Segment Disclosures

3 Months Ended

Mar. 31, 2016

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 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 March 31,
	2016		2015
Revenues:
Homebuilding Mid Atlantic	$	633,571	$	556,120
Homebuilding North East		97,153		82,993
Homebuilding Mid East		244,277		185,429
Homebuilding South East		146,503		116,996
Mortgage Banking		22,522		16,211
Total consolidated revenues	$	1,144,026	$	957,749

	Three Months Ended March 31,
	2016			2015
Profit before taxes:
Homebuilding Mid Atlantic	$	46,609		$	44,566
Homebuilding North East		4,065			5,983
Homebuilding Mid East		22,733			7,063
Homebuilding South East		12,786			8,815
Mortgage Banking		10,375			6,625
Total segment profit before taxes		96,568			73,052
Reconciling items:
Contract land deposit reserve adjustment (1)		1,329			903
Equity-based compensation expense		(10,549	)		(13,399	)
Corporate capital allocation (2)		44,315			36,945
Unallocated corporate overhead		(29,509	)		(29,984	)
Consolidation adjustments and other		5,985			649
Corporate interest expense		(4,827	)		(5,803	)
Reconciling items sub-total		6,744			(10,689	)
Consolidated profit before taxes	$	103,312		$	62,363

	March 31, 2016			December 31, 2015
Assets:
Homebuilding Mid Atlantic	$	1,204,871		$	994,804
Homebuilding North East		136,718			133,106
Homebuilding Mid East		250,580			220,094
Homebuilding South East		189,437			175,572
Mortgage Banking		227,764			372,203
Total segment assets		2,009,370			1,895,779
Reconciling items:
Consolidated variable interest entity		1,731			1,749
Cash and cash equivalents		302,945			397,522
Deferred taxes		164,932			161,805
Intangible assets and goodwill		52,563			52,909
Contract land deposit reserve		(40,910	)		(42,239	)
Consolidation adjustments and other		51,020			44,193
Reconciling items sub-total		532,281			615,939
Consolidated assets	$	2,541,651		$	2,511,718

(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 March 31,
	2016		2015
Corporate capital allocation charge:
Homebuilding Mid Atlantic	$	27,186	$	23,411
Homebuilding North East		4,953		3,310
Homebuilding Mid East		6,699		5,935
Homebuilding South East		5,477		4,289
Total	$	44,315	$	36,945