Segment Information, Nature of Operations, and Certain Concentrations

12 Months Ended

Dec. 31, 2022

Segment Reporting [Abstract]

Segment Information, Nature of Operations, and Certain Concentrations

2.    Segment Information, Nature of Operations, and Certain Concentrations

Our homebuilding operations primarily construct and sell single-family detached homes, townhomes and condominium buildings under three trade names: Ryan Homes, NVHomes and Heartland Homes. The Ryan Homes product is marketed primarily to first-time and first-time move-up buyers. Ryan Homes operates in thirty-five metropolitan areas located in Maryland, Virginia, Washington, D.C., Delaware, West Virginia, Pennsylvania, Ohio, New York, New Jersey, Indiana, Illinois, North Carolina, South Carolina, Georgia, Florida and Tennessee.  The NVHomes and Heartland Homes products are marketed primarily to move-up and luxury buyers. NVHomes operates in Delaware and the Washington, D.C., Baltimore, MD and Philadelphia, PA metropolitan areas. Heartland Homes operates in the Pittsburgh, PA metropolitan area. We derived approximately 21% of our 2022 homebuilding revenues from the Washington, D.C. metropolitan area.

Our mortgage banking segment is a regional mortgage banking operation. Substantially all of our loan closing activity is for our homebuilding customers. Our mortgage banking business generates revenues primarily from origination fees, gains on sales of loans, and title fees. A substantial portion of our mortgage operations is conducted in the Washington, D.C. metropolitan area.

The following disclosure includes four homebuilding reportable segments that aggregate geographically our homebuilding operating segments, and the mortgage banking operations presented as a single 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, Tennessee, Florida and Georgia

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 charged to the operating segment upon the termination of an LPA with the developer, or the restructuring of an LPA 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 income and expense. Our overhead functions, such as accounting, treasury and human resources are centrally performed and the 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 3.00% Senior Notes due 2030 (the “Senior Notes”), which are not charged to the operating segments because the charges are included in the corporate capital allocation discussed above.

The following tables present certain segment financial data, with reconciliations to the amounts reported for the consolidated company, where applicable:

	Year Ended December 31,
	2022		2021		2020
Revenues:
Homebuilding Mid Atlantic	$	4,766,329	$	4,049,871	$	3,668,542
Homebuilding North East	892,543		767,828		538,772
Homebuilding Mid East	2,147,262		1,891,729		1,524,667
Homebuilding South East	2,520,636		1,992,265		1,596,908
Mortgage Banking	199,664		249,332		208,034
Consolidated revenues	$	10,526,434	$	8,951,025	$	7,536,923

	Year Ended December 31,
	2022		2021		2020
Profit before taxes:
Homebuilding Mid Atlantic	$	994,027	$	734,941	$	437,849
Homebuilding North East	157,333		105,432		50,677
Homebuilding Mid East	343,236		271,756		168,605
Homebuilding South East	577,030		329,982		205,029
Mortgage Banking	125,756		176,251		143,319
Total segment profit	2,197,382		1,618,362		1,005,479
Reconciling items:
Contract land deposit reserve adjustment (1)	(27,300)		22,163		(24,633)
Equity-based compensation expense (2)	(82,537)		(58,234)		(50,794)
Corporate capital allocation (3)	302,904		252,787		239,233
Unallocated corporate overhead	(129,998)		(139,611)		(114,921)
Consolidation adjustments and other (4)	(1,719)		(56,511)		54,561
Corporate interest income	32,457		2,840		8,464
Corporate interest expense	(37,995)		(51,393)		(39,356)
Reconciling items sub-total	55,812		(27,959)		72,554
Consolidated profit before taxes	$	2,253,194	$	1,590,403	$	1,078,033

(1)This item represents changes to the contract land deposit impairment reserve, which are not allocated to the reportable segments. See further discussion of contract land deposit impairment charges in Note 3.

(2)The increase in equity-based compensation expense in 2022 was primarily attributable to a four year block grant of Options and RSUs in May 2022. See Note 12 for additional discussion of equity-based compensation.

(3)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 years presented:

	Year Ended December 31,
	2022		2021		2020
Corporate capital allocation charge:
Homebuilding Mid Atlantic	$	143,251	$	124,316	$	124,426
Homebuilding North East	30,623		25,431		22,850
Homebuilding Mid East	51,376		43,686		40,256
Homebuilding South East	77,654		59,354		51,701
Total corporate capital allocation charge	$	302,904	$	252,787	$	239,233

(4)    The consolidation adjustments and other in each period are primarily driven by changes in units under construction as well as significant fluctuations in lumber prices year over year. Our reportable segments' results include the intercompany profits of our production facilities for home packages delivered to our homebuilding divisions. Costs related to homes not yet settled are reversed through the consolidation adjustment and recorded in inventory. These costs are subsequently recorded through the consolidation adjustment when the respective homes are settled. The consolidation adjustment in 2021 was negatively impacted by a higher number of units under construction as of the end of the year compared to the prior year end, resulting in an increase in the reversal of intercompany profits year over year through the consolidation adjustment. In 2022, the consolidation adjustment was favorably impacted by a reduction in the number of units under construction year over year, resulting in a decrease in intercompany profits deferred year over year. This favorable impact was offset by the recognition of previously deferred home package costs that included higher priced lumber.

	As of December 31,
	2022		2021
Assets:
Homebuilding Mid Atlantic	$	1,152,564	$	1,322,818
Homebuilding North East	250,001		235,048
Homebuilding Mid East	378,833		438,700
Homebuilding South East	697,923		629,198
Mortgage Banking	406,456		371,685
Total segment assets	2,885,777		2,997,449
Reconciling items:
Cash and cash equivalents	2,503,424		2,545,069
Deferred taxes	143,585		132,894
Intangible assets and goodwill	49,368		49,368
Operating lease right-of-use assets	71,081		59,010
Finance lease right-of-use assets	13,745		14,578
Contract land deposit reserve	(57,060)		(30,041)
Consolidation adjustments and other	51,053		66,148
Reconciling items sub-total	2,775,196		2,837,026
Consolidated assets	$	5,660,973	$	5,834,475

	Year Ended December 31,
	2022		2021		2020
Interest income:
Mortgage Banking	$	11,853	$	8,725	$	8,930
Total segment interest income	11,853		8,725		8,930
Other unallocated interest income	32,458		3,154		8,549
Consolidated interest income	$	44,311	$	11,879	$	17,479

	Year Ended December 31,
	2022		2021		2020
Interest expense:
Homebuilding Mid Atlantic	$	143,322	$	124,385	$	124,486
Homebuilding North East	30,658		25,463		22,859
Homebuilding Mid East	51,384		43,695		40,261
Homebuilding South East	77,685		59,381		51,729
Mortgage Banking	1,384		1,587		1,414
Total segment interest expense	304,433		254,511		240,749
Corporate capital allocation (3)	(302,904)		(252,787)		(239,233)
Senior Notes and other interest	37,995		51,393		39,356
Consolidated interest expense	$	39,524	$	53,117	$	40,872

	Year Ended December 31,
	2022		2021		2020
Depreciation and amortization:
Homebuilding Mid Atlantic	$	5,923	$	6,183	$	6,806
Homebuilding North East	1,216		1,628		1,800
Homebuilding Mid East	3,948		4,259		4,969
Homebuilding South East	3,093		3,325		3,636
Mortgage Banking	1,135		1,283		1,534
Total segment depreciation and amortization	15,315		16,678		18,745
Unallocated corporate	2,081		2,785		3,247
Consolidated depreciation and amortization	$	17,396	$	19,463	$	21,992

	Year Ended December 31,
	2022		2021		2020
Expenditures for property and equipment:
Homebuilding Mid Atlantic	$	7,033	$	7,073	$	5,712
Homebuilding North East	1,420		1,062		1,083
Homebuilding Mid East	4,504		4,813		5,041
Homebuilding South East	3,993		4,142		3,818
Mortgage Banking	1,062		401		265
Total segment expenditures for property and equipment	18,012		17,491		15,919
Unallocated corporate	416		384		200
Consolidated expenditures for property and equipment	$	18,428	$	17,875	$	16,119