UNITED STATES SECURITIES AND EXCHANGE COMMISSION


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

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

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.

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 ~~August 31, 2021,~~March 1, 2022, there were approximately ~~121,717,000~~117,299,000 shares of Common Stock, par value $0.01 per share, outstanding.

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”)~~COVID-19 pandemic on the U.S. economy and on our business; expectations regarding interest rates and inflation; the markets in which we operate or may 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, in profitability and 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; 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 remain highly uncertain, cannot be predicted and will depend upon future developments, including the duration of the pandemic, the impact of 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, inflation, consumer sentiment, 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 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~~risks arising 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

Receivables, prepaid expenses, and other assets (1)


	January 31, 2022		October 31, 2021
	(unaudited)
ASSETS
Cash and cash equivalents	$	671,365	$	1,638,494


Inventory	8,584,427		7,915,884
Property, construction, and office equipment, net	315,098		310,455
Receivables, prepaid expenses, and other assets (1)	743,368		738,078
Mortgage loans held for sale, at fair value	137,210		247,211
Customer deposits held in escrow	106,884		88,627
Investments in unconsolidated entities	679,643		599,101
Income taxes receivable	45,884		—
	$	11,283,879	$	11,537,850
LIABILITIES AND EQUITY
Liabilities
Loans payable	$	1,143,248	$	1,011,534
Senior notes	1,994,544		2,403,989
Mortgage company loan facility	101,615		147,512
Customer deposits	732,254		636,379
Accounts payable	557,272		562,466
Accrued expenses	1,236,425		1,220,235
Income taxes payable	217,071		215,280
Total liabilities	5,982,429		6,197,395
Equity
Stockholders’ equity
Preferred stock, none issued	—		—
Common stock, 127,937 shares issued at January 31, 2022 and October 31, 2021	1,279		1,279
Additional paid-in capital	711,558		714,453
Retained earnings	5,100,841		4,969,839
Treasury stock, at cost — 10,426 and 7,820 shares at January 31, 2022 and October 31, 2021, respectively	(563,618)		(391,656)
Accumulated other comprehensive income ("AOCI")	5,811		1,109
Total stockholders’ equity	5,255,871		5,295,024
Noncontrolling interest	45,579		45,431
Total equity	5,301,450		5,340,455
	$	11,283,879	$	11,537,850

(1) As of ~~July~~January 31, ~~2021~~2022 and October 31, ~~2020,~~2021, receivables, prepaid expenses, and other assets include ~~$120.0~~$91.8 million and ~~$163.0~~$90.8 million, respectively, of assets related to consolidated variable interest entities (“VIEs”). See Note 4,3, “Investments in Unconsolidated Entities” for additional information regarding VIEs.

See accompanying notes.

For the three months ended ~~July~~January 31, ~~2021~~2022 and ~~2020:~~2021:


		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		AOCI		Non-controlling Interest		Total Equity

Balance, April 30, 2021		$	1,529	$	709,422	$	5,352,573	$	(1,148,406)	$	(2,048)	$	47,719	$	4,960,789

Balance, October 31, 2021																Balance, October 31, 2021	$	1,279	$	714,453	$	4,969,839	$	(391,656)	$	1,109	$	45,431	$	5,340,455
Net income	Net income					234,932								234,932		Net income					151,904								151,904

Purchase of treasury stock	Purchase of treasury stock							(95,411)						(95,411)		Purchase of treasury stock							(185,768)						(185,768)
Exercise of stock options and stock based compensation issuances				(937)				1,987						1,050
Employee stock purchase plan issuances				111				248						359
Exercise of stock options, stock based compensation issuances, and employee stock purchase plan issuances																Exercise of stock options, stock based compensation issuances, and employee stock purchase plan issuances			(16,510)				13,806						(2,704)

Stock-based compensation				3,663										3,663

Dividends declared						(20,943)								(20,943)
Other comprehensive loss										(1,807)				(1,807)
Loss attributable to non-controlling interest												(27)		(27)
Capital contributions, net												1,298		1,298
Balance, July 31, 2021		$	1,529	$	712,259	$	5,566,562	$	(1,241,582)	$	(3,855)	$	48,990	$	5,083,903

Balance, April 30, 2020		$	1,529	$	725,246	$	4,878,017	$	(1,034,999)	$	(5,275)	$	49,204	$	4,613,722

Net income						114,761								114,761

Purchase of treasury stock								(320)						(320)
Exercise of stock options and stock based compensation issuances				(6,858)				12,473						5,615
Employee stock purchase plan issuances				(107)				440						333

Stock-based compensation	Stock-based compensation			3,834										3,834		Stock-based compensation			13,615										13,615

Dividends declared	Dividends declared					(13,946)								(13,946)		Dividends declared					(20,902)								(20,902)
Other comprehensive income	Other comprehensive income									279				279		Other comprehensive income									4,702				4,702
Income attributable to non-controlling interest	Income attributable to non-controlling interest											2		2		Income attributable to non-controlling interest											21		21
Capital contributions, net	Capital contributions, net											1,848		1,848		Capital contributions, net											127		127
Balance, July 31, 2020		$	1,529	$	722,115	$	4,978,832	$	(1,022,406)	$	(4,996)	$	51,054	$	4,726,128
Balance, January 31, 2022																Balance, January 31, 2022	$	1,279	$	711,558	$	5,100,841	$	(563,618)	$	5,811	$	45,579	$	5,301,450

Balance, October 31, 2020																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																Cumulative effect adjustment upon adoption of ASC 326, net of tax	0		0		(595)		0		0		0		(595)
Net income																Net income					96,499								96,499

Purchase of treasury stock																Purchase of treasury stock							(179,395)						(179,395)
Exercise of stock options, stock based compensation issuances, and employee stock purchase plan issuances																Exercise of stock options, stock based compensation issuances, and employee stock purchase plan issuances			(21,438)				17,038						(4,400)

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

Dividends declared																Dividends declared					(14,055)								(14,055)
Other comprehensive income																Other comprehensive income									712				712
Loss attributable to non-controlling interest																Loss attributable to non-controlling interest											(21)		(21)
Capital distributions, net																Capital distributions, net											(4,563)		(4,563)
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

~~For the nine months ended July 31, 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 459,297 459,297
Purchase of treasury stock (275,058) (275,058)
Exercise of stock options and stock based compensation issuances (25,171) 33,085 7,914
Employee stock purchase plan issuances 216 845 1,061
Stock-based compensation 19,942 19,942
Dividends declared (56,226) (56,226)
Other comprehensive income 3,343 3,343
Loss attributable to non-controlling interest (47) (47)
Capital distributions, net (3,204) (3,204)
Balance, July 31, 2021 $ 1,529 $ 712,259 $ 5,566,562 $ (1,241,582) $ (3,855) $ 48,990 $ 5,083,903
Balance, October 31, 2019 $ 1,529 $ 726,879 $ 4,774,422 $ (425,183) $ (5,831) $ 46,877 $ 5,118,693
Net income 247,307 247,307
Purchase of treasury stock (633,873) (633,873)
Exercise of stock options and stock based compensation issuances (24,687) 34,875 10,188
Employee stock purchase plan issuances (713) 1,775 1,062
Stock-based compensation 20,636 20,636
Dividends declared (42,897) (42,897)
Other comprehensive income 835 835
Loss attributable to non-controlling interest (6) (6)
Capital contributions, net 4,183 4,183
Balance, July 31, 2020 $ 1,529 $ 722,115 $ 4,978,832 $ (1,022,406) $ (4,996) $ 51,054 $ 4,726,128

See accompanying notes.

1. Significant Accounting Policies

Basis of Presentation

~~The accompanying~~Our 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~~Our 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~~2021 balance sheet amounts and disclosures ~~included herein~~ have been derived from our October 31, ~~2020~~2021 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~~2021 (“~~2020~~2021 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,~~adjustments, necessary to present fairly our financial position as of ~~July~~January 31, ~~2021;~~2022; the results of our operations and changes in equity for the three-month ~~and nine-month~~ periods ended ~~July~~January 31, ~~2021~~2022 and ~~2020;~~2021; and our cash flows for the ~~nine-month~~three-month periods ended ~~July~~January 31, ~~2021~~2022 and ~~2020.~~2021. The results of operations for ~~such~~ interim periods are not necessarily indicative of the results to be expected for the full year.

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~~We are subject to risks and uncertainties, including risks and uncertainties resulting from the COVID-19 pandemic, ~~which~~and are likely to continue to impact ~~its~~our business operations. As a result, actual results could differ from the estimates and assumptions we make ~~that affect 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 $32.8 million, or 2.0% of home sales revenues for the three months ended July 31, 2020 and $89.3 million, or 2.0% of home sales revenues for the nine months ended July 31, 2020. All prior period amounts have been reclassified to conform to the 2021 presentation.

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 ~~July~~January 31, ~~2021,~~2022, 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 ~~$632.5~~$732.3 million and ~~$459.4~~$636.4 million at ~~July~~January 31, ~~2021~~2022 and October 31, ~~2020,~~2021, respectively. Of the outstanding customer deposits held as of October 31, ~~2020,~~2021, we recognized ~~$104.2 million and $303.4~~$110.9 million in home sales revenues during the three months ~~and nine months~~ ended ~~July~~January 31, ~~2021.~~2022.

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)~~(2) bulk sales to third parties of land we have decided no longer meets our development ~~criteria~~criteria; (3) lot sales to third-party builders within our master planned communities; 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 of incentive and by amount on a community-by-community and home-by-home basis. Incentives are reflected as a

reduction in home sales revenues. Incentives are recognized at the time the home is delivered to the home buyer and we receive the sales proceeds.

~~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, 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 measure those instruments at fair value.

We have entered into interest rate swaps related to a portion of our variable rate debt. These derivative transactions are designated as cash flow hedges. The entire change in the fair value of 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.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848),” as amended by ASU 2021-01 in January 2021, directly addressing the effects of reference rate reform on financial reporting as a result of the cessation of the publication of certain LIBOR rates beginning December 31, 2021, with complete elimination of the publication of the LIBOR rates by June 30, 2023. The guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform by virtue of referencing LIBOR or another reference rate expected to be discontinued. This guidance became effective on March 12, 2020 and can be adopted no later than December 31, 2022, with early adoption permitted. We are currently evaluating the ~~effect that such new guidance will have on our consolidated financial statements and related disclosures,~~impact, but do not expect that the adoption of ASU 2020-04, as amended by ASU 2021-01, will have a material impact on our ~~Condensed Consolidated Balance Sheet~~consolidated financial statements or ~~Condensed Consolidated Statement of Operations or Comprehensive Income.~~disclosures.

Certain prior period amounts have been reclassified to conform to the fiscal 2022 presentation.

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. NaN of these acquisitions was accounted for as a business combination and neither were material to our results of operations or financial condition.

~~Subsequent event~~

In August 2021, we acquired substantially all of the assets and operations of StoryBook Homes, LLC (“StoryBook”), a privately-held home builder with operations in Las Vegas, Nevada for approximately $38.8 million in cash. The assets acquired were primarily inventory for future communities, including approximately 550 home sites owned or controlled through land purchase agreements.

Inventory at ~~July~~January 31, ~~2021~~2022 and October 31, ~~2020~~2021 consisted of the following (amounts in thousands):


		July 31, 2021		October 31, 2020			January 31, 2022		October 31, 2021
Land controlled for future communities	Land controlled for future communities	$	167,038	$	223,525	Land controlled for future communities	$	227,659	$	185,656
Land owned for future communities	Land owned for future communities	574,042		1,036,843		Land owned for future communities	841,231		564,737
Operating communities	Operating communities	7,552,200		6,398,538		Operating communities	7,515,537		7,165,491
		$	8,293,280	$	7,658,906		$	8,584,427	$	7,915,884

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~~Backlog consists of homes ~~for sale~~under contract but ~~are temporarily closed due~~not yet delivered 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:~~
July 31,
2021 October 31,
2020
Land owned for future communities:
Number of communities 6 10
Carrying value (in thousands) $ 41,787 $ 68,064
Operating communities:
Number of communities 1 4
Carrying value (in thousands) $ 6,921 $ 32,112
our home buyers (“backlog”).

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 July 31, Nine months ended July 31,
2021 2020 2021 2020
Land controlled for future communities $ 2,045 $ 3,926 $ 3,792 $ 16,765
Land owned for future communities 11,105 2,764 11,105 4,869
Operating communities — — 1,100 300
$ 13,150 $ 6,690 $ 15,997 $ 21,934


	Three months ended January 31,
		2022		2021
Land controlled for future communities		$	793	$	167
Land owned for future communities		1,440		—
Operating communities		—		1,100
		$	2,233	$	1,267

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,~~13, “Commitments and Contingencies,” for information regarding land purchase commitments.

At ~~July~~January 31, ~~2021,~~2022, we evaluated our land purchase contracts, including those to acquire land for apartment developments, to determine whether any of the selling entities were ~~VIEs~~variable interest entities (“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 ~~July~~January 31, ~~2021,~~2022, we determined that ~~280~~298 land purchase contracts, with an aggregate purchase price of ~~$3.32~~$3.96 billion, on which we had made aggregate deposits totaling ~~$270.8~~$360.1 million, were VIEs, and that we were not the primary beneficiary of any VIE related to our land purchase contracts. At October 31, ~~2020,~~2021, we determined that ~~207~~289 land purchase contracts, with an aggregate purchase price of ~~$2.31~~$3.67 billion, on which we had made aggregate deposits totaling ~~$208.7~~$302.4 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 July 31, Nine months ended July 31,
2021 2020 2021 2020
Interest capitalized, beginning of period $ 295,145 $ 324,864 $ 297,975 $ 311,323
Interest incurred 37,133 41,794 116,447 131,547
Interest expensed to home sales cost of revenues (49,995) (40,467) (127,412) (111,278)
Interest expensed to land sales and other cost of revenues (1,064) (2,820) (3,482) (4,124)
Interest expensed in other income – net — — — (2,440)
Interest reclassified to property, construction and office equipment (1,034) — (1,034) —
Interest capitalized on investments in unconsolidated entities (1,078) (1,013) (3,403) (2,790)
Previously capitalized interest on investments in unconsolidated entities transferred to inventory 76 88 92 208
Interest capitalized, end of period $ 279,183 $ 322,446 $ 279,183 $ 322,446


	Three months ended January 31,
		2022		2021
Interest capitalized, beginning of period		$	253,938	$	297,975
Interest incurred		31,005		41,268
Interest expensed to home sales cost of revenues		(32,437)		(33,325)
Interest expensed to land sales and other cost of revenues		(3,409)		(1,838)


Interest capitalized on investments in unconsolidated entities		(1,290)		(1,134)

Previously capitalized interest on investments in unconsolidated entities transferred to inventory		135		15
Interest capitalized, end of period		$	247,942	$	302,961

During the three months ended ~~July~~January 31, ~~2021,~~2022, we incurred approximately ~~$265,000~~$274,000 of interest related to our interest rate swaps which is included in accumulated other comprehensive ~~loss,~~income, and approximately ~~$60,000~~$76,000 was reclassified out of accumulated other comprehensive ~~loss~~income to home sales cost of revenues. During the ~~nine~~three months ended ~~July~~January 31, 2021, we incurred approximately ~~$665,000~~$154,000 of interest related to our interest rate swaps which is included in accumulated other comprehensive ~~loss,~~income, and approximately ~~$101,000~~$10,000 was reclassified out of accumulated other comprehensive ~~loss~~income to home sales cost of revenues. ~~No similar amounts were incurred during the three months or nine months ended July 31, 2020.~~

4.3. Investments in Unconsolidated Entities

We have investments in various unconsolidated entities and our ownership interest in these investments ranges from ~~15.8%~~5.0% to 50%. These entities, which are structured as joint ventures and either: (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~~or (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 ~~July~~January 31, ~~2021,~~2022, 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	13		3		28		4		48		Number of unconsolidated entities	14		2		35		4		55
Investment in unconsolidated entities(1)	Investment in unconsolidated entities(1)	$	235,796	$	16,508	$	271,161	$	26,967	$	550,432	Investment in unconsolidated entities(1)	$	288,426	$	8,630	$	361,483	$	21,104	$	679,643
Number of unconsolidated entities with funding commitments by the Company	Number of unconsolidated entities with funding commitments by the Company	6		—		6		1		13		Number of unconsolidated entities with funding commitments by the Company	11		—		14		1		26
Company’s remaining funding commitment to unconsolidated entities(2)	Company’s remaining funding commitment to unconsolidated entities(2)	$	25,486	$	—	$	26,964	$	25,085	$	77,535	Company’s remaining funding commitment to unconsolidated entities(2)	$	108,611	$	—	$	54,383	$	25,147	$	188,141

(1) Our total investment includes $92.5 million related to 12 unconsolidated joint venture-related variable interests in VIEs and our maximum exposure to losses related to these VIEs is approximately $210.5 million as of January 31, 2022. Our ownership interest in such unconsolidated Joint Venture VIEs ranges from 20% to 50%.

(2) Our remaining funding commitment includes approximately $115.5 million related to our unconsolidated joint venture-related variable interests in VIEs.

Certain joint ventures in which we have investments obtained debt financing to finance a portion of their activities. The table below provides information at ~~July~~January 31, ~~2021,~~2022, regarding the debt financing obtained by category ($ amounts in thousands):


		Land Development Joint Ventures		Rental Property Joint Ventures		Total			Land Development Joint Ventures		Rental Property Joint Ventures		Total
Number of joint ventures with debt financing	Number of joint ventures with debt financing	6		25		31		Number of joint ventures with debt financing	8		26		34
Aggregate loan commitments	Aggregate loan commitments	$	326,735	$	2,049,486	$	2,376,221	Aggregate loan commitments	$	507,427	$	2,308,554	$	2,815,981
Amounts borrowed under loan commitments	Amounts borrowed under loan commitments	$	276,509	$	1,403,337	$	1,679,846	Amounts borrowed under loan commitments	$	376,534	$	1,391,668	$	1,768,202

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

The table below provides information on joint ventures entered into during the ~~nine-months~~three-months ended ~~July~~January 31, ~~2021~~2022 ($ amounts in thousands):


		Land Development Joint Ventures		Rental Property Joint Ventures			Land Development Joint Ventures		Rental Property Joint Ventures		Gibraltar Joint Ventures
Number of unconsolidated joint ventures entered into during the period	Number of unconsolidated joint ventures entered into during the period	4				Number of unconsolidated joint ventures entered into during the period	2		4		1
Investment balance at July 31, 2021		$	102,700	$	51,300
Investment balance at January 31, 2022						Investment balance at January 31, 2022	$	13,557	$	47,569	1,641

In addition, in the first quarter of fiscal 2022, we entered into a joint venture with an unrelated party to develop a luxury for-rent residential apartment project in Washington, D.C. on land which we contributed to the venture. The land we contributed has a carrying value of $60.1 million and remains on our balance sheet under “Receivables, prepaid expenses, and other assets”. Under the terms of the joint venture agreement, our partner has the right to put their interest back to us if certain conditions are not satisfied. If those conditions are satisfied, we would expect to deconsolidate this land and recognize a land sale at that time.

The table below provides information on joint ventures entered into during the ~~nine-months~~three-months ended ~~July~~January 31, ~~2020~~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	1		6		Number of unconsolidated joint ventures entered into during the period	3		2
Investment balance at July 31, 2020		$	24,600	$	62,600
Investment balance at January 31, 2021						Investment balance at January 31, 2021	$	139,033	$	14,932

Results of Operations and Intra-entity Transactions

From time to time, certain of our land development and rental property joint ventures sell assets to unrelated parties or to our joint venture partner. In connection with these sales, we recognized ~~a gain~~gains of ~~$17.0~~$21.0 million and $5.9 million in the three-month ~~period ended~~ ~~July 31, 2021.~~ ~~No similar gains were recognized in the three-month period ended July 31, 2020.~~ ~~In the nine-month~~ periods ended ~~July~~January 31, 2022 and 2021, ~~and 2020, we recognized gains of $34.5 million and $10.7 million, respectively~~.respectively. These gains are included in “Income ~~(loss)~~ from unconsolidated entities” in our Condensed Consolidated Statements of Operations and Comprehensive Income.

In ~~the nine-month periods ended July 31,~~our first quarter of fiscal 2021, ~~and 2020,~~ we recognized other-than-temporary impairment charges on our investments in certain Home Building Joint Ventures of $2.1 ~~million and $3.0 million, respectively. No~~million. There were no other-than-temporary impairment charges ~~were~~ recognized in ~~the three-month periods ended July 31,~~our first quarter of fiscal 2022.

In our first quarters of fiscal 2022 and 2021, ~~and 2020.~~

Wewe purchased land from unconsolidated entities, principally related to our acquisition of lots from our Land Development Joint Ventures, totaling ~~$3.2~~$23.8 million and ~~$2.7~~$4.3 million, ~~in the three-month periods ended July 31, 2021 and 2020, respectively, and $11.0 million and $10.5 million in the nine-month periods ended July 31, 2021 and 2020,~~ respectively. Our share of income from the lots we acquired was insignificant in each period. We sold land to unconsolidated entities, which principally involved

land sales to our Rental Property Joint Ventures, totaling ~~$9.8~~$78.0 million and ~~$12.9~~$57.3 million in ~~the three-month periods ended July 31,~~our first quarters of fiscal 2022 and 2021, ~~and 2020, respectively, and $149.7 million and $59.3 million in the nine-month periods ended July 31, 2021 and 2020,~~ respectively. These amounts are included in “Land sales and other revenue” on our Condensed Consolidated ~~Statement~~Statements of Operations and Comprehensive Income and are generally sold at or near our land basis.

~~Subsequent Event~~

In August 2021, 2 of our Rental Property Joint Ventures sold their assets to unrelated parties for $162.7 million. In connection with such sales, the joint ventures repaid all then-outstanding loans, in an aggregate principal amount of $73.4 million. In connection with such sales, we received cash of $30.2 million and expect to recognize gains of approximately $22.6 million, which will be included in “Income (loss) from unconsolidated entities” in our Consolidated Statements of Operations and Comprehensive Income for the year ending October 31, 2021.

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 portions of 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 ~~July~~January 31, ~~2021,~~2022, 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):

~~July~~January 31, ~~2021~~2022

Loan commitments in the aggregate

~~1,866,300~~2,307,200

Our maximum estimated exposure under repayment and carry cost guarantees if the full amount of the debt obligations were borrowed(1)

~~340,600~~407,700

Debt obligations borrowed in the aggregate

~~1,169,900~~1,259,500

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

~~238,600~~237,200

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

~~9,400~~10,900

Terms of guarantees

1 ~~months~~month -
3.9 years

(1) Our maximum estimated exposure under repayment and carry cost guarantees includes approximately $95.0 million related to our unconsolidated Joint Venture VIEs.

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

We have both unconsolidated and consolidated joint venture-related variable interests in VIEs. Information regarding our involvement in unconsolidated joint-venture related variable interests in VIEs has been disclosed throughout information presented above.

The table below provides information as of ~~July~~January 31, ~~2021~~2022 and October 31, ~~2020, regarding our unconsolidated joint venture-related variable interests in VIEs ($ amounts in thousands):~~
July 31,
2021 October 31,
2020
Number of Joint Venture VIEs that the Company is not the Primary Beneficiary (“PB”) 11 12
Investment balance in unconsolidated Joint Venture VIEs included in Investments in unconsolidated entities in our Consolidated Balance Sheets $ 101,200 $ 63,100
Our maximum exposure to losses related to loan guarantees and additional commitments provided to unconsolidated Joint Venture VIEs $ 279,300 $ 122,100

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

~~The table below provide information as of July 31,~~ 2021, ~~and October 31, 2020,~~ regarding our consolidated joint venture-related variable interests in VIEs ($ amounts in thousands):
Balance Sheet Classification July 31,
2021 October 31,
2020
Number of Joint Venture VIEs that the Company is the PB and consolidates 5 5
Carrying value of consolidated VIEs assets Receivables prepaid expenses, and other assets $ 120,000 $ 163,000
Our partners’ interests in consolidated VIEs Noncontrolling interest $ 43,000 $ 46,200


	Balance Sheet Classification	January 31, 2022		October 31, 2021
Number of Joint Venture VIEs that the Company is the primary beneficiary and consolidates		5		5
Carrying value of consolidated VIEs assets	Receivables prepaid expenses, and other assets	$	91,800	$	90,800
Our partners’ interests in consolidated VIEs	Noncontrolling interest	$	39,500	$	39,400

Our ownership interest in the above consolidated Joint Venture VIEs ranges from 50% to 98%. We are actively looking for additional partners for these investments and to the extent we are able to find such partners, we will reduce our ownership interest in these entities.

As shown above, we ~~have concluded we~~ are the PBprimary beneficiary 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 PBprimary beneficiary 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.

Joint Venture Condensed Combined Financial Information

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

Condensed Combined Balance Sheets:


		July 31, 2021		October 31, 2020			January 31, 2022		October 31, 2021
Cash and cash equivalents	Cash and cash equivalents	$	150,668	$	109,478	Cash and cash equivalents	$	167,968	$	153,582
Inventory	Inventory	748,938		511,000		Inventory	1,060,893		964,962
Loans receivable, net	Loans receivable, net	79,170		78,576		Loans receivable, net	61,539		86,727

Rental properties	Rental properties	1,421,009		1,244,911		Rental properties	1,454,564		1,496,355
Rental properties under development	Rental properties under development	754,755		666,386		Rental properties under development	914,785		697,659
Real estate owned		2,332		6,752

Other assets	Other assets	198,560		169,368		Other assets	272,758		227,579
Total assets	Total assets	$	3,355,432	$	2,786,471	Total assets	$	3,932,507	$	3,626,864
Debt, net of deferred financing costs	Debt, net of deferred financing costs	$	1,689,292	$	1,368,065	Debt, net of deferred financing costs	$	1,764,604	$	1,677,619
Other liabilities	Other liabilities	212,498		186,817		Other liabilities	264,246		248,545
Members’ equity	Members’ equity	1,453,642		1,231,173		Members’ equity	1,903,657		1,700,700
Noncontrolling interest		—		416

Total liabilities and equity	Total liabilities and equity	$	3,355,432	$	2,786,471	Total liabilities and equity	$	3,932,507	$	3,626,864
Company’s net investment in unconsolidated entities (1)	Company’s net investment in unconsolidated entities (1)	$	550,432	$	430,701	Company’s net investment in unconsolidated entities (1)	$	679,643	$	599,101

(1) Our underlying equity in the net assets of the unconsolidated entities exceeded our net investment in unconsolidated entities by ~~$17.8~~$21.2 million and ~~$29.4~~$16.5 million as of ~~July~~January 31, ~~2021~~2022 and October 31, ~~2020,~~2021, respectively, and these differences are primarily a result of other than temporary impairments ~~related to our investments in unconsolidated entities;~~we have recognized; interest capitalized on our investments; the estimated fair value of the guarantees provided to the joint ventures; unrealized gains on our retained joint venture interests; gains recognized from the sale of our ownership interests; and distributions from entities in excess of the carrying amount of our net investment.

Condensed Combined Statements of Operations:


		Three months ended July 31,				Nine months ended July 31,					Three months ended January 31,
		2021		2020		2021		2020				2022		2021
Revenues	Revenues	$	89,304	$	78,897	$	268,257	$	291,179	Revenues		$	155,752	$	92,530
Cost of revenues ~~(2)~~	Cost of revenues ~~(2)~~	52,414		56,830		209,273		197,192		Cost of revenues ~~(2)~~		108,483		96,723
Other expenses ~~(2)~~	Other expenses ~~(2)~~	37,497		28,185		107,968		106,422		Other expenses ~~(2)~~		43,603		35,390
Total expenses	Total expenses	89,911		85,015		317,241		303,614		Total expenses		152,086		132,113
(Loss) gain on disposition of loans and real estate owned		(2,575)		1,053		(2,785)		1,053
Loss from operations		(3,182)		(5,065)		(51,769)		(11,382)

Income (loss) from operations										Income (loss) from operations		3,553		(39,583)
Other income(2)	Other income(2)	44,065		448		79,398		977		Other income(2)		33,347		948
Income (loss) before income taxes	Income (loss) before income taxes	40,883		(4,617)		27,629		(10,405)		Income (loss) before income taxes		36,900		(38,635)
Income tax expense (benefit)	Income tax expense (benefit)	27		37		(1,632)		(111)		Income tax expense (benefit)		83		(1,506)
Net income (loss) including earnings from noncontrolling interests	Net income (loss) including earnings from noncontrolling interests	40,856		(4,654)		29,261		(10,294)		Net income (loss) including earnings from noncontrolling interests		36,817		(37,129)
Less: loss (income) attributable to noncontrolling interest		—		34		(174)		34
Less: income attributable to noncontrolling interest										Less: income attributable to noncontrolling interest		—		(174)
Net income (loss) attributable to controlling interest	Net income (loss) attributable to controlling interest	$	40,856	$	(4,620)	$	29,087	$	(10,260)	Net income (loss) attributable to controlling interest		$	36,817	$	(37,303)

Company’s equity in earnings (losses) of unconsolidated entities (3)		$	16,636	$	(2,566)	$	28,313	$	5,304
Company’s equity in earnings of unconsolidated entities (3)										Company’s equity in earnings of unconsolidated entities (3)		$	22,037	$	1,194

(2) ~~Effective October~~The three months ending January 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 conform2022 includes $29.9 million related to the ~~2021 presentation.~~sale of an asset by one Rental Property Joint Venture.

(3) 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; promote earned on the gains recognized by joint ventures and those promoted cash flows being distributed; other than temporary impairments ~~related to our investments in unconsolidated entities;~~we have recognized; recoveries of previously incurred charges; unrealized gains on our retained joint venture interests; gains recognized from the sale of our investment to our joint

venture partner; and our share of the entities’ profits related to home sites purchased by us which reduces our cost basis of the home sites acquired.

5.4. Receivables, Prepaid Expenses, and Other Assets

Receivables, prepaid expenses, and other assets at ~~July~~January 31, ~~2021~~2022 and October 31, ~~2020,~~2021, consisted of the following (amounts in thousands):


		July 31, 2021		October 31, 2020			January 31, 2022		October 31, 2021
Expected recoveries from insurance carriers and others	Expected recoveries from insurance carriers and others	$	52,298	$	79,269	Expected recoveries from insurance carriers and others	$	15,126	$	16,773
Improvement cost receivable	Improvement cost receivable	84,746		86,116		Improvement cost receivable	68,532		67,626
Escrow cash held by our captive title company		68,775		24,712
Escrow cash held by our wholly owned title company						Escrow cash held by our wholly owned title company	51,683		41,429
Properties held for rental apartment and commercial development	Properties held for rental apartment and commercial development	446,497		542,796		Properties held for rental apartment and commercial development	348,624		381,401
Prepaid expenses	Prepaid expenses	27,277		28,104		Prepaid expenses	38,574		34,960
Right-of-use asset	Right-of-use asset	96,749		105,004		Right-of-use asset	98,923		96,276
Other	Other	88,791		90,293		Other	121,906		99,613
		$	865,133	$	956,294		$	743,368	$	738,078

See Note 7,6, “Accrued Expenses,” for additional information regarding the expected recoveries from insurance carriers and others. ~~Subsequent to July 31, 2021, we received $23.0 million from 1 of our insurance carriers.~~

~~At July 31, 2021, escrow cash held by our captive title company included $30.0 million in connection with the formation of a joint venture in August 2021.~~

As of ~~July~~January 31, ~~2021~~2022 and October 31, ~~2020,~~2021, properties held for rental apartment and commercial development include ~~$120.0~~$91.8 million and ~~$163.0~~$90.8 million, respectively, of assets related to consolidated VIEs. See Note 4,3, “Investments in Unconsolidated Entities” for additional information regarding VIEs.

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

Loans Payable

At ~~July~~January 31, ~~2021~~2022 and October 31, ~~2020,~~2021, loans payable consisted of the following (amounts in thousands):


		July 31, 2021		October 31, 2020			January 31, 2022		October 31, 2021
Senior unsecured term loan	Senior unsecured term loan	$	650,000	$	800,000	Senior unsecured term loan	$	650,000	$	650,000

Loans payable – other	Loans payable – other	388,999		351,257		Loans payable – other	495,624		364,042
Deferred issuance costs	Deferred issuance costs	(2,367)		(3,302)		Deferred issuance costs	(2,376)		(2,508)
		$	1,036,632	$	1,147,955		$	1,143,248	$	1,011,534

Senior Unsecured Term Loan

We ~~have~~are party to a ~~five-year~~$650.0 million senior unsecured term loan facility (the “Term Loan Facility”) with a syndicate of banks, ~~that~~most of which is scheduled to expire on November 1, ~~2025. Prior to January 28, 2021,~~2026. In the ~~principal amount outstanding under the Term Loan Facility was $800.0 million. On January 28,~~first quarter of fiscal 2021, we voluntarily repaid $150.0 million of the ~~Term Loan Facility, and the remaining $650.0~~then $800.0 million in principal amount ~~outstanding will become due and payable at maturity on November 1, 2025.~~that was outstanding. NaN prepayment charges were incurred in connection with the repayment. ~~At July~~On October 31, 2021, we entered into term loan extension agreements to extend the maturity date of $548.4 million of outstanding term loans from November 1, 2025 to November 1, 2026, with the remainder of the term loans remaining due November 1, 2025. Other than $101.6 million of term loans that are scheduled to mature on November 1, 2025, there are 0 payments required before the final maturity date on the Term Loan Facility. At January 31, 2022, the interest rate on ~~borrowings~~the Term Loan Facility was ~~1.39%~~1.16% 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 ~~1.30%~~1.05% as of ~~July~~January 31, ~~2021.~~2022. 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,~~2021, we entered into extension letter agreements which extended the maturity date of ~~$1.85~~$1.78 billion of the revolving loans and commitments under the Revolving Credit Facility from November 1, ~~2024~~2025 to November 1, ~~2025,~~2026, with the remainder of the revolving loans and commitments continuing to terminate on November 1, ~~2024.~~2025. 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 ~~July~~January 31, ~~2021,~~2022, 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 ~~$2.15~~$2.09 billion. Under the terms of the Revolving Credit Facility, at ~~July~~January 31, ~~2021,~~2022, our leverage ratio was approximately ~~0.49~~0.44 to 1.00, and our tangible net worth was approximately ~~$4.97~~$5.25 billion. Based upon the ~~limitations related to our repurchase~~terms of ~~common stock in~~ the Revolving Credit Facility, our ability to repurchase our common stock was limited to approximately ~~$3.77~~$4.26 billion as of ~~July~~January 31, ~~2021.~~2022. In addition, under the provisions of the Revolving Credit Facility, our ability to pay cash dividends was limited to approximately ~~$2.82~~$3.16 billion as of ~~July~~January 31, ~~2021.~~2022.

At ~~July~~January 31, ~~2021,~~2022, we had no outstanding borrowings under the Revolving Credit Facility and had approximately ~~$115.3~~$92.9 million of outstanding letters of credit that were issued under the Revolving Credit Facility. At ~~July~~January 31, ~~2021,~~2022, the interest rate on outstanding borrowings under the Revolving Credit Facility would have been ~~1.44%~~1.31% per ~~annum~~.annum. In February 2022, we borrowed $200.0 million under our Revolving Credit Facility.

Loans Payable – Other

“Loans payable – other” primarily represents purchase money mortgages on properties we acquired that the seller had financed, project-level financing, and various revenue bonds that were issued by government entities on our behalf to finance community infrastructure and our manufacturing facilities. At ~~July~~January 31, ~~2021,~~2022, the weighted-average interest rate on “Loans payable – other” was ~~4.40%~~3.80% per annum.

Senior Notes

At ~~July~~January 31, ~~2021,~~2022, we had 65 issues of senior notes outstanding with an aggregate principal amount of ~~$2.41~~$2.00 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,~~2022, we redeemed ~~prior to maturity, approximately $10.0~~the remaining $409.9 million ~~of the $419.9 million then-outstanding~~ principal amount of 5.875% Senior Notes due February 15, 2022, at par, plus accrued interest.

Mortgage Company Loan Facility

~~TBI~~Toll Brothers Mortgage® Company (“TBI Mortgage”), our wholly owned mortgage subsidiary, 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.” The Warehousing Agreement provides for loan purchases up to $75.0 million, subject to certain sublimits. In addition, the Warehousing Agreement 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 was~~Prior to its scheduled ~~to expire~~expiration on March 4, ~~2021, and borrowings thereunder bore interest at LIBOR plus 1.90% per annum. In March~~ 2021, the Warehousing Agreement was amended and restated to extend the expiration date to March 3, 2022 and ~~borrowings~~to reduce the interest rate thereunder ~~will bear interest at~~to LIBOR plus 1.75% per annum (with a LIBOR floor of 0.75%). Prior to the extension, borrowings under the facility bore interest at LIBOR plus ~~1.75%~~1.90% per annum. At ~~July~~January 31, ~~2021,~~2022, the interest rate on the Warehousing Agreement, as amended, was 2.50% per annum. Subsequent to January 31, 2022, the Warehousing Agreement was further extended to April 2, 2022.

1613

7.6. Accrued Expenses

Accrued expenses at ~~July~~January 31, ~~2021~~2022 and October 31, ~~2020~~2021 consisted of the following (amounts in thousands):


		July 31, 2021		October 31, 2020			January 31, 2022		October 31, 2021
Land, land development, and construction	Land, land development, and construction	$	274,930	$	233,783	Land, land development, and construction	$	298,390	$	310,996
Compensation and employee benefits	Compensation and employee benefits	209,917		219,965		Compensation and employee benefits	176,256		232,161
Escrow liability	Escrow liability	66,700		23,067		Escrow liability	46,159		36,107
Self-insurance	Self-insurance	232,535		215,884		Self-insurance	239,194		236,369
Warranty	Warranty	150,414		157,351		Warranty	143,043		145,062
Lease liabilities	Lease liabilities	116,613		124,756		Lease liabilities	119,851		116,248
Deferred income	Deferred income	35,719		34,096		Deferred income	38,515		36,638
Interest	Interest	46,347		38,446		Interest	35,762		34,033
Commitments to unconsolidated entities	Commitments to unconsolidated entities	17,745		8,928		Commitments to unconsolidated entities	29,969		22,150
Treasury share purchases						Treasury share purchases	57,699		—
Other	Other	48,284		53,920		Other	51,587		50,471
		$	1,199,204	$	1,110,196		$	1,236,425	$	1,220,235

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


		Three months ended July 31,				Nine months ended July 31,					Three months ended January 31,
		2021		2020		2021		2020				2022		2021
Balance, beginning of period	Balance, beginning of period	$	153,640	$	157,154	$	157,351	$	201,886	Balance, beginning of period		$	145,062	$	157,351
Additions – homes closed during the period	Additions – homes closed during the period	10,430		8,975		29,141		23,252		Additions – homes closed during the period		9,455		7,402
Addition – liabilities assumed in a business acquisition		—		—		—		60

Increase in accruals for homes closed in prior years, net	Increase in accruals for homes closed in prior years, net	1,111		2,150		6,002		5,730		Increase in accruals for homes closed in prior years, net		2,957		1,194
Decrease to water intrusion accrual		—		—		—		(24,400)

Charges incurred	Charges incurred	(14,767)		(9,880)		(42,080)		(48,129)		Charges incurred		(14,431)		(15,070)
Balance, end of period	Balance, end of period	$	150,414	$	158,399	$	150,414	$	158,399	Balance, end of period		$	143,043	$	150,877

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~~Delaware. 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~~were $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 and again in the fourth fiscal quarter of 2021, we reduced ~~the estimate of~~ the aggregate estimated repair costs to be incurred for known and unknown water intrusion claims by ~~$24.4~~a total of $36.2 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~~$36.2 million. Our recorded remaining estimated repair costs, which reflects a reduction for the aggregate amount expended to resolve claims, were approximately ~~$68.6~~$53.2 million at ~~July~~January 31, ~~2021~~2022 and ~~$79.5~~$54.7 million at October 31, ~~2020.~~2021. Our recorded remaining expected recoveries from insurance carriers and suppliers were approximately ~~$41.8~~$4.6 million at ~~July~~January 31, ~~2021~~2022 and ~~$68.4~~$5.8 million at October 31, ~~2020.~~

2021.

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.outcomes. 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. As a result of coverage disputes related to water intrusion claims, we entered arbitration proceedings during the third quarter of fiscal 2019 with certain of our insurance carriers. During the third quarter of fiscal 2021, we settled all such outstanding disputes and have since entered into coverage agreements with the relevant insurance carriers. Based on the resolution of such disputes and the terms of these coverage agreements, we concluded that no adjustments to our insurance receivables were necessary and we continue to believe that the collection of our remaining recorded insurance receivables is probable.

7. Income Taxes

We recorded income tax provisions of ~~$68.5~~$48.9 million and ~~$37.1~~$30.9 million for the three months ended ~~July~~January 31, ~~2021~~2022 and ~~2020,~~2021, respectively. The effective tax rate was ~~22.6% for the three months ended July 31, 2021, compared to~~ 24.4% for the three months ended ~~July~~January 31, ~~2020. For~~2022, compared to 24.3% for the ~~nine~~three months ended ~~July~~January 31, 2021 and 2020, we recorded income tax provisions of $141.3 million and $72.6 million, respectively. The effective tax rate was 23.5% for the nine months ended July 31, 2021, compared to 22.7% for the nine months ended July 31, 2020.2021. 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, federal energy efficient home credits 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~~2022 will be approximately ~~5.9%~~5.2%. Our state income tax rate for the full fiscal year ~~2020~~2021 was ~~5.6%~~5.8%.

At ~~July~~January 31, ~~2021,~~2022, we had ~~$6.3~~$5.9 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.

9.8. 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 July 31,				Nine months ended July 31,					Three months ended January 31,
		2021		2020		2021		2020				2022		2021
Total stock-based compensation expense recognized	Total stock-based compensation expense recognized	$	3,663	$	3,834	$	19,942	$	20,636	Total stock-based compensation expense recognized		$	13,615	$	12,834
Income tax benefit recognized	Income tax benefit recognized	$	938	$	891	$	5,105	$	5,169	Income tax benefit recognized		$	3,413	$	3,289

At ~~July~~January 31, ~~2021~~2022 and October 31, ~~2020,~~2021, the aggregate unamortized value of ~~outstanding~~unvested stock-based compensation awards was approximately ~~$18.0~~$24.4 million and ~~$15.9~~$14.7 million, respectively.

~~10.~~9. Stockholders’ Equity

Stock Repurchase Program

~~On March 10, 2020,~~From time to time since fiscal 2017, our Board of Directors ~~terminated our existing 20 million share~~has renewed its authorization to repurchase ~~program, which was authorized in December 2019, and authorized, under a new repurchase program, the repurchase of~~up to 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~~transactions. Most recently, on March 10, 2020, our Board of Directors renewed its authorization to ~~obtain~~repurchase of 20 million shares ~~for the Company’s equity awards and other employee benefit plans. Our~~of our common stock. The 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 July 31, Nine months ended July 31,
2021 2020 2021 2020
Number of shares purchased (in thousands) 1,655 10 5,687 15,948
Average price per share $ 57.66 $ 32.81 $ 48.37 $ 39.75
Remaining authorization at July 31 (in thousands) 14,298 19,988 14,298 19,988

Subsequent to July 31, 2021 and through September 1, 2021, we repurchased approximately 140,300 shares of our common stock at an average price of $64.19 per share, all of which were purchased pursuant to the repurchase program authorized by our Board of Directors on March 10, 2020.


	Three months ended January 31,
		2022		2021
Number of shares purchased (in thousands)		3,013		4,027
Average price per share		$	61.65	$	44.54
Remaining authorization at January 31 (in thousands)		9,550		15,957

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 ~~July~~January 31, ~~2021~~2022 and ~~2020,~~2021, we declared and paid cash dividends of $0.17 and $0.11 per share, respectively, to our shareholders. ~~During the nine months ended July 31, 2021 and 2020, we declared and paid cash dividends of $0.45 and $0.33 per share, respectively, to our shareholders.~~

1915

Accumulated Other Comprehensive ~~Loss~~Income (Loss)

The changes in each component of accumulated other comprehensive ~~loss~~income (loss) (“~~AOCL”~~AOCI”), for the periods indicated, were as follows (amounts in thousands):
Three months ended July 31, 2021 Nine months ended July 31, 2021
2021 2020 2021 2020
Employee Retirement Plans
Beginning balance $ (6,529) $ (5,275) $ (7,198) $ (5,831)
Gains (losses) arising during the period — — — —
Less: Tax (expense) benefit — — — —
Net gains (losses) arising during the period — — — —
Gains reclassified from AOCL to net income (1)
450 373 1,350 1,119
Less: Tax expense (2)
(115) (93) (346) (283)
Net gains reclassified from AOCL to net income 335 280 1,004 836
Other comprehensive income, net of tax 335 280 1,004 836
Ending balance $ (6,194) $ (4,995) $ (6,194) $ (4,995)
Derivative Instruments
Beginning balance $ 4,481 $ — $ — $ —
(Losses) gains on derivative instruments (2,939) — 3,033 —
Less: Tax benefit (expense) 752 — (771) —
Net (losses) gains on derivative instruments (2,187) — 2,262 —
Gains reclassified from AOCL to net income (3)
60 — 102 —
Less: Tax expense (2)
(15) — (25) —
Net gains reclassified from AOCL to net income 45 — 77 —
Other comprehensive (loss) income, net of tax (2,142) — 2,339 —
Ending balance $ 2,339 $ — $ 2,339 $ —
Total AOCL ending balance $ (3,855) $ (4,995) $ (3,855) $ (4,995)


	Three months ended January 31,
		2022		2021
Employee Retirement Plans
Beginning balance		$	(6,024)	$	(7,198)



Gains reclassified from AOCI to net income (1)		451		450
Less: Tax expense (2)		(113)		(116)
Net gains reclassified from AOCI to net income		338		334
Other comprehensive income, net of tax		338		334
Ending balance		$	(5,686)	$	(6,864)
Derivative Instruments
Beginning balance		$	7,133	$	—
Gains on derivative instruments		5,748		498
Less: Tax expense		(1,441)		(128)
Net gains on derivative instruments		4,307		370
Gains reclassified from AOCI to net income (3)		76		10
Less: Tax expense (2)		(19)		(2)
Net gains reclassified from AOCI to net income		57		8
Other comprehensive income, net of tax		4,364		378
Ending balance		$	11,497	$	378
Total AOCI ending balance		$	5,811	$	(6,486)

(1) Reclassified to “Other income – net”

(2) Reclassified to “Income tax provision”

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

~~11.~~10. 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 July 31,				Nine months ended July 31,					Three months ended January 31,
		2021		2020		2021		2020				2022		2021
Numerator:	Numerator:									Numerator:
Net income as reported	Net income as reported	$	234,932	$	114,761	$	459,297	$	247,307	Net income as reported		$	151,904	$	96,499

Denominator:	Denominator:									Denominator:
Basic weighted-average shares	Basic weighted-average shares	123,826		126,722		124,727		131,024		Basic weighted-average shares		120,996		126,060
Common stock equivalents (1)	Common stock equivalents (1)	1,784		677		1,663		1,008		Common stock equivalents (1)		1,862		1,502
Diluted weighted-average shares	Diluted weighted-average shares	125,610		127,399		126,390		132,032		Diluted weighted-average shares		122,858		127,562

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)	37		3,640		220		2,761		Weighted-average number of antidilutive options and restricted stock units (2)		204		589
Shares issued under stock incentive and employee stock purchase plans	Shares issued under stock incentive and employee stock purchase plans	64		342		938		950		Shares issued under stock incentive and employee stock purchase plans		408		456

(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.~~

11. 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	July 31, 2021		October 31, 2020		Financial Instrument	Fair value hierarchy	January 31, 2022		October 31, 2021
Residential Mortgage Loans Held for Sale	Residential Mortgage Loans Held for Sale	Level 2	$	183,268	$	231,797	Residential Mortgage Loans Held for Sale	Level 2	$	137,210	$	247,211
Forward Loan Commitments — Residential Mortgage Loans Held for Sale	Forward Loan Commitments — Residential Mortgage Loans Held for Sale	Level 2	$	(937)	$	(31)	Forward Loan Commitments — Residential Mortgage Loans Held for Sale	Level 2	$	1,948	$	1,782
Interest Rate Lock Commitments (“IRLCs”)	Interest Rate Lock Commitments (“IRLCs”)	Level 2	$	2,156	$	628	Interest Rate Lock Commitments (“IRLCs”)	Level 2	$	(6,509)	$	(1,773)
Forward Loan Commitments — IRLCs	Forward Loan Commitments — IRLCs	Level 2	$	(2,156)	$	(628)	Forward Loan Commitments — IRLCs	Level 2	$	6,509	$	1,773
Interest Rate Swap Contracts	Interest Rate Swap Contracts	Level 2	$	3,699	$	—	Interest Rate Swap Contracts	Level 2	$	16,351	$	10,330

At ~~July~~January 31, ~~2021~~2022 and October 31, ~~2020,~~2021, 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 ~~July~~January 31, ~~2021,~~2022, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our interest rate swap contract positions and have determined that the credit valuation adjustments were not significant to the overall valuation of our interest rate swap contracts. As a result, we have determined that our interest rate swap contracts valuations in their entirety are classified in Level 2 of the fair value hierarchy.

Mortgage Loans Held for Sale

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

The table below provides, as of the dates indicated, the aggregate unpaid principal and fair value of mortgage loans held for sale (amounts in thousands):
Aggregate unpaid
principal balance Fair value Excess
At July 31, 2021 $ 179,169 $ 183,268 $ 4,099
At October 31, 2020 $ 225,826 $ 231,797 $ 5,971


	Aggregate unpaid principal balance		Fair value		Excess
At January 31, 2022	$	137,051	$	137,210	$	159
At October 31, 2021	$	244,467	$	247,211	$	2,744

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 the aforementioned inventory was determined using Level 3 criteria. Estimated fair value is primarily determined by discounting the estimated future cash flow of each community. See Note 1, “Significant Accounting Policies – Inventory,” in our ~~2020~~2021 Form 10-K for additional information regarding our methodology for determining fair value. ~~The table below summarizes, for~~Impairments on operating communities were insignificant during the ~~periods indicated,~~three months ended January 31, 2022 and 2021 and, accordingly, we did not disclose the ranges of certain quantitative unobservable inputs utilized in determining the fair value of such impaired operating ~~communities:~~
Three months ended: Selling price
per unit
($ in thousands) Sales pace
per year
(in units) Discount rate
Fiscal 2021:
January 31 2,003 2 14.3%
April 30 — — —%
July 31 — — —%
Fiscal 2020:
January 31 — — —%
April 30 613 - 789 9 14.3%
July 31 — — —%
October 31 — — —%

In nine-months ended July 31, 2021 and in full fiscal 2020, we recognized $11.1 million and $31.7 million of impairment charges on land owned for future communities relating to 5 and 9 communities, respectively. As of the period the impairment charges were recognized, for impairments during the nine-months ended July 31, 2021 and full fiscal 2020, the estimated fair value of these communities in the aggregate, net of impairment charges, were $25.6 million and $21.8 million, respectively. 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 was approximately $33,000 - $180,000 per lot.communities.

2217

The table below provides, for the periods indicated, the number of operating communities that we reviewed for potential impairment, the number of operating communities in which we recognized impairment charges, the amount of impairment charges recognized, and, as of the end of the period indicated, the fair value of those communities, net of impairment charges ($ amounts in thousands):
Impaired operating communities
Three months ended: Number of
communities tested Number of
communities Fair value of
communities,
net of
impairment charges Impairment charges recognized
Fiscal 2021:
January 31 53 1 $ 419 $ 1,100
April 30 27 — $ — —
July 31 18 — $ — —
$ 1,100
Fiscal 2020:
January 31 65 — $ — $ —
April 30 80 1 $ 2,754 300
July 31 66 — $ — —
October 31 53 1 $ 1,113 375
$ 675

Debt

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


			July 31, 2021				October 31, 2020						January 31, 2022				October 31, 2021
		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	$	1,038,999	$	1,046,083	$	1,151,257	$	1,157,315	Loans payable (1)	Level 2	$	1,145,624	$	1,137,429	$	1,014,042	$	1,021,662
Senior notes (2)	Senior notes (2)	Level 1	2,409,856		2,617,648		2,669,876		2,888,822		Senior notes (2)	Level 1	2,000,000		2,114,051		2,409,856		2,577,818
Mortgage company loan facility (3)	Mortgage company loan facility (3)	Level 2	148,655		148,655		148,611		148,611		Mortgage company loan facility (3)	Level 2	101,615		101,615		147,512		147,512
			$	3,597,510	$	3,812,386	$	3,969,744	$	4,194,748			$	3,247,239	$	3,353,095	$	3,571,410	$	3,746,992

(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.~~12. Other Income – Net

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


		Three months ended July 31,				Nine months ended July 31,					Three months ended January 31,
		2021		2020		2021		2020				2022		2021
Interest income	Interest income	$	748	$	869	$	2,310	$	7,667	Interest income		$	1,558	$	1,455
Income from ancillary businesses	Income from ancillary businesses	8,544		1,548		24,464		16,652		Income from ancillary businesses		1,960		6,859
Management fee income from Home Building Joint Ventures, net	Management fee income from Home Building Joint Ventures, net	1,048		2,415		1,613		3,968		Management fee income from Home Building Joint Ventures, net		1,338		117
Directly expensed interest		—		—		—		(2,440)

Other	Other	(314)		(46)		(1,076)		(930)		Other		(1,144)		(1,330)
Total other income – net	Total other income – net	$	10,026	$	4,786	$	27,311	$	24,917	Total other income – net		$	3,712	$	7,101

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 months ended July 31,~~

2021 and 2020, our apartment living operations earned fees from unconsolidated entities of $4.3 million and $3.6 million, respectively. In the nine-month periods ended July 31, 2021 and 2020, our apartment living operations earned fees from unconsolidated entities of $12.9 million and $10.9 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,~~smart home technology, 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 July 31,				Nine months ended July 31,					Three months ended January 31,
		2021		2020		2021		2020				2022		2021
Revenues	Revenues	$	34,869	$	27,434	$	96,700	$	81,276	Revenues		$	27,697	$	29,101
Expenses	Expenses	$	26,325	$	25,886	$	72,236	$	77,594	Expenses		$	25,737	$	22,242
Other income (1)		$	—	$	—	$	—	$	12,970

~~(1)~~ In ~~April 2020, we sold one~~each of the three-month periods ended January 31, 2022 and 2021, our ~~golf club properties to a third party for $15.6 million and recognized a gain~~apartment living operations earned fees from unconsolidated entities of ~~$9.1 million~~$4.8 million. Fees earned by our apartment living operations are included 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.~~income from ancillary businesses.

~~14.~~13. 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.

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.

Land Purchase ~~Commitments~~Contracts

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,~~contracts, as of the dates indicated, is provided in the table below (amounts in thousands):


		July 31, 2021		October 31, 2020			January 31, 2022		October 31, 2021
Aggregate purchase commitments:
Aggregate purchase price:						Aggregate purchase price:
Unrelated parties	Unrelated parties	$	4,055,246	$	2,630,128	Unrelated parties	$	4,644,319	$	4,442,804
Unconsolidated entities that the Company has investments in	Unconsolidated entities that the Company has investments in	10,091		10,097		Unconsolidated entities that the Company has investments in	9,648		9,953
Total	Total	$	4,065,337	$	2,640,225	Total	$	4,653,967	$	4,452,757

Deposits against aggregate purchase commitments		$	311,293	$	223,571
Deposits against aggregate purchase price						Deposits against aggregate purchase price	$	408,873	$	336,363

Additional cash required to acquire land	Additional cash required to acquire land	3,754,044		2,416,654		Additional cash required to acquire land	4,245,094		4,116,394
Total	Total	$	4,065,337	$	2,640,225	Total	$	4,653,967	$	4,452,757
Amount of additional cash required to acquire land included in accrued expenses	Amount of additional cash required to acquire land included in accrued expenses	$	21,151	$	19,590	Amount of additional cash required to acquire land included in accrued expenses	$	20,690	$	37,447

In addition, we expect to purchase approximately ~~3,700~~6,200 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 ~~July~~January 31, ~~2021,~~2022, we also had ~~similar~~ purchase ~~commitments~~contracts to acquire land for apartment developments of approximately ~~$97.8~~$165.7 million, of which we had outstanding deposits in the amount of ~~$5.3~~$5.8 million. We intend to acquire and 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~~price 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 ~~July~~January 31, ~~2021,~~2022, 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 4,3, “Investments in Unconsolidated Entities,” for more information regarding our commitments to these entities.

~~Subsequent Event~~

On August, 24, 2021, the Company announced a strategic partnership with Equity Residential, an NYSE-listed company focused on the acquisition, development and management of residential rental properties, to selectively acquire and develop sites for new rental apartment communities in metro Boston, MA; Atlanta, GA; Austin, TX; Denver, CO; Orange County/San Diego, CA; Seattle, WA, and Dallas-Fort Worth, TX. The strategic partnership has an initial term of three years. For selected projects, Equity Residential is expected to invest 75% of the equity and Toll Brothers is expected to invest the remaining 25% of the equity. It is expected that each project will also be financed with approximately 60% leverage. Equity Residential will have the option to acquire each property upon stabilization. The parties have targeted an initial minimum co-investment of $733.0 million in combined equity, or $1.83 billion in aggregate value, assuming 60% leverage. In connection with this strategic partnership, our apartment living division will act as the managing member of each project, overseeing approvals, design and construction for which we will receive development, construction management, and financing fees, as well as a promoted interest to be realized upon the sale of each property. We have agreed, with limited exceptions, to develop apartment projects exclusively with Equity Residential in the designated metro markets. In connection with this strategic partnership, Equity Residential will receive fees for property management, leasing and marketing services, as well as construction oversight.

Surety Bonds and Letters of Credit

At ~~July~~January 31, ~~2021,~~2022, we had outstanding surety bonds amounting to ~~$838.4~~$863.0 million, primarily related to our obligations to governmental entities to construct improvements in our communities. We estimate that approximately ~~$387.3~~$426.0 million of work remains on these improvements. We have an additional ~~$202.9~~$241.2 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 ~~July~~January 31, ~~2021,~~2022, we had outstanding letters of credit of ~~$115.3~~$92.9 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. At January 31, 2022, we had provided financial guarantees of $26.3 million related to fronted letters of credit to secure obligations related to certain of our insurance policy deductibles and other claims.

Backlog

At ~~July~~January 31, ~~2021,~~2022, we had agreements of sale outstanding to deliver ~~10,661~~11,302 homes with an aggregate sales value of ~~$9.44~~$10.80 billion.

Mortgage Commitments

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

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

Information regarding our mortgage commitments, as of the dates indicated, is provided in the table below (amounts in thousands):
July 31,
2021 October 31, 2020
Aggregate mortgage loan commitments:
IRLCs $ 720,256 $ 381,116
Non-IRLCs 2,534,547 1,688,801
Total $ 3,254,803 $ 2,069,917
Investor commitments to purchase:
IRLCs $ 720,256 $ 381,116
Mortgage loans held for sale 177,845 217,876
Total $ 898,101 $ 598,992


	January 31, 2022		October 31, 2021
Aggregate mortgage loan commitments:
IRLCs	$	621,537	$	528,127
Non-IRLCs	2,888,866		2,705,772
Total	$	3,510,403	$	3,233,899
Investor commitments to purchase:
IRLCs	$	621,537	$	528,127
Mortgage loans held for sale	136,552		244,376
Total	$	758,089	$	772,503

~~15.~~14. 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, with current operations in the states listed below:

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

•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.

2620

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 July 31,				Nine months ended July 31,					Three months ended January 31,
		2021		2020		2021		2020				2022		2021
Revenues:	Revenues:									Revenues:
Traditional Home Building:	Traditional Home Building:									Traditional Home Building:
North	North	$	402,885	$	290,399	$	1,106,189	$	840,481	North		$	315,362	$	312,639
Mid-Atlantic	Mid-Atlantic	276,853		201,279		659,128		556,655		Mid-Atlantic		242,877		163,984
South	South	291,725		276,319		788,785		690,809		South		243,519		216,884
Mountain	Mountain	553,192		425,400		1,363,019		1,026,000		Mountain		462,300		377,977
Pacific	Pacific	523,995		406,424		1,313,758		1,225,072		Pacific		384,949		331,158
Traditional Home Building	Traditional Home Building	2,048,650		1,599,821		5,230,879		4,339,017		Traditional Home Building		1,649,007		1,402,642
City Living	City Living	184,099		26,366		249,877		102,973		City Living		39,772		7,793
Corporate and other	Corporate and other	1,616		1,625		573		(607)		Corporate and other		(1,427)		269
Total home sales revenues	Total home sales revenues	2,234,365		1,627,812		5,481,329		4,441,383		Total home sales revenues		1,687,352		1,410,704
Land sales and other revenues	Land sales and other revenues	21,116		23,677		267,652		90,609		Land sales and other revenues		103,729		152,672
Total revenues	Total revenues	$	2,255,481	$	1,651,489	$	5,748,981	$	4,531,992	Total revenues		$	1,791,081	$	1,563,376

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	$	39,700	$	13,722	$	97,802	$	33,249	North		$	31,539	$	18,882
Mid-Atlantic	Mid-Atlantic	25,347		13,356		68,127		20,189		Mid-Atlantic		33,425		18,813
South	South	41,439		32,422		101,190		61,612		South		22,532		21,483
Mountain	Mountain	85,085		53,099		173,178		103,883		Mountain		71,011		36,013
Pacific	Pacific	85,029		76,808		206,750		207,867		Pacific		64,534		47,554
Traditional Home Building	Traditional Home Building	276,600		189,407		647,047		426,800		Traditional Home Building		223,041		142,745
City Living (1)	City Living (1)	65,912		9,543		111,084		27,789		City Living (1)		12,717		32,692
Corporate and other	Corporate and other	(39,117)		(47,085)		(157,505)		(134,679)		Corporate and other		(34,942)		(48,032)
Total	Total	$	303,395	$	151,865	$	600,626	$	319,910	Total		$	200,816	$	127,405

(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;~~our apartment rental development business; and income from our Rental Property Joint Ventures and Gibraltar Joint Ventures.

2721

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


		July 31, 2021		October 31, 2020			January 31, 2022		October 31, 2021
Traditional Home Building:	Traditional Home Building:					Traditional Home Building:
North	North	$	1,469,778	$	1,427,523	North	$	1,407,992	$	1,357,168
Mid-Atlantic	Mid-Atlantic	1,056,586		918,641		Mid-Atlantic	1,052,923		976,887
South	South	1,420,453		1,176,962		South	1,662,383		1,421,612
Mountain	Mountain	2,293,469		1,961,348		Mountain	2,624,647		2,397,484
Pacific	Pacific	2,348,574		2,226,685		Pacific	2,254,252		2,174,997
Traditional Home Building	Traditional Home Building	8,588,860		7,711,159		Traditional Home Building	9,002,197		8,328,148
City Living	City Living	402,596		539,750		City Living	314,092		332,972
Corporate and other	Corporate and other	2,272,603		2,814,824		Corporate and other	1,967,590		2,876,730
Total	Total	$	11,264,059	$	11,065,733	Total	$	11,283,879	$	11,537,850

“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 July 31,				Nine months ended July 31,					Three months ended January 31,
		2021		2020		2021		2020				2022		2021
Traditional Home Building:	Traditional Home Building:									Traditional Home Building:
North	North	$	2,492	$	1,106	$	2,557	$	1,478	North		$	325	$	35
Mid-Atlantic	Mid-Atlantic	10,488		4,783		10,578		15,449		Mid-Atlantic		441		32
South	South	28		630		472		2,619		South		143		25
Mountain	Mountain	68		167		88		427		Mountain		102		9
Pacific	Pacific	74		4		1,202		1,961		Pacific		22		66
Total	Total	13,150		6,690		14,897		21,934		Total		1,033		167
City Living	City Living	—		—		1,100		—		City Living		1,200		1,100

		$	13,150	$	6,690	$	15,997	$	21,934			$	2,233	$	1,267

2822

~~16.~~15. 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):
Nine months ended July 31,
2021 2020
Cash flow information:
Interest paid, net of amount capitalized $ 16,256 $ 2,672
Income tax payments $ 147,247 $ 47,736
Income tax refunds $ 1,382 $ 1,488
Noncash activity:
Cost of inventory acquired through seller financing, municipal bonds, or included in accrued expenses, net $ 150,589 $ 34,215��
Increase in inventory for capitalized interest, our share of earnings, and allocation of basis difference in land purchased from unconsolidated entities, net $ — $ (208)
Increase in receivables, prepaid expenses, and other assets and accrued expenses related to the adoption of ASU 2016-02 and other lease activity $ — $ 122,269
Net decrease in other assets and retained earnings due to the adoption of ASC 326 $ 595 $ —
Reclassification of inventory to property, construction, and office equipment $ 32,021 $ 26,656
Noncontrolling interest $ 1,459 $ 6,118
Transfer of inventory to investment in unconsolidated entities $ 49,979 $ 13,690
Transfer of other assets to investment in unconsolidated entities, net $ 38,877 $ 41,269
Unrealized gain on derivatives $ 3,699 $ —
Increase in investments in unconsolidated entities for change in the fair value of debt guarantees $ 3,605 $ —
Acquisition of a Business:
Fair value of assets purchased $ — $ 63,854
Liabilities assumed $ — $ 3,505
Cash paid $ — $ 60,349
At July 31,
2021 2020
Cash, cash equivalents, and restricted cash
Cash and cash equivalents $ 946,097 $ 559,348
Restricted cash included in receivables, prepaid expenses, and other assets 72,325 26,744
Total cash, cash equivalents, and restricted cash shown in the Condensed Consolidated
Statements of Cash Flows $ 1,018,422 $ 586,092


	Three months ended January 31,
	2022		2021
Cash flow information:


Income tax paid, net	$	94,577	$	33,050

Noncash activity:
Cost of inventory acquired through seller financing, municipal bonds, or included in accrued expenses, net	$	123,176	$	40,511












Accrued treasury share purchases	$	57,699	$	—








Transfer of inventory to investment in unconsolidated entities	$	556	$	49,979


Transfer of other assets to investment in unconsolidated entities, net	$	36,154	$	13,228

Unrealized gain on derivatives	$	6,022	$	522










	At January 31,
	2022		2021
Cash, cash equivalents, and restricted cash
Cash and cash equivalents	$	671,365	$	949,696
Restricted cash included in receivables, prepaid expenses, and other assets	52,946		30,183
Total cash, cash equivalents, and restricted cash shown in the Condensed Consolidated Statements of Cash Flows	$	724,311	$	979,879

2923

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~~2021 (“~~2020~~2021 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~~2021 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 for the sale of homes signed during the relevant period, less the number or value of contracts canceled during the relevant period (irrespective of whether the contract was signed during the relevant period or in a prior 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, New York and ~~New York;~~Pennsylvania;

•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.

OVERVIEW

Our Business Environment and Current Outlook

In the three months ended ~~July~~January 31, ~~2021,~~2022, we continued to experience strong demand for our homes as the overall housing market remained robust. In the quarter, we signed ~~3,154~~2,929 net contracts with an aggregate value of ~~$2.98~~$2.99 billion, compared to ~~2,833~~2,874 net contracts with an aggregate value of ~~$2.21~~$2.51 billion in the three months ended ~~July~~January 31, ~~2020,~~2021, representing increases of ~~11%~~2% and ~~35%~~19% in units and dollars, respectively. Our backlog at ~~July~~January 31, ~~2021~~2022 was ~~10,661~~11,302 homes and ~~$9.44~~$10.80 billion, up ~~47%~~27% in units and ~~55%~~45% in dollars as compared to our backlog at ~~July~~January 31, ~~2020. These results are indicative of~~2021. We believe the ~~continued~~ strength in demand for ~~our homes. As a result of this strong demand, we continued~~new homes continues to ~~raise sales prices in most of our communities during the quarter. In addition, in certain markets, particularly in our South~~be driven by demographic and Mountain regions, we continued to limit lot releases as demand has continued to outstrip supply. In other markets, particularly in our North region, demand, while still strong, has begun to revert to more seasonal patterns.

~~We attribute the strong demand to a number of factors, including~~migration trends, a supply-demand imbalance resulting from over a decade of underproduction of new homes, ~~low mortgage rates,~~ a tight supply of resale homes, ~~favorable demographics,~~and a renewed appreciation for the importance of ~~home, and an improving economy. We~~home. In addition, although mortgage interest rates have increased in recent months, they remain near historic lows. Overall, we believe ~~many of~~ these factors will continue to support demand in the foreseeable future.

~~As a result of industry-wide strong demand for new homes, as well as widespread disruptions to supply chains directly or indirectly related to the COVID-19 pandemic,~~Like many other home builders, we continue to ~~face cost pressures and labor and material shortages. Due~~experience production challenges due to the demand for our homes, our strong relationships with our trade partners and suppliers, and our operating scale, we believe we will be able to continue to manage these cost increases through price increases and other means. In addition, the price of certain inputs, especially lumber, has improved in recent months. However, these supply chain disruptions, tightness in labor markets and ~~labor~~municipality-related delays, which in our first quarter were exacerbated by the Omicron variant of the COVID-19 pandemic. These disruptions have resulted in build times (the time it takes from contract signing to delivery of the completed home) that continue to be extended and ~~material shortages have extended delivery times for~~delays in deliveries. We continue to work with our ~~homes by an average of approximately two weeks during our fiscal third quarter.~~suppliers and trade partners to resolve these issues, but we do not expect conditions to significantly improve in the near term. Continued supply chain disruptions and labor and material shortages could further elongate delivery ~~times.~~times and increase cost pressures.

Although housing market ~~demand has~~conditions have remained strong over the past year, future economic conditions and the demand for homes are subject to continued uncertainty due to many factors, including the recent increase in mortgage interest rates, higher inflation, ongoing disruptions from supply chain challenges and labor shortages, the ongoing impact of the COVID-19 ~~pandemic-related disruptions,~~pandemic and 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.~~factors. The potential effect of these factors on our future operational and financial performance is highly uncertain, unpredictable and outside our control. As a result, our past performance may not be indicative of future results.

Financial and Operational Highlights

In the three-month period ended ~~July~~January 31, ~~2021,~~2022, we recognized ~~$2.26~~$1.79 billion of revenues, consisting of ~~$2.23~~$1.69 billion of home sales revenue and ~~$21.1~~$103.7 million of land sales ~~revenue,~~ and ~~net income of $234.9 million,~~other revenue, as compared to ~~$1.65~~$1.56 billion of

revenues, consisting of ~~$1.63~~$1.41 billion of home sales revenue and ~~$23.7~~$152.7 million of land sales and other revenue ~~and $114.8~~in the three-month period ended January 31, 2021. Net income was $151.9 million compared to $96.5 million of net income in the three-month period ended ~~July~~January 31, ~~2020.~~2021.

In the three-month periods ended ~~July~~January 31, ~~2021~~2022 and ~~2020,~~2021, the value of net contracts signed was ~~$2.98~~$2.99 billion ~~(3,154~~(2,929 homes) and ~~$2.21~~$2.51 billion ~~(2,833~~(2,874 homes), respectively.

In the nine-month period ended July 31, 2021, we recognized $5.75 billion of revenues, consisting of $5.48 billion of home sales revenue and $267.7 million of land sales and other revenue, and net income of $459.3 million, as compared to $4.53 billion of revenues, consisting of $4.44 billion of home sales revenue and $90.6 million of land sales and other revenue, and $247.3 million of net income in the nine-month period ended July 31, 2020.

~~In the nine-month periods ended July 31, 2021 and 2020, the value of net contracts signed was $8.54 billion (9,515 homes) and $5.26 billion (6,525 homes), respectively.~~

The value of our backlog at ~~July~~January 31, ~~2021~~2022 was ~~$9.44~~$10.80 billion ~~(10,661~~(11,302 homes), as compared to our backlog at ~~July~~January 31, ~~2020~~2021 of ~~$6.09~~$7.47 billion ~~(7,239~~(8,888 homes). Our backlog at October 31, ~~2020~~2021 was ~~$6.37~~$9.50 billion ~~(7,791~~(10,302 homes), as compared to backlog of ~~$5.26~~$6.37 billion ~~(6,266~~(7,791 homes) at October 31, ~~2019.~~2020.

At ~~July~~January 31, ~~2021,~~2022, we had ~~$946.1~~$671.4 million of cash and cash equivalents on hand and approximately ~~$1.790~~$1.81 billion available under our $1.905 billion revolving credit facility (the “Revolving Credit Facility”), substantially all of which matures in November ~~2025.~~2026. At ~~July~~January 31, ~~2021,~~2022, we had no borrowings and we had approximately ~~$115.3~~$92.9 million of outstanding letters of credit under the Revolving Credit Facility. In February 2022, we borrowed $200 million under our Revolving Credit Facility.

At ~~July~~January 31, ~~2021,~~2022, we owned or controlled through options approximately ~~79,500~~86,500 home sites, as compared to approximately 80,900 at October 31, 2021; and approximately 63,200 at October 31, ~~2020; and approximately 59,200 at October 31, 2019.~~2020. Of the approximately ~~79,500~~86,500 total home sites that we owned or controlled through options at ~~July~~January 31, ~~2021,~~2022, we owned approximately ~~37,500~~39,700 and controlled approximately ~~42,000~~46,800 through options. Of the ~~37,500~~39,700 home sites owned, approximately ~~17,800~~17,700 were substantially improved. In addition, as of ~~July~~January 31, ~~2021,~~2022, we expect to purchase approximately ~~3,700~~6,200 additional home sites over several years from certain of the joint ventures in which we have interests, at prices to be determined.

At ~~July~~January 31, ~~2021,~~2022, we were selling from ~~314~~325 communities, compared to 340 at October 31, 2021; and 317 at October 31, ~~2020; and 333 at October 31, 2019.~~2020.

At ~~July~~January 31, ~~2021,~~2022, our total stockholders’ equity and our debt to total capitalization ratio were ~~$5.03~~$5.26 billion and ~~0.42~~0.38 to 1.00, respectively.

~~Acquisitions~~

~~Subsequent Event~~

In August 2021, we acquired substantially all of the assets and operations of StoryBook Homes, LLC (“StoryBook”), a privately-held home builder serving the Las Vegas, Nevada market, for approximately $38.8 million in cash. The assets acquired were primarily inventory for future communities, including approximately 550 home sites owned or controlled through land purchase agreements.

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RESULTS OF OPERATIONS – OVERVIEW

The following table compares certain items in our Condensed Consolidated Statements of Operations and Comprehensive Income and other supplemental information for the three months ended January 31, 2022 and ~~nine months ended July 31,~~ 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 July 31,								Nine months ended July 31,									Three months ended January 31,
		2021			2020			% Change		2021			2020			% Change				2022			2021			% Change
Revenues:	Revenues:																	Revenues:
Home sales	Home sales	$	2,234.4		$	1,627.8		37	%	$	5,481.3		$	4,441.4		23	%	Home sales		$	1,687.4		$	1,410.7		20	%
Land sales and other	Land sales and other	21.1			23.7					267.7			90.6					Land sales and other		103.7			152.7
		2,255.5			1,651.5			37	%	5,749.0			4,532.0			27	%			1,791.1			1,563.4			15	%
Cost of revenues:	Cost of revenues:																	Cost of revenues:
Home sales (1)		1,726.1			1,286.1			34	%	4,282.4			3,540.2			21	%
Home sales																		Home sales		1,289.5			1,121.8			15	%
Land sales and other	Land sales and other	18.7			22.3					222.5			81.0					Land sales and other		99.6			111.7
		1,744.8			1,308.4			33	%	4,504.9			3,621.2			24	%			1,389.1			1,233.5			13	%
Selling, general and administrative ~~(1)~~	Selling, general and administrative ~~(1)~~	233.9			193.5			21	%	663.8			621.1			7	%	Selling, general and administrative ~~(1)~~		226.9			210.7			8	%
Income from operations	Income from operations	276.7			149.6			85	%	580.2			289.7			100	%	Income from operations		175.1			119.1			47	%
Other	Other																	Other
Income (loss) from unconsolidated entities		16.6			(2.6)			748	%	28.3			5.3			434	%
Income from unconsolidated entities																		Income from unconsolidated entities		22.0			1.2			NM
Other income – net	Other income – net	10.0			4.8			108	%	27.3			24.9			10	%	Other income – net		3.7			7.1			(48)	%
Expenses related to early retirement of debt		—			—					(35.2)			—

Income before income taxes	Income before income taxes	303.4			151.9			100	%	600.6			319.9			88	%	Income before income taxes		200.8			127.4			58	%
Income tax provision	Income tax provision	68.5			37.1			85	%	141.3			72.6			95	%	Income tax provision		48.9			30.9			58	%
Net income	Net income	$	234.9		$	114.8		105	%	$	459.3		$	247.3		86	%	Net income		$	151.9		$	96.5		57	%

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)~~	77.3		%	79.0		%			78.1		%	79.7		%			Home sales cost of revenues as a percentage of home sales revenues ~~(1)~~		76.4		%	79.5		%
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	88.6		%	94.0		%			83.1		%	89.3		%			Land sales and other cost of revenues as a percentage of land sales and other revenues		96.0		%	73.2		%
SG&A as a percentage of home sale revenues ~~(1)~~	SG&A as a percentage of home sale revenues ~~(1)~~	10.5		%	11.9		%			12.1		%	14.0		%			SG&A as a percentage of home sale revenues ~~(1)~~		13.4		%	14.9		%
Effective tax rate	Effective tax rate	22.6		%	24.4		%			23.5		%	22.7		%			Effective tax rate		24.4		%	24.3		%

Deliveries – units	Deliveries – units	2,597			2,022			28	%	6,645			5,556			20	%	Deliveries – units		1,929			1,777			9	%
Deliveries – average delivered price (in ‘000s)	Deliveries – average delivered price (in ‘000s)	$	860.4		$	805.0		7	%	$	824.9		$	799.4		3	%	Deliveries – average delivered price (in ‘000s)		$	874.7		$	793.9		10	%

Net contracts signed – value	Net contracts signed – value	$	2,979.7		$	2,213.9		35	%	$	8,540.6		$	5,256.4		62	%	Net contracts signed – value		$	2,993.0		$	2,508.0		19	%
Net contracts signed – units	Net contracts signed – units	3,154			2,833			11	%	9,515			6,525			46	%	Net contracts signed – units		2,929			2,874			2	%
Net contracts signed – average selling price (in ‘000s)	Net contracts signed – average selling price (in ‘000s)	$	944.7		$	781.5		21	%	$	897.6		$	805.6		11	%	Net contracts signed – average selling price (in ‘000s)		$	1,021.8		$	872.6		17	%

		At July 31,								At October 31,									At January 31,
		2021			2020			% Change		2020			2019			% Change				2022			2021			% Change
Backlog – value	Backlog – value	$	9,437.5		$	6,085.2		55	%	$	6,374.6		$	5,257.1		21	%	Backlog – value		$	10,804.9		$	7,473.5		45	%
Backlog – units	Backlog – units	10,661			7,239			47	%	7,791			6,266			24	%	Backlog – units		11,302			8,888			27	%
Backlog – average selling price (in ‘000s)	Backlog – average selling price (in ‘000s)	$	885.2		$	840.6		5	%	$	818.2		$	839.0		(2)	%	Backlog – average selling price (in ‘000s)		$	956.0		$	840.9		14	%

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 ofNM: Not meaningful

3226

revenues (and increasing home sales gross margin) and increasing selling, general and administrative expense by the amount of third-party broker commissions, which totaled $32.8 million, or 2.0% of home sales revenues for the three months ended July 31, 2020 and $89.3 million, or 2.0% of home sales revenues for the nine months ended July 31, 2020. All prior period amounts have been reclassified.

Home Sales Revenues and Home Sales Cost of Revenues

~~Three months ended July 31, 2021 compared to the three months ended July 31, 2020~~

The increase in home sale revenues for the three months ended ~~July~~January 31, ~~2021~~,2022, as compared to the three months ended ~~July~~January 31, ~~2020~~,2021, was attributable to a ~~28%~~9% increase in the number of homes delivered and a 7%10% increase in the average price of homes delivered. The increase in the number of homes delivered in the three months ended ~~July~~January 31, ~~2021~~2022 was primarily due to ~~an increase in the number of homes in~~higher backlog at October 31, ~~2020,~~2021, as compared to ~~the number of homes in backlog at~~ October 31, ~~2019, most significantly in the Mountain region. 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~~2020, partially offset by lower backlog conversion in the fiscal ~~2020 period, including New Jersey, New York City, metro Seattle and California.~~ 2022 period. 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 July 31, 2021, as compared to the three months ended July 31, 2020, was principally due to a shift in the mix of revenues to higher margin products/areas, and sales price increases outpacing cost increases, offset by higher inventory impairment charges in the fiscal 2021 period. In addition, interest expense as a percentage of home sales revenues was lower in the fiscal 2021 period. In the three months ended ~~July 31, 2021~~ ~~and 2020, interest expense, as a percentage of home sales revenues, was 2.2% and 2.5%, respectively.~~

~~Nine months ended July 31, 2021 compared to the nine months ended July 31, 2020~~

~~The~~an increase in home sale revenues for the nine months ended July 31, 2021, as compared to the nine months ended July 31, 2020, was attributable to a 20% 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 nine months ended July 31, 2021 was primarily due to higher backlog at October 31, 2020, as compared to October 31, 2019, partially offset by lower backlog conversion in the fiscal 2021 period. The increase in the average delivered home price was mainly due to sales price increases.more expensive product types/geographic regions.

The decrease in home sales cost of revenues, as a percentage of home sales revenues, in the fiscal ~~2021~~2022 period was principally due to a shift in the mix of revenues to higher margin products/areas, ~~higher~~ sales ~~prices~~price increases outpacing cost increases, ~~lower inventory impairment charges~~ and lower interest expense as a percentage of home sales revenues. In the ~~nine~~three months ended ~~July~~January 31, ~~2021~~2022 and ~~2020,~~2021, interest expense, as a percentage of home sales revenues, was ~~2.3%~~1.9% and ~~2.5%~~2.4%, 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; (3) lot sales to third-party builders within our master planned communities; and (4) sales of commercial and retail properties generally located at our City Living buildings. Land 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~~In the ~~nine-month period~~first quarter of fiscal 2021, we sold a parking garage and retail space associated with our Hoboken, New Jersey condominium projects for $82.4 million and we recognized ~~gains~~a gain of $38.3 million. ~~In addition, we sold four land parcels to newly formed Rental Property Joint Ventures in which we have an interest for~~ ~~$149.7 million~~. No gains were recognized on these land sales to joint ventures. During the nine-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 ~~$59.3 million. Minimal gains were recognized on these land sales to joint ventures.~~

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

SG&A spending increased by $40.4 million in the three-month period ended July 31, 2021, as compared to the three-month period ended July 31, 2020. As a percentage of home sales revenues, SG&A was 10.5% in the three months ended July 31, 2021, as compared to 11.9% in the three months ended July 31, 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 a lower increase in SG&A spending, which increased 21% year-over-year in the period, relative to the 37% increase in revenues.

~~SG&A spending increased by $42.7~~$16.1 million in the fiscal ~~2021 nine-month~~2022 period, as compared to the fiscal ~~2020 nine-month~~2021 period. As a percentage of home sales revenues, SG&A was ~~12.1%~~13.4% in the fiscal ~~2021~~2022 period, as compared to ~~14.0%~~14.9% in the fiscal ~~2020~~2021 period. The dollar increase in SG&A was primarily due to ~~the increase in home~~higher headcount and increased commissions as a result of sales ~~revenues~~volume improvement in the fiscal ~~2021~~2022 period, ~~compared to the fiscal 2020 period, offset by decreases in costs due to a number of cost reduction initiatives, including reduced advertising.~~along with normal compensation increases. The decrease in SG&A as a percentage of revenues was due to revenues increasing ~~23%~~20% year-over-year in the fiscal ~~2021~~2022 period, while SG&A spending increased only 7%8%.

Income 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 from unconsolidated entities increased ~~$19.2~~by $20.8 million in the three-month period ended ~~July~~January 31, ~~2021,~~2022, as compared to the three-month period ended ~~July~~January 31, ~~2020.~~2021. This increase was primarily due to an ~~$17.0~~a $21.0 million gain recognized in the fiscal ~~2021 three-month~~2022 period related to a property sale by one of our Rental Property Joint Ventures.

Income from unconsolidated entities increased by $23.0 million in the nine-month period ended July 31, 2021, as compared to the nine-month period ended July 31, 2020. This increase was primarily due to a ~~$28.5 million~~ gain recognized in the fiscal 2021 nine-month period related to property sales by two of our Rental Property Joint Ventures, a $6.0 million gain recognized in the fiscal 2021 nine-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 nine-month period from the sale of our investment in our of our Rental Property Joint Ventures to our joint venture partner and lower income from a Home Building Joint Venture and Land Development Joint 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 July 31,				Nine months ended July 31,					Three months ended January 31,
		2021		2020		2021		2020				2022		2021
Income from ancillary businesses	Income from ancillary businesses	$	8,544	$	1,548	$	24,464	$	16,652	Income from ancillary businesses		$	1,960	$	6,859
Management fee income from Home Building Joint Ventures, net	Management fee income from Home Building Joint Ventures, net	1,048		2,415		1,613		3,968		Management fee income from Home Building Joint Ventures, net		1,338		117
Other	Other	434		823		1,234		4,297		Other		414		125
Total other income – net	Total other income – net	$	10,026	$	4,786	$	27,311	$	24,917	Total other income – net		$	3,712	$	7,101

The ~~increase~~decrease in income from ancillary businesses in the three months ended ~~July~~January 31, ~~2021,~~2022, as compared to the three months ended ~~July~~January 31, ~~2020,~~2021, was mainly due to ~~higher~~lower income from our mortgage ~~and title~~ operations due to increased ~~volume,~~competition which reduced spreads, as well as ~~lower~~higher losses incurred in our apartment living operations.

The increase in income from ancillary businesses in the nine months ended July 31, 2021 was mainly due to higher earnings from volume increases and wider spreads in our mortgage and title operations, as well as lower losses incurred in our apartment living operations, offset by gains of $12.9 million recognized in the fiscal 2020 period from the sale of golf club properties.

Management fee income from home building unconsolidated entities presented above includes fees earned by our City Living and Traditional Home Building operations. The ~~decrease~~increase in income in the three ~~and nine~~ months ended ~~July~~January 31, ~~2021~~2022 was primarily related to ~~a decrease~~an increase in unconsolidated entities to which we provide services. In addition to the fees earned by our City Living and Traditional Home Building operations, in each of the ~~three months~~three-month periods ended ~~July~~January 31, ~~2021~~2022 and ~~2020,~~2021, our apartment living operations earned fees from unconsolidated entities of $4.3 million and $3.6 million, respectively. The fees earned by our apartment living operations in the nine-month periods ended July 31, 2021 and 2020, were $12.9 million and $10.9 million, respectively.$4.8 million. Fees earned by our apartment living operations are included in income from ancillary businesses.

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

~~Expenses Related to Early Retirement of Debt~~

In the nine-month period ended July 31, 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 ~~July~~January 31, ~~2021,~~2022, we reported income before income taxes of ~~$303.4~~$200.8 million, as compared to ~~$151.9~~$127.4 million in the three-month period ended ~~July~~January 31, ~~2020.~~

~~For the nine-month period ended July 31, 2021, we reported income before income taxes of $600.6 million, as compared to $319.9 million in the nine-month period ended July 31, 2020.~~2021.

Income Tax Provision

~~In the three-month periods ended July 31, 2021 and July 31, 2020, we~~We recognized an income tax provision of ~~$68.5~~$48.9 million and ~~$37.1~~$30.9 million in the three-month period ended January 31, 2022 and January 31, 2021, respectively. Based upon the federal statutory rate of 21.0% for the fiscal ~~2021~~2022 and ~~2020~~2021 periods, our federal tax provision would have been ~~$63.7~~$42.2 million and ~~$31.9~~$26.8 million, in the three-month period ended July 31, 2021 and 2020, respectively. 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 and permanent differences, offset, in part, by energy tax credits.

We recognized an income tax provision of $141.3 million and $72.6 million in the nine-month period ended July 31, 2021 and July 31, 2020, respectively. Based upon the federal statutory rate of 21.0% for the fiscal 2021 and 2020 periods, our federal tax provision would have been $126.1 million and $67.2 million, in the nine-month periods ended ~~July~~January 31, ~~2021~~2022 and ~~July~~January 31, ~~2020,~~2021, respectively. 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 and permanent differences, offset, in part, by energy tax credits and excess tax benefits related to stock-based compensation.

Contracts

In the three-month periods ended ~~July~~January 31, ~~2021~~2022 and ~~2020,~~2021, the value of net contracts signed was ~~$3.0~~$2.99 billion ~~(3,154~~(2,929 homes) and ~~$2.2~~$2.51 billion ~~(2,833~~(2,874 homes), respectively. The aggregate value of net contracts signed increased ~~$765.8~~$485.0 million, or ~~35%~~19%, in the three-month period ended ~~July~~January 31, ~~2021,~~2022, as compared to the three-month period ended ~~July~~January 31, 2020. The increase in the aggregate value of net contracts signed was due to an 11% increase in the number of net contracts signed and a 21% increase in the average value of each signed contract. In the nine-month periods ended July 31, 2021 and 2020, the value of net contracts signed was $8.54 billion (9,515 homes) and $5.26 billion (6,525 homes), respectively. The aggregate value of net contracts signed increased $3.3 billion, or 62%, in the nine-month period ended July 31, 2021, as compared to the nine-month period ended July 31, 2020.2021. The increase in the aggregate value of net contracts signed was due to a ~~46%~~2% increase in the number of net contracts signed and ~~an 11%~~a 17% increase in the average value of each signed contract. The increase in the number of net contracts signed ~~in both periods~~ reflects strong demand for new homes in the housing market, ~~including a resurgence~~partially offset by limiting lot releases in ~~demand for~~certain of our homes that began at the outset of fiscal 2020’s third quarter. The fiscal 2020 nine-month period was 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 signedcommunities 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 a supply-demand imbalance resulting from a decade of underproduction of new homes, low mortgage rates, a tight supply of resale homes, favorable demographics, a renewed appreciation for the importance of home, and an improving economy. three months ended January 31, 2022. The increase in the average ~~price~~value of ~~net contracts~~each signed ~~was~~contract is principally due to ~~sale~~sales price ~~increases.~~

increases, as well as a shift in the number of contracts signed to more expensive areas and/or products.

Backlog

The value of our backlog at ~~July~~January 31, ~~2021~~2022 increased ~~55%~~45% to ~~$9.44~~$10.80 billion ~~(10,661~~(11,302 homes), as compared to ~~$6.09~~$7.47 billion ~~(7,239~~(8,888 homes) at ~~July~~January 31, ~~2020.~~2021. Our backlog at October 31, 2021 and 2020 was $9.50 billion (10,302 homes) 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 July 31, 2021, as compared to the backlog at July 31, 2020, was primarily attributable to an increase in the value of net contracts signed in the nine months ended July 31, 2021, as compared to the nine~~-month period ended~~ ~~July 31, 2020, partially offset by higher home sales revenues in the nine months ended July 31, 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 July 31, 2021 and October 31, 2020, we had $946.1 million and $1.37 billion, respectively,~~Our cash flows from operations generally provide us with a significant source of liquidity. Our cash ~~and cash equivalents. Cash~~flows provided by operating activities, during the nine-month period ended July 31, 2021 was $448.4 million. Cash provided by operating activities during the fiscal 2021 period was primarily related to net income (adjusted for stock-based compensation, inventory impairments, depreciationsupplemented with our short-term borrowings and ~~amortization, expenses related to the early retirement of~~long-term 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 nine-month period ended July 31, 2021, cash provided by investing activities was $11.3 million, which was primarily related to $80.4 million of cash received from the sale of commercial properties and $166.0 million of cash received as returns from our investments in unconsolidated entities. This activity was offset, in part, by $190.0 million usedhave been sufficient to fund our ~~investments~~operations while allowing us to invest in ~~unconsolidated entities and $45.8 million used for~~activities that support the ~~purchase of property and equipment.~~

~~We used $837.9 million of cash in financing activities in the nine-month period ended July 31, 2021, primarily for the repurchase of $275.1 million~~long-term growth of our ~~common stock; the payment~~operations. Our primary uses of ~~dividends on our common stock of $56.1 million; payments of $216.9 million of loans payable, net of borrowings; and redemption of senior notes of $294.2 million.~~

~~Fiscal 2020~~

At July 31, 2020 and October 31, 2019, we had $559.3 million and $1.29 billion, respectively, of cash and cash equivalents. Cash provided by operating activities during the nine-month period ended July 31, 2020 was $141.6 million. Cash provided by operating activities during the fiscal 2020 period was primarily related to net income (adjusted for stock-based compensation, inventory impairments, depreciation and amortization, and deferred taxes); mortgage loans sold, net of mortgage loans originated; an increase in customer deposits – net; and a decrease in income taxes payable, offset, in part, by increases in inventory, and receivables, prepaid expenses, and other assets, and a decrease in accounts payable and accrued expenses.

In the nine-month period ended July 31, 2020, cash used in investing activities was $123.5 million, which was primarily related to $75.0 million used for the purchase of property and equipment; $60.3 million used to acquire The Thrive Group, LLC; and $47.3 million used to fund our investments in unconsolidated entities. This activity was offset, in part, by $42.6 million of cash received as returns from our investments in unconsolidated entities and $15.6 million cash received from the sale of a golf club property.

We used $751.6 million of cash in financing activities in the nine-month period ended July 31, 2020, primarily for the repurchase of $633.9 million of our common stock and the payment of dividends on our common stock of $42.7 million, offset, in part, by borrowings of $84.4 million of loans payable, net of repayments, and proceeds of $11.3 million from our stock-based benefit plans.

~~Other~~

We own or control several years of home sites and 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 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

3628

~~reduce~~cash include inventory additions in the form of land acquisitions and deposits to obtain control of land, land development, working capital to fund day to day operations, and investments in existing and future unconsolidated joint ventures. We may also use cash to fund capital expenditures such as investments in our ~~inventory levels~~information technology systems. From time to time we use some or all of the remaining available cash flow to repay debt, and to fund share repurchases and dividends on our common stock. We believe our sources of cash and liquidity will continue to be adequate to fund operations, finance our strategic operating initiatives, repay debt, fund our share repurchases and pay dividends for the foreseeable future.

At January 31, 2022, we had $671.4 million of cash and cash equivalents on hand and approximately $1.812 billion available for borrowing under our Revolving Credit Facility. In February 2022, we borrowed $200 million under our Revolving Credit Facility.

Short-term Liquidity and Capital Resources

For at least the next twelve months, we expect our principal demand for funds will be for inventory additions in the form of land acquisition, deposits to control land and land development, operating expenses, including our general and administrative expenses, investments and funding of capital improvements, investments in existing and future unconsolidated joint ventures, debt repayment, common stock repurchases, and dividend payments. Demand for funds include interest and principal payments on current and future debt financing. We expect to meet our short-term liquidity requirements primarily through our cash and cash equivalents on hand and net cash flows provided by operations. Additional sources of funds include distributions from our unconsolidated joint ventures, borrowing capacity under our revolving credit facility and our mortgage company loan facility, and borrowings from banks and other lenders.

We believe we will have sufficient liquidity available to fund our business needs, commitments and contractual obligations in a timely manner for the next twelve months. We may, however, seek additional financing to fund future growth or refinance our existing indebtedness through the debt capital markets, but we cannot be assured that such financing will be available on favorable terms, or at all.

Long-term Liquidity and Capital Resources

Beyond the next twelve months, our principal demands for funds will be for the payments of the principal amount of our long-term debt as it becomes due or matures, land purchases and inventory additions needed to grow our business, long-term capital investments and investments in unconsolidated joint ventures, common stock repurchases, and dividend payments.

Over the longer term, to the extent the sources of capital described above are insufficient to meet our needs, we may also conduct additional public offerings of our securities, refinance debt or dispose of certain assets to fund our operating activities and debt service. We expect these resources will be adequate to fund our ongoing operating activities as well as providing capital for investment in future land purchases and related development activities and future joint ventures.

Material Cash Requirements

We are a party to many contractual obligations involving commitments to make payments to third parties. These obligations impact our short-term and long-term liquidity and capital resource needs. ~~At July~~Certain contractual obligations are reflected on the Condensed Consolidated Balance Sheet as of January 31, ~~2021, we owned or controlled through options approximately 79,500 home sites,~~2022, while others are considered future commitments. Our contractual obligations primarily consist of long-term debt and related interest payments, payments due on our Mortgage Company Loan Facility, purchase obligations related to expected acquisition of land under purchase agreements and land development agreements (many of which ~~we owned approximately 37,500. Of~~are secured by letters of credit or surety bonds), operating leases, and obligations under our ~~owned home sites at July 31, 2021, significant improvements were completed on approximately 17,800 of them.~~

~~At July 31, 2021, the aggregate purchase price of land parcels under option~~deferred compensation plan, supplemental executive retirement plans, and ~~purchase agreements was approximately $4.07 billion (including $10.1 million of land~~401(k) savings plans. We also enter into certain short-term lease commitments, commitments to ~~be acquired from~~fund our existing or future unconsolidated joint ventures, letters of credit and other purchase obligations in ~~which we have invested). Of~~ the ~~$4.07 billion~~normal course of ~~land purchase~~business. For more information regarding our primary obligations, refer to Note 5, “Loans Payable, Senior Notes, and Mortgage Company Loan Facility,” and Note 13, “Commitments and Contingencies,” to the Condensed Consolidated Financial Statements for amounts outstanding as of January 31, 2022, related to debt and commitments ~~we paid or deposited $311.3 million,~~ and if we acquire all of these land parcels, we will be required to pay an additional $3.75 billion. The purchases of these land parcels are scheduled to occur over the next several years. In addition, we expect to purchase approximately 3,700 additional home sites overcontingencies, respectively.

We also operate through a number of ~~years from several~~ joint ventures ~~in which we~~and 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~~undertaken various commitments as a result 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 provided by (used in) investing activities.”those arrangements. At ~~July~~January 31, ~~2021,~~2022, we had investments in these entities of ~~$550.4~~$679.6 million and were committed to invest or advance up to an additional ~~$77.5~~$188.1 million to these entities if they require additional funding. At ~~July~~January 31, 2021, we had purchase commitments to acquire land for apartment developments of approximately $97.8 million, of which we had outstanding deposits in the amount of $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 $2.15 billion. Under the terms of the Revolving Credit Facility, at July 31, 2021, our leverage ratio was approximately 0.49 to 1.00, and our tangible net worth was approximately $4.97 billion. At July 31, 2021, we had no outstanding borrowings under our Revolving Credit Facility and had outstanding letters of credit thereunder of approximately $115.3 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 $800.0 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 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 $3.77 billion and our ability to pay cash dividends was limited to approximately $2.82 billion as of July 31, 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 1.30% as of July 31, 2021. These interest rate swaps were designated as cash flow hedges.

On March 15, 2021, we redeemed all $250 million in aggregate principal amount of our then-outstanding 5.625% Senior Notes due 2024 (the “2024 Notes”). The 2024 Notes were redeemed at a redemption price in cash of $284.2 million. Accrued and unpaid interest to, but excluding, March 15, 2021 was paid in accordance with the terms of the Indenture and the Notes. In connection with the redemption, the Company incurred a pre-tax charge of $34.2 million in its second fiscal quarter for the early retirement of debt, inclusive of the write-off of unamortized deferred financing costs, which is recorded in our Condensed Consolidated Statement of Operations and 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, 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 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 July 31, 2021, we had investments in these entities of $550.4 million and were committed to invest or advance up to an additional $77.5 million to these entities if they require additional funding. At July 31, 2021,2022, we had agreed to terms for the acquisition of ~~180~~178 home sites from ~~two~~three joint ventures for an estimated aggregate purchase price of ~~$10.1~~$9.6 million. In addition, we expect to purchase approximately ~~3,700~~6,200 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.

The unconsolidated ~~entities~~joint ventures in which we have investments generally finance their activities with a combination of partner equity and debt financing. In some instances, we and our joint venture partner 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,~~these situations where we have joint and several guarantees with 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~~such a reimbursement agreement, we may be liable for more than our proportionate share.

We believe that, as of ~~July~~January 31, ~~2021,~~2022, 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 ~~July~~January 31, ~~2021,~~2022, we had guaranteed the debt of certain unconsolidated entities that have loan commitments aggregating ~~$1.87~~$2.31 billion, of which, if the full amount of the debt obligations were borrowed, we estimate ~~$340.6~~$407.7 million to be our maximum exposure related to repayment and carry cost guarantees. At ~~July~~January 31, ~~2021,~~2022, the unconsolidated entities had borrowed an aggregate of ~~$1.17~~$1.26 billion, of which we estimate ~~$238.6~~$237.2 million to be our maximum exposure related to repayment and carry cost guarantees. The terms of these guarantees generally range from 1 month to 3.9 years. These maximum exposure estimates do not take into account any recoveries from the underlying collateral or any reimbursement from our partners.

~~Subsequent Event - Apartment Living Strategic Partnership~~

For more information regarding these joint ventures, see Note 4,3, “Investments in Unconsolidated ~~Entities,”~~Entities” in the Notes to Condensed Consolidated Financial ~~Statements~~Statements.

Debt Service Requirements

Our financing strategy is to ensure liquidity and access to capital markets, to maintain a balanced profile of debt maturities, and to manage our exposure to floating interest rate volatility.

Outside of the normal course of operations, one of our principal liquidity needs is the payment of principal and interest on outstanding indebtedness. We are required by the terms of certain loan documents to meet certain covenants, such as financial ratios and reporting requirements. As of January 31, 2022, we were in ~~this Form 10-Q.~~compliance with all such covenants and requirements on our term loan, credit facility and other loans payable. Refer to Note 5, “Loans Payable, Senior Notes, and Mortgage Company Loan Facility” in the Notes to the Condensed Consolidated Financial Statements.

Operating Activities

At January 31, 2022 and October 31, 2021, we had $671.4 million and $1.64 billion, respectively, of cash and cash equivalents. Cash used in operating activities during the three-month period ended January 31, 2022 was $280.7 million. Cash used in operating activities during the fiscal 2022 period was primarily related to an increase in inventory, an increase in receivables, prepaid expenses, and other assets, an increase in income tax receivable, and a decrease in accounts payable and accrued expenses. This activity was offset, in part, by net income (adjusted for stock-based compensation, inventory impairments, depreciation and amortization, income from unconsolidated entities and deferred taxes); mortgage loans sold, net of mortgage loans originated; and an increase in customer deposits – net.

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

Investing Activities

In the three-month period ended January 31, 2022, cash used in investing activities was $62.4 million, which was primarily related to $109.9 million used to fund our investments in unconsolidated entities and $18.5 million used for the purchase of property and equipment. This activity was offset, in part, by $65.8 million of cash received as returns from our investments in unconsolidated entities

In the three-month period ended January 31, 2021, cash used in investing activities was $9.8 million, which was primarily related to $112.8 million used to fund our investments in unconsolidated entities and $14.5 million used for the purchase of

property and equipment. This activity was offset, in part, by $79.4 million of cash received from the sale of commercial properties and $37.9 million of cash received as returns from our investments in unconsolidated entities.

Financing Activities

We used $617.0 million of cash in financing activities in the three-month period ended January 31, 2022, primarily for the redemption of senior notes of $409.9 million, the repurchase of $128.1 million of our common stock; payments of $55.3 million of loans payable, net of borrowings, and the payment of dividends on our common stock of $21.1 million.

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

CRITICAL ACCOUNTING ~~POLICIES~~ESTIMATES

As disclosed in our ~~2020~~2021 Form 10-K, our most critical accounting ~~policies~~estimates relate to inventory, cost of revenue ~~and cost~~ recognition, ~~and~~ warranty and ~~self-insurance.~~self-insurance, and investments in unconsolidated entities. Since October 31, ~~2020,~~2021, there have been no material changes to those critical accounting ~~policies.~~estimates.

SUPPLEMENTAL GUARANTOR INFORMATION

At ~~July~~January 31, ~~2021,~~2022, our 100%-owned subsidiary, Toll Brothers Finance Corp. (the “Subsidiary Issuer”), had issued and outstanding ~~$2.41~~$2.00 billion aggregate principal amount of senior notes maturing on various dates between ~~February~~April 15, ~~2022~~2023 and November 1, 2029 (the “Senior Notes”). For further information regarding the Senior Notes, see Note 65 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 Toll Brothers, Inc. and substantially all of its 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). We voluntarily adopted the new disclosure requirements for the period ending October

31 ~~2020 in accordance with the early adoption provisions in Rule 33-10762.~~

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

Summarized Balance Sheet Data ($ amounts in millions):


	~~July~~January 31, ~~2021~~2022
Assets
Cash	$	~~777.3~~498.6
Inventory	$	~~8,140.4~~8,414.4
Amount due from ~~Nonguarantor~~Non-Guarantor Subsidiaries	$	~~630.2~~643.8
Total assets	$	~~10,296.4~~10,268.5

Liabilities & Stockholders' Equity
Loans payable	$	~~1,004.3~~1,101.9
Senior notes	$	~~2,403.6~~1,994.5
Total liabilities	$	~~5,565.2~~5,389.9
Stockholders' equity	$	~~4,731.2~~4,878.5

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


	For the ~~nine~~three months ended ~~July~~January 31, ~~2021~~2022
Revenues	$	~~5,582.7~~1,699.3
Cost of revenues	$	~~4,344.0~~1,302.3
Selling, general and administrative	$	~~662.5~~225.8
Income before income taxes	$	~~539.1~~169.3
Net income	$	~~412.3~~128.0

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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 July 31,
Revenues
($ in millions) Units Delivered Average Delivered Price
($ in thousands)
2021 2020 % Change 2021 2020 % Change 2021 2020 % Change
Traditional Home Building:
North $ 402.9 $ 290.4 39 % 552 412 34 % $ 729.9 $ 704.9 4 %
Mid-Atlantic 276.9 201.3 38 % 361 305 18 % $ 766.9 $ 659.9 16 %
South 291.7 276.3 6 % 435 410 6 % $ 670.6 $ 674.0 (1) %
Mountain 553.2 425.4 30 % 755 612 23 % $ 732.7 $ 695.1 5 %
Pacific 524.0 406.4 29 % 386 263 47 % $ 1,357.5 $ 1,545.3 (12) %
Traditional Home Building 2,048.7 1,599.8 28 % 2,489 2,002 24 % $ 823.1 $ 799.1 3 %
City Living 184.1 26.4 597 % 108 20 440 % $ 1,704.6 $ 1,318.3 29 %
Other 1.6 1.6
Total home sales revenues 2,234.4 1,627.8 37 % 2,597 2,022 28 % $ 860.4 $ 805.0 7 %
Land sales revenues 21.1 23.7
Total revenues $ 2,255.5 $ 1,651.5


	Three months ended January 31,
	Revenues ($ in millions)						Units Delivered				Average Delivered Price ($ in thousands)
	2022		2021		% Change		2022	2021	% Change		2022		2021		% Change
Traditional Home Building:
North	$	315.4	$	312.6	1	%	398	451	(12)	%	$	792.4	$	693.2	14	%
Mid-Atlantic	242.9		164.0		48	%	276	227	22	%	$	880.0	$	722.4	22	%
South	243.5		216.9		12	%	347	341	2	%	$	701.8	$	636.0	10	%
Mountain	462.3		378.0		22	%	603	525	15	%	$	766.7	$	720.0	6	%
Pacific	384.9		331.1		16	%	285	226	26	%	$	1,350.7	$	1,465.3	(8)	%
Traditional Home Building	1,649.0		1,402.6		18	%	1,909	1,770	8	%	$	863.8	$	792.5	9	%
City Living	39.8		7.8		410	%	20	7	186	%	$	1,988.6	$	1,113.4	79	%
Other	(1.4)		0.3
Total home sales revenues	1,687.4		1,410.7		20	%	1,929	1,777	9	%	$	874.7	$	793.9	10	%
Land sales revenues	103.7		152.7
Total revenues	$	1,791.1	$	1,563.4

Nine months ended July 31,
Revenues
($ in millions) Units Delivered Average Delivered Price
($ in thousands)
2021 2020 % Change 2021 2020 % Change 2021 2020 % Change
Traditional Home Building:
North $ 1,106.2 $ 840.5 32 % 1,565 1,254 25 % $ 706.8 $ 670.3 5 %
Mid-Atlantic 659.1 556.6 18 % 892 848 5 % $ 738.9 $ 656.4 13 %
South 788.8 690.8 14 % 1,184 1,032 15 % $ 666.2 $ 669.4 — %
Mountain 1,363.0 1,026.0 33 % 1,885 1,518 24 % $ 723.1 $ 675.9 7 %
Pacific 1,313.7 1,225.1 7 % 959 819 17 % $ 1,369.9 $ 1,495.8 (8) %
Traditional Home Building 5,230.8 4,339.0 21 % 6,485 5,471 19 % $ 806.6 $ 793.1 2 %
City Living 249.9 103.0 143 % 160 85 88 % $ 1,561.9 $ 1,211.8 29 %
Other 0.6 (0.6)
Total home sales revenues 5,481.3 4,441.4 23 % 6,645 5,556 20 % $ 824.9 $ 799.4 3 %
Land sales revenues 267.7 90.6
Total revenues $ 5,749.0 $ 4,532.0
Net Contracts Signed:


	Three months ended January 31,
	Net Contract Value ($ in millions)						Net Contracted Units				Average Contracted Price ($ in thousands)
	2022		2021		% Change		2022	2021	% Change		2022		2021		% Change
Traditional Home Building:
North	$	415.9	$	356.8	17	%	472	449	5	%	$	881.2	$	794.6	11	%
Mid-Atlantic	360.6		327.5		10	%	366	373	(2)	%	$	985.3	$	878.0	12	%
South	611.5		388.8		57	%	737	568	30	%	$	829.7	$	684.5	21	%
Mountain	758.0		751.8		1	%	799	978	(18)	%	$	948.7	$	768.7	23	%
Pacific	824.1		644.1		28	%	543	473	15	%	$	1,517.6	$	1,361.8	11	%
Traditional Home Building	2,970.1		2,469.0		20	%	2,917	2,841	3	%	$	1,018.2	$	869.1	17	%
City Living	22.9		39.0		(41)	%	12	33	(64)	%	$	1,907.7	$	1,181.8	61	%
Total	$	2,993.0	$	2,508.0	19	%	2,929	2,874	2	%	$	1,021.8	$	872.6	17	%

4133

~~Net Contracts Signed:~~Backlog:
Three months ended July 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 $ 450.5 $ 428.0 5 % 539 620 (13) % $ 835.7 $ 690.4 21 %
Mid-Atlantic 314.7 334.5 (6) % 361 478 (24) % $ 871.9 $ 699.8 25 %
South 585.6 344.1 70 % 736 538 37 % $ 795.6 $ 639.5 24 %
Mountain 846.5 561.8 51 % 956 801 19 % $ 885.5 $ 701.4 26 %
Pacific 713.4 536.7 33 % 517 393 32 % $ 1,380.0 $ 1,365.6 1 %
Traditional Home Building 2,910.7 2,205.1 32 % 3,109 2,830 10 % $ 936.2 $ 779.2 20 %
City Living 69.0 8.8 684 % 45 3 1,400 % $ 1,533.3 $ 2,936.0 (48) %
Total $ 2,979.7 $ 2,213.9 35 % 3,154 2,833 11 % $ 944.7 $ 781.5 21 %


		Nine months ended July 31,																	At January 31,
		Net Contract Value ($ in millions)						Net Contracted Units				Average Contracted Price ($ in thousands)							Backlog Value ($ in millions)						Backlog Units				Average Backlog Price ($ in thousands)
		2021		2020		% Change		2021	2020	% Change		2021		2020		% Change			2022		2021		% Change		2022	2021	% Change		2022		2021		% Change
Traditional Home Building:	Traditional Home Building:																	Traditional Home Building:
North	North	$	1,261.6	$	985.0	28	%	1,539	1,397	10	%	$	819.8	$	705.1	16	%	North	$	1,566.7	$	1,413.5	11	%	1,798	1,904	(6)	%	$	871.4	$	742.4	17	%
Mid-Atlantic	Mid-Atlantic	966.1		723.9		33	%	1,120	1,014	10	%	$	862.6	$	713.9	21	%	Mid-Atlantic	1,122.5		934.0		20	%	1,143	1,136	1	%	$	982.1	$	822.1	19	%
South	South	1,536.2		861.8		78	%	2,104	1,286	64	%	$	730.1	$	670.1	9	%	South	2,333.4		1,210.4		93	%	2,860	1,715	67	%	$	815.9	$	705.8	16	%
Mountain	Mountain	2,518.3		1,281.3		97	%	3,150	1,800	75	%	$	799.5	$	711.8	12	%	Mountain	3,317.9		2,044.8		62	%	3,794	2,727	39	%	$	874.5	$	749.8	17	%
Pacific	Pacific	2,065.1		1,320.5		56	%	1,478	974	52	%	$	1,397.2	$	1,355.7	3	%	Pacific	2,452.9		1,700.7		44	%	1,702	1,291	32	%	$	1,441.2	$	1,317.4	9	%
Traditional Home Building	Traditional Home Building	8,347.3		5,172.5		61	%	9,391	6,471	45	%	$	888.9	$	799.3	11	%	Traditional Home Building	10,793.4		7,303.4		48	%	11,297	8,773	29	%	$	955.4	$	832.5	15	%
City Living	City Living	193.3		83.9		130	%	124	54	130	%	$	1,558.9	$	1,553.7	—	%	City Living	11.5		170.1		(93)	%	5	115	(96)	%	$	2,293.4	$	1,478.9	55	%
Total	Total	$	8,540.6	$	5,256.4	62	%	9,515	6,525	46	%	$	897.6	$	805.6	11	%	Total	$	10,804.9	$	7,473.5	45	%	11,302	8,888	27	%	$	956.0	$	840.9	14	%

~~Backlog:~~
At July 31,
Backlog Value
($ in millions) Backlog Units Average Backlog Price
($ in thousands)
2021 2020 % Change 2021 2020 % Change 2021 2020 % Change
Traditional Home Building:
North $ 1,525.5 $ 1,325.5 15 % 1,880 1,885 — % $ 811.4 $ 703.2 15 %
Mid-Atlantic 1,077.7 707.5 52 % 1,218 954 28 % $ 884.8 $ 741.6 19 %
South 1,786.2 930.7 92 % 2,408 1,302 85 % $ 741.8 $ 714.8 4 %
Mountain 2,826.8 1,408.8 101 % 3,539 1,888 87 % $ 798.8 $ 746.2 7 %
Pacific 2,138.9 1,581.6 35 % 1,563 1,129 38 % $ 1,368.5 $ 1,400.9 (2) %
Traditional Home Building 9,355.1 5,954.1 57 % 10,608 7,158 48 % $ 881.9 $ 831.8 6 %
City Living 82.4 131.1 (37) % 53 81 (35) % $ 1,554.1 $ 1,617.9 (4) %
Total $ 9,437.5 $ 6,085.2 55 % 10,661 7,239 47 % $ 885.2 $ 840.6 5 %


		At October 31,																	At October 31,
		Backlog Value ($ in millions)						Backlog Units				Average Backlog Price ($ in thousands)							Backlog Value ($ in millions)						Backlog Units				Average Backlog Price ($ in thousands)
		2020		2019		% Change		2020	2019	% Change		2020		2019		% Change			2021		2020		% Change		2021	2020	% Change		2021		2020		% Change
Traditional Home Building:	Traditional Home Building:																	Traditional Home Building:
North	North	$	1,369.1	$	1,179.6	16	%	1,906	1,742	9	%	$	718.3	$	677.2	6	%	North	$	1,465.9	$	1,369.1	7	%	1,724	1,906	(10)	%	$	850.3	$	718.3	18	%
Mid-Atlantic	Mid-Atlantic	770.4		535.3		44	%	990	784	26	%	$	778.2	$	682.7	14	%	Mid-Atlantic	1,004.5		770.4		30	%	1,053	990	6	%	$	954.0	$	778.2	23	%
South	South	1,038.4		757.3		37	%	1,488	1,048	42	%	$	697.9	$	722.6	(3)	%	South	1,965.2		1,038.4		89	%	2,470	1,488	66	%	$	795.6	$	697.9	14	%
Mountain	Mountain	1,670.7		1,150.9		45	%	2,274	1,606	42	%	$	734.7	$	716.6	3	%	Mountain	3,021.9		1,670.7		81	%	3,598	2,274	58	%	$	839.9	$	734.7	14	%
Pacific	Pacific	1,387.1		1,484.4		(7)	%	1,044	974	7	%	$	1,328.6	$	1,524.0	(13)	%	Pacific	2,013.3		1,387.1		45	%	1,444	1,044	38	%	$	1,394.3	$	1,328.6	5	%
Traditional Home Building	Traditional Home Building	6,235.7		5,107.5		22	%	7,702	6,154	25	%	$	809.6	$	829.9	(2)	%	Traditional Home Building	9,470.8		6,235.7		52	%	10,289	7,702	34	%	$	920.5	$	809.6	14	%
City Living	City Living	138.9		149.6		(7)	%	89	112	(21)	%	$	1,560.3	$	1,335.6	17	%	City Living	28.3		138.9		(80)	%	13	89	(85)	%	$	2,173.0	$	1,560.3	39	%
Total	Total	$	6,374.6	$	5,257.1	21	%	7,791	6,266	24	%	$	818.2	$	839.0	(2)	%	Total	$	9,499.1	$	6,374.6	49	%	10,302	7,791	32	%	$	922.1	$	818.2	13	%

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


		Three months ended July 31,						Nine months ended July 31,							Three months ended January 31,
		2021		2020		% Change		2021		2020		% Change				2022		2021		% Change
Traditional Home Building:	Traditional Home Building:													Traditional Home Building:
North	North	$	39.7	$	13.7	190	%	$	97.8	$	33.2	195	%	North		$	31.5	$	18.9	67	%
Mid-Atlantic	Mid-Atlantic	25.4		13.4		90	%	68.1		20.2		237	%	Mid-Atlantic		33.4		18.8		78	%
South	South	41.4		32.4		28	%	101.2		61.6		64	%	South		22.5		21.5		5	%
Mountain	Mountain	85.1		53.1		60	%	173.2		103.9		67	%	Mountain		71.0		36.0		97	%
Pacific	Pacific	85.0		76.8		11	%	206.7		207.9		(1)	%	Pacific		64.5		47.5		36	%
Traditional Home Building	Traditional Home Building	276.6		189.4		46	%	647.0		426.8		52	%	Traditional Home Building		222.9		142.7		56	%
City Living (1)	City Living (1)	65.9		9.6		586	%	111.1		27.8		300	%	City Living (1)		12.7		32.7		(61)	%
Corporate and other	Corporate and other	(39.1)		(47.1)		17	%	(157.5)		(134.7)		(17)	%	Corporate and other		(34.8)		(48.0)		28	%
Total	Total	$	303.4	$	151.9	100	%	$	600.6	$	319.9	88	%	Total		$	200.8	$	127.4	58	%

(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;~~our apartment rental development business; and income from our Rental Property Joint Ventures and Gibraltar Joint Ventures.

Traditional Home Building

North


		Three months ended July 31,								Nine months ended July 31,									Three months ended January 31,
		2021			2020			Change		2021			2020			Change				2022			2021			Change
Units Delivered and Revenues:	Units Delivered and Revenues:																	Units Delivered and Revenues:
Home sales revenues ($ in millions)	Home sales revenues ($ in millions)	$	402.9		$	290.4		39	%	$	1,106.2		$	840.5		32	%	Home sales revenues ($ in millions)		$	315.4		$	312.6		1	%
Units delivered	Units delivered	552			412			34	%	1,565			1,254			25	%	Units delivered		398			451			(12)	%
Average delivered price ($ in thousands)	Average delivered price ($ in thousands)	$	729.9		$	704.9		4	%	$	706.8		$	670.3		5	%	Average delivered price ($ in thousands)		$	792.4		$	693.2		14	%

Net Contracts Signed:	Net Contracts Signed:																	Net Contracts Signed:
Net contract value ($ in millions)	Net contract value ($ in millions)	$	450.5		$	428.0		5	%	$	1,261.6		$	985.0		28	%	Net contract value ($ in millions)		$	415.9		$	356.8		17	%
Net contracted units	Net contracted units	539			620			(13)	%	1,539			1,397			10	%	Net contracted units		472			449			5	%
Average contracted price ($ in thousands)	Average contracted price ($ in thousands)	$	835.7		$	690.4		21	%	$	819.8		$	705.1		16	%	Average contracted price ($ in thousands)		$	881.2		$	794.6		11	%

Home sales cost of revenues as a percentage of home sale revenues	Home sales cost of revenues as a percentage of home sale revenues	82.7		%	85.8		%			82.8		%	85.0		%			Home sales cost of revenues as a percentage of home sale revenues		80.8		%	84.0		%

Income before income taxes ($ in millions)	Income before income taxes ($ in millions)	$	39.7		$	13.7		190	%	$	97.8		$	33.2		195	%	Income before income taxes ($ in millions)		$	31.5		$	18.9		67	%

Number of selling communities at July 31,		58			83			(30)	%
Number of selling communities at January 31,																		Number of selling communities at January 31,		60			61			(2)	%

The ~~increases~~decrease in the number of homes delivered in the fiscal ~~2021 periods were~~2022 period was mainly due to ~~an increase~~a decrease in the number of homes in backlog at October 31, ~~2020,~~2021, as compared to the number of homes in backlog at October 31, ~~2019, and higher backlog conversion in the fiscal 2021 periods.~~2020. The ~~increases~~increase in the average price of homes delivered in the fiscal ~~2021 periods were~~2022 period was primarily due to sales price ~~increases.~~

~~The decrease~~increases and a shift in the number of ~~net contracts signed in the three-month fiscal 2021 period was due mainly~~homes delivered to ~~the decrease in the number of selling communities, offset, in part, by increased demand.~~ more expenses areas and/or products.

The increase in the number of net contracts signed in the ~~nine-month~~ fiscal ~~2021~~2022 period was mainly due to increased ~~demand partially offset by a decrease in the number of selling communities.~~demand. The ~~increases~~increase in the average value of each contract signed in the fiscal ~~2021 periods were~~2022 period was mainly due to sales price increases and a shift in the number of contracts signed to more expensive areas and/or products.

The ~~increases~~increase in income before income taxes in the fiscal ~~2021 periods were principally~~2022 period was attributable to ~~higher earnings from increased revenues and~~ lower home sales cost of revenues, as a percentage of home sale ~~revenues.~~revenues, and lower SG&A costs. The ~~decreases~~decrease in home sales cost of revenues, as a percentage of home sales revenues, in the fiscal ~~2021 periods were~~2022 period was primarily due to a shift in product mix/areas to higher-margin areas, sales price increases, and lower interest expense as a percentage of home sales revenues.

Mid-Atlantic


		Three months ended July 31,								Nine months ended July 31,									Three months ended January 31,
		2021			2020			Change		2021			2020			Change				2022			2021			Change
Units Delivered and Revenues:	Units Delivered and Revenues:																	Units Delivered and Revenues:
Home sales revenues ($ in millions)	Home sales revenues ($ in millions)	$	276.9		$	201.3		38	%	$	659.1		$	556.6		18	%	Home sales revenues ($ in millions)		$	242.9		$	164.0		48	%
Units delivered	Units delivered	361			305			18	%	892			848			5	%	Units delivered		276			227			22	%
Average delivered price ($ in thousands)	Average delivered price ($ in thousands)	$	766.9		$	659.9		16	%	$	738.9		$	656.4		13	%	Average delivered price ($ in thousands)		$	880.0		$	722.4		22	%

Net Contracts Signed:	Net Contracts Signed:																	Net Contracts Signed:
Net contract value ($ in millions)	Net contract value ($ in millions)	$	314.7		$	334.5		(6)	%	$	966.1		$	723.9		33	%	Net contract value ($ in millions)		$	360.6		$	327.5		10	%
Net contracted units	Net contracted units	361			478			(24)	%	1,120			1,014			10	%	Net contracted units		366			373			(2)	%
Average contracted price ($ in thousands)	Average contracted price ($ in thousands)	$	871.9		$	699.8		25	%	$	862.6		$	713.9		21	%	Average contracted price ($ in thousands)		$	985.3		$	878.0		12	%

Home sales cost of revenues as a percentage of home sale revenues	Home sales cost of revenues as a percentage of home sale revenues	82.9		%	83.1		%			80.9		%	85.0		%			Home sales cost of revenues as a percentage of home sale revenues		77.5		%	77.9		%

Income before income taxes ($ in millions)	Income before income taxes ($ in millions)	$	25.4		$	13.4		90	%	$	68.1		$	20.2		237	%	Income before income taxes ($ in millions)		$	33.4		$	18.8		78	%

Number of selling communities at July 31,		40			42			(5)	%
Number of selling communities at January 31,																		Number of selling communities at January 31,		34			38			(11)	%

The ~~increases~~increase in the number of homes delivered in the fiscal ~~2021 periods were~~2022 period was mainly due to an increase in the number of homes in backlog at October 31, ~~2020,~~2021, as compared to the number of homes in backlog at October 31, ~~2019.~~2020 and higher backlog conversion. The ~~increases~~increase in the average price of homes delivered in the fiscal ~~2021 periods were~~2022 period was 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 periods.~~2022 period.

The decrease in the number of net contracts signed in the ~~three-month~~ fiscal ~~2021~~2022 period was mainly due to the decrease in the number of selling communities and ~~the~~ limited lot releases in certain communities. The increase in the number of net contracts signed in the nine-month fiscal 2021 period was mainly due to increased demand partially offset by a decrease in the number of selling communities and our limiting of lot releases in certain communities. The increases in the average value of each contract signed in the fiscal ~~2021 periods were~~2022 period was 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 periods.~~2022 period.

The ~~increases~~increase in income before income taxes in the fiscal ~~2021 periods were~~2022 period was mainly due to higher earnings from increased revenue and lower SG&A costs, partially offset by ~~higher SG&A costs. The three-month~~lower earnings from unconsolidated entities. During the fiscal 2021 period, ~~was impacted by higher inventory impairment charges. The nine-month fiscal 2021 period benefited from lower home sales cost of revenues, as~~ a percentage of home sale revenues, primarily due to a shift in product mix/areas to higher-margin areas, lower interest expense as a percentage of home sales revenues and the impact of purchase accounting on the fiscal 2020 period related to a builder acquisition in Georgia, which was completed in fiscal 2019. Additionally, the nine-month fiscal 2021 period benefited from lower inventory impairment charges and sales price increases. A $6.0 million gain was recognized from an asset sale of a commercial property by one of our Land Development Joint ~~Ventures was also~~Ventures. No similar gains were recognized ~~during the nine-month fiscal 2021 period with no similar gain~~ in the ~~nine-month~~ fiscal ~~2020~~2022 period.

South
Three months ended July 31, Nine months ended July 31,
2021 2020 Change 2021 2020 Change
Units Delivered and Revenues:
Home sales revenues ($ in millions) $ 291.7 $ 276.3 6 % $ 788.8 $ 690.8 14 %
Units delivered 435 410 6 % 1,184 1,032 15 %
Average delivered price ($ in thousands) $ 670.6 $ 674.0 (1) % $ 666.2 $ 669.4 — %
Net Contracts Signed:
Net contract value ($ in millions) $ 585.6 $ 344.1 70 % $ 1,536.2 $ 861.8 78 %
Net contracted units 736 538 37 % 2,104 1,286 64 %
Average contracted price ($ in thousands) $ 795.6 $ 639.5 24 % $ 730.1 $ 670.1 9 %
Home sales cost of revenues as a percentage of home sale revenues 76.1 % 79.1 % 76.6 % 80.4 %
Income before income taxes ($ in millions) $ 41.4 $ 32.4 28 % $ 101.2 $ 61.6 64 %
Number of selling communities at July 31, 79 67 18 %


	Three months ended January 31,
		2022			2021			Change
Units Delivered and Revenues:
Home sales revenues ($ in millions)		$	243.5		$	216.9		12	%
Units delivered		347			341			2	%
Average delivered price ($ in thousands)		$	701.8		$	636.0		10	%

Net Contracts Signed:
Net contract value ($ in millions)		$	611.5		$	388.8		57	%
Net contracted units		737			568			30	%
Average contracted price ($ in thousands)		$	829.7		$	684.5		21	%

Home sales cost of revenues as a percentage of home sale revenues		77.8		%	77.5		%

Income before income taxes ($ in millions)		$	22.5		$	21.5		5	%

Number of selling communities at January 31,		86			73			18	%

The ~~increases~~increase in the number of homes delivered in the fiscal ~~2021 periods were~~2022 period was mainly due to an increase in the number of homes in backlog at October 31, ~~2020,~~2021, as compared to the number of homes in backlog at October 31, ~~2019, partially~~2020, offset by lower backlog conversion in the fiscal ~~2021 periods.~~2022 period. The increase in the average price of homes delivered in the fiscal 2022 period was primarily due to sales price increases and a shift in the number of homes delivered to more expensive areas.

The ~~increases~~increase in the number of net contracts signed in the fiscal ~~2021 periods were~~2022 period was due principally to an increase in demand and an increase in the ~~average~~ number of selling communities in the fiscal ~~2021 periods,~~2022 period, offset by our limiting of lot releases in certain communities. The ~~increases~~increase in the average value of each contract signed in the fiscal ~~2021 periods were~~2022 period was primarily due to sales price increases in the fiscal ~~2021 periods~~2022 period and a shift in the number of contracts signed to more expensive ~~areas.~~areas or product types.

The ~~increases~~increase in income before income taxes in the fiscal ~~2021 periods were~~2022 period was principally due to higher earnings from increased revenues, partially offset by higher home sales cost of revenues, as a percentage of home sale revenues, and higher SG&A costs in the fiscal 2022 period. The increase in home sales cost of revenues, as a percentage of home sales revenues, in the fiscal 2022 period was primarily due to a shift in product mix/areas to lower-margin areas.

Mountain


	Three months ended January 31,
		2022			2021			Change
Units Delivered and Revenues:
Home sales revenues ($ in millions)		$	462.3		$	378.0		22	%
Units delivered		603			525			15	%
Average delivered price ($ in thousands)		$	766.7		$	720.0		6	%

Net Contracts Signed:
Net contract value ($ in millions)		$	758.0		$	751.8		1	%
Net contracted units		799			978			(18)	%
Average contracted price ($ in thousands)		$	948.7		$	768.7		23	%

Home sales cost of revenues as a percentage of home sale revenues		75.3		%	79.5		%

Income before income taxes ($ in millions)		$	71.0		$	36.0		97	%

Number of selling communities at January 31,		100			93			8	%

The increase in the number of homes delivered in the fiscal 2022 period was mainly due to an increase in the number of homes in backlog at October 31, 2021, as compared to the number of homes in backlog at October 31, 2020, partially offset by lower backlog conversion in the fiscal 2022 period. The increase in the average price of homes delivered in the fiscal 2022 period was primarily due to sales price increases.

The decrease in the number of net contracts signed in the fiscal 2022 period was primarily due to our limiting of lot releases in certain communities during the fiscal 2022 period. The increase in the average value of each contract signed in the fiscal 2022 period was mainly due to sales price increases.

The increase in income before income taxes in the fiscal 2022 period was due mainly to higher earnings from increased revenues in the fiscal 2022 period 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.~~2022 period. The ~~decreases~~decrease 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 the impact of purchase accounting on the fiscal 2020 periods related to a builder acquisition in South Carolina, which2022 period was ~~completed in fiscal 2019.~~

~~Mountain~~
Three months ended July 31, Nine months ended July 31,
2021 2020 Change 2021 2020 Change
Units Delivered and Revenues:
Home sales revenues ($ in millions) $ 553.2 $ 425.4 30 % $ 1,363.0 $ 1,026.0 33 %
Units delivered 755 612 23 % 1,885 1,518 24 %
Average delivered price ($ in thousands) $ 732.7 $ 695.1 5 % $ 723.1 $ 675.9 7 %
Net Contracts Signed:
Net contract value ($ in millions) $ 846.5 $ 561.8 51 % $ 2,518.3 $ 1,281.3 97 %
Net contracted units 956 801 19 % 3,150 1,800 75 %
Average contracted price ($ in thousands) $ 885.5 $ 701.4 26 % $ 799.5 $ 711.8 12 %
Home sales cost of revenues as a percentage of home sale revenues 76.6 % 78.8 % 77.8 % 79.3 %
Income before income taxes ($ in millions) $ 85.1 $ 53.1 60 % $ 173.2 $ 103.9 67 %
Number of selling communities at July 31, 100 83 20 %

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

The increases in the number of net contracts signed in the fiscal 2021 periods were primarily due to increased demand and an increase in the average number of selling communities in the fiscal 2021 periods, offset by our limiting of lot releases in certain communities. The increases in the average value of each contract signed in the fiscal 2021 periods were mainly due to sales price increases.

The increases in income before income taxes in the fiscal 2021 periods were due mainly to higher earnings from increased revenues in the fiscal 2021 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 July 31,								Nine months ended July 31,									Three months ended January 31,
		2021			2020			Change		2021			2020			Change				2022			2021			Change
Units Delivered and Revenues:	Units Delivered and Revenues:																	Units Delivered and Revenues:
Home sales revenues ($ in millions)	Home sales revenues ($ in millions)	$	524.0		$	406.4		29	%	$	1,313.7		$	1,225.1		7	%	Home sales revenues ($ in millions)		$	384.9		$	331.1		16	%
Units delivered	Units delivered	386			263			47	%	959			819			17	%	Units delivered		285			226			26	%
Average delivered price ($ in thousands)	Average delivered price ($ in thousands)	$	1,357.5		$	1,545.3		(12)	%	$	1,369.9		$	1,495.8		(8)	%	Average delivered price ($ in thousands)		$	1,350.7		$	1,465.3		(8)	%

Net Contracts Signed:	Net Contracts Signed:																	Net Contracts Signed:
Net contract value ($ in millions)	Net contract value ($ in millions)	$	713.4		$	536.7		33	%	$	2,065.1		$	1,320.5		56	%	Net contract value ($ in millions)		$	824.1		$	644.1		28	%
Net contracted units	Net contracted units	517			393			32	%	1,478			974			52	%	Net contracted units		543			473			15	%
Average contracted price ($ in thousands)	Average contracted price ($ in thousands)	$	1,380.0		$	1,365.6		1	%	$	1,397.2		$	1,355.7		3	%	Average contracted price ($ in thousands)		$	1,517.6		$	1,361.8		11	%

Home sales cost of revenues as a percentage of home sale revenues	Home sales cost of revenues as a percentage of home sale revenues	76.8		%	73.1		%			76.4		%	74.8		%			Home sales cost of revenues as a percentage of home sale revenues		74.3		%	76.3		%

Income before income taxes ($ in millions)	Income before income taxes ($ in millions)	$	85.0		$	76.8		11	%	$	206.7		$	207.9		(1)	%	Income before income taxes ($ in millions)		$	64.5		$	47.5		36	%

Number of selling communities at July 31,		34			45			(24)	%
Number of selling communities at January 31,																		Number of selling communities at January 31,		45			41			10	%

conversion. The ~~decreases~~decrease in the average price of homes delivered in fiscal ~~2021 periods were~~2022 period was primarily due to a shift in

the number of homes delivered to less expensive areas and/or products, ~~primarily in Washington and California,~~ offset, in part, by sales price increases in the fiscal ~~2021 periods.~~2022 period.

The ~~increases~~increase in the number of net contracts signed in the fiscal ~~2021 periods were~~2022 period was primarily due to an increase in demand, ~~offset,~~coupled with the increase in ~~part, by a decrease in~~ the ~~average~~ number of selling communities in the fiscal ~~2021 periods and the limited lot releases in certain communities.~~2022 period. The ~~increases~~increase in the average value of each contract signed in the fiscal ~~2021 periods were~~2022 period was mainly due to sales price increases ~~offset, in part, by~~and a shift in ~~the number of contracts signed to less expensive areas and/or products.~~product mix.

The increase in income before income taxes in the fiscal ~~2021 three-month~~2022 period was mainly due to higher earnings from increased revenues ~~offset by higher~~and lower home sales cost of revenues, as a percentage of home sales revenues, ~~and~~offset in part, by higher SG&A costs in the fiscal ~~2021~~2022 period. The ~~increase~~decrease in home sales cost of revenues, as a percentage of home sales revenues, was primarily due to a shift in product mix/areas to ~~lower-margin areas. The decrease in income before income taxes in the fiscal 2021 nine-month period was mainly due to higher home~~higher-margin areas and sales cost of revenues, as a percentage of home sales revenues in the fiscal 2021 period, offset, in part, by higher sales revenues. The increase in home sales cost of revenues, as a percentage of home sales revenues, was primarily due to a shift in product mix/areas to lower-margin areas.price increases.

City Living


		Three months ended July 31,								Nine months ended July 31,									Three months ended January 31,
		2021			2020			Change		2021			2020			Change				2022			2021			Change
Units Delivered and Revenues:	Units Delivered and Revenues:																	Units Delivered and Revenues:
Home sales revenues ($ in millions)	Home sales revenues ($ in millions)	$	184.1		$	26.4		597	%	$	249.9		$	103.0		143	%	Home sales revenues ($ in millions)		$	39.8		$	7.8		410	%
Units delivered	Units delivered	108			20			440	%	160			85			88	%	Units delivered		20			7			186	%
Average delivered price ($ in thousands)	Average delivered price ($ in thousands)	$	1,704.6		$	1,318.3		29	%	$	1,561.9		$	1,211.8		29	%	Average delivered price ($ in thousands)		$	1,988.6		$	1,113.4		79	%

Net Contracts Signed:	Net Contracts Signed:																	Net Contracts Signed:
Net contract value ($ in millions)	Net contract value ($ in millions)	$	69.0		$	8.8		684	%	$	193.3		$	83.9		130	%	Net contract value ($ in millions)		$	22.9		$	39.0		(41)	%
Net contracted units	Net contracted units	45			3			1,400	%	124			54			130	%	Net contracted units		12			33			(64)	%
Average contracted price ($ in thousands)	Average contracted price ($ in thousands)	$	1,533.3		$	2,936.0		(48)	%	$	1,558.9		$	1,553.7		—	%	Average contracted price ($ in thousands)		$	1,907.7		$	1,181.8		61	%

Home sales cost of revenues as a percentage of home sale revenues	Home sales cost of revenues as a percentage of home sale revenues	60.0		%	62.1		%			63.1		%	63.5		%			Home sales cost of revenues as a percentage of home sale revenues		58.0		%	88.2		%

Income before income taxes ($ in millions) (1)	Income before income taxes ($ in millions) (1)	$	65.9		$	9.6		586	%	$	111.1		$	27.8		300	%	Income before income taxes ($ in millions) (1)		$	12.7		$	32.7		(61)	%

Number of selling communities at July 31,		3			3			—	%
Number of selling communities at January 31,																		Number of selling communities at January 31,		—			3			(100)	%

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

The ~~increases~~increase in the number of homes delivered in the fiscal ~~2021 periods~~2022 period was ~~mainly~~ attributable to ~~the low number of deliveries~~higher backlog conversion in the fiscal ~~2020 periods due to the COVID-19 pandemic, in particular in New York City and northern New Jersey.~~2022 period. The ~~increases~~increase in the average price of homes delivered in fiscal ~~2021 periods were~~2022 period was primarily due to a shift in the number of homes delivered to more expensive ~~areas and/or~~ products and sales price increases.

The ~~increases~~decrease in the number of net contracts signed in the fiscal ~~2021 periods were~~2022 period was mainly due to ~~an increase in demand in fiscal 2021 coupled with the low number of net contracts signed in the fiscal 2020 periods due to the COVID-19 pandemic. The year-over-year~~a decrease in the ~~average sales price of net contracts for the three-month period ended July 31 was skewed due to the lower~~ number of ~~sales (three) in the fiscal 2020 period.~~selling communities.

The ~~increases~~decrease in income before income taxes in the fiscal ~~2021 periods~~2022 period was primarily due to increased home sales revenues, lower home sales cost of revenues, as a percentage of home sale revenues, offset by higher SG&A costs. The increase in income before income taxes in the fiscal 2021 nine-month period also benefited from 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, ~~and lower losses~~offset by $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. This is offset, in part, by higher earnings from ~~our investments in unconsolidated entities in City Living. The~~increased revenues and lower home sales cost of revenues, as a percentage of home ~~sale~~sales revenues, in the fiscal ~~2021 periods were principally due to a shift in the number of homes delivered to buildings with higher margins and lower interest expense as a percentage of home sales revenues.~~2022 period.

In the three months ended ~~July~~January 31, ~~2021~~2022 and ~~2020,~~2021, loss before income taxes was ~~$39.1~~$34.8 million and ~~$47.1~~$48.0 million, respectively. The decrease in the loss before income taxes in the fiscal ~~2021 period was principally due to increased earnings from our investments in unconsolidated entities (principally the result of a~~ ~~$17.0 million~~ ~~gain from the sale of property by one of our Rental Property Joint Ventures) and higher volume-based earnings from our mortgage and title company operations, offset by higher SG&A costs.~~

~~In the nine months ended July 31, 2021 and 2020, loss before income taxes was $157.5 million and $134.7 million, respectively. The increase in the loss before income taxes in the fiscal 2021~~2022 period was principally due to a ~~$35.2 million charge incurred related to early retirement of debt, a $10.7~~$21.0 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; higher SG&A costs; 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 a ~~$17.0 million~~ ~~gain recognized in the fiscal 2021~~2022 period related to a property sale by one of our Rental Property Joint Ventures, ~~and~~offset in part, by higher SG&A costs, lower earnings from our mortgage company operations primarily due to ~~volume~~a decrease in spreads and higher losses incurred in our apartment living operations. The increase in SG&A costs in the fiscal 2022 period was primarily due to normal compensation increases and ~~wider spreads.~~higher headcount.

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 company overview, 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 London Interbank Offered Rate (“LIBOR”) is the primary basis for determining interest payments on borrowings under each of our $650.0 million Term Loan Facility and our $1.905 billion Revolving Credit Facility. On March 5, 2021, ICE Benchmark Administration (“IBA”) confirmed it would cease publication of Overnight, 1, 3, 6 and 12 month US Dollar LIBOR settings immediately following the LIBOR publication on June 30, 2023. Various parties, including government agencies, are seeking to identify an alternative rate to replace LIBOR. The Alternative Reference Rates Committee, which was convened by the Federal Reserve Board and the New York Federal Reserve, has identified the Secured Overnight Financing Rate (“SOFR”) as the recommended risk-free alternative rate for US Dollar LIBOR. We expect a substantial portion of our indebtedness will eventually transition to bearing interest based on SOFR. At this time, it is not possible to predict the effect the anticipated discontinuance of LIBOR, or the establishment of alternative reference rates such as SOFR, will have on us or our borrowing costs. SOFR is a relatively new reference rate and its composition and characteristics are not the same as LIBOR. Given SOFR’s very limited history and potential volatility as compared to other benchmark or market rates, the future performance of SOFR cannot be predicted based on historical performance. The consequences of using SOFR could include an increase in the cost of our variable rate indebtedness. We are monitoring these transition efforts and, although each of our Term Loan Facility and Revolving Credit Facility contain provisions designed to accommodate an alternate reference rate, we may need to amend these and other contracts, such as interest rate hedges that reference these contracts, to accommodate any replacement rate. The potential effect of any such event on our cost of capital cannot yet be determined, but we do not expect it to have a material impact on our consolidated financial condition, results of operations, or cash flows.

The table below sets forth, at ~~July~~January 31, ~~2021,~~2022, 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		$	35,297	3.52%	$	13,210	0.28%
2022	2022	467,663		5.68%	148,655		2.50%	2022	$	40,140	4.13%	$	114,675	2.24%
2023	2023	480,929		4.33%	—			2023	549,728		4.17%	—
2024	2024	72,181		3.94%	—			2024	102,851		3.62%	—
2025	2025	67,498		5.57%	—			2025	77,397		5.19%	—
2026								2026	374,842		4.86%	101,563		1.16%
Thereafter (b)	Thereafter (b)	1,662,077		4.50%	650,000		1.39%	Thereafter (b)	1,337,606		4.30%	548,437		1.16%
Bond discounts, premiums and deferred issuance costs, net	Bond discounts, premiums and deferred issuance costs, net	(6,280)			(2,367)			Bond discounts, premiums and deferred issuance costs, net	(5,456)			(2,376)
Total	Total	$	2,779,365	4.67%	$	809,498	1.58%	Total	$	2,477,108	4.35%	$	762,299	1.32%
Fair value at July 31, 2021		$	3,000,521		$	811,865
Fair value at January 31, 2022								Fair value at January 31, 2022	$	2,588,420		$	764,675

(b) 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 ~~1.30%~~1.05% as of ~~July~~January 31, ~~2021.~~2022. 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 ~~July~~January 31, ~~2021,~~2022, 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

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

Issuer Purchases of Equity Securities

During the three-month period ended ~~July~~January 31, ~~2021,~~2022, 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)
May 1, 2021 to May 31, 2021 1 $ 66.27 1 15,952
June 1, 2021 to June 30, 2021 913 $ 59.95 913 15,039
July 1, 2021 to July 31, 2021 741 $ 54.83 741 14,298
Total 1,655 $ 57.66 1,655


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, 2021 to November 30, 2021	1	$	63.67	1	12,563
December 1, 2021 to December 31, 2021	340	$	69.65	340	12,223
January 1, 2022 to January 31, 2022	2,673	$	60.63	2,673	9,550
Total	3,014			3,014

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

~~July~~January 31, ~~2021.~~2022.

During the ~~nine~~three months ended ~~July~~January 31, ~~2021,~~2022, we paid cash dividends of ~~$0.45~~$0.17 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 ~~July~~January 31, ~~2021,~~2022, under our bank credit agreements, we could have paid up to approximately ~~$2.82~~$3.16 billion of cash dividends.


*			Filed electronically herewith.


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)


			Page No.

Statement on Forward-Looking Information			1

PART I. Financial Information

Item 1. Financial Statements

Condensed Consolidated Balance Sheets (Unaudited)			2

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

Condensed Consolidated Statements of Changes in Equity (Unaudited)			4

Condensed Consolidated Statements of Cash Flows (Unaudited)			65

Notes to Condensed Consolidated Financial Statements (Unaudited)			76

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			3024

Item 3. Quantitative and Qualitative Disclosures About Market Risk			4939

Item 4. Controls and Procedures			4940

PART II. Other Information

Item 1. Legal Proceedings			5041

Item 1A. Risk Factors			5041

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			5141

Item 6. Exhibits			5242

SIGNATURES			5343


		Nine months ended July 31,					Three months ended January 31,
		2021		2020			2022		2021
Cash flow provided by operating activities:
Cash flow (used in) provided by operating activities:						Cash flow (used in) provided by operating activities:
Net income	Net income	$	459,297	$	247,307	Net income	$	151,904	$	96,499
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash (used in) provided by operating activities:						Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization	Depreciation and amortization	53,938		46,700		Depreciation and amortization	14,679		16,876
Stock-based compensation	Stock-based compensation	19,942		20,636		Stock-based compensation	13,615		12,834
Income from unconsolidated entities	Income from unconsolidated entities	(28,313)		(5,304)		Income from unconsolidated entities	(22,037)		(1,194)
Distributions of earnings from unconsolidated entities	Distributions of earnings from unconsolidated entities	30,716		17,996		Distributions of earnings from unconsolidated entities	23,502		1,080

Deferred tax provision	Deferred tax provision	6,956		14,804		Deferred tax provision	2,408		1,277

Inventory impairments and write-offs	Inventory impairments and write-offs	15,997		21,934		Inventory impairments and write-offs	2,233		1,267
Gain on sale of assets	Gain on sale of assets	(38,706)		(12,970)		Gain on sale of assets	—		(38,279)
Other	Other	1,984		(558)		Other	2,372		3,617

Expenses related to early retirement of debt		35,211		—

Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Inventory	Inventory	(578,461)		(124,235)		Inventory	(565,482)		(274,327)
Origination of mortgage loans	Origination of mortgage loans	(1,452,289)		(1,191,066)		Origination of mortgage loans	(412,955)		(376,036)
Sale of mortgage loans	Sale of mortgage loans	1,498,946		1,250,109		Sale of mortgage loans	520,370		478,982
Receivables, prepaid expenses, and other assets	Receivables, prepaid expenses, and other assets	97,738		(172,790)		Receivables, prepaid expenses, and other assets	(6,557)		34,733
Income taxes receivable		(11,233)		11,552
Current income taxes, net						Current income taxes, net	(48,074)		(3,421)
Customer deposits – net	Customer deposits – net	163,440		47,222		Customer deposits – net	77,618		60,580
Accounts payable and accrued expenses	Accounts payable and accrued expenses	173,524		(29,742)		Accounts payable and accrued expenses	(34,294)		40,835
Income taxes payable		(259)		—
Net cash provided by operating activities		448,428		141,595

Net cash (used in) provided by operating activities						Net cash (used in) provided by operating activities	(280,698)		55,323
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	(45,772)		(75,001)		Purchase of property, construction, and office equipment – net	(18,475)		(14,496)

Investments in unconsolidated entities	Investments in unconsolidated entities	(190,027)		(47,310)		Investments in unconsolidated entities	(109,866)		(112,828)
Return of investments in unconsolidated entities	Return of investments in unconsolidated entities	166,045		42,639		Return of investments in unconsolidated entities	65,792		37,853
Proceeds from the sale of assets	Proceeds from the sale of assets	80,418		15,617		Proceeds from the sale of assets	—		79,356

Business acquisitions		—		(60,349)

Other	Other	649		885		Other	194		334
Net cash provided by (used in) investing activities		11,313		(123,519)
Net cash used in investing activities						Net cash used in investing activities	(62,355)		(9,781)
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	2,164,646		3,250,010		Proceeds from loans payable	766,858		597,973

Principal payments of loans payable	Principal payments of loans payable	(2,381,509)		(3,334,431)		Principal payments of loans payable	(822,142)		(847,415)
Redemption of senior notes	Redemption of senior notes	(294,168)		—		Redemption of senior notes	(409,856)		(10,020)

Proceeds from stock-based benefit plans, net		8,979		11,252
Payments for stock-based benefit plans, net						Payments for stock-based benefit plans, net	(2,701)		(4,397)
Purchase of treasury stock	Purchase of treasury stock	(275,058)		(633,873)		Purchase of treasury stock	(128,069)		(179,395)
Dividends paid	Dividends paid	(56,103)		(42,650)		Dividends paid	(21,077)		(14,285)
Payments related to noncontrolling interest, net	Payments related to noncontrolling interest, net	(4,710)		(1,935)		Payments related to noncontrolling interest, net	(61)		(4,728)
Net cash used in financing activities	Net cash used in financing activities	(837,923)		(751,627)		Net cash used in financing activities	(617,048)		(462,267)
Net decrease in cash, cash equivalents, and restricted cash	Net decrease in cash, cash equivalents, and restricted cash	(378,182)		(733,551)		Net decrease in cash, cash equivalents, and restricted cash	(960,101)		(416,725)
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	1,684,412		1,396,604
Cash, cash equivalents, and restricted cash, end of period	Cash, cash equivalents, and restricted cash, end of period	$	1,018,422	$	586,092	Cash, cash equivalents, and restricted cash, end of period	$	724,311	$	979,879


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


	July 31, 2021		October 31, 2020
Land owned for future communities:
Number of communities	6		10
Carrying value (in thousands)	$	41,787	$	68,064
Operating communities:
Number of communities	1		4
Carrying value (in thousands)	$	6,921	$	32,112


	Three months ended July 31, 2021				Nine months ended July 31, 2021
	2021		2020		2021		2020
Employee Retirement Plans
Beginning balance	$	(6,529)	$	(5,275)	$	(7,198)	$	(5,831)
Gains (losses) arising during the period	—		—		—		—
Less: Tax (expense) benefit	—		—		—		—
Net gains (losses) arising during the period	—		—		—		—
Gains reclassified from AOCL to net income (1)	450		373		1,350		1,119
Less: Tax expense (2)	(115)		(93)		(346)		(283)
Net gains reclassified from AOCL to net income	335		280		1,004		836
Other comprehensive income, net of tax	335		280		1,004		836
Ending balance	$	(6,194)	$	(4,995)	$	(6,194)	$	(4,995)
Derivative Instruments
Beginning balance	$	4,481	$	—	$	—	$	—
(Losses) gains on derivative instruments	(2,939)		—		3,033		—
Less: Tax benefit (expense)	752		—		(771)		—
Net (losses) gains on derivative instruments	(2,187)		—		2,262		—
Gains reclassified from AOCL to net income (3)	60		—		102		—
Less: Tax expense (2)	(15)		—		(25)		—
Net gains reclassified from AOCL to net income	45		—		77		—
Other comprehensive (loss) income, net of tax	(2,142)		—		2,339		—
Ending balance	$	2,339	$	—	$	2,339	$	—
Total AOCL ending balance	$	(3,855)	$	(4,995)	$	(3,855)	$	(4,995)


Three months ended:	Selling price per unit ($ in thousands)	Sales pace per year (in units)	Discount rate
Fiscal 2021:
January 31	2,003	2	14.3%
April 30	—	—	—%
July 31	—	—	—%

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


		Impaired operating communities
Three months ended:	Number of communities tested	Number of communities	Fair value of communities, net of impairment charges		Impairment charges recognized
Fiscal 2021:
January 31	53	1	$	419	$	1,100
April 30	27	—	$	—	—
July 31	18	—	$	—	—
					$	1,100
Fiscal 2020:
January 31	65	—	$	—	$	—
April 30	80	1	$	2,754	300
July 31	66	—	$	—	—
October 31	53	1	$	1,113	375
					$	675






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 ~~July~~January 31, ~~2021,~~2022, filed on ~~September 2, 2021,~~March 3, 2022, 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.