS STOCK
------ --------- -------- --------
BALANCE, DECEMBER 31, 1995 $184 $144,072 $21,626 $(19,702)
Net income -- -- 20,784 --
Option activity -- 88 -- --
Warrant activity 15 13,146 (309) --
Purchases of treasury stock -- -- -- (23,179)
Performance share activity -- (1,710) -- 1,710
------- ------ ------- -------
BALANCE, SEPTEMBER 30, 1996 $199 $155,596 $42,101 $(41,171)
------- -------- ------- --------
------- -------- ------- --------
During the nine months ended September 30, 1996, the Company repurchased
2,175,504 shares of its common stock at an aggregate purchase price of $23,179,
which completed the equity repurchase program announced in April 1996.
7
NVR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
On September 30, 1993, NVR issued warrants to purchase 2,162,828 shares of
common stock at an exercise price of $8.80 per share with an expiration date of
September 30, 1996. During 1996, 1,495,515 warrants were exercised for a like
number of common shares. Of the $13,161 aggregate increase to equity pursuant
to the warrant conversion, $9,600 is included as a receivable at September 30,
1996 as those proceeds were not received by the Company until October 1, 1996.
In addition, pursuant to the previously announced warrant repurchase program,
during 1996 NVR repurchased 561,135 warrants, at market prices, for an aggregate
purchase price of $309. The Company retired the repurchased warrants with a
charge to retained earnings equal to the purchase price. A total of 106,178
warrants expired unexercised.
4. DEBT
In May 1996, the Company amended and restated its working capital revolving
credit facility (the "Facility") for a three year term expiring on May 31, 1999
under an agreement with a syndicate of financial institutions. The Facility
provides 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, 1995.
In June 1996, NVR Mortgage Finance, Inc. ("NVR Finance") renewed its
mortgage warehouse facility for one year with more favorable pricing and an
increase in the available borrowing limit to $105,000. The other terms and
conditions are substantially the same as under the previous facility.
During the first quarter of 1996, 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
$50,000, and amounts outstanding thereunder accrue interest at various rates
tied to the federal funds rate, depending on the type of collateral. Borrowings
outstanding under the Repo Facility are collateralized by gestation
mortgage-backed securities. The covenants under the Repo Facility are
consistent with NVR Finance's mortgage warehouse credit facility.
5. STOCK OPTION PLANS
During the second quarter of 1996, the Company's Shareholders approved the
Board of Directors' adoption of the Management Long-Term Stock Option Plan (the
"Stock Option Plan") and the Directors' Long-Term Stock Option Plan (the
"Directors' Plan").
Under the Stock Option Plan, awards of non-qualified stock options
("Options") to purchase 2,000,000 Shares of the Company's common stock
("Shares") may be granted to executive officers and other key management
personnel. Each Option will be granted for a period of ten (10) years from the
date of grant. As of September 30, 1996, 1,504,000 Options have been granted
under the Stock Option Plan at an exercise price of $10.63, which was equal to
the fair market value of the Company's Shares on the date of grant. The Options
granted will vest as to thirty-three and one-third percent (33 1/3 %) of the
underlying Shares on each of December 31, 2000, 2001, and 2002, with vesting
based upon continued employment.
8
NVR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
Also as of September 30, 1996, the 192,000 Options authorized under the
Directors' Plan were granted to the Company's outside directors at an exercise
price of $10.25, which was equal to the fair market value of the Company's
Shares on the date of grant. The Options were granted for a ten (10) year
period beginning from the date of grant, and vest as to thirty three and
one-third percent (33 1/3%) of the underlying Shares on each of December 31,
1999, 2000, and 2001.
6. MORTGAGE SERVICING RIGHTS
During the third quarter of 1996, the financial services segment sold the
mortgage servicing rights to approximately $740,000 of its mortgage servicing
portfolio, incurring a $1,104 pre-tax loss, which is included in mortgage
banking fees on the accompanying statement of operations. At September 30,
1996, the financial services segment was servicing approximately 9,400 loans
with aggregate principal balances of approximately $584,000.
9
ITEM 2.
NVR, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
NVR, Inc. ("NVR" or the "Company") is a holding company that operates in
two business segments: homebuilding and financial services. Holding company
general and administrative expenses are fully allocated to the homebuilding and
financial services segments in the information presented below.
HOMEBUILDING SEGMENT
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
During the third quarter of 1996, homebuilding operations generated
revenues of $312,658 compared to revenues of $256,110 in the third quarter of
1995. The change in revenues is primarily due to a 17.7% increase in the number
of homes settled from 1,420 in 1995 to 1,672 in 1996 and to a 3.6% increase in
the average settlement price from $179.5 in 1995 to $186.0 in 1996. The
increase in settlements was a direct result of the higher backlog at the
beginning of the 1996 quarter as compared to the same 1995 quarter. New orders
of 969 during the third quarter of 1996 decreased 15.3% compared with the 1,144
new orders generated during the same 1995 period. The Company attributes the
decrease in new orders to interest rate uncertainty and to the general economic
environment in the Company's primary markets.
Gross profit margins in the third quarter of 1996 decreased to 13.5%
compared to 13.7% for the same 1995 quarter. The decrease in gross profit
margins from the prior year quarter was primarily due to increased competitive
market conditions in certain of the Company's markets and, to a lesser extent,
higher lumber costs.
SG&A expenses for the third quarter of 1996 increased $3,197 as compared to
the same 1995 period, but decreased slightly as a percentage of revenues. The
dollar increase in SG&A was primarily due to increased costs that corresponded
to the aforementioned increase in revenues.
Backlog units and dollars were 2,398 and $436,487, respectively, at
September 30, 1996 compared to 2,379 and $425,929 at September 30, 1995. The
increase in backlog dollars is due primarily to a 3.3% increase in the average
sales prices during the nine months period ended September 30, 1996 compared to
the same 1995 period.
The Company believes that earnings before interest, taxes, depreciation and
amortization ("EBITDA") provides a more meaningful comparison of operating
performance of the homebuilding segment than operating income 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.
10
CALCULATION OF HOMEBUILDING EBITDA:
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1996 1995
---- ----
Operating income $ 20,073 $ 15,995
Depreciation 701 589
Amortization of excess reorganization
value 1,761 1,761
---------- ----------
HOMEBUILDING EBITDA $ 22,535 $ 18,345
---------- ---------
% OF HOMEBUILDING REVENUES 7.2% 7.2%
Homebuilding EBITDA in the third quarter of 1996 was $4,190 or 22.8% higher
than in the third quarter of 1995, and as a percentage of revenues was
consistent with the prior year quarter.
FINANCIAL SERVICES SEGMENT
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
The financial services segment generated operating income of $406 for the
three months ended September 30, 1996 compared to operating income of $129
during the same period in 1995, representing an increase of $277. Loan
closings were $338,895 and $359,756 during the respective quarters ended
September 30, 1996 and 1995, representing a decrease of 6%. The increase in
operating income over the prior year quarter was achieved despite fewer
operating branch offices and continued strong price competition. Operating
income for the three months ended September 30, 1995 was negatively impacted by
the accrual of $1,000 for the closure of thirteen mortgage origination branch
offices. As noted below, operating income for the third quarter of 1996 was
impacted by a loss of approximately $1,104 from the sale of mortgage servicing
rights
Mortgage banking fees had a net decrease of $921, representing a 13%
decrease when comparing the respective quarters of September 30, 1996 and 1995.
This decrease can be primarily attributed to the loss of approximately $1,104
from the sale of $740,000 of mortgage servicing rights during the third quarter
of 1996. This resulted in a servicing portfolio balance of $584,000 at September
30, 1996. A summary of mortgage banking fees is noted below:
MORTGAGE BANKING FEES: 1996 1995
---- ----
Net gain on sale of loans $ 4,412 $ 2,762
Servicing 1,239 1,895
Title services 1,678 1,593
Gain/(loss) on sale of servicing rights (1,104) 896
------- --------
$ 6,225 $ 7,146
------- --------
------- --------
HOMEBUILDING SEGMENT
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
During the first nine months of 1996, homebuilding operations generated
revenues of $796,425 compared to revenues of $607,501 in the first nine months
of 1995. The increase in revenues was primarily due to a 26.3% increase in the
number of homes settled from 3,431 in 1995 to 4,335 in 1996, and to a 4.0%
increase in the average settlement price from $175.8 in 1995 to $182.8 in 1996.
The increase in settlements was a direct result of a higher backlog at the
beginning of 1996 and throughout the first six months of 1996 when compared to
the same 1995 period. New orders increased by 4.3% to 4,262 during the first
nine months of 1996 compared with 4,088 during the first nine months of 1995.
11
Gross profit margins decreased to 13.4% in the first nine months of 1996
compared to 13.7% in the first nine months of 1995. The decrease in gross
profit margins from the prior year was primarily attributable to more
competitive market conditions in certain of the Company's markets, additional
costs incurred in the construction of homes as a result of severe winter weather
conditions in NVR's principal markets in the first quarter of 1996 and, to a
lesser extent, higher lumber costs.
SG&A expenses for 1996 increased $8,285 as compared to the same 1995
period, but as a percentage of revenues decreased .6%. The dollar increase in
SG&A was primarily due to increased costs that correspond to the aforementioned
increase in revenues.
CALCULATION OF HOMEBUILDING EBITDA:
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1996 1995
---------- -----------
Operating income $ 51,476 $ 36,904
Depreciation 2,104 1,638
Amortization of excess reorganization
value 5,283 5,283
--------- ----------
HOMEBUILDING EBITDA $ 58,863 $ 43,825
--------- ----------
% OF HOMEBUILDING REVENUES 7.4% 7.2%
Homebuilding EBITDA for the first nine months of 1996 was $15,038 or 34.3%
higher than the first nine months of 1995, and as a percentage of revenues
increased from 7.2% to 7.4%.
FINANCIAL SERVICES SEGMENT
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
The financial services segment generated operating income of $2,125
compared to $239 during the same period in 1995, representing an increase of
$1,886. Loan closings were $949,918 and $760,092 during the respective periods
ended September 30, 1996 and 1995, representing an increase of 25%. The
increase in operating income and the increased volume of loan closings during
the current nine month period were achieved despite fewer operating branch
offices and continued strong price competition. Operating income for the nine
months ended September 30, 1995 was negatively impacted by the accrual of $1,000
for the closure of thirteen mortgage origination branch offices. As noted
below, operating income for the nine months ended September 30, 1996 was
impacted by a loss of approximately $1,104 from the sale of mortgage servicing
rights.
Mortgage banking fees had a net increase of $2,246, representing a 13%
increase when comparing the respective periods of September 30, 1996 and 1995.
This increase can be primarily attributed to the higher gain on sale of loans
resulting from the increased loan closings. This increase is partially offset
by the loss of approximately $1,104 from the sale of $740,000 of mortgage
servicing rights during the third quarter of 1996. A summary of mortgage
banking fees is noted below:
MORTGAGE BANKING FEES: 1996 1995
---------- -----------
Net gain on sale of loans $ 11,531 $ 4,812
Servicing 4,046 5,330
Title services 4,570 3,760
Gain/(loss) on sale of servicing rights (1,104) 2,895
---------- -----------
$ 19,043 $ 16,797
---------- -----------
---------- -----------
12
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1996, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 125, ACCOUNTING FOR
TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES.
SFAS No. 125 establishes accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities. SFAS No. 125
is effective for financial statements for fiscal years beginning after December
15, 1996. Upon adoption, the Company does not believe that SFAS No. 125 will
have a material impact on its consolidated financial statements.
OTHER ELEMENTS IMPACTING RESULTS OF OPERATIONS
SUPPLEMENTAL DISCLOSURE OF NET INCOME PER SHARE
The Company is amortizing the reorganization value in excess of amounts
allocable to identifiable assets on a straight-line basis over a fifteen year
period beginning in the fourth quarter of 1993. Because this non-cash expense
significantly impacts net income, the following is presented for additional
analysis. Although the Company believes the calculation is helpful in assessing
the financial results of the Company, it should not be considered a substitute
for earnings per share as presented on the face of the statements of operations
on the accompanying financial statements.
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------------ ----------------------
1996 1995 1996 1995
----------- ---------- ----------- ---------
WEIGHTED AVERAGE SHARES OUTSTANDING:
Weighted average number of
shares of common stock and
common stock equivalents
outstanding 14,017,496 15,373,244 15,138,306 15,387,869
SUPPLEMENTAL INFORMATION:
Reported net income $ 8,274 $ 5,863 $ 20,784 $ 12,539
Plus:
Amortization of reorganization
value in excess of amounts
allocable to identifiable
assets 2,033 2,033 6,099 6,099
Less:
Extraordinary gain--
net of taxes -- -- -- (927)
----------- ----------- ---------- -----------
Income before extraordinary gain
and amortization of reorganization
value in excess of amounts allocable
to identifiable assets $ 10,307 $ 7,896 $ 26,883 $ 17,711
----------- ----------- ---------- -----------
----------- ----------- ---------- -----------
Earnings per share before
extraordinary gain and
amortization of reorganization
value in excess of amounts
allocable to identifiable
assets $ 0.74 $ 0.51 $ 1.78 $ 1.15
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
13
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 to fund its working capital needs, under which there
were no amounts outstanding at September 30, 1996.
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 $78,059 was outstanding at
September 30, 1996. NVR Finance also has available two annually renewable,
uncommitted gestation mortgage-backed security repurchase agreements ( "Repo
Facilities"), with a maximum of $50,000 in borrowings available under each
agreement. There was $9,054 outstanding under the Repo Facilities at September
30, 1996.
The Company believes that internally generated cash and borrowings
available under credit facilities will be sufficient to satisfy near term cash
requirements for working capital in both its homebuilding and mortgage banking
operations.
OTHER ELEMENTS IMPACTING LIQUIDITY
During the nine months ended September 30, 1996, the Company repurchased
2,175,504 shares of its common stock at an aggregate purchase price of $23,179,
which completed the equity repurchase program announced in April 1996.
On September 30, 1993, NVR issued warrants to purchase 2,162,828 shares of
common stock at an exercise price of $8.80 per share with an expiration date of
September 30, 1996. During 1996, 1,495,515 warrants were exercised for a like
number of common shares. Of the $13,161 aggregate increase to equity pursuant
to the warrant conversion, $9,600 is included as a receivable at September 30,
1996 as those proceeds were not received by the Company until October 1, 1996.
In addition, pursuant to the previously announced warrant repurchase program,
during 1996 NVR repurchased 561,135 warrants, at market prices, for an aggregate
purchase price of $309. The Company retired the repurchased warrants with a
charge to retained earnings equal to the purchase price. A total of 106,178
warrants expired unexercised.
14
PART II
-------
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 September 30, 1996.
15
EXHIBIT INDEX
EXHIBIT
NUMBER PAGE
- ------- --------------------------------------------------- ----
11. Computation of Earnings per Share 18
27. Financial Data Schedule 19
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.
October 25, 1996 NVR, Inc.
By: /s/ Paul C. Saville
-------------------
Paul C. Saville
Senior Vice President Finance and
Chief Financial Officer
17
EXHIBIT 11
NVR, INC.
COMPUTATION OF EARNINGS PER SHARE
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
1. Net income $8,274 $5,863 $20,784 $12,539
------ ------ ------- -------
2. Weighted average number of shares
outstanding 13,643 15,373 14,696 15,336
3. Shares issuable upon exercise
of dilutive options, warrants and
subscriptions outstanding during
period, based on average market
price 374 -- 442 52
------ ------ ------ ------
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 374 -- 442 52
------ ------ ------ ------
5. Weighted average number of shares
and share equivalents outstanding
(2 + 3) 14,017 15,373 15,138 15,388
------ ------ ------ ------
------ ------ ------ ------
6. Weighted average number
of shares outstanding assuming
full dilution (2 + 4) 14,017 15,373 15,138 15,388
------ ------ ------ ------
------ ------ ------ ------
7. Net income per share and
share equivalents (1/5) $0.59 $0.38 $1.37 $0.81
------ ------ ------ ------
------ ------ ------ ------
8. Net income per share, assuming
full dilution (1/6) $0.59 $0.38 $1.37 $0.81
------ ------ ------ ------
------ ------ ------ ------
18
5
1,000
U.S. DOLLARS
9-MOS
DEC-31-1996
JAN-1-1996
SEP-30-1996
1.
73,640
0
17,351
0
163,617
0
18,584
0
587,583
0
174,149
0
0
155,795
930
587,583
796,425
826,840
689,577
69,189
6,099
0
14,337
41,076
20,292
20,784
0
0
0
20,784
1.37
1.37
Item represents the non-cash amortization of excess reorganization value.
