RESTON, Va., Oct. 17 /PRNewswire-FirstCall/ -- NVR, Inc. (AMEX:NVR), one of the nation's largest homebuilding and mortgage banking companies, announced that diluted earnings per share for its third quarter ended September 30, 2006 decreased 19% and net income decreased 32% when compared to the 2005 third quarter. Net income for the 2006 third quarter was $129,333,000, $19.63 per diluted share, compared to net income of $189,443,000, $24.33 per diluted share, for the same period of 2005. Consolidated revenues for the third quarter of 2006 totaled $1,553,411,000, a 13% increase from $1,373,022,000 for the comparable 2005 quarter.
For the nine months ended September 30, 2006, consolidated revenues were $4,506,994,000, 25% higher than the $3,604,143,000 reported for the same period of 2005. Net income for the nine months ended September 30, 2006 was $452,245,000, a decrease of 5% when compared to the nine months ended September 30, 2005. Earnings per diluted share for the nine months ended September 30, 2006 was $67.23, an increase of 12% from $59.87 per diluted share for the comparable period of 2005.
Homebuilding New orders in the third quarter of 2006 decreased 18% to 2,378 units, when compared to 2,897 units in the third quarter of 2005. The cancellation rate in the quarter ended September 30, 2006 was 27% compared to 15% in the third quarter of 2005 and 13% in the second quarter of 2006. The cancellation rate in Washington was 39% in the quarter compared to 19% in the third quarter of 2005 and 21% cancellation rate in the second quarter of 2006. The cancellation rate in Baltimore was 24% in the quarter compared to 11% in the third quarter of 2005 and 14% in the second quarter of 2006. The average sales price of total new orders in the third quarter of 2006 declined 9% from the third quarter of 2005. The decline is the result of a shift of new orders out of the higher priced Washington and Baltimore markets. Also contributing to the decline in average new order price was a 25% drop in average new order price in the Washington market as compared to 2005.
Settlements increased in the third quarter of 2006 to 3,854 units, 8% more than the same period of 2005. Homebuilding revenues for the three months ended September 30, 2006 totaled $1,528,964,000, 13% higher than the year earlier period. Income before tax from the homebuilding segment totaled $194,816,000, a decrease of 33% when compared to the third quarter of the previous year. Gross profit margins decreased to 19.0% in the 2006 third quarter compared to 28.1% for the same period in 2005. Gross profit margins were negatively impacted by land deposit impairments of approximately $80,800,000. These impairments lowered gross margins by 529 basis points. The Company's backlog of homes sold but not settled at the end of the 2006 quarter decreased on a unit basis by 17% to 7,388 units and 18% on a dollar basis to $3,132,419,000 when compared to the same period last year.
Mortgage Banking Mortgage closed loan production of $986,677,000 for the three months ended September 30, 2006 was 14% higher than the same period last year. Operating income contributed by the mortgage banking operations during the third quarter of 2006 increased 6% to $17,291,000, when compared to the $16,250,000 reported for the same period of 2005.
Outlook The Company expects gross margins to continue to be negatively impacted by pricing pressure in many of its markets. As a result of the lot deposit impairments in the current quarter and the continued deterioration in the housing market, the Company lowered its full year 2006 guidance on net income to a range of $600,000,000 to $620,000,000. Full year net income expectations include an after tax expense of approximately $36,000,000 for the implementation of SFAS 123R, Share Based Payment.
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. 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 those 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 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. The Company has no obligation to update such forward- looking statements.
NVR, Inc. Consolidated Statements of Income
(in thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005 Homebuilding:
Revenues $1,528,964 $1,350,465 $4,435,503 $3,546,965
Other income 3,238 1,224 8,248 4,157
Cost of sales (1,238,671) (970,437) (3,403,893) (2,557,268)
Selling, general and
administrative (95,574) (86,626) (329,131) (243,276)
Operating income 197,957 294,626 710,727 750,578
Interest expense (3,141) (2,905) (14,773) (8,835)
Homebuilding income 194,816 291,721 695,954 741,743 Mortgage Banking:
Mortgage banking fees 24,447 22,557 71,491 57,178
Interest income 1,986 1,492 5,236 3,276
Other income 403 435 1,017 1,022
General and
administrative (8,847) (7,957) (27,867) (22,486)
Interest expense (698) (277) (2,619) (730)
Mortgage banking
income 17,291 16,250 47,258 38,260 Income before taxes 212,107 307,971 743,212 780,003
Income tax expense (82,774) (118,528) (290,967) (304,981) Net income $129,333 $189,443 $452,245 $475,022 Basic earnings per share $22.59 $30.08 $79.60 $73.73 Diluted earnings per share $19.63 $24.33 $67.23 $59.87 Basic average shares
outstanding 5,725 6,298 5,682 6,443 Diluted average shares
outstanding 6,588 7,787 6,727 7,934 NVR, Inc. Consolidated Balance Sheets
(in thousands, except share and per share data)
September December
30, 2006 31, 2005
(unaudited) ASSETS Homebuilding:
Cash and cash equivalents $235,771 $170,090
Receivables 16,762 40,562
Inventory:
Lots and housing units, covered under
sales agreements with customers 912,111 723,657
Unsold lots and housing units 89,765 60,419
Manufacturing materials and other 9,263 9,899
1,011,139 793,975 Contract land deposits, net 437,519 517,241
Assets not owned, consolidated
per FIN 46R 262,534 275,306
Property, plant and equipment, net 36,985 31,096
Reorganization value in excess of amounts
allocable to identifiable assets, net 41,580 41,580
Goodwill and other indefinite and definite
life intangibles, net 11,967 12,061
Other assets 201,167 142,851
2,255,424 2,024,762 Mortgage Banking:
Cash and cash equivalents 2,834 7,436
Mortgage loans held for sale, net 203,443 193,932
Property and equipment, net 1,260 1,003
Reorganization value in excess of amounts
allocable to identifiable assets, net 7,347 7,347
Other assets 2,437 3,189
217,321 212,907 Total assets $2,472,745 $2,237,669
LIABILITIES AND SHAREHOLDERS' EQUITY Homebuilding:
Accounts payable $281,082 $262,086
Accrued expenses and other liabilities 301,741 337,257
Liabilities related to assets not owned,
consolidated per FIN 46R 207,579 215,284
Customer deposits 213,379 256,837
Other term debt 3,141 3,325
Notes payable - 103,000
Senior notes 200,000 200,000
1,206,922 1,377,789 Mortgage Banking:
Accounts payable and other liabilities 11,245 25,902
Notes payable 168,062 156,816
179,307 182,718 Total liabilities 1,386,229 1,560,507 Commitments and contingencies Shareholders' equity:
Common stock, $0.01 par value; 60,000,000
shares authorized; 20,592,640 shares
issued for both September 30, 2006 and
December 31, 2005 206 206
Additional paid-in capital 562,608 473,886
Deferred compensation trust -- 547,238 and
547,697 shares of NVR, Inc. common stock
for September 30, 2006 and December 31,
2005, respectively (80,090) (76,303)
Deferred compensation liability 80,090 76,303
Retained earnings 3,060,873 2,608,628
Less treasury stock at cost -- 14,947,725
14,964,482 shares for September 30, 2006
and December 31, 2005, respectively (2,537,171) (2,405,558)
Total shareholders' equity 1,086,516 677,162
Total liabilities and shareholders'
equity $2,472,745 $2,237,669 NVR, Inc. Operating Activity
(unaudited)
(dollars in thousands)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
2006 2005 2006 2005 Homebuilding data:
New orders (units)
Washington (1) 510 622 2,296 2,881
Baltimore (2) 267 431 1,185 1,461
North (3) 937 1,225 4,307 4,480
South (4) 664 619 2,427 2,216
Total 2,378 2,897 10,215 11,038 Average new order
price $362.5 $399.3 $380.6 $403.8 Settlements (units)
Washington (1) 869 964 2,688 2,570
Baltimore (2) 463 388 1,494 1,046
North (3) 1,692 1,491 4,631 3,889
South (4) 830 733 2,324 2,102
Total 3,854 3,576 11,137 9,607 Average settlement
price $396.3 $377.5 $397.7 $368.5 Backlog (units)
Washington (1) 2,357 2,864
Baltimore (2) 764 1,231
North (3) 2,743 3,340
South (4) 1,524 1,440
Total 7,388 8,875 Average backlog price $424.0 $431.7 Community count (average) 609 518 602 501
Lots controlled at end of
period 98,000 100,000 Mortgage banking data:
Loan closings $986,677 $867,864 $2,846,920 $2,340,177
Capture rate 86% 85% 86% 87% Common stock information:
Shares outstanding at
end of period 5,644,915 6,240,568
Weighted average
basic shares
outstanding 5,725,000 6,298,000 5,682,000 6,443,000
Weighted average
diluted shares
outstanding 6,588,000 7,787,000 6,727,000 7,934,000
Number of shares
repurchased 127,085 137,000 288,941 643,150
Aggregate cost of
shares repurchased $62,469 $115,216 $183,286 $510,532
(1) Washington, D.C. metropolitan area and adjacent counties in Maryland,
Virginia and West Virginia
(2) Baltimore, MD metropolitan area and adjacent counties in Pennsylvania
(3) Delaware, Maryland Eastern Shore, New Jersey, New York, Ohio,
Pennsylvania, Michigan, and Kentucky
(4) North Carolina, South Carolina, Tennessee and Richmond, VA
DATASOURCE: NVR, Inc.
CONTACT: Dan Malzahn of NVR, Inc., +1-703-956-4204 Web site: http://www.nvrinc.com/
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