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Note 17 - Operating and Reporting Segments
 3 Months Ended
Jan. 31, 2021
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

17.

Operating and Reporting Segments

 

HEI’s operating segments are components of the Company’s 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 the Company's communities qualifies as an operating segment, and therefore, it is impractical to provide segment disclosures for this many segments. As such, HEI has aggregated the homebuilding operating segments into six reportable segments.

 

HEI’s 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. HEI’s reportable segments consist of the following six homebuilding segments and a financial services segment noted below.

 

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 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 Financial Services segment include mortgage banking and title services provided to the homebuilding operations’ customers. Our financial services subsidiaries 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 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 (loss) 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 HEI’s segment operations was as follows:

 

  

Three Months Ended

 
  

January 31,

 

(In thousands)

 

2021

  

2020

 
         

Revenues:

        

Northeast

 $32,044  $45,276 

Mid-Atlantic

  92,945   87,759 

Midwest

  59,157   46,444 

Southeast

  45,774   36,774 

Southwest

  190,409   163,899 

West

  134,832   99,621 

Total homebuilding

  555,161   479,773 

Financial services

  19,497   14,014 

Corporate and unallocated

  6   269 

Total revenues

 $574,664  $494,056 
         

Income (loss) before income taxes:

        

Northeast

 $4,594  $5,741 

Mid-Atlantic

  10,701   4,058 

Midwest

  3,584   (3,443)

Southeast

  354   (4,311)

Southwest

  21,050   8,620 

West

  9,677   1,611 

Total homebuilding

  49,960   12,276 

Financial services

  9,143   4,460 

Corporate and unallocated (1)

  (39,518)  (24,172)

Income (loss) before income taxes

 $19,585  $(7,436)

 

 

(1)  Corporate and unallocated for the three months ended January 31, 2021 included corporate general and administrative costs of $23.5 million, interest expense of $16.2 million (a component of Other interest on our Condensed Consolidated Statements of Operations) and $(0.2) million of other income and expenses primarily related to interest income and stock compensation. Corporate and unallocated for the three months ended January 31, 2020 included corporate general and administrative costs of $19.7 million, interest expense of $14.9 million (a component of Other interest on our Condensed Consolidated Statements of Operations), $(9.5) million of gain on extinguishment of debt and $(0.9) million of other income and expenses primarily related to interest income and stock compensation.

 

 

  

January 31,

  

October 31,

 

(In thousands)

 

2021

  

2020

 
         

Assets:

        

Northeast

 $138,294  $107,748 

Mid-Atlantic

  283,805   271,867 

Midwest

  105,329   106,774 

Southeast

  251,114   248,506 

Southwest

  388,793   357,444 

West

  283,681   278,811 

Total homebuilding

  1,451,016   1,371,150 

Financial services

  171,596   140,607 

Corporate and unallocated

  228,087   315,585 

Total assets

 $1,850,699  $1,827,342