tollbrothers 10_Q_apr_2006

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
6 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
x
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED April 30, 2006
OR
x 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 1-9186

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)

Not applicable
(Former name, former address and former fiscal year, if changed since last report)
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 6 No x
x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-
accelerated filer. See definition of ‘‘accelerated filer and large accelerated filer’’ in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer 6 Accelerated filer x Non-accelerated filer x
x
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act)
Yes x No 6
x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the
latest practicable date:
At May 31, 2006, there were approximately 153,824,000 shares of Common Stock, $.01 par value,
outstanding.

TOLL BROTHERS, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

Page No.

Statement on Forward-Looking Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PART I. Financial Information
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets at April 30, 2006 (Unaudited)
and October 31, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Condensed Consolidated Statements of Income for the Six-Month and
Three-Month periods ended April 30, 2006 and 2005 (Unaudited) . . . . 3
Condensed Consolidated Statements of Cash Flows for the Six Months
Ended April 30, 2006 and 2005 (Unaudited) . . . . . . . . . . . . . . . . . . . . 4
Notes to Condensed Consolidated Financial Statements (Unaudited) . . . . 5
ITEM 2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . 32
ITEM 4. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
PART II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds . . . . . . . . . . 34
Item 3. Defaults upon Senior Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . 35
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Item 6. Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

STATEMENT ON FORWARD-LOOKING INFORMATION

Certain information included herein and in our other reports, SEC filings, statements and presentations is
forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995, including, but
not limited to, statements concerning our anticipated operating results, financial resources, changes in
revenues, changes in profitability, interest expense, growth and expansion, anticipated income to be realized
from our investments in unconsolidated entities, the ability to acquire land, the ability to secure governmental
approvals and the ability to open new communities, the ability to sell homes and properties, the ability to
deliver homes from backlog, the average delivered prices of homes, the ability to secure materials and
subcontractors, the ability to maintain the liquidity and capital necessary to expand and take advantage of
future opportunities, and stock market valuations. In some cases you can identify those so called forward-
looking statements by words such as ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘expect,’’ ‘‘plan,’’ ‘‘anticipate,’’ ‘‘believe,’’
‘‘estimate,’’ ‘‘predict,’’ ‘‘potential,’’ ‘‘project,’’ ‘‘intend,’’ ‘‘can,’’ ‘‘could,’’ ‘‘might,’’ or ‘‘continue’’ or the
negative of those words or other comparable words. Such forward-looking information involves important
risks and uncertainties that could significantly affect actual results and cause them to differ materially from
expectations expressed herein and in our other reports, SEC filings, statements and presentations. These risks
and uncertainties include local, regional and national economic conditions, the demand for homes, domestic
and international political events, uncertainties created by terrorist attacks, the effects of governmental
regulation, the competitive environment in which we operate, fluctuations in interest rates, changes in home
prices, the availability and cost of land for future growth, the availability of capital, uncertainties and
fluctuations in capital and securities markets, changes in tax laws and their interpretation, legal proceedings,
the availability of adequate insurance at reasonable cost, the ability of customers to finance the purchase of
homes, the availability and cost of labor and materials, and weather conditions. Additional information
concerning potential factors that we believe could cause our actual results to differ materially from expected
and historical results is included in Item 1A ‘‘Risk Factors’’ of our Annual Report on Form 10-K for the
fiscal year ended October 31, 2005. Moreover, the financial guidance contained herein related to our expected
results of operations for fiscal 2006 reflects our expectations as of May 23, 2006 and is not being reconfirmed
or updated by this Quarterly Report on Form 10-Q.
If one or more of the assumptions underlying our forward-looking statements proves incorrect, then our
actual results, performance or achievements could differ materially from those expressed in, or implied by the
forward-looking statements contained in this report. Therefore, we caution you not to place undue reliance on
our forward-looking statements. This statement is provided as permitted by the Private Securities Litigation
Reform Act of 1995.
When this report uses the words ‘‘we,’’ ‘‘us,’’ and ‘‘our,’’ they refer to Toll Brothers, Inc. and its
subsidiaries, unless the context otherwise requires. Reference herein to ‘‘fiscal 2006,’’ ‘‘fiscal 2005,’’ and
‘‘fiscal 2004’’ refer to our fiscal year ending October 31, 2006, and our fiscal years ended October 31, 2005
and October 31, 2004, respectively.

1

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
April 30, October 31,
2006 2005
(Unaudited)
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . .. . .. . . .. . . .. . . .. . $ 398,110 $ 689,219
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . .. . . .. . . .. . . .. . 5,939,352 5,068,624
Property, construction and ofﬁce equipment, net . . . . . . . . .. . .. . . .. . . .. . . .. . 95,640 79,524
Receivables, prepaid expenses and other assets . . . . . . . . . .. . .. . . .. . . .. . . .. . 170,945 185,620
Contracts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . .. . . .. . . .. . . .. . 97,524
Mortgage loans receivable . . . . . . . . . . . . . . . . . . . . . . . . .. . .. . . .. . . .. . . .. . 59,606 99,858
Customer deposits held in escrow . . . . . . . . . . . . . . . . . . . .. . .. . . .. . . .. . . .. . 87,636 68,601
Investments in and advances to unconsolidated entities . . . .. . .. . . .. . . .. . . .. . 224,697 152,394
$7,073,510 $6,343,840
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Loans payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . .. . . .. . $ 689,837 $ 250,552
Senior notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . .. . . .. . 1,140,597 1,140,028
Senior subordinated notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . .. . . .. . 350,000 350,000
Mortgage company warehouse loan . . . . . . . . . . . . . . . . . . . . . . . .. . . .. . . .. . 48,679 89,674
Customer deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . .. . . .. . 446,564 415,602
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . .. . . .. . 259,995 256,557
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . .. . . .. . 757,334 791,769
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . .. . . .. . 276,715 282,147
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,969,721 3,576,329
Minority interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,983 3,940
Stockholders’ equity
Preferred stock, none issued
Common stock, 156,292 shares issued at April 30, 2006 and October 31, 2005 . 1,563 1,563
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230,119 242,546
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,914,848 2,576,061
Treasury stock, at cost – 1,590 shares and 1,349 shares at April 30, 2006 and
October 31, 2005, respectively. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (49,724) (56,599)
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,096,806 2,763,571
$7,073,510 $6,343,840

See accompanying notes

2

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
(Unaudited)

Six months ended April 30, Three months ended April 30,
2006 2005 2006 2005
Revenues:
Traditional home sales . . . . . . . . . . . . . . . . . . . . . . $2,679,187 $2,215,095 $1,400,478 $1,225,998
Percentage of completion . . . . . . . . . . . . . . . . . . . . 97,524 39,955
Land sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,778 11,025 2,100 9,800
2,783,489 2,226,120 1,442,533 1,235,798
Cost of revenues:
Traditional home sales . . . . . .. . . .. . .. . . .. . . .. 1,860,634 1,516,142 976,543 830,649
Percentage of completion . . . .. . . .. . .. . . .. . . .. 78,524 31,178
Land sales . . . . . . . . . . . . . . .. . . .. . .. . . .. . . .. 5,939 6,095 2,103 5,316
Interest. . . . . . . . . . . . . . . . . .. . . .. . .. . . .. . . .. 58,629 49,938 29,875 28,126
2,003,726 1,572,175 1,039,699 864,091
Selling, general and administrative . . . . . . . . . . . . . . . 281,224 223,423 142,046 116,358
Income from operations . . . . . . . . . . . . . . . . . . . .... 498,539 430,522 260,788 255,349
Other:
Equity earnings from unconsolidated entities . . . . .. 29,393 5,308 12,824 3,373
Interest and other . . . . . . . . . . . . . . . . . . . . . . . . .. 22,293 15,992 10,966 9,109
Income before income taxes . . . . . . . . . . . . . . . . . . .. 550,225 451,822 284,578 267,831
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 211,438 171,496 109,641 97,698
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 338,787 $ 280,326 $ 174,937 $ 170,133
Earnings per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.19 $ 1.83 $ 1.13 $ 1.10
Diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.04 $ 1.67 $ 1.06 $ 1.00
Weighted average number of shares:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154,919 153,140 154,763 154,627
Diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166,377 167,718 165,727 169,352


3

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)

Six Months ended April 30,
2006 2005
Cash flow from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 338,787 $ 280,326
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,227 8,978
Amortization of initial benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . 952 1,901
Share-based compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,402
Equity earnings in unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . (29,393) (5,308)
Distributions from unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . 4,383 536
Deferred tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,250 12,993
Provision for inventory write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,145 2,554
Changes in operating assets and liabilities
Increase in inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (683,553) (380,172)
Origination of mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (405,317) (368,422)
Sale of mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 445,569 389,672
Increase in contracts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (97,524)
Increase (decrease) in receivables, prepaid expenses and other assets . . . . 13,647 (5,392)
Increase in customer deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,927 75,089
(Decrease) increase in accounts payable and accrued expenses . . . . . . . . . (29,641) 84,678
Decrease in current income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . (3,812) (26,097)
Net cash (used in) provided by operating activities . . . . . . . . . . . . . . . . (374,761) 71,336
Cash flow from investing activities:
Purchase of property and equipment, net . . . . . . . . . . . . . .. . . .. . . .. . . .. . . (26,221) (18,450)
Purchases of marketable securities . . . . . . . . . . . . . . . . . .. . . .. . . .. . . .. . . (1,571,420) (1,970,588)
Sale of marketable securities. . . . . . . . . . . . . . . . . . . . . . .. . . .. . . .. . . .. . . 1,571,420 2,085,617
Investments in and advances to unconsolidated entities . . .. . . .. . . .. . . .. . . (77,433) (19,933)
Acquisition of joint venture interest . . . . . . . . . . . . . . . . .. . . .. . . .. . . .. . . (40,751)
Distributions from unconsolidated entities . . . . . . . . . . . . .. . . .. . . .. . . .. . . 6,772 4,479
Net cash (used in) provided by investing activities . . .............. (137,633) 81,125
Cash flow from financing activities:
Proceeds from loans payable. . . . . . . . . . . . . . . . . . . . . . . . . . .. . . .. . . .. . . 913,566 497,048
Principal payments of loans payable . . . . . . . . . . . . . . . . . . . . .. . . .. . . .. . . (643,162) (545,160)
Proceeds from stock based benefit plans . . . . . . . . . . . . . . . . . .. . . .. . . .. . . 9,594 27,175
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . .. . . .. . . (61,756) (30,690)
Change in minority interest. . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . .. . . .. . . 3,043
Net cash provided by (used in) financing activities . . . . .. . . .. . . .. . . 221,285 (51,627)
Net (decrease) increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . (291,109) 100,834
Cash and cash equivalents, beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . 689,219 465,834
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 398,110 $ 566,668


4

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of
Toll Brothers, Inc. (the ‘‘Company’’), 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 the Company
has effective control of the entity, in which case the entity would be consolidated.
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, 2005 balance sheet amounts and disclosures included herein have been
derived from our October 31, 2005 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 for complete financial statements, we suggest that they be read in conjunction
with the consolidated financial statements and notes thereto included in our October 31, 2005 Annual Report
on 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 April 30, 2006, the results of our operations for the six-month and three-month
periods ended April 30, 2006 and 2005 and our cash flows for the six months ended April 30, 2006 and 2005.
The results of operations for such interim periods are not necessarily indicative of the results to be expected
for the full year.

Recent Accounting Pronouncements
On December 16, 2004, the Financial Accounting Standards Board (‘‘FASB’’) issued Statement of
Financial Accounting Standards (‘‘SFAS’’) No. 123 (revised 2004), ‘‘Share-Based Payment’’ (‘‘SFAS 123R’’).
In April 2005, the SEC adopted a rule permitting implementation of SFAS 123R at the beginning of the fiscal
year commencing after June 15, 2005. Under the provisions of SFAS 123R, an entity is required to treat all
stock-based compensation as a cost that is reflected in the financial statements. The Company was required to
adopt SFAS 123R beginning in its fiscal quarter ended January 31, 2006. Under the provisions of SFAS
123R, the Company had the choice of adopting the fair-value-based method of expensing of stock options
using (a) the ‘‘modified prospective method,’’ whereby the Company recognizes the expense only for periods
beginning after October 31, 2005, or (b) the ‘‘modified retrospective method,’’ whereby the Company
recognizes the expense for all years and interim periods since the effective date of SFAS 123, or for only
those interim periods during the year of initial adoption of SFAS 123R. The Company adopted SFAS 123R
using the modified prospective method. See Note 7, ‘‘Stock Based Benefit Plans,’’ for information regarding
expensing of stock options in fiscal 2006 and for pro forma information regarding the Company’s expensing
of stock options for fiscal 2005.

Stock Split
On June 9, 2005, the Company’s Board of Directors declared a two-for-one split of the Company’s
common stock in the form of a stock dividend to stockholders of record on June 21, 2005. The additional
shares of stock were distributed as of the close of business on July 8, 2005. All share and per share
information has been restated to reflect this split.

Acquisition
In January 2004, the Company entered into a joint venture in which it had a 50% interest with an
unrelated party to develop Maxwell Place, a luxury condominium community of approximately 800 units in
Hoboken, New Jersey. In November 2005, the Company acquired its partner’s 50% equity ownership interest

5

in this joint venture. As a result of the acquisition, the Company now owns 100% of the joint venture and it
has been included as a consolidated subsidiary of the Company as of the acquisition date. As of the
acquisition date, the joint venture had open contracts of sale to deliver 165 units with a sales value of
approximately $128.3 million. The Company’s investment in and subsequent purchase of the partner’s interest
in the joint venture is not material to the financial position of the Company. The Company is recognizing
revenue and costs related to this project using the percentage of completion method of accounting.

Reclassification
The presentation of certain prior period amounts have been reclassified to conform to the fiscal 2006
presentation.

2. Inventory
Inventory consisted of the following (amounts in thousands):
2006 2005
Land and land development costs . . . . . . . . . . . . . .. . .. . . .. . . $2,278,583 $1,717,825
Construction in progress . . . . . . . . . . . . . . . . . . . . .. . .. . . .. . . 3,061,169 2,709,795
Sample homes and sales offices . . . . . . . . . . . . . . .. . .. . . .. . . 216,902 202,286
Land deposits and costs of future development . . . .. . .. . . .. . . 369,957 427,192
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . .. . . .. . . 12,741 11,526
$5,939,352 $5,068,624

Construction in progress includes the cost of homes under construction, land and land development costs
and the carrying costs of lots that have been substantially improved.

The Company capitalizes certain interest costs to inventory during the development and construction
period. Capitalized interest is charged to cost of revenues when the related inventory is delivered for
traditional home sales or when the related inventory is charged to cost of revenues under percentage of
completion accounting. Interest incurred, capitalized and expensed for the six-month and three-month periods
ended April 30, 2006 and 2005 is summarized as follows (amounts in thousands):
2006 2005 2006 2005
Interest capitalized,
beginning of period . . . . . . . . . . .... $162,672 $173,442 $172,862 $180,673
Interest incurred . . . . . . . . . . . . . .... 66,655 58,148 33,640 28,998
Capitalized interest in inventory
acquired . . . . . . . . . . . . . . . . . .... 6,100
Interest expensed . . . . . . . . . . . . .... (58,629) (49,938) (29,875) (28,126)
Write-off to cost and expenses . . .... (274) (855) (103) (748)
Interest capitalized, end of period . . . . $176,524 $180,797 $176,524 $180,797

Interest included in cost of revenues for the six-month and three-month periods ended April 30, 2006
and 2005 was (amounts in thousands):
2006 2005 2006 2005
Traditional home sales . . . . . . . . . . . . $55,346 $49,512 $28,516 $27,754
Percentage of completion . . . . . . . . . . 2,545 1,128
Land sales . . . . . . . . . . . . . . . . . . . . . 738 426 231 372
$58,629 $49,938 $29,875 $28,126

6

The Company provided for inventory write-downs and the expensing of costs that it believed not to be
recoverable of $13.1 million and $12.0 million in the six-month and three-month periods ended April 30, 2006,
respectively. Of these amounts, $2.4 million and $1.3 million were applicable to land held for future
communities in the six-month and three-month periods ended April 30, 2006, respectively.
The Company provided for inventory write-downs and the expensing of costs that it believed not to be
recoverable of $2.6 million and $.2 million in the six-month and three-month periods ended April 30, 2005,
respectively. Of these amounts, $1.5 million was applicable to land held for future communities in the six-
month period ended April 30, 2005.
The Company has evaluated its land purchase contracts to determine if the selling entity is a variable
interest entity (‘‘VIE’’) and, if it is, whether the Company is the primary beneficiary of the entity. The
Company does not possess legal title to the land, and its risk is generally limited to deposits paid to the
seller. The creditors of the seller generally have no recourse against the Company. At April 30, 2006 and
October 31, 2005, the Company had determined that it was not the primary beneficiary of any VIE related to
its land purchase contracts and had not recorded any land purchase contracts as inventory.

3. Investments in and Advances to Unconsolidated Entities
The Company has investments in and advances to several joint ventures with unrelated parties to develop
land. Some of these joint ventures develop land for the sole use of the venture partners, including the
Company, and others develop land for sale to the venture partners and to unrelated builders. The Company
recognizes its share of earnings from the sale of home sites to other builders. The Company does not
recognize earnings from home sites it purchases from the joint ventures, but instead reduces its cost basis in
these home sites by its share of the earnings on the home sites. At April 30, 2006, the Company had
approximately $148.6 million invested in or advanced to these joint ventures and was committed to
contributing additional capital in an aggregate amount of approximately $170.5 million (net of the Company’s
$129.6 million of loan guarantees related to two of the joint ventures’ loans) if required by the joint ventures.
At April 30, 2006, two of the joint ventures had an aggregate of $1.0 billion of loan commitments, and had
approximately $816.9 million borrowed against the commitments, of which the Company’s guarantee of its
pro-rata share of the borrowings was $103.2 million.
In October 2004, the Company entered into a joint venture in which it has a 50% interest with an
unrelated party to convert a 525-unit apartment complex, The Hudson Tea Buildings, located in Hoboken,
New Jersey, into luxury condominium units. At April 30, 2006, the Company had investments in and
advances to the joint venture of $44.5 million, and was committed to making up to $1.5 million of additional
investments in and advances to the joint venture.
The Company has investments in and advances to two joint ventures with unrelated parties to develop
luxury condominium projects, including for-sale residential units and commercial space. At April 30, 2006,
the Company had investments in and advances to the joint ventures of $17.0 million, and was committed to
making up to $127.2 million of additional investments in and advances to the joint ventures if required by the
joint ventures. At April 30, 2006, one of the joint ventures had a $254.2 million loan commitment and had
approximately $89.4 million borrowed against the commitment, of which the Company guaranteed
$18.0 million.
In fiscal 2005, the Company, together with the Pennsylvania State Employees Retirement System
(‘‘PASERS’’), formed Toll Brothers Realty Trust Group II (‘‘Trust II’’) to be in a position to take advantage
of commercial real estate opportunities. Trust II is owned 50% by the Company and 50% by PASERS.
At April 30, 2006, the Company had an investment of $8.1 million in Trust II. In addition, the Company and
PASERS each entered into subscription agreements that expire in September 2007, whereby each agreed to
invest additional capital in an amount not to exceed $11.1 million if required by Trust II. The Company
provides development and management services to Trust II and recognized fees for such services under the
terms of various agreements in the amounts of $1.0 million and $.7 million in the six-month and three-month
periods ended April 30, 2006, respectively. Prior to the formation of Trust II, the Company used Toll Brothers
Realty Trust Group (‘‘Trust’’) to invest in commercial real estate opportunities.

7

The Trust, formed in 1998, is effectively owned one-third by the Company; one-third by Robert I. Toll,
Bruce E. Toll (and members of his family), Zvi Barzilay (and members of his family), Joel H. Rassman and
other current and former members of the Company’s senior management; and one-third by PASERS
(collectively, the ‘‘Shareholders’’). The Shareholders entered into subscription agreements whereby each group
has agreed to invest additional capital in an amount not to exceed $1.9 million if required by the Trust. The
subscription agreements expire in August 2006. At April 30, 2006, the Company had an investment of
$6.6 million in the Trust. The Company provides development, ﬁnance and management services to the Trust
and recognized fees under the terms of various agreements in the amounts of $1.2 million and $.6 million in
the six-month and three-month periods ended April 30, 2006, respectively. The Company recognized fees
under the terms of various agreements in the amounts of $1.5 million and $1.1 million in the six-month and
three-month periods ended April 30, 2005, respectively. The Company believes that the transactions between
itself and the Trust were on terms no less favorable than it would have agreed to with unrelated parties.
The Company’s investments in these entities are accounted for using the equity method.

4. Accrued Expenses
Accrued expenses at April 30, 2006 and October 31, 2005 consisted of the following (amounts in
thousands):
2006 2005
Land, land development and construction costs . . .. . .. . . .. . . .. . $358,374 $385,031
Compensation and employee beneﬁt costs . . . . . . .. . .. . . .. . . .. . 111,095 122,836
Insurance and litigation. . . . . . . . . . . . . . . . . . . . .. . .. . . .. . . .. . 104,128 92,809
Warranty costs . . . . . . . . . . . . . . . . . . . . . . . . . . .. . .. . . .. . . .. . 54,372 54,722
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . .. . . .. . . .. . 40,440 34,431
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . .. . . .. . . .. . 88,925 101,940
$757,334 $791,769

The Company accrues for the expected warranty costs at the time each home is closed and title and
possession have been transferred to the home buyer. Costs are accrued based upon historical experience.
Changes in the warranty accrual for the six-month and three-month periods ended April 30, 2006 and 2005
are as follows (amounts in thousands):
2006 2005 2006 2005
Balance, beginning of period . .. . . .. $ 54,722 $ 42,133 $54,649 $43,479
Additions . . . . . . . . . . . . . . . . .. . . .. 16,924 15,512 8,393 8,830
Charges incurred . . . . . . . . . . .. . . .. (17,274) (11,587) (8,670) (6,251)
Balance, end of period . . . . . . .. . . .. $ 54,372 $ 46,058 $54,372 $46,058

8

5. Employee Retirement Plan
In October 2004, the Company established an unfunded defined benefit retirement plan effective as of
September 1, 2004, which covers four current or former senior executives and a director of the Company. As
of February 1, 2006, the Company adopted an additional unfunded defined benefit retirement plan for nine
other executives. For the six-month and three-month periods ended April 30, 2006 and 2005, the Company
recognized the following costs related to these plans (amounts in thousands):
2006 2005 2006 2005
Service cost . . . . . . . . . . . . . . . . . . . . $ 168 $ 156 $101 $ 78
Interest cost . . . . . . . . . . . . . . . . . . . . 446 388 241 194
Amortization of initial
benefit obligation . . . . . . . . . . . . . . 952 1,901 503 951
$1,566 $2,445 $845 $1,223

The Company used a 5.65% and a 5.69% discount rate in its calculation of the present value of its
projected benefit obligations for fiscal 2006 and 2005, respectively.

6. Income Taxes
The Company’s estimated combined federal and state income tax rate before providing for the effect of
permanent book-tax differences (‘‘Base Rate’’) was 39.1% at April 30, 2006 for fiscal 2006 and 38.0% at
April 30, 2005 for fiscal 2005.
The effective tax rates for the six-month periods ended April 30, 2006 and 2005 were 38.4% and 38.0%,
respectively. For the six-month period ended April 30, 2006, the difference between the Company’s Base
Rate and effective tax rate was primarily due to the impact on the Company’s tax rate from tax-free income
and a manufacturing tax credit, offset in part by the non-deductible portion of stock option expense related to
incentive stock options. For the six-month period ended April 30, 2005, the primary difference between the
Company’s Base Rate and effective tax rate was the effect of an adjustment due to the recomputation of the
Company’s net deferred tax liability of approximately $3.7 million, resulting from the change in the
Company’s Base Rate from 37.0% at October 31, 2004 to 38.0% at April 30, 2005, offset by tax-free income.
The effective tax rates for the three-month periods ended April 30, 2006 and 2005 were 38.5% and
36.5%, respectively. For the three-month period ended April 30, 2006, the difference between the Company’s
Base Rate and effective tax rate was primarily due to the impact on the Company’s tax rate from tax-free
income and a manufacturing tax credit, offset in part by the non-deductible portion of stock option expense
related to incentive stock options. The difference between the effective rate and the Base Rate in the fiscal
2005 period was the effect of an adjustment due to the recomputation of the Company’s net deferred tax
liability of approximately $2.1 million and the recalculation of the tax provision for the three-month period
ended January 31, 2005 of approximately $.9 million, resulting from a change in the Company’s estimated
Base Rate from 38.5% at January 31, 2005 to 38.0% at April 30, 2005 and by tax-free income.

7. Stock Based Benefit Plans
The Company’s four stock option plans for employees, officers and directors provide for the granting of
incentive stock options and non-qualified options with a term of up to ten years at a price not less than the
market price of the stock at the date of grant. Options granted generally vest over a four-year period for
employees and a two-year period for non-employee directors. No additional options may be granted under the
Company’s Stock Option Plan (1986), the Executives and Non-Employee Directors Stock Option Plan (1993)
and the Company’s Stock Option and Incentive Stock Plan (1995). Shares issued upon the exercise of a stock
option are either from shares held in treasury or new issued shares.

9

The following table summarizes stock option activity for the four plans during the six-month and three-
month periods ended April 30, 2006:
Six months ended Three months ended
April 30, 2006 April 30, 2006
Weighted - Weighted -
Average Average
Shares Exercise Shares Exercise
(in thousands) Price (in thousands) Price
Outstanding, beginning of period . . . .. . . .. . . . 26,155 $11.04 26,683 $12.52
Granted . . . . . . . . . . . . . . . . . . . . . . .. . . .. . . . 1,433 35.97 — —
Exercised . . . . . . . . . . . . . . . . . . . . .. . . .. . . . (1,318) 7.01 (424) 7.82
Cancelled . . . . . . . . . . . . . . . . . . . . .. . . .. . . . (137) 28.33 (126) 28.38
Outstanding, end of period . . . . . . . . .. . . .. . . . 26,133 $12.52 26,133 $12.52
Exercisable, end of period . . . . . . . . . . . . . . . . . 21,272 $15.38 21,272 $15.38

Intrinsic value (in thousands):
Options outstanding at April 30, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $512,987
Options exercisable at April 30, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $356,736
Options exercised in the six months ended April 30, 2006 . . . . . . . . . . . . . . . $ 37,099
Options exercised in the three months ended April 30, 2006 . . . . . . . . . . . . . $ 10,230
Options exercised in the six months ended April 30, 2005 . . . . . . . . . . . . . . . $122,971
Options exercised in the three months ended April 30, 2005 . . . . . . . . . . . . . $ 55,426
Fair value of options that became vested (in thousands):
In the six months and three months ended April 30, 2006 . . . . . . . . . . . . . . . $ 23,551
In the six months and three months ended April 30, 2005 . . . . . . . . . . . . . . . $ 17,424
Weighted-average remaining contractual life (in years):
All options outstanding at April 30, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9
Exercisable options at April 30, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1

The intrinsic value of options outstanding and exercisable is the difference between the fair market value
of the Company’s common stock on April 30, 2006 and the exercise price of the options outstanding and
exercisable on April 30, 2006. The intrinsic value of options exercised is the difference between the fair
market value of the Company’s common stock on the date of exercise and the exercise price.
Prior to the adoption of SFAS 123R, the Company accounted for its stock option plans according to
Accounting Principles Board Opinion No. 25, ‘‘Accounting for Stock Issued to Employees.’’ Accordingly, no
compensation cost was recognized upon issuance or exercise of stock options in fiscal 2005.
The fair value of each option award in fiscal 2006 and 2005 is estimated on the date of grant using a
lattice-based option valuation model that uses ranges of assumptions as disclosed in the following table.
Expected volatilities are based on implied volatilities from traded options on the Company’s stock, historical
volatility of the Company’s stock and other factors. The expected life of options granted is derived from the
historical exercise patterns and anticipated future patterns and represents the period of time that options
granted are expected to be outstanding; the range given below results from certain groups of employees
exhibiting different behavior. The risk-free rate for periods within the contractual life of the option is based
on the U.S. Treasury yield curve in effect at the time of grant. Prior to fiscal 2005, the Company used the
Black-Scholes pricing model to value stock options.

10

2006 2005
Expected volatility . . . . . . . . . . . . . . . . . . .. . . .. . .. 36.33% – 38.28% 27.0% – 33.46%
Weighted-average volatility . . . . . . . . . . . .. . . .. . .. 37.55% 31.31%
Risk-free interest rate . . . . . . . . . . . . . . . . .. . . .. . .. 4.38% – 4.51% 3.13% – 4.2%
Expected life (years) . . . . . . . . . . . . . . . . .. . . .. . .. 4.11 – 9.07 2.8 – 9.07
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . .. . . .. . .. none none
Weighted-average grant date fair value
per share of options granted . . . . . . . . . ........... $15.30 $11.67

During the six-month and three-month periods ended April 30, 2006, the Company recognized
$16.3 million and $5.3 million of expense, respectively, and an income tax benefit of $5.7 million and
$1.7 million related to option awards, respectively. Stock option expense is included in the Company’s
selling, general and administrative expenses. At April 30, 2006, total compensation cost related to non-vested
awards not yet recognized was approximately $41.4 million, unrecognized income tax benefits from non-
vested awards was approximately $14.6 million and the weighted average period over which the Company
expects to recognize such compensation and tax benefit was 1.6 years. The Company expects to recognize
approximately $26.8 million of expense and $9.2 million of income tax benefit for the full fiscal 2006 year
related to option awards.
Had the Company adopted SFAS 123R as of November 1, 2004, pro forma income before taxes, income
taxes, net income and net income per share for the six-month and three-month periods ended April 30, 2005
would have been as follows (amounts in thousands, except per share amounts):
SFAS 123 R
Six months ended April 30, 2005 As Reported Adjustment Pro Forma
Income before income taxes . . . . . . . . . . . . . . . . . . $451,822 $(11,133) $440,689
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171,496 (3,424) 168,072
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $280,326 $ ( 7,709) $272,617
Income per share
Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.83 $ 1.78
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.67 $ 1.63
Three months ended April 30, 2005
Income before income taxes . . . . . . . . . . . . . . . . . . $267,831 $ ( 5,777) $262,054
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,698 (1,777) 95,921
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $170,133 $ ( 4,000) $166,133
Income per share
Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.10 $ 1.07
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.00 $ 0.98

11

8. Earnings per Share Information
Information pertaining to the calculation of earnings per share for the six-month and three-month periods
ended April 30, 2006 and 2005 are as follows (amounts in thousands):
2006 2005 2006 2005
Basic weighted average shares . . . . . . 154,919 153,140 154,763 154,627
Common stock equivalents . . . . . . . . . 11,458 14,578 10,964 14,725
Diluted weighted average shares . . . . . 166,377 167,718 165,727 169,352

9. Stock Repurchase Program
In March 2003, the Company’s Board of Directors authorized the repurchase of up to 20 million shares
of its Common Stock, par value $.01, from time to time, in open market transactions or otherwise, for the
purpose of providing shares for its various employee beneﬁt plans. At April 30, 2006, the number of shares
remaining under the repurchase authorization was approximately 13.8 million shares.

10. Commitments and Contingencies
At April 30, 2006, the aggregate purchase price of land parcels under option, referred to herein as ‘‘land
purchase contracts,’’ ‘‘options,’’ or ‘‘option agreements,’’ was approximately $4.52 billion (including
$1.14 billion of land to be acquired from joint ventures which the Company has invested in, made advances
to or made loan guarantees on behalf of), of which it had paid or deposited approximately $256.8 million.
The amounts included in the purchase price of such land parcels has not been reduced by any amounts the
Company has invested in or made advances to the joint ventures. The Company’s option agreements to
acquire the home sites do not typically require the Company to buy the home sites, although the Company
may, in some cases, forfeit any deposit balance outstanding if and at the time it terminates an option contract.
Of the $256.8 million the Company had paid or deposited on these purchase agreements at April 30, 2006,
$171.3 million was non-refundable. Any deposit in the form of a stand-by letter of credit is recorded as a
liability at the time the stand-by letter of credit is issued. Included in accrued liabilities is $68.6 million
representing the Company’s outstanding stand-by letters of credit issued in connection with its options to
purchase home sites.
At April 30, 2006, the Company had outstanding surety bonds amounting to approximately
$755.5 million, related primarily to its obligations to various governmental entities to construct improvements
in the Company’s various communities. The Company estimates that approximately $348.4 million of work
remains on these improvements. The Company has an additional $124.8 million of surety bonds outstanding
that guarantee other obligations of the Company. The Company does not believe it is likely that any
outstanding bonds will be drawn upon.
At April 30, 2006, the Company had agreements of sale outstanding to deliver 8,739 homes with an
aggregate sales value of approximately $6.2 billion, of which the Company recognized $97.5 million of
revenues using percentage of completion accounting.
At April 30, 2006, the Company was committed to providing approximately $738.6 million of mortgage
loans to its home buyers and to others. All loans with committed interest rates are covered by take-out
commitments from third-party lenders, which minimize the Company’s interest rate risk. The Company also
arranges a variety of mortgages through programs that are offered to its home buyers through outside
mortgage lenders.
The Company has a $1.8 billion credit facility consisting of a $1.5 billion unsecured revolving credit
facility and a $300 million term loan facility (collectively, the ‘‘Credit Facility’’) with 31 banks, which
extends to March 17, 2011. At April 30, 2006, interest was payable on borrowings under the revolving credit
facility at 0.475% (subject to adjustment based upon the Company’s debt rating and leverage ratios) above
the Eurodollar rate or at other speciﬁed variable rates as selected by the Company from time to time. At

12

April 30, 2006, the Company had no outstanding borrowings against the revolving credit facility and letters
of credit of approximately $330.5 million were outstanding under the revolving credit facility, of which the
Company had recorded $68.6 million of liabilities under land purchase agreements. Under the term loan
facility, interest is payable at 0.50% (subject to adjustment based upon the Company’s debt rating and
leverage ratios) above the Eurodollar rate or at other specified variable rates as selected by the Company
from time to time. At April 30, 2006, interest was payable on the $300 million term loan at 5.36%. Under the
terms of the Credit Facility, the Company is not permitted to allow its maximum leverage ratio (as defined in
the agreement) to exceed 2.00 to 1.00 and was required to maintain a minimum tangible net worth (as defined
in the agreement) of approximately $2.2 billion at April 30, 2006. At April 30, 2006, the Company’s leverage
ratio was approximately .65 to 1.00 and its tangible net worth was approximately $3.1 billion. Based upon the
minimum tangible net worth requirement, the Company’s ability to pay dividends and repurchase its common
stock was limited to an aggregate amount of approximately $1.0 billion at April 30, 2006.
The Company is involved in various claims and litigation arising in the ordinary course of business. The
Company believes that the disposition of these matters will not have a material effect on the business or on
the financial condition of the Company.
In January 2006, the Company received a request for information pursuant to Section 308 of the Clean
Water Act from Region 3 of the Environmental Protection Agency (‘‘EPA’’) requesting information about
storm water discharge practices in connection with our homebuilding projects in the states that comprise EPA
Region 3. To the extent the EPA’s review were to lead the EPA to assert violations of state and/or federal
regulatory requirements and request injunctive relief and/or civil penalties, the Company would defend and
attempt to resolve any such asserted violations. At this time the Company cannot predict the outcome of the
EPA’s review or estimate the costs that may be involved in resolving any potential claims.

11. Supplemental Disclosure to Statements of Cash Flows
The following are supplemental disclosures to the statements of cash flows for the six months ended
April 30, 2006 and 2005 (amounts in thousands):
2006 2005
Cash flow information:
Interest paid, net of amount capitalized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,120 $ 21,232
Income taxes paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $200,000 $184,600
Non-cash activity:
Cost of inventory acquired through seller financing . . . . . . . . . . . . . . . . . . . . . . $ 55,833 $ 43,709
Contribution of inventory, net of related debt to unconsolidated entities . . . . . . . $ 4,500
Income tax benefit related to exercise of employee stock options . . . . . . . . . . . . $ 16,869 $ 48,827
Stock bonus awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,926 $ 30,396
Contribution to employee retirement plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,411
Acquisition of joint venture assets and liabilities
Fair value of assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $181,473
Liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $110,548
Cash paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,751
Reduction in investment and advances to unconsolidated entities . . . . . . . . . . . . $ 30,174

12. Supplemental Guarantor Information
Toll Brothers Finance Corp., a 100% owned indirect subsidiary (the ‘‘Subsidiary Issuer’’) of the
Company, is the issuer of four series of senior notes aggregating $1.15 billion. The obligations of the
Subsidiary Issuer to pay principal, premiums, if any, and interest are guaranteed jointly and severally on a

13

senior basis by the Company and substantially all of its 100% owned home building subsidiaries (the
‘‘Guarantor Subsidiaries’’). The guarantees are full and unconditional. The Company’s non-home building
subsidiaries and certain home building subsidiaries (the ‘‘Non-Guarantor Subsidiaries’’) do not guarantee the
debt. Separate financial statements and other disclosures concerning the Guarantor Subsidiaries are not
presented because management has determined that such disclosures would not be material to investors. The
Subsidiary Issuer has not had and does not have any operations other than the issuance of the four series of
senior notes and the lending of the proceeds from the senior notes to subsidiaries of the Company.
Supplemental consolidating financial information of the Company, the Subsidiary Issuer, the Guarantor
Subsidiaries, the Non-Guarantor Subsidiaries and the eliminations to arrive at the Company on a consolidated
basis are as follows:

Condensed Consolidating Balance Sheet at April 30, 2006 ($ in thousands) (unaudited):
Toll Non-
Brothers, Subsidiary Guarantor Guarantor
Inc. Issuer Subsidiaries Subsidiaries Eliminations Consolidated
ASSETS
Cash and cash equivalents. . . . . . . . . . . 360,383 37,727 398,110
Inventory . . . . . . . . . . . . . . . . . . . . . . . 5,613,165 326,187 5,939,352
Property, construction and office
equipment, net . . . . . . . . . . . . . . . . . 87,781 7,859 95,640
Receivables, prepaid expenses and other
assets . . . . . . . . . . . . . . . . . . . . . . . . 5,258 94,793 70,416 478 170,945
Contracts receivable . . . . . . . . . . . . . . . 53,040 44,484 97,524
Mortgage loans receivable. . . . . . . . . . . 59,606 59,606
Customer deposits held in escrow . . . . . 58,848 28,788 87,636
Investments in and advances to
unconsolidated entities. . . . . . . . . . . . 224,697 224,697
Investments in and advances to
consolidated entities . . . . . . . . . . . . . 3,375,467 1,156,658 (1,362,737) (123,903) (3,045,485) —
3,375,467 1,161,916 5,129,970 451,164 (3,045,007) 7,073,510

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Loans payable . . . . . . . . . . . . . . . . . . 492,669 197,168 689,837
Senior notes . . . . . . . . . . . . . . . . . . . 1,140,597 1,140,597
Senior subordinated notes . . . . . . . . . 350,000 350,000
Mortgage company warehouse loan . . 48,679 48,679
Customer deposits . . . . . . . . . . . . . . . 417,776 28,788 446,564
Accounts payable . . . . . . . . . . . . . . . 248,678 11,317 259,995
Accrued expenses . . . . . . . . . . . . . . . 21,319 640,145 95,873 (3) 757,334
Income taxes payable . . . . . . . . . . . . 278,661 (1,946) 276,715
Total liabilities . . . . . . . . . . . . . . . 278,661 1,161,916 2,149,268 379,879 (3) 3,969,721

Minority interest . . . . . . . . . . . . . . . . . . 6,983 6,983
Stockholders’ equity:
Common stock . . . . . . . . . . . .. . . .. 1,563 2,003 (2,003) 1,563
Additional paid-in capital . . . .. . . . . 230,119 4,420 2,734 (7,154) 230,119
Retained earnings . . . . . . . . . .. . . . . 2,914,848 2,976,282 59,565 (3,035,847) 2,914,848
Treasury stock, at cost. . . . . . .. . . .. (49,724) (49,724)
Total stockholders’ equity . .. . . . . 3,096,806 — 2,980,702 64,302 (3,045,004) 3,096,806
3,375,467 1,161,916 5,129,970 451,164 (3,045,007) 7,073,510

14

Condensed Consolidating Balance Sheet at October 31, 2005 ($ in thousands):
Toll Non-
ASSETS
Cash & cash equivalents . . . . . . . . . . . . 664,312 24,907 689,219
Inventory . . . . . . . . . . . . . . . . . . . . . . . 4,951,168 117,456 5,068,624
Property, construction & ofﬁce
equipment – net . . . . . . . . . . . . . . . . 70,438 9,086 79,524
Receivables, prepaid expenses and other
assets . . . . . . . . . . . . . . . . . . . . . . . . 5,453 123,815 89,115 (32,763) 185,620
Mortgage loans receivable. . . . . . . . . . . 99,858 99,858
Customer deposits held in escrow . . . . . 68,601 68,601
Investments in & advances to
unconsolidated entities. . . . . . . . . . . . 152,394 152,394
Investments in & advances to
consolidated entities . . . . . . . . . . . . . 3,047,664 1,155,164 (1,503,295) 3,318 (2,702,851) —
3,047,664 1,160,617 4,527,433 343,740 (2,735,614) 6,343,840

LIABILITIES & STOCKHOLDERS’ EQUITY
Liabilities:
Loans payable . . . . . . . . . . . . . . . . . . 162,761 87,791 250,552
Senior notes . . . . . . . . . . . . . . . . . . . 1,140,028 1,140,028
Senior subordinated notes . . . . . . . . . 350,000 350,000
Mortgage company warehouse loan . . 89,674 89,674
Customer deposits . . . . . . . . . . . . . . . 415,602 415,602
Accounts payable . . . . . . . . . . . . . . . 256,548 9 256,557
Accrued expenses . . . . . . . . . . . . . . . 20,589 701,627 102,425 (32,872) 791,769
Income taxes payable . . . . . . . . . . . . 284,093 (1,946) 282,147
Total liabilities . . . . . . . . . . . . . . . 284,093 1,160,617 1,886,538 277,953 (32,872) 3,576,329

Minority interest . . . . . . . . . . . . . . . . . . 3,940 3,940
Stockholders’ equity:
Common stock . . . . . . . . . . . .. . . .. 1,563 2,003 (2,003) 1,563
Additional paid-in capital . . . .. . . . . 242,546 4,420 2,734 (7,154) 242,546
Retained earnings . . . . . . . . . .. . . . . 2,576,061 2,636,475 57,110 (2,693,585) 2,576,061
Treasury stock. . . . . . . . . . . . .. . . .. (56,599) (56,599)
Total stockholders’ equity . .. . . . . 2,763,571 — 2,640,895 61,847 (2,702,742) 2,763,571
3,047,664 1,160,617 4,527,433 343,740 (2,735,614) 6,343,840

15

Condensed Consolidating Statement of Income for the six months ended April 30, 2006
($ in thousands) (unaudited):
Toll Non-
Revenues:
Home sales . . . . . . . . . . . . . . . . . . . . . . 2,679,187 2,679,187
Percentage of completion . . . . . . . . . . . . 53,040 44,484 97,524
Land sales . . . . . . . . . . . . . . . . . . . . . . . 6,778 6,778
— — 2,739,005 44,484 — 2,783,489
Costs and expenses:
Home sales . . . . . . . . . . . . . . .. . . .. . . 1,859,464 2,563 (1,393) 1,860,634
Percentage of completion . . . . .. . . .. . . 41,264 37,260 78,524
Land sales . . . . . . . . . . . . . . . .. . . .. . . 5,939 5,939
Interest . . . . . . . . . . . . . . . . . .. . . .. . . 33,470 49,293 10,329 (34,463) 58,629
— 33,470 1,955,960 50,152 (35,856) 2,003,726
Selling, general and administrative . ...... 16 349 281,806 15,024 (15,971) 281,224
Income from operations . . . . . . . . . ...... (16) (33,819) 501,239 (20,692) 51,827 498,539
Other:
Equity earnings . . . . . . . . . . . . . . . .. . . 29,393 29,393
Interest and other . . . . . . . . . . . . . . .. . . 33,819 19,609 24,724 (55,859) 22,293
Earnings from subsidiaries . . . . . . . .. . . 550,241 (550,241) —
Income before income taxes. . . . . . . . .. . . 550,225 — 550,241 4,032 (554,273) 550,225
Income taxes . . . . . . . . . . . . . . . . . . . .. . . 211,438 210,434 1,577 (212,011) 211,438
Net income . . . . . . . . . . . . . . . . . . . . .. . . 338,787 — 339,807 2,455 (342,262) 338,787

Condensed Consolidating Statement of Income for the three months ended April 30, 2006
Toll Non-
Revenues:
Home sales . . . . . . . . . . . . . . . . . . . . . . 1,400,478 1,400,478
Percentage of completion . . . . . . . . . . . . 25,025 14,930 39,955
Land sales . . . . . . . . . . . . . . . . . . . . . . . 2,100 2,100
— — 1,427,603 14,930 — 1,442,533
Costs and expenses:
Home sales . . . . . . . . . . . . . . .. . . .. . . 975,995 1,292 (744) 976,543
Percentage of completion . . . . .. . . .. . . 19,648 11,530 31,178
Land sales . . . . . . . . . . . . . . . .. . . .. . . 2,103 2,103
Interest . . . . . . . . . . . . . . . . . .. . . .. . . 16,735 25,310 4,993 (17,163) 29,875
— 16,735 1,023,056 17,815 (17,907) 1,039,699
Selling, general and administrative . ...... (1) 176 142,252 7,603 (7,984) 142,046
Income from operations . . . . . . . . . ...... 1 (16,911) 262,295 (10,488) 25,891 260,788
Other:
Equity earnings . . . . . . . . . . . . . . . .. . . 12,824 12,824
Income taxes . . . . . . . . . . . . . . . . . . . .. . . 109,641 107,862 876 (108,738) 109,641
Net income . . . . . . . . . . . . . . . . . . . . .. . . 174,938 — 176,716 1,364 (178,081) 174,937

16

Condensed Consolidating Statement of Income for the six months ended April 30, 2005
Toll Non-
Revenues:
Home sales . . . . . . . . . . . . . . . . . . . . . . 2,215,095 2,215,095
Land sales . . . . . . . . . . . . . . . . . . . . . . . 11,025 11,025
— — 2,226,120 — — 2,226,120
Costs and expenses:
Home sales . . . . . . . . . . . . . . . . . . . . . . 1,514,952 2,306 (1,116) 1,516,142
Land sales . . . . . . . . . . . . . . . . . . . . . . . 6,095 6,095
Interest . . . . . . . . . . . . . . . . . . . . . . . . . 25,424 49,854 1,142 (26,482) 49,938
— 25,424 1,570,901 3,448 (27,598) 1,572,175
Other:
Equity earnings . . . . . . . . . . . . . . . .. . . 5,308 5,308
Income taxes . . . . . . . . . . . . . . . . . . . .. . . 171,496 169,957 2,334 (172,291) 171,496
Net income . . . . . . . . . . . . . . . . . . . . .. . . 280,326 — 281,883 3,807 (285,690) 280,326

Condensed Consolidating Statement of Income for the three months ended April 30, 2005
Toll Non-
Revenues:
Home sales . . . . . . . . . . . . . . . . . . . . . . 1,225,998 1,225,998
Land sales . . . . . . . . . . . . . . . . . . . . . . . 9,800 9,800
— — 1,235,798 — — 1,235,798
Costs and expenses:
Home sales . . . . . . . . . . . . . . . . . . . . . . 830,154 1,201 (706) 830,649
Land sales . . . . . . . . . . . . . . . . . . . . . . . 5,316 5,316
Interest . . . . . . . . . . . . . . . . . . . . . . . . . 12,712 28,070 601 (13,257) 28,126
— 12,712 863,540 1,802 (13,963) 864,091
Other:
Equity earnings . . . . . . . . . . . . . . . .. . . 3,373 3,373
Income taxes . . . . . . . . . . . . . . . . . . . .. . . 97,698 99,843 1,058 (100,901) 97,698
Net income . . . . . . . . . . . . . . . . . . . . .. . . 170,133 — 167,996 1,774 (169,770) 170,133

17

Condensed Consolidating Statement of Cash Flows for the six months ended April 30, 2006
Toll Non-
Net income . . . . . . . . . . . . . . . . . . . . . 338,787 339,807 2,455 (342,262) 338,787
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization. . . . . . 569 12,505 1,153 14,227
Amortization of initial benefit
obligation . . . . . . . . . . . . . . . . . . . 952 952
Share based compensation . . . . . . . . 16,402 16,402
Equity earnings in unconsolidated
entities . . . . . . . . . . . . . . . . . . . . . (29,393) (29,393)
Distributions from unconsolidated
entities . . . . . . . . . . . . . . . . . . . . . 4,383 4,383
Deferred tax provision . . . . . . . . . . . 15,250 15,250
Provision for inventory write-offs . . . 13,145 13,145
Changes in operating assets and
liabilities
(Increase) decrease in inventory . . (580,914) (102,639) (683,553)
Origination of mortgage loans . . . . (405,317) (405,317)
Sale of mortgage loans . . . . . . . . . 445,569 445,569
Increase in contracts receivable . . . (53,040) (44,484) (97,524)
(Increase) decrease in receivables,
prepaid expenses and other
assets . . . . . . . . . . . . . . . . . . . . (327,803) (1,299) (113,342) 146,696 309,395 13,647
Increase in customer deposits . . . . 11,927 11,927
Increase (decrease) in accounts
payable and accrued expenses . . 13,338 730 (71,868) (4,518) 32,867 (29,451)
Decrease in current income taxes
payable . . . . . . . . . . . . . . . . . . . (3,812) (3,812)
Net cash (used in) provided by
operating activities . . . . . . . . 52,162 — (465,838) 38,915 — (374,761)
Purchase of property and equipment,
net . . . . . . . . . . . . . . . . . . . . . . . . . . (26,445) 224 (26,221)
Purchase of marketable securities . . . . . (1,542,445) (28,975) (1,571,420)
Sale of marketable securities . . . . . . . . 1,542,445 28,975 1,571,420
Investments in unconsolidated entities . (77,433) (77,433)
Acquisition of joint venture interest . . . (40,751) (40,751)
entities . . . . . . . . . . . . . . . . . . . . . . . 6,772 6,772
Net cash used in investing activities . . . — — (137,857) 224 — (137,633)
Proceeds from loans payable . . . . . . . . 511,017 402,549 913,566
Principal payments of loans payable . . . (211,251) (431,911) (643,162)
Proceeds from stock based benefit
plans . . . . . . . . . . . . . . . . . . . . . . . . 9,594 9,594
Purchase of treasury stock . . . . . . . . . . (61,756) (61,756)
Change in minority interest . . . . . . . . . 3,043 3,043
Net cash provided by (used in)
financing activities . . . . . . . . . . (52,162) — 299,766 (26,319) — 221,285
Net decrease in cash and cash equivalents — — (303,929) 12,820 — (291,109)
Cash and cash equivalents, beginning of
period . . . . . . . . . . . . . . . . . . . . . . . 664,312 24,907 689,219
Cash and cash equivalents, end of period . — — 360,383 37,727 — 398,110

18

Condensed Consolidating Statement of Cash Flows for the six months ended April 30, 2005
Toll Non-
Net income . . . . . . . . . . . . . . . . . . . . . 280,326 281,883 3,807 (285,690) 280,326
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization . . . . . . . 249 7,874 855 8,978
Amortization of initial benefit
obligation. . . . . . . . . . . . . . . . . . . . . 1,901 1,901
Equity earnings in unconsolidated
entities . . . . . . . . . . . . . . . . . . . . . . . (5,308) (5,308)
entities . . . . . . . . . . . . . . . . . . . . . . . 536 536
Deferred tax provision . . . . . . . . . . . . . 12,993 12,993
Provision for inventory write-offs . . . . . 2,554 2,554
Changes in operating assets and
liabilities
(Increase) decrease in inventory . . . . . . (380,207) 35 (380,172)
Origination of mortgage loans . . . . . . . (368,422) (368,422)
Sale of mortgage loans. . . . . . . . . . . . . 389,672 389,672
(Increase) decrease in receivables,
prepaid expenses and other assets . . . (294,104) (249) 12,160 (19,568) 296,369 (5,392)
Increase in customer deposits . . . . . . . . 75,089 75,089
Increase (decrease) in accounts payable
and accrued expenses . . . . . . . . . . . . 30,397 43,901 21,059 (10,679) 84,678
Decrease in current income taxes
payable . . . . . . . . . . . . . . . . . . . . . . (26,097) (26,097)
Net cash provided
by operating activities. . . . . . . . . . 3,515 — 40,383 27,438 — 71,336
Purchase of property and equipment,
net . . . . . . . . . . . . . . . . . . . . . . . . . . (14,715) (3,735) (18,450)
Purchase of marketable securities . . . . . (1,970,588) (1,970,588)
Sale of marketable securities . . . . . . . . 2,080,617 5,000 2,085,617
Investments in unconsolidated entities . (19,933) (19,933)
entities . . . . . . . . . . . . . . . . . . . . . . . 4,479 4,479
Net cash provided by investing
activities . . . . . . . . . . . . . . . . . . . . . — — 79,860 1,265 — 81,125
Proceeds from loans payable . . . . . . . . 159,886 337,162 497,048
Principal payments of loans payable . . . (185,557) (359,603) (545,160)
Proceeds from stock based benefit
plans . . . . . . . . . . . . . . . . . . . . . . . . 27,123 27,123
Unearned stock compensation. . . . . . . . (834) (834)
Purchase of restricted shares. . . . . . . . . 886 886
Purchase of treasury stock . . . . . . . . . . (30,690) (30,690)
Net cash used in financing activities . (3,515) — (25,671) (22,441) — (51,627)
Net increase in cash and cash equivalents. — — 94,572 6,262 — 100,834
Cash and cash equivalents, beginning of
period . . . . . . . . . . . . . . . . . . . . . . . 456,836 8,998 465,834
Cash and cash equivalents, end of period . — — 551,408 15,260 — 566,668

19

tollbrothers 10_Q_apr_2006

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