使用警語:中文譯文來源為 Google 翻譯,僅供參考,實際內容請以英文原文為主
Operator
Good day, ladies and gentlemen, and welcome to the third quarter 2006 Pulte Homes, Inc. earnings conference call. [OPERATOR INSTRUCTIONS]
I would now like to turn the presentation over to your host for today's conference, Mr. Jim Zeumer, Vice President.
You may go ahead, sir.
- Vice President of Investor and Corporate Communications
Thank you, Jackie and good morning.
I want to thank you for joining this morning's call to discuss Pulte Homes third quarter financial results, for the nine months ended September 30th, 2006.
I'm Jim Zeumer, Vice President of Investor and Corporate communications.
You've all had a chance to review the press release we issued last night detailing Pulte's third quarter operating and financial performance.
On the call to discuss the results are Richard Dugas, President and Chief Executive Officer, Steve Petruska, Executive Vice President and Chief Operating Officer, Roger Cregg, Executive Vice President and CFO, and Vinny Frees, Vice President and Controller.
For those of you who have access to the internet, a slide presentation will accompany this discussion.
The presentation will be archived on the site for the next 30 days for those who want to review at a later time.
As with all such calls, I want to alert everyone listening on the call and via the Internet, that certain statements and comments made during the course of this call must be considered forward looking statements as defined by the Securities Litigation Reform Act of 1995.
Pulte Homes believes such statements are based on reasonable assumptions, but there are no assurances that actual outcomes will not be materially different from those discussed today.
All forward looking statements are based on information available to the Company on the date of this call and the Company did not undertake any obligation to publicly update or revise any forward looking statements as a result of new information in the future.
Participants in today's call should refer to Pulte's annual and quarterly reports on Form 10K and 10Q for a detailed list of the risk and uncertainties associated with the business.
As always at the end of our prepared comments, we will have time for Q&A.
We will wait until then before opening the queue for potential questions.
Let me now turn the call over to Richard Dugas for a few opening comments.
Richard?
- President, CEO
Thank you, Jim, and good morning everyone.
Over the past few weeks, we have all started to hear and read more comments suggesting that the slow down in housing, at least in some markets may be finding a bottom.
For some it's the flattening out of new home inventory numbers, suggesting that supply into the market has started to moderate.
Others are pointing to the recent sequential improvement albeit humble in builders' sentiment.
A few of the recent reports have talked about signs of stability in Sacramento, which was considered important as this was one of the first markets hit by the slow down.
And still other people are pointing to modest improvements in Washington, D.C. and Arizona.
It is too early to say if these individual points will turn into trends, but they're better than the negative information talked about in the housing industry for much of the past year.
You can count us among the companies that would like to see this be the beginning of a more stable operating environment.
But for now, we will wait for the trends to continue and to broaden before we conclude that a bottom is being reached.
Given our expectations that market conditions will remain challenging for the foreseeable future, we continue to throttle back the business and advance initiatives consistent with operating in a slower demand environment.
These initiatives touch every aspect of our business, but let me quickly highlight three key points.
On the second quarter conference call, we talked about slowing any incremental investment geared toward Pulte's-- geared toward growing Pulte's overall lot position.
As Steve will discuss in greater detail, we have reduced the number of lots we control by roughly 10%, relative to our position at the end of the second quarter.
We continue to invest in the development of Pulte's own land positions and we are willing to acquire those assets that still make financial and strategic sense given today's market conditions.
Beyond these types of investments, however, our approach is to reduce incremental land purchases, and work to shorten Pulte's land pipeline.
The fact is that over the past few years we have assembled a strong land position and can support the Company for multiple years.
We now have to capitalize on these assets and work to maximize their value going forward.
As was indicated in our press release, and as Roger will detail, our third quarter results include charges associated with our decision to pass on certain existing option deals, as well as from impairment charges associated with adjusting the value of certain other land parcels.
While small relative to the size of Pulte's asset base and overall equity value, we appreciate that writing off deposit and preacquisition dollars is previously invested cash that is gone forever.
It's better, however to take immediate action rather than to invest significantly more dollars in the future into what could be an underperforming project for years to come.
Where we can, we are working with land sellers to renegotiate the terms of existing deals.
I'm sure it's no surprise that negotiations, focus on both the price and the timing of the transaction with the latter often being as critical a factor.
Given the slower rate of current sales, even good land positions may not be needed as early as previously forecasted.
Assessing the need for an option write-off for land impairment charge is an ongoing process for Pulte, and I would assume for the rest of the industry.
Unless demand conditions get better or at least stabilize in the short-term, the risk of additional charges in the future is still with us as reflected in Pulte's fourth quarter guidance.
Beyond our land pipeline, Pulte has also put its foot on the production brake in terms of the number of new homes we're starting.
We talked last quarter about scaling back on new spec starts with the goal of significantly lowering the number of new homes we start without a buyer in place.
Since we build attached products such as townhouses and condos, where we start construction before a building is 100% sold, this number will never be zero for Pulte, but there is no need for us to aggravate existing market difficulties by throwing unnecessary supply into the market.
By reducing our production, we help to significantly lower the total number of spec homes we have on the ground relative to the second quarter of this year.
The numbers are still too high, but we have lowered total spec units by 14%.
This is a good first step, but we will drive the number lower over the course of the next few quarters, although we recognize that cancellation rates will have an impact on how quickly this number drops.
We can control our production, but obviously cancellations mean that some percentage of homes we start to sold change into spec during the construction cycle.
And finally, we continue to move aggressively to control and ultimately lower those costs directly within our control, namely overhead expenditures.
Over the past few years, Pulte has done an excellent job capturing greater overhead leverage, but we need to sharpen our pencils further within this difficult environment.
Let me finish here and say that as investors try to sort through a myriad of questions regarding changing market conditions, and builder response strategies, we are being asked what model Pulte Homes is implementing.
Are we driving for volumes at the expense of margins?
Are we sacrificing pace in an effort to hold profitability?
Is it all about the balance sheet or are we focussed on maximizing current income?
Typically this is not a business where a national operating strategy can be boiled down to a single approach.
But if forced to choose, I would say Pulte is taking a balanced approach.
Where conditions warrant, we are accepting margin pressure, if that can translate into incremental sales.
At the same time, at other communities, we are electing to forego sales rather than just give away the home and more importantly the land.
As for the idea of giving away houses in an attempt to liquidate a land portfolio as some competitors appear to be doing, that is not a strategy that make much long-term sense to Pulte.
The market has gotten tougher faster than anyone expected.
But we have a great market position and a strong financial foundation.
With good execution of our strategies, I like our long-term prospects.
Thank you and now let me turn the call over to Roger Cregg.
Roger?
- Executive Vice President, CFO
Thank you, Richard and good morning, everyone.
The third quarter home building net new unit order rate decreased approximately 39% from the third quarter last year.
And in dollars, decreased 40% to approximately $2.4 billion or an increase-- on an increase in the community count of approximately 9% versus the same quarter last year.
Revenues from home settlements, for Pulte Home building operations, decreased approximately 6% over the prior year quarter to approximately $3.5 billion.
Lower revenues for the period were driven primarily by lower unit closings, that were below prior year by approximately 11%.
The average sales price increased approximately 6% versus the prior year quarter to an average of $335,000.
The increase in the average selling price versus prior year is primarily the result of an overall volume-driven shift in product mix and geographical market mix.
In the third quarter land sales generated approximately $15 million in total revenues, which is a decrease compared with the previous year's quarter of approximately $10 million.
Homebuilding gross profits from home settlements including homebuilding interest expense for the quarter decreased approximately 32% to $599 million or a decrease of approximately $287 million for the quarter.
Third quarter homebuilding gross margins from home settlements as a percentage of revenues were 17.1% compared with 23.8% in the third quarter of 2005.
The decreased margin conversion of approximately 670 basis points, versus the prior year quarter, is attributable to an unfavorable product and geographical mix, increased selling incentives, higher material and labor costs, and land and community valuation adjustments.
Additionally, homebuilding interest expense increased during the quarter to approximately $65 million versus approximately $49 million in the prior year and contributed approximately 54 basis points in the declining margin versus the previous year quarter.
Also included in gross margin for the quarter was a charge related to land and community valuation adjustments, in the amount of approximately $48 million, which contributed approximately 140 basis points in the decline in margin versus the prior year quarter.
The total gross loss from land sales posted for the quarter was approximately $3 million.
The gross profit contribution from specific land sales transactions were approximately $4 million for the current quarter versus approximately 3 million in the prior year quarter.
Land sales transactions during the third quarter included single family custom lot sales, residential parcels and several commercial land parcels.
In addition, we recognize the fair market value adjustment for land being held for disposition, in the current quarter in the amount of approximately $7 million, which is included in the land cost of sales.
SG&A costs as a percentage of home sales for the quarter was approximately 8%, an increase of approximately 70 basis points over the prior year quarter.
The decreased conversion versus the prior year quarter was the result of lower revenues offset by our internal initiatives focused on controlling costs in the current business environment, as the actual increase was approximately $7 million on a 6% reduction in revenues.
In the other income and expense category for the quarter, the expense of approximately $30 million is primarily the result of the write-off of land deposits and preacquisition costs of approximately $33 million, which was associated with land option contracts that we determined not to exercise.
To recap the components of the $88 million of charges, included in the third quarter, gross margins included approximately $48 million resulting from adjustments to land inventory.
Land cost of sales included approximately $7 million, and in the other income and expense category, the write-off of land deposits and preacquisition costs were approximately $33 million.
While focusing on our balance sheet and land positioning, we have over the last several quarters dropped land deals of approximately 58,000 lots representing a value of approximately $2.6 billion.
Homebuilding pretax income for the third quarter decreased approximately 54% to approximately $286 million with pretax margins at approximately 8% on total home building revenues.
This decrease in conversion over the prior year quarter of approximately 840 basis points is mainly a result of the low gross margin conversion as discussed previously and charges related to the write-off of land deposits and preacquisition costs.
At the end of the third quarter, our homebuilding operations had a backlog of 16,375 homes valued at approximately $5.8 billion.
Compared to 23,700 homes valued at approximately $8 billion as of the prior year quarter.
The third quarter, pretax income from Pulte Homes Financial Services operations was approximately $21 million or an increase compared with the prior year quarter of approximately $2 million.
Lower revenues from decreased volumes were offset by a favorable product mix shift and an increase in capture rate.
The level of adjustable rate mortgage products originated during the third quarter of 2006, decreased from approximately 42% of origination dollars funded from our warehouse line in the third quarter of last year, to approximately 26% this quarter.
Pulte mortgages capture rate for the current quarter was approximately 91%.
Mortgage origination dollars decreased in the quarter approximately $8 million or less than 1% when compared to the same period last year.
The decrease is related to the overall slow down in the homebuilder closing activity for the quarter.
The other nonoperating category, pretax loss for the third quarter of approximately $12 million included corporate expenses of approximately 10 million, and corporate net interest expense of approximately $2 million.
Income from continuing operations for the third quarter decreased approximately 50% to approximately $191 million or $0.74 per fully diluted share, as compared to approximately $382 million or $1.45 per diluted share for the same period last year.
Fully diluted shares were approximately 257.2 million shares for the quarter.
The lower income tax rate for the third quarter of approximately 35.2% was due primarily to an adjustment, of the section 199 manufacturing deduction, a change in the overall state tax rate associated with the geographical mix in income, and certain other tax matters.
Moving on to the balance sheet for the third quarter, we ended with a cash balance of approximately $95 million.
House and land inventory ended the quarter at approximately $10.8 billion or an increase from year end 2005 of approximately $2.1 billion.
Of the $2.1 billion increase, approximately 60% or $1.2 billion is related to home construction in progress to include house and land related to house.
The balance of the increase or approximately $834 million is related to land acquired under development and held for future development.
For the third quarter, the Company's debt to total capitalization ratio was approximately 39.5% and on a net basis was 39%.
During the third quarter, we increased our short-term borrowings to approximately $754 million mainly as a result of the increase in house inventory during the quarters.
Interest incurred amounted to $73 million in the third quarter, compared to $58 million for the same period last year.
Pulte Homes, shareholder equity for the quarter increased to approximately $6.6 billion with return on average shareholder equity for the latest 12 months of approximately 21%, a decrease of approximately 700 basis points versus the same period last year.
Pulte Homes return on invested capital for the latest 12 months was approximately 14%, a decline of approximately 350 basis points from the same period last year.
During the third quarter, approximately 701,000 shares were repurchased for approximately $20 million or an average of approximately $28.35 per share.
On a year-to-date basis, we repurchased approximately 3.568 million shares for approximately $117 million at an average price of $32.84 per share.
The Company has approximately $102 million remaining on its current authorization.
Now looking ahead under the SEC regulation FD guidelines, we provide the following guidance on our current expectation for the fourth quarter of 2006.
Fourth quarter earnings per share from continuing operations are estimated to be in the range of approximately $0.30 to $0.70 per share.
Due to the uncertainty of the current housing market environment, we are guiding to the lower end of the range to reflect the potential for additional land valuation adjustments and option deposits and land preacquisition cost charges.
While these charges are not certain, we have reflected the potential of up to $150 million pretax write-off in the fourth quarter.
This earnings per share number is calculated based on approximately 256.1 million fully diluted shares.
We are projecting our earnings target for the full year of 2006, earnings per share from continuing operations, at between $3 and $3.40 per share based on approximately 258.1 million fully diluted shares.
This range anticipates the annual closings of approximately 40,000 to 41,000 homes for 2006.
Unit settlements in the fourth quarter of 2006 are projected to be approximately 25% below the same period last year, driven primarily by the lower order rates experienced in the second and third quarters this year as well as the increased level of cancellations experienced in most of our markets.
Average selling prices for closings in the fourth quarter are estimated to be approximately 1.5% above the third quarter of 2006.
The projected increase in the average selling price is primarily being driven by product and geographical mix for the houses projected to be delivered during the fourth quarter.
Gross margin performance from home settlements as a percent of sales for the fourth quarter are anticipated to be approximately 330 basis points below the third quarter of 2006.
The projected lower gross margins for the quarter primarily reflect pricing strategies and generated sales momentum and a volume mix shift as a result of lower volume in higher margin markets.
In addition, the guidance reflects the potential for approximately $50 million in land valuation adjustments.
These charges are not certain and are dependent on local market conditions and specific properties identified by our markets as they may or may not occur accordingly.
We're currently projecting land sale gains in the fourth quarter of approximately 5 to $6 million.
As a percentage of sales SG&A is expected to be in the range of approximately 20 to30 basis points increase over the third quarter of 2006.
In the Homebuilding, other income and expense category for the fourth quarter, we are projecting an expense of approximately 100 to $105 million, reflecting the potential for additional deposit preacquisition charges associated with land options and joint venture land valuation adjustments totaling approximately $100 million.
These charges are not certain and are dependent on our ability to negotiate terms with the land sellers on specific properties identified by our markets.
And they may or may not occur accordingly.
Given no material change for the current and short-term projected interest rate environment, or a significant shift in customer mortgage product preference, pretax income in our financial services operations is expected to be approximately 22 to $23 million for the fourth quarter of 2006.
The other nonoperating expenses are projected to be 15 to $16 million for the fourth quarter.
We're projecting the effective income tax rate to be approximately 37% for the fourth quarter of 2006.
During this quarter, we typically give our outlook for the following year, but given the current market environment, we will assess conditions through the fourth quarter and provide an update on our fourth quarter conference call.
I will now turn the call over to Steve Petruska for more specific comments on operations.
Steve?
- Executive Vice President, COO
Thanks Roger and good morning, everyone.
As Richard talked about earlier on this call, and as we discussed at the end of the second quarter, we have been adjusting our operations to the more challenging conditions the industry is facing in many markets.
This includes shrinking our land pipeline and dramatically reducing starts to match current sales and closing volumes.
The size and fundamental nature of our business means that we can't turn things on a dime, but we're already seeing the impact of our actions to effectively align our operational metrics to the business environment we find ourselves in.
We've talked about slowing down planned land purchases and shrinking our lot supply.
At the end of the third quarter, Pulte controlled approximately 294,000 lots, this is down 10% sequentially from our second quarter and down almost 20% from the same period last year.
We continue to purchase select land positions where it makes economic and strategic sense to do so.
But at the same time we're shrinking the overall number of lots Pulte controls.
As Roger mentioned in his comments, while we are foregoing-- continue to forego and or delay new land purchases, we are still investing development dollars into projects that we already own.
Pulte has a number of larger projects, including some great new Del Webb communities that just opened, or they're in the process of opening, that we need to advance.
These projects include several large multi-generational communities, such as Merrill Ranch in Phoenix, and Wiregrass outside of Tampa, which will open in early 2007.
As well as 14 new Del Webb communities that have opened this year.
Having gotten the entitlements and in many cases having made significant infrastructure investments, it makes economic sense to get the doors open and begin selling homes in these communities.
Beyond land investment, we've also scaled back the number of homes we are putting into production.
We have historically averaged 25 to 35% of homes under production as spec.
Given the lower sales pace and high cancelation rates we're experiencing, we are working to scale back this number significantly.
Internally we talked about getting spec starts as close to zero, as is feasible, given the uncertainty of buyer demand.
By scaling back production volumes in just one quarter we reduced our spec count by 14% to roughly 7,700 homes.
Keep in mind, that these homes are at all stages of production as we count the unit once we begin preparing the lot for construction.
We will continue to limit production volumes so as we sell and close homes that are currently listed as specs, we're not starting a comparable number of new specs.
Over the next couple of quarters, I expect that this number will continue to drop rapidly.
Having fewer specs in the ground puts our salespeople in a stronger selling position.
However, it also means we could miss out on some up side when demand rebounds.
That's a tradeoff we are willing to make.
So having talked about the adjusting market conditions, just what did we see in the third quarter?
To start, settlement revenues were down 6% as an 11% decrease in home closings was offset by a 6% increase in the average sales price.
The increase at ASP was driven more by mix than true price increases taken in the field.
Sign-ups for the third quarter totalled roughly $2.4 billion as our sales price declined by less than 1%, but unit volumes decreased a more significant 39%.
Just one quick observation about selling prices.
As many people point to the lowering of prices for new and existing homes as a real threat to the market.
The reality is that new home builders have been and continue to adjust what buyers are paying for their new homes.
You need only look at our margins to see the impact.
In the broader housing market, however, if we point to affordability and rapid price appreciation, as the two causes of housing slow down, the price of existing homes will also have to come down.
Only by finding, in effect, the market [faring] price, can we get transactions happening again which in turn can help put the U.S. housing market on firmer footing.
Moving on.
Continuing the trend we've experienced over the past few quarters, gross sign-ups for the third quarter were down roughly 21%, but a 36% cancellation rate eroded that number and helped create a 39% decrease in net sign-ups for the period.
The cancellation rate was consistent month-to-month throughout the quarter.
Beyond the aggregate numbers, let me provide a little commentary on what our regions experienced.
Third quarter sign-ups in the Northeast were down about 37%, which is consistent with the second quarter.
Community count was essentially unchanged as the issues we face-- as were the issues we face, most critical being a lot of existing home inventory on the ground giving our potential buyers a tough time selling their homes.
This is one of the regions where we're willing to give up some sales rather than erode margins to accelerate pace, and burn through assets that take years to put into place.
In the Southeast, which includes the Carolinas, Georgia, Tennessee, and into Florida, sign ups were down about 50%.
Outside of Florida, most of our markets held up pretty well.
Our Florida operations in general experienced a serious pull back in demand.
Within the state itself, Orlando and Naples were particularly hard hit.
There is a lot of inventory on the ground in Orlando and builders are being incredibly aggressive in trying to move new homes.
Naples, Fort Myers faces a similar issue, although it's more of a second home buyer market, with much higher price points.
We are moving towards the buying season for Naples, so we'll get a better sense about the overall health of the market.
The Midwest was unchanged.
The year-over-year decline in net sign-ups was only 30%, which compares to a decline of 35% in the second quarter of 2006.
We had a great opening of a new Del Webb community outside of Chicago.
But beyond that the tough economic conditions haven't changed and likely won't any time in the near future.
We just have to keep slugging through it.
Our Del Webb communities are providing some important support to the business and we are certainly pleased with that.
Sign-ups in our central region were down 44% in the quarter, the most notable change for the region was that Texas slowed down after a very strong first half of 2006.
Traffic for the quarter and the community count were comparable year-over-year.
But in Texas we experienced a higher cancellation rate.
In the west, the markets continue to deal with a variety of issues, including increased inventory, affordability, and the difficulty of buyers having to sell an existing home.
The result is that sign-ups for the quarter were down 33%, which is consistent with the sales pace in the second quarter.
There was some noticeable differences in relative performance, however as Arizona experienced a small increase in net sign-ups relative to the same period last year.
When southern California encountered softer demand and a higher cancellation rate.
After some extended delays, we're getting our larger communities, Merrill Ranch and Festival Ranch up and running in Phoenix, which accounted for the pick up.
These are both big lifestyle communities, so they certainly have the capacity to capture incremental sales as they begin to hit their stride.
Just to wrap up here, we all appreciate the conditions are difficult in many of our markets and that our expectations are that these conditions will persist for at least the next couple of quarters, and could get worse before getting better.
We've adjusted our approach to land acquisition and construction practices which will help to strengthen our market positions and allow Pulte to take advantage of opportunities that will ultimately develop, as they do when softer markets begin to wring out the weaker competitors.
With that, let me turn the call back over to, Jim.
- Vice President of Investor and Corporate Communications
Thank you, Steve.
And I want to thank everyone for your time and attention on the call this morning.
As is appropriate, we are now prepared to answer your questions.
So that everyone gets a chance, participants will be limited to one question and one follow-up, after which they will have to get back in the queue.
At this time, let's open the call to questions.
Jackie?
Operator
[OPERATOR INSTRUCTIONS] And your first question will come from the line of Stephen Kim from Citigroup.
You may proceed, Stephen.
- Analyst
Thanks very much.
Thanks for all of the color.
I guess I had a question regarding your cancellation rate.
You said your cancellation rate was about 36%.
First of all, can you give us a sense for how that may have trended through the quarter and if that sort of trend varied in a significant way across some of your more important markets?
- Executive Vice President, COO
Stephen, this is Steve.
The trend quarter-to-quarter as an aggregate for the Company was about flat.
We saw about 36% in July and we saw about 36% in September and the same in August.
So it didn't vary much in aggregate.
Market-to-market it did go up and down a couple of times but I don't have those numbers right in front of me on a market-to-market basis.
But on an overall basis, it was pretty flat throughout the quarter.
- Analyst
Got it.
And as we go forward and try to forecast what this cancellation rate might look like, many folks have pointed out that probably the can rate as a percentage of growth orders probably isn't the best way to go about it, maybe cancelations as a percentage of backlog might be better.
In light of the fact that you guys have a smaller backlog that will lead to lower [inaudible] etcetera-- sorry lower cancellations.
My math tells me that even if your cancellation rate as a percentage of backlog stayed the same in 4Q, that your reported cancellation rate would be down about 800 basis points, which obviously would aid your reported net orders by about the same amount.
Anything there that you would, you could point me to that might sort of work, the wrong way on this kind of math?
For example are you seeing any reason why your backlog will have a greater propensity to cancel as you head into 4Q versus 3Q?
- Executive Vice President, CFO
Yes, Stephen, this is Roger, I think we continue to watch all the metrics like that.
As you said it's very difficult to lock on one number and feel comfortable that you've got a good read on it.
So I would say, that again, your logic isn't wrong, but it's very difficult for us to project any surety and certainty in that going forward.
- Executive Vice President, COO
Just to add to Roger's comment, we can't control what goes on in the marketplace with our competitors.
And a lot of the cancellation rate is being driven by, very, very aggressive pricing strategies across the board.
So buyers are moving in and out of different builders backlog all the time.
And so even though your logic would hold true probably in a normal environment, as your backlog shrinks that your cancellations would probably shrink as well, as a percentage of new sales.
As Roger said that's probably not as predictable in today's environment.
Operator
And your next question will come from the line of Susan Berliner from Bear Stearns.
You may proceed, Susan.
- Analyst
Good morning, could you talk a little bit about, I think you talked about it last quarter, free cash flow and what you're looking to do with that free cash flow.
And also provide us with the incentive amounts?
- Executive Vice President, CFO
Okay, from a free cash flow standpoint, I think projecting out the balance of the year, we'll probably be in a negative free cash flow position.
Again, started out the year with roughly about $1 billion in cash.
Right now looking at the guidance for the fourth quarter we'll probably be between 100 and $300 million let's say, in cash balance by the end of the year.
That will have given us the consumption of somewhere around 800 plus -- $800 million in negative cash flow.
So just again looking at that, we'll-- our view is that the amount we're drawing down in our revolvers today on the lines will be paid down.
So as we generate free cash flow in the fourth quarter, just looking out for the full year is what I just gave you, we will have free cash flow from closings in the fourth quarter to pay down our lines, and end up with roughly any where between 100 and $300 million in cash.
From an incentive standpoint, I think looking ahead where we are this quarter, and roughly against even last year's quarter, our incentives and discounting roughly, if you will, are probably in the 4 to 4.5% range.
I think if you look at our margins, from the 670 basis points we're down year-on-year.
Again part of that is due to the drop off of a couple of our communities that we talk about in the fourth quarter, from Sun City Lincoln Hills in Sacramento and Sun City Grand in Phoenix.
They contributed roughly around 230 basis points in decrease, a [loan] with the buying that we lost in those two communities that we don't have this year in this quarter.
So again you drop those out, roughly all of the other movement there, we're right around 400 to 450 basis points in margin, really driven from incentives.
- Analyst
Great.
Thanks very much.
Operator
And your next question will come from the line of from Carl Reichardt from Wachovia Securities.
You may proceed Carl.
- Analyst
Morning, guys.
How are you?
- Executive Vice President, CFO
Morning, Carl.
- Analyst
Steve, I think you said your community count in Northeast was flat and somewhere else here, I think the central if I recall.
In Southeast, Midwest, West what were the rough store count increases or decreases versus last year?
- Executive Vice President, COO
Let Vinny have that.
- Vice President, Controller
Carl, we did mention that we had about 720 active selling communities throughout our organization.
I'm still turning to some of the area information.
That 720 really compares, let's see to 662 last year and, Carl I just can seem to put my hands on the area information.
- Analyst
I could get that later.
The second question just has to do with the guidance on land valuation adjustments for next quarter.
I'm -- are you basically saying that you've got some communities that when you ran the test this quarter look like they're on the edge of potential write downs and so you're going to take another quarter to see if absorptions or margins meet test and then retest them?
I'm just not sure how you can project a land valuation number given the way the FASB rules work and, I may be missing something.
- Executive Vice President, CFO
Yes, Carl, this is Roger, and you're not missing anything.
It is really very sensitive to the time you look at it.
But our assumptions were that we're continuing in an eroding market.
And so, we looked at that specific thing that you're discussing here, when do you know it?
And you actually know it after you passed it.
You don't know it looking forward.
So our view was that we were going to continue in an eroding market.
Which we said, this is very uncertain.
And so these are potentials.
But what we felt is that we needed to really put some parameters around it and that was it and that's how we came up with, roughly the $150 million for the fourth quarter.
It was looking at a deteriorating market from where we are today.
And the potential is either there or not there, but we won't know that til we actually get toward the end of the quarter.
Operator
Thank you, gentlemen.
And your next question will come from the line of Michael Rehaut from JP Morgan.
You may proceed Michael.
Thank you, good morning, guys.
- Executive Vice President, CFO
Morning, Mike.
- Executive Vice President, COO
Morning, Mike.
- Analyst
Just another question on the write-off, the potential write-off charges.
Roger, you had mentioned that obviously it's a lot of things in motion and potentially a part of that is if things get worse from here.
But I guess just wanted to try and understand two things.
One you had kind of broken out, I believe you said that roughly 100 million of the 150 was due to options and preac costs, is that correct?
- Executive Vice President, CFO
Yes, that's correct.
I mentioned joint ventures in that group as well.
- Analyst
Okay and then as part of that, also, I guess.
Do you have an idea how much potential of those charges or if things just roughly continue at today's level and it's more of just --
- Executive Vice President, CFO
Yes, Mike.
Just to clarify if it was at the same level, then they'd basically be nothing from the standpoint of impairments.
But the preac again potentially as we look at really our inventory levels.
And we have to look out at potentially what the demand side is.
And so the demand side is going to dictate whether we make investment or don't, or stay with projects or don't going forward.
So I think there's separate issues all together.
The preac is really, what we're looking at from an inventory standpoint of taking down over the future.
And as we continue to look at demand, the market conditions, we may continue to walk away from the options going forward in order to drop our inventory going forward, as well.
So it's the dynamics of watching where the market is and managing the balance sheet, and cash liquidity at the same time.
- Analyst
Okay.
So then what you're saying is that there isn't really a sort of number that you can point to in terms of just that.
If things stay the same that, because of draw downs or approaching certain hurdles on those options that there's a certain number of that 100 million or so that, even if things stay the same you probably have to walk away from?
- Executive Vice President, CFO
That could be, we're in negotiations, and the trigger point has happened yet, we know the trigger point may be out there, lets say again in November, that an answer is due one way or the other on an option.
And if that date is November 30th, and we have to exercise the option that day or not exercise it, we know that that date's coming.
And we may not have made a determination because we're still in negotiations, so it's not certain at this point.
And so that's where the range comes in here is looking at timing, and it is very specific on timing, and what we do going forward, as well.
Operator
Thank you, gentlemen.
And your next question will come from the line of Greg Gieber from A.G. Edwards.
You may proceed.
- Analyst
Morning, gentlemen.
We also appreciate the detail you've given us here on the thoughts on what charges you might be taking in the future.
My question really relates to the break down your business between the retirement business, Del Webb, and your more traditional Homebuilding.
When you look at your orders, gross orders, or more importantly your cancellation rate.
Are you seeing differences there between the two?
Could you perhaps give some color on how Del Webb is performing relative to the overall?
- Executive Vice President, COO
Yes, Greg, we've got some of those numbers, but not a whole lot of detail.
We don't break out the sign-ups, the net sign-ups by brand type.
It's something that we've looked in to doing, but we just haven't done it yet.
But on a cancellation basis, we can tell which Del Webb communities are actually experiencing cancellations, and which Pulte communities are.
On an overall basis, we talked about a 36% cancellation rate as an average.
The Del Webb cancellation was 29%.
The Pulte cancellation rate was about 39%.
- Analyst
Could you tell us what a year ago the Del Webb would be or what you're sort of --well for both, you just tell us sort of your normal cancellation rate is for those two?
- Executive Vice President, COO
Yes, VInny's looking that up right now.
- Vice President, Controller
As Steve said we don't really look at this, but inquiring minds have a need to know, and we certainly addressed it as well.
We did look back to the third quarter of '05.
And at that time, cancellation rates for the entire Company was just about 17%.
The Del Webb cancellation rate in the third quarter of '05 was about 12%.
Operator
Thank you, gentlemen.
And your next question will come from the line of Steve Fockens from Lehman Brothers.
You may proceed, Steve.
- Analyst
Hi, guys.
Two quick questions.
First would be presuming that conditions don't change a whole lot from today, where would you see your roughly 11 billion in inventory being 12 months from now?
- Executive Vice President, CFO
Steve, this is Roger, we're not giving any guidance on 2007 at this point.
And the reason is because we need to understand a little bit more about the demand side.
Certainly that's going to drive our thinking on what we go forward with in inventories.
So we don't have a view of the end of 2007 at this point in time.
- Analyst
All right.
Well, secondly, have you guys given any thought to adjusting compensation structures for your guys in the field so that it's more asset focussed and less growth focussed?
- President, CEO
Steve, this is Richard, in fact we have and we are moving to more of a return based model.
We've always had our model based on a combination of growth and return.
We're emphasizing return much more going forward for '07.
Operator
Thank you, gentlemen.
And your next question will come from the line of from Ivy Zelman from Credit Swiss.
You may proceed.
- Analyst
Good morning, guys.
- Executive Vice President, COO
Good morning, Ivy.
- Analyst
I appreciate the detail.
With respect to your pulling-- putting the brake on the production model, a few questions on that front.
Can you talk about the staffing and how much you've cut so far, we just saw some news in Jacksonville that you've cut a significant amount of staff.
I'm just curious in aggregate, what it looks like since the downturn began?
- Executive Vice President, COO
Vinny's got some data.
- Vice President, Controller
Sure Ivy I have it, I'm just turning right to it.
- Executive Vice President, COO
Just one second on that.
- Analyst
And while you're looking that up, just to follow on the same idea.
With respect to the framing company you acquired.
Obviously in times when labor's tight, it was probably a great move.
What's that doing to operational fixed cost component looking at a downturn with absorptions down so much?
Is it a drain?
And in hindsight is it something that you might not have needed to acquire?
- Executive Vice President, COO
No, Ivy, I'll address that one.
Obviously, yes the labor component is quite variable and we've experienced similar things there that we haven't needed the production capacity that we've laid off a lot of folks at Pulte building systems out west.
But the fixed investment is mostly in trucks and in [grain alls] and some equipment.
And although we've made some investments there in anticipation of a much higher volume amount that we thought we were going to experience, it really hasn't been as bad as you might think.
And we look at the investment in Pulte building systems as still, it's been a very positive addition to our earnings in both Arizona and Nevada.
I think Roger's got the specifics on it.
- Executive Vice President, CFO
Yes, Ivy in those two markets alone, we were driving in excess of 300 basis points in margin because of the ability to actually manage that process ourselves.
And even in a downturn, if you look at the overall cost structure as, Steve mentioned, it's more labor-based than fixed asset-based if you will.
So it's more about activity with people.
Vinny?
- Vice President, Controller
Yes,Ivy to follow up on your question on the headcount reduction.
And this is really addressing our salary work force.
During the third quarter, we separated about 800, just under 800 employees.
And year-to-date nine months it's accumulative 1,400 employees.
And again, that's over salaried work force.
Operator
Thank you, gentlemen.
And your next question will come from the line of Rob Stevenson from Morgan Stanley.
You may proceed, sir.
- Analyst
Good morning, guys.
Can you give us an idea of what the expected IRR or whatever return measure you guys look at was on on the options you walked away from in the third quarter versus the ones that you decided to exercise?
- Executive Vice President, CFO
Yes, again, it's not just about the IRR when we walk away from it.
It's also about walking away from projects that may be pretty good.
But again looking at the level of demand, the level of investment and the cash flow, certainly if the demand's not there, you put the money in and you've got a liquidity problem at the end of the day as you manage all of that.
So we've walked away have very good projects, projects we think will be successful.
But we're managing the short-term for the long-term at the same time.
We do underwrite our projects at roughly about 21% in the IRR basis.
So again some of those were in excess of those, as well.
But given certain markets, given certain demand conditions and looking out further we decided to from a short-term basis walk away from those given what we thought demand might be.
- Analyst
And what percentage of your land options have exercise dates in the next six months or so?
- Executive Vice President, CFO
Again, we don't, we don't track that kind of information on a project-by-project.
Because again we're dealing with hundreds and hundreds of projects.
But again I'd tell you the stuff we walked away from in the quarter roughly about 70% of those projects were underwritten or approved from our freezability process in 2006 and 2005.
So I would tell you that, we're walking away from more of the current stuff than the older stuff.
And again that was just for the third quarter.
Operator
Thank you, gentlemen.
And your next question will come from the line of Kenneth Zener from Merrill Lynch.
You may proceed, Kenneth.
- Analyst
Good morning.
- Executive Vice President, CFO
Hi Ken.
- Analyst
I just want to look at the impairments from a bit higher level.
We spend a lot of time of looking at inventory impairments, that occurred during the last major cycle, call it 90 to 95, and found impairments of roughly 10% of inventory in total were not abnormal.
Assuming you take the full 155 in the fourth quarter so 300 in '06, this would have been about 3% of your beginning inventory.
Is there any reason that you wouldn't expect to asset deflation to continue whether it's the land options or the actual raw land, the land that you guys own?
So 3% is what it is in '06 if you hit the full 155.
Why couldn't it keep creeping up to let's say 10% what we saw in the past?
- Executive Vice President, CFO
Yes, it's excellent question,Ken.
This is Roger.
I think again, there are dynamic differences.
Some of them are in the process itself.
It's not only about the land quite frankly.
It's also about the process of the infrastructure, the development, the cost of that.
We haven't seen inflation as we've seen from the fourth quarter of last year after the hurricanes.
I mean we talked about that in the fourth quarter.
We saw some very significant spikes in cement, big spikes in asphalt, oil-based products, that type of thing.
So that has also put more pressure on the land cost side, as well as you look at some of that stuff.
So as you look at your margins and look at basis for impairments and adjustments, you're looking at how you go forward with that.
So I would tell you I think there's a combination of gotten better and more efficient in the construction and the operation, as well.
That just doesn't lean it back on the sale, excuse me, on the sales price side if you will relative to the land side.
So I think, more efficiency even in the construction side of the vertical also has helped buffer that a little bit.
Again, not to say that prices don't continue to fall going forward that there isn't more of this.
But relative to that period back in the mid '90s and early '90s, I would tell you that's a big piece of what I see and my view.
- Analyst
I appreciate that.
I guess related to the investment there, you talked about significant investments in like the 14 new Del Webb communities,could you -- realizing all the communities are different, what's the kind of average up front investment that you guys put in there in terms of the land and the other improvement costs?
- President, CEO
Ken, this is Richard, every project is so different.
If you're putting in development dollars into a Festival Ranch, 6, 7, 8,000 unit community in Phoenix, it's substantial.
But if you're putting them into a 1,200 lot Del Webb project in north Georgia, it's substantially lower.
I wish we could give you an exact number.
We do our best at tying the investment dollars with when they're needed.
That's one of the things Pulte has done, I think a much better job of than was previously done in the old Del Webb projects.
We time that cash flow when we need it.
But there's really no way to give you a specific on that.
Operator
Thank you, gentlemen.
And your next question will come from the line of Margaret Whelan from UBS.
You may proceed.
- Analyst
Morning, guys.
- President, CEO
Morning, Margaret.
- Analyst
Could we just spend a little bit of time talking about the [inaudible] count.
I think you said 294,000 at the end of the period, is that right?
- Executive Vice President, COO
Sure, Margaret.
It is 293,600.
And of which our own amount is 182,700, which is 62% of the total.
- Analyst
62 zone and so that's going to free things up.
- Executive Vice President, COO
Yes.
- Analyst
And what I'm trying to get a sense for is by just do back of the envelope, I guess you've brought down the [inaudible] count from the beginning of the year by about 70,000 versus 30,000 deliveries. [inaudible] maybe 40,000 options for $150 million year-to-date.
So for the fourth quarter, would we expect you to be working from the same number roughly?
- Executive Vice President, COO
Well, again Margaret, again that's got to be determined as we look forward here.
So right at this point we don't have a view of that.
Operator
Thank you, gentlemen.
And your next question will come from the line of Dan Oppenheim from Banc of America Securities.
You may proceed Dan.
- Analyst
Thanks very much.
Wondering if you could give a little more color on the Del Webb operations.
Some of your peers are now talking about profits by region.
Wonder if you could talk about margins for Del Webb versus the traditional business, and also given that you're talking about cancellation rates for Del Webb, I imagine that you're calculating that based on order trends.
Can you try to give us a little more color on that?
- Executive Vice President, CFO
Yes Dan, this is Roger.
We have not gone to that level in disclosure.
So we're not going to give that information at this point.
- Analyst
Okay.
And then second question.
Wondering about the, just what your thoughts are in terms of the cycle here.
Richard, when you started the call, you talked about how there's some signs of stabilization, but then later in the call there's some new comments suggesting that things could still be getting worse here.
When do you think we will see the bottom in terms of margins as you're looking at the business right now?
- President, CEO
Dan, I wish I could tell you.
Frankly our strategy is to run the business as best we can, given the current environment we see.
And candidly prepare for it to get a little worse if we think it's there.
But I don't know.
We don't have a crystal ball on that.
I do think some of the signs you're going to see are stabilizing can rates and then hopefully improving order rates, inventory levels coming down.
I don't know that there's enough data out there to suggest that's here yet.
So I guess the best answer I could give you is I don't think it's here today.
Is it three months away or a year away?
I don't know.
That's the best answer I can tell you.
Operator
Thank you, gentlemen.
And your next question will come from the line of Stephen East from SIG, you may proceed.
- Analyst
Good morning, guys.
I guess a quick question on the land charges, could you just give us a little color as to where those were occuring?
- Executive Vice President, CFO
Yes, pretty much, I think if you take a look at where we were, seems to be more in the northeast, the central area, which is the Rocky Mountain area, Minnesota, Colorado, down into Texas.
And the western part of the U.S.
We really didn't have anything in Arizona or Nevada.
We did have in California, which would be northern California, southern California.
- Analyst
Okay and geographically what you're sort of expecting for the fourth quarter, can we assume it's a similar type break out?
- Executive Vice President, CFO
Again it's very hard to predict.
But if you can see where the stretch points are and the pricing in the demand side, you would say that these are the areas still that have it.
A little bit more in the Midwest so we continue to watch the auto industry and the impact in the Midwest states.
But again, I would say that those are the more likely suspects going forward.
Operator
Thank you, gentlemen.
And your next question will come from the line of Rick Murray from Raymond James.
You may proceed.
- Analyst
Hi good morning guys.
- Executive Vice President, CFO
Hi Rick.
- Analyst
Just a question, Steve, with regard to your comments about existing capital commitments in terms of development spend that you have yet to do on certain projects, that are sort of pass the point of no return if you will.
Can you try and quantify that for us over the next 12 or 18 months?
- Executive Vice President, COO
Yes, Rick, that's a hard one to do.
And so quite frankly without getting the cash flow project-by-project and getting it out and comparing it, I couldn't tell you.
But I will tell you this that my comments were more around the 14 that we opened this year.
And the significant investment that we had to make in places like Merrill Ranch, in places like Festival.
But we had to-- we spent millions of dollars in infrastructure costs to just get the first sign up in the first closing.
And was really speaking about a lot of that in some of these big markets being behind us as we replaced the communities like Sun City Grand, and Anthem in Arizona, that we were selling out of last year that were producing so many sales and closings for us.
- President, CEO
Rick, this is Richard, one other item for communities that are ongoing beyond the ones Steve talked about, we're only adding infrastructure dollars to the extent we need lots.
And in this environment where we may have needed a 100 lots in a given period of time, maybe now it's only 60 or 70, and that's what we're putting on the ground.
So we're certainly trying to be as efficient as we can.
- Analyst
I understand that and I appreciate the color there.
I guess, perhaps maybe I'll ask it another way.
How much land spend did you guys expend in the last 12 or 18 months?
And just give us a sense of in terms of communities perhaps that where you've just taken land down and have yet to really expend a lot of the significant infrastructure dollars as of yet.
- Executive Vice President, CFO
Yes, Rick, this is Roger, just I think to the point that we certainly are going to balance going forward the cash generation and the cash investment.
Again we've talked about our leverage points being no more than 40% debt-to-Cap.
So I think you can feel pretty comfortable that we're not going to go outside those parameters.
Something internally we continue to focus on.
I'll just give you the first nine months of what we've done from a land standpoint roughly.
We've invested in development dollars, roughly about $2.4 billion through the nine months of this year, we acquired roughly $1.4 billion worth of raw ground and we've basically [exspent] $2.5 billion of land charged off to cost of sales.
So roughly, you can see the land acquisition about 1.4 and the development dollar investment about 2.4.
And you know that's through the first nine months.
And again, as we go forward, I think we'll see the land acquisition number be very small and again the development dollars as we move forward, as well as Steve said, are going to be project specific from that standpoint.
But all within the parameters of really balancing ourselves from a balance sheet standpoint to stay very flexible, but very solid.
Operator
Thank you, gentlemen.
And your next question will come from the line of Jim Wilson from JMP Securities.
You may proceed, Jim.
- Analyst
Thanks, good morning.
Was wondering, your results and your orders, obviously in Phoenix, that was pretty impressive given the environment.
And I was wondering if you could just give us a little more color on how things are going for you, what you're doing differently in Phoenix and actually I'd also love to know about Las Vegas, as well.
How things are going there and what you're seeing.
- President, CEO
Yes, as it pertains to Phoenix, you've got to look at the year-over-year comparisons.
Certainly our sign-ups were up in our Arizona area, which also includes Tucson by the way.
And I mean, but at the same time, we were selling out of some very large communities last year and we're getting into some new communities that we've been talking about for a long time this year.
And quite frankly the teams are very very motivated there and we're selling about 700 gross sign ups a month for about the last five or six months.
So it's indicative of a good market with good underlying fundamentals.Cancelation rates are still hurting us, but our year-over-year comparisons are helping us out because we were selling out of a lot of communities a year ago.
And we think that giving the gross order trends in Phoenix that we're still going to stay, very, very competitive there.
As it pertains to Las Vegas, Las Vegas got a little softer in the third quarter than what we saw in the first half of the year.
But in the first half of the year, by all indications, we were out selling the market pretty handily relative to our competitors.
So a bit of it was a catchup for us probably from a stand point of our own situation with our competitors getting more real about their pricing.
But overall, market in Vegas for us has been steady if not outstanding.
- Analyst
Okay, and then I guess my follow-up would be on land positioning.
And obviously overall lot positions are coming down, but your owned is up.
Is there an incremental shift of money that has occurred this year maybe into, as you've noted these Del Webb openings, into those Del Webb type communities though that you might not option like some of your conventional product?
Is that part of the shift?
- Executive Vice President, CFO
Yes, Jim there's always that movement.
And again every project is different, as Richard mentioned.
And there's timing and phases that we'll put in the infrastructure on some of these things.
I think if you look overall, definitely the investment there has been increasing relative to the cash that came off from the ones that we had closed because they were in, basically a harvest mode versus an investment mode and some of those.
So you're definitely seeing that type of a mix in the inventory.
- Vice President, Controller
Yes, I'd also add that as a percent of total, the number of lots owned, it's really the math that's driving the increase to the 60% owned, 62% of lots that are owned of the total.
Because most of the write-offs, as Roger had mentioned in his opening remarks, on a cumulative basis, 58,000 lots have really been reduced from what had been optioned.
And if I could for just a minute address and perhaps clarify.
We had mentioned that cumulative 9 months, we had dropped land deals of approximately 58,000 lots or $2.6 billion of value.
And we want to just make sure that it's clear that about 70% of those drop yields were really from contracts that were underwritten in 2004 and 2005.
Operator
Thank you, gentlemen, and your next question will come from the line of Scott O'Shea from Deutsche Banc.
You may proceed
- Analyst
Yes, good morning.
Could I get the home builder interest incurred number for the third quarter?
- Vice President, Controller
Sure.
Let me just flip to that.
Okay the interest incurred in the third quarter was 72 million -- just under $73 million.
- Analyst
That's great, thank you.
Also on the 1400 reduction in salaried staff, where did you come into the year?
What was the base number coming into the year?
- Vice President, Controller
Of our employee base coming into the year?
- Analyst
Yes what was the salary staff count at the beginning then?
- Executive Vice President, COO
Scott, we may need to get back to you on that exact number.
- Analyst
Okay.
- Executive Vice President, COO
If we could.
Operator
Thank you, gentlemen.
And your next question will come from the line of [Joe Lockard] from FBN.
You may proceed.
- Analyst
Yes, guys, I just wanted to see if I could get a break down geographically of the, what it looks like 6.8 billion in land under development and land held for future development?
- Vice President, Controller
See if I can help you with that Joe.
- Analyst
Sure thanks.
- President, CEO
It barely require hitting the numbers together that-- Joe, I'll give you a call back with the information.
- Analyst
All right.
And just a second question.
Out of the 7,700 specs, how many of those were finished?
- President, CEO
Sure, we're looking that up.
About 1,600, Joe.
Operator
Thank you, gentlemen.
And your next question will come from the line of [Alex Barren] from JMP Securities.
- Analyst
Thanks.
I was hoping you could give us some color by region as to where you've seen the biggest incentives or price decreases.
- President, CEO
On an overall basis, it's varying.
I would tell you that we got pretty aggressive in our California markets this quarter.
And that'll probably continue.
Mostly around inventory that's going to be [finaling] in the next 60 to 90 days.
But, again because we're pricing the market our incentives end up being driven a lot by what's going on in that marketplace to remain competitive and to sell homes.
But predominantly northern California we were probably more-- most aggressive and then southern California be right there with them.
- Analyst
Can you quantify as a percent of the price of how it would have compared against a year ago?
- President, CEO
It's tough to say because we've lowered prices at the same time that we've done some incentives.
So I think Roger's overall look at the impact being about 4.5 to 4% is pretty much right on.
- Analyst
Okay.
Operator
And gentlemen, due to the time restraints, your last question will come from the line of Carl Reichardt from Wachovia Securities.
You may proceed Carl.
- Analyst
Thanks.
Just, Steve do you know what percentage of your deliveries this quarter were spec,originally spec or canned units that return to spec?
- Executive Vice President, COO
Boy, that's a tough one, Carl.
No but anecdotally I've got some information.
Like for instance, in our Arizona operations, they were seeing that within 90 days of deliveries, so if you kind of go a quarter there, about 40% of the specs generation was coming from sales that were coming over the wall.
So there were cancellations that were going back into spec.
How many we actually delivered is one number, how many we actually moved again from a spec back into a sold, but couldn't get it closed in time, that's another number.
But it's a fairly significant.
People are canceling within 30 days of closing, so it's causing some issues right now.
- President, CEO
And Carl, it's clearly been increasing given this environment.
- Analyst
Okay, thanks.
- Vice President of Investor and Corporate Communications
All right, well, want to thank everybody for your time.
If you do have any follow-up questions, certainly feel free to give me a call.
Have a great day.
Operator
Thank you, ladies and gentlemen for your participation in today's presentation.