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 June 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
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(State or other jurisdiction of (IRS employer identification
incorporation or organization) number)
7601 Lewinsville Road, Suite 300
McLean, Virginia 22102
(703) 761-2000
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(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
(Not Applicable)
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(Former name, former address, and former fiscal
year if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No_____
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As of July 17, 2001 there were 7,974,188 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 June 30, 2001
(unaudited) and December 31, 2000..................... 3
Condensed Consolidated Statements of Income for the
Three Months Ended June 30, 2001 (unaudited)
and June 30, 2000 (unaudited) and the
Six Months Ended June 30, 2001 (unaudited)
and June 30, 2000 (unaudited)......................... 5
Condensed Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 2001 (unaudited) and
June 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
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Item 1. Legal Proceedings..................................... 14
Item 4. Submission of Matters to a Vote of Security Holders... 14
Item 6. Exhibits and Reports on Form 8-K...................... 14
Exhibit Index......................................... 15
Signature............................................. 15
2
PART I
------
Item 1.
- -------
NVR, Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands, except per share data)
June 30, 2001 December 31, 2000
------------- -----------------
ASSETS (unaudited)
Homebuilding:
Cash and cash equivalents $ 78,592 $ 130,079
Receivables 13,314 6,670
Inventory:
Lots and housing units, covered under
sales agreements with customers 359,554 294,094
Unsold lots and housing units 26,858 32,600
Manufacturing materials and other 8,733 7,987
------------ -----------
395,145 334,681
Property, plant and equipment, net 13,302 13,514
Reorganization value in excess of amounts
allocable to identifiable assets, net 44,661 47,741
Goodwill, net 6,926 7,472
Contract land deposits 125,099 96,119
Other assets 70,427 61,210
------------ -----------
747,466 697,486
------------ -----------
Mortgage Banking:
Cash and cash equivalents 10,705 7,629
Mortgage loans held for sale, net 139,664 120,999
Mortgage servicing rights, net 1,367 1,479
Property and equipment, net 2,131 2,351
Reorganization value in excess of amounts
allocable to identifiable assets, net 7,890 8,435
Other assets 4,166 2,881
------------ -----------
165,923 143,774
------------ -----------
Total assets $ 913,389 $ 841,260
============ ===========
See notes to condensed consolidated financial statements.
(Continued)
3
NVR, Inc.
Condensed Consolidated Balance Sheets (Continued)
(dollars in thousands, except per share data)
June 30, 2001 December 31, 2000
------------- -----------------
(unaudited)
LIABILITIES AND SHAREHOLDERS'
EQUITY
Homebuilding:
Accounts payable $ 124,528 $ 108,064
Accrued expenses and other liabilities 156,988 173,787
Customer deposits 85,561 63,486
Notes payable 35 210
Other term debt 4,946 4,957
Senior notes 115,000 115,000
------------ -----------
487,058 465,504
------------ -----------
Mortgage Banking:
Accounts payable and other liabilities 11,920 9,760
Notes payable 110,448 53,488
------------ -----------
122,368 63,248
------------ -----------
Total liabilities 609,426 528,752
------------ -----------
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 June 30, 2001 and
December 31, 2000 206 206
Additional paid-in-capital 190,604 115,136
Deferred compensation trust- 367,618 and
337,703 shares as of June 30, 2001 and
December 31, 2000, respectively of
NVR, Inc. common stock (19,457) (15,915)
Deferred compensation liability 19,457 15,915
Retained earnings 507,092 399,810
Less treasury stock at cost; 12,626,764
and 11,755,671 shares at June 30, 2001
and December 31, 2000, respectively (393,939) (267,672)
------------ -----------
Total shareholders' equity 303,963 247,480
------------ -----------
Total liabilities and shareholders'
equity $ 913,389 $ 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 June 30, Six Months Ended June 30,
------------------------------------- ------------------------------------
2001 2000 2001 2000
-------------- --------------- ---------------- ----------------
Homebuilding:
Revenues $ 648,465 $ 558,506 $ 1,167,714 $ 1,049,087
Other income 1,250 741 2,308 1,356
Cost of sales (505,676) (454,982) (912,841) (854,659)
Selling, general and administrative (46,818) (38,552) (81,334) (67,961)
Amortization of reorganization value
in excess of amounts allocable to
identifiable assets and goodwill (1,814) (1,814) (3,627) (3,627)
----------- ----------- ----------- -----------
Operating income 95,407 63,899 172,220 124,196
Interest expense (3,052) (3,359) (5,823) (6,701)
----------- ----------- ----------- -----------
Homebuilding income 92,355 60,540 166,397 117,495
----------- ----------- ----------- -----------
Mortgage Banking:
Mortgage banking fees 12,915 9,175 22,905 17,138
Interest income 1,406 1,673 2,664 3,711
Other income 168 117 309 184
General and administrative (7,223) (7,615) (12,141) (15,757)
Amortization of reorganization value
in excess of amounts allocable to
identifiable assets and goodwill (272) (272) (544) (708)
Interest expense (413) (1,080) (787) (2,041)
Restructuring and asset impairment
charge - 200 - (5,726)
----------- ----------- ----------- -----------
Operating income/(loss) 6,581 2,198 12,406 (3,199)
----------- ----------- ----------- -----------
Total segment income 98,936 62,738 178,803 114,296
Income tax expense (39,574) (25,534) (71,521) (46,518)
----------- ----------- ----------- -----------
Net Income $ 59,362 $ 37,204 $ 107,282 $ 67,778
=========== =========== =========== ===========
Basic Earnings per Share: $ 7.30 $ 4.09 $ 13.02 $ 7.29
=========== =========== =========== ===========
Diluted Earnings per Share: $ 6.10 $ 3.62 $ 10.92 $ 6.51
=========== =========== =========== ===========
See notes to condensed consolidated financial statements.
5
NVR, Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands, except share data)
(unaudited)
Six Months Ended June 30,
-------------------------------------------------
2001 2000
-------------------- ------------------
Cash flows from operating activities:
Net income $ 107,282 $ 67,778
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 7,262 6,917
Restructuring and asset impairment charge - 5,726
Mortgage loans closed (841,043) (937,416)
Proceeds from sales of mortgage loans 829,235 974,317
Gain on sale of mortgage servicing rights (411) (320)
Gain on sale of loans (15,635) (9,072)
Net change in assets and liabilities:
Increase in inventories (60,464) (42,926)
Increase in receivables (6,080) (10,596)
Increase in contract land deposits (28,980) (15,528)
Increase in accounts payable, accrued expenses
and other liabilities 40,625 30,808
Other, net (7,831) (3,987)
----------------- ----------------
Net cash provided by operating activities 23,960 65,701
----------------- ----------------
Cash flows from investing activities:
Purchase of property, plant and equipment (2,024) (2,137)
Principal payments on mortgage-backed securities 399 368
Proceeds from sales of mortgage servicing rights 5,353 8,016
Other, net 70 (254)
----------------- ----------------
Net cash provided by investing activities 3,798 5,993
----------------- ----------------
Cash flows from financing activities:
Purchase of NVR common stock for
funding of deferred compensation plan (3,542) (1,606)
Redemption of mortgage bonds (526) -
Net borrowings (repayments) under notes payable and other
term debt 56,774 (26,054)
Purchase of treasury stock (134,160) (44,730)
Proceeds from exercise of stock options 5,285 2,070
----------------- ----------------
Net cash used by financing activities (76,169) (70,320)
----------------- ----------------
Net (decrease) increase in cash (48,411) 1,374
Cash, beginning of the period 137,708 89,126
----------------- ----------------
Cash, end of period $ 89,297 $ 90,500
================= ================
Supplemental disclosures of cash flow information:
Interest paid during the period $ 6,197 $ 8,485
================= ================
Income taxes paid, net of refunds $ 64,124 $ 45,081
================= ================
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 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. 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 six month period ended June 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 six-month periods ended June 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 with 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:
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 - - 107,282 - - -
Deferred compensation activity - - - - (3,542) 3,542
Purchase of common stock
for treasury - - - (134,160) - -
Option activity - 5,285 - - - -
Tax benefit from stock-based
compensation activity - 13,048 - - - -
Treasury shares issued
upon option exercise - (7,893) - 7,893 - -
Settlement of forward purchase
obligation - 65,028 - - - -
--------- -------- ---------- --------- --------- ---------
Balance, June 30, 2001 $ 206 $190,604 $ 507,092 $(393,939) $ (19,457) $ 19,457
--------- -------- ---------- --------- --------- ---------
7
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share and share data)
Approximately 282,000 options were exercised during the first six months of
2001, with NVR realizing approximately $5,285 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.
In addition to the shares repurchased in settling the forward purchase
contract, the Company repurchased approximately 489,000 shares of its common
stock during the first six months of 2001. The aggregate purchase price of all
treasury shares repurchased during the first six months of 2001 was
approximately $134,160.
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 Six Months Ended June 30, 2001
- --------------------------------------
Homebuilding Mortgage Banking Totals
------------ ---------------- ------
Revenues from external customers $ 1,167,714 $ 22,905 $ 1,190,619 (a)
Segment profit 170,024 12,950 182,974 (b)
Segment assets 695,879 158,033 853,912 (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 $ 170,024 $ 12,950 $ 182,974
Less: amortization of excess
reorganization value and goodwill (3,627) (544) (4,171)
------------ -------------- -------------
Consolidated income before income taxes $ 166,397 $ 12,406 $ 178,803
============ ============== =============
Segment assets $ 695,879 $ 158,033 $ 853,912
Add: Excess reorganization value
and goodwill 51,587 7,890 59,477
------------ -------------- -------------
Total consolidated assets $ 747,466 $ 165,923 $ 913,389
============ ============== =============
For the Three Months Ended June 30, 2001
- ----------------------------------------
Homebuilding Mortgage Banking Totals
------------ ---------------- ------
Revenues from external customers $ 648,465 $ 12,915 $ 661,380 (c)
Segment profit 94,169 6,853 101,022 (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:
8
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share and share data)
Homebuilding Mortgage Banking Totals
------------ ---------------- ------
Segment profit $ 94,169 $ 6,853 $ 101,022
Less: amortization of excess
reorganization value and goodwill (1,814) (272) (2,086)
------------- -------------- -------------
Consolidated income before income taxes $ 92,355 $ 6,581 $ 98,936
============= ============== =============
For the Six Months Ended June 30, 2000
- --------------------------------------
Homebuilding Mortgage Banking Totals
------------ ---------------- ------
Revenues from external customers $ 1,049,087 $ 17,138 $ 1,066,225 (e)
Segment profit/(loss) 121,122 (2,491) 118,631 (f)
Segment assets 601,866 126,249 728,115 (f)
(e) Total amounts for the reportable segments equal the respective amounts for
the consolidated enterprise.
(f) The following reconciles segment profit/(loss) and segment assets to the
respective amounts for the consolidated enterprise:
Homebuilding Mortgage Banking Totals
------------ ---------------- ------
Segment profit/(loss) $ 121,122 $ (2,491) $ 118,631
Less: amortization of excess
reorganization value and goodwill (3,627) (708) (4,335)
-------------- --------------- -------------
Consolidated income/(loss) before
income taxes $ 117,495 $ (3,199) $ 114,296
============== =============== =============
Segment assets $ 601,866 $ 126,249 $ 728,115
Add: Excess reorganization value
and goodwill 58,840 8,979 67,819
-------------- --------------- -------------
Total consolidated assets $ 660,706 $ 135,228 $ 795,934
============== =============== =============
For the Three Months Ended June 30, 2000
- ----------------------------------------
Homebuilding Mortgage Banking Totals
------------ ---------------- ------
Revenues from external customers $ 558,506 $ 9,175 $ 567,681 (g)
Segment profit 62,354 2,470 64,824 (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 $ 62,354 $ 2,470 $ 64,824
Less: amortization of excess
reorganization value and goodwill (1,814) (272) (2,086)
-------------- ------------- ------------
Consolidated income before income taxes $ 60,540 $ 2,198 $ 62,738
============== ============= ============
4. Mortgage Banking Segment Restructuring Plan
During the second quarter ended June 30, 2001, approximately $148 in
lease costs was applied against the restructuring reserve established in the
first quarter of 2000. Approximately $563 of the restructuring reserve
established at March 31, 2000 remains at June 30, 2001, which primarily relates
to accrued lease costs.
9
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share and share data)
5. Stock Option Plan
On May 3, 2001, the Company issued 1,801,100 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 is granted 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 will vest as to twenty five
percent (25%) of the underlying shares on each of December 31, 2006, 2007, 2008
and 2009, with vesting based upon continued employment. The 2000 Plan is
consistent with the Company's strategy of structuring compensation plans to
focus the attention of company employees on NVR's long-term goals and link the
interests of company employees directly to those of the Company's shareholders.
Awards under the 2000 Plan also strongly encourage the retention of company
employees, a key component of the Company's business strategy.
10
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 and Six Months Ended June 30, 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 June 30, 2001 and 2000
During the second quarter of 2001, homebuilding operations generated
revenues of $648,465 compared to revenues of $558,506 in the second quarter of
2000. The change in revenues was due to a 6.5% increase in the number of homes
settled to 2,629 units in 2001 from 2,469 units in 2000 and a 9.2% increase in
the average selling price to $245.9 in 2001 from $225.2 in 2000. The increase in
settlements is primarily attributable to the higher backlog levels in first
quarter of 2001 as compared to the same period in 2000. The increase in the
average selling price is attributable to price increases in certain of the
Company's markets. New orders of 3,342 units during the second quarter of 2001
represents an increase of 11.0% compared with the 3,010 new orders generated
during the same period in 2000. The increase in new orders was primarily the
result of increased sales in the Company's markets outside the Washington, D.C.
metropolitan area.
Gross profit margins in the second quarter of 2001 increased to 22.0% as
compared to 18.5% for the second quarter of 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 markets, lower
costs for lumber and certain other commodities, and to the Company's ongoing
focus on controlling construction costs.
11
Selling, general and administrative ("SG&A") expenses for the second
quarter of 2001 increased $8,266 from the second quarter of 2000, and as a
percentage of revenues, increased to 7.2% from 6.9%. The increase in SG&A
dollars is primarily attributable to increases in personnel to facilitate
continued growth in existing markets, an increase in certain management
incentives, and to the aforementioned increase in revenues.
Backlog units and dollars were 6,478 and $1,687,032, respectively, at June
30, 2001 compared to 5,849 and $1,404,219, respectively, at June 30, 2000. The
increase in backlog units and dollars is primarily attributable to a 9.7%
increase in new orders for the six month period ended June 30, 2001 compared to
the same 2000 period. The increase in backlog dollars is also due to an 8.5%
increase in the average selling price over the same six month period.
Six Months Ended June 30, 2001 and 2000
During the first six months of 2001, homebuilding operations generated
revenues of $1,167,714 compared to revenues of $1,049,087 in the first six
months of 2000. The increase in revenues was primarily due to an 8.5% increase
in the average settlement price to $240.8 in 2001 from $222.0 in 2000 and to a
2.8% increase in the number of homes settled to 4,835 units in 2001 from 4,705
units in 2000. The increase in the average settlement price is attributable to
price increases in certain of the Company's markets. New orders increased by
9.7% to 6,165 units for the six months ended June 30, 2001 compared with 5,619
units for the six months ended June 30, 2000. The increase in new orders was
primarily the result of increased sales in the Company's markets outside the
Washington, D.C. metropolitan area.
Gross profit margins for the first six months of 2000 increased to 21.8%
compared to 18.5% for the six months ended June 30, 2000. The increase in gross
profit margins was due to continuing favorable market conditions, which provided
the Company the opportunity to increase selling prices in certain of its
markets, lower costs for lumber and certain other commodities, and to the
Company's continued focus on controlling construction costs.
SG&A expenses for 2001 increased $13,373 compared to the same 2000 period,
and as a percentage of revenues increased to 7.0% from 6.5%. The increase in
SG&A costs is primarily attributable to an increase in personnel to facilitate
continued growth in existing markets and to the aforementioned increase in
revenues.
Mortgage Banking Segment
Three and Six Months Ended June 30, 2001 and 2000
The mortgage banking segment had operating income of $6,853 during the
quarter ended June 30, 2001 compared to operating income of $2,470 for the three
months ended June 30, 2000. Loan closings from ongoing operations were $481,568
and $379,316 for the three months ended June 30, 2001 and June 30, 2000,
respectively, an increase of 27%. Total loan closings, including discontinued
wholesale and retail operations, were $467,818 for the period ended June 30,
2000.
The mortgage banking segment had operating income of $12,950 during the six
months ended June 30, 2001 compared to an operating loss of $2,491 for the six
months ended June 30, 2000. Excluding the $5,726 restructuring and asset
impairment charge incurred by the company in the first six months of 2000, first
half 2000 operating income was $3,235. Loan closings from ongoing operations
were $841,043 and $696,195 for the six months ended June 30, 2001 and 2000,
respectively, an increase of 21%. Total loan closings, including discontinued
wholesale and retail operations, were $937,416 for the period ended June 30,
2000.
12
The improvement in operating income over both comparative periods was
primarily the result of NVR's operational restructuring of the mortgage banking
segment announced in 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 has 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 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 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, 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 $20,899 was outstanding at June 30, 2001. There were
no direct borrowings outstanding under the Facility as of June 30, 2001. At June
30, 2001, there were no 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 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 June 30, 2001. NVR expects to renew the warehouse facility prior to
its expiration on August 31, 2001, at an increased borrowing limit. 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 $10,183 outstanding under such gestation and repurchase agreements at June
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 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.
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 1,153,000 shares of its common
stock at an aggregate purchase price of $134,160 during the six months ended
June 30, 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.
13
Part II
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Item 1 Legal Proceedings
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During April 1999, NVR was served with a lawsuit filed in the United States
District Court in Baltimore by a group of homeowners who purchased homes in a
community in Howard County, Maryland. The suit alleged violation of certain
Federal environmental laws, as well as State consumer protection and related
statutes arising from the alleged failure of NVR to disclose to its purchasers
that their homes were built either on or adjacent to a site formerly used as an
unlicensed landfill. In May 2001, NVR settled the litigation for an immaterial
cash payment and received a full release from all plaintiffs and the principal
co-defendant as part of the settlement. All amounts due under the terms of
settlement were paid in full in June 2001.
Item 4. Submission of Matters to a Vote of Security Holders
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NVR held its Annual Meeting of Shareholders on May 3, 2001.
Two matters were voted upon at the Annual Meeting:
Votes Votes Not
For Against Abstentions Voted
----------- ----------- ----------- ----------
1. Election of three directors to serve
three year terms:
Manuel H. Johnson 8,000,161 141,200 - 229,831
David A. Preiser 7,976,331 165,030 - 229,831
John M. Toups 7,992,324 149,037 - 229,831
2. Ratification of appointment of
KPMG LLP as independent
auditors for NVR 8,102,517 3,008 35,836 229,831
Item 6. Exhibits and Reports on Form 8-K
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a. 11. Computation of Earnings per Share.
b. The Company did not file any reports on Form 8-K during
the quarter ended June 30, 2001.
14
Exhibit Index
Exhibit
Number Description Page
- ------ --------------------------------------------- ----
11 Computation of Earnings per Share 16
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
July 25, 2001 NVR, Inc.
By: /s/ Paul C. Saville
----------------------
Paul C. Saville
Senior Vice President Finance and
Chief Financial Officer
15