Good afternoon. My name is Kina and I will be your conference operator today. At this time, I would like to welcome everyone to the M/I Homes Inc. first quarter conference call. (Operator Instructions) After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions) Thank you. Mr. Phil Creek you may begin your conference.

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

Thanks, Phil. Good afternoon, everyone. And I, too, want to thank you for joining us on our call today. Our first quarter results reflect what we believe to be slowly improving housing conditions. We sold 17% more homes than last year's first quarter as we continued to capture our fair share and, in some cases, more than our fair share of the new home market. Our backlog sales value is 33% higher than a year ago. Our operating gross margin of 18.1% reached its highest first quarter level in 5 years and is 180 basis points above last year's first quarter largely due to a planned strategic shift in our mix of communities towards newer, better performing locations and our continued focus on shifting our investment to stronger housing markets. In that regard, approximately 63% of our first quarter deliveries were from new communities. That is, those that we opened for sale since the start of 2009. This compares with 70% of our deliveries from new communities in the fourth quarter and 45% of our deliveries from new communities in the first quarter of last year. These newer communities performed better than our legacy communities in terms of both margins and sales. So this ongoing shift to a higher mix of new communities is driving our continued improvement in performance and trend towards consistent positive earnings. While we experienced a net loss for the quarter, we materially and substantially reduced our loss compared to the last year’s first quarter. Specifically, we had a net loss of $3.2 million in the quarter compared to a net loss of $17 million a year ago. It’s important to recognize that our first quarter is typically our weakest quarter due to the seasonality in new home sales. Thus, despite reporting a loss, our results…

Thanks, Bob. New contracts for the quarter increased 17% to 764 with the net absorption rate of 2 sales per community per month. By region, contracts were up 18% in the Midwest, up 35% in the south and 1% in the Mid-Atlantic. And our cancellation rate for the first quarter was 14% compared to last year's 16%. Our traffic for the quarter increased 37%. Our sales were down 10% in January while traffic was up 29%, sales were up 32% in February and traffic was up 47% and our sales were up 27% in March and traffic was up 35%. Our active communities increased 10% from 111 last year to 122. And the breakdown by region is 56 in the Midwest, 31 in the south and 35 in the Mid-Atlantic. During the quarter, we opened 10 new communities while also closing 10. At March 31, 68% of the communities we are selling out of are new and we define new communities are those that opened since January of ’09. And our current estimate is to end the year with about a 10% higher community count and we began 2012. We delivered 507 homes in 2012’s first quarter of 15% when delivered the last year and 63% of our first quarter deliveries were from new communities compared to 45% in the first quarter of 2011. We delivered 75% of our backlog this quarter compared to 83% a year ago and our backlog of 933 homes is 25% higher than a year ago and our average sale price and backlog of 269,000 is 7% higher. Bob talked about our gross margins being 18.1%. G&A expenses for the quarter were $12.5 million, increasing 9% from last year’s comparable expenses. And selling expenses for the quarter increased $2.4 million. These expenses were up primarily…

Thank you, Phil. Our mortgage and title operations pre-tax income increased from $1.4 million in 2011's first quarter to $2.1 million in the same period of 2012. The main reason for the increase is that loans originated increased 38%, from 334 in 2011 to 461 in 2012. Our first quarter results included increased income attributable to higher margins on the loans sold in addition to our refinance business. In 2012’s first quarter, we originated $18 million in refinance loans. We continue to see a shift towards conventional financing, 55% of the loans closed were conventional and 45% were FHA/VA. This compares to 38% and 62% respectively for 2011 same period. The loan-to-value on our first mortgages for the first quarter was 86% in 2012 compared to 88% in 2011’s first quarter. Overall, our average mortgage amount was $211,000 in 2012’s first quarter compared to $213,000 in 2011’s first quarter. The average borrower credit score on mortgage originated by M/I Financial was 738 in the first quarter of 2012 compared to 737 in 2011’s fourth quarter. Our mortgage operations captured 81% of our business in the first quarter compared to 2011’s 83%. On March 23, 2012, we signed an amendment and increased our M/I Financial credit commitment to $70 million and extended the maturity date to March 30, 2013. At March 31, 2012, M/I Financial has $42 million outstanding under the credit agreement. In the normal course of business, we received inquiries concerning underwriting matters on specific mortgages our investors have purchased from us. We thoroughly review and respond to each inquiry and even though we are not required to do so, we routinely engage an independent third-party to review the files and information related to the origination of each mortgage. Our reserve at March 31, 2012, with respect to these matters, was $2.2 million compared to $2.3 million at December 31, 2011. M/I Financial has not repurchased any loans this year. Now I will turn the call back over to Phil.

Thanks, Paul. As far as our balance sheet, we continue to manage our balance sheet carefully focusing on investing carefully in land while also managing our capital structure. Total home building inventory at March 31st was $490 million, an increase of $47 million above a year ago, primarily due to higher investment in our backlog. Our unsold land investment at March 31st is $249 million, a 4% decrease compared to 258 million a year ago. Compared to year ago raw land and land under development decreased 15% and finished unsold lots increased 7%. At March 31st, we had a $105 million of raw land and land under development and a $144 million of finished unsold lots. Our unsold finished lots totaled 2,800 lots with an average cost of $52,000 per lot and this $52,000 average lot cost is 19% of our $269,000 backlog average sale price. And the market breakdown of our $249 million of unsold land is $96 million in the Midwest, $40 million in the South and $113 million in the Mid-Atlantic. Lots owned and controlled at March 31st, totaled 10,400, 66% of which were owned and 34% under contract. We own 6,900 lots of which 50% are in the Midwest, 20% are in the South and 30% in the Mid-Atlantic and this is a 9% decrease in owned lots from 7,600 lots a year ago. During the first quarter, we spent $30 million on land and $9 million on land development for a total spend of $39 million. This compares to total spending of $27 million in 2011’s first quarter. About 10% of our land purchases were in the Midwest, 22% in the South and 68% in the Mid-Atlantic. And as to the type of our 2012 land purchases, about 84% were finished lot pickups under option…

[Operator Instructions] Your first question comes from Ivy Zelman of Zelman Associates.

You obviously have had a pretty nice improvement and very excited about finally seeing the beginnings of the recovery. Your profitability has been improving but the volume has been lagging relative to some of your peers and it looks like the Mid-Atlantic specifically is a little bit soft, which should actually be little bit different that some of your other competitors have been reporting like NVR. And you had said last quarter that you expected you would see some pricing pressure there over the next couple of quarters, but actually, your backlog price actually went up in Q1. So I am trying to understand competitively, why you might be lagging in the Mid-Atlantic, I don't know if it’s location, maybe you can don’t have as many desirable new communities opening up, but your performance would be lagging relative to your peers right now. Can you help me there?

Let me take a crack a part of it then maybe Phil or others want to also answer that. First of all, I think when you look at the whole Mid-Atlantic region, I think that we are gaining market share in Raleigh and not only holding steady, we’re probably gaining in Charlotte as well. So I think our performance in North Carolina is quite strong relative to the general market. And in DC, your comments about pricing pressures is what we have seen and our sales there have been a little slower than we would have anticipated and I think that's reflected in the fact that our sales were essentially flat for the quarter. I am not so sure we are lagging, I think that's just sort of the way it is. We had a number of communities in DC that we had hoped might open a little earlier than they in fact have, but they are I think the numbers somewhat speak for themselves. Phil, I don’t know if you want to add anything to that?

No, we wish that absorptions were a little bit better than they are. Have been openings, as Bob said, a lot of new communities and so forth. Hopefully things will improve as we get models open, merchandizing done and those type of things but it has been a little slower than we had hoped.

And you had not commented as other builders had on the trends in April so far. We've heard from a few other builders today. Would you say that the trends in April have continued at roughly the same level that you guys experienced for the 1Q?

Well, no we haven't commented on April and I guess the only thing I would say is that it appears the traffic has dropped off a little bit in the first 3 weeks or so of April. Some of that, I think, was due to Easter and so forth, but beyond that we are not going to comment any further on April.

And just in terms of the, I guess the strategy going forward as you are pulling back in the Midwest and recognize that the exception is Chicago where you are investing in other market. Can you just outline for us where you see, within each region, maybe you are a star and where the biggest dog would be within the various operations with I guess a longer term view maybe those dogs would continue to be dogs, like Cincinnati which I know is a challenge to the airport and Jacito [ph] leaving and some other factors, so I was just curious if you can break it down and hopefully it won't take you too long to do, Bob.

Ivy, do you define a dog as being a bad market?

Yes, sorry.

I mean some people love dogs, that’s why I asked you that way, but.

No, I love dogs. I don’t know it is just always being the jewel versus the dog.

You know what we really like all of our markets and I don’t want to be too politically correct here. But we really do like all of our markets. We were concerned, perhaps more so than most about Columbus, Cincinnati and Indianapolis, collectively, over the last several years. They were among the first markets to slow down and at one point appear it appeared that the job growth there might one of the last to come back. But we’ve seen a noticeable uptick in our business in Indianapolis. Are much more bullish about Indianapolis than we were frankly a year ago. I talked about permits being up 21% year-over-year in Columbus. We feel very good about that. Cincinnati, I think your score card is pretty accurate quite candidly. I think Cincinnati is probably, from a purely macro standpoint, 1 of our weakest but I also say this, that if you talk to most builders, I think they will tell you Chicago was a tough market and it's a show dog for us. So it is, which is also known as a star. We love the Carolinas, we are very bullish long term about DC as well. Tampa and Orlando, I think that, surprisingly -- we've seen a surprising uptick in demand in both Tampa and Orlando and you know I think you probably know as much about Texas as anybody and we really are just getting started there and we feel really good about our prospects there long term. So I guess I would that would be my rundown.

The next question comes from Alex Barron of Housing Research Center. Alex Barrón: I was tracking your community count and it seems like you guys have opened up a ton of communities, I guess in all of your markets, but I was interested in particular in the south which I guess is Texas and Florida. So I am expecting that you guys are going to see pretty good orders going forward. I guess I am just kind of wondering on -- as far as SG&A, roughly like, we should start to see some operating leverage there. So I am just kind of wondering, is it your expectation that you are going to maintain the fixed part of those costs here for the near term and also when do you expect you will be able to get the DTA back?

Hey, Alex, yes, a couple of questions there. As far as the community count we said that we expect, hope, to have about a 10% growth this year. When you break that down, we kind of see that being a continuation. Chicago continuing to grow some. As Bob said, Indianapolis also has been doing very well. We are also seeing a couple of opportunities in Cincinnati, but that community count not moving much. Columbus, we are working through legacy positions still, but growing our market share. So our Columbus count is coming down. So we don’t really see the Midwest count changing a whole lot this year. When you look at the south, I mean, you are right. We do see Texas going up a fair amount. San Antonio, which we closed on April of last year, we are growing that operation. And then Houston, we had a small partnership happen in April this year with Triumph Homes, which adds about 5 communities. And also we see Tampa and Orlando, some opportunities there. So we do see the South growing community count pretty much in all our markets and then when we look at the Mid-Atlantic we have been opening a fair amount of new communities in the Carolinas and DC. Now we are more getting models open and starting sales and so forth. But we also still expect to see a little growth in the Mid-Atlantic and, again, that's where we get maybe another 10 or 12 net communities for the year. So that hopefully addresses your first question. As far as SG&A, we obviously don’t give any projections on that. We did get some leverage this year’s first quarter compared to last years. Hopefully, we will get more in the future especially as Texas gets out of more of a startup mode and gets rolling. We were pretty pleased with our margins of 18:1 but of course we are working very hard every day to try to increase those. But we are very much focused on trying to get more volume of margin increase and also leverage those SG&A expenses. We talked about the focus on a whole lot on those expense levels. And then as far as the DTA reversal I will let Ann Marie deal with that.

And our DTA reversal will likely come as we begin to return to profitability. It won't be for a while because you have to show a trend over, frankly, more than 2 years or 3 years according to the rule. So we will likely see a reversal of the DTA as we make money. So it will bleed in. Alex Barrón: And so you don’t expect it to be like a one-time event?

I am not sure how the other builders are saying it's a one-time event to be frank with you. I have the same auditors as some of them.

Yes, I mean there's been comments obviously about Lenore and Gordon and you know, of course their situation is different than ours but, you know, again for us just focused on getting back to profitability. We would like to think as soon as we start getting back to consistent profitability that we would get some benefit from that and that is a very sizeable number for us although it doesn't help our cash situation as significantly. It helps to start net worth [ph] and so forth. So again that's something we will be focused on but it’s nothing we are really counting on, you know, in the short term. Alex Barrón: Okay, now as far as the -- if you do start to see some substantial growth. What are your plans on the balance sheet, I mean you guys just paid down the $40 million and, well I think if you start to see some substantial growth it seems like you are going to need a little bit more capital. So is your plan to raise some additional debt or just to use the line of credit?

Alex, this is Kevin. We haven't changed what we have been commenting on for a couple of quarters, that we believe that our current availability of capital sources is adequate to fund our business. As Phil gave, we are really -- we are 10% up right now in communities year-over-year. We expect to end the year about 10% up from now that [ph] end of 2011. So I am not sure how you will define substantial growth but we feel pretty comfortable that we have that capacity to fund our operations right now with using the combination of our bank lines and cash on hand.

Your next question comes from Jay McCanless with Guggenheim Securities.

I wanted to ask first, did you all dip into the credit facility to pay off the 2012 notes?

No Jay. This is Kevin, we saw -- we the ended the quarter with $67 million of unrestricted cash and we did take those notes out on April 2nd just because Sunday -- April 1 was a Sunday. So, no, we have enough cash, you know, at the time to take up the notes with cash on hand.

Okay. Great. And then with the Triumph acquisition, first could you talk about the reasons behind it and what it adds to your footprint there and then should we be looking for any one-time items in the 2Q numbers from that?

This is Bob Schottenstein. I’ll be happy to take a crack at part of that. It was a very important strategic decision for us in a number of respects. One, we were looking for a new leader for Houston division, which has been a startup and the individual that we identified and, believing to be the right candidate for us, happened to also own a relatively small homebuilding operation but he himself was a season builder in the Houston market. It run large operations for other builders there. And it just was an excellent fit for us and one that we think will serve us very well as we, you know, start to get a lot more traction in the Houston market. And the second part of the question --

Jay, as far as the financial impact, it was not any significant type number. It was about 5 communities and backlog of 25 or so. So again it was not any type of significant financial impact.

Okay. And then last question and you address this on the prepared remarks but just want to found out when we can expect the growth on it to slow down. Your selling expenses are up by about 27% year-over-year. Understanding that part of that is the addition of the San Antonio neighborhoods, but is that number, the growth rate going to flex down over time or are you having to do some extra ad spend, et cetera to get the word out in those new areas?

Well, when you look at, you know, starting up operations in Houston and also growing, San Antonio, it tends to take a little bit of while start making money bottom line. So we are spending time and money, new communities getting the word out, etcetera but of course if you look at our backlog, our backlog is up unit-wise, 25%. Our first quarter is usually our lowest amount of deliveries and weakest profit quarter. So we obviously hope to increase deliveries and improve results as we go through the year. That’s our goal.

Okay, and I think you said previously approximately 25 units, so could we tagged [ph] pro-forma another 25 units on the backlog from that Triumph acquisition?

Yes. It came in at 1st of April.

Your next question comes from Joel Locher of FBN Securities

I guess on the backlog conversions, you know, it’s dropped about roughly 10% year-over-year the last 2 quarters and I mean, did you see some more trajectory now that your backlog units are growing where you might get in the low 60s like you were, maybe back in ‘09?

It was disappointing to us to only deliver 75% of our backlog. We talked about last year in the first quarter it was 83%. If you look at the second quarter of last year, we delivered 79%, and the third quarter was 70% et cetera. We have been, if you look at the gross sales in the first quarter, about a third of those sales were specs which is the lowest it’s been in the few quarters. So that contributed somewhat to that. But we’re working very hard to get more of our backlog delivered, but also in general we prefer, like most people do, to sell more to-be-builts, the buyer tends to select more options and we tend to have ability to make more money on those options and those type things. But nothing real big caused the deliveries to go down a little bit, but we were hoping to deliver more or like 80% as opposed to 75% and that’s something we are continuing to work on.

And I expect it's become smaller percentage of your deliveries just because your backlog is growing in unit wise and your specs aren't growing near as high. Do you expect that just a normalize or has cycle times improved so much from 2009 where you can actually…..

Our cycle times have improved and we continue to work on that. You saw from the spec numbers, our spec numbers have actually come down from where they have been at kind of where we thought they would be. But again, spec business continues to be a significant part of our business. We just try to manage that as best we can. Taken into account our cash, liquidity and everything else that’s just something we try to manage. But I would sure hope to be delivering a higher percentage of my backlog in the future than I did in the first quarter of this year to answer that question.

And what was your gain or loss on your $700,000 land sale?

Virtually nothing. Not any profit of any significance or any loss.

So less than a 100 or down, plus a $100,000?

It’s very small number.

Very small. And would you also think about just changing your capital structure might affect your tax valuation allowance where you would swap your preferred equity for some common? And just obviously probably lower your debt to capital a little bit, at these attractive levels, or for the common at least, or if the preferred, would you be even open to it?

I think we've talked about I think in the past that, this is Kevin, that the preferred is something that we will have to give some consideration to it at some point in time. Right now, it’s just not a priority for us. We certainly look at different opportunities at all times to consider what might be available, but that transaction would not be attractive to us right now.

And just last question on the capitalized interest, you guys probably mentioned it, but I missed it, what was it?

The amount of capitalized interest, it really hasn't changed much. It’s about 2% to 3% of the balance sheet, it’s about $18 million and it was $20 million a year ago of capitalized interest.

[Operator Instructions] Your next question comes from Alex Barren, Housing Research Center. Alex Barrón: I wanted to ask if you can comment on -- some of the other builders today have been talking about pricing power and their ability to raise prices. And I am wondering what you guys have seen, what you guys are thinking on that front? And I guess related to that, what your margins and backlog are relative to what you just delivered?

It’s Bob Schottenstein, Alex. As far as the pricing power, we have seen some, there is no question about it, that's going to vary from market to market and submarket to submarket within markets. But the improvement in our margins are a reflection of a number of factors, I think I mentioned in my primary comments, one, the mix with new communities, because our margins on average are several hundred basis points higher in new communities than they are in legacy communities and we continue to get a greater preponderance of our closings from new communities. Of course, we’ve also shifted our investment into what we think are better markets where we get better returns, which also contributes to improved margins. But the other thing is, is that we have seen, I am not going to say in every one of our markets, but in many of them, in most of them, there are select communities where we have been to move our prices up. And I don’t think I could give you, of the 120 or so active communities, I couldn’t you give you a percentage where we’ve raised prices. But it is more than nominal and so I don’t want to comment any further, because I don’t want say anything that might be a little misleading. But clearly, we’ve seen, and this is something we wouldn’t have been able to say, a year so ago, the ability to begin to raise price.

Yeah, if you look at as far as the pricing backlog, this is fourth consecutive quarter that our average sale price in backlog has increased and now we’re at 269,000 which, by and large, is good news for us. As far as margins, what’s in backlog in forecast, we really don’t give those type of projections, but again work very hard every day to try to improve our margins. Alex Barrón: But the increase in the backlog, I mean how much of that is really because you raise prices versus just some change in geographic mix or product mix?

A lot of it also as far [indiscernible], it’s not just product which we spent a lot of time on, but it’s also a mix. I mean if you look at the average sale price, the Midwest is 257. The southern region is 240 and the Mid-Atlantic get 335. Raleigh tends to be a little higher price point for us, as well as DC. Also our Florida prices have been increasing. So again, we do feel pretty good that our backlog has been increasing.

[Operator Instructions] And there are no questions at this time.

Thank you very much for joining us. Look forward to talking to you next quarter.

This concludes today’s M/I Homes Incorporated First Quarter Conference Call. You may now disconnect.