Note 3 - Segment Reporting

9 Months Ended

Sep. 30, 2019

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, Oregon and Washington)

● Mountain (Colorado and Utah)

● East (mid-Atlantic, which includes Maryland and Virginia, and Florida)

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 revenues for our homebuilding and financial services operations:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
	(Dollars in thousands)
Homebuilding
West	$	410,414	$	409,001	$	1,164,502	$	1,120,316
Mountain		263,802		272,989		760,470		750,162
East		76,058		84,037		205,424		252,845
Total homebuilding revenues	$	750,274	$	766,027	$	2,130,396	$	2,123,323
Financial Services
Mortgage operations	$	14,395	$	11,919	$	36,258	$	39,162
Other		7,993		7,692		22,131		20,856
Total financial services revenues	$	22,388	$	19,611	$	58,389	$	60,018

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

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
	(Dollars in thousands)
Homebuilding
West	$	34,898		$	28,947		$	103,448		$	91,028
Mountain		31,391			34,697			89,077			94,736
East		2,136			3,771			5,761			11,287
Corporate		(19,734	)		(14,432	)		(46,926	)		(41,270	)
Total homebuilding pretax income	$	48,691		$	52,983		$	151,360		$	155,781
Financial Services
Mortgage operations	$	8,468		$	6,702		$	19,700		$	23,262
Other		5,647			7,735			21,683			15,525
Total financial services pretax income	$	14,115		$	14,437		$	41,383		$	38,787
Total pretax income	$	62,806		$	67,420		$	192,743		$	194,568

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 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.

	September 30,		December 31,
	2019		2018
	(Dollars in thousands)
Homebuilding assets
West	$	1,481,549	$	1,301,374
Mountain		873,656		793,150
East		190,677		169,485
Corporate		379,017		484,193
Total homebuilding assets	$	2,924,899	$	2,748,202
Financial services assets
Mortgage operations	$	131,554	$	159,677
Other		102,126		93,198
Total financial services assets	$	233,680	$	252,875
Total assets	$	3,158,579	$	3,001,077