Jeffrey T. O'Keefe - Vice President of Investor Relations Ara K. Hovnanian - Chairman, Chief Executive Officer and President J. Larry Sorsby - Chief Financial Officer, Executive Vice President and Director

David Goldberg - UBS Investment Bank, Research Division Daniel Oppenheim - Crédit Suisse AG, Research Division Jason Aaron Marcus - JP Morgan Chase & Co, Research Division Adam Rudiger - Wells Fargo Securities, LLC, Research Division Ivy Lynne Zelman - Zelman & Associates, LLC Nishu Sood - Deutsche Bank AG, Research Division Susan Berliner - JP Morgan Chase & Co, Research Division Brendan Lynch - Sidoti & Company, LLC Megan McGrath - MKM Partners LLC, Research Division Eli Hackel - Goldman Sachs Group Inc., Research Division

Good morning, and thank you for joining us today for Hovnanian Enterprises 2013 Third Quarter Earnings Conference Call. An archive of the webcast will be available after the completion of the call and run for 12 months. This conference is being recorded for rebroadcast. [Operator Instructions] Management will make some opening remarks about the third quarter results and then open up the line for questions. The conference will also be webcasting a slide presentation along with the opening comments from management. The slides are available on the Investors page of the company's website at www.khov.com. Those listeners who would like to follow along should log onto the website at this time. Before we begin, I would like to turn the call over to Jeff O'Keefe, Vice President, Investor Relations. Jeff, please go ahead. Jeffrey T. O'Keefe: Thank you very much. Before we get started, I would like to quickly read through our forward-looking statements. All statements in this conference call that are not historical facts should be considered as forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved. Such risks, uncertainties and other factors include, but are not limited to, changes in general and local economic, industry and business conditions and impacts of the sustained homebuilding downturn; adverse weather and other environmental conditions and natural disasters; changes in market conditions and seasonality of the company's business; changes in home prices and sales activity in the markets where the company builds homes; government regulation, including regulations concerning development of land, the homebuilding, sales and customer financing processes; tax laws and the environment; fluctuations in interest rates and the availability of mortgage financing; shortages in and price fluctuations of raw materials and labor; the availability and cost of suitable land and improved lots; levels of competition; availability of financing to the company; utility shortages and outages or rate fluctuations; levels of indebtedness and restrictions on the company's operations and activities imposed by the agreements governing the company's outstanding indebtedness; the company's sources of liquidity; changes in credit ratings; availability of net operating loss carryforwards; operations through joint ventures with third parties; product liability litigation; warranty claims and claims by mortgage investors; successful identification and integration of acquisitions; significant influence of the company's controlling stockholders; changes in tax laws affecting the after-tax cost of owning a home; geopolitical risks; terrorist acts and other acts of war; and other factors described in the company's Annual Report on Form 10-K for the year ended October 31, 2012. Except as otherwise required by applicable securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason. Now, I'll turn the call over to Ara Hovnanian, our Chairman, President and Chief Executive Officer. Go ahead, Ara. Ara K. Hovnanian: Thanks, Jeff, and thank you all for participating in this morning's call to review the results of our third quarter, ended July of 2013. Joining me today from the company are Larry Sorsby, Executive Vice President and CFO; Brad O'Connor, Vice President, Chief Accounting Officer and Corporate Controller; David Valiaveedan, Vice President of Finance and Treasurer; and Jeff O'Keefe, Vice President of Investor Relations. Let me start on Slide #3. Our operating results continued to improve during the third quarter of fiscal '13. We see in the top left-hand portion of this slide that our revenues increased sequentially each quarter in fiscal '13, with the first quarter shown in gray, the second quarter shown in yellow and the third quarter shown in blue. Below this, in the bottom left-hand quadrant, you can see that as our revenues increased, both SG&A as a percentage of revenues and interest as a percentage of revenues declined sequentially each quarter from prior quarter. Since the first quarter of this year, we saw SG&A and interest percentages decrease 200 and 210 basis points, respectively. This demonstrates our ability to leverage the fixed component of these costs as we grow the top line. Moving now to the upper right-hand corner, our gross margin has also shown sequential improvements each quarter during fiscal '13. In the third quarter of fiscal '13, our gross margin increased 140 basis points when compared to the second quarter of 2013. And it improved 330 basis points compared to our first quarter. We've been telling you for many quarters that we were steadily marching back toward normalized gross margins in the 20% to 21% range. And we are pleased that our third quarter gross margin of 20.3% has begun to enter a more normal territory. Our positive operating trends resulted in approximately $11 million of pretax profit during the third quarter before the impact of about $600,000 of land-related charges. All of the above metrics on this slide represent year-over-year improvements for the third quarter as well. For the third quarter of 2013, we reported net income of $8 million. This is the second consecutive quarter that we reported net income and just about gets us to breakeven for the first 9 months of 2013. Given both the number of homes in our contract backlog and the gross margins on these homes, we expect to report much stronger results for our fourth quarter, assuming market conditions remain stable, and we are reiterating that our guidance, that we expect to be profitable for all of fiscal '13. On Slide 4, during the third quarter of '13, we showed that our net contract dollars increased 8%, and our net contract numbers increased about 2% compared to the third quarter of fiscal '12. We jokingly wish we had a June quarter end, so that we could have reported our net contract dollars were up 17% and the number of contracts were up about 10%, similar to what many of our peers recently reported that had June quarter ends. However, we've seen the market for new homes slow down a little during the months of July and August. To put this slowdown into perspective, we were well ahead of our internal year-to-date budgets for net contracts going into July, and we are now slightly behind our year-to-date internal budget for net contracts at the end of August. We attributed our sale -- we attribute our sales pace slowdown to a number of factors, including significant home price increases, higher mortgage rates and a little lower consumer confidence. And we'll discuss all of this in just a moment. It appears that consumers need a little time to adjust to the new home prices and mortgage rate environment. If you turn to Slide 5, we take a more granular look at our net contract data. Here, we showed the dollar amount of net contracts for each month in fiscal '13 in blue, the same month a year ago in yellow and the same month 2 years ago in gray. Our year-over-year monthly dollar amount of net contracts continue to grow through June of '13. However, during July, the last month of our quarter and August, the beginning of our next quarter, our sales activity slowed down a bit compared to last year when we posted some very strong year-over-year growth in these same months. Looking at the steady gains, we've posted for net contracts over the past 2 years, comparisons are definitely a little more difficult. If you turn to Slide 6, the number of Sundays per month clearly skewed our recent results just a bit. This slide shows the average weekly dollar amount of net contracts per month over the last 3 years. When you adjust for the number of weekends, June was not quite as good as it appeared from the previous slide because there were 5 Sundays this year, with only 4 Sundays in June of '12. Here, you can see June of '13, we had $40 million of net contracts per week, slightly less than June of '12. July was actually better than it looked on the previous slide since there are only 4 Sundays in July of '13, and we had 5 Sundays in July of '12. This slide shows a 20% increase in the dollar amount of weekly net contracts in July over the previous year. August was off about 5% compared to '12, still up about 43% compared to fiscal '11. I also want to point out on this slide that there are times during recovery periods when the market takes a breather. March of 2013 is a good example of that, and we've circled that comparison in the red line. The absolute dollar amount of net contracts in March of '13 increased 12% over the previous March. However, when you look at it on a weekly basis, again, most of our sales activity happens on the weekends, you can see that March of 2013 actually dipped a little bit below March of '12. But then, thankfully, we saw significant increases in the following months of April and May as the market got back on track. If you look at net contracts per actively selling community, as we do on Slide #7, you can see improvements through June here as well. The slide shows monthly net contracts per community for the most recent 12-month period in blue and the same month 1 year before in yellow. Prior to July of '13, we had 20 consecutive months of year-over-year increases in net contracts per community. Once again, the results would look a little less favorable in July -- in June and a little more favorable in July if you adjusted for the number of weekends in each month. I'll now discuss the 4 factors that negatively impacted sales during the month of July and August from our perspective. The first factor was seasonality. We typically experience a normal seasonal slowdown in the summer months, which for us happens to fall on our third quarter. If you turn to Slide 8, here we show the current seasonal adjustment factors published by the U.S. Census Bureau. This shows normal monthly home sales peaking in April and then a significant decline in the months of July, August and September. So clearly, seasonality played some role in the slowdown for us. Another factor was the conscious decision on our part to aggressively raise home prices in many of our communities, which often slows down sales pace temporarily. In good times and in bad times, the lever that we have to control is where we set our home prices. We closely monitor both our sales velocity and our competitors' velocity and pricing trends. When our actual sales pace exceeds our budgeted sales pace, we try to push prices. In hindsight, we might have been a bit aggressive with our price increases in numerous communities, and you'll see an example -- a few examples of that in a moment. Throughout the first months -- 9 months of fiscal '13, we raised prices in about 80% of our communities. This was particularly evident in California. It's been harder to find new land acquisitions in California compared to other parts of the country, so it's very important for us to try to maximize profitability from the land that we do already own there. I'd like to show you a few micro-level details of sales and pricing at several communities around the country. If you turn to Slide #9, here we show the sales pace and sales prices by week on this slide. The net contracts each week for the trailing 12 months are the -- represented by the yellow line. And the average sales price each week is represented by the blue line. The axis for the blue line is on the right-hand side. This is for one of our communities in Northern California. From the beginning of this graph, in August of '12 through August of '13 at the end of the graph, we raised prices $131,000 or 38% in the single-family detached community at Roseville, California. Starting with the period, we indicated by the red-letter 1, sales were very strong. And during Period #2, where we show what we did with pricing, we got quite aggressive and raised prices $50,000 in 3 separate price increases from the end of February to the end of March. In the following 1.5 months, designated by Period 3, sales slowed down after those price increases. However, after a few slow weeks of selling at these higher prices, sales on their own finally started to pick up here again as people adjusted to the prices. And you could see that in Period 4. We quickly responded by raising prices, again with 4 additional price increases totaling $25,000. You can see that in the area we marked as Period 5. Clearly, this time we got a little overexuberant with the last price increase in June, which amounted to an aggregate total of $141,000 in 12 months or 40%. We only sold 1 home over the following 7-week period. In the 7 weeks prior to the June price increase, we sold 7 homes or 1 per week. As you can see in Period 7 on this graph, we recently made a small downward pricing adjustment in this community to try to increase the sales pace, and it resulted in a sale the very next week. Even at these adjusted prices, our margins would be above those on any of the homes we delivered during the third quarter of this year in this community. We show another community, this time in Southern California, on Slide 10. This single-family detached community is in Lake Elsinore, California. First, you can see in Period 1, sales started to accelerate in March, our normal spring selling season. We immediately responded with price increases, $35,000 in 3 stages as noted in Period 2. Sales continued at a more normal pace as you see in the area, in the period designated as #3. So we continued to raise home prices an additional $20,000 as noted in Period 4. Again, the final price increase might have been a bit aggressive in hindsight as the sales that we saw in the period that followed, which we marked in #5, slowed. We only sold about 5 homes in 12 weeks, and in the prior 12-week period, we sold 16 homes. However, you can also note that in the last few weeks, sales have started to pick up again. On Slide 11, we show our last example, this one on the East Coast, a single-family detached community in Woodbridge, Virginia. Over 9 months, we had 5 separate price increases totaling $47,000 or 12%. The last price increase in June finally slowed sales down. Recently, we made a minor $5,000 downward adjustment in prices, and we saw sales resume to a more normalized pace. The current prices are higher even after this small adjustment than any of the homes that we've delivered so far. These are just 3 examples of communities where we raise home prices to the point of significantly slowing down sales pace. When we first talk about increasing home prices, we stressed that we wanted to be careful not to cut off sales pace. Growing our top line is still important to achieving great performance. When appropriate, we are addressing these slower sales paces in some communities by offering some special concession or something that effectively lowers the net price, particularly now on started unsold homes. In other cases, the team prefers to wait a little longer for the market to adjust, and they feel confident that it will. We continue to test pricing throughout all of our markets. In many cases, like the examples I just showed you, we definitely found the top of the market in the pricing and had to react accordingly. Slide 12 shows weekly traffic in these same communities. As you can see, while sales slowed down for periods during these 3 communities, the traffic has remained quite steady and even increased in some cases. That's a positive sign that gives us some good solid confidence. Undoubtedly, a slight decline in consumer sentiment and the rise in mortgage rates during the same period that we were very aggressive in our price increases affected sales and took away some of the sense of buyer urgency. However, we're confident that the -- any hesitancy our consumers have seen or felt or acted with the higher rates will be a temporary bump in the road to housing recovery. Our confidence is bolstered by an analysis of long-term home ownership affordability, which we show on Slide 13. Even though there are some sticker shock for customers with the recent increase in mortgage rates and the increase in home prices, we're still very comfortable at the affordability levels compared to historic standards. Even if the 30-year mortgage rates were to increase 100 basis points to 5.4%, home -- and if home prices on top of that went up another 6% from the June '13 levels shown on this slide, affordability would still be better than at any point in the period, shown on this slide, '75 through 2007, notwithstanding the current few months' record-high affordability levels. Many people seem to think that interest rates in the 4.5% range that we saw in July were absolutely too high, and people would completely stop buying, no one would be able to qualify for a home. Obviously, that hasn't quite been the case, although it had a little more effect than frankly we thought, when you combine it with a little consumer sentiment slowdown and some very aggressive price increases. But if you turn to Slide 14, we show you where interest rates and total housing starts were in each of the last 3 housing recoveries. And I think this slide puts the current environment into a little better perspective. In 1983, after the recessions of the early '80s, we started more than 1.7 million homes in this country, almost double the current pace. And 30-year mortgage rates were over 13%. In '92, right after the '90,'91 recession, mortgage rates were over 8%, far higher than they are right now. And we started almost 1.2 million homes, a greater number than we have now. And most recently in 2002, after a short recession in 2001, 1.7 million homes were started when rates were about 6.5% on average, about 50% higher than they are right now. During each of these recoveries, we built far more homes than we're currently building, with rates that are much higher than they are today. Slide 15 shows the annual net contract per community for the last 16 years. The seasonally adjusted number for the first 9 months of 2013 is shown in blue, and it's an improvement at 32.3 net contracts per community compared to last year's pace of 28.1. However, there is still a substantial amount of upside opportunity before we return to more normalized pace levels in the mid-40s per community that you see on the left-hand side of this slide. Even with the slower sales pace in our July quarter, on Slide 6, we show you that when you compare us to our peers, we still have the fourth-highest net contracts per community in the industry from the prior 12 months. And that compares our results to most of our peers that had a quarter that ended in June, typically a better period. On Slide 17, we show consolidated newly-identified communities in yellow and legacy communities in blue. We finished the July quarter with 186 wholly-owned actively selling communities. Since the end of fiscal '12, our wholly-owned community count has increased about 8%. Our community count is beginning to reflect the efforts we've been making to control new land parcels in all of our markets. This increase in community count should help us to continue to grow our net contracts and revenues as we move forward. During the third quarter, we controlled 3,900 additional lots, and we spent $148 million on land and land development, which is higher than the average of $119 million that we spent during the previous 4 quarters. We definitely have the liquidity to keep buying more land as we move forward, and we'll discuss that a little more in Larry's portion of the presentation. Slide 18 shows our quarterly deliveries in blue and the net additions of newly-acquired land in yellow. For each of the past 5 quarters, over this time period, our net additions were in excess of our home deliveries. The land market certainly remains competitive in each of our markets, and our land acquisition teams had been very busy. When evaluating these land parcels, we remain disciplined in our underwriting assumptions. We are still able to find land that generates unlevered IRRs that meet or exceed our underwriting guidelines, based on current home prices and current sales pace without appreciation factored in. While we don't assume appreciation, nor do we assume increase in construction costs or absorption paces when we underwrite land, for a limited number of prime land sites in strong markets, we occasionally will lower our 25% IRR to around 20%. Our ability to grow our top line along with increasing gross margin allowed us to improve our performance during the third quarter of 2013. Although we are pleased with the improvement, we recognize that we still have much work to do. We've got to control more new land, grow our revenue further and continue to exercise our business plans in order to return to the levels of profitability that justify our shareholders' confidence. Now, I'll turn it over to Larry. J. Larry Sorsby: Thanks, Ara. On Slide 19, we show our homebuilding gross margin percentage each of the past 10 quarters. We've seen a steady trend of increasing gross margins over this time period, ending with the third quarter gross margin of 20.3%. During the third quarter of 2013, 77% of our wholly-owned deliveries were from newly-identified land parcels compared with only 39% in the second quarter of 2011. This increase in deliveries from newly-identified land parcels have certainly played a role in getting the gross margin back to normal levels. As Ara mentioned, we will be taking appropriate actions to increase our sales pace going -- in the future, including lowering home prices when necessary, but don't leap to the conclusion that our gross margin will drop. The gross margin for the third quarter reflected homes that were contracted in prior periods and in the vast majority of cases, do not reflect the price increases we implemented during the third quarter. Our fourth quarter deliveries are largely in backlog and will not be materially impacted by any actions we take to regain our sales momentum. Turning to Slide 20, we continue to make good progress on leveraging our total SG&A expense. On this slide, we show total SG&A as a percentage of total revenues. Here we show 2011 in gray, each quarter of 2012 is in yellow and the first 3 quarters of 2013 are in blue. Below each of these bars, we show the absolute dollar amount of our total SG&A for each quarter. As seen on this slide, SG&A as a percentage of revenues has declined each of the past 7 quarters on a year-over-year basis. During the third quarter of fiscal 2013, our total SG&A dollars increased slightly to $56 million compared to the second quarter of fiscal 2013. However, our ability to grow revenues without proportional increase of SG&A continues to provide us with operating leverage. Total SG&A as a percentage of total revenues improved from 12.4% in fiscal 2012's third quarter to 11.8% in our third quarter of fiscal 2013. On Slide 21, we show our annual total SG&A ratio as a percentage of total revenues, as well as year-to-date comparisons through the first 9 months of 2013 and 2012. For the first 9 months of 2013, our SG&A ratio dropped to 12.5%, down 170 basis points compared to the same time period last year. In normal times, our SG&A ratio is approximately 10%. As we continue to generate revenue growth, we expect to be able to leverage our fixed SG&A expenses and get this ratio back to a normalized level. We remain very focused on controlling new land parcels. On Slide 22, we show that since 2009 -- of January of 2009, we've controlled 30,100 lots in 497 communities. At the end of the third quarter of 2013, there are still about 20,100 of these newly-controlled lots remaining at attractive land values for our future deliveries. The right-hand side of this slide shows the total gross additions during the third quarter were 4,100 lots and that we walked away from about 200 newly-identified lots. In recent quarters, these walkaways have typically occurred during the initial due diligence period, and our deposit has been refunded. The net result for the third quarter was that our total lots purchased or controlled since January 2009 increased by about 3,900 lots sequentially from the second quarter of 2013. Turning now to Slide 23, you'll see our owned and optioned land position broken out by our publicly reported segments. Based on our trailing 12-month deliveries, we own 3.1 years worth of land. However, if you exclude the roughly 6,700 mothballed lots based on delivery rate of the past 4 quarters, we only have about 1.8 years worth of land. At the end of the third quarter, 83% of our optioned lots are newly-identified lots. Excluding mothballed lots, 76% of our total lots are newly-identified lots. Our investment in land option deposits was $63 million at July 31, 2013, was $62 million in cash deposits and the other $1 million of deposits being held by letters of credit. Additionally, we have another $10 million invested in predevelopment expenses. Turning now to Slide 24, we show our mothballed lots broken out by geographic segment. In total, we have about 6,700 mothballed lots within 51 communities that were mothballed as of July 31, 2013. The book value at the end of the third quarter for these remaining mothballed lots was $125 million net of an impairment balance of $443 million. We're carrying these mothballed lots at 22% of their original value. Since 2009, we've unmothballed approximately 3,500 lots within 62 communities. As home prices continue to rise, we expect to unmothball additional communities as we move forward. Every quarter, we review each of our mothballed communities to see if they are ready to be put back into production. Assuming market conditions remain strong as we look across the entire country, there are approximately 500 lots in 4 communities that could move from mothballed to active over the next couple of quarters. The combination of our 20,100 remaining newly-identified lots and the 6,700 mothballed lots provides approximately 26,800 lots at very attractive land values for future deliveries. Looking at all of our consolidated communities in the aggregate, including mothballed communities, we have an inventory book value of $1.1 billion net of $643 million of impairments, which we recorded on 91 of our communities. For the properties that have been impaired, we're carrying them at 22% of their pre-impaired value. Another area of discussion for the quarter is related to our current deferred tax asset valuation allowance. At the end of the third quarter, the valuation allowance in the aggregate was $941 million. Our valuation allowance is a very significant asset, not currently reflected on our balance sheet, and we've taken many steps to protect it. We expect to be able to reverse this allowance after we generate consecutive years of solid profitability and continue to project solid profitability going forward. We are predicting the return to profitability for our full 2013 fiscal year. As we said last quarter, if current market trends continue next year, we are optimistic that we could reverse the vast majority of our valuation allowance in the fourth quarter of fiscal 2014. When the reversal does occur, we expect the remaining allowance to be added back to our shareholders' equity to further strengthen our balance sheet. We ended the third quarter with total shareholders' deficit of $467 million. If you add back the total valuation allowance as we've done on Slide 25, then our shareholders' equity would be $474 million. While we have no intentions of issuing equity anytime soon, we could issue approximately 100 million additional shares of Hovnanian common stock for cash without limiting our ability to utilize our net operating losses. Let me reiterate that the tax asset valuation allowance is for GAAP purposes only. For tax purposes, our tax assets may be carried forward for 20 years from occurrence, and we expect to utilize those tax loss carryforwards as we generate profits in the future. We will not have to pay federal income taxes on $2.1 billion of future pretax profits. Now let me update you on our mortgage operations. Turning to Slide 26, you can see the credit quality of our mortgage customers continues to remain strong, with average FICO scores of 746. For the third quarter of fiscal 2013, our mortgage company captured 73% of our non-cash home-buying customers. Turning to Slide 27, we show a breakout of all the various loan types originated by our mortgage operations for the third quarter of fiscal 2013 compared to all of fiscal 2012. 22.5% of our originations were for FHA loans during our fiscal 2013 third quarter compared to 27.8% we saw during all of fiscal 2012 and the 34.1% we saw for FHA during all of fiscal 2011. Our use of FHA mortgages clearly has declined. At the same time, we saw our conforming conventional originations increase to 61.4% during the third quarter of 2013 compared to 53.7% for all of 2012 and 47.1% during all of fiscal 2011. Now turning to our debt maturity ladder, which can be found on Slide 28. We have only $122 million of debt maturing before 2016, and we remain quite confident that we can deal with the unsecured notes maturing between 2014 and 2017, either through refinancing them or paying them off as they come due. After spending $148 million on land and land development, we ended the third quarter of fiscal 2013 with approximately $227 million in homebuilding cash, including cash used to collateralize letters of credit. Additionally, during the third quarter, we announced that we obtained a $75 million, 5-year, unsecured revolving line of credit from Citibank, which further enhances our liquidity position. Prior to obtaining the revolving credit facility, we established a $170 million to $245 million cash target range. While we're not changing our cash -- our target levels, we are modifying our target to a liquidity target range rather than a cash target range. Total liquidity for this target will include homebuilding cash, plus any undrawn amount available under our revolver. At the end of the third quarter, we had $227 million of homebuilding cash and $52 million available to be drawn under our revolver for a total liquidity position of $279 million. As you can see on Slide 29, we show our liquidity position as of July 31, 2013 on the left, and our $170 million to $245 million targeted liquidity range on the right. Even though we spent $148 million on land and land development during our third quarter, which is more than the $119 million we've averaged on land spend for the previous 4 quarters, we remain above the $245 million upper end of our targeted liquidity range. We feel good about our liquidity position. And if we find sufficient new land parcels that meet our underwriting hurdle rates, we would remain comfortable even if liquidity was at the lower end of our target range. Finally, over the past couple of years, we've been explaining to investors that we believe we would be able to increase our inventory turnover rate, which allows us to grow the company even if we did not increase our capital position. On Slide 30, you can clearly see the progress we've made on this front during the past year. The first bar shows our inventory turnover rate at 2.1x in fiscal 2002 before the boom and bust of the industry. The next 2 bars indicate our turnover rates during fiscal 2011 and 2012. We increased our inventory turnover rate from 1.1x in fiscal 2011 to 1.4x during fiscal 2012. Looking to the right-hand side of the slide, you'll see that the trailing 12-month basis ended July 31, 2013, our turnover rate increased further to 1.7x, which is also slightly higher than the 1.6x for the trailing 12 months as of April 30, 2013. We believe our historical turnover rates in excess of 2x will be achievable again in the future. That concludes our formal remarks, and we'll be happy to open it up for Q&A now.

[Operator Instructions] Your first question comes from the line of David Goldberg representing UBS. David Goldberg - UBS Investment Bank, Research Division: My first question was on land acquisition and I wanted to get an idea how you guys are thinking about this potential uncertainty. I know you believe it's kind of a blip in the road here in July, and consumers maybe just needed to adjust to higher rates and the increase in home prices. But given you've had to pull back price in some of your communities to restart sales as you kind of reviewed in the presentation, how are you thinking about the potential downside on land acquisition? And how are you kind of managing against that risk? Ara K. Hovnanian: Right now, obviously, as we always do, we use the most current prices in evaluating our land acquisitions. So if there were sites where we have done a downward adjustment and frankly, they're tiny adjustments relatively speaking, then we use the current pricing, which would be lower. At the moment, we still see lots of opportunity, and we're moving forward on our acquisition plan without hesitating. Obviously, as always, we'll look at every month's results. And if we really felt like there was a broader overall market slowdown, we might alter our plans and we have plenty of time to do that. We're well below our targeted investment levels. So we've got a while to catch up to where we'd like to be and have the capability of being. And so we'll have an opportunity to adjust if we need to. I'd be surprised. J. Larry Sorsby: David, in addition to Ara's comment about price, our underwriting also self-adjusts for current absorption pace as well. So whatever is currently going on with home prices, currently going on with weekly, monthly absorption pace is taken into account towards our IRR hurdle rate. David Goldberg - UBS Investment Bank, Research Division: That's very helpful. My follow-up question was actually kind of on price discounts. I know you mentioned in a couple of slides taking pricing down. And obviously, after big moves in taking very slight price adjustments relatively. So I'm not trying to focus on the negative, I think pricing gains you've had are fantastic. But what I'm trying to understand is when you decide to cut prices, what are the other options that are available to you? Maybe taking some amenities out of the home to keep the price a little bit more affordable for the buyer or maybe doing them -- offering incentives in other ways like buying down rates or something like that. How do you thinking about the profit before you actually go to cut prices, which is, I would believe, much more visible to the buyer? Can you give some of the tools that are in the tool belt to use and how you think about employing those tools to help if needed to kind of restart the sales level you're comfortable with? Ara K. Hovnanian: Yes. There are a number of different approaches, and we really leave it up to the local management to decide what's the best approach that they would like to make. And by the way, in some cases, even though they've seen sales, let's say, below their budget for a month or 2, they may choose to do nothing and unless it really became a significant issue, we're okay with that. It's often in cases where they're way head of sales already for construction, and they don't mind having a little period of slowdown in a specific community for that community to catch up. But as you point out, there are a variety of ways to do it. One way is to just make an adjustment on spec homes that are ready to go. And that's often is a little less visible, it's a specific home. In other cases, they may do adjustments on lot premiums. Also, a little less visible perhaps than some. Although we're not overly concerned about the visibility because we, in many cases, where we've got too aggressive, more of the homes -- most of the homes are sold at lower prices anyway. So it's not as though there are a lot of buyers that would be upset at those higher prices. In other cases, it might be an incentive for somebody that buys a home and closes by our fiscal year end with a period. Maybe they'll throw in some appliance package or some nominal little promotion. And yet, in other cases, a couple of our divisions are looking at -- for specific communities perhaps for it's -- again, for specs looking at a short-term rate buy down with a limited amount. So they're looking at all the different tools, and we really leave it up to the local divisional management to make the selection. J. Larry Sorsby: And, David, just a final point, which may not have come across 100% clearly during the presentation. Those 3 slides that we gave as examples, that showed net pricing. So if one of our local teams decided to add incentives or some other form of concession rather than absolutely lowering the price, it still shows up as a net price decline, but they would've used some other tool other than just lowering the price.

Your next question comes from the line of Dan Oppenheim with Credit Suisse. Daniel Oppenheim - Crédit Suisse AG, Research Division: Just wondering if you can -- just start by talking about the idea of terms of raising price and what have you in the community level but also thinking what you're doing there in Red Bank in terms of just offering some guidance towards the regional level. And then, if we look at those 3 communities you're highlighting, there are some meaningful price increases that were taking place and implemented, call it, in May into June, at a time when rates were going up. And while it's clear that there's strength there and you could see from the springtime the demand, what about sort of just taking a step back saying, gee, with rates going up like this, should we be a bit less aggressive here? And just given the -- what can be problematic in terms of cancellations as you end up having to bring down pricing, just how do you think about that overall in terms of just guiding those -- the price increases and the pricing decisions at communities? Ara K. Hovnanian: We generally do not get from the corporate level, do not get very specific about prices other than to give general ranges. Generally speaking, we have encouraged our management teams to find the market. I think there were homes that were sold by ourselves and others that were under what the market was willing to bear. And perhaps, in retrospect, we could have or should have taken into account the effect of the rates. But we certainly saw pretty good sales even while the rates were going for some extended period of time. So we felt it was most prudent to continue to find the pricing and then we just adjust and react accordingly as we know how to do. Unfortunately, we had do it on the way down when things were really going down and we were able to do that effectively. And we wanted to find the top this time as well. And as we've shown you in a few cases, we've had to adjust it and that's been fine. In other cases, we really didn't do much adjustment and the market just got used to it for 4 or 5 or 6 weeks. And eventually, sales just picked up on their own without any additional incentives, just as they got over the sticker shock. So I mean, it's hard to call it perfectly, but we feel okay about what we're doing. If the sales continue much at slow paces in September and October, we would certainly look at doing some broader based adjustments. But hopefully, that won't be the case. Daniel Oppenheim - Crédit Suisse AG, Research Division: Great. And then, I guess, one follow-up. In terms of the -- just having seen some things in the past, we always just worried when there aren't any down adjustments in terms of cancellations. But given that -- the way that the orders did slow up since the last price increases, there probably isn't much of the backlog that would be if price is higher than where we are today. So feeling pretty confident in terms of what the future cancellation risk there in terms of just deliveries, correct? Ara K. Hovnanian: Yes, exactly the point. I mean, we didn't typically sell many homes at that IRR price, which is why we're looking at lowering now.

The next question comes from the line of Michael Rehaut representing JPMorgan. Jason Aaron Marcus - JP Morgan Chase & Co, Research Division: This is actually Jason Marcus in for Mike. Just moving back to the land market for a minute. I was just wondering if maybe you could comment on some of the recent trends that you've seeing as you're looking to purchase new land in terms of the competition and the pricing. And maybe if you've seen anything meaningful given the interest rate move over the last several months in terms of what you're seeing in the land market. Ara K. Hovnanian: It's interesting, and it's a good question, we -- in some of the very heated markets, we found some peers were beginning to either factor in a lower hurdle rate than we were willing to take on the IRR or they were factoring in some appreciation or so it seemed to us because there were prices that transacted that were a little higher than what we could justify. Just anecdotal feedback from the road, I was out on the West Coast a few days ago, was that they felt in the last month or so that, that has tapered a bit. And again, this is unscientific, but the feedback was that many of our peers that were anxious to fill the pipeline made some progress in filling their pipeline and are now not being quite as aggressive, which is frankly helpful for us but we shall see. That's just anecdotal from the last month or so. Jason Aaron Marcus - JP Morgan Chase & Co, Research Division: Next question. In terms of your buyer mix, have you seen -- in terms of the impact from interest rates over the last couple of months, has there been one segment that has -- maybe was more impacted than some of the others as you look across the different buyer segment? Ara K. Hovnanian: I think, I would say, the comments are pretty much like we have been making over the last few quarters and that's that the market overall has improved and perhaps, the group that still has not jumped in as much as the others is the first-time homebuyer market, which I've mentioned on prior calls was counterintuitive to me because they didn't have a home to sell, so they weren't burdened with an underwater mortgage. But that is the group that's been the most affected typically with the stricter qualifications right now, in my opinion, too strict. There are people that we were able to approve for decades are having a tough time today. I'm not talking about the ones that got subprime but those that were tried and true borrowers, really did not have problems. Those buyers at this moment because the pendulum has really over swung in my opinion, they are having a tough time. Eventually, the pendulum, I think, will swing back to normal. Normal not being the subprime days but before subprime. And I think that will help really round out the recovery by bringing that part of the food chain, if you will, the entry-level buyer into the overall market as well. But generally, we're seeing the active adult buyers come in, the move-up buyers come in. It's been -- and by product, I mean, whether they're townhouses or singles, we've seen it do well. Generally speaking, a little higher price points in larger homes are fairing quite well. Jason Aaron Marcus - JP Morgan Chase & Co, Research Division: Lastly, can you provide the order number for August excluding JVs for this year and last year? J. Larry Sorsby: Hold on for a second. We'll see whether we have it at our fingertips here. Got it, Jeff? Jeffrey T. O'Keefe: Yes. It was 390 during August 2013 versus 430 during August of '12.

The next question comes from the line of Adam Rudiger representing Wells Fargo Securities. Adam Rudiger - Wells Fargo Securities, LLC, Research Division: I guess, sticking with just with the same topic we were just discussing, mortgage availability, given your comments on--there was an article today in the Wall Street Journal on conforming loan lids. Any thoughts on how that will impact your business, if at all? J. Larry Sorsby: What did the article say? Adam Rudiger - Wells Fargo Securities, LLC, Research Division: Just that the temporary extension up to the $600,000, $700,000 range is going to be reduced. J. Larry Sorsby: We all sell -- I mean, our average home price is a little over $300,000. I don't think it will have a significant impact on us. It may have a very incremental negative, but we are seeing a little bit of money coming in on the nonconforming side. So I'm not overly concerned about it. Obviously, nonconforming mortgages are more expensive. So again, it's an incremental negative but because of where our price point is, I don't think it's anything to be overly concerned about. Ara K. Hovnanian: Yes. Interestingly, I've heard some comments and I haven't even had a chance to chat with Larry about it, that some of the jumbo rates we're hearing about on the private sector are coming in lower than our GSC rates. It will be interesting to see how that plays out. Adam Rudiger - Wells Fargo Securities, LLC, Research Division: Okay. And then going back on Dave's question earlier, could you actually -- can you tell us what the incentives were this quarter as a percentage of sales price relative to a year ago? J. Larry Sorsby: No. We just don't track it that way. Ara K. Hovnanian: Yes, yes.

Your next question comes from the line of Ivy Zelman representing Zelman & Associates. Ivy Lynne Zelman - Zelman & Associates, LLC: You gave a lot of great information. I thought your presentation and the examples you gave of the 3 markets on what your pricing and sales pace were was very, very helpful on transparency or gave us great transparency. But if you walk through the portfolio, sort of as you looked at it in aggregate, maybe you can talk about what the magnitude of communities where you were, let's say, forced to reduce price versus those that held steady versus those increased in total to give us sort of a broader perspective? And then just, Larry, in one of your comments, you talked about that the margins and backlog going into fourth quarter are going to be higher given that any of your price actions would not be reflected in fourth quarter. Are price actions that you've taken going out when those units do get delivered going to be a drag on margins where we'd actually see some potential margin compression because of the price actions that you took that won't close in for a few more quarters? J. Larry Sorsby: Let me just address the second part of your question first. To clarify, what I said was don't leap to the conclusion that these recent price tweaks that we've done are going to cause margins to deteriorate. I didn't say gross margin is going to be higher in the fourth quarter. I didn't make any prediction about fourth quarter gross margins. I just didn't want anybody to think that all of a sudden, we're going to have a big decline in gross margins for fourth quarter because even in the third quarter, the price increases that we instituted in the third quarter weren't a part of our third quarter deliveries. They are still in backlog, which may have led you to conclude that I'm saying that gross margins are going to go up, but I didn't quite say it that way. And I would also say that these tweaks in pricing that we've made community-by-community and again, we've encouraged our divisions where appropriate, to make adjustments. But it isn't widespread that they've actually occurred. So we're just kind of playing the market out to see what's happening at this point. Maybe Ara wants to add additional color. Ara K. Hovnanian: Yes. I think -- well, again, to even further clarify or reiterate Larry's point, that the examples we gave where we actually lowered prices a bit, the deliveries from those sales will probably have higher margins than the deliveries from those -- from our third quarter in those communities. So they were minor in amount and our prices are still higher than what we delivered in those. So I wouldn't be overly concerned on that. The -- if you look at our contracts from the release by geography, you'd see the West had the biggest decline, and that's the place where we saw the most price increases and where we've done a little bit of adjustment. Some of our other markets, we haven't done a lot. They still were up. You'd see that in the Midwest was up year-over-year. The Southeast was up year-over-year, so we haven't had to do a lot of adjusting in some of those markets. More of it was focused on the West. Mid-Atlantic was -- maybe had more examples because they were up only a couple of percent versus the Midwest and the Southeast where we had sales up -- net contracts up in the mid-20% range, if that gives you some clarity. Ivy Lynne Zelman - Zelman & Associates, LLC: No, that's helpful. If you guys talk about maybe more specifically, your spec strategy. I know that industry as a whole has not that much inventory in the market, completed specs certainly, even just started spec. With respect to the slowing that we've seen or softness and not realizing if it's going to pick up anytime soon. We know other builders are already in some markets that are not as -- I guess, don't have as easy access to capital could start to get nervous and start to use more concessions. So tell us about your spec strategy, what percent of inventory would you start specs or started specs? And will you change that strategy in light of a softer market? And how do you react to competitors who are starting to use concessions that are worried about getting their money out of the ground? J. Larry Sorsby: In the appendix to the slide deck is some pretty good information on our current position on unsold homes. We had 617 started unsold homes as of July 31, excluding models. Since 1997, we've averaged 4.7 started unsold homes per community. As of July 31, 2013, we're only at 3.3 started unsold homes per community, so we're lower than average. And you can even see kind of the yellow on that slide trending downward. So we've been pretty conservative in terms of the amount of started unsold homes. I understand your point with respect to there may be some builders that have been a little more aggressive, and they may cut prices. We've seen that in prior cycles, prior quarters. And we just address it community-by-community rather than kind of broad-based situation. And it's usually short term in nature, short lived kind of proposition. Ara, do you have any other comments? Ara K. Hovnanian: No. I would just end, overall, that we have fewer specs than our peers per community. If anything, I just recently reviewed the data. I don't remember the exact numbers, but I was surprised that we were quite a bit lower than some of our peers that had ramped up a bit more. Maybe that ramp up helped them in their recent few months of sales because they really had some homes that were obviously available for quick delivery that we didn't have. But we're not making any general change in our strategy right now. I think our decline in specs really resulted from faster sales than we had planned as opposed to any wide strategy to reduce the number of specs that we have.

Your next question comes from the line of Nishu Sood representing Deutsche Bank. Nishu Sood - Deutsche Bank AG, Research Division: I wanted to follow up on some of the land spend questions earlier. Your pace on lot acquisition has increased pretty impressively. And so I wanted to just get a sense of where you've been most successful in acquiring new lots just geographically. And maybe if you could kind of color that with your commentary earlier about what's driving the land market right now. Ara K. Hovnanian: I'd say just quick thoughts. And I don't have the exact numbers at my fingertips, but we haven't been as successful in Northern and Southern California and I -- as I'd like. I don't think they've held their percentage of our acquisitions. And probably in Minneapolis, we haven't been quite as able to get the sites that we'd like that pencil out. The other market that might come to mind is Orlando. We'd certainly like to be more aggressive than we've been. Those are the only quick standouts that come to mind. Having said that, I think we are making some progress in each of those and would hope to enter contracts and get through land committee in those markets with some more parcels. Nishu Sood - Deutsche Bank AG, Research Division: Got it and I agree. And following up on Ivy's question earlier about spec strategy. Just thinking about it a little bit differently, I wanted to get your thoughts on the industry, the evolving spec strategy here. With the volatility in interest rates obviously waiting for a to-be-built home especially with the rising material and labor shortages, 6 to 8 months is a long period of time to wait in terms of mortgage rate volatility. So you laid out what your strategy is going to be. Do you think the industry might begin to respond with a greater number of specs just due to the volatility in mortgage rates? Ara K. Hovnanian: That's an interesting thought. I really haven't focused on that. Generally, by the way, our spec strategy is a little different geographically. Houston, in particular, we run -- generally run our business with a spec strategy. Almost everything starts as a spec in the Houston geography, maybe not quite that extreme in Dallas but close to that. And then, if you exclude townhouses in the D.C. or the New Jersey market, we build virtually no specs and almost everything is to order. It is probably something worth pointing out, worth us focusing on in a potentially rising mortgage rate environment to think about that. It's a good point, and we'll probably kick it around a bit.

[Operator Instructions] The next question comes from the line of Susan Berliner representing JPMorgan. Susan Berliner - JP Morgan Chase & Co, Research Division: I guess, just starting with land spend going forward. Are you guys updating your land spend forecast for the remainder of the year at all, are you changing that at all? J. Larry Sorsby: We didn't make one to begin with. So I don't think we're going to adjust it now, Sue. But I think you can just assume that we're out there busily looking. And we've been -- we certainly spent a lot more in the third quarter than we had the previous 4 quarters on average as we indicated in the script. And we're continuing to look for deals and do not believe that liquidity is a limiting factor on being able to continue to do numbers similar to what you saw in the third quarter, but we've never made a formal land spend projection per se. Ara K. Hovnanian: We'll add that the addition of the Citibank line of credit gives us a little more dry powder to increase our land spend. Susan Berliner - JP Morgan Chase & Co, Research Division: Great. And just turning to liquidity. I guess, I assume the bank agreement will be filed with the 3Q. Is the $52.2 million available, is that based on the borrowing base calculation? J. Larry Sorsby: I'm sorry, repeat the question. Susan Berliner - JP Morgan Chase & Co, Research Division: Is the $52.2 million, is that limited by the borrowing base calculation of the revolver? J. Larry Sorsby: Yeah. Susan Berliner - JP Morgan Chase & Co, Research Division: Can you tell us what the differential is besides the LCs? J. Larry Sorsby: There's -- I mean, we can fully draw whenever we want without a financial covenant whatsoever with respect to drawing it down. Ara K. Hovnanian: Yes. So that is -- the LCs are the only differential. J. Larry Sorsby: Yes. Susan Berliner - JP Morgan Chase & Co, Research Division: Okay, great. And then any update on the GSO land banking relationship? J. Larry Sorsby: I think we've now identified everything to fill the second bucket, and we've almost closed out the second bucket. And the GSOs recently inquired whether we're interested in obtaining a third bucket, but nothing formally has been done yet.

Your next question comes from the line of Brendan Lynch representing Sidoti. Brendan Lynch - Sidoti & Company, LLC: You mentioned that the landmark in California is particularly constrained. In light of that, can you comment on your mothball lot situation there? And I know you're bringing some of those back online, and just an update on what that status is. J. Larry Sorsby: Yes. So just a summary of where we are, I mean there's 4,767 mothballed lots in California. Go ahead, Ara. Ara K. Hovnanian: Yes. And a good chunk of those are in Northern California, and that market is certainly gotten heated up. So in some of them, we're in the process of resite lining [ph] them to really optimize it for the current market. But we've been unmothballing some sites somewhere almost every quarter. And I suspect that's going to be continuing. I don't have any specific comments on the California ones and the timing, but I think we'll make steady progress as we determine the right timing on those. J. Larry Sorsby: Yes. Similar to my comments in the formal comments in the script, I mean, we clearly view those mothballed lots in all geographies, but especially in California, as very attractively priced future land for growth. So as the market continues to improve, you'll see more of that unmothballed. Brendan Lynch - Sidoti & Company, LLC: Okay, great. And could you also just comment on the higher cancellation rate during the quarter? I'd imagine this is mostly due to interest rates, but your thoughts on that. And also if any of the cancellations you see resulting in an order of a less expensive home just due to the pricing power that customers have. J. Larry Sorsby: Cancellation rates in our opinion are below normal levels. It was down year-over-year, it might have been up just a touch sequentially. But we think we're below normalized cancellation rates. Ara, I don't know, you want to address the second half of his question? Ara K. Hovnanian: I'm sorry, could you repeat the second half? Brendan Lynch - Sidoti & Company, LLC: Yes, sure. So I was asking whether if you see cancellations, I think they're at 21% this quarter versus 18% last quarter, if you see any of those cancellations resulting in order for a less expensive home. Ara K. Hovnanian: I cannot say that I have heard that specifically, no. J. Larry Sorsby: Cancellation rates were 18% compared to 21% a year ago, so we're actually down 3% this year versus last year. You said it the opposite.

Your next question comes from the line of Megan McGrath representing MKM Partners. Megan McGrath - MKM Partners LLC, Research Division: Most of my questions have been answered, but we haven't heard a lot lately about input prices. Maybe you should give us an update on labor and supply cost? Ara K. Hovnanian: Well, thankfully, lumber, which had been climbing quite a bit earlier in the year has settled back a little bit. That has been helpful. Other than that -- and that, by the way, is the primary ingredient in a home, if you will, the primary material. There's more dollars spent on lumber than any other material. So that's a good thing. There have been a few other products that have gone just slightly the other way, but I'd say in the last couple of months, we felt a little less pricing pressure for sure than we did last quarter. J. Larry Sorsby: And we're hearing less anecdotal comments about our divisions having trouble finding labor for this particular component or that particular component. So it seems to have abated somewhat. Megan McGrath - MKM Partners LLC, Research Division: Okay, great. And then maybe a little more color. We've talked a lot about the East Coast and the West Coast markets. But clearly, your results, at least on the order growth, were better in the Midwest and the Southeast on a year-over-year basis. Any specific areas you'd like to highlight there? J. Larry Sorsby: Midwest and Southeast, I don't know that we have any real color other than they've had a little bit more success there. But I can't think of any particular communities, Ara, maybe you can, that outperformed in those areas per se. Ara K. Hovnanian: Well, I mean, the Southeast, we've certainly done well in the Florida market, South Eastern Florida specifically, which is the most constrained. We've done relatively well in Orlando as well. We're doing well in Tampa, but not -- we don't quite have the pricing power in Tampa, where land is not quite as constrained as the other 2 markets.

The next question comes from the line of Eli Hackel representing Goldman Sachs. Eli Hackel - Goldman Sachs Group Inc., Research Division: Just 2 questions. One, how much do you think the increase in supply in existing homes has been impacting the business of new homes? And then just more of a higher level question, you had a good slide about your affordability relative to history. If houses still really are affordable relative to history, why do you think people aren't buying at the 4.5% or 4.7% mortgage when theoretically, they could still afford it? Ara K. Hovnanian: Sure. I think regarding your -- the latter part first, I think it's a little bit of sticker shock when we've had that much price increase at that -- in this soon of a period. I just think it takes a little adjusting time for people. By the way, the same thing happened on the way down. A lot of sellers did not want to sell their home initially as their values came down. But then eventually, they adjusted to the price, and people did decide to sell their home. The same thing happens to buyers on the way up. And sometimes, it just takes a little bit of time and a little bit of that sense of urgency diminishes, and they take their time. Regarding the other part of the question, month's supply in virtually every market were built in has been going down in terms of existing homes on the market. In fact, many of our markets, if not all of them -- not all of them, many of our market, if not most of them is what I meant to say, are below what we consider the normal range. The normal range would be 4 to 6 months’ supply. And you get there by just taking the total number of listings and dividing it by the sales in the most recent month. Most markets are below normal that we build in. So that's a pretty positive environment right now.

I would now like to turn the call back over to Mr. Hovnanian for closing remarks. Ara K. Hovnanian: Thank you. Well, we're pleased with the results. We tried to give you as much clarity and granularity in terms of the data as we could. And we look forward to delivering another great quarter and even hopefully, stronger quarter in the fourth quarter. Thank you.

This concludes our conference call for today. Thank you for all participating, and have a great day. You may now disconnect.