PR Newswire | Jul 22, 2020 09:01AM EDT

07/22 08:00 CDT

NVR, Inc. Announces Second Quarter Results RESTON, Va., July 22, 2020

RESTON, Va., July 22, 2020 /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, 2020 of $164,075,000, or $42.50 per diluted share. Net income and diluted earnings per share for the second quarter ended June 30, 2020 decreased 22% and 20%, respectively, when compared to 2019 second quarter net income of $210,209,000, or $53.09 per diluted share. Consolidated revenues for the second quarter of 2020 totaled $1,620,368,000, which decreased 10% from $1,800,194,000 in the second quarter of 2019.

For the six months ended June 30, 2020, consolidated revenues were $3,202,896,000, an 8% decrease from $3,487,205,000 reported for 2019. Net income for the six months ended June 30, 2020 was $339,778,000, a decrease of 15% when compared to the six months ended June 30, 2019. Diluted earnings per share for the six months ended June 30, 2020 was $87.56, a decrease of 13% from $100.61 per diluted share for 2019.

Homebuilding

New orders in the second quarter of 2020 increased by 13% to 5,901 units, when compared to 5,239 units in the second quarter of 2019. The average sales price of new orders in the second quarter of 2020 was $365,400, an increase of 2% when compared with the second quarter of 2019. The cancellation rate in the second quarter of 2020 increased to 16% compared to 13% in the second quarter of 2019. Settlements decreased in the second quarter of 2020 to 4,296 units, which was 9% lower than the second quarter of 2019. Our backlog of homes sold but not settled as of June 30, 2020 increased on both a unit and dollar basis by 11% and 14%, respectively, to 10,623 units and $4,009,695,000 compared to the respective backlog unit and dollar balances as of June 30, 2019.

Homebuilding revenues of $1,588,758,000 in the second quarter of 2020 decreased 10% compared to homebuilding revenues of $1,757,448,000 in the second quarter of 2019. Gross profit margin in the second quarter of 2020 increased to 19.2%, compared to 18.9% in the second quarter of 2019. Income before tax from the homebuilding segment totaled $194,805,000 in the second quarter of 2020, a decrease of 11% when compared to the second quarter of 2019.

Mortgage Banking

Mortgage closed loan production in the second quarter of 2020 totaled $1,144,428,000, a decrease of 7% when compared to the second quarter of 2019. Income before tax from the mortgage banking segment totaled $15,026,000 in the second quarter of 2020, a decrease of 40% when compared to $25,062,000 in the second quarter of 2019. This decrease is due primarily to the reduction in secondary marketing gains on the sales of loans as a result of the disruption in the mortgage market related to the COVID-19 pandemic.

Effective Tax Rate

Our effective tax rate for the three and six months ended June 30, 2020 was 21.8% and 8.5%, respectively, compared to 14.1% and 14.0% for the three and six months ended June 30, 2019, respectively. The effective tax rate in each period was favorably impacted by the recognition of an income tax benefit related to excess tax benefits from stock option exercises totaling $6,854,000 and $62,509,000 for the three and six months ended June 30, 2020, respectively, and $30,727,000 and $59,205,000, for the three and six months ended June 30, 2019.

Other Matters - COVID-19

The COVID-19 pandemic has had a significant impact on all facets of our business. Our primary focus as we face this challenge is to do everything we can to ensure the safety and well-being of our employees, customers and trade partners. We are currently able to operate in all of the markets we serve. In each of our markets, we continue to operate in accordance with the safety guidelines issued by the Centers for Disease Control and Prevention as well as state and local guidelines.

There is uncertainty regarding the extent and timing of disruption to our business that may result from COVID-19 and related governmental actions. There is also uncertainty as to the effects of economic relief efforts on the U.S. economy, unemployment, consumer confidence, demand for our homes and the mortgage market, including lending standards and secondary mortgage markets. We are unable to predict the extent to which this will impact our operational and financial performance including the impact of future developments such as the duration and spread of COVID-19, corresponding governmental actions, and the impact of such on our employees, customers and trade partners.

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-two 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: the impact of COVID-19 on the economy; 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,

2020 2019 2020 2019



Homebuilding:

Revenues $1,588,758 $1,757,448 $3,144,465$3,400,654

Other income 2,408 5,833 7,744 11,570

Cost of sales (1,284,493) (1,425,388) (2,579,236)(2,764,194)

Selling, general and(102,702) (112,210) (212,869) (227,944) administrative

Operating income 203,971 225,683 360,104 420,086

Interest expense (9,166) (6,033) (15,380) (12,026)

Homebuilding income 194,805 219,650 344,724 408,060



Mortgage Banking:

Mortgage banking 31,610 42,746 58,431 86,551 fees

Interest income 1,854 2,737 4,323 5,570

Other income 679 681 1,328 1,220

General and (18,758) (20,834) (36,969) (37,592) administrative

Interest expense (359) (268) (631) (490)

Mortgage banking 15,026 25,062 26,482 55,259 income



Income before taxes 209,831 244,712 371,206 463,319

Income tax expense (45,756) (34,503) (31,428) (64,704)



Net income $164,075 $210,209 $339,778 $398,615



Basic earnings per $44.56 $58.20 $92.52 $110.43 share



Diluted earnings per$42.50 $53.09 $87.56 $100.61 share



Basic weighted average shares 3,682 3,612 3,673 3,610 outstanding



Diluted weighted average shares 3,861 3,959 3,881 3,962 outstanding

NVR, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share data)

(unaudited)



June 30, 2020December 31, 2019

ASSETS

Homebuilding:

Cash and cash equivalents $ 1,982,890$1,110,892

Restricted cash 24,650 17,943

Receivables 20,801 18,278

Inventory:

Lots and housing units, covered under sales1,340,444 1,075,420 agreements with customers

Unsold lots and housing units 172,394 184,352

Land under development 69,323 69,196

Building materials and other 20,379 18,320

1,602,540 1,347,288



Contract land deposits, net 360,978 413,851

Property, plant and equipment, net 50,459 52,260

Operating lease right-of-use assets 57,701 63,825

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

Other assets 196,498 176,144

4,338,097 3,242,061

Mortgage Banking:

Cash and cash equivalents 17,986 29,412

Restricted cash 2,199 2,276

Mortgage loans held for sale, net 325,208 492,125

Property and equipment, net 5,258 5,828

Operating lease right-of-use assets 14,226 13,345

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

Other assets 19,699 17,421

391,923 567,754

Total assets $ 4,730,020$3,809,815



NVR, Inc.

Consolidated Balance Sheets (Continued)

(in thousands, except share and per share data)

(unaudited)



June 30, 2020December 31, 2019

LIABILITIES AND SHAREHOLDERS' EQUITY

Homebuilding:

Accounts payable $294,254 $262,987

Accrued expenses and other liabilities 349,113 346,035

Customer deposits 158,016 131,886

Operating lease liabilities 64,540 71,095

Senior notes 1,193,962 598,301

2,059,885 1,410,304

Mortgage Banking:

Accounts payable and other liabilities 42,500 43,985

Operating lease liabilities 15,223 14,282

57,723 58,267

Total liabilities 2,117,608 1,468,571



Commitments and contingencies



Shareholders' equity:

Common stock, $0.01 par value; 60,000,000 shares authorized; 20,555,330 shares issued206 206 as of both June 30, 2020 and December 31, 2019

Additional paid-in capital 2,151,623 2,055,407

Deferred compensation trust - 106,697 and 107,295 shares of NVR, Inc. common stock as(16,710) (16,912) of June 30, 2020 and December 31, 2019, respectively

Deferred compensation liability 16,710 16,912

Retained earnings 8,249,650 7,909,872

Less treasury stock at cost - 16,866,242 and 16,922,558 shares as of June 30, 2020 (7,789,067) (7,624,241) and December 31, 2019, respectively

Total shareholders' equity 2,612,412 2,341,244

Total liabilities and shareholders' equity $4,730,020 $3,809,815



NVR, Inc.

Operating Activity

(dollars in thousands)

(unaudited)



Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

UnitsAverage UnitsAverage Units Average Units Average Price Price Price Price

New orders, net of cancellations:

Mid Atlantic 2,381$443.02,322$411.34,442 $442.64,766 $415.3(1)

North East (2)369 $375.7364 $376.5727 $378.9677 $378.8

Mid East (3) 1,536$315.61,276$317.92,761 $320.32,490 $319.0

South East (4)1,615$296.11,277$298.42,986 $300.52,445 $300.3

Total 5,901$365.45,239$358.610,916$368.610,378$362.7





Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

UnitsAverage UnitsAverage Units Average Units Average Price Price Price Price

Settlements:

Mid Atlantic 1,931$434.92,326$422.23,726 $433.14,469 $416.9(1)

North East (2)262 $374.9314 $387.7543 $376.3617 $396.1

Mid East (3) 945 $317.41,097$328.01,930 $321.62,127 $328.3

South East (4)1,158$302.9983 $298.82,327 $303.22,000 $297.2

Total 4,296$369.84,720$372.38,526 $368.89,213 $369.1



As of June 30,

2020 2019

Units Average UnitsAverage Price Price

Backlog:

Mid Atlantic (1)4,328 $448.74,445$421.2

North East (2) 771 $403.5623 $384.4

Mid East (3) 2,644 $327.52,169$324.2

South East (4) 2,880 $309.22,293$306.0

Total 10,623$377.59,530$369.0



NVR, Inc.

Operating Activity (Continued)

(dollars in thousands)

(unaudited)



Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Average active communities:

Mid Atlantic (1) 188 211 189 211

North East (2) 41 34 40 32

Mid East (3) 141 131 139 128

South East (4) 114 94 111 89

Total 484 470 479 460





Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Homebuilding data:

New order 15.7 %13.1 %18.1 %13.6 %cancellation rate

Lots controlled 102,000 101,400 at end of period



Mortgage banking data:

Loan closings $1,144,428 $1,231,039 $2,276,531 $2,372,037

Capture rate 89 %89 %90 %89 %



Common stock information:

Shares outstanding at 3,689,088 3,643,596 end of period

Number of shares - 29,826 57,611 111,655 repurchased

Aggregate cost of shares $- $87,980 $216,582 $304,479 repurchased



(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.