e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|
|
|
þ |
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2010
OR
|
|
|
o |
|
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
incorporation or organization)
|
|
(I.R.S. Employer Identification No.) |
11700 Plaza America Drive, Suite 500
Reston, Virginia 20190
(703) 956-4000
(Address, including zip code, and telephone number, including
area code, of registrants 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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yeso No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
|
|
|
|
|
|
|
Large accelerated filer þ
|
|
Accelerated filer o
|
|
Non-accelerated filer o
(Do not check if smaller reporting company)
|
|
Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
As of April 28, 2010 there were 6,167,160 total shares of common stock outstanding.
NVR, Inc.
Form 10-Q
INDEX
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NVR, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
March 31, 2010 |
|
|
December 31, 2009 |
|
|
|
(unaudited) |
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,340,978 |
|
|
$ |
1,248,689 |
|
Marketable securities |
|
|
125,000 |
|
|
|
219,535 |
|
Receivables |
|
|
8,091 |
|
|
|
7,995 |
|
Inventory: |
|
|
|
|
|
|
|
|
Lots and housing units, covered under sales
agreements with customers |
|
|
430,944 |
|
|
|
337,523 |
|
Unsold lots and housing units |
|
|
62,964 |
|
|
|
73,673 |
|
Manufacturing materials and other |
|
|
6,001 |
|
|
|
7,522 |
|
|
|
|
|
|
|
|
|
|
|
499,909 |
|
|
|
418,718 |
|
|
|
|
|
|
|
|
|
|
Assets related to consolidated variable interest entities |
|
|
23,829 |
|
|
|
70,430 |
|
Contract land deposits, net |
|
|
63,630 |
|
|
|
49,906 |
|
Property, plant and equipment, net |
|
|
19,065 |
|
|
|
20,215 |
|
Reorganization value in excess of amounts allocable to
identifiable assets, net |
|
|
41,580 |
|
|
|
41,580 |
|
Other assets, net |
|
|
250,697 |
|
|
|
258,659 |
|
|
|
|
|
|
|
|
|
|
|
2,372,779 |
|
|
|
2,335,727 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage Banking: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
1,314 |
|
|
|
1,461 |
|
Mortgage loans held for sale, net |
|
|
83,385 |
|
|
|
40,097 |
|
Property and equipment, net |
|
|
739 |
|
|
|
446 |
|
Reorganization value in excess of amounts allocable to
identifiable assets, net |
|
|
7,347 |
|
|
|
7,347 |
|
Other assets |
|
|
10,833 |
|
|
|
10,692 |
|
|
|
|
|
|
|
|
|
|
|
103,618 |
|
|
|
60,043 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
2,476,397 |
|
|
$ |
2,395,770 |
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
(Continued)
3
NVR, Inc.
Condensed Consolidated Balance Sheets
(Continued)
(in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
March 31, 2010 |
|
|
December 31, 2009 |
|
|
|
(unaudited) |
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS
EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
144,153 |
|
|
$ |
120,464 |
|
Accrued expenses and other liabilities |
|
|
184,194 |
|
|
|
221,352 |
|
Liabilities related to consolidated variable interest entities |
|
|
|
|
|
|
65,915 |
|
Customer deposits |
|
|
72,261 |
|
|
|
63,591 |
|
Other term debt |
|
|
2,100 |
|
|
|
2,166 |
|
Senior notes |
|
|
133,370 |
|
|
|
133,370 |
|
|
|
|
|
|
|
|
|
|
|
536,078 |
|
|
|
606,858 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage Banking: |
|
|
|
|
|
|
|
|
Accounts payable and other liabilities |
|
|
15,346 |
|
|
|
19,306 |
|
Note payable |
|
|
56,249 |
|
|
|
12,344 |
|
|
|
|
|
|
|
|
|
|
|
71,595 |
|
|
|
31,650 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
607,673 |
|
|
|
638,508 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity: |
|
|
|
|
|
|
|
|
Common stock, $0.01 par value; 60,000,000 shares
authorized; 20,559,671 shares issued as of both
March 31, 2010 and December 31, 2009 |
|
|
206 |
|
|
|
206 |
|
Additional paid-in-capital |
|
|
870,408 |
|
|
|
830,531 |
|
Deferred compensation trust 245,278 and 265,278 shares
of NVR, Inc. common stock as of March 31, 2010 and
December 31, 2009, respectively |
|
|
(39,856 |
) |
|
|
(40,799 |
) |
Deferred compensation liability |
|
|
39,856 |
|
|
|
40,799 |
|
Retained earnings |
|
|
3,855,154 |
|
|
|
3,823,067 |
|
Less treasury stock at cost 14,410,336 and 14,609,560
shares at March 31, 2010 and December, 2009,
respectively |
|
|
(2,857,044 |
) |
|
|
(2,896,542 |
) |
|
|
|
|
|
|
|
Total shareholders equity |
|
|
1,868,724 |
|
|
|
1,757,262 |
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
2,476,397 |
|
|
$ |
2,395,770 |
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
4
NVR, Inc.
Condensed Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
Homebuilding: |
|
|
|
|
|
|
|
|
Revenues |
|
$ |
577,381 |
|
|
$ |
548,329 |
|
Other income |
|
|
2,369 |
|
|
|
2,539 |
|
Cost of sales |
|
|
(471,069 |
) |
|
|
(462,630 |
) |
Selling, general and administrative |
|
|
(60,741 |
) |
|
|
(59,694 |
) |
|
|
|
|
|
|
|
Operating income |
|
|
47,940 |
|
|
|
28,544 |
|
Interest expense |
|
|
(2,171 |
) |
|
|
(2,774 |
) |
|
|
|
|
|
|
|
Homebuilding income |
|
|
45,769 |
|
|
|
25,770 |
|
|
|
|
|
|
|
|
|
|
Mortgage Banking: |
|
|
|
|
|
|
|
|
Mortgage banking fees |
|
|
12,833 |
|
|
|
10,270 |
|
Interest income |
|
|
756 |
|
|
|
584 |
|
Other income |
|
|
166 |
|
|
|
89 |
|
General and administrative |
|
|
(6,529 |
) |
|
|
(5,758 |
) |
Interest expense |
|
|
(264 |
) |
|
|
(337 |
) |
|
|
|
|
|
|
|
Mortgage banking income |
|
|
6,962 |
|
|
|
4,848 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes |
|
|
52,731 |
|
|
|
30,618 |
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
(20,644 |
) |
|
|
(12,630 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
32,087 |
|
|
$ |
17,988 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
5.29 |
|
|
$ |
3.19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
5.01 |
|
|
$ |
3.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic average shares outstanding |
|
|
6,066 |
|
|
|
5,642 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted average shares outstanding |
|
|
6,399 |
|
|
|
5,958 |
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
5
NVR, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
32,087 |
|
|
$ |
17,988 |
|
Adjustments to reconcile net income to net cash (used in)
provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
1,881 |
|
|
|
2,581 |
|
Excess income tax benefit from exercise of stock options |
|
|
(31,911 |
) |
|
|
(39,953 |
) |
Stock option compensation expense |
|
|
5,678 |
|
|
|
11,768 |
|
Contract land deposit recoveries |
|
|
(1,922 |
) |
|
|
(250 |
) |
Gain on sales of loans |
|
|
(9,929 |
) |
|
|
(7,564 |
) |
Mortgage loans closed |
|
|
(398,316 |
) |
|
|
(391,118 |
) |
Proceeds from sales of mortgage loans |
|
|
363,555 |
|
|
|
369,618 |
|
Principal payments on mortgage loans held for sale |
|
|
169 |
|
|
|
221 |
|
Net change in assets and liabilities: |
|
|
|
|
|
|
|
|
(Increase) decrease in inventories |
|
|
(81,191 |
) |
|
|
30,041 |
|
(Increase) decrease in contract land deposits |
|
|
(10,524 |
) |
|
|
3,688 |
|
Decrease in receivables |
|
|
249 |
|
|
|
3,183 |
|
Increase
(decrease) in accounts payable, accrued expenses and customer deposits |
|
|
23,402 |
|
|
|
(18,162 |
) |
Other, net |
|
|
(11,391 |
) |
|
|
19,186 |
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities |
|
|
(118,163 |
) |
|
|
1,227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of marketable securities |
|
|
(100,000 |
) |
|
|
(708,362 |
) |
Redemption of marketable securities at maturity |
|
|
194,535 |
|
|
|
|
|
Investments in unconsolidated joint ventures |
|
|
(1,000 |
) |
|
|
|
|
Purchase of property, plant and equipment |
|
|
(881 |
) |
|
|
(367 |
) |
Proceeds from the sale of property, plant and equipment |
|
|
115 |
|
|
|
412 |
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
92,769 |
|
|
|
(708,317 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net borrowings under notes payable and credit lines |
|
|
43,839 |
|
|
|
30,790 |
|
Excess income tax benefit from exercise of stock options |
|
|
31,911 |
|
|
|
39,953 |
|
Exercise of stock options |
|
|
41,786 |
|
|
|
31,473 |
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
117,536 |
|
|
|
102,216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
92,142 |
|
|
|
(604,874 |
) |
Cash and cash equivalents, beginning of the period |
|
|
1,250,150 |
|
|
|
1,147,643 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
1,342,292 |
|
|
$ |
542,769 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid during the period |
|
$ |
587 |
|
|
$ |
711 |
|
|
|
|
|
|
|
|
Income taxes paid, net of refunds |
|
$ |
8,686 |
|
|
$ |
(35,025 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of non-cash activities: |
|
|
|
|
|
|
|
|
Investment in newly formed consolidated joint venture |
|
$ |
(23,776 |
) |
|
$ |
|
|
Change in net consolidated variable interest entities |
|
$ |
|
|
|
$ |
(323 |
) |
See notes to condensed consolidated financial statements.
6
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands except per 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 and certain other entities in which the
Company is deemed to be the primary beneficiary (see Note 2 to the accompanying financial
statements). 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 (GAAP) 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 GAAP, they should be
read in conjunction with the financial statements and notes thereto included in the Companys 2009
Annual Report on Form 10-K. In the opinion of management, all adjustments (consisting only of
normal recurring accruals except as otherwise noted herein) considered necessary for a fair
presentation have been included. Operating results for the three-month period ended March 31, 2010
are not necessarily indicative of the results that may be expected for the year ending December 31,
2010.
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes. Actual results
could differ from those estimates.
For the three-month periods ended March 31, 2010 and 2009, comprehensive income equaled net
income; therefore, a separate statement of comprehensive income is not included in the accompanying
financial statements.
2. Consolidation of Variable Interest Entities and Joint Ventures
Effective January 1, 2010, NVR adopted Statement of Financial Accounting Standards No. 167,
Amendments to FASB Interpretation No. 46(R), as codified in Accounting Standards Codification
(ASC) 810, Consolidation, through Accounting Standards Update 2009-17 (ASC 810). This
statement amends FASB Interpretation 46R related to the consolidation of variable interest entities
(VIEs) and revises the approach to determining the primary beneficiary of a VIE to be more
qualitative in nature and requires companies to more frequently reassess whether they must
consolidate a VIE.
NVR does not engage in the land development business. Instead, the Company typically acquires
finished building lots at market prices from various development entities under fixed price
purchase agreements. The purchase agreements require deposits that may be forfeited if NVR fails
to perform under the agreement. The deposits required under the purchase agreements are in the form
of cash or letters of credit in varying amounts, and typically range up to 10% of the aggregate
purchase price of the finished lots.
NVR believes this lot acquisition strategy reduces the financial requirements and risks
associated with direct land ownership and land development. NVR may, at its option, choose for any
reason and at any time not to perform under these purchase agreements by delivering notice of its
intent not to acquire the finished lots under contract. NVRs sole legal obligation and economic
loss for failure to perform under these purchase agreements is limited to the amount of the deposit
pursuant to the liquidating damage provisions contained within the purchase agreements. In other words, if NVR does not perform under a purchase
agreement, NVR loses only its deposit. None of the creditors of any of the development entities
with which NVR enters fixed price purchase agreements have recourse to the general credit of NVR.
NVR generally does not have any specific performance obligations to purchase a certain number or
any of the lots, nor do we guarantee completion of the development by the developer or guarantee
any of the developers financial or other liabilities.
7
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands except per share data)
NVR is not involved in the design or creation of any of the development entities from which we
purchase lots. The developers equity holders have the power to direct 100% of the operating
activities of the development entity. NVR has no voting rights in any of the development entities.
The sole purpose of the development entitys activities is to generate positive cash flow returns
to the equity holders. Further, NVR does not share in any of the profit or loss generated by the
projects development. The profits and losses are passed directly to the developers equity
holders.
The deposit placed by NVR pursuant to our fixed price purchase agreement is deemed to be a
variable interest in the respective development entities. An enterprise must consolidate a VIE
when that enterprise has a controlling financial interest in the VIE. An enterprise is deemed to
have a controlling financial interest if it has i) the power to direct the activities of a variable
interest entity that most significantly impact the entitys economic performance, and ii) the
obligation to absorb losses of the VIE that could be significant to the VIE or the rights to
receive benefits from the VIE that could be significant to the VIE.
We believe the activities that most significantly impact a development entitys economic
performance are the operating activities of the entity. Unless and until a development entity
completes finished building lots through the development process to be able to sell, the process of
which the development entities equity investors bear the full risk, the entity does not earn any
revenues. The operating development activities are managed solely by the development entitys
equity investors.
The development entities with which we contract to buy finish lots typically select the
respective projects independent from NVR, obtain the necessary zoning approvals, obtain the
financing required with no support or guarantees from NVR, select who will purchase the finished
lots and at what price, and manage the completion of the infrastructure improvements, all for the
purpose of generating a cash flow return to the development entitys equity holders. We possess no
more than limited protective legal rights through the purchase agreement in the specific finished
lots that we are purchasing, and we possess no participative rights in the development entities.
Accordingly, NVR does not have the power to direct the activities of a developer that most
significantly impact the developers economic performance. For this reason, NVR has concluded that
it is not the primary beneficiary of the development entities with which we enter fixed price
purchase agreements, and therefore, we do not consolidate any of these VIEs.
As of March 31, 2010, NVR controlled approximately 47,000 lots with deposits in cash and
letters of credit totaling approximately $150,000 and $6,200, respectively. As noted above, NVRs
sole legal obligation and economic loss for failure to perform under these purchase agreements is
limited to the amount of the deposit pursuant to the liquidating damage provisions contained within
the purchase agreements and in very limited circumstances, specific performance obligations, as
follows:
|
|
|
|
|
|
|
March 31, 2010 |
|
Contract land deposits |
|
$ |
150,124 |
|
Loss reserve on contract land deposits |
|
|
(86,494 |
) |
|
|
|
|
Contract land deposits, net |
|
|
63,630 |
|
|
|
|
|
|
Contingent obligations in the form of letters of credit |
|
|
6,230 |
|
Contingent specific performance obligations (1) |
|
|
2,643 |
|
|
|
|
|
Total risk of loss |
|
$ |
72,503 |
|
|
|
|
|
|
|
|
(1) |
|
At March 31, 2010, the Company was committed to purchase 20 finished lots under
specific performance obligations. |
Upon adoption of ASC 810, all of the assets and liabilities of consolidated VIEs at
December 31, 2009 were deconsolidated, and there was no resultant gain or loss.
8
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands except per share data)
On a limited basis, we also obtain finished lots using joint venture limited liability
corporations (JVs). All JVs are typically structured such that we are a non-controlling member
and are at risk only for the amount we have invested. We are not a borrower, guarantor or obligor
on any of the JVs debt. We enter into a standard fixed price purchase agreement to purchase lots
from these JVs, and as a result have a variable interest in these JVs.
At March 31, 2010, we had an aggregate investment totaling approximately $3,300 in six
separate JVs, all of which are non-performing and as a result, we had recorded an impairment
reserve equal to our total investment due to our determination that our investment was not
recoverable. We do not expect to obtain any lots from any of those six JVs in future periods. In
addition, at March 31, 2010, we have an aggregate investment totaling $46,000 in three performing
JVs that are expected to produce approximately 1,200 finished lots. At March 31, 2010, we had
additional funding commitments in the aggregate totaling $7,000 to two of the three performing JVs.
We have determined that we are not the primary beneficiary of the six non-performing JVs and two
of the performing JVs because NVR and the JV partner share power. We have concluded that we are
the primary beneficiary of the remaining performing JV because we have the controlling financial
interest in the JV. The condensed balance sheet at March 31, 2010 of the consolidated JV is as
follows:
|
|
|
|
|
|
|
March 31, 2010 |
|
Cash |
|
$ |
51 |
|
Land under development |
|
|
23,778 |
|
|
|
|
|
Total assets |
|
|
23,829 |
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
23,829 |
|
|
|
|
|
Total
liabilities and equity |
|
$ |
23,829 |
|
|
|
|
|
3. Contract Land Deposits
During the three-month periods ended March 31, 2010 and 2009, the Company recognized the
pre-tax recovery of approximately $1,900 and $250, respectively, of contract land deposits
previously determined to be uncollectible. The contract land deposit asset is shown net of an
approximate $86,500 and $89,500 impairment valuation allowance at March 31, 2010 and December 31,
2009, respectively.
4. Earnings per Share
The following weighted average shares and share equivalents are used to calculate basic and
diluted earnings per share for the three months ended March 31, 2010 and 2009:
9
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands except per share data)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
Weighted average number of
shares outstanding used
to calculate basic EPS |
|
|
6,066,000 |
|
|
|
5,642,000 |
|
|
|
|
|
|
|
|
|
|
Dilutive Securities: |
|
|
|
|
|
|
|
|
Stock options |
|
|
333,000 |
|
|
|
316,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
shares and share equivalents
outstanding used to calculate
diluted EPS |
|
|
6,399,000 |
|
|
|
5,958,000 |
|
|
|
|
|
|
|
|
The assumed proceeds used in the treasury method for calculating NVRs diluted earnings
per share includes the amount the employee must pay upon exercise, the amount of compensation cost
attributed to future services and not yet recognized, and the amount of tax benefits that would be
credited to additional paid-in capital assuming exercise of the option. The assumed amount
credited to additional paid-in capital equals the tax benefit from assumed exercise after
consideration of the intrinsic value upon assumed exercise less the actual stock-based compensation
expense to be recognized in the income statement from 2006 and future periods.
Options issued under equity benefit plans to purchase 27,076 and 429,156 shares of common
stock were outstanding during the quarters ended March 31, 2010 and 2009, respectively, but were
not included in the computation of diluted earnings per share because the effect would have been
anti-dilutive.
5. Marketable Securities
As of March 31, 2010 the Company held marketable securities totaling $125,000. These
securities, which are debt securities issued by U.S. government agencies, are classified by the
Company as held-to-maturity and are measured at amortized cost. The contractual maturities of the
Companys marketable securities as of March 31, 2010 are as follows:
|
|
|
|
|
|
|
March 31, 2010 |
|
Within one year |
|
$ |
25,000 |
|
After one year through five years |
|
|
100,000 |
|
|
|
|
|
Total marketable securities |
|
$ |
125,000 |
|
|
|
|
|
6. Excess Reorganization Value
Reorganization value in excess of identifiable assets (excess reorganization value) is an
indefinite life intangible asset that was created upon NVRs emergence from bankruptcy on September
30, 1993. Based on the allocation of the reorganization value, the portion of the reorganization
value which was not attributed to specific tangible or intangible assets has been reported as
excess reorganization value, which is treated similarly to goodwill. Excess reorganization value
is not subject to amortization. Rather, excess reorganization value is subject to an impairment
assessment on an annual basis or more frequently if changes in events or circumstances indicate
that impairment may have occurred. Because excess reorganization value was based on the
reorganization value of NVRs entire enterprise upon bankruptcy emergence, the impairment
assessment is conducted on an enterprise basis based on the comparison of NVRs total equity
compared to the market value of NVRs outstanding publicly-traded common stock. The Company
completed the annual
10
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands except per share data)
assessment of impairment during the first quarter of 2010 and determined that there was no
impairment of excess reorganization value.
7. Income Taxes
As of January 1, 2010, the Company had approximately $48,669 (on a net basis) of unrecognized
tax benefits, which would decrease income tax expense if recognized. The Company recognizes
interest related to unrecognized tax benefits as a component of income tax expense. As of January
1, 2010, the Company had a total of $22,149 of accrued interest for unrecognized tax benefits on
its balance sheet. Based on its historical experience in dealing with various taxing authorities,
the Company has found that it is the administrative practice of these authorities to not seek
penalties from the Company for the tax positions it has taken on its returns, related to its
unrecognized tax benefits. Therefore, the Company does not accrue penalties for the positions in
which it has an unrecognized tax benefit. However, if such penalties were to be accrued, they would
be recorded as a component of income tax expense. With few exceptions, the Company is no longer
subject to income tax examinations for years prior to 2006.
8. 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 |
|
|
Total |
|
Balance, December 31, 2009 |
|
$ |
206 |
|
|
$ |
830,531 |
|
|
$ |
3,823,067 |
|
|
$ |
(2,896,542 |
) |
|
$ |
(40,799 |
) |
|
$ |
40,799 |
|
|
$ |
1,757,262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
32,087 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,087 |
|
Deferred compensation activity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
943 |
|
|
|
(943 |
) |
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
5,678 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,678 |
|
Tax benefit from stock options
exercised and deferred
compensation distributions |
|
|
|
|
|
|
31,911 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,911 |
|
Stock option activity |
|
|
|
|
|
|
41,786 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,786 |
|
Treasury stock issued upon
option exercise |
|
|
|
|
|
|
(39,498 |
) |
|
|
|
|
|
|
39,498 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2010 |
|
$ |
206 |
|
|
$ |
870,408 |
|
|
$ |
3,855,154 |
|
|
$ |
(2,857,044 |
) |
|
$ |
(39,856 |
) |
|
$ |
39,856 |
|
|
$ |
1,868,724 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company did not repurchase any shares of its common stock during the three months
ended March 31, 2010. 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. Approximately 199,200 options to purchase shares of the
Companys common stock were exercised during the three months ended March 31, 2010.
9. Product Warranties
The Company establishes warranty and product liability reserves (warranty reserve) to
provide for estimated future expenses as a result of construction and product defects, product
recalls and litigation incidental to NVRs homebuilding business. Liability estimates are
determined based on managements judgment, considering such factors as historical experience, the
likely current cost of corrective action, manufacturers and subcontractors participation in
sharing the cost of corrective action, consultations with third party experts such as engineers,
and discussions with our general counsel and outside counsel retained to handle specific product
liability cases. The following table reflects the changes in the Companys warranty reserve during
the three months ended March 31, 2010 and 2009:
11
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands except per share data)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
2010 |
|
2009 |
Warranty reserve, beginning of period
|
|
$ |
64,417 |
|
|
$ |
68,084 |
|
Provision
|
|
|
8,221 |
|
|
|
3,039 |
|
Payments
|
|
|
(7,556 |
) |
|
|
(6,817 |
) |
|
|
|
|
|
|
|
|
|
Warranty reserve, end of period
|
|
$ |
65,082 |
|
|
$ |
64,306 |
|
|
|
|
|
|
|
|
|
|
10. Segment Disclosures
The following disclosure includes four homebuilding reportable segments that aggregate
geographically the Companys homebuilding operating segments, and the mortgage banking operations
presented as a single reportable segment. The homebuilding reportable segments are comprised of
operating divisions in the following geographic areas:
Homebuilding Mid Atlantic Virginia, West Virginia, Maryland, and Delaware
Homebuilding North East New Jersey and eastern Pennsylvania
Homebuilding Mid East Kentucky, New York, Ohio, western Pennsylvania and
Indiana
Homebuilding South East North Carolina, South Carolina, Florida and Tennessee
Homebuilding profit before tax includes all revenues and income generated from the sale of
homes, less the cost of homes sold, selling, general and administrative expenses, and a corporate
capital allocation charge. The corporate capital allocation charge eliminates in consolidation, is
based on the segments average net assets employed, and is charged using a consistent methodology
in the years presented. The corporate capital allocation charged to the operating segment allows
the Chief Operating Decision Maker to determine whether the operating segments results are
providing the desired rate of return after covering the Companys cost of capital. The Company
records charges on contract land deposits when it is determined that it is probable that recovery
of the deposit is impaired. For segment reporting purposes, impairments on contract land deposits
are charged to the operating segment upon the determination to terminate a finished lot purchase
agreement with the developer, or to restructure a lot purchase agreement resulting in the
forfeiture of the deposit. Mortgage banking profit before tax consists of revenues generated from
mortgage financing, title insurance and closing services, less the costs of such services and
general and administrative costs. Mortgage banking operations are not charged a capital allocation
charge.
In addition to the corporate capital allocation and contract land deposit impairments
discussed above, the other reconciling items between segment profit and consolidated profit before
tax include unallocated corporate overhead (including all management incentive compensation), stock
option compensation expense, consolidation adjustments and external corporate interest expense.
NVRs overhead functions, such as accounting, treasury, human resources, etc., are centrally
performed and the costs are not allocated to the Companys operating segments. Consolidation
adjustments consist of such items necessary to convert the reportable segments results, which are
predominantly maintained on a cash basis, to a full accrual basis for external financial statement
presentation purposes, and are not allocated to the Companys operating segments. Likewise, stock
option compensation expense is not charged to the operating segments. External corporate interest
expense is primarily comprised of interest charges on the Companys outstanding Senior Notes and
working capital line borrowings and is not charged to the operating segments because the charges
are included in the corporate capital allocation discussed above.
Following are tables presenting revenues, segment profit and segment assets for each
reportable segment, with reconciliations to the amounts reported for the consolidated enterprise,
where applicable:
12
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands except per share data)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
Revenues: |
|
|
|
|
|
|
|
|
Homebuilding Mid Atlantic |
|
$ |
339,469 |
|
|
$ |
341,756 |
|
Homebuilding North East |
|
|
64,157 |
|
|
|
53,375 |
|
Homebuilding Mid East |
|
|
124,989 |
|
|
|
92,110 |
|
Homebuilding South East |
|
|
48,766 |
|
|
|
61,088 |
|
Mortgage Banking |
|
|
12,833 |
|
|
|
10,270 |
|
|
|
|
|
|
|
|
Total Consolidated Revenues |
|
$ |
590,214 |
|
|
$ |
558,599 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
Profit: |
|
|
|
|
|
|
|
|
Homebuilding Mid Atlantic |
|
$ |
37,860 |
|
|
$ |
31,908 |
|
Homebuilding North East |
|
|
5,755 |
|
|
|
3,226 |
|
Homebuilding Mid East |
|
|
10,933 |
|
|
|
5,189 |
|
Homebuilding South East |
|
|
1,057 |
|
|
|
2,029 |
|
Mortgage Banking |
|
|
7,428 |
|
|
|
5,550 |
|
|
|
|
|
|
|
|
Total Segment Profit |
|
|
63,033 |
|
|
|
47,902 |
|
|
|
|
|
|
|
|
Contract land deposit recovery (1) |
|
|
2,008 |
|
|
|
1,553 |
|
Stock option compensation expense (2) |
|
|
(5,678 |
) |
|
|
(11,768 |
) |
Corporate capital allocation (3) |
|
|
14,480 |
|
|
|
14,696 |
|
Unallocated corporate overhead (4) |
|
|
(20,679 |
) |
|
|
(15,069 |
) |
Consolidation adjustments and other (5) |
|
|
1,645 |
|
|
|
(4,026 |
) |
Corporate interest expense |
|
|
(2,078 |
) |
|
|
(2,670 |
) |
|
|
|
|
|
|
|
Reconciling items sub-total |
|
|
(10,302 |
) |
|
|
(17,284 |
) |
|
|
|
|
|
|
|
Consolidated income before taxes |
|
$ |
52,731 |
|
|
$ |
30,618 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
Assets: |
|
|
|
|
|
|
|
|
Homebuilding Mid Atlantic |
|
$ |
507,926 |
|
|
$ |
393,665 |
|
Homebuilding North East |
|
|
55,989 |
|
|
|
48,966 |
|
Homebuilding Mid East |
|
|
104,366 |
|
|
|
81,844 |
|
Homebuilding South East |
|
|
54,754 |
|
|
|
44,666 |
|
Mortgage Banking |
|
|
96,271 |
|
|
|
110,615 |
|
|
|
|
|
|
|
|
Total Segment Assets |
|
|
819,306 |
|
|
|
679,756 |
|
|
|
|
|
|
|
|
Consolidated variable interest entities (6) |
|
|
23,829 |
|
|
|
69,305 |
|
Cash and cash equivalents |
|
|
1,340,978 |
|
|
|
541,490 |
|
Marketable securities |
|
|
125,000 |
|
|
|
708,362 |
|
Deferred taxes |
|
|
189,390 |
|
|
|
203,770 |
|
Intangible assets |
|
|
48,927 |
|
|
|
48,927 |
|
Contract land deposit and JV reserve |
|
|
(89,797 |
) |
|
|
(151,493 |
) |
Consolidation adjustments and other |
|
|
18,764 |
|
|
|
31,033 |
|
|
|
|
|
|
|
|
Reconciling items sub-total |
|
|
1,657,091 |
|
|
|
1,451,394 |
|
|
|
|
|
|
|
|
Consolidated Assets |
|
$ |
2,476,397 |
|
|
$ |
2,131,150 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
This item represents changes to the contract land deposit impairment reserve,
which is not allocated to the reportable segments. |
13
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands except per share data)
|
|
|
(2) |
|
The decrease in stock option expense is due to a significant number of outstanding
options, primarily within the 2000 Broadly-based Stock Option Plan, becoming fully vested
on December 31, 2009, and thus fully expensed. |
|
(3) |
|
This item represents the elimination of the corporate capital allocation charge
included in the respective homebuilding reportable segments. The corporate capital
allocation charge is based on the segments monthly average asset balance and is as follows
for the periods presented: |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
Homebuilding Mid Atlantic |
|
$ |
9,795 |
|
|
$ |
9,575 |
|
Homebuilding North East |
|
|
1,550 |
|
|
|
1,551 |
|
Homebuilding Mid East |
|
|
2,076 |
|
|
|
2,062 |
|
Homebuilding South East |
|
|
1,059 |
|
|
|
1,508 |
|
|
|
|
|
|
|
|
Total |
|
$ |
14,480 |
|
|
$ |
14,696 |
|
|
|
|
|
|
|
|
|
|
|
(4) |
|
The increase in unallocated corporate overhead in the first quarter of 2010 is
primarily attributable to an increase in management incentive costs as the prior year
incentive plan was limited to a payout of 50% of the maximum bonus opportunity. |
|
(5) |
|
The favorable variance in consolidation adjustments and other in 2010 from 2009 is primarily
attributable to changes in the corporate consolidation entries based on production volumes
in the respective quarters. |
|
(6) |
|
The decrease in consolidated variable interest entities (VIEs) is attributable
to the adoption of amended ASC 810, which resulted in the deconsolidation in 2010 of all
VIEs consolidated in 2009. See Note 2 for additional discussion of VIEs. |
11. Fair Value
Financial Instruments
Except as otherwise noted here, NVR believes that insignificant differences exist between the
carrying value and the fair value of its financial instruments. The estimated fair value of NVRs
5% Senior Notes due 2010 as of March 31, 2010 and December 31, 2009 was $134,114 and $134,829,
respectively. The estimated fair value is based on a quoted market price. The carrying value was
$133,370 at both March 31, 2010 and December 31, 2009.
Derivative Instruments and Mortgage Loans Held for Sale
In the normal course of business, NVRs mortgage banking segment enters into contractual
commitments to extend credit to buyers of single-family homes with fixed expiration dates. The
commitments become effective when the borrowers lock-in a specified interest rate within time
frames established by NVR. All mortgagors are evaluated for credit worthiness prior to the
extension of the commitment. Market risk arises if interest rates move adversely between the time
of the lock-in of rates by the borrower and the sale date of the loan to a broker/dealer. To
mitigate the effect of the interest rate risk inherent in providing rate lock commitments
to borrowers, the Company enters into optional or mandatory delivery forward sale contracts to sell
whole loans and mortgage-backed securities to broker/dealers. The forward sale contracts lock in
an interest rate and price for the sale of loans similar to the specific rate lock commitments.
NVR does not engage in speculative or trading derivative activities. Both the rate lock
commitments to borrowers and the forward sale contracts to broker/dealers are undesignated
derivatives and, accordingly, are marked to fair value
through earnings. At March 31, 2010, there were contractual commitments to extend credit to
borrowers aggregating $178,911 and open forward delivery contracts aggregating $212,447.
14
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands except per share data)
GAAP assigns a fair value hierarchy to the inputs used to measure fair value. Level 1 inputs
are quoted prices in active markets for identical assets and liabilities. Level 2 inputs are
inputs other than quoted market prices that are observable for the asset or liability, either
directly or indirectly. Level 3 inputs are unobservable inputs. The fair value of the Companys
rate lock commitments to borrowers and the related input levels includes, as applicable:
|
i) |
|
the assumed gain/loss of the expected resultant loan sale (level 2); |
|
|
ii) |
|
the effects of interest rate movements between the date of the rate lock and
the balance sheet date (level 2); and |
|
|
iii) |
|
the value of the servicing rights associated with the loan (level 2). |
The assumed gain/loss considers the amount that the Company has discounted the price to the
borrower from par for competitive reasons and the excess servicing to be received or buydown fees
to be paid upon securitization of the loan. The excess servicing and buydown fees are calculated
pursuant to contractual terms with investors. To calculate the effects of interest rate movements,
the Company utilizes applicable published mortgage-backed security prices, and multiplies the price
movement between the rate lock date and the balance sheet date by the notional loan commitment
amount. The Company sells all of its loans on a servicing released basis, and receives a servicing
released premium upon sale. Thus, the value of the servicing rights, which averaged 166 basis
points of the loan amount as of March 31, 2010, is included in the fair value measurement and is
based upon contractual terms with investors and varies depending on the loan type. The Company
assumes an approximate 7% fallout rate when measuring the fair value of rate lock commitments.
Fallout is defined as locked loan commitments for which the Company does not close a mortgage loan
and is based on historical experience.
The fair value of the Companys forward sales contracts to broker/dealers solely considers the
market price movement of the same type of security between the trade date and the balance sheet
date (level 2). The market price changes are multiplied by the notional amount of the forward
sales contracts to measure the fair value.
Mortgage loans held for sale are recorded at fair value when closed, and thereafter are
carried at the lower of cost or fair value, net of deferred origination costs, until sold. The
fair value of loans held-for-sale of $83,385 included in the accompanying consolidated balance
sheet has been increased by $305 from the aggregate principal balance of $83,080.
The undesignated derivative instruments are included in the accompanying condensed
consolidated balance sheet as follows:
|
|
|
|
|
|
|
|
|
|
|
Balance |
|
|
Fair |
|
|
|
Sheet |
|
|
Value |
|
|
|
Location |
|
|
March 31, 2010 |
|
Derivative Assets: |
|
|
|
|
|
|
|
|
Forward Sales
Contracts and Rate
Lock Commitments |
|
NVRM - Other assets |
|
$ |
2,430 |
|
|
|
|
|
|
|
|
|
The unrealized gain or loss from the change in the fair value measurements is included in
earnings as a component of mortgage banking fees in the accompanying condensed consolidated
statements of income as follows:
15
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumed |
|
|
Interest |
|
|
|
|
|
|
|
|
|
|
Total Fair |
|
|
|
Notional or |
|
|
Gain (Loss) |
|
|
Rate |
|
|
Servicing |
|
|
Security |
|
|
Value |
|
|
|
Principal |
|
|
From Loan |
|
|
Movement |
|
|
Rights |
|
|
Price |
|
|
Adjustment |
|
|
|
Amount |
|
|
Sale |
|
|
Effect |
|
|
Value |
|
|
Change |
|
|
Gain/(Loss) |
|
Rate lock commitments |
|
$ |
178,911 |
|
|
$ |
(718 |
) |
|
$ |
(1,233 |
) |
|
$ |
2,755 |
|
|
$ |
|
|
|
$ |
804 |
|
Forward sales contracts |
|
$ |
212,447 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,626 |
|
|
|
1,626 |
|
Mortgages held for sale |
|
$ |
83,080 |
|
|
|
(357 |
) |
|
|
(702 |
) |
|
|
1,364 |
|
|
|
|
|
|
|
305 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fair Value Measurement, March 31, 2010 |
|
|
|
|
|
|
(1,075 |
) |
|
|
(1,935 |
) |
|
|
4,119 |
|
|
|
1,626 |
|
|
|
2,735 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Fair Value Measurement, December 31, 2009 |
|
|
|
|
|
|
(788 |
) |
|
|
(2,501 |
) |
|
|
2,187 |
|
|
|
2,445 |
|
|
|
1,343 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fair Value Adjustment for the
period ended March 31, 2010 |
|
|
|
|
|
$ |
(287 |
) |
|
$ |
566 |
|
|
$ |
1,932 |
|
|
$ |
(819 |
) |
|
$ |
1,392 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair value measurement will be impacted in the future by the change in the value of
the servicing rights and the volume and product mix of the Companys closed loans and locked loan
commitments.
12. Debt
NVRs mortgage banking operations, NVR Mortgage Finance, Inc. (NVRM), provides for its
mortgage origination activities through a revolving mortgage repurchase facility (the Repurchase
Facility). The Repurchase Facility provides for loan purchases up to $100,000, subject to certain
sublimits. In addition, the Repurchase Agreement provides for an accordion feature under which
NVRM may request that the aggregate commitments under the Repurchase Agreement be increased to an
amount up to $125,000. The Repurchase Agreement expires on August 3, 2010.
At March 31, 2010, there was approximately $56,200 outstanding under the Repurchase Facility,
which is included in Mortgage Banking Notes payable in the accompanying condensed consolidated
financial statement. Amounts outstanding under the Repurchase Facility are collateralized by the
Companys mortgage loans held for sale, which are included in assets in the March 31, 2010 balance
sheet in the accompanying condensed consolidated financial statements. As of March 31, 2010,
borrowing base limitations reduced the amount available for borrowing to approximately $80,100.
There are several restrictions on purchased loans, including that they cannot be sold to others,
they cannot be pledged to anyone other than the agent, and they cannot support any other borrowing
or repurchase agreement.
13. Commitments and Contingencies
On July 18, 2007, former and current employees filed lawsuits against the Company in the Court
of Common Pleas in Allegheny County, Pennsylvania and Hamilton County, Ohio, in Superior Court in
Durham County, North Carolina, and in the Circuit Court in Montgomery County, Maryland, and on July
19, 2007 in the Superior Court in New Jersey, alleging that the Company incorrectly classified its
sales and marketing representatives as being exempt from overtime wages. These lawsuits are
similar in nature to another lawsuit filed on October 29, 2004 by another former employee in the
United States District Court for the Western District of New York. The complaints seek injunctive
relief, an award of unpaid wages, including fringe benefits, liquidated damages equal to the
overtime wages allegedly due and not paid, attorney and other fees and interest, and where
available, multiple damages. The suits were filed as purported class actions. However, while a
number of individuals have filed consents to join and assert federal claims in the New York action,
none of the groups of employees that the lawsuits purport to represent have been certified as a
class.
16
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands except per share data)
The lawsuits filed in Ohio, Pennsylvania, Maryland, New Jersey and North Carolina have been stayed
pending further developments in the New York action.
The Company believes that its compensation practices in regard to sales and marketing
representatives are entirely lawful and in compliance with two letter rulings from the United
States Department of Labor (DOL) issued in January 2007. The two courts to most recently
consider similar claims against other homebuilders have acknowledged the DOLs position that sales
and marketing representatives were properly classified as exempt from overtime wages and the only
court to have directly addressed the exempt status of such employees concluded that the DOLs
position was valid. Accordingly, the Company has vigorously defended and intends to continue to
vigorously defend these lawsuits. Because the Company is unable to determine the likelihood of an
unfavorable outcome of this case, or the amount of damages, if any, the Company has not recorded
any associated liabilities in the accompanying consolidated balance sheets.
NVR and its subsidiaries are also involved in various other litigation arising in the ordinary
course of business. In the opinion of management, and based on advice of legal counsel, this
litigation is not expected to have a material adverse effect on the financial position or results
of operations of NVR. Legal costs incurred in connection with outstanding litigation are expensed
as incurred.
On April 13, 2010, the Company, entered into a stalking horse Asset Purchase Agreement (the
Agreement) with Orleans Homebuilders, Inc. and certain of its affiliates (collectively, the
Seller), under which the Company has agreed to purchase substantially all of the land under
development, homebuilding work in process and other related assets of the Seller (together, the
Assets), subject to the terms and conditions contained therein. The Seller is a debtor in a
Chapter 11 case before the United States Bankruptcy Court for the District of Delaware (the
Bankruptcy Court).
The effectiveness of the Agreement is subject to the approval of the Bankruptcy Court. If the
Agreement is approved, the Company will be designated as the stalking horse bidder in an auction
of the Assets under Section 363 of the U.S. Bankruptcy Code. As the stalking horse bidder, the
Companys offer to purchase the Assets, as set forth in the Agreement, would be the standard by
which any other bids to purchase the Assets would be evaluated. Other interested bidders who
submit qualifying offers would be permitted to participate in the auction of the Assets.
Under the terms of the Agreement, the Company has agreed, absent any higher or otherwise
better bid, to acquire the Assets from the Seller for $170,000 in cash plus the assumption of
specified liabilities related to the Assets, subject to adjustment based upon changes in the
balance sheet subsequent to February 28, 2010 and other adjustments customary for real estate
transactions of this nature. The Company will deposit in the aggregate $17,000 into escrow which
will be credited to the purchase price on the completion of the acquisition of the Assets. If the
Agreement is terminated, the deposit will be returned to the Company unless the Company defaults
under the Agreement, in which event the deposit will be retained by the Seller without limitation
of other remedies available to Seller under the Agreement. If the Bankruptcy Court approves the
Agreement and the Agreement is later terminated for certain reasons, including because the Seller
enters into a competing transaction, the Seller may be required to pay the Company a termination
fee equal to $3,400, plus the Companys reasonable transaction expenses up to $1,000.
The completion of the acquisition is subject to a number of customary conditions, which, among
others, include the entry of the Bidding Procedures Order and the Sale Order by the Bankruptcy
Court, the performance by each party of its obligations under the Agreement and the material
accuracy of each partys representations.
17
NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands except per share data)
14. Recent Accounting Pronouncements
In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets, as
codified in ASC 860, Transfers and Servicing, which changes the conditions for reporting a transfer
of a portion of a financial asset as a sale and requires additional year-end and interim
disclosures. ASC 860 was effective for the Company beginning January 1, 2010. The adoption of ASC
860 did not have a material impact on the Companys financial statements.
In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R), as
codified in ASC 810 through Accounting Standards Update 2009-17. See Note 2 herein for further
discussion of the impact of adoption on the Companys financial statements.
In January 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-06, Fair Value
Measurements and Disclosures (Topic 820) Improving Disclosures about Fair Value Measurements,
which amends ASC 820 to require the disclosure of additional information related to fair value
measurement and provide clarification to existing requirements for fair value measurement
disclosure. ASU 2010-06 was effective for the Company beginning January 1, 2010. The Companys
disclosures conform to the requirements of ASU 2010-06. Refer to Note 11 for additional discussion
of fair value measurements.
18
|
|
|
Item 2. |
|
Managements Discussion and Analysis of Financial Condition and
Results of Operations
(dollars in thousands) |
Forward-Looking Statements
Some of the statements in this Form 10-Q, as well as statements made by us in periodic press
releases or 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 comparable terminology. All statements other than
of historical facts are forward looking statements. Forward looking statements contained in this
document include those regarding market trends, NVRs financial position, business strategy, the
outcome of pending litigation, 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 NVRs customers; 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. For additional information regarding risk factors, see Part II, Item
1(a) of this Report.
Unless the context otherwise requires, references to NVR, we, us or our include NVR
and its subsidiaries.
Results of Operations for the Three Months Ended March 31, 2010 and 2009
Overview
Business
Our primary business is the construction and sale of single-family detached homes, townhomes
and condominium buildings. To fully serve customers of our homebuilding operations, we also
operate a mortgage banking and title services business. We primarily conduct our operations in
mature markets. Additionally, we generally grow our business through market share gains in our
existing markets and by expanding into markets contiguous to our current active markets. Our four
homebuilding reportable segments consist of the following regions:
|
|
|
|
|
|
|
Mid Atlantic:
|
|
Maryland, Virginia, West Virginia and Delaware |
|
|
|
North East:
|
|
New Jersey and eastern Pennsylvania |
|
|
|
Mid East:
|
|
Kentucky, New York, Ohio, western Pennsylvania and Indiana |
|
|
|
South East:
|
|
North Carolina, South Carolina, Tennessee and Florida |
We believe we operate our business with a conservative operating strategy. We do not engage
in land development and primarily construct homes on a pre-sold basis. This strategy allows us to
maximize inventory turnover, which enables us to minimize market risk and to operate with less
capital, thereby enhancing rates of return on equity and total capital. In addition, we focus on obtaining and maintaining a leading
market position in each market we serve. This strategy allows us to gain valuable efficiencies and
competitive
19
advantages in our markets, which we believe contributes to minimizing the adverse
effects of regional economic cycles and provides growth opportunities within these markets.
Because we do not develop land, our continued success is contingent upon our ability to
control an adequate supply of finished lots on which to build, and on our developers ability to
timely deliver finished lots to meet the sales demands of our customers. We acquire finished
building lots at market prices from various land developers under purchase agreements. These
purchase agreements require deposits, typically ranging up to 10% of the aggregate purchase price
of the finished lots, in the form of cash or letters of credit that may be forfeited if we fail to
perform under the purchase agreement. However, we believe that this lot acquisition strategy
avoids the financial requirements and risks associated with direct land ownership and development.
As of March 31, 2010, we controlled approximately 47,000 lots with deposits in cash and letters of
credit totaling approximately $150,000 and $6,200, respectively, and approximately 1,200 additional
lots through joint venture limited liability corporations. Included in the number of controlled
lots are approximately 11,000 lots for which we have recorded a contract land deposit impairment
reserve of approximately $86,500 as of March 31, 2010. See Note 3 to the condensed consolidated
financial statements included herein for additional information regarding contract land deposits.
Overview of Current Business Environment
The current home sales environment remains challenging; however, after several years of
declining sales and selling prices, the homebuilding environment and home values in certain of our
markets began to stabilize during 2009 and in the first quarter of 2010. Despite this
stabilization, many uncertainties remain due to the continuing economic downturn. Homebuyer
confidence continues to be impacted by concerns regarding job stability driven by historically high
unemployment rates. In addition, the overall lower demand for homes and high foreclosure rates
have contributed to high levels of existing and new homes available for sale. The sales of new and
existing homes also continue to be adversely impacted by a tighter mortgage lending environment
that has made it more difficult for our customers to obtain mortgage financing. In addition, we
face significant future uncertainties as certain government stimulus programs, such as the federal
tax credit for first time and move-up buyers and the Federal Reserves purchases of mortgage-backed
securities, are set to end in the first half of 2010. The termination of those programs may lead to
a decline in demand and higher mortgage interest rates.
Consolidated revenues for the first quarter of 2010 totaled approximately $590,214, a 6%
increase from the first quarter of 2009. Additionally, net income and diluted earnings per share
in the current quarter increased approximately 78% and 66%, respectively, compared to the first
quarter of 2009. Gross profit margins within our homebuilding business increased to 18.4% in the
first quarter of 2010 as compared to 15.6% in the first quarter of 2009. These favorable results
as compared to the first quarter of 2009 are attributable to the market stabilization in certain of
our markets, as well as, to the significant decline in overall economic conditions that occurred in
the fourth quarter of 2008 and continued into the first quarter of 2009, which increased
cancellations and drove down sales and selling prices during those periods.
We expect to continue to experience pressure on sales and selling prices over at least the
next several quarters in all of our markets, as significant economic uncertainties remain.
However, we believe that we are well positioned to take advantage of opportunities that may arise
due to the strength of our balance sheet and liquidity. As of March 31, 2010, our cash and cash
equivalents and marketable securities balances totaled approximately $1,467,000.
Homebuilding Operations
The following table summarizes the results of operations and other data for the consolidated
homebuilding operations:
20
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
|
2010 |
|
2009 |
Revenues |
|
$ |
577,381 |
|
|
$ |
548,329 |
|
Cost of sales |
|
$ |
471,069 |
|
|
$ |
462,630 |
|
Gross profit margin percentage |
|
|
18.4 |
% |
|
|
15.6 |
% |
Selling, general and administrative |
|
$ |
60,741 |
|
|
$ |
59,694 |
|
Settlements (units) |
|
|
1,919 |
|
|
|
1,773 |
|
Average settlement price |
|
$ |
300.8 |
|
|
$ |
308.8 |
|
New orders (units) |
|
|
2,940 |
|
|
|
2,426 |
|
Average new order price |
|
$ |
286.7 |
|
|
$ |
281.9 |
|
Backlog (units) |
|
|
4,552 |
|
|
|
3,817 |
|
Average backlog price |
|
$ |
294.8 |
|
|
$ |
298.5 |
|
Consolidated Homebuilding Three Months Ended March 31, 2010 and 2009
Homebuilding revenues increased 5% for the first quarter of 2010 from the same period in 2009
as a result of an 8% increase in the number of units settled, offset partially by a 3% decrease in
the average settlement price quarter over quarter. The increase in the number of units settled is
primarily attributable to our beginning backlog being approximately 12%, or 367 units, higher at
the start of the first quarter of 2010 as compared to the beginning of 2009, offset partially by a
slower backlog turnover rate quarter over quarter. Average settlement prices were impacted
primarily by a 4% lower average price of homes in our beginning backlog entering the first quarter
of 2010 compared to the same period in 2009.
Gross profit margins in the quarter ended March 31, 2010 increased compared to the first
quarter of 2009 primarily due to the negative impact on the 2009 first quarter results of the sharp
decline in overall economic conditions that occurred in the fourth quarter of 2008 and continued
into the first quarter of 2009. In addition, gross profit margins were favorably impacted by cost
control measures within our purchasing and production operations initiated in prior quarters.
Despite these favorable quarter over quarter results, we expect to continue to experience gross
profit margin pressure over at least the next several quarters due to significant market
uncertainties as discussed in the Overview section above.
Additionally, we expect gross profit margin pressure in future quarters from rising lumber and certain other commodity costs.
The number of new orders, net of cancellations (new orders) for the first quarter of 2010
increased 21% compared to the first quarter of 2009. We believe the favorable variance in new
orders is partially attributable to the impending April 30, 2010 expiration of the federal
homebuyer tax credit, generating urgency for certain homebuyers intending to qualify for the tax
credit. Home sales in the current quarter have also been favorably impacted by a reduction in the
cancellation rate to 9% in the current quarter from 15% in the prior year quarter, and by the
stabilization of home values in many of our markets, favorably impacting homebuyer confidence. In
addition, the quarter over quarter favorable variance is attributable to the negative impact on the
first quarter 2009 results of the aforementioned sharp economic decline that occurred in the fourth
quarter of 2008.
Selling, general and administrative (SG&A) expenses in the first quarter of 2010 were
relatively flat compared to the first quarter of 2009 as staffing levels and the number of active
communities remained relatively constant quarter over quarter.
Backlog units and dollars were 4,552 and $1,342,000, respectively, as of March 31, 2010
compared to 3,817 and $1,139,210 as of March 31, 2009. The increase in backlog units is primarily
attributable to the net new order and settlement activity during the first quarter of 2010, coupled with our beginning
backlog units being approximately 12%, or 367 units, higher entering 2010 compared to the same
period in 2009. Backlog dollars were favorably impacted by the increase in backlog units.
21
Backlog, which represents homes sold but not yet settled with the customer, may be impacted by
customer cancellations for various reasons that are beyond our control, such as failure to obtain
mortgage financing, inability to sell an existing home, job loss, or a variety of other reasons.
In any period, a portion of the cancellations that we experience are related to new sales that
occurred during the same period, and a portion are related to sales that occurred in prior periods
and therefore appeared in the opening backlog for the current period. Expressed as the total of
all cancellations during the period as a percentage of gross sales during the period, our
cancellation rate was approximately 9% and 15% in the first quarters of 2010 and 2009,
respectively. During the most recent four quarters, approximately 6% of a reporting quarters
opening backlog cancelled during the fiscal quarter. We can provide no assurance that our
historical cancellation rates are indicative of the actual cancellation rate that may occur in
2010.
Reportable Segments
Homebuilding profit before tax includes all revenues and income generated from the sale of
homes, less the cost of homes sold, SG&A expenses, and a corporate capital allocation charge
determined at the corporate headquarters. The corporate capital allocation charge eliminates in
consolidation, is based on the segments average net assets employed, and is charged using a
consistent methodology in the periods presented. The corporate capital allocation charged to the
operating segment allows the Chief Operating Decision Maker to determine whether the operating
segments results are providing the desired rate of return after covering our cost of capital. We
record charges on contract land deposits when we determine that it is probable that recovery of the
deposit is impaired. For segment reporting purposes, impairments on contract land deposits are
generally charged to the operating segment upon the determination to terminate a finished lot
purchase agreement with the developer or to restructure a lot purchase agreement resulting in the
forfeiture of the deposit. We evaluate our entire net contract land deposit portfolio for
impairment each quarter. For additional information regarding our contract land deposit impairment
analysis, see the Critical Accounting Policies section within this Management Discussion and
Analysis. For presentation purposes below, the contract land deposit reserve at March 31, 2010 and
2009 has been allocated to the respective years reportable segments to show contract land deposits
on a net basis. The net contract land deposit balances below also include $6,200 and $5,000 at
March 31, 2010 and 2009, respectively, of letters of credit issued as deposits in lieu of cash.
The following table summarizes certain homebuilding operating activity by segment for the three
months ended March 31, 2010 and 2009:
22
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
|
2010 |
|
2009 |
Mid Atlantic: |
|
|
|
|
|
|
|
|
Revenues |
|
$ |
339,469 |
|
|
$ |
341,756 |
|
Settlements (units) |
|
|
935 |
|
|
|
928 |
|
Average settlement price |
|
$ |
363.0 |
|
|
$ |
368.2 |
|
New orders (units) |
|
|
1,391 |
|
|
|
1,203 |
|
Average new order price |
|
$ |
350.8 |
|
|
$ |
336.6 |
|
Backlog (units) |
|
|
2,319 |
|
|
|
2,051 |
|
Average backlog price |
|
$ |
352.4 |
|
|
$ |
352.3 |
|
Gross profit margin |
|
$ |
67,141 |
|
|
$ |
60,946 |
|
Gross profit margin percentage |
|
|
19.8 |
% |
|
|
17.8 |
% |
Segment profit |
|
$ |
37,860 |
|
|
$ |
31,908 |
|
New order cancellation rate |
|
|
8.0 |
% |
|
|
15.5 |
% |
Inventory: |
|
|
|
|
|
|
|
|
Sold inventory |
|
$ |
286,693 |
|
|
$ |
211,082 |
|
Unsold lots and housing units |
|
$ |
36,755 |
|
|
$ |
25,514 |
|
Unsold inventory impairments |
|
$ |
38 |
|
|
$ |
368 |
|
Contract land deposits, net |
|
$ |
49,181 |
|
|
$ |
13,646 |
|
Total lots controlled |
|
|
27,571 |
|
|
|
23,116 |
|
Total lots reserved |
|
|
6,631 |
|
|
|
10,138 |
|
Contract land deposit impairments |
|
$ |
|
|
|
$ |
1,065 |
|
Average active communities |
|
|
160 |
|
|
|
172 |
|
|
|
|
|
|
|
|
|
|
North East: |
|
|
|
|
|
|
|
|
Revenues |
|
$ |
64,157 |
|
|
$ |
53,375 |
|
Settlements (units) |
|
|
220 |
|
|
|
184 |
|
Average settlement price |
|
$ |
291.6 |
|
|
$ |
290.1 |
|
New orders (units) |
|
|
260 |
|
|
|
235 |
|
Average new order price |
|
$ |
305.8 |
|
|
$ |
285.3 |
|
Backlog (units) |
|
|
365 |
|
|
|
354 |
|
Average backlog price |
|
$ |
311.8 |
|
|
$ |
286.6 |
|
Gross profit margin |
|
$ |
11,460 |
|
|
$ |
8,439 |
|
Gross profit margin percentage |
|
|
17.9 |
% |
|
|
15.8 |
% |
Segment profit |
|
$ |
5,755 |
|
|
$ |
3,226 |
|
New order cancellation rate |
|
|
13.9 |
% |
|
|
13.9 |
% |
Inventory: |
|
|
|
|
|
|
|
|
Sold inventory |
|
$ |
37,812 |
|
|
$ |
28,711 |
|
Unsold lots and housing units |
|
$ |
4,989 |
|
|
$ |
2,565 |
|
Unsold inventory impairments |
|
$ |
270 |
|
|
$ |
41 |
|
Contract land deposits, net |
|
$ |
2,369 |
|
|
$ |
760 |
|
Total lots controlled |
|
|
3,870 |
|
|
|
3,481 |
|
Total lots reserved |
|
|
743 |
|
|
|
1,815 |
|
Contract land deposit impairments |
|
$ |
|
|
|
$ |
9 |
|
Average active communities |
|
|
35 |
|
|
|
36 |
|
23
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
|
2010 |
|
2009 |
Mid East: |
|
|
|
|
|
|
|
|
Revenues |
|
$ |
124,989 |
|
|
$ |
92,110 |
|
Settlements (units) |
|
|
565 |
|
|
|
413 |
|
Average settlement price |
|
$ |
221.1 |
|
|
$ |
221.1 |
|
New orders (units) |
|
|
879 |
|
|
|
701 |
|
Average new order price |
|
$ |
207.8 |
|
|
$ |
210.4 |
|
Backlog (units) |
|
|
1,274 |
|
|
|
1,019 |
|
Average backlog price |
|
$ |
214.6 |
|
|
$ |
215.7 |
|
Gross profit margin |
|
$ |
22,278 |
|
|
$ |
15,278 |
|
Gross profit margin percentage |
|
|
17.8 |
% |
|
|
16.6 |
% |
Segment profit |
|
$ |
10,933 |
|
|
$ |
5,189 |
|
New order cancellation rate |
|
|
9.6 |
% |
|
|
14.9 |
% |
Inventory: |
|
|
|
|
|
|
|
|
Sold inventory |
|
$ |
71,714 |
|
|
$ |
46,267 |
|
Unsold lots and housing units |
|
$ |
13,576 |
|
|
$ |
10,903 |
|
Unsold inventory impairments |
|
$ |
66 |
|
|
$ |
|
|
Contract land deposits, net |
|
$ |
5,063 |
|
|
$ |
4,661 |
|
Total lots controlled |
|
|
10,236 |
|
|
|
11,182 |
|
Total lots reserved |
|
|
1,997 |
|
|
|
3,635 |
|
Contract land deposit impairments |
|
$ |
86 |
|
|
$ |
213 |
|
Average active communities |
|
|
108 |
|
|
|
101 |
|
|
|
|
|
|
|
|
|
|
South East: |
|
|
|
|
|
|
|
|
Revenues |
|
$ |
48,766 |
|
|
$ |
61,088 |
|
Settlements (units) |
|
|
199 |
|
|
|
248 |
|
Average settlement price |
|
$ |
244.9 |
|
|
$ |
246.3 |
|
New orders (units) |
|
|
410 |
|
|
|
287 |
|
Average new order price |
|
$ |
226.4 |
|
|
$ |
223.9 |
|
Backlog (units) |
|
|
594 |
|
|
|
393 |
|
Average backlog price |
|
$ |
231.6 |
|
|
$ |
242.8 |
|
Gross profit margin |
|
$ |
7,687 |
|
|
$ |
9,464 |
|
Gross profit margin percentage |
|
|
15.8 |
% |
|
|
15.5 |
% |
Segment profit |
|
$ |
1,057 |
|
|
$ |
2,029 |
|
New order cancellation rate |
|
|
8.7 |
% |
|
|
14.1 |
% |
Inventory: |
|
|
|
|
|
|
|
|
Sold inventory |
|
$ |
35,157 |
|
|
$ |
23,152 |
|
Unsold lots and housing units |
|
$ |
5,471 |
|
|
$ |
4,434 |
|
Unsold inventory impairments |
|
$ |
14 |
|
|
$ |
|
|
Contract land deposits, net |
|
$ |
3,718 |
|
|
$ |
(42 |
) |
Total lots controlled |
|
|
6,424 |
|
|
|
6,059 |
|
Total lots reserved |
|
|
1,478 |
|
|
|
3,589 |
|
Contract land deposit impairments |
|
$ |
|
|
|
$ |
16 |
|
Average active communities |
|
|
55 |
|
|
|
49 |
|
24
Mid Atlantic
Three Months Ended March 31, 2010 and 2009
The Mid Atlantic segment had an approximate $6,000 increase in segment profit from the first
quarter of 2009. Revenues decreased slightly period over period due to a 1% decrease in the
average settlement price in the current quarter. The Mid Atlantic segments gross profit margin
percentage increased to 19.8% in 2010 from 17.8% in 2009. Gross profit margins were positively
impacted by cost control measures implemented in prior quarters and lower average lot costs quarter
over quarter.
Segment new orders and the average selling price increased by 16% and 4%, respectively, during
the first quarter of 2010 from the same period in 2009. New orders and the average selling price
for new orders have been positively impacted by the stabilization of home values in many of the
markets within the Mid Atlantic segment, favorably impacting homebuyer confidence. In addition, we
believe new orders were favorably impacted in the current quarter by the impending April 30, 2010
expiration of the federal homebuyer tax credit. New orders were also favorably impacted by a
decrease in the cancellation rate for the Mid Atlantic segment to 8% in the first quarter of 2010
from 16% in the first quarter of 2009.
Backlog units and dollars each increased approximately 13% as of March 31, 2010 as compared to
the same period in the prior year. The increase in backlog units is attributable to the increase
in new orders quarter over quarter, as well as, to the beginning backlog units being approximately
5%, or 87 units, higher at the beginning of 2010 as compared to the beginning of 2009.
North East
Three Months Ended March 31, 2010 and 2009
The North East segment had an approximate $2,500 increase in segment profit from the first
quarter of 2009. Revenues increased approximately $10,800, or 20%, for the three months ended
March 31, 2010 from the prior year quarter primarily due to a 20% increase in the number of units
settled. The increase in units settled is attributable to a 7%, or 22 unit, higher beginning
backlog entering the first quarter of 2010 compared to the same period in 2009, coupled with a
higher backlog turnover rate period over period. The North East segments gross profit margin
percentage increased to 17.9% in 2010 from 15.8% in 2009. Gross profit margins were positively
impacted by cost control measures implemented in prior quarters and lower average lot costs quarter
over quarter.
Segment new orders and the average selling price increased approximately 11% and 7%,
respectively, during the first quarter of 2010 from the same period in 2009. We believe, the
increase in new orders quarter over quarter was attributable to the 2009 first quarter new orders
being negatively impacted by the significant economic turmoil experienced towards the end of 2008
and into the first quarter of 2009. In addition, we believe that new orders were favorably
impacted by the impending April 30, 2010 expiration of the federal homebuyer tax credit.
Backlog units and dollars increased approximately 3% and 12%, respectively, quarter over
quarter. The increase in backlog units is attributable to the beginning backlog units being
approximately 7%, or 22 units, higher entering 2010 as compared to the beginning of 2009. The
dollar value of backlog was favorably impacted by the increase in backlog units, coupled with an
increase in the average selling price of homes in ending backlog, due primarily to 7% increase in
the average selling price for new orders during the six-month period ended March 31, 2010 compared
to the same period in 2009.
25
Mid East
Three Months Ended March 31, 2010 and 2009
The Mid East segment had an approximate $5,700 increase in segment profit from the first
quarter of 2009. Revenues increased approximately $32,900, or 36%, due to a 37% increase in the
number of units settled. The increase in settlements was primarily driven by a 31%, or 229 unit,
higher beginning backlog entering the first quarter of 2010 compared to the same period in 2009.
Gross profit margins increased to 17.8% in the first quarter of 2010 from 16.6% in the same period
of 2009 primarily as a result of cost control measures implemented in prior quarters.
Segment new orders increased 25% during the first quarter of 2010 as compared to the same
period in 2009, while the average selling price for new orders decreased 1% quarter over quarter.
The increase in new orders is attributable in part to approximately 80 new orders in the current
quarter in Indianapolis, which began operations in the fourth quarter of 2009. In addition, we
believe that new orders were favorably impacted by the impending April 30, 2010 expiration of the
federal homebuyer tax credit. New orders were also favorably impacted by a decrease in
cancellation rates to 10% in the first quarter of 2010 from 15% in the first quarter of 2009.
Backlog units and dollars increased approximately 25% and 24%, respectively, quarter over
quarter. The increase in backlog units is attributable to the beginning backlog units being
approximately 31%, or 229 units, higher entering 2010 as compared to the beginning of 2009.
Backlog dollars were favorably impacted by the increase in backlog units.
South East
Three Months Ended March 31, 2010 and 2009
The South East segment had an approximate $1,000 decrease in segment profit from the first
quarter of 2009. Revenues decreased approximately $12,300, or 20%, due to a 20% decrease in the
number of homes settled. The decrease in units settled is due to a slower backlog turnover rate
quarter over quarter. Gross profit margins remained relatively flat quarter over quarter as
average settlement prices remained flat in the comparable periods.
Segment new orders increased approximately 43% during the first quarter of 2010 from the same
period in 2009. The increase in new orders is attributable to a 13% increase in the average number
of active communities quarter over quarter, primarily due to the opening of new communities in the
Orlando, FL and Raleigh, NC markets, in which we began operations in the third quarter of 2009.
Approximately 40 new orders were recorded in these new markets in the first quarter of 2010. New
orders were also favorably impacted in the current quarter by increased absorption in each of our
markets within the South East segment and by a decrease in cancellation rates to 9% in the first
quarter of 2010 from 14% in the first quarter of 2009. In addition, we believe that new orders
were favorably impacted by the impending April 30, 2010 expiration of the federal homebuyer tax
credit.
Backlog units and dollars increased approximately 51% and 44%, respectively, quarter over
quarter. The increase in backlog units is primarily attributable to the aforementioned increase in
new orders, coupled with the decrease in settlements, quarter over quarter. Backlog dollars were
favorably impacted by the increase in backlog units, offset partially by a 5% decrease in the
average price of homes in ending backlog.
Homebuilding Segment Reconciliations to Consolidated Homebuilding Operations
In addition to the corporate capital allocation and contract land deposit impairments
discussed above, the other reconciling items between homebuilding segment profit and homebuilding
consolidated profit before tax include unallocated corporate overhead (which includes all
management incentive compensation), stock
26
option compensation expense, consolidation adjustments
and external corporate interest expense. Our overhead functions, such as accounting, treasury,
human resources, etc., are centrally performed and the costs
are not allocated to our operating segments. Consolidation adjustments consist of such items to
convert the reportable segments results, which are predominantly maintained on a cash basis, to a
full accrual basis for external financial statement presentation purposes, and are not allocated to
our operating segments. Likewise, stock option compensation expense is not charged to the
operating segments. External corporate interest expense is primarily comprised of interest charges
on our outstanding senior notes and working capital line borrowings and is not charged to the
operating segments because the charges are included in the corporate capital allocation discussed
above.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
Homebuilding Consolidated Gross Profit: |
|
|
|
|
|
|
|
|
Homebuilding Mid Atlantic |
|
$ |
67,141 |
|
|
$ |
60,946 |
|
Homebuilding North East |
|
|
11,460 |
|
|
|
8,439 |
|
Homebuilding Mid East |
|
|
22,278 |
|
|
|
15,278 |
|
Homebuilding South East |
|
|
7,687 |
|
|
|
9,464 |
|
Consolidation adjustments and other (5) |
|
|
(2,254 |
) |
|
|
(8,428 |
) |
|
|
|
|
|
|
|
Consolidated homebuilding gross profit |
|
$ |
106,312 |
|
|
$ |
85,699 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
Homebuilding Consolidated Profit Before Tax: |
|
|
|
|
|
|
|
|
Homebuilding Mid Atlantic |
|
$ |
37,860 |
|
|
$ |
31,908 |
|
Homebuilding North East |
|
|
5,755 |
|
|
|
3,226 |
|
Homebuilding Mid East |
|
|
10,933 |
|
|
|
5,189 |
|
Homebuilding South East |
|
|
1,057 |
|
|
|
2,029 |
|
Reconciling items: |
|
|
|
|
|
|
|
|
Contract land deposit recovery (1) |
|
|
2,008 |
|
|
|
1,553 |
|
Stock option compensation expense (2) |
|
|
(5,212 |
) |
|
|
(11,066 |
) |
Corporate capital allocation (3) |
|
|
14,480 |
|
|
|
14,696 |
|
Unallocated corporate overhead (4) |
|
|
(20,679 |
) |
|
|
(15,069 |
) |
Consolidation adjustments and other (5) |
|
|
1,645 |
|
|
|
(4,026 |
) |
Corporate interest expense |
|
|
(2,078 |
) |
|
|
(2,670 |
) |
|
|
|
|
|
|
|
Reconciling items sub-total |
|
|
(9,836 |
) |
|
|
(16,582 |
) |
|
|
|
|
|
|
|
Homebuilding consolidated profit before taxes |
|
$ |
45,769 |
|
|
$ |
25,770 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
This item primarily represents changes to the contract land deposit impairment reserve,
which is not allocated to the reportable segments. |
|
(2) |
|
The decrease in stock option expense is due to a significant number of outstanding
options, primarily within the 2000 Broadly-based Stock Option Plan, becoming fully vested
on December 31, 2009, and thus fully expensed. |
|
(3) |
|
This item represents the elimination of the corporate capital allocation charge
included in the respective homebuilding reportable segments. The decreases in the
corporate capital allocation charge are due to the lower segment asset balances during the
respective periods due to the decreases in operating activity period over period. The
corporate capital allocation charge is based on the segments monthly average asset
balance, and is as follows for the periods presented: |
27
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
Homebuilding Mid Atlantic |
|
$ |
9,795 |
|
|
$ |
9,575 |
|
Homebuilding North East |
|
|
1,550 |
|
|
|
1,551 |
|
Homebuilding Mid East |
|
|
2,076 |
|
|
|
2,062 |
|
Homebuilding South East |
|
|
1,059 |
|
|
|
1,508 |
|
|
|
|
|
|
|
|
Total |
|
$ |
14,480 |
|
|
$ |
14,696 |
|
|
|
|
|
|
|
|
|
|
|
(4) |
|
The increase in unallocated corporate overhead in the first quarter of 2010 is
primarily attributable to an increase in management incentive costs as prior year incentive
plans were limited to payouts of 50% of incentive earned. |
|
(5) |
|
The favorable variance in consolidation adjustments and other in 2010 from 2009 is primarily
attributable to changes in the corporate consolidation entries based on production volumes
in the respective quarters. |
Mortgage Banking Segment
Three Months Ended March 31, 2010 and 2009
We conduct our mortgage banking activity through NVR Mortgage Finance, Inc. (NVRM), a wholly
owned subsidiary. NVRM focuses almost exclusively on serving the homebuilding segments customer
base. Following is a table of financial and statistical data for the periods ended March 31, 2010
and 2009:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
Loan closing volume: |
|
|
|
|
|
|
|
|
Total principal |
|
$ |
418,042 |
|
|
$ |
427,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan volume mix: |
|
|
|
|
|
|
|
|
Adjustable rate mortgages |
|
|
1 |
% |
|
|
1 |
% |
|
|
|
|
|
|
|
Fixed-rate mortgages |
|
|
99 |
% |
|
|
99 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Profit: |
|
|
|
|
|
|
|
|
Segment Profit |
|
$ |
7,428 |
|
|
$ |
5,550 |
|
Stock option expense |
|
|
(466 |
) |
|
|
(702 |
) |
|
|
|
|
|
|
|
Mortgage banking income before tax |
|
$ |
6,962 |
|
|
$ |
4,848 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capture rate: |
|
|
90 |
% |
|
|
89 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage Banking Fees: |
|
|
|
|
|
|
|
|
Net gain on sale of loans |
|
$ |
9,929 |
|
|
$ |
7,564 |
|
Title services |
|
|
2,681 |
|
|
|
2,607 |
|
Servicing fees |
|
|
223 |
|
|
|
99 |
|
|
|
|
|
|
|
|
|
|
$ |
12,833 |
|
|
$ |
10,270 |
|
|
|
|
|
|
|
|
Loan closing volume for the three months ended March 31, 2010 decreased 2% over the same
period for 2009. The 2010 decrease is primarily attributable to a 1% decrease in the number of
units closed and a 1% decrease in the average loan amount.
Segment profit for the three months ended March 31, 2010 increased by approximately $1,900
from the same period for 2009. The increase is primarily due to an approximate $2,600 increase in
mortgage banking fees, which was primarily the result of a decrease in incentives given to
borrowers. The increase in mortgage banking fees was partially offset by an approximate $1,000
increase in general and administrative
28
expenses. This increase was primarily the result of an increase in salary costs due to a 13%
increase in headcount and to an increase in management incentive costs.
NVRM is dependent on our homebuilding segments customers for business. As sales and selling
prices of the homebuilding segment change, NVRMs operations are likewise affected. In addition,
NVRMs operating results may be adversely affected in future periods due to the continued
tightening and volatility of the credit markets.
Liquidity and Capital Resources
We fund our operations from cash flows provided by our operating activities, a short-term
credit facility and the public debt and equity markets. In the first quarter of 2010, cash used by
our operating activities was $118,163. Cash was used to fund the increase in homebuilding
inventory of $81,191, as a result of an increase in sold units under construction at March 31, 2010
compared to December 31, 2009. Cash was also used to fund the $10,524 increase in contract land
deposits during the period. The presentation of operating cash flows was also reduced by $31,911,
which is the amount of the excess tax benefit realized from the exercise of stock options during
the quarter and credited directly to additional paid in capital.
Net cash provided by investing activities was $92,769 for the first quarter of 2010, which
primarily resulted from the redemption at maturity of $194,535 of marketable securities throughout
the period, offset partially by $100,000 in purchases of marketable securities. The marketable
securities, which are debt securities issued by U.S. government agencies, are classified as
held-to-maturity securities and mature within the next 14 months.
Net cash provided by financing activities was $117,536 for the quarter ended March 31, 2010.
Stock option exercise activity provided $41,786 in exercise proceeds, and we realized $31,911 in
excess income tax benefits from stock option exercises. We also increased borrowings under the
mortgage Repurchase Agreement by approximately $43,900 based on current borrowing needs.
On April 13, 2010, we entered into a stalking horse Asset Purchase Agreement (the
Agreement) with Orleans Homebuilders, Inc. and certain of its affiliates (collectively, the
Seller). Under the Agreement, we have agreed to purchase substantially all of the land under
development, homebuilding work in process and other related assets of the Seller (together, the
Assets), for $170,000 in cash plus the assumption of specified liabilities related to the Assets,
subject to the terms and conditions contained in the Agreement. See Note 13 to the accompanying
condensed consolidated financial statements for additional discussion of the Agreement.
In addition to our homebuilding operating activities, we also utilize a short-term unsecured
working capital revolving credit facility (the Facility) to provide for working capital cash
requirements. The Facility provides for borrowings up to $300,000, subject to certain borrowing
base limitations. The Facility expires December 6, 2010. Outstanding amounts under the Amended
Facility bear interest at either (i) the prime rate or (ii) the London Interbank Offering Rate
(LIBOR) plus applicable margin as defined within the Facility. Up to $150,000 of the Facility is
currently available for issuance in the form of letters of credit, of which $14,997 was outstanding
at March 31, 2010. There were no direct borrowings outstanding under the Facility as of March 31,
2010 and there were no borrowing base limitations reducing the amount available to us for
borrowings.
Our mortgage banking segment provides for its mortgage origination and other operating
activities using cash generated from operations as well as a revolving mortgage repurchase facility
(the Repurchase Agreement). The Repurchase Agreement is used to fund NVRMs mortgage origination
activities, and provides for loan purchases up to $100,000, subject to certain sublimits. In
addition, the Repurchase Agreement provides for an accordion feature under which NVRM may request
that the aggregate commitments under the Repurchase Agreement be increased to an amount up to
$125,000. The Repurchase Agreement expires on August 3, 2010. We expect to be able to renew the
Repurchase Agreement at current market terms prior to its expiration.
29
Advances under the Repurchase Agreement carry a Pricing Rate based on the Libor Rate plus the
Libor Margin, or at NVRMs option, the Balance Funded Rate, as these terms are defined in the
Repurchase Agreement. The Repurchase Agreement contains various affirmative and negative
covenants. The negative covenants include among others, certain limitations on transactions
involving acquisitions, mergers, the incurrence of debt, sale of assets and creation of liens upon
any of its Mortgage Notes. Additional covenants include (i) a tangible net worth requirement, (ii)
a minimum tangible net worth ratio, (iii) a minimum net income requirement, and (iv) a minimum
liquidity requirement, all of which we were compliant with at March 31, 2010. As of March 31,
2010, there was approximately $56,200 outstanding under the Repurchase Agreement and borrowing base
limitations reduced the amount available to us for borrowing to approximately $80,100. The average
Pricing Rate on outstanding balances at March 31, 2010 was 4.06%.
In addition to funding growth in our homebuilding and mortgage operations, we historically
have used a substantial portion of our excess liquidity to repurchase outstanding shares of our
common stock in the open market and in privately negotiated transactions. This ongoing repurchase
activity is conducted pursuant to publicly announced Board authorizations, and is typically
executed in accordance with the safe harbor provisions of Rule 10b-18 under the Securities Exchange
Act of 1934, as amended. In addition, the Board resolutions authorizing us to repurchase shares of
our common stock specifically prohibit us from purchasing shares from our officers, directors,
Profit Sharing/401K Plan Trust or Employee Stock Ownership Plan Trust. We believe the repurchase
program assists us in accomplishing our primary objective, increasing shareholder value. To date
we have not repurchased any shares of our common stock during 2010. We expect to continue to
repurchase shares of our common stock from time to time subject to market conditions and available
excess liquidity. See Part II, Item 2 for further discussion.
We believe 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 our
homebuilding and mortgage banking operations. In addition, we have sufficient liquidity to repay
our 5% Senior Notes in the principal amount of $133,370 upon maturity on June 15, 2010.
Critical Accounting Policies
General
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America (GAAP) requires us to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting periods. We continually evaluate the estimates we use to prepare the
consolidated financial statements and update those estimates as necessary. In general, our
estimates are based on historical experience, on information from third party professionals, and
other various assumptions that are believed to be reasonable under the facts and circumstances.
Actual results could differ materially from those estimates made by management.
Homebuilding Inventory
The carrying value of inventory is stated at the lower of cost or market value. Cost of lots
and completed and uncompleted housing units represent the accumulated actual cost of the units.
Field construction supervisors salaries and related direct overhead expenses are included in
inventory costs. Interest costs are not capitalized into inventory. Upon settlement, the cost of
the unit is expensed on a specific identification basis. Cost of manufacturing materials is
determined on a first-in, first-out basis.
Sold inventory is evaluated for impairment based on the contractual selling price compared to
the total estimated cost to construct. Unsold inventory is evaluated for impairment by analyzing
recent comparable sales prices within the applicable community compared to the costs incurred to
date plus the expected costs to complete. Any calculated impairments are recorded immediately.
30
Contract Land Deposits
We purchase finished lots under fixed price purchase agreements that require deposits that may
be forfeited if we fail to perform under the contract. The deposits are in the form of cash or
letters of credit in varying amounts and represent a percentage of the aggregate purchase price of
the finished lots.
We maintain an allowance for losses on contract land deposits that reflects our judgment of
the present loss exposure in the existing contract land deposit portfolio at the end of the
reporting period. To analyze contract land deposit impairments, we utilize a loss contingency
analysis that is conducted each quarter. In addition to considering market and economic
conditions, we assess contract land deposit impairments on a community-by-community basis pursuant
to the purchase contract terms, analyzing, as applicable, current sales absorption levels, recent
sales gross profit, the dollar differential between the contractual purchase price and the current
market price for lots, a developers financial stability, a developers financial ability or
willingness to reduce lot prices to current market prices, and the contracts default status by
either us or the developer along with an analysis of the expected outcome of any such default.
Our analysis is focused on whether we can sell houses profitably in a particular community in
the current market with which we are faced. Because we dont own the finished lots on which we had
placed a contract land deposit, if the above analysis leads to a determination that we cant sell
homes profitably at the current contractual lot price, we then determine whether we will elect to
default under the contract, forfeit our deposit and terminate the contract, or whether we will
attempt to restructure the lot purchase contract, which may require us to forfeit the deposit to
obtain contract concessions from a developer. We also assess whether an impairment is present due
to collectability issues resulting from a developers non-performance because of financial or other
conditions.
Although we consider the allowance for losses on contract land deposits reflected on the March
31, 2010 balance sheet to be adequate (see Note 3 to the accompanying condensed consolidated
financial statements), there can be no assurance that this allowance will prove to be adequate over
time to cover losses due to unanticipated adverse changes in the economy or other events adversely
affecting specific markets or the homebuilding industry.
Intangible Assets
Reorganization value in excess of identifiable assets (excess reorganization value) is an
indefinite life intangible asset that was created upon our emergence from bankruptcy on September
30, 1993. Based on the allocation of our reorganization value, the portion of our reorganization
value which was not attributed to specific tangible or intangible assets has been reported as
excess reorganization value, which is treated similarly to goodwill. Excess reorganization value
is not subject to amortization. Rather, excess reorganization value is subject to an impairment
assessment on an annual basis or more frequently if changes in events or circumstances indicate
that impairment may have occurred. Because excess reorganization value was based on the
reorganization value of our entire enterprise upon bankruptcy emergence, the impairment assessment
is conducted on an enterprise basis based on the comparison of our total equity compared to the
market value of our outstanding publicly-traded common stock. We do not believe that excess
reorganization value is impaired at this time. However, changes in strategy or continued adverse
changes in market conditions could impact this judgment and require an impairment loss to be
recognized if our book value, including excess reorganization value, exceeds the fair value.
Warranty/Product Liability Accruals
Warranty and product liability accruals are established to provide for estimated future costs
as a result of construction and product defects, product recalls and litigation incidental to our
business. Liability estimates are determined based on our judgment considering such factors as
historical experience, the likely current cost of corrective action, manufacturers and
subcontractors participation in sharing the cost of corrective action, consultations with third
party experts such as engineers, and evaluations by our General
31
Counsel and outside counsel retained to handle specific product liability cases. Although we
consider the warranty and product liability accrual reflected on the March 31, 2010 balance sheet
to be adequate (see Note 9 to the accompanying condensed consolidated financial statements), there
can be no assurance that this accrual will prove to be adequate over time to cover losses due to
increased costs for material and labor, the inability or refusal of manufacturers or subcontractors
to financially participate in corrective action, unanticipated adverse legal settlements, or other
unanticipated changes to the assumptions used to estimate the warranty and product liability
accrual.
Stock Option Expense
Compensation costs related to our stock based compensation plans are recognized within our
income statement. The costs recognized are based on the grant date fair value. Compensation cost
for option grants is recognized on a straight-line basis over the requisite service period for the
entire award (from the date of grant through the period of the last separately vesting portion of
the grant).
We calculate the fair value of our non-publicly traded, employee stock options using the
Black-Scholes option-pricing model. While the Black-Scholes model is a widely accepted method to
calculate the fair value of options, its results are dependent on input variables, two of which,
expected term and expected volatility, are significantly dependent on managements judgment. We
have concluded that our historical exercise experience is the best estimate of future exercise
patterns to determine an options expected term. To estimate expected volatility, we analyze the
historical volatility of our common stock. Changes in managements judgment of the expected term
and the expected volatility could have a material effect on the grant-date fair value calculated
and expensed within the income statement. In addition, we are required to estimate future option
forfeitures when considering the amount of stock-based compensation costs to record. We have
concluded that our historical forfeiture rate is the best measure to estimate future forfeitures of
granted stock options. However, there can be no assurance that our future forfeiture rate will not
be materially higher or lower than our historical forfeiture rate, which would affect the aggregate
cumulative compensation expense recognized.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
There have been no material changes in our market risks during the three months ended March
31, 2010. For additional information regarding market risk, see our Annual Report on Form 10-K for
the year ended December 31, 2009.
Item 4. Controls and Procedures
As of the end of the period covered by this report, an evaluation was performed under the
supervision and with the participation of our management, including our Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures pursuant to Exchange Act Rule 13a-15. Based on that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that the design and operation of these
disclosure controls and procedures were effective. There have been no changes in our internal
control over financial reporting in the last fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
32
PART II. OTHER INFORMATION
Item 1A. Risk Factors
There has been no material change to the risk factors as previously disclosed in our Form 10-K
for the fiscal year ended December 31, 2009 in response to Item 1A. Part 1 of such Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
We had one repurchase authorization outstanding during the quarter ended March 31, 2010.
On July 31, 2007 (July Authorization), we publicly announced the board of directors approval for
us to repurchase up to an aggregate of $300 million of our common stock in one or more open market
and/or privately negotiated transactions. The July Authorization does not have an expiration date.
We did not repurchase any shares of our common stock during the first quarter of 2010. We have
$226.3 million available under the July Authorization as of March 31, 2010.
Item 6. Exhibits
|
10.1 |
|
Director Resignation Agreement with all Class II director
nominees and current Class I directors, dated February 22, 2010. Filed as
Exhibit 10.1 to NVRs Form 8-K filed February 23, 2010 and incorporated herein
by reference. |
|
10.2 |
|
Asset Purchase Agreement Among Orleans Homebuilders, Inc. and
certain of its affiliates, as Sellers, and NVR, Inc., as Purchaser, dated as of
April 13, 2010. Filed as Exhibit 10.1 to NVRs 8-K filed April 14, 2010 and
incorporated herein by reference. |
|
31.1 |
|
Certification of NVRs Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. |
|
31.2 |
|
Certification of NVRs Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. |
|
32 |
|
Certification of NVRs Chief Executive Officer and Chief
Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Filed herewith. |
33
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.
|
|
|
|
|
May 3, 2010 |
NVR, Inc.
|
|
|
By: |
/s/ Dennis M. Seremet
|
|
|
|
Dennis M. Seremet |
|
|
|
Senior Vice President, Chief Financial Officer
and Treasurer |
|
34
Exhibit Index
|
|
|
|
|
|
|
Exhibit |
|
|
|
|
Number |
|
Description |
|
Page |
10.1
|
|
Director Resignation Agreement with all Class II director nominees
and current Class I directors, dated February 22, 2010. Filed as
Exhibit 10.1 to NVRs Form 8-K filed February 23, 2010 and
incorporated herein by reference. |
|
|
|
|
|
|
|
|
|
|
|
10.2
|
|
Asset Purchase Agreement Among Orleans Homebuilders, Inc.
and certain of its affiliates, as Sellers, and NVR, Inc.,
as Purchaser, dated as of April 13, 2010. Filed as Exhibit 10.1 to
NVRs 8-K filed April 14, 2010 and incorporated herein by reference. |
|
|
|
|
|
|
|
|
|
|
|
31.1
|
|
Certification of NVRs Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
|
|
|
36 |
|
|
|
|
|
|
|
|
31.2
|
|
Certification of NVRs Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
|
|
|
37 |
|
|
|
|
|
|
|
|
32
|
|
Certification of NVRs Chief Executive Officer and Chief
Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. Filed herewith.
|
|
|
38 |
|
35