Business Segments

3 Months Ended

Mar. 31, 2020

Segment Reporting Disclosure [Text Block]

Business Segments

The Company’s chief operating decision makers evaluate the Company’s performance in various ways, including: (1) the results of our individual homebuilding operating segments and the results of our financial services operations; (2) the results of our 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 and have elected to aggregate our operating segments into separate reportable segments as they share similar aggregation characteristics 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.

During 2019, we decided to wind down our Washington D.C. operations, which was substantially complete by December 31, 2019. As a result, during the second quarter of 2019, we re-evaluated our reportable segments and elected to aggregate our Charlotte and Raleigh, North Carolina operating segments into our existing Southern region based on the aggregation criteria described above. As a result of this re-evaluation, we determined that our reportable segments are: Northern homebuilding; Southern homebuilding; and financial services operations. All prior year segment information has been recast to conform with this new presentation. The change in the reportable segments has no effect on the Company's condensed consolidated balance sheets, statement of income or statement of cash flows for the periods presented.

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



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

The following table shows, by segment: revenue, operating income and interest expense for the three months ended March 31, 2020 and 2019, as well as the Company’s income before income taxes for such periods:



	Three Months Ended March 31,
(In thousands)	2020			2019
Revenue:
Northern homebuilding	$	240,270		$	200,362
Southern homebuilding	323,866			268,964
Financial services ^(a)	13,467			11,783
Total revenue	$	577,603		$	481,109

Operating income:
Northern homebuilding^(b)	$	20,881		$	16,535
Southern homebuilding	28,857			17,594
Financial services^(a)	6,362			5,695
Less: Corporate selling, general and administrative expense	(10,096		)	(9,432		)
Total operating income^(b)	$	46,004		$	30,392

Interest expense:
Northern homebuilding	$	1,811		$	2,481
Southern homebuilding	2,158			3,568
Financial services ^(a)	731			743
Total interest expense	$	4,700		$	6,792

Equity in (income) loss from joint venture arrangements	(52		)	121

Income before income taxes	$	41,356		$	23,479


(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 $0.4 million of acquisition-related charges taken during the three months ended March 31, 2019 as a result of our acquisition of Pinnacle Homes in Detroit, Michigan on March 1, 2018.

The following tables show total assets by segment at March 31, 2020 and December 31, 2019:



	March 31, 2020
(In thousands)	Northern		Southern			Corporate, Financial Services and Unallocated		Total
Deposits on real estate under option or contract	$	4,407	$	27,298		$	—	$	31,705
Inventory ^(a)	821,291		969,535			—		1,790,826
Investments in joint venture arrangements	1,688		38,618			—		40,306
Other assets	26,571		52,959		^(b)	256,596		336,126
Total assets	$	853,957	$	1,088,410		$	256,596	$	2,198,963



	December 31, 2019
(In thousands)	Northern		Southern			Corporate, Financial Services and Unallocated		Total
Deposits on real estate under option or contract	$	3,655	$	24,877		$	—	$	28,532
Inventory ^(a)	783,972		957,003			—		1,740,975
Investments in joint venture arrangements	1,672		36,213			—		37,885
Other assets	21,564		52,662		^(b)	223,976		298,202
Total assets	$	810,863	$	1,070,755		$	223,976	$	2,105,594


(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.