RESTON, Va., Oct. 19, 2017 /PRNewswire/ -- NVR, Inc. (NYSE: NVR), one of the nation's largest homebuilding and mortgage banking companies, announced net income for its third quarter ended September 30, 2017 of $162,102,000, or $38.02 per diluted share. Net income and diluted earnings per share for the third quarter ended September 30, 2017 increased 38% and 34%, respectively, when compared to the 2016 third quarter net income of $117,392,000, or $28.46 per diluted share. Consolidated revenues for the third quarter of 2017 totaled $1,667,920,000, an 8% increase from $1,537,569,000 in the third quarter of 2016.
For the nine months ended September 30, 2017, consolidated revenues were $4,489,504,000, a 10% increase from $4,069,778,000 reported for the same period of 2016. Net income for the nine months ended September 30, 2017 was $412,902,000, an increase of 50% when compared to the nine months ended September 30, 2016. Diluted earnings per share for the nine months ended September 30, 2017 was $98.33, an increase of 48% from $66.24 per diluted share for the comparable period of 2016.
Homebuilding
New orders in the third quarter of 2017 increased 21% to 4,200 units, when compared to 3,477 units in the third quarter of 2016. The average sales price of new orders in the third quarter of 2017 was $382,800, a decrease of 3% when compared with the third quarter of 2016. The decrease in the average sales price of new orders is primarily attributable to a shift in new orders to lower priced markets and lower priced products. Settlements increased in the third quarter of 2017 to 4,158 units, 6% higher than the third quarter of 2016. The Company's backlog of homes sold but not settled as of September 30, 2017 increased on a unit basis by 16% to 8,855 units and increased on a dollar basis by 15% to $3,418,710,000 when compared to September 30, 2016.
Homebuilding revenues in the third quarter of 2017 totaled $1,633,726,000, 8% higher than the year earlier period. Gross profit margin in the third quarter of 2017 increased to 19.9%, compared to 17.6% in the third quarter of 2016. Gross profit margin was favorably impacted by modest improvement in pricing combined with moderating construction costs. Income before tax from the homebuilding segment totaled $226,043,000 in the third quarter of 2017, an increase of 35% when compared to the third quarter of 2016.
Mortgage Banking
Mortgage closed loan production in the third quarter of 2017 totaled $1,115,494,000, an increase of 6% when compared to the third quarter of 2016. Income before tax from the mortgage banking segment totaled $18,421,000 in the third quarter of 2017, an increase of 6% when compared to the third quarter of 2016.
Income Taxes
Net income and diluted earnings per share were favorably impacted by the reduction in the Company's effective tax rate for the three and nine months ended September 30, 2017 to 33.7% and 29.5%, respectively, compared to 36.5% and 36.6% for the three and nine months ended September 30, 2016, respectively. The reduction in the effective tax rate was primarily due to the Company's January 1, 2017 adoption of Accounting Standard Update 2016-09, which resulted in the Company recognizing an income tax benefit of $8,357,000 and $44,720,000 related to excess tax benefits from stock option exercises during the three and nine months ended September 30, 2017, respectively. For the three and nine months ended September 30, 2016, the excess tax benefits of $2,271,000 and $10,949,000, respectively, were recorded to additional paid-in capital within shareholders' equity on the consolidated balance sheet. Excluding the impact of the excess tax benefits recognized during the three and nine months ended September 30, 2017, the effective tax rate would have been 37.1% for both periods. Additionally, the excess tax benefits recognized during the three and nine months ended September 30, 2017 favorably impacted diluted earnings per share by $1.96 and $10.65 per share, respectively.
About NVR
NVR, Inc. operates in two business segments: homebuilding and mortgage banking. The homebuilding unit sells and builds homes under the Ryan Homes, NVHomes and Heartland Homes trade names, and operates in twenty-nine metropolitan areas in fourteen states and Washington, D.C. For more information about NVR, Inc. and its brands, see www.nvrinc.com, www.ryanhomes.com, www.nvhomes.com and www.heartlandluxuryhomes.com.
Some of the statements in this release made by the Company constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Certain, but not necessarily all, of such forward-looking statements can be identified by the use of forward-looking terminology, such as "believes," "expects," "may," "will," "should" or "anticipates" or the negative thereof or other comparable terminology. All statements other than of historical facts are forward-looking statements. Forward-looking statements contained in this document may include those regarding market trends, NVR's financial position, business strategy, the outcome of pending litigation, investigations or similar contingencies, projected plans and objectives of management for future operations. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance of NVR to be materially different from future results, performance or achievements expressed or implied by the forward-looking statements. Such risk factors include, but are not limited to the following: general economic and business conditions (on both a national and regional level); interest rate changes; access to suitable financing by NVR and NVR's customers; increased regulation in the mortgage banking industry; the ability of our mortgage banking subsidiary to sell loans it originates into the secondary market; competition; the availability and cost of land and other raw materials used by NVR in its homebuilding operations; shortages of labor; weather related slow-downs; building moratoriums; governmental regulation; fluctuation and volatility of stock and other financial markets; mortgage financing availability; and other factors over which NVR has little or no control. NVR undertakes no obligation to update such forward-looking statements except as required by law.
NVR, Inc. Consolidated Statements of Income (in thousands, except per share data) (unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 ---- ---- ---- ---- Homebuilding: Revenues $1,633,726 $1,507,451 $4,394,027 $3,990,696 Other income 1,715 703 4,264 2,223 Cost of sales (1,307,971) (1,242,292) (3,552,071) (3,294,421) Selling, general and administrative (95,606) (92,867) (294,610) (290,925) ------- ------- -------- -------- Operating income 231,864 172,995 551,610 407,573 Interest expense (5,821) (5,338) (17,040) (14,734) ------ ------ ------- ------- Homebuilding income 226,043 167,657 534,570 392,839 ------- ------- ------- ------- Mortgage Banking: Mortgage banking fees 34,194 30,118 95,477 79,082 Interest income 1,953 2,000 5,168 5,111 Other income 583 473 1,398 1,140 General and administrative (18,010) (14,959) (50,190) (44,345) Interest expense (299) (286) (830) (792) ---- ---- ---- ---- Mortgage banking income 18,421 17,346 51,023 40,196 ------ ------ ------ ------ Income before taxes 244,464 185,003 585,593 433,035 Income tax expense (82,362) (67,611) (172,691) (158,664) ------- ------- -------- -------- Net income $162,102 $117,392 $412,902 $274,371 ======== ======== ======== ======== Basic earnings per share $43.26 $30.43 $110.60 $70.70 ====== ====== ======= ====== Diluted earnings per share $38.02 $28.46 $98.33 $66.24 ====== ====== ====== ====== Basic weighted average shares outstanding 3,747 3,858 3,733 3,881 ===== ===== ===== ===== Diluted weighted average shares outstanding 4,263 4,125 4,199 4,142 ===== ===== ===== =====
NVR, Inc. Consolidated Balance Sheets (in thousands, except share and per share data) (unaudited) September 30, 2017 December 31, 2016 ------------------ ----------------- ASSETS Homebuilding: Cash and cash equivalents $611,094 $375,748 Restricted cash 13,797 17,561 Receivables 20,448 18,937 Inventory: Lots and housing units, covered under sales agreements with customers 1,187,508 883,868 Unsold lots and housing units 158,049 145,065 Land under development 19,182 46,999 Building materials and other 11,820 16,168 ------ ------ 1,376,559 1,092,100 Assets related to consolidated variable interest entity 1,222 1,251 Contract land deposits, net 365,142 379,844 Property, plant and equipment, net 43,822 45,915 Reorganization value in excess of amounts allocable to identifiable assets, net 41,580 41,580 Goodwill and finite-lived intangible assets, net 1,563 2,599 Other assets 266,572 257,811 ------- ------- 2,741,799 2,233,346 --------- --------- Mortgage Banking: Cash and cash equivalents 15,790 19,657 Restricted cash 2,075 1,857 Mortgage loans held for sale, net 258,554 351,958 Property and equipment, net 6,308 4,903 Reorganization value in excess of amounts allocable to identifiable assets, net 7,347 7,347 Other assets 17,638 24,875 ------ ------ 307,712 410,597 ------- ------- Total assets $3,049,511 $2,643,943 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Homebuilding: Accounts payable $267,039 $251,212 Accrued expenses and other liabilities 337,932 336,318 Liabilities related to consolidated variable interest entity 853 882 Customer deposits 162,285 122,236 Senior notes 596,913 596,455 ------- ------- 1,365,022 1,307,103 --------- --------- Mortgage Banking: Accounts payable and other liabilities 33,813 32,399 ------ ------ 33,813 32,399 ------ ------ Total liabilities 1,398,835 1,339,502 --------- --------- Commitments and contingencies Shareholders' equity: Common stock, $0.01 par value; 60,000,000 shares authorized; 20,555,330 shares issued as of both September 30, 2017 and December 31, 2016 206 206 Additional paid-in capital 1,626,112 1,515,828 Deferred compensation trust - 108,638 and 108,640 shares of NVR, Inc. common stock as of September 30, 2017 and December 31, 2016, respectively (17,376) (17,375) Deferred compensation liability 17,376 17,375 Retained earnings 6,107,321 5,695,376 Less treasury stock at cost - 16,819,467 and 16,862,327 shares as of September 30, 2017 and December 31, 2016, respectively (6,082,963) (5,906,969) ---------- ---------- Total shareholders' equity 1,650,676 1,304,441 --------- --------- Total liabilities and shareholders' equity $3,049,511 $2,643,943 ========== ==========
NVR, Inc. Operating Activity (dollars in thousands) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 ---- ---- ---- ---- Homebuilding data: New orders (units) Mid Atlantic (1) 2,113 1,817 6,501 6,088 North East (2) 346 305 1,066 960 Mid East (3) 939 769 3,218 2,829 South East (4) 802 586 2,517 2,061 Total 4,200 3,477 13,302 11,938 ===== ===== ====== ====== Average new order price $382.8 $392.8 $384.0 $383.6 Settlements (units) Mid Atlantic (1) 2,048 1,984 5,682 5,201 North East (2) 333 330 930 896 Mid East (3) 1,021 1,013 2,693 2,708 South East (4) 756 595 2,026 1,704 Total 4,158 3,922 11,331 10,509 ===== ===== ====== ====== Average settlement price $392.9 $384.1 $387.7 $378.0 Backlog (units) Mid Atlantic (1) 4,360 4,024 North East (2) 744 604 Mid East (3) 2,024 1,619 South East (4) 1,727 1,411 Total 8,855 7,658 ===== ===== Average backlog price $386.1 $389.4 New order cancellation rate 13% 18% 14% 15% Community count (average) 479 484 485 482 Lots controlled at end of period 84,000 77,300 Mortgage banking data: Loan closings $1,115,494 $1,055,163 $3,000,448 $2,751,410 Capture rate 88% 88% 87% 88% Common stock information: Shares outstanding at end of period 3,735,863 3,789,295 Number of shares repurchased 26,630 116,318 110,392 178,306 Aggregate cost of shares repurchased $70,693 $195,235 $230,199 $291,743
(1) Maryland, Virginia, West Virginia, Delaware and Washington, D.C. (2) New Jersey and Eastern Pennsylvania (3) New York, Ohio, Western Pennsylvania, Indiana and Illinois (4) North Carolina, South Carolina, Tennessee and Florida
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SOURCE NVR, Inc.