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Note 17 - Operating and Reporting Segments
9 Months Ended
Jul. 31, 2020
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 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

  

Nine Months Ended

 
  

July 31,

  

July 31,

 

(In thousands)

 

2020

  

2019

  

2020

  

2019

 
                 

Revenues:

                

Northeast

 $41,370  $20,696  $133,444  $53,696 

Mid-Atlantic

  111,402   86,948   288,899   221,225 

Midwest

  63,003   47,858   166,120   135,716 

Southeast

  65,790   50,233   158,933   143,606 

Southwest

  214,918   152,831   549,471   414,880 

West

  110,323   110,274   313,547   298,058 

Total homebuilding

  606,806   468,840   1,610,414   1,267,181 

Financial services

  21,295   12,764   49,670   34,679 

Corporate and unallocated

  35   437   459   1,466 

Total revenues

 $628,136  $482,041  $1,660,543  $1,303,326 
                 

Income (loss) before income taxes:

                

Northeast

 $5,240  $283  $17,703  $6,287 

Mid-Atlantic

  11,024   5,111   20,548   5,497 

Midwest

  765   191   (3,063)  (1,252)

Southeast

  (253)  (2,198)  (4,514)  (9,259)

Southwest

  20,072   8,598   41,744   15,270 

West

  226   6,584   4,560   28,599 

Total homebuilding

  37,074   18,569   76,978   45,142 

Financial services

  10,802   3,837   19,993   8,600 

Corporate and unallocated (1)

  (31,660)  (29,470)  (84,012)  (92,824)

Income (loss) before income taxes

 $16,216  $(7,064) $12,959  $(39,082)

 

(1)  Corporate and unallocated for the three months ended July 31, 2020 included corporate general and administrative costs of $19.3 million, interest expense of $15.9 million (a component of Other interest on our Condensed Consolidated Statements of Operations), $(4.1) million of gain on extinguishment of debt and $0.6 million of other income and expenses primarily related to interest income and stock compensation. Corporate and unallocated for the nine months ended July 31, 2020 included corporate general and administrative costs of $54.3 million, interest expense of $44.6 million (a component of Other interest on our Condensed Consolidated Statements of Operations), $(13.3) million of gain on extinguishment of debt and $(1.6) million of other income and expenses. Corporate and unallocated for the three months ended  July 31, 2019 included corporate general and administrative costs of $15.0 million, interest expense of $14.7 million (a component of Other interest on our Condensed Consolidated Statements of Operations) and $(0.3) million of other income and expenses primarily related to interest income and stock compensation. Corporate and unallocated for the nine months ended July 31, 2019 included corporate general and administrative costs of $48.8 million, interest expense of $45.4 million (a component of Other interest on our Condensed Consolidated Statements of Operations) and $(1.4) million of other income and expenses.

  

  

July 31,

  

October 31,

 

(In thousands)

 

2020

  

2019

 
         

Assets:

        

Northeast

 $109,806  $163,342 

Mid-Atlantic

  261,682   264,894 

Midwest

  111,978   117,242 

Southeast

  275,405   281,654 

Southwest

  349,983   357,052 

West

  302,415   311,919 

Total homebuilding

  1,411,269   1,496,103 

Financial services

  135,334   199,275 

Corporate and unallocated

  259,141   186,046 

Total assets

 $1,805,744  $1,881,424