UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☑Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended July 31, 2022
or
☐Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission file number 001-09186
Toll Brothers, Inc.
(Exact name of registrant as specified in its charter)
Delaware23-2416878
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification No.)
1140 Virginia DriveFort WashingtonPennsylvania19034
(Address of principal executive offices)(Zip Code)
(215) 938-8000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareTOLNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☑Accelerated filer☐Non-accelerated filer☐
Smaller reporting company☐Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
At August 30, 2022, there were approximately 113,330,000 shares of Common Stock, par value $0.01 per share, outstanding.



TOLL BROTHERS, INC.
TABLE OF CONTENTS
Page No.
1
PART I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (Unaudited)
2
Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)
3
Condensed Consolidated Statements of Changes in Equity (Unaudited)
4
Condensed Consolidated Statements of Cash Flows (Unaudited)
6
Notes to Condensed Consolidated Financial Statements (Unaudited)
7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
26
Item 3. Quantitative and Qualitative Disclosures About Market Risk
45
Item 4. Controls and Procedures
46
PART II. Other Information
Item 1. Legal Proceedings
47
Item 1A. Risk Factors
47
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
47
Item 6. Exhibits
48
49



STATEMENT ON FORWARD-LOOKING INFORMATION
Certain information included in this report or in other materials we have filed or will file with the Securities and Exchange Commission (“SEC”) (as well as information included in oral statements or other written statements made or to be made by us) contains or may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). One can identify these statements by the fact that they do not relate to matters of a strictly historical or factual nature and generally discuss or relate to future events. These statements contain words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “may,” “can,” “could,” “might,” “should,” “likely”, “will” and other words or phrases of similar meaning. Such statements may include, but are not limited to, information and statements regarding: the impact of the COVID-19 pandemic on the U.S. economy and on our business; expectations regarding interest rates and inflation; the markets in which we operate or may operate; our strategic objectives and priorities; our land acquisition, land development and capital allocation plans and priorities; housing market conditions; demand for our homes; anticipated operating results and guidance; home deliveries; financial resources and condition; changes in revenues, in profitability and in margins; changes in accounting treatment; cost of revenues, including expected labor and material costs; selling, general, and administrative expenses; interest expense; inventory write-downs; home warranty and construction defect claims; unrecognized tax benefits; anticipated tax refunds; sales paces and prices; effects of home buyer cancellations; growth and expansion; joint ventures in which we are involved; anticipated results from our investments in unconsolidated entities; our ability to acquire or dispose of land and pursue real estate opportunities; our ability to gain approvals to develop land, open new communities and deliver homes; our ability to market, construct and sell homes and properties; the rate at which we deliver homes from backlog; our ability to secure materials and subcontractors; our ability to produce the liquidity and capital necessary to conduct normal business operations or to expand and take advantage of opportunities; and the outcome of legal proceedings, investigations, and claims.
From time to time, forward-looking statements also are included in other reports on Forms 10-K, 10-Q, and 8-K; in press releases; in presentations; on our website; and in other materials released to the public. Any or all of the forward-looking statements included in this report and in any other reports or public statements made by us are not guarantees of future performance and may turn out to be inaccurate. Consequently, actual results may differ materially from those that might be anticipated from our forward-looking statements. This can occur as a result of incorrect assumptions or as a consequence of known or unknown risks and uncertainties. Therefore, we caution you not to place undue reliance on our forward-looking statements. The major risks and uncertainties – and assumptions that are made – that affect our business and may cause actual results to differ from these forward-looking statements include, but are not limited to:
•the ongoing effects of the COVID-19 pandemic, which remain highly uncertain, cannot be predicted and will depend upon future developments, including the duration of the pandemic, the impact of mitigation strategies taken by applicable government authorities, the continued availability and effectiveness of vaccines, adequate testing and therapeutic treatments and the prevalence of widespread immunity to COVID-19;
•the effect of general economic conditions, including employment rates, housing starts, interest rate levels, home affordability, inflation, consumer sentiment, availability of financing for home mortgages and strength of the U.S. dollar;
•market demand for our products, which is related to the strength of the various U.S. business segments and U.S. and international economic conditions;
•the availability of desirable and reasonably priced land and our ability to control, purchase, hold and develop such land;
•access to adequate capital on acceptable terms;
•geographic concentration of our operations;
•levels of competition;
•the price and availability of lumber, other raw materials, home components;
•the impact of labor shortages, including on our subcontractors, supply chain and municipalities;
•the effect of U.S. trade policies, including the imposition of tariffs and duties on home building products and retaliatory measures taken by other countries;
•the effects of weather and the risk of loss from earthquakes, volcanoes, fires, floods, droughts, windstorms, hurricanes, pest infestations and other natural disasters, and the risk of delays, reduced consumer demand, and shortages and price increases in labor or materials associated with such natural disasters;
•risks arising from acts of war, terrorism or outbreaks of contagious diseases, such as COVID-19;
•federal and state tax policies;
•transportation costs;
•the effect of land use, environmental and other governmental laws and regulations;
•legal proceedings or disputes and the adequacy of reserves;
•risks relating to any unforeseen changes to or effects on liabilities, future capital expenditures, revenues, expenses, earnings, indebtedness, financial condition, losses and future prospects;
•the effect of potential loss of key management personnel;
•changes in accounting principles; and
•risks related to unauthorized access to our computer systems, theft of our and our homebuyers’ confidential information or other forms of cyber-attack.
Many of the factors mentioned above, elsewhere in this report or in other reports or public statements made by us will be important in determining our future performance. Consequently, actual results may differ materially from those that might be anticipated from our forward-looking statements.
Forward-looking statements speak only as of the date they are made. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise.
For a further discussion of factors that we believe could cause our actual results to differ materially from expected and historical results, see “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our most recent Annual Report on Form 10-K filed with the SEC and in this report.
When this report uses the words “we,” “us,” “our,” and the “Company,” they refer to Toll Brothers, Inc. and its subsidiaries, unless the context otherwise requires. References herein to fiscal year refer to our fiscal years ended or ending October 31.


1

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TOLL BROTHERS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
July 31,
2022		October 31,
2021
 (unaudited) 
ASSETS
Cash and cash equivalents$316,471 $1,638,494 
Inventory9,408,525 7,915,884 
Property, construction, and office equipment – net288,110 310,455 
Receivables, prepaid expenses, and other assets (1)
645,109 738,078 
Mortgage loans held for sale – at fair value121,218 247,211 
Customer deposits held in escrow168,293 88,627 
Investments in unconsolidated entities767,566 599,101 
Income taxes receivable27,961 — 
 $11,743,253 $11,537,850 
LIABILITIES AND EQUITY
Liabilities
Loans payable$1,200,178 $1,011,534 
Senior notes1,995,029 2,403,989 
Mortgage company loan facility113,705 147,512 
Customer deposits812,470 636,379 
Accounts payable625,662 562,466 
Accrued expenses1,228,398 1,220,235 
Income taxes payable228,764 215,280 
Total liabilities6,204,206 6,197,395 
Equity
Stockholders’ equity
Preferred stock, none issued— — 
Common stock, 127,937 shares issued at July 31, 2022 and October 31, 20211,279 1,279 
Additional paid-in capital715,831 714,453 
Retained earnings5,548,496 4,969,839 
Treasury stock, at cost — 14,608 and 7,820 shares at July 31, 2022 and October 31, 2021, respectively(759,072)(391,656)
Accumulated other comprehensive income ("AOCI")16,739 1,109 
Total stockholders’ equity5,523,273 5,295,024 
Noncontrolling interest15,774 45,431 
Total equity5,539,047 5,340,455 
 $11,743,253 $11,537,850 
(1)    As of July 31, 2022 and October 31, 2021, receivables, prepaid expenses, and other assets or investments in unconsolidated entities include $82.0 million and $90.8 million, respectively, of assets related to consolidated variable interest entities (“VIEs”). See Note 4, “Investments in Unconsolidated Entities” for additional information regarding VIEs.




See accompanying notes.
2

TOLL BROTHERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Amounts in thousands, except per share data)
(Unaudited)
Three months ended July 31,Nine months ended July 31,
 2022202120222021
Revenues:
Home sales$2,256,337 $2,234,365 $6,130,218 $5,481,329 
Land sales and other238,465 21,116 433,206 267,652 
2,494,802 2,255,481 6,563,424 5,748,981 
Cost of revenues:
Home sales1,670,703 1,726,124 4,619,495 4,282,410 
Land sales and other229,561 18,709 422,159 222,534 
1,900,264 1,744,833 5,041,654 4,504,944 
Selling, general and administrative232,865 233,915 703,372 663,824 
Income from operations361,673 276,733 818,398 580,213 
Other:
Income from unconsolidated entities2,984 16,636 27,954 28,313 
Other income – net1,294 10,026 16,230 27,311 
Expenses related to early retirement of debt— — — (35,211)
Income before income taxes365,951 303,395 862,582 600,626 
Income tax provision92,484 68,463 216,618 141,329 
Net income$273,467 $234,932 $645,964 $459,297 
Other comprehensive (loss) income – net of tax(2,680)335 15,630 1,004 
Total comprehensive income$270,787 $235,267 $661,594 $460,301 
Per share:
Basic earnings$2.37 $1.90 $5.47 $3.68 
Diluted earnings$2.35 $1.87 $5.41 $3.63 
Weighted-average number of shares:
Basic115,334 123,826 118,056 124,727 
Diluted116,326 125,610 119,369 126,390 







See accompanying notes.
3

TOLL BROTHERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Amounts in thousands)
(Unaudited)

For the three months ended July 31, 2022 and 2021:
Common
Stock		Addi-
tional
Paid-in
Capital		Retained
Earnings		Treasury
Stock		AOCINon-controlling InterestTotal
Equity
Balance, April 30, 2022$1,279 $714,651 $5,297,939 $(669,396)$19,419 $15,774 $5,379,666 
Net income273,467 273,467 
Purchase of treasury stock(91,607)(91,607)
Exercise of stock options, stock based compensation issuances, and employee stock purchase plan issuances(1,058)1,931 873 
Stock-based compensation2,238 2,238 
Dividends declared(22,910)(22,910)
Other comprehensive loss(2,680)(2,680)
Balance, July 31, 2022$1,279 $715,831 $5,548,496 $(759,072)$16,739 $15,774 $5,539,047 
Balance, April 30, 2021$1,529 $709,422 $5,352,573 $(1,148,406)$(2,048)$47,719 $4,960,789 
Net income234,932 234,932 
Purchase of treasury stock(95,411)(95,411)
Exercise of stock options, stock based compensation issuances, and employee stock purchase plan issuances(826)2,235 1,409 
Stock-based compensation3,663 3,663 
Dividends declared(20,943)(20,943)
Other comprehensive loss(1,807)(1,807)
Loss attributable to non-controlling interest(27)(27)
Capital contributions – net1,298 1,298 
Balance, July 31, 2021$1,529 $712,259 $5,566,562 $(1,241,582)$(3,855)$48,990 $5,083,903 


4

For the nine months ended July 31, 2022 and 2021:
Common
Stock		Addi-
tional
Paid-in
Capital		Retained
Earnings		Treasury
Stock		AOCINon-controlling InterestTotal
Equity
Balance, October 31, 2021$1,279 $714,453 $4,969,839 $(391,656)$1,109 $45,431 $5,340,455 
Net income645,964 645,964 
Purchase of treasury stock(383,886)(383,886)
Exercise of stock options, stock based compensation issuances, and employee stock purchase plan issuances(17,880)16,470 (1,410)
Stock-based compensation19,258 19,258 
Dividends declared(67,307)(67,307)
Other comprehensive income15,630 15,630 
Income attributable to non-controlling interest86 86 
Capital distributions - net(29,743)(29,743)
Balance, July 31, 2022$1,279 $715,831 $5,548,496 $(759,072)$16,739 $15,774 $5,539,047 
Balance, October 31, 2020$1,529 $717,272 $5,164,086 $(1,000,454)$(7,198)$52,241 $4,927,476 
Cumulative effect adjustment upon adoption of ASC 326 - net of tax(595)(595)
Net income459,297 459,297 
Purchase of treasury stock(275,058)(275,058)
Exercise of stock options, stock based compensation issuances, and employee stock purchase plan issuances(24,955)33,930 8,975 
Stock-based compensation19,942 19,942 
Dividends declared(56,226)(56,226)
Other comprehensive income3,343 3,343 
Loss attributable to non-controlling interest(47)(47)
Capital distributions - net(3,204)(3,204)
Balance, July 31, 2021$1,529 $712,259 $5,566,562 $(1,241,582)$(3,855)$48,990 $5,083,903 








See accompanying notes.
5

TOLL BROTHERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Nine months ended July 31,
 20222021
Cash flow (used in) provided by operating activities:
Net income$645,964 $459,297 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization53,267 53,938 
Stock-based compensation19,258 19,942 
Income from unconsolidated entities(27,954)(28,313)
Distributions of earnings from unconsolidated entities31,182 30,716 
Deferred tax provision10,659 6,956 
Inventory impairments and write-offs10,673 15,997 
Property, construction and office equipment impairments6,800 — 
Gain on sale of assets326 (38,706)
Expenses related to early retirement of debt— 35,211 
Other3,435 1,984 
Changes in operating assets and liabilities: 
Inventory(1,288,029)(578,461)
Origination of mortgage loans(1,390,630)(1,452,289)
Sale of mortgage loans1,513,603 1,498,946 
Receivables, prepaid expenses, and other assets32,114 97,738 
Current income taxes – net(30,361)(11,492)
Customer deposits – net96,425 163,440 
Accounts payable and accrued expenses66,637 173,524 
Net cash (used in) provided by operating activities(246,631)448,428 
Cash flow (used in) provided by investing activities:
Purchase of property, construction, and office equipment – net(56,485)(45,772)
Investments in unconsolidated entities(176,592)(190,027)
Return of investments in unconsolidated entities109,645 166,045 
Proceeds from the sale of assets28,309 80,418 
Other194 649 
Net cash (used in) provided by investing activities(94,929)11,313 
Cash flow used in financing activities:
Proceeds from loans payable2,950,869 2,164,646 
Principal payments of loans payable(3,009,301)(2,381,509)
Redemption of senior notes(409,856)(294,168)
(Payments) proceeds for stock-based benefit plans – net(1,407)8,979 
Purchase of treasury stock(383,886)(275,058)
Dividends paid(66,948)(56,103)
Payments related to noncontrolling interest – net(25,766)(4,710)
Net cash used in financing activities(946,295)(837,923)
Net decrease in cash, cash equivalents, and restricted cash(1,287,855)(378,182)
Cash, cash equivalents, and restricted cash, beginning of period1,684,412 1,396,604 
Cash, cash equivalents, and restricted cash, end of period$396,557 $1,018,422 



See accompanying notes.
6

TOLL BROTHERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Significant Accounting Policies
Basis of Presentation
Our condensed consolidated financial statements include the accounts of Toll Brothers, Inc. (the “Company,” “we,” “us,” or “our”), a Delaware corporation, and its majority owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Investments in 50% or less owned partnerships and affiliates are accounted for using the equity method unless it is determined that we have effective control of the entity, in which case we would consolidate the entity.
Our unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. The October 31, 2021 balance sheet amounts and disclosures have been derived from our October 31, 2021 audited financial statements. Since the condensed consolidated financial statements do not include all the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements, they should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2021 (“2021 Form 10-K”). In the opinion of management, the unaudited condensed consolidated financial statements include all recurring adjustments necessary to present fairly our financial position as of July 31, 2022; the results of our operations and changes in equity for the three-month and nine-month periods ended July 31, 2022 and 2021; and our cash flows for the nine-month periods ended July 31, 2022 and 2021. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.
Use of Estimates
The preparation of financial statements in accordance with GAAP requires estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. In times of economic disruption when uncertainty regarding future economic conditions is heightened, these estimates and assumptions are subject to greater variability. We are subject to risks and uncertainties, including risks and uncertainties resulting from the COVID-19 pandemic, that are likely to continue to impact our business operations. As a result, actual results could differ from the estimates and assumptions we make and such differences may be material.
Revenue Recognition
Home sales revenues: Revenues and cost of revenues from home sales are recognized at the time each home is delivered and title and possession are transferred to the buyer. For the majority of our home closings, our performance obligation to deliver a home is satisfied in less than one year from the date a binding sale agreement is signed. In certain states where we build, we are not able to complete certain outdoor features prior to the closing of the home. To the extent these separate performance obligations are not complete upon the home closing, we defer a portion of the home sales revenues related to these obligations and subsequently recognize the revenue upon completion of such obligations. As of July 31, 2022, the home sales revenues and related costs we deferred related to these obligations were immaterial. Our contract liabilities, consisting of deposits received from customers for sold but undelivered homes, totaled $812.5 million and $636.4 million at July 31, 2022 and October 31, 2021, respectively. Of the outstanding customer deposits held as of October 31, 2021, we recognized $131.1 million and $374.8 million in home sales revenues during the three months and nine months ended July 31, 2022.
Land sales and other revenues: Our revenues from land sales and other generally consist of: (1) land sales to joint ventures in which we retain an interest; (2) bulk sales to third parties of land we have decided no longer meets our development criteria; (3) lot sales to third-party builders within our master planned communities; and (4) sales of commercial and retail properties generally located at our City Living buildings. In general, our performance obligation for each of these land sales is fulfilled upon the delivery of the land, which generally coincides with the receipt of cash consideration from the counterparty. For land sale transactions that contain repurchase options, revenues and related costs are not recognized until the repurchase option expires. In addition, when we sell land to a joint venture in which we retain an interest, we do not recognize revenue or gains on the sale to the extent of our retained interest in such joint venture.
Forfeited Customer Deposits: Forfeited customer deposits are recognized in “Home sales revenues” in our Condensed Consolidated Statements of Operations and Comprehensive Income in the period in which we determine that the customer will not complete the purchase of the home and we have the right to retain the deposit.
Sales Incentives: In order to promote sales of our homes, we may offer our home buyers sales incentives. These incentives vary by type of incentive and by amount on a community-by-community and home-by-home basis. Incentives are reflected as a
7

reduction in home sales revenues. Incentives are recognized at the time the home is delivered to the home buyer and we receive the sales proceeds.
Recent Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848),” as amended by ASU 2021-01 in January 2021, directly addressing the effects of reference rate reform on financial reporting as a result of the cessation of the publication of certain LIBOR rates beginning December 31, 2021, with complete elimination of the publication of the LIBOR rates by June 30, 2023. The guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform by virtue of referencing LIBOR or another reference rate expected to be discontinued. This guidance became effective on March 12, 2020 and can be adopted no later than December 31, 2022, with early adoption permitted. We are currently evaluating the impact, but do not expect that the adoption of ASU 2020-04, as amended by ASU 2021-01, will have a material impact on our consolidated financial statements or disclosures.

Reclassification
Certain prior period amounts have been reclassified to conform to the fiscal 2022 presentation.
2. Acquisition
In June 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.
3. Inventory
Inventory at July 31, 2022 and October 31, 2021 consisted of the following (amounts in thousands):
July 31,
2022		October 31,
2021
Land controlled for future communities$250,313 $185,656 
Land owned for future communities884,815 564,737 
Operating communities8,273,397 7,165,491 
$9,408,525 $7,915,884 
Operating communities include communities offering homes for sale; communities that have sold all available home sites but have not completed delivery of the homes and communities preparing to open for sale. The carrying value attributable to operating communities includes the cost of homes under construction, land and land development costs, the carrying cost of home sites in current and future phases of these communities, and the carrying cost of model homes.
Backlog consists of homes under contract but not yet delivered to our home buyers (“backlog”).
The amounts we have provided for inventory impairment charges and the expensing of costs that we believe not to be recoverable, for the periods indicated, are shown in the table below (amounts in thousands):
 Three months ended July 31,Nine months ended July 31,
 2022202120222021
Land controlled for future communities$3,848 $2,045 $6,833 $3,792 
Land owned for future communities2,400 11,105 3,840 11,105 
Operating communities— — — 1,100 
$6,248 $13,150 $10,673 $15,997 
See Note 14, “Commitments and Contingencies,” for information regarding land purchase commitments.
At July 31, 2022, we evaluated our land purchase contracts, including those to acquire land for apartment developments, to determine whether any of the selling entities were variable interest entities (“VIEs”) and, if they were, whether we were the primary beneficiary of any of them. Under these land purchase contracts, we do not possess legal title to the land; our risk is generally limited to deposits paid to the sellers and predevelopment costs incurred; and the creditors of the sellers generally have no recourse against us. At July 31, 2022, we determined that 240 land purchase contracts, with an aggregate purchase price of $3.84 billion, on which we had made aggregate deposits totaling $378.5 million, were VIEs, and that we were not the primary beneficiary of any VIE related to our land purchase contracts. At October 31, 2021, we determined that 289 land
8

purchase contracts, with an aggregate purchase price of $3.67 billion, on which we had made aggregate deposits totaling $302.4 million, were VIEs and that we were not the primary beneficiary of any VIE related to our land purchase contracts.
Interest incurred, capitalized, and expensed, for the periods indicated, was as follows (amounts in thousands):
 Three months ended July 31,Nine months ended July 31,
 2022202120222021
Interest capitalized, beginning of period$237,333 $295,145 $253,938 $297,975 
Interest incurred34,676 37,133 97,569 116,447 
Interest expensed to home sales cost of revenues(37,308)(49,995)(110,567)(127,412)
Interest expensed to land sales and other cost of revenues(1,221)(1,064)(4,848)(3,482)
Interest reclassified to property, construction and office equipment - net— (1,034)— (1,034)
Interest capitalized on investments in unconsolidated entities(1,759)(1,078)(4,566)(3,403)
Previously capitalized interest on investments in unconsolidated entities transferred to inventory32 76 227 92 
Interest capitalized, end of period$231,753 $279,183 $231,753 $279,183 
During the three months ended July 31, 2022 and 2021, we recognized approximately $(851,000) and $265,000 of net (gains) losses related to our interest rate swaps which is included in accumulated other comprehensive income, respectively, and approximately $38,000 and $60,000 of net losses were reclassified out of accumulated other comprehensive income to home sales cost of revenues, respectively. During the nine months ended July 31, 2022 and 2021, we recognized approximately $(483,000) and $665,000 of net (gains) losses related to our interest rate swaps which is included in accumulated other comprehensive income, respectively, and approximately $220,000 and $102,000 of net losses were reclassified out of accumulated other comprehensive income to home sales cost of revenues, respectively.
4. Investments in Unconsolidated Entities
We have investments in various unconsolidated entities and our ownership interest in these investments ranges from 5.0% to 50%. These entities, which are structured as joint ventures and either: (i) develop land for the joint venture participants and for sale to outside builders (“Land Development Joint Ventures”); (ii) develop for-sale homes (“Home Building Joint Ventures”); (iii) develop luxury for-rent residential apartments and single family homes, commercial space, and a hotel (“Rental Property Joint Ventures”); or (iv) provide financing and land banking to residential builders and developers for the acquisition and development of land and home sites (“Gibraltar Joint Ventures”).
The table below provides information as of July 31, 2022, regarding active joint ventures that we are invested in, by joint venture category ($ amounts in thousands):
 Land
Development
Joint Ventures		Home Building
Joint Ventures		Rental Property
Joint Ventures		Gibraltar
Joint Ventures		Total
Number of unconsolidated entities15141461
Investment in unconsolidated entities (1)
$320,263 $3,972 $426,850 $16,481 $767,566 
Number of unconsolidated entities with funding commitments by the Company12—161 29
Company’s remaining funding commitment to unconsolidated entities (2)
$121,728 $— $103,108 $13,326 $238,162 
(1)    Our total investment includes $97.6 million related to 13 unconsolidated joint venture-related variable interests in VIEs and our maximum exposure to losses related to these VIEs is approximately $199.9 million as of July 31, 2022. Our ownership interest in such unconsolidated Joint Venture VIEs ranges from 20% to 50%.
(2)    Our remaining funding commitment includes approximately $104.9 million related to our unconsolidated joint venture-related variable interests in VIEs.
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Certain joint ventures in which we have investments obtained debt financing to finance a portion of their activities. The table below provides information at July 31, 2022, regarding the debt financing obtained by category ($ amounts in thousands):
 Land
Development
Joint Ventures		Rental Property
Joint Ventures		Total
Number of joint ventures with debt financing83442
Aggregate loan commitments$532,685 $3,262,234 $3,794,919 
Amounts borrowed under loan commitments$419,031 $1,646,157 $2,065,188 
More specific and/or recent information regarding our investments in, advances to, and future commitments to these entities is provided below.
New Joint Ventures
The table below provides information on joint ventures entered into during the nine-months ended July 31, 2022 ($ amounts in thousands):
Land Development Joint VenturesRental Property Joint VenturesGibraltar Joint Ventures
Number of unconsolidated joint ventures entered into during the period3111 
Investment balance at July 31, 2022$44,500 $118,600 $2,400 
In the first quarter of fiscal 2022, we entered into a joint venture with an unrelated party to develop a luxury for-rent residential apartment project in Washington, D.C. on land which we contributed to the venture. Under the terms of the joint venture agreement, our partner had the right to put their interest back to us if certain conditions were not satisfied. Accordingly, the land we contributed and subsequent additional spend, which had a carrying value of $60.1 million, was previously recorded on our balance sheet under “Receivables, prepaid expenses, and other assets.” During our third quarter of fiscal 2022, the put option lapsed and we deconsolidated this land and recognized the land sale.
The table below provides information on joint ventures entered into during the nine-months ended July 31, 2021 ($ amounts in thousands):
Land Development Joint VenturesRental Property Joint Ventures
Number of unconsolidated joint ventures entered into during the period4 4
Investment balance at July 31, 2021$102,700 $51,300 

Subsequent event
In August 2022, we entered into two joint ventures with an unrelated party to develop two luxury condominium communities in the New York City metropolitan area. Prior to the formation of these ventures, we capitalized approximately $106.5 million of land and land development costs. Our partner acquired a 55% interest in these ventures for approximately $51.6 million, which equaled our pro-rata cost basis. We received cash of $61.2 million as a result of these formations, which included a combination of partner and loan proceeds, resulting in our initial investment in these ventures of $45.5 million. Concurrent with their formation, the joint ventures entered into construction loan agreements aggregating $219.7 million to finance the remaining development of these projects, of which $17.6 million was borrowed at the closing of the ventures. We, and an affiliate of our partner, provided certain guarantees under the construction loan agreements. We estimate that our maximum exposure under recourse guarantees, if the full amount of the loan commitments were borrowed, would be $44.9 million without taking into account any recoveries from the underlying collateral or any reimbursement from our partner.

Results of Operations and Intra-entity Transactions
From time to time, certain of our land development and rental property joint ventures sell assets to unrelated parties or to our joint venture partner. In connection with these sales, we recognized gains of $17.0 million in the three-month period ended July 31, 2021. No gains were recognized in the three-month period ended July 31, 2022. In the nine-month periods ended July 31, 2022 and 2021, we recognized gains of $21.0 million and $34.5 million, respectively. These gains are included in “Income from unconsolidated entities” on our Condensed Consolidated Statements of Operations and Comprehensive Income.
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In the nine-month period ended July 31, 2021, we recognized other-than-temporary impairment charges on our investments in certain Home Building Joint Ventures of $2.1 million. There were no other-than-temporary impairment charges recognized in the nine-month period ended July 31, 2022 or the three-month periods ended July 31, 2022 and 2021.
In the three-month periods ended July 31, 2022 and 2021, we purchased land from unconsolidated entities, principally related to our acquisition of lots from our Land Development Joint Ventures, totaling $2.4 million and $3.2 million, respectively. In the nine-month periods ended July 31, 2022 and 2021, we purchased land from unconsolidated entities, principally related to our acquisition of lots from our Land Development Joint Ventures, totaling $40.3 million and $11.0 million, respectively. Our share of income from the lots we acquired was insignificant in each period. In the three-month periods ended July 31, 2022 and 2021, we sold land to unconsolidated entities, which principally involved land sales to our Rental Property Joint Ventures, totaling $159.7 million and $9.8 million, respectively. In the nine-month periods ended July 31, 2022 and 2021, we sold land to unconsolidated entities, which principally involved land sales to our Rental Property Joint Ventures, totaling $311.5 million and $149.7 million, respectively. These amounts are included in “Land sales and other revenue” on our Condensed Consolidated Statements of Operations and Comprehensive Income and are generally sold at or near our land basis.
Guarantees
The unconsolidated entities in which we have investments generally finance their activities with a combination of partner equity and debt financing. In some instances, we have guaranteed portions of debt of unconsolidated entities. These guarantees may include any or all of the following: (i) project completion guarantees, including any cost overruns; (ii) repayment guarantees, generally covering a percentage of the outstanding loan; (iii) carry cost guarantees, which cover costs such as interest, real estate taxes, and insurance; (iv) an environmental indemnity provided to the lender that holds the lender harmless from and against losses arising from the discharge of hazardous materials from the property and non-compliance with applicable environmental laws; and (v) indemnification of the lender from “bad boy acts” of the unconsolidated entity.
In some instances, we and our joint venture partner have provided joint and several guarantees in connection with loans to unconsolidated entities. In these situations, we generally seek to implement a reimbursement agreement with our partner that provides that neither party is responsible for more than its proportionate share or agreed upon share of the guarantee; however, we are not always successful. In addition, if the joint venture partner does not have adequate financial resources to meet its obligations under such a reimbursement agreement, we may be liable for more than our proportionate share.
We believe that, as of July 31, 2022, in the event we become legally obligated to perform under a guarantee of an obligation of an unconsolidated entity due to a triggering event, the collateral in such entity should be sufficient to repay a significant portion of the obligation. If it is not, we and our partners would need to contribute additional capital to the venture.
Information with respect to certain of the Company’s unconsolidated entities’ outstanding debt obligations, loan commitments and our guarantees thereon are as follows ($ amounts in thousands):
July 31, 2022
Loan commitments in the aggregate$2,623,200 
Our maximum estimated exposure under repayment and carry cost guarantees if the full amount of the debt obligations were borrowed (1)
$544,600 
Debt obligations borrowed in the aggregate$980,600 
Our maximum estimated exposure under repayment and carry cost guarantees of the debt obligations borrowed$306,500 
Estimated fair value of guarantees provided by us related to debt and other obligations$15,300 
Terms of guarantees1 month - 3.9 years
(1)    Our maximum estimated exposure under repayment and carry cost guarantees includes approximately $95.0 million related to our unconsolidated Joint Venture VIEs.

The maximum exposure estimates presented above do not take into account any recoveries from the underlying collateral or any reimbursement from our partners. Nor do they include any potential exposures related to project completion guarantees or the indemnities noted above, which are not estimable. We have not made payments under any of the outstanding guarantees, nor have we been called upon to do so.
Variable Interest Entities

We have both unconsolidated and consolidated joint venture-related variable interests in VIEs. Information regarding our involvement in unconsolidated joint-venture related variable interests in VIEs has been disclosed throughout information presented above.
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The table below provides information as of July 31, 2022 and October 31, 2021, regarding our consolidated joint venture-related variable interests in VIEs ($ amounts in thousands):
Balance Sheet ClassificationJuly 31,
2022		October 31,
2021
Number of Joint Venture VIEs that the Company is the primary beneficiary and consolidates5 5 
Carrying value of consolidated VIEs assetsReceivables prepaid expenses, and other assets and Investments in unconsolidated entities$82,000 $90,800 
Our partners’ interests in consolidated VIEsNoncontrolling interest$9,700 $39,400 
Our ownership interest in the above consolidated Joint Venture VIEs ranges from 82% to 98%.
As shown above, we are the primary beneficiary of certain VIEs due to our controlling financial interest in such ventures as we have the power to direct the activities that most significantly impact the joint ventures’ performance and the obligation to absorb expected losses or receive benefits from the joint ventures. The assets of these VIEs can only be used to settle the obligations of the VIEs. In addition, in certain of the joint ventures, in the event additional contributions are required to be funded to the joint ventures prior to the admission of any additional investor at a future date, we will fund 100% of such contributions, including our partner’s pro rata share, which we expect would be funded through an interest-bearing loan. For other VIEs, we are not the primary beneficiary because the power to direct the activities of such VIEs that most significantly impact their performance was either shared by us and such VIEs’ other partners or such activities were controlled by our partner. For VIEs where the power to direct significant activities is shared, business plans, budgets, and other major decisions are required to be unanimously approved by all members. Management and other fees earned by us are nominal and believed to be at market rates, and there is no significant economic disproportionality between us and other members.
Joint Venture Condensed Combined Financial Information
The Condensed Combined Balance Sheets, as of the dates indicated, and the Condensed Combined Statements of Operations, for the periods indicated, for the unconsolidated entities in which we have an investment are included below (in thousands):
Condensed Combined Balance Sheets:
 July 31,
2022		October 31,
2021
Cash and cash equivalents$233,544 $153,582 
Inventory1,062,469 964,962 
Loans receivable – net38,666 86,727 
Rental properties1,581,268 1,496,355 
Rental properties under development1,303,236 697,659 
Other assets296,201 227,579 
Total assets$4,515,384 $3,626,864 
Debt – net of deferred financing costs$2,040,702 $1,677,619 
Other liabilities308,845 248,545 
Members’ equity2,165,837 1,700,700 
Total liabilities and equity$4,515,384 $3,626,864 
Company’s net investment in unconsolidated entities (1)
$767,566 $599,101 
(1)    Our underlying equity in the net assets of the unconsolidated entities was (less) more than our net investment in unconsolidated entities by $(5.4) million and $16.5 million as of July 31, 2022 and October 31, 2021, respectively, and these differences are primarily a result of other than temporary impairments we have recognized; interest capitalized on our investments; the estimated fair value of the guarantees provided to the joint ventures; unrealized gains on our retained joint venture interests; gains recognized from the sale of our ownership interests; and distributions from entities in excess of the carrying amount of our net investment.
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Condensed Combined Statements of Operations:
 Three months ended July 31,Nine months ended July 31,
 2022202120222021
Revenues$114,542 $89,304 $401,065 $268,257 
Cost of revenues60,566 52,414 256,256 209,273 
Other expenses45,967 37,497 128,742 107,968 
Total expenses106,533 89,911 384,998 317,241 
Loss on disposition of loans and real estate owned— (2,575)(113)(2,785)
Income (loss) from operations8,009 (3,182)15,954 (51,769)
Other income (2)
3,919 44,065 44,156 79,398 
Income before income taxes11,928 40,883 60,110 27,629 
Income tax expense (benefit)37 27 194 (1,632)
Net income including earnings from noncontrolling interests11,891 40,856 59,916 29,261 
Less: income attributable to noncontrolling interest— — — (174)
Net income attributable to controlling interest$11,891 $40,856 $59,916 $29,087 
Company’s equity in earnings of unconsolidated entities (3)
$2,984 $16,636 $27,954 $28,313 
(2)     The nine months ended July 31, 2022 includes $29.9 million related to the sale of an asset by one Rental Property Joint Venture. The three months and nine months ended July 31, 2021 includes $42.3 million and $74.9 million, respectively, related to the sale of assets by our Rental Property Joint Ventures.
(3)    Differences between our equity in earnings of unconsolidated entities and the underlying net income (loss) of the entities are primarily a result of distributions from entities in excess of the carrying amount of our investment; promote earned on the gains recognized by joint ventures and those promoted cash flows being distributed; other than temporary impairments we have recognized; recoveries of previously incurred charges; unrealized gains on our retained joint venture interests; gains recognized from the sale of our investment to our joint venture partner; and our share of the entities’ profits related to home sites purchased by us which reduces our cost basis of the home sites acquired.
5. Receivables, Prepaid Expenses, and Other Assets
Receivables, prepaid expenses, and other assets at July 31, 2022 and October 31, 2021, consisted of the following (amounts in thousands):
July 31, 2022October 31, 2021
Expected recoveries from insurance carriers and others$14,172 $16,773 
Improvement cost receivable71,202 67,626 
Escrow cash held by our wholly owned title company79,211 41,429 
Properties held for rental apartment and commercial development191,283 381,401 
Prepaid expenses39,159 34,960 
Right-of-use asset105,280 96,276 
Other144,802 99,613 
 $645,109 $738,078 
See Note 7, “Accrued Expenses,” for additional information regarding the expected recoveries from insurance carriers and others.
As of October 31, 2021, properties held for rental apartment and commercial development include $90.8 million of assets related to consolidated VIEs. There were no consolidated VIE assets included in properties held for rental apartment and commercial development as of July 31, 2022. See Note 4, “Investments in Unconsolidated Entities” for additional information regarding VIEs.
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6. Loans Payable, Senior Notes, and Mortgage Company Loan Facility
Loans Payable
At July 31, 2022 and October 31, 2021, loans payable consisted of the following (amounts in thousands):
July 31,
2022		October 31,
2021
Senior unsecured term loan$650,000 $650,000 
Loans payable – other552,290 364,042 
Deferred issuance costs(2,112)(2,508)
$1,200,178 $1,011,534 
Senior Unsecured Term Loan
We are party to a $650.0 million senior unsecured term loan facility (the “Term Loan Facility”) with a syndicate of banks. On October 31, 2021, we entered into term loan extension agreements to extend the maturity date of $548.4 million of outstanding term loans from November 1, 2025 to November 1, 2026, with the remainder of the term loans remaining due November 1, 2025. Other than $101.6 million of term loans that are scheduled to mature on November 1, 2025, there are no payments required before the final maturity date on the Term Loan Facility. At July 31, 2022, the interest rate on the Term Loan Facility was 3.43% per annum. We and substantially all of our 100%-owned home building subsidiaries are guarantors under the Term Loan Facility. The Term Loan Facility contains substantially the same financial covenants as the Revolving Credit Facility described below.
In November 2020, we entered into five interest rate swap transactions to hedge $400.0 million of the Term Loan Facility through October 2025. The interest rate swaps effectively fix the interest cost on the $400.0 million at 0.369% plus the spread set forth in the pricing schedule in the Term Loan Facility. The spread at July 31, 2022 was 1.05%. These interest rate swaps were designated as cash flow hedges.
Revolving Credit Facility
We have a $1.905 billion, senior unsecured revolving credit facility (the “Revolving Credit Facility”) with a syndicate of banks. On October 31, 2021, we entered into extension letter agreements which extended the maturity date of $1.78 billion of the revolving loans and commitments under the Revolving Credit Facility from November 1, 2025 to November 1, 2026, with the remainder of the revolving loans and commitments continuing to terminate on November 1, 2025. We and substantially all of our 100%-owned home building subsidiaries are guarantors under the Revolving Credit Facility.
Under the terms of the Revolving Credit Facility, at July 31, 2022, our maximum leverage ratio, as defined, may not exceed 1.75 to 1.00, and we are required to maintain a minimum tangible net worth, as defined, of no less than approximately $2.09 billion. Under the terms of the Revolving Credit Facility, at July 31, 2022, our leverage ratio was approximately 0.50 to 1.00, and our tangible net worth was approximately $5.47 billion. Based upon the terms of the Revolving Credit Facility, our ability to repurchase our common stock was limited to approximately $4.28 billion as of July 31, 2022. In addition, under the provisions of the Revolving Credit Facility, our ability to pay cash dividends was limited to approximately $3.38 billion as of July 31, 2022.
At July 31, 2022, we had no outstanding borrowings under the Revolving Credit Facility and had approximately $94.2 million of outstanding letters of credit that were issued under the Revolving Credit Facility. At July 31, 2022, the interest rate on outstanding borrowings under the Revolving Credit Facility would have been 3.56% per annum. In August 2022, we borrowed $400.0 million under our Revolving Credit Facility.
Loans Payable – Other
“Loans payable – other” primarily represents purchase money mortgages on properties we acquired that the seller had financed, project-level financing, and various revenue bonds that were issued by government entities on our behalf to finance community infrastructure and our manufacturing facilities. At July 31, 2022, the weighted-average interest rate on “Loans payable – other” was 4.00% per annum.
Senior Notes
At July 31, 2022, we had five issues of senior notes outstanding with an aggregate principal amount of $2.00 billion.
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In our first quarter of fiscal 2022, we redeemed the remaining $409.9 million principal amount of 5.875% Senior Notes due February 15, 2022, at par, plus accrued interest.
Mortgage Company Loan Facility
Toll Brothers Mortgage Company (“TBI Mortgage”), our wholly owned mortgage subsidiary, has a mortgage warehousing agreement (the “Warehousing Agreement”) with a bank, which has been amended from time to time, to finance the origination of mortgage loans by TBI Mortgage. The Warehousing Agreement is accounted for as a secured borrowing under ASC 860, “Transfers and Servicing.” The Warehousing Agreement provides for loan purchases up to $75.0 million, subject to certain sublimits. In addition, the Warehousing Agreement provides for an accordion feature under which TBI Mortgage may request that the aggregate commitments under the Warehousing Agreement be increased to an amount up to $150.0 million for a short period of time. Before amendment and restatement, the Warehousing Agreement was set to expire on April 2, 2022, and borrowings thereunder bore interest at LIBOR plus 1.75% per annum. In April 2022, the Warehousing Agreement was amended and restated to extend the expiration date to March 31, 2023 and borrowings thereunder will bear interest at the Bloomberg Short-Term Bank Yield Index Rate (“BSBY”) (with a BSBY floor of 0.50%) plus 1.75% per annum. At July 31, 2022, the interest rate on the Warehousing Agreement, as amended and restated, was 4.05% per annum.
7. Accrued Expenses
Accrued expenses at July 31, 2022 and October 31, 2021 consisted of the following (amounts in thousands):
July 31,
2022		October 31,
2021
Land, land development, and construction$284,669 $310,996 
Compensation and employee benefits199,495 232,161 
Escrow liability71,389 36,107 
Self-insurance239,677 236,369 
Warranty144,631 145,062 
Lease liabilities127,967 116,248 
Deferred revenue37,803 36,638 
Interest37,084 34,033 
Commitments to unconsolidated entities26,656 22,150 
Other59,027 50,471 
$1,228,398 $1,220,235 
The table below provides, for the periods indicated, a reconciliation of the changes in our warranty accrual (amounts in thousands):
 Three months ended July 31,Nine months ended July 31,
 2022202120222021
Balance, beginning of period$143,991 $153,640 $145,062 $157,351 
Additions – homes closed during the period15,598 10,430 38,798 29,141 
Addition – liabilities assumed in a business acquisition150 — 150 — 
Increase in accruals for homes closed in prior years – net3,315 1,111 6,987 6,002 
Charges incurred(18,423)(14,767)(46,366)(42,080)
Balance, end of period$144,631 $150,414 $144,631 $150,414 
Since fiscal 2014, we have received water intrusion claims from owners of homes built since 2002 in communities located in Pennsylvania and Delaware. We continue to perform review procedures to assess, among other things, the number of affected homes, whether repairs are likely to be required, and the extent of such repairs.
Our review process, conducted quarterly, includes an analysis of many factors to determine whether a claim is likely to be received and the estimated costs to resolve any such claim, including: the closing dates of the homes; the number of claims received; our inspection of homes; an estimate of the number of homes we expect to repair; the type and cost of repairs that have been performed in each community; the estimated costs to remediate pending and future claims; the expected recovery from our insurance carriers and suppliers; and the previously recorded amounts related to these claims. We also monitor legal developments relating to these types of claims and review the volume, relative merits and adjudication of claims in litigation or arbitration.
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From October 31, 2016 through the second quarter of fiscal 2020, our recorded aggregate estimated repair costs to be incurred for known and unknown water intrusion claims were $324.4 million and our recorded aggregate expected recoveries from insurance carriers and suppliers were approximately $152.6 million. Based on trends in claims experience over several years and lower than anticipated repair costs, in the second fiscal quarter of 2020 and again in the fourth fiscal quarter of 2021, we reduced the aggregate estimated repair costs to be incurred for known and unknown water intrusion claims by a total of $36.2 million. Because this reduction was associated with periods in which we expect our insurance deductibles and self-insured retentions to be exhausted, we reduced our aggregate expected recoveries from insurance carriers and suppliers by a corresponding $36.2 million. Our recorded remaining estimated repair costs, which reflects a reduction for the aggregate amount expended to resolve claims, were approximately $49.4 million at July 31, 2022 and $54.7 million at October 31, 2021. Our recorded remaining expected recoveries from insurance carriers and suppliers were approximately $3.1 million at July 31, 2022 and $5.8 million at October 31, 2021.
As noted above, our review process includes a number of estimates that are based on assumptions with uncertain outcomes. Due to the degree of judgment required in making these estimates and the inherent uncertainty in potential outcomes, it is reasonably possible that our actual costs and recoveries could differ from those recorded and such differences could be material. In addition, due to such uncertainty, we are unable to estimate the range of any such differences.
8. Income Taxes
We recorded income tax provisions of $92.5 million and $68.5 million for the three months ended July 31, 2022 and 2021, respectively. The effective tax rate was 25.3% for the three months ended July 31, 2022, compared to 22.6% for the three months ended July 31, 2021. We recorded income tax provisions of $216.6 million and $141.3 million for the nine months ended July 31, 2022 and 2021, respectively. The effective tax rate was 25.1% for the nine months ended July 31, 2022, compared to 23.5% for the nine months ended July 31, 2021. The income tax provisions for all periods included the provision for state income taxes, interest accrued on anticipated tax assessments, excess tax benefits related to stock-based compensation, federal energy efficient home credits and other permanent differences.
We are subject to state tax in the jurisdictions in which we operate. We estimate our state tax liability based upon the individual taxing authorities’ regulations, estimates of income by taxing jurisdiction, and our ability to utilize certain tax-saving strategies. Based on our estimate of the allocation of income or loss among the various taxing jurisdictions and changes in tax regulations and their impact on our tax strategies, we estimate that our state income tax rate for the full fiscal year 2022 will be approximately 5.6%. Our state income tax rate for the full fiscal year 2021 was 5.8%.
At July 31, 2022, we had $5.6 million of gross unrecognized tax benefits, including interest and penalties. If these unrecognized tax benefits were to reverse in the future, they would have a beneficial impact on our effective tax rate at that time. During the next 12 months, it is reasonably possible that our unrecognized tax benefits will change, but we are not able to provide a range of such change. The possible changes would be principally due to the expiration of tax statutes, settlements with taxing jurisdictions, increases due to new tax positions taken, and the accrual of estimated interest and penalties.
9. Stock-Based Benefit Plans
We grant stock options and various types of restricted stock units to our employees and our non-employee directors. Additionally, we have an employee stock purchase plan that allows employees to purchase our stock at a discount. Information regarding the amount of total stock-based compensation expense and tax benefit recognized by us, for the periods indicated, is as follows (amounts in thousands):
Three months ended July 31,Nine months ended July 31,
2022202120222021
Total stock-based compensation expense recognized$2,238 $3,663 $19,258 $19,942 
Income tax benefit recognized$622 $938 $4,890 $5,105 
At July 31, 2022 and October 31, 2021, the aggregate unamortized value of unvested stock-based compensation awards was approximately $18.2 million and $14.7 million, respectively.
10. Stockholders’ Equity
Stock Repurchase Program
From time to time since fiscal 2017, our Board of Directors has renewed its authorization to repurchase up to 20 million shares of our common stock in open market transactions, privately negotiated transactions (including accelerated share repurchases), issuer tender offers or other financial arrangements or transactions. Most recently, on May 17, 2022, our Board of Directors renewed its authorization to repurchase 20 million shares of our common stock. Shares may be repurchased in open market
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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. The Board of Directors did not fix any expiration date for this repurchase program.
The table below provides, for the periods indicated, information about our share repurchase programs:
 Three months ended July 31,Nine months ended July 31,
 2022202120222021
Number of shares purchased (in thousands)2,038 1,655 7,257 5,687 
Average price per share$44.93 $57.66 $52.90 $48.37 
Remaining authorization at July 31 (in thousands)18,319 14,298 18,319 14,298 
Cash Dividends
On March 8, 2022, our Board of Directors approved an increase in our quarterly cash dividend from $0.17 per share to $0.20 per share. During the three month periods ended July 31, 2022 and 2021, we declared and paid cash dividends of $0.20 and $0.17 per share, respectively, to our shareholders. During the nine months ended July 31, 2022 and 2021, we declared and paid cash dividends of $0.57 and $0.45 per share, respectively, to our shareholders.
Accumulated Other Comprehensive Income (Loss)
The changes in each component of accumulated other comprehensive income (loss) (“AOCI”), for the periods indicated, were as follows (amounts in thousands):
Three months ended July 31,Nine months ended July 31,
2022202120222021
Employee Retirement Plans
Beginning balance$(5,347)$(6,529)$(6,024)$(7,198)
Losses reclassified from AOCI to net income (1)
452 450 1,355 1,350 
Less: Tax benefit (2)
(115)(115)(341)(346)
Net losses reclassified from AOCI to net income337 335 1,014 1,004 
Other comprehensive income – net of tax337 335 1,014 1,004 
Ending balance$(5,010)$(6,194)$(5,010)$(6,194)
Derivative Instruments
Beginning balance$24,766 $4,481 $7,133 $— 
Unrealized (losses) gains on derivative instruments(4,082)(2,939)19,281 3,033 
Less: Tax benefit (expense)1,037 752 (4,829)(771)
Net (losses) gains on derivative instruments(3,045)(2,187)14,452 2,262 
Losses reclassified from AOCI to net income (3)
38 60 220 102 
Less: Tax benefit (2)
(10)(15)(56)(25)
Net losses reclassified from AOCI to net income28 45 164 77 
Other comprehensive (loss) income – net of tax(3,017)(2,142)14,616 2,339 
Ending balance$21,749 $2,339 $21,749 $2,339 
Total AOCI ending balance$16,739 $(3,855)$16,739 $(3,855)
(1) Reclassified to “Other income – net”
(2) Reclassified to “Income tax provision”
(3) Reclassified to “Cost of revenues – home sales”
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11. Earnings per Share Information
The table below provides, for the periods indicated, information pertaining to the calculation of earnings per share, common stock equivalents, weighted-average number of antidilutive options, and shares issued (amounts in thousands):
 Three months ended July 31,Nine months ended July 31,
 2022202120222021
Numerator:
Net income as reported$273,467 $234,932 $645,964 $459,297 
Denominator:
Basic weighted-average shares115,334 123,826 118,056 124,727 
Common stock equivalents (1)
992 1,784 1,313 1,663 
Diluted weighted-average shares116,326 125,610 119,369 126,390 
Other information:
Weighted-average number of antidilutive options and restricted stock units (2)
407 37 275 220 
Shares issued under stock incentive and employee stock purchase plans45 64 469 938 
(1)    Common stock equivalents represent the dilutive effect of outstanding in-the-money stock options using the treasury stock method and shares expected to be issued upon the conversion of restricted stock units under our equity award programs.
(2)    Weighted-average number of antidilutive options and restricted stock units are based upon the average closing price of our common stock on the New York Stock Exchange for the period.
12. Fair Value Disclosures
Financial Instruments
The table below provides, as of the dates indicated, a summary of assets/(liabilities) related to our financial instruments, measured at fair value on a recurring basis (amounts in thousands):
  Fair value
Financial InstrumentFair value
hierarchy		July 31,
2022		October 31, 2021
Residential Mortgage Loans Held for SaleLevel 2$121,218 $247,211 
Forward Loan Commitments — Residential Mortgage Loans Held for SaleLevel 2$1,464 $1,782 
Interest Rate Lock Commitments (“IRLCs”)Level 2$(3,207)$(1,773)
Forward Loan Commitments — IRLCsLevel 2$3,207 $1,773 
Interest Rate Swap ContractsLevel 2$29,128 $10,330 
At July 31, 2022 and October 31, 2021, the carrying value of cash and cash equivalents and customer deposits held in escrow approximated fair value.
The fair values of the interest rate swap contracts are included in “Receivables, prepaid expenses and other assets” in our Condensed Consolidated Balance Sheets and are determined using widely accepted valuation techniques including discounted cash flow analysis based on the expected cash flows of each swap contract. Although the Company has determined that the significant inputs, such as interest yield curve and discount rate, used to value its interest rate swap contracts fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our counterparties and our own credit risk utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. However, as of July 31, 2022, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our interest rate swap contract positions and have determined that the credit valuation adjustments were not significant to the overall valuation of our interest rate swap contracts. As a result, we have determined that our interest rate swap contracts valuations in their entirety are classified in Level 2 of the fair value hierarchy.
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Mortgage Loans Held for Sale
At the end of the reporting period, we determine the fair value of our mortgage loans held for sale and the forward loan commitments we have entered into as a hedge against the interest rate risk of our mortgage loans and commitments using the market approach to determine fair value.
The table below provides, as of the dates indicated, the aggregate unpaid principal and fair value of mortgage loans held for sale (amounts in thousands):
Aggregate unpaid
principal balance		Fair valueFair value
greater (less) than principal balance
At July 31, 2022$121,494 $121,218 $(276)
At October 31, 2021$244,467 $247,211 $2,744 
Inventory
We recognize inventory impairment charges based on the difference in the carrying value of the inventory and its fair value at the time of the evaluation. The fair value of the aforementioned inventory was determined using Level 3 criteria. Estimated fair value is primarily determined by discounting the estimated future cash flow of each community. See Note 1, “Significant Accounting Policies – Inventory,” in our 2021 Form 10-K for additional information regarding our methodology for determining fair value. Impairments on operating communities were insignificant during the three month and nine month periods ended July 31, 2022 and 2021 and, accordingly, we did not disclose the ranges of certain quantitative unobservable inputs utilized in determining the fair value of such impaired operating communities.
In the three and nine-months ended July 31, 2021, we recognized $11.1 million of impairment charges on land owned for future
communities relating to five communities. The estimated fair value of these communities in the aggregate, net of impairment charges, was $25.6 million. For the majority of these communities, the estimated fair values were determined based upon the expected sales price per lot in a sale to another builder. The sales price per lot utilized in determining fair values was approximately $86,000 per lot.

Debt
The table below provides, as of the dates indicated, the book value and estimated fair value of our debt (amounts in thousands):
 July 31, 2022October 31, 2021
 Fair value
hierarchy		Book valueEstimated
fair value		Book valueEstimated
fair value
Loans payable (1)
Level 2$1,202,290 $1,195,745 $1,014,042 $1,021,662 
Senior notes (2)
Level 12,000,000 1,942,321 2,409,856 2,577,818 
Mortgage company loan facility (3)
Level 2113,705 113,705 147,512 147,512 
$3,315,995 $3,251,771 $3,571,410 $3,746,992 
(1)    The estimated fair value of loans payable was based upon contractual cash flows discounted at interest rates that we believed were available to us for loans with similar terms and remaining maturities as of the applicable valuation date.
(2)    The estimated fair value of our senior notes is based upon their market prices as of the applicable valuation date.
(3)    We believe that the carrying value of our mortgage company loan borrowings approximates their fair value.
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13. Other Income – Net
The table below provides the significant components of other income – net (amounts in thousands):
Three months ended July 31,Nine months ended July 31,
2022202120222021
Income from ancillary businesses1,865 8,544 16,159 24,464 
Management fee income from Land Development and Home Building Joint Ventures – net931 1,048 3,306 1,613 
Other(1,502)434 (3,235)1,234 
Total other income – net$1,294 $10,026 $16,230 $27,311 
Management fee income from Land Development and Home Building Joint Ventures - net includes fees earned by Toll Brothers City Living® (“City Living”) and our Traditional Home Building operations.
Income from ancillary businesses is generated by our mortgage, title, landscaping, smart home technology, Gibraltar, apartment living and golf course and country club operations. The table below provides, for the periods indicated, revenues and expenses for our ancillary businesses (amounts in thousands):
 Three months ended July 31,Nine months ended July 31,
 2022202120222021
Revenues$32,994 $34,869 $92,581 $96,700 
Expenses$31,129 $26,325 $76,422 $72,236 
In the nine-month period ended July 31, 2022, our smart home technology business recognized a $9.0 million gain from a bulk sale of security monitoring accounts, which is included in income from ancillary businesses above.
In the three-month periods ended July 31, 2022 and 2021, our apartment living operations earned fees from unconsolidated entities of $7.0 million and $4.3 million, respectively. In the nine-month periods ended July 31, 2022 and 2021, our apartment living operations earned fees from unconsolidated entities of $16.6 million and $12.9 million, respectively. Fees earned by our apartment living operations are included in income from ancillary businesses.
14. Commitments and Contingencies
Legal Proceedings
We are involved in various claims and litigation arising principally in the ordinary course of business. We believe that adequate provision for resolution of all current claims and pending litigation has been made and that the disposition of these matters will not have a material adverse effect on our results of operations and liquidity or on our financial condition.
Subsequent event
On August 25, 2022, we entered into a $192.5 million settlement agreement with Southern California Gas Company to resolve our claims associated with a natural gas leak that occurred from October 2015 through February 2016 at the Aliso Canyon underground storage facility located near certain of our communities in southern California. Net of legal fees and expenses, in the fourth quarter of fiscal 2022 we expect to record a pre-tax gain of approximately $140.0 million in Other income – net” in our Consolidated Statements of Operations and Comprehensive Income.
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Land Purchase Contracts
Generally, our agreements to acquire land parcels do not require us to purchase those land parcels, although we, in some cases, forfeit any deposit balance outstanding if and when we terminate an agreement. Information regarding our land purchase contracts, as of the dates indicated, is provided in the table below (amounts in thousands):
July 31, 2022October 31, 2021
Aggregate purchase price:
Unrelated parties$4,434,860 $4,442,804 
Unconsolidated entities that the Company has investments in46,036 9,953 
Total$4,480,896 $4,452,757 
Deposits against aggregate purchase price$427,143 $336,363 
Additional cash required to acquire land4,053,753 4,116,394 
Total$4,480,896 $4,452,757 
Amount of additional cash required to acquire land included in accrued expenses$20,876 $37,447 
In addition, we expect to purchase approximately 6,900 additional home sites over a number of years from several joint ventures in which we have interests; the purchase prices of these home sites will be determined at a future date.
At July 31, 2022, we also had purchase contracts to acquire land for apartment developments of approximately $188.4 million, of which we had outstanding deposits in the amount of $7.9 million. We intend to acquire and develop these projects in joint ventures with unrelated parties in the future.
We have additional land parcels under option that have been excluded from the aggregate purchase price since we do not believe that we will complete the purchase of these land parcels and no additional funds will be required from us to terminate these contracts.
Investments in Unconsolidated Entities
At July 31, 2022, we had investments in a number of unconsolidated entities, were committed to invest or advance additional funds, and had guaranteed a portion of the indebtedness and/or loan commitments of these entities. See Note 4, “Investments in Unconsolidated Entities,” for more information regarding our commitments to these entities.
Surety Bonds and Letters of Credit
At July 31, 2022, we had outstanding surety bonds amounting to $886.3 million, primarily related to our obligations to governmental entities to construct improvements in our communities. We estimate that approximately $402.9 million of work remains on these improvements. We have an additional $275.5 million of surety bonds outstanding that guarantee other obligations. We do not believe that it is probable that any outstanding bonds will be drawn upon.
At July 31, 2022, we had outstanding letters of credit of $94.2 million under our Revolving Credit Facility. These letters of credit were issued to secure various financial obligations, including insurance policy deductibles and other claims, land deposits, and security to complete improvements in communities in which we are operating. We do not believe that it is probable that any outstanding letters of credit will be drawn upon. At July 31, 2022, we had provided financial guarantees of $26.3 million related to fronted letters of credit to secure obligations related to certain of our insurance policy deductibles and other claims.
Backlog
At July 31, 2022, we had agreements of sale outstanding to deliver 10,725 homes with an aggregate sales value of $11.19 billion.
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Mortgage Commitments
Our mortgage subsidiary provides mortgage financing for a portion of our home closings. For those home buyers to whom our mortgage subsidiary provides mortgages, we determine whether the home buyer qualifies for the mortgage based upon information provided by the home buyer and other sources. For those home buyers who qualify, our mortgage subsidiary provides the home buyer with a mortgage commitment that specifies the terms and conditions of a proposed mortgage loan based upon then-current market conditions. Prior to the actual closing of the home and funding of the mortgage, the home buyer will lock in an interest rate based upon the terms of the commitment. At the time of rate lock, our mortgage subsidiary agrees to sell the proposed mortgage loan to one of several outside recognized mortgage financing institutions (“investors”) that is willing to honor the terms and conditions, including interest rate, committed to the home buyer. We believe that these investors have adequate financial resources to honor their commitments to our mortgage subsidiary.
Mortgage loans are sold to investors with limited recourse provisions derived from industry-standard representations and warranties in the relevant agreements. These representations and warranties primarily involve the absence of misrepresentations by the borrower or other parties, the appropriate underwriting of the loan and in some cases, a required minimum number of payments to be made by the borrower. The Company generally does not retain any other continuing interest related to mortgage loans sold in the secondary market.
Information regarding our mortgage commitments, as of the dates indicated, is provided in the table below (amounts in thousands):
July 31,
2022		October 31, 2021
Aggregate mortgage loan commitments:
IRLCs$972,783 $528,127 
Non-IRLCs2,778,200 2,705,772 
Total$3,750,983 $3,233,899 
Investor commitments to purchase:
IRLCs$972,783 $528,127 
Mortgage loans held for sale118,945 244,376 
Total$1,091,728 $772,503 
15. Information on Segments
We operate in two segments: traditional home building and urban infill. We build and sell detached and attached homes in luxury residential communities located in affluent suburban markets that cater to move-up, empty-nester, active-adult, affordable luxury, age-qualified, and second-home buyers in the United States (“Traditional Home Building”). We also build and sell homes in urban infill markets through City Living.
Our Traditional Home Building segment operates in the following five geographic segments, with current operations generally located in the states listed below:
•The North region: Connecticut, Delaware, Illinois, Massachusetts, Michigan, New Jersey, New York and Pennsylvania;
•The Mid-Atlantic region: Georgia, Maryland, North Carolina, Tennessee and Virginia;
•The South region: Florida, South Carolina and Texas;
•The Mountain region: Arizona, Colorado, Idaho, Nevada and Utah; and
•The Pacific region: California, Oregon and Washington.
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Revenues and income (loss) before income taxes for each of our segments, for the periods indicated, were as follows (amounts in thousands):
 Three months ended July 31,Nine months ended July 31,
 2022202120222021
Revenues:
Traditional Home Building:
North$478,652 $402,885 $1,174,919 $1,106,189 
Mid-Atlantic253,973 276,853 765,100 659,128 
South352,674 291,725 922,544 788,785 
Mountain660,517 553,192 1,776,375 1,363,019 
Pacific506,597 523,995 1,433,041 1,313,758 
Traditional Home Building2,252,413 2,048,650 6,071,979 5,230,879 
City Living2,857 184,099 60,631 249,877 
Corporate and other1,067 1,616 (2,392)573 
Total home sales revenues2,256,337 2,234,365 6,130,218 5,481,329 
Land sales and other revenues238,465 21,116 433,206 267,652 
Total revenues$2,494,802 $2,255,481 $6,563,424 $5,748,981 
Income (loss) before income taxes:
Traditional Home Building:
North$80,543 $39,700 $162,812 $97,802 
Mid-Atlantic40,129 25,347 117,361 68,127 
South56,334 41,439 121,845 101,190 
Mountain120,606 85,085 296,579 173,178 
Pacific125,257 85,029 306,810 206,750 
Traditional Home Building422,869 276,600 1,005,407 647,047 
City Living (1)
(4,564)65,912 7,889 111,084 
Corporate and other(52,354)(39,117)(150,714)(157,505)
Total$365,951 $303,395 $862,582 $600,626 
(1)    In the first quarter of fiscal 2021, we sold certain commercial assets associated with our Hoboken, New Jersey condominium projects for $82.4 million which is included in Land sales and other revenues above. City Living recognized net gains of $38.3 million from these sales.
“Corporate and other” is comprised principally of general corporate expenses such as our executive offices; the corporate finance, accounting, audit, tax, human resources, risk management, information technology, marketing, and legal groups; interest income; income from certain of our ancillary businesses, including our apartment rental development business; and income from our Rental Property Joint Ventures and Gibraltar Joint Ventures.
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Total assets for each of our segments, as of the dates indicated, are shown in the table below (amounts in thousands):
July 31,
2022		October 31,
2021
Traditional Home Building:
North$1,415,913 $1,357,168 
Mid-Atlantic1,072,498 976,887 
South2,116,511 1,421,612 
Mountain2,888,093 2,397,484 
Pacific2,464,769 2,174,997 
Traditional Home Building9,957,784 8,328,148 
City Living275,313 332,972 
Corporate and other1,510,156 2,876,730 
Total$11,743,253 $11,537,850 
“Corporate and other” is comprised principally of cash and cash equivalents, restricted cash, deferred tax assets, investments in our Rental Property Joint Ventures, expected recoveries from insurance carriers and suppliers, our Gibraltar investments and operations, manufacturing facilities, and our mortgage and title subsidiaries.
The amounts we have provided for inventory impairment charges and the expensing of costs that we believed not to be recoverable for each of our segments, for the periods indicated, were as follows (amounts in thousands):
 Three months ended July 31,Nine months ended July 31,
 2022202120222021
Traditional Home Building:
North$387 $2,492 $1,156 $2,557 
Mid-Atlantic1,200 10,488 2,346 10,578 
South405 28 1,014 472 
Mountain1,421 68 1,865 88 
Pacific435 74 692 1,202 
Traditional Home Building3,848 13,150 7,073 14,897 
City Living2,400 — 3,600 1,100 
Total$6,248 $13,150 $10,673 $15,997 

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16. Supplemental Disclosure to Condensed Consolidated Statements of Cash Flows
The following are supplemental disclosures to the Condensed Consolidated Statements of Cash Flows, for the periods indicated (amounts in thousands):
Nine months ended July 31,
20222021
Cash flow information:
Income tax paid – net$235,565 $145,865 
Noncash activity:
Cost of inventory acquired through seller financing, municipal bonds, or included in accrued expenses - net$213,500 $150,589 
Reclassification from inventory to property, construction, and office equipment - net$— $32,021 
Transfer of inventory to investment in unconsolidated entities$556 $49,979 
Transfer of other assets to investment in unconsolidated entities, net$100,264 $38,877 
Transfer of other assets to property, construction and office equipment - net$8,571 $— 
Unrealized gain on derivatives$18,798 $3,699 
At July 31,
20222021
Cash, cash equivalents, and restricted cash
Cash and cash equivalents$316,471 $946,097 
Restricted cash included in receivables, prepaid expenses, and other assets80,086 72,325 
Total cash, cash equivalents, and restricted cash shown on the Condensed Consolidated Statements of Cash Flows$396,557 $1,018,422 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (“MD&A”)
This discussion and analysis is based on, should be read together with, and is qualified in its entirety by, the accompanying unaudited condensed consolidated financial statements and related notes, as well as our consolidated financial statements, notes thereto, and the related MD&A contained in our Annual Report on Form 10-K for the fiscal year ended October 31, 2021 (“2021 Form 10-K”). It also should be read in conjunction with the disclosure under “Statement on Forward-Looking Information” and “Risk Factors” in this report and in our 2021 Form 10-K.
Unless otherwise stated in this report, net contracts signed represents a number or value equal to the gross number or value of contracts for the sale of homes signed during the relevant period, less the number or value of contracts canceled during the relevant period (irrespective of whether the contract was signed during the relevant period or in a prior period). Backlog consists of homes under contract but not yet delivered to our home buyers (“backlog”). Backlog conversion represents the percentage of homes delivered in the period from backlog at the beginning of the period (“backlog conversion”).
We operate in two segments: Traditional Home Building and Urban Infill (“City Living”). Within Traditional Home Building, we operate in the following five geographic segments, with current operations generally located in the states listed below:
•The North region: Connecticut, Delaware, Illinois, Massachusetts, Michigan, New Jersey, New York and Pennsylvania;
•The Mid-Atlantic region: Georgia, Maryland, North Carolina, Tennessee and Virginia;
•The South region: Florida, South Carolina and Texas;
•The Mountain region: Arizona, Colorado, Idaho, Nevada and Utah; and
•The Pacific region: California, Oregon and Washington.
OVERVIEW
Our Business Environment and Current Outlook
In the three months ended July 31, 2022, home sales revenue increased 1% as compared to the three months ended July 31, 2021. In the third quarter of fiscal 2022, we delivered 2,414 homes at an average price of $934,700, as compared to 2,597 homes with an average delivered price of $860,400 in the third quarter of fiscal 2021. Although the number of homes we delivered in the third quarter was down 7% compared to the prior year period, which was primarily due to production challenges caused by supply chain disruptions, labor market shortages and municipality-related delays, the average delivered price was up 9%. The increase in the average delivered price reflects the robust housing market and strong demand for our homes that we experienced beginning in the second quarter of fiscal 2020 through the end of the second quarter of fiscal 2022. However, during the third quarter of fiscal 2022, overall demand for new homes significantly weakened, which we attribute to steep increases in mortgage rates since January 2022, the impact of substantial increases in home prices over the past two years, inflation concerns, stock market volatility and other macro-economic conditions. As a result, we experienced a significant decline in demand for our homes. We signed 1,266 net contracts with an aggregate value of $1.66 billion in the three months ended July 31, 2022, compared to 3,154 net contracts with an aggregate value of $2.98 billion in the three months ended July 31, 2021, representing decreases of 60% in units and 44% in dollars, respectively. In light of continued uncertainty regarding macro-economic conditions, including with respect to mortgage rates, home affordability, inflation and overall consumer sentiment regarding the future direction of the economy, it is unclear whether demand for new homes will improve in the near term. However, over the long term, we believe that the housing market will continue to benefit from strong fundamentals, including demographic and migration trends, a supply-demand imbalance in for-sale homes, and a renewed appreciation for the importance of home.
Our backlog at July 31, 2022 was 10,725 homes and $11.19 billion, up 1% in units and 19% in dollars as compared to our backlog at July 31, 2021. Like many other home builders, we continue to experience production challenges due to supply chain disruptions, tightness in labor markets and municipality-related delays. These disruptions have resulted in build times (the time it takes from contract signing to delivery of the completed home) that remain extended and delays in deliveries. We continue to work with our suppliers and trade partners to resolve these issues, but we do not expect conditions to significantly improve in the near term. Continued supply chain disruptions and labor and material shortages could further elongate delivery times and increase cost pressures.

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Financial and Operational Highlights
In the three-month period ended July 31, 2022, we recognized $2.49 billion of revenues, consisting of $2.26 billion of home sales revenues and $238.5 million of land sales and other revenues, and net income of $273.5 million, as compared to $2.26 billion of revenues, consisting of $2.23 billion of home sales revenues and $21.1 million of land sales and other revenues, and $234.9 million of net income in the three-month period ended July 31, 2021.
In the three-month periods ended July 31, 2022 and 2021, the value of net contracts signed was $1.66 billion (1,266 homes) and $2.98 billion (3,154 homes), respectively.
In the nine-month period ended July 31, 2022, we recognized $6.56 billion of revenues, consisting of $6.13 billion of home sales revenues and $433.2 million of land sales and other revenues, as compared to $5.75 billion of revenues, consisting of $5.48 billion of home sales revenues and $267.7 million of land sales and other revenues in the nine-month period ended July 31, 2021. Net income was $646.0 million compared to $459.3 million of net income in the nine-month period ended July 31, 2021.
In the nine-month periods ended July 31, 2022 and 2021, the value of net contracts signed was $7.75 billion (7,069 homes) and $8.54 billion (9,515 homes), respectively.
The value of our backlog at July 31, 2022 was $11.19 billion (10,725 homes), as compared to our backlog at July 31, 2021 of $9.44 billion (10,661 homes). Our backlog at October 31, 2021 was $9.50 billion (10,302 homes), as compared to backlog of $6.37 billion (7,791 homes) at October 31, 2020.
At July 31, 2022, we had $316.5 million of cash and cash equivalents on hand and approximately $1.81 billion available under our $1.905 billion revolving credit facility (the “Revolving Credit Facility”), substantially all of which matures in November 2026. At July 31, 2022, we had no borrowings and we had approximately $94.2 million of outstanding letters of credit under the Revolving Credit Facility. In August 2022, we borrowed $400.0 million under our Revolving Credit Facility.
At July 31, 2022, we owned or controlled through options approximately 82,100 home sites, as compared to approximately 80,900 at October 31, 2021; and approximately 63,200 at October 31, 2020. Of the approximately 82,100 total home sites that we owned or controlled through options at July 31, 2022, we owned approximately 39,900 and controlled approximately 42,200 through options. Of the 39,900 home sites owned, approximately 18,700 were substantially improved. In addition, as of July 31, 2022, we expect to purchase approximately 6,900 additional home sites over several years from certain of the joint ventures in which we have interests, at prices to be determined.
At July 31, 2022, we were selling from 332 communities, compared to 340 at October 31, 2021; and 317 at October 31, 2020.
At July 31, 2022, our total stockholders’ equity and our debt to total capitalization ratio were $5.52 billion and 0.37 to 1.00, respectively.
Recent Development
On August 25, 2022, we entered into a $192.5 million settlement agreement with Southern California Gas Company to resolve our claims associated with a natural gas leak that occurred from October 2015 through February 2016 at the Aliso Canyon underground storage facility located near certain of our communities in southern California. Net of legal fees and expenses, in the fourth quarter of fiscal 2022 we expect to record a pre-tax gain of approximately $148 million, of which approximately $140 million is expected to be recorded in “Other income – net” in our Consolidated Statement of Operations. The remainder is expected to be recorded as an offset to previously incurred expenses. Coincident with this gain, we intend to expense $10 million to seed a new Toll Brothers Charitable Foundation. Combined, we expect a benefit to our fourth quarter 2022 pre-tax income of approximately $138 million.

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RESULTS OF OPERATIONS – OVERVIEW
The following table compares certain items in our Condensed Consolidated Statements of Operations and Comprehensive Income and other supplemental information for the three and nine months ended July 31, 2022 and 2021 ($ amounts in millions, unless otherwise stated). For more information regarding results of operations by segment, see “Segments” in this MD&A.
 Three months ended July 31,Nine months ended July 31,
 20222021% Change20222021% Change
Revenues:
Home sales$2,256.3 $2,234.4 1 %$6,130.2 $5,481.3 12 %
Land sales and other238.5 21.1 433.2 267.7 
2,494.8 2,255.5 11 %6,563.4 5,749.0 14 %
Cost of revenues:
Home sales1,670.7 1,726.1 (3)%4,619.5 4,282.48 %
Land sales and other229.6 18.7 422.2 222.5 
1,900.3 1,744.8 9 %5,041.7 4,504.9 12 %
Selling, general and administrative232.9 233.9 — %703.4 663.8 6 %
Income from operations361.7 276.7 31 %818.4 580.2 41 %
Other    
Income from unconsolidated entities3.0 16.6 (82)%28.0 28.3 (1)%
Other income – net1.3 10.0 (87)%16.2 27.3 (41)%
Expenses related to early retirement of debt— — — (35.2)
Income before income taxes366.0 303.4 21 %862.6 600.6 44 %
Income tax provision92.5 68.5 35 %216.6 141.3 53 %
Net income$273.5 $234.9 16 %$646.0 $459.3 41 %
Supplemental information:
Home sales cost of revenues as a percentage of home sales revenues74.0 %77.3 %75.4 %78.1 %
Land sales and other cost of revenues as a percentage of land sales and other revenues96.3 %88.6 %97.4 %83.1 %
SG&A as a percentage of home sale revenues10.3 %10.5 %11.5 %12.1 %
Effective tax rate25.3 %22.6 %25.1 %23.5 %
Deliveries – units2,414 2,597 (7)%6,750 6,645 2 %
Deliveries – average delivered price (in ‘000s)$934.7 $860.4 9 %$908.2 $824.9 10 %
Net contracts signed – value$1,664.2 $2,979.7 (44)%$7,747.5 $8,540.6 (9)%
Net contracts signed – units1,266 3,154 (60)%7,069 9,515 (26)%
Net contracts signed – average contracted price (in ‘000s)$1,314.5 $944.7 39 %$1,096.0 $897.6 22 %
At July 31,At October 31,
20222021%
Change		20212020%
Change
Backlog – value$11,185.3 $9,437.5 19 %$9,499.1 $6,374.6 49 %
Backlog – units10,725 10,661 1 %10,302 7,791 32 %
Backlog – average contracted price (in ‘000s)$1,042.9 $885.2 18 %$922.1 $818.2 13 %
Note: Due to rounding, amounts may not add. “Net contracts signed – value” is net of all cancellations that occurred in the period. It includes the value of each binding agreement of sale that was signed in the period, plus the value of all options that were selected during the period, regardless of when the initial agreement of sale related to such options was signed.

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Home Sales Revenues and Home Sales Cost of Revenues
Three months ended July 31, 2022 compared to the three months ended July 31, 2021
The increase in home sale revenues for the three months ended July 31, 2022, as compared to the three months ended July 31, 2021, was attributable to a 9% increase in the average price of homes delivered, offset, in part, by a 7% decrease in the number of homes delivered. The increase in the average delivered home price was mainly due to sales price increases as well as a shift in the number of homes delivered to more expensive areas and/or products, most notably in the Mid-Atlantic and Pacific regions. The decrease in the number of homes delivered in the three months ended July 31, 2022 was primarily due to fewer deliveries of quick move-in homes, coupled with a lower backlog conversion in the three months ended July 31, 2022 compared to the three months ended July 31, 2021, in each case primarily due to supply chain disruptions, labor shortages and municipality-related delays. This was partially offset by an increase in the number of homes in backlog at October 31, 2021, as compared to the number of homes in backlog at October 31, 2020, most significantly in the South and Mountain regions.
The decrease in home sales cost of revenues, as a percentage of home sales revenues, in the three months ended July 31, 2022, as compared to the three months ended July 31, 2021, was principally due to a shift in the mix of revenues to higher margin products/areas, sales price increases outpacing cost increases, and lower inventory impairment charges in the fiscal 2022 period. In addition, interest expense as a percentage of home sales revenues was lower in the fiscal 2022 period. In the three months ended July 31, 2022 and 2021, interest expense, as a percentage of home sales revenues, was 1.7% and 2.2%, respectively.
Nine months ended July 31, 2022 compared to the nine months ended July 31, 2021
The increase in home sale revenues for the nine months ended July 31, 2022, as compared to the nine months ended July 31, 2021, was attributable to a 2% increase in the number of homes delivered and a 10% increase in the average price of homes delivered. The increase in the number of homes delivered in the nine months ended July 31, 2022 was primarily due to higher backlog at October 31, 2021, as compared to October 31, 2020, partially offset by lower backlog conversion in the fiscal 2022 period, primarily due to supply chain disruptions, labor shortages and municipality-related delays. The increase in the average delivered home price was mainly due to sales price increases, as well as an increase in homes delivered in more expensive product types/geographic regions.
The decrease in home sales cost of revenues, as a percentage of home sales revenues, for the nine months ended July 31, 2022, as compared to the nine months ended July 31, 2021, 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. In the nine months ended July 31, 2022 and 2021, interest expense, as a percentage of home sales revenues, was 1.8% and 2.3%, respectively.
Land Sales and Other Revenues and Land Sales and Other Cost of Revenues
Our revenues from land sales and other generally consist of the following: (1) land sales to joint ventures in which we retain an interest; (2) bulk sales to third parties of land we have decided no longer meets our development criteria; (3) lot sales to third-party builders within our master planned communities; and (4) sales of commercial and retail properties generally located at our City Living buildings. Land sales to joint ventures in which we retain an interest are generally sold at our land basis and therefore little to no gross margin is earned on these sales. During the nine-month period of fiscal 2022, we sold nine land parcels to newly formed Rental Property Joint Ventures in which we have an interest for approximately $311.5 million. Minimal gains were recognized on these land sales to joint ventures. In addition, during the nine-month period of fiscal 2022, we recorded an impairment charge of $5.2 million related to office space associated with our Hoboken, New Jersey condominium projects in connection with a planned sale. During the nine-month period of fiscal 2021, we sold a parking garage and retail space associated with our Hoboken, New Jersey condominium projects for $82.4 million and we recognized a gain of $38.3 million. In addition, during the nine-month fiscal 2021 period, we sold four land parcels to newly formed Rental Property Joint Ventures in which we have an interest for approximately $149.7 million. No gains were recognized on these land sales to joint ventures.
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Selling, General and Administrative Expenses (“SG&A”)
SG&A spending decreased by $1.1 million in the three-month period ended July 31, 2022, as compared to the three-month period ended July 31, 2021. As a percentage of home sales revenues, SG&A was 10.3% in the three months ended July 31, 2022, as compared to 10.5% in the three months ended July 31, 2021. The decrease in SG&A expenditures was due primarily to lower selling expenses on decreased sales unit volume in the fiscal 2022 period compared to the fiscal 2021 period, offset, in part, by higher headcount and normal compensation increases. The decrease in SG&A as a percentage of revenues was due to lower SG&A spending relative to the 1% increase in revenues.
SG&A spending increased by $39.5 million in the fiscal 2022 nine-month period, as compared to the fiscal 2021 nine-month period. As a percentage of home sales revenues, SG&A was 11.5% in the fiscal 2022 period, as compared to 12.1% in the fiscal 2021 period. The dollar increase in SG&A was primarily due to higher headcount and additional investments in information technology in the fiscal 2022 period, along with normal compensation increases. The decrease in SG&A as a percentage of revenues was due to revenues increasing 12% year-over-year in the fiscal 2022 period, while SG&A spending increased only 6%. The reduction in SG&A, as a percentage of revenues, was primarily due to reduced commissions and advertising in the fiscal 2022 nine-month period, as compared to the fiscal 2021 nine-month period.
Income from Unconsolidated Entities
We have investments in joint ventures to (i) develop land for the joint venture participants and for sale to outside builders (“Land Development Joint Ventures”); (ii) develop for-sale homes (“Home Building Joint Ventures”); (iii) develop luxury for-rent residential apartments and single family homes, commercial space, and a hotel (“Rental Property Joint Ventures”); and (iv) invest in distressed loans and real estate and provide financing and land banking to residential builders and developers for the acquisition and development of land and home sites (“Gibraltar Joint Ventures”).
We recognize our proportionate share of the earnings and losses from these unconsolidated entities. Many of our unconsolidated entities are land development projects, high-rise/mid-rise condominium construction projects, or for-rent apartment and for-rent single-family home projects, which do not generate revenues and earnings for a number of years during the development of the properties. Once development is complete for land development projects and high-rise/mid-rise condominium construction projects, these unconsolidated entities will generally, over a relatively short period of time, generate revenues and earnings until all of the assets of the entity are sold. Further, once for-rent apartments and for-rent single-family home projects are complete and stabilized, we may monetize a portion of these projects through a recapitalization or a sale of all or a portion of our ownership interest in the joint venture, generally resulting in an income-producing event. Because of the long development periods associated with these entities, the earnings recognized from these entities may vary significantly from quarter to quarter and year to year.
Income from unconsolidated entities decreased by $13.7 million in the three-month period ended July 31, 2022, as compared to the three-month period ended July 31, 2021. This decrease was primarily due to a $17.0 million gain recognized in the fiscal 2021 period related to a property sale by one of our Rental Property Joint Ventures.
Income from unconsolidated entities decreased by $0.4 million in the nine-month period ended July 31, 2022, as compared to the nine-month period ended July 31, 2021. This decrease was primarily due to a $28.5 million gain related to property sales by two of our Rental Property Joint Ventures and a $6.0 million gain related to an asset sale of commercial property by one of our Land Development Joint Ventures in the fiscal 2021 period. In the fiscal 2022 period we recognized a $21.0 million gain related to a property sale by one of our Rental Property Joint Ventures, lower losses by a joint venture that owns a hotel and increased earnings from our Land Development Joint Ventures due to lot sales.
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Other Income – Net
The table below provides, for the periods indicated, the components of “Other income – net” (amounts in thousands):
Three months ended July 31,Nine months ended July 31,
2022202120222021
Income from ancillary businesses$1,865 $8,544 $16,159 $24,464 
Management fee income from Land Development and Home Building Joint Ventures – net931 1,048 3,306 1,613 
Other(1,502)434 (3,235)1,234 
Total other income – net$1,294 $10,026 $16,230 $27,311 
The decrease in income from ancillary businesses in the three months ended July 31, 2022, as compared to the three months ended July 31, 2021, was mainly due to lower income from our mortgage operations due to lower volume and increased competition reducing spreads.
The decrease in income from ancillary businesses in the nine months ended July 31, 2022 was mainly due to lower earnings from our mortgage operations due to lower volume and increased competition, as well as higher operating losses incurred in our apartment living operations. This decrease was partially offset by a gain of $9.0 million related to the bulk sale of security monitoring accounts by our smart home technologies business during the nine months ended July 31, 2022.
In addition, in the three months ended July 31, 2022 and 2021, our apartment living operations earned fees from unconsolidated entities of $7.0 million and $4.3 million, respectively. The fees earned by our apartment living operations in the nine-month periods ended July 31, 2022 and 2021, were $16.6 million and $12.9 million, respectively. Fees earned by our apartment living operations are included in Income from ancillary businesses.
Management fee income from Home Building and Land Development Joint Ventures - net includes fees earned by our City Living and Traditional Home Building operations. The decrease in income in the three months ended July 31, 2022 was primarily related to a decrease in fees from a Land Development Joint Venture with respect to which we had earned additional fees in the fiscal 2021 period upon its formation. The increase in income in the nine months ended July 31, 2022 was primarily related to an increase in Joint Ventures to which we provide services.
The increased loss in “other” in the three months ended July 31, 2022 was primarily due to reduced interest income. The increased loss in “other” in the nine months ended July 31, 2022 was due to reduced interest income and a $1.6 million impairment charge recorded during the nine-month period ended July 31, 2022 in connection with a planned sale of a manufacturing facility.
Expenses Related to Early Retirement of Debt
In the nine-month period ended July 31, 2021, we redeemed prior to maturity all $250.0 million aggregate principal amount of our then-outstanding 5.625% Senior Notes due 2024. In connection with this redemption, we incurred a pre-tax charge of $34.2 million, inclusive of the write-off of unamortized deferred financing costs, which is recorded in our Condensed Consolidated Statement of Operations and Comprehensive Income. No similar charges were incurred in the fiscal 2022 period.
Income Before Income Taxes
For the three-month period ended July 31, 2022, we reported income before income taxes of $366.0 million, as compared to $303.4 million in the three-month period ended July 31, 2021.
For the nine-month period ended July 31, 2022, we reported income before income taxes of $862.6 million, as compared to $600.6 million in the nine-month period ended July 31, 2021.
Income Tax Provision
In the three-month periods ended July 31, 2022 and July 31, 2021, we recognized an income tax provision of $92.5 million and $68.5 million, respectively. Based upon the federal statutory rate of 21.0% for the fiscal 2022 and 2021 periods, our federal tax provision would have been $76.8 million and $63.7 million, in the three-month periods ended July 31, 2022 and 2021, respectively. The difference between the tax provisions recognized and the tax provision based on the federal statutory rate was mainly due to the provision for state income taxes and permanent differences, offset, in part, by a provision to return adjustment.
We recognized an income tax provision of $216.6 million and $141.3 million in the nine-month periods ended July 31, 2022 and July 31, 2021, respectively. Based upon the federal statutory rate of 21.0% for the fiscal 2022 and 2021 periods, our federal
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tax provision would have been $181.1 million and $126.1 million, in the nine-month periods ended July 31, 2022 and July 31, 2021, respectively. The difference between the tax provisions recognized and the tax provision based on the federal statutory rate was mainly due to the provision for state income taxes and permanent differences, offset, in part, by energy tax credits.
Contracts
In the three-month periods ended July 31, 2022 and 2021, the value of net contracts signed was $1.66 billion (1,266 homes) and $2.98 billion (3,154 homes), respectively. The aggregate value of net contracts signed decreased $1.32 billion, or 44%, in the three-month period ended July 31, 2022. The decrease in the aggregate value of net contracts signed was due to a 60% decrease in the number of net contracts signed, offset, in part, by a 39% increase in the average value attributed to each signed contract. The decrease in the number of net contracts signed reflects a moderation in demand from the extremely strong prior year period and, to a lesser extent, the impact of us limiting sales in certain communities due primarily to extended construction schedules. The increase in the average value attributed to each signed contract is principally due to sales price increases, as well as a shift in the number of contracts signed to more expensive areas and/or products. In addition, the average value attributed to each contract signed includes the value of each binding agreement of sale that was signed in the period, as well as the value of all options selected during the period, regardless of when the initial agreement of sale related to such options was signed. During the three-month period ended July 31, 2022 we signed 1,266 net contracts, a 60% decline compared to the prior year period. During the three-month periods ended April 30, 2022 and January 31, 2022, we signed 2,874 and 2,929 net contracts, respectively. As a result of the steep drop in signed contracts during the three-month period ended July 31, 2022, the average value attributed to each signed contract in such period includes an unusually large value related to option selections for homes purchased in prior periods.
In the nine-month periods ended July 31, 2022 and 2021, the value of net contracts signed was $7.75 billion (7,069 homes) and $8.54 billion (9,515 homes), respectively. The aggregate value of net contracts signed decreased $793.1 million, or 9%, in the nine-month period ended July 31, 2022, as compared to the nine-month period ended July 31, 2021. The decrease in the aggregate value of net contracts signed was due to a 26% decrease in the number of net contracts signed, offset, in part, by a 22% increase in the average value attributed to each signed contract. The decrease in the number of net contracts signed reflects a moderation in demand from the extremely strong prior year period and, to a lesser extent, the impact of us limiting sales in certain communities due primarily to extended construction schedules. The increase in the average value attributed to each signed contract is principally due to sales price increases, as well as a shift in the number of contracts signed to more expensive areas and/or products.
Backlog
The value of our backlog at July 31, 2022 increased 19% to $11.19 billion (10,725 homes), as compared to $9.44 billion (10,661 homes) at July 31, 2021. Our backlog at October 31, 2021 and 2020 was $9.50 billion (10,302 homes) and $6.37 billion (7,791 homes), respectively.
For more information regarding results of operations by segment, see “Segments” in this MD&A.
CAPITAL RESOURCES AND LIQUIDITY
Funding for our business has been, and continues to be, provided principally by cash flow from operating activities before inventory additions, unsecured bank borrowings, and the public capital markets.
Our cash flows from operations generally provide us with a significant source of liquidity. Our cash flows provided by operating activities, supplemented with our short-term borrowings and long-term debt, have been sufficient to fund our operations while allowing us to invest in activities that support the long-term growth of our Company. Our primary uses of cash include inventory additions in the form of land acquisitions and deposits to obtain control of land, land development, working capital to fund day-to-day operations, and investments in existing and future unconsolidated joint ventures. We may also use cash to fund capital expenditures such as investments in our information technology systems. From time to time we use some or all of the remaining available cash flow to repay debt, and to fund share repurchases and dividends on our common stock. We believe our sources of cash and liquidity will continue to be adequate to fund operations, finance our strategic operating initiatives, repay debt, fund our share repurchases and pay dividends for the foreseeable future.
At July 31, 2022, we had $316.5 million of cash and cash equivalents on hand and approximately $1.81 billion available for borrowing under our Revolving Credit Facility. In August 2022, we borrowed $400.0 million under our Revolving Credit Facility to fund short term obligations while maintaining a sufficient minimum cash balance.
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
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expenses, investments and funding of capital improvements, investments in existing and future unconsolidated joint ventures, debt repayment (including our $400.0 million 4.375% Senior Notes due April 15, 2023), common stock repurchases, and dividend payments. Demand for funds include interest and principal payments on current and future debt financing. We expect to meet our short-term liquidity requirements primarily through our cash and cash equivalents on hand and net cash flows provided by operations. Additional sources of funds include distributions from our unconsolidated joint ventures, borrowing capacity under our Revolving Credit Facility, and borrowings from banks and other lenders. In addition, we received net cash proceeds of approximately $150 million in the fourth quarter of fiscal 2022 related to a settlement resolving our claims associated with a natural gas leak that occurred from October 2015 through February 2016 at the Aliso Canyon underground storage facility located near certain of our communities in southern California.
We believe we will have sufficient liquidity available to fund our business needs, commitments and contractual obligations in a timely manner for the next twelve months. We may, however, seek additional financing to fund future growth or refinance our existing indebtedness through the debt capital markets, but we cannot be assured that such financing will be available on favorable terms, or at all.
Long-term Liquidity and Capital Resources
Beyond the next twelve months, our principal demands for funds will be for the payments of the principal amount of our long-term debt as it becomes due or matures, land purchases and inventory additions needed to grow our business, long-term capital investments and investments in unconsolidated joint ventures, common stock repurchases, and dividend payments.
Over the longer term, to the extent the sources of capital described above are insufficient to meet our needs, we may also conduct additional public offerings of our securities, refinance debt or dispose of certain assets to fund our operating activities and debt service. We expect these resources will be adequate to fund our ongoing operating activities as well as 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. These obligations impact our short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on the Condensed Consolidated Balance Sheet as of July 31, 2022, while others are considered future commitments. Our contractual obligations primarily consist of long-term debt and related interest payments, payments due on our mortgage company loan facility, purchase obligations related to expected acquisition of land under purchase agreements and land development agreements (many of which 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. We also enter into certain short-term lease commitments, commitments to fund our existing or future unconsolidated joint ventures, letters of credit and other purchase obligations in the normal course of business. For more information regarding our primary obligations, refer to Note 6, “Loans Payable, Senior Notes, and Mortgage Company Loan Facility,” and Note 14, “Commitments and Contingencies,” to the Condensed Consolidated Financial Statements for amounts outstanding as of July 31, 2022, related to debt and commitments and contingencies, respectively.
We also operate through a number of joint ventures and have undertaken various commitments as a result of those arrangements. At July 31, 2022, we had investments in these entities of $767.6 million and were committed to invest or advance up to an additional $238.2 million to these entities if they require additional funding. At July 31, 2022, we had agreed to terms for the acquisition of 444 home sites from two joint ventures for an estimated aggregate purchase price of $46.0 million. In addition, we expect to purchase approximately 6,900 additional home sites over a number of years from several joint ventures in which we have interests; the purchase price of these home sites will be determined at a future date.
The unconsolidated joint ventures in which we have investments generally finance their activities with a combination of partner equity and debt financing. In some instances, we and our joint venture partner have guaranteed debt of unconsolidated entities. These guarantees may include any or all of the following: (i) project completion guarantees, including any cost overruns; (ii) repayment guarantees, generally covering a percentage of the outstanding loan; (iii) carry cost guarantees, which cover costs such as interest, real estate taxes, and insurance; (iv) an environmental indemnity provided to the lender that holds the lender harmless from and against losses arising from the discharge of hazardous materials from the property and non-compliance with applicable environmental laws; and (v) indemnification of the lender from “bad boy acts” of the unconsolidated entity.
In these situations where we have joint and several guarantees with our joint venture partner, we generally seek to implement a reimbursement agreement with our partner that provides that neither party is responsible for more than its proportionate share or agreed-upon share of the guarantee; however, we are not always successful. In addition, if the joint venture partner does not have adequate financial resources to meet its obligations under such a reimbursement agreement, we may be liable for more than our proportionate share. We believe that, as of July 31, 2022, in the event we become legally obligated to perform under a guarantee of the obligation of an unconsolidated entity due to a triggering event, the collateral in such entity should be sufficient
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to repay all or a significant portion of the obligation. If it is not, we and our partners would need to contribute additional capital to the entity. At July 31, 2022, we had guaranteed the debt of certain unconsolidated entities that have loan commitments aggregating $2.62 billion, of which, if the full amount of the debt obligations were borrowed, we estimate $544.6 million to be our maximum exposure related to repayment and carry cost guarantees. At July 31, 2022, the unconsolidated entities had borrowed an aggregate of $980.6 million, of which we estimate $306.5 million to be our maximum exposure related to repayment and carry cost guarantees. The terms of these guarantees generally range from 1 month to 3.9 years. These maximum exposure estimates do not take into account any recoveries from the underlying collateral or any reimbursement from our partners. Nor do they include any potential exposures related to project completion guarantees or the indemnities noted above, which are not estimable.
For more information regarding these joint ventures, see Note 4, “Investments in Unconsolidated Entities” in the Notes to Condensed Consolidated Financial Statements.

Debt Service Requirements
Our financing strategy is to ensure liquidity and access to capital markets, to maintain a balanced profile of debt maturities, and to manage our exposure to floating interest rate volatility.
Outside of the normal course of operations, one of our principal liquidity needs is the payment of principal and interest on outstanding indebtedness. We are required by the terms of certain loan documents to meet certain covenants, such as financial ratios and reporting requirements. As of July 31, 2022, we were in compliance with all such covenants and requirements on our term loan, credit facility and other loans payable. Refer to Note 6, “Loans Payable, Senior Notes, and Mortgage Company Loan Facility” in the Notes to the Condensed Consolidated Financial Statements.

Operating Activities
At July 31, 2022 and October 31, 2021, we had $316.5 million and $1.64 billion, respectively, of cash and cash equivalents. Cash used in operating activities during the nine-month period ended July 31, 2022 was $246.6 million. Cash used in operating activities during the fiscal 2022 period was primarily related to an increase in inventory, and an increase in current income taxes - net. This activity was offset, in part, by net income (adjusted for stock-based compensation, impairments, depreciation and amortization, and deferred taxes); mortgage loans sold, net of mortgage loans originated; an increase in customer deposits – net and an increase in accounts payable and accrued expenses.
Cash provided by operating activities during the nine-month period ended July 31, 2021 was $448.4 million. Cash provided by operating activities during the fiscal 2021 period was primarily related to net income (adjusted for stock-based compensation, inventory impairments, depreciation and amortization, expenses related to the early retirement of debt, gain on sale of assets and deferred taxes); mortgage loans sold, net of mortgage loans originated; increases in customer deposits – net and accounts payable and accrued expenses; and a decrease in receivables, prepaid expenses, and other assets, offset, in part, by an increase in inventory.
Investing Activities
In the nine-month period ended July 31, 2022, cash used in investing activities was $94.9 million, which was primarily related to $176.6 million used to fund our investments in unconsolidated entities and $56.5 million used for the purchase of property and equipment. This activity was offset, in part, by $109.6 million of cash received as returns from our investments in unconsolidated entities and $28.3 million of cash proceeds from the sale of assets.
In the nine-month period ended July 31, 2021, cash provided by investing activities was $11.3 million, which was primarily related to $80.4 million of cash received from the sale of commercial properties and $166.0 million of cash received as returns from our investments in unconsolidated entities. This activity was offset, in part, by $190.0 million used to fund our investments in unconsolidated entities and $45.8 million used for the purchase of property and equipment.
Financing Activities
We used $946.3 million of cash in financing activities in the nine-month period ended July 31, 2022, primarily for the redemption of $409.9 million of senior notes; the repurchase of $383.9 million of our common stock; payments of $58.4 million of loans payable, net of borrowings, the payment of dividends on our common stock of $66.9 million and payments related to noncontrolling interest - net of $25.8 million.
We used $837.9 million of cash in financing activities in the nine-month period ended July 31, 2021, primarily for the repurchase of $275.1 million of our common stock; the payment of dividends on our common stock of $56.1 million; payments of $216.9 million of loans payable, net of borrowings; and redemption of senior notes of $294.2 million.
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CRITICAL ACCOUNTING ESTIMATES
As disclosed in our 2021 Form 10-K, our most critical accounting estimates relate to inventory, cost of revenue recognition, warranty and self-insurance, and investments in unconsolidated entities. Since October 31, 2021, there have been no material changes to those critical accounting estimates.
SUPPLEMENTAL GUARANTOR INFORMATION
At July 31, 2022, our 100%-owned subsidiary, Toll Brothers Finance Corp. (the “Subsidiary Issuer”), had issued and outstanding $2.00 billion aggregate principal amount of senior notes maturing on various dates between April 15, 2023 and November 1, 2029 (the “Senior Notes”). For further information regarding the Senior Notes, see Note 6 to our Consolidated Condensed Financial Statements under the caption “Senior Notes.”
The obligations of the Subsidiary Issuer to pay principal, premiums, if any, and interest are guaranteed jointly and severally on a senior basis by Toll Brothers, Inc. and substantially all of its 100%-owned home building subsidiaries (the “Guarantor Subsidiaries” and, together with us, the “Guarantors”). The guarantees are full and unconditional, and the Subsidiary Issuer and each of the Guarantor Subsidiaries are consolidated subsidiaries of Toll Brothers, Inc. Our non-home building subsidiaries and several of our home building subsidiaries (together, the “Non-Guarantor Subsidiaries”) do not guarantee the Senior Notes. The Subsidiary Issuer generates no operating revenues and does not have any independent operations other than the financing of our other subsidiaries by lending the proceeds of its public debt offerings, including the Senior Notes. Our home building operations are conducted almost entirely through the Guarantor Subsidiaries. Accordingly, the Subsidiary Issuer’s cash flow and ability to service the Senior Notes is dependent upon the earnings of the Company’s subsidiaries and the distribution of those earnings to the Subsidiary Issuer, whether by dividends, loans or otherwise. Holders of the Senior Notes have a direct claim only against the Subsidiary Issuer and the Guarantors. The obligations of the Guarantors under their guarantees will be limited as necessary to recognize certain defenses generally available to guarantors (including those that relate to fraudulent conveyance or transfer, voidable preference or similar laws affecting the rights of creditors generally) under applicable law.
The indentures under which the Senior Notes were issued provide that any of our subsidiaries that provide a guarantee of our obligations under the Revolving Credit Facility will guarantee the Senior Notes. The indentures further provide that any Guarantor Subsidiary may be released from its guarantee so long as (i) no default or event of default exists or would result from release of such guarantee; (ii) the Guarantor Subsidiary being released has consolidated net worth of less than 5% of the Company’s consolidated net worth as of the end of our most recent fiscal quarter; (iii) the Guarantor Subsidiaries released from their guarantees in any fiscal year comprise in the aggregate less than 10% (or 15% if and to the extent necessary to permit the cure of a default) of our consolidated net worth as of the end of our most recent fiscal quarter; (iv) such release would not have a material adverse effect on ours and our subsidiaries’ home building business; and (v) the Guarantor Subsidiary is released from its guaranty under the Revolving Credit Facility. If there are no guarantors under the Revolving Credit Facility, all Guarantor Subsidiaries under the indentures will be released from their guarantees.
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The following summarized financial information is presented for Toll Brothers, Inc., the Subsidiary Issuer, and the Guarantor Subsidiaries on a combined basis after intercompany transactions and balances have been eliminated among Toll Brothers, Inc., the Subsidiary Issuer and the Guarantor Subsidiaries, as well as their investment in, and equity in earnings from the Non-Guarantor Subsidiaries.
Summarized Balance Sheet Data (Amounts in millions):
July 31, 2022
Assets
Cash$125.0 
Inventory$9,218.3 
Amount due from Non-Guarantor Subsidiaries$694.7 
Total assets$10,680.4 
Liabilities & Stockholders' Equity
Loans payable$1,162.5 
Senior notes$1,995.0 
Total liabilities$5,570.9 
Stockholders' equity$5,109.5 
Summarized Statement of Operations Data (Amounts in millions):
For the nine months ended July 31, 2022
Revenues$6,179.4 
Cost of revenues$4,689.4 
Selling, general and administrative$700.3 
Income before income taxes$782.1 
Net income$585.7 


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SEGMENTS
The tables below summarize information related to units delivered and revenues, net contracts signed, and income (loss) before income taxes, by segment, for the periods indicated, and information related to backlog, by segment, as of the dates indicated.
Units Delivered and Revenues:
Three months ended July 31,
Revenues
($ in millions)		Units DeliveredAverage Delivered Price
($ in thousands)
20222021% Change20222021% Change20222021% Change
Traditional Home Building:
North$478.6 $402.9 19 %554 552 — %$864.0 $729.9 18 %
Mid-Atlantic254.0 276.9 (8)%267 361 (26)%$951.2 $766.9 24 %
South352.7 291.7 21 %469 435 8 %$752.0 $670.6 12 %
Mountain660.5 553.2 19 %802 755 6 %$823.6 $732.7 12 %
Pacific506.6 524.0 (3)%321 386 (17)%$1,578.2 $1,357.5 16 %
     Traditional Home Building2,252.4 2,048.7 10 %2,413 2,489 (3)%$933.4 $823.1 13 %
City Living2.8 184.1 (98)%1 108 (99)%$2,856.2 $1,704.6 68 %
Other1.1 1.6 
Total home sales revenues2,256.3 2,234.4 1 %2,414 2,597 (7)%$934.7 $860.4 9 %
Land sales revenues238.5 21.1 
Total revenues$2,494.8 $2,255.5 

Nine months ended July 31,
 Revenues
($ in millions)		Units DeliveredAverage Delivered Price
($ in thousands)
20222021% Change20222021% Change20222021% Change
Traditional Home Building:
North$1,174.9 $1,106.2 6 %1,437 1,565 (8)%$817.6 $706.8 16 %
Mid-Atlantic765.1 659.1 16 %819 892 (8)%$934.2 $738.9 26 %
South922.6 788.8 17 %1,263 1,184 7 %$730.5 $666.2 10 %
Mountain1,776.4 1,363.0 30 %2,219 1,885 18 %$800.5 $723.1 11 %
Pacific1,433.0 1,313.7 9 %982 959 2 %$1,459.3 $1,369.9 7 %
     Traditional Home Building6,072.0 5,230.8 16 %6,720 6,485 4 %$903.6 $806.6 12 %
City Living60.6 249.9 (76)%30 160 (81)%$2,020.0 $1,561.9 29 %
Other(2.4)0.6 
Total home sales revenues6,130.2 5,481.3 12 %6,750 6,645 2 %$908.2 $824.9 10 %
Land sales revenues433.2 267.7 
Total revenues$6,563.4 $5,749.0 





37

Net Contracts Signed:
Three months ended July 31,
Net Contract Value
($ in millions)		Net Contracted UnitsAverage Contracted Price
($ in thousands)
20222021% Change20222021% Change20222021% Change
Traditional Home Building:
North$251.1 $450.5 (44)%235 539 (56)%$1,068.7 $835.7 28 %
Mid-Atlantic224.7 314.7 (29)%186 361 (48)%$1,208.0 $871.9 39 %
South340.5 585.6 (42)%313 736 (57)%$1,088.0 $795.6 37 %
Mountain343.8 846.5 (59)%263 956 (72)%$1,307.1 $885.5 48 %
Pacific447.1 713.4 (37)%221 517 (57)%$2,023.1 $1,380.0 47 %
Traditional Home Building1,607.2 2,910.7 (45)%1,218 3,109 (61)%$1,319.6 $936.2 41 %
City Living57.0 69.0 (17)%48 45 7 %$1,187.3 $1,533.3 (23)%
Total$1,664.2 $2,979.7 (44)%1,266 3,154 (60)%$1,314.6 $944.7 39 %
 Nine months ended July 31,
Net Contract Value
($ in millions)		Net Contracted UnitsAverage Contracted Price
($ in thousands)
20222021% Change20222021% Change20222021% Change
Traditional Home Building:
North$1,115.7 $1,261.6 (12)%1,181 1,539 (23)%$944.7 $819.8 15 %
Mid-Atlantic871.9 966.1 (10)%806 1,120 (28)%$1,081.8 $862.6 25 %
South1,525.7 1,536.2 (1)%1,666 2,104 (21)%$915.8 $730.1 25 %
Mountain2,045.1 2,518.3 (19)%2,064 3,150 (34)%$990.8 $799.5 24 %
Pacific2,100.0 2,065.1 2 %1,287 1,478 (13)%$1,631.7 $1,397.2 17 %
Traditional Home Building7,658.4 8,347.3 (8)%7,004 9,391 (25)%$1,093.4 $888.9 23 %
City Living89.1 193.3 (54)%65 124 (48)%$1,370.8 $1,558.9 (12)%
Total$7,747.5 $8,540.6 (9)%7,069 9,515 (26)%$1,096.0 $897.6 22 %

Backlog:
 At July 31,
Backlog Value
($ in millions)		Backlog UnitsAverage Backlog Price
($ in thousands)
20222021% Change20222021% Change20222021% Change
Traditional Home Building:
North$1,407.3 $1,525.5 (8)%1,468 1,880 (22)%$958.6 $811.4 18 %
Mid-Atlantic1,110.8 1,077.7 3 %1,039 1,218 (15)%$1,069.1 $884.8 21 %
South2,636.2 1,786.2 48 %2,978 2,408 24 %$885.2 $741.8 19 %
Mountain3,292.0 2,826.8 16 %3,443 3,539 (3)%$956.1 $798.8 20 %
Pacific2,682.2 2,138.9 25 %1,749 1,563 12 %$1,533.6 $1,368.5 12 %
Traditional Home Building11,128.5 9,355.1 19 %10,677 10,608 1 %$1,042.3 $881.9 18 %
City Living56.8 82.4 (31)%48 53 (9)%$1,184.2 $1,554.1 (24)%
Total$11,185.3 $9,437.5 19 %10,725 10,661 1 %$1,042.9 $885.2 18 %

38

At October 31,
Backlog Value
($ in millions)		Backlog UnitsAverage Backlog Price
($ in thousands)
20212020% Change20212020% Change20212020% Change
Traditional Home Building:
North$1,465.9 $1,369.1 7 %1,724 1,906 (10)%$850.3 $718.3 18 %
Mid-Atlantic1,004.5 770.4 30 %1,053 990 6 %$954.0 $778.2 23 %
South1,965.2 1,038.4 89 %2,470 1,488 66 %$795.6 $697.9 14 %
Mountain3,021.9 1,670.7 81 %3,598 2,274 58 %$839.9 $734.7 14 %
Pacific2,013.3 1,387.1 45 %1,444 1,044 38 %$1,394.3 $1,328.6 5 %
Traditional Home Building9,470.8 6,235.7 52 %10,289 7,702 34 %$920.5 $809.6 14 %
City Living28.3 138.9 (80)%13 89 (85)%$2,173.0 $1,560.3 39 %
Total$9,499.1 $6,374.6 49 %10,302 7,791 32 %$922.1 $818.2 13 %

Income (Loss) Before Income Taxes ($ amounts in millions):
 Three months ended July 31,Nine months ended July 31,
 20222021% Change20222021% Change
Traditional Home Building:
North$80.5 $39.7 103 %$162.8 $97.8 66 %
Mid-Atlantic40.1 25.4 58 %117.4 68.1 72 %
South56.3 41.4 36 %121.8 101.2 20 %
Mountain120.6 85.1 42 %296.6 173.2 71 %
Pacific125.3 85.0 47 %306.8 206.7 48 %
Traditional Home Building422.8 276.6 53 %1,005.4 647.0 55 %
City Living (1)
(4.5)65.9 (107)%7.9 111.1 (93)%
Corporate and other(52.3)(39.1)(34)%(150.7)(157.5)4 %
Total$366.0 $303.4 21 %$862.6 $600.6 44 %
(1)    In the first quarter of fiscal 2021, we sold certain commercial assets associated with our Hoboken, New Jersey condominium projects for $82.4 million which is included in Land sales and other revenues. City Living recognized net gains of $38.3 million from these sales.
“Corporate and other” is comprised principally of general corporate expenses such as our executive offices; the corporate finance, accounting, audit, tax, human resources, risk management, information technology, marketing, and legal groups; interest income; income from certain of our ancillary businesses, including our apartment rental development business; and income from our Rental Property Joint Ventures and Gibraltar Joint Ventures.
39

Traditional Home Building
North
Three months ended July 31,Nine months ended July 31,
20222021Change20222021Change
Units Delivered and Revenues:
Home sales revenues ($ in millions)$478.6 $402.9 19 %$1,174.9 $1,106.2 6 %
Units delivered554 552 — %1,437 1,565 (8)%
Average delivered price ($ in thousands)$864.0 $729.9 18 %$817.6 $706.8 16 %
Net Contracts Signed:
Net contract value ($ in millions)$251.1 $450.5 (44)%$1,115.7 $1,261.6 (12)%
Net contracted units235 539 (56)%1,181 1,539 (23)%
Average contracted price ($ in thousands)$1,068.7 $835.7 28 %$944.7 $819.8 15 %
Home sales cost of revenues as a percentage of home sale revenues76.8 %82.7 %78.6 %82.8 %
Income before income taxes ($ in millions)$80.5 $39.7 103 %$162.8 $97.8 66 %
Number of selling communities at July 31,48 58 (17)%
The decrease in the number of homes delivered in the fiscal 2022 nine-month period was mainly due to a decrease in the number of homes in backlog at October 31, 2021, as compared to the number of homes in backlog at October 31, 2020. The increases in the average price of homes delivered in the fiscal 2022 periods were primarily due to sales price increases and a shift in the number of homes delivered to more expensive areas and/or products.
The decreases in the number of net contracts signed in the fiscal 2022 periods were mainly due to a decrease in the number of selling communities in the fiscal 2022 periods, limited lot releases in certain communities in the fiscal 2022 periods, and decreased demand in the three-month period ended July 31, 2022. The increases in the average value attributed to each signed contract in the fiscal 2022 periods were mainly due to sales price increases and a shift in the number of contracts signed to more expensive areas and/or products and, in the three-month period ended July 31, 2022, the steep decline in the number of contracted units signed.
The increases in income before income taxes in the fiscal 2022 periods were attributable to higher earnings from increased revenue and lower home sales cost of revenues, as a percentage of home sale revenues. The nine-month fiscal 2022 period also benefited from lower SG&A costs. The decreases in home sales cost of revenues, as a percentage of home sales revenues, in the fiscal 2022 periods were primarily due to a shift in product mix/areas to higher-margin areas, sales price increases, and lower interest expense as a percentage of home sales revenues.
40

Mid-Atlantic
Three months ended July 31,Nine months ended July 31,
20222021Change20222021Change
Units Delivered and Revenues:
Home sales revenues ($ in millions)$254.0 $276.9 (8)%$765.1 $659.1 16 %
Units delivered267 361 (26)%819 892 (8)%
Average delivered price ($ in thousands)$951.2 $766.9 24 %$934.2 $738.9 26 %
Net Contracts Signed:
Net contract value ($ in millions)$224.7 $314.7 (29)%$871.9 $966.1 (10)%
Net contracted units186 361 (48)%806 1,120 (28)%
Average contracted price ($ in thousands)$1,208.0 $871.9 39 %$1,081.8 $862.6 25 %
Home sales cost of revenues as a percentage of home sale revenues75.7 %82.9 %76.5 %80.9 %
Income before income taxes ($ in millions)$40.1 $25.4 58 %$117.4 $68.1 72 %
Number of selling communities at July 31,40 40 — %
The decreases in the number of homes delivered in the fiscal 2022 periods were mainly due to lower backlog conversion in the fiscal 2022 periods, primarily due to supply chain disruptions, labor shortages, and municipality-related delays. The increases in the average price of homes delivered in the fiscal 2022 periods were primarily due to a shift in the number of homes delivered to more expensive areas and/or products and sales price increases.
The decreases in the number of net contracts signed in the fiscal 2022 periods were mainly due to decreased demand in the three-month period ended July 31, 2022 and limited lot releases in certain communities. The increases in the average value attributed to each contract signed in the fiscal 2022 periods were mainly due to a shift in the number of contracts signed to more expensive areas and/or products and sales price increases, and, in the three-month period ended July 31, 2022, the steep decline in the number of contracted units signed.
The increases in income before income taxes in the fiscal 2022 periods were mainly due to lower home sales cost of revenues, as a percentage of home sale revenues. The decreases in home sales cost of revenues, as a percentage of home sales revenues, in the fiscal 2022 periods were primarily due to a shift in product mix/areas to higher-margin areas, sales price increases, and lower interest expense as a percentage of home sales revenues. The nine-month period ended July 31, 2021 also benefited from a $6.0 million gain recognized from an asset sale of commercial property by one of our Land Development Joint Ventures. No similar gains were recognized in the nine-month period ended July 31, 2022.
South
Three months ended July 31,Nine months ended July 31,
20222021Change20222021Change
Units Delivered and Revenues:
Home sales revenues ($ in millions)$352.7 $291.7 21 %$922.6 $788.8 17 %
Units delivered469 435 8 %1,263 1,184 7 %
Average delivered price ($ in thousands)$752.0 $670.6 12 %$730.5 $666.2 10 %
Net Contracts Signed:
Net contract value ($ in millions)$340.5 $585.6 (42)%$1,525.7 $1,536.2 (1)%
Net contracted units313 736 (57)%1,666 2,104 (21)%
Average contracted price ($ in thousands)$1,088.0 $795.6 37 %$915.8 $730.1 25 %
Home sales cost of revenues as a percentage of home sale revenues74.5 %76.1 %76.6 %76.6 %
Income before income taxes ($ in millions)$56.3 $41.4 36 %$121.8 $101.2 20 %
Number of selling communities at July 31,95 79 20 %
41

The increases in the number of homes delivered in the fiscal 2022 periods were mainly due to an increase in the number of homes in backlog at October 31, 2021, as compared to the number of homes in backlog at October 31, 2020. These increases were partially offset by lower backlog conversion in the fiscal 2022 periods, primarily due to supply chain disruptions, labor shortages, and municipality-related delays. The increases in the average price of homes delivered in the fiscal 2022 periods were primarily due to sales price increases and a shift in the number of homes delivered to more expensive areas.
The decreases in the number of net contracts signed in the fiscal 2022 periods were due principally to decreased demand in the three-month period ended July 31, 2022 and, in certain cases, our limiting of lot releases in certain communities during the fiscal 2022 periods. The increases in the average value attributed to each contract signed in the fiscal 2022 periods were primarily due to sales price increases and a shift in the number of contracts signed to more expensive areas or product types and, in the three-month period ended July 31, 2022, the steep decline in the number of contracted units signed.
The increases in income before income taxes in the fiscal 2022 periods were principally due to higher earnings from increased revenues and higher earnings from unconsolidated entities, partially offset by higher SG&A costs in the fiscal 2022 periods. The three-month fiscal 2022 period also benefited from a decrease in home sales cost of revenues as a percentage of home sales revenues. This decrease was primarily due to a shift in product mix/areas to higher-margin areas and lower interest expense as a percentage of home sales revenues in the fiscal 2022 period.

Mountain
Three months ended July 31,Nine months ended July 31,
20222021Change20222021Change
Units Delivered and Revenues:
Home sales revenues ($ in millions)$660.5 $553.2 19 %$1,776.4 $1,363.0 30 %
Units delivered802 755 6 %2,219 1,885 18 %
Average delivered price ($ in thousands)$823.6 $732.7 12 %$800.5 $723.1 11 %
Net Contracts Signed:
Net contract value ($ in millions)$343.8 $846.5 (59)%$2,045.1 $2,518.3 (19)%
Net contracted units263 956 (72)%2,064 3,150 (34)%
Average contracted price ($ in thousands)$1,307.1 $885.5 48 %$990.8 $799.5 24 %
Home sales cost of revenues as a percentage of home sale revenues74.9 %76.6 %75.6 %77.8 %
Income before income taxes ($ in millions)$120.6 $85.1 42 %$296.6 $173.2 71 %
Number of selling communities at July 31,102 100 2 %
The increases in the number of homes delivered in the fiscal 2022 periods were mainly due to an increase in the number of homes in backlog at October 31, 2021, as compared to the number of homes in backlog at October 31, 2020. These increases were partially offset by lower backlog conversion in the fiscal 2022 periods, primarily due to supply chain disruptions, labor shortages, and municipality-related delays. The increases in the average price of homes delivered in the fiscal 2022 periods were primarily due to sales price increases.
The decreases in the number of net contracts signed in the fiscal 2022 periods were primarily due to decreased demand in the three-month period ended July 31, 2022 and to our limiting of lot releases in certain communities during the fiscal 2022 periods. The increases in the average value attributed to each contract signed in the fiscal 2022 periods were mainly due to sales price increases and, in the three-month period ended July 31, 2022, the steep decline in the number of contracted units signed.
The increases in income before income taxes in the fiscal 2022 periods were due mainly to higher earnings from increased revenues in the fiscal 2022 periods and lower home sales cost of revenues, as a percentage of home sale revenues, partially offset by higher SG&A costs in the fiscal 2022 periods. The decreases in home sales cost of revenues, as a percentage of home sales revenues, in the fiscal 2022 periods were primarily due to a shift in product mix/areas to higher-margin areas, lower interest expense as a percentage of home sales revenues, and sales price increases.
42

Pacific
Three months ended July 31,Nine months ended July 31,
20222021Change20222021Change
Units Delivered and Revenues:
Home sales revenues ($ in millions)$506.6 $524.0 (3)%$1,433.0 $1,313.7 9 %
Units delivered321 386 (17)%982 959 2 %
Average delivered price ($ in thousands)$1,578.2 $1,357.5 16 %$1,459.3 $1,369.9 7 %
Net Contracts Signed:
Net contract value ($ in millions)$447.1 $713.4 (37)%$2,100.0 $2,065.1 2 %
Net contracted units221 517 (57)%1,287 1,478 (13)%
Average contracted price ($ in thousands)$2,023.1 $1,380.0 47 %$1,631.7 $1,397.2 17 %
Home sales cost of revenues as a percentage of home sale revenues68.9 %76.8 %71.4 %76.4 %
Income before income taxes ($ in millions)$125.3 $85.0 47 %$306.8 $206.7 48 %
Number of selling communities at July 31,46 34 35 %
The decrease in the number of homes delivered in the three-month fiscal 2022 period was principally due to lower backlog conversion, partially driven by municipality and supply chain delays on complete or near complete homes during the period. The increase in the number of homes delivered in the nine-month fiscal 2022 period was mainly due to an increase in the number of homes in backlog at October 31, 2021, as compared to the number of homes in backlog at October 31, 2020, partially offset by lower backlog conversion. The lower backlog conversion was primarily due to supply chain disruptions, labor shortages, and municipality-related delays. The increases in the average price of homes delivered in the fiscal 2022 periods were primarily due to sales price increases and a shift in the number of homes delivered to more expensive areas and/or products.
The decreases in the number of net contracts signed in the fiscal 2022 periods were primarily due to a decrease in demand during the three month period ended July 31, 2022 and to our limiting of lot releases in certain communities during the fiscal 2022 periods. The increases in the average value attributed to each contract signed in the fiscal 2022 periods were mainly due to sales price increases and a shift in product mix and, in the three-month period ended July 31, 2022, the steep decline in the number of contracted units signed.
The increases in income before income taxes in the fiscal 2022 periods were mainly due to lower home sales cost of revenues, as a percentage of home sales revenues. The decreases in home sales cost of revenues, as a percentage of home sales revenues, were primarily due to a shift in product mix/areas to higher-margin areas, lower interest expense as a percentage of home sales revenues, and sales price increases.
43

City Living
Three months ended July 31,Nine months ended July 31,
20222021Change20222021Change
Units Delivered and Revenues:
Home sales revenues ($ in millions)$2.8 $184.1 (98)%$60.6 $249.9 (76)%
Units delivered1 108 (99)%30 160 (81)%
Average delivered price ($ in thousands)$2,856.2 $1,704.6 68 %$2,020.0 $1,561.9 29 %
Net Contracts Signed:
Net contract value ($ in millions)$57.0 $69.0 (17)%$89.1 $193.3 (54)%
Net contracted units48 45 7 %65 124 (48)%
Average contracted price ($ in thousands)$1,187.3 $1,533.3 (23)%$1,370.8 $1,558.9 (12)%
Home sales cost of revenues as a percentage of home sale revenues155.6 %60.0 %62.8 %63.1 %
Income before income taxes ($ in millions) (1)
$(4.5)$65.9 (107)%$7.9 $111.1 (93)%
Number of selling communities at July 31,1 3 (67)%
(1)    In the first quarter of fiscal 2021, we sold certain commercial assets associated with our Hoboken, New Jersey condominium projects for $82.4 million which is included in Land sales and other revenues. City Living recognized net gains of $38.3 million from these sales.
The decreases in the number of homes delivered in the fiscal 2022 periods were attributable to a decrease in backlog at October 31, 2021 as compared to October 31, 2020, primarily driven by the reduction in the number of selling communities in our City Living business. The increases in the average price of homes delivered in fiscal 2022 periods were primarily due to a shift in the number of homes delivered to more expensive products and sales price increases.
The decrease in the number of net contracts signed in the fiscal 2022 nine-month period was mainly due to a decrease in the number of selling communities.
The decrease in income before income taxes in the three-month fiscal 2022 period was primarily due to decreased home sales revenue, higher home sales cost of revenues, as a percentage of home sales revenue, partially offset by lower SG&A costs. The increase in home sales cost of revenues, as a percentage of home sales revenue, was principally due to an impairment charge recognized in the fiscal 2022 period in connection with a planned asset sale. The decrease in income before income taxes in the nine-month fiscal 2022 period was primarily due to decreased home sales revenue, partially offset by lower home sales cost of revenues, as a percentage of home sales revenue and reduced SG&A costs. In addition, during the nine-month period of fiscal 2022, we recorded impairment charges of $8.8 million, principally in connection with planned asset sales. Furthermore, the nine-month fiscal 2021 period benefited from gains of $38.3 million recognized from the sales of a parking garage and retail space associated with one of our Hoboken, New Jersey condominium projects, offset by $2.1 million of other-than-temporary impairment charges that we recognized on two of our Home Building Joint Ventures.
Corporate and Other
In the three months ended July 31, 2022 and 2021, loss before income taxes was $52.3 million and $39.1 million, respectively. The increase in the loss before income taxes in the fiscal 2022 period was principally due to higher SG&A costs and lower earnings from our mortgage company operations primarily due to reduced volume and increased competition resulting in decreased spreads. In addition, the fiscal 2021 period benefited from a $17.0 million gain related to a property sale by one of our Rental Property Joint Ventures. The increase in SG&A costs in the fiscal 2022 period was primarily due to increased headcount, normal compensation increases, and additional investments in information technology.
In the nine months ended July 31, 2022 and 2021, loss before income taxes was $150.7 million and $157.5 million, respectively. The decrease in the loss before income taxes in the fiscal 2022 period was principally due to a $34.2 million charge incurred related to early retirement of debt during the fiscal 2021 period, a $21.0 million gain recognized in the fiscal 2022 period related to a property sale by one of our Rental Property Joint Ventures, and a gain of $9.0 million related to the bulk sale of security monitoring accounts by our smart home technologies business during the fiscal 2022 period. These improvements were offset in part, by higher SG&A costs, lower earnings from our mortgage company operations primarily due to a decrease in volume and reduced spreads, and higher losses incurred in our apartment living operations. In addition, the fiscal 2021 period benefited from $28.5 million of gains related to property sales by two of our Rental Property Joint Ventures.
44

The increase in SG&A costs in the fiscal 2022 period was primarily due to normal compensation increases, higher headcount, and additional investments made in information technology.
AVAILABLE INFORMATION
Our principal Internet address is www.tollbrothers.com, and our Investor Relations website is located at investors.tollbrothers.com. We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act available through our Investor Relations website, free of charge, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
We provide information about our business and financial performance, including our company overview, on our Investor Relations website. Additionally, we webcast our earnings calls and certain events we participate in with members of the investment community on our Investor Relations website. Corporate governance information, including our codes of ethics, corporate governance guidelines, and board committee charters, is also available on our Investor Relations website. The content of our websites is not incorporated by reference into this Quarterly Report on Form 10-Q or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk primarily due to fluctuations in interest rates. We utilize both fixed-rate and variable-rate debt. For fixed-rate debt, changes in interest rates generally affect the fair market value of the debt instrument, but not our earnings or cash flow. Conversely, for variable-rate debt, changes in interest rates generally do not impact the fair value of the debt instrument, but do affect our earnings and cash flow. We generally do not have the obligation to prepay fixed-rate debt before maturity, and, as a result, interest rate risk and changes in fair value should not have a significant impact on our fixed-rate debt until we are required or elect to refinance it.
The London Interbank Offered Rate (“LIBOR”) is the primary basis for determining interest payments on borrowings under each of our $650.0 million Term Loan Facility and our $1.905 billion Revolving Credit Facility. On March 5, 2021, ICE Benchmark Administration (“IBA”) confirmed it would cease publication of Overnight, 1, 3, 6 and 12 month US Dollar LIBOR settings immediately following the LIBOR publication on June 30, 2023. Various parties, including government agencies, are seeking to identify an alternative rate to replace LIBOR. The Alternative Reference Rates Committee, which was convened by the Federal Reserve Board and the New York Federal Reserve, has identified the Secured Overnight Financing Rate (“SOFR”) as the recommended risk-free alternative rate for US Dollar LIBOR. We expect a substantial portion of our indebtedness will eventually transition to bearing interest based on SOFR. At this time, it is not possible to predict the effect the anticipated discontinuance of LIBOR, or the establishment of alternative reference rates such as SOFR, will have on us or our borrowing costs. SOFR is a relatively new reference rate and its composition and characteristics are not the same as LIBOR. Given SOFR’s very limited history and potential volatility as compared to other benchmark or market rates, the future performance of SOFR cannot be predicted based on historical performance. The consequences of using SOFR could include an increase in the cost of our variable rate indebtedness. We are monitoring these transition efforts and, although each of our Term Loan Facility and Revolving Credit Facility contain provisions designed to accommodate an alternate reference rate, we may need to amend these and other contracts, such as interest rate hedges that reference these contracts, to accommodate any replacement rate. The potential effect of any such event on our cost of capital cannot yet be determined, but we do not expect it to have a material impact on our consolidated financial condition, results of operations, or cash flows.
45

The table below sets forth, at July 31, 2022, our debt obligations by scheduled maturity, weighted-average interest rates, and estimated fair value (amounts in thousands):
 Fixed-rate debt
Variable-rate debt (a)
Fiscal year of maturityAmountWeighted-
average
interest rate		AmountWeighted-
average
interest rate
2022$23,436 3.78%$13,060 2.05%
2023596,447 4.13%113,705 4.05%
2024120,260 4.37%— 
202584,264 5.15%— 
2026375,474 4.86%101,563 3.43%
Thereafter (b)
1,339,349 4.30%548,437 3.43%
Bond discounts, premiums and deferred issuance costs - net(4,971)(2,112)
Total$2,534,259 4.37%$774,653 3.50%
Fair value at July 31, 2022$2,475,006  $776,765  
(a)    Based upon the amount of variable-rate debt outstanding at July 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 $7.8 million per year, without consideration of the Company’s interest rate swap transactions.
(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. 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. The spread was 1.05% as of July 31, 2022. These interest rate swaps were designated as cash flow hedges.
ITEM 4. CONTROLS AND PROCEDURES
Any controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected; however, our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives.
Our Chief Executive Officer and Chief Financial Officer, with the assistance of management, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this report (the “Evaluation Date”). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
We continue to implement a new enterprise resource planning (“ERP”) system that affects many of our financial processes and is expected to improve the efficiency and effectiveness of certain financial and business transaction processes, as well as the underlying systems environment. The new ERP system will be a significant component of our internal control over financial reporting. Other than the ERP system implementation noted above, there has not been any change in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our quarter ended July 31, 2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are involved in various claims and litigation arising principally in the ordinary course of business. We believe that adequate provision for resolution of all current claims and pending litigation has been made and that the disposition of these matters will not have a material adverse effect on our results of operations and liquidity or on our financial condition.
ITEM 1A. RISK FACTORS
There have been no material changes in our risk factors as previously disclosed in Part I, Item 1A., “Risk Factors” in our 2021 Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
During the three-month period ended July 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 publicly announced plans or programs (b)
Maximum
number of shares
that may yet be
purchased under the plans or programs (b)
 (in thousands) (in thousands)(in thousands)
May 1, 2022 to May 31, 2022358 $44.81 358 19,999 
June 1, 2022 to June 30, 20221,680 $44.95 1,680 18,319 
July 1, 2022 to July 31, 2022— — 18,319 
Total2,038 $44.93 2,038 
(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. During the three months ended July 31, 2022, we withheld 6,909 of the shares subject to performance based restricted stock units and restricted stock units to cover approximately $307,900 of income tax withholdings and we issued the remaining 10,172 shares to the recipients. The shares withheld are not included in the total number of shares purchased in the table above.
Our stock incentive plans also permit participants to exercise non-qualified stock options using a “net exercise” method. In a net exercise, we generally withhold from the total number of shares that otherwise would be issued to the participant upon exercise of the stock option that number of shares having a fair market value at the time of exercise equal to the option exercise price and applicable income tax withholdings, and remit the remaining shares to the participant. During the three-month period ended July 31, 2022, the net exercise method was not employed to exercise options.
(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. This authorization terminated, effective May 17, 2022, the existing 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.
Except as set forth above, we have not repurchased any of our equity securities during the three-month period ended
July 31, 2022.

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Dividends
During the nine months ended July 31, 2022, we paid cash dividends of $0.57 per share to our shareholders. The payment of dividends is within the discretion of our Board of Directors and any decision to pay dividends in the future will depend upon an evaluation of a number of factors, including our results of operations, our capital requirements, our operating and financial condition, and any contractual limitations then in effect. Our revolving credit agreement and term loan agreement each require us to maintain a minimum tangible net worth (as defined in the applicable agreement), which restricts the amount of dividends we may pay. At July 31, 2022, under our bank credit agreements, we could have paid up to approximately $3.38 billion of cash dividends.
ITEM 6. EXHIBITS
4.1*
31.1*
31.2*
32.1*
32.2*
101The following financial statements from Toll Brothers, Inc. Quarterly Report on Form 10-Q for the quarter ended July 31, 2022, filed on September 1, 2022, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations and Comprehensive Income, (iii) Condensed Consolidated Statements of Changes in Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) the Notes to Condensed Consolidated Financial Statements.
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
*Filed electronically herewith.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
TOLL BROTHERS, INC.
(Registrant)
Date:September 1, 2022By:/s/ Martin P. Connor
Martin P. Connor
Senior Vice President and Chief Financial
Officer (Principal Financial Officer)
Date:September 1, 2022By:/s/ Michael J. Grubb
Michael J. Grubb
Senior Vice President and Chief Accounting
Officer (Principal Accounting Officer)

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