Welcome to Lennar's Fourth 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 statement.

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, and 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.

Great, thanks, David and good morning everybody. Just let you know I'm joined by Bruce Gross, our Chief Financial Officer; Dave Collins, who you just heard from; Diane Bessette, our Vice President and Treasurer; Rick Beckwitt, our President; and Jeff Krasnoff, CEO of Rialto are here with me with a few other members of our management team. John Jaffe, our Chief Operating Officer is joining by phone from California. Some of them will join in the conversation for Q&A. Eric Feder is here as well. He might jump. I'm going to give some brief remarks about the business in general and then Bruce is going to jump in and break down our financial details as he has in the past. And then of course we'll open up to Q&A as we always do and request that during Q&A each person limit yourself to one question and one follow-up, so that we can get as many participants in as possible. So, let me start by saying that our fourth quarter and full year 2015 results just marked another year of outstanding operating results for our company. Every part of the company has performed as expected and positioned itself for continued performance in 2016 and beyond. Management teams across our platform have risen beyond the challenges of sometimes complicated market conditions and have adjusted strategies to meet those challenges. We remain very well positioned to execute our strategically crafted operating plan in what continues to be a very solid macro-environment which is particularly well suited for large well capitalized companies like Lennar. In light of the FED's move in interest rates this week, let me speak briefly about our outlook for the housing market in general. Many have been concerned about the relationship between housing and interest rates. We're quite certain though…

Thank you, Stuart, and good morning. Our net earnings for the fourth quarter were 282 million, which is a 15% increase over the prior year. Revenues from home sales increased 16% in the quarter, driven by a 9% increase in wholly owned deliveries and a 6% year-over-year increase in average selling price to 347,000. Our gross margin on home sales in Q4 was 24.6% which achieved our goal of 24% gross margin for the full year. The prior year's gross margin percentage was 25.6%. The gross margin declined year-over-year was due primarily to increased land cost as well as Chinese Drywall settlement benefiting the prior year's quarter by 30 basis points. Sales incentives continue to decline this quarter at 5.9% versus 6.6% in the prior year. Gross margin percentages were once again highest in the East, Southeast Florida and West regions. Direct construction cost increases have moderated as we continue through the year. These costs were up 5% year-over-year to approximately $52 per square foot and that was driven almost entirely by changes in labor. We have a continued focus on reducing material cost due to commodity declines primarily in lumber, copper, oil and steel. We were successful in improving SG&A operating leverage by growing volume organically in our existing home building divisions. Additionally, we continue to see the benefits of our focus on digital marketing. This is the lowest quarterly SG&A percentage in 15 years. Equity in earnings from unconsolidated subs was 14.7 million in the fourth quarter, compared to a loss of 3.7 million in the prior year. This quarter's profit was primarily due to our share of the gain on sale home sites by our El Toro joint venture. This quarter we opened 61 new communities to end the quarter with 665 net active communities. New home…

Thank you, Sir. Our first question comes from Robert Wetenhall of RBC Capital Markets. Sir your line is open.

I just wanted to ask Bruce mentioned the soft pivot strategy. And I was hoping maybe Stuart or Rick or John, if you had any view on where are we in the recovery, is this like the fourth or fifth inning? And how should we think about land spend and investment going forward?

I think the way that we’re thinking about it is this, Bob, this has been a very shallow very slow and steady recovery unlike the kind that you would have expected in the context of such a deep and steep decline. It has been framed by mortgage availability and a variety of economic factors but because it has been slow and steady, we think that we’re probably earlier in the recovery cycle than one would expect for the duration that we’ve been at it. Now what that means is that from the standpoint of land, land has accelerated in pricing maybe even ahead of itself. So, in terms of the maturity of land pricing, we’re seeing that land pricing has recovered at a faster pace than the overall market. Land is still in short supply, so it is difficult to come by a location best located properties and the pricing is more of a retail nature than a deeply discounted nature. So the way we’re thinking about it is, we have a lot of runway ahead of us in terms of further recovery for the market as I’ve noted defined by the production deficit but at the same time with lands being a lot more pricy than it has been in the past. We’re really carefully managing our land acquisition and we’re also constraining growth. We could step on the accelerator and grow volume at an accelerated pace but that would mean reaching out for broader land deals, bigger land deals we’ve noted in the past that we’ve been managing both the front end and the tail of our land acquisitions in order to carefully balance maximizing pricing power, maximizing margins, and generating free cash flow at the same time.

With taking from your land inflation comments, it’s been a really strong year for average selling prices you guys are up 8% in the fourth quarter. Just trying to think against the 10% comp in 2015, what kind of expectations do you have for ASP performance in 2016 and just as kind of a housekeeping question, any color on your comments about the Houston market and the Miami markets from the press release that you've appreciated. Thanks and good luck.

Sure, thank you and I'll let Rick and John weigh in on that.

Yes, I would tell on an overall pricing standpoint, we're probably anticipating somewhere in the mid-single digits range about 4%, 5%, 6% and that we’ll definitely moved by market. Certainly we haven't underwritten any deals with any inflation to the extent that we get some upwardly moving price we’ll benefit from that on a performance standpoint. And with regard to Houston, I'll start off by saying that, it's a largest market in the country delivering about 28,000 homes and that in spite of the oil pressures there, it's still a pretty solid market. It's got fundamentals on the new home site there is about two months' supply of home which is good compared to the rest of the country. On resale side, it's about the same amount of supply, about two months homes are staying on the market and compared to what Houston has been historically and the rest of the nation, its strong market. And while job growth has accelerated primarily in the energy related sector, it's still net positive for the year with technology hiring, with the shipping sector being strong and with medical sectors bringing in employments. New home sales were definitely down year-to-date for us and the rest of the market. The market is being more sluggish on the higher price point but anything below 300,000 to 250,000 it's an extremely strong market. We are positioned in the market below the 310 price point and better located communities in the higher price point. If you look at our performance in the market, it's sort of interesting. Sales were down because as Stuart said, we regulated price pace, but our sales price for the quarter was up because we focused on margins and the price point below -- above 350 that 249 quarter and the 290 quarters are strong, Sugar Land is strong, Clear Lake is strong. And as I said below 300 it’s strong throughout the market. But we feel good about the position we have in the market, we are very focused on the land market there and I think we feel good, but it's a softer market there's no question, there is headline noise risk and that's impacted the market. With regard to Southeast Florida, we are very pleased with our performance there. Sales were up about 19% in Q4, closings were down and about 3%, but ASP was descent and our margins are strong. We're well-positioned for 2016 with great new communities coming onboard and we feel very positive about that core market. Jon?

Hi, Bob, it's Jon. I would just add that as you look at the markets across the country that inventory story is a very healthy one. We don’t' see a buildup of speculate inventory in any of our markets and see a very healthy balance of supply and demand despite sort of demand headwinds as Stuart described there is still strong enough demand that is keeping inventory levels very tight, which should lead to continued pricing power although moderated by the overall environment.

Next question comes from Ryan Gilbert of Morgan Stanley. Your line is open.

In the West it looks like orders have slowed down a little bit sequentially. I am just wondering if that’s off of a tough comp or you've seen some demand slowdown there.

Jon?

In the West, the markets that remain very healthy, as you look at California's overall market our sales pace was flat up just a little bit, compared to last year for the fourth quarter. And the Pacific Northwest our sales paces up year-over-year. Phoenix is flat to up a little bit and same with Nevada. So as you look at sales pace year-over-year very consistent, really don't see any slowdowns in any of our markets out here.

Great and then in Rialto, do you have a sort of target SG&A level that you guys are looking at or where do you think SG&A can go in terms of others or a percentage of revenue or assets under management?

This is Jeff. In terms of overhead for Rialto, I think we're kind of getting to the point where we will got some very good operating leverage just year-over-year personnel costs remained relatively flat, but the number of assets under management are going up. So we don't have any specific guidance on that in terms of numbers and in terms of percentages because it's really more geared towards by products, where we're actually working at the moment, but we do see that we are well positioned from an operating leverage perspective.

I think Rialto is growing its bottom line maintaining its overhead level. Operating leverage is going to derive from growing assets under management, RMF continuing to perform at a very strong level and the continued depletion of some of our legacy assets which do take some additional management time and stress. So, you're going to see Rialto continue to improve its bottom line.

Our next question comes from Mike Dahl of Credit Suisse. Your line is now open.

Just wanted to go back to the margin guidance on gross margins specifically and I'm wondering if you can give us a sense of -- you've got a range of basically flat to down a 100 basis points and how should we think about what some of the puts and takes are? Is it, as pricing stands now you'd hit midpoint, if you're able to push prices more aggressively to the high end, if labor cost accelerates to low end and this is -- is there anything you can give or -- like the some of the big buckets and what your expectations are within that guide?

Yes, well, look we've highlighted that you've got land costs that have been going up, you've got labor costs that have been going up, you've got pricing that is fitting in some market conditions and we'll see how that evolves, we're expecting kind of a mid-single digit increase in terms of ASP over the next year, as Rick properly point out. And offsetting some of that are some of the overhead considerations, some of the SG&A, we have some very strong some very innovative program to drive SG&A down even while normal -- normalized leveraging of SG&A will help margin overtime. We think that as we go through the year, we're going to see some of the programs that we've put in place really balance out some of the headwinds that we see in the marketplace and enable us to drive a really strong bottom line.

The only thing I'd add to that is the other bucket of activity that will temper some of the margin that we've had in the past, is we're bringing out some of our mothballed community in order to generate some cash at our inventory and those have margins that are lower than the company average.

And I guess just a follow-up on region-specific tying in Houston, so I guess it's been a market where the margins have been quite high relative to what builders would typically see in this market overtime and you made the comment around regulating pace and pushing price and some others have noted -- started to talk about maybe some slippage on price. So just wanted to get your sense of market dynamics around price there, how should we think about margins -- even if margins are holding up, you're kind of mixing away from Houston and so from a mix perspective seems like that might be a headwind to overall margins, any color there?

Margins at Houston are going -- are down year-over-year, given the decline in the market, there's still good margin for us as a company. But they're not as strong as they were a year ago.

This is John, I'll add, our healthiest margins are on the coast in Florida, in California and those markets remain very healthy for us. So, you have that balance between on in Houston and then our strong coastal markets.

Our next question comes from Dennis McGill of Zelman & Associates.

Just to close a loop on that last question there, Bruce is it fair to say if you back out Houston just given its size that the gross margin would actually be up across the company next year at this point?

Is it, I'm not sure that I would go there, I'm not sure how much the margins in Houston are actually going to come down, but it's likely that they’ll be more at least more flattish I would say.

Yes, I think look, I think when you get down to it, that's a mass question and we'd have to go back and run some numbers to give real answers to that. But look, I think there's a lot of averaging in looking at our margins, there're lot of moving pieces, Rick highlights bringing in some of our mothballed assets, Houston is part of the factor. Some of the markets are very strong, some of them are a little bit, a little bit more questionable like Houston. So, there is some averaging in all of that and we're trying to give guidance for a full year when in fact looking out over here a lot of things are likely to change. Not the least of which is the land landscape coupled with the labor constraints that are out there. Costs are clearly pressured to some extent. And then there's the opportunity to leverage SG&A and again I can't highlight enough, we think we have some really innovative components of our company that are focusing attention on leveraging SG&A even more than just normal averages.

Okay that’s fair and then Stuart you mentioned it a couple of times just now on the labor issue just curious for your opinion on how you would think about the almost on a go forward basis as well as it’s being talked about in a lot of different ways and I think everyone agrees it’s a challenge for the industry, but I think there is varying degrees of what builders are experiencing, varying degrees across markets. And also from a relatively standpoint it’s not clear I think based on how some of the companies have talked about it, whether this is a problem that’s getting worse, it’s been a problem for a while, or whether you are seeing any type of shift in the rate of labor inflation if you will. So I guess a lot in there but just curious on your thoughts how you guys are thinking about internally as you look forward?

Labor is a complicated factor. One of the big questions that people ask is where is all the labor gone and why isn’t it showing backup and how does it match with unemployment and wage gains everything. To me it’s kind of a double edged sword, on the one hand labor costs are going up on the other hand wages are going up and that means more people are going to be able to afford homes. And I think it’s generally a net positive for the industry. I know that there have been different accounts of the labor conditions, I think labor conditions are different in different markets. So different builders mix will play into that. Is it getting better or is it getting worse? I think it’s hanging around the same if we had a big spike up in volume for the industry, I think it would be very hard for the labor market to respond, it would be more constrained. But all of this speaks to the benefit of the largest best positioned best managed companies and I would have to put out in a top tier in that regard. We have an excellent management team, we’re very focused on having labor in place that we’ve worked with for many years. People that are used to being paid on time, used to being treated properly, we think our Everything’s Included program works to our benefit. It is a simplified production program, so it has enabled us to navigate these waters a little bit more confidently and consistently than perhaps some of the others. So given the simple platform, given our size and scope, given our management team, I think we are -- we feel that we’ll best in class in terms of being able to manage a tight labor market that we think is going to persist. Labor is not coming back to this industry in the quantity that we need to sustain growth going forward. So, being well positioned in that regard is a net positive for the Company.

And then just one last number, Bruce sorry if I missed this. But have you detailed how much labor on average have you funded across the country, is up year-over-year, the labor cost?

We said that it’s approximately 5%.

Our next question comes from Stephen Kim of Barclays. Your line is open.

Couple of questions, I guess my first question relates to land, and I would say, first off if you could help us put the rate at which you’re taking down your mothballed lot supply. I am wondering at the rate you envisioned taking that down into fiscal ’16. Like how many years on average do you think or how many years generally do you expect at that pace it would take you to work through your supply of mothballed lot? And then a second part of the land question is, can you refresh us exactly how much you spent on land and land developments this year and what your plans are for next year?

So on the mothballed communities I’d say it’s probably about a four year trajectory Steve, some markets will be faster and we brought a fair number of these communities in already. And there is some of these assets that require some land development, so that we brought into production but we may not get all the deliveries on them until the later years. But these are well positioned assets that we made a strategic decision during the downturn to not sell these communities and quite frankly that was -- looking back it was the right decision. With regards to land acquisition, I’ll give that to Bruce with regards to what we’ve spent.

So for the year Steve, we spent less on land acquisitions. Last year was a $1.410 billion this is $1.384, land development costs are slightly up last year it was just under $1.1 billion this year it’s $1.150.

And I guess the last thing I’d say on land acc is I think people need to be very focused on the difference between the purchase, the actual closing of the land deal and when the land was put under contract. And as we said, several quarters back going back into 2010, we had put under contract several assets that we’re still closing on today. And I think you’ll see that as we move into 2016 that several of these deals -- a lot of these -- most of these deals were pre 2016-2015 vintage.

Okay that's an important distinction, I appreciate that. Another somewhat related question to land, is the potential role of M&A. So I know as you guys look to deploy the assets often as you look at the entering a market or expanding your presence in the market through acquisitions, somewhat similarly to buying dirt [ph], I was wondering if you could comment little bit on what you see out there in terms of the M&A pipeline or sort of the deal flow [technical difficulty] in the context of your land commentary earlier? Thanks.

Okay, Steve, some of your questions didn't come through, so if I missed something you let me know, but we've always looked at M&A as an opportunity, but it's an opportunity that competes with what we think is an extraordinary and dynamic organic growth program. We simply have an excellent group that is focused on land acquisition growth organically and I think that we've been able to excel at that. So every acquisition candidate competes with that organic growth opportunity, so it's going to have to be something that really works quite well for the Company. With that said, in an environment where labor is in short supply, land is ever more complicated and we have what we think are fairly unique strategies there might be, can be, will be unique opportunities for groups that can benefit from some of our positioning to find our home here with us. And we think that, that attraction will ultimately find its way into M&A for the Company. Now if you look at the things that we've looked at, we've looked at just about everything in the marketplace, if you look at some of the things we've done, we recently close on some assets that could be considered in part M&A, we've got our cork in the water, we're looking very carefully but our standards are very-very high and we think ultimately the market will create attractions that bring M&A our way. Rick would you add to that?

Yes, I think that Stuart is spot on, we look at the acquisitions from a margin standpoint, operating leverage standpoint and given the platform that we've got it's a pretty high bar. This last quarter we closed on -- we acquired some communities from another builder it's about 8 or 9 communities, smaller deal, but these were ones that we could bring into production relatively quickly, that’s cash-on-cash and pretty much during the same year within 16 to 19 months. So we look at everything. We got a high bar, but I wouldn't be surprised if you see us do some more of that as we move forward in next year or so.

Thank you. Our next question comes from Michael Rehaut of J.P. Morgan. Your line is open.

First question I had was just going back to the gross margin and operating margin guidance and you know congrats on executing this past year along your guiding, really strong performance there. Looking at your outlook for ’16, it occurred to me that if you kind of -- you give a descent range on gross margin. Obviously there is some variability that can occur throughout the year either with rates or labor or whatnot that could impact closing let's and perhaps that’s part of it, but to the extent that you are able to hit the higher end of that gross margin guidance range and at the same time I would expect you guys to be able to extract some amount of additional SG&A leverage, is there the potential for operate -- little bit of further operating margin expansion in ’16 or is that pushing the envelope a little bit, but it's seemed to be that perhaps there could be a little bit of a touch of conservatism here, just want to know your thoughts around that or are there certain factors that you're a little bit more cautious around?

No, listen, Mike I think that if you look at the market in general, the market has many elements that are moving around. We're not injecting conservatism. I think that the market has headwinds that are very real and that have to be navigated. You're hearing it from all of the homebuilders. I think that -- I think you're going to get excellent performance out of our company, but we're still going to be performing within the limitations of the marketplace in general. You hear about land constraint, the difficulties that you see across the board, companies acquiring land, it's difficult out there that’s a headwind. Labor is a headwind that -- even though we feel that we're advantaged in some of those ways, it's a limitation. So, I wouldn't be thinking in terms of us conservitizing our numbers, I think we're trying to give you a real picture of where we think things are. We've given us, we've given ourselves a fairly sizeable margin in terms of our guidance because we think that the market is volatile and difficult enough where it's uncertain as to where we're actually going to land, but I wouldn't think of it in terms of conservitizing our numbers or our performance.

I guess, I guess I was just talking about if you were able to hit the higher end of the gross margin range that you would get a little SG&A leverage that at minimum you could hit on the flat operating margin if not perhaps slightly better, but obviously a long way to go to get there throughout the year.

Lot of work ahead of us, so we're going to have our head down and be focused on this, but I think that we're trying to give as good a guidance as we can, we don't have a crystal ball and we'll have to see how the year resolves itself.

Second question, just following up on the M&A question and certainly you guys over the last 10, 15 years, 20 years have been opportunistic in a lot of different ways. Stuart, I was just kind of interested in your broader thoughts on the market, where we are right now, I mean there is quite a bifurcation of evaluation across the publicly traded builder universe where you have many builders at or below book value and I know that book value is -- can often -- it only gets you so far in terms of the valuation metrics, in terms of the underlying assets, real value. But as you look at across the publicly traded universe, what would be your expectations that let's say over the next two or three years for there to be some additional public-to-public M&A, like we've seen that points in the past?

Well, look, Mike, I'm sure that you've already crafted in your mind that here at Lennar we know the metrics associated with each and every one of the other -- or the potential M&A candidates. We think about, we look at, we dissect the opportunities that could and might be out there. We don't talk much about M&A, but let me broaden the discussion and say that we've developed a highly diversified platform. Let's not forget Rialto, let's not forget our multifamily operations and even our financial services groups. We think about M&A and combination in terms of each and every one of those groups and the multiple kind of parts that can be brought together and used as offsets. There are in our opinion limping antelopes out there for us to consider as targets across our platform. And those opportunities for us are enhanced as we focus on the organic side of our business, breeding excellence in each and every one of our components. So in the homebuilding world we've had a more vibrant kind of landscape where many are performing quite well, in other areas there are more difficult trajectories for some of the potential targets and we think there are opportunities there as well. As the landscape evolves we're looking at all of the opportunities in M&A to enhance our business and to build shareholder value. But in all instances an acquisition target is measured against an excellent organic growth program as the baseline and in order for us to engage M&A which is a lot of work and a lot of engagement, it's got to be something that works really well for our company.

Just quickly, technically I'm sorry if I missed this, I was broken out before the call got dropped by me. Bruce can you give out guidance around for fiscal '16, the tax rate and your outlook for community growth, Bruce?

We did, we've said the tax rate for ’16 would be about 34% and the community count would grow in a range approximately 8% to 10%.

Our next question comes from Jade Rahmani of KBW. Your line is open.

Actually my question is related to Stuart's last point, its clear Lennar has evolved into much more than a home builder. So I wanted to ask how you envision the story evolving from here. Do you think with the ancillary businesses the strategy will be to monetize individual vehicles through asset sales, IPO spin offs, M&A, or would you at some point consider creating an umbrella asset manager company to oversee the various businesses and even development of future businesses? Just want to know what you think of the asset management business?

We’ve been very tuned into the asset management business. We’ve of course modeled the number of scenarios relative to that. This is a process of construction. We are looking and have been looking at a variety of scenarios as to how we take these maturing businesses and enhance shareholder value. While we’re not opening the curtain just yet and giving a peek inside, I think that we have day-lighted the fact that we look at these as unique opportunity set to build shareholder value. I think we’ve got some real treasures in these ancillary businesses and whether they are looked at as in their entirety each individually or whether we bifurcate our thinking around the core asset and the management assets is something that’s very much on the table and that we think about pretty regularly. So, the answer is, we’ll all have to wait and see. It’s a dynamic environment and even the public markets are dynamic environments in that regard. I think that as a proxy remember that we have already highlighted that we are working on the programming for FivePoint and as more information becomes available and with our confidential filings, we’re going to keep the market apprised, but that’s one step in answering the question that you’re asking.

On Rialto I wanted to ask if you think Rialto can continue to buy B-pieces [ph] primarily through third party funds as its industry leading, much as demonstrated, or with the onset of risk retention whether Rialto will need to put at least half of these investments on its own balance sheet in order to satisfy the risk retention rules?

Well, look the risk retention rules are in a dynamic phase right now. There is a lot of legal question around risk retention. We believe that Rialto is uniquely positioned to be able to benefit by the operation of the risk retention rules as they take shape and firm up. So, I can’t give you a definitive answer to that right but it is our belief that Rialto will be able to continue to invest a lot of money in that very dynamic investment class. And structurally while we might have to adjust in order to meet the risk retention rules in some way as they continue to evolve, we think that the momentum of the market is moving towards the Rialto like investor away from some of the hedge funds and other competitors that have been out there and Rialto’s strongly positioned to be able to do a lot more business in this arena and risk retention will really benefit our platform.

Thanks for that. Appreciate it.

Okay, let’s take one more question.

Thank you. Our last question is from Mr. Mark Weintraub of Buckingham Research. Your line is open.

Just first expanding on a lot of the answers you’ve given vis-à-vis capital allocation, M&A in the mix as a possibility, et cetera. Can you just also update us on your thoughts on where you want the balance sheet to be and return of capital to shareholders, how that gets prioritized in your thinking at this stage?

This is the question that occupies a lot of our management time. We have been focused over the past couple of years of turning our ancillary businesses into primarily asset like high returns, high turnover businesses and as I highlighted with Rialto that process is maturing. We continue to deplete legacy assets and enhance our asset light program on the apartment LMC side of the business. You’ve seen us make a strategic move this year towards a fund manager which enables us to become much more asset like in that regard as we go through 2016. FivePoint of course has been self-sufficient using its own capital for quite some time. The answer to the question is we’ve been moving away from capital heavily and towards capital light in all of our ancillary businesses and of course on the home building side we’ve talked about tapering back on land acquisition and land development, the land component of the business going less long -- not going short just yet, but less long over time. As Bruce highlighted the numbers, in terms of land acquisition we’re down a little bit year-over-year in terms of land acquisition. Really the more interesting thing is as we're growing our business, our land spend is fairly static right now which means as a percentage it's going down, we're really focused on a cash flow model which of course as we go forward we think is going to necessitate a question about how we start to think about returning capital, we will start by reducing our debt and that will start as we go into the future and then we will start thinking about capital return to shareholders.

And on the debt side, is there a specific target or range that we should be thinking of this as where you'd want to take it to before contemplating other potential uses, share repurchase or what have you?

I think just as right now, I wouldn't give a specific metric on that, we’ll kind of wait and see, but remember that our leverage because of our substantial earnings has been drifting down and we will continue to drift down even if the debt level remain static. Nevertheless, we think that during the maturing of the home building market, we're going bring that debt level down before we start returning capital, but we will start returning capital as well.

Okay and two real quick follow on, on Rialto, I just want to confirm, I assume you do not have recognition of carried interest in the guidance you've gave and what would cause there to be a booking of carried interest in 2016 possibly?

We did not include any of the carried interest in the guidance, unless there is cash that's received, that's what determines the booking and profitability.

Jeff you want to comment on it?

This is Jeff. Yes, I mean in an essence, what’s been recognized today have been the advances -- under the documents we get advances against taxable income and that's basically what's been recognized to-date. There are -- in the guidance, those ongoing cash receipts are projected, but nothing in addition to that, unless the cash has been received.

Okay if there is a quick easy answer to it, on the mothballed communities can you give us a sense as to the -- roughly speaking what percentage of deliveries or revenues in 2016 are expected to come from mothballed communities?

About the same as we said in 2015, close to 10%.

Okay very good, thanks everybody for joining us for our report this quarter and for yearend and we look forward to a vibrant 2016. Thanks for joining us.

That concludes today's conference. Thank you all for participating. You may now disconnect.