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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 July 31, 2022
or
☐ 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.)
1140 Virginia DriveFort Washington
Pennsylvania
19034
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareTOLNew 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 August 30, 2022, there were approximately 113,330,000 shares of Common Stock, par value $0.01 per share, outstanding.



TOLL BROTHERS, INC.
TABLE OF CONTENTS
 Page No.
  
  
 
  
 
  
  
  
  
  
  
  
 
  
  
  
  
  



STATEMENT ON FORWARD-LOOKING INFORMATION
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 (the “Exchange Act”). 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,” “likely”, “will” and other words or phrases of similar meaning. Such statements may include, but are not limited to, information and statements regarding: the impact of the COVID-19 pandemic on the U.S. economy and on our business; expectations regarding interest rates and inflation; the markets in which we operate or may operate; our strategic objectives and priorities; our land acquisition, land development and capital allocation plans and priorities; housing market conditions; demand for our homes; anticipated operating results and guidance; home deliveries; financial resources and condition; changes in revenues, in profitability and in margins; changes in accounting treatment; cost of revenues, including expected labor and material costs; selling, general, and administrative expenses; interest expense; inventory write-downs; home warranty and construction defect claims; unrecognized tax benefits; anticipated tax refunds; sales paces and prices; effects of home buyer cancellations; growth and expansion; joint ventures in which we are involved; anticipated results from our investments in unconsolidated entities; our ability to acquire or dispose of land and pursue real estate opportunities; our ability to gain approvals to develop land, open new communities and deliver homes; our ability to market, construct and sell homes and properties; the rate at which we deliver homes from backlog; our ability to secure materials and subcontractors; our ability to produce the liquidity and capital necessary to conduct normal business operations or to expand and take advantage of opportunities; and the outcome of legal proceedings, investigations, and claims.
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. Consequently, actual results may differ materially from those that might be anticipated from our forward-looking statements. This can occur as a result of incorrect assumptions or as a consequence of known or unknown risks and uncertainties. Therefore, we caution you not to place undue reliance on our forward-looking statements. The major risks and uncertainties – and assumptions that are made – that affect our business and may cause actual results to differ from these forward-looking statements include, but are not limited to:
•the ongoing effects of the COVID-19 pandemic, which remain highly uncertain, cannot be predicted and will depend upon future developments, including the duration of the pandemic, the impact of mitigation strategies taken by applicable government authorities, the continued availability and effectiveness of vaccines, adequate testing and therapeutic treatments and the prevalence of widespread immunity to COVID-19;
•the effect of general economic conditions, including employment rates, housing starts, interest rate levels, home affordability, inflation, consumer sentiment, availability of financing for home mortgages and strength of the U.S. dollar;
•market demand for our products, which is related to the strength of the various U.S. business segments and U.S. and international economic conditions;
•the availability of desirable and reasonably priced land and our ability to control, purchase, hold and develop such land;
•access to adequate capital on acceptable terms;
•geographic concentration of our operations;
•levels of competition;
•the price and availability of lumber, other raw materials, home components;
•the impact of labor shortages, including on our subcontractors, supply chain and municipalities;
•the effect of U.S. trade policies, including the imposition of tariffs and duties on home building products and retaliatory measures taken by other countries;
•the effects of weather and the risk of loss from earthquakes, volcanoes, fires, floods, droughts, windstorms, hurricanes, pest infestations and other natural disasters, and the risk of delays, reduced consumer demand, and shortages and price increases in labor or materials associated with such natural disasters;
•risks arising from acts of war, terrorism or outbreaks of contagious diseases, such as COVID-19;
•federal and state tax policies;
•transportation costs;
•the effect of land use, environmental and other governmental laws and regulations;
•legal proceedings or disputes and the adequacy of reserves;
•risks relating to any unforeseen changes to or effects on liabilities, future capital expenditures, revenues, expenses, earnings, indebtedness, financial condition, losses and future prospects;
•the effect of potential loss of key management personnel;
•changes in accounting principles; and
•risks related to unauthorized access to our computer systems, theft of our and our homebuyers’ confidential information or other forms of cyber-attack.
Many of the factors mentioned above, elsewhere in this report or in other reports or public statements made by us will be important in determining our future performance. Consequently, actual results may differ materially from those that might be anticipated from our forward-looking statements.
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 further discussion of factors that we believe could cause our actual results to differ materially from expected and historical results, see “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.


1

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TOLL BROTHERS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
July 31,
2022		October 31,
2021
 (unaudited) 
ASSETS
Cash and cash equivalents$316,471 $1,638,494 
Inventory9,408,525 7,915,884 
Property, construction, and office equipment – net288,110 310,455 
Receivables, prepaid expenses, and other assets (1)
645,109 738,078 
Mortgage loans held for sale – at fair value121,218 247,211 
Customer deposits held in escrow168,293 88,627 
Investments in unconsolidated entities767,566 599,101 
Income taxes receivable27,961 — 
 $11,743,253 $11,537,850 
LIABILITIES AND EQUITY
Liabilities
Loans payable$1,200,178 $1,011,534 
Senior notes1,995,029 2,403,989 
Mortgage company loan facility113,705 147,512 
Customer deposits812,470 636,379 
Accounts payable625,662 562,466 
Accrued expenses1,228,398 1,220,235 
Income taxes payable228,764 215,280 
Total liabilities6,204,206 6,197,395 
Equity
Stockholders’ equity
Preferred stock, none issued— — 
Common stock, 127,937 shares issued at July 31, 2022 and October 31, 20211,279 1,279 
Additional paid-in capital715,831 714,453 
Retained earnings5,548,496 4,969,839 
Treasury stock, at cost — 14,608 and 7,820 shares at July 31, 2022 and October 31, 2021, respectively(759,072)(391,656)
Accumulated other comprehensive income ("AOCI")16,739 1,109 
Total stockholders’ equity5,523,273 5,295,024 
Noncontrolling interest15,774 45,431 
Total equity5,539,047 5,340,455 
 $11,743,253 $11,537,850 
(1)    As of July 31, 2022 and October 31, 2021, receivables, prepaid expenses, and other assets or investments in unconsolidated entities include $82.0 million and $90.8 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.
2

TOLL BROTHERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Amounts in thousands, except per share data)
(Unaudited)
Three months ended July 31,Nine months ended July 31,
 2022202120222021
Revenues:
Home sales$2,256,337 $2,234,365 $6,130,218 $5,481,329 
Land sales and other238,465 21,116 433,206 267,652 
2,494,802 2,255,481 6,563,424 5,748,981 
Cost of revenues:
Home sales1,670,703 1,726,124 4,619,495 4,282,410 
Land sales and other229,561 18,709 422,159 222,534 
1,900,264 1,744,833 5,041,654 4,504,944 
Selling, general and administrative232,865 233,915 703,372 663,824 
Income from operations361,673 276,733 818,398 580,213 
Other:
Income from unconsolidated entities2,984 16,636 27,954 28,313 
Other income – net1,294 10,026 16,230 27,311 
Expenses related to early retirement of debt— — — (35,211)
Income before income taxes365,951 303,395 862,582 600,626 
Income tax provision92,484 68,463 216,618 141,329 
Net income$273,467 $234,932 $645,964 $459,297 
Other comprehensive (loss) income – net of tax(2,680)335 15,630 1,004 
Total comprehensive income$270,787 $235,267 $661,594 $460,301 
Per share:
Basic earnings$2.37 $1.90 $5.47 $3.68 
Diluted earnings$2.35 $1.87 $5.41 $3.63 
Weighted-average number of shares:
Basic115,334 123,826 118,056 124,727 
Diluted116,326 125,610 119,369 126,390 







See accompanying notes.
3

TOLL BROTHERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Amounts in thousands)
(Unaudited)

For the three months ended July 31, 2022 and 2021:
Common
Stock		Addi-
tional
Paid-in
Capital		Retained
Earnings		Treasury
Stock		AOCINon-controlling InterestTotal
Equity
Balance, April 30, 2022$1,279 $714,651 $5,297,939 $(669,396)$19,419 $15,774 $5,379,666 
Net income273,467 273,467 
Purchase of treasury stock
(91,607)(91,607)
Exercise of stock options, stock based compensation issuances, and employee stock purchase plan issuances(1,058)1,931 873 
Stock-based compensation
2,238 2,238 
Dividends declared
(22,910)(22,910)
Other comprehensive loss(2,680)(2,680)
Balance, July 31, 2022$1,279 $715,831 $5,548,496 $(759,072)$16,739 $15,774 $5,539,047 
Balance, April 30, 2021$1,529 $709,422 $5,352,573 $(1,148,406)$(2,048)$47,719 $4,960,789 
Net income234,932 234,932 
Purchase of treasury stock
(95,411)(95,411)
Exercise of stock options, stock based compensation issuances, and employee stock purchase plan issuances(826)2,235 1,409 
Stock-based compensation
3,663 3,663 
Dividends declared
(20,943)(20,943)
Other comprehensive loss(1,807)(1,807)
Loss attributable to non-controlling interest(27)(27)
Capital contributions – net1,298 1,298 
Balance, July 31, 2021$1,529 $712,259 $5,566,562 $(1,241,582)$(3,855)$48,990 $5,083,903 


4

For the nine months ended July 31, 2022 and 2021:
Common
Stock		Addi-
tional
Paid-in
Capital		Retained
Earnings		Treasury
Stock		AOCINon-controlling InterestTotal
Equity
Balance, October 31, 2021$1,279 $714,453 $4,969,839 $(391,656)$1,109 $45,431 $5,340,455 
Net income645,964 645,964 
Purchase of treasury stock
(383,886)(383,886)
Exercise of stock options, stock based compensation issuances, and employee stock purchase plan issuances(17,880)16,470 (1,410)
Stock-based compensation
19,258 19,258 
Dividends declared
(67,307)(67,307)
Other comprehensive income15,630 15,630 
Income attributable to non-controlling interest86 86 
Capital distributions - net(29,743)(29,743)
Balance, July 31, 2022$1,279 $715,831 $5,548,496 $(759,072)$16,739 $15,774 $5,539,047 
Balance, October 31, 2020$1,529 $717,272 $5,164,086 $(1,000,454)$(7,198)$52,241 $4,927,476 
Cumulative effect adjustment upon adoption of ASC 326 - net of tax(595)(595)
Net income459,297 459,297 
Purchase of treasury stock
(275,058)(275,058)
Exercise of stock options, stock based compensation issuances, and employee stock purchase plan issuances(24,955)33,930 8,975 
Stock-based compensation
19,942 19,942 
Dividends declared
(56,226)(56,226)
Other comprehensive income
3,343 3,343 
Loss attributable to non-controlling interest
(47)(47)
Capital distributions - net(3,204)(3,204)
Balance, July 31, 2021$1,529 $712,259 $5,566,562 $(1,241,582)$(3,855)$48,990 $5,083,903 








See accompanying notes.
5

TOLL BROTHERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Nine months ended July 31,
 20222021
Cash flow (used in) provided by operating activities:
Net income$645,964 $459,297 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization53,267 53,938 
Stock-based compensation19,258 19,942 
Income from unconsolidated entities(27,954)(28,313)
Distributions of earnings from unconsolidated entities31,182 30,716 
Deferred tax provision10,659 6,956 
Inventory impairments and write-offs10,673 15,997 
Property, construction and office equipment impairments6,800 — 
Gain on sale of assets326 (38,706)
Expenses related to early retirement of debt— 35,211 
Other3,435 1,984 
Changes in operating assets and liabilities: 
Inventory(1,288,029)(578,461)
Origination of mortgage loans(1,390,630)(1,452,289)
Sale of mortgage loans1,513,603 1,498,946 
Receivables, prepaid expenses, and other assets32,114 97,738 
Current income taxes – net(30,361)(11,492)
Customer deposits – net96,425 163,440 
Accounts payable and accrued expenses66,637 173,524 
Net cash (used in) provided by operating activities(246,631)448,428 
Cash flow (used in) provided by investing activities:
Purchase of property, construction, and office equipment – net(56,485)(45,772)
Investments in unconsolidated entities(176,592)(190,027)
Return of investments in unconsolidated entities109,645 166,045 
Proceeds from the sale of assets28,309 80,418 
Other194 649 
Net cash (used in) provided by investing activities(94,929)11,313 
Cash flow used in financing activities:
Proceeds from loans payable2,950,869 2,164,646 
Principal payments of loans payable(3,009,301)(2,381,509)
Redemption of senior notes(409,856)(294,168)
(Payments) proceeds for stock-based benefit plans – net(1,407)8,979 
Purchase of treasury stock(383,886)(275,058)
Dividends paid(66,948)(56,103)
Payments related to noncontrolling interest – net(25,766)(4,710)
Net cash used in financing activities(946,295)(837,923)
Net decrease in cash, cash equivalents, and restricted cash(1,287,855)(378,182)
Cash, cash equivalents, and restricted cash, beginning of period1,684,412 1,396,604 
Cash, cash equivalents, and restricted cash, end of period$396,557 $1,018,422 



See accompanying notes.
6

TOLL BROTHERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Significant Accounting Policies
Basis of Presentation
Our 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.
Our 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, 2021 balance sheet amounts and disclosures have been derived from our October 31, 2021 audited financial statements. Since the 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 included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2021 (“2021 Form 10-K”). In the opinion of management, the unaudited condensed consolidated financial statements include all recurring adjustments necessary to present fairly our financial position as of July 31, 2022; the results of our operations and changes in equity for the three-month and nine-month periods ended July 31, 2022 and 2021; and our cash flows for the nine-month periods ended July 31, 2022 and 2021. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.
Use of Estimates
The preparation of financial statements in accordance with GAAP requires estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. In times of economic disruption when uncertainty regarding future economic conditions is heightened, these estimates and assumptions are subject to greater variability. We are subject to risks and uncertainties, including risks and uncertainties resulting from the COVID-19 pandemic, that are likely to continue to impact our business operations. As a result, actual results could differ from the estimates and assumptions we make and such differences may be material.
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 July 31, 2022, 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 $812.5 million and $636.4 million at July 31, 2022 and October 31, 2021, respectively. Of the outstanding customer deposits held as of October 31, 2021, we recognized $131.1 million and $374.8 million in home sales revenues during the three months and nine months ended July 31, 2022.
Land sales and other revenues: Our revenues from land sales and other generally consist of: (1) land sales to joint ventures in which we retain an interest; (2) bulk sales to third parties of land we have decided no longer meets our development criteria; (3) lot sales to third-party builders within our master planned communities; and (4) sales of commercial and retail properties generally located at our City Living buildings. 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 of incentive and by amount on a community-by-community and home-by-home basis. Incentives are reflected as a
7

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 March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848),” as amended by ASU 2021-01 in January 2021, directly addressing the effects of reference rate reform on financial reporting as a result of the cessation of the publication of certain LIBOR rates beginning December 31, 2021, with complete elimination of the publication of the LIBOR rates by June 30, 2023. The guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform by virtue of referencing LIBOR or another reference rate expected to be discontinued. This guidance became effective on March 12, 2020 and can be adopted no later than December 31, 2022, with early adoption permitted. We are currently evaluating the impact, but do not expect that the adoption of ASU 2020-04, as amended by ASU 2021-01, will have a material impact on our consolidated financial statements or disclosures.

Reclassification
Certain prior period amounts have been reclassified to conform to the fiscal 2022 presentation.
2. Acquisition
In June 2022, we acquired substantially all of the assets and operations of a privately-held home builder with operations in San Antonio, Texas for approximately $48.1 million in cash. The assets acquired, which consisted of 16 communities, were primarily inventory, including approximately 450 home sites owned or controlled through land purchase agreements.
3. Inventory
Inventory at July 31, 2022 and October 31, 2021 consisted of the following (amounts in thousands):
July 31,
2022		October 31,
2021
Land controlled for future communities$250,313 $185,656 
Land owned for future communities884,815 564,737 
Operating communities8,273,397 7,165,491 
$9,408,525 $7,915,884 
Operating communities include communities offering homes for sale; communities that have sold all available home sites but have not completed delivery of the homes and communities preparing to open for sale. The carrying value attributable to operating communities includes the cost of homes under construction, land and land development costs, the carrying cost of home sites in current and future phases of these communities, and the carrying cost of model homes.
Backlog consists of homes under contract but not yet delivered to our home buyers (“backlog”).
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 July 31,Nine months ended July 31,
 2022202120222021
Land controlled for future communities$3,848 $2,045 $6,833 $3,792 
Land owned for future communities2,400 11,105 3,840 11,105 
Operating communities— — — 1,100 
$6,248 $13,150 $10,673 $15,997 
See Note 14, “Commitments and Contingencies,” for information regarding land purchase commitments.
At July 31, 2022, we evaluated our land purchase contracts, including those to acquire land for apartment developments, to determine whether any of the selling entities were variable interest entities (“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 July 31, 2022, we determined that 240 land purchase contracts, with an aggregate purchase price of $3.84 billion, on which we had made aggregate deposits totaling $378.5 million, were VIEs, and that we were not the primary beneficiary of any VIE related to our land purchase contracts. At October 31, 2021, we determined that 289 land
8

purchase contracts, with an aggregate purchase price of $3.67 billion, on which we had made aggregate deposits totaling $302.4 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 July 31,Nine months ended July 31,
 2022202120222021
Interest capitalized, beginning of period$237,333 $295,145 $253,938 $297,975 
Interest incurred34,676 37,133 97,569 116,447 
Interest expensed to home sales cost of revenues(37,308)(49,995)(110,567)(127,412)
Interest expensed to land sales and other cost of revenues(1,221)(1,064)(4,848)(3,482)
Interest reclassified to property, construction and office equipment - net— (1,034)— (1,034)
Interest capitalized on investments in unconsolidated entities(1,759)(1,078)(4,566)(3,403)
Previously capitalized interest on investments in unconsolidated entities transferred to inventory32 76 227 92 
Interest capitalized, end of period$231,753 $279,183 $231,753 $279,183 
During the three months ended July 31, 2022 and 2021, we recognized approximately $(851,000) and $265,000 of net (gains) losses related to our interest rate swaps which is included in accumulated other comprehensive income, respectively, and approximately $38,000 and $60,000 of net losses were reclassified out of accumulated other comprehensive income to home sales cost of revenues, respectively. During the nine months ended July 31, 2022 and 2021, we recognized approximately $(483,000) and $665,000 of net (gains) losses related to our interest rate swaps which is included in accumulated other comprehensive income, respectively, and approximately $220,000 and $102,000 of net losses were reclassified out of accumulated other comprehensive income to home sales cost of revenues, respectively.
4. Investments in Unconsolidated Entities
We have investments in various unconsolidated entities and our ownership interest in these investments ranges from 5.0% to 50%. These entities, which are structured as joint ventures and either: (i) develop land for the joint venture participants and for sale to outside builders (“Land Development Joint Ventures”); (ii) develop for-sale homes (“Home Building Joint Ventures”); (iii) develop luxury for-rent residential apartments and single family homes, commercial space, and a hotel (“Rental Property Joint Ventures”); or (iv) provide financing and land banking to residential builders and developers for the acquisition and development of land and home sites (“Gibraltar Joint Ventures”).
The table below provides information as of July 31, 2022, regarding active joint ventures that we are invested in, by joint venture category ($ amounts in thousands):
 Land
Development
Joint Ventures		Home Building
Joint Ventures		Rental Property
Joint Ventures		Gibraltar
Joint Ventures		Total
Number of unconsolidated entities
15141461
Investment in unconsolidated entities (1)
$320,263 $3,972 $426,850 $16,481 $767,566 
Number of unconsolidated entities with funding commitments by the Company
12—161 29
Company’s remaining funding commitment to unconsolidated entities (2)
$121,728 $— $103,108 $13,326 $238,162 
(1)    Our total investment includes $97.6 million related to 13 unconsolidated joint venture-related variable interests in VIEs and our maximum exposure to losses related to these VIEs is approximately $199.9 million as of July 31, 2022. Our ownership interest in such unconsolidated Joint Venture VIEs ranges from 20% to 50%.
(2)    Our remaining funding commitment includes approximately $104.9 million related to our unconsolidated joint venture-related variable interests in VIEs.
9

Certain joint ventures in which we have investments obtained debt financing to finance a portion of their activities. The table below provides information at July 31, 2022, regarding the debt financing obtained by category ($ amounts in thousands):
 Land
Development
Joint Ventures		Rental Property
Joint Ventures		Total
Number of joint ventures with debt financing
83442
Aggregate loan commitments$532,685 $3,262,234 $3,794,919 
Amounts borrowed under loan commitments
$419,031 $1,646,157 $2,065,188 
More specific and/or recent information regarding our investments in, advances to, and future commitments to these entities is provided below.
New Joint Ventures
The table below provides information on joint ventures entered into during the nine-months ended July 31, 2022 ($ amounts in thousands):
Land Development Joint VenturesRental Property Joint VenturesGibraltar Joint Ventures
Number of unconsolidated joint ventures entered into during the period3111 
Investment balance at July 31, 2022$44,500 $118,600 $2,400 
In the first quarter of fiscal 2022, we entered into a joint venture with an unrelated party to develop a luxury for-rent residential apartment project in Washington, D.C. on land which we contributed to the venture. Under the terms of the joint venture agreement, our partner had the right to put their interest back to us if certain conditions were not satisfied. Accordingly, the land we contributed and subsequent additional spend, which had a carrying value of $60.1 million, was previously recorded on our balance sheet under “Receivables, prepaid expenses, and other assets.” During our third quarter of fiscal 2022, the put option lapsed and we deconsolidated this land and recognized the land sale.
The table below provides information on joint ventures entered into during the nine-months ended July 31, 2021 ($ amounts in thousands):
Land Development Joint VenturesRental Property Joint Ventures
Number of unconsolidated joint ventures entered into during the period4 4
Investment balance at July 31, 2021$102,700 $51,300 

Subsequent event
In August 2022, we entered into two joint ventures with an unrelated party to develop two luxury condominium communities in the New York City metropolitan area. Prior to the formation of these ventures, we capitalized approximately $106.5 million of land and land development costs. Our partner acquired a 55% interest in these ventures for approximately $51.6 million, which equaled our pro-rata cost basis. We received cash of $61.2 million as a result of these formations, which included a combination of partner and loan proceeds, resulting in our initial investment in these ventures of $45.5 million. Concurrent with their formation, the joint ventures entered into construction loan agreements aggregating $219.7 million to finance the remaining development of these projects, of which $17.6 million was borrowed at the closing of the ventures. We, and an affiliate of our partner, provided certain guarantees under the construction loan agreements. We estimate that our maximum exposure under recourse guarantees, if the full amount of the loan commitments were borrowed, would be $44.9 million without taking into account any recoveries from the underlying collateral or any reimbursement from our partner.

Results of Operations and Intra-entity Transactions
From time to time, certain of our land development and rental property joint ventures sell assets to unrelated parties or to our joint venture partner. In connection with these sales, we recognized gains of $17.0 million in the three-month period ended July 31, 2021. No gains were recognized in the three-month period ended July 31, 2022. In the nine-month periods ended July 31, 2022 and 2021, we recognized gains of $21.0 million and $34.5 million, respectively. These gains are included in “Income from unconsolidated entities” on our Condensed Consolidated Statements of Operations and Comprehensive Income.
10

In the nine-month period ended July 31, 2021, we recognized other-than-temporary impairment charges on our investments in certain Home Building Joint Ventures of $2.1 million. There were no other-than-temporary impairment charges recognized in the nine-month period ended July 31, 2022 or the three-month periods ended July 31, 2022 and 2021.
In the three-month periods ended July 31, 2022 and 2021, we purchased land from unconsolidated entities, principally related to our acquisition of lots from our Land Development Joint Ventures, totaling $2.4 million and $3.2 million, respectively. In the nine-month periods ended July 31, 2022 and 2021, we purchased land from unconsolidated entities, principally related to our acquisition of lots from our Land Development Joint Ventures, totaling $40.3 million and $11.0 million, respectively. Our share of income from the lots we acquired was insignificant in each period. In the three-month periods ended July 31, 2022 and 2021, we sold land to unconsolidated entities, which principally involved land sales to our Rental Property Joint Ventures, totaling $159.7 million and $9.8 million, respectively. In the nine-month periods ended July 31, 2022 and 2021, we sold land to unconsolidated entities, which principally involved land sales to our Rental Property Joint Ventures, totaling $311.5 million and $149.7 million, respectively. These amounts are included in “Land sales and other revenue” on our Condensed Consolidated Statements of Operations and Comprehensive Income and are generally sold at or near our land basis.
Guarantees
The unconsolidated entities in which we have investments generally finance their activities with a combination of partner equity and debt financing. In some instances, we have guaranteed portions of debt of unconsolidated entities. These guarantees may include any or all of the following: (i) project completion guarantees, including any cost overruns; (ii) repayment guarantees, generally covering a percentage of the outstanding loan; (iii) carry cost guarantees, which cover costs such as interest, real estate taxes, and insurance; (iv) an environmental indemnity provided to the lender that holds the lender harmless from and against losses arising from the discharge of hazardous materials from the property and non-compliance with applicable environmental laws; and (v) indemnification of the lender from “bad boy acts” of the unconsolidated entity.
In some instances, we and our joint venture partner have provided joint and several guarantees in connection with loans to unconsolidated entities. In these situations, we generally seek to implement a reimbursement agreement with our partner that 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 July 31, 2022, in the event we become legally obligated to perform under a guarantee of an obligation of an unconsolidated entity due to a triggering event, the collateral in such entity should be sufficient to repay a significant portion of the obligation. If it is not, we and our partners would need to contribute additional capital to the venture.
Information with respect to certain of the Company’s unconsolidated entities’ outstanding debt obligations, loan commitments and our guarantees thereon are as follows ($ amounts in thousands):
July 31, 2022
Loan commitments in the aggregate$2,623,200 
Our maximum estimated exposure under repayment and carry cost guarantees if the full amount of the debt obligations were borrowed (1)
$544,600 
Debt obligations borrowed in the aggregate$980,600 
Our maximum estimated exposure under repayment and carry cost guarantees of the debt obligations borrowed$306,500 
Estimated fair value of guarantees provided by us related to debt and other obligations$15,300 
Terms of guarantees
1 month - 3.9 years
(1)    Our maximum estimated exposure under repayment and carry cost guarantees includes approximately $95.0 million related to our unconsolidated Joint Venture VIEs.

The maximum exposure estimates presented above do not take into account any recoveries from the underlying collateral or any reimbursement from our partners. Nor do they include any potential exposures related to project completion guarantees or the indemnities noted above, which are not estimable. We have not made payments under any of the outstanding guarantees, nor have we been called upon to do so.
Variable Interest Entities

We have both unconsolidated and consolidated joint venture-related variable interests in VIEs. Information regarding our involvement in unconsolidated joint-venture related variable interests in VIEs has been disclosed throughout information presented above.
11


The table below provides information as of July 31, 2022 and October 31, 2021, regarding our consolidated joint venture-related variable interests in VIEs ($ amounts in thousands):
Balance Sheet ClassificationJuly 31,
2022		October 31,
2021
Number of Joint Venture VIEs that the Company is the primary beneficiary and consolidates
5 5 
Carrying value of consolidated VIEs assetsReceivables prepaid expenses, and other assets and Investments in unconsolidated entities$82,000 $90,800 
Our partners’ interests in consolidated VIEsNoncontrolling interest$9,700 $39,400 
Our ownership interest in the above consolidated Joint Venture VIEs ranges from 82% to 98%.
As shown above, we are the primary beneficiary of certain VIEs due to our controlling financial interest in such ventures as we have the power to direct the activities that most significantly impact the joint ventures’ performance and the obligation to absorb expected losses or receive benefits from the joint ventures. The assets of these VIEs can only be used to settle the obligations of the VIEs. In addition, in certain of the joint ventures, in the event additional contributions are required to be funded to the joint ventures prior to the admission of any additional investor at a future date, we will fund 100% of such contributions, including our partner’s pro rata share, which we expect would be funded through an interest-bearing loan. For other VIEs, we are not the primary beneficiary because the power to direct the activities of such VIEs that most significantly impact their performance was either shared by us and such VIEs’ other partners or such activities were controlled by our partner. For VIEs where the power to direct significant activities is shared, business plans, budgets, and other major decisions are required to be unanimously approved by all members. Management and other fees earned by us are nominal and believed to be at market rates, and there is no significant economic disproportionality between us and other members.
Joint Venture Condensed Combined Financial Information
The Condensed Combined Balance Sheets, as of the dates indicated, and the Condensed Combined Statements of Operations, for the periods indicated, for the unconsolidated entities in which we have an investment are included below (in thousands):
Condensed Combined Balance Sheets:
 July 31,
2022		October 31,
2021
Cash and cash equivalents$233,544 $153,582 
Inventory1,062,469 964,962 
Loans receivable – net38,666 86,727 
Rental properties1,581,268 1,496,355 
Rental properties under development1,303,236 697,659 
Other assets296,201 227,579 
Total assets$4,515,384 $3,626,864 
Debt – net of deferred financing costs$2,040,702 $1,677,619 
Other liabilities308,845 248,545 
Members’ equity2,165,837 1,700,700 
Total liabilities and equity$4,515,384 $3,626,864 
Company’s net investment in unconsolidated entities (1)
$767,566 $599,101 
(1)    Our underlying equity in the net assets of the unconsolidated entities was (less) more than our net investment in unconsolidated entities by $(5.4) million and $16.5 million as of July 31, 2022 and October 31, 2021, respectively, and these differences are primarily a result of other than temporary impairments we have recognized; 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.
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Condensed Combined Statements of Operations:
 Three months ended July 31,Nine months ended July 31,
 2022202120222021
Revenues$114,542 $89,304 $401,065 $268,257 
Cost of revenues60,566 52,414 256,256 209,273 
Other expenses45,967 37,497 128,742 107,968 
Total expenses106,533 89,911 384,998 317,241 
Loss on disposition of loans and real estate owned— (2,575)(113)(2,785)
Income (loss) from operations8,009 (3,182)15,954 (51,769)
Other income (2)
3,919 44,065 44,156 79,398 
Income before income taxes11,928 40,883 60,110 27,629 
Income tax expense (benefit)37 27 194 (1,632)
Net income including earnings from noncontrolling interests11,891 40,856 59,916 29,261 
Less: income attributable to noncontrolling interest— — — (174)
Net income attributable to controlling interest$11,891 $40,856 $59,916 $29,087 
Company’s equity in earnings of unconsolidated entities (3)
$2,984 $16,636 $27,954 $28,313 
(2)     The nine months ended July 31, 2022 includes $29.9 million related to the sale of an asset by one Rental Property Joint Venture. The three months and nine months ended July 31, 2021 includes $42.3 million and $74.9 million, respectively, related to the sale of assets by our Rental Property Joint Ventures.
(3)    Differences between our equity in earnings of unconsolidated entities and the underlying net income (loss) of the entities are primarily a result of distributions from entities in excess of the carrying amount of our investment; promote earned on the gains recognized by joint ventures and those promoted cash flows being distributed; other than temporary impairments we have recognized; recoveries of previously incurred charges; unrealized gains on our retained joint venture interests; gains recognized from the sale of our investment to our joint venture partner; and our share of the entities’ profits related to home sites purchased by us which reduces our cost basis of the home sites acquired.
5. Receivables, Prepaid Expenses, and Other Assets
Receivables, prepaid expenses, and other assets at July 31, 2022 and October 31, 2021, consisted of the following (amounts in thousands):
July 31, 2022October 31, 2021
Expected recoveries from insurance carriers and others$14,172 $16,773 
Improvement cost receivable71,202 67,626 
Escrow cash held by our wholly owned title company79,211 41,429 
Properties held for rental apartment and commercial development191,283 381,401 
Prepaid expenses39,159 34,960 
Right-of-use asset105,280