TOLL BROTHERS : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ("MD&A") (form 10-K)

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 canceled during the
relevant period, which includes contracts that were signed during the relevant
period and in prior periods. Backlog consists of homes under contract but not
yet delivered to our home buyers ("backlog"). Backlog conversion represents the
percentage of homes delivered in the period from backlog at the beginning of the
period ("backlog conversion").
This discussion and analysis does not address certain items in respect of fiscal
2017 in reliance on amendments to disclosure requirements adopted by the SEC in
2019. A discussion and analysis of fiscal 2017 may be found in Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations of our Annual Report on Form 10-K for the fiscal year ended October
31, 2018, filed with the SEC on December 20, 2018.
OVERVIEW
Our Business
We design, build, market, sell, and arrange financing for an array of luxury
residential single-family detached, attached home, master planned resort-style
golf, and urban low-, mid-, and high-rise communities, principally on land we
develop and improve, as we continue to pursue our strategy of broadening our
product lines, price points and geographic footprint. We cater to luxury
first-time, move-up, empty-nester, active-adult, affordable luxury and
second-home buyers in the United States ("Traditional Home Building Product"),
as well as urban and suburban renters. We also design, build, market, and sell
urban low-, mid-, and high-rise condominiums through Toll Brothers City Living®
("City Living"). At October 31, 2019, we were operating in 23 states, as well as
in the District of Columbia.
In the five years ended October 31, 2019, we delivered 35,146 homes from 724
communities, including 8,107 homes from 426 communities in fiscal 2019. At
October 31, 2019, we had 715 communities containing approximately 59,200 home
sites that we owned or controlled through options.
We are developing several land parcels for master planned communities in which
we intend to build homes on a portion of the lots and sell the remaining lots to
other builders. Two of these master planned communities are being developed 100%
by us, and the remaining communities are being developed through joint ventures
with other builders or financial partners.
In addition to our residential for-sale business, we also develop and operate
for-rent apartments through joint ventures. See the section entitled "Toll
Brothers Apartment Living/Toll Brothers Campus Living" below.
We operate our own architectural, engineering, mortgage, title, land
development, golf course development, and landscaping subsidiaries. We also
operate our own security company, TBI Smart Home Solutions, which provides
homeowners with home automation and a full range of technology options. In
addition, we operate our own lumber distribution, house component assembly, and
manufacturing operations.
We have investments in various unconsolidated entities. We have investments in
joint ventures (i) to develop land 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, commercial space and a hotel ("Rental Property
Joint Ventures"); and (iv) to invest in distressed loans and real estate and
provide financing and land banking for residential builders and developers for
the acquisition and development of land and home sites ("Gibraltar Joint
Ventures").
Financial Highlights
In fiscal 2019, we recognized $7.08 billion of home sales revenues and net
income of $590.0 million, as compared to $7.14 billion of revenues and net
income of $748.2 million in fiscal 2018.
In fiscal 2019 and 2018, the value of net contracts signed was $6.71 billion
(8,075 homes) and $7.60 billion (8,519 homes), respectively. The value of our
backlog at October 31, 2019 was $5.26 billion (6,266 homes), as compared to our
backlog at October 31, 2018 of $5.52 billion (6,105 homes).

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At October 31, 2019, we had $1.29 billion of cash and cash equivalents and
approximately $1.73 billion available for borrowing under our $1.905 billion
revolving credit facility (the "Revolving Credit Facility") that matures in
November 2024. At October 31, 2019, we had no outstanding borrowings under the
Revolving Credit Facility and had outstanding letters of credit of approximately
$177.9 million.
In fiscal 2017, our Board of Directors approved the initiation of quarterly cash
dividends to shareholders. During fiscal 2019 and 2018, we paid aggregate cash
dividends of $0.44 and $0.41 per share, respectively, to our shareholders. In
December 2019, we declared a quarterly cash dividend of $0.11 which will be paid
on January 24, 2020 to shareholders of record on the close of business on
January 10, 2020.
At October 31, 2019, our total equity and our debt to total capitalization ratio
were $5.12 billion and 0.44 to 1.00, respectively.
Acquisitions
As part of our strategy to expand our geographic footprint and product
offerings, in fiscal 2019, we acquired substantially all of the assets and
operations of Sharp Residential, LLC ("Sharp") and Sabal Homes LLC ("Sabal"),
for approximately $92.8 million and $69.6 million, respectively, in cash. Sharp
operates in metropolitan Atlanta, Georgia; Sabal operates in the Charleston,
Greenville, and Myrtle Beach, South Carolina markets. The assets acquired, based
on our preliminary purchase price allocations, was primarily inventory,
including approximately 2,550 home sites owned or controlled through land
purchase agreements. In connection with these acquisitions, we assumed contracts
to deliver 204 homes with an aggregate value of $96.1 million. The average price
of undelivered homes at the dates of acquisitions was approximately $471,100. As
a result of these acquisitions, our selling community count increased by 22
communities.
Our Business Environment and Current Outlook

Over the past several years, sales prices for both new and resale homes have
generally increased, which has reduced housing affordability in many markets,
including in California, where we have a significant presence. In addition, late
in fiscal 2018 and in the first half of fiscal 2019, interest rates on mortgage
loans increased. These conditions resulted in a moderation in demand for our
homes late in fiscal 2018 into fiscal 2019, as well as margin compression on
contracts signed during this period. Late in the spring of 2019, market
conditions improved as interest rates on mortgage loans decreased and as home
builders increased sales incentives to improve sales pace. Buyer demand for our
homes steadily improved throughout the year, and, in the three months ended
October 31, 2019, the number of contracts we signed had increased 18% in units
and 12% in dollars compared to the three months ended October 31, 2018. For full
year fiscal 2019, we signed 8,075 contracts for the sale of Traditional Home
Building Product and City Living units with an aggregate value of $6.71 billion,
compared to 8,519 contracts with an aggregate value of $7.60 billion in fiscal
2018.
As we enter fiscal 2020, we continue to see solid economic fundamentals
underlying the housing market, as consumer confidence has been healthy,
household formations have been strong, and there continues to be a limited
supply of homes across most of our markets. As the nation's leading builder of
luxury homes, we remain committed to meeting the demands of our discerning
customers, who continue to pursue distinctive, high-quality homes in desirable
locations. At the same time, we are strategically focused on broadening our
portfolio through targeted expansion in high-potential markets and product-line
diversification that includes increasing our presence in more affordable luxury
communities. With a supportive economy as a backdrop, we expect this strategy to
improve revenue growth and capital efficiency as we increase community count and
seek to deliver more units with more rapid cycle times.
Tax Reform
On December 22, 2017, the Tax Cuts and Jobs Act (the "Tax Act") was enacted into
law, which changed many longstanding foreign and domestic corporate and
individual tax rules, as well as rules pertaining to the deductibility of
employee compensation and benefits. These changes include: (i) reducing the
corporate income tax rate from 35% to 21% for tax years beginning after December
31, 2017; (ii) eliminating the corporate alternative minimum tax; (iii) changing
rules related to uses and limitations of net operating loss carryforwards
created in tax years beginning after December 31, 2017; (iv) repeal of the
domestic production activities deduction for tax years beginning after December
31, 2017; and (v) establishing new limits on the federal tax deductions
individual taxpayers may take as a result of mortgage loan interest payments,
and state and local tax payments, including real estate taxes.
As required under accounting rules, we remeasured our net deferred tax liability
for the tax law change, which resulted in an income tax benefit of $35.5 million
in fiscal 2018. See Note 8, "Income Taxes" in Notes to Condensed Consolidated
Financial Statements in Item 15(a)1 of this Form 10-K for additional information
regarding the impact of the Tax Act.

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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 has acquired a home through a foreclosure, also provide competition. We
compete primarily based on price, location, design, quality, service, and
reputation. We believe our financial stability, relative to many others in our
industry, provides us with a competitive advantage.
Land Acquisition and Development
Our business is subject to many risks because of the extended length of time
that it takes to obtain the necessary approvals on a property, complete the land
improvements on it, and deliver a home after a home buyer signs an agreement of
sale. In certain cases, we attempt to reduce some of these risks and improve our
capital efficiency by utilizing one or more of the following methods:
controlling land for future development through options, which enable us to
obtain necessary governmental approvals before acquiring title to the land;
generally commencing construction of a detached home only after executing an
agreement of sale and receiving a substantial down payment from the buyer; and
using subcontractors to perform home construction and land development work on a
fixed-price basis.
During fiscal 2019 and 2018, we acquired control of approximately 13,900 and
13,400 home sites, respectively, net of options terminated and home sites sold.
At October 31, 2019, we controlled approximately 59,200 home sites, as compared
to approximately 53,400 home sites at October 31, 2018, and approximately 48,300
home sites at October 31, 2017. In addition, at October 31, 2019, we expect to
purchase approximately 2,500 additional home sites from several land development
joint ventures in which we have an interest, at prices not yet determined.
Of the approximately 59,200 total home sites that we owned or controlled through
options at October 31, 2019, we owned approximately 36,600 and controlled
approximately 22,600 through options. Of the 59,200 home sites, approximately
16,800 were substantially improved.
In addition, at October 31, 2019, our Land Development Joint Ventures owned
approximately 10,100 home sites (including 130 home sites included in the 22,600
controlled through options), and our Home Building Joint Ventures owned
approximately 100 home sites.
At October 31, 2019, we were selling from 333 communities, compared to 315
communities at October 31, 2018, and 305 communities at October 31, 2017.
Customer Mortgage Financing
We maintain relationships with a widely-diversified group of mortgage financial
institutions, many of which are among the largest in the industry. We believe
that regional and community banks continue to recognize the long-term value in
creating relationships with high-quality, affluent customers such as our home
buyers, and these banks continue to provide these customers with financing.
We believe that our home buyers generally are, and should continue to be,
well-positioned to secure mortgages due to their typically lower loan-to-value
ratios and attractive credit profiles, as compared to the average home buyer.
Toll Brothers Apartment Living/Toll Brothers Campus Living
In addition to our residential for-sale business, we also develop and operate
for-rent apartments through joint ventures. At October 31, 2019, we or joint
ventures in which we have an interest controlled 56 land parcels as for-rent
apartment projects containing approximately 18,300 units. These projects, which
are located in multiple metropolitan areas throughout the country, are being
operated, are being developed or will be developed with partners under the brand
names Toll Brothers Apartment Living and Toll Brothers Campus Living.
In fiscal 2019, one of our Rental Property Joint Ventures, located in located in
Phoenixville, Pennsylvania, sold its assets to an unrelated party for $77.8
million. From our investment in this joint venture, we received cash of $7.4
million and recognized a gain from this sale of $3.8 million in fiscal 2019. In
fiscal 2018, three of our Rental Property Joint Ventures sold their assets to
unrelated parties for $477.5 million. These joint ventures had owned, developed,
and operated multifamily rental properties located in suburban Washington, D.C.
and Westborough, Massachusetts, and a student housing community in College Park,
Maryland. From our investment in these joint ventures, we received cash of $79.1
million and recognized gains from these sales of $67.2 million in fiscal 2018.
The gains recognized from these sales are included in "Income from
unconsolidated entities" in our Consolidated Statement of Operations and
Comprehensive Income included in Item 15(a)1 of this Form 10-K.
At October 31, 2019, we had approximately 2,000 units in for-rent apartment
projects that were occupied or ready for

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occupancy, 1,700 units in the lease-up stage, 8,400 units in the design phase or
under development, and 6,200 units in the planning stage. Of the 18,300 units at
October 31, 2019, 7,700 were owned by joint ventures in which we have an
interest; approximately 4,400 were owned by us; and 6,200 were under contract to
be purchased by us.
CONTRACTS AND BACKLOG
The aggregate value of net sales contracts signed decreased 11.7% in fiscal
2019, as compared to fiscal 2018. The value of net sales contracts signed was
$6.71 billion (8,075 homes) in fiscal 2019 and $7.60 billion (8,519 homes) in
fiscal 2018. The decrease in the aggregate value of net contracts signed in
fiscal 2019, as compared to fiscal 2018, was due to decreases in the number of
net contracts signed and average value of each contract signed of 5% and 7%,
respectively. The decrease in the number of net contracts signed in fiscal 2019,
as compared to fiscal 2018, was primarily due to decreased demand and a lack of
inventory in certain locations in fiscal 2019, as compared to fiscal 2018,
offset, in part, by an increase in the average number of selling communities and
contracts signed in the metropolitan Atlanta, Georgia market and several markets
in South Carolina in fiscal 2019 from the Sharp and Sabal acquisitions. The
decrease in average price of net contracts signed in fiscal 2019, as compared to
fiscal 2018, was principally due to a shift in the number of contracts signed to
less expensive areas and/or products resulting in part from our strategy to
broaden of our geographic footprint, product types and price points in fiscal
2019.
The value of our backlog at October 31, 2019, 2018, and 2017 was $5.26 billion
(6,266 homes), $5.52 billion (6,105 homes), and $5.06 billion (5,851 homes),
respectively. Approximately 93% of the homes in backlog at October 31, 2019 are
expected to be delivered by October 31, 2020. The 4.8% decrease in the value of
homes in backlog at October 31, 2019, as compared to October 31, 2018, was due
to home deliveries with an aggregate value of $7.08 billion in fiscal 2019,
offset, in part, by our signing net contracts with a value of $6.71 billion in
fiscal 2019.
For more information regarding revenues, net contracts signed, and backlog by
geographic segment, see "Segments" in this MD&A.

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CRITICAL ACCOUNTING POLICIES
We believe the following critical accounting policies reflect the more
significant judgments and estimates used in the preparation of our consolidated
financial statements.
Inventory
Inventory is stated at cost unless an impairment exists, in which case it is
written down to fair value in accordance with U.S. generally accepted accounting
principles ("GAAP"). In addition to direct land acquisition, land development,
and home construction costs, costs also include interest, real estate taxes, and
direct overhead related to development and construction, which are capitalized
to inventory during periods beginning with the commencement of development and
ending with the completion of construction. For those communities that have been
temporarily closed, no additional capitalized interest is allocated to the
community's inventory until it reopens, and other carrying costs are expensed as
incurred. Once a parcel of land has been approved for development and we open
the community, it can typically take four or more years to fully develop, sell,
and deliver all the homes in that community. Longer or shorter time periods are
possible depending on the number of home sites in a community and the sales and
delivery pace of the homes in a community. Our master planned communities,
consisting of several smaller communities, may take up to 10 years or more to
complete. Because our inventory is considered a long-lived asset under GAAP, we
are required to regularly review the carrying value of each of our communities
and write down the value of those communities when we believe the values are not
recoverable.
Operating Communities: When the profitability of an operating community
deteriorates, the sales pace declines significantly, or some other factor
indicates a possible impairment in the recoverability of the asset, the asset is
reviewed for impairment by comparing the estimated future undiscounted cash flow
for the community to its carrying value. If the estimated future undiscounted
cash flow is less than the community's carrying value, the carrying value is
written down to its estimated fair value. Estimated fair value is primarily
determined by discounting the estimated future cash flow of each community. The
impairment is charged to cost of home sales revenues in the period in which the
impairment is determined. In estimating the future undiscounted cash flow of a
community, we use various estimates such as (i) the expected sales pace in a
community, based upon general economic conditions that will have a short-term or
long-term impact on the market in which the community is located and on
competition within the market, including the number of home sites available and
pricing and incentives being offered in other communities owned by us or by
other builders; (ii) the expected sales prices and sales incentives to be
offered in a community; (iii) costs expended to date and expected to be incurred
in the future, including, but not limited to, land and land development costs,
home construction, interest, and overhead costs; (iv) alternative product
offerings that may be offered in a community that will have an impact on sales
pace, sales price, building cost, or the number of homes that can be built in a
particular community; and (v) alternative uses for the property, such as the
possibility of a sale of the entire community to another builder or the sale of
individual home sites.
Future Communities: We evaluate all land held for future communities or future
sections of operating communities, whether owned or optioned, to determine
whether or not we expect to proceed with the development of the land as
originally contemplated. This evaluation encompasses the same types of estimates
used for operating communities described above, as well as an evaluation of the
regulatory environment in which the land is located and the estimated
probability of obtaining the necessary approvals, the estimated time and cost it
will take to obtain those approvals, and the possible concessions that may be
required to be given in order to obtain them. Concessions may include cash
payments to fund improvements to public places such as parks and streets,
dedication of a portion of the property for use by the public or as open space,
or a reduction in the density or size of the homes to be built. Based upon this
review, we decide (i) as to land under contract to be purchased, whether the
contract will likely be terminated or renegotiated, and (ii) as to land we own,
whether the land will likely be developed as contemplated or in an alternative
manner, or should be sold. We then further determine whether costs that have
been capitalized to the community are recoverable or should be written off. The
write-off is charged to cost of home sales revenues in the period in which the
need for the write-off is determined.
The estimates used in the determination of the estimated cash flows and fair
value of both current and future communities are based on factors known to us at
the time such estimates are made and our expectations of future operations and
economic conditions. Should the estimates or expectations used in determining
estimated fair value deteriorate in the future, we may be required to recognize
additional impairment charges and write-offs related to current and future
communities and such amounts could be material.

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We provided for inventory impairment charges and the expensing of costs that we believed not to be recoverable in each of the three fiscal years ended October 31, 2019, 2018, and 2017, as shown in the table below (amounts in thousands):

                                         2019        2018        2017

Land controlled for future communities $ 11,285 $ 2,820 $ 1,949 Land owned for future communities

             -       2,185       3,050
Operating communities                    31,075      30,151       9,795
                                       $ 42,360    $ 35,156    $ 14,794


The table below provides, for the periods indicated, the number of operating
communities that we reviewed for potential impairment, the number of operating
communities in which we recognized impairment charges, the amount of impairment
charges recognized, and, as of the end of the period indicated, the fair value
of those communities, net of impairment charges
($ amounts in thousands):
                                                                 Impaired operating communities
                                                                      Fair value of
                                       Number of                       communities,           Impairment
                                      communities    Number of            net of                charges
Three months ended:                     tested      communities     impairment charges        recognized
Fiscal 2019:
January 31                                49             5        $             37,282     $         5,785
April 30                                  64             6        $             36,159              17,495
July 31                                   69             3        $              5,436               1,100
October 31                                71             7        $             18,910               6,695
                                                                                           $        31,075
Fiscal 2018:
January 31                                64             5        $             13,318     $         3,736
April 30                                  65             4        $             21,811              13,325
July 31                                   55             5        $             43,063               9,065
October 31                                43             6        $             24,692               4,025
                                                                                           $        30,151
Fiscal 2017:
January 31                                57             2        $              8,372     $         4,000
April 30                                  46             6        $             25,092               2,935
July 31                                   53             4        $              5,965               1,360
October 31                                51             1        $              6,982               1,500
                                                                                           $         9,795


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.
Our deferred tax assets consist principally of the timing of deductibility of
accrued expenses, inventory impairments, inventory valuation differences, state
tax net operating loss carryforwards, and stock-based compensation expense. In
accordance with

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GAAP, we assess whether a valuation allowance should be established based on our
determination of whether it was more likely than not that some portion or all of
the deferred tax assets would not be realized. At October 31, 2019 and 2018, we
determined that it was more-likely-than-not that our deferred tax assets would
be realized. Accordingly, at October 31, 2019 and 2018, we did not have
valuation allowances recorded against our federal or state deferred tax assets.
During fiscal 2017, we reversed the remaining $32.2 million of state deferred
tax valuation allowances.
We file tax returns in the various states in which we do business. Each state
has its own statutes regarding the use of tax loss carryforwards. Some of the
states in which we do business do not allow for the carryforward of losses,
while others allow for carryforwards for five years to 20 years.
Revenue and Cost Recognition
Home sales revenues and cost recognition: Revenues and cost of revenues from
home sales are recognized at the time each home is delivered and title and
possession are transferred to the buyer. For the majority of our home closings,
our performance obligation to deliver a home is satisfied in less than one year
from the date a binding sale agreement is signed.
For our standard attached and detached homes, land, land development, and
related costs, both incurred and estimated to be incurred in the future, are
amortized to the cost of homes closed based upon the total number of homes to be
constructed in each community. Any changes resulting from a change in the
estimated number of homes to be constructed or in the estimated costs subsequent
to the commencement of delivery of homes are allocated to the remaining
undelivered homes in the community. Home construction and related costs are
charged to the cost of homes closed under the specific identification method.
For our master planned communities, the estimated land, common area development,
and related costs, including the cost of golf courses, net of their estimated
residual value, are allocated to individual communities within a master planned
community on a 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.
Forfeited Customer Deposits: Forfeited customer deposits are recognized in "Home
sales revenues" in our Consolidated Statements of Operations and Comprehensive
Income in the period in which we determine that the customer will not complete
the purchase of the home and we have the right to retain the deposit.
Sales Incentives: In order to promote sales of our homes, we may offer our home
buyers sales incentives. These incentives will vary by type of incentive and by
amount on a community-by-community and home-by-home basis. Incentives are
reflected as a reduction in home sales revenues. Incentives are recognized at
the time the home is delivered to the home buyer and we receive the sales
proceeds.
On November 1, 2018, we adopted Accounting Standards Codification ("ASC") Topic
606 "Revenue from Contracts with Customers" ("ASC 606"), which supersedes the
revenue recognition requirements in Accounting Standards Codification Topic 605,
"Revenue Recognition," and most industry-specific guidance. See Note 1,
"Significant Accounting Policies" in Notes to Consolidated Financial Statements
in Item 15(a)1 of this Form 10-K for additional information regarding the impact
of the adoption of ASC 606.
Warranty and Self-Insurance
Warranty: We provide all of our home buyers with a limited warranty as to
workmanship and mechanical equipment. We also provide many of our home buyers
with a limited 10-year warranty as to structural integrity. We accrue for
expected warranty costs at the time each home is closed and title and possession
are transferred to the home buyer. Warranty costs are accrued based upon
historical experience. Adjustments to our warranty liabilities related to homes
delivered in prior years are recorded in the period in which a change in our
estimate occurs. Over the past several years, we have had a significant number
of warranty claims related primarily to homes built in Pennsylvania and
Delaware. See Note 7 - "Accrued Expenses" in Item 15(a)1 of this Form 10-K for
additional information regarding these warranty charges.
Self-Insurance: We maintain, and require the majority of our subcontractors to
maintain, general liability insurance (including construction defect and bodily
injury coverage) and workers' compensation insurance. These insurance policies
protect us against a portion of our risk of loss from claims related to our home
building activities, subject to certain self-insured retentions, deductibles and
other coverage limits ("self-insured liability"). We also provide general
liability insurance for our subcontractors in Arizona, California, Colorado,
Nevada, Washington, and certain areas of Texas, where eligible subcontractors

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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.
We record expenses and liabilities based on the estimated costs required to
cover our self-insured liability and the estimated costs of potential claims and
claim adjustment expenses that are not covered by our insurance policies. These
estimated costs are based on an analysis of our historical claims and industry
data, and include an estimate of claims incurred but not yet reported ("IBNR").
We engage a third-party actuary that uses our historical claim and expense data,
input from our internal legal and risk management groups, as well as industry
data, to estimate our liabilities related to unpaid claims, IBNR associated with
the risks that we are assuming for our self-insured liability and other required
costs to administer current and expected claims. These estimates are subject to
uncertainty due to a variety of factors, the most significant being the long
period of time between the delivery of a home to a home buyer and when a
structural warranty or construction defect claim is made, and the ultimate
resolution of the claim. Though state regulations vary, construction defect
claims are reported and resolved over a prolonged period of time, which can
extend for 10 years or longer. As a result, the majority of the estimated
liability relates to IBNR. Adjustments to our liabilities related to homes
delivered in prior years are recorded in the period in which a change in our
estimate occurs.
The projection of losses related to these liabilities requires actuarial
assumptions that are subject to variability due to uncertainties regarding
construction defect claims relative to our markets and the types of product we
build, insurance industry practices and legal or regulatory actions and/or
interpretations, among other factors. Key assumptions used in these estimates
include claim frequencies, 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 underlying assumptions, our
actual future costs could differ from those estimated, and the difference could
be material to our consolidated financial statements.
OFF-BALANCE SHEET ARRANGEMENTS
We also operate through a number of joint ventures. We earn construction and
management fee income from many of these joint ventures. Our investments in
these entities are generally accounted for using the equity method of
accounting. We are a party to several joint ventures with unrelated parties to
develop and sell land that is owned by the joint ventures. We recognize our
proportionate share of the earnings from the sale of home sites to other
builders, including our joint venture partners. We do not recognize earnings
from the home sites we purchase from these ventures at the time of our purchase;
instead, our cost basis in the home sites is reduced by our share of the
earnings realized by the joint venture from those home sites.
At October 31, 2019, we had investments in these entities of $366.3 million, and
were committed to invest or advance up to an additional $38.8 million to these
entities if they require additional funding. At October 31, 2019, we had agreed
to terms for the acquisition of 130 home sites from one Land Development Joint
Ventures for an estimated aggregate purchase price of $10.8 million. In
addition, we expect to purchase approximately 2,500 additional home sites over a
number of years from several of these joint ventures; the purchase price of
these home sites will be determined at a future date.
The unconsolidated entities in which we have investments generally finance their
activities with a combination of partner equity and debt financing. In some
instances, we and our partners have guaranteed debt of certain 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, the guarantees provided in connection with loans to an
unconsolidated entity are joint and several. In these situations, we generally
have 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, if the joint venture partner does not have adequate
financial resources to meet its obligations under the reimbursement agreement,
we may be liable for more than our proportionate share.
We believe that as of October 31, 2019, in the event we become legally obligated
to perform under a guarantee of the obligation of an unconsolidated entity due
to a triggering event, the collateral should be sufficient to repay all or a
significant portion of the obligation. If it is not, we and our partners would
need to contribute additional capital to the entity. At October 31, 2019, we had
guaranteed the debt of certain unconsolidated entities with loan commitments
aggregating $1.53 billion, of which, if the

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full amount of the debt obligations were borrowed, we estimate $299.1 million to
be our maximum exposure related to repayment and carry cost guarantees. At
October 31, 2019, the unconsolidated entities had borrowed an aggregate of $1.14
billion, of which we estimate $239.6 million to be our maximum exposure related
to repayment and carry cost guarantees. These maximum exposure estimates do not
take into account any recoveries from the underlying collateral or any
reimbursement from our partners.
For more information regarding these joint ventures, see Note 4, "Investments in
Unconsolidated Entities" in the Notes to Consolidated Financial Statements in
Item 15(a)1 of this Form 10-K.
The trends, uncertainties or other factors that impact our business and the
industry in general also impact the unconsolidated entities in which we have
investments. We review each of our investments on a quarterly basis for
indicators of impairment. A series of operating losses of an investee, the
inability to recover our invested capital, or other factors may indicate that a
loss in value of our investment in the unconsolidated entity has occurred. If a
loss exists, we further review to determine if the loss is other than temporary,
in which case we write down the investment to its fair value. The evaluation of
our investment in unconsolidated entities entails a detailed cash flow analysis
using many estimates including but not limited to, expected sales pace, expected
sales prices, expected incentives, costs incurred and anticipated, sufficiency
of financing and capital, competition, market conditions and anticipated cash
receipts, in order to determine projected future distributions. Each of the
unconsolidated entities evaluates its inventory in a similar manner. In
addition, for our unconsolidated entities that own, develop, and manage for-rent
residential apartments, we review rental trends, expected future expenses, and
expected future cash flows to determine estimated fair values of the properties.
See "Critical Accounting Policies - Inventory" contained in this MD&A for more
detailed disclosure on our evaluation of inventory. If a valuation adjustment is
recorded by an unconsolidated entity related to its assets, our proportionate
share is reflected in income from unconsolidated entities with a corresponding
decrease to our investment in unconsolidated entities. Based upon our evaluation
of the fair value of our investments in unconsolidated entities, we recognized
charges in connection with one Land Development Joint Venture of $1.0 million in
fiscal 2019; two Land Development Joint Ventures of $6.0 million in fiscal 2018;
and $2.0 million in fiscal 2017 at one Land Development Joint Venture.

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RESULTS OF OPERATIONS
The following table compares certain items in our Consolidated Statements of
Operations and Comprehensive Income and other supplemental information for
fiscal 2019 and 2018 ($ amounts in millions, unless otherwise stated). For more
information regarding results of operations by operating segment, see "Segments"
in this MD&A.
                                                            Years ended October 31,
                                                      2019           2018         % Change
Revenues:(1)
Home sales                                        $  7,080.4     $  7,143.3           (1 )%
Land sales                                             143.6              -
                                                     7,224.0        7,143.3            1  %
Cost of revenues:(1)
Home sales                                           5,678.9        5,673.0            -  %
Land sales                                             129.7              -
                                                     5,808.6        5,673.0            2  %
Selling, general and administrative                    734.5          684.0            7  %
Income from operations                                 680.8          786.2          (13 )%
Other:
Income from unconsolidated entities                     24.9           85.2          (71 )%
Other income - net                                      81.5           62.5           30  %
Income before income taxes                             787.2          933.9          (16 )%
Income tax provision                                   197.2          185.8            6  %
Net income                                        $    590.0     $    748.2          (21 )%

Supplemental information:
Home sales cost of revenues as a percentage of
home sales revenues                                     80.2 %         79.4 %
Land sales cost of revenues as a percentage of
land sales revenues (1)                                 90.3 %
SG&A as a percentage of home sales revenues             10.4 %          9.6 %
Effective tax rate                                      25.1 %         19.9 %

Deliveries - units                                     8,107          8,265           (2 )%
Deliveries - average selling price (2)            $    873.4     $    864.3            1  %

Net contracts signed - value                      $  6,710.9     $  7,604.3          (12 )%
Net contracts signed - units                           8,075          8,519           (5 )%
Net contracts signed - average selling price (2)  $    831.1     $    892.6           (7 )%

                                                                At October 31,
                                                      2019           2018         % Change
Backlog - value                                   $  5,257.1     $  5,522.5           (5 )%
Backlog - units                                        6,266          6,105            3  %
Backlog - average selling price (2)               $    839.0     $    904.6

(7 )%

(1) On November 1, 2018, we adopted ASC 606. Upon adoption, land sale activity is

presented as part of income from operations where previously it was included

in "Other income - net." In fiscal 2018, we recognized land sales revenues

and land sales cost of revenues of $134.3 million and $128.0 million,

respectively. Further, retained customer deposits, which totaled $13.2

million in fiscal 2019, are included in "Home sales revenue" where previously

they were included in "Other income - net." In fiscal 2018, retained customer

deposits were $8.9 million. Prior periods are not restated.

(2) $ amounts in thousands.

Note: Amounts may not add due to rounding.

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FISCAL 2019 COMPARED TO FISCAL 2018
HOME SALES REVENUES AND HOME SALES COST OF REVENUES
The decrease in home sales revenues in fiscal 2019, as compared to fiscal 2018,
was attributable to a 2% decrease in the number of homes delivered, offset, in
part, by a 1% increase in the average price of the homes delivered. The decrease
in the number of homes delivered was primarily due to a moderation in demand,
particularly in California, which we experienced beginning in the fourth quarter
of fiscal 2018 through the third quarter of fiscal 2019. This decrease was
partially offset by contracts we signed in the metropolitan Atlanta, Georgia
market and several markets in South Carolina in fiscal 2019 from the Sharp and
Sabal acquisitions and an increase in the number of selling communities,
primarily in our South and West regions, in fiscal 2019, as compared to fiscal
2018. The increase in the average delivered home price was mainly due to price
increases in homes delivered in California and the West region and a shift in
the number of homes delivered to more expensive areas and/or products in
California, New Jersey, Virginia, and the West region in fiscal 2019, as
compared to fiscal 2018. These increases were partially offset by a shift in the
number of homes delivered to less expensive areas in City Living in fiscal 2019,
as compared to fiscal 2018 and a decrease in the number of homes delivered in
California where home prices were higher, in fiscal 2019, as compared to fiscal
2018.
Home sales cost of revenues, as a percentage of homes sales revenues, in fiscal
2019 was 80.2%, as compared to 79.4% in fiscal 2018. The increase in fiscal 2019
was primarily due to higher land, land development, material and labor costs; a
shift in the mix of our home sales revenues to lower margin products/areas; the
recovery of approximately $9.7 million from litigation settlements in fiscal
2018; a $7.0 million benefit in fiscal 2018 from the reversal of an accrual
related to an indemnification obligation related to the Shapell acquisition that
expired; and higher inventory impairment charges in fiscal 2019, as compared to
fiscal 2018. These increases were offset, in part, by a state reimbursement of
previously expensed environmental clean-up costs received in fiscal 2019; a
benefit in fiscal 2019 from the reversal of accruals for certain Home Owners
Associations ("HOA") turnovers that were no longer required; price increases in
homes delivered in California and the West region; and lower interest expense in
fiscal 2019 compared to fiscal 2018.
Interest cost in fiscal 2019 was $185.0 million or 2.6% of home sales revenues,
as compared to $190.7 million or 2.7% of home sales revenues in fiscal 2018. We
recognized inventory impairments and write-offs of $42.4 million or 0.6% of home
sales revenues and $35.2 million or 0.5% of home sales revenues in fiscal 2019
and fiscal 2018, respectively.
LAND SALES REVENUES AND LAND SALES COST OF REVENUES
Our revenues from land sales generally consist of the following: (1) land sales
to joint ventures in which we retain an interest; (2) lot sales to third-party
builders within our master planned communities; and (3) bulk land sales to third
parties of land we have decided no longer meets our development criteria. In
fiscal 2019, we recognized a gain of $9.3 million from the sale of land to two
newly formed Rental Property Joint Ventures in which we have interests of 25%.
Prior to the adoption of ASC 606, land sales activity was reported within "Other
income - net" in our Condensed Consolidated Statements of Operations and
Comprehensive Income. In fiscal 2018, we recognized land sales revenues and land
sales cost of revenues of $134.3 million and $128.0 million, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A")
SG&A spending increased by $50.5 million in fiscal 2019 compared to fiscal 2018.
As a percentage of home sales revenues, SG&A was 10.4% and 9.6% in fiscal 2019
and 2018, respectively. The dollar increase in SG&A was due primarily to
increased compensation costs due to a higher number of employees and normal
compensation increases, increased sales and marketing costs, and costs related
to the implementation of new enterprise information technology systems. The
higher sales and marketing costs were the result of the increased number of
selling communities, increased spending on advertising, and higher design studio
operating costs. The increased number of employees was due primarily to the
increase in the number of current and future selling communities.
INCOME FROM UNCONSOLIDATED ENTITIES
We recognize our proportionate share of the earnings and losses from the various
unconsolidated entities in which we have an investment. Many of our
unconsolidated entities are land development projects, high-rise/mid-rise
condominium construction projects, or for-rent apartments projects, which do not
generate revenues and earnings for a number of years during the development of
the property. Once development is complete for land development projects and
high-rise/mid-rise condominium construction projects, these unconsolidated
entities will generally, over a relatively short period of time, generate
revenues and earnings until all of the assets of the entity are sold. Further,
once for-rent apartments projects are complete and stabilized, we may monetize a
portion of these projects through a recapitalization or a sale of all or a
portion of our ownership

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interest in the joint venture, resulting in an income producing event. Because
of the long development periods associated with these entities, the earnings
recognized from these entities may vary significantly from quarter to quarter
and year to year.
The decrease in income from unconsolidated entities from $85.2 million in fiscal
2018 to $24.9 million in fiscal 2019, was due mainly to $67.2 million of gains
recognized in fiscal 2018 from asset sales by three of our Rental Property Joint
Ventures located in College Park, Maryland, Herndon, Virginia, and Westborough,
Massachusetts, and an increase in losses in several Rental Property Join
Ventures related to the commencement of operations and lease up activities in
fiscal 2019, as compared to fiscal 2018. These decreases were offset, in part,
by a $3.8 million gain recognized in fiscal 2019 from an asset sale by one of
our Rental Property Joint Ventures located in Phoenixville, Pennsylvania; higher
earnings from two of our Home Building Joint Ventures; and a $3.0 million
decrease in impairment charges recognized in fiscal 2019 as compared to fiscal
2018.
OTHER INCOME - NET
The table below provides the components of "Other Income - net" for the years
ended October 31, 2019 and 2018 (amounts in thousands):
                                                                 2019       

2018

Income from ancillary businesses                              $  53,568     $  25,692
Management fee income from home building unconsolidated
entities, net                                                     9,948        11,740
Income from land sales                                                -         6,331
Retained customer deposits                                            -         8,937
Other                                                            17,986         9,760
Total other income - net                                      $  81,502     $  62,460


As a result of our adoption of ASC 606 on November 1, 2018, land sale activity
is presented as part of income from operations where previously it was included
in "Other income - net." In addition, retained customer deposits are included in
"Home sales revenue" where previously they were included in "Other income -
net." Prior periods are not restated. See Note 1, "Significant Accounting
Policies - Recent Accounting Pronouncements" in Notes to Consolidated Financial
Statements in this Form 10-K for additional information regarding the adoption
of ASC 606.
The increase in income from ancillary businesses in fiscal 2019, as compared to
fiscal 2018, was mainly due to gains recognized of $35.1 million from the sale
of seven golf clubs in fiscal 2019 and lower losses incurred in our apartment
living operations in fiscal 2019, as compared to fiscal 2018, partially offset
by a $10.7 million gain from a bulk sale of security monitoring accounts by our
home control solutions business in fiscal 2018.
Management fee income from home building unconsolidated entities presented above
primarily represents fees earned by our City Living and Traditional Home
Building operations. In addition, in fiscal 2019 and 2018, our apartment living
operations earned fees from unconsolidated entities of $11.9 million and $7.5
million, respectively. Fees earned by our apartment living operations are
included in income from ancillary businesses.
The increase in "other" in fiscal 2019 was principally due to higher interest
income earned in fiscal 2019 compared to fiscal 2018, offset, in part, by $2.6
million received in fiscal 2018 from the resolution of a matter involving
defective floor joists.
INCOME BEFORE INCOME TAXES
In fiscal 2019, we reported income before income taxes of $787.2 million or
10.9% of revenues, as compared to $933.9 million, or 13.1% of revenues in fiscal
2018.
INCOME TAX PROVISION
We recognized a $197.2 million income tax provision in fiscal 2019. Based upon
the federal statutory rate of 21.0% for fiscal 2019, our federal tax provision
would have been $165.3 million. The difference between the tax provision
recognized and the tax provision based on the federal statutory rate was mainly
due to the provision for state income taxes of $37.9 million and an increase in
unrecognized tax benefits of $2.2 million, offset, in part, by the reversal of
$5.3 million of previously accrued tax provisions on uncertain tax positions
that were no longer necessary due to the expiration of the statute of
limitations and a benefit of $2.1 million from excess tax benefits related to
stock-based compensation.
We recognized a $185.8 million income tax provision in fiscal 2018. Based upon
the blended federal statutory rate of 23.3% for fiscal 2018, our federal tax
provision would have been $217.9 million. The difference between the tax
provision recognized and the tax provision based on the federal statutory rate
was mainly due to tax law changes of $38.7 million; a benefit of $18.2 million
related to the utilization of domestic production activities deductions; the
reversal of $4.7 million of previously accrued

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tax provisions on uncertain tax positions that were no longer necessary due to
the expiration of the statute of limitations and settlements with certain taxing
jurisdictions; a benefit of $4.2 million from excess tax benefits related to
stock-based compensation; and $15.2 million of permanent and other differences,
which primarily relates to the recognition of Section 45L energy credits and tax
planning transactions that benefited the Company's state net operating loss
carryforwards, offset, in part, by the provision for state income taxes of $47.1
million. See Note 8, "Income Taxes" in Item 15(a)1 of this Form 10-K for
additional information regarding the impact of the Tax Act.
CAPITAL RESOURCES AND LIQUIDITY
Funding for our business has been, and continues to be, provided principally by
cash flow from operating activities before inventory additions, unsecured bank
borrowings, and the public debt markets.
Fiscal 2019
At October 31, 2019, we had $1.29 billion of cash and cash equivalents and
approximately $1.73 billion available for borrowing under our Revolving Credit
Facility.
Cash provided by operating activities during fiscal 2019 was $437.7 million. It
was generated primarily from $590.0 million of net income plus $26.2 million of
stock-based compensation, $72.1 million of depreciation and amortization, $42.4
million of inventory impairments and write-offs, and a net deferred tax benefit
of $102.8 million; offset, in part, by a $40.2 million increase in inventory; an
increase of $185.3 million in receivables, prepaid assets, and other assets; an
increase of $45.6 million in mortgage loans held for sale; and a decrease of
$64.5 million in accounts payable and accrued expenses.
Cash used in investing activities during fiscal 2019 was $75.9 million,
primarily related to $162.4 million used to acquired Sharp and Sabal; $87.0
million for the purchase of property and equipment; and $56.6 million used to
fund investments in unconsolidated entities. This activity was offset, in part,
by $151.1 million of cash received as returns on our investments in
unconsolidated entities, foreclosed real estate, and distressed loans and
proceeds of $79.6 million of cash received from sales of golf club properties
and an office buildings in several separate transactions with unrelated third
parties.
We used $258.5 million of cash from financing activities in fiscal 2019,
primarily for the repayment of $600.0 million of senior notes; the repurchase of
$233.5 million of our common stock; and payment of $63.6 million of dividends on
our common stock, offset, in part, by the net proceeds of $396.4 million from
the issuance of $400.0 million aggregate principal amount of 3.80% Senior Notes
due 2029; borrowings of $227.4 million of other loans payable, net of new
repayments; and the proceeds of $17.4 million from our stock-based benefit
plans.
Fiscal 2018
At October 31, 2018, we had $1.18 billion of cash and cash equivalents on hand
and approximately $1.13 billion available for borrowing under our Revolving
Credit Facility.
Cash provided by operating activities during fiscal 2018 was $588.2 million. It
was generated primarily from $748.2 million of net income plus $28.3 million of
stock-based compensation, $25.3 million of depreciation and amortization, $35.2
million of inventory impairments and write-offs; and an increase of $57.9
million in accounts payable and accrued expenses; offset, in part, by a $143.6
million increase in inventory; an increase of $99.6 million in receivables,
prepaid assets, and other assets; an increase of $38.9 million in mortgage loans
held for sale; and a net deferred tax benefit of $21.9 million.
Cash provided by investing activities during fiscal 2018 was $81.3 million. The
cash generated by investing activities was primarily related to $138.0 million
of cash received as returns on our investments in unconsolidated entities,
foreclosed real estate, and distressed loans, offset, in part, by $28.2 million
for the purchase of property and equipment and $27.5 million used to fund
investments in unconsolidated entities.
We used $214.3 million of cash from financing activities in fiscal 2018,
primarily for repurchase of $503.2 million of our common stock; the repayment of
$89.2 million of other loans payable, net of new borrowings; and payment of
$61.7 million of dividends on our common stock, offset, in part, by the net
proceeds of $396.5 million from the issuance of $400.0 million aggregate
principal amount of 4.35% Senior Notes due 2028, the borrowings of $29.9 million
on our mortgage company loan facility, net of new borrowings; and the proceeds
of $13.4 million from our stock-based benefit plans.
Other
In general, our cash flow from operating activities assumes that, as each home
is delivered, we will purchase a home site to replace it. Because we own a
supply of several years of home sites, we do not need to buy home sites
immediately to replace those that we deliver. In addition, we generally do not
begin construction of our detached homes until we have a signed contract with
the home buyer. Should our business decline, we believe that our inventory
levels would decrease as we complete and

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deliver the homes under construction but do not commence construction of as many
new homes, as we complete the improvements on the land we already own, and as we
sell and deliver the speculative homes that are currently in inventory,
resulting in additional cash flow from operations. In addition, we might delay,
decrease, or curtail our acquisition of additional land, which would further
reduce our inventory levels and cash needs. At October 31, 2019, we owned or
controlled through options approximately 59,200 home sites, as compared to
approximately 53,400 at October 31, 2018; and approximately 48,300 at
October 31, 2017. Of the approximately 59,200 home sites owned or controlled
through options at October 31, 2019, we owned approximately 36,600. Of our owned
home sites at October 31, 2019, significant improvements were completed on
approximately 16,800 of them.
At October 31, 2019, the aggregate purchase price of land parcels under option
and purchase agreements was approximately $2.36 billion (including $10.8 million
of land to be acquired from joint ventures in which we have invested). Of the
$2.36 billion of land purchase commitments, we had paid or deposited $168.8
million and, if we acquire all of these land parcels, we will be required to pay
an additional $2.19 billion. The purchases of these land parcels are scheduled
over the next several years. In addition, we expect to purchase approximately
2,500 additional home sites over a number of years from several of these joint
ventures. We have additional land parcels under option that have been excluded
from the aforementioned aggregate purchase amounts since we do not believe that
we will complete the purchase of these land parcels and no additional funds will
be required from us to terminate these contracts.
During the past several years, we have made a number of investments in
unconsolidated entities related to the acquisition and development of land for
future home sites, the construction of luxury for-sale condominiums, and
for-rent apartments. Our investment activities related to investments in and
distributions of investments from unconsolidated entities are contained in the
Consolidated Statements of Cash Flows under "Net cash (used in) provided by
investing activities," At October 31, 2019, we had investments in these entities
of $366.3 million, and were committed to invest or advance up to an additional
$38.8 million to these entities if they require additional funding. At
October 31, 2019, we had purchase commitments to acquire land for apartment
developments of approximately $280.2 million, of which we had outstanding
deposits in the amount of $13.7 million. We intend to develop these apartment
projects in joint ventures with unrelated parties in the future.
On October 31, 2019, we amended and restated our existing $1.295 billion
Revolving Credit Agreement, dated as of May 19, 2016, to, among other things:
(i) increase the aggregate revolving credit commitments under the Revolving
Credit Facility from $1.295 billion to $1.905 billion; (ii) extend the Revolving
Credit Facility termination date from May 19, 2021 to November 1, 2024; (iii)
modify the pricing for outstanding commitments, borrowings and letters of credit
under the facility, as set forth in the pricing schedule that is attached to the
Revolving Credit Facility; (iv) modify the accordion feature to permit the
aggregate revolving credit commitments under the Revolving Credit Facility to be
increased to up to $2.5 billion, subject to certain conditions and availability
of bank commitments; and (iv) modify certain provisions relating to financial
maintenance and negative covenants. Under the terms of the amended and restated
Revolving Credit Facility, our maximum leverage ratio (as defined in the credit
agreement) may not exceed 1.75 to 1.00 and we are required to maintain a minimum
tangible net worth (as defined in the credit agreement) of no less than
approximately $2.70 billion. Under the terms of the Revolving Credit Facility,
at October 31, 2019, our leverage ratio was approximately 0.50 to 1.00 and our
tangible net worth was approximately $5.02 billion. Based upon the minimum
tangible net worth requirement, our ability to repurchase our common stock was
limited to approximately $3.53 billion as of October 31, 2019. At October 31,
2019, we had no outstanding borrowings under the Revolving Credit Facility and
had outstanding letters of credit of approximately $177.9 million.
On October 31, 2018, we had a $800.0 million, five-year senior unsecured term
loan facility (the "Term Loan Facility") with a syndicate of banks. On October
31, 2019, we entered into an amendment to the Term Loan Facility to, among other
things, extend the maturity date from November 1, 2023 to November 1, 2024, with
no principal payments being required before the maturity date.
We believe that we will have adequate resources and sufficient access to the
capital markets and external financing sources to continue to fund our current
operations and meet our contractual obligations. Due to the uncertainties in the
economy and for home builders in general, we cannot be certain that we will be
able to replace existing financing or find sources of additional financing in
the future.
INFLATION
The long-term impact of inflation on us is manifested in increased costs for
land, land development, construction, and overhead. We generally enter into
contracts to acquire land a significant period of time before development and
sales efforts begin. Accordingly, to the extent land acquisition costs are
fixed, subsequent increases or decreases in the sales prices of homes will
affect our profits. Because the sales price of each of our homes is fixed at the
time a buyer enters into a contract to purchase a home and because we generally
contract to sell our homes before we begin construction, any inflation of costs
in excess of those anticipated may result in lower gross margins. We generally
attempt to minimize that effect by entering into

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fixed-price contracts with our subcontractors and material suppliers for
specified periods of time, which generally do not exceed one year.
In general, housing demand is adversely affected by increases in interest rates
and housing costs. Interest rates, the length of time that land remains in
inventory, and the proportion of inventory that is financed affect our interest
costs. If we are unable to raise sales prices enough to compensate for higher
costs, or if mortgage interest rates increase significantly, affecting
prospective buyers' ability to adequately finance home purchases, our home sales
revenues, gross margins, and net income could be adversely affected. Increases
in sales prices, whether the result of inflation or demand, may affect the
ability of prospective buyers to afford new homes.
CONTRACTUAL OBLIGATIONS
The following table summarizes our estimated contractual payment obligations at
October 31, 2019 (amounts in millions):
                             2020         2021 - 2022       2023 - 2024       Thereafter        Total
Senior notes (a)         $    127.8     $       658.1     $       818.2     $    1,770.2     $  3,374.3
Loans payable (a)             121.3             144.2              99.7            940.7        1,305.9
Mortgage company loan
facility (a)(b)               152.8                                                               152.8
Operating lease
obligations                    15.4              22.7              14.5            218.2          270.8
Purchase obligations (c)    1,541.9           1,010.2             263.5             92.5        2,908.1
Retirement plans (d)           13.4              13.4              14.7             62.6          104.1
                         $  1,972.6     $     1,848.6     $     1,210.6     $    3,084.2     $  8,116.0


(a)    Amounts include estimated annual interest payments until maturity of the
       debt. Of the amounts indicated, $2.66 billion of the senior notes, $1.11
       billion of loans payable, $150.0 million of the mortgage company loan
       facility, and $31.3 million of accrued interest were recorded on our
       October 31, 2019 Consolidated Balance Sheet.

(b) In December 2019, we amended the mortgage company warehousing agreement

to, among other things, extend the maturity date to December 4, 2020.

(c) Amounts represent our expected acquisition of land under purchase

agreements and the estimated remaining amount of the contractual

obligation for land development agreements secured by letters of credit

       and surety bonds. Of the total amount indicated, $14.6 million was
       recorded on our October 31, 2019 Consolidated Balance Sheet.

(d) Amounts represent our obligations under our deferred compensation plan,

supplemental executive retirement plans and our 401(k) salary deferral

savings plans. Of the total amount indicated, $82.7 million was recorded

       on our October 31, 2019 Consolidated Balance Sheet.



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SEGMENTS

We operate in two segments: Traditional Home Building and City Living, our urban
development division. Within Traditional Home Building, we operate in five
geographic segments around the United States: (1) the North, consisting of
Connecticut, Illinois, Massachusetts, Michigan, New Jersey, and New York; (2)
the Mid-Atlantic, consisting of Delaware, Maryland, Pennsylvania, and Virginia;
(3) the South, consisting of Florida, Georgia, North Carolina, South Carolina,
and Texas; (4) the West, consisting of Arizona, Colorado, Idaho, Nevada, Oregon,
Utah, and Washington, and (5) California.
The following tables summarize information related to revenues, net contracts
signed, and income (loss) before income taxes by segment for fiscal years 2019,
2018, and 2017. Information related to backlog and assets by segment at
October 31, 2019 and 2018, has also been provided.
Units Delivered and Revenues:
                                                            Fiscal 2019 Compared to Fiscal 2018
                                   Revenues                                                            Average Delivered Price
                               ($ in millions)                      Units Delivered                       ($ in thousands)
                       2019          2018        % Change     2019      2018      % Change         2019            2018       % Change
Traditional Home
Building:
North               $   923.3     $   975.7        (5 )%     1,325     1,453        (9 )%     $    696.8        $  671.5         4  %
Mid-Atlantic          1,112.8       1,141.1        (2 )%     1,708     1,800        (5 )%          651.5           633.9         3  %
South                 1,244.6       1,045.4        19  %     1,725     1,391        24  %          721.5           751.5        (4 )%
West                  1,418.0       1,451.4        (2 )%     1,965     2,130        (8 )%          721.6           681.4         6  %
California            2,129.5       2,208.7        (4 )%     1,180     1,322       (11 )%        1,804.7         1,670.7         8  %
   Traditional Home
Building              6,828.2       6,822.3         -  %     7,903     8,096        (2 )%          864.0           842.7         3  %
City Living             253.2         321.0       (21 )%       204       169        21  %        1,241.2         1,899.4       (35 )%
Other                    (1.0 )
Total homes sales
revenue               7,080.4     $ 7,143.3        (1 )%     8,107     

8,265 (2 )% $ 873.4 $ 864.3 1 % Land sales revenue 143.6 Total revenue $ 7,224.0 $ 7,143.3

Net Contracts Signed:
                                                              Fiscal 2019 Compared to Fiscal 2018
                              Net Contract Value                                                          Average Contracted Price
                               ($ in millions)                     Net Contracted Units                       ($ in thousands)
                       2019          2018        % Change       2019       2018      % Change          2019             2018      % Change
Traditional Home
Building:
North               $   910.1     $   928.1        (2 )%      1,303       1,334        (2 )%     $    698.5          $  695.7        -  %
Mid-Atlantic          1,137.8       1,158.3        (2 )%      1,725       1,799        (4 )%          659.6             643.9        2  %
South                 1,177.3       1,132.7         4  %      1,705       1,502        14  %          690.5             754.1       (8 )%
West                  1,705.7       1,510.5        13  %      2,303       2,133         8  %          740.6             708.2        5  %
California            1,555.3       2,596.9       (40 )%        889       1,568       (43 )%        1,749.5           1,656.2        6  %
   Traditional Home
Building              6,486.2       7,326.5       (11 )%      7,925       8,336        (5 )%          818.4             878.9       (7 )%
City Living             224.7         277.8       (19 )%        150         183       (18 )%        1,498.3           1,518.0       (1 )%
Total               $ 6,710.9     $ 7,604.3       (12 )%      8,075       8,519        (5 )%     $    831.1          $  892.6       (7 )%




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Backlog at October 31:
                                                     October 31, 2019 Compared to October 31, 2018
                                Backlog Value                                                         Average Backlog Price
                               ($ in millions)                       Backlog Units                      ($ in thousands)
                       2019          2018        % Change     2019      2018      % Change       2019          2018       % Change
Traditional Home
Building:
North               $   757.1     $   768.5        (1 )%     1,076    

1,098 (2 )% $ 703.6 $ 699.9 1 % Mid-Atlantic

            785.1         758.8         3  %     1,159     1,142         1  %         677.4        664.4         2  %
South                   930.0         903.2         3  %     1,339     1,166        15  %         694.6        774.6       (10 )%
West                  1,321.2       1,031.1        28  %     1,738     1,400        24  %         760.2        736.5         3  %
California            1,314.1       1,883.3       (30 )%       842     1,133       (26 )%       1,560.7      1,662.2        (6 )%
   Traditional Home
Building              5,107.5       5,344.9        (4 )%     6,154     

5,939 4 % 829.9 900.0 (8 )% City Living

             149.6         177.6       (16 )%       112       166       (33 )%       1,335.6      1,069.7        25  %
Total               $ 5,257.1     $ 5,522.5        (5 )%     6,266     6,105         3  %     $   839.0     $  904.6        (7 )%

Income (Loss) Before Income Taxes ($ amounts in millions):

                             2019        2018       % Change
Traditional Home Building:
North                      $  55.9     $  56.5        (1 )%
Mid-Atlantic                  64.8        90.6       (28 )%
South                        117.5       110.3         7  %
West                         170.4       213.3       (20 )%
California                   452.4       494.3        (8 )%
Traditional Home Building    861.0       965.0       (11 )%
City Living                   70.1        78.1       (10 )%
Corporate and other         (143.9 )    (109.2 )     (32 )%
Total                      $ 787.2     $ 933.9       (16 )%


"Corporate and other" is comprised principally of general corporate expenses
such as our executive officers; the corporate finance, accounting, audit, tax,
human resources, risk management, information technology, marketing, and legal
groups; interest income; income from certain of our ancillary businesses,
including Gibraltar; and income from our Rental Property Joint Ventures and
Gibraltar Joint Ventures.
Total Assets ($ amounts in millions):
                                At October 31,
                              2019          2018
Traditional Home Building:
North                      $    917.5    $    970.9
Mid-Atlantic                  1,177.4       1,130.4
South                         1,412.5       1,237.7
West                          2,057.4       1,580.2
California                    2,339.7       2,734.0
Traditional Home Building     7,904.5       7,653.2
City Living                     529.5         516.2
Corporate and other           2,394.1       2,075.2
Total                      $ 10,828.1    $ 10,244.6



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"Corporate and other" is comprised principally of cash and cash equivalents,
restricted cash, income taxes receivable, investments in properties held for
rental apartments, expected recoveries from insurance carriers and suppliers,
our Gibraltar investments and operations, manufacturing facilities, and our
mortgage and title subsidiaries.
Traditional Home Building
North
                                                              Year ended October 31,
                                                        2019          2018         % Change
Units Delivered and Home Sales Revenues:
Home sales revenues ($ in millions)                 $    923.3     $   975.7           (5 )%
Units delivered                                          1,325         1,453           (9 )%
Average delivered price ($ in thousands)            $    696.8     $   671.5            4  %

Net Contracts Signed:
Net contract value ($ in millions)                  $    910.1     $   928.1           (2 )%
Net contracted units                                     1,303         1,334           (2 )%
Average contracted price ($ in thousands)           $    698.5     $   695.7            -  %

Home sales cost of revenues as a percentage of home sales revenues

                                            85.4 %        

86.7 %

Income before income taxes ($ in millions) $ 55.9 $ 56.5

           (1 )%

Number of selling communities at October 31,                50            

57 (12 )%

The decrease in the number of homes delivered in fiscal 2019 was mainly due to a
decrease in the number of homes in backlog at October 31, 2018, as compared to
the number of homes in backlog at October 31, 2017. The increase in the average
price of homes delivered in fiscal 2019 was due primarily to a shift in the
number of homes delivered to more expensive areas and/or products in fiscal
2019, as compared to fiscal 2018, particularly in Michigan and New Jersey.
The decrease in the number of net contracts signed in fiscal 2019, as compared
to fiscal 2018, was principally due to a decrease in demand in fiscal 2019, as
compared to fiscal 2018.
The decrease in income before income taxes in fiscal 2019 was principally
attributable to lower home sales cost of revenues, as a percentage of home sale
revenues, offset, in part, by lower earnings from decreased home sales revenues
and higher SG&A costs in fiscal 2019, as compared to fiscal 2018. The decrease
in home sales cost of revenues, as a percentage of home sales revenues, in
fiscal 2019 was primarily due to a shift in product mix/areas to higher-margin
areas and lower inventory impairment charges in fiscal 2019, as compared to
fiscal 2018.
Inventory impairment charges were $17.5 million in fiscal 2019, as compared to
$19.7 million in fiscal 2018. During fiscal 2019, we determined that the pricing
assumptions used in prior impairment reviews for one operating community located
in Illinois needed to be reduced primarily because weaker-than-expected market
conditions drove a lack of improvement and/or a decrease in customer demand for
homes in the community. As a result of the reduction in expected sales prices,
we determined that this community was impaired. Accordingly, the carrying value
was written down in the fiscal 2019 period to its estimated fair value, which
resulted in a charge to income before income taxes of $6.6 million. In addition,
with respect to two communities located in Illinois, we decided to sell their
remaining lots in bulk sales rather than sell and construct homes. As a result,
the carrying values of these communities were written down to their estimated
fair values, which resulted in a charge to income before income taxes of $4.9
million in fiscal 2019.
During fiscal 2018, we determined that the pricing assumptions used in prior
impairment reviews for one operating community located in Connecticut needed to
be reduced, primarily due to a lack of improvement and/or a decrease in customer
demand as a result of weaker than expected market conditions. As a result of the
reduction in expected sales prices, we determined that this community was
impaired. Accordingly, its carrying value was written down to its estimated fair
value, which resulted in a charge to income before income taxes of $12.0 million
in fiscal 2018. In addition, with respect to two communities located in Illinois
and Minnesota, we decided to sell their remaining lots in bulk sales rather than
sell and construct homes. As a result, the carrying values of these communities
were written down to their estimated fair values, which resulted in a charge to
income before income taxes of $4.4 million in fiscal 2018.

                                       40
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Mid-Atlantic
                                                             Year ended October 31,
                                                       2019          2018         % Change
Units Delivered and Home Sales Revenues:
Home sales revenues ($ in millions)                 $ 1,112.8     $ 1,141.1           (2 )%
Units delivered                                         1,708         1,800           (5 )%
Average delivered price ($ in thousands)            $   651.5     $   633.9            3  %

Net Contracts Signed:
Net contract value ($ in millions)                  $ 1,137.8     $ 1,158.3           (2 )%
Net contracted units                                    1,725         1,799           (4 )%
Average contracted price ($ in thousands)           $   659.6     $   643.9            2  %

Home sales cost of revenues as a percentage of home sales revenues

                                           86.3 %        84.4 %

Income (loss) before income taxes ($ in millions) $ 64.8 $ 90.6

(28 )%

Number of selling communities at October 31,               56            62 

(10 )%

The decrease in the number of homes delivered in fiscal 2019 was mainly due to
lower backlog conversion in fiscal 2019, as compared to fiscal 2018. The
increase in the average price of homes delivered in fiscal 2019 was primarily
due to a shift in the number of homes delivered to more expensive areas and/or
products in fiscal 2019, as compared to fiscal 2018.
The decrease in the number of net contracts signed in fiscal 2019 was
principally due to a decrease in the average number of selling communities in
fiscal 2019, as compared to fiscal 2018. The increase in the average value of
each contract signed in fiscal 2019 was mainly due to shifts in the number of
contracts signed to more expensive areas and/or products in fiscal 2019, as
compared to fiscal 2018.
The decrease in income before income taxes in fiscal 2019 was mainly due to
increases in home sales costs of revenues, as a percentage of home sale
revenues; lower earnings on decreased home sales revenues; and increases in SG&A
costs in fiscal 2019, as compared to fiscal 2018. This decrease was partially
offset by a $4.0 million impairment charge recognized in fiscal 2018 related to
one Land Development Joint Venture located in Maryland. The increase in home
sales costs of revenues, as a percentage of home sale revenues, in fiscal 2019
was primarily due to higher material and labor costs in fiscal 2019, as compared
to fiscal 2018.
Inventory impairment charges were $8.5 million and $9.8 million in fiscal 2019
and 2018, respectively. During our review of operating communities for
impairment in fiscal 2019, we determined that the pricing assumptions used in
prior impairment reviews for two operating communities located in Pennsylvania
needed to be reduced primarily because weaker-than-expected market conditions
drove a lack of improvement and/or a decrease in customer demand for homes in
the community. As a result of the reduction in expected sales prices, we
determined that these communities were impaired. Accordingly, the carrying value
of these communities were written down to their estimated fair values, which
resulted in a charge to income before income taxes of $8.0 million in fiscal
2019.
In fiscal 2018, we decided to sell a portion of the lots in a bulk sale in one
community located in Maryland, primarily due to increases in site costs and a
lack of improvement in customer demand as a result of weaker than expected
market conditions. The carrying value of this community was written down to its
estimated fair value resulting in a charge to income before income taxes in
fiscal 2018 of $6.7 million.

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South
                                                             Year ended October 31,
                                                       2019          2018         % Change
Units Delivered and Home Sale Revenues:
Home sales revenues ($ in millions)                 $ 1,244.6     $ 1,045.4           19  %
Units delivered                                         1,725         1,391           24  %
Average delivered price ($ in thousands)            $   721.5     $   751.5

(4 )%

Net Contracts Signed:
Net contract value ($ in millions)                  $ 1,177.3     $ 1,132.7            4  %
Net contracted units                                    1,705         1,502           14  %
Average contracted price ($ in thousands)           $   690.5     $   754.1

(8 )%

Home sales cost of revenues as a percentage of home sales revenues

                                           84.2 %        83.3 %

Income before income taxes ($ in millions) $ 117.5 $ 110.3

            7  %

Number of selling communities at October 31,               93            69 

35 %

The increase in the number of homes delivered in fiscal 2019 was mainly due to
the delivery of 137 homes in metropolitan Atlanta, Georgia and several markets
in South Carolina from the Sharp and Sabal acquisitions; an increase in the
number of homes in backlog at October 31, 2018, as compared to the number of
homes in backlog at October 31, 2017; and higher backlog conversion in fiscal
2019, as compared to fiscal 2018. The decrease in the average price of homes
delivered in fiscal 2019 was primarily due to a shift in the number of homes
delivered to less expensive areas and/or products in fiscal 2019, as compared to
fiscal 2018.
The increase in the number of net contracts signed in fiscal 2019 was mainly due
to contracts we signed in the metropolitan Atlanta, Georgia market and several
markets in South Carolina in fiscal 2019 and an increase in the number of
selling communities, primarily in Florida, in fiscal 2019, as compared to fiscal
2018, offset, in part, by decreased demand. The decrease in the average value of
each contract signed in fiscal 2019 was mainly due to shifts in the number of
contracts signed to less expensive areas and/or products in fiscal 2019, as
compared to fiscal 2018.
The increase in income before income taxes in fiscal 2019 was principally due to
higher earnings from increased home sales revenues, offset, in part, by higher
cost of home sales revenues, as a percentage of home sales revenues. The
increase in home sales cost of revenues, as a percentage of home sales revenues,
in fiscal 2019 was primarily due to higher material and labor costs and a shift
in product mix/areas to lower-margin areas in fiscal 2019, as compared to fiscal
2018.
Inventory impairment charges were $9.5 million and $3.8 million in fiscal 2019
and 2018, respectively. During fiscal 2019, we decided to sell the remaining
lots in a bulk sale in one community located in Texas rather than sell and
construct homes, primarily due to a lack of improvement and/or a decrease in
customer demand. As a result, the carrying value of this community was written
down to its estimated fair value, which resulted in a charge to income before
income taxes of $1.5 million in fiscal 2019. In addition, we terminated three
purchase agreements to acquire land parcels in Texas and forfeited the deposit
balances outstanding. We wrote off the deposits resulting in a charges to income
before income taxes of $4.2 million in fiscal 2019.


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West
                                                             Year ended October 31,
                                                       2019          2018         % Change
Units Delivered and Home Sales Revenues:
Home sales revenues ($ in millions)                 $ 1,418.0     $ 1,451.4           (2 )%
Units delivered                                         1,965         2,130           (8 )%
Average delivered price ($ in thousands)            $   721.6     $   681.4            6  %

Net Contracts Signed:
Net contract value ($ in millions)                  $ 1,705.7     $ 1,510.5           13  %
Net contracted units                                    2,303         2,133            8  %
Average contracted price ($ in thousands)           $   740.6     $   708.2            5  %

Home sales cost of revenues as a percentage of home sales revenues

                                           79.3 %        78.2 %

Income before income taxes ($ in millions) $ 170.4 $ 213.3

(20 )%

Number of selling communities at October 31,               94            83 

13 %

The decrease in the number of homes delivered in fiscal 2019 was mainly due to
lower backlog conversion in fiscal 2019, as compared to fiscal 2018. The
increase in the average price of homes delivered in fiscal 2019 was primarily
due to a shift in the number of homes delivered to more expensive areas and/or
products and price increases in fiscal 2019, as compared to fiscal 2018.
The increase in the number of net contracts signed in fiscal 2019 was
principally due to an increase in the average number of selling communities in
fiscal 2019, as compared to fiscal 2018, and an increase in demand, primarily in
the fourth quarter of fiscal 2019. The increase in the average value of each
contract signed in fiscal 2019 was mainly due to a shift in the number of
contracts signed to more expensive areas and/or products in fiscal 2019, as
compared to fiscal 2018.
The decrease in income before income taxes in fiscal 2019 was due mainly to
higher SG&A costs; higher home sales cost of revenues, as a percentage of home
sales revenues; and lower earnings from decreased revenues, in fiscal 2019, as
compared to fiscal 2018. The increase in home sales cost of revenues, as a
percentage of home sales revenues, was primarily due to a shift in product
mix/areas to lower-margin areas in fiscal 2019, as compared to fiscal 2018.
California
                                                             Year ended October 31,
                                                       2019          2018         % Change
Units Delivered and Home Sales Revenues:
Home sales revenues ($ in millions)                 $ 2,129.5     $ 2,208.7           (4 )%
Units delivered                                         1,180         1,322          (11 )%
Average delivered price ($ in thousands)            $ 1,804.7     $ 1,670.7            8  %

Net Contracts Signed:
Net contract value ($ in millions)                  $ 1,555.3     $ 2,596.9          (40 )%
Net contracted units                                      889         1,568          (43 )%
Average contracted price ($ in thousands)           $ 1,749.5     $ 1,656.2            6  %

Home sales cost of revenues as a percentage of home sales revenues

                                           74.0 %        72.9 %

Income before income taxes ($ in millions)              452.4         494.3 

(8 )%

Number of selling communities at October 31,               36            38 

(5 )%

The decrease in the number of homes delivered in fiscal 2019 was mainly due to
lower backlog conversion in fiscal 2019, as compared to fiscal 2018, offset, in
part, by the increased number of homes in backlog at October 31, 2018, as
compared to the

                                       43
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number of homes in backlog at October 31, 2017. The increase in the average
price of homes delivered in 2019 was primarily due to a shift in the number of
homes delivered to more expensive areas and/or products and increased selling
prices of homes delivered in fiscal 2019, as compared to fiscal 2018.
The decrease in the number of net contracts signed in fiscal 2019 was
principally due to a decrease in demand and reduced availability of lots in
fiscal 2019, as compared to fiscal 2018. The increase in the average value of
each contract signed in fiscal 2019 was mainly due to a shift in the number of
contracts signed to more expensive areas and/or products in fiscal 2019, as
compared to fiscal 2018.
The decrease in income before income taxes in fiscal 2019 was primarily due to
lower earnings from the decreased home sales revenues and higher home sales cost
of revenues, as a percentage of home sales revenues, in fiscal 2019, as compared
to fiscal 2018, partially offset by lower SG&A costs in fiscal 2019. The
increase in home sales cost of revenues, as a percentage of home sales revenues,
was primarily due to a shift in product mix/areas to lower-margin areas in
fiscal 2019, as compared to fiscal 2018, and a $7.0 million benefit in fiscal
2018 from the reversal of an accrual related to the Shapell acquisition that has
expired.
City Living
                                                             Year ended October 31,
                                                       2019          2018         % Change
Units Delivered and Home Sales Revenues:
Home sales revenues ($ in millions)                 $   253.2     $   321.0          (21 )%
Units delivered                                           204           169           21  %
Average delivered price ($ in thousands)            $ 1,241.2     $ 1,899.4

(35 )%

Net Contracts Signed:
Net contract value ($ in millions)                  $   224.7     $   277.8          (19 )%
Net contracted units                                      150           183          (18 )%
Average contracted price ($ in thousands)           $ 1,498.3     $ 1,518.0

(1 )%

Home sales cost of revenues as a percentage of home sales revenues

                                           70.6 %        75.1 %

Income before income taxes ($ in millions) $ 70.1 $ 78.1

(10 )%

Number of selling communities at October 31,                4             6 

(33 )%

The increase in the number of homes delivered in fiscal 2019 was mainly
attributable to homes delivered at a building located in Jersey City, New
Jersey, which commenced deliveries in the fourth quarter of fiscal 2018. The
decrease in the average price of homes delivered in fiscal 2019 was primarily
due to a shift in the number of homes delivered to less expensive buildings in
fiscal 2019, as compared to fiscal 2018, offset, in part, by the delivery of two
homes in fiscal 2019 in a building located in New York City, New York, where the
average price was $13.6 million. In fiscal 2019 and 2018, 7% and 37%,
respectively, of the units delivered were located in New York City, where
average home prices were higher.
The decrease in the number of net contracts signed in fiscal 2019 was primarily
due to a decrease in demand. The decrease in the average sales price of net
contracts signed in fiscal 2019, as compared to fiscal 2018, was principally due
to a shift to less expensive units in fiscal 2019, as compared to fiscal 2018,
offset, in part, by the sale of two home in fiscal 2019 period in a building
located in New York City, New York, where the average price was $13.6 million.
The decrease in income before income taxes in fiscal 2019 was mainly due to
lower earnings from decreased home sales revenues and a decrease in earnings
from our investments in unconsolidated entities, in fiscal 2019, as compared to
fiscal 2018. This decrease was partially offset by lower home sales cost of
revenues, as a percentage of home sale revenues, in fiscal 2019. The lower home
sales cost of revenues, as a percentage of home sale revenues, in fiscal 2019
was due primarily to a shift in the number of homes delivered to buildings with
higher margins; a state reimbursement of previously expensed environmental
clean-up costs received in fiscal 2019; a benefit in fiscal 2019 from the
reversal of accruals for certain HOA turnovers that were no longer required; and
lower interest costs in fiscal 2019, as compared to fiscal 2018. These decreases
were offset, in part, by impairment charges of $4.8 million in fiscal 2019. As a
result of decreased demand, we wrote down the carrying value of units in two
buildings, located in Maryland and New York, New York, to their estimated fair
value, which resulted in impairment charges of $4.8 million in fiscal 2019.

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In fiscal 2019, earnings from our investments in unconsolidated entities
decreased $2.8 million as compared to fiscal 2018. This decrease was primarily
due a shift in the number of homes delivered to buildings with lower margins and
a shift in the number of homes delivered in joint ventures where our ownership
percentage was lower in fiscal 2019, as compared to fiscal 2018. The tables
below provide information related to deliveries, home sales revenues and net
contracts signed by our City Living Home Building Joint Ventures, for the
periods indicated, and the related backlog for the dates indicated ($ amounts in
millions):
                                          Year ended October 31,
                                    2019     2018      2019       2018
                                   Units    Units       $          $

Deliveries and home sales revenues 147 14 $ 330.8 $ 65.7 Net contracts signed

                  39      102    $ 128.1    $ 245.6


                   At October 31,
         2019     2018     2019       2018
        Units    Units       $         $
Backlog    26      134    $ 76.3    $ 279.0


Corporate and other
In fiscal 2019 and 2018, loss before income taxes was $143.9 million and $109.2
million, respectively. The increase in the loss before income taxes in fiscal
2019 was principally attributable to $67.2 million of gains recognized in fiscal
2018 from asset sales by our Rental Property Joint Ventures located in College
Park, Maryland, Herndon, Virginia, and Westborough, Massachusetts; a $10.7
million gain from a bulk sale of security monitoring accounts by our home
control solutions business in fiscal 2018; an increase in losses in several
Rental Property Joint Ventures due to the commencement of operations and lease
up activities in fiscal 2019; and higher SG&A costs in fiscal 2019 compared to
fiscal 2018. These increases were partially offset by gains recognized of $35.1
million from the sale of seven golf clubs in fiscal 2019; a $9.3 million gain
recognized from the sales of land to newly formed Rental Property Joint Ventures
in fiscal 2019; a $3.8 million gain recognized in fiscal 2019 from an asset sale
by a Rental Property Joint Venture in Phoenixville, Pennsylvania; and higher
interest income in fiscal 2019.

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