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Note 17 - Operating and Reporting Segments
 6 Months Ended
Apr. 30, 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 or benefit 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

  

Six Months Ended

 
  

April 30,

  

April 30,

 

(In thousands)

 

2021

  

2020

  

2021

  

2020

 
                 

Revenues:

                

Northeast

 $30,189  $46,798  $62,233  $92,074 

Mid-Atlantic

  112,200   89,738   205,145   177,497 

Midwest

  64,079   56,673   123,236   103,117 

Southeast

  80,917   56,369   126,691   93,143 

Southwest

  217,312   170,654   407,721   334,553 

West

  176,733   103,603   311,565   203,224 

Total homebuilding

  681,430   523,835   1,236,591   1,003,608 

Financial services

  21,728   14,361   41,225   28,375 

Corporate and unallocated

  4   155   10   424 

Total revenues

 $703,162  $538,351  $1,277,826  $1,032,407 
                 

Income (loss) before income taxes:

                

Northeast

 $5,068  $6,722  $9,662  $12,463 

Mid-Atlantic

  12,010   5,466   22,711   9,524 

Midwest

  4,128   (385)  7,712   (3,828)

Southeast

  6,504   50   6,858   (4,261)

Southwest

  29,275   13,052   50,325   21,672 

West

  21,863   2,723   31,540   4,334 

Total homebuilding

  78,848   27,628   128,808   39,904 

Financial services

  10,367   4,731   19,510   9,191 

Corporate and unallocated (1)

  (58,183)  (28,180)  (97,701)  (52,352)

Income (loss) before income taxes

 $31,032  $4,179  $50,617  $(3,257)

 

(1)

Corporate and unallocated for the three months ended April 30, 2021 included corporate general and administrative costs of $40.4 million, interest expense of $17.5 million (a component of Other interest on our Condensed Consolidated Statements of Operations), and $0.3 million of other income and expenses primarily related to interest income and stock compensation. Corporate and unallocated for the six months ended April 30, 2021 included corporate general and administrative costs of $63.9 million, interest expense of $33.7 million (a component of Other interest on our Condensed Consolidated Statements of Operations), and $0.1 million of other income and expenses. Corporate and unallocated for the three months ended April 30, 2020 included corporate general and administrative costs of $15.3 million, interest expense of $13.8 million (a component of Other interest on our Condensed Consolidated Statements of Operations), $0.2 million of loss on extinguishment of debt and $(1.1) million of other income and expenses primarily related to interest income and stock compensation. Corporate and unallocated for the six months ended April 30, 2020 included corporate general and administrative costs of $35.0 million, interest expense of $28.7 million (a component of Other interest on our Condensed Consolidated Statements of Operations), $(9.3) million of gain on extinguishment of debt and $(2.0) million of other income and expenses. 

 

  

April 30,

  

October 31,

 

(In thousands)

 

2021

  

2020

 
         

Assets:

        

Northeast

 $126,306  $107,748 

Mid-Atlantic

  271,207   271,867 

Midwest

  100,896   106,774 

Southeast

  245,353   248,506 

Southwest

  411,068   357,444 

West

  278,568   278,811 

Total homebuilding

  1,433,398   1,371,150 

Financial services (1)

  169,832   140,607 

Corporate and unallocated

  734,758   315,585 

Total assets

 $2,337,988  $1,827,342 

 

(1)   Deferred tax assets for the Financial services segment are included in the Deferred tax assets, net line on the Condensed Consolidated Balance Sheets.