16.	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 for income taxes (“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 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 July 31,				Nine Months Ended July 31,
(In thousands)	2018		2017		2018		2017

Revenues:
Northeast	$26,705		$39,956		$90,675		$144,481
Mid-Atlantic	79,712		113,298		255,169		314,124
Midwest	45,659		41,052		129,176		126,773
Southeast	47,498		68,435		165,067		181,654
Southwest	157,514		209,295		444,966		617,959
West	86,105		104,523		249,253		301,897
Total homebuilding	443,193		576,559		1,334,306		1,686,888
Financial services	13,009		14,993		36,951		42,336
Corporate and unallocated (1)	510		483		5,165		755
Total revenues	$456,712		$592,035		$1,376,422		$1,729,979

Income (loss) before income taxes:
Northeast	$8,995		$(5,737	)	$5,254		$(7,553	)
Mid-Atlantic	3,401		3,714		12,053		8,514
Midwest	66		(3,313	)	(3,388	)	(5,771	)
Southeast	(4,752	)	(1,580	)	(11,699	)	(1,446	)
Southwest	12,461		19,010		28,019		50,718
West	14,442		5,873		29,681		7,436
Homebuilding income before income taxes	34,613		17,967		59,920		51,898
Financial services	4,023		6,126		10,826		19,254
Corporate and unallocated (1)	(38,558	)	(74,266	)	(110,717	)	(128,701	)
Income (loss) before income taxes	$78		$(50,173	)	$(39,971	)	$(57,549	)

(

) Corporate and unallocated for the

three

months ended

July 31, 2018

included corporate general and administrative costs of

$16.4

million, interest expense of

$20.2

million (a component of Other interest on our Condensed Consolidated Statements of Operations), loss on extinguishment of debt of

$4.3

million and $(

2.3

) million of other income and expenses primarily related to an adjustment to our insurance reserves, resulting from the recent Grandview legal settlement discussed in Note

Corporate and unallocated for the

nine

months ended

July 31, 2018

included corporate general and administrative costs of

$51.7

million, interest expense of

$59.7

million (a component of Other interest on our Condensed Consolidated Statements of Operations), loss on extinguishment of debt of

$5.7

million and $(

6.4

) million of other income and expenses primarily related to interest income and gain on the sale of our former corporate headquarters building, along with the adjustment to our insurance reserves, discussed above. Corporate and unallocated for the

three

months ended

July 31, 2017

included corporate general and administrative costs of

$15.7

million, interest expense of

$17.2

million (a component of Other interest on our Condensed Consolidated Statements of Operations), loss on extinguishment of debt of

$42.3

million and

$0.9

million of other income and expenses primarily related to interest income, rental income and stock compensation. Corporate and unallocated for the

nine

months ended

July 31, 2017

included corporate general and administrative costs of

$47.4

million, interest expense of

$46.5

million (a component of Other interest on our Condensed Consolidated Statements of Operations), loss on extinguishment of debt of

$34.9

million and

$0.1

million of other income and expenses primarily related to interest income, rental income, bond amortization and stock compensation.

(In thousands)	July 31, 2018	October 31, 2017

Assets:
Northeast	$136,264	$180,545
Mid-Atlantic	223,382	224,398
Midwest	87,105	84,960
Southeast	253,235	231,644
Southwest	343,168	294,337
West	236,354	175,347
Total homebuilding	1,279,508	1,191,231
Financial services	113,122	162,113
Corporate and unallocated	275,858	547,554
Total assets	$1,668,488	$1,900,898