Note 3 - Segment Reporting

6 Months Ended

Jun. 30, 2017

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

3. Segment Reporting

An operating segment is defined as a component of an enterprise for which discrete financial information is available and is reviewed regularly by the Chief Operating Decision Maker (“CODM”), or decision-making group, to evaluate performance and make operating decisions. We have identified our CODM as

two

key executives—the Chief Executive Officer and the Chief Operating Officer.

We have identified each homebuilding division as an operating segment. Our homebuilding operating segments have been aggregated into the reportable segments noted below because they are similar in the following regards: (

1

) economic characteristics; (

2

) housing products; (

3

) class of homebuyer; (

4

) regulatory environments; and (

5

) methods used to construct and sell homes. Our homebuilding reportable segments are as follows:

● West (Arizona, California, Nevada and Washington)

● Mountain (Colorado and Utah)

● East (Virginia, Florida and Maryland)

Our financial services business consists of the operations of the following operating segments: (

1

) HomeAmerican Mortgage Corporation (“HomeAmerican”); (

2

) Allegiant Insurance Company, Inc., A Risk Retention Group (“Allegiant”); (

3

) StarAmerican Insurance Ltd. (“StarAmerican”); (

4

) American Home Insurance Agency, Inc.; and (

5

) American Home Title and Escrow Company. Due to its contributions to consolidated pretax income, we consider HomeAmerican to be a reportable segment (“mortgage operations”). The remaining operating segments have been aggregated into

one

reportable segment (“other”) because they do

not

individually exceed

10

percent of: (

1

) consolidated revenue; (

2

) the greater of (a) the combined reported profit of all operating segments that did

not

report a loss or (b) the positive value of the combined reported loss of all operating segments that reported losses; or (

3

) consolidated assets.

Corporate is a non-operating segment that develops and implements strategic initiatives and supports our operating divisions by centralizing key administrative functions such as finance, treasury, information technology, insurance, risk management, litigation and human resources. Corporate also provides the necessary administrative functions to support MDC as a publicly traded company. A portion of the expenses incurred by Corporate are allocated to the homebuilding operating segments based on their respective percentages of assets, and to a lesser degree, a portion of Corporate expenses are allocated to the financial services segments. A majority of Corporate’s personnel and resources are primarily dedicated to activities relating to the homebuilding segments, and, therefore, the balance of any unallocated Corporate expenses is included in the homebuilding operations

section of our consolidated statements of operations and comprehensive income

.

The following table summarizes home and land sale revenues for our homebuilding operations and revenues for our financial services operations.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2017		2016		2017		2016
Homebuilding	(Dollars in thousands)
West	$	323,758	$	270,031	$	632,837	$	461,406
Mountain		224,356		190,334		397,492		328,158
East		100,857		111,146		182,368		178,691
Total homebuilding revenues	$	648,971	$	571,511	$	1,212,697	$	968,255
Financial Services
Mortgage operations	$	12,697	$	10,702	$	24,880	$	17,572
Other		6,376		5,121		12,172		9,268
Total financial services revenues	$	19,073	$	15,823	$	37,052	$	26,840

The

following table summarizes pretax income (loss) for our homebuilding and financial services operations:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2017			2016			2017			2016
Homebuilding	(Dollars in thousands)
West	$	21,134		$	15,740		$	36,589		$	25,438
Mountain		24,541			20,748			42,771			30,832
East		4,734			4,500			7,376			5,867
Corporate		(10,246	)		(9,582	)		(21,222	)		(22,075	)
Total homebuilding pretax income	$	40,163		$	31,406		$	65,514		$	40,062
Financial Services
Mortgage operations	$	7,670		$	6,445		$	15,236		$	9,768
Other		4,061			2,607			7,504			4,901
Total financial services pretax income	$	11,731		$	9,052		$	22,740		$	14,669
Total pretax income	$	51,894		$	40,458		$	88,254		$	54,731

The following table summarizes total assets for our homebuilding and financial services operations. The assets in our West, Mountain and East segments consist primarily of inventory while the assets in our Corporate segment primarily include our cash and cash equivalents, marketable securities and deferred tax assets. The assets in our financial services segment consist mostly of cash and cash equivalents, marketable securities and mortgage loans held-for-sale.

	June 30,		December 31,
	2017		2016
Homebuilding assets	(Dollars in thousands)
West	$	1,005,590	$	1,035,033
Mountain		630,621		571,139
East		230,096		256,816
Corporate		501,798		454,507
Total homebuilding assets	$	2,368,105	$	2,317,495
Financial services assets
Mortgage operations	$	107,904	$	153,182
Other		60,402		57,912
Total financial services assets	$	168,306	$	211,094
Total assets	$	2,536,411	$	2,528,589