Segment Disclosures

9 Months Ended

Sep. 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 September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Revenues:
Homebuilding Mid Atlantic	$	1,012,056	$	991,077	$	2,875,411	$	2,807,251
Homebuilding North East	120,478		152,858		364,909		423,190
Homebuilding Mid East	406,145		391,933		1,104,603		1,045,458
Homebuilding South East	334,652		273,477		929,062		774,002
Mortgage Banking	37,933		43,062		124,484		119,225
Total consolidated revenues	$	1,911,264	$	1,852,407	$	5,398,469	$	5,169,126



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Income before taxes:
Homebuilding Mid Atlantic	$	124,900		$	115,180		$	348,067		$	318,447
Homebuilding North East	13,164			18,560			36,187			51,041
Homebuilding Mid East	50,210			51,744			125,976			121,129
Homebuilding South East	39,721			31,426			105,582			83,867
Mortgage Banking	22,835			27,183			78,566			69,418
Total segment profit before taxes	250,830			244,093			694,378			643,902
Reconciling items:
Equity-based compensation expense (1)	(20,770		)	(23,586		)	(58,680		)	(51,690		)
Corporate capital allocation (2)	57,887			55,438			168,621			160,091
Unallocated corporate overhead	(27,914		)	(20,424		)	(89,003		)	(74,211		)
Consolidation adjustments and other	13,107			142			33,141			22,173
Corporate interest expense	(5,966		)	(5,953		)	(17,964		)	(17,971		)
Reconciling items sub-total	16,344			5,617			36,115			38,392
Consolidated income before taxes	$	267,174		$	249,710		$	730,493		$	682,294


(1)	The increase in equity-based compensation expense for the nine-month period ended September 30, 2019 was primarily attributable to incurring a full nine months of expense for the equity awards granted 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 September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Corporate capital allocation charge:
Homebuilding Mid Atlantic	$	31,504	$	31,733	$	93,297	$	93,682
Homebuilding North East	5,028		4,565		14,381		13,325
Homebuilding Mid East	9,791		9,541		28,303		26,571
Homebuilding South East	11,564		9,599		32,640		26,513
Total	$	57,887	$	55,438	$	168,621	$	160,091



	September 30, 2019			December 31, 2018
Assets:
Homebuilding Mid Atlantic	$	1,122,806		$	1,018,953
Homebuilding North East	176,567			144,412
Homebuilding Mid East	322,672			290,815
Homebuilding South East	410,556			332,468
Mortgage Banking	482,146			517,075
Total segment assets	2,514,747			2,303,723
Reconciling items:
Cash and cash equivalents	1,068,172			688,783
Deferred taxes	114,579			112,333
Intangible assets and goodwill	49,872			49,989
Operating lease right-of-use assets	63,505			—
Contract land deposit reserve	(27,644		)	(29,216		)
Consolidation adjustments and other	60,128			40,321
Reconciling items sub-total	1,328,612			862,210
Consolidated assets	$	3,843,359		$	3,165,933