Good afternoon and welcome to the Taylor Morrison Second Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. As a reminder, this conference is being recorded. I would now like to introduce Ms. Erin Willis, Director of Investor Relations and Corporate Communications.

Thank you, and welcome to Taylor Morrison’s second quarter 2014 earnings conference call. With me today are Sheryl Palmer, President and Chief Executive Officer; and Dave Cone, Vice President and Chief Financial Officer. Sheryl will begin the call with an overview of our business performance and our strategic priorities. Dave will take you through the financial review of the second quarter, as well as our guidance for the third quarter and full year 2014. Then Sheryl will provide some detail around our sales, land activity, and outlook for the business after which we will be happy to take your questions. Before I turn the call over to Sheryl, let me remind you, that today’s call, including the question-and-answer session includes forward-looking statements that are subject to the Safe Harbor statement for forward-looking information that you will find in today’s news release. These statements are subject to risk and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to those factors identified in the release and in our filings with the Securities and Exchange Commission, and we do not undertake any obligation to update our forward-looking statements. Now, let me turn the call over to Sheryl Palmer.

Thank you, Erin and good afternoon, everyone. We appreciate you joining us today, and we are pleased to share our second quarter 2014 results. We had another solid quarter and continue to recognize the benefit from executing on our long-term strategy which we believe provides us some resilience as the markets continue to normalize. For the second quarter, EPS was $0.45 on net income of $55 million. Our long-term strategy as we have discussed in the past, is built on four main pillars. First, our land acquisition investment strategy remains focused in core locations within our five states; Arizona, California, Colorado, Florida and Texas in the U.S. and Ontario in Canada. Our targeted land acquisition in core locations has not changed despite any evolving market conditions. We have the luxury of having a robust land bank consisting of what we believe to be prime strategic asset in core locations, as such, we have resisted the move to the French market. With our existing land bank, we can be opportunistic and search out for sites that should enhance the portfolio. I believe the success we have had in our community is in large part due to the disciplined processes and research we employee in our site selection and underwriting, as well as consistent quality execution by each of our teams in the field. We also have a just-in-time development philosophy so we are well prepared for the lots we need to operate our business. This allows us to be more prudent with our cash spend and not carry excessive inventory on the ground. Second, our consumer and community positioning is directed mostly to move our buyers who continue to be more financially secure, as well as the reemerging professional first time buyer. Our consumer and community positioning continues to evolve with…

Thanks, Sheryl. I’m pleased to share with you our results from our second quarter. As Sheryl mentioned, we had diluted earnings per share of $0.45 on net income of $55 million in the second quarter of 2014 driven by an increase in home closings of approximately 7% to 1,438, and an increase in average sales price of 21% to $448,000. Total revenue for the quarter was $658 million, an increase of 29% compared to $509 million in the second quarter of last year. Home closings revenue was $644 million for the quarter, a 30% increase year-over-year. In the U.S., homes closings revenue increased 33% while closed units increased 12%, and the average sales price increased $71,000 or 19% year-over-year to $452,000. In Canada, home closings revenue increased 4% as the average sales price increased 34%, while home closings decreased 22% relative to last year. Breaking down the mix of homes closed this quarter, 58% were from the East region, 32% were from the West, and 10% were from Canada. Consolidated adjusted home closings gross margin, excluding capitalized interest, was 23.6%, representing an 80 basis points increase over the second quarter of 2013 due to our continued focus on price over volume. Our U.S. adjusted home closings gross margin increased 170 basis points to 23.7%, as compared to 22% in the second quarter of the prior year, also driven by average sales price increases ahead of costs. Canadian adjusted home closings gross margins was 23.4%, as compared to 28.8% in the same quarter last year. As we detailed on our last few calls, and it’s important to reiterate, Canadian margins continue to have a tough compare through 2014, as we work through a mix shift. As for financial services, we generated $8.2 million of revenue during the quarter on 738 closings,…

Thanks Dave. Overall, I’m happy to report that even with some choppiness in few market, our communities have generally performed a bit ahead of our expectations. Our sales were flat sequentially between April and May, and fell slightly in June. This was consistent with typical seasonal trends, and we continue on track with our acquisition underwriting. So far in the current quarter, July sales were up nicely year-over-year and slightly ahead sequentially, but historically sales are flat. Traffic was up in each of our U.S. markets in the quarter and slightly down in Canada with the reduction of active outlet. I believe 2014 will show ongoing strength in the business with strong traffic and orders, and moderating pricing power, and continued cost pressures as we continue to move through the year. As we’ve outlined in prior calls, we expected some choppiness throughout the recovery, and lets be candid, it’s been tougher out there than expected. Labor and cost pressures will continue to be difficult in the near term as the infrastructure of the industry rebuilds and uncertainty remains about one building is expected to markedly increase back to historic levels. Most importantly, we believe we are still well positioned and we have set the business up for continued strength. We continue to be optimistic about the prospects of the housing industry and our ability to execute. As we look at the big picture, we believe the fundamentals are falling into place for a measured and sustainable growth trajectory as employment, incomes, and household growth build. Also let’s not forget that average rents continue to grow and recent report show renting at a 38% premium over average mortgage payment. Appreciating these factors, advisors via home ownership should continue to be more appealing to future home owners. Turning to our land operations,…

Thank you. (Operator Instructions) We have a question from Mike Rehaut from JPMorgan. Please go ahead. Michael Rehaut – JPMorgan: Thanks. Good morning – good afternoon, everyone, nice quarter.

Thanks, Michael.

Thanks, Michael. Michael Rehaut – JPMorgan: First question I had was on the order trends. You mentioned that they came in – I think the sales pace is little bit better than expected. The year ago comps get a little bit easier, particularly in the third quarter, and you mentioned also that July was up a little bit sequentially versus I think, typically down. As things are trending, would you potentially expect sales pace to be up a little bit in the third quarter and the fourth quarter as – again, the comps get that much easier?

It’s a nice question, Michael. If you kind of go back to the beginning of the second quarter, really April was the only quarter that I would tell you year-over-year we were just slightly down. We were up nicely in May, June, and even up as you would expect with the comps, even up a little greater than that in July. When I look at sales year-over-year, certainly I would expect that trend to continue from an absolute numbers standpoint. But when I look at sales pace, sales per community, I would actually tell you that as we’ve moved through kind of the peak selling season in the spring, I would not expect our pace to move up per community. We’ve guided throughout the year somewhere between 2 to 5, obviously, that’s going to be accelerated in the first half of the year but it should average out to that as we move through the full year. Michael Rehaut – JPMorgan: Okay, I appreciate that. And – I guess, secondly on the community count guidance, I guess it looks like you’ve lowered it roughly 10% in terms of what you expect to end or average for the year versus previously. If I have the numbers right, maybe I’m a little off from using year end, but – I – certainly a little bit of lowering of guidance, maybe it’s more like 6%, 7%. Is that – I guess it’s all being driven by different elements of community delays. How much is perhaps more even intentional as perhaps you’re pulling back the range as you want to see demand continue to normalize in certain markets. And if there is any regions that you’re seeing it more than others because again it would kind of result in some lowered growth expectations, and just trying to think about next year as well.

Yes, let me try to make sure I capture the full intent of your question. You’re right, it’s not 10%, it’s probably closer to 5% if you were to go up to the high end over the range. What it really breaks down to Michael, it’s probably a community per division, and so – from a U.S. standpoint, we’re still going to be up some 27% year-over-year, and I would tell you it’s all of the above. We certainly have a few communities that we’ve had some municipality delays, we’ve certainly had some community delays early in the year, primarily in Texas when we really lost about – I hate to ever use – but we really lost about 90 days. And when you start pushing out a community, a quarter starts impacting your average, there are a couple of communities we actually sold out a little ahead. So there is not one trend that gets you to that, and then you have Canada, where we had a high rise tower also, complete sales. So there is not a particular trend or issue, just a little bit of everything as you look across the company. Michael Rehaut – JPMorgan: Okay, thank you.

Thank you so much.

And the next question comes from Adam Rudiger from Wells Fargo. Please go ahead. Adam Rudiger – Wells Fargo: Hi, thanks for taking my questions. I understand the profit versus pace and it’s been working because of the mix to the higher home prices. I was wondering when you thought that mix shift on prices would start to stabilize, and where that might then translate into unit growth and revenue growth that were more in line with each other? And then once that happened, are you okay with the flattening top line best that it translates into or as long as – in that environment if you’re in the – they targeted 2.2 to 2.5 order pace, are you comfortable with a flat top line if that’s what occurs? Sorry, there was a lot in there [ph].

Yes, I mean we will continue to be focused primarily on profit growth, right, that’s going to be our primary objective. From a unit growth standpoint, we continue to look at our strategy on a community-by-community basis, because candidly there are some communities depending on the local dynamics where we’ve already pivoted from price to volume. Having said that, as I look across the Board, generally we focus on price versus pace, so we really do make that decision in every individual community and for us it’s about balancing the impact of the overall portfolio. So I think by balancing that portfolio what that really does gives us Adam is it continues to give us nice accretion on the overall unit numbers as we continue to add new communities. Certainly it should give us additional accretion on the top line generating with the efficiency, we’ll continue to recognize and down to the bottom line for us.

And if I could just jump in there, you know, I think we’re going to see the top line continuing to grow as Sheryl said. And then, as the mix changes kind of within the region, that’s obviously going to have some impact per share. Ultimately, we remain committed being focused on growing the EBT line which for us is a balance between gross margins and SG&A leverage, in combination with our pace. So as we look at those leverage, we’re always trying to maximize our returns, really for us return on invested capital, by really – trying to drive, trying to maximize it and you start driving pace, you’re going to burn through your inventory a little bit faster than we had probably prefer. So it makes it difficult I think in the long-term to maximize the – kind of the full depth of our assets. So for us we really look at optimizing kind of our returns, our return on invested capital which is really balancing those levers throughout the cycle. So for us there is a difference between maximizing and optimizing rate [ph], it’s settled but we still think it’s an important one. Adam Rudiger – Wells Fargo: Okay, thank you. And then, can you – any – I’m not asking – I’m sure you’re not going to give guidance but any general comments you can make on your expectations for 2015 in terms of margins, just directionally?

Yes, it is something we’re ready to do that Adam. Certainly as we get into next quarter, we’ll be prepared to look at 2015 for the group. Adam Rudiger – Wells Fargo: Okay. Thanks for taking my questions.

You bet, thank you.

And we have a question from Alan Ratner from Zelman & Associates. Please go ahead. Alan Ratner – Zelman & Associates: Hi guys, good afternoon, and nice quarter.

Thanks, Alan. Alan Ratner – Zelman & Associates: Sheryl, on the community countdown, when you look at the reduction in the guidance there, I’m getting to something like 15, 20 communities from year end. When you think about the seasonality of the business and obviously, ideally it’s like to have as many communities opening up into the spring and selling season is possible. In the municipality delays that you’ve sighted, is this something where we should expect to see kind of catch up in 1Q next year, or would you expect these to kind of get blood out more evenly and this is kind of just – kind of a stop gap in the system that maybe you guys didn’t quite appreciate as much previously?

You know Alan, like I said, I wouldn’t tell you that there is a stop gap that will just bleed a bunch of – that will just throw a bunch of communities into the system in any particular quarter. Our openings – we have something like 120 new communities this year and our openings were fairly well timed throughout the year. But as I said, as you start seeing for whether, municipality delays, you start losing two or three months in that process and it really did impact the overall. So – no, I don’t expect – and the reason it didn’t impact our closing guidance this year is because candidly, it was probably some of the mid-year openings that weren’t contended for closings this year. So I think you’ll continue to see those come through over the next few quarters. Alan Ratner – Zelman & Associates: Got it, thank you. And the mortgage data you gave us was very helpful as well, I might have missed it but do you happen to have the DTI statistics for your first-time buyers and move-up, as well?

I do. Alan Ratner – Zelman & Associates: Then I guess it will be upfront and then back in, that would be helpful.

Do you have it right there?

Yes, 37%.

So 37% Alan. Alan Ratner – Zelman & Associates: That’s for the first half?

No, that’s actually the total – for Q2, it would be the average DTI. First-time – yes, I actually do have it, it’s 41%. Alan Ratner – Zelman & Associates: Great.

On the true first-time homebuyer. Alan Ratner – Zelman & Associates: Got it, thanks a lot.

Okay.

And we have a question from Stephen East from ISI Group. Please go ahead. Stephen East – ISI Group: Thank you, good afternoon. Dave, would you mind walking through a little bit – with little bit more detail – the guidance on your gross margin coming down – perhaps you talked about Canada normalizing with U.S., a bit slower than expected, maybe what’s going on there?

Sure. I don’t know that the U.S. is slower than expected, really in the U.S. – and this is for the back half, we have a mix shift coming from California which we achieve a very high margin dollar there but a lower margin rate than kind of our company average. And California is expected to make more of our closing as part of our west region than they have in previous quarters. So, as we recognize closings in some of these higher ASP communities like Urbane Ranch [ph] in Southern California. We see excellent margin dollars per unit, and in fact, in some cases the margin dollar per unit in California exceeds the ASP in some of our other communities across our footprint. We look at those margin dollars as an example for the second quarter, just in the U.S. that was 25% to $107,000. We anticipate that same margin dollar growth per unit year-over-year in the third quarter, but it’s going to apply a little bit of pressure obviously into the third quarter, into the fourth quarter.

I might add something to that Steven, clearly, as we improve our mix in California and you look at some of these very high end communities, probably most infamous [ph] things like we are buying ranch. I mean these are generating very, very significant dollars per door and so it’s kind of this catch22, you certainly want that improvement in your overall but that’s what’s going to drive your bottom line, but it’s going to put pressure on the rate. But all-in-all, we believe it’s absolutely the right thing to do. Stephen East – ISI Group: Okay, thanks. And then, one follow-on to that and then – a different issue, on the cost inflation side, what are you all seeing on this square foot basis? And then, Sheryl, if you could just talk about a little bit regionally, the demand trends you’re seeing and you mentioned the west and I was just trying to understand your community count growth versus your absorption rate decline, and then particular part of the U.S. and so, that’s really what I was looking for.

Okay. So, on the build cost, I think that was your first question Steven? Stephen East – ISI Group: Right.

We’ve seen approximately 2% to 3% since the beginning of the year with the first quarter taking about two-thirds of that pressure, and second quarter taking about one-third of that pressure. Stephen East – ISI Group: Okay.

Those increases as you might expect vary a bit, market-by-market, however framing labor, dry wall materials, and labor specifically – generally more on the labor side was probably the piece that was consistent across most of the businesses, lumbers, probably the one that fluctuates the most, outside of – obviously, with the exception of our Florida business. So, we’ve seen some ups and downs but generally, I would tell you that through the first half of the year maybe – actually it’s a little slower than we might have anticipated. As I look forward, we’re going to do everything we can to manage those pressures but as I said in my prepared comments, I expect that builders have significant deliveries for the second half of the year, we’re going to see that labor pressure pick up, similarly to what we saw at the end of last year. Stephen East – ISI Group: Okay.

Okay. On a market – so, now I’m going to move to the market. Yes, the market-to-market – let me just go through some really quick comments. As I start with Florida, we’ve had nice community count growth there anticipated for this year. We’ve had really nice sales growth and our average selling price depending on the market has probably moved anywhere between 15 to low 20 percentage rates. Our closings probably have had the highest growth in the country when I look at our Florida market. So traffic remains strong, closings are strong. The active adult business there continues very, very favorable. Texas, as I’m sure you’ve heard from everyone, continues to be really nice across all of our Texas market, I would tell you from a community account standpoint. We didn’t have significant growth; our investment in Texas was obviously within the Darling business. Our ASP had a very significant range depending on the product profile of low single digits to mid-teens, closings also at nicely year-over-year. And what I’m quite pleased about in Texas is really the margin, I mean Texas has always been known for this high turn low margin, and we continue to see that be a very nice high turned high margin business for us, and when I look at progress Darling has made in 18 months, I mean, my hats off to them. When I look at California, probably the largest percentage growth on a community count basis but the numbers are significantly smaller, so you got to put it in context. Sales have grown handsomely year-over-year, obviously with that community count growth even with a very significant – let’s call it 20% year-over-year average sales price increase. And as Dave alluded to, our margin per door in California is about 50% higher…

Thank you.

And we have a question from Nishu Sood from Deutsche Bank. Please go ahead.

Thanks, this is Ravi [ph] for Nishu. So when – I came about that kind of the profit over volume statements that you’ve made throughout the call, what kind of implications does this have on your land spend and your community count outlook. I mean, should we start to see land spend decline a little bit, and as you’re focused on margins and therefore you’re not going to be opening as many communities? And how should that trend into next year?

I don’t know that I would jump to that conclusion. Our land spend will be based on really the market conditions that we see. For this year, what we’ve said is we should end the year at about 210 average community count which is about 27% up, year-over-year in the U.S. We haven’t given any community count guidance for next year or spend guidance, but I’m not sure that the price over pace really impacts the way we would look at individual market supply and demand conditions.

Okay, got it. And then, you mentioned a few examples of active adult communities. So are you making more of an overall push into active adults? And what percentage of your communities are active adult right now and how large are these projects relatively to your other product lines?

We’ve been talking about our movement into adult really for a number of yes, so this isn’t a new push, this is in the right locations where the demand exist, we’ve been opening communities over the last few years, we’ve opened communities in Florida, obviously I spoke about a new one in Houston and new one in Denver this year, we’re opening one is Boston, Southern California, so really a little bit across the Board. When I look at – in the quarter, the mix – and I look at those sales and closings – I would tell you that active adult in the U.S. was about 15% of our closings through the portal and about the same on the sales side.

And how larger are your projects compared to the other, your other projects, are they similar size or –

As I commented, we tend to look at these more [ph] at 55-plus communities, and across the Board they would range anywhere from a few hundred units to – probably our largest is over a thousand, just over a thousand.

Alright. Got it, thank you.

Thank you so much.

And we have a question from Will Randow from Citigroup. Please go ahead. Will Randow – Citigroup: Hey, good afternoon, and thank you for taking my questions.

Hello, how are you? Will Randow – Citigroup: Good, good, thanks Sheryl. I appreciate of color and the changes you mentioned that are upcoming. I was hoping you could discuss your thoughts on two related topics. The first thing, have you seen any impact from FHA Hawk program in terms of benefit, that’s the counseling program to reduce your upfront fees, as well as overall collect cost of the mortgage? And then second, do you have any initial thoughts on the draft for private mortgage insurance given that we’ve seen a big pick up in that with FHA back loans as we’ve seen FHA loans lose share?

Yes, I would tell you that on the Hawk side, we really haven’t seen anything that’s impacted the business from – on Hawk, and probably, mostly because of just our general consumer profile. On the insurance side, I think we’re going to see that overtime. I’m hopeful that we’re going to see some movement there on insurance but I don’t think we’re going to see a lot of changes there candidly, till the end of the year, I think on the – just on the regulatory front in total, there is certainly some opportunities in front of us on FHA, on fees, I just think given the current environment it’s going to take sometime. Will Randow – Citigroup: And then just on – in terms of the sub-market color you provided on Phoenix, and that really putting on a ton of incentives outsides a master plans. Have you seen that market stabilize in the same way we’ve seen that some of the markets have probably have been – you mentioned Mark [ph] on the last call, if I remember correctly. Have you seen kind of stabilization year-over-year in orders, not necessarily absorptions versus down pretty dramatically in the first half?

I think that well positioned communities in Phoenix continue to deal really well. We don’t happen to have any penetrations in there, that they use that to show the extreme of what’s happened from a permit standpoint year-over-year. But when I look at our new communities and when I look at one of our competitors new communities that opened in desirable sub-market, they do just fine. So if I take that and I take kind of the adjustment period that I think the market needed to go through because I think we would all agree that there is a lot of movement quite quickly in about 12 or 15 months. And then, you kind of layer on I think the opportunity that we have one the change coming that I just described on Fannie [ph], I think the markets going to be just fine. Will Randow – Citigroup: I appreciate the color, and congrats on the quarter.

Thank you, I appreciate it.

And we have a question from Alex Barron from Housing Research Center. Please go ahead. Alex Barron – Housing Research Center: Good afternoon, and great job on the quarter.

Thank you. Alex Barron – Housing Research Center: I just wanted a little bit on the guidance for the deliveries this year, so you’ve given us third quarter and I guess we can back into fourth quarter, but just to make sure – I guess that implies on units in Canada, is that correct? Is that like tower or what’s going on there?

Are you talking about moving for the fourth quarter Alex? Alex Barron – Housing Research Center: Yes, yes. And then, I guess a follow-up to that would be – you guys have some plan in place for that – there is not a huge drop fourth quarter of 2015?

Well, I think – I’ll start maybe on the reverse order. Our high rise business does create some lumpiness, so we do see that from time-to-time. We delivered three towers last year between wholly-owned and JV, three towers this year compared to ‘12 where we didn’t have any. So, there will be some lumpiness from that high rise business. But…

So you will see a drop off.

You will see a drop off.

Yes, I think we can be certain of that since we don’t have a tower next year. Sorry. Alex Barron – Housing Research Center: No, that’s fine. I guess I just wanted to make sure I was understanding that correctly. And then, I guess my other question was, I think you guys are trading at a pretty low level compared to other builders. Would you just consider like some type of a share buyback if you think your shares are undervalued at these levels?

Probably not right now. I think as we look at – we’re to deploy our capital, we still think investing in the business is going to provide the ultimate, greatest return for us in the longer term. Alex Barron – Housing Research Center: Okay, great. Thanks.

Thank you.

And we have a question from Jim Krapfel from Morningstar. Please go ahead. Jim Krapfel – Morningstar: Hi, good afternoon. Thanks for taking my question.

Sure, how are you Jim? Jim Krapfel – Morningstar: Good, thanks. In your prepared remarks, you’ve mentioned your just-in-time development philosophy, I just like to hear you elaborate on that a little bit and what you see longer term in terms of your land purchase needs, maybe as a percent of land that you see under options and how much you would like to ultimately engage in from the permitting and the developments of land. Just can’t see how you approach the capital intensity of the homebuilding industry.

Yes, and what was the first part of that question. Just in time development, thank you. Okay, on the first part of your question Jim, if you look back historically, I think builders got themselves in trouble in a couple of places, right. One would argue that there was a lot of land brought at the top of the market, and I think the other challenge that some builders had was – the paces were so strong and the development that got in front of builders put a lot of finished lots on the ground. So, we take that – we take both ends of the land equation quite seriously, and the teams have a significant rigor around their development strategy, and how many lots they put in front of the business, and they bring those request through our investment committee to make sure that we don’t ever end up in a place, you don’t want to run out of lots but we don’t want to have a two year supply of lots in front of the business. And because we have a longer land bank, we’re not trying to fill whole – we’re trying to purchase finished lot. So we just said it’s really a balancing act to make sure that we don’t get cut short but we don’t invest that capital quicker than we need to. When I look at our land purchase needs moving forward – as we’ve said, we expect in total between land and development to spend somewhere around $1.2 billion this year. One of the things that we are seeing this year and I think we’ve talked about it in prior quarters is, we are seeing the development side of our business ramp up compared to prior years given the amount of acquisition that we’ve done the last two or three years, we’re now actually investing to bring that to market. In addition, I would tell you that we will always look to optimize the deal structure and if options make sense, and we’re in a market where we can do that, that will always or seller financing, that will always be our priority. We’ve been averaging somewhere between 70%, 75% – around 25%, 30% controlled, to the extent that we can continue to control more as compared to own it, that would always be our first preference. Jim Krapfel – Morningstar: Thank you, that’s very helpful.

Thank you.

We have no further questions at this time.

Okay, thank you very much everyone today for joining our Q2 call. Have a wonderful evening.

Thank you, ladies and gentlemen. This concludes today’s conference. Thank you for participating. You may now disconnect.