Segment Information

An operating segment is defined as a component of an enterprise for which separate financial information is available and for which segment results are evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. We have identified each of our homebuilding divisions as an operating segment. Our homebuilding operating segments have been aggregated into four homebuilding reporting segments based primarily on similarities in economic and geographic characteristics, product types, regulatory environments, methods used to sell and construct homes and land acquisition characteristics. We also have one financial services reporting segment. Management evaluates segment performance primarily based on segment pretax results.

As of November 30, 2017, our homebuilding reporting segments conducted ongoing operations in the following states:

West Coast: California

Southwest: Arizona and Nevada

Central: Colorado and Texas

Southeast: Florida and North Carolina

Our homebuilding reporting segments are engaged in the acquisition and development of land primarily for residential purposes and offer a wide variety of homes that are designed to appeal to first-time, first move-up and active adult homebuyers. Our homebuilding operations generate most of their revenues from the delivery of completed homes to homebuyers. They also earn revenues from the sale of land.

In 2016, we announced that we had begun a transition out of the Metro Washington, D.C. market that was substantially completed in 2017. Our operations in the Metro Washington, D.C. market consisted of communities in Maryland and Virginia, which were included in our Southeast homebuilding reporting segment, and represented 2% of our consolidated homebuilding revenues for the year ended November 30, 2016. As described in Note 7 – Inventory Impairments and Land Option Contract Abandonments, we recorded inventory impairment and land option contract abandonment charges related to this transition during the year ended November 30, 2016.

Our financial services reporting segment offers property and casualty insurance and, in certain instances, earthquake, flood and personal property insurance to our homebuyers in the same markets as our homebuilding reporting segments, and provides title services in the majority of our markets located within our Central and Southeast homebuilding reporting segments. This segment earns revenues primarily from insurance commissions and from the provision of title services. Until October 2016, we provided mortgage banking services, including mortgage loan originations, to our homebuyers indirectly through HCM, a joint venture of a subsidiary of ours and a subsidiary of Nationstar. Through these respective subsidiaries, we have a 49.9% ownership interest and Nationstar has a 50.1% ownership interest in HCM, with Nationstar providing management oversight of HCM’s operations. In the 2016 fourth quarter, we and Nationstar began the process to wind down HCM and transfer HCM’s operations and certain assets to Stearns.

In 2016, a subsidiary of ours and a subsidiary of Stearns formed KBHS, an unconsolidated mortgage banking joint venture, to offer mortgage banking services, including mortgage loan originations, to our homebuyers. We and Stearns each have a 50.0% ownership interest, with Stearns providing management oversight of KBHS’ operations. KBHS was operational in all of our served markets as of June 2017. KBHS did not have an impact on our consolidated statement of operations for the year ended November 30, 2016. Our homebuyers may select any lender of their choice to obtain mortgage financing for the purchase of their home. The financial services reporting segment is separately reported in our consolidated financial statements.

Corporate and other is a non-operating segment that develops and oversees the implementation of company-wide strategic initiatives and provides support to our reporting segments by centralizing certain administrative functions. Corporate management is responsible for, among other things, evaluating and selecting the geographic markets in which we operate, consistent with our overall business strategy; allocating capital resources to markets for land acquisition and development activities; making major personnel decisions related to employee compensation and benefits; and monitoring the financial and operational performance of our divisions. Corporate and other includes general and administrative expenses related to operating our corporate headquarters. A portion of the expenses incurred by Corporate and other is allocated to our homebuilding reporting segments.

Our reporting segments follow the same accounting policies used for our consolidated financial statements as described in Note 1 – Summary of Significant Accounting Policies. The results of each reporting segment are not necessarily indicative of the results that would have occurred had the segment been an independent, stand-alone entity during the periods presented, nor are they indicative of the results to be expected in future periods.

The following tables present financial information relating to our homebuilding reporting segments (in thousands):



	Years Ended November 30,
	2017		2016		2015
Revenues:
West Coast	$	2,186,411	$	1,638,078	$	1,402,264
Southwest	533,052		447,473		398,242
Central	1,188,839		1,018,535		809,738
Southeast	447,963		478,857		410,743
Total	$	4,356,265	$	3,582,943	$	3,020,987



Pretax income (loss):
West Coast	$	217,649		$	148,014		$	127,946
Southwest	45,540			38,807			31,718
Central	116,098			85,924			70,959
Southeast	(509		)	(29,385		)	(22,758		)
Corporate and other	(101,851		)	(98,511		)	(92,446		)
Total	$	276,927		$	144,849		$	115,419

Equity in income (loss) of unconsolidated joint ventures:
West Coast	$	(1,770	)	$	(1,561	)	$	(1,106	)
Southwest	362			(618		)	(696		)
Central	—			—			—
Southeast	(1		)	(2		)	(2		)
Total	$	(1,409	)	$	(2,181	)	$	(1,804	)

Inventory impairment charges:
West Coast	$	13,482		$	8,209		$	645
Southwest	3,445			3,191			3,253
Central	—			10,633			—
Southeast	3,678			27,547			4,132
Total	$	20,605		$	49,580		$	8,030

Land option contract abandonments:
West Coast	$	3,225		$	769		$	352
Southwest	—			253			—
Central	846			460			225
Southeast	556			1,750			984
Total	$	4,627		$	3,232		$	1,561



	November 30,
	2017		2016
Inventories:
Homes under construction
West Coast	$	638,639	$	695,742
Southwest	179,240		130,886
Central	320,205		297,290
Southeast	98,764		122,020
Subtotal	1,236,848		1,245,938
Land under development
West Coast	723,761		820,088
Southwest	309,672		268,507
Central	435,373		456,508
Southeast	182,533		182,554
Subtotal	1,651,339		1,727,657
Land held for future development or sale
West Coast	233,188		210,910
Southwest	62,475		122,927
Central	12,654		15,439
Southeast	66,882		80,357
Subtotal	375,199		429,633
Total	$	3,263,386	$	3,403,228

Investments in unconsolidated joint ventures:
West Coast	$	53,506	$	51,612
Southwest	8,784		9,905
Central	—		—
Southeast	2,504		2,499
Total	$	64,794	$	64,016

Assets:
West Coast	$	1,747,786	$	1,847,279
Southwest	586,666		564,636
Central	901,516		909,497
Southeast	359,307		414,730
Corporate and other	1,433,883		1,384,983
Total	$	5,029,158	$	5,121,125