Inventory

Inventory at October 31, 2013 and 2012 consisted of the following (amounts in thousands):



	2013		2012
Land controlled for future communities	$	99,802	$	54,624
Land owned for future communities	1,287,630		1,013,565
Operating communities	3,262,980		2,664,514
	$	4,650,412	$	3,732,703

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

Communities that were previously offering homes for sale but are temporarily closed due to business conditions that do not have any remaining backlog and are not expected to reopen within twelve months of the end of the fiscal period being reported on have been classified as land owned for future communities. Backlog consists of homes under contract but not yet delivered to the Company's home buyers ("backlog").

Information regarding the classification, number and carrying value of these temporarily closed communities at October 31, 2013, 2012 and 2011 is provided in the table below ($ amounts in thousands).



	2013		2012		2011
Land owned for future communities:
Number of communities	25		40		43
Carrying value (in thousands)	$	153,498	$	240,307	$	256,468
Operating communities:
Number of communities	15		5		2
Carrying value (in thousands)	$	88,534	$	34,685	$	11,076

The Company provided for inventory impairment charges and the expensing of costs that it believed not to be recoverable in each of the three fiscal years ended October 31, 2013, 2012 and 2011 as shown in the table below (amounts in thousands).



Charge:	2013		2012		2011
Land controlled for future communities	$	1,183	$	451	$	17,752
Land owned for future communities	—		1,218		17,000
Operating communities	3,340		13,070		17,085
	$	4,523	$	14,739	$	51,837

See Note 12, "Fair Value Disclosures", for information regarding the number of operating communities that the Company tested for potential impairment, the number of operating communities in which it recognized impairment charges, the amount of impairment charges recognized, and the fair value of those communities, net of impairment charges.

See Note 15, "Commitments and Contingencies" for information regarding land purchase commitments.

At October 31, 2013, the Company evaluated its land purchase contracts to determine if any of the selling entities were variable interest entities ("VIEs") and, if they were, whether the Company was the primary beneficiary of any of them. Under these land purchase contracts, the Company does not possess legal title to the land and its risk is generally limited to deposits paid to the sellers and the creditors of the sellers generally have no recourse against the Company. At October 31, 2013, the Company determined that 87 land purchase contracts, with an aggregate purchase price of $1.12 billion, on which it had made aggregate deposits totaling $51.9 million, were VIEs and that it was not the primary beneficiary of any VIE related to its land purchase contracts.

Interest incurred, capitalized and expensed in each of the three fiscal years ended October 31, 2013, 2012 and 2011 was as follows (amounts in thousands):



	2013			2012			2011
Interest capitalized, beginning of year	$	330,581		$	298,757		$	267,278
Interest incurred	134,198			125,783			114,761
Interest expensed to cost of revenues	(112,321		)	(87,117		)	(77,623		)
Interest directly expensed in the consolidated statements of operations	—			—			(1,504		)
Write-off against other income	(2,917		)	(3,404		)	(1,155		)
Interest reclassified to property, construction and office equipment							(3,000		)
Capitalized interest applicable to investments in unconsolidated entities	(6,464		)	(3,438		)
Interest capitalized, end of year	$	343,077		$	330,581		$	298,757

Inventory impairment charges are recognized against all inventory costs of a community, such as land, land improvements, cost of home construction and capitalized interest. The amounts included in the table directly above reflect the gross amount of capitalized interest without allocation of any impairment charges recognized. The Company estimates that, had inventory impairment charges been allocated on a pro rata basis to the individual components of inventory, capitalized interest at October 31, 2013, 2012 and 2011 would have been reduced by approximately $38.2 million, $47.9 million and $54.0 million, respectively.

During fiscal 2013, the Company reclassified $28.5 million of land inventory primarily related to commercial properties located in two of its master planned communities to receivables, prepaid expenses and other assets. The $28.5 million was reclassified due to the substantial completion of the home building operations in the communities where the land is located. The consolidated balance sheet as of October 31, 2012 was reclassified to conform to the fiscal 2013 presentation.

During fiscal 2013 and 2012, the Company contributed $54.8 million and $5.8 million, respectively, of inventory and other assets to several unconsolidated entities. See Note 4, "Investments in and Advances to Unconsolidated Entities" for more information related these transfers.

During fiscal 2013 and 2011, the Company reclassified $5.6 million and $20.0 million, respectively, of inventory related to commercial retail space located in two of its high-rise projects to property, construction and office equipment. The amounts were reclassified due to the substantial completion of these projects.