David Goldberg - Vice President and Treasurer Allan Merrill - President and Chief Executive Officer Bob Salomon - Executive Vice President and Chief Financial Officer

Michael Rehaut - JP Morgan Will Randow - Citi Group Jay McCanless - Sterne Stephen Kim - Barclays Susan Berliner - JPMorgan Alex Barron - Housing Research Center

Good morning, and welcome to the Beazer Homes Earnings Conference Call for the quarter ended March 31, 2015. Today’s call is being recorded and a replay will be available on the company’s website later today. In addition, PowerPoint slides intended to accompany this call are available in the Investor Relations section of the company’s website at www.beazer.com. At this point, I will now turn the call over to your host, David Goldberg, Vice President and Treasurer.

Thank you. Good morning and welcome to the Beazer Homes conference call discussing our results for the second quarter of fiscal year 2015. 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, which are described in our SEC filings including our Form 10-K, which may cause actual results to differ materially from our projections. Any forward-looking statements 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 statements 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. 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.

Good morning, and thank you for joining us. Before we start I’d like to welcome David Goldberg to our team. David joins us from EBS where he covered the home builders for the past ten years. Since David just started on Monday, let’s agree not to hold him responsible for any of the mistakes Bob or I may make on this call. We’ll start that next quarter. We had a very productive second quarter, headlined by better than expected new home orders. We were a bit surprised by how well January started, and given the monthly variability we’ve experienced in demand the past few quarters. Perhaps even more surprised by how that strength continued through the quarter. It is hard to identify a specific reason for why this spring selling season has been encouraging, but more jobs, continued affordability, and low inventory, all helped. At the same time, it is important to remember that the entire new home industry is still only selling at levels that would have been considered severely depressed, for most of the last 25 years. Let’s turn to the highlights of the quarter. Orders rose 22%, driven by increases in both community count and sales pace. Our average community count was up 14%, and sales per community per month increased sequentially in year-over-year to a very strong 3.5 for the quarter. As expected, our average selling prices increased, both on our closings, which grew to nearly $306,000 and in our backlog, which was $321,000 at March 31. More home sales and higher selling prices allowed us to end the quarter with $814 million, at future closings and backlog. The highest value we’ve recorded since 2007. On the profitability front, despite having fewer closings than last year, which was anticipated based on last quarter’s backlog, we reported 20 million in adjusted EBITDA. This brought our LTM total to a $129 million, up 255 compared with a year ago. We’re in a good place at the mid-point in our fiscal year. While we can’t be assured that demand or pricing will remain exactly where they were this quarter. Based on our results so far this year, we’re comfortable reiterating our full-year expectation that we can exceed last year’s adjusted EBITDA by at least $20 million, excluding the unusual charges detailed in our presentation. As a reminder, fiscal 2014 adjusted EBITDA of 133 million, included a one-time gain of 6.3 million from the sale of our pre-owned homes business. Over the past several years, we’ve been able to substantially strengthen and improve our business. We’ve made big gains in sales pace, community counts, gross margins, overheads, and profitability. Underlying these efforts, we focused on improving the efficiency of our capital allocation while limiting operational risk. Moving forward, we realize further improvements in our capital allocation, can play a big role in creating shareholder value. With that as a backdrop, we’re excited to announce that we’ve activated one of our larger parcels from our land held for future development. Which until now had been restricted by the water levy issue we’ve previously discussed. We expect this parcel in Sacramento’s Natomas Basin, to start generating orders, revenue, and profit in the second half of fiscal 2016. Activating this asset, further reduces the portion of our inventory that is sitting idle, in turn, increasing the percentage of our capital generating returns. At the same time, and driven by this focus on maximizing capital efficiency, we’ve decided to stop reinvesting in our New Jersey division. We’ve talked about the challenges in this market on prior calls, and despite a lot of operational attention, conditions there have not improved enough to warrant further investment. Moving forward, we will honor all of our obligations, including building out the homes in our backlog, and handling all warranty items. But we won’t be taking down additional lots, or adding new communities. Instead, we’ll gradually reinvest our capital in markets where we can achieve better margins and better returns, with less operational risk. While the decision to reallocate this capital may have a modest impact on the timing of the achievement of our 2B-10 objectives, it is appropriate for maximizing shareholder returns over the longer term. Underscoring this, we expect the change to be accretive to gross margins in fiscal 2016, and the return on capital by fiscal 2017. With that, let me turn the call over to Bob, for some of the more detailed results for the quarter.

Thanks Allan. We continue to focus on the metrics to drive the achievement of our 2B-10 plan objectives. While we will likely reach certain target metrics before reaching others, the expectation that we will reach $2 billion in revenue, with a 10% EBITA margin, has not changed. So looking at our progress today, our LTM total revenue at March 31, was $1.47 billion. It is up almost $150 million, or 11% compared to this time last year. And our LTM adjusted EBITDA of $129 million, is up 25% versus the same time last year, excluding certain unusual charges, which are detailed in our presentation. In improved demand this year, we recorded 3.5 sales per community per month for the quarter, and 2.83 for the trailing 12 months. This compares with 3.3 sales per community per month during the second quarter last year, and an LTM pace of 2.91. Importantly, this has positioned us nicely with the backlog that is significantly higher than last year. Given the current sales momentum, but also acknowledging normal seasonal patterns, we do hope to report a sales pace in the third quarter that is comparable to last year. Turning now to average selling prices. Our ASP rose 12% this quarter to $306,000, marking the first time in the company’s history that it exceeded 300,000, helping to drive this improvement where our east and south-east segments, which grew as a percentage of total closings. And increased their ASPs 12% and 18.5% respectively. Our LTM basis, ASPs rose to almost $295,000 compared with $206 a year ago. And ASP in backlog at March 31, was $321,000 providing an expectation of further increases in our ASP, driven by a change in mix of communities. We ended March with 2,533 units in backlog, of which almost 1,300 were scheduled to close during the third quarter. While some of these will be pushed into future quarters, and others will cancel, we anticipate selling and closing some spec homes, as we do every quarter. Taking together, that should get us to a backlog conversion in the third quarter that is very similar to the second quarter. Extensive development efforts continue as we prepare to open more new communities in the quarters ahead. We ended March with 163 active communities, 18% higher than a year ago. And our active average community count during the quarter was 160, 14% higher than last year. At March 31 we had 39 communities under development, and 34 that were nearing close-out. As a result, we remain confident that the average third quarter community count will be higher than we had for Q2. Turning now to our gross margins. We recorded 21.7% gross margins for the quarter, close to our 22% 2B-10 target. Able gross margins coupled with continued growth in ASP, resulted in continued progress for our implied 2B-10 target of 71,500 gross profit dollars per closing. Those profit dollars relates to profitability better than just the margin percentage. And we continue to make real progress with this metric. In the second quarter last year, we generated $61,300 per closing. This quarter that was up to $66,400 per closing, or half of the profit needed to achieve the 2B-10 target. In the third quarter, we expect higher ASPs and similar gross margins, both heavily influenced by an increasing mix of closings from our east segment. While the east segment margins remain below our other two segments, in part due to the land banking activity in this region, we expect them to improve in the quarters ahead. Our G&A for the quarter, came in better than expected at $32.7 million, benefitting in part from some litigation recoveries. SG&A was 14.9% of total revenue for the quarter, and 13.5% for the last 12 months. As for any other unexpected recoveries, we still expect that our G&A in Q3 and Q4 will exceed the prior year’s quarter by approximately $4 million to $5 million. Enabling us to make continued progress toward our 2B-10 target. Moving now to our land investments shown on slide 14. In total we spent $102 million on land and land development during the quarter, bringing our total for the first six months of this fiscal year, to $248 million, or about half of what we expect to spend for the full year. Revenue from land sales during the quarter was $13 million, we continue to expect to record in excess of $50 million in land sale revenue, and between $2 million and $3 million of related gross profits. Essentially, all the land sales we expect to accrue this year are under contract at this point. Please note that revenue related to land sales is included in our SG&A ratio. At the end of March, we had almost 28,000 owned and controlled lots, and nearly $1.8 billion of total inventory, up $269 million or 18% from last year. As Allan mentioned earlier, we brought $41 million of land-held future development back into active status. As a result, our March 31 land-held for future development balance dropped to $271 million, representing only 15% total inventory. We expect to take steps over the next several years, to strengthen our balance sheets and reduce our cost to capital. Since we believe our stock price does not reflect our long-term opportunity, we currently have no appetite to issue equity to pay down debt. Instead, we expect to deal with our company’s balance sheet over the next several years, in other ways. The first big change will occur when we’re able to remove the valuation allowance on a deferred tax asset. That will reduce our leverage ratio by about 17 points, from 84% to 67%, which we think could be a positive catalyst for our ratings upgrade. In addition, we also expect to increase profitability over the next several years. This will add to retained earnings, increase book value, and provide more opportunities to refinance some of our debt. As we will look to reduce this interest expense, extend maturities, and eliminate secured financing. As our balance sheet improves, not only will we benefit from better credit ratings and lower interest costs, we should also chip away at the risk premium embedded in our current stock price. We currently estimate that we will be able to use approximately $426 million, or about $13.00 per share in deferred tax assets to offset our future tax liabilities. We hope to reign these assets back onto our balance sheet when we report our full-year results, which will immediately improve our book value, and as I indicated earlier, our debt equity ratio. With that, let me turn the call back over to Allan for his conclusion.

Overall, I’m very pleased with our results this quarter. Very strong sales combined with an ASP in backlog of $321,000 gives us a great start on the second half of the year. With additional communities scheduled to open, and improving fixed cost leverage, we’re positioned to continue our progress toward 2B-10. With that, I’ll turn the call over to the operator to take us to Q&A.

Thank you. [Operator Instructions] Our first question comes from [indiscernible] with UBS

In terms of the quarter, you’re order book was very impressive this quarter. Can you help us understand, was some of that driven by perhaps some of the moves that you guys have made over the last few years, that hat have allowed you to maybe sort of leverage the underlying strength that you’re saying?

I do think that there are - issues at play, in the order growth in the quarter. And we said - I’ve said it in the press release as well as in the script. We know that the environment is better, more jobs, attractive affordability, low inventory, those are all positives, and rents going up actually quite rapidly. So those things are helping, but I think inside the company, we have been aggressively rebuilding the community count in the company. So we have a better mix of communities than we’ve had in prior years. And I think some of the things that I know bored investors a little bit, we talk about CMAs doing comparative marketing analysis every week in ever community, to fine tune our offering. Our mortgage choice strategy, our choice plan strategy, I think there are things we are doing operationally that help. So it’s a sum of and I’d like to be able to say it was the one thing because if it were we just do more and more of that. But I think that it’s a mix, just an attitude that with better communities and better processes and some better consumer offerings we expect to do be better and we did.

Okay and then looking a bit longer given the sort of progress that you’re making on ASP’s across stability business, yet you are keeping the 2B10 target where it was, can you help us understand what would be the get to mark started to accelerate that or to change that at all?

Well 2B10 when it wasn’t initially introduced, I want to say year and a half ago, was kind of a multi-year objective, that’s where we want to get to. Because that was just in an environment or in a point where we had gotten to the point where it was clear, we could get to breakeven, so it was a building block. And we’ve always said it’s not the destination. 2B10 is not the final destination. We will have ambitions that exceed that, it’s clearly premature for us right now to start talking about what will come after that, because we are not there yet, we still have work to do. And without in anyway walking back from our commitment to get to 2B10 we are not going to let poor capital allocation to proceed the desire to get to that objective. And so what we did at New Jersey is an example like there’s a bunch of revenue that we are not going to have next year that we might have otherwise had and some profitability but my view was, the return on capital and the risk profile didn't match up. And we can do better with that money, so I again in trying to be fine-tuned about 2B10 timing, it can’t get in the way of making intelligent decisions about how to run the business.

Thank you next question is from Mr. Ivy Zalman with Zalman & Associates

Hey guys, it’s actually Allan on for Ivy. So I guess the Mr. applies here. Allan I think you were starting to touch on this a little bit on the 2B10 but dropping the by the end of ‘16, it sounds like you’re kind of hedging a little bit based on the impact of the exiting New Jersey. I was hoping you could just walk us through exactly the mechanics of that do you guess. I guess you had roughly about five or ten communities in New Jersey that will, I assume will no longer show up your active community count going forward. I don’t know if it was there on 2Q but is it really the revenue target that is kind of the - that’s a little bit more up in the air at this point because you said margins that’s going to be accretive in ‘16 SG&A looks like you’re on track here. So I was hoping you could just go on what exactly the impact is from New Jersey?

Well so the impact is related to both New Jersey on the one hand with what we do with the money on the other. Right so in the second part it’s to harder to answer than the first, but let’s talk about New Jersey a little bit. When we laid out 2B10 that’s a sum of the parts analysis that is aggregated up from our 16 divisions. And we had at that time again almost two years ago. Kind of run rate New Jersey and a set of expectations for where that could go from a revenue and a profitability standpoint. On a look back basis that revenue has been above $50 million and under a 100 million dollars in the business. But our real expectation was that we could drive increased profitability to contribute to the 2B10 target in New Jersey. The conclusion that I’ve reached in this much recent quarter is not withstanding that the hit to revenue associated with it, the probability of getting the level of contribution of incremental profitability out of New Jersey just isn’t there. So we’re going to take the capital and we’ll start to reinvest it. If I look backwards the impact in New Jersey is pretty modest on an EBITDA basis it’s got a as I said a $50 million to $100 million depending on the time period and the impact on revenue. But if I look forward what has happened over the last six or twelve months we’ve just reached the conclusion and the ability to squeeze EBITDA percentages in dollars out of the capital and out of the revenue in New Jersey just wasn’t there. So I’ve got to redeploy that capital in ways where we have a higher probability of getting to an even better result. And look there are opportunities that we have in front of us. We’ve talked about bringing active assets and so I haven’t given up and we haven't set a arbitrary dead line for 2B10. We have a clear objective with 2B10 which is as soon as possible but it would be just confusing or not just comprehensive to not acknowledge that when you withdraw from a market and you give up that revenue it could have some of that effect on the timing but I’ll tell you we’re very focused on the other opportunities we have in front of us to try and get 2B10 as we always have as soon as possible.

And that's helpful the 163 communities you had at the quarter end just to clarify does that include your New Jersey assets at the factory level?

Yeah it’s a low single digit number and it’s going to go to zero by the end of the year.

And yet you still think community count goes higher I think you mentioned next quarter despite that right?

Yes the average community count in the second quarter is 160, the average community count in the third quarter will be higher than that.

And then if I can get one more in, just on Texas I think you had some big land buys there recently or over the past couple of years. And some of which you, I believe you are selling land and so I curious if you can give us an update on what you’re seeing there given the oil concerns and some of it’s in Dallas as well but, any color would be helpful.

Yeah we’ve got two big business both on the order of 10% of our business, one in Houston and one in Dallas. So they are roughly equivalent in size and I have to say it’s related to Houston, it continues to perform very well for us. I have had, will continue to have some concerns about future difficulties that may arise in that market. But I think the location of our communities are slightly less levered to oil than maybe other communities. And I think we bought well and have developed well, so I think our communities compete effectively. It’s a little bit of a concern out into the future, but the current results, and the current environment have stayed pretty robust. Dallas is - I wouldn’t say shrugged it off, but there’s so many other things going on in Dallas. And we’ve so dramatically repositioned our business there, kind of north from south and more north-east that we’re in a great spot. So what’s happening with Toyota, what’s happening with other major corporate informant and transportation improvement dynamics, that’s a very dynamic market. And I will tell you that we have had good experience there, and I expect to continue to have good experience there.

Our next question is from the line of Michael Rehaut with JP Morgan

First question I just had on the sales pace, and you had 7% improvement against average community count this quarter. And I believe you said that you expected sales pace to be flattish year-over-year, was it year-over-year, or sequentially in the third quarter, perhaps you can just clarify that?

I think we did three, one in pace in the third quarter last year. And what we’ve said is, if we expect to do about that in the same quarter this year. So year-over-year --

So I guess the question then is, I guess we’re talking relatively small numbers that create these year-over-year flat or up 5 or down 5. But was there anything that perhaps gave you a little bit of extra lift in 2Q to have that positive 7 going to flat in 3Q, or is it just more kind of a broader statement, and maybe it’s a plus or minus around that flattish type of sales pace?

We clearly, certainly would try and do better than even being flat year-over-year. And we acknowledge that we did do better than flat in the second quarter. There is a different mix of communities, I mean that’s one of the things that’s been happening underneath the coverage here the last year and a half. So as you introduce new communities, and so it’s not a perfect same-store sales kind of a comp, it makes it a little tough. So I don’t know, that doesn’t really answer the question, but I don’t really know how it helps to answer the question. There is normally a little downtick and absorption rates between Q3 and Q2, we’ve seen that in each of the last several years. We’ve kind of guided to that, but we’ll clearly try and do better. I just think that with the mix in new communities, if we’re at 3-1 we’ll feel pretty good.

And then you also mentioned, I think Bob, that there was a little bit of a reversal that helped out the G&A a little bit. I was wondering if you can quantify that.

We just had a little bit of litigation recoveries, it’s not extremely significant it was less than $2 million.

The New Jersey division, I know you kind of said it depends over time $50 million to $100 million, I believe, in revenue. But I was hoping if you could give us a sense of what you expect the division to contribute in fiscal 2015, and how materially below where they are on a gross margin basis?

So I don’t have the New Jersey division annual number, and of course we don’t give a revenue number for the full-year for the company. So I’m sort of hamstrung a little bit on answering that part of the question. In terms of how far below, There were more than five points below on their portion of gross margins. And the dynamic and the locations where we were despite the 4B plans and other efforts, we just didn’t have a path to improve those to a level where that market can compete for capital.

Thank you our next question is from the line of Mr. Will Randow with Citi Group.

Just kind of curious in terms of your ASP trajectory, it seems like you might be 10% higher exiting the year. Can you give me some background on that?

Well the mix in communities has been a huge driver for us over the last year and a half, in terms of the ASP. And we have said, since the beginning of this fiscal year that we expect it for the full-year to get to an ASP that was approaching, or nearing, or in the range of 320. So, and that’s not because we think prices are going up, it’s because the mix of communities that will be contributing to sales to backlog and ultimately the closings is changing. It’s, so more communities in California, its more communities in the Mid-Atlantic, playing a big role in that. So in terms of the trajectory, we’re not backing away from having full-year ASP. That’s quite a bit higher than where we are right now. And again, maybe the right turn of phrase is nearing. 320,000 for the full-year, and so that creates some implications for Q3 and Q4. And the good news is, you can look at the backlog ASP and see some evidence that we’ve got some tools to get there.

And then in terms of strategic acquisitions, you have some strong private builders within 50 miles of you. Would you consider acquiring a strategic competitor in your market where you have a lot of overlap, a good team? And you get a lot of land etcetera, can you talk about that?

Sure, the short answer is yes, we would have repeatedly. And there are some very well run private builders, and some entities that have terrific land positions that would be hard to replicate, if not impossible, and we’ve looked at them. The one thing that we’re mindful of is, when you pay somebody else a big premium for their business, which they’re savvy sellers, their premiums got to go somewhere. So if you write up their assets, all of a sudden the margin pickup - or you end up with a bunch of goodwill and goodwill particularly, if you’re strategic rationale with synergies and overlap. And you may or may not be protecting a brand that goodwill ends up, in my experience, kind of going away, having to be written off. So that has made me a little cautious. The other part of the answer Will is, if we - and we try and hold ourselves accountable on everything. If we look at transactions that we were interested in, and really get some work on and where we didn’t win, and so far that’s been all of them. One of the common themes has been folks that are out of town, coming into a particular town and being able to rationalize that premium in a way that is an incumbent in that market, we haven’t been able to. And so that’s one of the dynamics that play, as we look at end-market acquisitions.

Thank you. Our next question is from the line of Mr. Jay McCanless with Sterne.

First question I had on the guidance for absorptions to be, I think you guys said flat, on a year-over-year basis. With the order growth this quarter I would have maybe expected a little bit more there. Is that a function of New Jersey rolling off, or is it the product mix that you’re delivering more move up versus entry level?

Well I guess New Jersey is a little thing I will tell you, that in the math that, well I look at, that’s not an overwhelming a particular or material issue. I think there is a mix issue, you got new communities coming on, have had, it’s not so much that they’ll move up. I think we do, do move up in many of our markets, but what’s really happened is the allocation of capital has shifted into some places that just endemically have higher ASP’s. So I want to be a little careful about the narrative that we’ve gone, move up. When you go to California, you’re not going to California under 300. So almost by definition, anything that we do there is going to kind of pull up ASP’s. But as I look at the mix of communities that we’ve got and the new ones that will be rolling on, and some of the ones frankly that we will have worked through. That were great communities that we don’t have any more, and there are some of those. There are some communities where we might have done a four in the prior year, and it’s not around this year to do a four again. So it’s really kind of you sift through all of that, given the strength that we’ve seen, we see with some confidence the ability to do the three one again. And as I said, that’s not a cap, we will try to do better. But I think if we’re trying to set expectations against the community count and the mix that we’ve got, I think that’s a good place to start.

Then on the cancellation rate, I think that’s the lowest can rate you guys have put up in several years, can you talk a little bit about what you’re seeing for mortgage availability. And is it easier to get higher risk credits financed than maybe a quarter ago, or a year ago?

It’s a great question, something I spend a lot of time on. I do think it is modestly easier, or more challenging credits to get access to mortgage finance, but I would underline and probably bold, modestly, it’s a very, very small improvement at this point. The credit boxes are still very tight. I think for us, and I can’t prove it but I believe it. I think having a mortgage choice program where we have multiple lenders working with a perspective buyer to get them qualified. We’ve increased the odds of getting those buyers qualified because the overlays and underwriting criteria do differ between institutions. And I think that’s one of the things that helps with the pace, and it also helps with the can rate.

Thank you. Our next question is from the line of Mr. Stephen Kim.

Thanks very much guys Steve Kim, Barclays. Few questions for you. First of all, I think you mentioned that your land spend was $102 million, how much of that was for development?

Well I think it’s shared on a slide -

About $57 million.

Okay. So yeah, I don’t have your slides in front of me, sorry about that. Now I think you said that you expect to spend a similar amount in the back half, but I would imagine also with higher revenues. Generally speaking I’ve been curious about your, building in - spend at that, at the first half rate. I mean I guess I’m wondering, does this imply to pretty much all of the two half, the second half land spend is going to be to develop existing parcels you already have as opposed to buying new ones? Or do you continue to sort of think you’re only going to need to spend about $55 million, $60 million on development in the back half?

Well I think what we said, Stephen, was that we expect to spend roughly $250 million in total land spend in the back half. And I think as we’ve said –

Oh, in the back half, 250 million in the back half?

Yes, in total land spend, which is inclusive of land development and land acquisition.

Okay got it. That answers my question.

That matches the 250 that we spent in the first half.

The second question relates to your comment about higher ASP’s, one of the things you mentioned was that, we’re not necessarily moving higher end, we’re moving to territory that have naturally higher ASP. I wanted to press on that a little bit, are there any functional differences between how you compete, or succeed in markets that have generally higher ASP’s? One of the things that would come to mind, maybe, is that the land market might be a little tighter. And I’m wondering about - so can you talk about what, if any, functional differences there are in general with markets that have higher ASP’s than others. And how do those differences maybe align with Beazer’s strength, as you see them?

So I think, it’s a complicated question and every market’s different, every land parcel’s different. So I’ll try and give you something that I think would hold together across multiple markets, but as even as I’m saying it or thinking it, I could kind of nit-pick it. But let’s think about Maryland and let’s think about California, because these are markets that are not new to us. We’ve been in both markets for 20 years or more. And so this isn’t some explorative, adventure by us into the frontier. These are markets that we have been in place for a long time. But the mix of what we’re doing in those markets are the locations within those markets, or the weighted average of what’s happening in those markets changes a little bit. So there’s within markets, not just the between markets dynamic. And I think that’s kind of important, but the answer is, when you start selling in Howard County and Maryland at $500,000 plus. Yes, the finished levels have to be different. Yes, the model home presentation has to be a little bit different. Yes, the paces in that community are a little different, and we would expect in a town home community. So those are some of the things that are different. And by the way, yes, we use different trades than we might use in another part of town on a different product type. So there - those things are absolutely in place. And it’s why we’re not very adventuresome in wondering off into new sub-markets, new buyer profiles, new trades, new realtor cohorts, because there are a lot of dumb taxes you’ve got to pay to get there. We’ve made investments in markets where we’ve had a presence. And so we won’t get it all right, don’t get me wrong, but we try to overlap with our existing footprint and our existing capabilities very strongly.

And so you were going to contrast, I guess, with California and so you’re saying doing a $500,000 product in California doesn’t require as many adjustments, is that what you were referring?

Well I was just thinking about two places where higher ASP’s will play a big role for us over the next six or so months. In California we’re in some markets that do have a pretty good price activity in Orange County and in price characteristics in Santa Clarita. But what we’re having to do isn’t materially different there, because it’s more similar. I think we just have more communities and California is probably the issue there that is helping us.

And then last one for me is capitalized interest, I noticed has been your balances has been continuing to grow. I was just curious if you could sort of talk a little bit about what you see for capitalized interest running through your income statement and then directly - went to cost of goods sold and interest expense directly for the year.

What we think is going to happen this year is, basically total interest expense in the income statement will probably be similar to what it was last year, just a geography will change a little bit. The direct interest expense, which is the interest expense related to where our assets are below our debt will trend down towards about $35 million for the year. And then the remainder to get to that total will in COGS. So COGS will have a little bit higher interest this year than last year, and the direct expense would lower. But in total it will be about the same.

Thank you. Our next question comes from the line of Susan Berliner with JPMorgan.

So I want to start with Sacramento. I was wondering if you could, I guess, tell us what happened that you were able to bring that parcel or those parcels back. And then when do you expect the remaining assets to become active there? What needs to happen?

Oh Sacramento is a really interesting case study for our industry not just for Beazer. Most of the folks on the call will be bored within the next minute, but I just want to give a bit of background. Sacramento and well-located land in close proximity to Downtown. And including Downtown, by the way, is within an area protected by a series of flood levies. And after hurricane Katrina, the core of engineers did a fairly thorough, I think, national assessment of the levies around the country and determined the levies in Sacramento, were in need of substantial repair. At the point of that determination was reached, the ability to pull building permits stopped, the ability to get mortgage insurance stopped. And so there’s really been a cessation in activity, and I don’t know what the number of square miles, but a very significant part of that market. Unfortunately, we owned an awful lot of land in that location. That’s not a good fact, but what’s happened in the last year is - and I’ll get my dates wrong, but there was something at the work that I get the euphemism wrong. The water act, it’s got a slightly - word act was signed by the President. I want to say last June, approximately, which made it possible for a process to commence that would result in building permits being issued within this zone, sometime this coming summer. Now it has to do with both the completion of much of the levy work. The appropriations and the approvals of the remainder of the levy work, but kind of the thing to take away from this is 100% and entirely outside of our control. So, the city of Sacramento right now and other authorities in that region are a little overwhelmed, because we and others do have land in this area. And we have backed actually both finished and finished lots and raw ground. And so what we and other builders are doing is, going through the process in reactivating these assets, looking at land plans, looking at building permits. And getting queued up to kind of restart the engine. And so the activation of this asset within that Natomas flood basin or basin, is really just the organic and evolutionary conclusion of this levy improvement project, as opposed to some philosophical view maybe that we had at the company. This is when we can do it. There are lot of unknown, still, in terms of the exact timing, because as I said the city, they’re doing their best but there are a lot of builders that want to get a lot of permits. And they don’t really have the staff and the resources to manage all of that in place yet. And so that’s been very interactive and very cooperative but that, that process is very much underway. So by activating the asset, we are acknowledging that we are back working specifically on that asset, we’re going to spend money to proceed with the entitlements to process building permits. And those are the things that when you do those things that’s kind of at the epicenter of changing its characterization, from future development to active. I think we want to get that asset up and running, and we do have some other Northern California assets including another major one in that broad Natomas area. I can’t predict right now when that will also go active, but things are certainly looking up in terms of being able to take, what’s essentially been dead capital into an earning asset, that’s a big positive for us.

Great that’s helpful. And then I was wondering if you could discuss some of your markets. I know you discussed markets in Texas and New Jersey. Anything else in the quarter that stood out from a really strong, or somewhat weak basis?

Well I think in terms of pockets of strength, one thing to remember is that for any builder, the position that you have this year versus the position you had last year. You may say hey, this market’s doing great, but hey, you doubled your community count. So of course it’s doing better than it otherwise would have. And there are some markets where we had a pretty big increase in community count. Atlanta would be one of those markets, and as a result Atlanta is doing a lot better. It’s a community count thing driving that, I pointed South Carolina, both Myrtle Beach and Charleston for us has been markets that are performing exceptionally well. That deep management team, great assets, slight increase in community count, but really strong conditions. There’s been a procession of national builders to Nashville. We’re happy to have been there since prior to our IPO in ‘94, it’s a strong market. And we’re doing very well there and enjoy our position. So those are some of the places that I would point out in addition to Texas, where things have gone pretty well.

And then just two other questions for me. I guess, Bob, with regards to the DTA, is that something that you’re anticipating you’ll get fully back after year-end, or mostly back?

Well we’re driving and working with a lot of those pretty intently, as you might imagine. And at this point it’s pretty hard to quantify, but I believe it’s going to be all, or substantially all by the end of the year.

And then my last question was, I was wondering if you guys could comment at all on April?

What I would say that April, and by the way, I’ve got three weeks of sales results, the end of the month hasn’t happened. So I’m kind of eight days or seven days behind right now, but the first three weeks of April exhibited trends that were pretty similar to what we experienced in the second quarter.

Thank you. Our last question is from the line of Mr. Alex Barron with Housing Research Center.

Just to clarify on the DTA, when you say end of the year, do you mean you expect to get it back in the September of fiscal year quarter or you mean calendar year December?

I mean the fiscal of year-end in September.

And then what would you expect to be the tax rate for next year then, if that happens?

It’s probably about 37%, 38%.

Thank you. And that concludes today’s conference call. Thank you all for joining.