ANNUAL REPORT
2024
Information for and as of FYE October 31, 2024, unless otherwise noted.
*From Fortune, ©2024 Fortune Media IP Limited. All rights reserved. Used under license.
†See “Reconciliation of Non-GAAP Measures” at the end of this report for more information on the calculation of the Company’s net debt-to-capital ratio.
Toll Brothers Company Overview
FINANCIAL SUMMARY
INDUSTRY-LEADING COMPANY AND BRAND
•
America’s Luxury Home Builder
•
Founded in 1967
•
NYSE-listed (TOL) since 1986
•
Fortune 500 Company
•
4th largest U.S. home builder by revenues
•
National Builder of the Year, Builder magazine
•
Two-time Builder of the Year, Professional Builder magazine
•
10 years in a row being named to the Fortune World’s Most Admired
Companies™ list*
•
Company’s Chairman and CEO Douglas C. Yearley, Jr. was named one
of 25 Top CEOs by Barron’s magazine
LUXURY HOMES AND COMMUNITIES
•
National presence in over 60 markets in 24 states and Washington, DC
•
Selling from 408 communities
•
Delivered over 10,800 homes in FY 2024
•
Average delivered home price of $976,900
•
Control 74,700 home sites (55% optioned/45% owned)
•
High-volume production of highly personalized homes
•
Build-to-order model: home buyers added an average of approximately
$203,000 in lot premiums and structural and design options to their
homes in FY 2024
•
40 Design Studio locations nationwide
•
Diverse Product Lines:
o
Luxury move-up homes
o
Millennial-focused luxury first-time homes
o
Active-adult and second homes
o
Master-planned communities; resort-style golf and country club
living
o
Toll Brothers City Living: luxury mid- and high-rise urban for-sale
communities
o
Toll Brothers Apartment Living and Toll Brothers Campus Living:
luxury for-rent urban, suburban, and student housing communities
FINANCIAL AND MANAGEMENT STRENGTH
•
Liquidity of $3.07 billion: $1.30 billion in cash and $1.77 billion available
under our $1.96 billion, 23-bank, 5-year revolving credit facility
•
$650 million, 12-bank, 4-year term loan
•
Over $18.8 billion in corporate and joint venture financing transactions
completed in the last 5 years
•
Debt-to-capital ratio of 27.0%; net debt-to-capital ratio† of 15.2%
•
Focus on driving return on equity through more capital-efficient land
buying, product optimization, and other strategies
•
Seasoned executive management team: average 21-year tenure with
Toll Brothers
$-
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
19
20
21
22
23
24
Revenues
For Home Sales in FY ($ in millions)
$-
$2
$4
$6
$8
$10
$12
$14
$16
19
20
21
22
23
24
Earnings Per Share
In FY ($)
$-
$2,400
$4,800
$7,200
$9,600
$12,000
19
20
21
22
23
24
Contracts
In FY ($ in millions)
$-
$2,000
$4,000
$6,000
$8,000
$10,000
19
20
21
22
23
24
Backlog
At FYE ($ in millions)
† Non-GAAP metrics. See “ReconciliaƟon of Non-GAAP Measures” at the end of this report for reconciliaƟon to GAAP metrics.
DECEMBER 2024
DEAR SHAREHOLDER
Fiscal 2024 was a milestone year for Toll Brothers. For the first time in our history, we
generated $10.6 billion of home sales revenues, over $2.0 billion of pre-tax income and
over $1.5 billion of net income. We produced record earnings per diluted share of
$15.01, a 21% increase over fiscal 2023, and our return on beginning equity was
23.1%, the third consecutive year above 20%. We delivered 10,813 homes at an
average price of approximately $977,000, and with an adjusted gross margin† of 28.4%.
Our SG&A expense was 9.3% of home sales revenues and our operating margin was
18.8%. In addition, we grew contracts by 27% in both units and dollars and increased
community count by 10% to 408 communities at year-end, positioning us for continued
growth in fiscal 2025 and beyond. During the year, we generated $1.0 billion of cash
flow from operations and returned $720 million to stockholders through share
repurchases and dividends, reducing our outstanding share count by nearly 5% in fiscal
2024.
This outstanding performance – even as mortgage rates remained elevated over the
past year – demonstrates the power of our luxury brand, the financial strength of our
buyers, and the success of our multi-year strategy of increasing spec home production,
widening our geographies, price points and product lines, and focusing on capital
efficiency. More broadly, it underscores the fundamental transformation that we, and
many of the nation’s other large, publicly traded homebuilders, have made to our
business models and operations over the past decade. We have grown revenues and
gained market share, lowered leverage, de-risked balance sheets, improved capital
efficiency and generated strong cash flows, all of which has allowed us to return a
substantial amount of capital to investors.
Our Strategy to Propel Growth
Several years ago, Toll Brothers began executing on a strategy that, at its core, was
focused on improving returns on the capital entrusted to us by our shareholders. This
included a plan for strategic growth and expansion that has allowed us to reach a larger
share of the luxury market while mitigating geographic and product concentration risks.
We now operate in over 60 markets across 24 states and we offer the greatest variety of
homes in the industry – from luxury single family homes to upscale townhomes and
active adult communities. Our home prices range from the $300,000s to over $5 million,
and well over 25% of our homebuyers paid all cash in our fourth quarter. We have been
able to enter new markets and expand our offerings while preserving all the qualities
that set us apart as America’s luxury homebuilder – an impeccable brand, our affluent
customer base, prestigious locations, distinctive architecture, unrivaled choice, and an
extraordinary customer experience.
Toll Brothers build-to-order homes have always been the hallmark of luxury in the
industry. Our Design Studios, the retail-like spaces where home buyers choose their
finishing selections, hit $1 billion in revenues in fiscal 2024. Over the past few years,
however, we have also woven into our growth strategy an increased emphasis on the
production and sale of spec homes, which we define as any home that has a foundation
poured without a buyer in place. We sell our spec homes at various stages of
construction, allowing us to capitalize on demand for quick move-in homes while still
affording many of our buyers the opportunity to personalize. We have steadily increased
sales of our spec homes from around 10% to roughly half of our sales. In the current
market, characterized by healthy demand for upscale homes and a shortage of these
homes on the resale market, we believe this is the right balance and the right strategy.
All of these strategies have proven their worth, as they have enabled us to increase our
home sales revenue by a compound annual growth rate of 10.4% over the past decade.
Mitigating Risk & Maximizing Returns
Our strategy was also crafted to squarely address the capital intensity that has
historically been associated with the homebuilding industry, primarily by adjusting the
way we own and control land. Ten years ago, at the end of fiscal 2014, we owned or
controlled 47,167 home sites. Of these, nearly 80% were owned and the remainder
were controlled through option arrangements, where we place a relatively small deposit
in exchange for the right to acquire land closer in time to when we build a home. To
support the acquisition of this land, we carried total debt of $3.4 billion and our net debt-
to-capital ratio† was 41.4% at our 2014 fiscal year-end. Fast forward to the end of fiscal
2024 and our total lot position stood at approximately 74,700 lots, but we had more than
doubled the percentage of lots optioned versus owned. Total debt was $2.8 billion and
our net debt-to-capital ratio† was 15.2%. Over this same period, we grew annual home
sales revenue from $3.9 billion in fiscal 2014 to $10.6 billion last year. So today, we now
own essentially the same number of home sites compared to a decade ago, but we
have grown our total lot count by over 50%, grown community count by 55% and we
nearly tripled the size of our business based on revenues – all with less debt. Looking
forward, we continue to target approximately 60% controlled and 40% owned land,
which includes land dedicated to homes in our backlog. This would give us one to two
years of owned land – sufficient to meet near-term deliveries while providing ample
opportunity for growth.
This increased capital efficiency has helped us generate significant operating cash flows
and has allowed us to return excess capital to our shareholders. Over the past five
years, we have generated an average of $1.1 billion of cash flow from operations each
year, and we have reduced our outstanding share count by nearly 30% through share
repurchases. Since 2016, we have bought back half of the company. It is clear that our
shift to a lighter owned land portfolio has helped free up cash, reduce debt and improve
shareholder returns – without sacrificing growth potential.
Making the Company Better Every Single Day
We have also taken great strides to become more efficient in our operations. In our
homebuilding operations, we have simplified designs, optimized floorplans, and reduced
SKU counts in our Design Studios. We recently launched our new Designer Appointed
Collections – a curation of finishes selected by nationally acclaimed interior designers –
to make it easier for our buyers to customize their homes while also reducing our costs.
Other initiatives have included a redesign of our divisional organization structure to
allow us to scale more efficiently and the implementation of new IT systems to increase
productivity.
These and other initiatives have helped us improve our margins. Since fiscal 2020, our
adjusted gross margin† has steadily improved from around 23.5% to above 28.0%. Over
the long term (and assuming normal economic conditions), we believe an adjusted
gross margin† at or above 27% is sustainable.
Likewise, several years ago, we set an internal goal to reduce our SG&A expense, as a
percentage of home sales revenue, to below 10%. Our teams responded with actions
aimed at improving productivity and eliminating redundancy, and over each of the past
two years we have achieved our goal. We have become an organization that is
committed to doing more with less and we will continue to look for opportunities to
leverage fixed costs, reduce overhead and gain efficiencies as we grow the business.
Leaning into Favorable Housing Trends
With these strategies firmly in place, and with the housing market continuing to benefit
from long-term trends that are driving buyers to new homes, I remain optimistic about
Toll Brothers’ future. These trends include the structural shortage of homes in the U.S.
(estimated at between 3 and 6 million homes) resulting from well over a decade of
underproduction, and favorable demographics driven by millennials, many of whom are
buying their first home later in life when they have higher incomes and accumulated
wealth, and baby boomers who are moving in retirement. Due primarily to the well-
known affordability issues in this country, the average age and wealth of a homebuyer
has increased. According to data published by the National Association of Realtors in
November, the median age of a first-time homebuyer is at an all-time high of 38 years
old and the median age of all buyers is now 56 years old. In addition, first-time buyers
comprised just 24% of the market in 2024, the lowest level in over 40 years. This means
the vast majority of buyers in the market are move-up or move-down. These trends play
right into our wheelhouse, as approximately 28% of our business is selling to older,
more affluent first-time buyers, and the balance is catering to move-up and move-down
buyers who are financially secure and have significant equity in their existing homes.
In addition, the resale market, our primary competition, continues to be locked up by
persistently high rates, with over half of outstanding mortgages under 4%. With limited
inventory driving resale prices higher, the new home premium, which averaged just 3%
in 2024, is the lowest it has been in decades, making new homes a great financial deal
compared to existing homes. In fact, the median age of an existing home in the U.S. is
now over 40 years old, making new homes even more attractive. They are built better,
require less maintenance, are less expensive to insure, are more energy efficient, and
most importantly are architecturally designed to appeal to today’s buyer. Many are also
part of communities that have sought after amenities. It is simply impossible or
prohibitively expensive to remodel most existing homes with these features, making the
value proposition for buying new even more compelling.
These trends, combined with the tremendous reservoir of wealth built up in the U.S.
over time (much of which is being passed down in the greatest generational wealth
transfer in history), represent tailwinds that should continue to support our business well
into the future.
The Toll Brothers Team – The Heart of The Company
When I joined Toll Brothers over thirty years ago, I was amazed at the depth of
leadership, the close-knit culture of teaching, and the spirit of entrepreneurship that our
founder Bob Toll continually fostered within the organization. From the start, Bob took
me under his wing and taught me the business from the ground up. No detail was too
small and no concept was too big. He took great pains to ensure that his leadership
team worked just as hard to develop the next generation of talent as they did the next
land opportunity. This ethos is one of the enduring legacies that Bob left us, and it is one
that we continue to cultivate as we prepare the next generation of leadership to continue
growing this incredible company.
We are sincerely grateful to our shareholders, clients, trade partners, and especially our
employees for believing in Toll Brothers. Together, we look forward to another great year
and a bright future for this company.
Sincerely,
Douglas C. Yearley, Jr.
Chairman & Chief Executive Officer
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☑
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 2024
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-09186
TOLL BROTHERS, INC.
(Exact name of Registrant as specified in its charter)
Delaware
23-2416878
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
1140 Virginia Drive
Fort Washington
Pennsylvania
19034
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code
(215) 938-8000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock (par value $.01)
TOL
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Act. Yes o No þ
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). Yes ☑ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging
growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☑
Accelerated filer ☐
Non-accelerated filer
☐
(Do not check if a smaller reporting company)
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in
the filing reflect the correction of an error to previously issued financial statements. o
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
As of April 30, 2024, the aggregate market value of our Common Stock held by non-affiliates (all persons other than executive officers and directors
of Registrant) of the Registrant was approximately $12,183,487,000.
As of December 18, 2024, there were approximately 100,037,000 shares of our Common Stock outstanding.
Documents Incorporated by Reference: Portions of the proxy statement of Toll Brothers, Inc. with respect to the 2025 Annual Meeting of
Stockholders, scheduled to be held on March 11, 2025, are incorporated by reference into Part III of this report.
TABLE OF CONTENTS
Page
PART I
ITEM 1. BUSINESS
1
ITEM 1A. RISK FACTORS
11
ITEM 1B. UNRESOLVED STAFF COMMENTS
20
ITEM 1C. CYBERSECURITY
20
ITEM 2. PROPERTIES
21
ITEM 3. LEGAL PROCEEDINGS
21
ITEM 4. MINE SAFETY DISCLOSURES
21
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
22
ITEM 6. [RESERVED]
23
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
24
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
43
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
43
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
43
ITEM 9A. CONTROLS AND PROCEDURES
44
ITEM 9B. OTHER INFORMATION
44
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
44
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
45
ITEM 11. EXECUTIVE COMPENSATION
46
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
46
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS; DIRECTOR
INDEPENDENCE
46
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
46
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
47
ITEM 16. FORM 10-K SUMMARY
54
SIGNATURES
55
PART I
ITEM 1. BUSINESS
Toll Brothers, Inc., a corporation incorporated in Delaware in May 1986, began doing business through predecessor entities in
1967. When this report uses the words “we,” “us,” “our,” and the “Company,” it refers 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.
General
We design, build, market, sell, and arrange financing for an array of luxury residential single-family detached home, attached
home, master-planned, and urban low-, mid-, and high-rise communities. In recent years, we have pursued a strategy of
broadening our product lines, price points and geographic footprint, as well as increasing the number of quick move-in (or
“spec”) homes that we sell relative to our traditional build-to-order homes. We cater to luxury first-time, move-up, empty-nester
(move-down), active-adult and second-home buyers in the United States, as well as urban and suburban renters under the brand
names Toll Brothers Apartment Living® and Toll Brothers Campus Living®. We also design, build, market, and sell high-
density, high-rise urban luxury condominiums with third-party joint venture partners through Toll Brothers City Living® (“City
Living”). At October 31, 2024, we were operating in 24 states and in the District of Columbia.
In the five years ended October 31, 2024, we delivered 49,407 homes from 986 communities, including 10,813 homes from 527
communities in fiscal 2024. At October 31, 2024, we had 1,041 communities in various stages of planning, development or
operations containing approximately 74,700 home sites that we owned or controlled through options. At fiscal year-end, were
were selling from 408 of these communities.
Backlog consists of homes under contract but not yet delivered to our home buyers. We had a backlog of $6.47 billion (5,996
homes) at October 31, 2024; we expect to deliver approximately 97% of these homes in fiscal 2025.
We operate our own architectural, engineering, mortgage, title, land development, insurance, smart home technology and
landscaping subsidiaries. We also develop master-planned and golf course communities as well as operate, in certain regions,
our own lumber distribution, house component assembly and manufacturing operations.
In addition to our residential for-sale business, we also develop and operate urban and suburban for-rent apartment communities
primarily through joint ventures. These projects are located in various metropolitan areas throughout the country and are
generally being operated or developed (or we expect will be developed) with partners under the brand names Toll Brothers
Apartment Living® and Toll Brothers Campus Living®
. At October 31, 2024, we or joint ventures in which we have an interest,
controlled 67 land parcels as for-rent apartment projects containing approximately 21,300 planned or completed units.
See “Investments in Unconsolidated Entities” below for more information relating to our joint ventures.
Our Communities and Homes
Our home building communities are generally located in affluent suburban areas near major transit hubs and highways that
provide access to employment and urban centers. They are generally located on land we have either acquired and developed or
acquired fully approved and, in some cases, improved.
At October 31, 2024, our home building communities were operating in the following major suburban and urban residential
markets:
•
Boston, Massachusetts metropolitan area
•
New Haven County, Connecticut
•
Westchester and Dutchess Counties, New York
•
New York metropolitan area
•
Central and northern New Jersey
•
Philadelphia, Pennsylvania metropolitan area
•
Virginia and Maryland suburbs of Washington, D.C.
•
Delaware
•
Raleigh and Charlotte, North Carolina metropolitan areas
1
•
Nashville, Tennessee
•
Charleston, Greenville, Hilton Head and Myrtle Beach, South Carolina
•
Atlanta, Georgia metropolitan area
•
Southeast and southwest coasts and the Jacksonville, Orlando, and Tampa areas of Florida
•
Detroit, Michigan metropolitan area
•
Dallas, Houston, Austin, and San Antonio, Texas metropolitan areas
•
Denver, Colorado metropolitan area, Fort Collins and Colorado Springs, Colorado
•
Phoenix and Sedona, Arizona
•
Las Vegas and Reno, Nevada metropolitan areas
•
Boise and Coeur d’Alene, Idaho metropolitan areas
•
Salt Lake City, Utah metropolitan area and St. George/southern Utah
•
San Diego and Palm Springs, California
•
Los Angeles, California metropolitan area and Orange County
•
San Francisco Bay, Sacramento, and San Jose areas of northern California
•
Seattle, Spokane, and Clark County, Washington metropolitan areas, and
•
Portland, Oregon metropolitan area.
We develop individual stand-alone single-product communities as well as multi-product, master-planned communities. Our
master-planned communities enable us to offer multiple home types and sizes to a broad range of move-up, first-time, empty-
nester, active-adult, and second-home buyers. We seek to realize efficiencies from shared common costs, such as land
development and infrastructure, over the several communities within the master-planned community.
Each of our detached home communities offers several home plans with the opportunity for many of our home buyers to select
various structural options and exterior styles. We design each community to fit existing land characteristics. We strive to
achieve diversity among architectural styles within a community by offering a variety of house models and several exterior
design options for each model, preserving existing trees, foliage and other natural features whenever feasible, and curving street
layouts to allow relatively few homes to be seen from any vantage point. Our communities have attractive entrances with
distinctive signage and landscaping. We believe that our added attention to detail gives each community a diversified
neighborhood appearance that enhances home values.
Our attached home communities generally offer one- to four-story homes, provide for select exterior options, and often include
commonly owned recreational facilities, such as clubhouses, playing fields, swimming pools, and tennis courts.
While historically most of our homes have been sold on a build-to-order basis where we do not begin construction of the home
until we have a signed contract with a customer, over the past two years, we have increased the number of spec homes in most
of our communities, which are homes started without a signed agreement with a customer. In fiscal 2024 and 2023,
approximately 49% and 27% of deliveries were spec homes. These homes allow us to compete more effectively with existing
homes available in the market, especially for homebuyers that require a home within a short time frame. We sell our spec
homes at various stages of construction, which allows many buyers of such homes to select their finishing options at our design
studios. We determine our spec home strategy for each community based on local market factors and maintain a level of spec
home inventory based on our current and planned sales pace and construction cadence for the community.
We are continuously developing new designs to replace or augment existing ones to ensure that our homes reflect current
consumer tastes. Increasingly, we are modifying designs and the number of options we provide to offer our customers a curated
experience while gaining efficiencies in the home building process, particularly in respect to our affordable luxury product and
our spec homes. We use our own architectural staff and also engage third-party architectural firms to develop new designs.
A wide selection of structural and finishing options are available to our home buyers for additional charges. The number and
complexity of options available typically increase with the size and base sales price of our homes. A greater variety of options
are generally available for detached build-to-order homes as compared to attached homes and spec homes. Major structural
options include home offices, fitness rooms, multi-generational living suites, finished basements, and spacious indoor/outdoor
2
living areas. We also offer numerous interior fit-out options such as flooring, wall tile, plumbing, cabinets, fixtures, appliances,
lighting, and home-automation and security technologies.
We market our high-quality homes to both upscale luxury and affordable luxury home buyers. Our luxury homes are marketed
primarily to buyers who generally have previously owned a home and who are seeking to buy a larger or more desirable home
— the so-called “move-up” market. Our affordable luxury homes are marketed primarily to more affluent first-time buyers. We
believe our reputation as a builder of luxury homes in these markets enhances our competitive position with respect to the sale
of our smaller, more moderately priced homes.
We continue to pursue growth initiatives by expanding our product lines and price points to appeal to buyers across the
demographic spectrum. We have also significantly expanded our geographic footprint over the past decade. In addition to our
traditional “move-up” home buyer, we are focusing on the “empty-nester” market, the millennial generation, and the affordable
luxury buyer.
We market to the “empty-nester” (or “move-down”) market, which we believe has strong growth potential. We have developed
a number of home designs with features such as single-story living and first-floor primary bedroom suites, as well as
communities with recreational amenities, such as golf courses, marinas, pool complexes, country clubs, fitness and recreation
centers that we believe appeal to this category of home buyer. We have integrated certain of these designs and features in some
of our other home types and communities. As of October 31, 2024, we were selling from 76 age-restricted active-adult
communities, in which at least one home occupant must be at least 55 years of age.
With the millennial generation in its prime family formation years, we also continue to focus on this group with our core
suburban homes, affordable luxury offerings, urban condominiums and luxury rental apartment products.
Through our City Living brand, with third-party joint venture partners, we currently are developing two high-density, high-rise
urban luxury communities to serve affluent move-up families, empty-nesters, and young professionals who are seeking to live
in or close to major cities.
Our City Living communities are generally high-rise condominiums that take an extended period of time to construct. We
generally start selling homes in these communities after construction has commenced. By the time construction has been
completed, we typically have a significant number of homes under contract with buyers in backlog. Once construction has been
completed, the homes in backlog in these communities are generally delivered quickly. Because of the larger upfront costs and
longer development time periods associated with high-rise projects, we generally expect to continue developing future high
density, high-rise urban luxury condominium communities through joint ventures with third parties.
We believe that the demographics supporting the luxury first-time, move-up, empty-nester, active-adult, affordable luxury and
second-home upscale markets will provide us with an opportunity for growth in the future. We continue to believe that many of
our communities are in desirable locations that are difficult to replace and that many of these communities have substantial
embedded value that may be realized in the future.
At October 31, 2024, we were selling homes from 408 communities, compared to 370 communities at October 31, 2023, and
348 communities at October 31, 2022.
The following table summarizes certain information with respect to our operating communities at October 31, 2024:
Total number
of operating
communities
Number of
selling
communities
Homes
approved
Homes
closed
Homes under
contract but
not closed
(Backlog)
Home sites
available
North
59
43
6,029
3,200
855
1,974
Mid-Atlantic
64
52
6,247
1,918
786
3,543
South
165
145
18,454
6,662
2,003
9,789
Mountain
126
117
17,266
8,126
1,595
7,545
Pacific
57
51
5,519
2,021
757
2,741
Total
471
408
53,515
21,927
5,996
25,592
At October 31, 2024, significant site improvements had not yet commenced on approximately 12,000 of the 25,592 available
home sites. Of the 25,592 available home sites, approximately 8,900 were not yet owned by us but were controlled through
options.
3
Of our 471 operating communities at October 31, 2024, a total of 408 communities were offering homes for sale; with the
remaining consisting primarily of sold out communities where not all homes had been completed and delivered. Of the 408
communities in which homes were being offered for sale at October 31, 2024, a total of 329 were detached home communities
and 79 were attached home communities.
At October 31, 2024, we had 3,526 spec homes in our communities, of which 2,664 were under construction and 862 were
completed.
As a result of the breath of our products and geographic footprint, we have a wide range of base sales prices for our homes. The
percentage of the 10,813 homes delivered in fiscal 2024 within the various ranges of base sales price was as follows:
Range of Base Sales Price
Percentage of Homes
Delivered in Fiscal 2024
Less than $500,000
11%
$500,000 to $750,000
31%
$750,000 to $1,000,000
25%
$1,000,000 to 2,000,000
27%
More than $2,000,000
6%
Of the homes delivered in fiscal 2024, approximately 27% of our home buyers paid the full purchase price in cash; the
remaining home buyers borrowed approximately 68% of the sales price of the home.
The table below provides the average value of all structural and finishing options purchased by our home buyers, including lot
premiums and excluding incentives, as well as the value of these options and premiums as a percent of the base sales price of
the homes purchased, excluding incentives, in fiscal 2024, 2023, and 2022:
2024
2023
2022
Option
value (in
thousands)
Percent of
base sales
price
Option
value (in
thousands)
Percent of
base sales
price
Option
value (in
thousands)
Percent of
base sales
price
Overall
$
206
24.9 % $
224
26.5 % $
190
25.3 %
Detached
$
232
27.3 % $
251
29.2 % $
215
28.9 %
Attached
$
125
16.4 % $
136
17.0 % $
117
15.4 %
In general, the ability to purchase a premium lot or customize a home with structural options and interior finishes varies widely
across our product lines and what stage of construction the home is in when a purchase contract is signed, which may result in
significant variation in the option value as a percentage of base sales price. For example, our attached homes and our spec
homes do not offer the opportunity for buyers to add significant structural options to their homes and thus they have a smaller
option value as a percentage of base sales price.
For more information regarding revenues, net contracts signed, income (loss) before income taxes, and assets by segment, see
“Management’s Discussion and Analysis of Financial Condition and Results of Operations – Segments” in Item 7 of this Form
10-K.
Acquisitions
From time to time, we acquire home builders in order to expand our footprint and/or product offerings in an existing market or
to enter a new market. These acquisitions are generally completed using available cash on hand and primarily consist of smaller
privately-held builders. In fiscal 2024 and 2023, we did not make any acquisitions.
In fiscal 2022, we acquired substantially all of the assets and operations of a privately-held home builder with operations in San
Antonio, Texas for approximately $48.1 million in cash. The assets acquired, which consisted of 16 communities, were
primarily inventory, including approximately 450 home sites owned or controlled through land purchase agreements.
Land Policy
Before entering into an agreement to purchase a land parcel, we complete extensive comparative studies and analyses that assist
us in evaluating the acquisition. These analyses may include soil tests, environmental studies, an evaluation of necessary zoning
and other governmental entitlements and extensive market research to evaluate which of our product offerings are appropriate
for the market. In addition to purchasing land parcels outright, we strive to enter into option agreements and other arrangements
4
to defer the acquisition of land until we are closer in time to delivering the completed home to our customer. We have also
entered into several joint ventures with other builders, financial partners, or developers to develop land for the use of the joint
venture partners or for sale to third parties. These structures are generally more capital efficient and less risky than outright land
purchases that occur earlier in the entitlement and development process. However, they are generally more expensive.
Our business is subject to many risks, including risks associated with obtaining the necessary approvals on a property and
completing the land improvements on it. In order to reduce the financial risk associated with land acquisitions and holdings and
to more efficiently manage our capital, where practicable, we enter into option agreements (also referred to herein as “land
purchase contracts,” “purchase agreements,” or “options”) to purchase land, on a non-recourse basis, thereby limiting our
financial exposure to amounts expended in obtaining any necessary governmental approvals, the costs incurred in the planning
and design of the community, and, in some cases, some or all of the cost of the option (also referred to as “deposits”). Option
agreements enable us to obtain necessary governmental approvals before we acquire title to the land, and allow us to acquire
lots over a specified period of time at contracted prices. The use of these agreements may increase our overall cost basis in the
land that we eventually acquire, but reduces our risk by allowing us to obtain the necessary development approvals before we
expend significant funds to acquire the land. In prior periods, during the time it took to obtain approvals, the value of the
purchase agreements and land generally increased; however, in any given time period, this may not happen. We have the ability
to extend some of these purchase agreements for varying periods of time, which in some cases would require an additional
payment. Our purchase agreements are typically subject to numerous conditions, including, but not limited to, obtaining
necessary governmental approvals for the proposed community. In certain instances, our deposit under an agreement may be
returned to us if all approvals are not obtained, although predevelopment costs usually will not be recoverable. We generally
have the right to cancel any of our agreements to purchase land by forfeiture of some or all of the deposits we have made
pursuant to the agreement.
During fiscal 2024 and 2023, we acquired control of approximately 14,900 and 4,200 home sites, respectively, net of options
terminated and lots sold. During fiscal year 2024 and 2023, we forfeited control of over 4,000 lots in each year that were
subject to land purchase agreements primarily because the planned community no longer met our development criteria. At
October 31, 2024, we owned or controlled approximately 74,700 home sites, as compared to approximately 70,700 home sites
at October 31, 2023. At October 31, 2024 and October 31, 2023, the percentage of these home sites optioned was
approximately 55% and 49%, respectively.
We, either alone or in joint venture, are developing several parcels of land for master-planned communities in which we intend
to build homes on a portion of the lots, with the remaining lots being sold to other builders. At October 31, 2024, one of these
master-planned communities was wholly owned, while the remaining communities were being developed through joint
ventures with other builders or financial partners. At October 31, 2024, our Land Development Joint Ventures owned
approximately 22,700 home sites. At October 31, 2024, we had agreed to acquire 316 home sites. We expect to purchase
approximately 9,000 additional home sites from several of our Land Development Joint Ventures over a number of years.
Our ability and willingness to continue development activities over the long term will depend on, among other things, a suitable
economic environment and our continued ability to locate and enter into options or agreements to purchase land, obtain
governmental approvals for suitable parcels of land, and consummate the acquisition and complete the development of such
land on acceptable terms.
The following is a summary of home sites for future communities (as distinguished from operating communities) that we either
owned or controlled through options or purchase agreements at October 31, 2024:
Number of
communities
Number of
home sites
North
95
6,595
Mid-Atlantic
133
8,621
South
142
11,799
Mountain
117
9,727
Pacific
83
6,389
Total
570
43,131
Of the 43,131 planned home sites at October 31, 2024, we owned 11,268 and controlled 31,863 through options and purchase
agreements.
At October 31, 2024, the aggregate purchase price of land parcels subject to option and purchase agreements in both operating
and future communities was approximately $6.10 billion (including $26.8 million of land to be acquired from joint ventures in
which we have invested). Of the $6.10 billion of land purchase contracts, we paid or deposited $549.2 million. If we acquire all
5
of these land parcels, we will be required to pay an additional $5.55 billion. The purchases of these land parcels are expected to
occur over the next several years. We have additional land parcels under option that have been excluded from this aggregate
purchase price because we do not believe that we will complete the purchase of these land parcels and no additional funds will
be required from us to terminate these contracts. These option contracts have either been written off or written down to the
estimated amount that we expect to recover when the contracts are terminated.
We have a substantial amount of land currently under control for which approvals have been obtained or are being sought. We
devote significant resources to locating suitable land for future development and obtaining the required approvals on land under
our control. There can be no assurance that the necessary development approvals will be secured for the land currently under
our control or for land that we may acquire control of in the future. In addition, upon obtaining such development approvals, we
may elect not to complete the purchases of land under option or complete the development of land that we own. We generally
have been successful in obtaining governmental approvals in the past. We believe that we have an adequate supply of land in
our existing communities and proposed communities (assuming that all properties are developed) to maintain our operations at
current levels for several years.
Community Development
We expend considerable effort in developing a plan for each community, which includes determining the size, style, and price
range of the homes; the layout of the streets and individual home sites; and the overall community design. After the necessary
governmental subdivision and other approvals have been obtained, which may take several years, we improve the land by
clearing and grading it; installing roads, underground utilities, recreational amenities, and distinctive entrance features; and
staking out individual home sites.
We act as a general contractor for substantially all of our communities. Subcontractors perform all home construction and land
development work, generally under fixed-price contracts. We generally have multiple sources for the materials we purchase and
believe our suppliers have sufficient capacity to support our business operations. However, factors beyond our control can and
have resulted in disruptions to our supply chain, the availability of labor, and the ability of municipalities to process approvals,
which can result in increased costs and elongated production cycles. See “Risk Factors – Risks Related to Our Business and
Industry” in Item 1A and “Manufacturing/Distribution Facilities” in Item 2 of this Form 10-K.
Our construction managers coordinate subcontracting activities and supervise all aspects of construction work and quality
control. One of the ways in which we seek to achieve home buyer satisfaction is by providing our construction managers with
incentive compensation arrangements based upon each home buyer’s satisfaction, as expressed by the buyers’ responses on pre-
and post-closing questionnaires.
The most significant variable affecting the timing of our sales, other than housing demand, is the opening of the community for
sale, which occurs after receipt of final land regulatory approvals. Receipt of approvals allows us to begin the process of
obtaining executed sales contracts from home buyers. Although our sales and construction activities vary somewhat by season,
which can affect the timing of closings, any such seasonal effect is relatively insignificant compared to the effect of the timing
of receipt of final regulatory approvals, the opening of the community, and the subsequent timing of closings.
Marketing and Sales
We believe that our marketing strategy for our homes has enhanced our reputation as a builder and developer of high quality
luxury homes. We believe this reputation results in greater demand for all of our product types. We generally include attractive
design features even in our less expensive homes based on our belief that these enhancements improve our marketing and sales
effort.
In determining the prices for our homes, in addition to management’s extensive experience, we utilize an internally developed
value analysis program that compares our homes with homes offered by other builders and competitive resale homes in each
local market area. In our application of this program, we assign a positive or negative dollar value to differences between our
product features and those of our competitors, such as home and community amenities, location, and reputation.
We typically have a sales center in each community that is staffed by our own sales personnel. Sales personnel are generally
compensated with both salary and commission. A significant portion of our sales is also derived from the introduction of
customers to our communities by local real estate agents, to whom we pay a real estate agent commission.
We expend great effort and cost in designing and merchandising our model homes, which play an important role in our
marketing. Interior merchandising varies among the models and is carefully selected to reflect the lifestyles of prospective
buyers.
Visitors to our website, www.TollBrothers.com, can obtain detailed information regarding our communities and homes across
the country, take panoramic or video tours of our homes, and design their own homes based upon our available floor plans and
6
options. We have increasingly focused our marketing efforts to the digital environment for media buying and have adopted a
number of virtual tools and techniques to allow our sales personnel to engage in remote interactions with potential customers.
We have a two-step sales process. The first step takes place when a potential home buyer visits one of our communities (either
in person or virtually) and decides to purchase one of our homes, at which point the home buyer signs a non-binding deposit
agreement and provides a small, refundable deposit. This deposit will reserve, for a short period of time, the home site or unit
that the home buyer has selected. This deposit also locks in the base price of the home. Because these deposit agreements are
non-binding, they are not recorded as signed contracts, nor are they recorded in backlog. Deposit rates are tracked on a weekly
basis to help us monitor the strength or weakness in demand in each of our communities. If demand for homes in a particular
community is strong, we determine whether the base sales prices in that community should be increased. If demand for the
homes in a particular community is weak, we determine whether or not sales incentives and/or discounts on home prices should
be adjusted.
The second step in the sales process occurs when we sign a binding agreement of sale contract with the home buyer and the
home buyer provides a larger cash down payment that is generally non-refundable. Cash down payments averaged
approximately 8% of the total purchase price of a home in fiscal year 2024. Between the time that the home buyer signs the
non-binding deposit agreement and the binding agreement of sale, which typically takes about three weeks, the home buyer is
required to complete a financial questionnaire that allows us to determine whether the home buyer has the financial resources
necessary to purchase the home. If we determine that the home buyer is not financially qualified, we will not enter into an
agreement of sale. During fiscal 2024, 2023, and 2022, our customers signed net contracts for $10.07 billion (10,231 homes),
$7.91 billion (8,077 homes), and $9.07 billion (8,255 homes), respectively. When we report net contracts signed, the number
and value of contracts signed are reported net of all cancellations occurring during the reporting period, whether the cancelled
contracts were originally signed in that reporting period or in a prior period. Additionally, all options selected during the
reporting period are reported as sales in that reporting period regardless of when the original contract was signed. Only
outstanding agreements of sale that have been signed by both the home buyer and us as of the end of the period for which we
are reporting are reported as contracts and included in backlog.
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 national, regional and community banks continue to recognize the long-term value in creating
relationships with our affluent 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, better able to secure mortgages due to their typically lower loan-
to-value ratios and attractive credit profiles, as compared to the average home buyer.
Our mortgage subsidiary, Toll Brothers Mortgage Company (“TBMC”), provides mortgage financing for a portion of our home
closings. Our mortgage subsidiary determines whether the home buyer qualifies for the mortgage that the home buyer is
seeking based upon information provided by the home buyer and other sources. For those home buyers who qualify, our
mortgage subsidiary provides the home buyer with a mortgage commitment that specifies the terms and conditions of a
proposed mortgage loan based upon then-current market conditions.
Information about the number and amount of loans funded by our mortgage subsidiary is contained in the table below.
Fiscal year
Total
Toll Brothers,
Inc.
settlements
(a)
TBMC
financed
settlements*
(b)
Gross
capture rate
(b/a)
Amount
financed
(in millions)
2024
10,813
4,114
38.0%
$
2,131.2
2023
9,597
3,123
32.5%
$
1,598.6
2022
10,515
3,706
35.2%
$
2,030.6
*
Amounts exclude referred loans, which amounted to 8.5%, 9.5%, and 6.5% of our home closings in fiscal 2024, 2023, and
2022, respectively.
Prior to the actual closing of the home and funding of the mortgage, the home buyer may 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 third-party established mortgage financing institutions (“investors”) that are willing to honor the terms and conditions,
including the 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,
7
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.
At October 31, 2024, our mortgage subsidiary was committed to fund $1.84 billion of mortgage loans. Of these commitments,
$168.8 million, as well as $182.8 million of mortgage loans receivable, had “locked-in” interest rates as of October 31, 2024.
Our mortgage subsidiary funds its commitments through a combination of its own capital, capital provided from us, its loan
facility, and the sale of mortgage loans to various investors. Our mortgage subsidiary has commitments from investors to
acquire all $351.7 million of these locked-in loans and receivables. Our home buyers had not locked in the interest rate on the
remaining $1.67 billion of mortgage loan commitments as of October 31, 2024.
Backlog
We had a backlog of $6.47 billion (5,996 homes) at October 31, 2024; $6.95 billion (6,578 homes) at October 31, 2023; and
$8.87 billion (8,098 homes) at October 31, 2022. Of the 5,996 homes in backlog at October 31, 2024, approximately 97% are
expected to be delivered by October 31, 2025. This delivery estimate is based on current expectations regarding our backlog
conversion rate. Our backlog conversion rate can vary based on a number of factors, including the availability of subcontractors
and qualified trades people; the availability of adequate utility infrastructure and services; the ability of municipalities to
process permits, conduct inspections and take similar actions in a timely manner; and shortages, or delays in availability. See
“Risk Factors – Risks Related to Our Business and Industry – Component shortages and increased costs of labor and supplies
are beyond our control and can result in delays and increased costs to develop our communities” in Item 1A of this Form 10-K.
Competition
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 also provide competition. We compete primarily on the basis of price, location, design, quality, service, and reputation.
We believe our financial stability, relative to many other home builders in our industry, is a favorable competitive factor.
Seasonality
Our quarterly operating results typically fluctuate with the seasons. A significant portion of our agreements of sale are generally
entered into with customers in the winter and spring months. Weather-related events can delay housing starts and closings and
increase costs. See “Risk Factors – Risks Related to Our Business and Industry – Our quarterly operating results may fluctuate
due to the seasonal nature of our business” and “Risk Factors – Risks Related to Other Events and Factors – Adverse weather
conditions, natural disasters, and other conditions could disrupt the development of our communities, which could harm our
sales and results of operation” in Item 1A of this Form 10-K.
Investments in Unconsolidated Entities
We have investments in joint ventures (i) to develop lots for the joint venture participants and for sale to outside builders
(“Land Development Joint Ventures”); (ii) to develop for-sale homes (“Home Building Joint Ventures”); (iii) to develop luxury
for-rent residential apartments and single family homes, and commercial space (“Rental Property Joint Ventures”); and (iv) to
provide financing and land banking for residential builders and developers for the acquisition and development of land and
home sites (“Other Joint Ventures”). At October 31, 2024, we had investments of $1.01 billion in these unconsolidated entities
and were committed to invest or advance up to an additional $312.8 million to these entities if they require additional funding.
In fiscal 2024, 2023, and 2022, we recognized (loss) income from the unconsolidated entities in which we had an investment of
$(23.8) million, $50.1 million, and $23.7 million, respectively. In addition, we earned construction and management fee income
from these unconsolidated entities of $40.0 million in fiscal 2024, $39.2 million in fiscal 2023, and $33.9 million in fiscal 2022.
Land Development Joint Ventures
At October 31, 2024, we had investments in 16 Land Development Joint Ventures to develop land. Some of these Land
Development Joint Ventures develop land for the sole use of the venture participants, including us, and others develop land for
sale to the joint venture participants and to unrelated builders. At October 31, 2024, we had $388.6 million invested in our Land
Development Joint Ventures and funding commitments of $243.0 million to six of the Land Development Joint Ventures which
will be funded if additional investments in the ventures are required. At October 31, 2024, eleven of these joint ventures had
aggregate loan commitments of $639.6 million and outstanding borrowings against these commitments of $381.6 million. At
October 31, 2024, our Land Development Joint Ventures owned approximately 22,700 home sites.
At October 31, 2024, we had agreed to acquire 316 home sites from four of our Land Development Joint Ventures for an
aggregate purchase price of approximately $26.8 million. In addition, we expect to purchase approximately 9,000 additional
8
home sites over a number of years from several of these joint ventures. The purchase prices of these home sites will be
determined at a future date. We count lots in these joint ventures as optioned lots if we have a contractual right to acquire them.
Home Building Joint Ventures
At October 31, 2024, we had an aggregate $58.4 million of investments in our Home Building Joint Ventures to develop luxury
for-sale homes. In fiscal 2024, the value of net contracts signed by our Home Building Joint Ventures was $125.0 million (101
homes), and they delivered $267.6 million (238 homes) of revenue.
Rental Property Joint Ventures
As part of our strategy to expand product lines, over the past several years, we acquired control of a number of land parcels
intended to be developed as for-rent apartment or single family rental home projects, including several student housing sites. At
October 31, 2024, we had an aggregate of $549.2 million of investments in 40 Rental Property Joint Ventures. At October 31,
2024, we or joint ventures in which we have an interest controlled 67 land parcels that are planned or operating as for-rent
apartment projects containing approximately 21,300 units. At October 31, 2024, joint ventures in which we had an interest had
aggregate loan commitments of $3.54 billion and outstanding borrowings against these commitments of $2.75 billion. These
projects are located in multiple metropolitan areas throughout the country and are being operated or developed (or we expect
will be developed) with partners under the brand names Toll Brothers Apartment Living and Toll Brothers Campus Living.
At October 31, 2024, we had approximately 4,500 units in for-rent apartment projects that were occupied or ready for
occupancy, 5,700 units in the lease-up stage, 6,500 units in the design phase or under development, and 4,700 units in the
planning stage. Of the 21,300 units at October 31, 2024, 13,300 were owned by joint ventures in which we have an interest,
approximately 2,400 were owned by us, and land underlying 5,600 were under contract to be purchased by us.
Regulatory and Environmental Matters
We are subject to various local, state, and federal statutes, ordinances, rules, and regulations concerning zoning, building
design, construction, and similar matters, including local regulations that impose restrictive zoning and density requirements. In
a number of our markets, there has been an increase in state and local legislation authorizing the acquisition of land as dedicated
open space, mainly by governmental, quasi-public, and nonprofit entities. In addition, we are subject to various licensing,
registration, and filing requirements in connection with the construction, advertisement, and sale of homes in our communities.
The impact of these laws and requirements has been to increase our overall costs, and they may have delayed, and in the future
may delay, the opening of communities, or may have caused, and in the future may cause, us to conclude that development of
particular communities would not be economically feasible, even if any or all necessary governmental approvals were obtained.
See “Land Policy” in this Item 1. We also may be subject to periodic delays or may be precluded entirely from developing
communities due to building moratoriums in one or more of the areas in which we operate. Generally, such moratoriums relate
to insufficient water or sewage facilities or inadequate road capacity.
In order to secure certain approvals in some areas, we may be required to provide affordable housing at below market rental or
sales prices. The impact of these requirements on us depends on how the various state and local governments in the areas in
which we engage, or intend to engage, in development implement their programs for affordable housing. To date, these
restrictions have not had a material impact on us.
We also are subject to a variety of local, state, and federal statutes, ordinances, rules, and regulations concerning protection of
public health and the environment (“environmental laws”). The particular environmental laws that apply to any given
community vary according to the location and environmental condition of the site and the present and former uses of the site.
An increased regulatory focus on reducing greenhouse gas emissions has led to legislative mandates in certain jurisdictions that
require new homes to be more energy efficient than existing homes, or that mandate energy efficient features, such as solar
panels, be included in new construction. Complying with these environmental laws may result in delays, may cause us to incur
substantial compliance and other costs, and/or may prohibit or severely restrict development in certain environmentally
sensitive regions or areas.
Before consummating an acquisition of land, we generally engage independent environmental consultants to evaluate land for
the potential of hazardous or toxic materials, wastes, or substances, and we believe that because of this, we have not been
significantly affected to date by the presence of such materials on our land.
Our mortgage subsidiary is subject to various state and federal statutes, rules, and regulations, including those that relate to
licensing, lending operations, and other areas of mortgage origination and financing. The impact of those statutes, rules, and
regulations can be to increase our home buyers’ cost of financing, increase our cost of doing business, and restrict our home
buyers’ access to some types of loans.
9
Insurance/Warranty
All of our homes are sold under our limited warranty as to workmanship and mechanical equipment. Many homes also come
with a limited multi-year warranty as to structural integrity.
We maintain insurance, subject to deductibles and self-insured amounts, to protect us against various risks associated with our
activities, including, among others, general liability, “all-risk” property, construction defects, workers’ compensation,
automobile, and employee fidelity. We accrue for our expected costs associated with the deductibles and self-insured amounts.
Human Capital Resources
At October 31, 2024, we employed approximately 4,900 persons full-time, as compared to approximately 4,800 employees at
October 31, 2023. At October 31, 2024, approximately 1% of our employees were covered by a collective bargaining
agreement.
We believe our employees are among our most important resources and are critical to our continued success. We focus
significant attention on attracting and retaining talented and experienced individuals to manage and support our operations, and
our management team routinely reviews employee turnover rates at various levels of the organization. Management also
reviews employee engagement and satisfaction surveys to monitor employee morale and receive feedback on a variety of
issues. We pay our employees competitively and offer a broad range of company-paid benefits, which we believe are
competitive with others in our industry.
We are committed to hiring, developing and supporting a diverse and inclusive workplace. Our management teams and all of
our employees are expected to exhibit and promote honest, ethical and respectful conduct in the workplace. All of our
employees must adhere to a code of conduct that sets standards for appropriate behavior and includes required annual training
on preventing, identifying, reporting and stopping any type of unlawful discrimination.
In recent years, we have implemented protocols and procedures to protect our employees, subcontractors and customers. For
example, we have expanded technologies that allow for virtual interactions in many aspects of our business, including customer
facing activities. Many administrative and operational routines have been modified including with respect to providing our
employees with greater flexibility to work remotely. Many of these modifications have been well received by our employees
with minimal disruption to our operations and have continued through fiscal 2024.
Available Information
We file annual, quarterly and current reports, proxy statements, and other information with the Securities and Exchange
Commission (the “SEC”). These filings are available over the internet at the SEC’s website at http://www.sec.gov.
Our principal Internet address is www.tollbrothers.com. We make our annual reports on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d)
of the Securities Exchange Act of 1934 available through our website under “Investor Relations” (our “Investor Relations
website”), free of charge, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the
SEC.
We provide information about our business and financial performance, including our Company Overview, on our Investor
Relations website. Additionally, we webcast our earnings calls and certain events we participate in with members of the
investment community on the Investor Relations portion of our website. Further corporate governance information, including
our code of ethics and business conduct, corporate governance guidelines, and board committee charters, is also available on the
Investor Relations portion of our website. The content of our websites is not incorporated by reference into this Annual Report
on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be
inactive textual references only.
10
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: market
conditions; mortgage rates; inflation rates; demand for our homes; our build-to-order and spec strategy; sales paces and prices;
effects of home buyer cancellations; our strategic priorities; growth and expansion; our land acquisition, land development and
capital allocation priorities; anticipated operating results; home deliveries; financial resources and condition; changes in
revenues, profitability, margins and returns; changes in accounting treatment; cost of revenues, including expected labor and
material costs; availability of labor and materials; impacts of tariffs; selling, general and administrative expenses; interest
expense; inventory write-downs; home warranty and construction defect claims; unrecognized tax benefits; anticipated tax
refunds; joint ventures in which we are involved; anticipated results from our investments in unconsolidated entities; our ability
to acquire land and pursue real estate opportunities; our ability to gain approvals and open new communities; our ability to
market, construct and sell homes and properties; our ability to deliver homes from backlog; our ability to secure materials and
subcontractors; our ability to produce the liquidity and capital necessary to conduct normal business operations or to expand
and take advantage of opportunities; the outcome of legal proceedings, investigations, and claims; and the impact of public
health or other emergencies.
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. This can occur as a result of assumptions or estimates
that differ from actual results or as a consequence of known or unknown risks and uncertainties. Many of the factors mentioned
in “Item 1A - Risk Factors” below 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. These statements may include guidance regarding
our future performance, such as our anticipated annual revenue, home deliveries, and margins, that represents management’s
estimates as of the date of publication. Guidance is based upon a number of assumptions and estimates that, while presented
with numerical specificity, is inherently subject to significant business, economic and competitive uncertainties and
contingencies, many of which are beyond our control and are based upon specific assumptions with respect to future business
decisions, some of which will change. Forward-looking statements, including guidance, 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” below. 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.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
Information about our executive officers is incorporated by reference from “Part III, Item 10” of this Form 10-K.
ITEM 1A. RISK FACTORS
Risks Related to Our Business and Industry
We are subject to demand fluctuations in the housing industry. Any reduction in demand would adversely affect our
business, results of operations, and financial condition.
Demand for our homes and rental apartments is subject to fluctuations and difficult to predict, often due to factors outside of
our control, such as employment levels, consumer confidence and spending, housing demand, availability of financing for
homebuyers, interest rates, availability, quality and prices of new homes compared to existing inventory, and demographic
trends. In a housing market downturn, our sales and results of operations will be adversely affected; we may have significant
inventory impairments and other write-offs; our gross margins may decline significantly from historical levels; and we may
incur substantial losses from operations. At any particular time, we cannot accurately predict whether housing market
conditions will improve, deteriorate or continue as they exist at that time.
11
Adverse changes in economic conditions in markets where we conduct our operations and where prospective purchasers
of our homes live could reduce the demand for homes and, as a result, could adversely affect our business, results of
operations, and financial condition.
Adverse changes in economic conditions in markets where we conduct our operations and where prospective purchasers of our
homes live have had and may in the future have a negative impact on our business. Adverse changes in mortgage rates,
employment levels, job growth, consumer confidence, perceptions regarding the strength of the housing market, and population
growth, or an oversupply of homes for sale may reduce demand or depress prices for our homes and cause home buyers to
cancel their agreements to purchase our homes. In addition, because we have increased our supply of spec homes relative to our
build-to-order homes, adverse changes in economic conditions could cause us to reduce prices more rapidly to avoid carrying
large amounts of finished inventory. This, in turn, could adversely affect our results of operations and financial condition.
Significant inflation, higher interest rates or deflation could adversely affect our business and financial results.
Inflation can adversely affect us by increasing costs of land, materials and labor, and interest rates. All of these factors can have
a negative impact on housing affordability and demand for our homes. In a highly inflationary environment, we may be unable
to raise the sales prices of our homes at or above the rate of inflation, which could reduce our profit margins. In addition, our
cost of capital, labor and materials can increase, which could have an adverse impact on our business or financial results.
Inflation may also accompany or give rise to higher interest rates, which could adversely impact our customers’ ability to obtain
financing on favorable terms, if at all, thereby decreasing demand for our homes. In recent years, high inflation and rising
interest rates were primary drivers of decreases in home demand, including our homes. If these trends persist, they could
adversely impact our business and financial results in the future.
Conversely, deflation could cause an overall decrease in spending and borrowing capacity, which could lead to deterioration in
economic conditions and employment levels. Deflation could also cause the value of our inventories to decline or reduce the
value of existing homes. These, or other factors that increase the risk of significant deflation, could have a negative impact on
our business or financial results.
The risks associated with our land, lot and rental inventory could adversely affect our business or financial results.
There are substantial risks inherent in controlling, owning and developing land. If housing demand declines, we may not be able
to build, sell or rent homes profitably in some of our communities, we may not be able to fully recover the costs of some of the
land and lots we own, and we may forfeit deposits on land that we put under control through option arrangements. We acquire
land or make payments to control land for expansion into new markets and for replacement of land inventory and expansion
within existing markets. If housing demand in a given market declines below the levels that we expected when we acquired or
gained control of land, we may have to sell or rent homes or land for a lower profit margin or record inventory impairment
charges on our land and lots. Due to the decline in our business during the 2006–2011 downturn in the housing industry, we
recognized significant inventory impairments. We cannot assure you that significant inventory impairments will not occur again
in the future.
If land is not available at reasonable prices, our sales and results of operations could decrease.
The home building industry is highly competitive for suitable land and the risk inherent in purchasing and developing land
increases as consumer demand for housing increases. In the long term, our operations depend on our ability to obtain land at
reasonable prices for the development of our residential communities. At October 31, 2024, we had approximately 74,700 home
sites that we owned or controlled through options. In the future, changes in the availability of land, competition for available
land, availability of financing to acquire land, zoning regulations that limit housing density, and other market conditions may
hurt our ability to obtain land for new residential communities at acceptable prices. If the supply of land appropriate for the
development of our residential communities becomes more limited because of these factors or for any other reason, the cost of
land could increase and/or the number of homes that we are able to sell and build could be reduced.
Our ability to execute on our business strategies is uncertain, and we may be unable to achieve our goals.
We cannot guarantee that (i) our strategies, which include expanding our presence in existing markets and potential expansion
into new markets, offering a wide variety of products and price points, becoming a more capital and operationally efficient
home builder, and maintaining an appropriate balance of spec homes for sale relative to our build-to-order homes, and any
related initiatives or actions (including home builder acquisitions), will be successful or that they will generate growth, earnings
or returns at any particular level or within any particular time frame; (ii) in the future we will achieve positive operational or
financial results or results in any particular metric or measure equal to or better than those attained in the past; or (iii) we will
perform in any period as well as other home builders. We also cannot provide any assurance that we will be able to maintain
our strategies, and any related initiatives or actions, in the future and, due to unexpectedly favorable or unfavorable market
conditions or other factors, we may determine that we need to adjust, refine or abandon all or portions of our strategies, and any
12
related initiatives or actions, though we cannot guarantee that any such adjustments will be successful. The failure of any one or
more of our present strategies, or any related initiatives or actions, or the failure of any adjustments that we may pursue or
implement, would likely have an adverse effect on our ability to increase the value and profitability of our business; on our
ability to operate our business in the ordinary course; on our overall liquidity; and on our consolidated financial statements, and
the effect, in each case, could be material.
Negative publicity could adversely impact sales, which could cause our revenues or results of operations to decline.
Our business is dependent upon the appeal of the Toll Brothers brand, and its association with quality and luxury is integral to
our success. Our strategy has involved growing our business by expanding our luxury brand to new price points, product lines
and geographies, including expansion of our affordable luxury products. If we are unable to maintain the position of the Toll
Brothers brand, our business may be adversely affected by diminishing the distinctive appeal of the brand and tarnishing its
image. This could result in lower sales and earnings.
In addition, unfavorable media or investor and analyst reports related to our industry, company, brand, marketing, personnel,
operations, business performance, or prospects may affect our stock price and the performance of our business, regardless of its
accuracy. Furthermore, the speed at which negative publicity is disseminated has increased dramatically through the use of
electronic communication, including social media outlets, websites and other digital platforms. Our success in maintaining and
enhancing our brand depends on our ability to adapt to this rapidly changing media environment. Adverse publicity or negative
commentary from media outlets or social media could damage our reputation and reduce the demand for our homes, which
would adversely affect our business.
We can also be affected by poor relations with the residents of communities we develop because efforts made by us to resolve
issues or disputes that may arise in connection with the operation or development of their communities, or in connection with
the transition of a homeowners association, could be deemed unsatisfactory by the affected residents and subsequent actions by
these residents could adversely affect sales or our reputation. In addition, we could decide or be required to make material
expenditures related to the settlement of such issues or disputes, which could adversely affect the results of our operations.
A significant portion of our revenues and income from operations is generated from California.
A significant portion of our revenues and income from operations are concentrated in California. In addition, our gross margin
in California tends to be higher than Company average. Factors beyond our control could have a material adverse effect on our
revenues, gross margin and/or income from operations generated in California. These factors include, but are not limited to:
changes in the regulatory and fiscal environment; prolonged economic downturns; high levels of foreclosures; lack of
affordability; a lack of foreign buyer demand; severe weather including drought; natural disasters such as earthquakes and wild
fires; the risk of local governments imposing building moratoriums and of state or local governments imposing regulations that
increase building costs; environmental incidents; and declining population and/or growth rates and the related reduction in
housing demand in this region. If home sale activity or sales prices decline in California, our costs may not decline at all or at
the same rate and our inventory and lots owned or controlled in the state may be at risk of impairment. As a result, our
consolidated financial results may be adversely affected.
The construction cycle for mid-rise, high-rise and multifamily building is generally longer than that of single family
detached homes, which puts us at greater risk of construction delays and changing market conditions that could
adversely affect our operating results in this part of our business.
Before a mid-rise, high-rise or multifamily building generates any revenues, we make significant expenditures to acquire land;
to obtain permits, development approvals, and entitlements; and to construct the building. It generally takes several years for us
to acquire the land and construct, market, and deliver units or lease units in a high-rise building. Completion times vary on a
building-by-building basis depending on the complexity of the project, its stage of development when acquired, our relationship
with any joint venture partners that may be involved in a project, and the regulatory and community issues involved. As a result
of these potential delays in the completion of a building, we face the risk that demand for housing may decline during this
period and we may be forced to sell or lease units at a loss or for prices that generate lower profit margins than we initially
anticipated. Furthermore, if construction is delayed, we may face increased costs as a result of inflation or other causes and/or
asset carrying costs (including interest on funds used to acquire the land and construct the building). These costs can be
significant and can adversely affect our operating results. In addition, if values of the building or units decline, we may also be
required to recognize significant impairments in the future.
Our condominium and rental multi-unit buildings are subject to fluctuations in delivery volume due to their extended
construction time, levels of pre-sales and lease-up, and quick delivery of units once buildings are complete.
Our quarterly operating results will fluctuate depending on the timing of completion of construction of our multi-unit
condominium buildings, levels of pre-sales, and the relatively short delivery time of the pre-sold units once the building is
13
completed. These sales can result in significant gains or losses that we recognize on our Consolidated Statements of Operations
and Comprehensive Income as income from unconsolidated entities. The timing of these gains or losses cannot be predicted
with certainty and, as a result, can cause our net income to fluctuate from quarter to quarter.
In addition to our residential for-sale business, we also develop, operate and/or, in certain situations, sell for-rent apartments,
which we accomplish mainly through joint ventures. Often, the joint venture through which we develop and lease-up a rental
property sells the property to a third party or to the joint venture partner upon stabilization. These sales can result in significant
gains or losses that we recognize on our Consolidated Statements of Operations and Comprehensive Income as income from
unconsolidated entities. The timing of these gains or losses cannot be predicted with certainty and, as a result, can cause our net
income to fluctuate from quarter to quarter.
Increases in cancellations of existing agreements of sale could have an adverse effect on our business.
Our backlog reflects agreements of sale with our home buyers for homes that have not yet been delivered. We have received a
deposit from our home buyer for each home reflected in our backlog, and generally we have the right to retain the deposit if the
home buyer does not complete the purchase. In some cases, however, a home buyer may cancel the agreement of sale and
receive a complete or partial refund of the deposit for reasons such as state and local law requirements, the home buyer’s
inability to obtain mortgage financing, the home buyer’s inability to sell their current home, or our inability to complete and
deliver the home within the specified time. Home buyers may also choose to cancel their home agreement and forfeit their
deposit. The amount of deposit that we require varies by community and market and may be insufficient to compel a home
buyer to complete the purchase. At October 31, 2024, we had 5,996 homes with a sales value of $6.47 billion in backlog. If
economic conditions decline, if mortgage financing becomes less available or more costly, or if our homes become less
attractive due to market price declines or due to other conditions at or in the vicinity of our communities, we could experience
an increase in home buyers canceling their agreements of sale with us, which could have an adverse effect on our business and
results of operations.
The home building industry is highly competitive, and, if other home builders are more successful or offer better value
to our customers, our business could decline.
We operate in a very competitive environment in which we face competition from a number of other home builders in each
market in which we operate. We compete with large national and regional home building companies and with smaller local
home builders for land, financing, building components, and skilled management and labor resources. We also compete with
the resale home market, also referred to as the “previously owned” or “existing” home market. An oversupply of homes
available for sale or the heavy discounting of home prices by some of our competitors could adversely affect demand for our
homes and the results of our operations. An increase in competitive conditions can have any of the following impacts on us:
delivery of fewer homes; sale of fewer homes; higher cancellations by our home buyers; an increase in selling incentives and/or
reduction of prices; and realization of lower gross margins due to lower sales prices or an inability to increase sales prices to
offset increased costs of the homes delivered. If we are unable to compete effectively in our markets, our business could decline
disproportionately to that of our competitors.
We rely on subcontractors to develop our land and construct our homes and on building supply companies to supply
components for the construction of our homes. The failure of our subcontractors to properly construct our homes and
adopt appropriate jobsite safety practices, or defects in the components we obtain from building supply companies
could have an adverse effect on us.
We engage subcontractors to develop our land and construct our homes, including by purchasing components used in the
construction of our homes from building supply companies. Despite our quality control and jobsite safety efforts, we may
discover that our subcontractors were engaging in improper development, construction or safety practices or that the
components purchased from building supply companies are not performing as specified. The occurrence of such events could
require us to repair facilities and homes in accordance with our standards and as required by law, or to respond to claims of
improper oversight of construction sites. The cost of satisfying our legal obligations in these instances may be significant, and
we may be unable to recover the cost of repair from subcontractors, suppliers and insurers.
We also can suffer damage to our reputation, and may be exposed to possible liability, if subcontractors fail to comply with
applicable laws, including laws involving matters that are not within our control. We have implemented policies that are
designed to inform subcontractors of observations of hazardous conditions that could jeopardize the safety of individuals or
result in penalties or other legal consequences, and ultimately to reduce or eliminate unsafe acts and conditions. However,
attempts at mitigation may not be successful and we could be subject to claims relating to actions of, or matters relating to, our
subcontractors.
14
We participate in certain joint ventures where we may be adversely impacted by the actions of the joint venture or its
participants.
We have investments in and commitments to certain unconsolidated joint ventures with unrelated parties generally involved in
land development, home building and apartment rental development activities. At October 31, 2024, we had investments of
$1.01 billion in unconsolidated entities and were committed to invest or advance up to an additional $312.8 million to these
unconsolidated entities if they require additional funding. These joint ventures generally borrow money to help finance their
activities. In certain circumstances, the joint venture participants, including us, are required to provide guarantees of certain
obligations relating to the joint ventures. In most of these joint ventures, we do not have a controlling interest and, as a result,
are not able to require these joint ventures or their participants to honor their obligations or renegotiate them on acceptable
terms. If the joint ventures or their participants do not honor their obligations, we may be required to expend additional
resources or suffer losses, which could be significant. In addition, because we generally do not control these joint ventures, our
investments may be illiquid and we may not always agree with our partners on major decisions, such as asset sales. Disputes
between us and partners may result in litigation or arbitration that could increase our expenses and distract our management
team. In addition, we may in certain circumstances be liable for the actions of its third-party partners.
Government regulations and legal challenges may delay the start or completion of our communities, increase our
expenses, or limit our home building activities, which could have a negative impact on our operations.
We must obtain the approval of numerous governmental authorities in connection with our development and construction
activities, and these governmental authorities often have broad discretion in exercising their approval authority. We incur
substantial costs related to compliance with legal and regulatory requirements. Any increase in legal and regulatory
requirements may cause us to incur substantial additional costs or, in some cases, cause us to determine that the property is not
feasible for development.
Various local, state, and federal statutes, ordinances, rules, and regulations concerning building, zoning, sales, accessibility,
safety, anti-discrimination, and similar matters apply to and/or affect the housing industry. Governmental regulation affects
construction activities as well as sales activities, mortgage lending activities, and other dealings with home buyers, including
anti-discrimination laws such as the Fair Housing Act and data privacy laws such as the California Consumer Privacy Act. The
industry also has experienced an increase in state and local legislation and regulations that limit the availability or use of land.
Municipalities may also restrict or place moratoriums on the availability of utilities, such as water and sewer taps. In some
areas, municipalities may enact growth control initiatives, which restrict the number of building permits available in a given
year. In addition, we may be required to apply for additional approvals or modify our existing approvals because of changes in
local circumstances or applicable law. If municipalities in which we operate take actions like these, it could have an adverse
effect on our business by causing delays, increasing our costs, or limiting our ability to operate in those municipalities. Further,
we may experience delays and increased expenses as a result of legal challenges to our proposed communities, whether brought
by governmental authorities or private parties.
Our mortgage subsidiary is subject to various state and federal statutes, rules, and regulations, including those that relate to
licensing, lending operations, and other areas of mortgage origination and financing. The impact of those statutes, rules, and
regulations can increase our home buyers’ cost of financing, increase our cost of doing business, and restrict our home buyers’
access to some types of loans.
Product liability claims and litigation and warranty claims that arise in the ordinary course of business may be costly,
which could adversely affect our business.
As a home builder, we are subject to construction defect and home warranty claims arising in the ordinary course of business.
These claims are common in the home building industry and can be costly. In addition, insuring against construction defect and
product liability claims has become increasingly difficult due to limited coverage options, high costs, lack of reinsurance
options and the exit of insurers from the market.There can be no assurance that any form of insurance coverage will be
available in the future or, if it is offered, that it will be available on reasonable terms. If the limits or coverages of our current
and former insurance programs prove inadequate, or we are not able to obtain adequate, or reasonably priced, insurance against
these types of claims in the future, or the amounts currently provided for future warranty or insurance claims are inadequate, we
may experience losses that could negatively impact our financial results.
We record expenses and liabilities based on the estimated costs required to cover our self-insured liability under our insurance
policies and 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. 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 products we build, insurance industry practices, and legal or regulatory actions and/or interpretations, among other
15
factors. Key assumptions used in these estimates include claim frequencies, severities, 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 assumptions, our actual
future costs could differ from those estimated, and the difference could be material to our consolidated financial statements.
Our quarterly operating results may fluctuate due to the seasonal nature of our business.
Our quarterly operating results fluctuate with the seasons; normally, a significant portion of our agreements of sale are entered
into with customers in the winter and spring months. Construction of our build-to-order homes typically proceeds after signing
the agreement of sale with our customer and typically require nine to 12 months to complete, although construction times may
extend beyond 12 months due to a variety of reasons, including high demand, labor shortages, supply chain disruption and
municipal related delays. In addition, weather-related events may occur from time to time, delaying starts or closings or
increasing costs and reducing profitability. In addition, delays in opening new communities or new sections of existing
communities could have an adverse impact on home sales and revenues. Expenses are not incurred and recognized evenly
throughout the year. Because of these factors, our quarterly operating results may be uneven and may be marked by lower
revenues and earnings in some quarters than in others.
Increases in taxes or government fees could increase our costs, and adverse changes in tax laws or their interpretation
could reduce demand for our homes and negatively affect our operating results.
Increases in real estate taxes and other local government fees, such as fees imposed on developers to fund schools, open space,
and road improvements, and/or provide low- and moderate-income housing, could increase our costs and have an adverse effect
on our operations. In addition, increases in local real estate taxes could adversely affect our potential home buyers, who may
consider those costs in determining whether to make a new home purchase and decide, as a result, not to purchase one of our
homes.
Changes in tax laws could reduce or eliminate tax deductions or incentives for homeowners and could make housing less
affordable or otherwise reduce the demand for housing, which in turn could reduce our sales and hurt our results of operations.
Further, while we believe that our recorded tax balances are adequate, it is not possible to predict the effects of possible changes
in the tax laws or changes in their interpretation and whether they could have a material adverse impact on our operating results.
We have filed our tax returns in prior years based upon certain filing positions we believe are appropriate. If the Internal
Revenue Service or state taxing authorities disagree with these filing positions, we may owe additional taxes, which could be
material.
We are subject to extensive environmental regulations, which may cause us to incur additional operating expenses,
subject us to longer construction cycle times, or result in material fines or harm to our reputation.
We are subject to a variety of local, state and federal statutes, ordinances, rules and regulations concerning the protection of
health and the environment, including those regulating the emission or discharge of materials into the environment, the
management of storm water runoff at construction sites, the handling, use, storage and disposal of hazardous substances,
impacts to wetlands and other sensitive environments, and the remediation of contamination at properties that we acquire, own
or develop. In addition, state and local jurisdictions have in recent years enacted regulations that require new homes to be more
energy efficient than existing homes, or to be more weather-resistant, or have mandated energy efficient features, such as solar
panels, be included in new construction. The environmental and housing code regulations applicable to each community in
which we operate vary greatly depending on the location of the community site, the site's environmental conditions and the
present and former use of the site. Environmental regulations may cause delays, may cause us to incur substantial compliance,
remediation or other costs, and can prohibit or severely restrict development and home building activity. In addition,
noncompliance with these regulations could result in fines and penalties, obligations to remediate, permit revocations or other
sanctions; and contamination or other environmental conditions at or in the vicinity of our developments, whether or not we
were responsible for such conditions, may result in claims against us for personal injury, property damage or other losses.
From time to time, the United States Environmental Protection Agency and other federal or state agencies review home
builders' compliance with environmental laws and may levy fines and penalties for failure to strictly comply with applicable
environmental laws or impose additional requirements for future compliance as a result of past failures. Any such actions taken
with respect to us may increase our costs or harm our reputation. Further, we expect that increasingly stringent requirements
will be imposed on home builders in the future. Environmental regulations can also have an adverse impact on the availability
and price of certain building components such as lumber.
In recent years, an increasing number of state and Federal laws and regulations have been enacted or proposed that deal with the
effect of climate change on the environment. These laws and regulations, which are generally intended to directly or indirectly
reduce greenhouse gas emissions, conserve water or limit other potential climate change impacts, may impose restrictions or
16
additional requirements on land development and home construction in certain areas. Such restrictions and requirements could
increase our operating and compliance costs or require additional technology and capital investment, which could adversely
affect our results of operations. This is a particular concern in the western United States, where some of the most extensive and
stringent environmental laws and residential building construction standards in the country have been enacted, and where we
have significant business operations. We believe we are in compliance in all material respects with existing climate-related
government regulations applicable to our business, and such compliance has not had a material impact on our business.
However, given the rapidly changing nature of environmental laws and matters that may arise that are not currently known, we
cannot predict our future exposure concerning such matters, and our future costs to achieve compliance or remedy potential
violations could be significant.
Additionally, increased governmental and societal attention to environmental, social, and governance (“ESG”) matters,
including expanding mandatory and voluntary reporting, diligence, and disclosure on topics such as climate change, human
capital, labor and risk oversight, could expand the nature, scope, and complexity of matters that we are required to control,
assess and report. These factors may alter the environment in which we do business and may increase the ongoing costs of
compliance and adversely impact our results of operations and cash flows. If we are unable to adequately address such ESG
matters or fail to comply with all laws, regulations, policies and related interpretations, it could negatively impact our reputation
and our business results.
Failure by our employees or representatives to comply with laws and regulations may harm us.
We are required to comply with laws and regulations that govern all aspects of our business including land acquisition,
development, home construction, labor and employment, mortgage origination, title and escrow operations, sales, and warranty.
It is possible that our employees or entities engaged by us, such as subcontractors, could intentionally or unintentionally violate
some of these laws and regulations. Although we endeavor to take immediate action if we become aware of such violations, we
may incur fines or penalties as a result of these actions and our reputation with governmental agencies and our customers could
be damaged.
Component shortages and increased costs of labor and supplies are beyond our control and can result in delays and
increased costs to develop our communities.
Our ability to develop residential communities may be adversely affected by circumstances beyond our control, including work
stoppages, labor disputes, and shortages of qualified trades people, such as carpenters, roofers, masons, electricians, and
plumbers; changes in laws relating to union organizing activity; lack of availability of adequate utility infrastructure and
services; our need to rely on local subcontractors who may not be adequately capitalized or insured; the ability of municipalities
to process permits, conduct inspections and take similar actions in a timely manner; and shortages, delays in availability, or
fluctuations in prices of building components and materials. Any of these circumstances could give rise to delays in the start or
completion of, or could increase the cost of, developing one or more of our residential communities. We may not be able to
recover these increased costs by raising our home prices because the price for each home, especially our build-to-order homes,
is typically set months prior to its delivery pursuant to the agreement of sale with the home buyer. If that happens, our operating
results could be harmed.
In the recent past, strong demand for homes combined with supply chain disruptions, labor shortages and municipal related
delays caused our construction cycles to lengthen and the costs of building materials to increase. Longer construction cycles can
lead to increased cancellation rates, lower customer satisfaction and brand diminishment. In addition, shortages and cost
increases in building materials and tightness in the labor market can erode our profit margins and adversely affect our results of
operations, especially if such disruptions, shortages and delays persist for extended periods of time. Changes in laws,
government regulations, or enforcement priorities, such as the imposition of tariffs (in particular on materials imported from
Canada or Mexico) or changes in immigration laws and/or their enforcement, could result in higher component costs, tighter
overall labor conditions and a shortage of skilled tradespeople, which could in turn adversely affect our business.
We are subject to one collective bargaining agreement that covers approximately 1% of our employees. We have not
experienced any work stoppages due to strikes by unionized workers, but we cannot make assurances that there will not be any
work stoppages due to strikes or other job actions in the future. We engage independent contractors that employ non-unionized
workers to construct our homes. At any given point in time, the employees of those subcontractors may decide to unionize.
Risks Related to Indebtedness and Financing
If we are not able to obtain suitable financing, or if the interest rates on our debt are increased, or if our credit ratings
are lowered, our business and results of operations may decline.
Our business and results of operations depend substantially on our ability to obtain financing and lines of credit, whether from
bank borrowings or from financing in the public debt markets. Our Revolving Credit Facility, which provides for $1.955 billion
17
in committed borrowing capacity and letters of credit, and substantial portions of our $650.0 million term loan mature in
February 2028, with smaller portions maturing in November 2025 and November 2026. In addition, $1.60 billion of our senior
notes become due and payable at various times from November 2025 through November 2029. We cannot be certain that we
will be able to replace existing financing and credit lines or find additional sources of financing in the future on favorable terms
or at all.
Another source of credit and liquidity for us is our ability to use letters of credit and surety bonds to back certain performance-
related obligations and as security for certain land option agreements and insurance programs. The majority of these letters of
credit and surety bonds support our land development and construction obligations to various municipalities, other government
agencies, and utility companies related to infrastructure construction. At October 31, 2024, we had outstanding letters of credit
and surety bonds totaling $180.0 million and $1.16 billion, respectively. Our letters of credit are generally, but not always,
issued under our Revolving Credit Facility, which contains certain financial covenants and other limitations. If we are unable to
obtain letters of credit or surety bonds when required, or the conditions imposed by issuers increase significantly, our liquidity
and costs of operations could be adversely affected.
If we are not able to obtain suitable financing at reasonable terms or replace existing debt and credit facilities when they
become due or expire, our costs for borrowings may increase and our revenues may decrease or we could be precluded from
continuing our operations at current levels or expanding them.
Increases in interest rates can make it more difficult and/or expensive for us to obtain the funds and credit we need to operate
our business. The amount of interest we incur on our revolving bank credit facility and term loan (exclusive of the amount we
have hedged with interest rate swap transactions through October 2025 as further described in Note 6 – “Loans Payable, Senior
Notes, and Mortgage Company Loan Facility” in Item 15(a)1 of this Form 10-K) fluctuates based on changes in short-term
interest rates and the amount of borrowings we incur and letters of credit that are issued. Increases in interest rates generally
and/or any downgrade in the ratings that national rating agencies assign to our outstanding debt securities could increase the
interest rates we must pay on any subsequent issuances of debt securities, and any such ratings downgrade could also make it
more difficult for us to sell such debt securities.
If home buyers are not able to obtain suitable financing, our results of operations may decline.
Our results of operations also depend on the ability of our potential home buyers to obtain mortgages for the purchase of our
homes. Mortgage rates have increased significantly since January 2022, which has negatively impacted the overall housing
market. A variety of factors, including market conditions and government actions could cause mortgage rates to increase even
further in the future. Any uncertainty in the mortgage markets and its impact on the overall mortgage market, including the
tightening of credit standards, future increases in the effective cost of home mortgage financing (including as a result of
changes to federal tax law), and increased government regulation, could adversely affect the ability of our customers to obtain
financing for a home purchase, thus preventing our potential home buyers from purchasing our homes. In addition, where our
potential home buyers must sell their existing homes in order to buy a home from us, increases in mortgage costs and/or lack of
availability of mortgages could prevent the buyers of our potential home buyers’ existing homes from obtaining the mortgages
they need to complete their purchases, which would result in our potential home buyers’ inability to buy a home from us.
Similar risks apply to those buyers whose contracts are in our backlog of homes to be delivered. If our home buyers, potential
buyers, or buyers of our home buyers’ current homes cannot obtain suitable financing, our sales and results of operations could
be adversely affected.
If our ability to resell mortgages to investors is impaired, our home buyers may be required to find alternative
financing.
Generally, when our mortgage subsidiary closes a mortgage for a home buyer at a previously locked-in rate, it already has an
agreement in place with an investor to acquire the mortgage following the closing. Our 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.
We generally do not retain any other continuing interest related to mortgage loans sold in the secondary market. However, if
these recourse provisions are not satisfied, the mortgage loans sold to investors could be returned to us. In addition, if the resale
market for our mortgages decline or the underwriting standards of our investors become more stringent, our ability to sell future
mortgage loans could be adversely affected and either we would have to commit our own funds to long-term investments in
mortgage loans, which could, among other things, delay the time when we recognize revenues from home sales on our
statements of operations, or our home buyers would be required to find an alternative source of financing. If our home buyers
cannot obtain another source of financing in order to purchase our homes, our sales and results of operations could be adversely
affected.
18
Risks Related to Other Events and Factors
Public health issues such as a major epidemic or pandemic could adversely affect our business or financial results.
The United States and other countries have experienced, and may experience in the future, outbreaks of contagious diseases that
affect public health and public perception of health risk. In 2020, the COVID-19 pandemic resulted in federal, state and local
governments and private entities mandating various restrictions, including the closures of non-essential businesses for a period
of time, which had an adverse impact on our business. In addition, the effects of the pandemic on economic activity, combined
with strong demand for new homes that followed the initial onset of the pandemic, caused many disruptions to our supply chain
and shortages in certain building components and materials, as well as labor shortages, all of which lengthened our construction
cycle times. During the pandemic, overall economic conditions, as well as demand for our homes and our ability to conduct
normal business operations became highly unpredictable. Outbreaks of contagious diseases similar to the pandemic may occur
in the future, which could have a significant negative impact on the economy, our ability to conduct normal business operations
and our results of operations and financial condition.
Adverse weather conditions, natural disasters, and other conditions could disrupt the development of our communities,
which could harm our sales and results of operations.
Adverse weather conditions and natural disasters can have serious effects on our ability to develop our residential communities
and other aspects of our business. To the extent that hurricanes, tornadoes, severe storms, heavy or prolonged precipitation,
earthquakes, droughts, floods, wildfires or other natural disasters or similar events occur, our homes under construction or our
building lots in such states could be damaged or destroyed, which may result in losses exceeding our insurance coverage.
Natural disasters can also lead to increased competition for subcontractors, which can delay our construction activities even
after an event has concluded. They may also result in reduced demand for homes in a given community, as potential buyers
may avoid areas they deem to be at higher risk of loss, or they may face higher costs for, or may be unable to obtain, fire, flood
or other hazard insurance coverage in certain areas due to local environmental conditions or historical events. In addition,
adverse weather events could prompt governmental authorities to adopt more stringent building codes, which would likely
increase development costs in affected areas and negatively impact home affordability and/or demand.
In addition, our business may be affected by unforeseen engineering, environmental, or geological conditions or problems,
including conditions or problems which arise on lands of third parties in the vicinity of our communities, but nevertheless
negatively impact our communities. Any of these adverse events or circumstances could cause delays in or prevent the
completion of, or increase the cost of, developing one or more of our residential communities and, as a result, could harm our
sales and results of operations.
General Risk Factors
Increased domestic or international instability could have an adverse effect on our operations.
Increased domestic or international instability could adversely impact the economy and significantly reduce demand for homes
and the number of new contracts we sign, increase the number of cancellations of existing contracts, and/or increase our
operating expenses, which could adversely affect our business, results of operations and financial condition.
We could be adversely impacted by the loss of key management personnel or if we fail to attract qualified personnel.
Our future success depends, to a significant degree, on the efforts of our senior management and our ability to attract qualified
personnel. Competition for qualified personnel in all of our operating markets, as well as within our corporate operations, is
intense. Our operations could be adversely affected if key members of our senior management unexpectedly leave the
Company; if we cannot attract qualified personnel to manage our business; or if we are unable to successfully manage transition
matters when our senior executives, several of whom are retirement eligible under our various compensation plans.
Information technology failures and data security breaches could harm our business.
We use information technology and other computer resources to carry out important operational and marketing activities as well
as maintain our business records, including information provided by our customers. Many of these resources are provided to us
and/or maintained on our behalf by third-party service providers pursuant to agreements that specify certain security and service
level standards. Our ability to conduct our business may be impaired if these resources are compromised, degraded, damaged or
fail, whether due to a virus or other harmful circumstance, intentional breach or disruption of our information technology
resources by a third party, natural disaster, hardware or software corruption, failure or error (including a failure of security
controls incorporated into or applied to such hardware or software), telecommunications system failure, service provider error
or failure, intentional or unintentional personnel actions (including the failure to follow our security protocols), or lost
connectivity to our networked resources. A significant and extended disruption in the functioning of these resources could
impair our operations, damage our reputation, and cause us to lose customers, sales and revenue.
19
In addition, breaches of our data security systems, including by cyber-attacks, could result in the unintended public disclosure
or the misappropriation of our proprietary information or personal and confidential information, about our employees,
consumers who view our homes, home buyers, mortgage loan applicants and business partners, requiring us to incur significant
expense to address and resolve these kinds of issues. The release of confidential information may lead to identity theft and
related fraud, litigation or other proceedings against us by affected individuals and/or business partners and/or by regulators,
and the outcome of such proceedings, which could include penalties or fines, could have a material and adverse effect on our
reputation, business, financial condition and results of operations. Depending on its nature, a particular breach or series of
breaches of our systems may result in the unauthorized use, appropriation or loss of confidential or proprietary information on a
one-time or continuing basis, which may not be detected for a period of time. In addition, the costs of maintaining adequate
protection against such threats, as they develop in the future (or as legal requirements related to data security increase) could be
material.
We have been subject to cyber incidents in the past, including an attack that temporarily disrupted access to certain of our
systems and an incident involving identity theft through the unauthorized access of one of our third-party service provider’s
information systems. Neither of these incidents individually or in the aggregate resulted in any material liability to us, any
material damage to our reputation, or any material disruption to our operations. However, as a result of a widespread increase in
the frequency and number of cyber-attacks, we expect that we will continue to be the target of additional and increasingly
sophisticated cyber-attacks and data security breaches, and the safeguards we have designed to help prevent these incidents
from occurring may not be successful. Any further increase in the frequency or scope of cyber-attacks may exacerbate these
data security risks. If we experience additional cyber-attacks or data security breaches in the future, we could suffer material
liabilities, our reputation could be materially damaged, and our operations could be materially disrupted.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Risk Management and Strategy
We have established processes and policies for assessing, identifying and managing material risks posed by cybersecurity
threats. Our processes and policies are based upon the National Institute of Standards and Technology (NIST) Cybersecurity
Framework with our processes focused on: (i) developing organizational understanding to manage cybersecurity risks, (ii)
applying safeguards to protect our systems, (iii) detecting the occurrence of a cybersecurity incident, (iv) responding to a
cybersecurity incident and (v) recovering from a cybersecurity incident. Where appropriate, these processes and policies are
integrated into our overall risk management systems and processes. We take a risk-based approach to cybersecurity, with
processes that include:
•
requiring our employees with network access to complete information security and privacy training on an annual basis;
•
continuously working to improve our information technology systems and providing employee awareness training
around phishing, malware, and other cyber risks to enhance our levels of protection;
•
conducting penetration testing with the assistance of outside consultants at least annually to assess vulnerabilities and
use feedback from those exercises to improve our processes and defenses;
•
conducting tabletop exercises with the assistance of outside consultants to assess and improve where appropriate our
processes and policies; and
•
conducting diligence, and seeking engagements of, sophisticated, cloud-based third-party service providers for certain
critical functions.
We have engaged knowledgeable third parties to assist us in establishing and improving our policies, and monitoring and
responding to cyber threats. Our processes and policies include the identification of those third-party relationships that have the
greatest potential to expose us to cybersecurity threats and, upon identification, we conduct additional due diligence as a part of
establishing those relationships. We also manage risks related to cybersecurity by maintaining insurance coverage as part of
our overall insurance portfolio. For additional information concerning cybersecurity risks we face, see “Item 1A Risk Factors –
Information technology failures or data security breaches could harm our business”.
Governance
Our Board of Directors has delegated the primary responsibility to oversee cybersecurity matters to our Audit and Risk
Committee. Our Audit and Risk Committee regularly reviews the measures implemented to identify and mitigate data
20
protection and cybersecurity risks. As part of such reviews, our Audit and Risk Committee receives quarterly reports and
presentations from team members responsible for overseeing our cybersecurity risk management, including our Chief
Information Officer (CIO), which address a wide range of topics, including recent developments, evolving standards,
vulnerability assessments, third-party and independent reviews, the threat environment, technological trends, and information
security considerations arising with respect to our peers and third parties.
At the management level, our cybersecurity program is managed by our CIO. Our CIO joined the Company in 2014 and has
over 20 years of experience leading information technology teams, including with respect to cloud-based system integration,
strategic IT transformations, and the unification, standardization and implementation of technological solutions. Our CIO is
supported by our information security team, which is led by our Director of Information & Cybersecurity who has over 20 years
of experience in information security, and which is tasked with monitoring, detecting, preventing and responding to cyber
incidents. We have also engaged a team of dedicated professionals employed by our cybersecurity consultant, which includes
our Chief Information Security Officer (CISO). Our CISO has extensive experience assessing and managing cybersecurity
programs and cybersecurity risk and has over 25 years of experience in information security. His background includes technical
experience, strategy and architecture focused roles, cyber and threat experience, and various leadership roles in all areas of
information technology.
Pursuant to our Information Technology Incident Response Plan (IRP), when a cybersecurity event has been identified through
our detection processes, it is assessed in order to determine whether the event is a cybersecurity incident. Our IRP designates
the primary manager of a cybersecurity incident, describes the parties who should be informed about the incident and outlines
the processes for containment, eradication, recovery and resolution of the incident. Depending on the severity and impact of a
cybersecurity threat, members of our senior management team, the Audit and Risk Committee and the full Board of Directors
are notified of an incident and kept informed of the mitigation and remediation of the incident. We are not aware of any
material cybersecurity incidents in the last three years.
ITEM 2. PROPERTIES
Headquarters
Our corporate office, which we lease from an unrelated party, contains approximately 163,000 square feet and is located in Fort
Washington, Pennsylvania.
Manufacturing/Distribution Facilities
We own a manufacturing facility of approximately 225,000 square feet located in Morrisville, Pennsylvania, a manufacturing
facility totaling approximately 150,000 square feet located in Emporia, Virginia and a manufacturing facility totaling
approximately 30,500 square feet in Bartow, Florida. We also lease, from unrelated parties, a facility of approximately 56,000
square feet located in Fairless Hills, Pennsylvania and two facilities of approximately 38,000 square feet, on a combined basis,
located in Westfield, Massachusetts. In addition, we own a 34,000-square foot manufacturing, warehouse, and office facility in
Culpepper, Virginia. At these facilities, our Toll Integrated Systems subsidiary manufactures open wall panels, roof and floor
trusses, and certain interior and exterior millwork to supply a portion of our construction needs. These facilities supply
components used in our North, Mid-Atlantic, and portions of our South geographic regions. These operations also permit us to
purchase wholesale lumber, sheathing, windows, doors, certain other interior and exterior millwork, and other building
materials to supply to our communities. We believe that increased efficiencies, cost savings, quality control and productivity
result from the operation of these plants and from the wholesale purchase of materials.
ITEM 3. LEGAL PROCEEDINGS
We are involved in various claims and litigation arising principally in the ordinary course of business. We believe that adequate
provision for resolution of all current claims and pending litigation has been made and that the disposition of these matters will
not have a material adverse effect on our results of operations and liquidity or on our financial condition.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
21
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Shares of our common stock are listed on the New York Stock Exchange under the symbol “TOL.” On December 18, 2024,
there were approximately 381 record holders of our common stock.
Issuer Purchases of Equity Securities
During the three months ended October 31, 2024, we repurchased the following shares of our common stock:
Period
Total number
of shares
purchased (a)
Average
price
paid per share
(b)
Total number
of shares
purchased as
part of a
publicly
announced
plan or
program (c)
Maximum
number
of shares that
may yet be
purchased
under the plan
or program (c)
(in thousands)
(in thousands)
(in thousands)
August 1, 2024 to August 31, 2024
97 $
143.95
97
16,327
September 1, 2024 to September 30, 2024
472 $
145.95
472
15,855
October 1, 2024 to October 31, 2024
768 $
151.36
768
15,087
Total
1,337
1,337
(a) Our stock incentive plans permit us to withhold from the total number of shares that otherwise would be issued to a
performance based restricted stock unit recipient or a restricted stock unit recipient upon distribution that number of
shares having a fair value at the time of distribution equal to the applicable income tax withholdings due and remit the
remaining shares to the recipient. During the three months ended October 31, 2024, we withheld 1,147 of the shares
subject to performance based restricted stock units and restricted stock units to cover approximately $159,000 of
income tax withholdings and we issued the remaining 3,024 shares to the recipients. The shares withheld are not
included in the total number of shares purchased in the table above.
Our stock incentive plans also permit participants to exercise non-qualified stock options using a “net exercise” method.
In a net exercise, we generally withhold from the total number of shares that otherwise would be issued to the
participant upon exercise of the stock option that number of shares having a fair market value at the time of exercise
equal to the option exercise price and applicable income tax withholdings, and remit the remaining shares to the
participant. During the three-month period ended October 31, 2024, the net exercise method was not employed to
exercise options.
(b) Average price paid per share includes costs associated with the purchases, but excludes any excise tax that we accrue on
our share repurchases as a result of the Inflation Reduction Act of 2022.
(c) On December 13, 2023, our Board of Directors authorized the repurchase of 20 million shares of our common stock in
open market transactions, privately negotiated transactions (including accelerated share repurchases), issuer tender
offers or other financial arrangements or transactions for general corporate purposes, including to obtain shares for the
Company’s equity award and other employee benefit plans. This authorization terminated, effective December 13,
2023, the prior authorization that had been in effect since March 17, 2022. Our Board of Directors did not fix any
expiration date for the current share repurchase program.
Our revolving credit agreement and term loan agreement each require us to maintain a minimum tangible net worth (as
defined in the respective agreements), which limit the amount of share repurchases we may make. Based upon these
provisions, our ability to repurchase our common stock was limited to approximately $3.90 billion as of October 31,
2024.
Dividends
During fiscal 2024, we paid aggregate cash dividends of $0.90 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,
22
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, 2024, under the provisions of our revolving credit agreement and
term loan agreement, we could have paid up to approximately $3.57 billion of cash dividends.
Stockholder Return Performance Graph
The following graph and chart compares the five-year cumulative total return (assuming that an investment of $100 was made
on October 31, 2019, and that dividends were reinvested) from October 31, 2019 to October 31, 2024, 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
2019
2020
2021
2022
2023
2024
$0
$100
$200
$300
$400
October 31:
2019
2020
2021
2022
2023
2024
Toll Brothers, Inc.
$ 100.00 $ 107.71 $ 155.05 $ 112.73 $ 187.48 $ 391.20
S&P 500®
$ 100.00 $ 109.71 $ 156.79 $ 133.88 $ 147.46 $ 203.52
S&P 500 Homebuilding Index
$ 100.00 $ 117.37 $ 155.67 $ 132.48 $ 186.63 $ 310.37
ITEM 6. [RESERVED]
23
ITEM 7. 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 this Form 10-K, beginning at page F-1. It also should be read in
conjunction with the disclosure under “Forward-Looking Statements” in Part I of this 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 cancelled 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, master-
planned, resort-style golf, and urban low-, mid-, and high-rise communities, principally on land we develop and improve. In
recent years, we have pursued a strategy of broadening our product lines, price points and geographic footprint, as well as
increasing the number of spec homes that we sell relative to our traditional build-to-order homes. We cater to luxury first-time,
move-up, empty-nester (move-down), active-adult, and second-home buyers in the United States, as well as urban and suburban
renters. We also design, build, market, and sell high-density, high-rise urban luxury condominiums with third-party joint
venture partners. At October 31, 2024, we were operating in 24 states and in the District of Columbia.
In the five years ended October 31, 2024, we delivered 49,407 homes from 986 communities, including 10,813 homes from 527
communities in fiscal 2024. At October 31, 2024, we had 1,041 communities in various stages of planning, development or
operations containing approximately 74,700 home sites that we owned or controlled through options. At fiscal year-end, we
were selling from 408 of these communities.
We operate our own architectural, engineering, mortgage, title, land development, insurance, smart home technology and
landscaping subsidiaries. We also develop master-planned and golf course communities as well as operate, in certain regions,
our own lumber distribution, house component assembly and component manufacturing operations.
In addition to our residential for-sale business, we also develop and, in some cases operate, for-rent apartments generally
through joint ventures. See the section entitled “Toll Brothers Apartment Living/Toll Brothers Campus Living” below.
We have investments in various unconsolidated entities, including our Land Development Joint Ventures, Home Building Joint
Ventures and Rental Property Joint Ventures.
Financial Highlights
In fiscal 2024, we recognized $10.85 billion of revenues, consisting of $10.56 billion of home sales revenues and $283.4
million of land sales and other revenues, and net income of $1.57 billion, as compared to $9.99 billion of revenues, consisting
of $9.87 billion of home sales revenues and $128.9 million of land sales and other revenues, and net income of $1.37 billion in
fiscal 2023. Land sales and other revenue, pre-tax income and net income in fiscal 2024 included $185.0 million, $175.2
million and $124.1 million, respectively, related to the sale of a single parcel of land in northern Virginia to a commercial
developer.
In fiscal 2024 and 2023, the value of net contracts signed was $10.07 billion (10,231 homes) and $7.91 billion (8,077 homes),
respectively. The value of our backlog at October 31, 2024 was $6.47 billion (5,996 homes), as compared to our backlog at
October 31, 2023 of $6.95 billion (6,578 homes).
At October 31, 2024, we had $1.30 billion of cash and cash equivalents and approximately $1.77 billion available for
borrowing under our $1.955 billion revolving credit facility (the “Revolving Credit Facility”). At October 31, 2024, we had no
outstanding borrowings under the Revolving Credit Facility and had outstanding letters of credit of approximately $180.0
million.
At October 31, 2024, our total equity and our debt to total capitalization ratio were $7.69 billion and 0.27 to 1.00, respectively.
24
Our Business Environment and Current Outlook
Through fiscal 2024, demand for our homes remained solid despite geopolitical turmoil, continued inflationary pressures and
mortgage rates that remained elevated compared to the prior decade. Despite these conditions, the market for new homes, and in
particular higher-end new homes, has continued to perform well. We believe this is due to a variety of factors, including the
very low levels of resale inventory on the market, favorable demographic trends that include first time millennial buyers who
are acquiring homes later in life, and a continuation of a structural supply-demand imbalance that has resulted from
underproduction of homes relative to population growth for well over a decade. While home price appreciation and higher
mortgage rates have made homes unaffordable for many entry-level buyers, our more affluent customer base has been less
impacted by these trends. We believe the favorable trends described above will continue to support demand for our homes for
the foreseeable future. However, historically the home building industry has been highly cyclical and there can be no guarantee
that our business will not be disrupted by macroeconomic factors, such as negative impacts from inflation or mortgage rates that
may trend higher.
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 or otherwise,
also provide competition. We compete primarily based on price, location, design, quality, service, and reputation. We believe
our size and 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 and community amenities, and build and deliver a home. We attempt to reduce some
of these risks and improve our capital efficiency by utilizing one or more of the following methods: controlling land for future
development through options, which enables us to obtain necessary governmental approvals before acquiring title to the land;
commencing construction of a build-to-order home only after executing an agreement of sale and receiving a required down
payment from the buyer; and using subcontractors to perform home and amenity construction and land development work on a
fixed-price basis.
During fiscal 2024 and 2023, we acquired control of approximately 14,900 and 4,200 home sites, respectively, net of options
terminated and land sales. In each of fiscal 2024 and 2023 we forfeited control of approximately optioned 4,000 lots primarily
because the planned community no longer met our development criteria. At October 31, 2024, we controlled approximately
74,700 home sites, as compared to approximately 70,700 home sites at October 31, 2023, and approximately 76,000 home sites
at October 31, 2022. In addition, at October 31, 2024, we expected to purchase approximately 9,000 additional home sites from
several Land Development Joint Ventures in which we have an interest, at prices to be determined.
Of the approximately 74,700 total home sites that we owned or controlled through options at October 31, 2024, we owned
approximately 34,000 and controlled approximately 40,800 through options. Of the 74,700 home sites, approximately 19,000
were substantially improved.
In addition, at October 31, 2024, our Land Development Joint Ventures owned approximately 22,700 home sites (including 316
home sites included in the 40,800 controlled through options).
At October 31, 2024, we were selling from 408 communities, compared to 370 communities at October 31, 2023, and 348
communities at October 31, 2022.
Customer Mortgage Financing
We maintain relationships with a diverse group of mortgage financial institutions, many of which are among the largest in the
industry. We believe that national, regional and community banks continue to recognize the long-term value in creating
relationships with our home buyers, and these banks continue to provide these customers with financing.
We believe that our home buyers generally are, and will 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 in some cases operate for-rent apartments generally through
joint ventures. At October 31, 2024, we or joint ventures in which we have an interest, owned or controlled 67 land parcels that
are planned, or being developed or operated, as for-rent apartment projects containing approximately 21,300 units. These
25
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. Of
these 21,300 units, 13,300 were owned by joint ventures in which we have an interest; approximately 2,400 were owned by us;
and the land parcels underlying 5,600 units were under contract to be purchased by us. At October 31, 2024, we had
approximately 4,500 units in for-rent apartment projects that were occupied or ready for occupancy, 5,700 units in the lease-up
stage, 6,500 units in the design phase or under development, and 4,700 units in the planning stage.
In fiscal 2024, three of our Rental Property Joint Ventures sold their assets or we sold a portion of our ownership interest to
unrelated parties, resulting in aggregate gains of $176.1 million recognized by the joint ventures. From our investments in these
joint ventures we received cash and recognized our share of the gains of $24.1 million in fiscal 2024. In fiscal 2023, two of our
Rental Property Joint Ventures sold their assets to unrelated parties, resulting in aggregate gains of $106.2 million recognized
by the joint ventures. From our investments in these joint ventures, we received cash and recognized gains of $50.9 million in
fiscal 2023. In addition, in fiscal 2023, we sold our ownership interest in one of our Rental Property Joint Ventures and
recognized a gain of $16.0 million. The gains recognized from these sales are included in “Income from unconsolidated
entities” in our Consolidated Statements of Operations and Comprehensive Income included in Item 15(a)1 of this Form 10-K.
Contracts and Backlog
The aggregate value of net sales contracts signed increased 27% in fiscal 2024, as compared to fiscal 2023. The value of net
sales contracts signed was $10.07 billion (10,231 homes) in fiscal 2024 and $7.91 billion (8,077 homes) in fiscal 2023. The
increase in the aggregate value of net contracts signed in fiscal 2024, as compared to fiscal 2023, was due to a 27% increase in
the number of net contracts signed. The increase in the number of net contracts signed in fiscal 2024, as compared to fiscal
2023, reflects both solid demand and an increase in the average number of communities that we were selling from in 2024. The
average value attributed to each contract signed in fiscal 2024 was generally flat compared to those signed in fiscal 2023. The
average value attributed to each contract signed includes the value of each binding agreement of sale that was signed in the
period, as well as the value of all options selected during the period, regardless of when the initial agreement of sale related to
such options was signed.
The value of our backlog at October 31, 2024, 2023, and 2022 was $6.47 billion (5,996 homes), $6.95 billion (6,578 homes),
and $8.87 billion (8,098 homes), respectively. Approximately 97% of the homes in backlog at October 31, 2024 are expected to
be delivered by October 31, 2025. The 7% decrease in the value of homes in backlog at October 31, 2024, as compared to
October 31, 2023, was due to the delivery of more homes out of backlog than were added during fiscal 2024, and a decrease in
the average value of each contract signed.
For more information regarding revenues, net contracts signed, and backlog by geographic segment, see “Segments” in this
MD&A.
CRITICAL ACCOUNTING ESTIMATES
U.S. generally accepted accounting principles (“GAAP”) require us to make estimates and assumptions that affect our reported
amounts in the consolidated financial statements and accompanying notes. Our estimates are based on (i) currently known facts
and circumstances, (ii) prior experience, (iii) assessments of probability, (iv) forecasted financial information, and (v)
assumptions that management believes to be reasonable but that are inherently uncertain and unpredictable. We use our best
judgment when measuring these estimates, and if warranted, obtain advice from external sources. On an ongoing basis, we
review the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented
fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty,
actual results could differ from our assumptions and estimates, and such differences could be material. In times of economic
disruption when uncertainty regarding future economic conditions is heightened, these estimates and assumptions are subject to
greater variability.
For a discussion of all our significant accounting policies, including our critical accounting policies, refer to Note 1,“Significant
Accounting Policies” of the Consolidated Financial Statements. We believe that the accounting estimates and assumptions
described below involve significant subjectivity and judgment, and changes to such estimates or assumptions could have a
material impact on our financial condition or operating results. Therefore, we consider an understanding of the variability and
judgment required in making these estimates and assumptions to be critical in fully understanding and evaluating our reported
financial results.
We believe the following critical accounting estimates reflect the more significant judgments and estimates used in the
preparation of our consolidated financial statements.
26
Inventory
Inventory is stated at cost unless an impairment exists, in which case it is written down to fair value in accordance with 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. 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
discount rate used in determining each asset’s fair value reflects inherent risks associated with the related estimated cash flows,
as well as current risk-free rates available in the market and estimated market risk premiums. 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. Any impairment is charged to cost of home sales revenues in the period in
which the impairment is determined.
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, alternative land uses 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 or commitment to build or fund certain dedicated workforce
and affordable housing units. 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 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 have not made any material changes in the accounting methodology we use to assess possible impairments during the past
three fiscal years.
We recognized inventory impairment charges and the expensing of costs that we believed not to be recoverable in each of the
three fiscal years ended October 31, 2024, 2023, and 2022, as shown in the table below (amounts in thousands):
2024
2023
2022
Land controlled for future communities
$
6,676 $
10,712 $
13,051
Land owned for future communities
—
1,493
19,690
Operating communities
52,765
18,501
—
$
59,441 $
30,706 $
32,741
27
Cost of Revenue Recognition
Cost of revenues from home sales are recognized at the time each home is delivered and title and possession are transferred to
the buyer.
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 expected 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 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.
We rely on certain estimates to determine our construction and land development costs. Construction and land costs are
comprised of direct and allocated costs, including estimated future costs. In determining these costs, we compile community
budgets that are based on a variety of assumptions, including future construction schedules and costs to be incurred. Actual
results can differ from budgeted amounts for various reasons, including construction delays, labor or material shortages, slower
absorptions, increases in costs that have not yet been committed, changes in governmental requirements, or other unanticipated
issues encountered during construction and development and other factors beyond our control. To address uncertainty in these
budgets, we assess, update and revise community budgets on a regular basis, utilizing the most current information available to
estimate home construction and land costs.
We have not made any material changes in the methodology used in developing and revising community budgets over the past
three fiscal years.
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 related to product type, geographic location and other community specific factors.
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 decade, we have had a significant number of warranty claims related to water intrusion issues
primarily impacting homes built in Pennsylvania and Delaware. Our review process for these claims includes an analysis of
many factors to determine the estimated costs to resolve such claims, including: the closing dates of the homes; the number of
claims received; our inspection of homes; an estimate of the number of homes we expect to repair; the type and cost of repairs
that have been performed in each community; the estimated costs to remediate pending and future claims; 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.
We have not made any material changes in our methodology or significant assumptions used to establish our warranty reserves
during the past three fiscal years.
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-insurance through our captive insurance
subsidiary.
28
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, on an undiscounted basis, 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.
We have not made any material changes in our methodology used to establish our self-insurance reserves during the past three
fiscal years. Over the past three fiscal years adjustments to our estimates have not been material.
Investments in Unconsolidated Entities
We evaluate our investments in unconsolidated entities for indicators of impairment on a quarterly basis. A series of net
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 amount of impairment recognized is the
excess of the investment’s carrying amount over its estimated fair value.
The evaluation of our investments in unconsolidated entities for other-than-temporary impairment entails a detailed cash flow
analysis using many estimates, including but not limited to: (1) projected future distributions from the unconsolidated entities,
(2) discount rates applied to the future distributions and (3) various other factors. For our unconsolidated entities that develop
for-sale homes and condominiums these other factors include those that are similar to how we evaluate our inventory for
impairment as described above, such as expected sales pace, expected sales price, expected incentives, and costs incurred and
anticipated. For our unconsolidated entities that own, develop and manage for-rent residential apartments, these other factors
may include rental trends, expected future expenses and cap rates. Our assumptions on the projected future distributions from
unconsolidated entities are also dependent on market conditions, sufficiency of financing and capital, competition, and
anticipation of cash receipts.
We believe our assumptions on discount rates require significant judgment because the selection of the discount rate may
significantly impact the estimated fair value of our investments in unconsolidated entities. A higher discount rate reduces the
estimated fair value of our investments in unconsolidated entities, while a lower discount rate increases the estimated fair value
of our investments in unconsolidated entities. During the year ended October 31, 2024, we utilized discount rates ranging from
10% to 15% in our valuations. Because of changes in economic conditions, actual results could differ materially from
management’s assumptions and may require material valuation adjustments to our investments in unconsolidated entities to be
recorded in the future.
29
RESULTS OF OPERATIONS
The following table compares certain items in our Consolidated Statements of Operations and Comprehensive Income and other
supplemental information for fiscal 2024 and 2023 ($ 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,
2024
2023
% Change
Revenues:
Home sales
$ 10,563.3
$ 9,866.0
7 %
Land sales and other
283.4
128.9
10,846.7
9,994.9
9 %
Cost of revenues:
Home sales
7,753.4
7,207.3
8 %
Land sales and other
70.9
153.5
7,824.3
7,360.7
6 %
Selling, general and administrative
982.3
909.4
8 %
Income from operations
2,040.2
1,724.8
18 %
Other:
(Loss) income from unconsolidated entities
(23.8)
50.1
(148) %
Other income - net
69.3
67.5
3 %
Income before income taxes
2,085.6
1,842.4
13 %
Income tax provision
514.4
470.3
9 %
Net income
$ 1,571.2
$ 1,372.1
15 %
Supplemental information:
Home sales cost of revenues as a percentage of home sales revenues
73.4 %
73.1 %
Land sales and other cost of revenues as a percentage of land sales and other
revenues
25.0 %
119.1 %
SG&A as a percentage of home sales revenues
9.3 %
9.2 %
Effective tax rate
24.7 %
25.5 %
Deliveries – units
10,813
9,597
13 %
Deliveries – average sales price (in ‘000s)
$
976.9
$ 1,028.0
(5) %
Net contracts signed – value
$ 10,072.6
$ 7,907.8
27 %
Net contracts signed – units
10,231
8,077
27 %
Net contracts signed – average sales price (in ‘000s)
$
984.5
$
979.1
1 %
At October 31,
2024
2023
% Change
Backlog – value
$ 6,467.8
$ 6,945.3
(7) %
Backlog – units
5,996
6,578
(9) %
Backlog – average sales price (in ‘000s)
$ 1,078.7
$ 1,055.8
2 %
Note: Due to rounding, amounts may not add. “Net contracts signed – value” is net of all cancellations that occurred in the
period. It includes the value of each binding agreement of sale that was signed in the period, plus the value of all options that
were selected during the period, regardless of when the initial agreements of sale related to such options were signed.
A discussion and analysis regarding Results of Operations and Analysis of Financial Condition for the year ended October 31,
2023, as compared to the year ended October 31, 2022, is included in Part II, Item 7, “MD&A” to our Annual Report on Form
10-K for the fiscal year ended October 31, 2023, filed with the SEC on December 21, 2023.
30
FISCAL 2024 COMPARED TO FISCAL 2023
Home Sales Revenues and Home Sales Cost of Revenues
The increase in home sales revenues in fiscal 2024, as compared to fiscal 2023, was attributable to a 13% increase in the
number of homes delivered, offset, in part, by a 5% decrease in the average price of homes delivered. The increase in the
number of homes delivered in fiscal 2024, as compared to fiscal 2023, was principally due to higher backlog conversion and an
increase in the number of spec homes delivered in fiscal 2024, offset, in part, by a decrease in the number of homes in backlog
at October 31, 2023, as compared to the number of homes in backlog at October 31, 2022. The decrease in the average
delivered home price was mainly due to increase in homes delivered in less expensive product types/geographic regions.
Home sales cost of revenues, as a percentage of homes sales revenues, in fiscal 2024 was 73.4%, as compared to 73.1% in
fiscal 2023. The increase in fiscal 2024 was principally due to a shift in the mix of revenues to lower margin products/areas and
increased inventory impairment charges, offset, in part, by lower interest expense as a percentage of home sales revenues. We
recognized inventory impairments and write-offs of $59.4 million, or 0.6% of home sales revenues, and $30.7 million, or 0.3%
of home sales revenues, in fiscal 2024 and fiscal 2023, respectively. Interest cost in fiscal 2024 was $129.0 million, or 1.2% of
home sales revenues, as compared to $139.4 million, or 1.4% of home sales revenues in fiscal 2023.
Land Sales and Other Revenues and Land Sales and Other Cost of Revenues
Our revenues from land sales and other generally consist of the following: (1) land sales to joint ventures in which we retain an
interest; (2) lot sales to third-party builders within our master-planned communities; (3) bulk land sales to third parties of land
we have decided no longer meets our development criteria; (4) sales of land parcels to third parties (typically because there is a
superior economic use of the property); and (5) sales of commercial and retail properties generally located at our urban luxury
condominium communities. Land sales to joint ventures in which we retain an interest are generally sold at our land basis and
therefore little to no gross margin is earned on these sales.
The increase in land sales and other cost of revenues as a percentage of land sales and other revenues in fiscal 2024 compared to
fiscal 2023 was primarily due to the sale of a single land parcel to a commercial developer in our second quarter for net cash
proceeds of $180.7 million, which resulted in a pre-tax gain of $175.2 million. In addition, we incurred lower impairment
charges in fiscal 2024. We recognized $4.4 million of impairment charges in fiscal 2024 in connection with planned land sales.
This compares to $30.6 million of land sales and other impairment charges recognized in fiscal 2023.
Selling, General and Administrative Expenses (“SG&A”)
SG&A spending increased by $72.8 million in fiscal 2024, as compared to fiscal 2023. As a percentage of home sales revenues,
SG&A was 9.3% and 9.2% in fiscal 2024 and 2023, respectively. The dollar increase in SG&A was primarily due to an
increase in variable spending such as selling expenses associated with increased home sales revenues. The increase in SG&A as
a percentage of home sales revenues was primarily due to general cost inflation.
Income from Unconsolidated Entities
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 apartment projects and for-rent single-family home 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 and
for-rent single-family home projects are complete and stabilized, we often 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 projects, the earnings recognized from these entities may
vary significantly from quarter to quarter and year to year.
For our Rental Property Joint Ventures specifically, these entities typically generate operating losses until the related property
reaches stabilization. For the fiscal years 2024 and 2023, our earnings related to the Rental Property Joint Ventures include
approximately $50.3 million and $32.9 million, respectively, of our share of net operating losses incurred by these joint
ventures, of which approximately $29.8 million and $26.1 million, respectively, was our share of the depreciation expense
recognized by these joint ventures.
We recognized a loss from unconsolidated entities of $23.8 million in fiscal 2024, as compared to income of $50.1 million in
fiscal 2023. This decrease was mainly due to $50.9 million of gains recognized in fiscal 2023 related to property sales
compared to $24.1 million of such gains in fiscal 2024. We also recognized a $16.0 million gain as the result of the sale of our
ownership interest in a Rental Property Joint Venture in fiscal 2023. No similar sales occurred in fiscal 2024. Fiscal 2024 was
31
also impacted by higher losses incurred by various Rental Property Joint Ventures, reduced income at one Home Building Joint
Venture due to its underlying assets being sold out, lower earnings from a Land Development Joint Venture due to reduced
sales volume, and an increase in other-than-temporary impairment charges recognized. We recognized other-than-temporary
impairment charges in fiscal 2024 of $6.6 million related to two investments in Rental Property Joint Ventures. No similar
impairment charges were recognized in fiscal 2023.
Other Income - Net
The table below provides the components of “Other Income – net” for the years ended October 31, 2024 and 2023 (amounts in
thousands):
2024
2023
Interest income
$
38,497 $
35,133
Income from ancillary businesses
19,534
2,846
Management fee income earned by home building operations
4,297
4,462
Gain on litigation settlements – net
—
27,683
Other
6,968
(2,606)
Total other income – net
$
69,296 $
67,518
The increase in income from ancillary businesses in fiscal 2024, as compared to fiscal 2023, was principally due to higher
earnings from our mortgage and title operations due to increased closing volume and a $4.4 million gain from a bulk sale of
security monitoring accounts by our smart home technology business, offset, in part, by higher operating losses incurred in our
apartment living operations. In fiscal 2024 and fiscal 2023, we also recognized $8.9 million and $8.4 million, respectively, of
write-offs related to previously incurred costs that we believed not to be recoverable in our apartment living operations.
In fiscal 2024 and 2023, income from ancillary businesses included management fees earned on our apartment rental
development, high-rise urban luxury condominium, and other unconsolidated entities and operations totaling $35.7 million and
$34.7 million, respectively.
In fiscal 2023, the gain on litigation settlements - net primarily related to the settlement of an insurance claim.
The increase in “other” in fiscal 2024 was principally due to a $5.0 million gain related to an investment we held in a privately
held company that sold substantially all of its assets to a third party during the year.
Income Before Income Taxes
In fiscal 2024, we reported income before income taxes of $2.09 billion, or 19.2% of revenues, as compared to $1.84 billion, or
18.4% of revenues, in fiscal 2023.
Income Tax Provision
We recognized a $514.4 million income tax provision in fiscal 2024. Based upon the federal statutory rate of 21.0% for fiscal
2024, our federal tax provision would have been $438.0 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 $103.9 million, $2.7
million of other permanent differences, and a $2.6 million increase in unrecognized tax benefits, offset, in part, by a benefit of
$17.5 million from excess tax benefits related to stock-based compensation, $2.1 million of reversal of accruals for uncertain
tax positions and $13.0 million of miscellaneous and other deferred tax adjustments.
We recognized a $470.3 million income tax provision in fiscal 2023. Based upon the federal statutory rate of 21.0% for fiscal
2023, our federal tax provision would have been $386.9 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 $90.7 million and a
$2.2 million increase in unrecognized tax benefits, offset, in part, by a benefit of $7.3 million from excess tax benefits related to
stock-based compensation, $2.8 million of other permanent differences, and a $2.3 million benefit of federal energy efficient
home credits.
CAPITAL RESOURCES AND LIQUIDITY
Funding for our business has been, and continues to be, provided principally by cash flow from operating activities before
inventory additions, credit arrangements with third parties, and the public capital markets.
Our cash flows from operations generally provide us with a significant source of liquidity. Our cash flows provided by
operating activities, supplemented with our short-term borrowings and long-term debt, have been sufficient to fund our
32
operations while allowing us to invest in activities that support the long-term growth of our Company. Our primary uses of cash
include inventory additions in the form of land acquisitions and deposits to obtain control of land, land development, working
capital to fund day-to-day operations, and investments in existing and future unconsolidated joint ventures. We may also use
cash to fund capital expenditures such as investments in our information technology systems. We also use cash to pay dividends
on our common stock, to repay debt and make share repurchases. We believe our sources of cash and liquidity will continue to
be adequate to fund operations, finance our strategic operating initiatives, repay debt, fund our share repurchases and pay
dividends for the foreseeable future.
At October 31, 2024, we had $1.30 billion of cash and cash equivalents on hand and approximately $1.77 billion available for
borrowing under our Revolving Credit Facility. The Revolving Credit Facility provides us with a committed borrowing
capacity of $1.955 billion, which we have the ability to increase up to $3.00 billion with the consent of lenders, and is
scheduled to mature on February 14, 2028. Toll Brothers, Inc. and substantially all of its 100%-owned home building
subsidiaries are guarantors of the borrower’s obligations under the Revolving Credit Facility. We are also a party to a $650.0
million unsecured Term Loan Facility, of which $487.5 million matures February 14, 2028, $101.6 million matures on
November 1, 2025 and the remaining $60.9 million matures on November 1, 2026.
Short-term Liquidity and Capital Resources
In fiscal 2025, we expect our principal demand for funds will be for inventory additions (in the form of land acquisition, land
development, home construction costs, and deposits to control land, which could occur directly or indirectly through builder
acquisitions), operating expenses, including our general and administrative expenses, investments and funding of capital
improvements, investments in existing and future unconsolidated joint ventures, repayment of community level debt, common
stock repurchases, and dividend payments. Demand for funds include interest and principal payments on current and future debt
financing. We expect to meet our short-term liquidity requirements primarily through our cash and cash equivalents on hand
and net cash flows provided by operations. Additional sources of funds include distributions from our unconsolidated joint
ventures, borrowing capacity under our Revolving Credit Facility and borrowings from banks and other lenders.
We believe we will have sufficient liquidity available to fund our business needs, commitments and contractual obligations in a
timely manner for the next twelve months. We may, however, seek additional financing to fund future growth or refinance our
existing indebtedness through the debt capital markets, but we cannot be assured that such financing will be available on
favorable terms, or at all.
Long-term Liquidity and Capital Resources
Beyond fiscal 2025, our principal demands for funds will be for the payments of the principal amount of our long-term debt as
it becomes due or matures, land purchases and inventory additions needed to grow our business, long-term capital investments
and investments in unconsolidated joint ventures, common stock repurchases, and dividend payments.
Over the longer term, to the extent the sources of capital described above are insufficient to meet our needs, we may also
conduct additional public offerings of our securities, refinance debt or dispose of certain assets to fund our operating activities
and debt service. We expect these resources will be adequate to fund our ongoing operating activities as well as provide capital
for investment in future land purchases and related development activities and future joint ventures.
Material Cash Requirements
We are a party to many agreements that include contractual obligations and commitments to make payments to third parties.
These obligations impact our short-term and long-term liquidity and capital resource needs. Certain contractual obligations are
reflected on the Consolidated Balance Sheet as of October 31, 2024, while others are considered future commitments. Our
contractual obligations primarily consist of long-term debt and related interest payments, payments due on our mortgage
company loan facility, purchase obligations related to expected acquisition of land under purchase agreements and land
development agreements (many of which are secured by letters of credit or surety bonds), operating leases, obligations under
our deferred compensation plan, and obligations under our supplemental executive retirement plans. We also enter into certain
short-term lease commitments, commitments to fund our existing or future unconsolidated joint ventures, letters of credit and
other purchase obligations in the normal course of business. For more information regarding our primary obligations, refer to
Note 6, “Loans Payable, Senior Notes, and Mortgage Company Loan Facility,” and Note 14, “Commitments and
Contingencies,” to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for amounts
outstanding as of October 31, 2024, related to debt and commitments and contingencies, respectively.
We also operate through a number of joint ventures and have undertaken various commitments as a result of those
arrangements. At October 31, 2024, we had investments in these entities of $1.01 billion, and were committed to invest or
advance up to an additional $312.8 million to these entities if they require additional funding. At October 31, 2024, we had
agreed to terms for the acquisition of 316 home sites from four joint ventures for an estimated aggregate purchase price of $26.8
33
million. In addition, we expect to purchase approximately 9,000 additional home sites over a number of years from several joint
ventures in which we have interests. The purchase price of these home sites will be determined at a future date.
The unconsolidated joint ventures in which we have investments generally finance their activities with a combination of partner
equity and debt financing. In some instances, we and our joint venture partner have guaranteed debt of unconsolidated entities.
These guarantees may include any or all of the following: (i) project completion guarantees, including any cost overruns; (ii)
repayment guarantees, generally covering a percentage of the outstanding loan; (iii) carry cost guarantees, which cover costs
such as interest, real estate taxes, and insurance; (iv) environmental indemnities provided to lenders that holds them harmless
from and against losses arising from the discharge of hazardous materials from the property and non-compliance with
applicable environmental laws; and (v) indemnifications of lenders from “bad boy acts” of the unconsolidated entity.
In these situations where we have joint and several guarantees with our joint venture partner, we generally seek to implement a
reimbursement agreement with our partner that provides that neither party is responsible for more than its proportionate share or
agreed-upon share of the guarantee; however, we are not always successful. In addition, if the joint venture partner does not
have adequate financial resources to meet its obligations under such a reimbursement agreement, we may be liable for more
than our proportionate share. We believe that, as of October 31, 2024, in the event we had become legally obligated to perform
under a guarantee of the obligation of an unconsolidated entity due to a triggering event, the collateral in such entity should be
sufficient to repay all or a significant portion of the obligation. If it is not, we and our partners would need to contribute
additional capital to the entity. At October 31, 2024, we had guaranteed the debt of certain unconsolidated entities that have
loan commitments aggregating $3.03 billion, of which, if the full amount of the debt obligations were borrowed, we estimate
$646.9 million to be our maximum exposure related to repayment and carry cost guarantees. At October 31, 2024, the
unconsolidated entities had borrowed an aggregate of $2.20 billion, of which we estimate $560.4 million to be our maximum
exposure related to repayment and carry cost guarantees. The terms of these guarantees generally range from 1 month to 3.0
years. These maximum exposure estimates do not take into account any recoveries from the underlying collateral or any
reimbursement from our partners, nor do they include any potential exposures related to project completion guarantees or the
indemnities noted above, which are not estimable.
For more information regarding these joint ventures, see Note 4, “Investments in Unconsolidated Entities” in the Notes to
Consolidated Financial Statements in Item 15(a)1 of this Form 10-K.
Debt Service Requirements
Our financing strategy is to ensure liquidity and access to capital markets, to maintain a balanced profile of debt maturities, and
to manage our exposure to floating interest rate volatility.
Outside of the normal course of operations, one of our principal liquidity needs is the payment of principal and interest on
outstanding indebtedness. We are required by the terms of certain loan documents to meet certain covenants, such as financial
ratios and reporting requirements. As of October 31, 2024, we were in compliance with all such covenants and requirements on
our term loan, credit facility and other loans payable. Refer to Note 6, “Loans Payable, Senior Notes, and Mortgage Company
Loan Facility” in the Notes to the Consolidated Financial Statements in Item 15(a)1 of this Form 10-K for additional
information.
Operating Activities
Cash provided by operating activities during fiscal 2024 was $1.01 billion. Cash provided by operating activities was generated
primarily from: (1) $1.57 billion of net income plus the following non-cash activities: $81.2 million of depreciation and
amortization, a net deferred tax benefit of $80.3 million, $72.8 million of impairments and write-offs, $29.6 million of stock-
based compensation, $23.8 million of losses from unconsolidated entities; and (2) $39.3 million of distributions received from
unconsolidated entities and $31.9 million in current income taxes, net. This activity was offset, in part, by an increase of $575.7
million in inventory, a decrease of $77.2 million in net customer deposits; $78.5 million in mortgage loan originations, net of
sales, and a decrease of $21.8 million in accounts payable and accrued expenses.
Cash provided by operating activities during fiscal 2023 was $1.27 billion. Cash provided by operating activities was generated
primarily from: (1) $1.37 billion of net income plus the following non-cash activities: $76.5 million of depreciation and
amortization, $69.5 million of impairments and write-offs, $24.8 million of stock-based compensation, $50.1 million of income
earned from unconsolidated entities; and a net deferred tax expense of $36.2 million and (2) $88.4 million of distributions
received from unconsolidated entities and $78.9 million in mortgage loan sales, net of originations. This activity was offset, in
part, by a decrease of $162.6 million in current income taxes, net; an increase of $135.9 million in receivables, prepaid assets,
and other assets; a decrease of $88.3 million in net customer deposits; a decrease of $23.7 million in accounts payable and
accrued expenses; and an increase of $22.2 million in inventory.
34
Investing Activities
Cash used in investing activities during fiscal 2024 was $167.6 million, primarily related to $193.2 million used to fund our
investments in unconsolidated entities and $73.6 million for the purchase of property and equipment. This activity was offset, in
part, by $101.4 million of cash received as returns from our investments in unconsolidated entities.
Cash used in investing activities during fiscal 2023 was $150.6 million, primarily related to $216.4 million used to fund our
investments in unconsolidated entities and $73.0 million for the purchase of property and equipment. This activity was offset, in
part, by $112.7 million of cash received as returns from our investments in unconsolidated entities and $26.0 million of cash
proceeds from the sale of assets, including ownership interests in unconsolidated entities.
Financing Activities
We used $816.5 million of cash from financing activities in fiscal 2024, primarily for the repurchase of $627.1 million of our
common stock; payments of $100.1 million of loans payable, net of new borrowings; and the payment of dividends on our
common stock of $93.4 million. This activity was offset by $4.1 million of proceeds from stock-based benefit plans.
We used $1.17 billion of cash from financing activities in fiscal 2023, primarily for the repurchase of $561.6 million of our
common stock; the redemption of $400.0 million of senior notes; payments of $160.3 million of loans payable, net of new
borrowings; the payment of dividends on our common stock of $91.1 million and $5.4 million of payments for debt issuance
costs. This activity was offset by $48.3 million of proceeds from stock-based benefit plans.
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 contract to sell a substantial number of our homes before we begin construction, any inflation of costs in
excess of those anticipated would likely result in lower gross margins for these homes. 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 other housing costs. Additionally, 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 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. See “Risk Factors — Risks Related to Our Business and Industry - Significant
inflation, higher interest rates or deflation could adversely affect our business and financial results” in Item 1A of this Form 10-
K.
SUPPLEMENTAL GUARANTOR INFORMATION
At October 31, 2024, our 100%-owned subsidiary, Toll Brothers Finance Corp. (the “Subsidiary Issuer”), had issued and
outstanding $1.60 billion aggregate principal amount of senior notes maturing on various dates between November 15, 2025
and November 1, 2029 (the “Senior Notes”). For further information regarding the Senior Notes, see Note 6 to our Consolidated
Financial Statements under the caption “Senior Notes.”
The obligations of the Subsidiary Issuer to pay principal, premiums, if any, and interest are guaranteed jointly and severally on
a senior basis by Toll Brothers, Inc. and substantially all of its 100%-owned home building subsidiaries (the “Guarantor
Subsidiaries” and, together with us, the “Guarantors”). 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.
35
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.
The following summarized financial information is presented for Toll Brothers, Inc., the Subsidiary Issuer, and the Guarantor
Subsidiaries on a combined basis after intercompany transactions and balances have been eliminated among Toll Brothers, Inc.,
the Subsidiary Issuer and the Guarantor Subsidiaries, as well as their investment in, and equity in earnings from the Non-
Guarantor Subsidiaries.
Summarized Balance Sheet Data (amounts in millions)
October 31, 2024
Assets
Cash
$
1,170.6
Inventory
$
9,594.5
Amount due from Non-Guarantor Subsidiaries
$
725.6
Total assets
$
12,242.5
Liabilities & Stockholders' Equity
Loans payable
$
968.4
Senior notes
$
1,597.1
Total liabilities
$
4,952.9
Stockholders' equity
$
7,289.6
Summarized Statement of Operations Data (amounts in millions)
For the
year ended
October 31, 2024
Revenues
$
10,673.2
Cost of revenues
$
7,687.0
Selling, general and administrative
$
975.7
Income before income taxes
$
2,048.6
Net income
$
1,543.3
SEGMENTS
During fiscal 2024 and 2023, we operated in five geographic segments, with operations generally located in the states listed
below:
•
The North region: Connecticut, Delaware, Illinois, Massachusetts, Michigan, New Jersey, New York and
Pennsylvania;
•
The Mid-Atlantic region: Georgia, Maryland, North Carolina, Tennessee and Virginia;
•
The South region: Florida, South Carolina and Texas
•
The Mountain region: Arizona, Colorado, Idaho, Nevada and Utah; and
•
The Pacific region: California, Oregon and Washington.
Our geographic reporting segments are consistent with how our chief operating decision makers are assessing operating
performance and allocating capital. The following tables summarize information related to revenues, net contracts signed, and
36
income (loss) before income taxes by segment for fiscal years 2024 and 2023. Information related to backlog and assets by
segment at October 31, 2024 and 2023 has also been provided.
Units Delivered and Revenues:
Fiscal 2024 Compared to Fiscal 2023
Revenues
($ in millions)
Units Delivered
Average Delivered Price
($ in thousands)
2024
2023
%
Change
2024
2023
%
Change
2024
2023
%
Change
North
$ 1,484.3 $ 1,494.1
(1) % 1,522 1,577
(3) % $ 975.2 $ 947.4
3 %
Mid-Atlantic
1,422.0 1,175.3
21 % 1,512 1,067
42 % $ 940.5 $ 1,101.5
(15) %
South
2,787.4 2,204.8
26 % 3,316 2,597
28 % $ 840.6 $ 849.0
(1) %
Mountain
2,590.4 2,660.7
(3) % 2,984 2,897
3 % $ 868.1 $ 918.4
(5) %
Pacific
2,279.1 2,329.4
(2) % 1,479 1,459
1 % $ 1,541.0 $ 1,596.6
(3) %
Total home building
10,563.2 9,864.3
7 % 10,813 9,597
13 % $ 976.9 $ 1,027.9
(5) %
Other
0.1
1.7
Total home sales revenue
10,563.3 $ 9,866.0
7 % 10,813 9,597
13 % $ 976.9 $ 1,028.0
(5) %
Land sales and other revenue
283.4
128.9
Total revenue
$ 10,846.7 $ 9,994.9
Net Contracts Signed:
Fiscal 2024 Compared to Fiscal 2023
Net Contract Value
($ in millions)
Net Contracted Units
Average Contracted Price
($ in thousands)
2024
2023
%
Change
2024
2023
%
Change
2024
2023
%
Change
North
$ 1,456.8 $ 1,336.9
9 % 1,421 1,411
1 % $ 1,025.2 $ 947.5
8 %
Mid-Atlantic
1,292.0
1,165.5
11 % 1,353 1,170
16 % $ 954.9 $ 996.2
(4) %
South
2,498.2
1,938.3
29 % 3,007 2,386
26 % $ 830.8 $ 812.4
2 %
Mountain
2,655.0
1,633.1
63 % 3,002 1,950
54 % $ 884.4 $ 837.5
6 %
Pacific
2,170.6
1,834.0
18 % 1,448 1,160
25 % $ 1,499.0 $ 1,581.0
(5) %
Total consolidated
$ 10,072.6 $ 7,907.8
27 % 10,231 8,077
27 % $ 984.5 $ 979.1
1 %
Backlog at October 31:
October 31, 2024 Compared to October 31, 2023
Backlog Value
($ in millions)
Backlog Units
Average Backlog Price
($ in thousands)
2024
2023
%
Change
2024
2023
%
Change
2024
2023
%
Change
North
$ 937.5 $ 964.1
(3) %
855
956
(11) % $ 1,096.5 $ 1,008.5
9 %
Mid-Atlantic
824.8
953.0
(13) %
786
945
(17) % $ 1,049.4 $ 1,008.4
4 %
South
1,807.5 2,093.4
(14) % 2,003 2,312
(13) % $ 902.4 $ 905.5
— %
Mountain
1,645.5 1,577.7
4 % 1,595 1,577
1 % $ 1,031.7 $ 1,000.5
3 %
Pacific
1,252.5 1,357.1
(8) %
757
788
(4) % $ 1,654.6 $ 1,722.2
(4) %
Total consolidated
$ 6,467.8 $ 6,945.3
(7) % 5,996 6,578
(9) % $ 1,078.7 $ 1,055.8
2 %
37
Income (Loss) Before Income Taxes ($ amounts in millions):
2024
2023
% Change
2024 vs 2023
North
$
252.7 $
197.4
28 %
Mid-Atlantic
471.5
243.5
94 %
South
578.0
416.7
39 %
Mountain
446.2
517.1
(14) %
Pacific
541.8
610.1
(11) %
Total home building
2,290.2
1,984.8
15 %
Corporate and other
(204.6)
(142.4)
(44) %
Total consolidated
$ 2,085.6 $ 1,842.4
13 %
“Corporate and other” is comprised principally of general corporate expenses such as our executive offices; the corporate
finance, accounting, audit, tax, human resources, risk management, information technology, marketing, and legal groups;
interest income; income from certain of our ancillary businesses, including our apartment rental development business and our
high-rise urban luxury condominium operations; and income from our Rental Property Joint Ventures and Other Joint Ventures.
Total Assets ($ amounts in millions):
At October 31,
2024
2023
North
$
1,425.7 $
1,281.4
Mid-Atlantic
1,445.0
1,323.4
South
2,514.4
2,399.1
Mountain
2,950.8
2,666.9
Pacific
2,266.8
2,175.8
Total home building
10,602.8
9,846.6
Corporate and other
2,765.2
2,680.4
Total consolidated
$
13,367.9 $
12,527.0
Note: Due to rounding, amounts may not add.
“Corporate and other” is comprised principally of cash and cash equivalents, restricted cash, investments in our Rental Property
Joint Ventures, expected recoveries from insurance carriers and suppliers, manufacturing facilities, our apartment rental
development operations, and our mortgage and title subsidiaries.
A discussion and analysis regarding our Segments’ Results of Operations and Analysis of Financial Condition for the year
ended October 31, 2023, as compared to the year ended October 31, 2022 is included in Part II, Item 7, “MD&A” to our Annual
Report on Form 10-K for the fiscal year ended October 31, 2023, filed with the SEC on December 21, 2023.
38
FISCAL 2024 COMPARED TO FISCAL 2023
North
Year ended October 31,
2024
2023
% Change
Units Delivered and Home Sales Revenues:
Home sales revenues ($ in millions)
$ 1,484.3
$ 1,494.1
(1) %
Units delivered
1,522
1,577
(3) %
Average delivered price ($ in thousands)
$
975.2
$
947.4
3 %
Net Contracts Signed:
Net contract value ($ in millions)
$ 1,456.8
$ 1,336.9
9 %
Net contracted units
1,421
1,411
1 %
Average contracted price ($ in thousands)
$ 1,025.2
$
947.5
8 %
Home sales cost of revenues as a percentage of home sales revenues
76.8 %
79.4 %
Income before income taxes ($ in millions)
$
252.7
$
197.4
28 %
Number of selling communities at October 31,
43
40
8 %
The decrease in the number of homes delivered in fiscal 2024, as compared to fiscal 2023, was mainly due to a decrease in the
number of homes in backlog at October 31, 2023, as compared to the number of homes in backlog at October 31, 2022, offset,
in part by a higher backlog conversion in fiscal 2024 and an increase in the number of spec homes delivered. The increase in the
average delivered price in fiscal 2024 was primarily due to a shift in the number of homes delivered to more expensive areas
and/or products, as well as sales price increases.
The increase in the number of net contracts signed in fiscal 2024, as compared to fiscal 2023, was principally due to an increase
in the number of selling communities in fiscal 2024. The increase in the average value of each contract signed in the fiscal 2024
period was primarily due to a shift in the number of contracts signed to more expensive areas and/or products and a decrease in
average sales incentives in fiscal 2024.
The increase in income before income taxes in fiscal 2024 was principally attributable to lower home sales cost of revenues, as
a percentage of home sales revenues, and decreased SG&A spend, partially offset by lower income from unconsolidated
entities. The decrease in home sales costs of revenues, as a percentage of home sale revenues, in fiscal 2024 was primarily due
to a shift in product mix/areas to higher-margin areas and lower interest expense as a percentage of home sales revenue. The
decrease in income from unconsolidated entities was principally due to one joint venture delivering its final home in fiscal
2023. In addition, we recognized $15.6 million of land impairment charges in fiscal 2023 in connection with planned land sales.
No similar charges were recognized in fiscal 2024.
39
Mid-Atlantic
Year ended October 31,
2024
2023
% Change
Units Delivered and Home Sales Revenues:
Home sales revenues ($ in millions)
$ 1,422.0
$ 1,175.3
21 %
Units delivered
1,512
1,067
42 %
Average delivered price ($ in thousands)
$
940.5
$ 1,101.5
(15) %
Net Contracts Signed:
Net contract value ($ in millions)
$ 1,292.0
$ 1,165.5
11 %
Net contracted units
1,353
1,170
16 %
Average contracted price ($ in thousands)
$
954.9
$
996.2
(4) %
Home sales cost of revenues as a percentage of home sales revenues
72.4 %
71.9 %
Income before income taxes ($ in millions)
$
471.5
$
243.5
94 %
Number of selling communities at October 31,
52
43
21 %
The increase in the number of homes delivered in fiscal 2024, as compared to fiscal 2023, was mainly due to an increase in the
number of homes in backlog at October 31, 2023, as compared to the number of homes in backlog at October 31, 2022, higher
backlog conversion, and an increase in the number of spec homes delivered in fiscal 2024. The decrease in the average price of
homes delivered in fiscal 2024 was primarily due to a shift in the number of homes delivered to less expensive areas and/or
products, as well as an increase in the number of spec homes delivered.
The increase in the number of net contracts signed in fiscal 2024, as compared to fiscal 2023, was principally due to an increase
in the number of selling communities, partially offset by a modestly lower community sales pace. The decrease in the average
value of each contract signed in fiscal 2024 was mainly due to shifts in the number of contracts signed to less expensive areas
and/or products and an increase in average sales incentives.
The increase in income before income taxes in fiscal 2024, as compared to fiscal 2023, was mainly due the sale of a land parcel
to a commercial developer that resulted in a pre-tax gain of $175.2 million and higher earnings from increased revenues, offset,
in part, with higher home sales costs of revenues, as a percentage of home sale revenues, and increased SG&A spend. The
increase in home sales costs of revenues, as a percentage of home sale revenues, in fiscal 2024 was primarily due to a shift in
product mix/areas to lower-margin areas.
Inventory impairment charges were $15.2 million and $15.9 million in fiscal 2024 and 2023, respectively. In addition, in fiscal
2024 and 2023 we recognized $0.6 million and $10.3 million, respectively, in land impairment charges included in land sales
and other cost of revenues in connection with planned land sales.
40
South
Year ended October 31,
2024
2023
% Change
Units Delivered and Home Sales Revenues:
Home sales revenues ($ in millions)
$ 2,787.4
$ 2,204.8
26 %
Units delivered
3,316
2,597
28 %
Average delivered price ($ in thousands)
$
840.6
$
849.0
(1) %
Net Contracts Signed:
Net contract value ($ in millions)
$ 2,498.2
$ 1,938.3
29 %
Net contracted units
3,007
2,386
26 %
Average contracted price ($ in thousands)
$
830.8
$
812.4
2 %
Home sales cost of revenues as a percentage of home sales revenues
71.7 %
73.5 %
Income before income taxes ($ in millions)
$
578.0
$
416.7
39 %
Number of selling communities at October 31,
145
115
26 %
The increase in the number of homes delivered in fiscal 2024, as compared to fiscal 2023, was mainly due to a higher backlog
conversion and an increase in the number of spec homes delivered in fiscal 2024, partially offset by a decrease in the number of
homes in backlog at October 31, 2023, as compared to the number of homes in backlog at October 31, 2022. The slight
decrease in the average price of homes delivered in fiscal 2024 was primarily due to a shift in the number of homes delivered to
less expensive areas and/or products.
The increase in the number of net contracts signed in fiscal 2024, as compared to fiscal 2023, was principally due to an increase
in the number of selling communities. The increase in the average value of each contract signed in fiscal 2024 was mainly due
to a shift in the number of contracts signed to more expensive areas, partially offset by an increase in average sales incentives.
The increase in income before income taxes in fiscal 2024, as compared to fiscal 2023, was principally due to higher earnings
from increased home sales revenues and lower home sales costs of revenues, as a percentage of home sales revenues, offset, in
part, by higher SG&A costs resulting from increased sales volume. The 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 interest
expense as a percentage of home sales revenue, offset by higher inventory impairment changes in fiscal 2024. Inventory
impairment charges were $3.4 million and $1.8 million in fiscal 2024 and 2023, respectively.
Mountain
Year ended October 31,
2024
2023
% Change
Units Delivered and Home Sales Revenues:
Home sales revenues ($ in millions)
$ 2,590.4
$ 2,660.7
(3) %
Units delivered
2,984
2,897
3 %
Average delivered price ($ in thousands)
$
868.1
$
918.4
(5) %
Net Contracts Signed:
Net contract value ($ in millions)
$ 2,655.0
$ 1,633.1
63 %
Net contracted units
3,002
1,950
54 %
Average contracted price ($ in thousands)
$
884.4
$
837.5
6 %
Home sales cost of revenues as a percentage of home sales revenues
76.5 %
74.0 %
Income before income taxes ($ in millions)
$
446.2
$
517.1
(14) %
Number of selling communities at October 31,
117
120
(3) %
The increase in the number of homes delivered in fiscal 2024, as compared to fiscal 2023, was mainly due to higher backlog
conversion and an increase in the number of spec homes delivered in fiscal 2024, partially offset by a decrease in the number of
41
homes in backlog at October 31, 2023, as compared to the number of homes in backlog at October 31, 2022. The decrease in
the average price of homes delivered in fiscal 2024 was primarily due to a shift in the number of homes delivered to less
expensive areas or product types.
The increase in the number of net contracts signed in fiscal 2024, as compared to fiscal 2023, was principally due to improved
demand in fiscal 2024, offset, in part, by a decrease in the number of selling communities. The increase in the average value of
each contract signed in fiscal 2024 was mainly due to shifts in the number of contracts signed to more expensive areas and/or
products, partially offset by an increase in average sales incentives.
The decrease in income before income taxes in fiscal 2024, as compared to fiscal 2023, was mainly due lower earnings from
decreased revenues, higher home sales cost of revenues, as a percentage of home sales revenues, and increased SG&A spend,
partially offset by higher earnings from land sales and other 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 and lower interest
expense as a percentage of home sales revenues, and higher inventory impairment charges. Inventory impairment charges were
$26.0 million and $5.7 million in fiscal 2024 and 2023, respectively.
Pacific
Year ended October 31,
2024
2023
% Change
Units Delivered and Home Sales Revenues:
Home sales revenues ($ in millions)
$ 2,279.1
$ 2,329.4
(2) %
Units delivered
1,479
1,459
1 %
Average delivered price ($ in thousands)
$ 1,541.0
$ 1,596.6
(3) %
Net Contracts Signed:
Net contract value ($ in millions)
$ 2,170.6
$ 1,834.0
18 %
Net contracted units
1,448
1,160
25 %
Average contracted price ($ in thousands)
$ 1,499.0
$ 1,581.0
(5) %
Home sales cost of revenues as a percentage of home sales revenues
70.2 %
67.9 %
Income before income taxes ($ in millions)
541.8
610.1
(11) %
Number of selling communities at October 31,
51
52
(2) %
The increase in the number of homes delivered in fiscal 2024, as compared to fiscal 2023, was mainly due to higher backlog
conversion and an increase in the number of spec homes delivered in fiscal 2024, partially offset by a decrease in the number of
homes in backlog at October 31, 2023, as compared to the number of homes in backlog at October 31, 2022. The decrease in
the average price of homes delivered in fiscal 2024 was primarily due to higher sales incentives and a shift in the number of
homes delivered to less expensive areas and/or product types.
The increase in the number of net contracts signed in fiscal 2024, as compared to fiscal 2023, was principally due to an increase
in demand in fiscal 2024, partially offset by an decrease in the number of selling communities. The decrease in the average
value of each contract signed in fiscal 2024 was mainly due to a shift in the number of contracts signed in less expensive areas
or product types, offset, in part, by a decrease in average sale incentives.
The decrease in income before income taxes in fiscal 2024, as compared to fiscal 2023, 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 a shift in product mix/areas to lower-
margin areas and an increase in inventory impairment charges, partially offset by lower interest expense as a percentage of
home sales revenues. Inventory impairment charges were $13.7 million and $6.7 million in fiscal 2024 and 2023, respectively.
In addition, we recognized a $2.2 million impairment charge in land sales and other cost of revenues in fiscal 2023 in
connection with a planned land sale. No similar charges were recognized in fiscal 2024.
Corporate and Other
In fiscal 2024 and 2023, loss before income taxes was $204.6 million and $142.4 million respectively. The increase in the loss
before income taxes in fiscal 2024 was principally due to $27.7 million of gains from litigation settlements - net, recognized in
fiscal 2023, which did not recur in fiscal 2024. In addition, fiscal 2023 was positively impacted by $50.9 million of gains
42
recognized from property sales by two of our Rental Property Joint Ventures and a $16.0 million gain from the sale of our
ownership interest in one of our Rental Property Joint Ventures. The fiscal 2024 period was positively impacted by a $5.0
million gain related to our investment in a privately held company that sold substantially all of its assets to a third party; a $4.4
million gain from a bulk sale of security monitoring accounts by our smart home technology business; higher earnings from our
mortgage and title company operations primarily due to increased volume; offset by higher losses by various Rental Property
Joint Ventures.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk primarily due to fluctuations in interest rates. We incur both fixed-rate and variable-rate debt.
For fixed-rate debt, changes in interest rates generally affect the fair market value of the debt instrument, but not our earnings or
cash flow. Conversely, for variable-rate debt, changes in interest rates generally do not affect the fair market value of the debt
instrument, but do affect our earnings and cash flow. We do not have the obligation to prepay fixed-rate debt prior to maturity,
and, as a result, interest rate risk and changes in fair market value should not have a significant impact on our fixed-rate debt
until we are required or elect to refinance it.
The following table shows our debt obligations by scheduled maturity, weighted-average interest rates, and estimated fair value
as of October 31, 2024 ($ amounts in thousands):
Fixed-rate debt
Variable-rate debt (a)
Fiscal year of maturity
Amount
Weighted-
average
interest rate
(%)
Amount
Weighted-
average
interest rate
(%)
2025
$
165,472
5.17%
$
185,024
6.72%
2026
412,922
4.98%
178,277
6.62%
2027
493,194
4.89%
60,937
5.73%
2028
410,488
4.30%
487,500
5.73%
2029
409,820
3.77%
—
Thereafter (b)
41,759
3.46%
—
Bond discounts, premiums, and deferred issuance costs - net
(10,322)
(2,152)
Total
$ 1,923,333
4.56%
$
909,586
6.12%
Fair value at October 31, 2024
$ 1,880,418
$
911,738
(a) Based upon the amount of variable-rate debt outstanding at October 31, 2024, and holding the variable-rate debt
balance constant, each 1% increase in interest rates would increase the interest incurred by us by approximately $9.1
million per year, without consideration of the Company’s interest rate swap transactions.
(b) In November 2020, we entered into five interest rate swap transactions to hedge $400.0 million of the $650.0 million
Term Loan Facility, which is included in the variable-rate debt column in the table above. The interest rate swaps
effectively fix the interest cost on the $400.0 million at 0.369% plus the spread set forth in the pricing schedule in the
Term Loan Facility through October 2025. The spread was 0.90% as of October 31, 2024. These interest rate swaps
were designated as cash flow hedges.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements, listed in Item 15(a)(1) beginning on page F-1 of this report are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not applicable.
43
ITEM 9A. CONTROLS AND PROCEDURES
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Any controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative to costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any,
within the Company have been detected. Because of the inherent limitations in a cost-effective control system, misstatements
due to error or fraud may occur and not be detected; however, our disclosure controls and procedures are designed to provide
reasonable assurance of achieving their objectives.
Our Chief Executive Officer and Chief Financial Officer, with the assistance of management, evaluated the effectiveness of our
disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended, (“Exchange Act”), as of the end of the period covered by this report (“Evaluation Date”). Based on that evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and
procedures were effective to provide reasonable assurance that information required to be disclosed in our reports under the
Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms,
and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control Over Financial Reporting and Attestation Report of the Independent
Registered Public Accounting Firm
Management’s Annual Report on Internal Control Over Financial Reporting and the attestation report of our independent
registered public accounting firm on internal control over financial reporting on pages F-1 and F-2, respectively, are
incorporated herein by reference.
Changes in Internal Control Over Financial Reporting
There has not been any change in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) during our quarter ended October 31, 2024, that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
Securities Trading Plans of Directors and Executive Officers
During the period covered by this Annual Report on Form 10-K, no director or officer of the Company adopted or terminated a
“Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of
Regulation S-K.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
44
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table includes information with respect to all persons serving as executive officers as of the date of this Form 10-
K. All executive officers serve at the pleasure of our Board of Directors.
Name
Age
Positions
Douglas C. Yearley, Jr.
64 Chairman of the Board and Chief Executive Officer
Robert Parahus
61 President and Chief Operating Officer
Martin P. Connor
60 Senior Vice President and Chief Financial Officer
Douglas C. Yearley, Jr. joined us in 1990, specializing in land acquisitions and project finance. He has been an officer since
1994, holding the position of Senior Vice President from January 2002 until November 2005, the position of Regional President
from November 2005 until November 2009, and the position of Executive Vice President from November 2009 until
June 2010, when he was promoted to Chief Executive Officer. On November 1, 2018, he was appointed to the position of
Chairman of the Board and Chief Executive Officer. Mr. Yearley was first elected as a Director in June 2010.
Robert Parahus joined us in 1986 and served in various positions with us, including Regional President from 2006 through
October 31, 2019. During this time, he oversaw the Company’s home building operations in New Jersey, New York,
Connecticut, Massachusetts, and Florida, and had oversight responsibility for Toll Integrated Systems, the Company’s building
component manufacturing operations. He was appointed to the position of Executive Vice President and Co-Chief Operating
Officer effective November 1, 2019, with responsibility for the Company’s North, Mid-Atlantic, and South regions. Effective
November 1, 2021, Mr. Parahus was promoted to President and Chief Operating Officer.
Martin P. Connor joined us as Vice President and Assistant Chief Financial Officer in December 2008 and was appointed a
Senior Vice President in December 2009. Mr. Connor was appointed to his current position of Senior Vice President and Chief
Financial Officer in September 2010. From June 2008 to December 2008, Mr. Connor was President of Marcon Advisors LLC,
a finance and accounting consulting firm that he founded. From October 2006 to June 2008, Mr. Connor was Chief Financial
Officer and Director of Operations for O’Neill Properties, a diversified commercial real estate developer in the Mid-Atlantic
area. Prior to October 2006, he spent over 20 years at Ernst & Young LLP as an Audit and Advisory Business Services Partner,
responsible for the real estate practice for Ernst & Young LLP in the Philadelphia marketplace. During the period from 1998 to
2005, he served on the Toll Brothers, Inc. audit engagement. Mr. Connor is a director of Univest Financial Corporation, a
publicly traded banking and financial services provider serving customers primarily in Pennsylvania and New Jersey.
Code of Ethics
We have adopted a Code of Ethics for the Principal Executive Officer and Senior Financial Officers (“Code of Ethics”) that
applies to our principal executive officer, principal financial officer, principal accounting officer, controller, and persons
performing similar functions designated by our Board of Directors. The Code of Ethics is available on our Internet website at
www.tollbrothers.com under “Investor Relations – Corporate Governance.” If we were to amend or waive any provision of our
Code of Ethics, we intend to satisfy our disclosure obligations with respect to any such waiver or amendment by posting such
information on our Internet website set forth above rather than by filing a Form 8-K.
Insider Trading Policy
The Company has an insider trading policy governing the purchase, sale and other dispositions of the Company’s securities that
applies to all Company personnel, including directors, officers, employees, and other covered persons, as well as the Company
itself. The Company also follows procedures for the repurchase of its securities. The Company believes that its insider trading
policy and repurchase procedures are reasonably designed to promote compliance with insider trading laws, rules and
regulations, and listing standards applicable to the Company. A copy of the Company’s insider trading policy is filed as Exhibit
19.1 to this Form 10-K.
Indemnification of Directors and Officers
Our Certificate of Incorporation and Bylaws provide for indemnification of our directors and officers. We have also entered
into individual indemnification agreements with each of our directors.
The remaining information required by this Item 10 will be included in our Proxy Statement for the 2025 Annual Meeting of
Stockholders (the “2025 Proxy Statement”), and is incorporated herein by reference.
45
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be included in the “Executive Compensation” section of our 2025 Proxy Statement
and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information required in this item will be included in the “Voting Securities and Beneficial Ownership” and “Equity
Compensation Plan Information” sections of our 2025 Proxy Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS; DIRECTOR INDEPENDENCE
The information required in this item will be included in the “Corporate Governance” and “Certain Relationships and
Transactions” sections of our 2025 Proxy Statement and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required in this item will be included in the “Ratification of the Re-Appointment of Independent Registered
Public Accounting Firm” section of the 2025 Proxy Statement and is incorporated herein by reference.
46
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) Financial Statements and Financial Statement Schedules
Page
1. Financial Statements
Management’s Annual Report on Internal Control Over Financial Reporting
F-1
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42)
F-2
Consolidated Balance Sheets
F-6
Consolidated Statements of Operations and Comprehensive Income
F-7
Consolidated Statements of Changes in Equity
F-8
Consolidated Statements of Cash Flows
F-9
Notes to Consolidated Financial Statements
F-10
2. Financial Statement Schedules
None
Financial statement schedules have been omitted because either they are not applicable or the required information is included
in the financial statements or notes hereto.
(b) Exhibits
The following exhibits are included with this report or incorporated herein by reference:
3.1
Second Restated Certificate of Incorporation of the Registrant, dated September 8, 2005, is hereby
incorporated by reference to Exhibit 3.1 of the Registrant’s Form 10-Q for the quarter ended July 31, 2005.
3.2
Certificate of Amendment of the Second Restated Certificate of Incorporation of the Registrant, filed with the
Secretary of State of the State of Delaware, is hereby incorporated by reference to Exhibit 3.1 of the
Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 22,
2010.
3.3
Certificate of Amendment of the Second Restated Certificate of Incorporation of the Registrant, dated as of
March 16, 2011, is hereby incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on
Form 8-K filed with the Securities and Exchange Commission on March 18, 2011.
3.4
Certificate of Amendment of the Second Restated Certificate of Incorporation of the Registrant, dated as of
March 8, 2016, is hereby incorporated by reference to Annex B to the Registrant’s definitive proxy statement
on Schedule 14A its 2016 Annual Meeting of Stockholders filed with the Securities and Exchange
Commission on February 2, 2016.
3.5
By-Laws of Toll Brothers, Inc., as Amended and Restated June 13, 2023 is hereby incorporated by reference
to Exhibit 3.01 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange
Commission on June 13, 2023
4.1
Specimen Stock Certificate is hereby incorporated by reference to Exhibit 4.1 of the Registrant’s Form 10-K
for the year ended October 31, 2017.
4.2
Indenture, dated as of February 7, 2012, among Toll Brothers Finance Corp., the Registrant and the other
guarantors named therein and The Bank of New York Mellon, as trustee, is hereby incorporated by reference
to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange
Commission on February 7, 2012.
Exhibit
Number
Description
47
4.3
Authorizing Resolutions, dated as of October 30, 2015, relating to the $350,000,000 principal amount of
4.875% Senior Notes due 2025 of Toll Brothers Finance Corp. guaranteed on a senior basis by the Registrant
and certain of its subsidiaries, is hereby incorporated by reference to Exhibit 4.2 to the Registrant’s Current
Report on Form 8-K filed with the Securities and Exchange Commission on October 30, 2015.
4.4
Form of Global Note for Toll Brothers Finance Corp.’s 4.875% Senior Notes due 2025 is hereby incorporated
by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on October 30, 2015.
4.5
Authorizing Resolutions, dated as of March 10, 2017, relating to the $300,000,000 principal amount of
4.875% Senior Notes due 2027 of Toll Brothers Finance Corp. guaranteed on a senior basis by the Registrant
and certain of its subsidiaries, is hereby incorporated by reference to Exhibit 4.2 to the Registrant’s Current
Report on Form 8-K filed with the Securities and Exchange Commission on March 10, 2017.
4.6
Form of Global Note for Toll Brothers Finance Corp.’s 4.875% Senior Notes due 2027 is hereby incorporated
by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on March 10, 2017.
4.7
Authorizing Resolutions, dated as of June 12, 2017, relating to the $150,000,000 principal amount of 4.875%
Senior Notes due 2027 of Toll Brothers Finance Corp. guaranteed on a senior basis by the Registrant and
certain of its subsidiaries, is hereby incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report
on Form 8-K filed with the Securities and Exchange Commission on June 12, 2017.
4.8
Form of Global Note for Toll Brothers Finance Corp.’s 4.875% Senior Notes due 2027 is hereby incorporated
by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on June 12, 2017
4.9
Authorizing Resolution, dated as of January 22, 2018, relating to the $400,000,000 aggregate principal
amount of 4.350% Senior Notes due 2028 of Toll Brothers Finance Corp., guaranteed on a senior basis by
Toll Brothers, Inc. and certain of its subsidiaries, is hereby incorporated by reference to Exhibit 4.2 to the
Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 22,
2018.
4.10
Form of Global Note for the Issuer’s 4.350% Senior Notes due 2028 is hereby incorporated by reference to
Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange
Commission on January 22, 2018.
4.11
Authorizing Resolution, dated as of September 12, 2019, relating to the $400,000,000 aggregate principal
amount of 3.800% Senior Notes due 2029 of Toll Brothers Finance Corp., guaranteed on a senior basis by
Toll Brothers, Inc. and certain of its subsidiaries, is hereby incorporated by reference to Exhibit 4.2 to the
Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September
12, 2019.
4.12
Form of Global Note for the Issuer’s 3.800% Senior Notes due 2029 is hereby incorporated by reference to
Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange
Commission on September 12, 2019.
4.13
First Supplemental Indenture dated as of April 27, 2012, to the Indenture dated as of February 7, 2012 by and
among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor Trustee, is
hereby incorporated by reference to Exhibit 4.3 of the Registrant’s Form 10-Q for the quarter ended April 30,
2012.
4.14
Second Supplemental Indenture dated as of April 30, 2013, to the Indenture dated as of February 7, 2012 by
and among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor Trustee,
is hereby incorporated by reference to Exhibit 4.4 of the Registrant’s Form 10-Q for the quarter ended April
30, 2013.
4.15
Third Supplemental Indenture dated as of April 30, 2014, to the Indenture dated as of February 7, 2012 by and
among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor Trustee, is
hereby incorporated by reference to Exhibit 4.1 of the Registrant’s Form 10-Q for the quarter ended April 30,
2014.
4.16
Fourth Supplemental Indenture dated as of July 31, 2014, to the Indenture dated as of February 7, 2012 by and
among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor Trustee, is
hereby incorporated by reference to Exhibit 4.1 of the Registrant’s Form 10-Q for the quarter ended July 31,
2014.
Exhibit
Number
Description
48
4.17
Fifth Supplemental Indenture dated as of October 31, 2014, to the Indenture dated as of February 7, 2012 by
and among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor Trustee,
is hereby incorporated by reference to Exhibit 4.55 of the Registrant’s Form 10-K for the year ended
October 31, 2014.
4.18
Sixth Supplemental Indenture dated as of January 30, 2015, to the Indenture dated as of February 7, 2012 by
and among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor Trustee,
is hereby incorporated by reference to Exhibit 4.3 of the Registrant’s Form 10-Q for the quarter ended
January 31, 2015.
4.19
Seventh Supplemental Indenture dated as of April 30, 2015, to the Indenture dated as of February 7, 2012 by
and among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor Trustee,
is hereby incorporated by reference to Exhibit 4.3 of the Registrant’s Form 10-Q for the quarter ended
April 30, 2015.
4.20
Eighth Supplemental Indenture dated as of October 30, 2015, to the Indenture dated as of February 7, 2012 by
and among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor Trustee,
is hereby incorporated by reference to Exhibit 4.34 of the Registrant’s Form 10-K for the year ended
October 31, 2015.
4.21
Ninth Supplemental Indenture dated as of January 29, 2016, to the Indenture dated as of February 7, 2012 by
and among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor Trustee,
is hereby incorporated by reference to Exhibit 4.2 of the Registrant’s Form 10-Q for the quarter ended January
31, 2016.
4.22
Tenth Supplemental Indenture dated as of April 29, 2016, to the Indenture dated as of February 7, 2012 by
and among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor Trustee,
is hereby incorporated by reference to Exhibit 4.2 of the Registrant’s Form 10-Q for the quarter ended April
30, 2016.
4.23
Eleventh Supplemental Indenture dated as of October 31, 2016, to the Indenture dated as of February 7, 2012
by and among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor
Trustee, is hereby incorporated by reference to Exhibit 4.41 of the Registrant’s Form 10-K for the year ended
October 31, 2016.
4.24
Twelfth Supplemental Indenture dated as of October 31, 2016, to the Indenture dated as of February 7, 2012
by and among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor
Trustee, is hereby incorporated by reference to Exhibit 4.42 of the Registrant’s Form 10-K for the year ended
October 31, 2016.
4.25
Thirteenth Supplemental Indenture dated as of January 31, 2017, to the Indenture dated as of February 7, 2012
by and among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor
Trustee, is hereby incorporated by reference to Exhibit 4.2 of the Registrant’s Form 10-Q for the quarter
ended January 31, 2017.
4.26
Fourteenth Supplemental Indenture dated as of April 28, 2017, to the Indenture dated as of February 7, 2012
by and among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor
Trustee, is hereby incorporated by reference to Exhibit 4.2 of the Registrant’s Form 10-Q for the quarter
ended April 30, 2017.
4.27
Fifteenth Supplemental Indenture dated as of July 31, 2017, to the Indenture dated as of February 7, 2012 by
and among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor Trustee,
is hereby incorporated by reference to Exhibit 4.2 of the Registrant’s Form 10-Q for the quarter ended July 31,
2017.
4.28
Sixteenth Supplemental Indenture dated as of October 31, 2017, to the Indenture dated as of February 7, 2012
by and among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor
Trustee, is hereby incorporated by reference to Exhibit 4.55 of the Registrant’s Form 10-K for the year ended
October 31, 2017.
4.29
Seventeenth Supplemental Indenture dated as of October 31, 2017, to the Indenture dated as of February 7,
2012 by and among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor
Trustee, is hereby incorporated by reference to Exhibit 4.56 of the Registrant’s Form 10-K for the year ended
October 31, 2017.
Exhibit
Number
Description
49
4.30
Eighteenth Supplemental Indenture dated as of April 13, 2018, to the Indenture dated as of February 7, 2012
by and among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor
Trustee, is hereby incorporated by reference to Exhibit 4.3 of the Registrant’s Form 10-Q for the quarter
ended April 30, 2018.
4.31
Nineteenth Supplemental Indenture dated as of April 30, 2018, to the Indenture dated as of February 7, 2012
by and among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor
Trustee, is hereby incorporated by reference to Exhibit 4.4 of the Registrant’s Form 10-Q for the quarter
ended April 30, 2018.
4.32
Twentieth Supplemental Indenture dated as of October 31, 2018, to the Indenture dated as of February 7, 2012
by and among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor
Trustee, is hereby incorporated by reference to Exhibit 4.62 of the Registrant’s Form 10-K for the year ended
October 31, 2018.
4.33
Twenty-First Supplemental Indenture dated as of January 31, 2019, to the Indenture dated as of February 7,
2012 by and among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor
Trustee, is hereby incorporated by reference to Exhibit 4.2 of the Registrant’s Form 10-Q for the quarter
ended January 31, 2019.
4.34
Twenty-Second Supplemental Indenture dated as of October 30, 2019, to the Indenture dated as of February 7,
2012 by and among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor
Trustee, is hereby incorporated by reference to Exhibit 4.41 of the Registrant’s Form 10-K for the year ended
October 31, 2019.
4.35
Twenty-third Supplemental Indenture dated as of October 30, 2019, to the Indenture dated as of February 7,
2012 by and among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor
Trustee, is hereby incorporated by reference to Exhibit 4.42 of the Registrant’s Form 10-K for the year ended
October 31, 2019.
4.36
Twenty-fourth Supplemental Indenture dated as of April 30, 2020, to the Indenture dated as of February 7,
2012 by and among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor
Trustee, is hereby incorporated by reference to Exhibit 4.1 of the Registrant’s Form 10-Q for the quarter
ended April 30, 2020.
4.37
Twenty-fifth Supplemental Indenture dated as of October 30, 2020, to the Indenture dated as of February 7,
2012 by and among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor
Trustee, is hereby incorporated by reference to Exhibit 4.44 of the Registrant’s Form 10-K for the year ended
October 31, 2020.
4.38
Twenty-sixth Supplemental Indenture dated as of April 30, 2021, to the Indenture dated as of February 7,
2012 by and among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor
Trustee, is hereby incorporated by reference to Exhibit 4.1 of the Registrant’s Form 10-Q for the quarter
ended April 30, 2021.
4.39
Twenty-seventh Supplemental Indenture dated as of July 29, 2022, to the Indenture dated as of February 7,
2012 by and among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor
Trustee, is hereby incorporated by reference to Exhibit 4.1 of the Registrant’s Form 10-Q for the quarter
ended July 31, 2022.
4.40
Twenty-eighth Supplemental Indenture dated as of October 31, 2022, to the Indenture dated as of February 7,
2012 by and among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor
Trustee, is hereby incorporated by reference to Exhibit 4.43 of the Registrants’s Form 10-K for the year ended
October 31, 2022.
4.41
Twenty-ninth Supplemental Indenture dated as of January 31, 2023, to the Indenture dated as of February 7,
2012 by and among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor
Trustee, is hereby incorporated by reference to Exhibit 4.1 of the Registrants’s Form 10-Q for the quarter
ended January 31, 2023.
4.42
Thirtieth Supplemental Indenture dated as of July 31, 2023, to the Indenture dated as of February 7, 2012 by
and among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor Trustee,
is hereby incorporated by reference to Exhibit 4.1 of the Registrants’s Form 10-Q for the quarter ended July
31, 2023.
Exhibit
Number
Description
50
4.43
Thirty-first Supplemental Indenture dated as of October 31, 2023, to the Indenture dated as of February 7,
2012 by and among the parties listed on Schedule A thereto, and The Bank of New York Mellon, as successor
Trustee, is hereby incorporated by reference to Exhibit 4.43 of the Registrant’s Form 10-K for the year ended
October 31, 2023.
4.44
Thirty-Second Supplemental Indenture dated as of April 30, 2024 to the Indenture dated as of February 7,
2012 by and among the party listed on Schedule A hereto and The Bank of New York Mellon, as successor
trustee, is hereby incorporated by reference to Exhibit 4.1 of the Registrant’s Form 10-Q for the quarter ended
July 31, April 30, 2024.
4.45
Thirty-Third Supplemental Indenture dated as of July 31, 2024 to the Indenture dated as of February 7, 2012
by and among the party listed on Schedule A hereto and The Bank of New York Mellon, as successor trustee,
is hereby incorporated by reference to Exhibit 4.1 of the Registrant’s Form 10-Q for the quarter ended July 31,
2024.
4.46
Thirty-Fourth Supplemental Indenture dated as of October 31, 2024 to the Indenture dated as of February 7,
2012 by and among the party listed on Schedule A hereto and The Bank of New York Mellon, as successor
trustee.**
4.47
Description of Certain of Registrant’s Securities is hereby incorporated by reference to Exhibit 4.44 of the
Registrant’s Form 10-K for the year ended October 31, 2021.
10.1
Credit Agreement, dated as of February 14, 2023, by and among First Huntingdon Finance Corp., Toll
Brothers, Inc., the Lenders party thereto and Mizuho Bank, Ltd. as Administrative Agent, is hereby
incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the
Securities and Exchange Commission on February 15, 2023
10.2
Credit Agreement by and among First Huntingdon Finance Corp., Toll Brothers, Inc., the lenders party thereto
and SunTrust Bank, as Administrative Agent dated February 3, 2014, is hereby incorporated by reference to
Exhibit 10.2 of the Registrant’s Form 8-K filed with the Securities and Exchange Commission on February 5,
2014
10.3
Amendment No. 1, dated as of May 19, 2016, to the Credit Agreement, dated as of February 3, 2014, among
First Huntingdon Finance Corp., Toll Brothers, Inc., the Lenders party thereto and SunTrust Bank, as
Administrative Agent, is hereby incorporated by reference to Exhibit 10.2 of the Registrant’s Form 8-K filed
with the Securities and Exchange Commission on May 24, 2016.
10.4
Amendment No. 2, dated August 2, 2016, to Credit Agreement dated as of February 3, 2014, as amended, by
and among First Huntingdon Finance Corp., Toll Brothers, Inc., the designated guarantors party thereto, the
lenders party thereto and SunTrust Bank, as Administrative Agent, is hereby incorporated by reference to
Exhibit 10.1 of the Registrant’s Form 8-K filed with the Securities and Exchange Commission on August 4,
2016.
10.5
Amendment No. 3, dated November 1, 2018, to Credit Agreement dated as of February 3, 2014, as amended,
by and among First Huntingdon Finance Corp., Toll Brothers, Inc., the designated guarantors party thereto,
the lenders party thereto and SunTrust Bank, as Administrative Agent, is hereby incorporated by reference to
Exhibit 10.1 of the Registrant’s Form 8-K filed with the Securities and Exchange Commission on November
2, 2018.
10.6
Amendment No. 4, dated as of October 31, 2019, to the Credit Agreement, dated as of February 3, 2014, as
amended, by and First Huntingdon Finance Corp., Toll Brothers, Inc., the designated guarantors party thereto,
the lenders party thereto and SunTrust Bank, as Administrative Agent, is hereby incorporated by reference to
Exhibit 10.2 of the Registrant’s Form 8-K filed with the Securities and Exchange Commission on November
1, 2019.
10.7
Amendment No. 5, dated as of February 14, 2023, to the Credit Agreement, dated as of February 3, 2014 (as
amended by Amendment No. 1, dated as of May 19, 2016, Amendment No. 2, dated as of August 2, 2016,
Amendment No. 3, dated as of November 1, 2018 and Amendment No. 4, dated as of October 31, 2019),
among First Huntingdon Finance Corp., Toll Brothers, Inc., the Lenders party thereto and Truist Bank, as
Administrative Agent, is hereby incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report
on Form 8-K filed with the Securities and Exchange Commission on February 15, 2023
Exhibit
Number
Description
51
10.8
Term Loan Extension Agreements, effective as of October 31, 2020, with respect to the Term Loan Credit
Agreement dated as of February 3, 2014 (as amended by Amendment No. 1, dated as of May 19, 2016,
Amendment No. 2, dated as of August 2, 2016, Amendment No. 3, dated as of November 1, 2018, and
Amendment No. 4, dated as of November 1, 2019) among the Registrant, the Borrower, the lenders party
thereto and SunTrust Bank, as Administrative Agent is hereby incorporated by reference to Exhibit 10.2 to the
Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 31,
2020.
10.9
Term Loan Extension Agreements, effective as of October 31, 2021, with respect to the Term Loan Credit
Agreement dated as of February 3, 2014 (as amended by Amendment No. 1, dated as of May 19, 2016,
Amendment No. 2, dated as of August 2, 2016, Amendment No. 3, dated as of November 1, 2018, and
Amendment No. 4, dated as of November 1, 2019) among the Registrant, the Borrower, the lenders party
thereto and Truist Bank (as successor by merger to SunTrust Bank), as Administrative Agent is hereby
incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the
Securities and Exchange Commission on October 31, 2020.
10.10*
Toll Brothers, Inc. Employee Stock Purchase Plan (2017) is hereby incorporated by reference to Annex A to
the Registrant’s Definitive Proxy Statement on Schedule 14A for its 2017 Annual Meeting of Stockholders
filed with the SEC on January 31, 2017.
10.11*
Amendment No. 1, dated as of December 13, 2017, to the Toll Brothers, Inc. Employee Stock Purchase Plan
(2017) is hereby incorporated by reference to Exhibit 10.7 of the Registrant’s Form 10-K for the year ended
October 31, 2017.
10.12*
Amendment No. 2, dated as of June 19, 2018, to the Toll Brothers, Inc. Employee Stock Purchase Plan (2017)
is hereby incorporated by reference to Exhibit 10.8 of the Registrant’s Form 10-K for the year ended October
31, 2018.
10.13*
Toll Brothers, Inc. Stock Incentive Plan for Employees (2014) is hereby incorporated by reference to Annex A
to the Registrant’s definitive proxy statement on Schedule 14A for its 2014 Annual Meeting of Stockholders
filed with the SEC on February 3, 2014.
10.14*
Form of Non-Qualified Stock Option Grant pursuant to the Toll Brothers, Inc. Stock Incentive Plan for
Employees (2014) is incorporated by reference to Exhibit 10.16 of the Registrant’s Form 10-K for the period
ended October 31, 2014.
10.15*
Form of Non-Qualified Stock Option Grant, is hereby incorporated by reference to Exhibit 10.18 of the
Registrant’s Form 10-K for the year ended October 31, 2016.
10.16*
Toll Brothers, Inc. Amended and Restated Stock Incentive Plan for Non-Employee Directors (2007)
(amended and restated as of September 17, 2008) is hereby incorporated by reference to Exhibit 4.1 of the
Registrant’s Amendment No. 1 to its Registration Statement on Form S-8 (No. 333-144230) filed with the
Securities and Exchange Commission on October 29, 2008.
10.17*
Form of Non-Qualified Stock Option Grant pursuant to the Toll Brothers, Inc. Stock Incentive Plan for Non-
Employee Directors (2007) is hereby incorporated by reference to Exhibit 10.2 of the Registrant’s Current
Report on Form 8-K filed with the Securities and Exchange Commission on December 19, 2007.
10.18*
Form of Addendum to Non-Qualified Stock Option Grant pursuant to the Toll Brothers, Inc. Amended and
Restated Stock Incentive Plan for Non-Employee Directors (2007) is hereby incorporated by reference to
Exhibit 10.6 of the Registrant’s Form 10-Q for the quarter ended July 31, 2007.
10.19*
Toll Brothers, Inc. Stock Incentive Plan for Non-Executive Directors (2016) is hereby incorporated by
reference to Annex A to the Registrant’s definitive proxy statement on Schedule 14A for its 2016 Annual
Meeting of Stockholders filed with the Securities and Exchange Commission on February 2, 2016.
10.20*
Form of Non-Qualified Stock Option Grant (Non-Executive Directors), is hereby incorporated by reference to
Exhibit 10.26 of the Registrant’s Form 10-K for the year ended October 31, 2016.
10.21*
Form of Restricted Stock Unit Agreement (Non-Executive Directors) pursuant to the Toll Brothers, Inc. 2019
Omnibus Incentive Plan**
10.22*
Toll Brothers, Inc. 2019 Omnibus Incentive Plan, is hereby incorporated by reference to Exhibit 10.2 of the
Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 14,
2019.
Exhibit
Number
Description
52
10.23*
Form of Non-Qualified Stock Option Grant pursuant to the Toll Brothers, Inc. 2019 Omnibus Incentive Plan,
is hereby incorporated by reference to Exhibit 10.28 of the Registrant’s Form 10-K for the year ended October
31, 2019.
10.24*
Form of Restricted Stock Unit Agreement pursuant to the Toll Brothers, Inc. 2019 Omnibus Incentive Plan, is
hereby incorporated by reference to Exhibit 10.29 of the Registrant’s Form 10-K for the year ended October
31, 2019.
10.25*
Form of Restricted Stock Unit Agreement (Performance Based) pursuant to the Toll Brothers, Inc. 2019
Omnibus Incentive Plan, is hereby incorporated by reference to Exhibit 10.30 of the Registrant’s Form 10-K
for the year ended October 31, 2019.
10.26*
Toll Brothers, Inc. Supplemental Executive Retirement Plan, as amended effective as of October 29, 2019, is
hereby incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 10-Q filed with
the Securities and Exchange Commission on October 30, 2019.
10.27*
Toll Bros., Inc. Non-Qualified Deferred Compensation Plan, amended and restated as of November 1, 2008, is
incorporated by reference to Exhibit 10.45 of the Registrant’s Form 10-K for the period ended October 31,
2008.
10.28*
Amendment Number 1 dated November 1, 2010 to the Toll Bros., Inc. Non-Qualified Deferred Compensation
Plan, amended and restated as of November 1, 2008, is incorporated by reference to Exhibit 10.40 of the
Registrant’s Form 10-K for the period ended October 31, 2010.
10.29*
Amendment Number 2 dated December 30, 2010 to the Toll Bros., Inc. Non-Qualified Deferred
Compensation Plan, amended and restated as of November 1, 2008 is incorporated by reference to
Exhibit 10.28 of the Registrant’s Form 10-K for the period ended October 31, 2014.
10.30*
Amendment Number 3 dated December 22, 2011 to the Toll Bros., Inc. Non-Qualified Deferred
Compensation Plan, amended and restated as of November 1, 2008, is incorporated by reference to
Exhibit 10.29 of the Registrant’s Form 10-K for the period ended October 31, 2014.
10.31*
Toll Bros., Inc. Nonqualified Deferred Compensation Plan, amended and restated effective as of December
31, 2014, is incorporated by reference to Exhibit 10.1 of the Registrant’s Form 10-Q for the quarter ended
January 31, 2015.
10.32*
Toll Brothers, Inc. Executive Severance Plan, is hereby incorporated by reference to Exhibit 10.1 of the
Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 14,
2019.
10.33*
Form of Indemnification Agreement between the Registrant and the members of its Board of Directors, is
hereby incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with
the Securities and Exchange Commission on March 17, 2009.
19.1**
Insider Trading Policy.
21**
Subsidiaries of the Registrant.
22**
List of guarantor subsidiaries.
23**
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.
31.1**
Certification of Douglas C. Yearley, Jr. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2**
Certification of Martin P. Connor pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**
Certification of Douglas C. Yearley, Jr. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**
Certification of Martin P. Connor pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
97*
Compensation Clawback Policy.**
Exhibit
Number
Description
53
101
The following financial statements from Toll Brothers, Inc. Annual Report on Form 10-K for the year ended
October 31, 2024, filed on December 20, 2024, formatted in iXBRL (Inline eXtensible Business Reporting
Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations and Comprehensive
Income, (iii) Consolidated Statements of Changes in Equity, (iv) Consolidated Statements of Cash Flows, and
(v) the Notes to Consolidated Financial Statements.
101.INS
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its
XBRL tags are embedded within the Inline XBRL document.
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)
Exhibit
Number
Description
*
This exhibit is a management contract or compensatory plan or arrangement required to be filed as an exhibit to this
report.
** Filed electronically herewith.
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other
disclosure other than with respect to the terms of the agreements or other documents themselves; they should not be relied on
for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were
made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as
of the date they were made or at any other time.
ITEM 16. FORM 10-K SUMMARY
None.
54
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized on December 20, 2024.
TOLL BROTHERS, INC.
By: /s/ Douglas C. Yearley, Jr.
Douglas C. Yearley, Jr.
Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.
/s/ Douglas C. Yearley, Jr.
Chairman of the Board and Chief Executive
December 20, 2024
Douglas C. Yearley, Jr.
Officer (Principal Executive Officer)
/s/ Martin P. Connor
Senior Vice President and Chief Financial Officer
December 20, 2024
Martin P. Connor
(Principal Financial Officer)
/s/ Michael J. Grubb
Senior Vice President and Chief Accounting
December 20, 2024
Michael J. Grubb
Officer (Principal Accounting Officer)
/s/ Stephen F. East
Director
December 20, 2024
Stephen F. East
/s/ Christine N. Garvey
Director
December 20, 2024
Christine N. Garvey
/s/ Karen H. Grimes
Director
December 20, 2024
Karen H. Grimes
/s/ Derek T. Kan
Director
December 20, 2024
Derek T. Kan
/s/ John A. McLean
Director
December 20, 2024
John A. McLean
/s/ Wendell E. Pritchett
Director
December 20, 2024
Wendell E. Pritchett
/s/ Judith A. Reinsdorf
Director
December 20, 2024
Judith A. Reinsdorf
Signature
Title
Date
55
/s/ Katherine A. Sandstrom
Director
December 20, 2024
Katherine A. Sandstrom
/s/ Paul E. Shapiro
Director
December 20, 2024
Paul E. Shapiro
/s/ Scott D. Stowell
Director
December 20, 2024
Scott D. Stowell
Signature
Title
Date
56
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 controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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, 2024.
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.
F-1
Report of Independent Registered Public Accounting Firm
To the Stockholders 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, 2024, 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, 2024, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the 2024 consolidated financial statements of the Company and our report dated December 20, 2024 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 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.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
December 20, 2024
F-2
Report of Independent Registered Public Accounting Firm
To the Stockholders 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, 2024
and 2023, 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, 2024, 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, 2024 and 2023, and the results of its operations and its cash flows for each of the three
years in the period ended October 31, 2024, 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, 2024, 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 20, 2024 expressed an unqualified opinion thereon.
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 and risk 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.
Accrual for Self-insurance
Description of the
Matter
As described in Notes 1 and 7 of the consolidated financial statements, the Company maintains general
liability insurance, including construction defect and bodily injury coverage, and workers’
compensation insurance. These insurance policies protect the Company against a portion of the risk of
loss from claims related to home building activities, subject to certain self-insured retentions,
deductibles and other coverage limits. The Company accrues for expected costs associated with the self-
insured retentions, deductibles and other coverage limits which constitute the accrual for self-insurance.
The Company’s accrual for self-insurance was $242.3 million as of October 31, 2024.
The Company records expenses and accrues liabilities based on the estimated costs required to cover its
self-insured liability and the estimated costs of potential claims and claim adjustment expenses that are
above coverage limits or that are not covered by insurance policies. These estimated costs are based on
an analysis of historical claims and industry data. The majority of the accrual for self-insurance is an
estimate of claims incurred but not yet reported (“IBNR”).
F-3
The Company engages a third-party actuary that uses historical claim and expense data, input from the
Company’s internal legal and risk management groups, as well as industry data, to estimate the IBNR
associated with the risks that the Company is assuming for its accrual for self-insurance, 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.
Auditing the Company’s estimate of IBNR was especially challenging as evaluating 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 markets and types of products the
Company builds, 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, the estimate of IBNR
is sensitive to significant assumptions including changes in the frequency and severity of reported
claims and loss development factors for reported claims.
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 estimate of IBNR, including controls over the significant assumptions
and the data inputs used in the actuarial analysis. For example, we tested controls over management’s
review of the actuarial analysis, including its review of the model and methodology, significant
assumptions and the data inputs used in the analysis.
To test the estimate of IBNR we performed audit procedures that included, among others, testing the
significant assumptions as well as the completeness and accuracy of the underlying data used by the
Company as inputs to develop the assumptions. We reviewed the Company’s contractual self-insured
retentions, deductibles and other coverage limits. We also evaluated management’s conclusions about
the Company’s legal and contractual obligations with respect to certain claims. We involved our internal
actuarial specialists to assist in evaluating the Company’s estimate of IBNR, including evaluating the
appropriateness of the model and methodology used by management, evaluating the reasonableness of
the actuarial assumptions used by management and independently calculating an estimate of IBNR. We
also evaluated the Company’s disclosures in its consolidated financial statements.
Inventory Impairment
Description of the
Matter
As described in Notes 1 and 3 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, 2024, the Company recorded inventory impairment charges of $52.8 million to
operating communities and land owned for future communities. 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 flows 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 and its tests for recoverability 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 and the pace of future sales, 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.
F-4
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 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 cash flows in each analysis. In certain 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 also evaluated the Company’s disclosures in its
consolidated financial statements.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1983.
Philadelphia, Pennsylvania
December 20, 2024
F-5
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
October 31,
2024
2023
ASSETS
Cash and cash equivalents
$
1,303,039 $
1,300,068
Inventory
9,712,925
9,057,578
Property, construction, and office equipment – net
453,007
323,990
Receivables, prepaid expenses, and other assets (1)
590,611
691,256
Mortgage loans held for sale – at fair value
191,242
110,555
Customer deposits held in escrow
109,691
84,530
Investments in unconsolidated entities (1)
1,007,417
959,041
$ 13,367,932 $ 12,527,018
LIABILITIES AND EQUITY
Liabilities
Loans payable
$
1,085,817 $
1,164,224
Senior notes
1,597,102
1,596,185
Mortgage company loan facility
150,000
100,058
Customer deposits
488,690
540,718
Accounts payable
492,213
597,582
Accrued expenses
1,752,848
1,548,781
Income taxes payable
114,547
166,268
Total liabilities
5,681,217
5,713,816
Equity
Stockholders’ equity
Preferred stock, none issued
—
—
Common stock, 112,937 shares issued at October 31, 2024 and October 31, 2023
1,129
1,129
Additional paid-in capital
694,713
698,548
Retained earnings
8,153,356
6,675,719
Treasury stock, at cost —13,149 and 9,146 shares at October 31, 2024 and October 31,
2023, respectively
(1,209,547)
(619,150)
Accumulated other comprehensive income ("AOCI")
31,277
40,910
Total stockholders’ equity
7,670,928
6,797,156
Noncontrolling interest
15,787
16,046
Total equity
7,686,715
6,813,202
$ 13,367,932 $ 12,527,018
(1) As of October 31, 2024 and 2023, Receivables, prepaid expenses and other assets and Investments in unconsolidated entities include
$105.3 million and $89.6 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.
F-6
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Amounts in thousands, except per share data)
Year ended October 31,
2024
2023
2022
Revenues:
Home sales
$ 10,563,332 $
9,866,026 $
9,711,170
Land sales and other
283,408
128,911
564,388
10,846,740
9,994,937
10,275,558
Cost of revenues:
Home sales
7,753,351
7,207,279
7,237,409
Land sales and other
70,911
153,457
551,770
7,824,262
7,360,736
7,789,179
Selling, general and administrative
982,291
909,446
977,753
Income from operations
2,040,187
1,724,755
1,508,626
Other:
(Loss) income from unconsolidated entities
(23,843)
50,098
23,723
Other income – net
69,296
67,518
171,377
Income before income taxes
2,085,640
1,842,371
1,703,726
Income tax provision
514,445
470,300
417,226
Net income
$
1,571,195 $
1,372,071 $
1,286,500
Other comprehensive (loss) income – net of tax
(9,633)
3,292
36,509
Total comprehensive income
$
1,561,562 $
1,375,363 $
1,323,009
Per share:
Basic earnings
$
15.16 $
12.47 $
11.02
Diluted earnings
$
15.01 $
12.36 $
10.90
Weighted-average number of shares:
Basic
103,653
110,020
116,771
Diluted
104,690
111,008
117,975
See accompanying notes.
F-7
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Amounts in thousands)
Common
Stock
Addi-
tional
Paid-in
Capital
Retained
Earnings
Treasury
Stock
AOCI
Stock-
holders’
Equity
Non-
controlling
Interest
Total
Equity
Shares
$
$
$
$
$
$
$
$
Balance, 10/31/2021
127,937
1,279
714,453
4,969,839
(391,656)
1,109
5,295,024
45,431
5,340,455
Net income
1,286,500
1,286,500
1,286,500
Purchase of treasury stock
(542,739)
(542,739)
(542,739)
Exercise of stock options,
and stock based
compensation issuances,
and employee stock plan
issuances
(18,762)
18,068
(694)
(694)
Stock-based compensation
21,095
21,095
21,095
Dividends declared
(89,607)
(89,607)
(89,607)
Other comprehensive
income
36,509
36,509
36,509
Income attributable to non-
controlling interest
—
64
64
Capital distributions, net
—
(29,743)
(29,743)
Balance, 10/31/2022
127,937
1,279
716,786
6,166,732
(916,327) 37,618
6,006,088
15,752
6,021,840
Net income
1,372,071
1,372,071
1,372,071
Purchase of treasury stock
(565,950)
(565,950)
(565,950)
Exercise of stock options,
and stock based
compensation issuances,
and employee stock plan
issuances
(43,043)
91,308
48,265
48,265
Stock-based compensation
24,805
24,805
24,805
Cancellation of treasury
stock
(15,000) (150)
(771,669)
771,819
—
—
Dividends declared
(91,415)
(91,415)
(91,415)
Other comprehensive
income
3,292
3,292
3,292
Loss attributable to non-
controlling interest
—
(666)
(666)
Capital contributions, net
—
960
960
Balance, 10/31/2023
112,937
1,129
698,548
6,675,719
(619,150) 40,910
6,797,156
16,046
6,813,202
Net income
1,571,195
1,571,195
1,571,195
Purchase of treasury stock
(627,920)
(627,920)
(627,920)
Exercise of stock options,
and stock based
compensation issuances,
and employee stock plan
issuances
(33,393)
37,523
4,130
4,130
Stock-based compensation
29,558
29,558
29,558
Dividends declared
(93,558)
(93,558)
(93,558)
Other comprehensive loss
(9,633)
(9,633)
(9,633)
Loss attributable to non-
controlling interest
—
(1,093)
(1,093)
Capital contributions, net
—
834
834
Balance, 10/31/2024
112,937
1,129
694,713
8,153,356
(1,209,547) 31,277
7,670,928
15,787
7,686,715
See accompanying notes.
F-8
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Year ended October 31,
2024
2023
2022
Cash flow provided by operating activities:
Net income
$ 1,571,195 $ 1,372,071 $ 1,286,500
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization
81,201
76,473
76,816
Stock-based compensation
29,558
24,805
21,095
Loss (income) from unconsolidated entities
23,843
(50,098)
(23,723)
Distributions of earnings from unconsolidated entities
39,276
88,393
32,316
Deferred tax provision
(80,330)
36,239
(96,680)
Impairment charges and write-offs
72,789
69,537
39,541
(Gain) loss on sale of assets
(5,042)
(416)
576
Other - net
(1,544)
3,181
3,781
Changes in operating assets and liabilities:
Inventory
(575,734)
(22,212)
(618,829)
Origination of mortgage loans
(2,137,278) (1,602,700) (2,035,637)
Sale of mortgage loans
2,058,780 1,681,610 2,086,358
Receivables, prepaid expenses, and other assets
505
(135,924)
(95,018)
Current income taxes – net
31,927
(162,570)
160,500
Customer deposits – net
(77,189)
(88,285)
(3,279)
Accounts payable and accrued expenses
(21,790)
(23,674)
152,499
Net cash provided by operating activities
1,010,167 1,266,430
986,816
Cash flow used in investing activities:
Purchase of property, construction, and office equipment – net
(73,643)
(72,961)
(71,726)
Investments in unconsolidated entities
(193,235)
(216,438)
(226,724)
Return of investments in unconsolidated entities
101,363
112,749
116,769
Proceeds from the sale of assets, including ownership interests in
unconsolidated entities
1,139
26,049
28,309
Other – net
(3,242)
—
196
Net cash used in investing activities
(167,618)
(150,601)
(153,176)
Cash flow used in financing activities:
Proceeds from loans payable
3,744,727 3,079,142 4,304,635
Debt issuance costs
(202)
(5,365)
—
Principal payments of loans payable
(3,844,816) (3,239,418) (4,356,185)
Redemption of senior notes
—
(400,000)
(409,856)
Proceeds (payments) related to stock-based benefit plans – net
4,131
48,269
(690)
Purchase of treasury stock and excise tax payment
(627,061)
(561,595)
(542,739)
Dividends paid
(93,401)
(91,082)
(88,901)
Receipts (payments) related to noncontrolling interest – net
167
11
(25,766)
Net cash used in financing activities
(816,455) (1,170,038) (1,119,502)
Net increase (decrease) in cash, cash equivalents, and restricted cash
26,094
(54,209)
(285,862)
Cash, cash equivalents, and restricted cash, beginning of year
1,344,341 1,398,550 1,684,412
Cash, cash equivalents, and restricted cash, end of year
$ 1,370,435 $ 1,344,341 $ 1,398,550
See accompanying notes.
F-9
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.
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. 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.
Cash and Cash Equivalents
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. During fiscal 2024, 2023 and 2022, the Company’s qualified inventory exceeded its indebtedness and
substantially all interest incurred, excluding interest related to our mortgage company subsidiary’s operations, was capitalized
to inventory. See Note 3, “Inventory”.
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
F-10
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 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 $310.5
million and $285.7 million at October 31, 2024 and 2023, respectively. For property and equipment related to onsite sales
centers, 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
2024, 2023, and 2022, we recognized $80.9 million, $75.5 million, and $75.9 million of depreciation expense, respectively.
F-11
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 sale is calculated based upon the stated
interest rate of each loan. In addition, 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
We have investments in a number of unconsolidated entities, including joint ventures, with independent third parties.
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. Under the equity method of
accounting, we recognize our proportionate share of the earnings and losses of these entities. Additionally, we track cumulative
earnings and distributions from our investments in unconsolidated entities. For cash flow classification, to the extent
distributions do not exceed cumulative earnings, we designate such distributions as return on capital and reflected in the
operating section of our Consolidated Statements of Cash Flows. Distributions in excess of cumulative earnings are treated as
return of capital and reflected in the investing section of our Consolidated Statements of Cash Flows.
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 net 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, other than those that own
rental properties, 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.
Fair Value Disclosures
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.
F-12
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.
Derivative Instruments and Hedging Activities
Our objective in entering into derivative transactions is to manage our exposure to interest rate movements associated with
certain variable rate debt, mortgage loans held for sale, interest rate lock commitments, and forward loan commitments we have
entered into related to our mortgage operations. We recognize derivatives as either assets or liabilities on the balance sheet and
measure those instruments at fair value.
We have entered into interest rate swaps related to a portion of our variable rate debt. These derivative transactions are
designated as cash flow hedges. The entire change in the fair value of these derivative transactions included in the assessment of
hedge effectiveness is initially reported in Accumulated other comprehensive income (loss) and subsequently reclassified to
home sales cost of revenues in the accompanying Consolidated Statements of Operations and Comprehensive Income when the
hedged transaction affects earnings. If it is determined that a derivative is not highly effective as a hedge, or if the hedged
forecasted transaction is no longer probable of occurring, the amount recognized in Accumulated other comprehensive income
(loss) is released to earnings.
Our derivative transactions related to our mortgage loans held for sale, interest rate lock commitments, and our forward loan
commitments are not designated as hedges and therefore the entire change in the fair value of these derivative transactions is
included as a gain or loss in Other income – net in the accompanying Consolidated Statements of Operations and
Comprehensive Income.
See Note 12 “Fair Value Disclosures” for more information.
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
cancelled, any excess purchase price over par value is charged directly to retained earnings. In fiscal 2023, we cancelled
15 million shares of treasury stock. No treasury stock was cancelled in fiscal 2024 and 2022.
Revenue and Cost Recognition
Home sales revenues: Revenues and cost of revenues from home sales are recognized at the time each home is delivered and
title and possession are transferred to the buyer. For the majority of our home closings, our performance obligation to deliver a
home is satisfied in less than one year from the date a binding sale agreement is signed. In certain states where we build, we
may not be able to complete certain outdoor features prior to the closing of the home. To the extent these separate performance
obligations are not complete upon the home closing, we defer the portion of the home sales revenues related to these obligations
and subsequently recognize the revenue upon completion of such obligations. As of October 31, 2024, 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 $488.7 million and $540.7 million at October 31, 2024 and
October 31, 2023, respectively. Of the outstanding customer deposits held as of October 31, 2023, we recognized $476.5
million in home sales revenues during the fiscal year ended October 31, 2024. Of the outstanding customer deposits held as of
October 31, 2022, we recognized $542.0 million in home sales revenues during the fiscal year ended October 31, 2023.
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.
F-13
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) land sales to joint ventures in
which we retain an interest; (2) lot sales to third-party builders within our master-planned communities; (3) bulk land sales to
third parties of land we have decided no longer meets our development criteria; (4) sales of land parcels to third parties
(typically because there is a superior economic use of the property); and (5) sales of commercial and retail properties generally
located at our high-rise urban luxury condominium projects. In general, our performance obligation for each of these land sales
is fulfilled upon the delivery of the land, which generally coincides with the receipt of cash consideration from the counterparty.
For land sale transactions that contain repurchase options, revenues and related costs are not recognized until the repurchase
option expires. In addition, when we sell land to a joint venture in which we retain an interest, we do not recognize revenue or
gains on the sale to the extent of our retained interest in such joint venture.
In fiscal 2024, we sold a parcel of land to a commercial developer for net cash proceeds of $180.7 million, which resulted in a
pre-tax gain of $175.2 million during the year ended October 31, 2024.
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 the customer defaults on or cancels the contract
and we determine that 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
Advertising costs are expensed as incurred. Advertising costs, including brochures and signage, were $63.1 million, $49.6
million, and $42.5 million for the years ended October 31, 2024, 2023, and 2022, 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.
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, on an undiscounted basis, 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
F-14
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.
Stock-Based Compensation
We measure compensation cost for share-based compensation on the grant date. Fair value for restricted stock units is
determined based on the quoted price of our common shares on the New York Stock Exchange on the grant date, adjusted for
post-vesting restrictions applicable to retirement eligible participants. We used 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.
We recognize compensation expense ratably over the shorter of the vesting period or the period between the grant date and the
time the award becomes nonforfeitable by the participant. For shared-based awards containing performance conditions, we
estimate the fair value of the award by evaluating the performance conditions quarterly and estimating the number of shares
underlying award that are probable of being issued. Based on this estimate, we recognize compensation expense ratably over
the vesting period. We record cumulative adjustments in the period in which estimates change. Stock-based compensation
expense is generally included in “Selling, general and administrative” expense in our Consolidated Statements of Operations
and Comprehensive Income. We recognize forfeitures of stock-based awards as a reduction to compensation expense in the
period in which they occur.
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
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. 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.
ASC 740, “Income Taxes” (“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.
F-15
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
jurisdictions. 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
During fiscal 2024 and 2023, we operated in the following five geographic segments, with operations generally located in the
states listed below:
•
The North region: Connecticut, Delaware, Illinois, Massachusetts, Michigan, New Jersey, New York and
Pennsylvania;
•
The Mid-Atlantic region: Georgia, Maryland, North Carolina, Tennessee and Virginia;
•
The South region: Florida, South Carolina and Texas;
•
The Mountain region: Arizona, Colorado, Idaho, Nevada and Utah; and
•
The Pacific region: California, Oregon and Washington.
Our geographic reporting segments are consistent with how our chief operating decision makers are assessing operating
performance and allocating capital.
Recent Accounting Pronouncements
In November 2024, the FASB issued ASU No. 2024-03, “Income Statement—Reporting Comprehensive Income—Expense
Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”), which
requires disclosure of certain costs and expenses on an interim and annual basis in the notes to the financial statements. ASU
2024-03 will be effective for our fiscal year 2028. The amendments in this update are to be applied on a prospective basis, with
the option for retrospective application. Early adoption is permitted. We are currently evaluating the impact this standard will
have on our disclosures.
In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable
Segment Disclosures” (“ASU 2023-07”). ASU 2023-07 requires disclosure of significant segment expenses that are regularly
provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss,
an amount and description of its composition for other segment items to reconcile to segment profit or loss, and the title and
position of the entity’s CODM. The amendments in this update also expand the interim segment disclosure requirements. ASU
2023-07 will be effective for our fiscal year ending October 31, 2025 and for interim periods starting in our first quarter of
fiscal 2026. Early adoption is permitted and the amendments in this update are required to be applied on a retrospective basis.
We are currently evaluating the impact this standard will have on our disclosures.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax
Disclosures” (“ASU 2023-09”), which requires expanded disclosure of our income tax rate reconciliation and income taxes
paid. ASU 2023-09 will be effective for our fiscal year ending October 31, 2026 and may be applied either retrospectively or
prospectively. We are currently evaluating the impact this standard will have on our disclosures.
In March 2024, the SEC issued final rules on the enhancement and standardization of climate-related disclosures. The rules
require disclosure of material climate-related risks; activities to mitigate or adapt to such risks; governance and management of
F-16
such risks; and material greenhouse gas (GHG) emissions from operations owned or controlled (Scope 1) and/or indirect
emissions from purchased energy consumed in operations (Scope 2). Additionally, the rules require disclosures in the notes to
the financial statements of the effects of severe weather events and other natural conditions, subject to certain materiality
thresholds. On March 15, 2024, a federal appellate court imposed a temporary stay pending judicial review of these new rules
and on April 4, 2024, the SEC voluntarily stayed implementation pending completion of the judicial review. We are currently
awaiting the outcome of the litigation or other actions the SEC may take with respect to this rule.
Reclassification
Certain prior period amounts have been reclassified to conform to the fiscal 2024 presentation.
2. Acquisition
In fiscal 2022, we acquired substantially all of the assets and operations of a privately-held home builder with operations in San
Antonio, Texas for approximately $48.1 million in cash. The assets acquired, which consisted of 16 communities, were
primarily inventory, including approximately 450 home sites owned or controlled through land purchase agreements. This
acquisition was accounted for as an asset acquisition and was not material to our results of operations or financial condition.
3. Inventory
Major components of inventory at October 31, 2024 and 2023 consisted of the following (amounts in thousands):
October 31,
2024
October 31,
2023
Land deposits and costs of future communities
$
620,040 $
549,035
Land and land development costs
2,532,221
2,631,147
Land and land development costs associated with homes under construction
3,617,266
2,916,334
Total land and land development costs
6,769,527
6,096,516
Homes under construction
2,458,541
2,515,484
Model homes (1)
484,857
445,578
$
9,712,925 $
9,057,578
(1) Includes the allocated land and land development costs associated with each of our model homes in operation.
The following table provides a summary of the composition of our inventory based on community status at October 31, 2024
and October 31, 2023 (amounts in thousands):
October 31,
2024
October 31,
2023
Land controlled for future communities
$
200,166 $
173,175
Land owned for future communities
353,030
663,413
Operating communities
9,159,729
8,220,990
$
9,712,925 $
9,057,578
Operating communities include communities offering homes for sale; communities that have sold all available home sites but
have not completed delivery of the homes; and communities preparing to open for sale. The carrying value attributable to
operating communities includes the cost of homes under construction, land and land development costs, the carrying cost of
home sites in current and future phases of these communities, and the carrying cost of model homes.
Backlog consists of homes under contract but not yet delivered to our home buyers (“backlog”).
F-17
The amounts we have provided for inventory impairment charges and the expensing of costs that we believed not to be
recoverable, included in home sales cost of revenues, in each of the three fiscal years ended October 31, 2024, 2023, and 2022,
are shown in the table below (amounts in thousands):
2024
2023
2022
Land controlled for future communities
$
6,676 $
10,712 $
13,051
Land owned for future communities
—
1,493
19,690
Operating communities
52,765
18,501
—
$
59,441 $
30,706 $
32,741
We have also recognized $4.4 million, $30.6 million, and $6.8 million of impairment charges on land held for sale included in
land sales and other cost of revenues during the fiscal years ended October 31, 2024, 2023, and 2022, respectively.
See Note 14, “Commitments and Contingencies,” for information regarding land purchase contracts.
At October 31, 2024, 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, 2024, we determined that 297 land purchase contracts, with an aggregate purchase price of
$5.59 billion, on which we had made aggregate deposits totaling $522.1 million, were VIEs, but that we were not the primary
beneficiary of any VIE related to such land purchase contracts. At October 31, 2023, we determined that 251 land purchase
contracts, with an aggregate purchase price of $3.79 billion, on which we had made aggregate deposits totaling $421.4 million,
were VIEs, but that we were not the primary beneficiary of any VIE related to such land purchase contracts. See Note 7,
“Accrued Expenses,” for information regarding liabilities related to consolidated inventory not owned.
Interest incurred, capitalized, and expensed in each of the three fiscal years ended October 31, 2024, 2023, and 2022, was as
follows (amounts in thousands):
2024
2023
2022
Interest capitalized, beginning of year
$
190,550 $
209,468 $
253,938
Interest incurred
128,743
140,426
135,029
Interest expensed to home sales cost of revenues
(128,962)
(139,410)
(164,831)
Interest expensed to land sales and other cost of revenues
(3,142)
(10,787)
(5,788)
Interest capitalized on investments in unconsolidated entities
(8,404)
(9,783)
(6,699)
Previously capitalized interest transferred to investments in unconsolidated
entities
—
(244)
(2,412)
Previously capitalized interest on investments in unconsolidated entities
transferred to inventory
1,012
880
231
Interest capitalized, end of year
$
179,797 $
190,550 $
209,468
4. Investments in Unconsolidated Entities
We have investments in various unconsolidated entities and our ownership interest in these investments range from 2.5% to
50%. These entities are structured as joint ventures and either (i) develop land for the joint venture participants and for sale to
outside builders (“Land Development Joint Ventures”); (ii) develop for-sale homes (“Home Building Joint Ventures”); or (iii)
develop luxury for-rent residential apartments and single family homes, commercial space, and a hotel (“Rental Property Joint
Ventures”).
F-18
The table below provides information as of October 31, 2024, regarding active joint ventures that we were invested in, by joint
venture category ($ amounts in thousands):
Land
Development
Joint Ventures
Home Building
Joint Ventures
Rental Property
Joint Ventures
Other
Joint Ventures
Total
Number of unconsolidated entities
16
2
40
2
60
Investment in unconsolidated entities (1)
$
388,550 $
58,403 $
549,195 $
11,269 $
1,007,417
Number of unconsolidated entities with
funding commitments by the Company
6
—
20
1
27
Company’s remaining funding commitment
to unconsolidated entities (2)
$
242,966 $
— $
65,444 $
4,427 $
312,837
(1) Our total investment includes $158.0 million related to eight unconsolidated joint venture-related variable interests in
VIEs and our maximum exposure to losses related to these VIEs is approximately $369.8 million as of October 31, 2024,
inclusive of our investment in these joint ventures. Our ownership interest in such unconsolidated Joint Venture VIEs
ranges from 25% to 50%.
(2) Our remaining funding commitment includes approximately $109.6 million related to our unconsolidated joint venture-
related variable interests in VIEs.
The table below provides information as of October 31, 2023, regarding active joint ventures that we were invested in, by joint
venture category ($ amounts in thousands):
Land
Development
Joint Ventures
Home Building
Joint Ventures
Rental Property
Joint Ventures
Other
Joint Ventures
Total
Number of unconsolidated entities
16
2
43
3
64
Investment in unconsolidated entities (1)
$
351,154 $
65,285 $
531,823 $
10,779 $
959,041
Number of unconsolidated entities with
funding commitments by the Company
9
—
19
1
29
Company’s remaining funding commitment
to unconsolidated entities (2)
$
204,438 $
— $
184,266 $
12,066 $
400,770
(1) Our total investment includes $121.6 million related to 11 unconsolidated joint venture-related variable interests in VIEs
and our maximum exposure to losses related to these VIEs is approximately $329.3 million as of October 31, 2023,
inclusive of our investment in joint ventures. Our ownership interest in such unconsolidated Joint Venture VIEs ranges
from 25% to 50%.
(2) Our remaining funding commitment includes approximately $105.4 million related to our unconsolidated joint venture-
related variable interests in VIEs.
Certain joint ventures in which we have investments obtained debt financing to finance a portion of their activities. The table
below provides information at October 31, 2024, regarding the debt financing obtained by category ($ amounts in thousands):
Land
Development
Joint Ventures
Home Building
Joint Ventures
Rental Property
Joint Ventures
Total
Number of joint ventures with debt financing
11
1
38
50
Aggregate loan commitments
$
639,589 $
98,150 $
3,538,148 $ 4,275,887
Amounts borrowed under commitments
$
381,614 $
47,903 $
2,751,201 $ 3,180,718
The table below provides information at October 31, 2023, 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
12
2
42
56
Aggregate loan commitments
$
610,758 $
219,650 $
3,731,847 $ 4,562,255
Amounts borrowed under commitments
$
445,506 $
135,723 $
2,152,872 $ 2,734,101
More specific and/or recent information regarding our investments in and future commitments to these entities is provided
below.
F-19
New Joint Ventures
The table below provides information on joint ventures entered into during fiscal 2024 ($ amounts in thousands):
Land
Development
Joint Ventures
Number of unconsolidated joint ventures entered into during the period
1
Investment balance at October 31, 2024
$
17,956
The table below provides information on joint ventures entered into during fiscal 2023 ($ amounts in thousands):
Land
Development
Joint Ventures
Rental Property
Joint Ventures
Number of unconsolidated joint ventures entered into during the period
1
5
Investment balance at October 31, 2023
$
14,867 $
59,567
Number of consolidated joint ventures entered into during the period
—
1
Carrying value of consolidated joint ventures’ assets at October 31, 2023
$
— $
10,600
Noncontrolling interests in consolidated joint ventures at October 31, 2023
$
— $
2,700
Results of Operations and Intra-entity Transactions
From time to time, certain of our rental property joint ventures sell assets to unrelated parties. In fiscal 2024, 2023 and 2022,
certain of our Rental Property Joint Ventures sold their underlying assets and we recognized our proportionate share of the
gains of $24.1 million, $50.9 million, and $21.0 million, respectively, which is included in “(Loss) income from unconsolidated
entities” in our Consolidated Statements of Operations and Comprehensive Income.
In fiscal 2023, we sold our ownership interest in one of our Rental Property Joint Ventures and recognized a gain of $16.0
million, which is included in “Income from unconsolidated entities” in our Consolidated Statements of Operations and
Comprehensive Income. No similar gains were recognized in fiscal 2024 or 2022.
In fiscal 2024, and 2022, we recognized other-than-temporary impairment charges on our investments in certain Rental
Property Joint Ventures of $6.6 million and $8.0 million, respectively. No similar impairments were recognized in fiscal 2023.
In fiscal 2024, 2023 and 2022, we purchased land from unconsolidated entities, principally related to our acquisition of lots
from our Land Development Joint Ventures, totaling $139.2 million, $110.7 million, and $54.8 million, respectively. Our share
of income from the lots we acquired was insignificant in each period.
In our normal course of business, we may contribute land to certain of our joint ventures in exchange for an ownership interest.
In fiscal 2023 and 2022, we sold land to unconsolidated entities, which principally involved land sales to our Home Building
and Rental Property Joint Ventures, totaling $44.2 million and $434.2 million, respectively. These amounts are included in
“Land sales and other revenue” on our Consolidated Statements of Operations and Comprehensive Income and are generally
sold at or near our land basis. No similar land sales to unconsolidated entities occurred in fiscal 2024.
At October 31, 2024 and 2023, we had receivables due from joint ventures totaling $9.8 million and $12.6 million, respectively,
primarily related to amounts we funded on behalf of our partners that had not yet been reimbursed and amounts due to us for
management fees earned.
Guarantees
The unconsolidated entities in which we have investments generally finance their activities with a combination of partner equity
and debt financing. In some instances, we have guaranteed portions of debt of unconsolidated entities. These guarantees may
include any or all of the following: (i) project completion guarantees, including any cost overruns; (ii) repayment guarantees,
generally covering a percentage of the outstanding loan; (iii) carry cost guarantees, which cover costs such as interest, real
estate taxes, and insurance; (iv) an environmental indemnity provided to the lender that holds the lender harmless from and
against losses arising from the discharge of hazardous materials from the property and non-compliance with applicable
environmental laws; and (v) indemnification of the lender from “bad boy acts” of the unconsolidated entity.
In some instances, we and our joint venture partner have provided joint and several guarantees in connection with loans to
unconsolidated entities. In these situations, we generally seek to implement a reimbursement agreement with our partner that
F-20
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, 2024, 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 all or 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):
October 31,
2024
October 31,
2023
Loan commitments in the aggregate
$
3,031,500 $
3,341,700
Our maximum estimated exposure under repayment and carry cost guarantees if the full
amount of the debt obligations were borrowed (1)
$
646,900 $
688,000
Debt obligations borrowed in the aggregate
$
2,204,300 $
1,643,600
Our maximum estimated exposure under repayment and carry cost guarantees of the debt
obligations borrowed
$
560,400 $
544,100
Estimated fair value of guarantees provided by us related to debt and other obligations
$
17,400 $
19,500
Terms of guarantees
1 month -
3.0 years
1 month - 4.0
years
(1) At October 31, 2024 and 2023, our maximum estimated exposure under repayment and carry cost guarantees includes
approximately $102.3 million, related to our unconsolidated joint venture VIEs.
The maximum exposure estimates presented above do not take into account any recoveries from the underlying collateral or any
reimbursement from our partners nor do they include any potential exposures related to project completion guarantees or the
indemnities noted above, which are not estimable. We have not made payments under any of the outstanding guarantees, nor
have we been called upon to do so.
Variable Interest Entities
We have both unconsolidated and consolidated joint venture-related variable interests in VIEs. Information regarding our
involvement in unconsolidated joint-venture related variable interests in VIEs has been disclosed throughout information
presented above.
The table below provides information as of October 31, 2024 and October 31, 2023, regarding our consolidated joint venture-
related variable interests in VIEs ($ amounts in thousands):
Balance Sheet Classification
October 31,
2024
October 31,
2023
Number of Joint Venture VIEs that the Company is the primary
beneficiary and consolidates
5
5
Carrying value of consolidated VIEs assets
Receivables, prepaid
expenses and other assets
and Investments in
unconsolidated entities
$
105,300 $
89,600
Our partners’ interests in consolidated VIEs
Noncontrolling interest
$
9,800 $
10,200
Our ownership interest in the above consolidated Joint Venture VIEs ranges from 75% to 98%. The income/losses generated
from such joint ventures were not material.
As shown above, we are the primary beneficiary of certain VIEs due to our controlling financial interest in such ventures as we
have the power to direct the activities that most significantly impact the joint ventures’ performance and the obligation to
absorb expected losses or receive benefits from the joint ventures. The assets of these VIEs can only be used to settle the
obligations of the VIEs. In addition, in certain of the joint ventures, in the event additional contributions are required to be
funded to the joint ventures prior to the admission of any additional investor at a future date, we will fund 100% of such
contributions, including our partner’s pro rata share, which we expect would be funded through an interest-bearing loan. For
other VIEs, we are not the primary beneficiary because the power to direct the activities of such VIEs that most significantly
impact their performance was either shared by us and such VIEs’ other partners or such activities were controlled by our
F-21
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 partners. 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 partners.
Joint Venture Condensed Combined Financial Information
The Condensed Combined Balance Sheets, as of the dates indicated, and the Condensed Combined Statements of Operations,
for the periods indicated, for the unconsolidated entities in which we have an investment, aggregated by type, are included
below (in thousands).
Condensed Combined Balance Sheets:
October 31, 2024
Land
Develop-
ment Joint
Ventures
Home
Building
Joint
Ventures
Rental
Property Joint
Ventures
Other
Joint
Ventures
Total
Cash and cash equivalents
$
111,910 $
34,187 $
58,925 $
942 $
205,964
Inventory
1,082,597
128,913
—
27,164
1,238,674
Loan receivables, net
—
—
—
26,171
26,171
Rental properties
—
—
2,916,210
—
2,916,210
Rental properties under development
—
—
1,544,266
—
1,544,266
Other assets
305,844
25,615
203,276
976
535,711
Total assets
$
1,500,351 $
188,715 $
4,722,677 $
55,253 $
6,466,996
Debt, net of deferred financing costs
$
379,829 $
47,580 $
2,735,319 $
— $
3,162,728
Other liabilities
189,767
12,028
299,201
14,497
515,493
Members’ equity
930,755
129,107
1,688,157
40,756
2,788,775
Total liabilities and equity
$
1,500,351 $
188,715 $
4,722,677 $
55,253 $
6,466,996
Company’s net investment in
unconsolidated entities (1)
$
388,550 $
58,403 $
549,195 $
11,269 $
1,007,417
October 31, 2023
Land
Develop-
ment Joint
Ventures
Home
Building
Joint
Ventures
Rental
Property Joint
Ventures
Other
Joint
Ventures
Total
Cash and cash equivalents
$
83,330 $
14,124 $
62,734 $
1,086 $
161,274
Inventory
1,112,382
277,438
—
35,325
1,425,145
Loan receivables, net
—
—
—
17,024
17,024
Rental properties
—
—
1,907,604
—
1,907,604
Rental properties under development
—
—
1,804,664
—
1,804,664
Other assets
210,831
15,961
157,481
924
385,197
Total assets
$
1,406,543 $
307,523 $
3,932,483 $
54,359 $
5,700,908
Debt, net of deferred financing costs
$
445,123 $
134,427 $
2,132,436 $
— $
2,711,986
Other liabilities
131,798
32,625
312,691
21,752
498,866
Members’ equity
829,622
140,471
1,487,356
32,607
2,490,056
Total liabilities and equity
$
1,406,543 $
307,523 $
3,932,483 $
54,359 $
5,700,908
Company’s net investment in
unconsolidated entities (1)
$
351,154 $
65,285 $
531,823 $
10,779 $
959,041
(1) Our underlying equity in the net assets of the unconsolidated entities was more than our net investment in unconsolidated
entities by $3.0 million and $40.9 million as of October 31, 2024 and 2023, respectively, and these differences are
primarily a result of interest capitalized on our investments; the estimated fair value of the guarantees provided to the joint
ventures; distributions from entities in excess of the carrying amount of our net investment; unrealized gains on our
retained joint venture interests; other than temporary impairments we have recognized; and gains recognized from the sale
of our ownership interests.
F-22
Condensed Combined Statements of Operations and Comprehensive Income:
For the year ended October 31, 2024
Land
Develop-
ment Joint
Ventures
Home
Building
Joint
Ventures
Rental
Property Joint
Ventures
Other
Joint
Ventures
Total
Revenues
$
269,545 $
252,415 $
273,353 $
57,663 $
852,976
Cost of revenues
200,939
193,533
120,787
51,054
566,313
Other expenses
11,943
11,990
269,785
1,368
295,086
Total expenses
212,882
205,523
390,572
52,422
861,399
Income (loss) from operations
56,663
46,892
(117,219)
5,241
(8,423)
Other income (loss) (2)
9,478
(176)
162,885
3,026
175,213
Income before income taxes
66,141
46,716
45,666
8,267
166,790
Income tax provision
268
37
291
—
596
Net income
$
65,873 $
46,679 $
45,375 $
8,267 $
166,194
Company’s equity in earnings (losses)
of unconsolidated entities (3)
$
10,724 $
(6,324) $
(30,339) $
2,096 $
(23,843)
For the year ended October 31, 2023
Land
Develop-
ment Joint
Ventures
Home
Building
Joint
Ventures
Rental
Property Joint
Ventures
Other
Joint
Ventures
Total
Revenues
$
240,365 $
38,124 $
238,651 $
28,221 $
545,361
Cost of revenues
196,924
26,583
85,328
21,031
329,866
Other expenses
13,261
7,201
233,734
1,053
255,249
Total expenses
210,185
33,784
319,062
22,084
585,115
Income (loss) from operations
30,180
4,340
(80,411)
6,137
(39,754)
Other income (2)
2,500
205
102,865
241
105,811
Income before income taxes
32,680
4,545
22,454
6,378
66,057
Income tax provision (benefit)
214
367
(940)
—
(359)
Net income
$
32,466 $
4,178 $
23,394 $
6,378 $
66,416
Company’s equity in earnings of
unconsolidated entities (3)
$
13,178 $
972 $
34,327 $
1,621 $
50,098
For the year ended October 31, 2022
Land
Develop-
ment Joint
Ventures
Home
Building
Joint
Ventures
Rental
Property Joint
Ventures
Other
Joint
Ventures
Total
Revenues
$
207,179 $
60,902 $
192,901 $
37,705 $
498,687
Cost of revenues
172,921
45,087
65,387
26,229
309,624
Other expenses
8,911
4,717
165,447
1,436
180,511
Total expenses
181,832
49,804
230,834
27,665
490,135
Loss on disposition of loans and REO
—
—
—
(113)
(113)
Income (loss) from operations
25,347
11,098
(37,933)
9,927
8,439
Other income (2)
23,292
804
36,805
—
60,901
Income (loss) before income taxes
48,639
11,902
(1,128)
9,927
69,340
Income tax provision (benefit)
348
508
(607)
—
249
Net income (loss)
48,291
11,394
(521)
9,927
69,091
Company’s equity in earnings (losses) of
unconsolidated entities (3)
$
20,402 $
1,068 $
(335) $
2,588 $
23,723
F-23
(2) Other income generated by Rental Property Joint Ventures for the years ending October 31, 2024, 2023, and 2022 include
gains of $176.1 million, $106.2 million, and $29.9 million related to the sale of assets by multiple Rental Property Joint
Ventures.
(3) Differences between our income (loss) from unconsolidated entities and our percentage interest in the underlying net
income (loss) of the entities are primarily a result of distributions from entities in excess of the carrying amount of our
investment; promote earned on the gains recognized by join ventures and those promoted cash flows being distributed;
other than temporary impairments we have recognized; recoveries of previously incurred charges; unrealized gains on our
retained joint venture interests; gains recognized from the sale of our investment to our joint venture partner; and our
share of the entities’ profits related to home sites purchased by us which reduces our cost basis of the home sites acquired.
5. Receivables, Prepaid Expenses, and Other Assets
Receivables, prepaid expenses, and other assets at October 31, 2024 and 2023, consisted of the following (amounts in
thousands):
2024
2023
Expected recoveries from insurance carriers and others
$
109,569 $
94,987
Improvement cost receivable
41,173
40,992
Escrow cash held by our wholly owned captive title company
62,048
44,273
Properties held for rental apartment and commercial development
116,802
225,261
Prepaid expenses
40,432
43,763
Right-of-use asset
108,311
102,787
Derivative assets
18,398
41,612
Other
93,878
97,581
$
590,611 $
691,256
6. Loans Payable, Senior Notes, and Mortgage Company Loan Facility
Loans Payable
At October 31, 2024 and 2023, loans payable consisted of the following (amounts in thousands):
2024
2023
Senior unsecured term loan
$
650,000
$
650,000
Loans payable – other
437,969
517,378
Deferred issuance costs
(2,152)
(3,154)
$
1,085,817
$
1,164,224
Senior Unsecured Term Loan
We are party to a $650.0 million senior unsecured term loan facility (the “Term Loan Facility”) with a syndicate of banks of
which $487.5 million matures February 14, 2028, $101.6 million matures on November 1, 2025 and the remaining $60.9
million matures on November 1, 2026. There are no payments required before these stated maturity dates. Under the Term Loan
Facility, we may select interest rates equal to (i) SOFR 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, 2024, the interest rate on the Term Loan Facility was 5.73%
per annum. Toll Brothers, Inc. and substantially all of its 100%-owned home building subsidiaries are guarantors under the
Term Loan Facility. The Term Loan Facility contains substantially the same financial covenants as the Revolving Credit
Facility described below.
In November 2020, we entered into five interest rate swap transactions to hedge $400.0 million of the Term Loan Facility
through October 2025. The interest rate swaps effectively fix the interest cost on the $400.0 million at 0.369% plus the spread
set forth in the pricing schedule in the Term Loan Facility, which was 0.90% as of October 31, 2024. These interest rate swaps
were designated as cash flow hedges.
F-24
Revolving Credit Facility
At October 31, 2024, we had a $1.955 billion senior unsecured revolving credit facility (the “Revolving Credit Facility”) with a
syndicate of banks that is scheduled to mature on February 14, 2028. The Revolving Credit Facility provides us with a
committed borrowing capacity of $1.955 billion, which we have the ability to increase up to $3.00 billion with the consent of
lenders. Under the Revolving Credit Facility, up to 100% of the commitment is available for letters of credit. Toll Brothers, Inc.
and substantially all of its 100%-owned home building subsidiaries are guarantors of the borrower’s obligations under the
Revolving Credit Facility.
Both our Revolving Credit Facility and Term Loan Facility require us to maintain certain financial covenants, which include not
exceeding a defined maximum leverage ratio and maintaining a minimum tangible net worth. In addition, our ability to
repurchase our common stock and pay cash dividends is limited by these agreements. However, during fiscal 2024, these
limitations did not meaningfully restrict the amount of cash dividends paid or stock repurchased. We were in compliance with
all covenants and requirements as of October 31, 2024.
At October 31, 2024, we had no outstanding borrowings under the Revolving Credit Facility and had outstanding letters of
credit of $180.0 million. At October 31, 2024, the interest rate on outstanding borrowings under the Revolving Credit Facility
would have been 6.03% per annum.
Loans Payable – Other
“Loans payable – other” primarily represent purchase money mortgages on properties we acquired that the seller had financed,
project-level financing, and various revenue bonds that were issued by government entities on our behalf to finance community
infrastructure and our manufacturing facilities. Information regarding our loans payable at October 31, 2024 and 2023, is
included in the table below ($ amounts in thousands):
2024
2023
Aggregate loans payable at October 31
$
437,969
$
517,378
Weighted-average interest rate
5.73 %
5.25 %
Interest rate range
1.00% - 9.00%
0.38% - 9.00%
Loans secured by assets:
Carrying value of loans secured by assets
$
437,256
$
516,186
Carrying value of assets securing loans
$ 1,326,440
$ 1,416,034
The contractual maturities of “Loans payable – other” as of October 31, 2024, ranged from one day to 28.9 years.
Senior Notes
At October 31, 2024 and 2023, senior notes consisted of the following (amounts in thousands):
2024
2023
4.875% Senior Notes due November 15, 2025
$
350,000 $
350,000
4.875% Senior Notes due March 15, 2027
450,000
450,000
4.35% Senior Notes due February 15, 2028
400,000
400,000
3.80% Senior Notes due November 1, 2029
400,000
400,000
Bond discounts, premiums, and deferred issuance costs - net
(2,898)
(3,815)
$
1,597,102 $
1,596,185
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.
In our second quarter of fiscal 2023, we redeemed all $400.0 million principal amount of 4.375% Senior Notes due April 15,
2023, at par, plus accrued interest.
F-25
Mortgage Company Loan Facility
During fiscal 2023 and until December 2023, our wholly owned mortgage subsidiary, Toll Brothers Mortgage Company
("TBMC"), was party to a mortgage warehousing facility that contained substantially the same terms as those described in the
paragraph below.
On December 5, 2023, TBMC executed a new Warehousing Agreement (“New Warehousing Agreement”) with a bank which
provides for loan purchases up to $75.0 million, subject to certain sublimits. In addition, the New Warehousing Agreement,
provides for an accordion feature under which TBMC may request that the aggregate commitments under the New
Warehousing Agreement be increased to an amount up to $150.0 million for a short period of time. TBMC is also subject to an
under usage fee based on outstanding balances, as defined in the New Warehousing Agreement. Prior to its scheduled
expiration on December 3, 2024, the New Warehousing Agreement was amended to extend the expiration date to December 2,
2025. No other changes were made to the terms of the New Warehousing Agreement as a result of the amendment. The New
Warehousing Agreement bears interest at SOFR plus 1.75% per annum (with a SOFR floor of 2.50%). At October 31, 2024, the
interest rate on the New Warehousing Agreement was 6.59% per annum.
At October 31, 2024 and 2023, there was $150.0 million and $100.1 million, respectively, outstanding under the agreements
which are included in liabilities in our Consolidated Balance Sheets. At October 31, 2024 and 2023, amounts outstanding under
the agreements were collateralized by $182.8 million and $104.7 million, respectively, of mortgage loans held for sale, which
are included in assets in our Consolidated Balance Sheets. As of October 31, 2024, there were no aggregate outstanding
purchase price limitations reducing the amount available to TBMC. 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.
General
As of October 31, 2024, the annual aggregate maturities of our loans and notes during each of the next five fiscal years are as
follows (amounts in thousands):
Amount
2025
$
350,496
2026
$
591,199
2027
$
554,131
2028
$
897,988
2029
$
409,820
7. Accrued Expenses
Accrued expenses at October 31, 2024 and 2023, consisted of the following (amounts in thousands):
2024
2023
Land, land development and construction
$
356,613 $
286,516
Liabilities related to consolidated inventory not owned
388,778
268,630
Compensation and employee benefits
208,394
212,684
Escrow liability associated with our wholly owned captive title company
62,038
42,451
Self-insurance
242,306
230,688
Warranty
189,258
206,171
Lease liabilities
128,588
123,866
Deferred income
51,138
52,907
Interest
29,669
30,044
Commitments to unconsolidated entities
38,661
29,212
Other
57,405
65,612
$
1,752,848 $
1,548,781
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
F-26
which a change in our estimate occurs. The table below provides a reconciliation of the changes in our warranty accrual during
fiscal 2024, 2023, and 2022 (amounts in thousands):
2024
2023
2022
Balance, beginning of year
$
206,171 $
164,409 $
145,062
Additions - homes closed during the year
36,186
44,949
42,423
Addition - liabilities assumed in an asset acquisition
—
—
150
Increase in accruals for homes closed in prior years - net
3,150
12,739
10,433
(Decrease) increase in accruals expected to be recovered from third parties (1)
(6,000)
58,000
29,000
Reclassification from self-insurance accruals
—
696
—
Charges incurred
(50,249)
(74,622)
(62,659)
Balance, end of year
$
189,258 $
206,171 $
164,409
(1) The (decrease) increase in accruals for warranty charges are expected to be recovered from our insurance carriers or
suppliers, which are recorded as receivables included in “Receivables, prepaid expenses, and other assets” on our
Consolidated Balance Sheets.
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, 2024, 2023, and 2022 ($ amounts in thousands):
2024
2023
2022
$
%*
$
%*
$
%*
Federal tax provision at statutory rate
437,984
21.0
386,898
21.0
357,782
21.0
State tax provision, net of federal benefit
103,880
5.0
90,698
4.9
75,465
4.4
Other permanent differences
2,737
0.1
(2,782)
(0.2)
4,386
0.3
Reversal of accrual for uncertain tax positions
(2,132)
(0.1)
(621)
—
(1,690)
(0.1)
Accrued interest on anticipated tax
assessments
1,418
0.1
403
—
234
—
Increase in unrecognized tax benefits
2,556
0.1
2,209
0.1
658
—
Excess stock compensation benefit
(17,546)
(0.8)
(7,320)
(0.4)
(3,012)
(0.2)
Energy tax credits
(68)
—
(2,348)
(0.1)
(22,153)
(1.3)
Other
(14,384)
(0.7)
3,163
0.2
5,556
0.3
Income tax provision*
514,445
24.7
470,300
25.5
417,226
24.5
* Due to rounding, percentages may not add
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 6.3% in
fiscal 2024. Our state income tax rate, before federal benefit, was 6.2% and 5.6% in fiscal 2023 and 2022, respectively.
The following table provides information regarding the provision (benefit) for income taxes for each of the fiscal years ended
October 31, 2024, 2023, and 2022 (amounts in thousands):
2024
2023
2022
Federal
$
425,445 $
385,650 $
343,524
State
89,000
84,650
73,702
$
514,445 $
470,300 $
417,226
Current
$
594,775 $
433,837 $
513,075
Deferred
(80,330)
36,463
(95,849)
$
514,445 $
470,300 $
417,226
F-27
The components of income taxes payable at October 31, 2024 and 2023 are set forth below (amounts in thousands):
2024
2023
Current
$
37,905 $
5,978
Deferred
76,642
160,290
$
114,547 $
166,268
The following table provides a reconciliation of the change in the unrecognized tax benefits for the years ended October 31,
2024, 2023, and 2022 (amounts in thousands):
2024
2023
2022
Balance, beginning of year
$
10,512 $
4,922 $
5,780
Increase in benefit as a result of tax positions taken in prior years
8,650
3,633
296
Increase in benefit as a result of tax positions taken in current year
3,142
2,733
833
Decrease in benefit as a result of settlements
(1,782)
—
—
Decrease in benefit as a result of lapse of statute of limitations
(493)
(776)
(1,987)
Balance, end of year
$
20,029 $
10,512 $
4,922
The statute of limitations has expired on our federal tax returns for fiscal years through 2020. The statute of limitations for our
major state tax jurisdictions remains open for examination for fiscal year 2019 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 previously accrued interest and penalties, of potential interest and penalties
in the fiscal years ended October 31, 2024, 2023, and 2022, and the amounts accrued for potential interest and penalties at
October 31, 2024 and 2023 (amounts in thousands):
Expense recognized in the Consolidated Statements of Operations and Comprehensive Income
Fiscal year
2024
$
785
2023
$
332
2022
$
296
Accrued at:
October 31, 2024
$
1,728
October 31, 2023
$
1,259
F-28
The components of net deferred tax assets and liabilities at October 31, 2024 and 2023 are set forth below (amounts in
thousands):
2024
2023
Deferred tax assets:
Accrued expenses
$
61,353 $
48,088
Impairment charges
23,074
25,005
Inventory valuation differences
44,307
20,690
Stock-based compensation expense
11,966
12,603
Amounts related to unrecognized tax benefits
4,130
1,385
State tax, net operating loss carryforwards
4,285
11,129
Other
117
1,709
Total assets
149,232
120,609
Deferred tax liabilities:
Capitalized interest
20,634
22,909
Deferred income
171,954
223,225
Expenses taken for tax purposes not for book
2,304
3,143
Depreciation
13,681
14,484
Deferred marketing
17,301
17,138
Total liabilities
225,874
280,899
Net deferred tax liabilities
$
(76,642) $
(160,290)
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, 2024
and 2023, we determined that it was more-likely-than-not that our deferred tax assets would be realized. Accordingly, at
October 31, 2024 and 2023, 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 ranging from five years to an indefinite carryforward period.
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, 2024, we had 99.8 million shares of common
stock issued and outstanding, 2.4 million shares of common stock reserved for outstanding stock options and restricted stock
units, 3.2 million shares of common stock reserved for future stock option and award issuances, and 232,780 shares of common
stock reserved for issuance under our employee stock purchase plan. As of October 31, 2024, no shares of preferred stock have
been issued.
Cash Dividends
In March 2024, our Board of Directors approved an increase in the quarterly dividend from $0.21 to $0.23 per share. During the
fiscal years October 31, 2024, 2023 and 2022, we declared and paid aggregate cash dividends of $0.90, $0.83 and $0.77 per
share, respectively, to our shareholders.
Stock Repurchase Program
From time to time, 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 December 13, 2023, the Board of Directors
renewed its authorization to repurchase 20 million shares of our common stock and terminated, effective the same date, the
existing authorization that had been in effect since May 17, 2022. The Board of Directors did not fix any expiration date for this
repurchase program.
F-29
The following table provides information about the share repurchase programs for the fiscal years ended October 31, 2024,
2023, and 2022:
2024
2023
2022
Number of shares purchased (in thousands)
4,914
7,860
11,000
Average price per share (1)
$
127.79 $
72.00 $
49.34
Remaining authorization at October 31 (in thousands)
15,087
6,716
14,577
(1) Average price per share includes costs associated with the purchases. For the fiscal 2024 and 2023 periods, it also includes
the excise tax accrued on our share repurchases as a result of the Inflation Reduction Act of 2022.
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.
Accumulated Other Comprehensive Income (Loss)
The changes in each component of accumulated other comprehensive income (loss) (“AOCI”), for fiscal years ended
October 31, 2024, 2023, and 2022, were as follows (amounts in thousands):
2024
2023
2022
Employee Retirement Plans
Beginning balance
$
3,080 $
2,475 $
(6,024)
Gains (losses) arising during the period
(2,314)
736
9,573
Less: Tax expense (benefit)
593
(199)
(2,424)
Net gains (losses) arising during the period
(1,721)
537
7,149
Net (gains) losses reclassified from AOCI to net income (1)
(457)
92
1,805
Less: Tax (expense) benefit (2)
116
(24)
(455)
Net (losses) gains reclassified from AOCI to net income
(341)
68
1,350
Other comprehensive (loss) income, net of tax
(2,062)
605
8,499
Ending balance
$
1,018 $
3,080 $
2,475
Derivative Instruments
Beginning balance
$
37,830 $
35,143 $
7,133
Gains on derivative instruments
515
8,369
37,539
Less: Tax expense
(472)
(2,110)
(9,505)
Net gains on derivative instruments
43
6,259
28,034
(Losses) gains reclassified from AOCI to net income (3)
(10,695)
(4,784)
(32)
Less: Tax benefit (expense) (2)
3,081
1,212
8
Net (losses) gains reclassified from AOCI to net income
(7,614)
(3,572)
(24)
Other comprehensive (loss) income, net of tax
(7,571)
2,687
28,010
Ending balance
$
30,259 $
37,830 $
35,143
Total AOCI ending balance
$
31,277 $
40,910 $
37,618
(1) Reclassified to “Other income – net”
(2) Reclassified to “Income tax provision”
(3) Reclassified to “Cost of revenues – home sales”
F-30
10. Stock-Based Benefit Plans
We grant various types of restricted stock units to our employees and our non-employee directors under our stock incentive
plans. We also granted stock options to certain of our employees and non-employee directors through fiscal year 2023.
Restricted stock unit awards may be based on performance conditions, market conditions or service over a requisite time period
(time-based). 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 equity awards granted after its adoption, 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 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 provides for the issuance of
stock appreciation rights and restricted and unrestricted stock awards and stock units, which may be performance-based. Stock
options and restricted stock units granted under the Omnibus Plan generally vest over a four-year period for employees and
prior to fiscal 2024, a two-year period for non-employee directors. Beginning in fiscal 2024, stock-based compensation awards
granted to non-employee directors vest over a one-year period. Shares issued upon the exercise of a stock option or settlement
of restricted stock units are either from shares held in treasury or newly issued shares. At October 31, 2024, 2023, and 2022, we
had 3.2 million; 3.7 million; and 5.0 million shares, respectively, available for grant under the plans.
The following table provides information regarding the amount of total stock-based compensation expense recognized by us for
fiscal year 2024, 2023, and 2022 (amounts in thousands):
2024
2023
2022
Total stock-based compensation expense recognized
$
29,558 $
24,805 $
21,095
Income tax benefit recognized
$
7,555 $
6,291 $
5,312
At October 31, 2024, the aggregate unamortized value of outstanding stock-based compensation awards was approximately
$21.8 million and the weighted-average period over which we expect to recognize such compensation costs was approximately
2.5 years.
Performance-Based Restricted Stock Units:
In fiscal 2024, 2023, and 2022, 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 is 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% of the base award depending on actual achievement
as compared to the target performance goals. Shares earned based on actual performance vest pro-rata over a four-year period
(provided the recipients continue to be employed by us as specified in the award document) or cliff-vest at the end of a three-
year performance period measured from the grant date.
Compensation expense related to these grants is based on the Company’s performance against the related performance criteria,
the elapsed portion of the performance or vesting period and the grant date fair value of the award.
F-31
A summary of the status of our nonvested Performance-Based RSUs as of October 31, 2024, and changes during the year ended
October 31, 2024, is presented below:
Number of shares
(in thousands)
Weighted-average
grant date fair
value
Nonvested at November 1, 2023
253 $
41.60
Granted
67 $
82.97
Vested
(114) $
42.70
Nonvested at October 31, 2024
206 $
54.51
The following table provides information regarding the issuance, valuation assumptions, and amortization of the Performance-
Based RSUs issued in fiscal 2024, 2023, and 2022:
2024
2023
2022
Estimated number of shares underlying Performance-Based RSUs to be issued
67,499
126,068
71,576
Aggregate number of Performance-Based RSUs outstanding at October 31
346,630
442,961
507,604
Weighted-average fair value per share of Performance-Based RSUs issued
$
33.98 $
34.70
$
45.41
Aggregate grant date fair value of Performance-Based RSUs issued (in thousands)
$
5,795 $
7,244
$
6,156
Performance-Based RSU expense recognized (in thousands)
$
6,713 $
5,838
$
4,346
Fair market value of Performance-Based RSUs vested (in thousands)
$
4,864 $
5,595
$
4,514
Shares earned with respect to Performance-Based RSUs granted in December 2017, 2018, and 2019 were delivered in fiscal
2022, 2023, and 2024, respectively.
Time-Based Restricted Stock Units:
We issue time-based restricted stock units (“Time-Based RSUs”) to various officers, employees, and non-employee directors on
an annual basis.
A summary of our nonvested Time-Based RSUs as of October 31, 2024, and changes during the year ended October 31, 2024,
is presented below (share amounts in thousands):
Number of shares
(in thousands)
Weighted-average
grant date fair
value
Nonvested at November 1, 2023
1,015 $
50.64
Granted
240 $
94.13
Vested
(374) $
46.47
Forfeited
(22) $
66.53
Nonvested at October 31, 2024
859 $
64.20
F-32
The following table provides additional information on the Time-Based RSUs for fiscal 2024, 2023, and 2022:
2024
2023
2022
Time-Based RSUs issued:
Number of Time-Based RSUs issued
372,973
324,399
276,421
Weighted-average fair value per share of Time-Based RSUs issued
$
39.58 $
34.26 $
45.55
Aggregate fair value of Time-Based RSUs issued (in thousands)
$
14,761 $
11,114 $
12,591
Time-Based RSU expense recognized (in thousands):
$
22,365 $
18,340 $
15,738
Fair market value of Time-Based RSUs vested (in thousands):
$
17,378 $
14,592 $
13,925
2024
2023
2022
At October 31:
Aggregate number of Time-Based RSUs outstanding
1,344,851
1,500,097
1,315,303
Cumulative unamortized value of Time-Based RSUs (in thousands)
$
21,587 $
22,836 $
14,902
11. Earnings Per Share Information
Information pertaining to the calculation of earnings per share for each of the fiscal years ended October 31, 2024, 2023, and
2022, is as follows (amounts in thousands):
2024
2023
2022
Numerator:
Net income as reported
$ 1,571,195 $ 1,372,071 $ 1,286,500
Denominator:
Basic weighted-average shares
103,653
110,020
116,771
Common stock equivalents (1)
1,037
988
1,204
Diluted weighted-average shares
104,690
111,008
117,975
Other information:
Weighted-average number of antidilutive options and restricted stock units (2)
39
200
410
Shares issued under stock incentive and employee stock purchase plans
910
2,026
507
(1) Common stock equivalents represent the dilutive effect of outstanding in-the-money stock options using the treasury stock
method and shares expected to be issued upon the conversion of restricted stock units under our equity award programs.
(2) Weighted-average number of antidilutive options and restricted stock units are based upon the average closing price of our
common stock on the New York Stock Exchange for the period.
12. Fair Value Disclosures
Financial Instruments
A summary of assets and (liabilities) at October 31, 2024 and 2023, related to our financial instruments, measured at fair value
on a recurring basis, is set forth below (amounts in thousands):
Fair value
Financial Instrument
Fair value
hierarchy
October 31,
2024
October 31,
2023
Mortgage Loans Held for Sale
Level 2
$
191,242 $
110,555
Forward Loan Commitments – Mortgage Loans Held for Sale
Level 2
$
2,152 $
2,234
Interest Rate Lock Commitments (“IRLCs”)
Level 2
$
(962) $
(4,135)
Forward Loan Commitments – IRLCs
Level 2
$
962 $
4,135
Interest Rate Swap Contracts
Level 2
$
15,283 $
35,243
At October 31, 2024 and 2023, the carrying value of cash and cash equivalents, escrow cash held by our wholly owned captive
title company, and customer deposits held in escrow approximated fair value.
F-33
The fair values of the interest rate swap contracts are included in “Receivables, prepaid expenses and other assets” in our
Consolidated Balance Sheets and are determined using widely accepted valuation techniques including discounted cash flow
analysis based on the expected cash flows of each swap contract. Although the Company has determined that the significant
inputs, such as interest yield curve and discount rate, used to value its interest rate swap contracts fall within Level 2 of the fair
value hierarchy, the credit valuation adjustments associated with our counterparties and our own credit risk utilize Level 3
inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. However,
as of October 31, 2024 and 2023, we have assessed the significance of the impact of the credit valuation adjustments on the
overall valuation of our interest rate swap contract positions and have determined that the credit valuation adjustments were not
significant to the overall valuation of our interest rate swap contracts. As a result, we have determined that our interest rate
swap contracts valuations in their entirety are classified in Level 2 of the fair value hierarchy.
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.”
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):
At October 31,
Aggregate
unpaid
principal
balance
Fair value
Fair value
greater (less)
than principal
balance
2024
$
193,333 $
191,242 $
(2,091)
2023
$
114,835 $
110,555 $
(4,280)
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 and land 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. In
determining the fair value related to land impairments, we consider recent offers received, prices for land in recent comparable
sales transactions, and other factors. We record land impairments related to land parcels we plan to sell to third parties within
land sales and other cost of revenues. 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. Impairments on operating communities were not significant in each of the three fiscal years ended October 31,
2024, 2023, and 2022 and, accordingly, we did not disclose the ranges of certain quantitative unobservable inputs utilized in
determining the fair value of such impaired operating communities.
F-34
Debt
The table below provides, as of the dates indicated, the book value, excluding any bond discounts, premiums, and deferred
issuance costs, and estimated fair value of our debt at October 31, 2024 and 2023 (amounts in thousands):
2024
2023
Fair value
hierarchy
Book value
Estimated
fair value
Book value
Estimated
fair value
Loans payable (1)
Level 2
$ 1,087,969 $ 1,069,577 $ 1,167,378 $ 1,150,704
Senior notes (2)
Level 1
1,600,000
1,572,580
1,600,000
1,481,220
Mortgage company loan facility (3)
Level 2
150,000
150,000
100,058
100,058
$ 2,837,969 $ 2,792,157 $ 2,867,436 $ 2,731,982
(1) The estimated fair value of loans payable was based upon contractual cash flows discounted at interest rates that we
believed were available to us for loans with similar terms and remaining maturities as of the applicable valuation date.
(2) The estimated fair value of our senior notes is based upon their market prices as of the applicable valuation date.
(3) We believe that the carrying value of our mortgage company loan borrowings approximates their fair value.
13. Employee 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 $19.2 million, $17.1 million, and $17.1 million for the fiscal years ended October 31,
2024, 2023, and 2022, 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 $36.6 million
and $35.6 million at October 31, 2024 and 2023, respectively, for our obligations under the plan, which is included in “Accrued
expenses” in the Consolidated Balance Sheets.
Defined Benefit Retirement Plans
We have two unfunded defined benefit retirement plans. Retirement benefits generally vest when the participant reaches normal
retirement age. 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 4.98%, 5.83%, and 5.26% discount rate in our calculation of the present value of
our projected benefit obligations at October 31, 2024, 2023, and 2022, 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, 2024, 2023 and 2022.
F-35
Information related to our retirement plans for each of the fiscal years ended October 31, 2024, 2023, and 2022, is as follows
(amounts in thousands):
2024
2023
2022
Plan costs:
Service cost
$
179 $
137 $
261
Interest cost
1,982
1,869
1,055
Amortization of prior service cost
1,182
1,407
1,806
Amortization of unrecognized losses
(1,638)
(1,316)
—
$
1,705 $
2,097 $
3,122
Projected benefit obligation:
Beginning of year
$
35,376 $
36,904 $
47,705
Plan amendments adopted during year
405
1,171
—
Service cost
179
137
261
Interest cost
1,982
1,869
1,055
Benefit payments
(2,818)
(2,748)
(2,544)
Change in unrecognized loss (gain)
1,910
(1,957)
(9,573)
Projected benefit obligation, end of year
$
37,034 $
35,376 $
36,904
Unamortized prior service cost:
Beginning of year
$
3,442 $
3,678 $
5,484
Plan amendments adopted during year
405
1,171
—
Amortization of prior service cost
(1,182)
(1,407)
(1,806)
Unamortized prior service cost, end of year
$
2,665 $
3,442 $
3,678
Accumulated unrecognized gain, October 31
$
4,378 $
7,926 $
7,285
Accumulated benefit obligation, October 31
$
37,034 $
35,376 $
36,904
Accrued benefit obligation, October 31
$
37,034 $
35,376 $
36,904
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, 2034 in
the aggregate (in thousands):
Year ending October 31,
Amount
2025
$
2,858
2026
$
3,469
2027
$
3,668
2028
$
3,647
2029
$
3,685
November 1, 2029 – October 31, 2034
$
16,336
14. Commitments and Contingencies
Legal Proceedings
We are involved in various claims and litigation arising principally in the ordinary course of business. We believe that adequate
provision for resolution of all current claims and pending litigation has been made and that the disposition of these matters will
not have a material adverse effect on our results of operations and liquidity or on our financial condition.
F-36
Land Purchase Contracts
Generally, our agreements to acquire land parcels do not require us to purchase those land parcels, although we, in some cases,
forfeit any deposit balance outstanding if and when we terminate an agreement. 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 contracts at October 31, 2024 and 2023, is provided in the table below (amounts in
thousands):
2024
2023
Aggregate purchase price:
Unrelated parties
$
6,073,847 $
4,191,160
Unconsolidated entities that the Company has investments in
26,783
31,477
Total
$
6,100,630 $
4,222,637
Deposits against aggregate purchase price
$
549,195 $
449,925
Additional cash required to acquire land
5,551,435
3,772,712
Total
$
6,100,630 $
4,222,637
Amount of additional cash required to acquire land included in accrued expenses
$
382,277 $
254,030
In addition, we expect to purchase approximately 9,000 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, 2024, we also had similar purchase contracts to acquire land for apartment developments of approximately
$209.3 million, of which we had outstanding deposits in the amount of $9.8 million. We intend to develop these projects in
joint ventures with unrelated parties in the future.
We have additional land parcels under option that have been excluded from the 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, 2024, 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, 2024, we had outstanding surety bonds amounting to $820.2 million, primarily related to our obligations to
governmental entities to construct improvements in our communities. We have an additional $337.3 million of surety bonds
outstanding that guarantee other obligations. Although significant construction and development activities have been completed
related to these improvements, the bonds are generally not released until all construction and development activities are
completed and acceptance by the counterparty is received. The aggregate amount of surety bonds outstanding is in excess of the
estimated cost of the remaining work to be performed. We do not believe that it is probable that any outstanding bonds will be
drawn upon.
At October 31, 2024, we had outstanding letters of credit of $180.0 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.
At October 31, 2024, we had provided financial guarantees of $28.5 million related to fronted letters of credit to secure
obligations related to certain of our insurance policy deductibles and other claims.
F-37
Backlog
At October 31, 2024, we had agreements of sale outstanding to deliver 5,996 homes with an aggregate sales value of $6.47
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
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, 2024 and 2023, is provided in the table below (amounts in
thousands):
2024
2023
Aggregate mortgage loan commitments:
IRLCs
$
168,829 $
354,716
Non-IRLCs
1,668,455
1,818,486
Total
$
1,837,284 $
2,173,202
Investor commitments to purchase:
IRLCs
$
168,829 $
354,716
Mortgage loans receivable
182,834
104,703
Total
$
351,663 $
459,419
Lease Commitments
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. Right-of-use (“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 Sheets. 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, 2024, ROU assets and lease liabilities were $108.3 million and $128.6 million, respectively. At
October 31, 2023, ROU assets and lease liabilities were $102.8 million and $123.9 million, respectively. Payments on lease
liabilities totaled $22.5 million and $20.2 million, and $17.7 million for the years ending October 31, 2024, 2023, and 2022
respectively.
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, 2024, 2023, and 2022, our total lease expense was $24.3 million, $27.1 million,
and $25.6 million, respectively, inclusive of variable lease costs of approximately $4.1 million, $4.2 million, and $3.3 million,
respectively. Short-term lease costs and sublease income was de minimis.
F-38
Information regarding our remaining lease payments as of October 31, 2024 is provided in the table below (amounts in
thousands):
Year ended October 31,
2025
$
25,000
2026
23,100
2027
19,400
2028
16,100
2029
11,800
Thereafter
138,600
Total lease payments (1)
234,000
Less: Interest (2)
105,400
Present value of lease liabilities
$
128,600
(1) Lease payments include options to extend lease terms that are reasonably certain of being exercised.
(2) Our leases do not provide a readily determinable implicit rate. Therefore, we estimate our discount rate for such leases to
determine the present value of lease payments at the lease commencement date.
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 7.2 years and 5.9%,
respectively, at October 31, 2024 and 7.2 years and 5.8%, respectively, at October 31, 2023.
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 93.4 years and 4.5%, respectively, at October 31, 2024 and 94.4 years and 4.5%, respectively, at October 31,
2023.
15. Other Income – Net
The table below provides the significant components of “Other income – net” for the years ended October 31, 2024, 2023, and
2022 (amounts in thousands):
2024
2023
2022
Interest income
$
38,497 $
35,133 $
6,180
Income from ancillary businesses
19,534
2,846
24,668
Management fee income earned by home building operations
4,297
4,462
7,968
Gain on litigation settlements – net
—
27,683
141,234
Other
6,968
(2,606)
(8,673)
Total other income – net
$
69,296 $
67,518 $
171,377
In fiscal 2022, we entered into a $192.5 million settlement agreement with Southern California Gas Company to resolve our
claims associated with a natural gas leak that occurred from October 2015 through February 2016 at the Aliso Canyon
underground storage facility located near certain of our communities in southern California. As a result, net of legal fees and
expenses, we recorded a pre-tax gain of $148.4 million, of which $141.2 million was recorded in Other Income - net in our
Consolidated Statements of Operations and Comprehensive Income in fiscal 2022. The remainder was recorded as an offset to
previously incurred expenses. Coincident with this settlement, we seeded a new Toll Brothers charitable foundation with $10.0
million which was recorded in Selling, general and administrative in our Consolidated Statements of Operations and
Comprehensive Income in fiscal 2022.
F-39
Income from ancillary businesses is generated by our mortgage, title, landscaping, smart home technology, apartment living,
city 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, 2024, 2023, and 2022 (amounts in thousands):
2024
2023
2022
Revenues
$
165,615 $
140,272 $
135,510
Expenses
$
146,081 $
137,426 $
110,842
In fiscal 2024 and 2022, our smart home technology business recognized gains of $4.4 million and $9.0 million, respectively,
from bulk sales of security monitoring accounts, which is included in income from ancillary businesses above. No similar gains
were recognized in fiscal 2023.
In fiscal 2024, 2023 and 2022, we recognized $8.9 million and $8.4 million, and $0.3 million, of write-offs related to previously
incurred costs that we believed not to be recoverable in our apartment rental development business operations, respectively.
In fiscal 2024 and 2023, income from ancillary businesses included management fees earned on our apartment rental
development, high-rise urban luxury condominium, and other unconsolidated entities and operations totaling $35.7 million and
$34.7 million, respectively. In fiscal 2022, income from ancillary businesses included management fees earned on our
apartment rental development and other unconsolidated entities and operations totaling $25.9 million. Prior to fiscal 2023,
management fees earned on our high-rise luxury condominium unconsolidated entities were included in “Management fees
earned by home building operations” above.
16. 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, 2024, 2023, and 2022 (amounts in thousands):
Revenue
Income (loss) before income taxes
2024
2023
2022
2024
2023
2022
North
$ 1,484,267 $ 1,494,127 $ 1,853,720 $
252,739 $
197,414 $
280,829
Mid-Atlantic
1,422,018
1,175,348
1,148,966
471,478
243,464
189,485
South
2,787,459
2,204,763
1,519,600
578,022
416,711
249,665
Mountain
2,590,445
2,660,746
2,747,783
446,168
517,080
509,512
Pacific
2,279,083
2,329,365
2,441,959
541,789
610,126
572,844
Total home building
10,563,272
9,864,349
9,712,028
2,290,196
1,984,795
1,802,335
Corporate and other (1)
60
1,677
(858)
(204,556)
(142,424)
(98,609)
10,563,332
9,866,026
9,711,170
2,085,640
1,842,371
1,703,726
Land sales and other revenue (2)
283,408
128,911
564,388
Total consolidated
$ 10,846,740 $ 9,994,937 $ 10,275,558 $ 2,085,640 $ 1,842,371 $ 1,703,726
(1) Included in fiscal 2022 is a $141.2 million net gain related to a favorable litigation settlement as further discussed in
Note 15, “Other Income - Net”.
(2) Land sales and other revenues by segment has been provided in the table below.
“Corporate and other” is comprised principally of general corporate expenses such as our executive offices; the corporate
finance, accounting, audit, tax, human resources, risk management, information technology, marketing, and legal groups;
interest income; income from certain of our ancillary businesses, including our apartment rental development business and our
high-rise urban luxury condominium operations; and income from our Rental Property Joint Ventures and Other Joint Ventures.
F-40
Land sales and other revenues for each of the fiscal years ended October 31, 2024, 2023, and 2022 are shown in the table below
(amounts in thousands):
2024
2023
2022
North
$
4,486 $
32,620
$
139,439
Mid-Atlantic (1)
208,436
13,169
38,423
South
25,930
19,014
24,415
Mountain
28,277
1,140
8,897
Pacific
1,365
8,705
30,900
Total home building
268,494
74,648
242,074
Corporate and other
14,914
54,263
322,314
Total consolidated
$
283,408 $
128,911
$
564,388
(1) Included in the year ended October 31, 2024 is a $185.0 million land sale to a commercial developer in February 2024,
which is further discussed in Note 1, “Significant Accounting Policies”.
“Corporate and other” is comprised principally of activities from our apartment rental development business.
Total assets for each of our segments at October 31, 2024 and 2023, are shown in the table below (amounts in thousands):
2024
2023
North
$
1,425,738 $
1,281,479
Mid-Atlantic
1,444,951
1,323,381
South
2,514,446
2,399,055
Mountain
2,950,806
2,666,874
Pacific
2,266,829
2,175,776
Total home building
10,602,770
9,846,565
Corporate and other
2,765,162
2,680,453
Total consolidated
$ 13,367,932 $ 12,527,018
“Corporate and other” is comprised principally of cash and cash equivalents, restricted cash, investments in our Rental Property
Joint Ventures, expected recoveries from insurance carriers and suppliers, manufacturing facilities, our apartment rental
development operations, and our mortgage and title subsidiaries.
F-41
Inventory for each of our segments, as of the dates indicated, is shown in the table below (amounts in thousands):
Land
controlled for
future
communities
Land owned
for future
communities
Operating
communities
Total
Balances at October 31, 2024
North
$
30,597 $
38,920 $
1,169,490 $
1,239,007
Mid-Atlantic
51,400
50,762
1,297,021
1,399,183
South
43,571
89,145
2,100,079
2,232,795
Mountain
10,868
94,103
2,705,213
2,810,184
Pacific
63,730
80,100
1,887,926
2,031,756
Total consolidated
$
200,166 $
353,030 $
9,159,729 $
9,712,925
Balances at October 31, 2023
North
$
32,762 $
31,253 $
1,031,625 $
1,095,640
Mid-Atlantic
34,175
135,042
1,089,270
1,258,487
South
40,335
198,467
1,908,468
2,147,270
Mountain
12,443
129,326
2,426,113
2,567,882
Pacific
53,460
169,325
1,765,514
1,988,299
Total consolidated
$
173,175 $
663,413 $
8,220,990 $
9,057,578
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, 2024, 2023, and 2022, are shown in the table below
(amounts in thousands):
2024
2023
2022
North
$
1,098
$
677
$
11,860
Mid-Atlantic
15,214
15,898
3,369
South
3,404
1,766
3,391
Mountain
26,032
5,662
4,091
Pacific
13,693
6,703
10,030
Total consolidated
$
59,441
$
30,706
$
32,741
In the year ended October 31, 2024, we recognized $4.4 million of land impairment charges included in land sales and other
cost of revenues, of which $0.6 million and $3.8 million were in our Mid-Atlantic and Corporate and other segments,
respectively. In the year ended October 31, 2023 we recognized $30.6 million of land impairment charges included in land sales
and other cost of revenues, of which $15.6 million, $10.3 million, $2.2 million, and $2.5 million were in our North, Mid-
Atlantic, Pacific and Corporate and other segments, respectively. In the year ended October 31, 2022 we recognized $6.8
million of land impairment charges included in land sales and other cost of revenues in our North segment.
F-42
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
Equity in earnings (losses) from
unconsolidated entities
At October 31,
Year ended October 31,
2024
2023
2024
2023
2022
North
$
58,403 $
65,285 $
(6,324) $
972 $
1,068
Mid-Atlantic
12,647
19,807
(243)
283
(405)
South
168,042
169,004
10,590
13,520
20,065
Mountain
74,909
61,363
688
(211)
494
Pacific
132,952
100,980
(311)
(414)
248
Total home building
446,953
416,439
4,400
14,150
21,470
Corporate and other
560,464
542,602
(28,243)
35,948
2,253
Total consolidated
$
1,007,417 $
959,041 $
(23,843) $
50,098 $
23,723
“Corporate and other” is comprised of our investments in the Rental Property Joint Ventures and Other Joint Ventures.
17. 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, 2024, 2023 and 2022 (amounts in thousands):
Cash flow information:
Income tax paid - net
$
550,077 $
584,695 $
350,650
Noncash activity:
Cost of inventory acquired through seller financing, municipal bonds, or
included in accrued expenses - net
$
186,714 $
359,042 $
273,893
Transfer of inventory to investment in unconsolidated entities
$
4,167 $
1,000 $
46,019
Transfer of investment in unconsolidated entities to inventory
$
9,049 $
1,675 $
474
Transfer of other assets to investment in unconsolidated entities, net
$
— $
47,780 $
100,123
Transfer of other assets to property, construction, and office equipment - net
$
133,020 $
47,280 $
16,168
Income tax expense recognized in total comprehensive income
$
6,197 $
6,710 $
11,519
Unrealized (loss) gain on derivatives
$
(19,959) $
(9,767) $
34,680
Accrued excise tax and other share repurchases
$
5,213 $
4,355 $
—
Miscellaneous increases (decreases) to investments in unconsolidated entities
$
7,468 $
(5,917) $
797
At October 31,
2024
2023
2022
Cash, cash equivalents, and restricted cash
Cash and cash equivalents
$ 1,303,039 $ 1,300,068 $ 1,346,754
Restricted cash included in receivables, prepaid expenses, and other assets
$
67,396 $
44,273 $
51,796
Total cash, cash equivalents, and restricted cash shown in the Consolidated
Statements of Cash Flows
$ 1,370,435 $ 1,344,341 $ 1,398,550
2024
2023
2022
F-43
18. Summary Consolidated Quarterly Financial Data (Unaudited)
The table below provides summary income statement data for each quarter of fiscal 2024 and 2023 (amounts in thousands,
except per share data):
Three Months Ended
October 31
July 31
April 30
January 31
Fiscal 2024:
Revenue:
Home sales
$
3,260,004 $
2,724,472 $
2,647,020 $
1,931,836
Land sales and other (1)
$
73,458 $
3,472 $
190,466 $
16,012
Gross profit (loss):
Home sales
$
846,324 $
747,310 $
683,737 $
532,610
Land sales and other (1)
$
34,465 $
(5,306) $
177,487 $
5,851
Income before income taxes
$
621,073 $
503,627 $
649,779 $
311,161
Net income
$
475,409 $
374,611 $
481,617 $
239,558
Earnings per share (2)
Basic
$
4.67 $
3.64 $
4.60 $
2.28
Diluted
$
4.63 $
3.60 $
4.55 $
2.25
Weighted-average number of shares
Basic
101,716
102,980
104,794
105,122
Diluted
102,676
104,014
105,803
106,265
Fiscal 2023:
Revenue:
Home sales
$
2,951,904 $
2,674,602 $
2,490,098 $
1,749,422
Land sales and other
$
68,243 $
13,040 $
16,881 $
30,747
Gross profit (loss):
Home sales
$
810,375 $
742,653 $
657,220 $
448,499
Land sales and other
$
(10,351) $
1,462 $
(3,969) $
(11,688)
Income before income taxes
$
604,966 $
553,017 $
430,592 $
253,796
Net income
$
445,536 $
414,789 $
320,216 $
191,530
Earnings per share (2)
Basic
$
4.15 $
3.77 $
2.88 $
1.72
Diluted
$
4.11 $
3.73 $
2.85 $
1.70
Weighted-average number of shares
Basic
107,465
110,003
111,214
111,397
Diluted
108,388
111,123
112,184
112,336
(1) Land sales and other revenue and gross profit in the three months ended April 30, 2024 included $185.0 million and
$124.1 million, respectively, related to the sale of a single parcel of land in northern Virginia to a commercial developer.
(2) Due to rounding, the sum of the quarterly earnings per share amounts may not equal the reported earnings per share for
the year.
F-44
RECONCILIATION OF NON-GAAP MEASURES
Net Debt-to-Capital Ratio Reconciliation
(Amounts in thousands, except percentages)
October 31,
2024
2014
Loans payable
$ 1,085,817
$
654,261
Senior notes
1,597,102
2,655,044
Mortgage company loan facility
150,000
90,281
Total debt
2,832,919
3,399,586
Total stockholders' equity
7,670,928
3,854,376
Total capital
$ 10,503,847
$ 7,253,962
Ratio of debt-to-capital
27.0 %
46.9 %
Total debt
$ 2,832,919
$ 3,399,586
Less: Mortgage company loan facility
(150,000)
(90,281)
Cash and cash equivalents
(1,303,039)
(586,315)
Total net debt
1,379,880
2,722,990
Total stockholders' equity
7,670,928
3,854,376
Total net capital
$ 9,050,808
$ 6,577,366
Net debt-to-capital ratio
15.2 %
41.4 %
Adjusted Home Sales Gross Margin Reconciliation
(Amounts in thousands, except percentages)
Twelve Months Ended
October 31,
2024
2020
Revenues - home sales
$ 10,563,332
$ 6,937,357
Cost of revenues - home sales
7,753,351
5,534,103
Home sales gross margin
2,809,981
1,403,254
Add: Interest recognized in cost of revenues - home sales
128,962
174,375
Inventory impairments and write-offs in cost of revenues - home sales
59,441
55,883
Adjusted home sales gross margin
$ 2,998,384
$ 1,633,512
Home sales gross margin as a percentage of home sale revenues
26.6 %
20.2 %
Adjusted home sales gross margin as a percentage of home sale revenues
28.4 %
23.5 %
(i)
Toll Brothers Board of Directors
Douglas C. Yearley, Jr., Chairman and Chief Executive
Officer, Toll Brothers, Inc.
Scott D. Stowell, Lead Independent Director and
President and CEO, Capital Thirteen LLC
____________________
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
Derek T. Kan, Vice President, Operations, Shopify Inc.
John A. McLean, Retired Senior Managing Director,
New York Life Investment Management
Wendell E. Pritchett, Riepe Presidential Professor of
Law and Education, University of Pennsylvania Carey
Law School
Judith A. Reinsdorf, Retired Executive Vice President
and General Counsel, Johnson Controls International plc
Katherine M. Sandstrom, Retired Senior Managing
Director, Heitman LLC
Paul E. Shapiro, Chairman, Q Capital LLC
Corporate Information
Corporate Office
Toll Brothers, Inc.
1140 Virginia Drive
Fort Washington, PA 19034
215-938-8000 / TollBrothers.com
Transfer Agent & Registrar
Equiniti Trust Company, LLC
48 Wall Street, Floor 23
New York, NY 10005
1-800-937-5449
email: helpAST@equiniti.com
Independent Auditors
Ernst & Young LLP
Philadelphia, PA
Our common stock is traded on the New York Stock Exchange under the symbol “TOL”.
Investor Relations Information Request
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:
Gregg L. Ziegler, Senior Vice President, Investor Relations and Treasurer
gziegler@tollbrothers.com | 215-938-8365
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.
(ii)