Segment Disclosures

9 Months Ended

Sep. 30, 2015

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:

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, 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 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 and human resources, 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 primarily consists 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,
	2015		2014		2015		2014
Revenues:
Homebuilding Mid Atlantic	$	792,532	$	702,645	$	2,094,820	$	1,825,500
Homebuilding North East		120,143		96,015		317,510		267,245
Homebuilding Mid East		299,157		257,649		705,670		629,385
Homebuilding South East		162,635		128,851		419,116		346,297
Mortgage Banking		27,884		18,006		66,617		48,103
Total consolidated revenues	$	1,402,351	$	1,203,166	$	3,603,733	$	3,116,530

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Profit before taxes:
Homebuilding Mid Atlantic	$	88,058		$	76,542		$	217,665		$	184,900
Homebuilding North East		10,745			9,056			29,359			23,761
Homebuilding Mid East		29,958			18,374			52,607			29,241
Homebuilding South East		17,372			10,093			38,812			26,034
Mortgage Banking		16,966			8,617			35,847			17,884
Total segment profit		163,099			122,682			374,290			281,820
Reconciling items:
Contract land deposit reserve adjustment (1)		4,705			453			11,511			4,108
Equity-based compensation expense		(13,571	)		(18,233	)		(39,874	)		(44,874	)
Corporate capital allocation (2)		45,690			42,220			124,033			105,697
Unallocated corporate overhead		(18,055	)		(8,179	)		(67,803	)		(49,652	)
Consolidation adjustments and other		9,147			10,464			11,477			22,093
Corporate interest expense		(6,019	)		(5,616	)		(17,591	)		(16,870	)
Reconciling items sub-total		21,897			21,109			21,753			20,502
Consolidated profit before taxes	$	184,996		$	143,791		$	396,043		$	302,322

	September 30, 2015			December 31, 2014
Assets:
Homebuilding Mid Atlantic	$	1,094,256		$	917,689
Homebuilding North East		135,579			103,631
Homebuilding Mid East		249,269			192,781
Homebuilding South East		180,531			144,939
Mortgage Banking		299,021			255,969
Total segment assets		1,958,656			1,615,009
Reconciling items:
Consolidated variable interest entity		1,799			3,590
Cash and cash equivalents		375,886			514,780
Deferred taxes		172,032			165,189
Intangible assets and goodwill		53,254			54,291
Contract land deposit reserve		(44,532	)		(56,074	)
Consolidation adjustments and other		53,587			54,550
Reconciling items sub-total		612,026			736,326
Consolidated assets	$	2,570,682		$	2,351,335

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

(2) 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,
	2015		2014		2015		2014
Corporate capital allocation charge:
Homebuilding Mid Atlantic	$	28,743	$	27,187	$	78,412	$	67,085
Homebuilding North East		4,451		3,151		11,566		8,333
Homebuilding Mid East		7,472		7,202		20,079		18,680
Homebuilding South East		5,024		4,680		13,976		11,599
Total	$	45,690	$	42,220	$	124,033	$	105,697