Welcome to Lennar's first quarter earnings conference call. At this time, all participants are in a listen-only mode. After the presentation, we will conduct a question-and-answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I will now turn the call over to David Collins for the reading of the forward-looking statements.

Thank you and good morning, everyone. Today's conference call may include forward-looking statements, including statements regarding Lennar's business, financial condition, results of operations, cash flows, strategies and prospects. Forward-looking statements represent only Lennar's estimates on the date of this conference call and are not intended to give any assurance as to actual future results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties. Many factors could affect future results and may cause Lennar's actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those described in this morning's press release and our SEC filings, including those under the caption Risk Factors contained in Lennar's Annual Report on Form 10-K most recently filed with the SEC. Please note that Lennar assumes no obligation to update any forward-looking statements.

I would like to introduce your host, Mr. Stuart Miller, CEO. Sir, you may begin. Stuart A. Miller - Chief Executive Officer & Director: Okay. Good morning everyone. Thank you, David, and thank you all for joining us for our first quarter conference call. This morning, I'm joined by Bruce Gross, our Chief Financial Officer; Dave Collins, who you've just heard from; and Diane Bessette. Rick Beckwitt's here with Jeff Krasnoff, our Chief Financial (sic) [Executive] Officer of Rialto; and Jon Jaffe, our Chief Operating Officer, is on the phone from California and they'll all join in for our Q&A period. This morning, I'm going to be very brief with my opening remarks as I feel that our views about the market have been consistently expressed on our prior calls. Bruce is going to jump in with our financial detail and then, as always, we'll open up for Q&A. And we'd like to request that during Q&A, as always each person, please limit yourself to one question and one follow-up. So, let me go ahead and begin and I'll begin by saying that, of course, we're very pleased to report another quarter of performance for Lennar with each of our major segments performing as expected. In spite of some very difficult weather conditions in various parts of the country that have limited both sales and pushed back production, our first quarter results demonstrate that Lennar is very well positioned to continue to perform extremely well in current market conditions and we continue to execute our balanced operating strategy. Consistent with our prior conference call messages, we continue to believe that we are still in the early stages of a protracted, slower-than-history-would-suggest housing recovery, and an early read from this year's spring selling season suggest that the market is continuing to…

Our first question is from Bob Wetenhall, RBC Capital Markets. Your line is open.

Hey, congratulations everyone. Great start to the spring selling season. I just wanted to ask, your average selling prices on new orders were up 5.5%, which we thought was really good. I wanted to ask you. How are you thinking about balancing price and pace in the current environment? Are you seeing pricing power and how much pushback are you getting from buyers?

Hi, Bob. It's Rick, Rick Beckwitt. We're still continuing to balance price and pace specifically in a couple of markets where demand is really strong and we've got excellent land positions. As you look at the pricing increase year-over-year, a component of that was mix. We had a higher level of deliveries coming from California, some of it was just pure price increase so it's a balance.

Okay. And with the order growth that you're seeing right now, and just thinking about Bruce's gross margin guidance of 24%, do you expect the majority of the expansion in gross margin to come from volume-driven operating leverage or is that going to be more a reflection of the growth in average selling prices you're seeing? Thanks very much and good luck. Bruce E. Gross - Chief Financial Officer & Vice President: It's going to be driven by the mix, Bob. It's not going to be driven primarily by average selling price increases.

Okay, thanks very much. Bruce E. Gross - Chief Financial Officer & Vice President: We get a higher a level of field absorption, so some of it is volume-driven, Bob.

Next question from Haendel St. Juste, Morgan Stanley. Your line is open. Stuart A. Miller - Chief Executive Officer & Director: Good morning. Anyone there? All right. We ought to go onto the next one.

Michael Rehaut, JPMC. Your line is open.

Hi, thanks. Good morning everyone and congrats on a solid quarter. First question I had was on Houston. Did the 7% decline in orders – obviously, you still had a great overall order growth number, also noticed the 4% drop in Southeast Florida. Perhaps you could talk about those two regions in terms of was that more community count-driven. We were just through Houston and saw a little bit of perhaps the slower pace in February, but really did very, very much by sub-market and positioning, et cetera. But any comments on Houston and for that matter, Southeast Florida, what was driving the order trends during the quarter would be helpful?

Okay, this is Rick. First, let's talk about Houston because I know it's in everybody's thoughts right now. I'd tell you that across the board, we had good traffic in all price points. Definitely stronger traffic and absorption at the sub $350,000 price point; real, real strong between $200,000 and $300,000. As you got above the $400,000, $500,000 price point, it's slowing down. Traffic is still strong. The buyers there are just more cautious in pulling the trigger on the sales side. But we really think that the Houston market is a strong market. We decided not to chase prices down and focus more on gross margin in Houston. We're very positive on the Houston market. With regard to Southeast Florida, that really is just the timing of communities. If you look at the average sales price, it was up 9% year-over-year in the market that we chose to focus more on pricing power there as opposed to sales absorptions.

Great. No, that's very helpful. I guess just second question on pricing and incentives, broadly speaking. We've heard that the spring is off generally speaking to a solid start; obviously your comments echo that. At the same time, given how 2014 for many builders was a little bit of an uneven year, I think at this point from what we understand, builders are still a little bit hesitant to exact any material price increases or dial back incentives. But perhaps as the spring progresses, if there's still kind of a solid pace that you could see that a little bit more into April and May, is that kind of similar to what you're seeing in the market and an approach that you might take if you continue to see overall – the solid start to the spring progress?

Mike, I go back to the scene that I have advanced pretty much quarter-after-quarter. And now for the past few years, and that is that we're operating in this kind of narrow channel of improvement that's defined by a production deficit across the country and constrained mortgage availability. So, you have demand pushing up, you've got constraint pushing down, and all of this is happening with inventories very, very tight across the country, both on the existing and the new home and the rental side of the equation. So the market condition generally has been choppy. It's been moving inside the channel, a little bit up, a little bit down and you're seeing some of that. And of course, as you go through the first quarter, you've seen some rather severe weather conditions in a number of parts of country that have really limited the ability of buyers to get out of their home and go look for a home if they're even inclined to. And you've not just seen that in the Northeast where it's been kind of most aggressively articulated. It's in Dallas. It's been in Atlanta. We've had weather conditions in a number of places across the country. So even in the context of some constraining weather conditions, the market is still presenting itself and early signs of the spring are showing themselves to be steady improvement in the marketplace continuing along that trajectory of an improving, recovering housing market constrained by the mortgage market, limited inventories and still primarily defined by a production deficit that has been growing over the years that is pushing where pent-up demand is pushing production upward. We think this is a terrific tailwind for the industry and as we look ahead to the spring selling season, we're going to be balancing price and pace as we have done in a very methodical way. I think most builders will be doing the same. And while the market might move up, might move down a little bit, we see steady improvement.

Great, thanks so much, guys.

Next question from Haendel St. Juste, Morgan Stanley. Your line is open. Haendel E. St. Juste - Morgan Stanley & Co. LLC: Thank you. Sorry about the technical difficulties earlier. Stuart A. Miller - Chief Executive Officer & Director: Okay. Haendel E. St. Juste - Morgan Stanley & Co. LLC: So wanted to ask about the absorption pace. How did that spread throughout quarter and how is it turning currently? And can you talk about what buyer segments are currently driving the orders and the absorption growth? Stuart A. Miller - Chief Executive Officer & Director: Let me ask Jon to lay in on that. Jonathan M. Jaffe - Chief Operating Officer & Vice President: Well, as you would expect in our first quarter, we saw sequentially for the months order pace improve as you move from December, January into February. And then as we've been saying, it's really submarket by submarket "saw" the strongest absorption improvements in the coastal markets, particularly places like California, parts of Florida up into the Carolinas, which is what we expect as we've seen looking backwards in this recovery as the coastal market seem to be outperforming from an absorption standpoint. Haendel E. St. Juste - Morgan Stanley & Co. LLC: Okay, I appreciate that. On the deliveries beat, was that just driven by higher demand for spec or the platform just running better maybe perhaps than you expected during the quarter? Stuart A. Miller - Chief Executive Officer & Director: That's a combination of the two. Haendel E. St. Juste - Morgan Stanley & Co. LLC: Okay, fair enough. Thank you.

Next question from Ivy Zelman, Zelman & Associates, your line is open. Alan Ratner - Zelman & Associates: Hey, guys. Good morning. It's Alan on for Ivy, and congrats on the quarter. First question, Rick, I was hoping maybe just to follow up quickly on the Southeast Florida orders there. The order pace this quarter was well below where you've been running in the back half of last year. And you mentioned the timing effect there from some communities. If we look at the trends through 2014, it looks like you had a similar drop-off in 1Q, and then activity ramps pretty significantly through the remainder of the year there. So as you think about the pipeline of community openings in that market specifically, should we expect to see a similar trend this year, or is this kind of first quarter run rate just based on your pipeline a more realistic run rate through the year?

Some of it's going to be – it's really dependent on when we can get the big communities open. We went through some rather large, high productive communities last year, and we've got similar battleships opening this year throughout Southeast Florida. Unfortunately, right now there, we're getting the models open, getting the monuments, the entries opened, and it's going to be probably a couple of quarters until that pace picks back up. But as we move into 2016, you'll see a lot of activity coming from Southeast Florida. It will still be a really good year, high margins, just a little bit on the flat side for the year. Alan Ratner - Zelman & Associates: Got it, I appreciate that color. And second, Stuart, there have been some articles written about a community opened recently in Nevada geared towards rentals on the single-family side. So I was curious if you can give some color there about what the company strategy is, whether this is a one-off, or whether that's a business you're looking to get into. Stuart A. Miller - Chief Executive Officer & Director: Look, as you know, we started years ago focusing on the rental component of the market, recognizing that the mortgage constraint would play a big role in the way that the housing market would recover. Frankly, we didn't anticipate that the regulatory environment would constrain the mortgage market as much as it has. And as the market has presented, we've continued to grow a rather sizable apartment rental business. We've built a platform that, as Bruce articulated, is very large across our geography. And we're not only pleased with the $5.5 billion pipeline that we've put together, and we think that even to our underwriting we're seeing upside just based on low vacancies and high…

Next question from Stephen East, Evercore ISI Group.

Thank you. Good morning, guys. Stuart, you've talked a few times about mortgages, et cetera. I guess a compound question here. One, who's really providing the mortgages as you look across the country? Is this coming from the bigger guys in the world or is it just the smaller guys and non-banks? And then if you just look at what you think the market – what type of growth rates the market could support this year, say, over the next 12 months or so, what's limiting factor? Is it the mortgage availability, or would it be more on the land or labor? How do you all look at it right now? Stuart A. Miller - Chief Executive Officer & Director: First of all, as it relates to the mortgage market, Stephen, there's clearly somewhat of a shift going on. The traditional banking world is really constrained in its view of the mortgage market and the regulatory environment. But really that regulatory environment spreads or is equally applied across the mortgage platform. Even if you're an unconventional lender, you have to look at the regulations around mortgage origination and some of the punitive constraints of the environment as a limiting factor. And it's not just at the origination point; it's all the way through to the servicing platforms out there. So the mortgage market, even though we're seeing that originations are finding their way across smaller lenders and less traditional lenders in the market at large, it doesn't move the needle dramatically to see the shift from big banks to others in terms of healing the mortgage market. It's more about the regulatory environment softening, the punitive side being softened and lenders just feeling their way through this kind of turbulent landscape. So I still view the mortgage landscape as the primary limiting factor. Now a secondary limiting factor, because we have been constrained in production, the land development machine has not reemerged in this housing recovery in full force. So it takes time to get land entitled. I keep going back to the fact that there is a land shortage, and that means entitled developed land is in short supply. So if you see an uptick in the marketplace, land will continue to be a constraining factor. And then the question of materials and labor, I think they're subsidiary questions. I think to the extent that demand reveals itself, labor can be sourced with higher wages, materials. There are clearly some constraints on the trucking side and maybe the import markets are little bit more complicated. But I think your primary constraining factors are the mortgage market number one, and then land number two.

Okay, thanks. And then the other question I had, if you look at really two things. One, your apartment sales that you got coming in the back half, if you could, give us a rundown on location and what you think the general cap rate will be. And then what you think your cash flows – are you cash flow neutral this year? Do you turn positive in 2016 with the soft pivot, and how much of it would probably revolve around the sales of the apartments? Stuart A. Miller - Chief Executive Officer & Director: First of all, Steve, I want to recognize that you're asking compound questions, which really kind of defeat the policy of one question.

I've got to squeeze them in somehow. Stuart A. Miller - Chief Executive Officer & Director: That's right. So in terms of apartment sales, I'm not going to give specific cap rates and sale numbers. What I will say is that our performance in the apartment segment is defined by low vacancies, higher rental rates than we had originally underwritten. And as we look to sell apartment communities, just remember that we are in partnership in those apartment community, so we don't have the complete unilateral ability to define a sell and define the exact timing of that sale. So this is going to unfold and we've been very cautious about describing the parameters around how sales will actually happen because we recognize it's an imperfect landscape right now. And of course, in order to model it, you who do will analyze what we're trying to do. We're looking for some certainty as to how many and what the cap rate is and what the profitability will be. And we've realized there is a little tug and pull there. We're trying to give you some general parameters recognizing that the specifics are going to define themselves at that time. And as we go through some of our sales, we'll start to develop some more specific parameters, which will be helpful to you when we get into 2016.

Okay, fair enough. Stuart A. Miller - Chief Executive Officer & Director: And then the second part of that compound question was?

Just looking at your cash flows for this year and next year. Stuart A. Miller - Chief Executive Officer & Director: So, Bruce, do you want to talk about that? Bruce E. Gross - Chief Financial Officer & Vice President: Sure. So as we've been saying, we think 2015, we are going through the soft pivot. So depending on some of the timing of some of the land acquisitions, we're getting to a point where by the end of this year, we think we'll be in a position of turning positive cash flow and into next year. And most of that is driven by the soft pivot because the ancillary businesses as you go through this year are pretty much self-funding. We're putting a little bit more into Multifamily this year. But we expect as we get into 2016, those businesses will be returning cash and self-funding. So the soft pivot is what's going to be driving us to get to cash flow positive as we get towards the end of this year.

All right, I appreciate all the help. Thank you, guys. Bruce E. Gross - Chief Financial Officer & Vice President: Thanks, Steve.

Next question from Stephen Kim, Barclays. Your line is open.

Hi, guys. This is actually Trey on for Steve. Going back and touch a little bit on the mortgage market that you guys have talked about a few times, you actually, early May, published some FICO and DTI data regarding February with both tightening on the margin. Do you believe this is representative of what's currently going on in the underwriting market or do you think this is more a reflection of people walking through the door? And are you seeing similar trends coming from your customers? Stuart A. Miller - Chief Executive Officer & Director: I saw that. I don't know really what to make of it. It seems fairly – it seems that the data that's reported is really kind of it's within a range. I don't know that we – I don't know that I could see a trend from that. It seems to us as we look at our book of business that still – that the mortgage market is opening at a margin. And the fact that FICO scores might move a little bit one way or another I think is all part of that process of one step forward, two steps back, but gently improving as we go forward. So, I just don't know that I would read too much into that data.

All right, thanks for that. Now, speaking to your ancillary businesses a little bit, could you talk about the recent departures at Rialto and what most excited you about that business? And also regarding FivePoint, what do you consider the timing for the next group of lot sales to be released there? Stuart A. Miller - Chief Executive Officer & Director: Okay. Let me let Jeff talk about the departures and then we'll talk about FivePoint.

This is Jeff. And as far as the departures go, I think it could go probably a lot more for us than really what the price made a bigger deal of it than it really was at the end of the day. And we have about 400 folks in Rialto, the team that was – that left has already been replaced most of it, almost a 100% of it internally with a group of individuals that have been growing up in the business and actually been in the business even longer. So from that perspective, we're feeling really good about it in terms of where we are. Stuart A. Miller - Chief Executive Officer & Director: Let me just add to that. I think if you look at the markets in which Rialto operates, most of the participants are groups that have been homegrown here within the Lennar environment. Jeff and his senior management team are, I would say, the educators of the industry and I would say that we have the recipe here. Some of the ingredients sometimes leave the building, but we can replace the ingredients. And we have a great and stable program at Rialto that continues to move forward. I wouldn't read too much into the departure of any one or any few associates either in the Rialto platform or the Lennar platform and again, as Jeff said, I think the press made a lot of much ado about very little. Let me turn to Jon to answer the part about FivePoint. Jonathan M. Jaffe - Chief Operating Officer & Vice President: Thanks, Stuart. We're very excited where FivePoint is positioned right now. Most of the activity is occurring at El Toro in Orange County. We reported sales have gone extremely well in the first phase…

All right. Thanks, guys. It's very helpful. Stuart A. Miller - Chief Executive Officer & Director: Okay.

Next question from Jade Rahmani, KBW. Your line is open. Jade J. Rahmani - Keefe, Bruyette & Woods, Inc.: Hi. Thanks for taking the question. On Rialto, I wanted to also ask about if you could provide an update on your thinking regarding what you might eventually choose to do with that business, whether it'd be spin-off sale or combination with another entity. It seems that in the current regulatory environment with the Basel III, increased capital requirements for banks in the Dodd-Frank risk retention rules that go into effect late next year. Non-banking platforms like Rialto should stand to benefit and also should see not only market growth opportunities, but interest from other players. So want to see if you could an update on how you're thinking about it. Stuart A. Miller - Chief Executive Officer & Director: Well, listen. Jade, part of our thesis with Rialto was, as we've grown it, has definitely marched along the lines of recognizing that the constraints around the banking industry presented a distinct opportunity for our Rialto platform, and we're pretty enthusiastic about the prospects for future. To the first part of your question, we have built Rialto as distinct from when we built LNR in the 1990s. We built Rialto as a segregated segment with a full complement of management team that was disentangled from the Lennar platform. It was designed to be built with full optionality. As we developed maturity in the business, we would have the ability to either spin to IPO, to combine, to sell, to do any number of things. As we look at Rialto today, given its current maturity, given the prospects for its future, it's a platform that we continue to like having the ability to hold within the company and wait for the right next move to present itself. So we don't feel any urgency in doing something immediately with that segment. We think that it continues its progression of coming right along with a tremendous opportunity set in front of it. And there will be an intersection of a right next move for Rialto as we continue to grow it and as the market continues to ripen and present itself. So think about it in terms of having an excellent operating platform with perfect optionality to be able to realize its maximum value as the market recognizes what its potential is. And that's exactly how we think about it, and we couldn't be happier with the way it's positioned. Jade J. Rahmani - Keefe, Bruyette & Woods, Inc.: Great, thanks for that. Just a small follow-up on the risk retention rules. Since Rialto is buying B-pieces at this point through funds, I just wanted to get clarification on whether that would meet the risk retention requirements.

Jade, it's Jeff. As we understand them, it would. It clearly would. And we believe that in terms of how we're positioned and in terms of the types of investors that we have, we're expecting that to be an advantage for us as we go forward and when the rules actually begin from there. Stuart A. Miller - Chief Executive Officer & Director: And I think that like the mortgage, the residential mortgage environment, risk retention rules across all asset classes are continuing to evolve. I think the initial intent or the initial concept of risk retention proved to be a limiting factor to the evolution of markets. And in order to keep markets moving and working properly, those rules have had to morph. As we sit right now, we think we're a beneficiary of whatever those risk retention rules are because we have the unique ability to match up special servicing with the acquisition of the underlying collateral of the B-piece. And so however it evolves, we'll be compliant and we'll be a primary engine. Jade J. Rahmani - Keefe, Bruyette & Woods, Inc.: Thanks for taking my questions. Stuart A. Miller - Chief Executive Officer & Director: Sure.

Next question from Adam Rudiger, Wells Fargo Securities.

Hi, this is Joey Matthews on for Adam. My question is probably for Rick or Jon in regards to your mothballed asset strategy. You said last quarter you expect about 10% of your deliveries this year to be from those previously mothballed assets. I'm wondering what percentage of your deliveries in Q1 were from those previously mothballed assets and how any difficulties you're having developing that land to get it ready to open communities.

We're looking at the number right now, but my guess is it's somewhere around that 10% number. Jonathan M. Jaffe - Chief Operating Officer & Vice President: Just a little below 10%, 8% to 10%.

And then... Jonathan M. Jaffe - Chief Operating Officer & Vice President: And...

Go ahead. Jonathan M. Jaffe - Chief Operating Officer & Vice President: ...there are really no difficulties in bringing those online. We've been making sure that we're on top of keeping entitlements in place, land ready to go. So as the market recovers, they're in existing divisions. We're able to, we've got product in our portfolio and able to methodically bring those online.

And since those are probably in B and C locations, I would guess. How have absorptions in those communities progressed this quarter?

Jon? Jonathan M. Jaffe - Chief Operating Officer & Vice President: Consistent with the marketplace. Sometimes they're in B and C locations, sometimes a little bit better just depending on when they were acquired. We held on to mostly our better locations as we went through the liquidation of many of those assets in the downturn, particularly with our large transaction. So we're finding that they perform fairly consistently with other communities in those areas, and we're not experiencing any activity that are really in far outreaching areas. So I don't have any color on something that would be in a true tertiary market.

Great, thank you. Stuart A. Miller - Chief Executive Officer & Director: All right, and why don't we go ahead and take our last question?

Your last question from Michael Dahl, Credit Suisse, your line is open. Michael G. Dahl - Credit Suisse Securities (USA) LLC (Broker): Hi, thanks. I wanted to go back to – I think Rick made a comment earlier in response to a Houston comment and make sure we understood the context around it. You said you chose not to chase pricing down. Is that a comment relating to just your mix of communities not shifting towards the lower end, or competitively were you seeing more discounting in that market?

A lot of times when you have a bunch of builders in a market where there's a lot – there's headline oil everyday in the paper, some of the smaller, less capitalized builders get nervous with regard to what they do with inventory. We've taken the position that we've got great quality assets in the right locations, so there's no reason to adjust pricing just because other builders that maybe in tertiary areas are bringing their prices down. So we've just chosen to focus more on margin than on pace. Michael G. Dahl - Credit Suisse Securities (USA) LLC (Broker): Yeah.

That smoke should clear out at some point. And actually, we view it long term – medium term as an advantage for us because we're starting to see some of the land parcels that were under contract by other folks come back to the market or people walking away from deals. And as Stuart had said in the past, a lot of times distress or perceived distress is where we really excel. Michael G. Dahl - Credit Suisse Securities (USA) LLC (Broker): Got it. Okay, that is helpful. Secondly, I think, Bruce, in some of your opening remarks, you made some references to focused efforts on some of the material costs. And I guess from manufacturers, you've kind of heard mix. Some are still staying hey, our feedstock cost hasn't really flowed through to us yet. So could you give any more color on just how those conversations are going and how much success you are having or expect? Bruce E. Gross - Chief Financial Officer & Vice President: Let me turn it over to Jon to answer that one. Jonathan M. Jaffe - Chief Operating Officer & Vice President: I'm sorry. Could you repeat the question, please? I apologize. Michael G. Dahl - Credit Suisse Securities (USA) LLC (Broker): The question was around just efforts to reduce some of the input cost dependent materials that you guys use and how the conversations are going with manufacturers given some of them are still trying to claim lower feedstock hasn't flowed through to them yet. Jonathan M. Jaffe - Chief Operating Officer & Vice President: From our vantage point, we're achieving success on one hand with manufacturers and then having headwinds on another side of the equation. The success has been with the drop in copper cost, steel cost that flow…

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