Good morning and welcome to the Toll Brothers First Quarter Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask question. Please note this event is being recorded. I would now like to turn the conference over to Douglas Yearley, Chief Executive Officer. Please go ahead.

Thank you, Amy. Welcome and thank you for joining us. I'm Doug Yearley, CEO. With me today are Bob Toll, Executive Chairman; Rick Hartman, President and COO; Marty Connor, Chief Financial Officer; Fred Cooper, Senior VP of Finance and Investor Relations; Joe Sicree, Chief Accounting Officer; Mike Snyder, Chief Planning Officer; Don Salmon, President of TBI Mortgage Company; and Gregg Ziegler, Senior VP and Treasurer. Before I begin, I ask you to read the statement on forward-looking information in today's release and on our website. I caution you that many statements on this call are forward-looking statements based on assumptions about the economy, world events, housing and financial markets and many other factors beyond our control that could significantly affect future results. Those listening on the web can email questions to rtoll@tollbrothersinc.com. We completed fiscal year 2016's first quarter on January 31. First quarter net income was $73 million or $0.40 per share diluted compared to the fiscal year 2015's first quarter earnings of $81.3 million or $0.44 per share diluted. Fiscal year 2016's first quarter pre-tax income was $116.6 million versus $124 million one year ago. Revenues of $928.6 million and home building deliveries of 1,063 units rose 9% in dollars and declined 3% in units compared to fiscal year 2015's first quarter totals. The average price of homes delivered was $873,500 compared to $782,300 in 2015's first quarter. This was the highest average delivered price for any quarter in our history. Net signed contracts of $1.09 billion and 1,250 units rose 24% in dollars and 18% in units compared to fiscal year 2015's first quarter. The average price of net signed contracts was $869,600 compared to $821,500 in 2015's first quarter. This was the highest average price for any first quarter in our history. Fiscal year 2016's first quarter was our sixth consecutive quarter of year-over-year growth in contract units and dollars, and for the last three quarters, we believe we are at or near the top of the industry in the growth of the dollar value of our contracts. Our first quarter-end backlog of $3.66 billion and 4,251 units rose 34% in dollars and 16% in units compared to fiscal year 2015's first quarter-end backlog. The average price of homes in backlog was $861,600 compared to $750,300 at first quarter-end fiscal year 2015. We ended the first quarter with 291 selling communities compared to 258 selling communities one year ago. Deposits and contracts signed in the first three weeks of February, the start of our second quarter, were basically flat compared to the prior year. This is understandable, given the recent stock market decline and global economic uncertainty. Positively, traffic was up 13% over the same three weeks and appears to be improving in quality. This gives us reason for optimism for the balance of the spring selling season. Now, let me turn it over to Marty.

Thanks, Doug. First quarter homebuilding gross margin excluding interest and write-downs was 26.9% of revenues compared to 27.3% in 2015's first quarter and 26.0% in 2015's fourth quarter. The year-over-year margin change reflects a drop in super high-margin mix associated with our 160 East 22nd Street project in New York City that delivered a year ago. Sequentially, Q1 2016 over Q4 2015 margin improvements were due primarily to the absence of any charges for warranty and litigation. First quarter SG&A of approximately $122.3 million or 13.1% of revenues was higher than the $106.3 million or 12.5% of revenues in the first quarter of 2015, due primarily to a larger head count associated with a 13% increase in community count and a 16% increase in our backlog. SG&A for the first quarter of 2016 was also impacted by $1.5 million of non-recurring professional services and technology expenses as well as approximately $3 million of normal compensation expenses that we incur an expense only in our first quarters. We remain confident in our full-year SG&A guidance. To reiterate, that as a percentage of revenues, we expect SG&A to trend down each quarter and average between 10.1% and 10.3% of full fiscal year revenues. We continue to consistently generate significant income from JVs and other sources. Our Q1 2016 other and joint venture income was $22.6 million compared to Q1 2015's total of $26.9 million. Recall that Q1 2015's other and joint venture income included an $8.1 million gain on the sale of our security company's customer accounts. Our share count on a diluted basis averaged 182.4 million shares for the quarter. Our contracts and backlog in dollars have been up year-over-year in each of the past six quarters and our gross margin has held up well. We believe the selloff of homebuilder…

Thank you, Marty. Looking around the country, our business remains solid as customers continue to demonstrate a healthy appetite for luxury homes. In California, the drop in our first quarter contracts was not indicative of how we see the current market. While contracts were flat in dollars, and down 28% in units, both Northern and Southern California remained healthy. First quarter contracts per community of 5.2 were ahead of the company's average of 4.3 by 21%. Given the fabulous locations of our communities in these coastal markets, with demand so brisk over the past two years, and with our backlog up 138% in dollars this quarter and versus last year, we made the decision to raise prices this year to manage our supply in order to maximize returns. This is the classic give-and-take of pace versus price, and I am comfortable we are executing this business plan properly. In Southern California, our Porter Ranch community, which in fiscal year 2015 produced 33 agreements in the first quarter, was hobbled this year by a natural gas leak one mile from our site, which stalled sales for the past three months. Adjusting for that one community, Southern Cal agreements were up 16% compared to last year. Last Thursday, the State announced that the leak was certified as permanently sealed, and officials stated that air quality was back to normal levels. Obviously, this is very good news, and we look forward to returning to normalcy soon. We already saw an increase in traffic this past weekend, and even took a few new deposits. In Northern California, our largest community, Gale Ranch, did well. We have some other communities that are nearing sell out, so we have somewhat limited inventory available to offer to the market in the near-term. Still out West, Seattle was…

Thanks, Doug. The stock market seems to be pricing in a steep decline in the economy, and along with it, our sector. We on the other hand, are seeing signs that reflects strength and positive momentum in our business based on six consecutive quarters of year-over-year contract growth in both units and dollars. Our average sales pace per community was also up this quarter versus one year ago, and we believe it still has room to grow. Industry-wide housing starts remain far below normal, and new home supply remains constrained. Interest rates are very attractive. Unemployment is lowest since 2008, and home values are rising. As you saw in our press release this morning, my brother Bruce has chosen to retire from the Toll Brothers board of directors effective on the day of the company's annual meeting of stockholders, March 8, 2016. We all thank Bruce for his tremendous contributions to Toll Brothers over the past 49 years. Now, back to you, Doug.

Thank you, Bob. While global concerns have weighed on economic outlooks, we remain committed to growing our community count. We continue to evaluate new land deals, although with a slightly sharper pencil at the moment, given the global turmoil. And we continue to believe that the industry remains on a trajectory of slow but steady growth, with pent up demand that will release over time. Late last week, we learned that Toll Brothers had repeated as the World's Most Admired Home Builder in Fortune Magazine's survey of the World's Most Admired Companies. Even more exciting, we learned that we ranked number six in the world across all industries for the quality of our products and services, behind only Apple, Walt Disney, Amazon, Alphabet and Nordstrom. Bob and I agree that not just in my 26-year career, but more importantly, in his 49 years, this is the single greatest honor in our history, and is an incredible tribute to our Toll Brothers associates, and their dedication to our customers and our communities. Apple, Walt Disney, Amazon, Alphabet and then Toll Brothers. Ahead of Facebook and Netflix among others in the top 10. Truly incredible. I have never been more proud. Back to Bob.

Following up on Doug's comments, we thank Fortune Magazine for these tremendous honors. Our goal has always been to provide our customers with the homes of their dreams. To be grouped among the finest companies in the world for the quality of our products reflects tremendously on the customer focus culture that drives our business each and every day. It is a marvelous acknowledgment of the hard work and commitment of the entire Toll Brothers team. Doug?

Thank you, Bob. Amy, we're ready for questions. Amy?

Thank you. . Our first question from Stephen East at Evercore ISI.

Thank you. Good morning, guys, and Bob and Doug, congratulations on the award. That's great.

Thank you.

Thanks, David.

Doug, you mentioned in the call and also on the press release when it comes to land and development you're sharpening your pencil. Could you talk about one, what that means in the real world to you all? And then also the capital allocation, you got more aggressive on share repurchases. You've got a lot more that you could go out and buy. Could you talk about, are those mutually exclusive? How are you evaluating the two alternatives et cetera?

Stephen, we are still in the land buying business. We are evaluating new deals every week. Thankfully we are in a great position with the land we own. So we don't feel like we have to go out and overpay for land because we've set up a land bank that we think is top quality, in the right locations, and positions us well for the coming years. But we're still seeing deals, we're still buying deals. We continue to be opportunistic, but we've sharpened our pencil a bit. And that is really again because of the quality of the land we have and some of the uncertainty out there in the markets. Trading stock buyback versus land buying, we don't look at it that way. I think we're opportunistic on both fronts and we have the balance sheet that allows us to continue to buy stock back when we think it's the right time but also stay active in the land business.

Okay. I appreciate that. And does that mean on the land buying side, are you still trying to build your land base or is it more just a replacement type of thing? And then the second question I had is, can you talk a bit more about California? Your big price increases, it sounds like primarily that was priced, but do you have a lot of mix going on and it sounds like maybe Northern California is a bit weaker than Southern California when you take away the Porter Ranch impact. Am I looking at that correctly?

So first on the land side, we are looking to build our land holdings. But again, carefully and opportunistically. With respect to California, Northern California is very strong. The numbers don't reflect the quality of the markets and our business. We have been aggressive in raising price, as we mentioned. Our backlog is up tremendously. We've also had a few communities that are nearing sellout so they have less inventory and therefore we have less to offer at the moment. That will change over time. But I would not suggest in any way that Northern California is not doing as well as Southern Cal. I think those numbers are again not reflective of what we're seeing in the market. It's more the inventory that we have and the mix that we have at the moment. Southern Cal, as we mentioned, would have been up this quarter but for Porter Ranch, which was effectively shut down for the last three months. And thankfully this gas leak, which is about a mile from our property, has been permanently sealed, signed off on by everybody and we saw increased traffic and started taking deposits again this weekend. So we're very happy and optimistic about both the Northern and Southern California markets.

All right, thank you.

You're welcome.

Your next question is from Stephen Kim at Barclays.

Thanks very much, guys. Good quarter. Looking forward to seeing you soon.

Thank you.

I guess my first question, I really do want to touch on that Fortune article since you mentioned it, that survey. Generally, we think of homebuilder quality as being secondary to location and I was curious as to whether or not it was the intent of the company to take this result and build anything around it in a more significant way on the marketing side. And what implications do you think it has that pretty much everybody else on that list is having very frequent touch points with their customers versus you guys, which is very infrequent but the dollar value, of course, being much higher?

Well, Steve, there is no question we will be marketing this award. I hope everybody that ever thinks of Toll Brothers visits our website, visits our communities, walks into a Wall Street investor meeting. Whatever they may do, they will be reminded that we are number six on a list of some pretty incredible companies worldwide. It's a reflection on the quality of our communities, the quality of our homes, the passion we bring to the business, the way we treat our client. And I don't think it's because we're a custom homebuilder. I think it's because of how we treat the customer and how our homes lasts through generations. And we're just so proud of what we've accomplished. But absolutely we will be marketing this starting last night and continuing for a very long time.

It's usually (25:50) the dedication to our – enhancements of our brand. It goes hand in hand with what we're talking about here.

Right.

Great. Okay. Well, second question, you made a commentary about – you made a comment regarding Houston which I thought was interesting. I think you had indicated that in light of the somewhat lower order pace there that you were sort of looking to, I guess, take some of your existing parcels and subdivide them up into somewhat smaller lots. I think that was what I heard, and that some of those you were going to be divvying up to other builders building at somewhat lower price points. And I was just wondering if you could talk a little bit more about that. My general sense has been that taking a parcel that's zoned and permitted for a particular type of – particularly larger or higher end house, it's pretty difficult to kind of go back and sort of renegotiate that to have a higher number of families at a lower price points. So just can you talk about a little bit about what you meant by that statement and how widespread this is?

Stephen, it's Marty. Recall that in Houston, most of our land holdings are in three master plan communities where the bulk of our business is actually selling lots to other builders. We take some of them for ourselves, but those other builders are generally at lower price points. So our commentary there was focused on the fact that we will be accelerating the phases that are at the lower price points, and deferring some of those that are bigger homes.

Right, but by no means are we taking existing Toll Brothers communities and creating smaller lots and selling those lots to other lower-priced builders. That comment was simply as Marty said, related to the three master plan communities where we are in the lot development, lot sale business. And the builders anxiously want more and more of the lower-priced lots, so we are aggressively developing those lots to satisfy their needs. That's all we were talking about.

Got it. (27:56)

The other thing that's worth mentioning, and we did it in the prepared remarks is, while contracts were down 26% in Houston, we're talking about going from 30 units down to 22 units.

Right.

It's a very small component of our entire business. Less than 2% of our income statement, and a little bit less than that on our balance sheet.

Perfect. That's great clarification. Thanks very much guys.

You're welcome.

The next question is Susan Maklari at UBS.

Good morning.

Good morning, Susan.

Hi, good morning.

Your tone around the labor constraints seemed to have changed slightly relative to the prior quarters. Can you just give a little bit more color around what you're seeing there?

Sure. I'm not sure our tone has changed. There continues to be labor issues out in the field. Those issues appear to be moderating as the cost increases of labor are also moderating. We were up $1,500 this quarter over last quarter in building costs. And about 75% of that was labor. The balance, 25%, was very small increases in some materials. Our houses are taking a little bit longer to build. Two weeks longer, three weeks longer. It's a reflection of the tight labor market that the entire industry has been experiencing over the past year or two. And it's a reflection to some extent, of what you see happening with our average price point, which means our houses are getting bigger. There is more options going into the houses, and they're a bit more complicated to build. So I don't think the labor comment has changed dramatically. Maybe we're clarifying it a little bit right now.

We're also seeing in certain markets some municipality and utility company delays in terms of their ability to get out and inspect or provide meters et cetera. So the lengthening of cycle times is impacted by a number of different factors.

Okay. All right, that's helpful. And then you noted that for the first two weeks of February that traffic is actually up about 13%, even though the deposits are about flat. So it seems like people are definitely out there, they're shopping, they're thinking about it. Are you seeing it just taking them longer to actually make the buying decision? Or are more of them just kind of doing some shopping in anticipation of perhaps coming back later in the year? What exactly is sort of the tone or the feeling that you're getting?

Yeah. I don't think it's changed. I think we're very encouraged by the increase in traffic, in numbers and even more importantly in quality, which, of course, is the comments we get back from the sales teams every week when they grade the quality. So it doesn't appear that people are visiting more often. They're being more deliberate. It's early in the spring season, we're about three weeks in. And so we're encouraged by the traffic numbers and the quality of that traffic. But I don't think the buyer mentality right now is shifting.

Okay. Thank you.

You're welcome.

The next question is from Allen Ratner at Zelman & Associates. Alan Ratner - Zelman & Associates: Hey, guys, good morning and congrats on the Fortune honors as well. Doug, on the February commentary, just curious if there was any big regional differences, if there were any particular markets that were weaker than others or if that flattish trend was pretty consistent across your footprint?

Hold on one second. Right. So Gregg is giving me the three weeks by region. It's pretty consistent, Alan, across the company. I don't think there is any particular areas that – to note. The action has been relatively flat with the improving traffic pretty much everywhere and quality improving everywhere. Alan Ratner - Zelman & Associates: Great. Okay, thanks. And then a follow-up to that and then I actually have a second one if you don't mind. But I think you typically have your sales events around this time of year. I think you might have already had it. What percentage, if you look at your typical second quarter, what percentage of your sales generally come from the first three weeks in February or the month of February? And then second question, on the JV guidance reduction or the other income guidance reduction, I know Pierhouse is the big driver there. Was curious if that's being driven by some timing related delays of closings that you had expected or if that's more a function of price reductions that you've made on sales during the quarter?

All right, I'll take the sales event and then Marty can take Pierhouse.

Right.

For the last three or four or more years we have had a national sales event that runs from the last week of January through the third week of February, so it just ended for us last week. The comp is a good comp year to year because it's the same period of time. It generally ends right around President's weekend. And we get good deposits out of that event, which of course then take one, two, three, five weeks to convert to agreement. So the action from that period of time is always pretty good and is a fair component of the quarter. But it is not significantly disproportionate. Remember, we are heading into the end of February and all of March, which is really the meat of the spring selling season. So I don't think there is anything of significance in these three weeks, particularly since it's the same period as prior events.

With respect to the joint venture and other income guidance, it's important to note that we have not changed any of our expectations on Pierhouse from the beginning of the year to now. That continues to perform at expected levels and our timing for deliveries remains identical to what we thought three months ago. The move in that number is really associated with a push-out, probably by a quarter, of some settlements in those master plan communities in Houston that I referenced before. We think those will be sometime in fiscal 2017 rather than late in fiscal 2016. We have income we generate from those land sales that will probably be 2017 rather than 2016. Alan Ratner - Zelman & Associates: Great. That's very helpful. Thanks for the clarification. Good luck.

The next question is from Michael Rehaut at JPMorgan.

Good morning. It's Jason Marcus in for Mike.

Good morning.

The first question, just going back to the February transfer a second. Just wanted to see if you're able to provide what the comp was last year in February for the month. And if it was much different from what the overall quarter was? I think there the quarter was up 16%.

So the first three weeks in February last year was up 13%. So it's a challenging comp, but not an overwhelming comp that we're – compared to this year. And...

And March and April, were they similar?

And remember, last year we didn't have this global turmoil and the significant retraction in the stock market that we experienced in mid-January through hopefully last week.

Okay. And then moving on, you called out Northern Virginia as being particularly strong in the quarter. So just wanted to get a sense of what you think the drivers of the strong improvement there are, and if it was mostly driven by sales pace or community count.

It was driven by sales pace.

Demand.

And absolutely demand.

Is there anything that stood out to you as being a driver for that? Or is the market just improving overall?

Market is just improving overall. We're seeing better sales, better traffic, better interest across-the-board in Northern Virginia. It was a slower market to recover, and now it appears to be really clicking.

Okay. And then lastly on the City Living side, just wanted to get a sense of if prices have stabilized or if you're continuing to make any adjustments? And I guess just how you characterize the overall pricing environment there?

We're happy with our quarter in New York City Living, and prices are stabilized.

Okay. Thanks.

You're welcome.

The next question is from Mike Dahl at Credit Suisse. Anthony Trainor - Credit Suisse Securities (USA) LLC (Broker): Hi, this is Anthony Trainor on for Mike. Thanks for taking my question. Going back to the orders, can you talk about order progression through the quarter? And then on February, there was a shift in the Super Bowl weekend, which took one selling weekend out of this year compared to last year. Do you think that had an impact on Feb numbers? And how did February compare to January? Thank you.

Mostly they were monthly order progression.

Right. So December was a standout month in the first quarter. It was up mid-40% over the prior December. November and January were – what were they, flat?

11. They were right away...

11. So they were up but not quite as dramatically as December. Whether the move in interest rate moved some people off the fence there, is tough to determine. It's interesting to note that right now, mortgage rates for conforming are a quarter point below a year ago, and for Jumbo, are a half a point lower than they were a year ago. So it's still a great mortgage rate environment. I think the biggest driver we've seen since that December timeframe is the performance of the equity markets. Anthony Trainor - Credit Suisse Securities (USA) LLC (Broker): Great. Thanks. And then just a follow-up on Porter Ranch. How are you thinking about the impacts on sales and margin in that community? And then with the new contracts you took this past weekend, was there any difference in price or incentives with those?

We're relieved and happy that the leak has been permanently sealed. We have every reason to believe business will be back to normal. We have made no downward adjustments in our pricing. We have new models that have opened and will be opening. It's a great community. And we're – now that this is all behind us, I think this past weekend is an indication of what's coming. And it should absolutely be business as usual with typical Southern California pricing power and great action. Anthony Trainor - Credit Suisse Securities (USA) LLC (Broker): Great. Thanks.

You're welcome.

The next question is from John Lovallo at Bank of America Merrill Lynch.

Hi, guys. Thanks for taking my call as well. The first question on the SG&A outlook, does your guide exclude the $1.5 million in non-recurring expenses and the $3 million of stock comp, or is that still included? And I guess the follow-up to that would be how do you see kind of the cadence of the improvement over the remainder of the year?

Our total guidance for the year includes that $1.5 million and $3 million that were concentrated in the first quarter. The cadence for the course of the year is as revenues go up, the percentage will come down and I think you'll see the absolute dollars both on the S side, which is a little bit more variable to revenues and on the G&A side, continue to go up over each of the next three quarters.

Okay, that's helpful. And then the second question would be on the backlog conversion of 28%, the outlook for second quarter. It's a little bit lower than it has been in the past. Could you just talk maybe about what's driving that, please?

Yeah, I think generally in periods where we see significant increases in our unit and dollar sales, the backlog has a tendency to slow down. We've guided people in the past to the 2000 to 2006 periods. We're not quite in those periods right now, but that's really the biggest driver. You get busier, you've got a lot of things to be working on.

Okay. Thanks, guys.

The next question is from Nishu Sood at Deutsche Bank.

Hi, guys. Great quarter. This is actually Tim Daly on for Nishu.

Thank you.

Thanks, Tim.

My first question is regarding around closings guidance. So you generally maintained the guidance for deliveries in 2016, but it sounds like absorptions weren't that great in the first three weeks of February. What do you guys expect you need in absorptions growth to get to this volume guidance?

I think our volume guidance we are pretty confident in, in that we don't expect a lot of homes from this point forward to sell and settle in this calendar year. There is a few, but we have production times that are nine, 10 months on many of our homes. So most of what we expect to deliver is either some quick delivery homes or in our backlog.

All right. That's actually great. Thank you for that.

And let me just point out, if I could, the backlog conversion for the rest of the year should be in line with our five-year average.

All right. That is actually great to know. Thanks for that. I guess my second question, this a bit more technical, but I've been seeing that essentially the percent of owned lots that are finished, or as you guys put it, substantially improved, it's gone up quite a bit, about from 43% in 1Q 2015 to about 50% now. It's the highest level in the history since you've been giving this metric. So I was just kind of curious as to what's the rise of this and kind of is it from like not re-stocking development pipeline as rapidly, more finished lots in the transactions that you're doing? Because traditionally, you guys tend to buy to develop. What does this really tell us about the strategy going forward?

I don't think there is a change in strategy at all. We still generally buy to develop. It has been harder to find option deals with the farmers. Not option deals with the developers, but option the actual farmland, take it through the approvals, close on that ground when you get full entitlements, which is how we've always built the business. Those deals have been harder to find in the last three to five years. So we've had more owned lots than optioned lots at this point in time than in many prior cycles. And we are working hard on finding more option lands to set up the business two, three, four, five years out. But the percentage of improved lots, I would not read anything into that. There is no different strategy and I don't think it's really of any significance.

All right. All right. Thanks for clearing that up.

The next question is from Buck Horne at Raymond James & Associates. Buck Horne - Raymond James & Associates, Inc.: Hi, thanks. Good morning. I know it's been touched on, but I just wanted to quickly go back to Porter Ranch real quickly. I'm just saying or thinking that sales are a little bit slower to come back. How quickly could you evaluate if the land position at Porter Ranch has been permanently impaired and would you plan on pursuing SoCalGas for any damages to your sales or property value?

Well, we certainly have no comment on the second half of that question. How long would it take? Give us some time here to get through the spring season. From what I'm hearing, I mean, literally Thursday the Governor of California had a press conference saying Porter Ranch is permanently sealed and Friday our traffic increased. The weekend our traffic was up and we started taking deposits again. So I am very confident, particularly with the offerings we have at Porter Ranch, which are many. With many new models and many new sections that we've opened, that we're going to be in great shape. Buck Horne - Raymond James & Associates, Inc.: Well, it's awesome. Thank you. And just one quickly on the balance sheet. I noticed you all paid down a fair amount of the credit line in the quarter along with the stock buybacks. I'm just wondering how you view the mix of either debt repayment versus buybacks, just use of cash, how you want to manage the leverage at this point with the cash flow?

Sure. I think, Buck, that nuance you mentioned about paying down the line is influenced a bit by the fact that we had a debt raise in the last week of the last fiscal year. So our balance sheet was a bit grossed up at 1031. We took $300 million of that debt raise and paid down the line to essentially zero, other than the line of credit. As we look at balance sheet management and leverage and liquidity, I think it's safe to say that with nearly $1 billion of capacity on our line, we are comfortable that we have flexibility to buy land and buyback stock both meaningfully. Buck Horne - Raymond James & Associates, Inc.: Great. Thank you very much.

The next question is from Jack Micenko at SIG.

Hi, good morning. Doug, I want to revisit the California commentary a bit. I get it on pace and price and Cali is a bigger part of your business than it was say three or four years ago. I guess the question is, should we think about the change in approach there as temporary, meaning – or more permanent? I guess maybe a better way to ask it would be, will California community count be faster or slower than national community count growth maybe looking out 12-18 months?

With the land holdings we have out there, I think you could expect California growth to be in the top one-third of our markets over the next couple of years, based on the communities we see coming online.

Okay. So it sounds like it's maybe more of a temporary tapping of the brakes than something more strategic?

Yeah, well it's definitely strategic. Tapping the brakes, I'm not sure I would agree with that definition. We've sold really well. Our backlogs have grown, which means it takes longer to build the houses. We're sitting on spectacular land. So we don't want to give it away. We don't want to sell houses 12, 13, 14 months out. We raise the price. We don't just do that in California. We do that in many places in good markets. California has been a great market lately, so you're seeing more of that there. If the backlogs were to come down, then maybe we wouldn't be as aggressive with pricing, but right now we're in a situation in California that we believe we're making the right strategic decisions to manage the business by raising the price, which may reduce the sales, but we think increases the returns.

Okay. And then, Marty, tax rate. Higher this quarter than last year. How do we think about full-year tax rate and then the $1.3 million impairment. Can you give us some color on that?

Sure. So the tax rate, I think we set guidance at the end of our last fiscal year to expect 38% for fiscal year 2016. I think that's still a good expectation. As it relates to the impairments, about half of it was associated with exploring new land opportunities and incurring some costs that you write-off when you choose not to go forward with those deals and the balance of it was actually sales of some model homes that we expected to sell a little bit less than our embedded cost in them.

Okay. Thank you.

Not much to talk about on impairments right now.

Yeah.

The next question is from Jade Rahmani at KBW. Jade Rahmani - Keefe, Bruyette & Woods, Inc.: Thank you. On the New York City condo market, I was wondering if you could give additional color just in terms of interest level at your projects and if you're seeing any slowdown at higher price points than most of what you're selling? I think we've definitely seen a moderation in volumes, and there are some concerns in that market.

The pricing, the margins, the business of New York City Living this quarter, is as we expected when we set our full-year guidance. We're happy. As we mentioned, there is a building in Hoboken, which really is part of New York, that has done really well over the last three to six months. But our buildings in Manhattan are also doing very well. I think we found the right price. As I mentioned earlier, we are comfortable with our pricing. We haven't had to cut pricing, and we're happy with the business. Jade Rahmani - Keefe, Bruyette & Woods, Inc.: And in terms of the sort of stated plan in Manhattan, would you say that demand is stable? Or are you seeing a moderation?

Stable. Jade Rahmani - Keefe, Bruyette & Woods, Inc.: Okay. And just in terms of the land market in New York City, what's your – how do you characterize your appetite?

We are hungry with a sharper pencil. Jade Rahmani - Keefe, Bruyette & Woods, Inc.: And just finally in terms of...

We have an appetizer (51:55) already. Not quite really...

Right.

Other people are out there buying the whole meal.

Right. Jade Rahmani - Keefe, Bruyette & Woods, Inc.: On the construction side, how would you characterize capacity and cost given the amount of development going on right now?

We still have capacity in most communities where we are delivering less houses than we have at other points in housing cycles. Labor is tight, but it appears to be easing. As I mentioned, we're controlling costs better. And that seems to be much better for us. So there is the capability in most of our communities to increase velocity. Jade Rahmani - Keefe, Bruyette & Woods, Inc.: Thanks very much.

You're welcome.

The next question is from Ken Zener at KeyBanc.

Good morning, gentlemen.

Good morning, Ken.

Good morning.

Doug, I guess I just – I have two broad questions for you. One, if you could just expand on your comments about foreign buyers given different trends in different metro areas. I think in Miami, not where you guys have a lot, obviously, but their sales were down 5% by the cash buyers falling off. That's LatAm currency. But if you think about your 10% to 20% comment about foreign buyers, I think you said in California it's a bit higher than what you said two quarters ago. How do you guys get comfortable with orders sticking given your backlog, nine-10 months, when you have – how do you guys get comfortable with that, I guess? That dynamic? The person on the other side of the purchase?

Okay. Well, as you know, we're not in Miami.

Right.

4% of our total contracts nationwide are foreign buyers. Biggest concentration is California at 15% to 20%, New York City Living at 15%, and Seattle at 10%. Those numbers have not moved in any material way in the last two to three years. We're managing it. We don't have issues. It's not going up; it's not going down. We're great at obtaining mortgages for that clientele. We take big deposits to protect ourselves, big down payments. And it's business as usual with no issues.

Certainly in California and Seattle, these foreign buyers are occupiers of the homes. These are suburban homes where they move their family to get an education, so the motivation is different than a speculative investor who is trying to put money in the United States.

Okay. Then I guess, you guys, Doug you talked about having more owned lots. And I just, broadly speaking, what is the implication of having more owned lots longer-term – let's say to your profile. And I don't want to say risk profile, but relative to past cycles. Does that mean you're more motivated to increase turns to some extent? It sounds like it, because your gross margins obviously aren't reaching the high points they did in the past. So does that mean you by definition just have to turn harder? I know you guys were doing that with the Shapell assets, for example.

Ken, I don't think it's going to motivate us to increase turns. We're always working hard to be a more efficient builder while giving our client that luxury experience with many upgrades. And that's of course always the balancing act. But remember, when we had many optioned lots, we had over 90,000 total lots. So today, we're in the mid-40,000 lots, and while a greater percentage of those are owned, when you compare it to the top of the role, back in 2005 of over 90,000 lots, the number of owned lots haven't changed that dramatically, the percentage has. We are focused always on the corner of main and main. We are not buying land in B and C locations, and so if we see the right opportunity, at main and main, like Shapell, or like New York City, or like what we see in Seattle, and other markets, we must buy that land because the only way that seller works with us is if we write a check, we will step up and write that check. I am very comfortable with the quality of the land. As I said, we are focused more and more on optioning land, but when the right opportunity comes at the right location and we must buy it, we will.

Thank you, gentlemen.

The next question is from Alex Barrón at Housing Research Center. Alex Barrón - Housing Research Center LLC: Yeah, thanks and good morning. Or afternoon, I guess. I wanted to I guess talk a little bit about the Mid-Atlantic region, which was a pleasant surprise, I guess, that it seems to be coming back to life. But I kind of wanted to square that increase against other builders who commented that they've had to decrease prices and take impairments. So I was wondering if you guys did something similar to boost the sales pace there? And also, I wanted to, Doug, your comment against the 0% in February, is that also applied to that region or is there maybe some offset against some other markets?

Alex, on your first question, I can't comment on what others are doing, but I refer you to my last answer about owning land at the corner of main and main. And that appears to be paying off in our Mid-Atlantic markets. There is no new strategy except we love our land positions and our community locations and our brand. And the business is good.

Increased demand.

Absolute. Increase demand.

Which is not unusual in an election year.

And the Mid-Atlantic continues to do well in the beginning of this second quarter. Alex Barrón - Housing Research Center LLC: Okay. Great. Good luck. Thanks.

Thank you.

You're welcome.

The next question is from Ryan Gilbert at Morgan Stanley. Ryan Gilbert - Morgan Stanley & Co. LLC: Hi, thank you. In California, I'm wondering how quickly you expect to replace the communities that are near sellout, or if those are – are those going to be replaced within the next quarter or two? Is that more of a back half or 2017 event?

Hold on one second. Back half of 2016 event. Ryan Gilbert - Morgan Stanley & Co. LLC: Okay. Great. And then in the south, nice turnaround on orders growth there. I guess how much of that is driven by community count increases versus improvements in absorption pace? And then what regions of the south are driving that increase?

One second. So on agreements for Q1, the south was flat on a per community basis. But the highlights, or the highlight of that area would be Dallas and the Jacksonville market of Florida. And it looks like Charlotte's up, and Raleigh is up, but they're small markets for us. But for where the most action is, Dallas sold 4.9 homes per community, which is up from last year. And the company average, of course, is 4.3. Ryan Gilbert - Morgan Stanley & Co. LLC: That's great. Thanks a lot.

Does that help? Ryan Gilbert - Morgan Stanley & Co. LLC: Yeah, it does. Thank you.

You're welcome.

. And our last question comes from Mark Weintraub of Buckingham Research.

Thank you. I was hoping if you had it available to get the income before taxes by region, and in particular for City Living?

We still are refining that and that will be in our 10-Q, which will be filed in the next 10 days or so.

Okay. Do you have a preliminary read on kind of range for City Living?

Not with us at this time.

Okay. All right, thank you.

You're welcome.

You're welcome, Mark.

This concludes our question-and-answer session. I would like to turn the conference back over to Douglas Yearley for closing remarks.

Thanks very much, Amy. Thanks, everyone, for joining us today and we look forward to seeing you next quarter.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.