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 and six months ended June 30, 2018 and 2017, as well as the Company’s income before income taxes for such periods:



	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2018			2017			2018			2017
Revenue:
Midwest homebuilding	$	226,902		$	168,469		$	385,522		$	314,891
Southern homebuilding	237,582			178,780			427,970			328,145
Mid-Atlantic homebuilding	81,738			97,749			155,561			194,635
Financial services ^(a)	11,876			11,868			26,902			26,175
Total revenue	$	558,098		$	456,866		$	995,955		$	863,846

Operating income:
Midwest homebuilding^(b)	$	18,981		$	17,984		$	31,198		$	32,843
Southern homebuilding ^(c)	19,370			4,709			34,220			13,421
Mid-Atlantic homebuilding	5,106			9,588			7,698			16,841
Financial services^(a)	5,938			6,860			15,478			16,090
Less: Corporate selling, general and administrative expense	(10,890		)	(10,232		)	(18,948		)	(18,630		)
Total operating income^{(b) (c)}	$	38,505		$	28,909		$	69,646		$	60,565

Interest expense:
Midwest homebuilding	$	1,812		$	863		$	3,878		$	2,240
Southern homebuilding	1,908			1,791			4,195			4,168
Mid-Atlantic homebuilding	473			515			1,229			1,431
Financial services ^(a)	695			665			1,464			1,333
Total interest expense	$	4,888		$	3,834		$	10,766		$	9,172

Equity in loss (income) from joint venture arrangements	86			(110		)	(224		)	(127		)
Acquisition and integration costs^(d)	—			—			1,700			—

Income before income taxes	$	33,531		$	25,185		$	57,404		$	51,520


(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 $3.0 million and $3.9 million of charges related to purchase accounting adjustments taken during the three and six months ended June 30, 2018, respectively, as a result of our acquisition of Pinnacle Homes in Detroit, Michigan on March 1, 2018.


(c)	Includes an $8.5 million charge for stucco-related repair costs in certain of our Florida communities taken during both the three and six months ended June 30, 2017 (as more fully discussed in Note 6 to our financial statements).


(d)	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 June 30, 2018 and December 31, 2017:



	June 30, 2018
(In thousands)	Midwest		Southern			Mid-Atlantic		Corporate, Financial Services and Unallocated		Total
Deposits on real estate under option or contract	$	5,933	$	20,724		$	7,163	$	—	$	33,820
Inventory ^(a)	657,154		697,404			264,090		—		1,618,648
Investments in joint venture arrangements	342		5,088			8,323		—		13,753
Other assets	26,288		36,977		^(b)	16,440		224,614		304,319
Total assets	$	689,717	$	760,193		$	296,016	$	224,614	$	1,970,540



	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.