Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Ivy Zelman - Zelman & Associates
Ivy Zelman - Zelman & Associates
First question I want to ask you relates to your gross margins and backlog, realizing you said you’re focused on cash and we understand that, can you just give us some indication if the margins were substantially higher then the 8% plus that you reported for this quarter and the second question just relates to understanding again your finished lots versus undeveloped.
Larry Sorsby
We’re not making any projections about gross margins, you can see the trend that has occurred sequentially from the first to the second quarter but I will say that I don’t think there’s anything in the backlog that would lead to a dramatic improvement or decrease in the gross margin from what you saw in the second quarter.
Ivy Zelman - Zelman & Associates
The second question related to better clarification on the total owned and optioned inventory, how much is developed versus undeveloped, the finished versus unfinished.
Ara Hovnanian
Well we break it down only on the owned, the option loss we don’t give that same breakdown. The slide number is 20 and—
Ivy Zelman - Zelman & Associates
I was a little confused by that slide, that’s why I asked you to clarify it.
Ara Hovnanian
Okay, well what that means is 45% of the lots that we own have at least 80% of the development costs already in place. Some are finished, some are a 100% finished and some are almost finished and have just the last 20% remaining. The middle category means they’re in process of development, they’re not 100% finished nor are they undeveloped. They’re in the middle. They average about 50% developed.
And finally the last category is, they’re something around raw land. They may have some expenditures but if its less then 30% of the total land development cost we categorize them in that last category.
Operator
Your next question comes from the line of Dan Oppenheim - Credit Suisse
Dan Oppenheim - Credit Suisse
You have certainly done a great job opportunistically retiring debt and reducing near-term obligations, but if we start to look through the downturn here and kind of focus on what’s the next step and think about your future opportunities, leverage is still quite high so how comfortable will you be redeploying the cash you’ve built up to pursue and opportunities and what are the things that you’d need to see in order to make you comfortable doing that.
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