Good morning. My name is Steve, and I will be your conference operator today. At this time, I would like to welcome everyone to the PulteGroup, Inc. second quarter 2015 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question and answer session. Thank you. Mr. James Zeumer, you may begin your conference.

Great, thank you, Steve, and good morning, everyone participating today. I want to welcome you to PulteGroup's conference call to discuss our second quarter financial results for the three months ended June 30, 2015. Joining me for today's call are Richard Dugas, Chairman, President, CEO; Bob O'Shaughnessy, Executive Vice President and CFO; and Jim Ossowski, Vice President, Finance and Controller. A copy of this morning's earnings release and the presentation slides that accompany today's call have been posted to our corporate website at pultegroupinc.com. We will also post an audio replay of today's call to our website a little later today. Before we begin the discussion, I want to alert all the participants that 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 reports and quarterly reports. That said, let me turn the call over to Richard Dugas. Richard? Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: Thank you, Jim, and good morning everyone. For those of you who have been following PulteGroup for the past few years, you have repeatedly heard us use terms such as balance, discipline and return-driven, which are all supportive of the value creation strategy we have been pursuing since 2011. Consistent with this focus, let me highlight a few numbers. We have purposefully increased our land spend over the past 24-plus months, allowing us to grow our community county and land pipeline over the period, while actually owning fewer lots, but controlling more positions via options. We…

Thank you, Richard. We'll now open the call for questions so that we can speak with as many participants as possible during the remaining time of this call. We ask that you limit yourselves to one question and to one follow-up. Steve, if you'll explain the process, we'll get started.

Thank you. Thank you. Our first question comes from the line of Alan Ratner with Zelman & Associates. Your line is open. Alan Ratner - Zelman & Associates: Hey, guys, good morning. Nice quarter and congrats on the buyback activity. I think that's going to be well received. Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: Thanks, Alan, Alan Ratner - Zelman & Associates: First question on the backlog conversion and the closings. I think last quarter, you highlighted that you really expect to see most of the catch-up from the weather issues, more 3Q, 4Q. Was hoping you could just give us an update there on how you think closings are going to play out over the course of the remainder of the year. And with the new spec strategy or I guess a little bit higher spec total, is that something that we should kind of factor in to closing and order estimates for this year or is that more in anticipation of the 2016 selling season? Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: Morning, Alan, it's Richard. A couple of things, we really don't use conversion rate as something that we track a lot internally. But weather in the second quarter did impact our delivery schedule. And I would just say this, with regard to the balance of the year, we expect that conversion rates to trend back towards historical norms through Q3 and Q4. Relative to the spec comments Bob made, one thought there, we are not dramatically changing our spec position, but we are going to introduce selected spec deliveries to help even out production cadence. And that's more of a 2016 impact than anything you could expect this year. Alan Ratner - Zelman & Associates: Got it, thank you. And then one follow-up. On the pricing environment, you mentioned margins should be pretty flat with 2Q. Was curious what you're seeing on the pricing side. Is pricing power accelerating in any of your markets? And if so, how do you think about the margin outlook maybe beyond the next couple of quarters? Do you feel like the bias is more to the upside from current levels or are you still striving for maintaining a current kind of 23% level on a go-forward basis? Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: Well, first of all, this is Richard again. I'll say that we're pleased with our margin trajectory. And we're happy with the guidance that we provided, which is up slightly from what we said before. From a pricing perspective, I think we believe there is more upside than downside to pricing. We're going to have watch what happens with the economy and with rates overall. But we wouldn't want to provide, Alan, any commentary beyond the guidance that Bob gave. So nothing really at this point for 2016, our backlog visibility isn't quite that far yet.

Thank you. Our next question comes from the line of Stephen Kim with Barclays. Your line is open.

Yeah, thanks very much, guys. Good results. Let me ask you a question if I could about the orders. I think you mentioned about Centex down 7%. You were talking about some acquisition-related effects. Can you just give a little more granularity about that? What you meant by that and sort of what we're seeing on the ground which is driving that negative impact? Robert T. O'Shaughnessy - Chief Financial Officer & Executive Vice President: Yes, Stephen, this is Bob. What we were highlighting was that the cases out of the Columbus and Kentucky are slower. So if you had excluded that, for instance, from our Centex results, our Centex paces would have been flat quarter-over-quarter.

Got it, okay. That's great. The second question relates to a comment – or I think a thread of conversation that you and I had a month or so ago where you were talking about some consumer research I think that you were conducting regarding the entry level. And I think one of the takeaways was that you were starting to see that millennials or entry-level buyers are willing to trade size for proximity. So, they're not willing to drive till they qualify kind of thing. They kind of want to live closer to the job centers and were willing to take a smaller footprint home to do that. I wanted to follow up with you, see whether or not that is in fact what your research has concluded. And if so, do you have any availability in your existing communities or ones that you sort of teed up here over the next year or two to sort of accommodate maybe some smaller, more entry-level product into existing land positions, because that would seem to suggest you'd have to sort of rezone them, or not? If you could just sort of talk about the research and the conclusion – how you would deal with the conclusions in your – on the ground. Robert T. O'Shaughnessy - Chief Financial Officer & Executive Vice President: Yeah. Stephen, it's Bob again. We have not concluded that research. We're making progress and so certainly before the end of this year. But for everybody's benefit, essentially what it would suggest is that there is a group of first-time buyers in that millennial age group that – and you said it will – are willing to trade size for proximity. And I think it's essentially what Richard talked about in his prepared remarks about that millennial buyer. And what it was trying to tell you was that it is already a pretty significant part of our portfolio of, again, not entry-level, but first-time buyers in that millennial age group. And so, we do have communities open today. Certainly, you've heard us talk about three quarters of our spend is Pulte-branded – it includes that buyer group. So yeah, we are actively serving them today. Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: And Stephen, Richard with a little additional commentary. That's what we call our TCG3 category, which is part of that first-time buyer group that serve under the Pulte brand, and that was sort of a clarification we were providing at the end. In addition to it being a big piece, as Bob indicated, we also indicated in our prepared remarks it's a growing piece. And then lastly, we would not anticipate being able to rezone existing communities to take advantage of it, but that's not to discount the ramp up in investment activity geared toward that category, which will play out over the coming years.

Thank you. Your next question comes from the line of Stephen East with Evercore ISI. Your line is open.

Thank you. Good morning, Richard. You'd mentioned – made two comments during your prepared remarks that I thought were interesting. One, you talked about investing appropriately as you move forward, and the other, better located, still performing well. Could you talk some about what that means to you, investing appropriately as you go through this cycle? And maybe you can put it in content versus this year. I don't know whatever works best, but then also the better located, still performing well in through July and all that, talk a little bit about what that means, better located, if you will. Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: Sure, Stephen, good morning. I would say from an investing appropriately standpoint, what we really mean by that is tied to our disciplined philosophy, where number one, we invest in the business and our land positions. And then the other investment choices come after that, including on increasing dividend, selective M&A and then residual cash being used for routine systematic buyback purchases. And I think you saw us execute against all of those this quarter. So we view that as very consistent. And to put a little more granularity in it, we're very proud of the fact that we stuck to the appropriate investment philosophy, which leads to your second comment around better locations. What we're really trying to say there is, that's one of the reasons our margins are holding up well. We continue to believe we're buying the best dirt out there. We're not reaching for things. Overall, our land trajectory, our spend trajectory has been up; so we would expect a bigger business in the future and that's why we continued to invest where we are, while keeping all the other parameters in check, so hope that helps.

It does. Thanks. And then sort of along those lines, your orders grew pretty much in line with your community count. I know you focused a lot more on margins over the last three years and have not been as focused on the absorption pace, if you will. As you look out, call it, over the next four quarters, six quarters, whatever timeframe you're comfortable putting on it, how do you view that dynamic? Are you at a point in the cycle where you think your absorption should be greater or you still are – that's just secondary to what you're doing on the gross profit line? Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: Yeah, Stephen, our overall goal, we've said it repeatedly, is return on invested capital. And the blend between pace and price is a tricky one in every single community, and frankly, it depends on the community overall. I would be hard pressed to say whether we had more opportunity in margin or pace going forward. But I will tell you this, we've made a lot of progress on margin over the past few years. We haven't provided any guidance sort of beyond that, but we're looking to balance both. And for us, everything from compensation to the way we talk about the business is really ROIC. We've emphasized margins a lot these past few years because our margins needed a lot of improvement overall. And at this stage, we're really talking about returns. So I apologize for not being able to give you more specificity there, but that's the way we're looking at it.

Thank you. Your next question comes from the line of Mark (sic) [Mike] Dahl with Credit Suisse. Your line is open. Michael G. Dahl - Credit Suisse Securities (USA) LLC (Broker): Hi. Thanks for taking my questions and the helpful color here. Wanted to just ask a question, maybe a little more granularly on the margin guidance because it seems like if you're holding these levels for the next couple quarters, it nets out to like slightly above 23%. And the previous guide was approximately, so are we talking was the previous guide really like a 22.8% and now it's a 23.2%? Or just any sense of magnitude on just really what the increase is. Robert T. O'Shaughnessy - Chief Financial Officer & Executive Vice President: Yeah, Mike, it's Bob. We have, just trying to clarify, we have been speaking to 23% certainly in the last quarter since we delivered in excess of that and have suggested that we'll continue to. And with the seasonality of the business, the production being more geared towards the back half of the year, we would blend to a higher rate than 23% and just wanted to point that out. Michael G. Dahl - Credit Suisse Securities (USA) LLC (Broker): Got it. Okay. And then shifting to some of the color around Texas, obviously some challenging conditions as you noted with the weather. But were some of those comments also around just being the high end pricing issues being exacerbated by shortages, but then there was also a comment about more competition. Was that also still isolated at the high end or was that a broader issue that you're seeing on the market – on the ground in Houston? Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: So, Mike, this is Richard. Rain throughout Texas hampered results across the state for the quarter, particular with regard to production. The comment we made regarding the high end was specific to Houston, but the comment we made regarding a little bit more inventory in the market is statewide. So our overall view on Texas, we like Texas. We like the market environment. It's a little more competitive than it was. We're trying to say it as matter-of-factly as we can.

Thank you. Your next question comes from the line of Bob Wetenhall with RBC Capital Markets. Your line is open.

Hey, good morning, and congrats on a very nice quarter. Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: Thanks, Bob.

I've got a lot of very positive feedback on your share buyback activity. And just, I think, speaking to some of Richard's comments about land prices being inflated. If you don't find what you need in terms of land supply to your expectations, what is the priority for that excess cash? Does it go to share buybacks or what do you want to do with it? Robert T. O'Shaughnessy - Chief Financial Officer & Executive Vice President: Hey, Bob, this is Bob. I think the answer is we look at that every year. Certainly, we have been more active in the share repurchase arena, that's largely not a call on the equity, it's actually just capital structuring; we're below our targeted range of 30% to 40%, leverage at 26%, so we feel we have significant capacity to do that. But again, first and foremost, we want to invest in the business. You can see that in the investment levels. Going forward, we'll look at that with a forward view as based on our best estimates of what the business can do. Certainly, you heard Richard talk about the priority is investing in the business, paying an increasing dividend. So we look at dividends. M&A activity, if it's out there, we would opportunistically look at, and then the rest would be share repurchases.

Okay. That's very helpful. So my other question is just on that theme of reinvesting back into the business. Today, when you're looking at the incremental dollar spend that you're going to put in, which of your three brands is most likely to get that dollar? And geographically, where are you trying to invest the most? Thanks and good luck. Robert T. O'Shaughnessy - Chief Financial Officer & Executive Vice President: Thanks, Bob. Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: Thanks, Bob. Richard here. Thus far in housing recovery, and we've been pretty consistent in this, we've been putting most of our dollars into the Pulte brand to serve that move-up category. I would say there is an increasing focus on the entry-level for us, and again, we're trying to highlight in our commentary that we've been actually putting quite a bit of capital toward the first-time buyer, that millennial category, to serve that growing category. And we'll have more to say about that in the future as our study continues. And then I'd say some selective Del Webb investments in smaller positions across the system. So, overall I'd say Pulte is the priority and then probably the other two categories with a fairly balanced approach, but always trying to seek the highest return; so it can vary from quarter-to-quarter.

Thank you. Your next question comes from the line of Michael Rehaut with JPMorgan. And your line is open.

Thanks. Good morning, everyone. First question just on the segments, you kind of mentioned that the Pulte brand, in a sense, is bleeding into the other, if I could use that term, bleeding into the other categories in terms of serving some of the Del Webb demand as well as perhaps some of the entry-level or millennial demand. And I'm just curious when you think about, if you were to report ASPs and particularly closings is what I'm getting at, not by the brand, but by broader, let's say, entry-level move-up, entry-level/move-up for Centex, active adult instead of Del Webb, which would include perhaps some of that Pulte-branded offerings. At this point, would the Centex and Del Webb percentages be up by a couple percent? And given the morphing or brand extension of Pulte, is this perhaps how you might report the segments from a demographic perspective going forward? Robert T. O'Shaughnessy - Chief Financial Officer & Executive Vice President: Yeah, so, sorry, I hate to be technical. Our segments are geographic, Mike. We present this information for simplicity when we're talking to Wall Street. But I think the answer is, and what Richard highlighted, we are seeing a future pipeline of that active adult that's Pulte-branded. We have an existing book of business that is first-time buyer that is Pulte-branded. And he highlighted the amount of that. And so, I think what it would show you, if you looked at it in the way that you just asked, that entry-level first-time buyer group would be bigger than our Centex brand. You wouldn't see much of a change out of Pulte into the active adult, so that wouldn't change much. So I think what we're looking at is how to make that information digestible without confusing people with too much data.

Right, right. Yeah, no, I think that kind of the continuation of thinking about that would certainly be helpful and maybe, again, broadening the – instead of Centex, Del Webb, maybe just broadening the definition, so to speak. Secondly, you mentioned Texas and also California in your regional review. I was hoping to get a little bit more, if possible, market-by-market review of California, how the different markets are going. As well as when you talk about Texas being slightly more competitive, is that just in the form of perhaps discounts coming up a little bit by percentage or two, or if you're seeing any price reductions? Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: Hey, Mike, it's Richard. With regard to California, what we're seeing is the better located assets are doing extremely well. Some of the outer-lying positions not quite as well, but where you have very, very well-located communities, we're seeing a lot of strength. With regard to Texas, overall, the Dallas market is the strongest of the markets, but our commentary overall is not really related to discounts. It's just a little bit more inventory in the market across the state. Not a dramatic shift, but something that we've noticed over the past couple of quarters overall, so again, still a good housing market. One that we're pleased to be in, but a little more competitive than it was.

Thank you. Your next question comes from the line of Megan McGrath with MKM Partners. Your line is open.

Good morning. So I wanted to ask – I think you mentioned either in your slides or your press release about an increase in the amount of land that's optioned. Was that a change over the last couple of quarters? Are you seeing any kind of change in increase in options available or could you maybe give more detail on what's going on there? Robert T. O'Shaughnessy - Chief Financial Officer & Executive Vice President: Megan, it's Bob. We have been seeking to do more option transactions and I would say it goes back over years, not quarters. You've seen a gradual increase, I think, in the data we've presented. It showed 10%, up to now 30%. And the answer is, to your second question, is it more available? Really not. So, what we're seeing is a lot more raw transaction. So historically, it was a healthier developer base in the country. You might have seen more opportunity to do finished lot option takedowns. What we're really talking about is, if there's a position and I'll make up a fact pattern that has 600 lots in it, and we've got a current need for 200 of them, of medium-term need for 200 more and then a longer-term need for 200 more, what we're trying to do is structure transactions that would allow us to take the first third, control the second third and third third over time. But we would be the developer typically, and so it comes down to a parcel-by-parcel negotiation. Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: Megan, Richard here. One of the reasons we highlighted it is just when you look at it over the few years, as Bob indicated, it's a pretty dramatic improvement and very consistent with our overall focus on a much more balanced approach with regard to capital. So in addition to the priorities for capital, even within the land priority, we're very proud of the fact that we're controlling a lot more lots while not taking here as much risk as we have in the past.

Great, thanks. And then just a little more clarification on the first-time buyer discussion. I think you're trying to answer this, but let me just clarify. You mentioned in your initial comments that there is evidence in the market that the first-time buyer is coming back. You mentioned statistics from the NAR and you also mentioned that the new stuff – that your Centex was flat, so are you saying that you are actually seeing it, it's just in these Pulte-branded communities? Or are you saying there's some evidence, but you're not actually seeing it yet in your order growth? Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: Actually, Megan, if you go back over the last year or two, we've had pretty strong comps in terms of the Centex brand and not just in Texas. We've highlighted other parts of the country, but Texas is a big part of our Centex business. So I think we've seen, although flat absorptions this quarter, ex-Louisville and Columbus, we've seen pretty good results over time. And to your question in terms of what's in the Pulte brand, I don't have the data right now to tell you what that first-time buyer component that we've flagged Pulte is. But obviously, the Pulte same-store comps were up 6%, so you can certainly conclude that it was a portion of that.

Thank you. Your next question comes from the line of Jack Micenko with SIG. Your line is open.

Hi, good morning. Another question on the first-time buyer and how it relates to the Pulte brand expansion. What I think I'm hearing is the strategy on the first-time for Pulte is, hey, look, we're going to keep focusing on that higher income, first-time buyer, maybe the larger house in part to preserve margin, more so than a lower margin, lesser location Centex-type product. Is that a fair interpretation of where we're at on the first-time strategy? Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: Jack, I don't think it's either, candidly. What we're trying to highlight is that under the Pulte brand, as I think everyone's aware, we have been serving this millennial buyer. And sort of the traditional view of an entry-level consumer buying a home in their mid-20s and then trading up, et cetera, over time is changing. And in fact we're seeing a lot of people actually skip the Centex true entry-level product, say at $200,000, and buy a Pulte-branded home at $300,000 in their early-to-mid-30s, typically consistent with when they either get married or begin living together, and their housing needs change from rental to ownership. We have been doing quite a bit of that business with the Pulte brand. And it's in an urban sort of infill location, it's clearly targeted to that upwardly mobile millennial buyer. And as we started peeling through the data in response to lots of questions from investors, we wanted to just provide a little bit more clarity that that was a significant portion of our business. And we were not ignoring the growing interest in what's happening with the millennial category overall. So we've been doing a lot of that business through the Pulte brand with townhome product, a little bit of condominium product, and it's not an insignificant amount of our business, as we indicated, about 500 closings in the recent quarter. So, we're simply just trying to introduce this concept that our brand strategy was not always perfectly consistent with first-time move-up and active adult. And going forward, we're looking for ways to clarify that a little bit more.

Okay, thank you. And then I think Richard, in your prepared comments, you had mentioned that land was heating up. Any way you can give us sort of a magnitude of rate of change. And then curious if the step-up in buyback is in any way related to that higher – a higher, more expensive land picture that you mentioned? Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: I'll start and then Bob may want to add something here, Jack. First of all, the land environment has been competitive for the last several quarters. And we haven't noted anything unique this particular quarter overall. And as it relates to our buyback activity, starting last fall, we told investors very clearly that we had a priority for investment, first in land, second increasing dividend, third, opportunistic M&A, and then fourth, residual cash for systemic and routine buybacks, and we've been executing exactly against that. As Bob indicated, our leverage is a little bit lower than we like it. We had free cash flow. And I think we're extremely pleased with the flexibility we have. It's not an either-or for us. So we were able to step up our land purchases fairly significantly in the range of the guidance we provided, while still paying down debt and repurchasing shares at a higher rate than we had. So it wasn't particularly related to a spike in land prices this quarter, but more of an execution on our strategy that we think over time provides the best returns for our shareholders. Robert T. O'Shaughnessy - Chief Financial Officer & Executive Vice President: Yeah, Jack. The only thing I'd add to that on the land piece is it's important to remember, and you heard Richard talking about, that we are seeking better located assets, and the reality is those are always competitive.

Thank you. Your next question comes from the line of Will Randow with Citigroup. Your line is open.

Hey, good morning, and congrats on the quarter. Robert T. O'Shaughnessy - Chief Financial Officer & Executive Vice President: Thanks, Will. Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: Thanks, Will.

In terms of your two years of developed supply, is that skewed towards controlled? I won't expect it to. And do you think that's enough developed lot supply if we see demand pick up incrementally? Robert T. O'Shaughnessy - Chief Financial Officer & Executive Vice President: I'm not sure I understand the question, Will. You say it is our two-year supply? Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: Maybe you could repeat it, Will, if you don't mind.

Sure, sure, sorry about that. Your two years of developed lots in terms of supply. Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: Okay.

Do you think that's skewed – is that skewed towards controlled in any way? And do you feel like that's enough lot supply if we were to see demand pick up? Robert T. O'Shaughnessy - Chief Financial Officer & Executive Vice President: Yeah, I think the answer is, it's going to be market-by-market. There are certain markets where we have ample supply of lots in front of us. There are others where we're working through and developing lots as we go. I think we've got 27% of our lots are finished/owned, 26% are under development. So we feel pretty good, but you heard Richard talk about in Texas when we get weather, it can slow you down, so it's always a work-in-process.

Thanks for that. And in terms of the, as a follow-up, the $27 million legal settlement, do you expect any further reoccurrence of that? And what is the cash flow hit from that? Robert T. O'Shaughnessy - Chief Financial Officer & Executive Vice President: Well, actually, this is a reversal of an accrual, so it means we won't spend the cash.

Got it. Robert T. O'Shaughnessy - Chief Financial Officer & Executive Vice President: And it's really just another step in the process of settling construction issues, one that had been working its way through the courts for a number of years.

Okay, thanks, guys.

Thank you. Your next question comes from the line of Susan Maklari with UBS. Your line is open.

Good morning. Robert T. O'Shaughnessy - Chief Financial Officer & Executive Vice President: Morning, Susan.

Your Centex ASP rose 6% during the quarter despite some of the sort of issues around the acquisitions and things in that segment. Can you just talk a little bit about what drove that and how we should be thinking about it going forward? Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: Yeah, Susan, it's actually a mix issue. It's because of the production issues in Texas, which has our lowest Centex-priced product, so the mix is just different.

Okay. And then looking long, bigger picture, with the potential rise in rate that's coming this year, are you hearing from any of your buyers that that's factoring into their decision process yet? Or maybe how that will eventually factor into their thoughts and getting them maybe to pull the trigger and make that purchase decision? Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: Susan, it's Richard. I would say it's a little early yet for that to have played out. Rates just did begin rising here over the last month to six weeks primarily. Historically, I would say that does drive purchase behavior as people kind of fear the loss of a low rate environment. So we certainly don't fear that occurring, provided that it continues with the economy continuing to strengthen. But are we hearing a lot of anecdotal information on the ground about that? I'd say not yet.

Thank you. Your next question comes from the line of Buck Horne with Raymond James. Your line is open. Buck Horne - Raymond James & Associates, Inc.: Hey, thanks guys. I'm just trying to interpret some of the comments and maybe read between the lines here. But based on the land investment strategies and the talk about the first-time millennial buyer, which may be acting and behaving differently than previous generations, I'm kind of wondering is there a sense that the core Centex, that entry-level suburban sub-$200,000 price point, is that really going to have a recovery in this cycle? And I'm guessing what are your thoughts about – do we really need to maintain the Centex land positions at this point or do we – is there a need to continue reinvesting in that product? Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: So, Buck, this is Richard. We absolutely want to continue reinvesting in that area when returns make sense. And nothing in our commentary would suggest that we don't believe that's an important part of a housing recovery. I would say, however, consistent with what we said in the past, making the returns work for those more suburban, lower-priced product is more challenging still today. And we would expect that as the housing recovery continues that that will get a little bit easier as pace continues to come back into that segment. So that's a little bit disconnected, candidly, from our comments about the millennials. We're simply trying to highlight with regard to the millennials that there's a growing appetite for a fairly affluent, in-town urban buyer that wants this attached product that we have been delivering and will continue to. But with regard to Centex proper, if you will, the kind of traditional…

Thank you. Your next question comes from the line of Nishu Sood with Deutsche Bank. Your line is open.

Thanks. So, on the interest rate question, we've seen rates rising through most of this year, through, particularly in the second quarter. So, is there anything that you've seen on your month-by-month trends or maybe through your mortgage operation that could give us some sense of whether the rising rate environment has spurred people on or whether it has caused people to back away from purchases? Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: I don't know that there's anything that you would be able to know what would've happened if rates had been different. One thing that you can see is that people are locking a little bit earlier. People are not choosing arms. So from the financing perspective, it influences their behavior in terms of how much risk do they want to take coming up to the closing. But I haven't heard any detailed commentary about – I'm not buying because of interest rates or I bought today because interest rates might go up.

Got it. And you've talked a good bit about the weather, you addressed Texas mainly, as I understand it, in your comments so far. So, in the Midwest and the Northeast, there were also some pretty significant rains towards the end of the second quarter particularly in June. You folks obviously have decent-sized operations in those regions. So any effect on those regions either from a demand perspective or from a deferral of closings, construction schedules perspective? Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: Nishu, it's Richard. I would say what we've seen in the rest of the country, you'd typically see somewhere in the country with regard to weather. So we haven't called it out uniquely. Clearly, weather always plays a factor in production. It's not as big a factor with regard to sales unless it prevents you from opening communities, which the reason we called out Texas this time is it was so unique. It caused some community delays, which impacted our sales environment some, but more importantly, helped to cause the production shortfall that we've seen through the first couple of quarters of the year. So beyond that, nothing that we would note, particularly.

Thank you. Your next question comes from the line of Mark Weintraub with Buckingham Research. Your line is open.

Thank you. On the capital structure, wanted to get a sense as to where you think you are today. Is your cash position about where you'd want it to be? And do you feel that you are still under-levered? And what might be the key metrics that we should be thinking about to understand what you view as an optimal capital structure? Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: Yeah, what we've highlighted is that we'd like to have leverage and it sort of hinges off of leverage somewhere between 30% and 40%. We're obviously a little bit below that today. We have just under $500 million of cash at the end of the quarter. We have several hundred million dollars of availability under our credit facility above and beyond that. So, we feel like we have a really strong liquidity position. Obviously, we chose to pay down our debt instead of refinancing it with the maturity in the second quarter. So going forward, I think as we look at it, a lot of it will depend on our expectations for investment in the business, and obviously we reforecast that periodically, coupled with our expectations for cash generation out of the business. And so, in looking at it, I think it's fair to assume we've got a pretty big maturity coming up next year, so we'll be looking at our leverage over the next two quarters, three quarters to figure out what makes sense. We pay attention to capital markets activity all the time to see if there are attractive entry points. So, I think we're very comfortable running with this much cash and even a little bit less, candidly, because we have so much availability under the revolver. And then we think we've got access to the capital markets on terms that what would be attractive. So, when we need to, we have a way to fill any cash shortfalls that we might want to deal with. So, again, leverage being between 30% and 40% is what is driving most of our decision making.

And so is it fair to say – because I guess you had to make that decision whether to go refinance or not. And I certainly see that you might've decided to, yes, go out and refinance now, and yet, you choose not to. Is that because you want to have a greater degree of line of sight in terms of the investments in land and development opportunities that would have justified putting more debt on that balance sheet? Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: Well, we feel like we do have pretty good line of sight into our projected spend, certainly over the next six months to 12 months. So what it tells you is we have obviously a business that is cash-accretive. We're not paying cash taxes. We have a lot of production coming in the back half of this year, which will be generating a lot of cash. We're also going to be investing a lot, but we didn't feel any pressure that says, oh, gosh, we should go refinance this debt. So really, it's just an evaluation as time goes on.

Thank you. And your next question comes from the line of Jay McCanless with Sterne, Agee. Your line is open.

Thanks for taking my question. Just wanted to ask in terms of the ROIC focus. Could you talk about the returns on potentially selling some of the land that you may have earmarked for some of these entry-level and maybe a little more spec-heavy communities? Because it looks like in the first half of this year, you guys have run a land gross margin of about 22%. Last year, I think it was roughly 31%. So, I think there would be a case – there's a case to be made that you might make more from selling that land, especially with the appreciation you've discussed rather than trying to put maybe some gross margin-dilutive homes out there. Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: Yeah, Jay, this is Richard. Several years ago, about three years ago, we undertook a really deep-dive look at every single position in our balance sheet. And we were pretty clear with investors that we did intend to sell a portion of land and we've done most of that. I don't know what the exact numbers are, but somewhere around $300 million of land over the past few quarters have been sold. So it's always a portion of our portfolio, and from time to time, there'll be a position that gets sold. I would say a lot of that heavy lifting is done. It's also hard to predict the timing on it, so we couldn't give you any good projections, but there's not a concerted effort to wipe off a portion of the balance sheet there. We would rather develop that into home sites and capture the margin on the land as well as the home. We've gotten pretty efficient at capturing margin on the home in addition to any built-in land appreciation. So we prefer to capture it that way. And given the fact that our prudence with regard to our capital structure has been what it's been, we're pretty happy about that decision. So I wouldn't look for any big land sales.

Okay. And then just did want to ask a follow-on on the debt question with the 2016's and 2017's coming due. I mean is it – could you talk a little bit more about, could you refinance potentially both transactions at one shot? Or do you think you have a better shot at paying it off? Just a little more color on the 2016's and the 2017's? Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: Don't want to comment on 2016's and 2017's, other than to say we obviously look at them as we think about our leverage. I don't think necessarily it makes sense for us to go and take everything out. We'd probably start to want to build the leverage ladder again. So you'd see us putting different things in place, but not trying to take care of all our current maturities. But, you never know. Time will tell.

Thank you. Your next question comes from the line of Haendel St. Juste with Morgan Stanley. Your line is open. Haendel E. St. Juste - Morgan Stanley & Co. LLC: Hey there, good morning. Thanks for taking my question. Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: Morning. Haendel E. St. Juste - Morgan Stanley & Co. LLC: So I guess first question is follow-up on some other comments that you made on spec. I guess specifically, your appetite here for raising spec count levels. As you look across your platform, are there regions today where increasing spec count makes sense? Is it across the board? And how do margins on your spec compare to margins on build-to-order? Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: Yeah, our comments – this is Richard, Haendel. Our comments on spec are related to help us with regard to managing production cadence overall, and it would be on a very limited amount. We have gotten very, very comfortable and happy with our build-to-order model. So we're not trying to signal any kind of shift in priority. We just want to let you know we may feather in some additional spec in select communities to give us an opportunity to help even out our production cadence. And I would suggest the margin impact of that would be very, very minimal because we're not talking about any significant real change in spec policy. Haendel E. St. Juste - Morgan Stanley & Co. LLC: Got you, appreciate that. And second question is, I guess, another margin-related question. Curious to what extent mix was playing a factor in driving gross margin higher sequentially and whether specific areas were able to contain costs versus the first quarter. Robert T. O'Shaughnessy - Chief Financial Officer & Executive Vice President: Yeah. So, on a sequential basis, actually, our margins are up across all three of our brands as well as a little bit of a benefit from interest. So no concentrated issue there, just better performance across the entire spectrum.

Thank you. Your next question comes from the line of Ken Zener with KeyBanc. Your line is open.

Gentlemen.

Ken. Robert T. O'Shaughnessy - Chief Financial Officer & Executive Vice President: Hi, Ken. Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: Hey, Ken.

I wonder, I have two questions. One, is your success in gross margins, which is adjusted for commissions, industry-leading, is that kind of actually trapping you into a narrower opportunity in terms of how you're looking to invest, perhaps? Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: Ken, this is Richard. I would say absolutely not. We've tried to be as clear as we can that we run the business based on returns. And frankly, whether margins go up from here or go down from here, if we get excellent returns on it, that's the name of the game for us, and our land priorities are not margin-specific. They're return-specific as we look at the 200-plus communities we're going to open this year, it's all based on returns. So, no, I don't think gross margins have trapped us into anything. We're happy with our gross margins, we've done a good job with our gross margins. We're proud of them, but I don't think it limits what we do going forward at all.

Good. And I asked that – I was obviously doing that respectfully because you do have very high gross margins. And I'm thinking about another builder that also focuses on returns, but in that investment process, pursued a lower price point, got a higher absorption. I agree with that approach, but obviously there's a wider view perhaps from investors in terms of interpreting if that's good to have the gross margins go down as they're not as focused, investors, perhaps on the returns on capital. Could you perhaps highlight little concerns or thoughts you've had on how others have enacted that return on capital as it relates to lower gross margins? Richard J. Dugas, Jr. - Chairman, President & Chief Executive Officer: Well, I think you have to appreciate it in terms of what the company's overall philosophy is. And for us, it's very related to our overall capital approach. And if we were as focused on land investment exclusively as we were five years or 10 years ago, we might have a little bit of a different posture here. But given the fact that we want to be involved in all aspects of capital allocation, which we are very convinced over the housing cycle is going to be the best total shareholder return for shareholders, has dictated our philosophy. So, I wouldn't want to comment on what anyone else is doing. I would just say that we think we're doing a good job quarter-in and quarter-out and balancing it. And over time, we're very confident that it's going to yield the right result. We've learned our lesson in the past of trying to overdo it on the land side, and we're really pleased with our balanced and prudent approach today, so I hope that helps.

Yeah, and just to close that out, Ken, it's Jim, we've talked for a while now about not being so focused on just driving unit volumes or driving volumes for volumes' sake and really being more focused on, to Richard's point, about the returns. And as a consequence, the investments and everything line up accordingly.

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

Great. Thanks, everybody, for your time this morning. We'll certainly be around for the remainder of the day if you've got any additional questions. We'll look forward to speaking with you on our next call.

And this concludes today's conference call. You may now disconnect.