NVR, Inc. (NYSE: NVR) suffered a 43% drop in net income for the second quarter of 2008, compared to the same quarter last year, but still managed to end the quarter with a profit of $51.33 million, or $8.64 per diluted share. The company released its second-quarter earnings before market open Tuesday.
The company's merchant builder strategy again paid off as it took only $5,800,000 in land-related write-downs, compared to $55 million in last year's second quarter. Still, NVR said its gross profit margins or 17.9% were depressed "due to continued pricing pressure in many of our markets."It also cited "high levels of new and existing home inventories, affordability issues, a more restrictive mortgage lending environment and declining homebuyer confidence." The margins in the comparable quarter last year were 18.1%.
Consolidated revenues for the quarter were $955,723,000, down 27% from second quarter, 2007, as settlements fell 21% to 2,750 units. The average settlement price also fell, to $341,700 in this year's second quarter from $374,200 during the same period last year. SG&A expense fell to $89.9 million from $101.2 million during last year's second quarter. Income before tax from the home building segment totaled $79,262,000 in the 2008 second quarter, a decrease of 42% from the same quarter last year.
New orders fell 29% to 2,670 units. The cancellation rate was 19% compared to 16% in the second quarter of 2007 and 22% in the first quarter of 2008.
Backlog of homes sold but not settled at the end of the quarter decreased on a unit basis by 32% to 5,331 units and 41% on a dollar basis to $1,820,482,000, compared to the same period last year. NVR's community count was down to 435 from 516 at this time last year.
Mortgage closed loan production of $593,867,000 quarter was 30% lower than the same period last year. Operating income for the mortgage banking operations during the quarter decreased 39% to $7,155,000, compared to $11,719,000 reported for the same period of 2007.
For the first half of 2008, consolidated revenues were $1,843,654,000, 23% lower than the $2,409,857,000 reported for the same period of 2007. Net income was $94,798,000, down 46%. Diluted earnings per share came in at $16.10, a decrease of 41% from $27.11 for the comparable period of 2007.
NVR ended the quarter with $867.3 million in cash and cash equivalents on hand. It listed $202.7 million in term debt and senior notes in its home building segment and $116 million in notes payable in its mortgage banking unit.
NVR shares shot up more than 4% to $524.55 shortly after market opening. It ended the day up nearly 15% at $578.40 as the entire builder group was lifted by a late-day rally in financial stocks brought on by investor confidence that the worst was behind the nation's biggest banks. The S&P home builder ETF (AMEX:XHB) closed up 5.38% at $17.82.