What changed in this filing

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Item 1. Business

2021-12-17 compared with 2020-12-22 · 137 added, 118 removed, 298 unchanged (46% of the section changed)

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References herein to fiscal year refer to our fiscal years ended or ending October 31.

We design, build, market, sell, and arrange financing for an array of luxury residential single-family detached, attached home, master planned resort-style golf, and urban low-, mid-, and high-rise communities, principally on land we develop and improve, as we continue to pursue our strategy of broadening our product lines, price points and geographic footprint.

We cater to luxury first-time, move-up, empty-nester, active-adult, affordable luxury and second-home buyers in the United States (“Traditional Home Building Product”), as well as urban and suburban renters.

We design, build, market, sell, and arrange financing for an array of luxury residential single-family detached home, attached home, master-planned resort-style golf, and urban low-, mid-, and high-rise communities.

This is done principally on land we develop and improve, as we continue to pursue our strategy of broadening our product lines, price points and geographic footprint.

We cater to luxury first-time, move-up, empty-nester, active-adult and second-home buyers in the United States (“Traditional Home Building Product”), as well as urban and suburban renters under the brand names Toll Brothers Apartment Living ® and Toll Brothers Campus Living ® .

We also design, build, market, and sell urban low-, mid-, and high-rise condominiums through Toll Brothers City Living ® (“City Living”).

At October 31, 2020, we were operating in 24 states, as well as in the District of Columbia.

At October 31, 2021, we were operating in 24 states, and in the District of Columbia.

In the five years ended October 31, 2021, we delivered 42,005 homes from 835 communities, including 9,986 homes from 497 communities in fiscal 2021.

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We had a backlog of $9.50 billion (10,302 homes) at October 31, 2021;

we expect to deliver approximately 94% of these homes in fiscal 2021.

We operate our own architectural, engineering, mortgage, title, land development, insurance, and landscaping subsidiaries.

We also operate our own security company, TBI Smart Home Solutions, which provides homeowners with home automation and technology options.

In addition, in certain regions we operate our own lumber distribution, house component assembly, and manufacturing operations.

we expect to deliver over 90% of these homes in fiscal 2022.

We operate our own architectural, engineering, mortgage, title, land development, insurance, smart home technology, and landscaping subsidiaries.

In addition, in certain regions we operate our own lumber distribution, house component assembly and component manufacturing operations.

We are developing several land parcels for master-planned communities in which we intend to build homes on a portion of the lots and sell the remaining lots to other builders.

One of these master planned communities is being developed 100% by us, and the remaining communities are being developed through joint ventures with other builders or financial partners.

In addition to our residential for-sale business, we also develop and operate for-rent apartments primarily through joint ventures.

These projects are located in multiple metropolitan areas throughout the country and are being operated or developed, (or we expect will be developed) with partners under the brand names Toll Brothers Apartment Living and Toll Brothers Campus Living.

Two of these master-planned communities are being developed 100% by us, and the remaining communities are being developed through joint ventures with other builders or financial partners.

In addition to our residential for-sale business, we also develop and operate urban and suburban for-rent apartment communities primarily through joint ventures.

These projects are located in various metropolitan areas throughout the country and are being operated or developed, (or we expect will be developed) with partners under the brand names Toll Brothers Apartment Living ® and Toll Brothers Campus Living ® .

At October 31, 2021, we or joint ventures in which we have an interest, controlled 59 land parcels as for-rent apartment projects containing approximately 19,500 planned units.

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Our Communities and Homes

Our traditional home building communities are generally located in affluent suburban areas near major transit hubs and highways that provide access to urban centers.

Our traditional home building communities are generally located in affluent suburban areas near major transit hubs and highways that provide access to employment and urban centers.

They are generally located on land we have either acquired and developed or acquired fully approved and, in some cases, improved.

Our City Living division is currently selling units out of communities in Hoboken and Jersey City, New Jersey and New York City, New York, and also has planned developments in New York City, New York;

Our City Living division is currently selling units out of urban mid- and high-rise communities in Hoboken and Jersey City, New Jersey and New York City, New York, and also has planned developments in New York City, New York;

Northern New Jersey;

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• Westchester and Dutchess Counties, New York

• New York City, New York

• New York City

• Long Island, New York

• Central and northern New Jersey

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• Nashville, Tennessee

• Charleston, Greenville, and Myrtle Beach, South Carolina

• Charleston, Greenville, Hilton Head and Myrtle Beach, South Carolina

• Atlanta, Georgia, metropolitan area

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• Chicago, Illinois, metropolitan area

• Dallas, Houston, and Austin, Texas, metropolitan areas

• Dallas, Houston, Austin, and San Antonio, Texas, metropolitan areas

• Denver, Colorado, metropolitan area, Fort Collins and Colorado Springs, Colorado

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• Boise, Idaho, metropolitan area

• Salt Lake City, Utah, metropolitan area

• San Diego and Palm Springs, California, areas

• Los Angeles, California, metropolitan area

• Salt Lake City, Utah, metropolitan area and St.

George/Southern Utah

• San Diego and Palm Springs, California,

• Los Angeles, California, metropolitan area, and Orange County

• San Francisco Bay, Sacramento, and San Jose areas of northern California

• Seattle, Washington, metropolitan area, and

• Seattle and Spokane, Washington, metropolitan areas, and

• Portland, Oregon, metropolitan area.

We develop individual stand-alone communities as well as multi-product, master planned communities.

Our master planned communities enable us to offer multiple home types and sizes to a broad range of move-up, affordable luxury, empty-nester, active-adult, and second-home buyers.

We develop individual stand-alone single-product communities as well as multi-product, master-planned communities.

Our master-planned communities enable us to offer multiple home types and sizes to a broad range of move-up, first-time, empty-nester, active-adult, and second-home buyers.

We seek to realize efficiencies from shared common costs, such as land development and infrastructure, over the several communities within the master-planned community.

Each of our detached home communities offers several home plans with the opportunity for home buyers to select various exterior styles.

Each of our detached home communities offers several home plans with the opportunity for home buyers to select various structural options and exterior styles.

We design each community to fit existing land characteristics.

We strive to achieve diversity among architectural styles within a community by offering a variety of house models and several exterior design options for each model, preserving existing trees and foliage whenever feasible, and curving street layouts to allow relatively few homes to be seen from any vantage point.

We strive to achieve diversity among architectural styles within a community by offering a variety of house models and several exterior design options for each model, preserving existing trees, foliage and other natural features whenever feasible, and curving street layouts to allow relatively few homes to be seen from any vantage point.

Our communities have attractive entrances with distinctive signage and landscaping.

We believe that our added attention to detail gives each community a diversified neighborhood appearance that enhances home values.

Our traditional attached home communities generally offer one- to four-story homes, provide for limited exterior options, and often include commonly owned recreational facilities, such as clubhouses, playing fields, swimming pools, and tennis courts.

Our traditional attached home communities generally offer one- to four-story homes, provide for select exterior options, and often include commonly owned recreational facilities, such as clubhouses, playing fields, swimming pools, and tennis courts.

We are continuously developing new designs to replace or augment existing ones to ensure that our homes reflect current consumer tastes.

Increasingly, we are simplifying designs and the number of options we provide in order to offer our customers a more curated experience and gain efficiencies in the home building process, particularly in respect of our affordable luxury product.

Increasingly, we are modifying designs and the number of options we provide in order to continue to offer our customers a curated experience while gaining efficiencies in the home building process, particularly in respect to our affordable luxury product.

We use our own architectural staff and also engage unaffiliated architectural firms to develop new designs.

In our Traditional Home Building Product communities, a wide selection of options is available to home buyers for additional charges.

The number and complexity of options in our Traditional Home Building Product typically increase with the size and base selling price of our homes.

Major options include home offices, fitness rooms, multi-generational living suites and spacious indoor/outdoor living areas.

We also offer numerous interior fit-out options such as flooring, wall tile, plumbing fixtures, lighting and home-automation and security technologies.

The number and complexity of options in our Traditional Home Building Product typically increase with the size and

base sales price of our homes.

Major options include home offices, fitness rooms, multi-generational living suites, finished basements, and spacious indoor/outdoor living areas.

We also offer numerous interior fit-out options such as flooring, wall tile, plumbing, cabinets, fixtures, appliances, lighting, and home-automation and security technologies.

We market our high-quality homes to both upscale luxury and affordable luxury home buyers.

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Our affordable luxury homes are marketed primarily to more affluent first-time buyers.

We believe our reputation as a builder of homes in these markets enhances our competitive position with respect to the sale of our smaller, more moderately priced homes.

We believe our reputation as a builder of luxury homes in these markets enhances our competitive position with respect to the sale of our smaller, more moderately priced homes.

We continue to pursue growth initiatives by expanding our geographic footprint and by broadening our product lines and price points to appeal to buyers across the demographic spectrum.

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We market to the “empty-nester” market, which we believe has strong growth potential.

We have developed a number of home designs with features such as one-story living and first-floor master bedroom suites, as well as communities with recreational amenities, such as golf courses, marinas, pool complexes, country clubs, and recreation centers that we believe appeal to this category of home buyers.

We have developed a number of home designs with features such as single-story living and first-floor primary bedroom suites, as well as communities with recreational amenities, such as golf courses, marinas, pool complexes, country clubs, fitness and recreation centers that we believe appeal to this category of home buyer.

We have integrated certain of these designs and features in some of our other home types and communities.

As of October 31, 2020, we were selling from 39 active-adult communities, in which at least one home occupant must be at least 55 years of age.

With the millennial generation in its prime family formation years, we continue to focus on this group with our core suburban homes, affordable luxury offerings, urban condominiums and luxury rental apartment products.

We have developed and are developing, on our own or through joint ventures with third parties, a number of high-density, high-, mid- and low-rise urban luxury communities to serve a growing market of affluent move-up families, empty-nesters, and young professionals seeking to live in or close to major cities, which are currently marketed under our City Living brand.

Our City Living division is currently selling units in communities in Hoboken and Jersey City, New Jersey and New York City, and has planned developments in New York City, New York;

Northern New Jersey;

Philadelphia, Pennsylvania;

a suburb of Washington, D.C.;

Los Angeles, California;

and Seattle, Washington.

As of October 31, 2021, we were selling from 54 age-restricted active-adult communities, in which at least one home occupant must be at least 55 years of age.

With the millennial generation in its prime family formation years, we also continue to focus on this group with our core suburban homes, affordable luxury offerings, urban condominiums and luxury rental apartment products.

Through our City Living brand, we have developed and are developing, on our own or through joint ventures with third parties, a number of high-density, low-, mid-, and high-rise urban luxury communities to serve affluent move-up families, empty-nesters, and young professionals who are seeking to live in or close to major cities.

A majority of our City Living communities are high-rise projects and take an extended period of time to construct.

We generally start selling homes in these communities after construction has commenced and, by the time construction has been completed, we typically have a significant number of homes in backlog.

We generally start selling homes in these communities after construction has commenced.

By the time construction has been completed, we typically have a significant number of homes under contract with buyers in backlog.

Once construction has been completed, the homes in backlog in these communities are generally delivered quickly.

Following the onset of the COVID-19 pandemic, we have temporarily paused development of future communities in our City Living division.

For a detailed discussion of the impact of the COVID-19 pandemic on our business, see “Risk Factors – General Risk Factors” in Item 1A of this Form 10-K.

Currently, we anticipate that the majority of our future communities in our City Living division will be developed through joint ventures with third parties.

We believe that the demographics supporting the luxury first-time, move-up, empty-nester, active-adult, affordable luxury and second-home upscale markets will provide us with an opportunity for growth in the future.

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The following table summarizes certain information with respect to our operating communities at October 31, 2021:

Total number of operating communities Number of selling communities Homes approved Homes closed Homes under contract but not closed Home sites available

Total number of operating communities Number of selling communities Homes approved Homes closed Homes under contract but not closed (Backlog) Home sites available

Traditional Home Building:

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Of the 340 communities in which homes were being offered for sale at October 31, 2021, a total of 250 were detached home communities and 90 were attached home communities.

At October 31, 2020, we had 895 homes (exclusive of model homes) under construction or completed but not under contract in our traditional communities, of which 457 were in detached home communities and 438 were in attached home communities.

At October 31, 2020, we had 173 homes (exclusive of model homes) under construction or completed but not under contract in three City Living communities that were wholly owned.

At October 31, 2021, we had 866 homes (exclusive of 432 model homes) under construction or completed but not under contract in our traditional communities, of which 458 were affordable luxury homes, 261 were luxury homes, and 147 were active-adult homes.

At October 31, 2021, we had 14 homes (exclusive of model homes) under construction or completed but not under contract in two City Living communities that were wholly owned.

As a result of the breath of our products and geographic footprint, we have a wide range of base sales prices for our homes.

The percentage of the 8,496 home delivered in fiscal 2020 within the various ranges of base sales price was as follows:

The percentage of the 9,986 homes delivered in fiscal 2021 within the various ranges of base sales price was as follows:

Range of Base Sales Price Percentage of Homes Delivered in Fiscal 2021

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Of the homes delivered in fiscal 2021, approximately 18% of our home buyers paid the full purchase price in cash;

the remaining home buyers borrowed approximately 68% of the value of the home.

The table below provides the average value of options purchased by our home buyers, including lot premiums, and the value of the options as a percent of the base selling price of the homes purchased in fiscal 2020, 2019, and 2018:

the remaining home buyers borrowed approximately 69% of the sales price of the home.

The table below provides the average value of options purchased by our home buyers, including lot premiums, and the value of the options as a percent of the base sales price of the homes purchased in fiscal 2021, 2020, and 2019:

2021 2020 2019

Option value (in thousands) Percent of base selling price Option value (in thousands) Percent of base selling price Option value (in thousands) Percent of base selling price

Option value (in thousands) Percent of base sales price Option value (in thousands) Percent of base sales price Option value (in thousands) Percent of base sales price

Overall $ 168 23.9 % $ 173 25.5 % $ 178 24.4 %

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City Living Product $ 24 1.4 % $ 47 3.8 % $ 31 2.5 %

In general, our attached homes and City Living products do not offer significant structural options to our home buyer and thus they have a smaller option value as a percentage of base selling price.

In general, the ability to purchase a premium lot or customize a home with structural options and interior finishes varies widely across our product lines, which may result in significant variation in the option value as a percentage of base sales price.

For example, our attached homes and City Living condominiums do not offer the opportunity for buyers to add significant structural options to their homes and thus they have a smaller option value as a percentage of base sales price.

For more information regarding revenues, net contracts signed, income (loss) before income taxes, and assets by segment, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Segments” in Item 7 of this Form 10-K.

As part of our strategy to continue expanding our geographic footprint and product offerings, 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.

As part of our strategy to continue expanding our geographic footprint and product offerings, in fiscal 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.

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.

We also acquired substantially all of the assets and operations of Keller Homes, Inc.

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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.

The assets acquired were primarily inventory, including approximately 1,100 home sites owned or controlled through land purchase options.

In fiscal 2019, we acquired substantially all of the assets and operations of Sharp Residential, LLC (“Sharp”) and Sabal Homes LLC (“Sabal”), for approximately $92.8 million and $69.6 million, respectively, in cash.

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Sabal operates in the Charleston, Greenville, and Myrtle Beach, South Carolina markets.

The assets acquired, were primarily inventory, including approximately 2,550 home sites owned or controlled through land purchase agreements.

In connection with these acquisitions, we assumed contracts to deliver 204 homes with an aggregate value of $96.1 million.

average price of those undelivered homes was approximately $471,100 as of the applicable acquisition date.

As a result of these acquisitions, our selling community count increased by 22 communities.

The assets acquired, were primarily inventory, including approximately 2,550 home sites owned or controlled through land purchase options.

Before entering into an agreement to purchase a land parcel, we complete extensive comparative studies and analyses that assist us in evaluating the acquisition.

In addition to purchasing land parcels outright, we often attempt to enter into option agreements to purchase land for future communities.

We have also entered into several joint ventures with other builders or developers to develop land for the use of the joint venture participants or for sale to third parties.

These analyses may include soil tests, environmental studies, an evaluation of necessary zoning and other governmental entitlements and extensive market research to evaluate which of our product offerings are appropriate for the market.

In addition to purchasing land parcels outright, we are increasingly attempting to enter into option agreements and other arrangements to defer the acquisition of land until we are closer in time to delivering the completed home to our customer.

We have also entered into several joint ventures with other builders, financial partners, or developers to develop land for the use of the joint venture participants or for sale to third parties.

These structures are generally more capital efficient than outright land purchases that occur earlier in the entitlement and development process.

Our business is subject to many risks, including risks associated with obtaining the necessary approvals on a property and completing the land improvements on it.

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Option agreements enable us to obtain necessary governmental approvals before we acquire title to the land, and allow us to acquire lots over a specified period of time at pre-determined prices.

The use of these agreements may increase our overall cost basis in the land that we eventually acquire, but reduces our risk by allowing us to obtain the necessary development approvals before acquiring the land or allowing us to delay the acquisition to a later date.

Historically, as approvals were obtained, the value of the purchase agreements and land generally increased;

In prior periods, as approvals were obtained, the value of the purchase agreements and land generally increased;

however, in any given time period, this may not happen.

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Our purchase agreements are typically subject to numerous conditions, including, but not limited to, the ability to obtain necessary governmental approvals for the proposed community.

Our deposit under an agreement may be returned to us if all approvals are not obtained, although predevelopment costs usually will not be recoverable.

In certain instances, our deposit under an agreement may be returned to us if all approvals are not obtained, although predevelopment costs usually will not be recoverable.

We generally have the right to cancel any of our agreements to purchase land by forfeiture of some or all of the deposits we have made pursuant to the agreement.

During fiscal 2021 and 2020, we acquired control of approximately 27,700 and 12,400 home sites, respectively, net of options terminated and lots sold.

At October 31, 2020, we controlled approximately 63,200 home sites, as compared to approximately 59,200 home sites at October 31, 2019, and approximately 53,400 home sites at October 31, 2018.

At October 31, 2021, we controlled approximately 80,900 home sites, as compared to approximately 63,200 home sites at October 31, 2020.

At October 31, 2021 and October 31, 2020, our percentage of optioned versus owned lots was 55% and 43%, respectively.

We are developing several parcels of land for master-planned communities in which we intend to build homes on a portion of the lots and sell the remaining lots to other builders.

One of these master planned communities is being developed 100% by us, and the remaining communities are being developed through joint ventures with other builders or financial partners.

Two of these master-planned communities are being developed 100% by us, and the remaining communities are being developed through joint ventures with other builders or financial partners.

At October 31, 2021, our Land Development Joint Ventures owned approximately 23,700 home sites.

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At October 31, 2021, the aggregate purchase price of land parcels subject to option and purchase agreements in operating communities and future communities was approximately $4.45 billion (including $10.0 million of land to be acquired from joint ventures in which we have invested).

Of the $2.64 billion of land purchase commitments, we paid or deposited $223.6 million, and, if we acquire all of these land parcels, we will be required to pay an additional $2.42 billion.

Of the $4.45 billion of land purchase commitments, we paid or deposited $336.4 million.

If we acquire all of these land parcels, we will be required to pay an additional $4.12 billion.

The purchases of these land parcels are expected to occur over the next several years.

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Community Development

We typically expend considerable effort in developing a concept for each community, which includes determining the size, style, and price range of the homes;

We expend considerable effort in developing a plan for each community, which includes determining the size, style, and price range of the homes;

the layout of the streets and individual home sites;

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After the necessary governmental subdivision and other approvals have been obtained, which may take several years, we improve the land by clearing and grading it;

installing roads, underground utility lines, recreational amenities, and distinctive entrance features;

installing roads, underground utilities, recreational amenities, and distinctive entrance features;

and staking out individual home sites.

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Subcontractors perform all home construction and land development work, generally under fixed-price contracts.

We generally have multiple sources for the materials we purchase, and we have not experienced significant delays due to unavailability of necessary materials.

For certain materials, where lead time has increased as a result of the COVID-19 pandemic, we believe we have adequately adjusted our purchasing timelines to meet construction milestones.

See “Risk Factors – General Risk Factors” in Item 1A and “Manufacturing/Distribution Facilities” in Item 2, in each case of this Form 10-K.

We generally have multiple sources for the materials we purchase.

Due to the current strong demand for homes, periodic supply chain disruptions and the constrained availability of certain building products, housing components and construction labor as a result of the pandemic and other factors, the production cycle in many of our markets has elongated.

Due to these supply chain and other challenges, we are routinely monitoring our lot releases

and the pace of new orders to balance sales volume and production capacity.

See “Risk Factors – General Risk Factors” in Item 1A and “Manufacturing/Distribution Facilities” in Item 2 of this Form 10-K.

Our construction managers coordinate subcontracting activities and supervise all aspects of construction work and quality control.

One of the ways in which we seek to achieve home buyer satisfaction is by providing our construction managers with incentive compensation arrangements based upon each home buyer’s satisfaction, as expressed by the buyers’ responses on pre- and post-closing questionnaires.

The most significant variable affecting the timing of our sales, other than housing demand, is the opening of the community for sale, which generally occurs shortly after receipt of final land regulatory approvals.

The most significant variable affecting the timing of our sales, other than housing demand, is the opening of the community for sale, which occurs after receipt of final land regulatory approvals.

Receipt of approvals allows us to begin the process of obtaining executed sales contracts from home buyers.

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We believe this reputation results in greater demand for all of our product types.

We generally include attractive decorative features even in our less expensive homes, based on our belief that these enhancements improve our marketing and sales effort.

In determining the prices for our homes, we utilize, in addition to management’s extensive experience, an internally developed value analysis program that compares our homes with homes offered by other builders in each local marketing area.

In our application of this program, we assign a positive or negative dollar value to differences between our product features and those of our competitors, such as house and community amenities, location, and reputation.

We typically have a sales office in each community that is staffed by our own sales personnel.

We generally include attractive design features even in our less expensive homes, based on our belief that these enhancements improve our marketing and sales effort.

In determining the prices for our homes, in addition to management’s extensive experience, we utilize an internally developed value analysis program that compares our homes with homes offered by other builders and competitive resale homes in each local market area.

In our application of this program, we assign a positive or negative dollar value to differences between our product features and those of our competitors, such as home and community amenities, location, and reputation.

We typically have a sales center in each community that is staffed by our own sales personnel.

Sales personnel are generally compensated with both salary and commission.

A significant portion of our sales is also derived from the introduction of customers to our communities by local real estate agents.

A significant portion of our sales is also derived from the introduction of customers to our communities by local real estate agents, to whom we pay a real estate agent commission.

We expend great effort and cost in designing and merchandising our model homes, which play an important role in our marketing.

Interior merchandising varies among the models and is carefully selected to reflect the lifestyles of prospective buyers.

Visitors to our website, www.TollBrothers.com, can obtain detailed information regarding our communities and homes across the country, take panoramic or video tours of our homes, and design their own home based upon our available floor plans and options .

We also advertise on social media platforms, in newspapers, in other local and regional publications, and on billboards and online media sites.

We have increasingly focused our marketing efforts to the digital environment and have adopted a number of virtual tools and techniques to allow our sales personnel to engage in remote interactions with potential customers.

Visitors to our website, www.TollBrothers.com, can obtain detailed information regarding our communities and homes across the country, take panoramic or video tours of our homes, and design their own homes based upon our available floor plans and options .

We have increasingly focused our marketing efforts to the digital environment for media buying and have adopted a number of virtual tools and techniques to allow our sales personnel to engage in remote interactions with potential customers.

We have a two-step sales process.

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Deposit rates are tracked on a weekly basis to help us monitor the strength or weakness in demand in each of our communities.

If demand for homes in a particular community is strong, we determine whether the base selling prices in that community should be increased.

If demand for homes in a particular community is strong, we determine whether the base sales prices in that community should be increased.

If demand for the homes in a particular community is weak, we determine whether or not sales incentives and/or discounts on home prices should be adjusted.

The second step in the sales process occurs when we sign a binding agreement of sale with the home buyer and the home buyer provides a larger cash down payment that is generally non-refundable.

The second step in the sales process occurs when we sign a binding agreement of sale contract with the home buyer and the home buyer provides a larger cash down payment that is generally non-refundable.

Cash down payments averaged approximately 7% of the total purchase price of a home at the end of fiscal year 2021.

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During fiscal 2021, 2020, and 2019, our customers signed net contracts for $11.54 billion (12,472 homes), $8.00 billion (9,932 homes), and $6.71 billion (8,075 homes), respectively.

When we report net contracts signed, the number and value of contracts signed are reported net of all cancellations occurring during the reporting period, whether originally signed in that reporting period or in a prior period.

Only outstanding agreements of sale that have been signed by both the home buyer and us as of the end of the period for which we are reporting are included in backlog.

When we report net contracts signed, the number and value of contracts signed are reported net of all cancellations occurring during the reporting period, whether the cancelled contracts were originally signed in that reporting period or in a prior period.

Additionally, all options selected during the reporting period are reported as sales in that reporting period regardless of when the original contract was signed.

Only outstanding agreements of sale that have been signed by both the home buyer and us as of the end of the period for which we are reporting are reported as contracts and included in backlog.

Customer Mortgage Financing

We maintain relationships with a diversified group of mortgage financial institutions, many of which are among the largest in the industry.

We believe that regional and community banks continue to recognize the long-term value in creating relationships with affluent customers such as our home buyers, and these banks continue to provide these customers with financing.

We believe that national, regional and community banks continue to recognize the long-term value in creating relationships with our affluent home buyers, and these banks continue to provide these customers with financing.

We believe that our home buyers generally are, and should continue to be, better able to secure mortgages due to their typically lower loan-to-value ratios and attractive credit profiles, as compared to the average home buyer.

Our mortgage subsidiary provides mortgage financing for a portion of our home closings.

Our mortgage subsidiary determines whether the home buyer qualifies for the mortgage that he or she is seeking based upon information provided by the home buyer and other sources.

Our mortgage subsidiary, TBI Mortgage Company, provides mortgage financing for a portion of our home closings.

Our mortgage subsidiary determines whether the home buyer qualifies for the mortgage that the home buyer is seeking 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.

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2019 8,107 3,259 40.2% $ 1,572.1

* Amounts under “TBI Mortgage Company financed settlements” exclude brokered and referred loans, which amounted to approximately 4.7%, 4.0%, and 5.0% of our home closings in fiscal 2020, 2019, and 2018, respectively.

* Amounts exclude brokered and referred loans, which amounted to approximately 5.6%, 4.7%, and 4.0% of our home closings in fiscal 2021, 2020, and 2019, respectively.

Prior to the actual closing of the home and funding of the mortgage, the home buyer may 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 third-party established mortgage financing institutions (“investors”) that are willing to honor the terms and conditions,

including the interest rate, committed to the home buyer.

We believe that these investors have adequate financial resources to honor their commitments to our mortgage subsidiary.

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At October 31, 2021, our mortgage subsidiary was committed to fund $3.23 billion of mortgage loans.

Of these commitments, $381.1 million, as well as $217.9 million of mortgage loans receivable, have “locked-in” interest rates as of October 31, 2020.

Of these commitments, $528.1 million, as well as $244.4 million of mortgage loans receivable, had “locked-in” interest rates as of October 31, 2021.

Our mortgage subsidiary funds its commitments through a combination of its own capital, capital provided from us, its loan facility, and the sale of mortgage loans to various investors.

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We compete primarily on the basis of price, location, design, quality, service, and reputation.

We believe our financial stability, relative to many others in our industry, is a favorable competitive factor.

Our quarterly operating results fluctuate with the seasons.

A significant portion of our agreements of sale are entered into with customers in the winter and spring months and weather-related events will from time to time delay housing starts and closings and increase costs.

See “Risk Factors – Risks Related to Our Business and Industry – Our quarterly operating results may fluctuate due to the seasonal nature of our business” in Item 1A of this Form 10-K

We believe our financial stability, relative to many other home builders in our industry, is a favorable competitive factor.

Our quarterly operating results typically fluctuate with the seasons.

A significant portion of our agreements of sale are generally entered into with customers in the winter and spring months.

Weather-related events can delay housing starts and closings and increase costs.

See “Risk Factors – Risks Related to Our Business and Industry – Our quarterly operating results may fluctuate

due to the seasonal nature of our business” and “– Adverse weather conditions, natural disasters, and other conditions could disrupt the development of our communities, which could harm our sales and results of operation” in Item 1A of this Form 10-K.

Investments in Unconsolidated Entities

We have investments in joint ventures (i) to develop land for the joint venture participants and for sale to outside builders (“Land Development Joint Ventures”);

We have investments in joint ventures (i) to develop lots for the joint venture participants and for sale to outside builders (“Land Development Joint Ventures”);

(ii) to develop for-sale homes (“Home Building Joint Ventures”);

(iii) to develop luxury for-rent residential apartments, commercial space and a hotel (“Rental Property Joint Ventures”);

(iii) to develop luxury for-rent residential apartments, commercial space and hotels (“Rental Property Joint Ventures”);

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

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Land Development Joint Ventures

At October 31, 2020, we had investments in nine Land Development Joint Ventures to develop land.

At October 31, 2021, we had investments in 12 Land Development Joint Ventures to develop land.

Some of these Land Development Joint Ventures develop land for the sole use of the venture participants, including us, and others develop land for sale to the joint venture participants and to unrelated builders.

At October 31, 2020, we had approximately $127.7 million invested in our Land Development Joint Ventures and funding commitments of $33.0 million to three of the Land Development Joint Ventures which will be funded if additional investments in the ventures are required.

At October 31, 2020, four of these joint ventures had aggregate loan commitments of $158.8 million and outstanding borrowings against these commitments of $118.1 million.

At October 31, 2021, we had approximately $243.8 million invested in our Land Development Joint Ventures and funding commitments of $173.8 million to nine of the Land Development Joint Ventures which will be funded if additional investments in the ventures are required.

At October 31, 2021, seven of these joint ventures had aggregate loan commitments of $422.4 million and outstanding borrowings against these commitments of $328.2 million.

At October 31, 2021, our Land Development Joint Ventures owned approximately 23,700 home sites.

At October 31, 2020, we had agreed to acquire 139 home sites from one of our Land Development Joint Ventures for an aggregate purchase price of approximately $10.1 million.

At October 31, 2021, we had agreed to acquire 190 home sites from two of our Land Development Joint Ventures for an aggregate purchase price of approximately $10.0 million.

In addition, we expect to purchase approximately 5,800 additional home sites over a number of years from several of these joint ventures.

The purchase prices of these home sites will be determined at a future date.

We count lots in these joint ventures as optioned lots if we have a contractual right to acquire them.

Home Building Joint Ventures

At October 31, 2020, we had an aggregate of $33.8 million of investments in four Home Building Joint Ventures to develop 67 luxury for-sale homes.

At October 31, 2021, we had an aggregate $12.9 million of investments in our Home Building Joint Ventures to develop luxury for-sale homes.

In fiscal 2021, the value of net contracts signed by our Home Building Joint Ventures was $81.8 million (29 homes), and they delivered $88.5 million (32 homes) of revenue.

At October 31, 2020, our Home Building Joint Ventures had a backlog of undelivered homes of $10.0 million (4 homes).

Rental Property Joint Ventures

As part of our strategy to diversify product lines, over the past several years, we acquired control of a number of land parcels as for-rent apartment projects, including several student housing sites.

As part of our strategy to expand product lines, over the past several years, we acquired control of a number of land parcels to be developed as for-rent apartment projects, including several student housing sites.

At October 31, 2021, we had an aggregate of $316.6 million of investments in 32 Rental Property Joint Ventures.

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These projects are located in multiple metropolitan areas throughout the country and are being operated or developed (or we expect will be developed) with partners under the brand names Toll Brothers Apartment Living and Toll Brothers Campus Living.

In fiscal 2021, we 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;

Orange County/San Diego, CA;

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 we are 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.

In the fourth quarter of fiscal 2021, we entered into three joint ventures with Equity Residential under this arrangement.

We also continue to evaluate potential strategic partnerships for our apartment projects in metro markets that are not designated to be developed exclusively with Equity Residential.

At October 31, 2021, we had approximately 3,200 units in for-rent apartment projects that were occupied or ready for occupancy, 1,500 units in the lease-up stage, 9,200 units in the design phase or under development, and 5,600 units in the planning stage.

Of the 20,800 units at October 31, 2020, 9,400 were owned by joint ventures in which we have an interest;

approximately 6,100 were owned by us;

and 5,300 were under contract to be purchased by us.

Of the 19,500 units at October 31, 2021, 11,000 were owned by joint ventures in which we have an interest, approximately 3,600 were owned by us, and 4,900 were under contract to be purchased by us.

Gibraltar Joint Ventures

Over the past three years, we, through Gibraltar, entered into several ventures with an institutional investor to provide financing and land banking to residential buildings and developers.

We have approximately a 25% interest in these ventures.

We have an approximate 25% interest in these ventures.

These ventures will finance builders’ and developers’ acquisition and development of land and home sites and pursue other complementary investment strategies.

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The particular environmental laws that apply to any given community vary according to the location and environmental condition of the site and the present and former uses of the site.

An increased regulatory focus on reducing greenhouse gas emissions has lead to legislative mandates in certain jurisdictions that require new homes to be more energy efficient than existing homes, or that mandate energy efficient features, such as solar panels, be included in new construction.

Complying with these environmental laws may result in delays, may cause us to incur substantial compliance and other costs, and/or may prohibit or severely restrict development in certain environmentally sensitive regions or areas.

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Our mortgage subsidiary is subject to various state and federal statutes, rules, and regulations, including those that relate to licensing, lending operations, and other areas of mortgage origination and financing.

The impact of those statutes, rules, and

regulations can be to increase our home buyers’ cost of financing, increase our cost of doing business, and restrict our home buyers’ access to some types of loans.

The impact of those statutes, rules, and regulations can be to increase our home buyers’ cost of financing, increase our cost of doing business, and restrict our home buyers’ access to some types of loans.

Insurance/Warranty

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Human Capital Resources

At October 31, 2020, we employed approximately 4,500 persons full-time, as compared to 5,100 employees at October 31, 2019.

At October 31, 2021, we employed approximately 5,100 persons full-time, as compared to approximately 4,500 employees at October 31, 2020.

At October 31, 2021, less than 2% of our employees were covered by a collective bargaining agreement.

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All of our employees must adhere to a code of conduct that sets standards for appropriate behavior and includes required annual training on preventing, identifying, reporting and stopping any type of unlawful discrimination.

During fiscal 2020, in response to the COVID-19 pandemic, we implemented safety protocols and new procedures to protect our employees, our subcontractors and our customers.

These protocols include complying with social distancing and other health and safety standards as required by federal, state and local government agencies, taking into consideration guidelines of the Centers for Disease Control and Prevention and other public health authorities.

In addition, we modified the way we conduct many aspects of our business to reduce the number of in-person interactions.

For example, we significantly expanded the use of virtual interactions in all aspects of our business, including customer facing activities.

Many of our administrative and operational functions during this time have required modification as well, including most of our workforce working remotely.

In response to the COVID-19 pandemic, during fiscal 2020 we implemented enhanced safety protocols and procedures to protect our employees, our subcontractors and our customers.

Many of these protocols have evolved and were continued throughout fiscal 2021 in accordance with regulations from federal, state and local government agencies and taking into consideration guidelines of the Centers for Disease Control and Prevention and other public health authorities.

In addition, many of the modifications that we made to the way we conduct certain aspects of our business have become more permanent.

For example, we continue to use and expand technologies that allow for virtual interactions in many aspects of our business, including customer facing activities.

Many administrative and operational routines have been modified as a result of the pandemic as well, including with respect to providing our employees with greater flexibility to work remotely.

Many of these modifications have been well received by our employees with minimal disruption to our operations.

For a detailed discussion of the impact of the COVID-19 pandemic on our human capital resources, see “Risk Factors - Public health issues such as the COVID-19 pandemic have adversely affected, and could in the future adversely affect, our business or financial results” in “Item 1A” of this Form 10-K.

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We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 available through our website under “Investor Relations” (our “Investor Relations website”), free of charge, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

We provide information about our business and financial performance, including our corporate profile, on our Investor Relations website.

Additionally, we webcast our earnings calls and certain events we participate in with members of the investment community on our Investor Relations website.

Further corporate governance information, including our code of ethics and business conduct, corporate governance guidelines, and board committee charters, is also available on our Investor Relations website.

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 the Investor Relations portion of our website.

The content of our websites is not incorporated by reference into this Annual Report on Form 10-K 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.

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market conditions;

inflation rates;

demand for our homes;

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on our website;

and in other materials released to the public.This can occur as a result of incorrect assumptions or as a consequence of known or unknown risks and uncertainties.

and in other materials released to the public.

This can occur as a result of incorrect assumptions or as a consequence of known or unknown risks and uncertainties.

Forward-looking statements speak only as of the date they are made.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business