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,~~April 30, 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.)

1140 Virginia Drive	Fort Washington	Pennsylvania	19034
(Address of principal executive offices)			(Zip Code)

(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 4,~~June 1, 2021, there were approximately ~~123,124,000~~123,376,000 shares of Common Stock, par value $0.01 per share, outstanding.

TOLL BROTHERS, INC.

TABLE OF CONTENTS


			Page No.

Statement on Forward-Looking Information			1

PART I. Financial Information

Item 1. Financial Statements

Condensed Consolidated Balance Sheets (Unaudited)			2

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

Condensed Consolidated Statements of Changes in Equity (Unaudited)			4

Condensed Consolidated Statements of Cash Flows (Unaudited)			56

Notes to Condensed Consolidated Financial Statements (Unaudited)			67

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2428

Item 3. Quantitative and Qualitative Disclosures About Market Risk			4047

Item 4. Controls and Procedures			4047

PART II. Other Information

Item 1. Legal Proceedings			4148

Item 1A. Risk Factors			4148

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			4249

Item 6. Exhibits			4350

SIGNATURES			4451

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 (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 and statements regarding: the impact of the novel coronavirus (“COVID-19”) on the U.S. economy and on our business; expectations regarding interest rates and inflation; the markets in which we operate or may ~~operate, and on our business;~~operate; our strategic objectives and priorities; our land acquisition, land development and capital allocation plans and priorities; housing market conditions; demand for our homes; anticipated operating 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, 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; our ability to acquire or dispose of land and pursue real estate opportunities; our ability to gain approvals and open new communities; our ability to market, construct and sell homes and properties; ~~our ability to~~the rate at which we deliver homes from backlog; our ability to secure materials and subcontractors; 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 ongoing effects of the COVID-19 pandemic, which ~~are~~remain highly uncertain, cannot be predicted and will depend upon future developments, including the ~~severity~~duration of the pandemic, ~~and its duration,~~ the ~~duration~~impact of ~~social distancing and shelter-in-place orders, further~~ mitigation strategies taken by applicable government authorities, the continued 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;~~land;

•access to adequate capital on acceptable terms;

•geographic concentration of our operations;

•levels of competition;

•the price and availability of lumber, other raw materials, home components 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 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 further discussion of factors that we believe could cause our actual results to differ materially from expected and historical results, see “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			April 30, 2021		October 31, 2020
		(unaudited)					(unaudited)
ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	949,696	$	1,370,944	Cash and cash equivalents	$	714,968	$	1,370,944

Inventory	Inventory	7,923,635		7,658,906		Inventory	8,260,664		7,658,906
Property, construction, and office equipment, net	Property, construction, and office equipment, net	277,696		316,125		Property, construction, and office equipment, net	276,224		316,125
Receivables, prepaid expenses, and other assets (1)	Receivables, prepaid expenses, and other assets (1)	907,775		956,294		Receivables, prepaid expenses, and other assets (1)	849,764		956,294
Mortgage loans held for sale, at fair value	Mortgage loans held for sale, at fair value	125,475		231,797		Mortgage loans held for sale, at fair value	204,421		231,797
Customer deposits held in escrow	Customer deposits held in escrow	80,889		77,291		Customer deposits held in escrow	94,432		77,291
Investments in unconsolidated entities	Investments in unconsolidated entities	571,632		430,701		Investments in unconsolidated entities	533,595		430,701
Income taxes receivable	Income taxes receivable	27,195		23,675		Income taxes receivable	40,951		23,675
		$	10,863,993	$	11,065,733		$	10,975,019	$	11,065,733
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Liabilities	Liabilities					Liabilities
Loans payable	Loans payable	$	971,504	$	1,147,955	Loans payable	$	1,033,165	$	1,147,955
Senior notes	Senior notes	2,652,162		2,661,718		Senior notes	2,403,163		2,661,718
Mortgage company loan facility	Mortgage company loan facility	112,619		148,611		Mortgage company loan facility	146,932		148,611
Customer deposits	Customer deposits	523,584		459,406		Customer deposits	609,387		459,406
Accounts payable	Accounts payable	460,113		411,397		Accounts payable	502,293		411,397
Accrued expenses	Accrued expenses	1,109,129		1,110,196		Accrued expenses	1,115,437		1,110,196
Income taxes payable	Income taxes payable	200,390		198,974		Income taxes payable	203,853		198,974
Total liabilities	Total liabilities	6,029,501		6,138,257		Total liabilities	6,014,230		6,138,257
Equity	Equity					Equity
Stockholders’ equity	Stockholders’ equity					Stockholders’ equity
Preferred stock, none issued	Preferred stock, none issued	0		0		Preferred stock, none issued	0		0
Common stock, 152,937 shares issued at January 31, 2021 and October 31, 2020		1,529		1,529
Common stock, 152,937 shares issued at April 30, 2021 and October 31, 2020						Common stock, 152,937 shares issued at April 30, 2021 and October 31, 2020	1,529		1,529
Additional paid-in capital	Additional paid-in capital	708,668		717,272		Additional paid-in capital	709,422		717,272
Retained earnings	Retained earnings	5,245,935		5,164,086		Retained earnings	5,352,573		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)
Treasury stock, at cost — 29,567 and 26,410 shares at April 30, 2021 and October 31, 2020, respectively						Treasury stock, at cost — 29,567 and 26,410 shares at April 30, 2021 and October 31, 2020, respectively	(1,148,406)		(1,000,454)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(6,486)		(7,198)		Accumulated other comprehensive loss	(2,048)		(7,198)
Total stockholders’ equity	Total stockholders’ equity	4,786,835		4,875,235		Total stockholders’ equity	4,913,070		4,875,235
Noncontrolling interest	Noncontrolling interest	47,657		52,241		Noncontrolling interest	47,719		52,241
Total equity	Total equity	4,834,492		4,927,476		Total equity	4,960,789		4,927,476
		$	10,863,993	$	11,065,733		$	10,975,019	$	11,065,733

(1) As of ~~January 31,~~April 30, 2021 and October 31, 2020, receivables, prepaid expenses, and other assets include ~~$113.3~~$114.0 million and $163.0 million, respectively, of assets related to consolidated variable interest entities ~~("VIEs"~~(“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,				Three months ended April 30,				Six months ended April 30,
		2021		2020				2021		2020		2021		2020
Revenues:	Revenues:						Revenues:
Home sales	Home sales	$	1,410,704	$	1,297,337		Home sales	$	1,836,260	$	1,516,234	$	3,246,964	$	2,813,571
Land sales and other	Land sales and other	152,672		34,094			Land sales and other	93,864		32,838		246,536		66,932
		1,563,376		1,331,431				1,930,124		1,549,072		3,493,500		2,880,503

Cost of revenues:	Cost of revenues:						Cost of revenues:
Home sales	Home sales	1,121,793		1,033,122			Home sales	1,434,493		1,220,978		2,556,286		2,254,100
Land sales and other	Land sales and other	111,734		32,282			Land sales and other	92,091		26,418		203,825		58,700
		1,233,527		1,065,404				1,526,584		1,247,396		2,760,111		2,312,800
Selling, general and administrative	Selling, general and administrative	210,739		218,531			Selling, general and administrative	219,170		209,128		429,909		427,659
Income from operations	Income from operations	119,110		47,496			Income from operations	184,370		92,548		303,480		140,044
Other:	Other:						Other:
Income from unconsolidated entities		1,194		12,141
Income (loss) from unconsolidated entities							Income (loss) from unconsolidated entities	10,483		(4,271)		11,677		7,870
Other income – net	Other income – net	7,101		6,295			Other income – net	9,213		13,836		17,285		20,131

Expenses related to early retirement of debt							Expenses related to early retirement of debt	(34,240)		0		(35,211)		0
Income before income taxes	Income before income taxes	127,405		65,932			Income before income taxes	169,826		102,113		297,231		168,045
Income tax provision	Income tax provision	30,906		9,056			Income tax provision	41,960		26,443		72,866		35,499
Net income	Net income	$	96,499	$	56,876		Net income	$	127,866	$	75,670	$	224,365	$	132,546

Other comprehensive income, net of tax	Other comprehensive income, net of tax	713		278			Other comprehensive income, net of tax	4,438		278		5,150		556
Total comprehensive income	Total comprehensive income	$	97,212	$	57,154		Total comprehensive income	$	132,304	$	75,948	$	229,515	$	133,102

Per share:	Per share:						Per share:
Basic earnings	Basic earnings	$	0.77	$	0.41		Basic earnings	$	1.03	$	0.59	$	1.79	$	1.00
Diluted earnings	Diluted earnings	$	0.76	$	0.41		Diluted earnings	$	1.01	$	0.59	$	1.77	$	0.99

Weighted-average number of shares:	Weighted-average number of shares:						Weighted-average number of shares:
Basic	Basic	126,060		138,145			Basic	124,295		128,205		125,177		133,175
Diluted	Diluted	127,562		139,889			Diluted	125,999		128,809		126,780		134,349

See accompanying notes.

TOLL BROTHERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts in thousands)

(Unaudited)

For the three months ended ~~January 31,~~April 30, 2021 and 2020:


		Common Stock	Addi- tional Paid-in Capital	Retained Earnings	Treasury Stock	Accum- ulated Other Compre- hensive Loss	Non-controlling Interest	Total Equity		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, 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)
Balance, January 31, 2021									Balance, January 31, 2021	$	1,529	$	708,668	$	5,245,935	$	(1,162,811)	$	(6,486)	$	47,657	$	4,834,492

Net income									Net income	0		0		127,866		0		0		0		127,866

Purchase of treasury stock									Purchase of treasury stock	0		0		0		(253)		0		0		(253)
Exercise of stock options and stock based compensation issuances									Exercise of stock options and stock based compensation issuances	0		(2,790)		0		14,422		0		0		11,632
Employee stock purchase plan issuances									Employee stock purchase plan issuances	0		98		0		236		0		0		334

Stock-based compensation									Stock-based compensation	0		3,446		0		0		0		0		3,446

Dividends declared									Dividends declared	0		0		(21,228)		0		0		0		(21,228)
Other comprehensive income									Other comprehensive income	0		0		0		0		4,438		0		4,438
Income attributable to non-controlling interest									Income attributable to non-controlling interest	0		0		0		0		0		1		1
Capital contributions, net									Capital contributions, net	0		0		0		0		0		61		61
Balance, April 30, 2021									Balance, April 30, 2021	$	1,529	$	709,422	$	5,352,573	$	(1,148,406)	$	(2,048)	$	47,719	$	4,960,789

Balance, January 31, 2020									Balance, January 31, 2020	$	1,529	$	723,109	$	4,816,286	$	(879,820)	$	(5,553)	$	49,529	$	4,705,080

Net income	Net income	0	0	96,499	0	0	0	96,499	Net income	0		0		75,670		0		0		0		75,670

Purchase of treasury stock	Purchase of treasury stock	0	0	0	(179,395)	0	0	(179,395)	Purchase of treasury stock	0		0		0		(157,529)		0		0		(157,529)
Exercise of stock options and stock based compensation issuances	Exercise of stock options and stock based compensation issuances	0	(21,445)	0	16,676	0	0	(4,769)	Exercise of stock options and stock based compensation issuances	0		(716)		0		1,359		0		0		643
Employee stock purchase plan issuances	Employee stock purchase plan issuances	0	7	0	362	0	0	369	Employee stock purchase plan issuances	0		(566)		0		991		0		0		425

Stock-based compensation	Stock-based compensation	0	12,834	0	0	0	0	12,834	Stock-based compensation	0		3,419		0		0		0		0		3,419

Dividends declared	Dividends declared	0	0	(14,055)	0	0	0	(14,055)	Dividends declared	0		0		(13,939)		0		0		0		(13,939)
Other comprehensive income	Other comprehensive income	0	0	0	0	712	0	712	Other comprehensive income	0		0		0		0		278		0		278
Loss attributable to non-controlling interest	Loss attributable to non-controlling interest	0	0	0	0	0	(21)	(21)	Loss attributable to non-controlling interest	0		0		0		0		0		(7)		(7)
Capital distributions, net	Capital distributions, net	0	0	0	0	0	(4,563)	(4,563)	Capital distributions, net	0		0		0		0		0		(318)		(318)
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
Balance, April 30, 2020									Balance, April 30, 2020	$	1,529	$	725,246	$	4,878,017	$	(1,034,999)	$	(5,275)	$	49,204	$	4,613,722

For the six months ended April 30, 2021 and 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		224,365		0		0		0		224,365

Purchase of treasury stock	0		0		0		(179,648)		0		0		(179,648)
Exercise of stock options and stock based compensation issuances	0		(24,235)		0		31,098		0		0		6,863
Employee stock purchase plan issuances	0		106		0		598		0		0		704

Stock-based compensation	0		16,279		0		0		0		0		16,279

Dividends declared	0		0		(35,283)		0		0		0		(35,283)
Other comprehensive income	0		0		0		0		5,150		0		5,150
Loss attributable to non-controlling interest	0		0		0		0		0		(20)		(20)
Capital distributions, net	0		0		0		0		0		(4,502)		(4,502)
Balance, April 30, 2021	$	1,529	$	709,422	$	5,352,573	$	(1,148,406)	$	(2,048)	$	47,719	$	4,960,789


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

Net income	0		0		132,546		0		0		0		132,546

Purchase of treasury stock	0		0		0		(633,553)		0		0		(633,553)
Exercise of stock options and stock based compensation issuances	0		(17,828)		0		22,401		0		0		4,573
Employee stock purchase plan issuances	0		(607)		0		1,336		0		0		729

Stock-based compensation	0		16,802		0		0		0		0		16,802

Dividends declared	0		0		(28,951)		0		0		0		(28,951)
Other comprehensive income	0		0		0		0		556		0		556
Loss attributable to non-controlling interest	0		0		0		0		0		(8)		(8)
Capital contributions, net	0		0		0		0		0		2,335		2,335
Balance, April 30, 2020	$	1,529	$	725,246	$	4,878,017	$	(1,034,999)	$	(5,275)	$	49,204	$	4,613,722

See accompanying notes.

TOLL BROTHERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)


		Three months ended January 31,					Six months ended April 30,
		2021		2020			2021		2020
Cash flow provided by (used in) operating activities:	Cash flow provided by (used in) operating activities:					Cash flow provided by (used in) operating activities:
Net income	Net income	$	96,499	$	56,876	Net income	$	224,365	$	132,546
Adjustments to reconcile net income to net cash provided by (used in) operating activities:	Adjustments to reconcile net income to net cash provided by (used in) operating activities:					Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	Depreciation and amortization	16,876		14,667		Depreciation and amortization	33,181		30,285
Stock-based compensation	Stock-based compensation	12,834		13,383		Stock-based compensation	16,279		16,802
Income from unconsolidated entities	Income from unconsolidated entities	(1,194)		(12,141)		Income from unconsolidated entities	(11,677)		(7,870)
Distributions of earnings from unconsolidated entities	Distributions of earnings from unconsolidated entities	1,080		14,703		Distributions of earnings from unconsolidated entities	11,464		16,427

Deferred tax provision	Deferred tax provision	1,277		751		Deferred tax provision	3,222		2,309

Inventory impairments and write-offs	Inventory impairments and write-offs	1,267		1,031		Inventory impairments and write-offs	2,847		15,245
Gain on sale of assets	Gain on sale of assets	(38,279)		0		Gain on sale of assets	(38,706)		(12,970)
Other	Other	3,617		1,091		Other	1,882		127

Expenses related to early retirement of debt						Expenses related to early retirement of debt	35,211		0
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Inventory	Inventory	(274,327)		(303,384)		Inventory	(528,048)		(247,104)
Origination of mortgage loans	Origination of mortgage loans	(376,036)		(316,852)		Origination of mortgage loans	(906,251)		(745,847)
Sale of mortgage loans	Sale of mortgage loans	478,982		422,376		Sale of mortgage loans	929,763		823,354
Receivables, prepaid expenses, and other assets	Receivables, prepaid expenses, and other assets	34,733		(172,153)		Receivables, prepaid expenses, and other assets	77,624		(173,249)
Income taxes receivable	Income taxes receivable	(3,520)		(36,131)		Income taxes receivable	(17,276)		(11,815)
Customer deposits – net	Customer deposits – net	60,580		34,058		Customer deposits – net	132,840		33,271
Accounts payable and accrued expenses	Accounts payable and accrued expenses	40,835		(84,691)		Accounts payable and accrued expenses	60,449		(62,647)
Income taxes payable	Income taxes payable	99		0		Income taxes payable	98		0
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	55,323		(366,416)		Net cash provided by (used in) operating activities	27,267		(191,136)
Cash flow used in investing activities:	Cash flow used in investing activities:					Cash flow used in investing activities:
Purchase of property, construction, and office equipment – net	Purchase of property, construction, and office equipment – net	(14,496)		(26,839)		Purchase of property, construction, and office equipment – net	(29,606)		(50,757)

Investments in unconsolidated entities	Investments in unconsolidated entities	(112,828)		(4,909)		Investments in unconsolidated entities	(153,828)		(10,263)
Return of investments in unconsolidated entities	Return of investments in unconsolidated entities	37,853		28,983		Return of investments in unconsolidated entities	144,047		34,884
Proceeds from the sale of assets	Proceeds from the sale of assets	79,356		0		Proceeds from the sale of assets	80,418		15,617

Business acquisitions						Business acquisitions	0		(60,349)
Other	Other	334		649		Other	579		1,159
Net cash used in investing activities		(9,781)		(2,116)
Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	41,610		(69,709)
Cash flow used in financing activities:	Cash flow used in financing activities:					Cash flow used in financing activities:

Proceeds from loans payable	Proceeds from loans payable	597,973		702,729		Proceeds from loans payable	1,335,309		2,732,493

Principal payments of loans payable	Principal payments of loans payable	(847,415)		(608,481)		Principal payments of loans payable	(1,548,152)		(2,354,113)
Redemption of senior notes	Redemption of senior notes	(10,020)		0		Redemption of senior notes	(294,168)		0

(Payments) proceeds from stock-based benefit plans, net		(4,397)		4,235
Proceeds from stock-based benefit plans, net						Proceeds from stock-based benefit plans, net	7,569		5,305
Purchase of treasury stock	Purchase of treasury stock	(179,395)		(476,024)		Purchase of treasury stock	(179,648)		(633,553)
Dividends paid	Dividends paid	(14,285)		(14,956)		Dividends paid	(35,272)		(28,783)
(Payments) receipts related to noncontrolling interest, net		(4,728)		44
Payments related to noncontrolling interest, net						Payments related to noncontrolling interest, net	(4,718)		(936)
Net cash used in financing activities	Net cash used in financing activities	(462,267)		(392,453)		Net cash used in financing activities	(719,080)		(279,587)
Net decrease in cash, cash equivalents, and restricted cash	Net decrease in cash, cash equivalents, and restricted cash	(416,725)		(760,985)		Net decrease in cash, cash equivalents, and restricted cash	(650,203)		(540,432)
Cash, cash equivalents, and restricted cash, beginning of period	Cash, cash equivalents, and restricted cash, beginning of period	1,396,604		1,319,643		Cash, cash equivalents, and restricted cash, beginning of period	1,396,604		1,319,643
Cash, cash equivalents, and restricted cash, end of period	Cash, cash equivalents, and restricted cash, end of period	$	979,879	$	558,658	Cash, cash equivalents, and restricted cash, end of period	$	746,401	$	779,211

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, 2020 balance sheet amounts and disclosures included herein have been derived from our October 31, 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, 2020 (“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,~~April 30, 2021; the results of our operations and changes in equity for the three-month and six-month periods ended ~~January 31,~~April 30, 2021 and 2020; and our cash flows for the ~~three-month~~six-month periods ended ~~January 31,~~April 30, 2021 and 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, including risks and uncertainties resulting from the COVID-19 pandemic, which ~~continues~~continue 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~~certain 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~~$29.7 million, or ~~2.1%~~2.0% of home sales revenues for the three months ended ~~January 31,~~April 30, 2020 and $56.5 million, or 2.0% of home sales revenues for the six months ended April 30, 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,~~April 30, 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 ~~$523.6~~$609.4 million and $459.4 million at ~~January 31,~~April 30, 2021 and October 31, 2020, respectively. Of the outstanding customer deposits held as of October 31, 2020, we recognized ~~$94.0~~$105.1 million and $199.1 million in home sales revenues during the three months and six months ended ~~January 31,~~April 30, 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; (3) bulk sales to third

parties of land we have decided no longer meets our development 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.

Derivative Instruments and Hedging Activities

Our objective in entering into derivative transactions is to manage our exposure to interest rate movements associated with certain variable rate ~~debt.~~debt, mortgage loans held for sale and forward loan commitments we have entered into related to our mortgage operations. We recognize derivatives as either assets or liabilities on the balance sheet and measures those instruments at fair value.

~~Since all~~We have entered into interest rate swaps related to a portion of our ~~derivatives~~variable rate debt. These derivative transactions are designated as cash flow ~~hedges, the~~hedges. The entire change in the fair value of ~~the~~these derivative transactions included in the assessment of hedge effectiveness is initially reported in accumulated other comprehensive loss and subsequently reclassified to home sales cost of revenues in the accompanying 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 if the hedged forecasted transaction is no longer probable of occurring, the amount recognized in Accumulated other comprehensive loss is released to earnings.

Our derivative transactions related to our mortgage loans held for sale and our forward loan commitments are not designated as hedges and therefore the entire change in the fair value of these derivative transactions is included as a gain or loss in Other income – net in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income.

See Note 12 “Fair Value Disclosures” for more information.

Recent Accounting Pronouncements

In June 2016, the FASB 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 became effective for our fiscal year beginning November 1, 2020, and we adopted the new standard under the modified retrospective transition method. As a result of the adoption, we recognized a cumulative effect adjustment, net of tax, of $0.6 million to the opening balance of retained earnings. The adoption of ASU 2016-13 did not have a material impact on our Condensed Consolidated Balance Sheet or Condensed Consolidated Statement of Operations or Comprehensive Income, and there have been no significant changes to our internal controls, processes, or systems as a result of implementing this new standard.

2. Acquisitions

In fiscal 2020, we acquired substantially all of the assets and operations of The Thrive Group, LLC (“Thrive”), an urban 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 $79.2 million in cash. The assets acquired were primarily inventory, including approximately 1,100 home sites owned or controlled through land purchase agreements. One of these acquisitions was accounted for as a business combination and neither were material to our results of operations or financial condition.

3. Inventory

Inventory at ~~January 31,~~April 30, 2021 and October 31, 2020 consisted of the following (amounts in thousands):


		January 31, 2021		October 31, 2020			April 30, 2021		October 31, 2020
Land controlled for future communities	Land controlled for future communities	$	207,383	$	223,525	Land controlled for future communities	$	132,449	$	223,525
Land owned for future communities	Land owned for future communities	996,420		1,036,843		Land owned for future communities	605,619		1,036,843
Operating communities	Operating communities	6,719,832		6,398,538		Operating communities	7,522,596		6,398,538
		$	7,923,635	$	7,658,906		$	8,260,664	$	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 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, 2021		October 31, 2020			April 30, 2021		October 31, 2020
Land owned for future communities:	Land owned for future communities:					Land owned for future communities:
Number of communities	Number of communities	8		10		Number of communities	7		10
Carrying value (in thousands)	Carrying value (in thousands)	$	41,231	$	68,064	Carrying value (in thousands)	$	53,230	$	68,064
Operating communities:	Operating communities:					Operating communities:
Number of communities	Number of communities	4		4		Number of communities	1		4
Carrying value (in thousands)	Carrying value (in thousands)	$	54,040	$	32,112	Carrying value (in thousands)	$	7,277	$	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,				Three months ended April 30,				Six months ended April 30,
		2021		2020				2021		2020		2021		2020
Land controlled for future communities	Land controlled for future communities	$	167	$	1,031		Land controlled for future communities	$	1,581	$	11,809	$	1,747	$	12,840

Land owned for future communities							Land owned for future communities	0		2,105		1,100		2,105
Operating communities	Operating communities	1,100		0			Operating communities	0		300		0		300
		$	1,267	$	1,031			$	1,581	$	14,214	$	2,847	$	15,245

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,~~April 30, 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,~~April 30, 2021, we determined that ~~218~~275 land purchase contracts, with an aggregate purchase price of ~~$2.31~~$2.77 billion, on which we had made aggregate deposits totaling ~~$193.0~~$204.4 million, were VIEs, and that we were not the primary beneficiary of any VIE related to our land purchase contracts. At October 31, 2020, we determined that 207 land purchase contracts, with an aggregate purchase price of $2.31 billion, on which we had made aggregate deposits totaling $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 April 30,				Six months ended April 30,
	2021		2020		2021		2020
Interest capitalized, beginning of period	$	302,961	$	320,751	$	297,975	$	311,323
Interest incurred	38,047		46,104		79,315		89,754
Interest expensed to home sales cost of revenues	(44,092)		(38,037)		(77,417)		(70,811)
Interest expensed to land sales and other cost of revenues	(579)		(737)		(2,417)		(1,304)
Interest expensed in other income – net	0		(2,440)		0		(2,440)

Interest capitalized on investments in unconsolidated entities	(1,192)		(897)		(2,326)		(1,778)

Previously capitalized interest on investments in unconsolidated entities transferred to inventory	0		120		15		120
Interest capitalized, end of period	$	295,145	$	324,864	$	295,145	$	324,864

During the three months ended ~~January 31,~~April 30, 2021, we incurred ~~$154,000~~$246,000 of interest related to our interest rate swaps which is included in accumulated other comprehensive loss, of which approximately ~~$10,000~~$32,000 was expensed to home sales cost of revenues. ~~NaN~~During the six months ended April 30, 2021, we incurred $400,000 of interest related to our interest rate swaps which is included in accumulated other comprehensive loss, of which approximately $42,000 was expensed to home sales cost of revenues. No similar amounts were incurred during the three months or six months ended ~~January 31,~~April 30, 2020.

4. Investments in Unconsolidated Entities

We have investments in various unconsolidated 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”); 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,~~April 30, 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			Land Development Joint Ventures		Home Building Joint Ventures		Rental Property Joint Ventures		Gibraltar Joint Ventures		Total
Number of unconsolidated entities	Number of unconsolidated entities	12		4		28		7		51		Number of unconsolidated entities	13		3		28		4		48
Investment in unconsolidated entities	Investment in unconsolidated entities	$	264,274	$	26,191	$	263,280	$	17,887	$	571,632	Investment in unconsolidated entities	$	215,465	$	24,326	$	271,317	$	22,487	$	533,595
Number of unconsolidated entities with funding commitments by the Company	Number of unconsolidated entities with funding commitments by the Company	3		0		8		1		12		Number of unconsolidated entities with funding commitments by the Company	6		0		8		1		15
Company’s remaining funding commitment to unconsolidated entities	Company’s remaining funding commitment to unconsolidated entities	$	33,518	$	0	$	30,491	$	25,649	$	89,658	Company’s remaining funding commitment to unconsolidated entities	$	31,126	$	0	$	29,608	$	27,543	$	88,277

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,~~April 30, 2021, regarding the debt financing obtained by category ($ amounts in thousands):


		Land Development Joint Ventures		Home Building Joint Ventures		Rental Property Joint Ventures		Total			Land Development Joint Ventures		Home Building Joint Ventures		Rental Property Joint Ventures		Total
Number of joint ventures with debt financing	Number of joint ventures with debt financing	4		1		25		30		Number of joint ventures with debt financing	6		1		25		32
Aggregate loan commitments	Aggregate loan commitments	$	158,805	$	29,786	$	2,010,544	$	2,199,135	Aggregate loan commitments	$	326,753	$	3,211	$	2,069,244	$	2,399,208
Amounts borrowed under loan commitments	Amounts borrowed under loan commitments	$	107,551	$	29,786	$	1,312,325	$	1,449,662	Amounts borrowed under loan commitments	$	253,808	$	3,211	$	1,391,948	$	1,648,967

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

New Joint Ventures

The table below provides information on joint ventures entered into during ~~our first quarter of fiscal~~the six-months ended April 30, 2021 ($ amounts in thousands):


		Land Development Joint Ventures		Rental Property Joint Ventures			Land Development Joint Ventures		Rental Property Joint Ventures
Number of unconsolidated joint ventures entered into during the period	Number of unconsolidated joint ventures entered into during the period	3		2		Number of unconsolidated joint ventures entered into during the period	4		3
Investment balance at January 31, 2021		$	139,033	$	14,932
Investment balance at April 30, 2021						Investment balance at April 30, 2021	$	86,200	$	43,700

The table below provides information on joint ventures entered into during ~~our first quarter of fiscal~~the six-months ended April 30, 2020 ($ amounts in thousands):


		Land Development Joint Ventures		Rental Property Joint Ventures			Land Development Joint Ventures		Rental Property Joint Ventures
Number of unconsolidated joint ventures entered into during the period	Number of unconsolidated joint ventures entered into during the period	0		2		Number of unconsolidated joint ventures entered into during the period	0		3
Investment balance at January 31, 2020		$	0	$	24,900
Investment balance at April 30, 2020						Investment balance at April 30, 2020	$	0	$	31,800

Results of Operations and Intra-entity Transactions

~~In our first quarters of fiscal 2021 and 2020,~~From time to time, certain of our land development and rental property joint ventures ~~sold their underlying~~sell assets to unrelated parties or to our joint venture partner. In connection with these sales, we recognized gains of ~~$5.9~~$11.5 million in the three-month period ended April 30, 2021. NaN similar gains were recognized in the three-month period ended April 30, 2020. In the six-month periods ended April 30, 2021 and 2020, we recognized gains of $17.5 million and $10.7 million, respectively ~~which is~~. These gains are included in “Income from unconsolidated entities” in our Condensed Consolidated Statements of Operations and Comprehensive Income.

In ~~our first quarter~~the three-month period ended April 30, 2020, we recognized an other-than-temporary impairment charge on an investment in a Home Building Joint Venture of ~~fiscal~~$3.0 million. NaN similar charges were incurred in the three-month period ended April 30, 2021. In the six-month periods ended April 30, 2021 and 2020, we recognized other-than-temporary impairment charges on our investments in certain Home Building Joint Ventures of $2.1 ~~million. NaN similar charges were incurred in our first quarter of fiscal 2020.~~million and $3.0 million, respectively.

~~In our first quarters of fiscal 2021 and 2020, purchases~~Purchases from unconsolidated entities, principally related to our acquisition of lots from our Land Development Joint Ventures, were $3.5 million and $4.3 million in the three-month periods ended April 30, 2021 and ~~$3.5~~2020, respectively, and $7.8 million and $7.8 million in the six-month periods ended April 30, 2021 and 2020, respectively. Our share of income from the lots we acquired was insignificant in each period. Sales to unconsolidated entities, which principally involved land sales to our Rental Property Joint Ventures, were ~~$57.3~~$82.6 million and ~~$26.4~~$20.0 million in ~~our first quarters of fiscal~~the three-month periods ended April 30, 2021 and 2020, respectively, and $140.0 million and $46.4 million in the six-month periods ended April 30, 2021 and 2020, respectively. These amounts are included in “Land sales and other revenue” on our Condensed Consolidated Statement of Operations and Comprehensive ~~Income. Gains related to these sales were immaterial in both periods.~~Income and are generally sold at our land basis.

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 have guaranteed debt of 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, we and our joint venture partner have provided joint and several guarantees in connection with loans to unconsolidated entities. In these situations, we generally 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 such a reimbursement agreement, we may be liable for more than our proportionate share.

We believe that, as of ~~January 31,~~April 30, 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.

Information with respect to certain of the Company’s unconsolidated entities’ outstanding debt obligations, loan commitments and our guarantees thereon are as follows ($ amounts in thousands):

~~January 31,~~April 30, 2021

Loan commitments in the aggregate

~~1,858,000~~1,888,600

Our maximum estimated exposure under repayment and carry cost guarantees if the full amount of the debt obligations were borrowed

~~327,500~~352,900

Debt obligations borrowed in the aggregate

~~1,108,500~~1,138,400

Our maximum estimated exposure under repayment and carry cost guarantees of the debt obligations borrowed

~~236,700~~259,700

Estimated fair value of guarantees provided by us related to debt and other obligations

~~8,800~~9,200

Terms of guarantees

~~1 month~~4 months - ~~3.8~~
3.6 years

The maximum exposure estimates presented above do not take into account any recoveries from the underlying collateral or any reimbursement from our partners. We have not made payments under any of the outstanding guarantees, nor have we been called upon to do so.

Variable Interest Entities

The table below provide information as of ~~January 31,~~April 30, 2021 and October 31, 2020, regarding our unconsolidated joint venture-related variable interests in VIEs ($ amounts in thousands):


		January 31, 2021		October 31, 2020			April 30, 2021		October 31, 2020
Number of Joint Venture VIEs that the Company is not the Primary Beneficiary (“PB”)	Number of Joint Venture VIEs that the Company is not the Primary Beneficiary (“PB”)	12		12		Number of Joint Venture VIEs that the Company is not the Primary Beneficiary (“PB”)	10		12
Investment balance in unconsolidated Joint Venture VIEs included in Investments in unconsolidated entities in our Consolidated Balance Sheets	Investment balance in unconsolidated Joint Venture VIEs included in Investments in unconsolidated entities in our Consolidated Balance Sheets	$	55,300	$	63,100	Investment balance in unconsolidated Joint Venture VIEs included in Investments in unconsolidated entities in our Consolidated Balance Sheets	$	85,700	$	63,100
Our maximum exposure to losses related to loan guarantees and additional commitments provided to unconsolidated Joint Venture VIEs	Our maximum exposure to losses related to loan guarantees and additional commitments provided to unconsolidated Joint Venture VIEs	$	282,700	$	122,100	Our maximum exposure to losses related to loan guarantees and additional commitments provided to unconsolidated Joint Venture VIEs	$	282,400	$	122,100

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

The table below provide information as of ~~January 31,~~April 30, 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			Balance Sheet Classification	April 30, 2021		October 31, 2020
Number of Joint Venture VIEs that the Company is the PB and consolidates	Number of Joint Venture VIEs that the Company is the PB and consolidates		5		5		Number of Joint Venture VIEs that the Company is the PB and consolidates		5		5
Carrying value of consolidated VIEs assets	Carrying value of consolidated VIEs assets	Receivables prepaid expenses, and other assets	$	113,300	$	163,000	Carrying value of consolidated VIEs assets	Receivables prepaid expenses, and other assets	$	114,000	$	163,000
Our partners’ interests in consolidated VIEs	Our partners’ interests in consolidated VIEs	Noncontrolling interest	$	41,700	$	46,200	Our partners’ interests in consolidated VIEs	Noncontrolling interest	$	41,700	$	46,200

Our ownership interest in the above consolidated Joint Venture VIEs ranges from 50% to 98%.

As shown above, we have concluded we are the PB of 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. 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 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 other members.

1112

Joint Venture Condensed Combined 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			April 30, 2021		October 31, 2020
Cash and cash equivalents	Cash and cash equivalents	$	98,195	$	109,478	Cash and cash equivalents	$	107,721	$	109,478
Inventory	Inventory	736,821		511,000		Inventory	736,175		511,000
Loans receivable, net	Loans receivable, net	66,974		78,576		Loans receivable, net	73,452		78,576

Rental properties	Rental properties	1,428,734		1,244,911		Rental properties	1,483,363		1,244,911
Rental properties under development	Rental properties under development	700,218		666,386		Rental properties under development	688,942		666,386
Real estate owned	Real estate owned	6,818		6,752		Real estate owned	6,438		6,752
Other assets	Other assets	170,708		169,368		Other assets	195,618		169,368
Total assets	Total assets	$	3,208,468	$	2,786,471	Total assets	$	3,291,709	$	2,786,471
Debt, net of deferred financing costs	Debt, net of deferred financing costs	$	1,443,949	$	1,368,065	Debt, net of deferred financing costs	$	1,644,556	$	1,368,065
Other liabilities	Other liabilities	211,245		186,817		Other liabilities	207,177		186,817
Members’ equity	Members’ equity	1,544,803		1,231,173		Members’ equity	1,439,976		1,231,173
Noncontrolling interest	Noncontrolling interest	8,471		416		Noncontrolling interest	0		416
Total liabilities and equity	Total liabilities and equity	$	3,208,468	$	2,786,471	Total liabilities and equity	$	3,291,709	$	2,786,471
Company’s net investment in unconsolidated entities (1)	Company’s net investment in unconsolidated entities (1)	$	571,632	$	430,701	Company’s net investment in unconsolidated entities (1)	$	533,595	$	430,701

(1) ~~Differences between our net investment in unconsolidated entities and our~~Our underlying equity in the net assets of the entities ~~amounted to $34.3~~exceeded our net investment in unconsolidated entities by $16.4 million and $29.4 million as of ~~January 31,~~April 30, 2021 and October 31, 2020, respectively, and these differences 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.~~investment.

Condensed Statements of Operations:


		Three months ended January 31,				Three months ended April 30,				Six months ended April 30,
		2021		2020				2021		2020		2021		2020
Revenues	Revenues	$	92,530	$	133,170		Revenues	$	86,422	$	79,112	$	178,952	$	212,282
Cost of revenues (3)	Cost of revenues (3)	96,723		95,308			Cost of revenues (3)	60,136		46,890		156,859		140,361
Other expenses (3)	Other expenses (3)	35,390		41,183			Other expenses (3)	35,081		35,217		70,470		78,170
Total expenses	Total expenses	132,113		136,491			Total expenses	95,217		82,107		227,329		218,531

Gain on disposition of loans and real estate owned							Gain on disposition of loans and real estate owned	(209)		0		(209)		0
Loss from operations	Loss from operations	(39,583)		(3,321)			Loss from operations	(9,004)		(2,995)		(48,586)		(6,249)
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)
Other income (loss)							Other income (loss)	34,385		(84)		35,332		529
Income (loss) before income taxes							Income (loss) before income taxes	25,381		(3,079)		(13,254)		(5,720)
Income tax benefit							Income tax benefit	(152)		(287)		(1,659)		(147)
Net income (loss) including earnings from noncontrolling interests							Net income (loss) including earnings from noncontrolling interests	25,533		(2,792)		(11,595)		(5,573)
Less: loss attributable to noncontrolling interest	Less: loss attributable to noncontrolling interest	(174)		0			Less: loss attributable to noncontrolling interest	0		0		(174)		0
Net loss attributable to controlling interest		$	(37,303)	$	(2,849)
Net income (loss) attributable to controlling interest							Net income (loss) attributable to controlling interest	$	25,533	$	(2,792)	$	(11,769)	$	(5,573)

Company’s equity in earnings of unconsolidated entities (2)		$	1,194	$	12,141
Company’s equity in earnings (losses) of unconsolidated entities (2)							Company’s equity in earnings (losses) of unconsolidated entities (2)	$	10,483	$	(4,271)	$	11,677	$	7,870

(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.

5. Receivables, Prepaid Expenses, and Other Assets

Receivables, prepaid expenses, and other assets at ~~January 31,~~April 30, 2021 and October 31, 2020, consisted of the following (amounts in thousands):


		January 31, 2021		October 31, 2020			April 30, 2021		October 31, 2020
Expected recoveries from insurance carriers and others	Expected recoveries from insurance carriers and others	$	77,180	$	79,269	Expected recoveries from insurance carriers and others	$	76,468	$	79,269
Improvement cost receivable	Improvement cost receivable	85,539		86,116		Improvement cost receivable	83,160		86,116
Escrow cash held by our captive title company	Escrow cash held by our captive title company	28,540		24,712		Escrow cash held by our captive title company	29,954		24,712
Properties held for rental apartment and commercial development	Properties held for rental apartment and commercial development	504,580		542,796		Properties held for rental apartment and commercial development	437,029		542,796
Prepaid expenses	Prepaid expenses	29,472		28,104		Prepaid expenses	24,213		28,104
Right-of-use asset	Right-of-use asset	101,495		105,004		Right-of-use asset	101,751		105,004
Other	Other	80,969		90,293		Other	97,189		90,293
		$	907,775	$	956,294		$	849,764	$	956,294

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

As of ~~January 31,~~April 30, 2021 and October 31, 2020, properties held for rental apartment and commercial development include ~~$113.3~~$114.0 million and $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,~~April 30, 2021 and October 31, 2020, loans payable consisted of the following (amounts in thousands):


		January 31, 2021		October 31, 2020			April 30, 2021		October 31, 2020
Senior unsecured term loan	Senior unsecured term loan	$	650,000	$	800,000	Senior unsecured term loan	$	650,000	$	800,000

Loans payable – other	Loans payable – other	324,140		351,257		Loans payable – other	385,666		351,257
Deferred issuance costs	Deferred issuance costs	(2,636)		(3,302)		Deferred issuance costs	(2,501)		(3,302)
		$	971,504	$	1,147,955		$	1,033,165	$	1,147,955

Senior Unsecured Term Loan

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, 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. NoNaN prepayment charges were incurred in connection with the repayment. At ~~January 31,~~April 30, 2021, the interest rate on borrowings was ~~1.18%~~1.41% 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%~~1.30% as of ~~January 31,~~April 30, 2021. These interest rate swaps were designated as cash flow hedges.

Revolving Credit Facility

We have a $1.905 billion, five-year senior unsecured revolving credit facility (the “Revolving Credit Facility”) with a syndicate of banks. 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 from November 1, 2024 to 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,~~April 30, 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 ~~$2.10~~$2.15 billion. Under the terms of the Revolving Credit Facility, at ~~January 31,~~April 30, 2021, our leverage ratio was approximately ~~0.57~~0.56 to

1.00, and our tangible net worth was approximately ~~$4.72~~$4.85 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 ~~$3.66~~$3.74 billion as of ~~January 31,~~April 30, 2021. In addition, under the provisions of the Revolving Credit Facility, our ability to pay cash dividends was limited to approximately ~~$2.62~~$2.70 billion as of ~~January 31,~~April 30, 2021.

At ~~January 31,~~April 30, 2021, we had 0 outstanding borrowings under the Revolving Credit Facility and had approximately ~~$120.2~~$114.9 million of outstanding letters of credit that were issued under the Revolving Credit Facility. At ~~January 31,~~April 30, 2021, the interest rate on borrowings under the Revolving Credit Facility would have been ~~1.32%~~1.46% per 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,~~April 30, 2021, the weighted-average interest rate on “Loans payable – other” was ~~4.35%~~4.38% per annum.

Senior Notes

At ~~January 31,~~April 30, 2021, we had 76 issues of senior notes outstanding with an aggregate principal amount of ~~$2.66~~$2.41 billion.

In our second quarter of fiscal 2021, we redeemed, prior to maturity, all $250.0 million aggregate principal amount of our then-outstanding 5.625% Senior Notes due 2024. In connection with this redemption, we incurred a pre-tax charge of $34.2 million, inclusive of the write-off of unamortized deferred financing costs, which is recorded in our Condensed Consolidated Statement of Operations and Comprehensive Income.

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~~has a mortgage warehousing agreement (the “Warehousing Agreement”) with a bank, which has been amended from time to time, 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~~The Warehousing Agreement ~~was amended to provide~~provides 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. The Warehousing Agreement ~~as amended, expired~~was to expire on March 4, 2021, and borrowings thereunder bore interest at LIBOR plus 1.90% ~~per annum. At January 31, 2021, the interest rate on the Warehousing Agreement, as amended, was 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. At April 30, 2021, the interest rate on the Warehousing Agreement, as amended, was 2.50% per annum.

7. Accrued Expenses

Accrued expenses at ~~January 31,~~April 30, 2021 and October 31, 2020 consisted of the following (amounts in thousands):


		January 31, 2021		October 31, 2020			April 30, 2021		October 31, 2020
Land, land development, and construction	Land, land development, and construction	$	219,033	$	233,783	Land, land development, and construction	$	246,200	$	233,783
Compensation and employee benefits	Compensation and employee benefits	183,795		219,965		Compensation and employee benefits	203,088		219,965
Escrow liability	Escrow liability	27,047		23,067		Escrow liability	26,975		23,067
Self-insurance	Self-insurance	222,809		215,884		Self-insurance	228,748		215,884
Warranty	Warranty	150,877		157,351		Warranty	153,640		157,351
Lease liabilities	Lease liabilities	121,246		124,756		Lease liabilities	121,415		124,756
Deferred income	Deferred income	80,253		34,096		Deferred income	36,010		34,096
Interest	Interest	47,607		38,446		Interest	35,310		38,446
Commitments to unconsolidated entities	Commitments to unconsolidated entities	11,584		8,928		Commitments to unconsolidated entities	16,381		8,928
Other	Other	44,878		53,920		Other	47,670		53,920
		$	1,109,129	$	1,110,196		$	1,115,437	$	1,110,196

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,				Three months ended April 30,				Six months ended April 30,
		2021		2020				2021		2020		2021		2020
Balance, beginning of period	Balance, beginning of period	$	157,351	$	201,886		Balance, beginning of period	$	150,878	$	188,916	$	157,351	$	201,886
Additions – homes closed during the period	Additions – homes closed during the period	7,402		7,024			Additions – homes closed during the period	11,309		7,254		18,711		14,278
Addition – liabilities assumed in a business acquisition							Addition – liabilities assumed in a business acquisition	0		60		0		60
Increase in accruals for homes closed in prior years, net							Increase in accruals for homes closed in prior years, net	3,696		2,361		4,891		3,579

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

Decrease to water intrusion accrual							Decrease to water intrusion accrual	0		(24,400)		0		(24,400)
Charges incurred	Charges incurred	(15,070)		(21,212)			Charges incurred	(12,243)		(17,037)		(27,313)		(38,249)
Balance, end of period	Balance, end of period	$	150,877	$	188,916		Balance, end of period	$	153,640	$	157,154	$	153,640	$	157,154

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 fiscal 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.

From October 31, 2016 through the second quarter of fiscal 2020, our recorded aggregate estimated repair costs to be incurred for known and unknown water intrusion claims was $324.4 million and our recorded aggregate expected recoveries from insurance carriers and suppliers were approximately $152.6 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 we expect our insurance deductibles and self-insured retentions to be exhausted, we reduced our aggregate expected recoveries from 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 ~~$75.2~~$71.7 million at ~~January 31,~~April 30, 2021 and $79.5 million at October 31, 2020. Our recorded remaining expected recoveries from insurance carriers and suppliers were approximately ~~$67.3~~$66.6 million at ~~January 31,~~April 30, 2021 and $68.4 million at October 31, 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 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 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 disputed coverage for the same claims under policies that are substantially the same. As a result, we entered arbitration proceedings during the third quarter of fiscal 2019 with these carriers. Based on the legal merits that support our pending insurance claims, developments in the arbitration proceedings, 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 ~~$30.9~~$42.0 million and ~~$9.1~~$26.4 million for the three months ended ~~January 31,~~April 30, 2021 and 2020, respectively. The effective tax rate was ~~24.3%~~24.7% for the three months ended ~~January 31,~~April 30, 2021, compared to ~~13.7%~~25.9% for the three months ended ~~January 31,~~April 30, 2020. For the six months ended April 30, 2021 and 2020, we recorded income tax provisions of $72.9 million and $35.5 million, respectively. The effective tax rate was 24.5% for the six months ended April 30, 2021, compared to 21.1% for the six months ended April 30, 2020. The higher effective tax rate for the ~~three~~six months ended ~~January 31,~~April 30, 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 2021 will be approximately ~~6.0%~~5.8%. Our state income tax rate for the full fiscal year 2020 was 5.6%.

At ~~January 31,~~April 30, 2021, we had ~~$6.7~~$6.8 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 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,				Three months ended April 30,				Six months ended April 30,
		2021		2020				2021		2020		2021		2020
Total stock-based compensation expense recognized	Total stock-based compensation expense recognized	$	12,834	$	13,383		Total stock-based compensation expense recognized	$	3,446	$	3,419	$	16,279	$	16,802
Income tax benefit recognized	Income tax benefit recognized	$	3,289	$	3,407		Income tax benefit recognized	$	878	$	870	$	4,150	$	4,278

At ~~January 31,~~April 30, 2021 and October 31, 2020, the aggregate unamortized value of outstanding stock-based compensation awards was approximately ~~$26.0~~$21.7 million and $15.9 million, respectively.

10. ~~Stock Repurchase Program and Cash Dividends~~Stockholders’ Equity

Stock Repurchase Program

On March 10, 2020, our Board of Directors terminated our existing 20 million share repurchase program, which was authorized in December 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,				Three months ended April 30,				Six months ended April 30,
		2021		2020				2021			2020		2021		2020
Number of shares purchased (in thousands)	Number of shares purchased (in thousands)	4,027		11,686			Number of shares purchased (in thousands)	5			4,252		4,032		15,938
Average price per share	Average price per share	$	44.54	$	40.73		Average price per share	$	55.11		$	37.05	$	44.56	$	39.75
Remaining authorization at January 31 (in thousands)		15,957		8,314
Remaining authorization at April 30 (in thousands)							Remaining authorization at April 30 (in thousands)	15,952			19,998		15,952		19,998

Cash Dividends

On March 9, 2021, our Board of Directors approved an increase in our quarterly cash dividend from $0.11 per share to $0.17 per share. During the three months ended ~~January 31,~~April 30, 2021 and 2020, we declared and paid cash dividends of $0.17 and $0.11 per share, respectively, to our shareholders. During the six months ended April 30, 2021 and 2020, we declared and paid cash dividends of $0.28 and $0.22 per share, respectively, to our shareholders.

1618

Accumulated Other Comprehensive Loss

The changes in each component of accumulated other comprehensive loss (“AOCL”), for the periods indicated, were as follows (amounts in thousands):


	Three months ended April 30,				Six months ended April 30,
	2021		2020		2021		2020
Employee Retirement Plans
Beginning balance	$	(6,864)	$	(5,553)	$	(7,198)	$	(5,831)
Gains (losses) arising during the period	0		0		0		0
Less: Tax (expense) benefit	0		0		0		0
Net gains (losses) arising during the period	0		0		0		0
Gains reclassified from AOCL to net income (1)	450		373		900		746
Less: Tax expense (2)	(115)		(95)		(231)		(190)
Net gains reclassified from AOCL to net income	335		278		669		556
Other comprehensive income, net of tax	335		278		669		556
Ending balance	$	(6,529)	$	(5,275)	$	(6,529)	$	(5,275)
Derivative Instruments
Beginning balance	$	378	$	0	$	0	$	0
Gains on derivative instruments	5,474		0		5,972		0
Less: Tax expense	(1,395)		0		(1,523)		0
Net gains on derivative instruments	4,079		0		4,449		0
Gains reclassified from AOCL to net income (3)	32		0		42		0
Less: Tax expense (2)	(8)		0		(10)		0
Net gains reclassified from AOCL to net income	24		0		32		0
Other comprehensive income, net of tax	4,103		0		4,481		0
Ending balance	$	4,481	$	0	$	4,481	$	0
Total AOCL ending balance	$	(2,048)	$	(5,275)	$	(2,048)	$	(5,275)

(1) Reclassified to “Other income – net”

(2) Reclassified to “Income tax provision”

(3) Reclassified to “Cost of revenues – home sales”

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 April 30,				Six months ended April 30,
		2021		2020				2021		2020		2021		2020
Numerator:	Numerator:						Numerator:
Net income as reported	Net income as reported	$	96,499	$	56,876		Net income as reported	$	127,866	$	75,670	$	224,365	$	132,546

Denominator:	Denominator:						Denominator:
Basic weighted-average shares	Basic weighted-average shares	126,060		138,145			Basic weighted-average shares	124,295		128,205		125,177		133,175
Common stock equivalents (1)	Common stock equivalents (1)	1,502		1,744��			Common stock equivalents (1)	1,704		604		1,603		1,174
Diluted weighted-average shares	Diluted weighted-average shares	127,562		139,889			Diluted weighted-average shares	125,999		128,809		126,780		134,349

Other information:	Other information:						Other information:

Weighted-average number of antidilutive options and restricted stock units (2)	Weighted-average number of antidilutive options and restricted stock units (2)	589		675			Weighted-average number of antidilutive options and restricted stock units (2)	36		3,967		311		2,321
Shares issued under stock incentive and employee stock purchase plans	Shares issued under stock incentive and employee stock purchase plans	456		547			Shares issued under stock incentive and employee stock purchase plans	418		60		874		608

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

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

12. Fair Value Disclosures

Financial Instruments

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


			Fair value						Fair value
Financial Instrument	Financial Instrument	Fair value hierarchy	January 31, 2021		October 31, 2020		Financial Instrument	Fair value hierarchy	April 30, 2021		October 31, 2020
Residential Mortgage Loans Held for Sale	Residential Mortgage Loans Held for Sale	Level 2	$	125,475	$	231,797	Residential Mortgage Loans Held for Sale	Level 2	$	204,421	$	231,797
Forward Loan Commitments — Residential Mortgage Loans Held for Sale	Forward Loan Commitments — Residential Mortgage Loans Held for Sale	Level 2	$	52	$	(31)	Forward Loan Commitments — Residential Mortgage Loans Held for Sale	Level 2	$	1,656	$	(31)
Interest Rate Lock Commitments (“IRLCs”)	Interest Rate Lock Commitments (“IRLCs”)	Level 2	$	(358)	$	628	Interest Rate Lock Commitments (“IRLCs”)	Level 2	$	(120)	$	628
Forward Loan Commitments — IRLCs	Forward Loan Commitments — IRLCs	Level 2	$	358	$	(628)	Forward Loan Commitments — IRLCs	Level 2	$	120	$	(628)
Interest Rate Swap Contracts	Interest Rate Swap Contracts	Level 2	$	652	$	0	Interest Rate Swap Contracts	Level 2	$	6,372	$	0

At ~~January 31,~~April 30, 2021 and October 31, 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 included in “Receivables, prepaid expenses and other assets” in our Condensed Consolidated Balance Sheets and 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,~~April 30, 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.

1720

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			Aggregate unpaid principal balance		Fair value		Excess
At January 31, 2021		$	122,879	$	125,475	$	2,596
At April 30, 2021								At April 30, 2021	$	202,313	$	204,421	$	2,108
At October 31, 2020	At October 31, 2020	$	225,826	$	231,797	$	5,971	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 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:	Three months ended:	Selling price per unit ($ in thousands)	Sales pace per year (in units)	Discount rate	Three months ended:	Selling price per unit ($ in thousands)	Sales pace per year (in units)	Discount rate
Fiscal 2021:	Fiscal 2021:				Fiscal 2021:
January 31	January 31	2,003	2	14.3%	January 31	2,003	2	14.3%

April 30					April 30	—	—	—%

Fiscal 2020:	Fiscal 2020:				Fiscal 2020:
January 31	January 31	—	—	—%	January 31	—	—	—%
April 30	April 30	613 - 789	9	14.3%	April 30	613 - 789	9	14.3%
July 31	July 31	—	—	—%	July 31	—	—	—%
October 31	October 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							Impaired operating communities
Three months ended:	Three months ended:	Number of communities tested	Number of communities	Fair value of communities, net of impairment charges		Impairment charges recognized		Three months ended:	Number of communities tested	Number of communities	Fair value of communities, net of impairment charges		Impairment charges recognized
Fiscal 2021:	Fiscal 2021:							Fiscal 2021:
January 31	January 31	53	1	$	419	$	1,100	January 31	53	1	$	419	$	1,100

April 30								April 30	27	0	$	0	0

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

1821

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						April 30, 2021				October 31, 2020
		Fair value hierarchy	Book value		Estimated fair value		Book value		Estimated fair value			Fair value hierarchy	Book value		Estimated fair value		Book value		Estimated fair value
Loans payable (1)	Loans payable (1)	Level 2	$	974,139	$	979,592	$	1,151,257	$	1,157,315	Loans payable (1)	Level 2	$	1,035,666	$	1,042,997	$	1,151,257	$	1,157,315
Senior notes (2)	Senior notes (2)	Level 1	2,659,856		2,914,484		2,669,876		2,888,822		Senior notes (2)	Level 1	2,409,856		2,610,384		2,669,876		2,888,822
Mortgage company loan facility (3)	Mortgage company loan facility (3)	Level 2	112,619		112,619		148,611		148,611		Mortgage company loan facility (3)	Level 2	146,932		146,932		148,611		148,611
			$	3,746,614	$	4,006,695	$	3,969,744	$	4,194,748			$	3,592,454	$	3,800,313	$	3,969,744	$	4,194,748

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

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

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

13. Other Income – Net

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


		Three months ended January 31,				Three months ended April 30,				Six months ended April 30,
		2021		2020				2021		2020		2021		2020
Interest income	Interest income	$	1,455	$	4,902		Interest income	$	107	$	1,896	$	1,562	$	6,798
Income from ancillary businesses	Income from ancillary businesses	6,859		522			Income from ancillary businesses	9,061		14,582		15,920		15,104
Management fee income from Home Building Joint Ventures, net	Management fee income from Home Building Joint Ventures, net	117		1,346			Management fee income from Home Building Joint Ventures, net	448		207		565		1,553

Directly expensed interest							Directly expensed interest	0		(2,440)		0		(2,440)
Other	Other	(1,330)		(475)			Other	(403)		(409)		(762)		(884)
Total other income – net	Total other income – net	$	7,101	$	6,295		Total other income – net	$	9,213	$	13,836	$	17,285	$	20,131

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~~three months ended ~~January 31,~~April 30, 2021 and 2020, our apartment living operations earned fees from unconsolidated entities of ~~$4.8~~$3.8 million and ~~$3.8~~$3.5 million, respectively. In the six-month periods ended April 30, 2021 and 2020, our apartment living operations earned fees from unconsolidated entities of $8.6 million and $7.2 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,				Three months ended April 30,				Six months ended April 30,
		2021		2020				2021		2020		2021		2020
Revenues	Revenues	$	29,101	$	26,410		Revenues	$	32,731	$	27,432	$	61,831	$	53,842
Expenses	Expenses	$	22,242	$	25,888		Expenses	$	23,670	$	25,820	$	45,911	$	51,708

Other income							Other income	$	0	$	12,970	$	0	$	12,970

In April 2020, we sold one of our golf club properties to a third party for $15.6 million and recognized a gain of $9.1 million in the second quarter of fiscal 2020. In addition, we recognized a previously deferred gain of $3.8 million in our second quarter of fiscal 2020 related to the sale of a different golf club property.

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.

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.

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, 2021		October 31, 2020			April 30, 2021		October 31, 2020
Aggregate purchase commitments:	Aggregate purchase commitments:					Aggregate purchase commitments:
Unrelated parties	Unrelated parties	$	2,744,059	$	2,630,128	Unrelated parties	$	3,275,903	$	2,630,128
Unconsolidated entities that the Company has investments in	Unconsolidated entities that the Company has investments in	8,787		10,097		Unconsolidated entities that the Company has investments in	8,179		10,097
Total	Total	$	2,752,846	$	2,640,225	Total	$	3,284,082	$	2,640,225

Deposits against aggregate purchase commitments	Deposits against aggregate purchase commitments	$	207,600	$	223,571	Deposits against aggregate purchase commitments	$	220,950	$	223,571

Additional cash required to acquire land	Additional cash required to acquire land	2,545,246		2,416,654		Additional cash required to acquire land	3,063,132		2,416,654
Total	Total	$	2,752,846	$	2,640,225	Total	$	3,284,082	$	2,640,225
Amount of additional cash required to acquire land included in accrued expenses	Amount of additional cash required to acquire land included in accrued expenses	$	18,092	$	19,590	Amount of additional cash required to acquire land included in accrued expenses	$	16,178	$	19,590

In addition, we expect to purchase approximately 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,~~April 30, 2021, we also had similar purchase commitments to acquire land for apartment developments of approximately ~~$121.5~~$88.7 million, of which we had outstanding deposits in the amount of ~~$6.5~~$5.3 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,~~April 30, 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,~~April 30, 2021, we had outstanding surety bonds amounting to ~~$800.4~~$848.3 million, primarily related to our obligations to governmental entities to construct improvements in our communities. We estimate that approximately ~~$383.6~~$409.5 million of work remains on these improvements. We have an additional ~~$188.5~~$208.7 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,~~April 30, 2021, we had outstanding letters of credit of ~~$120.2~~$114.9 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,~~April 30, 2021, we had agreements of sale outstanding to deliver ~~8,888~~10,104 homes with an aggregate sales value of ~~$7.47~~$8.69 billion.

2023

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			April 30, 2021		October 31, 2020
Aggregate mortgage loan commitments:	Aggregate mortgage loan commitments:					Aggregate mortgage loan commitments:
IRLCs	IRLCs	$	521,022	$	381,116	IRLCs	$	711,264	$	381,116
Non-IRLCs	Non-IRLCs	2,280,509		1,688,801		Non-IRLCs	2,570,701		1,688,801
Total	Total	$	2,801,531	$	2,069,917	Total	$	3,281,965	$	2,069,917
Investor commitments to purchase:	Investor commitments to purchase:					Investor commitments to purchase:
IRLCs	IRLCs	$	521,022	$	381,116	IRLCs	$	711,264	$	381,116
Mortgage loans held for sale	Mortgage loans held for sale	117,309		217,876		Mortgage loans held for sale	199,160		217,876
Total	Total	$	638,331	$	598,992	Total	$	910,424	$	598,992

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, ~~wtih~~with current operations in the states listed below:

•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

•The Pacific region: California, Oregon and Washington.

2124

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,				Three months ended April 30,				Six months ended April 30,
		2021		2020				2021		2020		2021		2020
Revenues:	Revenues:						Revenues:
Traditional Home Building:	Traditional Home Building:						Traditional Home Building:
North	North	$	312,639	$	254,059		North	$	390,665	$	296,023	$	703,304	$	550,082
Mid-Atlantic	Mid-Atlantic	163,984		162,476			Mid-Atlantic	218,291		192,900		382,275		355,376
South	South	216,884		183,630			South	280,176		230,860		497,060		414,490
Mountain	Mountain	377,977		263,096			Mountain	431,850		337,504		809,827		600,600
Pacific	Pacific	331,158		395,356			Pacific	458,605		423,292		789,763		818,648
Traditional Home Building	Traditional Home Building	1,402,642		1,258,617			Traditional Home Building	1,779,587		1,480,579		3,182,229		2,739,196
City Living	City Living	7,793		39,835			City Living	57,985		36,772		65,778		76,607
Corporate and other	Corporate and other	269		(1,115)			Corporate and other	(1,312)		(1,117)		(1,043)		(2,232)
Total home sales revenues	Total home sales revenues	1,410,704		1,297,337			Total home sales revenues	1,836,260		1,516,234		3,246,964		2,813,571
Land sales and other revenues	Land sales and other revenues	152,672		34,094			Land sales and other revenues	93,864		32,838		246,536		66,932
Total revenues	Total revenues	$	1,563,376	$	1,331,431		Total revenues	$	1,930,124	$	1,549,072	$	3,493,500	$	2,880,503

Income (loss) before income taxes:	Income (loss) before income taxes:						Income (loss) before income taxes:
Traditional Home Building:	Traditional Home Building:						Traditional Home Building:
North	North	$	18,882	$	2,531		North	$	39,220	$	16,996	$	58,102	$	19,527
Mid-Atlantic	Mid-Atlantic	18,813		6,988			Mid-Atlantic	23,967		(155)		42,780		6,833
South	South	21,483		9,077			South	38,268		20,113		59,751		29,190
Mountain	Mountain	36,013		17,585			Mountain	52,080		33,199		88,093		50,784
Pacific	Pacific	47,554		63,322			Pacific	74,167		67,737		121,721		131,059
Traditional Home Building	Traditional Home Building	142,745		99,503			Traditional Home Building	227,702		137,890		370,447		237,393
City Living (1)	City Living (1)	32,692		9,549			City Living (1)	12,480		8,698		45,172		18,247
Corporate and other	Corporate and other	(48,032)		(43,120)			Corporate and other	(70,356)		(44,475)		(118,388)		(87,595)
Total	Total	$	127,405	$	65,932		Total	$	169,826	$	102,113	$	297,231	$	168,045

(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			April 30, 2021		October 31, 2020
Traditional Home Building:	Traditional Home Building:					Traditional Home Building:
North	North	$	1,415,114	$	1,427,523	North	$	1,454,881	$	1,427,523
Mid-Atlantic	Mid-Atlantic	984,134		918,641		Mid-Atlantic	1,033,712		918,641
South	South	1,289,620		1,176,962		South	1,353,477		1,176,962
Mountain	Mountain	2,053,597		1,961,348		Mountain	2,211,927		1,961,348
Pacific	Pacific	2,343,787		2,226,685		Pacific	2,372,804		2,226,685
Traditional Home Building	Traditional Home Building	8,086,252		7,711,159		Traditional Home Building	8,426,801		7,711,159
City Living	City Living	542,763		539,750		City Living	519,912		539,750
Corporate and other	Corporate and other	2,234,978		2,814,824		Corporate and other	2,028,306		2,814,824
Total	Total	$	10,863,993	$	11,065,733	Total	$	10,975,019	$	11,065,733

2225

“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,				Three months ended April 30,				Six months ended April 30,
		2021		2020				2021		2020		2021		2020
Traditional Home Building:	Traditional Home Building:						Traditional Home Building:
North	North	$	35	$	94		North	$	31	$	278	$	65	$	372
Mid-Atlantic	Mid-Atlantic	32		1			Mid-Atlantic	59		10,666		90		10,667
South	South	25		747			South	419		1,243		444		1,990
Mountain	Mountain	9		178			Mountain	11		81		20		259
Pacific	Pacific	66		11			Pacific	1,061		1,946		1,128		1,957
Total	Total	167		1,031			Total	1,581		14,214		1,747		15,245
City Living	City Living	1,100		0			City Living	0		0		1,100		0

		$	1,267	$	1,031			$	1,581	$	14,214	$	2,847	$	15,245

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,					Six months ended April 30,
		2021		2020			2021		2020
Cash flow information:	Cash flow information:					Cash flow information:

Interest paid, net of amount capitalized						Interest paid, net of amount capitalized	$	14,439	$	0
Interest capitalized, net of amount paid	Interest capitalized, net of amount paid	$	3,733	$	11,686	Interest capitalized, net of amount paid	$	0	$	11,178
Income tax payments	Income tax payments	$	34,427	$	45,752	Income tax payments	$	88,199	$	46,375
Income tax refunds	Income tax refunds	$	1,377	$	1,315	Income tax refunds	$	1,377	$	1,370
Noncash activity:	Noncash activity:					Noncash activity:
Cost of inventory acquired through seller financing, municipal bonds, or included in accrued expenses, net	Cost of inventory acquired through seller financing, municipal bonds, or included in accrued expenses, net	$	40,511	$	21,827	Cost of inventory acquired through seller financing, municipal bonds, or included in accrued expenses, net	$	124,333	$	26,717

Increase in inventory for capitalized interest, our share of earnings, and allocation of basis difference in land purchased from unconsolidated entities, net						Increase in inventory for capitalized interest, our share of earnings, and allocation of basis difference in land purchased from unconsolidated entities, net	$	0	$	(120)
Increase in receivables, prepaid expenses, and other assets and accrued expenses related to the adoption of ASU 2016-02 and other lease activity	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	Increase in receivables, prepaid expenses, and other assets and accrued expenses related to the adoption of ASU 2016-02 and other lease activity	$	0	$	122,269
Net decrease in other assets and retained earnings due to the adoption of ASC 326	Net decrease in other assets and retained earnings due to the adoption of ASC 326	$	595	$	0	Net decrease in other assets and retained earnings due to the adoption of ASC 326	$	595	$	0

Noncontrolling interest	Noncontrolling interest	$	144	$	2,610	Noncontrolling interest	$	196	$	3,262

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

Transfer of other assets to investment in unconsolidated entities, net	Transfer of other assets to investment in unconsolidated entities, net	$	13,228	$	24,736	Transfer of other assets to investment in unconsolidated entities, net	$	35,540	$	31,758

Unrealized gain on derivatives	Unrealized gain on derivatives	$	522	$	0	Unrealized gain on derivatives	$	6,372	$	0
Increase in investments in unconsolidated entities for change in the fair value of debt guarantees	Increase in investments in unconsolidated entities for change in the fair value of debt guarantees	$	2,656	$	0	Increase in investments in unconsolidated entities for change in the fair value of debt guarantees	$	3,123	$	0

Acquisition of a Business:						Acquisition of a Business:
Fair value of assets purchased						Fair value of assets purchased	$	0	$	61,906
Liabilities assumed						Liabilities assumed	$	0	$	1,557
Cash paid						Cash paid	$	0	$	60,349

		At January 31,					At April 30,
		2021		2020			2021		2020
Cash, cash equivalents, and restricted cash	Cash, cash equivalents, and restricted cash					Cash, cash equivalents, and restricted cash
Cash and cash equivalents	Cash and cash equivalents	$	949,696	$	519,793	Cash and cash equivalents	$	714,968	$	741,222
Restricted cash included in receivables, prepaid expenses, and other assets	Restricted cash included in receivables, prepaid expenses, and other assets	30,183		38,865		Restricted cash included in receivables, prepaid expenses, and other assets	31,433		37,989
Total cash, cash equivalents, and restricted cash shown in the Condensed Consolidated Statements of Cash Flows	Total cash, cash equivalents, and restricted cash shown in the Condensed Consolidated Statements of Cash Flows	$	979,879	$	558,658	Total cash, cash equivalents, and restricted cash shown in the Condensed Consolidated Statements of Cash Flows	$	746,401	$	779,211

2327

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, 2020 (“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 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~~(irrespective of whether the contract was signed during the relevant period and in a prior ~~periods.~~period). 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”). Within Traditional Home Building, we operate in the following five geographic segments, with current operations in the states listed below:

•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~~Texas;

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

•The Pacific region: California, Oregon and Washington.

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.~~disrupted our markets. In the three months ended ~~January 31,~~April 30, 2021, we signed ~~2,874~~3,487 net contracts for the sale of Traditional Home Building products and City Living homes with an aggregate value of ~~$2.51~~$3.05 billion, compared to ~~1,806~~1,886 net contracts with an aggregate value of ~~$1.49~~$1.55 billion in the three months ended ~~January 31,~~April 30, 2020, representing increases of ~~59%~~85% and ~~68%~~97% in units and dollars, respectively. Our backlog at ~~January 31,~~April 30, 2021 was ~~8,888~~10,104 homes and ~~$7.47~~$8.69 billion, up ~~38%~~57% in units and ~~37%~~58% in dollars as compared to our backlog at ~~January 31,~~April 30, 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~~the three months ended April 30, 2021. We have also continued to limit lot releases in ~~some communities.~~many of our communities, and we increased the number of communities that employ this strategy in the second fiscal quarter of 2021 as compared to the first fiscal quarter of 2021. 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~~supply-demand imbalance resulting from a decade of underproduction of new homes, low mortgage rates, ~~and~~a tight supply of resale homes, favorable demographics, a renewed appreciation for the importance of ~~home.~~home, and an improving economy. We believe these factors will continue to support demand through fiscal 2021.

We are also facing cost pressures related to labor and materials, especially lumber, although we have been and continue to believe we will be able to increase our sales prices to offset the majority of these cost increases due to the strong demand for our homes. This strong demand, coupled with the strength of the general economic recovery, has also resulted in some disruptions in our supply chain, including the availability of certain materials and construction labor. Thus far, however, these disruptions have not had a significant impact on our production cycle times to date.

Although housing market demand has ~~recently been very~~remained strong ~~future economic conditions~~following the onset of the COVID-19 pandemic in the United States, future economic conditions and the demand for homes ~~remain uncertain~~are subject to continued uncertainty due to ~~continuing~~ongoing 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 mid-March 2020, the outbreak of COVID-19 was declared a global pandemic and numerous governmental authorities issued stay-at-home and business closure orders, which made it especially challenging for us to sell, construct and deliver homes in many of our communities in the second half of our fiscal second quarter of 2020. As a result, comparisons to our fiscal 2020 second quarter, especially with respect to net signed contracts, reflect the steep decline in economic activity that occurred during that time period.

In the three-month period ended ~~January 31,~~April 30, 2021, we recognized ~~$1.56~~$1.93 billion of revenues, consisting of ~~$1.41~~$1.84 billion of home sales revenue and ~~$152.7~~$93.9 million of land sales revenue, and net income of $127.9 million, as compared to $1.55 billion of revenues, consisting of $1.52 billion of home sales revenue and $32.8 million of land sales revenue, and $75.7 million of net income in the three-month period ended April 30, 2020.

In the three-month periods ended April 30, 2021 and 2020, the value of net contracts signed was $3.05 billion (3,487 homes) and $1.55 billion (1,886 homes), respectively.

In the six-month period ended April 30, 2021, we recognized $3.49 billion of revenues, consisting of $3.25 billion of home sales revenue and $246.5 million of land sales and other revenue, and net income of ~~$96.5~~$224.4 million, as compared to ~~$1.33~~$2.88 billion of revenues, consisting of ~~$1.30~~$2.81 billion of home sales revenue and ~~$34.1~~$66.9 million of land sales and other revenue, and ~~$56.9~~$132.5 million of net income in the ~~three-month~~six-month period ended ~~January 31,~~April 30, 2020.

In the ~~three-month~~six-month periods ended ~~January 31,~~April 30, 2021 and 2020, the value of net contracts signed was ~~$2.51~~$5.56 billion ~~(2,874~~(6,361 homes) and ~~$1.49~~$3.04 billion ~~(1,806~~(3,692 homes), respectively.

The value of our backlog at ~~January 31,~~April 30, 2021 was ~~$7.47~~$8.69 billion ~~(8,888~~(10,104 homes), as compared to our backlog at ~~January 31,~~April 30, 2020 of ~~$5.45~~$5.49 billion ~~(6,461~~(6,428 homes). Our backlog at October 31, 2020 was $6.37 billion (7,791 homes), as compared to backlog of $5.26 billion (6,266 homes) at October 31, 2019.

At ~~January 31,~~April 30, 2021, we had ~~$949.7~~$715.0 million of cash and cash equivalents on hand and approximately ~~$1.785~~$1.790 billion available under our $1.905 billion revolving credit facility (the “Revolving Credit Facility”), substantially all of which matures in November 2025. At ~~January 31,~~April 30, 2021, we had no borrowings and we had approximately ~~$120.2~~$114.9 million of outstanding letters of credit under the Revolving Credit Facility.

At ~~January 31,~~April 30, 2021, we owned or controlled through options approximately ~~67,700~~74,500 home sites, as compared to approximately 63,200 at October 31, 2020; and approximately ~~53,400~~59,200 at October 31, 2019. Of the approximately ~~67,700~~74,500 total home sites that we owned or controlled through options at ~~January 31,~~April 30, 2021, we owned approximately ~~36,400~~38,000 and controlled approximately ~~31,300~~36,500 through options. Of the ~~36,400~~38,000 home sites owned, approximately ~~17,400~~18,000 were substantially improved. In addition, as of ~~January 31,~~April 30, 2021, we expect to purchase approximately 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,~~April 30, 2021, we were selling from ~~309~~320 communities, compared to 317 at October 31, 2020; and 333 at October 31, 2019.

At ~~January 31,~~April 30, 2021, our total stockholders’ equity and our debt to total capitalization ratio were ~~$4.79~~$4.91 billion and ~~0.44~~0.42 to 1.00, respectively.

2529

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 and six months ended ~~January 31,~~April 30, 2021 and 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,								Three months ended April 30,					Six months ended April 30,
		2021			2020			% Change				2021			2020			% Change		2021			2020			% Change
Revenues:	Revenues:										Revenues:
Home sales	Home sales	$	1,410.7		$	1,297.3		9	%		Home sales	$	1,836.3		$	1,516.2		21	%	$	3,247.0		$	2,813.6		15	%
Land sales and other	Land sales and other	152.7			34.1						Land sales and other	93.9			32.8					246.5			66.9
		1,563.4			1,331.4			17	%			1,930.1			1,549.1			25	%	3,493.5			2,880.5			21	%
Cost of revenues:	Cost of revenues:										Cost of revenues:
Home sales (1)	Home sales (1)	1,121.8			1,033.1			9	%		Home sales (1)	1,434.5			1,221.0			17	%	2,556.3			2,254.1			13	%
Land sales and other	Land sales and other	111.7			32.3						Land sales and other	92.1			26.4					203.8			58.7
		1,233.5			1,065.4			16	%			1,526.6			1,247.4			22	%	2,760.1			2,312.8			19	%
Selling, general and administrative (1)	Selling, general and administrative (1)	210.7			218.5			(4)	%		Selling, general and administrative (1)	219.2			209.1			5	%	429.9			427.7			1	%
Income from operations	Income from operations	119.1			47.5			151	%		Income from operations	184.4			92.5			99	%	303.5			140.0			117	%
Other	Other										Other
Income from unconsolidated entities		1.2			12.1			(90)	%
Income (loss) from unconsolidated entities											Income (loss) from unconsolidated entities	10.5			(4.3)			(345)	%	11.7			7.9			48	%
Other income – net	Other income – net	7.1			6.3			13	%		Other income – net	9.2			13.8			(33)	%	17.3			20.1			(14)	%
Expenses related to early retirement of debt											Expenses related to early retirement of debt	(34.2)			—					(35.2)			—
Income before income taxes	Income before income taxes	127.4			65.9			93	%		Income before income taxes	169.8			102.1			66	%	297.2			168.0			77	%
Income tax provision	Income tax provision	30.9			9.1			240	%		Income tax provision	42.0			26.4			59	%	72.9			35.5			105	%
Net income	Net income	$	96.5		$	56.9		70	%		Net income	$	127.9		$	75.7		69	%	$	224.4		$	132.5		69	%

Supplemental information:	Supplemental information:										Supplemental information:
Home sales cost of revenues as a percentage of home sales revenues (1)	Home sales cost of revenues as a percentage of home sales revenues (1)	79.5		%	79.6		%				Home sales cost of revenues as a percentage of home sales revenues (1)	78.1		%	80.5		%			78.7		%	80.1		%
Land sales and other cost of revenues as a percentage of land sales and other revenues	Land sales and other cost of revenues as a percentage of land sales and other revenues	73.2		%	94.7		%				Land sales and other cost of revenues as a percentage of land sales and other revenues	98.1		%	80.4		%			82.7		%	87.7		%
SG&A as a percentage of home sale revenues (1)	SG&A as a percentage of home sale revenues (1)	14.9		%	16.8		%				SG&A as a percentage of home sale revenues (1)	11.9		%	13.8		%			13.2		%	15.2		%
Effective tax rate	Effective tax rate	24.3		%	13.7		%				Effective tax rate	24.7		%	25.9		%			24.5		%	21.1		%

Deliveries – units	Deliveries – units	1,777			1,611			10	%		Deliveries – units	2,271			1,923			18	%	4,048			3,534			15	%
Deliveries – average delivered price (in ‘000s)	Deliveries – average delivered price (in ‘000s)	$	793.9		$	805.3		(1)	%		Deliveries – average delivered price (in ‘000s)	$	808.6		$	788.5		3	%	$	802.1		$	796.1		1	%

Net contracts signed – value	Net contracts signed – value	$	2,508.0		$	1,489.3		68	%		Net contracts signed – value	$	3,053.0		$	1,553.2		97	%	$	5,561.0		$	3,042.5		83	%
Net contracts signed – units	Net contracts signed – units	2,874			1,806			59	%		Net contracts signed – units	3,487			1,886			85	%	6,361			3,692			72	%
Net contracts signed – average selling price (in ‘000s)	Net contracts signed – average selling price (in ‘000s)	$	872.7		$	824.6		6	%		Net contracts signed – average selling price (in ‘000s)	$	875.5		$	823.5		6	%	$	874.2		$	824.1		6	%

		At January 31,										At April 30,								At October 31,
		2021			2020			% Change				2021			2020			% Change		2020			2019			% Change
Backlog – value	Backlog – value	$	7,473.5		$	5,450.2		37	%		Backlog – value	$	8,690.2		$	5,492.9		58	%	$	6,374.6		$	5,257.1		21	%
Backlog – units	Backlog – units	8,888			6,461			38	%		Backlog – units	10,104			6,428			57	%	7,791			6,266			24	%
Backlog – average selling price (in ‘000s)	Backlog – average selling price (in ‘000s)	$	840.9		$	843.6		—	%		Backlog – average selling price (in ‘000s)	$	860.1		$	854.5		1	%	$	818.2		$	839.0		(2)	%

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~~$29.7 million, or ~~2.1%~~2.0% of home sales revenues for the three months ended ~~January 31,~~April 30, 2020 and $56.5 million, or 2.0% of home sales revenues for the six months ended April 30, 2020. All prior period amounts have been reclassified.

Home Sales Revenues and Home Sales Cost of Revenues

Three months ended April 30, 2021

The increase in home sale revenues for the three months ended ~~January~~April 30, 2021, as compared to the three months ended April 30, 2020, was attributable to an 18% increase in the number of homes delivered and a 3% increase in the average price of homes delivered. The increase in the number of homes delivered in the three months ended April 30, 2021, as compared to the three months ended April 30, 2020, was primarily due to an increase in the number of homes in backlog at October 31, 2020, as compared to the number of homes in backlog at October 31, 2019, most significantly in the South and Mountain regions. In addition, restrictions and related impacts on economic activity from the COVID-19 pandemic adversely impacted our ability to construct and deliver homes in certain markets in the fiscal 2020 period, including New Jersey, New York City, metro Seattle and California. The increase in the average delivered home price was mainly due to sales price increases as well as a shift in the number of homes delivered to more expensive areas and/or products, principally in the Mid-Atlantic and Mountain regions.

The decrease in home sales cost of revenues, as a percentage of home sales revenues, in the three months ended April 30, 2021, as compared to the three months ended ~~January 31,~~April 30, 2020, was principally due to a shift in the mix of revenues to higher margin products/areas; sales price increases outpacing cost increases, and lower inventory impairment charges in the fiscal 2021 period, as compared to the fiscal 2020 period. In addition, interest expense as a percentage of home sales revenues was lower in the fiscal 2021 period, as compared to the fiscal 2020 period. In the three months ended April 30, 2021 and 2020, interest expense, as a percentage of home sales revenues, was 2.4% and 2.5%, respectively.

Six months ended April 30, 2021

The increase in home sale revenues for the six months ended April 30, 2021, as compared to the six months ended April 30, 2020, was attributable to a ~~10%~~15% increase in the number of homes delivered ~~offset, in part, by~~and a 1% ~~decrease~~increase in the average price of homes delivered. The increase in the number of homes delivered in the ~~three~~six months ended ~~January 31,~~April 30, 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~~increase 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, offset, in part, by~~ sales price increases. The shift in the number of homes delivered to less expensive areas and/or products in the fiscal 2021 period was primarily related to a decrease in the number of homes closed in City Living and California where the average prices are higher than the Company average. The shift was also the result of our strategic expansion into more affordable luxury home and attractive high-growth markets.

The decrease in home sales cost of revenues, as a percentage of home sales revenues, in the fiscal 2021 period, as compared to the fiscal 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,~~lower inventory impairment charges 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.~~ In the ~~three~~six months ended ~~January 31,~~April 30, 2021 and 2020, interest expense, as a percentage of home sales revenues, was 2.4% and 2.5%, 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; (3) bulk sales to third parties of land we have decided no longer meets our development criteria; and (4) sales of commercial and retail properties generally located at our City Living buildings. InLand sales to joint ventures in which we retain an interest are generally sold at our land basis and therefore little to no gross margin is earned on these sales. During the ~~first quarter~~six-month period 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 gains of $38.3 million. In addition, we sold three land parcels to newly formed Rental Property Joint Ventures in which we have an interest for approximately $140.0 million. No gains were recognized on these land sales to joint ventures. During the six-month period of fiscal 2020, we sold three land parcels to newly formed Rental Property Joint Ventures in which we retained an interest for approximately $46.4 million. Minimal gains were recognized on these land sales to joint ventures.

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

SG&A spending ~~decreased~~increased by ~~$7.8~~$10.0 million in the three-month period ended April 30, 2021, as compared to the three-month period ended April 30, 2020. As a percentage of home sales revenues, SG&A was 11.9% in the three months ended April 30, 2021, as compared to 13.8% in the three months ended April 30, 2020. The dollar increase in SG&A was due primarily to the increase in home sales revenues in the fiscal 2021 period compared to the fiscal 2020 period, offset, in part by decreases in costs due to a number of cost reduction initiatives, including reduced advertising. The decrease in SG&A as a percentage of revenues was due to better leverage on SG&A spending, which increased 5%, relative to revenues which increased 21% in the three-month period ended April 30, 2021, as compared to the three-month period ended April 30, 2020.

SG&A spending increased by $2.3 million in the fiscal 2021 six-month period, as compared to the fiscal 2020 six-month period. As a percentage of home sales revenues, SG&A was ~~14.9%~~13.2% in the fiscal 2021 period, as compared to ~~16.8%~~15.2% in the fiscal 2020 period. The dollar ~~decrease~~increase in SG&A was due ~~primarily~~ to the ~~implementation, commencing~~increase in home sales revenues in the fiscal ~~2020’s second quarter, of~~2021 period compared to the fiscal 2020 period, offset by decreases in costs due to a number of cost reduction initiatives, ~~to improve efficiencies and rationalize overhead expenses,~~ including ~~workforce reductions and~~ reduced ~~advertising and broker commission spend.~~advertising. The decrease in SG&A as a percentage of revenues was due to revenues increasing 9%15% as compared to the fiscal 2020 period, while SG&A spending decreased 4%1%.

Income ~~(loss)~~ from Unconsolidated Entities

We have investments in joint ventures to (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”); 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 apartment and single-family home projects, which do not generate revenues and earnings for a number of years during the development of the 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 ~~decreased by $10.9~~increased $14.8 million in the three-month period ended ~~January 31,~~April 30, 2021, as compared to the three-month period ended ~~January 31,~~April 30, 2020. This ~~decrease~~increase was primarily due to an $11.5 million gain recognized in the fiscal 2021 three-month period related to a property sale by one of our Rental Property Joint Ventures and a $3.0 million other than temporary impairment charge we recognized on one of our Home Building Joint Ventures in the fiscal 2020 period. No similar impairment charges were incurred in the fiscal 2021 period.

Income from unconsolidated entities increased by $3.8 million in the six-month period ended April 30, 2021, as compared to the six-month period ended April 30, 2020. This increase was primarily due to an $11.5 million gain recognized in the fiscal 2021 six-month period related to a property sale by one of our Rental Property Joint Ventures, a $6.0 million gain recognized in the fiscal 2021 six-month period related to an asset sale of commercial property by one of our Land Development Joint Ventures, increased earnings at two of our Land Development Joint Ventures due to lot sales, and a decrease in other than temporary impairment charges recognized. These increases are offset by a $10.7 million gain recognized in the fiscal 2020 six-month period from the sale of our investment in our of our Rental Property Joint Ventures to our joint venture ~~partner; a decrease in earnings~~partner and lower income 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 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 in~~

~~the fiscal 2021 period. These decreases were offset, in part, by a $6.0 million gain recognized in the fiscal 2021 period from an asset sale of commercial property by one of our~~ Land Development Joint ~~Ventures.~~Venture which are delivering their final lots/units.

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 April 30,				Six months ended April 30,
		2021		2020				2021		2020		2021		2020
Income from ancillary businesses	Income from ancillary businesses	$	6,859	$	522		Income from ancillary businesses	$	9,061	$	14,582	$	15,920	$	15,104
Management fee income from Home Building Joint Ventures, net	Management fee income from Home Building Joint Ventures, net	117		1,346			Management fee income from Home Building Joint Ventures, net	448		207		565		1,553
Other	Other	125		4,427			Other	(296)		(953)		800		3,474
Total other income – net	Total other income – net	$	7,101	$	6,295		Total other income – net	$	9,213	$	13,836	$	17,285	$	20,131

The decrease in income from ancillary businesses in the three months ended April 30, 2021, as compared to the three months ended April 30, 2020, was mainly due to gains of $13.0 million recognized in the fiscal 2020 period from the sale of golf clubs, offset, in part, by higher income from our title and mortgage operations due to increased volume.

The increase in income from ancillary businesses in the ~~three~~six months ended ~~January 31,~~April 30, 2021 was mainly due to higher earnings from volume increases and wider spreads in our mortgage operations, as well as lower losses incurred in our apartment living ~~operations.~~operations, offset by gains of $13.0 million recognized in the fiscal 2020 period from the sale of golf clubs.

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~~six months ended ~~January 31,~~April 30, 2021 was primarily related to a decrease in unconsolidated entities to which we provide services. In addition, toin the three months ended April 30, 2021 and 2020, our apartment living operations earned fees from unconsolidated entities of $3.8 million and $3.5 million, respectively. The fees earned by our City Living and Traditional Home Building operations, in the ~~three-month~~six-month periods ended ~~January 31,~~April 30, 2021 and 2020, our apartment living operations earned fees from unconsolidated entities of ~~$4.8~~$8.6 million and ~~$3.8~~$7.2 million, respectively. Fees earned by our apartment living operations are included in income from ancillary businesses.

The decrease in “other” in the ~~three~~six months ended ~~January 31,~~April 30, 2021 was primarily due to lower interest ~~income.~~income and directly expensed interest in the fiscal 2020 six-month period.

Expenses Related to Early Retirement of Debt

In the three-month period ended April 30, 2021, we redeemed, prior to maturity, all $250.0 million aggregate principal amount of our then-outstanding 5.625% Senior Notes due 2024. In connection with this redemption, we incurred a pre-tax charge of $34.2 million, inclusive of the write-off of unamortized deferred financing costs, which is recorded in our Condensed Consolidated Statement of Operations and Comprehensive Income. No similar charges were incurred in the fiscal 2020 period.

Income Before Income Taxes

For the three-month period ended ~~January 31,~~April 30, 2021, we reported income before income taxes of ~~$127.4~~$169.8 million, as compared to ~~$65.9~~$102.1 million in the three-month period ended ~~January 31,~~April 30, 2020.

For the six-month period ended April 30, 2021, we reported income before income taxes of $297.2 million, as compared to $168.0 million in the six-month period ended April 30, 2020.

Income Tax Provision

WeIn the three-month period ended April 30, 2021, we recognized an income tax provision of ~~$30.9 million in the three-month period ended January 31, 2021.~~$42.0 million. Based upon the federal statutory rate of 21.0% for the fiscal 2021 period, our federal tax provision would have been ~~$26.8~~$35.7 million in the three-month period ended ~~January 31,~~April 30, 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,~~April 30, 2020, we recognized an income tax provision of ~~$9.1~~$26.4 million. Based upon the federal statutory rate of 21.0% for the fiscal ~~2020~~2021 period, our federal tax provision would have been ~~$13.8~~$21.4 million in the three-month period ended ~~January 31,~~April 30, 2020. 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 and permanent differences, offset, in part by the retroactive extension of the federal energy efficient home credit, which was enacted into law on December 20, 2019, and which allowed us to recognize energy credits on homes that settled primarily in fiscal 2018 and 2019.

We recognized an income tax provision of $72.9 million in the six-month period ended April 30, 2021. Based upon the federal statutory rate of 21.0% for the fiscal 2021 period, our federal tax provision would have been $62.4 million in the six-month period ended April 30, 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. We recognized an income tax provision of $35.5 million in the six-month period ended April 30, 2020. Based upon the federal statutory rate of 21.0% for the fiscal 2021 period, our federal tax provision would have been $35.3 million in the six-month period ended April 30, 2020. The difference between the tax provision recognized and the tax provision based on the federal statutory rate was mainly due to the retroactive extension of the federal energy efficient home credit ~~which was enacted into law on December 20, 2019 and allowed us to recognize energy credits on homes that settled primarily in fiscal 2018 and 2019,~~described above, and excess tax benefits related to stock-based ~~compensation. These benefits were~~compensation, offset ~~in part,~~ by the provision for state income taxes.

Contracts

~~The aggregate value of net contracts signed increased $1.02 billion, or 68%, in the three-month period ended January 31, 2021, as compared to the three-month period ended January 31, 2020.~~ In the three-month periods ended ~~January 31,~~April 30, 2021 and 2020, the value of net contracts signed was ~~$2.51~~$3.1 billion ~~(2,874~~(3,487 homes) and ~~$1.49~~$1.6 billion ~~(1,806~~(1,886 homes), respectively. The aggregate value of net contracts signed increased $1.5 billion, or 97%, in the three-month period ended April 30, 2021, as compared to the three-month period ended April 30, 2020. The increase in the aggregate value of net contracts signed was due to an 85% increase in the number of net contracts signed and a 6% increase in the average value of each signed contract. In the six-month periods ended April 30, 2021 and 2020, the value of net contracts signed was $5.56 billion (6,361 homes) and $3.04 billion (3,692 homes), respectively. The aggregate value of net contracts signed increased $2.5 billion, or 83%, in the six-month period ended April 30, 2021, as compared to the six-month period ended April 30, 2020. The increase in the aggregate value of net contracts signed was due to a ~~59%~~72% increase in the number of net contracts signed and a 6% increase in the average value of each signed contract. The increase in the number of net contracts signed in both periods reflects anthe overall increase in demand in the housing market, including a resurgence in demand for our

homes that began at the outset of fiscal 2020’s third quarter. The fiscal 2020 periods were also significantly impacted by the implementation of COVID-19 stay-at-home and business closure orders in many states and municipalities, which resulted in a substantial decrease in contracts signed during the period from mid-March 2020 through the end of May 2020.

We attribute the current strong demand to a number of factors, including ~~favorable demographic trends,~~ a ~~very tight supply of for-sale homes stemming~~supply-demand imbalance resulting from a decade of underproduction of new homes, low mortgage rates, ~~and~~a tight supply of resale homes, favorable demographics, a renewed appreciation for the importance of ~~home.~~home, and an improving economy. The increase in average price of net contracts signed 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.

Backlog

The value of our backlog at ~~January 31,~~April 30, 2021 increased ~~37%~~58% to ~~$7.47~~$8.69 billion ~~(8,888~~(10,104 homes), as compared to ~~$5.45~~$5.49 billion ~~(6,461~~(6,428 homes) at ~~January 31,~~April 30, 2020. Our backlog at October 31, 2020 and 2019 was $6.37 billion (7,791 homes) and $5.26 billion (6,266 homes), respectively.

The increase in the value of our backlog at ~~January 31,~~April 30, 2021, as compared to the backlog at ~~January 31,~~April 30, 2020, was primarily attributable to an increase in the value of net contracts signed in the ~~three~~six months ended ~~January 31,~~April 30, 2021, as compared to the ~~three~~six-month period ended ~~January 31,~~April 30, 2020, partially offset by higher home sales revenues in the ~~three~~six months ended ~~January 31,~~April 30, 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,~~April 30, 2021 and October 31, 2020, we had ~~$949.7~~$715.0 million and $1.37 billion, respectively, of cash and cash equivalents. Cash provided by operating activities during the ~~three-month~~six-month period ended ~~January 31,~~April 30, 2021 was ~~$55.3~~$27.3 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, expenses related to the early retirement of debt, 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~~six-month period ended ~~January 31,~~April 30, 2021, cash used in investing activities was ~~$9.8~~$41.6 million, which was primarily related to ~~$112.8~~$153.8 million used to fund our investments in unconsolidated entities and ~~$14.5~~$29.6 million used for the purchase of property and equipment. This activity was offset, in part, by ~~$79.4~~$80.4 million of cash received from the sale of commercial properties and ~~$37.9~~$144.0 million of cash received as returns from our investments in unconsolidated entities.

We used ~~$462.3~~$719.1 million of cash in financing activities in the ~~three-month~~six-month period ended ~~January 31,~~April 30, 2021, primarily for the repurchase of ~~$179.4~~$179.6 million of our common stock; the payment of dividends on our common stock of ~~$14.3~~$35.3 million; payments of ~~$249.4~~$212.8 million of loans payable, net of borrowings; and redemption of senior notes of ~~$10.0~~$294.2 million.

Fiscal 2020

At ~~January 31,~~April 30, 2020 and October 31, 2019, we had ~~$519.8~~$741.2 million and $1.29 billion, respectively, of cash and cash equivalents. Cash used in operating activities during the ~~three-month~~six-month period ended ~~January 31,~~April 30, 2020 was ~~$366.4~~$191.1 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~~mortgage loans sold, net of mortgage ~~loan~~loans 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~~six-month period ended ~~January 31,~~April 30, 2020, cash used in investing activities was ~~$2.1~~$69.7 million, which was primarily related to ~~$26.8~~$60.3 million used to acquire Thrive; $50.8 million used for the purchase of property and ~~equipment~~equipment; and ~~$4.9~~$10.3 million used to fund our investments in unconsolidated entities. This activity was offset, in part, by ~~$29.0~~$34.9 million of cash received as returns from our investments in unconsolidated ~~entities.~~entities and $15.6 million cash received from the sale of a golf club property.

We used ~~$392.5~~$279.6 million of cash in financing activities in the ~~three-month~~six-month period ended ~~January 31,~~April 30, 2020, primarily for the repurchase of ~~$476.0~~$633.6 million of our common stock and the payment of dividends on our common stock of ~~$15.0~~$28.8 million, offset,

in part, by borrowings of ~~$94.2~~$378.4 million of loans payable, net of repayments, and proceeds of ~~$4.2~~$5.3 million from our stock-based benefit plans.

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~~We own ~~a supply of~~or control several years of home sites weand therefore 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~~market conditions 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,~~April 30, 2021, we owned or controlled through options approximately ~~67,700~~74,500 home sites, of which we owned approximately ~~36,400.~~38,000. Of our owned home sites at ~~January 31,~~April 30, 2021, significant improvements were completed on approximately ~~17,400~~18,000 of them.

At ~~January 31,~~April 30, 2021, the aggregate purchase price of land parcels under option and purchase agreements was approximately ~~$2.75~~$3.28 billion (including ~~$8.8~~$8.2 million of land to be acquired from joint ventures in which we have invested). Of the ~~$2.75~~$3.28 billion of land purchase commitments, we paid or deposited ~~$207.6~~$221.0 million, and, if we acquire all of these land parcels, we will be required to pay an additional ~~$2.55~~$3.06 billion. The purchases of these land parcels are scheduled to occur over the next several years. In addition, we expect to purchase approximately 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,~~April 30, 2021, we had investments in these entities of ~~$571.6~~$533.6 million, and were committed to invest or advance up to an additional ~~$89.7~~$88.3 million to these entities if they require additional ~~funding.At January 31,~~funding. At April 30, 2021, we had purchase commitments to acquire land for apartment developments of approximately ~~$121.5~~$88.7 million, of which we had outstanding deposits in the amount of ~~$6.5~~$5.3 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”) substantially all of which matures in November 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 ~~$2.10~~$2.15 billion. Under the terms of the Revolving Credit Facility, at ~~January 31,~~April 30, 2021, our leverage ratio was approximately ~~0.57~~0.56 to 1.00, and our tangible net worth was approximately ~~$4.72~~$4.85 billion. At ~~January 31,~~April 30, 2021, we had no outstanding borrowings under our Revolving Credit Facility and had outstanding letters of credit thereunder of approximately ~~$120.2~~$114.9 million.

We have a five-year senior unsecured term loan facility (the “Term Loan Facility”) with a syndicate of banks. Prior to January 28, 2021, the principal amount outstanding under the Term Loan Facility was ~~$800~~$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.The~~repayment. The Term Loan Facility contains substantially the same financial covenants as our Revolving Credit Facility, as described above.

Under the provisions of the Revolving Credit Facility and Term Loan Facility, our ability to repurchase our common stock was limited to approximately $3.74 billion and our ability to pay cash dividends was limited to approximately $2.70 billion as of April 30, 2021.

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%~~1.30% as of ~~January 31,~~April 30, 2021. These interest rate swaps were designated as cash flow hedges.

On ~~February 12,~~March 15, 2021, we ~~delivered a notice of optional redemption (the “Redemption Notice”) to the holders~~redeemed all $250 million in aggregate principal amount of our ~~outstanding~~then-outstanding of our 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~~were 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.$284.2 million. Accrued and unpaid interest to, but excluding, March 15, 2021 ~~will be~~was paid in accordance with the terms of the Indenture and the Notes. In connection with the redemption, the Company ~~expects to incur~~incurred a pre-tax charge of ~~approximately $34.0~~$34.2 million in its second fiscal quarter for the

early ~~extinguishment~~retirement of ~~debt.~~

~~Under the provisions~~debt, inclusive of the ~~Revolving Credit Facility~~write-off of unamortized deferred financing costs, which is recorded in our Condensed Consolidated Statement of Operations and Term Loan Facility, our ability to repurchase our common stock was limited to approximately $3.66 billion and our ability to pay cash dividends was limited to approximately $2.62 billion as of January 31, 2021.Comprehensive Income.

While 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. However, due to the inherent difficulty in making long-term predictions about the economy and the 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.~~future on favorable terms or at all.

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,~~April 30, 2021, we had investments in these entities of ~~$571.6~~$533.6 million and were committed to invest or advance up to an additional ~~$89.7~~$88.3 million to these entities if they require additional funding. At ~~January 31,~~April 30, 2021, we had agreed to terms for the acquisition of ~~112~~107 home sites from ~~one~~two joint ~~venture~~ventures for an estimated aggregate purchase price of ~~$8.8~~$8.2 million. In addition, we expect to purchase approximately 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, we and our joint venture partner have provided joint and several guarantees in connection with loans to unconsolidated entities. In these situations, we generally 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,~~April 30, 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,~~April 30, 2021, we had guaranteed the debt of certain unconsolidated entities that have loan commitments aggregating ~~$1.86~~$1.89 billion, of which, if the full amount of the debt obligations were borrowed, we estimate ~~$327.5~~$352.9 million to be our maximum exposure related to repayment and carry cost guarantees. At ~~January 31,~~April 30, 2021, the unconsolidated entities had borrowed an aggregate of ~~$1,108.5 million,~~$1.14 billion, of which we estimate ~~$236.7~~$259.7 million to be our maximum exposure related to repayment and carry cost guarantees. The terms of these guarantees generally range from ~~1 month~~4 months to ~~3.8~~3.6 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 2020 Form 10-K, our most critical accounting policies relate to inventory, revenue and cost recognition, and warranty and self-insurance. Since October 31, 2020, there have been no material changes to those critical accounting policies.

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SUPPLEMENTAL GUARANTOR INFORMATION

At ~~January 31,~~April 30, 2021, our 100%-owned subsidiary, Toll Brothers Finance Corp. (the “Subsidiary Issuer”), had issued and outstanding ~~$2.66~~$2.41 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.

3237

Summarized Balance Sheet Data ($ amounts in millions):


	~~January 31,~~April 30, 2021
Assets
Cash	$	~~758.7~~554.5
Inventory	$	~~7,783.9~~8,114.3
Amount due from Nonguarantor Subsidiaries	$	~~637.6~~591.9
Total assets	$	~~9,935.6~~10,003.1

Liabilities & Stockholders' Equity
Loans payable	$	~~951.5~~994.4
Senior notes	$	~~2,652.2~~2,403.2
Total liabilities	$	~~5,464.6~~5,425.5
Stockholders' equity	$	~~4,471.0~~4,577.6

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


	For the ~~three~~six months ended ~~January 31,~~April 30, 2021
Revenues	$	~~1,500.8~~3,346.0
Cost of revenues	$	~~1,171.9~~2,614.5
Selling, general and administrative	$	~~210.1~~429.1
Income before income taxes	$	~~125.5~~279.0
Net income	$	~~93.4~~203.0

3338

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 April 30,
	Revenues ($ in millions)						Units Delivered				Average Delivered Price ($ in thousands)
	2021		2020		% Change		2021	2020	% Change		2021		2020		% Change
Traditional Home Building:
North	$	390.7	$	296.0	32	%	562	449	25	%	$	695.1	$	659.3	5	%
Mid-Atlantic	218.3		192.9		13	%	304	303	—	%	$	718.1	$	636.6	13	%
South	280.2		230.8		21	%	408	348	17	%	$	686.7	$	663.4	4	%
Mountain	431.8		337.5		28	%	605	505	20	%	$	713.8	$	668.3	7	%
Pacific	458.6		423.3		8	%	347	289	20	%	$	1,321.6	$	1,464.7	(10)	%
Traditional Home Building	1,779.6		1,480.5		20	%	2,226	1,894	18	%	$	799.5	$	781.7	2	%
City Living	58.0		36.8		58	%	45	29	55	%	$	1,288.5	$	1,268.0	2	%
Other	(1.3)		(1.1)
Total home sales revenues	1,836.3		1,516.2		21	%	2,271	1,923	18	%	$	808.6	$	788.5	3	%
Land sales revenues	93.9		32.9
Total revenues	$	1,930.2	$	1,549.1

~~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 %


	Six months ended April 30,
	Revenues ($ in millions)						Units Delivered				Average Delivered Price ($ in thousands)
	2021		2020		% Change		2021	2020	% Change		2021		2020		% Change
Traditional Home Building:
North	$	703.3	$	550.1	28	%	1,013	842	20	%	$	694.3	$	653.3	6	%
Mid-Atlantic	382.3		355.4		8	%	531	543	(2)	%	$	720.0	$	654.5	10	%
South	497.1		414.5		20	%	749	622	20	%	$	663.7	$	666.4	—	%
Mountain	809.8		600.6		35	%	1,130	906	25	%	$	716.6	$	662.9	8	%
Pacific	789.8		818.6		(4)	%	573	556	3	%	$	1,378.4	$	1,472.3	(6)	%
Traditional Home Building	3,182.3		2,739.2		16	%	3,996	3,469	15	%	$	796.4	$	789.6	1	%
City Living	65.8		76.6		(14)	%	52	65	(20)	%	$	1,265.4	$	1,178.5	7	%
Other	(1.1)		(2.2)
Total home sales revenues	3,247.0		2,813.6		15	%	4,048	3,534	15	%	$	802.1	$	796.2	1	%
Land sales revenues	246.5		66.9
Total revenues	$	3,493.5	$	2,880.5

3439

~~Backlog:~~Net Contracts Signed:


		At January 31,																	Three months ended April 30,
		Backlog Value ($ in millions)						Backlog Units				Average Backlog Price ($ in thousands)							Net Contract Value ($ in millions)						Net Contracted Units				Average Contracted Price ($ in thousands)
		2021		2020		% Change		2021	2020	% Change		2021		2020		% Change			2021		2020		% Change		2021	2020	% Change		2021		2020		% Change
Traditional Home Building:	Traditional Home Building:																	Traditional Home Building:
North	North	$	1,413.5	$	1,213.1	17	%	1,904	1,749	9	%	$	742.4	$	693.6	7	%	North	$	454.4	$	269.8	68	%	551	377	46	%	$	824.6	$	715.7	15	%
Mid-Atlantic	Mid-Atlantic	934.0		542.5		72	%	1,136	786	45	%	$	822.1	$	690.2	19	%	Mid-Atlantic	323.9		219.9		47	%	386	294	31	%	$	839.1	$	748.1	12	%
South	South	1,210.4		818.4		48	%	1,715	1,127	52	%	$	705.8	$	726.1	(3)	%	South	561.8		273.3		106	%	800	395	103	%	$	702.3	$	691.8	2	%
Mountain	Mountain	2,044.8		1,246.4		64	%	2,727	1,695	61	%	$	749.8	$	735.4	2	%	Mountain	920.0		362.0		154	%	1,216	509	139	%	$	756.6	$	711.3	6	%
Pacific	Pacific	1,700.7		1,472.6		15	%	1,291	994	30	%	$	1,317.4	$	1,481.5	(11)	%	Pacific	707.6		400.5		77	%	488	294	66	%	$	1,450.0	$	1,362.1	6	%
Traditional Home Building	Traditional Home Building	7,303.4		5,293.0		38	%	8,773	6,351	38	%	$	832.5	$	833.4	—	%	Traditional Home Building	2,967.7		1,525.5		95	%	3,441	1,869	84	%	$	862.5	$	816.2	6	%
City Living	City Living	170.1		157.2		8	%	115	110	5	%	$	1,478.9	$	1,428.9	3	%	City Living	85.3		27.7		208	%	46	17	171	%	$	1,854.5	$	1,627.3	14	%
Total	Total	$	7,473.5	$	5,450.2	37	%	8,888	6,461	38	%	$	840.9	$	843.5	—	%	Total	$	3,053.0	$	1,553.2	97	%	3,487	1,886	85	%	$	875.5	$	823.5	6	%


	Six months ended April 30,
	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	$	811.1	$	557.0	46	%	1,000	777	29	%	$	811.1	$	716.9	13	%
Mid-Atlantic	651.4		389.4		67	%	759	536	42	%	$	858.2	$	726.5	18	%
South	950.7		517.7		84	%	1,368	748	83	%	$	695.0	$	692.1	—	%
Mountain	1,671.8		719.5		132	%	2,194	999	120	%	$	762.0	$	720.2	6	%
Pacific	1,351.7		783.8		72	%	961	581	65	%	$	1,406.6	$	1,349.1	4	%
Traditional Home Building	5,436.7		2,967.4		83	%	6,282	3,641	73	%	$	865.4	$	815.0	6	%
City Living	124.3		75.1		66	%	79	51	55	%	$	1,573.4	$	1,472.5	7	%
Total	$	5,561.0	$	3,042.5	83	%	6,361	3,692	72	%	$	874.2	$	824.1	6	%

Backlog:


	At April 30,
	Backlog Value ($ in millions)						Backlog Units				Average Backlog Price ($ in thousands)
	2021		2020		% Change		2021	2020	% Change		2021		2020		% Change
Traditional Home Building:
North	$	1,477.9	$	1,187.1	24	%	1,893	1,677	13	%	$	780.7	$	707.9	10	%
Mid-Atlantic	1,039.7		574.2		81	%	1,218	781	56	%	$	853.6	$	735.2	16	%
South	1,492.1		861.4		73	%	2,107	1,174	79	%	$	708.2	$	733.8	(3)	%
Mountain	2,533.4		1,271.4		99	%	3,338	1,699	96	%	$	759.0	$	748.4	1	%
Pacific	1,949.7		1,450.7		34	%	1,432	999	43	%	$	1,361.5	$	1,452.1	(6)	%
Traditional Home Building	8,492.8		5,344.8		59	%	9,988	6,330	58	%	$	850.3	$	844.4	1	%
City Living	197.4		148.1		33	%	116	98	18	%	$	1,701.7	$	1,510.9	13	%
Total	$	8,690.2	$	5,492.9	58	%	10,104	6,428	57	%	$	860.1	$	854.5	1	%


	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)	%

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


		Three months ended January 31,						Three months ended April 30,				Six months ended April 30,
		2021		2020		% Change				2021			2020		% Change		2021		2020		% Change
Traditional Home Building:	Traditional Home Building:								Traditional Home Building:
North	North	$	18.9	$	2.5	656	%		North	$	39.2		$	17.0	131	%	$	58.1	$	19.5	198	%
Mid-Atlantic	Mid-Atlantic	18.8		7.0		169	%		Mid-Atlantic	24.0			(0.2)		NM		42.8		6.8		529	%
South	South	21.5		9.1		136	%		South	38.3			20.1		91	%	59.8		29.2		105	%
Mountain	Mountain	36.0		17.6		105	%		Mountain	52.1			33.2		57	%	88.1		50.8		73	%
Pacific	Pacific	47.5		63.3		(25)	%		Pacific	74.2			67.8		9	%	121.7		131.1		(7)	%
Traditional Home Building	Traditional Home Building	142.7		99.5		43	%		Traditional Home Building	227.8			137.9		65	%	370.5		237.4		56	%
City Living (1)	City Living (1)	32.7		9.5		244	%		City Living (1)	12.5			8.7		44	%	45.2		18.2		148	%
Corporate and other	Corporate and other	(48.0)		(43.1)		(11)	%		Corporate and other	(70.4)			(44.5)		(58)	%	(118.4)		(87.6)		(35)	%
Total	Total	$	127.4	$	65.9	93	%		Total	$	169.9		$	102.1	66	%	$	297.3	$	168.0	77	%

NM - Not Meaningful

(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,								Three months ended April 30,					Six months ended April 30,
		2021			2020			Change				2021			2020			Change		2021			2020			Change
Units Delivered and Revenues:	Units Delivered and Revenues:										Units Delivered and Revenues:
Home sales revenues ($ in millions)	Home sales revenues ($ in millions)	$	312.6		$	254.1		23	%		Home sales revenues ($ in millions)	$	390.7		$	296.0		32	%	$	703.3		$	550.1		28	%
Units delivered	Units delivered	451			393			15	%		Units delivered	562			449			25	%	1,013			842			20	%
Average delivered price ($ in thousands)	Average delivered price ($ in thousands)	$	693.2		$	646.5		7	%		Average delivered price ($ in thousands)	$	695.1		$	659.3		5	%	$	694.3		$	653.3		6	%

Net Contracts Signed:	Net Contracts Signed:										Net Contracts Signed:
Net contract value ($ in millions)	Net contract value ($ in millions)	$	356.8		$	287.2		24	%		Net contract value ($ in millions)	$	454.4		$	269.8		68	%	$	811.1		$	557.0		46	%
Net contracted units	Net contracted units	449			400			12	%		Net contracted units	551			377			46	%	1,000			777			29	%
Average contracted price ($ in thousands)	Average contracted price ($ in thousands)	$	794.6		$	717.9		11	%		Average contracted price ($ in thousands)	$	824.6		$	715.7		15	%	$	811.1		$	716.9		13	%

Home sales cost of revenues as a percentage of home sale revenues	Home sales cost of revenues as a percentage of home sale revenues	84.0		%	85.4		%				Home sales cost of revenues as a percentage of home sale revenues	82.0		%	84.0		%			82.9		%	84.6		%

Income before income taxes ($ in millions)	Income before income taxes ($ in millions)	$	18.9		$	2.5		656	%		Income before income taxes ($ in millions)	$	39.2		$	17.0		131	%	$	58.1		$	19.5		198	%

Number of selling communities at January 31,		61			82			(26)	%
Number of selling communities at April 30,											Number of selling communities at April 30,	57			86			(34)	%

The ~~increase~~increases in the number of homes delivered in the fiscal 2021 ~~period was~~periods were mainly due to an increase in the number of 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.~~periods. The ~~increase~~increases in the average price of homes delivered in the fiscal 2021 ~~period was~~periods were due primarily to a shift in the number of homes delivered to more expensive areas and/or products and sales price increases.

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

The ~~increase~~increases in income before income taxes in the fiscal 2021 ~~period was~~periods were principally attributable to higher earnings from increased revenues and lower home sales cost of revenues, as a percentage of home sale ~~revenues, and~~revenues. The increase in the fiscal 2021 six-month period was also impacted by lower SG&A costs. The ~~decrease~~decreases in home sales cost of revenues, as a percentage of home sales revenues, in the fiscal 2021 ~~period was~~periods were primarily due to a shift in product mix/areas to higher-margin areas and sales price increases.

Mid-Atlantic


		Three months ended January 31,								Three months ended April 30,					Six months ended April 30,
		2021			2020			Change				2021			2020			Change		2021			2020			Change
Units Delivered and Revenues:	Units Delivered and Revenues:										Units Delivered and Revenues:
Home sales revenues ($ in millions)	Home sales revenues ($ in millions)	$	164.0		$	162.5		1	%		Home sales revenues ($ in millions)	$	218.3		$	192.9		13	%	$	382.3		$	355.4		8	%
Units delivered	Units delivered	227			240			(5)	%		Units delivered	304			303			—	%	531			543			(2)	%
Average delivered price ($ in thousands)	Average delivered price ($ in thousands)	$	722.4		$	677.0		7	%		Average delivered price ($ in thousands)	$	718.1		$	636.6		13	%	$	720.0		$	654.5		10	%

Net Contracts Signed:	Net Contracts Signed:										Net Contracts Signed:
Net contract value ($ in millions)	Net contract value ($ in millions)	$	327.5		$	169.4		93	%		Net contract value ($ in millions)	$	323.9		$	219.9		47	%	$	651.4		$	389.4		67	%
Net contracted units	Net contracted units	373			242			54	%		Net contracted units	386			294			31	%	759			536			42	%
Average contracted price ($ in thousands)	Average contracted price ($ in thousands)	$	878.0		$	700.1		25	%		Average contracted price ($ in thousands)	$	839.1		$	748.1		12	%	$	858.2		$	726.5		18	%

Home sales cost of revenues as a percentage of home sale revenues	Home sales cost of revenues as a percentage of home sale revenues	77.9		%	82.3		%				Home sales cost of revenues as a percentage of home sale revenues	80.6		%	89.2		%			79.4		%	86.1		%

Income before income taxes ($ in millions)	Income before income taxes ($ in millions)	$	18.8		$	7.0		169	%		Income before income taxes ($ in millions)	$	24.0		$	(0.2)		NM		$	42.8		$	6.8		529	%

Number of selling communities at January 31,		38			40			(5)	%
Number of selling communities at April 30,											Number of selling communities at April 30,	41			39			5	%

NM - Not Meaningful

The decrease in the number of homes delivered in the fiscal 2021 six-month period was mainly due to lower backlog conversion, offset, in part, by an increase in the number of homes in backlog at October 31, 2020, as compared to the number of homes in backlog at

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

The ~~increase~~increases in the number of net contracts signed in the fiscal 2021 ~~period was~~periods were due mainly to increased demand ~~partially offset by a decrease~~coupled with an increase in the average number of selling communities in the fiscal 2021 ~~period.~~periods. The ~~increase~~increases in the average value of each contract signed in the fiscal 2021 ~~period was~~periods were mainly due to a shift in the number of contracts signed to more expensive areas and/or products and sales price increases in the fiscal 2021 ~~period.~~periods.

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

South


		Three months ended January 31,								Three months ended April 30,					Six months ended April 30,
		2021			2020			Change				2021			2020			Change		2021			2020			Change
Units Delivered and Revenues:	Units Delivered and Revenues:										Units Delivered and Revenues:
Home sales revenues ($ in millions)	Home sales revenues ($ in millions)	$	216.9		$	183.6		18	%		Home sales revenues ($ in millions)	$	280.2		$	230.8		21	%	$	497.1		$	414.5		20	%
Units delivered	Units delivered	341			274			24	%		Units delivered	408			348			17	%	749			622			20	%
Average delivered price ($ in thousands)	Average delivered price ($ in thousands)	$	636.0		$	670.2		(5)	%		Average delivered price ($ in thousands)	$	686.7		$	663.4		4	%	$	663.7		$	666.4		—	%

Net Contracts Signed:	Net Contracts Signed:										Net Contracts Signed:
Net contract value ($ in millions)	Net contract value ($ in millions)	$	388.8		$	244.4		59	%		Net contract value ($ in millions)	$	561.8		$	273.3		106	%	$	950.7		$	517.7		84	%
Net contracted units	Net contracted units	568			353			61	%		Net contracted units	800			395			103	%	1,368			748			83	%
Average contracted price ($ in thousands)	Average contracted price ($ in thousands)	$	684.5		$	692.4		(1)	%		Average contracted price ($ in thousands)	$	702.3		$	691.8		2	%	$	695.0		$	692.1		—	%

Home sales cost of revenues as a percentage of home sale revenues	Home sales cost of revenues as a percentage of home sale revenues	77.5		%	82.3		%				Home sales cost of revenues as a percentage of home sale revenues	76.2		%	80.6		%			76.8		%	81.3		%

Income before income taxes ($ in millions)	Income before income taxes ($ in millions)	$	21.5		$	9.1		136	%		Income before income taxes ($ in millions)	$	38.3		$	20.1		91	%	$	59.8		$	29.2		105	%

Number of selling communities at January 31,		73			71			3	%
Number of selling communities at April 30,											Number of selling communities at April 30,	80			70			14	%

The ~~increase~~increases in the number of homes delivered in the fiscal 2021 ~~period was~~periods were mainly due to an increase in the number of homes in backlog at October 31, 2020, as compared to the number of homes in backlog at October 31, 2019, partially offset by lower backlog conversion in the fiscal 2021 ~~period.~~periods. The ~~decrease~~increase in the average price of homes delivered in the fiscal 2021 three-month period was primarily due to ~~a shift in the number of homes delivered to less expensive areas and/or products in the fiscal 2021 period.~~sales price increases.

The ~~increase~~increases in the number of net contracts signed in the fiscal 2021 ~~period was~~periods were due principally to an increase in demand and an increase in the average number of selling communities in the fiscal 2021 ~~period.~~periods. The ~~decrease~~increases in the average value of each contract signed in the fiscal 2021 ~~period was~~periods were primarily due to ~~a shift in the number of contracts signed to less expensive areas and/or products, primarily in Florida, offset, in part, by~~ sales price increases in the fiscal 2021 ~~period.~~periods.

The ~~increase~~increases in income before income taxes in the fiscal 2021 ~~period was~~periods were principally due to higher earnings from increased revenues and lower home sales cost of revenues, as a percentage of home sale revenues partially offset by higher SG&A costs in the fiscal 2021 ~~period.~~periods. The ~~decrease~~decreases in home sales cost of revenues, as a percentage of home sales revenues, in the fiscal 2021 ~~period was~~periods were primarily due to a shift in product mix/areas to higher-margin areas and the impact of purchase accounting on the fiscal 2020 ~~period~~periods related to a builder acquisition in South Carolina, which was completed in fiscal 2019.

3743

Mountain


		Three months ended January 31,								Three months ended April 30,					Six months ended April 30,
		2021			2020			Change				2021			2020			Change		2021			2020			Change
Units Delivered and Revenues:	Units Delivered and Revenues:										Units Delivered and Revenues:
Home sales revenues ($ in millions)	Home sales revenues ($ in millions)	$	378.0		$	263.1		44	%		Home sales revenues ($ in millions)	$	431.8		$	337.5		28	%	$	809.8		$	600.6		35	%
Units delivered	Units delivered	525			401			31	%		Units delivered	605			505			20	%	1,130			906			25	%
Average delivered price ($ in thousands)	Average delivered price ($ in thousands)	$	720.0		$	656.1		10	%		Average delivered price ($ in thousands)	$	713.8		$	668.3		7	%	$	716.6		$	662.9		8	%

Net Contracts Signed:	Net Contracts Signed:										Net Contracts Signed:
Net contract value ($ in millions)	Net contract value ($ in millions)	$	751.8		$	357.5		110	%		Net contract value ($ in millions)	$	920.0		$	362.0		154	%	$	1,671.8		$	719.5		132	%
Net contracted units	Net contracted units	978			490			100	%		Net contracted units	1,216			509			139	%	2,194			999			120	%
Average contracted price ($ in thousands)	Average contracted price ($ in thousands)	$	768.7		$	729.5		5	%		Average contracted price ($ in thousands)	$	756.6		$	711.3		6	%	$	762.0		$	720.2		6	%

Home sales cost of revenues as a percentage of home sale revenues	Home sales cost of revenues as a percentage of home sale revenues	79.5		%	79.5		%				Home sales cost of revenues as a percentage of home sale revenues	78.0		%	79.7		%			78.7		%	79.6		%

Income before income taxes ($ in millions)	Income before income taxes ($ in millions)	$	36.0		$	17.6		105	%		Income before income taxes ($ in millions)	$	52.1		$	33.2		57	%	$	88.1		$	50.8		73	%

Number of selling communities at January 31,		93			83			12	%
Number of selling communities at April 30,											Number of selling communities at April 30,	99			82			21	%

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

The ~~increase~~increases in the number of net contracts signed in the fiscal 2021 ~~period was~~periods were primarily due to increased demand and an increase in the average number of selling communities in the fiscal 2021 ~~period.~~periods. The ~~increase~~increases in the average value of each contract signed in the fiscal 2021 ~~period was~~periods were 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.~~periods.

The ~~increase~~increases in income before income taxes in the fiscal 2021 ~~period was~~periods were due mainly to higher earnings from increased revenues in the fiscal 2021 ~~period.~~periods and lower home sales cost of revenues, as a percentage of home sale revenues, partially offset by higher SG&A costs in the fiscal 2021 periods. The decreases in home sales cost of revenues, as a percentage of home sales revenues, in the fiscal 2021 periods were primarily due to a shift in product mix/areas to higher-margin areas and sales price increases.

Pacific


		Three months ended January 31,								Three months ended April 30,					Six months ended April 30,
		2021			2020			Change				2021			2020			Change		2021			2020			Change
Units Delivered and Revenues:	Units Delivered and Revenues:										Units Delivered and Revenues:
Home sales revenues ($ in millions)	Home sales revenues ($ in millions)	$	331.1		$	395.3		(16)	%		Home sales revenues ($ in millions)	$	458.6		$	423.3		8	%	$	789.8		$	818.6		(4)	%
Units delivered	Units delivered	226			267			(15)	%		Units delivered	347			289			20	%	573			556			3	%
Average delivered price ($ in thousands)	Average delivered price ($ in thousands)	$	1,465.3		$	1,480.7		(1)	%		Average delivered price ($ in thousands)	$	1,321.6		$	1,464.7		(10)	%	$	1,378.4		$	1,472.3		(6)	%

Net Contracts Signed:	Net Contracts Signed:										Net Contracts Signed:
Net contract value ($ in millions)	Net contract value ($ in millions)	$	644.1		$	383.4		68	%		Net contract value ($ in millions)	$	707.6		$	400.5		77	%	$	1,351.7		$	783.8		72	%
Net contracted units	Net contracted units	473			287			65	%		Net contracted units	488			294			66	%	961			581			65	%
Average contracted price ($ in thousands)	Average contracted price ($ in thousands)	$	1,361.8		$	1,335.8		2	%		Average contracted price ($ in thousands)	$	1,450.0		$	1,362.1		6	%	$	1,406.6		$	1,349.1		4	%

Home sales cost of revenues as a percentage of home sale revenues	Home sales cost of revenues as a percentage of home sale revenues	76.3		%	74.8		%				Home sales cost of revenues as a percentage of home sale revenues	75.7		%	76.3		%			76.0		%	75.6		%

Income before income taxes ($ in millions)	Income before income taxes ($ in millions)	$	47.5		$	63.3		(25)	%		Income before income taxes ($ in millions)	$	74.2		$	67.8		9	%	$	121.7		$	131.1		(7)	%

Number of selling communities at January 31,		41			48			(15)	%
Number of selling communities at April 30,											Number of selling communities at April 30,	40			46			(13)	%

The ~~decrease~~increases in the number of homes delivered in the fiscal 2021 ~~period was~~periods were mainly due to ~~the decreased number of homes delivered~~an increase in ~~California as a result~~ the ~~lower~~ number of homes in backlog at October 31, 2020, as compared to the number of homes in backlog at October 31, 2019, ~~and~~partially offset by lower backlog conversion in the fiscal 2021 ~~period.~~periods. The ~~decrease~~decreases in the average price of homes delivered in fiscal 2021 ~~period was~~

periods were primarily due to a shift in the number of homes delivered to less expensive areas and/or products, primarily in Washington, offset, in part, by sales price increases in the fiscal 2021 ~~period.~~periods.

The ~~increase~~increases in the number of net contracts signed in the fiscal 2021 ~~period was~~periods were primarily due to an increase in demand, offset, in part, by a decrease in the average number of selling communities in the fiscal 2021 ~~period.~~periods. The ~~increase~~increases in the average value

of each contract signed in the fiscal 2021 ~~period was~~periods were 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 increase in income before income taxes in the fiscal 2021 three-month period was mainly due to higher earnings from increased revenues and lower home sales cost of revenues, as a percentage of home sales revenues in the fiscal 2021 periods. The decrease in home sales cost of revenues, as a percentage of home sales revenues, was primarily due to sales price increases in the fiscal 2021 periods, partially offset by a shift in product mix/areas to lower-margin areas. The decrease in income before income taxes in the fiscal 2021 six-month period was mainly due to lower earnings from decreased revenues, and higher home sales cost of revenues, as a percentage of home sales revenues, offset in part by lower SG&A costs in the fiscal 2021 ~~period. This decrease was partially offset lower SG&A costs.~~periods. The increase in home sales cost of revenues, as a percentage of home sales revenues, ~~were~~was primarily due to a shift in product mix/areas to lower-margin ~~areas partially offset by sales price increases in the fiscal 2021 period.~~areas.

City Living


		Three months ended January 31,								Three months ended April 30,					Six months ended April 30,
		2021			2020			Change				2021			2020			Change		2021			2020			Change
Units Delivered and Revenues:	Units Delivered and Revenues:										Units Delivered and Revenues:
Home sales revenues ($ in millions)	Home sales revenues ($ in millions)	$	7.8		$	39.8		(80)	%		Home sales revenues ($ in millions)	$	58.0		$	36.8		58	%	$	65.8		$	76.6		(14)	%
Units delivered	Units delivered	7			36			(81)	%		Units delivered	45			29			55	%	52			65			(20)	%
Average delivered price ($ in thousands)	Average delivered price ($ in thousands)	$	1,113.4		$	1,106.5		1	%		Average delivered price ($ in thousands)	$	1,288.5		$	1,268.0		2	%	$	1,265.4		$	1,178.5		7	%

Net Contracts Signed:	Net Contracts Signed:										Net Contracts Signed:
Net contract value ($ in millions)	Net contract value ($ in millions)	$	39.0		$	47.4		(18)	%		Net contract value ($ in millions)	$	85.3		$	27.7		208	%	$	124.3		$	75.1		66	%
Net contracted units	Net contracted units	33			34			(3)	%		Net contracted units	46			17			171	%	79			51			55	%
Average contracted price ($ in thousands)	Average contracted price ($ in thousands)	$	1,181.8		$	1,394.9		(15)	%		Average contracted price ($ in thousands)	$	1,854.5		$	1,627.3		14	%	$	1,573.4		$	1,472.5		7	%

Home sales cost of revenues as a percentage of home sale revenues	Home sales cost of revenues as a percentage of home sale revenues	88.2		%	66.9		%				Home sales cost of revenues as a percentage of home sale revenues	69.4		%	60.8		%			70.0		%	64.0		%

Income before income taxes ($ in millions) (1)	Income before income taxes ($ in millions) (1)	$	32.7		$	9.5		244	%		Income before income taxes ($ in millions) (1)	$	12.5		$	8.7		44	%	$	45.2		$	18.2		148	%

Number of selling communities at January 31,		3			4			(25)	%
Number of selling communities at April 30,											Number of selling communities at April 30,	3			3			—	%

(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.~~sales.

The increase in the number of homes delivered in the fiscal 2021 three-month period was mainly attributable to the low number of deliveries in the fiscal 2020 three-month period due to the COVID-19 pandemic, in particular in New York City and northern New Jersey. The decrease in the number of homes delivered in the fiscal 2021 six-month period was mainly attributable to the decreased number of homes in backlog at October 31, 2020, as compared to the number of homes in backlog at October 31, 2019, and lower backlog conversion in the fiscal 2021 period. The ~~increase~~increases in the average price of homes delivered in fiscal 2021 ~~period was~~periods were primarily due to a shift in the number of homes delivered to more expensive areas and/or products.

The ~~decrease~~increases in the number of net contracts signed in the fiscal 2021 periods were mainly due to an increase in demand in the fiscal 2021 three-month period. The increases in the average sales price of net contracts signed in the fiscal 2021 ~~period was~~periods were principally due a shift to ~~less~~more expensive units in the fiscal 2021 ~~period.~~periods.

The increase in income before income taxes in the fiscal 2021 three-month period was primarily due to increased home sales revenues, partially offset by higher home sales cost of revenues, as a percentage of home sale revenues. The increase in income before income taxes in the fiscal 2021 six-month 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; and $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. The higher home sales cost of revenues, as a percentage of home sale revenues in the fiscal 2021 ~~period was~~periods were principally due to a shift in the number of homes delivered to buildings with lower ~~margins and~~margins. The fiscal 2021 six-month period was also impacted by an impairment charge of $1.1 ~~million in the fiscal 2021 period.~~million.

Corporate and Other

In the three months ended ~~January 31,~~April 30, 2021 and 2020, loss before income taxes was ~~$48.0~~$70.4 million and ~~$43.1~~$44.5 million, respectively. The increase in the loss before income taxes in the fiscal 2021 period was principally due to a ~~$10.7~~$34.2 million ~~gain recognized in the fiscal 2020 period from the sale~~charge incurred related to early retirement of ~~our investment in our of our Rental Property Joint Ventures to our joint venture partner;~~debt, lower interest income; ~~losses recognized in the fiscal 2021 period by a 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 in the fiscal 2021 ~~period.~~periods. These increases were partially offset by an $11.5 million gain recognized in the fiscal 2021 three-month period related to a property sale by one of our Rental Property Joint Ventures, 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 2021 period. The decrease in SG&A costs in the fiscal 2021 period was primarily due to the implementation, commencing in fiscal 2020’s second quarter, of a number of cost reduction initiatives to improve efficiencies and rationalize overhead expenses, including workforce reductions and reduced advertising spend.

In the six months ended April 30, 2021 and 2020, loss before income taxes was $118.4 million and $87.6 million, respectively. The increase in the loss before income taxes in the fiscal 2021 periods was principally due to a $34.2 million charge incurred related to early retirement of debt, $10.7 million gain recognized in the fiscal 2020 period from the sale of our investment in one of our Rental Property Joint Ventures to our joint venture partner; lower interest income; and an increase in losses in several Rental Property Joint Ventures related to the commencement of operations and lease up activities in the fiscal 2021 period. These increases were partially offset by an $11.5 million gain recognized in the fiscal 2021 period related to a property sale by one of our Rental Property Joint Ventures, lower SG&A costs, higher earnings from our mortgage company operations primarily due to volume increases and wider spreads, and lower losses incurred in our apartment living operations in the fiscal 2021 period. The decrease in SG&A costs in the fiscal 2021 period was primarily due to the implementation, commencing in fiscal 2020’s second quarter, of a number of cost reduction initiatives to improve efficiencies and rationalize overhead expenses, including workforce reductions and reduced advertising spend.

3946

AVAILABLE INFORMATION

Our principal Internet address is www.tollbrothers.com, and our Investor Relations website is located at 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 Exchange Act 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,~~April 30, 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)				Fixed-rate debt			Variable-rate debt (a)
Fiscal year of maturity	Fiscal year of maturity	Amount		Weighted- average interest rate	Amount		Weighted- average interest rate	Fiscal year of maturity	Amount		Weighted- average interest rate	Amount		Weighted- average interest rate
2021 ~~(b)~~	2021 ~~(b)~~	$	292,959	5.32%	$	125,829	1.83%	2021 ~~(b)~~	$	38,736	3.58%	$	13,210	0.16%
2022	2022	453,011		5.71%	—			2022	464,130		5.68%	146,932		2.50%
2023	2023	466,323		4.37%	—			2023	475,002		4.35%	—
2024	2024	57,943		3.29%	—			2024	72,510		3.88%	—
2025 ~~(b)~~	2025 ~~(b)~~	61,759		5.66%	—			2025 ~~(b)~~	69,382		5.48%	—
Thereafter ~~(c)~~(b)	Thereafter ~~(c)~~(b)	1,638,790		4.49%	650,000		1.18%	Thereafter ~~(c)~~(b)	1,662,552		4.50%	650,000		1.41%
Bond discounts, premiums and deferred issuance costs, net	Bond discounts, premiums and deferred issuance costs, net	(7,694)			(2,635)			Bond discounts, premiums and deferred issuance costs, net	(6,693)			(2,501)
Total	Total	$	2,963,091	4.74%	$	773,194	1.28%	Total	$	2,775,619	4.67%	$	807,641	1.59%
Fair value at January 31, 2021		$	3,230,866		$	775,829
Fair value at April 30, 2021								Fair value at April 30, 2021	$	2,990,171		$	810,142

(a) Based upon the amount of variable-rate debt outstanding at ~~January 31,~~April 30, 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~~$8.1 million per year, without consideration of the Company’s interest rate swap ~~transactions described in (c) below.~~transactions.

(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%~~1.30% as of ~~January 31,~~April 30, 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 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 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 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,~~April 30, 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

There have been no material changes in our risk factors as previously disclosed in Part I, Item 1A., “Risk Factors” in our 2020 Form 10-K.

4148

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

Issuer Purchases of Equity Securities

During the three-month period ended ~~January 31,~~April 30, 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)
February 1, 2021 to February 28, 2021	2	$	53.86	2	15,955
March 1, 2021 to March 31, 2021	2	$	54.39	2	15,953
April 1, 2021 to April 30, 2021	1	$	60.28	1	15,952
Total	5	$	55.11	5

(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,~~April 30, 2021, we withheld ~~153,986~~1,620 of the shares subject to performance based restricted stock units and restricted stock units to cover approximately ~~$7.2 million~~$93,000 of income tax withholdings and we issued the remaining ~~316,976~~4,513 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,~~April 30, 2021, the net exercise method was not employed to exercise options.

(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.

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

~~January 31,~~April 30, 2021.

Dividends

During the ~~three~~six months ended ~~January 31,~~April 30, 2021, we paid cash dividends of ~~$0.11~~$0.28 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,~~April 30, 2021, under our bank credit agreements, we could have paid up to approximately ~~$2.62~~$2.70 billion of cash dividends.

4249

ITEM 6. EXHIBITS




4.1*			Twenty-sixth Supplemental Indenture dated as of April 30, 2021 to the Indenture dated as of February 7, 20 12 by and among the party listed on Schedule A hereto and T he B an k of N ew Y ork M ellon , as successor trustee

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,~~April 30, 2021, filed on ~~March 8,~~June 3, 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.

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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 8,~~June 3, 2021

By:

/s/ Martin P. Connor

Martin P. Connor
Senior Vice President and Chief Financial
Officer (Principal Financial Officer)

Date:

~~March 8,~~June 3, 2021

By:

/s/ Michael J. Grubb

Michael J. Grubb
Senior Vice President and Chief Accounting
Officer (Principal Accounting Officer)

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