We continue to believe that many of our communities are in desirable locations that are difficult to replace and in markets where approvals have been increasingly difficult to achieve. We believe that many of these communities have substantial embedded value that may be realized in the future as the housing recovery strengthens.
Competitive Landscape
Based on our experience during prior downturns in the housing industry, we believe that attractive land acquisition opportunities arise in difficult times for those builders that have the financial strength to take advantage of them. In the current environment, we believe our strong balance sheet, liquidity, access to capital, broad geographic presence, diversified product line, experienced personnel and national brand name all position us well for such opportunities now and in the future.
We believe that many of the small and mid-sized private builders that had been our primary competitors in the luxury market are no longer in business and that access to capital by the remaining private builders is severely constrained. While some of these private builders may emerge with new capital, the scarcity of attractive land is a further impediment to their competitiveness. We believe that geographic and product diversification, access to lower-cost capital and strong demographics benefit those builders, like us, who can control land and persevere through the increasingly difficult regulatory approval process; these factors favor a large publicly traded home building company with the capital and expertise to control home sites and gain market share. We also believe that during the recent prolonged downturn, many builders and land developers reduced the number of home sites that were taken through the approval process. The process continues to be difficult and lengthy, and the political pressure from no-growth proponents continues to increase, but we believe our expertise in taking land through the approval process and our already-approved land positions will allow us to grow in the years to come as market conditions improve.
Land Acquisition and Development
Because of the length of time that it takes to obtain the necessary approvals on a property, complete the land improvements on it, and deliver a home after a home buyer signs an agreement of sale, we are subject to many risks. In certain cases, we attempt to reduce some of these risks by utilizing one or more of the following methods: controlling land for future development through options (also referred to herein as "land purchase contracts" or "option and purchase agreements"), thus allowing the necessary governmental approvals to be obtained before acquiring title to the land; generally commencing construction of a detached home only after executing an agreement of sale and receiving a substantial down payment from the buyer; and using subcontractors to perform home construction and land development work on a fixed-price basis. Based on our belief that the housing market has begun to recover, the increased attractiveness of land available for purchase and the revival of demand in certain areas, we have begun to increase our land positions. During fiscal 2012 and the three-month period ended January 31, 2013, we acquired control of approximately 6,100 home sites (net of options terminated) and 4,100 home sites (net of options terminated), respectively. At January 31, 2013, we controlled approximately 43,700 home sites of which we owned approximately 33,500. Of these 33,500 home sites, significant improvements were completed on approximately 12,000. At January 31, 2013 and 2012, we were selling from 225 and 228 communities, respectively. At October 31, 2012, we were selling from 224 communities, compared to 215 communities at October 31, 2011. During the three-month period ended January 31, 2013, we opened 12 new communities for sale and sold out of 11 communities.
We expect to open approximately 70 communities for sale in the nine-month period ending October 31, 2013. We expect to be selling from 225 to 255 communities at October 31, 2013. At January 31, 2013, we had 45 communities that were temporarily closed due to market conditions and 34 communities for which we had acquired the land but have temporarily decided not to open. Diversification
Based on our experience, our land acquisition/development, and construction expertise and our financial and marketing strength, we acquired control of a number of land parcels for for-rent apartment projects, including two student housing sites, totaling approximately 4,900 units. These projects, which are located in the metro Boston to Washington, D.C. corridor and which we are currently developing or expect to develop in partnership structures over the next several years, should start generating revenues beginning in 2015. A number of these sites had been acquired by us as part of a larger purchase or were originally acquired to develop as for-sale homes. Of the 4,900 units, 800 are owned by joint ventures in which we have a 50% interest; approximately 1,450 are owned by us; 1,850 of them are under contract; and 800 of them are under letters of intent. We currently own through Toll Brothers Realty Trust and Toll Brothers Realty Trust II interests in approximately 1,500 apartment units in the Washington, D.C. area and Princeton Junction, NJ.

Availability of Customer Mortgage Financing We maintain relationships with a widely diversified group of mortgage financial institutions, many of which are among the largest and, we believe, most reliable in the industry. We believe that regional and community banks continue to recognize the long-term value in creating relationships with high-quality, affluent customers such as our home buyers, and these banks continue to provide such customers with financing.
We believe that our home buyers generally are, and should continue to be, better able to secure mortgages due to their typically lower loan-to-value ratios and attractive credit profiles as compared to the average home buyer. Nevertheless, in recent years, tightened credit standards have shrunk the pool of potential home buyers and hindered accessibility of or eliminated certain loan products previously available to our home buyers. Our home buyers continue to face stricter mortgage underwriting guidelines, higher down payment requirements and narrower appraisal guidelines than in the past. In addition, some of our home buyers continue to find it more difficult to sell their existing homes as prospective buyers of their homes may face difficulties obtaining a mortgage. In addition, other potential buyers may have little or negative equity in their existing homes and may not be able or willing to purchase a larger or more expensive home.
While the range of mortgage products available to a potential home buyer is not what it was in the period 2005 through 2007, we have seen improvements over the past two years. Indications from industry participants, including commercial banks, mortgage banks, mortgage real estate investment trusts and mortgage insurance companies are that availability, parameters and pricing of jumbo loans are all improving. We believe that improvement should not only enhance financing alternatives for existing jumbo buyers, but also help to offset the reduction in Fannie Mae/Freddie Mac-eligible loan amounts in some markets. Based on the mortgages provided by our mortgage subsidiary, we do not expect the change in the Fannie Mae/Freddie Mac-eligible loan amounts to have a significant impact on our business.
There has been significant media attention given to mortgage put-backs, a practice by which a buyer of a mortgage loan tries to recoup losses from the loan originator. We do not believe this is a material issue for our mortgage subsidiary. Of the approximately 16,042 loans sold by our mortgage subsidiary since November 1, 2004, only 39 have been the subject of either actual indemnification payments or take-backs or contingent liability loss provisions related thereto. We believe that this is due to (i) our typical home buyer's financial position and sophistication; (ii) on average, our home buyers who use mortgage financing to purchase a home pay approximately 30% of the purchase price in cash; (iii) our general practice of not originating certain loan types such as option adjustable rate mortgages and down payment assistance products, and our origination of few sub-prime and high loan-to-value/no documentation loans; (iv) our elimination of "early payment default" provisions from each of our agreements with our mortgage investors several years ago; and (v) the quality of our controls, processes and personnel in our mortgage subsidiary. The Dodd-Frank Wall Street Reform and Consumer Protection Act provides for a number of new requirements relating to residential mortgage lending practices, many of which are subject to further potential rulemaking. These include, among others, minimum standards for mortgages and related lender practices, the definitions and parameters of a Qualified Mortgage and a Qualified Residential Mortgage, future risk retention requirements, limitations on certain fees, prohibition of certain tying arrangements and remedies for borrowers in foreclosure proceedings in the event that a lender violates fee limitations or minimum standards. The ultimate effect of such provisions on lending institutions, including our mortgage subsidiary, will depend on the rules that are ultimately promulgated.
Gibraltar
We look for distressed real estate opportunities through our Gibraltar Capital and Asset Management LLC ("Gibraltar") wholly-owned subsidiary. Gibraltar selectively reviews a steady flow of new opportunities, including bank portfolios and other distressed real estate investments.
During the three-month period ended January 31, 2013, Gibraltar acquired three loans directly and invested in a loan participation for an aggregate purchase price of approximately $16.1 million. The loans are secured by retail shopping centers, residential land and golf courses located in seven states. At January 31, 2013, Gibraltar had investments in distressed loans of approximately $42.8 million, investments in foreclosed real estate of $68.8 million and an investment in a structured asset joint venture of $37.5 million. At January 31, 2013, Gibraltar directly owned, or through loan participations held interests in, 102 loans and properties with a net unpaid principal of the loans or estimated fair value of the properties of approximately $160.1 million. During the three-month periods ended January 31, 2013 and 2012, we recognized income of $2.1 million and $1.7 million from the Gibraltar operations, respectively, including its equity in the earnings from its investment in a structured asset joint venture.

CONTRACTS AND BACKLOG
The aggregate value of net contracts signed increased $169.7 million or 38.2% in the three-month period ended January 31, 2013, as compared to the three-month period ended January 31, 2012. The value of net contracts signed was $614.4 million (973 homes) and $444.7 million (652 homes) in the three-month periods ended January 31, 2013 and 2012, respectively. The increase in the aggregate value of net contracts signed in the fiscal 2013 period, as compared to the fiscal 2012 period was the result of a 49.2% increase in the number of net contracts signed, offset, in part, by a 7.4% decrease in the average value of each contract signed. The increase in the number of net contracts signed was primarily due to an increase in demand for our homes in the fiscal 2013 period, as compared to the fiscal 2012 period. The decrease in the average value of each contract signed was due primarily to the sales contracts signed at one of our luxury high-rise developments in the metro-New York market in fiscal 2012 which averaged approximately $4.1 million each, offset, in part, by, increased prices and/or reduced incentives given on new contracts signed in the fiscal 2013 period and a change in mix to more expensive product and/or areas in the fiscal 2013 period.
In the three-month period ended January 31, 2013, home buyers canceled $45.3 million (64 homes) of signed contracts, representing 6.9% of the gross value of contracts signed and 6.2% of the gross number of contracts signed. In the three-month period ended January 31, 2012, home buyers canceled $25.6 million (43 homes) of signed contracts, representing 5.4% of the gross value of contracts signed and 6.2% of the gross number of contracts signed. Backlog consists of homes under contract but not yet delivered to our home buyers. The value of our backlog at January 31, 2013 of $1.86 billion (2,796 homes) increased 66.4%, as compared to our backlog at January 31, 2012 of $1.12 billion (1,784 homes). Our backlog at October 31, 2012 and 2011 was $1.67 billion (2,569 homes) and $981.1 million (1,667 homes), respectively. The increase in the value of backlog at January 31, 2013, as compared to the backlog at January 31, 2012, was primarily attributable to the increase in the aggregate value of net contracts signed in the three-month period ended January 31, 2013, as compared to the three-month period ended January 31, 2012, and the higher backlog at October 31, 2012, as compared to the backlog at October 31, 2011, offset, in part, by the increase in the aggregate value of our deliveries in the three-month period of fiscal 2013, as compared to the aggregate value of deliveries in the three-month period of fiscal 2012.
For more information regarding revenues, net contracts signed and backlog by geographic segment, see "Geographic Segments" in this MD&A.
CRITICAL ACCOUNTING POLICIES
As disclosed in our annual report on Form 10-K for the fiscal year ended October 31, 2012, our most critical accounting policies relate to inventory, income taxes-valuation allowances and revenue and cost recognition. Since October 31, 2012, there have been no significant changes to those critical accounting policies.
OFF-BALANCE SHEET ARRANGEMENTS
We have investments in and advances to various unconsolidated entities. At January 31, 2013, we had investments in and advances to these entities, net of impairment charges recognized, of $321.9 million, and were committed to invest or advance $91.9 million to these entities if they require additional funding. In addition, we have guaranteed approximately $11.9 million of joint venture liabilities, including $9.8 million of payments under a ground lease for one of the joint ventures. Our investments in these entities are accounted for using the equity method of accounting. For more information regarding these joint ventures, see Note 3, "Investments in and Advances to Unconsolidated Entities" in the Notes to Condensed Consolidated Financial Statements in this Form 10-Q. The trends, uncertainties or other factors that have negatively impacted our business and the industry in general have also impacted the unconsolidated entities in which we have investments. We review each of our investments on a quarterly basis for indicators of impairment. A series of operating losses of an investee, the inability to recover our invested capital, or other factors may indicate that a loss in value of our investment in the unconsolidated entity has occurred. If a loss exists, we further review to determine if the loss is other than temporary, in which case we write down the investment to its fair value. The evaluation of our investment in unconsolidated entities entails a detailed cash flow analysis using many estimates including but not limited to expected sales pace, expected sales prices, expected incentives, costs incurred and anticipated, sufficiency of financing and capital, competition, market conditions and anticipated cash receipts, in order to determine projected future distributions. Each of the unconsolidated entities evaluates its inventory in a similar manner as we do. See "Critical Accounting Policies - Inventory" contained in the MD&A in our Annual Report on Form 10-K for the year ended October 31, 2012 for more detailed disclosure on our evaluation of inventory. If a valuation adjustment is recorded by an unconsolidated entity related to its assets, our proportionate share is reflected in income (loss) from unconsolidated entities with a corresponding decrease to our investment in unconsolidated entities. Based upon our evaluation of the fair value of our investments in unconsolidated entities, we determined that no impairments of our investments occurred in the three-month periods ended January 31, 2013 and 2012.

RESULTS OF OPERATIONS
The following table sets forth, for the three-month periods ended January 31,
2013 and 2012, a comparison of certain items in the condensed consolidated
statements of operations ($ amounts in millions):
                                         Three months ended January 31,
                                             2013                 2012
                                           $           %*       $       %*
Revenues                              424.6                  322.0
Cost of revenues                      345.9           81.5   271.6      84.4
Selling, general and administrative    78.0           18.4    69.6      21.6
                                      424.0           99.9   341.2     106.0
Income (loss) from operations           0.6                  (19.3 )
Other
Income from unconsolidated entities     3.1                    6.7
Other income - net                      4.6                    6.2
Income (loss) before income taxes       8.3                   (6.4 )
Income tax provision (benefit)          3.9                   (3.6 )
Net income (loss)                       4.4                   (2.8 )

* Percent of revenues Note: Due to rounding, amounts may not add.
REVENUES AND COST OF REVENUES
Revenues for the three months ended January 31, 2013 were higher than those for the comparable period of fiscal 2012 by approximately $102.6 million, or 31.9%. This increase was primarily attributable to an increase in the number of homes delivered. In the fiscal 2013 period, we delivered 746 homes with a value of $424.6 million, as compared to 564 homes in the fiscal 2012 period with a value of $322.0 million. The increase in the number of homes delivered in the three-month period ended January 31, 2013, as compared to the fiscal 2012 period, was primarily due to the higher number of homes in backlog at the beginning of fiscal 2013, as compared to the beginning of fiscal 2012. Cost of revenues as a percentage of revenues was 81.5% in the three-month period ended January 31, 2013 , as compared to 84.4% in the three-month period ended January 31, 2012. In the three-month periods ended January 31, 2013 and 2012, we recognized inventory impairment charges and write-offs of $0.7 million and $8.1 million, respectively. Cost of revenues as a percentage of revenues, excluding impairments, was 81.3% of revenues in the three-month period ended January 31, 2013, as compared to 81.8% in the fiscal 2012 period. The decrease in cost of revenues, excluding inventory impairment charges, as a percentage of revenue in the fiscal 2013 period, as compared to the fiscal 2012 period, was due primarily to lower interest costs in the fiscal 2013 period, as compared to the fiscal 2012 period. During the fiscal 2013 period, the cost of land, land improvements, materials and labor increased as a percentage of revenues by approximately 0.8%, as compared to the fiscal 2012 period due in part to a change in the mix of product delivered in the fiscal 2013 period; these increases were offset by improved absorption of job overhead and closing costs due to the increased number of homes closed in the fiscal 2013 period, as compared to the fiscal 2012 period. In the three-month periods ended January 31, 2013 and 2012, interest cost as a percentage of revenues was 4.7% and 5.1%, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A") SG&A increased by $8.4 million in the three-month period ended January 31, 2013, as compared to the three-month period ended January 31, 2012. As a percentage of revenues, SG&A was 18.4% in the fiscal 2013 period, as compared to 21.6% in the fiscal 2012 period. The decline in SG&A as a percentage of revenues was due to SG&A increasing by 12.1% while revenues increased 31.9%. The increase in SG&A costs was due primarily to increased compensation costs and increased sales and marketing costs. The increased costs were due primarily to the increase in net sales contracts taken and the number of homes delivered in the fiscal 2013 period, as compared to the fiscal 2012 period, and the increased number of communities we were in the process of preparing to open in fiscal 2013, as compared to the fiscal 2012 period.

INCOME FROM UNCONSOLIDATED ENTITIES
We are a participant in several joint ventures. We recognize our proportionate share of the earnings and losses from these entities. Many of our joint ventures are land development projects or high-rise/mid-rise construction projects and do not generate revenues and earnings for a number of years during the development of the property. Once development is complete, these joint ventures will generally, over a relatively short period of time, generate revenues and earnings until all assets of the entity are sold. Because there is not a steady flow of revenues and earnings from these entities, the earnings recognized from these entities will vary significantly from quarter-to-quarter and year-to-year. In the three-month period ended January 31, 2013, we recognized $3.1 million of income from unconsolidated entities, as compared to $6.7 million in the comparable period of fiscal 2012. The $3.6 million decrease in income from unconsolidated entities in the fiscal 2013 period, as compared to the fiscal 2012 period, was due principally to lower income in the fiscal 2013 period, as compared to the fiscal 2012 period, generated from one of our development joint ventures and two condominium joint ventures due to their substantial completion in the fiscal 2012 period, offset, in part, by higher income realized from Gibraltar's structured asset joint venture in the fiscal 2013 period, as compared to the fiscal 2012 period.
OTHER INCOME - NET
Other income - net includes the gains and losses from our ancillary businesses, interest income, management fee income, retained customer deposits, income/losses on land sales and other miscellaneous items.
For the three months ended January 31, 2013 and 2012, other income was $4.6 million and $6.2 million, respectively. The decrease in other income - net in the three-month period ended January 31, 2013, as compared to the fiscal 2012 period, was primarily due to a decrease in income from our Gibraltar operations and lower management fee income in the fiscal 2013 period, as compared to the fiscal 2012 period, offset, in part, by higher interest and rental income in the fiscal 2013 period, as compared to the fiscal 2012 period.
INCOME (LOSS) BEFORE INCOME TAXES . . .