Note 4 - Segment Reporting

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

4. Segment Reporting

An operating segment is defined as a component of an enterprise for which discrete financial information is available and is reviewed regularly by the Chief Operating Decision Maker (“CODM”), or decision-making group, to evaluate performance and make operating decisions. We have identified our CODM as two key executives—the Chief Executive Officer (“CEO”) and the Chief Operating Officer (“COO”).

We have identified each homebuilding division as an operating segment. Our homebuilding operating segments have been aggregated into the reportable segments noted below because they are similar in the following regards: (1) economic characteristics; (2) housing products; (3) class of homebuyer; (4) regulatory environments; and (5) methods used to construct and sell homes. Our homebuilding reportable segments are as follows:

● West (Arizona, California, Nevada, Washington and Oregon)

● Mountain (Colorado and Utah)

● East (mid-Atlantic, which includes Virginia and Maryland, and Florida)

Our financial services business consists of the following operating segments: (1) HomeAmerican; (2) Allegiant; (3) StarAmerican; (4) American Home Insurance; and (5) American Home Title. Due to its contributions to consolidated pretax income we consider HomeAmerican to be a reportable segment (“mortgage operations”). The remaining operating segments have been aggregated into one reportable segment (“other”) because they do not individually exceed 10 percent of (1) consolidated revenue; (2) thre greater of (a) combined reported profit of all operating segments that did not report a loss or (b) the positive value of the combined reported loss of all operating segments that reported losses; or (3) consolidated assets.

Corporate is a non-operating segment that develops and implements strategic initiatives and supports our operating divisions by centralizing key administrative functions such as finance, treasury, information technology, insurance, risk management, litigation and human resources. Corporate also provides the necessary administrative functions to support MDC as a publicly traded company. A portion of the expenses incurred by Corporate are allocated to the homebuilding operating segments based on their respective percentages of assets, and to a lesser degree, a portion of Corporate expenses are allocated to the financial services segments. A majority of Corporate’s personnel and resources are primarily dedicated to activities relating to the homebuilding segments, and, therefore, the balance of any unallocated Corporate expenses is included in the homebuilding operations section of our consolidated statements of operations and comprehensive income.

The following tables present revenue and pretax income relating to our homebuilding and financial services operations:

	Year Ended December 31,
	2019		2018		2017
	(Dollars in thousands)
Homebuilding
West	$	1,771,060	$	1,567,141	$	1,316,069
Mountain		1,131,568		1,080,475		805,669
East		302,620		334,195		381,504
Total homebuilding revenues	$	3,205,248	$	2,981,811	$	2,503,242
Financial Services
Mortgage operations	$	55,222	$	53,476	$	48,841
Other		32,783		29,929		25,531
Total financial services revenues	$	88,005	$	83,405	$	74,372
Total revenues	$	3,293,253	$	3,065,216	$	2,577,614

	Year Ended December 31,
	2019			2018			2017
	(Dollars in thousands)
Homebuilding
West	$	163,069		$	128,829		$	79,719
Mountain		136,313			134,710			86,428
East		9,857			12,611			14,418
Corporate 1		(64,477	)		(58,656	)		5,374
Total homebuilding pretax income	$	244,762		$	217,494		$	185,939
Financial Services
Mortgage operations	$	29,312		$	31,920		$	28,628
Other		30,915			14,440			15,165
Total financial services pretax income	$	60,227		$	46,360		$	43,793
Total pretax income	$	304,989		$	263,854		$	229,732

¹ The pretax gain for the year ended December 31, 2017 was driven by $53.6 million in realized gains due to the sale of investments.

The following table summarizes total assets for our homebuilding and financial services operations. The assets in our West, Mountain and East segments consist primarily of inventory while the assets in our Corporate segment primarily include cash and cash equivalents, marketable securities, and our deferred tax assets. The assets in our financial services operations consist mostly of cash and cash equivalents, marketable securities and mortgage loans held-for-sale.

	December 31,
	2019		2018
	(Dollars in thousands)
Homebuilding Assets
West	$	1,461,645	$	1,301,374
Mountain		869,665		793,150
East		194,592		169,485
Corporate		505,507		484,193
Total homebuilding assets	$	3,031,409	$	2,748,202
Financial Services
Mortgage operations	$	209,946	$	159,677
Other		97,001		93,198
Total financial services assets	$	306,947	$	252,875
Total assets	$	3,338,356	$	3,001,077