Good afternoon. My name is Dawn and I will be your conference operator today. At this time, I would like to welcome everyone to the Toll Brothers Second Quarter 2012 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator instructions). Thank you. Mr. Douglas Yearley, you may begin your conference sir.

Thank you, Don. Welcome everyone and thank you for joining us. I'm Doug Yearley, CEO. With me today are Bob Toll, Executive Chairman; Marty Connor, Chief Financial Officer; Fred Cooper, Senior VP of Finance, International Development and Investor Relations; Joe Sicree, Chief Accounting Officer; Kira Sterling, Chief Marketing Officer; Mike Snyder, Chief Planning Officer; Don Salmon, President of TBI Mortgage Company; and Greg Ziegler, Senior VP, Treasury. Before I begin, I ask you to read the statement on forward-looking information in today's release and on our website. I caution you that many statements on this call are based on assumptions about the economy, world events, housing and financial markets, and many other factors beyond our control that could significantly affect future results. Those listening on the web can e-mail questions to rtoll@tollbrothersinc.com. As has become our regular practice, we are going to limit our prepared remarks to provide more time for Q&A. Since our detailed release has been out since early this morning and is posted on our website, I'm sure most have read it, so I won't re-read it to you. Today, we reported fiscal year 2012 second quarter net income of $16.9 million or $0.10 per share. Our second quarter included a $1.2 million net tax benefit, $2 million of pretax inventory write-downs and a $1.6 million recovery of prior joint venture impairments. Our second quarter revenues and home building deliveries of $373.7 million and 671 units rose 17% in dollars and 14% in units versus 2011. Our second quarter net signed contracts of $754.7 million and 1,290 units rose 51% in dollars and 47% in units versus fiscal year 2011. The average price per contract was $585,000. We signed 5.61 units per community this quarter, the highest for any second quarter since fiscal year 2006. Our second…

Thanks, Doug. Second quarter home building cost of sales before interest and write-downs as a percentage of homebuilding revenues was 76.8%, compared to 77.0% in 2011's second quarter. 2012's first quarter was also 76.8%. Our steady margin for Q2 compared to Q1 of 2012 reflects the dampening effect of purchase accounting related to settlements of backlog and quick delivery homes in Seattle, offset by the positive effects of higher-margin settlements at our 1450 Washington Street high-rise community in Hoboken. Second quarter interest expense included in cost of sales dropped to 4.7% of revenues from 5.1% in fiscal year ‘12's first quarter and 5.4% fiscal year ‘11's second quarter. The improvement over the prior periods was caused by deliberate inventory being held for a shorter time and mix. There was also no directly expensed interest in the current quarter or fiscal first half. Second quarter pretax write-downs of approximately $2 million included $2.6 million attributable to operating communities in a reversal of $600,000 attributable to land controlled for future communities. In addition, in our joint venture line item, we had a $1.6 million recovery of a prior impairment on a joint venture. Second quarter SG&A of approximately $68.3 million was lower than the $69.6 million in the first quarter of '12 and higher than the $67.1 million in the second quarter of 2011.

Excuse me, is this the first quarter of 2011?

2012

You assist well?

Yes. As a percentage of revenues Q2 fiscal year 2012 SG&A was 18.3% compared to 21.6% in the previous quarter and 21% a year earlier. The improvement as a percentage of revenues is due primarily to higher revenues. Second quarter other income and income from joint ventures, excluding impairments, was $17 million, reflecting the strong performance of our urban New York joint ventures and a contribution of $5.2 million from our Gibraltar operations. The average number of shares used to calculate earnings per share was approximately $168.5 million for the second quarter. Subject to our normal caveats regarding forward-looking statements in today's release and in our SEC filings, we offer the following limited guidance. We ended second quarter 2012 with the backlog of 2,403 homes aggregating $1.5 billion which was 49% higher in dollars and 37% higher in units than second quarter of 2011. We expect that deliveries in 2012 will be between 2,700 and 3,200 homes. We also expect to deliver about 10% more homes in the fourth quarter than in the third quarter. Our average delivered price per home in the second quarter of 2012 declined to $557,000 due to an expected shift in geographic and product mix. However, the average price in our current backlog and our net Q2 2012 signed contracts was $624,000 and $585,000 respectively. Thus, we estimate the average delivered price per home for the remainder of the year to rise to be between $560,000 and $580,000. Since we normally closed more homes and record more revenue in our third and fourth fiscal quarters, we expect SG&A to be higher on an absolute dollar basis, but lower as a percentage of revenue. Finally, as Doug mentioned, we have had a strong spring selling season which will result in us selling out of more communities than we had previously estimated. As such the guidance on the range of selling communities expected at year end has been revised to a range of 230 to 245 selling communities from 235 to 255. At this point, I'll turn it over to Bob.

Thank you, Marty. Our domestic and global headline risk remains a concern that could potentially undermine buyer confidence with mortgage rates at historic lows and inventory supplies dropping in many markets, we are feeling better than we have at any time in the past five years. In some locations, it is no longer a buyer's market. In a few locations, it's even a seller's market. We would like to say we're back, but we need a little more confirmation. Nonetheless, it sure feels good compared to the desert we've just crossed. Doug, take the questions.

Thanks Bob. Dawn?

At this time, I wanted to remind everyone (operator instructions). We’ll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Stephen East, with ISI Group.

Thank you. Good afternoon guys. Doug, if you wouldn't mind, could you talk a little bit about on your orders, your West and your South, just the huge blowout that you had in the West and then what do you think is happening in the South that makes it a little bit different than the rest of the country that you're seeing?

For the West is attributable with Seattle. Remember, that's a new market for us and CamWest is – our Seattle operation is now fully integrated, in action, and having a great spring. So, that's the big difference. We did not have Seattle a year ago. And the South, Florida, primarily East Coast had the best spring season we've seen in five years. We are primarily a second home builder down there and that buyer is beginning to come back, feeling better coming out of the Northeast, Mid-Atlantic, Midwest, and I think that's primarily what's going on. We also include Texas in our Southern division, and Texas is doing really well, particularly Dallas.

Okay. And then, if you look at the land, just what you're seeing out there on the land front, both in your Toll business and Gibraltar? I'm really interested whether, one, you're seeing deals available, but two, what the pricing looks like and are you seeing much in the way of distressed?

We spent $124 million on new land in Q2. Deal flow is good. In many markets, it is approaching retail, because there is a lot of money chasing limited numbers of deals. In other markets, where our competition has been blown up and we don't have the nationals hanging around, we tend to see lots of deals at good prices. So, it's a very, very local business as we've always said. But we're pretty happy with the deal flow. Stay tuned, we have some pretty big deals to announce over the coming months. Gibraltar, better than average? We haven't done a deal in some time, but we have some pretty good opportunities we're looking at. We have pretty much given up on the big large national portfolios and we're focused on the more local and regional banks and trying to do private transactions with those companies, with those banks.

Are you seeing that part of it increase?

I'd say it's about the same, maybe up a little bit.

I would say, we're seeing more portfolios, but they are of smaller size.

I got you. Alright, thanks.

Your next question comes from the line of Michael Rehaut, with JPMorgan.

Thanks, good morning everyone. The first question I had was on the gross margins. You've been able to really be very consistent in this number overall in the 23% range now for five quarters. Is there any reason to think that that wouldn't continue into the back half of the year and given maybe some of the success that you've had and the year-to-date with some, perhaps positive pricing in some regions, we wouldn't maybe expect a little bit of expansion into the back half of the year or into next year?

I think at this point, Michael we're comfortable with an expectation of flat margins through the end of this year. As we get into next year, we haven't analyzed in tremendous detail but we will be benefited by a particular building at 65th in Lex that we'll deliver in the first half of next year. We will be benefited here a little bit in the third quarter of fiscal year '12 by further deliveries out of 1450 Washington Street and 205 Water Street.

First one being in Hoboken and the second one being in Dumbo.

Correct. And that will dissipate a little bit in the fourth quarter simply because this is a lumpy business. When you start to deliver it, it delivers significantly in one quarter and then is a little bit smoother thereafter and those are only two buildings, so that thereafter it gets water down a little bit, if you will by the other 228 communities we sell from. So, I'd like to set expectations flat through the end of this year.

I guess, second question. Looking at the SG&A, you had some nice improvement year-over-year this quarter. I think you've talked about a 68 million type of number exclusive of or perhaps inclusive of – maybe you could remind us again on the commissions, but how should we think about that for the back half of the year and also into 2013?

I think the G&A component is relatively fixed and I put that at about $44 million to $46 million for each of the next two quarters and then the S-piece generally runs at about 5.5% in the third and fourth quarters of our fiscal years of revenue.

Perfect. Thank you.

Your next question comes from the line of Joshua Pollard, with Goldman Sachs.

Hey, thanks for taking my question. A couple of things; first, the reversal of write-downs that you guys have both on the land side and on the JV side, I really like to walk through what causes that for you guys and what you feel is the longer term opportunity for that, obviously, across the group from peak to trough, the builders have written down somewhere between 40% and 50% of the inventory and the opportunity for reversal isn't something that's been heavily discussed across the industry? I just wanted first builders to take some of these, particularly JV in our national column write-ups. What is the opportunity for you all?

Josh, I'm happy you asked the question. Go ahead Bob.

The first thing I want to caution them on is that while you write land down, as – apparently it can throw off less and less type of housing – less expensive housing. So, if you go below the line and you're not making anything. While you write down ground, you don't write it up. So…

Exactly. You take that in margin, correct?

Correct, and that's why I'm glad you asked the question. So, on the recovery we reported in our cost-of-goods sold associated with land controlled for future communities, that was simply an option. So, at one point, we litigated over the option and we're on the wrong side of the decision and now we have settled at an amount less than we had reserved.

So, we should think of that as more legal than an actual write-up?

And then, the joint venture impairment is associated with a project where we have estimated future development costs that have turned out to be less than we had estimated and we've actually recouped cash from that venture. So, they are unique situations. It's an appropriate assumption to believe that you generally can't reverse impairments. These were accruals, not necessarily write-downs of land.

Thank you. That is good to hear. You almost threw a den in something that I had believed for quite some time. My second question is just about your medium-term land strategy. It's well-documented that you guys have got double -- gears of land, and so my real question is, when you spend $125 million in a quarter on land, when are you planning to use that particular suite of land on average. I'm really just trying to get a sense for how much we should expect Toll to pull from the existing land they currently have as we look out over the next couple of years and how much more we should really be expecting you ought to buy and need to develop?

Joshua, the land we buy today comes in all variety. Some is fully improved ready to go, some has several years of entitlements left. But everything we buy, we are not buying to mothball, we are not building in inflation and buying it hoping that the market improves and one day it will work. Everything is underwritten to work today and it just depends on the status of the entitlements is the way that we bring it on. The average land that we own right now has about, Gregg, a four year?

Four year age, yeah.

Four year age to it. But that goes back with some real legacy land. So, I would say the newer land you would think would have less than that, unless of course, it becomes a very large community with the long build out. So I think you'll see a mix of the new land we're buying and the older land we own.

Okay. And if I could just sneak one last one in. This is actually for Bob. Bob, you've obviously seen a number of these downturns and then pickups, I’d love to hear what your view is of what happens to the traditional seasonality of the business. We saw a significant breakdown in seasonality over the course of the downturn. Does it work the exact opposite when you get into the early years of a pickup such that may be, this spring selling season will just push itself all the way through June and July or would you expect normal seasonality to play a part here? Thank you very much.

You're welcome. I think more than likely you're going to see ordinary seasonality as opposed to an expectation being fulfilled of continued action more typical of February, March and early April. I don't think that you’ll see that kind of excited demand during July and August, I think as a matter of fact during June, July and August probably. On the other hand it's not dead, which reflects very positively for us during the, we call them wandering in the desert years, we hope we've just gotten through. When you got into the dead season of June, July you went way down and it was very disheartening, we don't expect to see that anymore. So, like we answered the most question a little of this and a little bit of that.

Thanks guys. Appreciated.

Dawn, before we take the next question, I wanted to have Don Salmon who runs our mortgage company to give the Group a quick update on the mortgage world.

Sure. Doug, conforming rates today are astoundingly low 3.5%, jumbo rates are 4.5%, jumbo liquidity is improving every day. We are currently talking to six different brand-new jumbo investors each of whom is bringing either better product or better pricing or a combination of the two. We now have an 18 month lock option, which we haven't had since Moby Dick was a guppy. We have competitive 12 month options that are more competitive than they were in the past and to put it in perspective of 5.1on arm today is 2.25% on a conforming loan 2.78 on a jumbo loan for a 5.1 on arm, 7.1 on arm is 2.58. Just liquidity and pricing of mortgages is very, very strong right now. But when I say liquidity, I mean with portfolio there is a very little action in jumbo securitization. There is still Fannie and Freddie on the conforming side, but most of the jumbo is still portfolio, although we talked to a couple of REITs that hope to do securitizations before too long.

Thank you, Don.

Okay, Dawn, we are ready for the next question.

Our next question comes from the line of Ivy Zelman, with Zelman & Associates. Ivy Zelman - Zelman & Associates: Okay guys. Good afternoon and congratulations on a great quarter. Would love to understanding you may not be able to give too many specifics but your strength in the made on binding contracts was – deposits, sorry was impressive. Then there has been a lot of concern more recently in the last several weeks that the stock market rolling over and renewed concerns over European troubles and also, of course, a big fiscal spending cuts and tax increases. So, many are thinking especially on the Tri-State area that people aren't buying houses anymore in Westchester, especially at the high end and that you guys can be out disproportionately hurt by this on a go forward basis. So, to me deposits was actually, obviously, good news to see that continuous strength. But are you seeing weakness in any of these areas and when you think about your buyer and who is in the market today. I recall back in 2006, unfortunately not to reign on your parade, but I think you guys were thinking things were getting better then. Why is this difference in time in your opinion and why you feel more confident this is potentially the sustainable recovery? Are consumers buying because there – the typical reasons employment, babies, things like that? So, I appreciate your comments. Thank you.

We went into that on the monologue, Ivy, reaching down to the Florida and pull the section back out, where Bob says, while domestic and global headline risk and that's what you're talking about, I believe, remain a concern that could potentially undermine buyer confidence with mortgage rates at historic lows and inventory supplies dropping in many markets. We're feeling better than we have at any time in the past five years. True it is this is brought to you by the same fool that in '06 had the demographics as such that there are no way that we're going to see that bubble pop. We are, as I believe, (indiscernible) said entering a new paradigm or that this time it's different, while it wasn't different than down we went. What's significant about where we are now, is that the release today coming out of Census and HUD points out that we have 343,000 annualized seasonally adjusted new home sales, and while the release talks about, this is up 3.3 over March and it's up 9.9 over a year ago, we're still talking about 343,000 new home sales seasonally annualized. Compare that to the last – before this was terrible recession, 40 years where we averaged one million new home sales. This release says that we have 5.1 months in inventory, but that's talking about a 343,000 type year. What if you get a 600 type year? If you get the demand, and I think we see it increasing that continually builds on this 343,000, we won't have the capacity to produce it. We won't be in a place as an industry to deliver the product, and what happens when there's no product to deliver, you get what you're seeing now in New York City, and the 6 Barrow Hoboken,…

Well, we're pleasantly surprised. We concluded our national sales events in April and did not expect to see any kind of follow on deposit demand such as we have seen. It's not unbelievably over the top, but it's strong enough to make us feel pretty good because as you have said with all the bad news coming out of the world we're very concerned and watching our backdoor as much as our front. Doug, anything to add?

No, that's it. Ivy Zelman - Zelman & Associates: Can I?

Yeah, sure you can. I thought you're done. Go. Ivy Zelman - Zelman & Associates: I was just going to ask if you can elaborate on some of the reasons that people are buying, I know Doug, I always ask you this question, but you once talked about selling 17 houses in a weekend and there were $1.06 million a pop in Westchester and it was the month after the US debt was downgraded and you said people are tired of waiting. Do you have any commentary that help support what the consumers are saying when they are coming in and buying these expensive homes.Are they just again typical reasons or are they really just focused on the fact that mortgage rates are so low and home prices are down so much and they are not as afraid, just any color would be helpful?

Yeah, I think its five years of pent-up demand that is now coming out, people have put their lives on hold now for half a decade and they are ready to go and the interest rates are great, they feel better about their job security, they feel better about their ability to sell their home, the headlines are good. Every so often we get a great story about a bidding war. We have the story ourselves Hoboken in last month; a couple comes in to buy a condo at 1450 Washington, which is our Hudson Tea community. They are torn between two units, the realtor encourages them to go to lunch for an hour and come back, they go to lunch for an hour, they come back both units are gone. If story is like that, that are making people feel like now is the time to buy and they are isolated to one building in Hoboken. So I think people are just ready. They are feeling better. The confidence is up. The interest rates are there and they've been waiting so long to move on with their lives that they came up this spring.

I think they are also comfortable that house pricing has hit a floor and is not going to get lower next week.

That’s right. Ivy Zelman - Zelman & Associates: Well, that’s very helpful guys. Congratulations and thank you.

Your next question comes from the line of Megan McGrath with MKM Partners.

Good afternoon. Thanks. Just a sort of follow up to Ivy's questions around your performance. Years ago I think there was this fear that you guys couldn't grow faster than the market. You were going to lag because you needed the buyer’s, buyer’s, buyer to come back and clearly we've kind of debunked that by now. But just curious, when you think about the reasons why you are doing better, let's say, than the existing market, I can think of your particular regions are doing better than the U.S. You are gaining share from your competitors. Maybe you have some actual first-time buyers in the mix. How would you rank your 47% versus the let's say 10% that the overall market is growing. Where is the most of your gains coming from?

I think it is coming from a lack of competition, number one. We've talked about our home here in Philadelphia where we used to compete against 10 or 12 small local builders and now it’s about 2 and I think that's probably true for many of our markets. So our competition was hurt the most through this downturn. They were dependent upon local and regional banks that gave up on them and they are out of business. So I think we have a huge advantage there. I think our brand has helped us significantly. I think our staying power through this downturn and the confidence we give our client that we’ll not only complete their home, we’ll complete their community so they won't have weeds growing in the lot next to them and we'll service the home after closing. So I think all that's helped a lot and we're seeing it right now. We talked about chief mortgage money, but we have – our clients can get a mortgage. So it's available to our clients. The paper work is tedious, but we've got 755 FICO scores. We’ve got 30% down on average and we really don't have problems qualifying our client and I think that has helped us a lot in the luxury end.

I think another element is that we've got what they want and I think that's a significant part of the reason as to why we're doing better than the average market.

Location, location, location.

Okay, that’s great. And then just a follow-up on the cost side. We're starting to hear the first whispers of cost inflation in some of the input costs. Are you feeling that at all yet and what are you most worried about in terms of cost inflation?

I think there is some validity to those whispers. I think we've seen about $1,400 to $1,600 of cost creep per house. We're seeing it a little bit in concrete, we're seeing it in lumber and it's not being offset by labor savings. I think over the past four quarters we talked about labor savings and I think we've squeezed all the juice out of that orange at this point.

Great. Thank you.

Your next question comes from the line of Joel Locker with FBN Securities.

Hi guys. Just – I was looking at the nonbinding deposits and do you got a comparable on the second quarter also, what they were up year-over-year on a gross basis?

We do. Give us a moment while we drag that out.

You mean for the first quarter?

For the second quarter (inaudible). Second quarter to second quarter.

Compared to May. May, they were up 39%. Maybe while you look at that, just on the community side, how many mothball communities have you un-mothballed and how many do you leave in the mothball?

We have about 90 plus or minus mothball communities. We've only brought a couple out in the last year and for the balance of this year we only expect to bring one more out.

Just one more out? And what about beginning of 2013, are there a lot more in the pipeline to bring out or are you still -- it's just kind of wait and see basis?

Wait and see.

These mothballs are what have been impaired and we're waiting to see the white through their eyes before we bring this stuff back out. Mike, could we get a number?

We’re looking at it.

Still working on it.

And I guess the price – what kind of price increases did you see from either lower incentive or price increases on your average house across all your communities from the beginning of the second quarter to the second quarter? Would you say 100 basis points or…?

Marty?

If we go second quarter to second quarter, in our contracts, incentives dropped around $9,000. Did I look at the right second quarter? Yes, I did, okay. And I think through that period of time, we had not been pushing price increases all that significantly. It's really been over the last two to four months that I think we'd say we had some price increases and they have been kind of nominal because we're worried about scaring away any demand than we do find, New York being an extension.

Yes. I think the average is nominal. I think where we've been able to raise prices. We’ve been raising them pretty healthy and where we're not, we're not. So, the average is nominal, but…

Good point.

But where we're raising them in certain markets and for certain products it's a very healthy raise.

Would you see raised prices on maybe a quarter, quarter of your communities or so from the beginning of the second quarter to the end of the second quarter just in the last three month period?

I think its north of that, but probably not by a whole lot.

The question on deposits for the second quarter basically trended identical to what we just told you for the first three weeks of the third quarter. They were up 40% on a growth basis and 23% on a per community basis for the entire quarter.

All right guys. Thanks a lot for the info.

Your next question comes from the line of Wayne Cooperman with Cobalt Capital.

Hey guys, how are you doing?

Hi. We’re doing well.

I mean now that the business has picked up again, you guys are pretty healthy as far as inventory. But do you see increasing your amount of inventory as far as just finished lots or dollars? Or are you kind of in the mode of running inventory where it is and bringing it down?

What does he mean by inventory? I just don’t…

Your lots inventory. Do we need to spend a lot more money buying a land now because we're in a growth mode or you guys were smart enough to have a lot of inventory picked up at the bottom?

Actually it was surprising that for many of the years in the desert we were not seeing what it seemed we should be able to see, which is distress land deals at distress prices that led to spectacular buys. We are now seeing more good deals at more good prices on average that we have for a long time. We are opportunistic. If a good deal comes we go. If a good deal doesn’t come then we sit. So I can't give you an answer… Wayne Cooperman – Cobalt Capital Management: You don't have a sense whether your dollars in inventory is going to need to grow a lot to hit your goals the next few years or you can do it with what you've already got?

We have 12,000 plus improved lots in communities we are selling from right now. So while we want to add lots because we think it’s a great time in attractive pricing, we don't need to.

Right, because some of your competitors probably let the lot count get pretty low and then aren't in a great position anymore.

I don't know. I would imagine that a great many of them were as we were in pairing stuff with black top and in a position to put that stuff back into market. So I don't necessarily agree.

Got you. Okay, thanks.

Your next question comes from the line of Stephen Kim with Barclays. Stephen Kim – Barclays Capital: Hey guys, congratulations on a good quarter. I guess my first question relates to your inventory. You guys are one on the few builders that doesn't actually provide a breakdown of inventory in such a way that we can arrive at a work in process number, sort of the sticks and bricks. And I was wondering if you could give us some guidance as to what that number was this quarter.

What have we got Greg?

So construction in progress at the end of the quarter was about $1.85 billion.

What does that compare to at yearend?

$1.7 billion.

Great. And then the second question I had for you relates to pricing. This is something that I've been very intrigued by for months and you guys have really demonstrated probably greater ability to modulate price in your community than just about anybody else. A lot of people sort of attribute that to the fact that you're catering to the higher end and I was curious as to whether, because even within your higher-end mix or higher-end product; you have a pretty wide range. Are you in general finding that in the communities which are higher price point or higher end, given the region you're in, that those are the communities that you're able to move pricing up either to reduce incentives or actual base price increases or anything like that? Or is it really just coming down to the particular land buy that you've got, in other words the location of the parcel no matter what price point it's in?

My answer is location. I think that's it. It's as simple as that. We've always maintained and we strongly believe that in a good market we can move our 600 house to 850, a lot quicker than the 275 house gets to 350 or 375. Our buyers are putting more down. They have the ability to pay more for the house. We think we have fabulous locations and I think we've always proven out that we can drive that price pretty quickly in a hot market. Right now where we have pricing towers is all about location, it's not about price.

Great, appreciate it. Thanks very much guys.

Excuse me. Certain place, it's a market as opposed to a location in a specific market. The whole market in general is fabulous.

Dawn, we have an Internet question from Alex Barron. How many homes were included in the orders this quarter from CamWest? The answer is 90. How many last quarter? The answer is two, but that's because there was a change in some deposit rules. We had to digest CamWest and understand that their deposit amounts were strong and were not leading to more cancellations than we were seeing nationwide and once we became comfortable with that we were able to count their agreements as true agreements within our internal underwriting practices. And the last part of that question is, what was the impact of purchase accounting and basis points on the gross margin coming out CamWest? Marty?

Gross margin out of CamWest was about half the 22% gross margin we had – 23% gross margin we had.

Okay. Dawn, back to you.

Your next question comes from the line of Jack Micenko with SIG. Jack Micenko – SIG: Hi guys. Thanks. I'm wondering if you could answer the same question for the City Living as that prior CamWest question. How many orders came from the City Living product this quarter?

For Q2 2012, we had 102 contracts coming of City Living. But just to be clear, that includes two joint ventures that fall within the City Living brand. If you want for comparison purposes, Q1 of 12 it was 107. Jack Micenko – SIG: Okay, great. And then thinking about the community count and the high-class problem of selling through faster, can you give us a sense of which regions will see the greatest community count shrinkage because of that sell-through prospectively in the latter half of the year?

What do you think, Gregg?

It looks like California has a decent number of closings in the back half of the year and then Texas has a few closings and Pennsylvania. We do have that offset of course by quite a number of openings that we expect for the rest of the year and Pennsylvania and Texas hopefully will benefit from those openings. Jack Micenko – SIG: Okay. But if the momentum continues is there an opportunity to bring any mothball in those states on just to keep the momentum going or do you want to revisit and start from scratch on those?

It depends more on the pricing than it does on the momentum. If we've got strong demand but we can't push the price, then the mothballs will stay white and around. But if we see pricing power coming out of the market then we'll bring the multiple communities back out to life. Jack Micenko – SIG: Great. Appreciate it. Thank you.

Your next question comes from the line of Adam Rudiger with Wells Fargo. Adam Rudiger – Wells Fargo: I want to ask again about gross margins. I'm following one of the earlier questions. I'm surprised you're – maybe you're just being conservative, but why aren't you more confident you can grow gross margins if you have incentives that are down, costs that are up modestly, much less than incentives, and you have CamWest purchase accounting winding down and you have price increases in more than 25% of the communities. Why wouldn't that give you confidence that you can have some better gross margins going forward?

Wait a minute, over what period of time?

Next two quarters.

No, I mean, the next…

That’s the answer. Go ahead Doug.

Right. I think some of the price increases we've achieved are going to be reflected in fiscal year '13’s deliveries, not in '12’s. I did mentioned earlier we've seen some cost creep on the houses in terms of the cost and so we want to be a little bit conservative as we project forward. And I think when you look at the incentive reduction data I gave you that was year-over-year if you went six months over six months it would be much less than that. A lot of the incentive reduction was front end loaded for the first six months. Adam Rudiger – Wells Fargo: Okay. Just trying to square in some of the commentary because you are talking about having product people want and the Hoboken example and lack of competition and things like that and it doesn’t sound very positive and there just seems to a little disconnect with that not trend relating into higher gross margins and the ability to raise prices.

I think part of it is timing. Remember it generally takes us about nine months to deliver a home. So the stories we’re telling of this spring if it’s a to be built home, we won't be delivering until Q1 or Q2 of '13.

Okay. So can I interpret that we should see that you are more confident that next year we’ll get some better expansion?

Now, wait a minute guys. Don't draw your breadth to get ready to answer that question because it's been asked. I pass.

Thanks for your time.

I was going to pass.

You want a pass? All right, thank you.

Your next question comes from the line of Alex Barron with Housing Research Center.

Hi. Thanks for answering the other questions. But I wanted to ask you about Gibraltar, the $5 million you guys earned this quarter. How should I think about that? How much of that is recurring income versus how much is maybe of a one-time nature?

I would look at that $5.2 million in three buckets, each of them about equal. About a third of it was accretable yield, interest income recognition, which is recurring, a third of it was settlements of loans, and a third of it was gains on foreclosures of real estate. The latter two of those are not projectable. We hope to have them, but I wouldn't call them recurring.

Okay, that’s helpful. The other question I wanted to ask was on your deposits comment about being up I think it was 39%. Is that kind of an apples-to-apples, since you’ve got CamWest, or is that apples and oranges because it includes CamWest? In other words, without CamWest, would the number be lower?

I think on a gross we were 39% up and per community we were 23% up. The 23% is apples-to-apples.

Got it. Okay, thanks.

Your next question comes from the line of David Goldberg with UBS. Sue – UBS: Hi. It's actually Sue on for David. One quick question for you. As things have started to settle and conditions are slightly improving out there and more privates are now sort of looking at how they're going to grow their businesses as demand returns, are you seeing that more of them are potentially willing to talk to you or at least willing to consider doing some M&A or some kind of a partnership with you?

No. The M&A business is very quiet right now, I think for good reason. The big builders are using their capital to handpick individual pieces of land that make sense. Whenever you buy a builder, the number one asset of course is always the land, but with that, you get good land, average land and bad land, and you mix it together, and right now, we'd rather use our cash to go after the individual pieces that are out there and only go after the good ones. And so unless it is a distress deal, and there's very few of those right now, we're just not seeing any offerings to speak of.

Along with land on typical M&A comes a lot of personnel, a lot of overhead.

We don't need that.

That isn't necessary. So it's tough to make the buy. If a guy wants to sell himself and his buddies for a profit as well as selling his land, it's a difficult sale.

Right. We've done seven deals. Every one has been to enter a new market and when you enter a new market you need to brand, you need the overhead, you need the contractor relations, the land relations. Right now we're very comfortable with our geographic footprint. And so I don't see us going after a builder then or a new market. Sue – UBS: Okay. And then as you have seen buyer confidence get better and the fact that it is relatively – your buyers are able to qualify for mortgages, are you seeing any changes in the kinds of options or upgrades that they're taking?

We've discussed that through the downturn, our clients have spent about $110,000 per house on average for upgrades. It's certainly taken them a lot longer to decide to buy. They come back many more times, but once they press firmly and decide they want a house and we get them to go to our regional design centers, they load it up just like they did in the good times. So we really haven't seen any change in that. Sue – UBS: So, it's been relatively flat in the last quarter?

Yes, for options for a single family homes it's – for both Q1 and Q2 it's been about $115,000. Sue – UBS: Okay, perfect. Thank you.

Your next question comes from the line of Dan Oppenheim with Credit Suisse. Daniel Oppenheim – Credit Suisse: In terms of looking at some large land deals right now that could come through, how much of those are you thinking about in terms of finished lots that could come on in terms of 2013 community account? Just wondering as you've talked about moving through some of the current communities more quickly than expected and any chance some of those will be replacing the California communities that are closing out at the end of the year?

We're not ready to comment on any land deals that are coming through as I said earlier. It's everything from very large un-entitled pieces of land that need to get processed to very large fully entitled to very small fully improved with roads in. It's the normal variety that we see all the time and when that comes through it's just dependent upon the individual piece and where the permitting stands.

The key part is it's also determined by the government. Some places have nasty government and some places welcome you. Doug didn't mean to imply at all that we'll buy land and then slug away through the approvals without it being – the sale being contingent upon securing the necessary approvals. We generally do get the approvals and do go through with the acquisition, but in some places it can take five years and in some places it can take one year.

Right. We have not changed our business model where we will tie up the raw land, but we do not close until it's fully and fully and title is ready to go.

Right, makes sense. Just second question in terms of CamWest. Just some question in terms of the contracts for this quarter versus 1Q. If you're talking about 90 orders for this quarter and approximately 15 communities, that would be six per community which would be fairly similar to the Company average. Wondering how many were really sort of 1Q orders versus contracts signed during 2Q.

Maybe 15 to 20.

15 to 20.

Okay. So it's not a big issue? Perfect.

No.

Thank you.

Your next question comes from the line of Jade Rahmani with KBW. Ryan O'Steen – KBW: Hi. Thank you. Actually this is Ryan O'Steen on for Jade. Just to follow-up on a question from a couple of minutes ago. It sounds like there's not really any markets out there on the radar that you're looking to jump into. Anything where maybe you have a limited presence that you're looking to develop?

I’m sorry. That we’re looking to…?

Any markets we want to get bigger in.

Where we're small and we'd like to get bigger. I can think of one, Michigan. Ryan O'Steen – KBW: Where you wouldn't miss out any M&A?

Right. Detroit, Southeastern Michigan, Charlotte.

Well, Charlotte, this morning's reviews, I went through it, we've got a lot of good stuff coming through the pipe.

Right. Northern Cal, Southern Cal. We’re thinking about maybe stepping back into Austin where we were and we left, but it's a market we should be back in. We love Dallas, we love Houston. We’d like to get bigger there. Denver. Denver has returned nicely. The market's improved significantly in the last year and we have some good land holdings and some good opportunities but we need to grow there.

Massachusetts.

Anything from Northern Virginia to Boston. That's the home, and boy, whatever you can get in that entire quarter is gold because the entitlements are so difficult and we have such a great brand through that quarter. Ryan O'Steen – KBW: Okay. And when it comes to developing any of these markets, you'll have to significantly I guess rebuild any development teams or have you kept the bulk of the headcount in those markets throughout kind of the downturn over the last few years?

We're in really good shape. We were very fortunate that we didn't have to run this Company to make payroll. We were able to keep land teams intact through the downturn, so they were scouting deals constantly. We have strong land development teams nationwide that are available to put roads in, project management, construction management is in place. Plus we have a great alumni list of many employees that we had to let go that are very interested in coming back. And so when we have a need we go right to that alumni list and we've been very successful in bringing people back that we know fit in here and have worked out for us. So it should not be an issue. Ryan O'Steen – KBW: Okay. Thank you.

Your next question comes from the line of Michael Rehaut with JPMorgan. Michael Rehaut – JPMorgan: Thanks. Just a follow-up if possible. You've thrown out a couple of comments about pricing and just wanted to kind of get a sense, you said that you've been able to raise prices in a little more than a quarter of your communities. Just trying to get an idea what rough percent you might peg that at and if that could be also inclusive of – on a net effective basis inclusive of lower discounts or incentives and what that – could you then just take that number and divide it by four and get a rough, again admittedly very rough, but a rough idea of what the blended average would be on a Companywide basis?

Mike, it's a pretty small number. We are still scared. This is not '05. We do not have the confidence to raise the price $5,000 or $10,000 because we have a good weekend of sales. So we may take it up $1,000 or $2,000. We may drop the incentive $3,000 or $4,000. We're being very careful. We want to show confidence. We want to create urgency by having the new price sheet out for the client to get them to buy this week, not next week. But the increases are pretty modest and I want to make sure you understand that. I don't want them to be overstated.

That's on average.

On average. There are certainly locations where we're driving price every week. But on average the number is very small. Michael Rehaut – JPMorgan: Right. I appreciate that clarification, it's certainly helpful. The second question, just going back to Gibraltar for a moment, I believe – well, maybe you could remind us. I think as of last quarter you were at $135 million of an equity investment. Where you are today if that's unchanged. I'm sorry if I missed that from earlier. And over the next two or three years, how big could you see that getting, given that I believe you still see a good amount of deal flow and you're still interested in growing that unit?

I think to answer the first part of the question, the invested dollars is unchanged from a quarter ago. We did no deals in this quarter. In terms of ultimate size, right now it's about 5% of our equity at $135 million. It gets to 10% of our equity, it's probably a situation where we're going to stop the outflow or find other people's money to co-invest with us. But that isn't to say we don't churn some dollars in the middle and end up buying more than $130 million of more deals.

Marty, it depends on the deal.

Right. We have the cash, we need the deals.

If it's a deal that we like, we're not going to outside and scout up other people's money. Michael Rehaut – JPMorgan: Great. Thanks guys.

Our final question comes from the line of Megan McGrath with MKM Partners.

Hi. Thanks for taking my follow up. Just one quick modeling question. If I take the midpoint of your closings range and your 10% sequential guidance for 4Q from 3Q, it looks like you're expecting your backlog conversion rate to stay in the mid 30% range. Is that fair?

Yes.

Okay, great. And then a question on your cancellation rate, sort of with the theme of no good deed goes unpunished. It’s so low in the quarter, it almost makes me nervous. Is there anything that could be driving that cancellation rate in your tower business, in your high-rise business? Does it increase the risk of since that takes longer to close that that cancellation rate could tick up in the fourth quarter, the first quarter when you're expecting these tower closings to come through? I don't want to expect too much on that.

I would expect the cancellation rate to go up. But I don't think it's going to affect the closings. The cancellations come almost universally before any ground has been disturbed. They don't come after the people have gone the selection center, chosen the options, press firmly, put up additional deposits, watched to get on the roof and then they say oh, never mind. We don't have much of that, never did. But I would expect the ordinary cancellations to go back up somewhat because as you've noted, cancellation right now is…

2.4% against the historic average of 7.

Yeah, 6% or 7%.

And so the percentage looks very compelling, but if you just talk about the absolute number it hasn't changed that much. This quarter it was 32 cancellations versus 43 cancellations last quarter. So the percentage…

It's an anecdotal story as well.

Great. Thank you.

There are no further questions at this time. I would now like to turn the floor back over to the presenters for any closing remarks.

Thank you, Dawn. Thanks everyone. We appreciate your interest. Have a great day.

This concludes today's Toll Brothers second quarter 2012 conference call. You may now disconnect.