UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended January 31, ~~2020~~2021



☐						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)						(I.R.S. Employer Identification No.)

~~Delaware~~1140 Virginia Drive					~~23-2416878~~
~~(State or other jurisdiction of~~ ~~incorporation or organization)~~			~~(I.R.S. Employer~~ ~~Identification No.)~~

~~250 Gibraltar Road~~	~~Horsham~~Fort Washington	Pennsylvania		~~19044~~19034
(Address of principal executive offices)						(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 filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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 ☐ No ☑

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

At March ~~6, 2020,~~4, 2021, there were approximately ~~126,732,000~~123,124,000 shares of Common Stock, par value $0.01 per share, outstanding.

TOLL BROTHERS, INC.

TABLE OF CONTENTS

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.~~amended (the “Exchange Act”). 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,” “likely”, “will” and other words or phrases of similar meaning. Such statements may include, but are not limited to, information ~~related to:~~and statements regarding: the impact of the novel coronavirus (“COVID-19”) on the U.S. economy, the markets in which we operate or may operate, and on our business; our strategic objectives and priorities; our land acquisition, land development and capital allocation plans and priorities; market conditions; demand for our homes; anticipated operating ~~results;~~results and guidance; home deliveries; financial resources and condition; changes in revenues; changes in profitability; changes in margins; changes in accounting treatment; cost of ~~revenues;~~revenues, including expected labor and material costs; 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~~our ability to acquire or dispose of land and pursue real estate opportunities; ~~the~~our ability to gain approvals and open new communities; ~~the~~our ability to market, construct and sell homes and properties; ~~the~~our ability to deliver homes from backlog; ~~the~~our ability to secure materials and subcontractors; ~~the~~our ability to produce the liquidity and capital necessary to conduct normal business operations or to expand and take advantage of opportunities; and the outcome of 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. Consequently, actual results may differ materially from those that might be anticipated from our forward-looking statements. This can occur as a result of incorrect assumptions or as a consequence of known or unknown risks and uncertainties. Therefore, we caution you not to place undue reliance on our forward-looking statements. The major risks and uncertainties – and assumptions that are made – that affect our business and may cause actual results to differ from these forward-looking statements include, but are not limited to:

•the effects of the COVID-19 pandemic, which are highly uncertain, cannot be predicted and will depend upon future developments, including the severity of the pandemic and its duration, the duration of social distancing and shelter-in-place orders, further mitigation strategies taken by applicable government authorities, the availability and effectiveness of vaccines, adequate testing and therapeutic treatments and the prevalence of widespread immunity to COVID-19;

•the effect of general economic conditions, including employment rates, housing starts, interest rate levels, availability of financing for home mortgages and strength of the U.S. dollar;

•market demand for our products, which is related to the strength of the various U.S. business segments and U.S. and international economic conditions;

•the availability of desirable and reasonably priced land and our ability to control, purchase, hold and develop such parcels;

•access to adequate capital on acceptable terms;

•geographic concentration of our operations;

•levels of competition;

•the price and availability of lumber, other raw materials and labor;

•the effect of U.S. trade policies, including the imposition of tariffs and duties on home building products and retaliatory measures taken by other countries;

•the effects of weather and the risk of loss from earthquakes, volcanoes, fires, floods, droughts, windstorms, hurricanes, pest infestations and other natural disasters, and the risk of delays, reduced consumer demand, and shortages and price increases in labor or materials associated with such natural disasters;

•the risk of loss from acts of war, terrorism or outbreaks of contagious diseases, such as COVID-19;

•federal and state tax policies;

•transportation costs;

•the effect of land use, environmental and other governmental laws and regulations;

•legal proceedings or disputes and the adequacy of reserves;

•risks relating to any unforeseen changes to or effects on liabilities, future capital expenditures, revenues, expenses, earnings, indebtedness, financial condition, losses and future prospects;

•the effect of potential loss of key management personnel;

•changes in accounting principles; and

•risks related to unauthorized access to our computer systems, theft of our and our homebuyers’ confidential information or other forms of cyber-attack.

Many of the factors mentioned above, elsewhere in this report or in other reports or public statements made by us including macroeconomic factors such as 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~~further discussion of ~~these~~ factors that we believe could cause our actual results to differ materially from expected and historical results, 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)


	January 31, 2021		October 31, 2020
	(unaudited)
ASSETS
Cash and cash equivalents	$	949,696	$	1,370,944


Inventory	7,923,635		7,658,906
Property, construction, and office equipment, net	277,696		316,125
Receivables, prepaid expenses, and other assets (1)	907,775		956,294
Mortgage loans held for sale, at fair value	125,475		231,797
Customer deposits held in escrow	80,889		77,291
Investments in unconsolidated entities	571,632		430,701
Income taxes receivable	27,195		23,675
	$	10,863,993	$	11,065,733
LIABILITIES AND EQUITY
Liabilities
Loans payable	$	971,504	$	1,147,955
Senior notes	2,652,162		2,661,718
Mortgage company loan facility	112,619		148,611
Customer deposits	523,584		459,406
Accounts payable	460,113		411,397
Accrued expenses	1,109,129		1,110,196
Income taxes payable	200,390		198,974
Total liabilities	6,029,501		6,138,257
Equity
Stockholders’ equity
Preferred stock, none issued	0		0
Common stock, 152,937 shares issued at January 31, 2021 and October 31, 2020	1,529		1,529
Additional paid-in capital	708,668		717,272
Retained earnings	5,245,935		5,164,086
Treasury stock, at cost — 29,981 and 26,410 shares at January 31, 2021 and October 31, 2020, respectively	(1,162,811)		(1,000,454)
Accumulated other comprehensive loss	(6,486)		(7,198)
Total stockholders’ equity	4,786,835		4,875,235
Noncontrolling interest	47,657		52,241
Total equity	4,834,492		4,927,476
	$	10,863,993	$	11,065,733

January 31,
2020 October 31,
2019
(unaudited)
ASSETS
Cash and cash equivalents $ 519,793
$ 1,286,014
Inventory 8,198,352
7,873,048
Property, construction, and office equipment, net 285,785
273,412
Receivables, prepaid expenses, and other assets (1) 978,166
715,441
Mortgage loans held for sale, at fair value 111,995
218,777
Customer deposits held in escrow 71,841
74,403
Investments in unconsolidated entities 364,352
366,252
Income taxes receivable 56,922
20,791
$ 10,587,206
$ 10,828,138
LIABILITIES AND EQUITY
Liabilities
Loans payable $ 1,277,183
$ 1,111,449
Senior notes 2,660,352
2,659,898
Mortgage company loan facility 97,653
150,000
Customer deposits 417,092
385,596
Accounts payable 314,482
348,599
Accrued expenses 1,011,548
950,932
Income taxes payable 103,816
102,971
Total liabilities 5,882,126
5,709,445
Equity
Stockholders’ equity
Preferred stock, none issued —
—
Common stock, 152,937 shares issued at January 31, 2020 and October 31, 2019 1,529
1,529
Additional paid-in capital 723,109
726,879
Retained earnings 4,816,286
4,774,422
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 4,655,551
5,071,816
Noncontrolling interest 49,529
46,877
Total equity 4,705,080
5,118,693
$ 10,587,206
$ 10,828,138


~~(1)~~	As of January 31, 2020 and October 31, 2019, receivables, prepaid expenses, and other assets include $157.9 million and $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.

(1) As of January 31, 2021 and October 31, 2020, receivables, prepaid expenses, and other assets include $113.3 million and $163.0 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)


	Three months ended January 31,
	2021		2020
Revenues:
Home sales	$	1,410,704	$	1,297,337
Land sales and other	152,672		34,094
	1,563,376		1,331,431

Cost of revenues:
Home sales	1,121,793		1,033,122
Land sales and other	111,734		32,282
	1,233,527		1,065,404
Selling, general and administrative	210,739		218,531
Income from operations	119,110		47,496
Other:
Income from unconsolidated entities	1,194		12,141
Other income – net	7,101		6,295


Income before income taxes	127,405		65,932
Income tax provision	30,906		9,056
Net income	$	96,499	$	56,876

Other comprehensive income, net of tax	713		278
Total comprehensive income	$	97,212	$	57,154

Per share:
Basic earnings	$	0.77	$	0.41
Diluted earnings	$	0.76	$	0.41

Weighted-average number of shares:
Basic	126,060		138,145
Diluted	127,562		139,889

Three months ended January 31,
2020 2019
Revenues:
Home sales $ 1,297,337
$ 1,319,308
Land sales 34,094
43,873
1,331,431
1,363,181

Cost of revenues:
Home sales 1,059,900
1,042,245
Land sales 32,282
34,253
1,092,182
1,076,498
Selling, general and administrative 191,753
162,238
Income from operations 47,496
124,445
Other:
Income from unconsolidated entities 12,141
6,140
Other income – net 6,295
20,861
Income before income taxes 65,932
151,446
Income tax provision 9,056
39,396
Net income $ 56,876
$ 112,050

Other comprehensive income, net of tax 278
56
Total comprehensive income $ 57,154
$ 112,106

Per share:
Basic earnings $ 0.41
$ 0.76
Diluted earnings $ 0.41
$ 0.76

Weighted-average number of shares:
Basic 138,145
146,751
Diluted 139,889
148,032

See accompanying notes.

TOLL BROTHERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts in thousands)

(Unaudited)

For the three months ended January 31, ~~2020~~2021 and ~~2019:~~2020:


	Common Stock	Addi- tional Paid-in Capital	Retained Earnings	Treasury Stock	Accum- ulated Other Compre- hensive Loss	Non-controlling Interest	Total Equity
	$	$	$	$	$	$	$
Balance, October 31, 2020	1,529	717,272	5,164,086	(1,000,454)	(7,198)	52,241	4,927,476
Cumulative effect adjustment upon adoption of ASC 326, net of tax			(595)				(595)
Net income	0	0	96,499	0	0	0	96,499

Purchase of treasury stock	0	0	0	(179,395)	0	0	(179,395)
Exercise of stock options and stock based compensation issuances	0	(21,445)	0	16,676	0	0	(4,769)
Employee stock purchase plan issuances	0	7	0	362	0	0	369

Stock-based compensation	0	12,834	0	0	0	0	12,834

Dividends declared	0	0	(14,055)	0	0	0	(14,055)
Other comprehensive income	0	0	0	0	712	0	712
Loss attributable to non-controlling interest	0	0	0	0	0	(21)	(21)
Capital distributions, net	0	0	0	0	0	(4,563)	(4,563)
Balance, January 31, 2021	1,529	708,668	5,245,935	(1,162,811)	(6,486)	47,657	4,834,492


Balance, October 31, 2019	1,529	726,879	4,774,422	(425,183)	(5,831)	46,877	5,118,693

Net income	0	0	56,876	0	0	0	56,876

Purchase of treasury stock	0	0	0	(476,024)	0	0	(476,024)
Exercise of stock options and stock based compensation issuances	0	(17,112)	0	21,042	0	0	3,930
Employee stock purchase plan issuances	0	(41)	0	345	0	0	304

Stock-based compensation	0	13,383	0	0	0	0	13,383

Dividends declared	0	0	(15,012)	0	0	0	(15,012)
Other comprehensive income	0	0	0	0	278	0	278
Loss attributable to non-controlling interest	0	0	0	0	0	(1)	(1)
Capital contributions	0	0	0	0	0	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, 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

Balance, October 31, 2018 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 )
Net income

112,050

112,050
Purchase of treasury stock

(25,143 )

(25,143 )
Exercise of stock options and stock based compensation issuances

(18,194 )

16,044

(2,150 )
Employee stock purchase plan issuances

(39 )

354

315
Stock-based compensation

8,585

8,585
Dividends declared

(16,363 )

(16,363 )
Other comprehensive income

56

56
Capital contributions

32,914
32,914
Balance, January 31, 2019 1,779

717,405

5,239,251

(1,139,623 )
750

41,627

4,861,189

See accompanying notes.

TOLL BROTHERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)


	Three months ended January 31,
	2021		2020
Cash flow provided by (used in) operating activities:
Net income	$	96,499	$	56,876
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	16,876		14,667
Stock-based compensation	12,834		13,383
Income from unconsolidated entities	(1,194)		(12,141)
Distributions of earnings from unconsolidated entities	1,080		14,703


Deferred tax provision	1,277		751

Inventory impairments and write-offs	1,267		1,031
Gain on sale of assets	(38,279)		0
Other	3,617		1,091


Changes in operating assets and liabilities:
Inventory	(274,327)		(303,384)
Origination of mortgage loans	(376,036)		(316,852)
Sale of mortgage loans	478,982		422,376
Receivables, prepaid expenses, and other assets	34,733		(172,153)
Income taxes receivable	(3,520)		(36,131)
Customer deposits – net	60,580		34,058
Accounts payable and accrued expenses	40,835		(84,691)
Income taxes payable	99		0
Net cash provided by (used in) operating activities	55,323		(366,416)
Cash flow used in investing activities:
Purchase of property, construction, and office equipment – net	(14,496)		(26,839)


Investments in unconsolidated entities	(112,828)		(4,909)
Return of investments in unconsolidated entities	37,853		28,983
Proceeds from the sale of assets	79,356		0



Other	334		649
Net cash used in investing activities	(9,781)		(2,116)
Cash flow used in financing activities:


Proceeds from loans payable	597,973		702,729

Principal payments of loans payable	(847,415)		(608,481)
Redemption of senior notes	(10,020)		0

(Payments) proceeds from stock-based benefit plans, net	(4,397)		4,235
Purchase of treasury stock	(179,395)		(476,024)
Dividends paid	(14,285)		(14,956)
(Payments) receipts related to noncontrolling interest, net	(4,728)		44
Net cash used in financing activities	(462,267)		(392,453)
Net decrease in cash, cash equivalents, and restricted cash	(416,725)		(760,985)
Cash, cash equivalents, and restricted cash, beginning of period	1,396,604		1,319,643
Cash, cash equivalents, and restricted cash, end of period	$	979,879	$	558,658

Three months ended January 31,
2020 2019
Cash flow used in operating activities:
Net income $ 56,876
$ 112,050
Adjustments to reconcile net income to net cash used in operating activities:

Depreciation and amortization 14,667
15,669
Stock-based compensation 13,383
8,585
Income from unconsolidated entities (12,141 ) (6,140 )
Distributions of earnings from unconsolidated entities 14,703
6,427
Income from foreclosed real estate and distressed loans (285 ) (170 )
Deferred tax provision 751
1,621
Inventory impairments and write-offs 1,031
7,562
Gain on the sale of golf club property

(12,186 )
Other 1,376
703
Changes in operating assets and liabilities
Increase in inventory (303,384 ) (158,258 )
Origination of mortgage loans (316,852 ) (306,351 )
Sale of mortgage loans 422,376
389,974
Increase in receivables, prepaid expenses, and other assets (172,153 ) (47,823 )
Increase in income taxes receivable (36,131 ) (14,363 )
Increase in customer deposits – net 34,058
13,030
Decrease in accounts payable and accrued expenses (84,691 ) (166,751 )
Decrease in income taxes payable

(28,804 )
Net cash used in operating activities (366,416 ) (185,225 )
Cash flow (used in) provided by investing activities:
Purchase of property, construction, and office equipment – net (26,839 ) (19,576 )
Investments in unconsolidated entities (4,909 ) (17,205 )
Return of investments in unconsolidated entities 28,983
42,677
Investment in foreclosed real estate and distressed loans (234 ) (130 )
Return of investments in foreclosed real estate and distressed loans 883
482
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 702,729
809,506
Debt issuance costs

(2,058 )
Principal payments of loans payable (608,481 ) (633,593 )
Redemption of senior notes

(350,000 )
Proceeds (payments) from stock-based benefit plans, net 4,235
(1,831 )
Purchase of treasury stock (476,024 ) (25,143 )
Dividends paid (14,956 ) (16,369 )
Receipts related to noncontrolling interest, net 44

Net cash used in financing activities (392,453 ) (219,488 )
Net decrease in cash, cash equivalents, and restricted cash (760,985 ) (380,245 )
Cash, cash equivalents, and restricted cash, beginning of period 1,319,643
1,182,939
Cash, cash equivalents, and restricted cash, end of period $ 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, ~~2019~~2020 balance sheet amounts and disclosures included herein have been derived from our October 31, ~~2019~~2020 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, ~~2019~~2020 (“~~2019~~2020 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 January 31, ~~2020;~~2021; the results of our operations and changes in equity for the three-month periods ended January 31, ~~2020~~2021 and ~~2019;~~2020; and our cash flows for the three-month periods ended January 31, ~~2020~~2021 and ~~2019.~~2020. The results of operations for such interim periods are not necessarily indicative of the results to be expected for the full year.

Use of Estimates

The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. In times of economic disruption when uncertainty regarding future economic conditions is heightened, these estimates and assumptions are subject to greater variability. The Company is currently subject to risks and uncertainties resulting from the COVID-19 pandemic, which continues to impact our results of operations as well as our business operations. As a result, actual results could differ from the estimates and assumptions we make that affect the amounts reported in the condensed consolidated financial statements and accompanying notes, and such differences may be material.

Reclassifications

As discussed in our 2020 Form 10-K, effective October 31, 2020, we reclassified sales commissions paid to third-party brokers from home sales cost of revenues to selling, general and administrative expense in our Consolidated Statements of Operations and Comprehensive Income. The reclassification aligns the treatment of sales commissions paid to third-party brokers with the treatment of sales commissions paid to in-house salespersons, and is consistent with the manner in which the majority of the Company’s peers treat such commissions. The reclassification had the effect of lowering home sales cost of revenues (and increasing home sales gross margin) and increasing selling, general and administrative expense by the amount of third-party broker commissions, which totaled $26.8 million, or 2.1% of home sales revenues for the three months ended January 31, 2020. All prior period amounts have been reclassified to conform to the 2021 presentation.

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 where 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 revenues related to these obligations and subsequently recognize the revenue upon completion of such obligations. As of January 31, ~~2020,~~2021, the home sales revenues and related costs we deferred related to these obligations were immaterial. Our contract liabilities, consisting of deposits received from customers for sold but undelivered homes, totaled ~~$417.1~~$523.6 million and ~~$385.6~~$459.4 million at January 31, ~~2020~~2021 and October 31, ~~2019,~~2020, respectively. Of the outstanding customer deposits held as of October 31, ~~2019,~~2020, we recognized ~~$85.8~~$94.0 million in home sales revenues during the three months ended January 31, ~~2020.~~2021.

Land sales and other revenues: Our revenues from land sales and other generally consist 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 sales to third

parties of land we have decided no longer meets our development ~~criteria.~~criteria and (4) sales of commercial and retail properties generally located at our City Living buildings. 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. 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: 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 offer our home buyers sales incentives. These incentives vary by type and 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~~Derivative Instruments and Hedging Activities

~~In February 2016, the FASB issued ASU No. 2016-02, “Leases” (“ASU 2016-02”), which requires an entity~~Our objective in entering into derivative transactions is to manage our exposure to interest rate movements associated with certain variable rate debt. We recognize derivatives as either assets ~~and~~or liabilities on the balance sheet ~~for~~and measures those instruments at fair value.

Since all of our derivatives are designated as cash flow hedges, the ~~rights and obligations created by leased assets and provide additional disclosures. In July 2018,~~entire change in 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~~fair value 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~~derivative included in the associated lease component if certain conditions are met. ASU 2016-02, as amended by ASU 2018-11, became effective for our fiscal year beginning November 1, 2019, and we 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 or contain leases, (2) lease classification,~~hedge effectiveness is initially reported in accumulated other comprehensive loss and ~~(3) initial direct costs. In addition, we elected~~subsequently reclassified to home sales cost of revenues in the 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 had no impact on retained earnings and did not materially impact ouraccompanying Condensed Consolidated Statements of Operations and Comprehensive Income when the hedged transaction affects earnings. If it is determined that a derivative is not highly effective as a hedge, or ~~Condensed Consolidated Statements~~if the hedged forecasted transaction is no longer probable of ~~Cash Flows.~~occurring, the amount recognized in Accumulated other comprehensive loss is released to earnings. See Note 12 “Fair Value Disclosures” for more information.

Recent Accounting Pronouncements

In June 2016, the FASB ~~issued~~created ASC 326 with the issuance of 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 ~~will be~~became effective for our fiscal year beginning November 1, 2020, ~~with early~~and we adopted the new standard under the modified retrospective transition method. As a result of the adoption, ~~permitted as~~we recognized a cumulative effect adjustment, net of ~~November 1, 2019. We are currently evaluating~~tax, of $0.6 million to the ~~impact that the~~opening balance of retained earnings. The adoption of ASU 2016-13 ~~may~~did not have a material impact on our ~~consolidated financial statements~~Condensed Consolidated Balance Sheet or Condensed Consolidated Statement of Operations or Comprehensive Income, and ~~disclosures.~~there have been no significant changes to our internal controls, processes, or systems as a result of implementing this new standard.

2. Acquisitions

~~During~~In fiscal 2019, we acquired substantially all of the assets and operations of Sharp Residential, LLC (“Sharp”) and Sabal Homes LLC (“Sabal”), respectively, for an aggregate of approximately $162.4 million in cash. Sharp operates in metropolitan Atlanta, Georgia; Sabal operates in the Charleston, Greenville, and Myrtle Beach, South Carolina markets. The assets acquired, based on our preliminary purchase price allocations, were primarily inventory, including approximately 2,550 home sites owned or controlled through land purchase agreements. In connection with these acquisitions, we assumed contracts to deliver 204 homes with an aggregate value of $96.1 million. The average price of undelivered homes at the dates of acquisitions was approximately $471,100. As a result of 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 The Thrive ~~Residential~~Group, LLC (“Thrive”), an urban ~~in-fill~~infill builder with operations in Atlanta, Georgia and Nashville, Tennessee, and Keller Homes, Inc. (“Keller”), a builder with operations in Colorado Springs, Colorado. The aggregate purchase price for these acquisitions was approximately ~~$53.3~~$79.2 million in cash. The assets acquired were primarily inventory, ~~for future communities,~~ including approximately ~~680~~1,100 home sites owned or controlled through land purchase agreements. ~~The acquisition is expected to add 10 communities by the end~~One of ~~fiscal 2020.~~

~~The~~these acquisitions ~~discussed above were~~was accounted for as a business combination and neither were ~~not~~ material to our results of operations or financial condition.

3. Inventory

Inventory at January 31, ~~2020~~2021 and October 31, ~~2019~~2020 consisted of the following (amounts in thousands):

January 31,
2020 October 31,
2019
Land controlled for future communities $ 246,305
$ 182,929
Land owned for future communities 912,323
868,202
Operating communities 7,039,724
6,821,917
$ 8,198,352
$ 7,873,048


	January 31, 2021		October 31, 2020
Land controlled for future communities	$	207,383	$	223,525
Land owned for future communities	996,420		1,036,843
Operating communities	6,719,832		6,398,538
	$	7,923,635	$	7,658,906

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~~are included in 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:

January 31,
2020 October 31,
2019
Land owned for future communities:
Number of communities 15
16
Carrying value (in thousands) $ 114,216
$ 120,857
Operating communities:
Number of communities 2
1
Carrying value (in thousands) $ 6,252
$ 2,871


	January 31, 2021		October 31, 2020
Land owned for future communities:
Number of communities	8		10
Carrying value (in thousands)	$	41,231	$	68,064
Operating communities:
Number of communities	4		4
Carrying value (in thousands)	$	54,040	$	32,112

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

Three months ended January 31,
2020 2019
Land controlled for future communities $ 1,031
$ 1,777
Operating communities —
5,785
$ 1,031
$ 7,562


	Three months ended January 31,
	2021		2020
Land controlled for future communities	$	167	$	1,031

Operating communities	1,100		0
	$	1,267	$	1,031

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 January 31, ~~2020,~~2021, 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 January 31, ~~2020,~~2021, we determined that ~~129~~218 land purchase contracts, with an aggregate purchase price of ~~$2.39~~$2.31 billion, on which we had made aggregate deposits totaling ~~$181.1~~$193.0 million, were VIEs, and that we were not the primary beneficiary of any VIE related to our land purchase contracts. At October 31, ~~2019,~~2020, we determined that ~~127~~207 land purchase contracts, with an aggregate purchase price of ~~$2.00~~$2.31 billion, on which we had made aggregate deposits totaling ~~$149.2~~$208.7 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):


	Three months ended January 31,
	2021		2020
Interest capitalized, beginning of period	$	297,975	$	311,323
Interest incurred	41,268		43,650
Interest expensed to home sales cost of revenues	(33,325)		(32,774)
Interest expensed to land sales and other cost of revenues	(1,838)		(567)


Interest capitalized on investments in unconsolidated entities	(1,134)		(881)

Previously capitalized interest on investments in unconsolidated entities transferred to inventory	15		0
Interest capitalized, end of period	$	302,961	$	320,751

Three months ended January 31,
2020 2019
Interest capitalized, beginning of period $ 311,323
$ 319,364
Interest incurred 43,650
44,422
Interest expensed to home sales cost of revenues (32,774 ) (34,441 )
Interest expensed to land sales cost of revenues (567 ) (352 )
Interest capitalized on investments in unconsolidated entities (881 ) (1,814 )
Previously capitalized interest on investments in unconsolidated entities transferred to inventory

2,988
Interest capitalized, end of period $ 320,751
$ 330,167

During the three months ended January 31, 2021, we incurred $154,000 of interest related to our interest rate swaps which is included in accumulated other comprehensive loss, of which approximately $10,000 was expensed to home sales cost of revenues. NaN similar amounts were incurred during the three months ended January 31, 2020.

4. Investments in Unconsolidated Entities

We have investments in various unconsolidated ~~entities.~~entities and our ownership interest in these investments ranges from 15.8% to 50%. 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 January 31, ~~2020,~~2021, 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
Number of unconsolidated entities 8 4 21 7 40
Investment in unconsolidated entities $ 101,946
$ 48,860
$ 191,443
$ 22,103
$ 364,352
Number of unconsolidated entities with funding commitments by the Company 2 1 1 1
5
Company’s remaining funding commitment to unconsolidated entities $ 28,108
$ 1,400
$ 224
$ 6,830
$ 36,562


	Land Development Joint Ventures		Home Building Joint Ventures		Rental Property Joint Ventures		Gibraltar Joint Ventures		Total
Number of unconsolidated entities	12		4		28		7		51
Investment in unconsolidated entities	$	264,274	$	26,191	$	263,280	$	17,887	$	571,632
Number of unconsolidated entities with funding commitments by the Company	3		0		8		1		12
Company’s remaining funding commitment to unconsolidated entities	$	33,518	$	0	$	30,491	$	25,649	$	89,658

Certain joint ventures in which we have investments obtained debt financing to finance a portion of their activities. The table below provides information at January 31, ~~2020,~~2021, regarding the debt financing obtained by category ($ amounts in thousands):

Land
Development
Joint Ventures Home Building
Joint Ventures Rental Property
Joint Ventures Total
Number of joint ventures with debt financing 3 1 19 23
Aggregate loan commitments $ 100,842
$ 73,021
$ 1,441,784
$ 1,615,647
Amounts borrowed under loan commitments $ 86,092
$ 73,021
$ 1,009,618
$ 1,168,731


	Land Development Joint Ventures		Home Building Joint Ventures		Rental Property Joint Ventures		Total
Number of joint ventures with debt financing	4		1		25		30
Aggregate loan commitments	$	158,805	$	29,786	$	2,010,544	$	2,199,135
Amounts borrowed under loan commitments	$	107,551	$	29,786	$	1,312,325	$	1,449,662

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

~~Land Development~~New Joint Ventures

During the three months ended January 31, 2020, our Land Development Joint Ventures sold approximately 164 lots and recognized revenues of $24.7 million. We acquired 42 of these lots for $3.5 million. Our share of the joint venture income from the lots we acquired was insignificant. During the three months ended January 31, 2019, our Land Development Joint Ventures sold approximately 201 lots and recognized revenues of $89.8 million. We acquired 107 of these lots for $71.2 million. Our share of the joint venture income from the lots we acquired was insignificant.

~~Home Building Joint Ventures~~

Our Home Building Joint Ventures delivered homes in New York, New York, and Jupiter, Florida. During the three months ended January 31, 2020 and 2019, our Home Building Joint Ventures delivered 23 homes with a sales value of $67.1 million and 17 homes with a sales value of $27.3 million, respectively.

In November 2019, one of our Home Building Joint Ventures refinanced its existing $236.5 million construction loan with a $76.6 million post-construction loan that extended the maturity date of 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 of borrowings outstanding under the post-construction loan.

~~Rental Property Joint Ventures~~

As of January 31, 2020, our Rental Property Joint Ventures, including those that we consolidate, owned 26 for-rent apartment projects and a hotel, which are located in multiple metropolitan areas throughout the country. At January 31, 2020, theseThe table below provides information on joint ventures ~~had approximately 2,000 units that were occupied or ready for occupancy, 1,250 units~~entered into during our first quarter of fiscal 2021 ($ amounts in the lease-up stage, and 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 13,400 units, including 200 units under active development; we intend to develop these units inthousands):


	Land Development Joint Ventures		Rental Property Joint Ventures
Number of unconsolidated joint ventures entered into during the period	3		2
Investment balance at January 31, 2021	$	139,033	$	14,932

The table below provides information on joint ventures ~~with unrelated parties in the future.~~

~~In the~~entered into during our first quarter of fiscal 2020 ~~we sold all~~($ amounts in thousands):


	Land Development Joint Ventures		Rental Property Joint Ventures
Number of unconsolidated joint ventures entered into during the period	0		2
Investment balance at January 31, 2020	$	0	$	24,900

Results of Operations and Intra-entity Transactions

In our first quarters of fiscal 2021 and 2020, certain of our ~~ownership interest in one of our Rental Property Joint Ventures~~land development and rental property joint ventures sold their underlying assets to unrelated parties or 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.~~partner. In connection with ~~the sale, the joint venture’s existing $76.0~~these sales, we recognized gains of $5.9 million ~~loan was assumed by our partner. We recognized a gain of~~and $10.7 million, respectively, which is included in “Income from unconsolidated entities” in our Condensed Consolidated Statements of Operations and Comprehensive Income.

In ~~the~~our first quarter of fiscal 2020, we entered into 2 separate joint ventures with unrelated parties to develop (i) a luxury for-rent residential apartment project located in Dallas, Texas and (ii) a student housing community in State College, Pennsylvania. Prior to the formation of these joint ventures, we 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 these joint ventures. Concurrent with their formation, these joint ventures entered into construction loan agreements for an aggregate amount of $121.5 million to 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 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 and2021, we recognized ~~a gain~~other-than-temporary impairment charges on ~~land sale~~certain Home Building Joint Ventures of ~~$8.4 million~~$2.1 million. NaN similar charges were incurred in our first quarter of fiscal ~~2019. At January 31,~~2020.

In our first quarters of fiscal 2021 and 2020, purchases from unconsolidated entities, principally related to our acquisition of lots from our Land Development Joint Ventures, were $4.3 million and $3.5 million, respectively. Our share of income from the lots we ~~had an aggregate investment of $15.6~~acquired was insignificant in each period. Sales to unconsolidated entities, which principally involved land sales to our Rental Property Joint Ventures, were $57.3 million and $26.4 million in ~~these joint ventures. Concurrent with their formation, these joint ventures entered into construction loan agreements for an aggregate amount~~our first quarters of ~~$134.4 million. At January 31,~~fiscal 2021 and 2020, ~~the joint ventures had $38.9 million outstanding borrowings under these construction loan facilities.~~

~~In fiscals 2019 and 2018, we entered into 5 separate joint ventures with unrelated parties to develop luxury for-rent residential apartment projects and student housing communities located~~respectively. These amounts are included in Boston, Massachusetts, San Diego, California, Tempe, Arizona and Miami, Florida. We contributed an aggregate of $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 January 31, 2020 and October 31, 2019. The carrying value of these joint ventures’ assets totaling $157.9 million and $145.8 million are reflected in “Receivables, prepaid expenses,“Land sales and other ~~assets” in~~revenue” on our Condensed Consolidated ~~Balance Sheet as~~Statement of ~~January 31, 2020~~Operations and ~~October 31, 2019, respectively. Our partners’ interests aggregating $43.5 million and $41.0 million~~Comprehensive Income. Gains related to these sales were immaterial in the joint ventures are reflected as a component of “Noncontrolling interest” in our Condensed Consolidated Balance Sheet as of 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 fiscal 2019, we entered into a joint venture with unrelated parties to develop, build, and operate single-family rental communities. As of January 31, 2020, we have invested $1.1 million in this joint venture and have committed to invest up to $60.0 million.

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 January 31, 2020, our investment in the Trust was 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 $0.3 million in each of the three-month periods ended January 31, 2020 and 2019.

~~Gibraltar Joint Ventures~~

We, through our wholly owned subsidiary, Gibraltar Capital and Asset Management, LLC (“Gibraltar”), have entered into 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 January 31, 2020, we had an aggregate investment of $21.4 million in these ventures.both periods.

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~~we and our joint venture partner have provided joint and several guarantees ~~provided~~ in connection with loans to an unconsolidated ~~entity are joint and several.~~entities. In these situations, we generally ~~have~~seek to implement 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, we are not always successful. In addition, if athe joint venture partner does not have adequate financial resources to meet its obligations under ~~the~~such a reimbursement agreement, we may be liable for more than our proportionate share.

We believe that, as of January 31, ~~2020,~~2021, 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 January 31, 2020,~~

Information with respect to certain of the Company’s unconsolidated ~~entities have~~entities’ outstanding debt obligations, loan commitments ~~aggregating $1.27 billion, of which, if the full amount of the debt obligations were borrowed, we estimate $183.1 million to be~~and our guarantees thereon are as follows ($ amounts in thousands):


	January 31, 2021
Loan commitments in the aggregate	$	1,858,000
Our maximum estimated exposure under repayment and carry cost guarantees if the full amount of the debt obligations were borrowed	$	327,500
Debt obligations borrowed in the aggregate	$	1,108,500
Our maximum estimated exposure under repayment and carry cost guarantees of the debt obligations borrowed	$	236,700
Estimated fair value of guarantees provided by us related to debt and other obligations	$	8,800
Terms of guarantees	1 month - 3.8 years

The maximum exposure related to repayment and carry cost guarantees. At January 31, 2020, the unconsolidated entities had borrowed an aggregate of $825.3 million, of which we estimate $114.1 million to be our maximum exposure related to repayment and carry cost guarantees. The terms of these guarantees generally range from 7 months to 3.9 years. These maximum exposure estimates presented above do not take into account any recoveries from the underlying collateral or any reimbursement from our partners.

~~As of 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 $5.5 million.~~ We have not made payments under any of the outstanding guarantees, nor have we been called upon to do so.

Variable Interest Entities

~~At January 31, 2020 and October 31, 2019, we determined that 16 and 18 of our joint ventures, respectively, were VIEs under the guidance of ASC 810, “Consolidation.” For 11 and 13 of these VIEs~~

The table below provide information as of January 31, ~~2020~~2021 and October 31, ~~2019, respectively, we concluded that we were not the primary beneficiary of these~~2020, regarding our unconsolidated joint venture-related variable interests in 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($ amounts in ~~unconsolidated entities deemed to be VIEs is also included~~thousands):


	January 31, 2021		October 31, 2020
Number of Joint Venture VIEs that the Company is not the Primary Beneficiary (“PB”)	12		12
Investment balance in unconsolidated Joint Venture VIEs included in Investments in unconsolidated entities in our Consolidated Balance Sheets	$	55,300	$	63,100
Our maximum exposure to losses related to loan guarantees and additional commitments provided to unconsolidated Joint Venture VIEs	$	282,700	$	122,100

Our ownership interest in the ~~information provided above.~~above unconsolidated Joint Venture VIEs ranges from 20% to 50%.

~~As of January 31, 2020, we have consolidated 5 Rental Property Joint Ventures.~~ The ~~carrying value of these joint ventures’ assets totaling $157.9 million is reflected in “Receivables, prepaid expenses, and other assets” in our Condensed Consolidated Balance Sheet~~table below provide information as of January 31, ~~2020.~~ 2021 and October 31, 2020, regarding our consolidated joint venture-related variable interests in VIEs ($ amounts in thousands):


	Balance Sheet Classification	January 31, 2021		October 31, 2020
Number of Joint Venture VIEs that the Company is the PB and consolidates		5		5
Carrying value of consolidated VIEs assets	Receivables prepaid expenses, and other assets	$	113,300	$	163,000
Our partners’ interests in consolidated VIEs	Noncontrolling interest	$	41,700	$	46,200

Our ~~partners’ interests aggregating $43.5 million~~ownership interest in the ~~joint ventures are reflected as a component of “Noncontrolling interest” in our Condensed Consolidated Balance Sheet as of January 31, 2020. These joint ventures were determined~~above consolidated Joint Venture VIEs ranges from 50% 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 further98%.

As shown above, we have concluded ~~that~~ we are the ~~primary beneficiary~~PB of ~~these~~certain 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 January 31, 2020~~ For other VIEs, we have concluded that we are not the PB because the power to direct the activities of such VIEs that most significantly impact their performance was either shared by us and ~~October 31, 2019,~~such VIEs’ other partners or such activities were controlled by our ~~investments in~~partner. For VIEs where the ~~unconsolidated entities deemed~~power to direct significant activities is shared, business plans, budgets, and other major decisions are required to be ~~VIEs totaled $43.7 million~~unanimously approved by all members. Management and ~~$37.0 million, respectively. At January 31, 2020~~other fees earned by us are nominal and ~~October 31, 2019, the maximum exposure of loss~~believed to ~~our investments in these entities was limited to our investments in the unconsolidated VIEs, except with regard to $42.0 million~~be at market rates, and ~~$76.0 million, respectively, of loan guarantees~~there is no significant economic disproportionality between us and $6.8 million and $8.3 million, respectively, of additional commitments to the VIEs. Of our potential exposure for these loan guarantees 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 $76.0 million was borrowed at October 31, 2019. There were 0 borrowings under these loan repayment and carry cost guarantees at January 31, 2020.other members.

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:


	January 31, 2021		October 31, 2020
Cash and cash equivalents	$	98,195	$	109,478
Inventory	736,821		511,000
Loans receivable, net	66,974		78,576

Rental properties	1,428,734		1,244,911
Rental properties under development	700,218		666,386
Real estate owned	6,818		6,752
Other assets	170,708		169,368
Total assets	$	3,208,468	$	2,786,471
Debt, net of deferred financing costs	$	1,443,949	$	1,368,065
Other liabilities	211,245		186,817
Members’ equity	1,544,803		1,231,173
Noncontrolling interest	8,471		416
Total liabilities and equity	$	3,208,468	$	2,786,471
Company’s net investment in unconsolidated entities (1)	$	571,632	$	430,701

January 31,
2020 October 31,
2019
Cash and cash equivalents $ 68,237
$ 85,819
Inventory 516,740
579,226
Loans receivable, net 65,375
56,545
Rental properties 923,356
1,021,848
Rental properties under development 675,921
535,197
Real estate owned 12,274
12,267
Other assets 160,840
212,761
Total assets $ 2,422,743
$ 2,503,663
Debt, net of deferred financing costs $ 1,166,882
$ 1,226,857
Other liabilities 177,092
175,827
Members’ equity 1,078,769
1,100,563
Noncontrolling interest —
416
Total liabilities and equity $ 2,422,743
$ 2,503,663
Company’s net investment in unconsolidated entities (1) $ 364,352
$ 366,252
(1) Differences between our net investment in unconsolidated entities and our underlying equity in the net assets of the entities amounted to $34.3 million and $29.4 million as of January 31, 2021 and October 31, 2020, respectively, and are primarily a result of the deferred recognition of a sale of assets to a joint venture; other than temporary 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.

~~(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:


	Three months ended January 31,
	2021		2020
Revenues	$	92,530	$	133,170
Cost of revenues (3)	96,723		95,308
Other expenses (3)	35,390		41,183
Total expenses	132,113		136,491

Loss from operations	(39,583)		(3,321)
Other income	948		612
Loss before income taxes	(38,635)		(2,709)
Income tax (benefit) provision	(1,506)		140
Net loss including earnings from noncontrolling interests	(37,129)		(2,849)
Less: loss attributable to noncontrolling interest	(174)		0
Net loss attributable to controlling interest	$	(37,303)	$	(2,849)


Company’s equity in earnings of unconsolidated entities (2)	$	1,194	$	12,141

(2) Differences between our equity in earnings of unconsolidated entities and the underlying net income (loss) of the entities are primarily a result of distributions from entities in excess of the carrying amount of our investment; other than temporary impairments related to our investments in unconsolidated entities; 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.

(3) Effective October 31, 2020, we reclassified sales commissions paid to third-party brokers from home sales cost of revenues to selling, general and administrative expense. Prior year periods have been reclassified to conform to the 2021 presentation.

Three months ended January 31,
2020 2019
Revenues $ 133,170
$ 153,230
Cost of revenues 95,308
131,755
Other expenses 41,183
18,475
Total expenses 136,491
150,230
Gain on disposition of loans and real estate owned —
3,694
(Loss) income from operations (3,321 ) 6,694
Other income 612
647
(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 —
(2,109 )
Net (loss) income attributable to controlling interest $ (2,849 ) $ 4,967
Company’s equity in earnings of unconsolidated entities (1) $ 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 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 January 31, ~~2020~~2021 and October 31, ~~2019,~~2020, consisted of the following (amounts in thousands):


	January 31, 2020		October 31, 2019			January 31, 2021		October 31, 2020
Expected recoveries from insurance carriers and others	$	109,048	$	114,162	Expected recoveries from insurance carriers and others	$	77,180	$	79,269
Improvement cost receivable	104,416		100,864		Improvement cost receivable	85,539		86,116
Escrow cash held by our captive title company	38,107		32,863		Escrow cash held by our captive title company	28,540		24,712
Properties held for rental apartment and commercial development	504,924		367,072		Properties held for rental apartment and commercial development	504,580		542,796
Prepaid expenses	24,652		26,041		Prepaid expenses	29,472		28,104
Right-of-use asset (1)	108,769		—
Right-of-use asset					Right-of-use asset	101,495		105,004
Other	88,250		74,439		Other	80,969		90,293
	$	978,166	$	715,441		$	907,775	$	956,294

~~(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~~2021 and October 31, ~~2019,~~2020, properties held for rental apartment and commercial development include ~~$157.9~~$113.3 million and ~~$145.8~~$163.0 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 January 31, ~~2020~~2021 and October 31, ~~2019,~~2020, loans payable consisted of the following (amounts in thousands):

January 31,
2020 October 31,
2019
Senior unsecured term loan $ 800,000
$ 800,000
Revolving credit facility borrowings 150,000
—
Loans payable – other 330,147
314,577
Deferred issuance costs (2,964 ) (3,128 )
$ 1,277,183
$ 1,111,449


	January 31, 2021		October 31, 2020
Senior unsecured term loan	$	650,000	$	800,000

Loans payable – other	324,140		351,257
Deferred issuance costs	(2,636)		(3,302)
	$	971,504	$	1,147,955

Senior Unsecured Term Loan

~~At January 31, 2020, we had an $800.0 million, five-year~~We have a five-year senior unsecured term loan facility (the “Term Loan Facility”) with a syndicate of banks that is scheduled to expire on November 1, ~~2024.~~2025. Prior to January 28, 2021, the principal amount outstanding under the Term Loan Facility was $800.0 million. On January 28, 2021, we voluntarily repaid $150.0 million of the Term Loan Facility, and the remaining $650.0 million principal amount outstanding will become due and payable at maturity on November 1, 2025. No prepayment charges were incurred in connection with the repayment. At January 31, ~~2020,~~2021, the interest rate on borrowings was ~~2.70%~~1.18% 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.

In November 2020, we entered into 5 interest rate swap transactions to hedge $400.0 million of the Term Loan Facility through October 2025. The interest rate swaps effectively fix the interest cost on the $400.0 million at 0.369% plus the spread set forth in the pricing schedule in the Term Loan Facility, which was 1.05% as of January 31, 2021. These interest rate swaps were designated as cash flow hedges.

Revolving Credit Facility

We have a $1.905 billion, ~~five-year~~five-year senior unsecured revolving credit facility (the “Revolving Credit Facility”) with a syndicate of banks. ~~The~~On October 31, 2020, we entered into extension letter agreements which extended the maturity date of $1.85 billion of the revolving loans and commitments under the Revolving Credit Facility ~~is scheduled~~from November 1, 2024 to ~~mature~~November 1, 2025, with the remainder of the revolving loans and commitments continuing to terminate 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 Revolving Credit Facility, at January 31, ~~2020,~~2021, 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 ~~$2.24~~$2.10 billion. Under the terms of the Revolving Credit Facility, at January 31, ~~2020,~~2021, our leverage ratio was approximately ~~0.72~~0.57 to

1.00, and our tangible net worth was approximately ~~$4.61~~$4.72 billion. Based upon the limitations related to our repurchase of common stock in the Revolving Credit Facility, our ability to repurchase our common stock was limited to approximately ~~$3.14~~$3.66 billion as of January 31, ~~2020.~~2021. In addition, under the provisions of the Revolving Credit Facility, our ability to pay cash dividends was limited to approximately ~~$2.36~~$2.62 billion as of January 31, ~~2020.~~2021.

At January 31, ~~2020,~~2021, we had ~~$150.0 million~~0 outstanding borrowings under the Revolving Credit Facility and had approximately ~~$163.1~~$120.2 million of outstanding letters of credit that were issued under the Revolving Credit Facility. At January 31, ~~2020,~~2021, the interest rate on borrowings under the Revolving Credit Facility ~~was 2.77%~~would have been 1.32% per ~~annum. Subsequent to January 31, 2020, we borrowed an additional $200.0 million under the Revolving Credit Facility.~~annum.

Loans Payable – Other

“Loans payable – other” primarily 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 January 31, ~~2020,~~2021, the weighted-average interest rate on “Loans payable – other” was ~~4.51%~~4.35% per annum.

Senior Notes

At January 31, ~~2020,~~2021, we had 7 issues of senior notes outstanding with an aggregate principal amount of ~~$2.67~~$2.66 billion.

In our first quarter of fiscal 2021, we redeemed, prior to maturity, approximately $10.0 million of the $419.9 million then-outstanding principal amount of 5.875% Senior Notes due February 15, 2022, at par, plus accrued interest.

Subsequent event

In February 2021, we delivered notice to the holders of our outstanding 5.625% Senior Notes due 2024 that we intend to redeem, prior to maturity, all $250.0 million aggregate principal amount of such notes on March 15, 2021. In connection with this redemption, we expect to incur a pre-tax charge of approximately $34.0 million in our second quarter of fiscal 2021.

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 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~~expired on ~~December~~March 4, ~~2020~~,2021, and borrowings thereunder ~~bear~~bore interest at LIBOR plus 1.90% per annum. At January 31, ~~2020,~~2021, the interest rate on the Warehousing Agreement, as amended, was ~~3.56%~~2.02% per annum. In March 2021, the Warehousing Agreement was amended and restated to extend the expiration date to March 3, 2022 and borrowings thereunder will bear interest at LIBOR (with a LIBOR floor of 0.75%) plus 1.75% per annum.

7. Accrued Expenses

Accrued expenses at January 31, ~~2020~~2021 and October 31, ~~2019~~2020 consisted of the following (amounts in thousands):


	January 31, 2021		October 31, 2020
Land, land development, and construction	$	219,033	$	233,783
Compensation and employee benefits	183,795		219,965
Escrow liability	27,047		23,067
Self-insurance	222,809		215,884
Warranty	150,877		157,351
Lease liabilities	121,246		124,756
Deferred income	80,253		34,096
Interest	47,607		38,446
Commitments to unconsolidated entities	11,584		8,928
Other	44,878		53,920
	$	1,109,129	$	1,110,196

January 31,
2020 October 31,
2019
Land, land development, and construction $ 169,203
$ 192,658
Compensation and employee benefits 149,636
183,592
Escrow liability 36,891
31,587
Self-insurance 192,115
193,405
Warranty 188,916
201,886
Lease liabilities (1) 113,534
—
Deferred income 53,385
51,678
Interest 48,630
31,307
Commitments to unconsolidated entities 9,068
9,283
Other 50,170
55,536
$ 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):

Three months ended January 31,
2020 2019
Balance, beginning of period $ 201,886
$ 258,831
Additions – homes closed during the period 7,024
6,625
Increase (decrease) in accruals for homes closed in prior years 1,218
(691 )
Charges incurred (21,212 ) (27,439 )
Balance, end of period $ 188,916
$ 237,326


	Three months ended January 31,
	2021		2020
Balance, beginning of period	$	157,351	$	201,886
Additions – homes closed during the period	7,402		7,024

Increase in accruals for homes closed in prior years	1,194		1,218


Charges incurred	(15,070)		(21,212)
Balance, end of period	$	150,877	$	188,916

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 North region). During ~~the first quarter of~~ fiscal ~~2020,~~2021, 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.

AsFrom October 31, 2016 through the second quarter of ~~January 31,~~fiscal 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,~~million. Based on trends in claims experience over several years and lower than anticipated repair costs, in the second fiscal quarter of 2020, we reduced the estimate of the aggregate estimated repair costs to be incurred for known and unknown water intrusion claims by $24.4 million. Because this reduction was associated with periods in which ~~was also unchanged~~we expect our insurance deductibles and self-insured retentions to be exhausted, we reduced our aggregate expected recoveries from ~~October 31, 2016.~~insurance carriers and suppliers by a corresponding $24.4 million. Our recorded remaining estimated repair costs, which reflects a reduction for the aggregate amount expended to resolve claims, were approximately ~~$116.0~~$75.2 million at January 31, ~~2020~~2021 and ~~$124.6~~$79.5 million at October 31, ~~2019.~~2020. Our recorded remaining expected recoveries from insurance carriers and suppliers were approximately ~~$96.0~~$67.3 million at January 31, ~~2020~~2021 and ~~$97.9~~$68.4 million at October 31, ~~2019.~~ 2020.

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,~~arbitration, 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. With respect to our insurance receivables, disputes between ~~homebuilders~~home builders 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, 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 ~~$9.1~~$30.9 million and ~~$39.4~~$9.1 million for the three months ended January 31, ~~2020~~2021 and ~~2019,~~2020, respectively. The effective tax rate was 24.3% for the three months ended January 31, 2021, compared to 13.7% for the three months ended January 31, ~~2020, compared to 26.0%~~2020. The higher effective tax rate for the three months ended January 31, ~~2019. The lower effective tax rate for the fiscal 2020 period~~2021 was primarily due to a benefit recognized of $6.9 million in the fiscal 2020 period from the retroactive extension of the federal energy efficient home

credit, which was enacted into law on December 20, 2019. The income tax provisions for all periods included the provision for state income taxes, interest accrued on anticipated tax assessments, excess tax benefits related to stock-based compensation, and other permanent differences.

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 ~~2020~~2021 will be approximately ~~5.8%~~6.0%. Our state income tax rate for the full fiscal year ~~2019~~2020 was ~~6.1%~~5.6%.

At January 31, ~~2020,~~2021, we had ~~$8.1~~$6.7 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~~non-employee 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):

Three months ended January 31,
2020 2019
Total stock-based compensation expense recognized $ 13,383
$ 8,585
Income tax benefit recognized $ 3,407
$ 2,256


	Three months ended January 31,
	2021		2020
Total stock-based compensation expense recognized	$	12,834	$	13,383
Income tax benefit recognized	$	3,289	$	3,407

At January 31, ~~2020~~2021 and October 31, ~~2019,~~2020, the aggregate unamortized value of outstanding stock-based compensation awards was approximately ~~$28.2~~$26.0 million and ~~$18.7~~$15.9 million, respectively.

10. Stock Repurchase Program and Cash Dividends

Stock Repurchase Program

On ~~December 11, 2019,~~March 10, 2020, our Board of Directors terminated our existing 20 million share repurchase program, which was authorized in December ~~2018,~~2019, 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 other financial arrangements or transactions, in each case 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:

Three months ended January 31,
2020 2019
Number of shares purchased (in thousands) 11,686
785
Average price per share $ 40.73
$ 32.02
Remaining authorization at January 31 (in thousands) 8,314
19,787

~~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.~~


	Three months ended January 31,
	2021		2020
Number of shares purchased (in thousands)	4,027		11,686
Average price per share	$	44.54	$	40.73
Remaining authorization at January 31 (in thousands)	15,957		8,314

Cash Dividends

During ~~each of~~ the three months ended January 31, ~~2020~~2021 and ~~2019,~~2020, we declared and paid cash dividends of $0.11 per share 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):


	Three months ended January 31,					Three months ended January 31,
	2020		2019			2021		2020
Numerator:					Numerator:
Net income as reported	$	56,876	$	112,050	Net income as reported	$	96,499	$	56,876

Denominator:					Denominator:
Basic weighted-average shares	138,145		146,751		Basic weighted-average shares	126,060		138,145
Common stock equivalents (1)	1,744		1,281		Common stock equivalents (1)	1,502		1,744��
Diluted weighted-average shares	139,889		148,032		Diluted weighted-average shares	127,562		139,889

Other information:					Other information:

Weighted-average number of antidilutive options and restricted stock units (2)	675		2,623		Weighted-average number of antidilutive options and restricted stock units (2)	589		675
Shares issued under stock incentive and employee stock purchase plans	547		510		Shares issued under stock incentive and employee stock purchase plans	456		547


~~(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.~~

(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
Financial Instrument
Fair value
hierarchy
January 31,
2020 October 31, 2019
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 $ 852
$ 964
Forward Loan Commitments — IRLCs Level 2 $ (852 ) $ (964 )


		Fair value
Financial Instrument	Fair value hierarchy	January 31, 2021		October 31, 2020
Residential Mortgage Loans Held for Sale	Level 2	$	125,475	$	231,797
Forward Loan Commitments — Residential Mortgage Loans Held for Sale	Level 2	$	52	$	(31)
Interest Rate Lock Commitments (“IRLCs”)	Level 2	$	(358)	$	628
Forward Loan Commitments — IRLCs	Level 2	$	358	$	(628)
Interest Rate Swap Contracts	Level 2	$	652	$	0

At January 31, ~~2020~~2021 and October 31, ~~2019,~~2020, the carrying value of cash and cash equivalents and customer deposits held in escrow approximated fair value.

The fair values of the interest rate swap contracts are determined using widely accepted valuation techniques including discounted cash flow analysis based on the expected cash flows of each swap contract. Although the Company has determined that the significant inputs, such as interest yield curve and discount rate, used to value its interest rate swap contracts fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our counterparties and our own credit risk utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. However, as of January 31, 2021, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our interest rate swap contract positions and have determined that the credit valuation adjustments were not significant to the overall valuation of our interest rate swap contracts. As a result, we have determined that our interest rate swap contracts valuations in their entirety are classified in Level 2 of the fair value hierarchy.

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 January 31, 2020 $ 110,756
$ 111,995
$ 1,239
At October 31, 2019 $ 216,280
$ 218,777
$ 2,497


	Aggregate unpaid principal balance		Fair value		Excess
At January 31, 2021	$	122,879	$	125,475	$	2,596
At October 31, 2020	$	225,826	$	231,797	$	5,971

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 ~~2019~~2020 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 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%~~


Three months ended:	Selling price per unit ($ in thousands)	Sales pace per year (in units)	Discount rate
Fiscal 2021:
January 31	2,003	2	14.3%



Fiscal 2020:
January 31	—	—	—%
April 30	613 - 789	9	14.3%
July 31	—	—	—%
October 31	—	—	—%

In fiscal 2020, we recognized $31.7 million of impairment charges on land owned for future communities relating to 9 communities. As of the period the impairment charges were recognized, the estimated fair value of these communities in the aggregate, net of impairment charges, was $21.8 million. For the majority of these communities, the estimated fair values were determined based upon the expected sales price per lot in a community sale to another builder. The range of sales price per lot utilized in determining fair values in fiscal 2020 was approximately $33,000 - $180,000 per lot.

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
Three months ended:	Number of communities tested	Number of communities	Fair value of communities, net of impairment charges		Impairment charges recognized
Fiscal 2021:
January 31	53	1	$	419	$	1,100


					$	1,100
Fiscal 2020:
January 31	65	0	$	0	$	0
April 30	80	1	$	2,754	300
July 31	66	0	$	0	0
October 31	53	1	$	1,113	375
					$	675

Impaired operating communities
Three months ended: Number of
communities tested Number of
communities Fair value of
communities,
net of
impairment charges Impairment charges recognized
Fiscal 2020:
January 31 65 — $ —
$ —
$ —
Fiscal 2019:
January 31 (1) 49 5 $ 37,282
$ 5,785
April 30 (2) 64 6 $ 36,159
17,495
July 31 69 3 $ 5,436
1,100
October 31 (3) 71 7 $ 18,910
6,695
$ 31,075


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


~~(2)~~	~~Includes impairments of $2.0 million (1 community), $15.0 million (4 communities), and $0.5 million (1 community) located in our City Living, North, and South segments, respectively.~~


~~(3)~~	~~Includes impairments of $5.1 million (4 communities), $0.6 million (2 communities) and $1.0 million (1 community) located in our 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):


		January 31, 2021				October 31, 2020
	Fair value hierarchy	Book value		Estimated fair value		Book value		Estimated fair value
Loans payable (1)	Level 2	$	974,139	$	979,592	$	1,151,257	$	1,157,315
Senior notes (2)	Level 1	2,659,856		2,914,484		2,669,876		2,888,822
Mortgage company loan facility (3)	Level 2	112,619		112,619		148,611		148,611
		$	3,746,614	$	4,006,695	$	3,969,744	$	4,194,748

January 31, 2020 October 31, 2019
Fair value
hierarchy Book value
Estimated
fair value
Book value
Estimated
fair value
Loans payable (1) Level 2 $ 1,280,147
$ 1,281,745
$ 1,114,577
$ 1,112,040
Senior notes (2) Level 1 2,669,876
2,849,347
2,669,876
2,823,043
Mortgage company loan facility (3) Level 2 97,653
97,653
150,000
150,000
$ 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.


~~(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.~~

(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):

Three months ended January 31,
2020 2019
Interest income $ 4,902
$ 5,872
Income from ancillary businesses 522
13,844
Management fee income from home building unconsolidated entities, net 1,346
1,608
Other (475 ) (463 )
Total other income – net $ 6,295
$ 20,861


	Three months ended January 31,
	2021		2020
Interest income	$	1,455	$	4,902
Income from ancillary businesses	6,859		522
Management fee income from Home Building Joint Ventures, net	117		1,346

Other	(1,330)		(475)
Total other income – net	$	7,101	$	6,295

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 three-month periods ended January 31, ~~2020~~2021 and ~~2019,~~2020, our apartment living operations earned fees from unconsolidated entities of ~~$3.8~~$4.8 million and ~~$2.7~~$3.8 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, apartment living 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):


	Three months ended January 31,
	2021		2020
Revenues	$	29,101	$	26,410
Expenses	$	22,242	$	25,888

Three months ended January 31,
2020 2019
Revenues $ 26,410
$ 32,283
Expenses $ 25,888
$ 30,625
Other income

$ 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. In addition, in the 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):

January 31, 2020 October 31, 2019
Aggregate purchase commitments:
Unrelated parties $ 2,716,710
$ 2,349,900
Unconsolidated entities that the Company has investments in 10,077
10,826
Total $ 2,726,787
$ 2,360,726

Deposits against aggregate purchase commitments $ 199,907
$ 168,778
Additional cash required to acquire land 2,526,880
2,191,948
Total $ 2,726,787
$ 2,360,726
Amount of additional cash required to acquire land included in accrued expenses $ 14,250
$ 14,620


	January 31, 2021		October 31, 2020
Aggregate purchase commitments:
Unrelated parties	$	2,744,059	$	2,630,128
Unconsolidated entities that the Company has investments in	8,787		10,097
Total	$	2,752,846	$	2,640,225

Deposits against aggregate purchase commitments	$	207,600	$	223,571

Additional cash required to acquire land	2,545,246		2,416,654
Total	$	2,752,846	$	2,640,225
Amount of additional cash required to acquire land included in accrued expenses	$	18,092	$	19,590

In addition, we expect to purchase approximately ~~2,500~~3,900 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 January 31, ~~2020,~~2021, we also had similar purchase commitments to acquire land for apartment developments of approximately ~~$247.1~~$121.5 million, of which we had outstanding deposits in the amount of ~~$11.1~~$6.5 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 January 31, ~~2020,~~2021, 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 January 31, ~~2020,~~2021, we had outstanding surety bonds amounting to ~~$834.9~~$800.4 million, primarily related to our obligations to governmental entities to construct improvements in our communities. We estimate that approximately ~~$444.2~~$383.6 million of work remains on these improvements. We have an additional ~~$182.5~~$188.5 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 January 31, ~~2020,~~2021, we had outstanding letters of credit of ~~$163.1~~$120.2 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 January 31, ~~2020,~~2021, we had agreements of sale outstanding to deliver ~~6,461~~8,888 homes with an aggregate sales value of ~~$5.45~~$7.47 billion.

Mortgage Commitments

Our mortgage subsidiary provides mortgage financing for a portion of our home closings. For those home buyers to whom our mortgage subsidiary provides mortgages, we determine whether the home buyer qualifies for the mortgage based upon information provided by the home buyer and other sources. For those home buyers who qualify, our mortgage subsidiary provides the home buyer with a mortgage commitment that specifies the terms and conditions of a proposed mortgage loan based upon then-current market conditions. Prior to the actual closing of the home and funding of the mortgage, the home buyer will lock in an interest rate based upon the terms of the commitment. At the time of rate lock, our mortgage subsidiary agrees to sell the proposed mortgage loan to one of several outside recognized mortgage financing institutions (“investors”) that is willing to honor the terms and conditions, including interest rate, committed to the home buyer. We believe that these investors have adequate financial resources to honor their commitments to our mortgage subsidiary.

Mortgage loans are sold to investors with limited recourse provisions derived from industry-standard representations and warranties in the relevant agreements. These representations and warranties primarily involve the absence of misrepresentations by the borrower or other parties, the appropriate underwriting of the loan and in some cases, a required minimum number of payments to be made by the borrower. The Company generally does not retain any other continuing interest related to mortgage loans sold in the secondary market.

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


	January 31, 2021		October 31, 2020
Aggregate mortgage loan commitments:
IRLCs	$	521,022	$	381,116
Non-IRLCs	2,280,509		1,688,801
Total	$	2,801,531	$	2,069,917
Investor commitments to purchase:
IRLCs	$	521,022	$	381,116
Mortgage loans held for sale	117,309		217,876
Total	$	638,331	$	598,992

January 31,
2020 October 31, 2019
Aggregate mortgage loan commitments:
IRLCs $ 565,001
$ 565,634
Non-IRLCs 1,484,667
1,364,972
Total $ 2,049,668
$ 1,930,606
Investor commitments to purchase:
IRLCs $ 565,001
$ 565,634
Mortgage loans held for sale 101,062
208,591
Total $ 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 approxima~~tely $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 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.

Our Traditional Home Building segment operates in the following 5 geographic ~~segments. In the first quarter of fiscal 2020, we made certain changes to our Traditional Home Building regional management structure and realigned certain of~~segments, wtih current operations in the states ~~falling among our five geographic segments, as follows:~~listed below:

~~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 ~~allocating capital following the realignment of the regional management structure.~~ New York;

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

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

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

~~Revenue~~•The Pacific region: California, Oregon and Washington.

Revenues 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,
	2021		2020
Revenues:
Traditional Home Building:
North	$	312,639	$	254,059
Mid-Atlantic	163,984		162,476
South	216,884		183,630
Mountain	377,977		263,096
Pacific	331,158		395,356
Traditional Home Building	1,402,642		1,258,617
City Living	7,793		39,835
Corporate and other	269		(1,115)
Total home sales revenues	1,410,704		1,297,337
Land sales and other revenues	152,672		34,094
Total revenues	$	1,563,376	$	1,331,431

Income (loss) before income taxes:
Traditional Home Building:
North	$	18,882	$	2,531
Mid-Atlantic	18,813		6,988
South	21,483		9,077
Mountain	36,013		17,585
Pacific	47,554		63,322
Traditional Home Building	142,745		99,503
City Living (1)	32,692		9,549
Corporate and other	(48,032)		(43,120)
Total	$	127,405	$	65,932

Three months ended January 31,
2020 2019
(Restated)
Revenues:
Traditional Home Building:
North $ 254,059
$ 271,518
Mid-Atlantic 162,476
134,898
South 183,630
176,928
Mountain 263,096
226,399
Pacific 395,356
444,049
Traditional Home Building 1,258,617
1,253,792
City Living 39,835
68,594
Corporate and other (1,115 ) (3,078 )
Total home sales revenue 1,297,337
1,319,308
Land sales revenue 34,094
43,873
Total revenue $ 1,331,431
$ 1,363,181

Income (loss) before income taxes:
Traditional Home Building:
North $ 2,531
$ 15,070
Mid-Atlantic 6,988
7,140
South 9,077
15,666
Mountain 17,585
25,603
Pacific 63,322
91,632
Traditional Home Building 99,503
155,111
City Living 9,549
14,642
Corporate and other (43,120 ) (18,307 )
Total $ 65,932
$ 151,446

(1) In the first quarter of fiscal 2021, we sold certain commercial assets associated with our Hoboken, New Jersey condominium projects for $82.4 million which is included in Land sales and other revenues above. City Living recognized net gains of $38.3 million from these sales.

“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, 2021		October 31, 2020
Traditional Home Building:
North	$	1,415,114	$	1,427,523
Mid-Atlantic	984,134		918,641
South	1,289,620		1,176,962
Mountain	2,053,597		1,961,348
Pacific	2,343,787		2,226,685
Traditional Home Building	8,086,252		7,711,159
City Living	542,763		539,750
Corporate and other	2,234,978		2,814,824
Total	$	10,863,993	$	11,065,733

January 31,
2020 October 31,
2019
(Restated)
Traditional Home Building:
North $ 1,574,303
$ 1,487,012
Mid-Atlantic 908,884
854,470
South 1,234,819
1,165,974
Mountain 1,917,134
1,769,649
Pacific 2,611,868
2,627,417
Traditional Home Building 8,247,008
7,904,522
City Living 546,468
529,507
Corporate and other 1,793,730
2,394,109
Total $ 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.

The amounts we have provided for inventory impairment charges and the expensing of costs that we believed not to be recoverable for each of our segments, for the periods indicated, were as follows (amounts in thousands):


	Three months ended January 31,
	2021		2020
Traditional Home Building:
North	$	35	$	94
Mid-Atlantic	32		1
South	25		747
Mountain	9		178
Pacific	66		11
Total	167		1,031
City Living	1,100		0

	$	1,267	$	1,031

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):


	Three months ended January 31,
	2021		2020
Cash flow information:

Interest capitalized, net of amount paid	$	3,733	$	11,686
Income tax payments	$	34,427	$	45,752
Income tax refunds	$	1,377	$	1,315
Noncash activity:
Cost of inventory acquired through seller financing, municipal bonds, or included in accrued expenses, net	$	40,511	$	21,827


Increase in receivables, prepaid expenses, and other assets and accrued expenses related to the adoption of ASU 2016-02 and other lease activity	$	0	$	108,769
Net decrease in other assets and retained earnings due to the adoption of ASC 326	$	595	$	0









Noncontrolling interest	$	144	$	2,610







Transfer of inventory to investment in unconsolidated entities	$	49,979	$	0


Transfer of other assets to investment in unconsolidated entities, net	$	13,228	$	24,736

Unrealized gain on derivatives	$	522	$	0
Increase in investments in unconsolidated entities for change in the fair value of debt guarantees	$	2,656	$	0









	At January 31,
	2021		2020
Cash, cash equivalents, and restricted cash
Cash and cash equivalents	$	949,696	$	519,793
Restricted cash included in receivables, prepaid expenses, and other assets	30,183		38,865
Total cash, cash equivalents, and restricted cash shown in the Condensed Consolidated Statements of Cash Flows	$	979,879	$	558,658

Three months ended January 31,
2020 2019
Cash flow information:
Interest paid, net of amount capitalized

$ 495
Interest capitalized, net of amount paid $ 11,686

Income tax payments $ 45,752
$ 81,818
Income tax refunds $ 1,315
$ 877
Noncash activity:
Cost of inventory acquired through seller financing, municipal bonds, or included in accrued expenses, net $ 21,827
$ 72,731
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
Net decrease in inventory and retained earnings due to the adoption of ASC 606

$ 8,989
Net increase in accrued expenses and decrease in retained earnings due to the adoption of ASC 606

$ 6,541
Net decrease in investment in unconsolidated entities and retained earnings due to the adoption of ASC 606

$ 2,457
Noncontrolling interest $ 2,610
$ 32,914
Transfer of other assets to inventory

$ 7,100
Transfer of other assets to investment in unconsolidated entities, net $ 24,736
$ 9,398

At January 31,
2020 2019
Cash, cash equivalents, and restricted cash
Cash and cash equivalents $ 519,793
$ 801,734
Restricted cash included in receivables, prepaid expenses, and other assets 38,865
960
Total cash, cash equivalents, and restricted cash shown in the Condensed Consolidated
Statements of Cash Flows $ 558,658
$ 802,694

~~17. Supplemental Guarantor Information~~

~~At 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
5.875% Senior Notes due February 15, 2022 $ 419,876
4.375% Senior Notes due April 15, 2023 $ 400,000
5.625% Senior Notes due January 15, 2024 $ 250,000
4.875% Senior Notes due November 15, 2025 $ 350,000
4.875% Senior Notes due March 15, 2027 $ 450,000
4.350% Senior Notes due February 15, 2028 $ 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 January 31, 2020:~~

Toll
Brothers,
Inc.

Subsidiary
Issuer

Guarantor
Subsidiaries

Nonguarantor
Subsidiaries
Eliminations Consolidated
ASSETS
Cash and cash equivalents —
—
336,479
183,314
—
519,793
Inventory

8,102,794
95,558

8,198,352
Property, construction and office equipment, net

275,830
9,955

285,785
Receivables, prepaid expenses and other assets 5,840

300,894
750,123
(78,691 ) 978,166
Mortgage loans held for sale

111,995

111,995
Customer deposits held in escrow

71,568
273

71,841
Investments in unconsolidated entities

44,361
319,991

364,352
Investments in and advances to consolidated entities 4,721,368
2,724,966
185,371
147,413
(7,779,118 ) —
Income taxes receivable 56,922

56,922
4,784,130
2,724,966
9,317,297
1,618,622
(7,857,809 ) 10,587,206
LIABILITIES AND EQUITY
Liabilities
Loans payable

1,275,341
36,100
(34,258 ) 1,277,183
Senior notes

2,660,352

2,660,352
Mortgage company loan facility

97,653

97,653
Customer deposits

414,790
2,302

417,092
Accounts payable

283,119
31,363

314,482
Accrued expenses 6,776
46,773
572,041
462,991
(77,033 ) 1,011,548
Advances from consolidated entities

527,929
507,995
(1,035,924 ) —
Income taxes payable 103,816

103,816
Total liabilities 110,592
2,707,125
3,073,220
1,138,404
(1,147,215 ) 5,882,126
Equity
Stockholders’ equity
Common stock 1,529

48
3,006
(3,054 ) 1,529
Additional paid-in capital 723,109
49,400

199,034
(248,434 ) 723,109
Retained earnings (deficit) 4,834,273
(31,559 ) 6,244,029
228,649
(6,459,106 ) 4,816,286
Treasury stock, at cost (879,820 )

(879,820 )
Accumulated other comprehensive loss (5,553 )

(5,553 )
Total stockholders’ equity 4,673,538
17,841
6,244,077
430,689
(6,710,594 ) 4,655,551
Noncontrolling interest

49,529

49,529
Total equity 4,673,538
17,841
6,244,077
480,218
(6,710,594 ) 4,705,080
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, 2019:~~

Toll
Brothers,
Inc.

Subsidiary
Issuer

Guarantor
Subsidiaries
Nonguarantor
Subsidiaries Eliminations Consolidated
ASSETS
Cash and cash equivalents —
—
1,082,067
203,947
—
1,286,014
Inventory

7,791,759
81,289

7,873,048
Property, construction and office equipment, net

263,140
10,272

273,412
Receivables, prepaid expenses and other assets

224,681
610,541
(119,781 ) 715,441
Mortgage loans held for sale

218,777

218,777
Customer deposits held in escrow

74,303
100

74,403
Investments in unconsolidated entities

50,594
315,658

366,252
Investments in and advances to consolidated entities 5,172,737
2,704,551
163,371
147,413
(8,188,072 ) —
Income taxes receivable 20,791

20,791
5,193,528
2,704,551
9,649,915
1,587,997
(8,307,853 ) 10,828,138
LIABILITIES AND EQUITY
Liabilities
Loans payable

1,109,614
36,092
(34,257 ) 1,111,449
Senior notes

2,659,898

2,659,898
Mortgage company loan facility

150,000

150,000
Customer deposits

383,583
2,013

385,596
Accounts payable

347,715
884

348,599
Accrued expenses 754
26,812
569,476
443,180
(89,290 ) 950,932
Advances from consolidated entities

1,052,370
503,058
(1,555,428 ) —
Income taxes payable 102,971

102,971
Total liabilities 103,725
2,686,710
3,462,758
1,135,227
(1,678,975 ) 5,709,445
Equity
Stockholders’ equity
Common stock 1,529

48
3,006
(3,054 ) 1,529
Additional paid-in capital 726,879
49,400

177,034
(226,434 ) 726,879
Retained earnings (deficit) 4,792,409
(31,559 ) 6,187,109
225,853
(6,399,390 ) 4,774,422
Treasury stock, at cost (425,183 )

(425,183 )
Accumulated other comprehensive loss (5,831 )

(5,831 )
Total stockholders’ equity 5,089,803
17,841
6,187,157
405,893
(6,628,878 ) 5,071,816
Noncontrolling interest

46,877

46,877
Total equity 5,089,803
17,841
6,187,157
452,770
(6,628,878 ) 5,118,693
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 three months ended January 31, 2020:~~

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 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

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

Toll
Brothers,
Inc.

Subsidiary
Issuer

Guarantor
Subsidiaries
Nonguarantor
Subsidiaries Eliminations Consolidated
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

(27,071 ) 232

(26,839 )
Investments in unconsolidated entities

(35 ) (4,874 )

(4,909 )
Return of investments in unconsolidated entities

9,507
19,476

28,983
Investment in foreclosed real estate and distressed loans

(234 )

(234 )
Return of investments in foreclosed real estate and distressed loans

883

883
Investment paid - intercompany

(85,631 )

85,631
—
Intercompany advances 508,290
(20,425 )

(487,865 ) —
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

150,000
552,729

702,729
Principal payments of loans payable

(3,405 ) (605,076 )

(608,481 )
Proceeds from stock-based benefit plans, net 4,235

4,235
Purchase of treasury stock (476,024 )

(476,024 )
Dividends paid (14,956 )

(14,956 )
Receipts related to noncontrolling interest, net

44

44
Investment received - intercompany

85,628
(85,628 ) —
Intercompany advances

(458,004 ) (58,692 ) 516,696
—
Net cash (used in) provided by financing activities (486,745 ) —
(311,409 ) (25,367 ) 431,068
(392,453 )
Net decrease in cash, cash equivalents, and restricted cash —
—
(745,447 ) (15,538 ) —
(760,985 )
Cash, cash equivalents, and restricted cash, beginning of period —
—
1,082,090
237,553
—
1,319,643
Cash, cash equivalents, and restricted cash, end of period —
—
336,643
222,015
—
558,658

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

Toll
Brothers,
Inc.

Subsidiary
Issuer

Guarantor
Subsidiaries
Nonguarantor
Subsidiaries Eliminations Consolidated
Net cash (used in) provided by operating activities (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

(19,707 ) 131

(19,576 )
Investments in unconsolidated entities

(2,235 ) (14,970 )

(17,205 )
Return of investments in unconsolidated entities

42,677

42,677
Investment in foreclosed real estate and distressed loans

(130 )

(130 )
Return of investments in foreclosed real estate and distressed loans

482

482
Investment paid - intercompany

(20,000 )

20,000
—
Proceeds from the sale of a golf club property 18,220
18,220
Intercompany advances 76,603
345,732

(422,335 ) —
Net cash provided by (used in) investing activities 76,603
345,732
(41,942 ) 46,410
(402,335 ) 24,468
Cash flow (used in) provided by financing activities:
Proceeds from loans payable

300,000
509,506

809,506
Debt issuance costs for loans payable

(2,058 )

(2,058 )
Principal payments of loans payable

(48,222 ) (585,371 )

(633,593 )
Redemption of senior notes

(350,000 )

(350,000 )
Proceeds from stock-based benefit plans, net (1,831 )

(1,831 )
Purchase of treasury stock (25,143 )

(25,143 )
Dividends paid (16,369 )

(16,369 )
Investment received - intercompany

20,000
(20,000 ) —
Intercompany advances

(387,492 ) (44,234 ) 431,726
—
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 —
—
(387,255 ) 7,010
—
(380,245 )
Cash, cash equivalents, and restricted cash, beginning of period —
—
1,011,867
171,072
—
1,182,939
Cash, cash equivalents, and restricted cash, end of period —
—
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, ~~2019~~2020 (“~~2019~~2020 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 and in our ~~2019~~2020 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 Urban Infill (“City ~~Living. In the first quarter of fiscal 2020, we appointed co-chief operating officers and split oversight responsibility for the Company’s~~Living”). Within Traditional Home Building, we operate in the following five geographic segments, with current operations ~~between eastern and western regions. In connection with these appointments, we made certain changes to our Traditional Home Building regional management structure and realigned certain of~~in the states ~~falling among our five homebuilding regions, as follows:~~listed below:

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

Our Business Environment and Current Outlook

We continue to experience very strong demand for our homes. This resurgence in demand began for us in mid-May 2020, following the significant drop in sales we experienced in our fiscal second quarter of 2020 as the initial impact of the COVID-19 pandemic was felt in the United States. In the three months ended January 31, 2021, we signed 2,874 net contracts for the sale of Traditional Home Building products and City Living homes with an aggregate value of $2.51 billion, compared to 1,806 net contracts with an aggregate value of $1.49 billion in the three months ended January 31, 2020, representing increases of 59% and 68% in units and dollars, respectively. Our backlog at January 31, 2021 was 8,888 homes and $7.47 billion, up 38% in units and 37% in dollars as compared to our backlog at January 31, 2020. In response to the strong demand and in an effort to drive profitability and manage growth, we continued to raise sales prices in substantially all of our communities during our fiscal first quarter of 2021. We have also continued to limit lot releases in some communities. We expect to continue these pricing and lot-release measures during the remainder of fiscal 2021 assuming the strong demand environment continues.

We attribute the strong demand to a number of factors, including favorable demographic trends, a very tight supply of for-sale homes stemming from a decade of underproduction, low mortgage rates, and a renewed appreciation for the importance of home. We believe these factors will continue to support demand through fiscal 2021.

Although housing market demand has recently been very strong, future economic conditions in the United States and the demand for homes remain uncertain due to continuing pandemic-related disruptions, government directives, actions and economic relief efforts related thereto, and the impact of these actions on the economy, mortgage rates and markets, employment levels, consumer confidence, and financial markets, among other things. The potential effect of these factors on our future operational and financial performance is highly uncertain, unpredictable and outside our control. As a result, our past performance may not be indicative of future results.

Financial and Operational Highlights

In the three-month period ended January 31, ~~2020,~~2021, we recognized $1.56 billion of revenues, consisting of $1.41 billion of home sales revenue and $152.7 million of land sales and other revenue, and net income of $96.5 million, as compared to $1.33 billion of revenues, consisting of $1.30 billion of home sales revenue and $34.1 million of land sales and other revenue, and ~~net income of~~ $56.9 ~~million, as compared to $1.32 billion of revenues and $112.1~~ million of net income in the three-month period ended January 31, ~~2019.~~2020.

In the three-month periods ended January 31, ~~2020~~2021 and ~~2019,~~2020, the value of net contracts signed was $2.51 billion (2,874 homes) and $1.49 billion (1,806 homes) ~~and $1.16 billion (1,379 homes)~~, respectively.

The value of our backlog at January 31, ~~2020~~2021 was ~~$5.45~~$7.47 billion ~~(6,461~~(8,888 homes), as compared to our backlog at January 31, ~~2019~~2020 of ~~$5.37~~$5.45 billion ~~(5,954~~(6,461 homes). Our backlog at October 31, ~~2019~~2020 was ~~$5.26~~$6.37 billion ~~(6,266~~(7,791 homes), as compared to backlog of ~~$5.52~~$5.26 billion ~~(6,105~~(6,266 homes) at October 31, ~~2018.~~2019.

At January 31, ~~2020,~~2021, we had ~~$519.8~~$949.7 million of cash and cash equivalents on hand and approximately ~~$1.59~~$1.785 billion available under our $1.905 billion revolving credit facility (the “Revolving Credit Facility”) ~~that is scheduled to expire on~~, substantially all of which matures in November ~~1, 2024.~~2025. At January 31, ~~2020,~~2021, we had ~~$150.0 million of~~no borrowings and we had approximately ~~$163.1~~$120.2 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 January 31, ~~2020,~~2021, we owned or controlled through options approximately ~~62,000~~67,700 home sites, as compared to approximately ~~59,200~~63,200 at October 31, ~~2019;~~2020; and approximately 53,400 at October 31, ~~2018.~~2019. Of the approximately ~~62,000~~67,700 total home sites that we owned or controlled through options at January 31, ~~2020,~~2021, we owned approximately ~~37,100~~36,400 and controlled approximately ~~24,900~~31,300 through options. Of the ~~37,100~~36,400 home sites owned, approximately ~~17,200~~17,400 were substantially improved. In addition, as of January 31, ~~2020,~~2021, we expect to purchase approximately ~~2,500~~3,900 additional home sites over several years from certain of the joint ventures in which we have interests, at prices to be determined.

At January 31, ~~2020,~~2021, we were selling from ~~328~~309 communities, compared to 317 at October 31, 2020; and 333 at October 31, ~~2019; and 315 at October 31, 2018.~~2019.

At January 31, ~~2020,~~2021, our total stockholders’ equity and our debt to total capitalization ratio were ~~$4.66~~$4.79 billion and ~~0.46~~0.44 to 1.00, respectively.

~~Our Business Environment and Current Outlook~~

In the three months ended January 31, 2020, we signed 1,806 net contracts for the sale of Traditional Home Building Products and City Living units with an aggregate value of $1.49 billion, compared to 1,379 net contracts with an aggregate value of $1.16 billion in the three months ended January 31, 2019, and 1,822 net contracts with an aggregate value of $1.69 billion in the three months ended 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 the second half of fiscal 2018 through the first 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 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 the fourth quarter of fiscal 2019. Buyer demand continued to improve in fiscal 2020, and, in the three months ended January 31, 2020, the number of contracts we signed had increased 31% in units and 28% in dollars compared to the 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 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 and a limited supply of homes across most of our markets, we expect that overall economic conditions in the 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.

~~Acquisitions~~

In fiscal 2019, we acquired substantially all of the assets and operations of Sharp Residential, LLC (“Sharp”) and Sabal Homes LLC (“Sabal”), for an aggregate of approximately $162.4 million in cash. Sharp operates in metropolitan Atlanta, Georgia; Sabal operates in the Charleston, Greenville, and Myrtle Beach, South Carolina markets. The assets acquired, based on our preliminary purchase price allocations, were primarily inventory, including approximately 2,550 home sites owned or controlled through land purchase agreements. In connection with these acquisitions, we assumed contracts to deliver 204 homes with an aggregate value of $96.1 million. The average price of undelivered homes as of the respective acquisition date was approximately $471,100. As a result of 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 selling communities by the end of 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 three months ended January 31, ~~2020~~2021 and ~~2019~~2020 ($ amounts in millions, unless otherwise stated). For more information regarding results of operations by segment, see “Segments” in this MD&A.


	Three months ended January 31,
	2021			2020			% Change
Revenues:
Home sales	$	1,410.7		$	1,297.3		9	%
Land sales and other	152.7			34.1
	1,563.4			1,331.4			17	%
Cost of revenues:
Home sales (1)	1,121.8			1,033.1			9	%
Land sales and other	111.7			32.3
	1,233.5			1,065.4			16	%
Selling, general and administrative (1)	210.7			218.5			(4)	%
Income from operations	119.1			47.5			151	%
Other
Income from unconsolidated entities	1.2			12.1			(90)	%
Other income – net	7.1			6.3			13	%
Income before income taxes	127.4			65.9			93	%
Income tax provision	30.9			9.1			240	%
Net income	$	96.5		$	56.9		70	%

Supplemental information:
Home sales cost of revenues as a percentage of home sales revenues (1)	79.5		%	79.6		%
Land sales and other cost of revenues as a percentage of land sales and other revenues	73.2		%	94.7		%
SG&A as a percentage of home sale revenues (1)	14.9		%	16.8		%
Effective tax rate	24.3		%	13.7		%

Deliveries – units	1,777			1,611			10	%
Deliveries – average delivered price (in ‘000s)	$	793.9		$	805.3		(1)	%

Net contracts signed – value	$	2,508.0		$	1,489.3		68	%
Net contracts signed – units	2,874			1,806			59	%
Net contracts signed – average selling price (in ‘000s)	$	872.7		$	824.6		6	%

	At January 31,
	2021			2020			% Change
Backlog – value	$	7,473.5		$	5,450.2		37	%
Backlog – units	8,888			6,461			38	%
Backlog – average selling price (in ‘000s)	$	840.9		$	843.6		—	%

Three months ended January 31,
2020 2019 % Change
Revenues:
Home sales $ 1,297.3
$ 1,319.3
(2 )%
Land sales 34.1
43.9

1,331.4
1,363.2
(2 )%
Cost of revenues:
Home sales 1,059.9
1,042.2
2 %
Land sales 32.3
34.3

1,092.2
1,076.5
1 %
Selling, general and administrative 191.8
162.2
18 %
Income from operations 47.5
124.4
(62 )%
Other
Income from unconsolidated entities 12.1
6.1
98 %
Other income – net 6.3
20.9
(70 )%
Income before income taxes 65.9
151.4
(56 )%
Income tax provision 9.1
39.4
(77 )%
Net income $ 56.9
$ 112.1
(49 )%

Supplemental information:
Home sales cost of revenues as a percentage of home sales revenues 81.7 % 79.0 %
Land sales cost of revenues as a percentage of land sales revenues 94.7 % 78.1 %
SG&A as a percentage of home sale revenues 14.8 % 12.3 %
Effective tax rate 13.7 % 26.0 %

Deliveries – units 1,611
1,530
5 %
Deliveries – average delivered price (1) $ 805.3
$ 862.3
(7 )%

Net contracts signed – value $ 1,489.3
$ 1,163.4
28 %
Net contracts signed – units 1,806
1,379
31 %
Net contracts signed – average selling price (1) $ 824.6
$ 843.7
(2 )%

January 31, 2020 January 31, 2019 %
Change
Backlog – value $ 5,450.2
$ 5,366.7
2 %
Backlog – units 6,461
5,954
9 %
Backlog – average selling price (1) $ 843.6
$ 901.4
(6 )%


~~(1)~~	~~$ amounts in thousands.~~

Note: Due to rounding, amounts may not add.

(1) As previously disclosed in our 2020 Form 10-K, effective October 31, 2020, we reclassified sales commissions paid to third-party brokers from home sales cost of revenues to selling, general and administrative expense in our Consolidated Statements of Operations and Comprehensive Income. The reclassification had the effect of lowering home sales cost of revenues (and increasing home sales gross margin) and increasing selling, general and administrative expense by the amount of third-party broker commissions, which totaled $26.8 million, or 2.1% of home sales revenues for the three months ended January 31, 2020. All prior period amounts have been reclassified.

Home Sales Revenues and Home Sales Cost of Revenues

The ~~decrease~~increase in home sale revenues for the three months ended January 31, ~~2020,~~2021, as compared to the three months ended January 31, ~~2019,~~2020, was attributable to a ~~7% decrease~~10% increase in the ~~average price~~number of ~~the~~ homes delivered, offset, in part, by a 5%1% decrease in the average price of homes delivered. The increase in the number of homes ~~delivered.~~delivered in the three months ended January 31, 2021 was primarily due to higher backlog at October 31, 2020, as compared to October 31, 2019, partially offset by lower backlog conversion in the fiscal 2021 period. The decrease in the average delivered home price was mainly due to a shift in the number of homes delivered to less expensive areas and/or products, ~~and an increase~~offset, in ~~incentives in contracts signed in the first half of fiscal 2019.~~part, by sales price increases. The shift in the number of homes delivered to less expensive areas and/or products in the fiscal ~~2020 period, as compared to the fiscal 2019~~2021 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;~~average. The shift was also the result of our strategic expansion into more affordable luxury home and ~~an increase in the number of quick delivery homes delivered, where average prices are lower than the Company average.~~attractive high-growth markets.

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 increase~~decrease in home sales cost of revenues, as a percentage of home sales revenues, in the fiscal ~~2020~~2021 period, as compared to the fiscal ~~2019~~2020 period, was principally due to higher sales prices, the impact of purchase accounting for homes delivered in the fiscal 2020 period from businesses acquired in fiscal 2019, and lower interest expense as a percentage of home sales revenues. These decreases were partially offset by a shift in the mix of revenues to lower margin products/areas; higher incentives associated with the prior year selling environment; higher land, land development, material and labor costs; and the impact of purchase accounting for homes delivered from the Sharp and Sabal acquisitions. These increases were offset, in part, by lower inventory impairment charges and lower interest expense in the fiscal 2020 period, as compared to the fiscal 2019 period.areas. In the three months ended January 31, ~~2020~~2021 and ~~2019,~~2020, interest expense, as a percentage of home sales revenues, was ~~2.5%~~2.4% and ~~2.6%~~2.5%, ~~respectively, and we recognized inventory impairments and write-offs of $1.0 million and $7.6 million,~~ respectively.

Land Sales and Other Revenues and Land Sales and Other Cost of Revenues

Our revenues from land sales and other generally consist of the following: (1) 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 sales to third parties of land we have decided no longer meets our development ~~criteria.~~criteria; and (4) sales of commercial and retail properties generally located at our City Living buildings. In the ~~three months ended January 31, 2019,~~first quarter of fiscal 2021, we sold a parking garage and retail space associated with our Hoboken, New Jersey condominium projects for $82.4 million and we recognized ~~a gain~~gains of ~~$8.4 million from the sale of land to a newly formed Rental Property Joint Venture in which we have a 25% interest.~~$38.3 million.

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

SG&A spending ~~increased~~decreased by ~~$29.5~~$7.8 million in the ~~three-month~~fiscal 2021 period, ~~ended January 31, 2020,~~ as compared to the ~~three-month period ended January 31, 2019.~~fiscal 2020 period. As a percentage of home sales revenues, SG&A was ~~14.8%~~14.9% in the ~~three months ended January 31, 2020,~~fiscal 2021 period, as compared to ~~12.3%~~16.8% in the ~~three months ended January 31, 2019.~~fiscal 2020 period. The dollar ~~increase~~decrease in SG&A was due primarily to ~~increased compensation costs resulting primarily from~~the implementation, commencing in fiscal 2020’s second quarter, of a ~~higher~~ number of ~~employees~~cost reduction initiatives to improve efficiencies and ~~normal compensation increases, increased sales~~rationalize overhead expenses, including workforce reductions 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 selling communities, increased spending onreduced advertising and ~~higher design studio operating costs.~~broker commission spend. The increased number of employees was due primarily to the increased number of selling communities, other investments and costs to support community count growth, and the implementation of new enterprise resource planning and other information technology systems. The increasedecrease in SG&A as a percentage of revenues was due to ~~a higher increase in SG&A spending, at 18%, relative to~~ revenues ~~which decreased 2% in the three-month period ended January 31, 2020,~~increasing 9% as compared to the ~~three-month~~fiscal 2020 period, ~~ended January 31, 2019.~~while SG&A spending decreased 4%.

Income (loss) from Unconsolidated Entities

We have investments in ~~various unconsolidated entities. These entities, which are structured as~~ joint ventures to (i) develop land for the joint venture participants and for sale to ~~third-party~~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”); 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~~apartment and single-family home projects, which do not generate revenues and earnings for a number of years during the development of the ~~property.~~properties. 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 and single-family home 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 (loss) from unconsolidated entities ~~increased~~decreased by ~~$6.0~~$10.9 million in the three-month period ended January 31, ~~2020,~~2021, as compared to the three-month period ended January 31, ~~2019.~~2020. This ~~increase~~decrease was primarily due to a $10.7 million gain recognized in the fiscal 2020 period from the sale of our investment in ~~one~~our of our Rental Property Joint Ventures to our joint venture ~~partner. This increase~~partner; a decrease in earnings from a Home Building Joint Venture which completed its operations in the prior year; $2.1 million of other-than temporary impairment charges that we recognized on two of our Home Building Joint Ventures in the fiscal 2021 period; losses recognized by a joint venture that owns a hotel that was ~~offset, in part,~~adversely impacted by COVID-19; and an increase in losses in several Rental Property Joint Ventures related to the commencement of operations and lease up activities ~~and~~in

the fiscal 2021 period. These decreases were offset, in part, by a ~~decrease in earnings from one Home Building Joint Venture which delivered its last home~~$6.0 million gain recognized in the ~~third quarter~~fiscal 2021 period from an asset sale of ~~fiscal 2019.~~

commercial property by one of our Land Development Joint Ventures.

Other Income – Net

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


	Three months ended January 31,					Three months ended January 31,
	2020		2019			2021		2020
Income from ancillary businesses	$	522	$	13,844	Income from ancillary businesses	$	6,859	$	522
Management fee income from home building unconsolidated entities, net	1,346		1,608
Management fee income from Home Building Joint Ventures, net					Management fee income from Home Building Joint Ventures, net	117		1,346
Other	4,427		5,409		Other	125		4,427
Total other income – net	$	6,295	$	20,861	Total other income – net	$	7,101	$	6,295

The ~~decrease~~increase in income from ancillary businesses in the three months ended January 31, ~~2020, as compared to the three months ended January 31, 2019,~~2021 was mainly due to ~~a $12.2 million gain recognized~~higher earnings from ~~the sale of a golf club~~volume increases and wider spreads in ~~the fiscal 2019 period.~~our mortgage operations, as well as lower losses incurred in our apartment living operations.

Management fee income from home building unconsolidated entities presented above includes fees earned by our City Living and Traditional Home Building operations. The decrease in income in the three months ended January 31, 2021 was primarily related to a decrease in unconsolidated entities to which we provide services. In addition to the fees earned by our City Living and Traditional Home Building operations, in the three-month periods ended January 31, ~~2020~~2021 and ~~2019,~~2020, our apartment living operations earned fees from unconsolidated entities of ~~$3.8~~$4.8 million and ~~$2.7~~$3.8 million, respectively. Fees earned by our apartment living operations are included in income from ancillary businesses.

The decrease in “other” in the three months ended January 31, ~~2020, as compared to the three months ended January 31, 2019,~~2021 was primarily due to lower interest income.

Income Before Income Taxes

For the three-month period ended January 31, ~~2020,~~2021, we reported income before income taxes of ~~$65.9~~$127.4 million, as compared to ~~$151.4~~$65.9 million in the three-month period ended January 31, ~~2019.~~2020.

Income Tax Provision

We recognized an income tax provision of ~~$9.1~~$30.9 million in the three-month period ended January 31, ~~2020.~~2021. Based upon the federal statutory rate of 21.0% for the fiscal ~~2019~~2021 period, our federal tax provision would have been $26.8 million in the three-month period ended January 31, 2021. The difference between the tax provisions recognized and the tax provision based on the federal statutory rate was mainly due to the provision for state income taxes, offset, in part, by excess tax benefits related to stock-based compensation.

In the three-month period ended January 31, 2020, we recognized an income tax provision of $9.1 million. Based upon the federal statutory rate of 21.0% for the fiscal 2020 period, our federal tax provision would have been $13.8 million in the three-month period ended 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~~and 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 January 31, 2019. The difference between the tax provision recognized and the tax provision based on the federal statutory rate was mainly due to the provision for state income taxes, offset, in part, by the reversal of a previously accrued tax provision on uncertain tax positions that was no longer necessary due to a settlement.

Contracts

The aggregate value of net contracts signed increased ~~$325.9 million,~~$1.02 billion, or ~~28%~~68%, in the three-month period ended January 31, ~~2020,~~2021, as compared to the three-month period ended January 31, ~~2019.~~2020. In the three-month periods ended January 31, ~~2020~~2021 and ~~2019,~~2020, the value of net contracts signed was $2.51 billion (2,874 homes) and $1.49 billion (1,806 homes) ~~and $1.16 billion (1,379 homes)~~, respectively.

The increase in the aggregate value of net contracts signed ~~in the fiscal 2020 period~~ was ~~the result of~~due to a ~~31%~~59% increase in the number of net contracts signed ~~partially offset by~~and a ~~2% decrease~~6% increase in the average value of each ~~contract signed.~~signed contract. The increase in the number of net contracts signed ~~was the result of increased~~reflects an overall increase in demand in ~~many~~the housing market, including a resurgence in demand for our homes that began at the outset of ~~our markets; contracts signed in metropolitan Atlanta, Georgia and several markets in South Carolina from~~fiscal 2020’s third quarter. We attribute the ~~Sharp and Sabal acquisitions; and an increase in the average~~strong demand to a number of ~~selling communities.~~ factors, including favorable demographic trends, a very tight supply of for-sale homes stemming from a decade of underproduction, low mortgage rates, and a renewed appreciation for the importance of home. The ~~decrease~~increase in average price of net contracts signed ~~in the fiscal 2020 period~~ was principally due to sale price increases partially offset by mix changes. The change in mix was primarily due to our strategic expansion into more affordable luxury home and attractive high-growth markets, resulting in a shift in the number of contracts signed to less expensive areas and/or products. ~~We are strategically adding more affordable luxury communities to capitalize on demographic trends and to expand footprint and customer base.~~

Backlog

The value of our backlog at January 31, ~~2020~~2021 increased 2%37% to $7.47 billion (8,888 homes), as compared to $5.45 billion (6,461 homes)~~, as compared to the value of our backlog~~ at January 31, ~~2019 of $5.37 billion (5,954 homes).~~2020. Our backlog at October 31, 2020 and 2019 was $6.37 billion (7,791 homes) and ~~2018 was~~ $5.26 billion (6,266 homes) ~~and $5.52 billion (6,105 homes)~~, respectively.

The increase in the value of our backlog at January 31, ~~2020,~~2021, as compared to the backlog at January 31, ~~2019,~~2020, was primarily attributable to an increase in the value of net contracts signed in the three months ended January 31, 2021, as compared to the three-month period ended January 31, 2020, partially offset by ~~a lower backlog of homes at October~~higher home sales revenues in the three months ended January 31, ~~2019, as compared to October 31, 2018.~~2021.

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 2021

At January 31, 2021 and October 31, 2020, we had $949.7 million and $1.37 billion, respectively, of cash and cash equivalents. Cash provided by operating activities during the three-month period ended January 31, 2021 was $55.3 million. Cash provided by operating activities during the fiscal 2021 period was primarily related to net income (adjusted for stock-based compensation, inventory impairments, depreciation and amortization, gain on sale of assets and deferred taxes); mortgage loans sold, net of mortgage loans originated; increases in customer deposits – net and accounts payable and accrued expenses; and a decrease in receivables, prepaid expenses, and other assets, offset, in part, by an increase in inventory.

In the three-month period ended January 31, 2021, cash used in investing activities was $9.8 million, which was primarily related to $112.8 million used to fund our investments in unconsolidated entities and $14.5 million used for the purchase of property and equipment. This activity was offset, in part, by $79.4 million of cash received from the sale of commercial properties and $37.9 million of cash received as returns from our investments in unconsolidated entities.

We used $462.3 million of cash in financing activities in the three-month period ended January 31, 2021, primarily for the repurchase of $179.4 million of our common stock; the payment of dividends on our common stock of $14.3 million; payments of $249.4 million of loans payable, net of borrowings; and redemption of senior notes of $10.0 million.

Fiscal 2020

At January 31, 2020 and October 31, 2019, we had $519.8 million and $1.29 billion, respectively, of cash and cash equivalents. Cash used in operating activities during the three-month period ended 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 $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.

In the three-month period ended January 31, 2019, cash provided by investing activities was $24.5 million, which was primarily related to $42.7 million of cash received as returns from our investments in unconsolidated entities and proceeds of $18.2 million of cash received from the sale of one of our golf club properties to an unrelated third party. This activity was offset, in part, by $19.6 million used for the purchase of property and equipment and $17.2 million used to fund our investments in unconsolidated entities.

We used $219.5 million of cash in financing activities in the three-month period ended January 31, 2019 primarily for the repayment of $350.0 million of senior notes; the repurchase of $25.1 million of our common stock; and the payment of dividends on our common stock of $16.4 million; offset, in part, by borrowings of $173.9 million of loans payable, net of repayments and debt issuance 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 quick delivery homes that are 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 January 31, ~~2020,~~2021, we owned or controlled through options approximately ~~62,000~~67,700 home sites, of which we owned approximately ~~37,100.~~36,400. Of our owned home sites at January 31, ~~2020,~~2021, significant improvements were completed on approximately ~~17,200~~17,400 of them.

At January 31, ~~2020,~~2021, the aggregate purchase price of land parcels under option and purchase agreements was approximately ~~$2.73~~$2.75 billion (including ~~$10.1~~$8.8 million of land to be acquired from joint ventures in which we have invested). Of the ~~$2.73~~$2.75 billion of land purchase commitments, we paid or deposited ~~$199.9~~$207.6 million, and, if we acquire all of these land parcels, we will be required to pay an additional ~~$2.53~~$2.55 billion. The purchases of these land parcels are scheduled to occur over the next several years. In addition, we expect to purchase approximately ~~2,500~~3,900 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~~used in investing activities.” At January 31, ~~2020,~~2021, we had investments in these entities of $571.6 million, and were committed to invest or advance up to an additional $89.7 million to these entities if they require additional funding.At January 31, 2021, we had purchase commitments to acquire land for apartment developments of approximately ~~$247.1~~$121.5 million, of which we had outstanding deposits in the amount of ~~$11.1~~$6.5 million. We generally intend to develop these apartment projects in joint ventures with unrelated parties in the future.

We have a $1.905 billion, unsecured, five-year revolving credit facility (the “Revolving Credit Facility”) ~~that is scheduled to expire on~~substantially all of which matures in November ~~1, 2024.~~2025. 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 ~~$2.24~~$2.10 billion. Under the terms of the Revolving Credit Facility, at January 31, ~~2020,~~2021, our leverage ratio was approximately ~~0.72~~0.57 to 1.00, and our tangible net worth was approximately ~~$4.61~~$4.72 billion. At January 31, ~~2020,~~2021, we had ~~$150.0 million~~no outstanding borrowings under our Revolving Credit Facility and had outstanding letters of credit thereunder of approximately ~~$163.1~~$120.2 million. ~~Subsequent to January 31, 2020, we borrowed an additional $200.0 million under the Revolving Credit Facility.~~

~~At January 31, 2020, we had an $800.0 million,~~We have a five-year senior unsecured term loan facility (the “Term Loan Facility”) with a syndicate of ~~banks is scheduled~~banks. Prior to ~~expire~~January 28, 2021, the principal amount outstanding under the Term Loan Facility was $800 million. On January 28, 2021 we voluntarily repaid $150.0 million of the Term Loan Facility, and the remaining $650.0 million principal amount outstanding will become due and payable at maturity on November 1, ~~2024. The~~2025. No prepayment charges were incurred in connection with the repayment.The Term Loan Facility contains substantially the same financial covenants as our Revolving Credit Facility, as described above.

In November 2020, we entered into five interest rate swap transactions to hedge $400.0 million of the Term Loan Facility through October 2025. The interest rate swaps effectively fix the interest cost on the $400.0 million at 0.369% plus the spread set forth in the pricing schedule in the Term Loan Facility, which was 1.05% as of January 31, 2021. These interest rate swaps were designated as cash flow hedges.

On February 12, 2021, we delivered a notice of optional redemption (the “Redemption Notice”) to the holders of our outstanding 5.625% Senior Notes due 2024 (the “2024 Notes”), pursuant to which the we will redeem all $250.0 million aggregate principal amount of outstanding 2024 Notes. The 2024 Notes will be redeemed on March 15, 2021 (the “Redemption Date”) at a redemption price in cash of the greater of (a) 100% of the principal amount of the Notes being redeemed and (b) the present value of the Remaining Scheduled Payments (as defined in the Indenture) on the 2024 Notes being redeemed on the Redemption Date, discounted to the Redemption Date, on a semiannual basis, at the Treasury Rate (as defined in the Indenture) plus 50 basis points. Accrued and unpaid interest to, but excluding, March 15, 2021 will be paid in accordance with the terms of the Indenture and the Notes. In connection with the redemption, the Company expects to incur a pre-tax charge of approximately $34.0 million in its second fiscal quarter for the early extinguishment of debt.

Under the provisions of the Revolving Credit Facility and Term Loan Facility, our ability to repurchase our common stock was limited to approximately ~~$3.14~~$3.66 billion and our ability to pay cash dividends was limited to approximately ~~$2.36~~$2.62 billion as of January 31, ~~2020.~~2021.

WeWhile there is significant uncertainty as to general economic conditions for the remainder of fiscal 2021 and potentially beyond, we continue to 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~~However, due to the inherent difficulty in making long-term predictions about the economy and the ~~credit market~~capital markets for home builders, which has been exacerbated by COVID-19, 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 also operate through a number of joint ventures. We earn construction and 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 those home sites.

At January 31, ~~2020,~~2021, we had investments in these entities of ~~$364.4~~$571.6 million and were committed to invest or advance up to an additional ~~$36.6~~$89.7 million to these entities if they require additional funding. At January 31, ~~2020,~~2021, we had agreed to terms for the acquisition of ~~113~~112 home sites from ~~two~~one joint ~~ventures~~venture for an estimated aggregate purchase price of ~~$10.1~~$8.8 million. In addition, we expect to purchase approximately ~~2,500~~3,900 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~~we and our joint venture partner have provided joint and several guarantees ~~provided~~ in connection with loans to an unconsolidated ~~entity are joint and several.~~entities. In these situations, we generally ~~have~~seek to implement 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, we are not always successful. In addition, 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 January 31, ~~2020,~~2021, 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 January 31, ~~2020,~~2021, we had guaranteed the debt of certain unconsolidated entities have loan commitments aggregating ~~$1.27~~$1.86 billion, of which, if the full amount of the debt obligations were borrowed, we estimate ~~$183.1~~$327.5 million to be our maximum exposure related to repayment and carry cost guarantees. At January 31, ~~2020,~~2021, the unconsolidated entities had borrowed an aggregate of ~~$825.3~~$1,108.5 million, of which we estimate ~~$114.1~~$236.7 million to be our maximum exposure related to repayment and carry cost guarantees. The terms of these guarantees generally range from ~~7 months~~1 month to ~~3.9~~3.8 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 ~~2019~~2020 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, ~~2019,~~2020, there have been no material changes to those critical accounting policies.

SUPPLEMENTAL GUARANTOR INFORMATION

At January 31, 2021, our 100%-owned subsidiary, Toll Brothers Finance Corp. (the “Subsidiary Issuer”), had issued and outstanding $2.66 billion aggregate principal amount of senior notes maturing on various dates between February 15, 2022 and November 1, 2029 (the “Senior Notes”). For further information regarding the Senior Notes, see Note 6 to our Consolidated Condensed Financial Statements under the caption “Senior Notes.”

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” and, together with us, the “Guarantors”). The guarantees are full and unconditional, and the Subsidiary Issuer and each of the Guarantor Subsidiaries are consolidated subsidiaries of Toll Brothers, Inc. Our non-home building subsidiaries and several of our home building subsidiaries (together, the “Non-Guarantor Subsidiaries”) do not guarantee the 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 of its public debt offerings, including the Senior Notes. Our home building operations are conducted almost entirely through the Guarantor Subsidiaries. Accordingly, the Subsidiary Issuer’s cash flow and ability to service the Senior Notes is dependent upon the earnings of the Company’s subsidiaries and the distribution of those earnings to the Subsidiary Issuer, whether by dividends, loans or otherwise. Holders of the Senior Notes have a direct claim only against the Subsidiary Issuer and the Guarantors. The obligations of the Guarantors under their guarantees will be limited as necessary to recognize certain defenses generally available to guarantors (including those that relate to fraudulent conveyance or transfer, voidable preference or similar laws affecting the rights of creditors generally) under applicable law.

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 ours 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.

In March 2020, the SEC adopted amendments to Rule 3-10 of Regulation S-X, under Rule Release No. 33-10762, Financial Disclosures about Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant’s Securities (“Rule 33-10762”), that reduce and simplify the financial disclosure requirements applicable to SEC-registered debt offerings for guarantors and issuers of guaranteed debt securities (which we previously included within the notes to our consolidated financial statements in our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q). While amendments under Rule 33-10762 are effective January 4, 2021, voluntary compliance is permitted in advance of the effective date, and we had previously adopted the new disclosure requirements for the period ending October 31, 2020.

The following summarized financial information is presented for Toll Brothers, Inc., the Subsidiary Issuer, and the Guarantor Subsidiaries on a combined basis after intercompany transactions and balances have been eliminated among Toll Brothers, Inc., the Subsidiary Issuer and the Guarantor Subsidiaries, as well as their investment in, and equity in earnings from the Non-Guarantor Subsidiaries.

Summarized Balance Sheet Data ($ amounts in millions):


	January 31, 2021
Assets
Cash	$	758.7
Inventory	$	7,783.9
Amount due from Nonguarantor Subsidiaries	$	637.6
Total assets	$	9,935.6

Liabilities & Stockholders' Equity
Loans payable	$	951.5
Senior notes	$	2,652.2
Total liabilities	$	5,464.6
Stockholders' equity	$	4,471.0

Summarized Statement of Operations Data ($ amounts in millions):


	For the three months ended January 31, 2021
Revenues	$	1,500.8
Cost of revenues	$	1,171.9
Selling, general and administrative	$	210.1
Income before income taxes	$	125.5
Net income	$	93.4

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:


	Three months ended January 31,
	Revenues ($ in millions)						Units Delivered				Average Delivered Price ($ in thousands)
	2021		2020		% Change		2021	2020	% Change		2021		2020		% Change
Traditional Home Building:
North	$	312.6	$	254.1	23	%	451	393	15	%	$	693.2	$	646.5	7	%
Mid-Atlantic	164.0		162.5		1	%	227	240	(5)	%	$	722.4	$	677.0	7	%
South	216.9		183.6		18	%	341	274	24	%	$	636.0	$	670.2	(5)	%
Mountain	378.0		263.1		44	%	525	401	31	%	$	720.0	$	656.1	10	%
Pacific	331.1		395.3		(16)	%	226	267	(15)	%	$	1,465.3	$	1,480.7	(1)	%
Traditional Home Building	1,402.6		1,258.6		11	%	1,770	1,575	12	%	$	792.5	$	799.1	(1)	%
City Living	7.8		39.8		(80)	%	7	36	(81)	%	$	1,113.4	$	1,106.5	1	%
Other	0.3		(1.1)
Total home sales revenues	1,410.7		1,297.3		9	%	1,777	1,611	10	%	$	793.9	$	805.3	(1)	%
Land sales revenues	152.7		34.1
Total revenues	$	1,563.4	$	1,331.4

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

Net Contracts Signed:


	Three months ended January 31,
	Net Contract Value ($ in millions)						Net Contracted Units				Average Contracted Price ($ in thousands)
	2021		2020		% Change		2021	2020	% Change		2021		2020		% Change
Traditional Home Building:
North	$	356.8	$	287.2	24	%	449	400	12	%	$	794.6	$	717.9	11	%
Mid-Atlantic	327.5		169.4		93	%	373	242	54	%	$	878.0	$	700.1	25	%
South	388.8		244.4		59	%	568	353	61	%	$	684.5	$	692.4	(1)	%
Mountain	751.8		357.5		110	%	978	490	100	%	$	768.7	$	729.5	5	%
Pacific	644.1		383.4		68	%	473	287	65	%	$	1,361.8	$	1,335.8	2	%
Traditional Home Building	2,469.0		1,441.9		71	%	2,841	1,772	60	%	$	869.1	$	813.7	7	%
City Living	39.0		47.4		(18)	%	33	34	(3)	%	$	1,181.8	$	1,394.9	(15)	%
Total	$	2,508.0	$	1,489.3	68	%	2,874	1,806	59	%	$	872.6	$	824.6	6	%

Three months ended January 31,

Net Contract Value
($ in millions)
Net Contracted Units
Average Contracted Price
($ in thousands)
2020 2019 % Change 2020 2019 % Change 2020 2019 % Change
Restated Restated Restated
Traditional Home Building:
North $ 287.2
$ 275.2
4 % 400
402
— % $ 717.9
$ 684.7
5 %
Mid-Atlantic 169.4
160.4
6 % 242
253
(4 )% $ 700.1
$ 633.8
10 %
South 244.4
152.4
60 % 353
201
76 % $ 692.4
$ 758.2
(9 )%
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 1,441.9
1,123.7
28 % 1,772
1,356
31 % $ 813.7
$ 828.7
(2 )%
City Living 47.4
39.7
19 % 34
23
48 % $ 1,394.9
$ 1,724.4
(19 )%
Total $ 1,489.3
$ 1,163.4
28 % 1,806
1,379
31 % $ 824.6
$ 843.6
(2 )%

Backlog:


	At January 31,
	Backlog Value ($ in millions)						Backlog Units				Average Backlog Price ($ in thousands)
	2021		2020		% Change		2021	2020	% Change		2021		2020		% Change
Traditional Home Building:
North	$	1,413.5	$	1,213.1	17	%	1,904	1,749	9	%	$	742.4	$	693.6	7	%
Mid-Atlantic	934.0		542.5		72	%	1,136	786	45	%	$	822.1	$	690.2	19	%
South	1,210.4		818.4		48	%	1,715	1,127	52	%	$	705.8	$	726.1	(3)	%
Mountain	2,044.8		1,246.4		64	%	2,727	1,695	61	%	$	749.8	$	735.4	2	%
Pacific	1,700.7		1,472.6		15	%	1,291	994	30	%	$	1,317.4	$	1,481.5	(11)	%
Traditional Home Building	7,303.4		5,293.0		38	%	8,773	6,351	38	%	$	832.5	$	833.4	—	%
City Living	170.1		157.2		8	%	115	110	5	%	$	1,478.9	$	1,428.9	3	%
Total	$	7,473.5	$	5,450.2	37	%	8,888	6,461	38	%	$	840.9	$	843.5	—	%

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,
	Backlog Value ($ in millions)						Backlog Units				Average Backlog Price ($ in thousands)
	2020		2019		% Change		2020	2019	% Change		2020		2019		% Change
Traditional Home Building:
North	$	1,369.1	$	1,179.6	16	%	1,906	1,742	9	%	$	718.3	$	677.2	6	%
Mid-Atlantic	770.4		535.3		44	%	990	784	26	%	$	778.2	$	682.7	14	%
South	1,038.4		757.3		37	%	1,488	1,048	42	%	$	697.9	$	722.6	(3)	%
Mountain	1,670.7		1,150.9		45	%	2,274	1,606	42	%	$	734.7	$	716.6	3	%
Pacific	1,387.1		1,484.4		(7)	%	1,044	974	7	%	$	1,328.6	$	1,524.0	(13)	%
Traditional Home Building	6,235.7		5,107.5		22	%	7,702	6,154	25	%	$	809.6	$	829.9	(2)	%
City Living	138.9		149.6		(7)	%	89	112	(21)	%	$	1,560.3	$	1,335.6	17	%
Total	$	6,374.6	$	5,257.1	21	%	7,791	6,266	24	%	$	818.2	$	839.0	(2)	%

At October 31,

Backlog Value
($ in millions)
Backlog Units
Average Backlog Price
($ in thousands)
2019 2018 % Change 2019 2018 % Change 2019 2018 % Change
Restated Restated Restated Restated Restated Restated
Traditional Home Building:
North $ 1,179.6
$ 1,150.1
3 % 1,742
1,698
3 % $ 677.2
$ 677.3
— %
Mid-Atlantic 535.3
500.1
7 % 784
737
6 % $ 682.7
$ 678.6
1 %
South 757.3
780.3
(3 )% 1,048
971
8 % $ 722.6
$ 803.6
(10 )%
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 5,107.5
5,344.9
(4 )% 6,154
5,939
4 % $ 829.9
$ 900.0
(8 )%
City Living 149.6
177.6
(16 )% 112
166
(33 )% $ 1,335.6
$ 1,069.7
25 %
Total $ 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,
	2021		2020		% Change
Traditional Home Building:
North	$	18.9	$	2.5	656	%
Mid-Atlantic	18.8		7.0		169	%
South	21.5		9.1		136	%
Mountain	36.0		17.6		105	%
Pacific	47.5		63.3		(25)	%
Traditional Home Building	142.7		99.5		43	%
City Living (1)	32.7		9.5		244	%
Corporate and other	(48.0)		(43.1)		(11)	%
Total	$	127.4	$	65.9	93	%

Three months ended January 31,
2020 2019 % Change
Restated
Traditional Home Building:
North $ 2.5
$ 15.1
(83 )%
Mid-Atlantic 7.0
7.1
(1 )%
South 9.1
15.7
(42 )%
Mountain 17.6
25.6
(31 )%
Pacific 63.3
91.6
(31 )%
Traditional Home Building 99.5
155.1
(36 )%
City Living 9.5
14.6
(35 )%
Corporate and other (43.1 ) (18.3 ) (136 )%
Total $ 65.9
$ 151.4
(56 )%
(1) In the first quarter of fiscal 2021, we sold certain commercial assets associated with our Hoboken, New Jersey condominium projects for $82.4 million which is included in Land sales and other revenues. City Living recognized net gains of $38.3 million from these sales.

interest income; income from certain of our ancillary businesses, including Gibraltar; and income from our Rental Property Joint Ventures and Gibraltar Joint Ventures.

Traditional Home Building

North


	Three months ended January 31,
	2020			2019			Change			Three months ended January 31,
				Restated						2021			2020			Change
Units Delivered and Revenues:									Units Delivered and Revenues:
Home sales revenues ($ in millions)	$	254.1		$	271.5		(6	)%	Home sales revenues ($ in millions)	$	312.6		$	254.1		23	%
Units delivered	393			384			2	%	Units delivered	451			393			15	%
Average delivered price ($ in thousands)	$	646.5		$	707.1		(9	)%	Average delivered price ($ in thousands)	$	693.2		$	646.5		7	%

Net Contracts Signed:									Net Contracts Signed:
Net contract value ($ in millions)	$	287.2		$	275.2		4	%	Net contract value ($ in millions)	$	356.8		$	287.2		24	%
Net contracted units	400			402			—	%	Net contracted units	449			400			12	%
Average contracted price ($ in thousands)	$	717.9		$	684.7		5	%	Average contracted price ($ in thousands)	$	794.6		$	717.9		11	%

Home sales cost of revenues as a percentage of home sale revenues	86.8		%	83.7		%			Home sales cost of revenues as a percentage of home sale revenues	84.0		%	85.4		%

Income before income taxes ($ in millions)	$	2.5		$	15.1		(83	)%	Income before income taxes ($ in millions)	$	18.9		$	2.5		656	%

Number of selling communities at January 31,	82			89			(8	)%	Number of selling communities at January 31,	61			82			(26)	%

The increase in the number of homes delivered in the fiscal ~~2020 period, as compared to the fiscal 2019~~2021 period was mainly due to an increase in the number of ~~quickly delivery homes.~~homes in backlog at October 31, 2020, as compared to the number of homes in backlog at October 31, 2019, and higher backlog conversion in the fiscal 2021 period. The ~~decrease~~increase in the average price of homes delivered in the fiscal ~~2020 period, as compared to the fiscal 2019~~2021 period was due primarily to a shift in the number of homes delivered to ~~less~~more 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 period.~~sales price increases.

The ~~decrease~~increase in the number of net contracts signed in the fiscal ~~2020 period, as compared to the fiscal 2019~~2021 period was ~~principally~~ due mainly to increased demand partially offset by a decrease in the ~~average~~ number of selling ~~communities, offset, in part, by increased demand.~~communities. The increase in the average value of each contract signed in the fiscal ~~2020 period, as compared to the fiscal 2019~~2021 period was mainly due to ~~shifts~~sales price increases and a shift in the number of contracts signed to more expensive areas and/or products.

The ~~decrease~~increase in income before income taxes in the ~~three-month~~fiscal 2021 period ~~ended January 31, 2020, as compared to the three-month period ended January 31, 2019,~~ was principally attributable to higher earnings from increased revenues, lower home sales cost of revenues, as a percentage of home sale revenues, ~~lower earnings from decreased revenues,~~ and ~~higher~~lower SG&A costs. The ~~increase~~decrease in home sales cost of revenues, as a percentage of home sales revenues, in the fiscal 2021 period was primarily due to a shift in product mix/areas to ~~lower-margin~~higher-margin areas and higher incentives associated with the prior year selling environment, offset, in part, by lower inventory impairment charges. Inventory impairment charges were $94,000 in the three-month period ended January 31, 2020, as compared to $1.7 million in the three-month period ended January 31, 2019.sales price increases.

Mid-Atlantic


	Three months ended January 31,
	2020			2019			Change			Three months ended January 31,
				Restated						2021			2020			Change
Units Delivered and Revenues:									Units Delivered and Revenues:
Home sales revenues ($ in millions)	$	162.5		$	134.9		20	%	Home sales revenues ($ in millions)	$	164.0		$	162.5		1	%
Units delivered	240			211			14	%	Units delivered	227			240			(5)	%
Average delivered price ($ in thousands)	$	677.0		$	639.3		6	%	Average delivered price ($ in thousands)	$	722.4		$	677.0		7	%

Net Contracts Signed:									Net Contracts Signed:
Net contract value ($ in millions)	$	169.4		$	160.4		6	%	Net contract value ($ in millions)	$	327.5		$	169.4		93	%
Net contracted units	242			253			(4	)%	Net contracted units	373			242			54	%
Average contracted price ($ in thousands)	$	700.1		$	633.8		10	%	Average contracted price ($ in thousands)	$	878.0		$	700.1		25	%

Home sales cost of revenues as a percentage of home sale revenues	84.5		%	83.9		%			Home sales cost of revenues as a percentage of home sale revenues	77.9		%	82.3		%

Income before income taxes ($ in millions)	$	7.0		$	7.1		(1	)%	Income before income taxes ($ in millions)	$	18.8		$	7.0		169	%

Number of selling communities at January 31,	40			39			3	%	Number of selling communities at January 31,	38			40			(5)	%

The ~~increase~~decrease in the number of homes delivered in the fiscal ~~2020 period, as compared to the fiscal 2019~~2021 period was mainly due to ~~the delivery of 55 homes in metropolitan Atlanta, Georgia from the Sharp acquisition,~~lower backlog conversion, offset, in part, by ~~a decrease~~an increase in the number of ~~non-Sharp~~ homes in backlog at October 31, ~~2019,~~2020, as compared to the number of homes in backlog at

October 31, ~~2018.~~2019. The increase in the average price of homes delivered in the fiscal ~~2020 period, as compared to the fiscal 2019~~2021 period was primarily due to a shift in the number of homes delivered to more expensive areas and/or ~~products.~~products, primarily in Virginia, and sales price increases in the fiscal 2021 period.

The ~~decrease~~increase in the number of net contracts signed in the fiscal ~~2020 period, as compared to the fiscal 2019~~2021 period was ~~principally~~ due mainly to increased demand partially offset by a decrease in the average number of selling communities ~~offset,~~ in ~~part, by an increase in contracts resulting from~~ the ~~Sharp acquisition.~~fiscal 2021 period. The increase in the average value of each contract signed in the fiscal ~~2020 period, as compared to the fiscal 2019~~2021 period was mainly due to ~~shifts~~a shift in the number of contracts signed to more expensive areas and/or ~~products.~~products and sales price increases in the fiscal 2021 period.

The ~~decrease~~increase in income before income taxes in the fiscal ~~2020 period, as compared to the fiscal 2019~~2021 period was mainly due ~~to higher SG&A costs and an increase in~~lower home sales ~~costs of revenues, as a percentage of home sale revenues. This decrease was partially offset by higher earnings on increased revenues. The increase in home sales costs~~cost of revenues, as a percentage of home sale revenues, and higher joint venture income, partially offset by higher SG&A costs in the fiscal ~~2020~~2021 period. The decrease in home sales cost of revenues, as a percentage of home sales revenues, in the fiscal 2021 period was primarily due to a shift in product mix/areas to higher-margin areas in the fiscal 2021 period, the impact of purchase accounting ~~for~~on the ~~homes delivered~~fiscal 2020 period related to a builder acquisition in Georgia, which was completed in fiscal 2019, and sales price increases in the fiscal 2021 period. The higher joint venture income in the fiscal 2021 period was due to a $6.0 million gain recognized from an asset sale of commercial property by one of our Land Development Joint Ventures in 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.~~

fiscal 2021 period.

South


	Three months ended January 31,
	2020			2019			Change			Three months ended January 31,
				Restated						2021			2020			Change
Units Delivered and Revenues:									Units Delivered and Revenues:
Home sales revenues ($ in millions)	$	183.6		$	176.9		4	%	Home sales revenues ($ in millions)	$	216.9		$	183.6		18	%
Units delivered	274			228			20	%	Units delivered	341			274			24	%
Average delivered price ($ in thousands)	$	670.2		$	776.0		(14	)%	Average delivered price ($ in thousands)	$	636.0		$	670.2		(5)	%

Net Contracts Signed:									Net Contracts Signed:
Net contract value ($ in millions)	$	244.4		$	152.4		60	%	Net contract value ($ in millions)	$	388.8		$	244.4		59	%
Net contracted units	353			201			76	%	Net contracted units	568			353			61	%
Average contracted price ($ in thousands)	$	692.4		$	758.2		(9	)%	Average contracted price ($ in thousands)	$	684.5		$	692.4		(1)	%

Home sales cost of revenues as a percentage of home sale revenues	84.7		%	84.1		%			Home sales cost of revenues as a percentage of home sale revenues	77.5		%	82.3		%

Income before income taxes ($ in millions)	$	9.1		$	15.7		(42	)%	Income before income taxes ($ in millions)	$	21.5		$	9.1		136	%

Number of selling communities at January 31,	71			56			27	%	Number of selling communities at January 31,	73			71			3	%

The increase in the number of homes delivered in the fiscal ~~2020 period, as compared to the fiscal 2019~~2021 period was mainly due to an increase in the ~~delivery~~number of 51 homes in ~~several markets~~backlog at October 31, 2020, as compared to the number of homes in ~~South Carolina from~~backlog at October 31, 2019, partially offset by lower backlog conversion in the ~~Sabal acquisition.~~fiscal 2021 period. The decrease in the average price of homes delivered in the fiscal ~~2020 period, as compared to the fiscal 2019~~2021 period was primarily due to a shift in the number of homes delivered to less expensive areas and/or ~~products.~~products in the fiscal 2021 period.

The increase in the number of net contracts signed in the fiscal ~~2020 period, as compared to the fiscal 2019~~2021 period was ~~mainly~~ due principally to an increase in demand and 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.~~fiscal 2021 period. The decrease in the average value of each contract signed in the fiscal 2021 period was ~~mainly~~primarily due to a shift in the number of contracts signed to less expensive areas and/or products, primarily in ~~South Carolina resulting from~~Florida, offset, in part, by sales price increases in the ~~Sabal acquisition, where average prices are significantly lower than the regional average.~~fiscal 2021 period.

The ~~decrease~~increase in income before income taxes in the ~~three-month~~fiscal 2021 period ~~ended January 31, 2020, as compared to the three-month period ended January 31, 2019,~~ was ~~mainly~~principally due to higher ~~SG&A costs~~earnings from increased revenues and ~~higher~~lower home sales cost of revenues, as a percentage of home ~~sales~~sale revenues partially offset by higher ~~earnings from increased revenues.~~SG&A costs in the fiscal 2021 period. The ~~increases~~decrease in home sales cost of revenues, as a percentage of home sales revenues, in the fiscal 2021 period was primarily due to a shift in product mix/areas to ~~lower-margin~~higher-margin areas and the impact of purchase accounting ~~for~~on the 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 three months ended January 31,fiscal 2020 ~~and 2019, respectively.~~

~~During our review of operating communities for impairment in the three months ended January 31, 2019, primarily due~~period related to a ~~lack of improvement and/or a decrease~~builder acquisition in ~~customer demand, we decided to sell the remaining lots~~South Carolina, which was completed 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.~~2019.

Mountain


	Three months ended January 31,
	2020			2019			Change			Three months ended January 31,
				Restated						2021			2020			Change
Units Delivered and Revenues:									Units Delivered and Revenues:
Home sales revenues ($ in millions)	$	263.1		$	226.4		16	%	Home sales revenues ($ in millions)	$	378.0		$	263.1		44	%
Units delivered	401			366			10	%	Units delivered	525			401			31	%
Average delivered price ($ in thousands)	$	656.1		$	618.6		6	%	Average delivered price ($ in thousands)	$	720.0		$	656.1		10	%

Net Contracts Signed:									Net Contracts Signed:
Net contract value ($ in millions)	$	357.5		$	241.1		48	%	Net contract value ($ in millions)	$	751.8		$	357.5		110	%
Net contracted units	490			331			48	%	Net contracted units	978			490			100	%
Average contracted price ($ in thousands)	$	729.5		$	728.4		—	%	Average contracted price ($ in thousands)	$	768.7		$	729.5		5	%

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

Income before income taxes ($ in millions)	$	17.6		$	25.6		(31	)%	Income before income taxes ($ in millions)	$	36.0		$	17.6		105	%

Number of selling communities at January 31,	83			76			9	%	Number of selling communities at January 31,	93			83			12	%

The increase in the number of homes delivered in the fiscal ~~2020 period, as compared to the fiscal 2019~~2021 period was mainly due to an increase in the number of homes in backlog at October 31, ~~2019,~~2020, as compared to the number of homes in backlog at October 31, ~~2018,~~2019, partially offset by lower backlog ~~conversion.~~conversion in the fiscal 2021 period. The increase in the average price of homes delivered in the fiscal ~~2020 period, as compared to the fiscal 2019~~2021 period was primarily due to a shift in the number of homes delivered to more expensive areas and/or products.

The increase in the number of net contracts signed in the fiscal ~~2020 period, as compared to the fiscal 2019~~2021 period was primarily due to ~~an increase in~~increased demand and an increase in the average number of selling ~~communities.~~communities in the fiscal 2021 period. The increase in the average value of each contract signed in the fiscal 2021 period was mainly due to sales price increases partially offset by a shift in the number of contracts signed to less expensive areas and/or products in the fiscal 2021 period.

The ~~decrease~~increase in income before income taxes in the ~~three months ended January 31, 2020, as compared to the three months ended January 31, 2019,~~fiscal 2021 period was due mainly to higher ~~SG&A costs and higher home sales cost of revenues, as a percentage of home sales revenues, offset, in part, by higher~~ earnings from increased ~~revenues. The increase~~revenues in ~~home sales cost of revenues, as a percentage of home sales revenues, was primarily due to a shift in product mix/areas to lower-margin areas and higher incentives associated with~~ the ~~prior year selling environment.~~fiscal 2021 period.

Pacific


	Three months ended January 31,
	2020			2019			Change			Three months ended January 31,
				Restated						2021			2020			Change
Units Delivered and Revenues:									Units Delivered and Revenues:
Home sales revenues ($ in millions)	$	395.3		$	444.1		(11	)%	Home sales revenues ($ in millions)	$	331.1		$	395.3		(16)	%
Units delivered	267			277			(4	)%	Units delivered	226			267			(15)	%
Average delivered price ($ in thousands)	$	1,480.7		$	1,603.1		(8	)%	Average delivered price ($ in thousands)	$	1,465.3		$	1,480.7		(1)	%

Net Contracts Signed:									Net Contracts Signed:
Net contract value ($ in millions)	$	383.4		$	294.6		30	%	Net contract value ($ in millions)	$	644.1		$	383.4		68	%
Net contracted units	287			169			70	%	Net contracted units	473			287			65	%
Average contracted price ($ in thousands)	$	1,335.8		$	1,743.5		(23	)%	Average contracted price ($ in thousands)	$	1,361.8		$	1,335.8		2	%

Home sales cost of revenues as a percentage of home sale revenues	77.0		%	73.2		%			Home sales cost of revenues as a percentage of home sale revenues	76.3		%	74.8		%

Income before income taxes ($ in millions)	$	63.3		$	91.6		(31	)%	Income before income taxes ($ in millions)	$	47.5		$	63.3		(25)	%

Number of selling communities at January 31,	48			52			(8	)%	Number of selling communities at January 31,	41			48			(15)	%

The decrease in the number of homes delivered in the fiscal ~~2020 period, as compared to the fiscal 2019~~2021 period was mainly due to the decreased number of homes delivered in California as a result the lower number of homes in backlog at October 31, ~~2019,~~2020, as compared to the number of homes in backlog at

October 31, ~~2018, offset,~~2019, and lower backlog conversion in ~~part, by an increase in homes delivered in California, which was mainly attributable to closings at a large high-density condominium community in Northern California.~~the fiscal 2021 period. The decrease in the average price of homes delivered in fiscal ~~2020 period, as compared to the fiscal 2019~~2021 period was primarily due to a shift in the number of homes delivered to less expensive ~~areas.~~areas and/or products, offset, in part, by sales price increases in the fiscal 2021 period.

The ~~increases~~increase in the number of net contracts signed in the fiscal ~~2020 period, as compared to the fiscal 2019~~2021 period was ~~principally~~primarily due to an increase in demand, ~~partially~~ offset, in part, by a decrease in the average number of selling ~~communities.~~communities in the fiscal 2021 period. The ~~decrease~~increase in the average value

of each contract signed in the fiscal ~~2020 period, as compared to the fiscal 2019~~2021 period was mainly due to sales price increases, offset, in part, by a shift in the number of contracts signed to less expensive areas and/or products.

The decrease in income before income taxes in the fiscal ~~2020 period, as compared to the fiscal 2019~~2021 period was mainly due to lower earnings from decreased revenues and higher home sales cost of revenues, as a percentage of home sales revenues ~~and~~in the fiscal 2021 period. This decrease was partially offset lower ~~earnings from decreased revenues.~~SG&A costs. The increase in home sales cost of revenues, as a percentage of home sales revenues, ~~was~~were primarily due to ~~cost overruns at a large high-density condominium community in Northern California, higher incentives associated with the prior year selling environment, and~~ a shift in product mix/areas to lower-margin ~~areas.~~areas partially offset by sales price increases in the fiscal 2021 period.

City Living


	Three months ended January 31,
	2021			2020			Change
Units Delivered and Revenues:
Home sales revenues ($ in millions)	$	7.8		$	39.8		(80)	%
Units delivered	7			36			(81)	%
Average delivered price ($ in thousands)	$	1,113.4		$	1,106.5		1	%

Net Contracts Signed:
Net contract value ($ in millions)	$	39.0		$	47.4		(18)	%
Net contracted units	33			34			(3)	%
Average contracted price ($ in thousands)	$	1,181.8		$	1,394.9		(15)	%

Home sales cost of revenues as a percentage of home sale revenues	88.2		%	66.9		%

Income before income taxes ($ in millions) (1)	$	32.7		$	9.5		244	%

Number of selling communities at January 31,	3			4			(25)	%

Three months ended January 31,
2020 2019 Change
Units Delivered and Revenues:
Home sales revenues ($ in millions) $ 39.8
$ 68.6
(42 )%
Units delivered 36
64
(44 )%
Average delivered price ($ in thousands) $ 1,106.5
$ 1,071.8
3 %

Net Contracts Signed:
Net contract value ($ in millions) $ 47.4
$ 39.7
19 %
Net contracted units 34
23
48 %
Average contracted price ($ in thousands) $ 1,394.9
$ 1,724.4
(19 )%

Home sales cost of revenues as a percentage of home sale revenues 69.0 % 76.1 %

Income before income taxes ($ in millions) $ 9.5
$ 14.6
(35 )%

Number of selling communities at January 31, 4
5
(20 )%
(1) In the first quarter of fiscal 2021, we sold certain commercial assets associated with our Hoboken, New Jersey condominium projects for $82.4 million which is included in Land sales and other revenues. City Living recognized net gains of $38.3 million from these sales.

The decrease in the number of homes delivered in the fiscal ~~2020 period, as compared to the fiscal 2019~~2021 period was mainly attributable to the decreased number of homes in backlog at October 31, ~~2019,~~2020, as compared to the number of homes in backlog at October 31, ~~2018,~~2019, and lower backlog ~~conversion.~~conversion in the fiscal 2021 period. The increase in the average price of homes delivered in fiscal ~~2020 period, as compared to the fiscal 2019~~2021 period was primarily due to a shift in the number of homes delivered to more expensive areas and/or products.

The ~~increase in the number of net contracts signed in the fiscal 2020 period, as compared to the fiscal 2019 period, was primarily due to an increase in demand. The~~ decrease in the average sales price of net contracts signed in the fiscal ~~2020 period, as compared to the fiscal 2019~~2021 period was principally due a shift to less expensive ~~units. In the three months ended January 31, 2020, 32% of the net contracts signed were in buildings located in New York, New York, where average prices are higher, as compared to 61%~~units in the ~~three months ended January 31, 2019.~~fiscal 2021 period.

The ~~decrease~~increase in income before income taxes in the fiscal ~~2020 period, as compared to the fiscal 2019~~2021 period was mainly due to gains of $38.3 million recognized from the sales of a parking garage and retail space associated with one of our Hoboken, New Jersey condominium projects, offset, in part, by higher home sales cost of revenues, as a percentage of home sale revenues; lower earnings from decreased ~~revenues~~revenues; and ~~a decrease~~$2.1 million of other-than temporary impairment charges that we recognized on two of our Home Building Joint Ventures in ~~earnings from our investments in unconsolidated entities. This decrease was partially offset by lower~~the fiscal 2021 period. The higher home sales cost of revenues, as a percentage of home sale revenues ~~and lower SG&A costs. The lower home sales cost of revenues, as a percentage of home sale revenues,~~in the fiscal 2021 period was principally due ~~primarily~~ to a shift in the number of homes delivered to buildings with ~~higher~~lower margins and an impairment charge of ~~$2.8~~$1.1 million in the fiscal ~~2019~~2021 period. As a result of decreased demand, 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 three months ended January 31, 2020, earnings from our investments in unconsolidated entities decreased $3.1 million, as compared to the three months ended January 31, 2019. This decrease was primarily due to a decrease in earnings from one joint venture which delivered its last home in the third quarter of fiscal 2019; a shift in the number of homes delivered to buildings with lower margins; and a shift in the number of homes delivered in joint ventures where our ownership percentage was lower in fiscal 2020, as compared to fiscal 2019. The tables below provide information related to deliveries, revenues, and net contracts signed by our City Living Home Building Joint Ventures, for the periods indicated, and the related backlog for the dates indicated ($ amounts in millions):

Three months ended January 31,
2020
Units 2019
Units 2020
$ 2019
$
Deliveries 23
4
$ 67.1
$ 17.2
Net contracts signed 8
2
$ 23.8
$ 9.6

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 three months ended January 31, ~~2020~~2021 and ~~2019,~~2020, loss before income taxes was ~~$43.1~~$48.0 million and ~~$18.3~~$43.1 million, respectively. The increase in the loss before income taxes in the fiscal ~~2020 period, as compared to the fiscal 2019~~2021 period was principally ~~attributable to~~ a ~~$12.2~~$10.7 million gain recognized in the fiscal 2020 period from the sale of ~~a golf club~~our investment in our of our Rental Property Joint Ventures to our joint venture partner; lower interest income; losses recognized in the fiscal ~~2019 period; an $8.4 million gain recognized from the sale of land to~~2021 period by a ~~newly formed Rental Property Joint Venture in the fiscal 2019 period; higher SG&A costs; lower interest income;~~joint venture that owns a hotel that was adversely impacted by COVID-19; and an increase in losses in several Rental Property Joint Ventures related to the commencement of operations and lease up ~~activities.~~activities in the fiscal 2021 period. These increases were partially offset by ~~a $10.7 million gain recognized~~lower SG&A costs, higher earnings from our mortgage company operations primarily due to increases in volume increases and wider spreads, and lower losses incurred in our apartment living operations, in the fiscal ~~2020~~2021 period. The decrease in SG&A costs in the fiscal 2021 period ~~from~~was primarily due to the ~~sale~~implementation, commencing in fiscal 2020’s second quarter, of ~~our investment in one~~a number of ~~our Rental Property Joint Ventures~~cost reduction initiatives to ~~our joint venture partner.~~improve efficiencies and rationalize overhead expenses, including workforce reductions and reduced advertising spend.

AVAILABLE INFORMATION

Our principal Internet address is www.tollbrothers.com, and our Investor Relations website is located at ~~www.tollbrothers.com/investor-relations.~~investors.tollbrothers.com. 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 January 31, ~~2020,~~2021, our debt obligations by scheduled maturity, weighted-average interest rates, and estimated fair value (amounts in thousands):


	Fixed-rate debt			Variable-rate debt (a)
Fiscal year of maturity	Amount		Weighted- average interest rate	Amount		Weighted- average interest rate
2021 (b)	$	292,959	5.32%	$	125,829	1.83%
2022	453,011		5.71%	—
2023	466,323		4.37%	—
2024	57,943		3.29%	—
2025 (b)	61,759		5.66%	—
Thereafter (c)	1,638,790		4.49%	650,000		1.18%
Bond discounts, premiums and deferred issuance costs, net	(7,694)			(2,635)
Total	$	2,963,091	4.74%	$	773,194	1.28%
Fair value at January 31, 2021	$	3,230,866		$	775,829

Fixed-rate debt Variable-rate debt (a)
Fiscal year of maturity Amount
Weighted-
average
interest rate
Amount
Weighted-
average
interest rate
2020 $ 80,085
4.33% $ —
—%
2021 60,160
4.01% 97,803
3.56%
2022 438,773
5.85% 150
1.02%
2023 427,569
4.39% 150
1.02%
2024 293,081
5.44% 1,610
1.02%
Thereafter 1,686,995
4.52% 961,300
2.70%
Bond discounts, premiums and deferred issuance costs, net (9,524 )
(2,964 )
Total $ 2,977,139
4.77% $ 1,058,049
2.77%
Fair value at January 31, 2020 $ 3,167,731
$ 1,061,013

(a) Based upon the amount of variable-rate debt outstanding at January 31, 2021, and holding the variable-rate debt balance constant, each 1% increase in interest rates would increase the interest incurred by us by approximately $7.8 million per year, without consideration of the interest rate swap transactions described in (c) below.


~~(a)~~	Based upon the amount of variable-rate debt outstanding at 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 $10.6 million per year.

(b) On February 12, 2021, we delivered a notice of optional redemption to the holders of our outstanding 5.625% Senior Notes due 2024 (the “2024 Notes”), pursuant to which the we will redeem, on March 15, 2021, all $250.0 million aggregate principal amount of outstanding 2024 Notes.

(c) In November 2020, we entered into 5 interest rate swap transactions to hedge $400.0 million of the Term Loan Facility through October 2025, which is included in the variable-rate debt column in the table above. The interest rate swaps effectively fix the interest cost on the $400.0 million at 0.369% plus the spread set forth in the pricing schedule in the Term Loan Facility, which was 1.05% as of January 31, 2021. These interest rate swaps were designated as cash flow hedges.

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~~SEC’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.

We continue to implement a new ~~ERP~~enterprise resource planning (“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 January 31, ~~2020,~~2021, 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

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, thereThere have been no material changes in our risk factors ~~since those reported~~as previously disclosed in ~~2019~~Part I, Item 1A., “Risk Factors” in our 2020 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 January 31, ~~2020,~~2021, 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)
November 1, 2020 to November 30, 2020	1	$	43.94	1	19,983
December 1, 2020 to December 31, 2020	3,373	$	44.92	3,373	16,610
January 1, 2021 to January 31, 2021	653	$	42.62	653	15,957
Total	4,027			4,027

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 January 31, 2021, we withheld 153,986 of the shares subject to performance based restricted stock units and restricted stock units to cover approximately $7.2 million of income tax withholdings and we issued the remaining 316,976 shares to the recipients. The shares withheld are not included in the total number of shares purchased in the table above.

~~(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 January 31, 2020, we withheld 104,324 of the shares subject to performance based restricted stock units and restricted stock units to cover approximately $4.2 million of income tax withholdings and we issued the remaining 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 January 31, ~~2020,~~2021, the net exercise method was not employed to exercise options.

~~(b)~~

On December 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 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.

(b) On March 10, 2020, 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 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 March 10, 2020, the existing authorization that had been in effect since December 10, 2019. Our Board of Directors did not fix any expiration date for the current share repurchase program.

~~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

January 31, ~~2020.~~2021.

Dividends

During the three months ended January 31, ~~2020,~~2021, we paid a cash ~~dividend~~dividends of $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 revolving credit agreement and term loan agreement each require us to maintain a minimum tangible net worth (as defined in the applicable agreement), which restricts the amount of dividends we may pay. At January 31, ~~2020,~~2021, under our bank credit agreements, we could have paid up to approximately ~~$2.36~~$2.62 billion of cash dividends.

ITEM 6. EXHIBITS




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 January 31, ~~2020,~~2021, filed on March ~~9, 2020,~~8, 2021, 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:

March ~~9, 2020~~8, 2021

By:

/s/ Martin P. Connor

Martin P. Connor

Senior Vice President and Chief Financial

Officer (Principal Financial Officer)

Date:

March ~~9, 2020~~8, 2021

By:

/s/ Michael J. Grubb

Michael J. Grubb

Senior Vice President and Chief Accounting

Officer (Principal Accounting Officer)



			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)			5

Notes to Condensed Consolidated Financial Statements (Unaudited)			6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			3224

Item 3. Quantitative and Qualitative Disclosures About Market Risk			4740

Item 4. Controls and Procedures			4840

PART II. Other Information

Item 1. Legal Proceedings			4941

Item 1A. Risk Factors			4941

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			5142

Item 6. Exhibits			5243

SIGNATURES			5344



	January 31, 2020			October 31, 2019
	(unaudited)
ASSETS
Cash and cash equivalents	$	519,793		$	1,286,014
Inventory	8,198,352			7,873,048
Property, construction, and office equipment, net	285,785			273,412
Receivables, prepaid expenses, and other assets (1)	978,166			715,441
Mortgage loans held for sale, at fair value	111,995			218,777
Customer deposits held in escrow	71,841			74,403
Investments in unconsolidated entities	364,352			366,252
Income taxes receivable	56,922			20,791
	$	10,587,206		$	10,828,138
LIABILITIES AND EQUITY
Liabilities
Loans payable	$	1,277,183		$	1,111,449
Senior notes	2,660,352			2,659,898
Mortgage company loan facility	97,653			150,000
Customer deposits	417,092			385,596
Accounts payable	314,482			348,599
Accrued expenses	1,011,548			950,932
Income taxes payable	103,816			102,971
Total liabilities	5,882,126			5,709,445
Equity
Stockholders’ equity
Preferred stock, none issued	—			—
Common stock, 152,937 shares issued at January 31, 2020 and October 31, 2019	1,529			1,529
Additional paid-in capital	723,109			726,879
Retained earnings	4,816,286			4,774,422
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	4,655,551			5,071,816
Noncontrolling interest	49,529			46,877
Total equity	4,705,080			5,118,693
	$	10,587,206		$	10,828,138



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



	January 31, 2020		October 31, 2019
			(Restated)
Traditional Home Building:
North	$	1,574,303	$	1,487,012
Mid-Atlantic	908,884		854,470
South	1,234,819		1,165,974
Mountain	1,917,134		1,769,649
Pacific	2,611,868		2,627,417
Traditional Home Building	8,247,008		7,904,522
City Living	546,468		529,507
Corporate and other	1,793,730		2,394,109
Total	$	10,587,206	$	10,828,138



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



	Toll Brothers, Inc.		Subsidiary Issuer		Guarantor Subsidiaries	Nonguarantor Subsidiaries	Eliminations		Consolidated
ASSETS
Cash and cash equivalents	—		—		336,479	183,314	—		519,793
Inventory					8,102,794	95,558			8,198,352
Property, construction and office equipment, net					275,830	9,955			285,785
Receivables, prepaid expenses and other assets	5,840				300,894	750,123	(78,691	)	978,166
Mortgage loans held for sale						111,995			111,995
Customer deposits held in escrow					71,568	273			71,841
Investments in unconsolidated entities					44,361	319,991			364,352
Investments in and advances to consolidated entities	4,721,368		2,724,966		185,371	147,413	(7,779,118	)	—
Income taxes receivable	56,922								56,922
	4,784,130		2,724,966		9,317,297	1,618,622	(7,857,809	)	10,587,206
LIABILITIES AND EQUITY
Liabilities
Loans payable					1,275,341	36,100	(34,258	)	1,277,183
Senior notes			2,660,352						2,660,352
Mortgage company loan facility						97,653			97,653
Customer deposits					414,790	2,302			417,092
Accounts payable					283,119	31,363			314,482
Accrued expenses	6,776		46,773		572,041	462,991	(77,033	)	1,011,548
Advances from consolidated entities					527,929	507,995	(1,035,924	)	—
Income taxes payable	103,816								103,816
Total liabilities	110,592		2,707,125		3,073,220	1,138,404	(1,147,215	)	5,882,126
Equity
Stockholders’ equity
Common stock	1,529				48	3,006	(3,054	)	1,529
Additional paid-in capital	723,109		49,400			199,034	(248,434	)	723,109
Retained earnings (deficit)	4,834,273		(31,559	)	6,244,029	228,649	(6,459,106	)	4,816,286
Treasury stock, at cost	(879,820	)							(879,820	)
Accumulated other comprehensive loss	(5,553	)							(5,553	)
Total stockholders’ equity	4,673,538		17,841		6,244,077	430,689	(6,710,594	)	4,655,551
Noncontrolling interest						49,529			49,529
Total equity	4,673,538		17,841		6,244,077	480,218	(6,710,594	)	4,705,080
	4,784,130		2,724,966		9,317,297	1,618,622	(7,857,809	)	10,587,206



	Three months ended January 31,
	2020 Units	2019 Units	2020 $		2019 $
Deliveries	23	4	$	67.1	$	17.2
Net contracts signed	8	2	$	23.8	$	9.6