NVR, Inc. Announces Fourth Quarter And Full Year Results

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Jan 27, 2014, 09:01 ET

RESTON, Va., Jan. 27, 2014 /PRNewswire/ -- NVR, Inc. (NYSE: NVR), one of the nation's largest homebuilding and mortgage banking companies, announced net income for its fourth quarter ended December 31, 2013 of $97,811,000, $21.15 per diluted share. Net income and diluted earnings per share for its fourth quarter ended December 31, 2013 increased 61% and 77%, respectively, when compared to the 2012 fourth quarter. Consolidated revenues for the fourth quarter of 2013 totaled $1,242,152,000, a 32% increase from $943,738,000 for the comparable 2012 quarter.

For the year ended December 31, 2013, consolidated revenues were $4,211,267,000, an increase of 32% from the $3,184,650,000 reported for the year ended December 31, 2012. Net income for the year ended December 31, 2013 was $266,477,000, an increase of 48% when compared to the year ended December 31, 2012. Diluted earnings per share for the year ended December 31, 2013 was $54.81, an increase of 56% from $35.12 per diluted share for the comparable period of 2012.

Homebuilding

New orders in the fourth quarter of 2013 were 2,631 units, which was flat when compared to 2,625 units in the fourth quarter of 2012. The cancellation rate in the fourth quarter of 2013 was 14% compared to 15% in the fourth quarter of 2012 and 19% in the third quarter of 2013. Settlements increased in the fourth quarter of 2013 to 3,342 units, 20% higher than the same period in 2012. The Company's backlog of homes sold but not settled as of December 31, 2013 was down 1% on a unit basis to 4,945 units but was 7% higher on a dollar basis to $1,845,600,000 when compared to December 31, 2012.

Homebuilding revenues for the three months ended December 31, 2013 totaled $1,223,808,000, 32% higher than the year earlier period. Gross profit margin in the fourth quarter of 2013 was 18.2% compared to 18.3% in the fourth quarter of 2012 and 17.4% in the third quarter of 2013. Gross profit margin in the current quarter was negatively impacted by a $15,964,000 expense to increase the warranty accrual for a non-recurring service issue. This is unrelated to the warranty accrual increase recognized in the second quarter. Excluding this charge, gross profit margin for the fourth quarter of 2013 was 19.5%. Income before tax from the homebuilding segment totaled $143,976,000 in the 2013 fourth quarter, an increase of 67% when compared to the fourth quarter of 2012. The fourth quarter 2013 pre-tax income results also reflect a reversal of approximately $7,450,000 of stock-based compensation expense due to an adjustment to the Company's estimated forfeiture rate based on actual forfeiture experience.

New orders for the 2013 fiscal year increased 8% to 11,800 units, when compared to 10,954 units in fiscal year 2012. Home settlements in 2013 increased 20% to 11,834 units from 9,843 units settled in 2012. Homebuilding revenues for 2013 totaled $4,134,481,000, 32% higher than 2012. Pre-tax homebuilding income for the 2013 fiscal year was $379,370,000, a 57% increase when compared to 2012.

Mortgage Banking

Mortgage closed loan production of $721,926,000 for the three months ended December 31, 2013 was 12% higher than the same period in 2012. Operating income for the mortgage banking operations during the fourth quarter of 2013 decreased 19% to $7,844,000 when compared to $9,728,000 reported for the same period of 2012. The decrease in the operating income was attributable to an increase in general and administrative costs resulting from increased headcount in the current year.

Mortgage closed loan production for the 2013 fiscal year increased 15% to $2,538,072,000. Income before tax from the mortgage banking segment for 2013 increased 15% to $39,326,000 from $34,153,000 in 2012.

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, Fox Ridge Homes and Heartland Homes trade names, and operates in twenty-seven 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, www.foxridgehomes.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)

			Three Months Ended December 31,		Twelve Months Ended December 31,
			2013	2012	2013	2012
			(Unaudited)		(Unaudited)
*Homebuilding:*
	Revenues		$ 1,223,808	$ 925,363	$ 4,134,481	$ 3,121,244
	Other income		808	1,441	3,962	3,486
	Cost of sales		(1,001,415)	(756,396)	(3,424,204)	(2,575,639)
	Selling, general and administrative		(73,599)	(78,701)	(313,029)	(301,184)
		Operating income	149,602	91,707	401,210	247,907
	Interest expense		(5,626)	(5,404)	(21,840)	(6,983)
		Homebuilding income	143,976	86,303	379,370	240,924

*Mortgage Banking:*
	Mortgage banking fees		18,344	18,375	76,786	63,406
	Interest income		1,585	999	4,983	4,504
	Other income		187	191	696	564
	General and administrative		(12,135)	(9,746)	(42,594)	(33,775)
	Interest expense		(137)	(91)	(545)	(546)
		Mortgage banking income	7,844	9,728	39,326	34,153

*Income before taxes*			151,820	96,031	418,696	275,077

		Income tax expense	(54,009)	(35,404)	(152,219)	(94,489)

*Net income*			$ 97,811	$ 60,627	$ 266,477	$ 180,588

*Basic earnings per share*			$ 21.74	$ 12.38	$ 56.25	$ 36.04

*Diluted earnings per share*			$ 21.15	$ 11.98	$ 54.81	$ 35.12

*Basic weighted average shares outstanding*			4,500	4,897	4,737	5,011

*Diluted weighted average shares outstanding*			4,626	5,060	4,862	5,142

NVR, Inc. Consolidated Balance Sheets (in thousands, except share and per share data)

				December 31, 2013	December 31, 2012
				(Unaudited)
ASSETS

*Homebuilding:*
	Cash and cash equivalents			$ 844,274	$ 1,139,103
	Receivables			9,529	9,421
	Inventory:
		Lots and housing units, covered under
			sales agreements with customers	568,831	515,498
		Unsold lots and housing units		117,467	81,932
		Land under development		41,328	68,336
		Manufacturing materials and other		10,939	12,365
				738,565	678,131

	Assets related to consolidated variable interest entity			7,268	15,626
	Contract land deposits, net			236,885	191,538
	Property, plant and equipment, net			32,599	27,016
	Reorganization value in excess of amounts
		allocable to identifiable assets, net		41,580	41,580
	Goodwill and finite-lived intangible assets, net			6,747	9,219
	Other assets			307,933	270,636
				2,225,380	2,382,270

*Mortgage Banking:*
	Cash and cash equivalents			21,311	13,498
	Mortgage loans held for sale, net			210,641	188,929
	Property and equipment, net			4,699	2,465
	Reorganization value in excess of amounts
		allocable to identifiable assets, net		7,347	7,347
	Other assets			16,770	10,333
				260,768	222,572

		Total assets		$ 2,486,148	$ 2,604,842

LIABILITIES AND SHAREHOLDERS' EQUITY

*Homebuilding:*
	Accounts payable			$ 181,687	$ 163,446
	Accrued expenses and other liabilities			316,227	234,804
	Liabilities related to consolidated variable interest entity			1,646	2,180
	Non-recourse debt related to consolidated variable interest entity
				3,365	4,574
	Customer deposits			101,022	99,687
	Senior notes			599,075	598,988
				1,203,022	1,103,679

*Mortgage Banking:*
	Accounts payable and other liabilities			21,774	20,686
				21,774	20,686

		Total liabilities		1,224,796	1,124,365

*Commitments and contingencies*

*Shareholders' equity:*
	Common stock, $0.01 par value; 60,000,000 shares
		authorized; and 20,555,330 and 20,556,198
		shares issued as of December 31, 2013 and
		December 31, 2012, respectively		206	206
	Additional paid-in-capital			1,212,050	1,169,699
	Deferred compensation trust – 109,256 and
		152,223 shares of NVR, Inc. common
		stock as of December 31, 2013 and
		December 31, 2012, respectively		(17,741)	(25,331)
	Deferred compensation liability			17,741	25,331
	Retained earnings			4,605,557	4,339,080
	Less treasury stock at cost – 16,121,605 and
		15,642,068 shares at December 31, 2013
		and December 31, 2012, respectively		(4,556,461)	(4,028,508)
		Total shareholders' equity		1,261,352	1,480,477
		Total liabilities and shareholders' equity		$ 2,486,148	$ 2,604,842

NVR, Inc. Operating Activity (dollars in thousands) (Unaudited)

			Three Months Ended December 31,		Twelve Months Ended December 31,
			2013	2012	2013	2012
*Homebuilding data:*
	New orders (units)
		Mid Atlantic (1)	1,445	1,418	6,056	5,757
		North East (2)	243	234	1,075	946
		Mid East (3)	578	574	2,903	2,625
		South East (4)	365	399	1,766	1,626
		Total	2,631	2,625	11,800	10,954

	Average new order price		$ 375.7	$ 340.2	$ 360.4	$ 328.8

	Settlements (units)
		Mid Atlantic (1)	1,698	1,427	6,029	5,047
		North East (2)	299	224	1,013	889
		Mid East (3)	818	733	3,023	2,472
		South East (4)	527	404	1,769	1,435
		Total	3,342	2,788	11,834	9,843

	Average settlement price		$ 365.3	$ 331.9	$ 349.1	$ 317.1

	Backlog (units)
		Mid Atlantic (1)			2,710	2,683
		North East (2)			495	433
		Mid East (3)			1,032	1,152
		South East (4)			708	711
		Total			4,945	4,979

	Average backlog price				$ 373.2	$ 346.2

	Community count (average)		462	414	451	404
	Lots controlled at end of period				64,600	58,500

*Mortgage banking data:*
	Loan closings		$ 721,926	$ 642,171	$ 2,538,072	$ 2,206,092
	Capture rate		78%	87%	81%	87%

*Common stock information:*
	Shares outstanding at end of period				4,433,725	4,914,130
	Number of shares repurchased		126,605	8,500	581,387	285,495
	Aggregate cost of shares repurchased		$ 118,682	$ 7,153	$ 554,491	$ 227,281


(1)	Virginia, West Virginia, Maryland, 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