NVR, Inc. Announces Fourth Quarter and Full Year Results

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

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

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

• The enactment of the Tax Cuts and Jobs Act in December 2017, which required a remeasurement of the Company's deferred tax assets, resulted in a charge of $62,702,000 in the fourth quarter, and

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

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

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

Homebuilding

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

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

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

Mortgage Banking

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

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

Financial Disclosure Advisory

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

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

About NVR

NVR, Inc. operates in two business segments:  homebuilding and mortgage banking.  The homebuilding segment sells and builds homes under the Ryan Homes, NVHomes and Heartland Homes trade names, and operates in twenty-nine metropolitan areas in fourteen states and Washington, D.C.  For more information about NVR, Inc. and its brands, see www.nvrinc.com, www.ryanhomes.com, www.nvhomes.com and www.heartlandluxuryhomes.com.

Some of the statements in this release made by the Company constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  Certain, but not necessarily all, of such forward-looking statements can be identified by the use of forward-looking terminology, such as "believes," "expects," "may," "will," "should" or "anticipates" or the negative thereof or other comparable terminology.  All statements other than of historical facts are forward-looking statements.  Forward-looking statements contained in this document may include those regarding market trends, NVR's financial position, business strategy, the outcome of pending litigation, investigations or similar contingencies, projected plans and objectives of management for future operations.  Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance of NVR to be materially different from future results, performance or achievements expressed or implied by the forward-looking statements.  Such risk factors include, but are not limited to the following: general economic and business conditions (on both a national and regional level); interest rate changes; access to suitable financing by NVR and NVR's customers; increased regulation in the mortgage banking industry; the ability of our mortgage banking subsidiary to sell loans it originates into the secondary market; competition; the availability and cost of land and other raw materials used by NVR in its homebuilding operations; shortages of labor; weather related slow-downs; building moratoriums; governmental regulation; fluctuation and volatility of stock and other financial markets; mortgage financing availability; and other factors over which NVR has little or no control.  NVR undertakes no obligation to update such forward-looking statements except as required by law.

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SOURCE NVR, Inc.