David M. Collins - Principal Accounting Officer and Controller Stuart A. Miller - Chief Executive Officer, Director, Member of Executive Committee and Member of Independent Directors Committee Bruce E. Gross - Chief Financial Officer and Vice President Richard Beckwitt - President Jeffrey P. Krasnoff - Former Chief Executive Officer, President, Director, Member of Executive Committee and Member of Stock Option Committee Jonathan M. Jaffe - Chief Operating Officer and Vice President

Paul Przybylski - ISI Group Inc., Research Division Michael Jason Rehaut - JP Morgan Chase & Co, Research Division Ivy Lynne Zelman - Zelman & Associates, LLC John Coyle - Barclays Capital, Research Division Daniel Oppenheim - Crédit Suisse AG, Research Division Adam Rudiger - Wells Fargo Securities, LLC, Research Division Nishu Sood - Deutsche Bank AG, Research Division Will Randow - Citigroup Inc, Research Division Susan Maklari - UBS Investment Bank, Research Division Kenneth R. Zener - KeyBanc Capital Markets Inc., Research Division

Thank you for standing by, and welcome to Lennar's First Quarter Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. I will now turn the call over to Mr. David Collins for the reading of the forward-looking statement. David M. Collins: Thank you. Today's conference call may include forward-looking statements that are subject to risks and uncertainties relating to Lennar's future business and financial performance. These forward-looking statements may include statements regarding Lennar's business, financial condition, results of operations, cash flows, strategies and prospects. Forward-looking statements represent only Lennar's estimates on the date of this conference call and are not intended to give any assurance as to actual future results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties. Many factors could cause Lennar's actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those described under the caption Risk Factors contained in Lennar's annual report on Form 10-K most recently filed with the SEC. Please note that Lennar assumes no obligation to update any forward-looking statements.

I would like to introduce your host, Mr. Stuart Miller, CEO. Sir, you may begin. Stuart A. Miller: Great. Thank you, and good morning, everyone. Thanks for joining us for our first quarter 2013 update. We're pleased to share our results this morning. I'm joined this morning by Bruce Gross, our Chief Financial Officer; Dave Collins, who you just heard from, our Controller; and Diane Bessette, our Vice President and Treasurer. Additionally, Rick Beckwitt, our President; and Jeff Krasnoff, Chief Executive Officer of Rialto, are here with us here as well. Jon Jaffe, our Chief Operating Officer, is available by phone for the Q&A session. We also have with us Eric Feder, who has been a bridge for deals within the company, and today is his birthday, so we asked him to join us for the conference call today. So happy birthday, Eric. I'd like to begin this morning with some remarks on the overall state of the housing market recovery and then briefly overview our operation. Bruce is then going to provide some detail on our Financial Services segment as well as some additional color on our overall numbers. And as always, we'll open it up for Q&A. [Operator Instructions] So to begin, let me make 4 macro points about the housing market recovery. First, housing is recovering, and the recovery is consistent, healthy and growing stronger. We saw from yesterday's housing starts and permits numbers that the recovery in housing is continuing to progress in both multifamily and single-family products. This data confirms what we've seen in the field for some time. There has been an underproduction of housing during the downturn, as we produced as few as 550,000 homes per year during the downturn of both multi- and for-sale product. This is very close to the rate at which homes become obsolete. So for some of those years, we had essentially no net production against the normalized household formation rate of some 1.25 million annually. This shortfall will have to be made up, and the market is beginning to move in that direction. Second point, national numbers continue to be tricky to interpret. On Monday, the U.S. homebuilder confidence number showed a decline, which suggested that the recovery might be stalling or might not be as robust as expected. Against that backdrop, yesterday's numbers confirmed continued recovery. In our view, the conflict in the information rests in the fact that the homebuilder confidence survey is primarily a polling of smaller private builders. Their lowered confidence reflects their limited access to capital and, in turn, a limited access to land. The larger builders have had access to capital and land while the market was depressed. And since then, land prices have moved significantly. Late participants in the land market are having difficulty participating in the market recovery and are not able to solve to acceptable margins in their underwriting. The lack of builder confidence against the backdrop of increased starts and permits supports our thesis that larger builders will increase market share while also participating in the broader market recovery. Land positions owned in the context of housing recovery is driving homebuilder confidence. I suspect that a builder confidence survey of the larger, well-capitalized builders would reveal substantially higher confidence. Third point, the recovery is based on strong market fundamentals. Low interest rates and relatively low home prices continue to produce low monthly payment rates, which compare favorably with local rental rates. Not only is for-sale housing extremely affordable, but it is a preferred and more stable alternative to rentals, which reprice every 12 months. Inventories are low for both new and existing homes as demand increases, there are fewer homes to purchase and prices are being driven higher. Distressed homes are being absorbed by the investor community and repurposed as rentals. While these homes are primarily in secondary and outer fringe locations, they would not compete with new product anyway, and they're being taken out of the for-sale pool as the market rebuilds. In the short term, these rental homes are helping to fill the void of the short supply of rentals for a growing demand. In the longer term, as these homes are put back on the market, they will likely be purchased by the renters that are in them as they find that they can qualify for homeownership. We do not view this as a looming inventory problem. Finally, resurgent demand for homes is constrained by the mortgage market currently, which has constrained demand with an overly restrictive underwriting criteria. Slowly, however, the landscape is improving as banks are beginning to reconsider their credit underwriting overlays and open the doors to more approvals. While this process has been and continues to be slow to mature, we've come a long way since last year at this time, and we expect to see further definition of the regulatory environment leading to a further extension of credit to the market. While there have been and still are economic and political uncertainties ahead, we feel that this housing recovery is fundamentally based and driven by a long-term demographic need for housing. We believe we are still in the beginning stages of a recovery that will be sustained for several more years. Now turning to Lennar. Lennar has been and continues to be very well positioned for the current recovery in housing. This is reflected in our first quarter 2013 results and in our positioning for the future. In our first quarter, new orders were up 34% over last year, and our dollar value of backlog is up over 100% to the highest levels it's been in 5 years. Gross margins improved year-over-year to an industry-leading 22.1%, a 120-point -- basis point increase over last year. And operating margins increased 410 basis points to 10.1%, reflecting the operating leverage in our absorption growth. For the full year 2012, we expect our average gross margin to be between 23% and 24%. Margins continue to benefit from our proactive land acquisition strategy as well as higher home prices, lower incentives and operating leverage from greater absorption community of 3 per month, which is a 20% improvement over last year, and then, of course, from more sales overall. Our average selling price for the fourth quarter was $269,000, a 9% increase over last year, which covered the increases in labor and material costs, which increased approximately 4%. Our homebuilding operations have been improving due to a strong operating strategy complemented by excellent management execution. Additionally, we opened 80 new communities and closed out 55 communities during the quarter to end at 484 active communities, a 14% year-over-year increase. We continue to expect our year-end community count to be approximately 550 communities as our land acquisition strategy drives our growth. Today, we are fortunate to have the land in hand to meet our projected deliveries through 2014. As a result, we are primarily pursuing land opportunities for 2015 and beyond. This is an enviable position in today's market, a position that was earned through a very strategic land acquisition program that began in 2009. This program has put us several steps ahead of the competition and allows us to fish in a different pond. We're using our balance sheet to tie up land opportunities that will produce strong margins for years to come. Many of those assets are large-scale multiyear flagship development deals. Rialto has continued to play a very big part in our land program, and I want to thank the team for their hard work and dedication. Complementing our homebuilding operations, our Financial Services segment had another strong quarter with operating earnings of $16.1 million compared to $8.3 million last year. Our mortgage company captured some 79% of Lennar homebuyers within the markets in which it operates. Mortgage operations have also benefited from a robust financing market. Lennar home mortgages should continue to grow alongside our expanding Homebuilding business as well as serve non-Lennar purchasers in selected markets. While our Homebuilding and Financial Services divisions are the primary drivers of near-term revenues and earnings, our 3 additional operating divisions are all maturing to be excellent longer-term value creation platforms for the company. Rialto continues to grow as a blue-chip private capital investment management company. While current earnings have slowed as we have shifted from balance sheet investment to a fund investment model, the prospects for future consistent earnings continue to improve. We've now invested or committed almost $1 billion of equity in Fund 1. Performance for the fund is already well ahead of original projections, and subsequent to year end, we started distributing capital back to investors. In addition, if we continue on this performance path, we expect to well exceed the return hurdles set for our investors, which means carried interest with an oar to Rialto as the manager of the fund. None of that potential value is reflected in our current earnings picture. Finally, in December, Fund #2 had its first closing of commitments of approximately $260 million, including $100 million from us, and we've already started investing that capital. Lennar multi-family, our apartment division, commenced construction on an additional 2 communities in the quarter and now has 4 communities under construction nationwide with a growing pipeline. And FivePoint Communities is quickly moving to bring developed land in premium locations to the market to fill the growing demand for well-located approved and developed homesites. In conclusion, as I reflect on the current positioning of Lennar and the state of the current housing recovery, I could not be more optimistic about our future. The housing market is healing and recovery is accelerating as we produce shelter that is needed for a growing population and a return to normal levels of household formation. As the housing market continues its overall trajectory back to normal, it will provide stimulus to the overall economy through job creation and building long-term consumer wealth, which for generations has been a benefit of homeownership. Our homebuilding machine is extremely well positioned and continues to gain market share. We have excellent land position in a constrained land market, and we have an excellent management team that will continue to be our primary driver of current earnings. Homebuilding is supported and enhanced by Financial Services, which will grow in step with the homebuilder and continue to develop its third-party operations to enhance its bottom line. Rialto continues to expand its franchise and invest in high-yielding alternative assets while supporting the homebuilder with access to off-market homesites. Our growing multi-family platform provides an additional long-term and complementary growth opportunity for the company. And finally, FivePoint, with its large long-term California land assets, simply couldn't be better positioned to reap the benefits of an appreciating land-constrained housing market. Although there will be political and economic headline risk, the drivers of our business are fundamentally sound. I am confident of Lennar's position in today's marketplace and rest assured that our future growth is supported by a strong balance sheet with an exceptional group of leaders who will be able to navigate through the challenges and towards the opportunities of 2013. And with that, let me turn over to Bruce. Bruce E. Gross: Thank you, Stuart, and good morning. I'll provide additional colors to the numbers, starting with the homebuilding segment. Revenues from home sales increased 40% in the first quarter, which was driven by a 28% increase in deliveries and a 9% increase year-over-year in average sales price to $269,000. The increase in deliveries resulted in a 79% backlog conversion ratio, which exceeded the 75% expectation given on our fourth quarter conference call. The average sales price by region is as follows: The East region was $251,000, up 13%. The Southeast Florida region was $271,000, up 2%. The Central region was $258,000, up 17%. Houston was up 12% to $258,000. The West region was $294,000. This was down 7%, but that was due to product mix. And then the other region was $339,000, down 6%. Our gross margin on home sales was 22.1%, and that compared with 20.9% in the prior year, an improvement of 120 basis points. The gross margins from our new communities purchased since 2008 continue to outperform the company average gross margin during the quarter, and they represented 57% of the company's deliveries in the first quarter. Sales incentives were $23,300 per home, and that was 8% as a percentage of home sales revenue. The sales incentives improved by 420 basis points or $10,900 for home delivered versus the prior year. The gross margin percentage for the quarter was highest in the East and Southeast Florida regions. However, this quarter's results had an increased product mix coming from the Central and other regions, where the gross margin percentage is lower than the company average. As we highlighted on our fourth quarter conference call, there is seasonality in our gross margins, and it tends to be lower in the first quarter and then typically increases throughout the year. This is due to lower closings in the first quarter, as well as higher field cost due to preparing to open more communities as well as winter-related costs in our communities. Our SG&A percent increased -- improved by 290 basis points to 12% this quarter. This is the incremental operating leverage that we have been discussing for some time as our volume and particularly our absorption per community increases. Through the downturn, we transformed the entire company to be on our Everything's Included platform, and we eliminated our design studio divisions remaining from the U.S. home acquisition. This move allowed us to eliminate multiple divisions in the same markets. And as a result, the number of homebuilding divisions has been reduced from 124 divisions at the peak in 2006 to 29 today. This is resulting in significant operating leverage on our G&A line. Additionally, we have focused heavily on using social media to attract our homebuyers, which has significantly reduced our advertising costs. With the improvement in both gross margin and SG&A, our operating margins, as Stuart mentioned, improved by 410 basis points to 10.1%. During the quarter, we purchased approximately 9,400 homesites, totaling $472 million, and we invested $120 million in land development. Our homesites owned and controlled now total 135,000 homesites. Turning to Financial Services. Mortgage pretax income increased to $16.4 million from $8.9 million in the prior year. The first quarter improvement was again helped by the strong refinance environment leading to higher volumes and higher profit per transaction. This quarter's mortgage originations increased by 60% to $1.2 billion, and originations with non-Lennar homebuyers were 58% of total originations this quarter. Again, that was primarily driven by a robust refinance market. Our title company had a $300,000 profit in the quarter compared with a $100,000 loss in the prior year. Turning to our Rialto business segment. They generated operating earnings of $1.7 million during the quarter compared to $9.4 million in the prior year. Both amounts are net of noncontrolling interest. The composition of Rialto's $1.7 million of operating earnings by type of investment is as follows: The first Rialto real estate fund contributed $6.4 million of earnings. The FDIC and wholly-owned bank portfolios contributed a net of $300,000 of earnings. And these amounts were reduced by approximately $5 million of G&A and other, which is net of management fees and reimbursements of $6.3 million. At quarter end, the FDIC debt, net of cash available in the defeasance account and in Rialto's cash account, was only $99 million. We expect this debt to be paid off this year, and then there will be significant cash flow generation back to the parent. This quarter, we reversed approximately $25 million of the remaining deferred tax asset reserve, all of which pertains to state taxes. We expect reversing another $30 million to $40 million this year if our earnings trend continues. Turning to the balance sheet. Our liquidity remained strong during the quarter, with $1.1 billion of cash on hand and no outstanding borrowings under our $525 million credit facility. We continued our balance sheet strategy of pushing out debt maturities while driving down cost of capital as we raised $275 million of 4.125% 6-year senior notes and $175 million of 4.750% 10-year senior notes during the first quarter. We received a ratings upgrade from S&P to BB- during the quarter, and our net debt to total capital improved by 30 basis points year-over-year to 49.3%. To recap what was said on this call and highlight a few additional items for future quarters in 2013, I'm going to list a few areas, starting with active community count. Stuart mentioned that we are on track to be at 550 for the end of 2013. I wanted to remind people that there's a heavier concentration opening in the second half of the year. We expect our backlog conversion ratio to be between 85% and 90% for the second and third quarters and then should increase to between 90% and 100% in the fourth quarter. We expect to continue to see a positive gross margin trend during the year, increasing from last year's average of 22.7% for the whole year to between 23% and 24% as an average for 2013, with the typical seasonality throughout the year. We expect to see about 100 basis points year-over-year improvement in SG&A percentage in each of the next 3 quarters remaining in 2013. Financial Services. We do expect that the number of refinanced transactions will slow as we progress through the year, and the profit per transaction, which is at very high levels right now, will moderate as we go through the remainder of the year. As highlighted on the call, Rialto is in a transitional period as the PPIP investment was successfully completed last year and the second real estate fund will be ramping up throughout the year, so Rialto's profitability is expected to be backloaded in 2013. Excluding the impact from additional deferred tax asset valuation allowance reversals, we expect to have an effective tax rate going forward of approximately 39%. We're very well positioned, as we start our second quarter, with the strong backlog dollar value that Stuart mentioned and the favorable industry dynamics as well. So with that, let me turn it over to the operator, and we'll open it up for questions.

[Operator Instructions] The first question is coming from Stephen East, ISI Group. Paul Przybylski - ISI Group Inc., Research Division: Actually, this is Paul Przybylski on for Stephen. I was wondering if you could go over your philosophy on order pace versus price and what you're focusing on now as we move through the year.

It's Rick Beckwitt. It's a delicate balance in the field. We are reviewing pricing weekly in every community across the country. We have been increasing prices probably every couple of weeks in some communities, at least once a month in all communities. And we balanced the pace-price split really on a local basis. Our preference is to increase price over pace, particularly in communities where we have a long position, a lot of homesites to close out ahead of us. And to the extent that we're on the back end of the community, we may move through that community without too much price increase because of the incremental overhead associated with the fewer deliveries. Paul Przybylski - ISI Group Inc., Research Division: Okay. And you spent $500 million on land. What's your target for this year? Bruce E. Gross: I think that you could probably count on about $500 million a quarter.

The next question is coming from Michael Rehaut, JPMorgan Chase. Michael Jason Rehaut - JP Morgan Chase & Co, Research Division: I appreciate your comments at the beginning, Stuart, where you mentioned, in terms of some macro comments, that you believe the housing recovery is actually growing stronger and that credit also is slowly improving. I was wondering if you could give -- certainly, your own trends are improving quarter-to-quarter, particularly in terms of price, and the comments that Rick gave are very helpful. Are there any areas of specificity or granularity, particularly as it relates to the market growing stronger? It kind of almost points to acceleration, and I think that kind of belies some of the optimism, particularly around pricing, that you shared with us when we met with the last month. Stuart A. Miller: Well, I think, Mike, that -- I think that when we look backwards, what we have generally seen is that the trends that start to reveal themselves in the national numbers and come through performance reports are things that we start to see and feel in the field early. It's tough to be granular about these things. It's more about traffic, quality of traffic and the conversations at the field level that you're having with customers. I've noted that this recovery is starting to feel fundamentally driven and fundamentally sound, and it's primarily because the communications in the field are about people thinking about their monthly payment as it compares to rental rates, their monthly payment as it compares to stability and disposable income. And this is a real shift from people just kind of saying, "Hey, I want to own a home." It's about nickels, dollars and dimes and making sure that they're managing their life as well as possible. We are seeing that demand is growing. It is somewhat constrained by the smaller funnel of mortgage approvals. And so we're seeing not as much demand come through the numbers as demand is out there. And the constraint of the mortgage approval process is really keeping the recovery more sedate than it feels like it wants to be. And again, this is somewhat of a feeling from the field. Now looking at the mortgage approval process, it feels like it's fairly static when we think about it in kind of real-time sense. But if we go back a year or we go back 2 years, the mortgage approval process has really liberalized itself quite a bit. It was just a couple of years ago that it was virtually impossible to make your way through the maze of the paperwork and verifications that were required to get a mortgage. And though those might not be hard credit statistics, those impediments were just as severe as a 780 FICO score. People didn't want to go through the morass of trying to get a mortgage. Today, it is a more streamlined process. The buyer is educated as to what their down payment, their FICO scores, their credit status have to be in order to get approved, and they're coming in more prepared. Mortgage money is becoming marginally more available, and I think that trend will continue as we start to get legislative and regulatory certainty injected into the banking system; the overlays will start to dissipate a little bit. Michael Jason Rehaut - JP Morgan Chase & Co, Research Division: Great, I appreciate that. I guess, the second question, on the Rialto business. I believe you said that -- in the release that there was a $7 million impairment. Just wanted to get a sense of what that share was for Lennar's consolidated in terms of your pro rata share, how that affected profitability. And the real estate fund, $6.4 million contribution as well, is that something that we can assume will kind of continue in that rate? Or is it going to be kind of lumpy or maybe grow modestly? How should we think about that? Bruce E. Gross: Okay. Let me start, Mike, with your first question, the impairment of $7 million that was noted in the release. 40% of that is ours. That's our share in the FDIC transaction. And that's really based on, as we look at our cash flows, it's more of a timing issue. As we pushed out the timing of some of the resolution of the assets, that resulted in a little bit of an impairment. So in our numbers, it's 40% of that $7 million. On the real estate fund question, each quarter, we go through a fair value analysis. The real estate Fund #1 is doing exceedingly well. And as Stuart talked about there being a significant carried interest that will mirror back to Rialto, that's a significant amount of profitability that will come in at the tail end of the fund as opposed to on a regular basis. So there's significant value creation there, but that tends to be backloaded. The quarterly amounts for the real estate fund will be based on the fair value of the assets each quarter. Michael Jason Rehaut - JP Morgan Chase & Co, Research Division: So quarter-to-quarter, it could differ? It's not as much of a stream? Bruce E. Gross: Sorry. One more time, Mike? Michael Jason Rehaut - JP Morgan Chase & Co, Research Division: I said, so you're saying you've kind of a fair value analysis? So quarter-to-quarter, it might differ, as opposed to kind of like more of a consistent stream? Jeffrey P. Krasnoff: Mike, it's Jeff Krasnoff. There is a consistent stream from regular operating earnings as well. So the answer is it could vary quarter-by-quarter, but it is an ongoing stream.

The next question is coming from Ivy Zelman, Zelman & Associates. Ivy Lynne Zelman - Zelman & Associates, LLC: I guess I wanted to ask you, Stuart, given the success you've had in the quarter and, arguably, with the early signs of recovery, many clients asked me the question, "What can derail the housing recovery?" And the question is always posed, and as we see the Federal Reserve now with zero fund -- fed fund rates, QE3 likely to end potentially second half or first half of '14, how do we think about those risks and the potential negative impacts on the housing fundamentals and your just overall view on QE3 and the fed funds, et cetera? Stuart A. Miller: Well, look, as I noted, Ivy, there are political and economic questions that could impact. And clearly, the government is contending with questions of how to deal with the debt issues. And a radical mistake, which I don't think we're prone to make as a country, a radical mistake could derail everything. So I don't want to minimize the possibility that something very severe comes our way in terms of political risk. It just seems unlikely to me. The strength of this recovery, as I see it and as we see it in the field, it really is driven by monthly payment and people desiring to find a stable way to identify their cost of living, monthly cost of living, in a static wage environment and maybe even a growing wage environment. Because of those fundamentals, I think that we are pretty secure in terms of moving forward and continuing to recover. Now in terms of QE3 and the elimination of QE and all those questions, we're really talking about interest rates. And I think that we're -- as we look at our business, we think that there's room for interest rates to go up without derailing the current trajectory. If you really do the math and look at the impact of interest rate, of an increase of 100 or 200 basis points in today's limited shelter alternatives environment, we're likely to see rental rates get pushed up if demand shifts back over to rentals. And therefore, the comparison, even at those higher interest rates, is going to be favorable, and people have to have a place to live. So I think there's pent-up demand. I think there's a shortfall in supply that derives from the downturn. I think that the cost, the monthly cost of living is where people are focused right now, and we're likely to see a continued recovery. That's my best guess. Ivy Lynne Zelman - Zelman & Associates, LLC: No, that's very helpful. I guess my question will be more specific to the strategy, Rick, you alluded to that you prefer to take price over pace, but you have a balancing act to maximize. And what many of our clients are struggling with is trying to differentiate builders and the positioning they have, whether they were, like you, aggressive in the downturn, utilizing your capital structure and positioning yourself. Is it fair to say that even operators that are not as well positioned, as long as home prices are going up, that we should see, generally for the industry and probably Lennar, we'll outperform on margin improvement. Because many think we're hitting a wall because of labor constraints or raw material inflation, land inflation is getting too ahead of us. So just your general comments. I don't know, Rick, if you want to answer that.

Sure, Ivy. Clearly, if prices continue to increase, the industry will benefit from additional potential margin as long as the builders are careful and controlling the cost and the input cost into the homes. We're working it every day. We're not accepting all price increases that come through, although we are taking some on the chin. And we'll continue to work the inputs into the home. And we have to value engineer to keep costs down, that's what we'll do. I think some companies, and probably the publics, are better at dealing with these type of issues than the privates are. And we're optimistic that margins will continue to increase. We've given that guidance throughout the year, and we'll see where it goes, Ivy. Stuart A. Miller: Let me just add to that and just say that, look, the increasing costs come from land, labor, materials. Our land component is really well identified over the next couple of years, and the land that we're purchasing is for 2015 and beyond, so we have a pretty good lockdown on the land cost relative to the homes that we'll be delivering over the next couple of years. And that's a big component of what is, in some instances, a cost increase component. From a labor and materials perspective, we think that home price appreciation is likely, as we go forward, to continue to outpace the increases in those 2 areas. We've seen that. I think that we noted in our opening comments that sales price had increased some 9%. Costs were somewhere around 4%. Whether that's a relationship, whether it tightened a little bit, we still see sales price outpacing cost increases as we go forward. One last thing I'll say is as it relates to land, we are buying and have been buying a lot of land, but a lot of that land is in our pipeline already: land deals that have been contracted for, that are in diligence or in some form of entitlement process, that are waiting to be closed. So these land deals, even as we close them from today going forward, many of them were negotiated at a different point in time and help us lock down that cost component.

The next question is coming from Stephen Kim of Barclays. John Coyle - Barclays Capital, Research Division: It's John filling in for Stephen today. Since you touched on cost, could you maybe run through the various cost components and what specific materials you're seeing the biggest increase in price? And for those that you are seeing pretty dramatic increases in price, is there any ability to hedge that away? Maybe if you could give some color on that. Stuart A. Miller: Jon, why don't you take that? Jonathan M. Jaffe: Sure. The materials where we see the biggest increases, in order of that, is lumber being the largest, then drywall and then concrete. On the labor side, associated with that, framing labor has seen the biggest stress and, therefore, the biggest increase; drywall labor as well; and then plumbing and paint labor. Still seeing a lot of the metrics for pressure, upward pressure on those material costs as we look forward, and we expect we'll continue to see that. And the way that we manage -- we don't go out and buy hedges but we, through our national purchasing process, lock in extended contracts. And those vary in length depending on what the materials are. So for example, lumber, which has been volatile, we're typically locking in 3 or 4 months of pricing at a time. Other products and materials, we might be locking in a year at a time. Labor tends to go on a community-specific basis in terms of time period that, that's locked in. John Coyle - Barclays Capital, Research Division: Got it. That's really helpful. Then just wanted to get an update on the schedule for the big FivePoint Communities that you have out West. I believe the first one to really come on is going to be El Toro. But do you have any update as far as timing for those various communities? Jonathan M. Jaffe: This is Jon again. At El Toro, we'll see our first transaction, where we'll be selling homesites to builders, closing sometime in our second -- sometime in this quarter, and for builders to be having a grand opening of their products sometime later this year. At Newhall, we continue to move through the Valencia assets that are on the east side of the freeway. And Newhall Ranch, which is on the west side, is still in its processing of its maps for that process, so that's still probably about 18 months or so in front of us. In San Francisco, Hunters Point, we'll see the first vertical product coming out of the ground by sometime in the late second quarter or early third quarter of this year.

The next question is coming from Dan Oppenheim, Crédit Suisse. Daniel Oppenheim - Crédit Suisse AG, Research Division: Was wondering if you could talk about the trend in the West. Looking at the order growth, it was a little bit lower. So what we've seen is a lot of communities where they're temporarily sold out in terms of having lots for the future but sort of metering the pace of sales now. Can you talk about how much you're doing that in some of these communities and what we should think about in terms of order growth and pricing and such? Stuart A. Miller: Jon, go ahead. Jonathan M. Jaffe: Sure. In the West, it will be a very community-specific review of that sales pace. So since there hasn't been much in the way of finished lots being produced by the industry over the last several years, there are many communities which we do meter the rate of sales and suppress it below what the market would demand. So in that case, we are seeing more significant price increases. In some markets where there are finished homesites in front of us, we're able to achieve a much higher sales pace. So for example, in Northern California, in the Sacramento area, where we have a healthy supply of homesites in front of us, or the Inland Empire, we were able to be achieving a higher absorption level because we're able to pick up our production levels.

And this is Rick. The other thing I'd add is, if you look back over the last several quarters, probably going back through the last 2 or 3, 4, the West has been a large percentage of our new land acquisition. So you'll continue to see some growth stemming from those recently acquired deals in the next year or so. Daniel Oppenheim - Crédit Suisse AG, Research Division: And then next, the follow-up, you talked about the market broadening in terms of the recovery overall. We've heard some talk about how traffic isn't improving so much but so that it's very high quality in terms of conversion. Can you comment at all in terms of what you're seeing with the broadening? Are you seeing traffic increasing as well, or how is that, Rick?

This is Rick. Traffic has been very strong. Quality of traffic is even stronger. Year-to-date, our traffic is up significantly pretty much across the board, and conversion rates are strong. So we're encouraged with what we're seeing out there. It gets back to some of the fundamentals that Stuart mentioned in his opening comments with regard to limited supply, people being -- understanding the qualification process. It's a decent market today.

The next question is coming from Adam Rudiger, Wells Fargo Securities. Adam Rudiger - Wells Fargo Securities, LLC, Research Division: Stuart, I was wondering if you could talk a little bit more about the 2015 land purchase -- lands you're buying for 2015 and beyond in terms of what the competition is for those kind of lots relative to newer delivery-type lots, what the assumptions you used for those are and kind of what the state of that land is that you're buying or looking at? Stuart A. Miller: Well, listen, I'll let Rick take the bulk of that. But I think that a lot of the land parcels that we're looking at for 2015 or that we're purchasing for 2015 are really already identified and in our pipeline. We've been working on those deals. Either they're in negotiation and -- or under contract. The assumptions for many of our deals are without a pricing increase model, though, in some instances, we do find that we're injecting some inflation into our underwriting. So Rick, why don't you...

Yes, I think pretty much across the board, the stuff that we're looking for '15, and '16 for that matter, is things that are not yet developed. They're either raw or need some entitlement work. So we will work jointly with the landowner today, put some seed money into the deal or maybe carry the -- cover the entitlement cost with an opportunity and a lock on the purchase of the land once things happen. And as a result of that, land owners today don't have a lot of capital to invest in the underground -- the underlying property. So it's a win-win deal for us and for them. They move the property along, and we contract it at a wholesale price. So when things pass go and we get everything in line, the approvals, the entitlements, the -- everything the way we want it, the density, we'll close on the land 2 years from now. So it works well for us. With regard to the competition in that piece of the pie, what we found is that most of the other folks right now are looking for current delivery things. There are some that have a land-light model and don't want to invest in underground -- underlying property and develop. So the competition is much more limited. Stuart A. Miller: I think that one of the advantages, if I could just add, that we're finding, there are 2 groups of potential competitors that are kind of hamstrung right now, the land developers -- the banks are just not lending on land. The old acquisition development loan for land deals is not getting back on track right now. So it really is the well-capitalized public company that has the ability to access the capital to invest in land assets and to drive the entitlement and development process forward. The other group that's really sidelined are the smaller builders. The smaller builders have also had that same access to capital issue where, coming out of the downturn, the banks have just not recast their confidence relative to that group that did not perform particularly well in the downturn, and so they're not competitors. So while the large capitalized -- large well-capitalized homebuilders are out there and competing for some of the same properties, our ability to really cast our sole attention to those later land deals enables us to negotiate well and to position ourselves well and focus just on that group of assets. Adam Rudiger - Wells Fargo Securities, LLC, Research Division: That's helpful. The second question, Bruce, I wanted to ask about gross margins, I know you made a pretty intentional -- it sounded like some potential commentary on some other puts and takes, but I just wanted to ask the question again anyway. If I look at the gross margin this quarter relative to, say, the second quarter of last year when you actually had -- you did greater revenues, Homebuilding revenues this quarter, which would suggest volume maybe didn't -- wasn't a negative impact for you. I was just surprised. I would have thought the gross margins would have been up more, given how strong the reduction in incentives there. So can you just talk about that a little bit more and maybe what I'm missing? Bruce E. Gross: Sure. There is really 2 items that I'd say are different there. Number one, we did have an increased product mix coming from our Central and other regions, where the gross margin percentage tends to be lower than the company's average. And then additionally, our field costs tend to be higher in the first quarter. And what we did is we looked at our states that have colder weather: Minnesota, New Jersey, Colorado, some of the mid-Atlantic and even Pacific Northwest. And there's a number of costs that are involved when you're looking at those winter states that happen in the first quarter. And we went back over the last decade or so, and it's a typical trend that your first quarter falls off as you go sequentially from Q4 to Q1. And even if you looked at similar revenues, you just tend to have more of those winter costs, which, Rick, you might want to highlight a couple of those.

Yes, it's not in all the markets but clearly, Minnesota, Chicago, Maryland, Virginia, New Jersey, Boston and, to a lesser degree, the Carolinas, depending on the market. They're just incremental direct costs. Excavation is more important, more expensive depending how deep the frost line is, and you've got to over-excavate. You can't use the fill. You got to bring sand in because you can't compact the cold dirt. You got to mix the concrete hot with CO2 and with chloride and water -- hot water. You've got incremental field expenses associated with trenching for the utility lines. Cost of heating the homes is higher. There's just a lot of costs associated with building in the winter. For some markets like Minnesota, it could be $10,000 to $12,000 to $13,000 more per home during that time period of the year. So it happens every year. Depending on the amount of snow and how cold it is, it's worse or better.

The next question is coming from Nishu Sood of Deutsche Bank. Nishu Sood - Deutsche Bank AG, Research Division: Wanted to follow up on Adam's question about the land purchases. You mentioned you're focusing on land purchases for 2015 and beyond. I wanted to understand, in terms of your land buying activity, how absolute a statement that is. In other words, does that imply that if you see a finished lot deal or your land guys, who are obviously going to be super busy right now, they see a finished lot deal come up, they don't even bother going through the brain damage of submitting a proposal for it just on the presumption that the pricing is not going to be attractive? Maybe if there's some numbers you could give us the kind of help us understand, like 70% of land or lots that you're buying is for 2015 and beyond, some of them may be for a nearer term. Just some color around that, please.

This is Rick. Clearly, if we find a finished home site deal that's available at good margins with a developer that we're working with today, good relationships, we're going to gobble that thing down. What Stuart and I have been saying is that, given the fact that we have in place today a pipeline of land to meet deliveries through 2014, it gives us the flexibility to focus more on the long, dated type of things that will come online in the later years. We've very focused on leveraging our overhead structure, investing cash, maximizing returns and driving profitability for our shareholders. So to that extent, if we see something that can be added for this year or next year, we're going to focus on that. It just gives us the flexibility to look a little bit longer in the land curve. Stuart A. Miller: Yes. Just adding to that, we have always been driven by opportunity. And I think that, that is what is unique about our company is our ability to hunt, I think, is better than it's ever been. It's Eric's birthday. He's sitting here in the room. But Eric, I've mentioned before, has been a bridge between Rialto and Lennar, enabling us to find opportunities when we're looking for one thing that really services another part of our company, keeping that open mind to opportunities where and when they might exist that might be off the beaten path. To the extent that we see opportunities to get off-market deals that are not subject to the same competition, the same pricing pressures, where we can make a company-normalized margin, we're all over that. And those kinds of opportunities are still out there for us, and we're still looking for them, it's just not our primary everyday focus. Our primary everyday focus is recognizing that as we go forward, we're going to have a -- we're already stable for 2013 and '14 in terms of what we expect to deliver. And '15 and beyond is where our primary focus is right now. Nishu Sood - Deutsche Bank AG, Research Division: Okay, great. That's helpful. And second question I wanted to ask about was spec homes under construction. I was just wondering if you can give us an update on those numbers. And in particular, what I wanted to understand was we're heading into the -- or I'm sorry, we're in the spring selling season, obviously, with a greater degree of confidence than we've had in years and years. And so how has that affected your rate of spec build and just generally what you're seeing out there from your other competitors as well? Stuart A. Miller: Okay. In terms of the spec building, the number of homes under construction that are unsold are 3,667 this quarter, and that's about -- that's 52% of what's under construction during the quarter. And if you look at total starts for the quarter, we had 4,898, and that compares to 2,954 in the first quarter of last year. Bruce E. Gross: And I guess the other stat we look at is number of completed homes that we have across the universe of our communities that are unsold, and it's less than 2. So we think that we have a very fresh inventory today. We're starting on a very fast clip. We want to get our inventory moving. And if you look at it today versus at the end of the year, we had about 1,600 or 1,700 more homes than where we ended up at the end of the year.

The next question is coming from Will Randow of Citigroup. Will Randow - Citigroup Inc, Research Division: Stuart, Rick, I wanted to revisit the color you provided on land spend a few times. I was hoping to get a feel for the breakdown in 3 ways; specifically, what is the breakdown between develop spend -- or development spend, rather, spend on undeveloped dirt and spend on developed lots.

Will, I don't have the breakdown right now, but we could get it to you later on what was finished versus developed. So I'll have to get back on you -- back to you on that. Will Randow - Citigroup Inc, Research Division: I guess, could you provide color directionally on how you think -- how you go through that thought process for when you're acquiring today? Is it more on development dollars?

There are some markets where there's a pretty active development business. Those would be in some of the Texas markets where there's developers that are churning land today. So in those type of markets, we're buying finished homesites on a takedown. I would tell you that across the board, we have been acquiring properties that require some development activity. We've got development skill set in-house, and we're leveraging that expertise. My guess is if I had to pick a number out, it's probably 60%, 70% development-oriented deals, and the balance is either finished or semifinished, take them down on a plot and just doing on-site versus the off-site. Will Randow - Citigroup Inc, Research Division: And then, Bruce, as a follow-up, I may have missed it, but did you mention where demand is tracking second quarter to date? And could you provide any color on what gross margin is for that demand? Bruce E. Gross: No, to answer your question, Will, we did not give any additional color going into the second quarter on demand, and we didn't talk specifically about the gross margin trend going into the second quarter. But we did reiterate that we're still comfortable that our gross margins for the year will be 23% to 24% for the full year and that the sequential trend will continue where it's lower at the beginning of the year and tends to grow each quarter throughout the year.

The next question is coming from David Goldberg, UBS. Susan Maklari - UBS Investment Bank, Research Division: It's actually Sue for David. Bruce, in your comments, you mentioned that you guys have closed out of your design studios in Houston. And as this recovery is coming together, are you finding that your Everything's Included is sort of ramping up with that in that you're having to make fewer sort of one-off or specific changes to what's in the packages? And as part of that, given that this recovery is more concentrated among the move-up buyers, have you made any fundamental changes to it in order to be more attractive to the buyer that you're seeing out there today?

This is Rick. In Houston, we do operate under the brand Village Builders, which has a component of a design center, but we still are a very much EI-oriented builder. What we have done on the EI platform is incorporate, just to simplify, the good, better, best type of specification level for our homes. You can't choose the individual items out of the package. It comes with the package, so it's Everything's Included in that package. That's allowed us to move up through the different stages of what someone wants to spend on the homes. Jonathan M. Jaffe: This is Jon. I'd also add that our EI platform makes it easier for us to ramp up our production because we know what we're going build, we don't have to wait for the customer's order, as well as, in markets where we're able to benefit from greater appreciation by wading into the construction cycle, since we know what's going to go into the home before we sell the home. So our EI platform is both very efficient, as well as it allows us to maximize the margin, having our cost locked in when we start the home, before we sell it. Susan Maklari - UBS Investment Bank, Research Division: Okay. And then along those lines, as demand ramps up and as we get further into this cycle, are you seeing any changes in your cycle times? And now do you think those will compare as demand improves relative to past cycles? Jonathan M. Jaffe: This is Jon again. We're clearly seeing a small increase in cycle time, as there is stress on the labor market as not only we but the whole industry is increasing the production flow that's out there. It's still below where it was at the peak of the last cycle, and we feel like we're much better able to control it with our more focused product strategy and fewer divisions. So we have more consistency of product. But clearly, as you would naturally expect, as the cycle picks up its volume, we are seeing a little bit of movement in cycle time. Stuart A. Miller: Okay, let's take one last question.

And the last question is coming from Ken Zener, KeyBanc Capital Markets. Kenneth R. Zener - KeyBanc Capital Markets Inc., Research Division: I wonder if you could give us -- given your joint ventures are getting more active, clearly, in places like Valencia or El Toro [ph] as they're coming online, can you give us, one, a description of how much income you expect within a range from your JVs this year versus, let's say, last year? And then taking a step back, are you more inclined to be the seller of the land? Or should we think that the buyer of the land is actually getting a better deal, however you want to cut a balance? Because I would think the seller of the land would be in a better position than the builder. If you could just kind of give us a sense how you balance that in terms of the price you set to the other side, the buyers? Stuart A. Miller: Well, first of all, we're generally not giving an overall guidance as to what the joint ventures will produce. Those earnings will come as they come, and they will tend to be a little bit lumpy from time to time. In terms of the pricing of the property, the land, right now, those ventures, the FivePoint deal, the deals that fall under the FivePoint umbrella, are really uniquely positioned in just some of the most desirable markets that are extremely land constrained. And any time, as an owner of land and a developer, you find yourself in that position, pricing really does come down to what the seller's selling for. So it really gives us some pricing power and opportunity to drive earnings as the market continues to improve, and we just think that FivePoint is very well positioned. I think Bruce talked earlier about some of the timing relative to some of our positions coming on -- or Jon did. But that's about as much guidance as we give. Kenneth R. Zener - KeyBanc Capital Markets Inc., Research Division: Understood. It seems like as a seller of land, you're in the better position. Maybe Bruce or whoever, I think people, investors, have in their mind, given the deflationary environment we faced or are coming out of, that, in fact, specs are lower margin, which in the last 4, 5 years has been the case. But it seems to me, given pricing moving upwards more often than not, can you talk about specs and how you see the spec spread coming in? Because it's seems if you -- especially with an Everything's Included house, if you start building in January and fix the price, you can actually be, in fact, making more money on specs as you move through the cycle if, in fact, the home is worth more in May when you're setting the price as opposed to have locked it in, in January. So can you talk about the impact of spec margins impacting you and if my thesis is correct?

Well, this is Rick, and I'll start out. And if Jon's got something, he can add to it. We definitely have crossed the line where a spec is not something that's discounted. We are waiting to lock the price of that as late in the process as we can. Our inventory is working for us today as opposed to several years back where someone wanted a discount if there was something that was standing tall in a community that was unsold. So we're letting the appreciation in the market work towards our benefit. And what we are doing also is on presales, we're not discounting those as well. To the extent someone wants a premium homesite in a community, we're loading it with what that homesite premium should be. And for them to choose a homesite and a community and a particular home, we're loading that up at the front-end, given the fact that it probably takes us 2 to 3 months to build it. Jon, do you have... Jonathan M. Jaffe: Yes, this is Jon. I would just add to that, that, as Rick said earlier, we manage this weekly in each of our communities, what the pace is and pricing. We're clearly able to drive more to our bottom line margin by having our construction cost locked in with a started home versus a presale situation and benefit from an appreciating market by selling later in the cycle. So we should see incrementally more margin, to specifically answer your question, on a spec home versus a presale. Stuart A. Miller: All right. That concludes our conference call. We want to thank everybody for joining us. Look forward to reporting as we go forward, and thank you.

This will conclude today's conference. All parties may disconnect at this time.