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Segment Disclosures
9 Months Ended
Sep. 30, 2017
Segment Reporting [Abstract]  
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