Greetings, and welcome to D.R. Horton America’s Builder, the largest builder in the United states, Third Quarter 2014 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) as a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Don Tomnitz, President and CEO of D. R. Horton. Thank you, Mr. Tomnitz. You may begin.

Thank you, Kevin. Thank you and good morning. Joining me this morning are David Auld, Executive Vice President and Chief Operating Officer; Bill Wheat, Executive Vice President and Chief Financial Officer; Mike Murray, Senior Vice President of Business Development; and Jessica Hansen, Vice President of Communications. Before we get started, Jessica?

Some comments made on this call may constitute forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Although D.R. Horton believes any such statements are based upon reasonable assumptions, there is no assurance that actual outcomes will not be materially different. All forward-looking statements are based upon information available to D.R. Horton on the date of this conference call, and D.R. Horton does not undertake any obligation to publicly update or revise any forward-looking statements. Additional information about issues that could lead to material changes in performance is contained in D.R. Horton’s annual report on Form 10-K, and our most recent quarterly report on Form 10-Q, both of which are filed with the Securities and Exchange Commission. Don?

This brings demand for new homes remain relatively stable, compared to last year across the most of our markets. and the D.R Horton team leveraged our platform as the largest and most geographically diverse homebuilders to generate a 25% year-over-year increase in our third quarter net sales orders. Our increased community count, and inventories of lands, lots and homes put us in a strong competitive position. and our teams in the field have secured our business plan superbly, this quarter by focusing on achieving their targeted sales absorptions in each community every week. D.R Horton has been the leader in the U.S homebuilding industry for 12 consecutive years. Our market share position today is the largest in our history, with 40% more homes closed than any other builder in the most recently reported 12-month period. To diversify and strengthen our market share, both nationally and at the local level. we’re actively extending product offerings across all price points throughout D.R. Horton, Express Homes and Emerald Homes brands. The rollouts of our entry-level Express brand and our move-up on luxury Emerald brand are going well. And we will discuss our progress on both later in the call. Our homebuilding and financial services operations generated another solid quarter of profitable with $22.65 – with $226.5 million, excuse me, say that one more time, with $226.5 million of operating income and a 10.6% operating margin excluding impairment charges. With our 11,365 homes in backlog and the year-over-year improvement, we have seen in our sales during the first part of July, we expect strong home closings, revenues and profits in our fourth fiscal quarter ending September. All our efforts are part of our comprehensive return focus strategy, which we will explain in more detail throughout the call. Our primary strategic goal is to leverage our strong competitive position to generate growth, and revenues, and profits at a double-digit pace, while improving our cash flows and increasing our returns on invested capital. Some of the operating actions we are taking to execute our return focus strategy resulted in some volatility on our financial metrics this quarter. However, we believe our consistent focus on increasing our returns and cash flows were still growing our revenues and profits will greatly benefit our company, and most importantly, our shareholders over the next two years. Bill?

Net income for the third quarter was $113.1 million, or $0.32 per diluted share, compared to $146 million, or $0.42 per diluted share in the year-ago quarter. Our consolidated pre-tax income was $171.8 million in the third quarter, compared to $205.1 million in the year-ago quarter. And homebuilding pretax income was $158.6 million, compared to $185.4 million in the prior year quarter. The decrease in our pretax income this quarter was caused by $54.7 million of inventory impairment charges, primarily in our Chicago market where we are taking actions to reduce inventories to enable us to redeploy the capital to generate better returns. We will discuss these actions later in the call. Our third quarter, home sales revenues increased 28% to $2.1 billion on 7,676 homes closed, up from $1.6 billion on 6,464 homes closed in the year-ago quarter. Our average closing price for the quarter was $272,300, up 8% compared to the prior year, largely driven by increases in average selling prices in our Southeast and West regions. David?

The value of our net sales orders in the third quarter increased 32% from the year-ago quarter to $2.4 billion. Homes sold increased 25% to 8,551 homes on 11% increase in active selling communities. Our average sales price increased 5% to $281,300, the cancellation for the third – cancellation rate for the third quarter was 24%, consistent with the year-ago quarter. The value of our backlog increased 26% from a year ago to $3.3 billion, with an average sales price of $286,200, and homes in backlog increased 15% to 11,365 homes. Our backlog conversion rate for the third quarter was 74%, excluding closings from Crown Communities, subsequent to the acquisition date. We expect our fourth quarter backlog conversion rate to be around 75%, consistent with our long-term average for the fourth quarter. A key part of our return focus strategy is to consistently achieve our targeted sales absorptions in each community. Community absorption targets vary depending on location, product type, lot supply and market conditions at a local level. Our operators proactively adjust product offerings, sales prices and incentives to meet the market effectively compete from new home demand, with a goal of improving inventory turn and optimizing return on our investments. The best way to maximize returns and profits over the life of our communities is to sell and close at a consistent and plan phase. As the spring unfolded, we adjusted an increase to level of incentives in many communities, which helped generate our strong sales result. Overall, incentive levels were extremely low levels in fiscal 2013 and early 2014, but are now returning to normal levels in many markets with significant variations across our communities. Mike?

In early May, we acquired the home building operations of Crown Communities for approximately $210 million in cash; Crown operates in Georgia, South Carolina and Eastern Alabama. we acquired approximately 640 homes in inventory, 2,350 lots and control of an additional 3,400 lots through option contracts. We also acquired a sales order backlog of 431 homes valued at $113.6 million. All of the assets acquired were recorded at their estimated fair values and $53.6 million of goodwill was recorded as a result of the purchase. Our home sales gross profit this quarter was reduced by $9 million of purchase accounting related to the acquisition and we expect additional purchase accounting impact of $9 million on home sales gross profit over the next three quarters. Our third quarter results include 290 net sales and 254 closings from the Crown operations. And Crown increased our average active selling communities by 4% for the quarter. The Crown team operates an efficient business with very strong returns and we are pleased to have them on the D.R. Horton team. Jessica.

We continue to experience strong growth and profitability in the heart of our business our D.R. Horton branded communities which accounted for the substantial majority of our sales and closing this quarter. We are also pleased with the progress and performance of the rollouts of our Express Homes and Emerald Homes brands as we expand our product offerings to diversify and strengthen our market position both nationally and at a local level. This year we introduced our Express Homes brand which is targeted as the true entry-level buyer who is focused first and foremost on affordability. A segment we believe is currently underserved. In October we acquired Regent Homes an entry level builder on the Carolinas as we began to refocus on that segment of the market. Today and going forward we include Regent in our reported metrics for Express. We are now offering Express in 22 markets and eight states with a significant majority of our sales and closings to date coming from Texas the Carolinas. Even though we are still in an early stages of the roll out Express accounted for 7% of our homes sold, 4% of our home’s closed and 2% of homes sales revenue in the third quarter. The Average closing price for an Express Homes this quarter was $156,000. Customer response to our affordable Express product offerings has been extremely positive. In 2012 under the D.R. Horton brand we began adding more communities and floor plans targeted toward move out buyers. Last year we introduced Emerald Homes as our brand for the higher end move up and luxury communities, 6% of homes closed this quarter were greater than $500,000 under both the Horton an Emerald brands accounting for 16% of our home sales revenue up from 3% in homes closed and 9% revenues in the same quarter of last year. We are now offering Emerald in 32 markets across the 11 states. Homes market in under our Emerald homes brand accounted for 2% of our homes sold and closed and 4% of our home sales revenue in the third quarter. The average closing price for an Emerald home this quarter was $655,000 consistent with our return focused strategy our expectation for all three of our brands is at 20% minimum annual return on inventory defined as pre-tax income divided by average inventory. And our underwriting criteria for all land and lot purchases reflects this ROI expectation. In general we expect our Emerald communities to generate higher than average gross margin at slower than average absorptions. Our Express communities to generate faster than average absorption at lower than average gross margin and our Horton communities to continue to operate around our average margin and absorption. Bill?

At the significant improvement in our gross margins over the last several quarters, we expected further improvement in our margins to be challenging and we expected revenue growth to become the strongest driver of our profit growth. Our expectation will realize this quarter as home price appreciation is moderating, some costs were still rising and incentives are increasing back to normal levels. At the same time we are focused on improving our returns on our inventory investments in each community at balancing our home prices incentives sales pace and profit margins. Our gross profit margin on home sales revenue in the third quarter was 20.7 % down 70 basis point from the year ago quarter, 60 basis points of the margin decrease was caused by higher relative costs for warranty and construction defect claims as a percentage of home sales revenue. Due to a large amount of costs reimbursements received in the prior year quarter. 40 basis points of decrease related to purchase accounting impact from the acquisitions of Crown Communities and Regent Homes. These decreases were partially offset by 20 basis points from year-over-year increases in sales prices and by 10 basis point due to lower amortized interest and property taxes costs as a percentage of home sales revenue compared to the prior year quarter. Sequentially, our home sales gross margin decreased 180 basis points from the second quarter, 90 basis points of the sequential margin decrease was due to the combined effect of higher levels of incentives and cost increases. As we mentioned earlier we adjusted and increased the level of incentives in many communities throughout the spring in an effort to improve sales absorptions and maximize returns and profits. In general incentives were at extremely low levels in fiscal 2013 and early 2014 and are now returning to more levels. An additional 60 basis points of the sequential margin decrease was due to higher relative costs for warranty and construction defect claims, and the remaining 30 basis points related to the purchase accounting impact from the Crown acquisition. Generally in a stable housing environment we expect our average gross margins to be around 20% with quarterly fluctuations due to product and geographic mix and the relative impact of warranty and construction defects and interest costs. Mike?

Another important aspect of our return focused strategy is actively managing inactive or underperforming assets to improve returns and cash flows. And redeploying the cash in the more productive assets as market conditions have improved we are activating development of many of our mothballed assets and we’ll begin selling and closing homes in these new communities over the next year. As a result our balance of land held for development declined over $100 million to $396 million at June 30 which corresponds to a 22% decrease in the number of lots to 17,000 lots from year ago our operators continue to develop their plans for each remaining held land parcel and we expect that land held for development will significantly decline over the upcoming year. Our third quarter results included $54.7 million of inventory impairment charges $48.8 million of the charges occurred in our mid west region primarily related to large land positions and actively selling communities in Chicago acquired between 2004 and 2007 that had been previously impaired in contrast to most of our markets the Chicago housing markets remains very weak with sales absorptions and returns in these communities performing a lower expectations relative to the size of our investments. In response during the quarter we reduced prices and identified land parcels we intend to sell in these communities in an effort to increase sales pace reduced inventories and improved cash flows and returns. Based on current market conditions we believe that we do not have another concentration of underperforming communities in an individual market that would result in impairment charges of the same magnitude as we incurred in Chicago this quarter. However as we execute our return focus strategy and take actions to optimize cash returns by modifying our product, pricing, incentives or plans to sell land in individual active communities and land held for development we could incur additional impairment charges in the future. Don?

Home building SG&A expense for the quarter was $221.9 million compared to $167.5 million in the prior year quarter as a percentage of home building revenues our SG&A was 10.8% this quarter compared to 10.2% in the prior year quarter. Fiscal year to date SG&A as a percentage of home sales revenues was 10.9% flat with last year. We are actively investing an SG&A infrastructure to support our current and expected growth. Additionally the third quarter SG&A percentage included a 20 basis point impact due to the increased valuation and compensation accruals, which increased because of our higher stock prices this quarter. And to correct myself our SG&A expense for the quarter was 10.6%. We expect SG&A as a percentage of home sales revenues to decrease sequentially on fourth quarter on higher expected revenues. Beyond fiscal 2014 our ongoing annual target for SG&A as a percentage of home building revenues is 10%.

Financial services pretax income for the quarter with $13.2 million compared to $19.7 million in the year-ago quarter. This quarter continued to reflect a more normal competitive pricing environment, where as the year-ago quarter benefitted from unusually favorable market condition which produced higher than normal gains on sale of mortgages. 88% of our mortgage company’s loan originations during the quarter related to homes closed by homebuilding operation. FHA and VA loans accounted for 43% of the mortgage company’s volume down from 47% in the year-ago quarter. Borrowers originating loans with our mortgage company during the quarter had an average FICO score of 719 and an average loan-to-value ratio of 89%. David?

At the end of June, we had 20,500 homes and inventory, of which 1,500 were models, 10,000 were speculative homes with 31,100 of the specs being completed. Our construction and progress and finished homes inventory increased by $518 million during the quarter. And now it represents 46% of our inventory balance. The highest percentage continues. This component of our inventory is the fastest turning portion of the inventory investment. At June 30, our lot portfolio consisted of a 125,000 owned lots with an additional 54,000 lots controlled through option contracts. 66,000 of our lots are finished with half owned and optioned. Our land held for development totaled 17,000 lots down 22% from March. As we continue to proactively work through the older inactive land to redeploy the capital and improve inventory turns, cash flow and the overall return on investment. With a 179,000 total lots owned and controlled we are in a strong position to compete in a current housing market, with a sufficient lot supply to support strong growth in those sales and closings in the coming years. In the third quarter, our investment and lots, land and development totaled $665 million, of which $456 million was to replenish finished lots and land and $209 million were spent on land development. Our investment and lots, land and development for the first nine months of the year excluding the Crown and Regent acquisitions totaled $1.7 billion down from $2.1 billion last year. Bill?

At June 30, our unrestricted home building cash, totaled $538.5 million and we had available capacity on a revolving credit facility of $657 million with no cash borrowings outstanding. Our home building leverage ratio net of cash was 34.4% and our gross home building leverage was 38.7%. The balance of our public notes outstanding at June 30 was $3.1 billion. $137.9 million of our senior notes mature in September and we have sufficient cash and revolver capacity to repay these notes. During the quarter the holders are 2% convertible senior notes converted their notes into 38.6 million shares of common stock, which added $500 million to paid-in capital this quarter. At June 30, our shareholders equity balance was $5 billion and book value per share was $13.63. Based on our solid balance sheet, liquidity and current and expected levels of profitability, our Board of Directors increased our quarterly cash dividend by 67% from the most recent dividend paid to $6.25 per share. The dividend is payable on August 18, to shareholders of record on August 8. Don?

In closing, we are pleased that we maintained our position as the largest builder in United States by volume for the 12 consecutive year. We are growing our volume at a faster rate than the overall industry and continue to capture additional market share. Based on the recent local leaders issue of Builder Magazine ranking homebuilders market share in the top 50 new home markets in the United States. D.R. Horton is the number one builder in four of the top 10 markets, is a top five builder in eight of the top 10 markets, has a double-digit percentage share in 10 markets, and is a top five builder in half of the top 15 new home markets. We also have a leading market share position in many markets outside of the top 50. Our leading market share position nationally and in many of our local markets provided the platform for us to produce very strong increases in a value of our sales, closings, and backlog of 32%, 28%, and 26% respectively. We generated another solid quarter of profitability with consolidated pre-tax income of $171.8 million and $2.1 billion of revenues. We have also made good progress this year towards our long-term goal producing positive cash flow from operations was still growing the business. In the first nine months of fiscal 2014, our cash used in operating activities declined by $560 million as compared to the prior year period. We expect additional substantial progress on our cash flow performance over the next year. We remain intently focused on growing our revenues at a double-digit pace with strong profits while improving our cash flows and increasing our returns on invested capital. We are very well positioned to do so with our solid balance sheet, industry leading market share, broad geographic footprint, diversified product offerings across our three brands, and attractive finished lot and land position, and most importantly, our tremendous operational team across the country. D.R. and I would like to personally thank our employees for your continued hard work and accomplishments. We want to specifically thank our sales people for focusing on achieving their budgeted net sales in each week in each subdivision. A key element in improving our ROI and free cash flow. Keep it up and let’s finish our fiscal year out strong. This concludes our prepared remarks. We will now host any question.

Thank you. (Operator Instructions) Our first question today is coming from David Goldberg from UBS. Please proceed with your question David Goldberg – UBS Securities LLC: Good morning, everybody.

Good morning, David.

Good morning, David. David Goldberg – UBS Securities LLC: My first question was about the level of incentives you guys are offering and what I’m trying to figure out is are you finding that other builders are kind of coming out and matching you on these incentives. And if so is there an endgame, when you said look it doesn't make sense anymore, we might sell more homes for a short period of time, but eventually it’s just kind of a zero sum game or do you find that the competition is a little more reluctant to come after you guys given that you probably have a better cost structure and can still make money maybe at little bit lower price?

We really have not noticed the other builders coming after us as you mentioned. And I think that's reflected in their sales increases that most of them have reported so far compared to our sales increase. So as a result I don't believe that it’s adversely affecting the market for other builders. We’re focused on our key strategy of hitting our minimum absorption for community for a week, so that we can generate a higher return on our inventory and generate free cash flow for our investors. David Goldberg – UBS Securities LLC: And then just as a follow-up on the warranty – the change in warranty, nothing specific happening there, there wasn't anything underlying that, no change in terms of increased claims or anything like that just kind of normal fluctuations or is there anymore to read into that?

Just normal fluctuations, nothing specific in the quarter that occurred, no specific charges. The comparison to the prior-year period we had received some more infrequent cash reimbursements in the prior-year quarter. This quarter we received no such reimbursements. So it's just simply a normal fluctuations. David Goldberg – UBS Securities LLC: Okay. Thank you, guys.

Thank you. Our next question today is coming from Stephen Kim from Barclays. Please proceed with your question. Stephen S. Kim – Barclays Capital: Hey, guys. Great job in the quarter. Wanted to get some clarity I guess. You made the comment I think you used the phrase stable demand earlier on in your prepared remarks and obviously the new home sales numbers came out and look like it was a pretty squishy number. Know that that’s not the most reliable metric of all, but I wanted to see if you could clarify that. Particularly in the context of your commentary about discounting being up, and Bill’s comment that I think you said generally you look for about a 20% gross margin which is obviously lower than – significantly lower than what you kind of been doing if you make the adjustments for the one-time event. So was curious if you could just sort of talk about what you mean by seeing stable demand in the context of you discounting in the comment on gross margins? Thanks.

Well, in terms of our comment on stable demand we saw a significant increase in demand in 2013. And we saw a significant price appreciation in 2013. And so the levels of demand a year ago had increased dramatically. We all know that has moderated some since then and as we assess this spring, we would say on an overall basis the demand is relatively stable with where it was last year. Obviously there are significant variations across our markets. Some markets were still seeing increasing demand, others are flatter. Generally in most markets we are seeing less price appreciation here this quarter. So really from our perspective settling into a more normal pattern perhaps modest growth, modest price appreciation, but not as dramatic as a year ago. Same thing for our incentives. A year ago our incentive levels were very low, extremely low. Now that is simply moving back to a more normal level and so reflectively than we would expect our margins to return to a more normal level, which is really around that 20% level. The margins when they get a point, two points, two and a half points higher than that 20% level are really the exception rather than the rule over the long-term.

And as we said for years, Steve, we said the normal margins in this industry are somewhere between 18% and 22% and our goal is to hit a 20% gross margin, 10% SG&A, and 10% pretax operating margin. So that’s our focus and it continues to be our focus.

And our number one focus is generating a 20% return on investment community by community and that is – that requires us balancing our pace, our pricing, our incentives, and our margin I guess volumes to maximize really the return. And so yes, we’ll give some incentive to achieve 25% sales increase will take that train.

We are in a strong position if you take a look at out total lot inventory of 175,000 lots and I’ve said after quarter after quarter after quarter our people have done a great job of buying land on lots at a very early time in the recovery. And what we are doing is taking those lots, putting homes on them and producing very good margins based upon our low costs in land on lots. Now important to realize this is community by community, every community has a different target depending on its own situation, there is certain market were our lot suppliers are more constrained, but we cannot replace the lots we have whether it’s very limited housing inventory. And so in those markets, our target absorptions are lower and we will push prices more there. Because that is the path to higher return in those communities, other communities there is not such good strengths and the best path is to drive volume at a consistent pace. Stephen S. Kim – Barclays Capital: That’s very helpful, thanks very much. Regarding the volume, we obviously are hearing about your plans across the price spectrum to grow pretty significantly and it looks very intriguing. One of the things that we gotten as pushback from folks is the Commonwealth, it sounds like an incredibly bold market strategy. In environment that frankly doesn't sound so bullish. My interpretation is that your strategy is not actually characterized, cannot be categorized as a bull market share. I was wondering if you could respond in your own words that the proliferation of your communities plant openings and Emerald, Express and D.R. Horton and in the context of somebody saying that’s sounds like a bull market strategy.

I think it’s a very conservative strategy and if you look at our creation and our expansion of our express model. That’s creating a lot of the bullish scenario associated with our sales and we are in a limited number of markets now both our Express really in 22 markets in each stated and obviously we have 79 markets in 27 states and wish to expand the Express. With an ASP of $156,000 this quarter on Express, we feel very bullish about the opportunity to continue to expand Express and I think that will contribute to our higher than industry level sales on a go forward basis, simply because we have chosen apart of the market that we believe truly as underserved. And as I said last quarter a portion of the market that we feel comfortable is going to grow with the higher rate than the other parts of the market and that’s why we chose to leverage up ourselves and expand into Express, and as well we clearly believe there is demand in that segment of the market that there is no supply board. And so we don’t believe that’s an aggressive strategy, that just simply addressing a need in the market.

We also Steve, are leveraging of existing profitable platforms, so it’s not like we’re jumping into new markets that we don’t have operating platforms in today. To me it’s a very conservative later take demand is a market today.

We are not trying to do Greenfield as a market, so we don’t know anything about, we no a lot about the markets. We’re just opening our new brand, which we feel like the market is being underserved. Stephen S. Kim – Barclays Capital: Makes a lot of sense. Thanks a lot guys.

Thank you.

Thank you. Our next question today is coming from Michael Rehaut from JPMorgan. Please proceed with your question. Michael J. Rehaut – JPMorgan Securities LLC: Thanks. Good morning, everyone. I had a question, first off on the timing and pattern of the incentives if there is any way to give a little more detail there. In terms of, you mentioned that obviously, you want to get to a certain pace and incentives were particularly low. and now you’ve taken it back to normal, but I’m curious if that occurred maybe towards the beginning of the second quarter, or the late in the end of – late at the end of your fiscal first quarter, or is it something that has the spring selling season been in maybe in fully materialized to your more hopeful expectations in the May, June timeframe, you’ve kind of cranked it up then?

(Indiscernible) please. Michael J. Rehaut – JPMorgan Securities LLC: And I’m sorry, and also if the incentives were more prevalent in some markets versus others.

Actually, occurred in March, and we had our division presence meeting in April, and that’s at which point in time, we focus with our division presence on hitting their full form of absorption level on a community-by-community basis, because we fell like that if they give that and they would achieve the ROIs, return on inventories that they have projected and the return on inventories that we won it. And again, the incentive levels will vary by community-to-community as Bill said earlier, where they are a shortage of lots, or we can’t replace those lots with the cost basis we have in them and we’re going to maximize our gross margins and our absorptions are going to go at a slower pace. But as David said, where we have larger inventory of loss, and we can easily price those lots, and that’s going to be the business model where we’re focusing on higher absorptions and lower gross margins. I want to emphasize though, if you look at our three product lines, Express where we’re going to have lower margins and higher absorptions, Emerald, where we’re going to have lower absorptions and higher margins, and both of those are going to blend right in to D.R. Horton margins. And once again, I don’t want anybody to get confused, our overall company goal is 20,10,10, 20% gross margin, 10% 10% SG&A and 10% of the PTI lines, with a 20% net ROI community-by-community. Michael J. Rehaut – JPMorgan Securities LLC: So in terms of that 20% goal Don, I mean, last quarter, I believe you said it’s a company that you talked going forward, gross margins in a range of the prior four quarters, which is in a kind of a 21% to 22% range, was more sustainable. it seems like you are more kind of revising that more based towards, saying that you said on a much longer basis that is just again this 20, 10, 10, is that fair?

As I’ve mentioned to Steve, and I’ll say it again and again, as said ever since we have been doing these conference calls, the normal gross margins on this industry, a range between 18% to 22%, we believe a normalized gross margin for ourselves, or somewhere right at the 20% level. and we were very fortunate and early stages of the recovery where we have a lot of pricing power, there was a lot of increase in medium prices of homes across the country, because I had, the market had overreacted in a lot of markets, and prices that decline more than they probably should have, but normal margins for us are 20%, 10% and as Bill said, a 20% level line.

I mean, Don, speaking to the longer-term – longer-term expectations, which that is clearly specific to the guidance we gave last quarter that was targeted more towards the next few quarters. And I’d like the low end of that range, would have been around 21.4%. So our margins did come in below the low end of the range that we gave. Specifically, the causes for that would have been the purchase accounting impact and the fluctuation that we had in the warranty and construction defect claims, outside of those, would have been within the range. and then going forward, over the long-term, we expect to fluctuate around the 20%, but again, focusing on returns. But if you look at a very important metric and we’ll do this all day long. We can get a 25% to 28% increase in sales, quarter-over-quarter and only have to give up 90 basis points on incentives. That’s a win-win for us in our shareholders. Michael J. Rehaut – JPMorgan Securities LLC: I appreciate that and thanks for the additional color, Bill. I guess one last one, the SG&A; I think you said that 20 bips was due to some of the stock comp related expense. but even without that, SG&A was on a percentage basis roughly similar to year ago on a 28% revenue growth. So but we expected maybe a little bit of leverage there on a percentage basis on a year-over-year basis. Any thoughts around that, and are there any items that we’re not taking to account?

I think we’re going to continue to see further leverage in the SG&A. Sales are still pacing at a pretty good level ahead of – with revenues and ahead of revenues, and we’re still building some of the infrastructure to support that growth that we’re seeing in the brand launches and the platforms across the country as we do that. So I think we’re going to see better leverage on our SG&A into the fourth quarter. And then coming closer to – back to our historical target of 10% in the next year with the leverage we’ll attain on the SG&A. We believe that’s a good problem that we have, and that is our SG&A is growing to support our extraordinary growth in sales and our backlog. Michael J. Rehaut – JPMorgan Securities LLC: Okay. And the better leverage for 4Q would be on a year-over-year basis as well or just sequentially?

Certainly sequentially. Michael J. Rehaut – JPMorgan Securities LLC: Thanks very much.

Thank you. Our next question today is coming from Dan Oppenheim from Credit Suisse. Please proceed with your question. Dan M. Oppenheim – Credit Suisse Securities LLC: Thanks very much. Good job in terms of responding to the market. I think historically, you guys have always done well in terms of balancing the pace and price there. Wondering as you talked about the 90 basis points in terms of the second quarter margins, presumably some of the – what you’re doing with the incentives were to generate sales that will be closing – sorry, the second calendar quarter of its third fiscal. But if we think about the fourth fiscal quarter here, some of those would like to be coming two or three, that’s more of a hit to margins in the coming quarter from this impact.

We’re not necessaries for giving specific guidance from next quarter, or the next quarter. in terms of margins, we are going to continue to balance the incentive to what we see in the marketplace and we still close a significant percentage of homes in the same quarter in which we sell them. So there is some reflection of the current market in our closings each quarter, but our overall guidance has really built the longer-term. We’re going to fluctuate around 20%, some quarters we may be higher than that, some quarters we may not. Dan M. Oppenheim – Credit Suisse Securities LLC: Great, thanks very much.

Thanks. So our next question today is coming from Mike Roxland form Bank of America. Please proceed with your question. Michael A. Roxland – Bank of America Merrill Lynch: Thanks very much. Is there anyway to quantify how much incentives have increased versus earlier in the year 2013?

Mike, we really look at it in terms of the impact on our gross margin. and so the biggest impact we’ve seen from incentives so far in 2014 would be this quarter, with the 90 basis points, there are also some cost increases associated with those 90 basis points, but for the most part, that is incentives. So we’ll continue to see how that falls out, that we really just to try to talk about it in terms of how it impacts our gross margin. Michael A. Roxland – Bank of America Merrill Lynch: Got you. and then just when you look at the entire housing complex, what would say is the biggest limiting factor preventing more robust housing recoveries, credit is an employment, is the labor availability constraining the ability of builders to construct homes?

It’s the biggest impediment of the housing industry continues to be job growth. and I still say that we continue to create a lot of temporary jobs and part-time jobs, and my comment is, is that part-time workers are now looking for a house, or looking for a full-time job. so I think combined the major thing that we can do to help the housing industry and all industries is to create permanent jobs and better paying jobs. and secondly to have a consumer confidence level where people can wake up in the morning, feel good about what’s going on in the economy and then the rights, so those two factors continue to drive our business more than anything else, but jobs, jobs, jobs is what grows our industry. Michael A. Roxland – Bank of America Merrill Lynch: Thanks.

Thank you. our next question is coming from Stephen East from ISI Group. please proceed with your question. Stephen F. East – International Strategy & Investment Group LLC: Thanks. good morning, guys. you talked about the gross margin expectations et cetera moving back to 20 – and I assume the global warming, maturity of that is going to be in your core D.R. Horton product. but if you look at express, where you are today with its volumes, where would you expect that the sort of run through over the next two or three years, and how much of that would be driving this move back down to a 20% gross margin?

Well, we’re underwriting as Jessica said earlier in the conference call, we’re underwriting our express, as well as our D.R. Horton are at 20% gross margin, I’d say 20% return, which then basically employs that are turning in our inventory couple times a year, but our gross margin as we said would be less than the 20% level. Yes.

And Steven, so what you’re actually seeing so far, I would say is better than expected margins on express, and they are trending relatively close to that 20% range, just high of that that made change as we go forward, because as we said multiple times throughout the call, we are focused first and foremost on that 20% ROI. And if we’re turning to inventory quick enough, as Don said, we can work for a little bit less gross margins. but in terms of our gross margin, a guidance, which really, isn’t guidance, but in terms of it being around that 20% that’s just a combination of our day-to-day business and isn’t really an expectation of Express, becoming a bigger piece of our business. It will become a bigger piece of our business, but we think we can run all three brands combined and put out somewhere around a 20% gross margin over the long-term. Stephen F. East – International Strategy & Investment Group LLC: Okay.

You asked about how big it could be. we haven’t put necessarily specific targets on how big it could be. We’re still on the very early stages. we do expect substantial growth in Express and Emerald, that we expected to grow as well, but we haven’t necessarily put a specific target as far as percentage of the business, and really different times in the cycle, different economic conditions, the percentages of the business may fluctuate about. but clearly, right now, we expect substantial growth from where we are today. Stephen F. East – International Strategy & Investment Group LLC: Okay.

As Jessica said right now, our Express is running about 20% gross margin, even though it’s – we’re underwriting it for less, but we think that will probably decline some over the years. Stephen F. East – International Strategy & Investment Group LLC: Sure, got you. and then different subject, if you just look at the order progression through the quarter, we got noised the June absorptions much lower than the prior two months is better as one – what your progression looks like, did you see that in just any color on July.

And really just on July what we said on that call, that we’re continuing to see year-over-year improvement in our July sales. And so I’d say we’re pleased just like we were in Q2 thus far we’re not finished with July, but we’re happy with what we’ve seen.

And really we saw strong steady sales pace really throughout all three months of the quarter, typically when you get into June you start to see a little bit of seasonal slowdown, but we didn’t see very much. So, overall now we will still see good, consistent demand all three months. Stephen F. East – International Strategy & Investment Group LLC: Okay, thank you.

Thank you our question today is coming from Adam Rudiger from Wells Fargo Securities. Please, proceed with your question. Adam Rudiger – Wells Fargo Securities: Thanks. My question, I recognize this is all done at community level, but if you look at the company wide average how was – how are the absorptions now, relative to the budgets, and employment is getting added there, you think there is further need to tweak some things to get things going or do you have the pace where you want it.

Adam its David, what I’ve experienced out in the field for 25 years is that nothing drives margins higher than consistent absorption. And we are right now operating pretty much on our budget on a community by community basis without anything unusual from a concession standpoint than what would be at historical norm. And part of look we believe as we drive consistent absorption in these communities we will be able to maximize margin, not continue to or see a deterioration of margin. And right now we are getting consistent absorptions throughout our communities. Adam Rudiger – Wells Fargo Securities: Okay. And then totally different topic, the Crown acquisition – Atlanta seem like a market in the past a lot of big builders had shied away from – I think the new general criticism of it had been the segmentation of it. So, could you talk about what you saw on that opportunity and really what you liked about it?

We liked about that opportunity was a geographic footprint within the Atlanta market itself that, we weren’t serving well that grounded in very good job of serving with the very efficient platform, great team of people, very happy to have those on as part of our organization. And Atlanta is a very large housing market in the country. It will, it is on the rebound and permits growing there. Job growth has been good in Atlanta. And we are seeing very good demand in a broad range of the submarkets around Atlanta.

And frankly their operating metrics as well as the just our style of operation reminded us so much of our formative days. And D.R. Horton the company and we are operating with very little capital and having do rolling option contracts and turning our inventory more quickly. And so we think that we’ll able to take what they are doing now and transition that over into some of our other operations were perhaps, we’re not as entrepreneurially oriented as we use to be or they are. So, great learning experience for us and they protested where well on our Division President meeting that we have in April. And already began the transfer ideas from them to us and from us to them. Adam Rudiger – Wells Fargo Securities: Okay, thanks for taking my questions.

Thank you and our next question today is coming from Eric Bosshard from Cleaveland Research Company. Please, precede your few questions. Eric Bosshard – Cleveland Research Company: Thanks. Two things first of all I’m curios if you could give us some sense of breadth and depth of where that is and the trend that we should expect moving forward obviously you stepped up effectively this quarter. But I’m trying to figure it are you at a level now that you feel is effective enough or do you see a need to continue to increase the amount of that breadth of the incentive efforts.

Well if you take a look at our net sales orders having increased 32% in value and our backlog having increased 26% in value. We believe, we’re at a really sweet spot. And we don’t see the real need to increase it significant over where it is today. And a matter of fact we might be able to decrease at some because obviously, we have industry leading sales increases, closing increases and backlog increases. So, we are far head of our competition at this stage.

And at the same time, its very difficult to make general comments about it. We can talk overall – overall we are very pleased with where we are and we are hitting our expectations, but it’s really managed community-by-community. So there will be communities where we can led off on incentives and raised prices and improved margin, that will be others – where we will have to increase. But, in general the overall results of what we done collectively across all our communities. We are pleased with the pace that we’re at, and overall wouldn’t expect to have to increase it from here. Eric Bosshard – Cleveland Research Company: Great, and then just within that – I know you commented that a component of those incentives were invested for the completions in this current quarter that would have showed up in these financials. I just trying to get sense of how much the incentive investment would have shown in the gross margin in this current quarter versus how much is yet to show in the closings that will come in the coming quarter?

Sure, Eric. That 33% of the homes we sold this quarter were actually close to this quarter as well. So, I kind of said that backwards. That sold and closed in the same quarter was 33%, of our closing. Eric Bosshard – Cleveland Research Company: And then the second question interested in the strategic thinking at this point in a cycle with land purchases and how you are thinking about – the desire the demand to add more land to inventory I know that you continue to be active there. But how are you thinking about that in terms of the magnitude and if the type of land that you are acquiring and that’s changing at all.

Well, as we said on the conference call, the vast majority of our spend was associated with just replacing lots, that we have rolled through roll off over the course of the past two quarters to three quarters, and rest of those actually on land development spend which was on developing loss that we had already purchased the land on. So, we believe again, we have a total of 178,000 – 175,000 total lots and that’s about a 4 point – eight or nine year supply based upon on our trailing 12 month sales. So, we feel like that, we are in a very, very strong position that we are not out there in marketplace today, paying higher price for land, that we’ve got a great land inventory as we said quarter-after-quarter, with that very, very low cost basis in it. So, we are being very conservative on that land purchasing right now. Eric Bosshard – Cleveland Research Company: Thank you.

Thank you. Our next question today is coming from Ken Zener from KeyBanc. Please proceed with your question. Kenneth Zener – KeyBanc Capital Markets: Good morning, all.

Good morning. Kenneth Zener – KeyBanc Capital Markets: So, pretty exciting quarter here. You guys result obviously on a company basis reflect your initiatives whether it's Express or the numerous acquisitions. Yet I wonder if you have an adjective an early one, Don, for 15 given. I think income lack of income is a big and that’s missing this time but if you're looking at 20% gross margin I heard it a lot longer-term. Can you talk about how you're responding and if Bill I know you are doing it community by community, but I think that – markets like Sacramento and Phoenix were new sales are down rising existing inventory those are once distressed markets could you talk about what's happening there from your perspective and contrast that with the new home sales number today that had the South obviously Texas is a big number in there, where you're having down sales there which obviously you are having job growth and income growth. So you do you really view that market more as supply constraint and could you contrasted with the distressed market please. Thank you.

Well, first of all I’m going to state… Kenneth Zener – KeyBanc Capital Markets: That was first question…

And I’m going to answer the way I’ve been answering here for the last quarter or actually the last four or five quarters. I do not want to get into specific markets and talk about the strength or weaknesses in the individual market, and yes I read the same things about Sacramento and Phoenix and those different markets and we are experiencing pretty much what everybody else is experiencing in those markets. So they are both difficult markets.

But clearly in Texas, when you look at our south central region in the sales we’re reporting clearly we are not down in Texas, clearly we are up substantially in our sales in Texas. So we would be – that would be gaining market share for us in Texas.

We haven’t had time to actually look at the new home sales numbers and they came out the minute our call started. That being said, Ken I mean we are battled a lot of times when we see it, because it doesn’t necessarily look the same as what we are seeing in our internal results for those period. Kenneth Zener – KeyBanc Capital Markets: Okay, that’s fair and I do understand it’s just there is obviously several different markets occurring. How about this then? Given what you’ve talked about and I appreciate the sequential breakdown in gross margin. With price flattening cost going up generically it’s all pace. Can you talk about the spread this quarter and last quarter relative to units closed from backlog versus spec units with you guys drive a lot of volume through? Thank you.

Spec versus build jobs as we’ve said in the last couple of quarters. We’re getting closer to our normal spread we’re a little bit lower margins on specs and than build jobs, but the gap is still higher then it has been over the long-term. So really no concerning trends there.

And same thing as usual for us Ken, that about 80% of the homes we closed this quarter were spec. So, when you see our reported gross margin that is essentially our spec gross margin.

I don’t want anyone to get confused, we’re trying to explain to you what the historical gross margins have been in the industry 18% to 22%. And we’re not saying our margins are going to 20% whatever, we’re just basically trying to set a reasonable expectation out there right now. Because we believe that pricing has moderated over the last probably nine months to 12 months. Costs are definitely increasing as our subcontractors and our vendors continue to try to raise their prices given where they had to take their prices so low during the downturn. So, we’re finding increasing prices with moderating increases in sales prices and we believe that the norm as Bill said earlier, we are going to gravitate back to a more normal level, certainly 2013 was not a normal level in terms of gross margins, and land supply, and cost and everything else. So, we believe it’s going to gravitate back to a more traditional level, which is 20% gross margins.

The level will not gravitate back, that will increase is our return on inventory. Return on investment will increase and that is if you want to measure the progress of our strategy and how we execute our business, watch our increasing returns on investment quarter-to-quarter-to-quarter over the next couple of years because our plan is for that to increase steadily. And we believe that returns are much more important to our overall performance and helping the company then one element on the P&L then gross margin is returns. Kenneth Zener – KeyBanc Capital Markets: Thank you.

Thank you. Our next question is coming from Jay McCanless from Sterne Agee. Please proceed with your question. James McCanless – Sterne Agee & Leach Inc.: Good morning, everyone. First question I have with this focus on a 20% community level of return is that means that the 10,000 specs, this quarter is probably the top for the cycle?

We are not called anything on cycle. But clearly we drive, as Jessica, said 80% of our closing come from spec. So clearly we prepare for a volume level and our spec are an indicator of what our expectations are. But we don’t believe we are at a peak of cycle at all. We are just out there competing in the market and responding market by market.

As a matter of fact we strongly believe the market will gradually grow and perhaps in a year or two grow even faster simply because the part of the market that's underserved and largely it's underserved because of the ASP is the entry-level buyer, and also the mortgage underwriting standards are still high relative to where they have been in the past. I expect mortgage underwriting standards to moderate hopefully not back to the level they were back end in 2004, 2005 and 2006 that we believe that the underwriting standards will be moderated some and by virtue of us being able to offer Express homes, 156,000 current ASP and if we get any relief on the mortgage underwriting, we think the home building business is ready to take off especially as it applies to the entry-level buyer. James McCanless – Sterne Agee & Leach Inc.: That kind of – into my second question, because I think this is to disconnect all those we are trying to get to because from the outside looking and right now you guys are cutting back on you land spending, you are increasingly pushing out your absorption to try to push them up even on land that may not be in the best markets right now, but then you are coming back and saying that you think that there is growth ahead for the homebuilding industry. I mean is that plus this change in language from the last conference call to this conference call where you are talking much more about return on the inventory rather than stable gross margins that you discussed last quarter. There is a disconnect there that I think we are all trying to figure out what changed from the last conference call to now?

Hey, Jay. On your land – comment about land we are not decreasing our land investment, we are maintaining what we believe is that adequate substantial land investment around 179,000 lots owned and controlled, 125,000 lots owned. So we are replacing, we bought early in the cycle, we believe that that level will support double-digit growth on the top line, which is still our expectation. We’ve always been focused on return, we’ve always been focused on balancing our volume and our pricing to optimize our returns. As we move through the spring and we’ve adjusted incentives the gross margin line has adjusted, but at the same time we believe that’s more than balanced by our increase in volume. And so we are not pulling back, there is really been no shift from that perspective which essentially delivering stronger returns on the investments we’ve made.

And I said earlier in the conference call and I said this for three of four quarters on a row, we’ve made really, really good land buys early in the market, we’ve about 4.7 year supply of random lots today and we’ve got about a 2.4 year supply of finished lots today all based up on a trailing 12-month sales space of about 27,000 units. So we think that it’s incredibly strong statement to say that we don’t have to be forcing ourselves on the land side like some of our competitors are and having to go out and buy a land today. We got adequate lands at great cost basis. As far the return side of the business, we have looked at our business upside down and sidewise and there is one thing that we’ve concluded. We concluded the good gross margin as a good thing, but if you are only generating one net sale for subdivision with a 25% gross margin, that’s not nearly as well as generating a 16% gross margin with return of sales for month in the subdivision. So our focus is on how do we improve our return on inventory because that’s the bottom line, that’s the best way we can increase our share holder value is that by consistently receiving a solid return on inventory, not necessarily having an arbitrary gross margin levels that has a very low return on it. James McCanless – Sterne Agee & Leach Inc.: Okay. Thank you for the explanation.

Thank you. Our next question today is coming from Nishu Sood from Deutsche Bank. Please proceed with your question. Nishu Sood – Deutsche Bank Securities, Inc.: Hey, good morning, guys. I wanted to – I wanted to kind of dig into the incentive question here a little bit as well. When your folks were thinking about this back in March, looking ahead to this quarter, I wanted to get understanding of what you were seeing on the ground that led to change in your thinking at this point, because obviously demand has been slow for about a year ago. If you think about incentives, they can lower price. and I think you made it up very well, and clearly, very successful with the amount of order growth you’ve got. If affordability is stretched, then the incentives of reducing price can obviously spur some sales. if you have skittish buyers, then offering incentives can probably bring them in, just diverting traffic from competitors more from the resale market. so what were you seeing in the ground thinking about in that those terms that led you to the correct conclusion that if we increase our incentives a little bit, we will be able to generate such a significant increase in sales like you did?

Let’s go back to one thing that really drove our incentives, and a lot of those have to deal with David Auld, coming up here and spending some time, analyzing where we were and what we were doing. But he is known for years that we needed to hit the absorption level that we have projected when we funded a land deal and we have been reluctant and sometimes reticent to drive those absorptions at that level they were projected to be, because we’re trying to hold to a specific gross margin. And we’ve included that having a specific gross margin in the subdivision and not being to able to turn our inventory as frequently as we need to is not exactly the most optimum return on our money. so what really drove our incentives, not necessarily the market, not necessarily what we saw in the market, what drove our incentives was we are committed to hitting our absorptions and we believe by hitting our absorptions that we can deliver a higher return on inventory and a better return for investors. so that’s what drove our incentives.

And so Nishu, whatever that takes on a community-by-community basis, it will let to it is what it is, because we’re going to do what we need to do to hit that targeted ROI. Nishu Sood – Deutsche Bank Securities, Inc.: No, I understand all that. and your folks of the Express did pretty well. What I was trying to ask is to, like something even from buyer perspective, if it’s a – if it’s more of a unique luxury community than affordability is probably not the constraint. so an incentive doesn’t work, but if it’s an entry-level community, where there are four competitor communities, or they are distressed properties perhaps to look at our single family homes for rent and incentive makes it more affordable maybe, it gives the person more confidence. So I was trying to understand what you saw in the ground from a buyer behavior perspective, clearly made the right call, because your volumes increased so much. so I was trying to understand from a little bit of a different angle?

Well, I’m not so sure that I agree with your comments that it doesn’t – the incentives don’t drive the high ends, as much as at both the low end, because I can say as we were selling Emerald homes, or even our normal D. R. Horton, someone coming in and looking at the $289,000 average sales price home, or a $655,000 average sales price Emerald home. They are looking for the best deal, and so as a result, incentives do drive that into the market as well as driving incentives us on the low end of the market. Nishu Sood – Deutsche Bank Securities, Inc.: Okay, got it. That’s helpful. The 20% return on inventory that you’ve been mentioning in the return on capital, I was wondering if you could – it sounds like you are describing the internal metric and the external metric. So I was wondering if you could just give us a little bit more detail on that, the return on inventory, the 20% is that like the divisional metric that’s – are you asking the divisional managers to focus on what’s in that and then that kind of corporate level metric, how are you defining that?

Yes, it is at our division level it’s on an annual basis, is the pretax income that division generates, divided by the average inventory balance. And just to give you where we are currently today, we are sitting at around 13.5%, that is our run rate on our internal ROI and so that target is to get that our guys get our divisions up to 20% or better. On a company wide level, return on invested capital, obviously that’s a very well calculation obviously to the extend that we do a better job internally with our guys at ROI, our return on invested capital will be better for the company, which you can just as easily simply look at return on inventory for us, look at pretax income divided by our average inventory for the company as well and it would be pretty similar. Nishu Sood – Deutsche Bank Securities, Inc.: Okay, thanks.

Thank you. Our next question today is coming from Jade Rahmani from KBW. Please proceed with your question. Jade Rahmani – Keefe, Bruyette & Woods: Yes, I was wondering if you could talk about what kind of earnings growth do you think the double-digit revenue growth that you mentioned will translate in?

Well, we would hope to grow our profits faster than our revenue pace. And as we generate returns, faster returns, faster cash flows that we could redeploy into the business faster than we’ve been able to in the past, then we would expect that earnings growth to be able to continue to grow faster. Jade Rahmani – Keefe, Bruyette & Woods: Okay. So just a follow-up on that is the main driver of that earning growth is going to be lower SG&A then because the gross margin relative to where it’s been is declining?

I’m sorry you cutout just a little bit there. Jade Rahmani – Keefe, Bruyette & Woods: Sorry, just to follow-up is the main driver of getting to that faster than the double-digit revenue growth in earning is the main driver are going to be lower SG&A since the gross margin is a headwind going forward?

There would certainly be some leverage there as well, but as you turn your inventory faster and redeploy, redeploy it faster than there is simply more capital available on an ongoing basis to generate growth and profits over the long-term. This is a long-term measurement that you could be looking at. Jade Rahmani – Keefe, Bruyette & Woods: Okay, are you willing to comment on what you would expect for operating and free cash flow in the fourth quarter?

Yes, we don’t make specific quarter comments on that, but it can be volatility on a quarter-to-quarter basis, but what we would comment on as we expect our operating cash flow metric to continue to improve here, and out returns to continue to improve. And our goal is to get to a point where we are both growing the company, growing revenues at double-digit pace while improving our returns in and getting to a positive cash flow position. Jade Rahmani – Keefe, Bruyette & Woods: And just to follow-up, do you think the fourth quarter operating and free cash flow are likely to be positive. In other words more cash flow generated from home sales then to replenish inventory

Again, we’re not going to comment on one quarter of cash flows, but it's certainly possible, but it's that we’re not going to comment on one quarter cash flows measures. Specifically our goal is in fiscal year 2015, free cash flow and have free cash flow at an increasing amount and every fiscal year there after as our long-term goal. Jade Rahmani – Keefe, Bruyette & Woods: And just a clarification on the 20% gross margin is that inclusive of the purchase accounting charges for the next three quarters or that’s before that.

Yes, inclusive. Jade Rahmani – Keefe, Bruyette & Woods: Okay, thanks a lot.

Thank you, our next question is comes from Bob Wetenhall from RBC Capital Markets. Please proceed with your question. Robert Wetenhall – RBC Capital Markets: Hey, good morning. Good ASP performance you are hitting tough comps in the back half of the year. What's your thoughts on pricing, how should we think of ASP performance going forward.

Stable to slightly improvement in general. Again we’re in a – what we believe is a relative stable environment is going to depend on geographic mix and product mix obviously but we're not seeing dramatic price decreases and also we would expect relatively stable environment Robert Wetenhall – RBC Capital Markets: Would you quantify that as mid single-digit, high single-digit or low single-digit?

That’s a hard one Bob just because we have three different product types now in terms of our brands and we don’t know what the market’s going to deliver, so we’re going to stay we’re just similar to slightly up. Robert Wetenhall – RBC Capital Markets: Cool. Understood. 13.5% on the way to 20% what it your mind just for trajectory for that to happen what has to fall into place to close the gap? Thanks

We need to continue to hit our unit absorptions on a week by week basis and each subdivision and that's the best way – currently as ramp 13% to 14% our goal is 20% and that will probably take two or three year time period for us to achieve that but it's hitting those of absorption net per week per subdivision on a consistent basis as David said.

Thank you. Our next question today is coming from Buck Horne from Raymond James & Associates. Please proceed with your question. Buck Horne – Raymond James & Associates: Hi, guys I apologize for the late question going over a quick clarification I just want to be sure that they were clear that the order count the 25% growth in the order count reported. Does that include the 431 homes acquired from Crown in the quarter?

No not. Their opening backlog is not included in the 25% order growth. Buck Horne – Raymond James & Associates: Any of those sales from Crown included in the 25% I guess…

The sales we made post the acquisition to the end of the quarter 296 sales I believe we’re included in that 25% order growth. Buck Horne – Raymond James & Associates: Okay, but otherwise it’s clean. Okay, and what was the community count X the Crown acquisition or, the active community count.

We were up 7% on year-over-year basis without Crown.

Thank you. Our next question is coming from Jim Krapfel from Morningstar. Please proceed with your question. James Krapfel – Morningstar Inc.: Hi, thanks for taking my question. How much were cost per square foot up in the quarter.

Our cost per square foot were up year-over-year I have that somewhere. Sorry 8.3%. James Krapfel – Morningstar Inc.: Okay, and then what’s your forward outlook on labor do you expect some moderation and labor inflation there and then also in terms of land. To look out maybe two years based on where you underwritten plan holding all else how much would you expect there to be gross margin decrement just from that the higher price land going to cost itself. Thanks.

Right now we are seeing more of an impact I’d say on the labor side and our land still continues to be a benefit because we were early movers and in terms of our stick and brick costs we are seeing some pressure on the material side. But more so on the labor side its specifically in those local markets where we’ve seen pretty good growth in volumes.

We think we moderate our labor costs as clearly were 40% larger and the second builder and we believe those kinds of volumes are going to help control our costs much better that our competition.

Thank you. Our next question is coming from Joel Locker from, FBN Securities. Please proceed with your question. Joel T. Locker – FBN Securities, Inc.: Hi guys. Just a commenting on the community count if you include Crown just at the quarter end what was your community count up year-over-year third quarter last year and then sequentially also.

Sure, Joel. We were up about 11% including Crown and sequentially we were flat. Joel T. Locker – FBN Securities, Inc.: You are flat? And that was, that was the quarter and community count not the average community count?

We will talk about in terms of our average and just to give a good representation and let me correct myself with Crown sequentially we are up 4%. Joel T. Locker – FBN Securities, Inc.: You are up 4%. And 11% year-over-year.

Yes. Joel T. Locker – FBN Securities, Inc.: And then, just last question on what was your dollar amount of customer deposits you had at third quarter end.

If its one second. Joel T. Locker – FBN Securities, Inc.: Customer deposits.

About $53 million. Joel T. Locker – FBN Securities, Inc.: All right. Thanks a lot guys.

Thank you. Our next question comes from Housing Research Centre. Please proceed with your question. Alex Barrón – Housing Research Center: Good morning guys. Good job on the orders.

Thank you. Alex Barrón – Housing Research Center: Wanted to ask you I guess if you could kind of spec little bit more, you are rationale for doing acquisitions at this point in time and how view them I guess in the future do you think the industry needs more consolidation that be more rationale?

Well, frankly the way we have – Mike speaks specifically as to the acquisitions but generally speaking we are looking for builders who fit well within our business model who have a very efficient operations and also some people who – we can learn something from and just because we are the largest builder doesn’t – obviously we don’t have all the answers and lot of these entrepreneurial builders that Mike Murray is been working with truly have some unique ideas or certainly some ideas to remind us of the way we used to be. So as a result, I think that we are looking at been supplementing our existing markets on a number of situations and continuing to grow our market share in each of these markets as we continue to grow our market share in each one of our markets like we are in Atlanta, we get better cost and both on the labor side as well as on the material side and most importantly on the land side going forward.

Sorry, Alex, we have a, we look builder by builder at different opportunities and look for different geographies different customer segments and were different capabilities to add to our existing platform, looking all the time for a good cultural fit. There is no set recipe or formula for what works and the motivation of the sellers also a big factor in whether we’ll we have the successful transaction or not. But it’s not something were driven or compel to do. But it’s a good opportunity that we can take advantage of – it’s going to make sense for us to do those. Alex Barrón – Housing Research Center: Got it. And then I guess a separate question, maybe for Jessica do you some type of community counts or percentage of your over all communities that are in Emerald and Express as a percentage of total or just some absolute numbers.

No, Alex. I mean we haven’t disclosed our community count and right now, we are just talking about how many markets were offering Emerald and Express in.

Thank you. We’ve reached end of our question-and-answer session. I would like to turn the floor back over to management for any further closing comments.

Thank you. I want to remind all of our D.R. Horton employees and especially our sales people that we do not need to be deterred from our mission. We have a revised business model that is going to be very accretive and additive to our shareholders, and we need to continue to focus on our mission. We are currently in a trailing 12 months; we closed 40% more homes and the second largest builder. We want to continue to dominate our markets and to be as profitable as we can in each one of our markets, but most importantly what you can do for us as you know to set your absorptions on a community by community basis, so that we can get our return on inventory from its current 13% to 14% up to 20% because that’s the best thing we can do for ourselves and our shareholders. So we thank you very much. Let's kick tail on the rest of the year.

Thank you. That does conclude today’s teleconference. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.