Toll Brothers Inc

Previous wording

Since January 2023, we have experienced solid demand for our homes as the housing market adjusted to a new environment following the steep and rapid rise in mortgage rates that occurred over the course of calendar year 2022. In recent months, the market for new homes has continued to benefit from a healthy job market, improving consumer sentiment and continued low levels of resale inventory. In the three months ended January 31, 2024, we signed 2,042 net contracts with an aggregate value of $2.06 billion as compared to 1,461 net contracts with an aggregate value of $1.45 billion in the three months ended January 31, 2023. Year-over-year, net signed contracts increased 39.8% in units and 42.0% in dollars in the first quarter of fiscal 2024. This increase in the number and value of net signed contracts reflects the improved demand environment for new homes that has existed since the last month of our 2023 fiscal first quarter. While the near-term direction of interest and mortgage rates, consumer sentiment and the overall economy is difficult to predict, over the longer term we continue to believe that the market for new homes will benefit from strong housing market fundamentals, including favorable demographic trends, the aging of the existing housing stock, and the supply-demand imbalance that has resulted from the persistent underproduction of homes relative to household formations.

Current wording

Although mortgage rates have remained elevated compared to the years preceding the Federal Reserve’s latest rate-hiking cycle, demand for new homes remained solid in the second quarter of fiscal 2024. We attribute the strength in demand to a resilient economy, favorable demographic trends and the continued imbalance in the supply and demand of for-sale homes, which has been caused by both the persistent underproduction of homes relative to household formations and by very low levels of resale inventory on the market. In addition, because we focus on the luxury segment of the market, our home buyers are generally more affluent than the average consumer and tend to be less sensitive to the affordability pressures caused by higher mortgage rates. In the three months ended April 30, 2024, we signed 3,041 net contracts with an aggregate value of $2.94 billion as compared to 2,333 net contracts with an aggregate value of $2.28 billion in the three months ended April 30, 2023. Year-over-year, net signed contracts increased 30% in units and 29% in dollars, respectively, in the second quarter of fiscal 2024. This increase in the number and value of net signed contracts reflects both the solid demand environment for new homes and the year-over-year increase in the number of communities from which we were selling during the quarter. At the end of the second quarter of fiscal 2024, we were selling from 386 communities, a 10% increase compared to the 350 communities in operation at the end of the second quarter of fiscal 2023. While it is difficult to predict the near-term impact on home demand of changes in the economy, including the impact of changes in mortgage rates, inflation expectations and consumer sentiment, over the longer term we continue to believe that the market for new homes will benefit from strong housing market fundamentals.

Previous wording

In the three months ended January 31, 2024, home sales revenue increased 10% as compared to the three months ended January 31, 2023. In this quarter, we delivered 1,927 homes with an average delivered price of $1,002,500, as compared to 1,826 delivered homes at an average price of $958,100 in the first quarter of fiscal 2023. The increase in the number of homes delivered was partially a result of improvements in our cycle times, as pandemic-induced supply chain and labor disruptions have largely subsided, a year-over-year increase in the number of communities we were operating from during the first quarter of fiscal 2024, and a higher backlog conversion ratio. While most of our homes are sold on a built-to-order basis where we do not begin construction of the home until we have a signed contract with a customer, in recent quarters, we have increased the number of quick move-in homes (or “spec” homes) in our inventory, which are homes started without a signed agreement with a customer. These homes allow us to compete more effectively with existing homes available in the market, especially for homebuyers that require a home within a short time frame. We sell our spec homes at various stages of construction and determine how many such homes to offer within each community based on local market factors, our current and planned sales pace and construction cadence for the community.

Current wording

In the three months ended April 30, 2024, home sales revenue increased 6% as compared to the three months ended April 30, 2023. In the quarter, we delivered 2,641 homes with an average delivered price of $1,002,300, as compared to 2,492 delivered homes at an average price of $999,200 in the second quarter of fiscal 2023. The year-over-year increase in the number of homes delivered was partially a result of improvements in our cycle times, as supply chain and labor disruptions have largely normalized, the year-over-year increase in the number of communities we were operating from during the second quarter of fiscal 2024, and a higher backlog conversion ratio. While most of our homes have historically been sold on a build-to-order basis, where we do not begin construction of the home until we have a signed contract with a customer, in recent quarters, we have increased the number of quick move-in homes (or “spec” homes) in our inventory, which are homes started without a signed agreement with a customer. In the second quarter of fiscal 2024, 54% of net signed contracts were spec homes and the remainder were build-to-order. Spec homes allow us to compete more effectively with existing homes available in the market, especially for homebuyers that wish to take delivery within a short time frame. We sell our spec homes at various stages of construction and determine how many such homes to offer within each community based on local market factors, our current and planned sales pace and construction cadence for the community.

Previous wording

In the three-month period ended January 31, 2024, we recognized $1.95 billion of revenues, consisting of $1.93 billion of home sales revenue and $16.0 million of land sales and other revenue, and net income of $239.6 million, as compared to $1.78 billion of revenues, consisting of $1.75 billion of home sales revenue and $30.7 million of land sales and other revenue, and net income of $191.5 million in the three-month period ended January 31, 2023.

Current wording

In the six-month period ended April 30, 2024, we recognized $4.79 billion of revenues, consisting of $4.58 billion of home sales revenues and $206.5 million of land sales and other revenues, and net income of $721.2 million, as compared to $4.29 billion of revenues, consisting of $4.24 billion of home sales revenues and $47.6 million of land sales and other revenues, and net income of $511.7 million in the six-month period ended April 30, 2023.

Previous wording

The value of our backlog at January 31, 2024 was $7.08 billion (6,693 homes), as compared to our backlog at January 31, 2023 of $8.58 billion (7,733 homes). Our backlog at October 31, 2023 was $6.95 billion (6,578 homes), as compared to backlog of $8.87 billion (8,098 homes) at October 31, 2022.

Current wording

The value of our backlog at April 30, 2024 was $7.38 billion (7,093 homes), as compared to our backlog at April 30, 2023 of $8.38 billion (7,574 homes). Our backlog at October 31, 2023 was $6.95 billion (6,578 homes), as compared to backlog of $8.87 billion (8,098 homes) at October 31, 2022.

Previous wording

At January 31, 2024, we had $754.8 million of cash and cash equivalents on hand and approximately $1.76 billion available under our $1.905 billion senior unsecured revolving credit facility (the “Revolving Credit Facility”). At January 31, 2024, we had no borrowings and we had approximately $146.1 million of outstanding letters of credit under our $1.905 billion Revolving Credit Facility.

Current wording

At April 30, 2024, we had $1.03 billion of cash and cash equivalents on hand and approximately $1.74 billion available under our $1.905 billion revolving credit facility (the “Revolving Credit Facility”). At April 30, 2024, we had no borrowings and we had approximately $170.0 million of outstanding letters of credit under the Revolving Credit Facility.

Previous wording

At January 31, 2024, we owned or controlled through options approximately 70,400 home sites, as compared to approximately 70,700 at October 31, 2023; and approximately 76,000 at October 31, 2022. Of the approximately 70,400 total home sites that we owned or controlled through options at January 31, 2024, we owned approximately 36,000 and controlled approximately 34,400 through options. Of the 36,000 home sites owned, approximately 18,400 were substantially improved. In addition, as of January 31, 2024, we expect to purchase approximately 8,600 additional home sites over several years from certain of the joint ventures in which we have interests, at prices to be determined.

Current wording

At April 30, 2024, we owned or controlled through options approximately 71,800 home sites, as compared to approximately 70,700 at October 31, 2023; and approximately 76,000 at October 31, 2022. Of the approximately 71,800 total home sites that we owned or controlled through options at April 30, 2024, we owned approximately 37,000 and controlled approximately 34,800 through options. Of the 37,000 home sites owned, approximately 18,500 were substantially improved. In addition, as of April 30, 2024, we expect to purchase approximately 8,400 additional home sites over several years from certain of the joint ventures in which we have interests, at prices to be determined.

Previous wording

At January 31, 2024, we were selling from 377 communities, compared to 370 at October 31, 2023 and 328 at January 31, 2023.

Current wording

At April 30, 2024, we were selling from 386 communities, compared to 370 at October 31, 2023; and 350 at April 30, 2023.

Previous wording

At January 31, 2024, our total stockholders’ equity and our debt to total capitalization ratio were $7.02 billion and 0.28 to 1.00, respectively.

Current wording

At April 30, 2024, our total stockholders’ equity and our debt to total capitalization ratio were $7.31 billion and 0.28 to 1.00, respectively.

Previous wording

The following table compares certain items in our Condensed Consolidated Statements of Operations and Comprehensive Income and other supplemental information for the three months ended January 31, 2024 and 2023 ($ amounts in millions, unless otherwise stated). For more information regarding results of operations by segment, see “Segments” in this MD&A.

Current wording

The following table compares certain items in our Condensed Consolidated Statements of Operations and Comprehensive Income and other supplemental information for the three months and six months ended April 30, 2024 and 2023 ($ amounts in millions, unless otherwise stated). For more information regarding results of operations by segment, see “Segments” in this MD&A.

Previous wording

The increase in home sale revenues for the three months ended January 31, 2024, as compared to the three months ended January 31, 2023, was primarily attributable to a 6% increase in the number of homes delivered and a 5% increase in the average price of homes delivered. The increase in the number of homes delivered in the three months ended January 31, 2024 was primarily due to more deliveries of spec homes coupled with higher backlog conversion as compared to the three months ended January 31, 2023. These factors are offset, in part, by a decrease in the number of homes in backlog at October 31, 2023, as compared to the number of homes in backlog at October 31, 2022, most notably in the Mountain and Pacific regions. 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 geographic regions, most notably in the Pacific region.

Current wording

The increase in home sale revenues for the six months ended April 30, 2024, as compared to the six months ended April 30, 2023, was primarily attributable to a 6% increase in the number of homes delivered and a 2% increase in the average price of homes delivered. The increase in the number of homes delivered in the six months ended April 30, 2024 was primarily due to more deliveries of spec homes, coupled with a higher backlog conversion in the six months ended April 30, 2024 compared to the six months ended April 30, 2023, primarily as a result of improvement in build times. These factors are offset, in part, by a decrease in the number of homes in backlog at October 31, 2023, as compared to the number of homes in backlog at October 31, 2022, most significantly in the Mountain and Pacific regions. 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, most notably in the Pacific region.

Previous wording

The decrease in home sales cost of revenues, as a percentage of home sales revenues, for the three months ended January 31, 2024, as compared to the three months ended January 31, 2023, was principally due toa shift in the mix of revenues to higher margin products/areas, sales price increases outpacing cost increases for homes delivered in the quarter, lower inventory impairment charges, and lower interest expense as a percentage of home sales revenues in the fiscal 2024 period. In the three months ended January 31, 2024 and 2023, interest expense, as a percentage of home sales revenues, was 1.2% and 1.4%, respectively, and inventory impairments included in homes sales cost of revenues were $1.5 million and $8.0 million, respectively.

Current wording

The decrease in home sales cost of revenues, as a percentage of home sales revenues, for the six months ended April 30, 2024, as compared to the six months ended April 30, 2023, was principally due toa shift in the mix of revenues to higher margin products/areas, sales price increases outpacing cost increases for homes delivered, and lower interest expense as a percentage of home sales revenues, offset, in part, byhigher inventory impairment charges in the fiscal 2024 period. In the six months ended April 30, 2024 and 2023, interest expense, as a percentage of home sales revenues, was 1.3% and 1.5%, respectively.

Previous wording

Our revenues from land sales and other generally consist of the following: (1) land sales to joint ventures in which we retain an interest; (2) lot sales to third-party builders within our master-planned communities; (3) bulk lot sales to third parties of land we have decided no longer meets our development criteria; (4) sales of land parcels to third parties (typically because there is a superior economic use of the property); and (5) sales of commercial and retail properties generally located at our urban luxury condominium communities. Land sales to joint ventures in which we retain an interest are generally sold at our land basis and therefore little to no gross margin is earned on these sales. The decrease in land sales and other cost of revenues as a percentage of land sales and other revenues was primarily due to $13.0 million of impairment charges recognized in the three months ended January 31, 2023 in connection with planned land sales. No similar impairment charges were recognized in the three months ended January 31, 2024.

Current wording

Our revenues from land sales and other generally consist of the following: (1) land sales to joint ventures in which we retain an interest; (2) lot sales to third-party builders within our master-planned communities; (3) bulk sales to third parties of land we have decided no longer meets our development criteria; (4) sales of land parcels to third parties (typically because there is a superior economic use of the property); and (5) sales of commercial and retail properties generally located at our

Previous wording

SG&A spending increased by $18.5 million in the fiscal 2024 three-month period, as compared to the fiscal 2023 three-month period. As a percentage of home sales revenues, SG&A was 11.9% in the fiscal 2024 period, as compared to 12.1% in the fiscal 2023 period. The dollar increase in SG&A was primarily due to higher commissions on increased home sales revenues. The decrease in SG&A as a percentage of revenues was due to revenues increasing 10% year-over-year in the fiscal 2024 period, while SG&A spending increased 9%.

Current wording

SG&A expenditures increased by $28.7 million in the fiscal 2024 six-month period, as compared to the fiscal 2023 six-month period. As a percentage of home sales revenues, SG&A expense was 10.2% in the fiscal 2024 period, as compared to 10.4% in the fiscal 2023 period. The dollar increase in SG&A expenditures was primarily due to higher commissions and marketing spend from greater sales volume and increased community count. The decrease in SG&A expense as a percentage of revenues was due to revenues increasing 8% year-over-year in the fiscal 2024 period, while SG&A expenditures increased 7%.

Previous wording

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 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.

Current wording

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.

Previous wording

In the three-month period ended January 31, 2024, we recognized a loss from unconsolidated entities of $9.2 million, as compared to a loss of $4.4 million in the prior year period. The increase in losses was primarily due to a higher losses by various Rental Property Joint Ventures that are currently in the development or lease-up phases, higher losses by two Home Building Joint Ventures, and lower earnings from a Land Development Joint Venture due to reduced lot sales in the fiscal 2024 period.

Current wording

In the three-month period ended April 30, 2024, we recognized income from unconsolidated entities of $5.9 million as compared to a loss of $5.3 million in the prior year period. The increase was primarily due a $21.0 million gain in the fiscal 2024 period related to our share of the gain from a property sale by one of our Rental Property Joint Ventures. This increase was offset, in part, by higher losses by various Rental Property Joint Ventures that are currently in the development or lease-up phase, losses incurred by two Home Building Joint Ventures, and lower earnings from a Land Development Joint Venture due to reduced volume of sales.

Previous wording

The increase in interest incomein the three month periods ended January 31, 2024 was primarily due to higher interest rates.

Current wording

The increase in interest income in the six month and three month periods ended April 30, 2024 was primarily due to higher interest rates on invested cash balances.

Previous wording

The increase in income from ancillary businesses in the three months ended January 31, 2024 was mainly due to the fiscal 2024 period benefiting from higher income from our mortgage and title operations due to higher volume.

Current wording

The increases in income from ancillary businesses in the three and six month periods ended April 30, 2024, were mainly due to a $4.4 million gain from a bulk sale of security monitoring accounts by our smart home technology business. In addition, the fiscal 2024 periods benefited from higher income from our mortgage and title operations due to increased volume. These increases were offset, in part, by higher operating losses incurred in our apartment living operations. Our apartment living operations were also impacted by $5.0 million of write-offs related to previously incurred costs that we believed not to be recoverable in three-month and six-month periods ended April 30, 2024, compared to $0.4 million in the three-month and six-month periods ended April 30, 2023.

Previous wording

The decrease in management fee income earned by our home building operations in the three month periods ended January 31, 2024 were primarily related to a decrease in fees from certain of our Rental Property Joint Ventures.

Current wording

The increases in management fee income earned by our home building operations in the three month and six month periods ended April 30, 2024 were primarily related to an increase in fees from certain of our Rental Property Joint Ventures.

Previous wording

The gain on litigation settlements - net in the fiscal 2023 period primarily relates to the settlement of an open insurance claim. No similar gains occurred in the fiscal 2024 period.

Current wording

The gain on litigation settlements - net in six months ended April 30, 2023 primarily relates to the settlement of an insurance claim. No similar gains occurred in the fiscal 2024 period.

Previous wording

For the three-month period ended January 31, 2024, we reported income before income taxes of $311.2 million, as compared to $253.8 million in the three-month period ended January 31, 2023.

Current wording

For the three-month period ended April 30, 2024, we reported income before income taxes of $649.8 million, as compared to $430.6 million in the three-month period ended April 30, 2023.

Previous wording

We recognized income tax provisions of $71.6 million and $62.3 million in the three-month periods ended January 31, 2024 and January 31, 2023, respectively. Based upon the federal statutory rate of 21.0% for the fiscal 2024 and 2023 periods, our federal tax provisions would have been $65.3 million and $53.3 million, in the three-month periods ended January 31, 2024 and January 31, 2023, 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, offset, in part, by excess tax benefits related to stock-based compensation.

Current wording

In the three-month periods ended April 30, 2024 and April 30, 2023, we recognized income tax provisions of $168.2 million and $110.4 million, respectively. Based upon the federal statutory rate of 21.0% for the fiscal 2024 and 2023 periods, our federal tax provisions would have been $136.5 million and $90.4 million, in the three-month periods ended April 30, 2024 and 2023, 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 excess tax benefits related to stock-based compensation.

Previous wording

In the three-month periods ended January 31, 2024 and 2023, the value of net contracts signed was $2.06 billion (2,042 homes) and $1.45 billion (1,461 homes), respectively. The aggregate value of net contracts signed increased $610.5 million, or 42.0%, in the three-month period ended January 31, 2024, as compared to the three-month period ended January 31, 2023. The increase in the aggregate value of net contracts signed was due to a 39.8% increase in the number of net contracts signed and a 1.6% increase in the average value attributed to each signed contract. The increase in the average value attributed to each signed contract is principally due to a shift in the number of contracts signed to more expensive areas and/or products and higher sales prices.

Current wording

In the six-month periods ended April 30, 2024 and 2023, the value of net contracts signed was $5.01 billion (5,083 homes) and $3.73 billion (3,794 homes), respectively. The aggregate value of net contracts signed increased $1.28 billion, or 34.2%, in the six-month period ended April 30, 2024, as compared to the six-month period ended April 30, 2023. The increase in the aggregate value of net contracts signed was due to a 34.0% increase in the number of net contracts signed and an 0.2% increase in the average value attributed to each signed contract. The increase in the number of net contracts signed reflects both the solid the solid demand environment and the year-over-year increase in the number of communities from which we were operating during the period. The average value of each signed contract in the six-months ended April 30, 2024 was essentially flat compared to the prior year period.

Previous wording

The value of our backlog at January 31, 2024 decreased 18% to $7.08 billion (6,693 homes), as compared to $8.58 billion (7,733 homes) at January 31, 2023. Our backlog at October 31, 2023 and 2022 was $6.95 billion (6,578 homes) and $8.87 billion (8,098 homes), respectively.

Current wording

The value of our backlog at April 30, 2024 decreased 12% to $7.38 billion (7,093 homes), as compared to $8.38 billion (7,574 homes) at April 30, 2023. Our backlog at October 31, 2023 and 2022 was $6.95 billion (6,578 homes) and $8.87 billion (8,098 homes), respectively. The decrease in the value of our backlog at April 30, 2024 as compared to April 30, 2023, is due to a 6% decrease in the number of homes in backlog and a 6% decrease in the average contracted price per home. These decreases are primarily attributable to spec homes representing a larger portion of our net signed contracts and homes delivered.

Previous wording

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.

Current wording

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. We also use cash to pay dividends on our common stock and may from time to time repay debt and make share repurchases with cash flows from operations and other sources. 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.

Previous wording

At January 31, 2024, we had $754.8 million of cash and cash equivalents on hand and approximately $1.76 billion available for borrowing under our Revolving Credit Facility. The Revolving Credit Facility provides us with a committed borrowing capacity of $1.905 billion, which we have the ability to increase up to $3.0 billion with the consent of lenders, and is scheduled to mature on February 14, 2028. Toll Brothers, Inc. and substantially all of its 100%-owned home building subsidiaries are guarantors of the borrower’s obligations under the Revolving Credit Facility. We are also a party to a $650.0 million unsecured Term Loan Facility of which $487.5 million matures on February 14, 2028, $60.9 million matures on November 1, 2026 and the remaining $101.6 million matures on November 1, 2025.

Current wording

At April 30, 2024, we had $1.03 billion of cash and cash equivalents on hand and approximately $1.74 billion available for borrowing under our Revolving Credit Facility. The Revolving Credit Facility provides us with a committed borrowing capacity of $1.905 billion, which we have the ability to increase up to $3.0 billion with the consent of lenders, and is scheduled to mature on February 14, 2028. Toll Brothers, Inc. and substantially all of its 100%-owned home building subsidiaries are guarantors of the borrower’s obligations under the Revolving Credit Facility. We are also a party to a $650.0 million unsecured Term Loan Facility of which $487.5 million matures on February 14, 2028, $60.9 million matures on November 1, 2026 and the remaining $101.6 million matures on November 1, 2025.

Previous wording

For at least the next twelve months, we expect our principal demand for funds will be for inventory additions (in the form of land acquisition, land development, home construction costs, and deposits to control land), operating expenses, including our general and administrative expenses, investments and funding of capital improvements, investments in existing and future unconsolidated joint ventures, repayment of community-level borrowings, 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 other borrowings from banks and other lenders. In addition, cash flow from operating activities in the second quarter of fiscal 2024 will include approximately $181 million related to the sale of a parcel of land to a commercial developer.

Current wording

For the next twelve months, we expect our principal demand for funds will be for inventory additions (in the form of land acquisition, land development, home construction costs, and deposits to control land, which could occur directly or indirectly through builder acquisitions), operating expenses, including our general and administrative expenses, investments and funding of capital improvements, investments in existing and future unconsolidated joint ventures, repayment of community-level borrowings, 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 other borrowings from banks and other lenders.

Previous wording

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.

Current wording

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 (which could occur directly or indirectly through builder acquisitions), long-term capital investments and investments in unconsolidated joint ventures, common stock repurchases, and dividend payments.

Previous wording

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 January 31, 2024, 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, obligations under our deferred compensation plan, and obligations under our supplemental executive retirement plans. We also enter into certain short-term lease commitments, commitments to fund our existing or future unconsolidated joint ventures, letters of credit and other purchase obligations in the normal course of business. For more information regarding our primary obligations, refer to Note 5, “Loans Payable, Senior Notes, and Mortgage Company Loan Facility,” and Note 13, “Commitments and Contingencies,” to the Condensed Consolidated Financial Statements for amounts outstanding as of January 31, 2024, related to debt and commitments and contingencies, respectively.

Current wording

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 April 30, 2024, 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, obligations under our deferred compensation plan, and obligations under our supplemental executive retirement plans. We also enter into certain short-term lease commitments, commitments to fund our existing or future unconsolidated joint ventures, letters of credit and other purchase obligations in the normal course of business. For more information regarding our primary obligations, refer to Note 5, “Loans Payable, Senior Notes, and Mortgage Company Loan Facility,” and Note 13, “Commitments and Contingencies,” in the Notes to the Condensed Consolidated Financial Statements for amounts outstanding as of April 30, 2024, related to debt and commitments and contingencies, respectively.

Previous wording

We also operate through a number of joint ventures and have undertaken various commitments as a result of those arrangements. At January 31, 2024, we had investments in these entities of $995.8 million and were committed to invest or advance up to an additional $340.2 million to these entities if they require additional funding. At January 31, 2024, we had agreed to terms for the acquisition of 360 home sites from five joint ventures for an estimated aggregate purchase price of $31.0 million. In addition, we expect to purchase approximately 8,600 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.

Current wording

We also operate through a number of joint ventures and have undertaken various commitments as a result of those arrangements. At April 30, 2024, we had investments in these entities of $1.00 billion and were committed to invest or advance up to an additional $319.4 million to these entities if they require additional funding. At April 30, 2024, we had agreed to terms for the acquisition of 369 home sites from four joint ventures for an estimated aggregate purchase price of $31.5 million. We also expect to purchase approximately 8,400 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.

Previous wording

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 January 31, 2024, in the event we become legally obligated to perform under a guarantee of the obligation of an unconsolidated entity due to a triggering event, the collateral in such entity should be sufficient to repay all or a significant portion of the obligation. If it is not, we and our partners would need to contribute additional capital to the entity. At January 31, 2024, we had guaranteed the debt of certain unconsolidated entities that have loan commitments aggregating $3.34 billion, of which, if the full amount of the debt obligations were borrowed, we estimate $688.0 million to be our maximum exposure related to repayment and carry cost guarantees. At January 31, 2024, the unconsolidated entities had borrowed an aggregate of $1.87 billion, of which we estimate $571.7 million to be our maximum exposure related to repayment and carry cost guarantees. The terms of these guarantees generally range from 2 months to 3.8 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.

Current wording

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 April 30, 2024, in the event we become legally obligated to perform under a guarantee of the obligation of an unconsolidated entity due to a triggering event, the collateral in such entity should be sufficient to repay all or a significant portion of the obligation. If it is not, we and our partners would need to contribute additional capital to the entity. At April 30, 2024, we had guaranteed the debt of certain unconsolidated entities that have loan commitments aggregating $3.22 billion, of which, if the full amount of the debt obligations were borrowed, we estimate $694.8 million to be our maximum exposure related to repayment and carry cost guarantees. At April 30, 2024, the unconsolidated entities had borrowed an aggregate of $2.00 billion, of which we estimate $590.6 million to be our maximum exposure related to repayment and carry cost guarantees. The terms of these guarantees generally range from 1 month to 3.5 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.

Previous wording

For more information regarding these joint ventures, see Note 3, “Investments in Unconsolidated Entities” in the Notes to Condensed Consolidated Financial Statements.

Current wording

For more information regarding these joint ventures, see Note 3, “Investments in Unconsolidated Entities” in the Notes to the Condensed Consolidated Financial Statements.

Previous wording

At January 31, 2024 and October 31, 2023, we had $754.8 million and $1.30 billion, respectively, of cash and cash equivalents. Cash used in operating activities during the three-month period ended January 31, 2024 was $307.0 million. Cash used in operating activities during the fiscal 2024 period was primarily related to an increase in inventory; decreases in accounts payable and accrued expenses, current income taxes – net, and customer deposits – net; and an increase in receivables, prepaid expenses, and other assets. This activity was offset, in part, by net income (adjusted for stock-based compensation, depreciation and amortization, income and distributions of earnings from unconsolidated entities, deferred taxes and impairments); and mortgage loans sold, net of mortgage loans originated.

Current wording

At April 30, 2024 and October 31, 2023, we had $1.03 billion and $1.30 billion, respectively, of cash and cash equivalents. Cash provided by operating activities during the six-month period ended April 30, 2024 was $152.0 million. Cash provided by operating activities during the fiscal 2024 period was primarily related to net income (adjusted for stock-based compensation, depreciation and amortization, losses and distributions of earnings from unconsolidated entities, deferred taxes, impairments and gain on sale of assets); increases in accounts payable and accrued expenses, and current income taxes – net. This activity was offset, in part, by an increase in inventory; mortgage loans originated, net of mortgage loans sold, a decrease in customer deposits – net; and an increase in receivables, prepaid expenses, and other assets.

Previous wording

At January 31, 2023 and October 31, 2022, we had $791.6 million and $1.35 billion, respectively, of cash and cash equivalents. Cash used in operating activities during the three-month period ended January 31, 2023 was $357.8 million. Cash used in operating activities during the fiscal 2023 period was primarily related to an increase in inventory, a decrease in accounts payable and accrued expenses, a decrease in current income taxes - net and a decrease in customer deposits – net. This activity was offset, in part, by net income (adjusted for stock-based compensation, impairments, depreciation and amortization, income and distributions of earnings from unconsolidated entities and deferred taxes); mortgage loans sold, net of mortgage loans originated; and a decrease in receivables, prepaid expenses, and other assets.

Current wording

At April 30, 2023 and October 31, 2022, we had $761.9 million and $1.35 billion, respectively, of cash and cash equivalents. Cash provided by operating activities during the six-month period ended April 30, 2023 was $145.6 million. Cash provided by operating activities during the fiscal 2023 period was primarily related to net income (adjusted for stock-based compensation, impairments, depreciation and amortization, income and distributions of earnings from unconsolidated entities and deferred taxes); mortgage loans sold, net of mortgage loans originated; and a decrease in receivables, prepaid expenses, and other assets. This activity was offset, in part, an increase in inventory, a decrease in accounts payable and accrued expenses, a decrease in current income taxes - net and a decrease in customer deposits – net.

Previous wording

In the three-month period ended January 31, 2024, cash used in investing activities was $59.4 million, which was primarily related to $58.9 million used to fund our investments in unconsolidated entities and $13.6 million used for the purchase of property and equipment. This activity was offset, in part, by $13.1 million of cash received as returns from our investments in unconsolidated entities.

Current wording

In the six-month period ended April 30, 2024, cash used in investing activities was $100.7 million, which was primarily related to $99.6 million used to fund our investments in unconsolidated entities and $29.7 million used for the purchase of property and equipment. This activity was offset, in part, by $29.3 million of cash received as returns from our investments in unconsolidated entities.

Previous wording

In the three-month period ended January 31, 2023, cash used in investing activities was $69.4 million, which was primarily related to $74.6 million used to fund our investments in unconsolidated entities and $19.7 million used for the purchase of property and equipment. This activity was offset, in part, by $15.9 million of cash received as returns from our investments in unconsolidated entities and $9.0 million of cash proceeds from the sale of assets.

Current wording

In the six-month period ended April 30, 2023, cash used in investing activities was $99.2 million, which was primarily related to $117.2 million used to fund our investments in unconsolidated entities and $39.5 million used for the purchase of property and equipment. This activity was offset, in part, by $48.6 million of cash received as returns from our investments in unconsolidated entities and $9.0 million of cash proceeds from the sale of assets.

Previous wording

We used $178.0 million of cash in financing activities in the three-month period ended January 31, 2024, primarily for the payments of $145.6 million of loans payable, net of borrowings, the payment of dividends on our common stock of $23.3 million, and $9.3 million of payments related to stock-based benefit plans - net.

Current wording

We used $308.2 million of cash in financing activities in the six-month period ended April 30, 2024, primarily for the repurchase of $180.1 million of our common stock, the payments of $77.7 million of loans payable, net of borrowings, the payment of dividends on our common stock of $47.1 million, and $3.5 million of payments related to stock-based benefit plans - net.

Previous wording

We used $132.5 million of cash in financing activities in the three-month period ended January 31, 2023, primarily for payments of $125.1 million of loans payable, net of borrowings, the payment of dividends on our common stock of $22.9 million, and the repurchase of $9.4 million of our common stock. This activity was offset, in part, by $24.9 million of proceeds related to stock-based benefit plans - net.

Current wording

We used $635.3 million of cash in financing activities in the six-month period ended April 30, 2023, primarily for the redemption of $400.0 million of senior notes, payments of $118.9 million of loans payable, net of borrowings, the payment of dividends on our common stock of $46.3 million the repurchase of $93.1 million of our common stock and payments of $5.3 million of debt issuance costs. This activity was offset, in part, by $28.3 million of proceeds related to stock-based benefit plans - net.

Previous wording

At January 31, 2024, our 100%-owned subsidiary, Toll Brothers Finance Corp. (the “Subsidiary Issuer”), had issued and outstanding $1.60 billion aggregate principal amount of senior notes maturing on various dates between November 15, 2025 and November 1, 2029 (the “Senior Notes”). For further information regarding the Senior Notes, see Note 5 to our Consolidated Condensed Financial Statements under the caption “Senior Notes.”

Current wording

At April 30, 2024, our 100%-owned subsidiary, Toll Brothers Finance Corp. (the “Subsidiary Issuer”), had issued and outstanding $1.60 billion aggregate principal amount of senior notes maturing on various dates between November 15, 2025 and November 1, 2029 (the “Senior Notes”). For further information regarding the Senior Notes, see Note 5, “Loans Payable, Senior Notes and Mortgage Company Loan Facility” in the Notes to the Consolidated Condensed Financial Statements under the caption “Senior Notes.”

Previous wording

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.

Current wording

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.

Previous wording

The decrease in the number of homes delivered in the fiscal 2024 period was mainly due to a decrease in the number of homes in backlog at October 31, 2023, as compared to the number of homes in backlog at October 31, 2022 and lower backlog conversion, offset, in part, by an increase in spec homes delivered. The increase in the average prices of homes delivered in the fiscal 2024 period was primarily due to sales price increases and a shift in the number of homes delivered to more expensive areas and/or products.

Current wording

The decreases in the number of homes delivered in the fiscal 2024 periods were mainly due to a decrease in the number of homes in backlog at October 31, 2023, as compared to the number of homes in backlog at October 31, 2022 offset, in part, by an increase in spec homes delivered. The increases in the average prices of homes delivered in the fiscal 2024 periods were primarily due to sales price increases and a shift in the number of homes delivered to more expensive areas and/or products.