| OPERATING AND REPORTING SEGMENTS |
NOTE 12 — OPERATING AND REPORTING SEGMENTS
As defined in ASC 280-10, Segment Reporting, we have seven operating segments (the seven states in which we operate). These segments are engaged in the business of acquiring and developing land, constructing homes, marketing and selling those homes and providing warranty and customer services. We aggregate our operating segments into a reporting segment based on similar long-term economic characteristics and geographical proximity. In 2012, management's evaluation of segment reporting led to a re-grouping of our segments to more closely align them into long-term expected profitability trends and, accordingly, all prior year segment financial information has been updated to reflect our new aggregation. Our current reportable homebuilding segments are as follows:
West: Arizona, California, Colorado and Nevada
Central: Texas
East: Florida and the Carolinas
Management’s evaluation of segment performance is based on segment operating income, which we define as homebuilding and land revenues less cost of home construction, commissions and other sales costs, land development and other land sales costs and other costs incurred by or allocated to each segment, including impairments. Each reportable segment follows the same accounting policies described in Note 1, “Business and Summary of Significant Accounting Policies.” Operating results for each segment may not be indicative of the results for such segment had it been an independent, stand-alone entity for the periods presented. The following segment information is in thousands:
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Years Ended December 31, |
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2012 |
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2011 |
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2010 |
Revenue (1): |
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West |
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$ |
600,227 |
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$ |
366,265 |
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$ |
368,137 |
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Central |
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392,678 |
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395,638 |
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489,047 |
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East |
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200,769 |
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99,341 |
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84,472 |
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Consolidated total |
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1,193,674 |
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861,244 |
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941,656 |
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Operating income (2): |
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West |
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44,727 |
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5,037 |
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23,261 |
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Central |
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17,790 |
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11,042 |
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19,350 |
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East |
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15,283 |
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6,858 |
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8,925 |
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Segment operating income |
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77,800 |
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22,937 |
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51,536 |
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Corporate and unallocated costs (3) |
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(22,619 |
) |
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(20,925 |
) |
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(20,422 |
) |
Earnings from unconsolidated entities, net |
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10,233 |
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5,849 |
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5,243 |
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Interest expense |
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(24,244 |
) |
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(30,399 |
) |
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(33,722 |
) |
Loss on extinguishment of debt, net of transaction costs |
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(5,772 |
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— |
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(3,454 |
) |
Other (expense)/income, net |
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(6,544 |
) |
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2,162 |
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3,303 |
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Net income/(loss) before income taxes |
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$ |
28,854 |
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$ |
(20,376 |
) |
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$ |
2,484 |
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(1) |
Revenue includes the following land closing revenue, by segment: 2012 – $6.5 million in the West Region, $2.0 million in the Central Region and $790,000 in the East Region; 2011 – $360,000 in the Central Region; 2010 – $1.3 million in the Central Region.
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(2) |
See Note 2 to these consolidated financial statements for breakout of real estate-related impairment by Region. |
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(3) |
Balance consists primarily of corporate costs and numerous shared service functions that are not allocated to the reporting segments. |
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At December 31, 2012 |
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West |
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Central |
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East |
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Corporate and
Unallocated (1)
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Total |
Deposits on real estate under option or contract |
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$ |
4,419 |
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$ |
7,168 |
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$ |
2,764 |
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$ |
— |
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$ |
14,351 |
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Real estate |
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647,316 |
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305,100 |
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160,771 |
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— |
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1,113,187 |
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Investments in unconsolidated entities |
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365 |
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10,645 |
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16 |
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1,059 |
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12,085 |
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Other assets |
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24,935 |
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132,546 |
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25,914 |
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252,544 |
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435,939 |
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Total assets |
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$ |
677,035 |
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$ |
455,459 |
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$ |
189,465 |
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$ |
253,603 |
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$ |
1,575,562 |
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At December 31, 2011 |
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West |
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Central |
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East |
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Corporate and
Unallocated (1)
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Total |
Deposits on real estate under option or contract |
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$ |
5,387 |
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$ |
8,987 |
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$ |
834 |
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$ |
— |
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$ |
15,208 |
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Real estate |
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504,617 |
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232,924 |
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77,884 |
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— |
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|
815,425 |
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Investments in unconsolidated entities |
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371 |
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10,050 |
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14 |
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653 |
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11,088 |
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Other assets |
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18,421 |
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81,022 |
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8,842 |
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271,372 |
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379,657 |
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Total assets |
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$ |
528,796 |
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$ |
332,983 |
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$ |
87,574 |
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$ |
272,025 |
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$ |
1,221,378 |
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(1) |
Balance consists primarily of cash and other corporate assets not allocated to the reporting segments. |
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