10-Q 1 nvr-20220331.htm 10-Q nvr-20220331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
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)
Virginia54-1394360
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
11700 Plaza America Drive, Suite 500
Reston, Virginia 20190
(703) 956-4000
(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)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.01 per shareNVRNew York Stock Exchange
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   No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  Accelerated filer
Non-accelerated filer Smaller reporting company
    Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of April 30, 2022 there were 3,289,666 total shares of common stock outstanding.



NVR, Inc.
FORM 10-Q




PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NVR, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
(unaudited)
 March 31, 2022December 31, 2021
ASSETS  
Homebuilding:  
Cash and cash equivalents$2,138,706 $2,545,069 
Restricted cash65,562 60,730 
Receivables23,471 18,552 
Inventory:
Lots and housing units, covered under sales agreements with customers1,997,115 1,777,862 
Unsold lots and housing units142,015 127,434 
Land under development14,668 12,147 
Building materials and other39,841 29,923 
 2,193,639 1,947,366 
Contract land deposits, net512,042 497,139 
Property, plant and equipment, net56,829 56,979 
Operating lease right-of-use assets59,819 59,010 
Reorganization value in excess of amounts allocable to identifiable assets, net41,580 41,580 
Other assets220,675 229,018 
 5,312,323 5,455,443 
Mortgage Banking:  
Cash and cash equivalents19,157 28,398 
Restricted cash3,402 2,519 
Mortgage loans held for sale, net312,726 302,192 
Property and equipment, net3,386 3,658 
Operating lease right-of-use assets8,491 9,758 
Reorganization value in excess of amounts allocable to identifiable assets, net7,347 7,347 
Other assets59,381 25,160 
 413,890 379,032 
Total assets$5,726,213 $5,834,475 


See notes to condensed consolidated financial statements.
1


NVR, Inc.
Condensed Consolidated Balance Sheets (Continued)
(in thousands, except share and per share data)
(unaudited)
March 31, 2022December 31, 2021
LIABILITIES AND SHAREHOLDERS' EQUITY  
Homebuilding:  
Accounts payable$398,516 $336,560 
Accrued expenses and other liabilities501,091 435,860 
Customer deposits453,178 417,463 
Operating lease liabilities64,546 64,128 
Senior notes1,515,964 1,516,255 
 2,933,295 2,770,266 
Mortgage Banking:  
Accounts payable and other liabilities58,098 51,394 
Operating lease liabilities9,221 10,437 
 67,319 61,831 
Total liabilities3,000,614 2,832,097 
Commitments and contingencies
Shareholders' equity:  
Common stock, $0.01 par value; 60,000,000 shares authorized; 20,555,330 shares issued as of both March 31, 2022 and December 31, 2021
206 206 
Additional paid-in capital2,416,660 2,378,191 
Deferred compensation trust – 106,697 shares of NVR, Inc. common stock as of both March 31, 2022 and December 31, 2021
(16,710)(16,710)
Deferred compensation liability16,710 16,710 
Retained earnings10,473,939 10,047,839 
Less treasury stock at cost – 17,240,495 and 17,107,889 shares as of March 31, 2022 and December 31, 2021, respectively
(10,165,206)(9,423,858)
Total shareholders' equity2,725,599 3,002,378 
Total liabilities and shareholders' equity$5,726,213 $5,834,475 


See notes to condensed consolidated financial statements.
2

NVR, Inc.
Condensed Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
 Three Months Ended March 31,
 20222021
Homebuilding:  
Revenues$2,309,227 $1,963,711 
Other income1,339 1,586 
Cost of sales(1,651,365)(1,577,453)
Selling, general and administrative(129,510)(121,419)
Operating income529,691 266,425 
Interest expense(12,804)(13,006)
Homebuilding income516,887 253,419 
Mortgage Banking:  
Mortgage banking fees69,182 77,735 
Interest income2,074 2,032 
Other income1,072 867 
General and administrative(22,908)(21,656)
Interest expense(362)(391)
Mortgage banking income49,058 58,587 
Income before taxes565,945 312,006 
Income tax benefit (expense)(139,845)(63,244)
Net income$426,100 $248,762 
Basic earnings per share$125.87 $67.72 
Diluted earnings per share$116.56 $63.21 
Basic weighted average shares outstanding3,385 3,673 
Diluted weighted average shares outstanding3,656 3,935 


See notes to condensed consolidated financial statements.
3

NVR, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 Three Months Ended March 31,
 20222021
Cash flows from operating activities:  
Net income$426,100 $248,762 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization4,460 5,203 
Equity-based compensation expense11,668 14,471 
Contract land deposit recoveries, net(5,924)(6,183)
Gain on sale of loans, net(57,978)(67,550)
Mortgage loans closed(1,484,771)(1,413,988)
Mortgage loans sold and principal payments on mortgage loans held for sale1,511,850 1,583,701 
Distribution of earnings from unconsolidated joint ventures2,000  
Net change in assets and liabilities:  
Increase in inventory(246,273)(120,710)
Increase in contract land deposits(8,979)(3,092)
Increase in receivables(13,782)(4,243)
Increase in accounts payable and accrued expenses127,083 33,618 
Increase in customer deposits35,715 73,695 
Other, net8,157 (15,426)
Net cash provided by operating activities309,326 328,258 
Cash flows from investing activities:  
Investments in and advances to unconsolidated joint ventures(472)(659)
Purchase of property, plant and equipment(4,056)(3,104)
Proceeds from the sale of property, plant and equipment210 369 
Net cash used in investing activities(4,318)(3,394)
Cash flows from financing activities:  
Purchase of treasury stock(748,788)(377,425)
Principal payments on finance lease liabilities(356)(329)
Proceeds from the exercise of stock options34,241 57,625 
Net cash used in financing activities(714,903)(320,129)
Net (decrease) increase in cash, restricted cash, and cash equivalents(409,895)4,735 
Cash, restricted cash, and cash equivalents, beginning of the period2,636,984 2,809,782 
Cash, restricted cash, and cash equivalents, end of the period$2,227,089 $2,814,517 
Supplemental disclosures of cash flow information:  
Interest paid during the period, net of interest capitalized$12,521 $12,614 
Income taxes paid during the period, net of refunds$2,536 $2,635 


See notes to condensed consolidated financial statements.
4

NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

1. Significant Accounting Policies

Basis of Presentation
The accompanying unaudited, condensed consolidated financial statements include the accounts of NVR, Inc. (“NVR”, the “Company”, "we", "us" or "our") and its subsidiaries and certain other entities in which the Company is deemed to be the primary beneficiary (see Notes 2 and 3 to the accompanying condensed consolidated financial statements).  Intercompany accounts and transactions have been eliminated in consolidation.  The statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) 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 GAAP for complete financial statements.  Because the accompanying condensed consolidated financial statements do not include all of the information and footnotes required by GAAP, they should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021.  In the opinion of management, all adjustments (consisting only of normal recurring accruals except as otherwise noted herein) considered necessary for a fair presentation have been included.  Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Actual results could differ from those estimates.
For the three months ended March 31, 2022 and 2021, comprehensive income equaled net income; therefore, a separate statement of comprehensive income is not included in the accompanying condensed consolidated financial statements.
Cash and Cash Equivalents
The beginning-of-period and end-of-period cash, restricted cash, and cash equivalent balances presented on the accompanying condensed consolidated statements of cash flows includes cash related to a consolidated joint venture which is included in homebuilding "Other assets" on the accompanying condensed consolidated balance sheets. The cash related to this consolidated joint venture as of March 31, 2022 and December 31, 2021 was $262 and $268, respectively, and as of March 31, 2021 and December 31, 2020 was $273 and $269, respectively.
Revenue Recognition
Homebuilding revenue is recognized on the settlement date at the contract sales price, when control is transferred to our customers. Our contract liabilities, which consist of deposits received from customers on homes not settled, were $453,178 and $417,463 as of March 31, 2022 and December 31, 2021, respectively. We expect that substantially all of the customer deposits held at December 31, 2021 will be recognized in revenue in 2022. Our contract assets consist of prepaid sales compensation and totaled approximately $26,300 and $25,200, as of March 31, 2022 and December 31, 2021, respectively. Prepaid sales compensation is included in homebuilding “Other assets” on the accompanying condensed consolidated balance sheets.
2.    Variable Interest Entities ("VIEs")
Fixed Price Finished Lot Purchase Agreements (“LPAs”)
We generally do not engage in the land development business.  Instead, we typically acquire finished building lots at market prices from various development entities under LPAs.  The LPAs require deposits that may be forfeited if we fail to perform under the LPAs.  The deposits required under the LPAs are in the form of cash or letters of credit in varying amounts, and typically range up to 10% of the aggregate purchase price of the finished lots.  
5

NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)
The deposit placed by us pursuant to the LPA is deemed to be a variable interest in the respective development entities.  Those development entities are deemed to be VIEs.  Therefore, the development entities with which we enter into LPAs, including the joint venture limited liability corporations discussed below, are evaluated for possible consolidation by us.  We have concluded that we are not the primary beneficiary of the development entities with which we enter into LPAs, and therefore, we do not consolidate any of these VIEs.
As of March 31, 2022, we controlled approximately 124,600 lots under LPAs with third parties through deposits in cash and letters of credit totaling approximately $529,600 and $8,800, respectively.  Our sole legal obligation and economic loss for failure to perform under these LPAs is limited to the amount of the deposit pursuant to the liquidated damage provisions contained in the LPAs and, in very limited circumstances, specific performance obligations. For the three months ended March 31, 2022 and 2021, we recorded a net reversal of approximately $5,900 and $6,200, respectively, related to previously impaired lot deposits as market conditions have improved. Our contract land deposit asset is shown net of a $24,115 and $30,041 impairment reserve at March 31, 2022 and December 31, 2021, respectively.
In addition, we have certain properties under contract with land owners that are expected to yield approximately 18,500 lots, which are not included in the number of total lots controlled.  Some of these properties may require rezoning or other approvals to achieve the expected yield. These properties are controlled with deposits in cash totaling approximately $6,600 as of March 31, 2022, of which approximately $4,600 is refundable if certain contractual conditions are not met.  We generally expect to assign the raw land contracts to a land developer and simultaneously enter into an LPA with the assignee if the project is determined to be feasible.
Our total risk of loss related to contract land deposits is limited to the amount of the deposits pursuant to the liquidated damages provision of the LPAs. As of March 31, 2022 and December 31, 2021, our total risk of loss was as follows:
March 31, 2022December 31, 2021
Contract land deposits$536,157 $527,180 
Loss reserve on contract land deposits(24,115)(30,041)
Contract land deposits, net512,042 497,139 
Contingent obligations in the form of letters of credit8,829 10,145 
Total risk of loss$520,871 $507,284 

3.    Joint Ventures
On a limited basis, we obtain finished lots using joint venture limited liability corporations (“JVs”). The JVs are typically structured such that we are a non-controlling member and are at risk only for the amount we have invested, or have committed to invest, in addition to any deposits placed under LPAs with the joint venture. We are not a borrower, guarantor or obligor on any debt of the JVs, as applicable. We enter into LPAs to purchase lots from these JVs, and as a result have a variable interest in these JVs.
At March 31, 2022, we had an aggregate investment totaling approximately $18,800 in four JVs that are expected to produce approximately 2,200 finished lots, of which approximately 1,850 lots were controlled by us and the remaining approximately 350 lots were either under contract with unrelated parties or not currently under contract. We had additional funding commitments totaling approximately $2,000 to one of the JVs at March 31, 2022.
We determined that we are not the primary beneficiary in three of the JVs because we and the other JV partner either share power or the other JV partner has the controlling financial interest. The aggregate investment in unconsolidated JVs was approximately $18,800 and $20,300 at March 31, 2022 and December 31, 2021, respectively, and is reported in the homebuilding “Other assets” line item on the accompanying condensed consolidated balance sheets. None of the unconsolidated JVs had any indicators of impairment as of March 31,
6

NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)
2022. For the remaining JV, we concluded that we are the primary beneficiary because we have the controlling financial interest in the JV. All activities under the consolidated JV had been completed and as of March 31, 2022, we had no remaining investment in the JV. The JV had remaining balances of $262 in cash and $235 in accrued expenses, which are included in homebuilding "Other assets" and "Accrued expenses and other liabilities," respectively, in the accompanying condensed consolidated balance sheets.
We recognize income from the JVs as a reduction to the lot cost of the lots purchased from the respective JVs when the homes are settled, based on the expected total profitability and the total number of lots expected to be produced by the respective JVs.
We classify distributions received from unconsolidated JVs using the cumulative earnings approach. As a result, distributions received up to the amount of cumulative earnings recognized by us are reported as distributions of earnings and those in excess of that amount are reported as a distribution of capital. These distributions are classified within the accompanying condensed consolidated statements of cash flows as cash flows from operating activities and investing activities, respectively.
4.    Land Under Development
On a limited basis, we directly acquire raw land parcels already zoned for its intended use to develop into finished lots.  Land under development includes the land acquisition costs, direct improvement costs, capitalized interest, where applicable, and real estate taxes.
As of March 31, 2022, we owned land parcels with a carrying value of $14,668 that we intend to develop into approximately 350 finished lots. We have additional funding commitments of approximately $2,000 under a joint development agreement related to one parcel, a portion of which we expect will be offset by development credits of approximately $600. None of the raw parcels had any indicators of impairment as of March 31, 2022.
5.    Capitalized Interest
We capitalize interest costs to land under development during the active development of finished lots.  In addition, we capitalize interest costs on our JV investments while the investments are considered qualified assets pursuant to ASC Topic 835-20 - Interest. Capitalized interest is transferred to sold or unsold inventory as the development of finished lots is completed, then charged to cost of sales upon our settlement of homes and the respective lots.  Interest incurred in excess of the interest capitalizable based on the level of qualified assets is expensed in the period incurred.
The following table reflects the changes in our capitalized interest during the three months ended March 31, 2022 and 2021:
 Three Months Ended March 31,
 20222021
Interest capitalized, beginning of period$593 $1,025 
Interest incurred13,254 13,422 
Interest charged to interest expense(13,166)(13,397)
Interest charged to cost of sales(41)(221)
Interest capitalized, end of period$640 $829 

7

NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)
6.    Earnings per Share
The following weighted average shares and share equivalents were used to calculate basic and diluted earnings per share ("EPS") for the three months ended March 31, 2022 and 2021:
 Three Months Ended March 31,
 20222021
Weighted average number of shares outstanding used to calculate basic EPS3,385,259 3,673,394 
Dilutive securities:
Stock options and restricted share units270,258 262,095 
Weighted average number of shares and share equivalents outstanding used to calculate diluted EPS3,655,517 3,935,489 
The following non-qualified stock options ("Options") issued under equity incentive plans were outstanding during the three months ended March 31, 2022 and 2021, but were not included in the computation of diluted EPS because the effect would have been anti-dilutive.
 Three Months Ended March 31,
 20222021
Anti-dilutive securities21,032 22,862 


7.    Shareholders’ Equity
A summary of changes in shareholders’ equity for the three months ended March 31, 2022 is presented below:
 Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Treasury
Stock
Deferred
Compensation
Trust
Deferred
Compensation
Liability
Total
Balance, December 31, 2021$206 $2,378,191 $10,047,839 $(9,423,858)$(16,710)$16,710 $3,002,378 
Net income— — 426,100 — — — 426,100 
Purchase of common stock for treasury— — — (748,788)— — (748,788)
Equity-based compensation— 11,668 — — — — 11,668 
Proceeds from Options exercised— 34,241 — — — — 34,241 
Treasury stock issued upon Option exercise and restricted share vesting— (7,440)— 7,440 — — — 
Balance, March 31, 2022$206 $2,416,660 $10,473,939 $(10,165,206)$(16,710)$16,710 $2,725,599 
8

NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)
A summary of changes in shareholders’ equity for the three months ended March 31, 2021 is presented below:
 Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Treasury
Stock
Deferred
Compensation
Trust
Deferred
Compensation
Liability
Total
Balance, December 31, 2020$206 $2,214,426 $8,811,120 $(7,922,678)$(16,710)$16,710 $3,103,074 
Net income— — 248,762 — — — 248,762 
Purchase of common stock for treasury— — — (377,425)— — (377,425)
Equity-based compensation— 14,471 — — — — 14,471 
Proceeds from Options exercised— 57,625 — — — — 57,625 
Treasury stock issued upon Option exercise and restricted share vesting— (14,516)— 14,516 — — — 
Balance, March 31, 2021$206 $2,272,006 $9,059,882 $(8,285,587)$(16,710)$16,710 $3,046,507 

We repurchased 146,054 and 86,523 shares of our outstanding common stock during the three months ended March 31, 2022 and 2021, respectively. We settle Option exercises and vesting of restricted stock units ("RSUs") by issuing shares of treasury stock.  Approximately 13,323 and 30,555 shares were issued from the treasury account during the three months ended March 31, 2022 and 2021, respectively, in settlement of Option exercises and vesting of RSUs.  Shares are relieved from the treasury account based on the weighted average cost basis of treasury shares.
8.    Product Warranties
We establish warranty and product liability reserves (“Warranty Reserve”) to provide for estimated future expenses as a result of construction and product defects, product recalls and litigation incidental to our homebuilding business.  Liability estimates are determined based on management’s judgment, considering such factors as historical experience, the estimated current cost of corrective action, manufacturers’ and subcontractors’ participation in sharing the cost of corrective action, consultations with third party experts such as engineers, and discussions with our general counsel and outside counsel retained to handle specific product liability cases.
The following table reflects the changes in our Warranty Reserve during the three months ended March 31, 2022 and 2021:
 Three Months Ended March 31,
 20222021
Warranty reserve, beginning of period$134,859 $119,638 
Provision17,967 22,329 
Payments(17,485)(17,131)
Warranty reserve, end of period$135,341 $124,836 

9.    Segment Disclosures
We disclose four homebuilding reportable segments that aggregate geographically our homebuilding operating segments, and our mortgage banking operations presented as one reportable segment.  The homebuilding
9

NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)
reportable segments are comprised of operating divisions in the following geographic areas:
Mid Atlantic: Maryland, Virginia, West Virginia, Delaware and Washington, D.C.
North East: New Jersey and Eastern Pennsylvania
Mid East: New York, Ohio, Western Pennsylvania, Indiana and Illinois
South East: North Carolina, South Carolina, Florida and Tennessee
Homebuilding profit before tax includes all revenues and income generated from the sale of homes, less the cost of homes sold, selling, general and administrative expenses and a corporate capital allocation charge.  The corporate capital allocation charge is eliminated in consolidation and is based on the segment’s average net assets employed.  The corporate capital allocation charged to the operating segment allows the Chief Operating Decision Maker (“CODM”) to determine whether the operating segment’s results are providing the desired rate of return after covering our cost of capital.  
Assets not allocated to the operating segments are not included in either the operating segment’s corporate capital allocation charge or the CODM’s evaluation of the operating segment’s performance.  We record charges on contract land deposits when it is determined that it is probable that recovery of the deposit is impaired.  For segment reporting purposes, impairments on contract land deposits are generally charged to the operating segment upon the termination of an LPA with the developer, or the restructuring of an LPA resulting in the forfeiture of the deposit.  Mortgage banking profit before tax consists of revenues generated from mortgage financing, title insurance and closing services, less the costs of such services and general and administrative costs.  Mortgage banking operations are not charged a corporate capital allocation charge.
In addition to the corporate capital allocation and contract land deposit impairments discussed above, the other reconciling items between segment profit and consolidated profit before tax include unallocated corporate overhead (including all management incentive compensation), equity-based compensation expense, consolidation adjustments and external corporate interest expense.  Our overhead functions such as accounting, treasury and human resources are centrally performed and these costs are not allocated to our operating segments.  Consolidation adjustments consist of such items necessary to convert the reportable segments’ results, which are predominantly maintained on a cash basis, to a full accrual basis for external financial statement presentation purposes, and are not allocated to our operating segments.  External corporate interest expense primarily consists of interest charges on our 3.95% Senior Notes due 2022 and 3.00% Senior Notes due 2030 (the “Senior Notes”), which are not charged to the operating segments because the charges are included in the corporate capital allocation discussed above.
The following tables present segment revenues, profit and assets with reconciliations to the amounts reported for the consolidated enterprise, where applicable:
 Three Months Ended March 31,
 20222021
Revenues:
Homebuilding Mid Atlantic$1,141,708 $936,141 
Homebuilding North East175,551 162,193 
Homebuilding Mid East461,405 424,952 
Homebuilding South East530,563 440,425 
Mortgage Banking69,182 77,735 
Total consolidated revenues$2,378,409 $2,041,446 
10

NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)
Three Months Ended March 31,
 20222021
Income before taxes:
Homebuilding Mid Atlantic$249,781 $129,067 
Homebuilding North East25,928 15,227 
Homebuilding Mid East71,183 48,941 
Homebuilding South East113,454 56,665 
Mortgage Banking50,106 59,562 
Total segment profit before taxes510,452 309,462 
Reconciling items:
Contract land deposit recoveries (1)5,926 6,196 
Equity-based compensation expense (2)(11,668)(14,471)
Corporate capital allocation (3)69,744 61,551 
Unallocated corporate overhead(45,261)(39,717)
Consolidation adjustments and other (4)49,507 1,967 
Corporate interest expense(12,755)(12,982)
Reconciling items sub-total55,493 2,544 
Consolidated income before taxes$565,945 $312,006 
(1)This item represents changes to the contract land deposit impairment reserve, which are not allocated to the reportable segments. See further discussion of lot deposit impairment charges in Note 2.
(2)The decrease in equity-based compensation expense for the three-month period ended March 31, 2022 was primarily attributable to options issued under the 2018 Equity Incentive Plan becoming fully vested as of December 31, 2021.
(3)This item represents the elimination of the corporate capital allocation charge included in the respective homebuilding reportable segments.  The corporate capital allocation charge is based on the segment’s monthly average asset balance, and was as follows for the periods presented:
Three Months Ended March 31,
 20222021
Corporate capital allocation charge:
Homebuilding Mid Atlantic$34,087 $30,596 
Homebuilding North East7,087 6,038 
Homebuilding Mid East11,417 10,624 
Homebuilding South East17,153 14,293 
Total$69,744 $61,551 

(4)The increase in consolidation adjustments and other for the three-month period ended March 31, 2022 compared to the respective 2021 period was driven by higher lumber prices quarter over quarter. Our reportable segments' results include the intercompany profits of our production facilities for home packages delivered to our homebuilding divisions, which were negatively impacted by the increase in lumber costs. The increase in lumber costs related to homes not yet settled is reversed through the consolidation adjustment. As the homes currently in inventory are settled in subsequent quarters, our consolidated homebuilding margins will be negatively impacted by these higher lumber costs.


11

NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)
 March 31, 2022December 31, 2021
Assets:
Homebuilding Mid Atlantic$1,355,052 $1,322,818 
Homebuilding North East286,796 235,048 
Homebuilding Mid East478,605 438,700 
Homebuilding South East706,244 629,198 
Mortgage Banking406,543 371,685 
Total segment assets3,233,240 2,997,449 
Reconciling items:
Cash and cash equivalents2,138,706 2,545,069 
Deferred taxes135,136 132,894 
Intangible assets and goodwill49,368 49,368 
Operating lease right-of-use assets59,819 59,010 
Finance lease right-of-use assets14,386 14,578 
Contract land deposit reserve(24,115)(30,041)
Consolidation adjustments and other119,673 66,148 
Reconciling items sub-total2,492,973 2,837,026 
Consolidated assets$5,726,213 $5,834,475 

10.    Fair Value
GAAP assigns a fair value hierarchy to the inputs used to measure fair value.  Level 1 inputs are quoted prices in active markets for identical assets and liabilities.  Level 2 inputs are inputs other than quoted market prices that are observable for the asset or liability, either directly or indirectly.  Level 3 inputs are unobservable inputs.
Financial Instruments
The following table presents the estimated fair values and carrying values of our Senior Notes as of March 31, 2022 and December 31, 2021. The estimated fair value is based on recent market prices of similar transactions, which is classified as Level 2 within the fair value hirarchy.
March 31, 2022December 31, 2021
Estimated Fair Values:
3.95% Senior Notes due 2022$600,900 $610,452 
3.00% Senior Notes due 2030842,904 942,192 
Total$1,443,804 $1,552,644 
Carrying Values:
3.95% Senior Notes due 2022$599,711 $599,553 
3.00% Senior Notes due 2030916,253 916,702 
Total$1,515,964 $1,516,255 
12

NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

Except as otherwise noted below, we believe that insignificant differences exist between the carrying value and the fair value of our financial instruments, which consist primarily of cash equivalents, due to their short term nature.
Derivative Instruments and Mortgage Loans Held for Sale
In the normal course of business, our wholly-owned mortgage subsidiary, NVR Mortgage Finance, Inc. (“NVRM”), enters into contractual commitments to extend credit to our homebuyers with fixed expiration dates.  The commitments become effective when the borrowers "lock-in" a specified interest rate within time frames established by NVRM.  All mortgagors are evaluated for credit worthiness prior to the extension of the commitment.  Market risk arises if interest rates move adversely between the time of the "lock-in" of rates by the borrower and the sale date of the loan to a broker/dealer.  To mitigate the effect of the interest rate risk inherent in providing rate lock commitments to borrowers, NVRM enters into optional or mandatory delivery forward sale contracts to sell whole loans and mortgage-backed securities to broker/dealers.  The forward sales contracts lock in an interest rate and price for the sale of loans similar to the specific rate lock commitments.  NVRM does not engage in speculative or trading derivative activities.  Both the rate lock commitments to borrowers and the forward sale contracts to broker/dealers are undesignated derivatives and, accordingly, are marked to fair value through earnings.  At March 31, 2022, there were rate lock commitments to extend credit to borrowers aggregating $2,146,716 and open forward delivery contracts aggregating $2,301,443, which hedge both the rate lock commitments and closed loans held for sale.
The fair value of NVRM’s rate lock commitments to borrowers and the related input levels include, as applicable:
i)the assumed gain/loss of the expected resultant loan sale (Level 2);
ii)the effects of interest rate movements between the date of the rate lock and the balance sheet date (Level 2); and
iii)the value of the servicing rights associated with the loan (Level 2).
The assumed gain/loss considers the excess servicing to be received or buydown fees to be paid upon securitization of the loan.  The excess servicing and buydown fees are calculated pursuant to contractual terms with investors.  To calculate the effects of interest rate movements, NVRM utilizes applicable published mortgage-backed security prices, and multiplies the price movement between the rate lock date and the balance sheet date by the notional loan commitment amount.  NVRM sells all of its loans on a servicing released basis, and receives a servicing released premium upon sale.  Thus, the value of the servicing rights is included in the fair value measurement and is based upon contractual terms with investors and varies depending on the loan type.  NVRM assumes a fallout rate when measuring the fair value of rate lock commitments.  Fallout is defined as locked loan commitments for which NVRM does not close a mortgage loan and is based on historical experience.
The fair value of NVRM’s forward sales contracts to broker/dealers solely considers the market price movement of the same type of security between the trade date and the balance sheet date (Level 2).  The market price changes are multiplied by the notional amount of the forward sales contracts to measure the fair value.
Mortgage loans held for sale are recorded at fair value when closed, and thereafter are carried at the lower of cost or fair value, net of deferred origination costs, until sold.  Fair value is measured using Level 2 inputs.  As of March 31, 2022, the fair value of loans held for sale of $312,726 included on the accompanying condensed consolidated balance sheet was decreased by $5,959 from the aggregate principal balance of $318,685. As of
13

NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)
December 31, 2021, the fair value of loans held for sale of $302,192 was increased by $4,296 from the aggregate principal balance of $297,896.
The fair value measurement of NVRM's undesignated derivative instruments was as follows:
March 31, 2022December 31, 2021
Rate lock commitments:
Gross assets$39,547 $15,949 
Gross liabilities44,238 1,790 
Net rate lock commitments$(4,691)$14,159 
Forward sales contracts:
Gross assets$40,007 $708 
Gross liabilities1,011 926 
Net forward sales contracts$38,996 $(218)
As of March 31, 2022, the net rate lock commitments are reported in mortgage banking "Accrued expenses and other liabilities" and the net forward sales contracts are reported in mortgage banking "Other assets" on the accompanying condensed consolidated balance sheets. As of December 31, 2021, the net rate lock commitments are reported in mortgage banking "Other assets" and the net forward sales contracts are reported in mortgage banking "Accrued expenses and other liabilities".
The fair value measurement as of March 31, 2022 was as follows:
Notional or
Principal
Amount
Assumed
Gain
From Loan
Sale
Interest
Rate
Movement
Effect
Servicing
Rights
Value
Security
Price
Change
Total Fair
Value
Measurement
Rate lock commitments$2,146,716 $9,863 $(43,284)$28,730 $— $(4,691)
Forward sales contracts$2,301,443 — — — 38,996 38,996 
Mortgages held for sale$318,685 1,472 (12,263)4,832 — (5,959)
Total fair value measurement$11,335 $(55,547)$33,562 $38,996 $28,346 

The total fair value measurement as of December 31, 2021 was $18,237. NVRM recorded a fair value adjustment to income of $10,109 for the three months ended March 31, 2022. NVRM recorded a fair value adjustment to income of $548 for the three months ended March 31, 2021. Unrealized gains/losses from the change in the fair value measurements are included in earnings as a component of mortgage banking fees in the accompanying condensed consolidated statements of income.  The fair value measurement will be impacted in the future by the change in the value of the servicing rights, interest rate movements, security price fluctuations, and the volume and product mix of NVRM’s closed loans and locked loan commitments.
11.    Debt
As of March 31, 2022, we had the following debt instruments outstanding:
3.95% Senior Notes due 2022 ("2022 Senior Notes")
The 2022 Senior Notes have a principal balance of $600,000. The 2022 Senior Notes mature on September 15, 2022 and bear interest at 3.95%, payable semi-annually in arrears on March 15 and September 15. The 2022 Senior Notes were issued at a discount to yield 3.97% and have been reflected net of the unamortized discount and unamortized debt issuance costs in the accompanying condensed consolidated balance sheet.
3.00% Senior Notes due 2030 ("2030 Senior Notes")
The 2030 Senior Notes have an aggregate principal balance of $900,000 and mature on May 15, 2030. The 2030 Senior Notes bear interest at 3.00%, payable semi-annually in arrears on May 15 and November 15. The 2030
14

NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)
Senior Notes were issued in three separate issuances, $600,000 issued at a discount to yield 3.02%, and the two additional issuances totaling $300,000 issued at a premium to yield 2.00%. The 2030 Senior Notes have been reflected net of the unamortized discount or premium, as applicable, and the unamortized debt issuance costs in the accompanying condensed consolidated balance sheet.
Credit Agreement
We have an unsecured Credit Agreement (the “Credit Agreement”), which provides for aggregate revolving loan commitments of $300,000 (the “Facility”). Under the Credit Agreement, we may request increases of up to $300,000 to the Facility in the form of revolving loan commitments or term loans to the extent that new or existing lenders agree to provide additional revolving loan or term loan commitments.  The Credit Agreement provides for a $100,000 sublimit for the issuance of letters of credit, of which approximately $15,000 was outstanding at March 31, 2022. The Credit Agreement termination date is February 12, 2026. There was no debt outstanding under the Facility at March 31, 2022.
Repurchase Agreement
NVRM provides for its mortgage origination and other operating activities using cash generated from its operations, borrowings from its parent company, NVR, as well as a revolving mortgage repurchase agreement (the “Repurchase Agreement”), which is non-recourse to NVR.  The Repurchase Agreement provides for loan purchases up to $150,000, subject to certain sub-limits. Amounts outstanding under the Repurchase Agreement are collateralized by the Company’s mortgage loans held for sale.
The Repurchase Agreement expires on July 20, 2022. At March 31, 2022, there were no borrowing base limitations reducing the amount available under the Repurchase Agreement. There was no debt outstanding under the Repurchase Agreement at March 31, 2022.
12.    Commitments and Contingencies
We are involved in various litigation arising in the ordinary course of business. In the opinion of management, and based on advice of legal counsel, this litigation is not expected to have a material adverse effect on our financial position, results of operations or cash flows. Legal costs incurred in connection with outstanding litigation are expensed as incurred.
13.    Leases
We have operating leases for our corporate and division offices, production facilities, model homes, and certain office and production equipment. Additionally, we have finance leases for certain plant equipment and one of our production facilities which are recorded in homebuilding "Property, plant and equipment, net" and "Accrued expenses and other liabilities" on the accompanying condensed consolidated balance sheets. Our finance lease ROU assets and finance lease liabilities were $14,386 and $15,329, respectively, as of March 31, 2022, and $14,578 and $15,413, respectively, as of December 31, 2021. Our leases have remaining lease terms of up to 18.4 years, some of which include options to extend the lease for up to 20 years, and some of which include options to terminate the lease.
We recognize operating lease expense on a straight-line basis over the lease term. We have elected to use the portfolio approach for certain equipment leases which have similar lease terms and payment schedules. Additionally, for certain equipment we account for the lease and non-lease components as a single lease component. Our sublease income is de minimis.
We have certain leases, primarily the leases of model homes, which have initial lease terms of twelve months or less ("Short-term leases"). We elected to exclude these leases from the recognition requirements under Topic 842, and these leases have not been included in our recognized ROU assets and lease liabilities.
15

NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)
The components of lease expense were as follows:
Three Months Ended March 31,
20222021
Lease expense
Operating lease expense$8,101 $7,577 
Finance lease expense:
Amortization of ROU assets464 443 
Interest on lease liabilities104 110 
Short-term lease expense6,332 5,890 
Total lease expense$15,001 $14,020 
Other information related to leases was as follows:
Three Months Ended March 31,
20222021
Supplemental Cash Flows Information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$7,169 $6,810 
Operating cash flows from finance leases104 110 
Financing cash flows from finance leases356 329 
ROU assets obtained in exchange for lease obligations:
Operating leases$5,813 $3,013 
Finance leases$272 $89 
March 31, 2022December 31, 2021
Weighted-average remaining lease term (in years):
Operating leases6.26.3
Finance leases11.411.7
Weighted-average discount rate:
Operating leases3.0 %3.0 %
Finance leases2.8 %2.8 %

14.    Income Taxes
Our effective tax rate for the three months ended March 31, 2022 was 24.7% compared to 20.3% for the three months ended March 31, 2021. The increase in the effective tax rate quarter over quarter is primarily attributable to recognizing a lower income tax benefit related to excess tax benefits from stock option exercises in the first quarter of 2022. For the three months ended March 31, 2022 and 2021, we recognized $8,446 and $17,377, respectively, in such income tax benefits.
16


Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations
(dollars in thousands, except per share data)
Forward-Looking Statements
Some of the statements in this Quarterly Report on Form 10-Q, as well as statements made by us in periodic press releases or other public communications, 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, our financial position and financial results, business strategy, the impact of the COVID-19 pandemic on our business and customers, supply chain disruptions, 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 our actual results or performance 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: the economic impact of COVID-19 and related supply chain disruption; general economic and business conditions (on both a national and regional level); interest rate changes; access to suitable financing by us and our 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 us in our 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 we have little or no control.  We undertake no obligation to update such forward-looking statements except as required by law.  For additional information regarding risk factors, see Part II, Item 1A of this Quarterly Report on Form 10-Q and Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Unless the context otherwise requires, references to “NVR,” “we,” “us,” or “our” include NVR and its consolidated subsidiaries.
Results of Operations for the Three Months Ended March 31, 2022 and 2021
Business Environment and Current Outlook
Despite experiencing rising mortgage interest rates during the quarter, demand for new homes remained strong during the first quarter of 2022 driven by limited housing supply. As a result, the market has seen significant appreciation in home prices, allowing us to improve profitability despite rising material and labor costs. Additionally, strong housing demand has resulted in increased construction activity and demand for building materials and contractor labor, which, coupled with the ongoing effects of the COVID-19 pandemic, has led to supply chain disruptions and longer construction cycle times. We expect to continue to face these disruptions well into 2022, and we continue to work closely with our suppliers and trade partners to manage these disruptions.
Although current demand for new homes is strong, there is uncertainty regarding the extent and timing of the supply chain disruption and the effects of the ongoing pandemic and related economic relief efforts on the U.S. economy, which have contributed to high inflation during the first quarter of 2022. Demand for new homes and home affordability may be negatively impacted by both rising inflation and mortgage interest rates. We expect to continue to face cost pressures related to building materials, labor and land costs, which will impact profit margins based on our ability to manage these costs while balancing sales pace and pricing. Although we are unable to predict the extent to which this will impact our operational and financial performance, we believe that we are well positioned to take advantage of opportunities that may arise from future economic and homebuilding market volatility due to the strength of our balance sheet.
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Business
Our primary business is the construction and sale of single-family detached homes, townhomes and condominiums, all of which are primarily constructed on a pre-sold basis.  To fully serve customers of our homebuilding operations, we also operate a mortgage banking and title services business.  We primarily conduct our operations in mature markets. Additionally, we generally grow our business through market share gains in our existing markets and by expanding into markets contiguous to our current active markets.  Our four homebuilding reportable segments consist of the following regions:
Mid Atlantic: Maryland, Virginia, West Virginia, Delaware and Washington, D.C.
North East: New Jersey and Eastern Pennsylvania
Mid East: New York, Ohio, Western Pennsylvania, Indiana and Illinois
South East: North Carolina, South Carolina, Florida and Tennessee
Our lot acquisition strategy is predicated upon avoiding the financial requirements and risks associated with direct land ownership and development.  We generally do not engage in land development (see discussion below of our land development activities). Instead, we typically acquire finished building lots from various third party land developers pursuant to fixed price finished lot purchase agreements (“LPAs”).  These LPAs require deposits, typically ranging up to 10% of the aggregate purchase price of the finished lots, in the form of cash or letters of credit that may be forfeited if we fail to perform under the LPA.  This strategy has allowed us to maximize inventory turnover, which we believe enables us to minimize market risk and to operate with less capital, thereby enhancing rates of return on equity and total capital.
In addition to constructing homes primarily on a pre-sold basis and utilizing what we believe is a conservative lot acquisition strategy, we focus on obtaining and maintaining a leading market position in each market we serve.  This strategy allows us to gain valuable efficiencies and competitive advantages in our markets, which we believe contributes to minimizing the adverse effects of regional economic cycles and provides growth opportunities within these markets.  Our continued success is contingent upon our ability to control an adequate supply of finished lots on which to build.
In certain specific strategic circumstances, we deviate from our historical lot acquisition strategy and engage in joint venture arrangements with land developers or directly acquire raw ground already zoned for its intended use for development.  Once we acquire control of raw ground, we determine whether to sell the raw parcel to a developer and enter into an LPA with the developer to purchase the finished lots or to hire a developer to develop the land on our behalf.  While joint venture arrangements and direct land development activity are not our preferred method of acquiring finished building lots, we may enter into additional transactions in the future on a limited basis where there exists a compelling strategic or prudent financial reason to do so.  We expect, however, to continue to acquire substantially all our finished lot inventory using LPAs with forfeitable deposits.
As of March 31, 2022, we controlled approximately 126,800 lots as described below.
Lot Purchase Agreements
We controlled approximately 124,600 lots under LPAs with third parties through deposits in cash and letters of credit totaling approximately $529,600 and $8,800, respectively. Included in the number of controlled lots are approximately 4,300 lots for which we have recorded a contract land deposit impairment reserve of approximately $24,100 as of March 31, 2022.
Joint Venture Limited Liability Corporations (“JVs”)
We had an aggregate investment totaling approximately $18,800 in four JVs, expected to produce approximately 2,200 lots. Of the lots to be produced by the JVs, approximately 1,850 lots were controlled by us and approximately 350 were either under contract with unrelated parties or currently not under contract. We had additional funding commitments totaling approximately $2,000 to one of the JVs at March 31, 2022.
Land Under Development
We owned land with a carrying value of approximately $14,700 that we intend to develop into approximately 350 finished lots.  We had additional funding commitments of approximately $2,000 under a joint development
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agreement related to one parcel, a portion of which we expect will be offset by development credits of approximately $600.
See Notes 2, 3 and 4 to the condensed consolidated financial statements included herein for additional information regarding LPAs, JVs and land under development, respectively.
Raw Land Purchase Agreements
In addition, we have certain properties under contract with land owners that are expected to yield approximately 18,500 lots, which are not included in the number of total lots controlled.  Some of these properties may require rezoning or other approvals to achieve the expected yield.  As of March 31, 2022, these properties are controlled with deposits in cash totaling approximately $6,600, of which approximately $4,600 is refundable if certain contractual conditions are not met.  We generally expect to assign the raw land contracts to a land developer and simultaneously enter into an LPA with the assignee if the project is determined to be feasible.
Key Financial Results
Our consolidated revenues for the first quarter of 2022 totaled $2,378,409, a 17% increase from the first quarter of 2021.  Net income for the first quarter ended March 31, 2022 was $426,100, or $116.56 per diluted share, increases of 71% and 84% when compared to net income and diluted earnings per share in the first quarter of 2021, respectively.  Our homebuilding gross profit margin percentage increased to 28.5% in the first quarter of 2022 from 19.7% in the first quarter of 2021. New orders, net of cancellations (“New Orders”) decreased by 6% in the first quarter of 2022 compared to the first quarter of 2021. The average sales price for New Orders in the first quarter of 2022 increased by 13% to $465.7 compared to the first quarter of 2021.


Homebuilding Operations
The following table summarizes the results of operations and other data for our homebuilding operations:
 Three Months Ended March 31,
 20222021
Financial Data:
Revenues$2,309,227 $1,963,711 
Cost of sales$1,651,365 $1,577,453 
Gross profit margin percentage28.5 %19.7 %
Selling, general and administrative expenses$129,510 $121,419 
Operating Data:
New orders (units)5,927 6,314 
Average new order price$465.7 $410.5 
Settlements (units)5,214 5,072 
Average settlement price$442.9 $387.2 
Backlog (units)13,443 12,791 
Average backlog price$463.7 $406.9 
New order cancellation rate10.3 %9.6 %

Consolidated Homebuilding - Three Months Ended March 31, 2022 and 2021
Homebuilding revenues increased 18% in the first quarter of 2022 compared to the same period in 2021, as a result of a 3% increase in the number of units settled and a 14% increase in the average settlement price. The increase in the number of units settled was attributable to a 10% higher backlog unit balance entering 2022 compared to the backlog unit balance entering 2021, offset partially by a lower backlog turnover rate quarter over quarter attributable in part to the impact of supply chain issues on our construction cycle times. The increase in the
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average settlement price was primarily attributable to a 15% higher average sales price of units in backlog entering 2022 compared to backlog entering 2021.
Gross profit margin percentage in the first quarter of 2022 increased to 28.5%, from 19.7% in the first quarter of 2021. Gross profit margins were favorably impacted by the increase in the average settlement price attributable to improved pricing power in prior quarters, lower lumber costs and improved leveraging of certain operating costs attributable to the increase in settlement activity in the first quarter of 2022.
The number of New Orders decreased 6% while the average sales price of New Orders increased 13% in the first quarter of 2022 compared to the first quarter of 2021.  New Orders were lower due primarily to a 9% decrease in the average number of active communities in the first quarter of 2022 compared to the same period in 2021. The increase in the average sales price of New Orders was attributable to strong price appreciation attributable to sustained demand driven by favorable market conditions.
Selling, general and administrative (“SG&A”) expense in the first quarter of 2022 increased by approximately $8,100 compared to the first quarter of 2021, but as a percentage of revenue decreased to 5.6% from 6.2% quarter over quarter due to improved leveraging of SG&A costs. The increase in SG&A expense was attributable primarily to increases of approximately $7,400 in personnel costs and approximately $2,900 in incentive compensation attributable largely to increased headcount.
Our backlog represents homes sold but not yet settled with our customers. As of March 31, 2022, our backlog increased on a unit basis by 5% to 13,443 units and increased on a dollar basis by 20% to $6,232,955 when compared to 12,791 units and $5,204,091, respectively, as of March 31, 2021. The increase in backlog units was primarily attributable to a lower backlog turnover rate quarter over quarter, which was negatively impacted by a longer production cycle attributable to supply chain disruptions and external subcontractor capacity constraints as we work to expand production capacity to meet our increased sales pace. Backlog dollars were higher due to the increase in backlog units and a 14% increase in the average sales price of New Orders during the six-month period ended March 31, 2022 compared to the same period in 2021.
Our backlog may be impacted by customer cancellations for various reasons that are beyond our control, such as failure to obtain mortgage financing, inability to sell an existing home, job loss, or a variety of other reasons.  In any period, a portion of the cancellations that we experience are related to new sales that occurred during the same period, and a portion are related to sales that occurred in prior periods and therefore appeared in the opening backlog for the current period.  Calculated as the total of all cancellations during the period as a percentage of gross sales during that same period, our first quarter cancellation rate was approximately 10% for both 2022 and 2021.  During the most recent four quarters, approximately 3% of a reporting quarter’s opening backlog cancelled during the fiscal quarter. We can provide no assurance that our historical cancellation rates are indicative of the actual cancellation rate that may occur during the remainder of 2022 or future years. Other than those units that are cancelled, and subject to potential construction delays resulting from continued supply chain and/or COVID-19 related disruptions, we expect to settle substantially all of our March 31, 2022 backlog within the next twelve months.
The backlog turnover rate is impacted by various factors, including, but not limited to, changes in New Order activity, internal production capacity, external subcontractor capacity, building material supply chain disruptions and other external factors over which we do not exercise control.
Reportable Segments
Homebuilding segment profit includes all revenues and income generated from the sale of homes, less the cost of homes sold, SG&A expenses, and a corporate capital allocation charge determined by corporate management.  The corporate capital allocation charge eliminates in consolidation and is based on the segment’s average net assets employed.  The corporate capital allocation charged to the operating segment allows the Chief Operating Decision Maker to determine whether the operating segment is providing the desired rate of return after covering our cost of capital.
We record charges on contract land deposits when we determine that it is probable that recovery of the deposit is impaired.  For segment reporting purposes, impairments on contract land deposits are generally charged to the operating segment upon the termination of an LPA with the developer, or the restructuring of an LPA resulting
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in the forfeiture of the deposit.  We evaluate our entire net contract land deposit portfolio for impairment each quarter.  For presentation purposes below, the contract land deposit reserve at March 31, 2022 and December 31, 2021 has been allocated to the respective year’s reportable segments to show contract land deposits on a net basis.  The net contract land deposit balances below also include approximately $8,800 and $10,100 at March 31, 2022 and December 31, 2021, respectively, of letters of credit issued as deposits in lieu of cash.
The following tables summarize certain homebuilding operating activity by reportable segment for the three months ended March 31, 2022 and 2021.
Selected Segment Financial Data:
 Three Months Ended March 31,
 20222021
Revenues:
Mid Atlantic$1,141,708 $936,141 
North East175,551 162,193 
Mid East461,405 424,952 
South East530,563 440,425 
 Three Months Ended March 31,
 20222021
Gross profit margin:
Mid Atlantic$318,214 $191,302 
North East41,704 28,946 
Mid East101,407 77,504 
South East152,099 89,730 
 Three Months Ended March 31,
 20222021
Gross profit margin percentage:
Mid Atlantic27.9 %20.4 %
North East23.8 %17.8 %
Mid East22.0 %18.2 %
South East28.7 %20.4 %
 Three Months Ended March 31,
 20222021
Segment profit:
Mid Atlantic$249,781 $129,067 
North East25,928 15,227 
Mid East71,183 48,941 
South East113,454 56,665 
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Operating Activity:
 Three Months Ended March 31,
 20222021
 UnitsAverage
Price
UnitsAverage
Price
New orders, net of cancellations:    
Mid Atlantic2,307 $529.1 2,291 $502.2 
North East460 $522.9 440 $474.7 
Mid East1,534 $398.6 1,795 $350.4 
South East1,626 $422.8 1,788 $337.6 
Total5,927 $465.7 6,314 $410.5 
 Three Months Ended March 31,
 20222021
 UnitsAverage
Price
UnitsAverage
Price
Settlements:    
Mid Atlantic2,180 $523.7 2,010 $465.7 
North East348 $504.5 372 $436.0 
Mid East1,210 $381.3 1,263 $336.4 
South East1,476 $359.5 1,427 $308.6 
Total5,214 $442.9 5,072 $387.2 
 As of March 31,
 20222021
 UnitsAverage
Price
UnitsAverage
Price
Backlog:    
Mid Atlantic5,045 $537.0 4,760 $488.2 
North East1,081 $518.6 1,018 $463.7 
Mid East3,351 $389.2 3,406 $350.6 
South East3,966 $418.3 3,607 $336.6 
Total13,443 $463.7 12,791 $406.9