e10vq
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2006
OR
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o |
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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)
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Virginia
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54-1394360 |
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer Identification No.) |
11700 Plaza America Drive, Suite 500
Reston, Virginia 20190
(703) 956-4000
(Address, including zip code, and telephone number, including
area code, of registrants 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 þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer (as defined in Exchange Act Rule 12b-2).
Large accelerated filer þ Accelerated filer o Non-accelerated filer o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
As of April 21, 2006 there were 5,694,590 total shares of common stock outstanding.
NVR, Inc.
Form 10-Q
INDEX
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Page |
PART I |
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FINANCIAL INFORMATION |
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Item 1. |
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NVR, Inc. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at March 31, 2006
(unaudited) and December 31, 2005 |
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3 |
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Condensed Consolidated Statements of Income for the
Three Months Ended March 31, 2006 (unaudited)
and March 31, 2005 (unaudited) |
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5 |
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Condensed Consolidated Statements of Cash Flows for
the Three Months Ended March 31, 2006 (unaudited) and
March 31, 2005 (unaudited) |
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6 |
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Notes to Condensed Consolidated Financial Statements |
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7 |
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Item 2. |
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Managements Discussion and Analysis of Financial
Condition and Results of Operations |
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17 |
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Item 3. |
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Quantitative and Qualitative Disclosures About Market Risk |
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24 |
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Item 4. |
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Controls and Procedures |
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24 |
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PART II |
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OTHER INFORMATION |
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Item 1. |
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Legal Proceedings |
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25 |
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Item 1A. |
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Risk Factors |
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25 |
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Item 2. |
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Unregistered Sales of Equity Securities and Use of Proceeds |
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25 |
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Item 6. |
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Exhibits |
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25 |
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Signature |
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26 |
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Exhibit Index
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27 |
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NVR, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
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March 31, 2006 |
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December 31, 2005 |
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(unaudited) |
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ASSETS |
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Homebuilding: |
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Cash and cash equivalents |
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$ |
101,979 |
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$ |
170,090 |
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Receivables |
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12,573 |
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40,562 |
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Inventory: |
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Lots and housing units, covered under
sales agreements with customers |
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943,761 |
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723,657 |
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Unsold lots and housing units |
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68,856 |
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60,419 |
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Manufacturing materials and other |
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9,693 |
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9,899 |
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1,022,310 |
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793,975 |
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Assets not owned, consolidated
per FIN 46R |
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274,179 |
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275,306 |
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Property, plant and equipment, net |
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32,855 |
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31,096 |
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Reorganization value in excess of amounts
allocable to identifiable assets, net |
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41,580 |
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41,580 |
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Goodwill and indefinite life intangibles, net |
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11,686 |
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11,686 |
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Definite life intangibles, net |
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344 |
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375 |
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Contract land deposits |
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552,962 |
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549,160 |
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Other assets |
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151,553 |
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142,851 |
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2,202,021 |
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2,056,681 |
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Mortgage Banking: |
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Cash and cash equivalents |
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2,529 |
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7,436 |
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Mortgage loans held for sale, net |
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132,281 |
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193,932 |
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Property and equipment, net |
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1,254 |
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1,003 |
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Reorganization value in excess of amounts
allocable to identifiable assets, net |
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7,347 |
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7,347 |
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Other assets |
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2,271 |
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3,189 |
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145,682 |
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212,907 |
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Total assets |
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$ |
2,347,703 |
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$ |
2,269,588 |
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See notes to condensed consolidated financial statements.
(Continued)
3
NVR, Inc.
Condensed Consolidated Balance Sheets (Continued)
(in thousands, except share and per share data)
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March 31, 2006 |
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December 31, 2005 |
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(unaudited) |
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LIABILITIES AND SHAREHOLDERS
EQUITY |
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Homebuilding: |
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Accounts payable |
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$ |
293,810 |
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$ |
262,086 |
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Accrued expenses and other liabilities |
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271,552 |
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308,621 |
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Liabilities related to assets not owned,
consolidated per FIN 46R |
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212,620 |
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215,284 |
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Obligations under incentive plans |
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23,547 |
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60,555 |
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Customer deposits |
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270,352 |
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256,837 |
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Other term debt |
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3,262 |
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3,325 |
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Senior notes |
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200,000 |
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200,000 |
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Notes payable |
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215,000 |
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103,000 |
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1,490,143 |
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1,409,708 |
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Mortgage Banking: |
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Accounts payable and other liabilities |
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5,274 |
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25,902 |
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Note payable |
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78,392 |
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156,816 |
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83,666 |
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182,718 |
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Total liabilities |
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1,573,809 |
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1,592,426 |
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Commitments and contingencies |
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Shareholders equity: |
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Common stock, $0.01 par value; 60,000,000
shares authorized; 20,592,640 shares
issued as of both March 31, 2006 and
December 31, 2005 |
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206 |
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206 |
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Additional paid-in-capital |
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522,434 |
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473,886 |
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Deferred compensation trust 548,295 and
547,697 shares as of March 31, 2006
and December 31, 2005, respectively, of
NVR, Inc. common stock |
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(79,546 |
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(76,303 |
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Deferred compensation liability |
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79,546 |
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76,303 |
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Retained earnings |
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2,741,188 |
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2,608,628 |
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Less treasury stock at cost 14,911,451 and
14,964,482 shares at March 31, 2006
and December 31, 2005, respectively |
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(2,489,934 |
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(2,405,558 |
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Total shareholders equity |
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773,894 |
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677,162 |
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Total liabilities and shareholders equity |
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$ |
2,347,703 |
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$ |
2,269,588 |
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See notes to condensed consolidated financial statements.
4
NVR, Inc.
Condensed Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
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Three Months Ended March 31, |
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2006 |
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2005 |
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Homebuilding: |
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Revenues |
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$ |
1,183,742 |
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$ |
939,252 |
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Other income |
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2,376 |
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2,059 |
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Cost of sales |
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(861,039 |
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(679,547 |
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Selling, general and administrative |
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(114,006 |
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(72,415 |
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Operating income |
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211,073 |
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189,349 |
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Interest expense |
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(5,527 |
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(2,924 |
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Homebuilding income |
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205,546 |
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186,425 |
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Mortgage Banking: |
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Mortgage banking fees |
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20,913 |
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14,180 |
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Interest income |
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1,459 |
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916 |
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Other income |
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231 |
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215 |
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General and administrative |
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(9,168 |
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(6,636 |
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Interest expense |
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(954 |
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(175 |
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Mortgage banking income |
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12,481 |
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8,500 |
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Income before taxes |
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218,027 |
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194,925 |
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Income tax expense |
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(85,467 |
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(76,995 |
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Net income |
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$ |
132,560 |
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$ |
117,930 |
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Basic earnings per share |
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$ |
23.69 |
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$ |
17.71 |
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Diluted earnings per share |
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$ |
19.48 |
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$ |
14.38 |
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Basic average shares outstanding |
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5,596 |
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6,659 |
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Diluted average shares outstanding |
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6,805 |
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8,200 |
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See notes to condensed consolidated financial statements.
5
NVR, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
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Three Months Ended March 31, |
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2006 |
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2005 |
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Cash flows from operating activities: |
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Net income |
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$ |
132,560 |
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$ |
117,930 |
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Adjustments to reconcile net income to
net cash (used) provided by operating activities: |
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Depreciation and amortization |
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3,011 |
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2,406 |
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Stock option compensation expense |
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13,560 |
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Excess income tax benefit from exercise of stock options |
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(60,494 |
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Mortgage loans closed |
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(476,798 |
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(388,093 |
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Proceeds from sales of mortgage loans |
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551,910 |
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417,844 |
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Principal payments on mortgage loans held for sale |
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2,331 |
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4,539 |
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Gain on sale of loans |
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(15,792 |
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(9,690 |
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Net change in assets and liabilities: |
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Increase in inventories |
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(228,335 |
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(100,027 |
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Decrease (Increase) in receivables |
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28,971 |
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(2,463 |
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Increase in contract land deposits |
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(5,512 |
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(39,386 |
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Increase in accounts payable, customer deposits and accrued expenses |
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48,316 |
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92,726 |
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Decrease in obligations under incentive plans |
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(37,008 |
) |
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(42,128 |
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Other, net |
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(9,104 |
) |
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(6,683 |
) |
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Net cash (used) provided by operating activities |
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(52,384 |
) |
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46,975 |
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Cash flows from investing activities: |
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Purchase of property, plant and equipment |
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(4,847 |
) |
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(2,166 |
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Business acquisition, net of cash acquired |
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(7,465 |
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Other, net |
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88 |
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141 |
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Net cash used in investing activities |
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(4,759 |
) |
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(9,490 |
) |
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Cash flows from financing activities: |
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Net borrowings under notes payable and
other term debt |
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33,513 |
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88,558 |
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Purchase of treasury stock |
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(120,817 |
) |
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(248,406 |
) |
Excess income tax benefit from exercise of stock options |
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60,494 |
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Proceeds from exercise of stock options |
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10,935 |
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8,697 |
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Net cash used by financing activities |
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(15,875 |
) |
|
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(151,151 |
) |
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Net decrease in cash and cash equivalents |
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(73,018 |
) |
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(113,666 |
) |
Cash and cash equivalents, beginning of the period |
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|
177,526 |
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|
367,365 |
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Cash and cash equivalents, end of period |
|
$ |
104,508 |
|
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$ |
253,699 |
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Supplemental disclosures of cash flow information: |
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Interest paid during the period |
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$ |
3,397 |
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$ |
447 |
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Income taxes paid, net of refunds |
|
$ |
81,662 |
|
|
$ |
6,105 |
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Supplemental disclosures of non-cash activities: |
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Net assets not owned, consolidated per FIN 46 |
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$ |
1,537 |
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$ |
6,328 |
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|
See notes to condensed consolidated financial statements.
6
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands except per 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 and certain other entities in which the
Company is deemed to be the primary beneficiary (see note 2 to the condensed consolidated financial
statements). Intercompany accounts and transactions have been eliminated in consolidation. The
statements have been prepared in conformity with accounting principles generally accepted in the
United States of America 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 accounting principles generally accepted in the United States of America for complete financial
statements. Because the accompanying condensed consolidated financial statements do not include
all of the information and footnotes required by accounting principles generally accepted in the
United States of America, they should be read in conjunction with the financial statements and
notes thereto included in the Companys 2005 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, 2006 are not necessarily indicative of the results that may be expected for the year ending
December 31, 2006.
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes. Actual results
could differ from those estimates.
For the three-month periods ended March 31, 2006 and 2005, comprehensive income equaled net
income; therefore, a separate statement of comprehensive income is not included in the accompanying
financial statements.
2. Consolidation of Variable Interest Entities
In December 2003, Financial Accounting Standards Board issued Revised Interpretation No. 46
(FIN 46R), Consolidation of Variable Interest Entities, which was effective for NVR as of March
31, 2004. FIN 46R requires the primary beneficiary of a variable interest entity to consolidate
that entity on its financial statements. The primary beneficiary of a variable interest entity is
the party that absorbs a majority of the variable interest entitys expected losses, receives a
majority of the entitys expected residual returns, or both, as a result of ownership, contractual,
or other financial interests in the entity. Expected losses are the expected negative variability
in the fair value of an entitys net assets, exclusive of its variable interests, and expected
residual returns are the expected positive variability in the fair value of an entitys net assets,
exclusive of its variable interests. As discussed below, NVR evaluates the provisions of FIN 46R
as it relates to NVRs finished lot acquisition strategy.
NVR does not engage in the land development business. Instead, the Company typically
acquires finished building lots at market prices from various development entities under fixed
price purchase agreements. The purchase agreements require deposits that may be forfeited if NVR
fails to perform under the agreement. The deposits required under the purchase agreements are in
the form of cash or letters of credit in varying amounts, and typically range up to 10% of the
aggregate purchase price of the finished lots. As of March 31, 2006, the Company controlled
approximately 104,000 lots with deposits in cash and letters of credit totaling approximately
$605,000 and $16,000, respectively.
The Company believes that this lot acquisition strategy reduces the financial requirements and
risks associated with direct land ownership and land development. NVR may, at its option, choose
for any reason and at any time not to perform under these purchase agreements by delivering notice
of its intent not to acquire the finished lots under contract. NVRs sole legal obligation and
economic loss for failure to perform under these purchase agreements is limited to the amount of
the deposit pursuant to the liquidating damage
7
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands except per share data)
provisions contained within the purchase agreements. In other words, if NVR does not perform under
a purchase agreement, NVR loses only its deposit. NVR does not have any financial or specific
performance guarantees, or completion obligations, under these purchase agreements, with the
exception of three specific performance contracts pursuant to which the company is committed to
purchasing approximately 55 finished lots at an aggregate purchase price of approximately $6,700.
None of the creditors of any of the development entities with which NVR enters fixed price purchase
agreements have recourse to the general credit of NVR. Except as described below, NVR also does
not share in an allocation of either the profit earned or loss incurred by any of these entities
with which NVR enters fixed price purchase agreements.
On a very limited basis, NVR also obtains finished lots using joint venture limited liability
corporations (LLCs). All LLCs are structured such that NVR is a non-controlling member and is
at risk only for the amount invested. NVR is not a borrower, guarantor or obligor on any of the
LLCs debt. NVR enters into a standard fixed price purchase agreement to purchase lots from the
LLCs.
At March 31, 2006, NVR had an aggregate investment in thirteen separate LLCs totaling
approximately $14,000, which controlled approximately 1,000 lots. NVR recognizes its share of the
earnings of the LLCs as an adjustment of the cost basis of the lots at the time that the lot and
related home is settled with an external customer. During the three months ended March 31, 2006
and March 31, 2005, NVR adjusted cost of sales by approximately $(110) and $112, respectively,
which represented NVRs share of the earnings (losses) of the LLCs.
Forward contracts, such as the fixed price purchase agreements utilized by NVR to acquire
finished lot inventory, are deemed to be variable interests under FIN 46R. Therefore, the
development entities with which NVR enters fixed price purchase agreements, including the LLCs,
are examined under FIN 46R for possible consolidation by NVR of such development entities on NVRs
financial statements. NVR has developed a methodology to determine whether it, or conversely, the
owner(s) of the applicable development entity is the primary beneficiary of a development entity.
The methodology used to evaluate NVRs primary beneficiary status requires substantial management
judgment and estimation. These judgments and estimates involve assigning probabilities to various
estimated cash flow possibilities relative to the development entitys expected profits and losses
and the cash flows associated with changes in the fair value of finished lots under contract.
Although management believes that its accounting policy is designed to properly assess NVRs
primary beneficiary status relative to its involvement with the development entities from which NVR
acquires finished lots, changes to the probabilities and the cash flow possibilities used in NVRs
evaluation could produce widely different conclusions regarding whether NVR is or is not a
development entitys primary beneficiary.
The Company has evaluated all of its fixed price purchase agreements and LLC arrangements and
has determined that it is the primary beneficiary of thirty-six of those development entities with
which the agreements and arrangements are held. As a result, at March 31, 2006, NVR has
consolidated such development entities in the accompanying consolidated balance sheet. Where NVR
deemed itself to be the primary beneficiary of a development entity created after December 31, 2003
and the development entity refused to provide financial statements to NVR, NVR utilized estimation
techniques to perform the consolidation. The effect of the consolidation under FIN 46R at March
31, 2006 was the inclusion on the balance sheet of $274,179 as Assets not owned, consolidated per
FIN 46R, with a corresponding inclusion of $212,620 as Liabilities related to assets not owned,
consolidated per FIN 46R, after elimination of intercompany items. Inclusive in these totals were
assets of approximately $32,000 and liabilities of approximately $26,000 estimated for ten
development entities created after December 31, 2003 that did not provide financial statements.
8
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands except per share data)
Following is the consolidating schedule at March 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NVR, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
and |
|
|
FIN 46R |
|
|
|
|
|
|
Consolidated |
|
|
|
Subsidiaries |
|
|
Entities |
|
|
Eliminations |
|
|
Total |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
101,979 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
101,979 |
|
Receivables |
|
|
12,573 |
|
|
|
|
|
|
|
|
|
|
|
12,573 |
|
Homebuilding inventory |
|
|
1,022,310 |
|
|
|
|
|
|
|
|
|
|
|
1,022,310 |
|
Property, plant and equipment, net |
|
|
32,855 |
|
|
|
|
|
|
|
|
|
|
|
32,855 |
|
Reorganization value in excess of amount
allocable to identifiable assets, net |
|
|
41,580 |
|
|
|
|
|
|
|
|
|
|
|
41,580 |
|
Goodwill and intangibles, net |
|
|
12,030 |
|
|
|
|
|
|
|
|
|
|
|
12,030 |
|
Contract land deposits |
|
|
605,042 |
|
|
|
|
|
|
|
(52,080 |
) |
|
|
552,962 |
|
Other assets |
|
|
161,032 |
|
|
|
|
|
|
|
(9,479 |
) |
|
|
151,553 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,989,401 |
|
|
|
|
|
|
|
(61,559 |
) |
|
|
1,927,842 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage banking assets: |
|
|
145,682 |
|
|
|
|
|
|
|
|
|
|
|
145,682 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIN 46R Entities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land under development |
|
|
|
|
|
|
259,250 |
|
|
|
|
|
|
|
259,250 |
|
Other assets |
|
|
|
|
|
|
14,929 |
|
|
|
|
|
|
|
14,929 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
274,179 |
|
|
|
|
|
|
|
274,179 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
2,135,083 |
|
|
$ |
274,179 |
|
|
$ |
(61,559 |
) |
|
$ |
2,347,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable, accrued expenses
and other liabilities |
|
$ |
588,909 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
588,909 |
|
Customer deposits |
|
|
270,352 |
|
|
|
|
|
|
|
|
|
|
|
270,352 |
|
Other term debt |
|
|
3,262 |
|
|
|
|
|
|
|
|
|
|
|
3,262 |
|
Senior notes |
|
|
200,000 |
|
|
|
|
|
|
|
|
|
|
|
200,000 |
|
Notes payable |
|
|
215,000 |
|
|
|
|
|
|
|
|
|
|
|
215,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,277,523 |
|
|
|
|
|
|
|
|
|
|
|
1,277,523 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage banking liabilities: |
|
|
83,666 |
|
|
|
|
|
|
|
|
|
|
|
83,666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIN 46R Entities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable, accrued expenses
and other liabilities |
|
|
|
|
|
|
11,575 |
|
|
|
(53 |
) |
|
|
11,522 |
|
Debt |
|
|
|
|
|
|
154,492 |
|
|
|
|
|
|
|
154,492 |
|
Contract land deposits |
|
|
|
|
|
|
52,080 |
|
|
|
(52,080 |
) |
|
|
|
|
Advances from NVR, Inc. |
|
|
|
|
|
|
9,025 |
|
|
|
(9,025 |
) |
|
|
|
|
Minority interest |
|
|
|
|
|
|
|
|
|
|
46,606 |
|
|
|
46,606 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
227,172 |
|
|
|
(14,552 |
) |
|
|
212,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
773,894 |
|
|
|
47,007 |
|
|
|
(47,007 |
) |
|
|
773,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders
equity |
|
$ |
2,135,083 |
|
|
$ |
274,179 |
|
|
$ |
(61,559 |
) |
|
$ |
2,347,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands except per share data)
Under FIN 46R, an enterprise with an interest in a variable interest entity or potential
variable interest entity created before December 31, 2003, is not required to apply FIN 46R to that
entity if the enterprise, after making an exhaustive effort, is unable to obtain the information
necessary to perform the accounting required to consolidate the variable interest entity for which
it is determined to be the primary beneficiary. At March 31, 2006 NVR has been unable to obtain
the information necessary to perform the accounting required to consolidate thirteen separate
development entities created before December 31, 2003 for which NVR determined it was the primary
beneficiary. NVR has made, or has committed to make, aggregate deposits, totaling approximately
$15,500 to these thirteen separate development entities, with a total aggregate purchase price for
the finished lots of approximately $121,000. The aggregate deposit made or committed to being made
is NVRs maximum exposure to loss. As noted above, because NVR does not have any contractual or
ownership interests in the development entities with which it contracts to buy finished lots (other
than the limited use of the LLCs as discussed above), NVR does not have the ability to compel
these development entities to provide financial or other data. Because NVR has no ownership rights
in any of these thirteen development entities, the consolidation of such entities has no impact on
NVRs net income or earnings per share for the three months ended March 31, 2006. Aggregate
activity with respect to the thirteen development entities is included in the following table:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
2006 |
|
2005 |
Finished lots purchased dollars |
|
$ |
5,125 |
|
|
$ |
4,958 |
|
Finished lots purchased units |
|
|
56 |
|
|
|
61 |
|
3. Stock-Based Compensation
On January 1, 2006 (the Effective Date), the Company adopted Statement of Financial
Accounting Standards (SFAS) 123R, Share-Based Payment, which revised SFAS 123, Accounting
for Stock-Based Compensation. Prior to fiscal year 2006 and the adoption of SFAS 123R, NVR
followed the intrinsic value method in accounting for its stock-based employee compensation
arrangements as defined by Accounting Principles Board Opinion (APB) No. 25, Accounting for
Stock Issued to Employees.
SFAS 123R requires an entity to recognize an expense within its income statement for all
share-based payment arrangements, which includes employee stock option plans. The expense is
based on the grant-date fair value of the options granted, and is recognized ratably over the
requisite service period. NVR adopted SFAS 123R under the modified prospective method.
Under the modified prospective method, SFAS 123R applies to new awards and to awards modified,
repurchased, or cancelled after the required Effective Date, as well as to the unvested
portion of awards outstanding as of the required Effective Date. The Companys stock option
programs are accounted for as equity awards.
NVRs option plans provide for the granting of stock options to certain key employees of
the Company to purchase shares of common stock. The exercise price of options granted is
equal to the market value of the Companys common stock on the date of grant. Options are
granted for a ten-year term, and vest in separate tranches over periods of seven to nine
years, depending upon the plan from which the shares were granted. For options granted prior
to May 2005, vesting was predicated solely on continued employment over a long-term vesting
schedule (service-only options). For options granted in May 2005 and thereafter, option
vesting is contingent first on the Company achieving an aggregate four-year diluted earnings
per share target, and if that target is met, then on continued employment over a five year
period subsequent to the conclusion of the performance period (performance condition
options).
10
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands except per share data)
At March 31, 2006, there is an aggregate of 2,861,357 options outstanding, and an additional
204,726 options available to grant, under existing stock option plans.
The following table provides additional information relative to NVRs stock option plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2006 |
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Aggregate |
|
|
|
|
|
|
|
Exercise |
|
|
Contract Life |
|
|
Intrinsic |
|
|
|
Options |
|
|
Price |
|
|
(Years) |
|
|
Value |
|
Stock Options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at beginning of period |
|
|
3,085,019 |
|
|
$ |
265.05 |
|
|
|
5.77 |
|
|
|
|
|
Granted |
|
|
10,585 |
|
|
|
708.19 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(214,887 |
) |
|
|
50.88 |
|
|
|
|
|
|
|
|
|
Forfeited or expired |
|
|
(19,360 |
) |
|
|
296.31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of period |
|
|
2,861,357 |
|
|
|
282.49 |
|
|
|
5.72 |
|
|
$ |
1,306,095 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at end of period |
|
|
411,244 |
|
|
$ |
52.07 |
|
|
|
3.24 |
|
|
$ |
282,216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To estimate the grant-date fair value of its stock options, the Company uses the
Black-Scholes option-pricing model. The Black-Scholes model estimates the per share fair value of
an option on its date of grant based on the following: the options exercise price; the price of
the underlying stock on the date of grant; the estimated dividend yield; a risk-free interest
rate; the estimated option term; and the expected volatility. For the risk-free interest rate,
the Company uses a U.S. Treasury Strip due in a number of years equal to the options expected
term. NVR has concluded that its historical exercise experience is the best estimate of future
exercise patterns to determine an options expected term. To estimate expected volatility, NVR
analyzed the historic volatility of its common stock, and further analyzed the implied and
historical volatility of publicly traded options of a peer group. The estimated fair value of the
options granted under SFAS 123R during the 2006 first quarter was calculated using the following
assumptions:
|
|
|
|
|
|
|
Three Months |
|
|
|
Ended |
|
|
|
March 31, 2006 |
|
Estimated option life |
|
9.02 years |
|
Risk free interest rate (range) |
|
|
4.46% - 4.97 |
% |
Expected volatility |
|
|
34.00 |
% |
Expected dividend rate |
|
|
0.00 |
% |
Weighted average grant-date fair
value per share of options granted |
|
$ |
364.99 |
|
Compensation cost for service-only option grants is recognized on a straight-line
basis over the requisite service period for the entire award (from the date of grant through
the period of the last separately vesting portion of the grant). Compensation cost for
performance condition option grants is recognized on a straight-line basis over the
requisite service period for each separately vesting tranche of the award as if the award was,
in substance, multiple awards (graded vesting attribution method). Of the 2,861,357 options
outstanding at March 31, 2006, 2,458,332 vest solely based on a service condition, and 403,025
vest based on a combined performance and service condition. Compensation cost is recognized
within the income statement in the same expense line as the cash compensation paid to the
respective employees. SFAS 123R also requires the Company to estimate forfeitures in
calculating the expense related to stock-based compensation. NVR has concluded that its
historical forfeiture rate is the best measure to estimate future forfeitures of granted stock
options. The impact on compensation costs due to changes in the expected forfeiture rate will
be recognized in the period that they become known.
11
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands except per share data)
The effect of adopting SFAS 123R during the period ended March 31, 2006 is as follows:
|
|
|
|
|
Total pre-tax stock-based compensation |
|
$ |
13,560 |
|
Total stock-based compensation, net of tax |
|
|
9,067 |
|
Effect on basic earnings per share |
|
|
(1.62 |
) |
Effect on diluted earnings per share |
|
|
(1.33 |
) |
As of March 31, 2006, the total unrecognized compensation cost for outstanding
unvested stock option awards equals approximately $284,000, and the weighted-average period
over which the unrecognized compensation will be recorded is equal to 5.8 years.
Because NVR adopted SFAS 123R using the modified prospective basis, the prior interim
period has not been restated. The following table sets forth the effect on net income and
basic and diluted earnings per share as if the Company had applied the fair value recognition
provisions for its stock-based compensation arrangements for the three-month period ended
March 31, 2005:
|
|
|
|
|
|
|
Three Months |
|
|
|
Ended |
|
|
|
March 31, 2005 |
|
Net income, as reported |
|
$ |
117,930 |
|
Add: Total stock-based employee compensation expense
included in reported net income, net of related tax effects |
|
|
|
|
Deduct: Total stock-based employee compensation expense
determined under fair value based method, net of tax |
|
|
(6,280 |
) |
|
|
|
|
Pro forma net income |
|
$ |
111,650 |
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
Basicas reported |
|
$ |
17.71 |
|
|
|
|
|
Basicpro forma |
|
$ |
16.77 |
|
|
|
|
|
|
|
|
|
|
Dilutedas reported |
|
$ |
14.38 |
|
|
|
|
|
Dilutedpro forma |
|
$ |
13.82 |
|
|
|
|
|
The Company settles option exercises by issuing shares of treasury stock to option
holders. Shares are relieved from the treasury account based on the weighted average cost basis of
treasury shares acquired. Approximately 215,000 options to purchase shares of the Companys common
stock were exercised during the three months ended March 31, 2006. Information with respect to the
exercised options is as follows:
|
|
|
|
|
|
|
Three Months |
|
|
Ended |
|
|
March 31, 2006 |
Aggregate exercise proceeds |
|
$ |
10,935 |
|
Aggregate intrinsic value on exercise dates |
|
|
152,087 |
|
The Company has elected the alternative transition method pursuant to FASB Staff Position
SFAS 123R-3 to establish the beginning balance of the additional paid-in capital pool available to
absorb any future write-offs of deferred tax benefits associated with stock-based compensation.
12
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands except per share data)
4. Earnings per Share
The following weighted average shares and share equivalents are used to calculate basic and
diluted EPS for the three months ended March 31, 2006 and 2005:
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
Basic weighted average number of
shares outstanding |
|
|
5,596,000 |
|
|
|
6,659,000 |
|
Shares issuable upon exercise
of dilutive options |
|
|
1,209,000 |
|
|
|
1,541,000 |
|
|
|
|
|
|
|
|
Diluted average number of
shares outstanding |
|
|
6,805,000 |
|
|
|
8,200,000 |
|
|
|
|
|
|
|
|
As discussed in note 3, NVR adopted SFAS 123R on the modified prospective basis. Prior
period amounts have not been restated. Beginning in 2006 with the adoption of SFAS 123R, the
assumed proceeds used in the treasury method for calculating NVRs diluted earnings per share
includes the amount the employee must pay upon exercise, the amount of compensation cost attributed
to future services and not yet recognized, and the amount of tax benefits that would be credited to
additional paid-in capital assuming exercise of the option. Beginning in 2006, the assumed amount
credited to additional paid-in capital equals the tax benefit from assumed exercise after
consideration of the intrinsic value upon assumed exercise less the actual stock-based compensation
expense to be recognized in the income statement in 2006 and future periods. During 2005 when the
Company was still accounting for its stock-based compensation under APB 25, there was no
compensation cost attributed to future services included in the assumed proceeds calculation, and
the amount assumed to be credited to additional paid-in capital equaled the full assumed tax
benefit resulting from the intrinsic value of the options upon the assumed exercise.
Options issued under service-only equity plans to purchase 57,177 and 1,750 shares of common
stock were outstanding during the quarters ended March 31, 2006 and 2005, respectively, but were
not included in the computation of diluted earnings per share because the effect would have been
anti-dilutive. In addition, the 384,740 options outstanding under the 2005 Stock Option Plan,
9,055 options outstanding under the 1998 Directors Long-Term Stock Option Plan, 285 options
outstanding under the 2000 Broadly-Based Stock Option Plan, and 8,945 options outstanding under the
1998 Management Long-Term Stock Option Plan are considered performance-based compensation, and
accordingly, have been excluded from the computation of diluted earnings per share because the
performance target has not been achieved as of March 31, 2006, pursuant to the requirements of SFAS
128, Earnings Per Share.
5. Excess Reorganization Value, Goodwill and Other Intangibles
Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets,
requires goodwill and reorganization value in excess of amounts allocable to identifiable assets
(excess reorganization value) to be tested for impairment on an annual basis subsequent to the
year of adoption. The Company completed the annual assessment of impairment during the first
quarter of 2006 and determined that there was no impairment of either goodwill or excess
reorganization value.
6. Debt
During the first quarter of 2006, the Company increased its commitment under its existing
revolving credit agreement by $45,000 to $445,000. The credit agreement includes an accordion
feature permitting the Company to request increases in the principal amount of the credit
agreement, subject to Administrative Agent approval and the agreement of existing or new lenders to
provide such increase, up to an aggregate commitment of $600,000. As of March 31, 2006, the
Company has not requested any additional increases. There were no changes made to any other terms
of the credit agreement.
13
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands except per share data)
7. Shareholders Equity
A summary of changes in shareholders equity is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
|
|
|
|
Deferred |
|
|
Deferred |
|
|
|
|
|
|
Common |
|
|
Paid-In |
|
|
Retained |
|
|
Treasury |
|
|
Comp. |
|
|
Comp. |
|
|
|
|
|
|
Stock |
|
|
Capital |
|
|
Earnings |
|
|
Stock |
|
|
Trust |
|
|
Liability |
|
|
Total |
|
Balance, December 31, 2005 |
|
$ |
206 |
|
|
$ |
473,886 |
|
|
$ |
2,608,628 |
|
|
$ |
(2,405,558 |
) |
|
$ |
(76,303 |
) |
|
$ |
76,303 |
|
|
$ |
677,162 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
132,560 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
132,560 |
|
Deferred compensation activity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,243 |
) |
|
|
3,243 |
|
|
|
|
|
Purchase of common stock
for treasury |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(120,817 |
) |
|
|
|
|
|
|
|
|
|
|
(120,817 |
) |
Stock-based compensation |
|
|
|
|
|
|
13,560 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,560 |
|
Stock option activity |
|
|
|
|
|
|
10,935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,935 |
|
Tax benefit from stock-based
compensation activity |
|
|
|
|
|
|
60,494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,494 |
|
Treasury shares issued
upon option exercise |
|
|
|
|
|
|
(36,441 |
) |
|
|
|
|
|
|
36,441 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2006 |
|
$ |
206 |
|
|
$ |
522,434 |
|
|
$ |
2,741,188 |
|
|
$ |
(2,489,934 |
) |
|
$ |
(79,546 |
) |
|
$ |
79,546 |
|
|
$ |
773,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company repurchased approximately 162,000 shares of its common stock at an aggregate
purchase price of approximately $120,800 during the three months ended March 31, 2006. See Item 2
of Part II for additional information on treasury stock repurchases made during the quarter ended
March 31, 2006.
8. Product Warranties
The Company establishes warranty and product liability reserves to provide for estimated
future expenses as a result of construction and product defects, product recalls and litigation
incidental to NVRs homebuilding business. Liability estimates are determined based on
managements judgment, considering such factors as historical experience, the likely current cost
of corrective action, manufacturers and subcontractors participation in sharing the cost of
corrective action, consultations with third party experts such as engineers, and discussions with
our general counsel and outside counsel retained to handle specific product liability cases. The
following table reflects the changes in the Companys warranty reserve during the three months
ended March 31, 2006 and 2005:
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
Warranty reserve, beginning of period |
|
$ |
60,112 |
|
|
$ |
42,319 |
|
Provision |
|
|
10,285 |
|
|
|
7,689 |
|
Payments |
|
|
(8,831 |
) |
|
|
(8,394 |
) |
|
|
|
|
|
|
|
Warranty reserve, end of period |
|
$ |
61,566 |
|
|
$ |
41,614 |
|
|
|
|
|
|
|
|
14
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands except per share data)
9. 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, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding |
|
Mortgage Banking |
|
Totals |
Revenues from external customers |
|
$ |
1,183,742 |
|
|
$ |
20,913 |
|
|
$ |
1,204,655 |
(a) |
Segment profit |
|
|
218,276 |
|
|
|
13,342 |
|
|
|
231,618 |
(b) |
Segment assets |
|
|
1,874,232 |
|
|
|
138,335 |
|
|
|
2,012,567 |
(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: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding |
|
|
Mortgage Banking |
|
|
Totals |
|
Segment profit |
|
$ |
218,276 |
|
|
$ |
13,342 |
|
|
$ |
231,618 |
|
Less: stock-based compensation expense |
|
|
(12,699 |
) |
|
|
(861 |
) |
|
|
(13,560 |
) |
Less: amortization of definite life
intangibles |
|
|
(31 |
) |
|
|
|
|
|
|
(31 |
) |
|
|
|
|
|
|
|
|
|
|
Consolidated income before income taxes |
|
$ |
205,546 |
|
|
$ |
12,481 |
|
|
$ |
218,027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
$ |
1,874,232 |
|
|
$ |
138,335 |
|
|
$ |
2,012,567 |
|
Add: Excess reorganization value,
goodwill and intangibles, net |
|
|
53,610 |
|
|
|
7,347 |
|
|
|
60,957 |
|
Add: Assets not owned, consolidated
per FIN 46R |
|
|
274,179 |
|
|
|
|
|
|
|
274,179 |
|
|
|
|
|
|
|
|
|
|
|
Total consolidated assets |
|
$ |
2,202,021 |
|
|
$ |
145,682 |
|
|
$ |
2,347,703 |
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding |
|
Mortgage Banking |
|
Totals |
Revenues from external customers |
|
$ |
939,252 |
|
|
$ |
14,180 |
|
|
$ |
953,432 |
(c) |
Segment profit |
|
|
186,456 |
|
|
|
8,500 |
|
|
|
194,956 |
(d) |
Segment assets |
|
|
1,518,009 |
|
|
|
122,287 |
|
|
|
1,640,296 |
(d) |
|
|
|
(c) |
|
Total amounts for the reportable segments equal the respective amounts for the
consolidated enterprise. |
|
(d) |
|
The following reconciles segment profit and segment assets to the respective amounts for
the consolidated enterprise: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding |
|
|
Mortgage Banking |
|
|
Totals |
|
Segment profit |
|
$ |
186,456 |
|
|
$ |
8,500 |
|
|
$ |
194,956 |
|
Less: amortization of definite life
intangibles |
|
|
(31 |
) |
|
|
|
|
|
|
(31 |
) |
|
|
|
|
|
|
|
|
|
|
Consolidated income before income taxes |
|
$ |
186,425 |
|
|
$ |
8,500 |
|
|
$ |
194,925 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
$ |
1,518,009 |
|
|
$ |
122,287 |
|
|
$ |
1,640,296 |
|
Add: Excess reorganization value,
goodwill and intangibles, net |
|
|
52,628 |
|
|
|
7,347 |
|
|
|
59,975 |
|
Add: Assets not owned, consolidated
per FIN 46R |
|
|
144,255 |
|
|
|
|
|
|
|
144,255 |
|
|
|
|
|
|
|
|
|
|
|
Total consolidated assets |
|
$ |
1,714,892 |
|
|
$ |
129,634 |
|
|
$ |
1,844,526 |
|
|
|
|
|
|
|
|
|
|
|
15
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands except per share data)
10. Legal Proceedings
In February 2006, NVR received a request for information pursuant to Section 308(a) of
the Clean Water Act (the Act) from Region 4 of the United States Environmental Protection
Agency (the EPA). The request sought information regarding the Companys storm water
management practices in North Carolina during the homebuilding construction process. In 2005,
NVR received a request for information from Region 3 of the EPA about the storm water
discharge practices the Company utilized in connection with other recent homebuilding
projects. NVR has provided the EPA with information in response to each of its requests.
Additionally in 2005, the EPA notified the Company of alleged storm water management
violations under the Act at a homebuilding site in Pennsylvania, and that the Company may
potentially be subject to administrative fines of up to $157 for the alleged violations. NVR
cannot predict the outcome of the EPAs review of our storm water management practices.
Further, it is not known at this time whether the EPA will seek to take legal action or impose
penalties in connection with the alleged violation at the construction site in Pennsylvania.
16
|
|
|
Item 2. |
|
Managements Discussion and Analysis of Financial Condition and Results of Operations
(dollars in thousands) |
Forward-Looking Statements
Some of the statements in this Form 10-Q, as well as statements made by NVR in periodic press
releases and other public communications, constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. Certain, but not
necessarily all, of such forward-looking statements can be identified by the use of
forward-looking terminology, such as believes, expects, may, will, should, or
anticipates or the negative thereof or other variations thereof or comparable terminology, or by
discussion of strategies, each of which involves risks and uncertainties. All statements other
than those of historical facts included herein, including those regarding market trends, NVRs
financial position, business strategy, projected plans and objectives of management for future
operations, are forward-looking statements. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause the actual results or performance of
NVR to be materially different from any future results, performance or achievements expressed or
implied by the forward-looking statements. Such risks, uncertainties and other factors include,
but are not limited to, general economic and business conditions (on both a national and regional
level), interest rate changes, access to suitable financing, competition, the availability and
cost of land and other raw materials used by NVR in its homebuilding operations, shortages of
labor, weather related slow downs, building moratoria, governmental regulation, the ability of NVR
to integrate any acquired business, fluctuation and volatility of stock and other financial
markets and other factors over which NVR has little or no control. NVR has no obligation to
update such forward-looking statements. For additional information regarding risk factors, see
Part II, Item 1(a) of this Report.
Unless the context otherwise requires, references to NVR, we, us or our include NVR
and its subsidiaries.
Results of Operations for the Three Months Ended March 31, 2006 and 2005
Overview
Our primary business is the construction and sale of single-family detached homes,
townhomes and condominium buildings. To fully serve our homebuilding customers, we also operate
a mortgage banking and title services business. We operate in the following markets:
|
|
|
|
|
|
|
Washington:
|
|
Washington, D.C. metropolitan area and adjacent counties in Maryland, Virginia, and West Virginia |
|
|
Baltimore:
|
|
Baltimore, MD metropolitan area and adjacent counties in Pennsylvania |
|
|
North:
|
|
Delaware, Kentucky, Maryland Eastern Shore, Michigan, New Jersey, New York, Ohio and Pennsylvania |
|
|
South:
|
|
North Carolina, South Carolina, Tennessee and Richmond, VA |
We believe that we operate our business with a conservative operating strategy. We do not
engage in land development and primarily construct homes on a pre-sold basis. This strategy
allows us to maximize inventory turnover, which enables us to minimize market risk and to
operate with less capital, thereby enhancing rates of return on equity and total capital. In
addition, we focus on obtaining and maintaining a leading market position in each market we
serve. This strategy allows us to gain valuable efficiencies and competitive advantages in our
markets which management believes contributes to minimizing the adverse effects of regional
economic cycles and provides growth opportunities within these markets.
17
Because we are not active in the land development business, our continued success is
contingent upon our ability to control an adequate supply of finished lots on which to build,
and on our developers ability to timely deliver finished lots to meet the sales demands of our
customers. We acquire finished lots at market prices from various development entities under
fixed price purchase agreements (purchase agreements). These purchase agreements require
deposits in the form of cash or letters of credit that may be forfeited if we fail to perform
under the purchase agreement. However, we believe this lot acquisition strategy reduces the
financial requirements and risks associated with direct land ownership and development. As of
March 31, 2006, we controlled approximately 104,000 lots, an increase of 17% from March 31,
2005, with deposits in cash and letters of credit totaling approximately $605,000 and $16,000,
respectively.
Consolidated revenues and net income for the quarter ended March 31, 2006 increased 26% and
12%, respectively, from the same period in 2005. The increase in net income coupled with our
continuing share repurchase program resulted in a 35% increase in diluted earnings per share in
the first quarter of 2006 as compared to the first quarter of 2005.
We implemented Statement of Accounting Standards (SFAS) 123R in the first quarter of
2006, which resulted in a consolidated pre-tax charge of $13,560 (see note 3 to the condensed
consolidated financial statements for more information). For the full year, we expected to
record a post-tax charge of approximately $36,000 for stock based compensation.
Homebuilding Segment
The following table summarizes homebuilding settlements, new orders and backlog unit
activity by region for the quarters ended March 31, 2006 and 2005:
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
Settlements: |
|
|
|
|
|
|
|
|
Washington |
|
|
745 |
|
|
|
629 |
|
Baltimore |
|
|
465 |
|
|
|
341 |
|
North |
|
|
1,138 |
|
|
|
1,019 |
|
South |
|
|
638 |
|
|
|
626 |
|
|
|
|
|
|
|
|
Total |
|
|
2,986 |
|
|
|
2,615 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average settlement price |
|
$ |
395.9 |
|
|
$ |
358.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Orders: |
|
|
|
|
|
|
|
|
Washington |
|
|
805 |
|
|
|
911 |
|
Baltimore |
|
|
458 |
|
|
|
427 |
|
North |
|
|
1,591 |
|
|
|
1,313 |
|
South |
|
|
779 |
|
|
|
661 |
|
|
|
|
|
|
|
|
Total |
|
|
3,633 |
|
|
|
3,312 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average new order price |
|
$ |
387.6 |
|
|
$ |
401.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Backlog: |
|
|
|
|
|
|
|
|
Washington |
|
|
2,809 |
|
|
|
2,835 |
|
Baltimore |
|
|
1,066 |
|
|
|
902 |
|
North |
|
|
3,520 |
|
|
|
3,043 |
|
South |
|
|
1,562 |
|
|
|
1,361 |
|
|
|
|
|
|
|
|
Total |
|
|
8,957 |
|
|
|
8,141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average backlog price |
|
$ |
435.6 |
|
|
$ |
406.2 |
|
|
|
|
|
|
|
|
18
The following table summarizes the results of operations for the homebuilding segment for the
quarters ended March 31, 2006 and 2005:
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
Revenues |
|
$ |
1,183,742 |
|
|
$ |
939,252 |
|
Cost of sales |
|
$ |
861,039 |
|
|
$ |
679,547 |
|
Gross profit margin percentage |
|
|
27.3 |
% |
|
|
27.7 |
% |
Selling, general and administrative expenses |
|
$ |
114,006 |
|
|
$ |
72,415 |
|
Three Months Ended March 31, 2006 and 2005
Homebuilding revenues increased 26% for the first quarter of 2006 from the same period in 2005
as a result of a 14% increase in the number of homes settled and a 10% increase in the average
settlement price. The increase in the number of homes settled is primarily attributable to a 13%
increase in the number of homes in backlog at December 31, 2005 as compared to December 31, 2004.
Average settlement prices increased throughout a majority of our markets quarter over quarter
primarily as a result of strong housing demand in prior quarters within these markets.
Gross profit margins in the first quarter of 2006 were down slightly as compared to the first
quarter of 2005. However, we expect that gross profit margins in future periods will be negatively
impacted as we are facing an increasingly competitive sales environment in many of our markets,
which is causing downward pressure on current selling prices.
Additionally, future gross profit margins may be
negatively impacted if the geographic mix shift that we are currently
experiencing (as discussed below) continues.
New orders for the first quarter of 2006 increased 10% from the same period in 2005. However,
overall sales absorption slowed as the average number of active communities increased 20% to 578 in
the first quarter of 2006 as compared to 481 communities in the same period in 2005. Increases in
new orders occurred in each of our regions except for the Washington region. The 12% decrease in
new orders in the Washington region is primarily attributable to a more highly competitive sales
environment within this region, and an increase in cancellation rates. As a result of our new
order geographic mix shifting out of the Washington region (which historically has had higher
selling prices than our other regions) to our other regions, the average selling price of new
orders decreased 3% in the first quarter of 2006 as compared to the same period in 2005. Our
overall cancellation rate has increased to approximately 17% in the first quarter of 2006 as
compared to 13% in the same period in 2005. Backlog units and dollars were 8,957 and $3,901,354,
respectively, at March 31, 2006 compared to 8,141 and $3,306,804, respectively, at March 31, 2005.
Selling, general and administrative (SG&A) expenses for the first quarter of 2006 increased
approximately $41,600 from the first quarter of 2005, and as a percentage of revenues increased to
9.6% from 7.7%. SG&A expenses increased approximately $25,700 in
the current quarter because of higher personnel costs due
to increased staffing levels and higher selling and marketing costs. These increased costs are related to the 20% increase in the average number
of active communities from the same period in 2005, and support our overall growth strategy.
Additionally, as a result of implementing SFAS 123R in the first quarter of 2006, we have recorded
$12,240 in SG&A compensation costs related to outstanding stock options.
19
Mortgage Banking Segment
Three Months Ended March 31, 2006 and 2005
We conduct our mortgage banking activity through NVR Mortgage Finance, Inc. (NVRM), a wholly
owned subsidiary. NVRM focuses exclusively on serving the homebuilding segments customer base.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2006 |
|
|
2005 |
|
Loan closing volume: |
|
|
|
|
|
|
|
|
Total principal |
|
$ |
736,782 |
|
|
$ |
614,492 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan Volume Mix: |
|
|
|
|
|
|
|
|
Adjustable rate mortgages |
|
|
36 |
% |
|
|
53 |
% |
|
|
|
|
|
|
|
Fixed-rate mortgages |
|
|
64 |
% |
|
|
47 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit: |
|
$ |
12,481 |
|
|
$ |
8,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage banking fees: |
|
|
|
|
|
|
|
|
Net gain on sale of loans |
|
$ |
15,792 |
|
|
$ |
9,690 |
|
Title services |
|
|
4,882 |
|
|
|
4,173 |
|
Servicing |
|
|
239 |
|
|
|
317 |
|
|
|
|
|
|
|
|
|
|
$ |
20,913 |
|
|
$ |
14,180 |
|
|
|
|
|
|
|
|
Loan closing volume for the three months ended March 31, 2006 increased 20% over the same
period for 2005. The 2006 increase is primarily attributable to a 10% increase in the number of
units closed and a 9% increase in the average loan amount. The unit increase reflects an increase
in the number of homes that we settled in the 2006 first quarter, as noted above. The increase in
the average loan amount reflects the aforementioned increase in the average settlement prices. The
percentage of the number of loans closed by NVRM for our homebuyers who obtain a mortgage to
purchase the home (Capture Rate) decreased four percentage points to 83% for the 2006 first
quarter compared to 87% for the 2005 first quarter.
Segment income for the three months ended March 31, 2006 increased approximately $4,000 from
the same period for 2005. The increase is primarily due to a net increase in mortgage banking fees
attributable to the aforementioned increase in closed loan volume and to a lesser extent, a shift
in product mix towards fixed rate mortgages. The increase in mortgage banking fees was partially
offset by a $1,000 increase in contractual repayments of loan sale income to investors for loans
that were paid in full within a set number of days following the sale of the loan. The increase in
segment income was net of an approximate $2,500 increase in general and administrative expenses
during the first three months of 2006 compared to the same period for 2005. The increase in
general and administrative expenses is primarily due to an increase in salaries and other personnel
costs due to an increase of approximately 20% in the total number of NVRM employees in the first
three months of 2006 compared to the same period for 2005. The additional staffing is intended to
position NVRM for future growth. General and Administrative expenses in 2006 were also impacted by
approximately $860 in stock-based compensation expense from the adoption of SFAS 123R.
Liquidity and Capital Resources
We fund our operations from cash flows provided by our operating activities, a short-term
credit facility and the public debt and equity markets. In the first quarter of 2006, our
operating activities used cash of $52,384. Cash was used to fund the increase in homebuilding
inventory of approximately $228,000 as a result of an increase in units under construction at
March 31, 2006 as compared to December 31, 2005. The presentation of operating cash flows was
also reduced by $60,494, which is the amount of the excess tax
20
benefit realized from the exercise of stock options during the quarter and credited directly to
additional paid in capital. As required by SFAS 123R, which we adopted effective January 1,
2006, excess tax benefits credited directly to additional paid in capital resulting from
stock-based compensation must be presented as an operating cash outflow and a financing cash
inflow. In addition to cash being provided by our current quarters homebuilding operations,
cash was also provided by an approximate $29,000 reduction in receivables and an increase in
customer deposits of approximately $13,500 attributable to the increase in backlog units.
Net cash used for investing activities was approximately $4,800 for the period ended March
31, 2006, which resulted from property and equipment purchases throughout the period.
Net cash used for financing activities was approximately $15,900 for the period ended March
31, 2006. During the 2006 first quarter, we repurchased approximately 162,000 shares of our
common stock at an aggregate purchase price of $120,817 under our ongoing common stock
repurchase program, discussed below. We also reduced borrowings under the mortgage warehouse
facility by approximately $78,000 based on current borrowing needs, and increased borrowings under
the working capital facility by $112,000 to support our higher
homebuilding inventory levels. Cash was also
provided by the realization of $60,494 in excess income tax benefits from the exercise of stock
options, which pursuant to SFAS 123R, must be reported as a financing cash inflow.
In addition to our homebuilding operating activities, we also utilize a short-term
unsecured working capital revolving credit facility (the Facility) to provide for working
capital cash requirements. During the first quarter of 2006, we executed a Commitment and Acceptance increasing the
commitment under the existing Facility by $45,000 to an aggregate commitment of $445,000,
subject to certain borrowing base limitations. The Facility expires in December 2010 and
outstanding amounts bear interest at either (i) the prime rate plus an Applicable Margin (as
defined within the Facility) based on our credit rating and/or debt to capital ratio or (ii) the
London Interbank Offering Rate (LIBOR) plus the Applicable Margin. Up to $150,000 of the
Facility is currently available for issuance in the form of letters of credit, of which $24,838
was outstanding at March 31, 2006. There were $215,000 direct borrowings outstanding under the
Facility as of March 31, 2006. At March 31, 2006, there were no borrowing base limitations
reducing the amount available to us for borrowings.
Our mortgage banking segment provides for its mortgage origination and other operating
activities using cash generated from operations as well as a short-term credit facility. The
mortgage banking segment utilizes an annually renewable mortgage warehouse facility with an
aggregate available borrowing limit of $175,000 to fund its mortgage origination activities. The
interest rate under the Revolving Credit Agreement is either: (i) LIBOR plus 1.125%, or (ii) 1.125%
to the extent that NVRM provides compensating balances. The mortgage warehouse facility expires in
August 2006. We believe that the mortgage warehouse facility will be renewed with terms consistent
with the current warehouse facility prior to its expiration. There was $78,392 outstanding under
this facility at March 31, 2006. At March 31, 2006, borrowing base limitations reduced the amount
available to us for borrowings to approximately $128,400. Our mortgage banking segment also
currently has available an aggregate of $50,000 of borrowing capacity in an uncommitted gestation
and repurchase agreement. There were no amounts outstanding under the gestation and repurchase
agreement at March 31, 2006.
In addition to funding growth in our homebuilding and mortgage operations, we
historically have used a substantial portion of our excess liquidity to repurchase outstanding
shares of our common stock in the open market and in privately negotiated transactions. This
ongoing repurchase activity is conducted pursuant to publicly announced Board authorizations,
and is typically executed in accordance with the safe harbor provisions of Rule 10b-18 under
the Securities Exchange Act of 1934. We believe the repurchase program assists us in
accomplishing our primary objective, increasing shareholder value. See Part II, Item 2 of
this Form 10-Q for disclosure of amounts repurchased during the first quarter of 2006. We
expect to continue to repurchase shares of our common stock from time to time subject to
market conditions and available excess liquidity.
21
In 2004, we filed a shelf registration statement (Shelf) with the Securities and Exchange
Commission (SEC) to register up to $1,000,000 for future offer and sale of debt securities,
common shares, preferred shares, depositary shares representing preferred shares and warrants.
The SEC declared the Shelf effective on June 15, 2004. The proceeds received from future
offerings issued under the New Shelf are expected to be used for general corporate purposes. In
addition, we have $55,000 available for issuance under a prior shelf registration statement
filed with the SEC on January 20, 1998. The prior shelf registration statement, which was
declared effective on February 27, 1998, provides that securities may be offered from time to
time in one or more series and in the form of senior or subordinated debt. This discussion of
our shelf registration capacity does not constitute an offer of any securities for sale.
We believe that internally generated cash and borrowings available under credit facilities and
the public debt and equity markets will be sufficient to satisfy near and long term cash
requirements for working capital in both our homebuilding and mortgage banking operations.
Critical Accounting Policies
General
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported amounts of revenues
and expenses during the reporting periods. We continually evaluate the estimates we use to
prepare the consolidated financial statements, and update those estimates as necessary. In
general, managements estimates are based on historical experience, on information from third
party professionals, and other various assumptions that management believes to be reasonable
under the facts and circumstances. Actual results could differ materially from those estimates
made by management.
Variable Interest Entities
Revised Financial Interpretation No. 46 (FIN 46R), Consolidation of Variable Interest
Entities, which was effective for us as of March 31, 2004, requires the primary beneficiary of a
variable interest entity to consolidate that entity on its financial statements. The primary
beneficiary of a variable interest entity is the party that absorbs a majority of the variable
interest entitys expected losses, receives a majority of the entitys expected residual
returns, or both, as a result of ownership, contractual, or other financial interests in the
entity. Expected losses are the expected negative variability in the fair value of an entitys
net assets exclusive of its variable interests, and expected residual returns are the expected
positive variability in the fair value of an entitys net assets, exclusive of its variable
interests.
Forward contracts, such as the fixed price purchase agreements utilized by us to acquire
finished lot inventory, are deemed to be variable interests under FIN 46R. Therefore, the
development entities with which we enter fixed price purchase agreements are examined under FIN 46R
for possible consolidation by us, including certain joint venture limited liability corporations
(LLCs) utilized by us to acquire finished lots on a limited basis. We have developed a
methodology to determine whether we, or, conversely, the owner(s) of the applicable development
entity, are the primary beneficiary of a development entity. The methodology used to evaluate our
primary beneficiary status requires substantial management judgment and estimates. These judgments
and estimates involve assigning probabilities to various estimated cash flow possibilities relative
to the development entitys expected profits and losses and the cash flows associated with changes
in the fair value of finished lots under contract. Although we believe that our accounting policy
is designed to properly assess our primary beneficiary status relative to our involvement with the
development entities from which we acquire finished lots, changes to the probabilities and the cash
flow possibilities used in our evaluation could produce widely different conclusions regarding
whether we are or are not a development entitys primary beneficiary, possibly resulting in
additional, or fewer, development entities being consolidated on our financial
statements. See note 2 to the condensed, consolidated financial statements contained within
for further information.
22
Homebuilding Inventory
The carrying value of inventory is stated at the lower of cost or market value. Cost of lots
and completed and uncompleted housing units represent the accumulated actual cost thereof. Field
construction supervisors salaries and related direct overhead expenses are included in inventory
costs. Interest costs are not capitalized into inventory. Upon settlement, the cost of the units
is expensed on a specific identification basis. Cost of manufacturing materials is determined on a
first-in, first-out basis. Recoverability and impairment, if any, is primarily evaluated by
analyzing sales of comparable assets. We believe that our accounting policy is designed to
properly assess the carrying value of our homebuilding inventory.
Contract Land Deposits
We purchase finished lots under fixed price purchase agreements that require deposits that may
be forfeited if we fail to perform under the contract. The deposits are in the form of cash or
letters of credit in varying amounts and represent a percentage of the aggregate purchase price of
the finished lots. We maintain an allowance for losses on contract land deposits that we believe
is sufficient to provide for losses in our existing contract land deposit portfolio. The allowance
reflects managements judgment of the present loss exposure at the end of the reporting period,
considering market and economic conditions, sales absorption and profitability within specific
communities and terms of the various contracts. Although we consider the allowance for losses on
contract land deposits reflected on the March 31, 2006 balance sheet to be adequate, there can be
no assurance that this allowance will prove to be adequate over time to cover losses due to
unanticipated adverse changes in the economy or other events adversely affecting specific markets
or the homebuilding industry.
Intangible Assets
Reorganization value in excess of identifiable assets (excess reorganization value),
goodwill and indefinite life intangible assets are not subject to amortization upon the adoption of
Statement of Financial Accounting Standards No 142, Goodwill and Other Intangible Assets (FAS
142). Rather, excess reorganization value, goodwill and other intangible assets are subject to at
least an annual assessment for impairment by applying a fair-value based test. We continually
evaluate whether events and circumstances have occurred that indicate that the remaining value of
excess reorganization value, goodwill and other intangible assets may not be recoverable. We
completed the annual assessment of impairment during the first quarter of 2006, and as of March 31,
2006, we believe that excess reorganization value, goodwill and other intangible assets were not
impaired. This conclusion is based on our judgment, considering such factors as our history of
operating success, our well recognized brand names and the significant positions held in the
markets in which we operate. However, changes in strategy or adverse changes in market conditions
could impact this judgment and require an impairment loss to be recognized for the amount that the
carrying value of excess reorganization value, goodwill and/or other intangible assets exceeds
their fair value.
Warranty/Product Liability Accruals
Warranty and product liability accruals are established to provide for estimated future
expenses as a result of construction and product defects, product recalls and litigation incidental
to our business. Liability estimates are determined based on managements judgment, considering
such factors as historical experience, the likely current cost of corrective action, manufacturers
and subcontractors participation in sharing the cost of corrective action, consultations with
third party experts such as engineers, and discussions with our general counsel and outside counsel
retained to handle specific product liability cases. Although we consider the warranty and product
liability accrual reflected on the March 31, 2006 balance sheet
(see note 8 to the condensed
consolidated financial statements) to be adequate, there can be no assurance that this accrual will
prove to be adequate over time to cover losses due to increased costs for material and labor, the
inability or
refusal of manufacturers or subcontractors to financially participate in corrective action,
unanticipated adverse legal settlements, or other unanticipated changes to the assumptions used to
estimate the warranty and product liability accrual.
23
Stock Option Expense
Beginning in 2006 with our adoption of SFAS 123R, we are required to recognize within our
income statement compensation costs related to our stock based compensation plans. The costs
recognized are based on the grant date fair value. Compensation cost for service-only option
grants is recognized on a straight-line basis over the requisite service period for the entire
award (from the date of grant through the period of the last separately vesting portion of the
grant). Compensation cost for performance condition option grants is recognized on a
straight-line basis over the requisite service period for each separately vesting portion of the
award as if the award was, in substance, multiple awards (graded vesting attribution method).
We calculate the fair value of our non-publicly traded, employee stock options using the
Black-Scholes option-pricing model. While the Black-Scholes model is a widely accepted method to
calculate the fair value of options, its results are dependent on input variables, two of which,
expected term and expected volatility, are significantly dependent on managements judgment. We
have concluded that our historical exercise experience is the best estimate of future exercise
patterns to determine an options expected term. To estimate expected volatility, we analyze the
historic volatility of our common stock, and the implied and historical volatility of
publicly-traded options of a peer group. Changes in managements judgment of the expected term and
the expected volatility could have a material effect on the grant-date fair value calculated and
expensed within the income statement. In addition, we are required to estimate future option
forfeitures when considering the amount of stock-based compensation costs to record. We have
concluded that our historical forfeiture rate is the best measure to estimate future forfeitures of
granted stock options. However, there can be no assurance that our future forfeiture rate will not
be materially higher or lower than our historical forfeiture rate, which would affect the aggregate
cumulative compensation expense recognized. Further, although we believe that the compensation
costs recognized during the quarter ended March 31, 2006 is representative of the ratable
amortization of the grant-date fair value of unvested options outstanding and expected to be
exercised, changes to the estimated input values such as expected term and expected volatility
could produce widely different fair values. See note 3 to the condensed consolidated financial
statements included herein for additional information on our adoption
of SFAS 123R.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
There have been no material changes in our market risks during the three months ended March
31, 2006. For additional information regarding market risk, see our Annual Report on Form 10-K
for the year ended December 31, 2005.
Item 4. Controls and Procedures
As of the end of the period covered by this report, an evaluation was performed under
the supervision and with the participation of our management, including our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based on that
evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the design
and operation of these disclosure controls and procedures were effective. There have been no
changes in our internal controls over financial reporting identified in connection with the
evaluation referred to above that have materially affected, or are reasonably likely to
materially affect, our internal controls over financial reporting.
24
PART
II. OTHER INFORMATION
Item 1. Legal Proceedings
We are involved in various claims and litigation arising principally in the ordinary
course of business. At this time, we are not involved in any legal proceedings that we
believe are likely to have a material adverse effect on our financial condition or results of
operations. See note 10 to the condensed consolidated financial statements for a discussion
of notification received from the United States Environmental Protection Agency regarding
alleged violations of Section 308(a) of the Clean Water Act.
Item 1A. Risk Factors
There has been no material change in our risk factors as previously disclosed in our Form
10-K for the fiscal year ended December 31, 2005 in response to Item 1A. to Part 1 of such Form
10-K.
|
|
|
Item 2. |
|
Unregistered Sales of Equity Securities and Use of Proceeds
(Dollars in thousands, except per share data) |
We had one repurchase authorization outstanding during the quarter ended March 31, 2006.
On November 3, 2005 (November Authorization), we publicly announced the board of directors
approval for us to repurchase up to an aggregate of $300,000 of our common stock in one or more
open market and/or privately negotiated transactions. The November Authorization did not have an
expiration date. During the quarter ended March 31, 2006, NVR completed the utilization of the
November Authorization. We repurchased the following shares of our common stock during the
first quarter of 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Number |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(or Approximate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollar Value) of |
|
|
|
|
|
|
Average |
|
Total Number of Shares |
|
Shares that May |
|
|
Total Number |
|
Price |
|
Purchased as Part of |
|
Yet Be Purchased |
|
|
of Shares |
|
Paid per |
|
Publicly Announced |
|
Under the Plans or |
Period |
|
Purchased |
|
Share |
|
Plans or Programs |
|
Programs |
January 1-31, 2006 (1) |
|
|
161,856 |
|
|
$ |
746.44 |
|
|
|
161,856 |
|
|
$ |
0 |
|
February 1-28, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 1-31, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
161,856 |
|
|
$ |
746.44 |
|
|
|
161,856 |
|
|
$ |
0 |
|
|
|
|
(1) |
|
All shares were purchased under the November Authorization. As such, the
November Authorization expired pursuant to its terms. |
Item 6. Exhibits
(a) Exhibits:
|
10.1 |
|
Commitment and Acceptance dated March 27, 2006. Filed as Exhibit
10.1 to NVRs Current Report on Form 8-K filed March 30, 2006. |
|
|
31.1 |
|
Certification of NVRs Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
31.2 |
|
Certification of NVRs Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
32 |
|
Certification of NVRs Chief Executive Officer and Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. |
25
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.
|
|
|
|
|
|
|
|
|
By: |
/s/ Dennis M. Seremet
|
|
|
Dennis M. Seremet |
|
|
Vice President, Chief Financial Officer
and Treasurer |
|
|
26
Exhibit Index
|
|
|
|
|
|
|
Exhibit |
|
|
|
|
Number |
|
Description |
|
Page |
10.1
|
|
Commitment and Acceptance dated March 27, 2006.
Filed as Exhibit 10.1 to NVRs Current Report on Form
8-K filed March 30, 2006. |
|
|
|
|
|
|
|
|
|
|
|
31.1
|
|
Certification of NVRs Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
28 |
|
|
|
|
|
|
|
|
31.2
|
|
Certification of NVRs Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
29 |
|
|
|
|
|
|
|
|
32
|
|
Certification of NVRs Chief Executive Officer and Chief
Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
|
|
30 |
|
27
exv31w1
Exhibit 31.1
SARBANES-OXLEY ACT SECTION 302 CERTIFICATIONS
I, Paul C. Saville, certify that:
1. |
|
I have reviewed this report on Form 10-Q of NVR, Inc.; |
|
2. |
|
Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
|
3. |
|
Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report; |
|
4. |
|
The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
|
Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being
prepared; |
|
|
b) |
|
Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted
accounting principles; |
|
|
c) |
|
Evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such
evaluation; and |
|
|
d) |
|
Disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter (the
registrants fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrants internal control
over financial reporting; and |
5. |
|
The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of directors (or persons performing the equivalent
functions): |
|
a) |
|
All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information;
and |
|
|
b) |
|
Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrants internal control over financial reporting. |
|
|
|
|
|
|
|
|
Date: April 26, 2006 |
By: |
/s/ Paul C. Saville
|
|
|
|
Paul C. Saville |
|
|
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President
and Chief Executive Officer |
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exv31w2
Exhibit 31.2
SARBANES-OXLEY ACT SECTION 302 CERTIFICATIONS
I, Dennis M. Seremet, certify that:
1. |
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I have reviewed this report on Form 10-Q of NVR, Inc.; |
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2. |
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Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
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3. |
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Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report; |
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4. |
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The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
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a) |
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Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being
prepared; |
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b) |
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Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted
accounting principles; |
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c) |
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Evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such
evaluation; and |
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d) |
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Disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter (the
registrants fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrants internal control
over financial reporting; and |
5. |
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The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of directors (or persons performing the equivalent
functions): |
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a) |
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All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information;
and |
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b) |
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Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrants internal control over financial reporting. |
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Date: April 26, 2006 |
By: |
/s/ Dennis M. Seremet
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Dennis M. Seremet |
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Vice President, Chief Financial Officer and
Treasurer |
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exv32
Exhibit 32
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of NVR, Inc. for the period ended March 31,
2006 as filed with the Securities and Exchange Commission on the date hereof (the Report), each
of the undersigned officers of NVR, Inc., hereby certifies pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
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1. |
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The Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and |
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2. |
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The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of NVR, Inc. |
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Date: April 26, 2006 |
By: |
/s/ Paul C. Saville
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Paul C. Saville |
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President and Chief Executive Officer |
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By: |
/s/ Dennis M. Seremet
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Dennis M. Seremet |
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Vice President, Chief Financial Officer
and Treasurer |
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