Segment Disclosures |
Segment Disclosures The following disclosure includes four homebuilding reportable segments that aggregate geographically the Company’s homebuilding operating segments, and the mortgage banking operations presented as one reportable segment. The homebuilding 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 the Company’s cost of capital. In addition, certain assets, including goodwill and intangible assets and consolidation adjustments as discussed further below, are not allocated to the operating segments as those assets are neither included in the operating segment’s corporate capital allocation charge, nor in the CODM’s evaluation of the operating segment’s performance. The Company records 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 a Lot Purchase Agreement with the developer, or the restructuring of a Lot Purchase Agreement 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. NVR’s overhead functions, such as accounting, treasury and human resources, are centrally performed and the costs are not allocated to the Company’s 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 the Company’s operating segments. External corporate interest expense primarily consists of interest charges on the Company’s 3.95% Senior Notes due 2022 (the “Senior Notes”) and is 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 September 30, | | Nine Months Ended September 30, | | | 2017 | | 2016 | | 2017 | | 2016 | Revenues: | | | | | | | | | Homebuilding Mid Atlantic | | $ | 927,551 |
| | $ | 873,490 |
| | $ | 2,521,967 |
| | $ | 2,279,207 |
| Homebuilding North East | | 141,033 |
| | 123,754 |
| | 374,804 |
| | 329,674 |
| Homebuilding Mid East | | 338,900 |
| | 327,387 |
| | 895,168 |
| | 877,921 |
| Homebuilding South East | | 226,242 |
| | 182,820 |
| | 602,088 |
| | 503,894 |
| Mortgage Banking | | 34,194 |
| | 30,118 |
| | 95,477 |
| | 79,082 |
| Total consolidated revenues | | $ | 1,667,920 |
| | $ | 1,537,569 |
| | $ | 4,489,504 |
| | $ | 4,069,778 |
|
| | | | | | | | | | | | | | | | | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | 2017 | | 2016 | | 2017 | | 2016 | Profit before taxes: | | | | | | | | | Homebuilding Mid Atlantic | | $ | 109,417 |
| | $ | 81,137 |
| | $ | 274,527 |
| | $ | 191,476 |
| Homebuilding North East | | 18,762 |
| | 8,711 |
| | 41,980 |
| | 18,354 |
| Homebuilding Mid East | | 44,990 |
| | 34,699 |
| | 103,135 |
| | 87,488 |
| Homebuilding South East | | 26,849 |
| | 16,548 |
| | 64,330 |
| | 45,159 |
| Mortgage Banking | | 19,336 |
| | 18,155 |
| | 53,293 |
| | 42,503 |
| Total segment profit before taxes | | 219,354 |
| | 159,250 |
| | 537,265 |
| | 384,980 |
| Reconciling items: | | | | | | | | | Contract land deposit reserve adjustment (1) | | 1,910 |
| | 785 |
| | (882 | ) | | 3,421 |
| Equity-based compensation expense | | (11,211 | ) | | (11,081 | ) | | (32,678 | ) | | (32,459 | ) | Corporate capital allocation (2) | | 51,904 |
| | 50,032 |
| | 147,737 |
| | 140,606 |
| Unallocated corporate overhead | | (18,768 | ) | | (18,459 | ) | | (69,362 | ) | | (74,485 | ) | Consolidation adjustments and other | | 7,087 |
| | 9,798 |
| | 20,513 |
| | 25,660 |
| Corporate interest expense | | (5,812 | ) | | (5,322 | ) | | (17,000 | ) | | (14,688 | ) | Reconciling items sub-total | | 25,110 |
| | 25,753 |
| | 48,328 |
| | 48,055 |
| Consolidated profit before taxes | | $ | 244,464 |
| | $ | 185,003 |
| | $ | 585,593 |
| | $ | 433,035 |
|
| | | | | | | | | | | | September 30, 2017 | | December 31, 2016 | Assets: | | | | | Homebuilding Mid Atlantic | | $ | 1,163,794 |
| | $ | 1,054,779 |
| Homebuilding North East | | 145,094 |
| | 126,720 |
| Homebuilding Mid East | | 278,609 |
| | 222,736 |
| Homebuilding South East | | 288,473 |
| | 214,225 |
| Mortgage Banking | | 300,365 |
| | 403,250 |
| Total segment assets | | 2,176,335 |
| | 2,021,710 |
| Reconciling items: | | | | | Consolidated variable interest entity | | 1,222 |
| | 1,251 |
| Cash and cash equivalents | | 611,094 |
| | 375,748 |
| Deferred taxes | | 176,892 |
| | 170,652 |
| Intangible assets and goodwill | | 50,490 |
| | 51,526 |
| Contract land deposit reserve | | (32,188 | ) | | (31,306 | ) | Consolidation adjustments and other | | 65,666 |
| | 54,362 |
| Reconciling items sub-total | | 873,176 |
| | 622,233 |
| Consolidated assets | | $ | 3,049,511 |
| | $ | 2,643,943 |
|
| | (1) | This item represents changes to the contract land deposit impairment reserve, which are not allocated to the reportable segments. |
| | (2) | 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 September 30, | | Nine Months Ended September 30, | | | 2017 | | 2016 | | 2017 | | 2016 | Corporate capital allocation charge: | | | | | | | | | Homebuilding Mid Atlantic | | $ | 32,025 |
| | $ | 31,960 |
| | $ | 92,154 |
| | $ | 87,911 |
| Homebuilding North East | | 4,244 |
| | 4,572 |
| | 12,191 |
| | 13,972 |
| Homebuilding Mid East | | 7,747 |
| | 7,366 |
| | 22,024 |
| | 21,523 |
| Homebuilding South East | | 7,888 |
| | 6,134 |
| | 21,368 |
| | 17,200 |
| Total | | $ | 51,904 |
| | $ | 50,032 |
| | $ | 147,737 |
| | $ | 140,606 |
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