Back to GetFilings.com
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, 2002
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.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Virginia 54-1394360
- ----------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7601 Lewinsville Road, Suite 300
McLean, Virginia 22102
(703) 761-2000
- --------------------------------------------------------------------------------
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
(Not Applicable)
- --------------------------------------------------------------------------------
Former name, former address, and former fiscal year if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No_____
---
As of July 22, 2002 there were 7,586,208 total shares of common stock
outstanding.
NVR, Inc.
Form 10-Q
INDEX
================================================================================ ==============
Page
----
Part I FINANCIAL INFORMATION
------
Item 1. NVR, Inc. Condensed Consolidated Financial Statements
-----------------------------------------------------
Condensed Consolidated Balance Sheets at June 30, 2002
(unaudited) and December 31, 2001 ......................... 3
Condensed Consolidated Statements of Income for the
Three Months Ended June 30, 2002 (unaudited)
and June 30, 2001 (unaudited) and the
Six Months Ended June 30, 2002 (unaudited)
and June 30, 2001 (unaudited) ............................. 5
Condensed Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 2002 (unaudited) and
June 30, 2001 (unaudited) ................................. 6
Notes to Condensed Consolidated Financial Statements ...... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ....................... 11
Part II OTHER INFORMATION
-------
Item 4. Submission of Matters to a Vote of Security Holders ....... 14
Item 6. Exhibits and Reports on Form 8-K .......................... 14
Exhibit Index ............................................. 14
Signature ................................................. 15
2
PART I. FINANCIAL INFORMATION
- -------
Item 1. Financial Statements
- -------
NVR, Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands, except per share data)
June 30, 2002 December 31, 2001
------------- -----------------
ASSETS (unaudited)
Homebuilding:
Cash and cash equivalents $ 93,532 $ 134,181
Receivables 8,059 5,745
Inventory:
Lots and housing units, covered under
sales agreements with customers 432,745 356,275
Unsold lots and housing units 26,816 37,265
Manufacturing materials and other 7,540 8,835
------------ -----------
467,101 402,375
Property, plant and equipment, net 14,639 15,397
Reorganization value in excess of amounts
allocable to identifiable assets, net 41,580 41,580
Goodwill, net 6,379 6,379
Contract land deposits 196,899 155,652
Other assets 87,740 76,556
------------ -----------
915,929 837,865
------------ -----------
Mortgage Banking:
Cash and cash equivalents 3,023 4,430
Mortgage loans held for sale, net 142,258 142,059
Mortgage servicing rights, net 5,317 1,328
Property and equipment, net 713 781
Reorganization value in excess of amounts
allocable to identifiable assets, net 7,347 7,347
Other assets 3,596 1,237
------------ -----------
162,254 157,182
------------ -----------
Total assets $ 1,078,183 $ 995,047
============ ===========
(Continued)
See notes to condensed consolidated financial statements.
3
NVR, Inc.
Condensed Consolidated Balance Sheets (Continued)
(dollars in thousands, except per share data)
June 30, 2002 December 31, 2001
------------- -----------------
(unaudited)
LIABILITIES AND SHAREHOLDERS'
EQUITY
Homebuilding:
Accounts payable $ 150,136 $ 127,658
Accrued expenses and other liabilities 93,572 114,781
Obligations under incentive plans 75,235 72,241
Customer deposits 113,859 81,924
Other term debt 5,094 5,259
Senior notes 115,000 115,000
---------- ---------
552,896 516,863
---------- ---------
Mortgage Banking:
Accounts payable and other liabilities 12,895 10,355
Notes payable 124,707 118,711
---------- ---------
137,602 129,066
---------- ---------
Total liabilities 690,498 645,929
---------- ---------
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, 2002 and December 31, 2001 206 206
Additional paid-in-capital 237,930 193,757
Deferred compensation trust-371,788 and
393,955 shares as of June 30, 2002
and December 31, 2001, respectively, of
NVR, Inc. common stock (23,157) (24,201)
Deferred compensation liability 23,157 24,201
Retained earnings 797,147 636,604
Less treasury stock at cost-13,323,233 and
13,139,332 shares at June 30, 2002 and
December 31, 2001, respectively (647,598) (481,449)
---------- ---------
Total shareholders' equity 387,685 349,118
---------- ---------
Total liabilities and shareholders' equity $1,078,183 $ 995,047
========== =========
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,
------------------------------------- ------------------------------------
2002 2001 2002 2001
-------------- --------------- ---------------- ----------------
Homebuilding:
Revenues $ 769,910 $ 648,465 $ 1,444,892 $ 1,167,714
Other income 702 1,250 1,460 2,308
Cost of sales (585,828) (505,676) (1,099,059) (912,841)
Selling, general and administrative (58,063) (46,818) (105,480) (81,334)
Amortization of reorganization value
in excess of amounts allocable to
identifiable assets and goodwill - (1,814) - (3,627)
----------- ----------- ----------- -----------
Operating income 126,721 95,407 241,813 172,220
Interest expense (3,154) (3,052) (6,218) (5,823)
----------- ----------- ----------- -----------
Homebuilding income 123,567 92,355 235,595 166,397
----------- ----------- ----------- -----------
Mortgage Banking:
Mortgage banking fees 16,181 12,915 31,042 22,905
Interest income 1,492 1,406 3,018 2,664
Other income 154 168 282 309
General and administrative (6,372) (7,223) (11,453) (12,141)
Amortization of reorganization value
in excess of amounts allocable to
identifiable assets and goodwill - (272) - (544)
Interest expense (464) (413) (791) (787)
----------- ----------- ----------- -----------
Mortgage banking income 10,991 6,581 22,098 12,406
----------- ----------- ----------- -----------
Total segment income 134,558 98,936 257,693 178,803
Income tax expense (50,728) (39,574) (97,150) (71,521)
----------- ----------- ----------- -----------
Net Income $ 83,830 $ 59,362 $ 160,543 $ 107,282
=========== =========== =========== ===========
Basic Earnings per Share: $ 11.42 $ 7.30 $ 21.79 $ 13.02
=========== =========== =========== ===========
Diluted Earnings per Share: $ 8.90 $ 6.10 $ 17.05 $ 10.92
=========== =========== =========== ===========
See notes to condensed consolidated financial statements.
5
NVR, Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
Six Months Ended June 30,
--------------------------------
2002 2001
----------- -----------
Cash flows from operating activities:
Net income $ 160,543 $ 107,282
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 3,613 7,262
Mortgage loans closed (1,013,768) (841,043)
Proceeds from sales of mortgage loans 1,025,857 829,235
Gain on sale of mortgage servicing rights (292) (411)
Gain on sale of loans (22,806) (15,635)
Net change in assets and liabilities:
Increase in inventories (64,726) (60,464)
Increase in receivables (2,361) (6,080)
Increase in contract land deposits (41,247) (28,980)
Increase in accounts payable and accrued expenses 93,897 49,198
Increase (decrease) in obligations under
incentive plans 2,994 (8,573)
Other, net (9,243) (2,903)
----------- -----------
Net cash provided by operating activities 132,461 28,888
----------- -----------
Cash flows from investing activities:
Purchase of property, plant and equipment (1,772) (2,024)
Principal payments on mortgage loans held for sale 790 399
Proceeds from sales of mortgage servicing rights, net 2,230 5,353
Other, net 58 70
----------- -----------
Net cash provided by investing activities 1,306 3,798
----------- -----------
Cash flows from financing activities:
Purchase of NVR common stock for
funding of deferred compensation plan (37,469) (3,542)
Net borrowings under notes payable and other
term debt 5,831 56,774
Payment of senior note consent fees (2,125) (4,928)
Redemption of mortgage-backed bonds - (526)
Purchase of treasury stock (150,140) (134,160)
Proceeds from exercise of stock options 8,080 5,285
----------- -----------
Net cash used by financing activities (175,823) (81,097)
----------- -----------
Net decrease in cash (42,056) (48,411)
Cash, beginning of the period 138,611 137,708
----------- -----------
Cash, end of period $ 96,555 $ 89,297
=========== ===========
Supplemental disclosures of cash flow information:
Interest paid during the period $ 6,010 $ 6,197
=========== ===========
Income taxes paid, net of refunds $ 65,991 $ 64,124
=========== ===========
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 2001 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, 2002 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2002.
For the quarters and six month periods ended June 30, 2002 and 2001,
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, 2001 $ 206 $ 193,757 $ 636,604 $(481,449) $ (24,201) $ 24,201
Net income - - 160,543 - - -
Deferred compensation activity - - - - 1,044 (1,044)
Purchase of NVR common stock
for treasury - - - (150,140) - -
Purchase of NVR common stock
for deferred compensation plan - - - (37,469) - -
Option activity - 8,080 - - - -
Tax benefit from stock-based
compensation activity - 57,553 - - - -
Treasury shares issued
upon option exercise - (21,460) - 21,460 - -
--------- --------- --------- --------- --------- ---------
Balance, June 30, 2002 $ 206 $ 237,930 $ 797,147 $(647,598) $ (23,157) $ 23,157
========= ========= ========= ========= ========= =========
Approximately 510,500 options to purchase shares of the Company's common
stock were exercised during the first six months of 2002. The Company settles
option exercises by issuing shares of treasury stock to option holders. Shares
are relieved from the treasury account based on the weighted average cost basis
of treasury shares acquired.
7
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share and share data)
Subsequent to June 30, 2002, approximately 333,800 stock options were
exercised. Year to date through the date of this filing, NVR received $11,627 in
aggregate equity proceeds from the exercise of options and has recorded a tax
benefit directly to equity of approximately $97,000.
The Company repurchased 523,648 shares of its common stock at an
aggregate purchase price of $150,140 during the six months ended June 30, 2002.
In addition, 170,732 shares of the Company's common stock were purchased at an
aggregate purchase price of $37,469 by the Company's Rabbi Trust, which holds
the investments for the Deferred Compensation Plan. These shares are recorded in
the Company's treasury stock account until such shares are vested under the
respective compensation plan (see footnote 4).
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, 2002
- --------------------------------------
Homebuilding Mortgage Banking Totals
------------ ---------------- ------
Revenues from external customers $ 1,444,892 $ 31,042 $ 1,475,934 (a)
Segment profit 235,595 22,098 257,693 (a)
Segment assets 867,970 154,907 1,022,877 (b)
(a) Total amounts for the reportable segments equal the respective amounts for
the consolidated enterprise.
(b) The following reconciles segment assets to the respective amounts for the
consolidated enterprise:
Homebuilding Mortgage Banking Totals
------------ ---------------- ------
Segment assets $ 867,970 $ 154,907 $ 1,022,877
Add: Excess reorganization value
and goodwill 47,959 7,347 55,306
----------- ----------- -------------
Total consolidated assets $ 915,929 $ 162,254 $ 1,078,183
=========== =========== =============
For the Three Months Ended June 30, 2002
- ----------------------------------------
Homebuilding Mortgage Banking Totals
------------ ---------------- ------
Revenues from external customers $ 769,910 $ 16,181 $ 786,091 (c)
Segment profit 123,567 10,991 134,558 (c)
(c) Total amounts for the reportable segments equal the respective amounts for
the consolidated enterprise.
For the Six Months Ended June 30, 2001
- --------------------------------------
Homebuilding Mortgage Banking Totals
------------ ---------------- ------
Revenues from external customers $ 1,167,714 $ 22,905 $ 1,190,619 (d)
Segment profit 170,024 12,950 182,974 (e)
Segment assets 695,879 158,033 853,912 (e)
(d) Total amounts for the reportable segments equal the respective amounts for
the consolidated enterprise.
(e) 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
============ =========== =============
8
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share and share data)
Homebuilding Mortgage Banking Totals
------------ ---------------- ------
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 (f)
Segment profit 94,169 6,853 101,022 (g)
(f) Total amounts for the reportable segments equal the respective amounts for
the consolidated enterprise.
(g) The following reconciles segment profit to the respective amounts for the
consolidated enterprise:
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
=========== ============ ==========
4. Deferred Compensation Plan
In January 2002, the Company amended the High Performance Compensation
Plan (the "HP Plan") to require executive officers to defer receipt of
compensation earned under the HP Plan for the three-year measurement period
ended December 31, 2001 into the Deferred Compensation Plan until the officer's
separation of service from the Company. The effect of this amendment is
estimated to produce a $7,975 deferred tax benefit for compensation expense
recognized for the HP Plan from inception through December 31, 2001. Amounts
deferred into the Deferred Compensation Plan are invested in shares of NVR
common stock, which, if vested, will be distributed to the executive officer
upon the officer's separation of service. Shares held in the Deferred
Compensation Plan for participants terminating prior to full vesting revert back
to the Company, and any related compensation expense previously recognized will
be reversed in the period of termination.
The Company recognizes compensation expense using a graded vesting
method over the six-year period from inception of the measurement period of the
HP Plan through final vesting. During the first six months of 2002 and 2001, the
Company recognized compensation expense of $7,290 and $6,428, respectively,
under the HP Plan covering the three-year measurement period ended December 31,
2001.
During the first six months of 2002, the Company contributed $37,469 to
a Rabbi Trust, which holds the investment for the Deferred Compensation Plan, to
fund the total obligations earned by the executive officers under the HP Plan
for the three-year measurement period ended December 31, 2001. The Rabbi Trust
in turn purchased 170,732 shares of NVR common stock in the open market. In
accordance with Emerging Issue Task Force Abstract 97-14, Accounting for
Deferred Compensation Arrangements Where Amounts Earned are Held in a Rabbi
Trust and Invested, the shares purchased by the Rabbi Trust will be initially
classified as treasury stock in the equity section of the accompanying balance
sheet. At each vesting date, the historical basis of the vested shares will be
reclassified to the deferred compensation trust caption in the equity section of
the balance sheet. Additionally, the portion of the accrued compensation
obligation previously expensed relative to the vested shares will be
reclassified from obligations under incentive plans within the liability section
of the balance sheet to the deferred compensation liability caption in the
equity section. The deferred compensation trust and deferred compensation
liability accounts will be relieved upon distribution of the shares.
9
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share and share data)
In accordance with Financial Accounting Standards Board Statement No.
128, Earnings per Share ("SFAS 128"), for purposes of calculating basic and
diluted earnings per share, the Company classifies the vested shares held in the
Rabbi Trust as outstanding shares, weighted to reflect the portion of the period
during which the shares were vested. Unvested shares held in the Rabbi Trust are
considered outstanding only for purposes of calculating diluted earnings per
share. The dilutive effect of such shares is computed using the treasury stock
method as defined in SFAS 128.
5. Excess Reorganization Value and Goodwill
The Company has adopted Statement of Financial Accounting Standards No.
142, Goodwill and Other Intangible Assets ("SFAS 142"), which changed the
accounting for goodwill and reorganization value in excess of amounts allocable
to identifiable assets ("excess reorganization value") from an amortization
approach to an impairment-only approach. SFAS 142 requires goodwill and excess
reorganization value, which is no longer subject to amortization, to be tested
for impairment as of the beginning of the fiscal year in which SFAS 142 is
adopted. The Company completed the assessment of impairment during the first
quarter of 2002 and determined that there is no impairment of either goodwill or
excess reorganization value. Following is the pro forma effect of adoption of
SFAS 142 on the six-month period ended June 30, 2001:
For the Six Months Ended June 30,
2002 2001
--------- ---------
Net income $ 160,543 $ 107,282
Add back:
Goodwill, net of tax - 331
Excess reorganization value - 3,624
--------- ---------
Adjusted net income $ 160,543 $ 111,237
========= =========
Basic earnings per share:
Net income $ 21.79 $ 13.02
Goodwill amortization - 0.04
Excess reorganization value amortization - 0.44
--------- ---------
Adjusted net income $ 21.79 $ 13.50
========= =========
Diluted earnings per share:
Net income $ 17.05 $ 10.92
Goodwill amortization - 0.03
Excess reorganization value amortization - 0.37
--------- ---------
Adjusted net income $ 17.05 $ 11.32
========= =========
10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-Looking Statements
Some of the statements in this Form 10-Q, as well as statements made by
NVR in periodic press releases and other public communications, constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934. Certain, but
not necessarily all, of such forward-looking statements can be identified by the
use of forward-looking terminology, such as "believes," "expects," "may,"
"will," "should," or "anticipates" or the negative thereof or other variations
thereof or comparable terminology, or by discussion of strategies, each of which
involves risks and uncertainties. All statements other than of historical facts
included herein, including those regarding market trends, NVR'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 NVR 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 NVR in its
homebuilding operations, shortages of labor, weather related slow downs,
building moratoria, governmental regulation, the ability of NVR to integrate any
acquired business, fluctuation and volatility of stock and other financial
markets and other factors over which NVR has little or no control.
Results of Operations for the Three and Six Months Ended June 30, 2002 and 2001
NVR, Inc. ("NVR") operates in two business segments: homebuilding and
mortgage banking. Corporate general and administrative expenses are fully
allocated to the homebuilding and mortgage banking segments in the information
presented below. Unless otherwise indicated, all references to dollars in this
Item 2 are in thousands.
Homebuilding Segment
Three Months Ended June 30, 2002 and 2001
During the second quarter of 2002, homebuilding operations generated
revenues of $769,910 compared to revenues of $648,465 in the second quarter of
2001. The change in revenues was due to a 7.4% increase in the number of homes
settled to 2,824 units in 2002 from 2,629 units in 2001 and a 10.5% increase in
the average selling price to $271.7 in 2002 from $245.9 in 2001. The increase in
settlements is primarily attributable to the higher backlog levels entering the
second quarter of 2002 as compared to the same period in 2001. The increase in
the average selling price is attributable to a larger percentage of settlements
of single family detached homes, which, in comparison, are generally higher
priced than NVR's single family attached homes, and to price increases in
certain of NVR's markets. New orders increased 8.7% to 3,634 units during the
second quarter of 2002 compared with the 3,342 new orders generated during the
same period in 2001. The increase in new orders was primarily the result of
increased sales in NVR's markets outside the Washington, D.C. and Baltimore
metropolitan areas.
Gross profit margins in the second quarter of 2002 increased to 23.9%
as compared to 22.0% for the second quarter of 2001. The increase in gross
margins was due to continuing favorable market conditions, which provided NVR
the opportunity to increase selling prices in certain of its markets, and
relatively stable costs for lumber and certain other commodities.
11
Selling, general and administrative ("SG&A") expenses for the second
quarter of 2002 increased $11,245 from the second quarter of 2001, and as a
percentage of revenues, increased to 7.5% from 7.2%. 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 6,729 and $1,956,655, respectively, at
June 30, 2002 compared to 6,478 and $1,687,032, respectively, at June 30, 2001.
The increase in backlog units is primarily attributable to the 7.4% increase in
new orders for the six-month period ended June 30, 2002 as compared to the
six-month period ended June 30, 2001. The increase in backlog dollars is
attributable to a 14.5% increase in the average sales price during the same
comparative six-month periods.
Six Months Ended June 30, 2002 and 2001
During the first six months of 2002, homebuilding operations generated
revenues of $1,444,892 compared to revenues of $1,167,714 in the first six
months of 2001. The increase in revenues was primarily due to a 12.8% increase
in the number of homes settled to 5,452 units in 2002 from 4,835 units in 2001
in addition to a 9.8% increase in the average settlement price to $264.3 in 2002
from $240.8 in 2001. The increase in the number of homes settled is primarily
attributable to a higher backlog of homes to be delivered at the beginning of
2002 as compared to 2001. The increase in the average selling price is
attributable to a larger percentage of settlements of single family detached
homes, which, in comparison, are generally higher priced than NVR's single
family attached homes, and to price increases in certain of NVR's markets. New
orders increased by 7.4% to 6,623 units for the six months ended June 30, 2002
compared with 6,165 units for the six months ended June 30, 2001. The increase
in new orders was primarily the result of increased sales in NVR's markets
outside the Washington, D.C. and Baltimore metropolitan areas.
Gross profit margins for the first six months of 2002 increased to
23.9% compared to 21.8% for the six months ended June 30, 2001. The increase in
gross profit margins was due to continuing favorable market conditions, which
provided NVR the opportunity to increase selling prices in certain of its
markets, and relatively stable costs for lumber and certain other commodities.
SG&A expenses for the six months ended June 30, 2002 increased $24,146
compared to the same 2001 period, and as a percentage of revenues increased to
7.3% from 7.0%. The increase in SG&A costs is primarily attributable to an
increase in personnel to facilitate continued growth in existing markets,
increases in certain management incentives and to the aforementioned increase in
revenues.
Mortgage Banking Segment
Three and Six Months Ended June 30, 2002 and 2001
The mortgage banking segment had operating income of $10,991 during the
quarter ended June 30, 2002 compared to operating income of $6,853 for the three
months ended June 30, 2001. Loan closings were $536,031 and $481,568 for the
three months ended June 30, 2002 and June 30, 2001, respectively, an increase of
11%. The $54,463 increase in the dollar volume of loan closings is primarily
attributable to an increase in the average loan amount; unit volume in the
current quarter was approximately the same as the year ago quarter.
The mortgage banking segment had operating income of $22,098 during the
six months ended June 30, 2002 compared to operating income of $12,950 for the
six months ended June 30, 2001. Loan closings were $1,013,768 and $841,043 for
the six months ended June 30, 2002 and 2001, respectively, an increase of 21%.
The $172,725 increase in the dollar volume of loan closings
12
is primarily attributable to a 10% increase in the average loan amount and to a
9% increase in the number of loans closed.
The improvement in operating income for the three and six month 2002
periods is primarily the result of higher mortgage banking fees due to the
increased dollar volume of loan closings, and a more favorable pricing
environment. The three and six month periods of 2001 were also impacted by
approximately $600 and $850, respectively, for costs associated with the
mortgage segment's discontinued retail activities; there were minimal similar
such costs incurred in the three and six month periods of 2002. The mortgage
banking segment continues to focus almost exclusively on serving NVR's
homebuilding operations. Year to date, this focus has resulted in the mortgage
segment capturing an increased percentage of the loans and title work associated
with the growing homebuilding segment's customer base. As noted above, the
homebuilding segment's settlements increased to 5,452 in the first six months of
2002 from 4,835 in the first six months of 2001.
Liquidity and Capital Resources
NVR has $255,000 of securities 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, 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 $18,691 was outstanding at June 30, 2002.
There were no direct borrowings outstanding under the Facility as of June 30,
2002. At June 30, 2002, 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's mortgage banking segment has available an
annually renewable mortgage warehouse facility with an aggregate available
borrowing limit of $150,000 to fund its mortgage origination activities.
Management believes that the mortgage warehouse facility will be renewed with
terms consistent with the current warehouse facility prior to its expiration on
August 30, 2002. There was $116,097 outstanding under this facility at June 30,
2002. NVR's mortgage banking segment also currently has available an aggregate
of $75,000 of borrowing capacity in various uncommitted gestation and repurchase
agreements. There was an aggregate of $8,472 outstanding under such gestation
and repurchase agreements at June 30, 2002.
On March 14, 2002, NVR successfully completed a solicitation of
consents from holders of its 8% Senior Notes due 2005 ("Notes") to amend the
Indenture governing the Notes. The amendment to the Indenture allows NVR to
repurchase up to an aggregate $100 million of its capital stock, in addition to
that otherwise provided under NVR's Indenture, in one or more open market and/or
privately negotiated transactions through June 1, 2003. On March 19, 2002, NVR
paid to each holder of the Notes who provided a consent, an amount equal to 2.0%
of the principal amount of such holder's Notes. The aggregate fee paid of $2,125
was deferred and will be amortized as an adjustment to interest expense over the
remaining life of the Notes.
NVR repurchased 523,648 shares of its common stock at an aggregate
purchase price of $150,140 during the six months ended June 30, 2002. In
addition, NVR's Rabbi Trust, which holds the investments for the Deferred
Compensation Plan, purchased 170,732 shares of NVR's common stock at an
aggregate purchase price of $37,469. The Rabbi Trust shares are recorded in
NVR's treasury stock account until such shares are vested under the respective
compensation plan (see footnote 4 of the condensed
13
consolidated financial statements). NVR may, from time to time, repurchase
additional shares of its common stock pursuant to repurchase authorizations by
the Board of Directors and subject to the restrictions contained within NVR's
debt agreements.
Year to date through the date of this filing, approximately 844,300
options to purchase shares of the Company's common stock were exercised, with
the Company receiving $11,627 in aggregate equity proceeds. These exercises will
result in NVR recording a tax benefit directly to equity of approximately
$97,000 in 2002.
Management believes that internally generated cash and borrowings
available under credit facilities will be sufficient to satisfy near and long
term cash requirements for working capital in both its homebuilding and mortgage
banking operations.
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
NVR held its Annual Meeting of Shareholders on May 1, 2002. 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:
Dwight C. Schar 5,733,164 1,394,976 - 396,115
Robert C. Butler 7,027,735 100,405 - 396,115
George E. Slye 6,970,764 157,376 - 396,115
2. Ratification of appointment of
KPMG LLP as independent
auditors for NVR 7,015,879 58,792 53,469 396,115
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
11. Computation of Earnings per Share.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
quarter ended June 30, 2002.
Exhibit Index
Exhibit
Number Description Page
- ------ ---------------------------------------- ----
11 Computation of Earnings per Share 16
14
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 24, 2002 NVR, Inc.
By: /s/ Paul C. Saville
---------------------------------------
Paul C. Saville
Executive Vice President, Chief
Financial Officer and Treasurer
15