Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Michael Bilerman – Citigroup.
Michael Bilerman – Citigroup
This is David here with Michael. I thought we’d start with, could you provide a little bit of color on the inventory adjustment that occurred on the home sales in the fourth quarter?
Michael Berman
In connection with closing down the sales operation, we reviewed all the elements with that and we discovered that over time we had been making estimates with respect to rebate programs. You make a lot of estimates with respect to cost of goods sold and we found a receivable that we’re not going to be able to collect on so we wrote it off.
Michael Bilerman – Citigroup
Is that something that could occur again? Is that sort of an ongoing adjustment process?
Michael Berman
There’s no more receivable with respect to that, and going forward we won’t be estimating what expected rebates might be we’ll just be calculating actual as we go. Over the years we’ve been purchasing hundreds if not a thousand homes in a given year, so there was a lot of estimation that was going on. We had all kind of different programs all kinds of manufacturers.
Michael Bilerman – Citigroup
Moving over to the discussions you’re having with the agencies at the moment. Are you seeing any change in tone relative to their appetite for underwriting? Are you seeing any change in the terms of the underwriting? Anything you can disclose with that would be helpful.
Michael Berman
I would say that with respect to the terms of the underwriting they have been fairly consistent in our dealings with them. They continued to be more cost effective than insurance companies and banks with respect to spreads. They have increased their spreads over the last 12 months. We locked rate in the last couple of days that we noted in the press release. The spread was 400 over I would say last year it was more like 250, 300.
Michael Bilerman – Citigroup
Michael, this is Michael Bilerman. Can you go over just in terms of the seasonality in FFO, if you look at where your guidance is for the first quarter relative to the year it would imply a much bigger ramp than you’ve seen I guess in the back half of the year. So if you’re at 103 to 113 in Q1 and 345 to 365 for the year you’re sort of in an $0.80 to $0.84 quarter for the second, third and fourth, which would be a much bigger increase over last year. I’m just trying to figure out what’s impacting 1Q and then what are you sort off getting to benefit for the rest of the year.
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