UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____ Commission file number 1-12378 NVR, Inc. --------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Virginia 54-1394360 ---------------------------------- ------------------------------ (State or other jurisdiction of (IRS employer identification incorporation or organization) number) 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) (Not Applicable) --------------------------------------------------------------------------- (Former name, former address, and former fiscal year if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No_____ --- As of July 17, 2001 there were 7,974,188 total shares of common stock outstanding.
NVR, Inc. FORM 10-Q INDEX ======================================================================= Page ---- PART I FINANCIAL INFORMATION ------ Item 1. NVR, Inc. Condensed Consolidated Financial Statements ----------------------------------------------------- Condensed Consolidated Balance Sheets at June 30, 2001 (unaudited) and December 31, 2000..................... 3 Condensed Consolidated Statements of Income for the Three Months Ended June 30, 2001 (unaudited) and June 30, 2000 (unaudited) and the Six Months Ended June 30, 2001 (unaudited) and June 30, 2000 (unaudited)......................... 5 Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2001 (unaudited) and June 30, 2000 (unaudited)............................. 6 Notes to Condensed Consolidated Financial Statements.. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................... 11 PART II OTHER INFORMATION ------- Item 1. Legal Proceedings..................................... 14 Item 4. Submission of Matters to a Vote of Security Holders... 14 Item 6. Exhibits and Reports on Form 8-K...................... 14 Exhibit Index......................................... 15 Signature............................................. 15 2
PART I ------ Item 1. - ------- NVR, Inc. Condensed Consolidated Balance Sheets (dollars in thousands, except per share data) <TABLE> <CAPTION> June 30, 2001 December 31, 2000 ------------- ----------------- ASSETS (unaudited) <S> <C> <C> Homebuilding: Cash and cash equivalents $ 78,592 $ 130,079 Receivables 13,314 6,670 Inventory: Lots and housing units, covered under sales agreements with customers 359,554 294,094 Unsold lots and housing units 26,858 32,600 Manufacturing materials and other 8,733 7,987 ------------ ----------- 395,145 334,681 Property, plant and equipment, net 13,302 13,514 Reorganization value in excess of amounts allocable to identifiable assets, net 44,661 47,741 Goodwill, net 6,926 7,472 Contract land deposits 125,099 96,119 Other assets 70,427 61,210 ------------ ----------- 747,466 697,486 ------------ ----------- Mortgage Banking: Cash and cash equivalents 10,705 7,629 Mortgage loans held for sale, net 139,664 120,999 Mortgage servicing rights, net 1,367 1,479 Property and equipment, net 2,131 2,351 Reorganization value in excess of amounts allocable to identifiable assets, net 7,890 8,435 Other assets 4,166 2,881 ------------ ----------- 165,923 143,774 ------------ ----------- Total assets $ 913,389 $ 841,260 ============ =========== </TABLE> See notes to condensed consolidated financial statements. (Continued) 3
NVR, Inc. Condensed Consolidated Balance Sheets (Continued) (dollars in thousands, except per share data) <TABLE> <CAPTION> June 30, 2001 December 31, 2000 ------------- ----------------- (unaudited) <S> <C> <C> LIABILITIES AND SHAREHOLDERS' EQUITY Homebuilding: Accounts payable $ 124,528 $ 108,064 Accrued expenses and other liabilities 156,988 173,787 Customer deposits 85,561 63,486 Notes payable 35 210 Other term debt 4,946 4,957 Senior notes 115,000 115,000 ------------ ----------- 487,058 465,504 ------------ ----------- Mortgage Banking: Accounts payable and other liabilities 11,920 9,760 Notes payable 110,448 53,488 ------------ ----------- 122,368 63,248 ------------ ----------- Total liabilities 609,426 528,752 ------------ ----------- Forward purchase contract obligation - 65,028 Commitments and contingencies Shareholders' equity: Common stock, $0.01 par value; 60,000,000 shares authorized; 20,614,365 shares issued as of June 30, 2001 and December 31, 2000 206 206 Additional paid-in-capital 190,604 115,136 Deferred compensation trust- 367,618 and 337,703 shares as of June 30, 2001 and December 31, 2000, respectively of NVR, Inc. common stock (19,457) (15,915) Deferred compensation liability 19,457 15,915 Retained earnings 507,092 399,810 Less treasury stock at cost; 12,626,764 and 11,755,671 shares at June 30, 2001 and December 31, 2000, respectively (393,939) (267,672) ------------ ----------- Total shareholders' equity 303,963 247,480 ------------ ----------- Total liabilities and shareholders' equity $ 913,389 $ 841,260 ============ =========== </TABLE> See notes to condensed consolidated financial statements. 4
NVR, Inc. Condensed Consolidated Statements of Income (dollars in thousands, except per share data) (unaudited) <TABLE> <CAPTION> Three Months Ended June 30, Six Months Ended June 30, ------------------------------------- ------------------------------------ 2001 2000 2001 2000 -------------- --------------- ---------------- ---------------- <S> <C> <C> <C> <C> Homebuilding: Revenues $ 648,465 $ 558,506 $ 1,167,714 $ 1,049,087 Other income 1,250 741 2,308 1,356 Cost of sales (505,676) (454,982) (912,841) (854,659) Selling, general and administrative (46,818) (38,552) (81,334) (67,961) Amortization of reorganization value in excess of amounts allocable to identifiable assets and goodwill (1,814) (1,814) (3,627) (3,627) ----------- ----------- ----------- ----------- Operating income 95,407 63,899 172,220 124,196 Interest expense (3,052) (3,359) (5,823) (6,701) ----------- ----------- ----------- ----------- Homebuilding income 92,355 60,540 166,397 117,495 ----------- ----------- ----------- ----------- Mortgage Banking: Mortgage banking fees 12,915 9,175 22,905 17,138 Interest income 1,406 1,673 2,664 3,711 Other income 168 117 309 184 General and administrative (7,223) (7,615) (12,141) (15,757) Amortization of reorganization value in excess of amounts allocable to identifiable assets and goodwill (272) (272) (544) (708) Interest expense (413) (1,080) (787) (2,041) Restructuring and asset impairment charge - 200 - (5,726) ----------- ----------- ----------- ----------- Operating income/(loss) 6,581 2,198 12,406 (3,199) ----------- ----------- ----------- ----------- Total segment income 98,936 62,738 178,803 114,296 Income tax expense (39,574) (25,534) (71,521) (46,518) ----------- ----------- ----------- ----------- Net Income $ 59,362 $ 37,204 $ 107,282 $ 67,778 =========== =========== =========== =========== Basic Earnings per Share: $ 7.30 $ 4.09 $ 13.02 $ 7.29 =========== =========== =========== =========== Diluted Earnings per Share: $ 6.10 $ 3.62 $ 10.92 $ 6.51 =========== =========== =========== =========== </TABLE> See notes to condensed consolidated financial statements. 5
NVR, Inc. Condensed Consolidated Statements of Cash Flows (dollars in thousands, except share data) (unaudited) <TABLE> <CAPTION> Six Months Ended June 30, ------------------------------------------------- 2001 2000 -------------------- ------------------ <S> <C> <C> Cash flows from operating activities: Net income $ 107,282 $ 67,778 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,262 6,917 Restructuring and asset impairment charge - 5,726 Mortgage loans closed (841,043) (937,416) Proceeds from sales of mortgage loans 829,235 974,317 Gain on sale of mortgage servicing rights (411) (320) Gain on sale of loans (15,635) (9,072) Net change in assets and liabilities: Increase in inventories (60,464) (42,926) Increase in receivables (6,080) (10,596) Increase in contract land deposits (28,980) (15,528) Increase in accounts payable, accrued expenses and other liabilities 40,625 30,808 Other, net (7,831) (3,987) ----------------- ---------------- Net cash provided by operating activities 23,960 65,701 ----------------- ---------------- Cash flows from investing activities: Purchase of property, plant and equipment (2,024) (2,137) Principal payments on mortgage-backed securities 399 368 Proceeds from sales of mortgage servicing rights 5,353 8,016 Other, net 70 (254) ----------------- ---------------- Net cash provided by investing activities 3,798 5,993 ----------------- ---------------- Cash flows from financing activities: Purchase of NVR common stock for funding of deferred compensation plan (3,542) (1,606) Redemption of mortgage bonds (526) - Net borrowings (repayments) under notes payable and other term debt 56,774 (26,054) Purchase of treasury stock (134,160) (44,730) Proceeds from exercise of stock options 5,285 2,070 ----------------- ---------------- Net cash used by financing activities (76,169) (70,320) ----------------- ---------------- Net (decrease) increase in cash (48,411) 1,374 Cash, beginning of the period 137,708 89,126 ----------------- ---------------- Cash, end of period $ 89,297 $ 90,500 ================= ================ Supplemental disclosures of cash flow information: Interest paid during the period $ 6,197 $ 8,485 ================= ================ Income taxes paid, net of refunds $ 64,124 $ 45,081 ================= ================ </TABLE> See notes to condensed consolidated financial statements. 6
NVR, Inc. Notes to Condensed Consolidated Financial Statements (dollars in thousands, except per share and share data) 1. Basis of Presentation The accompanying unaudited, condensed consolidated financial statements include the accounts of NVR, Inc. ("NVR" or the "Company") and its subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. The statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. Because the accompanying condensed consolidated financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America, they should be read in conjunction with the financial statements and notes thereto included in the Company's 2000 Annual Report on Form 10-K. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six month period ended June 30, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. For the quarters and the six-month periods ended June 30, 2001 and 2000, comprehensive income equaled net income; therefore, a separate statement of comprehensive income is not included in the accompanying financial statements. Certain reclassifications have been made to the prior year financial statements to conform with the current year presentation. The reclassifications have no impact on the net income or retained earnings previously reported. 2. Shareholders' Equity A summary of changes in shareholders' equity is presented below: <TABLE> <CAPTION> Additional Deferred Deferred Common Paid-In Retained Treasury Comp. Comp. Stock Capital Earnings Stock Trust Liability --------- -------- ---------- ---------- ---------- ----------- <S> <C> <C> <C> <C> <C> <C> Balance, December 31, 2000 $ 206 $115,136 $ 399,810 $(267,672) $ (15,915) $ 15,915 Net income - - 107,282 - - - Deferred compensation activity - - - - (3,542) 3,542 Purchase of common stock for treasury - - - (134,160) - - Option activity - 5,285 - - - - Tax benefit from stock-based compensation activity - 13,048 - - - - Treasury shares issued upon option exercise - (7,893) - 7,893 - - Settlement of forward purchase obligation - 65,028 - - - - --------- -------- ---------- --------- --------- --------- Balance, June 30, 2001 $ 206 $190,604 $ 507,092 $(393,939) $ (19,457) $ 19,457 --------- -------- ---------- --------- --------- --------- </TABLE> 7
NVR, Inc. Notes to Condensed Consolidated Financial Statements (dollars in thousands, except per share and share data) Approximately 282,000 options were exercised during the first six months of 2001, with NVR realizing approximately $5,285 in aggregate equity proceeds. On January 2, 2001, NVR settled a forward purchase obligation created on October 3, 2000 with an unaffiliated shareholder by taking physical delivery of the shares for the agreed upon purchase price paid in cash. Of the approximately 780,000 shares settled, approximately 86,000 shares were used for the Company"s employer contribution to the Employee Stock Ownership Plan for plan year 2000 and approximately 30,000 shares were used to fund the Deferred Compensation Plan. The remaining shares were retained in treasury. In addition to the shares repurchased in settling the forward purchase contract, the Company repurchased approximately 489,000 shares of its common stock during the first six months of 2001. The aggregate purchase price of all treasury shares repurchased during the first six months of 2001 was approximately $134,160. 3. Segment Disclosures NVR operates in two business segments: homebuilding and mortgage banking. Corporate general and administrative expenses are fully allocated to the homebuilding and mortgage banking segments in the information presented below. <TABLE> <CAPTION> For the Six Months Ended June 30, 2001 - -------------------------------------- Homebuilding Mortgage Banking Totals ------------ ---------------- ------ <S> <C> <C> <C> Revenues from external customers $ 1,167,714 $ 22,905 $ 1,190,619 (a) Segment profit 170,024 12,950 182,974 (b) Segment assets 695,879 158,033 853,912 (b) </TABLE> (a) Total amounts for the reportable segments equal the respective amounts for the consolidated enterprise. (b) The following reconciles segment profit and segment assets to the respective amounts for the consolidated enterprise: <TABLE> <CAPTION> Homebuilding Mortgage Banking Totals ------------ ---------------- ------ <S> <C> <C> <C> Segment profit $ 170,024 $ 12,950 $ 182,974 Less: amortization of excess reorganization value and goodwill (3,627) (544) (4,171) ------------ -------------- ------------- Consolidated income before income taxes $ 166,397 $ 12,406 $ 178,803 ============ ============== ============= Segment assets $ 695,879 $ 158,033 $ 853,912 Add: Excess reorganization value and goodwill 51,587 7,890 59,477 ------------ -------------- ------------- Total consolidated assets $ 747,466 $ 165,923 $ 913,389 ============ ============== ============= For the Three Months Ended June 30, 2001 - ---------------------------------------- Homebuilding Mortgage Banking Totals ------------ ---------------- ------ Revenues from external customers $ 648,465 $ 12,915 $ 661,380 (c) Segment profit 94,169 6,853 101,022 (d) </TABLE> (c) Total amounts for the reportable segments equal the respective amounts for the consolidated enterprise. (d) The following reconciles segment profit to the respective amounts for the consolidated enterprise: 8
NVR, Inc. Notes to Condensed Consolidated Financial Statements (dollars in thousands, except per share and share data) <TABLE> <CAPTION> Homebuilding Mortgage Banking Totals ------------ ---------------- ------ <S> <C> <C> <C> Segment profit $ 94,169 $ 6,853 $ 101,022 Less: amortization of excess reorganization value and goodwill (1,814) (272) (2,086) ------------- -------------- ------------- Consolidated income before income taxes $ 92,355 $ 6,581 $ 98,936 ============= ============== ============= For the Six Months Ended June 30, 2000 - -------------------------------------- Homebuilding Mortgage Banking Totals ------------ ---------------- ------ Revenues from external customers $ 1,049,087 $ 17,138 $ 1,066,225 (e) Segment profit/(loss) 121,122 (2,491) 118,631 (f) Segment assets 601,866 126,249 728,115 (f) </TABLE> (e) Total amounts for the reportable segments equal the respective amounts for the consolidated enterprise. (f) The following reconciles segment profit/(loss) and segment assets to the respective amounts for the consolidated enterprise: <TABLE> <CAPTION> Homebuilding Mortgage Banking Totals ------------ ---------------- ------ <S> <C> <C> <C> Segment profit/(loss) $ 121,122 $ (2,491) $ 118,631 Less: amortization of excess reorganization value and goodwill (3,627) (708) (4,335) -------------- --------------- ------------- Consolidated income/(loss) before income taxes $ 117,495 $ (3,199) $ 114,296 ============== =============== ============= Segment assets $ 601,866 $ 126,249 $ 728,115 Add: Excess reorganization value and goodwill 58,840 8,979 67,819 -------------- --------------- ------------- Total consolidated assets $ 660,706 $ 135,228 $ 795,934 ============== =============== ============= For the Three Months Ended June 30, 2000 - ---------------------------------------- Homebuilding Mortgage Banking Totals ------------ ---------------- ------ Revenues from external customers $ 558,506 $ 9,175 $ 567,681 (g) Segment profit 62,354 2,470 64,824 (h) </TABLE> (g) Total amounts for the reportable segments equal the respective amounts for the consolidated enterprise. (h) The following reconciles segment profit to the respective amounts for the consolidated enterprise: <TABLE> <CAPTION> Homebuilding Mortgage Banking Totals ------------ ---------------- ------ <S> <C> <C> <C> Segment profit $ 62,354 $ 2,470 $ 64,824 Less: amortization of excess reorganization value and goodwill (1,814) (272) (2,086) -------------- ------------- ------------ Consolidated income before income taxes $ 60,540 $ 2,198 $ 62,738 ============== ============= ============ </TABLE> 4. Mortgage Banking Segment Restructuring Plan During the second quarter ended June 30, 2001, approximately $148 in lease costs was applied against the restructuring reserve established in the first quarter of 2000. Approximately $563 of the restructuring reserve established at March 31, 2000 remains at June 30, 2001, which primarily relates to accrued lease costs. 9
NVR, Inc. Notes to Condensed Consolidated Financial Statements (dollars in thousands, except per share and share data) 5. Stock Option Plan On May 3, 2001, the Company issued 1,801,100 non-qualified stock options ("Options") under the 2000 Broadly-Based Stock Option Plan (the "2000 Plan"). The 2000 Plan had been approved in 2000 by the Company's Board of Directors and allows the Company to issue Options to directors, key employees and other employees to purchase 2,000,000 shares of the Company's common stock. Each Option is granted for a period of ten (10) years from the date of grant. The exercise price of the Options granted was equal to the fair value of the Company's common stock on the date of Grant and will vest as to twenty five percent (25%) of the underlying shares on each of December 31, 2006, 2007, 2008 and 2009, with vesting based upon continued employment. The 2000 Plan is consistent with the Company's strategy of structuring compensation plans to focus the attention of company employees on NVR's long-term goals and link the interests of company employees directly to those of the Company's shareholders. Awards under the 2000 Plan also strongly encourage the retention of company employees, a key component of the Company's business strategy. 10
Item 2. - ------- Management's Discussion and Analysis of Financial Condition and Results of Operations (dollars in thousands, except per share and share data) Forward-Looking Statements Some of the statements in this Form 10-Q, as well as statements made by the Company in periodic press releases and other public communications, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. 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 variations thereof or comparable terminology, or by discussion of strategies, each of which involves risks and uncertainties. All statements other than of historical facts included herein, including those regarding market trends, the Company's financial position, business strategy, projected plans and objectives of management for future operations, are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such risk factors include, but are not limited to, 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 the Company in its homebuilding operations, shortages of labor, weather related slow downs, building moratoria, governmental regulation, the ability of the Company to integrate any acquired business, fluctuation and volatility of stock and other financial markets and other factors over which the Company has little or no control. Results of Operations for the Three and Six Months Ended June 30, 2001 and 2000 NVR, Inc. ("NVR" or the "Company") operates in two business segments: homebuilding and mortgage banking. Corporate general and administrative expenses are fully allocated to the homebuilding and mortgage banking segments in the information presented below. Homebuilding Segment Three Months Ended June 30, 2001 and 2000 During the second quarter of 2001, homebuilding operations generated revenues of $648,465 compared to revenues of $558,506 in the second quarter of 2000. The change in revenues was due to a 6.5% increase in the number of homes settled to 2,629 units in 2001 from 2,469 units in 2000 and a 9.2% increase in the average selling price to $245.9 in 2001 from $225.2 in 2000. The increase in settlements is primarily attributable to the higher backlog levels in first quarter of 2001 as compared to the same period in 2000. The increase in the average selling price is attributable to price increases in certain of the Company's markets. New orders of 3,342 units during the second quarter of 2001 represents an increase of 11.0% compared with the 3,010 new orders generated during the same period in 2000. The increase in new orders was primarily the result of increased sales in the Company's markets outside the Washington, D.C. metropolitan area. Gross profit margins in the second quarter of 2001 increased to 22.0% as compared to 18.5% for the second quarter of 2000. The increase in gross margins was due to continuing favorable market conditions, which provided the Company the opportunity to increase selling prices in certain of its markets, lower costs for lumber and certain other commodities, and to the Company's ongoing focus on controlling construction costs. 11
Selling, general and administrative ("SG&A") expenses for the second quarter of 2001 increased $8,266 from the second quarter of 2000, and as a percentage of revenues, increased to 7.2% from 6.9%. The increase in SG&A dollars is primarily attributable to increases in personnel to facilitate continued growth in existing markets, an increase in certain management incentives, and to the aforementioned increase in revenues. Backlog units and dollars were 6,478 and $1,687,032, respectively, at June 30, 2001 compared to 5,849 and $1,404,219, respectively, at June 30, 2000. The increase in backlog units and dollars is primarily attributable to a 9.7% increase in new orders for the six month period ended June 30, 2001 compared to the same 2000 period. The increase in backlog dollars is also due to an 8.5% increase in the average selling price over the same six month period. Six Months Ended June 30, 2001 and 2000 During the first six months of 2001, homebuilding operations generated revenues of $1,167,714 compared to revenues of $1,049,087 in the first six months of 2000. The increase in revenues was primarily due to an 8.5% increase in the average settlement price to $240.8 in 2001 from $222.0 in 2000 and to a 2.8% increase in the number of homes settled to 4,835 units in 2001 from 4,705 units in 2000. The increase in the average settlement price is attributable to price increases in certain of the Company's markets. New orders increased by 9.7% to 6,165 units for the six months ended June 30, 2001 compared with 5,619 units for the six months ended June 30, 2000. The increase in new orders was primarily the result of increased sales in the Company's markets outside the Washington, D.C. metropolitan area. Gross profit margins for the first six months of 2000 increased to 21.8% compared to 18.5% for the six months ended June 30, 2000. The increase in gross profit margins was due to continuing favorable market conditions, which provided the Company the opportunity to increase selling prices in certain of its markets, lower costs for lumber and certain other commodities, and to the Company's continued focus on controlling construction costs. SG&A expenses for 2001 increased $13,373 compared to the same 2000 period, and as a percentage of revenues increased to 7.0% from 6.5%. The increase in SG&A costs is primarily attributable to an increase in personnel to facilitate continued growth in existing markets and to the aforementioned increase in revenues. Mortgage Banking Segment Three and Six Months Ended June 30, 2001 and 2000 The mortgage banking segment had operating income of $6,853 during the quarter ended June 30, 2001 compared to operating income of $2,470 for the three months ended June 30, 2000. Loan closings from ongoing operations were $481,568 and $379,316 for the three months ended June 30, 2001 and June 30, 2000, respectively, an increase of 27%. Total loan closings, including discontinued wholesale and retail operations, were $467,818 for the period ended June 30, 2000. The mortgage banking segment had operating income of $12,950 during the six months ended June 30, 2001 compared to an operating loss of $2,491 for the six months ended June 30, 2000. Excluding the $5,726 restructuring and asset impairment charge incurred by the company in the first six months of 2000, first half 2000 operating income was $3,235. Loan closings from ongoing operations were $841,043 and $696,195 for the six months ended June 30, 2001 and 2000, respectively, an increase of 21%. Total loan closings, including discontinued wholesale and retail operations, were $937,416 for the period ended June 30, 2000. 12
The improvement in operating income over both comparative periods was primarily the result of NVR's operational restructuring of the mortgage banking segment announced in the first quarter of 2000. The operational restructuring specifically entailed the closure of all of the Company's retail operations to focus solely on serving NVR's homebuilding operations ("builder business"). The Company's builder business historically has created greater operating margins than its other lines of mortgage business. As part of its restructuring, the Company also substantially reduced staffing in anticipation of reduced loan volume. Liquidity and Capital Resources The Company has $255,000 available for issuance under a shelf registration statement filed with the Securities and Exchange Commission on January 20, 1998. 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. 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 (the "Facility"). The Facility expires on May 31, 2004. The Facility provides for unsecured borrowings of up to $85,000, subject to certain borrowing base limitations. Up to approximately $40,000 of the Facility is currently available for issuance in the form of letters of credit, of which $20,899 was outstanding at June 30, 2001. There were no direct borrowings outstanding under the Facility as of June 30, 2001. At June 30, 2001, 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 a short-term credit facility. NVR Finance has available a mortgage warehouse facility with an aggregate available borrowing limit of $100,000 to fund its mortgage origination activities. There was $100,000 outstanding under this facility at June 30, 2001. NVR expects to renew the warehouse facility prior to its expiration on August 31, 2001, at an increased borrowing limit. NVR Finance also currently has available an aggregate of $150,000 of borrowing capacity in various uncommitted gestation and repurchase agreements. There was an aggregate of $10,183 outstanding under such gestation and repurchase agreements at June 30, 2001. On January 2, 2001, NVR settled a forward purchase obligation created on October 3, 2000 with an unaffiliated shareholder by taking physical delivery of the shares for the agreed upon purchase price paid in cash. Of the approximately 780,000 shares settled, approximately 86,000 shares were used for the Company's employer contribution to the Employee Stock Ownership Plan for plan year 2000 and approximately 30,000 shares were used to fund the Deferred Compensation Plan. The remaining shares were retained in treasury. On February 27, 2001, NVR successfully completed a solicitation of consents from holders of its Notes to amend the Indenture governing the Notes. The amendment to the Indenture allows for NVR to repurchase up to an aggregate $85 million of its capital stock, in addition to that otherwise provided under the Company's Indenture, in one or more open market and/or privately negotiated transactions through March 31, 2002. On March 2, 2001, NVR paid to each holder of the Notes who provided a consent, an amount equal to 4.5% of the principal amount of such holder's Notes. Including the shares repurchased in the settlement of the forward purchase obligation, the Company repurchased approximately 1,153,000 shares of its common stock at an aggregate purchase price of $134,160 during the six months ended June 30, 2001. The Company may, 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 the Company's debt agreements. The Company believes that internally generated cash and borrowings available under credit facilities will be sufficient to satisfy near and long term cash requirements for working capital in both its homebuilding and mortgage banking operations. 13
Part II ------- Item 1 Legal Proceedings - ------ During April 1999, NVR was served with a lawsuit filed in the United States District Court in Baltimore by a group of homeowners who purchased homes in a community in Howard County, Maryland. The suit alleged violation of certain Federal environmental laws, as well as State consumer protection and related statutes arising from the alleged failure of NVR to disclose to its purchasers that their homes were built either on or adjacent to a site formerly used as an unlicensed landfill. In May 2001, NVR settled the litigation for an immaterial cash payment and received a full release from all plaintiffs and the principal co-defendant as part of the settlement. All amounts due under the terms of settlement were paid in full in June 2001. Item 4. Submission of Matters to a Vote of Security Holders - ------- NVR held its Annual Meeting of Shareholders on May 3, 2001. Two matters were voted upon at the Annual Meeting: <TABLE> <CAPTION> Votes Votes Not For Against Abstentions Voted ----------- ----------- ----------- ---------- <S> <C> <C> <C> <C> 1. Election of three directors to serve three year terms: Manuel H. Johnson 8,000,161 141,200 - 229,831 David A. Preiser 7,976,331 165,030 - 229,831 John M. Toups 7,992,324 149,037 - 229,831 2. Ratification of appointment of KPMG LLP as independent auditors for NVR 8,102,517 3,008 35,836 229,831 </TABLE> Item 6. Exhibits and Reports on Form 8-K - ------- a. 11. Computation of Earnings per Share. b. The Company did not file any reports on Form 8-K during the quarter ended June 30, 2001. 14
Exhibit Index Exhibit Number Description Page - ------ --------------------------------------------- ---- 11 Computation of Earnings per Share 16 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. July 25, 2001 NVR, Inc. By: /s/ Paul C. Saville ---------------------- Paul C. Saville Senior Vice President Finance and Chief Financial Officer 15