Segment Disclosures

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

Segment Disclosures

12. 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:

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 and Florida

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, 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 neither 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 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. 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 (the “Senior Notes”) 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,
	2014			2013			2014			2013
Revenues:
Homebuilding Mid Atlantic	$	657,825		$	594,902		$	1,122,855		$	1,026,770
Homebuilding North East		92,438			82,260			171,230			144,871
Homebuilding Mid East		221,088			213,463			371,736			384,219
Homebuilding South East		112,729			101,585			217,446			187,218
Mortgage Banking		17,974			17,682			30,097			37,070
Total consolidated revenues	$	1,102,054		$	1,009,892		$	1,913,364		$	1,780,148
Profit:
Homebuilding Mid Atlantic	$	67,347		$	48,727		$	108,358		$	85,266
Homebuilding North East		8,398			6,397			14,705			10,083
Homebuilding Mid East		11,116			9,412			10,867			11,235
Homebuilding South East		7,895			5,101			15,941			8,748
Mortgage Banking		7,427			9,316			9,267			21,118
Total segment profit		102,183			78,953			159,138			136,450
Contract land deposit reserve adjustment (1)		1,672			2,845			3,655			3,852
Equity-based compensation expense (2)		(15,938	)		(10,589	)		(26,641	)		(18,652	)
Corporate capital allocation (3)		34,511			29,673			63,477			55,291
Unallocated corporate overhead		(15,513	)		(20,972	)		(41,473	)		(46,170	)
Consolidation adjustments and other		7,488			5,479			11,629			15,138
Corporate interest expense		(5,579	)		(5,208	)		(11,254	)		(10,623	)
Reconciling items sub-total		6,641			1,228			(607	)		(1,164	)
Consolidated income before taxes	$	108,824		$	80,181		$	158,531		$	135,286

	June 30, 2014			December 31, 2013
Assets:
Homebuilding Mid Atlantic	$	944,257		$	810,270
Homebuilding North East		95,993			84,958
Homebuilding Mid East		223,559			172,167
Homebuilding South East		146,000			106,389
Mortgage Banking		204,518			253,421
Total segment assets		1,614,327			1,427,205
Consolidated variable interest entity		6,802			7,268
Cash and cash equivalents		538,940			844,274
Deferred taxes		166,695			162,378
Intangible assets and goodwill		54,982			55,674
Contract land deposit reserve		(55,869	)		(59,761	)
Consolidation adjustments and other		56,186			49,110
Reconciling items sub-total		767,736			1,058,943
Consolidated assets	$	2,382,063		$	2,486,148

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

(2) The increase in equity-based compensation expense in the three month period ended June 30, 2014 was attributable to the issuance of Options under the 2014 Plan during the second quarter of 2014. The increase in equity-based compensation expense in the six month period ended June 30, 2014 is primarily attributable to the second quarter 2014 Options granted and RSUs granted in the second quarter of 2013. See Note 6 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 periods presented:

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Homebuilding Mid Atlantic	$	21,742	$	18,609	$	39,898	$	34,716
Homebuilding North East		2,733		2,353		5,182		4,347
Homebuilding Mid East		6,180		5,716		11,478		10,731
Homebuilding South East		3,856		2,995		6,919		5,497
Total	$	34,511	$	29,673	$	63,477	$	55,291