Note 3 - Segment Reporting

3 Months Ended

Mar. 31, 2018

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 (“CEO”) and the Chief Operating Officer (“COO”).

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, Washington and Oregon)

● Mountain (Colorado and Utah)

● East (Virginia, Florida and Maryland)

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

1

) HomeAmerican; (

2

) Allegiant; (

3

) 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 revenues for our homebuilding and financial services operations:

	Three Months Ended
	March 31,
	2018		2017
	(Dollars in thousands)
Homebuilding
West	$	319,509	$	309,079
Mountain		208,632		173,136
East		79,547		81,511
Total homebuilding revenues	$	607,688	$	563,726
Financial Services
Mortgage operations	$	12,696	$	12,183
Other		6,339		5,796
Total financial services revenues	$	19,035	$	17,979

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

	Three Months Ended
	March 31,
	2018			2017
	(Dollars in thousands)
Homebuilding
West	$	24,373		$	15,455
Mountain		24,185			18,230
East		3,375			2,642
Corporate		(11,472	)		(10,976	)
Total homebuilding pretax income	$	40,461		$	25,351
Financial Services
Mortgage operations	$	7,520		$	7,566
Other		2,551			3,443
Total financial services pretax income	$	10,071		$	11,009
Total pretax income	$	50,532		$	36,360

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.

	March 31,		December 31,
	2018		2017
	(Dollars in thousands)
Homebuilding assets
West	$	1,187,865	$	1,084,756
Mountain		717,796		674,057
East		189,483		201,684
Corporate		472,372		597,589
Total homebuilding assets	$	2,567,516	$	2,558,086
Financial services assets
Mortgage operations	$	128,931	$	152,345
Other		90,715		69,861
Total financial services assets	$	219,646	$	222,206
Total assets	$	2,787,162	$	2,780,292