M/I Homes Inc (MHO) 2005 Q1 法說會逐字稿

Good afternoon and welcome to the M/I Homes Incorporated first quarter conference call. It is now my pleasure to turn the floor over to your house, Mr. Phil Creek. Sir, you may begin.

Thanks you for joining us today. Joining me on the call from Columbus, Ohio is Bob Schottenstein, our CEO and President, and Steven Schottenstein, our Chief Operating Officer. First to address regulations concerning disclosure, we encourage you to ask any questions regarding issues that you consider to be immaterial during this call, because as you know, we are prohibited from discussing significant non-public items with you directly. We provided our 2005 earnings guidance in our press release, and as to forward-looking statements, this presentation includes forward-looking statements as characterized in the Private Securities Litigation Reform Act of 1995. Any statements that are not historical in nature are forward-looking statements, that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Please refer to our most recent 10-K, 10-Q and earnings press release for other factors that could cause results to differ. Please be advised that the Company undertakes no obligation to update any forward-looking statements made during this call. The audio of which will be available on our website through April of '06. It should also be noted that certain information related to the use of non-GAAP financial measures required by SEC regulation G is posted on our website. This information can be accessed by logging onto the M/I Homes website at MIhomes.com, then clicking on the Investor Relations section of the site, and selecting non-GAAP financial information reconciliation. Now we'll turn the call over to Bob Schottenstein.

Thanks Phil, and good afternoon everyone. As reported today, our first quarter results were completely in line with our expectations and put us in solid position for our 10th consecutive record year. 2005's first quarter generated all-time record backlog sales value and sales price. As expected and as reported when we released our 2004 year-end numbers, our new contracts and homes delivered for the first quarter of '04 were down compared to last year, as was our income. And as also reported when we released our year-end numbers for '04, we fully expect that second quarter deliveries and income will also fall slightly behind last year's record-setting performance. The reason for the decline in new contracts and homes delivered are several. First; the well-documented and continued soft market conditions in the midwest, which we will speak to here during the call. Lower community count and delays in opening up a number of new communities, primarily in our D.C., North Carolina and Florida divisions. These delays are owed to either regulatory issues that were unavoidable, or in the case of Florida, the lingering effects of last year's hurricanes. Although homes delivered in the first quarter were down 11% from Q4's record level, we did see significant improvement out the midwest, with 11% increase in deliveries in our Florida markets, and over a 50% improvement in North Carolina and D.C. Our margins were very solid in the first quarter with gross margins over 25%, and operating margins in excess of 12%.

For the three months as I mentioned, our new contract or sales were down 18% from 2004's first quarter level. This was expected. In fact, we're pleased that it was slightly ahead of what our own internal budget was. With the current demand for housing that we see in our Florida markets, in D.C. and in North Carolina, and with the expected opening of new communities throughout the year, we fully expect that by year-end, 2005's new contracts will exceed 2004's level by approximately %15. In terms of communities, our community count as of March 31, 2005 stood at 130, versus 140 a year ago, and we are well on target to open up and to have operating 150 communities by the end of the year. Our cancellation percentage in the first quarter was 19%, slightly down from last year's 20%, consistent with prior representations. The majority of our cancellations occur within our entry-level product, with most resulting from financing issues, and the majority of our interest is in the midwest with the vast majorities of cancellations occurring prior to commencement of construction. Our backlog at March 31 reached 2,991 units, with a sales value increasing 9% to over $900 million, which is the highest in the Company's 29-year history. The average selling price of homes and backlog of March 31 rose to a record high $305,000, a 13% increase over the 2004 price of $271,000. As mentioned in this morning's press release, we continue to significantly enhance and diversify our land position.

This year we plan on purchasing a record $360 million worth of ground, with over 85% of the ground purchased being located in our Florida, North Carolina and D.C. markets. The diversification away from the midwest puts us in a position where our land position is the strongest its ever been in the history of our company, and in the same vein, the future outlook for profitability and growth is the strongest its ever been in the history of our company. Let me talk just a little bit about our outlook for '05, and then I will get into some of the specific information on some of our markets before I turn it back over to Phil. First with respect to 2005, April's new contracts thus far, and there's still a few more days left in the month obviously, are at a very good level. And we've seen, and we expect our second quarter new contracts to come very close to last year's level and they may even surprise a few people and exceed last year's second quarter level. Demand in Florida is exceptionally strong. Our backlog today is higher than last year by over 30%. We will be doubling our community count in Florida this year as planned. We also see very strong demand in Washington and business has improved significantly for us in in North Carolina. Market conditions in the Midwest continue to be very spotty. They're not horrible, they're just not what they once were. Embedded into all of our projections is no improvement in the Midwest over the next two to three years. Overall, given the strength of our backlog and the diversification of our land position, we see our business model changing over the next two to three years, resulting in approximately 40% of our closings occurring in the state of Florida. 40% in the Midwest and 20% in North Carolina and D.C., all the while growing sales by approximately 15% per year over each of the next two to three years. With the Midwest not improving, virtually all of that growth will therefore occur in Florida, North Carolina and D.C., and we're very excited and optimistic about that.

Let me talk a little bit about the midwest in had terms of our three markets. Columbus, Ohio; first quarter new contracts were down about 20% from a year ago. Our backlog has decreased as a result of slower sales, although average selling price is up 10% from year-ago. Even with all of this, we will have a very solidly-profitable year in Columbus, Ohio. There's still a very decent demand for housing, and we expect 2005 to be the second best year we've ever had in Columbus in terms of profitability, and that should be clearly understood. Cincinnati sales for the first quarter were also down. The market there continues to be very spotty. We've been promoting to help our sales efforts there. Both Cincinnati and Columbus have seen a slight decline in margins in order to enhance sales. We expect that promotion to continue. Backlog is down about 20% from a year ago, although we will expect to have a solidly profitable year in Cincinnati, but by no means a great year. Indianapolis backlog units and sales value are both up 5% from a year ago but that shouldn't be construed to mean that the market is stronger. We think that's more about our business than it is the macro market. The market there is also challenged from lack of job growth in the same way that Columbus and Cincinnati is. Having said all of that, we expect to deliver about 300 homes this year in Indianapolis and have a very solidly profitable year.

Let me move next to Florida. First Tampa. Tampa continues to shine as a star within our Company, and we expect another outstanding year in Tampa. Margins are among the highest in the Company. Backlog units are up over 10%. We expect to deliver approximately 750 homes in Tampa this year, up significantly from 2004's 525 deliveries. Our land position in Tampa is the strongest and most diverse it's ever been. This year we plan to purchase approximately $100 million worth of ground in Tampa. Very excited about our growth prospects. Plan to open 10 new communities in Tampa this year, and we are on schedule to do that. We anticipate closing approximately 1,000 homes in Tampa in the year 2006. A very similar story exists in Orlando, where our business also continues to shine. Margins very strong. This year we plan to deliver over 500 homes in the Orlando market, an almost 50% increase over 2004. Our backlog is 55% higher than a year ago, very strong land position. Plans to purchase about $50 million worth of ground in '05. Expectations are for continued growth in Orlando, continued opening of new communities, we are on schedule to do that and we expect to deliver in '06 approximately 750 homes in Orlando. West Palm Beach, backlog units and sales value up over 40% from a year ago, while land continues to be difficult in southeast Florida, we have strengthened our land position considerably. We will double our closings in the West Palm Beach market this year. Overall, we're very excited and pleased with our Florida operations. By way of summary, in '04, we delivered about 1,000 homes in Florida. This year we expect to deliver approximately 1500 homes, and we will be pushing close to 2,000 deliveries in Florida in calendar year '06.

North Carolina, -- Charlotte, in particular. Our community count will be increasing every quarter this year as planned. Current average selling price and backlog, a very healthy $280,000. Our business there is improving. We expect to deliver over 40% more homes this year than a year ago. Our land position is the strongest ever, and we expect very significant growth in Charlotte over the next two years. Raleigh is pretty much in the same position. We have significantly strengthened our land position there. Sales were up 10% the first quarter a year ago. We expect to produce significantly higher sales and closings in '06. Basically in North Carolina in '04, we sold approximately 350 homes. This year we expect to sell approximately 450 homes, and we should be in excess of 600 sales in North Carolina next year.

The Washington market is also a very strong market for M/I Homes, and a strong market for -- we believe for all builders. Our margins are strong. Not quite as high as Florida, but very close. Sales are up over 25% from a year ago, backlog is up over 20%, closings were up 55% in the first quarter. Our land position is strong and we have strengthened it during the last six months. I'm very excited about our prospects in the greater Washington market, which for us, includes a number of locations now in Baltimore. We plan on purchasing close to $90 million worth of ground in the Washington market in '05. We continue to see very strong conditions. We closed about 200 homes in the D.C. market in '04. Expect to close about 275 homes in '05, with close to 400 closings projected in '06. And before I turn it back over to Phil, I want to again emphasize that while we're dealing with some difficult comps in this quarter and we'll also live with some difficult income comps and delivery comps in the second quarter, we fully expect 2005 to be a record year for M/I, which is the reason we have increased our guidance, and in terms of the future prospects for growth and profitability, our company is in the strongest position its ever been in. Phil?

Thanks, Bob. To go back a little bit on sales, our sales were actually down 20% in January with traffic being down 29%. Our sales were down 24% in February, with traffic down 12%. And our sales were down 12% in March with traffic being down 8%. Now to begin with the financial results. Homes delivered in the first quarter were 775 compared to 871 last year. We had discussed this in the 2004 year-end conference call. We closed 29% of our year-end backlog in the first quarter, versus 33% a year ago. Revenue increased 6% in the first quarter, compared to last year. The impact from the decline in homes delivered was offset by an 11% increase in average sale price from 252 to 278. Gross profit dollars dollars decreased $367,000 in the first quarter of '05. Our margins decreased to 25.2% from '04's 26.7%. Land gross profit was $2.1 million and 2005's first quarter, compared to $2.4 million in last year's first quarter. This decrease in margin was primarily due as we previously projected, to difficult midwest market conditions. And for the full year 2005 as our release stated, we expect to close approximately 4,700 homes, versus 4,300 deliveries in 2004. So even though we expect our margins to be lower this year than last year, our gross profit dollars should increase in '05. Our G&A costs in '05's first quarter increased $3.2 million and 105 basis points as a percent of revenue from a year ago. The dollar increase is attributable to a favorable interest rate swap adjustment in 2004 on a swap on our subordinated debt, which was prepaid later in '04. This mark-to-market of the interest rate swap was shown as a credit to G&A, therefore it brought our G&A costs down. Also, our G&A cost increased due to land-related expenses' associated with our increased land investment such as real estate taxes, HOA fees, et cetera. Of the $2.3 million increase in G&A, $900,000 was due to the interest rate swap, and $1.1 million was due to the land cost. While G&A expenses rose as a percentage of revenue to 6% for the first quarter, we do anticipate this percentage will be in-line with 2004's actual results of 5.5% by year-end.

Selling expenses for the quarter increased $1.3 million and increased slightly as a percent of revenue to 7%. The dollar increase is primarily due to higher third party realtor involvement in our closings. Our co-op rate was 65% in the first quarter of this year compared to 60% last year. And also, some expenses for new community openings. We've talked about increasing our communities from 130 to 150 with the big majority of that being in the second half of this year but we are starting to incur some of those expenses. Overall, our SG&A expenses increased to 13% of revenue in the first quarter of '05, compared to 11.8% of revenue in the first quarter of '04. We do anticipate this to normalize and decline as a percent of revenue in the second half of the year as we increase our volume. For the year, we believe our SG&A expenses will approximate last year's 11.9%. Operating income in the first quarter of '05 was 12.1% of revenue, compared to 14.9% last year. The decline reflects the factors we previously discussed, which include increased land-related costs, timing of costs associated with our growth initiatives, and expenses associated with our midwest sales efforts.

Interest expense remained at 0.8 of revenue for the first quarter of '05, when compared to the same period in '04, and increased slightly on a dollar amount basis. Our increase in weighted average borrowings to $288 million from $195 million in the first quarter of '04 was offset by a decline in our weighted average interest rate from 6.6% in '04 to 4.8% in '05, and we also had an increase in the amount of Interest Capitalized due to our land development activities. We have $15 million of capitalized interest in our balance sheet at 3/31/05 compared to $15.3 million at 2004 herein. This is less than 2% of our total assets. We continue to be conservative in our capitalization policy, expensing interest when land raw and when lots are finished. Our effective income tax rate for the first quarter was 39%, a slight decline from '04's 39.5% effective rate, reflecting primarily the impact of the 2004 jobs creation act. And for the first quarter, net income was $16.7 million, down 14% from '04's record first quarter $19.5 million. Diluted EPS for the quarter of $1.16 was a decrease of '04's record $1.35. M/I Financial, which includes our title operations, our mortgage and title operations pretax income, decreased from $5.5 million in '04's first quarter, to $5.3 million in the same period this year. This change occurred primarily because of a 15% decrease in loans originated from 664 in 2004 to this year's 565. The decline in originations was partially offset by higher average loan amounts. Loan to value on our first mortgages for the first quarter was 82% in '05, compared to 86% in '04. And for the quarter, 90% of our loans were conventional with 10% being FHA/VA. This compares to 74% and 26% respectively for last year's same period. The FHA maximum loans in the markets we operate ranged from $173,000 in Florida and North Carolina to over $300,000 in Virginia. Also, approximately 45% of our first quarter closings were adjustable rate mortgages. This compares to 33% in the first quarter of '04. And 45% of our first quarter applications where adjustable rates mortgages, compared to the fourth quarter's 57%. And the mortgages closed in the first quarter, 29% were interest-only loans. This compares to 32% in '04's fourth quarter. Overall, our average mortgage amount was $223,000 in '05's first quarter.

The average borrower's credit score on mortgages originated by M/I Financial was 726 in the first quarter of '05, compared to 721 in last year's fourth quarter. And these scores compared to 708 in 2004's first quarter and 2003's fourth quarter. The percentage of customers that received down payment assistance in the first quarter decreased to 6% versus 10% in '04. And in the first quarter, the average mortgage balance on these down-payment assisted originations was 179,000, compared to 175,000 in '04. The majority of these customers are in our Indianapolis and Columbus markets, and buy our entry-level product. We sell our mortgages, along with our servicing rights, our contingent repurchase obligation, due to loan delinquency, is primarily limited to the first couple of payments being made timely. And in 2005, we have not repurchased any loans. Our mortgage operations captured about 82% of our business in the first quarter, a slight decline when compared to 2004's 85%. We believe this decline is due to increased competition, as the mortgage business overall is slowing. We constantly focus on our capture rate as M/I Financial only serves M/I Homes' customers. Overall, our mortgage entitled businesses produced 18% of our total operating income in the first quarter of '05, compared to 16% in last year's first quarter.

Now to the balance sheet. Homebuilding inventories at March 31 '05 increased 27% over last year's level, due primarily to our backlog in our land activities. Compared to a year ago, raw land has increased about 50%. Land under development, 5%, and finished unsold lots have increased 45%. At March 31, '05, we had $299 million of raw land, $108 million of land under development and $128 million of finished, unsold lots. Our total unsold land investment at March 31, '05 is $535 million, which compares to $382 million at March 31, '04. Also at the end of the quarter, we had 186 specs in various stages of construction with $21 million of investment. This compares to 110 specs at March 31, '04 with $12 million of investment. The increase in speck levels from the prior year reflects a conscious management decision to stimulate sales in some older subdivisions, meet customer demands in our midwest markets, and to showcase new products lines across certain of our markets. And even with the increases, we still believe we had the lowest speck levels in the industry. We constantly focus on our land investment. As Bob mentioned, we plan on purchasing $360 million, approximately of land in '05, and the breakdown is 16% in Ohio and Indiana, 44% in Florida and 40% in North Carolina and Washington, D.C. At March 31, '05, we owned 16,600 lots, and have an additional 11,900 lots under our control. In total today, we own a three-year supply and control about a six-year supply, for a total under control of 28,500. This is about 3300 more lots than we had a year ago. The breakdown by region of our total lots under control is 14,800 in the midwest, 9,400 in Florida and 4,300 in Washington, D.C. and North Carolina. And in total, the 28,500 lots are 58% owned and 42% optioned.

As previously announced during the first quarter of '05, we sold $150 million of 6 7/8% senior notes. In addition, affective of April 22 of '05, we have amended our existing line of credit facility to increased the limit to $600 million from $500 million. We took these actions to increase the flexibility of our capital structure. On March 31, '05, there was $164 million outstanding under the bank credit facility. Our current estimate is that our bank borrowings will peak at about $350 million this year. Long-term debt on March 31, '05, totaled $330 million, compared to $239 million a year ago. Homebuilding debt-to-cap was 39%, versus 35% a year ago, and our current projection is that we will peak this year at approximately 48%. Our interest coverage for the quarter remained very strong at 11 times EBITDA. EBITDA for the quarter was $31.4 million. Interest incurred for the quarter was $3.5 million, compared to $3.2 million for last year's first quarter. In March 31, '05, shareholders equity was $509 million with the book value per share of over $35. We did not repurchase any stock in 2005's first quarter. At quarter-end we had 3.3 million shares in treasury as an average price of $17, with approximately $15 million available to repurchase from our current Board approval.

In summary, we believe our financial performance in the first quarter was solid and it met our internal expectations. Also, our financial position has never been stronger. Based on our quarter-end backlog of over $900 million, our land position and planned community openings, we anticipate that 2005 will be our 10th consecutive record year. We currently estimate diluted earnings per share to be between 675 and 695 per share, representing a slight increase from our previous estimate of 665 to 690. This completes our formal presentation. We now will open the call for questions and comments.

Thank you Sir. The floor is now open for questions. Your first question comes from Robert Manowitz of UBS. Sir, please pose your question.

Hi, good afternoon.

Hi.

I heard your comments regarding your year-end community count of 150 and you, in addition, said you would double the communities in Florida. And so I'm trying to understand how the remainder of the communities at year-end, roughly, call it 105, 100 communities, break out between Ohio and North Carolina.

And that breakout basically is today we're in about 90 communities in the Midwest. We see that number not moving much as the year goes on. In Florida right now, --

Although there will be in the Midwest some that close, and some new communities that are opening, but on a net basis, that number will remain.

So, what happens to get from the - up to the 150, Florida will go up 15 to 20 communities, and then North Carolina and D.C. will go up about 10 communities. That's the increase.

Okay.

No movement in the Midwest.

On a net basis.

On a net basis. Okay. And then one other comment or question. You mentioned that Columbus pricing was up 10%, is that mix or is there something else going on there? It seems inconsistent with the order trends.

I think it's a combination of a number of things. First of all, we have had, even though our sales are down 20% from a year ago, the decline in sales is greater at the entry level than at the upper price points. So, the mix, to use your terminology, is certainly some of the reason for that. Some of the other reason is that, these are newer communities that have opened up, where we expected the prices to be slightly higher. But I think more than anything, it represents, from a backlog standpoint, a decline in our entry level product. Our entry level product in Columbus has an average price of about $180,000 and that part of our business is down much more than the more mid-priced part of our business, which has an average price of considerably higher than that, close to $300,000.

When we talked about the average being up 10% that was the backlog to 3/31. As Bob stated, our entry level product, when you look at our horizon operation, that average sale price basically has not changed. What's gone up is more the mid price than the more expensive.

The number of units.

Right.

Yes.

Okay. Thank you very much.

Thank you very much.

And the next question comes from Mr. Mike Kender of Citigroup. Pose your question, please.

Yes, just a couple of follow-ups. One is on the $350 million revolver peak. When do you expect to see that hit? Which month or quarter?

Into the second quarter, first part of the third quarter, Mike.

Okay.

And that would be 350 of the 600 now available.

Okay. And on the availability, you said that you had 164 drawn at the end of the quarter. How much unused availability did you have? Could you use the whole facility or did you have some limitations?

I could use the whole facility.

Okay. And just two numbers questions that weren't in the press release, were interest and cost of goods sold and depreciation and amortization. I know you gave the EBITDA number, I'm trying to get the remaining pieces.

The interest and cost of sales was $1.8 million.

Okay.

And depreciation is a very, very small -- depreciation -- We might have to get back to you.

Was a very, very small number. We will have to call you back on that, Mike.

That's fine.

Depreciation for the quarter was 600,000.

Okay. Great, that's all I had. Thank you.

Thanks, Mike.

Thank you. Our next question is coming from Jason Rogers of Great Lakes Review. Sir, please pose your question.

Hello.

Hey, Jason.

Question on the Florida markets. Obviously they've been very strong. Have you seen any kind of I guess issues lately with possibly an overheated market, maybe a shortage of labor or materials in those markets?

We've seen since the hurricanes, shortages on roofing, actually the material itself. We are seeing shortages of screen enclosures for our pools right now, we're not seeing an overheating of the market yet but the labor pool is strained, yes it is. As well as the governmental inspection process is strained. The thing I think that is also interesting is the prospects -- is the current job growth, and the prospects for job growth. Just to give an example in the fourth quarter and you may already know this and may have access to the same information, Tampa recorded 24,000 new jobs. The creation, I should say, of 24,000 new jobs in the fourth quarter. The projection for job growth in Tampa in '05 is anywhere from 50 to 90,000 new jobs. In Orlando, it's between 50 and 75,000 new jobs. And the -- in that respect, while nobody really ever knows for sure, I don't think too many people are projecting an overheating of that market. What they're really projecting is just continued strength, continued demand, most of what you read and hear is that the Florida markets are likely to be amongst the strongest in the country over the next decade and we're betting on that, and we think it's a good bet.

Okay, and in the midwest area, given that you're expecting really no improvement over the next few years, is the strategy there to offer more incentives for the homeowner to kind of increase the top line? Or is the margins really the focus in that area?

The strategy is this; to a certain extent we all get spoiled because we think that trees grow to the sky and so on and so forth, and the Midwest is - you can point to the reason, there's more than a few and it's taken us a little while to get into the situation. The most serious problem is just a lack of job growth. M/I has always differentiated itself in terms of its product, its approach to marketing, its emphasis on quality. In my judgment, whether you're in Florida, where you're selling houses by way of taking orders, or in the Midwest where you're selling because you're really selling, the builders continue to emphasis quality and unique product, and approach the business with a high level of integrity will shine in the long run. That's what's gotten us to where we are. We continue to focus on that in the Midwest. The levels of volume in Columbus and Cincinnati and Indianapolis are lower than we would have liked them to have been. But frankly, on a historical basis, when we operated these levels a few years ago and they were record levels at that time, we all were beating ourselves on the chest, bragging about our levels of profitability. We were very profitable then. We will remain very profitable now. We just believe that the unit levels will level off and our profit probability likewise will likely level off. May see a little bit of erosion in margins, we may see a little bit of appreciation in average selling price. That may offset itself somewhat. The introduction of some attached product, not a lot, but a little bit of attached product might help us a little bit, but by and large, we think that there's a very good level of business in the Midwest, but not one that we're going to run with long-term if we're going to grow the Company. And as we said during the last several calls, we fully intend to grow the Company in terms of sales by level of approximately 15% a year at least to the next to to three years. We're going to do that, we're on pace to do that, but we're going to do it in spite of, not because of the Midwest.

Okay. And finally, do you have a figure of the cash flow from operations for the quarter?

The cash flow from operations?

Right.

I will have to get back to you on that, Jason.

Okay. All right, thanks a lot.

Thanks.

Our next question comes from Mr. John Barlow of Lehman Brothers. Sir, please pose your question.

Hi, I was wondering if you could address what your sales and traffic did year-over-year in Ohio and Indiana during April?

In April?

Yes.

Well, of course, April is not over yet. As Bob stated, April so far has really been pretty solid. We hope to pretty much achieve levels that we had last year --

Internally we will beat our budget, we know that. And we hope to at least reach last year's level with a little luck here in the last four or five days, we could beat last year's level. But we're just - that's one of those deals where we're in the ninth inning, and it's a question of where it's going to end up.

I can share with you that in the first quarter of this year, we did have in Columbus approximately 500 sales, which was pretty much right on target with our budget. Last year in the first quarter we sold a little over 600 homes in Columbus. But again, what we've tried to do, unfortunately we've had to lay some people off in Columbus. We've worked very hard on our investment levels in Columbus. of course, some of those things take a little while to improve significantly, but our view is as Bob said, we can still have a very, very solid run rate of business in Columbus.

And how many communities do you expect to have by the end of the second quarter?

By the end of the second quarter, things are not going to move a whole lot. Most of our community count improvements actually come in the third and fourth quarter of this year. Our current view is that our -- at the end of June, we'll hopefully be in the 130, 135 range. At the end of September, we will be in the 145 range and by the end of the year, we should still be at the 150 level.

Great, thank you.

Thank you very much.

Your next question is coming from Gabriel Kim from Basswood Partners --

Back to Jason.

We want to add one comment to the last one.

Back to Jason's comment from Great Lakes Review about the cash from operations. We actually had net cash views in operations in $4 million. If you need more detail, just give us a call. Hey, Gabe, sorry about that.

I'm just wondering, in terms of stock buy-backs, I just heard your comment that you didn't buy back any shares in the quarter, and I'm wondering if you can elaborate on the rationales for that decision?

Go ahead, Phil.

We talk with our Board every quarter about our stock buyback program, and we use stock buyback programs as a use of investment dollars as we do any other investment in our business. We talked about we think we have a low of very very solid opportunities in our business. This year with buy-ins, $360 million of land, increasing our subdivision count of 150. working that through the pipeline, hopefully with our record profitability, that will probably increase our debt-to-cap to somewhere in the high 40s, as I talked about. Book value today is a little bit over $35 a share. So, when we continue to look at it, Gabe, we have a board meeting next week, and we'll talk to our board again. But our view is to look at that like like we do any other investment dollars.

Okay fair enough. Thank you.

Thanks, Gabe.

Thank you. Mr. Creek, I'm showing no further questions at this time.

With that, we appreciate you joining us and your support and we look forward to talking to again at the second quarter. Thanks.

Thanks a lot.

Thank you, Ladies and gentlemen. That does conclude today's teleconference. Please disconnect your lines at this time and have a wonderful day.