Ladies and gentlemen, thank you for standing-by and welcome to the M/I Homes Fourth Quarter and Year End Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. [Operator Instructions]. Thank you. I would now like to turn today's conference over to Phil Creek. Please go ahead.

Thank you very much. Joining me on the call today is Bob Schottenstein, our CEO and President; Tom Mason, EVP; Paul Rosen, President of our Mortgage Company; Ann Marie Hunker, VP, Corporate Controller and Kevin Hake, our Senior VP. First, to address regulation fair disclosure, we encourage you to ask any questions regarding issues that you consider material during this call, because we are prohibited from discussing significant non-public items with you directly. And as to forward-looking statements, I want to remind everyone that the cautionary language about forward-looking statements contained in today's press release also applies to any comments made during this call. Also, be advised that the company undertakes no obligation to update any forward-looking statements made during this call. I'll turn the call over to Bob.

Thanks, Phil and welcome, everyone. Welcome to our fourth quarter and full year 2015 conference call. We are very pleased with our strong performance in 2015, as we continue to make important and meaningful progress at a number of areas. Our pre-tax income for the year posted a significant 36% increase to $94.8 million. As noted in our release, the $94.8 million of income excluded the one-time charge we incurred in refinancing our senior notes. As Phil will discuss later in the call. We were very pleased, we've successfully completed the refinancing in December. Where we replaced our $230 million, 8.625% notes, which were due in 2018, with a new issuance of $300 million of 6.75% notes, which are due in 2021. Our 2015 results, included 40 basis points increase in our gross margins and 70 basis point production in our SG&A overhead expense ratio. As a result, we were able to improve our 2015 full year operating margins by more than 100 basis points. For the fourth quarter, closings increased 13% and revenues rose 27%. For the year, total revenues increased 17% and the number of homes closed increased 4% to 3,883 homes, which is our highest closing volume, since 2006. Given the challenges, we and many other builders faced in 2015 from labor shortages, particularly unusual weather delays, as well as delays in getting a number of our new communities open. We were very pleased with our 2015 closings. In terms of sales. Our new contracts were up 16% in the fourth quarter. For the year, we sold 493,000 homes which was 12% better than 2014. Our new contracts have now increased at annual compounded rate of 12% per year since 2008. And our revenues have grown at 13% compounded annual rate since 2008. We believe, these are…

Thanks, Bob. New contracts for the fourth quarter increased 16% to 897 and our traffic for the quarter was up 17% and our community count was also up 17%. Our new contracts were up 14% in October, up 20% in November, and up 14% in December. As to our buyer profile, 38% of our fourth quarter sales were the first time buyers, which was slashed compared to 2015 third quarter. And 51% of our fourth quarter sales were inventory homes compared to 49% in 2015's third quarter. Our active community were 175 at the end of 2015. The breakdown by region is 73 in Midwest, 66 in South and 36 in the Mid-Atlantic. During the quarter, we opened 20 new communities while closing 11. And for the year, we opened 62 new communities and closed 37. For 2016, our current estimate is that our average community count for the year should be up 5% to 10% over 2015 level. We delivered 1,253 homes in 2015's fourth quarter. Delivering 70% of our backlog compared to 71% a year ago. Revenue increased 27% into the fourth quarter compared to the same period last year primarily as a result of an increase in both average closing price and number of homes delivered. For the full year revenue increased 17%. Our average closing price for the fourth quarter $360,000, a 12% increase over last year's $322,000. And our backlog average sales price is $372,000 up 7% from a year ago. We recorded an impairment of $3.6 million in the fourth quarter, this relates to certain communities in our DC market. Our building cycle times for homes were slightly higher in 2015's fourth quarter than 2014's fourth quarter, and our construction and land development cost increased slightly, when compared to the fourth quarter of last…

Thanks, Phil. Our mortgage and title operations pre-tax income increased from $3 million in 2014's fourth quarter to $5.1 million in the same period of 2015. Our fourth quarter results include an increase to loans originated from 771 to 906, an increase in average loan amount. Additionally, we were well positioned through the year end to aggressively market our loans during the chaotic regulatory environment. As resulted in higher margins on loans sold. The loan-to-value on our first mortgages for the fourth quarter was 83% in 2015, compared to 86% in 2014's fourth quarter. 74% of the loans closed were conventional, and 26% were FHA, VA. This compares to 73% and 27% respectively for 2014 same period. Overall, our average mortgage amount increased to 11% and $299,000 in 2015's fourth quarter, compared to $269,000 in 2014's fourth quarter. The average borrower credit score on mortgages originated by M/I Financial was 738 in the fourth quarter of 2015 compared to 736 in 2015's third quarter. Our mortgage operation captured 82% of our business in the fourth quarter compared to 2014's, 80%. Due to the high volume of fourth quarter closings. We temporarily increased our warehouse facilities to $150 million through February 1, 2016. At December 31, 2015 we had $105 million outstanding under the M/I F credit agreement, which is a $110 million commitment that expires June 24, 2016. And $19 million outstanding under a separate repo facility, which expires November 1, 2016. Both facilities are typical 364-day mortgage warehouse facilities that we extend annually. Now I will turn the call back to Phil.

Thanks, Paul. As far as the balance sheet, we continue to manage our balance sheet carefully focusing on investing carefully in new communities, while also managing our capital structure. Total home building inventory at 12/31/15 was $1.1 billion, an increase of $193 million above December 31, 2014 levels. This increase is primarily due to higher investment in our backlog, higher community count and more finished lots. Our land investment at 12/31/15 is $597 million, a 27% increase compared to $470 million a year ago. At December 31 we had $257 million of raw land and land under development and $340 million of finished unsold lots. We own 4,559 unsold finished lots, with an average cost of 75,000 per lot, and this average lot cost is 20% of our 372,000 backlog average sale price. The market breakdown of our $597 million of unsold land is $184 million in the Midwest, $227 million in the South and $186 million in the Mid-Atlantic. Lots owned and controlled as of 12/31/15 totaled 22,422 lots, 51% of which are owned and 49% under contract. We own 11,399 lots, of which 34% are in the Midwest, 41% in the South and 25% in the Mid-Atlantic. During 2015's fourth quarter, we spent $55 million on land purchases and $60 million on land development, for a total of $115 million. And for 2015, we spent $438 million on land purchases and land development. About 50% of the purchase amount was raw land. Our estimate today for 2016 land purchase and development spending is total of $425 million to $475 million. At the end of the quarter, we had 483 completed inventory homes, which are three per community. And 872 total inventory homes. And of the total inventory homes, 270 are in the Midwest, 409 are in the Southern region and 193's in the Mid-Atlantic. At 12/30/14, we had 460 completed inventory homes and 979 total inventory homes. Our financial condition continues to be strong, with $597 million in equity and net debt to cap ratio of 50%. And at 12/31/15, there was $44 million outstanding under our $400 million unsecured revolving credit facility. This completes our presentation. We'll now open the call for any questions or comments.

[Operator Instructions] Your first question comes from the line of Michael Rehaut of JPMorgan

It's actually Jason in for Mike. So in terms of your backlog conversion, it was pretty strong for the quarter. I wanted to see, if you can talk a little bit about, the labor environment that you're seeing. It looks like you weren't as impacted by some of the delays that you saw, over the last few quarters. And I guess more broadly, if you could talk about labor cost and if that was the main driver of the sequential gross margin decline or say some other factors that you're going to.

It's Bob Schottenstein, I'll take the first part of that question and then I'll let somebody else here answer the second part. I think that the labor issues probably stabilized for us throughout the year. It was a bit of a challenge during the first quarter. Slightly, less of a challenge during the second. We sort of got used to in the third and then, I think we were beginning to do a better job managing it, by the fourth. So, every market is little bit different. But I think that and I think the other thing is. I think we were successful in closing a few more spec homes in the fourth quarter than in quarters in particular may be two and three. And so, I think it was the aggregate of those things. As far as pricing and margins, Phil, maybe you want to talk about that.

Yes, I guess, I should - little more information, it looks like our cost were up about 2% to 3% last year. Labor issues continued to be a challenge. And every market needs to be a little bit different from a margin standpoint. We were very pleased, there are fourth quarter margins were above a year ago. Our full year margins were above a year ago. I think, we did a pretty good job managing pricing in pace. So overall, we felt pretty good about our margins in 2015.

Okay, then just moving onto sales pace. You had improvements in the Midwest, in Mid-Atlantic. But in the southern region, it looks like you had a 13% decline in sales pace. So wanted to see, if you could give a little bit more color on what the driver of that was.

I think, part of which impacted by the slowdown in sales, that we experienced in Houston, where not many communities met their pace or absorption objectives. I think, I mentioned in my comments that we had particularly strong years in Tampa and Orlando, and we did. And, San Antonio was a little sluggish. So I think, there were some puts and takes. And the takes, may have exceeded the puts slightly. Phil, I don't know if you or Paul or anyone else want to comment on that?

No, I think that. It was a little slower in some of our Texas markets and Florida was a very strong the year before or so.

Okay and then lastly, given where you stock is trading and the discounted book value. Just wanted to get your thoughts around potential share repurchases and if that's what you're considering, you haven't done in a while.

No, that's true. We haven't done in a while and this is probably the same way, we answer. I was trying to go back and see how we answered it, the last time it was asked because we felt the same way then than we do now. And that is, that something we always look at, you always discuss and you hopefully are thoughtful, about it. I think, we are - not just with ourselves but certainly with our board. Right, and I share your view of the stock price in terms of where it's trading below book value and in our judgment is no way near, any kind of reflection of our performance. The fact is, is that we feel that the best use of our capital is where it's headed now, which is back into our markets. Which growing income 36% year-over-year excluding the one-time debt charge. What we see in terms of the conditions of the field today. Our outlook for this year, even though we provide no guidance. We do expect to continue growing not just in terms of top line, but bottom line and improving margins and returns and when you, take all that into account. That's right now, we have no plans to buy back any shares. Kevin is that, you're looking at me noddingly. I assume that, that's why you see this well.

Yes, remember you always, like you said, we always look at it and continue to consider potential use of some amount of cash. But right now we'd agree, that there's no opportunities.

All right, thanks.

Your next question comes from the line of Alan Ratner, Zelman & Associates.

Congratulations on all the progress and we agree that the performance is certainly very strong and the growth is impressive. About - you guys made an acquisition during the quarter, you haven't been too acquisitive in the past, although you have bought a couple of companies to enter new market. So I was curious, just given what's going on in the capital markets. Whether you think there's going to be more opportunities for M&A and if so, are there specific markets that you're targeting for growth or are you really just looking to grow organically, at this point.

I think both, we want to always keep one eye very closely on our balance sheet. Our debt levels are, our debt-to-cap ratio is around 50% and that's about as high as we like to see it go, just in terms of the way we want to manage the ship. But, we believe that, but the good news is, we do not need to open up any new markets to achieve our current and multi-year growth goals. But the fact is, there are other markets that we continue to look at. And the possibility that we might open up an another market or two over the next 12 months to 18 months. I think, as it's at least worth nothing. Whether it happens or not, will depend upon finding not just the right market, but the right leader to help us, run that operation. Whether it would be a pure start-up or a combined or consistent of something like we did in Minneapolis, where we bought a relatively small builder, but still a builder these units we're doing 125 units. Hans Hagen was doing around 125 units to 140 units, a year. Which in rank them, I think 10th in the Minneapolis, St. Paul market. So they were technically a top 10 builder. Acquisition of that size, is possible if you can find the right one, the right way in position and so forth. But, back to the answer. We don't need to open up any new markets to achieve our growth goals. We believe, we have meaningful organic growth. Maybe not in all, but certainly in almost or most of our, almost on most of our markets. And but we're looking.

Great, that's very helpful. And if I can ask a second separate questions. I mean, you guys entered Texas over the downturn and interest, maybe some concerns now, that you entered a little bit on the later side, especially given what's going on in Houston. So I was hoping, you could just give us an update on what percentage of your inventory actually is in Houston today, maybe in dollar terms, any comments on the margins you're achieving there currently because I think there's some concern that pricing could come under pressure and trigger some impairments. I don't think, you've taken any to-date, but any kind of sensitivity you can give you around, that would be really helpful.

Well let me just say a couple things first. We entered five new markets between 2008 and Dallas was I think, 2013. Chicago plus the four Texas markets. And in hindsight, there is not one, there is not part of that feels anything but they were all the right decisions. We feel really good about having done that. And we do not feel, I mean Houston is what it is. When you're in 14 markets, there is always going to be something, someplace, somewhere. And I haven't seen too many instances, where there hasn't been the case. It's just sort of the reality of life. So we feel really good about our operation in Austin. The Dallas is off to a very good start as I indicated, while things were relative - were sort of sluggish in San Antonio. We're seeing improving conditions there and in terms of asset deployment and intensity, we feel okay about Houston. Phil, you want to add something to that?

Yes, as far as Alan in total, we have 175 active communities here. And as we said, 38 of those communities are in Texas, there was 32 of them at the end of 2014. So again, as of the end of 2015, 38 of 175 communities are in Texas and the breakdown of the four divisions. I mean, there is a few less and Dallas because it's more of a start-up, that type thing but it's kind of evenly spread. As far as investment level and risk or whatever. We feel really pretty good about our land position, our investment level. We did take $3.5 million impairment that was in DC. As Bob talked about, we talked about the last couple of calls. Demand has been little bit weak there and I think a lot of other builders share that. As far as investment levels. We talked about, $597 million of unsold land on our books at 12/31/15 and off that $597 million of unsold land, $227 million is in the south region that includes the four Texas divisions and also the two Florida divisions. But overall, we feel we're like in a good shape. Have we invested as much in Houston and DC, some of those markets that have been little slow and down, we know we're always mindful of the market conditions and so forth, as we make investments, but we feel really pretty good about investment level, our spec levels, our land position, we feel like we're in pretty good shape.

Okay, I appreciate that and I guess just, if I could ask, a little bit differently then. So would you just say or summarize it, your Texas markets and Houston specifically your land strategies pretty comparable to the company average in terms of year's supply, finished lot, raw law split-in, in other words, just not unique not option more land there or more quick return deals, that's pretty consistent with the rest of the portfolio.

It's very consistent with the other divisions.

Okay, thanks a lot guys. Good luck.

Your next question comes from the line of Alex Barron, Housing Research Center.

I wanted to ask, regarding Houston, what is your outlook for starts for this year? Do you expect it to be flattish or down some percents? So that's my first question.

I think overall, our view is that markets in general will be a little better this year as far as Texas. We're probably more, that things are probably are going to be a little more challenging. With things going on there, so we're little more conservative.

Not necessarily all of Texas, but Houston. Your question was specific to Houston, are you asking from a macro standpoint, what do we see happening there?

Yes, not necessarily [indiscernible], but just what your take off is on the overall macro for this year, in terms of starts year-over-year.

I think it's pretty consistent with what we're seeing for most of the forecast. And that is, it's still a very large market. But there's pressures, there's negative pressures. The job growth is slow and I think that case starts will be flat. The starts will be probably off slightly. We're in markets now, we're starts are up 4%, 5% and our business was up 15%. It’s so location price product and community-driven at the same time. So I appreciate the question, but I have to provide the fact that individual performance can radically be different. And Chicago is one of our best operations and it is not ready to, it's very good market.

Right, my other question I guess was regarding the Mid-Atlantic, where you guys said you had an impairment what kind of land deal was that, was that a development deal or finished lots and I guess, what kind of triggered that, was it some competitor acting or why is that happening?

It was a couple of communities, Alex. It was one community that we developed. There was also, some developed lots and it's really being driven more by kind of weakness in the market there in the last year. So and us basically are writing down some assets to what we think the market value is, to move - to build through the pipeline. We think, we have one of the cleanest balance sheets in the business. We don't really anything mothballed or hail [ph] type thing. We continue to work through our assets. Really it's more market-driven and we thought it was a good decision to deal with that now.

Okay and then if I could ask, one last one on the acquisition, you guys did in Minnesota. How many homes, did that builder do last year? Just to have some idea of the size of their operation.

I mentioned it earlier, I think around 125. In 2014, they did 125 homes. We acquired them in the fourth quarter of 2015.

Okay, great. Thanks.

Your next question comes from the line of Michael Rehaut of JPMorgan.

I think, he already asked his question.

Michael, your line is open. And we'll proceed to the next question. It comes from the line of Lee Brading of Wells Fargo.

This is actually Melissa Zayas on for Lee. I wanted to, I guess from - that last question on the impairment and given you've been talking about sluggishness in the DC market for a while. Do you foresee any sort of additional impairments and communities in that market or was it like, this sort of address that?

Those kind of things are always hard to predict based on market conditions and competition and so forth. We think that, we're a very much dealt with the issues, that we felt we needed to. Again, we tend to work through assets as oppose to, some of those type things. But we felt like, we dealt with everything we needed to right now.

Okay, got it. Thanks. And then, on liquidity front. You paid down a good amount of your revolver this past quarter with cash and maybe some higher yield proceeds. I think in the past, you guys have mentioned something about being comfortable with peak usage and the 150 to 200-ish range. And I was wondering what your thoughts are for 2016 in terms of, do you think you'll repeat that type of revolver fundings to fund 2016 growth?

We haven't given any guidance yet at this point yet for our peak usage. This year, 2016. It's Kevin. And I expect, we will be - we do have our, serve our budgets rolled up in our planning that we will give some something probably when we put out our 10-K, but at this point we haven't given necessarily a peak amount. We certainly wouldn't expect it to be any higher than I think, where we peaked last year. We did get in the range of 79 of proceeds excess from the refinancing of our senior notes. So we're growing the business, but I think it will be something less than what we peaked last year.

Got it, thanks. That's all from me.

[Operator Instructions] and at this time, there are no further questions. I would now like to turn the floor back over to management for any closing remarks.

Thank you very much for joining us.