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Segment Disclosures
 9 Months Ended
Sep. 30, 2012
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:

Homebuilding Mid Atlantic – Virginia, West Virginia, Maryland, Delaware and Washington, D.C.

Homebuilding North East – New Jersey and eastern Pennsylvania

Homebuilding Mid East – Kentucky, New York, Ohio, western Pennsylvania, Indiana and Illinois

Homebuilding 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 eliminates in consolidation, is based on the segment’s average net assets employed, and is charged using a consistent methodology in the periods presented. The corporate capital allocation charged to the operating segment allows the Chief Operating Decision Maker to determine whether the operating segment’s results are providing the desired rate of return after covering the Company’s cost of capital. 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 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, human resources, etc., 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. Likewise, equity-based compensation expense is not charged to the operating segments.

Following are tables presenting segment revenues, segment profit and segment assets for each reportable segment, with reconciliations to the amounts reported for the consolidated enterprise, where applicable:

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2012     2011     2012     2011  

Revenues:

         

Homebuilding Mid Atlantic

    $ 509,487      $ 417,742      $ 1,324,802      $ 1,134,935   

Homebuilding North East

      80,525        55,214        203,926        162,122   

Homebuilding Mid East

      174,645        160,585        432,948        402,118   

Homebuilding South East

      89,739        63,439        234,205        183,212   

Mortgage Banking

      16,241        10,496        45,031        35,474   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total consolidated revenues

    $ 870,637      $ 707,476      $ 2,240,912      $ 1,917,861   
  

 

 

    

 

 

    

 

 

    

 

 

  

Profit:

         

Homebuilding Mid Atlantic

    $ 56,763      $ 42,389      $ 130,428      $ 113,592   

Homebuilding North East

      8,383        3,981        16,476        11,780   

Homebuilding Mid East

      13,652        9,716        24,256        20,045   

Homebuilding South East

      5,555        2,851        13,839        10,315   

Mortgage Banking

      10,646        5,036        27,267        18,818   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total segment profit

      94,999        63,973        212,266        174,550   
  

 

 

    

 

 

    

 

 

    

 

 

  

Contract land deposit reserve adjustment (1)

      (764 )      133        586        (2,372 ) 

Equity-based compensation expense

      (16,963 )      (16,261 )      (50,136 )      (47,966 ) 

Corporate capital allocation (2)

      24,712        19,182        66,239        52,502   

Unallocated corporate overhead (3)

      (19,027 )      (4,355 )      (53,039 )      (35,216 ) 

Consolidation adjustments and other (4)

      2,486        6,365        4,562        15,938   

Corporate interest expense

      (1,310 )      (95 )      (1,432 )      (305 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Reconciling items sub-total

      (10,866 )      4,969        (33,220 )      (17,419 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Consolidated income before taxes

    $ 84,133      $ 68,942      $ 179,046      $ 157,131   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

     September 30,
2012		     December 31,
2011		  

Assets:

     

Homebuilding Mid Atlantic

    $ 749,379      $ 626,157   

Homebuilding North East

      67,242        55,948   

Homebuilding Mid East

      147,367        94,593   

Homebuilding South East

      89,217        63,263   

Mortgage Banking

      147,480        270,820   
  

 

 

    

 

 

  

Total segment assets

      1,200,685        1,110,781   
  

 

 

    

 

 

  

Consolidated variable interest entity

      16,210        20,182   

Cash and cash equivalents

      1,071,999        475,566   

Deferred taxes

      163,815        155,881   

Intangible assets

      48,927        48,927   

Contract land deposit reserve

      (69,785 )      (70,333 ) 

Consolidation adjustments and other

      48,875        38,481   
  

 

 

    

 

 

  

Reconciling items sub-total

      1,280,041        668,704   
  

 

 

    

 

 

  

Consolidated assets

    $ 2,480,726      $ 1,779,485   
  

 

 

    

 

 

  

 

(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,		  
     2012      2011      2012      2011  

Homebuilding Mid Atlantic

    $ 15,592       $ 13,117       $ 43,109       $ 36,053   

Homebuilding North East

      2,203         1,423         6,024         4,152   

Homebuilding Mid East

      4,371         3,149         10,619         8,193   

Homebuilding South East

      2,546         1,493         6,487         4,104   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 24,712       $ 19,182       $ 66,239       $ 52,502   
  

 

 

     

 

 

     

 

 

     

 

 

  

 

(3) The increase in unallocated corporate overhead in the three and nine month periods of 2012 was primarily attributable to higher management incentive costs period over period.
(4) The decrease in consolidation adjustments and other in 2012 from 2011 was primarily attributable to changes in the corporate consolidation entries based on production and settlement volumes in the respective quarters.