NVR, Inc. Announces Third Quarter Results

RESTON, Va., Oct. 19, 2017 /PRNewswire/ -- NVR, Inc. (NYSE: NVR), one of the nation's largest homebuilding and mortgage banking companies, announced net income for its third quarter ended September 30, 2017 of $162,102,000, or $38.02 per diluted share. Net income and diluted earnings per share for the third quarter ended September 30, 2017 increased 38% and 34%, respectively, when compared to the 2016 third quarter net income of $117,392,000, or $28.46 per diluted share. Consolidated revenues for the third quarter of 2017 totaled $1,667,920,000, an 8% increase from $1,537,569,000 in the third quarter of 2016.

For the nine months ended September 30, 2017, consolidated revenues were $4,489,504,000, a 10% increase from $4,069,778,000 reported for the same period of 2016. Net income for the nine months ended September 30, 2017 was $412,902,000, an increase of 50% when compared to the nine months ended September 30, 2016. Diluted earnings per share for the nine months ended September 30, 2017 was $98.33, an increase of 48% from $66.24 per diluted share for the comparable period of 2016.

Homebuilding

New orders in the third quarter of 2017 increased 21% to 4,200 units, when compared to 3,477 units in the third quarter of 2016. The average sales price of new orders in the third quarter of 2017 was $382,800, a decrease of 3% when compared with the third quarter of 2016. The decrease in the average sales price of new orders is primarily attributable to a shift in new orders to lower priced markets and lower priced products. Settlements increased in the third quarter of 2017 to 4,158 units, 6% higher than the third quarter of 2016. The Company's backlog of homes sold but not settled as of September 30, 2017 increased on a unit basis by 16% to 8,855 units and increased on a dollar basis by 15% to $3,418,710,000 when compared to September 30, 2016.

Homebuilding revenues in the third quarter of 2017 totaled $1,633,726,000, 8% higher than the year earlier period. Gross profit margin in the third quarter of 2017 increased to 19.9%, compared to 17.6% in the third quarter of 2016. Gross profit margin was favorably impacted by modest improvement in pricing combined with moderating construction costs. Income before tax from the homebuilding segment totaled $226,043,000 in the third quarter of 2017, an increase of 35% when compared to the third quarter of 2016.

Mortgage Banking

Mortgage closed loan production in the third quarter of 2017 totaled $1,115,494,000, an increase of 6% when compared to the third quarter of 2016. Income before tax from the mortgage banking segment totaled $18,421,000 in the third quarter of 2017, an increase of 6% when compared to the third quarter of 2016.

Income Taxes

Net income and diluted earnings per share were favorably impacted by the reduction in the Company's effective tax rate for the three and nine months ended September 30, 2017 to 33.7% and 29.5%, respectively, compared to 36.5% and 36.6% for the three and nine months ended September 30, 2016, respectively. The reduction in the effective tax rate was primarily due to the Company's January 1, 2017 adoption of Accounting Standard Update 2016-09, which resulted in the Company recognizing an income tax benefit of $8,357,000 and $44,720,000 related to excess tax benefits from stock option exercises during the three and nine months ended September 30, 2017, respectively. For the three and nine months ended September 30, 2016, the excess tax benefits of $2,271,000 and $10,949,000, respectively, were recorded to additional paid-in capital within shareholders' equity on the consolidated balance sheet. Excluding the impact of the excess tax benefits recognized during the three and nine months ended September 30, 2017, the effective tax rate would have been 37.1% for both periods. Additionally, the excess tax benefits recognized during the three and nine months ended September 30, 2017 favorably impacted diluted earnings per share by $1.96 and $10.65 per share, respectively.

About NVR

NVR, Inc. operates in two business segments: homebuilding and mortgage banking. The homebuilding unit sells and builds homes under the Ryan Homes, NVHomes and Heartland Homes trade names, and operates in twenty-nine 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 September 30,                             Nine Months Ended September 30,

                                               2017                                   2016                        2017                      2016
                                               ----                                   ----                        ----                      ----

    Homebuilding:

    Revenues                                           $1,633,726                                            $1,507,451                           $4,394,027  $3,990,696

    Other income                              1,715                                      703                                     4,264                  2,223

    Cost of sales                       (1,307,971)                              (1,242,292)                               (3,552,071)            (3,294,421)

    Selling, general and administrative    (95,606)                                (92,867)                                (294,610)             (290,925)
                                            -------                                  -------                                  --------               --------

    Operating income                        231,864                                  172,995                                   551,610                407,573

    Interest expense                        (5,821)                                 (5,338)                                 (17,040)              (14,734)
                                             ------                                   ------                                   -------                -------

    Homebuilding income                     226,043                                  167,657                                   534,570                392,839
                                            -------                                  -------                                   -------                -------


    Mortgage Banking:

    Mortgage banking fees                    34,194                                   30,118                                    95,477                 79,082

    Interest income                           1,953                                    2,000                                     5,168                  5,111

    Other income                                583                                      473                                     1,398                  1,140

    General and administrative             (18,010)                                (14,959)                                 (50,190)              (44,345)

    Interest expense                          (299)                                   (286)                                    (830)                 (792)
                                               ----                                     ----                                      ----                   ----

    Mortgage banking income                  18,421                                   17,346                                    51,023                 40,196
                                             ------                                   ------                                    ------                 ------


    Income before taxes                     244,464                                  185,003                                   585,593                433,035

    Income tax expense                     (82,362)                                (67,611)                                (172,691)             (158,664)
                                            -------                                  -------                                  --------               --------


    Net income                                           $162,102                                              $117,392                             $412,902    $274,371
                                                         ========                                              ========                             ========    ========


    Basic earnings per share                               $43.26                                                $30.43                              $110.60      $70.70
                                                           ======                                                ======                              =======      ======


    Diluted earnings per share                             $38.02                                                $28.46                               $98.33      $66.24
                                                           ======                                                ======                               ======      ======


    Basic weighted average shares
     outstanding                              3,747                                    3,858                                     3,733                  3,881
                                              =====                                    =====                                     =====                  =====


    Diluted weighted average shares
     outstanding                              4,263                                    4,125                                     4,199                  4,142
                                              =====                                    =====                                     =====                  =====



                                                                  NVR, Inc.

                                                         Consolidated Balance Sheets

                                               (in thousands, except share and per share data)

                                                                 (unaudited)




                                                                 September 30, 2017               December 31, 2016
                                                                 ------------------               -----------------

    ASSETS

    Homebuilding:

    Cash and cash equivalents                                                            $611,094                          $375,748

    Restricted cash                                                          13,797                               17,561

    Receivables                                                              20,448                               18,937

    Inventory:

    Lots and housing units, covered under
     sales agreements with customers                                      1,187,508                              883,868

    Unsold lots and housing units                                           158,049                              145,065

    Land under development                                                   19,182                               46,999

    Building materials and other                                             11,820                               16,168
                                                                             ------                               ------

                                                                          1,376,559                            1,092,100

    Assets related to consolidated variable
     interest entity                                                          1,222                                1,251

    Contract land deposits, net                                             365,142                              379,844

    Property, plant and equipment, net                                       43,822                               45,915

    Reorganization value in excess of amounts
     allocable to identifiable assets, net                                   41,580                               41,580

    Goodwill and finite-lived intangible
     assets, net                                                              1,563                                2,599

    Other assets                                                            266,572                              257,811
                                                                            -------                              -------

                                                                          2,741,799                            2,233,346
                                                                          ---------                            ---------

    Mortgage Banking:

    Cash and cash equivalents                                                15,790                               19,657

    Restricted cash                                                           2,075                                1,857

    Mortgage loans held for sale, net                                       258,554                              351,958

    Property and equipment, net                                               6,308                                4,903

    Reorganization value in excess of amounts
     allocable to identifiable assets, net                                    7,347                                7,347

    Other assets                                                             17,638                               24,875
                                                                             ------                               ------

                                                                            307,712                              410,597
                                                                            -------                              -------

    Total assets                                                                       $3,049,511                        $2,643,943
                                                                                       ==========                        ==========


    LIABILITIES AND SHAREHOLDERS' EQUITY

    Homebuilding:

    Accounts payable                                                                     $267,039                          $251,212

    Accrued expenses and other liabilities                                  337,932                              336,318

    Liabilities related to consolidated
     variable interest entity                                                   853                                  882

    Customer deposits                                                       162,285                              122,236

    Senior notes                                                            596,913                              596,455
                                                                            -------                              -------

                                                                          1,365,022                            1,307,103
                                                                          ---------                            ---------

    Mortgage Banking:

    Accounts payable and other liabilities                                   33,813                               32,399
                                                                             ------                               ------

                                                                             33,813                               32,399
                                                                             ------                               ------

    Total liabilities                                                     1,398,835                            1,339,502
                                                                          ---------                            ---------


    Commitments and contingencies


    Shareholders' equity:

    Common stock, $0.01 par value; 60,000,000
     shares authorized; 20,555,330 shares
     issued as of both September 30, 2017 and
     December 31, 2016                                                          206                                  206

    Additional paid-in capital                                            1,626,112                            1,515,828

    Deferred compensation trust - 108,638 and
     108,640 shares of NVR, Inc. common stock
     as of September 30, 2017 and December 31,
     2016, respectively                                                    (17,376)                            (17,375)

    Deferred compensation liability                                          17,376                               17,375

    Retained earnings                                                     6,107,321                            5,695,376

    Less treasury stock at cost - 16,819,467
     and 16,862,327 shares as of September 30,
     2017 and December 31, 2016, respectively                           (6,082,963)                         (5,906,969)
                                                                         ----------                           ----------

    Total shareholders' equity                                            1,650,676                            1,304,441
                                                                          ---------                            ---------

    Total liabilities and shareholders' equity                                         $3,049,511                        $2,643,943
                                                                                       ==========                        ==========



                                                                           NVR, Inc.

                                                                       Operating Activity

                                                                     (dollars in thousands)

                                                                          (Unaudited)




                                  Three Months Ended September 30,                     Nine Months Ended September 30,

                                   2017                             2016                      2017                        2016
                                   ----                             ----                      ----                        ----

    Homebuilding data:

    New orders (units)

    Mid Atlantic (1)              2,113                              1,817                                  6,501                      6,088

    North East (2)                  346                                305                                  1,066                        960

    Mid East (3)                    939                                769                                  3,218                      2,829

    South East (4)                  802                                586                                  2,517                      2,061

    Total                         4,200                              3,477                                 13,302                     11,938
                                  =====                              =====                                 ======                     ======


    Average new order price                   $382.8                                         $392.8                                  $384.0             $383.6


    Settlements (units)

    Mid Atlantic (1)              2,048                              1,984                                  5,682                      5,201

    North East (2)                  333                                330                                    930                        896

    Mid East (3)                  1,021                              1,013                                  2,693                      2,708

    South East (4)                  756                                595                                  2,026                      1,704

    Total                         4,158                              3,922                                 11,331                     10,509
                                  =====                              =====                                 ======                     ======


    Average settlement price                  $392.9                                         $384.1                                  $387.7             $378.0


    Backlog (units)

    Mid Atlantic (1)                                                                       4,360                         4,024

    North East (2)                                                                           744                           604

    Mid East (3)                                                                           2,024                         1,619

    South East (4)                                                                         1,727                         1,411

    Total                                                                                  8,855                         7,658
                                                                                           =====                         =====


    Average backlog price                                                                              $386.1                                $389.4


    New order cancellation rate     13%                               18%                                   14%                       15%

    Community count (average)       479                                484                                    485                        482

    Lots controlled at end of
     period                                                                                 84,000                        77,300


    Mortgage banking data:

    Loan closings                         $1,115,494                                     $1,055,163                              $3,000,448         $2,751,410

    Capture rate                    88%                               88%                                   87%                       88%


    Common stock information:

    Shares outstanding at end of
     period                                                                              3,735,863                     3,789,295

    Number of shares repurchased 26,630                            116,318                                110,392                    178,306

    Aggregate cost of shares
     repurchased                             $70,693                                       $195,235                                $230,199           $291,743

    (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.