Phil Creek – EVP and CFO Bob Schottenstein – Chairman, President and CEO Paul Rosen – President, Mortgage Company Kevin Hake – SVP.

Michael Rehaut – JPMorgan Ivy Zelman – Zelman & Associates Will Randow – Citi.

Good afternoon. My name is Sony and I will be your conference operator today. At this time, I would like to welcome everyone to the M/I Homes First Quarter Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. (Operator Instructions). Thank you.

Phil Creek, you may begin your conference..

Thank you for joining us. On the call is Bob Schottenstein, our CEO and President; Tom Mason, EVP; Paul Rosen, President of our Mortgage Company; and Marie Hunker, VP Corporate Controller; and Kevin Hake, Senior VP.

First, to address regulation fair disclosure, we encourage you to ask any questions regarding issues that you consider material during this call, because we are prohibited from discussing significant non-public items with you directly.

And as to forward-looking statements, want to remind everyone that the cautionary language about forward-looking statements contained in today’s press release also applies to any comments made during this call. Also, be advised that the Company undertakes no obligation to update any forward-looking statements made during this call.

With that, I’ll now turn the call over to Bob..

the usually harsh winter weather conditions particularly in our mid-west and mid-Atlantic regions clearly impact the traffic in sales as well as contributed to a delay in the opening of our new communities.

In addition, while we continue to believe that housing is in the early stages of a multi-year recovery, the spring selling season has gotten off to a slower than expected start. Last year, our first quarter sales were up nearly 40% and in this particular quarter, we were also dealing with the somewhat significantly challenging sales calls.

At this time, I’d like to take a few minutes to review our regions. First the Midwest region, where we have operations in Columbus, Cincinnati, Indianapolis and Chicago. The Midwest had 259 closings during the first quarter or 35% of total homes closed.

This ratio has declined from 55% of closings in 2010 as we have successfully and strategically expanded and shifted our geographic footprint over the last five years.

Our deliveries increased 12% in the Midwest quarter-over-quarter compared with last year and new contracts in this region were up 7% for the quarter despite the challenging selling conditions.

Our sales backlog in the Midwest was up 45% from the end of the first quarter last year a dollar value and our total controlled lot position in the Midwest is flat year-over-year. We ended the quarter with 67 active communities in the Midwest which is 10% over March of last year.

We have clearly seen improvements in our Midwest markets with Chicago continuing to be one of our best performing markets. Columbus market is showing signs and improvement and Indianapolis is just good market for us and even the Cincinnati market has begun to pick up both in terms of margins and sales pace.

Next is our southern region where we have operations in Tampa and Orlando, Florida as well as Houston, San Antonio and Austin Texas and soon Dallas Texas. We delivered 275 homes in the southern region for the first quarter, this was a 44% increase from a year ago, 37% of total volume.

The dollar value of our sales backlog at the end of the quarter was nearly 15% higher than a year ago. We increased our controlled lot position in the southern region by more than 2,600 lots an increase of nearly 41% from a year ago. We are excited about our operation in the southern region.

We had 52 communities in the southern region at the end of the quarter which represents a 33% increase from the prior year. Despite our strong financial performance in this region, our sales in the southern region actually declined 11% for the quarter in part frankly due to choppy selling conditions in Tampa Florida.

We expect open for sale in Dallas during the second quarter as planned and are very excited about this. Finally, the Mid-Atlantic region where we have operations in Raleigh and Charlotte, North Carolina as well as Washington D.C.

Our new contracts in this region were down 15% for the quarter compared with last year while our backlog value is up nearly 10% at the quarter-end. As it relates to sales in particular selling conditions in the D.C. market are a bit soft.

Our deliveries were flat in the Mid-Atlantic region for the first quarter compared to the last year, out of the 737 homes we delivered in the first quarter company-wide, the Mid-Atlantic region accounted for 203 of these closings or 28% of the total. In general, our Washington D.C., Raleigh, and Charlotte markets are all being performing well.

We feel very good about our positions in these markets as well as our outlook there and we are opening new communities as we continue to grow our positions. We ended the quarter with 39 active communities in the Mid-Atlantic region which is up over 10% from last year.

And our total controlled lots in Mid-Atlantic region at quarter end increased by more than 1,800 lots, a nearly 50% increase from a year ago.

Finally, let me just say that our balance sheet and liquidity remain strong, our net-debt to capital equaled to healthy 39% at quarter’s end and we continue to be optimistic both about our business and the outlook for housing. With the strength of our backlog and planned community openings, we are very much looking forward to having a solid 2014.

We will remain focused on continuing to improve and increase our profitability, growing our market share and investing in attractive land and lock opportunities. And with that, I’ll turn it over to you, Phil..

Thanks Bob. New contracts for the first quarter decreased 6% and our traffic for the quarter was down 1%. Last year’s first quarter sales were strong, up 37% over 2012’s first quarter. Our sales were up 1% in January, down 9% in February and down 8% in March.

As to our buyer profile, 42% of our first quarter sales with the first time buyers compared to 41% in 2013’s fourth quarter and about 46% of our first quarter sales were inventory homes compared to 53% in the fourth quarter of ’13. Our active communities increased 17% from 135 at the end of March last year to 158 this year.

The breakdown by region is 67 in the Midwest, 52in the South and 39in the Mid-Atlantic. During the quarter, we opened 13 new communities, while closing 12.

Our current estimate is to end the year with about 5% to 10% higher community count that we began in 2014, opening about 75 new communities, with the majority of the new communities opening in the second half of 2014. We expect that our Southern region, led by our growth in our Texas markets will add the most new communities this year.

We delivered 737 homes in the first quarter delivering 58% of our backlog compared to 65% a year ago. And we delivered our first home that Austin Texas during the first quarter.

Our building times have continue to increased slightly due primarily to shortages of qualify some contractors and our average closing price for the first quarter was 299,000 compared to last year's first quarter of 284,000. Our backlog average sales price is 326,000. Revenue increased 23% in the first quarter compared to last year.

As a result, both the increased and deliveries and the average closing price increase. Our gross margin was 21.7% for the quarter, up 160 basis points year-over-year and 180 basis points over last year's fourth quarter. And land gross profit was 1.3 million in 2014's first quarter compared to 1 million in last year's first quarter.

Our first quarter SG&A expenses decline to 14.6% of revenue, a 70 basis point improvement from last year's first quarter, in dollars our SG&A expenses increased 18% in the first quarter compared to last year.

Interest expense decrease slightly for the quarter when compared to the same period last year and we have $14 million in capitalized interest on our balance sheet compared to $15 million a year ago, about 1% of our total assets.

With respect to income taxes during the quarter, we reversed an additional $5.3 million of our stake deferred tax assets valuation allowance approximately $3 million of this reversal was due to a tax structure change which allowed us to utilized more of our stake net operating loss carry forward while the remainder was due to a change in estimate based on our improved financial results.

This reversal was offset by $5.2 million of current tax expense related to our current quarter earnings. Excluding the reversal, our effective tax rate for the quarter was 41%. We expect our effective tax rate for the remainder of 2014 to approximate 38%.

Our earnings per diluted share for the quarter was $0.41 per share, this per share amount reflects 1.2 million of dividends pay to our preferred shareholders. Now Paul Rosen will cover our mortgage company results..

Thanks Phil. Our mortgage and title operations pre-tax income decreased from $5.1 million in 2013's first quarter, the $4.7 million in the same period of 2014. Our first quarter results include a slight decrease in loans originated from 497 to 493 in higher average loan amounts.

While still strong, the margins on loans sold during this period were lower than we experienced in the first quarter of 2013. We also saw continued shift from FHA to conventional financing compared to 2013 same period. The 2014 income also included additional revenue from the reversal of reserves.

The loan to value on our first mortgages for the first quarter was 85% compared to 87% in 2013's first quarter. We continue to see a shift towards conventional financing 67% of the loan’s close with conventional and 33% for FHA, VA compared to 61% and 39% respectively for 2013 same period.

Overall, our average mortgage amount increased 3% to $252,000 in 2014's first quarter compared to $244,000 in 2013's first quarter. The average borrower credit score on mortgages originated by M/I financial was 736 in the first quarter of 2014 compared to 2013's fourth quarter.

Our mortgage operation captured approximately 76% of our business in the first quarter compared to 2013, 77%. On March 28th, we increased our warehouse facility and extended the expiration date to March 27, 2015 on the M/I F credit agreement.

At March 31, 2014, we had $41 million outstanding under this facility and $11 million outstanding under our separate $50 million repo facility which expires November 5th, 2014. Both facilities are typical 364 day mortgage facility as we extend annually. Now, I'll turn the call back over to Phil..

Thanks, Paul. As far as our balance sheet, we continue to manage our balance sheet carefully focusing on investing carefully in new communities while also managing our capital structure.

Total homebuilding inventory at March 31, 2014 was $724 million, an increase of $146 million of our prior year levels primarily due to higher investment in our backlog, higher community count and increase land investment. Our land investment in March 31, 2014 is 357 million or 40% increase compared to 255 million a year ago.

In March 31st, we had 260 million of raw land at land under development and 141 million of finished unsold lots. We own 2,600 unsold finished lots with an average cost of 54,000 per lot and this average lot costs is 17% of our 326,000 backlog average sale price.

The market breakdown of our 357 million of unsold land is a 107 million in the Midwest, 151 million in the South and 99 million in the Mid Atlantic. Lots owned and controls as of March 31, 2014, totaled 21,000 lots, 51% of which were owned and 49% under contract. Our owned and controlled lots of 21,000 is an increase of 28% versus a year ago.

We owned 10,600 lots of which 33% are in the Midwest, 45% in the South and 22% in the Mid Atlantic. We believe, we have a very good solid land position, 29% of our own control lots during the Midwest, 44% of our lands is in our Southern region and 27% is in the Mid Atlantic.

During 2014's first quarter, we spent$ 53 million on land purchases and $18 million on land development for a total of $71 million. About 54% of the purchase amount was raw land. Our estimate today for 2014 land purchase and development spending is $400 million to $500 million including the $71 million we spend in our first quarter.

At the end of the quarter, we got [190] million in inventory homes, 305 that were completed and 477 inventory homes under construction. This translates into about 4.9 inventory homes per community and of the 700 maybe to inventory homes 253 are in the Midwest, 325 are in the Southern region and 204 are in the Mid Atlantic.

In March 31, 2013, we had 616 inventory homes with an investment of $76 million, which was about 4.6 homes per community. We believe, we are positioned well with our inventory levels.

Our financial condition continues to be strong with $101 million of cash, $507 million in equity and a net debt to cap ratio of 39% and the company had no borrowings under our $200 million unsecured credit facility. This completes our presentation. We now will open the call for any questions or comments..

(Operator Instructions). And your first question comes from the line of Michael Rehaut..

Yes, hi, good afternoon everyone. I was hoping to get some incremental color on the sales pace. You mentioned that decline if you look at just the, is the average community count down about 21% year-over-year for the quarter overall and I believe you kind of refer to the challenged weather. But also some challenges in the Tampa market.

So I was hoping by region to give us a sense of where perhaps weather hit you the hardest and your thoughts about the extent there is a fall that might be obviously is occurring or has occurred over the last few weeks. What your expectations are in terms of sales pace for 2Q versus a year ago? Thanks..

Thanks Michael, this is Bob Schottenstein and I appreciate the question. I am not going to give you any guidance on Q2, but let me just say a couple of things. First, I want to be really clear about this and I think I said this in my comments and even if -- and knowing that I do I still want to reiterate it.

We continue to believe that we're in the early stages of housing recovery that will last a number of years. We're optimistic not just about our business but we are optimistic about macro housing conditions. That said, we were coming off and these are not excuses they are just facts.

We were coming off for particularly different comp from a year ago, about 70% of our communities are located in our four Midwest and three Mid Atlantic divisions which relative, our footprint is what it is, but when you think about that way the weather was particularly impactful.

Perhaps, in those cities received more of an impact from within Indianapolis where we have really ramped up or growth projections and there is no question that there were hard hit by the winter weather.

And the other thing is that the weather contributed even though we opened 13 new communities, a number of communities that we hope to open earlier in the quarter frankly did not get open or open late in the quarter.

The other thing I would add is, is that in our judgment, while it's -- the spring selling season is not quite as good as it was a year ago, it doesn't mean it's bad. That means it wasn't quite as good as a year ago.

A year ago it was very, very robust and conditions are good they're just not as good as they were a year ago and conditions as I mentioned before, one of our other markets that we have a very strong operation in and that does, there is a meaningful volume for us at Tampa and conditions in Tampa has been [uneven].

And I don't believe just for us like I know not just for us and then of course you also look at DC and I think the conditions have been a little bit choppy there as well. So you draw all of that up into a bag and you shake it and you come out with your sales just off slightly from a year ago where you had a pretty difficult comp.

I think over the course of time, our communities and our sub-division performance has been good and I believe it will continue to be in the future..

And one another thing Michael and it feel like if Bob talked about the tough comp last year up 37% in the first quarter. Also last year, we had a very strong second quarter where we were up 31%.

We also said, we talked about new community is being open this year, last year we opened about 65 new communities this year we're hoping to open about 75, the majority of this 75 this year also are in the second half and as Bob said the first quarter was impacted by communities, we thought would open in January opened in March, maybe we thought the models would be open in February and model is just opening now.

So that's also impacted our sales..

Okay. No, I appreciate that. I guess the second question just on the gross margins.

Another builder earlier today was able to give a rough estimate or idea of what whether might have impacted in terms of basis points or dollars, gross profit or gross margin for the quarter just given how the challenges of weather either from the construction standpoint et cetera, either delayed or created additional costs in the system.

I was wondering if perhaps you got a sense of how that might have played out for yourselves and more broadly if you can give us any thoughts in terms of it has been pretty steady on the gross margin line for the last three quarters now in the low 20% range.

If that something that make sense for us to think is sustainable at least for the rest for this year? Thanks..

Well, we definitely were impacted in the first quarter due to the bad weather, not going to give any type of specific as far the number where there wasn't impact there. We've been working very hard on improvement our margins and our margins improved pretty significantly in the first quarter.

And again we don't provide any margin guidance, but we are open to continue, to have better margins not given any projection or anything but that's just very, very key to us or every sale price now as backup to over 325 and if we continue to push these margins up and continue to get some SG&A leverage as Bob said, we're focused very much on improving our profitability..

And the only thing I'd add to that is that I think it was the last call, the fourth quarter call from last year might have been the third quarter call but I think it was the fourth where there was a lot of attention pay two what margins improve next year that being this year.

And we feel good about our margins now, we feel good about the improvement in the first quarter and we feel good about them going forward..

Alright, thank you..

Your next question comes from the line of Ivy Zelman..

Thank you, operator. Good afternoon guys. I think you did a great job just now Bob articulating review in the market and I think you answered most of my questions by answering or presenting your case that you did.

I guess if you are drilling a little bit more you talk about Tampa being spotty, thinking about markets where you're not getting absorptions maybe as easily as you might have or would expect to, what type of strategy would you implement in terms of incentives and thinking about pricing overall with respect to 2014 versus 2013 do you except the whole price and see some bumps throughout the portfolio, maybe talk about incentives in general but just give us some perspective but where there is spottiness or lumpiness and you're not seeing absorption and as to weather would certainly have negative impact, how strategically your position yourself.

I know you guys don't have a lot of spec, at least you have historically and with all the new communities you are bringing online, we'd love to understand your strategy and pricing as you're not seeing absorption or you don't get them?.

First of all, Ivy, thanks for your comments. The short answer of that question is that we have not yet seen the need to do much incentivizing. And I don't think there was any reason to panic. I think conditions are getting better sometime it's not as noticeable but we do believe conditions are going to continue to be good for housing.

And in select communities, we may do a little bit here and there but we haven't done anything in any material way to promote sales. I don't know if you anything to add Phil? I want to see anything want to add that Phil. I am sorry.

What Ivy?.

No, I'm sorry, I just going to add for you big picture perspective on what do you think pricing would do for this full year with respect to a year ago, do you think you'll hold an improved pricing for the company, companywide and strategically maybe talk a little bit about mix. But sorry I've asking more questions. Let me go with Bob..

I think when you look at expectation is that we’ll continue to get back a little more to our sweet spot which is the first and second move up and a little bigger houses, hopefully the pricing will continue to improve, I mean if you look our backlog every sale price is up about 12% from a year ago because averages can always be a little bit misleading.

When you look at our average ticks and bricks in the last year or so it tends to be a more in the 5%, 6%, 7% range. So we are also hopeful that our average sale price....

5%, 6%, 7% increase..

Increase compared to the average sale price being over 10%. So we're hope as we get more back to our sweet spot, at first time move up, second time move up hopefully price will continue to go the right direction as far as pricing and margins..

And do you guys….

The only thing I'd add to that too is, I don't-- knowing what we know today and I think we've made the point that we feel good about things but I don't see a lot of opportunity to push prices up in those instances. It doesn’t mean they're coming down and doesn't mean we're going to start centralizing.

But we think our margins have improved, we feel good about our outlook there but I don't see a lot of opportunity for prices to jump meaningfully..

Got it. And Bob just in terms of the company specific plan for the next sort of three year outlook, with your sweet spot being first time move up and recognized and there are lot of concern about it. If you're not in the affordable market, you're not going to get to the trajectory of growth.

Would you say that you guys are very comfortable in your sweets spot that you can realize the growth expectations that you have laid out?.

Yes. And frankly over the history of our company from time-to-time we've been very successful when we thought the market was there to rollout what I call 1200 to 1800 square foot houses. Houses that we're significantly smaller than first time move up houses.

Predominantly three bedroom homes for that first time buyer, that new family or that person entering in the housing market. If in lot of our market, we start, if in some of our markets I should say, we start to see an increasing demand for that.

Right now it's just not, it's not meaningful enough at least in our view, we will react to it, of course you got to find the communities for as well and be able to produce the last thing and get to the price..

Thank you, Bob..

Thank you..

(Operator Instructions). And your next question comes from the line of Will Randow..

Hi, good afternoon and thank you for taking my question..

Thank you..

I appreciated the detail on land costs as a percentage of backlog ASP. I guess when you're seeing trends and average selling prices as well as costs sort of the per square foot.

What is that spread look like, call it through the first quarter and where you seeing that kind of pacing based on your newer land buys?.

Well, I guess first from, kind of from stick and bricks standpoint, we're not seeing the increases that we've seen in the last year or so. So the stick and brick costs don't seem to be quite as they. We are trying to focus on improving cycle time which has been a little slow especially in Texas markets with good subs and suppliers.

As far as land costs, we feel really good about our land bank, if you look at our average lot cost and we give you the finished lots every quarter. It's been itching up a little bit, but noting real significant.

But we continue from – trying to focus on premier locations, we continue to buy at least half of our land and then you get into development costs in those types of things. So I guess the short answer is that thanks on not escalating as much as they have been but there is always a challenge to get premier locations..

Thanks for that. And then just you mentioned on (inaudible) market which was one of your best performers in the Midwest.

Are you seeing more competition there for land and sales given it has been (inaudible) of a larger private step into that market and kind of what are you seeing there?.

Probably not all active but the most of the other markets where they are very competitive, all the Texas markets are competitive certainly Tampa and Orland, Charlotte, Raleigh, they are all very competitive markets. Chicago is not a whole like different. Chicago market is cook starting to get better, may be as just one of our best performing market.

I wouldn't say there is anything particularly unusual there though..

I guess stated differently a lot of builders have kind of stepped away from the Chicago market are you seeing them, re-enter the market as it starting to get, it’s [legs] back..

I don't know that I'm aware of any major re-entrance or entrant into that market. So I guess, but the answer would be no, I am not aware of it..

Thank you for the time and good quarter..

Okay, thanks..

(Operator Instructions). And there are no further questions at this time..

Thank you very much for joining us. Look forward to talking to you next quarter..

This concludes today's conference call. You may now disconnect your lines..