Segment Disclosures

9 Months Ended

Sep. 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 September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Revenues:
Homebuilding Mid Atlantic	$	873,490	$	792,532	$	2,279,207	$	2,094,820
Homebuilding North East		123,754		120,143		329,674		317,510
Homebuilding Mid East		327,387		299,157		877,921		705,670
Homebuilding South East		182,820		162,635		503,894		419,116
Mortgage Banking		30,118		27,884		79,082		66,617
Total consolidated revenues	$	1,537,569	$	1,402,351	$	4,069,778	$	3,603,733

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Profit before taxes:
Homebuilding Mid Atlantic	$	81,137		$	88,058		$	191,476		$	217,665
Homebuilding North East		8,711			10,745			18,354			29,359
Homebuilding Mid East		34,699			29,958			87,488			52,607
Homebuilding South East		16,548			17,372			45,159			38,812
Mortgage Banking		18,155			16,966			42,503			35,847
Total segment profit before taxes		159,250			163,099			384,980			374,290
Reconciling items:
Contract land deposit reserve adjustment (1)		785			4,705			3,421			11,511
Equity-based compensation expense		(11,081	)		(13,571	)		(32,459	)		(39,874	)
Corporate capital allocation (2)		50,032			45,690			140,606			124,033
Unallocated corporate overhead		(18,459	)		(18,055	)		(74,485	)		(67,803	)
Consolidation adjustments and other		9,798			9,147			25,660			11,477
Corporate interest expense		(5,322	)		(6,019	)		(14,688	)		(17,591	)
Reconciling items sub-total		25,753			21,897			48,055			21,753
Consolidated profit before taxes	$	185,003		$	184,996		$	433,035		$	396,043

	September 30, 2016			December 31, 2015
Assets:
Homebuilding Mid Atlantic	$	1,223,426		$	994,804
Homebuilding North East		145,191			133,106
Homebuilding Mid East		253,806			220,094
Homebuilding South East		229,682			175,572
Mortgage Banking		326,656			372,203
Total segment assets		2,178,761			1,895,779
Reconciling items:
Consolidated variable interest entity		1,247			1,749
Cash and cash equivalents		249,728			397,522
Deferred taxes		171,941			161,805
Intangible assets and goodwill		51,872			52,909
Contract land deposit reserve		(38,817	)		(42,239	)
Consolidation adjustments and other		48,484			44,193
Reconciling items sub-total		484,455			615,939
Consolidated assets	$	2,663,216		$	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 September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Corporate capital allocation charge:
Homebuilding Mid Atlantic	$	31,960	$	28,743	$	87,911	$	78,412
Homebuilding North East		4,572		4,451		13,972		11,566
Homebuilding Mid East		7,366		7,472		21,523		20,079
Homebuilding South East		6,134		5,024		17,200		13,976
Total	$	50,032	$	45,690	$	140,606	$	124,033