Jeffrey S. Hoza - Corporate Vice President Allan P. Merrill - Chief Executive Officer, President and Director Robert L. Salomon - Chief Financial Officer, Chief Accounting Officer, Executive Vice President, Senior Vice President and Controller

David Goldberg - UBS Investment Bank, Research Division Alan Ratner - Zelman & Associates, Research Division Daniel Oppenheim - Crédit Suisse AG, Research Division Michael Rehaut - JP Morgan Chase & Co, Research Division Will Randow - Citigroup Inc, Research Division Adam Rudiger - Wells Fargo Securities, LLC, Research Division Alex Barrón - Housing Research Center, LLC

Good morning, and welcome to the Beazer Homes Earnings Conference Call for the Third Quarter of Fiscal Year 2012. Today's call is being recorded and will be hosted by Allan Merrill, the company's Chief Executive Officer. Joining him on the call today will be Bob Salomon, the company's Chief Financial Officer. Before he begins, Jeff Hoza, Vice President and Treasurer, will give instructions on accessing the company's slide presentation over the Internet and will make comments regarding forward-looking information. Mr. Hoza? Jeffrey S. Hoza: Thank you, Tonya. Good morning, and welcome to Beazer Homes conference call discussing our results for the quarter ended June 30, 2012. During this call, we will webcast a synchronized presentation which can be found on the Investor page at beazer.com. Before we begin, you should be aware that during this call, we will be making forward-looking statements. 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 our SEC filings, including our report on Form 10-K. 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 such factors. Joining me today are Allan Merrill, our President and Chief Executive Officer; and Bob Salomon, our Executive Vice President and Chief Financial Officer. Following their prepared remarks, we will take questions in the time remaining. I will now turn the call over to Allan. Allan P. Merrill: Thank you, Jeff, and thank you for joining us this morning. On our call today, I'll update -- I'll summarize our recent capital transactions, recap our results for the third quarter and update you on the progress we've made to date on our operational objectives and financial goals for the year. After the quarter, we successfully completed a series of important capital markets transactions that significantly strengthened our balance sheet, reduced annual interest expense and increased our liquidity. Specifically, we raised over $170 million of growth capital through the issuance of 22 million shares of common stock and 4.6 million tangible equity units. We refinanced our 12% notes that were due in 2017 with a 6.625% notes that are due in 2018, and we received commitments from 4 financial institutions for $150 million revolver. Combined, these transactions will save us approximately $15 million in annual interest expense and enable us to more confidently grow our new home community count with an overall goal of accelerating our return to profitability. At this point, we are very comfortable with our balance sheet, although there are 2 topics we're thinking about. The first is finding the right time and structure to refinance our 2015 and 2016 notes. Continued improvements in operations, I think, we'll have plenty of opportunities to address this prior to maturity. The second topic relates to our common stock. We're very sensitive to the dilution experienced by our shareholders with the recent capital raise and the share price performance since the offering. At the same time, we have heard from many market participants that our low share price and high stock price volatility are impediments for prospective shareholders. For this reason, the board is currently considering whether a reverse stock split may be beneficial. While a reverse split, we do nothing to change the value of the company, it may signal to investors that our balance sheet has been substantially enhanced and we're now in a forward-looking path-to-profitability mode. In the event we decide to pursue such a reverse split, we would expect to adjust downward our total authorized shares by some amount. And of course, any decision by our board on this matter would be explicitly subject to shareholder approval. The highlights from our third quarter include substantially higher new home orders and closings with improvements in every geographic segment. This quarter represents the fourth consecutive quarter of year-over-year improvement in these key metrics. In terms of specific numbers, we recorded 1,555 new home orders, which was up 28% over the third quarter of fiscal 2011, despite having a lower community count. The orders were driven by a substantial improvement in sales per community per month, which grew from 2.2 in last year's third quarter to about 2.9 this year. We closed 1,109 new homes, up 40% over the third quarter of fiscal 2011. We ended the quarter with a backlog that is 33% higher than the same time last year. We generated unlevered homebuilding gross margins of 16.7%, allowing us to reach a year-to-date gross margin of 18%, the same as last year's gross margins on a year-to-date basis. And we maintained substantial liquidity, ending the quarter with $232 million in unrestricted cash, which was further enhanced by our financing transactions in July. Taking a step back, these results demonstrate encouraging progress against our overarching goal of returning to profitability, for which we have outlined a 4-point plan: drive sales per community; gradually expand community count; generate higher margins; and leverage our fixed cost. As we told investors during the capital-raising effort a few weeks ago, we have made substantial progress on 2 of these components and are now focusing our efforts on improvements in the other 2. For the last year, our primary operational objective has been to improve sales per community in all of our communities and I'm extremely happy with the progress we have made. As a result of an intense focus at the community level, we achieved an average of 2.2 sales per community per month for the trailing 12 months ended June 30, up from 1.7 sales per community per month a year ago. And as I mentioned just a moment ago, in the third quarter, which is seasonally the strongest quarter of our year, we reached 2.9 monthly sales, up more than 30% from last year. One of the aspects that makes this improvement in absorption rates compelling is that it hasn't resulted from us just blowing through our best-positioned communities but rather from improving the performance of our previously underperforming communities. In the third quarter, just under 10% of our communities generated 3 or fewer sales, compared to a whopping 27% a year ago. With the momentum our team has made in becoming hypercompetitive in every location, we should be able to make further progress in absorption rates albeit in smaller increments in the quarters ahead. The other area where we can point to substantial improvement is leveraging our fixed costs. While there is still work to do, you can see real improvement on this chart. Our operating G&A is essentially flat in dollar terms despite much higher closing volumes, allowing us to drive our operating G&A ratio down to 9.1% for the 12 months ended June 30 compared to 14.8% at this point last year. That's nearly 600 basis points in improvement. On the interest expense side, the refinancing we just completed will result in $15 million in savings annually even as we add new communities. While the dollar amount of our overheads may start to slightly creep up as we expand the business, I'm confident we can keep any increases well below the revenue growth rate, allowing further G&A leverage in the quarters ahead. As you can see, we haven't grown our active community count in recent quarters, and the reason for this is pretty simple. I didn't believe we had earned the right to grow our community count until we proved to ourselves that we could operate our existing communities more effectively. That's the main reason our community count is down year-over-year, about 3%. But with our improving operational performance and our growing confidence in the trajectory of the housing recovery in our markets, we reached an important inflection point during the third quarter and have now reoriented our sales to gradually growing the community count. This change in priorities was one of the central reasons we completed the capital raise this summer. While we aren't in urgent need of land for 2013 in order for us to sustain double-digit growth in 2014 and beyond, we know that we need to grow the size of the business. By raising money now, we have the ability to invest more patiently, picking out opportunities for closings in 2014 and beyond, which happened to be a lot more attractively priced than the finished lots that can deliver closings next year. The alternative was to wait 6 to 9 months to raise the money, which would have delayed our ability to invest. In turn, this would have meant pushing out our growth ambitions at least a full year or running the risk of overpaying for finished lots next year. Over the next year, we intend to grow our community count in each of our markets but expect the incremental capital will enable us to particularly expand our presence in our Florida, Texas, California, Arizona and North Carolina markets, as successful, but gradual, expansion of our community count over the next 4 to 6 quarters is a critical component of our return to profitability. So let me turn to our fourth component of our path-to-profitability plan, improving margins. Now this may sound strange but have you ever heard the expression, if everything is equally important, nothing is really all that important? Well, that is exactly how I felt about gross margins until now. With so many opportunities in the business, we had to prioritize those items that needed to be addressed first. My view was the picking up margin points needed to wait a little bit until we figured out how to consistently sell in a very high portion of our existing communities. I am acutely aware that our unleveraged gross margins have lagged most of our peers for years. So outside observers may argue that improving margin should have been our first priority. But, it was my assessment that we needed to learn how to compete better, in every location, before we concentrated on margins because there was no margin improvement scenario where our formerly underwhelming sales pace could lift us to profitability. Even if it meant going backwards in margins to restart challenging communities or reposition struggling divisions, I believe focusing on sales momentum was the right thing to do. With that perspective, our margin goal for the full fiscal year was to generate gross margins comparable to last year while massively improving absorption rates. In this context, the trends in our gross margin are actually somewhat encouraging. Bob will give you more color on the margins in a minute, but through 9 months, our gross margins are actually even with last year, a full quarter ahead of schedule. Now that we have proven we can effectively compete for buyers, I'm confident we can harness the efforts of our team to create margin improvements. In addition to simply raising prices and reducing incentives, we have identified specific actionable opportunities for margin enhancement in the quarters ahead. Some examples include reducing our reliance on spec sales, especially finished specs, fine-tuning our floor plan and elevation offerings in each community to weed out the lowest-margin homes and adjusting the included features on our homes locally to ensure we offer a compelling local value. In recent years, we had to strip out features to get home prices as low as possible. As the market has strengthened, finding the sweet spot for buyers is increasingly about including features previously sold only as options but with adjustments in both base prices and concessions that more than cover the incremental cost. Getting back to profitability is our overriding corporate objective, and we believe that consistently and urgently working on these 4 initiatives is what we need to do to get there. With that, I'll turn the call over to Bob. Robert L. Salomon: Thanks, Allan. We're reporting a net loss from continuing operations for the quarter of $38.1 million, or $0.38 per share, which included noncash pretax charges of $5.8 million for inventory impairments. This compared to a loss from continuing operations of $55.8 million, or $0.75 per share, during the third quarter of fiscal 2011, which included noncash pretax charges of $6.9 million for inventory impairment. As Allan indicated earlier, we recorded another quarter of solid growth in new home orders, providing further evidence of stabilization in the market. We experienced order growth in all of our segments, but particularly strong growth in the West, which was up 63% over last year, driven by very strong improvement in our Phoenix and Las Vegas markets. On the other hand, our East segment delivered only modest growth in new home orders because of the 25% decline in orders from our Indianapolis division, which suffered from the closure of several highly successful communities in the last 2 quarters. Our solid sales results this year resulted in a 40% improvement in closings for this quarter and a backlog conversion of 56%. We have significantly reduced our reliance on spec sales this year with tight controls around spec production. To-be-built homes now make up over 75% of our backlog compared to 67% a year ago. And as a result, we've seen lower conversion rates than in prior periods where we relied on spec sales to drive our business. Looking back over the past 10 years, we've experienced a wide range of conversion rates in the third quarter, from a high of 92% in fiscal 2010, when closing had to occur prior to the expiration of the tax credit, to a low of 45% in fiscal 2006. This slide shows the various moving parts that impact this conversion ratio. First, in every quarter, we have homes in backlog whose closings are scheduled for future quarters, generally due to their construction status. Second, cancellations occur in the normal course of business. We canceled 9% of our backlog in the third quarter, which is at the low end of the 9% to 15% range we've experienced over the last 7 quarters. Third, we've pushed 11% of our March 31 backlog into future quarters. Consistent with the average we've seen since the beginning of fiscal 2011, the burdens of the mortgage documentation process continues to impact our ability and the ability of our homebuyers to accurately predict the timing of home closings. And finally, we sell and close a number of spec homes within each quarter. This quarter, the number of spec homes sold and closed during the quarter was 302. As I look toward the fourth quarter and the composition of our backlog, I believe that our backlog conversion rate will be within the range of 55% and 60%. The solid sales results we've experienced in recent quarters has generated a strong backlog as we enter our fourth quarter. At June 30, we had 2,421 homes in backlog, up 33% in units as compared to the same time last year. The sales value of our backlog at June 30 was $573 million, also up 33% from the sales value of $431 million last year. ASP can be volatile from quarter-to-quarter due to changes in geographics, product and community mix. The ASP of our third quarter closings was approximately $227,000, flatly above the 12-month average ASP of $225,000. We believe a trailing 12-month ASP is a somewhat better gauge of home pricing than a single quarter, and we're encouraged that prices on this basis have trended up for 3 quarters in a row. In the last year, we have talked a lot about our No Community Left Behind objective and its likely short-term negative effect on margins. And it is true that on a year-over-year basis, our gross margin in the third quarter was down about 110 basis points. But we think this slide provides some additional insight for investors to better understand the changes in margins occurring within the business. First of all, 2 of our 3 geographic segments, the Southeast and the West, actually generated better gross margins, excluding interest and impairments, than they did last year even as sales bases were improving. Only our East segment went backward in margins this quarter, due to our efforts to stimulate underperforming communities in the absence of some very strong margins in communities that have now closed out. Now, if that were the whole story, our gross margin in the quarter would have been nearly identical to last year as they are on a year-to-date basis. In fact, the primary driver of the decline in total home gross margin in the quarter relates to changes in estimates for product liability expenditures that are reflective in cost of sales that do not relate to current period closings. These items, which can be volatile from period to period, arise from changes in settlement accruals, actual recoveries and legal expenses incurred rather than warranty-related construction costs. In the appendix, you will find a new slide that depicts the relationship between our segment gross margin and these unallocated items for the past 3 years as presented in our segment disclosure in our quarterly and annual reports. You will continue to experience quarter-to-quarter variations in margins. However, I continue to expect the full-year gross margins, excluding interest and impairments, will be similar to what we reported last year. Let me now turn to our G&A expenses. As a reminder, beginning with the September quarter, we pulled commissions out as its own line item in our financial statements. We achieved significant leverage of our G&A expense as a result of both diligent cost control and our sales per community initiative, which has translated into increased revenues. In fact, total G&A declined to 11.6% of revenues on a trailing 12-month basis and 20.5% last year. In addition, operating G&A, which further adjusts for items such as legal fees, severance and stock compensation among others, also declined significantly, reaching 9.1% of revenues on a trailing 12-month basis, from 14.8% last year. Our current operating G&A positions us for further fixed-cost leverage in future quarters as we drive increased sales per community. For those of you interested in more details on our overheads, the reconciliation of our operating G&A is in the appendix of our presentation. We have the benefit of owning an ample supply of finished lots in most of our markets. At the end of the third quarter, we had over 6,700 finished lots, with homes under construction or ready to begin construction. In addition, we had 7,200 owned lots that were underdevelopment and another 4,000 lots under option, which could be ready for use in the near future. All told, that's a land position capable of delivering nearly 18,000 homes in the next few years. Beyond this active land, at June 30, we also had 596 lots held for sale and approximately 6,600 lots in land held for future development. For the third quarter, we spent $40.5 million on land and land development, compared with $54.2 million during the same period last year. Year-to-date, our land spending is $140.6 million, cumulatively down to about $37 million compared to last year. For the full year, we expect land spending to be pretty similar to last year, though our fourth quarter spending will be quite a bit higher than last year. This is the result in land spending about equal to our use of land and within the 20% to 25% of revenue physically associated with stable community counts. As Allan discussed earlier, we are now gearing up to grow our community count so our land spend over the next 4 to 6 quarters is likely to be higher as we deliberately deploy our newly raised capital. As I noted in our backlog conversion discussion, we are controlling our level of spec homes very carefully, allowing us to end the quarter down substantially from last year. At June 30, we had 519 unsold homes under construction or completed, down nearly 50% from 994 homes a year ago. Within this, we reduced the number of finished unsold homes under construction to 137 homes from 210 in the last 90 days. We will continue to carry a number of specs in most of our communities, but we've made a conscious effort to reduce the overall number and age of our specs, both because spec margins are typically lower and because specs tie up working capital. We've improved the mix of to-be-built sales versus spec sales in many of our markets, increased our margins and backlog and released working capital to be more efficiently deployed as we move forward. Pro forma for our recent capital transactions, we ended the quarter with over $417 million in unrestricted cash, and our net-debt-to-capital at June 30 was 46% rather than the 57% we reported. In addition, the commitments of our new $150 million revolver, which we expect to finalize before the end of our fiscal year, will provide additional liquidity that could be used for short-term working capital as we grow our business. With the completion of our recent financing, we have no significant debt maturities until mid-2015, and we have the capital to fund our growth objectives that we may fully participate in the emerging housing recovery. Finally, the dollar value of our deferred tax assets is significant and totaled $496 million at the end of June. While we are unlikely to use the entire DTA due to some IRS change-of-ownership limitations, our current expectation is that upon the resumption of sustained profitability, we will be able to utilize approximately $425 million to offset future taxes. With that, I will turn the call back over to Allan. Allan P. Merrill: Thanks, Bob. I am very pleased with the direction of our results so far. While we are clearly benefiting from improvements in the overall housing market, our operational strategies are also making a positive difference. Obviously, we have a long way to go in reaching our profitability objective, but we have -- now have the sales momentum and a substantially improved balance sheet to help push us towards that goal in the quarters ahead. Turning to our expectations for the full year. All of the objectives we communicated to you at the beginning of the year remain in place. We continue to expect to sell and close more homes this year than we did last year, generate positive EBITDA for the first time in years and preserve and protect our liquidity. With that, I will turn the call over to the operator to lead us into Q&A.

[Operator Instructions] Our first question comes from David Goldberg with UBS. David Goldberg - UBS Investment Bank, Research Division: My first question and I hope it's not vague, so if it is, please let me know. But, Allan, when you talked about the need for gross margin improvement and the steps you're taking, I get that. What I'm trying to get an idea about is as you look forward and you think about the processes that have been in place when you underwrite land deals and you do pro formas, and presumably, that's what kind of got to where you are today, how do you codify changes so that this doesn't happen again? In other words, as you get into a good market and your local division president and your local sales will say, hey, look, we need to put this option or we need to offer this elevation. And you say, well -- and maybe it happens, let's say, and that causes these problems as you kind of -- as it spirals up, how do you stop that from happening in terms of the discipline as you move forward? Allan P. Merrill: Well, I think the underwriting of -- and you correctly phrased the question, I think, because if you buy the land incorrectly with the wrong conception of how you're going to compete locally, that's a hard problem to recover from. And one of the interesting things, and I talked about it last quarter a little bit, was if we set aside for just a second the purchase of land and looked at an existing community and said, what's the competitive base that we have in that community? And I talked about the new CMA, or Comparative Market Analysis, that we're doing that, I think, is a dramatic, dramatic improvement in giving us real-time insight into pricing, features, incentives, what's happening in that micro climate, well, what becomes really important, to kind of link back to your question is, you have to have that level of market intelligence on the front end before you buy that deal. The fact that brand X is selling 3 a month in the community is interesting and maybe necessary information if we're looking at a new deal but it's clearly not sufficient. Are they selling single stories? Are they selling 2 stories? Are they selling master up? Are they selling master down? Are these brick sided? Are these hardy-board sided? I mean, that level of intelligence has to be embedded at the front end. So it isn't just a question of competing more effectively at the community level once you've got a community, but it's extracting that knowledge and pulling it earlier in the cycle so that you get it on the front end. And then continue to -- and this is the key, continue to apply that discipline, because notwithstanding perfect information, things happen, things change, competitors react, new market entries show up. So you have to be constantly able to turn and evolve what you're doing. But I think you're right to focus on buying new deals, but I do think it kind of links back to you've got to be locally competitive. You have to have great insight, and you've got to create a culture where it's important, in fact, it's unacceptable, to not have extraordinary knowledge about what's happening. I mean, the litmus test for me is if our buyers walking into a new home community know more about what our competitors are doing than our new home counselors, we've got a problem. And if we fix that problem, you bet that knowledge base, that skill set, is easily shared within the company to our land acquisition teams. David Goldberg - UBS Investment Bank, Research Division: Got it. My follow-up question, you talked about, and this and this is kind of in the same vein, the kind of move to say, okay, let's take some options, features that are currently options in the home, and let's put them in standard but let's make sure that we're charging enough that, presumably, this more than covers it and you get a margin benefit that's even greater than the kind of sale that you would have otherwise. And what I'm trying to figure out is how important is that process or that kind of included option or higher base level relative by buyer segment? So in other words, is the entry-level buyer today just a very price-sensitive buyer and features are features and you can sell them whatever features you offer, and that's more of a move-up kind of products issue or is this kind of across-the-board in your minds? Allan P. Merrill: That's a good question. Clearly, we're disproportionately exposed to the first-time buyer. And so our perspective on all buyer segments would be influenced by the market position that we have. But I would tell you looking across different geographies and against different buyer profiles, I think things have changed over the last 12 to 18 months where there is a baseline expectation among buyers for a higher feature level and a willingness to pay for those features that existed 1 or 1.5 years ago. Again, it's a broadly and fairly conservatively made statement, there's not a lot of risk in me saying that. I think, that's generally true. The implementation of that, though, clearly differs by both geography and by buyer profile. I mean, granite countertops may be something that we never stripped out of a move-up home but we did strip out of a first-time buyer home, and that could be an example of something that in a particular market, it now needs to be an included feature. And in another community or at a different price point, the tweak has to be the third-car garage as opposed to the granite countertop. So the composition of what that inclusion features is differs but the broad thesis that feature inclusion has had to improve, I think is true everywhere.

Our next question comes from Ivy Zelman with Zelman & Associates. Alan Ratner - Zelman & Associates, Research Division: It's actually Alan on for Ivy. Allan, and Bob as well, I guess, just was hoping to dig in a little bit more on the land spend going forward, and now that you've shored up the balance sheet and given yourself some extra liquidity. Just kind of curious what level of cash you're comfortable operating at going forward. And I know your guidance for the fourth quarter implies a pretty big ramp in land spend, but I was curious if you're targeting a specific increase in community counts looking out over the next year or 2 and kind of how that would translate into a run rate on land spend? Allan P. Merrill: Yes, I think one of the more dangerous things to try and do is create a run rate on land spend. And I only say it because if we knew with certainty which deals we'd acquire 2, 3, 4 quarters out, what the deal structures were, I mean, that would require a level of precision in our estimating that we just don't have. I think an easier question to answer is where do we expect community count to go? And as we've shown, we've got an active community count today that's below 200, and by the time we get to this stage next year or by the end of next year, it's got to be in the low 200s. We've got to add 30-plus communities over the next year, and I think we're going to have to continue to grow the community count into 2014. So those are some broad targets. In terms of what the cash requirements of that are, what's tricky is new communities certainly require cash to the extent that they're both purchases. But just in the last quarter, half of the deals we did, we did about 10 deals, half the deals we did were option deals, half of them were actually bulk deals. So you can't necessarily equate community count to dollars unless you know deal structure, and dollars until you know the exact markets. Obviously, a deal tied up in California is a lot more expensive today than a deal tied up or done in Florida. So I think, I'd caution against trying to make a precise quarter-to-quarter-to-quarter spend estimate. I think Bob said something kind of interesting in his comments, he talked about 20% to 25% of revenue is a ramp -- a ratio of land spending to revenue that we think is broadly representative of sustaining more level community counts, because that's about the value that we have in cost of sales for the land that we're using, that's kind of the neutral position. There's no question that we'll be above 25% over the next 1, 1.5 years as we are expanding community count. But to try and be much more precise in that, I just don't have a crystal ball that gives me that level of precision. Alan Ratner - Zelman & Associates, Research Division: That's very helpful and, I guess, just kind of adding to it if I can, so if you think about being above that range, it would imply a pretty big ramp in land spend, probably means that you're seeing some completion of the cash balance here now that you've shored that up. So if I tie that back to your initial comments about thinking about the reverse stock split and sending a message to investors that you're now focused on the path to profitability, does that mean that you're, I guess, implicitly comfortable with the current leverage here and feel like the refinancings going forward are going to be more in the debt-to-debt camp as opposed to any equity-linked offering? Or is that something that you're just going to kind of weigh based on the market conditions? Allan P. Merrill: No, I'd agree with your assessment. I think, any refinancings we do are much more likely to be in the debt-for-debt vein. I think we have to grow into our cap structure, I like our maturity structure, I like our interest rates. I mean, clearly, we'd like them to be lower but we need to grow into our cap structure now and it's going to take continued improvements in sales per month per community and a real step up now in community count to get us there but that's the program, that's what we're doing.

Our next question comes from Dan Oppenheim with Crédit Suisse. Daniel Oppenheim - Crédit Suisse AG, Research Division: Was wondering if you could talk about the plan that you had with absorptions that's really helped the lift that you did only 10% below that threshold level. As the market improves overall, do you think about lifting at hurdle rates to make it more difficult to just raise the expectations for communities? And then related to that, you talked about the margin declining in the East and was just curious in terms of that, was it really just portions of amounts of the -- or number of the underperforming communities from an absorption perspective that were in the East or what was concentration there? Allan P. Merrill: So the first part of the question, are we going to raise the hurdle rate in terms of defining what an underperforming community is? Absolutely. I thought one a month was kind of a simple number a year ago to kind of draw a line in the sand and say, all other things being equal, there may be excuses or reasons, if we're only selling one a month, that's not very good. And so to go from 27% to below 10%, that's terrific. But we've really got to think about numbers in the 2s, not in the 1s on a sales per month per community over a full year. So I don't know exactly what the new hurdle rate will be, but I think the fact is as we look at the aggregate number, the 2.2 on a trailing 12-month basis, we want to keep inching that up into the mid-2s. And I think a better market than what we currently have has the capacity to push it towards 3, but I think within our own operational capabilities, we can push it into the mid-2s. Your second question, I think, really related to the East segment, and there were a couple of things going on there. We've talked in the last couple of quarters about the fact that we really retooled our New Jersey division. That's a community that is, on a year-on-year basis, down in sales as we retooled product, people, the way we promote, and our pricing strategies. And I think it is -- I don't have the statistic in front of me, but if I think I looked at both our mid-Atlantic markets and New Jersey, our sales per month per community challenges have been slightly higher in that segment than in our other segments. I think that's a fair statement. Daniel Oppenheim - Crédit Suisse AG, Research Division: Great. And I guess, a quick follow-up. Just wondering you touched about the community count needing to rise both in 2013 and 2014. Is that especially based on your view in terms of where the overall overhead levels are and what you need to do in terms of just leveraging the overhead and getting to profitability? Allan P. Merrill: Yes, I mean, I think the equation to get to profitability, if you, for a moment, just assume that the overheads and the interest expense were not that had to be covered, that's the definition of getting to profitability. They're kind 3 levels. How many communities have you got? What sales per month per community are you getting? And how many contribution dollars are you getting from every home? So if you make sales per community go up, you make community count go up, you make margins go up and you hold those costs, that's how we've got to get to profitability. But the interplay of those 3 is dynamic, all right? I mean, you can't put all your eggs in the will-this-grow community count, because you run out of money. You can't -- and, frankly, it's operationally not sound, you can't put all your eggs in the basket of we're just going to grow sales per month per community, because at some point, the critical mass required or the operational efficiency that one would have to get there just on the back of absorption rates is too much but I -- and that's why we laid out this plan, it's having these 4 components. And we've made, as I say, great progress on sales per month per community. We've really got the community count now to contribute to this path to profitability and the margins.

Our next question comes from Michael Rehaut with JPMC. Michael Rehaut - JP Morgan Chase & Co, Research Division: First question I had is on the gross margins. You've outlined that, Allan, that now that you've reached at least a minimum threshold for the sales pace, that you're going to shift your focus to the next, I guess, big challenge and you wrote out 3 areas. So I was wondering as you've started to run this analysis, if you could share with us any thoughts around, perhaps what you expect to do over the next 2 or 3 years in terms of a potential margin improvement? And even if -- you kind of outlined 3 drivers to that, if you have any thoughts around how much each of those drivers would contribute? Allan P. Merrill: Sure. So at the risk of offending fans of the University of Alabama or Republicans, to the extent that, that is not mutually exclusive, the elephant in the room for us is making our margins go up, we know it. Now the thing is that when you think about elephants, the euphemism that people frequently use is you want to go elephant hunting. People think about a big animal and they think about big guns and big bullets. And for us, we need to improve our gross margins by, let's say, at least 300 basis points, because we're targeting getting to gross margins in the 20s, and we're right now, in the most recent quarter, just below 17. So the elephant is how do you pick up 300-plus basis points? But I actually think it's the wrong euphemism around elephants. I think the elephant's already in the room. We don't have to go kill the elephant, we have to eat the elephant. And the other expression about elephants, and this is where I hope to not offend anyone, eating an elephant one bite at a time. My focus, Mike, on this is to pick up 300 points, you don't worry about 300 points. You pick it up 10 basis points at a time. Now 10 basis points is $250. But the question is, what are the array of strategies and tactics at the community level, at the house plan level where you could pick up $250? As you adjust base price, as you adjust incentives, as you re-margin included features, as you change your closing cost concession, as you modify, evolve the way you compensate realtors for bringing buyers. If you think about this and we are thinking about it at the plan level, at the community level, not at the corporate level, where is every $250? I think that's how we eat the elephant. It's not a question of some grand strategy, top down, we need 300 points, I have every confidence that every transaction we do, there's $250, and as soon as we get the $250, why isn't there $250 more? Now your question kind of goes further than that and it tries to get to, well, what's the percentage contribution from each of those? And my team asks us the same question. But the thing is when we pull a deal sheet out or we pull a pricing strategy out, the right answer is every single home, the mix of opportunities to drive margin is a little bit different. And I've got plans in communities where when we sell it is as to-be-built, we make 18% contribution margins. When we sell it as a spec, we make 12%. Well, memo to self, let's not build that house as a spec. We see huge differences in the margins of the homes that we model versus the homes that we don't model. Well, that's sort of obvious. Let's make sure that if we're going to build a model, it's going to be a model that has the capacity to generate great margins. And one of the distressing things I've discovered is we built some models that chronically have lower margins than other plans within the same plan line-up in the community. Well, that's kind of dumb. And that's why it's really, really tough to say, well, the overall or the big buckets, 50% will be this and 30% will be that, I don't want anybody in our company thinking about it that way. I want them focused on where are the 10 basis point increments. House by house, lot by lot, feature by feature, incentive by incentive. And that's really the only way I think we're going to be able to digest this thing. Michael Rehaut - JP Morgan Chase & Co, Research Division: And maybe just a second question following on that, and I have a quick clarification, as well, request. But could you just describe where you are? It sounds like you're kind of in the process of it right now, active process of evaluating the whole gross margin equation and the opportunities? Where are you in that process as it relates to starting to put some of those plans in action that you would start to see some of the initiatives bear fruit? And then a clarification question in terms of the community count. It sounds like you're expecting growth of roughly 10%, at least year-over-year, by 4Q over 4Q. What are you thinking about -- should there be a little more slippage into the fiscal fourth quarter, though? Allan P. Merrill: Okay. So on the margin issue, it is -- I seem to be stuck on this eating an elephant thing, it's a movable feast. I mean, we're just getting going. There are parts that are under way. The idea of identifying the low margin plans within the plan line-up and getting rid of them, the great work that Bob has done with the team to shift from specs to to-be-builts, those are things that, as Bob talked about, we're starting to already see in the margins and backlog. But it's a good time of year for us because we've got a nice backlog, we've got some sales momentum. We're, I think, going to be able to finish the quarter relatively strong but this is also, as we're making our business plans for fiscal 2013, what our team is focused on, what are the community-by-community, house-by-house initiatives and targets that we've got for margin improvement. So over the next 60 days or as I'm with and Bob and I are with each of our division presidents, our sales vice presidents, looking at pricing strategies at the plan and at the elevation level, we'll be constructing the to-do list, house by house, plan by plan, line by line for what the opportunity is. And then that plan is the plan for our management team for next year. I have every confidence, absolute confidence our gross margins are going to be higher next year. And I think that we can build them through the year. Now the fact is we do suffer a bit of seasonality in our margins, and that's why we always show 4 quarters at a time at least, because the mix change between geographies and the buyer profiles that we serve and the ASPs in those geographies differ a little bit. So we want to make sure that we're as absolutely clear as we can be. We call ourselves out when improvement isn't really improvement, it's seasonality versus improvement really is improvement. But next year, our margins are going to be higher. We see bits and pieces of it now but over the next 60 days ago, plan by plan, line by line, that's the work we're engaged in. Now on the community count question, yes, I do think it's going to be that the community count growth will be more back-end loaded. We're going to continue to drive sales per month per community right through fiscal '13. We do have a number of transactions that we're working on now, things that I think will close in the fourth quarter that will give us the opportunity to get communities open in our second and third quarters. But as we start to invest in Q1 and Q2, some of those communities will get opened in the fourth quarter next year and some of them won't. And that's why I said I think the community count growth story is really a '13 and '14 story, not just a '13 story.

Our next question comes from Will Randow with Citi. Will Randow - Citigroup Inc, Research Division: Regarding the DTA and land spend, I want to hit a couple of things. I've just done some simple math and if I assume your sales grow by 30% per year through '15 back to normal that will require incremental $0.5 billion to $1 billion in cumulative land spend just to cover all those years. So I'm just trying to get a sense of where does that incremental capital come from considering you don't quite have it on the balance sheet, so to speak? And how do you protect the DTA during that period? Allan P. Merrill: Well, at the risk of embarrassing myself, because there may be something to your question than I understood, if for every $1 billion in revenue that we have, we're generating $250 million of cash from the release of the land that was underneath those homes embedded within that revenue. So if over 3 years, we had revenue growth from $1 billion and beyond, take 20% to 25% of that and that's the cash that's generated from our home closings. So recycling the capital that we have is going to generate an awful lot of land spending in and of itself. Will Randow - Citigroup Inc, Research Division: Okay, sorry. I was meaning more on a net basis. Allan P. Merrill: Well, I then fundamentally disagree with your premise that we need $1 billion to grow our sales 30%. I think that's not accurate math. Will Randow - Citigroup Inc, Research Division: Okay. And then in terms of your gross margin in your backlog, can you talk about that a bit? And are you seeing any input cost pressure? A lot of builders have mentioned that on their calls. Allan P. Merrill: Yes, I think the input cost issue for us at least has primarily been labor. You really want to make sure that you've got the best quality trades that you can have. And there's some false economies in trying to beat guys but the point that you're getting either poor quality or longer cycle times. So I would say that we clearly are exposed to some rising labor costs, particularly in trades like framing and particularly in markets that have been super strong from a selling standpoint. Happily, the sales price environment has been such that we have been able to accommodate that and then some. We don't have a metric on gross margin in backlog, if it's a dangerous number because the percentage of that backlog that closes in a particular period, you'd immediately get into kind of a reconciliation of margin by house trying to tie the 2 out. But what Bob said, I think, was pretty clear, we see stronger gross margins in backlog than we had a year ago. Will Randow - Citigroup Inc, Research Division: Okay, great. And then on the input cost pressure, what buckets is that coming from? Allan P. Merrill: Well, it's really framing labor. That's the #1 area that I'm concerned about right now and particularly in the South and the West markets where we have the greatest growth and others have enjoyed good growth as well. Gas prices are down, copper prices are down, lumber prices are in, I would call it, a normal seasonal band. The only real commodity category that had a significant increase earlier this year was a drywall, and it's not a significant cost component of the overall house.

Our next question comes from Adam Rudiger from Wells Fargo Securities. Adam Rudiger - Wells Fargo Securities, LLC, Research Division: Going back to the elephant-eating discussion, which I thought was -- I think was very useful and interesting to hear the way you talk about it. But how do you get your salespeople in the field onboard with that and to get that meticulous in watching $250 here and there? What kind of processes can you put in place to incentivize them? Allan P. Merrill: Well, Adam, you've asked a really -- I think a very, very perceptive question, but one that happily has an easy answer. The definition of having a high-quality sales team is they are very motivated by money. And I think, incentives have to be closely aligned with your objectives. And so you should expect that our compensation programs, as we look at 2013 and beyond, are going to create the kind of rewards that make it very worthwhile for our salespeople to be that meticulous. And I like the use of that word. I had a discussion with one of our salespeople in one of our markets in the last couple of weeks where we were having this discussion. We got the whiteboard out and we were going line by line through the home. And we identified several thousand dollars that a different negotiating tactic, a different level of attention and focus on the margin probably were extractable from that single transaction. And I asked them, I looked them in eye and I said, okay, what's it going to take to get it? And the reason I was having this discussion with this particular salesperson in our company is he's one of the few that couldn't care less what my title is, he looked me in the eye and he said, what's in it for me? And I thought, thank goodness, I'm glad somebody finally said that. And the fact is we pay our internal salespeople between 1.5% and 2% of our revenue. Well, for $2,000, you picked up 2 points, that's $40. I think we can do better than that. I think we can do better than paying them 2% on the $2,000. We've got to be careful. Any time you create an comp plan, there's a huge risk of unintended consequences. So I don't have the magic formula figured out, but I do know that we will have to have that incentive structure a part of what we're doing to make sure we drive to the outcome. And if we get it right, those are the people who will create the gross margin improvement for us. Adam Rudiger - Wells Fargo Securities, LLC, Research Division: That makes sense. And then just following up on your -- I think your commentary for backlog conversion was for the fourth quarter, I think, but how do you -- is that correct? And then also, how do you -- should this year's quarterly conversion rates, should next year look a little bit more like this year than what we've seen in the past couple of years? Robert L. Salomon: Yes, I think, Adam, I think it will continue to be similar, especially as we continue to focus on to-be-built homes versus just relying on spec homes to drive volume.

Our next question comes from Alex Barron with Housing Research Center. Alex Barrón - Housing Research Center, LLC: I wanted to focus a little bit on a couple of things related to the fourth quarter, I'm trying to square up some of the comments you made. The first one you said that margins year-to-date are flat compared to last year, and you said you expect the full year to be flat but last year in the fourth quarter you dropped. So does that imply a sequential drop of a similar magnitude? That's question number one. The second question was related to the share count, given the treatment of the tangible equity units. In other words, what should we expect for a share count in the quarter? And the last one is the backlog conversion. You mentioned about 55% to 60%. Does that apply -- does that comment apply to the fourth quarter as well? Allan P. Merrill: Okay. Well, in the reverse order, the last one was easiest, 55% to 60%. Robert L. Salomon: Yes, I would expect that in the fourth quarter, that same range. Allan P. Merrill: That was the range for the fourth quarter. Squaring the other comments is pretty simple. We are year-to-date comparable in gross margins through 9 months, and we expect to be comparable, maybe a little bit better, for the full year in gross margins. And so the implication of that is we expect the fourth quarter this year to be at least as good as the fourth quarter last year. Alex Barrón - Housing Research Center, LLC: Okay. And the share count issue, how should we think about that? Robert L. Salomon: Yes, if you think about the share count, we issued 22 million new shares. So those will be in the GAAP share count. The shares underlying the tangible equity units are not part of the outstanding GAAP share count number that will be reported. Those will only be in the GAAP number upon conversion.

Our final question comes from Michael Rehaut with JPMC. Michael Rehaut - JP Morgan Chase & Co, Research Division: Just wanted to see if you could discuss pricing and incentive levels and option trends if you've seen it over the last quarter and maybe year-to-date on average across your communities? Allan P. Merrill: Sure. The pricing trends have broadly been very positive. We've raised prices in at least one community in every market in the country and in some of our markets, particularly out West, we've raised prices in every community. And in many of those communities, we've raised prices multiple times. The thing, and I know others have talked about this, the thing you run headlong into as you might have a ready, willing and able buyer at a price, but you got to make sure you can also get an appraisal. So that's where taking smaller increments is safer, so that you don't end up with appraisal busts prior to closing. And it's also where you'd have to think very carefully about feature changes so that the appraisers have some handholds for things that they can relate back to the price increases. So I think, that is -- that's the good news. I will tell you, Mike, that I believe that some of the enthusiasm that we've had, both in velocity and in pricing, I'm a little bit maybe more conservative than some others. I think, the back half of this year has some risk in it in terms of sustaining the rate of improvement. I'm actually expecting the rate of improvement to decline. I don't think we're going to have a bad back half of the year as an industry, but I don't know whether it's going to be Europe or the economy locally or the election or the fiscal cliff, we're seasonality or some combination of the above, but I'm certainly planning for an environment where in the next couple of quarters, the rate of improvement will be slower, and I think that means our ability to continue on the trajectory we've been with pricing will probably flatten out. And I hope to be wrong about that but that's kind of what I'm sensing right now. Michael Rehaut - JP Morgan Chase & Co, Research Division: Okay. And just to, hopefully, clarify, given the comments around the ability to raise pricing but I guess, albeit at smaller increments, I mean, I think most builders on a year-to-date basis have seen net effective prices up maybe 1% to 2% year-to-date. Does that foot on a rough basis with what you've seen? And regarding your comments on the back half, I mean, I would think that simply being able to hold on to those price gains is a victory, considering where the industry's been the last 3, 4 years. Your thoughts around that? Allan P. Merrill: I agree with you. I think, we'd like to hold it and if we can eke out some more, we'd love it, but I agree with you. I think we'd like to be able to prove that this is a newer normal from a pricing standpoint. In terms of the 1% to 2%, I always get in trouble with this because there's this mix issue that goes on. You're out of this community, you're in that community. And when you're small, unfortunately like we are, those changes in individual communities end up sort of fogging up the mirror a little bit in terms of, well, what are you really saying? Bob gave a statistic, I think, where 3 quarters in a row, our trailing 12-month ASP is up and I think it was up about 1.5 points, the trailing 12-month ASP for us at June 30 versus June 30 a year ago. So that's in that range of 1% to 2% that you're talking about. So that feels right. And I think looking at it on a trailing 12-month basis rather than in a quarter or at the division level, has the chance to minimize the distortive effect of a mix change, so that feels about right.

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