UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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
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(State or other jurisdiction of (IRS employer identification
incorporation or organization) number)
7601 Lewinsville Road, Suite 300
McLean, Virginia 22102
(703) 761-2000
--------------
(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_____
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As of April 18, 2001 there were 8,140,818 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 March 31, 2001
(unaudited) and December 31, 2000...................... 3
Condensed Consolidated Statements of Income for the Three
Months Ended March 31, 2001 (unaudited) and
March 31, 2000 (unaudited).............................. 5
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2001 (unaudited) and
March 31, 2000 (unaudited).............................. 6
Notes to Condensed Consolidated Financial Statements.... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 10
Part II OTHER INFORMATION
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Item 4. Submission of Matters to a Vote of Security Holders..... 13
Item 6. Exhibits and Reports on Form 8-K........................ 13
Exhibit Index........................................... 13
Signature............................................... 14
2
PART I
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Item 1.
- -------
NVR, Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands, except share data)
March 31, 2001 December 31, 2000
---------------- ------------------
(unaudited)
ASSETS
Homebuilding:
Cash and cash equivalents $ 97,045 $130,079
Receivables 10,231 6,670
Inventory:
Lots and housing units, covered under
sales agreements with customers 335,270 294,094
Unsold lots and housing units 31,674 32,600
Manufacturing materials and other 6,772 7,987
-------- --------
373,716 334,681
Property, plant and equipment, net 13,068 13,514
Reorganization value in excess of amounts
allocable to identifiable assets, net 46,201 47,741
Goodwill, net 7,199 7,472
Contract land deposits 111,707 96,119
Deferred tax assets 43,844 43,844
Other assets 25,552 17,366
-------- --------
728,563 697,486
-------- --------
Mortgage Banking:
Cash and cash equivalents 12,233 7,629
Mortgage loans held for sale, net 118,509 120,999
Mortgage servicing rights, net 1,400 1,479
Property and equipment, net 2,181 2,351
Reorganization value in excess of amounts
allocable to identifiable assets, net 8,163 8,435
Other assets 3,043 2,881
-------- --------
145,529 143,774
-------- --------
Total assets $874,092 $841,260
======== ========
(Continued)
See notes to condensed consolidated financial statements.
3
NVR, Inc.
Condensed Consolidated Balance Sheets (Continued)
(dollars in thousands, except share data)
March 31, 2001 December 31, 2000
---------------- ------------------
(unaudited)
LIABILITIES AND SHAREHOLDERS'
EQUITY
Homebuilding:
Accounts payable $ 112,209 $ 108,064
Accrued expenses and other
liabilities 162,870 173,787
Customer deposits 72,834 63,486
Notes payable 120 210
Other term debt 4,868 4,957
Senior notes 115,000 115,000
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467,901 465,504
--------- ---------
Mortgage Banking:
Accounts payable and other
liabilities 10,036 9,760
Notes payable 106,204 53,488
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116,240 63,248
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Total liabilities 584,141 528,752
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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
March 31, 2001 and December 31, 2000 206 206
Additional paid-in-capital 187,083 115,136
Deferred compensation trust-367,618 and
337,703 shares as of March 31, 2001
and December 31, 2000, respectively,
of NVR, Inc. common stock (19,457) (15,915)
Deferred compensation liability 19,457 15,915
Retained earnings 447,730 399,810
Less treasury stock at cost-12,405,496
and 11,755,671 shares at March 31, 2001
and December 31, 2000, respectively (345,068) (267,672)
--------- ---------
Total shareholders' equity 289,951 247,480
--------- ---------
Total liabilities and
shareholders' equity $ 874,092 $ 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 Three Months Ended
March 31, 2001 March 31, 2000
------------------- -------------------
Homebuilding:
Revenues $ 519,249 $ 490,581
Other income 1,058 615
Cost of sales (407,165) (399,677)
Selling, general and administrative (34,516) (29,409)
Amortization of reorganization value
in excess of amounts allocable to
identifiable assets/goodwill (1,813) (1,813)
--------- ---------
Operating income 76,813 60,297
Interest expense (2,771) (3,342)
--------- ---------
Homebuilding income 74,042 56,955
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Mortgage Banking:
Mortgage banking fees 9,990 7,963
Interest income 1,258 2,038
Other income 141 67
General and administrative (4,918) (8,142)
Amortization of reorganization value
in excess of amounts allocable to
identifiable assets/goodwill (272) (436)
Interest expense (374) (961)
Restructuring and asset impairment charge - (5,926)
--------- ---------
Operating income (loss) 5,825 (5,397)
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Total segment income 79,867 51,558
Income tax expense (31,947) (20,984)
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Net income $ 47,920 $ 30,574
========= =========
Basic earnings per share $ 5.74 $ 3.22
========= =========
Diluted earnings per share $ 4.84 $ 2.90
========= =========
See notes to condensed consolidated financial statements.
5
NVR, Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
Three Months Ended Three Months Ended
March 31, 2001 March 31, 2000
--------------- --------------
Cash flows from operating activities:
Net income $ 47,920 $ 30,574
Adjustments to reconcile net income to
net cash (used) provided by operating activities:
Depreciation and amortization 3,240 3,439
Restructuring and asset impairment charge - 5,926
Mortgage loans closed (359,475) (469,598)
Proceeds from sales of mortgage loans 363,696 499,626
Gain on sales of mortgage servicing rights (378) (113)
Gain on sale of loans (6,445) (4,869)
Net change in assets and liabilities, net of acquisition:
Increase in inventories (39,035) (6,840)
Increase in contract land deposits (15,588) (6,383)
Increase in receivables (3,272) (7,064)
Increase in accounts payable and accrued expenses 14,843 20,153
Other, net (7,970) (2,678)
--------- ---------
Net cash (used) provided by operating activities (2,464) 62,173
--------- ---------
Cash flows from investing activities:
Purchase of property, plant and equipment (633) (848)
Principal payments on mortgage-backed securities 187 157
Proceeds from sales of mortgage servicing rights, net 4,474 5,894
Other, net (1) (151)
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Net cash provided by investing activities 4,027 5,052
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Cash flows from financing activities:
Purchase of NVR common stock for
funding of deferred compensation plan (3,542) (1,606)
Net borrowings (repayments) under notes payable and other
term debt 52,537 (21,975)
Redemption of mortgage-backed bonds (186) (168)
Purchase of treasury stock (82,798) (11,490)
Other, net 3,996 807
--------- ---------
Net cash used by financing activities (29,993) (34,432)
--------- ---------
Net (decrease) increase in cash and cash equivalents (28,430) 32,793
Cash and cash equivalents, beginning of the period 137,708 89,126
--------- ---------
Cash and cash equivalents, end of period $ 109,278 $ 121,919
========= =========
Supplemental disclosures of cash flow information:
Interest paid during the period $ 845 $ 1,224
========= =========
Income taxes paid, net of refunds $ 10,119 $ 3,115
========= =========
See notes to condensed consolidated financial statements.
6
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share and share data)
1. Basis of Presentation
The accompanying unaudited, condensed consolidated financial statements
include the accounts of NVR, Inc. ("NVR" or the "Company") and its subsidiaries.
Intercompany accounts and transactions have been eliminated in consolidation.
The statements have been prepared in 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 Company's 2000 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, 2001 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2001.
For the quarters ended March 31, 2001 and 2000, comprehensive income
equaled net income; therefore, a separate statement of comprehensive income is
not included in the accompanying financial statements.
2. Shareholders' Equity
A summary of changes in shareholders' equity is presented below:
Additional 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 - - 47,920 - - -
Deferred compensation activity - - - - (3,542) 3,542
Purchase of common stock
for treasury - - - (82,798) - -
Option activity - 3,996 - - - -
Tax benefit from stock-based
compensation activity - 8,325 - - - -
Treasury shares issued
upon option exercise - (5,402) - 5,402 - -
Forward purchase obligation - 65,028 - - - -
------ -------- --------- --------- --------- ---------
Balance, March 31, 2001 $206 $187,083 $447,730 $(345,068) $(19,457) $19,457
====== ======== ========= ========= ========= =========
Approximately 199,000 options were exercised during the first quarter of
2001, with NVR receiving approximately $3,996 in aggregate equity proceeds.
7
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share and share data)
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 for the Deferred
Compensation Plan. The remaining shares were retained in treasury.
In addition to the shares repurchased in settling the forward purchase
contract, the Company repurchased approximately 186,000 shares of its common
stock in the first quarter of 2001. The aggregate purchase price of all
treasury shares repurchased in the first quarter of 2001 was approximately
$82,800.
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 Three Months Ended March 31, 2001
- -------------------------------------------
Homebuilding Mortgage Banking Totals
------------ ---------------- --------
Revenues from external customers $519,249 $ 9,990 $529,239(a)
Segment profit 75,855 6,097 81,952(b)
Segment assets 675,163 137,367 812,530(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 $ 75,855 $ 6,097 $ 81,952
Less: amortization of excess
reorganization value and goodwill (1,813) (272) (2,085)
-------- -------- --------
Consolidated income before income
taxes $ 74,042 $ 5,825 $ 79,867
======== ======== ========
Segment assets $675,163 $137,367 $812,530
Add: Excess reorganization value
and goodwill 53,400 8,162 61,562
-------- -------- --------
Total consolidated assets $728,563 $145,529 $874,092
======== ======== ========
8
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share and share data)
For the Three Months Ended March 31, 2000
- -------------------------------------------
Homebuilding Mortgage Banking Totals
------------ ----------------- --------
Revenues from external customers $490,581 $ 7,963 $498,544(c)
Segment profit/(loss) 58,768 (4,961) 53,807(d)
Segment assets 581,347 132,354 713,701(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/(loss) $ 58,768 $ (4,961) $ 53,807
Less: amortization of excess
reorganization value and goodwill (1,813) (436) (2,249)
-------- -------- --------
Consolidated income before income
taxes $ 56,955 $ (5,397) $ 51,558
======== ======== ========
Segment assets $581,347 $132,354 $713,701
Add: Excess reorganization value
and goodwill 60,653 9,251 69,904
-------- -------- --------
Total consolidated assets $642,000 $141,605 $783,605
======== ======== ========
4. Mortgage Banking Segment Restructuring Plan
During the quarter ended March 31, 2001, approximately $216 in severance
and lease costs were applied against the restructuring reserve established in
the first quarter of 2000. Approximately $711 of the restructuring accrual
established at March 31, 2000, remains at March 31, 2001, which primarily
relates to accrued lease costs.
5. Adoption of Statement of Financial Accounting Standards No. 133
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities"
as amended by SFAS No. 137 and SFAS No. 138, effective January 1, 2001. The
implementation of SFAS No. 133 primarily impacts the Company's mortgage banking
segment and has not had a material effect on the Company's results of operations
or financial condition.
9
Item 2.
- -------
Management's Discussion and Analysis
of Financial Condition and Results of Operations
(dollars in thousands, except per share and share data)
Forward-Looking Statements
Some of the statements in this Form 10-Q, as well as statements made by the
Company in periodic press releases and other public communications, constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Certain, but not necessarily all, of such
forward-looking statements can be identified by the use of forward-looking
terminology, such as "believes," "expects," "may," "will," "should," or
"anticipates" or the negative thereof or other variations thereof or comparable
terminology, or by discussion of strategies, each of which involves risks and
uncertainties. All statements other than of historical facts included herein,
including those regarding market trends, the Company's financial position,
business strategy, projected plans 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 Months Ended March 31, 2001 and 2000
NVR, Inc. ("NVR" or the "Company") operates in two business segments:
homebuilding and mortgage banking. Corporate general and administrative
expenses are fully allocated to the homebuilding and mortgage banking segments
in the information presented below.
Homebuilding Segment
Three Months Ended March 31, 2001 and 2000
During the first quarter of 2001, homebuilding operations generated
revenues of $519,249 compared to revenues of $490,581 in the first quarter of
2000. The change in revenues was due primarily to a 7.5% increase in the
average selling price to $234.7 in 2001 from $218.3 in 2000. This increase was
partially offset by a 1.3% decrease in the number of units settled to 2,206
units in 2001 from 2,236 units in 2000. The increase in the average selling
price is attributable to price increases in certain of the Company's markets.
New orders increased 8.2% during the first quarter of 2001 to 2,823 units
compared with the 2,609 new orders generated during the same period in 2000.
The increase in new orders was predominantly the result of increased sales in
the Company's markets outside of the Washington, D.C. metropolitan area.
Gross profit margins in the first quarter of 2001 increased to 21.6% as
compared to 18.5% for the quarter ended March 31, 2000. The increase in gross
margins was due to continuing favorable market conditions, which provided the
Company the opportunity to increase selling prices in certain of its
10
markets, lower costs for lumber and certain other commodities and to the
Company's ongoing focus on controlling construction costs.
Selling, general and administrative ("SG&A") expenses for the first quarter
of 2001 increased $5,107 from the first quarter of 2000, and increased as a
percentage of revenues to 6.6% in 2001 from 6.0% in the first quarter of 2000.
The increase in SG&A dollars and as a percentage of revenues is primarily
attributable to an increase in personnel to facilitate continued growth in
existing markets, and to a lesser extent, certain expenses associated with the
successfully completed solicitation of consents from the holders of the Senior
Notes due 2005 (the "Notes").
Backlog units and dollars were 5,765 and $1,490,932, respectively, at March
31, 2001 compared to 5,308 and $1,273,407, respectively, at March 31, 2000. The
increase in backlog units and dollars is primarily attributable to a 5.3%
increase in new orders for the six month period ended March 31, 2001 compared to
the same 2000 period, and to a slower backlog turn. The increase in backlog
dollars is also due to a 4.6% increase in the average selling price over the
same six month period.
Mortgage Banking Segment
Three Months Ended March 31, 2001 and 2000
The mortgage banking segment had operating income of $6,097 during the
quarter ended March 31, 2001 compared to an operating loss of $4,961 for the
three months ended March 31, 2000. Excluding the $5,926 restructuring and asset
impairment charge incurred by the company in the first quarter of 2000, first
quarter 2000 operating income was $965. Loan closings for ongoing operations
were $359,475 and $316,879 for the three months ended March 31, 2001 and March
31, 2000, respectively, an increase of 13%. Total loan closings, including
discontinued wholesale and retail operations, was $469,598 for the period ended
March 31, 2000.
The improvement in operating income is primarily the result of NVR's
operational restructuring of the mortgage banking segment announced in the first
quarter of 2000, and to a lesser extent, a more favorable pricing environment as
compared to the first quarter of 2000. The operational restructuring
specifically entailed the closure of all of the Company's retail operations to
focus solely on serving NVR's homebuilding operations ("builder business"). The
Company's builder business historically created greater operating margins than
its other lines of mortgage business. As part of its restructuring, the Company
also substantially reduced staffing in anticipation of reduced loan volume.
Liquidity and Capital Resources
The Company has $255,000 available for issuance under a shelf registration
statement filed with the Securities and Exchange Commission on January 20, 1998.
The shelf registration statement as 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.
NVR's homebuilding segment generally provides for its working capital cash
requirements using cash generated from operations and a short-term unsecured
working capital revolving credit facility (the "Facility"). The Facility
expires on May 31, 2003. The Facility provides for unsecured borrowings of up
to $60,000, subject to certain borrowing base limitations. Up to approximately
$24,000 of the Facility is currently available for issuance in the form of
letters of credit of which $19,274 was outstanding at March 31, 2001. There
were no direct borrowings outstanding under the Facility as of March 31, 2001.
At March 31, 2001, there were no borrowing base limitations reducing the amount
available to NVR for borrowings.
11
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 Finance has available a mortgage warehouse
facility with an aggregate available borrowing limit of $100,000 to fund its
mortgage origination activities. There was $100,000 outstanding under this
facility at March 31, 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 $5,922 outstanding under such
gestation and repurchase agreements at March 31, 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
the Company's employer contribution to the Employee Stock Ownership Plan for
plan year 2000 and approximately 30,000 shares were used for 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 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
Company'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 the settlement of the forward purchase
obligation, the Company repurchased approximately 849,000 shares of its common
stock at an aggregate purchase price of $82,800 during the three months ended
March 31, 2001. The Company may, from time to time, repurchase additional
shares of its common stock, pursuant to repurchase authorizations by the Board
of Directors and subject to the restrictions contained within the Company's debt
agreements.
The Company believes that internally generated cash and borrowings available
under credit facilities will be sufficient to satisfy near and long term cash
requirements for working capital in both its homebuilding and mortgage banking
operations.
12
Part II
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Item 4. Submission of Matters to a Vote of Security Holders
- -------
During the first quarter of 2001, NVR commenced a consent
solicitation of the holders of its 8% Senior Notes due 2005 (the
"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 Company's Indenture, in one or more open market and/or
privately negotiated transactions through March 31, 2002. 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. The consent
was successfully completed on February 27, 2001.
Item 6. Exhibits and Reports on Form 8-K
- -------
11. Computation of Earnings per Share.
Reports on Form 8-K
Form 8-K filed February 15, 2001, announcing the solicitation of
consents from holders of NVR's 8% Senior Notes due 2005 (the
"Notes") to amend the indenture governing the Notes.
Exhibit Index
Exhibit
Number Description Page
- ------ ----------- ----
11 Computation of Earnings per Share 15
13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
April 30, 2001 NVR, Inc.
By: /s/ Paul C. Saville
-------------------------------
Paul C. Saville
Senior Vice President Finance and
Chief Financial Officer
14