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Note 17 - Operating and Reporting Segments | 9 Months Ended
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Jul. 31, 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 |  |  | Nine Months Ended |
|  | July 31, |  |  | July 31, |
(In thousands) |  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Revenues: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Northeast |  | $ | 76,032 |  |  | $ | 35,255 |  |  | $ | 151,517 |  |  | $ | 97,488 |
Mid-Atlantic |  |  | 168,135 |  |  |  | 106,419 |  |  |  | 396,750 |  |  |  | 311,564 |
Midwest |  |  | 61,410 |  |  |  | 60,659 |  |  |  | 173,175 |  |  |  | 183,895 |
Southeast |  |  | 71,542 |  |  |  | 68,854 |  |  |  | 200,359 |  |  |  | 195,545 |
Southwest |  |  | 266,374 |  |  |  | 213,127 |  |  |  | 692,766 |  |  |  | 620,848 |
West |  |  | 109,410 |  |  |  | 186,519 |  |  |  | 377,151 |  |  |  | 498,084 |
Total homebuilding |  |  | 752,903 |  |  |  | 670,833 |  |  |  | 1,991,718 |  |  |  | 1,907,424 |
Financial services |  |  | 14,533 |  |  |  | 19,845 |  |  |  | 43,548 |  |  |  | 61,070 |
Corporate and unallocated |  |  | 157 |  |  |  | 5 |  |  |  | 177 |  |  |  | 15 |
Total revenues |  | $ | 767,593 |  |  | $ | 690,683 |  |  | $ | 2,035,443 |  |  | $ | 1,968,509 |
Income before income taxes: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Northeast |  | $ | 20,179 |  |  | $ | 6,765 |  |  | $ | 31,052 |  |  | $ | 16,427 |
Mid-Atlantic |  |  | 37,756 |  |  |  | 15,907 |  |  |  | 82,441 |  |  |  | 38,618 |
Midwest |  |  | 2,023 |  |  |  | 3,358 |  |  |  | 4,303 |  |  |  | 11,070 |
Southeast |  |  | 15,263 |  |  |  | 2,682 |  |  |  | 36,185 |  |  |  | 9,540 |
Southwest |  |  | 42,725 |  |  |  | 28,523 |  |  |  | 99,370 |  |  |  | 78,848 |
West |  |  | 19,223 |  |  |  | 27,189 |  |  |  | 70,002 |  |  |  | 58,729 |
Total homebuilding |  |  | 137,169 |  |  |  | 84,424 |  |  |  | 323,353 |  |  |  | 213,232 |
Financial services |  |  | 3,743 |  |  |  | 8,607 |  |  |  | 11,566 |  |  |  | 28,117 |
Corporate and unallocated (1) |  |  | (28,985 | ) |  |  | (31,232 | ) |  |  | (106,646 | ) |  |  | (128,933 | )
Income before income taxes |  | $ | 111,927 |  |  | $ | 61,799 |  |  | $ | 228,273 |  |  | $ | 112,416 |
(1) | Corporate and unallocated for the three months ended July 31, 2022 included corporate general and administrative costs of $24.8 million, interest expense of $5.0 million (a component of Other interest on our Condensed Consolidated Statements of Operations), and $(0.8) million of other income and expenses primarily related to interest income and stock compensation. Corporate and unallocated for the nine months ended July 31, 2022 included corporate general and administrative costs of $75.9 million, interest expense of $25.5 million (a component of Other interest on our Condensed Consolidated Statements of Operations), loss on extinguishment of debt of $6.8 million, and $(1.6) million of other income and expenses primarily related to interest income and stock compensation. Corporate and unallocated for the three months ended July 31, 2021 included corporate general and administrative costs of $17.3 million, interest expense of $14.4 million (a component of Other interest on our Condensed Consolidated Statements of Operations), $0.3 million of loss on extinguishment of debt and $0.8 million of other income and expenses primarily related to interest income and stock compensation. Corporate and unallocated for the nine months ended July 31, 2021 included corporate general and administrative costs of $81.1 million, interest expense of $48.1 million (a component of Other interest on our Condensed Consolidated Statements of Operations), $0.3 million of loss on extinguishment of debt and $0.6 million of other income and expenses.
|  | July 31, |  |  | October 31, |
(In thousands) |  | 2022 |  |  | 2021 |
Assets: |  |  |  |  |  |  |  |
Northeast |  | $ | 170,420 |  |  | $ | 133,390 |
Mid-Atlantic |  |  | 342,870 |  |  |  | 273,073 |
Midwest |  |  | 75,690 |  |  |  | 85,044 |
Southeast |  |  | 352,012 |  |  |  | 257,044 |
Southwest |  |  | 526,788 |  |  |  | 413,532 |
West |  |  | 272,992 |  |  |  | 229,810 |
Total homebuilding |  |  | 1,740,772 |  |  |  | 1,391,893 |
Financial services (1) |  |  | 127,651 |  |  |  | 202,758 |
Corporate and unallocated |  |  | 669,081 |  |  |  | 725,857 |
Total assets |  | $ | 2,537,504 |  |  | $ | 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.

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