Segment Disclosures

3 Months Ended

Mar. 31, 2013

Segment Reporting [Abstract]

Segment Disclosures

10. 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, Delaware and Washington, D.C.

Homebuilding North East – New Jersey and eastern Pennsylvania

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

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 (“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 not 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 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. External corporate interest expense is primarily comprised of interest charges on the Company’s 3.95% Senior Notes due 2022 and is not charged to the operating segments because the charges are included in the corporate capital allocation discussed above.

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

	Three Months Ended March 31,
	2013			2012
Revenues:
Homebuilding Mid Atlantic	$	431,868		$	360,811
Homebuilding North East		62,611			52,200
Homebuilding Mid East		170,756			106,282
Homebuilding South East		85,633			66,902
Mortgage Banking		19,388			14,297
Total consolidated revenues	$	770,256		$	600,492
Profit:
Homebuilding Mid Atlantic	$	36,539		$	29,086
Homebuilding North East		3,686			2,461
Homebuilding Mid East		1,823			960
Homebuilding South East		3,647			3,905
Mortgage Banking		11,802			8,742
Total segment profit		57,497			45,154
Contract land deposit reserve adjustment (1)		1,007			1,309
Equity-based compensation expense (2)		(8,063	)		(16,440	)
Corporate capital allocation (3)		25,618			18,972
Unallocated corporate overhead (4)		(25,198	)		(18,803	)
Consolidation adjustments and other (5)		9,659			827
Corporate interest expense (6)		(5,415	)		(61	)
Reconciling items sub-total		(2,392	)		(14,196	)
Consolidated income before taxes	$	55,105		$	30,958
	March 31,			December 31,
	2013			2012
Assets:
Homebuilding Mid Atlantic	$	857,935		$	726,335
Homebuilding North East		76,842			64,568
Homebuilding Mid East		188,454			166,859
Homebuilding South East		95,454			85,521
Mortgage Banking		147,218			215,225
Total segment assets		1,365,903			1,258,508
Consolidated variable interest entity		11,436			15,626
Cash and cash equivalents		1,082,792			1,139,103
Deferred taxes		146,737			145,618
Intangible assets and goodwill		57,746			58,146
Contract land deposit reserve		(64,031	)		(65,039	)
Consolidation adjustments and other		64,472			52,880
Reconciling items sub-total		1,299,152			1,346,334
Consolidated assets	$	2,665,055		$	2,604,842

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

(2) Equity-based compensation expense is lower in the first quarter of 2013 due to restricted share units issued in 2010 under the 2010 Equity Incentive Plan becoming fully vested effective December 31, 2012.

(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 periods presented:

	Three Months Ended March 31,
	2013		2012
Homebuilding Mid Atlantic	$	16,107	$	12,680
Homebuilding North East		1,994		1,822
Homebuilding Mid East		5,015		2,742
Homebuilding South East		2,502		1,728
Total	$	25,618	$	18,972

(4) The change in unallocated corporate overhead in the first quarter of 2013 was primarily attributable to higher employee costs related to increased headcount period over period.

(5) The increase in consolidation adjustments and other in 2013 from 2012 was primarily attributable to changes in the corporate consolidation entries based on production and settlement volumes in the respective quarters.

(6) The increase in corporate interest expense in 2013 from 2012 was attributable to the issuance of 3.95% Senior Notes due 2022 in the third quarter of 2012.