Good morning. My name is Jody, and I will be your conference operator today. At this time, I would like to welcome everyone to the PulteGroup Incorporated Fourth Quarter 2012 Financial Results Conference Call. [Operator Instructions] I would now like to introduce today's speakers, Jim Zeumer, Vice President of Investor Relations for PulteGroup. Please go ahead.

Thank you, Jody, and good morning, everyone. I want to thank you all for participating in today's call to discuss PulteGroup's 2012 fourth quarter financial results. On the call today are Richard Dugas, Chairman, President and CEO; Bob O'Shaughnessy, Executive Vice President and Chief Financial Officer; Mike Schweninger, Vice President and Controller. And also joining us today is Jim Ossowski. Jim will be assuming the title of Vice President, Finance and Controller. Jim will be replacing Mike, who is heading to Florida and assuming a new position as Area Vice President of Finance for our Southeast Area. Before we begin, copies of this morning's press release and the presentation slide that accompanies today's call had been posted to our corporate website at pultegroupinc.com. Further, an audio replay of today's call will be available on the site later today. Also, please note that any non-GAAP financial measures discussed on this call, including references to gross margins, reflecting certain adjustments, are reconciled to the U.S. GAAP equivalent as part of the press release, and as an appendix to this call's presentation slide deck. Finally, today's presentation may include forward-looking statements about PulteGroup's future performance. Actual results could differ materially from those suggested by our comments made today. The most significant risk factors that could affect future results are summarized as part of today's earnings release and within the accompanying presentation slides. These risk factors and other key information are detailed in our SEC filings, including our annual and quarterly reports. With that, let me turn the call over to Richard Dugas. Richard?

Thanks, Jim, and good morning, everyone. I'm pleased to be with you this morning to have the opportunity to discuss PulteGroup's very positive fourth quarter and full-year results. 2012 was a year of important accomplishments for the company, both in terms of the financial results we delivered and the progress we made against the business initiatives we have been pursuing. As many of you know, 24 months ago, we launched our value creation program, which has served to dramatically reorient our organization, our strategies and our operating processes as we seek to improve our business performance and drive higher returns on invested capital. At the offset, our activities were tactical, as we deployed new processes and tools to support the value engineering, should [ph] costing and strategic pricing initiatives we have discussed across the organization. Building on these early efforts, we are now partway through implementing broader initiatives, relating to common plan management and product and purchasing zones. All these activities relate directly to our stated goals of expanding gross margins, leveraging overheads, accelerating inventory turns and driving improved capital efficiency. By improving PulteGroup's performance in each of these key metrics, we aim to deliver superior returns on invested capital, which we believe will drive greater returns for our shareholders. While the U.S. housing market is clearly getting better, the differentiating -- and differentiating market improvement from our own internal initiatives can be challenging, we feel the relative gains we have delivered in operating margins these past several quarters, point to the real company-specific progress we are making. At this stage, we are extremely pleased with the results we have delivered, and I remain excited about the opportunities we continue to identify for additional gains in the future. I look back on the year and the overall progress we have…

Thank you, Richard, and good morning, everyone. As Richard discussed, we are continuing to pursue the initiatives that are driving today's improved operating performance, which we believe have established a foundation for sustained gains over time. Looking at our income statement, we're pleased to report that we generated fourth quarter earnings of $59 million or $0.15 per share, which includes net charges of approximately $73 million or $0.19 per share. The net charges include $81 million of mortgage and debt repurchase charges, which were partially offset by $8 million of tax benefits, associated with the favorable resolution of certain tax matters. In the fourth quarter, net new orders totaled 3,926 homes, which represents an increase of 27% over last year. Our increased sign ups for the period were generated from fewer communities, as we realized better absorption paces within our existing project. Consistent with the first 3 quarters of the year, we saw improved demand for each of our brands in the fourth quarter. On a year-over-year basis, the 27% aggregate increase in net new orders included increases of 41% at our Pulte communities, 2% at our Centex communities and 38% at our Del Webb communities. We're particularly pleased by the increase in sales paces at our Del Webb communities. As we have discussed, the Del Webb buyer has been slower to return to the market, given the discretionary nature of their purchase, their need to sell an existing property and their fiscal conservatism. Over the course of 2012, we saw a very positive trend developing in the demand for Del Webb homes. On a year-over-year basis Webb sign-ups increased 6% in Q1; 17% in Q2; 23% in Q3; and 38% in the most recent quarter. The demand trend we saw in 2012 is encouraging, given how much volume these…

Thanks, Bob. As is our practice, before opening the call to questions, I'll provide some additional comments on the demand environment we experienced during the quarter. Broadly speaking, we realized improved demand in just about every market, which drove the 27% increase in the year-over-year sign-ups we reported for the quarter. More specifically, demand up and down the East Coast remains strong, with double-digit percentage increases in almost every market. We continue to see notable gains reported by our operations in the New England area, the Carolinas and Florida. In fact, exceptional demand in our Florida markets is forcing us to take similar action to that in Phoenix, where we are purposefully slowing our rate of sales, as we focus on maximizing margin over driving volume. Market conditions in the middle third of the country also showed continuous strength in the quarter. Demand in the Midwest was generally strong, with limited lot supply often being as big an influence of our reported sign-ups as buyer demand. All of our Texas markets posted double-digit gains, with Houston delivering the biggest year-over-year increase in sign-ups during the quarter. It likely -- It'd likely -- excuse me, won't be new news when I say that our operations out West continue to experience strong demand from Seattle through California and into the Southwest. Consistent with comments we had made earlier, while demand in Arizona remains exceptional, we are continuing to moderate sales to maximize price and to avoid getting too far out ahead of production. Consistent with the positive demand environment we experienced in the fourth quarter, all of our markets indicated that they were able to raise prices in at least one or more communities during the period. In addition, 70% of our markets reported that they were able to raise prices in…

Thank you, Richard. At this time, we will open the call for questions, so that we can speak with as many participants as possible during the remaining of time of this call, we ask you to limit yourselves to one question and to one follow-up. We know there's some calls following this, so we're going to move to our Q&A as promptly -- as quickly as possible so that we can get to as many questions as possible. Jody, if you'll explain the process, we'll get started with Q&A.

[Operator Instructions] Your first question comes from the line of Bob Wetenhall from RBC.

I was hoping you'd provide some color into the composition of the big move in gross margin. You picked up 320 basis points. If you could give us some color on what came from mix and what came from home size, that would be helpful.

It's difficult to break that down by square foot. We don't have that, but what we can say is that the mix shift in closings to the move-up buyer certainly helped. That's our richest margin business. Obviously, market influences that. The good news is that, we think we've been able to take advantage of the market improvement with our pricing initiatives. So obviously, option margin per house is up or option revenue per house is up about $4,000, which is almost a 12% increase. Lot premium is up per house by about $1,400, which is about 20% increase quarter-over-quarter. Again, richer margin business, all at the same time, while incentive dropped 200 basis points from 6.1% last year to 4.1% this year. So all those market factors we're able to take advantage of to the new processes we've put in place. And obviously, the should cost and value engineering efforts that we're undertaking, 17% of our volume has gone through that. And we're excited about the zone concept and our ability to build more consistently and efficiently in our floor plans.

That's really helpful. Your dollar value of ASP's went from about $260,000 in the first quarter to $287,000. So you had a nice $25,000, $26,000 pickup. Could you give us some guidance in terms of your expectations for '13 in ASP performance? Obviously, Richard's commentary about tight inventory supplies would suggest you have a lot of upward pricing power. Can we get a magnitude directionally for what you're thinking?

Well, I think, yes, we did certainly see increases. If you look quarter-over-quarter, we're up 6% to $287,000 on average. If you look at that by brand, Pulte was up about 8% to about $342,000. Centex and Del Webb were about flat year-over-year. But if you look in the backlog, the average selling prices is $299,000, which is up about 11% over the prior year. So obviously, mix is part of that, but pricing is up.

Your next question comes from the line of Ivy Zelman from Zelman & Associates. Ivy Lynne Zelman - Zelman & Associates, LLC: Good quarter. Exciting for you. Question, first, on Del Webb. Given that you've got community count that's actually shrinking, can you help us understand where absorptions are, specifically, for Del Webb? And how does that compare to historical absorption, and maybe prospective pre-boom and where it's been on a longer-term basis?

Yes, Ivy, this is Richard. One of the things we're excited about is the momentum we saw in the Del Webb business for the quarter. To give you a perspective, we were up 6% in Q1 Del Webb year-over-year, and that grew every quarter to where, in Q4, we were up 38% over prior year. So we really like the trend in that business. And it's following a very typical Del Webb pattern, where that category tends to lag the broader housing market because of the buyer's general conservatism and need to sell a home. So as you know, resale inventory is very low in many markets now, and it's really gotten better and better in that regard over the back half of the year. So we're not surprised to see the Del Webb buyer coming back. And that does give us reason for optimism as we head into '13. Relative to historical trends, however, we are still well below what we may have generated from a typical Del Webb community, historically. I think we've quoted before, some of our larger Del Webb communities in the past, we were able to do 700, 800, 900 units a year. We're still nowhere near that level in any of them. I would say, we're still less than half of that. So depending on how the housing market continues to unfold from here, we think we have a lot of runway there, and one of the real kind of x-factors for PulteGroup group, we believe.

Ivy, it's -- the pace in the fourth quarter of sales is 2.2 a month. So clearly, some room to run there. Ivy Lynne Zelman - Zelman & Associates, LLC: That's very helpful. And then the second question relates to your comments, Richard, on the gross margin going forward. You've spoken in the past about structural changes that you've made. How much of your gross margin improvement, going forward, is going to be contingent on home price inflation, as opposed to the structural improvements and other factors that are driving it, whether it be mix, or the move-up, lower-cost land basis, you're longer land than a lot of your competitors? And so I want to understand how much of your margin expansion is contingent on HPA.

Yes, so, Ivy, a couple of comments here. First of all, the biggest drivers in 2012 are good margin expansion, a combination of a strong reduction in spec inventory. We're seeing much better margins in presale. We're very proud of that because it also helped returns and cash flow, mix shift, as well as the pricing initiatives we mentioned. With regard to the other structural elements, Bob gave a comment just now, I don't know if everybody caught it, but we only had about 17% of our closings in the quarter that had the benefit of what we would call our big structural changes, which relate to value engineering, should costing and more specifically, this notion of common plan management, where we're trying to drive a much higher percentage of our total closings through those efforts. These will be homes that are consumer-designed upfront, value-engineered upfront, if you will. We know they're going to be successful before we put them into sales and to production. And only 17% of our volumes do that. So I would suggest we have a lot of runway to go, with regard to margin improvement from those initiatives. As it relates to how much are we counting on. Obviously, as much as we can drive there. But we're not going to get into the habit of running the business banking on improved demand environment. We want to be cautious. We want to continue to buy A-plus properties. And we think we're demonstrating that we're getting a lot out of our existing assets and we still have a lot to go there.

You're next question comes from the line of Michael Rehaut from JPMorgan. Michael Jason Rehaut - JP Morgan Chase & Co, Research Division: First question has to do with the land spend and your current land inventory with the, I guess, gap in community growth. Certainly, having the long land that you possess is viewed as an asset, but maybe you could walk us through where you are in terms of unlocking some of that value and how much of it is -- why you're not working through some more of what's on the balance sheet at this point? Certainly, it would suggest that, perhaps, it's not a margin accretive move at this point. And give us thoughts around how much is "mothballed" and when do you expect to unlock that value? Because certainly, community count growth down 10% to 15% is kind of atypical in terms of the peer group right now.

Mike, this is Richard. I'll start and then turn it to Bob for a little more comment on mothballed. I would suggest we are unlocking a large amount of opportunity in our existing business. I mean, our sign-up growth last year was predicated almost exclusively on existing store -- existing stores improving better, which was our thesis coming in all along. We tend to have a much longer lived community portfolio than many of our peers do. So it stands to reason we have room to run within those existing communities, kind of like Ivy's question on Del Webb, where we still have a lot of runway out in front of us given the number of lots we have on the ground. And we don't need to invest in that business specifically. We feel we're executing our strategy exactly as outlined for the past couple of years. We're focused on improving returns. And as long as we can continue to drive acceptable paces in our existing communities, we feel like it's the right move. Having said that, we're comfortable in implementing this additional investment now that we've outlined, but we're going to do so smartly. We are not going to chase unit volume, and I would suggest the quality of the earnings that we want to deliver going forward is going to be focused primarily from margin growth, SG&A leverage and some growth from exist -- or from additional assets over time as we bring them online. But that's our focus, and ROIC is the name of the game. We think we're doing a good job there. In terms of how much is left for mothballed, Bob, you might want to answer that.

Yes. We've never really answered that question. We have helped people to find mothballed in some of our longer-phase Webb development make it a little confusing. The only thing I'd add to what Richard said is, we opened 15 communities that were truly mothballed in fiscal '12. We think we'll open another 10 in fiscal '13. There aren't that many more that we see that would be obvious to open today. Michael Jason Rehaut - JP Morgan Chase & Co, Research Division: All right, I appreciate that. And I guess, the second question on the margins. I guess, going back to the comment of 17% of closings from the value engineering, should costing, common plan management, I think it'll be helpful to understand what type of margin differential those closings currently generate versus the corporate average to get a sense of, as this increases, what the upside from these initiatives are. And if I could just sneak in another one, any thoughts around moving the commissions out of COGS into SG&A? I think, something like 3/4 of your competitors do it that way. I think it might be helpful from an apples-to-apples. So sorry to sneak 2 in there, but if you could.

Mike, I'll handle the first one. All I'll say regarding the common plan management work is that, we do have better margins coming from those efforts than businesses that are -- excuse me, plans that are not commonly plan managed. So I'm not going to give a lot of specific detail, but we'd like the upside that, that ramping volume will give us as a percentage in terms of our margin. Bob, you want to handle the commission question?

Yes. We're comfortable with our presentation. We can think about it certainly Mike.

You're next question comes from the line of Ken Zener from KeyBanc.

Your guidance of $260 million, I believe, in the interest, that's, obviously, going to -- on a higher sales revenue volume, result in some margin benefit, probably, in the order of 100 basis points. What other -- for the gross margin, excluding that, what would be some of the other puts and takes that you're thinking? What's your fixed cost in gross margin that you're going to get volume leveraged? And how do you think about the price? Because, obviously, the labor and material inflation, given that your land cost has been largely fixed and not inflating?

Ken, it's Bob. I just want to be clear that, that incremental interest expense will be a detriment to reported gross margins. Right.

On a dollar basis.

Correct.

Right. But on a percentage with higher revenue, it's going to be...

Well, again, that's not a volume-based comment from us. It's just that it's where our expectation for -- based on our expectation of turns, our interest expense will be. And to your second point, the margin impact that we see of substance is commodity, we've planned in our 2013 and it's reflected in our view of margin, about a $2,000 to $2,500 increase in house cost. So maybe, call it, 1.5% or 1.6% of our actual house costs which may be 80 basis points of margins.

And just to add on to that. I mean, your question on fixed versus variable. For our composition of our margins, everything's variable. We don't have -- some people may have certain overheads that run through their margins for the [indiscernible], we do not.

Okay, I appreciate that. And then given your comments on community count and the trend down there, can you give us a feel for, at least, in the fifth -- fourth quarter to understand, the fixed versus variable mix in SG&A, which would give us the fixed G&A piece? And with the community counts going where they are, do you expect lower fixed G&A in 2013 on a dollar basis?

I apologize. There was a lot in there. The majority -- I think to Mike's point, our SG&A is largely dependent on our cost base; not on commission, because that's up in cost of goods sold. So I apologize, Ken, I don't understand the question.

And, Ken, maybe, just as we've mentioned in previous calls, from an SG&A perspective, it's all somewhat variable, but we keep it fixed, given where we expect the business to be. But to Bob's point, commissions don't impact in the like. So depending upon where we see the business going, we adjust our overhead structure accordingly, because most of it is kind of people and other type cost.

And just to follow that, we went through a fairly lengthy and painful, in some ways, restructuring of the business, last piece of that, 18 months or so ago. We feel very comfortable with the structure that's in place today. And what we said is that doesn't flex dramatically based on whether volume ramps up, and 2012 was a good example of that. So we got leverage with the increased volume, and so we think, certainly, if you have lower community count, you may have a one less salesperson, one less construction manager, but don't think it moves the needle very much on our SG&A spend.

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

My first question was about the comments on private builders and privates getting more active in the land market, and I thought that was very interesting. Most of your peers are probably saying that, although the privates want to be there, they're not getting financing. So I'm wondering if you kind of heard about how privates are getting financing and probably getting more aggressive in the land market, given that the ADC lending is still relatively tight for most privates at this point.

David, this is Richard. There's been a lot couple of larger privates that have been notably quite active in the land market overall. So I don't really have a lot of detail and color on where they're getting financing, but there's no question land market has gotten heated of late. And our comments are just to help everybody understand. We don't want to chase volume, we want to chase good returns. And we're very comfortable with a prudent, what we believe is intelligent investment strategy going forward. Our thinking all along was we needed to repair our balance sheet, and now that we feel like we can generate really good returns, we're comfortable putting more into the business. But we're just trying to reference the fact that, that in some markets, it's a real challenge to get land deals to pencil and we want to be careful.

Yes, that makes sense. Just a quick follow up, can you help us kind of frame the additional $250 million, what that would do in terms of either the potential for growth or community count? I mean, I know it's difficult to average or generalize, but just give us an idea, if you're able to put the $250 million to work, what kind of growth that would support or community count growth that would support?

Yes, David, the only thing we'll say, and Bob gave the community count guidance for '13, it's not going to impact '13 in a community count way. But we do believe that'll impact '14, start moving the needle back up then. We'll have more to say about that as we get through the year. But we've got to see how much of this capital we can actually put the work, what changes we may have to that capital assumption over the year as the market unfolds. It's an evergreen process within the company. And it's actually a very good process that -- thanks to some help that Bob has given us, and the way we think about this over the last 18 months, we reevaluated every single quarter. So I could just tell you that directionally, that incremental capital is not getting any impact on 2013 community count in a positive direction, but we do believe it'll start moving the needle in '14.

Your next question comes from the line of Adam Rudiger from Wells Fargo.

Richard, you talked a bit about not chasing volume, talked about focusing on quality, earnings and returns. I was wondering what that says about the longer term thoughts on, maybe, 2014 or '15 when in a normal environment, your thoughts on what that means for cash flow and how you'll balance future cash flow and how that relates to returning to cash to shareholders, how that differs from what Pulte was 10 years ago.

Yes, Adam, it's a great question. And actually, we have some continued work to do to think about that over time. And I think it's fair to say that we were definitely super bullish on land for a long time. We saw some pain, some significant pain as a result of that. And we want to be more balanced going forward. Our goal is to generate long-term returns on invested capital, because we think over the long run, that's going to benefit our shareholders the best. So what I would tell you is that in the past, it may have been heavy-weighting toward land. I think you've seen us take some aggressive moves with debt. We think we're investing in land appropriately, but the other uses of cash, including dividend and potential buybacks are on the table. And we'll have more to say about that as we make decisions. So nothing firm right now, but over time, we're likely to be, I would suggest, more balanced in our overall approach than perhaps we have been in the past.

Okay. And then I just want to follow up on one of the other questions that I wasn't -- maybe I missed or wasn't clear to me. But you said -- the interest, the higher interest amortized next year or this year, on a GAAP basis, are you expecting that to have a negative impact on your reported GAAP gross margin or are you just talking about dollar amounts?

Well, it is -- you've got an increase of reported interest expense that will flow through our gross margin, so it'll be deleterious to income compared to year-over-year.

Your next question comes from the line of Dan Oppenheim from Crédit Suisse. Daniel Oppenheim - Crédit Suisse AG, Research Division: I was wondering if you can just talk about the land and the community count really impacting '14 and not '13. I guess, you also talked then about the intentionally slowing sales in some of the markets. So if we're thinking about that, and presumably, the impact in committee count is probably worst as we go through the first half of this year in terms of year-over-year basis, is that correct? And should we be thinking about orders that way in terms of more of a focus on margin, but essentially, hurting the orders here during -- more during the first half than the second?

Yes, Dan, we're not going to provide any commentary on orders. Our community count is going to be down this year, as we mentioned. But we're not going to give a lot of guidance on exactly how it's down through the year. I will just go back to, though, some of the things that Bob mentioned when he was talking about community count. Everybody's very focused on it in the outside world. But given our community count composition and things like same-store sales in existing communities, things like the overall balanced approach that we feel that we have to running the business, the Del Webb component, a lot of things impact volume. So again, we're not providing volume guidance, and I'm not going to provide any more specifics on community count, but I guess, I would leave it in that. It's not only about community count in terms of your volume. Daniel Oppenheim - Crédit Suisse AG, Research Division: Okay. And then you talked about the Centex orders being up 2%. And I guess wondering in terms of just land investment, you talked about more in terms of the higher-end, but how is land investment focused in terms of the sort of Pulte, Del Webb and Centex?

Yes, we've seen the vast majority of our land investment recently going to the Pulte brand, with not as much into Centex or Del Webb. We have 1 or 2 Del Webb communities that we're going to be opening this year and some Centex communities as well. But the lion share of the investment has gone into Pulte, because that's where we're seeing the best returns right now. We are excited about the Centex brand over the long run. We have new product that's focused there, that's driving some, we believe, higher margins in that category and better profitability for us in that category, which will help the land transactions pencil more easily in the future. But to date, most of the investment's gone into Pulte.

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

First question on the balance sheet. Your $1 billion tender brought in about 1/2 that amount in this last quarter. And even with that, just coming in, in 1/2, your debt-to-capital dropping to 32% is pretty impressive now. Looking forward, I mean, you said you're going to -- you don't want to chase volume for volume's sake, but you are increasing the amount of capital spend. So at what stage, I mean, what -- how are you looking at leverage going forward, normalized -- a lot of people would consider to be a 40% to 45%, some builders might even run a little bit hotter than that in a recovery. So how far do you want that to go down? And how are you thinking about that going forward?

Nishu, again, it's Bob. Interestingly, the tender we offered for $1 billion, we actually got $222 million. We then called our '13 paper, which was another $170 million. And then we had open market repurchases, which were targeted in the $14s to $15s of $104 million. So looking at the maturity profile now, we have nothing to do in '13. And then the maturities stack, when we get out to '14 is just about $400 million. And in terms of your question on how we view the investment, I think Richard covered that. We are looking at the ways to utilize the cash balance at we have. We've talked about wanting to be at 40% debt-to-cap. That would be a gross number, not net. So we've got to some room to improve there. Again, the economics don't make a lot of sense to us to go out and buy our debt today because it is very richly priced, particularly, as you get into those outer maturity years. So again, we think we accomplished a great deal this year. We're proud of the fact that net debt-to-cap is in the 30s. We think we've got some room to run there. Obviously, we increased the investments that we're making in land, $250 million this year shows that we're positive on the market and willing to put our money to work, obviously, the overall goal to increase our returns. Daniel Oppenheim - Crédit Suisse AG, Research Division: Got it. And the second question on the charge in the Financial Services division. The $49 million, I believe, it was. The extra year of repurchase request you're assuming here and the delta that you increased in '12, being higher than you'd originally forecast, what time period does that relate to? And what sorts of originations does that relate to?

It really has little to no change from what we've reported in the past. Again 6 and 7 originations, by far, the majority of what we're seeing, severity on these hasn't changed materially. So it's really just -- we got more of them in 2012. Now it's interesting, you can see from the chart that the volume went down in the fourth quarter after having spiked in the third quarter. And what I would suggest is the same thing we said then, 2 or 3 months doesn't make a trend at that really elevated level that we saw in the third quarter. We're not sure that what we saw in the fourth quarter is completely consistent with what we're going to see going forward. So we -- when we -- yes, there's lots of estimates. There's lots of process that goes into the estimates for the reserve. But as we look at it over the balance of 2012, the heightened level resulted in a higher cost to us and then adding 1 year, obviously, drives the big change in the reserve.

Your next question comes from the line of Will Randow from Citi Group.

In terms of your active lots, maybe that's a different way of looking at it, or total lots, could you give a breakdown between Del Webb, Pulte and legacy Centex?

Yes. I can do that. From a -- about 38% of our controlled lots are Pulte; 23% is Centex; and 39% are Del Webb.

Okay. And do you have that -- is that on an active basis or total basis?

Well, it's -- we don't explain -- we don't list out active versus unactive, so those will be in our total controlled lot.

Okay. I really appreciate the studies you guys put out on housing demographics. I guess, Richard, how do you think about the echo boomers in the context of basically the sub 35-year-olds today are underemployed, hopefully not chronically, due to baby boomers not leaving the workforce or retiring. How do you think about that from a big picture perspective? And how do you think that'll hit your business?

Well, I think we're going to need to be very value focused in order to capture demand in that environment. And I do believe that mortgage availability for that category is something that we need to pay attention to. Hopefully, underwriting over time, will ease a little bit from pretty severe restrictions today in order to allow us to capture that business. But listen, we are focused on investment today where we think we have the best opportunity, which is primarily in the move-up category and in the active-adult category for a lot of the reasons that you're kind of alluding to there.

Your next question comes from the line of Stephen Kim from Barclays.

So basically, a couple of housekeeping questions, first. I guess, can you give us a sense for what your sticks-and-bricks level is looking like in dollars right now and the number of finished lots that you own?

Sure. I can give you that. Our house inventory balance is $580 million at 12/31. Our finished lots owned is 27,828, of which 6,537 relate to house. And just in addition to that, we control an additional 5,732 finished lots to be optioned.

Okay, that's great. And I guess, just the last question regarding your margins going forward. Can you give us a sense for your expectation of your ability to control specifically, your hard costs, not addressing the labor here. But obviously, we're starting to see some significant price increases coming through from the part of the manufacturer. And I was curious as to if you could share, in your view, something -- or not even in your view -- some things that you've actually -- some success stories perhaps, in terms of your ability to be able to keep those costs down on a relative basis to your competitors, particularly your smaller peers. Do you any data supporting that, that is actually happening?

Steve, a couple of things from Richard. And Bob, feel free to add anything. A couple of things. We added, as Bob indicated, some money in our forecasting processes this year, assuming pressure from both materials and labor. So that was kind of factored into our assumptions overall. Despite that, we're confident in our ability to grow margins through the structural efforts that we have underway, including pricing that we see on the market, our value engineering work, et cetera. So yes, while we are seeing the pressure that everyone else is seeing overall, we still are eclipsing that in our mind with the overall market environment, allowing us to take margins higher overall. I don't have any great data for you relative to the smaller peers. I don't know, Bob, do you have anything else there you want to add?

Yes. Stephen, I think the simple answer is as a big buyer of service and commodity, we believe we absolutely have price competitive advantage over, to your question, smaller peers. We buy things in bulk. We have a team of people who are focused on national purchase contracts and/or significant contracted market. And so we think we have preferred provider status with many of our suppliers. It would range anywhere from how we purchase appliances, to how we purchase lumber, paint. Again, so relative to a small private builder, we think we have a competitive advantage.

Stephen, I might just add one other item. I think as big an advantage in pricing as Bob alluded to, is the ability to get our homes built. As one of the bigger builders in the country, and I know a couple of our peers have talked about this. It's tough out there, particularly to find labor, and we can command more folks on our job sites than smaller guys. So I think as big an advantage we may have in dollar and cents, we have in terms of being able to meet production quotas over time.

Your next question comes from the line of Alex Barron from Housing Research Center. Alex Barrón - Housing Research Center, LLC: I guess I just kind of want to get your thoughts on the longer-term view of Centex. I mean, I know you said you got some stuff coming up, but we've seen kind of a community count going down. When do you guys think that's going to turn around?

Yes. It's very tough to forecast that overall. Centex, unlike, say, Del Webb, has a lot smaller communities, typically, for us overall. And listen, the best thing we can tell you there is we like the buyer category. We're very committed to the buyer category. We are continuing to invest in that category, not at the same rate, but that we're going to put our money where we can get the best returns. And if we're not seeing as good of returns in that category today for a variety of reasons, we're not going to just push investment into that category just to push investment there. So we're very comfortable with our approach. I can't answer the question in terms of when community count will start improving for Centex overall, but let's leave it with the fact that we want to continue investing in that category, but doing so to generate the best returns for our shareholders. Alex Barrón - Housing Research Center, LLC: Okay. And so how would you foresee, I guess, the percentage of the mix that Centex will play, maybe a couple of years down the road? And also just kind of a separate question, are you guys starting to see or what percentage of your buyers would you say your are people coming out of foreclosure rentals and starting to buy again?

Alex, with regard to the percentage, it's extremely hard to estimate out a couple of years. I wouldn't hesitate to want to guess that. I will say, on your second part of your question, we are starting to see people who have gone through the foreclosure process enter back. Anecdotally, over the past 6 months or so, I've heard more and more of that as people work through their 3-year period and reestablish credit to be able to buy. I think that's a good sign. It's an indication that people want to buy housing. And look, they're being squeezed really hard with rental rate increases. We've talked about that repeatedly. So that is a source of business for us in the future, and we're continuing to be focused there.

Thank you. There are no further questions at this time. I will turn the call back over to Mr. Zeumer for closing remarks.

Jody, thank you. I want to thank everybody for their time this morning. We will be available for the remainder of the day if you have any follow-up questions, and we look forward to speaking with you on our next call.

Thank you. That concludes today's conference call. You may now disconnect.