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Toll Brothers, Inc.

Toll Brothers, Inc.TOLEarnings & Financial Report

NYSE · Industrials · Operative Builders

Toll Brothers, Inc. is an American homebuilding company that builds, markets, and finances for residential and commercial properties in the United States. In 2020, the company was the fifth largest home builder in the United States, based on homebuilding revenue. The company is ranked 411th on the Fortune 500.

What changed in Toll Brothers, Inc.'s 10-K — 2022 vs 2023

Top changes in Toll Brothers, Inc.'s 2023 10-K

321 paragraphs added · 371 removed · 273 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

71 edited+9 added−9 removed79 unchanged
We have also entered into several joint ventures with other builders, financial partners, or developers to develop land for the use of the joint venture participants or for sale to third parties. These structures are generally more capital efficient than outright land purchases that occur earlier in the entitlement and development process.
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.
Gibraltar Joint Ventures Over the past three years, we, through Gibraltar, entered into several ventures with an institutional investor to provide financing and land banking to residential buildings and developers. We have 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.
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.
George/Southern Utah • San Diego and Palm Springs, California • Los Angeles, California metropolitan area and Orange County • San Francisco Bay, Sacramento, and San Jose areas of northern California • Seattle and Spokane, Washington metropolitan areas, and • Portland, Oregon metropolitan area. We develop individual stand-alone single-product communities as well as multi-product, master-planned communities.
George/Southern Utah • San Diego and Palm Springs, California • Los Angeles, California metropolitan area and Orange County • San Francisco Bay, Sacramento, and San Jose areas of northern California • Seattle, Spokane, and Clark County, Washington metropolitan areas, and • Portland, Oregon metropolitan area. We develop individual stand-alone single-product communities as well as multi-product, master-planned communities.
We have additional land parcels under option that have been excluded from this aggregate 5 purchase price because we do not believe that we will complete the purchase of these land parcels and no additional funds will be required from us to terminate these contracts.
We have additional land parcels under option that have been excluded from this aggregate purchase price because we do not believe that we will complete the purchase of these land parcels and no additional funds will be required from us to terminate these contracts.
Our luxury homes are marketed primarily to buyers who generally have previously owned a home and who are seeking to buy a larger or more desirable home 2 — the so-called “move-up” market. Our affordable luxury homes are marketed primarily to more affluent first-time buyers.
Our luxury homes are marketed primarily to buyers who generally have previously owned a home and who are seeking to buy a larger or more desirable home — the so-called “move-up” market. Our affordable luxury homes are marketed primarily to more affluent first-time buyers.
Each of our detached home communities offers several home plans with the opportunity for home buyers to select various structural options and exterior styles. We design each community to fit existing land characteristics.
Each of our detached home communities offers several home plans with the opportunity for many of our home buyers to select various structural options and exterior styles. We design each community to fit existing land characteristics.
See “Risk Factors – Risks Related to Our Business and Industry – Our quarterly operating results may fluctuate due to the seasonal nature of our business” and “– Adverse weather conditions, natural disasters, and other conditions could disrupt the development of our communities, which could harm our sales and results of operation” in Item 1A of this Form 10-K.
See “Risk Factors – Risks Related to Our Business and Industry – Our quarterly operating results may fluctuate due to the seasonal nature of our business” and “Risk Factors – Risks Related to Other Events and Factors – Adverse weather conditions, natural disasters, and other conditions could disrupt the development of our communities, which could harm our sales and results of operation” in Item 1A of this Form 10-K.
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”). At October 31, 2022, we were operating in 24 states and in the District of Columbia.
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”). At October 31, 2023, we were operating in 24 states and in the District of Columbia.
Such statements may include, but are not limited to, information related to: market conditions; mortgage rates; inflation rates; demand for our homes; sales paces and prices; effects of home buyer cancellations; our strategic priorities; growth and expansion; our land acquisition, land development and capital allocation priorities; anticipated operating results; home deliveries; financial resources and condition; changes in revenues; changes in profitability; changes in margins; changes in accounting treatment; cost of revenues, including expected labor and material costs; availability of labor and materials; selling, general and administrative expenses; interest expense; inventory write-downs; home warranty and construction defect claims; unrecognized tax benefits; anticipated tax refunds; joint ventures in which we are involved; anticipated results from our investments in unconsolidated entities; our ability to acquire land and pursue real estate opportunities; our ability to gain approvals and open new communities; our ability to market, construct and sell homes and properties; our ability to deliver homes from backlog; our ability to secure materials and subcontractors; our ability to produce the liquidity and capital necessary to conduct normal business operations or to expand and take advantage of opportunities; the outcome of legal proceedings, investigations, and claims; and the future impact of COVID-19 or other public health or other emergencies.
Such statements may include, but are not limited to, information related to: market conditions; mortgage rates; inflation rates; demand for our homes; our built-to-order and quick move-in home strategy; sales paces and prices; effects of home buyer cancellations; our strategic priorities; growth and expansion; our land acquisition, land development and capital allocation priorities; anticipated operating results; home deliveries; financial resources and condition; changes in revenues; changes in profitability; changes in margins; changes in accounting treatment; cost of revenues, including expected labor and material costs; availability of labor and materials; selling, general and administrative expenses; interest expense; inventory write-downs; home warranty and construction defect claims; unrecognized tax benefits; anticipated tax refunds; joint ventures in which we are involved; anticipated results from our investments in unconsolidated entities; our ability to acquire land and pursue real estate opportunities; our ability to gain approvals and open new communities; our ability to market, construct and sell homes and properties; our ability to deliver homes from backlog; our ability to secure materials and subcontractors; our ability to produce the liquidity and capital necessary to conduct normal business operations or to expand and take advantage of opportunities; the outcome of legal proceedings, investigations, and claims; and the impact of public health or other emergencies.
At October 31, 2022 and October 31, 2021, our percentage of optioned versus owned lots was 50% and 50%, 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 and October 31, 2022, our percentage of optioned versus owned lots was 49% and 50%, 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.
We believe our reputation as a builder of luxury homes in these markets enhances our competitive position with respect to the sale of our smaller, more moderately priced homes. We continue to pursue growth initiatives by expanding our geographic footprint and by broadening our product lines and price points to appeal to buyers across the demographic spectrum.
We believe our reputation as a builder of luxury homes in these markets enhances our competitive position with respect to the sale of our smaller, more moderately priced homes. We continue to pursue growth initiatives by expanding our product lines and price points to appeal to buyers across the demographic spectrum.
At October 31, 2022, we were operating in the following major suburban and urban residential markets: • Boston, Massachusetts metropolitan area • Fairfield, Hartford, and New Haven Counties, Connecticut • Westchester and Dutchess Counties, New York • New York metropolitan area • Central and northern New Jersey • Philadelphia, Pennsylvania metropolitan area • Lehigh Valley area of Pennsylvania • Virginia and Maryland suburbs of Washington, D.C. 1 • Delaware • Raleigh and Charlotte, North Carolina metropolitan areas • Nashville, Tennessee • Charleston, Greenville, Hilton Head and Myrtle Beach, South Carolina • Atlanta, Georgia metropolitan area • Southeast and southwest coasts and the Jacksonville, Orlando, and Tampa areas of Florida • 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 • Las Vegas and Reno, Nevada metropolitan areas • Boise and Coeur d’Alene, Idaho metropolitan areas • Salt Lake City, Utah metropolitan area and St.
At October 31, 2023, we were operating in the following major suburban and urban residential markets: • Boston, Massachusetts metropolitan area • New Haven County, Connecticut • Westchester and Dutchess Counties, New York • New York metropolitan area • Central and northern New Jersey • Philadelphia, Pennsylvania metropolitan area • Virginia and Maryland suburbs of Washington, D.C. • Delaware • Raleigh and Charlotte, North Carolina metropolitan areas • Nashville, Tennessee 1 • Charleston, Greenville, Hilton Head and Myrtle Beach, South Carolina • Atlanta, Georgia metropolitan area • Southeast and southwest coasts and the Jacksonville, Orlando, and Tampa areas of Florida • 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 • Las Vegas and Reno, Nevada metropolitan areas • Boise and Coeur d’Alene, Idaho metropolitan areas • Salt Lake City, Utah metropolitan area and St.
For example, our attached 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 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.
The second step in the sales process occurs when we sign a binding agreement of sale contract with the home buyer and the home buyer provides a larger cash down payment that is generally non-refundable. Cash down payments averaged approximately 8% of the total purchase price of a home at the end of fiscal year 2022.
The second step in the sales process occurs when we sign a binding agreement of sale contract with the home buyer and the home buyer provides a larger cash down payment that is generally non-refundable. Cash down payments averaged approximately 8% of the total purchase price of a home in fiscal year 2023.
In addition to purchasing land parcels outright, we are increasingly attempting to enter into option agreements and other arrangements to defer the acquisition of land until we are closer in time to delivering the completed home to our 4 customer.
In addition to purchasing land parcels outright, we strive to enter into option agreements and other arrangements 4 to defer the acquisition of land until we are closer in time to delivering the completed home to our customer.
In addition, we expect to purchase approximately 6,700 additional home sites over a number of years from several of these joint ventures. The purchase prices of these home sites will be determined at a future date. We count lots in these joint ventures as optioned lots if we have a contractual right to acquire them.
In addition, we expect to purchase approximately 8,200 additional home sites over a number of years from several of these joint ventures. The purchase prices of these home sites will be determined at a future date. We count lots in these joint ventures as optioned lots if we have a contractual right to acquire them.
We have integrated certain of these designs and features in some of our other home types and communities. As of October 31, 2022, we were selling from 51 age-restricted active-adult communities, in which at least one home occupant must be at least 55 years of age.
We have integrated certain of these designs and features in some of our other home types and communities. As of October 31, 2023, we were selling from 57 age-restricted active-adult communities, in which at least one home occupant must be at least 55 years of age.
If we acquire all of these land parcels, we will be required to pay an additional $3.86 billion. The purchases of these land parcels are expected to occur over the next several years.
If we acquire all 5 of these land parcels, we will be required to pay an additional $3.77 billion. The purchases of these land parcels are expected to occur over the next several years.
Increasingly, we are modifying designs and the number of options we provide in order to continue to offer our customers a curated experience while gaining efficiencies in the home building process, particularly in respect to our affordable luxury product. We use our own architectural staff and also engage unaffiliated architectural firms to develop new designs.
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.
Through our City Living brand, with third-party joint venture partners, we currently are developing a number of high-density, high-rise urban luxury communities to serve affluent move-up families, empty-nesters, and young professionals who are seeking to live in or close to major cities. These City Living communities are high-rise condominiums and take an extended period of time to construct.
Through our City Living brand, with third-party joint venture partners, we currently are developing two high-density, high-rise urban luxury communities to serve affluent move-up families, empty-nesters, and young professionals who are seeking to live in or close to major cities. Our City Living communities are generally high-rise condominiums that take an extended period of time to construct.
Our mortgage subsidiary funds its commitments through a combination of its own capital, capital provided from us, its loan facility, and the sale of mortgage loans to various investors. Our mortgage subsidiary has commitments from investors to acquire all $856.3 million of these locked-in loans and receivables.
Our mortgage subsidiary funds its commitments through a combination of its own capital, capital provided from us, its loan facility, and the sale of mortgage loans to various investors. Our mortgage subsidiary has commitments from investors to acquire all $459.4 million of these locked-in loans and receivables.
We generally have the right to cancel any of our agreements to purchase land by forfeiture of some or all of the deposits we have made pursuant to the agreement. During fiscal 2022 and 2021, we acquired control of approximately 5,700 and 27,700 home sites, respectively, net of options terminated and lots sold.
We generally have the right to cancel any of our agreements to purchase land by forfeiture of some or all of the deposits we have made pursuant to the agreement. During fiscal 2023 and 2022, we acquired control of approximately 4,200 and 5,700 home sites, respectively, net of options terminated and lots sold.
We may invest up to $100.0 million in these ventures. As of October 31, 2022, we had an investment of $18.2 million. Regulatory and Environmental Matters We are subject to various local, state, and federal statutes, ordinances, rules, and regulations concerning zoning, building design, construction, and similar matters, including local regulations that impose restrictive zoning and density requirements.
We may invest up to $100.0 million in these ventures. As of October 31, 2023, we had an investment of $10.8 million. Regulatory and Environmental Matters We are subject to various local, state, and federal statutes, ordinances, rules, and regulations concerning zoning, building design, construction, and similar matters, including local regulations that impose restrictive zoning and density requirements.
Land Development Joint Ventures At October 31, 2022, we had investments in 15 Land Development Joint Ventures to develop land. Some of these Land Development Joint Ventures develop land for the sole use of the venture participants, including us, and others develop land for sale to the joint venture participants and to unrelated builders.
Land Development Joint Ventures At October 31, 2023, we had investments in 16 Land Development Joint Ventures to develop land. Some of these Land Development Joint Ventures develop land for the sole use of the venture participants, including us, and others develop land for sale to the joint venture participants and to unrelated builders.
Consequently, actual results may differ materially from those that might be anticipated from our forward-looking statements. From time to time, forward-looking statements also are included in other reports on Forms 10-Q and 8-K; in press releases; in presentations; on our website; and in other materials released to the public. Forward-looking statements speak only as of the date they are made.
Consequently, actual results may differ materially from those that might be anticipated from our forward-looking statements. From time to time, forward-looking statements also are included in other reports on Forms 10-Q and 8-K; in press releases; in presentations; on our website; and in other materials released to the public.
At October 31, 2022, 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, 2022, our Land Development Joint Ventures owned approximately 24,300 home sites.
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, 2023, our Land Development Joint Ventures owned approximately 25,800 home sites.
If we determine that the home buyer is not financially qualified, we will not enter into an agreement of sale. During fiscal 2022, 2021, and 2020, our customers signed net contracts for $9.07 billion (8,255 homes), $11.54 billion (12,472 homes), and $8.00 billion (9,932 homes), respectively.
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.
Fiscal year Total Toll Brothers, Inc. settlements (a) TBMC financed settlements* (b) Gross capture rate (b/a) Amount financed (in millions) 2022 10,515 3,706 35.2% $ 2,030.6 2021 9,986 4,364 43.7% $ 2,160.8 2020 8,496 3,782 44.5% $ 1,757.5 * Amounts exclude brokered and referred loans, which amounted to 6.5%, 5.6%, and 4.7% of our home closings in fiscal 2022, 2021, and 2020, respectively.
Fiscal year Total Toll Brothers, Inc. settlements (a) TBMC financed settlements* (b) Gross capture rate (b/a) Amount financed (in millions) 2023 9,597 3,123 32.5% $ 1,598.6 2022 10,515 3,706 35.2% $ 2,030.6 2021 9,986 4,364 43.7% $ 2,160.8 * Amounts exclude referred loans, which amounted to 9.5%, 6.5%, and 5.6% of our home closings in fiscal 2023, 2022, and 2021, respectively.
At October 31, 2022, the aggregate purchase price of land parcels subject to option and purchase agreements in both operating and future communities was approximately $4.32 billion (including $42.1 million of land to be acquired from joint ventures in which we have invested). Of the $4.32 billion of land purchase contracts, we paid or deposited $463.5 million.
At October 31, 2023, the aggregate purchase price of land parcels subject to option and purchase agreements in both operating and future communities was approximately $4.22 billion (including $31.5 million of land to be acquired from joint ventures in which we have invested). Of the $4.22 billion of land purchase contracts, we paid or deposited $449.9 million.
At October 31, 2022, we or joint ventures in which we have an interest, controlled 73 land parcels as for-rent apartment projects containing approximately 25,000 planned units. See “Investments in Unconsolidated Entities” below for more information relating to our joint ventures.
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. See “Investments in Unconsolidated Entities” below for more information relating to our joint ventures.
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. At October 31, 2022, we controlled approximately 76,000 home sites, as compared to approximately 80,900 home sites at October 31, 2021.
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.
Backlog consists of homes under contract but not yet delivered to our home buyers. We had a backlog of $8.87 billion (8,098 homes) at October 31, 2022; we expect to deliver approximately 90% of these homes in fiscal 2023. We operate our own architectural, engineering, mortgage, title, land development, insurance, smart home technology, and landscaping subsidiaries.
Backlog consists of homes under contract but not yet delivered to our home buyers. We had a backlog of $6.95 billion (6,578 homes) at October 31, 2023; we expect to deliver approximately 96% of these homes in fiscal 2024. We operate our own architectural, engineering, mortgage, title, land development, insurance, smart home technology and landscaping subsidiaries.
One of the ways in which we seek to achieve home buyer satisfaction is by providing our construction managers with incentive compensation arrangements based upon each home buyer’s satisfaction, as expressed by the buyers’ responses on pre- and post-closing questionnaires.
Our construction managers coordinate subcontracting activities and supervise all aspects of construction work and quality control. One of the ways in which we seek to achieve home buyer satisfaction is by providing our construction managers with incentive compensation arrangements based upon each home buyer’s satisfaction, as expressed by the buyers’ responses on pre- and post-closing questionnaires.
Human Capital Resources At October 31, 2022, we employed approximately 5,200 persons full-time, as compared to approximately 5,100 employees at October 31, 2021. At October 31, 2022, less than 2% of our employees were covered by a collective bargaining agreement. We believe our employees are among our most important resources and are critical to our continued success.
Human Capital Resources At October 31, 2023, we employed approximately 4,800 persons full-time, as compared to approximately 5,200 employees at October 31, 2022. At October 31, 2023, approximately 1% of our employees were covered by a collective bargaining agreement. We believe our employees are among our most important resources and are critical to our continued success.
At October 31, 2022, we were selling homes from 348 communities, compared to 340 communities at October 31, 2021, and 317 communities at October 31, 2020.
At October 31, 2023, we were selling homes from 370 communities, compared to 348 communities at October 31, 2022, and 340 communities at October 31, 2021.
All of our employees must adhere to a code of conduct that sets standards for appropriate behavior and includes required annual training on preventing, identifying, reporting and stopping any type of unlawful discrimination. In response to the COVID-19 pandemic, we implemented enhanced safety protocols and procedures to protect our employees, subcontractors and customers.
All of our employees must adhere to a code of conduct that sets standards for appropriate behavior and includes required annual training on preventing, identifying, reporting and stopping any type of unlawful discrimination. In recent years, we have implemented protocols and procedures to protect our employees, subcontractors and customers.
We generally have been successful in obtaining governmental approvals in the past. We believe that we have an adequate supply of land in our existing communities and proposed communities (assuming that all properties are developed) to maintain our operations at current levels for several years.
We believe that we have an adequate supply of land in our existing communities and proposed communities (assuming that all properties are developed) to maintain our operations at current levels for several years.
Of the 8,098 homes in backlog at October 31, 2022, approximately 90% are expected to be delivered by October 31, 2023. This delivery estimate is based on current expectations regarding our backlog conversion rate.
Of the 6,578 homes in backlog at October 31, 2023, approximately 96% are expected to be delivered by October 31, 2024. This delivery estimate is based on current expectations regarding our backlog conversion rate.
At October 31, 2022, we had agreed to acquire 409 home sites and expect to purchase approximately 6,700 additional home sites from several of our Land Development Joint Ventures over a number of years.
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.
Our home buyers had not locked in the interest rate on the remaining $2.43 billion of mortgage loan commitments as of October 31, 2022. Backlog We had a backlog of $8.87 billion (8,098 homes) at October 31, 2022; $9.50 billion (10,302 homes) at October 31, 2021; and $6.37 billion (7,791 homes) at October 31, 2020.
Our home buyers had not locked in the interest rate on the remaining $1.82 billion of mortgage loan commitments as of October 31, 2023. Backlog We had a backlog of $6.95 billion (6,578 homes) at October 31, 2023; $8.87 billion (8,098 homes) at October 31, 2022; and $9.50 billion (10,302 homes) at October 31, 2021.
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 have also significantly expanded our geographic footprint over the past decade. 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.
The table below provides the average value of all structural and finishing options purchased by our home buyers, as well as lot premiums, and the value of these options and premiums as a percent of the base sales price of the homes purchased in fiscal 2022, 2021, and 2020: 2022 2021 2020 Option value (in thousands) Percent of base sales price Option value (in thousands) Percent of base sales price Option value (in thousands) Percent of base sales price Overall $ 190 25.3 % $ 168 23.9 % $ 173 25.5 % Detached $ 215 28.9 % $ 193 28.4 % $ 198 28.8 % Attached $ 117 15.4 % $ 105 15.3 % $ 98 15.7 % In general, the ability to purchase a premium lot or customize a home with structural options and interior finishes varies widely across our product lines, which may result in significant variation in the option value as a percentage of base sales price.
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: 2023 2022 2021 Option value (in thousands) Percent of base sales price Option value (in thousands) Percent of base sales price Option value (in thousands) Percent of base sales price Overall $ 224 26.5 % $ 190 25.3 % $ 168 23.9 % Detached $ 251 29.2 % $ 215 28.9 % $ 193 28.4 % Attached $ 136 17.0 % $ 117 15.4 % $ 105 15.3 % 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.
At October 31, 2022, we had $343.3 million invested in our Land Development Joint Ventures and funding commitments of $180.8 million to nine of the Land Development Joint Ventures which will be funded if additional investments in the ventures are required.
At October 31, 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, 2022, we had investments of $852.3 million in these unconsolidated entities and were committed to invest or advance up to an additional $304.3 million to these entities if they require additional funding.
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.
Because of the larger upfront costs and longer development time periods associated with high-rise projects, we are developing, and expect to continue to, develop all future City Living communities through joint ventures with third parties.
Because of the larger upfront costs and longer development time periods associated with high-rise projects, we generally expect to continue developing future high density, high-rise urban luxury condominium communities through joint ventures with third parties.
At October 31, 2022, joint ventures in which we had an interest had aggregate loan commitments of $3.32 billion and outstanding borrowings against these commitments of $1.77 billion.
At October 31, 2023, joint ventures in which we had an interest had aggregate loan commitments of $3.73 billion and outstanding borrowings against these commitments of $2.15 billion.
Of the 22,868 available home sites, approximately 6,500 were not yet owned by us but were controlled through options. Of our 459 operating communities at October 31, 2022, a total of 348 communities were offering homes for sale; with the remaining consisting primarily of sold out communities where not all homes had been completed and delivered.
Of the 25,220 available home sites, approximately 8,700 were not yet owned by us but were controlled through options. 3 Of our 432 operating communities at October 31, 2023, a total of 370 communities were offering homes for sale; with the remaining consisting primarily of sold out communities where not all homes had been completed and delivered.
Of the 348 communities in which homes were being offered for sale at October 31, 2022, a total of 276 were detached home communities and 72 were attached home communities.
Of the 370 communities in which homes were being offered for sale at October 31, 2023, a total of 304 were detached home communities and 66 were attached home communities.
Home Building Joint Ventures At October 31, 2022, we had an aggregate $49.4 million of investments in our Home Building Joint Ventures to develop luxury for-sale homes. In fiscal 2022, the value of net contracts signed by our Home Building Joint Ventures was $97.2 million (51 homes), and they delivered $60.9 million (19 homes) of revenue.
Home Building Joint Ventures At October 31, 2023, we had an aggregate $65.3 million of investments in our Home Building Joint Ventures to develop luxury for-sale homes. In fiscal 2023, the value of net contracts signed by our Home Building Joint Ventures was $101.3 million (77 homes), and they delivered $38.9 million (9 homes) of revenue.
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.
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.
Subcontractors perform all home construction and land development work, generally under fixed-price contracts. We generally have multiple sources for the materials we purchase.
Subcontractors perform all home construction and land development work, generally under fixed-price contracts. We generally have multiple sources for the materials we purchase and believe our suppliers have sufficient capacity to support our business operations.
In fiscal 2022, 2021, and 2020, we recognized income from the unconsolidated entities in which we had an investment of $23.7 million, $74.0 million, and $0.9 million, respectively. In addition, we earned construction and management fee income from these unconsolidated entities of $31.2 million in fiscal 2022, $21.8 million in fiscal 2021, and $17.6 million in fiscal 2020.
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. In addition, we earned construction and management fee income from these unconsolidated entities of $39.2 million in fiscal 2023, $33.9 million in fiscal 2022, and $24.3 million in fiscal 2021.
At October 31, 2022, we had an aggregate of $441.4 million of investments in 41 Rental Property Joint Ventures. At October 31, 2022, we or joint ventures in which we have an interest controlled 73 land parcels that are planned as for-rent apartment projects containing approximately 25,000 units.
At October 31, 2023, we had an aggregate of $531.8 million of investments in 43 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.
The percentage of the 10,515 homes delivered in fiscal 2022 within the various ranges of base sales price was as follows: Range of Base Sales Price Percentage of Homes Delivered in Fiscal 2022 Less than $500,000 10% $500,000 to $750,000 37% $750,000 to $1,000,000 24% $1,000,000 to 2,000,000 25% More than $2,000,000 4% Of the homes delivered in fiscal 2022, approximately 21% of our home buyers paid the full purchase price in cash; the remaining home buyers borrowed approximately 71% of the sales price of the home.
The percentage of the 9,597 homes delivered in fiscal 2023 within the various ranges of base sales price was as follows: Range of Base Sales Price Percentage of Homes Delivered in Fiscal 2023 Less than $500,000 7% $500,000 to $750,000 31% $750,000 to $1,000,000 24% $1,000,000 to 2,000,000 32% More than $2,000,000 6% Of the homes delivered in fiscal 2023, approximately 24% of our home buyers paid the full purchase price in cash; the remaining home buyers borrowed approximately 69% of the sales price of the home.
At October 31, 2022, our mortgage subsidiary was committed to fund $3.10 billion of mortgage loans. Of these commitments, $669.6 million, as well as $186.7 million of mortgage loans receivable, had “locked-in” interest rates as of October 31, 2022.
At October 31, 2023, our mortgage subsidiary was committed to fund $2.17 billion of mortgage loans. Of these commitments, $354.7 million, as well as $104.7 million of mortgage loans receivable, had “locked-in” interest rates as of October 31, 2023.
We also offer numerous interior fit-out options such as flooring, wall tile, plumbing, cabinets, fixtures, appliances, lighting, and home-automation and security technologies. We market our high-quality homes to both upscale luxury and affordable luxury home buyers.
Major options include home offices, fitness rooms, multi-generational living suites, 2 finished basements, and spacious indoor/outdoor living areas. We also offer numerous interior fit-out options such as flooring, wall tile, plumbing, cabinets, fixtures, appliances, lighting, and home-automation and security technologies. We market our high-quality homes to both upscale luxury and affordable luxury home buyers.
Of the 25,000 units at October 31, 2022, 13,900 were owned by joint ventures in which we have an interest, approximately 2,900 were owned by us, and 8,200 were under contract to be purchased by us.
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.
At October 31, 2022, we had approximately 4,000 units in for-rent apartment projects that were occupied or ready for occupancy, 2,150 units in the lease-up stage, 7,900 units in the design phase or under development, and 10,950 units in the planning stage.
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.
At October 31, 2022, our Land Development Joint Ventures owned approximately 24,300 home sites. 8 At October 31, 2022, we had agreed to acquire 409 home sites from two of our Land Development Joint Ventures for an aggregate purchase price of approximately $42.1 million.
At October 31, 2023, our Land Development Joint Ventures owned approximately 25,800 home sites. 8 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.
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. We are continuously developing new designs to replace or augment existing ones to ensure that our homes reflect current consumer tastes.
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.
There can be no assurance that the necessary development approvals will be secured for the land currently under our control or for land that we may acquire control of in the future or that, upon obtaining such development approvals, we will elect to complete the purchases of land under option or complete the development of land that we own.
We devote significant resources to locating suitable land for future development and obtaining the required approvals on land under our control. There can be no assurance that the necessary development approvals will be secured for the land currently under our control or for land that we may acquire control of in the future.
In the five years ended October 31, 2022, we delivered 45,369 homes from 904 communities, including 10,515 homes from 492 communities in fiscal 2022. At October 31, 2022, we had 981 communities in various stages of planning, development or operations containing approximately 76,000 home sites that we owned or controlled through options.
In the five years ended October 31, 2023, we delivered 46,701 homes from 931 communities, including 9,597 homes from 481 communities in fiscal 2023. At October 31, 2023, we had 930 communities in various stages of planning, development or operations containing approximately 70,700 home sites that we owned or controlled through options.
At October 31, 2022, excluding 373 model homes, we had 1,929 homes under construction or completed but not under contract in our communities, of which 998 were affordable luxury homes, 558 were luxury homes, and 373 were active-adult homes. 3 As a result of the breath of our products and geographic footprint, we have a wide range of base sales prices for our homes.
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. As a result of the breath of our products and geographic footprint, we have a wide range of base sales prices for our homes.
We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. For a more detailed discussion of factors that we believe could cause our actual results to differ materially from expected and historical results, see “Item 1A – Risk Factors” below.
For a more detailed discussion of factors that we believe could cause our actual results to differ materially from expected and historical results, see “Item 1A – Risk Factors” below.
Available Information We file annual, quarterly and current reports, proxy statements, and other information with the Securities and Exchange Commission (the “SEC”). These filings are available over the internet at the SEC’s website at http://www.sec.gov. Our principal Internet address is www.tollbrothers.com.
Many of these modifications have been well received by our employees with minimal disruption to our operations and have continued through fiscal 2023. Available Information We file annual, quarterly and current reports, proxy statements, and other information with the Securities and Exchange Commission (the “SEC”). These filings are available over the internet at the SEC’s website at http://www.sec.gov.
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. Major options include home offices, fitness rooms, multi-generational living suites, finished basements, and spacious indoor/outdoor living areas.
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.
At October 31, 2022, ten of these joint ventures had aggregate loan commitments of $557.2 million and outstanding borrowings against these commitments of $444.3 million.
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.
The following is a summary of home sites for future communities (as distinguished from operating communities) that we either owned or controlled through options or purchase agreements at October 31, 2022: Number of communities Number of home sites North 67 4,953 Mid-Atlantic 141 12,359 South 154 12,657 Mountain 99 9,754 Pacific 61 5,360 Total 522 45,083 Of the 45,083 planned home sites at October 31, 2022, we owned 13,213 and controlled 31,870 through options and purchase agreements.
The following is a summary of home sites for future communities (as distinguished from operating communities) that we either owned or controlled through options or purchase agreements at October 31, 2023: Number of communities Number of home sites North 74 4,905 Mid-Atlantic 121 8,353 South 137 11,084 Mountain 102 9,602 Pacific 64 4,922 Total 498 38,866 Of the 38,866 planned home sites at October 31, 2023, we owned 12,866 and controlled 26,000 through options and purchase agreements.
The following table summarizes certain information with respect to our operating communities at October 31, 2022: Total number of operating communities Number of selling communities Homes approved Homes closed Homes under contract but not closed (Backlog) Home sites available North 81 53 10,155 6,103 1,122 2,930 Mid-Atlantic 53 40 4,184 1,958 842 1,384 South 133 99 14,438 5,072 2,523 6,843 Mountain 133 113 17,774 6,225 2,524 9,025 Pacific 59 43 5,683 1,910 1,087 2,686 Total 459 348 52,234 21,268 8,098 22,868 At October 31, 2022, significant site improvements had not yet commenced on approximately 14,000 of the 22,868 available home sites.
The following table summarizes certain information with respect to our operating communities at October 31, 2023: Total number of operating communities Number of selling communities Homes approved Homes closed Homes under contract but not closed (Backlog) Home sites available North 57 40 7,541 4,283 956 2,302 Mid-Atlantic 60 43 6,606 2,692 945 2,969 South 133 115 16,050 6,151 2,312 7,587 Mountain 126 120 17,958 6,882 1,577 9,479 Pacific 56 52 6,044 2,393 788 2,883 Total 432 370 54,199 22,401 6,578 25,220 At October 31, 2023, significant site improvements had not yet commenced on approximately 15,000 of the 25,220 available home sites.
The majority of these master-planned communities are being developed through joint ventures with other builders or financial partners, with one being developed 100% by us. In addition to our residential for-sale business, we also develop and operate urban and suburban for-rent apartment communities primarily through joint ventures.
We also develop master-planned and golf course communities as well as operate, in certain regions, our own lumber distribution, house component assembly and manufacturing operations. In addition to our residential for-sale business, we also develop and operate urban and suburban for-rent apartment communities primarily through joint ventures.
Many administrative and operational routines have been modified including with respect to providing our employees with greater flexibility to work remotely. Many of these modifications have been well received by our employees with minimal disruption to our operations and have continued through fiscal 2022.
For example, we have expanded technologies that allow for virtual interactions in many aspects of our business, including customer facing activities. Many administrative and operational routines have been modified including with respect to providing our employees with greater flexibility to work remotely.
Removed
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.
Added
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.
Removed
Acquisitions As part of our strategy to continue expanding 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.
Added
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.
Removed
The assets acquired were primarily inventory for future communities, including approximately 550 home sites owned or controlled through land purchase agreements. In fiscal 2020, we acquired substantially all of the assets and operations of an urban infill builder with operations in Atlanta, Georgia and Nashville, Tennessee.
Added
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 are continuously developing new designs to replace or augment existing ones to ensure that our homes reflect current consumer tastes.
Removed
We also acquired substantially all of the assets and operations of a builder with operations is Colorado Springs, Colorado. The aggregate purchase price for these acquisitions was approximately $79.2 million in cash. The assets acquired were primarily inventory, including approximately 1,100 home sites owned or controlled through land purchase options.
Added
Acquisitions 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. 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.
Removed
We devote significant resources to locating suitable land for future development and obtaining the required approvals on land under our control.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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The failure of any one or more of our present strategies, or any related initiatives or actions, or the failure of any adjustments that we may pursue or implement, would likely have an adverse 12 effect on our ability to increase the value and profitability of our business; on our ability to operate our business in the ordinary course; on our overall liquidity; and on our consolidated financial statements, and the effect, in each case, could be material.
The failure of any one or more of our present strategies, or any related initiatives or actions, or the failure of any adjustments that we may pursue or implement, would likely have an adverse effect on our ability to increase the value and profitability of our business; on our ability to operate our business in the ordinary course; on our overall liquidity; and on our consolidated financial statements, and the effect, in each case, could be material.
We also cannot provide any assurance that we will be able to maintain our strategies, and any related initiatives or actions, in the future and, due to unexpectedly favorable or unfavorable market conditions or other factors, we may determine that we need to adjust, refine or abandon all or portions of our strategies, and any related initiatives or actions, though we cannot guarantee that any such adjustments will be successful.
We also cannot provide any assurance that we will be able to maintain our strategies, and any related initiatives or actions, in the future and, due to unexpectedly favorable or unfavorable market conditions or other factors, we may determine that we need to adjust, refine or 12 abandon all or portions of our strategies, and any related initiatives or actions, though we cannot guarantee that any such adjustments will be successful.
In addition, weather-related events may occur from time to time, delaying starts or closings or increasing costs and reducing profitability. In addition, delays in opening new communities or new sections 15 of existing communities could have an adverse impact on home sales and revenues. Expenses are not incurred and recognized evenly throughout the year.
In addition, weather-related events may occur from time to time, delaying starts or closings or increasing costs and reducing profitability. In addition, delays in opening new communities or new sections of existing communities could have an adverse impact on home sales and revenues. Expenses are not incurred and recognized evenly throughout the year.
Additionally, increased governmental and societal attention to environmental, social, and governance (“ESG”) matters, including expanding mandatory and voluntary reporting, diligence, and disclosure on topics such as climate change, human capital, labor and risk oversight, could expand the nature, scope, and complexity of matters that we are required to control, 16 assess and report.
Additionally, increased governmental and societal attention to environmental, social, and governance (“ESG”) matters, including expanding mandatory and voluntary reporting, diligence, and disclosure on topics such as climate change, human capital, labor and risk oversight, could expand the nature, scope, and complexity of matters that we are required to control, assess and report.
In some cases, however, a home buyer may cancel the agreement of sale and receive a complete or partial refund of the deposit for reasons such as state and local law requirements, the home buyer’s 13 inability to obtain mortgage financing, the home buyer’s inability to sell their current home, or our inability to complete and deliver the home within the specified time.
In some cases, however, a home buyer may cancel the agreement of sale and receive a complete or partial refund of the deposit for reasons such as state and local law requirements, the home buyer’s inability to obtain mortgage financing, the home buyer’s inability to sell their current home, or our inability to complete and deliver the home within the specified time.
If our home buyers cannot obtain another source of financing in order to purchase our homes, our sales and results of operations could be adversely affected. Risks Related to Other Events and Factors Public health issues such as a major epidemic or pandemic could adversely affect our business or financial results.
If our home buyers cannot obtain another source of financing in order to purchase our homes, our sales and results of operations could be adversely affected. 18 Risks Related to Other Events and Factors Public health issues such as a major epidemic or pandemic could adversely affect our business or financial results.
In some areas, municipalities may enact growth control initiatives, which will restrict the number of building permits available in a given year. In addition, we may be required to apply for additional approvals or modify our existing approvals because of 14 changes in local circumstances or applicable law.
In some areas, municipalities may enact growth control initiatives, which will restrict the number of building permits available in a given year. In addition, we may be required to apply for additional approvals or modify our existing approvals because of changes in local circumstances or applicable law.
These laws and regulations, which are generally intended to directly or indirectly reduce greenhouse gas emissions, conserve water or limit other potential climate change impacts, may impose restrictions or additional requirements on land development and home construction in certain areas.
These laws and regulations, which are generally intended to directly or indirectly 16 reduce greenhouse gas emissions, conserve water or limit other potential climate change impacts, may impose restrictions or additional requirements on land development and home construction in certain areas.
If we are unable to adequately implement and maintain procedures and controls relating to our ERP, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired and impact our assessment of the effectiveness of our internal controls over financial reporting.
If we are unable to adequately implement and maintain procedures and controls relating to our new ERP, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired and impact our assessment of the effectiveness of our internal controls over financial reporting.
If economic conditions decline, if mortgage financing becomes less available, or if our homes become less attractive due to market price declines or due to other conditions at or in the vicinity of our communities, we could experience an increase in home buyers canceling their agreements of sale with us, which could have an adverse effect on our business and results of operations.
If economic conditions decline, if mortgage financing becomes less available or more costly, or if our homes become less attractive due to market price declines or due to other conditions at or in the vicinity of our communities, we could experience an increase in home buyers canceling their agreements of sale with us, which could have an adverse effect on our business and results of operations.
Increases in interest rates can make it more difficult and/or expensive for us to obtain the funds we need to operate our business.
Increases in interest rates can make it more difficult and/or expensive for us to obtain the funds and credit we need to operate our business.
If we are not able to obtain suitable financing at reasonable terms or replace existing debt and credit facilities when they become due or expire, our costs for borrowings may increase and our revenues may decrease or we could be precluded from continuing our operations at current levels.
If we are not able to obtain suitable financing at reasonable terms or replace existing debt and credit facilities when they become due or expire, our costs for borrowings may increase and our revenues may decrease or we could be precluded from continuing our operations at current levels or expanding them.
Neither of these incidents individually or in the aggregate resulted in any material liability to us, any 19 material damage to our reputation, or any material disruption to our operations.
Neither of these incidents individually or in the aggregate resulted in any material liability to us, any material damage to our reputation, or any material disruption to our operations.
Demand for our homes and rental apartments is subject to fluctuations, often due to factors outside of our control, such as employment levels, consumer confidence and spending, housing demand, availability of financing for homebuyers, interest rates, availability and prices of new homes compared to existing inventory, and demographic trends.
Demand for our homes and rental apartments is subject to fluctuations and difficult to predict, often due to factors outside of our control, such as employment levels, consumer confidence and spending, housing demand, availability of financing for homebuyers, interest rates, availability and prices of new homes compared to existing inventory, and demographic trends.
Negative publicity could negatively impact sales, which could cause our revenues or results of operations to decline. Our business is dependent upon the appeal of the Toll Brothers brand, and its association with quality and luxury is integral to our success.
Negative publicity could adversely impact sales, which could cause our revenues or results of operations to decline. Our business is dependent upon the appeal of the Toll Brothers brand, and its association with quality and luxury is integral to our success.
Our business and results of operations depend substantially on our ability to obtain financing, whether from bank borrowings or from financing in the public debt mark ets.
Our business and results of operations depend substantially on our ability to obtain financing and lines of credit, whether from bank borrowings or from financing in the public debt mark ets.
The cost of satisfying our legal obligations in these instances may be significant, and we may be unable to recover the cost of repair from subcontractors, suppliers and insurers. For example, we have incurred or expect to incur significant costs to repair homes built in Pennsylvania and Delaware.
The cost of satisfying our legal obligations in these instances may be significant, and we may be unable to recover the cost of repair from subcontractors, suppliers and insurers. For example, we have incurred significant costs to repair homes built in Pennsylvania and Delaware.
Over the past several years, strong demand for homes combined with supply chain disruptions, labor shortages and municipal related delays has caused our construction cycle to lengthen and the costs of building materials to increase. Longer construction cycles can lead to increased cancellation rates.
In the past several years, strong demand for homes combined with supply chain disruptions, labor shortages and municipal related delays caused our construction cycles to lengthen and the costs of building materials to increase. Longer construction cycles can lead to increased cancellation rates.
In addition, shortages and cost increases in building materials and tightness in the labor market can erode our profit margins and adversely affect our results of operations, especially if such disruptions, shortages and delays persist for extended periods of time. We are subject to one collective bargaining agreement that covers less than 2% of our employees.
In addition, shortages and cost increases in building materials and tightness in the labor market can erode our profit margins and adversely affect our results of operations, especially if such disruptions, shortages and delays persist for extended periods of time. We are subject to one collective bargaining agreement that covers approximately 1% of our employees.
Increased domestic or international instability could adversely impact the economy and significantly reduce demand for homes and the number of new contracts we sign, increase the number of cancellations of existing contracts, and/or increase our operating expenses, which could adversely affect our business.
Increased domestic or international instability could adversely impact the economy and significantly reduce demand for homes and the number of new contracts we sign, increase the number of cancellations of existing contracts, and/or increase our operating expenses, which could adversely affect our business, results of operations and financial condition.
The amount of interest we incur on our revolving bank credit facility and term loan (exclusive of the amount we have hedged with interest rate swap transactions as further described in Note 6 – “Loans Payable, Senior Notes, and Mortgage Company Loan Facility” in Item 15(a)1 of this Form 10-K) fluctuates based on changes in short-term interest rates and the amount of borrowings we incur.
The amount of interest we incur on our revolving bank credit facility and term loan (exclusive of the amount we have hedged with interest rate swap transactions through October 2025 as further described in Note 6 – “Loans Payable, Senior Notes, and Mortgage Company Loan Facility” in Item 15(a)1 of this Form 10-K) fluctuates based on changes in short-term interest rates and the amount of borrowings we incur and letters of credit that are issued.
We also may be affected by unforeseen engineering, environmental, or geological conditions or problems, including conditions or problems which arise on lands of third parties in the vicinity of our communities, but nevertheless negatively impact our communities.
In addition, our business may be affected by unforeseen engineering, environmental, or geological conditions or problems, including conditions or problems which arise on lands of third parties in the vicinity of our communities, but nevertheless negatively impact our communities.
This, in turn, could adversely affect our results of operations and financial condition. Significant inflation, higher interest rates or deflation could adversely affect our business and financial results. Inflation can adversely affect us by increasing costs of land, materials and labor, and interest rates. All of these factors can have a negative impact on housing affordability.
Significant inflation, higher interest rates or deflation could adversely affect our business and financial results. Inflation can adversely affect us by increasing costs of land, materials and labor, and interest rates. All of these factors can have a negative impact on housing affordability.
We cannot guarantee that (i) our strategies, which include expanding our geographic footprint, product lines and price points, and becoming a more capital and operationally efficient home builder, and any related initiatives or actions (including home builder acquisitions), will be successful or that they will generate growth, earnings or returns at any particular level or within any particular time frame; (ii) in the future we will achieve positive operational or financial results or results in any particular metric or measure equal to or better than those attained in the past; or (iii) we will perform in any period as well as other home builders.
We cannot guarantee that (i) our strategies, which include expanding our geographic footprint, product lines and price points, becoming a more capital and operationally efficient home builder, and increasing the supply of our quick move-in homes for sale relative to our built-to-order homes, and any related initiatives or actions (including home builder acquisitions), will be successful or that they will generate growth, earnings or returns at any particular level or within any particular time frame; (ii) in the future we will achieve positive operational or financial results or results in any particular metric or measure equal to or better than those attained in the past; or (iii) we will perform in any period as well as other home builders.
The ERP implementation requires the integration of the new ERP with multiple new and existing information systems and business processes, and has been designed to accurately maintain our books and records and provide information to our management teams important to the operation of the business. Our ERP implementation will continue to require ongoing investment.
The ERP implementation has required the integration of the new ERP with multiple new and existing information systems and business processes, and has been designed to accurately maintain our books and records and provide information to our management teams important to the operation of the business. Our ERP implementation will continue to require ongoing maintenance and monitoring.
Substantial portions of our revolving credit facility, which provides for approximately $1.90 billion in committed borrowing capacity, and our $650.0 million term loan mature in November 2026, 17 with smaller portions maturing in November 2025.
Our New Revolving Credit Facility, which provides for approximately $1.90 billion in committed borrowing capacity and letters of credit, and substantial portions of our $650.0 million term loan mature in February 2028, with smaller portions maturing in Novemb er 2025 and November 2026.
Our quarterly operating results may fluctuate due to the seasonal nature of our business. Our quarterly operating results fluctuate with the seasons; normally, a significant portion of our agreements of sale are entered into with customers in the winter and spring months.
Our quarterly operating results fluctuate with the seasons; normally, a significant portion of our agreements of sale are entered into with customers in the winter and spring months.
Construction of one of our homes typically proceeds after signing the agreement of sale with our customer and typically require 9 to 12 months to complete, although recently construction times have extended beyond 12 months in many communities due to a variety of reasons, including high demand, labor shortages, supply chain disruption and municipal related delays.
Construction of one of our homes typically proceeds after signing the agreement of sale with our customer and typically require nine to 12 months to complete, although construction times may extend beyond 12 months due to a variety of reasons, including high demand, labor shortages, supply chain disruption and municipal related delays.
In 2020, the World Health Organization declared COVID-19 a pandemic, resulting in federal, state and local governments and private entities mandating various restrictions, including the closures of non-essential businesses for a period of time. These restrictions had an adverse impact on our business in the spring of 2020.
In 2020, the COVID-19 pandemic resulted in federal, state and local governments and private entities mandating various restrictions, including the closures of non-essential businesses for a period of time, which had an adverse impact on our business.
In addition, breaches of our data security systems, including by cyber-attacks, could result in the unintended public disclosure or the misappropriation of our proprietary information or personal and confidential information, about our employees, consumers who view our homes, home buyers, mortgage loan applicants and business partners, requiring us to incur significant expense to address and resolve these kinds of issues.
A significant and extended disruption in the functioning of these resources could impair our operations, damage our reputation, and cause us to lose customers, sales and revenue. 19 In addition, breaches of our data security systems, including by cyber-attacks, could result in the unintended public disclosure or the misappropriation of our proprietary information or personal and confidential information, about our employees, consumers who view our homes, home buyers, mortgage loan applicants and business partners, requiring us to incur significant expense to address and resolve these kinds of issues.
Home buyers may also choose to cancel their home agreement and forfeit their deposit. At October 31, 2022, we had 8,098 homes with a sales value of $8.87 billion in backlog.
Home buyers may also choose to cancel their home agreement and forfeit their deposit. At October 31, 2023, we had 6,578 homes with a sales value of $6.95 billion in backlog.
In most of these joint ventures, we do not have a controlling interest and, as a result, are not able to require these joint ventures or their participants to honor their obligations or renegotiate them on acceptable terms.
In certain circumstances, the joint venture participants, including us, are required to provide guarantees of certain obligations relating to the joint ventures. In most of these joint ventures, we do not have a controlling interest and, as a result, are not able to require these joint ventures or their participants to honor their obligations or renegotiate them on acceptable terms.
Our operations could be adversely affected if key members of our senior management leave the Company or we cannot attract qualified personnel to manage our business. Information technology failures and data security breaches could harm our business.
Our operations could be adversely affected if key members of our senior management unexpectedly leave the Company; if we cannot attract qualified personnel to manage our business; or if we are unable to successfully manage transition matters when our senior executives, several of whom are approaching retirement age, retire. Information technology failures and data security breaches could harm our business.
In the future, changes in the availability of land, competition for available land, availability of financing to acquire land, zoning regulations that limit housing density, and other market conditions may hurt our ability to obtain land for new residential communities at acceptable prices.
At October 31, 2023, we had approximately 70,700 home sites that we owned or controlled through options. In the future, changes in the availability of land, competition for available land, availability of financing to acquire land, zoning regulations that limit housing density, and other market conditions may hurt our ability to obtain land for new residential communities at acceptable prices.
The effects of the pandemic on economic activity, combined with the strong demand for new homes, caused many disruptions to our supply chain 18 and shortages in certain building components and materials, as well as labor shortages. These conditions caused our construction cycles to lengthen.
In addition, the effects of the pandemic on economic activity, combined with strong demand for new homes that followed the initial onset of the pandemic, caused many disruptions to our supply chain and shortages in certain building components and materials, as well as labor shortages, all of which lengthened our construction cycle times.
Our backlog reflects agreements of sale with our home buyers for homes that have not yet been delivered. We have received a deposit from our home buyer for each home reflected in our backlog, and generally we have the right to retain the deposit if the home buyer does not complete the purchase.
We have received a deposit from our home buyer for each home reflected in our backlog, and generally we have the right to retain the deposit if the 13 home buyer does not complete the purchase.
These sales can result in significant gains or losses that we recognize on our Consolidated Statements of Operations and Comprehensive Income as income from unconsolidated entities. The timing of these gains or losses cannot be predicted with certainty and, as a result, can cause our net income to fluctuate from quarter to quarter.
These sales can result in significant gains or losses that we recognize on our Consolidated Statements of Operations and Comprehensive Income as income from unconsolidated entities.
If home buyers are not able to obtain suitable financing, our results of operations may decline. Our results of operations also depend on the ability of our potential home buyers to obtain mortgages for the purchase of our homes.
If home buyers are not able to obtain suitable financing, our results of operations may decline. Our results of operations also depend on the ability of our potential home buyers to obtain mortgages for the purchase of our homes. Mortgage rates have increased significantly since January 2022, which has negatively impacted the overall housing market.
At any given point in time, the employees of those subcontractors, who are not yet represented by a union, may be unionized. We are implementing a new enterprise resource planning system, and challenges with the implementation of the system may impact our business and operations.
At any given point in time, the employees of those subcontractors may decide to unionize. We are implementing a new enterprise resource planning system, and challenges with the implementation of the system may impact our business and operations. We are in the process of completing a multi-year implementation of a complex new enterprise resource planning system (“ERP”).
The implementation of our ERP mandated new procedures and many new controls over financial reporting. These procedures and controls are not yet mature in their operation and not fully tested by our internal auditors.
Conversion from our old system to the new ERP may cause inefficiencies until the ERP is stabilized and mature. The implementation of our new ERP has mandated new procedures and many new controls over 17 financial reporting. These procedures and controls are not yet mature in their operation.
We cannot be certain that we will be able to replace existing financing or find additional sources of financing in the future on favorable terms or at all.
In addition, $1.60 billion of our senior notes become due and payable at various times from November 2025 through November 2029. We cannot be certain that we will be able to replace existing financing and credit lines or find additional sources of financing in the future on favorable terms or at all.
In addition, if values of the building or units decline, we may also be required to recognize material write-downs of the book value of the building in accordance with U.S. generally accepted accounting principles. Increases in cancellations of existing agreements of sale could have an adverse effect on our business.
In addition, if values of the building or units decline, we may also be required to recognize significant impairments in the future. Increases in cancellations of existing agreements of sale could have an adverse effect on our business. Our backlog reflects agreements of sale with our home buyers for homes that have not yet been delivered.
These sales can result in significant gains or losses that we recognize on our Consolidated Statements of Operations and Comprehensive Income as income from unconsolidated entities. The timing of these gains or losses cannot be predicted with certainty and, as a result, can cause our net income to fluctuate from quarter to quarter.
The timing of these gains or losses cannot be predicted with certainty and, as a result, can cause our net income to fluctuate from quarter to quarter. Our quarterly operating results may fluctuate due to the seasonal nature of our business.
Mortgage rates increased significantly during fiscal 2022, which has impacted the demand for our homes during the second half of fiscal 2022, and market conditions and/or government actions could cause mortgage rates to increase even further in the future.
Market conditions and/or government actions could cause mortgage rates to increase even further in the future.
If the joint ventures or their participants do not honor their obligations, we may be required to expend additional resources or suffer losses, which could be significant. Government regulations and legal challenges may delay the start or completion of our communities, increase our expenses, or limit our home building activities, which could have a negative impact on our operations.
In addition, we may in certain circumstances be liable for the actions of its third-party partners. 14 Government regulations and legal challenges may delay the start or completion of our communities, increase our expenses, or limit our home building activities, which could have a negative impact on our operations.
In addition to our residential for-sale business, we also develop, operate and, in certain situations, sell for-rent apartments, which we accomplish mainly through joint ventures. Often, the joint venture through which we develop and lease-up a rental property sells the property to a third party or to the joint venture partner upon stabilization.
The timing of these gains or losses cannot be predicted with certainty and, as a result, can cause our net income to fluctuate from quarter to quarter. 15 In addition to our residential for-sale business, we also develop, operate and, in certain situations, sell for-rent apartments, which we accomplish mainly through joint ventures.
Adverse weather conditions and natural disasters, such as hurricanes, tornadoes, earthquakes, floods, droughts, and wildfires, can have serious effects on our ability to develop our residential communities.
Adverse weather conditions, natural disasters, and other conditions could disrupt the development of our communities, which could harm our sales and results of operations. Adverse weather conditions and natural disasters can have serious effects on our ability to develop our residential communities and other aspects of our business.
In the long term, our operations depend on our ability to obtain land at reasonable prices for the development of our residential communities. At October 31, 2022, we had approximately 76,000 home sites that we owned or controlled through options.
The home building industry is highly competitive for suitable land and the risk inherent in purchasing and developing land increases as consumer demand for housing increases. In the long term, our operations depend on our ability to obtain land at reasonable prices for the development of our residential communities.
See Note 7 – “Accrued Expenses” in Item 15(a)1 of this Form 10-K for additional information regarding warranty charges. We participate in certain joint ventures where we may be adversely impacted by the failure of the joint venture or its participants to fulfill their obligations. We have investments in and commitments to certain joint ventures with unrelated parties.
See Note 7 – “Accrued Expenses” in Item 15(a)1 of this Form 10-K for additional information regarding warranty charges. We also can suffer damage to our reputation, and may be exposed to possible liability, if subcontractors fail to comply with applicable laws, including laws involving matters that are not within our control.
Removed
For example, the current and continued macro-economic conditions of high inflation and rising interest rates, especially the steep increases in mortgage rates during 2022, is one of the primary drivers behind the overall decrease in demand for new homes since our second quarter of fiscal 2022.
Added
In addition, because we have increased our supply of quick move-in (or “spec”) homes relative to our built-to-order homes, adverse changes in economic conditions could cause us to reduce prices more rapidly to avoid carrying large amounts of finished inventory. This, in turn, could adversely affect our results of operations and financial condition.
Removed
These joint ventures generally borrow money to help finance their activities. In certain circumstances, the joint venture participants, including us, are required to provide guarantees of certain obligations relating to the joint ventures.
Added
Inflation may also accompany higher interest rates, which could adversely impact our customers’ ability to obtain financing on favorable terms, thereby decreasing demand for our homes. During 2022 and 2023, high inflation and rising interest rates were primary drivers of decreases in home demand, including our homes. These trends could adversely impact our business and financial results in the future.
Removed
We are in the midst of a multi-year process of implementing a complex new enterprise resource planning system (“ERP”).
Added
We have implemented policies that are designed to inform subcontractors of observations of hazardous conditions that could jeopardize the safety of individuals or result in penalties or other legal consequences, and ultimately to reduce or eliminate unsafe acts and conditions.
Removed
If the system as it currently stands or after necessary investments does not result in our ability to maintain accurate books and records, our financial condition, results of operations, and cash flows could be negatively impacted. Additionally, conversion from our old system to the ERP may cause inefficiencies until the ERP is stabilized and mature.
Added
However, attempts at mitigation may not be successful and we could be subject to claims relating to actions of, or matters relating to, our subcontractors. We participate in certain joint ventures where we may be adversely impacted by the actions of the joint venture or its participants.
Removed
In addition, $400.0 million of our senior notes become due and payable in April 2023 and $1.60 billion of our senior notes become due and payable at various times from November 2025 through November 2029.
Added
We have investments in and commitments to certain unconsolidated joint ventures with unrelated parties generally involved in land development, home building and apartment rental development activities.
Removed
However, following the initial onset of the pandemic, economic activity resumed and demand for our homes improved significantly in the remainder of fiscal 2020 and remained strong through the first half of fiscal 2022.
Added
At October 31, 2023, we had investments of $959.0 million in unconsolidated entities and were committed to invest or advance up to an additional $400.8 million to these unconsolidated entities if they require additional funding. These joint ventures generally borrow money to help finance their activities.
Removed
There is continuing uncertainty regarding how long the impacts of COVID-19 will affect the U.S. economy and our supply chain and operations.
Added
If the joint ventures or their participants do not honor their obligations, we may be required to expend additional resources or suffer losses, which could be significant. In addition, because we generally do not control these joint ventures, our investments may be illiquid and we may not always agree with our partners on major decisions, such as asset sales.
Removed
The extent to which COVID-19 continues to impact our operational and financial performance will depend on future developments, including whether there is a resurgence in the pandemic and whether variant strains emerge, and the extent of any containment or mitigation measures on our customers, trade partners and employees, all of which are highly uncertain, unpredictable and outside our control.
Added
Disputes between us and partners may result in litigation or arbitration that could increase our expenses and distract our management team.
Removed
If COVID-19 or any of its variants continues to have a significant negative impact on the economy, or if a new pandemic emerges, our results of operations and financial condition could be adversely impacted. Adverse weather conditions, natural disasters, and other conditions could disrupt the development of our communities, which could harm our sales and results of operations.
Added
Often, the joint venture through which we develop and lease-up a rental property sells the property to a third party or to the joint venture partner upon stabilization. These sales can result in significant gains or losses that we recognize on our Consolidated Statements of Operations and Comprehensive Income as income from unconsolidated entities.
Removed
A significant and extended disruption in the functioning of these resources could impair our operations, damage our reputation, and cause us to lose customers, sales and revenue.
Added
During the pandemic, overall economic conditions, as well as demand for our homes and our ability to conduct normal business operations became highly unpredictable.
Added
Outbreaks of contagious diseases similar to the pandemic may occur in the future, which could have a significant negative impact on the economy, our ability to conduct normal business operations and our results of operations and financial condition.
Added
To the extent that hurricanes, tornadoes, severe storms, heavy or prolonged precipitation, earthquakes, droughts, floods, wildfires or other natural disasters or similar events occur, our homes under construction or our building lots in such states could be damaged or destroyed, which may result in losses exceeding our insurance coverage.
Added
Natural disasters can also lead to increased competition for subcontractors, which can delay our construction activities even after an event has concluded.
Added
They may also result in reduced demand for homes in a given community, as potential buyers may avoid areas they deem to be at higher risk of loss, or they may face higher costs for, or may be unable to obtain, fire, flood or other hazard insurance coverage in certain areas due to local environmental conditions or historical events.
Added
Competition for qualified personnel in all of our operating markets, as well as within our corporate operations, is intense.

Item 2. Properties

Properties — owned and leased real estate

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ITEM 2. PROPERTIES Headquarters Our corporate office, which we lease from an unrelated party, contains approximately 163,000 square feet and is located in Fort Washington, Pennsylvania. Manufacturing/Distribution Facilities We own a manufacturing facility of approximately 225,000 square feet located in Morrisville, Pennsylvania and a manufacturing facility totaling approximately 150,000 square feet located in Emporia, Virginia.
ITEM 2. PROPERTIES Headquarters Our corporate office, which we lease from an unrelated party, contains approximately 163,000 square feet and is located in Fort Washington, Pennsylvania.
Added
Manufacturing/Distribution Facilities We own a manufacturing facility of approximately 225,000 square feet located in Morrisville, Pennsylvania, a manufacturing facility totaling approximately 150,000 square feet located in Emporia, Virginia and a manufacturing facility totaling approximately 30,500 square feet in Bartow, Florida.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Our revolving credit agreement and term loan agreement each require us to maintain a minimum tangible net worth (as defined in the respective agreement), which 21 restricts the amount of dividends we may pay.
Our revolving credit agreement and term loan agreement each require us to maintain a minimum tangible net worth (as defined in the respective agreement), which restricts the amount of dividends we may pay.
(b) On May 17, 2022, our Board of Directors authorized the repurchase of 20 million shares of our common stock in open market transactions, privately negotiated transactions (including accelerated share repurchases), issuer tender offers or other financial arrangements or transactions for general corporate purposes, including to obtain shares for the Company’s equity award and other employee benefit plans.
(c) On May 17, 2022, our Board of Directors authorized the repurchase of 20 million shares of our common stock in open market transactions, privately negotiated transactions (including accelerated share repurchases), issuer tender offers or other financial arrangements or transactions for general corporate purposes, including to obtain shares for the Company’s equity award and other employee benefit plans.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Shares of our common stock are listed on the New York Stock Exchange (“NYSE”) under the symbol “TOL”. At December 14, 2022, there were approximately 110,727,000 record holders of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Shares of our common stock are listed on the New York Stock Exchange (“NYSE”) under the symbol “TOL”. At December 15, 2023, there were approximately 399 record holders of our common stock.
At October 31, 2022, under the provisions of our revolving credit agreement and term loan agreement, we could have paid up to approximately $3.72 billion of cash dividends.
At October 31, 2023, under the provisions of our revolving credit agreement and term loan agreement, we could have paid up to approximately $2.76 billion of cash dividends.
During the three months ended October 31, 2022, we withheld 1,528 of the shares subject to performance based restricted stock units and restricted stock units to cover approximately $68,500 of income tax withholdings and we issued the remaining 4,298 shares to the recipients. The shares withheld are not included in the total number of shares purchased in the table above.
During the three months ended October 31, 2023, we withheld 153,756 of the shares subject to performance based restricted stock units and restricted stock units to cover approximately $181,000 of income tax withholdings and we issued the remaining 6,837 shares to the recipients. The shares withheld are not included in the total number of shares purchased in the table above.
Issuer Purchases of Equity Securities During the three months ended October 31, 2022, we repurchased the following shares of our common stock: Period Total number of shares purchased (a) Average price paid per share Total number of shares purchased as part of a publicly announced plan or program (b) Maximum number of shares that may yet be purchased under the plan or program (b) (in thousands) (in thousands) (in thousands) August 1, 2022 to August 31, 2022 — $ — — 18,319 September 1, 2022 to September 30, 2022 3,695 $ 42.48 3,695 14,624 October 1, 2022 to October 31, 2022 47 $ 40.43 47 14,577 Total 3,742 3,742 (a) Our stock incentive plans permit us to withhold from the total number of shares that otherwise would be issued to a performance based restricted stock unit recipient or a restricted stock unit recipient upon distribution that number of shares having a fair value at the time of distribution equal to the applicable income tax withholdings due and remit the remaining shares to the recipient.
Issuer Purchases of Equity Securities During the three months ended October 31, 2023, we repurchased the following shares of our common stock: Period Total number of shares purchased (a) Average price paid per share (b) Total number of shares purchased as part of a publicly announced plan or program (c) Maximum number of shares that may yet be purchased under the plan or program (c) (in thousands) (in thousands) (in thousands) August 1, 2023 to August 31, 2023 707 $ 78.18 707 10,309 September 1, 2023 to September 30, 2023 2,301 $ 76.39 2,301 8,008 October 1, 2023 to October 31, 2023 1,292 $ 70.64 1,292 6,716 Total 4,300 4,300 (a) Our stock incentive plans permit us to withhold from the total number of shares that otherwise would be issued to a performance based restricted stock unit recipient or a restricted stock unit recipient upon distribution that number of shares having a fair value at the time of distribution equal to the applicable income tax withholdings due and remit the remaining shares to the recipient.
Our revolving credit agreement and term loan agreement each require us to maintain a minimum tangible net worth (as defined in the respective agreements), which limit the amount of share repurchases we may make. Based upon these provisions, our ability to repurchase our common stock was limited to approximately $4.47 billion as of October 31, 2022.
Our Board of Directors did not fix any expiration date for the current share repurchase program. Our revolving credit agreement and term loan agreement each require us to maintain a minimum tangible net worth (as defined in the respective agreements), which limit the amount of share repurchases we may make.
Stockholder Return Performance Graph The following graph and chart compares the five-year cumulative total return (assuming that an investment of $100 was made on October 31, 2017, and that dividends were reinvested) from October 31, 2017 to October 31, 2022, for (a) our common stock, (b) the S&P Homebuilding Index and (c) the S&P 500 ® : Comparison of 5 Year Cumulative Total Return Among Toll Brothers, Inc., the S&P 500 ® , and the S&P Homebuilding Index October 31: 2017 2018 2019 2020 2021 2022 Toll Brothers, Inc. $ 100.00 $ 73.89 $ 88.34 $ 95.15 $ 136.97 $ 99.58 S&P 500 ® $ 100.00 $ 107.35 $ 122.72 $ 134.64 $ 192.42 $ 164.31 S&P Homebuilding Index $ 100.00 $ 80.36 $ 117.66 $ 138.10 $ 183.16 $ 155.88 ITEM 6. [RESERVED] 22
Stockholder Return Performance Graph The following graph and chart compares the five-year cumulative total return (assuming that an investment of $100 was made on October 31, 2018, and that dividends were reinvested) from October 31, 2018 to October 31, 2023, for (a) our common stock, (b) the S&P Homebuilding Index and (c) the S&P 500 ® : Comparison of 5 Year Cumulative Total Return Among Toll Brothers, Inc., the S&P 500 ® , and the S&P Homebuilding Index October 31: 2018 2019 2020 2021 2022 2023 Toll Brothers, Inc. $ 100.00 $ 119.55 $ 128.77 $ 185.36 $ 134.77 $ 224.13 S&P 500 ® $ 100.00 $ 114.33 $ 125.43 $ 179.25 $ 153.06 $ 168.59 S&P Homebuilding Index $ 100.00 $ 146.42 $ 171.86 $ 227.93 $ 193.98 $ 273.26 ITEM 6. [RESERVED] 22
This authorization terminated, effective May 17, 2022, the prior authorization that had been in effect since March 10, 2020. Our Board of Directors did not fix any expiration date for the current share repurchase program.
This authorization terminated, effective May 17, 2022, the prior authorization that had been in effect since March 10, 2020. Most recently, on December 13, 2023, the Board of Directors renewed its authorization to repurchase 20 million shares of our common stock and terminated, effective the same date, the existing authorization that had been in effect since May 17, 2022.
Dividends During fiscal 2022, we paid aggregate cash dividends of $0.77 per share to our shareholders.
Based upon these provisions, our ability to repurchase our common stock was limited to approximately $3.60 billion as of October 31, 2023. 21 Dividends During fiscal 2023, we paid aggregate cash dividends of $0.83 per share to our shareholders.
During the three-month period ended October 31, 2022, the net exercise method was not employed to exercise options.
During the three-month period ended October 31, 2023, the net exercise method was not employed to exercise options. (b) Average price paid per share includes costs associated with the purchases, but excludes any excise tax that we accrue on our share repurchases as a result of the Inflation Reduction Act of 2022.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Investing Activities 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.
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.
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; 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.
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; 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.
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; (ii) the expected sales prices and sales incentives to be offered in a community; (iii) costs expended to date and expected to be incurred in the future, including, but not limited to, land and land development costs, home construction, interest, and overhead costs; (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 26 community to another builder or the sale of individual home sites.
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; (ii) the expected sales prices and sales incentives to be offered in a community; (iii) costs expended to date and expected to be incurred in the future, including, but not limited to, land and land development costs, home construction, interest, and overhead costs; (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.
The indentures further provide that any Guarantor Subsidiary may be released from its guarantee so long as (i) no default or event of default exists or would result from release of such guarantee; (ii) the Guarantor Subsidiary being released has consolidated net worth of less than 5% of the Company’s consolidated net worth as of the end of our most recent fiscal quarter; (iii) the Guarantor Subsidiaries released from their guarantees in any fiscal year comprise in the aggregate less than 10% (or 15% if and to the extent necessary to permit the cure of a default) of our consolidated net worth as of the end of our most recent fiscal quarter; (iv) such release would not have a material adverse effect on ours and our subsidiaries’ home building business; and (v) the Guarantor Subsidiary is released from its guaranty under the Revolving Credit Facility.
The indentures further provide that any Guarantor Subsidiary may be released from its guarantee so long as (i) no default or event of default exists or would result from release of such guarantee; (ii) the Guarantor Subsidiary being released has consolidated net worth of less than 5% of the Company’s consolidated net worth as of the end of our most recent fiscal quarter; (iii) the Guarantor Subsidiaries released from their guarantees in any fiscal year comprise in the aggregate less than 10% (or 15% if and to the extent necessary to permit the cure of a default) of our consolidated net worth as of the end of our most recent fiscal quarter; (iv) such release would not have a material adverse effect on ours and our subsidiaries’ home building business; and (v) the Guarantor Subsidiary is released from its guaranty under the New Revolving Credit Facility.
We believe that our home buyers generally are, and should continue to be, well-positioned to secure mortgages due to their typically lower loan-to-value ratios and attractive credit profiles, as compared to the average home buyer. Toll Brothers Apartment Living/Toll Brothers Campus Living In addition to our residential for-sale business, we also develop and operate for-rent apartments generally through joint ventures.
We believe that our home buyers generally are, and should continue to be, well-positioned to secure mortgages due to their typically lower loan-to-value ratios and attractive credit profiles, as compared to the average home buyer. 24 Toll Brothers Apartment Living/Toll Brothers Campus Living In addition to our residential for-sale business, we also develop and operate for-rent apartments generally through joint ventures.
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; however, we are not always successful.
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.
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 27 issues encountered during construction and development and other factors beyond our control.
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.
The Subsidiary 35 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.
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.
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.
Therefore, we consider an understanding of the variability and 25 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.
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 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 Company.
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 27 applicable community as part of our overall general liability insurance and our self-insurance through our captive insurance subsidiary.
Over the past three fiscal years adjustments to our estimates have not been material. 28 Investments in Unconsolidated Entities We evaluate our investments in unconsolidated entities for indicators of impairment on a quarterly basis.
Over the past three fiscal years adjustments to our estimates have not been material. Investments in Unconsolidated Entities We evaluate our investments in unconsolidated entities for indicators of impairment on a quarterly basis.
For more information regarding our primary obligations, refer to Note 6, “Loans Payable, Senior Notes, and Mortgage Company Loan Facility,” and Note 15, “Commitments and Contingencies,” to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for amounts outstanding as of October 31, 2022, related to debt and commitments and contingencies, respectively.
For more information regarding our primary obligations, refer to Note 6, “Loans Payable, Senior Notes, and Mortgage Company Loan Facility,” and Note 15, “Commitments and Contingencies,” to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for amounts outstanding as of October 31, 2023, related to debt and commitments and contingencies, respectively.
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.
If there are no guarantors under the Revolving Credit Facility, all Guarantor Subsidiaries under the indentures will be released from their guarantees.
If there are no guarantors under the New Revolving Credit Facility, all Guarantor Subsidiaries under the indentures will be released from their guarantees.
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 are required by the terms of certain loan documents to meet certain covenants, such as financial ratios and reporting requirements. As of October 31, 2022, we were in compliance with all such covenants and requirements on our term loan, credit facility and other loans payable.
We are required by the terms of certain loan documents to meet certain covenants, such as financial ratios and reporting requirements. 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.
The increase in income before income taxes in fiscal 2022, as compared to fiscal 2021, 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 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.
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, 2022, while others are considered future commitments.
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.
The decrease in fiscal 2022 was principally due to a shift in the mix of revenues to higher margin products/areas, sales price increases outpacing cost increases, and lower interest expense as a percentage of home sales revenues.
The decrease in fiscal 2023 was principally due to a shift in the mix of revenues to higher margin products/areas, sales price increases outpacing cost increases, and lower interest expense as a percentage of home sales revenues.
The increase in the average delivered price in fiscal 2022 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 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 increase in the average delivered price in fiscal 2022 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 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 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. 32 We recognized a $266.7 million income tax provision in fiscal 2021.
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 $1.7 million of previously accrued tax provisions on uncertain tax positions that were no longer necessary due to the expiration of the statute of limitations.
For further information regarding the Senior Notes, see Note 6 to our Consolidated Financial Statements under the caption “Senior Notes.” The obligations of the Subsidiary Issuer to pay principal, premiums, if any, and interest are guaranteed jointly and severally on a senior basis by us and substantially all of our 100%-owned home building subsidiaries (the “Guarantor Subsidiaries” and, together with us, the “Guarantors”).
For further information regarding the Senior Notes, see Note 6 to our Consolidated Financial Statements under the caption “Senior Notes.” The obligations of the Subsidiary Issuer to pay principal, premiums, if any, and interest are guaranteed jointly and severally on a senior basis by Toll Brothers, Inc. and substantially all of its 100%-owned home building subsidiaries (the “Guarantor Subsidiaries” and, together with us, the “Guarantors”).
Because of changes in economic conditions, actual results could differ materially from management’s assumptions and may require material valuation adjustments to our investments in unconsolidated entities to be recorded in the future. 29 RESULTS OF OPERATIONS The following table compares certain items in our Consolidated Statements of Operations and Comprehensive Income and other supplemental information for fiscal 2022 and 2021 ($ amounts in millions, unless otherwise stated).
Because of changes in economic conditions, actual results could differ materially from management’s assumptions and may require material valuation adjustments to our investments in unconsolidated entities to be recorded in the future. 28 RESULTS OF OPERATIONS The following table compares certain items in our Consolidated Statements of Operations and Comprehensive Income and other supplemental information for fiscal 2023 and 2022 ($ amounts in millions, unless otherwise stated).
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.
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; 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.
The increase in the average price of homes delivered in fiscal 2022 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 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.
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 33 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.
Increases in sales prices, whether the result of inflation or demand, may affect the ability of prospective buyers to afford new homes. SUPPLEMENTAL GUARANTOR INFORMATION At October 31, 2022, our 100%-owned subsidiary, Toll Brothers Finance Corp.
Increases in sales prices, whether the result of inflation or demand, may affect the ability of prospective buyers to afford new homes. 34 SUPPLEMENTAL GUARANTOR INFORMATION At October 31, 2023, our 100%-owned subsidiary, Toll Brothers Finance Corp.
We expect these resources will be adequate to fund our ongoing operating activities as well as providing capital for investment in future land purchases and related development activities and future joint ventures. Material Cash Requirements We are a party to many contractual obligations and commitments to make payments to third parties.
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 agreements that include contractual obligations and commitments to make payments to third parties.
Land Sales and Other Revenues and Land Sales and Other Cost of Revenues Our revenues from land sales and other generally consist of the following: (1) land sales to joint ventures in which we retain an interest; (2) lot sales to third-party builders within our master-planned communities; (3) bulk 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.
Land Sales and Other Revenues and Land Sales and Other Cost of Revenues Our revenues from land sales and other generally consist of the following: (1) land sales to joint ventures in which we retain an interest; (2) lot sales to third-party builders within our master-planned communities; (3) bulk 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 urban luxury condominium communities.
As a result, 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. The remainder was recorded as an offset to previously incurred expenses. No similar gains were incurred in fiscal 2021.
As a result, 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. The remainder was recorded as an offset to previously incurred expenses.
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.
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.
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.
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 32 and debt service.
During fiscal 2022 and 2021, we acquired control of approximately 5,700 and 27,700 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 acquired control of approximately 4,200 and 5,700 home sites, respectively, net of options terminated and home sites sold. 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.
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 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.
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.
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.
A higher discount rate reduces the estimated fair value of our investments in unconsolidated entities, while a lower discount rate increases the estimated fair value of our investments in unconsolidated entities. During the year ended October 31, 2022, we utilized discount rates ranging from 12% to 15% in our valuations.
A higher discount rate reduces the estimated fair value of our investments in unconsolidated entities, while a lower discount rate increases the estimated fair value of our investments in unconsolidated entities. During the year ended October 31, 2023, we utilized discount rates ranging from 10% to 18% in our valuations.
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.
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.
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 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.
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 2022 was $986.8 million.
Refer to Note 6, “Loans Payable, Senior Notes, and Mortgage Company 33 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.
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 2022, we sold nine land parcels to newly formed Rental Property Joint Ventures in which we have an interest for approximately $322.3 million.
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.
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. Our cash flows from operations generally provide us with a significant source of liquidity.
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, credit arrangements with third parties, and the public capital markets. Our cash flows from operations generally provide us with a significant source of liquidity.
We also operate through a number of joint ventures and have undertaken various commitments as a result of those arrangements. At October 31, 2022, we had investments in these entities of $852.3 million, and were committed to invest or advance up to an additional $304.3 million to these entities if they require additional funding.
We also operate through a number of joint ventures and have undertaken various commitments as a result of those arrangements. 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.
(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”).
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.
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 and community amenities, and build and deliver a home.
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 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.
NM - Not Meaningful A discussion and analysis regarding Results of Operations and Analysis of Financial Condition for the year ended October 31, 2021, as compared to the year ended October 31, 2020, is included in Part II, Item 7, “MD&A” to our Annual Report on Form 10-K for the fiscal year ended October 31, 2021, filed with the SEC on December 17, 2021. 30 FISCAL 2022 COMPARED TO FISCAL 2021 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.
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. 29 FISCAL 2023 COMPARED TO FISCAL 2022 Home Sales Revenues and Home Sales Cost of Revenues 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 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 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 value of our backlog at October 31, 2022, 2021, and 2020 was $8.87 billion (8,098 homes), $9.50 billion (10,302 homes), and $6.37 billion (7,791 homes), respectively. Approximately 90% of the homes in backlog at October 31, 2022 are expected to be delivered by October 31, 2023.
The value of our backlog at October 31, 2023, 2022, and 2021 was $6.95 billion (6,578 homes), $8.87 billion (8,098 homes), and $9.50 billion (10,302 homes), respectively. Approximately 96% of the homes in backlog at October 31, 2023 are expected to be delivered by October 31, 2024.
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.
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.
Home sales cost of revenues, as a percentage of homes sales revenues, in fiscal 2022 was 74.5%, as compared to 77.5% in fiscal 2021.
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.
The increase in fiscal 2022, as compared to fiscal 2021, was primarily related to an increase in Joint Ventures to which we provide services.
The increase in fiscal 2023, as compared to fiscal 2022, was primarily related to a decrease in Joint Ventures to which we provide services.
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.
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.
Interest cost in fiscal 2022 was $164.8 million or 1.7% of home sales revenues, as compared to $187.2 million or 2.2% of home sales revenues in fiscal 2021. We recognized inventory impairments and write-offs of $32.7 million or 0.3% of home sales revenues and $26.5 million or 0.3% of home sales revenues in fiscal 2022 and fiscal 2021, respectively.
Interest cost in fiscal 2023 was $139.4 million or 1.4% of home sales revenues, as compared to $164.8 million or 1.7% of home sales revenues in fiscal 2022. We recognized inventory impairments and write-offs of $30.7 million, or 0.3% of home sales revenues, and $32.7 million, or 0.3% of home sales revenues, in fiscal 2023 and fiscal 2022, respectively.
At October 31, 2022, we or joint ventures in which we have an interest, controlled 73 land parcels that are planned as for-rent apartment projects containing approximately 25,000 units.
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.
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.
Long-term Liquidity and Capital Resources Beyond the next twelve months, our principal demands for funds will be for the payments of the principal amount of our long-term debt as it becomes due or matures, land purchases and inventory additions needed to grow our business, long-term capital investments and investments in unconsolidated joint ventures, common stock repurchases, and dividend payments.
Of the 25,000 units at October 31, 2022, 13,900 were owned by joint ventures in which we have an interest; approximately 2,900 were owned by us; and 8,200 were under contract to be purchased by us. Contracts and Backlog The aggregate value of net sales contracts signed decreased 21% in fiscal 2022, as compared to fiscal 2021.
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. Contracts and Backlog The aggregate value of net sales contracts signed decreased 13% in fiscal 2023, as compared to fiscal 2022.
At October 31, 2022, we controlled approximately 76,000 home sites, as compared to approximately 80,900 home sites at October 31, 2021, and approximately 63,200 home sites at October 31, 2020.
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.
Based upon the federal statutory rate of 21.0% for fiscal 2022, our federal tax provision would have been $357.8 million.
We recognized a $417.2 million income tax provision in fiscal 2022. Based upon the federal statutory rate of 21.0% for fiscal 2022, our federal tax provision would have been $357.8 million.
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 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 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 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.
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.
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, 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.
If it were not, we and our partners would have needed to contribute additional capital to the entity.
If it is not, we and our partners would need to contribute additional capital to the entity.
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.
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.
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 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 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 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 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 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.
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.
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.
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 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.
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 primarily due to a shift in product mix/areas to higher-margin areas, partially offset by higher interest costs and inventory impairment charges.
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 no outstanding borrowings under the New Revolving Credit Facility and had outstanding letters of credit of approximately $118.9 million.
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.
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.
Financial Highlights 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.
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 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.
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.
From our investment in this joint venture, we received cash and recognized a gain of $21.0 million in fiscal 2022. 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.
We recognized inventory impairment charges and the expensing of costs that we believed not to be recoverable in each of the three fiscal years ended October 31, 2022, 2021, and 2020, as shown in the table below (amounts in thousands): 2022 2021 2020 Land controlled for future communities $ 13,051 $ 5,620 $ 23,539 Land owned for future communities 19,690 19,805 31,669 Operating communities — 1,110 675 $ 32,741 $ 26,535 $ 55,883 Cost of Revenue Recognition Cost of revenues from home sales are recognized at the time each home is delivered and title and possession are transferred to the buyer.
We have not made any material changes in the accounting methodology we use to assess possible impairments during the past three fiscal years. 26 We recognized inventory impairment charges and the expensing of costs that we believed not to be recoverable in each of the three fiscal years ended October 31, 2023, 2022, and 2021, as shown in the table below (amounts in thousands): 2023 2022 2021 Land controlled for future communities $ 10,712 $ 13,051 $ 5,620 Land owned for future communities 1,493 19,690 19,805 Operating communities 18,501 — 1,110 $ 30,706 $ 32,741 $ 26,535 Cost of Revenue Recognition Cost of revenues from home sales are recognized at the time each home is delivered and title and possession are transferred to the buyer.
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 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. At October 31, 2023, we were operating in 24 states and in the District of Columbia.
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 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 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 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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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(b) In November 2020, we entered into five interest rate swap transactions to hedge $400.0 million of the Term Loan Facility through October 2025, which is included in the variable-rate debt column in the table above.
(b) In November 2020, we entered into five interest rate swap transactions to hedge $400.0 million of the $650.0 million Term Loan Facility, which is included in the variable-rate debt column in the table above.
The interest rate swaps effectively fix the interest cost on the $400.0 million at 0.369% plus the spread set forth in the pricing schedule in the Term Loan Facility, which was 1.05% as of October 31, 2022. These interest rate swaps were designated as cash flow hedges.
The interest rate swaps effectively fix the interest cost on the $400.0 million at 0.369% plus the spread set forth in the pricing schedule in the Term Loan Facility through October 2025. The spread was 0.90% as of October 31, 2023. These interest rate swaps were designated as cash flow hedges.
The following table shows our debt obligations by scheduled maturity, weighted-average interest rates, and estimated fair value as of October 31, 2022 ($ amounts in thousands): Fixed-rate debt Variable-rate debt (a) Fiscal year of maturity Amount Weighted- average interest rate (%) Amount Weighted- average interest rate (%) 2023 $ 604,527 4.15% $ 150,623 5.35% 2024 130,214 4.56% 2025 88,488 5.11% 2026 376,111 4.86% 101,563 4.81% 2027 460,442 4.83% 548,437 4.81% Thereafter (b) 875,500 4.02% Bond discounts, premiums, and deferred issuance costs - net (4,729) (1,768) Total $ 2,530,553 4.39% $ 798,855 4.91% Fair value at October 31, 2022 $ 2,351,388 $ 800,623 (a) Based upon the amount of variable-rate debt outstanding at October 31, 2022, and holding the variable-rate debt balance constant, each 1% increase in interest rates would increase the interest incurred by us by approximately $8.0 million per year, without consideration of the Company’s interest rate swap transactions.
The following table shows our debt obligations by scheduled maturity, weighted-average interest rates, and estimated fair value as of October 31, 2023 ($ amounts in thousands): Fixed-rate debt Variable-rate debt (a) Fiscal year of maturity Amount Weighted- average interest rate (%) Amount Weighted- average interest rate (%) 2024 $ 215,925 4.61% $ 101,668 7.10% 2025 123,930 5.48% — 2026 434,787 5.12% 101,562 6.20% 2027 468,861 4.83% 60,938 6.20% 2028 407,890 4.30% — Thereafter (b) 464,374 3.76% 487,500 6.20% Bond discounts, premiums, and deferred issuance costs - net (6,968) — Total $ 2,108,799 4.57% $ 751,668 6.32% Fair value at October 31, 2023 $ 1,980,314 $ 751,668 (a) Based upon the amount of variable-rate debt outstanding at October 31, 2023, and holding the variable-rate debt balance constant, each 1% increase in interest rates would increase the interest incurred by us by approximately $7.5 million per year, without consideration of the Company’s interest rate swap transactions.
Removed
The London Interbank Offered Rate (“LIBOR”) is the primary basis for determining interest payments on borrowings under each of our $650.0 million Term Loan Facility and our $1.905 billion Revolving Credit Facility.
Removed
On March 5, 2021, ICE Benchmark Administration (“IBA”) confirmed it would cease publication of Overnight, 1, 3, 6 and 12 month US Dollar LIBOR settings immediately following the LIBOR publication on June 30, 2023. Various parties, including government agencies, are seeking to identify an alternative rate to replace LIBOR.
Removed
The Alternative Reference Rates Committee, which was convened by the Federal Reserve Board and the New York Federal Reserve, has identified the Secured Overnight Financing Rate (“SOFR”) as the recommended risk-free alternative rate for US Dollar LIBOR. We expect a substantial portion of our indebtedness will eventually transition to bearing interest based on SOFR.
Removed
At this time, it is not possible to predict the effect the anticipated discontinuance of LIBOR, or the establishment of alternative reference rates such as SOFR, will have on us or our borrowing costs. SOFR is a relatively new reference rate and its composition and characteristics are not the same as LIBOR.
Removed
Given SOFR’s very limited history and potential volatility as compared to other benchmark or market rates, the future performance of SOFR cannot be predicted based on historical performance. The consequences of using SOFR could include an increase in the cost of our variable rate indebtedness.
Removed
We are monitoring these transition efforts and, although each of our Term Loan Facility and Revolving Credit Facility contain provisions designed to accommodate an alternate reference rate, we may need to amend these and other contracts, such as interest rate hedges that reference these contracts, to accommodate any replacement rate.
Removed
The potential effect of any such event on our cost of capital cannot yet be determined, but we do not expect it to have a material impact on our consolidated financial condition, results of operations, or cash flows.

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