Good morning, and thank you for joining us today for Hovnanian Enterprises Fiscal 2012 Second Quarter Earnings Conference Call. An archive of the webcast will be available after the completion of the call and run for 12 months. [Operator Instructions] Management will make some opening remarks about the second quarter results and then open up the line for questions. The company will also be webcasting a slide presentation along with the opening comments from management. The slides are available on the investors page of the company's website at www.khov.com. Those listeners who would like to follow along should log onto the website at this time. Before we begin, I would like to turn the call over to Jeff O'Keefe, Vice President, Investor Relations. Jeff, please go ahead.

Thank you very much. Before I turn the call over to Ara, I would like to read the following about forward-looking statements. All statements made during this conference call that are not historical facts should be considered as forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved. Such risks and uncertainties and other factors include but are not limited to changes in general and local economic and industry and business conditions and impacts of the sustained homebuilding downturn; adverse weather and other environmental conditions and natural disasters; changes in market conditions and seasonality of the company's business; changes in home prices and sales activity to the markets where the company builds homes; government regulation, including regulations concerning development of land, the homebuilding sales and customer financing processes, tax laws and the environment; fluctuations in interest rates and availability of mortgage financing; shortages in and price fluctuations of raw materials and labor; the availability and cost of suitable land and improved lots; levels of competition; availability of financing to the company; utility shortages and outages or rate fluctuations; levels of indebtedness and restrictions on the company's operations and activities imposed by the agreements governing the company's outstanding indebtedness; the company's sources of liquidity; changes in credit ratings; availability of net operating loss carryforwards; operations through joint ventures with third parties; product liability litigation, warranty claims and claims by mortgage investors; successful identification and integration of acquisitions; significant influence of the company's controlling stockholders; changes in tax laws affecting the after-tax costs of owning a home; geopolitical risks, terrorist acts and other acts of war; and other factors described in detail in the company's annual report on Form 10-K for the year ended October 31, 2011. Except as otherwise required by applicable securities laws, we undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events, changed circumstances or any other reason. And with that out of the way, I'd now like to turn the call over to Ara Hovnanian, our Chairman, President and Chief Executive Officer. Ara, please go ahead.

Thanks, Jeff. Good morning, and thank you for participating in today's call to review the results of our second quarter and 6 months ended April 30, 2012. Joining me today from the company are Larry Sorsby, Executive Vice President and CFO; Brad O'Connor, Vice President, Chief Accounting Officer and Corporate Controller; David Valiaveedan, Vice President, Finance, and Treasurer; and Jeff O'Keefe, who you just heard from, Vice President of Investor Relations. On Slide 3, you can see a brief summary of our second quarter results and comparisons to the prior year's second quarter. All in all, we had a very good second quarter when you look at just about every line on this slide. Contracts were up 52% compared to the same quarter last year and up 56% on a contracts per community basis. The higher sales pace resulted in selling out some communities ahead of plan, resulting in our community count dropping 3% compared to last year. Deliveries increased 25%, backlog increased 48% and total revenues were up 34%. Land-related charges were dramatically lower at $3.2 million for the second quarter versus $16.9 million for the same period last year. Income was a positive $1.8 million, helped by a $27 million gain on extinguishment of debt, compared to a loss of $73 million last year. Finally, while cash was down compared to last year, it increased sequentially for the quarter from $202 million at the end of the first quarter 2012 to $229 million at April 30, 2012, including after land purchases and land development. Slide 4 shows the sequential and annual growth in net contracts gaining momentum during the second quarter. This is the first time that we have had 4 consecutive quarters with year-over-year net contract growth since the first quarter of 2006. During each of the…

Thanks, Ara. Turning to Slide 17. We show our gross margin for our second quarter compared to the most recent quarter of the other public homebuilders. The gray arrow indicates the year-over-year change in gross margin for each public builder, and you will note that our 270 basis point improvement was the highest amongst our 12 peers and was 90 basis points higher than the builder with the second largest quarterly increase. Unfortunately, not all public builders report gross margins the same way. Pulte, NVR and ourselves include commissions and cost of sales while the remaining public builders include all or a portion of those costs in SG&A. Turning to Slide 18. We have attempted to compare all public builders' gross margins on an apples-to-apples basis. To do this, we reduced the gross margins of KB Home, Lennar, MDC, M/I Homes, Meritage and Standard Pacific by the same 3.5% that our sales commissions totaled in our second quarter. For builders who publicly report sales commission or responded to industry surveys, we reduced their gross margins per the amounts contained in their SEC filings or per the estimates we have footnoted on this slide. As you can see, once the adjustments are made, our 17.4% gross margin is at the median and is directly comparable to the group's 17.46% average gross margin. To be fair, we also need to show you a similar apples-to-apples comparison to our peers for SG&A for the most recent quarter. Turning to Slide 19. As footnoted on this slide, we reduced SG&A amounts by the same adjustments we made on the previous slide for all the public builders who include all or some portion of the sales commission in SG&A. Once these reductions in SG&A costs are made for our peers, our 14.8% SG&A compares favorably…

[Operator Instructions] Your first question comes from the line of Adam Rudiger with Wells Fargo Securities.

Ara, you mentioned in your opening remarks some of the drivers potentially of the gross margin improvement, but I was wondering if you could elaborate a bit more and just break it down for us because it was a pretty nice correction this quarter, and then the components that you think quantify each for the sequential improvement.

We really don't break it down. There are so many factors, frankly, everything from the mix of communities that are delivering to a little bit of price increase to a little bit of cost increase. There's just a lot of factors going in and we don't have a breakout.

I mean, as we've been saying for a number of quarters now, as our mix of deliveries increases from our newly identified communities, we would expect our margins to improve. And I think you're seeing that begin to occur as well. It's very difficult to -- I mean, the geographic mix, the product mix, community by community, it's very tough to give you any granularity other than we're seeing the increase of newly identified lots finally begin to kick in, in a more meaningful way.

And then just sticking with gross margins. Ara, you mentioned that some of your price increases are being offset a bit by costs. Could you mention or elaborate at all that -- what kind of cost increases you're seeing and maybe address, if you could, from a material perspective and also from a geographic perspective.

Sure. Well, it's really been focused on some of the commodity materials. Since the beginning of our fiscal year end, lumber overall has increased about 20% and it's probably the single largest material cost component driver in the houses. The -- a variety of other commodity materials have moved in some directions. Interestingly, shingles have been fine. Concrete has moved up but only a few percent. Plastic, PVC pipe has been moving up and down, not a huge factor. Drywall, however, has increased quite a bit, it's been up over 10% since the beginning of the year. Insulation, on the other hand, has been flat. Paints moved up just a bit; vinyl siding, just a little bit. So there's stuff all up and down in general on the commodities. They would have been trending up a bit. Our branded materials, we have national contracts for most of them that hold prices for 1, 2 or 3 years. That includes kitchen cabinets, carpeting, appliances and a few other materials. So that has held out fine.

Your next question comes from the line of Andrew Casella with Imperial Capital.

I guess, just looking at your price increases, is there a way you could quantify, I guess, to the extent you're increasing prices as a percent of base price, what that might be across the portfolio on average and just talk about the range of price increases you're seeing?

As Ara mentioned in his prepared remarks, I mean, most of the increases have been kind of in thousand-dollar increments. And I would say, in the majority of the 40% of our communities where we've had it, there may be 1, may be 2, price increases. But they're relatively small. We just don't want to slow down the absorption pace that we've been experiencing. So we're just testing whether we can get price increases without adversely impacting kind of sales pace.

And to put it into perspective, our average price is about $300,000. So if we did $1,000 increment, that's 0.3% at a time. So it's really been in very small increments, but I'm happy to say that we've been able to test those increments in a good percentage of our communities.

And I would also say that not many of those price increases have ever -- have actually come through those deliveries yet. We're -- when we say 40% of our community, we're talking about from a contract perspective rather than from a delivery perspective.

And my follow-up question, if you could. Can you break down the allocation of cash between the secured group and the restricted group under the 2 different bond indentures and then also talk a little about how much inventory is sitting in the secured group as of the end of the second quarter?

Yes, we'll come back to that when -- we got to look it up. So if there's another question, we'll move on, but we will come back to answer that.

Your next question comes from the line of David Goldberg with UBS.

It's actually Susan for David. Your land spend in the quarter was about $30 million lower sequentially despite what seems to be an improvement in the overall land market. Can you just give us an update in terms of what you expect it to be for the year and how we should expect that to trend as we go through the back half of the year?

I'd say you should expect it absolutely to trend up. As Larry mentioned, I think, on his slides, our lands secured through options this past quarter increased significantly. And we absolutely are seeing more opportunities that make economic sense. I mean, the pace and price has helped. We are disappointed that the number was one of our lower quarters just recently, but we think it's going to get back. Certainly in the back half of the year, we'll see increases.

So it's more of really just a timing issue, I suppose.

It really was. And there is a delay and there was a period ensuing last year when we just didn't quite find the opportunities given there was a period last year where sales pace was not nearly where it is today and it was harder to make numbers pencil out. The time from contract actually closing on land can have a lag and that's what we felt this last quarter. But we feel quite confident that's going to be picking up. We're certainly seeing -- entering into new contracts that would settle in the next quarter or 2 and we're seeing more opportunities pop up right now.

Okay. And then given the fact that you expect the -- some level of overall improvement to continue through the summer, are you changing anything in terms of your expectations to open new communities or your scheduling for opening them?

Yes, well, I mean, we do it as fast as we can get them open after we actually control the land and have all the permits to where we can open them and have the models built and that kind of thing. So it's really just the speed of being able to get them open that's what's driving the timing of the openings.

Okay, but you don't expect to bring any more or any change in the overall?

Well, I mean, again, we are stepping up land acquisition. We've been as interested in land acquisition now as in the past. We're just finding more opportunities. So as we execute and consummate those land contracts, we would hope to be opening up more communities. As you know, it can depend on what the sales pace is in our existing communities, how rapidly do we wind those down based on the sales pace, what entitlement and regulatory delays are involved in new ones. But we are certainly planning to increase our new acquisition pace from what you just saw, and hopefully that will have some good results in community openings as well.

Before we take the next question, let me answer the previous question that we had to look up in terms of breaking out cash and inventory between the old secured group and the new secured group. With respect to the old secured group, cash at quarter end was $142.5 million and inventory was $687.1 million. With respect to the new secured group, cash was $93 million at quarter end and inventory was $31.5 million.

Your next question comes from the line of Michael Rehaut with JPMorgan. Jason A. Marcus - JP Morgan Chase & Co, Research Division: This is actually Jason Marcus, in for Mike. So just going back to the gross margins for a second. Gross margins improved pretty nicely sequentially on a year-over-year basis, and I know that you commented that you expect gross margins to increase in fiscal '12 over fiscal '11. So I was just wondering if the current level of gross margins, the 17.4%, is kind of an appropriate level that you expect to go going forward or if you expect that it can even increase from there in the back half of the year.

We're not providing any additional guidance before -- beside what we've already kind of indicated. So we're just not making an absolute projection on what's going to happen precisely with gross margins. Mix is a big driver of what margins may or may not be. But we're just not in the projection business these days, too much uncertainty. Jason A. Marcus - JP Morgan Chase & Co, Research Division: Okay. And then the next thing is if you could give -- break out what the May year-over-year order growth was, excluding JVs, and then also what the fully diluted share count was at the end of the quarter.

We'll get back to you on that one.

Your next question comes from the line of Dan Oppenheim with Credit Suisse. Daniel Oppenheim - Crédit Suisse AG, Research Division: I was wondering if you can talk about land. I think, if we look at your order trends and from other builders, many are starting to worry about lands probably in the next couple of years. And so just I'm wondering what you're doing in terms of land underwriting how you're thinking about margins on land that you're looking at right now.

Overall, our criteria has remained pretty steady. It's -- we're really focused primarily on an unleveraged IRR. Our hurdle rate has been 25%. That includes all overheads but excludes a corporate overhead allocation. So that remained pretty steady. We're actually finding more opportunities ironically now than we did 6 or 9 months ago. And I think, although it's counterintuitive, as we mentioned earlier in the presentation, it's because the faster pace -- we underwrite to a land residual. We know the IRR threshold we have to get to. We know the house prices and the cost, so we work backwards and come up with a land residual that we can offer a land seller. That number was disappointing for a long time. It still is from certain perspectives on many land sellers. But that number, that land residual, has been rising and that has made it more enticing for land sellers, including the banks, to sell their lands. So we're just finding more opportunities out there. So we're a little optimistic. There is always competition for land. I mean, that's been since the caveman era, I suppose, and we're out there slugging it away with everyone, as we normally are. In general, compared to the boom era, there are fewer private builders that we're competing against. So from that perspective, it's probably a more limited arena in terms of competition on land than it was 7 or 8 years ago. Daniel Oppenheim - Crédit Suisse AG, Research Division: And I guess, wondering in terms of the May order trends. You talked about how there was really an issue in terms of the weekends during the month and such. Just to get a more -- a little bit more color on that, were the trends that you saw in terms of percent, if we look at it regionally on that per-week basis, similar to what we saw during the full second quarter? Any change there? Just trying to understand if -- how May was relative to that.

Didn't really change in any material way. May's weekly pace was virtually identical -- it wasn't virtually. It was identical to what our April weekly pace was and there was no notable change in terms of mix.

And I'd say it was very steady during the month. And so far, it feels pretty steady again.

Before we take the next question, the prior questioner had a question with respect to fully diluted shares. For the quarter, fully diluted shares were about 116,117,000 shares. I think he also wanted to know what it was, what our fully diluted share count was at quarter end. I mean, there is no such thing. I can tell you what was outstanding at quarter end, and outstanding number of shares at quarter end was 126 million shares, roughly.

May's contracts.

May contracts was also another question, excluding JVs. So excluding JVs, our May net contracts for 2012, May of 2012, was 462 compared to 459 for May of 2011. And I think that those percentages are roughly the same that we've seen year-over-year, as well.

Your next question comes from the line of Nishu Sood with Deutsche Bank.

I wanted to ask a question about your cash balance, obviously at the higher end of your range. If I look back to 1Q, you had a really helpful slide where you basically laid out that -- beyond operating backlog conversion cash generation, a number of levers you can pull. If I looked at this quarter, you had 3 of those in effect basically, a reduced amount of land spend. You sold, I think, about $18 million or $20 million of excess land. There was the $27 million model sale leaseback as well. So I guess I wanted to step back and look at the bigger picture here. Was the second quarter just a confluence of events, these opportunities came up so you decided to take them? Or is this a broader push to boost your liquidity ahead of housing recovery?

I think, from a land sales perspective, there wasn't anything unusual in the quarter land sales-wise. And we periodically had land sales. In this quarter, we had land sales not too unlike what we've had in prior quarters. With respect to the model sale leaseback, I think, in some of the -- my comments that I've made in my prepared remarks, it was really finding very attractive rates and terms of a model sale leaseback. We'd much prefer to redeploy the cash from a model sale leaseback back into buying new land that we're getting 25-plus-percent unlevered IRRs and paying less than 10% on the model sale leaseback and participating in the upside of any price increases those models might have so, we just think, a great way to enhance returns as well as provide additional capital to invest in additional land transactions. So we didn't think about it in terms of pulling those levers because we have to. We think it's very opportunistic ways to be able to invest more on core operating business.

Okay, great. And the second question I wanted to ask was about your mothballed communities that you are un-mothballing. You've laid out for us pretty clearly that -- on your new vintage land, the 2009 and post vintage land, that you have good margins on those relative to obviously your legacy communities. I wanted to ask about the communities that are being un-mothballed. How do those fit in the margin spectrum?

I mean, generally speaking, mothballed lands have lower margins. And part of the reason why they're mothballed: either they don't generate a good-enough margin at this moment or they don't generate a cash flow that's worth the land development investment going into it right now. So I'd say, in general, those have lower margins. Now having said that, we're seeing some price and pace escalation in some of the areas where we've been un-mothballing, so that will be helpful. And that could ultimately change things because we'll be replenishing land at the then-current market, but our mothballed properties have been written down some time ago by 75% approximately and that price doesn't change with the market. So that could change, but right now, we have better margins on our new purchases, for sure.

Your next question comes from the line of Alan Ratner with Zelman & Associates. Alan Ratner - Zelman & Associates, Research Division: Ara, just first off on the orders side with regard to the number of weekends. I was just wondering if you could maybe quantify either in a typical month or year what percentage of your orders typically are written up on the weekends as opposed to during the weeks, just to kind of give us a little bit more clarity on that topic.

Oh, boy. I...

I think it's around 70% that occurs in those 2 days, as compared to the other 5. Alan Ratner - Zelman & Associates, Research Division: And the second question just relates to what you're seeing in the labor market in May with the job report. The BLS actually reported, at least on a seasonally adjusted basis, a pretty significant drop in construction-related jobs, and that definitely contradicts what we're hearing from builders that might be a little bit more concerned about possible labor cost increases in the next few quarters. So just curious kind of what you're seeing in your local markets on the labor side. Do you feel like you're creating jobs, losing jobs? And what your expectations are on costs going forward.

It's funny, I think we made a comment, sometimes we just can't figure out some of the overall statistics in housing and in other areas, and this is one of those areas. We just reported obviously a 52% increase in sales contracts. We're not standing out there by ourselves with the big increases. Many of our peers are reporting big increases and have over the recent months and quarter ends. While sales contract orders translate to permits, translate to starts, and I can guarantee you -- I mean, in our case, with 52% more starts. Pretty good chance we'll be employing 52% more masons, 52% more plumbers and 52% more painters and rug installers than we did the same quarter last year. So I think that's good news -- very good news in the coming quarters for the national unemployment rates. I'd be just shocked if it's not. And the reason I say that is because a lot of the unemployed has been in our sector as housing starts went from 2 million starts per year, including rentals, from -- down to 500,000. That put a lot of carpenters and sheetrock layers out of employment. They are not the same workers that are going to get a job at an Intel plant or writing a new Google app. They are often in the construction trade and need -- and stay in that business and are looking for the construction to come back. Well, based on the orders we're putting forward and the same with our peers, employment in this one industry, construction, which has really been lagging, has got to be growing in the next few quarters. I think it's going to be growing and help many in enterprises. And by the way, we, like most public homebuilders, subcontract out almost all of the construction, so you won't necessarily see our employee count rise but the employee count of all of the electricians, plumbers, roofers, et cetera that we hire should be going up in the coming quarters. Alan Ratner - Zelman & Associates, Research Division: Great, that's really helpful and it's definitely consistent with what we're expecting as well. Just adding on to that, though, are there any expectations then that, that increased volume will lead to inflation on the labor cost side in terms of what you're paying your subs? And any type of quantification you could give there would be helpful.

Yes, I -- it's a very good point and it's something we are really focused on and sensitive too. And I'd be lying if I didn't say that we will see pressure on labor side around the country, but I can't really quantify that. And at the moment, our price increases have been outpacing any overall construction cost increases that we've experienced. And that's cost increases from both the materials and the labor side. But it's something that is clearly a factor all homebuilders are very focused on.

Your next question comes from the line of Megan McGrath with MKM Partners.

Larry, I guess I'm just trying to gauge some of your comments around capital structure and equity issuances. It sounds like that you -- that the sort of larger equity issuance was kind of a one-off. Would you do it again in the same situation? Or is your appetite more for these smaller equity issuances related to debt paydown?

I think it depends on the circumstances at the time. We certainly haven't been interested in doing the lower share price. And frankly, the day we pull the trigger on the equity offering, I think we were fighting an extremely ugly tape in the overall broader markets, and that's kind of been down ever since. So I don't think we'd be very interested at these kind of prices, but it really depends on the circumstances at the time and what debt we could potentially be getting rid of. I mean, we've continued to chip away at our debt positions since 2008. We've reduced debt by $1 billion. I think sometimes that fact is overlooked by the analysts that follow us. And we've continued to chip away at it on a fairly regular basis. We'd be much happier to use our precious equity at higher prices than they are today, but if we had a tremendous opportunity that we felt made sense, we'd look at it.

And then just to follow up a little bit on Phoenix. You put that graph up and you're talking about sort of 1D, 2D [ph] incremental price increases. So just curious what's actually happening specifically in Phoenix, in a typical market at -- 2 months supply, that would be a great kind of market for you to really see price increases, but clearly this isn't a typical market. So what are you seeing specifically in Phoenix in terms of prices?

Phoenix specifically -- in the last few months especially, many of our communities have seen net price increases. And I use that term because, for us, it really doesn't matter what comes in base price or what's in the reduction of concession. It's really -- net price is all that matters. And we've been steadily tweaking net pricing up in Phoenix over this last quarter. It's always a delicate balance and a trade-off between that and velocity, which really helps our operating returns as well. But thus far, in Phoenix specifically, we've had good success raising prices.

Much higher than that sort of 0.3% you're talking about, or kind of in line with that?

I don't know percentage-wise, but I'd say it's been -- in the last quarter, pricewise, it's one of the healthy markets.

I think it's the best community by community, but it wouldn't surprise me if, on average, the price increases are slightly higher in Phoenix than they've been elsewhere.

Your next question comes from the line of Kristen McDuffy with Goldman Sachs.

I wanted to ask you a little bit more about the liquidity levers that you guys have listed in the past. You mentioned that you sell leaseback on 86 of 217 model homes. Do you expect to continue to do that sort of activity? And if so, should we think about the remaining model homes as being roughly worth what you got for the first 86?

I think it would be something that we would look at and potentially do. I can't address -- I -- if I stood in your shoes, I'd do the same kind of percentages, if you can get the percentages of -- I'm just not sure where the geographic mix of those models are or the product mix of those models versus what we've actually done. So that portion of the question, I can't really answer. But we're always interested if we can do something to enhance our return on invested capital, ROI. And we think we can do that by having less cash invested in models and more cash invest in our core homebuilding business. That's something we'd be interested in doing if the cost of the models sale leasebacks remains single digit. We certainly can earn much better returns on that in our core homebuilding business.

I will emphasize: We've been doing sale -- model sale leasebacks for a long, long time. There certainly was a larger slug than normal and slightly unusual in that there were transactions where we participate in the upside, hence you see a slightly different accounting treatment. Oftentimes, we'd sell the models at a higher cost than this but we have no participation in the upside. So this is going to be unique opportunity that we want to take advantage of for several of them.

And can you also update us on any progress with respect to land banking opportunities?

I'd say -- go ahead, Larry.

People that -- have approached us months and months ago and years ago. There's probably fewer land bankers out there than there used to be, but it seems like there's a few tiptoeing back into the market that it will be interesting to see whether a transaction is going to actually occur.

And just one last question in light of kind of the new sales pace that you guys are experiencing. Over the next couple of years, do you expect to replenish inventory at the same rate that you sell through, maybe draw down or build inventory in terms of your land purchase intentions?

We really don't make projections on what we're going to do land purchase-wise.

What I would say, though, in general, our focus is on more inventory turns. So to the extent we could own a month's worth of land and have the balance optioned, we would love to do that. It's difficult to do, but that would certainly be an optimum use of our cash. In general, I'd say we strive toward a shorter ownership position but a lengthy controlled position through options.

Your next question comes from the line of Joel Locker with FBN Securities.

Just a question on actual interest expense. It just jumped up a little bit. You expensed more. And your interest incurred actually fell, which should fall a little further with the -- more paydown of debt. But just wondering, going forward, like, looking at that, what do you expect from an interest expense line item?

Well, I think interest is up in the other interest line for this particular quarter because the assets that qualify for capitalization were down. And we have to look at the assets and the status that they're in, in terms of under construction or if the land is under development to capital that interest. And if they're -- if that total value goes down, we expense more of the interest that we've incurred in the period. I think, if you looked at the 6-month -- over the whole 6-month period and took that on a quarterly basis, it's probably closer than what you'll see on a quarterly rate going forward. But that will depend on what we do in terms of new land acquisitions and what we put under development, so...

But in general, we've been expensing more than we've been incurring. And over time, you'd expect -- and therefore, capitalized interest on our balance sheet has been going down. Over time, that should -- so the expense and the incurred should get more in line than it has been recently.

Right. And just a follow-up question on, say, Phoenix. Your owned lot supply there is -- in the Southwest, based on forward earning -- forward deliveries, is probably more like 0.9 versus the 1.1. And just was curious what it was in Phoenix on your owned lot side based on the trailing 12 months or forward 12 months or how...

Yes, unfortunately, we don't give market-by-market specifics beyond the segment data, but I will give you a hint. And that is that we're able to control, primarily by options on adjusted signed basis, land in the Houston and in Dallas, which is why the year supply is 0.9 in the Southwest segment. But I'm not going to give you specifics for a market segment in Arizona.

Yes, I'll tell you, just in general, we're making some progress in Phoenix and feel pretty good about some recent land commitments.

Your next question comes from the line of Alex Barrón with Housing Research Center. Alex Barrón - Housing Research Center, LLC: I wanted to ask you -- one thing that I'm a little bit struggling with is, even though your orders were up huge, your inventory was down sequentially and year-over-year. One would think that if your orders are growing that much, you'd have to start putting in more capital to work. So was there just a delayed reaction? Or how should I think about it over the balance of the year?

I mean, it's the inventory turns. I mean, we try to be pretty specific in the prepared remarks, but we are finding ways to turn our inventory more rapidly, which I think will work. Now a lot of what we sold during the quarter we haven't built at quarter end, so you're not going to instantaneously see an impact on inventory just because we sold a bunch of homes. It's more looking at what's in backlog and under construction compared to appropriated at the time. But our overall objective is to turn inventory more rapidly so that you can actually do more volume with the same amount of capital or even less.

And I think, Larry mentioned, comparing the same quarter of this year to last year, our inventory turn increased about 30%, so that can make a pretty significant difference. And that's part of our overall strategy: try to do more turns with the inventory we have. Alex Barrón - Housing Research Center, LLC: Okay. So I guess related to that same issue, would you expect your cash balance to drop below the $175 million you guys had mentioned at some point, or not really? And I'd still like to ask a second question.

It will be your third question. But we're managing the business to try to stay within that $175 million to $240 million or $170 million to $245 million total cash balance. Those are kind of the – accelerators or brakes to our ability to invest in new land deals, so that's really the governor to -- for that. We're not planning to fall below the $170 million, but we are comfortable at the lower end of the range, as we've previously mentioned. And feel free to ask a third question. Alex Barrón - Housing Research Center, LLC: Larry, my other question was, can you -- since you mentioned your commissions that are inside your cost of goods sold, can you help me understand on your SG&A what – how should I think about what portion is fixed and what portion is variable?

I mean, going forward, we think we can do lot more volume without very much increases in SG&A at all. I mean, at corporate, think of it as almost -- unless you want to get rid of a CFO or a CEO and run the company without us, we think most of corporate is pretty much fixed at this point in time. And frankly, the same thing's true at our various businesses. We shrunk those very significantly during this unprecedented industry downturn. I mean, our overall headcount's down 78%, I think, from the peak, something along those lines. So the people that are left and the costs that are left are, for the most part, fixed. The -- obviously, you can -- incremental decisions on advertising cost and those kinds of things community-specific. Or if you add a incremental additional community, you'll need another construction superintendent and 1 sales person or 2 and maybe a receptionist, but it's pretty incremental cost as we grow communities. So the rest of it we kind of look at as fixed. It just depends on your definition of fixed. Alex Barrón - Housing Research Center, LLC: Yes, I know because I -- usually, most of the time when I model SG&A, I assume a -- certain dollars is, kind of like you said, people who are on staff and stuff like that, and some of it is generally variable because of commissions and what have you. I'm just kind of looking at -- you guys booked $35 million this year, and I'm trying to -- I know your revenues are going to go up in the back half because of the growth in backlog and deliveries. I'm just trying to figure out how much leverage you guys are going to post and whether you're expecting they will start showing up operating profit in the back half.

Well, I'll just tell you that we're not anticipating adding much in -- if anything, in the way of people than you can model that -- as you see appropriate.

Your next question comes from the line of Susan Berliner with JPMorgan. Susan Berliner - JP Morgan Chase & Co, Research Division: Larry, I just wanted to follow-up on the model leaseback, I guess. I know it's in liabilities from inventory not owned. Should we be thinking that as a debt? Because I know you said, I think, it's sub-10% rate. And what kind of maturities should we be thinking about there?

Yes, it depends on the individual model. I mean, they're going to roll off as we roll out of those individual communities, it's a self rule. So each model sale leaseback has its own individual term. I mean, on average, our community lives that we've been doing on new identified is roughly 2 years, so that might be as good a benchmark as you can think about it in terms of. But at the time those roll off, it's going to come through as revenues like we're selling the home then from a GAAP accounting perspective. Susan Berliner - JP Morgan Chase & Co, Research Division: Got you. And then the second question was, can you give any color on the land sale, I guess, where it was and with regards to was it part of mothballed land or active land?

Yes. The big sale was in Orlando where we had a very large land position, it's in a very good and successful community. But we had bought a big land position several year's worth. So we still kept a couple of years worth and sold the excess land beyond that. Susan Berliner - JP Morgan Chase & Co, Research Division: And was that part of mothball or active?

No, it wasn't mothballed. It's actively selling community. And as I mentioned, it's selling quite well and with reasonable profits as well. But we didn't want to own 5 years worth of land and we thought it would be smarter to just keep a couple of years worth. I'd ideally like to keep 1 month's worth and just keep turning it over, but we took the longer end of that position, sold that. And those are the dollar that we'll deploy into shorter land positions, which is part of our overall strategy.

Another -- further evidence of inventory turn focus.

Yes.

[Operator Instructions] Your next question is a follow-up from the line of Andrew Casella with Imperial Capital.

Just, how much capacity do you have left to do the 3(a)(9) exchanges? I know in the past you've discussed that you do have some limitations on that. If you could give any color, that would be helpful.

I think, Larry, he's probably referring to how much capacity we could -- we have and not affect our NOL. Is that your question?

Is that the question, NOL-related? Because 3(a)(9), we don't have any individual limitation on that, that I'm aware of from accounting perspective or regulatory perspective. If you are referring to the NOL limitation, what I said in my prepared remarks is that we could issue an additional 100 million shares of HOV common without limiting our ability to utilize our NOLs.

And that's even with doing a sort of 3(a)(9) exchanges, as opposed to doing a secondary offering?

I think it's a little lower, Larry, correct me if I'm wrong, if you do it, the…

It's just slightly lower. It is slightly lower, but I don't have an absolute number. It's not materially...

It -- yes, slightly lower, if you do it through 3(a)(9).

This concludes the Q&A session for today's call. I would now like to turn the call back over to Ara Hovnanian for any closing remarks.

Thank you very much. We are pleased to give the results, which are much improved in the second quarter, and look forward to giving even better results in the back half of the year. Thank you.

This concludes our conference call for today. Thank you for your participating, and have a nice day. All parties may now disconnect.