10.

Operating and Reporting Segments

Our operating segments are components of our business for which discrete financial information is available and reviewed regularly by the chief operating decision maker, our Chief Executive Officer, to evaluate

performance and make operating decisions. Based on this criteria, each of our communities qualifies as an operating segment, and therefore, it is impractical to provide segment disclosures for this many segments. As such, we have aggregated the homebuilding operating segments into

six

reportable segments.

Our homebuilding operating segments are aggregated into reportable segments based primarily upon geographic proximity, similar regulatory environments, land acquisition characteristics and similar methods used to construct and sell homes.

Our reportable segments consist of the following

six

homebuilding segments and a financial services segment noted below. During fiscal

2016,

we decided to exit the Minneapolis, Minnesota and Raleigh, North Carolina markets and in the

third

quarter of fiscal

2016,

we completed the sale of our portfolios in those markets.

Homebuilding:

	( 1 )	Northeast (New Jersey and Pennsylvania)
	( 2 )	Mid-Atlantic (Delaware, Maryland, Virginia, Washington D.C. and West Virginia)
	( 3 )	Midwest (Illinois and Ohio)
	( 4 )	Southeast (Florida, Georgia and South Carolina)
	( 5 )	Southwest (Arizona and Texas)
	( 6 )	West (California)

Financial Services

Operations of the Company

’s Homebuilding segments primarily include the sale and construction of single-family attached and detached homes, attached townhomes and condominiums, urban infill and active lifestyle homes in planned residential developments. In addition, from time to time, operations of the homebuilding segments include sales of land. Operations of the Company’s Financial Services segment include mortgage banking and title services provided to the homebuilding operations’ customers. We do

not

typically retain or service mortgages that we originate but rather sell the mortgages and related servicing rights to investors.

Corporate and unallocated primarily represents operations at our headquarters in Red Bank, New Jersey.

This includes our executive offices, information services, human resources, corporate accounting, training, treasury, process redesign, internal audit, construction services, and administration of insurance, quality and safety. It also includes interest income and interest expense resulting from interest incurred that cannot be capitalized in inventory in the Homebuilding segments, as well as the gains or losses on extinguishment of debt from any debt repurchases or exchanges.

Evaluation of segment performance is based primarily on operating earnings from continuing operations before provision for income taxes (“Income (loss) before income taxes”).

Income (loss) before income taxes for the Homebuilding segments consist of revenues generated from the sales of homes and land, income (loss) from unconsolidated entities, management fees and other income, less the cost of homes and land sold, selling, general and administrative expenses and interest expense. Income before income taxes for the Financial Services segment consist of revenues generated from mortgage financing, title insurance and closing services, less the cost of such services and selling, general and administrative expenses incurred by the Financial Services segment.

Operational results of each 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.

Financial information relating to the Company

’s segment operations was as follows:

	Year Ended October 31,
(In thousands)	2017			2016			2015
Revenues:
Northeast	$	209,509		$	278,028		$	189,497
Mid-Atlantic		464,126			458,579			399,500
Midwest		199,770			311,322			311,449
Southeast		260,402			260,584			207,662
Southwest		827,503			1,028,529			823,853
West		430,546			342,447			159,969
Total homebuilding		2,391,856			2,679,489			2,091,930
Financial services		58,743			72,617			56,665
Corporate and unallocated		1,066			141			(115	)
Total revenues	$	2,451,665		$	2,752,247		$	2,148,480
(Loss) income before income taxes:
Northeast	$	2,300		$	(3,869	)	$	(7,742	)
Mid-Atlantic		17,191			17,476			21,431
Midwest		(1,151	)		(11,416	)		14,012
Southeast		(6,199	)		(17,791	)		(6,330	)
Southwest		71,540			84,424			67,437
West		19,636			3,445			(17,145	)
Total homebuilding		103,317			72,269			71,663
Financial services		26,397			35,473			24,693
Corporate and unallocated (1)		(174,958	)		(105,306	)		(118,121	)
(Loss) income before income taxes	$	(45,244	)	$	2,436		$	(21,765	)

(

) Corporate and unallocated for the year ended

October 31, 2017

included corporate general and administrative costs of

$59.4

million, interest expense of

$69.1

million (a component of Other interest on our Consolidated Statements of Operations), loss on extinguishment of debt of

$34.9

million,

$12.5

million adjustment for construction defect reserves (discussed in Note

) and

$0.9

million of other income and expenses primarily related to interest income, rental income, bond amortization and stock compensation.

Corporate and unallocated for the year ended

October 31, 2016

included corporate general and administrative costs of

$60.1

million, interest expense of

$50.4

million (a component of Other interest on our Consolidated Statements of Operations), loss on extinguishment of debt of

$3.2

million, $(

9.2

) million adjustment for construction defect reserves (discussed in Note

) and

$0.8

million of other income and expenses primarily related to bond amortization, stock compensation and rental income. Corporate and unallocated for the year ended

October 31, 2015

included corporate general and administrative costs of

$62.5

million, interest expense of

$64.5

million (a component of Other interest on our Consolidated Statements of Operations), $(

14.4

) million adjustment for construction defect reserves (discussed in Note

) and

$5.5

million of other income and expenses primarily related to bond amortization, stock compensation and rental income.

	October 31,
(In thousands)	2017		2016
Assets:
Northeast	$	180,545	$	219,363
Mid-Atlantic		224,398		292,899
Midwest		84,960		111,596
Southeast		231,644		226,124
Southwest		294,337		341,472
West		175,347		269,400
Total homebuilding		1,191,231		1,460,854
Financial services		162,113		197,230
Corporate and unallocated (1)		547,554		696,872
Total assets	$	1,900,898	$	2,354,956

(

)

Includes

$283.6

million of income taxes receivable - including

deferred tax assets in fiscal

2016

	October 31,
(In thousands)	2017		2016
Investments in and advances to unconsolidated joint ventures:
Northeast	$	36,411	$	28,115
Mid-Atlantic		20,873		22,407
Midwest		4,268		5,516
Southeast		36,320		22,876
Southwest		11,832		3,625
West		4,451		17,547
Total homebuilding		114,155		100,086
Corporate and unallocated		935		416
Total investments in and advances to unconsolidated joint ventures	$	115,090	$	100,502

	Year Ended October 31,
(In thousands)	2017			2016			2015
Homebuilding interest expense:
Northeast	$	20,308		$	19,417		$	14,150
Mid-Atlantic		23,886			23,662			16,268
Midwest		7,799			12,275			10,405
Southeast		13,646			16,770			9,552
Southwest		25,278			37,552			26,147
West		25,799			23,295			10,381
Total homebuilding		116,716			132,971			86,903
Corporate and unallocated		69,124			50,387			64,545
Financial services interest expense (1)		(630	)		(763	)		(1,066	)
Total interest expense, net	$	185,210		$	182,595		$	150,382

(

)

Financial services interest expenses are included in the Financial services lines on the Consolidated Statements of Operations in the respective revenues and expenses sections.

	Year Ended October 31,
(In thousands)	2017		2016		2015
Depreciation:
Northeast	$	71	$	62	$	136
Mid-Atlantic		50		56		28
Midwest		858		497		361
Southeast		83		82		40
Southwest		78		104		89
West		94		92		79
Total homebuilding		1,234		893		733
Financial services		16		41		47
Corporate and unallocated		2,999		2,631		2,608
Total depreciation	$	4,249	$	3,565	$	3,388

	Year Ended October 31,
(In thousands)	2017		2016		2015
Net additions to operating properties and equipment:
Northeast	$	442	$	78	$	-
Mid-Atlantic		71		208		58
Midwest		3,773		3,180		637
Southeast		28		233		227
Southwest		18		199		173
West		80		91		88
Total homebuilding		4,412		3,989		1,183
Financial services		-		30		-
Corporate and unallocated		2,066		3,988		871
Total net additions to operating properties and equipment	$	6,478	$	8,007	$	2,054

	Year Ended October 31,
(In thousands)	2017			2016			2015
Equity in (losses) earnings from unconsolidated joint ventures:
Northeast	$	(4,376	)	$	(2,639	)	$	856
Mid-Atlantic		1,180			(27	)		4,502
Midwest		(1,424	)		(1,304	)		(105	)
Southeast		837			(1,774	)		1,213
Southwest		(306	)		(64	)		-
West		(2,958	)		1,462			(2,297	)
Total equity in (losses) earnings from unconsolidated joint ventures	$	(7,047	)	$	(4,346	)	$	4,169