Commitments and Contingencies

9 Months Ended

Jul. 31, 2011

Commitments and Contingencies [Abstract]

14. Commitments and Contingencies

Generally, the Company’s option and purchase agreements to acquire land parcels do not require the Company to purchase those land parcels, although the Company may, in some cases, forfeit any deposit balance outstanding if and when it terminates an option or purchase agreement. If market conditions are weak, approvals needed to develop the land are uncertain or other factors exist that make the purchase undesirable, the Company may not expect to acquire the land. Whether an option or purchase agreement is legally terminated or not, the Company reviews the amount recorded for the land parcel subject to the option or purchase agreement to determine if the amount is recoverable. While the Company may not have formally terminated the option and purchase agreements for those land parcels that it does not expect to acquire, it has written off any non-refundable deposits and costs previously capitalized to such land parcels in the periods that it determined such costs were not recoverable.

Information regarding the Company’s purchase commitments at July 31, 2011 and October 31, 2010 is provided in the table below (amounts in thousands).


	July 31,		October 31,
	2011		2010
Aggregate purchase commitments
Unrelated parties	$	438,158	$	419,194
Unconsolidated entities that the Company has investments in		123,804		131,217

Total	$	561,962	$	550,411


Deposits against aggregate purchase commitments	$	45,825	$	47,111
Credits to be received from unconsolidated entities		43,803		37,272
Additional cash required to acquire land		472,334		466,028

Total	$	561,962	$	550,411

Amount of additional cash required to acquire land included in accrued expenses	$	57,012	$	77,618

The Company has additional land parcels under option that have been excluded from the aforementioned aggregate purchase amounts since it does not believe that it will complete the purchase of these land parcels and no additional funds will be required from the Company to terminate these contracts.

At July 31, 2011, the Company had investments in and advances to a number of unconsolidated entities, was committed to invest or advance additional funds and had guaranteed a portion of the indebtedness and/or loan commitments of these entities. In addition, the Company was subject to litigation related to one joint venture in which it had an investment. See Note 3, “Investments in and Advances to Unconsolidated Entities and Non-Performing Loan Portfolio,” for more information regarding the Company’s commitments to these entities.

At July 31, 2011, the Company had $777.5 million available to it under its $885 million revolving credit facility with 12 banks, which extends to October 2014. At July 31, 2011, the Company had no outstanding borrowings under the credit facility but had outstanding letters of credit of approximately $107.5 million. At July 31, 2011, interest would have been payable on borrowings under our credit facility at 2.75% (subject to adjustment based upon our debt rating and leverage ratios) above the Eurodollar rate or at other specified variable rates as selected by us from time to time. The Company is obligated to pay an undrawn commitment fee of 0.625% (subject to adjustment based upon our debt rating and leverage ratios) based on the average daily unused amount of the credit facility. Under the terms of the credit facility, the Company is not permitted to allow its maximum leverage ratio (as defined in the underlying credit agreement) to exceed 1.75 to 1.00, and is required to maintain a minimum tangible net worth (as defined in the underlying credit agreement) of approximately $1.91 billion at July 31, 2011. At July 31, 2011, the Company’s leverage ratio was approximately 0.16 to 1.00, and its tangible net worth was approximately $2.58 billion. In addition, at July 31, 2011, the Company had $15.0 million of letters of credit outstanding with three banks which were not part of its new credit facility; these letters of credit were collateralized by $16.7 million of cash deposits.

At July 31, 2011, the Company had outstanding surety bonds amounting to $384.8 million, primarily related to its obligations to various governmental entities to construct improvements in the Company’s various communities. The Company estimates that an aggregate of $188.1 million of work remains on these improvements. The Company has an additional $69.6 million of surety bonds outstanding that guarantee other obligations of the Company. The Company does not believe it is probable that any outstanding bonds will be drawn upon.

At July 31, 2011, the Company had agreements of sale outstanding to deliver 1,780 homes with an aggregate sales value of $1.02 billion.

The Company’s mortgage subsidiary provides mortgage financing for a portion of the Company’s home closings. The Company’s mortgage subsidiary funds its commitments through a combination of its own capital, capital provided from the Company, its $50 million repurchase facility and from the sale of mortgage loans to various investors. For those home buyers that obtain mortgages from the Company’s mortgage subsidiary, it determines whether the home buyer qualifies for the mortgage he or she is seeking based upon information provided by the home buyer and other sources. For those home buyers that qualify, the Company’s mortgage subsidiary provides the home buyer with a mortgage commitment that specifies the terms and conditions of a proposed mortgage loan based upon then-current market conditions. Prior to the actual closing of the home and funding of the mortgage, the home buyer will “lock” in an interest rate based upon the terms of the commitment. At the time of rate lock, the Company’s mortgage subsidiary agrees to sell the proposed mortgage loan to one of several outside recognized mortgage financing institutions, which is willing to honor the terms and conditions, including the locked interest rate, committed to the home buyer. The Company believes that these institutions have adequate financial resources to honor their commitments to its mortgage subsidiary.

Information regarding the Company’s mortgage commitments at July 31, 2011 and October 31, 2010 is provided in the table below (amounts in thousands).


	July 31,		October 31,
	2011		2010
Aggregate mortgage loan commitments
IRLCs	$	153,590	$	169,525
Non-IRLCs		314,291		263,477

Total	$	467,881	$	433,002


Investor commitments to purchase:
IRLCs	$	153,590	$	169,525
Mortgage loans receivable		41,537		91,689

Total	$	195,127	$	261,214


Amount of commitments with unlocked interest rates by home buyer	$	314,291	$	263,477