Public builder NVR on Wednesday reported a net profit of $41.4 million ($6.79 per diluted share) for the second quarter ended June 30 on a decline in closings and revenues and an increase in new orders. Shares of NVR opened higher on the news and were trading up nearly 5% at $581 by mid-morning.
The company's merchant builder strategy again paid off in the quarter. There were no impairments or write-downs for the quarter, but instead the Reston, Va.-based company booked$4.5 million in recovery of land deposits it previously thought uncollectable. It was NVR’s second profitable quarter following a loss of $30.5 million in last year's fourth quarter.
Still, profit was down 19% from the second quarter of 2008, itself down 43% from the same quarter in 2007. Revenues were down 35% to $625.4 million as closings fell 26% to 2,048 homes. Home building revenues were down 35% to $612.4 million, but gross profit margins increased slightly to 19.3%.
New orders, however, were up 2% from last year's second quarter to 2,728. Meanwhile, the cancellation rate fell to 14%, which represents 4 percentage-point drop year-over year but a one percentage-point increase on a quarterly basis. Backlog, compared to last year's second quarter, fell 16% to 4,497 units, which translates into a drop of 27% in dollar value to $1.3 billion. The average backlog price was down to $296,200 from $341,500 at the same time last year.
The increase in new orders came primarily in the company's Mid-Atlantic regions, comprising Virginia, West Virginia, Maryland, and Delaware, which saw an increase of nearly 6% to 1,421 homes. The Northeast division, Eastern Pennsylvania and New Jersey, was up marginally to 246 orders; and the company's Mid-East division, which includes Western Pennsylvania, Kentucky, New York. and Ohio, was up slightly more than 2% to 746 units. Finally, NVR's South East division, which encompasses North and South Carolina and Tennessee, was down 13.2% to 315 orders.
The average new-order price was down to $294,800 from $316,400 at the same time last year.
In terms of the builder’s geographic footprint, NVR's community count dropped 356 from 435 at the end of last year's second quarter. Lots controlled were down to 44,000 from 60,500 last July.
In the company's mortgage banking unit, operating income decreased 3% to $6.96 million as closed loan production slid 18% to $487.6 million.
NVR ended the quarter with cash, cash equivalents, and marketable securities totaling $1.24 billion. Term debt and senior notes fell to $137.7 million from $165.8 million at year-end 2008.