Segment Disclosures

6 Months Ended

Jun. 30, 2019

We disclose four homebuilding reportable segments that aggregate geographically our homebuilding operating segments, and our 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 our cost of capital.

Assets not allocated to the operating segments are not included in either the operating segment’s corporate capital allocation charge or the CODM’s evaluation of the operating segment’s performance. We record 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. Overhead functions such as accounting, treasury and human resources are centrally performed and these costs are not allocated to our 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 our operating segments. External corporate interest expense primarily consists of interest charges on our 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 June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Revenues:
Homebuilding Mid Atlantic	$	982,032	$	973,677	$	1,863,356	$	1,816,173
Homebuilding North East	121,804		147,618		244,431		270,332
Homebuilding Mid East	359,908		363,288		698,457		653,525
Homebuilding South East	293,704		265,880		594,410		500,526
Mortgage Banking	42,746		36,842		86,551		76,163
Total consolidated revenues	$	1,800,194	$	1,787,305	$	3,487,205	$	3,316,719



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Income before taxes:
Homebuilding Mid Atlantic	$	123,802		$	112,221		$	223,166		$	203,268
Homebuilding North East	11,563			16,777			23,023			32,481
Homebuilding Mid East	40,291			42,174			75,766			69,385
Homebuilding South East	30,825			29,203			65,861			52,440
Mortgage Banking	26,173			19,685			55,731			42,235
Total segment profit before taxes	232,654			220,060			443,547			399,809
Reconciling items:
Equity-based compensation expense (1)	(18,577		)	(18,595		)	(37,910		)	(28,104		)
Corporate capital allocation (2)	56,177			53,954			110,735			104,653
Unallocated corporate overhead	(29,354		)	(22,503		)	(61,089		)	(53,787		)
Consolidation adjustments and other	9,836			14,701			20,034			22,031
Corporate interest expense	(6,024		)	(6,031		)	(11,998		)	(12,018		)
Reconciling items sub-total	12,058			21,526			19,772			32,775
Consolidated income before taxes	$	244,712		$	241,586		$	463,319		$	432,584


(1)	The increase in equity-based compensation expense for the six-month period ended June 30, 2019 was primarily attributable to the equity grant in the second quarter of 2018.


(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 June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Corporate capital allocation charge:
Homebuilding Mid Atlantic	$	31,378	$	31,501	$	61,794	$	61,949
Homebuilding North East	4,626		4,580		9,353		8,760
Homebuilding Mid East	9,497		9,057		18,512		17,030
Homebuilding South East	10,676		8,816		21,076		16,914
Total	$	56,177	$	53,954	$	110,735	$	104,653



	June 30, 2019			December 31, 2018
Assets:
Homebuilding Mid Atlantic	$	1,082,646		$	1,018,953
Homebuilding North East	154,143			144,412
Homebuilding Mid East	330,446			290,815
Homebuilding South East	380,499			332,468
Mortgage Banking	537,496			517,075
Total segment assets	2,485,230			2,303,723
Reconciling items:
Cash and cash equivalents	860,956			688,783
Deferred taxes	115,432			112,333
Intangible assets and goodwill	49,911			49,989
Operating lease right-of-use assets	65,027			—
Contract land deposit reserve	(27,892		)	(29,216		)
Consolidation adjustments and other	54,576			40,321
Reconciling items sub-total	1,118,010			862,210
Consolidated assets	$	3,603,240		$	3,165,933