What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-12-21 compared with 2022-12-19 · 165 added, 366 removed, 493 unchanged (52% of the section changed)

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We cater to luxury first-time, move-up, empty-nester, active-adult, and second-home buyers in the United States, as well as urban and suburban renters.

We also design, build, market, and sell high-density, high-rise urban luxury condominiums with third-party joint venture partners through Toll Brothers City Living ® (“City Living”).

We also design, build, market, and sell high-density, high-rise urban luxury condominiums with third-party joint venture partners.

At October 31, 2023, we were operating in 24 states and in the District of Columbia.

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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.

We also develop master-planned and golf course communities as well as operate, in certain regions, our own lumber distribution, house component assembly and component manufacturing operations.

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

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Financial Highlights

In fiscal 2022, we recognized $10.28 billion of revenues, consisting of $9.71 billion of home sales revenues and $564.4 million of land sales and other revenues, and net income of $1.29 billion, as compared to $8.79 billion of revenues, consisting of $8.43 billion of home sales revenues and $358.6 million of land sales and other revenues, and net income of $833.6 million in fiscal 2021.

In fiscal 2023, we recognized $9.99 billion of revenues, consisting of $9.87 billion of home sales revenues and $128.9 million of land sales and other revenues, and net income of $1.37 billion, as compared to $10.28 billion of revenues, consisting of $9.71 billion of home sales revenues and $564.4 million of land sales and other revenues, and net income of $1.29 billion in fiscal 2022.

In fiscal 2023 and 2022, the value of net contracts signed was $7.91 billion (8,077 homes) and $9.07 billion (8,255 homes), respectively.

The value of our backlog at October 31, 2023 was $6.95 billion (6,578 homes), as compared to our backlog at October 31, 2022 of $8.87 billion (8,098 homes).

At October 31, 2022, we had $1.35 billion of cash and cash equivalents and approximately $1.79 billion available for borrowing under our $1.905 billion revolving credit facility (the “Revolving Credit Facility”), substantially all of which matures in November 2026.

At October 31, 2022, we had no outstanding borrowings under the Revolving Credit Facility and had outstanding letters of credit of approximately $117.7 million.

At October 31, 2023, we had $1.30 billion of cash and cash equivalents and approximately $1.79 billion available for borrowing under our $1.905 billion revolving credit facility (the “New Revolving Credit Facility”), which matures in February 2028.

At October 31, 2023, we had no outstanding borrowings under the New Revolving Credit Facility and had outstanding letters of credit of approximately $118.9 million.

At October 31, 2023, our total equity and our debt to total capitalization ratio were $6.81 billion and 0.30 to 1.00, respectively.

As part of our strategy to expand our geographic footprint and product offerings, in fiscal 2022, we acquired substantially all of the assets and operations of a privately-held home builder with operations in San Antonio, Texas for approximately $48.1 million in cash.

The assets acquired, which consisted of 16 communities, were primarily inventory, including approximately 450 home sites owned or controlled through land purchase agreements.

In fiscal 2021, we acquired substantially all of the assets and operations of 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.

These acquisitions were accounted for as asset acquisitions and were not material to our results of operations or financial condition.

Our Business Environment and Current Outlook

We entered fiscal year 2022 with a strong backlog of 10,302 homes valued at $9.5 billion.

During the year, we delivered 10,515 homes at an average delivered price of $923,600, increasing home sales revenues by 15.2% to $9.7 billion compared to $8.4 billion in fiscal year 2021.

In the fourth quarter, we delivered 3,765 homes at an average price of $951,100 as compared to 3,341 homes and $883,100 in the fourth quarter of fiscal 2021.

These results reflect the robust housing market and strong demand for our homes that we experienced beginning in the second quarter of fiscal 2020 through the end of the second quarter of fiscal 2022.

Since then, overall demand for new homes has significantly weakened, which we primarily attribute to the steep increases in mortgage rates during 2022.

Corresponding with the weakened housing market, we experienced a significant decline in demand for our homes in the second half of fiscal year 2022.

In the third and fourth fiscal quarters of 2022, we signed 2,452 net contracts with an aggregate value of $2.98 billion as compared to 6,111 net contracts with an aggregate value of $5.98 billion in the third and fourth fiscal quarters of 2021, representing a year-over-year decline of 60% in units and 56% in dollars.

In light of continued uncertainty regarding the direction of mortgage rates and overall macro-economic conditions, it is unclear whether demand for new homes will improve in the near term.

However, over the long term, we believe that the housing market will continue to benefit from strong fundamentals, including demographic and migration trends and an overall shortage of homes in the United States.

Our backlog at October 31, 2022 was 8,098 homes and $8.87 billion, down 21% in units and 7% in dollars, as compared to our backlog at October 31, 2021.

We continue to experience extended build times (the time it takes from contract signing to delivery of the completed home) due to the impacts of supply chain, labor and other disruptions that characterized the home construction industry during fiscal 2022.

However, with weakness in the housing market and fewer home starts in the overall market, we expect these disruptions to recede.

In addition, we continue to work with our suppliers and trade partners to resolve issues that arise.

Since January 2023, we have experienced solid demand for our homes as the housing market adjusted to a new environment following the steep and rapid rise in mortgage rates that occurred over the course of 2022.

Despite mortgage rates that remain elevated, the market for new homes has been supported by very low levels of resale inventory on the market, favorable demographic trends, and a supply-demand imbalance resulting from the underproduction of homes for over a decade.

In recent months, the 30-year fixed mortgage rate has declined from over 8.0% to approximately 7.25%, which we believe is also supportive of demand.

However, the direction of mortgage rates and the overall economy is uncertain, and the extent to which demand may improve, or remain at current levels, is unclear.

We believe we are well positioned to meet changing market conditions due to our strategies of expanding our product offerings, price points, and geographic footprint, balancing the mix of our built-to-order and quick move-in homes in inventory, and our focus on operational efficiency.

Over the long term, we continue to believe that the housing market will benefit from strong fundamentals, including demographic trends, the age of the existing housing stock, and an overall shortage of homes in the United States.

In addition, the disruptions in the supply chain for certain building materials and tightness in the labor market we experienced during the past two years have largely subsided, and our construction cycle times have improved.

Competitive Landscape

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Land Acquisition and Development

Our business is subject to many risks because of the extended length of time that it takes to obtain the necessary approvals on a property, complete the land improvements on it, and build and deliver a home after a home buyer signs an agreement of sale.

Our business is subject to many risks because of the extended length of time that it takes to obtain the necessary approvals on a property, complete the land improvements and community amenities, and build and deliver a home.

We attempt to reduce some of these risks and improve our capital efficiency by utilizing one or more of the following methods:

controlling land for future development through options, which enables us to obtain necessary governmental approvals before acquiring title to the land;

generally commencing construction of a detached home only after executing an agreement of sale and receiving a substantial down payment from the buyer;

and using subcontractors to perform home construction and land development work on a fixed-price basis.

commencing construction of a built-to-order home only after executing an agreement of sale and receiving a substantial down payment from the buyer;

and using subcontractors to perform home and amenity construction and land development work on a fixed-price basis.

During fiscal 2023 and 2022, we acquired control of approximately 4,200 and 5,700 home sites, respectively, net of options terminated and home sites sold.

During fiscal year 2022, we forfeited control of over 9,000 lots subject to land purchase agreements primarily because the planned community no longer met our development criteria.

During fiscal 2023 and 2022, we forfeited control of over 4,000 and 9,000 lots, respectively, subject to land purchase agreements primarily because the planned community no longer met our development criteria.

At October 31, 2023, we controlled approximately 70,700 home sites, as compared to approximately 76,000 home sites at October 31, 2022, and approximately 80,900 home sites at October 31, 2021.

In addition, at October 31, 2022, we expect to purchase approximately

6,700 additional home sites from several Land Development Joint Ventures in which we have an interest, at prices not yet determined.

In addition, at October 31, 2023, we expect to purchase approximately 8,200 additional home sites from several Land Development Joint Ventures in which we have an interest, at prices not yet determined.

Of the approximately 70,700 total home sites that we owned or controlled through options at October 31, 2023, we owned approximately 35,900 and controlled approximately 34,700 through options.

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These projects, which are located in multiple metropolitan areas throughout the country, are being operated, are being developed, or 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 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.

Through the fourth quarter of fiscal 2022, we entered into four 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.

In fiscal 2023, two of our Rental Property Joint Ventures sold their assets to unrelated parties, resulting in aggregate gains of $106.2 million recognized by the joint ventures.

From our investments in these joint ventures, we received cash and recognized gains of $50.9 million in fiscal 2023.

In addition, in fiscal 2023, we sold our ownership interest in one of our Rental Property Joint Ventures and recognized a gain of $16.0 million.

In fiscal 2022, one of our Rental Property Joint Ventures sold its assets to an unrelated party, resulting in a gain of $29.9 million recognized by the joint venture.

From our investment in this joint venture, we received cash and recognized a gain of $21.0 million in fiscal 2022.

In fiscal 2021, five of our Rental Property Joint Ventures sold their assets to unrelated parties, resulting in an aggregate gain of $177.6 million recognized by the joint ventures.

From our investments in these joint ventures, we received cash and recognized an aggregate gain of $74.8 million in fiscal 2021.

The gains recognized from these sales are included in “Income from unconsolidated entities” in our Consolidated Statement of Operations and Comprehensive Income included in Item 15(a)1 of this Form 10-K.

The gains recognized from these sales are included in “Income from unconsolidated entities” in our Consolidated Statements of Operations and Comprehensive Income included in Item 15(a)1 of this Form 10-K.

At October 31, 2023, we had approximately 3,400 units in for-rent apartment projects that were occupied or ready for occupancy, 3,400 units in the lease-up stage, 9,900 units in the design phase or under development, and 5,500 units in the planning stage.

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The value of net sales contracts signed was $7.91 billion (8,077 homes) in fiscal 2023 and $9.07 billion (8,255 homes) in fiscal 2022.

The decrease in the aggregate value of net contracts signed in fiscal 2022, as compared to fiscal 2021, was due to a 34% decrease in the number of net contracts signed, offset by a 19% increase in the average value of each contract signed.

The decrease in the number of net contracts signed in fiscal 2022, as compared to fiscal 2021, reflects an overall moderation in demand from the extremely strong prior year primarily due to the steep increases in mortgage rates during 2022.

The increase in average value attributed to each signed contracts signed in fiscal 2022 was principally due to price increases in many of our markets, as well

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

The decrease in the aggregate value of net contracts signed in fiscal 2023, as compared to fiscal 2022, was due to a 2% decrease in the number of net contracts signed and an 11% decrease in the average value of each contract signed.

The decrease in the number of net contracts signed in fiscal 2023, as compared to fiscal 2022, reflects an overall moderation in demand as compared to the first half of the prior fiscal year primarily due to increases in mortgage rates that commenced in 2022.

The decrease in average value attributed to each signed contracts signed in fiscal 2023 was principally due to a shift in the number of contracts signed to less expensive areas and/or products coupled with an increase in average sales incentives.

The average value attributed to each contract signed includes the value of each binding agreement of sale that was signed in the period, as well as the value of all options selected during the period, regardless of when the initial agreement of sale related to such options was signed.

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Approximately 96% of the homes in backlog at October 31, 2023 are expected to be delivered by October 31, 2024.

The 7% decrease in the value of homes in backlog at October 31, 2022, as compared to October 31, 2021, was due to the delivery of more homes out of backlog than were added during fiscal 2022, offset, in part, by an increase in the average value of each contract signed.

The 22% decrease in the value of homes in backlog at October 31, 2023, as compared to October 31, 2022, was due to the delivery of more homes out of backlog than were added during fiscal 2023, and a decrease in the average value of each contract signed.

For more information regarding revenues, net contracts signed, and backlog by geographic segment, see “Segments” in this MD&A.

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We believe that the accounting estimates and assumptions described below involve significant subjectivity and judgment, and changes to such estimates or assumptions could have a material impact on our financial condition or operating results.

Therefore, we consider an understanding of the variability and judgment required in making these estimates and assumptions to be critical in fully understanding and evaluating our reported financial results.

Therefore, we consider an understanding of the variability and

judgment required in making these estimates and assumptions to be critical in fully understanding and evaluating our reported financial results.

We believe the following critical accounting estimates reflect the more significant judgments and estimates used in the preparation of our consolidated financial statements.

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The discount rate used in determining each asset’s fair value reflects inherent risks associated with the related estimated cash flows, as well as current risk-free rates available in the market and estimated market risk premiums.

During the year ended October 31, 2022, we did not record any inventory impairment charges on our operating communities and therefore no discount rate was used.

In estimating the future undiscounted cash flow of a community, we use various estimates such as (i) the expected sales pace in a community, based upon general economic conditions that will have a short-term or long-term impact on the market in which the community is located and on competition within the market, including the number of home sites available and pricing and incentives being offered in other communities owned by us or by other builders;

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(iv) alternative product offerings that may be offered in a community that will have an impact on sales pace, sales price, building cost, or the number of homes that can be built in a particular community;

and (v) alternative uses for the property, such as the possibility of a sale of the entire

community to another builder or the sale of individual home sites.

and (v) alternative uses for the property, such as the possibility of a sale of the entire community to another builder or the sale of individual home sites.

Any impairment is charged to cost of home sales revenues in the period in which the impairment is determined.

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In determining these costs, we compile community budgets that are based on a variety of assumptions, including future construction schedules and costs to be incurred.

Actual results can differ from budgeted amounts for various reasons, including construction delays, labor or material shortages, slower absorptions, increases in costs that have not yet been committed, changes in governmental requirements, or other unanticipated

issues encountered during construction and development and other factors beyond our control.

To address uncertainty in these budgets, we assess, update and revise community budgets on a regular basis, utilizing the most current information available to estimate home construction and land costs.

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We also provide general liability insurance for our subcontractors in Arizona, California, Colorado, Nevada, Washington, and certain areas of Texas, where eligible subcontractors are enrolled as insureds under our general liability insurance policies in each community in which they perform work.

For those enrolled subcontractors, we absorb their general liability associated with the work performed on our homes within the applicable community as part of our overall general liability insurance and our self-insurance through our captive insurance subsidiary.

For those enrolled subcontractors, we absorb their general liability associated with the work performed on our homes within the

applicable community as part of our overall general liability insurance and our self-insurance through our captive insurance subsidiary.

We record expenses and liabilities based on the estimated costs required to cover our self-insured liability and the estimated costs of potential claims and claim adjustment expenses that are not covered by our insurance policies.

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Other income - net 67.5 171.4 (61) %

Expenses related to early retirement of debt — (35.2) NM

Income before income taxes 1,842.4 1,703.7 8 %

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It includes the value of each binding agreement of sale that was signed in the period, plus the value of all options that were selected during the period, regardless of when the initial agreements of sale related to such options were signed.

NM - Not Meaningful

A discussion and analysis regarding Results of Operations and Analysis of Financial Condition for the year ended October 31, 2022, as compared to the year ended October 31, 2021, is included in Part II, Item 7, “MD&A” to our Annual Report on Form 10-K for the fiscal year ended October 31, 2022, filed with the SEC on December 19, 2022.

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Home Sales Revenues and Home Sales Cost of Revenues

The increase in home sales revenues in fiscal 2022, as compared to fiscal 2021, was attributable to a 5% increase in the number of homes delivered and a 9% increase in the average price of the homes delivered.

The increase in the number of homes delivered in fiscal 2022, as compared to fiscal 2021, is principally 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 fiscal 2022, primarily due to supply chain disruptions, labor shortages, and municipality-related delays.

The increase in the average delivered home price was mainly due to our ability to raise prices in the first half of our fiscal year when the housing market was strong, as well as an increase in homes delivered in more expensive product types/geographic regions.

The increase in home sales revenues in fiscal 2023, as compared to fiscal 2022, was attributable to an 11% increase in the average price of the homes delivered, offset, in part, by a 9% decrease in the number of homes delivered.

The increase in the average delivered home price was mainly due to our ability to raise prices in certain communities as well as an increase in homes delivered in more expensive product types/geographic regions.

The decrease in the number of homes delivered in fiscal 2023, as compared to fiscal 2022, is principally due to a decrease in the number of homes in backlog at October 31, 2022, as compared to the number of homes in backlog at October 31, 2021, offset, in part, by higher backlog conversion and an increase in the number of quick move-in homes delivered in fiscal 2023.

Home sales cost of revenues, as a percentage of homes sales revenues, in fiscal 2023 was 73.1%, as compared to 74.5% in fiscal 2022.

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(3) bulk land sales to third parties of land we have decided no longer meets our development criteria;

and (4) sales of commercial and retail properties generally located at our City Living buildings.

and (4) sales of commercial and retail properties generally located at our urban luxury condominium communities.

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.

In fiscal 2023, we sold three land parcels to newly formed Rental Property Joint Ventures in which we have an interest for approximately $44.2 million.

In fiscal 2022, we sold nine land parcels to newly formed Rental Property Joint Ventures in which we have an interest for approximately $322.3 million.

Minimal gains were recognized on these land sales to joint ventures.

In addition, during fiscal 2022, we recorded an impairment charge of $5.2 million related to office space associated with certain Hoboken, New Jersey condominium projects in connection with a planned sale.

During fiscal 2021, we sold a parking garage and retail space associated with certain Hoboken, New Jersey condominium projects for $82.4 million and we recognized gains of $38.3 million.

In addition, in fiscal 2021, we sold ten land parcels to newly formed Rental Property Joint Ventures in which we have an interest for $227.8 million.

No gains were recognized on these land sales to joint ventures.

During fiscal 2023, we recorded impairment charges of $30.6 million in connection with planned land sales.

In fiscal 2022, we recorded an impairment charge of $6.8 million related to office space associated with certain Hoboken, New Jersey condominium projects in connection with a planned sale.

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

SG&A spending increased by $55.7 million in fiscal 2022, as compared to fiscal 2021.

SG&A spending decreased by $68.3 million in fiscal 2023, as compared to fiscal 2022.

As a percentage of home sales revenues, SG&A was 9.2% and 10.1% in fiscal 2023 and 2022, respectively.

The dollar increase in SG&A was primarily due to higher headcount and additional investments in information technology in addition to normal compensation increases, offset by reduced commissions due to lower broker co-op rates.

The dollar decrease in SG&A was primarily due to lower headcount and lower variable selling expense on a decreased number of homes delivered in fiscal 2023.

In addition, fiscal 2022 includes a $10.0 million charge for a charitable contribution made to the Toll Brothers Foundation.

The decrease in SG&A as a percentage of revenues was due to a 15% increase in revenues and reduced commission rates in fiscal 2022, as compared to fiscal 2021.

The decrease in SG&A, as a percentage of home sales revenues, was primarily due to improved fixed cost leverage on lower headcount and reduced commission rates in fiscal 2023, as compared to fiscal 2022.

Income from Unconsolidated Entities

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For the fiscal years 2023 and 2022, our earnings related to the Rental Property Joint Ventures include approximately $32.9 million and $17.5 million of our share of net operating losses incurred by these joint ventures, respectively, of which approximately $26.1 million and $21.7 million was our share of the depreciation expense recognized by these joint ventures, respectively.

The decrease in income from unconsolidated entities from $74.0 million in fiscal 2021 to $23.7 million in fiscal 2022, was due mainly to a $74.8 million of gains related to property sales by five of our Rental Property Joint Ventures and a $6.0 million gain related to an asset sale of commercial property by one of our Land Development Joint Ventures in the fiscal 2021 period.

In the fiscal 2022 period we recognized a $21.0 million gain related to a property sale by one of our Rental Property Joint Ventures, higher income by a joint venture that owns a hotel and increased earnings from our Land Development Joint Ventures due to lot sales.

In addition, during the fiscal 2022 period, we recognized other-than-temporary impairment charges on our investments in certain Home Building and Rental Property Joint Ventures of $8.0 million compared to $2.1 million in the fiscal 2021 period.

The increase in income from unconsolidated entities to $50.1 million in fiscal 2023 from $23.7 million in fiscal 2022, was mainly due to $50.9 million of gains recognized related to property sales by two of our Rental Property Joint Ventures and a $16.0 million gain recognized as the result of the sale of our ownership interest in one of our Rental Property Joint Ventures in fiscal 2023.

In the fiscal 2022 period, we recognized a $21.0 million gain related to a property sale by one of our Rental Property Joint Ventures, lower losses from our Rental Property Joint Ventures of approximately $14.2 million and increased earnings of approximately $7.2 million from our Land Development Joint Ventures due to lot sales.

In addition, during the fiscal 2022 period, we recognized an other-than-temporary impairment charge on one of our investments in a Rental Property Joint Venture of $8.0 million.

There were no similar other-than-temporary impairment charges in the fiscal 2023 period.

Other Income - Net

The table below provides the components of “Other Income – net” for the years ended October 31, 2023 and 2022 (amounts in thousands):

Interest income $ 35,133 $ 6,180

Income from ancillary businesses 2,846 24,668

Management fee income from Land Development and Home Building Joint Ventures – net

Gain on litigation settlement – net 141,234 —

Management fee income earned by home building operations

Gain on litigation settlements – net 27,683 141,234

Other (2,606) (8,673)

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$ 67,518 $ 171,377

The increase in interest income in fiscal 2023, as compared to fiscal 2022, was primarily due to higher interest rates.

The decrease in income from ancillary businesses in fiscal 2023, as compared to fiscal 2022, was principally due to lower earnings from our mortgage operations due to lower volume and increased competition, as well as higher operating losses incurred in our apartment living operations.

This decrease was partially offset by a gain of $9.0 million related to the bulk sale of security monitoring accounts by our smart home technologies business in fiscal 2022.

In addition, in fiscal 2022 and 2021, our apartment living operations earned fees from unconsolidated entities of $23.2 million and $20.2 million, respectively.

Fees earned by our apartment living operations are included in income from ancillary businesses.

Management fee income from Home Building and Land Development Joint Ventures - net includes fees earned by our City Living and home building operations.

The increase in fiscal 2022, as compared to fiscal 2021, was primarily related to an increase in Joint Ventures to which we provide services.

In addition, fiscal 2022 included a gain of $9.0 million related to the bulk sale of security monitoring accounts by our smart home technologies business.

This was offset by higher income generated in fiscal 2023 from our high-rise urban luxury condominium business operations principally due to property sales of approximately $4.0 million.

In fiscal 2023 and fiscal 2022, we also recognized $8.4 million and $0.3 million of write-offs related to previously incurred costs that we believed not to be recoverable in our apartment rental development business operations, respectively.

In fiscal 2023, income from ancillary businesses included management fees earned on our apartment rental development, high-rise urban luxury condominium, and Gibraltar unconsolidated entities and operations totaling $34.7 million.

In fiscal 2022, income from ancillary businesses included management fees earned on our apartment rental development and Gibraltar unconsolidated entities and operations totaling $25.9 million.

Prior to fiscal 2023, management fees earned on our high-rise luxury condominium unconsolidated entities were included in “Management fees earned by home building operations” above.

Management fee income earned by home building operations includes fees earned by our high-rise urban luxury condominium business and home building operations.

The increase in fiscal 2023, as compared to fiscal 2022, was primarily related to a decrease in Joint Ventures to which we provide services.

In fiscal 2022, we entered into a $192.5 million settlement agreement with Southern California Gas Company to resolve our claims associated with a natural gas leak that occurred from October 2015 through February 2016 at the Aliso Canyon underground storage facility located near certain of our communities in southern California.

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The remainder was recorded as an offset to previously incurred expenses.

No similar gains were incurred in fiscal 2021.

Expenses Related to Early Retirement of Debt

In 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 Consolidated Statement of Operations and Comprehensive Income.

No similar charges were incurred in fiscal 2022.

The gain on litigation settlements - net in fiscal 2023 primarily relates to the settlement of an insurance claim.

Income Before Income Taxes

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Based upon the federal statutory rate of 21.0% for fiscal 2023, our federal tax provision would have been $386.9 million.

The difference between the tax provision recognized and the tax provision based on the federal statutory rate was mainly due to the provision for state income taxes of $75.5 million and $4.4 million of other permanent differences, offset, in part, by a $22.2 million benefit of federal energy efficient home credits;

a benefit of $3.0 million from excess tax benefits related to stock-based compensation;

and the reversal of $1.7 million of previously accrued tax provisions on uncertain tax positions that were no longer necessary due to the expiration of the statute of limitations.

The difference between the tax provision recognized and the tax provision based on the federal statutory rate was mainly due to the provision for state income taxes of $90.7 million and a $2.2 million increase in unrecognized tax benefits, offset, in part, by a benefit of $7.3 million from excess tax benefits related to

stock-based compensation, $2.8 million of other permanent differences, and a $2.3 million benefit of federal energy efficient home credits.

We recognized a $417.2 million income tax provision in fiscal 2022.

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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 debt markets.

Funding for our business has been, and continues to be, provided principally by cash flow from operating activities before inventory additions, credit arrangements with third parties, and the public capital markets.

Our cash flows from operations generally provide us with a significant source of liquidity.

Our cash flows provided by operating activities, supplemented with our short-term borrowings and long-term debt, have been sufficient to fund our operations while allowing us to invest in activities that support the long-term growth of our operations.

Our primary uses of 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.

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At October 31, 2023, we had $1.30 billion of cash and cash equivalents on hand and approximately $1.79 billion available for borrowing under our revolving credit facility.

On February 14, 2023, we entered into a $1.905 billion New Revolving Credit Facility with a syndicate of banks that is scheduled to mature on February 14, 2028.

The New Revolving Credit Facility replaced the prior $1.905 billion revolving credit facility, which was terminated in connection with the execution of the new agreement.

The New Revolving Credit Facility provides us with a committed borrowing capacity of $1.905 billion, which we have the ability to increase up to $3.0 billion with the consent of lenders.

The terms of the New Revolving Credit Facility are substantially the same as the prior agreement, except that the LIBOR-based interest rate provisions have been replaced with SOFR-based provisions.

Toll Brothers, Inc.

and substantially all of its 100%-owned home building subsidiaries are guarantors of the borrower’s obligations under the New Revolving Credit Facility.

Also on February 14, 2023, we entered into an amendment to the Term Loan Facility to extend the maturity date of $487.5 million of outstanding term loans to February 14, 2028, with $60.9 million due on November 1, 2026 and the remaining $101.6 million due on November 1, 2025.

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 (including the $400.0 million principal payment on our 4.375% Senior Notes due April 15, 2023), common stock repurchases, and dividend payments.

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, land development, home construction costs, and deposits to control land), operating expenses, including our general and administrative expenses, investments and funding of capital improvements, investments in existing and future unconsolidated joint ventures, community level 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.

In addition, we received net cash proceeds of approximately $148 million in the fourth quarter of fiscal 2022 related to a litigation settlement.

Additional sources of funds include distributions from our unconsolidated joint ventures, borrowing capacity under our New Revolving Credit 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, refinance our existing indebtedness, or for other purposes.

There can be no assurance that such financing will be available on favorable terms, or at all.

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, we expect that our principal demand for funds will be for payment of the principal on our long-term debt as it becomes due or matures, land purchases and inventory additions, 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, debt service, dividends and common stock repurchases.

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.

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.

and debt service.

We expect these resources will be adequate to fund our ongoing operating activities as well as provide 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 and commitments to make payments to third parties.

We are a party to many agreements that include contractual obligations and commitments to make payments to third parties.

These obligations impact our short-term and long-term liquidity and capital resource needs.

Certain contractual obligations are reflected on the Consolidated Balance Sheet as of October 31, 2023, 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 are secured by letters of credit or surety bonds), operating leases, and obligations under our deferred compensation plan, supplemental executive retirement plans, and 401(k) savings plans.

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 are secured by letters of credit or surety bonds), operating leases, obligations under our deferred compensation plan, and obligations under our supplemental executive retirement plans.

We also enter into certain short-term lease commitments, commitments to fund our existing or future unconsolidated joint ventures, letters of credit and other purchase obligations in the normal course of business.

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At October 31, 2023, we had investments in these entities of $959.0 million, and were committed to invest or advance up to an additional $400.8 million to these entities if they require additional funding.

We expect to purchase approximately 6,700 home sites over a number of years from several of these joint ventures.

At October 31, 2023, we had agreed to terms for the acquisition of 332 home sites from three joint ventures for an estimated aggregate purchase price of $31.5 million.

In addition, we expect to purchase approximately 8,200 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.

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and (v) indemnification of the lender from “bad boy acts” of the unconsolidated entity.

In situations where we have joint and several guarantees with our joint venture partner, 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;

In these situations where we have joint and several guarantees with our joint venture partner, 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 October 31, 2022, in the event we had become legally obligated to perform under a guarantee of the obligation of an unconsolidated entity due to a triggering event, the collateral would have been sufficient to repay all or a significant portion of the obligation.

If it were not, we and our partners would have needed to contribute additional capital to the entity.

At October 31, 2022, we had guaranteed the debt of certain unconsolidated entities with loan commitments aggregating $2.86 billion, of which, if the full amount of the debt obligations were borrowed, we estimate $597.8 million to be our maximum exposure related to repayment and carry cost guarantees.

We believe that, as of October 31, 2023, 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 October 31, 2023, we had guaranteed the debt of certain unconsolidated entities that have loan commitments aggregating $3.34 billion, of which, if the full amount of the debt obligations were borrowed, we estimate $688.0 million to be our maximum exposure related to repayment and carry cost guarantees.

At October 31, 2023, the unconsolidated entities had borrowed an aggregate of $1.64 billion, of which we estimate $544.1 million to be our maximum exposure related to repayment and carry cost guarantees.

These maximum exposure estimates do not take into account any estimates related to the environmental or “bad boy acts” indemnifications provided to the lenders or recoveries from the underlying collateral or any reimbursement from our partners.

The terms of these guarantees generally range from 1 month to 4.0 years.

These maximum exposure estimates do not take into account any recoveries from the underlying collateral or any reimbursement from our partners, nor do they include any potential exposures related to project completion guarantees or the indemnities noted above, which are not estimable.

For more information regarding these joint ventures, see Note 4, “Investments in Unconsolidated Entities” in the Notes to Consolidated Financial Statements in Item 15(a)1 of this Form 10-K.

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As of October 31, 2023, we were in compliance with all such covenants and requirements on our term loan, credit facility and other loans payable.

Refer to Note 6, “Loans Payable, Senior Notes, and Mortgage Company Loan Facility” in the Notes to the Consolidated Financial Statements in Item 15(a)1 of this Form 10-K for additional information.

Refer to Note 6, “Loans Payable, Senior Notes, and Mortgage Company

Loan Facility” in the Notes to the Consolidated Financial Statements in Item 15(a)1 of this Form 10-K for additional information.

Operating Activities

Cash provided by operating activities during fiscal 2023 was $1.27 billion.

Cash provided by operating activities was generated primarily from:

(1) $1.37 billion of net income plus the following non-cash activities:

$76.5 million of depreciation and amortization, $69.5 million of impairments and write-offs, $24.8 million of stock-based compensation, $38.3 million of cash received, net of income earned, from unconsolidated entities;

and a net deferred tax benefit of $36.2 million and (2) $78.9 million in mortgage loan sales, net of originations.

This activity was offset, in part, by a decrease of $162.6 million in current income taxes, net;

an increase of $135.9 million in receivables, prepaid assets, and other assets;

a decrease of $88.3 million in net customer deposits;

a decrease of $23.7 million in accounts payable and accrued expenses;

and an increase of $22.2 million in inventory.

Cash provided by operating activities during fiscal 2022 was $986.8 million.

Cash provided by operating activities was generated primarily from $1.29 billion of net income plus $21.1 million of stock-based compensation, $76.8 million of depreciation and amortization, $32.7 million of inventory impairments and write-offs, less $23.7 million of income from unconsolidated entities;

an increase of $152.5 million in accounts payable and accrued expenses;

Cash provided by operating activities was generated primarily from:

(1) $1.29 billion of net income plus the following non-cash activities:

$76.8 million of depreciation and amortization, $39.5 million of impairments and write-offs, $21.1 million of stock-based compensation, $8.6 million of cash received, net of income earned, from unconsolidated entities;

offset by a net deferred tax benefit of $96.7 million and (2) an increase of $152.5 million in accounts payable and accrued expenses;

an increase of $160.5 million in current income taxes, net;

and an increase of $50.7 million in sale of mortgage loans, net of originations.

This activity was offset, in part, by an increase of $618.8 million in inventory;

a net deferred tax benefit of $96.7 million;

and a decrease of $95.0 million in receivables, prepaid assets, and other assets.

Cash provided by operating activities during fiscal 2021 was $1.30 billion.

Cash provided by operating activities was generated primarily from $833.6 million of net income plus $23.2 million of stock-based compensation, $76.3 million of depreciation and amortization, $26.5 million of inventory impairments and write-offs, a net deferred tax benefit of $11.8 million, less $74.0 million of income from unconsolidated entities;

an increase of $214.8 million in accounts payable and accrued expenses;

an increase of $165.6 million in net customer deposits;

and a decrease of $135.8 million in receivables, prepaid assets, and other assets.

This activity was offset, in part, by an increase of $196.2 million in inventory;

an increase of $18.6 million in mortgage loans held for sale;

and a $38.7 million gain from the sale of assets.

and an increase of $50.7 million in mortgage loan sales, net of originations.

This activity was offset, in part, by an increase of $618.8 million in inventory, and a decrease of $95.0 million in receivables, prepaid assets, and other assets.

Investing Activities

Cash used in investing activities during fiscal 2023 was $150.6 million, primarily related to $216.4 million used to fund our investments in unconsolidated entities and $73.0 million for the purchase of property and equipment.

This activity was offset, in part, by $112.7 million of cash received as returns from our investments in unconsolidated entities and $26.0 million of cash proceeds from the sale of assets, including ownership interests in unconsolidated entities.

Cash used in investing activities during fiscal 2022 was $153.2 million, primarily related to $226.7 million used to fund our investments in unconsolidated entities and $71.7 million for the purchase of property and equipment.

This activity was offset, in part, by $116.8 million of cash received as returns from our investments in unconsolidated entities and $28.3 million of cash proceeds from the sale of assets.

Cash used in investing activities during fiscal 2021 was $4.2 million, primarily related to $221.9 million used to fund investments in unconsolidated entities and $66.9 million for the purchase of property and equipment.

This activity was offset, in part, by $203.5 million of cash received as returns on our investments in unconsolidated entities and proceeds of $80.4 million of cash received from sales of certain commercial properties.

Financing Activities

We used $1.12 billion of cash from financing activities in fiscal 2022, primarily for the redemption of $409.9 million of senior notes;

the repurchase of $542.7 million of our common stock;

We used $1.17 billion of cash from financing activities in fiscal 2023, primarily for the repurchase of $561.6 million of our common stock;

the redemption of $400.0 million of senior notes;

payments of $160.3 million of loans payable, net of new borrowings;

the payment of dividends on our common stock of $88.9 million and payments related to noncontrolling interest - net of $25.8 million.

the payment of dividends on our common stock of $91.1 million and $5.4 million of payments for debt issuance costs.

This activity was offset by $48.3 million of proceeds from stock-based benefit plans.

We used $1.12 billion of cash from financing activities in fiscal 2022, primarily for the repurchase of $542.7 million of our common stock;

repayments of $267.0 million of other loans payable, net of new borrowings;

$294.2 million of redemption of senior notes, and payment of $76.6 million of dividends on our common stock, offset, in part, by the proceeds of $10.5 million from our stock-based benefit plans.

the redemption of $409.9 million of senior notes;

payments of $51.6 million of loans payable, net of new borrowings;

the payment of dividends on our common stock of $88.9 million and payments related to noncontrolling interest - net of $25.8 million.

The long-term impact of inflation on us is manifested in increased costs for land, land development, construction, and overhead.

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Accordingly, to the extent land acquisition costs are fixed, subsequent increases or decreases in the sales prices of homes will affect our profits.

Because the sales price of each of our homes is fixed at the time a buyer enters into a contract to purchase a home and because we generally contract to sell our homes before we begin construction, any inflation of costs in excess of those anticipated may result in lower gross margins.

Because the sales price of each of our homes is fixed at the time a buyer enters into a contract to purchase a home and because we contract to sell a majority of our homes before we begin construction, any inflation of costs in excess of those anticipated may result in lower gross margins.

We generally attempt to minimize that effect by entering into fixed-price contracts with our subcontractors and material suppliers for specified periods of time, which generally do not exceed one year.

In general, housing demand is adversely affected by increases in interest rates and housing costs.

For example, since the end of the second quarter of fiscal 2022, overall demand for new homes has significantly weakened, which we primarily attribute to the high inflationary period and steep mortgage rate increases during 2022.

Additionally, interest rates, the length of time that land remains in inventory, and the proportion of inventory that is financed affect our interest costs.

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At October 31, 2023, our 100%-owned subsidiary, Toll Brothers Finance Corp.

(the “Subsidiary Issuer”), had issued and outstanding $2.00 billion aggregate principal amount of senior notes maturing on various dates between April 15, 2023 and November 1, 2029 (the “Senior Notes”).

(the “Subsidiary Issuer”), had issued and outstanding $1.60 billion aggregate principal amount of senior notes maturing on various dates between November 15, 2025 and November 1, 2029 (the “Senior Notes”).

For further information regarding the Senior Notes, see Note 6 to our Consolidated Financial Statements under the caption “Senior Notes.”

The obligations of the Subsidiary Issuer to pay principal, premiums, if any, and interest are guaranteed jointly and severally on a senior basis by us and substantially all of our 100%-owned home building subsidiaries (the “Guarantor Subsidiaries” and, together with us, the “Guarantors”).

The 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.

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.

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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 under which the Senior Notes were issued provide that any of our subsidiaries that provide a guarantee of our obligations under the New 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;

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(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.

and (v) the Guarantor Subsidiary is released from its guaranty under the New Revolving Credit Facility.

If there are no guarantors under the New Revolving Credit Facility, all Guarantor Subsidiaries under the indentures will be released from their guarantees.

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.

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Our geographic reporting segments are consistent with how our chief operating decision makers are assessing operating performance and allocating capital.

At October 31, 2022, we concluded that our City Living operations were no longer a reportable operating segment, primarily due to its insignificance as a result of the change in structure and shift in strategy for its operations.

Therefore, we have five operating segments as reflected above.

Amounts reported in prior periods have been restated to conform to the fiscal 2022 presentation.

The realignment did not have any impact on our consolidated financial position, results of operations, earnings per share or cash flows for the periods presented.

The following tables summarize information related to revenues, net contracts signed, and income (loss) before income taxes by segment for fiscal years 2023 and 2022.

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2023 2022 % Change 2023 2022 % Change 2023 2022 % Change

(restated) (restated) (restated)

North $ 1,494.1 $ 1,853.7 (19) % 1,577 2,163 (27) % $ 947.4 $ 857.0 11 %

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Total revenue $ 9,994.9 $ 10,275.6

Units Delivered and Revenues (continued):

Fiscal 2021 Compared to Fiscal 2020

($ in millions) Units Delivered Average Delivered Price

($ in thousands)

2021 2020 % Change 2021 2020 % Change 2021 2020 % Change

(restated) (restated) (restated) (restated) (restated) (restated) (restated) (restated) (restated)

North $ 2,011.9 $ 1,480.2 36 % 2,503 2,103 19 % $ 803.8 $ 703.9 14 %

Mid-Atlantic 1,076.9 851.1 27 % 1,402 1,274 10 % $ 768.1 $ 668.1 15 %

South 1,183.3 1,041.2 14 % 1,783 1,566 14 % $ 663.7 $ 664.9 — %

Mountain 2,003.0 1,535.8 30 % 2,732 2,219 23 % $ 733.2 $ 692.1 6 %

Pacific 2,156.1 2,029.9 6 % 1,566 1,334 17 % $ 1,376.8 $ 1,521.7 (10) %

Total home building 8,431.2 6,938.2 22 % 9,986 8,496 18 % $ 844.4 $ 816.5 3 %

Other 0.5 (0.8)

Total home sales revenue 8,431.7 $ 6,937.4 22 % 9,986 8,496 18 % $ 844.4 $ 816.5 3 %

Land sales and other revenue 358.6 140.3

Total revenue $ 8,790.3 $ 7,077.7

Net Contracts Signed:

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2023 2022 % Change 2023 2022 % Change 2023 2022 % Change

(restated) (restated) (restated)

North $ 1,336.9 $ 1,534.7 (13) % 1,411 1,596 (12) % $ 947.5 $ 961.6 (1) %

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Total consolidated $ 7,907.8 $ 9,067.4 (13) % 8,077 8,255 (2) % $ 979.1 $ 1,098.4 (11) %

Fiscal 2021 Compared to Fiscal 2020

Net Contract Value

($ in millions) Net Contracted Units Average Contracted Price

($ in thousands)

2021 2020 % Change 2021 2020 % Change 2021 2020 % Change

(restated) (restated) (restated) (restated) (restated) (restated) (restated) (restated) (restated)

North $ 1,996.4 $ 1,659.4 20 % 2,245 2,245 — % $ 889.3 $ 739.2 20 %

Mid-Atlantic 1,310.7 1,077.8 22 % 1,465 1,475 (1) % $ 894.7 $ 730.7 22 %

South 2,109.6 1,320.1 60 % 2,765 2,006 38 % $ 763.0 $ 658.1 16 %

Mountain 3,341.5 2,008.2 66 % 4,031 2,802 44 % $ 828.9 $ 716.7 16 %

Pacific 2,781.7 1,929.6 44 % 1,966 1,404 40 % $ 1,414.9 $ 1,374.4 3 %

Total consolidated $ 11,539.9 $ 7,995.1 44 % 12,472 9,932 26 % $ 925.3 $ 805.0 15 %

Backlog at October 31:

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2023 2022 % Change 2023 2022 % Change 2023 2022 % Change

(restated) (restated) (restated)

North $ 964.1 $ 1,119.5 (14) % 956 1,122 (15) % $ 1,008.5 $ 997.8 1 %

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Total consolidated $ 6,945.3 $ 8,874.1 (22) % 6,578 8,098 (19) % $ 1,055.8 $ 1,095.8 (4) %

October 31, 2021 Compared to October 31, 2020

Backlog Value

($ in millions) Backlog Units Average Backlog Price

($ in thousands)

2021 2020 % Change 2021 2020 % Change 2021 2020 % Change

(restated) (restated) (restated) (restated) (restated) (restated) (restated) (restated) (restated)

North $ 1,494.2 $ 1,508.0 (1) % 1,737 1,995 (13) % $ 860.2 $ 755.9 14 %

Mid-Atlantic 1,004.5 770.4 30 % 1,053 990 6 % $ 954.0 $ 778.2 23 %

South 1,965.2 1,038.4 89 % 2,470 1,488 66 % $ 795.6 $ 697.9 14 %

Mountain 3,021.9 1,670.7 81 % 3,598 2,274 58 % $ 839.9 $ 734.7 14 %

Pacific 2,013.3 1,387.1 45 % 1,444 1,044 38 % $ 1,394.3 $ 1,328.6 5 %

Total consolidated $ 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):

2022 2021 % Change 2022 vs 2021 2020 % Change 2021 vs 2020

(restated) (restated) (restated)

2023 2022 % Change 2023 vs 2022

North $ 197.4 $ 280.8 (30) %

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interest income;

income from certain of our ancillary businesses, including our apartment rental development business;

income from certain of our ancillary businesses, including our apartment rental development business and our high-rise urban luxury condominium operations;

and income from our Rental Property Joint Ventures and Gibraltar Joint Ventures.

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Total consolidated $ 12,527.0 $ 12,288.7

“Corporate and other” is comprised principally of cash and cash equivalents, restricted cash, deferred tax assets, properties held for rental apartments, 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.

FISCAL 2022 COMPARED TO FISCAL 2021 (Restated)

“Corporate and other” is comprised principally of cash and cash equivalents, restricted cash, investments in our Rental Property Joint Ventures, expected recoveries from insurance carriers and suppliers, our Gibraltar investments and operations, manufacturing facilities, our apartment rental development and high-rise urban luxury condominium operations, and our mortgage and title subsidiaries.

A discussion and analysis regarding our Segments’ Results of Operations and Analysis of Financial Condition for the year ended October 31, 2022, as compared to the year ended October 31, 2021 is included in Part II, Item 7, “MD&A” to our Annual Report on Form 10-K for the fiscal year ended October 31, 2022, filed with the SEC on December 19, 2022.

FISCAL 2023 COMPARED TO FISCAL 2022

Year ended October 31,

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Number of selling communities at October 31, 40 53 (25) %

The decrease in the number of homes delivered in fiscal 2022 was mainly due to a decrease in the number of homes in backlog at October 31, 2021, as compared to the number of homes in backlog at October 31, 2020.

The increase in the average price of homes delivered in fiscal 2022 was principally due to sales price increases.

The decrease in the number of net contracts signed in fiscal 2022, as compared to fiscal 2021, was principally due to a decrease in the average number of selling communities, as well as a weakening in demand in the second half of fiscal 2022.

The increase in the average value of each contract signed in fiscal 2022, as compared to fiscal 2021, was mainly due to shifts in the number of contracts signed to more expensive areas and/or products and price increases.

The decrease in income before income taxes in fiscal 2022 was principally attributable to lower earnings from decreased revenues, offset by lower home sales cost of revenues, as a percentage of home sales revenues.

The decrease in home sales cost of revenues, as a percentage of home sales revenues in fiscal 2022 was primarily due to a shift in product mix/areas to higher-margin areas and sales price increases.

Furthermore, fiscal 2021 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, offset by $2.1 million of other-than-temporary impairment charges that we recognized on two of our Home Building Joint Ventures.

The decrease in the number of homes delivered in fiscal 2023 was mainly due to a decrease in the number of homes in backlog at October 31, 2022, as compared to the number of homes in backlog at October 31, 2021, partially offset by higher backlog conversion and an increase in the number of quick move-in homes delivered in fiscal 2023.

The increase in the average price of homes delivered in fiscal 2023 was principally due to sales price increases and a shift in the number of homes delivered to more expense areas and/or products.

The decrease in the number of net contracts signed in fiscal 2023, as compared to fiscal 2022, was principally due to a decrease in the number of selling communities, offset, in part, by an increase in demand in fiscal 2023.

The decrease in the average value of each contract signed in fiscal 2023, as compared to fiscal 2022, was mainly due to shifts in the number of contracts signed to less expensive areas and/or products and an increase in average sales incentives.

The decrease in income before income taxes in fiscal 2023 was principally attributable to lower earnings from decreased revenues and higher home sales cost of revenues, as a percentage of home sales revenues , partially offset by decreased variable SG&A spend on lower revenues.

The increase in home sales costs of revenues, as a percentage of home sale revenues, in fiscal 2023 was primarily due to a shift in product mix/areas to lower-margin areas, offset, in part, by lower interest costs as a percentage of home sales revenue and decreased inventory impairment charges.

Inventory impairment charges were $0.7 million in fiscal 2023, as compared to $11.9 million in fiscal 2022.

During the fourth quarter of fiscal 2022, we decided to sell a land parcel in Philadelphia, Pennsylvania that formerly was included in our City

Living segment.

In connection with this planned sale, we recognized an impairment charge of $10.3 million.

During the fourth quarter of fiscal 2021, we decided to sell the remaining lots in two communities, one in Connecticut and one in Illinois, in bulk sales.

As a result, we recognized an impairment charge of $8.7 million in the fourth quarter of fiscal 2021.

In fiscal 2022, we decided to sell a parcel in Philadelphia, Pennsylvania.

In connection with this planned sale, we recognized an inventory impairment charge of $10.3 million.

In addition, we recognized $15.6 million of land impairment charges, included in land sales and other cost of revenues in fiscal 2023 in connection with planned land sales compared to $6.8 million in fiscal 2022.

Year ended October 31,

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Number of selling communities at October 31,

The decrease in the number of homes delivered in fiscal 2022, as compared to fiscal 2021, was mainly due to lower backlog conversion in fiscal 2022, partially offset by 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.

The decrease in the number of homes delivered in fiscal 2023, as compared to fiscal 2022, was mainly due to a decrease in the number of homes in backlog at October 31, 2022, as compared to the number of homes in backlog at October 31, 2021, partially offset by a higher backlog conversion and an increase in the number of quick move-in homes delivered in fiscal 2023.

The increase in the average delivered price in fiscal 2023 was primarily due a shift in the number of homes delivered to more expensive areas and/or products, as well as sales price increases.

The decrease in the number of net contracts signed in fiscal 2022, as compared to fiscal 2021, was principally due to a weakening in demand in the second half of fiscal 2022.

The increase in the average value of each contract signed in fiscal 2022 was primarily due to shifts in the number of contracts signed to more expensive areas and/or products, as well as sales price increases in fiscal 2022.

The increase in income before income taxes in fiscal 2022, as compared to fiscal 2021, was mainly due to higher earnings from increased revenues, coupled with lower home sales costs of revenues, as a percentage of home sale revenues.

The decrease in home sales costs of revenues, as a percentage of home sale revenues, in fiscal 2022 was primarily due to a shift in product mix/areas to higher-margin areas, lower interest costs as a percentage of home sales revenue and reduced inventory impairment charges.

Included in fiscal 2021 income before income taxes was a $6.0 million gain recognized from an asset sale of a commercial property by one of our Land Development Joint Ventures.

The increase in the number of net contracts signed in fiscal 2023, as compared to fiscal 2022, was principally due to an increase in the number of selling communities coupled with an increase in demand in fiscal 2023.

The decrease in the average value of each contract signed in fiscal 2023 was primarily due to shifts in the number of contracts signed to less expensive areas and/or products, as well as an increase in average sales incentives in fiscal 2023.

The increase in income before income taxes in fiscal 2023, as compared to fiscal 2022, was mainly due to higher earnings from increased revenues, coupled with lower home sales costs of revenues, as a percentage of home sale revenues and lower SG&A spend.

The decrease in home sales costs of revenues, as a percentage of home sale revenues, in fiscal 2023 was primarily due to a shift in product mix/areas to higher-margin areas and lower interest costs as a percentage of home sales revenue, partially offset by higher inventory impairment charges.

Inventory impairment charges were $15.9 million and $3.4 million in fiscal 2023 and 2022, respectively.

In the third quarter of fiscal 2021, we decided to sell the remaining lots in one community located in Maryland in a bulk sale.

As a result, we wrote down the carrying value of inventory in this community to its estimated fair value.

This resulted in an impairment charge of $10.1 million in fiscal 2021.

In addition, we recognized a $10.3 million land impairment charge, included in land sales and other cost of revenues in fiscal 2023 in connection with a planned land sale.

No similar charges were recognized in fiscal 2022.

Year ended October 31,

14 unchanged sentences

Number of selling communities at October 31,

The increase in the number of homes delivered in fiscal 2022, as compared to fiscal 2021, 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 fiscal 2022.

The increase in the number of homes delivered in fiscal 2023, as compared to fiscal 2022, was mainly due to a higher backlog conversion in fiscal 2023, an increase in the number of homes in backlog at October 31, 2022, as compared to the number of homes in backlog at October 31, 2021, and an increase in the number of quick move-in homes delivered.

The increase in the average delivered price in fiscal 2023 was primarily due to a shift in the number of homes delivered to more expensive areas and/or products, as well as sales price increases.

The decrease in the number of net contracts signed in fiscal 2022, as compared to fiscal 2021, was principally due to a weakening in demand during the second half of fiscal 2022.

The increase in the average value of each contract signed in the fiscal 2022 period was primarily due to sales price increases in fiscal 2022 and a shift in the number of contracts signed to more expensive areas and/or products.

The increase in the number of net contracts signed in fiscal 2023, as compared to fiscal 2022, was principally due to an increase in the number of selling communities in fiscal 2023.

The decrease in the average value of each contract signed in the fiscal 2023 period was primarily due to a shift in the number of contracts signed to less expensive areas and/or products and an increase in average sales incentives in fiscal 2023.

The increase in income before income taxes in fiscal 2023, as compared to fiscal 2022, was principally due to higher earnings from increased home sales revenues and lower home sales costs of revenues, as a percentage of home sales revenues, offset, in part, by higher SG&A costs resulting from increased sales volume.

The decrease in home sales cost of revenues, as a percentage of home sales revenues, was mainly due to a shift in product mix/areas to higher-margin areas, lower interest costs as a percentage of home sales revenue, offset by higher inventory impairment changes in fiscal 2022.

The decrease in home sales cost of revenues, as a percentage of home sales revenues, was mainly due to a shift in product mix/areas to higher-margin areas, lower interest costs as a percentage of home sales revenue and lower inventory impairment changes in fiscal 2023.

Inventory impairment charges were $1.8 million and $3.4 million in fiscal 2023 and 2022, respectively.

15 unchanged sentences

Number of selling communities at October 31,

The decrease in the number of homes delivered in fiscal 2023, as compared to fiscal 2022, was mainly due to a decrease in the number of homes in backlog at October 31, 2022, as compared to the number of homes in backlog at October 31, 2021, partially offset by higher backlog conversion and an increase in the number of quick move-in homes delivered in fiscal 2023.

The increase in the average price of homes delivered in fiscal 2023 was primarily due to a shift in the number of homes delivered to more expensive areas and/or products and sales price increases.

The decrease in the number of net contracts signed in fiscal 2022, as compared to fiscal 2021, was principally due to a weakening in demand during the second half of fiscal 2022.

The decrease in the average value of each contract signed in fiscal 2022 was mainly due to shifts in the number of contracts signed to less expensive areas and/or products.

The increase in income before income taxes in fiscal 2022, as compared to fiscal 2021, was mainly due to higher earnings from increased revenues coupled with lower home sales cost of revenues, as a percentage of home sales revenues, offset in part by higher SG&A resulting from increased volume.

The 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 higher-margin areas.

The decrease in the number of net contracts signed in fiscal 2023, as compared to fiscal 2022, was principally due to a weakening in demand in fiscal 2023, offset, in part, by an increase in the number of selling communities.

The decrease in the average value of each contract signed in fiscal 2023 was mainly due to shifts in the number of contracts signed to less expensive areas and/or products and an increase in average sales incentives.

The increase in income before income taxes in fiscal 2023, as compared to fiscal 2022, was mainly due lower home sales cost of revenues, as a percentage of home sales revenues, and reduced SG&A resulting from decreased volume.

The 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 higher-margin areas, partially offset by higher interest costs and inventory impairment charges.

Inventory impairment charges were $5.7 million and $4.1 million in fiscal 2023 and 2022, respectively.

Year ended October 31,

14 unchanged sentences

Number of selling communities at October 31,

The increase in the average price of homes delivered in fiscal 2022

was primarily due increases in sales prices, partially offset by a shift in the number of homes delivered to less expensive areas and/or products.

The decrease in the number of net contracts signed in fiscal 2022, as compared to fiscal 2021, was principally due to a weakening in demand during the second half of fiscal 2022, as well as a decrease in the number of selling communities.

The decrease in the average value of each contract signed in fiscal 2022 was mainly due to a shift in the number of contracts signed in less expensive areas.

The increase in income before income taxes in fiscal 2022, as compared to fiscal 2021, was primarily due to higher earnings from increased revenues and lower SG&A costs, offset by higher inventory impairment charges.

The decrease in the number of homes delivered in fiscal 2023, as compared to fiscal 2022, was mainly due to a decrease in the number of homes in backlog at October 31, 2022, as compared to the number of homes in backlog at October 31, 2021, partially offset by higher backlog conversion and an increase in the number of quick move-in homes delivered in fiscal 2023.

The increase in the average price of homes delivered in fiscal 2023 was primarily due to increases in sales prices.

The decrease in the number of net contracts signed in fiscal 2023, as compared to fiscal 2022, was principally due to a weakening in demand in fiscal 2023, partially offset by an increase in the number of selling communities.

The decrease in the average value of each contract signed in fiscal 2023 was mainly due to a shift in the number of contracts signed in less expensive areas and an increase in average sales incentives.

The increase in income before income taxes in fiscal 2023, as compared to fiscal 2022, was primarily due to lower home sales cost of revenues, as a percentage of home sales revenues, and reduced SG&A resulting from decreased volume.

The 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 higher-margin areas, lower interest costs and a decrease in inventory impairment charges.

Inventory impairment charges were $6.7 million and $10.0 million in fiscal 2023 and 2022, respectively.

During the fourth quarter of fiscal 2022, we decided to sell a land parcel in California that was formerly included in our City Living segment.

During the fourth quarter of fiscal 2022, we decided to sell a land parcel in California.

In connection with this planned sale, we recognized an impairment charge of $5.6 million.

In addition, we recognized a $2.2 million land impairment charge, included in land sales and other cost of revenues in fiscal 2023 in connection with a planned land sale.

No similar charges were recognized in fiscal 2022.

Corporate and Other

In fiscal 2023 and 2022, loss before income taxes was $142.4 million and $98.6 million, respectively.

The decrease in the loss before income taxes in fiscal 2022 was principally attributable to a favorable litigation settlement.

The increase in the loss before income taxes in fiscal 2023 was principally attributable to a favorable litigation settlement in fiscal 2022.

As a result of the settlement, net of legal fees and expenses, we recorded a pre-tax gain of $148.4 million, of which $141.2 million was recorded in Other Income - net in our Consolidated Statements of Operations and Comprehensive Income in fiscal 2022.

1 unchanged sentence

Coincident with this settlement, we made a charitable contribution of $10.0 million to the Toll Brothers Foundation, which was recorded in Selling, general and administrative in our Consolidated Statements of Operations and Comprehensive Income in fiscal 2022.

In addition, we incurred a $35.2 million charge related to the early retirement of debt in fiscal 2021.

These decreases to loss before income taxes were offset by higher income generated by our Rental Property Joint Ventures in fiscal 2021 primarily as a result of $74.8 million of gains recognized related to property sales by five of our Rental Property Joint Ventures;

lower earnings from our mortgage company due to a decrease in volume and increased interest spreads in fiscal 2022;

higher SG&A costs in fiscal 2022 primarily due to normal compensation increases and additional investments in information technology, and higher losses incurred in our apartment living operations.

FISCAL 2021 (Restated) COMPARED TO FISCAL 2020 (Restated)

Year ended October 31,

2021 2020 % Change

Units Delivered and Home Sales Revenues:

Home sales revenues ($ in millions) $ 2,011.9 $ 1,480.2 36 %

Units delivered 2,503 2,103 19 %

Average delivered price ($ in thousands)

$ 803.8 $ 703.9 14 %

Net Contracts Signed:

Net contract value ($ in millions) $ 1,996.4 $ 1,659.4 20 %

Net contracted units 2,245 2,245 — %

Average contracted price ($ in thousands)

$ 889.3 $ 739.2 20 %

Home sales cost of revenues as a percentage of home sales revenues

78.8 % 84.2 %

Income before income taxes ($ in millions)

$ 313.7 $ 87.5 259 %

Number of selling communities at October 31, 66 73 (10) %

The increase in the number of homes delivered in fiscal 2021 was 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.

The increase in the average price of homes delivered in fiscal 2021 was principally due to sales price increases.

The number of net contracts signed in fiscal 2021, as compared to fiscal 2020, was flat.

The increase in the average value of each contract signed in fiscal 2021, as compared to fiscal 2020, was mainly due to shifts in the number of contracts signed to more expensive areas and/or products and price increases.

The increase in income before income taxes in fiscal 2021 was principally attributable to higher earnings from increased revenues and lower home sales cost of revenues, as a percentage of home sales revenues and decreased losses from our investments in unconsolidated entities.

The decrease in home sales cost of revenues, as a percentage of home sales revenues in fiscal 2021 was primarily due to a shift in product mix/areas to higher-margin areas, sales price increases and lower inventory impairment charges.

The decrease in losses from our investments in unconsolidated entities is primarily due to $6.0 million of other than temporary impairment charges that we recognized on one of our Home Building Joint Ventures in fiscal 2020.

Inventory impairment charges were $12.2 million in fiscal 2021, as compared to $28.4 million in fiscal 2020.

During the fourth quarter of fiscal 2021, we decided to sell the remaining lots in two communities, one in Connecticut and one in Illinois, in bulk sales.

As a result, we recognized impairment charges of $8.7 million in the fourth quarter of fiscal 2021.

In the fourth quarter of fiscal 2020, we changed our strategy with respect to our land in the Delaware beach markets and the Chicago market.

As a result, the carrying values of our land and communities were written down to their estimated fair values, which resulted in a charge to income before income taxes of $18.0 million in fiscal 2020 related to this land.

In addition, in the fourth quarter of fiscal 2020, due to a loss in lot density at one community located in New Jersey, the carrying value was written down to its estimated fair value, which resulted in a charge to income of $6.4 million.

Year ended October 31,

2021 2020 % Change

Units Delivered and Home Sales Revenues:

Home sales revenues ($ in millions) $ 1,076.9 $ 851.1 27 %

Units delivered 1,402 1,274 10 %

Average delivered price ($ in thousands)

$ 768.1 $ 668.1 15 %

Net Contracts Signed:

Net contract value ($ in millions) $ 1,310.7 $ 1,077.8 22 %

Net contracted units 1,465 1,475 (1) %

Average contracted price ($ in thousands)

$ 894.7 $ 730.7 22 %

Home sales cost of revenues as a percentage of home sales revenues 80.0 % 83.7 %

Income before income taxes ($ in millions) $ 128.5 $ 52.0 147 %

Number of selling communities at October 31,

The increase in the number of homes delivered in fiscal 2021, as compared to fiscal 2020, was 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 fiscal 2021.

The increase in the average delivered price in fiscal 2021 was primarily due a shift in the number of homes delivered to more expensive areas and/or products, as well as sales price increases.

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

The increase in the average value of each contract signed in fiscal 2021 was primarily due to shifts in the number of contracts signed to more expensive areas and/or products, as well as sales price increases in fiscal 2021.

The increase in income before income taxes in fiscal 2021, as compared to fiscal 2020, was mainly due to higher earnings from increased revenues, coupled with lower home sales costs of revenues, as a percentage of home sale revenues.

The decrease in home sales costs of revenues, as a percentage of home sale revenues, in fiscal 2021 was primarily due to a shift in product mix/areas to higher-margin areas, lower interest costs as a percentage of home sales revenue and reduced inventory impairment charges.

A $6.0 million gain recognized from an asset sale of a commercial property by one of our Land Development Joint Ventures was also recognized during fiscal 2021 with no similar gain in fiscal 2020.

Inventory impairment charges were $12.0 million and $17.9 million in fiscal 2021 and 2020, respectively.

In the third quarter of fiscal 2021, we decided to sell the remaining lots in one community located in Maryland in a bulk sale.

As a result, we wrote down the carrying value of inventory in this community to its estimated fair value.

This resulted in an impairment charge of $10.1 million in fiscal 2021.

In the second quarter of fiscal 2020, following the onset of the COVID-19 pandemic, we terminated a land purchase agreement in Virginia and wrote-off the deposits and soft costs incurred.

In addition, in the third quarter of fiscal 2020, we decided to sell the remaining lots in one community located in Maryland in a bulk sale.

we wrote down the carrying value of inventory in this community to its estimated fair value, resulting in an impairment charge of $13.5 million in fiscal 2020.

Year ended October 31,

2021 2020 % Change

Units Delivered and Home Sale Revenues:

Home sales revenues ($ in millions) $ 1,183.3 $ 1,041.2 14 %

Units delivered 1,783 1,566 14 %

Average delivered price ($ in thousands)

$ 663.7 $ 664.9 — %

Net Contracts Signed:

Net contract value ($ in millions) $ 2,109.6 $ 1,320.1 60 %

Net contracted units 2,765 2,006 38 %

Average contracted price ($ in thousands)

$ 763.0 $ 658.1 16 %

Home sales cost of revenues as a percentage of home sales revenues 76.7 % 79.9 %

Income before income taxes ($ in millions)

$ 153.8 $ 108.4 42 %

Number of selling communities at October 31,

The increase in the number of net contracts signed in fiscal 2021, as compared to fiscal 2020, was principally due to an increase in demand from our homes and an increase in the average number of selling communities in fiscal 2021, 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 primarily due to sales price increases in fiscal 2021 and a shift in the number of contracts signed to more expensive areas and/or products.

The increase in income before income taxes in fiscal 2021, as compared to fiscal 2020, was principally due to higher earnings from increased home sales revenues and lower home sales costs of revenues, as a percentage of home sales revenues, offset, in part, by higher SG&A costs due to increased sales volume.

The decrease in home sales cost of revenues, as a percentage of home sales revenues, was mainly due to a shift in product mix/areas to higher-margin areas, lower interest costs as a percentage of home sales revenue and lower inventory impairment changes in fiscal 2021, as compared to fiscal 2020.

Inventory impairment charges were $0.7 million and $2.9 million in fiscal 2021 and 2020, respectively.

Year ended October 31,

2021 2020 % Change

Units Delivered and Home Sales Revenues:

Home sales revenues ($ in millions) $ 2,003.0 $ 1,535.8 30 %

Units delivered 2,732 2,219 23 %

Average delivered price ($ in thousands)

$ 733.2 $ 692.1 6 %

Net Contracts Signed:

Net contract value ($ in millions) $ 3,341.4 $ 2,008.2 66 %

Net contracted units 4,031 2,802 44 %

Average contracted price ($ in thousands)

$ 828.9 $ 716.7 16 %

Home sales cost of revenues as a percentage of home sales revenues 77.2 % 79.2 %

Income before income taxes ($ in millions)

$ 276.4 $ 167.7 65 %

Number of selling communities at October 31,

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

The increase in the number of net contracts signed in fiscal 2021, as compared to fiscal 2020, was principally due to increased demand for our homes and an increase in the average number of selling communities.

The increases in the average value of each contract signed in fiscal 2021 was mainly due to shifts in the number of contracts signed to more expensive areas and/or products and price increases.

The increase in income before income taxes in fiscal 2021, as compared to fiscal 2020, was mainly due to higher earnings from increased revenues coupled with lower home sales cost of revenues, as a percentage of home sales revenues, offset in part by higher SG&A costs due to increased volume.

The 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 higher-margin areas.

Year ended October 31,

2021 2020 % Change

Units Delivered and Home Sales Revenues:

Home sales revenues ($ in millions) $ 2,156.1 $ 2,029.9 6 %

Units delivered 1,566 1,334 17 %

Average delivered price ($ in thousands)

$ 1,376.8 $ 1,521.7 (10) %

Net Contracts Signed:

Net contract value ($ in millions) $ 2,781.7 $ 1,929.6 44 %

Net contracted units 1,966 1,404 40 %

Average contracted price ($ in thousands)

$ 1,414.9 $ 1,374.4 3 %

Home sales cost of revenues as a percentage of home sales revenues 75.3 % 75.2 %

Income before income taxes ($ in millions)

382.9 351.5 9 %

Number of selling communities at October 31,

with higher backlog conversion in fiscal 2021.

The decrease in the average price of homes delivered in fiscal 2021 was primarily due to a shift in the number of homes delivered to less expensive areas and/or products.

The increase in the number of net contracts signed in fiscal 2021, as compared to fiscal 2020, was principally due to an increase in demand, as well as an increase in the number of selling communities.

The increase in the average value of each contract signed in fiscal 2021 was mainly due to price increases, partially offset by a shift in the number of contracts signed in less expensive areas.

The increase in income before income taxes in fiscal 2021, as compared to fiscal 2020, was primarily due to higher earnings from increased revenues, lower SG&A costs and lower inventory impairment charges.

Inventory impairment charges were $1.3 million and $6.0 million in fiscal 2021 and 2020, respectively.

The fiscal 2020 impairment charge relates primarily to a land purchase agreement where we no longer expected to purchase the land and, accordingly, wrote-off soft costs incurred.

Corporate and Other

In fiscal 2021 and 2020, loss before income taxes was $154.9 million and $180.1 million respectively.

The decrease in the loss before income taxes in fiscal 2021 was principally attributable to higher income generated by our Rental Property Joint Ventures primarily as a result of $74.8 million of gains recognized in the fiscal 2021 period related to property sales by five of our Rental Property Joint Ventures;

higher earnings from our mortgage company and title company operations due to an increase in volumes and improved interest spreads in fiscal 2021;

lower losses incurred in our apartment living operations;

and directly expensed interest of $2.4 million in the fiscal 2020 period with no similar charges in fiscal 2021.

These increases were offset, in part by a $35.2 million charge incurred related to early retirement of debt in fiscal 2021, lower interest income in fiscal 2021, gains recognized in fiscal 2020 of $13.0 million from the sale of golf club properties, and higher SG&A costs in fiscal 2021 primarily due to normal compensation increases and an increase in insurance costs due to higher revenues.

During fiscal 2022, we also recognized a $21.0 million gain related to a property sale by one of our Rental Property Joint Ventures and a $9.0 million gain related to the bulk sale of security monitoring accounts by our smart home technology business.

In addition, fiscal 2023 was impacted by lower earnings from our mortgage and our apartment living operations and a $2.5 million land impairment charge, included in land sales and other cost of revenues, in connection with a planned land sale.

These increases were offset by lower SG&A costs as a result of decreased headcount, $50.9 million in gain recognized from property sales by two of our Rental Property Joint Ventures, $27.7 million of gains from litigation settlements-net recognized, a $16.0 million gain as a result of the sale of our ownership interest in one of our Rental Property Joint Ventures and an increase in interest income due to higher interest rates in fiscal 2023.

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 7. Management’s Discussion and Analysis