Document

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



☑		Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended January 31, 2020



☐		Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission file number 001-09186

Toll Brothers, Inc.

(Exact name of registrant as specified in its charter)



Delaware			23-2416878
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

250 Gibraltar Road	Horsham	Pennsylvania	19044
(Address of principal executive offices)			(Zip Code)

(215) 938-8000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	TOL	New York Stock Exchange
Guarantee of Toll Brothers Finance Corp. 5.625% Senior Notes due 2024	TOL/24	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☑	Accelerated filer	☐	Non-accelerated filer	☐
Smaller reporting company	☐	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

At March 6, 2020, there were approximately 126,732,000 shares of Common Stock, par value $0.01 per share, outstanding.

TOLL BROTHERS, INC.

TABLE OF CONTENTS



	Page No.

Statement on Forward-Looking Information	1

PART I. Financial Information

Item 1. Financial Statements

Condensed Consolidated Balance Sheets (Unaudited)	2

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)	3

Condensed Consolidated Statements of Changes in Equity (Unaudited)	4

Condensed Consolidated Statements of Cash Flows (Unaudited)	5

Notes to Condensed Consolidated Financial Statements (Unaudited)	6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	32

Item 3. Quantitative and Qualitative Disclosures About Market Risk	47

Item 4. Controls and Procedures	48

PART II. Other Information

Item 1. Legal Proceedings	49

Item 1A. Risk Factors	49

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	51

Item 6. Exhibits	52

SIGNATURES	53

STATEMENT ON FORWARD-LOOKING INFORMATION

Certain information included in this report or in other materials we have filed or will file with the Securities and Exchange Commission (“SEC”) (as well as information included in oral statements or other written statements made or to be made by us) contains or may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. One can identify these statements by the fact that they do not relate to matters of a strictly historical or factual nature and generally discuss or relate to future events. These statements contain words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “may,” “can,” “could,” “might,” “should,” and other words or phrases of similar meaning. Such statements may include, but are not limited to, information related to: market conditions; demand for our homes; anticipated operating results; home deliveries; financial resources and condition; changes in revenues; changes in profitability; changes in margins; changes in accounting treatment; cost of revenues; selling, general, and administrative expenses; interest expense; inventory write-downs; home warranty and construction defect claims; unrecognized tax benefits; anticipated tax refunds; sales paces and prices; effects of home buyer cancellations; growth and expansion; joint ventures in which we are involved; anticipated results from our investments in unconsolidated entities; the ability to acquire land and pursue real estate opportunities; the ability to gain approvals and open new communities; the ability to sell homes and properties; the ability to deliver homes from backlog; the ability to secure materials and subcontractors; the ability to produce the liquidity and capital necessary to expand and take advantage of opportunities; and legal proceedings, investigations, and claims.

From time to time, forward-looking statements also are included in other reports on Forms 10-K, 10-Q, and 8-K; in press releases; in presentations; on our website; and in other materials released to the public. Any or all of the forward-looking statements included in this report and in any other reports or public statements made by us are not guarantees of future performance and may turn out to be inaccurate. This can occur as a result of incorrect assumptions or as a consequence of known or unknown risks and uncertainties. Many factors mentioned in this report or in other reports or public statements made by us, including macroeconomic factors such as employment levels, interest rates, consumer confidence and spending, housing demand, availability of financing for home buyers, availability and prices of new homes compared to existing inventory, demographic trends, government regulation, and the competitive environment, will be important in determining our future performance. Consequently, actual results may differ materially from those that might be anticipated from our forward-looking statements.

Forward-looking statements speak only as of the date they are made. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise.

For a more detailed discussion of these factors, see the information under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our most recent Annual Report on Form 10-K filed with the SEC and in this report.

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.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TOLL BROTHERS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)



	January 31, 2020			October 31, 2019
	(unaudited)
ASSETS
Cash and cash equivalents	$	519,793		$	1,286,014
Inventory	8,198,352			7,873,048
Property, construction, and office equipment, net	285,785			273,412
Receivables, prepaid expenses, and other assets (1)	978,166			715,441
Mortgage loans held for sale, at fair value	111,995			218,777
Customer deposits held in escrow	71,841			74,403
Investments in unconsolidated entities	364,352			366,252
Income taxes receivable	56,922			20,791
	$	10,587,206		$	10,828,138
LIABILITIES AND EQUITY
Liabilities
Loans payable	$	1,277,183		$	1,111,449
Senior notes	2,660,352			2,659,898
Mortgage company loan facility	97,653			150,000
Customer deposits	417,092			385,596
Accounts payable	314,482			348,599
Accrued expenses	1,011,548			950,932
Income taxes payable	103,816			102,971
Total liabilities	5,882,126			5,709,445
Equity
Stockholders’ equity
Preferred stock, none issued	—			—
Common stock, 152,937 shares issued at January 31, 2020 and October 31, 2019	1,529			1,529
Additional paid-in capital	723,109			726,879
Retained earnings	4,816,286			4,774,422
Treasury stock, at cost — 23,138 and and 11,999 shares at January 31, 2020 and October 31, 2019, respectively	(879,820		)	(425,183		)
Accumulated other comprehensive loss	(5,553		)	(5,831		)
Total stockholders’ equity	4,655,551			5,071,816
Noncontrolling interest	49,529			46,877
Total equity	4,705,080			5,118,693
	$	10,587,206		$	10,828,138


(1)	As of January 31, 2020 and October 31, 2019, receivables, prepaid expenses, and other assets include $157.9 million and $145.8 million, respectively, of assets related to consolidated variable interest entities ("VIEs"). See Note 4, “Investments in Unconsolidated Entities” for additional information regarding VIEs.

See accompanying notes.

TOLL BROTHERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Amounts in thousands, except per share data)

(Unaudited)



	Three months ended January 31,
	2020		2019
Revenues:
Home sales	$	1,297,337	$	1,319,308
Land sales	34,094		43,873
	1,331,431		1,363,181

Cost of revenues:
Home sales	1,059,900		1,042,245
Land sales	32,282		34,253
	1,092,182		1,076,498
Selling, general and administrative	191,753		162,238
Income from operations	47,496		124,445
Other:
Income from unconsolidated entities	12,141		6,140
Other income – net	6,295		20,861
Income before income taxes	65,932		151,446
Income tax provision	9,056		39,396
Net income	$	56,876	$	112,050

Other comprehensive income, net of tax	278		56
Total comprehensive income	$	57,154	$	112,106

Per share:
Basic earnings	$	0.41	$	0.76
Diluted earnings	$	0.41	$	0.76

Weighted-average number of shares:
Basic	138,145		146,751
Diluted	139,889		148,032

See accompanying notes.

TOLL BROTHERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts in thousands)

(Unaudited)

For the three months ended January 31, 2020 and 2019:



	Common Stock	Addi- tional Paid-in Capital		Retained Earnings		Treasury Stock		Accum- ulated Other Compre- hensive (Loss)/Income		Non-controlling Interest		Total Equity
	$	$		$		$		$		$		$
Balance, October 31, 2019	1,529	726,879		4,774,422		(425,183	)	(5,831	)	46,877		5,118,693
Net income				56,876								56,876
Purchase of treasury stock						(476,024	)					(476,024	)
Exercise of stock options and stock based compensation issuances		(17,112	)			21,042						3,930
Employee stock purchase plan issuances		(41	)			345						304
Stock-based compensation		13,383										13,383
Dividends declared				(15,012	)							(15,012	)
Other comprehensive income								278				278
Loss attributable to non-controlling interest										(1	)	(1	)
Capital contributions										2,653		2,653
Balance, January 31, 2020	1,529	723,109		4,816,286		(879,820	)	(5,553	)	49,529		4,705,080


Balance, October 31, 2018	1,779	727,053		5,161,551		(1,130,878	)	694		8,713		4,768,912
Cumulative effect adjustment upon adoption of ASC 606, net of tax				(17,987	)							(17,987	)
Net income				112,050								112,050
Purchase of treasury stock						(25,143	)					(25,143	)
Exercise of stock options and stock based compensation issuances		(18,194	)			16,044						(2,150	)
Employee stock purchase plan issuances		(39	)			354						315
Stock-based compensation		8,585										8,585
Dividends declared				(16,363	)							(16,363	)
Other comprehensive income								56				56
Capital contributions										32,914		32,914
Balance, January 31, 2019	1,779	717,405		5,239,251		(1,139,623	)	750		41,627		4,861,189

See accompanying notes.

TOLL BROTHERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)



	Three months ended January 31,
	2020			2019
Cash flow used in operating activities:
Net income	$	56,876		$	112,050
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	14,667			15,669
Stock-based compensation	13,383			8,585
Income from unconsolidated entities	(12,141		)	(6,140		)
Distributions of earnings from unconsolidated entities	14,703			6,427
Income from foreclosed real estate and distressed loans	(285		)	(170		)
Deferred tax provision	751			1,621
Inventory impairments and write-offs	1,031			7,562
Gain on the sale of golf club property				(12,186		)
Other	1,376			703
Changes in operating assets and liabilities
Increase in inventory	(303,384		)	(158,258		)
Origination of mortgage loans	(316,852		)	(306,351		)
Sale of mortgage loans	422,376			389,974
Increase in receivables, prepaid expenses, and other assets	(172,153		)	(47,823		)
Increase in income taxes receivable	(36,131		)	(14,363		)
Increase in customer deposits – net	34,058			13,030
Decrease in accounts payable and accrued expenses	(84,691		)	(166,751		)
Decrease in income taxes payable				(28,804		)
Net cash used in operating activities	(366,416		)	(185,225		)
Cash flow (used in) provided by investing activities:
Purchase of property, construction, and office equipment – net	(26,839		)	(19,576		)
Investments in unconsolidated entities	(4,909		)	(17,205		)
Return of investments in unconsolidated entities	28,983			42,677
Investment in foreclosed real estate and distressed loans	(234		)	(130		)
Return of investments in foreclosed real estate and distressed loans	883			482
Proceeds from the sale of a golf club property				18,220
Net cash (used in) provided by investing activities	(2,116		)	24,468
Cash flow used in financing activities:
Proceeds from loans payable	702,729			809,506
Debt issuance costs				(2,058		)
Principal payments of loans payable	(608,481		)	(633,593		)
Redemption of senior notes				(350,000		)
Proceeds (payments) from stock-based benefit plans, net	4,235			(1,831		)
Purchase of treasury stock	(476,024		)	(25,143		)
Dividends paid	(14,956		)	(16,369		)
Receipts related to noncontrolling interest, net	44
Net cash used in financing activities	(392,453		)	(219,488		)
Net decrease in cash, cash equivalents, and restricted cash	(760,985		)	(380,245		)
Cash, cash equivalents, and restricted cash, beginning of period	1,319,643			1,182,939
Cash, cash equivalents, and restricted cash, end of period	$	558,658		$	802,694

See accompanying notes.

TOLL BROTHERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of Toll Brothers, Inc. (the “Company,” “we,” “us,” or “our”), a Delaware corporation, and its majority owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Investments in 50% or less owned partnerships and affiliates are accounted for using the equity method unless it is determined that we have effective control of the entity, in which case we would consolidate the entity.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. The October 31, 2019 balance sheet amounts and disclosures included herein have been derived from our October 31, 2019 audited financial statements. Since the accompanying condensed consolidated financial statements do not include all the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements, they should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2019 (“2019 Form 10-K”). In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, which are of a normal recurring nature, necessary to present fairly our financial position as of January 31, 2020; the results of our operations and changes in equity for the three-month periods ended January 31, 2020 and 2019; and our cash flows for the three-month periods ended January 31, 2020 and 2019. The results of operations for such interim periods are not necessarily indicative of the results to be expected for the full year.

Revenue Recognition

Home sales revenues: Revenues and cost of revenues from home sales are recognized at the time each home is delivered and title and possession are transferred to the buyer. For the majority of our home closings, our performance obligation to deliver a home is satisfied in less than one year from the date a binding sale agreement is signed. In certain states where we build, we are not able to complete certain outdoor features prior to the closing of the home. To the extent these separate performance obligations are not complete upon the home closing, we defer a portion of the home sales revenues related to these obligations and subsequently recognize the revenue upon completion of such obligations. As of January 31, 2020, the home sales revenues and related costs we deferred related to these obligations were immaterial. Our contract liabilities, consisting of deposits received from customers for sold but undelivered homes, totaled $417.1 million and $385.6 million at January 31, 2020 and October 31, 2019, respectively. Of the outstanding customer deposits held as of October 31, 2019, we recognized $85.8 million in home sales revenues during the three months ended January 31, 2020.

Land sales revenues: Our revenues from land sales generally consist of: (1) lot sales to third-party builders within our master planned communities; (2) land sales to joint ventures in which we retain an interest; and (3) bulk sales to third parties of land we have decided no longer meets our development criteria. In general, our performance obligation for each of these land sales is fulfilled upon the delivery of the land, which generally coincides with the receipt of cash consideration from the counterparty. For land sale transactions that contain repurchase options, revenues and related costs are not recognized until the repurchase option expires. In addition, when we sell land to a joint venture in which we retain an interest, we do not recognize revenue or gains on the sale to the extent of our retained interest in such joint venture.

Forfeited Customer Deposits: Forfeited customer deposits are recognized in “Home sales revenues” in our Condensed 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 vary by type and 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.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, “Leases” (“ASU 2016-02”), which requires an entity to recognize assets and liabilities on the balance sheet for the rights and obligations created by leased assets and provide additional disclosures. In July 2018, the FASB issued ASU No. 2018-11, “Leases: Targeted Improvements” (“ASU 2018-11”), which provides an entity with the option to apply the transition provisions of the new standard at its adoption date instead of at its earliest comparative

period presented. ASU 2018-11 also provides an entity with a practical expedient that permits lessors to not separate nonlease components from the associated lease component if certain conditions are met. ASU 2016-02, as amended by ASU 2018-11, became effective for our fiscal year beginning November 1, 2019, and we adopted the new standard using a modified retrospective approach. The prior year period was not recast and our Condensed Consolidated Balance Sheet as of October 31, 2019 does not reflect any changes resulting from the adoption of the new standard. We elected to apply the transition provisions that allow us to carry forward our historical assessment of (1) whether contracts are or contain leases, (2) lease classification, and (3) initial direct costs. In addition, we elected the practical expedient that allows lessees the option to account for lease and non-lease components together as a single component for all classes of underlying assets. As a result of the adoption, we recorded a right-of-use (“ROU”) asset and lease liability of $114.5 million and $118.5 million, respectively, as of November 1, 2019. The ROU asset is included in “Receivables, prepaid expenses, and other assets” and the corresponding lease liability is included in “Accrued expenses” in our Condensed Consolidated Balance Sheet. The adoption of ASU 2016-02 had no impact on retained earnings and did not materially impact our Condensed Consolidated Statements of Operations and Comprehensive Income or Condensed Consolidated Statements of Cash Flows.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to estimate credit losses. ASU 2016-13 will be effective for our fiscal year beginning November 1, 2020, with early adoption permitted as of November 1, 2019. We are currently evaluating the impact that the adoption of ASU 2016-13 may have on our consolidated financial statements and disclosures.

2. Acquisitions

During fiscal 2019, we acquired substantially all of the assets and operations of Sharp Residential, LLC (“Sharp”) and Sabal Homes LLC (“Sabal”), respectively, for an aggregate of approximately $162.4 million in cash. Sharp operates in metropolitan Atlanta, Georgia; Sabal operates in the Charleston, Greenville, and Myrtle Beach, South Carolina markets. The assets acquired, based on our preliminary purchase price allocations, were primarily inventory, including approximately 2,550 home sites owned or controlled through land purchase agreements. In connection with these acquisitions, we assumed contracts to deliver 204 homes with an aggregate value of $96.1 million. The average price of undelivered homes at the dates of acquisitions was approximately $471,100. As a result of these acquisitions, our selling community count increased by 22 communities.

Subsequent event

In February 2020, we acquired substantially all of the assets and operations of Thrive Residential (“Thrive”), an urban in-fill builder with operations in Atlanta, Georgia and Nashville, Tennessee, for approximately $53.3 million in cash. The assets acquired were primarily inventory for future communities, including approximately 680 home sites owned or controlled through land purchase agreements. The acquisition is expected to add 10 communities by the end of fiscal 2020.

The acquisitions discussed above were accounted for as a business combination and were not material to our results of operations or financial condition.

3. Inventory

Inventory at January 31, 2020 and October 31, 2019 consisted of the following (amounts in thousands):



	January 31, 2020		October 31, 2019
Land controlled for future communities	$	246,305	$	182,929
Land owned for future communities	912,323		868,202
Operating communities	7,039,724		6,821,917
	$	8,198,352	$	7,873,048

Operating communities include communities offering homes for sale; communities that have sold all available home sites but have not completed delivery of the homes; communities that were previously offering homes for sale but are temporarily closed due to business conditions or non-availability of improved home sites and that are expected to reopen within 12 months of the end of the fiscal period being reported on; and communities preparing to open for sale. The carrying value attributable to operating communities includes the cost of homes under construction, land and land development costs, the carrying cost of home sites in current and future phases of these communities, and the carrying cost of model homes.

Communities that were previously offering homes for sale but are temporarily closed due to business conditions, do not have any remaining backlog, and are not expected to reopen within 12 months of the end of the fiscal period being reported on have been classified as land owned for future communities.

Information regarding the classification, number, and carrying value of these temporarily closed communities, as of the dates indicated, is provided in the table below:



	January 31, 2020		October 31, 2019
Land owned for future communities:
Number of communities	15		16
Carrying value (in thousands)	$	114,216	$	120,857
Operating communities:
Number of communities	2		1
Carrying value (in thousands)	$	6,252	$	2,871

The amounts we have provided for inventory impairment charges and the expensing of costs that we believe not to be recoverable, for the periods indicated, are shown in the table below (amounts in thousands):



	Three months ended January 31,
	2020		2019
Land controlled for future communities	$	1,031	$	1,777
Operating communities	—		5,785
	$	1,031	$	7,562

See Note 12, “Fair Value Disclosures,” for information regarding the number of operating communities that we tested for potential impairment, the number of operating communities in which we recognized impairment charges, the amount of impairment charges recognized, and the fair values of those communities, net of impairment charges.

See Note 14, “Commitments and Contingencies,” for information regarding land purchase commitments.

At January 31, 2020, we evaluated our land purchase contracts, including those to acquire land for apartment developments, to determine whether any of the selling entities were VIEs and, if they were, whether we were the primary beneficiary of any of them. Under these land purchase contracts, we do not possess legal title to the land; our risk is generally limited to deposits paid to the sellers and predevelopment costs incurred; and the creditors of the sellers generally have no recourse against us. At January 31, 2020, we determined that 129 land purchase contracts, with an aggregate purchase price of $2.39 billion, on which we had made aggregate deposits totaling $181.1 million, were VIEs, and that we were not the primary beneficiary of any VIE related to our land purchase contracts. At October 31, 2019, we determined that 127 land purchase contracts, with an aggregate purchase price of $2.00 billion, on which we had made aggregate deposits totaling $149.2 million, were VIEs and that we were not the primary beneficiary of any VIE related to our land purchase contracts.

Interest incurred, capitalized, and expensed, for the periods indicated, was as follows (amounts in thousands):



	Three months ended January 31,
	2020			2019
Interest capitalized, beginning of period	$	311,323		$	319,364
Interest incurred	43,650			44,422
Interest expensed to home sales cost of revenues	(32,774		)	(34,441		)
Interest expensed to land sales cost of revenues	(567		)	(352		)
Interest capitalized on investments in unconsolidated entities	(881		)	(1,814		)
Previously capitalized interest on investments in unconsolidated entities transferred to inventory				2,988
Interest capitalized, end of period	$	320,751		$	330,167

4. Investments in Unconsolidated Entities

We have investments in various unconsolidated entities. These entities, which are structured as joint ventures, (i) develop land for the joint venture participants and for sale to outside builders (“Land Development Joint Ventures”); (ii) develop for-sale homes (“Home Building Joint Ventures”); (iii) develop luxury for-rent residential apartments, commercial space, and a hotel (“Rental Property Joint Ventures”), which includes our investment in Toll Brothers Realty Trust (the “Trust”); and (iv) invest in

distressed loans and real estate and provide financing and land banking to residential builders and developers for the acquisition and development of land and home sites (“Gibraltar Joint Ventures”).

The table below provides information as of January 31, 2020, regarding active joint ventures that we are invested in, by joint venture category ($ amounts in thousands):



	Land Development Joint Ventures		Home Building Joint Ventures		Rental Property Joint Ventures		Gibraltar Joint Ventures		Total
Number of unconsolidated entities	8		4		21		7		40
Investment in unconsolidated entities	$	101,946	$	48,860	$	191,443	$	22,103	$	364,352
Number of unconsolidated entities with funding commitments by the Company	2		1		1		1		5
Company’s remaining funding commitment to unconsolidated entities	$	28,108	$	1,400	$	224	$	6,830	$	36,562

Certain joint ventures in which we have investments obtained debt financing to finance a portion of their activities. The table below provides information at January 31, 2020, regarding the debt financing obtained by category ($ amounts in thousands):



	Land Development Joint Ventures		Home Building Joint Ventures		Rental Property Joint Ventures		Total
Number of joint ventures with debt financing	3		1		19		23
Aggregate loan commitments	$	100,842	$	73,021	$	1,441,784	$	1,615,647
Amounts borrowed under loan commitments	$	86,092	$	73,021	$	1,009,618	$	1,168,731

More specific and/or recent information regarding our investments in, advances to, and future commitments to these entities is provided below.

Land Development Joint Ventures

During the three months ended January 31, 2020, our Land Development Joint Ventures sold approximately 164 lots and recognized revenues of $24.7 million. We acquired 42 of these lots for $3.5 million. Our share of the joint venture income from the lots we acquired was insignificant. During the three months ended January 31, 2019, our Land Development Joint Ventures sold approximately 201 lots and recognized revenues of $89.8 million. We acquired 107 of these lots for $71.2 million. Our share of the joint venture income from the lots we acquired was insignificant.

Home Building Joint Ventures

Our Home Building Joint Ventures delivered homes in New York, New York, and Jupiter, Florida. During the three months ended January 31, 2020 and 2019, our Home Building Joint Ventures delivered 23 homes with a sales value of $67.1 million and 17 homes with a sales value of $27.3 million, respectively.

In November 2019, one of our Home Building Joint Ventures refinanced its existing $236.5 million construction loan with a $76.6 million post-construction loan that extended the maturity date of the loan to November 2021 and revised certain guarantees provided for under the original construction loan. At January 31, 2020, this joint venture had $73.0 million of borrowings outstanding under the post-construction loan.

Rental Property Joint Ventures

As of January 31, 2020, our Rental Property Joint Ventures, including those that we consolidate, owned 26 for-rent apartment projects and a hotel, which are located in multiple metropolitan areas throughout the country. At January 31, 2020, these joint ventures had approximately 2,000 units that were occupied or ready for occupancy, 1,250 units in the lease-up stage, and 4,800 units in the design phase or under development. In addition, we either own, have under contract, or under a letter of intent approximately 13,400 units, including 200 units under active development; we intend to develop these units in joint ventures with unrelated parties in the future.

In the first quarter of 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. In connection with the sale, the joint venture’s existing $76.0 million loan was assumed by our partner. We recognized a gain of $10.7 million, which is included in “Income from unconsolidated entities” in our Condensed Consolidated Statements of Operations and Comprehensive Income.

In the first quarter of fiscal 2020, we entered into two separate joint ventures with unrelated parties to develop (i) a luxury for-rent residential apartment project located in Dallas, Texas and (ii) a student housing community in State College, Pennsylvania. Prior to the formation of these joint ventures, we acquired the properties and incurred an aggregate of approximately $51.0 million of land and land development costs. Our partners acquired interests in these entities ranging from 50% to 70% for an aggregate amount of $26.2 million. At January 31, 2020, we had an aggregate investment of $25.0 million in these joint ventures. Concurrent with their formation, these joint ventures entered into construction loan agreements for an aggregate amount of $121.5 million to finance the development of these projects. At January 31, 2020, the joint ventures had no outstanding borrowings under these construction loan facilities.

In the first quarter of fiscal 2019, we entered into two separate joint ventures with unrelated parties to develop luxury for-rent residential apartment projects located in Harrison, New York and Frisco, Texas. Prior to the formation of these joint ventures, we acquired the properties and incurred approximately $41.9 million of land and land development costs. Our partners each acquired a 75% interest in these entities for an aggregate amount of $39.8 million and we recognized a gain on land sale of $8.4 million in our first quarter of fiscal 2019. At January 31, 2020, we had an aggregate investment of $15.6 million in these joint ventures. Concurrent with their formation, these joint ventures entered into construction loan agreements for an aggregate amount of $134.4 million. At January 31, 2020, the joint ventures had $38.9 million outstanding borrowings under these construction loan facilities.

In fiscals 2019 and 2018, we entered into five separate joint ventures with unrelated parties to develop luxury for-rent residential apartment projects and student housing communities located in Boston, Massachusetts, San Diego, California, Tempe, Arizona and Miami, Florida. We contributed an aggregate of $95.5 million for our initial ownership interests in these joint ventures, which ranged from 50% to 98%. Due to our controlling financial interest, our power to direct the activities that most significantly impact each joint venture’s performance, and/or our obligation to absorb expected losses or receive benefits from these joint ventures, we consolidated these joint ventures at January 31, 2020 and October 31, 2019. The carrying value of these joint ventures’ assets totaling $157.9 million and $145.8 million are reflected in “Receivables, prepaid expenses, and other assets” in our Condensed Consolidated Balance Sheet as of January 31, 2020 and October 31, 2019, respectively. Our partners’ interests aggregating $43.5 million and $41.0 million in the joint ventures are reflected as a component of “Noncontrolling interest” in our Condensed Consolidated Balance Sheet as of January 31, 2020 and October 31, 2019, respectively. These joint ventures intend to obtain additional equity investors and secure third-party financing at a later date. At such time, it is expected that these entities would no longer be consolidated.

In fiscal 2019, we entered into a joint venture with unrelated parties to develop, build, and operate single-family rental communities. As of January 31, 2020, we have invested $1.1 million in this joint venture and have committed to invest up to $60.0 million.

In 1998, we formed the Trust to invest in commercial real estate opportunities. The Trust is effectively owned one-third by us; one-third by current and former members of our senior management; and one-third by an unrelated party. As of January 31, 2020, our investment in the Trust was zero as cumulative distributions received from the Trust have been in excess of the carrying amount of our net investment. We provide development, finance, and management services to the Trust and recognized fees under the terms of various agreements in the amount of $0.3 million in each of the three-month periods ended January 31, 2020 and 2019.

Gibraltar Joint Ventures

We, through our wholly owned subsidiary, Gibraltar Capital and Asset Management, LLC (“Gibraltar”), have entered into six ventures with an institutional investor to provide builders and developers with land banking and venture capital. These ventures will finance builders’ and developers’ acquisition and development of land and home sites and pursue other complementary investment strategies. We also are a member in a separate venture with the same institutional investor, which purchased, from Gibraltar, certain foreclosed real estate owned and distressed loans in fiscal 2016. Our ownership interest in these ventures is approximately 25%. We may invest up to $100.0 million in these ventures. As of January 31, 2020, we had an aggregate investment of $21.4 million in these ventures.

Guarantees

The unconsolidated entities in which we have investments generally finance their activities with a combination of partner equity and debt financing. In some instances, we and our partners have guaranteed debt of certain unconsolidated entities. These guarantees may include any or all of the following: (i) project completion guarantees, including any cost overruns; (ii) repayment guarantees, generally covering a percentage of the outstanding loan; (iii) carry cost guarantees, which cover costs such as interest, real estate taxes, and insurance; (iv) an environmental indemnity provided to the lender that holds the lender harmless from and against losses arising from the discharge of hazardous materials from the property and non-compliance with applicable environmental laws; and (v) indemnification of the lender from “bad boy acts” of the unconsolidated entity.

In some instances, the guarantees provided in connection with loans to an unconsolidated entity are joint and several. In these situations, we generally have a reimbursement agreement with our partner that provides that neither party is responsible for more than its proportionate share or agreed upon share of the guarantee; however, if a joint venture partner does not have adequate financial resources to meet its obligations under the reimbursement agreement, we may be liable for more than our proportionate share.

We believe that, as of January 31, 2020, in the event we become legally obligated to perform under a guarantee of an obligation of an unconsolidated entity due to a triggering event, the collateral in such entity should be sufficient to repay a significant portion of the obligation. If it is not, we and our partners would need to contribute additional capital to the venture. At January 31, 2020, certain unconsolidated entities have loan commitments aggregating $1.27 billion, of which, if the full amount of the debt obligations were borrowed, we estimate $183.1 million to be our maximum exposure related to repayment and carry cost guarantees. At January 31, 2020, the unconsolidated entities had borrowed an aggregate of $825.3 million, of which we estimate $114.1 million to be our maximum exposure related to repayment and carry cost guarantees. The terms of these guarantees generally range from 7 months to 3.9 years. These maximum exposure estimates do not take into account any recoveries from the underlying collateral or any reimbursement from our partners.

As of January 31, 2020, the estimated aggregate fair value of the guarantees provided by us related to debt and other obligations of certain unconsolidated entities was approximately $5.5 million. We have not made payments under any of the guarantees, nor have we been called upon to do so.

Variable Interest Entities

At January 31, 2020 and October 31, 2019, we determined that 16 and 18 of our joint ventures, respectively, were VIEs under the guidance of ASC 810, “Consolidation.” For 11 and 13 of these VIEs as of January 31, 2020 and October 31, 2019, respectively, we concluded that we were not the primary beneficiary of these VIEs because the power to direct the activities of such VIEs that most significantly impact their performance was either shared by us and such VIEs’ other partners or such activities were controlled by our partner. For VIEs where the power to direct significant activities is shared, business plans, budgets, and other major decisions are required to be unanimously approved by all members. Management and other fees earned by us are nominal and believed to be at market rates, and there is no significant economic disproportionality between us and the other members. The information presented below regarding the investments, commitments, and guarantees in unconsolidated entities deemed to be VIEs is also included in the information provided above.

As of January 31, 2020, we have consolidated five Rental Property Joint Ventures. The carrying value of these joint ventures’ assets totaling $157.9 million is reflected in “Receivables, prepaid expenses, and other assets” in our Condensed Consolidated Balance Sheet as of January 31, 2020. Our partners’ interests aggregating $43.5 million in the joint ventures are reflected as a component of “Noncontrolling interest” in our Condensed Consolidated Balance Sheet as of January 31, 2020. These joint ventures were determined to be VIEs due to their current inability to finance their activities without additional subordinated financial support as well as our partners’ inability to participate in the significant decisions of the joint venture and their lack of substantive kick-out rights. We further concluded that we are the primary beneficiary of these VIEs due to our controlling financial interest in such ventures as we have the power to direct the activities that most significantly impact the joint ventures’ performance and the obligation to absorb expected losses or receive benefits from the joint ventures. The assets of these VIEs can only be used to settle the obligations of the VIEs. In addition, in certain of the joint ventures, in the event additional contributions are required to be funded to the joint ventures prior to the admission of any additional investor at a future date, we will fund 100% of such contributions, including our partner’s pro rata share, which we expect would be funded through an interest-bearing loan.

At January 31, 2020 and October 31, 2019, our investments in the unconsolidated entities deemed to be VIEs totaled $43.7 million and $37.0 million, respectively. At January 31, 2020 and October 31, 2019, the maximum exposure of loss to our investments in these entities was limited to our investments in the unconsolidated VIEs, except with regard to $42.0 million and $76.0 million, respectively, of loan guarantees and $6.8 million and $8.3 million, respectively, of additional commitments to the VIEs. Of our potential exposure for these loan guarantees at January 31, 2020 and October 31, 2019, $11.1 million and $76.0 million, respectively, is related to loan repayment and carry cost guarantees, of which $76.0 million was borrowed at October 31, 2019. There were no borrowings under these loan repayment and carry cost guarantees at January 31, 2020.

Joint Venture Condensed Financial Information

The Condensed Balance Sheets, as of the dates indicated, and the Condensed Statements of Operations, for the periods indicated, for the unconsolidated entities in which we have an investment are included below (in thousands):

Condensed Balance Sheets:



	January 31, 2020		October 31, 2019
Cash and cash equivalents	$	68,237	$	85,819
Inventory	516,740		579,226
Loans receivable, net	65,375		56,545
Rental properties	923,356		1,021,848
Rental properties under development	675,921		535,197
Real estate owned	12,274		12,267
Other assets	160,840		212,761
Total assets	$	2,422,743	$	2,503,663
Debt, net of deferred financing costs	$	1,166,882	$	1,226,857
Other liabilities	177,092		175,827
Members’ equity	1,078,769		1,100,563
Noncontrolling interest	—		416
Total liabilities and equity	$	2,422,743	$	2,503,663
Company’s net investment in unconsolidated entities (1)	$	364,352	$	366,252

(1)

Differences between our net investment in unconsolidated entities and our underlying equity in the net assets of the entities are primarily a result of impairments related to our investments in unconsolidated entities; interest capitalized on our investments; the estimated fair value of the guarantees provided to the joint ventures; unrealized gains on our retained joint venture interests; gains recognized from the sale of our ownership interests; and distributions from entities in excess of the carrying amount of our net investment.

Condensed Statements of Operations:



	Three months ended January 31,
	2020			2019
Revenues	$	133,170		$	153,230
Cost of revenues	95,308			131,755
Other expenses	41,183			18,475
Total expenses	136,491			150,230
Gain on disposition of loans and real estate owned	—			3,694
(Loss) income from operations	(3,321		)	6,694
Other income	612			647
(Loss) income before income taxes	(2,709		)	7,341
Income tax provision	140			265
Net (loss) income including earnings from noncontrolling interests	(2,849		)	7,076
Less: income attributable to noncontrolling interest	—			(2,109		)
Net (loss) income attributable to controlling interest	$	(2,849	)	$	4,967
Company’s equity in earnings of unconsolidated entities (1)	$	12,141		$	6,140

(1)

Differences between our equity in earnings of unconsolidated entities and the underlying net income of the entities are primarily a result of distributions from entities in excess of the carrying amount of our net investment; recoveries of previously incurred charges; unrealized gains on our retained joint venture interests; gains recognized from the sale of our investment to our joint venture partner; and our share of the entities’ profits related to home sites purchased by us which reduces our cost basis of the home sites acquired.

5. Receivables, Prepaid Expenses, and Other Assets

Receivables, prepaid expenses, and other assets at January 31, 2020 and October 31, 2019, consisted of the following (amounts in thousands):



	January 31, 2020		October 31, 2019
Expected recoveries from insurance carriers and others	$	109,048	$	114,162
Improvement cost receivable	104,416		100,864
Escrow cash held by our captive title company	38,107		32,863
Properties held for rental apartment and commercial development	504,924		367,072
Prepaid expenses	24,652		26,041
Right-of-use asset (1)	108,769		—
Other	88,250		74,439
	$	978,166	$	715,441

(1)

On November 1, 2019, we adopted ASU 2016-02 which resulted in the establishment of a right-of-use asset on our Condensed Consolidated Balance Sheet as of January 31, 2020. The Condensed Consolidated Balance Sheet as of October 31, 2019 does not reflect any changes resulting from the adoption of the new standard. See Note 1, “Significant Accounting Policies – Recent Accounting Pronouncements” for additional information regarding the adoption of ASU 2016-02.

See Note 7, “Accrued Expenses,” for additional information regarding the expected recoveries from insurance carriers and others.

As of January 31, 2020 and October 31, 2019, properties held for rental apartment and commercial development include $157.9 million and $145.8 million, respectively, of assets related to consolidated VIEs. See Note 4, “Investments in Unconsolidated Entities” for additional information regarding VIEs.

6. Loans Payable, Senior Notes, and Mortgage Company Loan Facility

Loans Payable

At January 31, 2020 and October 31, 2019, loans payable consisted of the following (amounts in thousands):



	January 31, 2020			October 31, 2019
Senior unsecured term loan	$	800,000		$	800,000
Revolving credit facility borrowings	150,000			—
Loans payable – other	330,147			314,577
Deferred issuance costs	(2,964		)	(3,128		)
	$	1,277,183		$	1,111,449

Senior Unsecured Term Loan

At January 31, 2020, we had an $800.0 million, five-year senior unsecured term loan facility (the “Term Loan Facility”) with a syndicate of banks that is scheduled to expire on November 1, 2024. At January 31, 2020, the interest rate on borrowings was 2.70% per annum. We and substantially all of our 100%-owned home building subsidiaries are guarantors under the Term Loan Facility. The Term Loan Facility contains substantially the same financial covenants as the Revolving Credit Facility described below.

Revolving Credit Facility

We have a $1.905 billion, five-year senior unsecured revolving credit facility (the “Revolving Credit Facility”) with a syndicate of banks. The Revolving Credit Facility is scheduled to mature on November 1, 2024. We and substantially all of our 100%-owned home building subsidiaries are guarantors under the Revolving Credit Facility.

Under the terms of the Revolving Credit Facility, at January 31, 2020, our maximum leverage ratio, as defined, may not exceed 1.75 to 1.00, and we are required to maintain a minimum tangible net worth, as defined, of no less than approximately $2.24 billion. Under the terms of the Revolving Credit Facility, at January 31, 2020, our leverage ratio was approximately 0.72 to

1.00, and our tangible net worth was approximately $4.61 billion. Based upon the limitations related to our repurchase of common stock in the Revolving Credit Facility, our ability to repurchase our common stock was limited to approximately $3.14 billion as of January 31, 2020. In addition, under the provisions of the Revolving Credit Facility, our ability to pay cash dividends was limited to approximately $2.36 billion as of January 31, 2020.

At January 31, 2020, we had $150.0 million outstanding borrowings under the Revolving Credit Facility and had approximately $163.1 million of outstanding letters of credit that were issued under the Revolving Credit Facility. At January 31, 2020, the interest rate on borrowings under the Revolving Credit Facility was 2.77% per annum. Subsequent to January 31, 2020, we borrowed an additional $200.0 million under the Revolving Credit Facility.

Loans Payable – Other

“Loans payable – other” primarily represents purchase money mortgages on properties we acquired that the seller had financed and various revenue bonds that were issued by government entities on our behalf to finance community infrastructure and our manufacturing facilities. At January 31, 2020, the weighted-average interest rate on “Loans payable – other” was 4.51% per annum.

Senior Notes

At January 31, 2020, we had seven issues of senior notes outstanding with an aggregate principal amount of $2.67 billion.

Mortgage Company Loan Facility

In October 2017, TBI Mortgage^® Company (“TBI Mortgage”), our wholly owned mortgage subsidiary, entered into a mortgage warehousing agreement (the “Warehousing Agreement”) with a bank to finance the origination of mortgage loans by TBI Mortgage. The Warehousing Agreement is accounted for as a secured borrowing under ASC 860, “Transfers and Servicing.” In December 2018, the Warehousing Agreement was amended to provide for loan purchases up to $75.0 million, subject to certain sublimits. In addition, the Warehousing Agreement, as amended, provides for an accordion feature under which TBI Mortgage may request that the aggregate commitments under the Warehousing Agreement be increased to an amount up to $150.0 million for a short period of time. In December 2019, the Warehousing Agreement was amended to extend the expiration date on substantially the same terms as the existing agreement. The Warehousing Agreement, as amended, expires on December 4, 2020, and borrowings thereunder bear interest at LIBOR plus 1.90% per annum. At January 31, 2020, the interest rate on the Warehousing Agreement, as amended, was 3.56% per annum.

7. Accrued Expenses

Accrued expenses at January 31, 2020 and October 31, 2019 consisted of the following (amounts in thousands):



	January 31, 2020		October 31, 2019
Land, land development, and construction	$	169,203	$	192,658
Compensation and employee benefits	149,636		183,592
Escrow liability	36,891		31,587
Self-insurance	192,115		193,405
Warranty	188,916		201,886
Lease liabilities (1)	113,534		—
Deferred income	53,385		51,678
Interest	48,630		31,307
Commitments to unconsolidated entities	9,068		9,283
Other	50,170		55,536
	$	1,011,548	$	950,932

(1)

On November 1, 2019, we adopted ASU 2016-02 which resulted in the establishment of lease liabilities on our Condensed Consolidated Balance Sheet as of January 31, 2020. The Condensed Consolidated Balance Sheet as of October 31, 2019 does not reflect any changes resulting from the adoption of the new standard. See Note 1, “Significant Accounting Policies – Recent Accounting Pronouncements” for additional information regarding the adoption of ASU 2016-02.

The table below provides, for the periods indicated, a reconciliation of the changes in our warranty accrual (amounts in thousands):



	Three months ended January 31,
	2020			2019
Balance, beginning of period	$	201,886		$	258,831
Additions – homes closed during the period	7,024			6,625
Increase (decrease) in accruals for homes closed in prior years	1,218			(691		)
Charges incurred	(21,212		)	(27,439		)
Balance, end of period	$	188,916		$	237,326

Since fiscal 2014, we have received water intrusion claims from owners of homes built since 2002 in communities located in Pennsylvania and Delaware (which are in our North region). During the first quarter of fiscal 2020, we continued to receive water intrusion claims from homeowners in this region, mostly related to older homes, and we continue to perform review procedures to assess, among other things, the number of affected homes, whether repairs are likely to be required, and the extent of such repairs.

Our review process, conducted quarterly, includes an analysis of many factors applicable to these communities to determine whether a claim is likely to be received and the estimated costs to resolve any such claim, including: the closing dates of the homes; the number of claims received; our inspection of homes; an estimate of the number of homes we expect to repair; the type and cost of repairs that have been performed in each community; the estimated costs to remediate pending and future claims; the expected recovery from our insurance carriers and suppliers; and the previously recorded amounts related to these claims. We also monitor legal developments relating to these types of claims and review the volume, relative merits and adjudication of claims in litigation or arbitration.

As of January 31, 2020, our recorded aggregate estimated repair costs to be incurred for known and unknown water intrusion claims was $324.4 million, which was unchanged from October 31, 2016, and our recorded aggregate expected recoveries from insurance carriers and suppliers were approximately $152.6 million, which was also unchanged from October 31, 2016. Our recorded remaining estimated repair costs, which reflects a reduction for the aggregate amount expended to resolve claims, were approximately $116.0 million at January 31, 2020 and $124.6 million at October 31, 2019. Our recorded remaining expected recoveries from insurance carriers and suppliers were approximately $96.0 million at January 31, 2020 and $97.9 million at October 31, 2019. As noted above, our review process includes a number of estimates that are based on assumptions with uncertain outcomes, including, but not limited to, the number of homes to be repaired, the extent of repairs needed, the repair procedures employed, the cost of those repairs, outcomes of litigation or arbitrations, and expected recoveries from insurance carriers and suppliers. Due to the degree of judgment required in making these estimates and the inherent uncertainty in potential outcomes, it is reasonably possible that our actual costs and recoveries could differ from those recorded and such differences could be material. In addition, due to such uncertainty, we are unable to estimate the range of any such differences. With respect to our insurance receivables, disputes between homebuilders and carriers over coverage positions relating to construction defect claims are common, and resolution of claims with carriers involves the exchange of significant amounts of information and frequently involves legal action. While our primary insurance carrier has funded substantially all of the water intrusion claims that we have submitted to it to date, other insurance carriers have recently disputed coverage for the same claims under policies that are substantially the same. As a result, we have entered arbitration proceedings during the third quarter of fiscal 2019 with these carriers. Based on the legal merits that support our pending insurance claims, review by legal counsel, our history of collecting significant amounts funded by our primary carrier under policies that are substantially the same, and the high credit ratings of our insurance carriers, we believe collection of our remaining recorded insurance receivables is probable. However, due to the complexity of the underlying claims and the variability of the other factors described above, it is reasonably possible that our actual insurance recoveries could materially differ from those recorded. Resolution of these known and unknown claims is expected to take several years.

8. Income Taxes

We recorded income tax provisions of $9.1 million and $39.4 million for the three months ended January 31, 2020 and 2019, respectively. The effective tax rate was 13.7% for the three months ended January 31, 2020, compared to 26.0% for the three months ended January 31, 2019. The lower effective tax rate for the fiscal 2020 period was primarily due to a benefit recognized of $6.9 million from the retroactive extension of the federal energy efficient home credit, which was enacted into law on December 20, 2019. The income tax provisions for all periods included the provision for state income taxes, interest accrued on anticipated tax assessments, excess tax benefits related to stock-based compensation, and other permanent differences.

We are subject to state tax in the jurisdictions in which we operate. We estimate our state tax liability based upon the individual taxing authorities’ regulations, estimates of income by taxing jurisdiction, and our ability to utilize certain tax-saving strategies. Based on our estimate of the allocation of income or loss among the various taxing jurisdictions and changes in tax regulations and their impact on our tax strategies, we estimate that our state income tax rate for the full fiscal year 2020 will be approximately 5.8%. Our state income tax rate for the full fiscal year 2019 was 6.1%.

At January 31, 2020, we had $8.1 million of gross unrecognized tax benefits, including interest and penalties. If these unrecognized tax benefits were to reverse in the future, they would have a beneficial impact on our effective tax rate at that time. During the next 12 months, it is reasonably possible that our unrecognized tax benefits will change, but we are not able to provide a range of such change. The possible changes would be principally due to the expiration of tax statutes, settlements with taxing jurisdictions, increases due to new tax positions taken, and the accrual of estimated interest and penalties.

9. Stock-Based Benefit Plans

We grant stock options and various types of restricted stock units to our employees and our nonemployee directors. Additionally, we have an employee stock purchase plan that allows employees to purchase our stock at a discount. Information regarding the amount of total stock-based compensation expense and tax benefit recognized by us, for the periods indicated, is as follows (amounts in thousands):



	Three months ended January 31,
	2020		2019
Total stock-based compensation expense recognized	$	13,383	$	8,585
Income tax benefit recognized	$	3,407	$	2,256

At January 31, 2020 and October 31, 2019, the aggregate unamortized value of outstanding stock-based compensation awards was approximately $28.2 million and $18.7 million, respectively.

10. Stock Repurchase Program and Cash Dividends

Stock Repurchase Program

On December 11, 2019, our Board of Directors terminated our existing 20 million share repurchase program, which was authorized in December 2018, and authorized, under a new repurchase program, the repurchase of 20 million shares of our common stock in open market transactions, privately negotiated transactions (including accelerated share repurchases), issuer tender offers or other financial arrangements or transactions for general corporate purposes, including to obtain shares for the Company’s equity award and other employee benefit plans. Our Board of Directors did not fix any expiration date for this repurchase program.

The table below provides, for the periods indicated, information about our share repurchase programs:



	Three months ended January 31,
	2020		2019
Number of shares purchased (in thousands)	11,686		785
Average price per share	$	40.73	$	32.02
Remaining authorization at January 31 (in thousands)	8,314		19,787

Subsequent to January 31, 2020, we repurchased approximately 3.8 million shares of our common stock at an average price of $37.52 per share.

Cash Dividends

During each of the three months ended January 31, 2020 and 2019, we declared and paid cash dividends of $0.11 per share to our shareholders.

11. Earnings per Share Information

The table below provides, for the periods indicated, information pertaining to the calculation of earnings per share, common stock equivalents, weighted-average number of antidilutive options, and shares issued (amounts in thousands):



	Three months ended January 31,
	2020		2019
Numerator:
Net income as reported	$	56,876	$	112,050

Denominator:
Basic weighted-average shares	138,145