Segment Disclosures

9 Months Ended

Sep. 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 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 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. 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 September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Revenues:
Homebuilding Mid Atlantic	$	702,645	$	685,822	$	1,825,500	$	1,712,592
Homebuilding North East		96,015		88,451		267,245		233,322
Homebuilding Mid East		257,649		266,598		629,385		650,817
Homebuilding South East		128,851		126,724		346,297		313,942
Mortgage Banking		18,006		21,372		48,103		58,442
Total consolidated revenues	$	1,203,166	$	1,188,967	$	3,116,530	$	2,969,115

Profit:
Homebuilding Mid Atlantic	$	76,542		$	92,496		$	184,900		$	177,762
Homebuilding North East		9,056			8,031			23,761			18,114
Homebuilding Mid East		18,374			21,823			29,241			33,058
Homebuilding South East		10,093			11,529			26,034			20,277
Mortgage Banking		8,617			12,665			17,884			33,783
Total segment profit		122,682			146,544			281,820			282,994
Contract land deposit reserve adjustment (1)		453			699			4,108			4,551
Equity-based compensation expense (2)		(18,233	)		(11,733	)		(44,874	)		(30,385	)
Corporate capital allocation (3)		42,220			31,297			105,697			86,588
Unallocated corporate overhead		(8,179	)		(13,969	)		(49,652	)		(60,139	)
Consolidation adjustments and other		10,464			(15,743	)		22,093			(605	)
Corporate interest expense		(5,616	)		(5,505	)		(16,870	)		(16,128	)
Reconciling items sub-total		21,109			(14,954	)		20,502			(16,118	)
Consolidated income before taxes	$	143,791		$	131,590		$	302,322		$	266,876

	September 30, 2014			December 31, 2013
Assets:
Homebuilding Mid Atlantic	$	1,022,146		$	810,270
Homebuilding North East		108,597			84,958
Homebuilding Mid East		218,105			172,167
Homebuilding South East		148,140			106,389
Mortgage Banking		225,489			253,421
Total segment assets		1,722,477			1,427,205
Consolidated variable interest entity		6,232			7,268
Cash and cash equivalents		455,387			844,274
Deferred taxes		167,983			162,378
Intangible assets and goodwill		54,637			55,674
Contract land deposit reserve		(54,375	)		(59,761	)
Consolidation adjustments and other		60,735			49,110
Reconciling items sub-total		690,599			1,058,943
Consolidated assets	$	2,413,076		$	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 months ended September 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 nine months ended September 30, 2014 is primarily attributable to the issuance of Options under the 2014 Plan 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 September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Homebuilding Mid Atlantic	$	27,187	$	19,320	$	67,085	$	54,036
Homebuilding North East		3,151		2,487		8,333		6,834
Homebuilding Mid East		7,202		6,137		18,680		16,868
Homebuilding South East		4,680		3,353		11,599		8,850
Total	$	42,220	$	31,297	$	105,697	$	86,588