NVR, Inc. Announces Second Quarter Results
RESTON, Va., July 20, 2018 /PRNewswire/ -- NVR, Inc. (NYSE: NVR), one of the nation's largest homebuilding and mortgage banking companies, announced net income for its second quarter ended June 30, 2018 of $203,174,000, or $49.05 per diluted share. Net income and diluted earnings per share for the second quarter ended June 30, 2018 increased 37% and 39%, respectively, when compared to 2017 second quarter net income of $147,877,000, or $35.19 per diluted share. Consolidated revenues for the second quarter of 2018 totaled $1,787,305,000, a 16% increase from $1,544,492,000 in the second quarter of 2017.
For the six months ended June 30, 2018, consolidated revenues were $3,316,719,000, an 18% increase from $2,821,584,000 reported for 2017. Net income for the six months ended June 30, 2018 was $369,223,000, an increase of 47% when compared to the six months ended June 30, 2017. Diluted earnings per share for the six months ended June 30, 2018 was $88.31, an increase of 46% from $60.36 per diluted share for 2017.
Net income and diluted earnings per share were favorably impacted by the reduction in the Company's effective tax rate for the three and six months ended June 30, 2018 to 15.9% and 14.6%, respectively, compared to 29.2% and 26.5% for the three and six months ended June 30, 2017, respectively. The reduction in the effective tax rate was primarily due to the enactment of the Tax Cuts and Jobs Act in December 2017, which lowered the Company's federal statutory tax rate from 35% to 21%. Additionally, the effective tax rate for the three and six months ended June 30, 2018 was favorably impacted by the recognition of an income tax benefit related to excess tax benefits from stock option exercises totaling $26,456,000 and $46,022,000, respectively. For the three and six months ended June 30, 2017, the income tax benefit related to excess tax benefits from stock option exercises totaled $16,464,000 and $36,364,000, respectively.
Homebuilding
New orders in the second quarter of 2018 increased 6% to 4,964 units, when compared to 4,678 units in the second quarter of 2017. The average sales price of new orders in the second quarter of 2018 was $376,300, which was essentially flat when compared with the second quarter of 2017. Settlements increased in the second quarter of 2018 to 4,611 units, 18% higher than the second quarter of 2017. The Company's backlog of homes sold but not settled as of June 30, 2018 increased on a unit basis by 15% to 10,162 units and increased on a dollar basis by 12% to $3,861,853,000 when compared to June 30, 2017.
Homebuilding revenues in the second quarter of 2018 totaled $1,750,463,000, 16% higher than the year earlier period. Gross profit margin in the second quarter of 2018 decreased to 19.1%, compared to 19.5% in the second quarter of 2017. Income before tax from the homebuilding segment totaled $223,266,000 in the second quarter of 2018, an increase of 17% when compared to the second quarter of 2017.
Mortgage Banking
Mortgage closed loan production in the second quarter of 2018 totaled $1,214,101,000, an increase of 17% when compared to the second quarter of 2017. Income before tax from the mortgage banking segment totaled $18,320,000 in the second quarter of 2018, an increase of 4% when compared to $17,631,000 in the second quarter of 2017.
About NVR
NVR, Inc. operates in two business segments: homebuilding and mortgage banking. The homebuilding segment sells and builds homes under the Ryan Homes, NVHomes and Heartland Homes trade names, and operates in thirty-one metropolitan areas in fourteen states and Washington, D.C. For more information about NVR, Inc. and its brands, see www.nvrinc.com, www.ryanhomes.com, www.nvhomes.com and www.heartlandluxuryhomes.com.
Some of the statements in this release made by the Company constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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 comparable terminology. All statements other than of historical facts are forward-looking statements. Forward-looking statements contained in this document may include those regarding market trends, NVR's financial position, business strategy, the outcome of pending litigation, investigations or similar contingencies, projected plans and objectives of management for future operations. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance of NVR to be materially different from future results, performance or achievements expressed or implied by the forward-looking statements. Such risk factors include, but are not limited to the following: general economic and business conditions (on both a national and regional level); interest rate changes; access to suitable financing by NVR and NVR's customers; increased regulation in the mortgage banking industry; the ability of our mortgage banking subsidiary to sell loans it originates into the secondary market; competition; the availability and cost of land and other raw materials used by NVR in its homebuilding operations; shortages of labor; weather related slow-downs; building moratoriums; governmental regulation; fluctuation and volatility of stock and other financial markets; mortgage financing availability; and other factors over which NVR has little or no control. NVR undertakes no obligation to update such forward-looking statements except as required by law.
NVR, Inc.
Consolidated Statements of Income
(in thousands, except per share data)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
---- ---- ---- ----
Homebuilding:
Revenues $1,750,463 $1,512,714 $3,240,556 $2,760,301
Other income 2,164 1,447 4,141 2,549
Cost of sales (1,416,797) (1,218,083) (2,628,743) (2,244,100)
Selling, general and administrative (106,517) (99,100) (212,064) (199,004)
-------- ------- -------- --------
Operating income 229,313 196,978 403,890 319,746
Interest expense (6,047) (5,641) (12,054) (11,219)
------ ------ ------- -------
Homebuilding income 223,266 191,337 391,836 308,527
------- ------- ------- -------
Mortgage Banking:
Mortgage banking fees 36,842 31,778 76,163 61,283
Interest income 2,915 1,554 5,008 3,215
Other income 641 506 1,165 815
General and administrative (21,796) (15,934) (41,031) (32,180)
Interest expense (282) (273) (557) (531)
---- ---- ---- ----
Mortgage banking income 18,320 17,631 40,748 32,602
------ ------ ------ ------
Income before taxes 241,586 208,968 432,584 341,129
Income tax expense (38,412) (61,091) (63,361) (90,329)
------- ------- ------- -------
Net income $203,174 $147,877 $369,223 $250,800
======== ======== ======== ========
Basic earnings per share $55.90 $39.46 $101.03 $67.30
====== ====== ======= ======
Diluted earnings per share $49.05 $35.19 $88.31 $60.36
====== ====== ====== ======
Basic weighted average shares outstanding 3,635 3,748 3,655 3,726
===== ===== ===== =====
Diluted weighted average shares outstanding 4,142 4,202 4,181 4,155
===== ===== ===== =====
NVR, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
(Unaudited)
June 30, 2018 December 31, 2017
------------- -----------------
ASSETS
Homebuilding:
Cash and cash equivalents $417,341 $645,087
Restricted cash 22,130 19,438
Receivables 30,179 20,026
Inventory:
Lots and housing units, covered under sales agreements with customers 1,263,408 1,046,094
Unsold lots and housing units 113,493 148,620
Land under development 35,292 34,212
Building materials and other 21,422 17,273
------ ------
1,433,615 1,246,199
Contract land deposits, net 361,052 370,429
Property, plant and equipment, net 41,612 43,191
Reorganization value in excess of amounts allocable to identifiable assets, net 41,580 41,580
Other assets 205,760 198,930
------- -------
2,553,269 2,584,880
--------- ---------
Mortgage Banking:
Cash and cash equivalents 14,209 21,707
Restricted cash 3,672 2,256
Mortgage loans held for sale, net 399,806 352,489
Property and equipment, net 7,018 6,327
Reorganization value in excess of amounts allocable to identifiable assets, net 7,347 7,347
Other assets 24,074 14,273
------ ------
456,126 404,399
------- -------
Total assets $3,009,395 $2,989,279
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Homebuilding:
Accounts payable $290,923 $261,973
Accrued expenses and other liabilities 306,452 341,891
Customer deposits 172,033 150,033
Senior notes 597,373 597,066
------- -------
1,366,781 1,350,963
--------- ---------
Mortgage Banking:
Accounts payable and other liabilities 35,043 32,824
------ ------
35,043 32,824
------ ------
Total liabilities 1,401,824 1,383,787
--------- ---------
Commitments and contingencies
Shareholders' equity:
Common stock, $0.01 par value; 60,000,000 shares authorized; 20,555,330 shares issued as 206 206
of both June 30, 2018 and December 31, 2017
Additional paid-in capital 1,721,696 1,644,197
Deferred compensation trust - 107,904 and 108,640 shares of NVR, Inc. common stock as (17,148) (17,383)
of June 30, 2018 and December 31, 2017, respectively
Deferred compensation liability 17,148 17,383
Retained earnings 6,603,359 6,231,940
Less treasury stock at cost - 16,926,815 and 16,864,324 shares as of June 30, 2018 and (6,717,690) (6,270,851)
December 31, 2017, respectively
Total shareholders' equity 1,607,571 1,605,492
--------- ---------
Total liabilities and shareholders' equity $3,009,395 $2,989,279
========== ==========
NVR, Inc.
Operating Activity
(dollars in thousands)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
---- ---- ---- ----
Homebuilding data:
New orders (units)
Mid Atlantic (1) 2,414 2,263 4,917 4,388
North East (2) 365 361 736 720
Mid East (3) 1,142 1,145 2,438 2,279
South East (4) 1,043 909 2,047 1,715
Total 4,964 4,678 10,138 9,102
===== ===== ====== =====
Average new order price $376.3 $377.0 $377.3 $384.6
Settlements (units)
Mid Atlantic (1) 2,239 1,976 4,165 3,634
North East (2) 354 329 655 597
Mid East (3) 1,092 947 1,971 1,672
South East (4) 926 665 1,716 1,270
Total 4,611 3,917 8,507 7,173
===== ===== ===== =====
Average settlement price $379.6 $386.1 $380.9 $384.8
Backlog (units)
Mid Atlantic (1) 4,976 4,295
North East (2) 763 731
Mid East (3) 2,365 2,106
South East (4) 2,058 1,681
Total 10,162 8,813
====== =====
Average backlog price $380.0 $390.9
New order cancellation rate 13% 13% 13% 14%
Community count (average) 480 491 483 488
Lots controlled at end of period 94,200 83,700
Mortgage banking data:
Loan closings $1,214,101 $1,041,613 $2,223,774 $1,884,954
Capture rate 87% 88% 87% 87%
Common stock information:
Shares outstanding at end of period 3,628,515 3,747,606
Number of shares repurchased 42,112 32,840 158,380 83,762
Aggregate cost of shares repurchased $126,296 $73,959 $483,538 $159,506
(1) Maryland, Virginia, West Virginia,
Delaware and Washington, D.C.
(2) New Jersey and Eastern Pennsylvania
(3) New York, Ohio, Western
Pennsylvania, Indiana and Illinois
(4) North Carolina, South Carolina,
Tennessee and Florida
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SOURCE NVR, Inc.
