Business Segments

The Company’s chief operating decision makers evaluate the Company’s performance in various ways, including: (1) the results of our 16 individual homebuilding operating segments and the results of our financial services operations; (2) the results of our three homebuilding reportable segments; and (3) our consolidated financial results.

In accordance with ASC 280, Segment Reporting (“ASC 280”), we have identified each homebuilding division as an operating segment as each homebuilding division engages in business activities from which it earns revenue, primarily from the sale and construction of single-family attached and detached homes, acquisition and development of land, and the occasional sale of lots to third parties. Our financial services operations generate revenue primarily from the origination, sale and servicing of mortgage loans and title services primarily for purchasers of the Company’s homes and are included in our financial services reportable segment. In accordance with the aggregation criteria defined in ASC 280, we have identified each homebuilding division as an operating segment and have determined our reportable segments are as follows: Midwest homebuilding; Southern homebuilding; Mid-Atlantic homebuilding; and financial services operations. The homebuilding operating segments that are included within each reportable segment have been aggregated because they share similar aggregation characteristics as prescribed in ASC 280 in the following regards: (1) long-term economic characteristics; (2) historical and expected future long-term gross margin percentages; (3) housing products, production processes and methods of distribution; and (4) geographical proximity.

The homebuilding operating segments that comprise each of our reportable segments are as follows:



Midwest	Southern	Mid-Atlantic
Chicago, Illinois	Orlando, Florida	Charlotte, North Carolina
Cincinnati, Ohio	Sarasota, Florida	Raleigh, North Carolina
Columbus, Ohio	Tampa, Florida	Washington, D.C.
Indianapolis, Indiana	Austin, Texas
Minneapolis/St. Paul, Minnesota	Dallas/Fort Worth, Texas
Detroit, Michigan	Houston, Texas
	San Antonio, Texas

The following table shows, by segment: revenue, operating income and interest expense for the three months ended March 31, 2018 and 2017, as well as the Company’s income before income taxes for such periods:



	Three Months Ended March 31,
(In thousands)	2018			2017
Revenue:
Midwest homebuilding	$	158,620		$	146,422
Southern homebuilding	190,388			149,365
Mid-Atlantic homebuilding	73,823			96,886
Financial services ^(a)	15,026			14,307
Total revenue	$	437,857		$	406,980

Operating income:
Midwest homebuilding^(b)	$	12,217		$	14,859
Southern homebuilding	14,850			8,712
Mid-Atlantic homebuilding	2,592			7,253
Financial services^(a)	9,540			9,230
Less: Corporate selling, general and administrative expense	(8,058		)	(8,398		)
Total operating income^(b)	$	31,141		$	31,656

Interest expense:
Midwest homebuilding	$	2,066		$	1,377
Southern homebuilding	2,287			2,377
Mid-Atlantic homebuilding	756			916
Financial services ^(a)	769			668
Total interest expense	$	5,878		$	5,338

Equity in income of joint venture arrangements	(310		)	(17		)
Acquisition and integration costs^(c)	1,700			—

Income before income taxes	$	23,873		$	26,335


(a)	Our financial services operational results should be viewed in connection with our homebuilding business as its operations originate loans and provide title services primarily for our homebuying customers, with the exception of an immaterial amount of mortgage refinancing.


(b)	Includes $0.9 million of charges related to purchase accounting adjustments taken during the first quarter of 2018 as a result of our acquisition of Pinnacle Homes in Detroit, Michigan on March 1, 2018.


(c)	Represents costs which include, but are not limited to, legal fees and expenses, travel and communication expenses, cost of appraisals, accounting fees and expenses, and miscellaneous expenses related to our recent acquisition of Pinnacle Homes. As these costs are not eligible for capitalization as initial direct costs, such amounts are expensed as incurred.

The following tables show total assets by segment at March 31, 2018 and December 31, 2017:



	March 31, 2018
(In thousands)	Midwest		Southern			Mid-Atlantic		Corporate, Financial Services and Unallocated		Total
Deposits on real estate under option or contract	$	6,253	$	23,163		$	6,747	$	—	$	36,163
Inventory ^(a)	615,973		686,632			241,576		—		1,544,181
Investments in joint venture arrangements	4,972		10,169			6,925		—		22,066
Other assets	20,198		41,147		^(b)	11,305		219,313		291,963
Total assets	$	647,396	$	761,111		$	266,553	$	219,313	$	1,894,373



	December 31, 2017
(In thousands)	Midwest		Southern			Mid-Atlantic		Corporate, Financial Services and Unallocated		Total
Deposits on real estate under option or contract	$	4,933	$	20,719		$	6,904	$	—	$	32,556
Inventory ^(a)	500,671		636,019			245,328		—		1,382,018
Investments in joint venture arrangements	4,410		9,677			6,438		—		20,525
Other assets	13,573		38,784		^(b)	13,311		364,004		429,672
Total assets	$	523,587	$	705,199		$	271,981	$	364,004	$	1,864,771


(a)	Inventory includes single-family lots, land and land development costs; land held for sale; homes under construction; model homes and furnishings; community development district infrastructure; and consolidated inventory not owned.


(b)	Includes development reimbursements from local municipalities.