Segment Disclosures

6 Months Ended

Jun. 30, 2013

Segment Reporting [Abstract]

Segment Disclosures

11. 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 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 (“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 June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Revenues:
Homebuilding Mid Atlantic	$	594,902		$	454,504		$	1,026,770		$	815,315
Homebuilding North East		82,260			71,201			144,871			123,401
Homebuilding Mid East		213,463			152,021			384,219			258,303
Homebuilding South East		101,585			77,564			187,218			144,466
Mortgage Banking		17,682			14,493			37,070			28,790
Total consolidated revenues	$	1,009,892		$	769,783		$	1,780,148		$	1,370,275
Profit:
Homebuilding Mid Atlantic	$	48,727		$	44,579		$	85,266		$	73,665
Homebuilding North East		6,397			5,632			10,083			8,093
Homebuilding Mid East		9,412			9,644			11,235			10,604
Homebuilding South East		5,101			4,379			8,748			8,284
Mortgage Banking		9,316			7,879			21,118			16,621
Total segment profit		78,953			72,113			136,450			117,267
Contract land deposit reserve adjustment (1)		2,845			41			3,852			1,350
Equity-based compensation expense (2)		(10,589	)		(16,733	)		(18,652	)		(33,173	)
Corporate capital allocation (3)		29,673			22,555			55,291			41,527
Unallocated corporate overhead (4)		(20,972	)		(15,209	)		(46,170	)		(34,012	)
Consolidation adjustments and other (5)		5,479			1,249			15,138			2,076
Corporate interest expense (6)		(5,208	)		(61	)		(10,623	)		(122	)
Reconciling items sub-total		1,228			(8,158	)		(1,164	)		(22,354	)
Consolidated income before taxes	$	80,181		$	63,955		$	135,286		$	94,913

	June 30, 2013			December 31, 2012
Assets:
Homebuilding Mid Atlantic	$	906,532		$	726,335
Homebuilding North East		86,039			64,568
Homebuilding Mid East		219,485			166,859
Homebuilding South East		116,916			85,521
Mortgage Banking		207,539			215,225
Total segment assets		1,536,511			1,258,508
Consolidated variable interest entity		10,209			15,626
Cash and cash equivalents		773,289			1,139,103
Deferred taxes		150,930			145,618
Intangible assets and goodwill		57,221			58,146
Contract land deposit reserve		(61,186	)		(65,039	)
Consolidation adjustments and other		64,193			52,880
Reconciling items sub-total		994,656			1,346,334
Consolidated assets	$	2,531,167		$	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 for the three and six months ended June 30, 2013 due to restricted share units issued in 2010 under the 2010 Equity Incentive Plan becoming fully vested effective December 31, 2012. This reduction was partially offset by equity-based compensation expense incurred in 2013 related to RSUs issued in May 2013 under the 2010 Equity Incentive Plan.

(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 June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Homebuilding Mid Atlantic	$	18,609	$	14,837	$	34,716	$	27,517
Homebuilding North East		2,353		1,999		4,347		3,821
Homebuilding Mid East		5,716		3,506		10,731		6,248
Homebuilding South East		2,995		2,213		5,497		3,941
Total	$	29,673	$	22,555	$	55,291	$	41,527

(4) The change in unallocated corporate overhead in the three and six month periods 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 periods.

(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.