NVR, INC. ANNOUNCES A 35% INCREASE IN EARNINGS PER SHARE
FOR IMMEDIATE RELEASE | Contact: Office: | Dan Malzahn (703) 956-4204 |
April 19, 2006, Reston, VA—NVR, Inc. (AMEX: NVR), one of the nation’s largest homebuilding and mortgage banking companies, announced that diluted earnings per share for its first quarter ended March 31, 2006 increased 35% and net income increased 12% when compared to the 2005 first quarter. Net income for the 2006 first quarter was $132,560,000, $19.48 per diluted share, compared to net income of $117,930,000, $14.38 per diluted share, for the same period of 2005. Consolidated revenues for the first three months of 2006 totaled $1,204,655,000, a 26% increase from $953,432,000 for the comparable 2005 quarter.
Homebuilding
New orders in the first quarter of 2006 increased 10% to 3,633 units, when compared to 3,312 units in the first quarter of 2005. New orders in the Washington D.C. market declined 12% in the first quarter when compared with the year earlier quarter as a result of a higher cancellation rate than the same period last year. The average sales price of total new orders in the first quarter of 2006 declined 3% from the first quarter of 2005. The decline is the result of a shift of new orders out of the Washington D.C. market into lower priced markets in the North and South regions. The cancellation rate in the first quarter of 2006 was 17% compared to 13% in the first quarter of 2005. Settlements increased in the first quarter of 2006 to 2,986 units, 14% more than the same period of 2005. Homebuilding revenues for the three months ended March 31, 2006 totaled $1,183,742,000, 26% higher than the year earlier period. Income before tax from the homebuilding segment totaled $205,546,000, an increase of 10% when compared to the first quarter of the previous year. Gross profit margins decreased to 27.3% in the 2006 first quarter compared to 27.7% for the same period in 2005. Selling, general and administrative costs as a percentage of revenue increased from 7.7% in the 2005 first quarter to 9.6% in the first quarter of 2006. The increase was primarily due to a pre-tax $12,240,000 charge for stock option expense related to the implementation of SFAS 123R, Share Based Payment. Increased personnel costs to position the Company for future growth and higher selling and marketing costs to support the Company’s community count growth also contributed to this increase. The Company’s backlog of homes sold but not settled at the end of the 2006 quarter increased on a unit basis by 10% to 8,957 units and 18% on a dollar basis to $3,901,354,000 when compared to the same period last year.
Mortgage Banking
Mortgage closed loan production of $736,782,000 for the three months ended March 31, 2006 was 20% higher than the same period last year. Operating income contributed by the mortgage banking operations during the first quarter of 2006 increased 47% to $12,481,000, when compared to $8,500,000 reported for the same period of 2005.
Outlook
The Company expects full year 2006 gross margins will continue to be negatively impacted by pricing pressure in many of its markets; however, the Company reiterated its full year 2006 guidance of approximately 15% growth in net income over 2005. Full year net income expectations include an after tax expense of approximately $36,000,000 for the implementation of SFAS 123R, Share Based Payment.
Some of the statements in this release made by the Company 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, NVR’s 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 future results, performance or achievements expressed or implied by the forward-looking statements. Such risk factors include, but are not limited to, general economic and business conditions (on both a national and regional level), interest rate changes, 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. The Company has no obligation to update such forward-looking statements.
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NVR, Inc.
Consolidated Statements of Income
(in thousands, except per share data)
(Unaudited)
Three Months Ended March 31, | ||||||||
2006 | 2005 | |||||||
Homebuilding: | ||||||||
Revenues | $ | 1,183,742 | $ | 939,252 | ||||
Other income | 2,376 | 2,059 | ||||||
Cost of sales | (861,039 | ) | (679,547 | ) | ||||
Selling, general and administrative | (114,006 | ) | (72,415 | ) | ||||
Operating income | 211,073 | 189,349 | ||||||
Interest expense | (5,527 | ) | (2,924 | ) | ||||
Homebuilding income | 205,546 | 186,425 | ||||||
Mortgage Banking: | ||||||||
Mortgage banking fees | 20,913 | 14,180 | ||||||
Interest income | 1,459 | 916 | ||||||
Other income | 231 | 215 | ||||||
General and administrative | (9,168 | ) | (6,636 | ) | ||||
Interest expense | (954 | ) | (175 | ) | ||||
Mortgage banking income | 12,481 | 8,500 | ||||||
Income before taxes | 218,027 | 194,925 | ||||||
Income tax expense | (85,467 | ) | (76,995 | ) | ||||
Net income | $ | 132,560 | $ | 117,930 | ||||
Basic earnings per share | $ | 23.69 | $ | 17.71 | ||||
Diluted earnings per share | $ | 19.48 | $ | 14.38 | ||||
Basic average shares outstanding | 5,596 | 6,659 | ||||||
Diluted average shares outstanding | 6,805 | 8,200 | ||||||
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NVR, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
March 31, 2006 | December 31, 2005 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Homebuilding: | ||||||||
Cash and cash equivalents | $ | 101,979 | $ | 170,090 | ||||
Receivables | 12,573 | 40,562 | ||||||
Inventory: | ||||||||
Lots and housing units, covered under | ||||||||
sales agreements with customers | 943,761 | 723,657 | ||||||
Unsold lots and housing units | 68,856 | 60,419 | ||||||
Manufacturing materials and other | 9,693 | 9,899 | ||||||
1,022,310 | 793,975 | |||||||
Contract land deposits | 552,962 | 549,160 | ||||||
Assets not owned, consolidated | ||||||||
per FIN 46R | 274,179 | 275,306 | ||||||
Property, plant and equipment, net | 32,855 | 31,096 | ||||||
Reorganization value in excess of amounts | ||||||||
allocable to identifiable assets, net | 41,580 | 41,580 | ||||||
Goodwill and other indefinite and definite | ||||||||
life intangibles, net | 12,030 | 12,061 | ||||||
Other assets | 151,553 | 142,851 | ||||||
2,202,021 | 2,056,681 | |||||||
Mortgage Banking: | ||||||||
Cash and cash equivalents | 2,529 | 7,436 | ||||||
Mortgage loans held for sale, net | 132,281 | 193,932 | ||||||
Property and equipment, net | 1,254 | 1,003 | ||||||
Reorganization value in excess of amounts | ||||||||
allocable to identifiable assets, net | 7,347 | 7,347 | ||||||
Other assets | 2,271 | 3,189 | ||||||
145,682 | 212,907 | |||||||
Total assets | $ | 2,347,703 | $ | 2,269,588 | ||||
(Continued)
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NVR, Inc.
Consolidated Balance Sheets (Continued)
(in thousands, except share and per share data)
March 31, 2006 | December 31, 2005 | |||||||
(unaudited) | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Homebuilding: | ||||||||
Accounts payable | $ | 293,810 | $ | 262,086 | ||||
Accrued expenses and other liabilities | 295,099 | 369,176 | ||||||
Liabilities related to assets not owned, | ||||||||
consolidated per FIN 46R | 212,620 | 215,284 | ||||||
Customer deposits | 270,352 | 256,837 | ||||||
Other term debt | 3,262 | 3,325 | ||||||
Notes payable | 215,000 | 103,000 | ||||||
Senior notes | 200,000 | 200,000 | ||||||
1,490,143 | 1,409,708 | |||||||
Mortgage Banking: | ||||||||
Accounts payable and other liabilities | 5,274 | 25,902 | ||||||
Notes payable | 78,392 | 156,816 | ||||||
83,666 | 182,718 | |||||||
Total liabilities | 1,573,809 | 1,592,426 | ||||||
Commitments and contingencies | ||||||||
Shareholders’ equity: | ||||||||
Common stock, $0.01 par value; 60,000,000 | ||||||||
shares authorized; 20,592,640 shares issued | ||||||||
for both March 31, 2006 and December 31, 2005 | 206 | 206 | ||||||
Additional paid-in capital | 522,434 | 473,886 | ||||||
Deferred compensation trust – 548,295 and | ||||||||
547,697 shares of NVR, Inc. common stock for | ||||||||
March 31, 2006 and December 31, 2005, | ||||||||
respectively | (79,546 | ) | (76,303 | ) | ||||
Deferred compensation liability | 79,546 | 76,303 | ||||||
Retained earnings | 2,741,188 | 2,608,628 | ||||||
Less treasury stock at cost – 14,911,451 and | ||||||||
14,964,482 shares for March 31, 2006 and | ||||||||
December 31, 2005, respectively | (2,489,934 | ) | (2,405,558 | ) | ||||
Total shareholders’ equity | 773,894 | 677,162 | ||||||
Total liabilities and shareholders’ | ||||||||
equity | $ | 2,347,703 | $ | 2,269,588 | ||||
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NVR, Inc.
Operating Activity
(unaudited)
(dollars in thousands)
Three Months Ended March 31, | ||||||||
2006 | 2005 | |||||||
Homebuilding data: | ||||||||
New orders (units) | ||||||||
Washington (1) | 805 | 911 | ||||||
Baltimore (2) | 458 | 427 | ||||||
North (3) | 1,591 | 1,313 | ||||||
South (4) | 779 | 661 | ||||||
Total | 3,633 | 3,312 | ||||||
Average new order price | $ | 387.6 | $ | 401.4 | ||||
Settlements (units) | ||||||||
Washington (1) | 745 | 629 | ||||||
Baltimore (2) | 465 | 341 | ||||||
North (3) | 1,138 | 1,019 | ||||||
South (4) | 638 | 626 | ||||||
Total | 2,986 | 2,615 | ||||||
Average settlement price | $ | 395.9 | $ | 358.7 | ||||
Backlog (units) | ||||||||
Washington (1) | 2,809 | 2,835 | ||||||
Baltimore (2) | 1,066 | 902 | ||||||
North (3) | 3,520 | 3,043 | ||||||
South (4) | 1,562 | 1,361 | ||||||
Total | 8,957 | 8,141 | ||||||
Average backlog price | $ | 435.6 | $ | 406.2 | ||||
Community count (average) | 578 | 481 | ||||||
Lots controlled at end of period | 105,000 | 88,600 | ||||||
Mortgage banking data: | ||||||||
Loan closings | $ | 736,782 | $ | 614,492 | ||||
Capture rate | 83 | % | 87 | % | ||||
Common stock information: | ||||||||
Shares outstanding at end of period | 5,681,189 | 6,506,875 | ||||||
Weighted average basic shares outstanding | 5,596,000 | 6,659,000 | ||||||
Weighted average diluted shares outstanding | 6,805,000 | 8,200,000 | ||||||
Number of shares repurchased | 161,856 | 315,450 | ||||||
Aggregate cost of shares repurchased | $ | 120,817 | $ | 248,406 |
(1) | Washington, D.C. metropolitan area and adjacent counties in Maryland, Virginia and West Virginia |
(2) | Baltimore, MD metropolitan area and adjacent counties in Pennsylvania |
(3) | Delaware, Maryland Eastern Shore, New Jersey, New York, Ohio, Pennsylvania, Michigan, and Kentucky |
(4) | North Carolina, South Carolina, Tennessee and Richmond, VA |
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