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Operating and Reporting Segments
9 Months Ended
Sep. 30, 2014
Segment Reporting [Abstract]  
Operating and Reporting Segments

3. OPERATING AND REPORTING SEGMENTS

In accordance with ASC Topic 280, Segment Reporting, we have 12 homebuilding operating divisions which we aggregate into three reportable homebuilding segments. These segments are engaged in the business of acquiring and developing land, constructing homes, marketing and selling those homes, and providing warranty and customer service. We aggregate our operating segments into a reporting segment based on similar long-term economic characteristics. We have no inter-segment sales as all home sales are to external customers. To the extent we have inter-segment land sales, the profit is deferred until the land is sold to a third party. In addition, we include Mortgage Operations as a separate segment. Our reporting segments are as follows:

 

East (Domestic)    Houston (which includes a Taylor Morrison division and a Darling Homes division), Austin, Dallas, North Florida and West Florida
West (Domestic)    Phoenix, Northern California, Southern California and Denver
Canada (Foreign)    Kitchener-Waterloo, Ottawa and Toronto
Mortgage Operations (Domestic)    Mortgage and Financial Services

Management evaluates segment performance based on segment adjusted gross margin, which is comprised of GAAP gross margin, less interest amortized to cost of home closings (“adjusted gross margin”). We define segment gross margin as homebuilding and land revenue less cost of home construction, commissions and other sales costs, land development and other land sales costs and other costs incurred by or allocated to each segment, including impairments. Operating results for each segment may not be indicative of the results for such segment had it been an independent, stand-alone entity.

 

Our segment information is as follows (in thousands):

 

     Three Months Ended September 30,      Nine Months Ended September 30,  
     2014     %      2013     %      2014     %      2013     %  

Revenue:

                   

East

   $ 346,065        45.6       $ 279,747        44.1       $ 968,488        50.0       $ 751,623        49.3   

West

     274,698        36.2         203,480        32.1         705,321        36.4         504,562        33.1   

Canada

     129,842        17.1         143,423        22.6         239,348        12.4         247,737        16.2   

Mortgage Operations

     8,433        1.1         7,791        1.2         22,870        1.2         20,896        1.4   
  

 

 

      

 

 

      

 

 

      

 

 

   

Total revenues

     759,038           634,441           1,936,027           1,524,818     

Gross margin:

                   

East

     76,975        22.2         56,828        20.3         213,204        22.0         146,418        19.5   

West

     51,601        18.8         44,570        21.9         140,252        19.9         108,285        21.5   

Canada

     21,438        16.5         29,419        20.5         43,353        18.1         57,053        23.0   

Mortgage Operations

     3,376        40.0         3,406        43.7         9,229        40.4         8,952        42.8   
  

 

 

      

 

 

      

 

 

      

 

 

   

Total gross margin

     153,390        20.2         134,223        21.2         406,038        21.0         320,708        21.0   

Sales, commissions and other marketing costs(1)

     (47,186        (37,029        (124,303        (97,238  

General and administrative expenses(1)

     (21,572        (21,944        (66,274        (68,193  

Equity in income of unconsolidated entities

     11,756           9,425           22,497           21,049     

Indemnification and transaction (expense) income

     (21        (396        142           (188,320  

Loss on extinguishment of debt

     —            —            —            (10,141  

Interest and other (expense) income, net

     (3,347        28           (11,043        (1,469  
  

 

 

      

 

 

      

 

 

      

 

 

   

Income (loss) before income taxes

   $ 93,020        12.3       $ 84,307        13.3       $ 227,057        11.7       $ (23,604     (1.5
  

 

 

      

 

 

      

 

 

      

 

 

   

 

  (1)  Represents sales, commissions and other marketing costs, and general and administrative expenses, including segment G&A.

 

Gross Margin by Segment:

   Three Months Ended September 30, 2014  
     East     West     Canada     Mortgage
Operations
    Total  

Gross margin

   $   76,975      $   51,601      $ 21,438      $ 3,376      $ 153,390   

Add back interest amortized to cost of revenue

     6,152        9,078        7,082              22,312   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted gross margin

   $ 83,127      $ 60,679      $ 28,520      $ 3,376      $ 175,702   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted gross margin %

     24.0     22.1     22.0     40.0     23.1
     Three Months Ended September 30, 2013  
     East     West     Canada     Mortgage
Operations
    Total  

Gross margin

   $ 56,828      $ 44,570      $ 29,419      $ 3,406      $ 134,223   

Add back interest amortized to cost of revenue

     4,891        5,332        6,121        —         16,344   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted gross margin

   $ 61,719      $ 49,902      $ 35,540      $ 3,406      $ 150,567   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted gross margin %

     22.1     24.5     24.8     43.7     23.7
     Nine Months Ended September 30, 2014  
     East     West     Canada     Mortgage
Operations
    Total  

Gross margin

   $ 213,204      $ 140,252      $ 43,353      $ 9,229      $ 406,038   

Add back interest amortized to cost of revenue

     15,878        23,899        10,715              50,492   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted gross margin

   $ 229,082      $ 164,151      $ 54,068      $ 9,229      $ 456,530   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted gross margin %

     23.7     23.3     22.6     40.4     23.6

 

     Nine Months Ended September 30, 2013  
     East     West     Canada     Mortgage
Operations
    Total  

Gross margin

   $ 146,418      $ 108,285      $ 57,053      $ 8,952      $ 320,708   

Add back interest amortized to cost of revenue

     11,614        13,232        11,123        —         35,969   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted gross margin

   $ 158,032      $ 121,517      $ 68,176      $ 8,952      $ 356,677   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted gross margin %

     21.0     24.1     27.5     42.8     23.4

 

Inventory by Segment:

   September 30, 2014  
     East      West      Canada      Mortgage
Operations
     Corporate
and
Unallocated
     Total  

Real estate inventory and land deposits

   $ 1,316,415       $ 1,352,522       $ 223,161       $ —        $ —        $ 2,892,098   

Investments in unconsolidated entities

     51,747         33,960        129,826         1,244         —          216,777   

Other assets

     142,694         47,169         263,749         83,840         386,813         924,265   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 1,510,856       $ 1,433,651       $ 616,736       $ 85,084       $ 386,813       $ 4,033,140   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     December 31, 2013  
     East      West      Canada      Mortgage
Operations
     Corporate
and
Unallocated
     Total  

Real estate inventory and land deposits

   $ 1,048,091       $ 1,002,500       $ 255,487       $ —        $ —        $ 2,306,078   

Investments in unconsolidated entities

     20,191         —          118,115         1,244         —          139,550   

Other assets

     103,107         27,842         289,527         110,004         462,450         992,930   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 1,171,389       $ 1,030,342       $ 663,129       $ 111,248       $ 462,450       $ 3,438,558