Erin Willis - Director, IR & Corporate Communication Sheryl Palmer - President & CEO Dave Cone - VP & CFO

Ivy Zelman - Zelman & Associates Michael Dahl - Credit Suisse Stephen East - Evercore ISI Joey Matthews - Wells Fargo Michael Rehaut - JP Morgan Jack Micenko - SIG Nishu Sood - Deutsche Bank Jay Mccanless - Sterne Agee Will Randow - Citi Group Alex Barron - Housing Research Center Jim Krapfel - Morningstar

Thank you, and welcome to Taylor Morrison's third 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 a financial review of the third quarter, as well as our guidance for the full year 2014.

And Sheryl will provide some detail around our 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 our 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 morning everyone. We appreciate you joining us today.

I am pleased to announce our financial results for the third quarter. We had earnings per share of $0.54, a 26% increase over last year, on net income of $66.2 million.

It was a record third quarter for Taylor Morrison in several metrics including closings and revenue. Our performance for the third quarter was in line with our expectations and as we have stated in the past few quarters we continue to believe this recovery will be uneven until broader economic support gains consistent traction.

I believe many thought we would see normal housing growth in 2014. We believe 2014 might be an indication of a new normal.

We believe this new normal will continue to evolve and will likely include a positive market trajectory that comes along the way as the industry infrastructure rebuild, lending normalizes, and consumer demand increases. Overall I'm happy to report that even with the moderation in a few markets, our operations have continued to perform very well.

Through the deliberate and consistent use of our four pillar strategy, we continue to execute well and the third quarter results add to our solid year-to-date performance. As a quick reminder, these four pillars include first, our land acquisition strategy dedicated to prime assets in core locations.

Next, maintaining our product portfolio to appeal primarily to move up customers and our insistence on a culture of overhead efficiency and finally our commitment to maximizing shareholder value through the optimization of profit and volume. The company increased community count by industry leading 30% year-over-year in the third quarter to an average of 226 communities.

The company's traffic in the quarter increased by more than 50% year-over-year. Traffic was up in our U.S.

markets, while down slightly in Canada due to a slight reduction in active outlets. In the quarter net sales orders totaled 1,591 which were up 37% year-over-year.

Sales per outlet were up 5%. In the U.S.

sales were up 36% compared to the prior year period. Despite traffic in outlets being down, absorptions in Canada increased to 5.6 per month and orders grew 43%.

Our core locations led companywide community absorptions slightly ahead of our expectations for the quarter at 2.4 per month. This resulted in a net sales order value increase of 38% to nearly $730 million.

Our company ASP on closed homes was up more than 10% in North America even with the high number of high-rise closings in Canada. ASP was up by more than 15% in the U.S.

relative to the closings in the prior year period. This year's sales within the third quarter remained stable from month-to-month, while last year our sales between July and September were down 12% in the period.

So far in the current quarter, October sales were up just over 40% year-over-year. Conditions tend to vary regionally more in this recovery than in prior cycles.

We believe this regional choppiness may lead to some exciting future opportunities throughout the country on both the land and construction side. I thought it would be worth spending a few minutes to share some local perspective from the field, as Dave and I just had the pleasure of meeting with our Division President and management team for our annual strategic planning session.

So let's go through our geography. Staring in California, we continue to see robust demand and limited supply of new housing, particularly in the Bay area, where we are the second largest builder and permits year-to-date.

Sales in our northern and southern California markets were up dramatically for the quarter compared to last year, while outlets increased just over 20%. As I mentioned last quarter, we have had solid performance in our Southern California master plans with consistent sales cases, ASPs and backlogs over a $1 million, high margin dollars with a lower margin rate than the business average.

Although, sales are up in those markets, getting quality labor has become increasingly more difficult. As in a number of markets, municipalities and utilities continue to be a pinch point as they have not increased resources to handle the increase in new community.

Moving to Arizona, it continues to be softer than many expected with market starts down about 10% year-to-date. Although, we have had the temporary expectations, I am quite pleased with the team's performance.

We have the highest market share and we rank first in home closings through September due to our prime location. Given our price point, that might not be expected but underscores this trend of our locations in this market.

Total traffic in our communities has increased by over 90%. Across the entire Phoenix market, builder community count has increased by 30% in the last year.

As a result, we have seen buyers taking more time converting as they have significantly more choices to consider. Our Phoenix business continues to deliver one of our highest gross margins in the business today.

However, Colorado continues to be our smallest operation and we have a number of new communities just on board. The team is focused on executing on new communities like our 55-plus Community Skyestone, which has recently been awarded community of the year by the local home building association.

This is a market where trade labor has been affected by the growth in the energy sector and significant increases in apartment construction. Texas continues to be strong with nationally-leading diverse employment growth.

As a result, our Texas markets have historically been more resilient and both our Darling and Taylor Morrison brand continue to show great strength. Traffic in Texas was flat from the prior year period, however sales and new outlets increased roughly 30%.

Incentives here have been the largest drop sequentially and year-over-year. We continue to diversify our trade base as we have seen cycle times expand and cost increase with the labor constraints from the strong energy sector and residential and commercial construction growth.

For example, construction workers in the energy sector are paid approximately $8 more per hour more than framers in residential home building. Florida was later to the recovery than our other markets and continues to show signs of stable recovery.

Traffic increased nearly 90% year-over-year, while community count has increased 43%. Sales increased nearly 40%.

Our 55-plus communities continued to lead the way with robust sales and nice pricing power. Our West Florida business delivers our highest gross margins across the business.

Finishing our tour, our Canada operations have been very solid. The markets of Toronto and Ottawa are generally stable.

Toronto continues to be particularly strong, while Ottawa tends to have some sensitivity around government civil service staffing announcements. We have completed roughly 50% of our 2014 high-rise deliveries with 283 wholly-owned closings in the third quarter.

Our next tower deliveries in 2016 are 94% presold and our cancelation rate remains at 1% for all of our Canadian operation. I now like to cover incentives in more detail as it is a topic that has been getting a lot of air time this earnings season.

Incentives are a normal sales tool used to drive urgency. We use them in a majority of our communities and all we have.

In the quarter, incentives as a percentage of revenue were down year-over-year. We have seen various use of incentives across each of our markets, and have conscientiously stayed the course with our strategy, as we believe in the long-term recovery and the quality of our land position.

We do not believe there is merit to our business and aggressively discounting through many of our communities for short-term gain, as our prime strategic assets have continued to perform well relative to the market. We have some communities that we tend to push harder for volume, while we have others that we continue to maximize price, recognizing scarce land supply in the area.

Across the Company, we had an average slightly more than one completed stack per community, which is generally where I like to see it. Our customary incentive is a mortgage incentive used across all sales to enable better control of the buyer experience.

If we find ourselves in an ultracompetitive community a tiered discount based on price point or stage of construction can be effective. In many instances we do this by rotating the packaging without changing the dollar benefit to the buyer much as retailers do.

Ultimately we use incentives as a tool to drive urgency and traditionally we would expect to see an uptick at the end of the year to solidify year-end closings. As I mentioned earlier, sales were within our expectations for the quarter.

As the recovery continues in some markets and price points we have seen buyers shift more towards to be built home than we have seen in the past, as they prefer to customize their home. Due to this trend which we believe is positive in reinforcing the buyers' emotional commitment to their home, we have been careful not to discount across the board to grow for growth sake.

The impact of this however will likely result in some deferral of our closings, as homebuyers aren't selecting specs in as large number. There has also been a lot of discussion about credit availability impeding the housing recovery.

Candidly we believe one of the largest obstacles facing the industry is the lack of consumer awareness about what qualification truly mean and what credit might be available. Mortgage credit availability was the focus of discussion at the recent MBA Annual Convention where HUD Secretary Castro, and FHFA Director Watt, addressed the mortgage banker attendee and stressed the need to expand credit access.

Last week the industry heard that key changes are eminent to the GSE Revs and warrant framework. We also heard the final definition of QRM closely aligned with QM, which should give lenders more assurance and clarity to allow them to loosen their credit box.

Target quantified the full universe or getting to that statistics of those who are not able to qualify for a mortgage are sitting on the sideline because of this lack of awareness. However I can tell you that 97.8% of our borrowers' year-to-date that formally apply for loans to our mortgage subsidiary have been approved.

This is partly due to our thorough prequalification process we encourage through our mortgage lender TMHF before a buyer enters into a purchase agreement. This process improves the profitability of credit qualification and loan approval.

TMHF also offers each borrower an opportunity to enroll in our qualification improvement program Arrow. Arrow works closely with borrowers to educate them about their credit to maximize their qualification for their Taylor Morrison home purchased.

Similar to previous quarters nearly 20% of our buyers said this was their first home purchase. And again I would repeat from our last call that these are sometimes the easiest borrowers for us to qualify and they tend to have cleaner financial background.

Our results this quarter show that our long-term strategy has continued to be a profitable one and that our consistent execution of this strategy has proven successful. I believe we will show ongoing resilience in the business with strong traffic and orders, yet likely see moderating pricing power, continued cost pressures, and an overall recovering economic environment.

Now, I will turn the call over to Dave for the financial overview.

Thanks, Sheryl, and hello everyone. As Sheryl mentioned, earnings per share was $0.54 on net income of $66.2 million for the third quarter, an increase of nearly 26% over the third quarter of last year.

Total revenue for the quarter increased over 19% to $759 million. Home closings revenue increased to $746 million or 20% driven by increases in home closings of 9% and average closing price of 10%.

In our U.S. operations, home closings revenue increased over 28% to $660 million as home closings increased 11% and average closing price increased nearly 16%.

Home closings revenue in our Canadian operations was $130 million, down $13.6 million driven by a decrease in average closing price of 11%. We closed 283 wholly-owned high-rise units on the quarter, which was 70 more than last year.

These units generally have a lower average closing price, which were in the mid 200s. As expected, our total average closing price declined slightly from the second quarter of this year due to the significant number of high-rise closings we had in the third quarter.

The second quarter only included 24 closed units. We anticipate our average closing price will increase in the fourth quarter to be slightly above that of the second quarter.

Consolidated adjusted home closings gross margin, excluding capitalized interest, was 23%. In many of our markets we continue to benefit from a lower land basis and direct construction cost as a percentage of home closings revenue.

However, we continue to see success in some of our high price but lower margin community such as those in Southern California. In our Canadian operations, adjusted home closings gross margin declined 280 basis points due to the higher proportion of high-rise units and some moderation in the margin in both the high-rise and single-family homes, which has been falling more in line with historical norms.

As for our financial services, we generated $8.4 million of revenue during the quarter on $788 closings with an average loan amount of $329,000, representing an increase of 8% in volume and loan value over the prior year quarter. Gross profit was $3.4 million, while our capture rate continues to be strong at 75%.

We continue to leverage SG&A as a as a percentage of home closings revenue, which was 9.2%, a 30 basis point improvement over the same quarter last year. Equity and income from our joint ventures was $12 million.

Our Canadian operations generated $11 million from our portion of joint venture closings which included 108 high-rise units. Our U.S.

operations which have limited joint venture activity generate about $1 million primarily through joint land development operations. Our earnings before income taxes totaled $93 million or 12.3% of total revenue.

This represents a 10% improvement over last year. Income tax has totaled $27 million for the quarter representing an effective rate of 28.9%.

During the quarter, we were able to increase the amount of certain tax credits beyond what we previously anticipated. Consolidated backlog at quarter-end was valued at over $1.7 billion, an increase of 18% over the third quarter of last year.

The U.S. backlog value was up 34% to $1.5 billion, with an 18% increase in average selling price to $504,000.

Our Canadian backlog value was $261 million, down 30% primarily due to closing of high-rise units, offset by an increase in backlog ASP of 14% to $384,000. I believe the impact of the high-rise business to our backlog is worth repeating.

High-rise units may sit in our backlog for several years as we sell and construct the building. They typically come out of backlog over the course of a few months as we deliver the tower.

Since the third quarter of last year we have delivered 408 wholly-owned high-rise units from our Canadian backlog. Turning to the balance sheet, we ended the quarter with more than $280 million of cash.

We had $150 million in outstanding borrowings under our $400 million unsecured revolving credit facility. At September 30, our net debt to capital ratio was 46.9% and in line with our previous guidance as we continue to invest in our business.

We are continually assessing our capital allocation strategy. Our Board of Directors have authorized a share repurchase program for up to $50 million of Class A common stock through December 2015.

Last month we saw our stock price dip to record lows as the public home builders continue to experience market volatility. This market volatility has led us to expand our capital allocation options.

Typically companies implementing share repurchases have a long history of a publicly traded company with consistent free cash flow generation. As you know, we've only been a publicly traded company for 18 months.

Our focus has been on profitably growing our business; however we recognize the importance of capital allocation to maximize shareholder return. We will use our authorization to repurchase our stock opportunistically at times when we believe it makes sense.

We will evaluate our options such as investing in organic and other growth opportunities and the repayment of debt. Our desire is not to use debt to repurchase shares.

We will continue to assess the best use of capital between investment in the business and opportunistically repurchasing our shares to maximize shareholder return. Now turning to our guidance for fiscal year 2014, we anticipate community count to finish at approximately 210 averaged communities.

We expect closings for the year to come in near the low-end of our range which is 6,700. We anticipate consolidated home closings gross margin to be down approximately 50 basis points relative to 2013.

SG&A as a percentage of home closings revenue is anticipated to be under 10% likely in the mid-to-high 9% range. And we expect income from unconsolidated joint ventures to be approximately $24 million to $26 million.

Thanks, and I will now turn the call back over to Sheryl.

Thanks, Dave. I would like to conclude our prepared comments today with a discussion around our land strategy and land bank.

We continue to believe we have set the business up for a prolonged recovery. We are optimistic about the prospects for the housing industry and our ability to execute upon our stated strategy.

Our strategy of targeted land acquisition within core location has not changed despite any evolving market condition. In fact it has been reaffirmed.

In the quarter we spent $233 million in land purchases and development and have spent $857 million in the first nine months of 2014. As we look at our capital allocation, we have prioritized funding responsible growth in the operations in order to position ourselves to take advantage of a protracted recovery, but won't press deals that appear to have excessive risk in the underwriting.

Roughly one-third of land spent in 2014 is expected to be for development, which is done in just-in-time fashion to meet our home building needs. The North American total land bank as of September 30 was nearly 43,000 lots owned and controlled, excluding lots held in unconsolidated joint ventures.

The percentage of lots owned was approximately 77% with the remainder under control. On average our land bank had just under seven years of supply at quarter-end based on trailing 12-months of wholly-owned closing.

Although we have just under seven years of supply, in reality that number varies across the business depending on our land strategy in the individual operations. For example, in California, where the customer land is higher we have a more limited supply.

In our Darling operations, where we are a finished lot builder we also carry a shorter land bank. We're comfortable with the level of supply as it relates to each of our businesses.

In our larger markets where we do our own land development we have an inherent need for longer land bank and believe we are well positioned at this stage in the cycle. The distribution of lots acquired in the third quarter include 55% in Texas, 33% in Florida, 8% in Arizona, and 4% in California.

As should be expected in this stage of the recovery we continue to target smaller communities and pursue creative deal structures where possible to optimize shareholder returns as we have the longer-term land controlled from earlier in the cycle. I continue to believe that the success I spoke about earlier in the call as large part due to the consistently disciplined processes and research we employ in our acquisitions and portfolio management, as well as quality execution by each of our teams in the field throughout this choppy time.

On that note, I would like to thank our dedicated team members for delivering another wonderful quarter. You really made it happen.

Thanks and we will now open the call to questions. Operator, please provide instructions to our callers.

Good morning and congratulations on a solid quarter. You guys have revived my hope in this industry.

So thank you for that. My question is really Sheryl, if you could elaborate a little bit on the impact of some of the proposed announcements that you mentioned out of director Mel Watt realizing that the western markets has been hit pretty hard on the FHA loan limits coming down.

May be you can talk about what you think the impact could be knowing you do more on the move upside but even with that said if there have been some parts around that on the positive impact 97% LTVs would be with the higher loan limits from Fannie Freddie. And then also on this three point rule, which I don't think you mentioned, but I know that there has been some positive reception to brokers, wholesalers, correspondence, and may be Tom Kelly and she's on can comment.

But generally we would like to hear your thoughts and I'll come back if I'm allowed a follow-up, I know that was long but thank you.

Thanks Ivy, I appreciate your comments. Yes, I would love to.

Truly the news is pretty recent as we know and so it's in some respect it's a little -- it's too early to know for sure with all the details yet to be announced. But I think any progress that Watt and the GSEs make to improve the rep and warranty framework should encourage lenders.

Really the back away from the credit overlay and to apply full flexibilities in the conventional underwriting guidelines for qualified borrowers. He did say they are working on improvements in a number of areas, clear definitions on the life for loan exclusion.

Some real benefits for the lenders that have had good underwriting track record and may be a slightly higher tolerance power for misrepresentation and data and accuracy if it doesn't really reflect the risk. I think that everything we can do to help the lenders understand the risk and better improve -- will better improve our business and increase lending without adding unknown exposure to the industry.

The primary issue that's been associated with the lenders reluctant to open the credit box has been the life of loan exclusion. And this -- all the feedback around the 36 month rep and warrant expiration is really been tough.

If you think about the lenders, they're out there underwriting loans believing they have a good loan and at any time in the first 36 months or candidly after that the agencies have been able to come back in and with the re-audit create really a risk just doesn't make sense. So any clarity that we can give for lenders and give them certainty around the loan that won't be recalculated or audited, I think will help a lot.

With specifically I think to be 97% LTV, I'm very excited about that. As you said Ivy, there is a couple of markets that are going to be more impacted than others.

But candidly, down payments has been one of the largest barriers for home ownership for many families. Because of our prequalification process I think we have a really good appreciation of how many purchasers can qualify for today's home, if they actually had more of a down payment because they have all the other criteria necessary.

And I don't think down payment on its own is truly an indicator of a good loan. I mean, there are so many considerations the underwriters have to look at with credit, cash flow, and stability in an individual job environment.

So I think provided that these 95%, 97% LTV programs are supported with continued prudent underwriting and good mortgage insurance, these loans are going to perform very well. And I think it's going to open up a new environment for us and I hope we get more detail between now and the end of the year.

I mean specifically, I guess the last thing I'd say, Ivy, on it specifically, if I look at the Phoenix market and to your question, the project mix have changed dramatically to really appreciate the impact of FHA loan limits for us I can tell you in 2013 Phoenix had 37% of our closed loans with FHA mortgage products. So year-to-date we've had about 23% in Phoenix and if we look at our backlog that probably drops in half again.

So recognizing opening that box -- its going to make a real difference for us and the industry.

Did you want to comment on the three points that was included in the first question?

Yes, I think that 3% limit will help lenders limit their exposure. I probably need to do a deeper dive on the three points so and probably get some greater feedback from Ivy, so I mean from Tom.

Okay great. And then if I'm allowed a second question as it relates to gross margins.

As you indicated moderate pricing power, higher cost, how should we be thinking about gross margins in future quarters and recognizing you also have still very attractive land cost basis and the indication for your full year guidance being sustained?

And let me just take a quick and then Dave may be you can get into any more detail. But I think when you look at the margin Ivy, you really need to look at a couple of different dissected in a couple of different areas as I look forward and some of the work that we're doing to sustain good solid margin.

First I would tell you just from a planned development creating synergies within the business, kind of value engineering, make sure that we're balancing production and true consumer demand and to create the best environment we can. Then I think you look at the labor and material.

And I think we have a little bit of a double edge sword there, right, because with the market activity at some level when I look at the labor base that's where we continue to see the greatest pressure point. If I look at 2014 year-to-date the material side of the business has not moved that dramatically I think we expected higher increases the labor had.

I think for us to really build the infrastructure we're going to continue to see those labor pressures as we look into 2015 and candidly we might see on the commodity side as well if we could any pick up in starts next year, but more specifically on the numbers, Dave.

Yes, as you look at Q4 Ivy, I mean we're still up against some difficult compares in the U.S. and to some extent in Canada as well.

Last year we did see the benefit from significantly higher ASP growth which as you know has moderated a bit this year in the U.S. We continue to expect growth in California in those high ASP but lower margin communities, which will continue to put some impact on our margin from a mix perspective year-over-year.

And then lastly Canadian margins, they'll continue to compress a bit as we continue to see that more normalized rate as well as we're going to have some additional high-rise closings in the fourth quarter higher than what we had in the fourth quarter of last year.

It's also going to come down, don't you think Dave, at the end of the year there's going to be such a variation in what’s posing those last couple of weeks from a price point standpoint but that's more of a timing thing than kind of long-term.

Great guys. Thank you congrats again.

Thanks Ivy.

Thank you.

Hi thanks. Just a quick follow-up on the comments just on margins.

Dave, as if I look at the full year guidance under sensing the pressures but it does seem like to get to the full year margin targets you'd have to be up in the mid 21% range on gross margins for 4Q, is that fair or are we missing something there?

Yes, we're going to have to see I'm looking at it on may be an adjusted gross margin so excluding interest. So we'll see some sequential improvement from Q3.

Again obviously it comes down to mix. We do expect to see a little bit better improvement in some of our higher volume, higher margin communities such in places like Florida.

And then on the Canadian side kind of that year-over-year delta is going to start to decline more in Q4 than what you saw probably in Q3 as we're getting a lot closer to normalizing that rate.

Okay, thanks. Then shifting gears back to the sales side, it's a good job on the absorptions here and Sheryl your comments on incentives ROE is kind of part of the business and there wasn't anything unusual in the quarter.

So given the out performance for you guys relative to some peers that have reported I guess any color on what you think has been kind of most successful or whether it's a product type any sort of mix issue anything you're telling your sales people differently these days seems particularly effective getting buyers to convert?

Yes, it's a great question. I don't think there is one silver bullet.

I think it's a numbers of things that I would put at the top of the list the strength of our land build location. And I mean, as we had said for the last few years, and we were going to stay core and that was the most important part of our overall strategy, and it's easy to say and hard to do.

When you see the kind of activity that we saw over the last few years and there is a run for land, it's very easy to continue to kind of move out and we just didn't. We stayed very, very true to our strategy of core locations.

So I think, first and foremost, I would point to that because all of our -- I don't say all of them but I would tell you most of our communities are performing quite well. From a project standpoint we're really seeing it across all product profile.

If I were to point to one I would tell you it's the active adult site that we've seen just remarkable strength in all of our active adult communities across the country and that's our Esplanade brand in Florida, we have four, five Esplanade communities. We opened a community in Houston, Ontario.

We're opening one up in North Florida, in Austin, Denver our Skyestone community. We've really seen continued strength at all price points within our active adult communities.

That's really helpful. Thank you and good luck in the fourth quarter.

Hey, thanks so much.

Sheryl, just a follow-on a little bit on the order side. Last quarter you thought your pace was a bit faster than it needed to be given your price points etcetera.

This quarter it came down sequentially, it's up year-over-year. Do you think on the year-over-year basis is that just because of a better market you think you're seeing or is there something going on, did the incentives drive a bit more traffic and also last quarter the West was pretty weak up about 7%, this quarter jumped up pretty dramatically.

What do you all think was going on in that market?

Okay. I'm going to try to get all that Stephen but I think on the sales side I'm really going to go back to my last point on the strength of our core locations.

I think that's what's continuing to drive, we also had some really nice opening Stephen, if I were to be honest throughout the quarter in all parts of the country, which I think gave us some continued strength, traffic was good. But you really almost have to kind of peal back the onion in each of the markets to really appreciate what we're seeing.

And we spend a lot of time talking about Phoenix and for us sales were up year-over-year, absorptions were slightly down, and our discounts were up just a bit. As I go into California we just had remarkable sales strength in Northern California and specifically in the Bay Area and some new introductions in Sacramento.

Southern Cal and really have our highest absorptions on a per community basis in Northern California throughout the country and Southern Cal is our second highest and our higher price point. So those markets even though in California act very differently they're both Southern Cal, is really a spec market for us and our incentives have not moved much year-over-year but we're selling on average one a week.

As I look through Florida, generally consistent year-over-year but the seasonal buyer has done very well. I mean our sales are up quite a bit but once again the active adult has really performed well.

Texas, Houston, just continues to be so robust. Our discounts are down there so it's clearly not discounts that are driving the absorption basis.

And in Dallas and Austin, generally very stable but once again I'm going to keep repeating it I really think the teams have done a great job on the quality of the land that we're putting through the pipeline.

Okay all right thanks. And just the other think I've got to ask, is there a difference in pace between your first move up and your second move up.

And then you mentioned Texas, with oil prices down where they are, how do you all, do you start thinking differently about the markets, do you prepare for it, is it more you're just -- you'll wait and see how it plays out just the general thought process there?

Yes, absolutely. So I'm going to take your second one first because I'm not sure I remember your first one.

Pace between I just --

I am sorry pace between first and move up.

Right.

We don't track it specifically that way. But I would tell you kind of intuitively the active adult paces have been very strong and you look at California, even at that price point that's a real kind of first and a pretty good mix of first and second time.

So I would tell you across really all consumer set Stephen, the paces have been pretty solid.

Okay.

Specific to Texas, the good news about Texas, compared to what we over the last 20 years of working in Texas, it's a very broad based economy today. I mean certainly there was a time when we relied exclusively on the energy sector, it's got a very large medical infrastructure, it's got a good construction infrastructure, it's got one of the most largest ports in international ports in the U.S.

So absolutely we continue to look at what's happening across the energy sector and be very mindful. We haven't seen that it's had any real significant impact the consumers are still feeling very good.

But recognize if you look at our business model there it allows us to really be flexible. If you think about our Darling program with finished lots, we bring those on as we need them.

And then if you think about out Taylor Morrison model where we're a big developer there with just-in-time development, we make sure we don't get too far in front of ourself.

Hi, thanks for taking my question. First question is on what trends in land costs and in particular you mentioned that California comprised just about 4% of your land purchases during the quarter.

Is that largely driven by higher land cost you're seeing there and not being able to underwrite them to your desired criteria?

Land cost I would tell you continue to rise. And deals across the country I think we haven't seen any moderation on pricing.

We have in some markets seen some benefit on the structure side of land deals. Specific to the acquisition and activity in the third quarter, I'd be careful not to jump to any real assumptions, because much of the acquisition activity is based on contracts and deals that were approved anywhere from 60 days ago to one or two years ago.

And when I look at what we actually acquired in the quarter it was absolutely a difference in the number of lots we bought between the east and the west. And if I look at the spend it's actually the spend that we approved, it's actually much more consistent.

So let me tell you it's much more around timing than anything else.

Okay. And moving to --

And making sure obviously overall that we always continue to look at just how we balance the portfolio. So from time-to-time you're going to see that move one way or the other.

Thanks. Moving to community counts, your guidance looked like it was unchanged from last quarter but if I kind of plug into my model kind of flat line U.S.

and Canada from here I have trouble getting to the 210 average for the year and I get to more of like a 217 number. So it seems to suggest there's going to be a decline in community count.

I was wondering where that's coming from in Q4?

Yes, I would tell you that when we reduced our community count last quarter we were seeing a numbers of issues, from a timing standpoint, and we had a number of communities that were opening toward the end of the quarter. And given the track record of what we're seeing on the municipalities we didn't have high confidence that those were actually going to get across the finish line, most of them did.

So it turned out a little better than we expected. We find ourselves in a similar situation in the fourth quarter with a number of new communities opening across the market.

And so if I were to be honest I hope we're going to need that 210 by a number of units. But once again we have a number of communities that are opening through the quarter and we just can't be 100% confident today that they're going to actually get there.

Thanks. If I could sneak one more in on October trends and if you have an order number for October either gross or for community that would be really helpful?

What I can tell you is its up just over 40%. But we're literally in validation mode obviously as all the numbers are rolling in the last 24 hours.

So I don't think I'll quote an actual sales number at this point.

First question I just had was going back to sales pace for a moment and you've been pretty clear about how you approach it and price versus pace and community by community. This quarter though as others have noted it's the first quarter in a while where you've actually had slightly up sales pace year-over-year.

And so -- but on a full year basis I think you've been talking in the range of a -- and correct me if I'm wrong here, 2.2 to 2.5 per month if that sounds right.

That's right, Michael.

If given I guess the mix and the stated demand is that something that you would want to at this point hold for next year obviously somewhat you get stronger you might exceed that at points. But is that a sales pace that at this point you're comfortable managing the business or do you think there is may be a little bit of upside to that as the market heats up in some areas where you've had other builders kind of talk about sales pace still being a little bit less than optimal?

Yes, it's a great question and we have stayed very consistent and I'm not going to break the trend today. We really do believe the way we've gotten to the sales pace that we have shared with everyone has really been around consolidating all of our underwriting efforts and what that rolls up to.

And we continue to believe given what we're going to be introducing that that 2.2 to 2.5 and you'll see some seasonality throughout the year. But I think you are going to see that stay relatively consistent.

And that's what we're seeing in our underwriting right now as deals are coming to us, Michael. We're still seeing them in that 2.2 to 2.5 range so.

Our price point continues to grow.

Right. And so it gives us confidence as we look out.

Okay. Thank you.

And I guess just also Sheryl; I just wanted some clarification on an answer you gave earlier when you were going through region by region and you characterized Florida as consistent year-over-year. I think the orders were up but you said consistent year-over-year and Dallas and Austin very stable.

Were you talking about sales pace year-over-year or incentives or what does that description allude to?

It was a little different for each one but I'm sorry if I wasn't clear there. I would tell you that in Texas we've actually seen community count grow so our sales are up but our paces are pretty consistent year-over-year.

In Florida, I would tell you that's pretty much the same. Our paces have stayed and very consistent year-over-year.

I mean specifically in West Florida they have, kind of the Orlando Jacksonville area, there probably our paces are down a bit year-over-year but our sales price is up quite a bit as well.

That's helpful. And just one last one if I could, the incentives at the beginning of the call you walked through some thoughts around incentives given the focus today and you said incentives were down year-over-year.

I presume that was referring to your closings if I got that -- if I'm assuming right and often what's more helpful a little bit is just talking about incentives on actual incoming orders where there have been a few builders that have kind of talked to or reported a modest uptick sequentially?

You're right, Michael.

Slightly year-over-year. Can you talk to that at all?

Yes, you're actually right. Specifically I think in our prepared remarks we did speak to our closing incentive being down year-over-year both on a percentage basis and a dollar basis.

I also think I said that in the first quarter as we're trying to solidify your year-end backlog you tend to see an uptick, we always have and I don't think this year is any exception. Our incentives that are out there are quite focused on year-end deliveries and those manifest ourselves in a number of different ways.

We're seeing a slop of incentives across the market and there's a lot of different activity and everyone does that a little bit differently. Our focus is on Q4 delivery and that can be anything from additional design center credit, it can be realtor commissions, special programs for realtors.

So I would tell you that where we have some inventory closeout communities is probably the most or we would see higher incentives that's where we will see the activity and then generally we have other parts of the country where we don't really have anything left to sell. So our incentives are pretty consistent.

So it's a little bit, it's a catch-up but if I were to say in total I would say that our sales incentives in Q4 will be higher than the prior quarter.

But what about year-over-year I guess it's the more important, because seasonality is really what's driving that per se but year-over-year do you have any sense?

In sales incentives?

Right, yes 4Q over 4Q.

It would be intuitive that because I don't have any numbers to support that yet as the sales are just starting to roll in. So I haven't seen it.

But if I just look at the posted promotion I would say that you have some that are down, you have some that are consistent and you absolutely have some parts of the country where we have a lot of closeout and rollout. So in the round it would probably be similar or slightly up.

Hi, good morning. Just to revisit the high-rise commentary and that being a drag on margin this quarter.

Obviously the condos that are lumpy when they deliver. I think you said no deliveries in 2015, would that imply all else equal I mean, obviously, you've got labor, you've got materials, you've got difference in land spend with Callie versus Florida.

Would the margin be higher next year absent everything else just because there is no Canadian high-rise in the mix potentially?

Yes, I'm not really ready to give too much as far as the U.S. on margin for next year, because we're actually going through our internal process right now as kind of rolling up our plans.

But as you look at Canada in the high-rise business yes that typically has a little bit lower margin. We're not going to have that.

I think, as you get into Q4, we're seeing that more normalized rate one that we can kind of look towards more for next year.

Okay. Great.

And then on the buyback obviously positive news. Can you just update us where your land business is or the pipeline for 2015 and 2016 I think you said you have may be all in new for 2015 and all of 2016 or part and then kind of what kind of net debt to cap target do you run does that change the mid-40s.

How are you thinking about that -- about the buyback announcement?

Yes, on land, you're absolutely right we're in good shape for 2015. We own or control it, and I say, own or control because obviously there are places where we just take down options through the year.

In 2016 we are in great shape and I'd say we're pretty close to done but not a 100% done. And once again pretty similar a lot of those are future extensions with the master plans and stuff that we're in.

So our primary focus is really showing up 2016 but it's really 2017 and beyond.

And then from a net debt perspective we're going to see the rate drop some below 46.9 that we had in Q3, it will drop down in Q4. And then as we look out or the next year we'll probably run in the low-to-mid-40s.

There will be probably a quarter or two where that will spike up a little bit more to that kind of mid-to-high 40% range. But as I mentioned, our intention is to be optimistic around the buyback and it's not something we're really going to use our revolver to go out and do so.

So we're going to do that more from the cash flow from operations that we're going to generate.

Thanks. First question, I wanted to asked was about community count.

Sheryl, you mentioned industry high community count growth in the quarter and that certainly has been a very important feature of your story since you came to public markets. How much longer do you expect this sort of differential between you community count growth rate and the rest of the industries.

Is this something that you think it persist into 2015 and 2016 or should we expect some sort of convergence of growth rates down to average at some stage.

Even though we're not formally giving guidance at this point for 2015 Nishu, I think what we've always said is that we needed that 2012 through 2014 was going to real strong. I mean I think it's about 40% compounded growth rate for the last three years.

Do I think long-term is that sustainable? No.

So I don't think you will see, I think we're still going to have -- I don't know what some of the other builders are doing. But I would tell you that we're still going to have strong growth but not at the level as you've seen over the last couple of years.

Got it. And then your tour as you called it around the country was really helpful.

I wanted to approach that from a different perspective. If I were to summarize investor perceptions or concerns as you would call it, early this year obviously Phoenix was a real focus of investor concerns and the emerging weakness there.

See recently concerns have spread to areas like Texas, which has obviously come up for that and Southern California as well. So given what you're seeing in the market, is that a reasonable view?

And may be if you could differentiate as well between perhaps what you're seeing and what the broader market might be seeing? Or based on what you're seeing do you think that those concerns aren't spreading into Texas and Southern California or not warranted?

Yes. I would tend to agree with the later, Nishu.

I mean, yes there has been a lot of noise around Phoenix whole year. And I think we have tried to articulate a slightly different view on Phoenix.

And for us our Phoenix business is very strong. And certainly, we might not have the total level of sales that we had anticipated but on a community-to-community basis and a margin basis the market continues to do very well.

But having said that, we also have a 100% of our communities in the core and so that continues to stay very well for us. And I think that continues to translate when you start talking about Southern California and Texas.

All of our positions in Southern California are San Diego County, Orange County, and so we continue to feel very, very good about those communities and how the market is performing. Now, there might be other parts of the market that have seen some reductions in case but we're just not seeing that.

And then, when you go to Texas, I would actually echo the very same sentiment. I am so pleased with our communities and how they're performing there.

If anything we find ourselves in much of Huston really having the whole back releases to make sure that we don't get ahead of ourselves. I would tell you Dallas tends to be a little bit more steady state, but continues to do real well.

Good Morning. First question, what tax rates should we expect for the fourth quarter?

For the fourth quarter we're probably somewhere in the 34% to 36% range. And I'd say that take it to the year somewhere in the 30% to 32% range.

Okay. Thanks.

And then, my second question, just focusing on your domestic communities. This is the first time in six quarters that it looks like quarterly domestic orders per community were basically flat on a year-over-year basis.

Should we view this as more of a steady state? Have you guys crossed the barrier now?

Where you are not going to see those year-over-year declines on quarterly orders per community?

Yes. I think this is -- I think that's a fair assumption.

As we said, I think that 2.2 to 2.5 is continues to be what we expect with some variation from quarter-to-quarter. But I think at the margin that's -- that would -- that should remain pretty consistent.

Okay. And then, just one more quick one.

Could you give us the actual community count you're expecting for the end of the quarter and where was it in 4Q 2013?

Do you have that?

Yes. We have that -- pull that one for you, give us a second.

We'll come back to you on that one; we got to dig it out of the books. Sorry, we just have the average one in front of us.

Yes, we have the average. But we can get back to you on that.

Hey, good morning. And thanks for taking my question.

Good morning, Will.

Sorry, if I missed it. But in terms of talking about October, orders up 40%, which by the way congratulations.

Is there a difference between kind of the pace in Canada, as well as the pace in the U.S. and Canada, I really mean is high-rise distorting that number at all?

Just want to make sure.

No, actually high-rise -- from a sales perspective we didn't have any I mean --

It may be a handful in it.

Yes. I mean if anything --

Okay.

It would be the other way Will, because we didn't have an non-JV towers I mean, like Dave said more than a handful. I mean one of the things we did do in October that I'm really quite pleased with and I may be should have mentioned it before when we were talking about how we look at incentive.

Then, we talked a little bit about repackaging incentive. As we are -- we offered a rate promotion, where we used our incentive dollars to guarantee a 3.6% rate to give people an understanding that you really could get a mortgage today.

And it was really a strategic way to maximize our incentives with the least amount of impact and I think we sold over 50 units on that motion.

Okay. And just speaking to that point, I was curious in terms of repackaging incentives.

Was there something that happened in terms of the originators you're passing loans through to, that allowed you to cut repackage incentives or is there something you could have done for a while, I just wanted to know if there is a real catalyst there or no?

Well, no. It's just -- it's just -- its -- like I said, it's kind of a retail approach.

You want to mix it up a bit and you want to make sure you have different ways to send the message to the consumer. With all the discussion and -- that we had about mortgage awareness, we believe that anything we could do to help the consumer understand that they could qualify for a loan with our -- with really the kinds of traffic that we see we sent out a very targeted campaign to many of our prior guests and got them back in, because it was a very unique opportunity.

So it gives you something a little different to talk about. And I don't know that there was an underwriting, because there was definitely not an underwriting catalyst for us.

Got it. And if I could just take one last in on -- in terms of your competitors, land price inflation assumptions or I should call it home price inflation assumptions were quite aggressive last year.

Are you seeing a sequential drop in -- call it land price of some of the stronger ASP markets like California for example?

I want to make sure I understand your question well. Are we seeing a sequential drop in our assumption?

No, no. Sequential drop in actual land transacted prices meaning, land sellers are willing to accept a little bit less.

So --

Not in California.

Got it. Well, thank you very much.

No, not in California. So thank you very much.

Again, congrats on the quarter.

Thanks.

I wanted to focus a little bit on your land spend. I don't know if you -- if I mentioned or you mentioned what you expected to spend this year.

I think you gave the nine month number. But what were you guys expecting this year and how are you thinking about how that will compare to next year?

Yes. What we've guided all year is about 1.2.

We'll see if we get there, it really depends on the quality of the fourth quarter activity but that's what we've guided to.

Okay. And I guess in general, I think the market has shown some little bit of slowness on the margin may be you guys haven't seen it because as you indicated your communities are better positioned.

But are you guys seeing this relative slowdown as an opportunity to may be buy more land or are you not -- don't really see it as a way to take an advantage of it because you already having now?

I guess, what I'd say throughout the year we have seen some kind of ebbs and flows around the orders.

Yes.

And we start pretty strong to our strategy as far as the land that we're going after so as to meet the underwriting. So it's really a more of a function of what we think we can underwrite the deals at.

Yes. I mean there is -- to Dave's point a remarkable correlation between trailing 12 -- trailing 90-day sales.

And land activity from the builder, we tend to want to be a little bit more even because as we talk about today, we're closing on land that we likely underwrote a year ago. So in some markets -- if I'm understanding your question, in some markets, market like Phoenix you do see the sellers taking a little different position but that's very slow to happen.

So you kind of just -- if it doesn't make sense you just -- you pull back.

Right. Yes.

I guess the nature of my question is that it seems sometimes when the market heats up some builders get excited and go by land and when the market slows down they pullback, which I think should be the exact opposite.

No, you're absolutely right. That's why you have to take a very even and strategic view, because the land that I'm buying today and how the market is performing today has nothing to do what I can expect 18 months from today.

So you're right that correlation does exist. If you look at the way we've acquired land, I think we've been a little bit contrary into that view.

So based on what you've underwritten recently in recent months and quarters, would you expect your land spend to go up next year versus this year? And I guess to the extent that you don't buy as much land and your share price may be as attractive you think you will then deploy that excess cash toward share repurchases or would you just wait for a better opportunity to buy land in the future?

Yes. I think from a capital allocation standpoint, and we're going to have to factor current market conditions where we think that's going to go.

If there was any kind of slowdown obviously, we would see an increase in cash flow from operations that -- and we weren't putting that towards land act then clearly we would look towards returning that to the shareholders in some way. Right now, we have the $50 million share repurchase.

We would have to revisit that. But again, it's just -- it's hard to predict where that's going to go.

We just have to see where the market takes us and what kind of opportunities we have from a growth perspective.

Yes. And at this point, I wouldn't assume any significant changes from year-over-year but we haven't given any specific guidance yet.

Okay. And then, second question.

Just looking at -- so looking at labor inflation that you have highlighted earlier to -- I guess, all else equal, what kind of margin impact might that have on your 2015 gross margin?

Well, I think it depends what happens on the pricing standpoint. I mean, if prices moderate and we don't get any kind of wind at our back then, we're going to have continued margin pressure.

I mean, sorry to state the obvious. But if we get any kind of run as we go into the spring selling season we would -- I would expect to see some margin improvement.

If we don't, I mean, the reality is, from and infrastructure standpoint we are going to have to continue to see at some level labor prices continue to rise to continue to meet the demand, a permanent environment significantly greater than where we are today. So it's a little bit of a catch 22.

But I think it's too early to know for sure until we see what kind of activity we get after the first of the year.

And just want to follow-up on Jay's question as far as the ending community count for the end of Q3 that number is 231.

Thank you all for being with us today. Really appreciate it.

Wish you a wonderful day. Bye, bye.