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Note 10 - Operating and Reporting Segments
 12 Months Ended
Oct. 31, 2021
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

10. 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:  

 

  

Year Ended October 31,

 

(In thousands)

 

2021

  

2020

  

2019

 

Revenues:

            

Northeast

 $142,445  $192,069  $124,372 

Mid-Atlantic

  465,876   403,669   357,247 

Midwest

  262,770   225,718   204,461 

Southeast

  285,658   232,730   220,082 

Southwest

  903,178   744,197   629,344 

West

  641,219   472,889   425,516 

Total homebuilding

  2,701,146   2,271,272   1,961,022 

Financial services

  81,692   72,162   54,152 

Corporate and unallocated

  19   467   1,742 

Total revenues

 $2,782,857  $2,343,901  $2,016,916 

Income (loss) before income taxes:

            

Northeast

 $22,922  $30,371  $20,954 

Mid-Atlantic

  61,567   34,570   14,327 

Midwest

  18,407   (1,805)  (649)

Southeast

  17,764   1,355   (10,060)

Southwest

  115,840   68,184   33,459 

West

  82,503   16,415   40,018 

Total homebuilding

  319,003   149,090   98,049 

Financial services

  37,563   32,102   17,627 

Corporate and unallocated (1)

  (166,705)  (125,789)  (155,344)

Income (loss) before income taxes

 $189,861  $55,403  $(39,668)

 

(1) Corporate and unallocated for the year ended October 31, 2021 included corporate general and administrative costs of $106.7 million, interest expense of $57.1 million (a component of Other interest on our Consolidated Statements of Operations), loss on extinguishment of debt of $3.7 million, and $0.8 million of other income and expenses. Corporate and unallocated for the year ended October 31, 2020 included corporate general and administrative costs of $80.5 million, interest expense of $61.9 million (a component of Other interest on our Consolidated Statements of Operations), gain on extinguishment of debt of $13.3 million, and $3.3 million of other income and expenses, along with the adjustment to our insurance reserves. Corporate and unallocated for the year ended October 31, 2019 included corporate general and administrative costs of $66.4 million, interest expense of $55.5 million (a component of Other interest on our Consolidated Statements of Operations), loss on extinguishment of debt of $42.4 million and $9.0 million of other income and expenses primarily related to interest income and gain on the sale of our former corporate headquarters building, along with the adjustment to our insurance reserves.  

 

  

October 31,

 

(In thousands)

 

2021

  

2020

 

Assets:

        

Northeast

 $133,390  $107,748 

Mid-Atlantic

  273,073   271,867 

Midwest

  85,044   106,774 

Southeast

  257,044   248,506 

Southwest

  413,532   357,444 

West

  229,810   278,811 

Total homebuilding

  1,391,893   1,371,150 

Financial services

  202,758   140,607 

Corporate and unallocated

  725,857   315,585 

Total assets

 $2,320,508  $1,827,342 

 

  

October 31,

 

(In thousands)

 

2021

  

2020

 

Investments in and advances to unconsolidated joint ventures:

        

Northeast

 $10,259  $14,646 

Mid-Atlantic

  8,660   11,055 

Midwest

  1   498 

Southeast

  40,563   66,234 

Southwest

  -   9,965 

West

  268   64 

Total homebuilding

  59,751   102,462 

Corporate and unallocated

  1,146   702 

Total investments in and advances to unconsolidated joint ventures

 $60,897  $103,164 

 

  

Year Ended October 31,

 

(In thousands)

 

2021

  

2020

  

2019

 

Homebuilding interest expense:

            

Northeast

 $8,156  $13,636  $10,011 

Mid-Atlantic

  14,416   16,076   18,563 

Midwest

  7,640   9,377   7,121 

Southeast

  19,490   17,005   18,798 

Southwest

  28,899   29,898   27,731 

West

  26,130   30,222   23,051 

Total homebuilding

  104,731   116,214   105,275 

Corporate and unallocated

  57,085   61,917   55,506 

Financial services interest expense (1)

  (35)  (35)  334 

Total interest expense, net

 $161,781  $178,096  $161,115 

 

 

(1)

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)

 

2021

  

2020

  

2019

 

Depreciation:

            

Northeast

 $111  $229  $188 

Mid-Atlantic

  205   264   209 

Midwest

  1,143   1,112   1,097 

Southeast

  214   327   230 

Southwest

  870   699   331 

West

  941   801   326 

Total homebuilding

  3,484   3,432   2,381 

Financial services

  13   13   14 

Corporate and unallocated

  1,783   1,859   1,777 

Total depreciation

 $5,280  $5,304  $4,172 

 

  

Year Ended October 31,

 

(In thousands)

 

2021

  

2020

  

2019

 

Net additions to operating properties and equipment:

            

Northeast

 $96  $43  $107 

Mid-Atlantic

  118   165   168 

Midwest

  1,057   861   237 

Southeast

  256   102   221 

Southwest

  782   776   741 

West

  392   846   921 

Total homebuilding

  2,701   2,793   2,395 

Financial services

  -   -   - 

Corporate and unallocated

  3,241   587   1,610 

Total net additions to operating properties and equipment

 $5,942  $3,380  $4,005 

 

  

Year Ended October 31,

 

(In thousands)

 

2021

  

2020

  

2019

 

Equity in earnings (losses) from unconsolidated joint ventures:

            

Northeast

 $3,681  $11,039  $19,242 

Mid-Atlantic

  (774)  (292)  3,404 

Midwest

  51   (103)  (432)

Southeast

  2,061   820   1,310 

Southwest

  3,780   5,111   7,951 

West

  50   (10)  (2,543)

Total equity in earnings from unconsolidated joint ventures

 $8,849  $16,565  $28,932