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Note 17 - Operating and Reporting Segments
 6 Months Ended
Apr. 30, 2023
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

17.

Operating and Reporting Segments

 

We currently have homebuilding operations in 14 states that are aggregated into reportable segments based primarily upon geographic proximity.

 

Historically, the Company had seven reportable segments consisting of six homebuilding segments (Northeast, Mid-Atlantic, Midwest, Southeast, Southwest and West) and its financial services segment. During the fourth quarter of fiscal 2022, we reevaluated our reportable segments as a result of changes in the business and our management thereof. In particular, we considered the fact that, since our segments were last established, the Company had exited the Minnesota, North Carolina and Tampa markets and is currently in the process of exiting the Chicago market. Applying the principles set forth under Accounting Standards Codification ("ASC") 280, including that our business trends are reflective of economic conditions in markets with general geographic proximity, we realigned our homebuilding operating segments.

 

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

 

Homebuilding:

 

 

(1)

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

 (2)Southeast (Florida, Georgia and South Carolina)
 (3)West (Arizona, California and Texas)

  

All prior period amounts related to the segment change have been retrospectively reclassified throughout to conform to the new presentation.

 

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.

 

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.

 

Financial information relating to our reportable segments was as follows:

 

  

Three Months Ended

  

Six Months Ended

 
  

April 30,

  

April 30,

 

(In thousands)

 

2023

  

2022

  

2023

  

2022

 
                 

Revenues:

                

Northeast

 $212,047  $240,920  $423,509  $415,865 

Southeast

  101,050   73,235   174,844   128,817 

West

  374,001   372,663   589,735   694,133 

Total homebuilding

  687,098   686,818   1,188,088   1,238,815 

Financial services

  14,203   15,706   26,367   29,015 

Corporate and unallocated

  2,360   13   4,572   20 

Total revenues

 $703,661  $702,537  $1,219,027  $1,267,850 
                 

Income before income taxes:

                

Northeast

 $28,711  $38,000  $57,223  $57,838 

Southeast

  14,848   10,760   26,471   20,922 

West

  28,219   63,489   38,108   107,424 

Total homebuilding

  71,778   112,249   121,802   186,184 

Financial services

  4,051   4,914   7,162   7,823 

Corporate and unallocated (1)

  (29,706)  (36,218)  (64,794)  (77,661)

Income before income taxes

 $46,123  $80,945  $64,170  $116,346 

 

(1)

Corporate and unallocated for the three months ended April 30, 2023 included corporate general and administrative expenses of $25.1 million, interest expense of $5.2 million (a component of Other interest in our Condensed Consolidated Statements of Operations), and $(0.6) million of other expense (income). Corporate and unallocated for the six months ended April 30, 2023 included corporate general and administrative expenses of $50.6 million, interest expense of $11.8 million, and $2.4 million of other expense (income). Corporate and unallocated for the three months ended April 30, 2022 included corporate general and administrative expenses of $21.7 million, interest expense of $9.0 million, loss on extinguishment of debt of $6.8 million, and $(1.3) million of other expense (income). Corporate and unallocated for the six months ended April 30, 2022 included corporate general and administrative expenses of $51.1 million, interest expense of $20.5 million, loss on extinguishment of debt of $6.8 million, and $(0.7) million of other expense (income).

 

  

April 30,

  

October 31,

 

(In thousands)

 

2023

  

2022

 
         

Assets:

        

Northeast

 $539,642  $530,884 

Southeast

  367,497   330,894 

West

  731,545   802,704 

Total homebuilding

  1,638,684   1,664,482 

Financial services

  113,162   155,993 

Corporate and unallocated

  731,908   741,555 

Total assets

 $2,483,754  $2,562,030