NVR - 10-K annual report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

OR

Commission file number 1-12378

NVR, Inc.

(Exact name of registrant as specified in its charter)

7601 Lewinsville Road, Suite 300

McLean, Virginia 22102

(703) 761-2000

(Address, including zip code, and telephone number, including

area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

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  x  No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is an accelerated filer (as described in Exchange Act Rule 12b-2).  Yes  x  No  ¨

The aggregate market value of the voting stock held by non-affiliates of NVR, Inc., based on the closing price reported on the American Stock Exchange for the Common Stock of NVR, Inc. on June 28, 2002, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $2.1 billion.

As of January 27, 2003 there were 7,136,198 total shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement of NVR, Inc. to be filed with the Securities and Exchange Commission pursuant to Regulation 14A of the Securities Exchange Act of 1934 on or prior to April 30, 2003 are incorporated by reference into Part III of this report.

Page 1 of 65 pages

The Exhibit Index begins on page 24.

Table of Contents

INDEX

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Forward-Looking Statements

Some of the statements in this Form 10-K, as well as statements made by NVR, Inc. (“NVR”) 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, NVR’s financial position, business strategy, 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; 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 moratoria; governmental regulation; the ability of NVR to integrate any acquired business; fluctuation and volatility of stock and other financial markets; and other factors over which NVR has little or no control.

RISK FACTORS

Our business can be negatively impacted by interest rate movements, inflation and other economic factors.

Our business is affected by the risks generally incident to the residential construction business, including:

High rates of inflation generally affect the homebuilding industry adversely because of their adverse impact on interest rates. High interest rates not only increase the cost of borrowed funds to homebuilders but also have a significant effect on housing demand and on the affordability of permanent mortgage financing to prospective purchasers. We are also subject to potential volatility in the price of commodities that impact costs of materials used in our homebuilding business. Increases in prevailing interest rates could have a material adverse effect on our sales, profitability, stock performance and ability to service our debt obligations.

Our financial results also are affected by the risks generally incident to our mortgage banking business, including interest rate levels, the impact of government regulation of mortgage loan originations and servicing and the need to issue forward commitments to fund and sell mortgage loans. Our homebuilding customers accounted for almost all of our mortgage banking business in 2002. Our mortgage banking business is therefore affected by the volume of our continuing homebuilding operations.

Our mortgage banking business also is affected by interest rate fluctuations. We also may experience marketing losses resulting from daily increases in interest rates to the extent we are unable to match interest rates and amounts on loans we have committed to originate with forward commitments from third parties to purchase such loans. We employ procedures designed to mitigate any such potential losses, but there can be no assurance that such procedures will be entirely successful. Increases in interest rates may have a material adverse effect on our sales, profitability, stock performance and ability to service our debt obligations.

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These factors (and thus the homebuilding business) have tended to be cyclical in nature. Any downturn in the national economy or the local economies of the markets in which we operate could have a material adverse effect on our sales, profitability, stock performance and ability to service our debt obligations. In particular, approximately 45% of our home settlements during 2002 occurred in the Washington, D.C. and Baltimore, MD. metropolitan areas, which amounted to 56% of NVR’s 2002 homebuilding revenues. Thus, NVR is dependent to a significant extent on the economy and demand for housing in those areas.

Our inability to secure and control an adequate inventory of lots could adversely impact our operations.

The results of our homebuilding operations are dependent upon our continuing ability to control an adequate number of homebuilding lots in desirable locations. We have not experienced significant shortages in the supply of lots in our principal markets or difficulty in controlling lots through option contracts in sufficient numbers and in adequate locations to fulfill our business plan and on terms consistent with our past operations. There can be no assurance, however, that an adequate supply of building lots will continue to be available on terms similar to those available in the past, or that we will not be required to devote a greater amount of capital to controlling building lots than we have historically. Although we believe that we will have adequate capital resources and financing to control a sufficient number of building lots to fulfill our current business plan, there can be no assurance that our resources and financing will in fact be sufficient to meet our expectations. An insufficient supply of building lots in one or more of our markets or our inability to purchase or finance building lots on reasonable terms could have a material adverse effect on our sales, profitability, stock performance and ability to service our debt obligations.

Inventory risk can be substantial for homebuilders. The market value of building lots and housing inventories can fluctuate significantly as a result of changing market conditions. In addition, inventory carrying costs can be significant and can result in losses in a poorly performing project or market. We must, in the ordinary course of our business, continuously seek and make acquisitions of lots for expansion into new markets as well as for replacement and expansion within our current markets. Although we employ various measures designed to manage inventory risks, there can be no assurance that such measures will be successful. In the event of significant changes in economic or market conditions, we may dispose of certain subdivision inventories on a bulk or other basis which may result in a loss which could have a material adverse effect on our profitability, stock performance and ability to service our debt obligations.

Our current indebtedness may impact our future operations and our ability to access necessary financing.

Our homebuilding operations are dependent in part on the availability and cost of working capital financing, and may be adversely affected by a shortage or an increase in the cost of such financing. We believe that we will be able to meet our needs for working capital financing from cash generated from operations and from our existing or a replacement working capital revolving credit facility. If we require working capital greater than that provided by our operations and our credit facility, we may be required to seek to increase the amount available under the facility or to obtain alternative financing. No assurance can be given that additional or replacement financing will be available on terms that are favorable or acceptable. If we are at any time unsuccessful in obtaining sufficient capital to fund our planned homebuilding expenditures, we may experience a substantial delay in the completion of any homes then under construction. Any delay could result in cost increases and could have a material adverse effect on our sales, profitability, stock performance, ability to service our debt obligations and future cash flows.

Our existing indebtedness contains financial and other restrictive covenants and any future indebtedness may also contain covenants. These covenants include limitations on our ability, and the ability of our subsidiaries, to incur additional indebtedness, pay cash dividends and make distributions, make loans and investments, enter into transactions with affiliates, effect certain asset sales, incur certain liens, merge or consolidate with any other person, or transfer all or substantially all of our properties and assets. Substantial losses by us or other action or inaction by us or our subsidiaries could result in the violation of one or more of these covenants which could result in decreased liquidity or a default on our indebtedness, thereby having a material adverse effect on our sales, profitability, stock performance and ability to service our debt obligations.

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Our mortgage banking operations are dependent on the availability, cost and other terms of mortgage warehouse financing, and may be adversely affected by any shortage or increased cost of such financing. Although we believe that our needs for mortgage warehouse financing will be met by our existing mortgage warehouse arrangements and repurchase agreements, no assurance can be given that any additional or replacement financing will be available on terms that are favorable or acceptable. Our mortgage banking operations are also dependent upon the securitization market for mortgage-backed securities, and could be materially adversely affected by any fluctuation or downturn in such market.

Government regulations and environmental matters can negatively affect our operations.

We are subject to various local, state and federal statutes, ordinances, rules and regulations concerning zoning, building design, construction and similar matters, including local regulations that impose restrictive zoning and density requirements in order to limit the number of homes that can eventually be built within the boundaries of a particular area. We have from time to time been subject to, and may also be subject in the future to, periodic delays in our homebuilding projects due to building moratoria in the areas in which we operate. Changes in regulations that restrict homebuilding activities in one or more of our principal markets could have a material adverse effect on our sales, profitability, stock performance and ability to service our debt obligations.

We are also subject to a variety of local, state and federal statutes, ordinances, rules and regulations concerning the protection of health and the environment. We are subject to a variety of environmental conditions that can affect our business and our homebuilding projects. The particular environmental laws that apply to any given homebuilding site vary greatly according to the location and environmental condition of the site and the present and former uses of the site and adjoining properties. Environmental laws and conditions may result in delays, cause us to incur substantial compliance and other costs, or prohibit or severely restrict homebuilding activity in certain environmentally sensitive regions or areas, thereby adversely affecting our sales, profitability, stock performance and ability to service our debt obligations.

We are an approved seller/servicer of FNMA, GNMA, FHLMC, FHA and VA mortgage loans, and are subject to all of those agencies’ rules and regulations. Any significant impairment of our eligibility to sell/service these loans could have a material adverse impact on our mortgage operations. In addition, we are subject to regulation at the state and federal level with respect to specific origination, selling and servicing practices. Adverse changes in governmental regulation may have a negative impact on our mortgage loan origination business.

We face competition in our housing and mortgage banking operations.

The homebuilding industry is highly competitive. We compete with numerous homebuilders of varying size, ranging from local to national in scope, some of whom have greater financial resources than we do. We face competition:

Our homebuilding operations compete primarily on the basis of price, location, design, quality, service and reputation. Historically we have been one of the leading homebuilders in each of the markets where we operate.

The mortgage banking industry is also competitive. Our main competition comes from other national, regional and local mortgage bankers, thrifts, banks and mortgage brokers in each of these markets. Our mortgage banking operations compete primarily on the basis of customer service, variety of products offered, interest rates offered, prices of ancillary services and relative financing availability and costs.

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There can be no assurance that we will continue to compete successfully in our homebuilding or mortgage banking operations. An inability to effectively compete may have an adverse impact on our sales, profitability, stock performance and ability to service our debt obligations.

A shortage of building materials or labor may adversely impact our operations.

The homebuilding business has in the past, from time to time, experienced material and labor shortages, including shortages in insulation, drywall, certain carpentry work, concrete, as well as fluctuating lumber prices and supply. In addition, high employment levels and strong construction market conditions could restrict the labor force available to our subcontractors and us in one or more of our markets. While we are not presently experiencing any serious material or labor shortages, significant increases in costs resulting from these shortages, or delays in construction of homes, could have a material adverse effect upon our sales, profitability, stock performance and ability to service our debt obligations.

Weather-related and other events beyond our control may adversely impact our operations.

Extreme weather or other events, such as hurricanes, tornadoes, earthquakes, forest fires, floods, terrorist attacks or war, may affect our markets, our operations and our profitability. These events may impact our physical facilities or those of our suppliers or subcontractors, causing us material increases in costs, or delays in construction of homes, which could have a material adverse effect upon our sales, profitability, stock performance and ability to service our debt obligations.

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PART I

Item 1.Business.

General

NVR, Inc. (“NVR”) was formed in 1980 as NVHomes, Inc. NVR operates in two business segments: 1) homebuilding and 2) mortgage banking. NVR conducts its homebuilding activities directly and its mortgage banking operations primarily through a wholly owned subsidiary, NVR Mortgage Finance, Inc. (“NVRM”). Unless the context otherwise requires, references to “NVR” include NVR and its subsidiaries.

NVR is one of the largest homebuilders in the United States and in the Washington, D.C. and Baltimore, MD metropolitan areas. Approximately 45% of our home settlements in 2002 occurred in the Washington, D.C. and Baltimore, MD metropolitan areas, which amounted to 56% of NVR’s 2002 homebuilding revenues. NVR’s homebuilding operations include the construction and sale of single-family detached homes, townhomes and condominium buildings under three tradenames: Ryan Homes, NVHomes and Fox Ridge Homes. The Ryan Homes and Fox Ridge Homes products are moderately priced and marketed primarily to first-time homeowners and first-time move-up buyers. The NVHomes product is marketed primarily to move-up and upscale buyers and is built in the Washington, D.C., Baltimore, MD and Philadelphia, PA metropolitan areas. The Ryan Homes product is built in nineteen metropolitan areas located in Maryland, Virginia, West Virginia, Pennsylvania, New York, North Carolina, South Carolina, Ohio, New Jersey, Delaware and Tennessee. The Fox Ridge Homes product is built solely in the Nashville, TN metropolitan area. In 2002, the average price of a unit settled by NVR was approximately $268,500.

NVR is not in the land development business. NVR purchases finished lots under option contracts, which require deposits that may be forfeited if NVR fails 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. This lot acquisition strategy reduces the financial requirements and risks associated with direct land ownership and land development. NVR generally seeks to maintain control over a supply of lots believed to be suitable to meet its sales objectives for the next 24 to 36 months.

In addition to building and selling homes, NVR provides a number of mortgage-related services through its mortgage banking operations, which operate in 11 states. Through office locations in each of NVR’s homebuilding markets, NVRM originates mortgage loans predominantly for NVR’s homebuyers. NVRM generates revenues primarily from origination fees, gains on sales of loans, title fees, and sales of servicing rights. NVRM sells all of the mortgage loans it closes into the secondary markets, and also sells substantially all of its originated mortgage servicing rights on a flow basis.

Segment information for NVR’s homebuilding and mortgage banking businesses is included in note 2 to NVR’s consolidated financial statements.

Homebuilding

    Products

NVR offers single-family detached homes, townhomes, and condominium buildings with many different basic home designs. These home designs have a variety of elevations and numerous other options. Homes built by NVR combine traditional or colonial exterior designs with contemporary interior designs and amenities. NVR’s homes range from approximately 1,000 to 7,300 square feet, with two to five bedrooms, and are priced from approximately $91,000 to $1,600,000.

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    Markets

NVR operates in the following geographic regions:

The following table summarizes settlements, new orders and backlog unit activity for each of the last three years by region:

    Backlog

Backlog units and dollars were 6,357 and approximately $2.0 billion respectively, at December 31, 2002 compared to backlog units of 5,558 and dollars of approximately $1.5 billion at December 31, 2001. Based on historical trends, NVR anticipates that approximately 15% of the units in backlog at December 31, 2002 will cancel prior to settlement. The remaining 85% of the units are expected to settle in 2003.

    Construction

Independent subcontractors under fixed-price contracts perform construction work on NVR’s homes. The subcontractors’ work is performed under the supervision of NVR employees who monitor quality control. NVR uses many independent subcontractors in its various markets and is not dependent on any single subcontractor or on a small number of subcontractors.

    Land Development

NVR is not in the land development business. NVR purchases finished lots from various land developers under option contracts. NVR is not dependent on any single developer or on a small number of developers.

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    Sales and Marketing

NVR’s preferred marketing method is for customers to visit a furnished model home featuring many built-in options and a landscaped lot. The garages of these model homes are usually converted into temporary sales centers where alternative facades and floor plans are displayed and designs for other models are available for review. Sales representatives are compensated predominantly on a commission basis.

    Regulation

NVR and its subcontractors must comply with various federal, state and local zoning, building, environmental, advertising and consumer credit statutes, rules and regulations, as well as other regulations and requirements in connection with its construction and sales activities. All of these regulations have increased the cost to produce and market NVR’s products. Counties and cities in which NVR builds homes have at times declared moratoriums on the issuance of building permits and imposed other restrictions in the areas in which sewage treatment facilities and other public facilities do not reach minimum standards. To date, restrictive zoning laws and the imposition of moratoriums have not had a material adverse effect on NVR’s construction activities. However, there is no assurance that such restrictions will not adversely affect NVR in the future.

    Competition and Market Factors

The housing industry is highly competitive. NVR competes with numerous homebuilders of varying size, ranging from local to national in scope, some of whom have greater financial resources than NVR. NVR also faces competition from the home resale market. NVR’s homebuilding operations compete primarily on the basis of price, location, design, quality, service and reputation. NVR historically has been one of the market leaders in each of the markets where NVR builds homes.

The housing industry is cyclical and is affected by consumer confidence levels, prevailing economic conditions and interest rates. Other factors that affect the housing industry and the demand for new homes include the availability and increases in the cost of land, labor and materials, changes in consumer preferences, demographic trends and the availability of mortgage finance programs.

NVR is dependent upon building material suppliers for a continuous flow of raw materials. Whenever possible, NVR utilizes standard products available from multiple sources. Such raw materials have been generally available in adequate supply.

Mortgage Banking

NVR provides a number of mortgage related services to its homebuilding customers through its mortgage banking operations. The mortgage banking operations of NVR also include separate subsidiaries that broker title insurance and perform title searches in connection with mortgage loan closings for which they receive commissions and fees. Because NVR originates mortgage loans predominately for NVR’s homebuilding customers, NVRM is dependent on NVR’s homebuilding segment. In 2002, NVRM closed approximately 10,200 loans with an aggregate principal amount of approximately $2.2 billion.

NVRM sells all of the mortgage loans it closes to investors in the secondary markets, rather than holding them for investment. NVRM is an approved seller/servicer for FNMA, GNMA, FHLMC, VA and FHA mortgage loans. NVRM sells substantially all originated mortgage servicing rights on a flow basis. NVRM’s servicing portfolio was approximately $444.3 million in unpaid principal balance of loans serviced at the end of 2002 compared to approximately $223 million at December 31, 2001. The year over year increase in the servicing portfolio is the result of NVRM selling its servicing rights on a quarterly basis during 2002 rather than on a monthly basis as was done during 2001.

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    Competition and Market Factors

NVRM operates through 15 offices in 11 states. NVRM’s main competition comes from national, regional, and local mortgage bankers, mortgage brokers, thrifts and banks in each of these markets. NVRM competes primarily on the basis of customer service, variety of products offered, interest rates offered, prices of ancillary services and relative financing availability and costs.

    Regulation

NVRM is an approved seller/servicer of FNMA, GNMA, FHLMC, FHA and VA mortgage loans, and is subject to all of those agencies’ rules and regulations. These rules and regulations restrict certain activities of NVRM. NVRM is currently eligible and expects to remain eligible to participate in such programs. However, any significant impairment of its eligibility could have a material adverse impact on its operations. In addition, NVRM is subject to regulation at the state and federal level with respect to specific origination, selling and servicing practices.

    Pipeline

NVRM’s mortgage loans in process, which had not closed (the “Pipeline”) at December 31, 2002 and 2001, had an aggregate principal balance of $1.3 billion and $1.1 billion, respectively. NVRM anticipates that approximately 20% of its Pipeline at December 31, 2002 will cancel prior to closing. The remaining 80% of the Pipeline is expected to close in 2003.

Employees

At December 31, 2002, NVR employed 3,596 full-time persons, of whom 1,330 were officers and management personnel, 206 were technical and construction personnel, 692 were sales personnel, 487 were administrative personnel and 881 were engaged in various other service and labor activities. None of NVR’s employees are subject to a collective bargaining agreement and NVR has never experienced a work stoppage. Management believes that its employee relations are good.

Internet Website

NVR’s internet website can be found at www.nvrinc.com. NVR makes available free of charge on or through our internet website, access to our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such material is filed, or furnished, to the Securities and Exchange Commission.

Item 2.Properties.

NVR’s executive offices are located in McLean, Virginia, where NVR currently leases office space for a nine and one-half year term expiring in March 2005.

NVR’s manufacturing facilities are currently located in Thurmont, Maryland; Farmington, New York; Kings Mountain, North Carolina; Darlington, Pennsylvania; and Portland, Tennessee. NVR has leased the Thurmont and Farmington manufacturing facilities for a term expiring in 2014 with various options for extension of the leases and for the purchase of the facilities. The Kings Mountain, Darlington and Portland leases expire in 2022, 2005 and 2004, respectively, and also contain various options for extensions of the leases and for the purchase of the facilities. NVR’s lease on the manufacturing plant in Clover, South Carolina expired during the first quarter of 2002. This lease was not renewed and the manufacturing operation was moved to a new facility in Kings Mountain, North Carolina. NVR has entered into a lease for a new manufacturing facility in Burlington County, New Jersey and expects to initiate operations at this facility in the second half of 2003. This lease agreement expires in 2023 and contains various options for extensions of the lease.

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NVR also leases office space in 82 locations in 11 states for field offices, mortgage banking and title services branches under leases expiring at various times through 2009. NVR anticipates that, upon expiration of existing leases, it will be able to renew them or obtain comparable facilities on acceptable terms.

Item 3.Legal Proceedings.

NVR is not involved in any legal proceedings that are likely to have a material adverse effect on its financial condition or results of operations.

Item 4.Submission of Matters to a Vote of Security Holders.

No matters had been submitted to a vote of security holders during the quarter ended December 31, 2002.

Executive Officers of the Registrant

Dwight C. Schar has been chairman of the board, president and chief executive officer of NVR since September 30, 1993.

William J. Inman has been president of NVRM since January 1992.

Paul C. Saville had been senior vice president finance, chief financial officer and treasurer of NVR since September 30, 1993. Effective January 1, 2002, Mr. Saville was named an executive vice president.

Dennis M. Seremet has been vice president and controller of NVR since April 1, 1995.

PART II

Item 5.Market for Registrant’s Common Equity and Related Shareholder Matters.

NVR’s shares of common stock are listed and principally traded on the American Stock Exchange (“AMEX”). The following table sets forth for the periods indicated the high and low closing sales prices per share for the years 2002 and 2001 as reported by the AMEX.

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As of the close of business on January 30, 2003, there were 613 shareholders of record.

NVR did not pay any cash dividends on its shares of common stock during the years 2002 or 2001. NVR’s bank indebtedness and the indenture governing NVR’s 8% Senior Notes due 2005 (the “Senior Notes”) contain restrictions on the ability of NVR to pay cash dividends on its common stock. See note 6 to the financial statements for a detailed description of the restrictions included in the indenture governing the Senior Notes.

Item 6.Selected Financial Data. (dollars in thousands, except per share amounts)

The following tables set forth selected consolidated financial information for NVR. The selected income statement and balance sheet data have been extracted from NVR’s consolidated financial statements for each of the periods presented. The selected financial data should be read in conjunction with, and is qualified in its entirety by, the consolidated financial statements and related notes included elsewhere in this report.

(1) For the years ended December 31, 2002, 2001, 2000, 1999, and 1998, income before extraordinary loss per diluted share was computed based on 9,193,677, 9,525,960, 10,564,215, 12,088,388 and 13,300,064 shares, respectively, which represents the weighted average number of shares and share equivalents outstanding for each year.

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Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

             (dollars in thousands, except per share data)

Results of Operations for the Years Ended December 31, 2002, 2001 and 2000

NVR, Inc. (“NVR”) operates in two business segments: (1) homebuilding and (2) mortgage banking. Corporate general and administrative expenses are fully allocated to the homebuilding and mortgage banking segments in the information presented below.

Homebuilding Segment

Homebuilding revenues for 2002 increased 20% to $3,060,671 compared to revenues of $2,559,744 in 2001. The increase in revenues is primarily due to a 10% increase in the number of homes settled to 11,368 in 2002 from 10,372 in 2001 and to a 9% increase in the average settlement price to $268.5 in 2002 from $246.0 in 2001. The increase in the number of homes settled is primarily the result of a 13% increase in new orders to 12,167 in 2002 from 10,782 in 2001, and to an 8% higher backlog at the beginning of 2002 as compared to the beginning of 2001. New orders increased predominately in markets outside the Baltimore and Washington, D.C. market areas. The increase in the average settlement price is primarily attributable to favorable market conditions resulting in price increases in a majority of NVR’s markets, and to a 2% increase, as a percentage of total settlements, in single family detached home settlements, which in comparison are generally higher priced than NVR’s single family attached homes.

Homebuilding revenues for 2001 increased 13% to $2,559,744 compared to revenues of $2,267,810 in 2000. The increase in revenues is primarily due to a 10% increase in the average settlement price to $246.0 in 2001 from $224.6 in 2000 and a 3% increase in the number of homes settled to 10,372 in 2001 from 10,055 in 2000. The increase in the average settlement price is attributable to price increases in certain of NVR’s markets and to a larger number of settlements of single family detached homes, which, in comparison, are generally higher priced than NVR’s single family attached homes. The increase in settlements is a result of a 4% higher backlog at the beginning of the 2001 period as compared to the beginning of the same 2000 period, as well as, to an increase in new orders. New orders for 2001 increased by 5% to 10,782 units compared with 10,268 units for 2000. The increase in new orders is predominantly in markets outside the Baltimore and Washington, D.C. market areas.

Gross profit margins for 2002 increased to 24% compared to 22% for 2001. The increase in gross profit margins is primarily due to favorable market conditions which provided NVR the opportunity to increase selling prices in a majority of its markets and to relatively stable costs for lumber and certain other commodities over this two-year period. Gross profit margins for 2001 increased to 22% compared to 19% for 2000. The increase in gross profit margins is due to favorable market conditions, which provided NVR the opportunity to increase selling prices in certain of its markets and to a decrease in the cost of lumber and certain other material costs.

Selling, general and administrative expenses (“SG&A”) for 2002 increased $48,132, or 27%, as compared to 2001, and as a percentage of revenues increased to 7.4% from 7.0%. The increase in SG&A dollars is primarily attributable to a $23,000 increase in certain management incentives, an approximate $15,000 increase in wages resulting from increases in personnel to support NVR’s continued growth, and to the aforementioned increase in revenues. SG&A expenses for 2001 increased $24,867 as compared to 2000, and as a percentage of revenues increased to 7.0% from 6.8%. The increase in SG&A dollars is primarily attributable to a $15,000 increase in wages resulting from increases in personnel to support the companies continued growth, and to the aforementioned 13% increase in revenues.

Backlog units and dollars were 6,357 and $1,962,115, respectively, at December 31, 2002 compared to backlog units of 5,558 and dollars of $1,511,503 at December 31, 2001. The increase in backlog dollars is primarily due to a 14% increase in backlog units at December 31, 2002, and to an 11% increase in the average selling price of new orders for the six-month period ended December 31, 2002 as compared to the same period for 2001. The increase in backlog units is primarily attributable to a 20%

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increase in new orders for the six-month period ended December 31, 2002 as compared to the same period for 2001. Backlog units and dollars were 5,558 and $1,511,503, respectively, at December 31, 2001 compared to backlog units of 5,148 and dollars of $1,318,277 at December 31, 2000. The increase in backlog dollars is primarily due to an 8% increase in the average selling price for the six-month period ended December 31, 2001 as compared to the same period for 2000, and to the 8% increase in backlog units at December 31, 2001 as compared to December 31, 2000. Backlog units increased primarily due to a slower backlog turn during 2001.

Mortgage Banking Segment

NVR conducts its mortgage banking activity through NVR Mortgage Finance, Inc. (“NVRM”), a wholly owned subsidiary. Beginning in 2000, NVR restructured NVRM to focus solely on serving the homebuilding segment’s customer base by discontinuing NVRM’s retail mortgage origination activities. Following is a table of financial and statistical data for the three years ended December 31, 2002, 2001 and 2000:

Loan closing volume for the year ended December 31, 2002 increased 15% over 2001. The 2002 increase is attributable to a 5% increase in the number of units closed and to a 10% increase in the average loan amount due to the homebuilding segment’s higher average selling prices. Loan closing volume for the year ended December 31, 2001 increased 8% over 2000. The 2001 increase is attributable to a 19% increase in the average loan amount, offset by an 11% reduction in units closed due to the discontinuation of retail activity.

Operating income for the year ended December 31, 2002 increased approximately $14,600 over 2001. The increase is primarily due to an increase in mortgage banking fees attributable to the aforementioned 15% increase in closed loan volume, increased secondary marketing gains, and higher revenues per loan. Secondary marketing gains for the year ended December 31, 2002 increased approximately $4,000 over 2001 due to a more favorable pricing environment. Average revenues per loan (including origination fees, ancillary fees and discount points) for 2002 increased by approximately 24% primarily due to a more favorable market environment than that experienced in 2001. The 2001 year was also impacted by approximately $1,700 for costs associated with discontinued retail activity, which was the primary cause of the overall decrease in general and administrative costs when comparing 2002 to 2001.

Operating income for the year ended December 31, 2001 increased approximately $28,100 over 2000. The increase is primarily due to an increase in mortgage banking fees attributable to the aforementioned 8% increase in closed loan volume, higher revenues per loan and higher secondary marketing gains. Average revenues per loan for 2001 increased by approximately 36% over that experienced during 2000, which resulted from replacing less profitable retail loan volume with more profitable builder business, and to a more favorable market environment. Secondary marketing revenue for the year ended December 31, 2001 increased approximately $2,500 over 2000 due to an improving pricing environment. General and administrative expenses were approximately $5,600 less in 2001 compared to 2000. This is primarily attributable to NVRM

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substantially reducing staff and other related overhead costs due to the restructuring carried out in 2000. A $5,726 restructuring and asset impairment charge recorded in the first quarter of 2000 also impacted operating income in 2000. The restructuring plan was substantially completed during the second quarter of 2000. A detail of the costs comprising the total charge incurred in the first quarter of 2000 is as follows:

During 2002, approximately $48 of the non-cancelable office and equipment lease accrual was reversed to the segment’s operating income due to the termination of certain leases. During 2001 and 2000, approximately $797 and $863, respectively, in severance and lease costs were applied against the restructuring accrual. Approximately $81 of the restructuring accrual established at March 31, 2000 remains at December 31, 2002, and solely relates to accrued lease costs.

Seasonality

Overall, NVR does not experience material seasonal fluctuations in sales, settlements or loan closings.

Effective Tax Rate

NVR’s consolidated effective tax rates were 38.2%, 40.0% and 40.7% in 2002, 2001 and 2000, respectively. The reduction of the effective tax rate over the three-year period is primarily due to higher taxable income relative to NVR’s permanent differences, primarily the amortization of reorganization value in excess of amounts allocable to identifiable assets in 2000 and 2001, and non-deductible compensation. In January 2002, NVR amended one of its long-term cash incentive plans, requiring executive officers to defer receipt of payments due under the plan until separation of service with NVR. The effect of this amendment converted compensation expensed prior to January 1, 2002 from a permanent tax difference to a temporary tax difference, producing an approximate $7,800 deferred tax benefit.

Recent Accounting Pronouncements

In April 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections,” that, among other things, rescinded SFAS No. 4, “Reporting Gains and Losses from Extinguishment of Debt.” With the rescission of SFAS No. 4, the early extinguishment of debt generally will no longer be classified as an extraordinary item for financial statement presentation purposes. The provision is effective for fiscal years beginning after May 15, 2002. NVR does not anticipate that the adoption of SFAS No. 145 will have a material effect on its financial position or results of operations.

In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” which replaces Emerging Issues Task Force Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” The new standard requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. The statement is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. NVR does not anticipate that the adoption of SFAS No. 145 will have a material effect on its financial position or results of operations.

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In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure,” which amended SFAS No. 123 “Accounting for Stock-Based Compensation.” The new standard provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. Additionally, the statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in the annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. This statement is effective for financial statements for fiscal years ending after December 15, 2002. In compliance with SFAS No. 148, NVR has elected to continue to follow the intrinsic value method in accounting for its stock-based employee compensation arrangement as defined by Accounting Principles Board Opinion (“APB”) No. 25, Accounting for Stock Issued to Employee, and has made the applicable disclosures in note 1 to the consolidated financial statements.

In January 2003, the FASB issued FASB Interpretation (“FIN”) No. 46, “Consolidation of Variable Interest Entities”, an interpretation of Accounting Research Bulletin No. 51, “Consolidated Financial Statements”. FIN No. 46 explains how to identify variable interest entities and how an enterprise assesses its interests in a variable interest entity to decide whether to consolidate that entity. This Interpretation requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among parties involved. FIN No. 46 is effective immediately for variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. The Interpretation applies in the first fiscal year or interim period beginning after June 15, 2003, to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. NVR does not anticipate that the adoption of FIN No. 46 will have a material effect on its financial position or results of operations.

Liquidity and Capital Resources

Lines of Credit and Notes Payable

NVR’s homebuilding segment generally provides for its working capital cash requirements using cash generated from operations and a short-term unsecured working capital revolving credit facility (“Facility”). The Facility expires on May 31, 2004, and bears interest at the election of NVR at i) the base rate of interest announced by the Facility agent, or ii) 1.35% above the Eurodollar rate. The weighted average interest rate for amounts outstanding under the Facility during 2002 was 3.2%. The Facility provides for borrowings of up to $135,000, subject to certain borrowing base limitations. Up to $40,000 of the Facility is currently available for issuance in the form of letters of credit of which $19,206 was outstanding at December 31, 2002. There were no direct borrowings outstanding under the Facility as of December 31, 2002. At December 31, 2002, there were no borrowing base limitations reducing the amount available to NVR for borrowings.

NVR’s mortgage banking segment provides for its mortgage origination and other operating activities using cash generated from operations as well as various short-term credit facilities. NVRM has available an annually renewable mortgage warehouse facility (the “Mortgage Warehouse Revolving Credit Agreement”) with an aggregate borrowing limit of $150,000 to fund its mortgage origination activities, under which $126,249 was outstanding at December 31, 2002. The Mortgage Warehouse Revolving Credit Agreement expires August 29, 2003. The interest rate under the Mortgage Warehouse Revolving Credit Agreement is either: (i) the London Interbank Offering Rate (“Libor”) plus 1.25%, or (ii) 1.25% to the extent that NVRM provides compensating balances. The weighted average interest rate for amounts outstanding under the Mortgage Warehouse Revolving Credit Agreement was 2.2% during 2002. NVRM from time to time enters into various gestation and repurchase agreements. NVRM currently has available an aggregate of $50,000 of borrowing capacity in such uncommitted facilities. Amounts outstanding thereunder accrue interest at various rates tied to the Libor rate and are collateralized by gestation mortgage-backed securities and whole loans. The weighted average interest rate for amounts outstanding under these uncommitted facilities was 2.3% during 2002. There was an aggregate of $13,008 outstanding under such gestation and repurchase agreements at December 31, 2002. NVRM’s mortgage warehouse facility limits the ability of NVRM to transfer funds to NVR in the form of dividends, loans or advances.

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NVRM had net assets of $12,000 as of December 31, 2002, that were so restricted.

On January 20, 1998, NVR filed a shelf registration statement with the Securities and Exchange Commission for the issuance of up to $400,000 of NVR’s debt securities. The shelf registration statement was declared effective on February 27, 1998 and provides that securities may be offered from time to time in one or more series, and in the form of senior or subordinated debt. As of December 31, 2002, an aggregate principal balance of $255,000 was available for issuance under the shelf registration statement.

On April 14, 1998, NVR completed an offering under the shelf registration statement for $145,000 of senior notes due 2005 (the “Senior Notes”), resulting in aggregate net proceeds to NVR of approximately $142,800 after fees and expenses. The Senior Notes mature on June 1, 2005 and bear interest at 8%, payable semi-annually on June 1 and December 1 of each year, commencing June 1, 1998. The Senior Notes are senior unsecured obligations of NVR, ranking equally in right of payment with NVR’s other existing and future unsecured indebtedness. The Senior Notes are redeemable at the option of the Company, in whole or in part, at any time on or after June 1, 2003 at redemption prices ranging from 104% of par on June 1, 2003 to par at their maturity date on June 1, 2005.

During 2000, NVR purchased, in the open market, an aggregate of $30,000 in principal amount of the Senior Notes. The Senior Notes were purchased at par, with no material gain or loss resulting from the transaction. There is an aggregate of $115,000 of Senior Notes outstanding at December 31, 2002.

On March 14, 2002, NVR successfully completed a solicitation of consents from holders of its Senior Notes to amend the Indenture governing the Senior Notes. In March 2002, NVR paid to each holder of the Senior Notes who provided consent, an amount equal to 2.0% of the principal amount of such holder’s Senior Notes. The amendment to the Indenture allowed NVR to repurchase up to an aggregate $100,000 of its capital stock, in addition to that otherwise provided under NVR’s Indenture, in one or more open market and/or privately negotiated transactions through June 1, 2003. NVR had fully utilized the $100,000 for its intended purpose during 2002.

NVR expects that it will, from time to time, repurchase additional shares of its common stock, pursuant to repurchase authorizations by the Board of Directors and subject to the restrictions contained within NVR’s debt agreements. During 2002, NVR fully utilized the $300,000 NVR common stock repurchase authorization approved by the Board of Directors in January 2002. In November 2002, the Board of Directors approved the repurchase of up to an aggregate of $150,000 of NVR’s common stock in one or more open market and/or privately negotiated transactions. Through January 31, 2003, NVR has repurchased shares of its common stock at an aggregate purchase price of approximately $71,000 pursuant to the $150,000 repurchase authorization.

Cash Flows

As shown in NVR’s consolidated statement of cash flows for the year ended December 31, 2002, NVR’s operating activities provided cash of $381,216 for this period. The cash was provided primarily by homebuilding operations and by the utilization of a tax benefit of approximately $101,000 as a result of stock option exercises. This tax benefit is recorded directly to equity and reduced estimated tax payments during the year. Cash was used for entering into contract land deposits with developers to acquire control of finished lots under lot option contracts and for increasing homebuilding inventory.

Net cash used by investing activities was $3,963 for the year ended December 31, 2002, primarily due to capital spending, partially offset by proceeds from the sale of mortgage servicing rights.

Net cash used for financing activities was $373,019 for the year ended December 31, 2002. NVR purchased approximately 1,200,000 shares of its common stock in 2002 for an aggregate purchase price of $362,399. In addition to the aforementioned share repurchases, NVR’s rabbi trust, which holds the investments for the Deferred Compensation Plan, purchased 170,732 shares of NVR’s common stock at an aggregate purchase price of $37,469 during 2002. These shares purchased by the rabbi trust are recorded in NVR’s treasury stock account until such shares are vested under the respective compensation plan (see note

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9 of the consolidated financial statements). Included in net cash used for financing is an approximate $20,000 increase in borrowings under credit lines to finance mortgage loan inventory by NVR’s mortgage banking segment.

At December 31, 2002, the homebuilding and mortgage banking segments had restricted cash of $6,268 and $2,150, respectively, which includes certain customer deposits, mortgagor tax, insurance, completion escrows and other amounts collected at closing which relates to mortgage loans held for sale and to home sales.

NVR believes that internally generated cash and borrowings available under credit facilities will be sufficient to satisfy near and longer term cash requirements for working capital and debt service in both its homebuilding and mortgage banking operations.

Critical Accounting Policies

    General

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 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. NVR continually evaluates the estimates it uses to prepare the consolidated financial statements, and updates those estimates as necessary. In general, management’s 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 thereof. 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 units is expensed on a specific identification basis. Cost of manufacturing materials is determined on a first-in, first-out basis. Recoverability and impairment, if any, is primarily evaluated by analyzing sales of comparable assets. Management believes that its accounting policy is designed to properly assess the carrying value of homebuilding inventory.

    Contract Land Deposits

NVR purchases finished lots under option contracts that require deposits that may be forfeited if NVR fails 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. NVR maintains an allowance for losses on contract land deposits that it believes is sufficient to provide for losses in the existing contract land deposit portfolio. The allowance reflects management’s judgment of the present loss exposure at the end of the reporting period, considering market and economic conditions, sales absorption and profitability within specific communities and terms of the various contracts. Although NVR considers the allowance for losses on contract land deposits reflected on the December 31, 2002 balance sheet to be adequate, 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

NVR adopted the provisions of Statement of Financial Accounting Standards No 142, “Goodwill and Other Intangible Assets (“SFAS No 142) during 2002. Excess reorganization value in excess of identifiable assets (“excess reorg value”) and goodwill is no longer subject to amortization. Rather, excess reorg value and goodwill is subject to at least an annual assessment for impairment by applying a fair-value based test. NVR

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continually evaluates whether events and circumstances have occurred that indicate that the remaining value of excess reorg value and goodwill may not be recoverable. At December 31, 2002, management believes that excess reorg value and goodwill were not impaired. This conclusion is based on management’s judgment, considering such factors as NVR’s history of operating success, NVR’s well recognized brand names and the significant positions held in the markets in which NVR operates. However, changes in strategy or adverse changes in market conditions could impact this judgment and require an impairment loss to be recognized for the amount that the carrying value of excess reorg value and/or goodwill exceeds their fair value.

    Mortgage Servicing Rights

NVR sells its servicing rights on a flow basis through fixed price servicing sales contracts. Due to the short period of time the servicing rights are held, from one to four months, NVR does not amortize the servicing asset. Since the servicing rights are recorded at the value in the servicing sales contracts, there are no impairment issues related to these assets.

    Warranty/Product Liability Accruals

Warranty and product liability accruals are established to provide for estimated future expenses as a result of construction and product defects, product recalls and litigation incidental to NVR’s business. Liability estimates are determined based on management 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 other outside counsel retained to handle specific product liability cases. Although NVR considers the warranty and product liability accrual reflected on the December 31, 2002 balance sheet to be adequate, 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.

Impact of Inflation, Changing Prices and Economic Conditions

See Risk Factors previously discussed.

Item 7A.Quantitative and Qualitative Disclosure About Market Risk.

Market risk is the risk of loss arising from adverse changes in market prices and interest rates. NVR’s market risk arises from interest rate risk inherent in its financial instruments. Interest rate risk is the possibility that changes in interest rates will cause unfavorable changes in net income or in the value of interest rate-sensitive assets, liabilities and commitments. Lower interest rates tend to increase demand for mortgage loans for home purchasers, while higher interest rates make it more difficult for potential borrowers to purchase residential properties and to qualify for mortgage loans. NVR has no market rate sensitive instruments held for speculative or trading purposes.

NVR’s mortgage banking segment is exposed to interest rate risk as it relates to its lending activities. The mortgage banking segment originates mortgage loans, which are either sold through optional or mandatory forward delivery contracts into the secondary markets. All of the mortgage banking segment’s loan portfolio is held for sale and subject to forward sale commitments. NVR also sells predominantly all of its mortgage servicing rights in bulk sales at predetermined prices which significantly reduces the market risk associated with these interest sensitive assets.

NVR’s homebuilding segment generates operating liquidity and acquires capital assets through fixed-rate and variable-rate debt. The homebuilding segment’s primary variable-rate debt is a working capital revolving credit facility that currently provides for unsecured borrowings up to $135,000, subject to certain borrowing base limitations. The working capital credit facility expires May 31, 2004 and outstanding amounts bear interest at the election of NVR, at (i) the base rate of interest announced by the

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working capital credit facility agent or (ii) 1.35% above the Eurodollar Rate. The weighted average interest rate for the amounts outstanding under the Facility was 3.2% during 2002. There were no amounts outstanding under the working capital revolving credit facility at December 31, 2002.

NVRM generates operating liquidity primarily through the mortgage warehouse facility which currently has a borrowing limit of $150,000. The interest rate under the mortgage warehouse facility is either: (i) the London Interbank Offering Rate (“Libor”) plus 1.25%, or (ii) 1.25% to the extent that NVRM provides compensating balances. The weighted-average interest rate for amounts outstanding under the mortgage warehouse facility was 2.2% during 2002. Mortgage loans and gestation mortgage-backed securities collateralize the mortgage warehouse facility borrowings. The mortgage warehouse facility is annually renewable and currently expires August 29, 2003. There was $126,249 outstanding under the mortgage warehouse facility at December 31, 2002.

The mortgage warehouse facility agreement includes, among other items, restrictions on NVRM incurring additional borrowings and making intercompany dividends and tax payments. In addition, NVRM is required to maintain a minimum net worth of $12,000.

NVRM from time to time enters into various gestation and repurchase agreements. NVRM currently has available an aggregate of $50,000 of borrowing capacity in such uncommitted facilities. Amounts outstanding thereunder accrue interest at various rates tied to the Libor rate and are collateralized by gestation mortgage-backed securities and whole loans. The uncommitted facilities generally require NVRM to, among other items, maintain a minimum net worth and limit its level of liabilities in relation to its net worth. The weighted-average interest rates for amounts outstanding under these uncommitted facilities were 2.3% and 4.3% during 2002 and 2001, respectively. There was $13,008 outstanding under these uncommitted facilities at December 31, 2002.

The following table represents the contractual balances of NVR’s on-balance sheet financial instruments in dollars at the expected maturity dates, as well as the fair values of those on balance sheet financial instruments, at December 31, 2002. The expected maturity categories take into consideration historical and anticipated prepayment speeds, as well as actual amortization of principal and does not take into consideration the reinvestment of cash or the refinancing of existing indebtedness. Because NVR sells all of the mortgage loans it originates into the secondary markets, NVR has made the assumption that the portfolio of mortgage loans held for sale will mature in the first year. Consequently, outstanding warehouse borrowings and repurchase facilities are also assumed to mature in the first year.

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Item 8.Financial Statements and Supplementary Data.

The financial statements listed in Item 15 are filed as part of this report and are incorporated herein by reference.

Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable.

PART III

Item 10.Directors and Executive Officers of the Registrant.

Item 10 is hereby incorporated by reference to NVR’s Proxy Statement expected to be filed with the Securities and Exchange Commission on or prior to April 30, 2003. Reference is also made regarding the executive officers of the registrant to “Executive Officers of the Registrant” following Item 4 of Part I of this report.

Item 11.Executive Compensation.

Item 11 is hereby incorporated by reference to NVR’s Proxy Statement expected to be filed with the Securities and Exchange Commission on or prior to April 30, 2003.

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Security ownership of certain beneficial owners and management is hereby incorporated by reference to NVR’s Proxy Statement expected to be filed with the Securities and Exchange Commission on or prior to April 30, 2003.

Equity Compensation Plan Information

The table below sets forth the following information as of the end of the NVR 2002 fiscal year for (i) all compensation plans previously approved by our shareholders and (ii) all compensation plans not previously approved by our shareholders:

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Equity compensation plans approved by our shareholders include the NVR, Inc. Management Equity Incentive Plan, the NVR, Inc. Management Long-Term Stock Option Plan, the NVR, Inc. 1998 Management Long-Term Stock Option Plan, the NVR, Inc. Directors’ Long-Term Incentive Plan, the NVR, Inc. Directors’ Long-Term Stock Option Plan, and the 1998 Directors’ Long-Term Stock Option Plan. Equity compensation plans that have not been approved by our shareholders include the NVR, Inc. 1994 Management Equity Incentive Plan and the NVR, Inc. 2000 Broadly-Based Stock Option Plan.

Item 13.Certain Relationships and Related Transactions.

Item 13 is hereby incorporated by reference to NVR’s Proxy Statement expected to be filed with the Securities and Exchange Commission on or prior to April 30, 2003.

Item 14.Controls and Procedures.

Within the 90-day period prior to the filing of this annual report, an evaluation was performed under the supervision and with the participation of NVR’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of NVR’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based on that evaluation, the 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 significant changes in NVR’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

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PART IV

Item 15.Exhibits, Financial Statement Schedules and Reports on Form 8-K.

The following documents are filed as part of this report:

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NVR did not file any reports on Form 8-K during the quarter ended December 31, 2002.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Dated: February 6, 2003

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

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SARBANES-OXLEY ACT SECTION 302 CERTIFICATIONS

I, Dwight C. Schar, certify that:

Date: February 6, 2003

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I, Paul C. Saville, certify that:

Date: February 6, 2003

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SARBANES-OXLEY ACT SECTION 906 CERTIFICATIONS

In connection with this annual report on Form 10-K of NVR, Inc. for the period ended December 31, 2002, I, Dwight C. Schar, Chairman and Chief Executive Officer of NVR, Inc., hereby certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

Date: February 6, 2003

In connection with this annual report on Form 10-K of NVR, Inc. for the period ended December 31, 2002, I, Paul C. Saville, Executive Vice President, Chief Financial Officer and Treasurer of NVR, Inc., hereby certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

Date: February 6, 2003

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Independent Auditors’ Report

The Board of Directors and Shareholders

NVR, Inc.:

We have audited the accompanying consolidated balance sheets of NVR, Inc. and subsidiaries as of December 31, 2002 and 2001 and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2002. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of NVR, Inc. and subsidiaries as of December 31, 2002 and 2001 and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.

As discussed in note 1 to the consolidated financial statements, effective January 1, 2002, NVR, Inc. and subsidiaries adopted the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets,” as required for the accounting for its goodwill and reorganization value in excess of amounts allocable to identifiable intangible assets balances.

KPMG LLP

McLean, Virginia

January 23, 2003

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NVR, Inc.

Consolidated Balance Sheets

(dollars in thousands, except share data)

(Continued)

See notes to consolidated financial statements.

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NVR, Inc.

Consolidated Balance Sheets (Continued)

(dollars in thousands, except share data)

See notes to consolidated financial statements.

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NVR, Inc.

Consolidated Statements of Income

(dollars in thousands, except per share data)