Leslie H. Kratcoski – Vice President, Investor Relations & Corporate Communications Ian J. McCarthy – President & Chief Executive Officer Allan P. Merrill – Chief Financial Officer & Executive Vice President Robert L. Salomon – Chief Accounting Officer

David Goldberg - UBS Larry Taylor - Credit Suisse Alan Ratner for Ivy Zelman - Zelman & Associates Michael Rehaut - JP Morgan Carl Reichardt - Wachovia Capital Markets Alex Bering - Agency Trading Group Lee Brading - Wachovia Securities Joel Locker - FTN Securities Andrew Ebersole - Sutton Asset Management James Wilson - JMP Securities Timothy Jones - Wasserman & Associates David Martin – Blue Mountain Capital

Welcome to the Beazer Homes earnings conference call. (Operator Instructions)Today's call will be hosted by Ian McCarthy, the company's Chief Executive Officer. Joining him on the call will be Allan Merrill, the company’s Chief Financial Officer, and Bob Salomon, the company’s Chief Accounting Officer. Before he begins Leslie Kratcoski, Vice President of Investor Relations will give instructions on accessing the company's slide presentation over the Internet and will make comments regarding forward-looking information. Leslie H. Kratcoski: Welcome to the Beazer Homes conference call on our results for the quarters ended June 30, 2008. During this call we will webcast a synchronized slide presentation. To access the slide presentation, go to the Investor home page of Beazer.com and click on the webcast link in the center of the screen. Before we begin, you should be aware that we will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. Such risks, uncertainties and other factors are described in the company's SEC filings, including its Annual Report on 10-K for the year ended September 30, 2007. Any forward-looking statement speaks only as of the date on which such statement is made and except as required by law, we do not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time-to-time and it is not possible for management to predict all such factors. Ian McCarthy, our President & Chief Executive Officer, and Allan Merrill, our Executive Vice President & Chief Financial Officer, will give a brief presentation after which they will address questions you may have for the duration of this one-hour conference call. Today we are also joined by Bob Salomon, our Chief Accounting Officer. In the interest of time in allowing everyone a chance to ask questions, we kindly request that you limit yourself to one question and then one follow up. I'll now turn the call over to Ian. Ian J. McCarthy: Before we begin our discussion of the results in the release this morning and the current business environment, I would like to make a few brief comments on the company’s specific issues that we have been and continue to work through. As previously disclosed, Beazer Homes and our subsidiary, Beazer Mortgage Corporation, are under investigation by the U.S. Attorney’s Office in the Western District of North Carolina, the SEC, and other federal and state agencies concerning matters that were the subject of our audit committee’s previous independent investigation. From the outset we have been fully cooperating and will continue to fully cooperation with the ongoing external investigations and intend to attempt to negotiate the settlement with government authorities with respect to these matters. We also continue to defend the company’s interest in the related civil litigation. To date two cases have been concluded following dismissal by the courts. We also continue to actively work on remediation efforts to address the material weaknesses identified in our ICFR, or internal control over financial reporting. This is an ongoing process that will take several quarters, but you can track our progress in Item 4 of our 10-Q to be filed shortly. I would like to confirm that with respect to ongoing investigations, litigation, and possible future settlements, our public filings to date speak for themselves and until definite resolutions have been reached we cannot provide any further comment beyond the details included in those filings. Turning to the current business environment, market conditions remained very difficult for the home building industry during our third quarter. Despite lower home prices, relatively low interest rates, and a wide choice of available homes, potential home buyers remained reluctant amid concerns over slowing job growth, higher energy costs, and the overall economy. In addition to these demand dynamics, supply levels of both new and existing homes inventory remain elevated, exacerbated by increased numbers of foreclosures. As such, we maintained a disciplined and cautious operating approach as we believe industry conditions will remain challenging for the remainder of this fiscal year and as we enter fiscal 2009. Despite the challenging conditions reflected in our quarterly financial results overall, there are certainly some bright spots to report, including positive operating cash flow for the quarter and year to date, enabling us to end the quarter with $314.0 million in cash, more than double the year-ago level. Sequential improvement in gross margins from the second quarter of this fiscal year, before inventory impairments and lot contract abandonments, continued reductions in both overhead and direct costs, and further reduction in unsold inventory. Subsequent to the end of the quarter we also finalized two large asset sales in Virginia totaling approximately $85.0 million and successfully completed the amendment to our revolving credit facility, modifying or eliminating restrictive covenants. At this point we are comfortable with our current liquidity position. We have achieved this by following our principal operating goals of generating cash from operations, reducing both overhead and direct costs, limiting investment in land and inventory, and exiting non-strategic markets and communities. We still expect to end fiscal 2008 with a cash balance in excess of year-end fiscal 2007 levels despite paying down approximately $100.0 million in debt and absorbing a significant loss from operations. While maintaining a solid liquidity position to weather this part of the cycle remains a key priority, we are also implementing near- and long-term strategies aimed at returning to profitability and positioning ourselves for the eventual market recovery. These strategies include increasing sales absorptions per community, continuing to pursue direct cost reductions and efficiencies in our business, and re-allocating capsule end resources within our geographic footprint. We also strongly focused on further differentiating Visa Homes in the eyes of the consumer through our holistic approach to home building, which we call Smart Design, in which we bring together a team of experts who understand homes, our own architects, designers, and builders, as well as outside sources like professional chefs, home organizers, and realtors to design and build homes for our customers that are more livable, more organized, well built, and eco-friendly. We believe this strategy enables us to differentiate our homes, not only with other new homes, but also with existing homes and specifically against foreclosures, which are often perceived to be the most affordable way to purchase a home. In fact, in addition to the immediate cash cost required to close, foreclosures may require extensive cash outlays for improvements and deferred maintenance after closing. In contrast, we can offer a home ready for immediate occupancy upon closing which is more livable for today’s contemporary homeowner and which is eco-friendly and results in substantially lower cost of ownership. We believe these strategies will enable us to enhance shareholder value over the long run. Let’s now review the financial results. For the third quarter we experienced a total revenue decline of 40% from the same period in the prior year. This decline was driven by both decreases in closings and average selling prices year-over-year. These factors negatively impacted gross margins compared to the prior year. However, gross margin, excluding inventory impairments and abandonment charges, improved sequentially to 10.6% in the third quarter from 6.4% in the second quarter of this year. Inventory-related and goodwill impairment charges of $95.5 million and $4.4 million respectively contributed to a net loss per share from continuing operations of $2.85 compared to a loss of $3.09 in the prior year. The third quarter home building revenue declined about 40% due to both a 37% decline in home closings and a 9% decline in average selling price from the same period in the prior fiscal year. Home closings declined in all regions with the most significant declines in the Southeast, the West, and Florida. Average selling prices were most under pressure in the West and Florida. Net new home owners totaled 1,774, a decline of 42% from the prior fiscal year, with declines most pronounced in our Mid-Atlantic and Other home building segments. At 37% the cancellation rate for the quarter was comparable to the 36% rate experienced for the same period in the prior fiscal year. The decline in net orders and the unusually high cancellation rate in the Mid-Atlantic were due in part to cancellations arising from our decision to sell a condominium project in Virginia to an apartment owner. This resulted in the cancellation of over 100 sales contracts. Excluding these contracts, the cancellation rate for the quarter would have been 33%, in line with that of the March quarter. Resulting backlog as of June 30,2008, was 2,716 units, with a dollar value of $668.0 million representing a 54% and 61% decline from the unit and dollar backlog levels as of June 30, 2007. I would now like to turn it over to Allen Merrill, our Chief Financial Officer, to further discuss our financial results and other items. Allan P. Merrill: I’ll start with the inventory, option abandonment, joint venture, and goodwill impairment charges incurred during the quarter. As with our May filings, you will find expanded disclosure in our 10-Q as it relates to impairment charges, split between properties held for development and land held for sale, as well as by segment. Inventory impairments totaled $68.0 million in the June quarter. Of that amount, $47.0 million related to properties held for development and $21.0 million related to land held for sale. Impairments recorded on our held-for-development inventory resulted from the continued decline in the housing market, characterized by falling home prices and slowing sales paces, which in turn led to higher levels of home-buyer incentives. Many impairments were again incurred in the West regions where a significant portion of our inventory is located. The June quarter impairments represented 2,430 lots in 44 communities. Year-to-date we have impaired approximately 8,850 lots in 191 communities. The $21.0 million in impairments related to properties held for sale were spread across many different markets with approximately 75% in our continuing markets and approximately 25% in markets we are exiting. During the June quarter we also incurred lot option abandonment charges totaling $28.0 million. Over 40% of this amount related to projects in markets we decided to exit during the quarter. We also further reduced the carrying value of our interest in joint ventures by $18.0 million. Lastly, as a result of our decision in the third quarter to exit operations in Colorado, we impaired the $4.4 million in goodwill related to that market. As a result of our comprehensive market reviews, we have exited, or are in the process of exiting, eight markets: Fresno, California; Denver and Colorado Springs, Colorado; Cincinnati and Columbus, Ohio; Lexington, Kentucky; Charlotte, North Caroline; and Columbia, South Carolina. Our land position as of June 30, 2008, totaled 46,224 lots, 72% of which were owned, and 28% of which were controlled under option. This represents a reduction of approximately 15% and 36% from levels as of March 31, 2008, and June 30, 2007, respectively. We have achieved these reductions through the abandonment of lot options, selected asset sales, and of course, our own home closings. This has led to a significant shift in the weighting of our land holdings toward land owned. Of the 33,297 owned lots as of June 30, 2008, approximately 1/3 were finished lots. Less than 4% were in the form of raw land. We continue to exercise caution and discipline with regard to land and land development spending. So far this year we have spent about $275.0 million on land and land development compared to $694.0 million in the first nine months of last year. Our expenditures in the fourth quarter should be around $100.0 million allowing us to end the year with land and land development spending below half of the $800.0 million we spent in fiscal 2007. As of June 30, 2008, we had 300 unsold finished homes and 1,157 unsold homes under construction, representing declines of 32% and 41% respectively from year-ago levels. We have continued to significantly limit new homes starts, but as you may have heard from other builders, a modest level of speculative units remain an inevitable part of the business today. Buyers with homes to sell often have short decision-making windows so having homes nearly complete can be important. Also, even moderate cancellation rates will result in some unsold homes under construction. At June 30, 2008, our total debt stood at $1.8 billion, a net decrease of about $95.0 million from our fiscal year end in September. However, net debt to total capitalization stood at 63%, up from September due to the impact on our balance sheet of the approximately $565.0 million in impairments and abandonments we have recognized so far this year. At June 30, 2008, we had a cash balance of $314.0 million. Cash provided by operations totaled $52.1 million for the quarter, bringing year-to-date cash from operations to a positive $24.5 million. This cash generation has occurred despite year-to-date cash costs of approximately $28.0 million related to the investigation and a further $21.0 million in bond holder consent fees paid. As previously reported, we received a cash tax refund of approximately $56.0 million relating to a fiscal 2007 net operating loss carried back to fiscal 2005. During fiscal 2009 we expect to collect additional cash tax refunds of approximately $150.0 million. As Ian mentioned, we remain comfortable that we will exit the year with cash balances above the level at the end of last year. With the $85.0 million in proceeds already collected from asset sales in the fourth quarter, a significant number of home closings scheduled before year end, proceeds from several small asset sales currently pending, and moderate land and land development spending, our liquidity should be quite strong at year end. We will continue to consider ways to strengthen the balance sheet going forward but with our strong liquidity and still-to-be-resolved issues with regulatory authorities, we don’t expect to make any changes to the capital structure in the near term. We are pleased to report that yesterday we entered into an amendment to our revolving credit facility, which changed the size, covenants, and pricing of the facility. During a very tough time in the credit markets, we achieved our principal objective in the amendment negotiation, namely, gaining additional financial flexibility during the current housing downturn by modifying or eliminating certain restrictive covenants, by agreeing to reduce the size of the facility, increase collateralization requirements, and increased pricing pay to the bank group. In addition, to minimize uncertainty regarding the real or perceived consequences of potential further deterioration in our financial metrics over the next three years, we and the bank group also agreed to a framework that would further reduce the size of the facility and increase collateralization and pricing if particular financial metrics are not maintained. We believe this framework should eliminate many of the circumstances that might otherwise lead to the requirement for future facility amendments. The amendment eliminated financial covenants related to interest coverage, leverage, and land holdings, and reduced the net worth maintenance covenant from $900.0 million to $100.0 million, which provides significant additional flexibility for the company to absorb both potential additional inventory impairments, and the potential consequences of a reserve against the company’s deferred tax assets under FAS 109. In exchange, the company agreed to a reduction in the size of the facility, from $500.0 million to $400.0 million, an increase in collateralization requirements, which are the value of assets secured under the facility in relation to amounts outstanding or drawn as letters of credit, from approximately 2.25x to 3.0x. And to an increase in pricing from LIBOR plus 350 basis points to LIBOR plus 450 basis points. Other than the $100.0 million tangible net worth covenant, the only other financial maintenance covenant, which remains unchanged by the amendment, is a requirement for the company to maintain minimum liquidity of $120.0 million in the form of cash or availability under the facility, or a combination of the two. The facility is subject to further reductions in the future, to $250.0 million and $100.0 million if the company’s consolidated tangible net worth falls below $350.0 million and $250.0 million respectively. As of June 30, 2008, the company’s consolidated tangible net worth is calculated for the facility was $748.0 million. The facility size is also subject to a reduction, to $250.0 million, if the company’s leverage ratio exceeds 5x, or 3.5x excluding the effect of any deferred tax valuation allowance. The company’s leverage ratio at June 30, 2008, was 2.19x. To the extent that the facility is reduced to $250.0 million, or $100.0 million, both the multiple of assets securing the facility and the pricing will increase. The facility size is also subject to a reduction to $200.0 million if the company’s interest coverage ratio for the quarter ended June 30, 2010, is less than 1x. Availability under the facility continues to be subject to satisfaction of the secured borrowing base. And I want to point out that the company has not had cash borrowings under this facility since its inception in June of last year. I would like to conclude my remarks by saying that we are very pleased with the flexibility this amended facility provides and we appreciate the support and confidence of our bank group, led by both Wachovia and Citigroup. I will now turn it back over to Ian. Ian J. McCarthy: I would like to add my appreciation to our bank group, as well as to our many other partners and stakeholders who continue to work with us to weather the current down turn. And in particular I would also like to thank the many Visa Ambassadors for their tireless efforts on our behalf. Before moving on to the Q&A I wanted to take a few minutes to discuss the recently passed housing stimulus legislation. Although it’s too early to tell what the impact will be, we are encouraged by certain provisions of the stimulus package, including the $7,500 tax credit available for first-time home buyers, the permanent increases in FHA and GSE loan limits, the extension of the maximum FHA loan maturity to 40 years, and other measures including GSE support and foreclosure relief. We are hopeful that these measures will provide an incremental boost to the industry over the next several quarters. We are immediately seeking to leverage the availability of the tax credit by hosting a fee national first-time-home-buyer Webinar next week and offering free onsite seminars in all of our markets through mid-September focusing on the new tax credit and basic steps of the mortgage approval process. We are disappointed with certain aspects of the bill, that will provide some near-term challenges and inhibit home ownership possibilities for certain home buyers. Specifically the increase in the minimum down payment for FHA loans to 3.5% and the elimination of down-payment assistance. We currently estimate that approximately 20% of our customers make use of down-payment assistance, although our visibility is somewhat limited as we no longer conduct our own mortgage operations. With its elimination in October, we would not be surprised if we see an up tick in its usage during our fourth quarter. At the same time we, and our mortgage partners at Countrywide, believe a portion of the buyers who have made use of it, may not have actually needed the assistance to close on their home. Irrespective of the potential positives and negatives of this legislation, in the end we view anything that can stimulate potential home-buyer awareness, interest, and education is good for our business. Allan and I will now be glad to answer your questions.

(Operator Instructions) Your first question comes from David Goldberg with UBS. David Goldberg - UBS: First question is actually on SG&A and kind of the efforts you are making to lower SG&A. The number this quarter as a percentage of revenue came in a little bit higher than we were expecting and I’m wondering how you are thinking about overhead and reducing overhead as you look forward and where you think that could get to over time? Allan P. Merrill: This quarter had a couple of anomalies, or at least one big anomaly, in that the investigation-related expenses were quite significant in the quarter. Remember that was the quarter that we completed our restatement in and so the professional fees associated with that were very significant. The other factor that flows through that line is a pretty good sized bump in realtor cooperation in our home sales. And those two provided the majority of the increase in the SG&A. We don’t have a target number going forward, but I will say that between division-level overheads and corporate-level overheads, we have taken out, with jobs, with re-organizations of the financial structure of the business, centralizing things like planning and design. We have taken out over 1,500 jobs, really 1,700 jobs from the peak, and nearly $200.0 million in overheads over the last 18 months. David Goldberg - UBS: Could you talk about the margin on the spec homes you sell versus the built-to-order homes. It was interesting you noted in your remarks that some buyers are looking to get homes more immediately and so you need to have a certain amount of spec on the ground. I’m just wondering what the margin profiles look like and how you think about that moving forward in terms of the mix of spec versus built-to-order? Allan P. Merrill: I will give you a couple of thoughts and then Ian will probably have some as well. One thing we’ve tried to institute is the concept of a line of margins between spec sales and to-be-built sales within every community. And you should expect that there is a slope, that we would expect, and do receive, a quite a bit higher margin on a to-be-built home where we still have the work to do, to lay out the cash to build the home, and a somewhat lower margin on a spec. Now the slope of that line that would kind of connect those points is dependent on a number of factors. If it’s a particular community where we had had more specs, the slope might be somewhat steeper. If it’s a community where we have a significant cost basis in the land, and therefore the cash generation out a spec sale is very significant, we may take a lower margin as well. It’s hard to give a number that would be representative, we’ve just gone through our first pass of looking into 2009 and reviewing year-to-date results across every single division in the last couple of weeks, and I would tell you universally, that slope exists, we are getting better margins on presales than on the spec sales, but that GAAP can range from 200 basis points to nearly 1,000 basis points Ian J. McCarthy: And I would to that in terms of the number of specs that we have. We’ve been very disciplined during this current down turn. We continue to have less than one finished spec home per community and approximately 2.5 under construction. So that’s the level that we’ve maintained over the last 12 months and we’ve brought in down in absolute numbers by over 900 homes. So a very disciplined approach there, we realize that we’re going to have specs through cancellations rates we have, but with the cancellation rate somewhat normalized now, in the low 30s, we’ve not been incurring too many specs.

Your next question comes from Larry Taylor with Credit Suisse. Larry Taylor - Credit Suisse: I know it’s impossible to quantify exactly, but I wonder if as you look at the business and think about the relative order of magnitudes, the difference between the impacts of the down payment assistance loss and then the impacts of these tax changes, how would you weigh those two? Ian J. McCarthy: As you say, it is too early to tell. We don’t feel that we have too high a percentage. As I said about 20% of our buyers use down payment assistance. It’s higher in certain markets. California is substantially higher, Florida is higher. But, as I said, with the ease of being able to accept down payment assistance, we believe that many buyers who didn’t actually need it were using it. And why wouldn’t they if it’s there and available? So I think that we want to educate our buyers now, that’s why we’re proactively getting out to our buyers, we’re holding this Webinar next week and across the whole country, in every market, we’ll be holding seminars to try and understand from the buyers, and explain to the buyers, how they can use that tax credit. A lot of these first-time home buyers are not going to be that sophisticated so we really want to be proactive in getting out there. At this point we can’t really tell if the tax credit and the linked ability for family members to now loan the down payment, in addition to gifting, that’s a benefit as well, we can’t tell if those measures are going to equal out all of the down payment assistance. As I said in the remarks, we were certainly disappointed the down payment assistance was taken away, and as you well know, there are some measures to try to bring it back as well. So I think this is a moving target and we’re hoping that the positive news about housing, after many years now of negative news about houses, falling prices, foreclosures, etc., now we’ve got something positive to talk to the buyers about. We just hope that that positive stimulus at least gets some people into homes. Plus the time restrictions on the tax credit, again, I think will take some people off the fence and put them into a home. Larry Taylor - Credit Suisse: You had this rather large project sale subsequent end, can you give us some sense of what the book value was of that piece of property? Allan P. Merrill: It was actually two different assets. I believe the impairment in the quarter associated with those two asset sales was about $5.0 million but I don’t know if there had been impairments of those assets in prior quarters. I don’t have that at my fingertips. But these were two to-be-sold out condo projects, sold to apartment developers that were never occupied by our home buyers. So these were sold awfully close to their cost basis and hadn’t been kind of white elephants sitting around waiting. We sold them literally at their completion date. Larry Taylor - Credit Suisse: So that just means there wasn’t a big write-off associated with that asset sale in the fourth quarter? Allan P. Merrill: We had, as I said, $5.0 million associated with these assets in the third quarter, which they would have been carried as property held for sale. And we had to mark them to our expected realized value and then several days later we sold them. So you would think that our mark for assets at June 30 was pretty close to their sale proceeds.

Your next question comes from Alan Ratner for Ivy Zelman with Zelman & Associates. Alan Ratner for Ivy Zelman - Zelman & Associates: I was hoping to dig in a little bit more to your cash flow. We were a bit surprised through the first three quarters of the year to see you negative on a free cash basis if you exclude the tax free fund. And understanding that the fourth quarter is typically your seasonally strong period for cash flow generation. Just wanted to see, given the fact that you’re down 60% year-to-date on land spend, really how much room there is to cut further to generate cash and I guess tie that into your current supply of finished lots, which I think is roughly around a year’s supply, on a trailing 12-month basis. Allan P. Merrill: A few comments. First of all, you’re clearly right to acknowledge, and we did intentionally, the $56.0 million cash tax refund as a component of the year-to-date cash flow of $24.5 million. But I think at the same time we wanted to point out the $50.0 million spent on investigation and bond holder consent fees. So if we’re really going to look at the cash generation of the business we probably need to look at both sides of that. Further, you did point out, and it was clearly the case last year, that we had very significant cash generation in the fourth quarter. We expect that to be the case again. That’s why we’ve said consistently from December forward that we expect it to get to a cash balance at the end of this year in excess of the cash balance at the end of last year, despite incurring the extraordinary investigation expenses and despite paying down $100.0 million in debt. So, we have been making decisions project by project, market by market, managing to a strong liquidity position. We have had some market exit decisions that we have made that have also added to our cash strategy and we are seeing the benefits of that already through the third quarter and will see more of that in the fourth quarter. I think we feel pretty good. You’re well aware of what our maturity situation is with respect to our long-term indebtedness, with no maturities until 2011, so we think we’ve been very prudent in building the cash position and a growing cash position that we have. On the finished lot side, I think we said we have about 33,000-34,000 owned lots, 1/3 of which, 11,000-12,000 are finished. Unfortunately, that represents well over a year’s supply. And I think the other thing is that the 2/3 that are not finished, such a tiny fraction are raw, there are many of the lots that are in-between, that don’t require significant capital to get to a finished lot position. So I think net-net there is some further room in land and land development spending as we look into 2009. Not a lot, but we are not at this point giving any 2009 forecasts as to cash flow or balance sheet metrics.

Your next question comes from Michael Rehaut with JP Morgan. Michael Rehaut - JP Morgan: First question. I was hoping to get a little bit more clarity with the DPA. You said that you estimated it was 20% of your buyers but that at the same time you don’t have a full visibility given that Countrywide has taken over the origination. Where is that 20% from, it is what’s in your backlog or is it the last quarter that you, yourselves originated loans and can you give us a sense of a time snapshot where that 20% relates to? Ian J. McCarthy: I would say it’s our best estimate of the calendar year to date. Because as you know, FHA rule limits changed January 1, 2008, and that really enhanced the use of the FHA program in calendar 2008. So, we’ve seen approximately 50% of our closings now going through the FHA program and that’s where we’ve got the use of that down payment assistance. So I would say that’s it’s something we haven’t got a clear number on because as we’ve transitioned to Countrywide through this year, they haven’t got the full capture rate of all our buyers. So a number of our buyers, as we integrate Countrywide into our various operations, we’ve got a number of smaller mortgage companies closing loans for us, up to this point, year-to-date. So I think we say that number as best we can. I think what we’re saying going forward is that we actually might see that go up a little bit in the September quarter as people get in to use that program. And then of course we will have to decide how well the tax effect is being used going forward, until July next year. Allan P. Merrill: Let me just add, one other data point we used in arriving at that estimate is some checking that we did with the charities that provide that benefit to our buyers and so we’ve done that checking through them directly, looked at our own closings, worked with Countrywide, so it’s not a shot in the dark it’s just when you’re not closing them yourselves, we wanted to point out that there was the possibility of a slight discrepancy but we feel very good about that estimate capturing what’s happened so far this year. Michael Rehaut - JP Morgan: On the tax [credit], you mentioned that it’s unclear how perhaps the homebuyers will take to that. A lot of people talk about the tax credit and they kind of talk in the description of that tax credit in a very brief way just saying it’s a credit. Are you concerned at all about the 15-year payback? When I see a lot of builders describe the tax credit, they really don’t describe the other half of it. How does that work in terms of making potential home buyers aware and do you think that payback will factor into their decision? Ian J. McCarthy: I think that we would much prefer this to have been a straight gift, a straight tax credit rather than a loan that has to be paid back over 15 years. I have discussed this on many occasions with our Chief Operating Officer, who told me back in the 70s, before I was here, that there was a straight tax credit, that was absolutely really positive stimulus to the market at that time. And again, we were very involved in the lobbying here in terms of assisting NAHB in trying to get this through. And we would have much preferred that to be the case, because it was so effective. I think buyers are beginning to look at this now and say it’s a real benefit, there’s a real benefit. But we need to explain it to the buyers, they need to understand how it works. In many cases we may need to explain it to their families, if their families are going to help them get into this deposit going forward. So, I think there’s an explanation there, we recognize that it’s not a straight gift, we recognize that it’s got to be repaid over a period to time, but I do think that just that positive impact of getting people on the front foot instead of the back foot and being able to say to people that if they buy a new home within the next year there is a real positive benefit to them. I think that’s the positive stimulus. Michael Rehaut - JP Morgan: On the credit facility, it said in the press release, I think you mentioned in your prepared remarks that you expect to add more assets to the borrowing base in order to create availability under the facility. I was wondering if you could give us a sense of that. And given, at this point, the borrowing base, the availability of zero, what do you hope that number to increase to over the next 12 months? Allan P. Merrill: We have plenty of assets. We can kind of make that number whatever number we want it to be. It’s clearly an operational financial burden to add assets to it. With this amendment, a couple of things that went on, and this may be more detail than you want, but with the asset sales that Ian and I talked about, the $85.0 million, one of those assets, the larger of the two, was actually in the borrowing base and so that came out. The collateralization requirement went up from 2.25x to 3x. So the combination of those things really affected availability at a moment in time. We will deal with that. We are in the process of putting additional assets in. Now you question as to what’s the target level? We clearly want to cover our LCs. We clearly want to cover something in excess of the LCs. I don’t today, and I don’t think Ian has a specific number that we want to have available, but I would tell you it would be very surprising if we went to the effort in the near term to create availability that approximated the entire amount of the facility. Because we simply don’t need it and don’t need to incur the expense or the distraction of gaining it. And I know you didn’t specifically ask this. What we were really trying to do was future-proof the facility so that as business conditions evolved, whether better or worse, we weren’t in a quarter-to-quarter kind of mode of do we or don’t we have a facility. And I think that was really the important part of the amendment.

Your next question comes from Carl Reichardt with Wachovia Capital Markets Carl Reichardt - Wachovia Capital Markets: Just like clarification on the cash flow for next quarter. I assume that assumes the $85.0 million from the condo sales, so will you be free cash flow positive without that? Allan P. Merrill: Yes. Carl Reichardt - Wachovia Capital Markets: [inaudible] as you may have seen their rights offering that they talked about earlier related to Section 382 of the IRS code and I’m curious if you’ve taken a look at that and whether or not you expect that change in ownership in your share base might impact the ability of you to continue to utilize your NOL carry-forwards? Allan P. Merrill: I think that was an important and a very interesting development this week. As you know, we had our annual shareholder meeting that happened to coincide with other preparations so that’s probably a direct way of saying that we haven’t spent as much time looking at it yet. But it’s clearly important, it is interesting and we will study it closely.

Your next question comes from Alex Bering - Agency Trading Group. Alex Bering - Agency Trading Group: I wanted to ask if you have a way to quantify the benefit to your gross margins this quarter from previous impairments? Allan P. Merrill: I don’t have a specific number to give you. I will tell you it’s a range of, it’s clearly about $25.0 million in the quarter. Because of the different types of things that happen in the impairment, it hits previously capitalized interest, it hits the bases, some of it relates to property held for sale, which is accounted for differently than homes sold. It’s hard to give you a number that would be particularly meaningful. But having taken nearly $1.0 billion in total impairments, those are in the process of working their way through the income statement. But I give you as a swag number, kind of, $25.0 million. Alex Bering - Agency Trading Group: My other question is more theoretical. At what point in the gross margin is an impairment triggered and after you take the impairment, what does the typical gross margin get reset back up to? Allan P. Merrill: I think there’s been a lot of confusion on this point. The first thing is that the level of the gross margin, at a moment in time, is not really much more than a data point for the determination of whether an impairment exists. An impairment exists if the aggregate cash flows of the project, undiscounted, are below the book value. And there are circumstances where that can occur with higher or lower gross margins, based on the projections of what’s going to happen in the future. So I need to create a kind of a break here where we don’t say that a margin itself is going to create an impairment. It’s a good indicator but it isn’t the only indicator. What happens in the future is really important. And the second side of it is what should be margins be or what are they when you get done impairing it? Well, for the same reason that the margin isn’t the sole trigger, it isn’t the sole benefit or the sole way in which to look at what the result of the impairment was. And we will have a wide range of gross margins or contribution margins after impairments, depending on the length of the community, longer-lived communities tending to have higher gross margins after impairments, and quick-turning, nearly built out communities having much lower gross margins. And the reason for that is that the valuations that are arrived at in the impairment calculation are discounted cash flows. And obviously the power of compounding affects longer-lived communities more than shorter-lived communities. So we use a range of 18% to 22% in our discount rates, and that then drives what the margins are. I know that that isn’t very satisfactory because the way the question was framed was just tell what the gross margin is before impairment and after impairment, but I’m intentionally not answering it because it isn’t really the way that we are able to look at it under the accounting standard. Alex Bering - Agency Trading Group: I guess a number of builders have taken a deferred tax asset allowance, primarily because they are hardest hit by E&Y. I’m trying to understand what your situation is and perhaps why we haven’t seen any from you. Allan P. Merrill: You haven’t seen anything from us yet. We certainly haven’t said that there won’t be something. We talked at length in our last Q and we will in the Q that we will file here shortly talk about it more. And that is we’ve listed all factors that you are required to look at to reach a determination as to whether or not a reserve in whole or part needs to be taken. As of June 30 we had still concluded that it was more likely than not that we would be able to use it. We have to look at that based on this whole mix of factors every quarter. I said last call, I’ll say again, I will be surprised if at some point we don’t have an impairment or a reserve against that asset in whole or in part, but we’re making that determination on a quarter-by-quarter basis.

Your next question comes from Lee Brading with Wachovia Securities. Lee Brading - Wachovia Securities: I did see where you had an impairment on the JV side of about $18.0 million and I know that the JVs are relatively small for you. I wondered if you could give a little more detail, like how much balance-sheet debt there is at the JV level? Allan P. Merrill: Our total investment in JVs is down to under $40.0 million. Our total exposure to repayment guarantees is under $40.0 million. Our exposure to loan to value maintenance is about $6.0 million. Total debt in the JVs is a little over $625.0 million, I think it’s $640.0 million. But almost $400.0 million of that is in one joint venture in Las Vegas that we have a 2.6% interest in. So our share of that is about $10.0 million. So that’s kind of the numbers of the JVs. Lee Brading - Wachovia Securities: On the investigation, you said it was $28.0 million and I was wondering how much of that fell into this last quarter? Allan P. Merrill: I think $11.0 million hit this quarter.

Your next question comes from Joel Locker with FTN Securities. Joel Locker - FTN Securities: I was wondering if you had a number on your total customer deposits versus your backlog? Robert L. Salomon: Total customer deposits at June are $25.0 million. Joel Locker - FTN Securities: The other expense being down negative $13.5 million or so, were there any one-time charges in that? Robert L. Salomon: It was principally the fact that due to not being able to capitalize interest over all of our inventory assets, we have expensed approximately $36.0 million of interest year-to-date that is in that other income expense account. Joel Locker - FTN Securities: How much was it this quarter? Robert L. Salomon: This quarter was $15.0 million.

Your next question comes from Andrew Ebersole with Sutton Asset Management. Andrew Ebersole - Sutton Asset Management: I was wondering regarding your legal liabilities and a hoped-for settlement, are you close to being in a position to begin negotiations? If not, can you discuss a little bit what the barriers are in getting to that point where you can start negotiations? Ian J. McCarthy: As I said in the prepared remarks, everything that we can say currently will be in our filings. So it will be the Q that we’ve issued already and the Q that we are going to issue very shortly, so really we can’t add any more to that at this time. But we will give as much disclosure as we can in our public filings.

Your next question comes from Jim Wilson with JMP Securities. James Wilson - JMP Securities: Could you give a little color on pre-impairment profitability in different parts of the country, kind of where things are working better or worse for you by region? Allan P. Merrill: Pre-impairment. I’m not sure I understand exactly what you mean. Post-impairment is a little bit easier to analyze where we are today. James Wilson - JMP Securities: That would be fine, too. Ian J. McCarthy: Why don’t I address it more on an operations sense first and if Allan wants to add any margins sense to that, he can do. But what I would say is across the markets that we’re in at this time, there’s not a lot of good news. It’s pretty tough out there. It’s been very tough in this last quarter and we’re still seeing a very tough environment. That’s why the stimulus that we’re going to get out there and talk to home buyers about potential tax credits are hopeful issue with maybe mopping us some of the foreclosures we hope will improve. But I can tell you, in terms of new orders, there’s only a couple of markets that were positive in June: Charleston, South Carolina; and somewhat surprisingly, Las Vegas. We had quite an improvement in new home orders in Las Vegas and I think that really is just because the prices have gone down so much that buyers are now taking up opportunities to buy. I think one of the other things to look at might be stabilization in average prices across the markets, we’ve seen some stabilization in the Mid-Atlantic. Simply for us in New Jersey and Maryland, where we’ve seen some stability in prices. We’ve seen a little bit of that, again, somewhat surprisingly but positive improvements, in Florida. In Jacksonville particularly. So a couple of markets are seeing some stability. In Texas, in our Dallas markets, we’ve seen stabilized new orders and stabilized pricing as well. So, I would say those are very small incremental benefits amid quite a lot of other negatives. But the only one other point I would look at and say we’re seeing some stability, is in our cancellation rate. As we reported, if you exclude that 100 units of sales that we had to cancel in Virginia because of the sale, our average cancellation rate across the markets now is 33%. But if you look at all of our Southeast markets, and including Florida, they’re all somewhat below that. The only one in all of those markets would be Orlando, which is above. So we’ve got about a 20% cancellation rate in all of our markets in the Southeast. We’re also seeing going with that stronger orders in Las Vegas, cancellation rates in Las Vegas also coming down. And the higher cancellation rates for us are really in our exit markets. It’s not surprising that the markets we’re leaving, we’re seeing some churning of sales in those markets. So I look at this as a somewhat more stable environment in terms of the cancellation rates. Obviously we want to write every deal that we can, but we are seeing some benefits there in certain markets, which I take as a slight positive.

Our next question comes from the line of Tim Jones with Wasserman & Associates. Timothy Jones - Wasserman & Associates: On this 20% DAP, that’s a six-month figure, not a three-month figure? Ian J. McCarthy: It’s a run rate at this point, that’s right. As I said, that’s this calendar year. Timothy Jones - Wasserman & Associates: Your larger competitor, [inaudible], have reported those numbers between 25% to 33%. Is that mainly because they have a bigger portion of their business in Texas? Ian J. McCarthy: I think it may well be with the reporting controls that they have within their own mortgage businesses. As we said, we’ve transitioned during this period from our own mortgage company to Countrywide and Countrywide hasn’t got up to full capture rate in all the markets. So we have had to collect this information from various sources. I think that number is reasonable. And in certain markets we don’t use a lot of DAP. Over the last few years, as we’ve broadened our product line, I think we’ve got quite a wide range of product now. So not all of these buyers are going to be using this. I think you’ve just got to take that number as it comes. Timothy Jones - Wasserman & Associates: Is your experience roughly the same as Countrywide’s? Ian J. McCarthy: I couldn’t tell you on that. They obviously cover an enormous range of home building, so I really couldn’t tell you that. Timothy Jones - Wasserman & Associates: You lowered your tangible net worth covenant from $900.0 million to $100.0 million. I trust that includes any potential write-down under FAS 109. What were your deferred taxes at the end of the quarter and also your tangibles? Allan P. Merrill: Deferred tax was a little over $400.0 million and the intangibles were about $16.0 million. Timothy Jones - Wasserman & Associates: So it’s been written down since the fiscal end of the year? Allan P. Merrill: Yes. By a lot. Timothy Jones - Wasserman & Associates: Generally when people take these write-offs on the AME, I know it’s very difficult to estimate, but usually the deferred tax write-downs come to about 2/3 of what’s on the books. Is that a good guess is you have to take? Allan P. Merrill: One thing I’ve learned so far is not to guess. So I would say at this point we don’t have a reserve against it. I’m aware of what others have done. In the future we may very well have a reserve but I just can’t speculate as to what it may be in the future. Timothy Jones - Wasserman & Associates: I trust your $100.0 million tangible net worth includes any write-offs from deferred taxes. Allan P. Merrill: Yes. That is done with the intention to deal with potential future impairments, potential FAS 109. We have, as I said, tried to move this bank agreement kind of into a future state where we’re not living quarter to quarter worrying about tangible net worth.

Your final question comes from David Martin with Blue Mountain Capital. David Martin – Blue Mountain Capital: I just wanted to drill down on the cash flow a little bit. I want to see if I understand this correctly. You closed the quarter with $314.0 million of cash. I think last year you closed the year at about $450.0 million, implying if you are going to exceed that target for the end of the year, you will generate about $140.0 million. And the condo sale is $85.0 million. So are you leading us to think that cash flow would be in that ballpark or should I be focused more on the in-excess of the comment? Allan P. Merrill: We said a few things and I think we just said above, we haven’t given a specific dollar amount. But there are some very small pending asset sales that will also contribute to our cash position at the end of the year. But we have said, and maintained, that we will expect to get above where we were last year. I’m not going to get into by what amount or just at the number. But as we’ve said, we’ve got a great head start in the fourth quarter with those asset sales. We had a good starting point with where we ended the third quarter. We’ve got a lot of closings coming. We feel very good about where the cash position will get to. David Martin – Blue Mountain Capital: I wanted to circle back on the line of credit and availability under the line of credit. Michael was asking about this before and I think it’s a little difficult to understand exactly why you aren’t a little more proactive, in terms of at least maintaining some availability just for the financial flexibility that there is. I was curious as to why you didn’t seem to have a lot of urgency to replenish or set a target for minimum availability you would like to maintain. Allan P. Merrill: Couple of answers there. There’s this sort of short-term issue. There was the kind of double whammy of having a big hunk of assets pulled out of the borrowing base with our successful sale, and an increase in the collateralization multiple that happened effective yesterday. So at a moment in time, irrespective or whatever our intent had been, the dynamics changed. We anticipated that. We are well along in getting additional assets into the borrowing base. We have a high degree of urgency to do that, to more than cover our LCs. What I was trying to intimate, though, is that we don’t have a number in mind that is toward the top end of the total facility size and at this point we don’t have a specific number that we’re shooting at. But we clearly want to have availability under the line, in addition to the LCs. Part of it is sort of project by project as we put those projects in and they go through the appraisal process and the liens get perfected, it’s a little bit hard. And we could set a specific dollar amount, target a specific date, and then events outside of our control that relate to reporting mortgages or appraisal process don’t happen as quickly as we would lie, and all of a sudden it looks like we’ve missed some target that has implications for our liquidity. The fact is it’s in the near term really more optical than it is substantive. We do want availability, we will create availability, but that’s really the position that we’ve taken. Ian J. McCarthy: Thank you all. I would like to take this opportunity to thank you for joining us today.