普爾特房屋 (PHM) 2003 Q3 法說會逐字稿

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  • Operator

  • Good day, all sites are now on the conference line in a listen-only mode.

  • I'd like to turn your program over to Mr. James Zeumer.

  • Jim Zeumer - VP, IR & CC

  • Good morning, everyone.

  • Let me welcome you to Pulte's conference call to review the company's third quarter results for 2003.

  • In response to many requests, we adjusted our earnings release procedure by issuing the announcement last night, and hopefully this works better for everyone, as it will be your practice for future releases.

  • More important for the how we release is the what the release said.

  • Namely, that Pulte reported another record quarter.

  • Pulte reported another record quarter.

  • On the call today to discuss Pulte Homes results are Richard Dugas, President and Chief Financial Officer, Roger Cregg, Executive Vice President and Chief Financial Officer, and Vinnie Frees, Vice President and Controller.

  • For those of you who have access to the Internet, a slide presentation will accompany this call.

  • The presentation will be archived on our website for those who want to review it at a later time.

  • As with all prior conference calls, I want to alert everyone that 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 actual results to differ materially from those discussed during this call.

  • At this time, let me turn the call over to Richard for a few comments.

  • Richard Dugas - President & CEO

  • Thank you, Jim, and good morning.

  • Pulte Homes delivered record third quarter results, enabling the company to once again raise earnings guidance for the year.

  • Pulte Homes will be approaching its three-year earnings goal, a full year ahead of plan.

  • Further, we will have produced year over year growth in earnings per share exceeding 35%.

  • This level of performance not only meets, but exceeds our recent history as the company has delivered compounded annual growth and EPS of 22% over the past decade.

  • As part of our third quarter report, we also established initial earnings guidance for 2004, with our expectations for earnings of $11.50 to $12.00 per share from continuing operations.

  • As we're in the early planning stages, we are not in a position to provide many details on 2004, but it's clear we still see tremendous growth opportunities for the business.

  • Pulte's operating and financial results have been solid.

  • The good news is that we think they can get better.

  • A lot better.

  • When I assumed responsibilities as CEO, I communicated that our focus is, and will remain, on aggressively growing our business through market segmentation, by investing in human assets through people development, and last, but certainly not least, by running a better business through operational excellence.

  • Also unchanged is our unique business model of serving all home buyer segments.

  • This provides the company with a huge competitive advantage as we work to capture greater share within existing markets while identifying potentially underserved customer segments.

  • For example, by developing communities targeted at first and second move-up buyers, Pulte Homes expects to increase its unit deliveries in the Sacramento market from zero, just two years ago, to over 500 units in 2005.

  • This traditional business is incremental to the more than 1,000 active adult homes we sell in this market currently.

  • At the same time, through our acquisition of Civich Thomas Assets, we expect to deliver well over 1500 homes to first-time buyers in Phoenix and Albuquerque in 2004.

  • This is all incremental to us since we previously weren't serving these buyer segments.

  • So while our focus is not changing, what is changing is the operating environment within the company.

  • Now we're good, we have torque to work on getting great.

  • Part of this is on the people side where we just announced that Steve Petruska is joining the team as Chief Operating Officer as Jan 1, next year.

  • Over his 19 years with the company, Steve has demonstrated the business understanding and leadership skills critical to raising our operations to the next level of success.

  • In his most recent position as area president for Arizona and Nevada, Steve led these operations to be among our highest performers in operating, financial and customer service measures.

  • In fact, Steve's operations in Vegas are the only four-time winners of the J.D.

  • Power customer satisfaction award.

  • As you know, we've stated over time, higher quality and customer satisfaction will pay huge dividends in terms of increased revenues, improved margins and lower costs.

  • I'll have more to say on this later.

  • Steve's lived this out west so we look forward to his leadership in this and other areas as we work to improve business results across all our markets.

  • Along with Steve's new role, we made a number of other changes within the organization.

  • We are taking these proactive steps with an eye toward improving the operational excellence of the company in a number of critical areas.

  • Part of these moves include raising the visibility of two very important areas to our future success-- supply chain management and manufacturing services.

  • Both of these areas, along with other related initiatives, will now receive more attention as we attack the fantastic opportunity before us on the cost and quality side of the business.

  • We're in the early stages in this process, but the potential is significant.

  • In fact, we see the opportunity for further gains at every point along the sales and construction chain from customer acquisition strategies and product design, to supplier and contractor relationships and basic construction efficiencies.

  • Further, with our emphasis on growth within our existing markets, we are bringing increased focus on realizing more overhead leverage.

  • We need to be smart about it, but we have to squeeze excessive cost out of the system today and not wait for when business becomes more competitive.

  • Between operating practices and overhead leverage, there remains tens and more likely hundreds of millions of dollars of potential operating margin benefit we expect to realize over the coming years.

  • Improving financial performance goes hand in hand with driving better returns.

  • We acknowledge that our conservative business practices make comparisons with a peer group a little uneven.

  • But our return on capital needs to be and certainly can be better than where we are today.

  • After bottoming out around 11% in 2002, we should see returns around 13% this year, with opportunities for continued improvement going forward.

  • Achieving this goal, while continuing to grow the business, will require a lot of hard work and tough decisions.

  • You can view this as good or bad news, but the fact is that each of our U.S. markets can get better.

  • Of course, it's not just in this country, but our international operations also need to drive better results.

  • As mentioned earlier, our focus on operational excellence is obviously designed to improve Pulte's financial performance.

  • We'll have more details on how these efforts will benefit our 2004 plans when we issue fourth quarter results in January.

  • In support of the business improvements we're driving, we've held employee meetings throughout the country to outline exactly what we'll expect from our operations.

  • I feel one of my most important tasks is to ensure that every employee understands our strategy and is united behind it.

  • In a word, alignment.

  • We are fortunate that we're making these changes from a position of strength.

  • We have one of the industry's best balance sheets.

  • We have a leadership position in many of our markets.

  • We are by far the industry leader in active adult, and as reported recently, we are the leader in customer satisfaction as represented by Pulte's ranking 1st in 12 of 20 markets surveyed in the 2003 J.D.

  • Power and associates new home builder customer satisfaction study.

  • Over time, we are certain that better quality will not only drive better pace, higher sales prices and lower customer acquisition and service costs, but also help us secure and entitle scarce land resources, where others with poor quality my struggle.

  • In short, it makes good business sense.

  • As good as Pulte's results have been, I believe if we're willing to make the tough decisions and take the right actions, our results will only accelerate from here.

  • Let me now turn the call over to Roger Cregg, for a more detailed discussion of our third quarter results.

  • Roger?

  • Roger Cregg - EVP & CFO

  • Thank you, Richard, and good morning, everyone.

  • As Jim mentioned, for those of you following along on the web cast, we'll present a few slides to help facilitate the decision.

  • We are pleased to report another solid quarter of operating and financial performance.

  • For the third quarter of 2003, revenues from home settlements for Pulte Homes domestic home building operations increased approximately 30% over the prior year quarter to approximately $2.3 billion.

  • Higher revenues for the period were driven by an increase in unit closings of approximately 19%.

  • Average selling prices increased over 9%, to an average of $263,000--resulting primarily from increased product prices and an overall improvement in product and market mix.

  • For the third quarter, land sales generated approximately $40 million in total revenues, which is an increase over the previous year's quarter by approximately $11 million or 38%.

  • Domestic home building gross profits from home settlements for the quarter increased approximately 38% to $486 million.

  • Third quarter domestic home building margins from home settlements as a percentage of sales were 21.4%, compared with 20.2% in the third quarter of 2002.

  • This increased margin conversion of approximately 120 basis points versus the prior year quarter is mainly attributed to product price increases, and market and product mix shifts.

  • Gross profit contribution from land sales was approximately $7 million for the third quarter, versus $7 million in the third quarter last year.

  • The gain on land sales may vary significantly from period to period, based on the timing of the land sales.

  • SG&A costs as a percentage of home sales for the quarter was approximately 9.3%-- increasing approximately 10 basis points over the prior year quarter.

  • This increase is mainly attributed to increased start-up expenses associated with the start-up of new communities.

  • Excluding the additional start-up expenses for the quarter, we were able to leverage SG&A expenses by 30 basis points over the prior year quarter.

  • In the other income and expense category for the third quarter, the income of approximately $4 million is primarily the net result of joint venture income generated from the sales of land during the quarter of approximately $10 million, offset by expenses that include the amortization of intangible assets and all other miscellaneous expenses from the domestic home building operations.

  • Home building interest expense increased during the quarter versus the prior year, as a result of the increased debt levels associated with the continued growth of the business.

  • Domestic home building pre-tax income for the quarter increased 46% to approximately $263 million, with pre-tax margins at 11.4% on total domestic home building revenues.

  • This represents an increase of approximately 130 basis points in conversion over the prior year quarter.

  • At the end of the third quarter, our domestic home building operations had a back log of just under 16,650 homes valued at approximately $4.7 billion, compared to approximately 13,700 homes in the prior year quarter.

  • Third quarter pre-tax income from our financial services operations was approximately $13 million, a decrease of 30% or approximately $6 million below the prior year quarter.

  • The decrease in performance was attributed to the unfavorable market conditions to sell loans as a result of the rising interest rate environment experienced during the third quarter, compared to a declining interest rate environment in the prior year quarter.

  • This accounted for approximately $3 million of the decline.

  • In addition, an increase in administrative costs of approximately $3 million were associated with the continued growth of the business.

  • Accounting for this difference were personnel costs, training expenses, occupancy costs and software development costs.

  • Pulte mortgages capture rate increased to approximately 83% from 78% in the same period last year.

  • Mortgage originations increased in the quarter approximately $395 million, or 42% when compared to the same period last year.

  • The increase in originations is a result of higher production volumes and the higher capture rate.

  • Mortgage refinancings represented approximately 9% of a total originations, compared to 8% for the same period last year, and below the 11% experienced in the first two quarters of 2003.

  • International operations posted pre-tax income of approximately $800,000 for the third quarter, compared to a pre-tax income of approximately $400,000 in the prior year quarter.

  • The increase is primarily attributed to higher pricing and margins in Mexico on slightly lower volumes.

  • Total corporate expenses for the third quarter were approximately $18 million or an increase of approximately $4 million versus the prior year.

  • This increase is associated with higher net interest expenses in the current year quarter and in the other expense category included in the prior year quarter, there was a gain on the sale of a commercial property reflected for approximately $6 million.

  • Net income from continuing operations for the third quarter increased approximately 42% to $161 million or $2.56 a share, as compared to approximately $114 million or $1.83 per share for the same period last year.

  • Fully diluted shares were approximately $62.9 million for the current quarter.

  • Also in the third quarter, we posted approximately an $8 million gain in discontinued operations.

  • This gain is related to the recognition of income tax benefits resulting from the favorable resolution of certain tax matters that were associated with the thrift operations the company discontinued in 1994 and the related purchase transactions in 1988.

  • The recognition of these benefits had no impact on cash.

  • Net income for the quarter, reflecting discontinued operations, was approximately $169 million or $2.69 per share, versus the approximate $123 million or $1.99 per share in the previous year quarter.

  • Moving to the balance sheet, the major changes in the third quarter versus the year end of 2002 continued to be in support of the company's growth initiatives as planned for the year.

  • We ended the third quarter with approximately a $312 million cash balance.

  • This is mainly attributed to the $400 million 30-year senior note issuance completed in the second quarter, in anticipation of the continued investment in the business and the scheduled retirement of the approximate $200 million of face value, senior and subordinated notes coming due and callable, in the fourth quarter of 2003 and the first quarter of 2004.

  • At the end of the third quarter, the company's debt to total capitalization ratio was approximately 41.7%, and on a net basis, 38.1%--in line with our expectations.

  • Included in the other assets category, of the approximately $1 billion, are the major items such as land held for sale of approximately $300 million, and receivables, prepaids and deposits of approximately $250 million.

  • The category also includes fixed assets, investments in joint ventures, deferred compensation and all other miscellaneous assets for the remaining $450 million from the corporate, home building, international and financial services operations.

  • Pulte Homes shareholder equity for the third quarter increased to approximately $3.2 billion with a return on average shareholders equity for the latest 12 months of approximately 19%.

  • In addition, under the company's authorized $100 million share repurchase program no shares were repurchased during the third quarter.

  • Under the authorization to date, we've repurchased a total of 495,000 shares for a total of approximately $23 million.

  • On July 10 and September 2, 2003 the company reported that the U.S. federal court of claims issued an opinion and final judgment respectively finding that Pulte Homes has been damaged by approximately $48.7 million by the U.S. government's breach of its contract with the company.

  • The award follows the court's August 17, 2001, ruling that held the United States breached the contract related to the company's 1988 acquisitions of five savings and loan associations by the enactment of the Greenlee (ph)legislation in 1993.

  • Due to the potential continued litigation through the appeal process by both the government and Pulte Homes, it is uncertain when the judgment would be paid.

  • Looking ahead as permissible under the SEC regulation FD guidelines, we provide the following guidance on our current expectations for the fourth quarter of 2003.

  • Unit settlements in the fourth quarter of 2003 are likely to increase by approximately 14% to 15% over the same period last year, driven primarily by additional volume across most major markets.

  • Average selling prices for closings in the fourth quarter are projected to be slightly below by 3% to 4% with the third quarter of 2003.

  • This projection is primarily being driven by product and geographical mix for the quarter.

  • Gross margin performance from home settlements, as a percentage of sales for the fourth quarter are, is anticipated to be in the approximate range of 21% dependent upon the product and geographical mix of the homes delivered.

  • We are projecting land sales Gaines in the quarter to be approximately $30 million to $35 million dollars.

  • Home builder interest expenses of approximately $28 million and a gain in the all other miscellaneous income of approximately $5 million to $7 million for the quarter.

  • As a percentage of sales, SG&A is expected to be 30 to 35 basis points below the fourth quarter last year.

  • Given no material change in interest rate environment, pre-tax income in our financial services operations is expected to be approximately 10% to 15% above the fourth quarter of 2002.

  • In the fourth quarter, international operations are anticipated to generate a pre-tax profit in the range of $4 million to $5 million dollars.

  • Other corporate expenses are expected to be higher than the third quarter of 2003 by approximately $1 million to 2 million dollars and net corporate interest expense is projected to increase $2 million to $3 million dollars over the third quarter of 2003 primarily as a result of a lower net cash position.

  • We are projecting the effective income tax rate to be 38% for the fourth quarter of 2003.

  • Fourth quarter earnings per share for continuing operations are estimated to be in the range of $3.60 to $3.85 per share.

  • This earnings per share number is calculated based on approximately $63.4 million fully diluted shares.

  • Given our performance through the third quarter of 2003, and the outlook for the fourth quarter, we are increasing our guidance for the full year of 2003 earnings per share from continuing operations, which is now targeted in the range of $9.50 to $9.75 per share.

  • Estimates are based on approximately 62.8 million fully diluted shares.

  • Our outlook and guidance for the full year of 2003 is based on the assumption that the overall macro economic conditions remain in somewhat modest range comparable to what we've experienced over the last several quarters with little or no volatility in interest rates.

  • Looking forward, we offer the following comments regarding our expectations for the full 2004.

  • We are currently in the planning stages of our 2004 annual business plans, so I'll keep my comments guided to the macro overview for now.

  • Given the current operating environment for the home building industry, the comments are based on the assumption that the overall macro economic conditions remain in modest comparable range to what we're experiencing today.

  • We are establishing an initial earnings target for 2004 earnings per share from continuing operations of between $11.50 and $12.00 per share.

  • Estimates are based on 64 million fully diluted shares.

  • As mentioned earlier, we provide greater detail guidance for our full year and the first quarter of 2004 on our fourth quarter earnings conference call to be held in January of next year.

  • With that, I'll now turn the call over to Richard for a few more comments.

  • Richard?

  • Richard Dugas - President & CEO

  • Thank you, Roger.

  • Before opening the call to questions, we wanted to provide a little color on the business environment we experienced during the third quarter.

  • Traffic to our sub divisions was up about 17% for the quarter, with the big market drivers being Florida and out west, where new community openings attracted strong buyer interest.

  • As is typical during the summer selling season, demand conditions varied from market to market accurate country.

  • Sign-ups in the northeast were up about 13%.

  • We're finally getting our communities open after having been slowed by tough weather conditions during the first half of the year.

  • Sign-ups in the southeast were unchanged in the quarter as strong results in Florida were offset by lower sales from the Atlanta operations.

  • We're in the process of rebuilding land positions in the Georgia market as well as adjusting the operating model in that market to support higher margins going forward.

  • After a slow start for the first half of the year, our Midwest operations are starting to build some momentum.

  • Overall, I would characterize demand in these markets as stable, where communities in the right place with the right value equation are successful, but we're definitely working for each sale.

  • Sign-ups in the central region were very strong, up over 19%.

  • Excluding the Civich back log units we acquired.

  • For those of you who had a chance to tour our community in Austin, you have a better understanding of market conditions.

  • Overall, I'd say the markets are very competitive but we're doing a great job taking market share, particularly in Dallas and Houston.

  • As you've heard many times, the west continues to experience very strong demand conditions throughout all of the markets, helping to drive Pulte sign-ups for the period up 30%.

  • Some of you toured the Southern California market and got to see firsthand what happens when good demand meets limited supply, as we were able to push prices and realize great sales pace.

  • Two final points.

  • First, we continue to push pricing in all markets, especially where lots are in short supply.

  • While it's true that some markets are more land constrained than others, we do have the opportunity to take price increases in selected segments in all markets.

  • Our segmentation strategy pays off here as we continue to invest in better and better sites.

  • Second, our cancellation rate for the quarter was 17%, which is down about 1 percentage point from this time last year, at the low end of our historical range.

  • Overall, I'd say we're in a great position to close out another record year and head into 2004 with a lot of momentum.

  • Let me turn the call back to Jim.

  • Jim?

  • Jim Zeumer - VP, IR & CC

  • Thank you.

  • As both Richard and Roger indicated, we're still in the early planning process for 2004 so we'll have few specific comments about next year's results beyond those Roger gave earlier.

  • Where possible and appropriate, we are prepared to answer questions to assist you in the understanding of Pulte Homes' operations and our results.

  • Right now, wee prepared to open the call to questions.

  • Nate, if you'd explain the process?

  • Operator

  • Thank you, Mr. Zeumer.

  • We'll take our first question from Margaret Whelan.

  • Margaret Whelan - Analyst

  • Good morning.

  • Jim Zeumer - VP, IR & CC

  • Good morning.

  • Margaret Whelan - Analyst

  • Great quarter.

  • I know you don't want to give us too many specifics in terms of the guidance, but would you talk maybe about your margin target over the next couple of years?

  • Roger Cregg - EVP & CFO

  • Yeah, Margaret, this is Roger.

  • We're certainly pushing internally to drive more margin expansion.

  • I think we've said that publicly many times on our road shows.

  • I don't have specific information to give you, you know, at this point, but I can say we continue to push on improving our selling prices and our cost structure to be able to leverage the margin area.

  • As commodity prices move in and out of there at various times, it's hard to predict.

  • But at this point, we continue to say we're driving our margins to continued to improve year on year.

  • Margaret Whelan - Analyst

  • Where do you think you'll get the most expansion?

  • Is it on the procurement side as a benefit of the scale or in terms of improving the process with projects like Pulte Homes sciences?

  • Roger Cregg - EVP & CFO

  • I think it's a combination of all those things that we look to drive more value.

  • Certainly, market prices are market prices.

  • The things we can control internally, we think we can leverage going forward.

  • We're putting a lot of emphasis on that today and in the years in front of us.

  • Margaret Whelan - Analyst

  • Then when -- last time we met with you in New York, you said your return on capital target was about 15% and you're getting there more quickly than expected.

  • Is that still the target?

  • Roger Cregg - EVP & CFO

  • Yes, I'd say we're comfortable driving that.

  • We'd certainly like to be above that, but given our conservative nature on the balance sheet and how we account for land and take that on, I think compared to the peer group, it's a little lower.

  • But we are driving everything we can again in that direction to improve those returns.

  • Margaret Whelan - Analyst

  • But no new target as of yet?

  • Roger Cregg - EVP & CFO

  • At this point, you know, 15% is a good target for us.

  • You know, again, as we go forward, we'll modify that upward.

  • Margaret Whelan - Analyst

  • Finally, you did very well on the customer satisfaction polls.

  • What is the benefit, apart from the obvious in terms of repeat customers, what's the benefit for you as you go into a new market, many to secure land or anything like that?

  • Richard Dugas - President & CEO

  • Margaret, which is Richard.

  • One of the benefits, we get, I would say first you have to look at existing market, particularly where markets are are very land constrained and competitive, we find we have specific instances where we'll get properties entitled where others may not have the opportunity to do.

  • Whether that's through the zoning process or permitting process on a given piece of property, that's what we're speaking to.

  • The other thing is we oftentimes will get land sellers bringing property to us because they believe it's the best chance to monetize their land, given our track record.

  • Certainly, the reputation helps us there.

  • In terms of going into new market, again, as we're able to demonstrate a nationwide sweep of the awards if you will, and continue to gain the momentum as our size builds, we believe that reputation will be something we can trade on in any market we go into.

  • So hope that answers your question.

  • Margaret Whelan - Analyst

  • Perfect.

  • Great job.

  • Thanks, guys.

  • Richard Dugas - President & CEO

  • Thank you, Margaret.

  • Operator

  • Our next question comes from the site of Steven Kim, Smith Barney.

  • Go ahead, please.

  • Steven Kim - Analyst

  • Thanks very much.

  • Again, congratulations on a great quarter.

  • I also thought that your initial comments were comprehensive.

  • I'll limit my questions to two.

  • One, I was wondering if you could comment in any way on the Manassas (ph) plant which you talked about at our special ops conference in New York in September.

  • You talked about how you were going to be looking to take Pulte home sciences and some of your other initiatives perhaps a little bit more aggressively across the country over the next several years.

  • That seemed to be one of the things most identifiable near-term.

  • I was wondering if you could give us an update on how that's going and what the ramifications might be.

  • Richard Dugas - President & CEO

  • The Manassas plant will produce its first units in the fourth quarter this year.

  • It's a bit early to predict exactly what our experience is going to be there.

  • Our expectation is two fold.

  • Number one, we ratchet up the quality of the product we build there significantly from an already very high level in that area.

  • Two, that we gain operating efficiencies and cost benefits like we explained it at the conference in New York in that marketplace.

  • The potential for expansion beyond that is going to be determined based on our experience there.

  • But I think it's important to mention that Pulte Homes sciences initiatives are not just limited to those production facilities such as the one in Manassas.

  • We mentioned on my comments we're going to be strengthen be our focus on the supply chain side of the business.

  • As we look at our huge spend in house cost items accurate system we think we've just begun to attack that huge animal on the cost side, and we are looking at our supply chain much more aggressively than we have in the past, getting into some things other industries have done for years.

  • So we'll be bringing in a couple of outside experts to help us with that, that that knowledge is not yet contained within the company, we think.

  • I'd characterize the answer in two ways.

  • One, yes we want to expand Pulte Homes sciences in terms of production facilities accurate system, but we want to make sure that we have a repeatable process before we do that.

  • So stay tuned on that.

  • The other is to point out that we're going to aggressively attack that approximately $4.5 billion spend line this year and of course, growing for future years, looking at the supply chain side.

  • Steven Kim - Analyst

  • Great.

  • I guess the second question relates to margins again.

  • I know you've talked a little bit about it already.

  • But margins really do seem to me to be one of the most important issues on the table right now.

  • Probably where the greatest controversy resides.

  • Many people are under the impression that because your margin is so influenced by land profit that your ability to continue to drive margins up is limited and many people are looking for margins to be down.

  • Sendex (ph) in their call yesterday felt comfortable affirming they could easily get as much as 300 basis points over the next couple years from an already extremely high level in the present quarter.

  • If I were to put that question to you all, do you feel another incremental 300 basis points over the next few years is achievable?

  • Richard Dugas - President & CEO

  • Steven, this is Richard.

  • I'll comment first and ask Roger to add color to it.

  • We are attacking margin on all fronts.

  • Frankly, we're not waiting for land depreciation to get there.

  • I think the supply chain stuff I mentioned a minute ago is a huge piece of that.

  • And that is completely within our control.

  • Suffice to say, we think we have significant gapes we can attribute in that arena.

  • The other factor, as our segmentation strategy plays out, the investment we're making in better sites, even in a market that is competitive, we have the ability to raise pricing in certain segments and we're aggressively doing that.

  • We're taking, I would characterize it as maybe a more proactive approach than we even have in the past with our operations, looking at the ability to raise prices there just based on that segmentation strategy.

  • So I would tell you that we do believe we can expand margins going forward.

  • Maybe Roger can expand a bit on it.

  • Roger Cregg - EVP & CFO

  • To the comment on 300 basis point improvement, we'd see something like that, in that range, over two, three years.

  • I think we feel comfort with that.

  • We've got internal programs right now where we're trying to expand that.

  • You can get there two ways, cost side and price side.

  • We're not relying on the price side to move momentum in that direction.

  • We're pushing hard on the cost side of it to make sure we can leverage that and we think we'll be successful in driving those type of numbers over the next 2 to 3 years.

  • Steven Kim - Analyst

  • Considering the pricing almost never goes down in this industry on a national basis, sounds like you guys have a lot of weapons.

  • Congratulations on a good quarter.

  • Richard Dugas - President & CEO

  • Thank you, Steven.

  • Operator

  • Our next question comes from the site of Joseph Sroka, Merrill Lynch.

  • Go ahead, please.

  • Joseph Sroka - Analyst

  • Do you know what the community count was at the end of the quarter and where you're projecting it for the end of the year?

  • Vinnie Frees - VP & Controller

  • Let me give you some direction on that.

  • This is Vinnie.

  • During the third quarter of '03, our active selling community count was 541 communities.

  • As a benchmark over some of the positions that we were in the past, we ended the second quarter at about 510 and a year ago at 463.

  • As we look for some direction, we can probably achieve somewhere near 550 communities in our fourth quarter of '03.

  • As we look for guidance for 2004, you can probably look at communities up 10% to 15% throughout 2004.

  • Richard would you like to add any additional commentary to that?

  • Richard Dugas - President & CEO

  • No, that's where we see it coming in, Joseph, as we continue to open more communities.

  • You know, our investment in the land side is coming through the pipeline.

  • Joseph Sroka - Analyst

  • Okay.

  • Vinnie, out of the 541, how many came from Civich Thomas?

  • Vinnie Frees - VP & Controller

  • Let me turn the page and get that for you.

  • During the quarter, we had active selling communities with CT of 31 communities.

  • Joseph Sroka - Analyst

  • Okay.

  • Thank you.

  • Operator

  • Your next question comes from the site of Greg Nejmeh, Deutsche Banc.

  • Greg Nejmeh - Analyst

  • Regarding the increased emphasis that you mentioned with respect to supply side management.

  • I've long regarded Pulte as a company that was a pioneer in this area.

  • And now, you're suggesting, I guess, that's going to receive even greater internal emphasis.

  • Could you share with us internally the nature of the change or the nature of the heightened emphasis, and what you expect to come out of it?

  • And perhaps any changes in either personnel or management incentive systems surrounding this specific initiative?

  • Richard Dugas - President & CEO

  • Greg, couple things.

  • When we announced Steve Petruska’s promotion to Chief Operating Officer, we also announced two field regional representatives to push the field.

  • As part of that, we're strengthening some of the functional vice president reporting relationships right to Steve Petruska as operating officer.

  • One of those will be vice president of supply chain and purchasing, which we currently don't have in the company.

  • We're going to go external for that search and we're looking at industry leaders in other industry that have really taken the supply chain and pushed it aggressively.

  • As an example a company like Dell computer or Wal-Mart, that is known for their aggressive look at their supply chain.

  • So specifically, on the personnel side, not only are we going to bring in an individual or two that has got tremendous experience in that arena, we are also planning on having that person report directly to Steve to give it the visibility throughout the operations.

  • Because everything that we realize and the benefits that we see coming from that learning, we of course want to aggressively push and not get lost here in headquarters somewhere.

  • So that's our specific focus on the personnel side.

  • In terms what was we're going to be looking at, I do believe we're a pioneer in some of those areas today, but I think our knowledge base has to increase.

  • It's simply too large an area for us to ignore.

  • And to Roger's point earlier, we're not waiting for continued expansion and pricing to drive our margin improvement.

  • We think we've got a great opportunity there.

  • So I can't tell you exactly what that individual and the rest of our already excellent purchasing team that exists in the company is going to focus on.

  • But stay tuned.

  • We'll certainly give you more color over time.

  • Greg Nejmeh - Analyst

  • You have been engaged in the efforts for some time.

  • Can you share with us how fruitful they've been to date and just share with us briefly what kind of (inaudible) or increase in terms of savings, growth rates we can anticipate from here?

  • Richard Dugas - President & CEO

  • I'll give you color on that.

  • We currently have a very sophisticated, I believe, national, regional and local consolidated purchasing strategy that we've said, targeted this year in the $50 million to $60 million range in terms of savings out of operations, which has been increasing over the last few years.

  • In addition to that, I would point out that our Pulte Homes Sciences initiatives, particularly on the quality and efficiency side, help to drive our J.D.

  • Power results.

  • So you can't just look at the soft side but look at the quality side as well and how much that exactly translates into pricing power, it's tough to say.

  • But I didn't want you to ignore that.

  • In terms of how fast we can accelerate that in the future?

  • Frankly, I don't know if we know how high is high yet completely.

  • I would certainly say the $50 million to $60 million annual range we have today we can increase.

  • Specifically, I'd be hesitant to give targets on that until we know a little bit more.

  • We'll certainly provide that Information as we go forward.

  • Greg Nejmeh - Analyst

  • Just one final question on this.

  • It seems to us as though a lot of the challenges that builders face is encountered because bids are commingled, labor and materials together.

  • And therefore, it makes the opportunity that much more difficult to quantify and identify, actually.

  • How do you plan to address or tackle that issue?

  • Richard Dugas - President & CEO

  • That's a great comment.

  • You're exactly right.

  • It varies throughout the country.

  • In certain market, it's not bundled as you describe and we have great visibility into it.

  • The challenge for us there and what we intend to do is literally attempt to break apart the components, even on a bundled bid, so we understand them.

  • The more we work with suppliers to get that information shared to us, the better visibility we have in that regard.

  • And we do have weapons at our disposal to help with that.

  • Part of it appears doing accurate take-offs on our products ahead of time, not relying on the supplier to provide that so that we can dictate specific sticks and brick quantities, if you will, as an example.

  • Another piece of it is looking for opportunities to take a contractor and expand their reach from one area of the country to another in a geographic region to where we can attack that sort of bundled supply environment that you described.

  • So a big key to us is to understanding our quantity ahead of time, understanding our cost structure that should go into the home and then comparing that against the actual bid we have.

  • Doesn't sound very sophisticated but as we start to dig into these areas, those are the kinds of things we're getting better and better at.

  • Greg Nejmeh - Analyst

  • Great, thanks.

  • Richard Dugas - President & CEO

  • Thank you.

  • Operator

  • Our next question comes from the site of Michael Rehaut, JP Morgan.

  • Go ahead, please.

  • Michael Rehaut - Analyst

  • Good morning.

  • On the gross margin for the quarter, I was wondering if you could give a little bit more detail if you could, on, you know, what were the drivers of that.

  • I know you mentioned mix and cost savings and perhaps price.

  • But if you could just sort of give the order of magnitude of each of those factors, what you think were the, you know, bigger drivers in the quarter?

  • Roger Cregg - EVP & CFO

  • Mike, this is Roger.

  • You know, I think with as we have stated before, it's difficult to pinpoint exactly what price does.

  • Although to just give you some anecdotal comments on that, typically, we're looking at kind of the movement is probably you know, maybe a third, a third, a third.

  • A third price, a third cost savings, a third mix.\

  • Some quarters, we see a little bit more price and a little bit more mix.

  • But specifically, we're looking at pretty good mix for this quarter for ourselves in the northeast and the Mid-Atlantic regions where the margins and the volume was greater there.

  • We see the same thing out of Florida for the quarter.

  • Again, this is against last year's quarter and Northern Cal and Southern Cal so the mix there is.

  • We're pretty good.

  • Pricing power-- still pretty good in the Northeast.

  • In the Washington market, the Virginia market, the southern California market.

  • For some degree coming back in certain segments in northern California.

  • Florida as well, we've seen opportunities there for ourselves in pricing power.

  • All of that added to pretty good margins for this quarter against last year's quarter.

  • Michael Rehaut - Analyst

  • Okay.

  • Taking a step back and looking at free cash flow goals, what you want to do, obviously, debt to cap continues to come down, but I assume it's in a range you'd like it to be.

  • If you could just describe what your priorities are in terms of, additional share buy back--if there's going to be a dedicated amount of cash flow that goes towards that?

  • In terms of investment in land, do you have an idea what would be used towards just internal investment, organic investment versus acquisition related investment?

  • Roger Cregg - EVP & CFO

  • Again, this is Roger.

  • I guess you know, stepping an back and taking a look at it, we're looking at an opportunity to continue to grow the business.

  • We see tremendous opportunity to invest in the business.

  • With the discipline of maintaining a 40% debt to cap.

  • With that, you can see that we can continue to lever up the business and use the free cash flow off the business to reinvest in it.

  • We've talked about in the past that our approach to share buy backs will be opportunistic.

  • We know how to do that and have demonstrated that in the past, to have at one point bought more than 35% of the shares pack there the outstanding amount in the market.

  • You'll see that I think a little bit more of our portfolio going forward so we have the opportunity to focus on investing in the business and buying back stock.

  • Today, we're focused on investing in the business.

  • We still see a tremendous opportunity.

  • You can see that in the numbers for 2004 and that's our priority on investment.

  • But on the shareholder side, for stock buy-backs, I wouldn't say we'll be overly aggressive about that, but we're going to be opportunistic about it, more so than we have been in the last couple years as we've been managing the debt to cap.

  • Some of our cash right now is in the higher debt on a gross basis is because we anticipated buying back or paying down the debt that comes due in December and February of next year.

  • On a gross basis, we're slightly higher.

  • Net basis, 38%, we're right in the 40% range where we want to be.

  • We're staying with that type of a model going forward into '04 and even looking out beyond that.

  • As far as organic versus acquisition, we're mainly looking at organic.

  • Acquisitions we don't count on.

  • If they're there and they fit with our strategy and they are strategic or because they offer the opportunity for greater land supply, we take a look at those.

  • We're constantly looking at them.

  • We always trade off.

  • If we've got all we need in a market from a management standpoint some become less strategic and others and they push back on the pricing we're willing to pay for it.

  • Looking at all that, I’d say organically is our approach, we're not relying on growth going forward from acquisition, although if it's there and opportunistic and strategic for us, we'll certainly entertain those.

  • Michael Rehaut - Analyst

  • Thanks.

  • One last question.

  • There's been a lot of talk on margin expansion and the different ways to get there.

  • As you execute and get more savings through the different channels open to you, on the supply side construction, overhead leverage, do you have an idea how your cost structure might change or be altered?

  • Today, most builders kind of give or take a few percentage points have roughly 75% -- I'm sorry, 25%, 25%, 25%--land, labor and materials in terms of cost of sales.

  • Do you see that changing at all, particularly on the material side or the labor side as you extract some of the savings?

  • Roger Cregg - EVP & CFO

  • I think the two primary is -- again, this is Roger.

  • The two primaries will be the labor side and material side.

  • You can build product with different materials or design your house better than it's designed today.

  • You can take costs out of that.

  • Those are the things we end up taking a look at as the opportunities to improve our cost structure.

  • Michael Rehaut - Analyst

  • Great.

  • Thanks so much.

  • Operator

  • Our next question comes from the site of Steve Fockens, Lehman Brothers.

  • Steve Fockens - Analyst

  • Roger, one quick house keeping issue.

  • In the fourth quarter, did you say land to about $30 million to $35 million?

  • Roger Cregg - EVP & CFO

  • Yes, you good.

  • Steve Fockens - Analyst

  • Compared to roughly $7 million in this quarter?

  • Roger Cregg - EVP & CFO

  • Yes.

  • Steve Fockens - Analyst

  • In terms of actual designing the house using less materials, using different materials, as you look out over the next couple years, what's the relevance of that versus national purchasing versus other cost savings?

  • How much leverage or a better way-- Are you in the early innings on the design stage, in the middle innings?

  • Richard Dugas - President & CEO

  • Steve, this is Richard.

  • I'd say we're in the early innings.

  • There's a huge opportunity on the design side.

  • I want characterize it as much on the material side, though there's things there, but what I'd call the value engineering side.

  • We have to get smarter about leveraging specific truss links, as an example, for the houses.

  • Things like that where we're not overly complicated our lives with things that don't matter to the customer in terms of how we lay off a group of homes.

  • To give an example, in a given market if we offer, say, 50 floor plans in various different communities, we might be able to average those 50 plan boss the best 50 plans that have maybe similar lengths for lumber and different layout components of the home.

  • All of that is part of a value engineering effort.

  • What happens there is you have to go up front before you actually design the home, specifically and look at your product on paper and come up with the best designs you can that leverage your look at that.

  • Fortunately, we have great visibility into the importance of that, so we're aggressively pushing on that.

  • So good question and we definitely have opportunity there.

  • Steve Fockens - Analyst

  • Are you already working fairly closely with large lumber product suppliers, others in that regard, in items of length or types of product they supply you, or is that also in the early stages?

  • Richard Dugas - President & CEO

  • That's also in the early stages.

  • We do work with maybe large framing companies to help with that, that literally folks with crews to erect the homes.

  • Fortunately, we do a lot of that in house.

  • We have a lot of expertise in house, with a long track record of strong construction team members in the operation.

  • There's a bit of a process we use when designing product and laying it out and rolling it out to operations.

  • We have visibility to that up front internally.

  • Steve Fockens - Analyst

  • Great.

  • Thanks much.

  • Nice quarter.

  • Richard Dugas - President & CEO

  • Thank you.

  • Operator

  • Our next question comes from the site of Jim Wilson, JMP securities.

  • Jim Wilson - Analyst

  • Good morning, thanks.

  • In looking forward to your guidance, Richard, or your thoughts for '04 on the community rollout, could you give any color?

  • Will there be any markets you particularly expect to have a greater percentage of openings or you're targeting?

  • In context of that, are there any certain regions where you see a turnaround beginning that you're looking to maybe more aggressively invest capital in?

  • Richard Dugas - President & CEO

  • Jim, first of all, the only market I'd highlight specifically, just because we've not had as big as A presence as we're continuing to openly pursue openings in southern California.

  • Beyond that we're spreading across the system.

  • There's no question we see opportunities there.

  • Frankly, the segmentation work we've been speaking about is beginning to pay dividends to us.

  • We've had strong segmentation focus in certain market, but where we've not, now we have visibility in the opportunities.

  • We're going to be active on the active adult side.

  • We probably have a web community in a third or fewer of our markets today and I hope a year from now to be able to tell you a different number.

  • So we can expand in that particular segment in a lot of areas.

  • Beyond that, we've got visibility down to each of these 11 consumer groups that we've talked about in the past, in all our markets.

  • I think it's fair to say our investment will be across-the-board with the one emphasis there that I mentioned.

  • Jim Wilson - Analyst

  • Thanks.

  • Richard Dugas - President & CEO

  • Thank you.

  • Operator

  • Our next question comes from the site of Carlo Ribiero (ph), Credit Suisse.

  • Carlos Ribiero - Analyst

  • Good job on the quarter.

  • A couple of cleanup home items.

  • I don't know if you mentioned lock count as well as speck unit?

  • Vinnie Frees - VP & Controller

  • Sure, Carlos.

  • This is Vinnie Frees.

  • I'll help you with that.

  • Specs at the end of the quarter September 30, 2003.

  • We -- I said specs and pulled out my worksheet on number of lots.

  • So, let me address that first.

  • Number of lots under control as of September 30 -- 239,500 lots.

  • Now, of that, about 43% are owned and the remainder, 57% are under control through option agreements, and the split there between what is approved and what is pending (inaudible) approval is roughly 60/40 on our option side.

  • Now, as a benchmark and you want to compare that to where we were a year ago, our number of lots under control were 158,300.

  • There, we owned 53% of the lots and optioned 47.

  • So currently, there's a change there.

  • We're optioning more than what we currently own as of September 30.

  • Let me help you with where we are with respect to some of the specs.

  • When you talk specs, the number of spec units that we have of 9/30/03, were 4,876 specs.

  • But certainly, you need to put that into perspective--not only of where you've been in the past but also, according to one of our key measurements, what are some of the our operating goals where their spec inventory dollars as a percent of house inventory dollars, we have a goal of 35%.

  • Currently, as of September 30, 2003, we're at a 25% level.

  • So we think that that is a little better than our stated goal.

  • Hope you find that helpful, Carlos.

  • Carlos Ribiero - Analyst

  • Appreciate, Vinnie.

  • Roger, a quick question with you a follow-up to your explanation on financial services.

  • Did I understand you correctly, your financial services was off about $3 million because of the higher rate environment?

  • Roger Cregg - EVP & CFO

  • That's correct.

  • Carlos Ribiero - Analyst

  • If that's the case, should we expect, if rates do back up next year, will that be the case going forward?

  • Was it -- are they losses associated with loans or what's the deal there?

  • Roger Cregg - EVP & CFO

  • Just comparative to a previous year, where interest rates were falling away, now interest rates were rising, it's a comparative to the year-to-year.

  • Carlos Ribiero - Analyst

  • Okay.

  • Roger Cregg - EVP & CFO

  • So there's an opportunity to have pickup gains when the rate falls, versus when the rate rises.

  • Carlos Ribiero - Analyst

  • Okay.

  • And I know you guys didn't comment on specific comment on guidance for '04, but should we expect any material difference in land sales or land sales profits in '04?

  • Roger Cregg - EVP & CFO

  • Again, we're in the process putting that together.

  • Right now, I can’t comment on it til we actually, really get into the detail of it.

  • Carlos Ribiero - Analyst

  • Very well.

  • Thanks, guys.

  • Roger Cregg - EVP & CFO

  • Thanks, Carlos.

  • Operator

  • Our next question comes from the site of Wayne Cooperman, (ph) Cobalt Capital.

  • Wayne On the financial services, you're saying you had a loss on loans held for sale?

  • Is that what happened?

  • Richard Dugas - President & CEO

  • What we're saying is that comparative to the previous year where interest rates were falling --.

  • Wayne Cooperman - Analyst

  • but this is -- you're talking about loans that you originated and were holding to sell and, in the meantime, you took a loss on them?

  • Richard Dugas - President & CEO

  • It's when you sell them into the market place, where you have the opportunity against the interest rate movement.

  • So it's an arbitrage, more or less, than anybody else.

  • Wayne Cooperman - Analyst

  • It's not affected by the rate in rates but the movement of rates over a short period of time when holding inventory?

  • Richard Dugas - President & CEO

  • That's correct.

  • Wayne Cooperman - Analyst

  • On the '04 guidance, can you give more color on number of units, margins that go into the guidance?

  • Richard Dugas - President & CEO

  • All I'd say, Wayne is that correct we gave guidance, a year or so ago on targeting 38,000 to 42,000 units for '04 and we're in that range.

  • We're seeing volume over this year, that's why the guidance $11.50 to $12.00 Volume is driving a good part of it.

  • Wayne Cooperman - Analyst

  • It's based on 38,000 to 42,000 closings?

  • Richard Dugas - President & CEO

  • Roughly in that range, yes.

  • Wayne Cooperman - Analyst

  • Fantastic quarter.

  • You guys are doing a great job.

  • Congratulations.

  • Richard Dugas - President & CEO

  • Thank you.

  • Jim Zeumer - VP, IR & CC

  • Wayne, this is Jim Zeumer.

  • To clear up one point.

  • It's not, on the mortgage piece, it was pick-ups in Q3 of last year that we didn't see this year so it's not a situation where you've got a loss on these loans.

  • You just had a pick-up in last year's business because of the declining interest rate environment.

  • Wayne Cooperman - Analyst

  • Thanks.

  • Operator

  • Thank you.

  • Our next question comes from the site of Paul Puryear, Raymond James.

  • Paul Puryear - Analyst

  • Thanks.

  • We're curious about what you're seeing in the multi-family business.

  • Any changes in the trends there versus some of the other products?

  • Richard Dugas - President & CEO

  • Paul, this is Richard.

  • Specifically, are we opening more projects there in when you reference trends --.

  • Paul Puryear - Analyst

  • The sales volumes, the strength of those markets and, yes, the strategy going forward, also.

  • Richard Dugas - President & CEO

  • Okay.

  • Specifically, we are aggressively pursuing multi-family projects around the country.

  • We are, I think, one of the leading builders in doing some infill redevelopment work.

  • We specifically have great examples of that Northern California, on the east coast, in the Northern Jersey markets and the D.C. markets.

  • We're even doing that in a number of other cities around the country today.

  • It's a specific focus for us.

  • To give you an example, in the city of Chicago, of 9 million people, 6 million live in Cook County and we don't have a single project in Cook County, that's a focus because we know people want to live there.

  • That's going to be infill properties, meaning higher density and mull multi-family.

  • Our strategy is to understand that there are separate buyers who want that type of product that are not your traditional family buyer, as an example.

  • Our goal is to expand our region to all of those segments.

  • We've mentioned active adult and family product, but that's another good example of an area that we're currently probably underinvested, frankly, today.

  • So our focus is going to strengthen there.

  • And we find the market good.

  • Frankly, it's a supply versus demand environment there.

  • Where there's not a lot of supply and you put up a project that hits the goal, you do extremely well.

  • Paul Puryear - Analyst

  • Do you see yourself going even higher density?

  • Richard Dugas - President & CEO

  • We do.

  • In terms of, like, high rise products?

  • Paul Puryear - Analyst

  • Exactly.

  • Richard Dugas - President & CEO

  • We currently do product up to five, six stories in some areas today.

  • We are going to expand our focus there.

  • I'll tell you, this, though before we get too heavily into the business, we're going to understand it completely.

  • It's a different construction model, frankly, than we're used to.

  • We have a lot of efforts underway that I won't comment on the specifics about in that arena.

  • But you can probably look for this company to do 12 and 12-story product in the not too distant future.

  • Paul Puryear - Analyst

  • Great, thanks.

  • Operator

  • Our next question comes from the site of William Nobler, Go ahead.

  • William Nobler - Analyst

  • Hi.

  • One question I had.

  • On the international area, could you tell us what your investments are in Mexico and Puerto Rico and Argentina?

  • And looking at your desire to improve returns, is there any reason why you wouldn't want to monetize those areas?

  • Roger Cregg - EVP & CFO

  • This is Roger.

  • We basically have somewhere around $100 million invested in total in international.

  • The lion's share in Mexico.

  • Smaller amounts in Argentina and Puerto Rico.

  • And the question on monetize it, I'm not sure what you're talking about but we're looking at our opportunities to improve our returns there, which would consider a lot of different aspects of that.

  • William Nobler - Analyst

  • Thank you.

  • Great quarter, and great forecast.

  • Roger Cregg - EVP & CFO

  • Thank you.

  • Operator

  • Our last question comes from the site of Timothy Jones (ph), Wasserman and Associates.

  • Go ahead.

  • Timothy Jones - Analyst

  • One question.

  • Are you thinking of expanding into the on-your-lot business?

  • Richard Dugas - President & CEO

  • This is Richard.

  • Currently, we don't have plans for that business expansion.

  • I mean, you never say never in terms of ruling it out, but we have so much opportunity to drive our business today, you know, being one of the largest builders in the country with a 3% share, we want to keep our focus directed to what with we know well and where we know how to make money.

  • I would tell you that's not on our radar screen today.

  • Timothy Jones - Analyst

  • How about expanding the Devasta (ph) operations more out of Florida?

  • Richard Dugas - President & CEO

  • Probably the concepts of Devasta -- not probably.

  • We will expand it outside of Florida outside the country and have it underway in two very specific effort in California and we'll be piloting that in a number of markets accurate country.

  • We also helped to expand the Devasta brand in Florida.

  • Timothy Jones - Analyst

  • In California, are you going to follow the plan by having your own employees build, like, Devasta does in Florida?

  • Richard Dugas - President & CEO

  • Probably not.

  • The experiment underway today, which is extremely successful in the second community, has us working with contractors.

  • I will tell you, Tim, the first community we took that into, they didn't believe us, that we were able to be so consistent and focus with our scheduling and with our product offerings like Devasta has.

  • By the time we got around to the second community, they'd seen the benefits.

  • We've found we're able to drive lower cost of purchasing materials, because our process is so efficient and the huge improvement there was in our bill times.

  • Devasta currently has a fantastic build time and we were able to take 20 days out of the build cycle in the project in California, not using a vertical integrated method, but working with the contractor.

  • So we're very, very pleased with the effort and that's part of what I was mentioning earlier on our whole focus on the cost and timing side.

  • Richard Dugas - President & CEO

  • Lastly when I was down at Devasta -- first of all, are you going to do the brick type, the -- not the molds in California?

  • Richard Dugas - President & CEO

  • Not sure I understand the question.

  • Timothy Jones - Analyst

  • In other words, they do -- they build a cinder block and then with a mold.

  • Are you going to do bold ways or just a cinder block?

  • Richard Dugas - President & CEO

  • Actually, what we're taking is the construction techniques, the process techniques, they have, the discipline on schedule and roll that out.

  • Timothy Jones - Analyst

  • Their time, I think, was a fantastic 53 days for the cinder block.

  • How fast did you do it in California?

  • Richard Dugas - President & CEO

  • It's down to 47 days now, by the way, in Florida.

  • In Deavasta.

  • I couldn't give you a specific number of days.

  • Jim is telling me it's 51 days, specifically.

  • Timothy Jones - Analyst

  • Fantastic.

  • That's not with the molds?

  • That's with the cinder block?

  • Richard Dugas - President & CEO

  • No, that's with traditional construction materials.

  • Timothy Jones - Analyst

  • That is fantastic.

  • Okay.

  • Thank you.

  • Richard Dugas - President & CEO

  • Thank you.

  • Operator

  • That was our last question today.

  • I'd like it turn the program back over to Mr. James Zuemer

  • Jim Zeumer - VP, IR & CC

  • Thank you very much.

  • Thank you, everybody, for your time this morning.

  • We're available later today if you have follow-up questions.

  • Operator

  • That concludes today's conference.

  • Thank everyone for your participation.

  • Have a wonderful day.

  • You may now disconnect your lines.