普爾特房屋 (PHM) 2002 Q2 法說會逐字稿

Good day and welcome to the Pulte Homes second quarter 2002 earnings results conference call.

This call is being recorded.

At this time I'd like to turn the call over to the Vice President, Investor and Corporate Communications, Mr. Jim Zeumer. Please go ahead, sir.

Thank you. Good morning, everyone.

I want to thank you for joining us via the telephone line and the internet.

I want to welcome everyone to this morning's call to review Pulte Homes' record-setting second quarter results.

The press release we issued this morning details another quarter of outstanding performance and highlighting some of the other important efforts that took place during the quarter.

Joining me on the call today to discuss our results are Mark O'Brien, President and CEO, Roger Craig, Senior Vice President and Chief Financial Officer, [INAUDIBLE]

Richard Zugoff, our new Chief Operating Officer, will participate in calls in the future but had travel commitments that could not be altered.

At this time, I also want to alert everyone listening on the call and via the internet that certain statements and comments made during the course of the call must be considered forward-looking statements, and as such are subject to risk and uncertainties that could cause the actual results to differ materially from those we said during the call.

With that said, let me turn the call over to Mark O'Brien for a few opening comments. Mark?

Thank you, Jim.

Good morning, everyone.

You heard us say many time that is home building is a business that requires a long-term perspective.

When you are selecting land today that won't move into production for three or four years, clearly you must have your eyes on the horizon.

There's an awful lot going on around us right now, most of which isn't positive, but I'm sorry to say we are all old enough to know this, too, will pass.

Given the continued strength of our business, the performance of Pulte Homes stock makes this a very frustrating time for us all.

We had to take a step back, however, and appreciate that for some companies and investors, it may be a downright frightening period.

At times like this, the only thing we can do is stay focused on our business and at least deliver the best results we can.

Beyond the great financial results which Roger Craig will review in a few minutes, there were a number of other accomplishments during the quarter.

Pulte Homes completed the sale of $300 million in 30-year debt at less than 8% interest.

The 30-year term is believed to be an industry first and the rate was certainly attractive and favorable.

People sometimes ask us what we get for our investment grade rating in our financial discipline.

I think this most recent note offering answers those questions very clearly.

During the quarter, we also introduced the Dell Webb brand name into the northeast through the opening of communities in [INAUDIBLE] Massachusetts and Sommerset, New Jersey.

These two rural communities are reflective of the new models which we can comfortably say that --comfortably say spanned our presence within the actual adult market.

In these two cases, the land was sourced by our established homebuilding operations, [INAUDIBLE] design amenities, lifestyle propositions and sales processes were reviewed and approved by our excellent development team, the initial investment and community development had been structured to support a return on investment in access of our cost of capital and internal hurdle rates and like the traditional web communities, the openings met with tremendous buyer interest.

And last but certainly not least our board member, Richard Zugoff, will fill the new Chief Operating Officer, to fill the position left open when I became CEO last year.

The [INAUDIBLE] of this COO was just one of a number of organizational changes we made to support the continued growth and success of our company.

The external reporting will remain the same but we realigned divisions into geographic areas, each headed by an area president.

We believe the structure can better drive growth while allowing for greater focus on initiatives surrounding quality, customer segmentation, land control and operational best practices.

We are extremely excited about this structure and the opportunities it offers.

With all that said, let me turn the call over to Roger Cregg for some more specific comments about Pulte Homes second quarter results, Roger?

Thank you, Mark, and good morning everyone.

Pulte Homes completed the second quarter in first half of the year posting solid operating and financial performance.

For those of you following along on the webcast, we'll be presenting a few slides to facilitate the discussion.

Also just as a reminder, the merger with Dell Webb was effective July 31, 2001 and thus the previous year's financials have no Dell Webb impact until the third quarter.

Now for the second quarter of 2002, revenues from home settlements for Pulte Homes domestic homebuilding operations increased 58% over the prior year.

Higher revenues for the period were driven by a 9% increase in average sell price versus prior year to $239,000 resulting primarily from increased product prices, a modest improvement in overall product mix and the addition of Del Webb volume.

Unique closings for the quarter increased 45% reflecting the inclusion of Dell Webb volumes and in increases in deliveries from Pulte Homes existing operations.

For the second quarter, land sales generated approximately $34 million in total revenues which is relatively even to last year's sales for the quarter.

Domestic homebuilding gross profits this quarter increased approximately 56% to $314 million.

The gain over last year is attributed to the increase of the Dell Webb operations plus the additional [INAUDIBLE] traditional volume and the benefits of the ongoing initiatives to lower construction costs throughout the operation.

Purchase accounting adjustment associated with the merger impacted gross profits in the second quarter by approximately $1 million or roughly 8 basis points.

Second quarter domestic homebuilding margins were 19.9% as compared to 20.1% in the second quarter of 2001.

The resulting lower margin conversion versus last year is mainly attributed to product and market mix influences.

The gross profit combination from land sale is approximately $10 million for the second quarter versus $12 million in the second quarter of last year.

Now the total asset release of employee sales, the [INAUDIBLE] inventory represented $8 million.

As also as I mentioned in the past, the gain on land sales may vary significantly from period to period based on the timing of these land sales.

SG&A costs as a percentage of home sales increased 30 basis points versus the prior year reflecting and including the Dell Webb[INAUDIBLE] for the second quarter of 2002 and in line with our expectations and guidance.

The other income and expense category variance versus the second quarter of the previous year in approximately $6 million, literally resulted in gains resulted in the previous year quarter.

These were associated with the land gains from a joint venture of approximately $4 million and insurance and litigation recoveries of approximately $1 million.

Homebuilding interest expense increased during the quarter vs. the prior years' quarter, as a result of the increased [INAUDIBLE] of Dell Webb and the continued growth of the business.

Domestic homebuilding percentages were up for the quarter, increased 36% to a second quarter record of approximately $145 million with pre-tax market of 9% on total domestic [INAUDIBLE] revenues.

At the end of the second quarter, our domestic operations had a backlog of homes to be built approximately 13,000 houses valued at approximately $3.3 billion compared to approximately 8800 homes in the prior year quarter.

Second quarter pre-tax income from our financial services operations was approximately $16 million, an increase of 116% or approximately $9 million vs.

the prior year quarter.

The overall improving performance was attributed to increased production volume,as [INAUDIBLE] capture rate increased to 77% from 73% last year.

The inclusion of Dell Webb, a continued favorable interest rate environment and effectively leveraged overhead expenses.

Mortgage refinancings represented approximately 3% of the total originations for the quarter versus 10% last year.

Refinancing activity is not a major focus of our mortgage operation and it continues to remain a small part of the overall business.

International operations posted a pre-tax profit of approximately $2 million for the second quarter compared to a loss of $1.5 million in the prior year quarter.

The improvement is attributed to a $2 million profit in Mexico versus a break even in the prior year period, resulting from increased volumes, a positive product mix and a stable currency exchange rate.

In addition, Argentina posted a modest profit of approximately $200,000 versus a loss of $1.5 million in the prior year quarter.

Despite the economic turmoil in Argentina, we were successful in increasing unit closings in the quarter, while keeping our focus on minimizing our risk exposure in the short-term.

On the bottom line, net income from continuing operations in the second quarter increased 49% to approximately $90 million or $1.45 per share as compared to approximately $60 million or $1.40 per share for the same period last year.

Fully diluted shares were approximately $62.4 million, an increase of 44% over the prior year period mainly reflecting the issuance of shares in the [INAUDIBLE] Dell Webb merger.

On the balance sheet the major increases on the second quarter versus the prior year are mostly attributed to the merger of Dell Webb plus, incremental increases from Pulte homes' growth initiates.

At the end of the second quarter, the company's debt to total capitalization ratio was approximately 44.1% and on a net basis was 41.3%.

We also took particular advantage of the successful [INAUDIBLE] of the second quarter, an industry leading 30-year note offering of $300 million and a coupon of 7 7/8.

The proceeds of which we used to pay our short-term debt were approximately $155 million and some of the Dell Webb notes are approximately $70 million.

In line with our expectations for the quarter, we continue to maintain a strong and conservative balance sheet.

As we stated previously, we look to maintain our debt to total capitalization ratio at the 40% level and are committed to reaching this target.

During our [INAUDIBLE] we will target a net debt to toll capitalization of 40% or below at year end with a cash balance [INAUDIBLE] availability, sufficient enough to redeem the notes that are due in early 2003.

The other asset category of approximately $860 million includes major items such as land held for sale at approximately $270 million, receivables, pre-paid and deposits of approximately $185 million and all other miscellaneous assets to round out the balance.

[INAUDIBLE] shareholder equity for the second quarter increased to a record of approximately $2.5 billion posting a return on average shareholders equity for the latest 12 months of approximately 17%.

Looking ahead as permissible under the FCC regulations guidelines we provide the following guidance on our current expectations for the third quarter of 2002.

The following comments assume that overall macro economic conditions remain at a comparable range to what we've experienced over the first several quarters of 2002.

Unit settlements in the third quarter are likely to increase 15-20% over the same period last year driven primarily by the inclusion of Dell Webb units for one additional month versus the prior year

quarter, plus a modest increase in the Pulte Homes traditional business.

Average selling prices in the third quarter should be even to up 1% over the second quarter of 2002 depending upon the final product and geographical mix.

Gross margins for the third quarter are anticipated to show a slight increase over the second quarter of 2002 as a result of and dependent upon the product and geographically mix of products delivered.

As a percentage of sales, SG&A is expected to show an increase of 20-30 basis points versus the third quarter last year.

Given a stable interest rate environment, the addition of Dell Webb and increase sales to date, pre-tax income in our financial services operations is expected to be ahead of last year by approximately 25-35% in the third quarter.

In the third quarter, international operations are anticipated to post a positive profit performance of approximately $2 million.

Corporate expenses should be flat to down slightly as compared to the third quarter of 2001.

And corporate interest expenses projected to be even with the third quarter of 2001.

Third quarter earnings per share for continuing operations are estimated to be in the range of $1.75 to $1.85 per share.

This earnings per share number is contemplated based on approximately 62.8 fully diluted shares.

The increase in share count versus the first two quarters of 2002 is [INAUDIBLE] with an increase in stock option exercise.

Looking forward, we offer the following comments regarding the expectations for the full year of 2002.

Given the current operating environment for the homebuilding industry we remain comfortable at this time with the guidance we established for the full year 2002, earnings per share with continuing operation of between $6.75 and $7 per share with a target toward the upper end of the range.

This represents an increase of approximately 15-17% over 2001 reported results.

Estimates are based on approximately 62.4 million fully diluted shares for the full year of 2002.

As I mentioned earlier these comments and guidance are based on the assumption that overall macro conditions remain in a somewhat modest range comparable to what we have been experiencing over the last several quarters.

With that I will now turn the call back over to Mark O'Brien for a few more comments. Mark?

Thank you, Roger.

Before we open the call to questions, let me update everyone on the market conditions we experienced during the quarter.

Obviously the second quarter was solid, showing a gain of 60% and up 17% on the combined businesses. Demand conditions remain very, very strong.

Demand in the northeast has remained quite strong with second quarter sign-ups increasing 26% after adjusting for 130 backlog units acquired last year in the [INAUDIBLE] acquisition.

Sales were particularly strong in the Maryland and Delaware valley markets.

As I discussed earlier we introduced the Dell Webb brand in the northeast, in rural communities in Massachusetts and New Jersey.

Both new notions met with tremendous customer response.

In fact, New Jersey had a lottery to establish the order in which customers could select lots and sign contracts. Some of the [INAUDIBLE] will be reflected starting with [INAUDIBLE] set up numbers.

The southeast improved throughout the quarter with a notable increase in the Atlanta market.

Florida, including our [INAUDIBLE] operations has also been extremely strong; although, a lack of product is hurting sign-ups in the Fort Myers area.

Since we are talking about the southeast, let me update you on our Dell Webb Sun City Hilton Head project.

We redesigned the product offering to get better alignment with the best of the segment we are trying to reach.

The new model's opening price and the sales pace has increased dramatically.

In what is a seasonably slow period for the area, sign-ups in the second quarter were just over 130 homes, which is almost double last year's pace for the same quarter.

We are very excited to see what happens when we get into the prime selling season later this year.

The midwest continues to have an outstanding year being led by Michigan, Chicago and Cleveland.

Sun City Huntly showed similar strength with sign-ups in the quarter up more than 40%.

Our central group, which includes Texas and Colorado, showed year over year gains in every market.

Even Austin is starting to rebound after a difficult year in 2001.

Finally, the improvement we saw out west during the first quarter continued and accelerated into the second quarter.

California sales continue to surge and stage a dramatic rebound with gains also being realized in both Arizona and Nevada.

Clearly then, demand continues to hold up very well for Pulte Homes.

Over the long-term I am optimistic that this will continue to be the situation.

The recent study put forth by the Joint Center for Housing Studies of Harvard University calls for an annual average construction of 1.7 million new homes and apartments in the decade ahead.

The Harvard study results were based on a variety of factors, including [INAUDIBLE], which are very supportive of future demand.

For those of you interested in the long-term trends of this industry, this study makes very interesting reading.

At this time, I turn the call back over to Jim Zeumer for final comments.

Thank you, Mark.

Q2 was another outstanding quarter for Pulte Homes and with more than $3 billion in the backlog, we are certainly well positioned to remain [INAUDIBLE].

Guidance [INAUDIBLE] with regard to [INAUDIBLE] operations, business initiatives and our aim for corporate financial performance.

[INAUDIBLE] We are prepared to answer questions about the business and our expectations for the remainder of 2002.

At this time I'll ask Steve to open the call for questions and explain how they can ask.

Thank you.

Today's question and answer session will be conducted electronically.

To ask a question, press the star key followed by the digit 1 on your touch tone phone.

Again that's star 1 for questions, we'll pause a moment to assemble the roster.

Our first question from.

Matt Moyer, [INAUDIBLE]

Good morning, everybody.

Good quarter.

Could you discuss a little bit about what you are seeing in terms of land prices and velocity of land deals and, you know, and then also your lot position currently on options.

Matt, this is Mark.

I'll take the first part of the question and let Zeumer fill the second one.

Land is still a critical element to our business, and land remains in short supply.

The country doesn't seem to be disposed to increase the entitlement base and it's still a very competitive product.

We are probably seeing land behaving about like it has for the past -- oh, I don't know, three or four quarters.

Some pressure is to raise prices, but generally it is fairly stable. Jim?

Sure, Matt.

Let me give you statistics on lots and options.

First of all, total lots under control by [INAUDIBLE] on 6/30/02 is 118,200 lots and [INAUDIBLE] a 70/30 split.

In this quarter the lots owned are 84,000 and the lots optioned are 34,200.

Okay.

And in terms of the amount that you are purchasing, are you still -- are you out there asking your division vice presidents and things for more land deals?

Are you getting enough, do you think, to sustain the kind of growth that you guys are accustomed to?

Well, as we said in the beginning of the call, we have to look out three or four years in the land business.

Obviously if we don't have the land for our 02 and early 03 deliveries right now, we would be very much at risk.

So we continue to be forward-looking.

We have asked our people to do very detailed product cycle plans and generally we have land identified, much of it is bought.

Obviously, as we go to the outlying years, less of it is identified and less of it is approved.

Roger can give you some data on the specifics of the [INAUDIBLE] and that kind of thing.

this year we were looking to incrementally increase our [INAUDIBLE] by approximately $400 million.

Okay.

Great.

And long-term on the owned option, I know Dell Webb kind of spiked up the owned percentage, long-term where would you like that number to be, say three or four years from now?

Traditionally Pulte was at a 60/40 growth split until Dell Webb took us up to a 73 split.

As we grow the business continually, we're probably going to see that come back down.

I don't think it's going to be immediately in the next year but expect we'll be heading back to the 60/40 split given regional differences around the country.

Matt, I think it's important to understand that while that split is clearly an issue, one of the things we try to align is equity and long-term debt in our acquisition, and as that continues to grow, we feel more comfortable with slightly more ownership.

Sure, sure.

Okay, great, thank you very much.

Our next question from David Jarrett, Credit DNA.

I was wondering if you could discuss the Sommerset and Plymouth projects, specifically how many acres of land you have, how many lot sites, what sort of amenities will be involved, what the price points might be, the whole works there and mainly can you expand in that immediate area or will you be going down state and other places?

David hi, it's Jim.

The projects are similar in that regard.

Both sub1,000 units in total in that 850-900-lot range.

The build-out pace is probably going to be between four to five years.

So they certainty have some life in front of them.

The amenity package is smaller than what you maybe have experienced, as in last year out in Vegas.

It's built around a large and well-developed reck center.

The one in Massachusetts is built adjoining a master plan with a championship 18-hole golf course, a smaller amenity package that will be phased in support of a better return on investment in terms of the project and then both set off from the proximity of major cities, obviously Boston and New York.

The immediate expansion, they are looking at other properties in the mid-Atlantic market now.

Probably looking at Pennsylvania, possibly another in New Jersey, nothing immediately identified in New York and dozen follow-up positions in place at this time.

Thank you.

Our next question from John Stanley, UBS Warburg.

Good morning, gentleman.

Good morning.

First, Mark, you touched on the good things happening and the Dell Webb project in terms of orders, I wondered if you could talk collectively about how Dell Webb did in terms of orders in the quarters of last year.

Actually, it's Jim.

We don't pick out the businesses separately.

I appreciate that.

But overall the Dell Webb businesses has done very well and probably will parallel things we've seen from a market position, you know, in Arizona, in Nevada, you know, similar to what other businesses are seeing.

John, Mark here.

We couldn't be happier with the amount of progress we're making with Webb.

It's exceeded our expectations. [INAUDIBLE]

Our work is incomplete at this point but we feel very, very comfortable with where we are now.

On that subject, Mark, the company had thrown out a cost savings target, can you update us on how good that number looks and then how far along the road are you are to getting there?

I think the number is done and probably even better than what we showed you as an example.

Some of the improved performance in our mortgage company is volume-driven and that came from web and a positive synergy.

One of the things we tried to emphasize when we did the deal, was that this transaction was not just about cutting costs and taking combined costs out but was much about the opportunity to enhance that business and we are very, very comfortable with where that is today.

Jim, going back to the order of performance for the quarter, how much of the acceleration from the last two or three quarters on a pro forma basis would reflect improvement on the community count?

We -- the most recent quarter, the final number was about 480.

Sequentially it was roughly flat with where we were at Q1.

If you want to get to a same basis, same selling effort basis, we are probably up sequentially flat and probably up a couple of percentage points year over year.

Go back and get specifics for you.

You have the count in front of you?

I show just over 400.

Okay.

So we had given guidance earlier in the year we were expecting to see a 10% increase sequentially during the year.

We are at that level now and we see that kind of holding stable for the rest of the year.

Obviously that would be second quarter pre-Dell Webb.

Right.

At year end, for instance, we were at 440.

And on the margin front, --.

[INAUDIBLE], we expect margins to ease industry wide because of greater use of incentives last fall, did that not play a meaningful role in your numbers?

It's Roger.

No, there was no meaningful incentives in the numbers for the quarter.

A little bit in a couple areas in the northeast but that's probably through this quarter but nothing significant.

What generally would be your comment now in terms of your ability to pass through whatever cost increases you are seeing?

I would say the pricing power is still in the majority of our market and pretty good at this standpoint to pass along cost increase.

Great, thanks, guys.

Our next question from Greg Nejmeh from Deutsche Banc.

Good morning, gentlemen. A couple of questions.

First could you just review the purchase accounting adjustments in both the first and second quarters and what you anticipate for the final two quarters of the year?

Sure.

Sure.

Let me just turn to that, Greg.

And help you with it.

Okay.

During the second quarter running through our cost of sales was about $1.2 million of house construction and progress amortization.

In the first quarter it was about $1.7 million.

And expectations for the third and fourth?

Yes, from where you look at what we started with during the acquisition and what's remaining, there's about $2 million remaining.

I think it's fair to say that it could be somewhat around $1 million or slightly less in the third quarter.

Okay.

Second question, perhaps, Mark, you could comment just on recognizing it's still early in the third quarter, any change in trend relative to traffic, order patterns, can rates that you've seen thus far in the month of July relative to the strength exhibited in the second quarter, particularly given the equity market instability that continues to persist here in the early part of the third quarter?

Greg, we don't give that information on a quarter or interim basis but as a general statement, I think our business is very healthy.

Okay.

Third question, a number of the large builders are obviously gaining share at a rapid rate, yourselves included, I'm just wondering if you could comment on the change in the competitive landscape as you increasingly compete against one another as opposed to competing against smaller or medium-sized developers.

To what degree is that shift in the competitive landscape affecting your business and most of your markets and what's the nature of the difference in terms of competitive landscape?

Well, I think it's important to keep the macro numbers in context.

While we obviously compete with each other, there's still a tremendous pool to feed on beneath us.

So most of the market share we are taking, obviously we are taking from those not as big and as fortunate as we are and that's born out in the numbers.

Suffice it to say that business combinations, mergers, acquisitions and the like have accounted for a fair bit of increased market share of the large builders.

I remind us all frequently that every day we're competing for the real precious resource of land, and that landscape has changed as we and our larger competitors have developed the human financial resource to acquire and entitle land, that landscape has changed considerably over the last three to five years and certainly over the last ten.

About the markets, Mark, Isn't it true that the concentration of large builders is increasing service in places like Phoenix, like Vegas, like Dallas/Ft. Worth, the top tier builders in theses markets occupy a much greater share, and therefore you are competing increasingly against one another in those particular cases?

I think that's true but the historical context of those particular markets is important.

Those are markets that are relatively new to the world.

Use Las Vegas as an example, very few small landowners out there.

No way for the traditional home building industry to develop.

Certainly in those markets we compete with one another.

You know, fortunately so far the markets are big enough to accommodate us all.

Greg, this is Jim.

The other piece that we try to throw in there is as you know, we're the only builder that is going to be building to all the price points in the market, so

The landscape does change but to some degree it says, okay, in a particularly market at the lower price, we'll compete and at a mid-price we are competing with somebody else and with a higher price competing with somebody else. [INAUDIBLE]

So for us, the landscape changes selectively and it's not that we're going to continue batting heads or butting heads with somebody because we're all trying to sell the same 2000-square-foot $200,000 box.

We have the flexibility to move around in the marketplace that others may not.

One other very important point that there's some benefits to competing with our large peer group.

They are motivated by the same financial returns and goals that we are.

Then it just becomes a question of execution.

We are very comfortable with the environment we see ourselves in and I believe that the next five to seven years, most of the share gain will come at the expenses of smaller regional holders.

One final question, there was an article in the Journal today talking about the market instability and the impact that that's had on retirees in terms of decisions to go back to work or to scale back in terms of their dwelling units and there was a reference to one of your communities with where a year, year and a half ago, the product was much larger and much more richly amenityized in the product that we demanded in the market, and in that particular market Webb has altered its positioning, I'm just wondering if you acquire a piece of ground with the expectation of a certain-sized home and a home that's amenityized in a certain way and the market shifts for whatever reason and this having to do with equity market instability, what are the implications for margins if the ground was purchased with the expectation of a larger unit in mind, what are the implications for margins and how quickly are you able to shift your product positioning to accommodate market needs?

You just asked for a [INAUDIBLE] on the homebuilding industry.

Let me see if I can take them in reverse order or an order that makes some sense.

When we buy a piece of land and I suspect this goes on in every company, we establish or confirm its value using a discounted cash flow method.

So it's not just about margin, but margin and pace.

What we want to do is keep our cash flowing and keep the project alive.

I don't know, I haven't seen the paper this morning yet but in the Hilton Head project that we described earlier, we had [INAUDIBLE] treatment and moved way way ahead in terms of what the buyer could afford.

So we needed to get that back in line with the demographics of our targeting market.

That's one very good example.

By doing that, we've actually improved the value of the property if we've increased the cash flow and increased the activity at margins that are acceptable.

When you look at the contemporary scene in some of the equity market issues, one of the interesting confirmations of the homebuilding industry is the biggest asset most of our customers have [INAUDIBLE] is the home they are coming out of.

Very fortunately that equity hasn't been damaged. In fact,

It's been enhanced.

As they sell that home, they are perfectly willing to go to a new home.

Obviously there is concern about their continued P&Ls but in terms of assets, most haven't taken a significant impairment that the markets have taken over the last six months.

So I can tell you that our traffic corridors are still quite full.

Uh-huh.

Terrific.

Great, thank you.

Our next question from Joseph Stroker with Merrill Lynch.

Good morning.

Just a couple of cleanup questions.

Roger, roughly if I take that $3.3 billion backlog that you quoted, it looks like the average price is probably a little north of $250,000 a unit, does that roughly make sense with what you guys see?

[INAUDIBLE] what's not in there is, you know, any speck sales or something like that would end up bringing it back down to the average we are running at.

Okay.

And then on international, can you just refresh us with a rough breakout between Mexico, Puerto Rico and Argentina as far as, you know percentage exposure in each market?

As far as invested capital?

My second question was going to be, where are you investing capital and withdrawing it.

More of either unit or revenue per market to give us like a sense of scale, and then if you could comment on how you're drawing or withdrawing capital from any of those markets.

Just on average 95 percent of it is coming out of Mexico.

That's the lion's share of it.

We anticipated in the 8-9,000 range in units in 2002 to be delivered in Mexico and as you know they are social interest housing.

You know, In Puerto Rico, less than 300 units for the year roughly.

Argentina, probably around 200 units, somewhere around in that range.

Most of it is in Mexico.

Okay.

And capital inflow or outflow is stable?

In Argentina, stable down there.

We have roughly about $10 million invested in Argentina and the bigger portion I would say probably about $40-45 million in Mexico and maybe $15 million to right around $15 million in Puerto Rico.

Okay.

Great.

And real quick on the mortgage business, do you know roughly the fixed to adjustable underwriting mix and do you know an average or composite kind-of loan to value ratio you've been seeing in the underwriting?

I can handle a little bit of the statistics on this.

Just a fixed relative, 77% of the origination volume of just under 5,000 loans during the quarter.

And Roger had mentioned refines were about 3% of that volume as well.

And the last piece on the loan value, I'll get the information on that.

That's fair.

Thanks.

Due to time constraints, Mr. Zimmer, I'd like to call the call back over to you for any additional comments.

Is there anybody else in the cue? Or are we all set right now.

We do have three questions remaining in the cue.

If you have them, let's take them. [INAUDIBLE]

Alright. Our next question from Wayne Cooperman, Cobalt Capital.

Actually, mine was answered.

Next question from Carlos Rivero, Credit Suisse First Boston.

Hi guys, congratulations on the quarter.

Roger, you mentioned pricing power in most markets; can you talk about any particular markets you're definitely not getting into the pricing power?

Pricing power is one thing vs. what actually was delivered in the quarter.

Certainly in the northeast and in the New Jersey area, Delaware Valley area, it's been a little bit slower.

Certainly beginning to pick up and some of that was hangover, really, from September 11th and fourth quarter of last year sliding into the end of the first -- end of the second quarter.

[INAUDIBLE] California seems to be coming back, [INAUDIBLE] it's been pretty good.Silicon valley hit good and is coming back.

We are seeing resiliency is in some of these markets.

Probably a difficult pricing market might be Denver where the telecommunications business has hit harder.

Yeah, and probably suggest in Denver in particular is probably as much a price point issue where some of the higher-priced products are a little bit slower.

Ballpark in the $250-300,000 range, the houses are still moving fairly well.

Given what your stock is right now at these levels, any plan for share repurchase program here?

Yeah, Carlos, as you know and I stated this year, we certainly have targeted it to be at the 40% target debt to cap.

We don't have an authorization at this point and certainly continue to look at that from time to time.

Given our capital markets on the debt side and the issuances we have about out there with, right now we are not anticipating anything but again to watch where the values, [INAUDIBLE] we are looking at it on a day by day basis.

We don't have an authorization in place at this point.

Can you give us an update on Pulte Homes scientists?

Yes, Carlos. You know, we continue to develop that concept.

We've signed a contract for lease in Virginia.

We will be rolling that out in early next year or late in the first quarter next year to the Washington, D.C. marketplace.

And we continue to tweak and move ahead with it.

If you want to see it, come on out.

Great guys. Thank you.

We have a follow-up question from John Stanley, UBS Warburg.

Thank you.

You all mentioned new web communities in the northeast, I was just curious whether you have plans for other regions in the works as well.

We do. You know,

We talked about one in Colorado that is continuing to mature.

We are looking at them in parts of the southeast and frankly in parts of Florida.

And would you expect to have a you know, a handful of these kind-of up and going by this time next year, Mark, or--

I think we'll have them on the drawing board.

It remains to be seen on the specific timing of when the orders will come through.

But yes, we do expect to have it.

These would most likely be on the smaller scale similar to what you've seen on the northeast.

Sort-of, that 850-1250 units, not anything at this point in terms of the scale of Sun City or anything like that.

I'd be surprised to see any one of those any time soon.

Last question on surplus land that came along with Webb, can you update us on how much of what you targeted for sales and how much land you've actually transferred to Pulte Homes' traditional business?

I don't think we have that statistic handy but I can tell you we've transferred quite a bit to Pulte Homes' traditional business both in Las Vegas and in Arizona.

We are looking at it in other places as well.

We've sold some to third parties, competitors.

We've sold some of the commercial industry land to others.

We are very much on target with our expectations there.

We've got some things we can't yet talk about we are negotiating, we are pretty comfortable with where we are.

Great.

Thanks, guys.

Mr. Zimmer, having no further questions, I'd like to turn the call back over to you for any additional or further comments.

Thanks, everybody.

I appreciate you joining us on the call.

If you have more questions during the day, give me a call.

Thank you.

This does conclude today's conference.

Thank you for your participation.

You may now disconnect.