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").
OVERVIEW
Our Business
We design, build, market, sell, and arrange financing for an array of luxury
residential single-family detached, attached home, master planned resort-style
golf, and urban low-, mid-, and high-rise communities, principally on land we
develop and improve, as we continue to pursue our strategy of broadening our
product lines, price points and geographic footprint. We cater to luxury
first-time, move-up, empty-nester, active-adult, affordable luxury and
second-home buyers in the United States ("Traditional Home Building Product"),
as well as urban and suburban renters. We also design, build, market, and sell
urban low-, mid-, and high-rise condominiums through Toll Brothers City Living®
("City Living"). At October 31, 2020, we were operating in 24 states, as well as
in the District of Columbia.
In the five years ended October 31, 2020, we delivered 38,117 homes from 779
communities, including 8,496 homes from 457 communities in fiscal 2020. At
October 31, 2020, we had 778 communities in various stages of planning,
development or operations containing approximately 63,200 home sites that we
owned or controlled through options.
We are developing several land parcels for master planned communities in which
we intend to build homes on a portion of the lots and sell the remaining lots to
other builders. One of these master planned communities is being developed 100%
by us, and the remaining communities are being developed through joint ventures
with other builders or financial partners.
In addition to our residential for-sale business, we also develop and operate
for-rent apartments through joint ventures. See the section entitled "Toll
Brothers Apartment Living/Toll Brothers Campus Living" below.
We operate our own architectural, engineering, mortgage, title, land
development, golf course development, and landscaping subsidiaries. We also
operate our own security company, TBI Smart Home Solutions, which provides
homeowners with home automation and a full range of technology options. In
addition, in certain regions we operate our own lumber distribution, house
component assembly, and manufacturing operations.
We have investments in various unconsolidated entities, including our Land
Development Joint Ventures, Home Building Joint Ventures, Rental Property Joint
Ventures and Gibraltar Joint Ventures.
Financial Highlights
In fiscal 2020, we recognized $6.94 billion of home sales revenues and net
income of $446.6 million, as compared to $7.08 billion of revenues and net
income of $590.0 million in fiscal 2019.
In fiscal 2020 and 2019, the value of net contracts signed was $8.00 billion
(9,932 homes) and $6.71 billion (8,075 homes), respectively. The value of our
backlog at October 31, 2020 was $6.37 billion (7,791 homes), as compared to our
backlog at October 31, 2019 of $5.26 billion (6,266 homes).
At October 31, 2020, we had $1.37 billion of cash and cash equivalents and
approximately $1.79 billion available for borrowing under our $1.905 billion
revolving credit facility (the "Revolving Credit Facility"), substantially all
of which matures in November 2025. At October 31, 2020, we had no outstanding
borrowings under the Revolving Credit Facility and had outstanding letters of
credit of approximately $119.0 million.
At October 31, 2020, our total equity and our debt to total capitalization ratio
were $4.93 billion and 0.45 to 1.00, respectively.
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Acquisitions

As part of our strategy to expand our geographic footprint and product
offerings, in fiscal 2020, we acquired substantially all of the assets and
operations of Thrive, an urban infill builder with operations in Atlanta,
Georgia and Nashville, Tennessee. We also acquired substantially all of the
assets and operations of Keller, a builder with operations is Colorado Springs,
Colorado. The aggregate purchase price for these acquisitions was approximately
$79.2 million in cash. The assets acquired were primarily inventory, including
approximately 1,100 home sites owned or controlled through land purchase
agreements.
Our Business Environment and Current Outlook
We have recently experienced very strong demand for our homes. This resurgence
in demand began for us in mid-May 2020, following the significant drop in sales
we experienced in our fiscal second quarter as the initial impact of the
COVID-19 pandemic was felt in the United States. The net signed contract in our
fiscal fourth quarter of 3,407 homes and $2.74 billion were the highest totals
for any quarter in our history, up 68% in homes and 63% in dollars, compared to
the fiscal fourth quarter of 2019. Our backlog at fiscal year end was 7,791
homes and $6.37 billion, up 24% in units and 21% in dollars as compared to our
backlog at fiscal year end 2019. The build time for our homes is generally 9 to
12 months from contract signing and, as a result, we expect to deliver
significantly more homes in fiscal 2021 compared to fiscal 2020 as we deliver
homes on contracts signed during this strong period of demand describe above. In
response to the strong demand and in an effort to drive profitability and manage
growth, we raised prices in a substantially all of our communities during our
fiscal third and fourth quarters. We have also limited lot releases in some
communities. We expect to continue these pricing and lot-release measures during
fiscal 2021 assuming the strong demand environment continues.
We attribute the strong demand to a number of factors, including low interest
rates, a continued undersupply of homes, and consumers' increased focus on the
importance of home. We believe these factors will continue to support demand in
fiscal 2021.
Although housing market demand has recently been very strong, we remain cautious
as to the impact of the COVID-19 pandemic on the economy, among other things.
Future economic conditions in the United States remain uncertain, in particular
due to the disruptions caused by the pandemic and how related government
directives, actions and economic relief efforts will impact the U.S. economy,
employment levels, financial markets, secondary mortgage markets, consumer
confidence, demand for our homes and availability of mortgage loans to
homebuyers. The extent of such impact on our operational and financial
performance will depend on future developments, including the duration of the
pandemic, the acceptance and effectiveness of vaccines, and the related impact
on the economy, financial markets, and our customers, trade partners and
employees, all of which are highly uncertain, unpredictable and outside our
control.
Competitive Landscape
The home building business is highly competitive and fragmented. We compete with
numerous home builders of varying sizes, ranging from local to national in
scope, some of which have greater sales and financial resources than we do.
Sales of existing homes, whether by a homeowner or by a financial institution
that may have acquired a home through a foreclosure, also provide competition.
We compete primarily based on price, location, design, quality, service, and
reputation. We believe our financial stability, relative to many others in our
industry, provides us with a competitive advantage.
Land Acquisition and Development
Our business is subject to many risks because of the extended length of time
that it takes to obtain the necessary approvals on a property, complete the land
improvements on it, and deliver a home after a home buyer signs an agreement of
sale. We attempt to reduce some of these risks and improve our capital
efficiency by utilizing one or more of the following methods: controlling land
for future development through options, which enable us to obtain necessary
governmental approvals before acquiring title to the land; generally commencing
construction of a detached home only after executing an agreement of sale and
receiving a substantial down payment from the buyer; and using subcontractors to
perform home construction and land development work on a fixed-price basis.
During fiscal 2020 and 2019, we acquired control of approximately 18,400 and
13,900 home sites, respectively, net of options terminated and home sites sold.
At October 31, 2020, we controlled approximately 63,200 home sites, as compared
to approximately 59,200 home sites at October 31, 2019, and approximately 53,400
home sites at October 31, 2018. In addition, at October 31, 2020, we expect to
purchase approximately 2,100 additional home sites from several land development
joint ventures in which we have an interest, at prices not yet determined.
Of the approximately 63,200 total home sites that we owned or controlled through
options at October 31, 2020, we owned approximately 36,100 and controlled
approximately 27,000 through options. Of the 63,200 home sites, approximately
16,600 were substantially improved.
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In addition, at October 31, 2020, our Land Development Joint Ventures owned
approximately 9,600 home sites (including 139 home sites included in the 27,000
controlled through options), and our Home Building Joint Ventures owned
approximately 67 home sites.
At October 31, 2020, we were selling from 317 communities, compared to 333
communities at October 31, 2019, and 315 communities at October 31, 2018.
Customer Mortgage Financing
We maintain relationships with a diversified group of mortgage financial
institutions, many of which are among the largest in the industry. We believe
that regional and community banks continue to recognize the long-term value in
creating relationships with high-quality, affluent customers such as our home
buyers, and these banks continue to provide these customers with financing.
We believe that our home buyers generally are, and should continue to be,
well-positioned to secure mortgages due to their typically lower loan-to-value
ratios and attractive credit profiles, as compared to the average home buyer.
Toll Brothers Apartment Living/Toll Brothers Campus Living
In addition to our residential for-sale business, we also develop and operate
for-rent apartments through joint ventures. At October 31, 2020, we or joint
ventures in which we have an interest, controlled 64 land parcels that are
planned as for-rent apartment projects containing approximately 20,800 units.
These projects, which are located in multiple metropolitan areas throughout the
country, are being operated, are being developed or will be developed with
partners under the brand names Toll Brothers Apartment Living and Toll Brothers
Campus Living.
In fiscal 2020, we sold all of our ownership interest in one of our Rental
Property Joint Ventures to our partner for cash of $16.8 million, net of closing
costs. The joint venture had owned, developed, and operated multifamily
residential apartments in northern New Jersey. We recognized a gain of $10.7
million in fiscal 2020 from this sale. In fiscal 2019, one of our Rental
Property Joint Ventures, located in 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, 2020, we had approximately 2,000 units in for-rent apartment
projects that were occupied or ready for occupancy, 2,200 units in the lease-up
stage, 11,100 units in the design phase or under development, and 5,500 units in
the planning stage. Of the 20,800 units at October 31, 2020, 9,400 were owned by
joint ventures in which we have an interest; approximately 6,100 were owned by
us; and 5,300 were under contract to be purchased by us.
CONTRACTS AND BACKLOG
The aggregate value of net sales contracts signed increased 19.1% in fiscal
2020, as compared to fiscal 2019. The value of net sales contracts signed was
$8.00 billion (9,932 homes) in fiscal 2020 and $6.71 billion (8,075 homes) in
fiscal 2019. The increase in the aggregate value of net contracts signed in
fiscal 2020, as compared to fiscal 2019, was due to a 23% increase in the number
of net contracts signed offset, in part, by a 3% decrease in the average value
of each contract signed. The increase in the number of net contracts signed in
fiscal 2020, as compared to fiscal 2019, reflects an overall increase in demand
in the housing market, as well as a resurgence in demand for our homes that
began at the outset of our fiscal third quarter. We attribute the increase in
demand to a number of factors, including low interest rates, a continued
undersupply of homes, and consumers' increased focus on the importance of home.
The decrease in average price of net contracts signed in fiscal 2020, as
compared to fiscal 2019, was principally due to our strategic expansion into
more affordable luxury homes and our geographic expansion into attractive
high-growth markets. This decrease was partially offset by price increases in
many of our markets.
The value of our backlog at October 31, 2020, 2019, and 2018 was $6.37 billion
(7,791 homes), $5.26 billion (6,266 homes), and $5.52 billion (6,105 homes),
respectively. Approximately 94% of the homes in backlog at October 31, 2020 are
expected to be delivered by October 31, 2021. The 21.3% increase in the value of
homes in backlog at October 31, 2020, as compared to October 31, 2019, was due
to an increase in the value of net contracts signed and lower home sales
revenues in fiscal 2020, as compared to fiscal 2019.
For more information regarding revenues, net contracts signed, and backlog by
geographic segment, see "Segments" in this MD&A.
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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, 2020, 2019, and 2018, as shown in the table below (amounts in thousands):

                                             2020          2019          

2018

Land controlled for future communities $ 23,539 $ 11,285 $ 2,820 Land owned for future communities

           31,669             -         2,185
Operating communities                          675        31,075        30,151
                                          $ 55,883      $ 42,360      $ 35,156


In fiscal 2020, we recognized $31.7 million of impairment charges on land owned
for future communities relating to nine communities. As of the period the
impairment charges were recognized, the fair value of these communities in the
aggregate, net of impairment charges, was $21.8 million. There were no
impairment charges on land owned for future communities in 2019 and $2.2 million
recognized in fiscal 2018.
The table below provides, for the periods indicated, the number of operating
communities that we reviewed for potential impairment, the number of operating
communities in which we recognized impairment charges, the amount of impairment
charges recognized, and, as of the end of the period indicated, the fair value
of those communities, net of impairment charges
($ amounts in thousands):
                                                                                                 Impaired operating communities
                                                                                                          Fair value of
                                                                                                           communities,               Impairment
                                                      Number of                  Number of                    net of                   charges
Three months ended:                               communities tested            communities             impairment charges            recognized
Fiscal 2020:
January 31                                                65                         -                $                 -          $           -
April 30                                                  80                         1                $             2,754                    300
July 31                                                   66                         -                $                 -                      -
October 31                                                53                         1                $             1,113                    375
                                                                                                                                   $         675
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



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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.
In the fourth quarter of fiscal 2020, we reclassified sales commissions paid to
third-party brokers from home sales cost of revenues to selling, general and
administrative expense ("SG&A") in the Consolidated Statements of Operations and
Comprehensive Income. The reclassification aligns the treatment of sale
commissions paid to third-party brokers with the treatment of sales commissions
paid to in-house salespersons, and is consistent with the manner in which the
majority of the Company's peers treat such commissions. The reclassification had
the effect of lowering home sales cost of revenues (and increasing homes sales
gross margin) and increasing SG&A by the amount of sale commissions paid to
third-party brokers.
Warranty and Self-Insurance
Warranty: We provide all of our home buyers with a limited warranty as to
workmanship and mechanical equipment. We also provide many of our home buyers
with a limited 10-year warranty as to structural integrity. We accrue for
expected warranty costs at the time each home is closed and title and possession
are transferred to the home buyer. Warranty costs are accrued based upon
historical experience. Adjustments to our warranty liabilities related to homes
delivered in prior years are recorded in the period in which a change in our
estimate occurs. Over the past several years, we have had a significant number
of warranty claims related primarily to homes built in Pennsylvania and
Delaware. See Note 7 - "Accrued Expenses" in Item 15(a)1 of 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
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.
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We record expenses and liabilities based on the estimated costs required to
cover our self-insured liability and the estimated costs of potential claims and
claim adjustment expenses that are not covered by our insurance policies. These
estimated costs are based on an analysis of our historical claims and industry
data, and include an estimate of claims incurred but not yet reported ("IBNR").
We engage a third-party actuary that uses our historical claim and expense data,
input from our internal legal and risk management groups, as well as industry
data, to estimate our liabilities related to unpaid claims, IBNR associated with
the risks that we are assuming for our self-insured liability and other required
costs to administer current and expected claims. These estimates are subject to
uncertainty due to a variety of factors, the most significant being the long
period of time between the delivery of a home to a home buyer and when a
structural warranty or construction defect claim is made, and the ultimate
resolution of the claim. Though state regulations vary, construction defect
claims are reported and resolved over a prolonged period of time, which can
extend for 10 years or longer. As a result, the majority of the estimated
liability relates to IBNR. Adjustments to our liabilities related to homes
delivered in prior years are recorded in the period in which a change in our
estimate occurs.
The projection of losses related to these liabilities requires actuarial
assumptions that are subject to variability due to uncertainties regarding
construction defect claims relative to our markets and the types of product we
build, insurance industry practices and legal or regulatory actions and/or
interpretations, among other factors. Key assumptions used in these estimates
include claim frequencies, severity and settlement patterns, which can occur
over an extended period of time. In addition, changes in the frequency and
severity of reported claims and the estimates to settle claims can impact the
trends and assumptions used in the actuarial analysis, which could be material
to our consolidated financial statements. Due to the degree of judgment
required, and the potential for variability in these underlying assumptions, our
actual future costs could differ from those estimated, and the difference could
be material to our consolidated financial statements.
OFF-BALANCE SHEET ARRANGEMENTS
We also operate through a number of joint ventures. We earn construction and
management fee income from many of these joint ventures. Our investments in
these entities are generally accounted for using the equity method of
accounting. We are a party to several joint ventures with unrelated parties to
develop and sell land that is owned by the joint ventures. We recognize our
proportionate share of the earnings from the sale of home sites to other
builders, including our joint venture partners. We do not recognize earnings
from the home sites we purchase from these ventures at the time of our purchase;
instead, our cost basis in the home sites is reduced by our share of the
earnings realized by the joint venture from those home sites.
At October 31, 2020, we had investments in these entities of $430.7 million, and
were committed to invest or advance up to an additional $75.0 million to these
entities if they require additional funding. At October 31, 2020, we had agreed
to terms for the acquisition of 139 home sites from one Land Development Joint
Ventures for an estimated aggregate purchase price of $10.1 million. In
addition, we expect to purchase approximately 2,100 additional home sites over a
number of years from several of these joint ventures; the purchase price of
these home sites will be determined at a future date.
The unconsolidated entities in which we have investments generally finance their
activities with a combination of partner equity and debt financing. In some
instances, we have guaranteed debt of unconsolidated entities. These guarantees
may include any or all of the following: (i) project completion guarantees,
including any cost overruns; (ii) repayment guarantees, generally covering a
percentage of the outstanding loan; (iii) carry cost guarantees, which cover
costs such as interest, real estate taxes, and insurance; (iv) an environmental
indemnity provided to the lender that holds the lender harmless from and against
losses arising from the discharge of hazardous materials from the property and
non-compliance with applicable environmental laws; and (v) indemnification of
the lender from "bad boy acts" of the unconsolidated entity.
In some instances, we and our joint venture partner have provided joint and
several guarantees in connection with loans to unconsolidated entities. In these
situations, we generally seek to implement a reimbursement agreement with our
partner that provides that neither party is responsible for more than its
proportionate share or agreed-upon share of the guarantee; however, we are not
always successful. In addition, if the joint venture partner does not have
adequate financial resources to meet its obligations under such a reimbursement
agreement, we may be liable for more than our proportionate share.
We believe that as of October 31, 2020, in the event we become legally obligated
to perform under a guarantee of the obligation of an unconsolidated entity due
to a triggering event, the collateral should be sufficient to repay all or a
significant portion of the obligation. If it is not, we and our partners would
need to contribute additional capital to the entity. At October 31, 2020, we had
guaranteed the debt of certain unconsolidated entities with loan commitments
aggregating $1.51 billion, of which, if the full amount of the debt obligations
were borrowed, we estimate $229.3 million to be our maximum exposure related to
repayment and carry cost guarantees. At October 31, 2020, the unconsolidated
entities had borrowed an aggregate of $1.02 billion, of which we estimate $179.1
million to be our maximum exposure related to repayment and carry cost
guarantees. These
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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 estimated fair value. The
evaluation of our investment in unconsolidated entities entails a detailed cash
flow analysis using many estimates including but not limited to, expected sales
pace, expected sales prices, expected incentives, costs incurred and
anticipated, sufficiency of financing and capital, competition, market
conditions and anticipated cash receipts, in order to determine projected future
distributions. Each of the unconsolidated entities evaluates its inventory in a
similar manner. In addition, for our unconsolidated entities that own, develop,
and manage for-rent residential apartments, we review rental trends, expected
future expenses, and expected future cash flows to determine estimated fair
values of the underlying properties. See "Critical Accounting Policies -
Inventory" contained in this MD&A for more detailed disclosure on our evaluation
of inventory. If a valuation adjustment is recorded by an unconsolidated entity
related to its assets, our proportionate share is reflected in income from
unconsolidated entities with a corresponding decrease to our investment in
unconsolidated entities. Based upon our evaluation of the fair value of our
investments in unconsolidated entities, we recognized charges in connection with
one Home Building Joint Venture of $6.0 million in fiscal 2020; one Land
Development Joint Venture of $1.0 million in fiscal 2019; and two Land
Development Joint Ventures of $6.0 million in fiscal 2018.
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RESULTS OF OPERATIONS
The following table compares certain items in our Consolidated Statements of
Operations and Comprehensive Income and other supplemental information for
fiscal 2020, 2019 and 2018 ($ amounts in millions, unless otherwise stated). For
more information regarding results of operations by operating segment, see
"Segments" in this MD&A.
                                                                                  Years ended October 31,
                                                                                       % Change 2020                            % Change
                                                     2020               2019             vs. 2019              2018           2019 vs. 2018

Revenues: (1)
Home sales                                       $ 6,937.4          $ 7,080.4                  (2) %         7,143.3                  (1) %
Land sales and other                                 140.3              143.6                                      -
                                                   7,077.7            7,224.0                  (2) %         7,143.3                   1  %
Cost of revenues: (1)
Home sales (2)                                     5,534.1            5,534.2                   -  %         5,536.8                   -  %
Land sales and other                                 125.9              129.7                                      -
                                                   5,660.0            5,663.9                   -  %         5,536.8                   2  %
Selling, general and administrative (2)              867.4              879.2                  (1) %           820.2                   7  %
Income from operations                               550.3              680.8                 (19) %           786.2                 (13) %

Other:

Income from unconsolidated entities                    0.9               24.9                 (96) %            85.2                 (71) %
Other income - net                                    35.7               81.5                 (56) %            62.5                  30  %

Income before income taxes                           586.9              787.2                 (25) %           933.9                 (16) %
Income tax provision                                 140.3              197.2                 (29) %           185.8                   6  %
Net income                                       $   446.6          $   590.0                 (24) %           748.2                 (21) %

Supplemental information:
Home sales cost of revenues as a percentage of
home sales revenues (2)                               79.8  %            78.2  %                                77.5  %
Land sales and other cost of revenues as a
percentage of land sales and other revenues (1)       89.7  %            90.3  %
SG&A as a percentage of home sales revenues (2)       12.5  %            12.4  %                                11.5  %
Effective tax rate                                    23.9  %            25.1  %                                19.9  %

Deliveries - units                                   8,496              8,107                   5  %           8,265                  (2) %

Deliveries - average selling price (in '000s) $ 816.5 $ 873.4

                  (7) %       $   864.3                   1  %

Net contracts signed - value                     $ 7,995.1          $ 6,710.9                  19  %       $ 7,604.3                 (12) %
Net contracts signed - units                         9,932              8,075                  23  %           8,519                  (5) %
Net contracts signed - average selling price (in
'000s)                                           $   805.0          $   831.1                  (3) %       $   892.6                  (7) %

                                                                                       At October 31,
                                                                                       % Change 2020                            % Change
                                                     2020               2019             vs. 2019              2018           2019 vs. 2018
Backlog - value                                  $ 6,374.6          $ 5,257.1                  21  %       $ 5,522.5                  (5) %
Backlog - units                                      7,791              6,266                  24  %           6,105                   3  %

Backlog - average selling price (in '000s) $ 818.2 $ 839.0

                  (2) %       $   904.6                  (7) %


Note: Amounts may not add due to rounding.
(1)  On November 1, 2018, we adopted ASC 606. Upon adoption, land sale activity
is presented as part of income from operations where previously it was included
in "Other income - net." In fiscal 2018, we recognized land sales revenues and
land sales cost of revenues of $134.3 million and $128.0 million, respectively.
Further, retained customer deposits, which totaled $11.8 million and $13.2
million, in fiscal 2020 and 2019, respectively, are included in "Home sales
revenue" where previously they were included in "Other income - net." In fiscal
2018, retained customer deposits were $8.9 million. Prior periods are not
restated.
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(2)  Effective October 31, 2020, we reclassified sales commissions paid to
third-party brokers from home sales cost of revenues to selling, general and
administrative expense in our Consolidated Statements of Operations and
Comprehensive Income. The reclassification aligns the treatment of sales
commissions paid to third-party brokers with the treatment of sales commissions
paid to in-house salespersons, and is consistent with the manner in which the
majority of the Company's peers treat such commissions. The reclassification had
the effect of lowering home sales cost of revenues (and increasing home sales
gross margin) and increasing selling, general and administrative expense by the
amount of third-party broker commissions, which totaled $138.6 million, $144.7
million and $136.2 million, or 2.0%, 2.0% and 1.9% of home sales revenues, for
the years ended October 31, 2020, 2019 and 2018, respectively. All prior period
amounts have been reclassified to conform to the 2020 presentation.
FISCAL 2020 COMPARED TO FISCAL 2019
HOME SALES REVENUES AND HOME SALES COST OF REVENUES
The decrease in home sales revenues in fiscal 2020, as compared to fiscal 2019,
was attributable to a 7% decrease in the average price of the homes delivered,
offset, in part, by a 5% increase in the number of homes delivered. Consistent
with our strategy to expand geographically and by product type, the decrease in
the average delivered home price was primarily due to a shift in the number of
homes delivered to less expensive areas and/or products. The shift in the number
of homes delivered to less expensive areas and/or products in the fiscal 2020,
as compared to the fiscal 2019, was primarily related to a decrease in the
number of homes closed under our City Living brand and in Southern California,
where average prices are higher than the Company average; our strategic
expansion into more affordable luxury home and attractive high-growth markets,
which includes homes delivered in metropolitan Atlanta, Georgia and several
markets in South Carolina from the Sharp and Sabal acquisitions; and an increase
in the number of quick delivery homes delivered, where average prices are lower
than the Company average. The increase in the number of homes delivered in
fiscal 2020, as compared to fiscal 2019, was primarily due to home deliveries
resulting from the Sharp and Sabal acquisitions; an increase in homes delivered
in Northern California mainly attributable to closings at a large high-density
condominium community; and an increase in the number of quick delivery homes
delivered in fiscal 2020. These increases were partially offset by decreases in
homes delivered in Southern California and under our City Living brand,
primarily due to lower backlog at October 31, 2019, as compared to October 31,
2018.
Home sales cost of revenues, as a percentage of homes sales revenues, in fiscal
2020 was 79.8%, as compared to 78.2% in fiscal 2019. The increase in fiscal 2020
was principally due to a shift in the mix of revenues to lower margin
products/areas; higher land, land development, material and labor costs; and
higher inventory impairment charges. These increases were offset, in part, by
lower interest expense in the fiscal 2020 period, as compared to the fiscal 2019
period. Interest cost in fiscal 2020 was $174.4 million or 2.5% of home sales
revenues, as compared to $185.0 million or 2.6% of home sales revenues in fiscal
2019. We recognized inventory impairments and write-offs of $55.9 million or
0.8% of home sales revenues and $42.4 million or 0.6% of home sales revenues in
fiscal 2020 and fiscal 2019, respectively.
LAND SALES AND OTHER REVENUES AND LAND SALES AND OTHER COST OF REVENUES
Our revenues from land sales and other generally consist of the following: (1)
land sales to joint ventures in which we retain an interest; (2) lot sales to
third-party builders within our master planned communities; and (3) bulk land
sales to third parties of land we have decided no longer meets our development
criteria.
Prior to the adoption of ASC 606, land sales activity was reported within "Other
income - net" in our Consolidated Statements of Operations and Comprehensive
Income. In fiscal 2018, we recognized land sales revenues and land sales cost of
revenues of $134.3 million and $128.0 million, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A")
SG&A spending decreased by $11.8 million in fiscal 2020, as compared to fiscal
2019. As a percentage of home sales revenues, SG&A was 12.5% and 12.4% in fiscal
2020 and 2019, respectively. The dollar decrease in SG&A was due primarily to
lower sales and marketing expenses as we reduced spend following the onset of
the COVID-19 pandemic and we implemented a number of cost reduction initiatives
to improve efficiencies and rationalize overhead expenses, including workforce
reductions. Such initiatives included cancellation of discretionary benefit plan
contributions related to fiscal 2019, which resulted in the reversal of an $8.0
million accrual. The decrease in spending in fiscal 2020 was offset, in part, by
a $7.5 million charge for severance costs incurred in the second quarter of
fiscal 2020, other compensation increases, and costs related to the
implementation of new enterprise information technology systems. The increase in
SG&A as a percentage of revenues was due to a 2% decrease in revenues partially
offset by a 1% decrease in SG&A spending in fiscal 2020, as compared to fiscal
2019.
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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 interest in the joint venture, resulting in an income
producing event. Because of the long development periods associated with these
entities, the earnings recognized from these entities may vary significantly
from quarter to quarter and year to year.
The decrease in income from unconsolidated entities from $24.9 million in fiscal
2019 to $0.9 million in fiscal 2020, was due mainly to a decrease in earnings
from two Home Building Joint Ventures which delivered their last homes in fiscal
2019; $6.0 million of other-than-temporary impairment charges that we recognized
on one of our Home Building Joint Ventures in fiscal 2020; a $3.8 million gain
recognized in fiscal 2019 from an asset sale by one of our Rental Property Joint
Ventures; losses recognized by a joint venture that owns a hotel that was
adversely impacted by COVID-19; and an increase in losses in several Rental
Property Joint Ventures related to the commencement of operations and lease up
activities in fiscal 2020, as compared to fiscal 2019. The decrease was offset,
in part, by a $10.7 million gain recognized in the fiscal 2020 period from the
sale of our investment in one of our Rental Property Joint Ventures to our joint
venture partner.
OTHER INCOME - NET
The table below provides the components of "Other Income - net" for the years
ended October 31, 2020 and 2019 (amounts in thousands):
                                                                         2020              2019
Income from ancillary businesses                                      $ 25,540          $ 53,568
Management fee income from home building unconsolidated entities, net    3,636             9,948
Other                                                                    6,517            17,986
Total other income - net                                              $ 35,693          $ 81,502


The decrease in income from ancillary businesses in fiscal 2020, as compared to
fiscal 2019, was mainly due to gains recognized of $35.1 million from the sale
of seven golf clubs in fiscal 2019; higher losses incurred in our apartment
living operations; lower income from golf club operations; and $0.3 million of
severance costs in fiscal 2020, as compared to fiscal 2019. This decrease was
partially offset by gains of $13.0 million recognized in fiscal 2020 from the
sale of golf club properties and higher earnings from our mortgage company
operations primarily due to an increase in volume in fiscal 2020, as compared to
fiscal 2019.
Management fee income from home building unconsolidated entities presented above
includes fees earned by our City Living and Traditional Home Building
operations. The decrease in fiscal 2020, as compared to fiscal 2019, was
primarily related to the decrease in the number of communities. In addition to
the fees earned by our City Living and Traditional Home Building operations, in
fiscal 2020 and 2019, our apartment living operations earned fees from
unconsolidated entities of $14.0 million and $11.9 million, respectively. Fees
earned by our apartment living operations are included in income from ancillary
businesses.
The decrease in "other" in fiscal 2020, as compared to fiscal 2019, was
principally due to lower interest income earned and $2.4 million of directly
expensed interest in fiscal 2019.
INCOME BEFORE INCOME TAXES
In fiscal 2020, we reported income before income taxes of $586.9 million or 8.3%
of revenues, as compared to $787.2 million, or 10.9% of revenues in fiscal 2019.
INCOME TAX PROVISION
We recognized a $140.3 million income tax provision in fiscal 2020. Based upon
the federal statutory rate of 21.0% for fiscal 2020, our federal tax provision
would have been $123.2 million. The difference between the tax provision
recognized and the tax provision based on the federal statutory rate was mainly
due to the provision for state income taxes of $25.8 million and $4.8 million of
other permanent differences, offset, in part, by a $11.5 million benefit of
federal energy efficient home credits; a benefit of $3.3 million from excess tax
benefits related to stock-based compensation; and the reversal of $1.7 million
of
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previously accrued tax provisions on uncertain tax positions that were no longer
necessary due to the expiration of the statute of limitations.
We recognized a $197.2 million income tax provision in fiscal 2019. Based upon
the federal statutory rate of 21.0% for fiscal 2019, our federal tax provision
would have been $165.3 million. The difference between the tax provision
recognized and the tax provision based on the federal statutory rate was mainly
due to the provision for state income taxes of $37.9 million, $4.9 million of
other permanent differences, and an increase in unrecognized tax benefits of
$2.2 million, offset, in part, by the reversal of $5.3 million of previously
accrued tax provisions on uncertain tax positions that were no longer necessary
due to the expiration of the statute of limitations, a $3.1 million benefit of
federal energy efficient home credits, and a benefit of $2.1 million from excess
tax benefits related to stock-based compensation.
FISCAL 2019 COMPARED TO FISCAL 2018
HOME SALES REVENUES AND HOME SALES COST OF REVENUES
The decrease in home sales revenues in fiscal 2019, as compared to fiscal 2018,
was attributable to a 2% decrease in the number of homes delivered, offset, in
part, by a 1% increase in the average price of the homes delivered. The decrease
in the number of homes delivered was primarily due to a moderation in demand,
particularly in California, which we experienced beginning in the fourth quarter
of fiscal 2018 through the third quarter of fiscal 2019. This decrease was
partially offset by contracts we signed in the metropolitan Atlanta, Georgia
market and several markets in South Carolina in fiscal 2019 from the Sharp and
Sabal acquisitions and an increase in the number of selling communities,
primarily in our South and Mountain regions, in fiscal 2019, as compared to
fiscal 2018. The increase in the average delivered home price was mainly due to
price increases in homes delivered in the Pacific and Mountain regions and a
shift in the number of homes delivered to more expensive areas and/or products
in California, New Jersey, Virginia, Washington, and the Mountain region in
fiscal 2019, as compared to fiscal 2018. These increases were partially offset
by a shift in the number of homes delivered to less expensive areas in City
Living in fiscal 2019, as compared to fiscal 2018 and a decrease in the number
of homes delivered in California where home prices were higher, in fiscal 2019,
as compared to fiscal 2018.
Home sales cost of revenues, as a percentage of homes sales revenues, in fiscal
2019 was 78.2%, as compared to 77.5% in fiscal 2018. The increase in fiscal 2019
was primarily due to higher land, land development, material and labor costs; a
shift in the mix of our home sales revenues to lower margin products/areas; the
recovery of approximately $9.7 million from litigation settlements in fiscal
2018; a $7.0 million benefit in fiscal 2018 from the reversal of an accrual
related to an indemnification obligation related to the Shapell acquisition that
expired; and higher inventory impairment charges in fiscal 2019, as compared to
fiscal 2018. These increases were offset, in part, by a state reimbursement of
previously expensed environmental clean-up costs received in fiscal 2019; a
benefit in fiscal 2019 from the reversal of accruals for certain Home Owners
Associations ("HOA") turnovers that were no longer required; price increases in
homes delivered in California and the Mountain region; and lower interest
expense in fiscal 2019 compared to fiscal 2018.
Interest cost in fiscal 2019 was $185.0 million or 2.6% of home sales revenues,
as compared to $190.7 million or 2.7% of home sales revenues in fiscal 2018. We
recognized inventory impairments and write-offs of $42.4 million or 0.6% of home
sales revenues and $35.2 million or 0.5% of home sales revenues in fiscal 2019
and fiscal 2018, respectively.
LAND SALES AND OTHER REVENUES AND LAND SALES AND OTHER COST OF REVENUES
In fiscal 2019, we recognized a gain of $9.3 million from the sale of land to
two newly formed Rental Property Joint Ventures in which we had interests of
25%.
Prior to the adoption of ASC 606, land sales activity was reported within "Other
income - net" in our Consolidated Statements of Operations and Comprehensive
Income. In fiscal 2018, we recognized land sales revenues and land sales cost of
revenues of $134.3 million and $128.0 million, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A")
SG&A spending increased by $59.0 million in fiscal 2019 compared to fiscal 2018.
As a percentage of home sales revenues, SG&A was 12.4% and 11.5% in fiscal 2019
and 2018, respectively. The dollar increase in SG&A was due primarily to
increased compensation costs due to a higher number of employees and normal
compensation increases, increased sales and marketing costs, and costs related
to the implementation of new enterprise information technology systems. The
higher sales and marketing costs were the result of the increased number of
selling communities, increased spending on advertising, increased third-party
broker commissions, and higher design studio operating costs. The increased
number of employees was due primarily to the increase in the number of current
and future selling communities.
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INCOME FROM UNCONSOLIDATED ENTITIES
The decrease in income from unconsolidated entities from $85.2 million in fiscal
2018 to $24.9 million in fiscal 2019, was due mainly to $67.2 million of gains
recognized in fiscal 2018 from asset sales by three of our Rental Property Joint
Ventures located in College Park, Maryland, Herndon, Virginia, and Westborough,
Massachusetts, and an increase in losses in several Rental Property Join
Ventures related to the commencement of operations and lease up activities in
fiscal 2019, as compared to fiscal 2018. These decreases were offset, in part,
by a $3.8 million gain recognized in fiscal 2019 from an asset sale by one of
our Rental Property Joint Ventures located in Phoenixville, Pennsylvania; higher
earnings from two of our Home Building Joint Ventures; and a $3.0 million
decrease in impairment charges recognized in fiscal 2019 as compared to fiscal
2018.
OTHER INCOME - NET
The table below provides the components of "Other Income - net" for the years
ended October 31, 2019 and 2018 (amounts in thousands):
                                                                         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." Fiscal 2018 is 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, $4.9 million of
other permanent differences, and an increase in unrecognized tax benefits of
$2.2 million, offset, in part, by the reversal of $5.3 million of previously
accrued tax provisions on uncertain tax positions that were no longer necessary
due to the expiration of the statute of limitations, a $3.1 million benefit of
federal energy efficient home credits, and a benefit of $2.1 million from excess
tax benefits related to stock-based compensation.
We recognized a $185.8 million income tax provision in fiscal 2018. Based upon
the blended federal statutory rate of 23.3% for fiscal 2018, our federal tax
provision would have been $217.9 million. The difference between the tax
provision recognized and the tax provision based on the federal statutory rate
was mainly due to tax law changes of $38.7 million; a benefit of $18.2 million
related to the utilization of domestic production activities deductions; the
reversal of $4.7 million of previously accrued
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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; a $3.2 million benefit of federal energy efficient
home credits; and $12.0 million of permanent and other differences, which
primarily relates to tax planning transactions that benefited the Company's
state net operating loss carryforwards, offset, in part, by the provision for
state income taxes of $47.1 million. See Note 8, "Income Taxes" in Item 15(a)1
of this Form 10-K for additional information regarding the impact of the Tax
Act.
CAPITAL RESOURCES AND LIQUIDITY
Funding for our business has been, and continues to be, provided principally by
cash flow from operating activities before inventory additions, unsecured bank
borrowings, and the public debt markets.
Fiscal 2020
At October 31, 2020, we had $1.37 billion of cash and cash equivalents on hand
and approximately $1.79 billion available for borrowing under our Revolving
Credit Facility.
Cash provided by operating activities during fiscal 2020 was $1.01 billion. Cash
provided by operating activities was generated primarily from $446.6 million of
net income plus $24.3 million of stock-based compensation, $68.9 million of
depreciation and amortization, $55.9 million of inventory impairments and
write-offs, and a net deferred tax benefit of $97.8 million; a $352.9 million
decrease in inventory; an increase of $71.8 million in accounts payable and
accrued expenses; and an increase of $70.4 million in net customer deposits.
This activity was offset, in part, by an increase of $176.3 million in
receivables, prepaid assets, and other assets and an increase of $9.5 million in
mortgage loans held for sale.
Cash used in investing activities during fiscal 2020 was $177.8 million,
primarily related to $109.6 million for the purchase of property and equipment;
$71.7 million used to fund investments in unconsolidated entities; and $60.3
million used to acquire Thrive. This activity was offset, in part, by $49.2
million of cash received as returns on our investments in unconsolidated
entities, foreclosed real estate, and distressed loans and proceeds of $15.6
million of cash received from sales of a golf club property.
We used $753.3 million of cash from financing activities in fiscal 2020,
primarily for the repurchase of $634.1 million of our common stock; repayments
of $85.8 million of other loans payable, net of new borrowings; and payment of
$56.6 million of dividends on our common stock, offset, in part, by the proceeds
of $24.9 million from our stock-based benefit plans.
Fiscal 2019
At October 31, 2019, we had $1.29 billion of cash and cash equivalents on hand
and approximately $1.73 billion available for borrowing under our Revolving
Credit Facility.
Cash provided by operating activities during fiscal 2019 was $437.7 million. It
was generated primarily from $590.0 million of net income plus $26.2 million of
stock-based compensation, $72.1 million of depreciation and amortization, $42.4
million of inventory impairments and write-offs, and a net deferred tax benefit
of $102.8 million; offset, in part, by a $40.2 million increase in inventory; an
increase of $185.3 million in receivables, prepaid assets, and other assets; an
increase of $45.6 million in mortgage loans held for sale; and a decrease of
$64.5 million in accounts payable and accrued expenses.
Cash used in investing activities during fiscal 2019 was $75.9 million,
primarily related to $162.4 million used to acquire Sharp and Sabal; $87.0
million for the purchase of property and equipment; and $556.6 million used to
fund investments in unconsolidated entities. This activity was offset, in part,
by $151.1 million of cash received as returns on our investments in
unconsolidated entities, foreclosed real estate, and distressed loans and
proceeds of $79.6 million of cash received from sales of golf club properties
and an office building in several separate transactions with unrelated third
parties.
We used $258.5 million of cash from financing activities in fiscal 2019,
primarily for the repayment of $600.0 million of senior notes; the repurchase of
$233.5 million of our common stock; and payment of $63.6 million of dividends on
our common stock, offset, in part, by the net proceeds of $396.4 million from
the issuance of $400.0 million aggregate principal amount of 3.80% Senior Notes
due 2029; borrowings of $227.4 million of other loans payable, net of new
repayments; and the proceeds of $17.4 million from our stock-based benefit
plans.
Other
In general, our cash flow from operating activities assumes that, as each home
is delivered, we will purchase a home site to replace it. Because we own a
supply of several years of home sites, we do not need to buy home sites
immediately to replace those that we deliver. In addition, we generally do not
begin construction of our detached homes until we have a signed contract with
the home buyer. Should our business decline, we believe that our inventory
levels would decrease as we complete and
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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 quick delivery homes that are then 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. During fiscal 2020, in response to the economic
disruption and uncertainty caused by the COVID-19 pandemic, we significantly
reduced spending on new land acquisitions and land development in our second
fiscal quarter. We have since resumed a more normal level of land acquisition
and development spending. At October 31, 2020, we owned or controlled through
options approximately 63,200 home sites, as compared to approximately 59,200 at
October 31, 2019; and approximately 53,400 at October 31, 2018. Of the
approximately 63,200 home sites owned or controlled through options at
October 31, 2020, we owned approximately 36,100. Of our owned home sites at
October 31, 2020, significant improvements were completed on approximately
16,600 of them.
At October 31, 2020, the aggregate purchase price of land parcels under option
and purchase agreements was approximately $2.64 billion (including $10.1 million
of land to be acquired from joint ventures in which we have invested). Of the
$2.64 billion of land purchase commitments, we had paid or deposited $223.6
million and, if we acquire all of these land parcels, we will be required to pay
an additional $2.42 billion. The purchases of these land parcels are scheduled
over the next several years. In addition, we expect to purchase approximately
2,100 additional home sites over a number of years from several of these joint
ventures. We have additional land parcels under option that have been excluded
from the aforementioned aggregate purchase amounts since we do not believe that
we will complete the purchase of these land parcels and no additional funds will
be required from us to terminate these contracts.
During the past several years, we have made a number of investments in
unconsolidated entities related to the acquisition and development of land for
future home sites, the construction of luxury for-sale condominiums, and
for-rent apartments. Our investment activities related to investments in, and
distributions of investments from, unconsolidated entities are contained in the
Consolidated Statements of Cash Flows under "Net cash (used in) provided by
investing activities." At October 31, 2020, we had investments in these entities
of $430.7 million, and were committed to invest or advance up to an additional
$75.0 million to these entities if they require additional funding. At
October 31, 2020, we had purchase commitments to acquire land for apartment
developments of approximately $111.3 million, of which we had outstanding
deposits in the amount of $6.5 million. We generally intend to develop these
apartment projects in joint ventures with unrelated parties in the future.
We have a $1.905 billion, unsecured, five-year revolving credit facility that
was scheduled to expire on November 1, 2024. On October 31, 2020, we entered
into extension letter agreements (the "Revolver Extension Agreements") with
respect to the Revolving Credit Facility. In connection with the Revolver
Extension Agreements, the Company extended the maturity date of $1.85 billion of
the revolving loans and commitments under the Revolving Credit Agreement from
November 1, 2024 to November 1, 2025, with the remainder of the revolving loans
and commitments continuing to terminate on November 1, 2024. Under the terms of
the Revolving Credit Facility, our maximum leverage ratio (as defined in the
credit agreement) may not exceed 1.75 to 1.00 and we are required to maintain a
minimum tangible net worth (as defined in the credit agreement) of no less than
approximately $2.25 billion. Under the terms of the Revolving Credit Facility,
at October 31, 2020, our leverage ratio was approximately 0.49 to 1.00 and our
tangible net worth was approximately $4.81 billion. Based upon the minimum
tangible net worth requirement, our ability to repurchase our common stock was
limited to approximately $3.18 billion as of October 31, 2020. At October 31,
2020, we had no outstanding borrowings under the Revolving Credit Facility and
had outstanding letters of credit of approximately $119.0 million.
At October 31, 2020, we had an $800.0 million, five-year senior unsecured term
loan facility (the "Term Loan Facility") with a syndicate of banks. On October
31, 2020, we entered into term loan extension agreements with the banks which
extended the maturity date of all $800 million of outstanding term loans under
the Term Loan Facility from November 1, 2024 to November 1, 2025, with no
principal payments being required before the maturity date.
In November 2020, we entered into five interest rate swap transactions to hedge
$400.0 million of the Term Loan Facility through October 2025. The interest rate
swaps effectively fix the interest cost on the $400.0 million at 0.369% plus the
spread set forth in the pricing schedule in the Term Loan Facility, which was
1.3% as of October 31, 2020. These interest rate swaps were designated as cash
flow hedges.
We believe that we will have adequate resources and sufficient access to the
capital markets and external financing sources to continue to fund our current
operations and meet our contractual obligations. Due to the uncertainties in the
economy and for home builders in general, we cannot be certain that we will be
able to replace existing financing or find sources of additional financing in
the future.

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INFLATION

The long-term impact of inflation on us is manifested in increased costs for
land, land development, construction, and overhead. We generally enter into
contracts to acquire land a significant period of time before development and
sales efforts begin. Accordingly, to the extent land acquisition costs are
fixed, subsequent increases or decreases in the sales prices of homes will
affect our profits. Because the sales price of each of our homes is fixed at the
time a buyer enters into a contract to purchase a home and because we generally
contract to sell our homes before we begin construction, any inflation of costs
in excess of those anticipated may result in lower gross margins. We generally
attempt to minimize that effect by entering into fixed-price contracts with our
subcontractors and material suppliers for specified periods of time, which
generally do not exceed one year.
In general, housing demand is adversely affected by increases in interest rates
and housing costs. Interest rates, the length of time that land remains in
inventory, and the proportion of inventory that is financed affect our interest
costs. If we are unable to raise sales prices enough to compensate for higher
costs, or if mortgage interest rates increase significantly, affecting
prospective buyers' ability to adequately finance home purchases, our home sales
revenues, gross margins, and net income could be adversely affected. Increases
in sales prices, whether the result of inflation or demand, may affect the
ability of prospective buyers to afford new homes.
CONTRACTUAL OBLIGATIONS
The following table summarizes our estimated contractual payment obligations at
October 31, 2020 (amounts in millions):
                                    2021             2022 - 2023           2024 - 2025          Thereafter            Total
Senior notes (a)                $   127.8          $    1,023.9          $      396.1          $  1,733.4          $ 3,281.2
Loans payable (a)                   136.7                 128.4                 148.8               874.6            1,288.5
Mortgage company loan facility
(a)(b)                              150.1                     -                     -                   -              150.1
Operating lease obligations          19.9                  33.7                  22.5               204.5              280.6
Purchase obligations (c)          1,487.2                 935.5                 255.1               234.0            2,911.8
Retirement plans (d)                 13.3                  16.9                  16.9                61.9              109.0
                                $ 1,935.0          $    2,138.4          $      839.4          $  3,108.4          $ 8,021.2


(a)Amounts include estimated annual interest payments until maturity of the
debt. Of the amounts indicated, $2.66 billion of the senior notes, $1.15 billion
of loans payable, $148.6 million of the mortgage company loan facility, and
$38.4 million of accrued interest were recorded on our October 31, 2020
Consolidated Balance Sheet.
(b)In December 2020, we amended the mortgage company warehousing agreement to,
among other things, extend the maturity date to January 18, 2021.
(c)Amounts represent our expected acquisition of land under purchase agreements
and the estimated remaining amount of the contractual obligation for land
development agreements secured by letters of credit and surety bonds. Of the
total amount indicated, $19.6 million was recorded on our October 31, 2020
Consolidated Balance Sheet.
(d)Amounts represent our obligations under our deferred compensation plan,
supplemental executive retirement plans and our 401(k) salary deferral savings
plans. Of the total amount indicated, $89.9 million was recorded on our
October 31, 2020 Consolidated Balance Sheet.

SUPPLEMENTAL GUARANTOR INFORMATION
At October 31, 2020, our 100%-owned subsidiary, Toll Brothers Finance Corp. (the
"Subsidiary Issuer"), had issued and outstanding $2.66 billion aggregate
principal amount of senior notes maturing on various dates between February 15,
2022 and November 1, 2029 (the "Senior Notes"). For further information
regarding the Senior Notes, see Note 6 to our Consolidated Financial Statements
under the caption "Senior Notes."
The obligations of the Subsidiary Issuer to pay principal, premiums, if any, and
interest are guaranteed jointly and severally on a senior basis by us and
substantially all of our 100%-owned home building subsidiaries (the "Guarantor
Subsidiaries" and, together with us, the "Guarantors"). The guarantees are full
and unconditional, and the Subsidiary Issuer and each of the Guarantor
Subsidiaries are consolidated subsidiaries of Toll Brothers, Inc. Our non-home
building subsidiaries and several of our home building subsidiaries (together,
the "Non-Guarantor Subsidiaries") do not guarantee the Senior Notes. The
Subsidiary Issuer generates no operating revenues and does not have any
independent operations other than the financing of our other subsidiaries by
lending the proceeds of its public debt offerings, including the Senior Notes.
Our home building operations are conducted almost entirely through the Guarantor
Subsidiaries. Accordingly, the Subsidiary Issuer's cash flow and ability to
service the Senior Notes is dependent upon the earnings of the Company's
subsidiaries and the distribution of those earnings to the Subsidiary Issuer,
whether by dividends, loans or otherwise. Holders of the Senior Notes have a
direct claim only against
                                       38
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the Subsidiary Issuer and the Guarantors. The obligations of the Guarantors
under their guarantees will be limited as necessary to recognize certain
defenses generally available to guarantors (including those that relate to
fraudulent conveyance or transfer, voidable preference or similar laws affecting
the rights of creditors generally) under applicable law.
The indentures under which the Senior Notes were issued provide that any of our
subsidiaries that provide a guarantee of our obligations under the Revolving
Credit Facility will guarantee the Senior Notes. The indentures further provide
that any Guarantor Subsidiary may be released from its guarantee so long as (i)
no default or event of default exists or would result from release of such
guarantee; (ii) the Guarantor Subsidiary being released has consolidated net
worth of less than 5% of the Company's consolidated net worth as of the end of
our most recent fiscal quarter; (iii) the Guarantor Subsidiaries released from
their guarantees in any fiscal year comprise in the aggregate less than 10% (or
15% if and to the extent necessary to permit the cure of a default) of our
consolidated net worth as of the end of our most recent fiscal quarter; (iv)
such release would not have a material adverse effect on ours and our
subsidiaries' home building business; and (v) the Guarantor Subsidiary is
released from its guaranty under the Revolving Credit Facility. If there are no
guarantors under the Revolving Credit Facility, all Guarantor Subsidiaries under
the indentures will be released from their guarantees.
In March 2020, the SEC adopted amendments to Rule 3-10 of Regulation S-X, under
Rule Release No. 33-10762, Financial Disclosures about Guarantors and Issuers of
Guaranteed Securities and Affiliates Whose Securities Collateralize a
Registrant's Securities ("Rule 33-10762"), that reduce and simplify the
financial disclosure requirements applicable to SEC-registered debt offerings
for guarantors and issuers of guaranteed debt securities (which we previously
included within the notes to our consolidated financial statements in our Annual
Reports on Form 10-K and Quarterly Reports on Form 10-Q). While amendments under
Rule 33-10762 are effective January 4, 2021, voluntary compliance is permitted
in advance of the effective date, and we have adopted the new disclosure
requirements for the period ending October 31, 2020.
The following summarized financial information is presented for Toll Brothers,
Inc., the Subsidiary Issuer, and the Guarantor Subsidiaries on a combined basis
after intercompany transactions and balances have been eliminated among Toll
Brothers, Inc., the Subsidiary Issuer and the Guarantor Subsidiaries, as well as
their investment in, and equity in earnings from the Non-Guarantor Subsidiaries.
Summarized Balance Sheet Data (amounts in millions)
                                                October 31, 2020

Assets

Cash                                         $         1,235.3
Inventory                                    $         7,596.9
Amount due from Nonguarantor Subsidiaries    $           671.1
Total assets                                 $        10,193.6

Liabilities & Stockholders' Equity
Loans payable                                $         1,110.3
Senior notes                                 $         2,661.7
Total liabilities                            $         5,575.0
Stockholders' equity                         $         4,618.6

Summarized Statement of Operations Data (amounts in millions)

                                                  For the
                                        year ended October 31, 2020
Revenues                               $                   6,962.1
Cost of revenues                       $                   5,554.2
Selling, general and administrative    $                     863.8
Income before income taxes             $                     571.9
Net income                             $                     435.2



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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. In the first quarter of fiscal
2020, we made certain changes to our Traditional Home Building regional
management structure and realigned certain of the states falling among our five
geographic segments, as follows:
Eastern Region:
•The North region: Connecticut, Delaware, Illinois, Massachusetts, Michigan,
Pennsylvania, New Jersey and New York;
•The Mid-Atlantic region: Georgia, Maryland, North Carolina, Tennessee and
Virginia;
•The South region: Florida, South Carolina and Texas;
Western Region:
•The Mountain region: Arizona, Colorado, Idaho, Nevada and Utah; and
•The Pacific region: California, Oregon and Washington.
Previously, our geographic segments were:
•North: Connecticut, Illinois, Massachusetts, Michigan, New Jersey and New York;
•Mid-Atlantic: Delaware, Maryland, Pennsylvania and Virginia;
•South: Florida, Georgia, North Carolina, South Carolina and Texas;
•West: Arizona, Colorado, Idaho, Nevada, Oregon, Utah and Washington; and
•California: California.
Our new geographic reporting segments are consistent with how our chief
operating decision makers are assessing operating performance and allocating
capital following the realignment of the regional management structure. The
realignment did not have any impact on our consolidated financial position,
results of operations, earnings per share or cash flows. Prior period segment
information was restated to conform to the new reporting structure.
The following tables summarize information related to revenues, net contracts
signed, and income (loss) before income taxes by segment for fiscal years 2020,
2019, and 2018. Information related to backlog and assets by segment at
October 31, 2020 and 2019, has also been provided.
Units Delivered and Revenues:
                                                                                                      Fiscal 2020 Compared to Fiscal 2019
                                                       Revenues                                                                                                        Average Delivered Price
                                                   ($ in millions)                                             Units Delivered                                             ($ in thousands)
                                     2020               2019              % Change               2020               2019              % Change               2020                2019              % Change
                                                      Restated                                                    Restated                                                     Restated
Traditional Home Building:
North                            $ 1,364.8          $ 1,484.4                   (8) %             2,010             2,223                  (10) %       $      679.0          $  667.7                    2  %
Mid-Atlantic                         845.6              804.4                    5  %             1,271             1,237                    3  %              665.3             650.3                    2  %
South                              1,041.2              991.9                    5  %             1,566             1,298                   21  %              664.9             764.2                  (13) %
Mountain                           1,535.8            1,130.9                   36  %             2,219             1,711                   30  %              692.1             661.0                    5  %
Pacific                            2,029.9            2,416.6                  (16) %             1,334             1,434                   (7) %            1,521.7           1,685.2                  (10) %
   Traditional Home Building       6,817.3            6,828.2                    -  %             8,400             7,903                    6  %              811.6             864.0                   (6) %
City Living                          120.9              253.2                  (52) %                96               204                  (53) %            1,259.4           1,241.1                    1  %
Other                                 (0.8)              (1.0)
Total home sales revenue           6,937.4          $ 7,080.4                   (2) %             8,496             8,107                    5  %       $      816.5          $  873.4                   (7) %
Land sales and other revenue         140.3              143.6
Total revenue                    $ 7,077.7          $ 7,224.0




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                                                                                                      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
                                   Restated           Restated                                 Restated           Restated                                 Restated            Restated
Traditional Home Building:
North                            $ 1,484.4          $ 1,517.9                   (2) %             2,223             2,259                   (2) %       $      667.7          $  671.9                   (1) %
Mid-Atlantic                         804.4              775.7                    4  %             1,237             1,271                   (3) %              650.3             610.3                    7  %
South                                991.9              868.6                   14  %             1,298             1,114                   17  %              764.2             779.7                   (2) %
Mountain                           1,130.9            1,126.6                    -  %             1,711             1,797                   (5) %              661.0             626.9                    5  %
Pacific                            2,416.6            2,533.5                   (5) %             1,434             1,655                  (13) %            1,685.2           1,530.8                   10  %
   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  %            1,241.1           1,899.4                  (35) %
Other                                 (1.0)
Total home sales revenue           7,080.4            7,143.3                   (1) %             8,107             8,265                   (2) %       $      873.4          $  864.3                    1  %
Land sales and other revenue         143.6
Total revenue                    $ 7,224.0          $ 7,143.3



Net Contracts Signed:
                                                                                                      Fiscal 2020 Compared to Fiscal 2019
                                                  Net Contract Value                                                                                                    Average Contracted Price
                                                   ($ in millions)                                           Net Contracted Units                                           ($ in thousands)
                                     2020               2019              % Change               2020                2019              % Change               2020                2019              % Change
                                                      Restated                                                     Restated                                                     Restated
Traditional Home Building:
North                            $ 1,552.4          $ 1,511.7                    3  %              2,174             2,267                   (4) %       $      714.1          $  666.8                    7  %
Mid-Atlantic                       1,075.3              772.5                   39  %              1,473             1,159                   27  %              730.0             666.5                   10  %
South                              1,320.1              941.0                   40  %              2,006             1,307                   53  %              658.1             720.0                   (9) %
Mountain                           2,008.2            1,456.2                   38  %              2,802             2,097                   34  %              716.7             694.4                    3  %
Pacific                            1,929.6            1,804.8                    7  %              1,404             1,095                   28  %            1,374.4           1,648.2                  (17) %
   Traditional Home Building       7,885.6            6,486.2                   22  %              9,859             7,925                   24  %              799.8             818.4                   (2) %
City Living                          109.5              224.7                  (51) %                 73               150                  (51) %            1,500.0           1,498.0                    -  %
Total                            $ 7,995.1          $ 6,710.9                   19  %              9,932             8,075                   23  %       $      805.0          $  831.1                   (3) %




                                                                                                      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
                                   Restated           Restated                                 Restated            Restated                                 Restated            Restated
Traditional Home Building:
North                            $ 1,511.7          $ 1,511.3                    -  %              2,267             2,247                    1  %       $      666.8          $  672.6                   (1) %
Mid-Atlantic                         772.5          $   759.5                    2  %              1,159             1,176                   (1) %              666.5             645.8                    3  %
South                                941.0          $   948.3                   (1) %              1,307             1,212                    8  %              720.0             782.4                   (8) %
Mountain                           1,456.2          $ 1,229.6                   18  %              2,097             1,871                   12  %              694.4             657.2                    6  %
Pacific                            1,804.8          $ 2,877.8                  (37) %              1,095             1,830                  (40) %            1,648.2           1,572.6                    5  %
   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) %            1,498.0           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, 2020 Compared to October 31, 2019
                                                     Backlog Value                                                                                                         Average Backlog Price
                                                    ($ in millions)                                               Backlog Units                                               ($ in thousands)
                                      2020                 2019              % Change              2020              2019              % Change                 2020                  2019              % Change
                                                         Restated                                                  Restated                                                         Restated
Traditional Home Building:
North                           $     1,369.1          $ 1,179.6                   16  %           1,906             1,742                    9  %       $     718.3               $  677.2                    6  %
Mid-Atlantic                            770.4              535.3                   44  %             990               784                   26  %             778.2                  682.7                   14  %
South                                 1,038.4              757.3                   37  %           1,488             1,048                   42  %             697.9                  722.6                   (3) %
Mountain                              1,670.7            1,150.9                   45  %           2,274             1,606                   42  %             734.7                  716.6                    3  %
Pacific                               1,387.1            1,484.4                   (7) %           1,044               974                    7  %           1,328.6                1,524.0                  (13) %
   Traditional Home Building          6,235.7            5,107.5                   22  %           7,702             6,154                   25  %             809.6                  829.9                   (2) %
City Living                             138.9              149.6                   (7) %              89               112                  (21) %           1,560.3                1,335.6                   17  %
Total                           $     6,374.6          $ 5,257.1                   21  %           7,791             6,266                   24  %       $     818.2               $  839.0                   (2) %




                                                                                                       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
                                     Restated             Restated                                   Restated             Restated                                   Restated              Restated
Traditional Home Building:
North                            $     1,179.6          $ 1,150.1                    3  %                 1,742             1,698                    3  %       $     677.2               $  677.3                    -  %
Mid-Atlantic                             535.3              500.1                    7  %                   784               737                    6  %             682.7                  678.6                    1  %
South                                    757.3              780.3                   (3) %                 1,048               971                    8  %             722.6                  803.6                  (10) %
Mountain                               1,150.9              823.8                   40  %                 1,606             1,220                   32  %             716.6                  675.3                    6  %
Pacific                                1,484.4            2,090.6                  (29) %                   974             1,313                  (26) %           1,524.0                1,592.2                   (4) %
   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):

                                                                                 % Change 2020                             % Change
                                                2020             2019              vs. 2019              2018            2019 vs. 2018
                                                               Restated                                Restated
Traditional Home Building:
North                                        $  57.8          $   81.4                   (29) %       $   98.2                   (17) %
Mid-Atlantic                                    50.6              50.7                     -  %           59.3                   (15) %
South                                          108.4             106.1                     2  %           99.9                     6  %
Mountain                                       167.7             113.0                    48  %          136.2                   (17) %
Pacific                                        352.8             509.8                   (31) %          571.4                   (11) %
Traditional Home Building                      737.3             861.0                   (14) %          965.0                   (11) %
City Living                                     29.7              70.1                   (58) %           78.1                   (10) %
Corporate and other                           (180.1)           (143.9)                  (25) %         (109.2)                  (32) %
Total                                        $ 586.9          $  787.2                   (25) %       $  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.
                                       42
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Total Assets ($ amounts in millions):

                                                     At October 31,
                                                  2020            2019
                                                               (Restated)
                Traditional Home Building:
                North                         $  1,427.5      $  1,487.0
                Mid-Atlantic                       918.6           854.5
                South                            1,177.0         1,166.0
                Mountain                         1,961.3         1,769.6
                Pacific                          2,226.7         2,627.4
                Traditional Home Building        7,711.1         7,904.5
                City Living                        539.8           529.5
                Corporate and other              2,814.8         2,394.1
                Total                         $ 11,065.7      $ 10,828.1


"Corporate and other" is comprised principally of cash and cash equivalents,
restricted cash, income taxes receivable, investments in properties held for
rental apartments, expected recoveries from insurance carriers and suppliers,
our Gibraltar investments and operations, manufacturing facilities, and our
mortgage and title subsidiaries.
FISCAL 2020 COMPARED TO FISCAL 2019 (Restated)
Traditional Home Building
North
                                                                               Year ended October 31,
                                                                   2020                2019               % Change
Units Delivered and Home Sales Revenues:
Home sales revenues ($ in millions)                            $  1,364.8          $ 1,484.4                     (8) %
Units delivered                                                     2,010              2,223                    (10) %
Average delivered price ($ in thousands)                       $    679.0          $   667.7                      2  %

Net Contracts Signed:
Net contract value ($ in millions)                             $  1,552.4          $ 1,511.7                      3  %
Net contracted units                                                2,174              2,267                     (4) %
Average contracted price ($ in thousands)                      $    714.1          $   666.8                      7  %

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

                                                             86.3  %            84.9  %

Income before income taxes ($ in millions)                     $     57.8          $    81.4                    (29) %

Number of selling communities at October 31,                           70                 86                    (19) %


The decrease in the number of homes delivered in fiscal 2020 was mainly due to
lower backlog conversion, which reflected difficulties in delivering homes
following the institution of COVID-19 related government restrictions in many
markets in the North region, and a decrease in the number of homes sold and
settled in fiscal 2020, as compared to fiscal 2019. The increase in the average
price of homes delivered in fiscal 2020 was due primarily to a shift in the
number of homes delivered to more expensive areas and/or products in fiscal
2020, as compared to fiscal 2019.
The decrease in the number of net contracts signed in fiscal 2020, as compared
to fiscal 2019, was principally due to a decrease in the average number of
selling communities, offset, in part, by an increase in demand in fiscal 2020,
as compared to fiscal 2019. The increase in the average value of each contract
signed in fiscal 2020, as compared to fiscal 2019, was mainly due to shifts in
the number of contracts signed to more expensive areas and/or products and price
increases.
The decrease in income before income taxes in fiscal 2020 was principally
attributable to higher home sales cost of revenues, as a percentage of home sale
revenues and lower earnings from decreased home sales revenues. The increase in
home sales cost of revenues, as a percentage of home sales revenues, in fiscal
2020, as compared to fiscal 2019, was primarily due to higher land,
                                       43
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land development, and material and labor costs; higher impairment charges; and a
shift in product mix/areas to lower-margin areas.
Inventory impairment charges were $28.4 million in fiscal 2020, as compared to
$25.5 million in fiscal 2019. In the fourth quarter of fiscal 2020, we changed
our strategy with respect to our land in the Delaware beach markets and the
Chicago market. As a result, the carrying values of our land and communities
were written down to their estimated fair values, which resulted in a charge to
income before income taxes of $18.0 million in fiscal 2020. In addition, in the
fourth quarter of fiscal 2020, due to a loss in lot density at one community
located in New Jersey, the carrying value was written down to its estimated fair
value, which resulted in a charge to income of $6.4 million.
Mid-Atlantic
                                                                               Year ended October 31,
                                                                    2020                2019              % Change
Units Delivered and Home Sales Revenues:
Home sales revenues ($ in millions)                            $      845.6          $ 804.4                      5  %
Units delivered                                                       1,271            1,237                      3  %
Average delivered price ($ in thousands)                       $      665.3          $ 650.3                      2  %

Net Contracts Signed:
Net contract value ($ in millions)                             $    1,075.3          $ 772.5                     39  %
Net contracted units                                                  1,473            1,159                     27  %
Average contracted price ($ in thousands)                      $      730.0          $ 666.5                     10  %

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

                                                               83.6 

% 83.4 %

Income (loss) before income taxes ($ in millions)              $       50.6          $  50.7                      -  %

Number of selling communities at October 31,                             39               41                     (5) %


The increase in the number of homes delivered in fiscal 2020, as compared to
fiscal 2019, was mainly due to the delivery of homes in metropolitan Atlanta,
Georgia from the Sharp acquisition, offset, in part, by fewer homes in backlog
at October 31, 2019 (excluding Sharp homes), as well as production delays
stemming from COVID-19 and related government restrictions. The increase in the
average price of homes delivered in fiscal 2020, as compared to fiscal 2019, was
primarily due a shift in the number of homes delivered to more expensive areas
and/or products in Virginia partially offset by an increase in the number of
homes delivered in Georgia, where average prices were significantly lower than
the average in the Mid-Atlantic region.
The increase in the number of net contracts signed in fiscal 2020, as compared
to fiscal 2019, was principally due to an increase in contracts resulting from
the Sharp and Thrive acquisitions, and an increase in demand offset, in part, by
a decrease in the average number of selling communities in Maryland. The
increase in the average value of each contract signed in fiscal 2020, as
compared to fiscal 2019, were mainly due to shifts in the number of contracts
signed to more expensive areas and/or products primarily in North Carolina,
Maryland and Virginia, and price increases in fiscal 2020, offset, in part by an
increase in contracts signed in Georgia.
The decrease in income before income taxes in fiscal 2020, as compared to fiscal
2019, was mainly due to higher impairment charges partially offset by other
lower home sales costs of revenues, as a percentage of home sale revenues, and
higher earnings on increased home sales revenues, in fiscal 2020. The decrease
in home sales costs of revenues (other than inventory impairments), as a
percentage of home sale revenues, in fiscal 2020 was primarily due to a shift in
product mix/areas to higher-margin areas.
Inventory impairment charges were $17.9 million and $1.5 million in fiscal 2020
and 2019, respectively. In our second quarter of fiscal 2020, following the
onset of the COVID-19 pandemic, we terminated a land purchase agreement in
Virginia and wrote-off the deposits and soft costs incurred. In addition, in the
three months ended July 31, 2020, we decided to sell the remaining lots in one
community located in Maryland in a bulk sale rather than sell and construct
homes. As a result, we wrote down the carrying value of inventory in this
community to its estimated fair value. These actions resulted in impairment
charges of $13.5 million in fiscal 2020.
                                       44
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South
                                                                               Year ended October 31,
                                                                    2020                2019              % Change
Units Delivered and Home Sale Revenues:
Home sales revenues ($ in millions)                            $    1,041.2          $ 991.9                      5  %
Units delivered                                                       1,566            1,298                     21  %
Average delivered price ($ in thousands)                       $      664.9          $ 764.2                    (13) %

Net Contracts Signed:
Net contract value ($ in millions)                             $    1,320.1          $ 941.0                     40  %
Net contracted units                                                  2,006            1,307                     53  %
Average contracted price ($ in thousands)                      $      658.1          $ 720.0                     (9) %

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

                                                               79.9 

% 81.1 %

Income before income taxes ($ in millions)                     $      108.4          $ 106.1                      2  %

Number of selling communities at October 31,                             67               72                     (7) %


The increase in the number of homes delivered in fiscal 2020, as compared to
fiscal 2019, was mainly due to the delivery of homes in several markets in South
Carolina from the Sabal acquisition and an increase in homes sold and settled in
fiscal 2020, as compared to fiscal 2019. The decrease in the average price of
homes delivered in fiscal 2020, as compared to fiscal 2019, was primarily due to
a shift in the number of homes delivered to less expensive areas and/or products
mainly due to homes delivered in South Carolina, where average prices were
significantly lower than the average of the South region.
The increase in the number of net contracts signed in fiscal 2020, as compared
to fiscal 2019, was mainly due to net contracts we signed in several markets in
South Carolina due to the Sabal acquisition and an increase in demand. The
decrease in the average value of each contract signed was mainly due to
contracts signed in South Carolina resulting from the Sabal acquisition, where
average prices are significantly lower than the regional average, and to shifts
in the number of contracts signed to less expensive areas and/or products
primarily in Florida and Texas, offset, in part, by price increases.
The increase in income before income taxes in fiscal 2020, as compared to fiscal
2019, was principally due to higher earnings from increased home sales revenues
and lower home sales costs of revenues, as a percentage of home sales revenues,
offset, in part, by lower joint venture and management fee income from one Home
Building Joint Venture that delivered its last home in the third quarter of
fiscal 2019. The decrease in home sales cost of revenues, as a percentage of
home sales revenues, was mainly due to a shift in product mix/areas to
higher-margin areas and lower inventory impairment changes in fiscal 2020, as
compared to fiscal 2019. Inventory impairment charges were $2.9 million and $8.5
million in fiscal 2020 and 2019, respectively.
Mountain
                                                                               Year ended October 31,
                                                                   2020                2019               % Change
Units Delivered and Home Sales Revenues:
Home sales revenues ($ in millions)                            $  1,535.8          $ 1,130.9                     36  %
Units delivered                                                     2,219              1,711                     30  %
Average delivered price ($ in thousands)                       $    692.1          $   661.0                      5  %

Net Contracts Signed:
Net contract value ($ in millions)                             $  2,008.2          $ 1,456.2                     38  %
Net contracted units                                                2,802              2,097                     34  %
Average contracted price ($ in thousands)                      $    716.7          $   694.4                      3  %

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

                                                             79.2  %            78.9  %

Income before income taxes ($ in millions)                     $    167.7          $   113.0                     48  %

Number of selling communities at October 31,                           94                 79                     19  %


                                       45
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The increase in the number of homes delivered in fiscal 2020, as compared to
fiscal 2019, was mainly due to an increase in the number of homes in backlog at
October 31, 2019, as compared to the number of homes in backlog at October 31,
2018, and an increase in the number of homes sold and settled in fiscal 2020.
The increase in the average price of homes delivered in fiscal 2020, as compared
to fiscal 2019, was primarily due to an increase in the number of homes settled
in Arizona, Nevada and Utah, where average prices were higher than the regional
average. This increase was partially offset by an increase in the number of home
delivered in Idaho, where average prices were significantly lower than the
regional average.
The increase in the number of net contracts signed in fiscal 2020, as compared
to fiscal 2019, was principally due to increased demand and an increase in the
average number of selling communities. The increases in the average value of
each contract signed in fiscal 2020, as compared to fiscal 2019, was mainly due
to shifts in the number of contracts signed to more expensive areas and/or
products and price increases.
The increase in income before income taxes in fiscal 2020, as compared to fiscal
2019, was mainly due to higher earnings from increased revenues offset, in part,
by higher home sales cost of revenues, as a percentage of home sales revenues.
The increase in home sales cost of revenues, as a percentage of home sales
revenues, was primarily due to a shift in product mix/areas to lower-margin
areas.
Pacific
                                                                               Year ended October 31,
                                                                   2020                2019               % Change
Units Delivered and Home Sales Revenues:
Home sales revenues ($ in millions)                            $  2,029.9          $ 2,416.6                    (16) %
Units delivered                                                     1,334              1,434                     (7) %
Average delivered price ($ in thousands)                       $  1,521.7          $ 1,685.2                    (10) %

Net Contracts Signed:
Net contract value ($ in millions)                             $  1,929.6          $ 1,804.8                      7  %
Net contracted units                                                1,404              1,095                     28  %
Average contracted price ($ in thousands)                      $  1,374.4          $ 1,648.2                    (17) %

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

                                                             75.2  %            71.7  %

Income before income taxes ($ in millions)                          352.8              509.8                    (31) %

Number of selling communities at October 31,                           44                 51                    (14) %


The decrease in the number of homes delivered in fiscal 2020, as compared to
fiscal 2019, was mainly due to the decreased number of homes in backlog at
October 31, 2019, as compared to the number of homes in backlog at October 31,
2018, offset, in part, by higher backlog conversion. The decrease in the average
price of homes delivered in fiscal 2020 was primarily due to a shift in the
number of homes delivered to less expensive areas.
The increase in the number of net contracts signed in fiscal 2020, as compared
to fiscal 2019, was principally due to an increase in demand, offset, in part,
by a decrease in the number of selling communities. The decrease in the average
value of each contract signed in fiscal 2020 was mainly due to a shift in the
number of contracts signed to less expensive areas and/or products partially
offset by price increases.
The decrease in income before income taxes in fiscal 2020, as compared to fiscal
2019, was primarily due to lower earnings from decreased revenues and higher
home sales cost of revenues, as a percentage of home sales revenues. The
increase in home sales cost of revenues, as a percentage of home sales revenues,
was primarily due to cost overruns at a large high-density condominium community
in Northern California, higher incentives associated with the prior year selling
environment, higher impairment charges, and a shift in product mix/areas to
lower-margin areas. Inventory impairment charges were $6.0 million and $1.1
million in fiscal 2020 and 2019, respectively. The fiscal 2020 impairment charge
relates primarily to a land purchase agreement where we no longer expect to
purchase the land and, accordingly, wrote-off soft costs incurred.



                                       46
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City Living
                                                                               Year ended October 31,
                                                                   2020                2019               % Change
Units Delivered and Home Sales Revenues:
Home sales revenues ($ in millions)                            $    120.9          $   253.2                    (52) %
Units delivered                                                        96                204                    (53) %
Average delivered price ($ in thousands)                       $  1,259.4          $ 1,241.1                      1  %

Net Contracts Signed:
Net contract value ($ in millions)                             $    109.5          $   224.7                    (51) %
Net contracted units                                                   73                150                    (51) %
Average contracted price ($ in thousands)                      $  1,500.0          $ 1,498.0                      -  %

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

                                                             61.7  %            67.8  %

Income before income taxes ($ in millions)                     $     29.7          $    70.1                    (58) %

Number of selling communities at October 31,                            3                  4                    (25) %


The decrease in the number of homes delivered in fiscal 2020, as compared to
fiscal 2019, was mainly attributable to the decreased number of homes in backlog
at October 31, 2019, as compared to the number of homes in backlog at October
31, 2018, and the impacts of the COVID-19 pandemic, in particular in New York
City and northern New Jersey. The increase in the average price of homes
delivered in fiscal 2020, as compared to fiscal 2019, was primarily due to a
shift in the number of homes delivered to more expensive areas and/or products.
The decrease in the number of net contracts signed in fiscal 2020, as compared
to fiscal 2019, was primarily due to a significant decrease in demand following
the onset of the COVID-19 pandemic, offset, in part, by increased demand prior
to its onset.
The decrease in income before income taxes in fiscal 2020, as compared to fiscal
2019, was mainly due to lower earnings from decreased revenues and decreases in
earnings from our investments in unconsolidated entities. This decrease was
partially offset by lower home sales cost of revenues, as a percentage of home
sale revenues. The lower home sales cost of revenues, as a percentage of home
sale revenues, in fiscal 2020 was principally due to a shift in the number of
homes delivered to buildings with higher margins, an impairment charge of $4.8
million in fiscal 2019, and the reversal of an accrual related to a litigation
matter that was no longer needed. This decrease was offset, in part, by a state
reimbursement of $6.5 million of previously expensed environmental cleanup costs
received in fiscal 2019.
In fiscal 2020, earnings from our investments in unconsolidated entities in City
Living decreased $11.8 million as compared to fiscal 2019. This decrease was
primarily due to $6.0 million of other than temporary impairment charges that we
recognized on one of our Home Building Joint Ventures in fiscal 2020. In
addition, fiscal 2019 benefited from earnings from one joint venture that
delivered its last home in the third quarter of fiscal 2019. The tables below
provide information related to deliveries, revenues, and net contracts signed by
our City Living Home Building Joint Ventures, for the periods indicated, and the
related backlog for the dates indicated ($ amounts in millions):
                                                    Year ended October 31,
                                          2020         2019        2020         2019
                                         Units        Units          $            $
Deliveries and home sales revenues           44       147        $ 139.6      $ 330.8
Net contracts signed                         22        39        $  73.3      $ 128.1



                          At October 31,
             2020        2019        2020        2019
             Units      Units         $           $
Backlog         4        26        $ 10.0      $ 76.3



                                       47

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Corporate and other
In fiscal 2020 and 2019, loss before income taxes was $180.1 million and $143.9
million, respectively. The increase in the loss before income taxes in fiscal
2020 was principally attributable to lower interest income; higher losses
incurred in our apartment living operations; lower income from golf club
operations; losses recognized by a joint venture that owns a hotel that was
adversely impacted by COVID-19; an increase in losses in several Rental Property
Joint Ventures related to the commencement of operations and lease up
activities; and directly expensed interest of $2.4 million in the fiscal 2020
period. In addition, during the fiscal 2019 period, we recognized gains of $35.1
million from the sale of seven golf clubs; $9.3 million from the sale of land to
a newly formed Rental Property Joint Venture; and $3.8 million from an asset
sale by one of our Rental Property Joint Ventures. These increases were
partially offset by gains recognized in fiscal 2020 of $13.0 million from the
sale of golf club properties and $10.7 million from the sale of our investment
in one of our Rental Property Joint Ventures to our joint venture partner;
higher earnings by our mortgage company operations primarily due to an increase
in volumes in fiscal 2020; and lower SG&A costs. The lower SG&A costs were due
primarily to the implementation of a number of cost reduction initiatives to
improve efficiencies and rationalize overhead expenses, including workforce
reductions, that we implemented following the onset of the COVID-19 pandemic,
including the reversal of an $8.0 million accrual in fiscal 2020 for
discretionary benefit plan contributions with respect to fiscal 2019. The
decrease in SG&A spending in fiscal 2020 was offset, in part, by a $7.5 million
charge for severance costs incurred in the second quarter of fiscal 2020, other
compensation increases, and costs related to the implementation of new
enterprise information technology systems.
FISCAL 2019 (Restated) COMPARED TO FISCAL 2018 (Restated)
Traditional Home Building
North
                                                                               Year ended October 31,
                                                                   2019                2018               % Change
Units Delivered and Home Sales Revenues:
Home sales revenues ($ in millions)                            $  1,484.4          $ 1,517.9                     (2) %
Units delivered                                                     2,223              2,259                     (2) %
Average delivered price ($ in thousands)                       $    667.7          $   671.9                     (1) %

Net Contracts Signed:
Net contract value ($ in millions)                             $  1,511.7          $ 1,511.3                      -  %
Net contracted units                                                2,267              2,247                      1  %
Average contracted price ($ in thousands)                      $    666.8          $   672.6                     (1) %

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

                                                             84.9  %            85.0  %

Income before income taxes ($ in millions)                     $     81.4          $    98.2                    (17) %

Number of selling communities at October 31,                           86                 92                     (7) %


The decrease in the number of homes delivered in fiscal 2019 was mainly due to a
decrease in the number of homes in backlog at October 31, 2018, as compared to
the number of homes in backlog at October 31, 2017 and lower backlog conversion
in fiscal 2019, as compared to fiscal 2018. The decrease in the average price of
homes delivered in fiscal 2019 was due primarily to a shift in the number of
homes delivered to less expensive areas and/or products in fiscal 2019.
The increase in the number of net contracts signed in fiscal 2019, as compared
to fiscal 2018, was principally due to an increase in demand in fiscal 2019.
The decrease in income before income taxes in fiscal 2019 was principally
attributable to lower earnings from decreased home sales revenues, higher SG&A
costs, and higher inventory impairment charges.
Inventory impairment charges were $25.5 million in fiscal 2019, as compared to
$20.7 million in fiscal 2018. During fiscal 2019, we determined that the pricing
assumptions used in prior impairment reviews for one operating community located
in Illinois and two operating communities located in Pennsylvania needed to be
reduced primarily because weaker-than-expected market conditions drove a lack of
improvement and/or a decrease in customer demand for homes in these communities.
As a result of the reduction in expected sales prices, we determined that these
communities were impaired. Accordingly, the carrying values were written down to
their estimated fair values, which resulted in a charge to income before income
taxes of $14.6
                                       48
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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 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 $4.4 million in fiscal 2018.
Mid-Atlantic
                                                                                 Year ended October 31,
                                                                    2019                   2018              % Change
Units Delivered and Home Sales Revenues:
Home sales revenues ($ in millions)                            $    804.4                 775.7                      4  %
Units delivered                                                     1,237                 1,271                     (3) %
Average delivered price ($ in thousands)                       $    650.3               $ 610.3                      7  %

Net Contracts Signed:
Net contract value ($ in millions)                             $    772.5               $ 759.5                      2  %
Net contracted units                                                1,159                 1,176                     (1) %
Average contracted price ($ in thousands)                      $    666.5               $ 645.8                      3  %

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

                                                             83.4   %              82.2  %

Income (loss) before income taxes ($ in millions)              $     50.7               $  59.3                    (15) %

Number of selling communities at October 31,                           41                    43                     (5) %


The decrease in the number of homes delivered in fiscal 2019 was mainly due to a
decrease in the number of homes in backlog at October 31, 2018, as compared to
the number of homes in backlog at October 31, 2017 and lower backlog conversion
in fiscal 2019. This decrease was partially offset by the delivery of 114 homes
in metropolitan Atlanta, Georgia from the Sharp acquisition. The increase in the
average price of homes delivered in fiscal 2019 was primarily due to a shift in
the number of homes delivered to more expensive areas and/or products in fiscal
2019.
The decrease in the number of net contracts signed in fiscal 2019 was
principally due to a decrease in the average number of selling communities in
fiscal 2019 offset, in part, by contracts we signed in the metropolitan Atlanta,
Georgia market in fiscal 2019. The increase in the average value of each
contract signed in fiscal 2019 was mainly due to shifts in the number of
contracts signed to more expensive areas and/or products in fiscal 2019.
The decrease in income before income taxes in fiscal 2019 was mainly due to
increases in home sales costs of revenues, as a percentage of home sale revenues
and increases in SG&A costs in fiscal 2019. This decrease was partially offset
by higher earnings on increased home sales revenues in fiscal 2019 and a $4.0
million impairment charge recognized in fiscal 2018 related to one Land
Development Joint Venture located in Maryland. The increase in home sales costs
of revenues, as a percentage of home sale revenues, in fiscal 2019 was primarily
due to higher material and labor costs in fiscal 2019.
Inventory impairment charges were $1.5 million and $11.8 million in fiscal 2019
and 2018, respectively. In fiscal 2018, we decided to sell a portion of the lots
in a bulk sale in one community located in Maryland, primarily due to increases
in site costs and a lack of improvement in customer demand as a result of weaker
than expected market conditions. The carrying value of this community was
written down to its estimated fair value resulting in a charge to income before
income taxes in fiscal 2018 of $6.7 million.
                                       49
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South
                                                                                 Year ended October 31,
                                                                    2019                   2018              % Change
Units Delivered and Home Sale Revenues:
Home sales revenues ($ in millions)                            $    991.9                 868.6                     14  %
Units delivered                                                     1,298                 1,114                     17  %
Average delivered price ($ in thousands)                       $    764.2               $ 779.7                     (2) %

Net Contracts Signed:
Net contract value ($ in millions)                             $    941.0               $ 948.3                     (1) %
Net contracted units                                                1,307                 1,212                      8  %
Average contracted price ($ in thousands)                      $    720.0               $ 782.4                     (8) %

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

                                                             81.1   %              80.5  %

Income before income taxes ($ in millions)                     $    106.1               $  99.9                      6  %

Number of selling communities at October 31,                           72                    53                     36  %


The increase in the number of homes delivered in fiscal 2019 was mainly due to
an increase in the number of homes in backlog at October 31, 2018, as compared
to the number of homes in backlog at October 31, 2017; higher backlog conversion
in fiscal 2019, as compared to fiscal 2018; and the delivery of 23 homes in
several markets in South Carolina from the Sabal acquisition. The decrease in
the average price of homes delivered in fiscal 2019 was primarily due to a shift
in the number of homes delivered to less expensive areas and/or products in
fiscal 2019.
The increase in the number of net contracts signed in fiscal 2019 was mainly due
to contracts we signed in several markets in South Carolina in fiscal 2019 and
an increase in the number of selling communities, primarily in Florida, in
fiscal 2019 offset, in part, by decreased demand. The decrease in the average
value of each contract signed in fiscal 2019 was mainly due to shifts in the
number of contracts signed to less expensive areas and/or products in fiscal
2019.
The increase in income before income taxes in fiscal 2019 was principally due to
higher earnings from increased home sales revenues, offset, in part, by higher
inventory impairment charges. Inventory impairment charges were $8.5 million and
$0.7 million in fiscal 2019 and 2018, respectively. During fiscal 2019, we
decided to sell the remaining lots in a bulk sale in one community located in
Texas rather than sell and construct homes, primarily due to a lack of
improvement and/or a decrease in customer demand. As a result, the carrying
value of this community was written down to its estimated fair value, which
resulted in a charge to income before income taxes of $1.5 million in fiscal
2019. In addition, we terminated three purchase agreements to acquire land
parcels in Texas and forfeited the deposit balances outstanding. We wrote off
the related deposits resulting in a charges to income before income taxes of
$4.2 million in fiscal 2019.
                                       50
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Mountain
                                                                               Year ended October 31,
                                                                   2019                2018               % Change
Units Delivered and Home Sales Revenues:
Home sales revenues ($ in millions)                            $  1,130.9            1,126.6                      -  %
Units delivered                                                     1,711              1,797                     (5) %
Average delivered price ($ in thousands)                       $    661.0          $   626.9                      5  %

Net Contracts Signed:
Net contract value ($ in millions)                             $  1,456.2          $ 1,229.6                     18  %
Net contracted units                                                2,097              1,871                     12  %
Average contracted price ($ in thousands)                      $    694.4          $   657.2                      6  %

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

                                                             78.9  %            78.6  %

Income before income taxes ($ in millions)                     $    113.0          $   136.2                    (17) %

Number of selling communities at October 31,                           79                 73                      8  %


The decrease in the number of homes delivered in fiscal 2019 was mainly due to
lower backlog conversion in fiscal 2019, as compared to fiscal 2018. The
increase in the average price of homes delivered in fiscal 2019 was primarily
due to a shift in the number of homes delivered to more expensive areas and/or
products and price increases in fiscal 2019.
The increase in the number of net contracts signed in fiscal 2019 was
principally due to an increase in the average number of selling communities in
fiscal 2019. The increase in the average value of each contract signed in fiscal
2019 was mainly due to a shift in the number of contracts signed to more
expensive areas and/or products in fiscal 2019.
The decrease in income before income taxes in fiscal 2019 was due mainly to
higher SG&A costs and higher home sales cost of revenues, as a percentage of
home sales revenues, in fiscal 2019. The increase in home sales cost of
revenues, as a percentage of home sales revenues, was primarily due to a shift
in product mix/areas to lower-margin areas in fiscal 2019.
Pacific
                                                                               Year ended October 31,
                                                                   2019                2018               % Change
Units Delivered and Home Sales Revenues:
Home sales revenues ($ in millions)                            $  2,416.6          $ 2,533.5                     (5) %
Units delivered                                                     1,434              1,655                    (13) %
Average delivered price ($ in thousands)                       $  1,685.2          $ 1,530.8                     10  %

Net Contracts Signed:
Net contract value ($ in millions)                             $  1,804.8          $ 2,877.8                    (37) %
Net contracted units                                                1,095              1,830                    (40) %
Average contracted price ($ in thousands)                      $  1,648.2          $ 1,572.6                      5  %

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

                                                             71.7  %            70.5  %

Income before income taxes ($ in millions)                          509.8              571.4                    (11) %

Number of selling communities at October 31,                           51                 48                      6  %


The decrease in the number of homes delivered in fiscal 2019 was mainly due to
lower backlog conversion in fiscal 2019, as compared to fiscal 2018, offset, in
part, by the increased number of homes in backlog at October 31, 2018, as
compared to the number of homes in backlog at October 31, 2017. The increase in
the average price of homes delivered in 2019 was primarily due to a shift in the
number of homes delivered to more expensive areas and/or products and increased
selling prices of homes delivered in fiscal 2019.
                                       51
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The decrease in the number of net contracts signed in fiscal 2019 was
principally due to a decrease in demand and reduced availability of lots in
fiscal 2019. The increase in the average value of each contract signed in fiscal
2019 was mainly due to a shift in the number of contracts signed to more
expensive areas and/or products in fiscal 2019.
The decrease in income before income taxes in fiscal 2019 was primarily due to
lower earnings from the decreased home sales revenues and higher home sales cost
of revenues, as a percentage of home sales revenues, in fiscal 2019, as compared
to fiscal 2018, partially offset by lower SG&A costs in fiscal 2019. The
increase in home sales cost of revenues, as a percentage of home sales revenues,
was primarily due to a shift in product mix/areas to lower-margin areas in
fiscal 2019, and a $7.0 million benefit in fiscal 2018 from the reversal of an
accrual related to the Shapell acquisition that had expired.
City Living
                                                                               Year ended October 31,
                                                                   2019                2018               % Change
Units Delivered and Home Sales Revenues:
Home sales revenues ($ in millions)                            $    253.2          $   321.0                    (21) %
Units delivered                                                       204                169                     21  %
Average delivered price ($ in thousands)                       $  1,241.1          $ 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)                      $  1,498.0          $ 1,518.0                     (1) %

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

                                                             67.8  %            72.7  %

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 offset, in part, by the delivery of two homes in fiscal 2019 in a
building located in New York City, New York, where the average price was $13.6
million. In fiscal 2019 and 2018, 7% and 37%, respectively, of the units
delivered were located in New York City, where average home prices were higher.
The decrease in the number of net contracts signed in fiscal 2019 was primarily
due to a decrease in demand. The decrease in the average sales price of net
contracts signed in fiscal 2019 was principally due to a shift to less expensive
units in fiscal 2019, offset, in part, by the sale of two homes in fiscal 2019
in a building located in New York City, New York, where the average price was
$13.6 million.
The decrease in income before income taxes in fiscal 2019 was mainly due to
lower earnings from decreased home sales revenues and a decrease in earnings
from our investments in unconsolidated entities in fiscal 2019. This decrease
was partially offset by lower home sales cost of revenues, as a percentage of
home sale revenues, in fiscal 2019. The lower home sales cost of revenues, as a
percentage of home sale revenues, in fiscal 2019 was due primarily to a shift in
the number of homes delivered to buildings with higher margins; a state
reimbursement of previously expensed environmental clean-up costs received in
fiscal 2019; a benefit in fiscal 2019 from the reversal of accruals for certain
HOA turnovers that were no longer required; and lower interest costs in fiscal
2019. These decreases were offset, in part, by impairment charges of $4.8
million in fiscal 2019. As a result of decreased demand, we wrote down the
carrying value of units in two buildings, located in Maryland and New York, New
York, to their estimated fair values, which resulted in impairment charges of
$4.8 million in fiscal 2019.
In fiscal 2019, earnings from our investments in unconsolidated entities
decreased $2.8 million as compared to fiscal 2018. This decrease was primarily
due a shift in the number of homes delivered to buildings with lower margins and
a shift in the number of homes delivered in joint ventures where our ownership
percentage was lower in fiscal 2019, as compared to fiscal 2018. The tables
below provide information related to deliveries, home sales revenues and net
contracts signed by our City Living Home Building Joint Ventures, for the
periods indicated, and the related backlog for the dates indicated ($ amounts in
millions):
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                                                    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. These
increases were partially offset by gains recognized in fiscal 2019 of $35.1
million from the sale of seven golf clubs; $9.3 million from the sales of land
to newly formed Rental Property Joint Ventures; $3.8 million from an asset sale
by a Rental Property Joint Venture in Phoenixville, Pennsylvania; and higher
interest income in fiscal 2019.
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