Greetings, and welcome to the TRI Pointe Homes' Fourth Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to our Chris Martin, Vice President of Finance and Investor Relations. Thank you, please go ahead.

Good morning. Welcome to the TRI Pointe fourth quarter and full year 2014 earnings conference call. Earlier today, the Company released its financial results for the quarter. Documents detailing these results are available on the Company's Investor Relations website at www.tripointegroup.com. Before the call begins, I would like to remind everyone that certain statements made in the course of this call are not based on historical information and constitute forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described or implied in those forward-looking statements. I refer you to the Company's filings made with the SEC for a more detailed discussion of the risks and factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. The Company undertakes no duty to update these forward-looking statements that are made during the course of this call. Additionally, non-GAAP financial measures will be discussed on this conference call. The Company's presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP can be accessed through the TRI Pointe website and the filings with the SEC at www.sec.gov. Hosting the call today is Doug Bauer, the Company's Chief Executive Officer; Mike Grubbs, the Company's Chief Financial Officer and Tom Mitchell, the Company's Chief Operating Officer and President. With that, I will now turn the call over to Doug.

Thank you, Chris, and good morning everyone. Welcome to TRI Pointe's fourth quarter and full year 2014 earnings call. As a supplement to our prepared remarks, we have posted a slide deck in the investors section of our website with highlights for the quarter and full year. I will begin the call with an overview of the Company's strategic positioning and commentary about the current market conditions for each of our six brands, and then Mike will discuss the full year and fourth quarter results. 2014 was a year of great change at TRI Pointe, the merger with WRECO elevated the company from a regional builder with limited size and scope to a national builder with powerful regional brands and significant operating leverage. We believe the positive attribute to this transaction are numerous and will yield significant benefit for our shareholders for years to come. To better reflect the new size and scope of our organization, we are pleased to announce the re-branding of the company to TRI Pointe Group. The re-brand to TRI Pointe Group not only signifies a new name, but also a new national company comprised of six premium regional home builders. We plan to reorganize our corporate structure with a new holding company parent to be named TRI Pointe Group. We expect to complete the reorganization in the second quarter of 2015. The TRI Pointe Group stock ticker will remain 'TPH'. TRI Pointe Homes will continue its homebuilding operations in California and Colorado as a wholly-owned subsidiary of the TRI Pointe Group. While the WRECO acquisition dramatically changed the complexion of our company, it did not alter the defining characteristics that make TRI Pointe Group special. We remain committed to be in a best-in-class builder and developer providing our customers with a unique, one of a…

Thanks Doug, good morning. I would also like to welcome everyone to today's call. I’m going to highlight some of our results in key financial metrics on a GAAP basis from the fourth quarter and then finish my remarks with an update on our expectations and outlook for both the first quarter and full year 2015. As a reminder our merger with warehouse and real-estate company or WRECO is accounted for as a reverse acquisition with WRECO as the accounting acquirer and legacy TRI Pointe as the accounting acquiree. As a result, the consolidated financial statements for all periods prior to the closing of the merger will only reflect the historical financial statements of WRECO and not reflect the legacy TRI Pointe operations. As a part of our press release and in slide deck located in the Investor Relations on our website, we have included supplemental financial data of the combined company adjusted to add back legacy TRI Pointe operations. For the fourth quarter we generated solid revenue growth year-over-year, we combined a 5% increase in home deliveries with a 26% increase in our average selling price of 555,000 to deliver a 31% increase in our home sales revenue. Our homebuilding gross margin was 19.9%, down 310 basis points year-over-year, but up 160 basis points sequentially. The year-over-year decrease in margin was due to increases in land, labor, and material cost outpacing home price appreciation and purchase accounting adjustments related to the fair value increase of legacy TRI Pointe inventory. We’re also very successful in generating significant operating leverage during the quarter as reflected in our selling, general and administrative expense ratio, which improved 8.9% as a percentage of home sales revenue. This resulted in income from continuing operations of $41.4 million or $0.26 per diluted share or $0.28 per…

Thanks Mike. In conclusion TRI Pointe is well-positioned to take advantage of the improving new home market. The WRECO acquisition gives us six great brands in many of the best long term housing markets in the country. It also provides us with unique opportunities to generate cash by the strategic sale of non-core assets. Our new mortgage and insurance subsidiary, TRI Pointe Solution should also prove to be a great addition to our homebuilding franchise and a source of profits in the future. For TRI Pointe Connect, our Mortgage Company, we expect to be licensed and operational in all of our markets by the end of the second quarter, while realizing the full benefits of this operation in 2016. With two quarters as a combined company under our belt, we now have everyone aligned and working towards common goals. To that end, starting 2015 we have implemented a company wide incentive program focused on growing our bottom line and increasing shareholder value. Despite the shift in EPS guidance, I am more optimistic than ever about the long-term prospects of our company. Let me spend a considerable amount of time in each of our homebuilding brands over the last two quarters I’m confident that we have the right people, leadership and operating philosophy in place to deliver strong results for our shareholder in 2015 and beyond. That concludes our prepared remarks and now I'm happy to take any questions. Operator?

[Operator Instructions] Our first question comes from the line of Nishu Sood with Deutsche Bank. Please go ahead with your question.

Thanks. Good morning everyone. I wanted to focus in on some of the gross margin commentary and we appreciate the additional color around the guidance. You mentioned that your gross margin outlook is a little bit lower, Mike you are mentioning the backlog gross margin being a little bit lower and the factor you're citing there is lower demand in the fourth quarter. Now if we look at the first two months of the year the pace of sales has accelerated dramatically, I think as not -- not an overstatement and if you look at regionally Doug when you are talking about division by division it sounds like Winchester was really the only place where the gross margins were weak. So how do we reconcile that? If demand is strong and it's really only Winchester where gross margins have been softer what is driving the lower gross margin outlook?

Nishu, it's Mike. A couple things are driving lower outlook. When you look at the back half of last year, the selling season was a little tough for us and I think you have to add Arizona in there as well, and that's pretty well documented with all of the builders Arizona's going to have a tough comparative analysis when you compare that to 2013 where they were raising prices and had pretty good margins going into 14. So Arizona as well as Winchester on the East Coast are tough margins for us. Quadrant is a lower margin market as well for us up in Washington. But as Doug mentioned that's -- we've more than doubled our absorption pace going into 2015 in most of those markets. So that brought our margins down. The other thing that factoring in our margin being - the first quarter being the low watermark and then growing throughout the years, when you look at our percentage of deliveries in California, California being our highest margin market more specifically Pardee with its long land and low land basis delivers real significant margins but our percentage of deliveries in California is at the low watermark; in the first quarter we only delivered about 30%, 31% of our deliveries in California, and typically we've been delivering in the high 30s in California. So there's a few things going on in the margin that's what gives us confidence of our margin rising through the balance of the year as well as a percentage of the California deliveries in the new communities that we’re bringing online.

Got it. Well my question was related specifically the outlook that you gave at the end of the third quarter versus the outlook you're giving here at the end of the fourth quarter. So the Phoenix issue you mentioned was more of a year-over-year issue but Phoenix clearly looks a lot better at the beginning of the year than it did at the end of last year and same thing on Winchester was what I was trying to point out was really the only thing that seemed to as a actually weakened on gross margin. So what over the last three months have changed for the worst on the gross margin outlook?

Arizona - let's not discount Arizona, we were giving incentives away to move product in the back half of the year in Arizona and that's kind of roll out through the backlog in the first half of the year. So there is tough comparisons in Arizona as well.

I'd add Nishu in Phoenix in our Maracay Homes brand, as I mentioned the sales pace has more than doubled sequentially. We have not had to increase any incentives or concessions so that's a good sign but as we look at the competitive landscape there I wouldn't say it's entirely broad-based yet. But we're having a lot of success, I know some of our competitors have quoted it but it's -- I mean our feeling in our forecast is in the back half of the second order hopefully we'll see some firming in Phoenix because we have strong absorption, you should eventually see some firming and pricing.

Got it. That's helpful and then my second question the acceleration in the order growth, the dramatic acceleration in the order growth, how should we understand that relative to tactical strategies that you might be taking in terms of incentives or sales and marketing to improve the orders out of the legacy WRECO operations or how much of that is market driven because it really is quite a dramatic acceleration and obviously you've been with these assets now for two quarters here. So how much of it is the market and how much of it is the natural kind of convergence we would expect to see over time of absorptions between TRI Pointe and legacy WRECO.

I think there's a number of questions there. And each one is specific to its marketplace. Speaking again in Arizona, it was obviously well documented how tough of a market that was in 2014 and literally it felt like a light switch went on in the first week of January and so that's -- that's a positive sign. Again we're not seeing a big sign of pricing strength but when you see absorptions what we’ll do on each one of our markets is continue to balance pace with pricing and trimming back incentives to get a net overall pricing increase and that's going to be the game plan in Arizona. We are seeing that up in the Washington base market. Quadrant has been able to increase their net pricing because of the dramatic increase in pace there. And then the California, Las Vegas, Colorado markets, we've seen the same thing. But we're always tactically balancing pace with margin and pricing throughout the year because in the end as Mike indicated, we do believe that our margins will improve in the second half of the year as we hopefully continue to get into the spring selling season. But it's too early to tell. We're obviously very excited about the growth in the first two months but two months doesn't make a year.

Hi Nishu, this is Tom, I'll chime in on the question. Certainly I think you're right in highlighting that some of it is strategy related. Specifically some of the organizational changes that we've made relative to Pardee have had a significant effect in freeing up strategy relative to early implementation to capitalize on the beginning of the year similarly at Quadrant and some of the other groups as well. So some of it is specifically strategy related.

Got it. Thanks for the thoughts.

Thank you. And our next question comes from the line of Ivy Zelman with Zelman & Associates. Please go ahead with your question.

Hi guys. Good morning. Thanks for taking my questions. Doug, thank you for the detail around the six operating company results. May be I missed it, but I didn't hear the first two months in the Houston market as you did cite trends in the other division. So, maybe you can first - my question just, give us an update on how the first quarter is looking in that market?

Ivy, this is Mike. When you look at our order for Houston, we are [off] [ph] about 10% to 15% in the first two months of the year, year-over-year.

And are you guys seeing use of incentives picking up in that market to stimulate more activity?

It's still been an incentive driven market as we started to see in the fourth quarter of last year. I was out in Houston a couple of weeks ago, Ivy and sat with a big portion of our sales team and I wouldn't say, I would consider it a knife fight so to speak. It's going to be a competitive marketplace going forward. It's been drowned out a little bit by headline noise. Although it's interesting, we just opened a new community down in Clearlake which is South of Houston really caters to the petrochemicals and Houston Medical Center. And we've never experienced this at Trendmaker but we had 400 people waiting for the opening of our two communities down there. So, what I think although we were more conservative in our planning for Houston, all of us builders are always optimistic but I’m hoping that the Houston economy has a little more diversification to it than we all give it credit, and that the pace of sales activity won’t be as dramatically different year-over-year as we kind of – we’ve planned at least internally. And because of the - some of the sub-markets in Houston, they are still pretty good.

That was very helpful, thank you. I guess the next question is really related to overall incentives as a percent of home price that you experienced in the fourth quarter comparing to what it was in the third quarter and then following on that same idea. If you could talk about the outlook on an apples-to-apples basis, maybe either company wide, are you actually getting home price inflation on the same square footage home apples-to-apples or on a net basis with incentives, are you seeing it more flattish and maybe where the star performers are versus the weaker links and Winchester obviously with that market being more challenged for job growth just sort of giving us some parameters on what your expectations are related to home prices and what you guys are currently seeing with incentives/home prices, please.

This is Tom. Incentives I'd say right now have been performing relatively flat but to answer your first part of your question, overall for last year, we averaged about 4.3% as a number for the year. And then in the fourth quarter, we were slightly increased from that to stimulate sales activity at about 4.5%. As you look around our different marketplaces, certainly different markets are performing differently there and incentive varies quite a bit. But I would say that certainly Winchester as you highlighted still has some significant incentives although they are flat we haven’t seen a trending downward in those yet but we are optimistic in the spring selling season that will begin to happen. Surprisingly, Vegas has seen a rapid reduction of incentives and a really strong market to start the year off there. So overall I'd say in the western region we see incentives trending downward and we are already experiencing that in the first couple of months of the year.

But Tom just to continue on that net benefit to an apples-to-apples comparison are you actually seeing inflation in the same square footage home even net of incentives or as an aggregate company?

I'd say, it’s relatively flat with the exception of the more core closely orient markets of California we’re certainly seeing net price increases there.

And I would also, Ivy this is Doug, say that up in the Seattle market we are also seeing on a store-to-store basis - we have seen net pricing increases and as a result of drop in incentives.

Okay. And then if I can sneak in one quick one, with that said Doug, obviously you're still seeing some cost inflation as it relates to lots I would presume, correct me if I’m wrong. Some of the margin pressure that you might witness is going to be just on the - not being able to offset all the cost creep or are you seeing that starting to stabilize on the cost side as some of the release on the input cost beyond lots. Can you give us a comparisons on the flat look at home price inflation versus cost creep?

We're hoping to expect some margin expansion as we mentioned earlier by the end of the year and that would lead to having slightly higher net price increases over any cost creep, but overall we're still seeing some pretty tight labor conditions in most of our markets from California to Colorado. And obviously in Houston to the end of this year, with the changes in the oil and gas industry that could kind of make that number flatten out to some of the oil based products that we use in our development activities. And also in the labor side where we saw a great amount of labor that we lost to the oil and gas industry. So, I think as you progress through the year and those type of markets you will see some of that labor and pricing of materials flatten out a little bit.

This is Mike, just to add on to what Doug just said is, our margin guidance is assuming no net price appreciation. So it's assuming that the pace of prices is the same as what the pace of cost increases are. So, if we do see prices start to appreciate we will see additional expansion in our margins going forward.

Very helpful. Okay guys, good luck. Thank you.

Our next question comes from the line of Will Randow with Citi. Please go ahead with your questions.

Good morning guys, congrats on the progress, and I’m very happy to hear all three of you on the call. In terms of the backlog conversion, how should we think about that through the year, is it little light relative to our expectations, but I imagine that's because the different markets and maybe we weren’t thinking about it right.

You mean light in the first quarter or light in the fourth quarter.

Light in the first quarter of 2015, I don't know if it takes up to the year in 2015 or essentially how should we think about backlog conversion of the pro forma company?

Backlog conversion is probably going to be growing throughout each quarter. I mean again just looking at the first quarter, when you look at our average sales price in backlog as 633,000, and what our ASP is going to be for 2015, a lot of the backlog is related to longer build cycle homes, higher in product and attach product in Northern California, and some of the hiring product in Winchester on the East Coast and some of the costly oriented large homes here in Southern California take a longer build time. So that’s why we're seeing a lower backlog conversion in the first quarter. And as I mentioned, a fairly low percentage of our deliveries during California in the first quarter but throughout the year you should see that backlog conversion start to increase every quarter, quarter-over-quarter.

And I guess from a cash flow form operations perspective, I mean one pushback we always get on the builders is, they continually grow their balance sheet and typically there's no cash on cash return from investors. Are you thinking about that differently or are you kind of still on the state where you want to grow the baseline if you will think about that in a year or two?

Yeah, we’re still looking to grow the company and I think we probably mentioned that when we brought the two companies together that we look that - we would be cash flow not cash flow positive for at least 18 to 24 months as we want to deploy our capital, continuing growing the company. We were slightly cash flow positive I think $30 million or so for the fourth quarter. But we don’t anticipate to be cash flow positive in 2015 as we’re deploying lot of capital in land and land development.

Thanks again guys. I really appreciate your time.

Our next question comes from the line of Jay McCanless with Sterne Agee. Please go ahead with your questions.

Good morning everyone. First question, how should we model the tax rate for 2015?

Our GAAP tax rate Jay, is 38% for 2015.

And then secondly would you all be willing to give any definitive guidance in terms of dollars and potentially profit margin on the land sales for 2015 versus what you are expecting before?

I mean that's something that we're under contract, we're really not going to discuss a specific dollar amounts and margins of land transactions for obvious reasons.

Okay. And then the final question I had in this kind of picks up on what Will was asking, we were trying to model out the increase in unit closing 25% you talked about in the remarks. Is there going to be a shift to more attach products that delivers at the end of the year, is that what's going to give you guys the increased closings per community relative to what you saw for WRECO historical in 2014?

Jay, this is Doug. Now it's not so much attach, we did assume some modest pace improvement in 2015 when we finalized our plan at the end of December despite some of the softer market conditions. So I wouldn't say it’s a product driven. I mean Winchester in the mid-Atlantic region does have a little heavier influence on attach, but in generally speaking, when we put our plan together we did assume some modest pace expansion in 2015.

Okay, great. Thank you.

Our next question comes from the line of Brendan Lynch with Sidoti. Please go ahead with your question.

Good morning guys, thanks for taking my questions. First I wanted to touch a little on the 78% backlog conversion in the fourth quarter. This is particularly high and even with the drop off that you’re projecting in the first quarter it still seems quite good. I was wondering if that was a function of the WRECO acquisition and some timing related to that or more a function of short construction cycle times or what could be contributing to that higher level of conversion?

Brendan, it's Tom. It's a good question, we certainly had a high performing portfolio relative to that conversion ratio. I think there is some impact due to the WRECO transaction and the timing of the closing of that. But historically I think you will see the fourth quarter always being a little bit higher in nature as we're trying to capitalize on those final closings for the year. We are consciously aware making sure we get our starts in place in the beginning of the third quarter to meet our overall business plan. So I'd say you would see that consistently on a go forward basis.

And in terms of the construction cycle times, have you seen any change in that over the past couple of quarters or is that pretty much been steady?

I'd say it's been fairly steady, it certainly varies by market, we've seen some positive impacts and some negative ones as well positively both Quadrant and Winchester, we did some fine-tuning of our product offerings and we were able to reduce some cycle time there and our production times improved overall. Rightly the Denver market has been challenging without a doubt due to the labor and trade partner constraints and I'd say that's running about a 10-day increase to our cycle times there. The other markets have been pretty consistent with what we see in the last couple of years.

Great, that's very helpful. And then my other question is just on the increase in the orders in the first two months of the year versus the fourth quarter. Do you have any commentary from, perhaps some of the sales force, what is related that change in such a short amount of time?

Brendan, it's Doug. The quality of the traffic in the consumer seems to be much more engaged this first two months of the year, and I call it consumer engagement, it seem like last year. Frankly the consumer was less engaged despite, strong macroeconomic trends whether its job growth, household formations, didn't spike in the fourth quarter, although was a spike that a lot of people are still trying to figure out. So, to me its really been in the consumer and the nice thing that we see going forward is in all our markets, there is not an over supply situation either in each one of the markets, the new home business is not overbuild, permits have not been - Phoenix frankly permits actually in '14 were down over '13. So, I think we’ve set our sales up for a very strong recovery - continued recovery in the homebuilding business, there is quite a pause in 2014. And as I mentioned, I’m very optimistic and one of the other optimistic data points that we're all missing is the Millennials. There is $98 million the largest group ever born, $43 million of those people will be 25 and older by 2018 by some calculations, that's over 8 million new households. So as you look at our company in the way we are positioned in some of these strong housing market, that's not only going to help fill the entry level but it starts that domino effect all the way up to the second time and move up product. It's been well documented that the entry level buyer has been missing in this recovery, it’s been a little bit disjointed and more in the move up in and were starting to feel that also, in all our markets. So, I’m very optimistic. I think housing has a great long term runway here and we're in a position A to take advantage of it, now that we have these companies combined.

Great, I agree. Thanks for the color.

Thank you. And our next question comes from the line of Mark Weintraub with Buckingham Research. Please go ahead with your question.

Thank you. I was wondering may be get a little bit of color possibly on where you’re expecting to spend the $900 million to a $1 billion whether in particular relative to your current footprint, do you expect to be spending disproportionately in certain markets or region in California most notably?

Mark, I’ll start off and then Tom, I'm sure can fill in the details. But when we look at budgeting our land acquisition spend, it’s a function of looking at each one of our companies and looking at how we want to organically grow in each one of our markets as evidenced by our growth rate. So, the dollars vary by area but its all driven by a growth model that we see over the next several years for each one of our builders, but while we show those dollars planned, we are still very disciplined in our underwriting and all our markets and consistent with our underwriting not only to focus on projects that are in key location, with strong school districts and close to employment corridors, but also meeting our underwriting criteria of 18% to 22% in gross margins. That criteria doesn’t change. So I’ll just give you a little color from the macro level.

With that Mark to answer you questions, specifically you are absolutely correct with our growth trajectory at TRI Pointe, the bulk of that land spend has been the TRI Pointe companies and all three divisions Southern California, Northern California and Colorado. But the rest of the dollars are spread fairly evenly there, as we’re trying to capitalize an improved market share in each one of the other company.

Okay. Thank you. And I recognized - for competitive reasons et cetera, you want to be too specific on expectations on the lands, so I think at one point you had suggested historically have been running at about $100 million or so, and that had at one point been roughly what was embedded in the number. Is that accurate from a prior perspective and so is the new information that you're expecting to be more conservative than that or is that not the correct read?

Mark good question. As you know we previously guided to generating land sales, which fairly should be close to the historical average of the WRECO companies but ultimately our goal is really to maximize cash from profits of our non-core assets irrespective of the timing on land sales. And land sales are market specific and obviously highly condition on market conditions and timing does a result we're not giving any guidance on a firm number per year. We can tell you in 2015, we should be very close to the historical average of $100 million and obviously work on our way with the opportunity in San Diego. But again our focus will be to continue to maximize cash on profits and land sales can be lumpy - some years can be higher than others.

Thanks very much.

[Operator Instructions] And our next question comes from the line of Steve Stelmach with FBR. Please go ahead with your question.

Hi, good morning. I just wanted to follow up on the land sales stuff and I understand, I appreciate from your perspective sort of the nuances, sort of maximizing the value there and so the timing and lumpiness. Just want to get some color on the part of the buyers of those assets, any change or material sort of change in outlook of the buyer profile in terms of the markets that they’re looking for some of your non-core assets, any sort of demand shifts?

Steve, it's Tom. No, really I think our original vision for the buyer demographic is still right on and we haven’t seen any significant change there.

Okay. Great, thanks guys.

Thank you. And our next question comes from the line of Alex Barron with Housing Research Center. Please go ahead with your question.

Thanks. Good morning guys. I wanted to focus a little bit on the SG&A component, so I guess on the sales and marketing side, it looks like it didn't move much sequentially went from like 6% down to 5% of revenues. So I was trying to get a sense, if we should look at that as some type of a run rate at 5%. And then on the G&A side, also wanted to see if you could give us some guidance there, what's closure to a run rate the third quarter number or the fourth quarter number. In other words does the fourth quarter number include some type of annual incentive comp or something like that?

No Alex, this is Mike. Just talking about our guidance - the percentage of 10.5% to 11% that we’re anticipating for 2015, that breaks up roughly about by 5.5% on the sales and marketing side and 5% on the G&A side. The run rate is probably more typical to what you saw in the fourth quarter.

Okay, got it. And then I guess just to touch a little bit of the land sale side, is that on top of the guidance that you guys gave whatever you guys end up doing with that special land sale or is that inclusive of the range?

Alex, I'm sorry, what special land sale you’re referring to?

The one you said that, went into contract in San Diego?

Yeah, that's inclusive. I'm sorry, yeah.

Okay. And is there any timing associated with that, if that goes through or would you care to comment on that?

Yeah, we indicated, we expected to close in the second quarter but as I mentioned in the prepared remarks, nothing is guaranteed until it closes but that's our expectation and we're pleased to have it under contract.

Got it. Okay, thanks, good jobs guys.

Thank you. This concludes today's question-and-answer session. And I'd like to turn the floor back to Doug Bauer for closing remarks.

Well thank you everyone for joining us on today's call. And we look forward to talking again next quarter as we get further into the spring selling season. Thank you, and have a great day.

This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.