Shaky NVR posts loss of $36 million Builder struggles with debt, recession

March 29, 1991|By Timothy J. Mullaney

NVR L.P. said yesterday that it lost $36 million during the fourth quarter of 1990. The loss came as the debt-ravaged parent of NVHomes and Ryan Homes struggled to cope with a slow market for new homes and the debts the company owes from its 1987 takeover of Ryan Homes and its land-buying spree throughout the Baltimore-Washington area.

The company said that $21 million of the loss reflected special charges related to the restructuring it announced after the third quarter.

A company spokesman said that most of the write-off was caused by the falling value of land the company owns around Washington and metropolitan Baltimore.

But even without the special charge, NVR's $15 million quarterly loss on operations was the biggest the company had in 1990. Despite the yearlong weak market for new homes, the company's operating losses were less than $3 million in the third quarter, and it eked out small operating profits in the first half of the year.

The company announced the news late yesterday afternoon, after most securities analysts who follow NVR had left their offices for the day. But one analyst who could be reached said the news didn't look good.

"I certainly wouldn't want to make a bet on the company's recovery," said Lawrence Horan, an analyst at Prudential-Bache Securities Inc. in New York.

There was little indication in yesterday's news release of whether the operating earnings will recover soon. The announcement broke with past NVR policy and did not disclose how many homes consumers ordered from the company during the fourth quarter.

Because it can take months for a home sale to settle as the buyer lines up a mortgage and tends to other details, orders during one quarter are an excellent indicator of sales and profits in coming quarters.

A spokesman said that NVR didn't report its sales figures because it has pulled out of some unprofitable markets across the country and cut back its activity in other cities. NVR hopes that pruning back to its key markets of Washington, Baltimore

and Pittsburgh will help it survive the recession.

Because NVR is now selling homes in fewer cities, last year's sales figures aren't comparable to sales in the fourth quarter of 1989, the spokesman said.

NVR, which is based in McLean, Va., is the second-largest building company in metropolitan Baltimore behind the Ryland Group Inc. of Columbia. It is the largest builder in the metropolitan Washington market.

The special charge was a surprise because NVR had said in November that it did not anticipate write-offs during coming quarters. But the fourth-quarter charge was much smaller than the $169 million write-off NVR was forced to take during the third quarter, and smaller than the $50 million-plus write-off it took during the second quarter.

"It's fair to say it's mopping up provisions that weren't caught in the second and third quarters," the company spokesman said.

NVR has run into severe financial trouble in the past year, when slower housing sales left it unable to keep up with payments on more than $800 million in debt. The biggest chunks of the debt are junk bonds that the company used to pay for the Ryan takeover, bank debt that paid for the company's leap into huge land positions in 1987-89, and a line of credit for working capital.

NVR suspended payments on the junk bonds and the land debt last year and is negotiating with its banks and bond holders.

In November, NVR announced that it was closing two factories where it made "lumber packages," or essentially home-building kits that it sold to other builders. It has also gotten out of the land development business, in which it bought large pieces of vacant land and divided it into individual lots, installed roads and sold the lots to other builders.

What's left is just its home-building operations and its financial services arm, which includes a mortgage company and a Virginia thrift institution. The fact that the company is so much smaller now partially accounts for the company's 34 percent drop in revenue during the quarter.

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