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Headquartered in Reston, Virginia, NVR, Inc. is one of America’s leading homebuilders.

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NVR, Inc. Announces Fourth Quarter and Full Year Results

RESTON, Va., Jan. 25, 2018 /PRNewswire/ -- NVR, Inc. (NYSE: NVR), one of the nation's largest homebuilding and mortgage banking companies, announced net income for its fourth quarter ended December 31, 2017 of $124,619,000, or $28.88 per diluted share.  Net income and diluted earnings per share for the fourth quarter ended December 31, 2017 decreased 17% and 24%, respectively, when compared to 2016 fourth quarter net income of $150,891,000, or $37.80 per diluted share.  Consolidated revenues for the fourth quarter of 2017 totaled $1,816,336,000, a 4% increase from $1,752,766,000 in the fourth quarter of 2016.

For the year ended December 31, 2017, consolidated revenues were $6,305,840,000, an 8% increase from $5,822,544,000 reported for 2016.  Net income for the year ended December 31, 2017 was $537,521,000, an increase of 26% when compared to the year ended December 31, 2016.  Diluted earnings per share for the year ended December 31, 2017 was $126.77, an increase of 22% from $103.61 per diluted share for 2016.

Net income and diluted earnings per share for the fourth quarter and year ended December 31, 2017 were impacted by the following items:

  • The enactment of the Tax Cuts and Jobs Act in December 2017, which required a remeasurement of the Company's deferred tax assets, resulted in a charge of $62,702,000 in the fourth quarter, and
  • The Company's January 1, 2017 adoption of Accounting Standard Update 2016-09, which resulted in the Company recognizing an income tax benefit of $13,960,000 and $58,681,000 related to excess tax benefits from stock option exercises during the fourth quarter and year ended December 31, 2017, respectively.  For the fourth quarter and year ended December 31, 2016, the excess tax benefits of $2,712,000 and $13,661,000, respectively, were recorded to additional paid-in capital within shareholders' equity on the consolidated balance sheet.

The following summarizes the impact of these items on income tax expense and diluted earnings per share ("EPS") during the fourth quarter and year ended December 31, 2017:

 


Three Months Ended

December 31, 2017


Twelve Months Ended

December 31, 2017


Income Tax
Expense

EPS Impact


Income Tax
Expense

EPS Impact

GAAP Income Tax Expense

$

136,699,000




$

309,390,000



Less:  Impact of Tax Cuts and Jobs Act

(62,702,000)


$(14.53)


(62,702,000)


$(14.79)

Add:  Impact of excess tax benefits recognized

13,960,000


$3.24


58,681,000


$13.84







Adjusted Income Tax Expense (non-GAAP measure)

$

87,957,000




$

305,369,000









 

The Company's effective tax rate for the fourth quarter and year ended December 31, 2017 was 52.3% and 36.5%, respectively, compared to 34.0% and 35.7% for the fourth quarter and year ended December 31, 2016, respectively.  Excluding the impact of the previously discussed remeasurement of the deferred tax asset and excess tax benefits recognized during the fourth quarter and year ended December 31, 2017, the Company's effective tax rate would have been 33.7% and 36.1%, respectively.

Homebuilding

New orders in the fourth quarter of 2017 increased 18% to 4,306 units, when compared to 3,645 units in the fourth quarter of 2016. The average sales price of new orders in the fourth quarter of 2017 was $380,800, a decrease of 4% when compared with the fourth 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 fourth quarter of 2017 to 4,630 units, 5% higher than the fourth quarter of 2016.  The Company's backlog of homes sold but not settled as of December 31, 2017 increased on a unit basis by 24% to 8,531 units and increased on a dollar basis by 21% to $3,277,888,000 when compared to December 31, 2016.

Homebuilding revenues in the fourth quarter of 2017 totaled $1,781,494,000, 4% higher than the year earlier period.  Gross profit margin in the fourth quarter of 2017 increased to 19.3%, compared to 17.8% in the fourth quarter of 2016.  Gross profit margin was favorably impacted by modest improvements in pricing combined with moderating construction costs.  Income before tax from the homebuilding segment totaled $241,800,000 in the fourth quarter of 2017, an increase of 16% when compared to the fourth quarter of 2016.

New orders for the year ended December 31, 2017 increased 13% to 17,608 units, when compared to 15,583 units in 2016.  Settlements increased 7% year over year to 15,961 units in 2017 from 14,928 units in 2016.  Homebuilding revenues for the year ended December 31, 2017 totaled $6,175,521,000, which is 8% higher than 2016.  Gross profit margin for the year ended December 31, 2017 was 19.2%, compared to 17.5% in 2016.  Income before tax for the homebuilding segment for the year ended December 31, 2017 was $776,370,000, a 29% increase when compared to 2016.

Mortgage Banking

Mortgage closed loan production in the fourth quarter of 2017 totaled $1,229,695,000, an increase of 2% when compared to the fourth quarter of 2016.  Income before tax from the mortgage banking segment totaled $19,518,000 in the fourth quarter of 2017, a decrease of 4% when compared to $20,399,000 in the fourth quarter of 2016.  The decrease is due to higher general and administrative costs in the fourth quarter of 2017.

Mortgage closed loan production for the year ended December 31, 2017 increased 7% to $4,229,507,000. Income before tax from the mortgage banking segment for the year ended December 31, 2017 increased 16% to $70,541,000 from $60,595,000 in 2016.

Financial Disclosure Advisory

The Company reports its financial results in accordance with U.S. generally accepted accounting principles ("GAAP"). This press release references a non-GAAP financial measure, Adjusted Income Tax Expense, which reflects the Company's income tax expense excluding the impact of the charge associated with the enactment of the Tax Cut and Jobs Act and the impact of the income tax benefit recognized from excess tax benefits from stock option exercises.  These adjustments result in an Adjusted Income Tax Expense for the current quarter and year that, in the Company's view, facilitate a more consistent comparison to GAAP income tax expense in the prior year.

The Company believes that the non-GAAP financial measure included in this press release allows investors to understand and compare results in a more consistent manner for the fourth quarters and years ended December 31, 2017 and 2016. This non-GAAP financial measure should be considered supplemental and not a substitute for the Company's results reported in accordance with GAAP for the periods presented.

About NVR

NVR, Inc. operates in two business segments:  homebuilding and mortgage banking.  The homebuilding segment 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)




Three Months Ended December 31,


Twelve Months Ended December 31,



2017


2016


2017


2016



(Unaudited)


(Unaudited)


(Unaudited)



Homebuilding:









Revenues


$

1,781,494



$

1,718,527



$

6,175,521



$

5,709,223


Other income


2,272



597



6,536



2,820


Cost of sales


(1,438,307)



(1,413,440)



(4,990,378)



(4,707,861)


Selling, general and administrative


(97,662)



(91,534)



(392,272)



(382,459)


Operating income


247,797



214,150



799,407



621,723


Interest expense


(5,997)



(5,887)



(23,037)



(20,621)


Homebuilding income


241,800



208,263



776,370



601,102











Mortgage Banking:









Mortgage banking fees


34,842



34,239



130,319



113,321


Interest income


2,682



2,458



7,850



7,569


Other income


650



512



2,048



1,652


General and administrative


(18,338)



(16,516)



(68,528)



(60,861)


Interest expense


(318)



(294)



(1,148)



(1,086)


Mortgage banking income


19,518



20,399



70,541



60,595











Income before taxes


261,318



228,662



846,911



661,697


Income tax expense


(136,699)



(77,771)



(309,390)



(236,435)











Net income


$

124,619



$

150,891



$

537,521



$

425,262











Basic earnings per share


$

33.39



$

40.25



$

144.00



$

110.53











Diluted earnings per share


$

28.88



$

37.80



$

126.77



$

103.61











Basic weighted average shares outstanding


3,732



3,749



3,733



3,847











Diluted weighted average shares outstanding


4,315



3,992



4,240



4,104


 

 

NVR, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share data)

(unaudited)




December 31, 2017


December 31, 2016

ASSETS





Homebuilding:





Cash and cash equivalents


$

645,087



$

375,748


Restricted cash


19,438



17,561


Receivables


20,026



18,937


Inventory:





Lots and housing units, covered under sales agreements with customers


1,046,094



883,868


Unsold lots and housing units


148,620



145,065


Land under development


34,212



46,999


Building materials and other


17,273



16,168




1,246,199



1,092,100







Contract land deposits, net


370,429



379,844


Property, plant and equipment, net


43,191



45,915


Reorganization value in excess of amounts allocable to identifiable assets, net


41,580



41,580


Deferred tax assets, net


111,953



170,652


Other assets


86,977



91,009




2,584,880



2,233,346


Mortgage Banking:





Cash and cash equivalents


21,707



19,657


Restricted cash


2,256



1,857


Mortgage loans held for sale, net


352,489



351,958


Property and equipment, net


6,327



4,903


Reorganization value in excess of amounts allocable to identifiable assets, net


7,347



7,347


Other assets


14,273



24,875




404,399



410,597


Total assets


$

2,989,279



$

2,643,943







LIABILITIES AND SHAREHOLDERS' EQUITY





Homebuilding:





Accounts payable


$

261,973



$

251,212


Accrued expenses and other liabilities


341,891



337,200


Customer deposits


150,033



122,236


Senior notes


597,066



596,455




1,350,963



1,307,103


Mortgage Banking:





Accounts payable and other liabilities


32,824



32,399




32,824



32,399


Total liabilities


1,383,787



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 December 31, 2017 and December 31, 2016


206



206


Additional paid-in capital


1,644,197



1,515,828


Deferred compensation trust – 108,640 shares of NVR, Inc. common stock as of both
  December 31, 2017 and December 31, 2016


(17,383)



(17,375)


Deferred compensation liability


17,383



17,375


Retained earnings


6,231,940



5,695,376


Less treasury stock at cost – 16,864,324 and 16,862,327 shares as of December 31, 2017 and
December 31, 2016, respectively


(6,270,851)



(5,906,969)


Total shareholders' equity


1,605,492



1,304,441


Total liabilities and shareholders' equity


$

2,989,279



$

2,643,943


 

 

NVR, Inc.

Operating Activity

(dollars in thousands)

(Unaudited)




Three Months Ended December 31,


Twelve Months Ended December 31,



2017


2016


2017


2016

Homebuilding data:









New orders (units)









   Mid Atlantic (1)


2,153



1,828



8,654



7,916


   North East (2)


296



354



1,362



1,314


   Mid East (3)


953



830



4,171



3,659


   South East (4)


904



633



3,421



2,694


  Total


4,306



3,645



17,608



15,583











Average new order price


$

380.8



$

395.2



$

383.2



$

386.4











Settlements (units)









   Mid Atlantic (1)


2,289



2,311



7,971



7,512


   North East (2)


358



350



1,288



1,246


   Mid East (3)


1,079



950



3,772



3,658


   South East (4)


904



808



2,930



2,512


  Total


4,630



4,419



15,961



14,928











Average settlement price


$

384.7



$

388.8



$

386.9



$

381.2











Backlog (units)









   Mid Atlantic (1)






4,224



3,541


   North East (2)






682



608


   Mid East (3)






1,898



1,499


   South East (4)






1,727



1,236


  Total






8,531



6,884











Average backlog price






$

384.2



$

392.8











New order cancellation rate


14

%


17

%


14

%


15

%

Community count (average)


484



495



485



485


Lots controlled at end of period






88,700



78,000











Mortgage banking data:









Loan closings


$

1,229,695



$

1,201,164



$

4,229,507



$

3,952,575


Capture rate


88

%


89

%


88

%


88

%










Common stock information:









Shares outstanding at end of period






3,691,006



3,693,003


Number of shares repurchased


56,128



101,982



166,520



280,288


Aggregate cost of shares repurchased


$

191,967



$

163,608



$

422,166



$

455,351


 

(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

 

Cision View original content:http://www.prnewswire.com/news-releases/nvr-inc-announces-fourth-quarter-and-full-year-results-300587929.html

SOURCE NVR, Inc.

Investor Relations: Curt McKay, (703) 956-4058, ir@nvrinc.com