UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



þ☑		Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~April 30, 2019~~January 31, 2020



o☐		Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission file number 001-09186

Toll Brothers, Inc.

(Exact name of registrant as specified in its charter)



Delaware			23-2416878
(State or other jurisdiction of incorporation or organization)		~~23-2416878~~	(I.R.S. Employer Identification No.)

250 Gibraltar Road	Horsham	Pennsylvania	19044
(Address of principal executive offices)		~~19044~~	(Zip Code)

~~(215)~~ (215) 938-8000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	TOL	New York Stock Exchange
Guarantee of Toll Brothers Finance Corp. 5.625% Senior Notes due 2024	TOL/24	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filerþ	~~Accelerated~~ ~~filer~~ o ☑	~~Non-accelerated~~ Accelerated filero	☐	Non-accelerated filer	☐
Smaller reporting companyo	☐	Emerging growth companyo	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No þ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

At ~~June 4, 2019,~~March 6, 2020, there were approximately ~~143,870,000~~126,732,000 shares of Common Stock, par value $0.01 per share, outstanding.

TOLL BROTHERS, INC.

TABLE OF CONTENTS



	Page No.

Statement on Forward-Looking Information	1

PART I. Financial Information

Item 1. Financial Statements

Condensed Consolidated Balance Sheets (Unaudited)	2

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)	3

Condensed Consolidated Statements of Changes in Equity (Unaudited)	4

Condensed Consolidated Statements of Cash Flows (Unaudited)	65

Notes to Condensed Consolidated Financial Statements (Unaudited)	76

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	3332

Item 3. Quantitative and Qualitative Disclosures About Market Risk	5247

Item 4. Controls and Procedures	5248

PART II. Other Information

Item 1. Legal Proceedings	5349

Item 1A. Risk Factors	5349

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	5351

Item 6. Exhibits	5452

SIGNATURES	5553

STATEMENT ON FORWARD-LOOKING INFORMATION

Certain information included in this report or in other materials we have filed or will file with the Securities and Exchange Commission (“SEC”) (as well as information included in oral statements or other written statements made or to be made by us) contains or may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. One can identify these statements by the fact that they do not relate to matters of a strictly historical or factual nature and generally discuss or relate to future events. These statements contain words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “may,” “can,” “could,” “might,” “should,” and other words or phrases of similar meaning. Such statements may include, but are not limited to, information related to: market conditions; demand for our homes; anticipated operating results; home deliveries; financial resources and condition; changes in revenues; changes in profitability; changes in margins; changes in accounting treatment; cost of revenues; selling, general, and administrative expenses; interest expense; inventory write-downs; home warranty and construction defect claims; unrecognized tax benefits; anticipated tax refunds; sales paces and prices; effects of home buyer cancellations; growth and expansion; joint ventures in which we are involved; anticipated results from our investments in unconsolidated entities; the ability to acquire land and pursue real estate opportunities; the ability to gain approvals and open new communities; the ability to sell homes and properties; the ability to deliver homes from backlog; the ability to secure materials and subcontractors; the ability to produce the liquidity and capital necessary to expand and take advantage of opportunities; and legal proceedings, investigations, and claims.

From time to time, forward-looking statements also are included in other reports on Forms 10-K, 10-Q, and 8-K; in press releases; in presentations; on our website; and in other materials released to the public. Any or all of the forward-looking statements included in this report and in any other reports or public statements made by us are not guarantees of future performance and may turn out to be inaccurate. This can occur as a result of incorrect assumptions or as a consequence of known or unknown risks and uncertainties. Many factors mentioned in this report or in other reports or public statements made by us, including macroeconomic factors such as ~~market conditions,~~employment levels, interest rates, consumer confidence and spending, housing demand, availability of financing for home buyers, availability and prices of new homes compared to existing inventory, demographic trends, government regulation, and the competitive environment, will be important in determining our future performance. Consequently, actual results may differ materially from those that might be anticipated from our forward-looking statements.

Forward-looking statements speak only as of the date they are made. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise.

For a more detailed discussion of these factors, see the information under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our most recent Annual Report on Form 10-K filed with the SEC and in this report.

When this report uses the words “we,” “us,” “our,” and the “Company,” they refer to Toll Brothers, Inc. and its subsidiaries, unless the context otherwise requires. References herein to fiscal year refer to our fiscal years ended or ending October 31.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TOLL BROTHERS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)


	April 30, 2019			October 31, 2018			January 31, 2020			October 31, 2019
	(unaudited)						(unaudited)
ASSETS
Cash and cash equivalents	$	924,448		$	1,182,195		$	519,793		$	1,286,014
Inventory	7,790,840			7,598,219			8,198,352			7,873,048
Property, construction, and office equipment, net	289,186			193,281			285,785			273,412
Receivables, prepaid expenses, and other assets (1)	659,768			550,778			978,166			715,441
Mortgage loans held for sale	124,940			170,731
Mortgage loans held for sale, at fair value							111,995			218,777
Customer deposits held in escrow	97,462			117,573			71,841			74,403
Investments in unconsolidated entities	390,085			431,813			364,352			366,252
Income taxes receivable							56,922			20,791
	$	10,276,729		$	10,244,590		$	10,587,206		$	10,828,138
LIABILITIES AND EQUITY
Liabilities
Loans payable	$	1,027,408		$	686,801		$	1,277,183		$	1,111,449
Senior notes	2,512,404			2,861,375			2,660,352			2,659,898
Mortgage company loan facility	110,012			150,000			97,653			150,000
Customer deposits	419,479			410,864			417,092			385,596
Accounts payable	318,346			362,098			314,482			348,599
Accrued expenses	890,668			973,581			1,011,548			950,932
Income taxes payable	12,172			30,959			103,816			102,971
Total liabilities	5,290,489			5,475,678			5,882,126			5,709,445
Equity
Stockholders’ equity
Preferred stock, none issued	—			—			—			—
Common stock, 177,937 shares issued at April 30, 2019 and October 31, 2018	1,779			1,779
Common stock, 152,937 shares issued at January 31, 2020 and October 31, 2019							1,529			1,529
Additional paid-in capital	721,311			727,053			723,109			726,879
Retained earnings	5,352,424			5,161,551			4,816,286			4,774,422
Treasury stock, at cost — 31,907 and 31,774 shares at April 30, 2019 and October 31, 2018, respectively	(1,135,166		)	(1,130,878		)
Accumulated other comprehensive income	806			694
Treasury stock, at cost — 23,138 and and 11,999 shares at January 31, 2020 and October 31, 2019, respectively							(879,820		)	(425,183		)
Accumulated other comprehensive loss							(5,553		)	(5,831		)
Total stockholders’ equity	4,941,154			4,760,199			4,655,551			5,071,816
Noncontrolling interest	45,086			8,713			49,529			46,877
Total equity	4,986,240			4,768,912			4,705,080			5,118,693
	$	10,276,729		$	10,244,590		$	10,587,206		$	10,828,138


(1)	As of ~~April 30, 2019~~January 31, 2020 and October 31, ~~2018,~~2019, receivables, prepaid expenses, and other assets include ~~$138.5~~$157.9 million and ~~$19.7~~$145.8 million, respectively, of assets related to consolidated variable interest entities ("VIEs"). See Note 4, “Investments in Unconsolidated Entities” for additional information regarding VIEs.

See accompanying notes.

TOLL BROTHERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Amounts in thousands, except per share data)

(Unaudited)


	Six months ended April 30,				Three months ended April 30,				Three months ended January 31,
	2019		2018		2019		2018		2020		2019
Revenues:
Home sales	$	3,031,365	$	2,774,667	$	1,712,057	$	1,599,199	$	1,297,337	$	1,319,308
Land sales	47,910		—		4,037		—		34,094		43,873
	3,079,275		2,774,667		1,716,094		1,599,199		1,331,431		1,363,181

Cost of revenues:
Home sales	2,416,592		2,232,637		1,374,347		1,298,157		1,059,900		1,042,245
Land sales	37,174		—		2,921		—		32,282		34,253
	2,453,766		2,232,637		1,377,268		1,298,157		1,092,182		1,076,498
Selling, general and administrative	340,609		323,919		178,371		166,652		191,753		162,238
Income from operations	284,900		218,111		160,455		134,390		47,496		124,445
Other:
Income from unconsolidated entities	10,559		41,444		4,419		2,564		12,141		6,140
Other income – net	32,146		24,791		11,285		15,794		6,295		20,861
Income before income taxes	327,605		284,346		176,159		152,748		65,932		151,446
Income tax provision	86,231		40,429		46,835		40,938		9,056		39,396
Net income	$	241,374	$	243,917	$	129,324	$	111,810	$	56,876	$	112,050

Other comprehensive income, net of tax	112		341		56		170		278		56
Total comprehensive income	$	241,486	$	244,258	$	129,380	$	111,980	$	57,154	$	112,106

Per share:
Basic earnings	$	1.65	$	1.58	$	0.88	$	0.73	$	0.41	$	0.76
Diluted earnings	$	1.63	$	1.55	$	0.87	$	0.72	$	0.41	$	0.76

Weighted-average number of shares:
Basic	146,687		154,306		146,622		152,731		138,145		146,751
Diluted	148,081		157,013		148,129		155,129		139,889		148,032

See accompanying notes.

TOLL BROTHERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts in thousands)

(Unaudited)

For the ~~six~~three months ended ~~April 30, 2019~~January 31, 2020 and ~~2018:~~2019:


														Common Stock	Addi- tional Paid-in Capital		Retained Earnings		Treasury Stock		Accum- ulated Other Compre- hensive (Loss)/Income		Non-controlling Interest		Total Equity
														$	$		$		$		$		$		$
Balance, October 31, 2019														1,529	726,879		4,774,422		(425,183	)	(5,831	)	46,877		5,118,693
Net income																	56,876								56,876
Purchase of treasury stock																			(476,024	)					(476,024	)
Exercise of stock options and stock based compensation issuances															(17,112	)			21,042						3,930
Employee stock purchase plan issuances															(41	)			345						304
Stock-based compensation															13,383										13,383
Dividends declared																	(15,012	)							(15,012	)
Other comprehensive income																					278				278
Loss attributable to non-controlling interest																							(1	)	(1	)
Capital contributions																							2,653		2,653
Balance, January 31, 2020														1,529	723,109		4,816,286		(879,820	)	(5,553	)	49,529		4,705,080
	Common Stock	Addi- tional Paid-in Capital		Retained Earnings		Treasury Stock		Accum- ulated Other Compre- hensive (Loss)/Income		Non-controlling Interest		Total Equity
	$	$		$		$		$		$		$
Balance, October 31, 2018	1,779	727,053		5,161,551		(1,130,878	)	694		8,713		4,768,912		1,779	727,053		5,161,551		(1,130,878	)	694		8,713		4,768,912
Cumulative effect adjustment upon adoption of ASC 606, net of tax				(17,987	)							(17,987	)				(17,987	)							(17,987	)
Net income				241,374								241,374					112,050								112,050
Purchase of treasury stock						(25,244	)					(25,244	)						(25,143	)					(25,143	)
Exercise of stock options and stock based compensation issuances		(19,667	)			20,245						578			(18,194	)			16,044						(2,150	)
Employee stock purchase plan issuances		9				711						720			(39	)			354						315
Stock-based compensation		13,916										13,916			8,585										8,585
Dividends declared				(32,514	)							(32,514	)				(16,363	)							(16,363	)
Other comprehensive income								112				112									56				56
Loss attributable to non-controlling interest										(4	)	(4	)
Capital contributions										36,377		36,377											32,914		32,914
Balance, April 30, 2019	1,779	721,311		5,352,424		(1,135,166	)	806		45,086		4,986,240


Balance, October 31, 2017	1,779	720,115		4,474,064		(662,854	)	(1,910	)	5,896		4,537,090
Cumulative effect adjustment upon adoption of ASU 2016-09 and ASU 2018-02, net of tax		374		1,502				(411	)			1,465
Net income				243,917								243,917
Purchase of treasury stock						(291,478	)					(291,478	)
Exercise of stock options and stock based compensation issuances		(19,984	)			28,520						8,536
Employee stock purchase plan issuances		98				495						593
Stock-based compensation		15,346										15,346
Dividends declared				(29,211	)							(29,211	)
Other comprehensive income								341				341
Loss attributable to non-controlling interest										(3	)	(3	)
Balance, April 30, 2018	1,779	715,949		4,690,272		(925,317	)	(1,980	)	5,893		4,486,596
Balance, January 31, 2019														1,779	717,405		5,239,251		(1,139,623	)	750		41,627		4,861,189

~~For the three months ended April 30, 2019 and 2018:~~

Common
Stock

Addi-
tional
Paid-in
Capital

Retained
Earnings

Treasury
Stock
Accum-
ulated
Other
Compre-
hensive (Loss)/Income Non-controlling Interest
Total
Equity
$ $ $ $ $ $ $
Balance, January 31, 2019 1,779
717,405
5,239,251
(1,139,623 ) 750
41,627
4,861,189
Net income

129,324

129,324
Purchase of treasury stock

(101 )

(101 )
Exercise of stock options and stock based compensation issuances

(1,473 )

4,201

2,728
Employee stock purchase plan issuances

48

357

405
Stock-based compensation

5,331

5,331
Dividends declared

(16,151 )

(16,151 )
Other comprehensive income

56

56
Loss attributable to non-controlling interest

(4 ) (4 )
Capital contributions

3,463
3,463
Balance, April 30, 2019 1,779

721,311

5,352,424

(1,135,166 )
806

45,086

4,986,240

Balance, January 31, 2018 1,779
709,800
4,595,233
(845,668 ) (2,150 ) 5,896
4,464,890
Net income

111,810

111,810
Purchase of treasury stock

(81,508 )

(81,508 )
Exercise of stock options and stock based compensation issuances

(347 )

1,583

1,236
Employee stock purchase plan issuances

39

276

315
Stock-based compensation

6,457

6,457
Dividends declared

(16,771 )

(16,771 )
Other comprehensive income

170

170
Loss attributable to non-controlling interest

(3 ) (3 )
Balance, April 30, 2018 1,779
715,949
4,690,272
(925,317 ) (1,980 ) 5,893

4,486,596

See accompanying notes.

TOLL BROTHERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)


	Six months ended April 30,						Three months ended January 31,
	2019			2018			2020			2019
Cash flow used in operating activities:
Net income	$	241,374		$	243,917		$	56,876		$	112,050
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	33,314			12,520			14,667			15,669
Stock-based compensation	13,916			15,347			13,383			8,585
Income from unconsolidated entities	(10,559		)	(41,444		)	(12,141		)	(6,140		)
Distributions of earnings from unconsolidated entities	13,835			39,508			14,703			6,427
Income from foreclosed real estate and distressed loans	(351		)	(1,026		)	(285		)	(170		)
Deferred tax provision (benefit)	2,557			(29,886		)
Deferred tax provision							751			1,621
Inventory impairments and write-offs	26,956			17,685			1,031			7,562
Gain on sales of golf club property and an office building	(13,331		)
Gain on the sale of golf club property										(12,186		)
Other	254			754			1,376			703
Changes in operating assets and liabilities
Increase in inventory	(215,141		)	(540,898		)	(303,384		)	(158,258		)
Origination of mortgage loans	(673,032		)	(575,285		)	(316,852		)	(306,351		)
Sale of mortgage loans	720,231			594,933			422,376			389,974
Increase in receivables, prepaid expenses, and other assets	(94,837		)	(97,388		)	(172,153		)	(47,823		)
Increase in income taxes receivable							(36,131		)	(14,363		)
Increase in customer deposits – net	28,726			40,505			34,058			13,030
(Decrease) increase in accounts payable and accrued expenses	(142,959		)	14,204
Decrease in accounts payable and accrued expenses							(84,691		)	(166,751		)
Decrease in income taxes payable	(16,631		)	(19,714		)				(28,804		)
Net cash used in operating activities	(85,678		)	(326,268		)	(366,416		)	(185,225		)
Cash flow provided by investing activities:
Cash flow (used in) provided by investing activities:
Purchase of property, construction, and office equipment – net	(44,941		)	(6,501		)	(26,839		)	(19,576		)
Investments in unconsolidated entities	(31,560		)	(10,800		)	(4,909		)	(17,205		)
Return of investments in unconsolidated entities	70,465			54,315			28,983			42,677
Investment in foreclosed real estate and distressed loans	(522		)	(195		)	(234		)	(130		)
Return of investments in foreclosed real estate and distressed loans	1,214			3,122			883			482
Proceeds from sales of golf club property and an office building	33,539
Net cash provided by investing activities	28,195			39,941
Cash flow (used in) provided by financing activities:
Proceeds from issuance of senior notes				400,000
Debt issuance costs for senior notes				(3,410		)
Proceeds from the sale of a golf club property										18,220
Net cash (used in) provided by investing activities							(2,116		)	24,468
Cash flow used in financing activities:
Proceeds from loans payable	1,339,641			1,238,283			702,729			809,506
Debt issuance costs for loans payable	(1,948		)
Debt issuance costs										(2,058		)
Principal payments of loans payable	(1,131,795		)	(1,276,148		)	(608,481		)	(633,593		)
Redemption of senior notes	(350,000		)							(350,000		)
Proceeds from stock-based benefit plans, net	1,302			9,133
Proceeds (payments) from stock-based benefit plans, net							4,235			(1,831		)
Purchase of treasury stock	(25,244		)	(291,478		)	(476,024		)	(25,143		)
Dividends paid	(32,434		)	(29,090		)	(14,956		)	(16,369		)
Receipts related to noncontrolling interest, net	13						44
Net cash (used in) provided by financing activities	(200,465		)	47,290
Net cash used in financing activities							(392,453		)	(219,488		)
Net decrease in cash, cash equivalents, and restricted cash	(257,948		)	(239,037		)	(760,985		)	(380,245		)
Cash, cash equivalents, and restricted cash, beginning of period	1,182,939			715,311			1,319,643			1,182,939
Cash, cash equivalents, and restricted cash, end of period	$	924,991		$	476,274		$	558,658		$	802,694

See accompanying notes.

TOLL BROTHERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of Toll Brothers, Inc. (the “Company,” “we,” “us,” or “our”), a Delaware corporation, and its majority owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Investments in 50% or less owned partnerships and affiliates are accounted for using the equity method unless it is determined that we have effective control of the entity, in which case we would consolidate the entity.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. The October 31, ~~2018~~2019 balance sheet amounts and disclosures included herein have been derived from our October 31, ~~2018~~2019 audited financial statements. Since the accompanying condensed consolidated financial statements do not include all the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements, they should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended October 31, ~~2018~~2019 (“~~2018~~2019 Form 10-K”). In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, which are of a normal recurring nature, necessary to present fairly our financial position as of ~~April 30, 2019;~~January 31, 2020; the results of our operations and changes in equity for the ~~six-month and~~ three-month periods ended ~~April 30, 2019~~January 31, 2020 and ~~2018;~~2019; and our cash flows for the ~~six-month~~three-month periods ended ~~April 30, 2019~~January 31, 2020 and ~~2018.~~2019. The results of operations for such interim periods are not necessarily indicative of the results to be expected for the full year.

Revenue Recognition

As discussed under “Recent Accounting Pronouncements” below, on November 1, 2018, we adopted Accounting Standards Codification (“ASC”) Topic 606 “Revenue from Contracts with Customers” (“ASC 606”). As a result of this adoption, we updated our revenue recognition policies effective November 1, 2018, as follows:

Home sales revenues: Revenues and cost of revenues from home sales are recognized at the time each home is delivered and title and possession are transferred to the buyer. For the majority of our home closings, our performance obligation to deliver a home is satisfied in less than one year from the date a binding sale agreement is signed. In certain states ~~that~~where we build, we are not able to complete certain outdoor features prior to the closing of the home. ~~Effective November 1, 2018, to~~To the extent these separate performance obligations are not complete upon the home closing, we defer a portion of the home sales revenues related to these obligations and subsequently recognize the revenue upon completion of such obligations. As of ~~April 30, 2019, we deferred~~January 31, 2020, the home sales revenues and related costs ~~of $2.5 million and $1.9 million, respectively,~~we deferred related to these obligations ~~not completed on closed homes.~~were immaterial. Our contract liabilities, consisting of deposits received from customers for sold but undelivered homes, totaled ~~$419.5 million, $406.4~~$417.1 million and ~~$410.9~~$385.6 million at ~~April 30, 2019,~~ January 31, ~~2019,~~2020 and October 31, ~~2018,~~2019, respectively. Of the outstanding customer deposits held as of October 31, ~~2018, we recognized $204.4 million in home sales revenues during the six months ended April 30, 2019. Of the outstanding customer deposits held as of January 31,~~ 2019, we recognized ~~$124.5~~$85.8 million in home sales revenues during the three months ended ~~April 30, 2019.~~January 31, 2020.

Land sales revenues: Our revenues from land sales generally consist ~~of the following:~~of: (1) lot sales to third-party builders within our master planned communities; (2) land sales to joint ventures in which we retain an interest; and (3) bulk ~~land~~ sales to third parties of land we have decided no longer meets our development criteria. In general, our performance obligation for each of these land sales is fulfilled upon the delivery of the land, which generally coincides with the receipt of cash consideration from the counterparty. ~~Effective November 1, 2018, in~~For land sale transactions that contain repurchase options, revenues and related costs are not recognized until the repurchase option expires. In addition, when we sell land to a joint venture in which we retain an interest, we do not recognize revenue or gains on the sale to the extent of our retained interest in such joint venture.

Forfeited Customer Deposits: ~~Effective November 1, 2018, forfeited~~Forfeited customer deposits are recognized in “Home sales revenues” in our Condensed Consolidated Statements of Operations and Comprehensive Income in the period in which we determine that the customer will not complete the purchase of the home and we have the right to retain the deposit.

Sales Incentives: In order to promote sales of our homes, we may ~~grant~~offer our home buyers sales incentives. These incentives ~~will~~ vary by type ~~of incentive~~ and by amount on a community-by-community and home-by-home basis. Incentives are reflected as a reduction in home sales revenues. Incentives are recognized at the time the home is delivered to the home buyer and we receive the sales proceeds.

Recent Accounting Pronouncements

In May 2014, the FASB created ASC 606 with the issuance ASU No. 2014-09, “Revenue from Contracts with Customers,” which provides guidance for revenue recognition. ASC 606 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets. ASC 606 supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition,” and most industry-specific guidance. ASC 606 also supersedes some cost guidance included in ASC Subtopic 605-35, “Revenue Recognition—Construction-Type and Production-Type Contracts.” The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which a company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under the previous guidance. These judgments and estimates include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price, and allocating the transaction price to each separate performance obligation. In August 2015, the FASB issued ASU 2015-14 “Revenue from Contracts with Customers” (“ASU 2015-14”), which delayed the effective date of ASC 606 by one year. ASC 606, as amended by ASU 2015-14, became effective for our fiscal year beginning November 1, 2018, and we adopted the new standard under the modified retrospective transition method applied to contracts that were not completed as of November 1, 2018. We recognized the cumulative effect, net of tax, of applying ASC 606 as an adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the previous accounting standards. The adoption of ASC 606 did not have a material impact on our Condensed Consolidated Balance Sheet or Condensed Consolidated Statement of Operations or Comprehensive Income, and there have been no significant changes to our internal controls, processes, or systems as a result of implementing this new standard. However, the adoption of ASC 606 resulted in the following changes:

Prior to adoption of ASC 606, we capitalized certain costs related to our marketing efforts, including sales offices and model home upgrades and furnishings within “Inventory” on our Condensed Consolidated Balance Sheets and amortized such costs through “Selling, general, and administrative” on our Condensed Consolidated Statements of Operations and Comprehensive Income. As of November 1, 2018, we reclassified $104.8 million to “Property, construction, and office equipment, net” on our Condensed Consolidated Balance Sheets, primarily related to sales offices and model home improvement costs. The amortization of such costs will remain unchanged and will continue to be included in “Selling, general, and administrative” on our Condensed Consolidated Statements of Operations and Comprehensive Income. Additionally, we recorded a net cumulative effect adjustment to retained earnings of approximately $13.2 million for certain other marketing costs that no longer qualify for capitalization under the new guidance, and such costs will be expensed as incurred in the future.

Prior to adoption of ASC 606, we recorded our land sale revenues, net of their related expenses, within “Other income – net” on our Condensed Consolidated Statements of Operations and Comprehensive Income. As of November 1, 2018, we are presenting this activity in income from operations and breaking out the components of land sales revenues and land sales cost of revenues on our Condensed Consolidated Statements of Operations and Comprehensive Income. In addition, due to the existence of certain repurchase options in existing agreements to sell lots to third party builders in our master planned communities, both for wholly owned projects as well as projects in which we are a joint venture partner, we recorded a net cumulative effect adjustment to retained earnings of approximately $4.6 million to account for previously settled lots for which the related repurchase option has not yet expired. Because the amount of the deferred earning is not material to our condensed consolidated financial statements, we have elected to recognize the revenue and related expenses for such lots in future periods when such repurchase options expire rather than account for them as leases under ASC 840, “Leases.”

Prior to adoption of ASC 606, retained customer deposits were classified in “Other income – net” on our Condensed Consolidated Statements of Operations and Comprehensive Income. As of November 1, 2018, retained customer deposits, which totaled $6.4 million and $3.2 million during the six months and three months ended April 30, 2019, respectively, are included in “Home sales revenue” on our Condensed Consolidated Statements of Operations and Comprehensive Income. Prior period balances for retained customer deposits have not been reclassified and are not material to our condensed consolidated financial statements.

In February 2017, the FASB issued ASU No. 2017-05, “Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets” (“ASU 2017-05”). ASU 2017-05 is meant to clarify the scope of the original guidance within Subtopic 610-20 that was issued in connection with ASC 606, which provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. ASU 2017-05 also added guidance for partial sales of nonfinancial assets. ASU 2017-05 became effective for our fiscal year beginning November 1, 2018 and we adopted ASU

~~2017-05 concurrent with our adoption of ASC 606. The adoption of ASU 2017-05 did not have a material effect on our condensed consolidated financial statements and disclosures.~~

In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash” (“ASU 2016-18”), which provides guidance on the classification of restricted cash in the statement of cash flows. ASU 2016-18 became effective for our fiscal year beginning November 1, 2018 and resulted in a change in the presentation to our Condensed Consolidated Statement of Cash Flows but did not have a material effect on our other condensed consolidated financial statements or disclosures.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”), which is intended to reduce diversity in practice in how certain transactions are classified and makes eight targeted changes to how cash receipts and cash payments are presented in the statement of cash flows. ASU 2016-15 became effective for our fiscal year beginning November 1, 2018 and did not have a material effect on our condensed consolidated financial statements and disclosures.

In February 2016, the FASB issued ASU No. 2016-02, “Leases” (“ASU 2016-02”), which requires an entity to recognize assets and liabilities on the balance sheet for the rights and obligations created by leased assets and provide additional disclosures. In July 2018, the FASB issued ASU No. 2018-11, “Leases: Targeted Improvements” (“ASU 2018-11”), which provides an entity with the option to apply the transition provisions of the new standard at its adoption date instead of at its earliest comparative

period presented. ASU 2018-11 also provides an entity with a practical expedient that permits lessors to not separate nonlease components from the associated lease component if certain conditions are met. ASU 2016-02, as amended by ASU 2018-11, isbecame effective for our fiscal year beginning November 1, 2019, ~~at which time~~and we ~~will adopt~~adopted the new standard using a modified retrospective approach. The prior year period was not recast and our Condensed Consolidated Balance Sheet as of October 31, 2019 does not reflect any changes resulting from the adoption of the new standard. We elected to apply the transition provisions that allow us to carry forward our historical assessment of (1) whether contracts are ~~currently evaluating~~or contain leases, (2) lease classification, and (3) initial direct costs. In addition, we elected the ~~impact~~practical expedient that allows lessees the option to account for lease and non-lease components together as a single component for all classes of underlying assets. As a result of the adoption, we recorded a right-of-use (“ROU”) asset and lease liability of $114.5 million and $118.5 million, respectively, as of November 1, 2019. The ROU asset is included in “Receivables, prepaid expenses, and other assets” and the corresponding lease liability is included in “Accrued expenses” in our Condensed Consolidated Balance Sheet. The adoption of ASU 2016-02 ~~as amended by ASU 2018-11, may have~~had no impact on retained earnings and did not materially impact our ~~consolidated financial statements~~Condensed Consolidated Statements of Operations and ~~disclosures.~~Comprehensive Income or Condensed Consolidated Statements of Cash Flows.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to estimate credit losses. ASU 2016-13 iswill be effective for our fiscal year beginning November 1, 2020, with early adoption permitted as of November 1, 2019. We are currently evaluating the impact that the adoption of ASU 2016-13 may have on our consolidated financial statements and disclosures.

2. ~~Acquisition – Subsequent Event~~Acquisitions

~~In May~~During fiscal 2019, we acquired substantially all of the assets and operations of Sharp Residential, LLC (“Sharp”) and Sabal Homes LLC (“Sabal”), ~~a builder~~respectively, for an aggregate of approximately $162.4 million in cash. Sharp operates in metropolitan Atlanta, ~~Georgia, for approximately $93.2 million~~Georgia; Sabal operates in ~~cash.~~the Charleston, Greenville, and Myrtle Beach, South Carolina markets. The assets acquired, based on our preliminary purchase price allocations, were primarily inventory, including approximately ~~950~~2,550 home sites owned or controlled through land purchase agreements. In connection with ~~this acquisition,~~these acquisitions, we assumed contracts to deliver ~~125~~204 homes with an aggregate value of ~~$66.1~~$96.1 million. The average price of undelivered homes at the ~~date~~dates of ~~acquisition~~acquisitions was approximately ~~$528,900.~~$471,100. As a result of ~~this acquisition,~~these acquisitions, our selling community count increased by 22 communities.

Subsequent event

In February 2020, we acquired substantially all of the assets and operations of Thrive Residential (“Thrive”), an urban in-fill builder with operations in Atlanta, Georgia and Nashville, Tennessee, for approximately $53.3 million in cash. The assets acquired were primarily inventory for future communities, including approximately 680 home sites owned or controlled through land purchase agreements. The acquisition is expected to add 10 communities atby the ~~acquisition date.~~end of fiscal 2020.

The acquisitions discussed above were accounted for as a business combination and were not material to our results of operations or financial condition.

3. Inventory

Inventory at ~~April 30, 2019~~January 31, 2020 and October 31, ~~2018~~2019 consisted of the following (amounts in thousands):


	April 30, 2019		October 31, 2018		January 31, 2020		October 31, 2019
Land controlled for future communities	$	174,116	$	139,985	$	246,305	$	182,929
Land owned for future communities	934,774		916,616		912,323		868,202
Operating communities	6,681,950		6,541,618		7,039,724		6,821,917
	$	7,790,840	$	7,598,219	$	8,198,352	$	7,873,048

Operating communities include communities offering homes for sale; communities that have sold all available home sites but have not completed delivery of the homes; communities that were previously offering homes for sale but are temporarily closed due to business conditions or non-availability of improved home sites and that are expected to reopen within 12 months of the end of the fiscal period being reported on; and communities preparing to open for sale. The carrying value attributable to operating communities includes the cost of homes under construction, land and land development costs, the carrying cost of home sites in current and future phases of these communities, and the carrying cost of model homes.

Communities that were previously offering homes for sale but are temporarily closed due to business conditions, do not have any remaining backlog, and are not expected to reopen within 12 months of the end of the fiscal period being reported on have been classified as land owned for future communities.

Information regarding the classification, number, and carrying value of these temporarily closed communities, as of the dates indicated, is provided in the table below:


	April 30, 2019		October 31, 2018		January 31, 2020		October 31, 2019
Land owned for future communities:
Number of communities	15		17		15		16
Carrying value (in thousands)	$	105,281	$	124,426	$	114,216	$	120,857
Operating communities:
Number of communities	3		1		2		1
Carrying value (in thousands)	$	21,931	$	2,622	$	6,252	$	2,871

The amounts we have provided for inventory impairment charges and the expensing of costs that we ~~believed~~believe not to be recoverable, for the periods indicated, are shown in the table below (amounts in thousands):


	Six months ended April 30,				Three months ended April 30,				Three months ended January 31,
	2019		2018		2019		2018		2020		2019
Land controlled for future communities	$	3,676	$	377	$	1,899	$	260	$	1,031	$	1,777
Land owned for future communities			247				247
Operating communities	23,280		17,061		17,495		13,325		—		5,785
	$	26,956	$	17,685	$	19,394	$	13,832	$	1,031	$	7,562

See Note 12, “Fair Value Disclosures,” for information regarding the number of operating communities that we tested for potential impairment, the number of operating communities in which we recognized impairment charges, the amount of impairment charges recognized, and the fair values of those communities, net of impairment charges.

See Note 14, “Commitments and Contingencies,” for information regarding land purchase commitments.

At ~~April 30, 2019,~~January 31, 2020, we evaluated our land purchase contracts, including those to acquire land for apartment developments, to determine whether any of the selling entities were VIEs and, if they were, whether we were the primary beneficiary of any of them. Under these land purchase contracts, we do not possess legal title to the land; our risk is generally limited to deposits paid to the sellers and predevelopment costs incurred; and the creditors of the sellers generally have no recourse against us. At ~~April 30, 2019,~~January 31, 2020, we determined that ~~130~~129 land purchase contracts, with an aggregate purchase price of ~~$2.00~~$2.39 billion, on which we had made aggregate deposits totaling ~~$130.1~~$181.1 million, were VIEs, and that we were not the primary beneficiary of any VIE related to our land purchase contracts. At October 31, ~~2018,~~2019, we determined that ~~110~~127 land purchase contracts, with an aggregate purchase price of ~~$1.88~~$2.00 billion, on which we had made aggregate deposits totaling ~~$120.5~~$149.2 million, were VIEs and that we were not the primary beneficiary of any VIE related to our land purchase contracts.

Interest incurred, capitalized, and expensed, for the periods indicated, was as follows (amounts in thousands):


	Six months ended April 30,						Three months ended April 30,						Three months ended January 31,
	2019			2018			2019			2018			2020			2019
Interest capitalized, beginning of period	$	319,364		$	352,049		$	330,167		$	354,496		$	311,323		$	319,364
Interest incurred	87,862			81,269			43,440			42,582			43,650			44,422
Interest expensed to home sales cost of revenues	(79,227		)	(78,912		)	(44,786		)	(45,027		)	(32,774		)	(34,441		)
Interest expensed to land sales cost of revenues	(635		)				(283		)				(567		)	(352		)
Interest expensed in other income				(1,001		)				(285		)
Interest capitalized on investments in unconsolidated entities	(3,084		)	(3,602		)	(1,270		)	(1,891		)	(881		)	(1,814		)
Previously capitalized interest on investments in unconsolidated entities transferred to inventory	4,303			115			1,315			43						2,988
Interest capitalized, end of period	$	328,583		$	349,918		$	328,583		$	349,918		$	320,751		$	330,167

4. Investments in Unconsolidated Entities

We have investments in various unconsolidated entities. These entities, which are structured as joint ventures, (i) develop land for the joint venture participants and for sale to outside builders (“Land Development Joint Ventures”); (ii) develop for-sale homes (“Home Building Joint Ventures”); (iii) develop luxury for-rent residential apartments, commercial space, and a hotel (“Rental Property Joint Ventures”), which includes our investment in Toll Brothers Realty Trust (the “Trust”); and (iv) invest in

distressed loans and real estate and provide financing and land banking to residential builders and developers for the acquisition and development of land and home sites (“Gibraltar Joint Ventures”).

The table below provides information as of ~~April 30, 2019,~~January 31, 2020, regarding active joint ventures that we are invested in, by joint venture category ($ amounts in thousands):


	Land Development Joint Ventures		Home Building Joint Ventures		Rental Property Joint Ventures		Gibraltar Joint Ventures		Total		Land Development Joint Ventures		Home Building Joint Ventures		Rental Property Joint Ventures		Gibraltar Joint Ventures		Total
Number of unconsolidated entities	7		4		18		8		37		8		4		21		7		40
Investment in unconsolidated entities	$	139,883	$	64,081	$	168,574	$	17,547	$	390,085	$	101,946	$	48,860	$	191,443	$	22,103	$	364,352
Number of unconsolidated entities with funding commitments by the Company	2		1		2		1		6		2		1		1		1		5
Company’s remaining funding commitment to unconsolidated entities	$	17,551	$	1,400	$	2,300	$	9,621	$	30,872	$	28,108	$	1,400	$	224	$	6,830	$	36,562

Certain joint ventures in which we have investments obtained debt financing to finance a portion of their activities. The table below provides information at ~~April 30, 2019,~~January 31, 2020, regarding the debt financing obtained by category ($ amounts in thousands):


	Land Development Joint Ventures		Home Building Joint Ventures		Rental Property Joint Ventures		Total		Land Development Joint Ventures		Home Building Joint Ventures		Rental Property Joint Ventures		Total
Number of joint ventures with debt financing	3		3		16		22		3		1		19		23
Aggregate loan commitments	$	100,877	$	280,118	$	1,191,229	$	1,572,224	$	100,842	$	73,021	$	1,441,784	$	1,615,647
Amounts borrowed under loan commitments	$	76,894	$	247,328	$	924,613	$	1,248,835	$	86,092	$	73,021	$	1,009,618	$	1,168,731

More specific and/or recent information regarding our investments in, advances to, and future commitments to these entities is provided below.

Land Development Joint Ventures

During the ~~six~~three months ended ~~April 30, 2019,~~January 31, 2020, our Land Development Joint Ventures sold approximately ~~498~~164 lots and recognized revenues of ~~$138.8~~$24.7 million. We acquired ~~195~~42 of these lots for $96.5 million. Our share of the joint venture income from the lots we acquired was insignificant. During the six months ended April 30, 2018, our Land Development Joint Ventures sold approximately 449 lots and recognized revenues of $102.8 million. We acquired 55 of these lots for $7.3 million. Our share of the income of $0.9 million from the lots we acquired was deferred by reducing our basis in those lots.

~~During the three months ended April 30, 2019, our Land Development Joint Ventures sold approximately 297 lots and recognized revenues of $49.0 million. We acquired 88 of these lots for $25.3~~$3.5 million. Our share of the joint venture income from the lots we acquired was insignificant. During the three months ended ~~April 30, 2018,~~January 31, 2019, our Land Development Joint Ventures sold approximately ~~200~~201 lots and recognized revenues of ~~$62.6~~$89.8 million. We acquired 25107 of these lots for ~~$4.2~~$71.2 million. Our share of the joint venture income ~~of $0.4 million~~ from the lots we acquired was ~~deferred by reducing our basis in those lots.~~insignificant.

Home Building Joint Ventures

Our Home Building Joint Ventures ~~are delivering~~delivered homes in New York, New York, and Jupiter, Florida. During the ~~six~~three months ended ~~April 30,~~January 31, 2020 and 2019, ~~and 2018,~~ our Home Building Joint Ventures delivered 7223 homes with a sales value of ~~$121.8~~$67.1 million and 5417 homes with a sales value of ~~$67.9~~$27.3 million, respectively. ~~During the three months ended April 30,~~

In November 2019, ~~and 2018,~~one of our Home Building Joint Ventures ~~delivered 55 homes~~refinanced its existing $236.5 million construction loan with a ~~sales value~~$76.6 million post-construction loan that extended the maturity date of ~~$94.6~~the loan to November 2021 and revised certain guarantees provided for under the original construction loan. At January 31, 2020, this joint venture had $73.0 million ~~and 26 homes with a sales value~~ of ~~$35.4 million, respectively.~~borrowings outstanding under the post-construction loan.

Rental Property Joint Ventures

As of ~~April 30, 2019,~~January 31, 2020, our Rental Property Joint Ventures, including those that we consolidate, owned 2126 for-rent apartment projects and a hotel, which are located in multiple metropolitan areas throughout the ~~metropolitan Boston, Massachusetts to metropolitan Washington, D.C. corridor; Tempe, Arizona; San Diego, California; Miami, Florida; Atlanta, Georgia; and Frisco, Texas.~~country. At ~~April 30, 2019,~~January 31, 2020, these joint ventures had approximately ~~2,100~~2,000 units that were occupied or ready for occupancy, ~~1,500~~1,250 units in the lease-up stage, and ~~1,700~~4,800 units in the design phase or under development. In addition, we either own, have under contract, or under a letter of intent approximately ~~13,200~~13,400 units, including ~~1,700~~200 units under active development; we intend to develop these units in joint ventures with unrelated parties in the future.

In the first quarter of fiscal 2020, we sold all of our ownership interest in one of our Rental Property Joint Ventures to our partner for cash of $16.8 million, net of closing costs. The joint venture had owned, developed, and operated multifamily residential apartments in northern New Jersey. In connection with the sale, the joint venture’s existing $76.0 million loan was assumed by our partner. We recognized a gain of $10.7 million, which is included in “Income from unconsolidated entities” in our Condensed Consolidated Statements of Operations and Comprehensive Income.

In the ~~second~~first quarter of fiscal ~~2019,~~2020, we entered into a2 separate joint ~~venture~~ventures with unrelated parties to develop ~~build,~~(i) a luxury for-rent residential apartment project located in Dallas, Texas and ~~operate single-family rental communities. As~~(ii) a student housing community in State College, Pennsylvania. Prior to the formation of ~~April 30, 2019,~~these joint ventures, we ~~have invested $0.9~~acquired the properties and incurred an aggregate of approximately $51.0 million of land and land development costs. Our partners acquired interests in these entities ranging from 50% to 70% for an aggregate amount of $26.2 million. At January 31, 2020, we had an aggregate investment of $25.0 million in ~~this~~these joint ~~venture and have committed~~ventures. Concurrent with their formation, these joint ventures entered into construction loan agreements for an aggregate amount of $121.5 million to ~~invest up to $60.0 million.~~finance the development of these projects. At January 31, 2020, the joint ventures had 0 outstanding borrowings under these construction loan facilities.

In the first quarter of fiscal 2019, we entered into ~~two~~2 separate joint ventures with unrelated parties to develop luxury for-rent residential apartment projects located in Harrison, New York and Frisco, Texas. Prior to the formation of these joint ventures, we acquired the properties and incurred approximately $41.9 million of land and land development costs. Our partners each acquired a 75% interest in these entities for an aggregate amount of $39.8 million and we recognized a gain on land sale of $8.4 million in our first quarter of fiscal 2019. At ~~April 30, 2019,~~January 31, 2020, we had an aggregate investment of ~~$13.6~~$15.6 million in these joint ventures. Concurrent with their formation, these joint ventures entered into construction loan agreements for an aggregate amount of $134.4 ~~million to finance the development of these projects.~~million. At ~~April 30, 2019,~~January 31, 2020, the joint ventures had ~~$5.6~~$38.9 million outstanding borrowings under these construction loan facilities.

In ~~addition, during the six months ended April 30,~~fiscals 2019 and 2018, we entered into ~~four~~5 separate joint ventures with unrelated parties to develop luxury for-rent residential apartment projects and student housing communities located in Boston, Massachusetts, San Diego, California, Tempe, Arizona and Miami, Florida. We contributed an aggregate of ~~$79.4~~$95.5 million for our initial ownership interests in these joint ventures, which ranged from 50% to 98%. Due to our controlling financial interest, our power to direct the activities that most significantly impact each joint venture’s performance, and/or our obligation to absorb expected losses or receive benefits from these joint ventures, we consolidated these joint ventures at ~~April 30,~~January 31, 2020 and October 31, 2019. The carrying value of these joint ventures’ assets totaling ~~$118.6~~$157.9 million and $145.8 million are reflected in “Receivables, prepaid expenses, and other assets” in our Condensed Consolidated Balance Sheet as of ~~April 30, 2019.~~January 31, 2020 and October 31, 2019, respectively. Our partners’ interests aggregating ~~$36.2~~$43.5 million and $41.0 million in the joint ventures are reflected as a component of “Noncontrolling interest” in our Condensed Consolidated Balance Sheet as of ~~April 30, 2019.~~January 31, 2020 and October 31, 2019, respectively. These joint ventures intend to obtain additional equity investors and secure third-party financing at a later date. At such time, it is expected that these entities would no longer be consolidated.

In ~~the third quarter of~~ fiscal ~~2018,~~2019, we entered into a joint venture with an unrelated ~~party~~parties to develop, ~~a 289-unit luxury for-rent residential apartment project in a suburb~~build, and operate single-family rental communities. As of ~~Boston, Massachusetts. We contributed cash of $15.9~~January 31, 2020, we have invested $1.1 million ~~for our initial 85% ownership interest~~ in this joint ~~venture. Due~~venture and have committed to ~~our controlling financial interest, our power~~invest up to direct the activities that most significantly impact the joint venture’s performance, and/or our obligation to absorb expected losses or receive benefits from the joint venture, we have consolidated this joint venture at April 30, 2019. The carrying value of the joint venture’s assets totaling $19.9 million are reflected in “Receivables, prepaid expenses, and other assets” in our Condensed Consolidated Balance Sheet as of April 30, 2019. Our partner’s 15% interest of $3.0 million in the joint venture is reflected as a component of “Noncontrolling interest” in our Condensed Consolidated Balance Sheet as of April 30, 2019. The joint venture intends to obtain additional equity investors and secure third-party financing at a later date. At such time, it is expected that the entity would no longer be consolidated.

~~In the first quarter of fiscal 2018, one of our Rental Property Joint Ventures sold its assets to an unrelated party for $219.0~~$60.0 million. The joint venture had owned, developed, and operated a student housing community in College Park, Maryland. In connection with the sale, the joint venture’s existing $110.0 million loan was repaid. We received cash of $39.3 million and recognized a gain of $30.8 million in the three months ended January 31, 2018, which is included in “Income from unconsolidated entities” in our Condensed Consolidated Statements of Operations and Comprehensive Income.

In 1998, we formed the Trust to invest in commercial real estate opportunities. The Trust is effectively owned one-third by us; one-third by current and former members of our senior management; and one-third by an unrelated party. As of ~~April 30, 2019,~~January 31, 2020, our investment in the Trust was ~~zero~~0 as cumulative distributions received from the Trust have been in excess of the carrying amount of our net investment. We provide development, finance, and management services to the Trust and recognized fees under the terms of various agreements in the amount of ~~$0.5 million and $1.2~~$0.3 million in each of the ~~six-month~~three-month periods ended ~~April 30, 2019~~January 31, 2020 and ~~2018, respectively.~~2019.

Gibraltar Joint Ventures

We, through our wholly owned subsidiary, Gibraltar Capital and Asset Management, LLC (“Gibraltar”), have entered into ~~six~~6 ventures with an institutional investor to provide builders and developers with land banking and venture capital. These ventures will finance builders’ and developers’ acquisition and development of land and home sites and pursue other complementary investment strategies. We also are a member in a separate venture with the same institutional investor, which purchased, from Gibraltar, certain foreclosed real estate owned and distressed loans in fiscal 2016. Our ownership interest in these ventures is approximately 25%. We may invest up to $100.0 million in these ventures. As of ~~April 30, 2019,~~January 31, 2020, we had an aggregate investment of ~~$17.5~~$21.4 million in these ventures.

Guarantees

The unconsolidated entities in which we have investments generally finance their activities with a combination of partner equity and debt financing. In some instances, we and our partners have guaranteed debt of certain unconsolidated entities. These guarantees may include any or all of the following: (i) project completion guarantees, including any cost overruns; (ii) repayment guarantees, generally covering a percentage of the outstanding loan; (iii) carry cost guarantees, which cover costs such as interest, real estate taxes, and insurance; (iv) an environmental indemnity provided to the lender that holds the lender harmless from and against losses arising from the discharge of hazardous materials from the property and non-compliance with applicable environmental laws; and (v) indemnification of the lender from “bad boy acts” of the unconsolidated entity.

In some instances, the guarantees provided in connection with loans to an unconsolidated entity are joint and several. In these situations, we generally have a reimbursement agreement with our partner that provides that neither party is responsible for more than its proportionate share or agreed upon share of the guarantee; however, if a joint venture partner does not have adequate financial resources to meet its obligations under the reimbursement agreement, we may be liable for more than our proportionate share.

We believe that, as of ~~April 30, 2019,~~January 31, 2020, in the event we become legally obligated to perform under a guarantee of an obligation of an unconsolidated entity due to a triggering event, the collateral in such entity should be sufficient to repay a significant portion of the obligation. If it is not, we and our partners would need to contribute additional capital to the venture. At ~~April 30, 2019,~~January 31, 2020, certain unconsolidated entities have loan commitments aggregating ~~$1.23~~$1.27 billion, of which, if the full amount of the debt obligations were borrowed, we estimate ~~$310.6~~$183.1 million to be our maximum exposure related to repayment and carry cost guarantees. At ~~April 30, 2019,~~January 31, 2020, the unconsolidated entities had borrowed an aggregate of ~~$903.5~~$825.3 million, of which we estimate ~~$271.1~~$114.1 million to be our maximum exposure related to repayment and carry cost guarantees. The terms of these guarantees generally range from 27 months to ~~42 months.~~3.9 years. These maximum exposure estimates do not take into account any recoveries from the underlying collateral or any reimbursement from our partners.

As of ~~April 30, 2019,~~January 31, 2020, the estimated aggregate fair value of the guarantees provided by us related to debt and other obligations of certain unconsolidated entities was approximately ~~$5.4~~$5.5 million. We have not made payments under any of the guarantees, nor have we been called upon to do so.

Variable Interest Entities

At ~~April 30, 2019~~January 31, 2020 and October 31, ~~2018,~~2019, we determined that 1716 and ~~11, respectively,~~18 of our joint ventures, respectively, were VIEs under the guidance of ASC 810, “Consolidation.” For 1211 and 1013 of these VIEs as of ~~April 30, 2019~~January 31, 2020 and October 31, ~~2018,~~2019, respectively, we concluded that we were not the primary beneficiary of these VIEs because the power to direct the activities of such VIEs that most significantly impact their performance was either shared by us and such VIEs’ other partners or such activities were controlled by our partner. For VIEs where the power to direct significant activities is shared, business plans, budgets, and other major decisions are required to be unanimously approved by all members. Management and other fees earned by us are nominal and believed to be at market rates, and there is no significant economic disproportionality between us and the other members. The information presented below regarding the investments, commitments, and guarantees in unconsolidated entities deemed to be VIEs is also included in the information provided above.

As of ~~April 30, 2019,~~January 31, 2020, we have consolidated ~~five~~5 Rental Property Joint Ventures. The carrying value of these joint ventures’ assets totaling ~~$138.5~~$157.9 million is reflected in “Receivables, prepaid expenses, and other assets” in our Condensed Consolidated Balance Sheet as of ~~April 30, 2019.~~January 31, 2020. Our partners’ interests aggregating ~~$39.2~~$43.5 million in the joint ventures are reflected as a component of “Noncontrolling interest” in our Condensed Consolidated Balance Sheet as of ~~April 30, 2019.~~January 31, 2020. These joint ventures were determined to be VIEs due to their current inability to finance their activities without additional subordinated financial support as well as our partners’ inability to participate in the significant decisions of the joint venture and their lack of substantive kick-out rights. We further concluded that we are the primary beneficiary of these VIEs due to our controlling financial interest in such ventures as we have the power to direct the activities that most significantly impact the joint ventures’ performance and the obligation to absorb expected losses or receive benefits from the joint ventures. The assets of these VIEs can only be used to settle the obligations of the VIEs. In addition, in certain of the joint ventures, in the event additional contributions are required to be funded to the joint ventures prior to the admission of any additional investor at a future date, we will fund 100% of such contributions, including our partner’s pro rata share, which we expect would be funded through an interest-bearing loan.

At ~~April 30, 2019~~January 31, 2020 and October 31, ~~2018,~~2019, our investments in the unconsolidated entities deemed to be VIEs totaled ~~$36.3~~$43.7 million and ~~$33.8~~$37.0 million, respectively. At ~~April 30, 2019~~January 31, 2020 and October 31, ~~2018,~~2019, the maximum exposure of loss to our investments in these entities was limited to our investments in the unconsolidated VIEs, except with regard to ~~$70.0~~$42.0 million and $76.0 million, respectively, of loan guarantees and ~~$10.4~~$6.8 million and ~~$10.8~~$8.3 million, respectively, of additional commitments to the VIEs. Of our potential

exposure for these loan guarantees ~~$70.0~~at January 31, 2020 and October 31, 2019, $11.1 million and $76.0 million, respectively, is related to loan repayment and carry cost guarantees, of which ~~$70.0~~$76.0 million was borrowed at ~~April 30, 2019 and~~ October 31, ~~2018.~~2019. There were 0 borrowings under these loan repayment and carry cost guarantees at January 31, 2020.

Joint Venture Condensed Financial Information

The Condensed Balance Sheets, as of the dates indicated, and the Condensed Statements of Operations, for the periods indicated, for the unconsolidated entities in which we have an investment are included below (in thousands):

Condensed Balance Sheets:


	April 30, 2019		October 31, 2018		January 31, 2020		October 31, 2019
Cash and cash equivalents	$	90,183	$	102,462	$	68,237	$	85,819
Inventory	803,161		973,990		516,740		579,226
Loans receivable, net	38,887		40,065		65,375		56,545
Rental properties	1,070,823		808,785		923,356		1,021,848
Rental properties under development	348,886		437,586		675,921		535,197
Real estate owned	14,860		14,838		12,274		12,267
Other assets	168,261		166,029		160,840		212,761
Total assets	$	2,535,061	$	2,543,755	$	2,422,743	$	2,503,663
Debt, net of deferred financing costs	$	1,240,577	$	1,145,998	$	1,166,882	$	1,226,857
Other liabilities	181,247		158,570		177,092		175,827
Members’ equity	1,110,319		1,235,974		1,078,769		1,100,563
Noncontrolling interest	2,918		3,213		—		416
Total liabilities and equity	$	2,535,061	$	2,543,755	$	2,422,743	$	2,503,663
Company’s net investment in unconsolidated entities (1)	$	390,085	$	431,813	$	364,352	$	366,252

(1)

Differences between our net investment in unconsolidated entities and our underlying equity in the net assets of the entities are primarily a result of impairments related to our investments in unconsolidated entities; interest capitalized on our investments; the estimated fair value of the guarantees provided to the joint ventures; unrealized gains on our retained joint venture interests; gains recognized from the sale of our ownership interests; and distributions from entities in excess of the carrying amount of our net investment.

Condensed Statements of Operations:


	Six months ended April 30,						Three months ended April 30,						Three months ended January 31,
	2019			2018			2019			2018			2020			2019
Revenues	$	331,617		$	276,284		$	178,388		$	82,663		$	133,170		$	153,230
Cost of revenues	288,951			209,410			157,196			60,660			95,308			131,755
Other expenses	41,354			44,584			22,879			20,297			41,183			18,475
Total expenses	330,305			253,994			180,075			80,957			136,491			150,230
Gain on disposition of loans and real estate owned	3,694			26,480			—			11,809			—			3,694
Income (loss) from operations	5,006			48,770			(1,687		)	13,515
(Loss) income from operations													(3,321		)	6,694
Other income	1,737			80,866			1,090			1,502			612			647
Income (loss) before income taxes	6,743			129,636			(597		)	15,017
Income tax provision (benefit)	225			349			(40		)	151
Net income (loss) including earnings from noncontrolling interests	6,518			129,287			(557		)	14,866
(Loss) income before income taxes													(2,709		)	7,341
Income tax provision													140			265
Net (loss) income including earnings from noncontrolling interests													(2,849		)	7,076
Less: income attributable to noncontrolling interest	(2,078		)	(11,937		)	31			(5,855		)	—			(2,109		)
Net income (loss) attributable to controlling interest	$	4,440		$	117,350		$	(526	)	$	9,011
Net (loss) income attributable to controlling interest													$	(2,849	)	$	4,967
Company’s equity in earnings of unconsolidated entities (1)	$	10,559		$	41,444		$	4,419		$	2,564		$	12,141		$	6,140

(1)

Differences between our equity in earnings of unconsolidated entities and the underlying net income of the entities are primarily a result of ~~a basis difference of an acquired joint venture interest;~~ distributions from entities in excess of the carrying amount of our net investment; recoveries of previously incurred charges; unrealized gains on our retained joint venture interests; gains recognized from the sale of our investment to our joint venture partner; and our share of the entities’ profits related to home sites purchased by us which reduces our cost basis of the home sites acquired.

5. Receivables, Prepaid Expenses, and Other Assets

Receivables, prepaid expenses, and other assets at ~~April 30, 2019~~January 31, 2020 and October 31, ~~2018,~~2019, consisted of the following (amounts in thousands):


	April 30, 2019		October 31, 2018		January 31, 2020		October 31, 2019
Expected recoveries from insurance carriers and others	$	121,354	$	126,291	$	109,048	$	114,162
Improvement cost receivable	103,377		96,937		104,416		100,864
Escrow cash held by our captive title company	32,787		33,471		38,107		32,863
Properties held for rental apartment and commercial development	302,706		193,015		504,924		367,072
Prepaid expenses	19,418		23,065		24,652		26,041
Right-of-use asset (1)					108,769		—
Other	80,126		77,999		88,250		74,439
	$	659,768	$	550,778	$	978,166	$	715,441

(1)

On November 1, 2019, we adopted ASU 2016-02 which resulted in the establishment of a right-of-use asset on our Condensed Consolidated Balance Sheet as of January 31, 2020. The Condensed Consolidated Balance Sheet as of October 31, 2019 does not reflect any changes resulting from the adoption of the new standard. See Note 1, “Significant Accounting Policies – Recent Accounting Pronouncements” for additional information regarding the adoption of ASU 2016-02.

See Note 7, “Accrued Expenses,” for additional information regarding the expected recoveries from insurance carriers and others.

As of January 31, 2020 and October 31, 2019, properties held for rental apartment and commercial development include $157.9 million and $145.8 million, respectively, of assets related to consolidated VIEs. See Note 4, “Investments in Unconsolidated Entities” for additional information regarding VIEs.

6. Loans Payable, Senior Notes, and Mortgage Company Loan Facility

Loans Payable

At ~~April 30, 2019~~January 31, 2020 and October 31, ~~2018,~~2019, loans payable consisted of the following (amounts in thousands):


	April 30, 2019			October 31, 2018			January 31, 2020			October 31, 2019
Senior unsecured term loan	$	800,000		$	500,000		$	800,000		$	800,000
Revolving credit facility borrowings							150,000			—
Loans payable – other	230,305			188,115			330,147			314,577
Deferred issuance costs	(2,897		)	(1,314		)	(2,964		)	(3,128		)
	$	1,027,408		$	686,801		$	1,277,183		$	1,111,449

Senior Unsecured Term Loan

At ~~April 30, 2019,~~January 31, 2020, we had an $800.0 million, five-year senior unsecured term loan facility (the “Term Loan Facility”) with a syndicate of ~~banks. On~~banks that is scheduled to expire on November 1, ~~2018, we entered into an amendment to the Term Loan Facility to, among other things, (i) increase the size of the outstanding term loan to $800.0 million; (ii) extend the maturity date to~~ ~~November 1, 2023~~, with no principal payments being required before the maturity date; (iii) provide an accordion feature under which we may, subject to certain conditions set forth in the agreement, increase the Term Loan Facility up to a maximum aggregate amount of $1.0 billion; (iv) revise certain provisions to reduce the interest rate applicable on outstanding borrowings; and (v) modify certain provisions relating to existing financial maintenance and negative covenants.2024. At ~~April 30, 2019,~~January 31, 2020, the interest rate on borrowings was ~~3.78%~~2.70% per annum. We and substantially all of our 100%-owned home building subsidiaries are guarantors under the Term Loan Facility. The Term Loan Facility contains substantially the same financial covenants as the Revolving Credit Facility described below.

Revolving Credit Facility

We have a $1.905 billion, five-year senior unsecured revolving credit facility (the “Revolving Credit Facility”) with a syndicate of banks. The Revolving Credit Facility is scheduled to mature on November 1, 2024. We and substantially all of our 100%-owned home building subsidiaries are guarantors under the Revolving Credit Facility.

Under the terms of the ~~Term Loan~~Revolving Credit Facility, at ~~April 30, 2019,~~January 31, 2020, our maximum leverage ratio, as defined, may not exceed 1.75 to 1.00, and we are required to maintain a minimum tangible net worth, as defined, of no less than approximately ~~$2.76~~$2.24 billion. Under the terms of the ~~Term Loan~~Revolving Credit Facility, at ~~April 30, 2019,~~January 31, 2020, our leverage ratio was approximately ~~0.56~~0.72 to

1.00, and our tangible net worth was approximately ~~$4.90~~$4.61 billion. Based upon the limitations related to our repurchase of common stock in the ~~Term Loan~~Revolving Credit Facility, our ability to repurchase our common stock was limited to approximately ~~$3.35~~$3.14 billion as of ~~April 30, 2019. In addition, our ability to pay cash dividends was limited to approximately $2.14 billion as of April 30, 2019.~~

~~Credit Facility~~

We have a $1.295 billion, five-year senior unsecured revolving credit facility (the “Credit Facility”) with a syndicate of banks. The Credit Facility is scheduled to expire in May 2021. We and substantially all of our 100%-owned home building subsidiaries are guarantors under the Credit Facility.

Under the terms of the Credit Facility, at April 30, 2019, our maximum leverage ratio, as defined, may not exceed 1.75 to 1.00, and we are required to maintain a minimum tangible net worth, as defined, of no less than approximately $2.59 billion. Under the terms of the Credit Facility, at April 30, 2019, our leverage ratio was approximately 0.56 to 1.00, and our tangible net worth was approximately $4.90 billion. Based upon the limitations related to our repurchase of common stock in the Credit Facility,

~~our ability to repurchase our common stock was limited to approximately $3.00 billion as of April 30, 2019.~~January 31, 2020. In addition, under the provisions of the Revolving Credit Facility, our ability to pay cash dividends was limited to approximately ~~$2.31~~$2.36 billion as of ~~April 30, 2019.~~January 31, 2020.

At ~~April 30, 2019,~~January 31, 2020, we had no$150.0 million outstanding borrowings under the Revolving Credit Facility and had approximately ~~$179.3~~$163.1 million of outstanding letters of credit that were issued under the Revolving Credit Facility. At ~~April 30, 2019,~~January 31, 2020, the interest rate on borrowings under the Revolving Credit Facility ~~would have been 3.98%~~was 2.77% per annum. Subsequent to January 31, 2020, we borrowed an additional $200.0 million under the Revolving Credit Facility.

Loans Payable – Other

“Loans payable – other” primarily ~~represent~~represents purchase money mortgages on properties we acquired that the seller had financed and various revenue bonds that were issued by government entities on our behalf to finance community infrastructure and our manufacturing facilities. At ~~April 30, 2019,~~January 31, 2020, the weighted-average interest rate on “Loans payable – other” was ~~4.81%~~4.51% per annum.

Senior Notes

At ~~April 30, 2019,~~January 31, 2020, we had ~~seven~~7 issues of senior notes outstanding with an aggregate principal amount of ~~$2.52~~$2.67 billion. In January 2018, we issued $400.0 million principal amount of 4.350% Senior Notes due 2028. We received $396.4 million of net proceeds from the issuance of these senior notes. On November 30, 2018, we redeemed, prior to maturity, the $350.0 million of then-outstanding principal amount of 4.00% Senior Notes due December 31, 2018, at par, plus accrued interest.

Mortgage Company Loan Facility

In October 2017, TBI Mortgage^® Company (“TBI Mortgage”), our wholly owned mortgage subsidiary, entered into a mortgage warehousing agreement (the “Warehousing Agreement”) with a bank to finance the origination of mortgage loans by TBI Mortgage. The Warehousing Agreement is accounted for as a secured borrowing under ASC 860, “Transfers and Servicing.” In December 2018, the Warehousing Agreement was amended ~~again~~ to provide for loan purchases up to $75.0 million, subject to certain sublimits. In addition, the Warehousing Agreement, as amended, provides for an accordion feature under which TBI Mortgage may request that the aggregate commitments under the Warehousing Agreement be increased to an amount up to $150.0 million for a short period of time. In December 2019, the Warehousing Agreement was amended to extend the expiration date on substantially the same terms as the existing agreement. The Warehousing Agreement, as amended, expires on December ~~6, 2019~~4, 2020, and borrowings thereunder bear interest at LIBOR plus 1.90% per annum. At ~~April 30, 2019,~~January 31, 2020, the interest rate on the Warehousing Agreement, as amended, was ~~4.38%~~3.56% per annum.

~~Prior to the December 2018 amendment, the Warehousing Agreement was operating pursuant to the December 2017 amendment which had substantially similar terms to the December 2018 amendment.~~

7. Accrued Expenses

Accrued expenses at ~~April 30, 2019~~January 31, 2020 and October 31, ~~2018~~2019 consisted of the following (amounts in thousands):


	April 30, 2019		October 31, 2018		January 31, 2020		October 31, 2019
Land, land development, and construction	$	178,474	$	213,641	$	169,203	$	192,658
Compensation and employee benefits	136,715		159,374		149,636		183,592
Escrow liability	31,809		32,543		36,891		31,587
Self-insurance	182,275		168,012		192,115		193,405
Warranty	223,655		258,831		188,916		201,886
Lease liabilities (1)					113,534		—
Deferred income	43,993		42,179		53,385		51,678
Interest	37,882		40,325		48,630		31,307
Commitments to unconsolidated entities	8,653		10,553		9,068		9,283
Other	47,212		48,123		50,170		55,536
	$	890,668	$	973,581	$	1,011,548	$	950,932

(1)

On November 1, 2019, we adopted ASU 2016-02 which resulted in the establishment of lease liabilities on our Condensed Consolidated Balance Sheet as of January 31, 2020. The Condensed Consolidated Balance Sheet as of October 31, 2019 does not reflect any changes resulting from the adoption of the new standard. See Note 1, “Significant Accounting Policies – Recent Accounting Pronouncements” for additional information regarding the adoption of ASU 2016-02.

The table below provides, for the periods indicated, a reconciliation of the changes in our warranty accrual (amounts in thousands):


	Six months ended April 30,						Three months ended April 30,						Three months ended January 31,
	2019			2018			2019			2018			2020			2019
Balance, beginning of period	$	258,831		$	329,278		$	237,326		$	311,450		$	201,886		$	258,831
Additions – homes closed during the period	14,954			14,687			8,329			8,462			7,024			6,625
Increase in accruals for homes closed in prior years	272			3,154			963			1,211
Increase (decrease) in accruals for homes closed in prior years													1,218			(691		)
Charges incurred	(50,402		)	(49,776		)	(22,963		)	(23,780		)	(21,212		)	(27,439		)
Balance, end of period	$	223,655		$	297,343		$	223,655		$	297,343		$	188,916		$	237,326

Since fiscal 2014, we have received water intrusion claims from owners of homes built since 2002 in communities located in Pennsylvania and Delaware (which are in our ~~Mid-Atlantic~~North region). During the first ~~two quarters~~quarter of fiscal ~~2019,~~2020, we continued to receive water intrusion claims from homeowners in this region, mostly related to older homes, and we continue to perform review procedures to assess, among other things, the number of affected homes, whether repairs are likely to be required, and the extent of such repairs.

Our review process, conducted quarterly, includes an analysis of many factors applicable to these communities to determine whether a claim is likely to be received and the estimated costs to resolve any such claim, including: the closing dates of the homes; the number of claims received; our inspection of homes; an estimate of the number of homes we expect to repair; the type and cost of repairs that have been performed in each community; the estimated costs to remediate pending and future claims; the expected recovery from our insurance carriers and suppliers; and the previously recorded amounts related to these claims. We also monitor legal developments relating to these types of claims and review the volume, relative merits and adjudication of claims in litigation or arbitration.

As of ~~April 30, 2019,~~January 31, 2020, our recorded aggregate estimated repair costs to be incurred for known and unknown water intrusion claims was $324.4 million, which was unchanged from October 31, 2016, and our recorded aggregate expected recoveries from insurance carriers and suppliers were approximately $152.6 million, which was also unchanged from October 31, 2016. Our recorded remaining estimated repair costs, which reflects a reduction for the aggregate amount expended to resolve claims, were approximately ~~$148.1~~$116.0 million at ~~April 30, 2019~~January 31, 2020 and ~~$177.6~~$124.6 million at October 31, ~~2018.~~2019. Our recorded remaining expected recoveries from insurance carriers and suppliers were approximately ~~$104.1~~$96.0 million at ~~April 30, 2019~~January 31, 2020 and ~~$109.3~~$97.9 million at October 31, ~~2018.~~2019. As noted above, our review process includes a number of estimates that are based on assumptions with uncertain outcomes, including, but not limited to, the number of homes to be repaired, the extent of repairs needed, the repair procedures employed, the cost of those repairs, outcomes of litigation or arbitrations, and expected recoveries from insurance carriers and suppliers. Due to the degree of judgment required in making these estimates and the inherent uncertainty in potential outcomes, it is reasonably possible that our actual costs and recoveries could differ from those recorded and such differences could be material. In addition, due to such uncertainty, we are unable to estimate the range of any such differences. ~~We believe collection of~~With respect to our ~~recorded~~ insurance receivables, ~~is probable based~~disputes between homebuilders and carriers over coverage positions relating to construction defect claims are common, and resolution of claims with carriers involves the exchange of significant amounts of information and frequently involves legal action. While our primary insurance carrier has funded substantially all of the water intrusion claims that we have submitted to it to date, other insurance carriers have recently disputed coverage for the same claims under policies that are substantially the same. As a result, we have entered arbitration proceedings during the third quarter of fiscal 2019 with these carriers. Based on the legal merits that support our pending insurance claims, review by legal counsel, our history of collecting significant amounts funded by our primary carrier under policies that are substantially the same, and the high credit ratings of our insurance ~~carriers; however,~~carriers, we believe collection of our remaining recorded insurance receivables is probable. However, due to the complexity of the underlying claims and the variability of the other factors described above, it is reasonably possible that our actual insurance recoveries could materially differ from those recorded. Resolution of these known and unknown claims is expected to take several years.

8. Income Taxes

We recorded income tax provisions of ~~$86.2~~$9.1 million and ~~$40.4~~$39.4 million for the ~~six~~three months ended ~~April 30,~~January 31, 2020 and 2019, ~~and 2018,~~ respectively. The effective tax rate was 26.3% for the six months ended April 30, 2019, compared to 14.2% for the six months ended April 30, 2018. For the three months ended April 30, 2019 and 2018, we recorded income tax provisions of $46.8 million and $40.9 million, respectively. The effective tax rate was 26.6%13.7% for the three months ended ~~April 30, 2019,~~January 31, 2020, compared to ~~26.8%~~26.0% for the three months ended ~~April 30, 2018.~~January 31, 2019. The lower effective tax rate for the ~~six months ended April 30, 2018~~fiscal 2020 period was primarily due to a ~~$31.2~~benefit recognized of $6.9 million ~~income tax benefit~~ from the ~~remeasurement~~retroactive extension of the ~~Company’s net deferred tax liability as a result of the Tax Cuts and Jobs Act (the “Tax Act”),~~federal energy efficient home credit, which was enacted into law on December ~~22, 2017.~~20, 2019. The income tax provisions for ~~both~~all periods included athe provision for state income ~~taxes;~~taxes, interest accrued on anticipated tax ~~assessments;~~assessments, excess tax benefits related to stock-based ~~compensation;~~compensation, and other permanent differences. The income tax provisions for the fiscal 2018 periods also benefited from the domestic activities deduction. The Tax Act repealed the domestic production activities deduction effective for the fiscal 2019 period.

The Tax Act, among other changes, reduced the corporate income tax rate from 35% to 21% effective for tax years beginning after December 31, 2017. For companies with a fiscal year that does not end on December 31, the change in law required the application of a blended tax rate for the year of the change. Our blended tax rate for the fiscal 2018 periods was 23.3%. For the fiscal 2019 periods and thereafter, the applicable statutory rate is 21%.

We are subject to state tax in the jurisdictions in which we operate. We estimate our state tax liability based upon the individual taxing authorities’ regulations, estimates of income by taxing jurisdiction, and our ability to utilize certain tax-saving strategies. Based on our estimate of the allocation of income or loss among the various taxing jurisdictions and changes in tax regulations and their impact on our tax strategies, we estimate that our state income tax rate for the full fiscal year ~~2019~~2020 will be approximately ~~6.8%~~5.8%. Our state income tax rate for the full fiscal year ~~2018~~2019 was ~~6.6%~~6.1%.

At ~~April 30, 2019,~~January 31, 2020, we had ~~$9.9~~$8.1 million of gross unrecognized tax benefits, including interest and penalties. If these unrecognized tax benefits were to reverse in the future, they would have a beneficial impact on our effective tax rate at that time. During the next 12 months, it is reasonably possible that our unrecognized tax benefits will change, but we are not able to provide a range of such change. The possible changes would be principally due to the expiration of tax statutes, settlements with taxing jurisdictions, increases due to new tax positions taken, and the accrual of estimated interest and penalties.

9. Stock-Based Benefit Plans

We grant stock options and various types of restricted stock units to our employees and our nonemployee directors. Additionally, we have an employee stock purchase plan that allows employees to purchase our stock at a discount. Information regarding the amount of total stock-based compensation expense and tax benefit recognized by us, for the periods indicated, is as follows (amounts in thousands):


	Six months ended April 30,				Three months ended April 30,				Three months ended January 31,
	2019		2018		2019		2018		2020		2019
Total stock-based compensation expense recognized	$	13,916	$	15,347	$	5,331	$	6,458	$	13,383	$	8,585
Income tax benefit recognized	$	3,652	$	4,359	$	1,396	$	1,843	$	3,407	$	2,256

At ~~April 30, 2019~~January 31, 2020 and October 31, ~~2018,~~2019, the aggregate unamortized value of outstanding stock-based compensation awards was approximately ~~$30.1~~$28.2 million and ~~$20.9~~$18.7 million, respectively.

10. Stock Repurchase Program and Cash Dividends

Stock Repurchase Program

On December ~~12, 2018,~~11, 2019, our Board of Directors terminated our existing 20 million share repurchase program, which was authorized in December ~~2017,~~2018, and authorized, under a new repurchase program, the repurchase of 20 million shares of our common stock in open market transactions, privately negotiated transactions (including accelerated share repurchases), issuer tender offers or ~~otherwise~~other financial arrangements or transactions for general corporate purposes, including to obtain shares for the Company’s equity award and other employee benefit plans. Our Board of Directors did not fix any expiration date for this repurchase program.

The table below provides, for the periods indicated, information about our share repurchase programs:


	Six months ended April 30,				Three months ended April 30,				Three months ended January 31,
	2019		2018		2019		2018		2020		2019
Number of shares purchased (in thousands)	788		6,221		3		1,794		11,686		785
Average price per share	$	32.04	$	46.86	$	36.95	$	45.44	$	40.73	$	32.02
Remaining authorization at April 30 (in thousands)	19,784		16,876		19,784		16,876
Remaining authorization at January 31 (in thousands)									8,314		19,787

Subsequent to ~~April 30, 2019 and through June 5, 2019,~~January 31, 2020, we repurchased approximately ~~2.5~~3.8 million shares of our common stock at an average price of $~~35.70~~37.52 per share.

Cash Dividends

~~On February 21, 2017, our Board~~During each of Directors approved the initiation of quarterly cash dividends to shareholders. During the six months ended April 30, 2019 and 2018, we declared and paid aggregate cash dividends of $0.22 and $0.19 per share, respectively, to our shareholders. During the three months ended ~~April 30,~~January 31, 2020 and 2019, ~~and 2018,~~ we declared and paid cash dividends of $0.11 ~~and $0.08~~ per share ~~respectively,~~ to our shareholders.

11. Earnings per Share Information

The table below provides, for the periods indicated, information pertaining to the calculation of earnings per share, common stock equivalents, weighted-average number of antidilutive options, and shares issued (amounts in thousands):


	Six months ended April 30,				Three months ended April 30,				Three months ended January 31,
	2019		2018		2019		2018		2020		2019
Numerator:
Net income as reported	$	241,374	$	243,917	$	129,324	$	111,810	$	56,876	$	112,050

Denominator:
Basic weighted-average shares	146,687		154,306		146,622		152,731		138,145		146,751
Common stock equivalents (1)	1,394		2,707		1,507		2,398		1,744		1,281
Diluted weighted-average shares	148,081		157,013		148,129		155,129		139,889		148,032

Other information:
Weighted-average number of antidilutive options and restricted stock units (2)	1,690		823		756		278		675		2,623
Shares issued under stock incentive and employee stock purchase plans	654		880		144		57		547		510


(1)	Common stock equivalents represent the dilutive effect of outstanding in-the-money stock options using the treasury stock method and shares expected to be issued upon the conversion of restricted stock units under our equity award programs.


(2)	Weighted-average number of antidilutive options and restricted stock units are based upon the average closing price of our common stock on the New York Stock Exchange for the period.

12. Fair Value Disclosures

Financial Instruments

The table below provides, as of the dates indicated, a summary of assets/(liabilities) related to our financial instruments, measured at fair value on a recurring basis (amounts in thousands):


		Fair value							Fair value
Financial Instrument	Fair value hierarchy	April 30, 2019			October 31, 2018			Fair value hierarchy	January 31, 2020			October 31, 2019
Mortgage Loans Held for Sale	Level 2	$	124,940		$	170,731
Forward Loan Commitments — Mortgage Loans Held for Sale	Level 2	$	87		$	1,750
Residential Mortgage Loans Held for Sale								Level 2	$	111,995		$	218,777
Forward Loan Commitments — Residential Mortgage Loans Held for Sale								Level 2	$	181		$	298
Interest Rate Lock Commitments (“IRLCs”)	Level 2	$	2,330		$	(4,366	)	Level 2	$	852		$	964
Forward Loan Commitments — IRLCs	Level 2	$	(2,330	)	$	4,366		Level 2	$	(852	)	$	(964	)

At ~~April 30, 2019~~January 31, 2020 and October 31, ~~2018,~~2019, the carrying value of cash and cash equivalents and customer deposits held in escrow approximated fair value.

Mortgage Loans Held for Sale

At the end of the reporting period, we determine the fair value of our mortgage loans held for sale and the forward loan commitments we have entered into as a hedge against the interest rate risk of our mortgage loans and commitments using the market approach to determine fair value.

The table below provides, as of the dates indicated, the aggregate unpaid principal and fair value of mortgage loans held for sale (amounts in thousands):

Aggregate unpaid
principal balance
Fair value Excess
At April 30, 2019 $ 123,529
$ 124,940
$ 1,411
At October 31, 2018 $ 170,728
$ 170,731
$ 3



	Aggregate unpaid principal balance		Fair value		Excess
At January 31, 2020	$	110,756	$	111,995	$	1,239
At October 31, 2019	$	216,280	$	218,777	$	2,497

Inventory

We recognize inventory impairment charges based on the difference in the carrying value of the inventory and its fair value at the time of the evaluation. The fair value of inventory was determined using Level 3 criteria. See Note 1, “Significant Accounting Policies – Inventory,” in our ~~2018~~2019 Form 10-K for information regarding our methodology for determining fair value. The table below summarizes, for the periods indicated, the ranges of certain quantitative unobservable inputs utilized in determining the fair value of impaired operating communities:

Three months ended:
Selling price
per unit
($ in thousands)

Sales pace
per year
(in units)
Discount rate
Fiscal 2019:
January 31 836 - 13,495 2 - 12 12.5% - 15.8%
April 30 372 - 1,915 2 - 19 12.0% - 26.0%

Fiscal 2018:
January 31 381 - 1,029 7 - 10 13.8% - 19.0%
April 30 485 - 522 10 - 16 16.9%
July 31 (1) – – –
October 31 470 - 1071 4 - 23 13.5% - 16.3%



~~(1)~~Three months ended:	~~The impairment charges recognized were related to our decisions to sell lots~~ Selling price per unit ($ in ~~a bulk sale~~ thousands)	Sales pace per year (in ~~certain communities rather than sell and construct homes as previously intended. The sale price per lot used in the fair value determination for these bulk sales ranged from $10,000 to $155,000.~~units)	Discount rate
Fiscal 2020:
January 31	—	—	—

Fiscal 2019:
January 31	836 - 13,495	2 - 12	12.5% - 15.8%
April 30	372 - 1,915	2 - 19	12.0% - 26.0%
July 31	530 - 1,113	2 - 9	7.8% - 13%
October 31	478 - 857	2 - 5	13.8% - 14.5%

The table below provides, for the periods indicated, the number of operating communities that we reviewed for potential impairment, the number of operating communities in which we recognized impairment charges, the amount of impairment charges recognized, and, as of the end of the period indicated, the fair value of those communities, net of impairment charges ($ amounts in thousands):


		Impaired operating communities						Impaired operating communities
Three months ended:	Number of communities tested	Number of communities	Fair value of communities, net of impairment charges		Impairment charges recognized		Number of communities tested	Number of communities	Fair value of communities, net of impairment charges		Impairment charges recognized
Fiscal 2020:
January 31 ~~(1)~~							65	—	$	—	$	—
											$	—
Fiscal 2019:
January 31 ~~(1)~~	49	5	$	37,282	$	5,785	49	5	$	37,282	$	5,785
April 30 (2)	64	6	$	36,159	17,495		64	6	$	36,159	17,495
July 31							69	3	$	5,436	1,100
October 31 (3)							71	7	$	18,910	6,695
					$	23,280					$	31,075
Fiscal 2018:
January 31	64	5	$	13,318	$	3,736
April 30 (2)	65	4	$	21,811	13,325
July 31 (3)	55	5	$	43,063	9,065
October 31	43	6	$	24,692	4,025
					$	30,151


(1)	Includes impairments of $2.8 million ~~(one~~(1 community), $1.5 million ~~(three~~(3 communities), and $1.5 million ~~(one~~(1 community) located in our City Living, North, and South segments, respectively.

(2)

Includes impairments of $2.0 million ~~(one~~(1 community), ~~$7.0~~$15.0 million ~~(two communities), $8.0 million (two~~(4 communities), and $0.5 million ~~(one~~(1 community) located in our City Living, North, ~~Mid-Atlantic,~~ and South segments, ~~respectively, in our fiscal 2019 period. Includes $12.0 million of impairments from one community located in our North segment in our fiscal 2018 period.~~respectively.


(3)	Includes ~~$7.3~~impairments of $5.1 million ~~of impairments from two communities~~(4 communities), $0.6 million (2 communities) and $1.0 million (1 community) located in our ~~Mid-Atlantic segment.~~North, South, and Pacific segments, respectively

Debt

The table below provides, as of the dates indicated, the book value and estimated fair value of our debt (amounts in thousands):


		April 30, 2019				October 31, 2018					January 31, 2020				October 31, 2019
	Fair value hierarchy	Book value		Estimated fair value		Book value		Estimated fair value		Fair value hierarchy	Book value		Estimated fair value		Book value		Estimated fair value
Loans payable (1)	Level 2	$	1,030,305	$	1,028,938	$	688,115	$	687,974	Level 2	$	1,280,147	$	1,281,745	$	1,114,577	$	1,112,040
Senior notes (2)	Level 1	2,519,876		2,573,568		2,869,876		2,779,270		Level 1	2,669,876		2,849,347		2,669,876		2,823,043
Mortgage company loan facility (3)	Level 2	110,012		110,012		150,000		150,000		Level 2	97,653		97,653		150,000		150,000
		$	3,660,193	$	3,712,518	$	3,707,991	$	3,617,244		$	4,047,676	$	4,228,745	$	3,934,453	$	4,085,083


(1)	The estimated fair value of loans payable was based upon contractual cash flows discounted at interest rates that we believed were available to us for loans with similar terms and remaining maturities as of the applicable valuation date.


(2)	The estimated fair value of our senior notes is based upon their market prices as of the applicable valuation date.


(3)	We believe that the carrying value of our mortgage company loan borrowings approximates their fair value.

13. Other Income – Net

The table below provides the significant components of other income – net (amounts in thousands):


	Six months ended April 30,						Three months ended April 30,						Three months ended January 31,
	2019			2018			2019			2018			2020			2019
Interest income	$	10,210		$	3,292		$	4,338		$	1,212		$	4,902		$	5,872
Income from ancillary businesses	18,086			7,456			4,242			4,873			522			13,844
Management fee income from home building unconsolidated entities, net	4,727			7,425			3,119			4,354			1,346			1,608
Retained customer deposits				4,155						3,071
Income from land sales				3,287						2,587
Other	(877		)	(824		)	(414		)	(303		)	(475		)	(463		)
Total other income – net	$	32,146		$	24,791		$	11,285		$	15,794		$	6,295		$	20,861

As a result of our adoption of ASC 606 as of November 1, 2018, revenues and cost of revenues from land sales are presented as separate components on our Condensed Consolidated Statement of Operations and Comprehensive Income. In addition, retained customer deposits are presented in home sales revenues on our Condensed Consolidated Statement of Operations and Comprehensive Income. Because we elected to apply the modified retrospective method of adoption, prior periods have not been restated to reflect these changes in presentation. See Note 1, “Significant Accounting Policies – Recent Accounting Pronouncements” for additional information regarding the impact of the adoption of ASC 606.

Management fee income from home building unconsolidated entities presented above primarily represents fees earned by Toll Brothers City Living^® (“City Living”) and traditional home building operations. In addition, in the ~~six-month~~three-month periods ended ~~April 30,~~January 31, 2020 and 2019, ~~and 2018,~~ our apartment living operations earned fees from unconsolidated entities of ~~$4.7~~$3.8 million and ~~$4.0 million, respectively. In the three-month periods ended April 30, 2019 and 2018, our apartment living operations earned fees from unconsolidated entities of $2.1 million and $1.7~~$2.7 million, respectively. Fees earned by our apartment living operations are included in income from ancillary businesses.

Income from ancillary businesses is generated by our mortgage, title, landscaping, security monitoring, Gibraltar, and golf course and country club operations. The table below provides, for the periods indicated, revenues and expenses for our ancillary businesses (amounts in thousands):


	Six months ended April 30,				Three months ended April 30,				Three months ended January 31,
	2019		2018		2019		2018		2020		2019
Revenues	$	65,129	$	65,234	$	32,846	$	33,911	$	26,410	$	32,283
Expenses	$	60,374	$	57,778	$	29,749	$	29,038	$	25,888	$	30,625
Other income	$	13,331			$	1,145					$	12,186

In December 2018, we sold one of our golf club properties to a third party for $18.2 million and we recognized a gain of $12.2 million in the first quarter of fiscal 2019.

~~The table below provides revenues and expenses recognized from land sales for~~ In addition, in the ~~periods indicated (amounts in thousands):~~

Six
months ended
April 30, 2018

Three
months ended
April 30, 2018
Revenues $ 41,352
$ 34,384
Expenses (38,065 ) (31,797 )
Income from land sales $ 3,287
$ 2,587

fourth quarter of fiscal 2019, we sold six of our golf club properties to a third party.

14. Commitments and Contingencies

Legal Proceedings

We are involved in various claims and litigation arising principally in the ordinary course of business. We believe that adequate provision for resolution of all current claims and pending litigation has been made and that the disposition of these matters will not have a material adverse effect on our results of operations and liquidity or on our financial condition.

information and documents in response to a subpoena issued in the second quarter of fiscal 2019. Management cannot at this time predict the eventual scope or outcome of this matter.

Land Purchase Commitments

Generally, our agreements to acquire land parcels do not require us to purchase those land parcels, although we, in some cases, forfeit any deposit balance outstanding if and when we terminate an agreement. Information regarding our land purchase commitments, as of the dates indicated, is provided in the table below (amounts in thousands):


	April 30, 2019		October 31, 2018		January 31, 2020		October 31, 2019
Aggregate purchase commitments:
Unrelated parties	$	2,407,312	$	2,404,660	$	2,716,710	$	2,349,900
Unconsolidated entities that the Company has investments in	43,953		128,235		10,077		10,826
Total	$	2,451,265	$	2,532,895	$	2,726,787	$	2,360,726

Deposits against aggregate purchase commitments	$	180,724	$	168,421	$	199,907	$	168,778
Credits to be received from unconsolidated entities	46,233		79,168
Additional cash required to acquire land	2,224,308		2,285,306		2,526,880		2,191,948
Total	$	2,451,265	$	2,532,895	$	2,726,787	$	2,360,726
Amount of additional cash required to acquire land included in accrued expenses	$	12,553	$	40,103	$	14,250	$	14,620

In addition, we expect to purchase approximately ~~2,600~~2,500 additional home sites over a number of years from several joint ventures in which we have interests; the purchase prices of these home sites will be determined at a future date.

At ~~April 30, 2019,~~January 31, 2020, we also had purchase commitments to acquire land for apartment developments of approximately ~~$326.9~~$247.1 million, of which we had outstanding deposits in the amount of ~~$14.3~~$11.1 million. We intend to develop these projects in joint ventures with unrelated parties in the future.

We have additional land parcels under option that have been excluded from the aggregate purchase commitments since we do not believe that we will complete the purchase of these land parcels and no additional funds will be required from us to terminate these contracts.

Investments in Unconsolidated Entities

At ~~April 30, 2019,~~January 31, 2020, we had investments in a number of unconsolidated entities, were committed to invest or advance additional funds, and had guaranteed a portion of the indebtedness and/or loan commitments of these entities. See Note 4, “Investments in Unconsolidated Entities,” for more information regarding our commitments to these entities.

Surety Bonds and Letters of Credit

At ~~April 30, 2019,~~January 31, 2020, we had outstanding surety bonds amounting to ~~$734.2~~$834.9 million, primarily related to our obligations to governmental entities to construct improvements in our communities. We estimate that approximately ~~$334.5~~$444.2 million of work remains on these improvements. We have an additional ~~$175.4~~$182.5 million of surety bonds outstanding that guarantee other obligations. We do not believe that it is probable that any outstanding bonds will be drawn upon.

At ~~April 30, 2019,~~January 31, 2020, we had outstanding letters of credit of ~~$179.3~~$163.1 million under our Revolving Credit Facility. These letters of credit were issued to secure various financial obligations, including insurance policy deductibles and other claims, land deposits, and security to complete improvements in communities in which we are operating. We do not believe that it is probable that any outstanding letters of credit will be drawn upon.

Backlog

At ~~April 30, 2019,~~January 31, 2020, we had agreements of sale outstanding to deliver ~~6,467~~6,461 homes with an aggregate sales value of ~~$5.66~~$5.45 billion.

Mortgage Commitments

Information regarding our mortgage commitments, as of the dates indicated, is provided in the table below (amounts in thousands):


	April 30, 2019		October 31, 2018		January 31, 2020		October 31, 2019
Aggregate mortgage loan commitments:
IRLCs	$	813,497	$	614,255	$	565,001	$	565,634
Non-IRLCs	1,113,759		1,329,674		1,484,667		1,364,972
Total	$	1,927,256	$	1,943,929	$	2,049,668	$	1,930,606
Investor commitments to purchase:
IRLCs	$	813,497	$	614,255	$	565,001	$	565,634
Mortgage loans held for sale	115,107		163,208		101,062		208,591
Total	$	928,604	$	777,463	$	666,063	$	774,225

Lease Commitments

We lease certain facilities, equipment, and properties held for rental apartment operation or development under non-cancelable operating leases which, in the case of certain rental properties, have an initial term of 99 years. We recognize lease expense for these leases on a straight-line basis over the lease term. ROU assets and lease liabilities are recorded on the balance sheet for all leases with an expected term over one year. A majority of our facility lease agreements include rental payments based on a pro-rata share of the lessor’s operating costs which are variable in nature. Our lease agreements do not contain any residual value guarantees or material restrictive covenants.

ROU assets are classified within “Receivables, prepaid expenses, and other assets” and the corresponding lease liability is included in “Accrued expenses” in our Condensed Consolidated Balance Sheet. Leases with an initial term of 12 months or less are not recorded on the balance sheet. At January 31, 2020, ROU assets and lease liabilities were $108.8 million and $113.5 million, respectively. Payments on lease liabilities during the three months ended January 31, 2020 totaled $3.9 million.

Lease expense includes costs for leases with terms in excess of one year as well as short-term leases with terms of one year or less. For the three months ended January 31, 2020, our total lease expense was $6.4 million, inclusive of variable lease costs of approximately $0.6 million and short-term lease costs of approximately $1.0 million. Sublease income was de minimis.

Information regarding our remaining lease payments as of January 31, 2020 is provided in the table below (amounts in thousands):



Year ended January 31, 2020
2020 (a)	$	11,899
2021	18,237
2022	16,794
2023	14,698
2024	11,722
Thereafter	211,869
Total lease payments (b)	285,219
Less: Interest (c)	171,685
Present value of lease liabilities	$	113,534

(a)Remaining payments are for the nine months ending October 31, 2020

(b) Lease payments include options to extend lease terms that are reasonably certain of being exercised

(c) Our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our discount rate for such leases to determine the present value of lease payments at the lease commencement date.

The majority of our facility leases give us the option to extend the lease term. The exercise of lease renewal options is at our discretion. For several of our facility leases we are reasonably certain the option will be exercised and thus the renewal term has been included in our calculation of the ROU asset and lease liability. The weighted average remaining lease term and weighted average discount rate used in calculating these facility lease liabilities, excluding our land leases, were 8 years and 4.1%, respectively, at January 31, 2020.

We have a small number of land leases with initial terms of 99 years. We are not reasonably certain that, if given the option, we would extend these leases. We have therefore excluded the renewal terms from our ROU asset and lease liability for these leases.The weighted average remaining lease term and weighted average discount rate used in calculating these land lease liabilities were 95 years and 4.5%, respectively, at January 31, 2020.

15. Information on Segments

We operate in ~~two~~2 segments: traditional home building and urban infill. We build and sell detached and attached homes in luxury residential communities located in affluent suburban markets that cater to move-up, empty-nester, active-adult, affordable luxury, age-qualified, and second-home buyers in the United States (“Traditional Home Building”). We also build and sell homes in urban infill markets through City Living.

~~We have determined that~~Our Traditional Home Building segment operates in 5 geographic segments. In the first quarter of fiscal 2020, we made certain changes to our Traditional Home Building ~~operations operate in~~regional management structure and realigned certain of the states falling among our five geographic ~~segments: North, Mid-Atlantic, South, West, and California. The states comprising each geographic segment are~~segments, as follows:

~~North:~~ ~~Connecticut, Illinois, Massachusetts, Michigan, Minnesota,~~Eastern Region:


•	The North region: Connecticut, Delaware, Illinois, Massachusetts, Michigan, Pennsylvania, New Jersey and New York;


•	The Mid-Atlantic region: Georgia, Maryland, North Carolina, Tennessee and Virginia;


•	The South region: Florida, South Carolina and Texas;

Western Region:


•	The Mountain region: Arizona, Colorado, Idaho, Nevada and Utah; and


•	The Pacific region: California, Oregon and Washington.

Previously, our geographic segments were:


•	North: Connecticut, Illinois, Massachusetts, Michigan, New Jersey and New York;


•	Mid-Atlantic: Delaware, Maryland, Pennsylvania and Virginia;


•	South: Florida, Georgia, North Carolina, South Carolina and Texas;


•	West: Arizona, Colorado, Idaho, Nevada, Oregon, Utah and Washington; and


•	California: California.

Our new geographic reporting segments are consistent with how our chief operating decision makers are assessing operating performance and ~~New York~~

~~Mid-Atlantic:~~ ~~Delaware, Maryland, Pennsylvania, and Virginia~~

~~South:~~ ~~Florida, North Carolina, and Texas~~

~~West:~~ ~~Arizona, Colorado, Idaho, Nevada, Oregon, Utah, and Washington~~

~~California:~~ ~~California~~

~~In fiscal 2018, we acquired land and commenced development activities in~~allocating capital following the ~~Salt Lake City, Utah and Portland, Oregon markets. In~~realignment of the ~~second quarter~~regional management structure. The realignment did not have any impact on our consolidated financial position, results of ~~fiscal 2019, we opened several communities in these markets.~~operations, earnings per share or cash flows. Prior period segment information was restated to conform to the new reporting structure.

Revenue and income (loss) before income taxes for each of our segments, for the periods indicated, were as follows (amounts in thousands):


													Three months ended January 31,
	Six months ended April 30,						Three months ended April 30,						2020			2019
	2019			2018			2019			2018						(Restated)
Revenues:
Traditional Home Building:
North	$	391,397		$	360,494		$	221,896		$	226,214		$	254,059		$	271,518
Mid-Atlantic	461,388			461,865			255,692			254,907			162,476			134,898
South	492,499			412,206			284,352			240,714			183,630			176,928
West	665,314			607,421			364,884			349,388
California	870,559			725,446			500,541			438,342
Mountain													263,096			226,399
Pacific													395,356			444,049
Traditional Home Building	2,881,157			2,567,432			1,627,365			1,509,565			1,258,617			1,253,792
City Living	152,668			207,235			84,074			89,634			39,835			68,594
Corporate and other	(2,460		)	—			618			—			(1,115		)	(3,078		)
Total home sales revenue	3,031,365			2,774,667			1,712,057			1,599,199			1,297,337			1,319,308
Land sales revenue	47,910			—			4,037			—			34,094			43,873
Total revenue	$	3,079,275		$	2,774,667		$	1,716,094		$	1,599,199		$	1,331,431		$	1,363,181

Income (loss) before income taxes:
Traditional Home Building:
North	$	17,962		$	2,036		$	7,226		$	1,657		$	2,531		$	15,070
Mid-Atlantic	18,952			34,344			7,580			20,444			6,988			7,140
South	47,363			39,278			31,595			27,130			9,077			15,666
West	87,422			78,653			43,808			48,049
California	180,173			146,518			106,552			85,661
Mountain													17,585			25,603
Pacific													63,322			91,632
Traditional Home Building	351,872			300,829			196,761			182,941			99,503			155,111
City Living	40,476			46,649			25,834			16,685			9,549			14,642
Corporate and other	(64,743		)	(63,132		)	(46,436		)	(46,878		)	(43,120		)	(18,307		)
Total	$	327,605		$	284,346		$	176,159		$	152,748		$	65,932		$	151,446

“Corporate and other” is comprised principally of general corporate expenses such as our executive offices; the corporate finance, accounting, audit, tax, human resources, risk management, information technology, marketing, and legal groups; interest income; income from certain of our ancillary businesses, including Gibraltar; and income from our Rental Property Joint Ventures and Gibraltar Joint Ventures.

Total assets for each of our segments, as of the dates indicated, are shown in the table below (amounts in thousands):


					January 31, 2020		October 31, 2019
	April 30, 2019		October 31, 2018				(Restated)
Traditional Home Building:
North	$	968,396	$	970,854	$	1,574,303	$	1,487,012
Mid-Atlantic	1,202,321		1,130,417		908,884		854,470
South	1,289,163		1,237,744		1,234,819		1,165,974
West	1,782,581		1,580,199
California	2,697,809		2,733,956
Mountain					1,917,134		1,769,649
Pacific					2,611,868		2,627,417
Traditional Home Building	7,940,270		7,653,170		8,247,008		7,904,522
City Living	502,406		516,238		546,468		529,507
Corporate and other	1,834,053		2,075,182		1,793,730		2,394,109
Total	$	10,276,729	$	10,244,590	$	10,587,206	$	10,828,138

“Corporate and other” is comprised principally of cash and cash equivalents, restricted cash, deferred tax assets, investments in our Rental Property Joint Ventures, expected recoveries from insurance carriers and suppliers, our Gibraltar investments and operations, manufacturing facilities, and our mortgage and title subsidiaries.

16. Supplemental Disclosure to Condensed Consolidated Statements of Cash Flows

The following are supplemental disclosures to the Condensed Consolidated Statements of Cash Flows, for the periods indicated (amounts in thousands):


	Six months ended April 30,					Three months ended January 31,
	2019			2018		2020		2019
Cash flow information:
Interest paid, net of amount capitalized	$	13,999		$	5,878			$	495
Interest capitalized, net of amount paid						$	11,686
Income tax payments	$	101,232		$	90,352	$	45,752	$	81,818
Income tax refunds	$	927		$	322	$	1,315	$	877
Noncash activity:
Cost of inventory acquired through seller financing, municipal bonds, or included in accrued expenses, net	$	110,269		$	46,575	$	21,827	$	72,731
(Increase) decrease in inventory for capitalized interest, our share of earnings, and allocation of basis difference in land purchased from unconsolidated entities, net	$	(4,276	)	$	861
Increase in inventory for capitalized interest, our share of earnings, and allocation of basis difference in land purchased from unconsolidated entities, net								$	(2,960	)
Increase in receivables, prepaid expenses, and other assets and accrued expenses related to the adoption of ASU 2016-02						$	108,769
Reclassification from inventory to property, construction, and office equipment, net due to the adoption of ASC 606	$	104,807						$	104,807
Net decrease in inventory and retained earnings due to the adoption of ASC 606	$	8,989						$	8,989
Net increase in accrued expenses and decrease in retained earnings due to the adoption of ASC 606	$	6,541						$	6,541
Net decrease in investment in unconsolidated entities and retained earnings due to the adoption of ASC 606	$	2,457						$	2,457
Non-controlling interest	$	36,362
Noncontrolling interest						$	2,610	$	32,914
Transfer of other assets to inventory	$	7,100		$	21,189			$	7,100
Transfer of other assets to investment in unconsolidated entities, net	$	11,656		$	21,546	$	24,736	$	9,398
Reclassification of deferred income from accrued expenses to investment in unconsolidated entities				$	5,995

	At April 30,					At January 31,
	2019			2018		2020		2019
Cash, cash equivalents, and restricted cash
Cash and cash equivalents	$	924,448		$	475,113	$	519,793	$	801,734
Restricted cash included in receivables, prepaid expenses, and other assets	543			1,161		38,865		960
Total cash, cash equivalents, and restricted cash shown in the Condensed Consolidated Statements of Cash Flows	$	924,991		$	476,274	$	558,658	$	802,694

17. Supplemental Guarantor Information

At ~~April 30, 2019,~~January 31, 2020, our 100%-owned subsidiary, Toll Brothers Finance Corp. (the “Subsidiary Issuer”), has issued the following outstanding Senior Notes (amounts in thousands):


	Original amount issued and amount outstanding		Original amount issued and amount outstanding
6.75% Senior Notes due November 1, 2019	$	250,000
5.875% Senior Notes due February 15, 2022	$	419,876	$	419,876
4.375% Senior Notes due April 15, 2023	$	400,000	$	400,000
5.625% Senior Notes due January 15, 2024	$	250,000	$	250,000
4.875% Senior Notes due November 15, 2025	$	350,000	$	350,000
4.875% Senior Notes due March 15, 2027	$	450,000	$	450,000
4.350% Senior Notes due February 15, 2028	$	400,000	$	400,000
3.80% Senior Notes due November 1, 2029			$	400,000

The obligations of the Subsidiary Issuer to pay principal, premiums, if any, and interest are guaranteed jointly and severally on a senior basis by us and substantially all of our 100%-owned home building subsidiaries (the “Guarantor Subsidiaries”). The guarantees are full and unconditional. Our non-home building subsidiaries and several of our home building subsidiaries (together, the “Nonguarantor Subsidiaries”) do not guarantee these Senior Notes. The Subsidiary Issuer generates no operating revenues and does not have any independent operations other than the financing of our other subsidiaries by lending the proceeds from the above-described debt issuances. The indentures under which the Senior Notes were issued provide that any of our subsidiaries that provide a guarantee of our obligations under the Revolving Credit Facility will guarantee the Senior Notes. The indentures further provide that any Guarantor Subsidiary may be released from its guarantee so long as (i) no default or event of default exists or would result from release of such guarantee; (ii) the Guarantor Subsidiary being released has consolidated net worth of less than 5% of the Company’s consolidated net worth as of the end of our most recent fiscal quarter; (iii) the Guarantor Subsidiaries released from their guarantees in any fiscal year comprise in the aggregate less than 10% (or 15% if and to the extent necessary to permit the cure of a default) of our consolidated net worth as of the end of our most recent fiscal quarter; (iv) such release would not have a material adverse effect on our and our subsidiaries’ home building business; and (v) the Guarantor Subsidiary is released from its guaranty under the Revolving Credit Facility. If there are no guarantors under the Revolving Credit Facility, all Guarantor Subsidiaries under the indentures will be released from their guarantees.

Separate financial statements and other disclosures concerning the Guarantor Subsidiaries are not presented because management has determined that such disclosures would not be material to investors.

Supplemental consolidating financial information of Toll Brothers, Inc., the Subsidiary Issuer, the Guarantor Subsidiaries, the Nonguarantor Subsidiaries, and the eliminations to arrive at Toll Brothers, Inc. on a consolidated basis is presented below ($ amounts in thousands).

Condensed Consolidating Balance Sheet at ~~April 30, 2019:~~January 31, 2020:


	Toll Brothers, Inc.		Subsidiary Issuer		Guarantor Subsidiaries	Nonguarantor Subsidiaries	Eliminations		Consolidated		Toll Brothers, Inc.		Subsidiary Issuer		Guarantor Subsidiaries	Nonguarantor Subsidiaries	Eliminations		Consolidated
ASSETS
Cash and cash equivalents	—		—		701,016	223,432	—		924,448		—		—		336,479	183,314	—		519,793
Inventory					7,713,940	76,900			7,790,840						8,102,794	95,558			8,198,352
Property, construction and office equipment, net					273,870	15,316			289,186						275,830	9,955			285,785
Receivables, prepaid expenses and other assets	1,585				269,886	470,437	(82,140	)	659,768		5,840				300,894	750,123	(78,691	)	978,166
Mortgage loans held for sale						124,940			124,940							111,995			111,995
Customer deposits held in escrow					96,419	1,043			97,462						71,568	273			71,841
Investments in unconsolidated entities					46,092	343,993			390,085						44,361	319,991			364,352
Investments in and advances to consolidated entities	4,970,319		2,562,921		149,657	148,993	(7,831,890	)	—		4,721,368		2,724,966		185,371	147,413	(7,779,118	)	—
Income taxes receivable											56,922								56,922
	4,971,904		2,562,921		9,250,880	1,405,054	(7,914,030	)	10,276,729		4,784,130		2,724,966		9,317,297	1,618,622	(7,857,809	)	10,587,206
LIABILITIES AND EQUITY
Liabilities
Loans payable					1,025,599	1,809			1,027,408						1,275,341	36,100	(34,258	)	1,277,183
Senior notes			2,512,404						2,512,404				2,660,352						2,660,352
Mortgage company loan facility						110,012			110,012							97,653			97,653
Customer deposits					415,831	3,648			419,479						414,790	2,302			417,092
Accounts payable					317,922	424			318,346						283,119	31,363			314,482
Accrued expenses	592		32,676		532,744	411,498	(86,842	)	890,668		6,776		46,773		572,041	462,991	(77,033	)	1,011,548
Advances from consolidated entities					1,120,299	472,324	(1,592,623	)	—						527,929	507,995	(1,035,924	)	—
Income taxes payable	12,172								12,172		103,816								103,816
Total liabilities	12,764		2,545,080		3,412,395	999,715	(1,679,465	)	5,290,489		110,592		2,707,125		3,073,220	1,138,404	(1,147,215	)	5,882,126
Equity
Stockholders’ equity
Common stock	1,779				48	3,006	(3,054	)	1,779		1,529				48	3,006	(3,054	)	1,529
Additional paid-in capital	721,311		49,400			151,651	(201,051	)	721,311		723,109		49,400			199,034	(248,434	)	723,109
Retained earnings (deficit)	5,370,410		(31,559	)	5,838,437	205,596	(6,030,460	)	5,352,424		4,834,273		(31,559	)	6,244,029	228,649	(6,459,106	)	4,816,286
Treasury stock, at cost	(1,135,166	)							(1,135,166	)	(879,820	)							(879,820	)
Accumulated other comprehensive income	806								806
Accumulated other comprehensive loss											(5,553	)							(5,553	)
Total stockholders’ equity	4,959,140		17,841		5,838,485	360,253	(6,234,565	)	4,941,154		4,673,538		17,841		6,244,077	430,689	(6,710,594	)	4,655,551
Noncontrolling interest						45,086			45,086							49,529			49,529
Total equity	4,959,140		17,841		5,838,485	405,339	(6,234,565	)	4,986,240		4,673,538		17,841		6,244,077	480,218	(6,710,594	)	4,705,080
	4,971,904		2,562,921		9,250,880	1,405,054	(7,914,030	)	10,276,729		4,784,130		2,724,966		9,317,297	1,618,622	(7,857,809	)	10,587,206

Condensed Consolidating Balance Sheet at October 31, ~~2018:~~2019:


	Toll Brothers, Inc.		Subsidiary Issuer		Guarantor Subsidiaries	Nonguarantor Subsidiaries	Eliminations		Consolidated		Toll Brothers, Inc.		Subsidiary Issuer		Guarantor Subsidiaries	Nonguarantor Subsidiaries	Eliminations		Consolidated
ASSETS
Cash and cash equivalents	—		—		1,011,863	170,332	—		1,182,195		—		—		1,082,067	203,947	—		1,286,014
Inventory					7,493,205	105,014			7,598,219						7,791,759	81,289			7,873,048
Property, construction and office equipment, net					169,265	24,016			193,281						263,140	10,272			273,412
Receivables, prepaid expenses and other assets					291,299	392,559	(133,080	)	550,778						224,681	610,541	(119,781	)	715,441
Mortgage loans held for sale						170,731			170,731							218,777			218,777
Customer deposits held in escrow					116,332	1,241			117,573						74,303	100			74,403
Investments in unconsolidated entities					44,329	387,484			431,813						50,594	315,658			366,252
Investments in and advances to consolidated entities	4,791,629		2,916,557		91,740	126,872	(7,926,798	)	—		5,172,737		2,704,551		163,371	147,413	(8,188,072	)	—
Income taxes receivable											20,791								20,791
	4,791,629		2,916,557		9,218,033	1,378,249	(8,059,878	)	10,244,590		5,193,528		2,704,551		9,649,915	1,587,997	(8,307,853	)	10,828,138
LIABILITIES AND EQUITY
Liabilities
Loans payable					686,801				686,801						1,109,614	36,092	(34,257	)	1,111,449
Senior notes			2,861,375						2,861,375				2,659,898						2,659,898
Mortgage company loan facility						150,000			150,000							150,000			150,000
Customer deposits					405,318	5,546			410,864						383,583	2,013			385,596
Accounts payable					361,655	443			362,098						347,715	884			348,599
Accrued expenses	471		37,341		600,907	462,128	(127,266	)	973,581		754		26,812		569,476	443,180	(89,290	)	950,932
Advances from consolidated entities					1,551,196	476,040	(2,027,236	)	—						1,052,370	503,058	(1,555,428	)	—
Income taxes payable	30,959								30,959		102,971								102,971
Total liabilities	31,430		2,898,716		3,605,877	1,094,157	(2,154,502	)	5,475,678		103,725		2,686,710		3,462,758	1,135,227	(1,678,975	)	5,709,445
Equity
Stockholders’ equity
Common stock	1,779				48	3,006	(3,054	)	1,779		1,529				48	3,006	(3,054	)	1,529
Additional paid-in capital	727,053		49,400			93,734	(143,134	)	727,053		726,879		49,400			177,034	(226,434	)	726,879
Retained earnings (deficit)	5,161,551		(31,559	)	5,612,108	178,639	(5,759,188	)	5,161,551		4,792,409		(31,559	)	6,187,109	225,853	(6,399,390	)	4,774,422
Treasury stock, at cost	(1,130,878	)							(1,130,878	)	(425,183	)							(425,183	)
Accumulated other comprehensive income	694								694
Accumulated other comprehensive loss											(5,831	)							(5,831	)
Total stockholders’ equity	4,760,199		17,841		5,612,156	275,379	(5,905,376	)	4,760,199		5,089,803		17,841		6,187,157	405,893	(6,628,878	)	5,071,816
Noncontrolling interest						8,713			8,713							46,877			46,877
Total equity	4,760,199		17,841		5,612,156	284,092	(5,905,376	)	4,768,912		5,089,803		17,841		6,187,157	452,770	(6,628,878	)	5,118,693
	4,791,629		2,916,557		9,218,033	1,378,249	(8,059,878	)	10,244,590		5,193,528		2,704,551		9,649,915	1,587,997	(8,307,853	)	10,828,138

Condensed Consolidating Statement of Operations and Comprehensive Income for the ~~six~~three months ended ~~April 30, 2019:~~January 31, 2020:

Toll
Brothers,
Inc.

Subsidiary
Issuer

Guarantor
Subsidiaries
Nonguarantor
Subsidiaries Eliminations Consolidated
Revenues:
Home sales

2,967,351
64,014

3,031,365
Land sales and other

30,793
107,644
(90,527 ) 47,910
—
—
2,998,144
171,658
(90,527 ) 3,079,275

Cost of revenues:
Home sales

2,365,786
50,965
(159 ) 2,416,592
Land sales and other

7,979
62,801
(33,606 ) 37,174
—
—
2,373,765
113,766
(33,765 ) 2,453,766
Selling, general and administrative 491
1,395
355,050
36,095
(52,422 ) 340,609
Income (loss) from operations (491 ) (1,395 ) 269,329
21,797
(4,340 ) 284,900
Other:
Income from unconsolidated entities

8,541
2,018

10,559
Other income – net

12,255
14,250
5,641
32,146
Intercompany interest income

67,004
870
2,980
(70,854 ) —
Interest expense

(65,609 ) (2,980 ) (964 ) 69,553
—
Income from subsidiaries 328,096

40,081

(368,177 ) —
Income before income taxes 327,605
—
328,096
40,081
(368,177 ) 327,605
Income tax provision 86,231

86,355
10,549
(96,904 ) 86,231
Net income 241,374
—
241,741
29,532
(271,273 ) 241,374
Other comprehensive income 112

112
Total comprehensive income 241,486
—
241,741
29,532
(271,273 ) 241,486

~~Condensed Consolidating Statement of Operations and Comprehensive Income for the six months ended April 30, 2018:~~

Toll
Brothers,
Inc.

Subsidiary
Issuer

Guarantor
Subsidiaries
Nonguarantor
Subsidiaries Eliminations Consolidated
Revenues

2,627,343
237,658
(90,334 ) 2,774,667
Cost of revenues

2,093,152
171,743
(32,258 ) 2,232,637
Selling, general and administrative 32
1,627
333,128
40,334
(51,202 ) 323,919
32
1,627
2,426,280
212,077
(83,460 ) 2,556,556
Income (loss) from operations (32 ) (1,627 ) 201,063
25,581
(6,874 ) 218,111
Other:
Income from unconsolidated entities

6,733
34,711

41,444
Other income – net

12,683
4,066
8,042
24,791
Intercompany interest income

69,203
389
2,081
(71,673 ) —
Interest expense

(67,576 ) (2,081 ) (786 ) 70,443
—
Income from subsidiaries 284,378

65,653

(350,031 ) —
Income before income taxes 284,346
—
284,440
65,653
(350,093 ) 284,346
Income tax provision 40,429

40,442
9,335
(49,777 ) 40,429
Net income 243,917
—
243,998
56,318
(300,316 ) 243,917
Other comprehensive income 341

341
Total comprehensive income 244,258
—
243,998
56,318
(300,316 ) 244,258



	Toll Brothers, Inc.		Subsidiary Issuer		Guarantor Subsidiaries		Nonguarantor Subsidiaries		Eliminations		Consolidated
Revenues:
Home sales					1,289,377		7,960				1,297,337
Land sales and other					17,796		58,275		(41,977	)	34,094
	—		—		1,307,173		66,235		(41,977	)	1,331,431

Cost of revenues:
Home sales					1,053,702		6,002		196		1,059,900
Land sales and other					11,858		38,835		(18,411	)	32,282
	—		—		1,065,560		44,837		(18,215	)	1,092,182
Selling, general and administrative	52		24		197,950		16,796		(23,069	)	191,753
Income (loss) from operations	(52	)	(24	)	43,663		4,602		(693	)	47,496
Other:
Income (loss) from unconsolidated entities					14,202		(2,061	)			12,141
Other income – net					4,666		968		661		6,295
Intercompany interest income			36,370		1,505		1,293		(39,168	)	—
Interest expense			(36,346	)	(1,293	)	(1,561	)	39,200		—
Income from subsidiaries	65,984				3,241				(69,225	)	—
Income before income taxes	65,932		—		65,984		3,241		(69,225	)	65,932
Income tax provision	9,056				9,063		444		(9,507	)	9,056
Net income	56,876		—		56,921		2,797		(59,718	)	56,876
Other comprehensive income	278										278
Total comprehensive income	57,154		—		56,921		2,797		(59,718	)	57,154

Condensed Consolidating Statement of Operations and Comprehensive Income for the three months ended ~~April 30,~~January 31, 2019:



	Toll Brothers, Inc.		Subsidiary Issuer		Guarantor Subsidiaries		Nonguarantor Subsidiaries		Eliminations		Consolidated
Revenues:
Home sales					1,292,196		27,112				1,319,308
Land sales and other					15,333		73,315		(44,775	)	43,873
	—		—		1,307,529		100,427		(44,775	)	1,363,181

Cost of revenues:
Home sales					1,020,895		21,350				1,042,245
Land sales and other					4,138		45,891		(15,776	)	34,253
	—		—		1,025,033		67,241		(15,776	)	1,076,498
Selling, general and administrative	390		733		169,917		18,753		(27,555	)	162,238
Income (loss) from operations	(390	)	(733	)	112,579		14,433		(1,444	)	124,445
Other:
Income from unconsolidated entities					5,387		753				6,140
Other income – net					5,497		13,231		2,133		20,861
Intercompany interest income			34,121		527		1,505		(36,153	)	—
Interest expense			(33,388	)	(1,505	)	(571	)	35,464		—
Income from subsidiaries	151,836				29,352				(181,188	)	—
Income before income taxes	151,446		—		151,837		29,351		(181,188	)	151,446
Income tax provision	39,396				39,497		7,635		(47,132	)	39,396
Net income	112,050		—		112,340		21,716		(134,056	)	112,050
Other comprehensive income	56										56
Total comprehensive income	112,106		—		112,340		21,716		(134,056	)	112,106

Toll
Brothers,
Inc.

Subsidiary
Issuer

Guarantor
Subsidiaries

Nonguarantor
Subsidiaries
Eliminations Consolidated
Revenues:
Home sales

1,675,155
36,902

1,712,057
Land sales and other

15,460
34,329
(45,752 ) 4,037
—
—
1,690,615
71,231
(45,752 ) 1,716,094

Cost of revenues:

Home sales

1,344,891
29,616
(160 ) 1,374,347
Land sales and other

3,841
16,909
(17,829 ) 2,921
—
—
1,348,732
46,525
(17,989 ) 1,377,268
Selling, general and administrative 101
662
185,133
17,342
(24,867 ) 178,371
Income (loss) from operations (101 ) (662 )
156,750

7,364

(2,896 )
160,455
Other:
Income from unconsolidated entities

3,154
1,265

4,419
Other income – net

6,758
1,019
3,508
11,285
Intercompany interest income

32,883
343
1,475
(34,701 ) —
Interest expense

(32,221 ) (1,475 ) (393 ) 34,089
—
Income from subsidiaries 176,260

10,730

(186,990 ) —
Income before income taxes 176,159
—

176,260
10,730
(186,990 ) 176,159
Income tax provision 46,835

46,859
2,914
(49,773 ) 46,835
Net income 129,324
—

129,401

7,816

(137,217 )
129,324
Other comprehensive income 56

56
Total comprehensive income 129,380
—

129,401

7,816

(137,217 )
129,380

~~Condensed Consolidating Statement of Operations and Comprehensive Income for the three months ended April 30, 2018:~~

Toll
Brothers,
Inc.

Subsidiary
Issuer

Guarantor
Subsidiaries

Nonguarantor
Subsidiaries
Eliminations Consolidated
Revenues

1,511,989
133,544
(46,334 ) 1,599,199
Cost of revenues

1,218,344
94,256
(14,443 ) 1,298,157
Selling, general and administrative 14
787
171,049
20,161
(25,359 ) 166,652
14
787

1,389,393

114,417

(39,802 ) 1,464,809
Income (loss) from operations (14 ) (787 )
122,596

19,127

(6,532 ) 134,390
Other:
Income from unconsolidated entities

1,601
963

2,564
Other income – net

6,798
3,022
5,974
15,794
Intercompany interest income

36,508
389
1,058
(37,955 ) —
Interest expense

(35,721 ) (1,058 ) (418 ) 37,197
—
Income from subsidiaries 152,762

23,752

(176,514 ) —
Income before income taxes 152,748
—

154,078

23,752

(177,830 ) 152,748
Income tax provision (benefit) 40,938

52,971
(2,527 ) (50,444 ) 40,938
Net income 111,810
—

101,107

26,279

(127,386 ) 111,810
Other comprehensive income 170

170
Total comprehensive income 111,980
—

101,107

26,279

(127,386 ) 111,980

Condensed Consolidating Statement of Cash Flows for the ~~six~~three months ended ~~April 30, 2019:~~January 31, 2020:


	Toll Brothers, Inc.		Subsidiary Issuer		Guarantor Subsidiaries		Nonguarantor Subsidiaries		Eliminations		Consolidated		Toll Brothers, Inc.		Subsidiary Issuer		Guarantor Subsidiaries		Nonguarantor Subsidiaries		Eliminations		Consolidated
Net cash used in operating activities	(525	)	(3,635	)	(69,339	)	(1,854	)	(10,325	)	(85,678	)
Cash flow provided by (used in) investing activities:
Net cash (used in) provided by operating activities													(21,545	)	20,425		(330,808	)	(5,654	)	(28,834	)	(366,416	)
Cash flow (used in) provided by investing activities:
Purchase of property and equipment - net					(45,805	)	864				(44,941	)					(27,071	)	232				(26,839	)
Investments in unconsolidated entities					(3,091	)	(28,469	)			(31,560	)					(35	)	(4,874	)			(4,909	)
Return of investments in unconsolidated entities							70,465				70,465						9,507		19,476				28,983
Investment in foreclosed real estate and distressed loans							(522	)			(522	)							(234	)			(234	)
Return of investments in foreclosed real estate and distressed loans							1,214				1,214								883				883
Proceeds from sales of golf club property and an office building					15,319		18,220				33,539
Investment paid - intercompany					(57,917	)			57,917		—						(85,631	)			85,631		—
Intercompany advances	56,901		353,635						(410,536	)	—		508,290		(20,425	)					(487,865	)	—
Net cash provided by (used in) investing activities	56,901		353,635		(91,494	)	61,772		(352,619	)	28,195
Cash flow provided by (used in) financing activities:
Net cash (used in) provided by investing activities													508,290		(20,425	)	(103,230	)	15,483		(402,234	)	(2,116	)
Cash flow (used in) provided by financing activities:
Proceeds from loans payable					300,000		1,039,641				1,339,641						150,000		552,729				702,729
Debt issuance costs for loans payable					(1,948	)					(1,948	)
Principal payments of loans payable					(52,165	)	(1,079,630	)			(1,131,795	)					(3,405	)	(605,076	)			(608,481	)
Redemption of senior notes			(350,000	)							(350,000	)
Proceeds from stock-based benefit plans, net	1,302										1,302		4,235										4,235
Purchase of treasury stock	(25,244	)									(25,244	)	(476,024	)									(476,024	)
Dividends paid	(32,434	)									(32,434	)	(14,956	)									(14,956	)
Receipts related to noncontrolling interest, net							13				13								44				44
Investment received - intercompany							57,917		(57,917	)	—								85,628		(85,628	)	—
Intercompany advances					(395,905	)	(24,956	)	420,861		—						(458,004	)	(58,692	)	516,696		—
Net cash (used in) provided by financing activities	(56,376	)	(350,000	)	(150,018	)	(7,015	)	362,944		(200,465	)	(486,745	)	—		(311,409	)	(25,367	)	431,068		(392,453	)
Net (decrease) increase in cash, cash equivalents, and restricted cash	—		—		(310,851	)	52,903		—		(257,948	)
Net decrease in cash, cash equivalents, and restricted cash													—		—		(745,447	)	(15,538	)	—		(760,985	)
Cash, cash equivalents, and restricted cash, beginning of period	—		—		1,011,867		171,072		—		1,182,939		—		—		1,082,090		237,553		—		1,319,643
Cash and cash equivalents, end of period	—		—		701,016		223,975		—		924,991
Cash, cash equivalents, and restricted cash, end of period													—		—		336,643		222,015		—		558,658

Condensed Consolidating Statement of Cash Flows for the ~~six~~three months ended ~~April 30, 2018:~~January 31, 2019:


	Toll Brothers, Inc.		Subsidiary Issuer		Guarantor Subsidiaries		Nonguarantor Subsidiaries		Eliminations		Consolidated		Toll Brothers, Inc.		Subsidiary Issuer		Guarantor Subsidiaries		Nonguarantor Subsidiaries		Eliminations		Consolidated
Net cash (used in) provided by operating activities	(34,719	)	5,576		(357,136	)	61,072		(1,061	)	(326,268	)	(33,260	)	4,268		(207,541	)	60,699		(9,391	)	(185,225	)
Cash flow provided by (used in) investing activities:
Purchase of property and equipment — net					(6,660	)	159				(6,501	)					(19,707	)	131				(19,576	)
Investments in unconsolidated entities					(1,393	)	(9,407	)			(10,800	)					(2,235	)	(14,970	)			(17,205	)
Return of investments in unconsolidated entities					23,421		30,894				54,315								42,677				42,677
Investment in foreclosed real estate and distressed loans							(195	)			(195	)							(130	)			(130	)
Return of investments in foreclosed real estate and distressed loans							3,122				3,122								482				482
Investment paid - intercompany																	(20,000	)			20,000		—
Proceeds from the sale of a golf club property																			18,220				18,220
Intercompany advances	346,154		(402,166	)					56,012		—		76,603		345,732						(422,335	)	—
Net cash provided by (used in) investing activities	346,154		(402,166	)	15,368		24,573		56,012		39,941		76,603		345,732		(41,942	)	46,410		(402,335	)	24,468
Cash flow provided by (used in) financing activities:
Proceeds from issuance of senior notes			400,000								400,000
Debt issuance costs for senior notes			(3,410	)							(3,410	)
Cash flow (used in) provided by financing activities:
Proceeds from loans payable					450,000		788,283				1,238,283						300,000		509,506				809,506
Debt issuance costs for loans payable																	(2,058	)					(2,058	)
Principal payments of loans payable					(471,270	)	(804,878	)			(1,276,148	)					(48,222	)	(585,371	)			(633,593	)
Redemption of senior notes															(350,000	)							(350,000	)
Proceeds from stock-based benefit plans, net	9,133										9,133		(1,831	)									(1,831	)
Purchase of treasury stock	(291,478	)									(291,478	)	(25,143	)									(25,143	)
Dividends paid	(29,090	)									(29,090	)	(16,369	)									(16,369	)
Investment received - intercompany																			20,000		(20,000	)	—
Intercompany advances					112,935		(57,984	)	(54,951	)	—						(387,492	)	(44,234	)	431,726		—
Net cash provided by (used in) financing activities	(311,435	)	396,590		91,665		(74,579	)	(54,951	)	47,290
Net cash (used in) provided by financing activities													(43,343	)	(350,000	)	(137,772	)	(100,099	)	411,726		(219,488	)
Net (decrease) increase in cash, cash equivalents, and restricted cash	—		—		(250,103	)	11,066		—		(239,037	)	—		—		(387,255	)	7,010		—		(380,245	)
Cash, cash equivalents, and restricted cash, beginning of period	—		—		534,704		180,607		—		715,311		—		—		1,011,867		171,072		—		1,182,939
Cash, cash equivalents, and restricted cash, end of period	—		—		284,601		191,673		—		476,274		—		—		624,612		178,082		—		802,694

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (“MD&A”)

This discussion and analysis is based on, should be read together with, and is qualified in its entirety by, the accompanying unaudited condensed consolidated financial statements and related notes, as well as our consolidated financial statements, notes thereto, and the related MD&A contained in our Annual Report on Form 10-K for the fiscal year ended October 31, ~~2018~~2019 (“~~2018~~2019 Form 10-K”). It also should be read in conjunction with the disclosure under “Statement on Forward-Looking Information” and “Risk Factors” in this ~~report.~~report and in our 2019 Form 10-K.

Unless otherwise stated in this report, net contracts signed represents a number or value equal to the gross number or value of contracts signed during the relevant period, less the number or value of contracts canceled during the relevant period, which includes contracts that were signed during the relevant period and in prior periods. Backlog consists of homes under contract but not yet delivered to our home buyers (“backlog”). Backlog conversion represents the percentage of homes delivered in the period from backlog at the beginning of the period (“backlog conversion”).

We operate in two segments: Traditional Home Building and City Living. ~~We conduct~~In the first quarter of fiscal 2020, we appointed co-chief operating officers and split oversight responsibility for the Company’s Traditional Home Building operations between eastern and western regions. In connection with these appointments, we made certain changes to our Traditional Home Building ~~operations in five geographic areas around the United States: (1) the North, consisting of Connecticut, Illinois, Massachusetts, Michigan, Minnesota, New Jersey,~~regional management structure and New York; (2) the Mid-Atlantic, consisting of Delaware, Maryland, Pennsylvania, and Virginia; (3) the South, consisting of Florida, North Carolina, and Texas; (4) the West, consisting of Arizona, Colorado, Idaho, Nevada, Oregon, Utah, and Washington; and (5) California.

On November 1, 2018, we adopted Accounting Standards Codification (“ASC”) Topic 606 “Revenue from Contracts with Customers” (“ASC 606”). Upon adoption, land sale activity is presented as part of income from operations where previously it was included in “Other income – net.” Prior periods are not restated. See Note 1, “Significant Accounting Policies – Recent Accounting Pronouncements” in Notes to Condensed Consolidated Financial Statements in this Form 10-Q for additional information regarding the impactrealigned certain of the ~~adoption~~states falling among our five homebuilding regions, as follows:

Eastern Region:


•	The North region: Connecticut, Delaware, Illinois, Massachusetts, Michigan, Pennsylvania, New Jersey and New York;


•	The Mid-Atlantic region: Georgia, Maryland, North Carolina, Tennessee and Virginia;


•	The South region: Florida, South Carolina and Texas;

Western Region:


•	The Mountain region: Arizona, Colorado, Idaho, Nevada and Utah; and


•	The Pacific region: California, Oregon and Washington.

Previously, the Company’s homebuilding regional segments were:


•	North: Connecticut, Illinois, Massachusetts, Michigan, New Jersey and New York;


•	Mid-Atlantic: Delaware, Maryland, Pennsylvania and Virginia;


•	South: Florida, Georgia, North Carolina, South Carolina and Texas;


•	West: Arizona, Colorado, Idaho, Nevada, Oregon, Utah and Washington; and


•	California: California.

Our new geographic reporting segments are consistent with how our chief operating decision makers are assessing operating performance and allocates capital following the realignment of ~~ASC 606.~~the regional management structure. The realignment did not have any impact on our consolidated financial position, results of operations, earnings per share or cash flows. Prior period segment information was restated to conform to the new reporting structure.

OVERVIEW

Financial and Operational Highlights

In the ~~six-month~~three-month period ended ~~April 30, 2019,~~January 31, 2020, we recognized ~~$3.08~~$1.33 billion of revenues, consisting of ~~$3.03~~$1.30 billion of home sales revenue and ~~$47.9~~$34.1 million of land sales revenue, and net income of ~~$241.4~~$56.9 million, as compared to ~~$2.77~~$1.32 billion of revenues and net income of $243.9 million in the six-month period ended April 30, 2018. In the three-month period ended April 30, 2019, we recognized $1.72 billion of revenues, consisting of $1.71 billion of home sales revenue and $4.0$112.1 million of ~~land sales revenue, and~~ net income ~~of $129.3 million, as compared to $1.60 billion of revenues and net income of $111.8 million~~ in the three-month period ended ~~April 30, 2018.~~January 31, 2019.

In the ~~six-month~~three-month periods ended ~~April 30,~~January 31, 2020 and 2019, ~~and 2018,~~ the value of net contracts signed was ~~$3.17~~$1.49 billion ~~(3,803~~(1,806 homes) and ~~$4.07~~$1.16 billion ~~(4,488 homes), respectively. In the three-month periods ended April 30, 2019 and 2018, the value of net contracts signed was $2.00 billion (2,424 homes) and $2.38 billion (2,666~~(1,379 homes), respectively.

The value of our backlog at ~~April 30, 2019~~January 31, 2020 was ~~$5.66~~$5.45 billion ~~(6,467~~(6,461 homes), as compared to our backlog at ~~April 30, 2018~~January 31, 2019 of ~~$6.36~~$5.37 billion ~~(7,030~~(5,954 homes). Our backlog at October 31, ~~2018~~2019 was ~~$5.52~~$5.26 billion ~~(6,105~~(6,266 homes), as compared to backlog of ~~$5.06~~$5.52 billion ~~(5,851~~(6,105 homes) at October 31, ~~2017.~~2018.

At ~~April 30, 2019,~~January 31, 2020, we had ~~$924.4~~$519.8 million of cash and cash equivalents on hand and approximately ~~$1.12~~$1.59 billion available under our ~~$1.295~~$1.905 billion revolving credit facility (the ~~“Credit~~“Revolving Credit Facility”) that ~~matures in May 2021.~~is scheduled to expire on November 1, 2024. At ~~April 30, 2019,~~January 31, 2020, we had ~~no outstanding~~$150.0 million of borrowings and we had approximately ~~$179.3~~$163.1 million of outstanding letters of credit under the Revolving Credit Facility. Subsequent to January 31, 2020, we borrowed an additional $200.0 million under the Revolving Credit Facility.

At ~~April 30, 2019,~~January 31, 2020, we owned or controlled through options approximately ~~54,600~~62,000 home sites, as compared to approximately 59,200 at October 31, 2019; and approximately 53,400 at October 31, ~~2018; and approximately 48,300 at October 31, 2017.~~2018. Of the approximately ~~54,600~~62,000 total home sites that we owned or controlled through options at ~~April 30, 2019,~~January 31, 2020, we owned approximately ~~33,500~~37,100 and controlled approximately ~~21,100~~24,900 through options. Of the ~~33,500~~37,100 home sites owned, approximately ~~16,000~~17,200 were substantially improved. In addition, ~~at April 30, 2019,~~as of January 31, 2020, we ~~expected~~expect to purchase approximately ~~2,600~~2,500 additional home sites over ~~a number of~~several years from ~~several~~certain of the joint ventures in which we have interests, at prices ~~not yet~~to be determined.

At ~~April 30, 2019,~~January 31, 2020, we were selling from ~~311~~328 communities, compared to 333 at October 31, 2019; and 315 at October 31, ~~2018; and 305 at October 31, 2017.~~2018.

At ~~April 30, 2019,~~January 31, 2020, our total stockholders’ equity and our debt to total capitalization ratio were ~~$4.94~~$4.66 billion and ~~0.42~~0.46 to 1.00, respectively.

Our Business Environment and Current Outlook

In the three months ended ~~April 30, 2019,~~January 31, 2020, we signed ~~2,424~~1,806 net contracts for the sale of Traditional Home Building ~~Product~~Products and City Living units with an aggregate value of ~~$2.00~~$1.49 billion, compared to ~~2,666~~1,379 net contracts with an aggregate value of ~~$2.38~~$1.16 billion in the three months ended ~~April 30, 2018,~~January 31, 2019, and ~~2,511~~1,822 net contracts with an aggregate value of ~~$2.02~~$1.69 billion in the three months ended ~~April 30, 2017.~~January 31, 2018.

Demand for our homes is dependent on a variety of macroeconomic factors, such as employment levels, interest rates, changes in stock market valuations, consumer confidence, housing demand, availability of financing for home buyers, availability and prices of new homes compared to existing inventory, and demographic trends. In ~~our fourth quarter~~the second half of fiscal 2018 ~~and~~through the first ~~quarter~~half of fiscal 2019, due primarily to rising interest rates, we experienced a moderation in demand for our homes, as well as gross margin compression on contracts signed during this period. Late in ~~particular~~the spring of 2019, market conditions began to improve as interest rates on mortgage loans decreased and buyer demand for our homes turned positive in ~~California, which continued into~~ the ~~second~~fourth quarter of fiscal ~~2019, although we experienced an improvement~~2019. Buyer demand continued to improve in ~~demand late in our second~~ fiscal ~~quarter. We attribute this decline in demand to an industry-wide slowdown that began~~2020, and, in the ~~second half~~three months ended January 31, 2020, the number of ~~fiscal 2018 arising from~~contracts we signed had increased 31% in units and 28% in dollars compared to the ~~cumulative impact~~three months ended January 31, 2019.

We remain strategically focused on broadening our portfolio through targeted expansion in promising markets and product-line diversification that includes increasing our presence in more affordable luxury communities. With a supportive economy as a backdrop, we expect this strategy to improve revenue growth and capital efficiency as we increase community count and seek to deliver more units with more rapid cycle times, with an accompanying reduction in average unit price to reflect a change in mix and a reduction in the number and mix of ~~rising~~homes being delivered in California.

While we currently see a supportive economy and solid economic fundamentals underlying the housing market, strong household formations, low interest rates ~~increased prices,~~ and a ~~shift in buyer sentiment.~~

~~We continue to believe that many~~limited supply of homes across most of our ~~communities are in desirable locations~~markets, we expect that ~~are difficult to replace and in markets where approvals have been increasingly difficult to achieve. We believe that many of these communities have substantial embedded value that may be realized~~overall economic conditions in the ~~future.~~United States will be impacted by the emerging threat posed by the coronavirus disease 2019 (“COVID-19”), although the breadth and duration of any such impact is unknown.

~~Acquisition – Subsequent Event~~Acquisitions

In ~~May~~fiscal 2019, we acquired substantially all of the assets and operations of Sharp Residential, LLC (“Sharp”) and Sabal Homes LLC (“Sabal”), ~~a builder~~for an aggregate of approximately $162.4 million in cash. Sharp operates in metropolitan Atlanta, ~~Georgia, for approximately $93.2 million~~Georgia; Sabal operates in ~~cash.~~the Charleston, Greenville, and Myrtle Beach, South Carolina markets. The assets acquired, based on our preliminary purchase price allocations, were primarily inventory, including approximately ~~950~~2,550 home sites owned or controlled through land purchase agreements. In connection with ~~this acquisition,~~these acquisitions, we assumed contracts to deliver ~~125~~204 homes with an aggregate value of ~~$66.1~~$96.1 million. The average price of undelivered homes atas of the respective acquisition date ~~of acquisition~~ was approximately ~~$528,900.~~$471,100. As a result of ~~this acquisition,~~these acquisitions, our selling community count increased by ~~10 communities at~~22 communities.

Subsequent event

In February 2020, we acquired substantially all of the ~~acquisition date.~~

~~Tax Reform~~

~~On December 22, 2017, the Tax Cuts~~assets and ~~Jobs Act (the “Tax Act”~~operations of Thrive Residential (“Thrive”) ~~was enacted into law, which changed many longstanding foreign~~, an urban in-fill builder with operations in Atlanta, Georgia and domestic corporate and individual tax rules, as well as rules pertaining to the deductibility of employee compensation and benefits. As required under accounting rules, we remeasured our net deferred tax liabilityNashville, Tennessee, for ~~the tax law change, which resulted in an income tax benefit of $31.2~~approximately $53.3 million in cash. The assets acquired were primarily inventory for future communities, including approximately 680 home sites owned or controlled through land purchase agreements. The acquisition is expected to add 10 selling communities by the ~~six months ended April 30, 2018. See Note 8, “Income Taxes” in Notes to Condensed Consolidated Financial Statements in this Form 10-Q for additional information regarding the impact~~end of ~~the Tax Act.~~fiscal 2020.

RESULTS OF OPERATIONS – OVERVIEW

The following table compares certain items in our Condensed Consolidated Statements of Operations and Comprehensive Income and other supplemental information for the ~~six months and~~ three months ended ~~April 30,~~January 31, 2020 and 2019 ~~and 2018~~ ($ amounts in millions, unless otherwise stated). For more information regarding results of operations by segment, see “Segments” in this MD&A.


	Six months ended April 30,								Three months ended April 30,								Three months ended January 31,
	2019			2018			% Change		2019			2018			% Change		2020			2019			% Change
Revenues:~~(1)~~
Home sales	$	3,031.4		$	2,774.7		9	%	$	1,712.1		$	1,599.2		7	%	$	1,297.3		$	1,319.3		(2	)%
Land sales	47.9			—					4.0			—					34.1			43.9
	3,079.3			2,774.7			11	%	1,716.1			1,599.2					1,331.4			1,363.2			(2	)%
Cost of revenues:~~(1)~~
Home sales	2,416.6			2,232.6			8	%	1,374.3			1,298.2			6	%	1,059.9			1,042.2			2	%
Land sales	37.2			—					2.9			—					32.3			34.3
	2,453.8			2,232.6			10	%	1,377.3			1,298.2					1,092.2			1,076.5			1	%
Selling, general and administrative	340.6			323.9			5	%	178.4			166.7			7	%	191.8			162.2			18	%
Income from operations	284.9			218.1			31	%	160.5			134.4			19	%	47.5			124.4			(62	)%
Other
Income from unconsolidated entities	10.6			41.4			(75	)%	4.4			2.6			72	%	12.1			6.1			98	%
Other income – net	32.1			24.8			30	%	11.3			15.8			(28	)%	6.3			20.9			(70	)%
Income before income taxes	327.6			284.3			15	%	176.2			152.7			15	%	65.9			151.4			(56	)%
Income tax provision	86.2			40.4			113	%	46.8			40.9			14	%	9.1			39.4			(77	)%
Net income	$	241.4		$	243.9		(1	)%	$	129.3		$	111.8		16	%	$	56.9		$	112.1		(49	)%

Supplemental information:
Home sales cost of revenues as a percentage of home sales revenues	79.7		%	80.5		%			80.3		%	81.2		%			81.7		%	79.0		%
Land sales cost of revenues as a percentage of land sales revenues ~~(1)~~	77.6		%						72.4		%						94.7		%	78.1		%
SG&A as a percentage of home sale revenues	11.2		%	11.7		%			10.4		%	10.4		%			14.8		%	12.3		%
Effective tax rate	26.3		%	14.2		%			26.6		%	26.8		%			13.7		%	26.0		%

Deliveries – units	3,441			3,309			4	%	1,911			1,886			1	%	1,611			1,530			5	%
Deliveries – average delivered price ~~(2)~~(1)	$	881.0		$	838.5		5	%	$	895.9		$	847.9		6	%	$	805.3		$	862.3		(7	)%

Net contracts signed – value	$	3,166.6		$	4,073.6		(22	)%	$	2,003.3		$	2,383.2		(16	)%	$	1,489.3		$	1,163.4		28	%
Net contracts signed – units	3,803			4,488			(15	)%	2,424			2,666			(9	)%	1,806			1,379			31	%
Net contracts signed – average selling price ~~(2)~~(1)	$	832.7		$	907.7		(8	)%	$	826.4		$	893.9		(8	)%	$	824.6		$	843.7		(2	)%

	April 30, 2019			April 30, 2018			% Change		October 31, 2018			October 31, 2017			% Change		January 31, 2020			January 31, 2019			% Change
Backlog – value	$	5,661.7		$	6,360.4		(11	)%	$	5,522.5		$	5,061.5		9	%	$	5,450.2		$	5,366.7		2	%
Backlog – units	6,467			7,030			(8	)%	6,105			5,851			4	%	6,461			5,954			9	%
Backlog – average selling price ~~(2)~~(1)	$	875.5		$	904.8		(3	)%	$	904.6		$	865.1		5	%	$	843.6		$	901.4		(6	)%

(1)

On November 1, 2018, we adopted ASC 606. Upon adoption, land sale activity is presented as part of income from operations where previously it was included in “Other income – net.” During the six months ended April 30, 2018, we recognized land sales revenues and land sales cost of revenues of $41.4 million and $38.1 million, respectively. During the three months ended April 30, 2018, we recognized land sales revenues and land sales cost of revenues of $34.4 million and $31.8 million, respectively. Further, retained customer deposits, which totaled $6.4 million and $3.2 million during the six months and three months ended April 30, 2019, respectively, are included in “Home sales revenue” where previously they were included in “Other income – net.” During the six months and three months ended April 30, 2018, retained customer deposits were $4.2 million and $3.1 million, respectively. Prior period balances have not been restated.


~~(2)~~	$ amounts in thousands.

Note: Due to rounding, amounts may not add.

Home Sales Revenues and Home Sales Cost of Revenues

The ~~increase~~decrease in home sale revenues for the ~~six~~three months ended ~~April 30, 2019,~~January 31, 2020, as compared to the ~~six~~three months ended ~~April 30, 2018,~~January 31, 2019, was attributable to a ~~4% increase in the number of homes delivered and a 5% increase~~7% decrease in the average price of the homes ~~delivered. The~~delivered, offset, in part, by a 5% increase in the number of homes delivered was primarily due to an increase in the number of homes that signed and settled in the fiscal 2019 period, as compared to the fiscal 2018 period, and an increase in the number of homes in backlog at October 31, 2018, as compared to the number of homes in backlog at October 31, 2017, offset, in part, by adelivered. The decrease ~~in backlog conversion in the fiscal 2019 period, as compared to the fiscal 2018 period. The increase~~ in the average delivered home price was mainly due to an increase in the number of homes delivered in California, where home prices were higher; price increases in homes delivered in California and the West region; and a shift in the number of homes delivered to more expensive areas and/or products in California, New Jersey, Virginia, and the West region in the fiscal 2019 period, as compared to the fiscal 2018 period. These increases were partially offset by a shift in the number of homes delivered to less expensive areas and/or products and an increase in ~~City Living~~incentives in contracts signed in the first half of fiscal 2019. The shift in the number of homes delivered to less expensive areas and/or products in the fiscal ~~2019~~2020 period, as compared to the fiscal ~~2018~~2019 period, was primarily related to homes delivered in metropolitan Atlanta, Georgia and several markets in South Carolina from the Sharp and Sabal acquisitions where average prices were significantly lower than the Company average; a decrease in the number of homes closed in City Living and Southern California where the average prices

are higher than the Company average; and an increase in the number of quick delivery homes delivered, where average prices are lower than the Company average.

The increase in the number of homes delivered in the fiscal 2020 period, as compared to the fiscal 2019 period, was primarily due to home deliveries resulting from the Sharp and Sabal acquisitions; an increase in homes delivered in Northern California mainly attributable to closings at a large high-density condominium community; and an increase in the number of quick delivery homes in the fiscal 2020 period. These increases were partially offset by lower backlog conversion in the fiscal 2020 period, as compared to the fiscal 2019 period.

The ~~decrease~~increase in home sales cost of revenues, as a percentage of home sales revenues, in the ~~six months ended April 30, 2019,~~fiscal 2020 period, as compared to the ~~six months ended April 30, 2018,~~fiscal 2019 period, was principally due to ~~an increase~~a shift in ~~home sales revenues generated in California, where home sales cost~~the mix of revenues ~~as a percentage of home sales revenues, was~~to lower ~~than~~margin products/areas; higher incentives associated with the ~~Company average; a shift to~~prior year selling environment; higher ~~margin products/areas in City Living~~land, land development, material and labor costs; and the ~~West region; a state reimbursement~~impact of ~~$6.5 million of previously expensed environmental clean-up costs received in~~purchase accounting for homes delivered from the ~~fiscal 2019 period;~~Sharp and ~~lower interest expense.~~Sabal acquisitions. These ~~decreases~~increases were offset, in part, by ~~higher material and labor costs and higher~~lower inventory impairment ~~charges.~~charges and lower interest expense in the fiscal 2020 period, as compared to the fiscal 2019 period. In the ~~six~~three months ended ~~April 30,~~January 31, 2020 and 2019, ~~and 2018,~~ interest expense, as a percentage of home sales revenues, was ~~2.6%~~2.5% and ~~2.8%~~2.6%, respectively, and we recognized inventory impairments and write-offs of ~~$27.0~~$1.0 million and ~~$17.7~~$7.6 million, respectively.

The increase in home sale revenues for the three months ended April 30, 2019, as compared to the three months ended April 30, 2018, was attributable to a 6% increase in the average price of the homes delivered and a 1% increase in the number of homes delivered. The increase in the average delivered home price was mainly due to price increases in homes delivered in California and the West region and a shift in the number of homes delivered to more expensive areas and/or products in California, New Jersey, Virginia, and the West region in the fiscal 2019 period, as compared to the fiscal 2018 period. These increases were partially offset by a shift in the number of homes delivered to less expensive areas in City Living in the fiscal 2019 period, as compared to the fiscal 2018 period. The increase in the number of homes delivered was primarily due to an increase in the number of homes that signed and settled in the fiscal 2019 period, as compared to the fiscal 2018 period, partially offset by a decrease in backlog conversion in the fiscal 2019 period, as compared to the fiscal 2018 period. The decrease in home sales cost of revenues, as a percentage of home sales revenues, in the three months ended April 30, 2019, as compared to the three months ended April 30, 2018, was principally due to an increase in home sales revenues generated in California, where home sales cost of revenues, as a percentage of home sales revenues, was lower than the Company average; a shift to higher margin products/areas in City Living and the West region; a state reimbursement of $6.5 million of previously expensed environmental clean-up costs received in the fiscal 2019 period; and lower interest expense. These decreases were offset, in part, by higher material and labor costs and higher inventory impairment charges. In the three months ended April 30, 2019 and 2018, interest expense as a percentage of home sales revenues was 2.6% and 2.8%, respectively, and we recognized inventory impairments and write-offs of $19.4 million and $13.8 million, respectively.

Land Sales Revenues and Land Sales Cost of Revenues

Our revenues from land sales generally consist of the following: (1) ~~lot sales to third-party builders within our master planned communities; (2)~~ land sales to joint ventures in which we retain an interest; (2) lot sales to third-party builders within our master planned communities; and (3) bulk ~~land~~ sales to third parties of land we have decided no longer meets our development criteria. In the ~~six~~three months ended ~~April 30,~~January 31, 2019, we recognized a gain of $8.4 million from the sale of land to a newly formed Rental Property Joint Venture in which we have ~~an interest of~~a 25%.

Prior to the adoption of ASC 606, land sales activity was reported within “Other income – net” in our Condensed Consolidated Statements of Operations and Comprehensive Income. During the six months ended April 30, 2018, we recognized land sales revenues and land sales cost of revenues in “Other income – net” of $41.4 million and $38.1 million, respectively. During the three months ended April 30, 2018, we recognized land sales revenues and land sales cost of revenues in “Other income – net” of $34.4 million and $31.8 million, respectively. interest.

Selling, General and Administrative Expenses (“SG&A”)

SG&A spending increased by ~~$16.7 million and $11.7~~$29.5 million in the ~~six-month and three month periods~~three-month period ended ~~April 30, 2019, respectively,~~January 31, 2020, as compared to the ~~six-month and three months periods~~three-month period ended ~~April 30, 2018.~~January 31, 2019. As a percentage of home sales revenues, SG&A was ~~11.2% and 11.7%~~14.8% in the ~~six~~three months ended ~~April 30, 2019 and 2018, respectively. As a percentage of home sales revenues, SG&A was 10.4%~~January 31, 2020, as compared to 12.3% in ~~each of~~ the ~~three-month periods~~three months ended ~~April 30, 2019 and 2018.~~January 31, 2019. The dollar ~~increases~~increase in SG&A was due primarily to increased compensation costs ~~due to~~resulting primarily from a higher number of employees and normal compensation increases, increased sales and marketing costs, and costs related to the implementation of new enterprise information technology systems. The higher

sales and marketing costs were the result of the increased number of ~~homes delivered,~~selling communities, increased spending on advertising, and higher design studio operating costs. The increased number of employees was due primarily to the ~~greater~~increased number of ~~home delivered in the fiscal 2019 periods, as compared~~selling communities, other investments and costs to ~~the fiscal 2018 periods,~~support community count growth, and the implementation of ~~the~~ new enterprise resource planning and other information technology systems. The ~~decrease~~increase in SG&A as a percentage of revenues ~~in the six-month period ended April 30, 2019, as compared to the six-month period ended April 30, 2018,~~ was due to a ~~lower~~higher increase in SG&A spending, at 5%18%, relative to revenues, which ~~increased 9% from~~decreased 2% in the ~~fiscal 2018 period.~~three-month period ended January 31, 2020, as compared to the three-month period ended January 31, 2019.

Income from Unconsolidated Entities

We have investments in various unconsolidated entities. These entities, which are structured as joint ventures, (i) develop land for the joint venture participants and for sale to ~~outside~~third-party builders (“Land Development Joint Ventures”); (ii) develop for-sale homes (“Home Building Joint Ventures”); (iii) develop luxury for-rent residential apartments, commercial space, and a hotel (“Rental Property Joint Ventures”); and (iv) invest in distressed loans and real estate and provide financing and land banking to residential builders and developers for the acquisition and development of land and home sites (“Gibraltar Joint Ventures”).

We recognize our proportionate share of the earnings and losses from these various unconsolidated entities. Many of our unconsolidated entities are land development projects, high-rise/mid-rise condominium construction projects, or for-rent apartments projects, which do not generate revenues and earnings for a number of years during the development of the property. Once development is complete for land development projects and high-rise/mid-rise condominium construction projects, these unconsolidated entities will generally, over a relatively short period of time, generate revenues and earnings until all of the assets of the entity are sold. Further, once for-rent apartments projects are complete and stabilized, we may monetize a portion of these projects through a recapitalization or a sale of all or a portion of our ownership interest in the joint venture, generally resulting in an income producing event. Because of the long development periods associated with these entities, the earnings recognized from these entities may vary significantly from quarter to quarter and year to year.

Income from unconsolidated entities ~~decreased by $30.8 million and~~ increased by ~~$1.8~~$6.0 million in the ~~six-month and~~ three-month ~~periods~~period ended ~~April 30, 2019, respectively,~~January 31, 2020, as compared to the ~~six-month and~~ three-month ~~periods ended April 30, 2018. The decrease in the six-month~~ period ended ~~April 30, 2019, as compared to the six-month period ended April 30, 2018,~~January 31, 2019. This increase was primarily due ~~mainly~~ to a ~~$30.8~~$10.7 million gain recognized in the fiscal ~~2018~~2020 period from ~~an asset~~the sale byof our investment in one of our Rental Property Joint Ventures ~~located~~to our joint venture partner. This increase was offset, in ~~College Park, Maryland.~~part, by an increase in losses in several Rental Property Joint Ventures related to the commencement of operations and lease up activities, and a decrease in earnings from one Home Building Joint Venture which delivered its last home in the third quarter of fiscal 2019.

Other Income – Net

The table below provides, for the periods indicated, the components of “Other income – net” (amounts in thousands):

Six months ended April 30, Three months ended April 30,
2019 2018 2019 2018
Income from ancillary businesses $ 18,086
$ 7,456
$ 4,242
$ 4,873
Management fee income from home building unconsolidated entities, net 4,727
7,425
3,119
4,354
Income from land sales
3,287

2,587
Retained customer deposits
4,155

3,071
Other 9,333
2,468
3,924
909
Total other income – net $ 32,146
$ 24,791
$ 11,285
$ 15,794

As a result of our adoption of ASC 606 on November 1, 2018, land sale activity is presented as part of income from operations where previously it was included in “Other income – net.” In addition, retained customer deposits are included in “Home sales revenue” where previously they were included in “Other income – net.” Prior periods are not restated. See Note 1, “Significant Accounting Policies – Recent Accounting Pronouncements” in Notes to Condensed Consolidated Financial Statements in this Form 10-Q for additional information regarding the adoption of ASC 606.



	Three months ended January 31,
	2020		2019
Income from ancillary businesses	$	522	$	13,844
Management fee income from home building unconsolidated entities, net	1,346		1,608
Other	4,427		5,409
Total other income – net	$	6,295	$	20,861

The ~~increase~~decrease in income from ancillary businesses in the ~~six~~three months ended ~~April 30, 2019,~~January 31, 2020, as compared to the ~~six~~three months ended ~~April 30, 2018,~~January 31, 2019, was mainly due to a $12.2 million gain recognized from the sale of a golf club in the fiscal 2019 period.

Management fee income from home building unconsolidated entities presented above includes fees earned by our City Living and Traditional Home Building operations. In addition, in the ~~six-month~~three-month periods ended ~~April 30,~~January 31, 2020 and 2019, ~~and 2018,~~ our apartment living operations earned fees from unconsolidated entities of ~~$4.7~~$3.8 million and ~~$4.0 million, respectively. In the three-month periods ended April 30, 2019 and 2018, our apartment living operations earned fees from unconsolidated entities of $2.1 million and $1.7~~$2.7 million, respectively. Fees earned by our apartment living operations are included in income from ancillary businesses.

The ~~increases~~decrease in “other” in the ~~fiscal 2019 periods,~~three months ended January 31, 2020, as compared to the ~~fiscal 2018 periods, were~~three months ended January 31, 2019, was primarily due to ~~higher~~lower interest ~~income earned in the fiscal 2019 periods, as compared to the fiscal 2018 periods.~~income.

Income Before Income Taxes

For the ~~six-month~~three-month period ended ~~April 30, 2019,~~January 31, 2020, we reported income before income taxes of ~~$327.6~~$65.9 million, as compared to ~~$284.3 million in the six-month period ended April 30, 2018. For the three-month period ended April 30, 2019, we reported income before income taxes of $176.2 million, as compared to $152.7~~$151.4 million in the three-month period ended ~~April 30, 2018.~~January 31, 2019.

Income Tax Provision

We recognized an income tax ~~provisions~~provision of ~~$86.2 million and $46.8~~$9.1 million in the ~~six-month and~~ three-month ~~periods~~period ended ~~April 30, 2019, respectively.~~January 31, 2020. Based upon the federal statutory rate of 21.0% for the fiscal 2019 ~~periods,~~period, our federal tax provision would have been ~~$68.8 million and $37.0~~$13.8 million in the ~~six-month and~~ three-month periods ended April 30, 2019, respectively. The differences between the tax provisions recognized and the tax provisions based on the federal statutory rate in the six-month and three-month periods ended April 30, 2019 were mainly due to the provision for state income taxes.

In the six-month and three-month periods ended April 30, 2018, we recognized income tax provisions of $40.4 million and $40.9 million, respectively. Based upon the blended federal statutory rate of 23.3% for the fiscal 2018 periods, our federal tax provisions would have been $66.3 million and $35.6 million in the six-month and three-month periods ended April 30, 2018, respectively. The difference between the tax provisions recognized and the tax provisions based on the federal statutory rate in the six-month period ended April 30, 2018 was mainly due to the impact of the Tax Act, excess tax benefits related to stock-based compensation, and tax benefits related to the utilization of domestic production activities deductions, offset, in part, by the provision for state income taxes. See Note 8, “Income Taxes” in Notes to Condensed Consolidated Financial Statements in this Form 10-Q for additional information regarding the impact of the Tax Act.January 31, 2020. The difference between the tax provision recognized and the tax provision based on the federal statutory rate was mainly due to the the retroactive extension of the federal energy efficient home credit, which was enacted into law on December 20, 2019, which allowed us to recognize energy credits on homes that settled primarily in fiscal 2018 and 2019, and excess tax benefits related to stock-based compensation. These benefits were offset, in part, by the provision for state income taxes.

In the three-month period ended January 31, 2019, we recognized an income tax provision of $39.4 million. Based upon the federal statutory rate of 21.0% for the fiscal 2019 period, our federal tax provision would have been $31.8 million in the three-month period ended ~~April 30, 2018~~January 31, 2019. The difference between the tax provision recognized and the tax provision based on the federal statutory rate was ~~primarily~~mainly due to the provision for state income taxes, ~~partially~~ offset, in part, by the reversal of a previously accrued tax ~~benefits related~~provision on uncertain tax positions that was no longer necessary due to ~~the utilization of domestic production activities deductions.~~a settlement.

Contracts

The aggregate value of net contracts signed ~~decreased $907.0~~increased $325.9 million, or ~~22%~~28%, in the ~~six-month~~three-month period ended ~~April 30, 2019,~~January 31, 2020, as compared to the ~~prior year period.~~three-month period ended January 31, 2019. In the ~~six-month~~three-month periods ended ~~April 30,~~January 31, 2020 and 2019, ~~and 2018,~~ the value of net contracts signed was ~~$3.17~~$1.49 billion ~~(3,803~~(1,806 homes) and ~~$4.07~~$1.16 billion ~~(4,488~~(1,379 homes), respectively.

The aggregate value of net contracts signed decreased $379.9 million, or 16%, in the three-month period ended April 30, 2019, as compared to the prior year period. In the three-month periods ended April 30, 2019 and 2018, the value of net contracts signed was $2.00 billion (2,424 homes) and $2.38 billion (2,666 homes), respectively.

~~The decreases~~increase in the aggregate value of net contracts signed in the fiscal ~~2019 periods, as compared to the fiscal 2018 periods, were~~2020 period was the result of ~~decreases of 15% and 9%, respectively,~~a 31% increase in the number of net contracts signed, ~~and~~partially offset by a 2% decrease ~~of 8%~~ in the average value of each contract ~~signed in each of the six-month and three month periods ended April 30, 2019, as compared to the six-month and three-month periods ended April 30, 2018.~~signed. The ~~decreases~~increase in the number of net contracts signed ~~were~~was the result of ~~decreased~~increased demand in many of our markets; contracts signed in metropolitan Atlanta, Georgia and ~~a lack of inventory~~several markets in ~~certain locations~~South Carolina from the Sharp and Sabal acquisitions; and an increase in the ~~fiscal 2019 periods, as compared to the fiscal 2018 periods.~~average number of selling communities. The ~~decreases~~decrease in average price of net contracts signed in the fiscal ~~2019 periods, as compared to the fiscal 2018 periods, were~~2020 period was principally due to a shift in the number of contracts signed to less expensive areas and/or ~~products~~products. We are strategically adding more affordable luxury communities to capitalize on demographic trends and ~~a decrease in home prices in certain markets in the fiscal 2019 periods, as compared~~ to ~~the fiscal 2018 periods.~~expand footprint and customer base.

Backlog

The value of our backlog at ~~April 30, 2019 decreased 11%~~January 31, 2020 increased 2% to ~~$5.66~~$5.45 billion ~~(6,467~~(6,461 homes), as compared to the value of our backlog at ~~April 30, 2018~~January 31, 2019 of ~~$6.36~~$5.37 billion ~~(7,030~~(5,954 homes). Our backlog at October 31, 2019 and 2018 was $5.26 billion (6,266 homes) and ~~2017 was~~ $5.52 billion (6,105 homes) ~~and $5.06 billion (5,851 homes)~~, respectively.

The ~~decrease~~increase in the value of our backlog at ~~April 30, 2019,~~January 31, 2020, as compared to the backlog at ~~April 30, 2018,~~January 31, 2019, was primarily attributable to ~~a decrease~~an increase in the value of net contracts signed ~~and an increase~~ in ~~deliveries in the six months ended April 30, 2019, as compared~~ the three months ended ~~April 30, 2018,~~January 31, 2020, partially offset by a ~~higher~~lower backlog of homes at October 31, ~~2018,~~2019, as compared to October 31, ~~2017.~~2018.

For more information regarding results of operations by segment, see “Segments” in this MD&A.

CAPITAL RESOURCES AND LIQUIDITY

Funding for our business has been, and continues to be, provided principally by cash flow from operating activities before inventory additions, unsecured bank borrowings, and the public capital markets.

Fiscal ~~2019~~2020

At ~~April 30, 2019~~January 31, 2020 and October 31, ~~2018,~~2019, we had ~~$924.4~~$519.8 million and ~~$1,182.2 million,~~$1.29 billion, respectively, of cash and cash equivalents. Cash used in operating activities during the ~~six-month~~three-month period ended ~~April 30,~~January 31, 2020 was $366.4 million. Cash used in operating activities during the fiscal 2020 period was primarily related to increases in inventory, receivables, prepaid expenses, and other assets, and income taxes receivable, and a decrease in accounts payable and accrued expenses, offset, in part, by mortgages loans sold, net of mortgage loan originated and net income (adjusted for stock-based compensation, inventory impairments, depreciation and amortization, and deferred taxes) and an increase in customer deposits – net.

In the three-month period ended January 31, 2020, cash used in investing activities was $2.1 million, which was primarily related to $26.8 million used for the purchase of property and equipment and $4.9 million used to fund our investments in unconsolidated entities. This activity was offset, in part, by $29.0 million of cash received as returns from our investments in unconsolidated entities.

We used $392.5 million of cash in financing activities in the three-month period ended January 31, 2020, primarily for the repurchase of $476.0 million of our common stock and the payment of dividends on our common stock of $15.0 million, offset, in part, by borrowings of $94.2 million of loans payable, net of repayments, and proceeds of $4.2 million from our stock-based benefit plans.

Fiscal 2019

At January 31, 2019 and October 31, 2018, we had $801.7 million and $1,182.2 million of cash and cash equivalents, respectively. Cash used in operating activities during the three-month period ended January 31, 2019 was ~~$85.7~~$185.2 million. Cash used in operating activities during the fiscal 2019 period was primarily related to the purchase of inventory; decreases in accounts payable, accrued expenses, and income taxes payable; and an increase in receivables, prepaid expenses, and other assets; offset, in part, by net income (adjusted for stock-based compensation, inventory impairments, depreciation and amortization, and deferred taxes);, a decrease in customer deposits – net, and an increase in mortgage loans sold, net of mortgage loans ~~originated; and an increase in customer deposits – net.~~originated.

In the ~~six-month~~three-month period ended ~~April 30,~~January 31, 2019, cash provided by investing activities was ~~$28.2~~$24.5 million, which was primarily related to ~~$70.5~~$42.7 million of cash received as returns offrom our investments in unconsolidated entities and proceeds of ~~$33.5~~$18.2 million of cash received from the sale of one of our golf club properties ~~and~~to an ~~office building in two separate transactions with~~ unrelated third ~~parties.~~party. This activity was offset, in part, by ~~$44.9~~$19.6 million used for the purchase of property and equipment and ~~$31.6~~$17.2 million used to fund our investments in unconsolidated entities.

We used ~~$200.5~~$219.5 million of cash in financing activities in the ~~six-month~~three-month period ended ~~April 30,~~January 31, 2019 primarily for the repayment of $350.0 million of senior notes; the repurchase of ~~$25.2~~$25.1 million of our common stock; and the payment of dividends on our common stock of ~~$32.4~~$16.4 million; offset, in part, by borrowings of ~~$207.8~~$173.9 million of loans payable, net of ~~repayments.~~

~~Fiscal 2018~~

~~At April 30, 2018~~repayments and October 31, 2017, we had $475.1 million and $712.8 million, respectively, of cash and cash equivalents. Cash used in operating activities during the six-month period ended April 30, 2018 was $326.3 million. Cash used in operating activities during the fiscal 2018 period was primarily related to the purchase of inventory; an increase in receivables, prepaid expenses, and other assets; and a decrease in income taxes payable; offset, in part, by net income adjusted for stock-based compensation, inventory impairments, depreciation and amortization, and deferred taxes; an increase in mortgage loans sold, net of mortgage loans originated; and increases in customer deposits, accounts payable, and accrued expenses.

In the six-month period ended April 30, 2018, cash provided by investing activities was $39.9 million, which was primarily related to $57.4 million of cash received as returns on our investments in unconsolidated entities, foreclosed real estate, and distressed loans. This was offset, in part, by $10.8 million used to fund our investments in unconsolidated entities and by $6.5 million for the purchase of property and equipment.

~~We generated $47.3 million of cash from financing activities in the six-month period ended April 30, 2018, primarily from the net proceeds of $396.6 million from the~~debt issuance of $400.0 million aggregate principal amount of 4.350% Senior Notes due 2028 and the proceeds of $9.1 million from our stock-based benefit plans; offset, in part, by the repurchase of $291.5 million of our common stock; the repayment of $37.9 million of loans payable, net of borrowings; and the payment of dividends on our common stock of $29.1 million.costs.

Other

In general, our cash flow from operating activities assumes that, as each home is delivered, we will purchase a home site to replace it. Because we own a supply of several years of home sites, we do not need to buy home sites immediately to replace those that we deliver. In addition, we generally do not begin construction of our detached homes until we have a signed contract with the home buyer. Should our business decline, we believe that our inventory levels would decrease as we complete and deliver the homes under construction but do not commence construction of as many new homes, as we complete the improvements on the land we already own, and as we sell and deliver ~~the speculative~~quick delivery homes that are ~~currently~~then in inventory, resulting in additional cash flow from operations. In addition, we might delay, decrease, or curtail our acquisition of additional land, which would further reduce our inventory levels and cash needs. At ~~April 30, 2019,~~January 31, 2020, we owned or controlled through options approximately ~~54,600~~62,000 home sites, of which we owned approximately ~~33,500.~~37,100. Of our owned home sites at ~~April 30, 2019,~~January 31, 2020, significant improvements were completed on approximately ~~16,000~~17,200 of them.

At ~~April 30, 2019,~~January 31, 2020, the aggregate purchase price of land parcels under option and purchase agreements was approximately ~~$2.45~~$2.73 billion (including ~~$44.0~~$10.1 million of land to be acquired from joint ventures in which we have invested). Of the ~~$2.45~~$2.73 billion of land purchase commitments, we paid or deposited ~~$180.7~~$199.9 million, and, if we acquire all of these land parcels, we will be required to pay an additional ~~$2.22~~$2.53 billion. The purchases of these land parcels are scheduled to occur over the next several

years. In addition, we expect to purchase approximately ~~2,600~~2,500 additional home sites over a number of years from several joint ventures in which we have interests. We have additional land parcels under option that have been excluded from the aforementioned aggregate purchase amounts since we do not believe that we will complete the purchase of these land parcels and no additional funds will be required from us to terminate these contracts.

During the past several years, we have made a number of investments in unconsolidated entities related to the acquisition and development of land for future home sites, the construction of luxury for-sale condominiums, and for-rent apartments. Our investment activities related to investments in, and distributions of investments from, unconsolidated entities are contained in the Condensed Consolidated Statements of Cash Flows under “Net cash (used in) provided by investing activities.” At ~~April 30, 2019,~~January 31, 2020, we had purchase commitments to acquire land for apartment developments of approximately ~~$326.9~~$247.1 million, of which we had outstanding deposits in the amount of ~~$14.3~~$11.1 million. We generally intend to develop these apartment projects in joint ventures with unrelated parties in the future.

We have a ~~$1.295~~$1.905 billion, unsecured, five-year revolving credit facility (the ~~“Credit~~“Revolving Credit Facility”) that is scheduled to expire ~~in May 2021.~~on November 1, 2024. Under the terms of the Revolving Credit Facility, our maximum leverage ratio (as defined in the credit agreement) may not exceed 1.75 to 1.00, and we are required to maintain a minimum tangible net worth (as defined in the credit agreement) of no less than approximately ~~$2.59~~$2.24 billion. Under the terms of the Revolving Credit Facility, at ~~April 30, 2019,~~January 31, 2020, our leverage ratio was approximately ~~0.56~~0.72 to 1.00, and our tangible net worth was approximately ~~$4.90~~$4.61 billion. At ~~April 30, 2019,~~January 31, 2020, we had no$150.0 million outstanding borrowings under our Revolving Credit Facility and had outstanding letters of credit thereunder of approximately ~~$179.3~~$163.1 million. Subsequent to January 31, 2020, we borrowed an additional $200.0 million under the Revolving Credit Facility.

At ~~April 30, 2019,~~January 31, 2020, we had an $800.0 million, five-year senior unsecured term loan facility (the “Term Loan Facility”) with a syndicate of ~~banks. On~~banks is scheduled to expire on November 1, ~~2018, we entered into an amendment to the~~2024. The Term Loan Facility ~~to, among other things, (i) increase~~contains substantially the size of the outstanding term loan to $800.0 million; (ii) extend the maturity date to November 1, 2023, with no principal payments being required before the maturity date; (iii) provide an accordion feature under which we may, subject to certain conditions set forth in the agreement, increase the Term Loansame financial covenants as our Revolving Credit Facility, up to a maximum aggregate amount of $1.0 billion; (iv) revise certain provisions to reduce the interest rate applicable on outstanding borrowings; and (v) modify certain provisions relating to existing financial maintenance and negative covenants. Under the terms of the Term Loan Facility, at April 30, 2019, our maximum leverage ratio, as defined, may not exceed 1.75 to 1.00, and we are required to maintain a minimum tangible net worth, as defined, of no less than approximately $2.76 billion. Under the terms of the Term Loan Facility, at April 30, 2019, our leverage ratio was approximately 0.56 to 1.00, and our tangible net worth was approximately $4.90 billion.described above.

Under the ~~most restrictive~~ provisions of the Revolving Credit Facility and Term Loan Facility, our ability to repurchase our common stock was limited to approximately ~~$3.00~~$3.14 billion and our ability to pay cash dividends was limited to approximately ~~$2.14~~$2.36 billion as of ~~April 30, 2019.~~January 31, 2020.

We believe that we will have adequate resources and sufficient access to the capital markets and external financing sources to continue to fund our current operations and meet our contractual obligations. Due to the ~~uncertainties~~inherent difficulty in making long-term predictions about the economy and the credit market for home builders, ~~in general,~~ we cannot be certain that we will be able to replace existing financing arrangements when they mature or find sources of additional financing in the future.

OFF-BALANCE SHEET ARRANGEMENTS

We ~~have investments in Land Development Joint Ventures; Home Building Joint Ventures; Rental Property Joint Ventures;~~also operate through a number of joint ventures. We earn construction and ~~Gibraltar Joint Ventures.~~

management fee income from many of these joint ventures. Our investments in these entities are generally accounted for using the equity method of accounting. We are a party to several joint ventures with unrelated parties to develop and sell land that is owned by the joint ventures. We recognize our proportionate share of the earnings from the sale of home sites to other builders, including our joint venture partners. We do not recognize earnings from the home sites we purchase from these ventures at the time of our purchase; instead, our cost basis in the home sites is reduced by our share of the earnings realized by the joint venture from ~~sales of~~ those home ~~sites to us.~~sites.

At ~~April 30, 2019,~~January 31, 2020, we had investments in these entities of ~~$390.1~~$364.4 million and were committed to invest or advance up to an additional ~~$30.9~~$36.6 million to these entities if they require additional funding. At ~~April 30, 2019,~~January 31, 2020, we had agreed to terms for the acquisition of ~~124~~113 home sites from two joint ventures for an estimated aggregate purchase price of ~~$44.0~~$10.1 million. In addition, we expect to purchase approximately ~~2,600~~2,500 additional home sites over a number of years from several joint ventures in which we have interests; the purchase price of these home sites will be determined at a future date.

In some instances, the guarantees provided in connection with loans to an unconsolidated entity are joint and several. In these situations, we generally have a reimbursement agreement with our partner that provides that neither party is responsible for more than its proportionate share or agreed-upon share of the guarantee; however, if the joint venture partner does not have adequate financial resources to meet its obligations under the reimbursement agreement, we may be liable for more than our proportionate share.

We believe that, as of ~~April 30, 2019,~~January 31, 2020, in the event we become legally obligated to perform under a guarantee of the obligation of an unconsolidated entity due to a triggering event, the collateral in such entity should be sufficient to repay all or a significant portion of the obligation. If it is not, we and our partners would need to contribute additional capital to the entity. At ~~April 30, 2019,~~January 31, 2020, certain unconsolidated entities have loan commitments aggregating ~~$1.23~~$1.27 billion, of which, if the full amount of the debt obligations were borrowed, we estimate ~~$310.6~~$183.1 million to be our maximum exposure related to repayment and carry cost guarantees. At ~~April 30, 2019,~~January 31, 2020, the unconsolidated entities had borrowed an aggregate of ~~$903.5~~$825.3 million, of which we estimate ~~$271.1~~$114.1 million to be our maximum exposure related to repayment and carry cost guarantees. The terms of these guarantees generally range from ~~two~~7 months to ~~42 months.~~3.9 years. These maximum exposure estimates do not take into account any recoveries from the underlying collateral or any reimbursement from our partners.

For more information regarding these joint ventures, see Note 4, “Investments in Unconsolidated Entities,” in the Notes to Condensed Consolidated Financial Statements in this Form 10-Q.

CRITICAL ACCOUNTING POLICIES

As disclosed in our ~~2018~~2019 Form 10-K, our most critical accounting policies relate to inventory, income taxes–valuation allowances, revenue and cost recognition, and warranty and self-insurance. Since October 31, ~~2018,~~2019, there have been no material changes to those critical accounting ~~policies, except that we updated our revenue recognition policies due to our adoption of ASC 606, as follows:~~policies.

~~Revenue Recognition~~

~~Home sales revenues:~~ Revenues and cost of revenues from home sales are recognized at the time each home is delivered and title and possession are transferred to the buyer. For the majority of our home closings, our performance obligation to deliver a home is satisfied in less than one year from the date a binding sale agreement is signed. In certain states that we build, we are not able to complete certain outdoor features prior to the closing of the home. To the extent these separate performance obligations are not complete upon the home closing, we defer a portion of the home sales revenue related to these obligations and subsequently recognize the revenue upon completion of such obligations.

~~Land sales revenues:~~ Our revenues from land sales generally consist of the following: (1) lot sales to third-party builders within our master planned communities; (2) land sales to joint ventures in which we retain an interest; and (3) bulk land sales to third parties of land we have decided no longer meets our development criteria. In general, our performance obligation for each of these land sales are fulfilled upon the delivery of the land, which generally coincides with the receipt of cash consideration from the counterparty. In land sale transactions that contain repurchase options, revenues and related costs are not recognized until the repurchase option expires. In addition, when we sell land to a joint venture in which we retain an interest, we do not recognize revenue or gains on the sale to the extent of our retained interest in such joint venture.

~~Forfeited Customer Deposits:~~ Forfeited customer deposits are recognized in “Home sales revenues” in our Condensed Consolidated Statements of Operations and Comprehensive Income in the period in which we determine that the customer will not complete the purchase of the home and we have the right to retain the deposit.

~~Sales Incentives:~~ In order to promote sales of our homes, from time to time we grant our home buyers sales incentives. These incentives will vary by type of incentive and by amount on a community-by-community and home-by-home basis. Incentives are reflected as a reduction in home sales revenues. Incentives are recognized at the time the home is delivered to the home buyer and we receive the sales proceeds.

See Note 1, “Significant Accounting Policies – Recent Accounting Pronouncements” in Notes to Condensed Consolidated Financial Statements in this Form 10-Q for additional information regarding the impact of the adoption of ASC 606.

SEGMENTS

The tables below summarize information related to units delivered and revenues, net contracts signed, and income (loss) before income taxes, by segment, for the periods indicated, and information related to backlog, by segment, as of the dates indicated.

Units Delivered and Revenues:

Six months ended April 30,

Revenues
($ in millions)
Units Delivered
Average Delivered Price
($ in thousands)
2019 2018 % Change 2019 2018 % Change 2019 2018 % Change
Traditional Home Building:
North $ 391.4
$ 360.5
9 % 553
547
1 % $ 707.8
$ 659.0
7 %
Mid-Atlantic 461.4
461.9
— % 692
730
(5 )% $ 666.8
$ 632.7
5 %
South 492.5
412.2
19 % 661
540
22 % $ 745.1
$ 763.3
(2 )%
West 665.3
607.4
10 % 922
944
(2 )% $ 721.6
$ 643.4
12 %
California 870.6
725.5
20 % 477
455
5 % $ 1,825.2
$ 1,594.5
14 %
Traditional Home Building 2,881.2
2,567.5
12 % 3,305
3,216
3 % $ 871.8
$ 798.4
9 %
City Living 152.7
207.2
(26 )% 136
93
46 % $ 1,122.8
$ 2,228.0
(50 )%
Other (2.5 )

Total home sales revenue 3,031.4
2,774.7
9 % 3,441
3,309
4 % $ 881.0
$ 838.5
5 %
Land sales revenue 47.9

Total revenue $ 3,079.3
$ 2,774.7



	Three months ended January 31,
	Revenues ($ in millions)								Units Delivered				Average Delivered Price ($ in thousands)
	2020			2019			% Change		2020	2019	% Change		2020		2019		% Change
				Restated						Restated					Restated
Traditional Home Building:
North	$	254.1		$	271.5		(6	)%	393	384	2	%	$	646.5	$	707.1	(9	)%
Mid-Atlantic	162.5			134.9			20	%	240	211	14	%	$	677.0	$	639.3	6	%
South	183.6			176.9			4	%	274	228	20	%	$	670.2	$	776.0	(14	)%
Mountain	263.1			226.4			16	%	401	366	10	%	$	656.1	$	618.6	6	%
Pacific	395.3			444.1			(11	)%	267	277	(4	)%	$	1,480.7	$	1,603.1	(8	)%
Traditional Home Building	1,258.6			1,253.8			—	%	1,575	1,466	7	%	$	799.1	$	855.2	(7	)%
City Living	39.8			68.6			(42	)%	36	64	(44	)%	$	1,106.5	$	1,071.8	3	%
Other	(1.1		)	(3.1		)
Total home sales revenue	1,297.3			1,319.3			(2	)%	1,611	1,530	5	%	$	805.3	$	862.3	(7	)%
Land sales revenue	34.1			$	43.9
Total revenue	$	1,331.4		$	1,363.2

Three months ended April 30,

Revenues
($ in millions)
Units Delivered
Average Delivered Price
($ in thousands)
2019 2018 % Change 2019 2018 % Change 2019 2018 % Change
Traditional Home Building:
North $ 221.9
$ 226.2
(2 )% 316
338
(7 )% $ 702.2
$ 669.3
5 %
Mid-Atlantic 255.7
254.9
— % 387
398
(3 )% $ 660.7
$ 640.5
3 %
South 284.4
240.7
18 % 380
319
19 % $ 748.3
$ 754.6
(1 )%
West 364.9
349.4
4 % 488
532
(8 )% $ 747.7
$ 656.7
14 %
California 500.5
438.4
14 % 268
270
(1 )% $ 1,867.7
$ 1,623.5
15 %
Traditional Home Building 1,627.4
1,509.6
8 % 1,839
1,857
(1 )% $ 884.9
$ 812.9
9 %
City Living 84.1
89.6
(6 )% 72
29
148 % $ 1,167.7
$ 3,090.8
(62 )%
Other 0.6

Total home sales revenue 1,712.1
1,599.2
7 % 1,911
1,886
1 % $ 895.9
$ 847.9
6 %
Land sales revenue 4.0

Total revenue $ 1,716.1
$ 1,599.2

Net Contracts Signed:


																	Three months ended January 31,
	Six months ended April 30,																Net Contract Value ($ in millions)						Net Contracted Units				Average Contracted Price ($ in thousands)
	Net Contract Value ($ in millions)						Net Contracted Units				Average Contracted Price ($ in thousands)						2020		2019		% Change		2020	2019	% Change		2020		2019		% Change
	2019		2018		% Change		2019	2018	% Change		2019		2018		% Change				Restated					Restated					Restated
Traditional Home Building:
North	$	457.0	$	450.0	2	%	648	634	2	%	$	705.2	$	709.8	(1	)%	$	287.2	$	275.2	4	%	400	402	—	%	$	717.9	$	684.7	5	%
Mid-Atlantic	567.5		559.9		1	%	877	872	1	%	$	647.1	$	642.1	1	%	169.4		160.4		6	%	242	253	(4	)%	$	700.1	$	633.8	10	%
South	543.5		578.5		(6	)%	766	769	—	%	$	709.5	$	752.3	(6	)%	244.4		152.4		60	%	353	201	76	%	$	692.4	$	758.2	(9	)%
West	721.3		779.0		(7	)%	994	1,149	(13	)%	$	725.7	$	678.0	7	%
California	774.6		1,547.2		(50	)%	454	952	(52	)%	$	1,706.2	$	1,625.2	5	%
Mountain																	357.5		241.1		48	%	490	331	48	%	$	729.5	$	728.4	—	%
Pacific																	383.4		294.6		30	%	287	169	70	%	$	1,335.8	$	1,743.5	(23	)%
Traditional Home Building	3,063.9		3,914.6		(22	)%	3,739	4,376	(15	)%	$	819.4	$	894.6	(8	)%	1,441.9		1,123.7		28	%	1,772	1,356	31	%	$	813.7	$	828.7	(2	)%
City Living	102.7		159.0		(35	)%	64	112	(43	)%	$	1,604.7	$	1,419.6	13	%	47.4		39.7		19	%	34	23	48	%	$	1,394.9	$	1,724.4	(19	)%
Total	$	3,166.6	$	4,073.6	(22	)%	3,803	4,488	(15	)%	$	832.7	$	907.7	(8	)%	$	1,489.3	$	1,163.4	28	%	1,806	1,379	31	%	$	824.6	$	843.6	(2	)%

Three months ended April 30,

Net Contract Value
($ in millions)
Net Contracted Units
Average Contracted Price
($ in thousands)
2019 2018 % Change 2019 2018 % Change 2019 2018 % Change
Traditional Home Building:
North $ 285.5
$ 252.5
13 % 407
363
12 % $ 701.4
$ 695.6
1 %
Mid-Atlantic 346.5
347.8
— % 530
548
(3 )% $ 653.7
$ 634.6
3 %
South 348.1
339.5
3 % 498
466
7 % $ 698.9
$ 728.4
(4 )%
West 454.4
445.1
2 % 643
660
(3 )% $ 706.8
$ 674.4
5 %
California 505.7
901.2
(44 )% 305
564
(46 )% $ 1,657.9
$ 1,597.9
4 %
Traditional Home Building 1,940.2
2,286.1
(15 )% 2,383
2,601
(8 )% $ 814.2
$ 878.9
(7 )%
City Living 63.1
97.1
(35 )% 41
65
(37 )% $ 1,538.9
$ 1,494.3
3 %
Total $ 2,003.3
$ 2,383.2
(16 )% 2,424
2,666
(9 )% $ 826.4
$ 893.9
(8 )%

Backlog:

At April 30,

Backlog Value
($ in millions)
Backlog Units
Average Backlog Price
($ in thousands)
2019 2018 % Change 2019 2018 % Change 2019 2018 % Change
Traditional Home Building:
North $ 834.8
$ 905.6
(8 )% 1,193
1,304
(9 )% $ 699.7
$ 694.5
1 %
Mid-Atlantic 865.5
839.7
3 % 1,327
1,285
3 % $ 652.2
$ 653.4
— %
South 955.5
982.2
(3 )% 1,271
1,284
(1 )% $ 751.8
$ 765.0
(2 )%
West 1,088.3
1,143.6
(5 )% 1,472
1,602
(8 )% $ 739.3
$ 713.8
4 %
California 1,789.9
2,316.8
(23 )% 1,110
1,384
(20 )% $ 1,612.6
$ 1,674.0
(4 )%
Traditional Home Building 5,534.0
6,187.9
(11 )% 6,373
6,859
(7 )% $ 868.4
$ 902.2
(4 )%
City Living 127.7
172.5
(26 )% 94
171
(45 )% $ 1,358.4
$ 1,009.0
35 %
Total $ 5,661.7
$ 6,360.4
(11 )% 6,467
7,030
(8 )% $ 875.5
$ 904.8
(3 )%



	At January 31,
	Backlog Value ($ in millions)						Backlog Units				Average Backlog Price ($ in thousands)
	2020		2019		% Change		2020	2019	% Change		2020		2019		% Change
			Restated					Restated					Restated
Traditional Home Building:
North	$	1,213.1	$	1,154.0	5	%	1,749	1,716	2	%	$	693.6	$	672.5	3	%
Mid-Atlantic	542.5		525.6		3	%	786	779	1	%	$	690.2	$	674.8	2	%
South	818.4		756.9		8	%	1,127	944	19	%	$	726.1	$	801.8	(9	)%
Mountain	1,246.4		838.8		49	%	1,695	1,185	43	%	$	735.4	$	707.9	4	%
Pacific	1,472.6		1,942.7		(24	)%	994	1,205	(18	)%	$	1,481.5	$	1,612.2	(8	)%
Traditional Home Building	5,293.0		5,218.0		1	%	6,351	5,829	9	%	$	833.4	$	895.2	(7	)%
City Living	157.2		148.7		6	%	110	125	(12	)%	$	1,428.9	$	1,189.4	20	%
Total	$	5,450.2	$	5,366.7	2	%	6,461	5,954	9	%	$	843.5	$	901.4	(6	)%


																	At October 31,
	At October 31,																Backlog Value ($ in millions)						Backlog Units				Average Backlog Price ($ in thousands)
	Backlog Value ($ in millions)						Backlog Units				Average Backlog Price ($ in thousands)						2019		2018		% Change		2019	2018	% Change		2019		2018		% Change
	2018		2017		% Change		2018	2017	% Change		2018		2017		% Change		Restated		Restated				Restated	Restated			Restated		Restated
Traditional Home Building:
North	$	768.5	$	816.1	(6	)%	1,098	1,217	(10	)%	$	699.9	$	670.6	4	%	$	1,179.6	$	1,150.1	3	%	1,742	1,698	3	%	$	677.2	$	677.3	—	%
Mid-Atlantic	758.8		741.6		2	%	1,142	1,143	—	%	$	664.4	$	648.8	2	%	535.3		500.1		7	%	784	737	6	%	$	682.7	$	678.6	1	%
South	903.2		815.9		11	%	1,166	1,055	11	%	$	774.6	$	773.4	—	%	757.3		780.3		(3	)%	1,048	971	8	%	$	722.6	$	803.6	(10	)%
West	1,031.1		972.0		6	%	1,400	1,397	—	%	$	736.5	$	695.7	6	%
California	1,883.3		1,495.1		26	%	1,133	887	28	%	$	1,662.2	$	1,685.6	(1	)%
Mountain																	1,150.9		823.8		40	%	1,606	1,220	32	%	$	716.6	$	675.3	6	%
Pacific																	1,484.4		2,090.6		(29	)%	974	1,313	(26	)%	$	1,524.0	$	1,592.2	(4	)%
Traditional Home Building	5,344.9		4,840.7		10	%	5,939	5,699	4	%	$	900.0	$	849.4	6	%	5,107.5		5,344.9		(4	)%	6,154	5,939	4	%	$	829.9	$	900.0	(8	)%
City Living	177.6		220.8		(20	)%	166	152	9	%	$	1,069.7	$	1,452.7	(26	)%	149.6		177.6		(16	)%	112	166	(33	)%	$	1,335.6	$	1,069.7	25	%
Total	$	5,522.5	$	5,061.5	9	%	6,105	5,851	4	%	$	904.6	$	865.1	5	%	$	5,257.1	$	5,522.5	(5	)%	6,266	6,105	3	%	$	839.0	$	904.6	(7	)%

Income (Loss) Before Income Taxes ($ amounts in millions):


																	Three months ended January 31,
	Six months ended April 30,								Three months ended April 30,								2020			2019			% Change
	2019			2018			% Change		2019			2018			% Change					Restated
Traditional Home Building:
North	$	18.0		$	2.0		800	%	$	7.3		$	1.7		329	%	$	2.5		$	15.1		(83	)%
Mid-Atlantic	18.9			34.3			(45	)%	7.5			20.4			(63	)%	7.0			7.1			(1	)%
South	47.3			39.3			20	%	31.5			27.1			16	%	9.1			15.7			(42	)%
West	87.4			78.7			11	%	43.8			48.0			(9	)%
California	180.2			146.5			23	%	106.6			85.7			24	%
Mountain																	17.6			25.6			(31	)%
Pacific																	63.3			91.6			(31	)%
Traditional Home Building	351.8			300.8			17	%	196.7			182.9			8	%	99.5			155.1			(36	)%
City Living	40.5			46.6			(13	)%	25.9			16.7			55	%	9.5			14.6			(35	)%
Corporate and other	(64.7		)	(63.1		)	(3	)%	(46.4		)	(46.9		)	(1	)%	(43.1		)	(18.3		)	(136	)%
Total	$	327.6		$	284.3		15	%	$	176.2		$	152.7		15	%	$	65.9		$	151.4		(56	)%

Traditional Home Building

North


																	Three months ended January 31,
	Six months ended April 30,								Three months ended April 30,								2020			2019			Change
	2019			2018			Change		2019			2018			Change					Restated
Units Delivered and Revenues:
Home sales revenues ($ in millions)	$	391.4		$	360.5		9	%	$	221.9		$	226.2		(2	)%	$	254.1		$	271.5		(6	)%
Units delivered	553			547			1	%	316			338			(7	)%	393			384			2	%
Average delivered price ($ in thousands)	$	707.8		$	659.0		7	%	$	702.2		$	669.3		5	%	$	646.5		$	707.1		(9	)%

Net Contracts Signed:
Net contract value ($ in millions)	$	457.0		$	450.0		2	%	$	285.5		$	252.5		13	%	$	287.2		$	275.2		4	%
Net contracted units	648			634			2	%	407			363			12	%	400			402			—	%
Average contracted price ($ in thousands)	$	705.2		$	709.8		(1	)%	$	701.4		$	695.6		1	%	$	717.9		$	684.7		5	%

Home sales cost of revenues as a percentage of home sale revenues	85.8		%	90.1		%			88.2		%	91.8		%			86.8		%	83.7		%

Income before income taxes ($ in millions)	$	18.0		$	2.0		800	%	$	7.3		$	1.7		329	%	$	2.5		$	15.1		(83	)%

Number of selling communities at April 30,	53			48			10	%
Number of selling communities at January 31,																	82			89			(8	)%

The increase in the number of homes delivered in the ~~six months ended April 30, 2019,~~fiscal 2020 period, as compared to the ~~six months ended April 30, 2018,~~fiscal 2019 period, was mainly due to ~~higher backlog conversion and~~ an increase in the number of homes signed and settled in the fiscal 2019 period, as compared to the fiscal 2018 period. These increases were partially offset by a decrease in the number of homes in backlog at October 31, 2018, as compared to the number of homes in backlog at October 31, 2017.quickly delivery homes. The decrease in the number of homes delivered in the three months ended April 30, 2019, as compared to the three months ended April 30, 2018, was due primarily to a decrease in the number of homes in backlog at October 31, 2018, as compared to the number of homes in backlog at October 31, 2017, offset, in part, by an increase in the number of homes signed and settled in the fiscal 2019 period, as compared to the fiscal 2018 period. The increases in the average price of homes delivered in the fiscal ~~2019 periods,~~2020 period, as compared to the fiscal ~~2018 periods, were mainly~~2019 period, was due primarily to a shift in the number of homes delivered to ~~more~~less expensive areas and/or products, particularly in New Jersey where deliveries in multi-family and active-adult communities were 90% of total deliveries in the fiscal 2020 period, as compared to 63% in the fiscal 2019 ~~periods, as compared to the fiscal 2018 periods, particularly in New Jersey.~~period.

The ~~increases~~decrease in the number of net contracts signed in the fiscal ~~2019 periods,~~2020 period, as compared to the fiscal ~~2018 periods, were~~2019 period, was principally due to ~~an increase in demand and an increase~~a decrease in the average number of selling communities, offset, in part, by increased demand. The increase in the average value of each contract signed in the fiscal ~~2019 periods,~~2020 period, as compared to the fiscal ~~2018 periods.~~2019 period, was mainly due to shifts in the number of contracts signed to more expensive areas and/or products.

The ~~increases~~decrease in income before income taxes in the ~~fiscal 2019 periods,~~three-month period ended January 31, 2020, as compared to the ~~fiscal 2018 periods, were~~three-month period ended January 31, 2019, was principally attributable to ~~lower~~higher home sales cost of revenues, as a percentage of home sale ~~revenues.~~revenues, lower earnings from decreased revenues, and higher SG&A costs. The increase ~~in the six-month period ended April 30, 2019 also benefited from higher earnings from increased revenues in the fiscal 2019 period, as compared to the fiscal 2018 period. The decreases~~ in home sales cost of revenues, as a percentage of home sales revenues ~~in the fiscal 2019 periods, as compared to the fiscal 2018 periods, were~~was primarily due to a shift in product mix/areas to ~~higher-margin~~lower-margin areas and higher incentives associated with the prior year selling environment, offset, in part, by lower inventory impairment ~~charges in the fiscal 2019 periods, as compared to the fiscal 2018 periods.~~

charges. Inventory impairment charges were ~~$9.7 million and $8.0~~$94,000 in the three-month period ended January 31, 2020, as compared to $1.7 million in the six months and three months ended April 30, 2019, respectively, as compared to $16.5 million and $13.4 million in the six months and three months ended April 30, 2018, respectively. During our review of operating communities for impairment in the three months ended April 30, 2019, primarily due to a lack of improvement and/or a decrease in customer demand as a result of weaker-than-expected market conditions, we determined that the pricing assumptions used in prior impairment reviews for one operating community located in Illinois needed to be reduced. As a result of this reduction in expected sales prices, we determined that this community was impaired. Accordingly, the carrying value of this community was written down in the fiscal 2019three-month period to its estimated fair value resulting in a charge to income before income taxes of $6.6 million. During the review in the three months ended April 30, 2018, primarily due to a lack of improvement and/or a decrease in customer demand as a result of weaker-than-expected market conditions, we determined that the pricing assumptions used in prior impairment reviews for one operating community located in Connecticut also needed to be reduced. As a result of this reduction in expected sales prices, we determined that this community was impaired. Accordingly, the carrying value of this community was written down in the three months ended April 30, 2018 to its estimated fair value resulting in a charge to income before income taxes of $12.0 million. In addition, during the review in the three months ended January 31, ~~2018, primarily due to a lack of improvement and/or a decrease in customer demand, we decided to sell the remaining lots in a bulk sale in one community located in Illinois rather than sell and~~2019.

construct homes as previously intended. The carrying value of this community was written down to its estimated fair value resulting in a charge to income before income taxes in the three months ended January 31, 2018 of $2.2 million.

Mid-Atlantic


																	Three months ended January 31,
	Six months ended April 30,								Three months ended April 30,								2020			2019			Change
	2019			2018			Change		2019			2018			Change					Restated
Units Delivered and Revenues:
Home sales revenues ($ in millions)	$	461.4		$	461.9		—	%	$	255.7		$	254.9		—	%	$	162.5		$	134.9		20	%
Units delivered	692			730			(5	)%	387			398			(3	)%	240			211			14	%
Average delivered price ($ in thousands)	$	666.8		$	632.7		5	%	$	660.7		$	640.5		3	%	$	677.0		$	639.3		6	%

Net Contracts Signed:
Net contract value ($ in millions)	$	567.5		$	559.9		1	%	$	346.5		$	347.8		—	%	$	169.4		$	160.4		6	%
Net contracted units	877			872			1	%	530			548			(3	)%	242			253			(4	)%
Average contracted price ($ in thousands)	$	647.1		$	642.1		1	%	$	653.7		$	634.6		3	%	$	700.1		$	633.8		10	%

Home sales cost of revenues as a percentage of home sale revenues	86.8		%	84.0		%			88.8		%	84.0		%			84.5		%	83.9		%

Income before income taxes ($ in millions)	$	18.9		$	34.3		(45	)%	$	7.5		$	20.4		(63	)%	$	7.0		$	7.1		(1	)%

Number of selling communities at April 30,	54			57			(5	)%
Number of selling communities at January 31,																	40			39			3	%

The ~~decreases~~increase in the number of homes delivered in the fiscal ~~2019 periods,~~2020 period, as compared to the fiscal ~~2018 periods, were~~2019 period, was mainly due to ~~lower backlog conversion~~the delivery of 55 homes in metropolitan Atlanta, Georgia from the Sharp acquisition, offset, in part, by a decrease in the ~~fiscal~~number of non-Sharp homes in backlog at October 31, 2019, ~~periods,~~ as compared to the ~~fiscal 2018 periods.~~number of homes in backlog at October 31, 2018. The ~~increases~~increase in the average price of homes delivered in the fiscal ~~2019 periods,~~2020 period, as compared to the fiscal ~~2018 periods, were~~2019 period, was primarily due to a shift in the number of homes delivered to more expensive areas and/or ~~products in the fiscal 2019 periods, as compared to the fiscal 2018 periods.~~products.

The decrease in the number of net contracts signed in the ~~three months ended April 30, 2019,~~fiscal 2020 period, as compared to the ~~three months ended April 30, 2018,~~fiscal 2019 period, was principally due to a decrease in ~~demand in Virginia,~~the average number of selling communities, offset, in part, by an increase in contracts resulting from the ~~average number of selling communities in Pennsylvania.~~Sharp acquisition. The ~~increases~~increase in the average value of each contract signed in the fiscal ~~2019 periods,~~2020 period, as compared to the fiscal ~~2018 periods, were~~2019 period, was mainly due to shifts in the number of contracts signed to more expensive areas and/or ~~products in the fiscal 2019 periods, as compared to the fiscal 2018 periods.~~products.

The ~~decreases~~decrease in income before income taxes in the fiscal ~~2019 periods,~~2020 period, as compared to the fiscal ~~2018 periods, were~~2019 period, was mainly due to ~~increases~~higher SG&A costs and an increase in home sales costs of revenues, as a percentage of home sale ~~revenues, and increases in SG&A in the fiscal 2019 periods, as compared to the fiscal 2018 periods.~~revenues. This decrease was partially offset by higher earnings on increased revenues. The ~~increases~~increase in home sales costs of revenues, as a percentage of home sale revenues in the fiscal ~~2019 periods, as compared to the fiscal 2018 periods, were~~2020 period was primarily due to ~~higher inventory impairment charges~~the impact of purchase accounting for the homes delivered from the Sharp acquisition and higher incentives associated with the prior year selling environment. This increase was offset, in part, by lower material and labor ~~costs in the fiscal 2019 periods, as compared to the fiscal 2018 periods.~~

Inventory impairment charges were $8.0 million in each of the six-month and three-month periods ended April 30, 2019, as compared to $54,000 and $50,000, respectively, in the six months and three months ended April 30, 2018. During our review of operating communities for impairment in the three months ended April 30, 2019, primarily due to a lack of improvement and/or a decrease in customer demand as a result of weaker-than-expected market conditions, we determined that the pricing assumptions used in prior impairment reviews for two operating communities located in Pennsylvania needed to be reduced. As a result of this reduction in expected sales prices, we determined that these communities were impaired. Accordingly, the carrying value of these communities were written down in the three months ended April 30, 2019 to their estimated fair values resulting in a charge to income before income taxes of $8.0 million.costs.

South


																	Three months ended January 31,
	Six months ended April 30,								Three months ended April 30,								2020			2019			Change
	2019			2018			Change		2019			2018			Change					Restated
Units Delivered and Revenues:
Home sales revenues ($ in millions)	$	492.5		$	412.2		19	%	$	284.4		$	240.7		18	%	$	183.6		$	176.9		4	%
Units delivered	661			540			22	%	380			319			19	%	274			228			20	%
Average delivered price ($ in thousands)	$	745.1		$	763.3		(2	)%	$	748.3		$	754.6		(1	)%	$	670.2		$	776.0		(14	)%

Net Contracts Signed:
Net contract value ($ in millions)	$	543.5		$	578.5		(6	)%	$	348.1		$	339.5		3	%	$	244.4		$	152.4		60	%
Net contracted units	766			769			—	%	498			466			7	%	353			201			76	%
Average contracted price ($ in thousands)	$	709.5		$	752.3		(6	)%	$	698.9		$	728.4		(4	)%	$	692.4		$	758.2		(9	)%

Home sales cost of revenues as a percentage of home sale revenues	83.6		%	83.3		%			82.8		%	82.5		%			84.7		%	84.1		%

Income before income taxes ($ in millions)	$	47.3		$	39.3		20	%	$	31.5		$	27.1		16	%	$	9.1		$	15.7		(42	)%

Number of selling communities at April 30,	71			62			15	%
Number of selling communities at January 31,																	71			56			27	%

The ~~increases~~increase in the number of homes delivered in the fiscal ~~2019 periods,~~2020 period, as compared to the fiscal ~~2018 periods, were~~2019 period, was mainly due to ~~an increase in~~ the ~~number~~delivery of ~~homes closed in Texas, which was mainly attributable to an increase in the number of~~51 homes in ~~backlog~~several markets in ~~Texas at October 31, 2018, as compared to~~South Carolina from the ~~number of homes in backlog at October 31, 2017.~~Sabal acquisition. The ~~decreases~~decrease in the average price of homes delivered in the fiscal ~~2019 periods,~~2020 period, as compared to the fiscal ~~2018 periods, were~~2019 period, was primarily due to a shift in the number of homes delivered to less expensive areas and/or ~~products in the fiscal 2019 periods, as compared to the fiscal 2018 periods.~~products.

The increase in the number of net contracts signed in the ~~three months ended April 30, 2019, as compared to the three months ended April 30, 2018, was mainly due to increases in demand in Florida and North Carolina in the~~ fiscal ~~2019~~2020 period, as compared to the fiscal ~~2018 period.~~2019 period, was mainly due to an increase in demand, an increase in the average number of selling communities, and an increase in the number of contracts we signed in several markets in South Carolina due to the Sabal acquisition. The decrease in the average value of each contract signed was mainly due to contracts signed in South Carolina resulting from the Sabal acquisition, where average prices are significantly lower than the regional average.

The ~~increases~~decrease in income before income taxes in the ~~fiscal 2019 periods,~~three-month period ended January 31, 2020, as compared to the ~~fiscal 2018 periods, were principally~~three-month period ended January 31, 2019, was mainly due to higher ~~earnings from increased revenues, offset, in part, by~~SG&A costs and higher home sales cost of revenues, as a percentage of home sales revenues, ~~in the fiscal 2019 periods, as compared to the fiscal 2018 periods.~~partially offset by higher earnings from increased revenues. The increases in home sales cost of revenues, as a percentage of home sales revenues, ~~were~~was primarily due to ~~higher inventory impairment charges, offset, in part, by~~ a shift in product mix/areas to ~~higher-margin~~lower-margin areas, in the ~~fiscal 2019 periods, as compared to~~impact of purchase accounting for the ~~fiscal 2018 periods.~~

homes delivered from the Sabal acquisition, and higher incentives associated with the prior year selling environment, partially offset by lower inventory impairment charges. Inventory impairment charges were $0.7 million and $2.9 million in the ~~six months and~~ three months ended ~~April 30,~~January 31, 2020 and 2019, ~~were $4.4 million and $1.4 million, respectively, as compared to $0.6 million and $54,000 in the six months and three months ended April 30, 2018,~~ respectively.

During our review of operating communities for impairment in the three months ended January 31, 2019, primarily due to a lack of improvement and/or a decrease in customer demand, we decided to sell the remaining lots in a bulk sale in one community located in Texas rather than sell and construct homes as previously intended. The carrying value of this community was written down to its estimated fair value resulting in a charge to income before income taxes of $1.5 million in the fiscal 2019 period. In addition, during the six months ended April 30, 2019, we terminated two purchase agreements to acquire land parcels in Texas and forfeited the deposit balances outstanding. We wrote off the deposits resulting in a charges to income before income taxes of $2.1 million and $0.8 million in the six months and three months ended April 30, 2019, respectively.

~~West~~Mountain


																	Three months ended January 31,
	Six months ended April 30,								Three months ended April 30,								2020			2019			Change
	2019			2018			Change		2019			2018			Change					Restated
Units Delivered and Revenues:
Home sales revenues ($ in millions)	$	665.3		$	607.4		10	%	$	364.9		$	349.4		4	%	$	263.1		$	226.4		16	%
Units delivered	922			944			(2	)%	488			532			(8	)%	401			366			10	%
Average delivered price ($ in thousands)	$	721.6		$	643.4		12	%	$	747.7		$	656.7		14	%	$	656.1		$	618.6		6	%

Net Contracts Signed:
Net contract value ($ in millions)	$	721.3		$	779.0		(7	)%	$	454.4		$	445.1		2	%	$	357.5		$	241.1		48	%
Net contracted units	994			1,149			(13	)%	643			660			(3	)%	490			331			48	%
Average contracted price ($ in thousands)	$	725.7		$	678.0		7	%	$	706.8		$	674.4		5	%	$	729.5		$	728.4		—	%

Home sales cost of revenues as a percentage of home sale revenues	78.2		%	79.2		%			79.5		%	79.2		%			81.6		%	78.8		%

Income before income taxes ($ in millions)	$	87.4		$	78.7		11	%	$	43.8		$	48.0		(9	)%	$	17.6		$	25.6		(31	)%

Number of selling communities at April 30,	89			72			24	%
Number of selling communities at January 31,																	83			76			9	%

The ~~decreases~~increase in the number of homes delivered in the fiscal ~~2019 periods,~~2020 period, as compared to the fiscal ~~2018 periods, were~~2019 period, was mainly due to ~~lower backlog conversion partially offset by increases~~an increase in the number of homes ~~that signed and settled~~ in ~~the fiscal~~backlog at October 31, 2019, ~~periods,~~ as compared to the ~~fiscal~~number of homes in backlog at October 31, 2018, ~~periods.~~partially offset by lower backlog conversion. The ~~increases~~increase in the average price of homes delivered in the fiscal ~~2019 periods,~~2020 period, as compared to the fiscal ~~2018 periods, were~~2019 period, was primarily due to a shift in the number of homes delivered to more expensive areas and/or products and price increases in the fiscal 2019 periods, as compared to the fiscal 2018 periods. The increase in the average price of homes delivered in six-month period ended April 30, 2019, as compared to the six-month period ended April 30, 2018, was offset, in part, by an increase in deliveries in Idaho, where average delivered home prices are lower than the Company average.products.

The ~~decreases~~increase in the number of net contracts signed in the fiscal ~~2019 periods,~~2020 period, as compared to the fiscal ~~2018 periods, were principally~~2019 period, was primarily due to an ~~decrease~~increase in demand ~~partially offset by~~and an increase in the average number of selling communities. The increases in the average value of each contract signed in the fiscal 2019 periods, as compared to the fiscal 2018 periods, were mainly due to a shift in the number of contracts signed to more expensive areas and/or products in the fiscal 2019 periods.

The ~~increase~~decrease in income before income taxes in the ~~six~~three months ended ~~April 30, 2019,~~January 31, 2020, as compared to the ~~six~~three months ended ~~April 30, 2018,~~January 31, 2019, was due mainly to higher ~~earnings from the increased revenues~~SG&A costs and ~~lower~~higher home sales cost of revenues, as a percentage of home sales revenues, offset, in ~~the fiscal 2019 period, as compared to the fiscal 2018 period. This increase was partially offset~~part, by higher ~~SG&A costs in the fiscal 2019 period as compared to the fiscal 2018 period.~~earnings from increased revenues. The ~~decrease~~increase in home sales cost of revenues, as a percentage of home sales revenues, was primarily due to a shift in ~~the number of homes delivered~~product mix/areas to ~~higher margin products and/or locations~~lower-margin areas and higher ~~sales prices, offset, in part, by higher material and labor costs in~~incentives associated with the ~~fiscal 2019 period, as compared to the fiscal 2018 period.~~prior year selling environment.

The decrease in income before income taxes in the three months ended April 30, 2019, as compared to the three months ended April 30, 2018, was due mainly to higher SG&A costs, offset, in part, by higher earnings from the increased revenues in the fiscal 2019 period, as compared to the fiscal 2018 period.

~~California~~Pacific


																	Three months ended January 31,
	Six months ended April 30,								Three months ended April 30,								2020			2019			Change
	2019			2018			Change		2019			2018			Change					Restated
Units Delivered and Revenues:
Home sales revenues ($ in millions)	$	870.6		$	725.5		20	%	$	500.5		$	438.4		14	%	$	395.3		$	444.1		(11	)%
Units delivered	477			455			5	%	268			270			(1	)%	267			277			(4	)%
Average delivered price ($ in thousands)	$	1,825.2		$	1,594.5		14	%	$	1,867.7		$	1,623.5		15	%	$	1,480.7		$	1,603.1		(8	)%

Net Contracts Signed:
Net contract value ($ in millions)	$	774.6		$	1,547.2		(50	)%	$	505.7		$	901.2		(44	)%	$	383.4		$	294.6		30	%
Net contracted units	454			952			(52	)%	305			564			(46	)%	287			169			70	%
Average contracted price ($ in thousands)	$	1,706.2		$	1,625.2		5	%	$	1,657.9		$	1,597.9		4	%	$	1,335.8		$	1,743.5		(23	)%

Home sales cost of revenues as a percentage of home sale revenues	73.8		%	73.6		%			73.7		%	74.5		%			77.0		%	73.2		%

Income before income taxes ($ in millions)	$	180.2		$	146.5		23	%	$	106.6		$	85.7		24	%	$	63.3		$	91.6		(31	)%

Number of selling communities at April 30,	40			38			5	%
Number of selling communities at January 31,																	48			52			(8	)%

The ~~increase~~decrease in the number of homes delivered in the ~~six months ended April 30, 2019,~~fiscal 2020 period, as compared to the ~~six months ended April 30, 2018,~~fiscal 2019 period, was mainly due to the ~~increased~~decreased number of homes in backlog at October 31, ~~2018,~~2019, as compared to the number of homes in backlog at

October 31, ~~2017,~~2018, offset, in part, by ~~lower backlog conversion~~an increase in ~~the fiscal 2019 period, as compared~~homes delivered in California, which was mainly attributable to ~~the fiscal 2018 period.~~closings at a large high-density condominium community in Northern California. The ~~increases~~decrease in the average price of homes delivered in fiscal ~~2019 periods,~~2020 period, as compared to the fiscal ~~2018 periods, were~~2019 period, was primarily due to a shift in the number of homes delivered to ~~more~~less expensive ~~areas and/or products and increased selling prices of homes delivered in fiscal 2019 periods, as compared to the fiscal 2018 periods.~~areas.

The ~~decreases~~increases in the number of net contracts signed in the fiscal ~~2019 periods,~~2020 period, as compared to the fiscal ~~2018 periods, were~~2019 period, was principally due to an increase in demand, partially offset by a decrease in ~~demand and reduced availability~~the average number of ~~lots in the fiscal 2019 periods, as compared to the fiscal 2018 periods.~~selling communities. The ~~increases~~decrease in the average value of each contract signed in the fiscal ~~2019 periods,~~2020 period, as compared to the fiscal ~~2018 periods, were~~2019 period, was mainly due to a shift in the number of contracts signed to ~~more~~less expensive areas and/or ~~products in the fiscal 2019 periods, as compared to the fiscal 2018 periods.~~products.

The ~~increases~~decrease in income before income taxes in the fiscal 2019 periods, as compared to the fiscal 2018 periods, were primarily due to higher earnings from the increased revenues. The increase in the six months ended April 30, 2019, as compared to the six months ended April 30, 2018, was offset, in part, by a decrease in earnings from unconsolidated entities in the fiscal 20192020 period, as compared to the fiscal ~~2018 period. The decrease in earnings from unconsolidated entities in the six months ended April 30,~~ 2019 ~~as compared to the six months ended April 30, 2018,~~period, was mainly due to ~~one Land Development Joint Venture which completed~~higher home sales cost of revenues, as a percentage of home sales revenues and lower earnings from decreased revenues. The increase in home sales cost of revenues, as a percentage of home sales revenues, was primarily due to cost overruns at a large high-density condominium community in Northern California, higher incentives associated with the ~~sale of its lots~~prior year selling environment, and a shift in ~~the fiscal 2018 period.~~product mix/areas to lower-margin areas.

City Living


	Six months ended April 30,								Three months ended April 30,								Three months ended January 31,
	2019			2018			Change		2019			2018			Change		2020			2019			Change
Units Delivered and Revenues:
Home sales revenues ($ in millions)	$	152.7		$	207.2		(26	)%	$	84.1		$	89.6		(6	)%	$	39.8		$	68.6		(42	)%
Units delivered	136			93			46	%	72			29			148	%	36			64			(44	)%
Average delivered price ($ in thousands)	$	1,122.8		$	2,228.0		(50	)%	$	1,167.7		$	3,090.8		(62	)%	$	1,106.5		$	1,071.8		3	%

Net Contracts Signed:
Net contract value ($ in millions)	$	102.7		$	159.0		(35	)%	$	63.1		$	97.1		(35	)%	$	47.4		$	39.7		19	%
Net contracted units	64			112			(43	)%	41			65			(37	)%	34			23			48	%
Average contracted price ($ in thousands)	$	1,604.7		$	1,419.6		13	%	$	1,538.9		$	1,494.3		3	%	$	1,394.9		$	1,724.4		(19	)%

Home sales cost of revenues as a percentage of home sale revenues	70.3		%	76.6		%			65.6		%	81.1		%			69.0		%	76.1		%

Income before income taxes ($ in millions)	$	40.5		$	46.6		(13	)%	$	25.9		$	16.7		55	%	$	9.5		$	14.6		(35	)%

Number of selling communities at April 30,	4			6			(33	)%
Number of selling communities at January 31,																	4			5			(20	)%

The ~~decreases~~decrease in the number of homes delivered in the fiscal 2020 period, as compared to the fiscal 2019 period, was mainly attributable to the decreased number of homes in backlog at October 31, 2019, as compared to the number of homes in backlog at October 31, 2018, and lower backlog conversion. The increase in the average price of homes delivered in ~~the~~ fiscal ~~2019 periods,~~2020 period, as compared to the fiscal ~~2018 periods, were~~2019 period, was primarily due to a shift in the number of homes delivered to ~~less~~more expensive buildings. In the six months and three months ended April 30, 2019, 7% and 8%, respectively, of the units delivered were located in New York City, where average home prices were higher, as compared to 43% and 69% in the six months and three months ended April 30, 2018, respectively.areas and/or products.

The ~~decreases~~increase in the number of net contracts signed in the fiscal ~~2019 periods,~~2020 period, as compared to the fiscal ~~2018 periods, were~~2019 period, was primarily due to ~~a decrease~~an increase in demand. The ~~increase~~decrease in the average sales price of net contracts signed in the ~~six months ended April 30, 2019, as compared to the six months ended April 30, 2018, was principally due to a shift to more expensive buildings in the~~ fiscal ~~2019~~2020 period, as compared to the fiscal ~~2018 period.~~2019 period, was principally due a shift to less expensive units. In the ~~six~~three months ended ~~April 30, 2019, 38%~~January 31, 2020, 32% of the net contracts signed were in buildings located in New York, New York, where average ~~home~~ prices ~~were~~are higher, as compared to ~~27% in the six months ended April 30, 2018. The increase in the average sales price of net contracts signed~~61% in the three months ended ~~April 30, 2019, as compared to the three months ended April 30, 2018, was principally due to a shift to more expensive units in the fiscal 2019 period, as compared to the fiscal 2018 period.~~January 31, 2019.

The decrease in income before income taxes in the ~~six months ended April 30, 2019,~~fiscal 2020 period, as compared to the ~~six months ended April 30, 2018,~~fiscal 2019 period, was mainly due to lower earnings from decreased revenues and a decrease in ~~the fiscal 2019 period, as compared to the fiscal 2018 period,~~earnings from our investments in unconsolidated entities. This decrease was partially offset ~~in part,~~ by lower home sales cost of revenues, as a percentage of home sale revenues, and lower interest expense in the fiscal 2019 period, as compared to the fiscal 2018 period. The increase in income before income taxes in the three months ended April 30, 2019, as compared to the three months ended April 30, 2018, was mainly due to lower home sales cost of revenues, as a percentage of home sale revenues, and lower interest expense offset, in part, by lower earnings from decreased revenues in the fiscal 2019 period, as compared to the fiscal 2018 period.SG&A costs. The lower home sales cost of revenues, as a percentage of home sale revenues, ~~in the fiscal 2019 periods, as compared to the fiscal 2018 periods,~~ was due primarily to a shift in the number of homes delivered to buildings with higher margins, and ~~a state reimbursement~~an impairment charge of ~~$6.5~~$2.8 million ~~of previously expensed environmental clean-up costs received~~ in the fiscal 2019 ~~periods, offset, in part, by impairment charges of $4.8 million and $2.0 million in the six months and three months ended April 30, 2019, respectively.~~period. As a result of decreased demand, in the second quarter of fiscal 2019, we wrote down the carrying value of units in one building located in Maryland to their estimated fair value resulting in an impairment charge of $2.0 million. In addition, in the first quarter of fiscal 2019, we wrote down the carrying value of units in one building located in New York, New York, to their estimated fair value, resulting in an impairment charge of $2.8 million.

In the ~~six months and~~ three months ended ~~April 30, 2019 and 2018,~~January 31, 2020, earnings from our investments in unconsolidated entities decreased ~~$1.0~~$3.1 million, as compared to the ~~six months and~~ three months ended ~~April 30, 2018.~~January 31, 2019. This decrease was primarily due to a decrease in earnings from one joint venture which delivered its last home in the third quarter of fiscal 2019; a shift in the number of homes delivered to buildings with lower margins; and a shift in the number of homes delivered in joint ventures where our ownership percentage was lower in fiscal 2020, as compared to fiscal 2019. The tables below provide information related to deliveries, revenues, and net contracts signed by our City Living Home Building Joint Ventures, for the periods indicated, and the related backlog for the dates indicated ($ amounts in millions):


	Six months ended April 30,						Three months ended April 30,						Three months ended January 31,
	2019 Units	2018 Units	2019 $		2018 $		2019 Units	2018 Units	2019 $		2018 $		2020 Units	2019 Units	2020 $		2019 $
Deliveries	42	5	$	91.5	$	21.5	38	2	$	74.3	$	10.8	23	4	$	67.1	$	17.2
Net contracts signed	15	74	$	53.4	$	148.4	13	18	$	43.8	$	45.8	8	2	$	23.8	$	9.6

At April 30, At October 31,
2019
Units 2018
Units 2019
$ 2018
$ 2018
Units 2017
Units 2018
$ 2017
$
Backlog 107
115
$ 240.9
$ 226.0
134
46
$ 279.0
$ 99.1



	At January 31,						At October 31,
	2020 Units	2019 Units	2020 $		2019 $		2019 Units	2018 Units	2019 $		2018 $
Backlog	11	132	$	33.0	$	271.4	26	134	$	76.3	$	279.0

Corporate and Other

In the ~~six~~three months ended ~~April 30,~~January 31, 2020 and 2019, ~~and 2018,~~ loss before income taxes was ~~$64.7~~$43.1 million and ~~$63.1~~$18.3 million, respectively. The increase in the loss before income taxes in the fiscal ~~2019~~2020 period, as compared to the fiscal ~~2018~~2019 period, was principally attributable to ~~a $30.8 million gain recognized in the fiscal 2018 period from an asset sale by one of our Rental Property Joint Ventures located in College Park, Maryland, partially offset by~~ a $12.2 million gain recognized from the sale of a golf club in the fiscal 2019 period; an $8.4 million gain recognized from the sale of land to a newly formed Rental Property Joint Venture in the fiscal 2019 period; ~~a change in allocation of certain~~higher SG&A ~~from corporate~~costs; lower interest income; and ~~other~~an increase in losses in several Rental Property Joint Ventures related to ~~home building segments;~~the commencement of operations and ~~higher interest income~~lease up activities. These increases were partially offset by a $10.7 million gain recognized in the fiscal ~~2019~~2020 period ~~as compared~~from the sale of our investment in one of our Rental Property Joint Ventures to ~~the fiscal 2018 period.~~

In the three months ended April 30, 2019 and 2018, loss before income taxes was $46.4 million and $46.9 million, respectively. The decrease in the loss before income taxes in the fiscal 2019 period, as compared to the fiscal 2018 period, was primarily due to higher interest and other income partially offset by higher SG&A expenses in the fiscal 2019 period, as compared to the fiscal 2018 period.our joint venture partner.

AVAILABLE INFORMATION

Our principal Internet address is www.tollbrothers.com, and our Investor Relations website is located at www.tollbrothers.com/investor-relations. We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 available through our Investor Relations website, free of charge, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

We provide information about our business and financial performance, including our corporate profile, on our Investor Relations website. Additionally, we webcast our earnings calls and certain events we participate in with members of the investment community on our Investor Relations website. Corporate governance information, including our codes of ethics, corporate governance guidelines, and board committee charters, is also available on our Investor Relations website. The content of our websites is not incorporated by reference into this Quarterly Report on Form 10-Q or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk primarily due to fluctuations in interest rates. We utilize both fixed-rate and variable-rate debt. For fixed-rate debt, changes in interest rates generally affect the fair market value of the debt instrument, but not our earnings or cash flow. Conversely, for variable-rate debt, changes in interest rates generally do not impact the fair value of the debt instrument, but do affect our earnings and cash flow. We generally do not have the obligation to prepay fixed-rate debt before maturity, and, as a result, interest rate risk and changes in fair value should not have a significant impact on our fixed-rate debt until we are required or elect to refinance it.

The table below sets forth, at ~~April 30, 2019,~~January 31, 2020, our debt obligations by scheduled maturity, weighted-average interest rates, and estimated fair value (amounts in thousands):


	Fixed-rate debt				Variable-rate debt (a)				Fixed-rate debt				Variable-rate debt (a)
Fiscal year of maturity	Amount			Weighted- average interest rate	Amount			Weighted- average interest rate	Amount			Weighted- average interest rate	Amount			Weighted- average interest rate
2019	$	20,930		3.76%	$	—
2020	282,302			6.56%	110,162			4.38%	$	80,085		4.33%	$	—		—%
2021	24,675			5.25%	150			2.15%	60,160			4.01%	97,803			3.56%
2022	432,917			5.85%	150			2.15%	438,773			5.85%	150			1.02%
2023	415,370			4.41%	150			2.15%	427,569			4.39%	150			1.02%
2024									293,081			5.44%	1,610			1.02%
Thereafter	1,560,477			4.89%	812,910			3.79%	1,686,995			4.52%	961,300			2.70%
Bond discounts, premiums and deferred issuance costs, net	(7,472		)		(2,897		)		(9,524		)		(2,964		)
Total	$	2,729,199		5.14%	$	920,625		3.86%	$	2,977,139		4.77%	$	1,058,049		2.77%
Fair value at April 30, 2019	$	2,788,996			$	923,522
Fair value at January 31, 2020									$	3,167,731			$	1,061,013


(a)	Based upon the amount of variable-rate debt outstanding at ~~April 30, 2019,~~January 31, 2020, and holding the variable-rate debt balance constant, each 1% increase in interest rates would increase the interest incurred by us by approximately ~~$9.2~~$10.6 million per year.

ITEM 4. CONTROLS AND PROCEDURES

Any controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected; however, our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives.

Our Chief Executive Officer and Chief Financial Officer, with the assistance of management, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), as of the end of the period covered by this report (the “Evaluation Date”). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

~~There~~We continue to implement a new ERP system that affects many of our financial processes and is expected to improve the efficiency and effectiveness of certain financial and business transaction processes, as well as the underlying systems environment. The new ERP system will be a significant component of our internal control over financial reporting. Other than the ERP system implementation noted above, there has not been any change in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our quarter ended ~~April 30, 2019,~~January 31, 2020, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In March 2018, the Pennsylvania Attorney General informed the Company that it was conducting a review of our construction of stucco homes in Pennsylvania after January 1, 2005 and requested that we voluntarily produce documents and information. The Company has produced documents and information in response to this request and, in addition, has produced requested information and documents in response to a subpoena issued in the second quarter of fiscal 2019. Management cannot at this time predict the eventual scope or outcome of this matter.

ITEM 1A. RISK FACTORS

~~There~~Part I, Item 1A., “Risk Factors” in our 2019 Form 10-K includes a discussion of our risk factors. The information presented below updates, and should be read in conjunction with, the risk factors and information disclosed in our 2019 Form 10-K. Except as presented below, there have been no material changes in our risk factors ~~as previously disclosed~~since those reported in ~~Part I, Item 1A., “Risk Factors,” in our 2018~~2019 Form 10-K.

Information technology failures and data security breaches could harm our business.

We use information technology and other computer resources to carry out important operational and marketing activities as well as maintain our business records, including information provided by our customers. Many of these resources are provided to us and/or maintained on our behalf by third-party service providers pursuant to agreements that specify certain security and service level standards. Our ability to conduct our business may be impaired if these resources are compromised, degraded, damaged or fail, whether due to a virus or other harmful circumstance, intentional penetration or disruption of our information technology resources by a third party, natural disaster, hardware or software corruption, failure or error (including a failure of security controls incorporated into or applied to such hardware or software), telecommunications system failure, service provider error or failure, intentional or unintentional personnel actions (including the failure to follow our security protocols), or lost connectivity to our networked resources. A significant and extended disruption in the functioning of these resources could impair our operations, damage our reputation and cause us to lose customers, sales and revenue.

In addition, breaches of our data security systems, including by cyber-attacks, could result in the unintended public disclosure or the misappropriation of our proprietary information or personal and confidential information, about our employees, consumers who view our homes, home buyers, mortgage loan applicants and business partners, requiring us to incur significant expense to address and resolve these kinds of issues. The release of confidential information may lead to identity theft and related fraud, litigation or other proceedings against us by affected individuals and/or business partners and/or by regulators, and the outcome of such proceedings, which could include penalties or fines, could have a material and adverse effect on our reputation, business, financial condition and results of operations. Depending on its nature, a particular breach or series of breaches of our systems may result in the unauthorized use, appropriation or loss of confidential or proprietary information on a one-time or continuing basis, which may not be detected for a period of time. In addition, the costs of maintaining adequate protection against such threats, as they develop in the future (or as legal requirements related to data security increase) could be material.

In 2019, certain of our loan applicants experienced identity theft that we determined had occurred through the unauthorized access of one of our third-party service provider’s information systems, and, more recently, we were the direct target of an external cyber-attack that temporarily disrupted access to certain of our systems and may have resulted in the compromise of some proprietary internal data. To date, neither of these incidents has individually or in the aggregate resulted in any material liability to us, any material damage to our reputation or any material disruption to our operations. However, we expect that we will continue to be the target of additional and increasingly sophisticated cyber-attacks and data security breaches, and the safeguards we have designed to help prevent these incidents from occurring may not be successful. If we experience additional cyber-attacks or data security breaches in the future, we could suffer material liabilities, our reputation could be materially damaged and our operations could be materially disrupted.

A variety of uncontrollable events may reduce demand for our homes, impair our ability to deliver homes on schedule or increase the cost of delivering homes.

natural disasters (such as hurricanes, floods, wildfires, earthquakes, droughts, excessive heat or rain, epidemics and terrorist attacks); international, political or military developments; and significant volatility in debt and equity markets. Certain of these events can also have a serious impact on our ability to develop our residential communities or could cause delays in, prevent the completion of, or increase the cost of, developing one or more of our residential communities, which in turn could harm our sales and results of operations.

In December 2019, a novel strain of coronavirus (“COVID-19”) surfaced in Wuhan, China. Through February 2020, the spread of this virus has caused business disruption primarily in the travel, leisure and hospitality industries and with respect to companies that have significant operations or supply chains in China. The spread of COVID-19 has also caused significant volatility in U.S. and international debt and equity markets, which can negatively impact consumer confidence. There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. economy and consumer confidence. The extent to which COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions taken to contain it or treat its impact. While we have not seen a significant impact on demand for our homes resulting from COVID-19 to date, if the virus causes significant negative impacts to economic conditions or consumer confidence, our results of operations and financial condition could be adversely impacted.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

During the three-month period ended ~~April 30, 2019,~~January 31, 2020, we repurchased the following shares of our common stock:

Period Total number
of shares purchased (a) Average
price
paid per share Total number of shares purchased as part of publicly announced plans or programs (b) Maximum
number of shares
that may yet be
purchased under the plans or programs (b)
(in thousands) (in thousands) (in thousands)
February 1, 2019 to February 28, 2019 1
$ 37.18
1
19,786
March 1, 2019 to March 31, 2019 1
$ 35.60
1
19,785
April 1, 2019 to April 30, 2019 1
$ 38.46
1
19,784
Total 3
$ 36.95
3



Period	Total number of shares purchased (a)	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs (b)	Maximum number of shares that may yet be purchased under the plans or programs (b)
	(in thousands)			(in thousands)	(in thousands)
November 1, 2019 to November 30, 2019	1	$	39.46	1	13,952
December 1, 2019 to December 31, 2019	5,726	$	39.64	5,726	14,273
January 1, 2020 to January 31, 2020	5,959	$	41.78	5,959	8,314
Total	11,686			11,686

(a)

Our stock incentive plans permit us to withhold from the total number of shares that otherwise would be issued to a performance based restricted stock unit recipient or a restricted stock unit recipient upon distribution that number of shares having a fair value at the time of distribution equal to the applicable income tax withholdings due and remit the remaining shares to the recipient. During the three months ended ~~April 30, 2019,~~January 31, 2020, we withheld ~~1,146~~104,324 of the shares subject to performance based restricted stock units and restricted stock units to cover approximately ~~$41,500~~$4.2 million of income tax withholdings and we issued the remaining ~~2,823~~182,902 shares to the recipients. The shares withheld are not included in the total number of shares purchased in the table above.

Our stock incentive plans also permit participants to exercise non-qualified stock options using a “net exercise” method. In a net exercise, we generally withhold from the total number of shares that otherwise would be issued to the participant upon exercise of the stock option that number of shares having a fair market value at the time of exercise equal to the option exercise price and applicable income tax withholdings, and remit the remaining shares to the participant. During the three-month period ended ~~April 30, 2019,~~January 31, 2020, the net exercise method was not employed to exercise options.

(b)

On December ~~12, 2018,~~11, 2019, our Board of Directors authorized the repurchase of 20 million shares of our common stock in open market transactions, privately negotiated transactions (including accelerated share repurchases), issuer tender offers or ~~otherwise~~other financial arrangements or transactions for general corporate purposes, including to obtain shares for the Company’s equity award and other employee benefit plans. This new authorization terminated, effective December 11 2019, the existing authorization that had been in effect since December 12, 2018. Our Board of Directors did not fix any expiration date for ~~this~~the current share repurchase program. ~~At the time it authorized the new program, our Board of Directors terminated the existing 20 million share repurchase program authorized in December 2017.~~

Subsequent to January 31, 2020, we repurchased approximately 3.8 million shares of our common stock at an average price of $37.52 per share.

Except as set forth above, we have not repurchased any of our equity securities during the three-month period ended

~~April 30, 2019.~~

January 31, 2020.

Dividends

~~In February 2017, our Board of Directors approved the initiation of quarterly cash dividends to shareholders.~~ During the ~~six~~three months ended ~~April 30, 2019,~~January 31, 2020, we paid ~~aggregate~~a cash ~~dividends~~dividend of ~~$0.22~~$0.11 per share to our shareholders. The payment of dividends is within the discretion of our Board of Directors and any decision to pay dividends in the future will depend upon an evaluation of a number of factors, including our results of operations, our capital requirements, our operating and financial condition, and any contractual limitations then in effect. Our ~~bank~~revolving credit agreement ~~requires~~and term loan agreement each require us to maintain a minimum tangible net worth (as defined in the ~~credit~~applicable agreement), which restricts the amount of dividends we may pay. At ~~April 30, 2019,~~January 31, 2020, under ~~the most restrictive provisions of~~ our bank credit agreements, we could have paid up to approximately ~~$2.14~~$2.36 billion of cash dividends.

ITEM 6. EXHIBITS



~~10.1~~	Toll Brothers, Inc. Executive Severance Plan (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 14, 2019)

~~10.2~~	Toll Brothers, Inc. 2019 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 14, 2019)

31.1*	Certification of Douglas C. Yearley, Jr. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*	Certification of Martin P. Connor pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*	Certification of Douglas C. Yearley, Jr. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*	Certification of Martin P. Connor pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101	The following financial statements from Toll Brothers, Inc. Quarterly Report on Form 10-Q for the quarter ended ~~April 30, 2019,~~January 31, 2020, filed on ~~June 6, 2019,~~March 9, 2020, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations and Comprehensive Income, (iii) Condensed Consolidated Statements of Changes in Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) the Notes to Condensed Consolidated Financial Statements
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.



*	Filed electronically herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		TOLL BROTHERS, INC.
		(Registrant)

Date:	~~June 6, 2019~~March 9, 2020	By:	/s/ Martin P. Connor
			Martin P. Connor Senior Vice President and Chief Financial Officer (Principal Financial Officer)

Date:	~~June 6, 2019~~March 9, 2020	By:	/s/ Michael J. Grubb
			Michael J. Grubb Senior Vice President and Chief Accounting Officer (Principal Accounting Officer)

5553



Three months ended:	Selling price per unit ($ in thousands)	Sales pace per year (in units)	Discount rate
Fiscal 2019:
January 31	836 - 13,495	2 - 12	12.5% - 15.8%
April 30	372 - 1,915	2 - 19	12.0% - 26.0%

Fiscal 2018:
January 31	381 - 1,029	7 - 10	13.8% - 19.0%
April 30	485 - 522	10 - 16	16.9%
July 31 (1)	–	–	–
October 31	470 - 1071	4 - 23	13.5% - 16.3%



	Six months ended April 30, 2018			Three months ended April 30, 2018
Revenues	$	41,352		$	34,384
Expenses	(38,065		)	(31,797		)
Income from land sales	$	3,287		$	2,587