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Note 17 - Operating and Reporting Segments
 9 Months Ended
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.