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Note 17 - Operating and Reporting Segments
 6 Months Ended
Apr. 30, 2022
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 before income taxes”). Income before income taxes for the Homebuilding segments consist of revenues generated from the sales of homes and land, income 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 HEI’s segment operations was as follows:

 

  

Three Months Ended

  

Six Months Ended

 
  

April 30,

  

April 30,

 

(In thousands)

 

2022

  

2021

  

2022

  

2021

 
                 

Revenues:

                

Northeast

 $55,126  $30,189  $75,485  $62,233 

Mid-Atlantic

  129,001   112,200   228,615   205,145 

Midwest

  56,793   64,079   111,765   123,236 

Southeast

  73,235   80,917   128,817   126,691 

Southwest

  231,882   217,312   426,392   407,721 

West

  140,781   176,733   267,741   311,565 

Total homebuilding

  686,818   681,430   1,238,815   1,236,591 

Financial services

  15,706   21,728   29,015   41,225 

Corporate and unallocated

  13   4   20   10 

Total revenues

 $702,537  $703,162  $1,267,850  $1,277,826 
                 

Income before income taxes:

                

Northeast

 $8,423  $5,068  $10,873  $9,662 

Mid-Atlantic

  27,948   12,010   44,685   22,711 

Midwest

  1,629   4,128   2,280   7,712 

Southeast

  10,760   6,504   20,922   6,858 

Southwest

  34,769   29,275   56,645   50,325 

West

  28,720   21,863   50,779   31,540 

Total homebuilding

  112,249   78,848   186,184   128,808 

Financial services

  4,914   10,367   7,823   19,510 

Corporate and unallocated (1)

  (36,218)  (58,183)  (77,661)  (97,701)

Income before income taxes

 $80,945  $31,032  $116,346  $50,617 

 

(1)

Corporate and unallocated for the three months ended April 30, 2022 included corporate general and administrative costs of $21.7 million, interest expense of $9.0 million (a component of Other interest on our Condensed Consolidated Statements of Operations), loss on extinguishment of debt of $6.8 million, and $(1.3) million of other income and expenses primarily related to interest income and stock compensation. Corporate and unallocated for the six months ended April 30, 2022 included corporate general and administrative costs of $51.1 million, interest expense of $20.5 million (a component of Other interest on our Condensed Consolidated Statements of Operations), loss on extinguishment of debt of $6.8 million, and $(0.7) million of other income and expenses primarily related to interest income and stock compensation. 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.

 

  

April 30,

  

October 31,

 

(In thousands)

 

2022

  

2021

 
         

Assets:

        

Northeast

 $164,887  $133,390 

Mid-Atlantic

  341,929   273,073 

Midwest

  77,366   85,044 

Southeast

  306,499   257,044 

Southwest

  500,108   413,532 

West

  240,972   229,810 

Total homebuilding

  1,631,761   1,391,893 

Financial services (1)

  138,253   202,758 

Corporate and unallocated

  614,155   725,857 

Total assets

 $2,384,169  $2,320,508 

 

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