Toll Brothers Inc

Previous 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.

Current wording

Through the first nine months of fiscal 2024, demand for our homes remained solid despite an uncertain economic outlook and mortgage rates that have remained elevated compared to the years preceding the Federal Reserve’s latest rate-hiking cycle, which began in March 2022. In the nine months ended July 31, 2024, we signed 7,573 net contracts for an aggregate value of $7.41 billion, an increase of approximately 25% in both units and dollars compared to the prior-year period. We attribute the resiliency in demand for new homes to, among other factors, strong demographic trends and the persistent underproduction of homes relative to household formations for well over the past decade. This structural undersupply of homes has been exacerbated in recent years by low levels of resale inventory on the market, caused in part by homeowners who are reluctant to sell because of the higher mortgage rate environment. In our most recent quarter, demand declined compared to the first half of the fiscal year, with net signed contracts up approximately 11% in both units and dollars primarily due to the year-over-year increase in the number of communities from which we were selling during the quarter. At the end of the third quarter of fiscal 2024, we were selling from 404 communities, a 17% increase compared to the 345 communities in operation at the end of the third quarter of fiscal 2023. In recent months, the Federal Reserve has indicated that it is likely to lower short-term interest rates, which we believe will put downward pressure on mortgage rates and should, in turn, increase sales of both new and existing homes. However, it is difficult to predict the near-term direction of home demand due to the many and varied factors that impact it, including changes in economic conditions, long-term interest rates, inflation expectations and consumer sentiment. Over the longer term we continue to believe that the market for new homes will benefit from the strong drivers of demand for new homes described above.

Previous 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.

Current wording

In the three months ended July 31, 2024, home sales revenue increased 2% as compared to the three months ended July 31, 2023. In the quarter, we delivered 2,814 homes with an average delivered price of $968,200, as compared to 2,524 delivered homes at an average price of $1,059,700 in the third quarter of fiscal 2023. The year-over-year increase in the number of homes delivered was primarily the result of the year-over-year increase in the number of communities we were operating from during the third quarter of fiscal 2024, and a higher backlog conversion ratio. The year-over-year decline in average delivered price was primarily due to our strategic expansion of our product lines and price points to include more affordable homes, and our increased production of quick move-in (or “spec”) homes. 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, over the past two years, we have increased the number of spec homes in our inventory, which are homes started without a signed agreement with a customer. In the third 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 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.

Current wording

In the three-month period ended July 31, 2024, we recognized $2.73 billion of revenues, consisting of $2.72 billion of home sales revenue and $3.5 million of land sales and other revenue, and net income of $374.6 million, as compared to $2.69 billion of revenues, consisting of $2.67 billion of home sales revenue and $13.0 million of land sales and other revenue, and net income of $414.8 million in the three-month period ended July 31, 2023.

Previous wording

In the three-month period ended April 30, 2024, we recognized $2.84 billion of revenues, consisting of $2.65 billion of home sales revenue and $190.5 million of land sales and other revenue, and net income of $481.6 million, as compared to $2.51 billion of revenues, consisting of $2.49 billion of home sales revenue and $16.9 million of land sales and other revenue, and net income of $320.2 million in the three-month period ended April 30, 2023. Land sales and other revenue and net income in the fiscal 2024 period included $185.0 million and $124.1 million, respectively, related to the sale of a single parcel of land in northern Virginia to a commercial developer.

Current wording

In the nine-month period ended July 31, 2024, we recognized $7.51 billion of revenues, consisting of $7.30 billion of home sales revenues and $210.0 million of land sales and other revenues, and net income of $1.10 billion, as compared to $6.97 billion of revenues, consisting of $6.91 billion of home sales revenues and $60.7 million of land sales and other revenues, and net income of $926.5 million in the nine-month period ended July 31, 2023. Land sales and other revenue and net income in the nine months ended July 31, 2024 period included $185.0 million and $124.1 million, respectively, related to the sale of a single parcel of land in northern Virginia to a commercial developer.

Previous 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.

Current wording

The value of our backlog at July 31, 2024 was $7.07 billion (6,769 homes), as compared to our backlog at July 31, 2023 of $7.87 billion (7,295 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 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.

Current wording

At July 31, 2024, we had $893.4 million of cash and cash equivalents and approximately $1.77 billion available under our $1.955 billion revolving credit facility (the “Revolving Credit Facility”). At July 31, 2024, we had no borrowings and we had approximately $180.9 million of outstanding letters of credit under the Revolving Credit Facility.

Previous 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.

Current wording

At July 31, 2024, we owned or controlled through options approximately 72,700 home sites, as compared to approximately 70,700 at October 31, 2023; and approximately 76,000 at October 31, 2022. Of the approximately 72,700 total home sites that we owned or controlled through options at July 31, 2024, we owned approximately 36,300 and controlled approximately 36,400 through options. Of the 36,300 home sites owned, approximately 19,300 were substantially improved. In addition, as of July 31, 2024, we expect to purchase approximately 8,100 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 April 30, 2024, we were selling from 386 communities, compared to 370 at October 31, 2023; and 350 at April 30, 2023.

Current wording

At July 31, 2024, we were selling from 404 communities, compared to 370 at October 31, 2023; and 345 at July 31, 2023.

Previous 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.

Current wording

At July 31, 2024, our total stockholders’ equity and our debt to total capitalization ratio were $7.41 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 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.

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 nine months ended July 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.

Previous wording

The increase in home sale revenues for thethree months ended April 30, 2024, as compared to thethree months ended April 30, 2023, was primarily attributable to a 6% increase in the number of homes delivered. The increase in the number of homes delivered in the three months ended April 30, 2024 was primarily due to more deliveries of spec homes, coupled with a higher backlog conversion in the three months ended April 30, 2024 compared to the three months ended April 30, 2023, primarily as a result of improvement in build times. These factors were 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.

Current wording

The increase in home sale revenues for thethree months ended July 31, 2024, as compared to thethree months ended July 31, 2023, was primarily attributable to an 11% increase in the number of homes delivered offset by a 9% decrease in the average price of homes delivered. The increase in the number of homes delivered in the three months ended July 31, 2024 was primarily due to an increase in operating communities, more deliveries of spec homes, and a higher backlog conversion in the three months ended July 31, 2024 compared to the three months ended July 31, 2023, primarily as a result of improvement in build times. These factors were 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 decrease in the average delivered home price was mainly due to an increase in homes delivered in less expensive product types/geographic regions, most notably in the Mid-Atlantic and Pacific regions.

Previous wording

The increase in home sales cost of revenues, as a percentage of home sales revenues, in thethree months ended April 30, 2024, as compared to thethree months ended April 30, 2023, was principally due to a higher inventory impairment charges in the fiscal 2024 period.

Current wording

The increase in home sales cost of revenues, as a percentage of home sales revenues, in thethree months ended July 31, 2024, as compared to thethree months ended July 31, 2023, was principally due to a shift in the mix of revenues to lower margin products/areas, most notably in the Mid-Atlantic, Mountain and Pacific regions, and higher inventory impairment charges in the fiscal 2024 period.

Previous 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.

Current wording

The increase in home sale revenues for the nine months ended July 31, 2024, as compared to the nine months ended July 31, 2023, was primarily attributable to an 8% increase in the number of homes delivered offset by a 2% decrease in the average price of homes delivered. The increase in the number of homes delivered in the nine months ended July 31, 2024 was primarily due to an increase in operating communities, more deliveries of spec homes, and a higher backlog conversion in the nine months ended July 31, 2024 compared to the nine months ended July 31, 2023, primarily as a result of improvement in build times. These factors were 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 decrease in the average delivered home price was mainly due to an increase in homes delivered in less expensive product types/geographic regions, most notably in the Mid-Atlantic region.

Previous 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.

Current wording

The decrease in home sales cost of revenues, as a percentage of home sales revenues, for the nine months ended July 31, 2024, as compared to the nine months ended July 31, 2023, was principally due toa shift in the mix of revenues to higher margin products/areas 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 nine months ended July 31, 2024 and 2023, interest expense, as a percentage of home sales revenues, was 1.2% and 1.4%, respectively.

Previous wording

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 increase in land sales and other revenues during the three and six months ended April 30, 2024 compared to the three and six months ended April 30, 2023 was primarily due to the sale of a land parcel to a commercial developer for net cash proceeds of $180.7 million which resulted in a pre-tax gain of $175.2 million. The increase in land sales and other cost of revenues as a percentage of land sales and other revenues was also positively impacted by lower impairment charges in the fiscal 2024 periods. We recognized $0.6 million of impairment charges in each of the three and six month periods ended April 30, 2024, in connection with planned land sales. This compares to $4.7 million and $17.7 million of land sales and other impairment charges recognized in the three andsix months ended April 30, 2023, respectively.

Current wording

The decrease in land sales and other cost of revenues as a percentage of land sales and other revenues in the nine months ended July 31, 2024 compared to the nine months ended July 31, 2023 was primarily due to the sale of a land parcel to a commercial developer for net cash proceeds of $180.7 million which resulted in a pre-tax gain of $175.2 million. In addition, we incurred lower impairment charges in the 2024 period. We recognized $4.4 million of impairment charges in the nine-month period ended July 31, 2024 in connection with planned land sales. This compares to $17.7 million of land sales and other impairment charges recognized in the nine months ended July 31, 2023.

Previous wording

SG&A expenditures increased by $10.2 million in the three-month period ended April 30, 2024, as compared to the three-month period ended April 30, 2023. As a percentage of home sales revenues, SG&A expense was 9.0% in the three months ended April 30, 2024, as compared to 9.1% in the three months ended April 30, 2023. The dollar increase in SG&A expenditures was due primarily 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 a relatively lower increase in SG&A expenditures compared to the 6% increase in revenues.

Current wording

SG&A expenditures increased by $15.8 million in the three-month period ended July 31, 2024, as compared to the three-month period ended July 31, 2023. As a percentage of home sales revenues, SG&A expense was 9.0% in the three months ended July 31, 2024, as compared to 8.6% in the three months ended July 31, 2023. The dollar increase in SG&A expenditures was due primarily to higher commissions and marketing spend from greater sales volume and increased community count. The increase in SG&A expense as a percentage of revenues was primarily due to the volume of new community openings in the fiscal 2024 period.

Previous 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%.

Current wording

SG&A expenditures increased by $44.5 million in the fiscal 2024 nine-month period, as compared to the fiscal 2023 nine-month period. As a percentage of home sales revenues, SG&A expense was 9.8% in the fiscal 2024 period, as compared to 9.7% 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 increase in SG&A expense as a percentage of revenues was due to revenues increasing 6% year-over-year in the fiscal 2024 period, while SG&A expenditures increased 7%.

Previous wording

In the six-month period ended April 30, 2024, we recognized a loss from unconsolidated entities of $3.3 million, as compared to a loss of $9.7 million in the prior year period. The decrease in losses 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.

Current wording

In the three-month period ended July 31, 2024, we recognized a loss from unconsolidated entities of $10.5 million as compared to income of $30.5 million in the prior year period. The decrease was primarily due to a $35.0 million gain in the fiscal 2023 period related to a property sale by one of our Rental Property Joint Ventures, which did not recur in the 2024 period, higher losses by various Rental Property Joint Ventures, reduced income at one Home Building Joint Venture due to its underlying assets being sold out, and higher losses at one Home Building Joint Venture that recently commenced closing its units.

Previous 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.

Current wording

In the nine-month period ended July 31, 2024, we recognized a loss from unconsolidated entities of $13.8 million, as compared to income of $20.8 million in the prior year period. The decrease was primarily due to a $35.0 million gain in the fiscal 2023 period related to a property sale by one of our Rental Property Joint Ventures compared to $21.0 million of such gains in the fiscal 2024 period. In addition, there were higher losses by various Rental Property Joint Ventures, higher losses incurred by one Home Building Joint Venture, reduced income at one Home Building Joint Venture due to its underlying assets being sold out, and lower earnings from a Land Development Joint Venture due to reduced sales volume.

Previous 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.

Current wording

The increase in interest income in the three-month and nine-month periods ended July 31, 2024 was primarily due to higher interest rates on invested cash balances.

Previous 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.

Current wording

The increase in income from ancillary businesses in the nine-month period ended July 31, 2024, was 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 and increased management fees related to our high-rise urban luxury condominium business operations as a result of unit closings. These increases were offset, in part, by higher operating losses incurred in our apartment living operations. Our apartment living operations were also impacted by $1.8 million and $6.7 million of write-offs related to previously incurred costs that we believed not to be recoverable in both the three-month and nine-month periods ended July 31, 2024, respectively, compared to $2.9 million and $3.3 million in the three-month and nine-month periods ended July 31,2023, respectively.

Previous 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.

Current wording

The increases in management fee income earned by our home building operations in the three-month and nine-month periods ended July 31, 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 six months ended April 30, 2023 primarily relates to the settlement of an insurance claim. No similar gains occurred in the fiscal 2024 period.

Current wording

The gain on litigation settlements - net in nine months ended July 31, 2023 primarily relates to the settlement of an insurance claim. No similar gains occurred in the fiscal 2024 period.

Previous wording

The increases in “other” in the three month and six month periods ended April 30, 2024 were primarily due to a $5.0 gain recognized related to an investment we held in a privately held company which sold substantially all of its assets to a third party during the period.

Current wording

The increase in “other” in the nine-month period ended July 31, 2024 was primarily due to a $5.0 million gain related to an investment we held in a privately held company which sold substantially all of its assets to a third party during the period.

Previous 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.

Current wording

For the three-month period ended July 31, 2024, we reported income before income taxes of $503.6 million, as compared to $553.0 million in the three-month period ended July 31, 2023.

Previous wording

For the six-month period ended April 30, 2024, we reported income before income taxes of $960.9 million, as compared to $684.4 million in the six-month period ended April 30, 2023.

Current wording

For the nine-month period ended July 31, 2024, we reported income before income taxes of $1.46 billion, as compared to $1.24 billion in the nine-month period ended July 31, 2023.

Previous wording

We recognized income tax provisions of $239.8 million and $172.6 million in the six-month periods ended April 30, 2024 and April 30, 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 $201.8 million and $143.7 million, in the six-month periods ended April 30, 2024 and April 30, 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.

Current wording

In the three-month periods ended July 31, 2024 and 2023, we recognized income tax provisions of $129.0 million and $138.2 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 $105.8 million and $116.1 million, in the three-month periods ended July 31, 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.

Previous 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.

Current wording

We recognized income tax provisions of $368.8 million and $310.9 million in the nine-month periods ended July 31, 2024 and 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 $307.6 million and $259.9 million, in the nine-month periods ended July 31, 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 April 30, 2024 and 2023, the value of net contracts signed was $2.94 billion (3,041 homes) and $2.28 billion (2,333 homes), respectively. The aggregate value of net contracts signed increased $665.7 million, or 29.3%, in the three-month period ended April 30, 2024, as compared to the three-month period ended April 30, 2023. The increase in the aggregate value of net contracts signed was due to a 30.3% increase in the number of net contracts signed offset, in part, by a 0.8% decrease in the average value of each signed contract. The increase in the number of net contracts signed reflects both the solid demand environment for new homes 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 three-months ended April 30, 2024 was essentially flat compared to the prior year period.

Current wording

In the three-month periods ended July 31, 2024 and 2023, the value of net contracts signed was $2.41 billion (2,490 homes) and $2.16 billion (2,245 homes), respectively. The aggregate value of net contracts signed increased $244.0 million, or 11.3%, in the three-month period ended July 31, 2024, as compared to the three-month period ended July 31, 2023. The increase in the aggregate value of net contracts signed was due to a 10.9% increase in the number of net contracts signed and a 0.3% increase in the average value attributed to each signed contract. The increase in the number of net contracts signed was primarily due to 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 three-months ended July 31, 2024 was essentially flat compared to the prior year period.

Previous 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.

Current wording

In the nine-month periods ended July 31, 2024 and 2023, the value of net contracts signed was $7.41 billion (7,573 homes) and $5.89 billion (6,039 homes), respectively. The aggregate value of net contracts signed increased $1.52 billion, or 25.8%, in the nine-month period ended July 31, 2024, as compared to the nine-month period ended July 31, 2023. The increase in the aggregate value of net contracts signed was due to a 25.4% increase in the number of net contracts signed and a 0.3% increase in the average value attributed to each signed contract. The increase in the number of net contracts signed reflects both an improved 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 nine months ended July 31, 2024 was essentially flat compared to the prior year period.

Previous 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.

Current wording

The value of our backlog at July 31, 2024 decreased 10% to $7.07 billion (6,769 homes), as compared to $7.87 billion (7,295 homes) at July 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. The decrease in the value of our backlog at July 31, 2024 as compared to July 31, 2023, is due to a 7% decrease in the number of homes in backlog and a 3% 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. 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.

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, to 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 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.

Current wording

At July 31, 2024, we had $893.4 million of cash and cash equivalents on hand and approximately $1.77 billion available for borrowing under our Revolving Credit Facility. The Revolving Credit Facility provides us with a committed borrowing capacity of $1.955 billion, which we have the ability to increase up to $3.00 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, $101.6 million matures on November 1, 2025, and the remaining $60.9 million matures on November 1, 2026.

Previous 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.

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 selling, 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

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.

Current wording

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

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 (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.

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 otherwise 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 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.

Current wording

We also operate through a number of joint ventures and have undertaken various commitments as a result of those arrangements. At July 31, 2024, we had investments in these entities of $983.6 million and were committed to invest or advance up to an additional $247.6 million to these entities if they require additional funding. At July 31, 2024, we had agreed to terms for the acquisition of 472 home sites from four joint ventures for an estimated aggregate purchase price of $35.7 million. We also expect to purchase approximately 8,100 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 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.

Current wording

In situations where we have joint and several guarantees with our joint venture partner, we generally seek to implement a reimbursement agreement with our partner that provides that neither party is responsible for more than its proportionate share or agreed-upon share of the guarantee; however, we are not always successful. In 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, 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 July 31, 2024, we had guaranteed the debt of certain unconsolidated entities that have loan commitments aggregating $3.10 billion, of which, if the full amount of the debt obligations were borrowed, we estimate $665.5 million to be our maximum exposure related to repayment and carry cost guarantees. At July 31, 2024, the unconsolidated entities had borrowed an aggregate of $2.12 billion, of which we estimate $569.5 million to be our maximum exposure related to repayment and carry cost guarantees. The terms of these guarantees generally range from 1 month to 3.3 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 other (non-carry cost/repayment) indemnities noted above, which are not estimable.

Previous wording

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 April 30, 2024, we were in compliance with all such covenants and requirements on our term loan, credit facility and other loans payable. Refer to Note 5, “Loans Payable, Senior Notes, and Mortgage Company Loan Facility” in the Notes to the Condensed Consolidated Financial Statements.

Current wording

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, 2024, we were in compliance with all such covenants and requirements on our term loan, revolving credit facility and other loans payable. Refer to Note 5, “Loans Payable, Senior Notes, and Mortgage Company Loan Facility” in the Notes to the Condensed Consolidated Financial Statements.

Previous 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.

Current wording

At July 31, 2024 and October 31, 2023, we had $963.3 million and $1.34 billion, respectively, of cash, cash equivalents, and restricted cash. Cash provided by operating activities during the nine-month period ended July 31, 2024 was $327.7 million. Cash provided by operating activities during the fiscal 2024 period was primarily related to net income (adjusted for depreciation and amortization, impairments, stock-based compensation, losses and distributions of earnings from unconsolidated entities, deferred taxes, and gain on sale of assets); and increases in accounts payable and accrued expenses. 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; an increase in prepaid expenses, receivables and other assets; and a decrease in current income taxes – net.