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Segment Information, Nature of Operations, and Certain Concentrations | 12 Months Ended
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Dec. 31, 2023
Segment Reporting [Abstract] |
Segment Information, Nature of Operations, and Certain Concentrations | 2. Segment Information, Nature of Operations, and Certain Concentrations Our homebuilding operations primarily construct and sell single-family detached homes, townhomes and condominium buildings under three trade names: Ryan Homes, NVHomes and Heartland Homes. The Ryan Homes product is marketed primarily to first-time and first-time move-up buyers. Ryan Homes operates in thirty-six metropolitan areas located in Maryland, Virginia, Washington, D.C., Delaware, West Virginia, Pennsylvania, Ohio, New York, New Jersey, Indiana, Illinois, North Carolina, South Carolina, Georgia, Florida and Tennessee. The NVHomes and Heartland Homes products are marketed primarily to move-up and luxury buyers. NVHomes operates in Delaware, New Jersey, and the Washington, D.C., Baltimore, MD and Philadelphia, PA metropolitan areas. Heartland Homes operates in the Pittsburgh, PA metropolitan area. Our mortgage banking operations primarily operate in the markets where we have homebuilding operations, as substantially all of our loan closing activity is for our homebuilding customers. Our mortgage banking business generates revenues primarily from origination fees, gains on sales of loans, and title fees. The following disclosure includes four homebuilding reportable segments that aggregate geographically our 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, Tennessee, Florida and Georgia
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 our cost of capital. Assets not allocated to the operating segments are not included in either the operating segment's corporate capital allocation charge or the CODM's evaluation of the operating segment's performance. We record 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 termination of an LPA with the developer, or the restructuring of an LPA 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 income and expense. Our overhead functions, such as accounting, treasury and human resources are centrally performed and the costs are not allocated to our 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 our operating segments. External corporate interest expense primarily consists of interest charges on our 3.00% Senior Notes due 2030 (the “Senior Notes”), which are not charged to the operating segments because the charges are included in the corporate capital allocation discussed above. The following tables present certain segment financial data, with reconciliations to the amounts reported for the consolidated company, where applicable:
|  | Year Ended December 31,
|  | 2023 |  | 2022 |  | 2021
Revenues: |  |  |  |  |  |
Homebuilding Mid Atlantic |  | $ | 4,189,957 |  |  | $ | 4,766,329 |  |  | $ | 4,049,871 |
Homebuilding North East |  | 948,289 |  |  | 892,543 |  |  | 767,828 |
Homebuilding Mid East |  | 1,723,514 |  |  | 2,147,262 |  |  | 1,891,729 |
Homebuilding South East |  | 2,452,845 |  |  | 2,520,636 |  |  | 1,992,265 |
Mortgage Banking |  | 203,597 |  |  | 199,664 |  |  | 249,332 |
Consolidated revenues |  | $ | 9,518,202 |  |  | $ | 10,526,434 |  |  | $ | 8,951,025 |
|  | Year Ended December 31,
|  | 2023 |  | 2022 |  | 2021
Profit before taxes: |  |  |  |  |  |
Homebuilding Mid Atlantic |  | $ | 745,323 |  |  | $ | 994,027 |  |  | $ | 734,941 |
Homebuilding North East |  | 169,012 |  |  | 157,333 |  |  | 105,432 |
Homebuilding Mid East |  | 257,865 |  |  | 343,236 |  |  | 271,756 |
Homebuilding South East |  | 440,538 |  |  | 577,030 |  |  | 329,982 |
Mortgage Banking |  | 138,313 |  |  | 125,756 |  |  | 176,251 |
Total segment profit |  | 1,751,051 |  |  | 2,197,382 |  |  | 1,618,362 |
Reconciling items: |  |  |  |  |  |
Contract land deposit reserve adjustment (1) |  | 3,279 |  |  | (27,300) |  |  | 22,163 |
Equity-based compensation expense (2) |  | (99,507) |  |  | (82,537) |  |  | (58,234) |
Corporate capital allocation (3) |  | 288,805 |  |  | 302,904 |  |  | 252,787 |
Unallocated corporate overhead |  | (175,208) |  |  | (129,998) |  |  | (139,611) |
Consolidation adjustments and other (4) |  | 44,619 |  |  | (1,719) |  |  | (56,511) |
Corporate interest income |  | 142,083 |  |  | 32,457 |  |  | 2,840 |
Corporate interest expense |  | (26,749) |  |  | (37,995) |  |  | (51,393) |
Reconciling items sub-total |  | 177,322 |  |  | 55,812 |  |  | (27,959) |
Consolidated profit before taxes |  | $ | 1,928,373 |  |  | $ | 2,253,194 |  |  | $ | 1,590,403 |
(1)This item represents changes to the contract land deposit impairment reserve, which are not allocated to the reportable segments. See further discussion of contract land deposit impairment charges in Note 3. (2)The increase in equity-based compensation expense in both 2023 and 2022 was primarily attributable to a four year block grant of Options and RSUs in May 2022. See Note 11 for additional discussion of equity-based compensation. (3)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 years presented:
|  | Year Ended December 31,
|  | 2023 |  | 2022 |  | 2021
Corporate capital allocation charge: |  |  |  |  |  |
Homebuilding Mid Atlantic |  | $ | 135,618 |  |  | $ | 143,251 |  |  | $ | 124,316 |
Homebuilding North East |  | 33,269 |  |  | 30,623 |  |  | 25,431 |
Homebuilding Mid East |  | 39,005 |  |  | 51,376 |  |  | 43,686 |
Homebuilding South East |  | 80,913 |  |  | 77,654 |  |  | 59,354 |
Total corporate capital allocation charge |  | $ | 288,805 |  |  | $ | 302,904 |  |  | $ | 252,787 |
(4) The consolidation adjustments and other in each period are primarily driven by changes in units under construction as well as significant fluctuations in lumber prices year over year. Our reportable segments' results include the intercompany profits of our production facilities for home packages delivered to our homebuilding divisions. Costs related to homes not yet settled are reversed through the consolidation adjustment and recorded in inventory. These costs are subsequently recorded through the consolidation adjustment when the respective homes are settled. The consolidation adjustment in 2021 was negatively impacted by a higher number of units under construction as of the end of the year compared to the prior year end, resulting in an increase in the reversal of intercompany profits year over year through the consolidation adjustment. In 2022, the consolidation adjustment was favorably impacted by a reduction in the number of units and value of the units under construction, resulting in a decrease in intercompany profits deferred. The consolidation adjustment in 2023 was favorably impacted by a reduction in the value of units under construction, resulting in a decrease in intercompany profits deferred. This favorable impact was offset partially by the recognition of previously deferred home package costs that included higher priced lumber.
|  | As of December 31,
|  | 2023 |  | 2022
Assets: |  |  |  |
Homebuilding Mid Atlantic |  | $ | 1,252,360 |  |  | $ | 1,152,564 |
Homebuilding North East |  | 314,904 |  |  | 250,001 |
Homebuilding Mid East |  | 368,154 |  |  | 378,833 |
Homebuilding South East |  | 796,505 |  |  | 697,923 |
Mortgage Banking |  | 452,323 |  |  | 406,456 |
Total segment assets |  | 3,184,246 |  |  | 2,885,777 |
Reconciling items: |  |  |  |
Cash and cash equivalents |  | 3,126,472 |  |  | 2,503,424 |
Deferred taxes |  | 148,005 |  |  | 143,585 |
Intangible assets and goodwill |  | 49,368 |  |  | 49,368 |
Operating lease right-of-use assets |  | 70,384 |  |  | 71,081 |
Finance lease right-of-use assets |  | 13,310 |  |  | 13,745 |
Contract land deposit reserve |  | (53,397) |  |  | (57,060) |
Consolidation adjustments and other |  | 63,369 |  |  | 51,053 |
Reconciling items sub-total |  | 3,417,511 |  |  | 2,775,196 |
Consolidated assets |  | $ | 6,601,757 |  |  | $ | 5,660,973 |
|  | Year Ended December 31,
|  | 2023 |  | 2022 |  | 2021
Interest income: |  |  |  |  |  |
Mortgage Banking |  | $ | 16,687 |  |  | $ | 11,853 |  |  | $ | 8,725 |
Total segment interest income |  | 16,687 |  |  | 11,853 |  |  | 8,725 |
Other unallocated interest income |  | 142,087 |  |  | 32,458 |  |  | 3,154 |
Consolidated interest income |  | $ | 158,774 |  |  | $ | 44,311 |  |  | $ | 11,879 |
|  | Year Ended December 31,
|  | 2023 |  | 2022 |  | 2021
Interest expense: |  |  |  |  |  |
Homebuilding Mid Atlantic |  | $ | 135,679 |  |  | $ | 143,322 |  |  | $ | 124,385 |
Homebuilding North East |  | 33,310 |  |  | 30,658 |  |  | 25,463 |
Homebuilding Mid East |  | 39,021 |  |  | 51,384 |  |  | 43,695 |
Homebuilding South East |  | 80,921 |  |  | 77,685 |  |  | 59,381 |
Mortgage Banking |  | 865 |  |  | 1,384 |  |  | 1,587 |
Total segment interest expense |  | 289,796 |  |  | 304,433 |  |  | 254,511 |
Corporate capital allocation (3) |  | (288,805) |  |  | (302,904) |  |  | (252,787) |
Senior Notes and other interest |  | 26,749 |  |  | 37,995 |  |  | 51,393 |
Consolidated interest expense |  | $ | 27,740 |  |  | $ | 39,524 |  |  | $ | 53,117 |
|  | Year Ended December 31,
|  | 2023 |  | 2022 |  | 2021
Depreciation and amortization: |  |  |  |  |  |
Homebuilding Mid Atlantic |  | $ | 5,914 |  |  | $ | 5,923 |  |  | $ | 6,183 |
Homebuilding North East |  | 1,125 |  |  | 1,216 |  |  | 1,628 |
Homebuilding Mid East |  | 3,724 |  |  | 3,948 |  |  | 4,259 |
Homebuilding South East |  | 3,218 |  |  | 3,093 |  |  | 3,325 |
Mortgage Banking |  | 1,296 |  |  | 1,135 |  |  | 1,283 |
Total segment depreciation and amortization |  | 15,277 |  |  | 15,315 |  |  | 16,678 |
Unallocated corporate |  | 1,639 |  |  | 2,081 |  |  | 2,785 |
Consolidated depreciation and amortization |  | $ | 16,916 |  |  | $ | 17,396 |  |  | $ | 19,463 |

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