Segment Disclosures

6 Months Ended

Jun. 30, 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 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 June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Revenues:
Homebuilding Mid Atlantic	$	772,147	$	746,168	$	1,405,718	$	1,302,288
Homebuilding North East		108,766		114,375		205,919		197,368
Homebuilding Mid East		306,257		221,083		550,534		406,512
Homebuilding South East		174,571		139,485		321,074		256,481
Mortgage Banking		26,442		22,522		48,964		38,733
Total consolidated revenues	$	1,388,183	$	1,243,633	$	2,532,209	$	2,201,382

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Profit before taxes:
Homebuilding Mid Atlantic	$	63,730		$	85,041		$	110,339		$	129,607
Homebuilding North East		5,578			12,631			9,643			18,615
Homebuilding Mid East		30,056			15,586			52,789			22,649
Homebuilding South East		15,825			12,625			28,611			21,441
Mortgage Banking		13,973			12,256			24,348			18,881
Total segment profit before taxes		129,162			138,139			225,730			211,193
Reconciling items:
Contract land deposit reserve adjustment (1)		1,307			5,903			2,636			6,806
Equity-based compensation expense		(10,829	)		(12,904	)		(21,378	)		(26,303	)
Corporate capital allocation (2)		46,259			41,398			90,574			78,341
Unallocated corporate overhead		(26,517	)		(19,764	)		(56,026	)		(49,748	)
Consolidation adjustments and other		9,877			1,681			15,862			2,330
Corporate interest expense		(4,539	)		(5,769	)		(9,366	)		(11,572	)
Reconciling items sub-total		15,558			10,545			22,302			(146	)
Consolidated profit before taxes	$	144,720		$	148,684		$	248,032		$	211,047

	June 30, 2016			December 31, 2015
Assets:
Homebuilding Mid Atlantic	$	1,167,199		$	994,804
Homebuilding North East		151,466			133,106
Homebuilding Mid East		264,674			220,094
Homebuilding South East		208,347			175,572
Mortgage Banking		311,685			372,203
Total segment assets		2,103,371			1,895,779
Reconciling items:
Consolidated variable interest entity		1,311			1,749
Cash and cash equivalents		353,176			397,522
Deferred taxes		168,076			161,805
Intangible assets and goodwill		52,218			52,909
Contract land deposit reserve		(39,602	)		(42,239	)
Consolidation adjustments and other		59,874			44,193
Reconciling items sub-total		595,053			615,939
Consolidated assets	$	2,698,424		$	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 June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Corporate capital allocation charge:
Homebuilding Mid Atlantic	$	28,766	$	26,258	$	55,951	$	49,667
Homebuilding North East		4,447		3,805		9,400		7,115
Homebuilding Mid East		7,458		6,672		14,157		12,607
Homebuilding South East		5,588		4,663		11,066		8,952
Total	$	46,259	$	41,398	$	90,574	$	78,341