UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2001
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____ to ____
Commission file number 1-12378
NVR, Inc.
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(Exact name of registrant as specified in its charter)
Virginia 54-1394360
------------------------------- ---------------------------
(State or other jurisdiction of (IRS employer identification
incorporation or organization) number)
7601 Lewinsville Road, Suite 300
McLean, Virginia 22102
(703) 761-2000
--------------------------------------------------------------------------------
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
(Not Applicable)
--------------------------------------------------------------------------------
(Former name, former address, and former fiscal year if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No___
---
As of October 15, 2001, there were 7,479,313 total shares of common stock
outstanding.
NVR, Inc.
FORM 10-Q
INDEX
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Page
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PART I FINANCIAL INFORMATION
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Item 1. NVR, Inc. Condensed Consolidated Financial Statements
-----------------------------------------------------
Condensed Consolidated Balance Sheets at September 30, 2001
(unaudited) and December 31, 2000 ................................... 3
Condensed Consolidated Statements of Income for the
Three Months Ended September 30, 2001 (unaudited)
and September 30, 2000 (unaudited) and the
Nine Months Ended September 30, 2001 (unaudited)
and September 30, 2000 (unaudited) .................................. 5
Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 2001 (unaudited) and
September 30, 2000 (unaudited) ...................................... 6
Notes to Condensed Consolidated Financial Statements ................ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................................. 11
PART II OTHER INFORMATION
-------
Item 6. Exhibits and Reports on Form 8-K .................................... 14
Exhibit Index ....................................................... 14
Signature ........................................................... 15
2
PART I
------
Item 1.
-------
NVR, Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands)
September 30, 2001 December 31, 2000
------------------ -----------------
ASSETS (unaudited)
Homebuilding:
Cash and cash equivalents $105,163 $130,079
Receivables 12,159 6,670
Inventory:
Lots and housing units, covered under
sales agreements with customers 377,423 294,094
Unsold lots and housing units 36,179 32,600
Manufacturing materials and other 8,493 7,987
-------- --------
422,095 334,681
Property, plant and equipment, net 14,890 13,514
Reorganization value in excess of amounts
allocable to identifiable assets, net 43,121 47,741
Goodwill, net 6,652 7,472
Contract land deposits 142,099 96,119
Other assets 70,118 61,210
-------- --------
816,297 697,486
-------- --------
Mortgage Banking:
Cash and cash equivalents 8,778 7,629
Mortgage loans held for sale, net 148,178 120,999
Mortgage servicing rights, net 1,470 1,479
Property and equipment, net 1,982 2,351
Reorganization value in excess of amounts
allocable to identifiable assets, net 7,618 8,435
Other assets 1,269 2,881
-------- --------
169,295 143,774
-------- --------
Total assets $985,592 $841,260
======== ========
See notes to condensed consolidated financial statements.
(Continued)
3
NVR, Inc.
Condensed Consolidated Balance Sheets (Continued)
(dollars in thousands)
September 30, 2001 December 31, 2000
------------------ -----------------
(unaudited)
LIABILITIES AND SHAREHOLDERS'
EQUITY
Homebuilding:
Accounts payable $ 129,706 $ 108,064
Accrued expenses and other liabilities 206,055 173,787
Customer deposits 84,796 63,486
Notes payable - 210
Other term debt 5,350 4,957
Senior notes 115,000 115,000
------------ -----------
540,907 465,504
------------ -----------
Mortgage Banking:
Accounts payable and other liabilities 14,302 9,760
Notes payable 132,351 53,488
------------ -----------
146,653 63,248
------------ -----------
Total liabilities 687,560 528,752
------------ -----------
Forward purchase contract obligation - 65,028
Commitments and contingencies
Shareholders' equity:
Common stock, $0.01 par value; 60,000,000
shares authorized; 20,614,365
shares issued as of September 30, 2001 and
December 31, 2000 206 206
Additional paid-in-capital 191,513 115,136
Deferred compensation trust- 367,618 and
337,703 shares of NVR, Inc. common
stock at September 30, 2001 and December
31, 2000, respectively (19,457) (15,915)
Deferred compensation liability 19,457 15,915
Retained earnings 569,584 399,810
Less treasury stock at cost; 13,053,877
and 11,755,671 shares at September 30, 2001
and December 31, 2000, respectively (463,271) (267,672)
------------ -----------
Total shareholders' equity 298,032 247,480
------------ -----------
Total liabilities and shareholders'
equity $ 985,592 $ 841,260
============ ===========
See notes to condensed consolidated financial statements.
4
NVR, Inc.
Condensed Consolidated Statements of Income
(dollars in thousands, except per share data)
(unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2001 2000 2001 2000
---- ---- ---- ----
Homebuilding:
Revenues $ 677,962 $ 602,485 $ 1,845,676 $ 1,651,572
Other income 655 650 2,963 2,006
Cost of sales (530,041) (485,414) (1,442,882) (1,340,073)
Selling, general and administrative (48,183) (41,211) (129,517) (109,172)
Amortization of reorganization value
in excess of amounts allocable to
identifiable assets and goodwill (1,813) (1,813) (5,440) (5,440)
----------- ----------- ----------- -----------
Operating income 98,580 74,697 270,800 198,893
Interest expense (2,976) (3,216) (8,799) (9,917)
----------- ----------- ----------- -----------
Homebuilding income 95,604 71,481 262,001 188,976
----------- ----------- ----------- -----------
Mortgage Banking:
Mortgage banking fees 13,922 10,147 36,827 27,285
Interest income 1,670 1,438 4,334 5,149
Other income 274 149 583 333
General and administrative (6,564) (8,337) (18,705) (24,094)
Amortization of reorganization value
in excess of amounts allocable to
identifiable assets and goodwill (272) (272) (816) (980)
Interest expense (480) (552) (1,267) (2,593)
Restructuring and asset impairment
charge - - - (5,726)
----------- ----------- ----------- -----------
Operating income/(loss) 8,550 2,573 20,956 (626)
----------- ----------- ----------- -----------
Total segment income 104,154 74,054 282,957 188,350
Income tax expense (41,662) (30,140) (113,183) (76,658)
----------- ----------- ----------- -----------
Net Income $ 62,492 $ 43,914 $ 169,774 $ 111,692
=========== =========== =========== ===========
Basic Earnings per Share $ 8.02 $ 4.93 $ 20.99 $ 12.19
=========== =========== =========== ===========
Diluted Earnings per Share $ 6.68 $ 4.30 $ 17.57 $ 10.78
=========== =========== =========== ===========
See notes to condensed consolidated financial statements.
5
NVR, Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
Nine Months Ended September 30,
-------------------------------
2001 2000
---- ----
Cash flows from operating activities:
Net income $ 169,774 $ 111,692
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 10,834 10,266
Restructuring and asset impairment charge - 5,726
Mortgage loans closed (1,344,108) (1,338,453)
Proceeds from sales of mortgage loans 1,329,607 1,388,708
Gain on sale of mortgage servicing rights (98) (622)
Gain on sale of loans (25,851) (18,416)
Net change in assets and liabilities:
Increase in inventories (87,414) (36,563)
Increase in receivables (4,725) (6,086)
Increase in contract land deposits (45,980) (27,431)
Increase in accounts payable, customer deposits and
accrued expenses 97,694 49,845
Other, net (7,519) (3,371)
----------- -----------
Net cash provided by operating activities 92,214 135,295
----------- -----------
Cash flows from investing activities:
Purchase of property, plant and equipment (4,629) (3,186)
Principal payments on mortgage-backed securities 399 504
Proceeds from sales of mortgage servicing rights 11,822 11,332
Other, net 118 426
----------- -----------
Net cash provided by investing activities 7,710 9,076
----------- -----------
Cash flows from financing activities:
Purchase of NVR common stock for
deferred compensation plan (3,542) (1,606)
Redemption of mortgage bonds (690) (581)
Net borrowings (repayments) under notes payable and other
term debt 79,046 (32,759)
Repurchase of 8% Senior Notes due 2005 - (30,000)
Purchase of treasury stock (203,911) (52,874)
Proceeds from exercise of stock options 5,406 2,721
----------- -----------
Net cash used by financing activities (123,691) (115,099)
----------- -----------
Net (decrease) increase in cash (23,767) 29,272
Cash, beginning of the period 137,708 89,126
Cash, end of period $ 113,941 $ 118,398
=========== ===========
Supplemental disclosures of cash flow information:
Interest paid during the period $ 7,090 $ 10,305
=========== ===========
Income taxes paid during the period, net of refunds $ 66,590 $ 70,026
=========== ===========
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.
Intercompany accounts and transactions have been eliminated in consolidation.
The statements have been prepared in accordance 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 Company's 2000 Annual Report on Form 10-K, as
filed with the Securities and Exchange Commission. In the opinion of management,
all adjustments (consisting only of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
nine month period ended September 30, 2001 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2001.
For the quarters and the nine-month periods ended September 30, 2001 and
2000, comprehensive income equaled net income; therefore, a separate statement
of comprehensive income is not included in the accompanying financial
statements.
Certain reclassifications have been made to the prior year financial
statements to conform to the current year presentation. The reclassifications
have no impact on the net income or retained earnings previously reported.
2. Shareholders' Equity
A summary of changes in shareholders' equity is presented below:
Deferred Deferred
Common Paid-In Retained Treasury Comp. Comp.
Stock Capital Earnings Stock Trust Liability
----- ------- -------- ----- ----- ---------
Balance, December 31, 2000 $ 206 $ 115,136 $ 399,810 $ (267,672) $ (15,915) $ 15,915
Net income - - 169,774 - - -
Deferred compensation activity - - - - (3,542) 3,542
Purchase of common stock
for treasury - - - (203,911) - -
Option activity - 5,406 - - - -
Tax benefit from stock-based
compensation activity - 14,255 - - - -
Treasury shares issued
upon option exercise - (8,312) - 8,312 - -
Settlement of forward
purchase obligation - 65,028 - - - -
--------- ---------- ------------ ---------- --------- ---------
Balance, September 30, 2001 $ 206 $ 191,513 $ 569,584 $ (463,271) $ (19,457) $ 19,457
========= ========== ============ ========== ========= =========
7
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
Approximately 294,000 options were exercised during the first nine months
of 2001, with NVR realizing approximately $5,406 in aggregate equity proceeds.
On January 2, 2001, NVR settled a forward purchase obligation created on
October 3, 2000 with an unaffiliated shareholder by taking physical delivery of
the shares for the agreed upon purchase price paid in cash. Of the approximately
780,000 shares settled, approximately 86,000 shares were used for the Company's
employer contribution to the Employee Stock Ownership Plan for plan year 2000
and approximately 30,000 shares were used to fund the Deferred Compensation
Plan. The remaining shares were retained in treasury.
Including the shares repurchased in settling the forward purchase contract,
the Company repurchased approximately 1,592,000 shares of its common stock
during the first nine months of 2001 at an aggregate purchase price of
approximately $203,911.
3. 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 Nine Months Ended September 30, 2001
--------------------------------------------
Homebuilding Mortgage Banking Totals
------------ ---------------- ------
Revenues from external customers $ 1,845,676 $ 36,827 $ 1,882,503 (a)
Segment profit 267,441 21,772 289,213 (b)
Segment assets 766,524 161,677 928,201 (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 $ 267,441 $ 21,772 $ 289,213
Less: amortization of excess
reorganization value and goodwill (5,440) (816) (6,256)
----------- ----------- -----------
Consolidated income before income
taxes $ 262,001 $ 20,956 $ 282,957
=========== =========== ===========
Segment assets $ 766,524 $ 161,677 $ 928,201
Add: Excess reorganization value
and goodwill 49,773 7,618 57,391
----------- ----------- -----------
Total consolidated assets $ 816,297 $ 169,295 $ 985,592
=========== =========== ===========
8
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
For the Three Months Ended September 30, 2001
---------------------------------------------
Homebuilding Mortgage Banking Totals
------------ ---------------- ------
Revenues from external customers $ 677,962 $ 13,922 $ 691,884 (c)
Segment profit 97,417 8,822 106,239 (d)
(c) Total amounts for the reportable segments equal the respective amounts for
the consolidated enterprise.
(d) The following reconciles segment profit to the respective amounts for the
consolidated enterprise:
Homebuilding Mortgage Banking Totals
------------ ---------------- ------
Segment profit $ 97,417 $ 8,822 $ 106,239
Less: amortization of excess
reorganization value and goodwill (1,813) (272) (2,085)
------------ ------------- -----------
Consolidated income before income
taxes $ 95,604 $ 8,550 $ 104,154
============ ============= ===========
For the Nine Months Ended September 30, 2000
--------------------------------------------
Homebuilding Mortgage Banking Totals
------------ ---------------- ------
Revenues from external customers $ 1,651,572 $ 27,285 $ 1,678,857 (e)
Segment profit 194,416 354 194,770 (f)
Segment assets 635,170 113,065 748,235 (f)
(e) Total amounts for the reportable segments equal the respective amounts for
the consolidated enterprise.
(f) The following reconciles segment profit and segment assets to the
respective amounts for the consolidated enterprise:
Homebuilding Mortgage Banking Totals
------------ ---------------- ------
Segment profit $ 194,416 $ 354 $ 194,770
Less: amortization of excess
reorganization value and goodwill (5,440) (980) (6,420)
------------ ------------- -----------
Consolidated income/(loss) before income
taxes $ 188,976 $ (626) $ 188,350
============ ============= ===========
Segment assets $ 635,170 $ 113,065 $ 748,235
Add: Excess reorganization value
and goodwill 57,027 8,707 65,734
------------ ------------- -----------
Total consolidated assets $ 692,197 $ 121,772 $ 813,969
============ ============= ===========
For the Three Months Ended September 30, 2000
---------------------------------------------
Homebuilding Mortgage Banking Totals
------------ ---------------- ------
Revenues from external customers $ 602,485 $ 10,147 $ 612,632 (g)
Segment profit 73,294 2,845 76,139 (h)
(g) Total amounts for the reportable segments equal the respective amounts for
the consolidated enterprise.
(h) The following reconciles segment profit to the respective amounts for the
consolidated enterprise:
Homebuilding Mortgage Banking Totals
------------ ---------------- ------
Segment profit $ 73,294 $ 2,845 $ 76,139
Less: amortization of excess
reorganization value and goodwill (1,813) (272) (2,085)
------------ ------------- -----------
Consolidated income before income
taxes $ 71,481 $ 2,573 $ 74,054
============ ============= ===========
9
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
4. Mortgage Banking Segment Restructuring Plan
During the nine months ended September 30, 2001, approximately $798 in
lease costs was applied against the restructuring reserve established in the
first quarter of 2000. Approximately $130 of the restructuring reserve remained
at September 30, 2001, which primarily related to accrued lease costs.
5. Stock Option Plan
During the nine months ended September 30, 2001, the Company issued
1,812,600 non-qualified stock options ("Options") under the 2000 Broadly-Based
Stock Option Plan (the "2000 Plan"). The 2000 Plan had been approved in 2000 by
the Company's Board of Directors and allows the Company to issue Options to
directors, key employees and other employees to purchase 2,000,000 shares of the
Company's common stock. Each Option grant is exercisable for a period of ten
(10) years from the date of grant. The exercise price of the Options granted was
equal to the fair value of the Company's common stock on the date of Grant and
the Options will vest as to twenty five percent (25%) of the underlying shares
on each of December 31, 2006, 2007, 2008 and 2009, subject to the optionee's
continued employment. The 2000 Plan is consistent with the Company's strategy of
structuring compensation plans to focus the attention of the Company's employees
on NVR's long-term goals and link the interests of the Company's employees
directly to those of the Company's shareholders. Awards under the 2000 Plan also
strongly encourage the retention of the Company's employees, a key component of
the Company's business strategy.
6. Debt
NVR amended its mortgage warehouse facility to increase the available
borrowing limit. The borrowing limit has been increased to $163,000 as of
September 30, 2001 and will be reduced to $125,000 effective January 1, 2002.
The other terms and conditions are substantially equivalent to those in effect
at December 31, 2000. There is $123,180 outstanding under the facility at
September 30, 2001.
10
Item 2.
------
Management's Discussion and Analysis
of Financial Condition and Results of Operations
(dollars in thousands, except per share data)
Forward-Looking Statements
Some of the statements in this Form 10-Q, as well as statements made by the
Company in periodic press releases 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 Exhange 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 of historical facts
included herein, including those regarding market trends, the Company'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 the Company to
be materially different from any future results, performance or achievements
expressed or implied by the forward-looking statements. Such risk factors
include, but are not limited to, general economic and business conditions (on
both a national and regional level), interest rate changes, access to suitable
financing, competition, the availability and cost of land and other raw
materials used by the Company in its homebuilding operations, shortages of
labor, weather related slow downs, building moratoria, governmental regulation,
the ability of the Company to integrate any acquired business, fluctuation and
volatility of stock and other financial markets and other factors over which the
Company has little or no control.
Results of Operations for the Three and Nine Months Ended September 30, 2001 and
2000
NVR, Inc. ("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.
Homebuilding Segment
Three Months Ended September 30, 2001 and 2000
During the third quarter of 2001, homebuilding operations generated
revenues of $677,962 compared to revenues of $602,485 in the third quarter of
2000. The change in revenues was due to a 2.5% increase in the number of homes
settled to 2,742 units in 2001 from 2,674 units in 2000, and to a 9.8% increase
in the average selling price to $246.4 in 2001 from $224.5 in 2000. The increase
in the average selling price is attributable to price increases in certain of
NVR's markets and to single family detached units representing a larger
percentage of the total units settled in the third quarter of 2001 as compared
to the same prior year period. New orders of 1,857 during the third quarter of
2001 decreased 14.8% compared with the 2,180 new orders generated during the
same 2000 period. The decrease in new orders was primarily a result of decreased
customer traffic following the events of September 11, 2001.
Gross profit margins in the third quarter of 2001 increased to 21.8% as
compared to 19.4% for the third quarter of 2000. The increase in gross margins
was due to favorable market conditions, which provided NVR the opportunity to
increase selling prices in certain of its markets, and to NVR's ongoing focus on
controlling construction costs.
11
Selling, general and administrative ("SG&A") expenses for the third quarter
of 2001 increased $6,972 from the third quarter of 2000, and as a percentage of
revenues, increased to 7.1% from 6.8%. The increase in SG&A dollars is primarily
attributable to increases in personnel to facilitate continued growth in
existing markets and to the aforementioned increase in revenues.
Backlog units and dollars were 5,593 and $1,491,260, respectively, at
September 30, 2001 compared to 5,355 and $1,328,585, respectively, at September
30, 2000 The increase in backlog dollars is due to the increase in backlog units
in addition to a 9.2% increase in the average selling price over the six month
period ended September 30, 2001 as compared to the same period in 2000.
Nine Months Ended September 30, 2001 and 2000
During the first nine months of 2001, homebuilding operations generated
revenues of $1,845,676 compared to revenues of $1,651,572 in the first nine
months of 2000. The increase in revenues was primarily due to a 2.7% increase in
the number of homes settled to 7,577 in 2001 from 7,379 in 2000, and to an 8.9%
increase in the average settlement price to $242.8 in 2001 from $222.9 in 2000.
The increase in the average settlement price is attributable to price increases
in certain of NVR's markets. New orders increased by 2.9% to 8,022 for the nine
months ended September 30, 2001 compared with 7,799 for the nine months ended
September 30, 2000
Gross profit margins for the first nine months of 2001 increased to 21.8%
compared to 18.9% for the nine months ended September 30, 2000. The increase in
gross profit margins was due to continuing favorable market conditions, which
provided NVR the opportunity to increase selling prices in certain of its
markets, lower costs for lumber and certain other commodities, and to NVR's
continued focus on controlling construction costs.
SG&A expenses for 2001 increased $20,345 compared to the same 2000 period,
and as a percentage of revenues increased to 7.0% from 6.6%. The increase in
SG&A dollars is primarily attributable to an increase in staffing and other
related administrative expenses to facilitate continued growth in existing
markets and to the aforementioned increase in revenues.
Mortgage Banking Segment
Three and Nine Months Ended September 30, 2001 and 2000
The mortgage banking segment had operating income of $8,822 during the
quarter ended September 30, 2001 compared to operating income of $2,845 for the
three months ended September 30, 2000. Loan closings were $503,065 and $401,037
for the three months ended September 30, 2001 and September 30, 2000,
respectively, an increase of 25%.
The mortgage banking segment had operating income of $21,772 during the
nine months ended September 30, 2001 compared to operating income of $354 for
the nine months ended September 30, 2000. Excluding the $5,726 restructuring and
asset impairment charge incurred by the mortgage segment in the first quarter of
2000, operating income for the nine months ended September 30, 2000, was $6,080.
Loan closings from continuing operations were $1,344,108 and $1,097,064 for the
nine months ended September 30, 2001 and 2000, respectively, an increase of 23%.
Total loan closings, including discontinued wholesale and retail operations,
were $1,338,453 for the period ended September 30, 2000.
12
The improvement in operating income over both comparative periods was
primarily due to NVR's operational restructuring of the mortgage segment
announced in the first quarter of 2000, and to a lesser extent, to a more
favorable pricing environment. The operational restructuring specifically
entailed the closure of all of the mortgage segment's retail operations to focus
solely on serving NVR's homebuilding operations ("builder business"). The
mortgage segment's builder business historically has created greater operating
margins than its other lines of mortgage business. As part of its restructuring,
the mortgage segment also substantially reduced staffing and related general and
administrative costs.
Recent Accounting Pronouncements
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards ("SFAS") No. 141, "Business Combinations" and SFAS No. 142,
"Goodwill and Other Intangible Assets." SFAS No. 141 requires that the purchase
method of accounting be used for all business combinations initiated after June
30, 2001. SFAS No. 142 changes the accounting for goodwill and reorganization
value in excess of amounts allocable to identifiable assets ("excess
reorganization value") from an amortization approach to an impairment-only
approach. Management does not expect that NVR will incur a material impairment
loss relative to its existing excess reorganization value and goodwill upon
adoption of SFAS No. 142 on January 1, 2002. Further, NVR will cease amortizing
goodwill and excess reorganization value effective January 1, 2002.
Liquidity and Capital Resources
NVR has $255,000 available for issuance under a shelf registration
statement filed with the Securities and Exchange Commission on January 20, 1998.
The shelf registration statement was declared effective on February 27, 1998 and
provides that securities may be offered from time to time in one or more series
and in the form of senior or subordinated debt.
NVR's homebuilding segment generally provides for its working capital
requirements using cash generated from operations and a short-term unsecured
working capital revolving credit facility (the "Facility"). The Facility expires
on May 31, 2004. The Facility provides for unsecured borrowings of up to
$85,000, subject to certain borrowing base limitations. Up to approximately
$40,000 of the Facility is currently available for issuance in the form of
letters of credit, of which $21,466 was outstanding at September 30, 2001. There
were no direct borrowings outstanding under the Facility as of September 30,
2001, nor were there any borrowing base limitations reducing the amount
available to NVR for borrowings.
NVR's 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. NVR Mortgage Finance, Inc. ("NVR Finance") has
available a mortgage warehouse facility with an aggregate available borrowing
limit of $163,000 to fund its mortgage origination activities. The warehouse
facility borrowing limit will be reduced to $125,000 as of January 1, 2002.
There was $123,180 outstanding under this facility at September 30, 2001. NVR
Finance also currently has available an aggregate of $150,000 of borrowing
capacity in various uncommitted gestation and repurchase agreements. There was
an aggregate of $8,955 outstanding under such gestation and repurchase
agreements at September 30, 2001.
On January 2, 2001, NVR settled a forward purchase obligation created on
October 3, 2000 with an unaffiliated shareholder by taking physical delivery of
the shares for the agreed upon purchase price paid in cash. Of the approximately
780,000 shares settled, approximately 86,000 shares were used for NVR's employer
contribution to the Employee Stock Ownership Plan for plan year 2000 and
13
approximately 30,000 shares were used to fund the Deferred Compensation Plan.
The remaining shares were retained in treasury.
On February 27, 2001, NVR successfully completed a solicitation of consents
from holders of its 8% Senior Notes due 2005 ("Notes") to amend the Indenture
governing the Notes. The amendment to the Indenture allows for NVR to repurchase
up to an aggregate $85 million of its capital stock, in addition to that
otherwise provided under the NVR's Indenture, in one or more open market and/or
privately negotiated transactions through March 31, 2002. On March 2, 2001, NVR
paid to each holder of the Notes who provided a consent, an amount equal to 4.5%
of the principal amount of such holder's Notes.
Including the shares repurchased in settling the forward purchase
obligation, NVR repurchased approximately 1,592,000 shares of its common stock
at an aggregate purchase price of $203,911 during the nine months ended
September 30, 2001. NVR may, from time to time, repurchase additional shares of
its common stock, pursuant to repurchase authorizations by the Board of
Directors and subject to the restrictions contained within its debt agreements.
NVR believes that internally generated cash and borrowings available under
credit facilities will be sufficient to satisfy near and long term cash
requirements for working capital in both its homebuilding and mortgage banking
operations.
Part II
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Item 6. Exhibits and Reports on Form 8-K
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a. 11. Computation of Earnings per Share.
b. NVR did not file any reports on Form 8-K during the quarter
ended September 30, 2001.
Exhibit Index
Exhibit
Number Description Page
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11 Computation of Earnings per Share 16
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
October 18, 2001 NVR, Inc.
By: /s/ Paul C. Saville
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Paul C. Saville
Senior Vice President Finance and
Chief Financial Officer
15