Good morning and welcome to Taylor Morrison’s Second Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. As a reminder, this conference call is being recorded. And I would now like to introduce Mr. Jason Lenderman, Vice President, Investor Relations and Treasury.

Thank you, operator and welcome everyone to Taylor Morrison’s second quarter 2015 earnings conference call. With me today are Sheryl Palmer, President and Chief Executive Officer; and Dave Cone, Vice President and Chief Financial Officer. Sheryl will begin the call with an overview of our business performance and our strategic priorities. Dave will take you through a financial review of the second quarter as well as our guidance for 2015. Then, Sheryl will conclude with the outlook for the business after which we will be happy to take your questions. Before I turn the call over to Sheryl, let me remind you that today’s call including the question-and-answer session, includes forward-looking statements that are subject to the Safe Harbor statement for forward-looking information that you will find in today’s news release. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to those factors identified in the release and in our filings with the Securities and Exchange Commission and we do not undertake any obligation to update our forward-looking statements. Lastly, I’d like to note that we have recently made changes to our Investor Relations website. Please visit www.taylormorrison.com and select Investor Relations to see the enhancements that we made, which we hope you find beneficial. Now, let me turn the call over to Sheryl Palmer.

Thank you, Jason and good morning everyone. We appreciate you joining us today and we’re pleased to share our good news. With the first half of the year wrapped up, I am pleased with our continued performance and progress in market share as indications of healthy housing demand remain intact. We are excited to discuss our results for the quarter, but before we get into those details, let me touch upon our most recent proof points in our strategy to grow the business and continue to increase our share of the new US home market. As we announced on July 21, we acquired very attractive assets within the prime business units of Orleans Homes. These assets and the talented teams that manage them are located in Charlotte, Raleigh and Chicago. All told the acquisition will provide approximately 2,100 lots that are either owned or controlled with nearly 80% of those lots in North Carolina and the remainder in Chicago. This acquisition continues the expansion of our geographic footprint, while targeting specific areas in the country where we believe the housing recovery is on an enviable trajectory. Our conviction in these markets include some critical data points centered on home ownership rates, affordability and employment to permit activity. Specifically the home ownership rate in all three markets is either equal to or greater than the US average. The affordability ratio has a significantly positive deviation to the US average in all three markets endorsing the early days of recovery and the employment to permit ratio is roughly 1.5 times greater than the US average in Chicago alone. The customer segment has a healthy range from the first-time buyer to the first move-up buyer as well as some focus in the 55 plus market. The average selling price for these communities have…

Thanks, Sheryl, and hello everyone. As a reminder, all reported financial information should be compared to our prior year’s US operations only, which will provide the best apples-to-apples comparison following the Monarch show that happened earlier this year. For the second quarter, adjusted net income was $39.8 million, which equated to $0.33 in adjusted earnings per share, exclusive of a $33 million charge for the early extinguishment of debt. On a year-over-year basis, home closings revenue grew 17%. This increase was largely driven by units with a small uptick in ASP. Closings were 1,480 for the quarter, up 15% from the prior year quarter. Adjusted home closings gross margin, excluding capitalized interest was 21.9% for the quarter representing sequential improvement of 70 basis points over the first quarter. The improvement is mainly mix driven as well as being impacted by weather-related challenges that we have experienced this year, which shifted from higher margin closings for the second quarter. Moving to mortgage services, we generated $9.8 million of revenue during the quarter, representing a 20% increase over the prior year. Gross profit was $3.7 million, while our capture rate in the first half of the year increased and is expected to show improvement with a strong backlog capture in the mid-80% range. Taylor Morrison home branding continues to add value to our profitability while serving the financial needs of our customer. Our SG&A line, as a percentage of home closings revenue came in at 10.4%, which includes transaction related expenses for the JH and the Orleans acquisitions. Our team continues to take great pride in finding ways to control cost throughout the portfolio which shows up across our P&L and is not isolated just at the SG&A line. However, you will see some modest impacts to SG&A as we work through…

Let me wrap up my comments with a quick update on mortgage. The lending landscape continues to evolve as lenders settle into the many new layers of the regulator y and compliance structure put in place under Dodd-Frank as well as their own acceptance of risk as they land into today’s high stake environment. Operational preparation and testing for quality control, compliance, audit and legal review for the RESPA/TILA integration rules have been a major area of focus at Taylor Morrison Home’s funding for the last several quarters and we are prepared to meet the TRID requirements by the CFPB’s new effective date of October 3 of this year. As Dave mentioned, at Taylor Morrison, we appreciate the importance of the mortgage process and use TMHF as a sales tool. We believe that as a result of our early introduction to the mortgage part of the buying process and professional mortgage guidance, our customers are pre-qualified, prepared and aligned to the best finance options before entering into a purchase agreement with us. TMHF’s low denial rate under 3% year-to-date provides Taylor Morrison certainty of the transaction and our divisions are able to coordinate construction and mortgage in preparation for a timely organized closing. The importance of mortgage and construction coordination is going to be vital in the upcoming TRID world. Finally, I want to express how very proud I am of our term and their continued willingness to roll up their sleeves and do the hard work. As I visit our divisions and work with people in our corporate office, there is a palpable sense of excitement about the direction of our company, another great quarter of results and four new market entries this year. Great job, team, and thank you for all your dedicated focus. Looking ahead to the rest of 2015, we will continue to execute on our four-pillar strategy while integrating the team from our latest market acquisitions. Only half way through the year I think it’s safe to say this has already been a pivotal year for Taylor Morrison. We are well positioned in the US home market and have tremendous confidence in our future. Thanks, and we will now open the call to questions. Operator, please provide instructions to our callers.

Thank you. [Operator Instructions] And we have our first question from Alan Ratner with Zelman & Associates.

Good morning, guys. Congrats on a great quarter and the Orleans acquisition. Sheryl, I was - it’s interesting you didn’t really spend a lot of time talking about Texas and I know a lot of your competitors have seen a lot of headwinds throughout the state from the weather, on deliveries, on orders and community openings and just looking at the numbers, it doesn’t seem like you guys skipped a beat there. So would love to hear how you are managing through all those headwinds in Texas. It seems like you are able to effectively get the homes closed that you were planning and it doesn’t look you are really impacting or expecting much impact in the back half of the year. But just curious what you are seeing on the labor side there, give then constraints and development and anything on demand as well.

You bet, Alan. You are right, we didn’t spend a lot of time in the prepared comments, because it feels like we’ve been doing that each quarter just like it felt like we did that in a fairly non-event in Phoenix all of last year. The Texas business continues really strong. What I would tell you, if you’ve got a little bit different story in each of the markets, I think that as we look at the overall business, Texas has probably moved from what I would have described as a smoking hot market to a very good solid strong market. When I look at the quarter, let’s start with Houston. Our sales were generally flat year-over-year, but when I look at my compares from the prior year, we had some four, five year record months last year in the same quarter. So with a remarkably strong base line, I am quite pleased, I look at some of the grand openings we had in Q2 last year, I look at the progress throughout the year and the business continues to be very strong. Closings were up, margin was up, discounts were down, backlog units were up, value was up. So all in all, I would say, it was a very good quarter in Houston. If I try to dig a little bit deeper into the segmentation of the Houston market and some of the comments and chatter that I think we’ve seen across the markets, because the market has clearly shown, for some, some pause. I think the first time buyer, the entry level continues to be very strong. I think the first time move-up has probably moderated a bit. And the luxury buyer still feels very, very strong. I think our strategy with core locations continues to pay dividends…

Yeah, you bet. Good morning, Alan. As Sheryl said, labor continues to be a challenge for us in pretty much all of our markets. It various by a degree market-by-market, but I think as we factor in the weather delays, that’s probably going to intensify the labor issues as industry is probably poised to deliver a large number of closings in the fourth quarter just with the weather delays that we’ve had. So, we kind of expect that to impact labor prices as we move through the rest of the year. Maybe, just another example, the impacts of labor, if you look at a place like Dallas, we lost 80 days of concrete pores. So, you can imagine that impact with everyone kind of trying to get starts into the ground for the rest of the year, not just us, but all the builders. And this is on top of our divisions doing some really great work trying to better even flow the deliveries across the quarters, but unfortunately, tough weather in places like Texas and also Colorado, it’s making it very tough for us.

Which is actually impacting our third quarter closings more than it did our second from the starts.

And there is a bit of that built into our margin guidance as well as for us what we think labor prices might do in the back half of the year.

So, long exhaustive answer for you in Texas, Alan.

Got it. And those are really helpful and comprehensive. I guess just follow-up, I guess it’s related. With those labor constraints, are there markets where you look at your backlog today and it’s gotten pretty far extended where you’re actually limiting your sales case or lot releases. I know you kind of maintain the absorption guidance but just curious though are there actually cases where you’re having to turn back sales? I guess you’re concerned about the backlog getting extended.

I think to Dave’s point, I think we definitely saw a little bit of that. I don’t know that we turned back sales, Alan, but I would tell you that we pushed us out of the year. So, for example, in Colorado, where I think we had based on sales and backlog, we could have assumed more closings for the year and I think realistically that’s not the case. Texas, to Dave’s point, when I look at our backlog, 2015, the balance of the year is all about deliveries. I think over the last couple of quarters, I’ve talked about what good shape we were in Texas and what we needed to get from a sales standpoint. That’s still remains the case. I don’t think we’ve shut half sales, we’ve just been very, very prudent in our release strategy.

Got it. Thanks. Good luck.

Thank you, Alan.

Thank you. Our next question is from Stephen East with Evercore/ISI.

Thank you. Good morning, Sheryl and Dave. If I could ask you, you talked some about where you were going with your cash utilization that you’re not taking acquisitions off the table even though you’ve made a couple. Would you first talk about - you talked about a lot what drove your decision to buy as far as from a macro level but does the product match up with what you’re trying to do? Are you going down the price spectrum and why Chicago at this point? And then, as you look forward, are the regions you still haven’t gone into that are attractive to you?

You bet, Stephen. Let me see if I can hit each of those, will probably kind of tag this from a kind of the strategy and cash. The acquisition is very consistent with our strategy. We think the markets have the appropriate right fundamentals. This expands our footprint in just three large new MSAs as you know. It provides I believe very helpful diversification as certain markets ebb and flow as we’ve seen over the last couple of years. Not only are they great markets but I think the teams there have done a very good job on being in the right submarkets and core locations and you know how strong we believe in that. When I look at the scale in the markets, Stephen, it isn’t where we like it across the board, but clearly there is a platform for us to build on. You asked about consumer focus, we like the consumer focus. Lot of alignment to our core business. Some expansions for Taylor Morrison on the first time more affordable plate but generally there is similar move up focused like us. We believe that scale will drive - continue to drive some overhead efficiencies as Dave mentioned. And this one really begins to pivot the organization structure as we prepare for future growth and we think it will be immediately accretive to the organization. I’d be remiss if I didn’t mention the quality of the team of folks that they have assembled. They have doubled their business over the last couple of years. I think they used the downturn very, very well to put together a great portfolio of assets on great terms. So, we’re very excited about all three markets. Very specific to Chicago, if I were to spend just a second on what the Chicago…

Yeah. From the cash perspective, we touched on it a bit earlier, obviously we have the $490 million from March that we wanted to deploy and it goes back to our overall capital allocation strategy where we look to reinvest in the business, look at M&A opportunity, and then our debt leverage and then finally returning excess cash to shareholders. And I think as we look forward as well, taking into consider those first three priorities and the strength of our balance sheet, we have the ability to invest and as Sheryl said, it’s really going to come down to getting in the markets that align with us and finding the right opportunity.

Okay. That was a great answer, I appreciate that. And just sort of following on, if you look at your land spend, what are you all seeing out there today is a land market generally pretty rational and you’ve done some big JVs in California. You talked about specifically in San Juan, wondering about Marblehead and are JVs, ongoing JVs a big part of the strategy in California for you as you look forward?

Yeah. Once again, we’ll probably tag team this one, Stephen. Let me go and reverse order when you talk about JVs and you specifically asked about Marblehead, which is now what we call C-Summit. We are just actually have come to market. We have an interest list over 3,000 people. We began writing contracts last week and have already written a pretty good handful strong interest, particularly at the very high end with the premium deluxe. We won’t release many of those until the models are completed. They’re under construction and they won’t open to the fall. So, the JV strategy with both Marblehead and Pac Point as Dave mentioned really does allow us to control some of the best quality land and not extend our balance sheet. So, we like the strategy. We will obviously do it with a lot of care and I don’t know that will ever be the largest piece of our business but I think strategically you’ll continue to see that. I think the second part of your question was on the land market in general. And I don’t know that I would describe the land market any differently than I have in the past. It continues to be very competitive in many markets. I think in some markets, we’re seeing things like terms come back into play. We’re starting to see a little bit of that in Houston. The majority of what we’re working on now is really for ‘17 and we’re in pretty good shape. As you know, we have about a seven year kind of supply. But I don’t know that I would say there is anything just in time. A lot of our land spend today is being spent on the development side of the business bringing to market some of the land that we’ve acquired over the last couple of years. But it continues to be - I think will continue to be the area that you lose sleep on to make sure we can good land in front of the business but I would tell you the teams are executing on it in a tremendous way.

All right. Thank you and congratulations on the quarter.

Thank you, Stephen.

Thank you. Our next question is from Mike Dahl with Credit Suisse.

Hi, this is actually Matt on for Mike. Thanks for taking the questions. I believe you mentioned July sales up 10% and I understand you highlighted some closings in 3Q were being impacted from weather in Texas. So, I’m just wondering if you could elaborate a little on that deceleration in closings in July and then just noting you’re still showing some solid community count growth.

Yeah, so let me make sure I wrap both those up for you Matt. On the sales side, yeah we articulated a 10%, just over 10% actually sales year-over-year and candidly most of that is a result of some remarkable comps as I mentioned earlier that we had in Houston last year. And so Houston, the Texas business was generally down to flat because of the quarter we had last year. The closing side is really a couple of things, we pulled closings into Q2, we came in a little stronger than expected and as we mentioned we looked at our start over the first four or five months of the year and the impacts we had that’s absolutely going to have some impact on Q3 and pushing some stuff into Q4.

Thanks that’s helpful. And then just I guess still focusing on the Houston market. Would you be able to elaborate on the actual pace of orders throughout the quarter and then into July?

Yeah, what I would tell you is that if I look at Houston specifically, our pace was stronger on a per outlet level than the Company average. Having said that, as I hate to be redundant but compared to last year, we opened and we’re going to continue to see I think it’s important to note, we’re going to continue to see those headwinds because we opened for example our active adult committee last summer, a Bonterra and you probably remember me talking about that. So we have some remarkable comps in 2014. But when I look at it compared to underwriting, when I look at it compared to three, four, five year trends, the business continued strong.

Okay, got it thank you very much.

Thank you.

Thank you. Our next question comes from Michael Rehaut with JP Morgan.

Thanks good morning everyone. First question I had was on the guidance and I apologize if you hit this earlier, I jumped on just a little bit ago but when you talk about the reduced, I guess updated guidance around gross margins and SG&A, I believe Dave, earlier you were talking about maybe a little bit of incremental labor pressures on the gross margin side or some cost pressure that drove the change in the gross margin outlook for the year, just want to make sure if there wasn’t anything else in terms of purchase accounting or any other types of items that was affecting that line item. And similarly on the SG&A side, I think just under 10% now versus mid-9s before, if any of that had to do with the acquisitions or any other changes and might we see and if those impacts were deemed more than temporary side.

Sure Michael, yeah let’s start with the margin, it’s a great question because there is a lot of moving pieces around the margin as we get to the back half of the year that’s creating some noise to the rate. So, just bear with me I’ll list out some of the highlights of it but obviously starting with the two acquisitions which includes the four markets and arguably they run a slightly different business model focused on returns in those markets, then we have the impacts of purchase accounting and as we look at the margin kind of excluding purchase accounting in these new markets, they’re going to run a little bit right now below our Company average. So it will take us some time to help drive some efficiency very similar to what we did with the Darling acquisition. And then, if you look at the second quarter, we had Atlanta for two of the three months, and if you look at the third quarter, we’re going to have Atlanta for all three months and about two and half months for Charlotte, Raleigh and Chicago. So we’re going to have the drag there from the acquisitions on purchase accounting that’s going to peak really in the back half of this year. If we look at kind of our legacy business on the Taylor Morrison and Darling side, we did overperform in the second quarter which included some closings getting pushed from Q1 and then as we mentioned earlier some pull forward from high margin communities originally planned for the third quarter and markets that were less impacted by weather. A part of this was our teams just doing a great job progressing the back-end of the houses in the second quarter allowing us to pull some of these higher margin closings in from Q3. And then, I think one of the big factors that obviously for us achieving the guidance is really going to the mix, hopefully we don’t have anything else weighing on us from a weather perspective as we move through the rest of the year.

And I think the only thing I’d add to that Dave is, Michael, I think as we sit here today given the weather issues that everyone seems to be talking about, what we don’t know is the pressures we have ahead and we’re not assuming that we’re going to see significant changes but we’re not in a very different position than any other builder and that is a lot of delayed starts and so you’re going to have a little bit a backlog as people are trying to get to your deliveries. We’re already seeing on the labor side some real pressures where people are coming and taking folks off job sites because we still just an industry in many markets with the increased permits we’re seeing year-over-over just don’t have the infrastructure to take these peaks that the industry is giving us right now.

All right and then just maybe filling out the set of questions I guess I asked, if it’s’ possible to just give a better sense of what you expect purchase accounting to be let’s say per quarter in the last couple of quarters as well as my question around SG&A in terms of the factors impacting the change there and if those factors are more temporary?

Yeah, so on the purchase accounting Michael, we’re looking at probably a 20 to 30 basis point drag for both the acquisitions in the third quarter. And the fourth quarter will have something likely similar to that in the third quarter but if you look at it weighted for the year it’s probably about 20 basis point drag. From an SG&A perspective, for the most part that was impacted by the transaction expenses that we incurred for both JH and Orleans during the second quarter. Overall, I’d say we’re pleased with where we are from an SG&A perspective. But as we move past the sale of Monarch, we still have the same corporate expenses without the benefit of those closings. So, we are feeling that a bit but with the recent acquisitions, that’s going to help us close the gap around levering the SG&A line. So we did take our guidance up a little bit to just under 10% but as we move through the integration, we feel we’re going to be back to levering SG&A year-over-year probably staring in ‘16.

And I would say that the other piece of that strategy in addition, we will leverage year-over-year but I think everyone appreciates that we’ve been running a very lean SG&A as a Company for a number of years. And as we look at these acquisitions, and our expansion into these markets, we want to make sure that we’re properly investing into the business and our systems, and so we’ve given ourselves a little room there as well.

Great, thanks so much guys.

Thank you.

And our next question comes from Jack Micenko with SIG.

Hi, good morning. Dave, I’m wondering if there was a positive margin impact to the adjusted margin given the debt paydown and refinancing or how we should be thinking about capitalized interest with that pay down this quarter going forward?

Yeah Jack there was a benefit, if you look at the spread between the GAAP number and the adjusted, it did come down about 20 basis points relative to Q1. So on a GAAP basis, we are seeing that improvement and we’re going to see that continue to tick down both in the third and fourth quarter. For the year, we’re probably going to run somewhere in the call it mid-to-high 2% range for the rest of the year. And as we continue to move away from the refi date, we’ll eventually get to the point where we realizing the interest savings which on an annualized basis amounts to about $17 million.

Okay, great. And then, Sheryl on past calls, I think you’ve talked about be growing out, you’re going to be active adult maybe it’s restricted but maybe targeted and didn’t really touch too much on this quarter and I think maybe because of the acquisitions at the other end of the buyer spectrum. But where are you on that business in terms of mix, where do you think that comes, what do you think that looks like a year from now relative to the newer communities coming into the business?

That business, you’re right Jack, I tried to pick a little bit of a different segment each quarter to talk about and so I took a little different spin but that business certainly there is a nothing that’s changed there, in fact, we continued to be as bullish about the [indiscernible] 55+ businesses ever before. If I look at it from just an overall mix standpoint in the quarter and in the year-to-date, both the sales and closing continues to be in somewhere between that 13% and 15% and that is, and that doesn’t matter if I’m talking with sales or closings but that’s only on our very dedicated age targeted communities, if I look at that as a percentage of our overall mix, it’s significantly higher than that because we see a lot of those folks in our first and second times move up. But that business continues very strong, many of the things that we’ve talked about in the past with respect to the lifestyle play and the buyers are not being as price sensitive and the money they’re prepared to spend on options and premiums continues to be a focal point for the organization.

Okay, thank you.

You bet.

And our next question comes from Nishu Sood with Deutsche Bank.

Thanks I wanted to ask Sheryl about community count. You folks have had terrific community count growth the past few years, above 20% I think each of the last three years. Certainly I think the only builder, the only large builder that can - that's seen that sort of growth. So in the last year or two, I think it may have been, well, I think in one of the years, it may have been more organic driven. This year, it's going to end up being more acquisition driven. I know you're probably not giving specific numbers, but as you look forward to ‘16, would the nature of the community count growth be similar to this year and kind of a little bit of baseline organic growth supplemented by any opportunistic acquisitions or do you look at your recent acquisitions and see a lot of scope for organic growth from within those entities you acquired?

Yes. I think I have some issue on all counts to be honest. And I appreciate your comments. Our growth for the last two, three years, I think the first year was over 50% and then we came down to a mere 35% or something percent and this year continues to be very strong. And as you said, I think historically, it was much more organic and the benefit of all the good acquisition we did back in 2009 through 12. This year, it’s folks. Certainly, we are seeing - you’re starting to see the benefit of everything you just talked about, it’s the organic growth we've had in certain markets, it's the growth of the Darling acquisition two years ago and it's the add-on of these new markets that are coming out in our new guidance. As I look forward, I would expect all of that to continue. I'm going to call it healthy responsible growth. I'm going to tell you we have some businesses where we actually don't expect to grow community count based on where those markets fit in the overall cycle and our ability to continue to deliver on the commitments of our strategy. I think other businesses and certainly the new businesses in all of our markets, we think we will grow those platforms. Some of them within their own existing kind of consumer profile and some of those in expanded consumer groups. So we’re not giving 2016 guidance yet, and I would say that as you look forward, we’ll continue to see good responsible growth and then take advantage of opportunistic acquisitions, which would really be more of a piling on effect.

Got it. That makes sense. And you mentioned as well the consumer segmentation, taking to account the changing nature of your customer base. Are there any initial insights you can give based on that and specifically I think it would be interesting to hear how that might change what you’re offering your strategy, whether it would be just product or location or product type or just features, any early insights from that would be great?

Yeah. The reason I mentioned an issue is, as I said in my remarks, it's not like this is new, but it is continuing to be a growing part of our business base across all markets and may be slightly different [indiscernible] in each of the markets we do business in. I think at the highest level, people have been talking about for some time the Asian buyers in Southern California and that continues to be a significant part of our buyer group there and even with the recent kind of backdrop in the stock market over there, I would tell you that that continues to be very solid at a very high price point. We have some communities in Southern California where that buyer could account for 50% to 75%. And when we think about it and think about it across all markets, it's a little bit different and some of it centers around product design to your point and that could be with floor plan design, multi-generational designs with optional guest suites, it definitely impacts our community design and parks and the kind of gathering spaces that folks want to see, it impacts the types of upgrades that we offer, it impacts the design of street layouts and the direction of home sites. And certainly from a marketing standpoint, we want to make sure we really understand these buyers because it’s a very strong referral network and with families and co-workers and friends, school districts are quite important, so it plays very well into our strategy of core locations. So once again, I mention it because it impacts at the front end from a design standpoint, all the way through the customer service part of the experience.

Our next question comes from Will Randow with Citigroup.

Congrats on the quarter and the recent acquisition. Just had two points of clarification from prior questions. In regards to just looking at the absorption rate, I'm guessing down 20% or so for July, hopefully you can clarify that. How much of that is contributed by, call it, the new acquisition, trying to ease in to it if you will, as well as maybe by Houston?

I think most broadly, I would tell you you've got a seasonal adjustment, Will, that as you move in to July, this isn't really anything different than we've seen in prior years. Having said that, since we did have such a strong quarter and July last year in our Texas business, we definitely saw some moderation there, but it’s not just Texas. Once again, I think it’s important to note that seasonally, we see this across the board. If I look at Florida, we had a little bit of both. If I look at California, part of it is impacted by our Bay area count, because we have - we don't have the active communities in the Bay today and then offset by just remarkably strong performance in Arizona.

And I think you’re right, Will, also the new acquisition is going to play a factor, we had two weeks’ worth of business, similar to looking at an average community count, that's going to play a factor.

Okay, thanks for that. And then just one quick follow-up in terms of the increased closing guidance for the year. I guess one is that entirely contributed by the Orleans acquisition, and two, are you guys going to adjust out purchase accounting in your adjusted gross margin, just for clarification?

Well, from a closing perspective, obviously the acquisition played a large factor in that number. And then, from a - I mean we gave you the basis point drag earlier on the margins, I’m not sure if I fully understand your question.

What I was asking, are you planning on adjusting that out, given that you have two sizeable acquisitions recently or will purchase accounting stay - adjustments stay in your gross margin - adjusted gross margin?

Yeah. We’ll break it out for you as we go forward, but it's all going to be in the margin.

Okay. So it will be…

We’ll break out what the drag is.

Okay. So - the drag is included in your 22% guidance for the year.

It is.

Our next question comes from Alex Barron with Housing Research Center.

Thanks. Good morning, guys and great job. I was hoping you could talk about the Orleans acquisition a little bit, I believe I read it was three of seven divisions, was that they didn’t want to sell the rest or you guys didn’t want to buy the rest?

That was us selecting, working with the seller to buy the markets that we believed were going to be best suited for our portfolio. So yeah, there is still an ongoing Orleans operation that we do not acquire. We, like I said earlier, we acquired the markets that we believed in were most suited for Taylor Morrison.

Got it. And, Sheryl, I was hoping you could talk about Phoenix, I think generally Phoenix has come back, I'm kind of wondering if you could segment, are you seeing it more across the board, is it more by price point and what is your strategy as far as pricings, are you raising prices or are you trying to keep the prices and just work on improving the sales pace as Phoenix gets better?

Well, let me clarify, Alex. Phoenix never left. It was a good market for us all of last year, but I think it hasn’t turned. From an overall market standpoint, we certainly are seeing significant market growth from a permit activity, but our business continues to stay very strong in Phoenix. But having said that, when I look at our business year-over-year, our pace has continued to do well and certainly they are stronger than last year. I think when I look at the market at the end of June, there was less than 2.5 months of supply in the existing home market from its rough 25% year-over-year. As Dave touched on earlier, it is creating challenges with the trade base, and somewhat deviating from what an ideal construction schedule is and it’s a very sizeable business for us, but I have great confidence in that team there. Our strategy hasn’t changed. We remain focused on core locations first and second time move-up. Interestingly enough, I think that served us so well last year and I think the communities that we acquired when others got a little bit more bearish are serving us even better this year, because we've had great sales this year with lots of new community openings and very strong demand. I think the market overall to your question has probably been a little bit more focused on pace than price, maybe some reductions on incentives, but I don't think we've seen significant price appreciation yet there.

We have no further questions at this time. I will now turn the call over to Sheryl Palmer for her closing remarks.

Thank you, Vinessa and thank you, everyone for attending our call. Have a wonderful afternoon.