Greetings and welcome to the First Quarter 2015 Earnings Conference Call of D.R. Horton America’s Builder, the largest builder in the United States. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder this conference is being recorded. I will now turn the conference over to Miss Jessica Hansen, Vice President of Investor Relations for D. R. Horton. Thank you Miss Hansen, you may begin.

Thank you, Mannie [ph]. Good morning and welcome to our call to discuss our first quarter 2015 financial results. Before we get started, today’s call may include comments that constitute forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Although D.R. Horton believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. All forward-looking statements are based upon information available to D.R. Horton on the date of this conference call and D.R. Horton does not undertake any obligation to publicly update or revise any forward-looking statements. Additional information about issues that could lead to material changes in performance is contained in D.R. Horton’s annual report on Form 10-K which is filed with the Securities and Exchange Commission. For your convenience this morning’s earnings release can be found on our website at investor.drhorton.com and we plan to file our 10-Q in the new few days. Also after the conclusion of our call we will be posting updated supplementary historical data on the investor relations section of our website for your reference. The supplementary information includes historical data on gross margins, change in active selling community, product mix and our mortgage operation. Now I will turn the call over to David Auld, our President and CEO.

Thank you, Jessica and good morning. In addition to Jessica, I am pleased to be joined on this call by Mike Murray, our Executive Vice President and Chief Operating Officer; and Bill Wheat, our Executive Vice President and Chief Financial Officer; We are off to a great start in 2015 and are looking forward to the spring. In the first quarter, our homes sold and closed increased by 35% and 29% respectively, and we had another solid quarter of profitability with $220.7 million of pretax income on $2.3 billion of revenue. Demand for new homes remains stable across most of our markets during this quarter, and consistent with normal seasonality our weekly sales pace has accelerated in January. We are in a strong competitive position for the upcoming spring sales season with a well-stocked supply of land, lots, and homes. For our full year in 2015, we expect to generate a 20% to 30% increase in revenues with similar levels of profitability and operating margins as we share on our last call. Our continued strategic focus is to leverage our operating platform to generate double digit growth in both revenues and pretax profits, while improving our cash flows and increasing our returns. Mike?

Net income for the first quarter increased 16% to $142.5 million or $0.39 per diluted share compared to $123.2 million or $0.36 per diluted share in the year ago quarter. Our consolidated pretax income increased 16% to $220.7 million in the first quarter compared to $189.7 million in the year ago quarter, and homebuilding pretax income increased 13% to $206.1 million compared to $181.9 million in the prior year quarter. Our first quarter home sales revenues increased 37% to $2.2 billion on 7,973 homes closed, up from $1.6 billion on 6,188 homes closed in the year ago quarter. Our average closing price for the quarter was $281,000, up 7% compared to the prior year primarily driven by a 4% in our average home size and a small increase in our average sales price per square foot. Bill?

The value of our net sales orders in the first quarter increased 40% from a year ago quarter to $2.1 billion, and homes sold increased 35% to 7,370 homes on a 6% increase in active selling communities. Our average sales prices on net sales orders in the first quarter increased 4% to $286,100. The cancellation rate for the first quarter was 24%, relatively stable compared to 23% in the year ago quarter. The value of our backlog increased 29% from a year ago to $2.7 billion with an average sales price per home of $293,600, and homes in backlog increased 21% to 9,285 homes. Our backlog conversion rate for the first quarter was higher than our expectations at 81%. We expect our second quarter backlog conversion rate to be in the range of 81% to 85%. Jessica.

We are experiencing strong growth and profitability in the heart of our business in our D.R. Horton branded communities, which accounted for the substantial majority of our sales and closings this quarter. We are also pleased with the progress and performance of the rollouts of our Express Homes and Emerald Homes brands. Our Express Homes brand, which is targeted at the true entry level buyer focused primarily on affordability, is now being offered in 38 markets and 11 states, with the significant majority of our Express sales and closings to-date coming from Texas, the Carolinas, and Florida. This quarter, Express accounted for 13% of our homes sold, 10% of homes closed, and 6% of home sales revenue. The average closing price of an Express Home in the first quarter was $169,000. Customer response to our affordable Express product offerings has been extremely positive, and we expect to have Express Homes communities open in the substantial majority of our markets by the end of this fiscal 2015. Emerald Homes, our brand for higher end move up and luxury communities is available in 35 markets across 15 states. In the first quarter, 7% of our homes closed were priced greater than $500,000, accounting for 17% of our home sales revenue, up from 5% of homes closed, and 14% of revenues in the same quarter last year. Mike?

Our gross profit margin on home sales revenue in the first quarter was 19.8%, in the middle of the expected range we shared on our last call. This was a 70 basis points sequential decline from the fourth quarter, 80 basis points of the margin decrease was due to cost increases in excess of sales price increases and changes in product mix, and 10 basis points was due to slightly higher relative cost for warranty and construction defect claims. These margin decreases were partially offset by a 20 basis point improvement related to less impact from purchase accounting for acquisitions. Our general gross margin expectations for fiscal 2015 remain unchanged from what we shared last quarter. With the strong performance of our Express Community so far, we continue to expect this brand to grow quickly as a percentage of our product mix helping us generate strong growth in both revenues and profits, but bringing our average gross margin percentage down this year. In the current stable housing environment, we continue to expect our average home sales gross margins to be around 20% with quarterly fluctuations that can range from 19% to 21% due to product and geographic mix and their relative impact of warranty, litigation, and interest costs. As a reminder, our reported gross margins include all of our interest costs. Bill?

Home building SG&A expense for the quarter was $238 million compared to $183.4 million in the prior year quarter. As a percentage of home building revenues, our SG&A improved 60 basis points to 10.6% compared to 11.2% in the prior year quarter as our significant revenue increase this quarter improved our SG&A leverage. For the second quarter, we expect our SG&A as a percentage of home sales revenues to improve year-over-year by 30 to 50 basis points to the range of 10.6% to 10.8%. We expect our third and fourth quarter SG&A percentage to trend down sequentially from the second quarter on higher expected volumes. Our ongoing annual target for SG&A as a percentage of home building revenues is 10%. Jessica?

Financial services’ pretax income in the first quarter increased 87% to $14.6 million from $7.8 million in the year ago quarter. 89% of our mortgage companies loan originations during the quarter related to homes closed by our home building operations. FHA and VA loans accounted for 42% of the mortgage companies’ volume, down from 45% in the year-ago quarter. Borrowers originating loans with our mortgage company this quarter had an average FICO score of 717 and an average loan-to-value ratio of 89%. David?

At the end of December, we had 21,300 homes in inventory, of which 1,600 were models, 12,400 were spec homes, and 4,500 of the specs were completed. Our construction in progress and finished homes inventory increased by $178 million during the quarter as we prepare for seasonally higher demand in the spring. Our first quarter investment in lots, land, and development totaled $564 million, of which $309 million was to replenish finished lots and land and $255 million was for land development. At December 31, 2014 our lot portfolio consisted of 125,000 owned lots with an additional 60,000 lots controlled through option contracts. 71,000 of our lots are finished 33,000 are owned and 38,000 are optioned. Our 185,000 total lots owned and controlled put us in a strong competitive position in the current housing market, with a sufficient lot supply to support strong growth in sales and closings in future periods. As we invest in new communities for all three of our brands our main underwriting criteria remains unchanged. A minimum annual pretax return on inventory of 20% defined as pre-tax income divided by average inventory over the life of the community. We expect each community regardless of brand to achieve this target by optimizing the balance between absorptions, margins and inventory levels. We expect our total home building pretax return on inventory to improve this year as compared to last year. Mike?

During the first quarter we recorded $2.2 million in land options charges for write-offs of earnest money deposits and due diligence cost for projects that we do not intend to pursue. We also recorded $3.8 million of inventory impairment charges related to a pending land sale in our west region. Our inactive land held for development of $304.3 million at the end of the quarter represents 13,900 loss, down slightly from September and down 36% from a year ago. We are proactively working through these older unproductive assets to redeploy the capital, and improve the cash flows and returns. We continue to formulate our operating plans for each of our remaining inactive land parcels and we expect that our land held for development will continue to decline this fiscal year. We will continue to evaluate our inactive land parcels for potential impairments which may result in additional impairment charges in future periods, but the timing and magnitude of these charges will fluctuate as they have in the past. Bill?

At December 31st our homebuilding liquidity included $517.7 million of unrestricted homebuilding cash and $506 million available capacity on our revolving credit facility. We had $375 million of cash borrowings and $94 million of letters of credit outstanding on the revolver. Our gross homebuilding leverage ratio was 39.3% and our homebuilding leverage ratio net of cash was 35.4%. The balance of our public notes outstanding at December 31 was $3 billion. Our only public debt maturity in fiscal 2015 is our $158 million of Senior Notes due in February. At December 31, our shareholders equity balance was $5.3 billion and book value per share was $14.40, up 11% from a year ago. Jessica?

Looking forward, we would like to highlight some of our expectations for the fiscal year which are unchanged from our last call and based on the current stable housing market conditions. In fiscal 2015, we continue to expect to close between 34,500 and 37,500 homes and generate consolidated revenues of between $9.5 billion and $10.5 billion. We also continue to expect to generate a similar level of profitability and operating margins is what we shared on our last call. We anticipate our home sales gross margin for the full year of fiscal 2015 will range from 19.5% to 20.5% with potential quarterly fluctuation outside of this range. We estimate our homebuilding SG&A expense will range from 10% to 10.3% of homebuilding revenues for the full year with our next quarter being higher than this range and the third and fourth quarters at the low end or below the annual range. We expect our financial services operating margin to range from 25% to 30%. We are forecasting our fiscal 2015 income tax rate to be between 35% and 36% and our diluted share count to be approximately 370 million shares. For our second fiscal quarter of 2015 we expect our number of homes closed to approximate the beginning backlog conversion rate of between 81% and 85%. We anticipate our second quarter home sales gross margin will be in the range of 19.5% to 20% subject to potential fluctuations from product mix, warranty and interest cost. We expect our homebuilding SG&A in the second quarter to be in the range of 10.6% to 10.8% of revenues, David?

In closing our first quarter growth in sales, closings and profits in a relatively stable market is a result of the strength of our operating platform and we are excited about the spring selling season and the opportunities ahead. This quarter, the value of our sales and closings increased by 40% and 37% respectively and we generated another solid quarter of profitability with a consolidated pretax income of $220.7 million on $2.3 billion of revenue. We remain focussed on growing both our revenues and pretax profits at a double digit pace, while improving our cash flows and increasing our returns. We are well positioned with our solid balance sheet, industry leading market share, broad geographic footprint, diversified product offerings across our three brands, attractive finished lot and land position and most importantly, our tremendous operational team across the country. We’d like to thank all of our employees for their continued hard work and we look forward to working together to continue growing and improving our operations during 2015. This concludes our prepared remarks. We will now host questions.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions]. The first question is coming from David Goldberg of UBS. Please go ahead.

Thanks, good morning everybody and congratulations on a great quarter.

Thank you, David.

My first question was on competitive behaviour. We've been hearing about more and more builders talking about incentives increasing, obviously you guys haven't had to change your gross margin forecast. I was wondering if you could give us a little bit of color on what you're hearing from the field. Are you hearing buyers are coming and asking for more incentives and you're just not willing to be flexible that way, or is the value proposition such that you think you already have a more competitive product essentially?

David, this is David Auld. I think we have been focussing on the value proposition really since last spring, and we just -- because of our broad footprint, number of communities we have, we are just not seeing the same pressure at any one location that some of the other guys are.

And just specifically David, our incentive levels are in the same range that we have seen really since last spring. It’s obviously that sort of community by community levels, so we see some variation there, but in general, we’re hitting our absorption targets pretty consistently and therefore, at a high level we are not seeing any big changes in incentive levels.

Got it. And just as a follow-up, I think everybody would love to get some color on the markets in Texas, obviously you guys have a very big position, there's a lot of concern given what's going on with oil, maybe you can just kind of give us some on the ground, I know you said January sales and traffic were up sequentially as would expect, generally, but maybe focus in on the markets in Texas and how you're seeing them move here, if we're seeing any pause from the buyers, would be helpful. Thank you.

Hi David, this is Mike. We saw our Texas operations perform in line with the company and our expectations for the first quarter and into the first few weeks of January so far. So, while we would expect that there could be some general slowdown in Texas at some point, specifically perhaps Houston and Midland, we haven’t exactly seen it yet, and we’re very encouraged seeing the results inline with the expectations right now.

Great. Thank you.

Thank you. The next question is from Stephen East of Evercore. Please go ahead.

Thank you. Good morning, everybody. Just following on Texas, since we get so many questions about it, have you changed what you're doing on land deals? What type of contingency planning are you going through, and again, I understand primarily Houston, but I would love your opinions about how much you think the other markets would ultimately be impacted versus what Houston would be impacted.

Stephen, this is David. Obviously Houston and Midland are going to have a tougher time if oil prices stay down than the balance of the markets and Texas. All of them will be impacted. From an investment standpoint, we are well positioned in Texas. We don’t have to go out today and take a lot of risk on the land side as the competition from other builders decreases even if the market stays relatively strong, you know price tomorrow just on rumor and innuendo is probably going to be less than it is today. So we are in the market, we are going to continue to be in the market, but we are not in a place today where we have to go buy anything, so we are going to take a more conservative approach than what you have seen in the last couple of years.

And Stephen, this Bill, just to add some specifics to Houston and Midland, our fiscal 2014 revenues in Houston were about 5% of the company and our fiscal 2014 revenues in Midland were less than 1%, so it is certainly compared to the rest of the company relatively small piece, but as you know we manage our business market by market, so we are treating these markets and while we are seeing there individually, we’ll adjust our investment decisions by what we see in those markets.

Okay. Fair enough. And then sort of a two-part, one southwest and west strong order growth just trying to understand where that's occurring and why it's occurring. And then David, you're sort of finishing your first hundred days, if you will, I would love to get your thoughts about what you're seeing maybe it’s a little bit different than your expectations, maybe a direction you'd like to move the company a little bit more or a little bit less, just sort of an initial hundred day wrap-up if you would.

I can tell you from the 100 day perspective; I’ve been a part of this management team for 25 years. There were no surprises coming up here, the difference in operational philosophy were we just continued to drive down subdivision by subdivision by subdivision, house by house. That’s been a part of our program for a long time. I’ll probably provide a little more focus on that or conversation with our operators about it, but it’s always been there.

Okay, fair enough.

Stephen, this is Bill, you asked about the west and the southwest, obviously the west is a bigger region for us. We have some very good positions in our western markets, and we’re seeing, we have seen pretty good strength in the market there through December, and so we feel like that’s reflecting in our sales growth that I wouldn’t necessarily call out one market in particular. Southwest is pretty small for us, it’s basically Arizona, New Mexico, and obviously there’s been a lot of volatility there over the last couple of years, and so you’re seeing a nice increase this quarter, but I wouldn’t read too much into our southwest results given its size.

The changes you are seeing, Stephen, though are truly being driven by absorption, which is what we are pretty excited about that’s what we’ve been focussed on for quite some time now, and with our active selling communities only up about 6% on a year-over-year basis for the entire company and you saw a very strong pick up in our absorption pace this quarter.

Okay, thanks and congratulations on a nice quarter.

Thank you.

Thank you. The next question is from Robert Wetenhall of RBC Capital Markets. Please go ahead.

Hi this is Collin [ph] filling in for Bob actually. I just had a question on ASP, you guys saw a pretty solid increase in ASP year-over-year. How do you think this pricing is going to trend throughout the year sequentially?

Collin [ph] we are kind of projecting ASPs to be flat sort of hard to really predict given the changing mix that we are seeing with Express representing a larger proportion of our sales and deliveries, but we are looking for a flat sales price outlook for the year.

Great. Thank you very much.

Thank you. The next question is from Stephen Kim from Barclays Capital. Please go ahead.

Thanks very much guys, yeah congratulations good job executing. I wanted to ask you a question about costs. And as we've been talking to folks in the industry, we've kind of gotten some I would say, we haven't really gotten a lot of agreement about the ability to extract some concessions from your subcontractors, your suppliers etcetera. Was wondering if you, given your significant gap that you created here between you all and number two, whether you're seeing more success in driving down your input costs, whether it be across labor or materials or really anything, if you could call out something that would be very helpful. Thanks.

Yes, Stephen this is Bill. You know that’s something we are still working to kind of trying to find the balance on. If we look year-over-year this on our closings this quarter, our stick and brick cost still increased on a per square foot basis about 6% and our revenues were only up 3%. So we still got some work to do there, we’ve seen that trend over the last few quarters and that’s something we are very focussed on. And in terms of improving our cost relative to our ability to raise our prices. There is certainly there are always things that we can do with our scale, market by market and globally there are national arrangements and we can assure you that that’s something that we are very focussed on throughout our organization as to even out that relationship and stabilize that going forward, so we can improve our margins. As far as specific matters, it’s across the gamut [ph] in different categories, you know with oil prices down we have the potential of seeing some benefit on some categories like shingles and things that have petroleum products in them, but I would tell you we are just focussed on anything we can do across the board to improve our improve our cost structure.

Got it, okay so it’s a little early still but still hopeful.

Absolutely.

I wanted to also than follow up if I could a little bit on the other half of the margin equation, which is your price. So obviously you put up a very good order number here as we expected you to. You are continuing to obviously gain a lot of share. But you also mentioned you’re your pretty much your absorption rates were, I think you said in line with your targets. And I guess, I'm trying to figure out whether or not the order growth that you achieved in the quarter, and are achieving generally, is enough for you to perhaps think you might have more opportunity on a pricing side, to get a little more aggressive with pricing. Because from your commentary it didn't sound like -- you maintained your guidance on margins and things like that. Do you think that you do have the ability to push pricing more than you have been, given what you've seen so far in the spring selling season?

Stephen its way too early in the spring selling season to really hand out that kind of message, we are happy with where we are. We feel like if it continues, if the market is a good market to this spring, then yes, we will try to push margins. But based upon where we are today it’s just not something we can put out there.

Okay.

Stephen, as we talked about our goal is to increase efficiencies and at a community by community level and that means, taking the communities to the planned pace that we want for each community. Pace then begets good momentum, positive momentum to given community and certainly as David said its early spring. Spring is not even really here yet. But we’re in line with our expectations and we would expect that we’re going to get every margin of dollar that every dollar of margin we can as we move to the spring and as our pace and absorptions stay on track.

Okay, great. Thanks very much guys. Good Job.

Thank you. The next question is from Ken Zener of KeyBanc. Please go ahead.

Gentlemen, Jessica.

Good morning.

Good morning, Ken.

Several items I just like to clarify and get a little feedback on. So, your sales pace rose sequentially it seems, is that normal seasonality to you or was there really just a step function in the absorptions that as we move into the second quarter and third quarter we’ll have more normal seasonality?

Ken, we actually saw our active selling communities on average trend down a little bit, so you’re right our increase in absorption was up, say, call it low to mid single-digit. That’s actually pretty consistent with what we’ve seen over the last few years.

Right.

So, nothing out of line. What’s more important which I think is what you’re getting at, is the pickups that we’ll see from December and March, and we’ll be very focused on driving that increase in absorption and making sure that we’re hitting that normal seasonal trends.

So, to get to that and realizing you guys aren’t necessarily going to give guidance, but historical over the last let’s say 15 years you usually had December pace decelerate to 15% to 18% from September? And then usually you picked up around 50%, 55% in the March quarter, while the December pace is now different slightly. Do you think the March pace, is there any reason that that would accelerate or decelerate versus that kind of 50% rate that we’ve seen historically?

I don’t think there’s anything that we would say that December would read into March. Obviously with improved pace in December we would feel very good if we see our normal 50% increase into the March quarter.

Okay. And then I guess last question around Express, given that you’re looking for flat pricing this year, you’re costs are kind of still up. You’re obviously executing well in terms of understand how your gross margins are trending. Do you think – this is a bigger question, but if you’re getting more mix from you Express product? Would it surprise you if 2016 if your price mix was actually down, its not necessarily a bad think obviously if your pace is up at the rate that you’re going, but would that surprise you?

I don’t like we’d be surprise, because there’s a lot less competition at that price point, and it’s going to drive, its continuing to drive month over month, quarter over quarter increases.

Yes. Ken, I think we would agree with you. That’s not necessarily a bad thing. It’s not a bad thing at all, if our average sales price were to go down because our Express mix has grown. And that’s really part of what’s behind our expectations for our average selling price to be roughly flat this year. Obviously we still saw an increase in Q1, but our expectation was roughly flat because we do expect Express to grow as a percentage of our business this year. And while we may see appreciation in some markets are mixed toward Express may offset that somewhat.

Thank you.

Thank you. The next question is from Eli Hackel of Goldman Sachs. Please go ahead.

Thanks. Good morning. Just following up on Express but a little differently, obviously you’re rolling it out throughout your markets now. I’m just curious is sort of what happens when you roll it out sort of the buyer types that are coming. Are these people that have been trying to buy a home for year or two and just there hasn’t been anything in their price point and there’s sort of jus a flood of buyers that come and they’re happy there’s something finally that they can afford. I’m curious about sort of what happens as you enter markets and who’s showing up at the door?

Hi, Eli, this is Mike. I think you have hit it pretty well. I think that’s been an underserved market segment and that they’re getting a new home product at a very affordable price is an alternative they haven’t had. That combined with some general strengthen in the economy over the past few years and in some job numbers working together to provide that product has been a good outcome for us quite frankly.

Great. Okay. Thanks. And then just little direct – different direction. You talked earlier about increasing cash flows. What type of return – what type of horizon are you thinking about the cash flows sort of going from negative to positive and you could just talk about preference in order and use of cash when it does do that flip? Thanks.

Eli, this is Bill. We’ve talked about fiscal 2015 being the point in which we kind of hit an inflection at a roughly breakeven level for cash. We could be slightly positive, slightly negative that will largely be determined based on what we see in the market in the spring and whether that affects our investment decisions in inventory, but then our expectation is then moving into fiscal 2016 that we should general solid positive cash flows. We’ve talked quite a bit about the fact that our land supply is at an adequate level and should support growth in sales and closings in the revenue in the next couple of years without really needing to increase that land supply. And we think that’s going to be a big driver towards getting us to a positive cash flow position. What we will do with it when we get to that point is really, we’ll make that decision when we get there. Today we’re still seeing very strong opportunities in our business to continue invest in strong markets and so that to the extend we see strong opportunities to reinvest in the business that will continue to be our number one priority. Beyond that we’ve continue to be a consistent dividend payer and we’ll always look at our dept levels and to the extent that we feel like it’s most appropriate for us to reduce and we will look at that as well.

Great. Thank you very much.

Thank you. The next question is from Eric Bosshard of Cleveland Research. Please go ahead.

Good morning. Just follow-up on Express, just curious as you continue to roll these homes out and have success. How things evolving with the strategy especially as you move into the other markets just thinking if there’s anything different on price points or features, anything that you can do to improve the margin profile, just give us a little bit of an update if you could on how the product is evolving?

Well, as you rolled out a new product you gain efficiencies every time your build. And we are also giving a better definition of who is buying. Why they are buying. And targeting what we’re building, what we’re putting in to that buyer. So, the general belief is over time we’ll get add it and we’ll make more money delivering it.

And thus far express while the average margin is below the company average. I think we would in general say that margins have been a little better than our original expectations on Express. Still below the average and as we execute and roll it out I think there is definitely will be opportunities to improve on that.

Great. And then, that’s helpful. Secondly, in terms of land costs, if you give us some perspective on the cost of land that you’re using and expect to use over the next year, if there’s any meaningful change in the margin opportunity or the pricing requirements associated with the inflation that’s taking place in your basic land?

No, doubt, our land costs are a components that we do expect to increase. We have seen our land as a percentage of our overall revenues or on a per square foot basis, similar to how it look at stick and brick. It has increase as well on a year-over-year basis, it’s up about 6%. And as we work through some of the communities that where we bought the lots and land in 2011 and 2012 and began to work through more of the ones we purchased in 2013 and 2014. We would expect that to increase somewhat. But that’s one of the things that we’re certainly focused on and as we look at our expectations for pricing and demand in our markets going forward we certainly focus on trying to only pay what we can afford to hit our margins and return objectives going forward.

Does the up 6% is that kind of sustain that where it should be your – as you work in more of a 2013, 2014 land, is that still up a little bit that 6% number?

That’s on per square foot basis, and that’s where things have been just recently. Would not be surprise for that to continue to move upward a bit as we move through 2015.

Okay. Thank you.

Thank you. The next question is from Will Randow of Citi. Please go ahead.

Hey, good morning and congratulations.

Thank you.

Thanks Will.

As you guys think about buying land today, I want to get a sense of what are assuming for ASP inflation if you will, I’m assuming low single digit, I know you’re not looking for inflation in your numbers and I would assume that land has actually become a bit cheaper as a percentage of called it home sales revenue for the last call it six months versus 2013 where we can have that double, but love to get your views on that?

From price of a lot to the selling price of the house, we haven’t seen a decline over 2013 primarily I think because what we’ve delivered in 2013 we bought in 2012.

As we look forward will underwrite a land purchase, we assume flat pricing on the homes as well as flat pricing on the cost develop if it’s a land parcel to be developed as well and stick and brick. It just too hard to start predicting, this is going to go up by this percent, these costs to go up by that percent. It’s much for us controllable underwriting process to look at pricing on a flat basis and then understand what that performance we expected to be to make the investment decision.

And in terms of regional exposure it seems like the southeast firing pretty strong particular, Atlanta where you’ve done a recent acquisition. I guess what’s been your strongest market and your weakest and where have been surprised? Thanks.

I mean, we’ve done. I wouldn’t say we’ve been surprised. We’ve made a conscious decision to push assets to the East, Southeast particularly. We like the just the demographics and the growth trends and the job growth there. Texas has been strong despite the softening of oil. Texas is going to remain strong at least in my opinion.

I think our investments we’ve made in the last couple years in terms we look at the inventory growth by region you’re now seeing that deliver in our results especially on the Southeastern and South Central.

Appreciate the color, and congrats again.

Thank you. The next question is from Mike Dahl with Credit Suisse. Please go ahead.

Hi. Thanks for taking my questions. Wanted to follow-up on I guess the Texas comment for tying [ph] in Express. If we look at the growth in Express, seems like its accounted for about half of the overall growth in unit orders for the company, presumably it’s a bit higher in Texas, so just wondering how your thinking. Would unit Express still be up in Texas? Just trying to think about how many of these comments are for in specific versus the market?

I don’t think there’s any doubt that our units would still up in Texas without Express or Express is certainly is a key part of our rollout right now at Texas and in other markets. But I think there is some Company’s specific factors with respect to D.R. Horton in Texas versus what you may hear from some other builders, obviously we’re based in Texas we’ve had a strong position in Texas historically and we have a strong operating platform there that’s allowing us to execute in the current market and we believe would allow us to execute very effectively if the market changes. It has historically and we believe that that we’re in good position to handle whatever the market may bring to us coming forward.

Got it. Thanks. And shifting gears, I guess, curious your thoughts on the FHA premium issue, you given the 42% FHA, VA and how your sales people are thinking about this? Is this something where that buyer is even aware of the change in premiums yet or is it a tool that you have your sales people needing to educate buyers and whether or not you’ve seen any initial response from that? Thanks.

Yes, Mike, it’s definitely a tool for our sales people and something that they’re already out there talking to our potential home buyers about. I think some people do come in educated just because that makes a lot of headlines when there are changes on that front. And then there are some people who probably come in that are little less educated. But our salespeople, but our sales people already have flyers out and about letting people know about the change and we’re definitely using that to our advantage from a marketing perspective, a little too early to know what kind of impact that could have, but clearly any incremental easing, in this case lowering of insurance premiums we would look at as a positive.

And whether that they are educated about exactly what it means or don’t – exactly what it means, it has people taking about buying a house and that’s always a good thing for us.

Okay. Great. Thanks.

Thank you. The next question is from Nishu Sood of Deutsche Bank. Please go ahead.

Thanks. Wanted to follow-up discussion about the gross margins. It’s been a while since we’ve had a kind of normal year from a seasonal flow perspective, so if we do end up with that this year stable pricing, incentives et cetera and closings volume rising throughout your fiscal year. Would we expect to see the normal gross margin leverage on fixed cost and therefore some increase this year goes on?

Nishu, we really don’t have any significant fixed costs in our gross margin at all, virtually all of our costs are associated in a variable within our margin. So we really don’t see that leverage with volume across our year. We do on the SG&A side, because obviously there’s a fixed component to SG&A, but there is not in terms of margin. What you would see if we see the normal lift and we see consistency through the market that may allow us in our communities to adjust pricing which certainly could help, but no, we don’t expect anything seasonally from a leverage of fixed cost to help our margins. We’re guiding to a range of 19.5% to 20.5% could have some potential quarterly fluctuations there. And right now three weeks into January really the spring and what we see in the market in the spring is going to determine the trajectory of our margins going forward for the rest of the year.

Got it. And that’s very helpful. And second question I wanted to ask about the January comments you made. So I know it’s obviously a difficult time of year to assess trends. But given the strong demand that’s you been seeing, any kind of anecdotal indicators you’ve seen to help you understand where that’s coming from? Is that the market? Is that the lower rate environment we’ve seen? You know, gas prices, some of the mortgage stuff that has helped out or is it kind of just D.R. Horton specific? Any kind anecdotal color on that would be helpful?

I think weather patterns have been better this year and last year, I mean, we didn’t gave a weather report last year, but I do think that weather impacted people’s ability to get out and buy else. I think the FHA conversation has got people thinking about buying a house and going into models. The gasoline price is a huge – I mean, that’s money directly back into the economy every week, I mean, there is no better way to get money into the economy and give it directly to the consumer. I think it’s a combination of three things. I think we’re better position this year coming out the blocks when we last year. We’re excited. We got good people working hard and are well positioned to capture what we think is going to be a good spring.

Okay. Great. Thank you for your color.

Thank you. The next question is from Adam Rudiger of Wells Fargo. Please go ahead.

Hi, thanks. On the heels of that question, this is kind of addressed, but I was curious if you think about your year-over-year change in orders per community how much of that you think is due to say in acquisition, say the product mix maybe incentives that you increased a little bit early in the year, just trying to get a sense of how much of this might be like kind of true organic changes in buying patterns versus as asked earlier kind of Company specific?

Yes. Adam, there is just clearly a couple of things running from our acquisition of Crown communities, they are very efficient community builder, so there is a component there as well as the mix to Express. That’s at a higher absorption rates, there is no doubt those are components, but with our sales increase of 35% on an average selling community increase of 6% obviously there’s a lot of organic improvement as well across our organization. And I really thing that’s results of us being very focused community by community and that’s been an emphasis across our organization over the last year to deliver community by community hitting our absorptions, hitting our targets, staying on plan, and then adjusting inventory levels, adjusting our pricing according whether its down or up in order to make sure we stay on target to generate the best returns that we can. I really think that’s that biggest factor.

Got it. Thanks. The rest of my questions have been answered. Thank you.

Thanks Adam.

Thank you. As a reminder ladies and gentlemen, we do have to limit yourself to one and one follow-up. The next question is Michael Rehaut of JPMorgan. Please go ahead.

Thanks. Good morning everyone and nice quarter.

Thank you.

First question I had just to go back to the community counts absorption stats from the quarter itself. Community count year-over-year I guess flowed a little bit and you said it was down a little bit sequentially. Is that more of a one quarter phenomenon at least from a sequential standpoint given that you had sort of this consistent low double-digit growth in 2014? Would that kind of stay in mid single-digit year-over-year rate for 2015 or how should we think about that?

Yeah, Mike, what happened this quarter is pretty much exactly in line with what we shared on our last call. We talked about for the year we would anticipate our community count being up. If it’s up in only a low to mid single-digit range. I think we still feel the same way about that for this quarter. We were up 6% on a year-over-year basis and we were down 2% on average sequentially. So we could see some more sequential quarters that are decreases, but we will – I mean lot of it depends on our sales pace and as always what we see in the spring, but I think we still think for the full year low to mid single digits is about as much as we would get in terms of increase in community count and we still expect the vast majority of our growth this year to come from increase and absorptions rather than communities.

Great. Now that’s very helpful. And I guess just switching to the sales pace, maybe kind of a two part, with the strong improvement in 1Q and that follow the similar type of rate in 4Q on a year-over-year basis, just wanted to get a sense of if you kind of stripe out maybe the mix shift from the success of Express, what the kind of let’s call the D.R. Horton branded bread and butter communities, would we see a similar type of increase or would it be more of like maybe mid-teen type of rate? That’s one. And two, just a clarification on the – when you talk about accelerating sales pace in January that’s typical with seasonality, I presume that if those comments were more towards seasonality that on a year-over-year basis maybe you’re still seeing a similar type of absorption that you saw in 1Q?

Mike, on the seasonality we are seeing January move in line with expectations. But three weeks in it’s hard to call a full month and to compare year-over-year. It’s kind of a short window for the comparison. We are encouraged with the January sales pace. It’s meeting our expectations. But there is a seasonal lift that generally occurs this time of year as well. And then the prior question on the organic Horton sales pace growth, I mean, we are getting lift from the Express rollout. That’s good, but we are also seeing strong solid growth in the Horton brands as well.

And is it mid-teens type of number, the right way to think about that, I mean, I know its maybe difficult parsing out, but clearly there’s a positive mix impact from Express, so just trying to get that order of magnitude?

Yeah, Mike we don’t have that specifically, but clearly there’s still a strong double digit growth across really all of our brands right now to nail it down to whether its 15 or whether its 20 would be a little bit difficult for us right here.

Okay. Great. Thanks very much.

Thank you. The next question is from Jack Micenko with SIG. Please go ahead.

Hi, good morning. Thanks for taking my question. Just anything about mix and the absorption and the backlog conversion, are you going into spring 2015 with a greater, larger number finished specs than you did 2014?

Yes, we are and it’s really ties to our expectation where the markets going to be.

Okay. And can you give us some magnitude on our same-store sales basis how many more you think you have last year? Is that something you can give us?

Well, it’s tied to the absorption per flag. As we have pushed up absorptions in our subdivision performance, we have increased spec levels to facilitate the next 90 days sales.

Jack, in absolute terms we’re up about 1000 completed specs on a year-over-year basis.

Okay. That’s helpful. And then on the impairment line, knowing that it’s a fluid situation and you’re going to opportunistic, I guess the question is more in context. Are you going to be – should we think of 2014 on that line something closer to 2014 or something lower like the 2013 or 2012 numbers just from a volume, I think you said you have $304 million in land you look to sale or something like that, any context there?

Jack, I think as we said that’s kind of a opportunistic taking advantage of pulling those assets out, something that results in impairments, sometimes it doesn’t. Generally my gut would be that it will be little bit inside the 2014 level. Hard to exactly predict it though.

Okay. That’s fair.

That’s really project-by-project, the 304 million that’s our land held for developments, some of which we may chose to bring out and build homes on. Some of which we may decide at some point to sell. What we’ve seen thus far is typically the deals that we’ve been to bring out and build homes on or develop and build homes. We have had very few impairments on those, as the projects that we determined that our best option is to sell in the current markets where it has been more of our impairment, so it will depend on our evaluations project-by-project.

Okay. Thank you.

Thank you. The next question is from Jade Rahmani of KBW. Please go ahead.

Thank you for taking the questions. Just two small ones. What is the mix of spec sales in the quarter and can you also give the mix of first time and first time move up at your mortgage company? Thank you.

Sure, Jade. In terms of our specs as a percentage of our closings this quarter it was right in the normal range we would see which was around 70% to 75% and then the mix of our products for the mortgage company, were you asking specifically about FHA and DA.

First time.

First time, I sorry, we are right around 40%, so that kind of in line with more long-term average range for us. But not surprisingly our Express percentage is running higher than the Company average.

Thank you very much for taking the questions.

Thank you. Our next question is from Mike Roxland from Bank of America/Merrill Lynch. Please go ahead.

Thanks very much. Congrats on a good quarter. As we begin to open communities, I think its goes back to one of Bill’s comments, as you begin to open communities on the lots you purchased in 2013 and 2014, is it possible that we could see further margin compression especially if you’re enable to get a better balance between rising inputs and modest price appreciation?

Could you repeat some of the Mike, I’m not sure we were quite following.

Bill, I think you mentioned or you made a comment that you expect to see lot costs continue to obviously increase and could serve as a potential headwind for gross margin going forward. So, if you’re unable to get a better balance between the rising inputs in aggregate, you obviously going to be dealing with rising inputs, higher lot costs, prices that are modestly improving. Could we see some continued gross margin compression or future gross margin compression in outer year, so maybe not call 2015, but I’ll say, 2016 and beyond?

We don’t have that visibility, if the market gets better, our margin will improve and the differential in land cost is not going to drive margins significantly higher or significantly lower.

Yes. What we ultimately pay for land is rolling the output of where we expect the market to be when we’re buying it. My comments were specific to the next few quarters in 2015 as we’re working through land that we may have purchased at bit higher prices in 2013 and 2014. But clearly as the market moderated a bit in 2014, the land market while it may not have come down much, certainly isn’t rising at the pace it was, so that’s self adjusting at some point here. So to comment really beyond the next few quarters we really don’t have that visibility.

Got it, thanks for the color. And just quickly on home building SG&A came a little better than we expected, is it possible to talk about the SG&A the individual brand specifically Express and Emerald. You know given that Emerald is relatively a new market new buyer type for you, as you gain the experience in producing that product I think you actually sold a few million dollar homes in Texas the last quarter, have you been able to more effectively leverage your volume with Emerald?

Mike [ph] we don’t track the SG&A by brand in one of the strategies we’ve looked to do is to leverage our operational platform to serve new customer segments and so that doesn’t require a repeat of all the infrastructure to support those different operations, so we haven’t tried to pass out what the sort of the home building SG&A burden is to those individual brands. But I would say that as we have anniversaried and more than that the roll out of these things we have gotten better, our execution has improved. We have had some of the inefficiencies that just come along with starting something new are behind us. And so I do think that we are gaining efficiencies and certainly as the volumes increase, it helps to absorb the SG&A cost as well.

Got it. Thank you for the color. Good luck -- for the balance of the year.

Thank you.

Thank you. That is all the time we have for questions. I would like to turn the floor back over to management for any additional or closing comments.

Thank you, Mannie. We appreciate everyone’s time on the call today and look forward to speaking with you again in April to share our second quarter results. Have a great day.