Good afternoon. My name is Dawn, and I will be your conference operator today. At this time, I would like to welcome everyone to the Toll Brothers First Quarter Earnings Conference Call. [Operator Instructions] Thank you. Mr. Douglas Yearley, you may begin your conference, sir.

Thank you, Dawn. Welcome, and thank you for joining us. I'm Doug Yearley, CEO. With me today are Bob Toll, Executive Chairman; Marty Connor, Chief Financial Officer; Fred Cooper, Senior VP of Finance, International Development and Investor Relations; Joe Sicree, Chief Accounting Officer; Kira Sterling, Chief Marketing Officer; Mike Snyder, Chief Planning Officer; Don Salmon, President of TBI Mortgage Company; and Gregg Ziegler, Senior VP, Treasury. Before I begin, I ask you to read the statement on forward-looking information in today's release and on our website. I caution you that many statements on this call are based on assumptions about the economy, world events, housing and financial markets and many other factors beyond our control that could significantly affect future results. Those listening on the web can e-mail questions to rtoll@tollbrothersinc.com. As has become our regular practice, we are going to limit our prepared remarks to provide more time for Q&A. Since our detailed release has been out since early this morning and is posted on our website, I'm sure most have read it, so I won't reread it to you. Our fiscal year 2013 first quarter ended January 31. Fiscal year 2013 first quarter net income was $4.4 million or $0.03 per share compared to a net loss of $2.8 million or $0.02 per share in fiscal year 2012's first quarter. Fiscal year 2013 first quarter revenues rose 32% in both dollars and units compared to fiscal year 2012's first quarter. Our backlog rose 66% in dollars and 57% in units, and our net signed contracts rose 38% in dollars and 49% in units. On a per-community basis, fiscal year 2013's first quarter net signed contracts were the highest for any first quarter since 2006. Demand has increased, and it appears that momentum is building. Through the first 3…

Thanks, Doug. First quarter homebuilding gross margin before interest and write-downs was 23.4% of revenues compared to 23.2% in 2012's first quarter and 24.6% in 2012's fourth quarter. Our margin decline of approximately 120 basis points from Q4 '12 to Q1 '13 was anticipated and was due primarily to a reduction in deliveries from our high-margin, high-rise communities and an increase in deliveries from some lower-margin communities. First quarter interest expense, including cost of sales, was 4.7% of revenues compared to 5.1% from 2012's first quarter and 4.3% from 2012's fourth quarter. The changes are a function of mix. First quarter SG&A of approximately $78 million was higher than the $69.6 million in the first quarter of '12 due to our growth. After adjusting for an $8 million insurance reversal in the fourth quarter of 2012, our SG&A in the first quarter of 2013 declined approximately $4.5 million from that fourth quarter, primarily associated with the reduction in revenue. As a percentage of homebuilding revenue, SG&A was 18.4% for Q1 of fiscal year 2013 compared to 21.6% in Q1 of 2012 and 11.8% in Q4 of fiscal year '12. The improvement compared to a year ago was due to revenue growth, partially offset by expense increases. The change from the fourth quarter is due primarily to the reduced revenue and the aforementioned insurance reversal. First quarter other income and income from joint ventures was $7.7 million and included $2.1 million of income from Gibraltar. We are pleased to announce that our Amtrust joint venture has fully defeased its debt and begun to generate cash flow in addition to income. Our share count on a diluted basis averaged 177.8 million shares for the quarter. Subject to our normal caveats regarding forward-looking statements, we offer the following guidance for the rest of…

Thanks, Marty. After 7 years of trepidation, buyers are reentering the housing market, and household formations are increasing. With low inventories of houses for sale and a limited supply of approved lots, home prices are rising. Buyers who need to sell one home to move on to the next one are more willing and able to make the move. These factors, plus record low interest rates, are boosting the housing market's recovery. Recently, mortgage rates have ticked up 0.25 point, which means the mortgage market is flashing a "price increase coming soon" sign. This is adding some urgency into customer demand. As housing continues to recover and home prices rise, personal and bank balance sheets get stronger, which should spur additional economic activity and more housing demand. Thanks for listening. Now I turn it back to Doug for Q&A.

Thanks, Bob. Dawn, let's line them up.

[Operator Instructions] Our first question comes from the line of Stephen East with ISI Group.

Doug, could you talk a little bit how you're looking at pace versus price now? Last year, you all were focused on driving volumes higher. Now as you sit today, how do you balance the 2, and what are you primarily trying to accomplish there?

Well, we've always maximized profit, and that's our goal through this cycle. Every community is different. The $2 million home is more difficult to deliver than the $500,000 home because there's many more upgrades and options and extras in the house. We look at the backlogs that are building by community. We look at the teams we have in place on those communities. We look at the price point and the amount of upgrades we're offering at those communities. We make our decisions on how aggressive to be with pricing based upon all of that. So if we have communities that can deliver the next house sold in 7 or 8 months, we may not be moving price as much as we will for a community that is out 12 months. So it really is very dependent upon each individual instance. We are seeing increased pricing power as we enter the spring season. And in most locations, the backlogs are building, which means we are increasing prices for all the reasons I gave.

Okay. That's very helpful. And then if you look at what you're seeing regionally, I guess what I'm a little bit worried about is we have the sequester that potentially sits out there and affects the mid-Atlantic. And I'm interested in one, your thoughts have you all seen anything in that market that's starting to change; and just more generally, just a quick regional round up of the differences that you're seeing.

We haven't seen anything negative coming out of D.C., Northern Virginia, Maryland. In fact, Virginia's one of our top 5 markets right now, and so I don't see it as having an impact. Bob?

Well, the best metrics, Stephen, for understanding what the sequester influence will be on the D.C. market is the number of deposits and agreements that you're taking while this is a matter of conversation. This past week, we took 32 deposits -- no, we took, I'm sorry, 27 deposits and 29 agreements of sale, this for 32 communities. So I'll take that metric for the rest of my life. So apparently, the market is not as concerned with the sequester as the press. And that's all we can say about that.

Regional roundup, Stephen, the top markets today continue to be New York, New Jersey, City Living; northern Cal, on fire; southern Cal, on fire; Dallas, Virginia, New Jersey, Pennsylvania; and we're thrilled with Seattle. Those would be our top markets at the moment.

Your next question comes from the line of David Goldberg with Zelman & Associates (sic) [UBS].

UBS, but pretty close. First question, Bob, you mentioned in your comments about rising rates and the impact that has on demand and creating the sense of urgency. And I'm wondering if you guys could kind of give us some more color as you look over history, is that bump in urgency, is that a temporary thing or does that have a more permanent effect? In other words, does that just spur some pull forward of demand? Or do you see more people say on a kind of go-forward basis, "Hey, look, maybe now is the right time to buy that next house," and so it's more of a lasting demand?

I think it has a lasting impact because although what you may be doing is bringing sales forward, you're creating more demand. And when that greater demand is created, nice -- naturally, the prices go up. Prices go up, it creates more demand. More demand creates more fence-sitters coming off a fence for whatever reason at that point, whether it's mortgages or whether it's just that green price increase from the industry. So I would guess that get yours now before interest rates go out of sight is the kind of marketing program that during good times the homebuilders use, which is don't miss this opportunity, prices are going up on a regular basis.

That's great color. And then just as a follow-up, I think you guys used to provide, and I'm kind of interested when you look at your buyers that go through Toll Brothers mortgage, how much effectively more house you think they could have bought? In other words, maybe they could have paid, they could have bought 20% more house based on kind of income levels and where they were qualifying. I think it's an interesting statistic when we think about the potential for higher rates and higher home prices, kind of how much more house there is for your buyers to purchase. Is that something you guys could provide potentially?

Well, what we can provide is what the interest -- what the average interest rate -- not interest rate, but the average LTV is...

71%.

And that -- the average LTV is 71%. That gives you the balance to calculate that they could have spent on housing if they wanted to or if they could have qualified for.

Do you find that people are willing to push their qualification a little bit further now, getting a little more comfortable with the market?

Why don't we refer this to Don Salmon, President of TBI Mortgage? Don?

I think, overall, the quality of our buyers has stayed relatively constant. Even throughout the downturn, our buyers were, on average, over the whole were very well qualified. There are buyers at the margin who are scrambling getting the housing right now. The one outlier is going to be the effect of QM going forward, what's going to happen with the qualified mortgage. Right now, my personal opinion it's not going to be huge because Fannie, Freddie and FHA are exempted from QM. Most of those people who are stretching for homes are not the affluent buying the big houses. They're the ones who are finding lower-end houses. So I don't expect it to have a major impact at all.

And David, we've been sitting at about 15% to 20% all-cash buyers. And an LTV, for those that get a mortgage of right around 70%, it's 71% this quarter. So it doesn't appear that the buyers are levering up more. It's still in that same 70% range.

Yes. And to put a little more color on that, Doug, our conforming buyers are really at a 67% LTV. The 70% average is being driven up by those who due FHA on average in VA, who are on average about a 94% LTV. That has never changed and will continue. Those are the folks who are getting the high loan-to-value loans. But our conforming buyer, which represents the bulk of our buyers, are at a 67% LTV right now.

I think it's very interesting that at the loan mix, you have no all-pay, you have no brokered sub-prime. Your prime this quarter was 100%.

Correct. It's interesting, David, we had potentially anticipated with mortgage rates this low an increase in the loan-to-value ratio from our buyer. If people are lending you money at 3.5%, take as much as you can get, but we really haven't seen that.

Your next question comes from the line of Dennis McGill with Zelman & Associates. Dennis McGill - Zelman & Associates, LLC: Doug, you mentioned earlier the 70 gross openings this year for communities, and I think you made a comment that 2014 would be a growth year. With your excitement around the land purchases and some of the activity today I think being more about the '14, '15 pipeline, would your early sense be that those gross openings would accelerate from that 70 level in '14?

Yes. Dennis McGill - Zelman & Associates, LLC: Okay. And then kind of -- that's good enough. I know you want to give specifics.

We'll give guidance at the end of the year, but to that specific question, the answer is yes. Dennis McGill - Zelman & Associates, LLC: Okay. And then of those 70 this year and however many it would be next year, how many would you say -- or let's just focus on '13, how many of the 70 this year would you say are cannibalizing an existing community in any way?

Very few. In fact, we have some that we're purposely holding back, and they're on our mothball list. But they're not on there for the bad reason of underperforming, they're on there because they're next door to similar products. So very few I'd say are cannibalizing. There's certainly many in the same submarket: Bucks County; Loudoun County, Virginia. But 2 gas stations across the street, very few of those. Dennis McGill - Zelman & Associates, LLC: Okay. And then from a margin standpoint, it's for Marty, how much of the mix now is purely high-rise or mid-rise versus single-family versus geographic mix?

Well, in the first quarter that just completed, our high-rise deliveries were about 3% or 4% of our total. And that's down from the mid-teens generally last year. And it's going to be there until The Touraine delivers. And thus, it'll kind of only be there for that one quarter of Touraine deliveries. So the rest is a function of the single families or the attached or the empty-nesters or the active-adults. Dennis McGill - Zelman & Associates, LLC: So are you able to look at your single-family product and look at an apples-to-apples margin comparison this first quarter versus last quarter -- first quarter? If there's a rate of change on the margin...

It's very challenging for us to do that because of the diversity of product types we have in single-family and the geographic differences, as well as the option selections of the buyers. So I wish I had a better answer for you. Gregg, have you got anything?

No, I'm not getting all the way down to margin. So the mix for settlements for a year ago versus today is very similar on the single-families. So Q1 2012, it was 62% of the settlements were the single-families and it's 61% this quarter. So that's consistent, but the margin's going to vary within each of those communities.

But even in the West, for example, the homes we sell in California are different than the ones we sell in Seattle even if they're single-family. Dennis McGill - Zelman & Associates, LLC: Sure. So the gap between the 3% to 4% being high-rise and 60-some percent being single-family, is the other product you mentioned active-adult, attached and so forth?

Yes.

Your next question comes from the line of Stephen Kim with Barclays.

This is Freda Zhuo on for Steve. So the first question that I had was just a housekeeping item. Do you guys have the number for your construction in progress? So last -- first quarter '12, it was 17 78.

Gregg is reaching for it in his leather notebook.

In the middle of the book. So construction in progress at 1/31/13 is $2.112 billion.

Okay, great. And the second question I had was you guys invested $330 million this quarter on 3,000 purchased lots. Do you guys have any details on where those land deals are located? And do you guys have any color on how you're approaching land acquisition deals going forward? Is it harder to getting those A and B locations?

Well, our approach is the same. We're very opportunistic. We're out there scouring. We have great land teams. We have a lot of money, a big appetite, and we continue to find good opportunities in our very strong markets. The land is -- that we've been buying is all over the country. Of the $330 million, 2 large deals in Manhattan made up about 1/3 of that, and that's a deal in West Soho and another one at First Avenue in the low 50s. And then beyond that, there are many deals in the $10 million to $20 million range that are really throughout many of our markets. We are very excited by some new opportunities in California. That's a market that we've really focused on to grow. And so that's based on what I said earlier about how strong Northern and Southern Cal are. In particular, we're very, very excited about what's going on out there.

Your next question comes from the line of Dan Oppenheim with Credit Suisse. Daniel Oppenheim - Crédit Suisse AG, Research Division: Was wondering about -- a little bit about the backlog conversion. You talked about -- I always think about the levels seen in 2002 to 2006 as time when there's generally a lot more construction taking place. Are you seeing challenges in terms of labor already that would lead to that? And just can you provide a little more color in terms of the overall environment and sort of backlog conversion there?

Well, the -- you've heard about it. There have been some labor shortages in some markets. Many, many, many workers left this industry; and now, the subcontractors are bringing them back. It is typical of the beginning of any recovery. We anticipated it. We've been dealing with it. I'm hearing from the field that it was worse 6 months ago than it is today, so that is certainly improving. Internally, we have construction teams that are now a lot busier than they were a year or 2 ago, and so we're supplementing those teams as needed. And remember, townships process permits, and they inspect houses. And the building departments of many townships have shrunk, and now they're coming back, and they have to deal with many more permit applications and many more houses to inspect. That's all anticipated. We are dealing with it. It is getting better, but it's something, as I say, that you expect this type of recovery, and all the builders have been talking about it.

It must be also remembered -- excuse me, it must also be remembered that our build time is longer than the typical merchant builder build time because our luxury homes are larger, more complex and have a higher level of finishes. And furthermore, our customization process takes several months between the time the option selection process has begun and the building permit is drawn. Our buyers can take several months thinking about their structural changes, their designer changes, their custom selections. And this lengthens the build time. So obviously, if you pile on a whole bunch at the beginning of the year, if they don't come out at the end of the year, it's because you've got this extra 3- or 4-month period between the time you sold and the time you drew a building permit, which lags the conversion ratio of your backlog.

And so long as they want to spend the money, we'll let them hang out in our design centers a little bit longer.

Right. Daniel Oppenheim - Crédit Suisse AG, Research Division: Got it. Okay. And then just one minor question. You talked about the contracts for the first couple weeks of the quarter when you normally talk about deposits for that time frame. Just wondering, are they running at the same pace? Just is there any reason for the distinction there?

No, last quarter, we went to contracts. So we decided we would stay consistent. And no, the deposits are also up a similar number. What we are experiencing is that the visitor to agreement continues to run at about the highest in the company's history, which means that the quality of our traffic is tremendous.

It also means hopefully, when the traffic increases, you get a lot luckier.

Right.

Your next question comes from the line of Michael Rehaut with JPMorgan. Michael Jason Rehaut - JP Morgan Chase & Co, Research Division: First question on the comments around pricing that you're seeing increasing pricing power into the spring, and certainly that's something that we saw in Southern California last week. Could you be specific in terms of if that increased pricing power, a little more specific, if that's being seen in some regions more than others? And if perhaps you can give us a degree of magnitude, let's say, if pricing maybe has been increasing on average across your communities a couple percent in each of the last couple quarters, let's say, what that would be for first quarter of '13 – or I'm sorry, into second quarter of '13.

We are raising prices in about 60% of our communities. But remember, where we're raising prices is also where we're having sales. So we are raising prices in more than 60% of our sales. This past quarter, we raised price about 1.5% company-wide. And as we head into the second quarter, we see that accelerating. And is it different from market to market? Absolutely. This is a very local business, and what goes on in Chicago is very different from what goes on in Orange County and Northern Virginia, and what goes on in one town to the neighboring town can be very different. So we look at it community by community, and that's how we've always run the business and always will. Michael Jason Rehaut - JP Morgan Chase & Co, Research Division: Great. I appreciate it. And I guess the second question just on community count. You reiterated the guidance of 225 to 255 by year end, and that would imply flat to up over 10%. The rollout of that, just want to make sure I understand correctly, said late in the second half of the year. So really, we're talking perhaps a potentially flattish community count over the next couple of quarters and then a potential pop in 4Q. Is that the right way to think about it? Or would community count maybe even go down a little bit in the interim?

Flat in 2, modestly increasing in 3, hopefully more in 4.

Your next question comes from the line of Adam Rudiger with Wells Fargo.

This is Joey Matthews on for Adam. I have a question on your underwriting deeds in this past quarter with the 3,000 lots purchased, if you have any price appreciation built into that and -- or any cost inflation assumptions that we should know.

No, from the beginning of time, we have not put inflation into our calculation for lot purchases. The lots we purchase have to carry -- would have to carry on without expectation of inflation. So what we do is we price the houses going out 5 years from now. If it's a large piece of ground and going to take 5 years to develop, we calculate the homes going out in the fifth year at the same price that we calculate the houses going out in the first quarter.

And then my second question is on traffic. In the past few weeks, you mentioned contracts are up 40%. Is there a metric you can give us or some color around traffic in the past few weeks?

Well, I mentioned before we have the highest conversion of a traffic -- of a visitor to an agreement in the company's history. Traffic is not up 40%. Traffic is relatively flat, maybe up a visitor or 2 per week per community. But boy, the quality of that client coming out is great. I think they spend a lot more time today on the Internet prescreening their purchase, so when they come out, they're more prepared.

Your next question comes from the line of Jade Rahmani with KBW. Jade J. Rahmani - Keefe, Bruyette, & Woods, Inc., Research Division: As a follow-up to the comments on build times, can you give us an update on where your current cycle time is running on average and how that's changed in the last 6 months?

Well, the average is combining a lot of different stories in a lot of different markets. Generally, 8 to 9 months, what it takes from when a client signs an agreement until we can deliver the home. But in some cases, it's 5 months, and in some cases, it's 13. Depends on backlog, it depends on a town. Some towns turn a permit around in 2 days, some towns turn a permit around in 3 months, but it's generally about 8 to 9 months. How has that changed in the last 6 months? As backlogs grow, it takes us longer to deliver houses. In most locations, our backlogs are growing.

Also, this is very much influenced by the price of the home. If you're talking $1.5 million homes, our people tend to spend a lot more time in the selection process. If they want to hang around the option, as Doug said earlier, the option room, the design center, we're more than happy to have them take an extra month before we insist that they get on with the process. Jade J. Rahmani - Keefe, Bruyette, & Woods, Inc., Research Division: So that would suffice it to say that you have a greater delay than your peers in seeing the benefits of price increases in both revenues and margins. I was wondering if you could quantify on an apples-to-apples basis how much you think prices in your communities are up year-over-year and how those increases might break out between lot premiums, reduced incentives or higher base prices?

It's a project you've just handed Gregg, Jade, but we'll get back to you next week. We can answer some of it now, but we can't break down...

There hasn't been a lot of move in incentives, right? It's gone from last -- in the last 12 months, they're down about $7,000 a home.

Right.

And lot premiums are unique to the lot, so it's tough to compare those. But the broad question was how much you're up in a year on an apples-to-apples basis? So I think that's what was asked. Same product a year ago and now, how much are you up on that same product? Any idea?

It's really hard to evaluate. The best guidance I could give you, Jade, was to look at our backlog numbers a year ago on an average price basis and our backlog numbers now on an average price basis. There's a mix difference in there, but it's the best we can do.

Well, our backlog right now is $665,000 per house; and at the end of fiscal '11, so call it 15 months ago, it was $588,000 per house. Jade J. Rahmani - Keefe, Bruyette, & Woods, Inc., Research Division: Okay. And actually, as a slightly related question, the land that you target to acquire or I mean characterize it any way you would like, but how much would you say the related land is up over the past 12 to 15 months?

How much is land up in the last 15 months?

Again, it's such a...

A lot and a little. Depends upon how desperate that seller is.

Right. And the location.

Right.

In certain markets like Northern Virginia and Northern and Southern California, land is up because house prices are up. In fact, there's deals that work today that we could not make work 15 months ago because the house prices are up so much. In other locations where the markets are relatively flat, the land is flat. And as Bob said, maybe a land seller is a little more desperate. So we're able to put a deal together today that we couldn't do 1.5 years ago. Every deal, every market has its own story.

Yes, I think one point of clarification in Doug's comparison of the $665,000 per house now in backlog to $588,000 back at the end of '11, the $665,000 includes 16 more units at The Touraine at $4 million each. So I don't have the x Touraine backlog number at the end of the quarter right in front of me, but that would be the number to compare it to, so...

Right. Thanks, Marty.

Your next question comes from the line of Ken Zener with KeyBanc Capital Markets.

Marty, obviously very explicit margin commentary, which highlights both the volatility of your business, as well as your visibility. So with such confidence, it seems like the 150 bps you guided to in the fourth quarter would imply with interest about 20% is your guidance, which preponderance, I assume, is already in your backlog. With Doug's comments on pricing on fire, why wouldn't it be reasonable to assume margins are going to be higher as you're entering '14 given you're selling those homes now, and you have an explicit kind of 20% exit rate in 4Q?

Well, we don't give guidance on '14 at this point, but I think some of the commentary we've had in the release and in our script implies we're optimistic about '14.

Okay. Then if we look at the communities, 70 new communities, about 1/3 of your communities by year end will be -- or a little less will be newly opened. So could you comment on perhaps the spread you're seeing between the newer communities you're bringing on, and if this isn't relevant, if it's incorrect to assume that new communities will have a higher absorption pace as many new communities do to get the flow going but also because you don't have a construction backlog?

Well, sometimes we open a new community when we're not able to pull that building permit of the first sale in that first week because we have a whole bunch of pent-up demand. We don't want those clients to go elsewhere. So we may make the business decision to let's open it up and let's quote the 10-, 12-month delivery because we still have a few roads to put in, we still have to work out the building plans with the township. So don't assume that, that first sale is benefiting from an immediate permit and a construction team that's sitting there waiting with nothing to do. It doesn't always work that way. And in fact, in some cases, you could have a bit of a delay until the deliveries begin. But you're right, many of the new communities we open today, because of pent-up demand, seem to have tremendous initial interest, which allows us to have pricing power and take a nice quantity of deals out of the gate.

And then if I may, the SG&A, how much of that is already included for the new communities that you're bringing on? Are you simply moving existing staff or have you already taken on those people on the fixed-cost basis?

Good questions.

So Ken, at the year-end conference call, I guided to an average quarterly SG&A number of approximately $82 million. I'll continue to guide you to that average for this fiscal year, which, based on the fact that we have $78 million in the first quarter, implies that we'll have an increasing amount as we go through the quarter. Some of that is incremental S because we sell more, some of it's incremental SG&A because we open more communities.

Your next question comes from the line of Joel Locker with FBN Securities.

Just on your amortized interest, where do you expect that going forward? There was a slight sequential bump, I think it went from 4.3% of revenues to 4.7%. Do you expect that to trend back down?

Long term, we expect it to trend back down. As part of next quarter, consistent with my guidance for increased cost of sales less margin, part of that is all due to mix, part of that is true cost of sales, and part of that is increased amortization. After that, we expect it to go down through the balance of the year.

And then on your JV income, do you expect -- that's drifted lower the last 3 quarters, I think. Do you expect any increase there to stabilize around the $3.1 million mark? I know it's lumpy, but it's just kind of what the general trend is.

It's lumpy. We have only one JV community delivering homes now, and that's Jupiter.

Right. And a little bit left out of Northside Piers.

And a little bit left out of Northside Piers, but not much. So most of the JV income you see there is associated with our Gibraltar subsidiary.

All right. And just one last one, if you have a monthly breakdown of your second quarter 2012 orders?

A weekly you need?

Just a monthly, like February, March, April.

Second quarter orders.

Right. Breakdown by what? I'm sorry.

By month.

Just by month. Just to make up the 1,290 from last year.

Give me the Monday morning sheet, Mike.

The 1,290? What's 1,290? We're not at 1,290 for this quarter.

1,290 orders from the second quarter of 2012.

Last year, it was break down by month.

Just the second quarter. February, March second quarter?

We do it biweekly. You expect me to have it in my head?

February, March, April.

430, 460, 420, and 410. So that's close, all right?

I may not have had it exactly. That's a gross because we have some lost agreements in there as well.

Your next question comes from the line of Mike Roxland with Bank of America Merrill Lynch.

Just one quick question. I know, Doug, you spoke about it earlier is labor cost. Can you speak to some of the other costs that you saw in the quarter with respect to let's say wood or concrete or drywall and the impact that they had on your operations, and whether there's any way for you to try to minimize let's say the impact that some of the wood costs have had, particularly given their continued strong run.

Sure. Cost is up $3,000 per house in the first quarter. That's on average nationwide. [Audio Gap] not buying lumber in bulk. We're doing our best to buy it out. We used to be a big player in the futures market. We got out of that game. So in the Northeast, mid-Atlantic, Midwest, I think we have the most protection. And in the other markets, we do our best with the framers and with the suppliers. But it's probably not taken us out more than 3 to 6 months at best.

So we believe we have our drywall contracted across the U.S. through the end of the year. We have about 25% of our East Coast lumber contracted through the middle of the year, June. And our appliances are contracted out for 2 more years. And many of the other components, to the extent we can control it, bricks, stones, siding, vinyl, windows are under contract through the end of the year, and that's the end of the calendar year.

Your next question comes from the line of Buck Horne with Raymond James. Buck Horne - Raymond James & Associates, Inc., Research Division: Wonder if you can talk about the strategy and opportunity behind the rental apartments and student housing projects? You mentioned putting those into a joint venture structure. I'm just wondering how much equity Toll Brothers plans to have in those? Do you guys intend to own and operate these buildings after completion or why not merchant build them for a fixed margin?

We presently own and operate about 1,500 apartments that we've had for a decade or more in an off-balance-sheet venture. We decided several years ago to bring in a team and to start building the apartment business. We're not interested in existing apartment communities where cap rates are getting very low. We are primarily interested in development sites where we can take advantage of the Toll Brothers land acquisition teams, the land development teams that get the approvals and put the roads in, the construction teams, the marketing group and of course, our brand. And so we see it as an opportunity to leverage off of the existing company, brand and people. We see it as an opportunity to hedge against homebuilding. We certainly learned through this down cycle that it would have been a nice thing to have some apartments. We understand that this business will be off balance sheet. Our primary focus is for sale luxury homebuilding, but we think this is a great way to diversify the company. And we are in action with about 4,000 units under control to be developed, plus another 900 or so units that will be student housing at 2 large universities in the East. What we want to do with it? We want to own it, operate it with great partners. The exit strategy has not been determined at this point, need not be determined. It could be a bulk exit opportunity. It could be individual. It is a very small part of our business, but we think an exciting and important way to diversify the company. Buck Horne - Raymond James & Associates, Inc., Research Division: And what kind of total equity commitment to the projects do you envision Toll having?

Our best guess right now is about $200 million. Buck Horne - Raymond James & Associates, Inc., Research Division: Okay, okay. One last one. I'm just wondering, have you seen any changes in the demographic profile of the buyers you're seeing now? Are you seeing more young people showing up in the communities, whether it's for one reason or another, just scarce existing home inventory that's out there? Any demographic changes you're noticing?

No, it doesn't appear so. It seems to be coming back to the same business that it's been for years and years.

Your next question comes from the line of Jack Micenko with SIG.

Most have been asked and answered. Just thinking about the multifamily strategy or the apartment rental strategy. Is it fair to say most of that will be suburban garden style or are you looking at some of the sort of City Living projects as an opportunity on the rental side as well?

It's a combination. Right now, we have 3 opportunities in Washington, D.C. We have one building planned in Jersey City. All 4 of those I mentioned are high-rise, and then we have others that are true suburban garden apartment variety.

But suburban even have podium parking.

Yes, yes, some – most do. That's right.

So currently, I would say we don't have the typical 2-, 3-story walkup garden apartment in the burbs. They're more sophisticated than that.

Okay, great. And then thinking about longer cycle time and labor pressure, I'm wondering sort of back to the '02, '06 time frame, is your cycle time perhaps an advantage with the labor pricing issues and that maybe the urgency of the subcontractors work along -- as long as it's not sort of outside the workflow process? Can you quantify that or is that something -- or am I thinking about that totally optimistically?

I don't understand.

You might want to reiterate your perspective, Jack. We didn't...

So it takes you 9 -- well, 9 to 12 months to build a house. As you're dealing with subcontractors, does that lengthened amount of timing allow you more flexibility in negotiation versus another builder who has more shorter cycle time with more urgency perhaps around the need for that labor to fit in at the right time?

No. Actually, it probably works the other way. You're a merchant builder and you can say to yourself I've got 20 homes ready to go today. They're all the same. Just go down the street, you can probably get a better price from that sub through that work because there's less brain damage than you can for a home that's customized from the one the sub built before.

Your next question comes from the line of Michael Rehaut with JPMorgan. Michael Jason Rehaut - JP Morgan Chase & Co, Research Division: Just a follow-up to clarify on my earlier question about price increases. Doug, I think you said in the first quarter, it was 1.5% company-wide, and it's accelerating into the second quarter. Just want to make sure we're talking about incoming orders rather than the actual deliveries.

Incoming orders at point of sale.

Your next question comes from the line of Jade Rahmani with KBW. Jade J. Rahmani - Keefe, Bruyette, & Woods, Inc., Research Division: Did you say anything on the tax rate in the quarter just being above a normalized tax rate? And what would you expect for the rest of the year?

I think we're still comfortable at a 39% tax rate for the full year. It was a little higher in the first quarter because some of the, what I'll call fixed components associated with accruals of interest and penalties for uncertain tax positions are a larger part of the total tax expense this quarter than they will be in subsequent quarters because the total tax expense was a little lower.

And I'm not showing any further questions.

Well, thank you very much, Dawn. Doug?

Thank you, Dawn. Thanks, everyone. Have a good day. Bye.

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