Good morning, and thank you for joining us today for Hovnanian Enterprises Fiscal 2011 Fourth Quarter and Year-End 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] The company will also be webcasting a slide presentation along with the opening comments from management. The slides are available on the Investors Page on the company's website at www.khov.com. Those listeners who would like to follow along should log in to the website at this time. Before we begin, I would like to read the following forward-looking statement: All statements are made during 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. Such risks, uncertainties and other factors include, but are not limited to, changes in general and local economic and 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 market where the company builds homes; government regulation, including regulations concerning development of land, the homebuilding, sales and customer financing process, tax laws and the environment; fluctuations in interest rates and the availability of mortgage financing; shortages and price fluctuations of raw materials and labor; the availability and cost of suitable land and improved lots; level of competition; availability of financing to the company; utility shortages and outages or rate fluctuation; 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 costs of owning a home; geopolitical risks, terrorist attacks and other acts of war; and other factors described in detail in the company's annual report on Form 10-K/A of the year-end October 31, 2010 and the company's quarterly reports on Form 10-Q or 10-Q/A for the quarters ended January 31, 2011, April 30, 2011 and July 31, 2011. 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. I would now like to turn the call over to Ara Hovnanian, Chairman, President and Chief Executive Officer of Hovnanian Enterprises. Ara, please go ahead.

After that rousing introduction, good morning, and thank you for participating in today's call to review the results of our full year and fourth quarter ended October 31, 2011. 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, Investor Relations. On Slide 3, you can see a brief summary of our full-year results and the comparisons to the prior year. For the first time since 2005, full-year net contracts surpassed the prior year. Additionally, backlog increased 19% on a unit basis. Obviously, deliveries have not caught up yet as you could see on the slide, but we believe that, that will happen in the increase in sales and backlog. These nascent indicators of growth are primarily driven by a 5% year-over-year increase in communities. We've achieved this community count growth through continued investment in new land parcels. As we've said in the past, part of our path back to profitability comes by gaining efficiencies through top line growth. Our internal projections for the next 2 years assume no improvement in market conditions, so any comp line growth is driven by community count growth. Slide 4 shows 12 months of our net contract per community on a monthly basis, which was flat at 1.9 per month for all 3 months of our fourth quarter. The conditions in the fall weren't dramatically different than what we saw at the end of the summer. If we were to annualize that number, we would've ended the year at approximately 23 net contracts per community for the full year, which was about where we were for 2009 and 2010. If you look at the absolute number of…

Thanks, Ara. Let me start with our efforts to reload our land position. Turning to Slide 10, it shows the cumulative balance of new land parcels that we've controlled since January 2009. So far, we have purchased or optioned approximately 16,900 lots. The land that we purchased or optioned met or exceeded our investment threshold of a 25% unlevered IRR based on the then current home selling prices and no change in sales pace for the next couple of years. In touching with each and every one of these new land purchases is to get the community open for sale as soon as we can. On average, these wholly-owned communities have 58 lots. Based on current annual sales pace of about 21.3 per community, this equates to about a 2.7 year average selling life per community. Taking into account additional time for land development and permitting, we would expect, on average, to be out of these most communities in less than 4 years. We continue to seek land opportunities in all of our markets and we've had success in finding new deals that made economic sense in most of our markets. However, the distribution of new land has been skewed the operations in Texas and, to a lesser extent, Washington DC. We will remain true to underwriting criteria and are not stretching for deals. This is evidenced by the fact that we walked away from 1,168 lots in 22 communities during the fourth quarter, which includes about 350 legacy lots. As you can see on this slide, throughout fiscal 2011, if the original terms of an option deal no longer made economic sense and we were not able to renegotiate to more favorable terms, we were willing to walk away from those communities. During the fourth quarter, we auctioned 1,700…

Thanks, Larry. I just wanted to reiterate a few highlights from the quarter. For starters, the combination of the debt exchange offer and the open market purchases that we have made have given us additional run way in terms of debt maturities and have also lowered our annual interest expenses by about $11.6 million, both are meaningful improvements from where we were at the end of the third quarter. While not yet positive, we had a solid quarter from a cash flow perspective at negative $7.9 million in our fourth quarter after spending $95 million on land and land development. We are working hard to improve cash flow further. Finally, for the first time since the slowdown began, we had a slight -- granted, slight, increase in the number of net contracts for the full year. Recently, our trend in year-over-year contract is showing even higher gains. This increase in net contracts, coupled with a 19% increase in backlog indicates that we're about to turn the corner on the delivery and revenue side of the equation. We are hopeful that our continued growth in community count and soon, revenues, combined with improving gross margins will lead us back to profitability. That concludes our prepared remarks and we'll now be glad to open it up for questions.

[Operator Instructions] Your first question comes from the line of Michael Rehaut with JPMorgan. Michael Rehaut - JP Morgan Chase & Co, Research Division: Just a little bit more on the gross margins if possible. As you said, you're expecting as of, I believe it was mid-September, as of your last call, 16.8% and it came in at 15.5%, that was still slightly better than the third quarter and you pointed that the big difference was just increase in incentives or lowered pricing. But on a sequential basis, were you expecting less incentives to drive the improvement? Because obviously, on a sequentially, you did a little bit better which on the surface might imply steady incentives. So I was wondering, if you could kind of maybe go a little bit more granular and where there particular geographic regions that really drove the shortfall or I guess, you've had issues in New Jersey. Anything -- a little more detail would be helpful.

Sure. Well, first, as typically the case. It's never one item. It was certainly primarily driven by increased incentives and I'd say that was fairly uniform, I guess, maybe a little bit more in northern California and New Jersey a little bit in DC, we also had and we didn't mention it specifically, but there certainly have been some appraisal issues throughout the industry and we felt that in the fourth quarter, and what makes that challenging is a lot of that really only comes to light at the closing table and that's particularly with VA mortgages, which continue to be our biggest problem on the appraisal side. And largely, mix can also contribute. So we were disappointed by it. We were expecting a little bit more of a sequential gain. We certainly hope we'll make up some ground a little later in this current fiscal year of 2012. Michael Rehaut - JP Morgan Chase & Co, Research Division: So, but if incentives were up or worse than you were looking for, but were they actually worse than the third quarter because, again, your gross margins did improve a little bit sequentially?

Yes, I'd say they increased a bit from the third quarter, in general. It's hard to be really specific, because as you know, nothing is quite uniform. But overall, we had more incidences of incentives in the third quarter -- excuse me, in the fourth quarter than the third. Having said that, it does feel a lot stronger in the last 6 weeks or so of sales. Maybe -- I'm not sure, frankly, what I could attribute that to. It's not as though the news is particularly better, but we saw it in our sales that we released, our November sales. It feels a little more resilient than it was and we haven't quite felt the pricing pressures. Having said that, it's only a month or 6 weeks or so, and it's not a particularly robust time in terms of the quantity of sales. Nonetheless, we're pleased by the current feeling. Michael Rehaut - JP Morgan Chase & Co, Research Division: And then there's the second question on land spend. Given the cash position, and I guess, still a little bit above your targeted number. Can you give us a sense of what you're looking for, for 2012 and what type of community growth that can support?

We're not really giving a projection on what we intend to spend. I think the governor to our ability to continue to tie up land is going to be cash. I think we've made it very clear over the last year or so on a quarterly basis and the story isn't changing this quarter. If we see opportunities in markets that meet our underwriting criteria based on the then current home selling prices and the current home selling basis over the next couple of years, we'll take advantage of those opportunities provided it doesn't [indiscernible] get below our cash target. But we think we're also going to be generating cash coming in from home sale revenues. It's both of those things coming in to play, Michael.

Yes, I mean, overall, we do expect that barring changes and conditions, barring approval delays, et cetera, we do expect to be able to increase our delivery count in 2012 with the new communities and still stay within our cash targets.

Your next question comes from the line of Dan Oppenheim with Credit Suisse.

This is actually William for Dan. We've seen some companies exit measure areas. How do you look at this and the trade-off between needing additional volume to generate cash? Is there a current [ph] materializes versus current profitability?

Well, it is something we discuss regularly. The issue is really efficiency and would we get more efficiency, a better percentage of SG&A and therefore, bottom line by dropping the market or 2, at the moment, we don't think so. It's something we always or continually evaluating but at the moment, we think the footprint is the right one and gives us the best opportunity for buying new land.

And then one more question on the land, how competitive is the market for land nowadays? Has it been getting easy or more difficult since the last conference call?

I'd say, about the same.

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

My first question was actually about the comments about November and some of the pick up that we saw. I mean, if I just do the back of the envelop math here, right? It's 314 sales -- 325 sales on 214 communities, which is about 1.5 sales per community. So just to make sure I kind of understand, when you say things have picked up a little bit, is it a sequential comment or is that versus normal seasonal trends? And does that kind of include traffic picking up or is it quality of traffic, maybe the same traffic but quality is coming up a little bit?

It really is compared to seasonal trends. If you go back to Slide 4, you kind of get the feeling of the seasonality. If you look -- first of all last year to the yellow bars, you see a significant drop-off from the August, September, October period in yellow to November and that's a more typical seasonal pattern. We certainly did have a drop-off in November but it just wasn't as significant so that gives us a little positive feeling about it.

I'll just say from our perspective, November is a time that, historically, sales slowdown as we approach Thanksgiving, things slowdown. And this year, we've not seen as dramatic a slowdown as we have seen in recent prior years. So from our perspective, it feels pretty good and I'll just tell you that we're kind of ahead of our own internal expectations. So that's really where we're coming from. Saying that the market feels a little bit better than we would have expected.

And with that, there's no change in the quality of those buyers? I mean, they're all -- you're not worry about their ability to qualify when they eventually come to closing the home? They're all pretty good credit quality and not...

Well, we're always concerned.

You know what I'm saying, but no more concern than you would normally do in this environment?

Quality is the same as it was. Having said that, mortgage qualification particularly on the lower end continues to be a challenge. And it's something we'd hope the administration in Capitol Hill can pay a little attention to because we do think there are qualified buyer that are being denied with the stringent rules in today's market.

Got it. And then just my follow-up question was on the actuarial charge, the $6.3 million increase in the construction to stack reserve, did that relate to any kind of specific problem you guys could identify or was it more just kind of higher charges over a period of time generally? Or is it something that we might see continue to kind of increase or...

This is our overall claims history, there's no particular, it's not related to Chinese drywall or any particular defect. It's just the overall kind of claim history and how an actuarial kind of analyzed this. And as we said in our comments, in the past several years. In fact, I could probably go back even more than several and say that we do not have to take any charges. So our methodologies have worked fine. For whatever reason, we had a few more instances of claims not related to any particular defect that caused us to take roughly a $6 million additional construction defect.

And just to emphasize that, it's not a particular vintage either, it's not like home is built in here?

No.

Your next question comes from the line of Alan Ratner with Zelman & Associates. Alan Ratner - Zelman & Associates, Research Division: Expanding on Mike's plan on the gross margin a little bit, I guess, what was probably even more concerning to us rather than the absolute level was the fact that you did give that guidance on the gross margin almost halfway through your quarter, and now thinking about your deliveries. You obviously had about 6 weeks deliveries already. To go off of, plus you had a pretty good backlog, which, even if the appraisal issue you highlighted, were pretty significant. I wouldn't expect to see that big of a miss there relative to what you would have been expecting in September. So I guess from a bigger picture standpoint, maybe you can comment a little bit or give us a little bit more comfort around kind of your real-time information from the corporate standpoint and communicating with the local divisions. Because -- and obviously, you're managing to a pretty tight cash flow guidance here and the need for real-time information is pretty important in terms of how you allocate your land spend. So to see that big of a miss, it's kind of almost opens up the possibility that there's a lack of information flow between divisions and corporate. So I was hoping you could help alleviate some of those concerns and maybe comment a bit on that.

Well, first, just to put it into perspective in terms of the effect on cash flow, a 1.5% miss and it was a little less than that, roughly $300 million of revenues is about $4.5 million of cash flow. So relative to the overall scheme of things, it didn't have a significant impact on our cash flow projections. It was more affected by deliveries, which were within the range. Nonetheless, as I've said, we're not happy of the shrinkage at the end and going into the quarter, we felt a little more confident. Just to answer your question more specifically, in terms of the real-time nature of our information, we are in the middle of a systems conversion. Most of our company is now converted. We've got a few divisions left to go, but the majority is on our new system, which gives us a little better guidance in terms of gross margins for anticipated closings. Generally speaking, we focus on a monthly update so when we are a month into the quarter, we would have been using data just before the quarter began but we really were just disappointed by the next few months of closings in terms of what it took to get the last minute sales and some of the appraisal issues that resulted in lower closing proceeds.

One other issue is gross margins by community vary widely. So if mix changes just a little bit, the amount of margin that we get on average can change more substantially than you might think. So mix by itself can move the margin if we're getting more deliveries from community A and less from community B, so to speak, can have an impact as well so it's a combination of things. We're very comfortable with the quality of our data. We're very comfortable that we have real insight into what we can expect to have happened. As Ara mentioned, we refresh our projections with each of our divisions on the bottom line [ph] basis every month. So we have good trend data as well.

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

This is actually Rob Hansen on for Nishu. We wanted to ask about your JV holdings entity. The one that was -- the issue of the new 2% and 5% notes, and I think at one point, you held somewhere around $130 million of cash in that entity. So I just wanted to get kind of an idea of what assets are helping that entity now and how much cash you have in there?

I don't think we actually put it in place until the beginning of our first quarter of 2012. So I think your assumption would be that there's $130 million of cash roughly and $50 million of equity interests in joint venture, which is exactly what we said when we are out marketing the notes.

Okay. And then just overall, how do you plan on managing the liquidity in terms of a operating cash burn perspective and land spend between the JV holdings entity and then the main operating subsidiaries?

First thing I'd say is we're going to carefully manage it. But the real thing is we're going to balance cash and make sure that we have sufficient cash in both of our kind of walled off secured groups to take care of all of their needs. And we can do that by investing more or less in the old secured group or more or less in the new secured group, which impacts their cash balance and the other one's cash balance. And we're looking at those numbers and very comfortable that we'll do that. Initially, there's probably more cash in the secured group than we feel is need. And you can expect over time for us to make investments using that cash to buy new community or land parcels that we'll build houses on in the near term. As those investments generate cash, we'll decide to invest more in the new secured group, but at the same time, we'll make investments in the old secure group as well. But the eye will be to kind of balance the cash as the cash needs are projected.

Your next question comes from the line of Andrew Casella with Imperial.

If you could -- your SG&A and [indiscernible].

Unfortunately, you're breaking up.

Regarding your SG&A, I guess, how do you guys think about initial cost reduction efforts. I know it's down pretty significantly from the peak, but is there any room for further cost reductions going forward?

Well, I think we mentioned. Clearly, we think our SG&A costs will be lower during the subsequent quarters in '12 than they were in the fourth quarter because of the unusual charges. Overall though, as you saw, headcounts continue to reduce as we work on our organizational structure and processes to get as efficient as possible with the volume of transactions.

Your next question comes from the line of Lee Brading with Wells Fargo Securities.

I know you don't want to give any guidance, per se, on the land spend, but I was wondering if you have another way to think about it. This past quarter, you noted that you generated free cash flow and essentially offset that with the land spend. Does that -- and you mentioned also, cash as a governor, but should we look at potentially that free cash flow as a governor on the land spend or is that going to vary quarter-to-quarter?

Again, it's a combination of making sure and, certainly, free cash flow flows into this, making sure that, a, we're not going to spend on land unless we find opportunities that meet our strict underwriting criteria. Frankly, we would have loved to have gotten down closer to $245 million top-end of our range rather than be higher than that. But we didn't find the opportunity that allowed us to do it. So that's the first governor is, do we find an opportunities that meet our underwriting criteria. Second governor, obviously, is cash, which, cash balance and, obviously, cash flow on a quarterly basis plays closely into that. I mean, they're inter-related, they're not something you could separate.

Yes, I mean, overall, they're very related. Obviously, we look at the cash balance as the key governor and try to project the closings we've got coming up, trying to project the land spend we'd like to do and just balance those all the time to make sure we've always got plenty of liquidity excess.

Got you. And just for your perspective, you've bought back about $15 million in bonds. And you mentioned that you have, I think, $157 million in capacity to purchase more bonds. And just going forward, how are you evaluating that? And was that more of a one-time anomaly or do you expect to continue to evaluate that going quarter-to-quarter here?

Certainly, I wouldn't call it a one-time anomaly given our track record on what we've done in terms of buying back debt over the past 4, 5 years we've been pretty regular at it. So we periodically evaluate it and we will. If we see opportunities that we think makes sense to buy back debt given our liquidity position at the time at cash balance et cetera, we may buy some in the future or we may choose not to, but it is something we constantly evaluate, and I think we have a pretty good track record of doing it periodically.

[Operator Instructions] Your next question is a follow-up question from the line of Michael Rehaut with JPMorgan. Michael Rehaut - JP Morgan Chase & Co, Research Division: Just getting back to the gross margins for a moment, did you -- and apologies if I didn't hear this -- describe the differential between newer communities and older communities in terms of the gross margin generation?

We didn't describe it. And we just don't break it out that way. Michael Rehaut - JP Morgan Chase & Co, Research Division: Okay. Well, I guess, it kind of leads into the second question, which is just looking at the absolute level of overall gross margins being, I think at the lower end of the peer group here and just trying to get a sense of why that might be? I think kind of related to that, when you look at the option walk always in terms of the lots, it looks like throughout the different quarters, you're walking away from anywhere from 50% to 90% of the net additions. And I'm just curious about the walk always, if those are primarily more newly purchased, stuff that's been signed up in the last couple of years and -- because it just seems like there's a lot of turnover there...

Sure, I can address that. First, most of our walk always occurred during the investigation period before there's any dollars at risk. So a contract is signed, we report that immediately. But we typically have 45 days or so to investigate everything having to do with the property. Everything from entitlements to improvement cost to fees, et cetera. And often times during the investigation, we find something that causes us not to proceed. That's where the overwhelming majority of the walkaways occur. Regarding your first question on gross margin, first, it is important that you compare apples and apples cost categories. In our case and this is slightly different from peer-to-peer, we deduct commissions both internal and external commissions as part of our cost of goods sold and therefore, it lowers our gross margin. So when you compare to peers, you have to check to see what they're practice is. That being said, we are disappointed in the gross margin, not quite as bad as it might appear before you do that adjustment, but we are certainly hoping that we're going to show better improvement. We showed sequential improvement for the last 3 quarters but we hope we're going to show more sequential improvement during fiscal '12.

Your next question comes from the line of Howard Weinberg with UBS.

Was wondering if you could talk about land holdings and you guys provide great color on the amount of land you have by region. But as we know that land spend is pretty local and that way you sell the homes, making sure they have the homes in the right places. For your land spending that you're currently doing right now, how much of that land spend is for -- to support 2012 and 2013 growth versus longer term?

We are definitely focused on shorter-term land positions. We don't think it's appropriate given the amount of capital we have to make investments in longer-term positions. We certainly have -- and by the way, our average targeted absorption pace on our purchases is about a 2-year hold or holding period. It's about 2 years on average from when we start sales and deliveries. We'd like it to be even shorter. We just have to balance that with the opportunities that are out in the marketplace. We certainly do have some older land holdings that are longer horizons, time horizons, but our focus today is shorter-term and we think that's a critical component being able to allow us to grow with the capital we have in place. We need a higher inventory turnover and it certainly is a focus.

And then just a second question, did you make any bond purchases subsequent to quarter end?

We've not publicly disclosed what we've done since quarter end.

And we never do.

Your next follow-up question comes from the line of Andrew Casella with Imperial.

Just going back to Slide 12, where you break out your own lots as a percentage of development costs spend, if you're investing in, I guess, shorter-term projects, why haven't we seen, I guess, the 80% above developed bucket kind of increase versus from prior quarter's?

Well, we still, even though they're shorter term, some of the purchases still require some land development.

I mean, the deliveries were coming out of that bucket. So that bucket gets depleted every quarter by the number of deliveries.

I mean having said that, overall, it's been relatively stable since the end of the prior year.

So I guess, your acquisitions are the short-term projects but not necessarily fully developed to where they would be classified in that bucket right away?

That's exactly right.

And at this time, I'd like to turn the presentation back over to Mr. Hovnanian for closing remarks.

Great. Well, thank you very much. As I've said, we're pleased by a variety of aspects of our quarter. Certainly, we're not pleased with the gross margin. We hope to be making improvements on that front as well. And we think a combination of some projected, or I should say, hope for improvements on our gross margin with the projected increase in deliveries from the new communities should help our overall performance and we'll look forward to reporting that in subsequent quarters. Thank you.

This concludes our conference call for today. Thank you for participating and have a nice day. All parties, you may now disconnect.