普爾特房屋 (PHM) 2008 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first quarter 2008 Pulte Homes Inc.

earnings conference call.

My name is Katie, and I'll be your coordinator for today.

At this time all participates will be in a listen-only mode.

We will be facilitating a question-and-answer session towards the end of this conference.

(OPERATOR INSTRUCTIONS)

I would like to now turn the call over to your host for today, Mr.

Calvin Boyd.

Sir, you may proceed.

Thank you, Katie.

Good morning, and thank you for joining us to discuss Pulte Homes financial results for the three months ended March 31st, 2008.

I am Calvin Boyd, Vice President of Investor and Corporate Communications.

You have all had a chance to review the press release we issued last night detailing Pulte's first quarter 2008 operating and financial performance.

On the call to discuss these 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 available at www.Pulte.com will accompany this discussion.

The presentation will be archived on the site for the next 30 days for those who want to review it at a later time.

As with prior conference 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 and Reform Act of 1995.

Pulte Homes believes such statements are based on reasonable assumptions, but that are no assurances 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 does 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 shall refer to Pulte's annual report and Form 10(K) for the year ending on December 31st, 2007, for a detailed list of the risks 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 questions.

I will now turn over the call to Richard Dugas for his opening comments.

Richard?

Thank you, Calvin and, good morning, everyone.

As you saw in our earnings release last night, the first quarter may best be described for Pulte as making the best of a very tough situation.

Clearly, the home building environment has continued to erode during the first three months of 2008 as extremely high levels of inventory, particularly existing home inventory, combined with very weak demand for new housing have left the industry in difficult spot.

High supply and weak demand do not make for a very pretty picture in any industry, and home building is no exception.

Despite the significant head winds the entire is encountering, Pulte made progress in many key areas the first quarter, while we are disappointed at the sizable large charges reported, they are a product of the overall environment we are facing.

These tell a part of the story for the first quarter.

Our operational performance was very respectable in the first quarter, and we are proud of our achievements in many respects.

At some point our industry and those that follow will move from these large land impairments and other charges and begin to focus again on earnings and other true operational metrics, such as sales, closings, overhead leverage, inventory turns and the like.

Pulte intends to be near the head of the class when that occurs.

Let me spend a minute detailing our accomplishments in the first quarter.

We ended the first quarter 2008 with approximately $1.1 billion of cash on hand and no debt outstanding under our revolving credit facility.

This level of cash was higher than our internal projections largely due to relatively strong sales and closings, bringing cash in plus the receipt of a $212 million tax refund in the first quarter.

We ended the quarter with a small loss from operations before considerations on land impairments.

This performance exceeded the upper-end of the guidance range we provided during our fourth quarter earnings call.

We saw lower overhead costs as our SG&A expenses were substantially lower than last year's first quarter.

We continue to size our business for reduced demand levels and the as a result is a leaner overall structure.

It is vitally important that any company experiencing a prolonged downturn, such as the one our industry faces today, have a clearly articulated plan with which to align the organizations efforts to accomplish its goals.

The items I just mentioned demonstrate our success against this plan and will help Pulte Homes emerge in this downturn a more efficient industry leader.

Across the country, the overall sales environment continues to be difficult.

There is substantial evidence that downward pressure on sales prices continues for both new and, more recently, for existing homes.

Builders are intensely competing for the attention of a diminishing pool of buyers who are ready to make a home purchase decision.

Although down year-over-year, we are pleased with the sales generated during the quarter, a result of a very clear organizational focus and excellent execution by our field teams.

Unless a builder plans to be independent on one-time events, like bulk land sales or other unique transaction, the best way to generate cash from operations, and that starts with selling homes.

Clearly Pulte is demonstrating strength in this area as our backlog remains at the top of the industry.

In an operating environment with relatively high cancellations and low buyer demand, managing house and land inventory remains an integral part of our operating plan.

We are once again able to reduce the overall level of spec inventory from the 2007 year-end level, and also drive down the number of lots under our control.

We consider these substantial accomplishments in an ongoing weak environment.

Continuing to drive down inventories levels from selling and then closing our homes remains one of our primary goals.

Let me also point out, Pulte has reaffirmed its goal to end 2008 with over $2 billion of cash on hand, less than a debt repurchased through the year.

While we can't control everything, we continue to make substantial progress to ensure that our cash inflow from closings exceeds our outflow of new acquisition and development spending.

We are off to a good start on this goal Q1 in the rear-view mirror.

As we look beyond the first quarter of 2008, many disturbing signs remain in the path of builders.

Most estimates concerning the duration of this downturn and any recovery continue to be further in the future, and accurate predictions are hard to come by.

We are, however, encouraged by the recent discussions in Congress to address housing with an eye towards helping the overall U.S.

economy.

Many of the initiatives being discussed would certainly aid housing in reaching the level of stabilization so desperately needed.

We will continue to be involved as a company in these ongoing discussions.

Regardless of the length of this housing downturn, Pulte will be l be unwavering in its pursuit of its short-term goals to properly manage inventory, align SG&A expenses to match the current demand environment, and generate cash.

We believe that our operating performance exemplifies our focus on the short-term elements of this plan, and these will continue to be our primary focus areas for the coming quarter.

Our longer-term focus still centers on demographic trends, household formation and population growth, which we believe will provide a foundation for stronger demands for new homes in the future.

With the proper balance of short-term goal execution and a necessary long-term view of the industry, Pulte will be in the best position to take advantage of opportunities when signs of stabilization become visible.

I would like to end my prepared comments with a huge thank you to our greatest asset our people.

You continue your excellent performance during one of the deepest and one of the most prolonged downturns in housing history.

Thank you for your commitment, which will serve as the foundation for Pulte's success going forward.

Thank you, and now let me turn the call over to Roger Cregg.

Roger?

Thank you, Richard, and good morning, everyone.

The first quarter home builder net new owner rate decreased approximately 36% from first quarter last year, on approximately 10% less communities versus the same quarter last year.

Revenues from home settlements for the home building operation decreased approximately 22% from the prior-year quarter to approximately $1.4 billion.

Lower revenue reflected lower unit closings that were below prior year by approximately 13%.

The average sales price decreased approximately 11% versus the prior-year quarter to an average of $295,000 per home.

In the first quarter, land sales generated approximately $2 million in total revenues, which is a decrease versus the previous year's quarter of approximately $39 million.

Home building gross profits from home settlements, including home-building interest expense for the quarter decreased versus the prior-year quarter by approximately 330% to a loss of approximately $449 million.

First quarter home building gross margins from home settlements as a percentage of revenues was a -32.1%, compared with 10.9% in the first quarter of 2007.

The decreased margin conversion versus the prior-year quarter is attributed to lower closing volume, land and community valuation adjustments, and in addition to increased selling incentives.

Adjusting the current quarter to land and community valuations were approximately $599 million, and a favorable house warranty reserves adjustment of $5 million, the gross margins from home settlements as a percentage of revenues was at a run-rate of approximately 10.4% for the quarter.

The current quarter benefited from the impact of prior quarter, land and community evaluation adjustments by approximately 486 basis points or approximately $68 million.

Additionally, home building interest expense increased during the quarter to approximately $58 million versus approximately $48 million in the prior year.

Included in the interest expense of $58 million is an additional $33 million of expense related to land and community evaluation adjustments taken in the current quarter.

Also included in gross margin for the quarter was a charge related to land and community valuation adjustments in the amount of $566 million.

For the first quarter, we tested approximately 175 communities for potential impairment valuation adjustments.

We recorded valuation adjustments on approximately 150 communities for the first quarter, of which approximately 80 communities, or 53%, have been previously impaired.

Of the $566 million of land and community valuation adjustments, approximately 21%, or $119 million were related to Del Webb communities.

We have approximately 26 land parcels moth-balled at the end of the first quarter and took valuation adjustments in the amount of approximately $135 million on a total of eight of these projects.

The total gross loss from land sales posted for the quarter was approximately $63 million.

The losses mainly attributed to the fair market value adjustment in the current court for land being held for disposition in the amount of approximately $64 million, which is included in the land cost of sales.

The gross profit contribution from specific sales transactions, were approximately $1 million for the current quarter.

Land sale transaction during the quarter included single-family custom lot sales along with residential and commercial land parcels.

Recapping the component of the $664 million in impairments and land-related charges for the first quarter, we have included a slide on the Web cast breaking out the charges by the categories and by reporting segment.

To further expand, 68% or $449 million of the total charges the quarter were concentrated in the Florida and Southwest reporting segments.

The market conditions continue to be challenged through an over-supply in new and existing home inventory, low buyer demand and a declining market price environment.

In our Southwest segment, approximately 47% of the charges were related to communities not yet open for sale.

These charges resulted from primarily the deteriorating market pricing and the start-up timing, life in each phase.

SG&A expenses as a percent of home sales for the quarter was approximately 14.5% or $202 million, a decrease of approximately $80 million versus the prior year quarter.

Additionally, the current also included approximately $8 million in severance charges related to further overhead reductions made during the quarter.

In the other income and expense category for the quarter, the income of approximately $9 million, includes approximately $4 million in customer -deposit forfeitures and approximately $4 million in joint venture equity earnings.

The home building pre-tax loss for the first quarter of approximately $705 million resulted in a pre-tax margin of approximately -50% on total home building revenue.

Excluding the charges related to the valuation adjustments and land inventory and investments, land held or sale, severance and related charges, home building pre-tax margins converted at approximately a -2.3%, or pre-tax loss from operations of approximately $33 million for the current quarter.

The first quarter home building operations backlog was 8,559 homes valued at approximately $2.6 billion.

The first quarter pre-tax income for Pulte's financial services operations was approximately $15 million, or an increase compared with the prior-year quarter of approximately $2 million.

The increase is mainly attributed to the adoption of new two accounting pronouncements that require that the fair value of rate-lock derivatives include the value of their servicing rights, and that loans held for sale be carried at fair value versus lower cost of market.

These lead to the recognition of approximately $8 million of revenue in the first quarter, offset from lower revenues from decreased volumes of approximately $6 million.

We continue to experience a favorable product mix-shift in to the first quarter as agency originations were approximately 76% of origination dollars funded from our warehouse line versus 46% for the same period last year.

Non-agency originations fell from 29% of originations dollars funded last year, to approximately 4% this quarter.

Additionally within the agency originations, FHA loans continued to increase as they were approximately 12% of the loans funded from the warehouse line in the first quarter, versus approximately 3% in the same period last year.

The level of adjustable rate mortgage products originated during the first quarter of 2008, decreased from approximately 15% of origination dollars funded from the warehouse lines in the first quarter of the previous year to approximately 4% this quarter.

Pulte mortgage capture rate for the current quarter was approximately 90%.

Mortgage originations dollars decreased approximately $340 million or 30% when compared to the same period last year.

The decrease is related to the volume decrease in the home building closing activity for the quarter.

Our average FICO scores was 741 versus a sore of 744 for the same period last year.

In the other non-operating category, pre-tax loss for the quarter of approximately $3 million, includes mainly -- excuse me -- corporate expenses of approximately $9 million offset by $6 million in net interest income related to our cash balance in the quarter.

In income taxes for the first quarter, in accordance to FAS-109, accounting for income taxes, and due to the uncertainty of a realization of a $258 million deferred tax benefit associated with the pre-tax loss, we recorded a charge against the deferred tax benefit of approximately $258 million.

The net loss for the first quarter was approximately $696 million, or a loss of $2.75 per share as compared to a net loss of approximately $86 million or $0.34 per share for the same period last year.

The number of shares used in EPS calculation was approximately 253.2 million shares for the quarter.

Looking at the balance sheet for the first quarter, we ended with a cash balance of approximately $1.1 billion, increasing approximately $10 million from the fourth quarter.

House and land inventory ended the quarter at approximately $6.2 billion.

Excluding the inventory adjustments for the first quarter, total inventory decreased approximately $249 million from the fourth quarter.

House inventory, excluding land, for the quarter increased approximately $8 million, related to the seasonal increase in home inventory build-up for the quarter.

Land inventory during the first quarter, excluding adjustments, decreased approximately $257 million as land relief offset rolling lot option take-downs and land development spending, and we moved approximately $137 million before valuation adjustments into land-held-for-sale category.

In the major components of cash flow for the quarter, we decreased total inventory, contributing approximately $111 million.

In addition, we also received a federal tax refund during the first quarter, contributing approximately $212 million, offset by decrease in payables and accrued liabilities of approximately $281 million for the quarter.

After maintaining approximately $1 billion in net cash to end the first quarter, we had no outstanding balance drawn on the revolving credit facility at the end of the quarter.

The company's gross debt-to-total capitalization ratio was approximately 49% and on a net basis 39.9% for the first quarter.

Interest incurred amounted to approximately $58 million compared to $61 million for the same period last year.

Pulte Homes shareholder equity for the first quarter was approximately $3.6 billion.

We purchased no shares during the first quarter, and the company has approximately $102 million remaining on our current authorization.

On our unsecured revolving credit facility financial convenants for the first quarter, the required debt-to-total capitalization ratio was not to exceed 55%, and, at March 31st, the ratio as defined in the credit facility was 46.6%.

And the tangible net worth cushion as defined in the credit facility was approximately $380 million.

Now, looking forward to the second quarter of 2008, under the SEC Regulation FD guidelines, we provide the following guidance on our current expectations and projections.

Second quarter earnings per share are estimated to be a loss in the range of approximately $0.10 to $0.20 per share.

This range does not include a tax benefit or the potential for additional land valuation adjustments, option deposit or other related charges.

Although we may incur additional write-offs it is uncertain at this time as to the estimate of the amounts.

These earnings-per-share number is based on approximately 252 million shares.

The following guidance is directional and targeting towards the mid-point of the range.

Unit settlements in the second quarter of 2008 are projected to be in the range of approximately 5,400 to 5,500 deliveries.

Average selling prices for closings in the second quarter are estimated to be approximately $289,000 per home.

Gross margin performance from home settlements as a percent of sales for the second quarter is estimated to be approximate range of 10% to 10.1%.

The projected gross margins for the quarter primarily reflect community pricing strategies and generating sales momentum and pricing incentives experienced over the period in response to local market conditions.

In addition, this gross margin range includes an estimated 175 basis point improvement from the recovery of additional inventory valuation adjustments taken in the first quarter of 2008.

We are currently projecting no land sale gains for the second quarter.

As a percentage of sales, SG&A is expected to be in the range of 12% to 13% for the quarter.

This the home-building other income and expense category for the first -- for the second quarter, we are projecting expense of approximately $4 to $5 million.

Pre-tax income in our financial services operations is expected to be approximately $3 to $4 million for the quarter.

Total other non-operating expenses are projected to be $1 to $2 million for the second quarter with other, non-operating expenses partially offset by increased net interest income.

For the second quarter, tax rate, we continue to take a conservative approach in our guidance and are projecting no tax benefit due to the complexities associated with FAS-109.

Given the challenging market environment we are offer nothing full-year outlook for 2008 at this time.

We will continue to assess conditions through the next quarter and provide any update accordingly on our second quarter conference call.

With our continued focus on cash management and house and land inventory, we are targeting ending the year of 2008 with an additional increase in our cash position of approximately $900 million to $1.1 billion or an additional or an ending balance of $2 billion to $2.2 billion, less any senior debt repurchases that may be completed during the year.

Additionally, with this level of cash on hand throughout the year, we anticipate no outstandings on our revolving credit facility at the end of the year.

Finally, I would also like to add my personal thanks to the Pulte organization for your dedication and commitment in accepting and meeting the challenges and changes we face on a day-to-day basis.

Thank you.

I will turn the call over to Steve Petruska.

Steve?

Thanks, Roger, and good morning, everyone, Richard and Roger already touched on the difficulties we faced in 2008 which in many ways are consistent with the factors that happened our 2007 performance, including high inventory levels for new and existing homes, tighter mortgage liquidity and week consumer demand.

We believe our near-term strategy focused on cash generation, maximizing sales and reducing our cost structure continues to be the right way to go.

I will dive further in our progress against this strategy.

One of our objectives is to keep new investment and land acquisition and development low.

Reducing the supply of lots under control through sales and closing, and generating cash in each community.

At the end of the first quarter 2008, Pulte controlled approximately 147,000 lots down 7% sequentially from the fourth quarter 2008, and down 33% from the same period last year.

For the remainder of 2008, we will continue our focus on reducing land inventory, limiting future land investments to current projects and take-downs on finished lots where absorption pace and margins are acceptable.

Additionally, we will continue to sell lots and land on a local basis as we typically find that these types of transactions net us better pricing relative to bulk sales.

We continue to make progress in managing our speculative home inventory.

We ended the quarter with 3,400 specs, down 19 -- 9% sequentially from the fourth quarter 2007, and 22% lower than the first -- last year's first quarter.

We have approximately 1,100 finished spec homes or less than two finished spec homes per community.

Our finished spec levels are flat versus a year ago, and down slightly from the fourth quarter of 2007.

Hats off to our field operators who manage to keep the spec inventory relatively low in the midst of a very challenging operating environment.

As with other builders, we experienced further downward pressure on home prices throughout the first quarter of 2008.

We will continue to adjust our short-term tactics as needed in response to the shifting market dynamics.

As we stated in our last earnings call, we will do our best to keep prices at acceptable levels in stronger communities, but remain responsive to an ever-changing pricing environment.

Settlement revenues for the first quarter of 2008 declined 22% from the first quarter 2007 levels as home closings decreased 13% for the same period.

Average sales price was also down approximately 11%.

First quarter 2008, sign-ups totaled approximately 1.5 billion as our average sales price for sign-ups were 21% lower from a year ago, and unit volumes decreased approximately 36% year-over-year.

Net new ordered dollars represent a composite of new order dollars combined with other movements of dollars in backlog related to cancellations and change orders.

Our cancellation rate was 28% for the first quarter, which is higher than the 24% rate a year ago, but down sequentially from the 40% rate we experienced in the fourth quarter of 2007.

Once again, Del Webb out-performed Pulte's other brands with a cancellation rate of 23% for the first quarter 2008.

As potential home buyers continue to have difficulties selling their existing homes and buyer confidence remains low, high cancellation rates will remain an issue for this industry.

Now, let me provide some commentary on what our regions experienced.

Sign-ups for our Northeast operations were down 29% year-over-year.

Our Washington DC, and Delaware Valley operations still suffer from the areas oversupply of unsold inventory, both new and used homes.

The Southeast, which includes the Carolinas, Georgia, and Tennessee, saw their sign-ups down 18% compared with last year's first quarter.

South Carolina coastal market continues to do well with sign-ups 22% higher year-over-year.

Our Charlotte operation performed relatively well with sign-ups down only 5% compared to the prior year quarter.

In both of these markets, our Del Webb communities are experiencing strong sales.

These relative successes were off-set by declines in Georgia and Raleigh, down 32% and 30% respectively.

ur Atlanta market continues to suffer from that areas high level of resale inventory as potential buyers often struggle to sell their existing homes.

Our sign-ups were down 35% in our Florida operations versus the first quarter of 2007.

Sales in Fort Myers Sarasota, and Orlando were down 52% and 29% respectively compared with the first quarter of 2007.

After showing a year-over-year increase in the fourth quarter of 2007, our Tampa market showed a decline in sales of 26% versus the first quarter of 2007.

High levels of unsold new and existing home inventories in this area, and low buyer demand continue to keep downward pressure on gross margins, and, overall ,the Florida region remains an extremely difficult housing environment.

Our Midwest continue to face challenges with sign-ups down 43% versus the first quarter of 2007.

Our Illinois market was down 52% year-over-year as demand continues to slide.

Although absolute supply of unsold inventory has begun to show some stabilization.

The sales in our Minnesota market also down 52% year-over-year, suffer from high levels of resale inventory in that area, which increased 11% from a year ago.

Our Denver, Michigan and Indianapolis markets all these showed weakness versus sign-ups in 2007.

Our Central region, which includes all of our Texas- markets, saw sign-ups decline a relatively modest 15% year-over-year.

While Dallas and Houston showed declines of 21% each as compared to the first quarter of 2007, sales in our Austin market were flat year-over-year.

It is encouraging to see this level of performance from this region as economic indicators across the state remain positive compared with the rest of the country.

Our Southwest segment, which includes New Mexico, Las Vegas, and Arizona, showed a 41% decrease in sign-ups from the first quarter of 2007.

Our Las Vegas market experienced the largest decline, down 56% year-over-year.

Our Phoenix operation saw sales decrease 33% versus last year, where high levels of resale inventory continued to impede thing progress for sales in that area.

Overall, the under-performance that we experienced at the end of 2007 continued in to 2008.

Yet, in spite of these declines, our local market share increased in Las Vegas, Phoenix, and Tucson.

Although modestly higher than our fourth quarter 2007 performance, sign-ups declined 56% year-over-year in our California operations.

In Northern California, our Bay area market was hardest hit with sign-ups lower than 63% year-over-year while our coastal operations in Southern California saw 86% decline as opposed to last year.

A significant excess supply of unsold new and existing home inventory continues to afflict this area while existing home prices seem to correct more rapidly during this quarter compared to prior quarters.

California continues to be one of the most challenging markets in the country in which to sell homes.

As the entire house industry continues to be severely hampered by this downturn,, we will remain focused on our near-term factors that the company and our employees can directly influence.

These include achieving our internal sales and closing goals, achieving an operating profit, targeting positive cash flow in all of our communities, and bolstering our commitment to customer satisfaction to ensure the best home ownership experience, which often leads to referrals and new business our loyal home buyers.

We will continue to work towards these goals by keeping land acquisition and development spending low, managing price and pace in all of our communities, and continuing to drive down spec inventory levels.

This consistent approach will help position Pulte for long-term success as more stable market conditions return.

Lastly, I join Richard and Roger in applauding the outstanding efforts given by our field leaders and all of the Pulte employees on a daily basis.

Their dedication drives Pulte's performance.

We will continue to sustain our company and fuel our future success.

Now, let me turn the call back over to Calvin.

Thank you, Steve.

I want to thank everyone for your time and attention on our call this morning.

We are now prepared to answer questions.

So that everyone gets a chance, participants will be limited to one question and a follow-up after which they will have to get back into the queue At this time, we'll open up the call to questions.

Katie?

(OPERATOR INSTRUCTIONS) Your first question comes from the line of Alex Barron from Agency Trading.

Please proceed.

Hi, good morning, guys.

Good morning, Alex.

I guess, I wanted to see if we could talk a little bit about the cash, I guess, this quarter.

You said that you received $200-something from a tax refund.

But, I guess, it doesn't seem like the cash balance went up by that much.

So can you talk about where the difference lies, please.

Yes, Alex, this is Roger.

I explained that in my comments, but basically the components were inventory came down about $111 million.

That contribution came from cash coming in.

Tax refund about $212 million, and payables and accruals changed by about $281 million, and all other would be the loss and -- anything else that we had rounded out -- the balance of that to get to about a $10 million increase for the quarter.

Okay.

And does the $2 billion projection, include like significant land sales?

Or what does that include?

Or what does that come from?

No, basically that's going to come from operations as we talked about last quarter.

We continue to see the ability to drive our inventories down, less investment in land acquisition and land development, and also from generating sales.

But, no land -- no bulk land sales at all.

Okay.

My second question has to do with this -- I guess, with the Kyle Canyon joint venture.

It seems like last night Campbell Hill filed bankruptcy, and so I'm wondering how does that affect you guys?

Well, this is Roger.

Specifically on Kyle Canyon, I can't talk about that due to confidentiality agreements, but -- and I can't comment on the Hill transaction either.

Okay.

Thanks a lot.

Your next question comes from the line of David Goldberg from UBS.

Please proceed.

Thanks, good morning, guys.

Good morning, David.

I was wondering if you could give us an idea -- Steve, I know you mentioned that Del Webb continued to out-perform from an cancellation rate perspective.

But, what I'm trying to get an idea of, and the sales pace, I guess is a little bit higher too, do you look at it more in terms of higher capital perspective, and how Del Webb would fair to your traditional home-building business?

And maybe some thoughts on tenure of communities in Del Webb, and where that stands on average now as we look forward?

Yes, David, this is Roger, metrics on returns today are somewhat pretty much upside down, so it's very difficult to give you what that is.

Most of them are negative in the environment we're in today with impairments.

But typically, we're looking for the same type of return on a Del Webb project so going forward.

And the ones we put on in the past have been relatively the same as we have done on the traditional side, so our expectation there isn't lower.

It's just the size of the communities and the time period that those communities are open are much longer, but nonetheless we are looking for roughly the same return on those.

So, there is enough profitability in the sales price still -- even though, obviously, returns are upside down today, there is still enough profitability to make the returns similar on the two businesses.

Yes, we think again going forward -- certainly the environment has got to change.

You generate returns not only on price and profitability, but on the velocity of those projects as well.

So, all of those in combination, yes, we feel very good about where we are with the current positions that we have, absolutely.

And, David, this Richard.

If I could just add, we commented in the past that, generally speaking, the Del Webb communities perform at, or slightly above on a return perspective, from our traditional communities.

Like Roger said, returns a little be it of a oxymoron at the moment, but relatively speaking we very much like our Del Webb position

Thanks, and I guess the second question would be would you guys consider changing your policy towards a bulk land sales if the NOL provisions were changed as incentives to give you a four-year carry back versus the two year now?

And I think I was interesting, Steve, you mentioned that -- you prefer to do the land sales on a location basis because you get a better price.

But, again, I think I'm thinking of the overall cost of doing individual -- small individual land transactions versus a bulk sale.

So maybe, if you could comment on where that stands, the positioning, and how that might change if Congress enacts this new legislation.

David, this Richard.

A couple of general thoughts on that.

First of all, we like our land positions, and from our perspective we have cash on hand, and, from operations as Roger indicated, which is closing on more homes, bringing in more homes on dollars than we're going to spend on new acquisition and development.

We think is the most sustainable way to generate cash, and, other than a couple of selected parcels that we might like to part with, we like our land position.

So we're generally not in favor of doing the bulk land sales due to the dramatic discounts you have to take to get somebody to be interested.

And as you have seen, they are anywhere from maybe $0.20 to $0.30 on the impaired dollar, and I think , from our view, as long as we have the balance sheet to be able to kind of weather through it, we would prefer to be able to take advantage of those land positions, which have been written down to a very fair value, given the current market conditions that we'll still have the opportunity to take advantage of the profitability on that land when conditions improve.

If the NOL laws change, I don't suspect that would change our view of it dramatically because we have cash on hand And, all things are subject to the environment going forward, but if things continue to play out, and we continue to be able to, you know, focus on having up to $2 billion or more by the end of the year, I don't suspect we're going to be in the bulk land sale

Okay.

Thanks, guys.

Your next question comes from the line of Michael Rehaut from JPMorgan.

Please proceed.

Hi.

Good morning, everyone.

Good morning, Mike.

First question, I guess is just on pricing throughout the quarter.

You had kind of given out order ASPs that was actually, surprisingly, up sequentially a little bit, but down greater on a year-over-year standpoint.

So I was wondering if you could just address that, number one, if it was mix involved.

Or what is your sense of apples-to-apples sequentially?

And, then if you could drill down to a more regional level and perhaps talk about some of your harder-hit markets, if you saw order price or pricing in those markets fall throughout the quarter or where the -- the trend was perhaps more severe?

Yes.

Mike, this is Steve.

I think -- first of all, sequentially, yes, it was probably mostly mix relative to the fourth quarter.

But, like I said in my prepared comments, the pricing environment continues to be difficult out there.

We -- we see some pockets of stability as conditions change relative to other active new selling communities decreasing, and resale opportunities, people pulling their house off of the market, those type of things.

But on, an overall base -- I mean, I wish I could point to an area where we were seeing overall price stability.

We're just not seeing that in the market today.

We're seeing it continue to soften almost every place, and, in some places, i.e., Florida, it's particularly difficult, if you drill down in to that.

And we have seen probably more decreases in the pricing -- overall pricing environment there, just from anecdotal total basis.

I don't have the percent handy in backlog, Vinny may have those for that region, but there's just -- I just can't give you a point to just say just stabilizing in any particular place.

I would tell you this, and, if it continues to decrease, and, it is, it is decreasing at a little bit slower rate.

In other words, we have a lot of room to move a year ago, we just don't have that much room to move anymore, and we're packed in there pretty tight with all of our competitors.

Alright.

I guess just on that point, Steve, before I go to the second question, are you seeing -- given -- how Florida has already come down so much?

And you are saying it is still not necessarily at a point of stability, we have been hearing that on the small- and mid-sized private home builder side, that those -- that they are potentially dozens if not hundreds of looming bankruptcies.

And, are you seeing that component of the market getting more aggressive in terms of trying to close out their business, or do they pose sort of an incremental negative force in the marketplace?

Or, is it just more of a general trend than even some of the public still getting aggressive with -- with getting spec out the door, or what not?

Yes, I mean, as it pertains to that, we are seeing a lot of mid-sized local people having difficulty continuing to sell in this environment, and I couldn't give you any information on whether they are teetering on bankruptcy or anything like that.

Our local operators tell us, though, it's very difficult for them kind of -- conversely to what you are thinking -- it's difficult for them to price relative to where we're at today and where we can move inventory today.

So, as demand continues to subside in those markets, supply is a little bit continuing to subside, as a lot of these operators close their doors, and, in a lot of markets, we're seeing community counts start to drop relative to that new home community count.

But, Mike, I think that comes out the other side eventually because those properties and those investments get back in to the hands of banks sooner or later, if those builders end up going that way.

And that remains the unknown in those marketplaces as to when those active communities come back out either as just relatively under-priced to market-value deals, or whether they -- the foreclosure process is long and drawn out as it often is, and we don't see the inventory pile right back on the market any time soon.

But, suffice to say there's just a continuing decrease community count in a lot of these very competitive areas in Florida, and that is driven by the inability for some people to price to what are the market conditions there.

Thanks.

And, thanks, Steve.

And just -- I guess my last question, I guess also relating to price, but, what are you seeing on the -- on the resale market side?

I mean, the comments that yourself and Roger and Richard made was that, you know, obviously that the resell market inventory -- resell inventory is still a big issue.

New home prices have come down in many instances below the resell price, and resell price is starting to move.

But what is our overall kind of feel, and if you have any specific anecdotal or color on market-by-market where perhaps the resale price is starting to move?

I think you had mentioned on the coast -- Coastal California, but any -- further detail there?

Mike, this is Richard, A couple of points.

First of all, new home pricing is way below resale, not some resale It's substantially below in almost every market.

Secondly, I would tell you that we saw some statistics in the late fall of last year that indicated in markets like Phoenix, where we may have lowered price 30% or 35% from the peak, that resale by that point had only come down 8% or 9%.

There's now evidence that it's coming down pretty fast, and it appears that the lag effect is beginning to wane.

In other words, resale pricing is beginning to come down pretty substantially.

I think you saw the Kay [Sheller] number, which is predominantly resale, come down 10%, 11% in the last 12 period.

I suspect each reporting period now going forward you're going to it has to in order for that to happen.

So, I can't tell you what GAAP that exactly is today, but it's clearly that difference between our 30% plus in resale and the high single digits has closed some.

I would suspect it's down another 4%, 5%, 6% in the last quarter.

So --

I don't -- go ahead, Steve.

I think it all creates pressure, Mike.

I mean, any time you have -- we look at all supply, new home and resale supply, and we look at the consumers options that are out there.

And, yes, certainly in some sub-markets, it's definitely putting pressure on us.

All things consider, people still would prefer at the same price, same value equation -- we believe people still prefer new over resale.

And, if we can drive them back into new, that's what we continue to try to do, but, yes, it's putting pressure in a lot of our communities on our pricing.

And, it will continue.

I suppose the other side of that is, as pricing comes down, and people can sell their homes, it's where do they choose as an option to go live versus if it's foreclosure sale back to a bank, and just a statistical number versus a real sale, right?

Your next question comes from the line of Ivy Zelman of Zelman and Associates.

Please proceed.

Thanks.

Good morning, guys.

Morning, Ivy.

Your strategy relative to others might be somewhat different.

So if you can elaborate on spec strategy, realizing that you still want to have some spec in the ground, what your plan is.

And as you think about a lot of markets.

DC, we hear only 90% of what is being sold are spec units as people don't want to take a chance of going to contractors.

Builders don't want to do that, and banks aren't willing to finance it, however you want to phrase it.

What is your plan as it relates to going forward on putting new, sticks and bricks in the ground, or foundation sticks and bricks, however you want to say it without an order?

Ivy, we continue to want to have a very limited number of spec.

Our goal is to start less than 10% of our production as spec.

But with cancellations still looming, we're not going to get very aggressive.

Having said that I think your statistics are pretty accurate that most of the inventory being sold is spec.

We haven't had a problem keeping enough spec out there keeping the velocity, and, because of the cans .

And, as Steve indicated, we still have a little over 3,000 spec units, and that number seems to be coming down slightly, but not dramatically So, I suspect that's likely to continue going forward, but as a policy we're starting, unless it's multi-family building where we sold half of the building or a little more, we're starting few new

Okay.

And then looking at the government plan and all of the stimulatives, I guess, initiatives by various parties involved, which of the proposals do you, one, think have the most -- I guess will have the most impact?

And, if you were sitting in Washington, if you can draw up a plan, what would it look like, versus what you see today which has the least amount of merit in your opinion and doesn't get through?

Well, I think there are two different things going right now.

One is the series of initiatives that you see being proposed that are more social in nature to help out folks who are in distress, versus the real stimulus ideas, which are there, and our company along with several of our peers have been advocating for specifically three things.

Number one, far and away, Ivy, would be a temporary large tax credit, say from now through the end of the year in the range of $10 to $15,000 a home that would allow people to have an incentive to get in the market.

There's a lot of evidence as you know of people on the fence that feel like pricing is terrific, deals are really strong, but they just don't want to catch a falling knife.

So, that's number one, and I would say by a factor of over several of the initiatives would be the biggest help.

And the biggest -- second would be FHA modernization on a permanent basis to keep the higher loan limits permanently in place versus just through the year, which is currently what is in place.

FHA financing has become a Godsend for the housing industry, particularly for those who play in the $300,000 and below price range.

It has become a huge percentage of what is being done right now, and then thirdly, would be some NOL relief for additional years of carry back, which would, we believe, help the own orderly liquidation of land and inventory that you are seeing in some case right now.

So, those three areas.

There are other proposals that the big builders, working with the NAHB, are working on, but those three specifically are being talked about actively.

And, we'll see what happens.

What about the one that had the least impact like the Dodd $300 billion for buying up for allowing for forbearance or foreclosures do you think that would help the housing market?

Well, I don't think that, you know, anything in that area would hurt.

Unfortunately, some of the plans that are being discussed, while they certainly may help folks in distress are not going to be real stimulus, and if you ask myself and some of our peers, I think we would say the one thing that would be a direct shot in to the vain of housing would be this tax credit idea.

And, a lot of the items aside from that are going to take longer to play out.

Even FHA modernization, which we think is really going to help, is not going to induce someone to buy that is not interested today.

So, I think that's where we really need to concentrate our efforts as an industry.

Can I sneak in another please?

Fire away.

Oh, thank you.

Just thinking about what is going on with builders that are more in distress, especially the private builder today with capital access now being shut off, and we're seeing defaults in single-family home building arena significantly increase as the banks are doing workouts and moving in to REO, and even trying to sell loan packages, how does that impact your business and all of the supply that might be coming back to the market?

And maybe, Steve, you can answer this, and just overall land values, you guys obviously had a bigger charge by what we have seen so far but others in the arena in terms of impairments, would you expect this could further extend the duration of more impairments to come for the industry?

Ivy, I'll start the answer, and then I'll turn it to Steve for more specifics.

One thing on our charge that Roger tried to point out, a significant portion of the charge was in phases that are way out in the future or existing properties.

And by nature our strategy of some of our longer positions in specific communities causes that when the pricing environment continues to decline, so I think he highlighted that approximately half of the Southwest charge, as an example, are for things not yet open and in some cases might not be open for three or four years.

Yet, they remain very strong properties.

So as difficult as it is to stomach, it -- they are in many cases properties we're very excited about the long-term potential on.

Getting to your question specifically, I think the short-term is that it is going to add pressure and increase supply on the market overall.

The flip side, I think, is that our operators are talking to all of the banks and other financing sources right now, and are likely to have opportunities that's are very capital light, going forward, once they work through the process.

Now having said that, I will tell you most of our operators, and, Steve, you can comment on this, right now are not yet finding anything that they feel is priced appropriate to even consider.

So, Steve?

Yes, to add to what Richard just ended up with there, Ivy.

There's a lot of activity going on right now, and I will tell you that it is pre-foreclosure activity.

And given today's pricing environment, the banks are in a position to potentially own this property, still aren't realistic with what they want to let it go for.

Secondarily, the question, does that you were asking about, buzz it create a supply gut?

Obviously, that's always potential, but the reality is who is going to build on that?

In other words if the banks, that are there are willing to also fund a lot of the working capital, the sticks and bricks capital, I think that creates a supply problem, Okay?

But if they are not, if there are loan committees, and a lot of the local smaller banks or regional banks are simply saying now way we're going to fund the sticks and bricks.

We're not putting another dime into that real estate, especially if we have to take this big of hit on it, I think that delays the coming to market of that.

Somethings that, quite frankly, have always hampered our industry was if you had a pickup truck and a hammer, you could get to the business if there was a developed lot there.

And this is a bit different given the capital market situation and the ability to even get simply working capital, but obviously, if the banks feel like they need to supply that as well, that could create an inventory issue for us.

And, that's why, as Richard said, our operators are staying very close to what is happening with some these opportunities.

Because, quite frankly, we could be in a position to pick up lots on a rolling-option basis that very -- are priced very below market and still provide the working capital and enhance our profitability.

So we stay tuned in to that very closely, and also there's fee opportunities for our company just in managing the real estate that may come back.

Thank you.

So we have certain infrastructure in place so we could do that

And, Steve, I think you guys will be a win-win longer term.

I think it's great for the publics.

The problem, though, is if you are buying lots on pennies on dollar through any mechanism, and the banks are selling at pennies on the dollar, which is likely to be the case.

It certainly marks to market the land and your portfolios lower potentially.

I mean it takes down land values overall whether it be finished or undeveloped

Yes.

So that's the risk, right?

Yes, it does.

It potentially does, Ivy, but it also could, depending on the location of the community, allow us to moth ball our community and an opportunity across the street using the same models and those type of things.

But, we haven't seen that yet, right?

But, boy, I tell you what, we have got our eyes open to it to just as you suggested.

Great.

Thanks, guys.

Thank you.

Your next question comes from the line of Nishu Sood from Deutsche Bank.

Please proceed.

Thanks, good morning, everyone.

Good morning.

I wanted to follow up on the -- just the issue of impairments.

Some of your peers have been out publicly saying that they think that the worst of impairments are behind us.

So obviously given the size of the impairment charge you took this quarter, and the difficult environment that a lot of the builders -- or most of the builders continue to face, just do you think it's just too optimistic to be saying that, or are we looking at a issue of situations where a builder has longer-term projects, such as you folks or builders that are sitting on a short, more developed land-supply situation?

This is Richard.

I have no idea how a competitor could make that statement.

The pricing environment has clearly declined, and the impairment models suggest that with pricing declines and pace being hard to come by, that land needs to be impaired further.

So, again, I can't comment specifically on why someone would make that statement, but that's not what we're seeing.

Okay.

Just, digging a little more specifically, a particular party or impairment this quarter, you mentioned impairments on some communities that you are moth balling, I believe, and I was just wondering, considering that the way the mechanics work, there's an undiscounted trigger to take an impairment.

But, when once you take the impairment, it's done on a discounted or PV basis.

If, you are moth balling something, and you haven't adjusted your pricing in that community.

You're just simply saying we're going to have to just generate these sales later, probably at the same price, but just later.

How does that the moth balling decision trigger an impairment in that type of situation?

Well this is, Roger, Nishu.

You can't ignore it because the asset is there, and you call it moth-balled.

It's still there.

But when you underwrite it, let's say on an average of $300,000 for a selling price , we look at those in our examples.

We look at them every single quarter, and, the longer it's out there, you do assume, maybe some price appreciation on it if it's out three or four years before it ends up starting up.

And then you continue to watch where you are today.

So what happens, the current pricing continues to fall away, and you are looking at something that is in the future, the ability to all of a sudden get a 10% price increase from where you are versus maybe a 20% or 30% price increase, becomes a little more challenging from a modeling standpoint.

So at that point you go back and say unrealistically I have probably left my pricing too high to realize projects out in the future like that.

Now, you have got to balance all of it because it's very difficult to determine three/four years out.

And then life of a project that may last four or five years after that as well.

So, there's a lot of art that's goes with it as well as science, but nonetheless you have to be consistent with the way you approach

One quick follow-up on the deferred tax valuation loans you took.

You basically took an allowance against the entire amount of the deferred tax benefit that you could have gotten this quarter.

As we go forward here, I mean, part of that I would imagine is because the impairments that you were taking as you described were on later phases or longer terms, so you wouldn't expect to recover that within this year or even the next year.

Is that the kind of pattern we would expect to follow in the next quarter or two if there were more impairments that it would basically off-set you would take an allowance against the entire deferred tax benefit?

Yes, unless we saw something that was going to change our view of what the bring-back was.

For instance, if approximate we were going to have large land sales, you might make an adjustment of on that, or we saw velocity of our projects all of a sudden increase, the opportunity to recover that would be much shorter in our view to be able to recognize it earlier.

But, yes, we're certainly taking a very conservative approach today looking out, not knowing how it is going forward here in the future.

Your next request comes from the line of Megan McGrath from Lehman Brothers.

Hi, good morning.

A couple of follow ups, in terms of the inventory situation, wanted to see how you guys are approaching the foreclosure issue?

What are you seeing out there in some of your markets?

And are you trying to price at all in relation to some of the foreclosures you are seeing in or near your community?

Megan, this is Steve.

The reality is as I stated been, is that, yes, all for-sale housing that is kind of within the circle of an active community for us, the marketing circle of an active community for us, becomes relatively speaking competition.

So clearly, foreclosures, especially in the markets that -- that everybody is aware of, the Las Vegases, the Phoenix, Arizonas, the north inland empires in parts of Southern and Northern California, Sacramento, and I could go into just about any market in Florida, present pricing and marketing issues for us.

The reality is, is that not everybody wants to buy a foreclosed home, even at the price that it's at, but it's not like a dollar-for-dollar trade-off or anything like that.

Secondarily, just as there's investors for land in today's current environment.

We're seeing private investors in markets go in and scoop up large -- large chunks of foreclosure inventory from banks, right after the foreclosure sale takes place at a discounted value, and in many cases they have a mentality to hold and then sell later.

So, it's just so dynamic and so all over the board, it's hard to give you one answer as to what might be going on in a particular market.

But generally speaking, right, the advent of more inventory coming onto the market at more aggressive pricing is not a good thing.

It's a bad thing.

Thanks.

Just quickly on the credit situation, you gave us some metrics earlier in your remarks on the percentages of loans that you were doing.

And certainly, the jumbo market, the non-conforming went down considerably, wanted to hear your thoughts on the jumbo conforming markets for the higher than 417, are you doing anything of those and with what you are seeing there?

And, is it really a supply issue or demand issue?

In other words, are people not able to get these loans, or it is just that you are not seeing the demand for them?

Megan, this is Roger.

There -- it is both, quite frankly, depends on where you are in the markets.

Certainly, a lot of the underwriting criteria changed.

So, t's spotty wherever you are in the country, based on the pricing of the homes.

Again, if you look at our average price, we're falling in to -- not so much in the jumbo area.

So, again, it's spotty, it's based on credit worthiness as well from the individuals.

Pricing is a part of that as well.

So, it's a combination of factors.

Okay.

Thanks very much.

Your next question comes from any line of Jim Wilson from JMP Securities.

Please proceed.

Thanks, good morning, guys.

Hi, Jim.

Just a couple of Del Webb questions.

It was great you gave the specific impairment at the Web level of 119.

Also, to contrast it can you separate the amount of assets or inventory that is in Web in dollars versus Pulte.

No, we don't have that, Jim.

Okay.

Something that could be available in the future, since you are at least giving impairments now for Web?

We'll have to take a look at it, yes.

Alright.

And the, just a general question of how -- you gave general market condition of how things are selling.

If you could contrast Web and better/worse, particular;y in its primary markets, like the Southwest, how you see its sales pace and see metric profitability, but sales pace in particular is going versus your conventional product?

In a word, Jim, better.

It's better than Pulte.

Lot better?

Little or -- any other color?

A little better.

We still fight the inability to sell the existing home, which is the primary source of capital for our primary Del Webb buyer, but generally speaking it's better than just the traditional business.

Jim, this is Richard, if this will help.

You have two things going on the inability to sell a home and the desire to buy a home.

I think a lot of the traditional buyers are hampered by inability to sell, but they also are afraid to buy for fear of the pricing.

The Del Webb buyer is not near as afraid of the pricing environment and making a longer-term decision.

They are ready to buy.

They are just having difficulty with their existing home.

So it is better, and primarily because they have got at least one of those two factors solved for in your mind.

Any of the things you have moth balled Del Webb, or is it all conventional product?

There is a little bit of both in there, Jim.

There are some that are Del Webb as well.

Okay, alright.

Thanks.

Thank you.

Your next question comes from line of Jay McCanless from FTN Midwest.

Please proceed.

Hi, good morning, everyone.

Good morning, Jay.

Wanted to pick up the competitive issue you were talking about, Steve, and the fact that the briefcase and the small builders just don't have access to credit right now.

How much longer do you think that situation lasts, and when does it turn in to a benefit for Pulte?

Jay, I do not know how much longer I think that lasts.

I mean, Roger could probably speak to where the capital markets are going better than I could.

I think that in some way it's already a relative benefit in that as the demand pool sinks, it is -- it is -- I means shrinks, it is shrinking the supply pool as well in the current environment like I talked about with community count going down, but maybe Roger could speak to capital.

Jay, I can speak a little bit it to.

I agree with Steve.

I don't know exactly how long it's going to go.

I don't see any evidence of it turning around any time soon.

In, terms of the capital and credit situation.

One of the things, though, that not anyone is really talking about, but it is, clearly going on, is all of the larger players, particularly those staying in markets and not exiting are gaining share as we speak.

So, I think some of the benefit if you will to some of the better capitalized players who the stomach what is happening today are gaining share.

There is a lot of every of that we track statistics whether its in Orlando or Phoenix or other places around the country.

So, but specifically, how long the deteriorating environment for funding the small guys lasts, I wish we knew.

Roger?

Yes, and certainly, that's where a lot of the stress is, because we working capital doesn't flow as well as the large builders do.

Because we have the diversified portfolio to e better in some marketing and less in others, where the small builders are in basically one location, quite frankly, or one market that creates lot more stress on them.

So, the lenders, are pulling back.

So, they don't want to lend in this environment.

It's hard to get the cash flow back out.

So they are not reticent to letting it go.

So, they are looking to pull it in.

Okay.I n terms of comparison, would you compare this period we're in right now, to say, the early '90s, right after the end of the S&L issue?

Is it -- or is the worst we've ever seen?

Could you just give a little frame -- frame how bad things are for these smaller builders are right now.?

This is Steve, again, Jay, what I would tell you is having kind of lived through both of those cycles, the difference with the S&L debacle that was in the late '80s, was is that there was still working capital for these banks that were lenders in the land to get out of the land.

And so, you know, again they were able to fund a retail outlet for that dirt , which was through a builder that might have been in a local marketplace, so there was some of that still available.

This is -- I think exponentially more difficult of a situation in that the number of retail outlets for the land has the been improved already is just rapidly being diminished because there is just not as many builders in the marketplace that they can get the capital to build the the

Jay, this is Richard again.

Pick your statistic, were it's starts or sales or permits or whatever other statistic you look at.

The data would indicate we are at a lower level today than we were at the trough back then.

Probably just as bad, if not maybe worse than, the '70s or early to mid-'70s decline.

Okay, great.

Thanks.

And then I have got one other question.

If you look at the people who are you actually getting to the closing table and signing right now, how would you describe the general characteristics, whether its the amount of down-payment they put down?

I know that you give FICO scores, but are these people who are investing now in housing because the prices have come down somewhat, or it is just the people who need to move?

Can you describe your current customer a little bit.

Yes, it's Richard.

It's the people who need a home.

Very few investors out there at all.

Again, people that are making the decision today need a home.

And, like I said, there's a lot of evidence of people that want a home, but they don't absolutely have to have one, so they are making a decision to stay with a relative or continue to rent or other alternatives that they have.

So, it's folks who need a home.

Okay.

Great.

Thank you guys.

Thank you.

Your next question comes from the line of Susan Berliner from Bear Stearns.

Please proceed.

Hi, good morning.

I was wondering -- How are you?

I was wondering if you could give any color just generically on the joint ventures.

I know it is pretty small for you guys, and it just went up a little bit.

Was that more from lot option take-downs?

If you can give any sort of color, and also what your debt obligations on the joint ventures are at this point?

Sure, Sue, this is Roger.

Our investment level on the equity basis was $110 million in the first quarter.

And our limited recourse debt was about $108 million.

To, also, from a subsequent standpoint on actually the first of April, we paid off about $28 million on one of those ventures, which -- which was debt, so that would reduce the $108 by roughly $28 million.

We have roughly about two joint ventures, quite frankly, that are sizable at that point.

And, we continue to focus on those and work them they are still very good working joint ventures.

So, we have minimized our overall approach to the joint ventures and the risk associated with it.

Great, and, I guess, secondly, on the bank line, I guess with your tangible net worth cushion going down, are you thinking of approaching the bank earlier just in case of additional impairments going forward, or how are you looking at that?

Well, like anything, we continue to look and plan.

You know, first thing would be to look at how we end up curing it.

So, you know, that would be a priority for us.

And certainly we're always talking to the banks, so I think we just have to work it out and continue to look at where we're going and where the market is going that is going to drive the ratios.

But, again we think we're in pretty good shape from this standpoint.

We just have to play by how we see it in the market almost week-to-week.

Great.

Thanks, Roger.

Your next question comes from the line of Buck Horne from Raymond James.

Please proceed.

Thank you, good morning.

Just wanted to talk about the land portfolio for a second, if you could just maybe give us the percentage of fully developed of lots you have to the total that's owns, and if there's any specific markets with higher concentrations of those developed lots?

Buck, I can probably help you with some of those statistics.

First, instead of the lots we own, so Steve had given the lots controlled at 147,000.

We own 122,800.

Of the 122,800, about 34% are finished.

Great.

Thanks.

Also, I guess on order of magnitude if there's any guidance you might be able to give us of what you think the land acquisition and development spending might be down year-over-year in 2008?

Yeah, I gave that last quarter as well, Buck.

You know, last year we spent roughly $1.9 billion in land acquisition and development.

And this year, 2008, we planned on doing about -- roughly about $1.2 billion.

Perfect.

Thank you so much.

Okay.

Thanks.

At this time I would like to turn the call back over to management for closing remarks.

Thank you, Katie.

Thanks everyone for your participation on the call today.

If you have any follow-up questions, please feel free to give me a call.

Have a great day.

Thank you for your participation in today's conference.

This concludes the presentation.

And you may now disconnect.

Have a wonderful day.