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Note 10 - Operating and Reporting Segments
 12 Months Ended
Oct. 31, 2023
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 resource allocations.

 

We currently have homebuilding operations in 13 states that are aggregated into reportable segments based primarily upon geographic proximity.

 

HEI’s reportable segments consist of the following three homebuilding segments and a financial services segment.

 

Homebuilding:

 

(1)

Northeast (Delaware, Maryland, New Jersey, Ohio, Pennsylvania, Virginia and West Virginia)

 

(2)

Southeast (Florida, Georgia and South Carolina)

 

(3)

West (Arizona, California and Texas)

 

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 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, 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 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 corporate general and administrative expenses. 

 

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 our reportable segments are as follows:  

 

  

Year Ended October 31,

 

(In thousands)

 

2023

  

2022

  

2021

 

Revenues:

            

Northeast

 $968,851  $1,085,081  $871,091 

Southeast

  420,296   323,961   285,658 

West

  1,295,992   1,450,632   1,544,397 

Total homebuilding

  2,685,139   2,859,674   2,701,146 

Financial services

  60,088   61,540   81,692 

Corporate and unallocated

  10,789   1,017   19 

Total revenues

 $2,756,016  $2,922,231  $2,782,857 

Income before income taxes:

            

Northeast

 $178,516  $177,406  $102,896 

Southeast

  77,750   60,178   17,764 

West

  114,084   207,519   198,343 

Total homebuilding

  370,350   445,103   319,003 

Financial services

  19,365   19,121   37,563 

Corporate and unallocated (1)

  (133,764)  (144,471)  (166,705)

Income before income taxes

 $255,951  $319,753  $189,861 

 

(1) Corporate and unallocated for the year ended October 31, 2023 included corporate general and administrative expenses of $103.2 million, interest expense of $17.7 million (a component of Other interest in our Consolidated Statements of Operations), loss on extinguishment of debt of $25.6 million and $(12.7) million of other (income) expenses, net. Corporate and unallocated for the year ended October 31, 2022 included corporate general and administrative expenses of $102.6 million, interest expense of $28.6 million, loss on extinguishment of debt of $6.8 million and $6.5 million of other (income) expenses, net. Corporate and unallocated for the year ended October 31, 2021 included corporate general and administrative expenses of $106.7 million, interest expense of $57.1 million, loss on extinguishment of debt of $3.7 million and $(0.8) million of other (income) expenses, net.

 

  

October 31,

 

(In thousands)

 

2023

  

2022

 

Assets:

        

Northeast

 $483,784  $530,884 

Southeast

  286,701   330,894 

West

  733,318   802,704 

Total homebuilding

  1,503,803   1,664,482 

Financial services

  168,671   155,993 

Corporate and unallocated

  820,466   741,555 

Total assets

 $2,492,940  $2,562,030 

 

  

October 31,

 

(In thousands)

 

2023

  

2022

 

Investments in and advances to unconsolidated joint ventures:

        

Northeast

 $56,758  $20,241 

Southeast

  35,262   52,651 

West

  4,503   174 

Total homebuilding

  96,523   73,066 

Corporate and unallocated

  1,363   1,874 

Total investments in and advances to unconsolidated joint ventures

 $97,886  $74,940 

 

  

Year Ended October 31,

 

(In thousands)

 

2023

  

2022

  

2021

 

Homebuilding interest expense:

            

Northeast

 $32,071  $31,552  $30,212 

Southeast

  20,055   17,403   19,490 

West

  65,068   55,056   55,029 

Total homebuilding

  117,194   104,011   104,731 

Corporate and unallocated

  17,707   28,572   57,085 

Financial services interest expense (income) (1)

  1   (213)  (35)

Total interest expense, net

 $134,902  $132,370  $161,781 

 

 

(1)

Financial services interest expense (income) is included in Financial services revenue or expense in the Consolidated Statements of Operations.

  

  

Year Ended October 31,

 

(In thousands)

 

2023

  

2022

  

2021

 

Depreciation:

            

Northeast

 $4,352  $1,542  $1,459 

Southeast

  444   291   214 

West

  1,325   1,298   1,811 

Total homebuilding

  6,121   3,131   3,484 

Financial services

  -   5   13 

Corporate and unallocated

  2,677   2,321   1,783 

Total depreciation

 $8,798  $5,457  $5,280 

 

  

Year Ended October 31,

 

(In thousands)

 

2023

  

2022

  

2021

 

Net additions to property and equipment:

            

Northeast

 $1,678  $1,848  $1,271 

Southeast

  263   229   256 

West

  1,599   1,841   1,174 

Total homebuilding

  3,540   3,918   2,701 

Financial services

  1,040   28   - 

Corporate and unallocated

  14,241   8,646   3,241 

Total net additions to property and equipment

 $18,821  $12,592  $5,942 

 

  

Year Ended October 31,

 

(In thousands)

 

2023

  

2022

  

2021

 

Equity in earnings from unconsolidated joint ventures:

            

Northeast

 $27,253  $12,674  $2,958 

Southeast

  15,696   16,359   2,061 

West

  211   -   3,830 

Total equity in earnings from unconsolidated joint ventures

 $43,160  $29,033  $8,849