2020 ANNUAL REPORT
$7,200
$6,000
$4,800
$3,600
$2,400
$1,200
$0
$7,200
$6,000
$4,800
$3,600
FINANCIAL SUMMARY
$2,400
$1,200
$780
$650
$520
$390
$260
20
19
$130
15
16
17
18
15
16
17
18
19
$0
20
15
16
17
18
19
20
15
16
17
18
19
20
$7,200
$6,000
$4,800
$780
$3,600
$650
$2,400
$520
$1,200
$390
$0
$260
$130
$0
$5.4
$4.5
$3.6
$8,000
$2.7
$6,400
$1.8
$4,800
$0.9
$3,200
$0
20
$1,600
$780
$650
$520
$390
$260
$130
$0
$8,000
$6,400
$4,800
$3,200
$1,600
$0
$40
$32
$24
$16
$8
$0
15
16
17
18
19
20
15
16
17
18
19
20
$40
$32
$24
$16
20
$8
$0
20
15
16
17
18
19
20
15
16
17
18
19
20
$7,200
$6,000
$4,800
$780
$3,600
$650
$2,400
$520
$1,200
15
16
17
18
19
$390
$0
20
$260
15
16
17
18
19
$130
REVENUES
For Home Sales in FY ($ in millions)
$0
15
16
17
18
19
$5.4
$4.5
$3.6
$2.7
$1.8
20
$0.9
$0
15
16
17
18
19
15
16
17
18
19
20
15
16
17
18
19
20
$7,200
$6,000
$4,800
$3,600
$2,400
$1,200
$0
$5.4
$4.5
$3.6
$2.7
$1.8
$0.9
$0
$6,500
$5,200
$3,900
$2,600
$1,300
$0
$7,200
$6,000
$4,800
$3,600
$2,400
$1,200
$0
$5.4
$4.5
$3.6
$2.7
$1.8
$0.9
$0
$6,500
$5,200
$3,900
$2,600
$1,300
$0
15
16
17
18
15
16
17
18
19
20
$5.4
$4.5
$3.6
$8,000
$2.7
$1.8
$6,400
$0.9
$4,800
$0
19
20
$3,200
$1,600
$0
$6,500
$5,200
$3,900
$40
$2,600
$32
$1,300
$24
$0
20
$16
$8
$0
$6,500
$5,200
$3,900
15
16
17
18
19
20
$2,600
$1,300
$0
15
16
17
18
19
20
15
16
17
18
19
CONTRACTS
In FY ($ in millions)
$0
20
$780
$650
$520
$5.4
$390
$4.5
$260
$3.6
$130
$2.7
$0
$1.8
$0.9
$0
20
$8,000
$6,400
$4,800
$6,500
$3,200
$5,200
$1,600
$3,900
$0
$2,600
$1,300
$0
20
$40
$32
$24
$16
$8
$0
15
16
17
18
19
20
$780
$650
$520
$390
$260
$130
$0
20
15
16
17
18
19
15
16
17
18
19
NET INCOME
18
15
In FY ($ in millions)
16
17
19
20
$8,000
$6,400
$4,800
$3,200
$1,600
15
16
17
18
19
$0
20
15
16
17
18
19
$8,000
$6,400
$4,800
$3,200
19
20
$1,600
15
16
17
18
EARNINGS PER SHARE
$0
$0
20
16
In FY ($)
19
18
15
17
$6,500
$5,200
$40
$3,900
$32
$2,600
$24
$1,300
20
$16
$0
$8
$0
15
16
17
18
19
15
16
17
18
19
20
15
16
17
18
19
BOOK VALUE PER SHARE
At FYE ($)
BACKLOG
At FYE ($ in millions)
$40
$32
$24
$16
$8
$0
20
15
16
17
18
19
15
16
17
18
19
20
15
16
17
18
19
15
16
17
18
19
20
15
16
17
18
19
20
15
16
17
18
19
20
TOLL BROTHERS 2020 The Rosebriar | Shirley Estates | Alpharetta, GA
The Olgiata | Toll Brothers at Rolling Hills Country Club | Rolling Hills Estates, CA
CORPORATE OVERVIEW
LUXURY HOMES
AND COMMUNITIES
INDUSTRY-LEADING
REPUTATION AND BRAND
SOPHISTICATED LAND
AND BUILDING PROGRAM
FINANCIAL AND
MANAGEMENT STRENGTH
Founded in 1967
America’s Luxury Home Builder
National presence in the luxury market:
operations in over 50 markets in 24 states
and Washington, DC
NYSE-listed (TOL) since 1986
Fortune 500 company
Selling from 317 communities
Average delivered home price of $816,500;
average price in backlog of $818,200
High-volume home production of highly
personalized homes
DIVERSE PRODUCT LINES
Luxury move-up homes
Millennial-focused affordable luxury homes
4th largest United States home builder
by revenues
Toll Brothers Active Adult: luxury homes
for active adults including 55+ buyers
Toll Brothers City Living®: luxury mid- and
high-rise urban for-sale communities
Toll Brothers Apartment Living and
Toll Brothers Campus Living®: luxury
for-rent urban, suburban, and student
housing communities
Elegant empty-nester, active-adult,
and second homes
AWARDS
Urban low-, mid-, and high-rise
condominiums
Multi-generational homes
National Builder of the Year,
Builder magazine
Two-time Builder of the Year,
Professional Builder magazine
Multi-product master planned communities
Suburban high-density communities
Six-time FORTUNE Magazine World’s
Most Admired Home Building Company*
Resort-style golf and country club living
Urban and suburban rental communities
Induction of founders Robert and
Bruce Toll into the Builder Hall of Fame
Delivered over 117,000 homes
($82 billion) since 2000
Control 63,182 home sites
Land planning, acquisition, approval,
development, and sales expertise
Build-to-order model offering home buyers
choice of structural and design options
35 Design Studio locations nationwide
In Q4 2020, average of $183,000
in upgrades and home site premiums,
26% above base home price
ANCILLARY BUSINESSES
TBI Mortgage and Westminster Title,
serving 45% and 75% of Toll Brothers
customers, respectively, in FY 2020
Integrated home automation and home
security via TBI Smart Home Solutions
Land banking, lending, and joint
venture financing services via
Gibraltar Real Estate Capital
Toll Brothers Insurance Agency and
Toll Landscape
Strong corporate credit ratings:
Standard & Poor’s (BB+), Moody’s (Ba1),
and Fitch (BBB-)
Liquidity of $3.2 billion: $1.4 billion in
cash and $1.8 billion available under our
$1.905 billion, 23-bank, 5-year revolving
credit facility
$800 million, 12-bank, 5-year term loan
Over $15.8 billion in corporate and joint
venture financing transactions completed
in the last 5 years
Debt-to-capital ratio of 44.8%;
net debt-to-capital ratio† of 33.3%
Laddered long-term public and bank
debt maturities with a weighted average
of 5.1 years remaining
Focus on driving return on equity through
more capital-efficient land buying and
other strategies
Seasoned executive management team:
average 16-year tenure
Information for and as of FYE October 31, 2020,
unless otherwise noted.
*See footnote on page 84.
†See “Reconciliation of Non-GAAP Measures” on
page 82 for more information on the calculation
of the company’s net debt-to-capital ratio.
3
TOLL BROTHERS 2020 GEOGRAPHIC DIVERSIFICATION
HOME SALES REVENUES
By segment in FY 2020 ($ in millions)
$121
$1,365
$2,030
TOTA L
$6,938
$846
$1,536
$1,041
CIT Y LIVING
Manhattan and Brooklyn, NYC
Hoboken and Jersey City, NJ
Philadelphia, PA
Metro Washington, DC
Seattle, WA
Los Angeles, CA
NY
MA
CT
NJ
DE
MD
PA
VA
NC
HOME SITES CONTROLLED
By segment at FYE 2020
1,220
8,389
10,825
TOTA L
63,182
10,149
20,435
12,164
IL
MI
TN
TX
SC
GA
FL
BACKLOG
By segment at FYE 2020 ($ in millions)
$139
$1,387
$1,369
TOTA L
$6,375
$770
$1,671
$1,039
WA
OR
ID
NV
CA
UT
CO
AZ
REGIONS
NORTH: Connecticut, Delaware, Illinois, Massachusetts,
Michigan, New Jersey, New York, Pennsylvania
MID-ATLANTIC: Georgia, Maryland, North Carolina,
Tennessee, Virginia
SOUTH: Florida, South Carolina, Texas
MOUNTAIN: Arizona, Colorado, Idaho, Nevada, Utah
PACIFIC: California, Oregon, Washington
4
TOLL BROTHERS 2020 The Kington | Seaside at Scituate | Scituate, MA
The Porter | Toll Brothers at Edelweiss | Draper, UT
The Mayne | Sereno Canyon | Scottsdale, AZ
The Warhol | Arden | Great Falls, VA
DECEMBER 2 2, 2020
DEAR SHAREHOLDER
It is an understatement to say that FY 2020 has been a demanding year. Still, our team
We also expect our gross margin to improve sequentially over the course of FY 2021, as this
responded to its many challenges and delivered on all fronts. Despite experiencing
strong demand, coupled with steady price increases since May, is reflected in the homes we
disruptions to our home building operations beginning in March as the Covid-19 pandemic
will deliver in the last three quarters of this fiscal year. We ended FY 2020 with 317 selling
hit the United States, in FY 2020 Toll Brothers delivered 8,496 homes to our customers,
communities and 63,200 lots owned or controlled, and we project to grow our community
generated home sales revenues of $6.94 billion and net income of $446.6 million, or
count by approximately 10% by FYE 2021. With our attractive land holdings and presence
$3.40 per share diluted, and produced record net signed contracts of $8.00 billion (9,932
in over 50 markets, we believe we are well-positioned for growth beyond FY 2021.
homes), the highest value in our history. These accomplishments are a testament to the
dedication of our employees and their commitment to our customers.
ADAPTING THROUGHOUT THE YEAR
Our industry, like much of our economy, experienced an unprecedented shock in the spring
of 2020. Yet as Americans discovered a renewed appreciation for their homes, the housing
market came roaring back, driven by historically low interest rates, positive long-term
demographic trends, and a significant undersupply of homes. The result: we are currently
experiencing what we believe is one of the strongest housing markets in our history.
FY 2020 began strongly for us, as contracts for the first 18 weeks—through mid-March of
2020—rose over 30% compared to the prior year’s period. Then on March 13, in response
to the Covid-19 pandemic, a national health emergency was declared. The impact of the
pandemic immediately reverberated across the industry. Demand came to a near standstill
as customers paused, and our signed contracts declined 64% from mid-March through
In our FY 2020 fourth quarter, net signed contracts of 3,407 homes and $2.74 billion were
the highest totals for any quarter in our history, up 68% in homes and 63% in dollars
compared to the same quarter of FY 2019. With our record fiscal year-end backlog of
$6.37 billion (7,791 homes) and continued strong demand, we expect to deliver the most
homes in our history in FY 2021.
April 30 versus the prior year.
During this time, our teams quickly adapted to a new operating environment of working
remotely, communicating virtually with our customers, and incorporating new health and
safety practices into all aspects of our business. Our priority was to keep employees,
trade partners, and customers safe while continuing to sell, build, and deliver homes.
7
TOLL BROTHERS 2020 Taking advantage of technologies already in our playbook, we created a seamless, virtual
process from initial contact through closing to maintain the high-quality home buying
experience that defines our trusted brand. We showed that model home tours, Design
Studio selections, construction inspections, and many other aspects of our business could
The Hillcrest | Bartram Ranch | St. Johns, FL
all occur virtually. Many of the innovations we implemented during this time will have a
Over the past two years, we have expanded into nine new markets in the South
lasting positive impact on the efficiency with which we run our company.
and West: Atlanta, Colorado Springs, Nashville, Portland, Salt Lake City, Tampa, and
In May, the housing market began to rebound—and then it surged. We ended July with our
third-quarter net signed contracts up 26% in homes and 18% in dollars compared to the
prior year. In our fourth quarter, net signed contracts rose 68% in homes and 63% in dollars,
compared to one year before, to reach the highest totals for any quarter in our history.
three South Carolina markets—Charleston, Greenville, and Myrtle Beach. As we have
entered new markets, we have continued to increase our affordable luxury product line
across our footprint to better capitalize on the growing number of millennials now
purchasing homes—many for the first time. Affordable luxury totaled 2,989 homes, or
38.4% of our FYE 2020 backlog, compared to 1,756 homes, or 28.8% of backlog just
STRATEGICALLY POSITIONED FOR GROWTH
two years ago at FYE 2018.
In recent years, we have focused on broadening our product lines and price points, as well
Our Toll Brothers Apartment Living division also had an active year. Since the start of
as expanding our geographic presence in higher growth markets. We now operate in 24
FY 2020, we have capitalized with debt and equity approximately $1.1 billion of new joint
states and Washington, DC. We believe this strategy has positioned us to take advantage
ventures to develop more than 3,000 rental apartments. These to-be-built urban and
of the resurgent housing market. With our move-up, active-adult, and affordable luxury
suburban communities are located across the United States in metro areas such as Boston,
new home communities as well as rental and urban condominium projects, we have a
New York City, Washington, DC, Atlanta, Dallas, Phoenix, and Los Angeles. Projects range
wide variety of product lines to serve the upscale market. We are seeing strength in every
in size from $50 million to $250 million, with Toll Brothers typically investing 10% to 20%
geographic region: Pacific, Mountain, South, Mid-Atlantic, and North.
of the capital in each project as the general partner.
8
TOLL BROTHERS 2020 The Austin | Edgeworth at Caramella Ranch | Reno, NV
The Park | Edge-on-Hudson | Sleepy Hollow, NY
The McCartney | Bridgewood Estates | Kirkland, WA
repurchased approximately $634 million of stock in FY 2020. We generated a record
$1.0 billion in cash flow from operations in FY 2020 and ended the year with a book value per
share of $38.53. With our strong balance sheet and focus on capital efficiency, we believe that
we can continue to grow our business while improving return on equity in the coming years.
A HOUSING MARKET ON SOLID FOUNDATION
We believe that the housing market is on a solid foundation and that we have significant
room to run. In addition to our diverse products and price points and our geographic
expansion, the confluence of favorable market conditions and our build-to-order model
will continue to play an important role in our growth in the coming year and beyond.
Historically low interest rates are driving the new home market at all price points, and we
expect low rates to continue for some time. A very tight resale market is leading more
people to consider new homes. At the end of 2020, there is just a 2.3-month supply of
resale homes on the market—the lowest on record. Since most of our buyers have a home
to sell, this tight market and escalating existing home prices give them the comfort to do
so. A strong stock market and a solid employment picture for our customers add to their
confidence. Based on the annual average rate of new home production over the past
A STRONG BALANCE SHEET AND A FOCUS ON
CAPITAL EFFICIENCY
As we grow, we are focused on improving our capital efficiency. In FY 2021, we project an
increase of approximately 350 basis points in our return on beginning equity. As we seek to
drive improvement in our financial metrics, we continue to strictly apply more rigorous
underwriting thresholds to new land deals to achieve both a higher gross margin and a
higher return on equity. To support this initiative, we are controlling more land through
options, land banking arrangements, joint ventures, and other strategies. We improved our
optioned-to-owned land ratio at FYE 2020 to 43% optioned compared to 38% at FYE 2019.
Our financial strength continues to be an engine for growth. We ended our fourth quarter
50 years and the growth in United States households in that time, we estimate that the
with a solid balance sheet and $3.16 billion of liquidity, including $1.37 billion of cash and
industry has underproduced nearly six million single-family homes since the start of the
$1.79 billion available under our $1.9 billion revolving bank credit facility, which matures in
housing recovery in 2008. In other words, six million fewer people bought a home in the
November 2025. At FYE 2020, our net debt-to-capital ratio† was 33.3% compared to 32.9%
last decade than would have in prior decades. Even now, new home building production
one year ago. This relatively flat net debt-to-capital ratio† was achieved even while we
is just reaching historic norms.
1 1
TOLL BROTHERS 2020 The work-from-home phenomenon is also driving demand by allowing more home buyers
We greatly appreciate the support of our customers, our shareholders, our trade partners,
to live where they want rather than where their jobs previously required. With our build-
and our capital providers during this uniquely challenging year. We especially want to
to-order model, Toll Brothers is particularly well-suited for this moment as Americans
thank the entire Toll Brothers family, whose resilience and commitment have been
place more importance on their homes. We provide our customers with structural,
inspiring. This year required that we think and operate in new ways and adjust to
architectural, and interior design choices to truly build their dream homes. Our expansive,
dramatically changing conditions while maintaining an unwavering focus on providing our
flexible floor plans give them more space for learning, working, entertaining, and multi-
customers with the superb quality, value, and service they expect from Toll Brothers. Our
generational living. In the fourth quarter our buyers added, on average, 26% above the
team worked harder than ever before and went the extra mile to prove once again why
base home price, or $183,000, in options and home site premiums to their homes.
our company is so special. We are proud of the results we produced together and excited
for the even greater achievements that lie ahead.
LOOKING FORWARD TO A BRIGHT TOMORROW
We continue to increase our focus on Environmental, Social, and Governance (ESG) issues
as we consider our company’s role in society at large. We have redoubled our efforts to
increase diversity throughout our organization and appointed a Chief Diversity and
Engagement Officer to lead this ongoing initiative. Additionally, our Board approved a
new Human Rights Policy this spring, and we are preparing our first ESG Report for
release in FY 2021.
As we look to the future, we are confident that our well-located land holdings, broad array
of community offerings, nationwide footprint, luxury brand, and distinctive build-to-order
model strategically position Toll Brothers for continued growth in FY 2021 and beyond.
But the key to achieving these goals is our tremendous Toll Brothers team.
1 2
DOUGLAS C. YEARLEY, JR.
Chairman of the Board, President,
& Chief Executive Officer
ROBERT I. TOLL
Chairman Emeritus
TOLL BROTHERS 2020 The Sandstone | Mesa Ridge | Las Vegas, NV
The Solana | The Isles at Lakewood Ranch | Lakewood Ranch, FL
The Rowling | Reserve at Center Square | Eagleville, PA
1 3
TOLL BROTHERS 2020 The Rio Verde | Toll Brothers at Verde River | Rio Verde, AZ
THE TOLL BROTHERS ADVANTAGE
DISTINCTIVE ARCHITECTURE
UNRIVALED CHOICE
The refined modern farmhouse on an acre of land. The contemporary townhome located
Through a wide selection of structural options and home feature upgrades, Toll Brothers
steps from every convenience. The stylish single-story home in a dynamic active-adult
enables our home buyers to showcase and enhance their individual preferences. From
community. The sleek condominium high-rise in a bustling city. Through our attention to
highly personalized and hands-on Design Studio appointments guided by a professional
detail and quality craftsmanship, Toll Brothers brings form and function together in every
design consultant to extraordinary architectural elements and thoughtful design, every
home we build and offers an extensive selection of architectural designs to suit any
detail gives home buyers another reason to love their Toll Brothers home.
lifestyle and life stage.
– 35 Toll Brothers Design Studio locations nationwide featuring curated showrooms
– Spaces available for indoor/outdoor living, home offices, virtual school workspaces,
with beautifully designed vignettes to inspire home buyers as they make design
multi-generational living suites, fitness studios, and more
selections
– Flexible open floor plans and unique architectural details
– Choice of professionally curated finishes in flooring, fixtures, lighting, cabinets,
– A wide array of home design styles from modern and contemporary to traditional
countertops, appliances, and more
and craftsman
– The latest home technologies in smart security, home automation, data and WiFi
– High-quality building components produced in our Toll Integrated Systems
networks, home audio, video and entertainment, and climate control
manufacturing plants leading to increased efficiency and reduced waste
– Community amenities such as resident clubhouses and lounges, fitness centers,
community pools, walking trails, business centers, playgrounds, and parks
1 6
TOLL BROTHERS 2020 The Clubhouse | Regency at South Whitehall | Allentown, PA
The Burke Elite | The Ridge at Big Rock | Duvall, WA
91 Leonard | Toll Brothers City Living | New York, NY
The Vanguard | Oakbridge at Flower Mound | Flower Mound, TX
1 9The Munari | Boulder Ranch | Scottsdale, AZ
TOLL BROTHERS 2020 PRESTIGIOUS LOCATIONS
EXTRAORDINARY CUSTOMER EXPERIENCE
Toll Brothers builds communities in the heart of where the discerning home buyer wants
Each Toll Brothers associate strives to provide home buyers with an exceptional
to live, with conveniences such as proximity to highly rated schools, efficient commuter
experience—from the first interaction with our sales consultants, to the design selection
routes, and nearby lifestyle destinations. Toll Brothers remains committed to building
process in our Design Studios, to closing day and beyond. Through regular interactions,
communities of luxury homes that deliver what buyers are looking for in the most highly
structured planning, and a personalized approach, we seek to exceed expectations at
desirable areas of the country.
every turn.
– Primary and second-home residences in 24 states and over 50 markets across
– Unparalleled service at every visit, whether in person or virtual
the United States
– A seasoned team of local experts to guide buyers through the process of building
– Urban and suburban locations in destination markets
a new home from the first visit to closing day
– Access to cultural institutions, prime shopping, entertainment, and recreation
– Consistent communication from sales, construction, and every other Toll Brothers
– High-quality public and private schools
associate throughout the home buying journey
– A focus on providing our customers with exceptional quality, value, and service
1 9
TOLL BROTHERS 2020 The Serrania | Tradewinds at Pacifica San Juan | San Juan Capistrano, CA
2 0
TOLL BROTHERS 2020 FINA NC IAL
TABLE OF CONTENTS
22
25
25
47
48
51
51
52
53
54
81
82
82
83
84
Toll Brothers’ 35-Year Financial Summary
Forward-Looking Statements
Management’s Discussion and Analysis
Management’s Annual Report on Internal Control Over Financial Reporting
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Income
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Dividends
Reconciliation of Non-GAAP Measures
Stockholder Return Performance Graph
Corporate Directors and Officers
Corporate Information
2 1
TOLL BROTHERS 2020 At October 31,
Cash and marketable securities
Inventory
Total assets
Debt
Loans payable
Senior notes
Subordinated notes
Mortgage related debt
Total
Stockholders’ Equity
Number of shares outstanding
Book value per share
Home Data
Year Ended October 31,
Number of homes closed (1)
Sales value of homes closed (1)(3)
Revenues — % of completion (3)
Number of homes contracted
TOLL BROTHERS’ 35-YEAR FINANCIAL SU MM ARY 1 986–2 02 0
Summary Consolidated Statement of Operations Data (amounts in thousands, except per share data)
Year Ended October 31,
Revenues — home sales
Pre-tax income (loss)
Net income (loss)
Earnings (loss) per share — Diluted
$
$
$
$
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
6,937,357 $
7,080,379 $
7,143,258 $
5,815,058 $
5,169,508 $
4,171,248 $
3,911,602 $
2,674,299 $
1,882,781
1,475,881 $
1,494,771 $
1,755,310 $
3,148,166 $
4,635,093 $
6,115,280 $
5,759,301 $
3,839,451 $
2,731,044 $
2,279,261 $
2,180,469 $
1,762,930 $
1,438,171
968,253 $
759,303 $
643,017 $
501,822 $
392,560 $
279,841 $
175,971 $
198,336 $
176,864 $
197,027 $
134,856 $
124,641
586,901 $
787,170 $
933,916 $
814,311 $
589,027 $
535,562 $
504,582 $
267,697 $
112,942
(29,366) $
(117,187) $
(496,465) $
(466,787) $
70,680 $
1,126,616 $
1,323,128 $
647,432 $
411,153 $
347,318 $
337,889 $
230,966 $
160,432
103,215 $
85,793 $
79,439 $
56,840 $
42,820 $
27,493 $
8,444 $
16,801 $
21,520 $
40,803 $
33,346 $
446,624 $
590,007 $
748,151 $
535,495 $
382,095 $
363,167 $
340,032 $
170,606 $
487,146
39,795 $
(3,374) $
(755,825) $
(297,810) $
35,651 $
687,213 $
806,110 $
409,111 $
259,820 $
219,887 $
213,673 $
145,943 $
101,566
65,075 $
53,744 $
49,932 $
36,177 $
28,058 $
16,538 $
9,988 $
13,127 $
24,074 $
17,173 $
3.40 $
4.03 $
4.85 $
3.17 $
2.18 $
1.97 $
1.84 $
0.97 $
2.86
0.24 $
(0.02) $
(4.68) $
(1.88) $
0.22 $
4.17 $
4.78 $
2.52 $
1.72 $
1.46 $
1.38 $
0.98 $
0.68
0.44 $
0.36 $
0.34 $
0.25 $
0.21 $
0.12 $
0.08 $
0.11 $
0.20 $
0.14 $
5,013 $
0.04 $
Weighted-average number of shares — Diluted
131,247
146,501
154,201
169,487
175,973
184,703
185,875
177,963
170,154
168,381
165,666
161,549
158,730
164,166
164,852
168,552
162,330
151,083
150,959
154,734
149,651
149,744
149,049
147,516
145,440
142,620
133,868
132,936
125,648
118,856
119,880
120,612
121,540
111,812
Summary Consolidated Balance Sheet Data (amounts in thousands, except per share data)
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1,370,944 $
1,286,014 $
1,182,195 $
712,829 $
633,715 $
928,994 $
598,341 $
825,480 $
1,217,892
1,139,912 $
1,236,927 $
1,908,894 $
1,633,495 $
900,337 $
632,524 $
689,219 $
580,863 $
425,251 $
102,337 $
182,840 $
161,860 $
147,575 $
22,891 $
27,772 $
38,026 $
32,329 $
33,407 $
31,475 $
10,379 $
9,160 $
27,110 $
18,009 $
7,658,906 $
7,873,048 $
7,598,219 $
7,281,453 $
7,353,967 $
6,997,516 $
6,490,321 $
4,650,412 $
3,732,703
3,416,723 $
3,241,725 $
3,183,566 $
4,127,475 $
5,572,655 $
6,095,702 $
5,068,624 $
3,878,260 $
3,080,349 $
2,551,061 $
2,183,541 $
1,712,383 $
1,443,282
1,111,863
921,595 $
772,471 $
623,830 $
506,347 $
402,515 $
287,844 $
222,775 $
240,155 $
256,934 $
206,593 $
143,894 $
11,065,733 $ 10,828,138 $ 10,244,590 $
9,445,225 $
9,736,789 $
9,206,515 $
8,398,457 $
6,811,782 $
6,165,915
5,048,478 $
5,163,450 $
5,624,972 $
6,582,350 $
7,214,739 $
7,576,873 $
6,336,251 $
4,897,626 $
3,779,440 $
2,888,671 $
2,525,014 $
2,025,633 $
1,662,810
1,250,505
$ 1,113,012 $
833,189 $
686,703 $
580,148 $
470,441 $
380,584 $
312,424 $
316,534 $
348,163 $
256,611 $
181,765 $
108,185
$
$
$
$
1,147,955 $
1,111,449 $
686,801 $
637,416 $
871,079 $
1,000,439 $
652,619 $
107,222 $
99,817
106,556 $
94,491 $
472,854 $
613,594 $
696,814 $
736,934 $
250,552 $
340,380 $
281,697 $
253,194 $
362,712 $
326,537 $
213,317
182,292
$
189,579 $
132,109 $
59,057 $
17,506 $
24,779 $
25,756 $
49,943 $
71,707 $
95,508 $
74,048 $
55,545 $
12,474
2,661,718
2,659,898
2,861,375
2,462,463
2,694,372
2,689,801
2,638,241
2,305,765
2,065,334
1,484,204
1,536,005
1,578,212
1,139,895
1,138,065
1,136,235
1,134,575
840,737
543,170
148,611
150,000
150,000
120,145
210,000
100,000
90,281
75,000
72,664
57,409
72,367
27,015
37,867
76,730
119,705
89,674
92,053
49,939
48,996
24,754
2,577
2,816
3,912
4,686
10,810
24,403
39,864
45,988
52,617
382
3,958,284 $
3,921,347 $
3,698,176 $
3,220,024 $
3,775,451 $
3,790,240 $
3,381,141 $
2,487,987 $
2,237,815
1,648,169 $
1,702,863 $
2,125,917 $
2,133,420 $
2,260,273 $
2,341,138 $
1,822,665 $
1,720,146 $
1,490,354 $
1,115,159 $
1,049,861 $
791,415 $
506,466 $
338,603 $
278,441 $
243,416 $
204,474 $
174,761 $
145,320 $
179,169 $
217,806 $
143,683 $
85,894 $
4,875,235 $
5,071,816 $
4,760,199 $
4,531,194 $
4,229,292 $
4,222,557 $
3,854,376 $
3,332,987 $
3,121,700
2,586,353 $
2,555,453 $
2,513,199 $
3,237,653 $
3,527,234 $
3,415,926 $
2,763,571 $
1,919,987 $
1,476,628 $
1,129,509 $
912,583 $
745,145 $
385,252 $
314,677 $
256,659 $
204,176 $
167,136 $
136,605 $
118,195 $
94,959 $
85,832 $
73,305 $
48,842 $
126,527
140,938
146,163
157,205
161,783
174,847
175,046
169,353
168,637
165,729
166,408
164,725
160,369
157,008
153,899
154,943
149,642
146,644
140,432
139,112
143,580
137,102
135,674
134,552
133,692
133,276
132,348
131,248
118,736
119,652
120,168
120,268
47,836
342,064
348,664
348,264
347,864
446,976
615,548
812,969
662,395
464,878
464,166
314,310
203,678
215,472
221,224
168,885
124,602
55,513
61,474
69,681
69,635
29,967
$
$
$
$
$
$
$
$
$
$
$
1998
1,206,290
132,523
84,704
0.55
153,441
1998
80,143
265,333
1,384
449,009
525,756
147,742
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
1999
96,484
1,145
678,628
616,334
145,814
4.23
19.3%
23,718
11,861
0.11
1986
14,720
66,543
29,963
5,969
48,406
31,405
119,972
0.26
122.5%
1986
378
74,194
15
1,461
4,853
6,314
18.51
18.8%
2012
3,286
15.61 $
15.36 $
15.26 $
1.6%
(0.1%)
(23.3%)
20.19 $
(8.4%)
22.47 $
1.0%
22.20 $
24.9%
17.84 $
42.0%
12.83 $
27.7%
10.07 $
23.0%
8.04 $
24.1%
6.56 $
28.7%
5.19 $
23.7%
3.56
$
2.81 $
22.0%
20.7%
2.32 $
20.9%
1.91 $
24.5%
1.53 $
21.7%
1.25 $
20.6%
1.03 $
14.0%
0.90 $
5.3%
0.80 $
11.7%
0.72 $
18.0%
0.61 $
49.3%
0.41 $
54.7%
2011
2,611
2010
2,642
2009
2,965
2008
4,743
2007
6,687
2006
8,601
2005
8,769
2004
6,627
2003
4,911
2002
4,430
2001
4,358
2000
3,945
1999
3,555
1998
3,099
1997
2,517
1996
2,109
1995
1,825
1994
1,583
1993
1,324
1992
1,019
1991
676
1990
727
1989
676
1988
778
1987
674
1986
802
Sales value of homes contracted (3)
$
7,995,086 $
6,710,937 $
7,604,265 $
6,828,277 $
5,649,570 $
4,955,579 $
3,896,490 $
3,633,908 $
2,557,917
$
1,604,827 $
1,472,030 $
1,304,656 $
1,608,191 $
3,010,013 $
4,460,734 $
7,152,463 $
5,641,454 $
3,475,992 $
2,734,457 $
2,158,536 $
2,134,522 $
1,627,849
$
1,383,093
$ 1,069,279 $
884,677 $
660,467 $
586,941 $
490,883 $
342,811 $
230,324 $
163,975 $
185,255 $
162,504 $
190,680 $
133,369
At October 31,
Number of homes in backlog
Sales value of homes in backlog (2)(3)
Number of selling communities
Home sites
Owned
Optioned
Total
2020
7,791
2019
6,266
2018
6,105
2017
5,851
2016
4,685
2015
4,064
2014
3,679
2013
3,679
2012
2,569
2011
1,667
2010
1,494
2009
1,531
2008
2,046
2007
3,950
2006
6,533
2005
8,805
2004
6,709
2003
4,652
2002
3,342
2001
2,702
2000
2,746
1999
2,327
1998
1,892
1997
1,551
1996
1,367
1995
1,078
1994
1,025
1993
892
1992
621
1991
438
1990
251
1989
366
1988
338
1987
460
$
6,374,570 $
5,257,091 $
5,522,523 $
5,061,517 $
3,984,065 $
3,504,004 $
2,719,673 $
2,629,466 $
1,669,857
$
981,052 $
852,106 $
874,837 $
1,325,491 $
2,854,435 $
4,488,400 $
6,014,648 $
4,433,895 $
2,631,900 $
1,858,784 $
1,403,588 $
1,425,521 $
1,053,929
$
814,714
$
627,220 $
526,194 $
400,820 $
370,560 $
285,441 $
187,118 $
124,148 $
69,795 $
104,156 $
95,765 $
130,288 $
317
333
315
305
310
288
263
232
224
215
195
200
273
315
300
230
220
200
170
155
146
140
122
116
100
97
80
67
62
42
41
40
26
21
36,105
27,077
63,182
36,567
22,663
59,230
32,503
20,919
53,422
31,341
16,970
48,311
34,137
14,700
48,837
35,872
8,381
44,253
36,224
10,943
47,167
33,967
14,661
48,628
31,327
9,023
40,350
30,199
7,298
37,497
28,891
5,961
34,852
26,872
5,045
31,917
32,081
7,703
39,784
37,139
22,112
59,251
41,808
31,960
73,768
35,838
47,288
83,126
29,804
30,385
60,189
29,081
18,977
48,058
25,822
15,022
40,844
25,981
13,165
39,146
22,275
10,843
33,118
23,163
11,268
34,431
15,578
14,803
30,381
12,820
9,145
21,965
12,065
5,237
17,302
9,542
5,042
6,779
4,445
5,744
4,271
14,584
11,224
10,015
5,633
3,592
9,225
3,974
3,281
7,255
4,548
2,117
6,665
5,075
2,832
7,907
4,724
4,041
8,765
2,147
7,141
9,288
(1) Excludes 88 units with an aggregate delivered value of $86.1 million in fiscal 2008 and 336 units with an aggregate delivered value of $263.3 million in fiscal 2007
that were accounted for using the percentage of completion accounting method.
(2) Net of $55.2 million and $170.1 million of revenues recognized in fiscal 2007 and 2006, respectively, under the percentage of completion accounting method.
(3) In 000’s
2 2
$
6,937,357 $
7,080,379 $
7,143,258 $
5,815,058 $
5,169,508 $
4,171,248 $
3,911,602 $
2,674,299 $
1,882,781
$
1,475,881 $
1,494,771 $
1,755,310 $
3,106,293 $
4,495,600 $
5,945,169 $
5,759,301 $
3,839,451 $
2,731,044 $
2,279,261 $
2,180,469 $
1,762,930 $
1,438,171
$
1,206,290
$
968,253 $
759,303 $
643,017 $
501,822 $
392,560 $
279,841 $
175,971 $
198,336 $
176,864 $
197,027 $
134,856 $
124,641
9,932
8,075
8,519
8,175
6,719
5,910
5,271
5,294
4,159
2,784
2,605
2,450
2,927
4,440
6,164
10,372
8,684
6,132
5,070
4,314
4,364
3,799
3,387
2,701
2,398
1,846
1,716
1,595
1,202
863
612
704
656
756
832
$
41,873 $
139,493 $
170,111
Return on beginning Stockholders’ Equity
8.8%
12.4%
16.5%
12.7%
9.0%
9.4%
10.2%
5.5%
38.53 $
35.99 $
32.57 $
28.82 $
26.14 $
24.15 $
22.02 $
19.68 $
2020
8,496
2019
8,107
2018
8,265
2017
7,151
2016
6,098
2015
5,525
2014
5,397
2013
4,184
$
$
$
TOLL BROTHERS 2020
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
$
$
$
$
$
$
$
$
$
$
$
1,475,881 $
1,494,771 $
1,755,310 $
3,148,166 $
4,635,093 $
6,115,280 $
5,759,301 $
3,839,451 $
2,731,044 $
2,279,261 $
2,180,469 $
1,762,930 $
1,438,171
968,253 $
759,303 $
643,017 $
501,822 $
392,560 $
279,841 $
175,971 $
198,336 $
176,864 $
197,027 $
134,856 $
124,641
(29,366) $
(117,187) $
(496,465) $
(466,787) $
70,680 $
1,126,616 $
1,323,128 $
647,432 $
411,153 $
347,318 $
337,889 $
230,966 $
160,432
103,215 $
85,793 $
79,439 $
56,840 $
42,820 $
27,493 $
8,444 $
16,801 $
21,520 $
40,803 $
33,346 $
39,795 $
(3,374) $
(755,825) $
(297,810) $
35,651 $
687,213 $
806,110 $
409,111 $
259,820 $
219,887 $
213,673 $
145,943 $
101,566
65,075 $
53,744 $
49,932 $
36,177 $
28,058 $
16,538 $
9,988 $
13,127 $
24,074 $
17,173 $
0.24 $
(0.02) $
(4.68) $
(1.88) $
0.22 $
4.17 $
4.78 $
2.52 $
1.72 $
1.46 $
1.38 $
0.98 $
0.68
0.44 $
0.36 $
0.34 $
0.25 $
0.21 $
0.12 $
0.08 $
0.11 $
0.20 $
0.14 $
5,013 $
0.04 $
168,381
165,666
161,549
158,730
164,166
164,852
168,552
162,330
151,083
150,959
154,734
149,651
149,744
149,049
147,516
145,440
142,620
133,868
132,936
125,648
118,856
119,880
120,612
121,540
111,812
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1,139,912 $
1,236,927 $
1,908,894 $
1,633,495 $
900,337 $
632,524 $
689,219 $
580,863 $
425,251 $
102,337 $
182,840 $
161,860 $
1999
96,484
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
147,575 $
22,891 $
27,772 $
38,026 $
32,329 $
33,407 $
31,475 $
10,379 $
9,160 $
27,110 $
18,009 $
3,416,723 $
3,241,725 $
3,183,566 $
4,127,475 $
5,572,655 $
6,095,702 $
5,068,624 $
3,878,260 $
3,080,349 $
2,551,061 $
2,183,541 $
1,712,383 $
1,443,282
1,111,863
921,595 $
772,471 $
623,830 $
506,347 $
402,515 $
287,844 $
222,775 $
240,155 $
256,934 $
206,593 $
143,894 $
5,048,478 $
5,163,450 $
5,624,972 $
6,582,350 $
7,214,739 $
7,576,873 $
6,336,251 $
4,897,626 $
3,779,440 $
2,888,671 $
2,525,014 $
2,025,633 $
1,662,810
1,250,505
$ 1,113,012 $
833,189 $
686,703 $
580,148 $
470,441 $
380,584 $
312,424 $
316,534 $
348,163 $
256,611 $
181,765 $
108,185
106,556 $
94,491 $
472,854 $
613,594 $
696,814 $
736,934 $
250,552 $
340,380 $
281,697 $
253,194 $
362,712 $
326,537 $
213,317
182,292
$
189,579 $
132,109 $
59,057 $
17,506 $
24,779 $
25,756 $
49,943 $
71,707 $
95,508 $
74,048 $
55,545 $
12,474
1,484,204
1,536,005
1,578,212
1,139,895
1,138,065
1,136,235
1,134,575
840,737
543,170
47,836
342,064
348,664
348,264
347,864
446,976
615,548
812,969
662,395
464,878
57,409
1,648,169 $
72,367
1,702,863 $
27,015
2,125,917 $
37,867
2,133,420 $
76,730
2,260,273 $
119,705
2,341,138 $
89,674
1,822,665 $
92,053
1,720,146 $
49,939
1,490,354 $
48,996
1,115,159 $
24,754
1,049,861 $
791,415 $
2,586,353 $
2,555,453 $
2,513,199 $
3,237,653 $
3,527,234 $
3,415,926 $
2,763,571 $
1,919,987 $
1,476,628 $
1,129,509 $
912,583 $
745,145 $
165,729
166,408
164,725
160,369
157,008
153,899
154,943
149,642
146,644
140,432
139,112
143,580
15.61 $
15.36 $
15.26 $
1.6%
(0.1%)
(23.3%)
20.19 $
(8.4%)
22.47 $
1.0%
22.20 $
24.9%
17.84 $
42.0%
12.83 $
27.7%
10.07 $
23.0%
8.04 $
24.1%
6.56 $
28.7%
5.19 $
23.7%
464,166
1,145
678,628
616,334
145,814
4.23
19.3%
314,310
203,678
215,472
221,224
168,885
124,602
55,513
61,474
69,681
69,635
29,967
2,577
2,816
3,912
4,686
10,810
24,403
39,864
45,988
52,617
382
506,466 $
338,603 $
278,441 $
243,416 $
204,474 $
174,761 $
145,320 $
179,169 $
217,806 $
143,683 $
85,894 $
385,252 $
314,677 $
256,659 $
204,176 $
167,136 $
136,605 $
118,195 $
94,959 $
85,832 $
73,305 $
48,842 $
137,102
135,674
134,552
133,692
133,276
132,348
131,248
118,736
119,652
120,168
120,268
3.56
$
2.81 $
22.0%
20.7%
2.32 $
20.9%
1.91 $
24.5%
1.53 $
21.7%
1.25 $
20.6%
1.03 $
14.0%
0.90 $
5.3%
0.80 $
11.7%
0.72 $
18.0%
0.61 $
49.3%
0.41 $
54.7%
1998
1,206,290
132,523
84,704
0.55
153,441
1998
80,143
265,333
1,384
449,009
525,756
147,742
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
6,937,357 $
7,080,379 $
7,143,258 $
5,815,058 $
5,169,508 $
4,171,248 $
3,911,602 $
2,674,299 $
1,882,781
$
1,475,881 $
1,494,771 $
1,755,310 $
3,106,293 $
4,495,600 $
5,945,169 $
5,759,301 $
3,839,451 $
2,731,044 $
2,279,261 $
2,180,469 $
1,762,930 $
1,438,171
$
1,206,290
$
968,253 $
759,303 $
643,017 $
501,822 $
392,560 $
279,841 $
175,971 $
198,336 $
176,864 $
197,027 $
134,856 $
124,641
2016
6,098
2015
5,525
2014
5,397
2013
4,184
2011
2,611
2010
2,642
2009
2,965
2008
4,743
2007
6,687
2006
8,601
2005
8,769
2004
6,627
2003
4,911
2002
4,430
2001
4,358
2000
3,945
1999
3,555
1998
3,099
1997
2,517
1996
2,109
1995
1,825
1994
1,583
1993
1,324
1992
1,019
1991
676
1990
727
1989
676
1988
778
1987
674
1986
802
$
41,873 $
139,493 $
170,111
Sales value of homes contracted (3)
$
7,995,086 $
6,710,937 $
7,604,265 $
6,828,277 $
5,649,570 $
4,955,579 $
3,896,490 $
3,633,908 $
2,557,917
$
1,604,827 $
1,472,030 $
1,304,656 $
1,608,191 $
3,010,013 $
4,460,734 $
7,152,463 $
5,641,454 $
3,475,992 $
2,734,457 $
2,158,536 $
2,134,522 $
1,627,849
$
1,383,093
$ 1,069,279 $
884,677 $
660,467 $
586,941 $
490,883 $
342,811 $
230,324 $
163,975 $
185,255 $
162,504 $
190,680 $
133,369
6,719
5,910
5,271
5,294
4,159
2,784
2,605
2,450
2,927
4,440
6,164
10,372
8,684
6,132
5,070
4,314
4,364
3,799
3,387
2,701
2,398
1,846
1,716
1,595
1,202
863
612
704
656
756
832
$
6,374,570 $
5,257,091 $
5,522,523 $
5,061,517 $
3,984,065 $
3,504,004 $
2,719,673 $
2,629,466 $
1,669,857
$
981,052 $
852,106 $
874,837 $
1,325,491 $
2,854,435 $
4,488,400 $
6,014,648 $
4,433,895 $
2,631,900 $
1,858,784 $
1,403,588 $
1,425,521 $
1,053,929
$
814,714
$
627,220 $
526,194 $
400,820 $
370,560 $
285,441 $
187,118 $
124,148 $
69,795 $
104,156 $
95,765 $
130,288 $
310
288
263
232
224
215
195
200
273
315
300
230
220
200
170
155
146
140
122
116
100
97
80
67
62
42
41
40
26
21
2016
4,685
2015
4,064
2014
3,679
2013
3,679
2012
2,569
2011
1,667
2010
1,494
2009
1,531
2008
2,046
2007
3,950
2006
6,533
2005
8,805
2004
6,709
2003
4,652
2002
3,342
2001
2,702
2000
2,746
1999
2,327
1998
1,892
1997
1,551
1996
1,367
1995
1,078
1994
1,025
1993
892
1992
621
1991
438
1990
251
1989
366
1988
338
1987
460
34,137
14,700
48,837
35,872
8,381
44,253
36,224
10,943
47,167
33,967
14,661
48,628
31,327
9,023
40,350
30,199
7,298
37,497
28,891
5,961
34,852
26,872
5,045
31,917
32,081
7,703
39,784
37,139
22,112
59,251
41,808
31,960
73,768
35,838
47,288
83,126
29,804
30,385
60,189
29,081
18,977
48,058
25,822
15,022
40,844
25,981
13,165
39,146
22,275
10,843
33,118
23,163
11,268
34,431
15,578
14,803
30,381
12,820
9,145
21,965
12,065
5,237
17,302
9,542
5,042
6,779
4,445
5,744
4,271
14,584
11,224
10,015
5,633
3,592
9,225
3,974
3,281
7,255
4,548
2,117
6,665
5,075
2,832
7,907
4,724
4,041
8,765
2,147
7,141
9,288
TO LL BROTH ER S’ 35-YEA R FINANCIAL SU MMARY 1 986–2 02 0
Summary Consolidated Statement of Operations Data (amounts in thousands, except per share data)
6,937,357 $
7,080,379 $
7,143,258 $
5,815,058 $
5,169,508 $
4,171,248 $
3,911,602 $
2,674,299 $
1,882,781
586,901 $
787,170 $
933,916 $
814,311 $
589,027 $
535,562 $
504,582 $
267,697 $
112,942
446,624 $
590,007 $
748,151 $
535,495 $
382,095 $
363,167 $
340,032 $
170,606 $
487,146
Earnings (loss) per share — Diluted
3.40 $
4.03 $
4.85 $
3.17 $
2.18 $
1.97 $
1.84 $
0.97 $
2.86
Weighted-average number of shares — Diluted
131,247
146,501
154,201
169,487
175,973
184,703
185,875
177,963
170,154
Summary Consolidated Balance Sheet Data (amounts in thousands, except per share data)
Cash and marketable securities
1,370,944 $
1,286,014 $
1,182,195 $
712,829 $
633,715 $
928,994 $
598,341 $
825,480 $
1,217,892
2020
2019
2018
2017
2016
2015
2014
2013
2012
7,658,906 $
7,873,048 $
7,598,219 $
7,281,453 $
7,353,967 $
6,997,516 $
6,490,321 $
4,650,412 $
3,732,703
11,065,733 $ 10,828,138 $ 10,244,590 $
9,445,225 $
9,736,789 $
9,206,515 $
8,398,457 $
6,811,782 $
6,165,915
$
1,147,955 $
1,111,449 $
686,801 $
637,416 $
871,079 $
1,000,439 $
652,619 $
107,222 $
99,817
2,661,718
2,659,898
2,861,375
2,462,463
2,694,372
2,689,801
2,638,241
2,305,765
2,065,334
148,611
150,000
150,000
120,145
210,000
100,000
90,281
75,000
72,664
3,958,284 $
3,921,347 $
3,698,176 $
3,220,024 $
3,775,451 $
3,790,240 $
3,381,141 $
2,487,987 $
2,237,815
4,875,235 $
5,071,816 $
4,760,199 $
4,531,194 $
4,229,292 $
4,222,557 $
3,854,376 $
3,332,987 $
3,121,700
126,527
140,938
146,163
157,205
161,783
174,847
175,046
169,353
168,637
38.53 $
35.99 $
32.57 $
28.82 $
26.14 $
24.15 $
22.02 $
19.68 $
Return on beginning Stockholders’ Equity
8.8%
12.4%
16.5%
12.7%
9.0%
9.4%
10.2%
5.5%
$
$
$
$
$
$
$
$
$
$
18.51
18.8%
2012
3,286
2020
8,496
9,932
2020
7,791
317
36,105
27,077
63,182
2019
8,107
8,075
2019
6,266
333
36,567
22,663
59,230
2018
8,265
8,519
2018
6,105
315
32,503
20,919
53,422
2017
7,151
8,175
2017
5,851
305
31,341
16,970
48,311
(1) Excludes 88 units with an aggregate delivered value of $86.1 million in fiscal 2008 and 336 units with an aggregate delivered value of $263.3 million in fiscal 2007
that were accounted for using the percentage of completion accounting method.
(2) Net of $55.2 million and $170.1 million of revenues recognized in fiscal 2007 and 2006, respectively, under the percentage of completion accounting method.
Year Ended October 31,
Revenues — home sales
Pre-tax income (loss)
Net income (loss)
At October 31,
Inventory
Total assets
Debt
Loans payable
Senior notes
Subordinated notes
Mortgage related debt
Total
Stockholders’ Equity
Number of shares outstanding
Book value per share
Home Data
Year Ended October 31,
Number of homes closed (1)
Sales value of homes closed (1)(3)
Revenues — % of completion (3)
Number of homes contracted
At October 31,
Number of homes in backlog
Sales value of homes in backlog (2)(3)
Number of selling communities
Home sites
Owned
Optioned
Total
(3) In 000’s
23,718
11,861
0.11
1986
14,720
66,543
29,963
5,969
48,406
31,405
119,972
0.26
122.5%
1986
378
74,194
15
1,461
4,853
6,314
TO L L B R OT H E R S 2 0 2 0
2 3
TOL L BR OT HER S’ 35-Y EA R FINA NCIA L SU MMARY 19 86–2 02 0
Summary Consolidated Statement of Operations Data (amounts in thousands, except per share data)
Year Ended October 31,
Revenues — home sales
Pre-tax income (loss)
Net income (loss)
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
6,937,357 $
7,080,379 $
7,143,258 $
5,815,058 $
5,169,508 $
4,171,248 $
3,911,602 $
2,674,299 $
1,882,781
1,475,881 $
1,494,771 $
1,755,310 $
3,148,166 $
4,635,093 $
6,115,280 $
5,759,301 $
3,839,451 $
2,731,044 $
2,279,261 $
2,180,469 $
1,762,930 $
1,438,171
586,901 $
787,170 $
933,916 $
814,311 $
589,027 $
535,562 $
504,582 $
267,697 $
112,942
(29,366) $
(117,187) $
(496,465) $
(466,787) $
70,680 $
1,126,616 $
1,323,128 $
647,432 $
411,153 $
347,318 $
337,889 $
230,966 $
160,432
446,624 $
590,007 $
748,151 $
535,495 $
382,095 $
363,167 $
340,032 $
170,606 $
487,146
39,795 $
(3,374) $
(755,825) $
(297,810) $
35,651 $
687,213 $
806,110 $
409,111 $
259,820 $
219,887 $
213,673 $
145,943 $
101,566
Earnings (loss) per share — Diluted
3.40 $
4.03 $
4.85 $
3.17 $
2.18 $
1.97 $
1.84 $
0.97 $
2.86
0.24 $
(0.02) $
(4.68) $
(1.88) $
0.22 $
4.17 $
4.78 $
2.52 $
1.72 $
1.46 $
1.38 $
0.98 $
0.68
Weighted-average number of shares — Diluted
131,247
146,501
154,201
169,487
175,973
184,703
185,875
177,963
170,154
168,381
165,666
161,549
158,730
164,166
164,852
168,552
162,330
151,083
150,959
154,734
149,651
149,744
Summary Consolidated Balance Sheet Data (amounts in thousands, except per share data)
Cash and marketable securities
1,370,944 $
1,286,014 $
1,182,195 $
712,829 $
633,715 $
928,994 $
598,341 $
825,480 $
1,217,892
1,139,912 $
1,236,927 $
1,908,894 $
1,633,495 $
900,337 $
632,524 $
689,219 $
580,863 $
425,251 $
102,337 $
182,840 $
161,860 $
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
7,658,906 $
7,873,048 $
7,598,219 $
7,281,453 $
7,353,967 $
6,997,516 $
6,490,321 $
4,650,412 $
3,732,703
3,416,723 $
3,241,725 $
3,183,566 $
4,127,475 $
5,572,655 $
6,095,702 $
5,068,624 $
3,878,260 $
3,080,349 $
2,551,061 $
2,183,541 $
1,712,383 $
1,443,282
11,065,733 $ 10,828,138 $ 10,244,590 $
9,445,225 $
9,736,789 $
9,206,515 $
8,398,457 $
6,811,782 $
6,165,915
5,048,478 $
5,163,450 $
5,624,972 $
6,582,350 $
7,214,739 $
7,576,873 $
6,336,251 $
4,897,626 $
3,779,440 $
2,888,671 $
2,525,014 $
2,025,633 $
1,662,810
$
1,147,955 $
1,111,449 $
686,801 $
637,416 $
871,079 $
1,000,439 $
652,619 $
107,222 $
99,817
106,556 $
94,491 $
472,854 $
613,594 $
696,814 $
736,934 $
250,552 $
340,380 $
281,697 $
253,194 $
362,712 $
326,537 $
213,317
2,661,718
2,659,898
2,861,375
2,462,463
2,694,372
2,689,801
2,638,241
2,305,765
2,065,334
1,484,204
1,536,005
1,578,212
1,139,895
1,138,065
1,136,235
1,134,575
840,737
543,170
47,836
342,064
348,664
348,264
347,864
446,976
615,548
812,969
662,395
464,878
464,166
148,611
150,000
150,000
120,145
210,000
100,000
90,281
75,000
72,664
57,409
72,367
27,015
37,867
76,730
119,705
89,674
92,053
49,939
48,996
24,754
3,958,284 $
3,921,347 $
3,698,176 $
3,220,024 $
3,775,451 $
3,790,240 $
3,381,141 $
2,487,987 $
2,237,815
1,648,169 $
1,702,863 $
2,125,917 $
2,133,420 $
2,260,273 $
2,341,138 $
1,822,665 $
1,720,146 $
1,490,354 $
1,115,159 $
1,049,861 $
791,415 $
4,875,235 $
5,071,816 $
4,760,199 $
4,531,194 $
4,229,292 $
4,222,557 $
3,854,376 $
3,332,987 $
3,121,700
2,586,353 $
2,555,453 $
2,513,199 $
3,237,653 $
3,527,234 $
3,415,926 $
2,763,571 $
1,919,987 $
1,476,628 $
1,129,509 $
912,583 $
745,145 $
126,527
140,938
146,163
157,205
161,783
174,847
175,046
169,353
168,637
165,729
166,408
164,725
160,369
157,008
153,899
154,943
149,642
146,644
140,432
139,112
143,580
Return on beginning Stockholders’ Equity
8.8%
12.4%
16.5%
12.7%
9.0%
9.4%
10.2%
5.5%
38.53 $
35.99 $
32.57 $
28.82 $
26.14 $
24.15 $
22.02 $
19.68 $
15.61 $
15.36 $
15.26 $
1.6%
(0.1%)
(23.3%)
20.19 $
(8.4%)
22.47 $
1.0%
22.20 $
24.9%
17.84 $
42.0%
12.83 $
27.7%
10.07 $
23.0%
8.04 $
24.1%
6.56 $
28.7%
5.19 $
23.7%
$
$
$
$
$
$
$
$
$
$
$
1998
1,206,290
132,523
84,704
0.55
153,441
1998
80,143
1,111,863
$
$
$
$
$
$
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
968,253 $
759,303 $
643,017 $
501,822 $
392,560 $
279,841 $
175,971 $
198,336 $
176,864 $
197,027 $
134,856 $
124,641
103,215 $
85,793 $
79,439 $
56,840 $
42,820 $
27,493 $
8,444 $
16,801 $
21,520 $
40,803 $
33,346 $
65,075 $
53,744 $
49,932 $
36,177 $
28,058 $
16,538 $
0.44 $
0.36 $
0.34 $
0.25 $
0.21 $
0.12 $
5,013 $
0.04 $
9,988 $
13,127 $
24,074 $
17,173 $
0.08 $
0.11 $
0.20 $
0.14 $
23,718
11,861
0.11
149,049
147,516
145,440
142,620
133,868
132,936
125,648
118,856
119,880
120,612
121,540
111,812
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
147,575 $
22,891 $
27,772 $
38,026 $
32,329 $
33,407 $
31,475 $
10,379 $
9,160 $
27,110 $
18,009 $
921,595 $
772,471 $
623,830 $
506,347 $
402,515 $
287,844 $
222,775 $
240,155 $
256,934 $
206,593 $
143,894 $
1986
14,720
66,543
1,250,505
$ 1,113,012 $
833,189 $
686,703 $
580,148 $
470,441 $
380,584 $
312,424 $
316,534 $
348,163 $
256,611 $
181,765 $
108,185
182,292
$
189,579 $
132,109 $
59,057 $
17,506 $
24,779 $
25,756 $
49,943 $
71,707 $
95,508 $
74,048 $
55,545 $
12,474
265,333
1,384
449,009
525,756
147,742
$
$
314,310
203,678
215,472
221,224
168,885
124,602
55,513
61,474
69,681
69,635
29,967
2,577
506,466 $
2,816
338,603 $
3,912
278,441 $
4,686
243,416 $
10,810
24,403
39,864
45,988
52,617
204,474 $
174,761 $
145,320 $
179,169 $
217,806 $
143,683 $
382
85,894 $
385,252 $
314,677 $
256,659 $
204,176 $
167,136 $
136,605 $
118,195 $
94,959 $
85,832 $
73,305 $
48,842 $
137,102
135,674
134,552
133,692
133,276
132,348
131,248
118,736
119,652
120,168
120,268
3.56
$
2.81 $
22.0%
20.7%
2.32 $
20.9%
1.91 $
24.5%
1.53 $
21.7%
1.25 $
20.6%
1.03 $
14.0%
0.90 $
5.3%
0.80 $
11.7%
0.72 $
18.0%
0.61 $
49.3%
0.41 $
54.7%
29,963
5,969
48,406
31,405
119,972
0.26
122.5%
1999
96,484
1,145
678,628
616,334
145,814
4.23
19.3%
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
6,937,357 $
7,080,379 $
7,143,258 $
5,815,058 $
5,169,508 $
4,171,248 $
3,911,602 $
2,674,299 $
1,882,781
$
1,475,881 $
1,494,771 $
1,755,310 $
3,106,293 $
4,495,600 $
5,945,169 $
5,759,301 $
3,839,451 $
2,731,044 $
2,279,261 $
2,180,469 $
1,762,930 $
1,438,171
$
1,206,290
$
968,253 $
759,303 $
643,017 $
501,822 $
392,560 $
279,841 $
175,971 $
198,336 $
176,864 $
197,027 $
134,856 $
124,641
2016
6,098
2015
5,525
2014
5,397
2013
4,184
2011
2,611
2010
2,642
2009
2,965
2008
4,743
2007
6,687
2006
8,601
2005
8,769
2004
6,627
2003
4,911
2002
4,430
2001
4,358
2000
3,945
1999
3,555
1998
3,099
1997
2,517
1996
2,109
1995
1,825
1994
1,583
1993
1,324
1992
1,019
1991
676
1990
727
1989
676
1988
778
1987
674
1986
802
$
41,873 $
139,493 $
170,111
Sales value of homes contracted (3)
$
7,995,086 $
6,710,937 $
7,604,265 $
6,828,277 $
5,649,570 $
4,955,579 $
3,896,490 $
3,633,908 $
2,557,917
$
1,604,827 $
1,472,030 $
1,304,656 $
1,608,191 $
3,010,013 $
4,460,734 $
7,152,463 $
5,641,454 $
3,475,992 $
2,734,457 $
2,158,536 $
2,134,522 $
1,627,849
$
1,383,093
$ 1,069,279 $
884,677 $
660,467 $
586,941 $
490,883 $
342,811 $
230,324 $
163,975 $
185,255 $
162,504 $
190,680 $
133,369
6,719
5,910
5,271
5,294
4,159
2,784
2,605
2,450
2,927
4,440
6,164
10,372
8,684
6,132
5,070
4,314
4,364
3,799
3,387
2,701
2,398
1,846
1,716
1,595
1,202
863
612
704
656
756
832
$
6,374,570 $
5,257,091 $
5,522,523 $
5,061,517 $
3,984,065 $
3,504,004 $
2,719,673 $
2,629,466 $
1,669,857
$
981,052 $
852,106 $
874,837 $
1,325,491 $
2,854,435 $
4,488,400 $
6,014,648 $
4,433,895 $
2,631,900 $
1,858,784 $
1,403,588 $
1,425,521 $
1,053,929
$
814,714
$
627,220 $
526,194 $
400,820 $
370,560 $
285,441 $
187,118 $
124,148 $
69,795 $
104,156 $
95,765 $
130,288 $
310
288
263
232
224
215
195
200
273
315
300
230
220
200
170
155
146
140
122
116
100
97
80
67
62
42
41
40
26
21
2016
4,685
2015
4,064
2014
3,679
2013
3,679
2012
2,569
2011
1,667
2010
1,494
2009
1,531
2008
2,046
2007
3,950
2006
6,533
2005
8,805
2004
6,709
2003
4,652
2002
3,342
2001
2,702
2000
2,746
1999
2,327
1998
1,892
1997
1,551
1996
1,367
1995
1,078
1994
1,025
1993
892
1992
621
1991
438
1990
251
1989
366
1988
338
1987
460
34,137
14,700
48,837
35,872
8,381
44,253
36,224
10,943
47,167
33,967
14,661
48,628
31,327
9,023
40,350
30,199
7,298
37,497
28,891
5,961
34,852
26,872
5,045
31,917
32,081
7,703
39,784
37,139
22,112
59,251
41,808
31,960
73,768
35,838
47,288
83,126
29,804
30,385
60,189
29,081
18,977
48,058
25,822
15,022
40,844
25,981
13,165
39,146
22,275
10,843
33,118
23,163
11,268
34,431
15,578
14,803
30,381
12,820
9,145
21,965
12,065
5,237
17,302
9,542
5,042
6,779
4,445
5,744
4,271
14,584
11,224
10,015
5,633
3,592
9,225
3,974
3,281
7,255
4,548
2,117
6,665
5,075
2,832
7,907
4,724
4,041
8,765
2,147
7,141
9,288
1986
378
74,194
15
1,461
4,853
6,314
2020
8,496
9,932
2020
7,791
317
36,105
27,077
63,182
2019
8,107
8,075
2019
6,266
333
36,567
22,663
59,230
2018
8,265
8,519
2018
6,105
315
32,503
20,919
53,422
2017
7,151
8,175
2017
5,851
305
31,341
16,970
48,311
18.51
18.8%
2012
3,286
At October 31,
Inventory
Total assets
Debt
Loans payable
Senior notes
Subordinated notes
Mortgage related debt
Total
Stockholders’ Equity
Number of shares outstanding
Book value per share
Home Data
Year Ended October 31,
Number of homes closed (1)
Sales value of homes closed (1)(3)
Revenues — % of completion (3)
Number of homes contracted
At October 31,
Number of homes in backlog
Sales value of homes in backlog (2)(3)
Number of selling communities
Home sites
Owned
Optioned
Total
(3) In 000’s
(1) Excludes 88 units with an aggregate delivered value of $86.1 million in fiscal 2008 and 336 units with an aggregate delivered value of $263.3 million in fiscal 2007
that were accounted for using the percentage of completion accounting method.
(2) Net of $55.2 million and $170.1 million of revenues recognized in fiscal 2007 and 2006, respectively, under the percentage of completion accounting method.
TO L L B R OT H E R S 2 0 2 0
24
FORWARD-LOOKING STATEMENTS
Certain information included in this report or in other materials we have filed or will file with
the SEC (as well as information included in oral statements or other written statements made
or to be made by us) contains or may contain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. One can identify these statements by the fact that they
do not relate to matters of strictly historical or factual nature and generally discuss or relate
to future events. These statements contain words such as “anticipate,” “estimate,” “expect,”
“project,” “intend,” “plan,” “believe,” “may,” “can,” “could,” “might,” “should,” “likely,” “will,”
and other words or phrases of similar meaning. Such statements may include, but are not
limited to, information related to: the impact of COVID-19 on the U.S. economy, the markets in
which we operate or may operate, and on our business; our strategic priorities; our land
acquisition, land development and capital allocation priorities; market conditions; demand for
our homes; anticipated operating results; home deliveries; financial resources and condition;
changes in revenues; changes in profitability; changes in margins; changes in accounting
treatment; cost of revenues, including expected labor and material costs; selling, general and
administrative expenses; interest expense; inventory write-downs; home warranty and
construction defect claims; unrecognized tax benefits; anticipated tax refunds; sales paces
and prices; effects of home buyer cancellations; growth and expansion; joint ventures in
which we are involved; anticipated results from our investments in unconsolidated entities;
our ability to acquire land and pursue real estate opportunities; our ability to gain approvals
and open new communities; our ability to market, construct and sell homes and properties;
our ability to deliver homes from backlog; our ability to secure materials and subcontractors;
our ability to produce the liquidity and capital necessary to conduct normal business
operations or to expand and take advantage of opportunities; and the outcome of legal
proceedings, investigations, and claims.
Any or all of the forward-looking statements included in this report and in any other reports
or public statements made by us are not guarantees of future performance and may turn out
to be inaccurate. Many of the factors mentioned in this report or in other reports or public
statements made by us will be important in determining our future performance. Consequently,
actual results may differ materially from those that might be anticipated from our forward-
looking statements.
From time to time, forward-looking statements also are included in other reports on Forms
10-Q and 8-K; in press releases; in presentations; on our website; and in other materials
released to the public. This can occur as a result of incorrect assumptions or as a consequence
of known or unknown risks and uncertainties.
Forward-looking statements speak only as of the date they are made. We undertake no
obligation to publicly update any forward-looking statements, whether as a result of new
information, future events or otherwise.
For a more detailed discussion of factors that we believe could cause our actual results to
differ materially from expected and historical results, see “Item 1A – Risk Factors” in our Form
10-K for the year ended October 31, 2020. This discussion is provided as permitted by the
Private Securities Litigation Reform Act of 1995, and all of our forward-looking statements are
expressly qualified in their entirety by the cautionary statements contained or referenced in
this section.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(“MD&A”)
This discussion and analysis is based on, should be read together with, and is qualified in its
entirety by, the Consolidated Financial Statements and Notes thereto in Item 15(a)1 of the
Form 10-K for the year ended October 31, 2020, beginning at page F-1. It also should be read
in conjunction with the disclosure under “Forward-Looking Statements” in Part I of the Form 10-K.
When this report uses the words “we,” “us,” “our,” and the “Company,” they refer to Toll Brothers,
Inc. and its subsidiaries, unless the context otherwise requires. References herein to fiscal year
refer to our fiscal years ended or ending October 31.
Unless otherwise stated in this report, net contracts signed represents a number or value equal to
the gross number or value of contracts signed during the relevant period, less the number or value
of contracts canceled during the relevant period, which includes contracts that were signed during
the relevant period and in prior periods. Backlog consists of homes under contract but not yet
delivered to our home buyers (“backlog”). Backlog conversion represents the percentage of
homes delivered in the period from backlog at the beginning of the period (“backlog conversion”).
OVERVIEW
Our Business
We design, build, market, sell, and arrange financing for an array of luxury residential single-family
detached, attached home, master planned resort-style golf, and urban low-, mid-, and high-rise
communities, principally on land we develop and improve, as we continue to pursue our strategy
of broadening our product lines, price points and geographic footprint. We cater to luxury first-
time, move-up, empty-nester, active-adult, affordable luxury and second-home buyers in the
United States (“Traditional Home Building Product”), as well as urban and suburban renters. We
also design, build, market, and sell urban low-, mid-, and high-rise condominiums through Toll
Brothers City Living® (“City Living”). At October 31, 2020, we were operating in 24 states, as well
as in the District of Columbia.
In the five years ended October 31, 2020, we delivered 38,117 homes from 779 communities,
including 8,496 homes from 457 communities in fiscal 2020. At October 31, 2020, we had 778
communities in various stages of planning, development or operations containing approximately
63,200 home sites that we owned or controlled through options.
We are developing several land parcels for master planned communities in which we intend to
build homes on a portion of the lots and sell the remaining lots to other builders. One of these
master planned communities is being developed 100% by us, and the remaining communities are
being developed through joint ventures with other builders or financial partners.
In addition to our residential for-sale business, we also develop and operate for-rent apartments
through joint ventures. See the section entitled “Toll Brothers Apartment Living/Toll Brothers
Campus Living” below.
We operate our own architectural, engineering, mortgage, title, land development, golf course
development, and landscaping subsidiaries. We also operate our own security company, TBI Smart
Home Solutions, which provides homeowners with home automation and a full range of technology
options. In addition, in certain regions we operate our own lumber distribution, house component
assembly, and manufacturing operations.
We have investments in various unconsolidated entities, including our Land Development Joint
Ventures, Home Building Joint Ventures, Rental Property Joint Ventures and Gibraltar Joint Ventures.
Financial Highlights
In fiscal 2020, we recognized $6.94 billion of home sales revenues and net income of $446.6
million, as compared to $7.08 billion of revenues and net income of $590.0 million in fiscal 2019.
In fiscal 2020 and 2019, the value of net contracts signed was $8.00 billion (9,932 homes) and $6.71
billion (8,075 homes), respectively. The value of our backlog at October 31, 2020 was $6.37 billion
(7,791 homes), as compared to our backlog at October 31, 2019 of $5.26 billion (6,266 homes).
At October 31, 2020, we had $1.37 billion of cash and cash equivalents and approximately $1.79
billion available for borrowing under our $1.905 billion revolving credit facility (the “Revolving
TO L L B R OT H E R S 2 0 2 0
2 5
Credit Facility”), substantially all of which matures in November 2025. At October 31, 2020, we had
no outstanding borrowings under the Revolving Credit Facility and had outstanding letters of credit
of approximately $119.0 million.
At October 31, 2020, our total equity and our debt to total capitalization ratio were $4.93 billion and
0.45 to 1.00, respectively.
Acquisitions
As part of our strategy to expand our geographic footprint and product offerings, in fiscal 2020, we
acquired substantially all of the assets and operations of Thrive, an urban infill builder with
operations in Atlanta, Georgia and Nashville, Tennessee. We also acquired substantially all of the
assets and operations of Keller, a builder with operations is Colorado Springs, Colorado. The
aggregate purchase price for these acquisitions was approximately $79.2 million in cash. The assets
acquired were primarily inventory, including approximately 1,100 home sites owned or controlled
through land purchase agreements.
Our Business Environment and Current Outlook
We have recently experienced very strong demand for our homes. This resurgence in demand
began for us in mid-May 2020, following the significant drop in sales we experienced in our fiscal
second quarter as the initial impact of the COVID-19 pandemic was felt in the United States. The net
signed contract in our fiscal fourth quarter of 3,407 homes and $2.74 billion were the highest totals
for any quarter in our history, up 68% in homes and 63% in dollars, compared to the fiscal fourth
quarter of 2019. Our backlog at fiscal year end was 7,791 homes and $6.37 billion, up 24% in units
and 21% in dollars as compared to our backlog at fiscal year end 2019. The build time for our homes
is generally 9 to 12 months from contract signing and, as a result, we expect to deliver significantly
more homes in fiscal 2021 compared to fiscal 2020 as we deliver homes on contracts signed during
this strong period of demand describe above. In response to the strong demand and in an effort to
drive profitability and manage growth, we raised prices in a substantially all of our communities
during our fiscal third and fourth quarters. We have also limited lot releases in some communities.
We expect to continue these pricing and lot-release measures during fiscal 2021 assuming the
strong demand environment continues.
We attribute the strong demand to a number of factors, including low interest rates, a continued
undersupply of homes, and consumers’ increased focus on the importance of home. We believe
these factors will continue to support demand in fiscal 2021.
Although housing market demand has recently been very strong, we remain cautious as to the
impact of the COVID-19 pandemic on the economy, among other things. Future economic conditions
in the United States remain uncertain, in particular due to the disruptions caused by the pandemic
and how related government directives, actions and economic relief efforts will impact the U.S.
economy, employment
levels, financial markets, secondary mortgage markets, consumer
confidence, demand for our homes and availability of mortgage loans to homebuyers. The extent of
such impact on our operational and financial performance will depend on future developments,
including the duration of the pandemic, the acceptance and effectiveness of vaccines, and the
related impact on the economy, financial markets, and our customers, trade partners and employees,
all of which are highly uncertain, unpredictable and outside our control.
Competitive Landscape
The home building business is highly competitive and fragmented. We compete with numerous
home builders of varying sizes, ranging from local to national in scope, some of which have greater
sales and financial resources than we do. Sales of existing homes, whether by a homeowner or by a
financial institution that may have acquired a home through a foreclosure, also provide competition.
We compete primarily based on price, location, design, quality, service, and reputation. We believe
our financial stability, relative to many others in our industry, provides us with a competitive advantage.
Land Acquisition and Development
Our business is subject to many risks because of the extended length of time that it takes to obtain
the necessary approvals on a property, complete the land improvements on it, and deliver a home
after a home buyer signs an agreement of sale. We attempt to reduce some of these risks and
improve our capital efficiency by utilizing one or more of the following methods: controlling land for
future development through options, which enable us to obtain necessary governmental approvals
before acquiring title to the land; generally commencing construction of a detached home only after
executing an agreement of sale and receiving a substantial down payment from the buyer; and using
subcontractors to perform home construction and land development work on a fixed-price basis.
During fiscal 2020 and 2019, we acquired control of approximately 18,400 and 13,900 home sites,
respectively, net of options terminated and home sites sold. At October 31, 2020, we controlled
approximately 63,200 home sites, as compared to approximately 59,200 home sites at October 31,
2019, and approximately 53,400 home sites at October 31, 2018. In addition, at October 31, 2020, we
expect to purchase approximately 2,100 additional home sites from several land development joint
ventures in which we have an interest, at prices not yet determined.
Of the approximately 63,200 total home sites that we owned or controlled through options at
October 31, 2020, we owned approximately 36,100 and controlled approximately 27,000 through
options. Of the 63,200 home sites, approximately 16,600 were substantially improved.
In addition, at October 31, 2020, our Land Development Joint Ventures owned approximately 9,600
home sites (including 139 home sites included in the 27,000 controlled through options), and our
Home Building Joint Ventures owned approximately 67 home sites.
At October 31, 2020, we were selling from 317 communities, compared to 333 communities at
October 31, 2019, and 315 communities at October 31, 2018.
Customer Mortgage Financing
We maintain relationships with a diversified group of mortgage financial institutions, many of
which are among the largest in the industry. We believe that regional and community banks
continue to recognize the long-term value in creating relationships with high-quality, affluent
customers such as our home buyers, and these banks continue to provide these customers with
financing.
We believe that our home buyers generally are, and should continue to be, well-positioned to
secure mortgages due to their typically lower loan-to-value ratios and attractive credit profiles,
as compared to the average home buyer.
Toll Brothers Apartment Living/Toll Brothers Campus Living
In addition to our residential for-sale business, we also develop and operate for-rent apartments
through joint ventures. At October 31, 2020, we or joint ventures in which we have an interest,
controlled 64 land parcels that are planned as for-rent apartment projects containing approximately
20,800 units. These projects, which are located in multiple metropolitan areas throughout the
country, are being operated, are being developed or will be developed with partners under the brand
names Toll Brothers Apartment Living and Toll Brothers Campus Living.
In fiscal 2020, we sold all of our ownership interest in one of our Rental Property Joint Ventures to
our partner for cash of $16.8 million, net of closing costs. The joint venture had owned, developed,
and operated multifamily residential apartments in northern New Jersey. We recognized a gain of
$10.7 million in fiscal 2020 from this sale. In fiscal 2019, one of our Rental Property Joint Ventures,
located in Phoenixville, Pennsylvania, sold its assets to an unrelated party for $77.8 million. From our
investment in this joint venture, we received cash of $7.4 million and recognized a gain from this sale
of $3.8 million in fiscal 2019. In fiscal 2018, three of our Rental Property Joint Ventures sold their
assets to unrelated parties for $477.5 million. These joint ventures had owned, developed, and
operated multifamily rental properties located in suburban Washington, D.C. and Westborough,
Massachusetts, and a student housing community in College Park, Maryland. From our investment in
2 6
TO L L B R OT H E R S 2 0 2 0
these joint ventures, we received cash of $79.1 million and recognized gains from these sales of $67.2
million in fiscal 2018. The gains recognized from these sales are included in “Income from
unconsolidated entities” in our Consolidated Statement of Operations and Comprehensive Income
included in Item 15(a)1 of the Form 10-K for the year ended October 31, 2020.
At October 31, 2020, we had approximately 2,000 units in for-rent apartment projects that were
occupied or ready for occupancy, 2,200 units in the lease-up stage, 11,100 units in the design phase
or under development, and 5,500 units in the planning stage. Of the 20,800 units at October 31,
2020, 9,400 were owned by joint ventures in which we have an interest; approximately 6,100 were
owned by us; and 5,300 were under contract to be purchased by us.
CONTRACTS AND BACKLOG
The aggregate value of net sales contracts signed increased 19.1% in fiscal 2020, as compared to
fiscal 2019. The value of net sales contracts signed was $8.00 billion (9,932 homes) in fiscal 2020
and $6.71 billion (8,075 homes) in fiscal 2019. The increase in the aggregate value of net contracts
signed in fiscal 2020, as compared to fiscal 2019, was due to a 23% increase in the number of net
contracts signed offset, in part, by a 3% decrease in the average value of each contract signed. The
increase in the number of net contracts signed in fiscal 2020, as compared to fiscal 2019, reflects an
overall increase in demand in the housing market, as well as a resurgence in demand for our homes
that began at the outset of our fiscal third quarter. We attribute the increase in demand to a number
of factors, including low interest rates, a continued undersupply of homes, and consumers’ increased
focus on the importance of home. The decrease in average price of net contracts signed in fiscal
2020, as compared to fiscal 2019, was principally due to our strategic expansion into more affordable
luxury homes and our geographic expansion into attractive high-growth markets. This decrease was
partially offset by price increases in many of our markets.
The value of our backlog at October 31, 2020, 2019, and 2018 was $6.37 billion (7,791 homes), $5.26
billion (6,266 homes), and $5.52 billion (6,105 homes), respectively. Approximately 94% of the
homes in backlog at October 31, 2020 are expected to be delivered by October 31, 2021. The 21.3%
increase in the value of homes in backlog at October 31, 2020, as compared to October 31, 2019, was
due to an increase in the value of net contracts signed and lower home sales revenues in fiscal 2020,
as compared to fiscal 2019.
For more information regarding revenues, net contracts signed, and backlog by geographic segment,
see “Segments” in this MD&A.
CRITICAL ACCOUNTING POLICIES
We believe the following critical accounting policies reflect the more significant judgments and
estimates used in the preparation of our consolidated financial statements.
Inventory
Inventory is stated at cost unless an impairment exists, in which case it is written down to fair value
in accordance with U.S. generally accepted accounting principles (“GAAP”). In addition to direct
land acquisition, land development, and home construction costs, costs also include interest, real
estate taxes, and direct overhead related to development and construction, which are capitalized to
inventory during periods beginning with the commencement of development and ending with the
completion of construction. For those communities that have been temporarily closed, no additional
capitalized interest is allocated to the community’s inventory until it reopens, and other carrying
costs are expensed as incurred. Once a parcel of land has been approved for development and we
open the community, it can typically take four or more years to fully develop, sell, and deliver all the
homes in that community. Longer or shorter time periods are possible depending on the number of
home sites in a community and the sales and delivery pace of the homes in a community. Our master
planned communities, consisting of several smaller communities, may take up to 10 years or more to
complete. Because our inventory is considered a long-lived asset under GAAP, we are required to
regularly review the carrying value of each of our communities and write down the value of those
communities when we believe the values are not recoverable.
OPERATING COMMUNITIES: When the profitability of an operating community deteriorates, the
sales pace declines significantly, or some other factor indicates a possible impairment in the
recoverability of the asset, the asset is reviewed for impairment by comparing the estimated future
undiscounted cash flow for the community to its carrying value. If the estimated future undiscounted
cash flow is less than the community’s carrying value, the carrying value is written down to its
estimated fair value. Estimated fair value is primarily determined by discounting the estimated
future cash flow of each community. The impairment is charged to cost of home sales revenues in
the period in which the impairment is determined. In estimating the future undiscounted cash flow
of a community, we use various estimates such as (i) the expected sales pace in a community, based
upon general economic conditions that will have a short-term or long-term impact on the market in
which the community is located and on competition within the market, including the number of
home sites available and pricing and incentives being offered in other communities owned by us or
by other builders; (ii) the expected sales prices and sales incentives to be offered in a community;
(iii) costs expended to date and expected to be incurred in the future, including, but not limited to,
land and land development costs, home construction, interest, and overhead costs; (iv) alternative
product offerings that may be offered in a community that will have an impact on sales pace, sales
price, building cost, or the number of homes that can be built in a particular community; and (v)
alternative uses for the property, such as the possibility of a sale of the entire community to another
builder or the sale of individual home sites.
FUTURE COMMUNITIES: We evaluate all land held for future communities or future sections of
operating communities, whether owned or optioned, to determine whether or not we expect to
proceed with the development of the land as originally contemplated. This evaluation encompasses
the same types of estimates used for operating communities described above, as well as an
evaluation of the regulatory environment in which the land is located and the estimated probability
of obtaining the necessary approvals, the estimated time and cost it will take to obtain those
approvals, and the possible concessions that may be required to be given in order to obtain them.
Concessions may include cash payments to fund improvements to public places such as parks and
streets, dedication of a portion of the property for use by the public or as open space, or a reduction
in the density or size of the homes to be built. Based upon this review, we decide (i) as to land under
contract to be purchased, whether the contract will likely be terminated or renegotiated, and (ii) as
to land we own, whether the land will likely be developed as contemplated or in an alternative
manner, or should be sold. We then further determine whether costs that have been capitalized to
the community are recoverable or should be written off. The write-off is charged to cost of home
sales revenues in the period in which the need for the write-off is determined.
The estimates used in the determination of the estimated cash flows and fair value of both current
and future communities are based on factors known to us at the time such estimates are made and
our expectations of future operations and economic conditions. Should the estimates or expectations
used in determining estimated fair value deteriorate in the future, we may be required to recognize
additional impairment charges and write-offs related to current and future communities and such
amounts could be material.
We provided for inventory impairment charges and the expensing of costs that we believed not to
be recoverable in each of the three fiscal years ended October 31, 2020, 2019, and 2018, as shown in
the table below (amounts in thousands):
2020
2019
Land controlled for future communities
$
23,539 $
11,285 $
Land owned for future communities
Operating communities
31,669
675
—
31,075
$
55,883 $
42,360 $
2018
2,820
2,185
30,151
35,156
In fiscal 2020, we recognized $31.7 million of impairment charges on land owned for future
communities relating to nine communities. As of the period the impairment charges were recognized,
TO L L B R OT H E R S 2 0 2 0
27
the fair value of these communities in the aggregate, net of impairment charges, was $21.8 million.
There were no impairment charges on land owned for future communities in 2019 and $2.2 million
recognized in fiscal 2018.
relative sales value basis. Any changes resulting from a change in the estimated number of homes
to be constructed or in the estimated costs are allocated to the remaining home sites in each of the
communities of the master planned community.
The table below provides, for the periods indicated, the number of operating communities that we
reviewed for potential impairment, the number of operating communities in which we recognized
impairment charges, the amount of impairment charges recognized, and, as of the end of the period
indicated, the fair value of those communities, net of impairment charges ($ amounts in thousands):
Impaired operating communities
Number of
communities
tested
Number of
communities
Fair value of
communities, net
of impairment
charges
Impairment
charges
recognized
65
80
66
53
49
64
69
71
64
65
55
43
—
1
—
1
5
6
3
7
5
4
5
6
$
$
$
$
$
$
$
$
$
$
$
$
— $
2,754
—
1,113
$
37,282 $
36,159
5,436
18,910
$
13,318 $
21,811
43,063
24,692
$
—
300
—
375
675
5,785
17,495
1,100
6,695
31,075
3,736
13,325
9,065
4,025
30,151
Three months
ended:
Fiscal 2020:
January 31
April 30
July 31
October 31
Fiscal 2019:
January 31
April 30
July 31
October 31
Fiscal 2018:
January 31
April 30
July 31
October 31
Revenue and Cost Recognition
HOME SALES REVENUES AND COST RECOGNITION: Revenues and cost of revenues from home
sales are recognized at the time each home is delivered and title and possession are transferred to
the buyer. For the majority of our home closings, our performance obligation to deliver a home is
satisfied in less than one year from the date a binding sale agreement is signed.
For our standard attached and detached homes, land, land development, and related costs, both
incurred and estimated to be incurred in the future, are amortized to the cost of homes closed based
upon the total number of homes to be constructed in each community. Any changes resulting from
a change in the estimated number of homes to be constructed or in the estimated costs subsequent
to the commencement of delivery of homes are allocated to the remaining undelivered homes in the
community. Home construction and related costs are charged to the cost of homes closed under the
specific identification method. For our master planned communities, the estimated land, common
area development, and related costs, including the cost of golf courses, net of their estimated
residual value, are allocated to individual communities within a master planned community on a
For high-rise/mid-rise projects, land, land development, construction, and related costs, both
incurred and estimated to be incurred in the future, are generally amortized to the cost of units
closed based upon an estimated relative sales value of the units closed to the total estimated sales
value. Any changes resulting from a change in the estimated total costs or revenues of the project
are allocated to the remaining units to be delivered.
FORFEITED CUSTOMER DEPOSITS: Forfeited customer deposits are recognized in “Home sales
revenues” in our Consolidated Statements of Operations and Comprehensive Income in the period in
which we determine that the customer will not complete the purchase of the home and we have the
right to retain the deposit.
SALES INCENTIVES: In order to promote sales of our homes, we may offer our home buyers sales
incentives. These incentives will vary by type of incentive and by amount on a community-by-
community and home-by-home basis. Incentives are reflected as a reduction in home sales revenues.
Incentives are recognized at the time the home is delivered to the home buyer and we receive the
sales proceeds.
On November 1, 2018, we adopted Accounting Standards Codification (“ASC”) Topic 606 “Revenue
from Contracts with Customers” (“ASC 606”), which supersedes the revenue recognition
requirements in Accounting Standards Codification Topic 605, “Revenue Recognition,” and most
industry-specific guidance. See Note 1, “Significant Accounting Policies” in Notes to Consolidated
Financial Statements in Item 15(a)1 of the Form 10-K for the year ended October 31, 2020 for
additional information regarding the impact of the adoption of ASC 606.
In the fourth quarter of fiscal 2020, we reclassified sales commissions paid to third-party brokers
from home sales cost of revenues to selling, general and administrative expense (“SG&A”) in the
Consolidated Statements of Operations and Comprehensive Income. The reclassification aligns the
treatment of sale commissions paid to third-party brokers with the treatment of sales commissions
paid to in-house salespersons, and is consistent with the manner in which the majority of the
Company’s peers treat such commissions. The reclassification had the effect of lowering home sales
cost of revenues (and increasing homes sales gross margin) and increasing SG&A by the amount of
sale commissions paid to third-party brokers.
Warranty and Self-Insurance
WARRANTY: We provide all of our home buyers with a limited warranty as to workmanship and
mechanical equipment. We also provide many of our home buyers with a limited 10-year warranty
as to structural integrity. We accrue for expected warranty costs at the time each home is closed and
title and possession are transferred to the home buyer. Warranty costs are accrued based upon
historical experience. Adjustments to our warranty liabilities related to homes delivered in prior
years are recorded in the period in which a change in our estimate occurs. Over the past several
years, we have had a significant number of warranty claims related primarily to homes built in
Pennsylvania and Delaware. See Note 7 – “Accrued Expenses” in Item 15(a)1 of the Form 10-K for the
year ended October 31, 2020 for additional information regarding these warranty charges.
SELF-INSURANCE: We maintain, and require the majority of our subcontractors to maintain, general
liability insurance (including construction defect and bodily injury coverage) and workers’
compensation insurance. These insurance policies protect us against a portion of our risk of loss
from claims related to our home building activities, subject to certain self-insured retentions,
deductibles and other coverage limits (“self-insured liability”). We also provide general liability
insurance for our subcontractors in Arizona, California, Colorado, Nevada, Washington, and certain
areas of Texas, where eligible subcontractors are enrolled as insureds under our general liability
insurance policies in each community in which they perform work. For those enrolled subcontractors,
we absorb their general liability associated with the work performed on our homes within the
2 8
TOLL BROTHERS 2020 applicable community as part of our overall general liability insurance and our self-insurance through
our captive insurance subsidiary.
We record expenses and liabilities based on the estimated costs required to cover our self-insured
liability and the estimated costs of potential claims and claim adjustment expenses that are not
covered by our insurance policies. These estimated costs are based on an analysis of our historical
claims and industry data, and include an estimate of claims incurred but not yet reported (“IBNR”).
We engage a third-party actuary that uses our historical claim and expense data, input from our
internal legal and risk management groups, as well as industry data, to estimate our liabilities related
to unpaid claims, IBNR associated with the risks that we are assuming for our self-insured liability
and other required costs to administer current and expected claims. These estimates are subject to
uncertainty due to a variety of factors, the most significant being the long period of time between
the delivery of a home to a home buyer and when a structural warranty or construction defect claim
is made, and the ultimate resolution of the claim. Though state regulations vary, construction defect
claims are reported and resolved over a prolonged period of time, which can extend for 10 years or
longer. As a result, the majority of the estimated liability relates to IBNR. Adjustments to our liabilities
related to homes delivered in prior years are recorded in the period in which a change in our
estimate occurs.
The projection of losses related to these liabilities requires actuarial assumptions that are subject to
variability due to uncertainties regarding construction defect claims relative to our markets and the
types of product we build, insurance industry practices and legal or regulatory actions and/or
interpretations, among other factors. Key assumptions used in these estimates include claim
frequencies, severity and settlement patterns, which can occur over an extended period of time. In
addition, changes in the frequency and severity of reported claims and the estimates to settle claims
can impact the trends and assumptions used in the actuarial analysis, which could be material to our
consolidated financial statements. Due to the degree of judgment required, and the potential for
variability in these underlying assumptions, our actual future costs could differ from those estimated,
and the difference could be material to our consolidated financial statements.
OFF-BALANCE SHEET ARRANGEMENTS
We also operate through a number of joint ventures. We earn construction and management fee
income from many of these joint ventures. Our investments in these entities are generally accounted
for using the equity method of accounting. We are a party to several joint ventures with unrelated
parties to develop and sell land that is owned by the joint ventures. We recognize our proportionate
share of the earnings from the sale of home sites to other builders, including our joint venture
partners. We do not recognize earnings from the home sites we purchase from these ventures at the
time of our purchase; instead, our cost basis in the home sites is reduced by our share of the earnings
realized by the joint venture from those home sites.
At October 31, 2020, we had investments in these entities of $430.7 million, and were committed to
invest or advance up to an additional $75.0 million to these entities if they require additional funding.
At October 31, 2020, we had agreed to terms for the acquisition of 139 home sites from one Land
Development Joint Ventures for an estimated aggregate purchase price of $10.1 million. In addition,
we expect to purchase approximately 2,100 additional home sites over a number of years from several
of these joint ventures; the purchase price of these home sites will be determined at a future date.
The unconsolidated entities in which we have investments generally finance their activities with a
combination of partner equity and debt financing. In some instances, we have guaranteed debt of
unconsolidated entities. These guarantees may include any or all of the following: (i) project
completion guarantees, including any cost overruns; (ii) repayment guarantees, generally covering a
percentage of the outstanding loan; (iii) carry cost guarantees, which cover costs such as interest,
real estate taxes, and insurance; (iv) an environmental indemnity provided to the lender that holds
the lender harmless from and against losses arising from the discharge of hazardous materials from
the property and non-compliance with applicable environmental laws; and (v) indemnification of the
lender from “bad boy acts” of the unconsolidated entity.
In some instances, we and our joint venture partner have provided joint and several guarantees in
connection with loans to unconsolidated entities. In these situations, we generally seek to implement
a reimbursement agreement with our partner that provides that neither party is responsible for
more than its proportionate share or agreed-upon share of the guarantee; however, we are not
always successful. In addition, if the joint venture partner does not have adequate financial resources
to meet its obligations under such a reimbursement agreement, we may be liable for more than our
proportionate share.
We believe that as of October 31, 2020, 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
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 October 31, 2020, we had
guaranteed the debt of certain unconsolidated entities with loan commitments aggregating $1.51
billion, of which, if the full amount of the debt obligations were borrowed, we estimate $229.3 million
to be our maximum exposure related to repayment and carry cost guarantees. At October 31, 2020,
the unconsolidated entities had borrowed an aggregate of $1.02 billion, of which we estimate $179.1
million to be our maximum exposure related to repayment and carry cost guarantees. These
maximum exposure estimates do not take into account any recoveries from the underlying collateral
or any reimbursement from our partners.
For more information regarding these joint ventures, see Note 4, “Investments in Unconsolidated
Entities” in the Notes to Consolidated Financial Statements in Item 15(a)1 of the Form 10-K for the
year ended October 31, 2020.
The trends, uncertainties or other factors that impact our business and the industry in general also
impact the unconsolidated entities in which we have investments. We review each of our investments
on a quarterly basis for indicators of impairment. A series of operating losses of an investee, the
inability to recover our invested capital, or other factors may indicate that a loss in value of our
investment in the unconsolidated entity has occurred. If a loss exists, we further review to determine
if the loss is other than temporary, in which case we write down the investment to its estimated fair
value. The evaluation of our investment in unconsolidated entities entails a detailed cash flow
analysis using many estimates including but not limited to, expected sales pace, expected sales
prices, expected incentives, costs incurred and anticipated, sufficiency of financing and capital,
competition, market conditions and anticipated cash receipts, in order to determine projected future
distributions. Each of the unconsolidated entities evaluates its inventory in a similar manner. In
addition, for our unconsolidated entities that own, develop, and manage for-rent residential
apartments, we review rental trends, expected future expenses, and expected future cash flows to
determine estimated fair values of the underlying properties. See “Critical Accounting Policies -
Inventory” contained in this MD&A for more detailed disclosure on our evaluation of inventory. If a
valuation adjustment is recorded by an unconsolidated entity related to its assets, our proportionate
share is reflected in income from unconsolidated entities with a corresponding decrease to our
investment in unconsolidated entities. Based upon our evaluation of the fair value of our investments
in unconsolidated entities, we recognized charges in connection with one Home Building Joint
Venture of $6.0 million in fiscal 2020; one Land Development Joint Venture of $1.0 million in fiscal
2019; and two Land Development Joint Ventures of $6.0 million in fiscal 2018.
RESULTS OF OPERATIONS
The following table compares certain items in our Consolidated Statements of Operations and
Comprehensive Income and other supplemental information for fiscal 2020, 2019 and 2018
($ amounts in millions, unless otherwise stated). For more information regarding results of operations
by operating segment, see “Segments” in this MD&A.
Years ended October 31,
2 9
TOLL BROTHERS 2020 Revenues: (1)
Home sales
Land sales and other
Cost of revenues: (1)
Home sales (2)
Land sales and other
Selling, general and administrative (2)
Income from operations
Other:
Income from unconsolidated entities
Other income – net
Income before income taxes
Income tax provision
Net income
Supplemental information:
Home sales cost of revenues as a percentage of home sales revenues (2)
Land sales and other cost of revenues as a percentage of land sales and other revenues (1)
SG&A as a percentage of home sales revenues (2)
Effective tax rate
Deliveries – units
2020
2019
% Change
2020 vs
2019
% Change
2019 vs
2018
2018
$
6,937.4 $
7,080.4
(2)% $
7,143.3
(1)%
140.3
143.6
—
7,077.7
7,224.0
(2)%
7,143.3
5,534.1
125.9
5,534.2
129.7
—%
5,536.8
—
5,660.0
5,663.9
—%
5,536.8
867.4
550.3
0.9
35.7
586.9
140.3
$
446.6 $
79.8%
89.7%
12.5%
23.9%
8,496
879.2
680.8
24.9
81.5
787.2
197.2
590.0
78.2%
90.3%
12.4%
25.1%
8,107
873.4
(1)%
(19)%
(96)%
(56)%
(25)%
(29)%
(24)% $
820.2
786.2
85.2
62.5
933.9
185.8
748.2
77.5%
11.5%
19.9%
5%
(7)% $
8,265
864.3
1%
—%
2%
7%
(13)%
(71)%
30%
(16)%
6%
(21)%
(2)%
1%
(12)%
(5)%
(7)%
Deliveries – average selling price (in ‘000s)
$
816.5 $
Net contracts signed – value
Net contracts signed – units
Net contracts signed – average selling price (in ‘000s)
$
7,995.1 $
6,710.9
19% $
7,604.3
9,932
$
805.0 $
8,075
831.1
23%
(3)% $
8,519
892.6
Backlog – value
Backlog – units
Backlog – average selling price (in ‘000s)
At October 31,
% Change
2020 vs
2019
% Change
2019 vs
2018
2018
2020
2019
$
6,374.6 $
5,257.1
21% $
5,522.5
7,791
$
818.2 $
6,266
839.0
24%
(2)% $
6,105
904.6
(5)%
3%
(7)%
Note: Amounts may not add due to rounding.
(1) On November 1, 2018, we adopted ASC 606. Upon adoption, land sale activity is presented as part of income from operations where previously it was included in “Other income - net.” In fiscal 2018, we recognized land sales
revenues and land sales cost of revenues of $134.3 million and $128.0 million, respectively. Further, retained customer deposits, which totaled $11.8 million and $13.2 million, in fiscal 2020 and 2019, respectively, are included in
“Home sales revenue” where previously they were included in “Other income – net.” In fiscal 2018, retained customer deposits were $8.9 million. Prior periods are not restated.
(2) Effective October 31, 2020, we reclassified sales commissions paid to third-party brokers from home sales cost of revenues to selling, general and administrative expense in our Consolidated Statements of Operations and
Comprehensive Income. The reclassification aligns the treatment of sales commissions paid to third-party brokers with the treatment of sales commissions paid to in-house salespersons, and is consistent with the manner in which
the majority of the Company’s peers treat such commissions. The reclassification had the effect of lowering home sales cost of revenues (and increasing home sales gross margin) and increasing selling, general and administrative
expense by the amount of third-party broker commissions, which totaled $138.6 million, $144.7 million and $136.2 million, or 2.0%, 2.0% and 1.9% of home sales revenues, for the years ended October 31, 2020, 2019 and 2018,
respectively. All prior period amounts have been reclassified to conform to the 2020 presentation.
3 0
TOLL BROTHERS 2020
FISCAL 2020 COMPARED TO FISCAL 2019
Income From Unconsolidated Entities
Home Sales Revenues And Home Sales Cost Of Revenues
The decrease in home sales revenues in fiscal 2020, as compared to fiscal 2019, was attributable to a
7% decrease in the average price of the homes delivered, offset, in part, by a 5% increase in the number
of homes delivered. Consistent with our strategy to expand geographically and by product type, the
decrease in the average delivered home price was primarily due to a shift in the number of homes
delivered to less expensive areas and/or products. The shift in the number of homes delivered to less
expensive areas and/or products in the fiscal 2020, as compared to the fiscal 2019, was primarily
related to a decrease in the number of homes closed under our City Living brand and in Southern
California, where average prices are higher than the Company average; our strategic expansion into
more affordable luxury home and attractive high-growth markets, which includes homes delivered in
metropolitan Atlanta, Georgia and several markets in South Carolina from the Sharp and Sabal
acquisitions; and an increase in the number of quick delivery homes delivered, where average prices
are lower than the Company average. The increase in the number of homes delivered in fiscal 2020, as
compared to fiscal 2019, was primarily due to home deliveries resulting from the Sharp and Sabal
acquisitions; an increase in homes delivered in Northern California mainly attributable to closings at a
large high-density condominium community; and an increase in the number of quick delivery homes
delivered in fiscal 2020. These increases were partially offset by decreases in homes delivered in
Southern California and under our City Living brand, primarily due to lower backlog at October 31,
2019, as compared to October 31, 2018.
Home sales cost of revenues, as a percentage of homes sales revenues, in fiscal 2020 was 79.8%, as
compared to 78.2% in fiscal 2019. The increase in fiscal 2020 was principally due to a shift in the mix
of revenues to lower margin products/areas; higher land, land development, material and labor costs;
and higher inventory impairment charges. These increases were offset, in part, by lower interest
expense in the fiscal 2020 period, as compared to the fiscal 2019 period. Interest cost in fiscal 2020
was $174.4 million or 2.5% of home sales revenues, as compared to $185.0 million or 2.6% of home
sales revenues in fiscal 2019. We recognized inventory impairments and write-offs of $55.9 million or
0.8% of home sales revenues and $42.4 million or 0.6% of home sales revenues in fiscal 2020 and fiscal
2019, respectively.
Land Sales And Other Revenues And Land Sales And Other Cost Of Revenues
Our revenues from land sales and other generally consist of the following: (1) land sales to joint
ventures in which we retain an interest; (2) lot sales to third-party builders within our master planned
communities; and (3) bulk land sales to third parties of land we have decided no longer meets our
development criteria.
Prior to the adoption of ASC 606, land sales activity was reported within “Other income – net” in our
Consolidated Statements of Operations and Comprehensive Income. In fiscal 2018, we recognized
land sales revenues and land sales cost of revenues of $134.3 million and $128.0 million, respectively.
Selling, General And Administrative Expenses (“Sg&A”)
SG&A spending decreased by $11.8 million in fiscal 2020, as compared to fiscal 2019. As a percentage
of home sales revenues, SG&A was 12.5% and 12.4% in fiscal 2020 and 2019, respectively. The dollar
decrease in SG&A was due primarily to lower sales and marketing expenses as we reduced spend
following the onset of the COVID-19 pandemic and we implemented a number of cost reduction
initiatives to improve efficiencies and rationalize overhead expenses, including workforce reductions.
Such initiatives included cancellation of discretionary benefit plan contributions related to fiscal
2019, which resulted in the reversal of an $8.0 million accrual. The decrease in spending in fiscal
2020 was offset, in part, by a $7.5 million charge for severance costs incurred in the second quarter
of fiscal 2020, other compensation increases, and costs related to the implementation of new
enterprise information technology systems. The increase in SG&A as a percentage of revenues was
due to a 2% decrease in revenues partially offset by a 1% decrease in SG&A spending in fiscal 2020,
as compared to fiscal 2019.
We recognize our proportionate share of the earnings and losses from the various unconsolidated
entities in which we have an investment. Many of our unconsolidated entities are land development
projects, high-rise/mid-rise condominium construction projects, or for-rent apartments projects,
which do not generate revenues and earnings for a number of years during the development of the
property. 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 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, 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.
The decrease in income from unconsolidated entities from $24.9 million in fiscal 2019 to $0.9 million
in fiscal 2020, was due mainly to a decrease in earnings from two Home Building Joint Ventures
which delivered their last homes in fiscal 2019; $6.0 million of other-than-temporary impairment
charges that we recognized on one of our Home Building Joint Ventures in fiscal 2020; a $3.8 million
gain recognized in fiscal 2019 from an asset sale by one of our Rental Property Joint Ventures; losses
recognized by a joint venture that owns a hotel that was adversely impacted by COVID-19; and an
increase in losses in several Rental Property Joint Ventures related to the commencement of
operations and lease up activities in fiscal 2020, as compared to fiscal 2019. The decrease was offset,
in part, by a $10.7 million gain recognized in the fiscal 2020 period from the sale of our investment
in one of our Rental Property Joint Ventures to our joint venture partner.
Other Income – Net
The table below provides the components of “Other Income – net” for the years ended October 31,
2020 and 2019 (amounts in thousands):
Income from ancillary businesses
Management fee income from home building
unconsolidated entities, net
Other
Total other income–net
$
$
2020
25,540 $
3,636
6,517
35,693 $
2019
53,568
9,948
17,986
81,502
The decrease in income from ancillary businesses in fiscal 2020, as compared to fiscal 2019, was
mainly due to gains recognized of $35.1 million from the sale of seven golf clubs in fiscal 2019; higher
losses incurred in our apartment living operations; lower income from golf club operations; and $0.3
million of severance costs in fiscal 2020, as compared to fiscal 2019. This decrease was partially
offset by gains of $13.0 million recognized in fiscal 2020 from the sale of golf club properties and
higher earnings from our mortgage company operations primarily due to an increase in volume in
fiscal 2020, as compared to fiscal 2019.
Management fee income from home building unconsolidated entities presented above includes fees
earned by our City Living and Traditional Home Building operations. The decrease in fiscal 2020, as
compared to fiscal 2019, was primarily related to the decrease in the number of communities. In
addition to the fees earned by our City Living and Traditional Home Building operations, in fiscal
2020 and 2019, our apartment living operations earned fees from unconsolidated entities of $14.0
million and $11.9 million, respectively. Fees earned by our apartment living operations are included
in income from ancillary businesses.
The decrease in “other” in fiscal 2020, as compared to fiscal 2019, was principally due to lower
interest income earned and $2.4 million of directly expensed interest in fiscal 2019.
3 1
TOLL BROTHERS 2020 Income Before Income Taxes
In fiscal 2020, we reported income before income taxes of $586.9 million or 8.3% of revenues, as
compared to $787.2 million, or 10.9% of revenues in fiscal 2019.
Income Tax Provision
We recognized a $140.3 million income tax provision in fiscal 2020. Based upon the federal statutory
rate of 21.0% for fiscal 2020, our federal tax provision would have been $123.2 million. The difference
between the tax provision recognized and the tax provision based on the federal statutory rate was
mainly due to the provision for state income taxes of $25.8 million and $4.8 million of other
permanent differences, offset, in part, by a $11.5 million benefit of federal energy efficient home
credits; a benefit of $3.3 million from excess tax benefits related to stock-based compensation; and
the reversal of $1.7 million of previously accrued tax provisions on uncertain tax positions that were
no longer necessary due to the expiration of the statute of limitations.
We recognized a $197.2 million income tax provision in fiscal 2019. Based upon the federal statutory
rate of 21.0% for fiscal 2019, our federal tax provision would have been $165.3 million. The difference
between the tax provision recognized and the tax provision based on the federal statutory rate was
mainly due to the provision for state income taxes of $37.9 million, $4.9 million of other permanent
differences, and an increase in unrecognized tax benefits of $2.2 million, offset, in part, by the
reversal of $5.3 million of previously accrued tax provisions on uncertain tax positions that were no
longer necessary due to the expiration of the statute of limitations, a $3.1 million benefit of federal
energy efficient home credits, and a benefit of $2.1 million from excess tax benefits related to stock-
based compensation.
FISCAL 2019 COMPARED TO FISCAL 2018
Home Sales Revenues And Home Sales Cost Of Revenues
The decrease in home sales revenues in fiscal 2019, as compared to fiscal 2018, was attributable to a
2% decrease in the number of homes delivered, offset, in part, by a 1% increase in the average price of
the homes delivered. The decrease in the number of homes delivered was primarily due to a moderation
in demand, particularly in California, which we experienced beginning in the fourth quarter of fiscal
2018 through the third quarter of fiscal 2019. This decrease was partially offset by contracts we signed
in the metropolitan Atlanta, Georgia market and several markets in South Carolina in fiscal 2019 from
the Sharp and Sabal acquisitions and an increase in the number of selling communities, primarily in our
South and Mountain regions, in fiscal 2019, as compared to fiscal 2018. The increase in the average
delivered home price was mainly due to price increases in homes delivered in the Pacific and Mountain
regions and a shift in the number of homes delivered to more expensive areas and/or products in
California, New Jersey, Virginia, Washington, and the Mountain region in fiscal 2019, as compared to
fiscal 2018. These increases were partially offset by a shift in the number of homes delivered to less
expensive areas in City Living in fiscal 2019, as compared to fiscal 2018 and a decrease in the number
of homes delivered in California where home prices were higher, in fiscal 2019, as compared to fiscal
2018.
Home sales cost of revenues, as a percentage of homes sales revenues, in fiscal 2019 was 78.2%, as
compared to 77.5% in fiscal 2018. The increase in fiscal 2019 was primarily due to higher land, land
development, material and labor costs; a shift in the mix of our home sales revenues to lower margin
products/areas; the recovery of approximately $9.7 million from litigation settlements in fiscal 2018; a
$7.0 million benefit in fiscal 2018 from the reversal of an accrual related to an indemnification obligation
related to the Shapell acquisition that expired; and higher inventory impairment charges in fiscal 2019,
as compared to fiscal 2018. These increases were offset, in part, by a state reimbursement of previously
expensed environmental clean-up costs received in fiscal 2019; a benefit in fiscal 2019 from the reversal
of accruals for certain Home Owners Associations (“HOA”) turnovers that were no longer required;
price increases in homes delivered in California and the Mountain region; and lower interest expense in
fiscal 2019 compared to fiscal 2018.
Interest cost in fiscal 2019 was $185.0 million or 2.6% of home sales revenues, as compared to $190.7
million or 2.7% of home sales revenues in fiscal 2018. We recognized inventory impairments and write-
offs of $42.4 million or 0.6% of home sales revenues and $35.2 million or 0.5% of home sales revenues
in fiscal 2019 and fiscal 2018, respectively.
Land Sales And Other Revenues And Land Sales And Other Cost Of Revenues
In fiscal 2019, we recognized a gain of $9.3 million from the sale of land to two newly formed Rental
Property Joint Ventures in which we had interests of 25%.
Prior to the adoption of ASC 606, land sales activity was reported within “Other income – net” in our
Consolidated Statements of Operations and Comprehensive Income. In fiscal 2018, we recognized
land sales revenues and land sales cost of revenues of $134.3 million and $128.0 million, respectively.
Selling, General And Administrative Expenses (“Sg&A”)
SG&A spending increased by $59.0 million in fiscal 2019 compared to fiscal 2018. As a percentage of
home sales revenues, SG&A was 12.4% and 11.5% in fiscal 2019 and 2018, respectively. The dollar
increase in SG&A was due primarily to increased compensation costs due to a higher number of
employees and normal compensation increases, increased sales and marketing costs, and costs
related to the implementation of new enterprise information technology systems. The higher sales
and marketing costs were the result of the increased number of selling communities, increased
spending on advertising, increased third-party broker commissions, and higher design studio
operating costs. The increased number of employees was due primarily to the increase in the number
of current and future selling communities.
Income From Unconsolidated Entities
The decrease in income from unconsolidated entities from $85.2 million in fiscal 2018 to $24.9 million
in fiscal 2019, was due mainly to $67.2 million of gains recognized in fiscal 2018 from asset sales by
three of our Rental Property Joint Ventures located in College Park, Maryland, Herndon, Virginia, and
Westborough, Massachusetts, and an increase in losses in several Rental Property Join Ventures
related to the commencement of operations and lease up activities in fiscal 2019, as compared to
fiscal 2018. These decreases were offset, in part, by a $3.8 million gain recognized in fiscal 2019 from
an asset sale by one of our Rental Property Joint Ventures located in Phoenixville, Pennsylvania;
higher earnings from two of our Home Building Joint Ventures; and a $3.0 million decrease in
impairment charges recognized in fiscal 2019 as compared to fiscal 2018.
OTHER INCOME – NET
The table below provides the components of “Other Income – net” for the years ended October 31,
2019 and 2018 (amounts in thousands):
Income from ancillary businesses
$
53,568 $
2019
Management fee income from home building
unconsolidated entities, net
Income from land sales
Retained customer deposits
Other
Total other income–net
9,948
—
—
17,986
$
81,502 $
2018
25,692
11,740
6,331
8,937
9,760
62,460
As a result of our adoption of ASC 606 on November 1, 2018, land sale activity is presented as part
of income from operations where previously it was included in “Other income – net.” In addition,
retained customer deposits are included in “Home sales revenue” where previously they were
included in “Other income – net.” Fiscal 2018 is not restated. See Note 1, “Significant Accounting
Policies – Recent Accounting Pronouncements” in Notes to Consolidated Financial Statements in the
32
TOLL BROTHERS 2020 Form 10-K for the year ended October 31, 2020 for additional information regarding the adoption of
ASC 606.
The increase in income from ancillary businesses in fiscal 2019, as compared to fiscal 2018, was
mainly due to gains recognized of $35.1 million from the sale of seven golf clubs in fiscal 2019 and
lower losses incurred in our apartment living operations in fiscal 2019, as compared to fiscal 2018,
partially offset by a $10.7 million gain from a bulk sale of security monitoring accounts by our home
control solutions business in fiscal 2018.
Management fee income from home building unconsolidated entities presented above primarily
represents fees earned by our City Living and Traditional Home Building operations. In addition, in
fiscal 2019 and 2018, our apartment living operations earned fees from unconsolidated entities of
$11.9 million and $7.5 million, respectively. Fees earned by our apartment living operations are
included in income from ancillary businesses.
The increase in “other” in fiscal 2019 was principally due to higher interest income earned in fiscal
2019 compared to fiscal 2018, offset, in part, by $2.6 million received in fiscal 2018 from the resolution
of a matter involving defective floor joists.
Income Before Income Taxes
Cash provided by operating activities during fiscal 2020 was $1.01 billion. Cash provided by operating
activities was generated primarily from $446.6 million of net income plus $24.3 million of stock-
based compensation, $68.9 million of depreciation and amortization, $55.9 million of inventory
impairments and write-offs, and a net deferred tax benefit of $97.8 million; a $352.9 million decrease
in inventory; an increase of $71.8 million in accounts payable and accrued expenses; and an increase
of $70.4 million in net customer deposits. This activity was offset, in part, by an increase of $176.3
million in receivables, prepaid assets, and other assets and an increase of $9.5 million in mortgage
loans held for sale.
Cash used in investing activities during fiscal 2020 was $177.8 million, primarily related to $109.6
million for the purchase of property and equipment; $71.7 million used to fund investments in
unconsolidated entities; and $60.3 million used to acquire Thrive. This activity was offset, in part, by
$49.2 million of cash received as returns on our investments in unconsolidated entities, foreclosed
real estate, and distressed loans and proceeds of $15.6 million of cash received from sales of a golf
club property.
We used $753.3 million of cash from financing activities in fiscal 2020, primarily for the repurchase
of $634.1 million of our common stock; repayments of $85.8 million of other loans payable, net of
new borrowings; and payment of $56.6 million of dividends on our common stock, offset, in part, by
the proceeds of $24.9 million from our stock-based benefit plans.
In fiscal 2019, we reported income before income taxes of $787.2 million or 10.9% of revenues, as
compared to $933.9 million, or 13.1% of revenues in fiscal 2018.
Fiscal 2019
Income Tax Provision
We recognized a $197.2 million income tax provision in fiscal 2019. Based upon the federal statutory
rate of 21.0% for fiscal 2019, our federal tax provision would have been $165.3 million. The difference
between the tax provision recognized and the tax provision based on the federal statutory rate was
mainly due to the provision for state income taxes of $37.9 million, $4.9 million of other permanent
differences, and an increase in unrecognized tax benefits of $2.2 million, offset, in part, by the
reversal of $5.3 million of previously accrued tax provisions on uncertain tax positions that were no
longer necessary due to the expiration of the statute of limitations, a $3.1 million benefit of federal
energy efficient home credits, and a benefit of $2.1 million from excess tax benefits related to stock-
based compensation.
We recognized a $185.8 million income tax provision in fiscal 2018. Based upon the blended federal
statutory rate of 23.3% for fiscal 2018, our federal tax provision would have been $217.9 million. The
difference between the tax provision recognized and the tax provision based on the federal statutory
rate was mainly due to tax law changes of $38.7 million; a benefit of $18.2 million related to the
utilization of domestic production activities deductions; the reversal of $4.7 million of previously
accrued tax provisions on uncertain tax positions that were no longer necessary due to the expiration
of the statute of limitations and settlements with certain taxing jurisdictions; a benefit of $4.2 million
from excess tax benefits related to stock-based compensation; a $3.2 million benefit of federal
energy efficient home credits; and $12.0 million of permanent and other differences, which primarily
relates to tax planning transactions that benefited the Company’s state net operating loss
carryforwards, offset, in part, by the provision for state income taxes of $47.1 million. See Note 8,
“Income Taxes” in Item 15(a)1 of this Form 10-K for additional information regarding the impact of
the Tax Act.
CAPITAL RESOURCES AND LIQUIDITY
Funding for our business has been, and continues to be, provided principally by cash flow from
operating activities before inventory additions, unsecured bank borrowings, and the public
debt markets.
Fiscal 2020
At October 31, 2020, we had $1.37 billion of cash and cash equivalents on hand and approximately
$1.79 billion available for borrowing under our Revolving Credit Facility.
At October 31, 2019, we had $1.29 billion of cash and cash equivalents on hand and approximately
$1.73 billion available for borrowing under our Revolving Credit Facility.
Cash provided by operating activities during fiscal 2019 was $437.7 million. It was generated
primarily from $590.0 million of net income plus $26.2 million of stock-based compensation, $72.1
million of depreciation and amortization, $42.4 million of inventory impairments and write-offs, and
a net deferred tax benefit of $102.8 million; offset, in part, by a $40.2 million increase in inventory;
an increase of $185.3 million in receivables, prepaid assets, and other assets; an increase of $45.6
million in mortgage loans held for sale; and a decrease of $64.5 million in accounts payable and
accrued expenses.
Cash used in investing activities during fiscal 2019 was $75.9 million, primarily related to $162.4
million used to acquire Sharp and Sabal; $87.0 million for the purchase of property and equipment;
and $556.6 million used to fund investments in unconsolidated entities. This activity was offset, in
part, by $151.1 million of cash received as returns on our investments in unconsolidated entities,
foreclosed real estate, and distressed loans and proceeds of $79.6 million of cash received from sales
of golf club properties and an office building in several separate transactions with unrelated third
parties.
We used $258.5 million of cash from financing activities in fiscal 2019, primarily for the repayment of
$600.0 million of senior notes; the repurchase of $233.5 million of our common stock; and payment
of $63.6 million of dividends on our common stock, offset, in part, by the net proceeds of $396.4
million from the issuance of $400.0 million aggregate principal amount of 3.80% Senior Notes due
2029; borrowings of $227.4 million of other loans payable, net of new repayments; and the proceeds
of $17.4 million from our stock-based benefit plans.
Other
In general, our cash flow from operating activities assumes that, as each home is delivered, we will
purchase a home site to replace it. Because we own a supply of several years of home sites, we do
not need to buy home sites immediately to replace those that we deliver. In addition, we generally
do not begin construction of our detached homes until we have a signed contract with the home
buyer. Should our business decline, we believe that our inventory levels would decrease as we
complete and deliver the homes under construction but do not commence construction of as many
new homes, as we complete the improvements on the land we already own, and as we sell and
deliver quick delivery homes that are then in inventory, resulting in additional cash flow from
3 3
TOLL BROTHERS 2020 operations. In addition, we might delay, decrease, or curtail our acquisition of additional land, which
would further reduce our inventory levels and cash needs. During fiscal 2020, in response to the
economic disruption and uncertainty caused by the COVID-19 pandemic, we significantly reduced
spending on new land acquisitions and land development in our second fiscal quarter. We have since
resumed a more normal level of land acquisition and development spending. At October 31, 2020,
we owned or controlled through options approximately 63,200 home sites, as compared to
approximately 59,200 at October 31, 2019; and approximately 53,400 at October 31, 2018. Of the
approximately 63,200 home sites owned or controlled through options at October 31, 2020, we
owned approximately 36,100. Of our owned home sites at October 31, 2020, significant improvements
were completed on approximately 16,600 of them.
At October 31, 2020, the aggregate purchase price of land parcels under option and purchase
agreements was approximately $2.64 billion (including $10.1 million of land to be acquired from joint
ventures in which we have invested). Of the $2.64 billion of land purchase commitments, we had
paid or deposited $223.6 million and, if we acquire all of these land parcels, we will be required to
pay an additional $2.42 billion. The purchases of these land parcels are scheduled over the next
several years. In addition, we expect to purchase approximately 2,100 additional home sites over a
number of years from several of these joint ventures. We have additional land parcels under option
that have been excluded from the aforementioned aggregate purchase amounts since we do not
believe that we will complete the purchase of these land parcels and no additional funds will be
required from us to terminate these contracts.
During the past several years, we have made a number of investments in unconsolidated entities
related to the acquisition and development of land for future home sites, the construction of luxury
for-sale condominiums, and for-rent apartments. Our investment activities related to investments in,
and distributions of investments from, unconsolidated entities are contained in the Consolidated
Statements of Cash Flows under “Net cash (used in) provided by investing activities.” At October 31,
2020, we had investments in these entities of $430.7 million, and were committed to invest or
advance up to an additional $75.0 million to these entities if they require additional funding. At
October 31, 2020, we had purchase commitments to acquire land for apartment developments of
approximately $111.3 million, of which we had outstanding deposits in the amount of $6.5 million. We
generally intend to develop these apartment projects in joint ventures with unrelated parties in
the future.
We have a $1.905 billion, unsecured, five-year revolving credit facility that was scheduled to expire
on November 1, 2024. On October 31, 2020, we entered into extension letter agreements (the
“Revolver Extension Agreements”) with respect to the Revolving Credit Facility. In connection with
the Revolver Extension Agreements, the Company extended the maturity date of $1.85 billion of the
revolving loans and commitments under the Revolving Credit Agreement from November 1, 2024 to
November 1, 2025, with the remainder of the revolving loans and commitments continuing to
terminate on November 1, 2024. Under the terms of the Revolving Credit Facility, our maximum
leverage ratio (as defined in the credit agreement) may not exceed 1.75 to 1.00 and we are required
to maintain a minimum tangible net worth (as defined in the credit agreement) of no less than
approximately $2.25 billion. Under the terms of the Revolving Credit Facility, at October 31, 2020,
our leverage ratio was approximately 0.49 to 1.00 and our tangible net worth was approximately
$4.81 billion. Based upon the minimum tangible net worth requirement, our ability to repurchase our
common stock was limited to approximately $3.18 billion as of October 31, 2020. At October 31,
2020, we had no outstanding borrowings under the Revolving Credit Facility and had outstanding
letters of credit of approximately $119.0 million.
At October 31, 2020, we had an $800.0 million, five-year senior unsecured term loan facility (the
“Term Loan Facility”) with a syndicate of banks. On October 31, 2020, we entered into term loan
extension agreements with the banks which extended the maturity date of all $800 million of
outstanding term loans under the Term Loan Facility from November 1, 2024 to November 1, 2025,
with no principal payments being required before the maturity date.
In November 2020, we entered into five interest rate swap transactions to hedge $400.0 million of
the Term Loan Facility through October 2025. The interest rate swaps effectively fix the interest cost
on the $400.0 million at 0.369% plus the spread set forth in the pricing schedule in the Term Loan
Facility, which was 1.3% as of October 31, 2020. These interest rate swaps were designated as cash
flow hedges.
We believe that we will have adequate resources and sufficient access to the capital markets and
external financing sources to continue to fund our current operations and meet our contractual
obligations. Due to the uncertainties in the economy and for home builders in general, we cannot be
certain that we will be able to replace existing financing or find sources of additional financing in
the future.
INFLATION
The long-term impact of inflation on us is manifested in increased costs for land, land development,
construction, and overhead. We generally enter into contracts to acquire land a significant period of
time before development and sales efforts begin. Accordingly, to the extent land acquisition costs
are fixed, subsequent increases or decreases in the sales prices of homes will affect our profits.
Because the sales price of each of our homes is fixed at the time a buyer enters into a contract to
purchase a home and because we generally contract to sell our homes before we begin construction,
any inflation of costs in excess of those anticipated may result in lower gross margins. We generally
attempt to minimize that effect by entering into fixed-price contracts with our subcontractors and
material suppliers for specified periods of time, which generally do not exceed one year.
In general, housing demand is adversely affected by increases in interest rates and housing costs.
Interest rates, the length of time that land remains in inventory, and the proportion of inventory that
is financed affect our interest costs. If we are unable to raise sales prices enough to compensate for
higher costs, or if mortgage interest rates increase significantly, affecting prospective buyers’ ability
to adequately finance home purchases, our home sales revenues, gross margins, and net income
could be adversely affected. Increases in sales prices, whether the result of inflation or demand, may
affect the ability of prospective buyers to afford new homes.
CONTRACTUAL OBLIGATIONS
The following table summarizes our estimated contractual payment obligations at October 31, 2020
(amounts in millions):
2013
2021
2022–2023
2024–2025
Thereafter
Total
Senior notes (a)
Loans payable (a)
Mortgage company loan
facility (a)(b)
Operating lease obligations
Purchase obligations (c)
Retirement plans (d)
$
127.8 $
1,023.9 $
396.1 $
1,733.4 $
3,281.2
136.7
128.4
148.8
874.6
1,288.5
150.1
19.9
1,487.2
13.3
—
33.7
935.5
16.9
—
22.5
255.1
16.9
—
204.5
234.0
61.9
150.1
280.6
2,911.8
109.0
$
1,935.0 $
2,138.4 $
839.4 $
3,108.4 $
8,021.2
(a) Amounts include estimated annual interest payments until maturity of the debt. Of the amounts indicated, $2.66
billion of the senior notes, $1.15 billion of loans payable, $148.6 million of the mortgage company loan facility, and
$38.4 million of accrued interest were recorded on our October 31, 2020 Consolidated Balance Sheet.
(b) In December 2020, we amended the mortgage company warehousing agreement to, among other things, extend
the maturity date to January 18, 2021.
(c) Amounts represent our expected acquisition of land under purchase agreements and the estimated remaining
amount of the contractual obligation for land development agreements secured by letters of credit and surety
bonds. Of the total amount indicated, $19.6 million was recorded on our October 31, 2020 Consolidated Balance
Sheet.
(d) Amounts represent our obligations under our deferred compensation plan, supplemental executive retirement
plans and our 401(k) salary deferral savings plans. Of the total amount indicated, $89.9 million was recorded on
our October 31, 2020 Consolidated Balance Sheet.
3 4
TOLL BROTHERS 2020 SUPPLEMENTAL GUARANTOR INFORMATION
Summarized Balance Sheet Data (amounts in millions)
At October 31, 2020, our 100%-owned subsidiary, Toll Brothers Finance Corp. (the “Subsidiary Issuer”),
had issued and outstanding $2.66 billion aggregate principal amount of senior notes maturing on
various dates between February 15, 2022 and November 1, 2029 (the “Senior Notes”). For further
information regarding the Senior Notes, see Note 6 to our Consolidated Financial Statements under
the caption “Senior Notes.”
Assets
Cash
Inventory
The obligations of the Subsidiary Issuer to pay principal, premiums, if any, and interest are
guaranteed jointly and severally on a senior basis by us and substantially all of our 100%-owned
home building subsidiaries (the “Guarantor Subsidiaries” and, together with us, the “Guarantors”).
The guarantees are full and unconditional, and the Subsidiary Issuer and each of the Guarantor
Subsidiaries are consolidated subsidiaries of Toll Brothers, Inc. Our non-home building subsidiaries
and several of our home building subsidiaries (together, the “Non-Guarantor Subsidiaries”) do not
guarantee the Senior Notes. The Subsidiary Issuer generates no operating revenues and does not
have any independent operations other than the financing of our other subsidiaries by lending the
proceeds of its public debt offerings, including the Senior Notes. Our home building operations are
conducted almost entirely through the Guarantor Subsidiaries. Accordingly, the Subsidiary Issuer’s
cash flow and ability to service the Senior Notes is dependent upon the earnings of the Company’s
subsidiaries and the distribution of those earnings to the Subsidiary Issuer, whether by dividends,
loans or otherwise. Holders of the Senior Notes have a direct claim only against the Subsidiary
Issuer and the Guarantors. The obligations of the Guarantors under their guarantees will be limited
as necessary to recognize certain defenses generally available to guarantors (including those that
relate to fraudulent conveyance or transfer, voidable preference or similar laws affecting the rights
of creditors generally) under applicable law.
The indentures under which the Senior Notes were issued provide that any of our subsidiaries
that provide a guarantee of our obligations under the Revolving Credit Facility will guarantee the
Senior Notes. The indentures further provide that any Guarantor Subsidiary may be released from
its guarantee so long as (i) no default or event of default exists or would result from release of
such guarantee; (ii) the Guarantor Subsidiary being released has consolidated net worth of less
than 5% of the Company’s consolidated net worth as of the end of our most recent fiscal quarter;
(iii) the Guarantor Subsidiaries released from their guarantees in any fiscal year comprise in the
aggregate less than 10% (or 15% if and to the extent necessary to permit the cure of a default) of
our consolidated net worth as of the end of our most recent fiscal quarter; (iv) such release would
not have a material adverse effect on ours and our subsidiaries’ home building business; and (v) the
Guarantor Subsidiary is released from its guaranty under the Revolving Credit Facility. If there are no
guarantors under the Revolving Credit Facility, all Guarantor Subsidiaries under the indentures will
be released from their guarantees.
In March 2020, the SEC adopted amendments to Rule 3-10 of Regulation S-X, under Rule Release
No. 33-10762, Financial Disclosures about Guarantors and Issuers of Guaranteed Securities and
Affiliates Whose Securities Collateralize a Registrant’s Securities (“Rule 33-10762”), that reduce
and simplify the financial disclosure requirements applicable to SEC-registered debt offerings for
guarantors and issuers of guaranteed debt securities (which we previously included within the notes
to our consolidated financial statements in our Annual Reports on Form 10-K and Quarterly Reports
on Form 10-Q). While amendments under Rule 33-10762 are effective January 4, 2021, voluntary
compliance is permitted in advance of the effective date, and we have adopted the new disclosure
requirements for the period ending October 31, 2020.
The following summarized financial information is presented for Toll Brothers, Inc., the Subsidiary
Issuer, and the Guarantor Subsidiaries on a combined basis after intercompany transactions and
balances have been eliminated among Toll Brothers, Inc., the Subsidiary Issuer and the Guarantor
Subsidiaries, as well as their investment in, and equity in earnings from the Non-Guarantor
Subsidiaries.
Amount due from Nonguarantor Subsidiaries
Total assets
Liabilities & Stockholders’ Equity
Loans payable
Senior notes
Total liabilities
Stockholders’ equity
Summarized Statement of Operations Data (amounts in millions)
Revenues
Cost of revenues
Selling, general and administrative
Income before income taxes
Net income
October 31, 2020
1,235.3
7,596.9
671.1
10,193.6
1,110.3
2,661.7
5,575.0
4,618.6
For the
year ended
October 31, 2020
6,962.1
5,554.2
863.8
571.9
435.2
$
$
$
$
$
$
$
$
$
$
$
$
$
SEGMENTS
We operate in two segments: Traditional Home Building and City Living, our urban development
division. Within Traditional Home Building, we operate in five geographic segments around the
United States. In the first quarter of fiscal 2020, we made certain changes to our Traditional Home
Building regional management structure and realigned certain of the states falling among our five
geographic segments, as follows:
3 5
TOLL BROTHERS 2020 EASTERN REGION:
NORTH :
Connecticut, Delaware, Illinois, Massachusetts, Michigan, Pennsylvania,
New Jersey and New York
MID-ATLANTIC:
Georgia, Maryland, North Carolina, Tennessee and Virginia
SO UTH:
Florida, South Carolina and Texas
WESTE RN REGION:
MOU NTAIN:
Arizona, Colorado, Idaho, Nevada and Utah
PACIFIC:
California, Oregon and Washington
Previously, our geographic segments were:
NORT H:
Connecticut, Illinois, Massachusetts, Michigan, New Jersey and New York
MID-ATLANTIC:
Delaware, Maryland, Pennsylvania, and Virginia
SO UTH:
WEST:
Florida, Georgia, North Carolina, South Carolina and Texas
Arizona, Colorado, Idaho, Nevada, Oregon, Utah and Washington
CALIFORNIA:
California
Our new geographic reporting segments are consistent with how our chief operating decision
makers are assessing operating performance and allocating capital following the realignment of the
regional management structure. The realignment did not have any impact on our consolidated
financial position, results of operations, earnings per share or cash flows. Prior period segment
information was restated to conform to the new reporting structure.
The following tables summarize information related to revenues, net contracts signed, and income
(loss) before income taxes by segment for fiscal years 2020, 2019, and 2018. Information related to
backlog and assets by segment at October 31, 2020 and 2019, has also been provided.
3 6
TOLL BROTHERS 2020 Units Delivered and Revenues:
Revenues ($ in millions)
Units Delivered
Average Delivered Price ($ in thousands)
2020
2019
% Change
2020
2019
% Change
2020
2019
% Change
Fiscal 2020 Compared to Fiscal 2019
Traditional Home Building:
(Restated)
(Restated)
North
Mid-Atlantic
South
Mountain
Pacific
Traditional Home Building
City Living
Other
Total home sales revenue
Land sales revenue
Total revenue
Units Delivered and Revenues:
$
1,364.8 $
845.6
1,041.2
1,535.8
2,029.9
6,817.3
120.9
(0.8)
$
$
6,937.4 $
140.3
7,077.7 $
1,484.4
804.4
991.9
1,130.9
2,416.6
6,828.2
253.2
(1.0)
7,080.4
143.6
7,224.0
(8)%
5%
5%
36%
(16)%
—%
(52)%
(2)%
2,010
1,271
1,566
2,219
1,334
8,400
96
8,496
2,223
1,237
1,298
1,711
1,434
7,903
204
8,107
(10)% $
3%
679.0 $
665.3
21%
30%
(7)%
6%
(53)%
664.9
692.1
1,521.7
811.6
1,259.4
(Restated)
667.7
650.3
764.2
661.0
1,685.2
864.0
1,241.1
5% $
816.5 $
873.4
2%
2%
(13)%
5%
(10)%
(6)%
1%
(7)%
Traditional Home Building:
(Restated)
(Restated)
(Restated)
(Restated)
(Restated)
(Restated)
Revenues ($ in millions)
Units Delivered
Average Delivered Price ($ in thousands)
2019
2018
% Change
2019
2018
% Change
2019
2018
% Change
Fiscal 2019 Compared to Fiscal 2018
North
Mid-Atlantic
South
Mountain
Pacific
Traditional Home Building
City Living
Other
Total home sales revenue
Land sales revenue
Total revenue
$
1,484.4 $
804.4
991.9
1,130.9
2,416.6
6,828.2
253.2
(1.0)
1,517.9
775.7
868.6
1,126.6
2,533.5
6,822.3
321.0
$
$
7,080.4 $
7,143.3
143.6
7,224.0 $
7,143.3
(2)% $
4%
14%
—%
(5)%
—%
(21)%
(1)%
2,223
1,237
1,298
1,711
1,434
7,903
204
8,107
2,259
1,271
1,114
1,797
1,655
8,096
169
8,265
(2)% $
(3)%
667.7 $
650.3
17%
(5)%
(13)%
(2)%
21%
764.2
661.0
1,685.2
864.0
1,241.1
671.9
610.3
779.7
626.9
1,530.8
842.7
1,899.4
(2)% $
873.4 $
864.3
(1)%
7%
(2)%
5%
10%
3%
(35)%
1%
3 7
TOLL BROTHERS 2020 Net Contracts Signed:
Net Contract Value ($ in millions)
Net Contracted Units
Average Contracted Price ($ in thousands)
2020
2019
% Change
2020
2019
% Change
2020
2019
% Change
Fiscal 2020 Compared to Fiscal 2019
Traditional Home Building:
(Restated)
(Restated)
North
Mid-Atlantic
South
Mountain
Pacific
Traditional Home Building
City Living
Total
Net Contracts Signed:
$
1,552.4 $
1,075.3
1,320.1
2,008.2
1,929.6
7,885.6
109.5
$
7,995.1 $
1,511.7
772.5
941.0
1,456.2
1,804.8
6,486.2
224.7
6,710.9
3%
39%
40%
38%
7%
22%
(51)%
19%
2,174
1,473
2,006
2,802
1,404
9,859
73
9,932
2,267
1,159
1,307
2,097
1,095
7,925
150
8,075
(4)% $
27%
714.1 $
730.0
53%
34%
28%
24%
(51)%
658.1
716.7
1,374.4
799.8
1,500.0
23% $
805.0 $
(Restated)
666.8
666.5
720.0
694.4
1,648.2
818.4
1,498.0
831.1
7%
10%
(9)%
3%
(17)%
(2)%
—%
(3)%
Net Contract Value ($ in millions)
Net Contracted Units
Average Contracted Price ($ in thousands)
2019
2018
% Change
2019
2018
% Change
2019
2018
% Change
Fiscal 2019 Compared to Fiscal 2018
Traditional Home Building:
(Restated)
(Restated)
(Restated)
(Restated)
(Restated)
(Restated)
North
Mid-Atlantic
South
Mountain
Pacific
Traditional Home Building
City Living
Total
$
1,511.7 $
772.5
941.0
1,456.2
1,804.8
6,486.2
224.7
$
6,710.9 $
1,511.3
759.5
948.3
1,229.6
2,877.8
7,326.5
277.8
7,604.3
—%
2%
(1)%
18%
(37)%
(11)%
(19)%
(12)%
2,267
1,159
1,307
2,097
1,095
7,925
150
8,075
2,247
1,176
1,212
1,871
1,830
8,336
183
8,519
1% $
(1)%
8%
12%
(40)%
(5)%
(18)%
666.8 $
666.5
720.0
694.4
1,648.2
818.4
1,498.0
(5)% $
831.1 $
672.6
645.8
782.4
657.2
1,572.6
878.9
1,518.0
892.6
(1)%
3%
(8)%
6%
5%
(7)%
(1)%
(7)%
3 8
TOLL BROTHERS 2020 Backlog at October 31:
Backlog at October
Backlog Value ($ in millions)
Backlog Units
Average Backlog Price ($ in thousands)
2020
2019
% Change
2020
2019
% Change
2020
2019
% Change
October 31, 2020 Compared to October 31, 2019
Traditional Home Building:
(Restated)
(Restated)
$
1,369.1 $
770.4
1,038.4
1,670.7
1,387.1
6,235.7
138.9
$
6,374.6 $
1,179.6
535.3
757.3
1,150.9
1,484.4
5,107.5
149.6
5,257.1
16%
44%
37%
45%
(7)%
22%
(7)%
21%
1,906
990
1,488
2,274
1,044
7,702
89
7,791
1,742
784
1,048
1,606
974
6,154
112
6,266
9% $
26%
42%
42%
7%
25%
(21)%
718.3 $
778.2
697.9
734.7
1,328.6
809.6
1,560.3
24% $
818.2 $
(Restated)
677.2
682.7
722.6
716.6
1,524.0
829.9
1,335.6
839.0
6%
14%
(3)%
3%
(13)%
(2)%
17%
(2)%
North
Mid-Atlantic
South
Mountain
Pacific
Traditional Home Building
City Living
Total
Backlog at October 31:
Backlog at October
Backlog Value ($ in millions)
Backlog Units
Average Backlog Price ($ in thousands)
2019
2018
% Change
2019
2018
% Change
2019
2018
% Change
October 31, 2019 Compared to October 31, 2018
Traditional Home Building:
(Restated)
(Restated)
(Restated)
(Restated)
(Restated)
(Restated)
North
Mid-Atlantic
South
Mountain
Pacific
Traditional Home Building
City Living
Total
$
1,179.6 $
535.3
757.3
1,150.9
1,484.4
5,107.5
149.6
$
5,257.1 $
1,150.1
500.1
780.3
823.8
2,090.6
5,344.9
177.6
5,522.5
3%
7%
(3)%
40%
(29)%
(4)%
(16)%
(5)%
1,742
784
1,048
1,606
974
6,154
112
6,266
1,698
737
971
1,220
1,313
5,939
166
6,105
3% $
6%
677.2 $
682.7
8%
32%
(26)%
4%
(33)%
722.6
716.6
1,524.0
829.9
1,335.6
3% $
839.0 $
677.3
678.6
803.6
675.3
1,592.2
900.0
1,069.7
904.6
—%
1%
(10)%
6%
(4)%
(8)%
25%
(7)%
3 9
TOLL BROTHERS 2020 Income (Loss) Before Income Taxes ($ amounts in millions):
FISCAL 2020 COMPARED TO FISCAL 2019 (RESTATED)
2020
2019
(Restated)
% Change
2020 vs.
2019
2018
(Restated)
% Change
2019 vs.
2018
NORTH
Traditional Home Building
Year ended October 31,
2019
2019
% Change
Traditional Home Building:
North
Mid-Atlantic
South
Mountain
Pacific
Traditional Home Building
City Living
$
57.8 $
50.6
108.4
167.7
352.8
737.3
29.7
81.4
50.7
106.1
113.0
509.8
861.0
70.1
Corporate and other
(180.1)
(143.9)
(29)% $
—%
2%
48%
(31)%
(14)%
(58)%
(25)%
98.2
59.3
99.9
136.2
571.4
965.0
78.1
(109.2)
Total
$
586.9 $
787.2
(25)% $
933.9
(17)%
(15)%
6%
(17)%
(11)%
(11)%
(10)%
(32)%
(16)%
“Corporate and other” is comprised principally of general corporate expenses such as our executive
officers; the corporate finance, accounting, audit, tax, human resources, risk management,
information technology, marketing, and legal groups; interest income; income from certain of our
ancillary businesses, including Gibraltar; and income from our Rental Property Joint Ventures and
Gibraltar Joint Ventures.
Total Assets ($ amounts in millions):
Traditional Home Building:
North
Mid-Atlantic
South
Mountain
Pacific
Traditional Home Building
City Living
Corporate and other
Total
At October 31,
2020
2019
(Restated)
$
1,427.5 $
918.6
1,177.0
1,961.3
2,226.7
7,711.1
539.8
2,814.8
1,487.0
854.5
1,166.0
1,769.6
2,627.4
7,904.5
529.5
2,394.1
$
11,065.7 $
10,828.1
“Corporate and other” is comprised principally of cash and cash equivalents, restricted cash, income
taxes receivable, investments in properties held for rental apartments, expected recoveries from
insurance carriers and suppliers, our Gibraltar investments and operations, manufacturing facilities,
and our mortgage and title subsidiaries.
4 0
Units Delivered and
Home Sales Revenues:
Home sales revenues ($ in millions) $
1,364.8 $
Units delivered
Average delivered price
($ in thousands)
Net Contracts Signed:
Net contract value ($ in millions)
Net contracted units
Average contracted price
($ in thousands)
Home sales cost of revenues as a
percentage of home sales revenues
Income before income taxes
($ in millions)
Number of selling communities at
October 31,
$
$
$
$
2,010
1,484.4
2,223
679.0 $
667.7
1,552.4 $
2,174
1,511.7
2,267
714.1 $
666.8
86.3%
84.9%
57.8 $
70
81.4
86
(8)%
(10)%
2%
3%
(4)%
7%
(29)%
(19)%
The decrease in the number of homes delivered in fiscal 2020 was mainly due to lower backlog
conversion, which reflected difficulties in delivering homes following the institution of COVID-19
related government restrictions in many markets in the North region, and a decrease in the number
of homes sold and settled in fiscal 2020, as compared to fiscal 2019. The increase in the average
price of homes delivered in fiscal 2020 was due primarily to a shift in the number of homes delivered
to more expensive areas and/or products in fiscal 2020, as compared to fiscal 2019.
The decrease in the number of net contracts signed in fiscal 2020, as compared to fiscal 2019, was
principally due to a decrease in the average number of selling communities, offset, in part, by an
increase in demand in fiscal 2020, as compared to fiscal 2019. The increase in the average value of
each contract signed in fiscal 2020, as compared to fiscal 2019, was mainly due to shifts in the
number of contracts signed to more expensive areas and/or products and price increases.
The decrease in income before income taxes in fiscal 2020 was principally attributable to higher
home sales cost of revenues, as a percentage of home sale revenues and lower earnings from
decreased home sales revenues. The increase in home sales cost of revenues, as a percentage of
home sales revenues, in fiscal 2020, as compared to fiscal 2019, was primarily due to higher land,
land development, and material and labor costs; higher impairment charges; and a shift in product
mix/areas to lower-margin areas.
Inventory impairment charges were $28.4 million in fiscal 2020, as compared to $25.5 million in
fiscal 2019. In the fourth quarter of fiscal 2020, we changed our strategy with respect to our land in
the Delaware beach markets and the Chicago market. As a result, the carrying values of our land and
communities were written down to their estimated fair values, which resulted in a charge to income
before income taxes of $18.0 million in fiscal 2020. In addition, in the fourth quarter of fiscal 2020,
due to a loss in lot density at one community located in New Jersey, the carrying value was written
down to its estimated fair value, which resulted in a charge to income of $6.4 million.
TOLL BROTHERS 2020 MID-ATLANTIC
SOUTH
Year ended October 31,
2020
2019
% Change
Year ended October 31,
2020
2019
% Change
Units Delivered and
Home Sales Revenues:
Home sales revenues ($ in millions) $
Units delivered
Average delivered price
($ in thousands)
Net Contracts Signed:
Net contract value ($ in millions)
Net contracted units
Average contracted price
($ in thousands)
$
$
$
Home sales cost of revenues as a
percentage of home sales revenues
Income (loss) before income taxes
($ in millions)
$
Number of selling communities at
October 31,
845.6 $
1,271
665.3 $
1,075.3 $
1,473
730.0 $
83.6%
50.6 $
39
804.4
1,237
650.3
772.5
1,159
666.5
83.4%
50.7
41
5%
3%
2%
39%
27%
10%
—%
(5)%
The increase in the number of homes delivered in fiscal 2020, as compared to fiscal 2019, was mainly
due to the delivery of homes in metropolitan Atlanta, Georgia from the Sharp acquisition, offset, in
part, by fewer homes in backlog at October 31, 2019 (excluding Sharp homes), as well as production
delays stemming from COVID-19 and related government restrictions. The increase in the average
price of homes delivered in fiscal 2020, as compared to fiscal 2019, was primarily due a shift in the
number of homes delivered to more expensive areas and/or products in Virginia partially offset by
an increase in the number of homes delivered in Georgia, where average prices were significantly
lower than the average in the Mid-Atlantic region.
The increase in the number of net contracts signed in fiscal 2020, as compared to fiscal 2019, was
principally due to an increase in contracts resulting from the Sharp and Thrive acquisitions, and an
increase in demand offset, in part, by a decrease in the average number of selling communities in
Maryland. The increase in the average value of each contract signed in fiscal 2020, as compared to
fiscal 2019, were mainly due to shifts in the number of contracts signed to more expensive areas and/
or products primarily in North Carolina, Maryland and Virginia, and price increases in fiscal 2020,
offset, in part by an increase in contracts signed in Georgia.
The decrease in income before income taxes in fiscal 2020, as compared to fiscal 2019, was mainly
due to higher impairment charges partially offset by other lower home sales costs of revenues, as a
percentage of home sale revenues, and higher earnings on increased home sales revenues, in fiscal
2020. The decrease in home sales costs of revenues (other than inventory impairments), as a
percentage of home sale revenues, in fiscal 2020 was primarily due to a shift in product mix/areas
to higher margin areas.
Inventory impairment charges were $17.9 million and $1.5 million in fiscal 2020 and 2019, respectively.
In our second quarter of fiscal 2020, following the onset of the COVID-19 pandemic, we terminated
a land purchase agreement in Virginia and wrote-off the deposits and soft costs incurred. In addition,
in the three months ended July 31, 2020, we decided to sell the remaining lots in one community
located in Maryland in a bulk sale rather than sell and construct homes. As a result, we wrote down
the carrying value of inventory in this community to its estimated fair value. These actions resulted
in impairment charges of $13.5 million in fiscal 2020.
Units Delivered and
Home Sales Revenues:
Home sales revenues ($ in millions) $
1,041.2 $
Units delivered
Average delivered price
($ in thousands)
Net Contracts Signed:
Net contract value ($ in millions)
Net contracted units
Average contracted price
($ in thousands)
Home sales cost of revenues as a
percentage of home sales revenues
Income before income taxes
($ in millions)
Number of selling communities at
October 31,
$
$
$
$
1,566
664.9 $
1,320.1 $
2,006
658.1 $
79.9%
991.9
1,298
764.2
941.0
1,307
720.0
81.1%
108.4 $
106.1
67
72
5%
21%
(13)%
40%
53%
(9)%
2%
(7)%
The increase in the number of homes delivered in fiscal 2020, as compared to fiscal 2019, was mainly
due to the delivery of homes in several markets in South Carolina from the Sabal acquisition and an
increase in homes sold and settled in fiscal 2020, as compared to fiscal 2019. The decrease in the
average price of homes delivered in fiscal 2020, as compared to fiscal 2019, was primarily due to a
shift in the number of homes delivered to less expensive areas and/or products mainly due to homes
delivered in South Carolina, where average prices were significantly lower than the average of the
South region.
The increase in the number of net contracts signed in fiscal 2020, as compared to fiscal 2019, was
mainly due to net contracts we signed in several markets in South Carolina due to the Sabal
acquisition and an increase in demand. The decrease in the average value of each contract signed
was mainly due to contracts signed in South Carolina resulting from the Sabal acquisition, where
average prices are significantly lower than the regional average, and to shifts in the number of
contracts signed to less expensive areas and/or products primarily in Florida and Texas, offset, in
part, by price increases.
The increase in income before income taxes in fiscal 2020, as compared to fiscal 2019, was principally
due to higher earnings from increased home sales revenues and lower home sales costs of revenues,
as a percentage of home sales revenues, offset, in part, by lower joint venture and management fee
income from one Home Building Joint Venture that delivered its last home in the third quarter of
fiscal 2019. The decrease in home sales cost of revenues, as a percentage of home sales revenues,
was mainly due to a shift in product mix/areas to higher-margin areas and lower inventory
impairment changes in fiscal 2020, as compared to fiscal 2019. Inventory impairment charges were
$2.9 million and $8.5 million in fiscal 2020 and 2019, respectively.
41
TOLL BROTHERS 2020 MOUNTAIN
PACIFIC
Year ended October 31,
2020
2019
% Change
Year ended October 31,
2020
2019
% Change
Units Delivered and
Home Sales Revenues:
Home sales revenues ($ in millions)
$
1,535.8 $
Units Delivered and
Home Sales Revenues:
Home sales revenues ($ in millions) $
2,029.9 $
Units delivered
Average delivered price
($ in thousands)
Net Contracts Signed:
Net contract value ($ in millions)
Net contracted units
Average contracted price
($ in thousands)
Home sales cost of revenues as a
percentage of home sales revenues
Income before income taxes
($ in millions)
Number of selling communities at
October 31,
$
$
$
$
2,219
1,130.9
1,711
692.1 $
661.0
2,008.2 $
2,802
716.7 $
79.2%
1,456.2
2,097
694.4
78.9%
167.7 $
113.0
94
79
36%
30%
5%
38%
34%
3%
48%
19%
Units delivered
Average delivered price
($ in thousands)
Net Contracts Signed:
Net contract value ($ in millions)
Net contracted units
Average contracted price
($ in thousands)
Home sales cost of revenues as a
percentage of home sales revenues
Income before income taxes
($ in millions)
Number of selling communities at
October 31,
$
$
$
$
1,334
2,416.6
1,434
1,521.7 $
1,685.2
1,929.6 $
1,404
1,804.8
1,095
1,374.4 $
1,648.2
75.2%
71.7%
352.8 $
509.8
44
51
(16)%
(7)%
(10)%
7%
28%
(17)%
(31)%
(14)%
The increase in the number of homes delivered in fiscal 2020, as compared to fiscal 2019, was mainly
due to an increase in the number of homes in backlog at October 31, 2019, as compared to the
number of homes in backlog at October 31, 2018, and an increase in the number of homes sold and
settled in fiscal 2020. The increase in the average price of homes delivered in fiscal 2020, as
compared to fiscal 2019, was primarily due to an increase in the number of homes settled in Arizona,
Nevada and Utah, where average prices were higher than the regional average. This increase was
partially offset by an increase in the number of home delivered in Idaho, where average prices were
significantly lower than the regional average.
The increase in the number of net contracts signed in fiscal 2020, as compared to fiscal 2019, was
principally due to increased demand and an increase in the average number of selling communities.
The increases in the average value of each contract signed in fiscal 2020, as compared to fiscal 2019,
was mainly due to shifts in the number of contracts signed to more expensive areas and/or products
and price increases.
The increase in income before income taxes in fiscal 2020, as compared to fiscal 2019, was mainly
due to higher earnings from increased revenues offset, in part, by higher home sales cost of revenues,
as a percentage of home sales revenues. The increase in home sales cost of revenues, as a percentage
of home sales revenues, was primarily due to a shift in product mix/areas to lower-margin areas.
The decrease in the number of homes delivered in fiscal 2020, as compared to fiscal 2019, was
mainly due to the decreased number of homes in backlog at October 31, 2019, as compared to the
number of homes in backlog at October 31, 2018, offset, in part, by higher backlog conversion. The
decrease in the average price of homes delivered in fiscal 2020 was primarily due to a shift in the
number of homes delivered to less expensive areas.
The increase in the number of net contracts signed in fiscal 2020, as compared to fiscal 2019, was
principally due to an increase in demand, offset, in part, by a decrease in the number of selling
communities. The decrease in the average value of each contract signed in fiscal 2020 was mainly
due to a shift in the number of contracts signed to less expensive areas and/or products partially
offset by price increases.
The decrease in income before income taxes in fiscal 2020, as compared to fiscal 2019, was primarily
due to lower earnings from decreased revenues and higher home sales cost of revenues, as a
percentage of home sales revenues. The increase in home sales cost of revenues, as a percentage of
home sales revenues, was primarily due to cost overruns at a large high-density condominium
community in Northern California, higher incentives associated with the prior year selling
environment, higher impairment charges, and a shift in product mix/areas to lower-margin areas.
Inventory impairment charges were $6.0 million and $1.1 million in fiscal 2020 and 2019, respectively.
The fiscal 2020 impairment charge relates primarily to a land purchase agreement where we no
longer expect to purchase the land and, accordingly, wrote-off soft costs incurred.
42
TOLL BROTHERS 2020
CITY LIVING
Year ended October 31,
2020
2019
% Change
Units Delivered and Home
Sales Revenues:
Home sales revenues ($ in millions) $
120.9 $
Units delivered
Average delivered price
($ in thousands)
Net Contracts Signed:
Net contract value ($ in millions)
Net contracted units
Average contracted price
($ in thousands)
Home sales cost of revenues as a
percentage of home sales revenues
Income before income taxes
($ in millions)
Number of selling communities at
October 31,
$
$
$
$
96
253.2
204
1,259.4 $
1,241.1
109.5 $
73
224.7
150
1,500.0 $
1,498.0
61.7%
67.8%
29.7 $
70.1
3
4
(52)%
(53)%
1%
(51)%
(51)%
—%
(58)%
(25)%
The decrease in the number of homes delivered in fiscal 2020, as compared to fiscal 2019, was
mainly attributable to the decreased number of homes in backlog at October 31, 2019, as compared
to the number of homes in backlog at October 31, 2018, and the impacts of the COVID-19 pandemic,
in particular in New York City and northern New Jersey. The increase in the average price of homes
delivered in fiscal 2020, as compared to fiscal 2019, was primarily due to a shift in the number of
homes delivered to more expensive areas and/or products.
The decrease in the number of net contracts signed in fiscal 2020, as compared to fiscal 2019, was
primarily due to a significant decrease in demand following the onset of the COVID-19 pandemic,
offset, in part, by increased demand prior to its onset.
The decrease in income before income taxes in fiscal 2020, as compared to fiscal 2019, was mainly
due to lower earnings from decreased revenues and decreases in earnings from our investments in
unconsolidated entities. This decrease was partially offset by lower home sales cost of revenues, as
a percentage of home sale revenues. The lower home sales cost of revenues, as a percentage of
home sale revenues, in fiscal 2020 was principally due to a shift in the number of homes delivered
to buildings with higher margins, an impairment charge of $4.8 million in fiscal 2019, and the reversal
of an accrual related to a litigation matter that was no longer needed. This decrease was offset, in
part, by a state reimbursement of $6.5 million of previously expensed environmental cleanup costs
received in fiscal 2019.
In fiscal 2020, earnings from our investments in unconsolidated entities in City Living decreased
$11.8 million as compared to fiscal 2019. This decrease was primarily due to $6.0 million of other than
temporary impairment charges that we recognized on one of our Home Building Joint Ventures in
fiscal 2020. In addition, fiscal 2019 benefited from earnings from one joint venture that delivered its
last home in the third quarter of fiscal 2019. The tables below provide information related to
deliveries, revenues, and net contracts signed by our City Living Home Building Joint Ventures, for
the periods indicated, and the related backlog for the dates indicated ($ amounts in millions):
Deliveries and home
sales revenues
Net contracts signed
Year ended October 31,
2020
Units
2019
Units
2020
$
44
22
147 $
39 $
139.6 $
73.3 $
2020
Units
At October 31,
2019
Units
2020
$
Backlog
4
26 $
10.0 $
2019
$
330.8
128.1
2019
$
76.3
CORPORATE AND OTHER
In fiscal 2020 and 2019, loss before income taxes was $180.1 million and $143.9 million, respectively.
The increase in the loss before income taxes in fiscal 2020 was principally attributable to lower
interest income; higher losses incurred in our apartment living operations; lower income from golf
club operations; losses recognized by a joint venture that owns a hotel that was adversely impacted
by COVID-19; an increase in losses in several Rental Property Joint Ventures related to the
commencement of operations and lease up activities; and directly expensed interest of $2.4 million
in the fiscal 2020 period. In addition, during the fiscal 2019 period, we recognized gains of $35.1
million from the sale of seven golf clubs; $9.3 million from the sale of land to a newly formed Rental
Property Joint Venture; and $3.8 million from an asset sale by one of our Rental Property Joint
Ventures. These increases were partially offset by gains recognized in fiscal 2020 of $13.0 million
from the sale of golf club properties and $10.7 million from the sale of our investment in one of our
Rental Property Joint Ventures to our joint venture partner; higher earnings by our mortgage
company operations primarily due to an increase in volumes in fiscal 2020; and lower SG&A costs.
The lower SG&A costs were due primarily to the implementation of a number of cost reduction
initiatives to improve efficiencies and rationalize overhead expenses, including workforce reductions,
that we implemented following the onset of the COVID-19 pandemic, including the reversal of an
$8.0 million accrual in fiscal 2020 for discretionary benefit plan contributions with respect to fiscal
2019. The decrease in SG&A spending in fiscal 2020 was offset, in part, by a $7.5 million charge for
severance costs incurred in the second quarter of fiscal 2020, other compensation increases, and
costs related to the implementation of new enterprise information technology systems.
4 3
TOLL BROTHERS 2020
FISCAL 2019 (RESTATED) COMPARED
TO FISCAL 2018 (RESTATED)
Traditional Home Building
NORTH
Year ended October 31,
2019
2018
% Change
Units Delivered and
Home Sales Revenues:
Home sales revenues ($ in millions) $
1,484.4 $
Units delivered
Average delivered price
($ in thousands)
Net Contracts Signed:
Net contract value ($ in millions)
Net contracted units
Average contracted price
($ in thousands)
Home sales cost of revenues as a
percentage of home sales revenues
Income before income taxes
($ in millions)
Number of selling communities at
October 31,
$
$
$
$
2,223
1,517.9
2,259
667.7 $
671.9
1,511.7 $
2,267
1,511.3
2,247
666.8 $
672.6
84.9%
85.0%
81.4 $
86
98.2
92
The decrease in the number of homes delivered in fiscal 2019 was mainly due to a decrease in the
number of homes in backlog at October 31, 2018, as compared to the number of homes in backlog
at October 31, 2017 and lower backlog conversion in fiscal 2019, as compared to fiscal 2018. The
decrease in the average price of homes delivered in fiscal 2019 was due primarily to a shift in the
number of homes delivered to less expensive areas and/or products in fiscal 2019.
The increase in the number of net contracts signed in fiscal 2019, as compared to fiscal 2018, was
principally due to an increase in demand in fiscal 2019.
The decrease in income before income taxes in fiscal 2019 was principally attributable to lower earnings
from decreased home sales revenues, higher SG&A costs, and higher inventory impairment charges.
Inventory impairment charges were $25.5 million in fiscal 2019, as compared to $20.7 million in fiscal
2018. During fiscal 2019, we determined that the pricing assumptions used in prior impairment
reviews for one operating community located in Illinois and two operating communities located in
Pennsylvania needed to be reduced primarily because weaker-than-expected market conditions
drove a lack of improvement and/or a decrease in customer demand for homes in these communities.
As a result of the reduction in expected sales prices, we determined that these communities were
impaired. Accordingly, the carrying values were written down to their estimated fair values, which
resulted in a charge to income before income taxes of $14.6 million. In addition, with respect to two
communities located in Illinois, we decided to sell their remaining lots in bulk sales rather than sell
and construct homes. As a result, the carrying values of these communities were written down to
their estimated fair values, which resulted in a charge to income before income taxes of $4.9 million
in fiscal 2019.
4 4
During fiscal 2018, we determined that the pricing assumptions used in prior impairment reviews for
one operating community located in Connecticut needed to be reduced, primarily due to a lack of
improvement and/or a decrease in customer demand as a result of weaker than expected market
conditions. As a result of the reduction in expected sales prices, we determined that this community
was impaired. Accordingly, its carrying value was written down to its estimated fair value, which
resulted in a charge to income before income taxes of $12.0 million. In addition, with respect to two
communities located in Illinois and Minnesota, we decided to sell their remaining lots in bulk sales
rather than sell and construct homes. As a result, the carrying values of these communities were
written down to their estimated fair values, which resulted in a charge to income before income
taxes of $4.4 million in fiscal 2018.
(2)%
(2)%
(1)%
—%
1%
(1)%
MID-ATLANTIC
Units Delivered and
Home Sales Revenues:
Home sales revenues ($ in millions) $
Units delivered
Average delivered price
($ in thousands)
Net Contracts Signed:
Net contract value ($ in millions)
(17)%
(7)%
Net contracted units
Average contracted price
($ in thousands)
$
$
$
Home sales cost of revenues as a
percentage of home sales revenues
Income (loss) before income taxes
($ in millions)
$
Number of selling communities at
October 31,
Year ended October 31,
2019
2018
% Change
804.4 $
1,237
650.3 $
772.5 $
1,159
666.5 $
83.4%
50.7 $
41
775.7
1,271
610.3
759.5
1,176
645.8
82.2%
59.3
43
4%
(3)%
7%
2%
(1)%
3%
(15)%
(5)%
The decrease in the number of homes delivered in fiscal 2019 was mainly due to a decrease in the
number of homes in backlog at October 31, 2018, as compared to the number of homes in backlog
at October 31, 2017 and lower backlog conversion in fiscal 2019. This decrease was partially offset by
the delivery of 114 homes in metropolitan Atlanta, Georgia from the Sharp acquisition. The increase
in the average price of homes delivered in fiscal 2019 was primarily due to a shift in the number of
homes delivered to more expensive areas and/or products in fiscal 2019.
The decrease in the number of net contracts signed in fiscal 2019 was principally due to a decrease
in the average number of selling communities in fiscal 2019 offset, in part, by contracts we signed in
the metropolitan Atlanta, Georgia market in fiscal 2019. The increase in the average value of each
contract signed in fiscal 2019 was mainly due to shifts in the number of contracts signed to more
expensive areas and/or products in fiscal 2019.
The decrease in income before income taxes in fiscal 2019 was mainly due to increases in home sales
costs of revenues, as a percentage of home sale revenues and increases in SG&A costs in fiscal 2019.
This decrease was partially offset by higher earnings on increased home sales revenues in fiscal 2019
and a $4.0 million impairment charge recognized in fiscal 2018 related to one Land Development
TOLL BROTHERS 2020 Joint Venture located in Maryland. The increase in home sales costs of revenues, as a percentage of
home sale revenues, in fiscal 2019 was primarily due to higher material and labor costs in fiscal 2019.
Inventory impairment charges were $1.5 million and $11.8 million in fiscal 2019 and 2018, respectively.
In fiscal 2018, we decided to sell a portion of the lots in a bulk sale in one community located in
Maryland, primarily due to increases in site costs and a lack of improvement in customer demand as
a result of weaker than expected market conditions. The carrying value of this community was
written down to its estimated fair value resulting in a charge to income before income taxes in fiscal
2018 of $6.7 million.
estimated fair value, which resulted in a charge to income before income taxes of $1.5 million in fiscal
2019. In addition, we terminated three purchase agreements to acquire land parcels in Texas and
forfeited the deposit balances outstanding. We wrote off the related deposits resulting in a charges
to income before income taxes of $4.2 million in fiscal 2019.
MOUNTAIN
Year ended October 31,
2019
2018
% Change
SOUTH
Units Delivered and
Home Sales Revenues:
Home sales revenues ($ in millions) $
Units delivered
Average delivered price
($ in thousands)
Net Contracts Signed:
Net contract value ($ in millions)
Net contracted units
Average contracted price
($ in thousands)
Home sales cost of revenues as a
percentage of home sales revenues
Income before income taxes
($ in millions)
Number of selling communities at
October 31,
$
$
$
$
Year ended October 31,
2019
2018
% Change
991.9 $
1,298
764.2 $
941.0 $
1,307
720.0 $
81.1%
868.6
1,114
779.7
948.3
1,212
782.4
80.5%
106.1 $
99.9
72
53
14%
17%
(2)%
(1)%
8%
(8)%
6%
36%
The increase in the number of homes delivered in fiscal 2019 was mainly due to an increase in the
number of homes in backlog at October 31, 2018, as compared to the number of homes in backlog
at October 31, 2017; higher backlog conversion in fiscal 2019, as compared to fiscal 2018; and the
delivery of 23 homes in several markets in South Carolina from the Sabal acquisition. The decrease
in the average price of homes delivered in fiscal 2019 was primarily due to a shift in the number of
homes delivered to less expensive areas and/or products in fiscal 2019.
The increase in the number of net contracts signed in fiscal 2019 was mainly due to contracts we
signed in several markets in South Carolina in fiscal 2019 and an increase in the number of selling
communities, primarily in Florida, in fiscal 2019 offset, in part, by decreased demand. The decrease
in the average value of each contract signed in fiscal 2019 was mainly due to shifts in the number of
contracts signed to less expensive areas and/or products in fiscal 2019.
The increase in income before income taxes in fiscal 2019 was principally due to higher earnings
from increased home sales revenues, offset, in part, by higher inventory impairment charges.
Inventory impairment charges were $8.5 million and $0.7 million in fiscal 2019 and 2018, respectively.
During fiscal 2019, we decided to sell the remaining lots in a bulk sale in one community located in
Texas rather than sell and construct homes, primarily due to a lack of improvement and/or a decrease
in customer demand. As a result, the carrying value of this community was written down to its
Units Delivered and
Home Sales Revenues:
Home sales revenues ($ in millions)
$
1,130.9 $
Units delivered
Average delivered price
($ in thousands)
Net Contracts Signed:
Net contract value ($ in millions)
Net contracted units
Average contracted price
($ in thousands)
Home sales cost of revenues as a
percentage of home sales revenues
Income before income taxes
($ in millions)
Number of selling communities at
October 31,
$
$
$
$
1,711
1,126.6
1,797
661.0 $
626.9
1,456.2 $
2,097
694.4 $
78.9%
1,229.6
1,871
657.2
78.6%
—%
(5)%
5%
18%
12%
6%
113.0 $
136.2
(17)%
79
73
8%
The decrease in the number of homes delivered in fiscal 2019 was mainly due to lower backlog
conversion in fiscal 2019, as compared to fiscal 2018. The increase in the average price of homes
delivered in fiscal 2019 was primarily due to a shift in the number of homes delivered to more
expensive areas and/or products and price increases in fiscal 2019.
The increase in the number of net contracts signed in fiscal 2019 was principally due to an increase
in the average number of selling communities in fiscal 2019. The increase in the average value of
each contract signed in fiscal 2019 was mainly due to a shift in the number of contracts signed to
more expensive areas and/or products in fiscal 2019.
The decrease in income before income taxes in fiscal 2019 was due mainly to higher SG&A costs and
higher home sales cost of revenues, as a percentage of home sales revenues, in fiscal 2019. The
increase in home sales cost of revenues, as a percentage of home sales revenues, was primarily due
to a shift in product mix/areas to lower-margin areas in fiscal 2019.
4 5
TOLL BROTHERS 2020 PACIFIC
CITY LIVING
Year ended October 31,
2019
2018
% Change
Year ended October 31,
2019
2018
% Change
Units Delivered and
Home Sales Revenues:
Home sales revenues ($ in millions) $
2,416.6 $
Units delivered
Average delivered price
($ in thousands)
Net Contracts Signed:
Net contract value ($ in millions)
Net contracted units
Average contracted price
($ in thousands)
Home sales cost of revenues as a
percentage of home sales revenues
Income before income taxes
($ in millions)
Number of selling communities at
October 31,
$
$
$
$
1,434
2,533.5
1,655
1,685.2 $
1,530.8
1,804.8 $
1,095
2,877.8
1,830
(5)%
(13)%
10%
(37)%
(40)%
Units Delivered and Home
Sales Revenues:
Home sales revenues ($ in millions) $
Units delivered
Average delivered price
($ in thousands)
Net Contracts Signed:
Net contract value ($ in millions)
Net contracted units
Average contracted price
1,648.2 $
1,572.6
5%
($ in thousands)
71.7%
70.5%
Home sales cost of revenues as a
percentage of home sales revenues
Income before income taxes
509.8 $
571.4
(11)%
($ in millions)
51
48
6%
Number of selling communities at
October 31,
$
$
$
$
253.2 $
204
321.0
169
1,241.1 $
1,899.4
224.7 $
150
277.8
183
1,498.0 $
1,518.0 $
67.8%
72.7%
70.1 $
78.1
4
6
(21)%
21%
(35)%
(19)%
(18)%
(1)%
(10)%
(33)%
The decrease in the number of homes delivered in fiscal 2019 was mainly due to lower backlog
conversion in fiscal 2019, as compared to fiscal 2018, offset, in part, by the increased number of
homes in backlog at October 31, 2018, as compared to the number of homes in backlog at October
31, 2017. The increase in the average price of homes delivered in 2019 was primarily due to a shift in
the number of homes delivered to more expensive areas and/or products and increased selling
prices of homes delivered in fiscal 2019.
The decrease in the number of net contracts signed in fiscal 2019 was principally due to a decrease
in demand and reduced availability of lots in fiscal 2019. The increase in the average value of each
contract signed in fiscal 2019 was mainly due to a shift in the number of contracts signed to more
expensive areas and/or products in fiscal 2019.
The decrease in income before income taxes in fiscal 2019 was primarily due to lower earnings from
the decreased home sales revenues and higher home sales cost of revenues, as a percentage of
home sales revenues, in fiscal 2019, as compared to fiscal 2018, partially offset by lower SG&A costs
in fiscal 2019. The increase in home sales cost of revenues, as a percentage of home sales revenues,
was primarily due to a shift in product mix/areas to lower-margin areas in fiscal 2019, and a $7.0
million benefit in fiscal 2018 from the reversal of an accrual related to the Shapell acquisition that
had expired.
The increase in the number of homes delivered in fiscal 2019 was mainly attributable to homes
delivered at a building located in Jersey City, New Jersey, which commenced deliveries in the fourth
quarter of fiscal 2018. The decrease in the average price of homes delivered in fiscal 2019 was
primarily due to a shift in the number of homes delivered to less expensive buildings in fiscal 2019
offset, in part, by the delivery of two homes in fiscal 2019 in a building located in New York City, New
York, where the average price was $13.6 million. In fiscal 2019 and 2018, 7% and 37%, respectively, of
the units delivered were located in New York City, where average home prices were higher.
The decrease in the number of net contracts signed in fiscal 2019 was primarily due to a decrease in
demand. The decrease in the average sales price of net contracts signed in fiscal 2019 was principally
due to a shift to less expensive units in fiscal 2019, offset, in part, by the sale of two homes in fiscal
2019 in a building located in New York City, New York, where the average price was $13.6 million.
The decrease in income before income taxes in fiscal 2019 was mainly due to lower earnings from
decreased home sales revenues and a decrease in earnings from our investments in unconsolidated
entities in fiscal 2019. This decrease was partially offset by lower home sales cost of revenues, as a
percentage of home sale revenues, in fiscal 2019. The lower home sales cost of revenues, as a
percentage of home sale revenues, in fiscal 2019 was due primarily to a shift in the number of homes
delivered to buildings with higher margins; a state reimbursement of previously expensed
environmental clean-up costs received in fiscal 2019; a benefit in fiscal 2019 from the reversal of
accruals for certain HOA turnovers that were no longer required; and lower interest costs in fiscal
2019. These decreases were offset, in part, by impairment charges of $4.8 million in fiscal 2019. As a
result of decreased demand, we wrote down the carrying value of units in two buildings, located in
Maryland and New York, New York, to their estimated fair values, which resulted in impairment
charges of $4.8 million in fiscal 2019.
In fiscal 2019, earnings from our investments in unconsolidated entities decreased $2.8 million as
compared to fiscal 2018. This decrease was primarily due a shift in the number of homes delivered
4 6
TOLL BROTHERS 2020
to buildings with lower margins and a shift in the number of homes delivered in joint ventures where
our ownership percentage was lower in fiscal 2019, as compared to fiscal 2018. The tables below
provide information related to deliveries, home sales revenues and net contracts signed by our City
Living Home Building Joint Ventures, for the periods indicated, and the related backlog for the dates
indicated ($ amounts in millions):
cannot yet be determined, but we do not expect it to have a material impact on our consolidated
financial condition, results of operations, or cash flows.
The following table shows our debt obligations by scheduled maturity, weighted-average interest
rates, and estimated fair value as of October 31, 2020 ($ amounts in thousands):
Deliveries and home
sales revenues
Net contracts signed
Year ended October 31,
2019
Units
2018
Units
2019
$
147
39
14 $
102 $
330.8 $
128.1 $
At October 31,
2019
Units
2018
Units
2019
$
Backlog
26
134 $
76.3 $
2018
$
65.7
245.6
2018
$
279.0
CORPORATE AND OTHER
In fiscal 2019 and 2018, loss before income taxes was $143.9 million and $109.2 million, respectively.
The increase in the loss before income taxes in fiscal 2019 was principally attributable to $67.2
million of gains recognized in fiscal 2018 from asset sales by our Rental Property Joint Ventures
located in College Park, Maryland, Herndon, Virginia, and Westborough, Massachusetts; a $10.7
million gain from a bulk sale of security monitoring accounts by our home control solutions business
in fiscal 2018; an increase in losses in several Rental Property Joint Ventures due to the commencement
of operations and lease up activities in fiscal 2019; and higher SG&A costs in fiscal 2019. These
increases were partially offset by gains recognized in fiscal 2019 of $35.1 million from the sale of
seven golf clubs; $9.3 million from the sales of land to newly formed Rental Property Joint Ventures;
$3.8 million from an asset sale by a Rental Property Joint Venture in Phoenixville, Pennsylvania; and
higher interest income in fiscal 2019.
QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk primarily due to fluctuations in interest rates. We utilize both fixed-
rate and variable-rate debt. For fixed-rate debt, changes in interest rates generally affect the fair
market value of the debt instrument, but not our earnings or cash flow. Conversely, for variable-rate
debt, changes in interest rates generally do not affect the fair market value of the debt instrument,
but do affect our earnings and cash flow. We do not have the obligation to prepay fixed-rate debt
prior to maturity, and, as a result, interest rate risk and changes in fair market value should not have
a significant impact on our fixed-rate debt until we are required or elect to refinance it.
The London Interbank Offered Rate (“LIBOR”) is the primary basis for determining interest payments
on borrowings under each of our $800 million Term Loan Facility and our $1.905 Revolving Credit
Facility. Banks currently reporting information used to set LIBOR will stop doing so after 2021.
Various parties, including government agencies, are seeking to identify an alternative rate to replace
LIBOR. We are monitoring their efforts and, although each of our Term Loan Facility and Revolving
Credit Facility contain provisions designed to accommodate an alternate reference rate, we may
need to amend these and other contracts, such as interest rate hedges that reference these contracts,
to accommodate any replacement rate. The potential effect of any such event on our cost of capital
Fiscal year of maturity
2021
2022
2023
2024
2025
Thereafter (b)
Bond discounts,
premiums, and deferred
issuance costs, net
Total
Fair value at
October 31, 2020
$
$
$
Fixed-rate debt
Variable-rate debt (a)
Weighted-
average
interest rate (%)
3.46% $
Weighted-
average
interest rate (%)
1.89%
Amount
161,971
5.75%
4.40%
5.20%
5.83%
4.49%
—
—
—
—
800,000
1.47%
(3,302)
4.73% $
958,669
1.54%
Amount
98,664
453,134
452,691
306,070
59,151
1,638,063
(8,158)
2,999,615
3,232,778
$
961,971
(a) Based upon the amount of variable-rate debt outstanding at October 31, 2020, and holding the variable-rate
debt balance constant, each 1% increase in interest rates would increase the interest incurred by us by
approximately $9.6 million per year.
(b) In November 2020, we entered into five interest rate swap transactions to hedge $400.0 million of the Term
Loan Facility through October 2025, which is included in the variable-rate debt column in the table above.
The interest rate swaps effectively fix the interest cost on the $400.0 million at 0.369% plus the spread set
forth in the pricing schedule in the Term Loan Facility, which was 1.3% as of October 31, 2020. These interest
rate swaps were designated as cash flow hedges.
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in the Securities Exchange Act Rule 13a-15(f). Internal
control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. Internal control over financial reporting
includes those policies and procedures that: (i) pertain to the maintenance of records that in
reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements. Because of its
inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
47
TOLL BROTHERS 2020
controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether effective internal control
over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
DEFINITION AND LIMITATIONS OF INTERNAL CONTROL OVER FINANCIAL REPORTING
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles. A company’s
internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Philadelphia, Pennsylvania
December 22, 2020
Under the supervision and with the participation of our management, including our principal
executive officer and our principal financial officer, we conducted an evaluation of the effectiveness
of our internal control over financial reporting based on the framework in Internal Control—
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 Framework). Based on this evaluation under the framework in Internal Control—
Integrated Framework, our management concluded that our internal control over financial reporting
was effective as of October 31, 2020.
During fiscal 2020, we completed the acquisitions of each of The Thrive Group, LLC (“Thrive”) and
Keller Homes, Inc. (“Keller”). In accordance with SEC Staff guidance permitting a company to
exclude an acquired business from management’s assessment of the effectiveness of internal control
over financial reporting for the year in which the acquisition is completed, we have excluded each of
Thrive and Keller from the Company’s assessment of the effectiveness of internal control over
financial reporting as of October 31, 2020. These companies represented approximately 1% of the
Company’s total assets as of October 31, 2020 and less than 1% of the Company’s revenues for the
fiscal year ended October 31, 2020.
Our independent registered public accounting firm, Ernst & Young LLP, has issued its report, which
is included herein, on the effectiveness of our internal control over financial reporting.
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Toll Brothers, Inc.
OPINION ON INTERNAL CONTROL OVER FINANCIAL REPORTING
We have audited Toll Brothers, Inc.’s internal control over financial reporting as of October 31, 2020,
based on criteria established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our
opinion, Toll Brothers, Inc. (the Company) maintained, in all material respects, effective internal
control over financial reporting as of October 31, 2020, based on the COSO criteria.
As indicated in the accompanying Management’s Annual Report on Internal Control Over Financial
Reporting, management’s assessment of and conclusion on the effectiveness of internal control over
financial reporting did not include the internal controls of The Thrive Group, LLC and Keller Homes,
Inc., which are included in the 2020 consolidated financial statements of the Company and constitute
approximately 1% of total assets as of October 31, 2020 and less than 1% of revenues for the year
then ended. Our audit of internal control over financial reporting of the Company also did not include
an evaluation of the internal control over financial reporting of The Thrive Group, LLC and
Keller Homes, Inc.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States) (PCAOB), the 2020 consolidated financial statements of the Company and our
report dated December 22, 2020 expressed an unqualified opinion thereon.
BASIS FOR OPINION
The Company’s management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting included
in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the Company’s internal control over financial reporting based
on our audit. We are a public accounting firm registered with the PCAOB and are required to be
4 8
TOLL BROTHERS 2020 REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Toll Brothers, Inc.
OPINION ON THE FINANCIAL STATEMENTS
We have audited the accompanying consolidated balance sheets of Toll Brothers, Inc. (the Company)
as of October 31, 2020 and 2019, the related consolidated statements of operations and
comprehensive income, changes in equity and cash flows for each of the three years in the period
ended October 31, 2020, and the related notes (collectively referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial statements present fairly, in all material
respects, the financial position of the Company at October 31, 2020 and 2019, and the results of its
operations and its cash flows for each of the three years in the period ended October 31, 2020, in
conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States) (PCAOB), the Company’s internal control over financial reporting as of
October 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our
report dated December 22, 2020 expressed an unqualified opinion thereon.
ADOPTION OF ASU NO. 2014-09
As discussed in Note 1 to the consolidated financial statements, the Company changed its method of
accounting for revenue recognition, inventory and cost of revenues in 2019 due to the adoption of
ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), and related Subtopic ASC
340-40, Other Assets and Deferred Costs - Contracts with Customers.
ADOPTION OF ASU NO. 2016-02
As discussed in Note 1 to the consolidated financial statements, the Company changed its method of
accounting for leases in 2020 due to the adoption of ASU No. 2016-02, Leases.
BASIS FOR OPINION
These financial statements are the responsibility of the Company’s management. Our responsibility
is to express an opinion on the Company’s financial statements based on our audits. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. Our audits included
performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in
the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
CRITICAL AUDIT MATTERS
The critical audit matters communicated below are matters arising from the current period audit of
the financial statements that were communicated or required to be communicated to the audit
committee and that: (1) relate to accounts or disclosures that are material to the financial statements
and (2) involved our especially challenging, subjective, or complex judgments. The communication
of critical audit matters does not alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating the critical audit matters below,
providing separate opinions on the critical audit matters or on the accounts or disclosures to which
they relate.
WATER INTRUSION RESERVES
Description of the Matter
As described in Note 7 of the consolidated financial statements, the Company accrues for the
estimated repair costs to be incurred for known and unknown water intrusion claims from owners of
certain homes built in Pennsylvania and Delaware. At October 31, 2020, the Company had an accrued
liability for water intrusion claims of $79.5 million, representing its best estimate of the expected
costs related to known and future water intrusion claims. The Company calculated the estimated
liability for water intrusion claims using assumptions that are subject to significant uncertainty,
including the number of homes that require repairs, outcomes of litigation or arbitrations, the extent
of repairs required, the repair procedures employed, and the expected costs of those repairs or costs
incurred to otherwise settle the homeowner’s claim. Due to the degree of judgment required in
making these assumptions and the inherent uncertainty of certain outcomes, it is reasonably possible
that the actual costs will differ from the amount accrued. If it is reasonably possible that such
additional costs may be incurred and the effect on the financial statements is material, the Company
discloses an estimate of the amount or range of additional costs or a statement that such an estimate
cannot be made within the notes to the financial statements.
Auditing the Company’s accounting for water intrusion claims, and the related disclosures, was
especially challenging as evaluating the likelihood and amount of cost was highly subjective and
required significant judgment. In particular, management’s estimates were sensitive to assumptions
about the number of claims and the costs to settle the claims, which are projected to be resolved over
an extended period of time, and the amount accrued by the Company was sensitive to relatively small
changes in those assumptions.
How We Addressed the Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of
controls over management’s review of the accrual calculation, including controls over the significant
assumptions and the data inputs utilized in the calculations, as well as the financial statement
disclosures. For example, we tested controls over management’s review of the accrual calculation,
including its review of the significant assumptions and the data inputs utilized in the calculations. We
also tested controls over management’s review of the disclosure in the notes to the consolidated
financial statements for compliance with generally accepted accounting principles.
To test the estimated liability and related financial statement disclosures for water intrusion claims,
we performed audit procedures that included, among others, testing the significant assumptions
discussed above and the underlying data used by the Company in its analysis. We compared the
significant assumptions used by management to historical water intrusion claims data, historical
data about additional homes delivered by the Company that could potentially be subject to water
intrusion claims, and historical costs incurred to either repair homes or otherwise settle water
intrusion claims from homeowners. We also reviewed contractual agreements and evaluated
management’s conclusions about the Company’s legal and contractual obligations with respect to
water intrusion claims. We assessed the historical accuracy of management’s estimates and
performed sensitivity analyses of significant assumptions to evaluate the changes in the accrual for
water intrusion claims that would result from changes in the assumptions. We recalculated the
Company’s liability for water intrusion claims using management’s data and evaluated the disclosure
of the liability in the Company’s consolidated financial statements.
INSURANCE RECEIVABLE
Description of the Matter
As described in Note 7 of the consolidated financial statements, the Company recorded a receivable
for expected recoveries from insurance carriers. At October 31, 2020, the Company recorded an
estimated insurance receivable of $68.4 million, inclusive of amounts that are subject to dispute with
the Company’s insurance carriers.
Auditing management’s accounting for the existence of insurance receivable was especially
challenging due to the complexity and variability of the underlying claims. Evaluating the likelihood
49
TOLL BROTHERS 2020 and amount of recoveries from insurance carriers was highly subjective and required significant
judgment. In particular, as stated in Note 7 of the consolidated financial statements, management’s
estimates were sensitive to assumptions about the amount of losses that the Company will incur on
warranty related repairs by policy year and management’s conclusions about the legal merits that
support the pending and future insurance claims.
cases, we involved our internal real estate valuation specialists to assist in performing these procedures.
We compared the significant assumptions used by management to historical sales data, sales trends, and
observable market-specific data. We assessed the historical accuracy of management’s estimates and
performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of
inventory that would result from changes in the assumptions.
We have served as the Company’s auditor since 1983.
Philadelphia, Pennsylvania
December 22, 2020
How We Addressed the Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of
controls over management’s review of the expected recoveries from insurance carriers and the
recorded receivable, including controls over the significant assumptions and the data inputs used to
calculate the expected recoverable amount, as well as the financial statement disclosures. For
example, we tested controls over management’s review of the insurance policies and related
coverage, the legal merits of the claims made and the expected amounts to be covered under those
insurance policies.
To test the expected recoveries from insurance carriers, we performed audit procedures that
included, among others, reading and understanding the Company’s insurance policies, testing the
claims submitted under the Company’s insurance policies to verify the completeness, occurrence
and measurement of the loss, and, when applicable, vouching cash receipts from the insurance
carrier for previously submitted claims. We also tested the Company’s calculation of the losses the
Company expects to incur on warranty related repairs by policy year. We reviewed communications
between the Company and its insurance carriers and evaluated management’s conclusions about
the legal merits of the insurance claims with respect to the recorded receivable by performing
procedures that included, among others, reviewing correspondence from external counsel regarding
the legal merits of the Company’s insurance claims.
INVENTORY IMPAIRMENT
Description of the Matter
As described in Note 1 of the consolidated financial statements, the Company states its inventory at
cost unless an impairment exists, in which case the inventory is written down to fair value. For the
year ended October 31, 2020, the Company recorded inventory impairment charges of $32.3 million.
The Company regularly evaluates whether there are any impairment indicators for inventory present
at the community level. If impairment indicators are present, the Company reviews the carrying
value of each community’s inventory by comparing the estimated future undiscounted cash flow to
the carrying value. For inventory for which the carrying value exceeds the future undiscounted cash
flows, the Company writes down the carrying value of the inventory to its estimated fair value
primarily based on a discounted cash flow model.
Auditing management’s accounting for inventory impairment, its tests for recoverability and, when
applicable, its measurement of impairment losses, was especially challenging and involved a high
degree of subjectivity as a result of the assumptions and estimates inherent in these evaluations. In
particular, management’s assumptions and estimates included future home and/or land sales prices,
the pace of future sales, and the applicable discount rates, which were sensitive to expectations
about future demand, operations and economic factors. Additionally, the fair value of certain
communities was highly sensitive to relatively small changes in one or more of those assumptions.
How We Addressed the Matter in Our Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls
over management’s inventory impairment review process. For example, we tested controls over
management’s review of the significant assumptions and data inputs utilized in the calculation of future
undiscounted and discounted cash flows.
To test the Company’s estimated future cash flows used to test for the recoverability of a community
and, if applicable, the measurement of an impairment loss, we performed audit procedures that included,
among others, testing the significant assumptions discussed above and the underlying data used by the
Company in its impairment analyses, evaluating the methodologies applied by management, and
recalculating the total undiscounted and discounted cash flows, if applicable, for each analysis. In certain
5 0
TOLL BROTHERS 2020 CONSOLIDATED BALANCE SHEETS (Amounts in thousands)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Amounts in thousands, except per share data)
ASSETS
Cash and cash equivalents
Inventory
Property, construction, and office equipment, net
Receivables, prepaid expenses, and other assets (1)
Mortgage loans held for sale, at fair value
Customer deposits held in escrow
Investments in unconsolidated entities
Income taxes receivable
LIABILITIES AND EQUITY
Liabilities
Loans payable
Senior notes
Mortgage company loan facility
Customer deposits
Accounts payable
Accrued expenses
Income taxes payable
Total liabilities
Equity
Stockholders’ equity
Preferred stock, none issued
Common stock, 152,937 shares issued at
October 31, 2020 and 2019
Additional paid-in capital
Retained earnings
Treasury stock, at cost – 26,410 and 11,999 shares at
October 31, 2020 and 2019, respectively
Accumulated other comprehensive loss
Total stockholders’ equity
Noncontrolling interest
Total equity
October 31,
2020
2019
$
1,370,944 $
7,658,906
316,125
956,294
231,797
77,291
430,701
23,675
1,286,014
7,873,048
273,412
715,441
218,777
74,403
366,252
20,791
$
11,065,733 $
10,828,138
$
1,147,955 $
2,661,718
148,611
459,406
411,397
1,110,196
198,974
6,138,257
1,111,449
2,659,898
150,000
385,596
348,599
950,932
102,971
5,709,445
—
—
1,529
717,272
5,164,086
(1,000,454)
(7,198)
4,875,235
52,241
4,927,476
1,529
726,879
4,774,422
(425,183)
(5,831)
5,071,816
46,877
5,118,693
$
11,065,733 $
10,828,138
(1) As of October 31, 2020 and 2019, receivables, prepaid expenses, and other assets include $163.0 million and
$145.8 million, respectively, of assets related to consolidated variable interest entities (“VIEs”). See Note 4,
“Investments in Unconsolidated Entities” for additional information regarding VIEs.
See accompanying notes.
Year ended October 31,
2020
2019
2018
$
6,937,357 $
7,080,379 $
7,143,258
140,302
7,077,659
5,534,103
125,854
5,659,957
867,442
550,260
948
35,693
586,901
140,277
143,587
7,223,966
5,534,217
129,704
5,663,921
879,245
680,800
24,868
81,502
787,170
197,163
$
446,624 $
590,007 $
—
7,143,258
5,536,812
—
5,536,812
820,230
786,216
85,240
62,460
933,916
185,765
748,151
$
$
$
(1,367)
(6,525)
445,257 $
583,482 $
2,926
751,077
3.43 $
3.40 $
4.07 $
4.03 $
4.92
4.85
130,095
131,247
145,008
146,501
151,984
154,201
Revenues:
Home sales
Land sales and other
Cost of revenues:
Home sales
Land sales and other
Selling, general and
administrative
Income from operations
Other:
Income from
unconsolidated entities
Other income – net
Income before income taxes
Income tax provision
Net income
Other comprehensive (loss)
income, net of tax
Total comprehensive income
Per share:
Basic earnings
Diluted earnings
Weighted-average number
of shares:
Basic
Diluted
See accompanying notes.
5 1
TOLL BROTHERS 2020
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Amounts in thousands)
Common Stock
Additional
Paid-in
Capital
Shares
$
$
Retained
Earnings
$
Treasury
Stock
$
Accumulated
Other
Comprehensive
Loss
$
Stock-
holders’
Equity
$
Non-
controlling
Interest
Total Equity
$
$
Balance, November 1, 2017
177,937
1,779
720,115
4,474,064
(662,854)
(1,910)
4,531,194
5,896
4,537,090
Cumulative effect adjustment upon adoption
of ASU 2016-09 and ASU 2018-02
Net income
Purchase of treasury stock
Exercise of stock options and stock
based compensation issuances
Employee stock purchase plan issuances
Stock-based compensation
Dividends declared
Other comprehensive income
Loss attributable to non-controlling interest
Capital contribution
Balance, October 31, 2018
Cumulative effect adjustment upon adoption
of ASC 606, net of tax
Net income
Purchase of treasury stock
Exercise of stock options and stock
based compensation issuances
Employee stock purchase plan issuances
Stock-based compensation
Cancellation of treasury stock
Dividends declared
Other comprehensive loss
Loss attributable to non-controlling interest
Capital contributions
Balance, October 31, 2019
Net income
Purchase of treasury stock
Exercise of stock options and stock
based compensation issuances
Employee stock purchase plan issuances
Stock-based compensation
Dividends declared
Other comprehensive loss
Loss attributable to non-controlling interest
Capital contributions
Balance, October 31, 2020
See accompanying notes.
52
372
1,413
748,151
(21,789)
43
28,312
(62,077)
(503,159)
33,969
1,166
(322)
2,926
1,463
748,151
(503,159)
12,180
1,209
28,312
(62,077)
2,926
—
—
177,937
1,779
727,053
5,161,551
(1,130,878)
694
4,760,199
(26,368)
14
26,180
(25,000)
(250)
152,937
1,529
726,879
(33,263)
(670)
24,326
(17,987)
590,007
(895,267)
(63,882)
4,774,422
446,624
(56,960)
(233,523)
42,392
1,309
895,517
(6,525)
(17,987)
590,007
(233,523)
16,024
1,323
26,180
—
(63,882)
(6,525)
—
—
(425,183)
(5,831)
5,071,816
(634,057)
56,702
2,084
(1,367)
446,624
(634,057)
23,439
1,414
24,326
(56,960)
(1,367)
—
—
152,937
1,529
717,272
5,164,086
(1,000,454)
(7,198)
4,875,235
1,463
748,151
(503,159)
12,180
1,209
28,312
(62,077)
2,926
(15)
2,832
4,768,912
(17,987)
590,007
(233,523)
16,024
1,323
26,180
—
(63,882)
(6,525)
(19)
38,183
5,118,693
446,624
(634,057)
23,439
1,414
24,326
(56,960)
(1,367)
(10)
5,374
4,927,476
(15)
2,832
8,713
(19)
38,183
46,877
(10)
5,374
52,241
TOLL BROTHERS 2020 CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands)
Cash flow provided by operating
activities:
Net income
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
Stock-based compensation
Year Ended October 31,
2020
2019
2018
$
446,624 $
590,007 $
748,151
Cash flow (used in) provided by
investing activities:
Purchase of property, construction,
and office equipment – net
Investments in unconsolidated entities
68,873
24,326
72,149
26,180
25,259
28,312
Return of investments in unconsolidated
entities
Income from unconsolidated entities
(948)
(24,868)
(85,240)
Distributions of earnings from
unconsolidated entities
Income from foreclosed real estate and
distressed loans
Deferred tax provision (benefit)
Inventory impairments and write-offs
Gain on sales of golf club properties and
an office building
Other
Changes in operating assets and
liabilities
27,236
31,799
86,099
(623)
97,780
55,883
(12,970)
(3,151)
(947)
102,764
42,360
(36,277)
(1,042)
(1,551)
(21,930)
35,156
—
3,111
Investment in foreclosed real estate and
distressed loans
Return of investments in foreclosed real
estate and distressed loans
Proceeds from the sale of golf club
properties and an office building
Business acquisitions
Net cash (used in) provided by
investing activities
Cash flow used in financing activities:
Year Ended October 31,
2020
2019
2018
(109,564)
(71,650)
(86,971)
(56,560)
(28,232)
(27,491)
47,403
147,927
133,190
(1,110)
(731)
(966)
1,808
3,147
4,765
15,617
(60,349)
79,647
(162,373)
—
—
(177,845)
(75,914)
81,266
Proceeds from issuance of senior notes
—
400,000
400,000
Proceeds from loans payable
4,027,152
2,699,028
2,630,835
Decrease (Increase) in inventory
352,858
(40,236)
(143,598)
Debt issuance costs
—
(6,180)
(3,531)
Origination of mortgage loans
(1,815,824)
(1,611,496)
(1,449,494)
Principal payments of loans payable
(4,112,956)
(2,471,616)
(2,690,164)
Sale of mortgage loans
Increase in receivables, prepaid
expenses, and other assets
Increase in income taxes receivable
Increase (decrease) in customer
deposits – net
Increase (Decrease) in accounts payable
and accrued expenses
Decrease in income taxes payable
Net cash provided by operating
1,806,278
1,565,944
1,410,627
Redemption of senior notes
—
(600,000)
—
(176,293)
(2,884)
(185,261)
(20,791)
(99,604)
—
70,423
14,041
(718)
71,835
(1,306)
(64,518)
(22,147)
57,927
(4,296)
Proceeds from stock-based benefit
plans, net
Purchase of treasury stock
Dividends paid
(Payments) receipts related to
noncontrolling interest, net
24,856
(634,057)
(56,588)
17,369
(233,523)
(63,641)
13,392
(503,159)
(61,704)
(1,718)
49
30
Net cash used in financing activities
(753,311)
(258,514)
(214,301)
Net increase in cash, cash equivalents, and
restricted cash
76,961
103,233
455,176
activities
1,008,117
437,661
588,211
Cash, cash equivalents, and restricted cash,
beginning of period
1,319,643
1,216,410
761,234
Cash, cash equivalents, and restricted cash,
end of period
See accompanying notes.
$
1,396,604 $
1,319,643 $
1,216,410
5 3
TOLL BROTHERS 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Toll Brothers, Inc. (the “Company,”
“we,” “us,” or “our”), a Delaware corporation, and its majority-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated. Investments in 50% or less owned
partnerships and affiliates are accounted for using the equity method unless it is determined that we
have effective control of the entity, in which case we would consolidate the entity.
References herein to fiscal year refer to our fiscal years ended or ending October 31.
Use of Estimates
The preparation of financial statements in accordance with U.S. generally accepted accounting
principles (“GAAP”) requires us to make estimates and assumptions that affect the amounts reported
in the Consolidated Financial Statements and accompanying notes. In times of economic disruption
when uncertainty regarding future economic conditions is heightened, these estimates and
assumptions are subject to greater variability. The Company is currently subject to risks and
uncertainties resulting from the COVID-19 pandemic, which adversely impacted our results of
operations in the second quarter of fiscal 2020, and is likely to continue to impact our results of
operations as well as our business operations. As a result, actual results could differ from the
estimates and assumptions we make that affect the amounts reported in the Consolidated Financial
Statements and accompanying notes, and such differences may be material.
Reclassifications
Effective October 31, 2020, we reclassified sales commissions paid to third-party brokers from home
sales cost of revenues to selling, general and administrative expense in our Consolidated Statements
of Operations and Comprehensive Income. The reclassification aligns the treatment of sales
commissions paid to third-party brokers with the treatment of sales commissions paid to in-house
salespersons, and is consistent with the manner in which the majority of the Company’s peers treat
such commissions. The reclassification had the effect of lowering home sales cost of revenues (and
increasing home sales gross margin) and increasing selling, general and administrative expense by
the amount of third-party broker commissions, which totaled $138.6 million, $144.7 million and
$136.2 million, or 2.0%, 2.0% and 1.9% of home sales revenues, for the years ended October 31, 2020,
2019 and 2018, respectively. All prior period amounts have been reclassified to conform to the
2020 presentation.
Cash and Cash Equivalents
Liquid investments or investments with original maturities of three months or less are classified as
cash equivalents. Our cash balances exceed federally insurable limits. We monitor the cash balances
in our operating accounts and adjust the cash balances as appropriate; however, these cash balances
could be impacted if the underlying financial institutions fail or are subject to other adverse
conditions in the financial markets. To date, we have experienced no loss or lack of access to cash in
our operating accounts.
Inventory
Inventory is stated at cost unless an impairment exists, in which case it is written down to fair value
in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) 360, “Property, Plant, and Equipment” (“ASC 360”). In addition to direct land
acquisition costs, land development costs, and home construction costs, costs also include interest,
real estate taxes, and direct overhead related to development and construction, which are capitalized
to inventory during the period beginning with the commencement of development and ending with
the completion of construction. For those communities that have been temporarily closed, no
additional capitalized interest is allocated to a community’s inventory until it reopens. While the
community remains closed, carrying costs such as real estate taxes are expensed as incurred.
We capitalize certain interest costs to qualified inventory during the development and construction
period of our communities in accordance with ASC 835-20, “Capitalization of Interest” (“ASC 835-
20”). Capitalized interest is charged to home sales cost of sales revenues when the related inventory
is delivered. Interest incurred on home building indebtedness in excess of qualified inventory, as
defined in ASC 835-20, is charged to the Consolidated Statements of Operations and Comprehensive
Income in the period incurred.
Once a parcel of land has been approved for development and we open one of our typical
communities, it may take four or more years to fully develop, sell, and deliver all the homes in such
community. Longer or shorter time periods are possible depending on the number of home sites in
a community and the sales and delivery pace of the homes in a community. Our master planned
communities, consisting of several smaller communities, may take up to 10 years or more to
complete. Because our inventory is considered a long-lived asset under GAAP, we are required,
under ASC 360, to regularly review the carrying value of each community and write down the value
of those communities for which we believe the values are not recoverable.
OPERATING COMMUNITIES: When the profitability of an operating community deteriorates, the
sales pace declines significantly, or some other factor indicates a possible impairment in the
recoverability of the asset, the asset is reviewed for impairment by comparing the estimated future
undiscounted cash flow for the community to its carrying value. If the estimated future undiscounted
cash flow is less than the community’s carrying value, the carrying value is written down to its
estimated fair value. Estimated fair value is primarily determined by discounting the estimated
future cash flow of each community. The impairment is charged to home sales cost of revenues in
the period in which the impairment is determined. In estimating the future undiscounted cash flow
of a community, we use various estimates such as (i) the expected sales pace in a community, based
upon general economic conditions that will have a short-term or long-term impact on the market in
which the community is located and on competition within the market, including the number of
home sites available and pricing and incentives being offered in other communities owned by us or
by other builders; (ii) the expected sales prices and sales incentives to be offered in a community;
(iii) costs expended to date and expected to be incurred in the future, including, but not limited to,
land and land development, home construction, interest, and overhead costs; (iv) alternative product
offerings that may be offered in a community that will have an impact on sales pace, sales price,
building cost, or the number of homes that can be built on a particular site; and (v) alternative uses
for the property such as the possibility of a sale of the entire community to another builder or the
sale of individual home sites.
FUTURE COMMUNITIES: We evaluate all land held for future communities or future sections of
operating communities, whether owned or under contract, to determine whether or not we expect
to proceed with the development of the land as originally contemplated. This evaluation encompasses
the same types of estimates used for operating communities described above, as well as an
evaluation of the regulatory environment applicable to the land and the estimated probability of
obtaining the necessary approvals, the estimated time and cost it will take to obtain the approvals,
and the possible concessions that may be required to be given in order to obtain them. Concessions
may include cash payments to fund improvements to public places such as parks and streets,
dedication of a portion of the property for use by the public or as open space, or a reduction in the
density or size of the homes to be built. Based upon this review, we decide (i) as to land under
contract to be purchased, whether the contract will likely be terminated or renegotiated, and (ii) as
to land owned, whether the land will likely be developed as contemplated or in an alternative
manner, or should be sold. We then further determine whether costs that have been capitalized to
the community are recoverable or should be written off. The write-off is charged to home sales cost
of revenues in the period in which the need for the write-off is determined.
The estimates used in the determination of the estimated cash flows and fair value of both current
and future communities are based on factors known to us at the time such estimates are made and
our expectations of future operations and economic conditions. Should the estimates or expectations
5 4
TOLL BROTHERS 2020 used in determining estimated fair value deteriorate in the future, we may be required to recognize
additional impairment charges and write-offs related to current and future communities and such
amounts could be material.
Variable Interest Entities
We are required to consolidate variable interest entities (“VIEs”) in which we have a controlling
financial interest in accordance with ASC 810, “Consolidation” (“ASC 810”). A controlling financial
interest will have both of the following characteristics: (i) the power to direct the activities of a VIE
that most significantly impact the VIE’s economic performance, and (ii) the obligation to absorb
losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from
the VIE that could potentially be significant to the VIE.
Our variable interest in VIEs may be in the form of equity ownership, contracts to purchase assets,
management services and development agreements between us and a VIE, loans provided by us to
a VIE or other member, and/or guarantees provided by members to banks and other parties.
We have a significant number of land purchase contracts and financial interests in other entities
which we evaluate in accordance with ASC 810. We analyze our land purchase contracts and the
entities in which we have an investment to determine whether the land sellers and entities are VIEs
and, if so, whether we are the primary beneficiary. We examine specific criteria and use our judgment
when determining if we are the primary beneficiary of a VIE. Factors considered in determining
whether we are the primary beneficiary include risk and reward sharing, experience and financial
condition of other member(s), voting rights, involvement in day-to-day capital and operating
decisions, representation on a VIE’s executive committee, existence of unilateral kick-out rights or
voting rights, level of economic disproportionality between us and the other member(s), and
contracts to purchase assets from VIEs. The determination whether an entity is a VIE and, if so,
whether we are the primary beneficiary may require significant judgment.
Property, Construction, and Office Equipment
Property, construction, and office equipment are recorded at cost and are stated net of accumulated
depreciation of $266.7 million and $252.5 million at October 31, 2020 and 2019, respectively. For
property and equipment related to onsite sales offices, depreciation is recorded using the units of
production method as homes are delivered. For all other property and equipment, depreciation is
recorded using a straight-line method over the estimated useful lives of the related assets. In fiscal
2020, 2019, and 2018, we recognized $67.6 million, $67.6 million, and $21.0 million of depreciation
expense, respectively.
sale is calculated based upon the stated interest rate of each loan. In addition, the recognition of net
origination costs and fees associated with residential mortgage loans originated are expensed as
incurred. These gains and losses, interest income, and origination costs and fees are recognized in
“Other income - net” in the Consolidated Statements of Operations and Comprehensive Income.
Investments in Unconsolidated Entities
In accordance with ASC 323, “Investments—Equity Method and Joint Ventures,” we review each of
our investments on a quarterly basis for indicators of impairment. A series of operating losses of an
investee, the inability to recover our invested capital, or other factors may indicate that a loss in
value of our investment in the unconsolidated entity has occurred. If a loss exists, we further review
the investment to determine if the loss is other than temporary, in which case we write down the
investment to its estimated fair value. The evaluation of our investment in unconsolidated entities
entails a detailed cash flow analysis using many estimates, including, but not limited to, expected
sales pace, expected sales prices, expected incentives, costs incurred and anticipated, sufficiency of
financing and capital, competition, market conditions, and anticipated cash receipts, in order to
determine projected future distributions from the unconsolidated entity. In addition, for investments
in rental properties, we review rental trends, expected future expenses, and expected cash flows to
determine estimated fair values of the properties.
Our unconsolidated entities that develop land or develop for-sale homes and condominiums evaluate
their inventory in a similar manner as we do. See “Inventory” above for more detailed disclosure on
our evaluation of inventory. For our unconsolidated entities that own, develop, and manage for-rent
residential apartments, we review rental trends, expected future expenses, and expected future cash
flows to determine estimated fair values of the underlying properties. If a valuation adjustment is
recorded by an unconsolidated entity related to its assets, our proportionate share is reflected in
income from unconsolidated entities with a corresponding decrease to our investment in
unconsolidated entities.
We are a party to several joint ventures with unrelated parties to develop and sell land that is owned
by the joint ventures. We recognize our proportionate share of the earnings from the sale of home
sites to other builders, including our joint venture partners. We do not recognize earnings from the
home sites we purchase from these ventures at the time of purchase; instead, our cost basis in those
home sites is reduced by our share of the earnings realized by the joint venture from sales of those
home sites to us.
We are also a party to several other joint ventures. We recognize our proportionate share of the
earnings and losses of our unconsolidated entities.
Subsequent events
Fair Value Disclosures
In November 2020, we closed on the sale of a parking garage at one of our City Living properties in
Hoboken, New Jersey for $34.7 million and we expect to recognize a gain of approximately $24.0
million during our first quarter of fiscal 2021 as a result of this sale.
Mortgage Loans Held for Sale
Residential mortgage loans held for sale are measured at fair value in accordance with the provisions
of ASC 825, “Financial Instruments” (“ASC 825”). We believe the use of ASC 825 improves consistency
of mortgage loan valuations between the date the borrower locks in the interest rate on the pending
mortgage loan and the date of the mortgage loan sale. At the end of the reporting period, we
determine the fair value of our mortgage loans held for sale and the forward loan commitments we
have entered into as a hedge against the interest rate risk of our mortgage loans using the market
approach to determine fair value. The evaluation is based on the current market pricing of mortgage
loans with similar terms and values as of the reporting date, and such pricing is applied to the
mortgage loan portfolio. We recognize the difference between the fair value and the unpaid principal
balance of mortgage loans held for sale as a gain or loss. In addition, we recognize the change in fair
value of our forward loan commitments as a gain or loss. Interest income on mortgage loans held for
We use ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), to measure the fair value
of certain assets and liabilities. ASC 820 provides a framework for measuring fair value in accordance
with GAAP, establishes a fair value hierarchy that requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value, and requires certain
disclosures about fair value measurements.
The fair value hierarchy is summarized below:
LEVEL 1:
Fair value determined based on quoted prices in active markets for identical assets
or liabilities.
LEVEL 2:
Fair value determined using significant observable inputs, generally either quoted
prices in active markets for similar assets or liabilities or quoted prices in markets
that are not active.
LEVEL 3:
Fair value determined using significant unobservable inputs, such as pricing
models, discounted cash flows, or similar techniques.
5 5
TOLL BROTHERS 2020
Treasury Stock
Treasury stock is recorded at cost. Issuance of treasury stock is accounted for on a first-in, first-out
basis. Differences between the cost of treasury stock and the re-issuance proceeds are charged to
additional paid-in capital. When treasury stock is canceled, any excess purchase price over par value
is charged directly to retained earnings.
Revenue and Cost Recognition
As discussed under “Recent Accounting Pronouncements” below, on November 1, 2018, we adopted
Accounting Standards Codification (“ASC”) Topic 606 “Revenue from Contracts with Customers”
(“ASC 606”). As a result of this adoption, we updated our revenue recognition policies effective
November 1, 2018, as follows:
HOME SALES REVENUES: Revenues and cost of revenues from home sales are recognized at the
time each home is delivered and title and possession are transferred to the buyer. For the majority
of our home closings, our performance obligation to deliver a home is satisfied in less than one year
from the date a binding sale agreement is signed. In certain states where we build, we are not able
to complete certain outdoor features prior to the closing of the home. Effective November 1, 2018, to
the extent these separate performance obligations are not complete upon the home closing, we
defer a portion of the home sales revenues related to these obligations and subsequently recognize
the revenue upon completion of such obligations. As of October 31, 2020, the home sales revenues
and related costs we deferred related to these obligations were immaterial. Our contract liabilities,
consisting of deposits received from customers for sold but undelivered homes, totaled $459.4
million and $385.6 million at October 31, 2020 and October 31, 2019, respectively. Of the outstanding
customer deposits held as of October 31, 2019, we recognized $332.8 million in home sales revenues
during the fiscal year ended October 31, 2020. Of the outstanding customer deposits held as of
October 31, 2018, we recognized $367.8 million in home sales revenues during the fiscal year ended
October 31, 2019.
For our standard attached and detached homes, land, land development, and related costs, both
incurred and estimated to be incurred in the future, are amortized to the cost of homes closed based
upon the total number of homes to be constructed in each community. Any changes resulting from
a change in the estimated number of homes to be constructed or in the estimated land, land
development, and related costs subsequent to the commencement of delivery of homes are allocated
to the remaining undelivered homes in the community. Home construction and related costs are
charged to the cost of homes closed under the specific identification method. The estimated land,
common area development, and related costs of master planned communities, including the cost of
golf courses, net of their estimated residual value, are allocated to individual communities within a
master planned community on a relative sales value basis. Any changes resulting from a change in
the estimated number of homes to be constructed or in the estimated costs are allocated to the
remaining home sites in each of the communities of the master planned community.
For high-rise/mid-rise projects, land, land development, construction, and related costs, both
incurred and estimated to be incurred in the future, are generally amortized to the cost of units
closed based upon an estimated relative sales value of the units closed to the total estimated sales
value. Any changes resulting from a change in the estimated total costs or revenues of the project
are allocated to the remaining units to be delivered.
LAND SALES AND OTHER REVENUES: Our revenues from land sales and other generally consist of:
(1) lot sales to third-party builders within our master planned communities; (2) land sales to joint
ventures in which we retain an interest; and (3) bulk land sales to third parties of land we have
decided no longer meets our development criteria. In general, our performance obligation for each
of these land sales is fulfilled upon the delivery of the land, which generally coincides with the
receipt of cash consideration from the counterparty. Effective November 1, 2018, in land sale
transactions that contain repurchase options, revenues and related costs are not recognized until the
repurchase option expires. In addition, when we sell land to a joint venture in which we retain an
interest, we do not recognize revenue or gains on the sale to the extent of our retained interest in
such joint venture.
FORFEITED CUSTOMER DEPOSITS: Effective November 1, 2018, forfeited customer deposits are
recognized in “Home sales revenues” in our Consolidated Statements of Operations and
Comprehensive Income in the period in which we determine that the customer will not complete the
purchase of the home and we have the right to retain the deposit.
SALES INCENTIVES: In order to promote sales of our homes, we may offer our home buyers sales
incentives. These incentives will vary by type of incentive and by amount on a community-by-
community and home-by-home basis. Incentives are reflected as a reduction in home sales revenues.
Incentives are recognized at the time the home is delivered to the home buyer and we receive the
sales proceeds.
Advertising Costs
We expense advertising costs as incurred. Advertising costs were $37.1 million, $38.5 million, and
$28.5 million for the years ended October 31, 2020, 2019, and 2018, respectively.
Warranty and Self-Insurance
WARRANTY: We provide all of our home buyers with a limited warranty as to workmanship and
mechanical equipment. We also provide many of our home buyers with a limited 10-year warranty
as to structural integrity. We accrue for expected warranty costs at the time each home is closed and
title and possession are transferred to the home buyer. Warranty costs are accrued based upon
historical experience. Adjustments to our warranty liabilities related to homes delivered in prior
periods are recorded in the period in which a change in our estimate occurs. Over the past several
years, we have had a significant number of warranty claims related primarily to homes built in
Pennsylvania and Delaware. See Note 7 – “Accrued Expenses” for additional information regarding
these warranty charges.
SELF-INSURANCE: We maintain, and require the majority of our subcontractors to maintain, general
liability insurance (including construction defect and bodily injury coverage) and workers’
compensation insurance. These insurance policies protect us against a portion of our risk of loss
from claims related to our home building activities, subject to certain self-insured retentions,
deductibles and other coverage limits (“self-insured liability”). We also provide general liability
insurance for our subcontractors in Arizona, California, Colorado, Nevada, Washington, and certain
areas of Texas, where eligible subcontractors are enrolled as insureds under our general liability
insurance policies in each community in which they perform work. For those enrolled subcontractors,
we absorb their general liability associated with the work performed on our homes within the
applicable community as part of our overall general liability insurance and our self-insured liability.
We record expenses and liabilities based on the estimated costs required to cover our self-insured
liability and the estimated costs of potential claims and claim adjustment expenses that are above
our coverage limits or that are not covered by our insurance policies. These estimated costs are
based on an analysis of our historical claims and industry data, and include an estimate of claims
incurred but not yet reported (“IBNR”).
We engage a third-party actuary that uses our historical claim and expense data, input from our
internal legal and risk management groups, as well as industry data, to estimate our liabilities related
to unpaid claims, IBNR associated with the risks that we are assuming for our self-insured liability,
and other required costs to administer current and expected claims. These estimates are subject to
uncertainty due to a variety of factors, the most significant being the long period of time between
the delivery of a home to a home buyer and when a structural warranty or construction defect claim
may be made, and the ultimate resolution of the claim. Though state regulations vary, construction
defect claims may be reported and resolved over a prolonged period of time, which can extend for
10 years or longer. As a result, the majority of the estimated liability relates to IBNR. Adjustments to
our liabilities related to homes delivered in prior years are recorded in the period in which a change
in our estimate occurs.
The projection of losses related to these liabilities requires actuarial assumptions that are subject to
variability due to uncertainties regarding construction defect claims relative to our markets and the
5 6
TOLL BROTHERS 2020 types of product we build, insurance industry practices, and legal or regulatory actions and/or
interpretations, among other factors. Key assumptions used in these estimates include claim
frequencies, severity, and settlement patterns, which can occur over an extended period of time. In
addition, changes in the frequency and severity of reported claims and the estimates to settle claims
can impact the trends and assumptions used in the actuarial analysis, which could be material to our
consolidated financial statements. Due to the degree of judgment required, and the potential for
variability in these underlying assumptions, our actual future costs could differ from those estimated,
and the difference could be material to our consolidated financial statements.
Stock-Based Compensation
We account for our stock-based compensation in accordance with ASC 718, “Compensation – Stock
Compensation” (“ASC 718”). We use a lattice model for the valuation of our stock option grants. The
option pricing models used are designed to estimate the value of options that, unlike employee
stock options and restricted stock units, can be traded at any time and are transferable. In addition
to restrictions on trading, employee stock options and restricted stock units may include other
restrictions such as vesting periods. Further, such models require the input of highly subjective
assumptions, including the expected volatility of the stock price. Stock-based compensation expense
is generally included in “Selling, general and administrative” expense in our Consolidated Statements
of Operations and Comprehensive Income.
Legal Expenses
Transactional legal expenses for land acquisition and entitlement, and financing are capitalized and
expensed over their appropriate life. We expense legal fees related to litigation, warranty and
insurance claims when incurred.
Income Taxes
We account for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”). Deferred tax
assets and liabilities are recorded based on temporary differences between the amounts reported for
financial reporting purposes and the amounts reported for income tax purposes. In accordance with
the provisions of ASC 740, we assess the realizability of our deferred tax assets. A valuation allowance
must be established when, based upon available evidence, it is more likely than not that all or a portion
of the deferred tax assets will not be realized. See “Income Taxes – Valuation Allowance” below.
Federal and state income taxes are calculated on reported pre-tax earnings based on current tax law
and also include, in the applicable period, the cumulative effect of any changes in tax rates from those
used previously in determining deferred tax assets and liabilities. Such provisions differ from the
amounts currently receivable or payable because certain items of income and expense are recognized
for financial reporting purposes in different periods than for income tax purposes. Significant judgment
is required in determining income tax provisions and evaluating tax positions. We establish reserves
for income taxes when, despite the belief that our tax positions are fully supportable, we believe that
our positions may be challenged and disallowed by various tax authorities. The consolidated tax
provisions and related accruals include the impact of such reasonably estimable disallowances as
deemed appropriate. To the extent that the probable tax outcome of these matters changes, such
changes in estimates will impact the income tax provision in the period in which such determination
is made.
ASC 740 clarifies the accounting for uncertainty in income taxes recognized and prescribes a
recognition threshold and measurement attributes for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides
guidance on de-recognition, classification, interest and penalties, accounting in interim periods,
disclosure, and transition. ASC 740 requires a company to recognize the financial statement effect of
a tax position when it is “more-likely-than-not” (defined as a substantiated likelihood of more than
50%), based on the technical merits of the position, that the position will be sustained upon
examination. A tax position that meets the more-likely-than-not recognition threshold is measured to
determine the amount of benefit to be recognized in the financial statements based upon the largest
amount of benefit that is greater than 50% likely of being realized upon ultimate settlement with a
taxing authority that has full knowledge of all relevant information. Our inability to determine that a
tax position meets the more-likely-than-not recognition threshold does not mean that the Internal
Revenue Service (“IRS”) or any other taxing authority will disagree with the position that we
have taken.
If a tax position does not meet the more-likely-than-not recognition threshold, despite our belief that
our filing position is supportable, the benefit of that tax position is not recognized in the Consolidated
Statements of Operations and Comprehensive Income and we are required to accrue potential interest
and penalties until the uncertainty is resolved. Potential interest and penalties are recognized as a
component of the provision for income taxes. Differences between amounts taken in a tax return and
amounts recognized in the financial statements are considered unrecognized tax benefits. We believe
that we have a reasonable basis for each of our filing positions and intend to defend those positions if
challenged by the IRS or other taxing jurisdiction. If the IRS or other taxing authorities do not disagree
with our position, and after the statute of limitations expires, we will recognize the unrecognized tax
benefit in the period that the uncertainty of the tax position is eliminated.
Income Taxes – Valuation Allowance
We assess the need for valuation allowances for deferred tax assets in each period based on whether
it is more-likely-than-not that some portion of the deferred tax asset would not be realized. If, based
on the available evidence, it is more-likely-than-not that such asset will not be realized, a valuation
allowance is established against a deferred tax asset. The realization of a deferred tax asset ultimately
depends on the existence of sufficient taxable income in either the carryback or carryforward
periods under tax law. This assessment considers, among other matters, the nature, consistency, and
magnitude of current and cumulative income and losses; forecasts of future profitability; the duration
of statutory carryback or carryforward periods; our experience with operating loss and tax credit
carryforwards being used before expiration; tax planning alternatives: and outlooks for the U.S.
housing industry and broader economy. Changes in existing tax laws or rates could also affect our
actual tax results. Due to uncertainties in the estimation process, particularly with respect to changes
in facts and circumstances in future reporting periods, actual results could differ from the estimates
used in our assessment that could have a material impact on our consolidated results of operations
or financial position.
Segment Reporting
We operate in two segments: traditional home building and urban infill. We build and sell homes for
detached and attached homes in luxury residential communities located in affluent suburban
markets and cater to move-up, empty-nester, active-adult, affordable luxury and second-home
buyers in the United States (“Traditional Home Building”). We also build and sell homes in urban infill
markets through Toll Brothers City Living® (“City Living”).
We have determined that our Traditional Home Building operations operate in five geographic
segments. In the first quarter of fiscal 2020, we made certain changes to our Traditional Home
Building regional management structure and realigned certain of the states falling among our five
geographic segments, as follows:
5 7
TOLL BROTHERS 2020 THE EASTERN REGION:
NORT H:
Connecticut, Delaware, Illinois, Massachusetts, Michigan, Pennsylvania,
New Jersey and New York
MID-ATLANTIC:
Georgia, Maryland, North Carolina, Tennessee and Virginia
SO UTH:
Florida, South Carolina and Texas
THE WESTERN REGION:
MOU NTAIN:
Arizona, Colorado, Idaho, Nevada and Utah
PACIFIC:
California, Oregan, and Washington
Previously, our geographic segments were:
NORTH :
Connecticut, Illinois, Massachusetts, Michigan, New Jersey, and New York
MID-ATLANTIC:
Delaware, Maryland, Pennsylvania, and Virginia
SOU TH:
WEST:
Florida, Georgia, North Carolina, South Carolina, and Texas
Arizona, Colorado, Idaho, Nevada, Oregon, Utah, and Washington
CALIFORNIA:
California
Our geographic reporting segments are consistent with how our chief operating decision makers are
assessing operating performance and allocating capital following the realignment of the regional
management structure. The realignment did not have any impact on our consolidated financial
position, results of operations, earnings per share or cash flows. Prior period segment information
was restated to conform to the new reporting structure.
In fiscal 2018, we acquired land and commenced development activities in the Salt Lake City, Utah
and Portland, Oregon markets. We opened communities in these markets in fiscal 2019. In addition,
as a result of recent acquisitions, we commenced operations in Georgia and South Carolina in fiscal
2019 and Tennessee in fiscal 2020.
Recent Accounting Pronouncements
In March 2020, the Securities and Exchange Commission (SEC) adopted amendments to the financial
disclosure requirements applicable to registered debt offerings that include credit enhancements,
such as subsidiary guarantees, in Rule 3-10 of Regulation S-X. The amended rule focuses on providing
material, relevant and decision-useful
information regarding guarantees and other credit
enhancements, while eliminating certain prescriptive requirements. The Company adopted these
amendments on October 31, 2020. Accordingly, summarized financial information has been
presented only for the issuers and guarantors of the Company’s registered securities for the most
recent fiscal year and as permitted, this information is included in Management’s Discussion and
Analysis of Financial Condition and Results of Operations. In October 2020, the FASB issued ASU
2020-09, “Debt (Topic 470) - Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-
10762,” to reflect the SEC’s new disclosure rules on guaranteed debt securities offerings adopted by
the Company.
In February 2016, the FASB issued ASU No. 2016-02, “Leases” (“ASU 2016-02”), which requires an
entity to recognize assets and liabilities on the balance sheet for the rights and obligations created
by leased assets and provide additional disclosures. In July 2018, the FASB issued ASU No. 2018-11,
“Leases: Targeted Improvements” (“ASU 2018-11”), which provides an entity with the option to apply
the transition provisions of the new standard at its adoption date instead of at its earliest comparative
period presented. ASU 2018-11 also provides an entity with a practical expedient that permits lessors
5 8
to not separate non-lease components from the associated lease component if certain conditions
are met. ASU 2016-02, as amended by ASU 2018-11, became effective for our fiscal year beginning
November 1, 2019, and we adopted the new standard using a modified retrospective approach. The
prior year period was not recast and our Consolidated Balance Sheet as of October 31, 2019 does not
reflect any changes resulting from the adoption of the new standard. We elected to apply the
transition provisions that allow us to carry forward our historical assessment of (1) whether contracts
are or contain leases, (2) lease classification, and (3) initial direct costs. In addition, we elected the
practical expedient that allows lessees the option to account for lease and non-lease components
together as a single component for all classes of underlying assets. As a result of the adoption, we
recorded a right-of-use (“ROU”) asset and lease liability of $114.5 million and $118.5 million,
respectively, as of November 1, 2019. The ROU asset is included in “Receivables, prepaid expenses,
and other assets” and the corresponding lease liability is included in “Accrued expenses” in our
Consolidated Balance Sheet. The adoption of ASU 2016-02 had no impact on retained earnings and
did not materially impact our Consolidated Statements of Operations and Comprehensive Income or
Consolidated Statements of Cash Flows.
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 replaces the
current incurred loss impairment methodology with a methodology that reflects expected credit
losses and requires consideration of a broader range of reasonable and supportable information to
estimate credit losses. ASU 2016-13 will be effective for our fiscal year beginning November 1, 2020.
We believe that the adoption of ASU 2016-13 will not have a material impact on our consolidated
financial statements or disclosures. We also do not expect significant changes to our business
processes, systems, or internal controls as a result of implementing the standard.
In May 2014, the FASB created ASC 606 with the issuance ASU No. 2014-09, “Revenue from Contracts
with Customers,” which provides guidance for revenue recognition. ASC 606 affects any entity that
either enters into contracts with customers to transfer goods or services or enters into contracts for
the transfer of nonfinancial assets. ASC 606 supersedes the revenue recognition requirements in
Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition,” and most industry-
specific guidance. ASC 606 also supersedes some cost guidance included in ASC Subtopic 605-35,
“Revenue Recognition—Construction-Type and Production-Type Contracts.” The standard’s core
principle is that a company will recognize revenue when it transfers promised goods or services to
customers in an amount that reflects the consideration to which a company expects to be entitled in
exchange for those goods or services. In doing so, companies will need to use more judgment and
make more estimates than under the previous guidance. These judgments and estimates include
identifying performance obligations in the contract, estimating the amount of variable consideration
to include in the transaction price, and allocating the transaction price to each separate performance
obligation. In August 2015, the FASB issued ASU 2015-14 “Revenue from Contracts with Customers”
(“ASU 2015-14”), which delayed the effective date of ASC 606 by one year. ASC 606, as amended by
ASU 2015-14, became effective for our fiscal year beginning November 1, 2018, and we adopted the
new standard under the modified retrospective transition method applied to contracts that were not
completed as of November 1, 2018. We elected to apply the practical expedient which allows us to
immediately expense incremental costs of obtaining a contract that would otherwise have been
recognized in one year or less. We recognized the cumulative effect, net of tax, of applying ASC 606
as an adjustment to the opening balance of retained earnings. The comparative information has not
been restated and continues to be reported under the previous accounting standards. The adoption
of ASC 606 did not have a material impact on our Consolidated Balance Sheet or Consolidated
Statement of Operations or Comprehensive Income, and there have been no significant changes to
our internal controls, processes, or systems as a result of implementing this new standard.
TOLL BROTHERS 2020 However, the adoption of ASC 606 resulted in the following changes:
• Prior to adoption of ASC 606, we capitalized certain costs related to our marketing efforts,
including sales offices and model home upgrades and furnishings within “Inventory” on our
Consolidated Balance Sheets and amortized such costs through “Selling, general, and
administrative” on our Consolidated Statements of Operations and Comprehensive Income. As
of November 1, 2018, we reclassified $104.8 million to “Property, construction, and office
equipment, net” on our Consolidated Balance Sheets, primarily related to sales offices and
model home improvement costs. The amortization of such costs will remain unchanged and
will continue to be included in “Selling, general, and administrative” on our Consolidated
Statements of Operations and Comprehensive Income. Additionally, we recorded a net
cumulative effect adjustment to retained earnings of approximately $13.2 million for certain
other marketing costs that no longer qualify for capitalization under the new guidance, and
such costs will be expensed as incurred in the future.
• Prior to adoption of ASC 606, we recorded our land sale revenues, net of their related expenses,
within “Other income – net” on our Consolidated Statements of Operations and Comprehensive
Income. As of November 1, 2018, we are presenting this activity in income from operations and
breaking out the components of land sales revenues and land sales cost of revenues on our
Consolidated Statements of Operations and Comprehensive Income. In addition, due to the
existence of certain repurchase options in existing agreements to sell lots to third party
builders in our master planned communities, both for wholly owned projects as well as projects
in which we are a joint venture partner, we recorded a net cumulative effect adjustment to
retained earnings of approximately $4.6 million to account for previously settled lots for which
the related repurchase option had not yet expired. Because the amount of the deferred earning
is not material to our consolidated financial statements, we have elected to recognize the
revenue and related expenses for such lots in future periods when such repurchase options
expire rather than account for them as leases under ASC 840, “Leases.”
• Prior to adoption of ASC 606, retained customer deposits were classified in “Other income –
net” on our Consolidated Statements of Operations and Comprehensive Income. As of
November 1, 2018, retained customer deposits, which totaled $11.8 million for our fiscal year
ending October 31, 2020, are included in “Home sales revenue” on our Consolidated Statements
of Operations and Comprehensive Income. Prior period balances for retained customer deposits
have not been reclassified and are not material to our consolidated financial statements.
2. ACQUISITIONS
In fiscal 2020, we acquired substantially all of the assets and operations of The Thrive Group, LLC
(“Thrive”), an urban infill builder with operations in Atlanta, Georgia and Nashville, Tennessee, and
Keller Homes, Inc. (“Keller”), a builder with operations in Colorado Springs, Colorado. The aggregate
purchase price for these acquisitions was approximately $79.2 million in cash. The assets acquired
were primarily inventory, including approximately 1,100 home sites owned or controlled through land
purchase agreements. One of these acquisitions was accounted for as a business combination and
neither were material to our results of operations or financial condition.
In fiscal 2019, we acquired substantially all of the assets and operations of Sharp Residential, LLC
(“Sharp”) and Sabal Homes LLC (“Sabal”), for approximately $162.4 million in cash. Sharp operates
in metropolitan Atlanta, Georgia; Sabal operates in the Charleston, Greenville, and Myrtle Beach,
South Carolina markets. The assets acquired, were primarily inventory, including approximately
2,550 home sites owned or controlled through land purchase agreements. In connection with these
acquisitions, we assumed contracts to deliver 204 homes with an aggregate value of $96.1 million.
The average price of undelivered homes at the dates of acquisitions was approximately $471,100. As
a result of these acquisitions, our selling community count increased by 22 communities. These
acquisitions were accounted for as a business combination and were not material to our results of
operations or financial condition.
3. INVENTORY
Inventory at October 31, 2020 and 2019 consisted of the following (amounts in thousands):
Land controlled for future communities
$
223,525 $
Land owned for future communities
Operating communities
1,036,843
6,398,538
2020
2019
182,929
868,202
6,821,917
$
7,658,906 $
7,873,048
Operating communities include communities offering homes for sale, communities that have sold all
available home sites but have not completed delivery of the homes, communities that were
previously offering homes for sale but are temporarily closed due to business conditions or non-
availability of improved home sites and that are expected to reopen within 12 months of the end of
the fiscal year being reported on, and communities preparing to open for sale. The carrying value
attributable to operating communities includes the cost of homes under construction, land and land
development costs, the carrying cost of home sites in current and future phases of these communities,
and the carrying cost of model homes.
Communities that were previously offering homes for sale but are temporarily closed due to business
conditions, do not have any remaining backlog, and are not expected to reopen within 12 months of
the end of the fiscal period being reported on have been classified as land owned for future
communities. Backlog consists of homes under contract but not yet delivered to our home buyers
(“backlog”).
Information regarding the classification, number, and carrying value of these temporarily closed
communities at October 31, 2020, 2019, and 2018, is provided in the table below ($ amounts
in thousands):
Land owned for future communities:
Number of communities
Carrying value (in thousands)
Operating communities:
Number of communities
Carrying value (in thousands)
$
$
2020
10
2019
16
2018
17
68,064 $
120,857 $
124,426
4
1
32,112 $
2,871 $
1
2,622
We provided for inventory impairment charges and the expensing of costs that we believed not to
be recoverable in each of the three fiscal years ended October 31, 2020, 2019, and 2018, as shown in
the table below (amounts in thousands):
2020
2019
2018
Charge:
Land controlled for future
communities
Land owned for future
communities
Operating communities
$
$
23,539 $
11,285 $
2,820
31,669
675
—
31,075
55,883 $
42,360 $
2,185
30,151
35,156
59
TOLL BROTHERS 2020
The table below provides information as of October 31, 2020, regarding active joint ventures that we
are invested in, by joint venture category ($ amounts in thousands):
Land
Development
Joint
Ventures
Home
Building
Joint
Ventures
Rental
Property
Joint
Ventures
Gibraltar
Joint
Ventures
Total
Number of
unconsolidated
entities
Investment in
unconsolidated
entities
Number of
unconsolidated
entities with
funding
commitments by
the Company
Company’s
remaining
funding
commitment to
unconsolidated
entities
9
4
26
7
46
$
127,690 $
33,819 $
247,049 $
22,143 $
430,701
3
—
10
1
14
$
33,045 $
— $
24,343 $
17,601 $
74,989
Certain joint ventures in which we have investments obtained debt financing to finance a portion of
their activities. The table below provides information at October 31, 2020, regarding the debt
financing obtained by category ($ amounts in thousands):
Land
Development
Joint Ventures
Home Building
Joint Ventures
Rental
Property Joint
Ventures
Total
Number of joint
ventures with debt
financing
Aggregate loan
commitments
Amounts borrowed
under commitments
$
$
4
1
23
28
158,823 $
30,953 $
1,660,496 $
1,850,272
118,071 $
30,953 $
1,217,614 $
1,366,638
See Note 12, “Fair Value Disclosures,” for information regarding (1) the number of operating
communities that we tested for potential impairment, the number of operating communities in
which we recognized impairment charges, the amount of impairment charges recognized, and the
fair value of those communities, net of impairment charges. and (2) the number of future communities
impaired, the amount of impairment charges recognized, and the fair value of those communities,
net of impairment charges.
See Note 15, “Commitments and Contingencies,” for information regarding land purchase commitments.
At October 31, 2020, we evaluated our land purchase contracts, including those to acquire land for
apartment developments, to determine whether any of the selling entities were VIEs and, if they
were, whether we were the primary beneficiary of any of them. Under these land purchase contracts,
we do not possess legal title to the land; our maximum exposure to loss is generally limited to
deposits paid to the sellers and predevelopment costs incurred; and the creditors of the sellers
generally have no recourse against us. At October 31, 2020, we determined that 207 land purchase
contracts, with an aggregate purchase price of $2.31 billion, on which we had made aggregate
deposits totaling $208.7 million, were VIEs, but that we were not the primary beneficiary of any VIE
related to such land purchase contracts. At October 31, 2019, we determined that 127 land purchase
contracts, with an aggregate purchase price of $2.00 billion, on which we had made aggregate
deposits totaling $149.2 million, were VIEs, but that we were not the primary beneficiary of any VIE
related to such land purchase contracts.
Interest incurred, capitalized, and expensed in each of the three fiscal years ended October 31, 2020,
2019, and 2018, was as follows (amounts in thousands):
Interest capitalized, beginning of year
$
311,323 $
319,364 $
Interest incurred
172,530
178,035
2020
2019
2018
352,049
165,977
Interest expensed to home sales cost of
revenues
Interest expensed to land sales and other
cost of revenues
Interest expensed in other income – net
Interest capitalized on investments in
unconsolidated entities
Previously capitalized interest on
investments in unconsolidated entities
transferred to inventory
(174,375)
(185,045)
(190,734)
(5,443)
(2,440)
(1,787)
—
—
(3,760)
(3,835)
(4,571)
(7,220)
215
5,327
3,052
Interest capitalized, end of year
$
297,975 $
311,323 $
319,364
4. INVESTMENTS IN UNCONSOLIDATED ENTITIES
We have investments in various unconsolidated entities and our ownership interest in these
investments range from 15.8% to 50%. These entities, which are structured as joint ventures (i)
develop land for the joint venture participants and for sale to outside builders (“Land Development
Joint Ventures”); (ii) develop for-sale homes (“Home Building Joint Ventures”); (iii) develop luxury
for-rent residential apartments, commercial space, and a hotel (“Rental Property Joint Ventures”),
which includes our investment in Toll Brothers Realty Trust (the “Trust”); and (iv) invest in distressed
loans and real estate and provide financing and land banking to residential builders and developers
for the acquisition and development of land and home sites (“Gibraltar Joint Ventures”). In fiscal
2020, 2019 and 2018, we recognized income from the unconsolidated entities in which we had an
investment of $0.9 million, $24.9 million, and $85.2 million, respectively.
6 0
TOLL BROTHERS 2020
More specific and/or recent information regarding our investments in and future commitments to
these entities is provided below.
New Joint Ventures
The table below provides information on joint ventures entered into during fiscal 2020 ($ amounts
in thousands):
Number of unconsolidated joint ventures entered into
during the period
1
Investment balance at October 31, 2020
$
24,602 $
7
80,448
Land
Development
Joint Ventures
Rental Property
Joint Ventures
The table below provides information on joint ventures entered into during fiscal 2019 ($ amounts
in thousands):
Land
Development
Joint Ventures
Rental Property
Joint Ventures
1
5,913 $
10
49,691
—
4
Number of unconsolidated joint ventures entered into
during the period
Investment balance at October 31, 2019
Number of consolidated joint ventures entered into
during the period
Carrying value of consolidated joint ventures’ assets
at October 31, 2019
Noncontrolling interests in consolidated joint ventures
at October 31, 2019
$
$
$
Guarantees
The unconsolidated entities in which we have investments generally finance their activities with a
combination of partner equity and debt financing. In some instances, we have guaranteed debt of
unconsolidated entities. These guarantees may include any or all of the following: (i) project
completion guarantees, including any cost overruns; (ii) repayment guarantees, generally covering a
percentage of the outstanding loan; (iii) carry cost guarantees, which cover costs such as interest,
real estate taxes, and insurance; (iv) an environmental indemnity provided to the lender that holds
the lender harmless from and against losses arising from the discharge of hazardous materials from
the property and non-compliance with applicable environmental laws; and (v) indemnification of the
lender from “bad boy acts” of the unconsolidated entity.
In some instances, we and our joint venture partner have provided joint and several guarantees in
connection with loans to unconsolidated entities. In these situations, we generally seek to implement
a reimbursement agreement with our partner that provides that neither party is responsible for
more than its proportionate share or agreed upon share of the guarantee; however, we are not
always successful. In addition, if the joint venture partner does not have adequate financial resources
to meet its obligations under such a reimbursement agreement, we may be liable for more than our
proportionate share.
We believe that, as of October 31, 2020, in the event we become legally obligated to perform under
a guarantee of an obligation of an unconsolidated entity due to a triggering event, the collateral in
such entity should be sufficient to repay a significant portion of the obligation. If it is not, we and our
partners would need to contribute additional capital to the venture.
Information with respect to certain of the Company’s unconsolidated entities’ outstanding debt
obligations, loan commitments and our guarantees thereon are as follows ($ amounts in thousands):
Loan commitments in the aggregate
Our maximum estimated exposure under repayment and carry cost
guarantees if the full amount of the debt obligations were borrowed
— $
124,988
Debt obligations borrowed in the aggregate
— $
37,832
Our maximum estimated exposure under repayment and carry cost
guarantees of the debt obligations borrowed
Estimated fair value of guarantees provided by us related to debt and
other obligations
October 31, 2020
$
$
$
$
$
1,508,300
229,300
1,024,700
179,100
6,100
Results of Operations and Intra-entity Transactions
Terms of guarantees
1 month - 3.5 years
In fiscal 2020, 2019 and 2018, certain of our rental property joint ventures sold their underlying
assets to unrelated parties or to our joint venture partner. In connection with these sales, we
recognized gains of $10.7 million, $3.8 million, and $67.2 million, respectively, which is included in
“Income from unconsolidated entities” in our Consolidated Statements of Operations and
Comprehensive Income.
In fiscal 2020, we recognized other-than-temporary impairment charges on a Home Building Joint
Venture of $6.0 million. In fiscal 2019 and 2018, we recognized an other-than-temporary impairment
charge on certain Land Development Joint Ventures of $1.0 million and $6.0 million, respectively.
In fiscal 2020, 2019 and 2018, purchases from unconsolidated entities principally related to our
acquisition of lots from our Land Development Joint Ventures and were $17.6 million, $137.1 million,
and $153.2 million, respectively. Our share of income from the lots we acquired was insignificant in
each period. Sales to unconsolidated entities principally related to land sales to our Rental Property
Joint Ventures for which we recognized gains in land sales and other revenues of $1.2 million, $9.4
million and $1.0 million in our fiscal 2020, 2019 and 2018, Consolidated Statements of Operations
and Comprehensive Income, respectively.
The maximum exposure estimates presented above do not take into account any recoveries from the
underlying collateral or anyreimbursement from our partners. We have not made payments under
any of the guarantees, nor have we been called upon to do so.
6 1
TOLL BROTHERS 2020
development of this project. We and an affiliate of our partner provided certain guarantees under
the construction loan agreement. We estimate that our maximum exposure under recourse
guarantees, if the full amount of the loan commitment was borrowed, would be the $28.3 million
without taking into account any recoveries from the underlying collateral or any reimbursement
from our partner.
In December 2020, a Rental Property Joint Venture that we previously formed in fiscal 2018 secured
a $160.0 million construction loan to finance the development of the project. We and an affiliate of
our partner provided certain guarantees under the construction loan agreement. We estimate that
our maximum exposure under recourse guarantees, if the full amount of the loan commitment was
borrowed, would be $24.0 million without taking into account any recoveries from the underlying
collateral or any reimbursement from our partner.
Variable Interest Entities
The table below provide information as of October 31, 2020 and 2019, regarding our unconsolidated
joint venture-related variable interests in VIEs ($ amounts in thousands):
Number of Joint Venture VIEs that the Company is not
the Primary Beneficiary (“PB”)
Investment balance in unconsolidated Joint Venture
VIEs included in Investments in unconsolidated
entities in our Consolidated Balance Sheets
Our maximum exposure to losses related to loan
guarantees and additional commitments provided to
unconsolidated Joint Venture VIEs
$
$
October 31,
2020
October 31,
2019
12
13
63,100 $
37,000
122,100 $
84,300
Our ownership interest in the above unconsolidated Joint Venture VIEs ranges from 20% to 50%.
The table below provide information as of October 31, 2020 and 2019, regarding our consolidated
joint venture-related variable interests in VIEs ($ amounts in thousands):
Number of Joint Venture VIEs
that the Company is the PB
and consolidates
Carrying value of
consolidated VIEs assets
Our partners’ interests in
consolidated VIEs
Balance Sheet
Classification
October 31,
2020
October 31,
2019
Receivables
prepaid expenses
and other assets $
Noncontrolling
5
5
163,000 $
145,800
interest $
46,200 $
41,000
Our ownership interest in the above consolidated Joint Venture VIEs ranges from 50% to 98%.
As shown above, we have concluded we are the PB of certain VIEs due to our controlling financial
interest in such ventures as we have the power to direct the activities that most significantly impact
the joint ventures’ performance and the obligation to absorb expected losses or receive benefits
from the joint ventures. The assets of these VIEs can only be used to settle the obligations of the
VIEs. In addition, in certain of the joint ventures, in the event additional contributions are required to
be funded to the joint ventures prior to the admission of any additional investor at a future date, we
will fund 100% of such contributions, including our partner’s pro rata share, which we expect would
be funded through an interest-bearing loan. For other VIEs, we have concluded that we are not the
PB because the power to direct the activities of such VIEs that most significantly impact their
performance was either shared by us and such VIEs’ other partners or such activities were controlled
by our partner. For VIEs where the power to direct significant activities is shared, business plans,
budgets, and other major decisions are required to be unanimously approved by all members.
Management and other fees earned by us are nominal and believed to be at market rates, and there
is no significant economic disproportionality between us and other members.
SUBSEQUENT EVENTS
In November 2020, we entered into a joint venture with an unrelated party to develop a for-rent
residential apartment project in Cambridge, Massachusetts. Prior to the formation of this venture,
we acquired the property and incurred approximately $60.1 million of land and land development
costs. Our partner acquired a 75% interest in this entity for approximately $49.2 million, of which
$44.0 million was distributed to us. Our initial investment is $16.4 million. Concurrent with its
formation, the joint venture entered into a $141.7 million construction loan agreement to finance the
62
TOLL BROTHERS 2020 Joint Venture Condensed Financial Information
The Condensed Balance Sheets, as of the dates indicated, and the Condensed Statements of Operations and Comprehensive Income, for the periods indicated, for the unconsolidated entities in which we
have an investment, aggregated by type of business, are included below (in thousands).
CONDENSED BALANCE SHEETS:
Cash and cash equivalents
Inventory
Loan receivables, net
Rental properties
Rental properties under development
Real estate owned
Other assets
Total assets
Debt, net of deferred financing costs
Other liabilities
Members’ equity
Noncontrolling interest
Total liabilities and equity
Company’s net investment in unconsolidated entities (1)
Cash and cash equivalents
Inventory
Loan receivables, net
Rental properties
Rental properties under development
Real estate owned
Other assets
Total assets
Debt, net of deferred financing costs
Other liabilities
Members’ equity
Noncontrolling interest
Total liabilities and equity
Company’s net investment in unconsolidated entities (1)
Land
Development
Joint Ventures
Home Building
Joint Ventures
Rental Property
Joint Ventures
Gibraltar Joint
Ventures
October 31, 2020
$
24,330 $
18,106 $
64,244 $
2,798 $
303,960
198,260
—
—
—
—
108,289
436,579 $
117,342 $
54,714
264,523
—
436,579 $
127,690 $
—
—
—
—
—
—
1,244,911
666,386
—
21,930
238,296 $
38,851
2,014,392 $
30,116 $
1,220,607 $
12,768
195,412
—
238,296 $
33,819 $
113,282
680,503
—
2,014,392 $
247,049 $
October 31, 2019
8,780
78,576
—
—
6,752
298
97,204 $
— $
6,053
90,735
416
97,204 $
22,143 $
23,669 $
38,115 $
20,647 $
3,388 $
247,866
313,991
—
—
—
—
—
—
—
—
—
—
1,021,848
535,197
—
96,602
78,916
368,137 $
431,022 $
36,879
1,614,571 $
88,050 $
132,606 $
1,006,201 $
49,302
230,785
—
33,959
264,457
—
84,735
523,635
—
368,137 $
110,306 $
431,022 $
1,614,571 $
60,512 $
174,292 $
17,369
56,545
—
—
12,267
364
89,933 $
— $
7,831
81,686
416
89,933 $
21,142 $
$
$
$
$
$
$
$
$
$
Total
109,478
511,000
78,576
1,244,911
666,386
6,752
169,368
2,786,471
1,368,065
186,817
1,231,173
416
2,786,471
430,701
85,819
579,226
56,545
1,021,848
535,197
12,267
212,761
2,503,663
1,226,857
175,827
1,100,563
416
2,503,663
366,252
(1) Differences between our net investment in unconsolidated entities and our underlying equity in the net assets of the entities amounted to $29.4 million and $30.9 million as of October 31, 2020 and 2019, respectively, and are
primarily a result of other than temporary impairments related to our investments in unconsolidated entities; interest capitalized on our investments; the estimated fair value of the guarantees provided to the joint ventures;
unrealized gains on our retained joint venture interests; gains recognized from the sale of our ownership interests; and distributions from entities in excess of the carrying amount of our net investment.
6 3
TOLL BROTHERS 2020 CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME:
For the year ended October 31, 2020
Land Development
Joint Ventures
Home Building
Joint Ventures
Rental Property
Joint Ventures
Gibraltar Joint
Ventures
Revenues
Cost of revenues
Other expenses
Total expenses
Gain on disposition of loans and REO
Income (loss) from operations
Other income (loss)
Income (loss) before income taxes
Income tax provision (benefit)
Net income (loss) including earnings from noncontrolling interests
Plus: income attributable to noncontrolling interest
Net income (loss) attributable to controlling interest
Company’s equity (deficit) in earnings of unconsolidated entities (2)
Revenues
Cost of revenues (3)
Other expenses (3)
Total expenses
Gain on disposition of loans and REO
Income (loss) from operations
Other income
Income (loss) before income taxes
Income tax provision
Net income (loss) including earnings from noncontrolling interests
Less: income attributable to noncontrolling interest
Net income (loss) attributable to controlling interest
Company’s equity (deficit) in earnings of unconsolidated entities (2)
Revenues
Cost of revenues (3)
Other expenses (3)
Total expenses
Gain on disposition of loans and REO
Income (loss) from operations
Other income
Income before income taxes
Income tax provision
Net income including earnings from noncontrolling interests
Less: income attributable to noncontrolling interest
Net income attributable to controlling interest
Company’s equity in earnings of unconsolidated entities (2)
$
$
$
$
$
$
$
$
$
87,174 $
64,810
2,948
67,758
—
19,416
3,061
22,477
188
22,289
—
22,289 $
11,412 $
261,677 $
246,980
4,752
251,732
—
9,945
3,079
13,024
193
12,831
—
12,831 $
6,160 $
351,397 $
317,103
9,385
326,488
—
24,909
5,939
30,848
86
30,762
—
30,762 $
3,392 $
139,587 $
124,899
15,731
140,630
—
(1,043)
536
(507)
(254)
(253)
—
(253) $
(3,424) $
111,122 $
37,770
117,419
155,189
—
(44,067)
(448)
(44,515)
—
(44,515)
—
(44,515) $
(9,389) $
For the year ended October 31, 2019
374,587 $
323,764
24,633
348,397
—
26,190
6,144
32,334
457
31,877
—
31,877 $
17,004 $
99,401 $
68,502
58,928
127,430
—
(28,029)
16,651
(11,378)
—
(11,378)
—
(11,378) $
(824) $
For the year ended October 31, 2018
148,002 $
109,357
11,742
121,099
—
26,903
2,134
29,037
767
28,270
—
28,270 $
14,069 $
121,276 $
74,946
61,502
136,448
—
(15,172)
222,744
207,572
—
207,572
—
207,572 $
62,204 $
26,781 $
15,762
1,505
17,267
1,053
10,567
—
10,567
—
10,567
48
10,615 $
2,349 $
21,377 $
13,234
1,880
15,114
4,383
10,646
12,793
23,439
—
23,439
(9,593)
13,846 $
2,528 $
19,592 $
17,817
3,201
21,018
53,192
51,766
1,937
53,703
—
53,703
(28,297)
25,406 $
5,575 $
Total
364,664
243,241
137,603
380,844
1,053
(15,127)
3,149
(11,978)
(66)
(11,912)
48
(11,864)
948
757,042
652,480
90,193
742,673
4,383
18,752
38,667
57,419
650
56,769
(9,593)
47,176
24,868
640,267
519,223
85,830
605,053
53,192
88,406
232,754
321,160
853
320,307
(28,297)
292,010
85,240
(2) Differences between our equity in earnings of unconsolidated entities and the underlying net income (loss) of the entities are primarily a result of distributions from entities in excess of the carrying amount of our investment; other
than temporary impairments related to our investments in unconsolidated entities; recoveries of previously incurred charges; unrealized gains on our retained joint venture interests; gained recognized from the sale of our investment
to our joint venture partner; and our share of the entities’ profits related to home sites purchased by us which reduces our cost basis of the home sites acquired.
(3) Effective October 31, 2020, we reclassified sales commissions paid to third-party brokers from home sales cost of revenues to selling, general and administrative expense. Prior year
periods have been reclassified to conform to the 2020 presentation.
6 4
TOLL BROTHERS 2020
5. RECEIVABLES, PREPAID EXPENSES, AND OTHER ASSETS
Receivables, prepaid expenses, and other assets at October 31, 2020 and 2019, consisted of the
following (amounts in thousands):
Expected recoveries from insurance carriers and others
$
79,269 $
2020
Improvement cost receivable
Escrow cash held by our captive title company
Properties held for rental apartment and commercial
development
Prepaid expenses
Right-of-use asset (1)
Other
86,116
24,712
542,796
28,104
105,004
90,293
$
956,294 $
2019
114,162
100,864
32,863
367,072
26,041
—
74,439
715,441
(1) On November 1, 2019, we adopted ASU 2016-02 which resulted in the establishment of a right-of-use (“ROU”)
asset on our Consolidated Balance Sheet as of October 31, 2020. The Consolidated Balance Sheet as of
October 31, 2019 does not reflect any changes resulting from the adoption of the new standard. See Note 1,
“Significant Accounting Policies – Recent Accounting Pronouncements” for additional information regarding
the adoption of ASU 2016-02.
See Note 7, “Accrued Expenses,” for additional information regarding the expected recoveries from
insurance carriers and others.
As of October 31, 2020 and 2019, properties held for rental apartment and commercial development
include $163.0 million and $145.8 million, respectively, of assets related to consolidated VIEs. See
Note 4, “Investments in Unconsolidated Entities” for additional information regarding VIEs.
6. L OANS PAYABLE, SENIOR NOTES, AND MORTGAGE
COMPANY LOAN FACILITY
Loans Payable
At October 31, 2020 and 2019, loans payable consisted of the following (amounts in thousands):
Senior unsecured term loan
Loans payable – other
Deferred issuance costs
2020
800,000 $
351,257
(3,302)
2019
800,000
314,577
(3,128)
1,147,955 $
1,111,449
$
$
Senior Unsecured Term Loan
At October 31, 2020, we had an $800.0 million, five-year senior unsecured term loan facility (the
“Term Loan Facility”) with a syndicate of banks. The Term Loan Facility provides an accordion feature
under which we may, subject to certain conditions set forth in the agreement, increase the Term
Loan Facility up to a maximum aggregate amount of $1.5 billion. On October 31, 2020, we entered
into term loan extension agreements with the banks which extended the maturity date of all $800.0
million of outstanding term loans under the Term Loan Facility from November 1, 2024 to November
1, 2025, with no payments being required before the maturity date.
Under the Term Loan Facility, as amended, we may select interest rates equal to (i) London Interbank
Offered Rate (“LIBOR”) plus an applicable margin, (ii) the base rate (as defined in the agreement)
plus an applicable margin, or (iii) the federal funds/Euro rate (as defined in the agreement) plus an
applicable margin, in each case, based on our leverage ratio. At October 31, 2020, the interest rate
on the Term Loan Facility was 1.46% per annum.
We and substantially all of our 100%-owned home building subsidiaries are guarantors under the
Term Loan Facility. The Term Loan Facility contains substantially the same financial covenants as the
Revolving Credit Facility, as described below.
Revolving Credit Facility
We have a $1.905 billion senior unsecured, five-year revolving credit facility (the “Revolving Credit
Facility”) with a syndicate of banks that was scheduled to expire on November 1, 2024. On October
31, 2020, we entered into extension letter agreements (the “Revolver Extension Agreements”) with
respect to the Revolving Credit Facility. In connection with the Revolver Extension Agreements, the
Company extended the maturity date of $1.850 billion of the revolving loans and commitments
under the Revolving Credit Agreement from November 1, 2024 to November 1, 2025, with the
remainder of the revolving loans and commitments continuing to terminate on November 1, 2024.
On October 31, 2019, we amended our Revolving Credit Facility to replace our then existing $1.295
billion revolving credit facility. Under the amended terms, up to 100% of the commitment is available
for letters of credit. The Revolving Credit Facility, as amended, has an accordion feature under which
we may, subject to certain conditions set forth in the agreement, increase the Revolving Credit
Facility up to a maximum aggregate amount of $2.5 billion. Prior to the amendment, the maximum
aggregate amount of the accordion feature was $2.0 billion. We may select interest rates for the
Revolving Credit Facility equal to (i) LIBOR plus an applicable margin or (ii) the lenders’ base rate
plus an applicable margin, which in each case is based on our credit rating and leverage ratio. At
October 31, 2020, the interest rate on outstanding borrowings under the Revolving Credit Facility
would have been 1.51% per annum. We are obligated to pay an undrawn commitment fee that is
based on the average daily unused amount of the Aggregate Credit Commitment and our credit
ratings and leverage ratio. Any proceeds from borrowings under the Revolving Credit Facility may
be used for general corporate purposes. We and substantially all of our 100%-owned home building
subsidiaries are guarantors under the Revolving Credit Facility.
Under the terms of the Revolving Credit Facility, at October 31, 2020, our maximum leverage ratio
(as defined in the credit agreement) may not exceed 1.75 to 1.00, and we are required to maintain a
minimum tangible net worth (as defined in the credit agreement) of no less than approximately
$2.25 billion. Under the terms of the Revolving Credit Facility, at October 31, 2020, our leverage ratio
was approximately 0.49 to 1.00 and our tangible net worth was approximately $4.81 billion. Based
upon the limitations related to our repurchase of common stock in the Revolving Credit Facility, our
ability to repurchase our common stock was limited to approximately $3.18 billion as of October 31,
2020. In addition, under the provisions of the Revolving Credit Facility, our ability to pay cash
dividends was limited to approximately $2.56 billion as of October 31, 2020.
At October 31, 2020, we had no outstanding borrowings under the Revolving Credit Facility and had
outstanding letters of credit of approximately $119.0 million.
Loans Payable – Other
“Loans payable – other” primarily represent purchase money mortgages on properties we acquired
that the seller had financed and various revenue bonds that were issued by government entities on
our behalf to finance community infrastructure and our manufacturing facilities.Information
regarding our loans payable at October 31, 2020 and 2019, is included in the table below ($ amounts
in thousands):
6 5
TOLL BROTHERS 2020
Aggregate loans payable at October 31
$
351,257 $
2020
2019
314,577
4.49%
4.30%
0.20% – 7.00%
1.26% – 7.00%
Weighted-average interest rate
Interest rate range
Loans secured by assets
Carrying value of loans secured by assets
Carrying value of assets securing loans
$
$
351,257 $
947,989 $
314,577
850,381
The contractual maturities of “Loans payable – other” as of October 31, 2020, ranged from one
month to 30 years.
Senior Notes
At October 31, 2020 and 2019, senior notes consisted of the following (amounts in thousands):
5.875% Senior Notes due February 15, 2022
$
4.375% Senior Notes due April 15, 2023
5.625% Senior Notes due January 15, 2024
4.875% Senior Notes due November 15, 2025
4.875% Senior Notes due March 15, 2027
4.35% Senior Notes due February 15, 2028
3.80% Senior Notes due November 1, 2029
Bond discounts, premiums, and deferred issuance
costs, net
2020
419,876
400,000
250,000
350,000
450,000
400,000
400,000
2019
419,876
400,000
250,000
350,000
450,000
400,000
400,000
(8,158)
(9,987)
$
2,661,718 $
2,659,898
The senior notes are the unsecured obligations of Toll Brothers Finance Corp., our 100%-owned
subsidiary. The payment of principal and interest is fully and unconditionally guaranteed, jointly and
severally, by us and substantially all of our 100%- owned home building subsidiaries (together with
Toll Brothers Finance Corp., the “Senior Note Parties”). The senior notes rank equally in right of
payment with all the Senior Note Parties’ existing and future unsecured senior indebtedness,
including the Revolving Credit Facility and the Term Loan Facility. The senior notes are structurally
subordinated to the prior claims of creditors, including trade creditors, of our subsidiaries that are
not guarantors of the senior notes. Each series of senior notes is redeemable in whole or in part at
any time at our option, at prices that vary based upon the then-current rates of interest and the
remaining original term of the senior notes to be redeemed.
On October 31, 2019, we redeemed, prior to maturity, the $250.0 million of then-outstanding
principal amount of 6.75% Senior Notes due November 1, 2019, at par, plus accrued interest.
In September 2019, we issued $400.0 million aggregate principal amount of 3.80% Senior Notes due
2029. The Company received $396.4 million of net proceeds from the issuance of these senior notes.
On November 30, 2018, we redeemed, prior to maturity, the $350.0 million of then-outstanding
principal amount of 4.00% Senior Notes due December 31, 2018, at par, plus accrued interest.
In January 2018, we issued $400.0 million aggregate principal amount of 4.350% Senior Notes due
2028. The Company received $396.4 million of net proceeds from the issuance of these senior notes.
6 6
Mortgage Company Loan Facility
In October 2017, TBI Mortgage® Company (“TBI Mortgage”), our wholly owned mortgage subsidiary,
entered into a mortgage warehousing agreement (“Warehousing Agreement”) with a bank to
finance the origination of mortgage loans by TBI Mortgage. The Warehousing Agreement is
accounted for as a secured borrowing under ASC 860, “Transfers and Servicing.” In December 2018,
the Warehousing Agreement was amended to provide for loan purchases up to $75.0 million, subject
to certain sublimits. In addition, the Warehousing Agreement, as amended, provides for an accordion
feature under which TBI Mortgage may request that the aggregate commitments under the
Warehousing Agreement be increased to an amount up to $150.0 million for a short period of time.
In December 2019, the Warehousing Agreement was amended to extend the expiration date on
substantially the same terms as the existing agreement. The Warehousing Agreement, as amended,
expires on December 4, 2020, and borrowings thereunder bear interest at LIBOR plus 1.90% per
annum. At October 31, 2020, the interest rate on the Warehousing Agreement was 2.04% per annum.
In addition, we are subject to an under usage fee based on outstanding balances, as defined in the
Warehousing Agreement. Borrowings under this facility are included in the fiscal 2021 maturities.
At each of October 31, 2020 and 2019, there was $148.6 million and $150.0 million, respectively,
outstanding under the Warehousing Agreement, which are included in liabilities in our Consolidated
Balance Sheets. At October 31, 2020 and 2019, amounts outstanding under the agreement were
collateralized by $219.4 million and $208.6 million, respectively, of mortgage loans held for sale,
which are included in assets in our Consolidated Balance Sheets. As of October 31, 2020, there were
no aggregate outstanding purchase price limitations reducing the amount available to TBI Mortgage.
There are several restrictions on purchased loans under the agreement, including that they cannot
be sold to others, they cannot be pledged to anyone other than the agent, and they cannot support
any other borrowing or repurchase agreements.
SUBSEQUENT EVENTS
In November 2020, we entered into five interest rate swap transactions to hedge $400.0 million of
the Term Loan Facility through October 2025. The interest rate swaps effectively fix the interest cost
on the $400.0 million at 0.369% plus the spread set forth in the pricing schedule in the Term Loan
Facility, which was 1.3% as of October 31, 2020 These interest rate swaps were designated as cash
flow hedges.
In December 2020, TBI Mortgage amended the Warehousing Agreement to extend the expiration
date to January 18, 2021 on substantially the same terms as the existing agreement.
General
As of October 31, 2020, the annual aggregate maturities of our loans and notes during each of the
next five fiscal years are as follows (amounts in thousands):
2021
2022
2023
2024
2025
Amount
260,635
453,134
452,691
306,070
59,151
$
$
$
$
$
TOLL BROTHERS 2020
repairs that have been performed in each community; the estimated costs to remediate pending and
future claims; the expected recovery from our insurance carriers and suppliers; and the previously
recorded amounts related to these claims. We also monitor legal developments relating to these
types of claims and review the volume, relative merits and adjudication of claims in litigation
or arbitration.
From October 31, 2016 through the second quarter of fiscal 2020, our recorded aggregate estimated
repair costs to be incurred for known and unknown water intrusion claims was $324.4 million and
our recorded aggregate expected recoveries from
insurance carriers and suppliers were
approximately $152.6 million. Based on trends in claims experience over several years and lower than
anticipated repair costs, in the second fiscal quarter of 2020, we reduced the estimate of the
aggregate estimated repair costs to be incurred for known and unknown water intrusion claims by
$24.4 million. Because this reduction was associated with periods in which we expect our insurance
deductibles and self-insured retentions to be exhausted, we reduced our aggregate expected
recoveries from insurance carriers and suppliers by a corresponding $24.4 million. Our recorded
remaining estimated repair costs, which reflects a reduction for the aggregate amount expended to
resolve claims, were approximately $79.5 million at October 31, 2020 and $124.6 million at October
31, 2019. Our recorded remaining expected recoveries from insurance carriers and suppliers were
approximately $68.4 million at October 31, 2020 and $97.9 million at October 31, 2019.
As noted above, our review process includes a number of estimates that are based on assumptions
with uncertain outcomes, including, but not limited to, the number of homes to be repaired, the
extent of repairs needed, the repair procedures employed, the cost of those repairs, outcomes of
litigation or arbitrations, and expected recoveries from insurance carriers and suppliers. Due to the
degree of judgment required in making these estimates and the inherent uncertainty in potential
outcomes, it is reasonably possible that our actual costs and recoveries could differ from those
recorded and such differences could be material. In addition, due to such uncertainty, we are unable
to estimate the range of any such differences. With respect to our insurance receivables, disputes
between homebuilders and carriers over coverage positions relating to construction defect claims
are common, and resolution of claims with carriers involves the exchange of significant amounts of
information and frequently involves legal action. While our primary insurance carrier has funded
substantially all of the water intrusion claims that we have submitted to it to date, other insurance
carriers have disputed coverage for the same claims under policies that are substantially the same.
As a result, we entered arbitration proceedings during the third quarter of fiscal 2019 with these
carriers. Based on the legal merits that support our pending insurance claims, review by legal
counsel, our history of collecting significant amounts funded by our primary carrier under policies
that are substantially the same, and the high credit ratings of our insurance carriers, we believe
collection of our remaining recorded insurance receivables is probable. However, due to the
complexity of the underlying claims and the variability of the other factors described above, it is
reasonably possible that our actual insurance recoveries could materially differ from those recorded.
Resolution of these known and unknown claims is expected to take several years.
7. ACCRUED EXPENSES
Accrued expenses at October 31, 2020 and 2019, consisted of the following (amounts in thousands):
Land, land development and construction
$
233,783 $
2020
Compensation and employee benefits
Escrow liability
Self-insurance
Warranty
Lease liabilities (1)
Deferred income
Interest
Commitments to unconsolidated entities
Other
219,965
23,067
215,884
157,351
124,756
34,096
38,446
8,928
53,920
2019
192,658
183,592
31,587
193,405
201,886
—
51,678
31,307
9,283
55,536
$
1,110,196 $
950,932
(1) On November 1, 2019, we adopted ASU 2016-02, which resulted in the establishment of lease liabilities on our
Consolidated Balance Sheet as of October 31, 2020. The Consolidated Balance Sheet as of October 31, 2019
does not reflect any changes resulting from the adoption of the new standard. See Note 1, “Significant
Accounting Policies – Recent Accounting Pronouncements” for additional information regarding the adoption
of ASU 2016-02.
At the time each home is closed and title and possession are transferred to the home buyer, we
record an initial accrual for expected warranty costs on that home. Our initial accrual for expected
warranty costs is based upon historical warranty claim experience. Adjustments to our warranty
liabilities related to homes delivered in prior periods are recorded in the period in which a change in
our estimate occurs. The table below provides a reconciliation of the changes in our warranty accrual
during fiscal 2020, 2019, and 2018 (amounts in thousands):
Balance, beginning of year
$
201,886 $
258,831 $
2020
2019
Additions – homes closed during
the year
Addition – liabilities acquired
Increase in accruals for homes
closed in prior years
Decrease to water intrusion
accrual
Charges incurred
Balance, end of year
36,103
190
6,711
(24,400)
(63,139)
35,475
855
6,023
—
(99,298)
$
157,351 $
201,886 $
2018
329,278
37,045
—
6,162
—
(113,654)
258,831
Since fiscal 2014, we have received water intrusion claims from owners of homes built since 2002 in
communities located in Pennsylvania and Delaware (which are in our North region). During fiscal
2020, we continued to receive water intrusion claims from homeowners in this region, mostly related
to older homes, and we continue to perform review procedures to assess, among other things, the
number of affected homes, whether repairs are likely to be required, and the extent of such repairs.
Our review process, conducted quarterly, includes an analysis of many factors applicable to these
communities to determine whether a claim is likely to be received and the estimated costs to resolve
any such claim, including: the closing dates of the homes; the number of claims received; our
inspection of homes; an estimate of the number of homes we expect to repair; the type and cost of
6 7
TOLL BROTHERS 2020 8. INCOME TAXES
The following table provides a reconciliation of our effective tax rate from the federal statutory tax
rate for the fiscal years ended October 31, 2020, 2019, and 2018 ($ amounts in thousands):
The following table provides information regarding the provision (benefit) for income taxes for each
of the fiscal years ended October 31, 2020, 2019, and 2018 (amounts in thousands):
Other permanent differences
4,755
—
—
0.8
—
4,866
—
0.6
(18,168)
(2,322)
(1.9)
(0.2)
The components of income taxes payable at October 31, 2020 and 2019 are set forth below (amounts
in thousands):
2020
%*
$
2019
%*
$
2018
%*
$
123,249
21.0
165,306
21.0
217,914
23.3
25,793
4.4
37,898
4.8
47,073
5.0
Federal
State
Current
Deferred
(1,749)
(0.3)
(5,348)
(0.7)
(4,741)
(0.5)
Current
Deferred
404
0.1
453
—
—
—
—
2,153
(523)
0.1
0.3
1,122
(0.1)
(38,740)
737
0.1
Federal tax provision at
statutory rate
State tax provision, net of
federal benefit
Domestic production
activities deduction
Reversal of accrual for
uncertain tax positions
Accrued interest on
anticipated tax assessments
Increase in unrecognized tax
benefits
Changes in tax law
Excess stock compensation
benefit
Energy tax credits
Other
0.1
(4.1)
(0.5)
(0.4)
(1.0)
19.9
(3,339)
(11,467)
2,631
(0.6)
(2.0)
0.5
(2,143)
(3,123)
(2,376)
(0.3)
(0.4)
(0.3)
(4,236)
(3,231)
(9,643)
Income tax provision*
140,277
23.9
197,163
25.0
185,765
*Due to rounding, percentages may not add.
On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law, which
changed many longstanding foreign and domestic corporate and individual tax rules, as well as rules
pertaining to the deductibility of employee compensation and benefits. The Tax Act, among other
changes, reduced the corporate income tax rate from 35% to 21% and repealed the domestic
production activities deduction effective for tax years beginning after December 31, 2017. For
companies with a fiscal year that does not end on December 31, the change in law requires the
application of a blended tax rate for the year of the change. Our blended tax rate for our fiscal year
ending October 31, 2018 was 23.3%. Thereafter, the applicable statutory rate is 21%. ASC 740, “Income
Taxes” (“ASC 740”), requires all companies to reflect the effects of the new law in the period in which
the law was enacted. Accordingly, we reduced the statutory tax rate applied to earnings from 35% in
fiscal 2017 to 23.3% in fiscal 2018 and to 21% in fiscal 2019. In addition, we remeasured our net
deferred tax liability for the tax law change, which resulted in an income tax benefit of $35.5 million
in fiscal 2018.
We are subject to state tax in the jurisdictions in which we operate. We estimate our state tax liability
based upon the individual taxing authorities’ regulations, estimates of income by taxing jurisdiction,
and our ability to utilize certain tax-saving strategies. Based on our estimate of the allocation of
income or loss among the various taxing jurisdictions and changes in tax regulations and their
impact on our tax strategies, we estimated that our rate for state income taxes, before federal
benefit, will be 5.6% in fiscal 2020. Our state income tax rate, before federal benefit, was 6.1% and
6.6% in fiscal 2019 and 2018, respectively.
6 8
2020
2019
114,204 $
161,904 $
26,073
140,277 $
42,497 $
97,780
35,259
197,163 $
94,399 $
102,764
140,277 $
197,163 $
2018
157,836
27,929
185,765
207,695
(21,930)
185,765
$
$
$
$
2020
6,591 $
192,383
198,974 $
2019
7,897
95,074
102,971
$
$
The following table provides a reconciliation of the change in the unrecognized tax benefits for the
years ended October 31, 2020, 2019, and 2018 (amounts in thousands):
Balance, beginning of year
$
Increase in benefit as a result of
tax positions taken in prior years
Increase in benefit as a result of tax
positions taken in current year
Decrease in benefit as a result of
settlements
Decrease in benefit as a result of
lapse of statute of limitations
Balance, end of year
$
2020
7,897 $
2019
12,222 $
512
306
2,148
1,126
2018
16,993
2,140
949
(2,670)
(4,707)
(2,124)
6,591 $
(4,929)
7,897 $
(3,153)
12,222
The statute of limitations has expired on our federal tax returns for fiscal years through 2016. The
statue of limitations for our major state tax jurisdictions remains open for examination for fiscal year
2015 and subsequent years.
Our unrecognized tax benefits are included in the current portion of “Income taxes payable” on our
Consolidated Balance Sheets. If these unrecognized tax benefits reverse in the future, they would
have a beneficial impact on our effective tax rate at that time. During the next 12 months, it is
reasonably possible that the amount of unrecognized tax benefits will change, but we are not able
to provide a range of such change. The anticipated changes will be principally due to the expiration
of tax statutes, settlements with taxing jurisdictions, increases due to new tax positions taken, and
the accrual of estimated interest and penalties.
The amounts accrued for interest and penalties are included in the current portion of “Income taxes
payable” on our Consolidated Balance Sheets. The following table provides information as to the
amounts recognized in our tax provision, before reduction for applicable taxes and reversal of
TOLL BROTHERS 2020 previously accrued interest and penalties, of potential interest and penalties in the fiscal years ended
October 31, 2020, 2019, and 2018, and the amounts accrued for potential interest and penalties at
October 31, 2020 and 2019 (amounts in thousands):
Expense recognized in the Consolidated Statements of Operations
and Comprehensive Income
Fiscal year
2020
2019
2018
Accrued at:
October 31, 2020
October 31, 2019
$
$
$
$
$
512
593
1,152
1,270
1,169
The components of net deferred tax assets and liabilities at October 31, 2020 and 2019 are set forth
below (amounts in thousands):
Deferred tax assets:
Accrued expenses
Impairment charges
Inventory valuation differences
Stock-based compensation expense
Amounts related to unrecognized tax benefits
State tax, net operating loss carryforwards
Other
Total assets
Deferred tax liabilities:
Capitalized interest
Deferred income
Expenses taken for tax purposes not for book
Depreciation
Deferred marketing
Total liabilities
Net deferred tax liabilities
2020
2019
$
57,089 $
42,956
48,276
19,905
319
68,705
1,830
54,162
43,583
55,313
23,928
311
67,718
18
37,697
351,589
5,346
23,567
13,264
431,463
(192,383)
44,196
277,005
3,571
5,024
10,311
340,107
(95,074)
In accordance with GAAP, we assess whether a valuation allowance should be established based on our
determination of whether it is more-likely-than-not that some portion or all of the deferred tax assets
would not be realized. At October 31, 2020 and 2019, we determined that it was more-likely-than-not
that our deferred tax assets would be realized. Accordingly, at October 31, 2020 and 2019, we did not
have valuation allowances recorded against our federal or state deferred tax assets.
We file tax returns in the various states in which we do business. Each state has its own statutes
regarding the use of tax loss carryforwards. Some of the states in which we do business do not allow
for the carryforward of losses, while others allow for carryforwards for 5 years to 20 years.
9. STOCKHOLDERS’ EQUITY
Our authorized capital stock consists of 400 million shares of common stock, $0.01 par value per
share (“common stock”), and 15 million shares of preferred stock, $0.01 par value per share. At
October 31, 2020, we had 126.5 million shares of common stock issued and outstanding, 5.1 million
shares of common stock reserved for outstanding stock options and restricted stock units, 6.7 million
shares of common stock reserved for future stock option and award issuances, and 352,000 shares
of common stock reserved for issuance under our employee stock purchase plan. As of October 31,
2020, no shares of preferred stock have been issued.
Cash Dividends
On February 21, 2017, our Board of Directors approved the initiation of quarterly cash dividends to
shareholders. During the fiscal years ended October 31, 2020 and 2019, we declared and paid
aggregate cash dividends of $0.44 and $0.44 per share, respectively, to our shareholders.
Stock Repurchase Program
In each year since fiscal 2017, our Board of Directors has renewed its authorization to repurchase up
to 20 million shares of our common stock in open market transactions, privately negotiated
transactions (including accelerated share repurchases), issuer tender offers or other financial
arrangements or transactions for general corporate purposes, including to obtain shares for the
Company’s equity award and other employee benefit plans. Most recently, on March 10, 2020, our
Board of Directors authorized the repurchase of 20 million shares of our common stock and
terminated, effective the same date, the existing authorization that had been in effect since December
11, 2019. The Board of Directors did not fix any expiration date for this repurchase program.
The following table provides information about the share repurchase programs for the fiscal years
ended October 31, 2020, 2019, and 2018:
Remaining authorization
at October 31 (in thousands)
19,984
13,953
10,989
Subsequent to October 31, 2020 and through December 21, 2020, we repurchased approximately 2.4
million shares of our common stock at an average price of $45.04 per share, substantially all of
which were purchased under the repurchase program authorized by our Board of Directors on
March 10, 2020.
Transfer Restriction
On March 17, 2010, our Board of Directors adopted a Certificate of Amendment to the Second
Restated Certificate of Incorporation of the Company (the “Certificate of Amendment”). The
Certificate of Amendment includes an amendment approved by our stockholders at the 2010 Annual
Meeting of Stockholders that restricts certain transfers of our common stock. The Certificate of
Amendment’s transfer restrictions generally restrict any direct or indirect transfer of our common
stock if the effect would be to increase the direct or indirect ownership of any Person (as defined in
the Certificate of Amendment) from less than 4.95% to 4.95% or more of our common stock or
increase the ownership percentage of a Person owning or deemed to own 4.95% or more of our
common stock. Any direct or indirect transfer attempted in violation of this restriction would be void
as of the date of the prohibited transfer as to the purported transferee.
6 9
239,080
245,033
Average price per share
$
39.75 $
35.28 $
Number of shares purchased
(in thousands)
2020
15,952
2019
6,619
2018
12,108
41.56
TOLL BROTHERS 2020 10. STOCK-BASED BENEFIT PLANS
We grant stock options, restricted stock, and various types of restricted stock units to our employees
and our non-employee directors under our stock incentive plans. On March 12, 2019, shareholders
approved the Toll Brothers, Inc. 2019 Omnibus Incentive Plan (the “Omnibus Plan”), which, succeeded
the Toll Brothers, Inc. Stock Incentive Plan for Employees (2014) and the Toll Brothers, Inc. Stock
Incentive Plan for Non-Executive Directors (2016) with respect to prospective equity awards, and no
additional equity awards may be granted under such prior plans. As a result, the Omnibus Plan is the
sole plan out of which new equity awards may be granted to employees (including executive
officers), directors and other eligible participants under the plan. The Omnibus Plan provides for the
granting of incentive stock options (solely to employees) and nonqualified stock options with a term
of up to 10 years at a price not less than the market price of the stock at the date of grant. The
Omnibus Plan also provide for the issuance of stock appreciation rights and restricted and
unrestricted stock awards and stock units, which may be performance-based. At October 31, 2020,
2019, and 2018, we had 6.7 million; 7.7 million; and 5.1 million shares, respectively, available for grant
under the plans.
Prior to the adoption of the Omnibus Plan, the Company had granted equity awards under four
separate stock incentive plans for employees, officers, and directors with respect to which equity
awards remained outstanding as of October 31, 2020. No additional equity awards may be granted
under these plans. Stock options granted under these plans were made with a term of up to 10 years
at a price not less than the market price of the stock at the date of grant. Stock options and restricted
stock units granted under these plans generally vested over a four-year period for employees and a
two-year period for non-employee directors.
The following table provides information regarding the amount of total stock-based compensation
expense recognized by us for fiscal 2020, 2019, and 2018 (amounts in thousands):
Total stock-based compensation
expense recognized
Income tax benefit recognized
$
$
2020
2019
24,326 $
6,227 $
26,180 $
6,749 $
2018
28,312
7,902
At October 31, 2020, 2019, and 2018, the aggregate unamortized value of outstanding stock-based
compensation awards was approximately $15.9 million, $18.7 million, and $20.9 million, respectively.
Information about our more significant stock-based compensation programs is outlined below.
Stock Options:
Stock options granted to employees generally vest over a four-year period, although certain grants
may vest over a longer or shorter period. Stock options granted to non-employee directors generally
vest over a two-year period. Shares issued upon the exercise of a stock option are either from shares
held in treasury or newly issued shares.
The fair value of each option award is estimated on the date of grant using a lattice-based option
valuation model that uses ranges of assumptions noted in the following table. Expected volatilities
were based on implied volatilities from traded options on our stock, historical volatility of our stock,
and other factors. The expected lives of options granted were derived from the historical exercise
patterns and anticipated future patterns and represent the period of time that options granted are
expected to be outstanding. The ranges set forth below result from certain groups of employees
exhibiting different behaviors. The risk-free rate for periods within the expected life of the option is
based on the U.S. Treasury yield curve in effect at the time of grant.
The following table summarizes the weighted-average assumptions and fair value used for stock
option grants in each of the fiscal years ended October 31, 2020, 2019, and 2018:
Expected volatility
27.42% – 28.30%
28.61% – 31.34%
27.66% – 31.83%
Weighted-average volatility
27.42%
30.46%
30.33%
2020
2019
2018
Risk-free interest rate
Expected life (years)
Dividends
Weighted-average fair value per
share of options granted
1.72% – 1.78%
2.65% – 2.76%
2.17% – 2.35%
4.64 – 5.76
4.63 – 8.50
5.00 – 8.50
1.11%
1.36%
none
$
9.68 $
10.22 $
16.09
The fair value of stock option grants is recognized evenly over the vesting period of the options or
over the period between the grant date and the time the option becomes nonforfeitable by the
employee, whichever is shorter. Information regarding the stock compensation expense related to
stock options for fiscal 2020, 2019 and 2018 was as follows (amounts in thousands):
Stock compensation expense
recognized – options
$
3,144 $
5,181 $
2020
2019
2018
7,497
At October 31, 2020, total compensation cost related to nonvested stock option awards not yet
recognized was approximately $2.5 million, and the weighted-average period over which we expect
to recognize such compensation costs was approximately 1.1 years.
The following table summarizes stock option activity for our plans during each of the fiscal years
ended October 31, 2020, 2019, and 2018 (amounts in thousands, except per share amounts):
2020
Weighted-
average
exercise
price
2019
Weighted-
average
exercise
price
2018
Weighted-
average
exercise
price
Number
of options
Number
of options
Number
of options
Balance, beginning
4,780 $
30.59
5,503 $
Granted
Exercised
Canceled
118
(1,284)
(54)
Balance, ending
3,560 $
39.51
24.50
33.83
33.03
344
(1,044)
(23)
4,780 $
28.84
32.42
21.87
34.47
30.59
6,120 $
27.60
210
(797)
(30)
47.84
24.16
33.08
5,503 $
28.84
Options exercisable,
at October 31,
2,969 $
32.38
3,799 $
29.52
4,231 $
27.03
The weighted average remaining contractual life (in years) for options outstanding and exercisable
at October 31, 2020, was 4.7 and 4.1, respectively.
The intrinsic value of options outstanding and exercisable is the difference between the fair market
value of our common stock on the applicable date (“Measurement Value”) and the exercise price of
those options that had an exercise price that was less than the Measurement Value. The intrinsic
value of options exercised is the difference between the fair market value of our common stock on
the date of exercise and the exercise price.
70
TOLL BROTHERS 2020 The following table provides information pertaining to the intrinsic value of options outstanding and
exercisable at October 31, 2020, 2019, and 2018 (amounts in thousands):
Intrinsic value of options outstanding $
Intrinsic value of options exercisable $
2020
34,058 $
29,961 $
2019
45,551 $
39,350 $
2018
30,477
29,010
Information pertaining to the intrinsic value of options exercised and the fair market value of options
that became vested or modified in each of the fiscal years ended October 31, 2020, 2019, and 2018,
is provided below (amounts in thousands):
Intrinsic value of options exercised
Fair market value of options vested
$
$
2020
23,281 $
5,926 $
2019
16,491 $
7,723 $
2018
18,165
10,007
Our stock option plans permit optionees to exercise stock options using a “net exercise” method at
the discretion of the Executive Compensation Committee of the Board of Directors (“Executive
Compensation Committee”). In a net exercise, we withhold from the total number of shares that
otherwise would be issued to an optionee upon exercise of the stock option that number of shares
having a fair market value at the time of exercise equal to the option exercise price and applicable
minimum income tax withholdings and remit the remaining shares to the optionee. In fiscal 2018, the
net exercise method was not utilized to exercise options.
The following table provides information regarding the use of the net exercise method for fiscal
2020 and 2019:
Options exercised
Shares withheld
Shares issued
2020
100,000
65,487
34,513
2019
33,250
21,842
11,408
Average fair market value per share withheld
Aggregate fair market value of shares withheld
(in thousands)
$
$
43.11 $
33.03
2,823 $
721
Performance-Based Restricted Stock Units:
In fiscal 2020, 2019, and 2018, the Executive Compensation Committee approved awards of
performance-based restricted stock units (“Performance-Based RSUs”) relating to shares of our
common stock to certain members of our senior management. The number of shares earned for
Performance-Based RSUs are based on the attainment of certain operational performance metrics
approved by the Executive Compensation Committee in the year of grant. The number of shares
underlying the Performance-Based RSUs that may be issued to the recipients ranges from, 0% to
150% for grants awarded in fiscal 2020 and 2019 and 0% to 110% for grants awarded in fiscal 2018,
of the base award depending on actual achievement as compared to the target performance goals.
Shares earned based on actual performance generally vest pro-rata over a four-year period provided
the recipients continue to be employed by us as specified in the award document.
The value of the Performance-Based RSUs was determined to be equal to the estimated number of
shares of our common stock to be issued multiplied by the closing price of our common stock on the
New York Stock Exchange (“NYSE”) on the date the Performance-Based RSU awards were approved
by the Executive Compensation Committee (“Valuation Date”), adjusted for post-vesting restrictions
applicable to retirement eligible participants. We evaluate the performance goals quarterly and
estimate the number of shares underlying the Performance-Based RSUs that are probable of being
issued. The following table provides information regarding the issuance, valuation assumptions, and
amortization of the Performance-Based RSUs issued in fiscal 2020, 2019, and 2018:
2013
2020
2019
2018
Number of shares underlying
Performance-Based RSUs to
be issued
Aggregate number of
Performance-Based RSUs
outstanding at October 31
Weighted-average fair value per
share of Performance-Based RSUs $
Aggregate grant date fair value of
Performance-Based RSUs issued
(in thousands)
$
Performance-Based RSU expense
recognized (in thousands)
Unamortized value of
Performance-Based RSUs at
October 31 (in thousands)
$
$
116,423
158,721
135,554
579,115
645,538
786,857
32.55 $
34.86 $
47.84
3,790 $
5,533 $
5,986 $
5,514 $
6,485
6,949
1,674 $
3,431 $
3,824
Shares earned with respect to Performance-Based RSUs issued in December 2013, 2014, and 2015 were
delivered in fiscal 2018, 2019, and 2020, respectively. The recipients of these Performance-Based RSUs
elected to use a portion of the shares underlying the Performance-Based RSUs to pay the required
income withholding taxes on the payout. In fiscal 2020, the gross value of the payout was $7.2 million
(182,846 shares), the minimum income tax withholding was $3.0 million (75,206 shares) and the net
value of the shares delivered was $4.3 million (107,640 shares). In fiscal 2019, the gross value of the
payout was $9.7 million (300,040 shares), the minimum income tax withholding was $4.0 million
(123,409 shares) and the net value of the shares delivered was $5.7 million (176,631 shares). In fiscal 2018,
the gross value of the payout was $13.7 million (288,814 shares), the minimum income tax withholding
was $6.0 million (126,330 shares) and the net value of the shares delivered was $7.7 million
(162,484 shares).
Total Shareholder Return Restricted Stock Units:
In fiscal 2020, 2019, and 2018, the Executive Compensation Committee approved awards of relative total
shareholder return performance-based restricted stock units (“TSR RSUs”) relating to 37,527, 48,710 and
39,411 target shares, respectively, of our common stock to certain members of our senior management.
Shares underlying the TSR RSUs granted are earned by comparing our total shareholder return during
specified performance periods to the total shareholder returns of companies in a performance peer
group as defined in the award document. The specified performance periods are as follows:
Performance Period Target Number of TSR RSUs issued
Fiscal 2020
November 1, 2019 to October 31, 2022
Fiscal 2019
November 1, 2018 to October 31, 2021
Fiscal 2018
November 1, 2017 to October 31, 2020
37,527
48,710
39,411
The TSR RSUs generally vest at the end of a 3-year period provided the recipients continue to be
7 1
TOLL BROTHERS 2020
employed by us as specified in the award document. Based upon our ranking in the performance peer
group, the recipient of the TSR RSUs may earn a total award ranging from 0% to 150% for awards
granted in fiscal 2020 and 2019 and 0% to 200% for awards granted in fiscal 2018, of the target
number of TSR RSUs granted. In fiscal 2020, recipients of the fiscal 2018 TSR RSUs earned 0% of the
target based on total shareholder return ranking in the performance peer group during the three-year
period ending October 31, 2020. In fiscal 2019, recipients of the fiscal 2017 TSR RSUs earned 0% of
the target based on total shareholder return ranking in the performance peer group during the three-
year period ending October 31, 2019. In fiscal 2018, recipients earned 76.81% of the 52,679 target TSR
RSUs awarded in fiscal 2016 based upon our total shareholder return ranking in the performance peer
group during the three-year period ended October 31, 2018.
We estimated the fair value of the TSR RSUs at the grant date using a Monte Carlo simulation. The
following table summarizes the assumptions used in the Monte Carlo simulation and the fair value per
share of the TSR RSUs granted in fiscal 2020, 2019, and 2018:
RSUs were awarded, adjusted for post-vesting restrictions applicable to retirement eligible
participants. The following table provides information regarding these Time-Based RSUs for fiscal
2020, 2019, and 2018:
2020
2019
2018
Time-Based RSUs issued:
Number of Time-Based RSUs
issued
Weighted-average fair value
per share of Time-Based RSUs
461,280
449,380
296,790
$
37.43 $
33.04 $
47.84
Aggregate fair value of Time-
Based RSUs issued (in thousands) $
17,267 $
14,848 $
14,198
Weighted-average volatility
Risk-free interest rate
Dividends
Weighted-average fair value per
share of TSR RSUs
2020
27.96%
1.66%
none
2019
29.06%
2.64%
none
2018
26.58%
1.92%
none
Time-Based RSU
expense recognized
(in thousands)
$
37.66 $
36.46 $
52.62
At October 31:
$
12,744 $
13,627 $
11,193
2020
2019
2018
The length of each performance period was used as the expected term in the simulation for each
respective tranche.
The following table provides information on expense recognized and the unamortized value of our
TSR RSUs for fiscal 2020, 2019, and 2018 (amounts in thousands):
TSR RSUs expense recognized
Unamortized value of TSR RSUs
at October 31
$
$
2020
2,264 $
2019
1,673 $
2018
2,502
716 $
1,875 $
1,773
Our stock incentive plans permit us to withhold from the total number of shares that otherwise
would be issued to a TSR RSU recipient upon distribution that number of shares having a fair value
at the time of distribution equal to the applicable income tax withholdings due and remit the
remaining shares to the restricted stock unit recipient. The following table provides information
regarding the number of shares withheld, the income tax withholding due, and the remaining shares
issued to the recipients for fiscal 2019:
Number of shares withheld
Income tax withholdings due
Remaining shares issued to the recipients
2019
16,643
537,902
23,817
$
Time-Based Restricted Stock Units:
In fiscal 2020, 2019, and 2018, we issued time-based restricted stock units (“Time-Based RSUs”) to
various officers, employees, and non-employee directors. These Time-Based RSUs generally vest in
annual installments over a two- to four-year period. The value of the Time-Based RSUs was
determined to be equal to the number of shares of our common stock underlying the Time-Based
RSUs multiplied by the closing price of our common stock on the NYSE on the date the Time- Based
7 2
Aggregate number of Time-Based
RSUs outstanding
Cumulative unamortized value
of Time-Based RSUs
(in thousands)
1,315,371
1,137,936
850,853
$
10,972 $
8,694 $
8,818
Our stock incentive plans permit us to withhold from the total number of shares that otherwise
would be issued to a restricted stock unit recipient upon distribution that number of shares having
a fair value at the time of distribution equal to the applicable income tax withholdings due and remit
the remaining shares to the restricted stock unit recipient. The following table provides information
regarding the number of shares withheld, the income tax withholding due, and the remaining shares
issued to the recipients for fiscal 2020, 2019, and 2018:
Number of shares withheld
2020
58,356
2019
29,681
Income tax withholdings due
$
2,214 $
1,042 $
2018
23,289
1,145
Remaining shares issued to
the recipients
236,697
82,795
58,552
Employee Stock Purchase Plan
Our employee stock purchase plan enables substantially all employees to purchase our common
stock at 95% of the market price of the stock on specified offering dates without restriction or at
85% of the market price of the stock on specified offering dates subject to restrictions. The plan,
which terminates in December 2027, provides that 500,000 shares be reserved for purchase. At
October 31, 2020, 352,000 shares were available for issuance.
TOLL BROTHERS 2020
The following table provides information regarding our employee stock purchase plan for fiscal
2020, 2019, and 2018:
At October 31, 2020 and 2019, the carrying value of cash and cash equivalents and customer
deposits held in escrow approximated fair value.
Shares issued
Average price per share
Compensation expense recognized
(in thousands)
$
$
2020
54,235
2019
41,744
26.10 $
31.80 $
2018
35,471
34.08
189 $
184 $
171
11. EARNINGS PER SHARE INFORMATION
Information pertaining to the calculation of earnings per share for each of the fiscal years ended
October 31, 2020, 2019, and 2018, is as follows (amounts in thousands):
Mortgage Loans Held for Sale
At the end of the reporting period, we determine the fair value of our mortgage loans held for sale
and the forward loan commitments we have entered into as a hedge against the interest rate risk of
our mortgage loans and commitments using the market approach to determine fair value. The
evaluation is based on the current market pricing of mortgage loans with similar terms and values as
of the reporting date and the application of such pricing to the mortgage loan portfolio. We
recognize the difference between the fair value and the unpaid principal balance of mortgage loans
held for sale as a gain or loss. In addition, we recognize the change in fair value of our forward loan
commitments as a gain or loss. These gains and losses are included in “Other income – net” in our
Consolidated Statements of Operations and Comprehensive Income. Interest income on mortgage
loans held for sale is calculated based upon the stated interest rate of each loan and is also included
in “Other income – net.”
Numerator:
2020
2019
2018
The table below provides, for the periods indicated, the aggregate unpaid principal and fair value of
mortgage loans held for sale as of the date indicated (amounts in thousands):
Net income as reported
$
446,624 $
590,007 $
748,151
130,095
1,152
131,247
145,008
1,493
146,501
151,984
2,217
154,201
At October 31,
2020
2019
Aggregate
unpaid principal
balance
$
$
225,826 $
216,280 $
Fair value
231,797 $
218,777 $
Excess
5,971
2,497
Denominator:
Basic weighted-average shares
Common stock equivalents (a)
Diluted weighted-average shares
Other information:
Weighted-average number of
antidilutive options and restricted
stock units (b)
Shares issued under stock
incentive and employee stock
purchase plans
2,141
1,156
813
1,541
1,394
1,066
(a) Common stock equivalents represent the dilutive effect of outstanding in-the-money stock options using the
treasury stock method and shares expected to be issued under our restricted stock units programs.
(b) Weighted-average number of antidilutive options and restricted stock units are based upon the average of
the average quarterly closing prices of our common stock on the NYSE for the year.
12. FAIR VALUE DISCLOSURES
Financial Instruments
A summary of assets and (liabilities) at October 31, 2020 and 2019, related to our financial
instruments, measured at fair value on a recurring basis, is set forth below (amounts in thousands):
Financial Instrument
Fair Value
Fair value
hierarchy October 31, 2020
October 31, 2019
Residential Mortgage Loans Held for Sale
Level 2 $
231,797 $
218,777
Forward Loan Commitments – Residential
Mortgage Loans Held for Sale
Interest Rate Lock Commitments
(“IRLCs”)
Forward Loan Commitments – IRLCs
Level 2 $
(31) $
Level 2 $
Level 2 $
628 $
(628) $
298
964
(964)
IRLCs represent individual borrower agreements that commit us to lend at a specified price for a
specified period as long as there is no violation of any condition established in the commitment
contract. These commitments have varying degrees of interest rate risk. We utilize best-efforts forward
loan commitments (“Forward Commitments”) to hedge the interest rate risk of the IRLCs and residential
mortgage loans held for sale. Forward Commitments represent contracts with third-party investors for
the future delivery of loans whereby we agree to make delivery at a specified future date at a specified
price. The IRLCs and Forward Commitments are considered derivative financial instruments under ASC
815, “Derivatives and Hedging,” which requires derivative financial instruments to be recorded at fair
value. We estimate the fair value of such commitments based on the estimated fair value of the
underlying mortgage loan and, in the case of IRLCs, the probability that the mortgage loan will fund
within the terms of the IRLC. The fair values of IRLCs and forward loan commitments are included in
either “Receivables, prepaid expenses and other assets” or “Accrued expenses” in our Consolidated
Balance Sheets, as appropriate. To manage the risk of non-performance of investors regarding the
Forward Commitments, we assess the creditworthiness of the investors on a periodic basis.
Inventory
We recognize inventory impairment charges based on the difference in the carrying value of the
inventory and its fair value at the time of the evaluation. The fair value of the aforementioned inventory
was determined using Level 3 criteria. Estimated fair value is primarily determined by discounting the
estimated future cash flow of each community. See Note 1, “Significant Accounting Policies - Inventory,”
for additional information regarding our methodology on determining fair value. As further discussed
in Note 1, determining the fair value of a community’s inventory involves a number of variables, many
of which are interrelated. If we used a different input for any of the various unobservable inputs used
in our impairment analysis, the results of the analysis may have been different, absent any other
changes. The table below summarizes, for the periods indicated, the ranges of certain quantitative
unobservable inputs utilized in determining the fair value of impaired operating communities:
7 3
TOLL BROTHERS 2020 Three months
ended:
Fiscal 2020
January 31
April 30
July 31
October 31
Fiscal 2019
January 31
April 30
July 31
October 31
Selling price per unit
($ in thousands)
Sales pace per year
(in units)
Discount rate
—
613 - 789
—
—
836 – 13,495
372 – 1,915
530 – 1,113
478 – 857
—
9
—
—
2 – 12
2 – 19
2 – 9
2 – 5
—
14.3%
—
—
12.5% – 15.8%
12.0% – 26.0%
7.8% – 13.0%
13.8% – 14.5%
In fiscal 2020, we recognized $31.7 million of impairment charges on land owned for future
communities relating to nine communities. As of the period the impairment charges were recognized,
the estimated fair value of these communities in the aggregate, net of impairment charges, was
$21.8 million. For the majority of these communities, the estimated fair values were determined
based upon the expected sales price per lot in a community sale to another builder. The range of
sales price per lot utilized in determining fair values in fiscal 2020 was approximately $33,000 -
$180,000 per lot. There were no impairment charges on land owned for future communities in 2019
and $2.2 million recognized in fiscal 2018.
Three months
ended:
Fiscal 2020:
January 31
April 30
July 31
October 31
Fiscal 2019:
January 31
April 30
July 31
October 31
Fiscal 2018:
January 31
April 30
July 31
October 31
The table below provides, for the periods indicated, the number of operating communities that we
reviewed for potential impairment, the number of operating communities in which we recognized
impairment charges, the amount of impairment charges recognized, and, as of the end of the period
indicated, the fair value of those communities, net of impairment charges ($ amounts in thousands):
Debt
Impaired operating communities
Number of
communities
tested
Number of
communities
Fair value of
communities, net
of impairment
charges
Impairment
charges
recognized
65
80
66
53
49
64
69
71
64
65
55
43
—
1
—
1
5
6
3
7
5
4
5
6
$
$
$
$
$
$
$
$
$
$
$
$
— $
2,754
—
1,113
$
37,282 $
36,159
5,436
18,910
$
13,318 $
21,811
43,063
24,692
$
—
300
—
375
675
5,785
17,495
1,100
6,695
31,075
3,736
13,325
9,065
4,025
30,151
The table below provides, as of the dates indicated, the book value and estimated fair value of our
debt at October 31, 2020 and 2019 (amounts in thousands):
Loans payable (a)
Senior notes (b)
Mortgage company loan
facility (c)
2020
2019
Fair value
hierarchy
Book
value
Estimated
fair value
Book
value
Estimated
fair value
Level 2 $ 1,151,257 $ 1,157,315 $ 1,114,577 $ 1,112,040
Level 1
2,669,876
2,888,822
2,669,876
2,823,043
Level 2
148,611
148,611
150,000
150,000
$3,969,744 $ 4,194,748 $ 3,934,453 $ 4,085,083
(a) The estimated fair value of loans payable was based upon contractual cash flows discounted at interest rates
that we believed were available to us for loans with similar terms and remaining maturities as of the
applicable valuation date.
(b) The estimated fair value of our senior notes is based upon their market prices as of the applicable valuation
date.
(c) We believe that the carrying value of our mortgage company loan borrowings approximates their fair value.
74
TOLL BROTHERS 2020 13. EMPL OYEE RETIREMENT AND
DEFERRED COMPENSATION PLANS
Salary Deferral Savings Plans
We maintain salary deferral savings plans covering substantially all employees. We recognized an
expense, net of plan forfeitures, with respect to the plans of $6.1 million, $14.1 million, and $12.6
million for the fiscal years ended October 31, 2020, 2019, and 2018, respectively, which is included in
“Selling, general and administrative” expense in the Consolidated Statements of Operations and
Comprehensive Income.
Deferred Compensation Plan
We have an unfunded, nonqualified deferred compensation plan that permits eligible employees to
defer a portion of their compensation. The deferred compensation, together with certain of our
contributions, earns various rates of return depending upon when the compensation was deferred. A
portion of the deferred compensation and interest earned may be forfeited by a participant if he or
she elects to withdraw the compensation prior to the end of the deferral period. We accrued $35.1
million and $31.1 million at October 31, 2020 and 2019, respectively, for our obligations under the plan.
Defined Benefit Retirement Plans
We have two unfunded defined benefit retirement plans. Retirement benefits generally vest when
the participant reaches normal retirement age. Such age was reduced from age 62 to age 58 in fiscal
2019. Unrecognized prior service costs are being amortized over the period from the date participants
enter the plans until their interests are fully vested. We used a 1.95%, 2.61%, and 4.06% discount rate
in our calculation of the present value of our projected benefit obligations at October 31, 2020, 2019,
and 2018, respectively. The rates represent the approximate long-term investment rate at October 31
of the fiscal year for which the present value was calculated. Information related to the plans is
based on actuarial information calculated as of October 31, 2020, 2019 and 2018.
Information related to our retirement plans for each of the fiscal years ended October 31, 2020, 2019,
and 2018, is as follows (amounts in thousands):
Plan costs:
Service cost
Interest cost
Amortization of prior service cost
Amortization of unrecognized
losses
Projected benefit obligation:
Beginning of year
Plan amendments adopted
during year
Service cost
Interest cost
Benefit payments
Change in unrecognized gain/loss
Projected benefit obligation, end
of year
Unamortized prior service cost:
Beginning of year
Plan amendments adopted during
year
Amortization of prior service cost
Unamortized prior service cost,
end of year
Accumulated unrecognized (loss)
gain, October 31
Accumulated benefit obligation,
October 31
Accrued benefit obligation,
October 31
$
$
$
$
$
$
$
$
$
2020
2019
453 $
403 $
1,158
1,468
23
1,416
506
—
3,102 $
2,325 $
2018
568
1,198
936
17
2,719
45,070 $
35,515 $
38,222
2,600
453
1,158
(1,636)
729
4,956
403
1,416
(1,358)
4,138
—
568
1,198
(1,358)
(3,115)
48,374 $
45,070 $
35,515
5,320 $
870 $
1,806
2,600
(1,468)
4,956
(506)
6,452 $
5,320 $
—
(936)
870
(3,273) $
(2,567) $
1,571
48,374 $
45,070 $
35,515
48,374 $
45,070 $
35,515
The accrued benefit obligation is included in accrued expenses on our Consolidated Balance Sheets.
The table below provides, based upon the estimated retirement dates of the participants in the
retirement plans, the amounts of benefits we would be required to pay in each of the next five fiscal
years and for the five fiscal years ended October 31, 2030 in the aggregate (in thousands):
Year ending October 31,
2021
2022
2023
2024
2025
November 1, 2025 – October 31, 2030
Amount
1,930
2,851
3,148
3,180
3,314
17,289
$
$
$
$
$
$
75
TOLL BROTHERS 2020 14. ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
2013
2020
2019
Accumulated other comprehensive (loss) income was primarily related to employee retirement
plans. The tables below provide, for the fiscal years ended October 31, 2020, 2019 and 2018, the
components of accumulated other comprehensive (loss) income (amounts in thousands):
Balance, beginning of period
$
(5,831) $
694 $
2020
2019
2018
(1,910)
Other comprehensive (loss) income before
reclassifications
Gross amounts reclassified from accumulated
other comprehensive income
Income tax benefit (expense)
Other comprehensive (loss) income,
net of tax
Adoption of ASU 2018-02
Balance, end of period
1,491
471
(1,367)
—
304
2,265
(6,525)
—
$
(7,198) $
(5,831) $
953
(1,142)
2,926
(322)
694
(3,329)
(9,094)
3,115
Total
Reclassifications for the amortization of the employee retirement plans are included in “Other
income – net” in the Consolidated Statements of Operations and Comprehensive Income.
15. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
We are involved in various claims and litigation arising principally in the ordinary course of business.
We believe that adequate provision for resolution of all current claims and pending litigation has
been made and that the disposition of these matters will not have a material adverse effect on our
results of operations and liquidity or on our financial condition.
In March 2018, the Pennsylvania Attorney General informed the Company that it was conducting a
review of our construction of stucco homes in Pennsylvania after January 1, 2005 and requested that
we voluntarily produce documents and information. The Company has produced documents and
information in response to this request and, in addition, has produced requested information and
documents in response to a subpoena issued in the second quarter of fiscal 2019. Management
cannot at this time predict the eventual scope or outcome of this matter.
Land Purchase Commitments
Generally, our agreements to acquire land parcels do not require us to purchase those land parcels,
although we, in some cases, forfeit any deposit balance outstanding if and when we terminate an
agreement. If market conditions are weak, approvals needed to develop the land are uncertain, or
other factors exist that make the purchase undesirable, we may choose not to acquire the land.
Whether a purchase agreement is legally terminated or not, we review the amount recorded for the
land parcel subject to the purchase agreement to determine whether the amount is recoverable.
While we may not have formally terminated the purchase agreements for those land parcels that we
do not expect to acquire, we write off any nonrefundable deposits and costs previously capitalized
to such land parcels in the periods that we determine such costs are not recoverable.
Information regarding our land purchase commitments at October 31, 2020 and 2019, is provided in
the table below (amounts in thousands):
76
Aggregate purchase commitments:
Unrelated parties
Unconsolidated entities that the Company has
investments in
Total
Deposits against aggregate purchase commitments
Additional cash required to acquire land
Amount of additional cash required to acquire land
included in accrued expenses
$
$
$
$
$
2,630,128 $
2,349,900
10,097
10,826
2,640,225 $
2,360,726
223,571 $
2,416,654
2,640,225 $
168,778
2,191,948
2,360,726
19,590 $
14,620
In addition, we expect to purchase approximately 2,100 additional home sites over a number of years
from several joint ventures in which we have investments; the purchase prices of these home sites
will be determined at a future date.
At October 31, 2020, we also had purchase commitments to acquire land for apartment developments
of approximately $111.3 million, of which we had outstanding deposits in the amount of $6.5 million.
We have additional land parcels under option that have been excluded from the aforementioned
aggregate purchase amounts since we do not believe that we will complete the purchase of these
land parcels and no additional funds will be required from us to terminate these contracts.
Investments in Unconsolidated Entities
At October 31, 2020, we had investments in a number of unconsolidated entities, were committed to
invest or advance additional funds, and had guaranteed a portion of the indebtedness and/or loan
commitments of these entities. See Note 4, “Investments in Unconsolidated Entities,” for more
information regarding our commitments to these entities.
Surety Bonds and Letters of Credit
At October 31, 2020, we had outstanding surety bonds amounting to $742.9 million, primarily related
to our obligations to governmental entities to construct improvements in our communities. We
estimate that $356.9 million of work remains on these improvements. We have an additional $182.1
million of surety bonds outstanding that guarantee other obligations. We do not believe it is probable
that any outstanding bonds will be drawn upon.
At October 31, 2020, we had outstanding letters of credit of $119.0 million under our Revolving Credit
Facility. These letters of credit were issued to secure our various financial obligations, including
insurance policy deductibles and other claims, land deposits, and security to complete improvements
in communities in which we are operating. We do not believe that it is probable that any outstanding
letters of credit will be drawn upon.
Backlog
At October 31, 2020, we had agreements of sale outstanding to deliver 7,791 homes with an aggregate
sales value of $6.37 billion.
Mortgage Commitments
Our mortgage subsidiary provides mortgage financing for a portion of our home closings. For those
home buyers to whom our mortgage subsidiary provides mortgages, we determine whether the
home buyer qualifies for the mortgage based upon information provided by the home buyer and
other sources. For those home buyers who qualify, our mortgage subsidiary provides the home buyer
with a mortgage commitment that specifies the terms and conditions of a proposed mortgage loan
TOLL BROTHERS 2020
based upon then-current market conditions. Prior to the actual closing of the home and funding of
the mortgage, the home buyer will lock in an interest rate based upon the terms of the commitment.
At the time of rate lock, our mortgage subsidiary agrees to sell the proposed mortgage loan to one
of several outside recognized mortgage financing institutions (“investors”) that is willing to honor the
terms and conditions, including interest rate, committed to the home buyer. We believe that these
investors have adequate financial resources to honor their commitments to our mortgage subsidiary.
Mortgage loans are sold to investors with limited recourse provisions derived from industry-standard
representations and warranties in the relevant agreements. These representations and warranties
primarily involve the absence of misrepresentations by the borrower or other parties, the appropriate
underwriting of the loan and in some cases, a required minimum number of payments to be made by
the borrower. The Company generally does not retain any other continuing interest related to
mortgage loans sold in the secondary market.
Information regarding our mortgage commitments at October 31, 2020 and 2019, is provided in the
table below (amounts in thousands):
Information regarding our remaining lease payments as of October 31, 2020 is provided in the table
below (amounts in thousands):
Year ending October 31,
2021
2022
2023
2024
2025
Thereafter
Total lease payments (a)
Less: Interest (b)
Present value of lease liabilities
$
$
$
19,942
18,093
15,621
13,018
9,475
204,509
280,658
155,902
124,756
2020
2019
(a) Lease payments include options to extend lease terms that are reasonably certain of being exercised
(b) Our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our discount rate
for such leases to determine the present value of lease payments at the lease commencement date.
Aggregate mortgage loan commitments:
IRLCs
Non-IRLCs
Total
Investor commitments to purchase:
IRLCs
Mortgage loans receivable
Total
Lease Commitments
$
$
$
$
381,116 $
1,688,801
2,069,917 $
381,116 $
217,876
598,992 $
565,634
1,364,972
1,930,606
565,634
208,591
774,225
We lease certain facilities, equipment, and properties held for rental apartment operation or
development under non-cancelable operating leases which, in the case of certain rental properties,
have an initial term of 99 years. We recognize lease expense for these leases on a straight-line basis
over the lease term. ROU assets and lease liabilities are recorded on the balance sheet for all leases
with an expected term over one year. A majority of our facility lease agreements include rental
payments based on a pro-rata share of the lessor’s operating costs which are variable in nature. Our
lease agreements do not contain any residual value guarantees or material restrictive covenants.
ROU assets are classified within “Receivables, prepaid expenses, and other assets” and the
corresponding lease liability is included in “Accrued expenses” in our Consolidated Balance Sheet.
We elected the short-term lease recognition exemption for all leases that, at the commencement
date, have a lease term of 12 months or less and do not include an option to purchase the underlying
asset that we are reasonably certain to exercise. For such leases, we do not recognize ROU assets or
lease liabilities and instead recognize lease payments in our Consolidated Statements of Operations
and Comprehensive Income on a straight-line basis. At October 31, 2020, ROU assets and lease
liabilities were $105.0 million and $124.8 million, respectively. Payments on lease liabilities totaled
$16.6 million for the year ending October 31, 2020.
Lease expense includes costs for leases with terms in excess of one year as well as short-term leases
with terms of one year or less. For the fiscal years ending October 31, 2020, 2019 and 2018, our total
lease expense was $21.6 million, $20.2 million, and $15.8 million, respectively, inclusive of variable
lease costs of approximately $3.1 million and short-term lease costs of approximately $3.5 million in
fiscal 2020. Sublease income was de minimis.
The majority of our facility leases give us the option to extend the lease term. The exercise of lease
renewal options is at our discretion. For several of our facility leases we are reasonably certain the
option will be exercised and thus the renewal term has been included in our calculation of the ROU
asset and lease liability. The weighted average remaining lease term and weighted average discount
rate used in calculating these facility lease liabilities, excluding our land leases, were 8.81 years and
4.1%, respectively, at October 31, 2020.
We have a small number of land leases with initial terms of 99 years. We are not reasonably certain
that, if given the option, we would extend these leases. We have therefore excluded the renewal
terms from our ROU asset and lease liability for these leases. The weighted average remaining lease
term and weighted average discount rate used in calculating these land lease liabilities were 93.9
years and 4.5%, respectively, at October 31, 2020.
16. OTHER INCOME – NET
The table below provides the components of “Other income – net” for the years ended October 31,
2020, 2019, and 2018 (amounts in thousands):
Interest income
Income from ancillary
businesses
Management fee income from
home building unconsolidated
entities, net
Retained customer deposits
Income from land sales
Directly expensed interest
Other
2020
2019
$
10,009 $
19,017 $
2018
8,570
25,540
53,568
25,692
3,636
—
—
(2,440)
(1,052)
9,948
—
—
—
(1,031)
81,502 $
11,740
8,937
6,331
—
1,190
62,460
Total other income – net
$
35,693 $
As a result of our adoption of ASC 606 as of November 1, 2018, revenues and cost of revenues from
land sales are presented as separate components on our Consolidated Statement of Operations and
Comprehensive Income. In addition, retained customer deposits are presented in home sales revenues
7 7
TOLL BROTHERS 2020 on our Consolidated Statement of Operations and Comprehensive Income. Because we elected to
apply the modified retrospective method of adoption, prior periods have not been restated to reflect
these changes in presentation. See Note 1, “Significant Accounting Policies – Recent Accounting
Pronouncements” for additional information regarding the impact of the adoption of ASC 606.
Management fee income from home building unconsolidated entities presented above primarily
represents fees earned by our City Living and Traditional Home Building operations. In addition, in
fiscal 2020, 2019 and 2018, our apartment living operations earned fees from unconsolidated entities
of $14.0 million, $11.9 million, and $7.5 million, respectively. Fees earned by our apartment living
operations are included in income from ancillary businesses above.
Income from ancillary businesses is generated by our mortgage, title, landscaping, security
monitoring, Gibraltar, apartment living, and golf course and country club operations. The table below
provides revenues and expenses for these ancillary businesses for the years ended October 31, 2020,
2019, and 2018 (amounts in thousands):
Revenues
Expenses
Other income
2020
118,855 $
106,285 $
12,970 $
2019
150,144 $
132,823 $
36,277 $
2018
158,051
132,359
—
$
$
$
In fiscal 2020, we sold one of our golf club properties to a third party for $15.6 million and recognized
a gain of $9.1 million. In addition, we recognized a previously deferred gain of $3.8 million related to
the sale of a golf club property from fiscal 2019.
In fiscal 2019, we sold seven of our golf club properties to third parties for $64.3 million and we
recognized a gain of $35.1 million during the year ended October 31, 2019 as a result of these sales.
In fiscal 2018, we recognized a $10.7 million gain from a bulk sale of security monitoring accounts by
our home control solutions business, which is included in income from ancillary businesses above. In
addition, in fiscal 2018, we recognized a $3.5 million write-down of a commercial property operated
by Toll Brothers Apartment Living, which is included in income from ancillary businesses above.
The table below provides revenues and expenses recognized from land sales for the year ended
October 31, 2018 (amounts in thousands):
Revenue
Income (loss) before income taxes
2020
2019
2018
2020
2019
2018
(Restated)
(Restated)
(Restated)
(Restated)
Traditional Home Building:
North
$ 1,364,750 $ 1,484,430 $ 1,517,917 $
57,826 $
81,350 $
98,233
Mid-Atlantic
South
Mountain
Pacific
Traditional
Home
Building
City Living
Corporate and
other
845,597
1,041,204
804,342
991,915
775,676
868,580
1,535,757
1,130,874
1,126,580
2,029,851
2,416,629
2,533,506
50,621
108,399
167,687
352,831
50,737
106,082
112,979
509,760
59,254
99,920
136,163
571,353
6,817,159
6,828,190
6,822,259
120,946
253,188
320,999
737,364
29,679
860,908
70,133
964,923
78,149
(748)
(999)
(180,142)
(143,871)
(109,156)
6,937,357
7,080,379
7,143,258
586,901
787,170
933,916
Land sales and
other revenue
140,302
143,587
—
Total
$ 7,077,659 $ 7,223,966 $ 7,143,258 $ 586,901 $ 787,170 $ 933,916
“Corporate and other” is comprised principally of general corporate expenses such as the offices of
our executive officers; the corporate finance, accounting, audit, tax, human resources, risk
management, information technology, marketing, and legal groups; interest income; income from
certain of our ancillary businesses, including Gibraltar; and income from our Rental Property Joint
Ventures and Gibraltar Joint Ventures.
Total assets for each of our segments at October 31, 2020 and 2019, are shown in the table below
(amounts in thousands):
Revenue
Expense
2018
134,327
127,996
6,331
$
$
Land sale revenues for the year ended October 31, 2018 included $80.3 million related to sale
transactions with four Rental Property Joint Ventures in which we have interests ranging from 25%
to 50%. On one of these transactions, we recognized a gain of $1.0 million in fiscal 2018. In addition,
due to our continued involvement in the joint venture primarily through guarantees provided on the
joint venture’s debt, we deferred $3.8 million of the gain realized on this sale. We will recognize the
deferred gain into income as the guarantees provided expire.
See Note 4, “Investments in Unconsolidated Entities,” for more information on these transactions.
17. INFORMATION ON SEGMENTS
The table below summarizes revenue and income (loss) before income taxes for our segments for
each of the fiscal years ended October 31, 2020, 2019, and 2018 (amounts in thousands). In the first
quarter of fiscal 2020, we made certain changes to our Traditional Home Building regional
management structure and realigned certain of the states falling among our five geographic
segments. See Note 1. Amounts for fiscal 2019 and 2018 have been restated to reflect this change.
78
Traditional Home Building:
North
Mid-Atlantic
South
Mountain
Pacific
Traditional Home Building
City Living
Corporate and other
2020
2019
(Restated)
$
1,427,523 $
1,487,012
918,641
1,176,962
1,961,348
2,226,685
7,711,159
539,750
2,814,824
854,470
1,165,974
1,769,649
2,627,417
7,904,522
529,507
2,394,109
$
11,065,733 $
10,828,138
“Corporate and other” is comprised principally of cash and cash equivalents, restricted cash, income
tax receivable, investments in our Rental Property Joint Ventures, expected recoveries from insurance
carriers and suppliers, our Gibraltar investments and operations, manufacturing facilities, and our
mortgage and title subsidiaries.
TOLL BROTHERS 2020
Inventory for each of our segments, as of the dates indicated, is shown in the table below (amounts
in thousands):
Balances at October 31, 2020
Traditional Home Building:
North
Mid-Atlantic
South
Mountain
Pacific
Traditional Home Building
City Living
Land
controlled
for future
communities
Land owned
for future
communities
Operating
communities
Total
$
40,753 $
155,737 $
1,140,833 $
1,337,323
31,572
13,964
8,811
128,425
223,525
—
142,196
122,671
38,370
379,916
838,890
197,953
647,481
847,360
1,840,830
1,656,682
6,133,186
265,352
821,249
983,995
1,888,011
2,165,023
7,195,601
463,305
$
223,525 $
1,036,843 $
6,398,538 $
7,658,906
Balances at October 31, 2019 (Restated)
Traditional Home Building:
North
Mid-Atlantic
South
Mountain
Pacific
Traditional Home Building
City Living
$
32,712 $
99,947 $
1,233,234 $
1,365,893
50,534
10,326
18,973
70,384
182,929
—
76,682
118,830
34,165
353,186
682,810
185,391
705,763
845,590
1,651,792
2,115,531
6,551,910
270,008
832,979
974,746
1,704,930
2,539,101
7,417,649
455,399
$
182,929 $
868,201 $
6,821,918 $
7,873,048
The amounts we have provided for inventory impairment charges and the expensing of costs that we
believed not to be recoverable for each of our segments, for the years ended October 31, 2020, 2019,
and 2018, are shown in the table below (amounts in thousands):
Traditional Home Building:
North
Mid-Atlantic
South
Mountain
Pacific
Traditional Home Building
City Living
Corporate and other
2020
2019
2018
(Restated)
(Restated)
$
28,352 $
25,472 $
17,905
2,869
790
5,967
55,883
—
—
1,535
8,452
984
1,117
37,560
4,800
—
20,675
11,839
720
176
879
34,289
98
769
$
55,883 $
42,360 $
35,156
The net carrying value of our investments in unconsolidated entities and our equity in earnings
(losses) from such investments, for each of our segments, as of the dates indicated, are shown in the
table below (amounts in thousands):
Investments in
unconsolidated
entities
At October 31,
Equity in earnings (losses)
from unconsolidated entities
Year ended October 31,
2020
2019
2020
2019
2018
(Restated)
(Restated)
(Restated)
Traditional Home Building:
Mid-Atlantic
$
33,523 $
8,525 $
(11) $
— $
(4,000)
South
Mountain
Pacific
Traditional Home
Building
City Living
Corporate and other
93,734
91,956
14,012
19,098
12,263
—
433
—
381
9,825
1,280
—
(37)
(63)
2,404
127,690
33,819
269,192
110,306
60,512
195,434
15,662
(7,674)
(7,040)
19,061
4,103
1,704
10,604
6,857
67,779
$ 430,701 $ 366,252 $
948 $
24,868 $
85,240
“Corporate and other” is comprised of our investments in the Rental Property Joint Ventures and the
Gibraltar Joint Ventures.
79
TOLL BROTHERS 2020
18. SUPPLEMENTAL DISCLOSURE TO CONSOLIDATED STATEMENTS OF CASH FLOWS
The following are supplemental disclosures to the Consolidated Statements of Cash Flows for each of the fiscal years ended October 31, 2020, 2019 and 2018 (amounts in thousands):
Cash flow information:
Interest paid, net of amount capitalized
Income tax payments
Income tax refunds
Noncash activity:
Cost of inventory acquired through seller financing, municipal bonds, or accrued liabilities, net
Increase in inventory for capitalized interest, our share of earnings,
and allocation of basis difference in land purchased from unconsolidated entities
Increase in receivables, prepaid expenses, and other assets and accrued expenses related to the adoption of ASU 2016-02
Reclassification from inventory to property, construction, and office equipment, net due to the adoption of ASC 606
Net decrease in inventory and retained earnings due to the adoption of ASC 606
Net increase in accrued expenses and decrease in retained earnings due to the adoption of ASC 606
Net decrease in investment in unconsolidated entities and retained earnings due to the adoption of ASC 606
Cost of inventory acquired through foreclosure
Cancellation of treasury stock
Non-controlling interest
Reclassification of inventory to property, construction, and office equipment, net
Decrease (increase) in unrecognized gain in defined benefit plans
Defined benefit plan amendment
Income tax benefit (expense) recognized in total comprehensive income
Transfer of other assets to inventory, net
Transfer of inventory to investment in unconsolidated entities
Transfer of other assets to investment in unconsolidated entities, net
Reclassification of deferred income from accrued expenses to investment in unconsolidated entities
Increase in investments in unconsolidated entities for change in the fair value of debt guarantees
Miscellaneous increases (decreases) to investments in unconsolidated entities
Business Acquisitions:
Fair value of assets purchased
Liabilities assumed
Cash paid
Cash, cash equivalents, and restricted cash
Cash and cash equivalents
Restricted cash and cash held by our captive title company included in receivables, prepaid expenses, and other assets
Total cash, cash equivalents, and restricted cash shown in the Consolidated Statements of Cash Flows
2020
2019
2018
18,326 $
48,509 $
1,822 $
35,422 $
141,681 $
4,344 $
20,812
215,092
3,101
158,435 $
213,824 $
185,633
215 $
122,269 $
— $
— $
— $
— $
— $
— $
7,092 $
16,558 $
729 $
2,600 $
471 $
— $
13,690 $
52,345 $
— $
25 $
645 $
63,854 $
3,505 $
60,349 $
5,300 $
— $
104,807 $
8,989 $
6,541 $
2,457 $
— $
895,517 $
38,134 $
— $
4,138 $
4,956 $
2,265 $
7,100 $
— $
44,139 $
— $
928 $
(1,876) $
173,516 $
11,143 $
162,373 $
1,320
—
—
—
—
—
4,609
—
2,801
—
(3,115)
—
(1,141)
16,763
—
60,971
5,995
623
1,776
—
—
—
At October 31,
2020
2019
2018
1,370,944 $
1,286,014 $
1,182,195
25,660
33,629
34,215
1,396,604 $
1,319,643 $
1,216,410
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
8 0
TOLL BROTHERS 2020
DIVIDENDS
During fiscal 2020, we paid aggregate cash dividends of $0.44 per share to our shareholders. The
payment of dividends is within the discretion of our Board of Directors and any decision to pay
dividends in the future, and the amount of any such dividend, will depend upon an evaluation of a
number of factors, including our results of operations, our capital requirements, our operating and
financial condition, and any contractual limitations then in effect. Our revolving credit agreement
and term loan agreement each require us to maintain a minimum tangible net worth (as defined in
the respective agreement), which restricts the amount of dividends we may pay. At October 31,
2020, under the provisions of our revolving credit agreement and term loan agreement, we could
have paid up to approximately $2.56 billion of cash dividends.
19. SUMMARY CONSOLIDATED QUARTERLY FINANCIAL DATA
(UNAUDITED)
The table below provides summary income statement data for each quarter of fiscal 2020 and 2019 (amounts in
thousands, except per share data):
Three Months Ended,
October 31
July 31
April 30
January 31
Fiscal 2020:
Revenue:
Home sales
Land sales and other
Gross profit:
Home sales (a)
Land sales and other
Income before income taxes
Net income
Earnings per share (b)
Basic
Diluted
Weighted-average number of shares
Basic
Diluted
Fiscal 2019:
Revenue:
Home sales
$ 2,495,974 $ 1,627,812 $ 1,516,234 $ 1,297,337
$
$
$
$
$
$
$
49,693 $
23,677 $
32,838 $
34,094
502,079 $
341,704 $
295,256 $
264,215
4,798 $
1,418 $
6,420 $
266,991 $
151,865 $
102,113 $
199,317 $
114,761 $
75,670 $
1,812
65,932
56,876
1.57 $
1.55 $
0.91 $
0.90 $
0.59 $
0.59 $
0.41
0.41
127,310
128,892
126,722
127,399
128,205
128,809
138,145
139,889
$ 2,292,044 $ 1,756,970 $ 1,712,057 $ 1,319,308
Land sales and other
Gross profit:
Home sales (a)
Land sales and other
Income before income taxes
Net income
Earnings per share (b)
Basic
Diluted
Weighted-average number of shares
$
$
$
$
$
$
$
86,956 $
8,721 $
4,037 $
43,873
478,262 $
391,653 $
373,183 $
303,064
658 $
2,489 $
1,116 $
9,620
272,649 $
186,916 $
176,159 $
151,446
202,315 $
146,318 $
129,324 $
112,050
1.43 $
1.41 $
1.01 $
1.00 $
0.88 $
0.87 $
0.76
0.76
Basic
Diluted
141,909
143,567
144,750
146,275
146,622
148,129
146,751
148,032
(a) Effective October 31, 2020, we reclassified sales commissions paid to third-party brokers from home sales cost
of revenues to selling, general and administrative expense. Prior periods have been reclassified to conform to
the 2020 presentation
(b) Due to rounding, the sum of the quarterly earnings per share amounts may not equal the reported earnings per
share for the year.
8 1
TOLL BROTHERS 2020 NET DEBT-TO-CAPITAL RATIO RECONCILIATION
(Amounts in thousands except percentages):
October 31,
2020
$
1,147,955 $
2,661,718
148,611
3,958,284
4,875,235
2019
1,111,449
2,659,898
150,000
3,921,347
5,071,816
$
$
8,833,519 $
8,993,163
44.8%
43.6%
3,958,284 $
3,921,347
STOCK RETURN PERFORMANCE GRAPH
The following graph and chart compares the five-year cumulative total return (assuming that an investment
of $100 was made on October 31, 2015, and that dividends were reinvested) from October 31, 2015 to
October 31, 2020, for (a) our common stock, (b) the S&P Homebuilding Index and (c) the S&P 500®:
Comparison of 5 Year Cumulative Total Return Among Toll Brothers, Inc., the
S&P 500®, and the S&P Homebuilding Index
Toll Brothers, Inc.
S&P 500®
S&P Homebuilding
$250
$200
$150
(148,611)
(1,370,944)
2,438,729
4,875,235
$
7,313,964 $
33.3%
(150,000)
(1,286,014)
$100
2,485,333
5,071,816
7,557,149
32.9%
$50
$0
2015
2016
2017
2018
2019
2020
October 31:
2015
2016
2017
2018
2019
2020
Toll Brothers, Inc.
$ 100.00 $
76.29 $ 128.77 $
95.15 $ 113.76 $ 122.53
S&P 500®
S&P Homebuilding Index $ 100.00 $
$ 100.00 $ 104.51 $ 129.21 $ 138.70 $ 158.57 $ 173.97
94.35 $ 141.28 $ 113.52 $ 166.22 $ 195.10
Loans payable
Senior notes
Mortgage company loan facility
Total debt
Total stockholders' equity
Total capital
Ratio of debt-to-capital
Total debt
Less: Mortgage company loan facility
Cash and cash equivalents
Total net debt
Total stockholders' equity
Total net capital
Net debt-to-capital ratio
8 2
TOLL BROTHERS 2020
CO R PORATE DIRECTORS AND OFFICERS
Board of Directors
Executive Vice Presidents and Co-Chief Operating Officers
Robert I. Toll
Chairman Emeritus of the Board
Douglas C. Yearley, Jr.* (30)
Chairman of the Board, President,
& Chief Executive Officer
Edward G. Boehne
Lead Independent Director
Retired President — Federal Reserve
Bank of Philadelphia
Richard J. Braemer
Senior Counsel — Ballard Spahr LLP,
Attorneys at Law
Stephen F. East
Retired Managing Director —
Wells Fargo & Company
Christine N. Garvey
Retired Global Head of Corporate Real
Estate Services — Deutsche Bank AG
Karen H. Grimes
Retired Partner, Senior Managing Director,
and Equity Portfolio Manager — Wellington
Management Company
Carl B. Marbach
President and Chief Executive Officer of Shared
Charter, Inc., a peer-to-peer private airplane
chartering service provider
John A. McLean
Senior Managing Director — New York Life
Investment Management
Stephen A. Novick
Senior Advisor — Chasbro Investments
Wendell E. Pritchett
Provost, Presidential Professor of Law
& Education — University of Pennsylvania
Paul E. Shapiro
Chairman — Q Capital Holdings LLC,
a life settlement company
Kevin J. Coen (2)
Corporate Secretary
*Executive Officer of the Company.
Director and employee listing as of 1/1/21.
( ) Years of service with Toll Brothers.
James W. Boyd* (27)
Robert Parahus* (34)
Senior Vice Presidents
Frederick N. Cooper (27)
Finance, International Development
& Investor Relations
John Critikos (7)
Chief Information Officer
Joseph R. DeSanto (17)
Tax
David Ernst (8)
Land Acquisitions
Patrick Galligan (27)
Homebuilding Controller
Michael J. Grubb (17)
Chief Accounting Officer
Timothy J. Hoban (15)
Chief Compliance Officer
General Counsel
John Jakominich (23)
Land Acquisitions
Home Building Operations
REGIONAL PRESIDENTS
Kevin D. Duermit (33)
Christopher G. Gaffney (24)
Karl Mistry (16)
Thomas J. Murray (26)
Seth J. Ring (17)
TOLL BROTHERS CITY LIVING®
Thomas R. Mulvey (16)
President
David H. Von Spreckelsen (17)
Group President
GROUP PRESIDENTS
Eric C. Anderson (24)
Mark G. Bailey (20)
Robert L. Flaherty (23)
Gary M. Mayo (23)
Kelley Moldstad (9)
Gregory S. Netro (20)
Robert G. Paul (19)
Chief Financial Officer
Martin P. Connor* (12)
Benjamin D. Jogodnik (25)
Mergers & Acquisitions
Wendy Marlett (2)
Chief Marketing Officer
Daniel J. Kennedy (26)
Chief Audit Officer
Andrew C. Lawhorn (13)
Acquisition Finance
John G. Mangano (33)
Building Technologies
Joy N. Roman (4)
Chief Human Resources Officer
Corey K. Tendler (3)
Chief Diversity &
Engagement Officer
Gregg L. Ziegler (18)
Treasurer
DIVISION PRESIDENTS
David S. Assid (20)
David Bauer (16)
Todd Callahan (8)
Craig Cherry (22)
Brandon Cooper (17)
John Dean (9)
Brock Fanning (12)
James Fitzpatrick (19)
Brad Hare (17)
R. Matthew Jones (2)
David A. Keller (1)
David A. Kelly (16)
Alexander Martin (10)
Steven R. Merten (16)
Richard M. Nelson (22)
Nicholas Norvilas (9)
Donna M. O’Connell (5)
Fredrick Pfister (15)
Jeremiah Portlock (9)
Jaime Pou (3)
Christopher A. Rudd (1)
Christopher Ryan (2)
Andrew J. Semon (18)
Susan Stanley (4)
Eric E. White (1)
Subsidiary and Affiliate Operations
TOLL BROTHERS APARTMENT LIVING
TOLL BROTHERS CAMPUS LIVING®
Charles L. Elliott (9)
President
TOLL BROTHERS
HOSPITALITY GROUP
John J. DePaul (3)
President
LAND DEVELOPMENT OPERATIONS
Robert N. McCarron (28)
Executive Vice President
ESE CONSULTANTS, INC.
Mark S. Mayhew (7)
SR. VP/Managing Director
TBI MORTGAGE® COMPANY
Steve Audet (4)
President
TOLL ARCHITECTURE, INC.
Jed Gibson (27)
President
TOLL INTEGRATED SYSTEMS
Keith Fell (12)
Director of Manufacturing
TBI SMART HOME SOLUTIONS
Felicia Ratka (20)
President
TOLL LANDSCAPE, LLC
Mark Culichia (23)
President
WESTMINSTER TITLE COMPANY, INC.
William T. Unkel (16)
President
GIBRALTAR REAL ESTATE CAPITAL
Roger A. Brush (27)
President
Michael L. LaPat (21)
Chief Financial Officer
8 3
TOLL BROTHERS 2020
Investor Relations Information Requests
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and other Company information
are available without charge either on or through our website, TollBrothers.com, or upon request
from the following individuals at our Corporate Office:
Frederick N. Cooper
Senior Vice President — Finance, International Development and Investor Relations
fcooper@tollbrothers.com | 215-938-8312
Our Board of Directors has an audit and risk committee, an executive compensation committee, a
nominating and corporate governance committee, and a public debt and equity securities committee.
Each of these committees has a formal charter. We also have Corporate Governance Guidelines, a
Code of Ethics for Members of the Board of Directors, and a Code of Ethics and Business Conduct
which applies to all officers and employees. Copies of these charters, guidelines, and codes can be
obtained on our website and are also available upon request from the individuals listed above.
Production Notes
Front Cover Photo:
The Sandstone | Mesa Ridge | Las Vegas, NV
Photography by:
Ray Barbour, Ron Blunt, Joshua Caldwell, Chad Davies, Roberto Gonzalez, Shawn May,
Christopher Mayer, Chris J. Roberts, Shoootin, Bill Taylor, William Wright
COR PORATE I NFORMATION
Corporate Office
Toll Brothers, Inc.
1140 Virginia Dr
Fort Washington, Pennsylvania 19034
215-938-8000 | TollBrothers.com
Transfer Agent and Registrar
American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, New York 11219
1-800-937-5449 | astfinancial.com
Independent Auditors
Ernst & Young LLP — Philadelphia, Pennsylvania
Employees
As of October 31, 2020, we had approximately 4,500 full-time employees.
Stockholders
As of December 18, 2020, we had 494 stockholders of record.
Stock Listing
Our common stock is traded on the New York Stock Exchange (symbol “TOL”).
Certifications
Our Chief Executive Officer and Chief Financial Officer have filed their certifications as required by
the SEC regarding the quality of our public disclosures for each of the periods ended during our
fiscal year ended October 31, 2020. Further, our Chief Executive Officer has certified to the New
York Stock Exchange (“NYSE”) that he is not aware of any violation by our Company of NYSE
corporate governance listing standards, as required by Section 303A.12(a) of the NYSE Listed
Company Manual.
Demographic and Other Data
Sources consulted for data included in this annual report include, Bloomberg Business Week,
Bloomberg L.P., Citigroup, Claritas, The Conference Board, Fannie Mae, Federal Home Loan Mortgage
Corporation, Federal Housing Finance Board, Federal Reserve Bank, Federal Reserve Board, Fitch
Ratings, Forbes, Fortune, Harvard Institute of Economic Research, Institutional Investor Magazine,
John Burns Real Estate Consulting, Joint Center for Housing Studies of Harvard University, J.P. Morgan
Securities, Moody’s Economy.com, Moody’s Investor Service, Mortgage Bankers Association, National
Association of Home Builders, National Association of Realtors,® Office of Federal Housing Enterprises
Oversight, S&P Corelogic Case-Shiller U.S. National Home Price NSA Index, Standard & Poor’s,
Thomson Reuters Corporation, Urban Land Institute Terwilliger Center for Housing, U.S. Bureau of
Labor Statistics, U.S. Census Bureau, U.S. Department of Commerce, U.S. Department of Housing and
Urban Development, U.S. Department of Labor, The Wall Street Journal, YAHOO! Finance.
8 4
*From FORTUNE Magazine, February 1, 2020 ©2020 Fortune Media IP Limited. FORTUNE and The World’s Most Admired
Companies are registered trademarks of Fortune Media IP Limited and are used under license.
Copyright 2020 by Toll Brothers, Inc.
TOLL BROTHERS 2020 The Calico | Mesa Ridge | Las Vegas, NV
The Mayne | Sereno Canyon | Scottsdale, AZ
The Bayhill | Regency at Kimberton Glen | Phoenixville, PA
The Hollister | Addison Pond | Holly Springs, NC
1140 Virginia Drive | Fort Washington, Pennsylvania 19034 | 215-938-8000 | TollBrothers.com