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Note 17 - Operating and Reporting Segments | 9 Months Ended
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Jul. 31, 2024
Operating and Reporting Segments |
Operating and Reporting Segments |
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 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 was as follows:
|  | Three Months Ended |  |  | Nine Months Ended |
|  | July 31, |  |  | July 31, |
(In thousands) |  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
Revenues: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Northeast |  | $ | 255,332 |  |  | $ | 201,814 |  |  | $ | 645,859 |  |  | $ | 625,323 |
Southeast |  |  | 115,964 |  |  |  | 121,240 |  |  |  | 350,761 |  |  |  | 296,084 |
West |  |  | 330,980 |  |  |  | 309,147 |  |  |  | 970,671 |  |  |  | 898,882 |
Total homebuilding |  |  | 702,276 |  |  |  | 632,201 |  |  |  | 1,967,291 |  |  |  | 1,820,289 |
Financial services |  |  | 18,888 |  |  |  | 14,649 |  |  |  | 51,323 |  |  |  | 41,016 |
Corporate and unallocated |  |  | 1,540 |  |  |  | 3,107 |  |  |  | 6,666 |  |  |  | 7,679 |
Total revenues |  | $ | 722,704 |  |  | $ | 649,957 |  |  | $ | 2,025,280 |  |  | $ | 1,868,984 |
Income before income taxes: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Northeast |  | $ | 40,006 |  |  | $ | 29,088 |  |  | $ | 107,645 |  |  | $ | 86,311 |
Southeast |  |  | 20,449 |  |  |  | 23,431 |  |  |  | 62,391 |  |  |  | 49,902 |
West |  |  | 21,009 |  |  |  | 27,873 |  |  |  | 77,198 |  |  |  | 65,981 |
Total homebuilding |  |  | 81,464 |  |  |  | 80,392 |  |  |  | 247,234 |  |  |  | 202,194 |
Financial services |  |  | 6,526 |  |  |  | 4,304 |  |  |  | 15,467 |  |  |  | 11,466 |
Corporate and unallocated (1) |  |  | 9,279 |  |  |  | (14,306 | ) |  |  | (63,477 | ) |  |  | (79,100 | )
Income before income taxes |  | $ | 97,269 |  |  | $ | 70,390 |  |  | $ | 199,224 |  |  | $ | 134,560 |
(1) | Corporate and unallocated for the three months ended July 31, 2024, included corporate general and administrative expenses of $38.4 million, $42.3 million of other income, and a $5.4 million reduction to interest expense. Corporate and unallocated for the nine months ended July 31, 2024, included corporate general and administrative expenses of $108.1 million, $43.2 million of other income, and $1.4 million of gain on extinguishment of debt. Corporate and unallocated for the three months ended July 31, 2023, included corporate general and administrative expenses of $27.4 million, interest expense of $2.6 million, $19.8 million of other income, and loss on extinguishment of debt of $4.1 million. Corporate and unallocated for the nine months ended July 31, 2023, included corporate general and administrative expenses of $78.0 million, interest expense of $14.4 million, $17.4 million of other income, and loss on extinguishment of debt of $4.1 million.
|  | July 31, |  |  | October 31, |
(In thousands) |  | 2024 |  |  | 2023 |
Assets: |  |  |  |  |  |  |  |
Northeast |  | $ | 647,257 |  |  | $ | 483,784 |
Southeast |  |  | 295,320 |  |  |  | 286,701 |
West |  |  | 877,310 |  |  |  | 733,318 |
Total homebuilding |  |  | 1,819,887 |  |  |  | 1,503,803 |
Financial services |  |  | 206,365 |  |  |  | 168,671 |
Corporate and unallocated |  |  | 514,253 |  |  |  | 820,466 |
Total assets |  | $ | 2,540,505 |  |  | $ | 2,492,940 |

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