SEGMENT INFORMATION

The Company’s operating segments are its 41 homebuilding divisions, its financial services operations and its other business activities. The homebuilding operating segments are aggregated into six reporting segments and the financial services segment is its own reporting segment. The Company’s reportable homebuilding segments are: East, Midwest, Southeast, South Central, Southwest and West. These reporting segments have homebuilding operations located in the following states:



	East:		Delaware, Georgia (Savannah only), Maryland, New Jersey, North Carolina, Pennsylvania, South Carolina and Virginia
	Midwest:		Colorado, Illinois and Minnesota
	Southeast:		Alabama, Florida, Georgia, Mississippi and Tennessee
	South Central:		Louisiana, Oklahoma and Texas
	Southwest:		Arizona and New Mexico
	West:		California, Hawaii, Nevada, Oregon, Utah and Washington

Homebuilding is the Company’s core business, generating 98% of consolidated revenues in fiscal 2017, 2016 and 2015. The Company’s homebuilding segments are primarily engaged in the acquisition and development of land and the construction and sale of residential homes in 26 states and 79 markets across the United States. The homebuilding segments generate most of their revenues from the sale of completed homes and to a lesser extent from the sale of land and lots.

The Company’s financial services segment provides mortgage financing and title agency services to homebuyers in many of the Company’s homebuilding markets. The segment generates the substantial majority of its revenues from originating and selling mortgages and collecting fees for title insurance agency and closing services. The Company sells substantially all of the mortgages it originates and the related servicing rights to third-party purchasers.

In addition to its core homebuilding and financial services operations, the Company has subsidiaries that engage in other business activities. These subsidiaries conduct insurance-related operations, construct and own income-producing rental properties, own non-residential real estate including ranch land and improvements and own and operate oil and gas related assets. The operating results of these subsidiaries are immaterial for separate reporting and therefore are grouped together and presented as other. One of these subsidiaries, DHI Communities, recently began developing and constructing multi-family rental properties on land parcels the Company already owned and currently has four projects under active construction. Costs incurred by DHI Communities totaled $93.7 million at September 30, 2017 and are included in property and equipment in the Financial Services and Other section of the consolidated balance sheet. The combined assets of all of the Company’s subsidiaries engaged in other business activities totaled $143.3 million and $54.9 million at September 30, 2017 and 2016, respectively, and the combined pre-tax loss of these subsidiaries was $11.7 million, $9.0 million and $0 in fiscal 2017, 2016 and 2015, respectively.

The accounting policies of the reporting segments are described throughout Note A. Financial information relating to the Company’s reporting segments is as follows:



	Year Ended September 30,
	2017			2016			2015
				(In millions)
Revenues
Homebuilding revenues:
East	$	1,640.1		$	1,446.5		$	1,333.6
Midwest	736.5			651.7			666.1
Southeast	4,087.6			3,463.5			2,890.6
South Central	3,383.1			2,995.1			2,725.2
Southwest	597.5			388.1			336.1
West	3,296.7			2,916.9			2,607.4
Homebuilding revenues	13,741.5			11,861.8			10,559.0
Financial services revenues	349.5			295.6			265.0
Total revenues	$	14,091.0		$	12,157.4		$	10,824.0
Inventory Impairments
East	$	10.5		$	12.3		$	14.3
Midwest	1.0			—			—
Southeast	2.4			0.7			8.8
South Central	1.6			1.0			1.4
Southwest	1.4			6.0			—
West	6.3			0.3			20.4
Total inventory impairments	$	23.2		$	20.3		$	44.9
Income Before Income Taxes (1) (2)
Homebuilding pre-tax income:
East	$	153.9		$	138.7		$	94.2
Midwest	49.1			44.3			49.8
Southeast	450.3			388.4			278.7
South Central	439.1			374.8			296.6
Southwest	39.6			7.3			13.1
West	357.3			310.9			285.9
Homebuilding pre-tax income	1,489.3			1,264.4			1,018.3
Financial services pre-tax income	124.5			98.1			105.1
Homebuilding and financial services pre-tax income	1,613.8			1,362.5			1,123.4
Other pre-tax loss	(11.7		)	(9.0		)	—
Income before income taxes	$	1,602.1		$	1,353.5		$	1,123.4

_____________

(1)

Expenses maintained at the corporate level consist primarily of interest and property taxes, which are capitalized and amortized to cost of sales or expensed directly, and the expenses related to operating the Company’s corporate office. The amortization of capitalized interest and property taxes is allocated to each segment based on the segment’s cost of sales, while expenses associated with the corporate office are allocated to each segment based on the segment’s inventory balances.


(2)	The operating results of certain subsidiaries that are immaterial for separate reporting are grouped together and presented as other.



	September 30,
	2017		2016
	(In millions)
Homebuilding Inventories (1):
East	$	1,068.9	$	891.1
Midwest	492.6		441.2
Southeast	2,392.3		2,070.3
South Central	2,199.4		2,075.6
Southwest	506.1		371.1
West	2,352.5		2,247.6
Corporate and unallocated (2)	225.3		244.0
Total homebuilding inventories	$	9,237.1	$	8,340.9

___________


(1)	Homebuilding inventories are the only assets included in the measure of homebuilding segment assets used by the Company’s chief operating decision makers.


(2)	Corporate and unallocated consists primarily of capitalized interest and property taxes.