Good day, and welcome to the Meritage Homes Third Quarter 2012 conference call. All participants will be in a listen-only mode. (Operator Instructions) After today’s presentation, there will be an opportunity to ask question. (Operator Instructions) Please note this event is being recorded. I’d now like to turn the conference over to Mr. Brent Anderson. Mr. Anderson, the floor is yours sir.

Thank you, Mike. Good morning, everyone. I’d like to welcome you to our analyst conference call today. Third quarter 2012 ended on September 30 and we issued our press release with our results before the market open today. If you need a copy of the release or the slides that accompany our webcast, you can find them on our website at investors.meritagehomes.com or by selecting the Investors link at the top of our home page. Turning to slide 2, the Safe Harbor language, our statements during this call and the accompanying materials contain projections and forward-looking statements which are the current opinions of management and subject to change. We undertake no obligation to update these projections or opinions. Additionally, our actual results may be materially different than our expectations due to various risk factors. For information regarding those risk factors, please see our press release and our most recent filings with the Securities and Exchange Commission specifically our 2010 Annual Report on Form 10-K and our 10-Qs for the first and second quarters of 2012. Today’s presentation also includes certain non-GAAP financial measures as defined by the SEC, to comply with their rules we have provided a reconciliation of the non-GAAP measures in our earnings press release and in the slide. Our speakers today are Mr. Steve Hilton, Chairman and CEO of Meritage Homes; and Larry Seay, our Executive Vice President and CFO. We expect our call to be concluded in about an hour and a replay will be available within an hour. So after that, we will remain active for at least 30 days. I’ll now turn the call over to Mr. Hilton to review our third quarter results. Steve?

Thank you, Brent. I’d like to welcome everyone to our call today. I’m pleased with our results for the third quarter. We reported net earnings of $6.8 million or diluted EPS of $0.19 a share, which could have been $0.43 a share if not for an $8.7 million non-cash charge related to our ongoing and unresolved litigation surrounding the old South Edge joint venture in Las Vegas. By comparison, we reported a net loss of $3.2 million or negative $0.10 per diluted share last year. So our year-over-year improvement was $0.53 per diluted share if you exclude the charge for litigation reserve. Our other key performance metrics improved across the Board over the third quarter of 2011. Home closings were up 43%, closing revenue was up 54%. Home closing gross margin was up 110 basis points. Orders were up 33% with a 13% increase in ASPs on top of that. We knew the quarter with a total backlog value of 17% and we grew our total lots supply and raise additional capital to continue to take advantage of opportunities for additional growth as the market improves. The housing market continues to show strength this year over last year within our markets. Many buyers who were previously hesitant or unable to purchase a home have gained confidence and are beginning to enter the market again. Where listings down, buyers looking for a home are finding fewer alternatives available and are seeing prices increase which creates urgency in turn. Other potential buyers who may have been living in existing home that was under water have now seen their value of their home appreciate allowing them to move to a new home which is good for move up homebuilders like Meritage. Because most of our customers are move up buyers who have an…

Thanks, Steve. Turning to slide 7, the earnings leverage in our operations was clearly evident again this quarter as it was last quarter. We increased home closing revenue by 54% on a 43% increase in closings and an 8% higher average closing price. That translated into a 63% increase in gross profit as our gross margin improved to 18.6% for the third quarter of 2012 from 17.5% last year. Our commissions and other selling costs increased at a slower pace on our revenues at only 31% year-over-year dropping 140 basis points as a percent of revenue. And general and administrative expenses increased to an even lesser degree only 17% year-over-year providing additional leverage to earnings as we expected. Interest expense decreased in nominal terms by $2.5 million by 200 basis points as a percent of revenue. Despite slightly higher interest incurred, a greater portion of it was capitalized to land under development and homes under construction. The end result of all that leverage was that we generated $16.1 million in adjusted pretax income during the third quarter of 2012, excluding impairments and the litigation related charge compared to a $2 million loss in the third quarter of 2011. Net earnings were reduced by an $8.7 million charge to increase the reserve accrual related to litigation surrounding the South Edge joint-venture in Nevada. The JV has been in litigation since 2008 and we increased our reserves due to a recent court ruling which we are contesting. We have recently filed the claims against certain joint-venture partner to we recover any amounts we maybe required to pay in connection with the South Edge litigation and such recovery would serve to reduce or eliminate the need for our South Edge reserve. This does not affect our current operations in Las Vegas, which we…

All in all, it was a very good quarter. Our results improved across the board which we believe was partially do the earlier recovery in the housing, in the homebuilding markets but also direct result of our strategies and the changes we made over the last several years. We believe the homebuilding industry can continue to rebound and grow that will serve a catalyst to help our national economy recover which is good for everyone, and we hopefully mean several more years of growth. Thank you for your attention, and I’ll now move up for questions. The operator will remind you of the instructions. Operator?

Thank you, sir. We’ll now begin the question-and-answer session. (Operator Instructions) First question comes from Michael Rehaut of JPMorgan. Please go ahead. Jason Marcus – JPMorgan: Hi, this is actually Jason Marcus in for Mike. How are you?

Good. Thank you. Jason Marcus – JPMorgan: So my first question is I wondering if you could talk a little bit about pricing and incentive trends as they occur throughout the quarter. And maybe I mean, which markets you see in the most pricing power, and how you think about the drivers of being able to further raise prices as we go forward?

We've raised prices in about 85% of our communities in the quarter. And I’d say we had the strongest price increases in California and Arizona. And prices have been slightly up to relatively flat in Texas. And I think we continue to have pricing power in the fourth quarter probably similar to what we saw in the third quarter. Larry, you want to add on that?

Sure. I guess I might add, percentagewise there is quite a variance between different communities, so you have some communities that had no price increases, but other communities during the quarter they may have had price increases of 5%, 10% averages and Phoenix are ranging like 5% price increases.

For the quarter.

For the quarter, right. So you are seeing ability to raise prices. Jason Marcus – JPMorgan: Okay. And then my next question is about the land market. I wonder if you could comment a little on the recent land market trends that you’ve seen, maybe in terms of competition and pricing you’ve seen there over the last quarter or so. And I think it also be interesting to know what types of land deals you are focusing on in terms of locations or may which you’re staying to what the A locations are if you are kind of entering more towards some B locations at this point.

Well, the land market is tackling the housing market, and the land market in the hardest market is most difficult. California and Phoenix prices have risen on land dramatically, and it’s tougher to find good land in those markets in particular. That said, we are continuing to selectively buy land. Fortunately in Phoenix, we bought quite a bit of land here early, so we haven’t had buyers as much land here in the last couple of quarters. So we are being more selective. What was the other part of your question about the land? Jason Marcus – JPMorgan: If you are kind of staying with A locations or if you’re branching out a little bit towards B?

No. It’s harder to find lots in A locations, we are buying some more Bs, C here and there that could potentially become a B. We’re doing more developments, finding very few finished lots, finding very few option deals, most of what we are buying is math lots that we have to develop. It will take about a year to bring online. Jason Marcus – JPMorgan: Okay, great. Thanks.

Okay. Thank you.

Next we have Stephen Kim, Barclays. Stephen Kim – Barclays Capital Inc.: Great. Thanks very much guys. Steve, last quarter when I asked you about margins and where you thought margins could go, we have in our notes here that you talked about sort of a normal “gross margin has been around 21%”. I was curious given the strong pricing we’ve seen and the rising of margins this quarter, do you think that the higher number is likely to be considered normal this cycle?

I said 20%, but I have to check that, but we've always been saying normal margins after construction overhead is around 20% and before construction overhead is about 23%. We still believe that over the next five quarters or so, we're going to get back to 20%. I expect more margin improvement in the fourth quarter. Certainly we've raised prices in the lot of our communities over the last couple – this quarter and the quarter previously which should start to flow through in the next couple of quarters and that’s what we are expecting. Stephen Kim – Barclays Capital Inc.: Could you clarify your margin before or after interest?

After interest. Yeah, the 20% is after capitalized interest. We don't report gross margin without interest, because we view it as a normal operating cost that we occur in. Day-in and day-out and to back it out is kind of like backing up some normal cost. So we guess don’t report that. Stephen Kim – Barclays Capital Inc.: So that might be the difference, because there are capitalized interest is it about 1% Larry?

Yeah, it's about maybe a little bit more than that. And we are expensing more, so we have a couple of percent down below operating income. Stephen Kim – Barclays Capital Inc.: Yeah, so that number that Steve given me, is that after just capitalized interest or is that after directly expense interest as well?

It’s capitalized interest only, because that is what in reported gross margin. Stephen Kim – Barclays Capital Inc.: Yeah, that's fine. Okay, great. And then secondly, Steve, can you talk about what you are seeing from your peers, your competitors in the marketplace in terms of their pricing discipline. Are you seeing I would imagine at this point it’s still very every on, so folks are definitely looking to push price. Are you seeing clear evidence of that across the markets, are there certain players who for whatever reason are trying to grab volume and putting downward pressure in anyway on pricing?

No, I’d say it's accurate to say that most builders are focused on margin improvement and are being disciplined about pricing and regulating their volumes. There is always exceptions of course in different markets with different communities, positions that guys want to get out off for whatever reason. But not saying everybody is kind of approaching similar fashion I believe. Stephen Kim – Barclays Capital Inc.: Okay, great. Thanks a lot guys.

Thank you.

Thank you.

Next, we have Ivy Zelman of Zelman & Associates. Ivy Zelman – Zelman & Associates: Good morning guys.

Hi. Ivy Zelman – Zelman & Associates: I think it would be helpful given your size, Steve, for you to dig into a little bit. There is a lot of concern about Phoenix slowing and I think those concerns are overdone considering the lack of inventory there and I’m hoping for the first part of my question you can just tell us what you think the environment looks like, and is it just again your point about builders being more strategic in terms of sales and pricing?

Yeah, I think Phoenix continues to be very strong. We could sell as many homes here as we wanted if we took the Governor off, but we've been aggressive about pushing prices here. I believe we push prices over 6% in Q2 and over 5% in Q3. Builders are bringing communities out of mothball here. It’s quite surprising that I think we had may be four communities here that were mothballed, and three of them pencil now, and we can make a near normal margin on those communities. So I don’t have a lot of concerns about Phoenix. The inventory still remains tight for the resale market particularly in the better markets in the Southeast valley. The hi-tech quarter around Intel hiring a lot of people very low unemployment in that area of the city and housing market in general is very, very strong. So I think some of the slowdown in permits, because the builders are regulating their sales, and there has been significant cost pressure here in the market. The labor base is at a bit of trouble keeping up, but I think that’s going to get resolved overtime, and I think it’s a short term problem. Ivy Zelman – Zelman & Associates: Well. Thank you.

So, hope we had answered your question. Ivy Zelman – Zelman & Associates: Sure, definitely. Thank you. My second question relates to your corporate G&A. It was up nearly $3 million sequentially and year-over-year. So is this really a function of the new markets in the account growth or – and is it the right runway we should be thinking about going forward?

Sure. The G&A increase was really caused by two things. To a small extent it’s been caused by additional overhead in some of our startup communities, but our startup divisions I should say. But the great majority of the increase has really increased bonuses from people starting to meet their performance targets; bonuses were very modest over the last few years. And a lot of that just relates to additional restricted stock and bonus cash bonus compensation, so I think that is going to be given…

Probably there’s a bit of adjustments on there and might not be quite that same runway, when you say Larry?

Yeah, what happens is it’s not clear to beginning at the year whether will meet all of our goal, so the bonus accruals are lesser in the beginning part of the year and then as people get closer to meeting them we accrue more itself, so there is more of an accrual this quarter than there was a last two quarters. Ivy Zelman – Zelman & Associates: Go it, that’s helpful. And then last question if I may, you guys you think about how much of your land and lots that you have in balance sheet, is there anyway for you to one and maybe you did this already, but breakout what percentage finished versus raw and/or partially developed, I know you’ve been acquiring partially developed lots, and then assuming you can give us that what percentage of your lots are currently mothballed, and just a ballpark?

Yeah, from the mothball perspective, we discloses in our Q now and Ks. We have about $40 million of mothball of assets represents about a 11 communities, and may be about 2000 lots. Now again some of that steps partially developed and develop, as for as the total split between the developed lots and undeveloped lots, we’re running now that as we’ve been buying more lots that need to be developed, we are running more of a 60%, 65%, 70% of our lots are really under development not too many lots are raw. But with the balance being finished, so our percentage of lots under development which is the great majority of our lots that are in some form of being developed is growing, and I would expected to continue to grow. So that could get up to 70% or 75% of being underdeveloped now. I need to emphasis that a lot of that stuff is being very close to being finished, because we’re starting to build houses on it, so its not all raw is the point, very little was actually just raw.

I’ll just add two things. Number one that our mothballed community should drop significantly over the next couple of quarters, because we made decisions here recently to as I mentioned earlier to bring several of those communities out of mothball and you’ll see those start to come online next two quarters. And then lastly, I’d say two-thirds to three quarters of all the lots that we are buying today are development lots, and as I said we are finding very, very few finished lots particularly in the west, hardly any in the west for that matter, but we are finding some in Texas and the Southeast, but mostly everything we are doing in-house development. Ivy Zelman – Zelman & Associates: Steve, when you say everything you are buying, is that generally for production in terms of going vertical for 2014 now or you still buying for 2013?

We are buying a little bit for 2013, not very much, but most of what we’re buying right now is for 2014. We may have a couple of more months left that we can find something that we can open-up by the end of 2013. Ivy Zelman – Zelman & Associates: Good quarter guys. Thanks.

Thank you.

Thank you.

Next we have Dan Oppenheim of Credit Suisse. Please go ahead. Dan Oppenheim – Credit Suisse: Thanks very much. You’ve done a great job overtime in terms of shifting geographic markets, I guess what you are seeing out there. Wondering what you are doing now as you think about the improving buyer confidence in terms –about ‘13 and ’14 in terms of communities with larger homes, higher price points with us to take advantage of the increased buyer confidence there?

I don’t think we do anything different. We are just going to continue to execute our strategy, we are going to continue to focus on market share in our existing markets to really get some traction and market share on our new markets in Charlotte and Tampa, and stick to the game plan. We’re moving up a little bit on the price band, because we are seeing a little bit more strength in the higher priced homes, but I don't really foresee any significant changes of what we've been doing. Dan Oppenheim – Credit Suisse: Okay, and then I guess the other question was geographically where do you – how much for say in terms of the shift away from Texas really going to be intentional move versus the demand in the other markets? Where do you see Texas as a percentage of overall volume over the next couple of years or (inaudible) Texas and other markets?

Well, I think the peak of the market in ‘04 to ‘06 timeframe, I think Texas was about maybe a third 40% of our business, and I expected to come back into that range overtime. We certainly have aspirations to get bigger in California and historically we’ve been relatively small in markets like Denver, which were getting – we are much more aggressive in and much bigger in. We want to expand our presence in Florida. We have a very strong position in Orlando. We want to match that in Tampa, and then the Carolina is important to us as well, we got to get bigger there. So we have a lot of opportunities for growth. Dan Oppenheim – Credit Suisse: Great, thank you.

The next question we have comes from Stephen East of ISI Group. Stephen East – ISI Group: Thank you. Good quarter guys. Steve, if I look at your sales pace that you talked about that’s achievable in 2013, you've already laid out where your gross margins can go over the next five quarters. What should we expect from the SG&A as far as the leverage that you have here? You talked about opening a lot of communities et cetera so trying to understand that path as we move forward?

While we are very focused on continuing to drive it down, we think our commission costs and sales costs are still little too high. We got to reduce those and I can give you a precise target number, but [regardless] of the fact that as we ramp up our activity, we need to improve in that area. Larry, do you want to add on that?

Sure. I cannot use the general rule from that that you can – that G&A can grow it only a third of the rate of revenue. This quarter, it actually grew less than that, but in the last comfortable quarters it actually grow from last. Over the longer term, I think that's a reasonable expectation, it could be less, it could be a little more but a third of just G&A I'm not talking about commissions or selling costs, but G&A, that gives a really good leverage result by growing your rate of overhead by only a third of revenue. Stephen East – ISI Group: Okay. The next question if I look at – you had great ASP growth, and if I look at price versus mix, you’ve talked about both of them. So could you just sort of break that out? And then also California had great growth, you've already said you're trying to grow Florida. What should we expect in California? Is this growth heavily driven by community growth as we look over the next year or two isn’t much more an absorption game.

It’s been more – its been more absorption than community count growth. We need to grow community count but again it’s hard to find a land in California. So it’s certainly going to be very difficult to come anywhere close to the growth rates we’ve experienced over the last several quarters. It’s a while been in three digits, so I expect growth to moderate there but I do expect California to remain strong. Stephen East – ISI Group: Okay, all right. And then the price versus mix on your orders ASP?

Again, yeah I would say that – if you look at the kind of percentage top-line average price increase that we’re reporting year-over-year a great portion of that is mix driven and you can look at – as we talked about our sales really grow in the high price states of California and Florida and to some extent Arizona compared to Texas. So I generally think in terms of about two-thirds of that top line percentage increase being mix driven and one-third being, well, we are talking about earlier in the call which is the true price increase. Stephen East – ISI Group: Okay. If I sneak in one more quickly, Larry, the DTA, will that come back all at once?

Probably or pretty much nearly all at once. There maybe a state or two that doesn’t come back on, but our DTA relative – is smaller relative to our ability to generate earnings and maybe other builders have ICS as once we cross the threshold of being able to book it, bring it all online at one time. Stephen East – ISI Group: Okay, thank you.

And next we have David Goldberg, UBS. David Goldberg – UBS Securities: Thanks. Good morning. Last quarter, you guys – you provided some helpful color in terms of the pressure of cost increases. And if I remember correctly, you said something like half or more of the price depreciation [followed up] by cost increases. If I think about that directionally today, where would you put that? Would you say that it’s a bigger percentage being followed up by cost increases or a smaller percentage?

It’s about the same. Let’s say it’s about the same. David Goldberg – UBS Securities: And that includes potentially higher land cost…

Yeah. Certainly construction cost and higher land costs are at least half of the price increase. David Goldberg – UBS Securities: Got it. And then my follow-up question. Steve, in the commentary, I think you talked about there is some labor shortages out there today. You are very confident those are going to resolve themselves as we look forward, and I think that makes sense. So what I’m trying to get more color on is, do you think the reason there is labor shortage is because there is available labor out there, but subcontractors are either unwilling or unable essentially to bring on more labors, more employees or are they just nervous to do so, because they are not confident enough in the recovery yet. Or do you think its just because there is an absence of trained labor and skilled labor in some of these trades, where its going to take some more time to may be bring it on skilled labor and get them trained up and get them kind of productivity level that would be kind of represented where you were before the downturn will start to take it fall.

First of all, I think this is only the third quarter of real subset of recovery. So I think a lot of trades are hesitant to go out and invest in more trucks and equipment and hire more people until they really believe this was a real recovery. So I think we had a slow kind of a slow start there. Number 2, I think lot of trades were – I’m going to focus on my margins before I want to focus on my volume, and they were going to push prices first, which lot of them did occurred. And then once they made the decision to expand and hire more labor, it doesn't happen overnight, it takes some little bit time to get people on board and trained. And then there's new contractors maybe previously in business, they are coming back into the market, and sticking them time to ramp up. So, I think the capacity will adjust overtime, because we are still operating at historically low levels, and I think once the market is come back in the balance how many contractors to build your houses. David Goldberg – UBS Securities: Is it fair to summarize those dealing process, some subcontractor position is already starting and starting to catch up when we are moving into the process?

Absolutely, absolutely, I mean we had some real trouble last quarter here in Phoenix and other places and we’ve made some adjustments and build some relationships bought some other contractors in, and it's not easy today, but it's improved. David Goldberg – UBS Securities: Thank you.

The next question we have comes from Joshua Pollard of Goldman Sachs. Joshua Pollard – Goldman Sachs: Hey, thanks for taking my question. You said only a small improvement in absorption pace next year. Is that by design or is that your forecast for the market. In other words, are you guys looking to constrain sales such that there’s only a small increase or you guys just assuming a relatively flat year for ‘13 from an industry standpoint?

No, it’s more of a conservative forecast. We recognize there is going to be more competition next year. Certainly we are going to be focused on margins and pushing prices. So certainly we could have better improvement in sales per community, but we're only forecasting a nominal amount at this point right now, quarter or two could tell you more. Joshua Pollard – Goldman Sachs: Okay. You actually hit on my next question Steve, new competition market share and your market as you guys push prices instead of volume, do you see large amount of market share going towards private or you are seeing them begin to build up their businesses already, are there any – is there any interest in joint ventures this cycle again?

Well, first, I see most of the competition coming from other publics. Some publics that have been some acquired in certain markets are waken up and get more aggressive and they are rarely out pushing hard to buy land, so I see more competition from those guys and I do from privates. I think the privates are still capital constrained other than large regional privates, [shay and weekly] those kinds of builders they have capital, but the smaller guys are building 100 to 300 homes a year. I don't see them making a big impact in any markets right now. So what we really could be even more public homebuilder appears. Joshua Pollard – Goldman Sachs: Okay. Then the last question was just on joint-ventures, we look across the last seven years, and joint-venture is actually work where they were supposed to. They stop some of the larger builders from actually having to go bankrupt, so I love to hear your thoughts on getting into joint ventures (inaudible) what you saw this quarter on South Edge. Just in general?

No, I don’t see that much going on or here, but that much going on joint ventures, yeah there maybe situations were two builders going and split land position, but I wouldn’t call out a joint venture per se, I think those Vegas joint ventures didn’t turn out to well so, we’re not eager to get into those types of situations again. I do think over time land banking will start to come back, we’ve been hear and about some players are might possibly coming back into the business or excited about that we’d like to do some way in making again, but still pretty early. Joshua Pollard – Goldman Sachs: Last question, October is still as good as things were in the third quarter?

Yeah, I’d say, so October is still looking right inline were expectations are so, we’re pretty happy with what we’ve seen the first few weeks. Joshua Pollard – Goldman Sachs: All right, thanks a lot guys. Keep up the good work.

Okay, thank you.

Thank you.

The next we have comes from Nishu Sood of Deutsche Bank. Please go ahead Robert Hansen – Deutsche Bank: This is Rob Hansen on for Nishu. The green initiatives for you guys has been a big differentiates, specific into the resell market the past few years – with for closures kind of declining and the market – turning up on its own, is the green initiative going to be emphasize as much has been in the past.

Yeah, absolutely, we think it’s a big part of our strategy, and the culture of our company, and we don’t intend to abandoned or move of diluted as the market improves, we’re going to stick with that and continue to be a leader in building green homes. I would say the solar component of it is probably having less of an influence, because the utility rebates are going away, and I think some of the federal tax credits are in jeopardy in that area, so I don't know there will be doing as much solar going forward, but I think as far as the rest of it we’re very committed to it. Robert Hansen – Deutsche Bank: All right, and then earlier in the call you mentioned that sometimes you buy a C location lots, what would that take for to become B or an A, is it price depreciation and volumes or combination, yes so I just want to get some color there?

It's a lot of factors we look at, I mean, we look at foreclosures or listings in the area, we look at proximity to schools, employment, highways, commute times, lot of availability in the area, what's the competition look like, and we look at a whole variety of factors, there’s not a hard line, this is the hardline for the As, hardline for the Bs, and Cs, so we have some certainly some opportunities in communities that we're pretty distressed a year-ago, but look a lot better today, because some of the stress has cleared in the locations not too bad as pretty good, its C or maybe wasn’t C and it could become a B, so we’re certainly pursuing some of those. We're not going out to the hint of land, so I can tell you that in volume stuff, that’s an hour drive from anywhere.

I would add that really in transition, so it's really a market that the B property that's a little closer in from the sea is getting built out and there is not really much in the way of available land to buy, and we're just going just a little bit further out and it's transitioning from a C to a B, so even though we might still classified as the C, we can see the transition starting to happen. Robert Hansen – Deutsche Bank: All right, thank you very much guys.

Thank you.

The next question we have comes from Alex Barron of Housing Research Center. Alex Barron – Housing Research Center: Hi, good morning. I wanted to get your opinion on something, it seems like a lot of the markets have been pretty resilient. This lead-in to the year and California actually seems to be getting stronger. Florida seems to be doing pretty good, but Phoenix is the only one that seems to have kind of slow – what you guys kind of attribute that to?

Well, I think I cannot speak to that what I view (inaudible) question. I think a lot of builders in Phoenix are regulating their sales, they are focused on price, I think you could sell as many homes you wanted lot of committees, but you can keep up with the production, it's taken a little time for the trade base to adjust in this market. And so with that I think builders are managing their sales to four, five or six homes per month. And I think that set an impact on the overall market, and then builders are trying to bringing new communities online to replace, all the communities that are selling out, and that's taken some time as well. So I don't think that you can expect at the torrid pace of improvement that we saw here earlier in the year can continue, but I would expect through ‘13 you're going to see still very solid growth in the Phoenix market. Alex Barron – Housing Research Center: Okay. I think it's fair. And in terms of your gross margins this quarter I guess, I thought we would have seen a little bit more sequential improvement, any thoughts on that?

Yeah, just be patient, you'll see more next quarter, and we're going to get to that 20% over the next four, five quarters, but it's common, it is common. Alex Barron – Housing Research Center: Okay, thanks.

We have two more questions in the queue. The next one we have from Jade Rahmani of KBW. Jade Rahmani – Keefe, Bruyette & Woods: Thanks for taking the question. As wondering if you could provide some color on what percentage of your current landholdings were acquired post-2009 and if you have a sense for price appreciation on average for this part of the portfolio versus where assets are carried?

I don't know if we have the precise number, but I’d say is probably 75% to 80%, for post-2009, and Larry what about the rest of it?

What was the second part of the question please? Jade Rahmani – Keefe, Bruyette & Woods: If you have a sense for any magnitude or price appreciation on average for that part of the portfolio versus where the assets are carried?

Certainly the rising market has improved has raising all boats and there are some of the older property that was impaired our mothballed, the last year it's gotten a lot further away from being from a potential future impairment, so I would view any future impairments as being highly unlikely at this point, but it's hard for me to gauge that bouncing of the impairment price how much it's recovered it depends on each market, but I guess I would add that we’ve seen a substantial improvement of the bottom with the lot prices. Well that's a good and that it has helped some of the older line obviously its may buying new land a bit more challenging, but we've been able to keep up with land price increases by raising prices and repositioning into better location. So the land prices have bounced quite a little bit in particularly markets like Phoenix. Jade Rahmani – Keefe, Bruyette & Woods: Okay, that's helpful. And a technical question regarding the convert, do you plan to use the F converted message so that will see the full impact of share dilution in the fourth quarter, and will you amortize any interest on that as you would straight that through COGS?

Well, the way we are accounting for this, we're not buy – we met all the traps the hurdles to not bifurcate. So essentially there is no equity component to that we have booked really into convert and the interest that run through the income statement is going to be stated rate on the notes. Jade Rahmani – Keefe, Bruyette & Woods: So no fourth quarter dilution for the share count?

Well, we are counting the shares as diluted shares, I believe, but I will double check on that, I'm not absolutely certain. Jade Rahmani – Keefe, Bruyette & Woods: Okay, thanks.

That's always more fully diluted calculation.

Next, we have Adam Rudiger of Wells Fargo. Adam Rudiger – Wells Fargo Securities, LLC: Hi, thank you. I want to go back to Arizona for a second, but from the fully different angle, because it seems like the epicenter of lot of the trends and issues and concerns that people have. Could you just talk about walk us through maybe like a chronology of what's happened this year, and I'm interested in this gross margin, so you raise prices and demand improvement earlier in the year, and materials and labor moved up, and then you are seeing this slowing space, I'm just curious if you look at your Arizona, your Phoenix communities how gross margins have trend through the year and really what the trend line or chronology is? Thanks.

Well, I mean going into this year most of our gross margins were pretty substandard here. Because we didn't have really any price appreciation last year, and other than a few select communities and margins have really turn around, because we've raised prices more than 10% in the last couple of quarters. So most of our gross margins today are at or above our underwriting expectations in Phoenix, and at the same time we're starting to bring a few communities back online that we had mothball as we said earlier. The Phoenix market was operating in such low numbers, any subset of improvement major headlines this was a market that 65,000 single family housing starts at the peak there was doing 7,000 starts last year. So going from 7,000 to 12,000 or 13,000 is massive improvement, but it is still half of the long-term historical average in the market. So although the improvements were enormous in the market, we’re still operating at a very low level compared to long-term historical averages. But as I said earlier, I see a lot of builders in the market that are carefully regulating the pricing in their sales phase, and the raising prices every four, five sales, and we’re having trouble with the getting their homes built, so the regulating the sales phase as well. Adam Rudiger – Wells Fargo Securities, LLC: So at the gross margins in Phoenix into the right improvement there have those shown up you yet in the overall company margins or is that when you’re taking about – coming is that…

I think lot of this [coming], Phoenix in California is coming over the next quarter or two because – these are sales that happened in May, June, July to the summer and some of these homes we haven’t delivered yet, particularly in the newer communities so long and we’re just bringing them online, so I think it’s common. Adam Rudiger – Wells Fargo Securities, LLC: Okay, that’s all I had, thanks very much.

Okay, thank you.

The next question we have comes from Joel Locker of FBN Securities.

This is our last question operator?

Yes, sir, does it fairly being the last question.

Okay, thank you.

Yes, sir. Joel Locker – FBN Securities: Hi, guys.

Hi, Joel. Joel Locker – FBN Securities: Just too carious just on the gross margins, if you said you’re up on your orders 11% year-to-date St. Arizona and California, I don’t know what is it exactly, but once if you look at your blend of reported gross margin say from the fourth quarter of 2011 and first quarter 2012 before price increases really started, hitting on the orders, and you get to run 18% gross margin, and say to give you another 100 basis points for the fourth quarter and first quarter of 2013, you get up to 19.7% that’s a 170 basis point increase, but so like how much of that is that 400 basis points and actually order price increases once all these orders closed versus say 230 basis point increase in direct cost. Or like – how would you qualify that are break that down because – I guess based on if you are hearing 10% or 11% order price growth and say Phoenix versus maybe the company is a lot is or maybe Texas flag.

Yeah. It’s hard to Apart the pinpoint for you, but I could tell that10.8% and in the Southeast has been very nominal. Price appreciation and that’s been cost increases sort of medicated most of the price appreciation we’ve had in those markets. So they are not helped some gross margin front. We going to get gross margin lift as really out of the west at California and Colorado. And as I said before, expect that to come through in the next couple of quarters. Joel Locker – FBN Securities: Right, would you say that I guess the direct cost are going up relatively high in California and Phoenix, just on labor system and material front just because it seems like – your margins maybe closer to the 21% based on the blended mix because?

At least half if not more of the price increases by being eaten up by construction cost increases and land cost increases. Joel Locker – FBN Securities: All right, and how much would you say your order prices. It’s there up a 11% the Phoenix year-to-date on orders. What kind of order increase did you get in California.

What kind of price increase that we’ve got in California? Joel Locker – FBN Securities: Yeah, just on organically, not including mix or anything like that, but just on...

I think our price increases for the last two quarters in Northern California have been up about 7% and Southern California only been up about may be 2%.

The blunt of the last quarter is like about 4.5%. Joel Locker – FBN Securities: Thank you very much.

Thank you, Steve. and I comment on the conversion of the convertible notes, the conversion calculation on the convertible notes was anti-dilutive this quarter, so therefore the additional shares are not in the EPS calc, because they were anti-dilutive.

Okay. Thanks for clarifying that. Thank you for participating on our call this quarter, and we will look forward to talking to you again with our fourth quarter results in January. Thank you very much.

And we thank you sir, and to the rest of management for your time. The conference has now concluded. We thank you all for attending today’s presentation. At this time you may disconnect your lines. Thank you and have a great day.