NVR, Inc. Announces Second Quarter Results

RESTON, Va., July 21, 2017 /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, 2017 of $147,877,000, or $35.19 per diluted share. Net income and diluted earnings per share for the second quarter ended June 30, 2017 increased 61% and 60%, respectively, when compared to the 2016 second quarter net income of $91,676,000, or $22.01 per diluted share. Consolidated revenues for the second quarter of 2017 totaled $1,544,492,000, an 11% increase from $1,388,183,000 in the second quarter of 2016.

For the six months ended June 30, 2017, consolidated revenues were $2,821,584,000, an 11% increase from $2,532,209,000 reported for the same period of 2016. Net income for the six months ended June 30, 2017 was $250,800,000, an increase of 60% when compared to the six months ended June 30, 2016. Diluted earnings per share for the six months ended June 30, 2017 was $60.36, an increase of 60% from $37.82 per diluted share for the comparable period of 2016.

Homebuilding

New orders in the second quarter of 2017 increased 8% to 4,678 units, when compared to 4,324 units in the second quarter of 2016. The average sales price of new orders in the second quarter of 2017 was $377,000, a decrease of 2% when compared with the second quarter of 2016. The decrease in the average sales price of new orders is primarily attributable to a shift in new orders from higher priced markets to lower priced markets. Settlements increased in the second quarter of 2017 to 3,917 units, 9% higher than the second quarter of 2016. The Company's backlog of homes sold but not settled as of June 30, 2017 increased on a unit basis by 9% to 8,813 units and increased on a dollar basis by 10% to $3,444,964,000 when compared to June 30, 2016.

Homebuilding revenues in the second quarter of 2017 totaled $1,512,714,000, 11% higher than the year earlier period. Gross profit margin in the second quarter of 2017 increased to 19.5%, compared to 17.3% in the second 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 $191,337,000 in the second quarter of 2017, an increase of 45% when compared to the second quarter of 2016.

Mortgage Banking

Mortgage closed loan production in the second quarter of 2017 totaled $1,041,613,000, an increase of 11% when compared to the second quarter of 2016. Income before tax from the mortgage banking segment for the second quarter of 2017 was $17,631,000, compared to $13,192,000 for the second 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 six months ended June 30, 2017 to 29.2% and 26.5%, respectively, compared to 36.7% for both the three and six months ended June 30, 2016. 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 $16,464,000 and $36,364,000 related to excess tax benefits from stock option exercises during the three and six months ended June 30, 2017, respectively. For the three and six months ended June 30, 2016, the excess tax benefits of $2,394,000 and $8,678,000, 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 six months ended June 30, 2017, the effective tax rate would have been 37.1% for both periods. Additionally, the excess tax benefits recognized during the three and six months ended June 30, 2017 favorably impacted diluted earnings per share by $3.92 and $8.75 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 June 30,				Six Months Ended June 30,
	2017		2016		2017		2016

*Homebuilding:*
Revenues	$	1,512,714	$	1,361,741	$	2,760,301	$	2,483,245
Other income		1,447		753		2,549		1,520
Cost of sales		(1,218,083)		(1,126,369)		(2,244,100)		(2,052,129)
Selling, general and administrative		(99,100)		(100,043)		(199,004)		(198,058)
Operating income		196,978		136,082		319,746		234,578
Interest expense		(5,641)		(4,554)		(11,219)		(9,396)
Homebuilding income		191,337		131,528		308,527		225,182

*Mortgage Banking:*
Mortgage banking fees		31,778		26,442		61,283		48,964
Interest income		1,554		1,437		3,215		3,111
Other income		506		409		815		667
General and administrative		(15,934)		(14,836)		(32,180)		(29,386)
Interest expense		(273)		(260)		(531)		(506)
Mortgage banking income		17,631		13,192		32,602		22,850

*Income before taxes*		208,968		144,720		341,129		248,032
Income tax expense		(61,091)		(53,044)		(90,329)		(91,053)

*Net income*	$	147,877	$	91,676	$	250,800	$	156,979

*Basic earnings per share*	$	39.46	$	23.51	$	67.30	$	40.34

*Diluted earnings per share*	$	35.19	$	22.01	$	60.36	$	37.82

*Basic weighted average shares outstanding*		3,748		3,900		3,726		3,892

*Diluted weighted average shares outstanding*		4,202		4,165		4,155		4,151

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

	June 30, 2017		December 31, 2016
ASSETS
*Homebuilding:*
Cash and cash equivalents	$	518,482	$	375,748
Restricted cash		15,963		17,561
Receivables		22,110		18,937
Inventory:
Lots and housing units, covered under sales agreements with customers		1,155,047		883,868
Unsold lots and housing units		147,195		145,065
Land under development		46,685		46,999
Building materials and other		16,024		16,168
		1,364,951		1,092,100

Assets related to consolidated variable interest entity		1,243		1,251
Contract land deposits, net		358,405		379,844
Property, plant and equipment, net		43,995		45,915
Reorganization value in excess of amounts allocable to identifiable assets, net		41,580		41,580
Goodwill and finite-lived intangible assets, net		1,908		2,599
Other assets		265,539		257,811
		2,634,176		2,233,346

*Mortgage Banking:*
Cash and cash equivalents		9,632		19,657
Restricted cash		2,900		1,857
Mortgage loans held for sale, net		241,398		351,958
Property and equipment, net		5,530		4,903
Reorganization value in excess of amounts allocable to identifiable assets, net		7,347		7,347
Other assets		17,104		24,875
		283,911		410,597
Total assets	$	2,918,087	$	2,643,943

LIABILITIES AND SHAREHOLDERS' EQUITY
*Homebuilding:*
Accounts payable	$	271,899	$	251,212
Accrued expenses and other liabilities		317,168		336,318
Liabilities related to consolidated variable interest entity		874		882
Customer deposits		165,684		122,236
Senior notes		596,760		596,455
		1,352,385		1,307,103
*Mortgage Banking:*
Accounts payable and other liabilities		29,925		32,399
		29,925		32,399
Total liabilities		1,382,310		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 June 30, 2017 and December 31, 2016		206		206
Additional paid-in capital		1,607,958		1,515,828
Deferred compensation trust – 108,636 and 108,640 shares of NVR, Inc. common stock as of June 30, 2017 and December 31, 2016, respectively		(17,371)		(17,375)
Deferred compensation liability		17,371		17,375
Retained earnings		5,945,219		5,695,376
Less treasury stock at cost – 16,807,724 and 16,862,327 shares as of June 30, 2017 and December 31, 2016, respectively		(6,017,606)		(5,906,969)
Total shareholders' equity		1,535,777		1,304,441
Total liabilities and shareholders' equity	$	2,918,087	$	2,643,943

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
*Homebuilding data:*
New orders (units)
Mid Atlantic (1)		2,263			2,242			4,388			4,271
North East (2)		361			314			720			655
Mid East (3)		1,145			1,003			2,279			2,060
South East (4)		909			765			1,715			1,475
Total		4,678			4,324			9,102			8,461

Average new order price	$	377.0		$	383.9		$	384.6		$	379.9

Settlements (units)
Mid Atlantic (1)		1,976			1,762			3,634			3,217
North East (2)		329			289			597			566
Mid East (3)		947			934			1,672			1,695
South East (4)		665			596			1,270			1,109
Total		3,917			3,581			7,173			6,587

Average settlement price	$	386.1		$	378.5		$	384.8		$	374.4

Backlog (units)
Mid Atlantic (1)								4,295			4,191
North East (2)								731			629
Mid East (3)								2,106			1,863
South East (4)								1,681			1,420
Total								8,813			8,103

Average backlog price							$	390.9		$	385.4

New order cancellation rate		13	%		13	%		14	%		14	%
Community count (average)		491			483			488			481
Lots controlled at end of period								83,700			76,300

*Mortgage banking data:*
Loan closings	$	1,041,613		$	942,407		$	1,884,954		$	1,696,247
Capture rate		88	%		88	%		87	%		88	%

*Common stock information:*
Shares outstanding at end of period								3,747,606			3,897,629
Number of shares repurchased		32,840			5,600			83,762			61,988
Aggregate cost of shares repurchased	$	73,959		$	9,407		$	159,506		$	96,508

(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