Segment Disclosures

9 Months Ended

Sep. 30, 2011

Segment Disclosures [Abstract]

Segment Disclosures

9. 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 a single reportable segment. The homebuilding reportable segments are comprised of operating divisions in the following geographic areas:

Homebuilding Mid Atlantic – Virginia, West Virginia, Maryland and Delaware

Homebuilding North East – New Jersey and eastern Pennsylvania

Homebuilding Mid East – Kentucky, New York, Ohio, western Pennsylvania, Indiana and Illinois

Homebuilding 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 eliminates in consolidation, is based on the segment’s average net assets employed, and is charged using a consistent methodology in the periods presented. The corporate capital allocation charged to the operating segment allows the Chief Operating Decision Maker to determine whether the operating segment’s results are providing the desired rate of return after covering the Company’s cost of capital. 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 charged to the operating segment upon the determination to terminate a finished lot purchase agreement with the developer, or to restructure 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 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, human resources, etc., 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. Likewise, equity-based compensation expense is not charged to the operating segments.

Following are tables presenting revenues, segment profit and segment assets for each reportable segment, with reconciliations to the amounts reported for the consolidated enterprise, where applicable:

		$395,265		$395,265		$395,265		$395,265
	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
Revenues:
Homebuilding Mid Atlantic	$	417,742	$	395,265	$	1,134,935	$	1,294,839
Homebuilding North East		55,214		72,552		162,122		221,671
Homebuilding Mid East		160,585		138,879		402,118		458,603
Homebuilding South East		63,439		55,239		183,212		211,175
Mortgage Banking		10,496		14,234		35,474		44,599
Total Consolidated Revenues	$	707,476	$	676,169	$	1,917,861	$	2,230,887

		$395,265			$395,265			$395,265			$395,265
	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Profit:
Homebuilding Mid Atlantic	$	42,389		$	47,192		$	113,592		$	162,110
Homebuilding North East		3,981			8,512			11,780			20,440
Homebuilding Mid East		9,716			9,103			20,045			41,418
Homebuilding South East		2,851			1,042			10,315			12,056
Mortgage Banking		5,036			7,515			18,818			27,480
Total Segment Profit		63,973			73,364			174,550			263,504
Contract land deposit impairment reserve (1)		133			545			(2,372	)		8,063
Equity-based compensation expense (2)		(16,261	)		(19,924	)		(47,966	)		(40,750	)
Corporate capital allocation (3)		19,182			16,239			52,502			48,672
Unallocated corporate overhead (4)		(4,355	)		(10,422	)		(35,216	)		(47,391	)
Consolidation adjustments and other (5)		6,365			5,492			15,938			8,065
Corporate interest expense (6)		(95	)		(404	)		(305	)		(4,283	)
Reconciling items sub-total		4,969			(8,474	)		(17,419	)		(27,624	)
Consolidated income before taxes	$	68,942		$	64,890		$	157,131		$	235,880

	September 30, 2011			December 31, 2010
Assets:
Homebuilding Mid Atlantic	$	660,327		$	492,148
Homebuilding North East		56,986			35,827
Homebuilding Mid East		111,766			78,246
Homebuilding South East		57,860			43,041
Mortgage Banking		209,011			196,441
Total Segment Assets		1,095,950			845,703
Consolidated variable interest entity		21,802			22,371
Cash and cash equivalents		492,331			1,190,731
Deferred taxes		171,737			184,930
Intangible assets		48,927			48,927
Contract land deposit reserve		(69,777	)		(73,517	)
Consolidation adjustments and other		38,646			40,916
Reconciling items sub-total		703,666			1,414,358
Consolidated Assets	$	1,799,616		$	2,260,061

(1) This item represents changes to the contract land deposit impairment reserve, which is not allocated to the reportable segments.

(2) The year-to-date increase in equity-based compensation expense is due primarily to the issuance of non-qualified stock options and restricted share units from the 2010 Equity Incentive Plan in the second quarter of 2010.

(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 is as follows for the periods presented:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
Homebuilding Mid Atlantic	$	13,117	$	11,078	$	36,053	$	32,742
Homebuilding North East		1,423		1,476		4,152		4,698
Homebuilding Mid East		3,149		2,350		8,193		7,087
Homebuilding South East		1,493		1,335		4,104		4,145
Total	$	19,182	$	16,239	$	52,502	$	48,672

(4) The decrease in unallocated corporate overhead in the three and nine month periods of 2011 is primarily attributable to a decrease in management incentive costs period over period.

(5) The favorable variance in consolidation adjustments and other in 2011 from 2010 is primarily attributable to changes in the corporate consolidation entries based on production and settlement volumes in the respective quarters.

(6) The decrease in corporate interest expense is attributable to the redemption upon maturity of the outstanding senior notes in the second quarter of 2010 and the termination of the working capital credit facility in the fourth quarter of 2010.