Douglas C. Yearley - Chief Executive Officer and Director Martin P. Connor - Chief Financial Officer and Senior Vice President Robert I. Toll - Co-Founder and Executive Chairman Gregg Ziegler Frederick Cooper Donald Salmon

Stephen F. East - ISI Group Inc., Research Division Ivy Lynne Zelman - Zelman & Associates, LLC Daniel Oppenheim - Crédit Suisse AG, Research Division David Goldberg - UBS Investment Bank, Research Division Adam Rudiger - Wells Fargo Securities, LLC, Research Division Buck Horne - Raymond James & Associates, Inc., Research Division Stephen Kim - Barclays Capital, Research Division Nishu Sood - Deutsche Bank AG, Research Division Megan McGrath - MKM Partners LLC, Research Division Joel Locker - FBN Securities, Inc., Research Division Jade J. Rahmani - Keefe, Bruyette, & Woods, Inc., Research Division Jack Micenko - Susquehanna Financial Group, LLLP, Research Division James McCanless - Sterne Agee & Leach Inc., Research Division Alex Barrón - Housing Research Center, LLC

Good afternoon. My name is Dawn, and I will be your conference operator today. At this time, I would like to welcome everyone to the Toll Brothers Second Quarter 2013 Earnings Conference Call. [Operator Instructions] Mr. Douglas Yearley, you may begin your conference, sir. Douglas C. Yearley: Thank you, Dawn. Welcome, and thank you for joining us. I'm Doug Yearley, CEO. With me today are Bob Toll, Executive Chairman; Marty Connor, Chief Financial Officer; Fred Cooper, Senior VP of Finance, International Development and Investor Relations; Joe Sicree, Chief Accounting Officer; Kira Sterling, Chief Marketing Officer; Mike Snyder, Chief Planning Officer; Don Salmon, President of TBI Mortgage Company; and Gregg Ziegler, Senior VP and Treasurer. Before I begin, I ask you to read the statement on forward-looking information in today's release and on our website. I caution you that many statements on this call are based on assumptions about the economy, world events, housing and financial markets and many other factors beyond our control that could significantly affect future results. Those listening on the web can e-mail questions to rtoll@tollbrothersinc.com. As has become our regular practice, we are going to limit our prepared remarks to provide more time for Q&A. Since our detailed release has been out since early this morning and is posted on our website, I'm sure most have read it, so I won't reread it to you. Our fiscal year 2013 second quarter ended April 30. Fiscal year 2013 second quarter net income was $24.7 million or $0.14 per share diluted, compared to net income of $16.9 million or $0.10 per share diluted in fiscal year 2012 second quarter. Fiscal year second quarter revenues rose 38% in dollars and 33% in units. Net signed contracts rose 57% in dollars and 36% in units, and our backlog rose 69% in dollars and 52% in units compared to fiscal year 2012 second quarter. On a per-community basis, fiscal year 2013's net signed contracts were the highest for any second quarter since fiscal year 2006. Demand accelerated significantly this quarter. Our strong brand, land position and capital base are giving us a competitive advantage in many of our markets. Buyers who have been on the sidelines for 6 years are jumping in. Low interest rates, improved customer confidence, a strong stock market, rising home prices and a reawakening economy are stoking demand in our luxury market. 1 year ago, we were somewhat reluctant to raise home prices for fear of crimping demand. Now we are finding that in many markets as prices increase, a sense of urgency takes hold and demand continues to rise. We have raised prices this quarter approximately $26,000 per home on average. We continue to take advantage of land opportunities. In the second quarter, we spent approximately $165 million on land. This quarter, we also put under option another $381 million on land, totaling 2,833 lots. One site we bought is our first active-adult community in the Western U.S. in metro Denver. We entered the active-adult market in 1999 and are excited to continue to expand our active lifestyle brand across the country as we follow the baby boomers entering the next phase of their lives. With our backlog up 69% in dollars and 52% in units, and with our community count increasing throughout fiscal year 2014, we expect continued growth over the next few years. Now let me turn it over to Marty. Martin P. Connor: Thanks, Doug. Second quarter homebuilding gross margin before interest and write-downs as a percentage of homebuilding revenues was 23.3% compared to 23.2% in 2012's second quarter. 2013's first quarter was 23.4%. The small decline in margin compared to last quarter is a result of mix. Our margin exceeded our guidance because the mix of deliveries from lower-margin communities was not as large as expected. Second quarter interest expense, including cost of sales, dropped to 4.5% of revenues from 4.7% in fiscal year '13's first quarter and 4.7% in fiscal year '12's second quarter. The improvement over the prior periods was caused by delivered inventory being held for a shorter time. Second quarter SG&A of approximately $79.6 million was higher than the $68.3 million in the second quarter of 2012 and higher than the $78 million in the first quarter of 2013. As a percentage of revenues, though, Q2 fiscal year '13's SG&A was 15.4% compared to 18.4% the previous quarter and 18.3% a year earlier. The improvement as a percentage of revenues was due primarily to higher revenues. Second quarter other income and income from joint ventures, excluding impairments, was $24.5 million, reflecting, amongst other items, a $13.2 million gain on settlement of a lawsuit, a $2.1 million gain on land sale and a contribution of $2.1 million from our Gibraltar operations. The average number of shares used to calculate earnings per share was approximately 178.1 million for the second quarter. Subject to our normal caveats regarding forward-looking statements in today's release and in our SEC filings, we offer the following limited guidance: We ended second quarter 2013 with a backlog of 3,655 homes, aggregating $2.5 billion, which was 69% higher in dollars and 52% higher in units than second quarter of 2012. We expect that deliveries in 2013 will be between 3,850 and 4,200 homes. We again encourage you to use our average third quarter backlog conversion rate for our last rapid growth period, 2002 to 2006, as the best indication of our delivery expectations for the third quarter. Furthermore, we expect to deliver about 25% more homes in the fourth quarter than in the third quarter. Our average delivered price per home in the second quarter of 2013 increased to $577,000 due to an expected shift in geographic and product mix. We estimate the average delivered price per home for the full year to be between $610,000 and $630,000. Our third quarter average delivered price should be about $25,000 higher than the fourth quarter. I'd also like to set some margin expectations. The following commentary includes interests but excludes impairments. In the third quarter with a high-margin high-rise project delivering and price increases from other communities starting to come through in revenues, margins are expected to improve approximately 275 points over Q2. In the fourth quarter, margins are projected to come in around 200 basis points over Q2. In our year-end 2012 call, we guided to flattish gross margins for the full 2013 fiscal year. With the benefit of first and second quarter sales and deliveries behind us, we now expect margin improvement for the full year '13 compared to '12 to be approximately 80 basis points higher. Again, all of the above figures include interest but exclude impairments. Finally, the range for our year-end community count remains 225 to 255. But as we've said before, the growth will happen late in the second half of our fiscal year. At this point, I'll turn it over to Bob. Robert I. Toll: Thank you, Marty. The most recent ISI survey of large and midsized builders is near record highs. For those builders who have the capital to buy land and build homes, it is a very good time. We believe the industry is still in the early stages of a recovery. Even so, this quarter, our pace of contracts per community was consistent with second quarter paces we've produced in the decade from '93 to 2003 as the industry normalized after the previous downturn. While up significantly from the bottom, April 2013 industry-wide total annualized housing starts were approximately 853,000, just 55% of the 1.5 million houses started annually on average between 1987 and 2006. With new home production still well below the volumes required to meet projected demand based on history, population growth and the pace of current household formations, we believe we and the industry have lots of room to grow. Thanks for listening. Back to you, Doug. Q&A time. Douglas C. Yearley: Thank you, Bob. Okay, Dawn. Line them up.

[Operator Instructions] Your first question comes from the line of Stephen East with ISI Group. Stephen F. East - ISI Group Inc., Research Division: Bob, I'm glad you find our survey helpful. I think it's -- I would agree. I think it's one of the best surveys you'll find out there and gives a good a reflection of what the big builders are doing. And if you wouldn't mind, can you just help us understand a little bit, Doug, maybe when you look at pace versus price today and compare it to how you're thinking about it a quarter or 2 ago? And where do you think the pricing metric goes over the next several quarters? Douglas C. Yearley: Well, we, of course, focus very much on backlog when we decide on price increases. That's what we spend most of our Mondays doing. And of course, when the backlogs are bigger and the next home sold take longer to deliver, we're more aggressive with pricing. And so we don't raise price by market. We raise price by community based on the action in that community. The best sale season, of course, is January through April. So when you talk about looking back a quarter or 2, we have just come through some terrific times where we have had great sales, and we've had significant price increases. You ask where it goes for the next few quarters. We will continue to raise price. We don't see anything getting in the way of that. Backlogs are growing, but we are heading into the summer. So the sales through the summer are generally not as strong as the winter. But based on what we're seeing right now in late May, I think you can expect us to continue to raise price, and business will be -- is and will be good. Stephen F. East - ISI Group Inc., Research Division: Okay. And then as you look at -- I'm sorry. If you look at... Robert I. Toll: I want to add to your -- add to the remarks started by your question. The other builders, be it big, small, large, also have backlog slots that they look to fill. And I would guesstimate that they have filled their backlog slots as we have filled ours, which means that the next house that a guy sells is not the 10th house he's got to produce, but the 20 or the 25th house that he's got to produce. Because he's in a situation where you can't deliver those in less than a year, he, she or us or we say to ourselves, "Why not raise the price on this 26th house or this 27th?" So I think you're in a situation where although -- as Doug said, although the summer is slow traditionally, you probably will see price increases greater than you did a summer ago or 2 summers ago or even back when times were good, not when times were silly, but when times were good. Stephen F. East - ISI Group Inc., Research Division: That's great to hear. That's for sure. And if you look at -- Doug, you mentioned watching your backlog and how long it takes you to run through it, what type of gross margin do you all have embedded now in the backlog? And just sort of relate that to -- I know last quarter, you talked about the cost inflation you were seeing wasn't giving -- versus your pricing wasn't giving you much of a bump and sort of how that dynamic is changing, some type of magnitude there. Martin P. Connor: Stephen, it's Marty. I think the margin in our backlog, we'll say, is better than the margin we're delivering today, but I don't want to get into specifics. I think we've given some commentary on what we have raised prices in the quarter from the beginning to the end of the quarter. We want to caution that, that doesn't mean we've raised prices $26,000 on every house in the backlog. First, we raise the prices, on average, $2,000 then $5,000 then $10,000. So through the course of the quarter, we have homes that we have contracted for that are less than that $26,000 increase, just to give you an order of magnitude. In terms of cost increases we are seeing, which is the second piece of that question, this quarter, things moderated a bit. They were only up around $700 a home. We saw lumber go up dramatically and start to come down. It's still about half of that $700 that is lumber-related price increases -- I'm sorry, is that right? No, I was looking at labor. Excuse me, lumber is even. Labor is about half of that. Those are my 49-year-old eyes.

Your next question comes from the line of Ivy Zelman with Zelman & Associates. Ivy Lynne Zelman - Zelman & Associates, LLC: Doug, you mentioned that the margins -- or maybe, Marty, it was you -- that sequentially your guidance, you actually did better than you guided for the 100 basis point sequential decline and it was that you had less lower-margin deliver in the mix. What would -- I guess, I would wonder what happened there? Obviously, if those homes were in backlog, it wasn't as if you raised prices on them. And should we expect that, that mix, negative mix is going to be impacting third and fourth quarter? And then more broadly, when you think about the legacy communities where you have lower margins or you expect that those are going to be lower margins, what percent of the, I guess, the next 12 months of order activity would you say is that an overhang or, a better way to think of it, is that your active inventory? Martin P. Connor: Smart. Okay, let me address the first 2/3 of that, Ivy, if I can. We'd sold and delivered more townhomes and condos in the quarter than we had expected. Some of those condos and townhomes are in our urban product and have higher margin. So that was the good news. The other good news, which turns into bad news is that some of our lower margin deliveries slid from the second quarter into the third quarter. So they will hurt the third quarter, but that is factored into the margin guidance I've given, and their hurt on the third quarter, which is a higher revenue quarter than the second quarter, is less than it would have been in the second quarter. In terms of lower-margin older communities, I don't think we've studied that. But they are naturally going to be a lesser percentage of the total as we sell out of some of those and the margins we see from our more recent openings are starting to gap more positively than they had in the past from the margins in the older communities. Ivy Lynne Zelman - Zelman & Associates, LLC: And then just on, broadly, your community count, kind of flat, and, Doug, you mentioned you expect to see community count growth in '14. Is there delays that you're experiencing that's causing community count to remain flat? And then just in a second-part question to that, your pace when you talk about going back to '03 to '06 pace and recognizing that April and the spring has been very good for the industry, Doug, can you talk to what you think a normal pace per community per year that you could expect to achieve? Because you've gapped higher than you normally have in been and there's been a slower pace historically versus your peers, which we would expect. So you actually got closer to your peer's pace in this recent quarter than you've been to before. So I kind of just want to understand what you're expectations are and should that gap continue to narrow, or what is the annualized pace that you're most comfortable guiding to? Douglas C. Yearley: Sure. On the community count question, we are selling out of communities faster than we had anticipated because of the hot market. So we are opening communities, but the net number has stayed flat. But as Marty mentioned in his comments, the fourth quarter, we see is the quarter where we begin to grow net community count, and that accelerates through 2014. On pace, we have some room to go to increase pace. Again, it's very community specific. We are ramping up construction teams. We can handle it. Are we bridging the gap with the others? Well, our homes are a lot more expensive, a lot more complicated. We put $100,000 of upgrades into an average house. So I don't think we will and I don't think we want to. I know we don't want to ever get to the absorptions of the others. Remember, our mix has changed. We have more multifamily now. We have more townhomes. We have more urban. And when you get into the higher density multifamily, you tend to have higher paces. So be careful not to compared today's pace with historic numbers when we are a very different company. Ivy Lynne Zelman - Zelman & Associates, LLC: So what do you think the right pace is at? We used to talk about the amp [ph] number of homes that you could do on an annualized basis that's normal, and so I think that, that number might not be applicable today that you've spoken with me about in the past. What do you think the right bogey is on annualized basis per community with the mix changing to more attached products? Douglas C. Yearley: Yes, I think it's mid-20s. Maybe with more attached, it could get into the high 20s. But remember, we have communities in Florida that sell $2.5 million homes that can probably handle 12 a year. And we have jewel box active-adult communities where we can handle 60 or 80 a year. So it's an average of many different parts of our business that are not similar, but I think mid to high 20s is a good bogey. Ivy Lynne Zelman - Zelman & Associates, LLC: All right, let me sneak in one more, but that was a great answer. And maybe this question is for Bob. But a lot of people that I meet with are always talking about the fact that we are have an aging population that soon will want to downsize and leave their large homes or go to something in condo even go into assisted living. And we're looking at the peaking of the baby boomers and concerned about that impact. And we certainly don't see it in the near term, but how are you preparing that -- preparing for that as a company? Is that the mix strategy that your employing right now and continue to expect that you'll move more to the mix of attached and condo living because of that phenomena? Robert I. Toll: I don't think it's because of the phenomena. I think it's because of opportunities that are presented to us. But there's no doubt after discovering the urban business, that they were doing pied-à-terre offering that is geared to, not just the young professional hedge fund manager, master of the universe, but is also geared to the people that have made it and decided they want to go back to the city. And therefore, the answer to your question is, we aren't following what we see to be the change in the demographic. But we don't turn down any opportunities on that basis to do large single-family luxury homes or even the executive size of single-family home.

Your next question comes from the line of Dan Oppenheim with Crédit Suisse. Daniel Oppenheim - Crédit Suisse AG, Research Division: I was, I guess, listening to some of the comments there in terms of the backlog is filled, backlog for others is filled, the communities are coming online, so prices are going up. But as we think about the quarter starting there in February, did you sort of -- as the quarter started and you didn't see your shadow on pricing, did you -- was there a lot more significance as the spring season went on so that if we look at those trends for April, it's far more significant than the 26 average for the quarter? Douglas C. Yearley: No, I don't think so. I think it occurred throughout the quarter. We had price increases in about 60% of our communities that accounted for about 70% of our sales. And I don't think it accelerated through April. I think it was consistent, and it continues to stay consistent through May. Daniel Oppenheim - Crédit Suisse AG, Research Division: Okay. And then I guess in terms of the backlog conversion. There's certainly a lot of talk of backlog conversion of the homes. If we think about backlog conversion in terms of the land based on the supply, you talked about that sort of the community count growth accelerating to '14, how much sort of emphasis is there so that we'll see much more of that coming -- what is the aim in terms of that for '14? Martin P. Connor: He's asking for community count guidance for the '14, which we'll give at the end of the year. Douglas C. Yearley: Go ahead, Marty. Martin P. Connor: Dan, as we said at the beginning of the year, we're kind of sticking pretty close to it. We're opening right now about a community and a half a week, and we're selling out of a community a week. We think that ratio will actually improve next year, and that we will be increasing the total number of our communities in '14 compared to the end of '13. We're not really prepared right now to set a specific number on that, but the growth in '14 should be bigger than the growth in '13. Douglas C. Yearley: That's correct. It will accelerate.

Your next question comes from the line of David Goldberg with UBS. David Goldberg - UBS Investment Bank, Research Division: My first question is about the kind of geographic mix shift in terms of new land purchases and if we should expect the new lots that are being put on option of being purchased. Or maybe geographically situated a little bit differently, is there more California exposure, given what's going on in that market? Or should we expect it to stay pretty similar? Douglas C. Yearley: It's -- we're happy to say this quarter, there's more in California, more in the west than in prior quarters. And we certainly have a focus out there. That market is so strong. But I think you'll see it everywhere. We're growing pretty rapidly in Houston and Dallas. We -- 48% of the land deals we've done in fiscal '13 have been from the west. Martin P. Connor: Option. This is option. Douglas C. Yearley: Option. Thank you. So we're focused out there, but we're also very opportunistic, and we're looking at deals everywhere. David Goldberg - UBS Investment Bank, Research Division: Great. And then just as a quick kind of housekeeping question. You guys on the last couple of releases have talked about reservations for the first couple of weeks post the quarter. I noticed that wasn't on the release this time. I assume there's nothing to that, just given how strong demand is. But would you say that the pace is decelerating a little bit just because you're focused a little more on raising prices. And so as we kind of move through, you might have seen that in the reservation numbers? Martin P. Connor: David, for the first 3 weeks of the third quarter, we're up about 1/2 a home per community in agreements and in deposits compared to a year ago. And remember, a year ago is a pretty tough comp because we were up significantly a year ago. Our third quarter total was up 60% in agreements over 2011. David Goldberg - UBS Investment Bank, Research Division: Wow. So pretty robust in terms of additional growth on top. That's great. Martin P. Connor: Yes, it's 25% to 30% up in terms of agreements in deposits in the first 3 weeks compared to a year ago.

Your next question comes from the line of Adam Rudiger with Wells Fargo Securities. Adam Rudiger - Wells Fargo Securities, LLC, Research Division: First question, just a modeling one. I think, Marty, the last call you mentioned that about $82 million in quarterly and SG&A was a decent average for the year; is that still intact? Martin P. Connor: It is still intact. Adam Rudiger - Wells Fargo Securities, LLC, Research Division: Okay. Second question is, we've seen some smaller private companies emerge to public companies now. And we've seen some other private companies raise some additional capital. I was just wondering if you'd seen that additional liquidity from other players, kind of rear its head in the land market you have from a competitive perspective. Douglas C. Yearley: No, not in our end of the market. Martin P. Connor: Not yet.

Your next question comes from the line of Buck Horne with Raymond James. Buck Horne - Raymond James & Associates, Inc., Research Division: I guess maybe said another way, back to the land question. Would you characterize the current environment for land positions? I mean, how competitive is the current environment for bidding on land? And is the underwriting remaining disciplined? Are you still seeing normalized margins and IRRs? Are we seeing others baking in significant price appreciation to make these numbers pencil? Douglas C. Yearley: The land market is hot in many places, Northern Cal. We have a community in Sunnyvale in Silicon Valley. We've taken 18 contracts in the second quarter, raised the price $280,000 over the quarter. We're up $500,000 since October. And when we opened, we've sold 41 homes. Obviously, that translates into a very hot land market, and we are continuing to be careful and conservative in our underwriting. We have found some, what we think are terrific deals in Northern Cal. It's very competitive. Are others baking in some inflation? Probably. Based on some of the numbers we see, we think that must be going on. But when I talk about these types of price increases since October, it seems it sure is working. Buck Horne - Raymond James & Associates, Inc., Research Division: Also what are your thoughts about potential M&A activity with -- are there interesting plays among maybe some of the private builders that may be a little bit more capital constrained in your end of the market? Given your ability to raise capital and some of the pricing terms of the street is affording all the homebuilders right now, does it make sense to go out and be a little bit more aggressive on the M&A side? Douglas C. Yearley: Right now, not for us. We haven't seen those opportunities. We've acquired 7 builders in our history. Every one wants to enter a new market. We're very happy with the footprint right now. So we're not looking at a new market to enter, which we would consider -- where we would consider a builder acquisition. Remember when you buy a builder, you have good land, you have average land, you have some bad land, and then you pay premium for the organization. So right now, we're focused on buying only good land in the best locations where we already operate. And so we're not all that enamored with the smaller builder deals that are coming along. Buck Horne - Raymond James & Associates, Inc., Research Division: All right. Great. If I can sneak 1 quick one in. Do you have a breakout for the new orders that were -- your City Living or part of the City Living projects, and what the average value of those City Living orders were? Douglas C. Yearley: While Gregg's looking that up, let me just tell you what happened this quarter with City Living. We have 2 buildings that opened: 1100 Maxwell Place, which is our newest Hoboken building. We've sold 75 homes -- units since February, raising the price on average $140,000. And we opened 160 East 22nd Street, which is 22nd and 3rd Ave., also in February, taking 27 agreements, raising the price $275,000 since February. So, Gregg, those are the 2 unique City Living buildings, and what do they account for?

So for Q2 of '13, City Living sold 157 units. The average price was just over $850,000. And of our consolidated results, including JVs, that's 11.1% of the sales in dollars for the quarter.

Your next question comes from the line of Stephen Kim with Barclays. Stephen Kim - Barclays Capital, Research Division: Wanted to just ask you first a housekeeping question. Your construction in progress that you reported in the balance sheet or in your old version, can you give us a sense of what that number was this quarter?

Yes. It was $2.419 billion. Stephen Kim - Barclays Capital, Research Division: Perfect, great. Second question I had relates to your gross margin. I know you talked about the fact that in your third quarter, there's going to be some of these homes that, I guess, you initially expected would be delivered into the second quarter. So that's going to be a little bit of a headwind for you in the second quarter. And at the same time, I also know that you're expected to have deliveries from The Touraine in that quarter. I just want to, I guess, make sure I understand when you're talking about a decline or lower-margin contribution from some -- it's going to be landing in the third quarter, is that primarily a geographic issue? Or is that a function of communities that are selling somewhat lower-end product in your spectrum? Really, is it geography or is it a price point issue? Martin P. Connor: It is community-specific. It is not geographic. It is not price point. Some of our communities, regardless of product type or location, have lower margins than others. And those are the ones where we saw some expected settlements slide from the second quarter to the third quarter. But that's not going to be significant. Remember, we expect roughly 40% more revenue in the third quarter than in the second. So these few homes that slide are not that significant. Stephen Kim - Barclays Capital, Research Division: Yes, I guess where I'm really going with this is that you've seen some tremendous price appreciation. I mean, you've seen price appreciation now that's pretty much on par, it would seem, in most of the hot markets, with your peers or even greater. And yet the margin guidance you're giving seems to be much more conservative than some of your peers. And I guess I'm curious as to whether or not this reflects a bit of a coiled spring that we might see lead to significant improvement in gross margin in 2014 or if there's something else that's more structural in your margin. And I guess the only structural thing I can really think of is that when I look at your company's margins in the past, you peaked out somewhere north of 30%. You're well below that now. I guess, the only thing that really comes to my mind is that you have a much longer land position than many of your peers. And so perhaps that 30% plus gross margin you achieved at the peak was a result of many, many years of price appreciation, which some of your peers weren't able to capture, that you were. And I guess, do you believe that, that was a major driving force behind your margins reaching such high peaks back in the mid-2000s? Or do you think that it really was primarily a function of just raising prices on a, let's say, trailing 2- to 3-year basis. Because if it's the latter, I would expect your margins would be approaching those prior peaks within the next couple of years. Robert I. Toll: From your mouth to God's ear. We're certainly ready for that phenomena to take place. But I wouldn't say that our prices went up because of pricing power in last 2 years. I think the description you gave at the initial try of what forced our margins up was more accurate. That we had long land positions that finally came through the snake. And when they spit out, they spit out with tremendous increased profits and, therefore, margins. And I would expect that we're building a backlog in land to replicate what happened before. So I think it's primarily the long line of growth. But we do increase prices as much as we can and especially when we run up against high backlogs in the communities that we are studying every Monday. Martin P. Connor: Steve, I guess I would add that many of the other builders have a shorter build cycle. So in an improving market, they can turn an order into revenue quicker than we do. So the price increases they get, they start reflecting 3 to 6 months later in their income statement. It takes us 9 to 12 because of the larger homes and the longer lead time. I would also say that one of the benefits of our longer land, whether this happened before or happens now, is that appreciation will benefit most of the lots in that stockpile as compared to going out necessarily and having to buy at current prices, land on an appreciated basis. Now, that's a generalization. Location is important and all that, but that's part of our strategic view. Robert I. Toll: We're seeing recently size making a difference. Because of the size of the company and the ability to raise money so easily in the bond market, we're able to take on deals that only a few of our competitors can take on as well. So that's adding this time around.

Your next question comes from the line of Nishu Sood with Deutsche Bank. Nishu Sood - Deutsche Bank AG, Research Division: Wanted to ask about your land acquisition so far this year. Since the beginning of your fiscal year, you've optioned more lots, in terms of your additions, than you have purchased out right. And that certainly runs counter to the trend to the general description of the land market out there, that the infrastructure for optioning lots, financial infrastructure, just isn't there like it used to be during the boom. So I just wanted to dig into that a little bit. One thought that came to mind was, obviously, since you guys do more land development, those sort of options may play a heavier role. Just trying to get your thoughts on what's enabled you to option more successfully than we're generally hearing. Douglas C. Yearley: I think we have a greater appetite for option land than some of the others. Remember, we have a very long land position. We had 90,000 lots, and we shed almost all of our option land so that we were left with 30,000 and now 45,000 lots, most of which was owned. So we're in a good position in most of our markets with owned land. And so we tend to look further out and look to tie land up that will come online after it's fully entitled, when we actually close on it, which could be 1, 2, 3, 5 years out. That's not say we don't go after land that is fully approved or even improved, but I think because we're in a good position with the owned land and we've always had the appetite to do our own land approvals and land development, we are looking further out than the others. Nishu Sood - Deutsche Bank AG, Research Division: Got it. Great. And the second question, I wanted to dig in on...

Excuse me, Nishu, this is Fred. You mentioned the financial structure in place for options. We're not typically doing land banking types of options. These are basically more conventional options with the seller. Nishu Sood - Deutsche Bank AG, Research Division: Got it, got it. I appreciate that color. The pricing on your new contracts, and I know that, that's an inexact figure given cancellations or whatnot, it accelerated to prior calculations of 17% order price, basically, year-over-year. I think I may have gotten the answer to my question earlier when you mentioned that you had some super sales out of the Hoboken and Gramercy project. I just wanted to confirm that. Douglas C. Yearley: I think it's a combination of price increases and mix. Yes. Okay?

Yes. And I think you're asking what's the purchase price by your math coming out on a per lot basis that we've done so far in '13, and we're still following historical norms, whether we're buying it raw, which is the majority of lots we buy or improve, which is the minority of lots. But that price per lot, except for a couple of outliers that you're mentioning, still follow historical norms, so 10% of the sales price, raw; pushing 20% of the sales price, improved. Nishu Sood - Deutsche Bank AG, Research Division: Oh, no, I was thinking of the pricing under new contracts, just working from your backlog and your... Douglas C. Yearley: Yes, I think he's off the lot issue when he was asking about the significant increase in price, is that because of Hoboken in New York, and that's why I answered it's a combination of mix and the price increases that we've achieved. Martin P. Connor: So California, where we've had significant sales. Douglas C. Yearley: Right. Martin P. Connor: In excess of $1 million homes. I think we did in Southern California, more than one a day for more than $1 million. Washington, Seattle, we had strong sales at higher price points. Arizona, we had strong sales at higher price points, particularly compared to a year ago. So if you look in our supplemental data, I think we're north of $800,000 on an ASP for contracts compared to mid-5s a year ago out west. And that is really a function a higher-priced homes. Nishu Sood - Deutsche Bank AG, Research Division: Got it. So does that mean that you're kind of mirroring the trend that we're seeing in the broader market? You've seen the move-up market stronger than the first-time-buyer markets, obviously, that's going to affect you folks, but also people being able to stretch their monthly mortgage payment a lot more. Are those -- are we seeing a similar trend here in what you're describing for you folks? Douglas C. Yearley: I think so. Don Salmon's here, runs TBI Mortgage. Don, why don't you give a quick overview of the mortgage market?

Well, I'll answer the question about stretching their payments. Stretching your payment is a function of interest rate. It's not a function of underwriting. Underwriting is still relatively tight. Most jumbo buyers, is what we're talking about, are maxing at about 40% DTI. But when you get to the lower interest rate, it, obviously, gives them the ability to stretch their payments. We're still in the 4% range on a true jumbo 30-year fixed-rate loan with no points. You can get a 10/1 ARM today with 0 points at 3.25%. So that's an awful lot of buying power. When you look at that on an after-tax basis, you're approaching 2% cost of capital to buy that asset. It's extremely attractive to people to do that, and that -- I think, that phenomenon is real and it's here. We'll see if it continues, but here it is. In terms of availability, we're seeing a lot more players in the jumbo market. We're dealing with 2 REITs today that we did not deal with 6 months ago, which -- and they're public REITs, which is terrific. We're in serious conversation with a major insurance company, who is going to shift their asset purchases from MBSs into directly buying the loans from originators. They love the Toll Brothers product, and that's going to be, we think, a terrific both conforming and jumbo product. But the real advantage for us, I think, is going to be in the jumbo end. We're looking at ability to leverage the Toll brand with them in terms of helping them with maybe some insurance product through our Westminster Insurance subsidiary, which I think will help both companies. So it's that kind of stuff that's going on in the marketplace, I think, that will be very helpful to us. Robert I. Toll: I want to make certain that we haven't left a misunderstanding with respect to the definition of optioned land. We're not talking land that a builder buys 30 lots and then he has to take down 6 a quarter for the next year, and then if he does that, he gets to take down 30 more, et cetera. We're not talking about those kinds of options, which is developer to production builder. What we're talking about is when we put land under contract, we give a down payment and a promise to close when we've secured the approvals and, in some cases, even installed infrastructure. If during the term of that contract, we decide that the land is not as it was supposed to be in terms of generating potential profit for us, then we walk away and leave the deposit on the table for the land seller. So that's one man's option. Another man would call it just an ordinary contract to buy land. So I wanted to straighten out the confusion in the definition of the word option. Nishu Sood - Deutsche Bank AG, Research Division: Got it. No, I appreciate that. So that makes sense then, that your "option," you're obviously describing a big bucket, has grown faster than your peers. That makes sense.

Your next question comes from the line of Megan McGrath with MKM Partners. Megan McGrath - MKM Partners LLC, Research Division: Wanted to ask you a little bit about inventory. We've got the macro U.S. housing data today at about 5 month's of supply, but curious as to your thoughts, either on a regional basis or for the luxury market, where you think the existing competition is now. And any color you're getting from your sales folks out there about any trends they're seeing, if it's starting to increase at all. Douglas C. Yearley: No. We're not hearing that. There is still very limited resale inventory in, I think, all of our markets or almost all of our markets. We haven't heard that it's increasing. Remember, the used home market does tend to begin a little later in the spring than the new home market because you can put your used home on the market in May or June and have it close in August, which is when most people want to move in. So I think that, that occurs naturally later in the spring, but it is still a very low number, which is helping new home sales. And we are not hearing about that increasing. Robert I. Toll: We can't get inventory in dollars [indiscernible]. Douglas C. Yearley: Correct. We're trying to build more and more stack, or what we call quick delivery homes, and they sell at foundation. So we can't even get sticks in the air that are unsold because the demand is so strong. Megan McGrath - MKM Partners LLC, Research Division: Great. That's helpful. And then just a quick modeling question, a follow-up on the Touraine. Just want to verify that you're still expecting to deliver all of those units in the third quarter? And if you could just remind us on the numbers there. Martin P. Connor: Sure, Megan. The Touraine is roughly $110 million of total revenue. We have not yet sold the penthouse, which is about 20% of that revenue. So that is not projected to deliver in the third quarter. The rest of the units, we are optimistic about delivering in the third quarter. But some of the more sophisticated detailed units, there is a potential for them to slide early into the fourth quarter. Megan McGrath - MKM Partners LLC, Research Division: And sorry, what's the number of -- the actual number of units? Martin P. Connor: So there are 21 units sold, 1 unit still available. Megan McGrath - MKM Partners LLC, Research Division: And the average price for about $4 million, yes? Douglas C. Yearley: We have about $90 million in backlog with those 21 units.

Your next question comes from the line of Joel Locker with FBN Securities. Joel Locker - FBN Securities, Inc., Research Division: Was just looking at your amortized interest. It's -- I know it's down to 450 basis points or so, but back in '05, I think it got down to as low as 220 basis points. But where do you see it in, say, 2014, coming down a lot from these levels or, I mean, maybe not close to '05 but just kind of where do you see that trajectory? Martin P. Connor: I think the trajectory will continue to come down because the inventory will have been held less, and the more favorable pricing on interest on our debt will contribute to that as well, plus we will continue to have a significant amount of more inventory than debt. So that should help us as well as we go into 2014 unless we choose to tap the markets for additional debt. So I can't give you a specific number, Joel, but it will continue to trend down. Joel Locker - FBN Securities, Inc., Research Division: And I was just curious on your mothball communities. I know you had about 90 2 years ago, and you had mothballed a couple a year and, I think, 3. How many of those are left in mothballed status, and how many do you plan to take out, say, in 2014? Douglas C. Yearley: We're down to 71. We've opened 5 so far this year, and we're projecting to open about 9 for the balance of the year. And we're not giving guidance yet on '14 community count, but right now we certainly expect to open more mothballs than the 5 plus 9 -- for then the 14 for this year.

Your next question comes from the line of Jade Rahmani with KBW. Jade J. Rahmani - Keefe, Bruyette, & Woods, Inc., Research Division: I wanted to ask with respect to the City Living business, if the pick up in CRE lending on the part of specialty finance companies and some of the banks creates more development opportunities. And on a related note, how comfortable you might be using project-specific leverage on your wholly owned future City Living projects? Martin P. Connor: So far right now, we are very comfortable building on our own balance sheet. We have put some project-specific debt on buildings where we have a joint venture partner in the past. And at Brooklyn Bridge, we may look to do that again, as it starts to incur additional cost here as it's constructed. In terms of paraphrasing your term, easy money, creating more competition out there, it may be the case. We haven't seen it overwhelm us yet. Jade J. Rahmani - Keefe, Bruyette, & Woods, Inc., Research Division: Okay. Can you quantify the amount of City Living G&A that's running through your SG&A line? Martin P. Connor: I don't think we're prepared to do that. We don't have that detail with us, and I don't think we look at it that way. Jade J. Rahmani - Keefe, Bruyette, & Woods, Inc., Research Division: Okay. And then just finally... Martin P. Connor: We don't look at any particular geography or product type. Jade J. Rahmani - Keefe, Bruyette, & Woods, Inc., Research Division: Okay. And then just finally, on the quality of the land deals you're seeing, how would you compare it this year or over the last 6 months with the types of deals you've looked at and executed on over the last couple of years? Beyond price, what other factors would you use to describe the deals, whether it be characterizing the types of sellers or whether it be the duration on when you would expect to bring those deals online? Douglas C. Yearley: As Bob mentioned earlier, I think we're doing bigger deals today than we've done maybe a few years ago when we were working with banks. And the banks, sometimes they had big problems and a lot of times they had small subdivisions here or there that they needed to get rid of. We're taking advantage of our capital structure, our ability to write the big check where there's a lot less competition. But we're also doing the 15, 20, 25 lot luxury suburban subdivisions, communities. So it's really all over the place. The sellers haven't changed except the banks are -- but it's been that way for some time now. The banks are no longer sellers for the most part. We're going back to more traditional sellers. There's more land out there because the sellers can now get a higher dollar. So those sellers that made it through and were waiting for better pricing, are now seeing that better pricing and bringing their land to market. Jade J. Rahmani - Keefe, Bruyette, & Woods, Inc., Research Division: And how would the locations compare now versus the last couple of years? Douglas C. Yearley: I mentioned earlier that half of the land we optioned this quarter came from our western region, which we're excited about because that's an area we're looking to grow. That's Seattle, Northern Cal, Southern Cal, Arizona. The -- I'm sorry, again. It seem... Jade J. Rahmani - Keefe, Bruyette, & Woods, Inc., Research Division: But in terms of quality like A, B location versus -- are you seeing the location, like, description move out? Douglas C. Yearley: No. If you're suggesting that the As have been picked over and all that's left is a couple of Bs and a lot of Cs and Ds, absolutely not. I think the quality today is as good or maybe even better than it's been. Martin P. Connor: Commitment and resolve to stay at Main Street and Main Street is very strong. Main and Main.

Your next question comes from the line of Jack Micenko with SIG. Jack Micenko - Susquehanna Financial Group, LLLP, Research Division: Your net debt-to-cap ratio has moved up in the last couple of quarters. Money is cheap. The business is improving. Is there a number we should think about as to maybe where that tops out at? Or any other way to think about that? Martin P. Connor: Jack, I think we've operated in the past in the mid to upper 40s debt ratio, and that number doesn't scare us moving forward. We have ways to get there with the $900-plus million of cash we have on our books right now. And as we grow and make money, increasing the cap, we're not averse to taking on more debt, so long as we see the appropriate uses for it. Jack Micenko - Susquehanna Financial Group, LLLP, Research Division: Perfect. And then any updates you can share with us on the apartment announcements from last quarter? And if anything's changed or there's anything incremental worth passing along there? Martin P. Connor: I think we're pleased with what we see there. We're making progress on the deals that we have previously announced. They are still a number of years away from producing revenue for the organization. We have around $130 million invested in that enterprise. That $130 million does not count and offset for $50 million to $55 million of unrealized depreciation we have on some of our existing buildings. If you were to offset that, we'd be down in the $70 million, $75 million range. We like what we're seeing. We like the progress we're making. We like the partnerships we're forming, and we have optimism about that business for the long term.

Your next question comes from the line of Jay McCanless with Sterne Agee. James McCanless - Sterne Agee & Leach Inc., Research Division: 2 questions. First one, did I understand or hear you guys correctly earlier that you increased prices at about 60% of the communities this quarter? And if that number is correct, is that number consistent across City Living and then everything else Toll builds? Or what is that mix in terms of one versus the other? Douglas C. Yearley: The number is correct. It's 60% of the communities, which represented 70% of the sales. And no, it's not consistent across geographies or product lines. City Living, we raised price, I think, everywhere. And... Martin P. Connor: Everywhere would be 5 communities. Douglas C. Yearley: Correct, correct. And in certain geographies like Northern California and almost all of Southern California, we're raising price, I believe, everywhere. When you get into Dallas, which is hot, and Houston, which is hot, we're probably raising price in 80%, so almost everywhere. And then, you get into some other markets that aren't quite as hot, and they will be less than 60%. So it's not only -- it's product-line driven and it's geography driven and we do it on a community-by-community basis. James McCanless - Sterne Agee & Leach Inc., Research Division: Okay. And then on the City Living delivery schedule that you all provided back in March, are there any changes to it besides the guidance that Marty gave about some of the Touraine deliveries potentially slipping into the fourth quarter? Martin P. Connor: I don't think there's any changes, Jay.

Your next question comes from the line of Alex Barrón with Housing Research Center. Alex Barrón - Housing Research Center, LLC: I wanted to see if we could talk a bit about the -- well, the actual leverage we've seen in the business on the SG&A side and what we might expect as we move into next year. I was kind of looking at, I guess, my expectations for your revenues and when the last time was that you guys got to those levels. And I think it'd be helpful if you could help me understand with the staff you guys have on board at the corporate level, and how much would you need to hire extra people, I guess, to handle what you expect to do next year in terms of deliveries? Maybe another way to put it is how fixed is the SG&A versus how much is the variable portion? Martin P. Connor: I think we're doing our best to control that, Alex, and -- but we do need some more people. We've probably increased our staff size since our fiscal year-end by about 5% to 7%, and we probably have another 5% to 7% of job openings. How many we'll need a year from now is probably a little bit beyond where we are thinking at this point. But you'll see, as you have, our SG&A increase. But we think it's modest, and we think the leverage coming from the revenues will more than offset that to show SG&A as a percentage of revenues continuing to trend down. Alex Barrón - Housing Research Center, LLC: Right, because this -- well, this quarter, I mean, your revenues were up 38%, and your SG&A was up 17% and -- which is great. And SG&A as a percentage of revenues was still high this quarter, but I'm expecting that in the very short term, we should be approaching, I guess, more normalized levels around 10%. In fact, I was looking at your historical levels and looks like before the bubble, you guys had some years where you were between 8% to 9%. So I was kind of wondering if that's somewhere where you think the business will trend over the next couple of years. Martin P. Connor: Alex, I've given guidance on an average SG&A of around $82 million for each quarter for the year. It was a little below that for the front end. It'll be a little higher than that for the back end. And either in my speech or in my -- or in the press release, I mentioned that revenues in the back 6 months of the year are going to be 50% higher than the front 6 months of the year. So I'll let you guys draw your own conclusions from that.

And there are no further questions at this time. I would now like to turn it back over to our presenters for any closing remarks. Douglas C. Yearley: Thank you very much, Dawn. Thanks, everyone, for listening in. We appreciate it very much. Have a great week.

This concludes today's conference call. You may now disconnect.