What changed in this filing

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Item 1. Business

2024-12-20 compared with 2023-12-21 · 51 added, 54 removed, 356 unchanged (23% of the section changed)

Toll Brothers, Inc., a corporation incorporated in Delaware in May 1986, began doing business through predecessor entities in 1967.

When this report uses the words “we,” “us,” “our,” and the “Company,” they refer to Toll Brothers, Inc.

When this report uses the words “we,” “us,” “our,” and the “Company,” it refers to Toll Brothers, Inc.

and its subsidiaries, unless the context otherwise requires.

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

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

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

In recent years, we have pursued a strategy of broadening our product lines, price points and geographic footprint, as well as increasing the number of quick move-in (or “spec”) homes that we sell relative to our traditional build-to-order homes.

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

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

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At October 31, 2024, we had 1,041 communities in various stages of planning, development or operations containing approximately 74,700 home sites that we owned or controlled through options.

At fiscal year-end, were were selling from 408 of these communities.

Backlog consists of homes under contract but not yet delivered to our home buyers.

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

At October 31, 2023, we or joint ventures in which we have an interest, controlled 44 land parcels as for-rent apartment projects containing approximately 22,200 planned units.

At October 31, 2024, we or joint ventures in which we have an interest, controlled 67 land parcels as for-rent apartment projects containing approximately 21,300 planned or completed units.

See “Investments in Unconsolidated Entities” below for more information relating to our joint ventures.

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

At October 31, 2023, we were operating in the following major suburban and urban residential markets:

At October 31, 2024, our home building communities were operating in the following major suburban and urban residential markets:

• Boston, Massachusetts metropolitan area

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• Detroit, Michigan metropolitan area

• Chicago, Illinois metropolitan area

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

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

• Phoenix, Arizona metropolitan area

• Phoenix and Sedona, Arizona

• Las Vegas and Reno, Nevada metropolitan areas

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

The majority of our homes are sold on a built-to-order basis where we do not begin construction of the home until we have a signed contract with a customer.

However, we also build quick move-in homes (also known as “spec” homes) in most of our communities, which are homes started without a signed agreement with a customer.

While historically most of our homes have been sold on a build-to-order basis where we do not begin construction of the home until we have a signed contract with a customer, over the past two years, we have increased the number of spec homes in most of our communities, which are homes started without a signed agreement with a customer.

In fiscal 2024 and 2023, approximately 49% and 27% of deliveries were spec homes.

These homes allow us to compete more effectively with existing homes available in the market, especially for homebuyers that require a home within a short time frame.

We sell our quick move-in homes at various stages of construction, which allows many buyers of such homes to select their finishing options at our design studios.

We determine our quick move-in home strategy for each community based on local market factors and maintain a level of quick move-in home inventory based on our current and planned sales pace and construction cadence for the community.

We sell our spec homes at various stages of construction, which allows many buyers of such homes to select their finishing options at our design studios.

We determine our spec home strategy for each community based on local market factors and maintain a level of spec home inventory based on our current and planned sales pace and construction cadence for the community.

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

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

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

We use our own architectural staff and also engage third-party architectural firms to develop new designs.

A wide selection of structural and finishing options are available to our home buyers for additional charges.

The number and complexity of options available typically increase with the size and base sales price of our homes and are generally only available on our built-to-order homes.

Major options include home offices, fitness rooms, multi-generational living suites,

finished basements, and spacious indoor/outdoor living areas.

The number and complexity of options available typically increase with the size and base sales price of our homes.

A greater variety of options are generally available for detached build-to-order homes as compared to attached homes and spec homes.

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

living areas.

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

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In addition to our traditional “move-up” home buyer, we are focusing on the “empty-nester” market, the millennial generation, and the affordable luxury buyer.

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

We market to the “empty-nester” (or “move-down”) market, which we believe has strong growth potential.

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

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Of the 408 communities in which homes were being offered for sale at October 31, 2024, a total of 329 were detached home communities and 79 were attached home communities.

At October 31, 2023, we had 3,026 quick move-in homes in various stages of construction in our communities, of which 1,460 were affordable luxury homes, 1,011 were luxury homes, and 555 were active-adult homes.

At October 31, 2024, we had 3,526 spec homes in our communities, of which 2,664 were under construction and 862 were completed.

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

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the remaining home buyers borrowed approximately 68% of the sales price of the home.

The table below provides the average value of all structural and finishing options purchased by our home buyers, including lot premiums, and the value of these options and premiums as a percent of the base sales price of the homes purchased in fiscal 2023, 2022, and 2021:

The table below provides the average value of all structural and finishing options purchased by our home buyers, including lot premiums and excluding incentives, as well as the value of these options and premiums as a percent of the base sales price of the homes purchased, excluding incentives, in fiscal 2024, 2023, and 2022:

2024 2023 2022

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

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

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

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

From time to time, we acquire home builders in order to increase our footprint and/or product offerings in an existing market or to expand into a new market.

From time to time, we acquire home builders in order to expand our footprint and/or product offerings in an existing market or to enter a new market.

These acquisitions are generally completed using available cash on hand and primarily consist of smaller privately-held builders.

In fiscal 2023, we did not make any acquisitions.

In fiscal 2024 and 2023, we did not make any acquisitions.

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.

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

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

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

However, they are generally more expensive.

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

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

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

In prior periods, during the time it took to obtain approvals, the value of the purchase agreements and land generally increased;

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We have the ability to extend some of these purchase agreements for varying periods of time, which in some cases would require an additional payment.

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

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

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

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During fiscal 2024 and 2023, we acquired control of approximately 14,900 and 4,200 home sites, respectively, net of options terminated and lots sold.

During fiscal year 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.

At October 31, 2023 and October 31, 2022, our percentage of optioned versus owned lots was 49% and 50%, respectively.

During fiscal year 2024 and 2023, we forfeited control of over 4,000 lots in each year that were subject to land purchase agreements primarily because the planned community no longer met our development criteria.

At October 31, 2024, we owned or controlled approximately 74,700 home sites, as compared to approximately 70,700 home sites at October 31, 2023.

At October 31, 2024 and October 31, 2023, the percentage of these home sites optioned was approximately 55% and 49%, respectively.

We, either alone or in joint venture, are developing several parcels of land for master-planned communities in which we intend to build homes on a portion of the lots, with the remaining lots being sold to other builders.

At October 31, 2023, one of these master-planned communities was wholly owned, while the remaining communities were developed through joint ventures with other builders or financial partners.

At October 31, 2024, one of these master-planned communities was wholly owned, while the remaining communities were being developed through joint ventures with other builders or financial partners.

At October 31, 2024, our Land Development Joint Ventures owned approximately 22,700 home sites.

At October 31, 2023, we had agreed to acquire 332 home sites and expect to purchase approximately 8,200 additional home sites from several of our Land Development Joint Ventures over a number of years.

At October 31, 2024, we had agreed to acquire 316 home sites.

We expect to purchase approximately 9,000 additional home sites from several of our Land Development Joint Ventures over a number of years.

Our ability and willingness to continue development activities over the long term will depend on, among other things, a suitable economic environment and our continued ability to locate and enter into options or agreements to purchase land, obtain governmental approvals for suitable parcels of land, and consummate the acquisition and complete the development of such land on acceptable terms.

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We generally have multiple sources for the materials we purchase and believe our suppliers have sufficient capacity to support our business operations.

However, factors beyond our control can and have resulted in disruptions to our supply chain, the availability of labor, and the ability of municipalities to process approvals, which can result in elongated production cycles.

See “Risk Factors – Risks Related to Our Business and Industry” in Item 1A and “Manufacturing/Distribution Facilities” in Item 2 of this Form 10-K.

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If we determine that the home buyer is not financially qualified, we will not enter into an agreement of sale.

During fiscal 2023, 2022, and 2021, our customers signed binding net contracts for $7.91 billion (8,077 homes), $9.07 billion (8,255 homes), and $11.54 billion (12,472 homes), respectively.

During fiscal 2024, 2023, and 2022, our customers signed net contracts for $10.07 billion (10,231 homes), $7.91 billion (8,077 homes), and $9.07 billion (8,255 homes), respectively.

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

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the ability of municipalities to process permits, conduct inspections and take similar actions in a timely manner;

and shortages, delays in availability, or fluctuations in prices of building materials.

See “Risk Factors – Risks Related to Our Business and Industry – Component shortages and increased costs of labor and supplies are beyond our control and can result in delays and increased costs to develop our communities.”

and shortages, or delays in availability.

The home building business is highly competitive and fragmented.

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

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

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

In fiscal 2023, 2022, and 2021, we recognized income from the unconsolidated entities in which we had an investment of $50.1 million, $23.7 million, and $74.0 million, respectively.

and (iv) to provide financing and land banking for residential builders and developers for the acquisition and development of land and home sites (“Other Joint Ventures”).

At October 31, 2024, we had investments of $1.01 billion in these unconsolidated entities and were committed to invest or advance up to an additional $312.8 million to these entities if they require additional funding.

In fiscal 2024, 2023, and 2022, we recognized (loss) income from the unconsolidated entities in which we had an investment of $(23.8) million, $50.1 million, and $23.7 million, respectively.

In addition, we earned construction and management fee income from these unconsolidated entities of $40.0 million in fiscal 2024, $39.2 million in fiscal 2023, and $33.9 million in fiscal 2022.

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

At October 31, 2023, we had $351.2 million invested in our Land Development Joint Ventures and funding commitments of $204.4 million to nine of the Land Development Joint Ventures which will be funded if additional investments in the ventures are required.

At October 31, 2023, twelve of these joint ventures had aggregate loan commitments of $610.8 million and outstanding borrowings against these commitments of $445.5 million.

At October 31, 2024, we had $388.6 million invested in our Land Development Joint Ventures and funding commitments of $243.0 million to six of the Land Development Joint Ventures which will be funded if additional investments in the ventures are required.

At October 31, 2024, eleven of these joint ventures had aggregate loan commitments of $639.6 million and outstanding borrowings against these commitments of $381.6 million.

At October 31, 2024, our Land Development Joint Ventures owned approximately 22,700 home sites.

At October 31, 2023, we had agreed to acquire 332 home sites from three of our Land Development Joint Ventures for an aggregate purchase price of approximately $31.5 million.

In addition, we expect to purchase approximately 8,200 additional home sites over a number of years from several of these joint ventures.

At October 31, 2024, we had agreed to acquire 316 home sites from four of our Land Development Joint Ventures for an aggregate purchase price of approximately $26.8 million.

In addition, we expect to purchase approximately 9,000 additional

home sites over a number of years from several of these joint ventures.

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

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At October 31, 2024, we had an aggregate of $549.2 million of investments in 40 Rental Property Joint Ventures.

At October 31, 2023, we or joint ventures in which we have an interest controlled 44 land parcels that are planned as for-rent apartment projects containing approximately 22,200 units.

At October 31, 2024, we or joint ventures in which we have an interest controlled 67 land parcels that are planned or operating as for-rent apartment projects containing approximately 21,300 units.

At October 31, 2024, joint ventures in which we had an interest had aggregate loan commitments of $3.54 billion and outstanding borrowings against these commitments of $2.75 billion.

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At October 31, 2024, we had approximately 4,500 units in for-rent apartment projects that were occupied or ready for occupancy, 5,700 units in the lease-up stage, 6,500 units in the design phase or under development, and 4,700 units in the planning stage.

Of the 22,200 units at October 31, 2023, 14,500 were owned by joint ventures in which we have an interest, approximately 1,800 were owned by us, and 5,900 were under contract to be purchased by us.

Gibraltar Joint Ventures

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

We have an approximate 25% interest in these ventures.

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

We may invest up to $100.0 million in these ventures.

As of October 31, 2023, we had an investment of $10.8 million.

Of the 21,300 units at October 31, 2024, 13,300 were owned by joint ventures in which we have an interest, approximately 2,400 were owned by us, and land underlying 5,600 were under contract to be purchased by us.

Regulatory and Environmental Matters

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We also may be subject to periodic delays or may be precluded entirely from developing communities due to building moratoriums in one or more of the areas in which we operate.

Generally, such moratoriums often relate to insufficient water or sewage facilities or inadequate road capacity.

Generally, such moratoriums relate to insufficient water or sewage facilities or inadequate road capacity.

In order to secure certain approvals in some areas, we may be required to provide affordable housing at below market rental or sales prices.

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demand for our homes;

our built-to-order and quick move-in home strategy;

our build-to-order and spec strategy;

sales paces and prices;

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financial resources and condition;

changes in revenues;

changes in profitability;

changes in margins;

changes in revenues, profitability, margins and returns;

changes in accounting treatment;

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availability of labor and materials;

impacts of tariffs;

selling, general and administrative expenses;

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

What changed 10-K

Item 1. Business