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Operator
Good morning and welcome to Beazer Homes' second fiscal quarter 2005 earnings conference call. Today's call is being recorded and will be hosted by Ian McCarthy, the Company's Chief Executive Officer. Before he begins, Ms. Leslie Kratcoski, Vice President of Investor Relations, will give information on accessing the Company's slide presentation over the Internet and will make comments regarding forward-looking information. Ms. Kratcoski, you may begin.
Leslie Kratcoski - VP of IR
Thank you. Good morning unwelcome to the Beazer Homes conference call on our results for the quarter ended March 31, 2005. During this call we will webcast a synchronized slide presentation. To access the slide presentation go to the investor homepage of Beazer. and click on the webcast link in the center of the screen. From the site you may submit questions to us electronically.
Before we begin you should be aware that during this call we will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially.
Such risks, uncertainties and other factors include, but are not limited to -- changes in general economic conditions fluctuations in interest rates; increases in raw materials and labor costs; levels of competition; potential liability as a result of construction defects; product liability and warranty claims; the possibility that the Company's improvement plan for the Midwest and strategies to broaden target price points and lessen dependence on the entry-level segment in certain markets will not achieve desired results; and other factors described in the Company's Form S-3A filed with the SEC on August 17, 2004 and the Annual Report on Form 10-K for the year ended September 30, 2004.
Ian McCarthy, our President and Chief Executive Officer, and Jim O'Leary, our Executive Vice President and Chief Financial Officer, will give a brief presentation, after which they will address any questions you may have. In the interest of time and allowing everyone a chance to ask questions, we request that you limit yourself to one question and then one follow-up.
I would now like to turn the call over to Ian McCarthy.
Ian McCarthy - CEO
Thank you Leslie, and thank you for joining us on the call today.
Earlier this morning we announced our financial results for the second quarter of fiscal 2005. Revenues of $976 million were up 11% and new orders were up 4%, both indicating continued strength and favorable conditions in the housing industry and our strong position in the market.
For the quarter we reported a net loss of $84.3 million, or a loss of $2.09 per share. This includes a non-cash goodwill impairment charge of $130.2 million, or $3.22 per share, and charges associated with the class action settlement for Trinity Homes for $45 million, or $0.69 per share. As you're probably, aware we had announced estimates for both of these charges on March 29th of approximately $131 million and $40 million respectively.
While our results is quarter were adversely impacted by these charges, the fundamentals of our business continue to be robust, as evidenced by our strong backlog and increased earnings outlook. And we remain committed to achieving profitable growth by leveraging our size, scale and geographic reach through our national brand.
In the March quarter new orders totaled 5239 homes, representing an increase of 4% year-over-year. The increases in new home orders for the second quarter resulted from increases in our Southeast, West, Central, and Mid-Atlantic regions. Order growth in the Southeast at 4% was driven by increases in Georgia, Tennessee and parts of Florida and the Carolinas, offset primarily by weakness in Charlotte. West region order growth was up 2% with increases in Arizona, Colorado and Nevada, offsetting lower orders in California because of unusually wet weather and delayed community openings. We achieved substantial order growth for the second quarter in a row in both the Mid-Atlantic and Central regions, up 39% and 16% respectively, with positive contributions from all markets in those regions. Midwest orders were down 15% with declines in most markets in that region.
Our backlog now stands at an all-time record of 10,064 homes, up 19% from a year ago, with backlog levels increasing in all regions except the Midwest. Our sales value of backlog totals approximately $2.9 billion, up 42% from a year ago and also an all-time record. Our average price in backlog now stands at $288,000, up 20% from the prior year. This results from a strong pricing environment, combined with strong sales in markets with higher average sales prices and our continued efforts in widening our price points. The sizable year-end backlog provides the basis for strong performance in the second half of fiscal 2005 and provides us with a high degree of confidence in raising our outlook for the year.
I will now turn it over to Jim O'Leary to address in more detail our financial results. Jim?
Jim O'Leary - EVP & CFO
Thanks Ian.
Before going into the results, I'd like to spend a few minutes on the goodwill impairment and the culmination of the Trinity charges in this quarter, which has added a degree of complexity to our results. While it's added some complexity, we do like to think we have slain a few dragons that have created some confusion and some uncertainty around our results. So it's nice to put these two issues behind us. This is an admittedly difficult release to sort through, so I'd like to walk through the components so you can get all the various models and estimates out there as comparable as possible.
As previously announced on March 29th, the Company and its Board of Directors concluded that substantially all of the goodwill allocated to certain under-performing operations in Indiana, Ohio, Kentucky, and Charlotte, North Carolina which was recorded upon the acquisition of Crossman Communities in April 2002 was impaired. We conducted impairment testing of goodwill in accordance with SFAS 142, Goodwill and Other Intangible Assets, and the results for the second quarter of fiscal 2005 reflect a non-cash goodwill impairment charge of 130.2 million, or $3.22 per share. This is a non-cash impairment charge. It does not impact our ability to generate cash flow in the future, nor does it impact our compliance with debt covenants. Also, however, the charge is not tax-deductible. That's why the $3.22 is a straight line number absent any tax effect.
Because the impairment charge creates an accounting loss for the quarter, the share count this quarter is 40.4 million shares as the diluted net loss per share in the GAAP income statement disregards the antidilutive effect of stock option awards and the shares into which our convertible notes may be converted. For the full year, we expect the diluted share count to be approximately 45.6 million when we cross back over into positive territory, which is exactly the number that was in our last quarter's 10-Q. Based on that, we expect the goodwill impairment charge to impact the full-year earnings per share by approximately $2.86.
While we remain committed to the Indiana, Ohio, Kentucky and Charlotte, North Carolina markets, they presently suffer from weaker than anticipated local economies, particularly in the Midwest, and severe price competition, particularly at entry-level price points. We have put in place several strategies to broaden our target price points and to reduce the investment in and exposure to the entry-level segment in these markets. I'd like to point out this is evidenced in the flat community count in the Midwest where we're holding down investment and working our way through communities, and the decline in the Southeast, which is primarily associated with reduced investment in the entry-level market in Charlotte, again where we are doing a great job of working down communities and repositioning our division there to focus on other than exclusively the entry-level.
The Company recorded 45 million in additional charges during the second quarter associated with the settlement agreement between the parties in the previously disclosed class action suit the related to construction defects claims from home water intrusion against Trinity Homes which was acquired as part of the Crossman acquisition. On March 29th, we have estimated those charges to be approximately 40 million for the quarter, and our previous guidance included 40 million, 10 million per quarter. This number has ended up being 45 million this quarter and 55 million for the total year, hopefully putting this behind us.
On a per-share basis, the impact of the 45 million in Trinity charges this quarter was $0.69 on an after-tax basis. But remember, based on the fully diluted share count of 45.6 million for the full year, the impact of this 45 million will be $0.61 per-share after tax in the full year.
The court previously approved the settlement agreement between the parties to the class action suit and no appeals to the order were received. On December 17th, we sent claims notices regarding potential class action members to respond by February 15, 2005 or be prohibited from taking future legal action against us. A total of 1311 claims were filed out of 2161 total class members. The charges taken this quarter to adjust recorded liabilities reflect our best estimate of the ultimate liability for this issue.
Now let's move on to the fundamental results for the quarter. For the quarter ended March 31, 2005, revenues totaled 976 million, a second quarter record and an 11% increase over last year's March quarter. The revenue increase was achieved despite a 2% increase in unit closings year-over-year which I will discuss momentarily as our average sale price increased to 267,000, a 15% increase year-over-year and a result of improved mix and measured opportunistic price increases.
Closings in the Southeast were flat with increases in several markets across the region offset by lower closings in parts of Florida and the Carolinas due to production delays associated with previous hurricane activity and weakness in Charlotte. The production delays in Florida are almost exclusively timing. We have rock solid backlog there today.
Closings in the West were down 3%, resulting from weather-related delays associated with heavy rains in Arizona, California and Nevada. These weather-related closing delays should also be viewed as a timing issue, and will result in a significant portion of the year's expected results to be shifted to the second half of this fiscal year.
Closings increased 28% in the Central region with increases in both Dallas and Houston, while closings were roughly flat in the Mid-Atlantic where increases in both Maryland and New Jersey were offset by lower closings in Virginia, as we continue to work on bringing production in line with our backlog in this market.
Closings in the Midwest declined 18%, evidence of the continued weakness we're experiencing in these markets. The pressable (ph) issues again continues to be weaker than anticipated market conditions and local economies that have yet to show a sustained improvement. This is particularly the case in the entry-level segment, which is also been impacted by severe competitive conditions.
As we've seen in prior quarter, revenues are increasing at a greater rate than units as we benefit from improved pricing power in most of our major markets, improved mix demonstrated by a relatively higher proportion of closings in markets with higher average sale prices, and execution of our price point diversification strategy. Our continued revenue growth this quarter reflects two key components of this strategy, geographic diversification and price point diversification, ensuring that we're not overly dependent on any single geographic or product segment.
For the second quarter, total cost of sales as a percentage of revenue increased approximately 180 basis points to 81.5% from 79.7% a year ago. This is a result of recording the 45 million in costs associated with the settlement agreement for Trinity Homes which increased cost of sales by approximately 460 basis points. Attorney (ph) charges in the second quarter of last year totaled 11.4 million, or approximately 130 basis points. Excluding these charges in both periods would have resulted in gross margin this quarter being approximately 150 basis points higher than the second quarter of last year as we continue to benefit from the strategic initiative to improve profits such as national purchasing and revenue enhancement strategies.
SG&A as a percentage of revenue decreased by approximately 30 basis points to 11.1% from 11.4% a year ago.
For the six months of fiscal 2005, total cost of sales as a percentage of revenue decreased approximately 70 basis points to 79% from 79.7% a year ago, despite the inclusion of Trinity warranty costs totaling 55 million, or 290 basis points, compared to 18.3 million, or approximately 108 basis points, in the same period a year ago. Excluding these charges in both period, would have resulted in gross margin for the first six months of the year being approximately 250 basis points higher than the previous year's six months.
Our land position as of March 31st totaled 101,094 lots, 48% of which were owned and 52% of which were under option, consistent with the last few quarters and in line with our overall strategy of maintaining a balance sheet balanced between owned and optioned lots.
Our financial position remained strong during the first quarter. Our cash position was approximately 16 million at March 31st, and net debt to total capitalization stood at 48.2%, in line with the range for our overall debt to total capitalization.
I will now turn it back over to Ian to provide our outlook and conclude our prepared remarks.
Ian McCarthy - CEO
Thanks Jim.
The basic fundamentals of the housing industry remain strong. Strong demographic trends, combined with constraints on land and housing supply, will continue to provide excellent opportunities for large public homebuilders such as Beazer Homes. And as demonstrated by this quarter's results, we continue to capitalize on these opportunities through execution of our strategic initiatives that, one, increase profitability by utilizing our size, scale and capabilities; two, increase market penetration through focused product expansion and price point diversification; and three, leverage our national brand, which is built around the customer.
Closing delays in our largest regions in the Southeast and West have shifted a significant portion of the year's expected results to the second half of the fiscal year. Performance to date, coupled with extremely strong backlog containing a significant number of units from our strongest and most profitable markets, gives us a high degree of confidence in our out-performance for the balance of this fiscal year. Furthermore, with the Trinity Homes issue substantially resolved, we would expect our reported margins going forward to better reflect the fundamental health of our overall business.
While the Midwest and Charlotte markets are weaker than originally anticipated, we remain committed to these markets, which are important to our long-term strategy of geographic diversification. The strength in our other major markets is currently expected to more than offset any shortfall in operating contribution from the Midwest and Charlotte.
Overall we start the second half of fiscal 2005 with unprecedented record backlog of $2.9 billion, up 42% over the prior year, which coupled with expectations of continued strength in the housing market and the continued execution of our strategic initiatives, gives us confidence in our future growth opportunities. As such, we are raising our outlook for earnings per share in fiscal 2005 from a range of $6.67 to 7% to a range of $7 to $7.25. This outlook is before the non-cash goodwill impairment charge recorded this quarter, and which, as Jim indicated, will impact full-year earnings by approximately $2.86 per share based on a fully diluted share count of 45.6 million. However, this outlook does take into account the charges associated with the class action settlement for Trinity Homes, which, although higher than anticipated when issuing our original outlook, we have been able to absorb in our increased outlook for the year. This outlook now represents an increase over fiscal 2004 earnings per share of approximately 25 to 30%.
Jim and I would now be glad to answer questions, and I would ask the operator to give the instructions for registering your questions.
Operator
(OPERATOR INSTRUCTIONS) Ivy Zelman, Credit Suisse First Boston.
Dennis McGill - Analyst
It's Dennis McGill in for Ivy. Just a double of quick once. On the math for the share count, I guess the quarters are not going to average the year number because of the way the accounting is treated. Is that right?
Jim O'Leary - EVP & CFO
That's right, Dennis. Whenever you have dilutive or potentially dilutive securities and they decreased the loss per share, you exclude them from the calculation. So the 40 million some odd you see in the second quarter, when you compare that to the first quarter and you compare that to what our full-year results will be when you see - well, the six-month results -- as well when you see our quarter, it should be 45,500,000 or so, and our guidance is based on that 40,500,000.
Dennis McGill - Analyst
So at the end of the year, that is what we will be reporting?
Jim O'Leary - EVP & CFO
That's right.
Dennis McGill - Analyst
You guys restated the past year's results because of the convert?
Jim O'Leary - EVP & CFO
Yes we did. That was last quarter actually, Dennis.
Dennis McGill - Analyst
Well, the reported diluted figure last quarter wasn't the --
Jim O'Leary - EVP & CFO
That's right.
Dennis McGill - Analyst
Looking at the Southeast, you have obviously had production delays, like many of the other builders. Just wondering, seeing as how we're multiple quarters past the hurricane, when we're going to get back to a normalized build cycle there.
Ian McCarthy - CEO
We really think that in June and September we should be definitely back on track. Unfortunately still particularly in Florida we have roofing issues down there. It's still problem still getting materials, and more importantly actually getting the roofs themselves. So that has really been the delay. There were also some community development delays as well associated with that, part of that just getting inspectors out there to look at that. So we really think certainly in June and September we should be back on track.
Dennis McGill - Analyst
Are you holding back orders similar to some of your competitors?
Ian McCarthy - CEO
We are in certain markets, particularly in the Mid-Atlantic where we have really been trying to get our backlog in order. It was too far out, so we were doing that. And if we can't deliver closings in a market, we will certainly be careful in how we're really future phases if we can't deliver them. So we are to an extent, but I would say mainly in the Mid-Atlantic.
Dennis McGill - Analyst
Just lastly, looking at the financing side of things, been asking the builders how much their units are via arms and the component of IOs (ph).
Jim O'Leary - EVP & CFO
We're at today -- arms are 43%. And the percentage of IOs, we don't track that, but we don't believe it is a material portion of that. But we do not track that.
Dennis McGill - Analyst
You do not think it is a material portion?
Jim O'Leary - EVP & CFO
We don't think so.
Dennis McGill - Analyst
Do you have the number of arms for last quarter or for last year's --?
Jim O'Leary - EVP & CFO
We'll get that for you, Dennis.
Operator
Alex Barron (ph), JMP Securities.
Alex Barron - Analyst
I wanted to focus on gross margins for a sec. You said for the first six months if you exclude all these warranty charges that the margins were up 250 basis points. And it seems to me that most of the increase was more in the December quarter than in the March quarter. So I was wondering if you could help us understand that, and also your expectations going forward also excluding that warranty charge.
Jim O'Leary - EVP & CFO
Actually, just on Dennis' question, it's 26% from last year.
On margins, obviously the six-month run rate, if you do that, drops this quarter. But you've got to remember mix has an enormous impact on that. Where we lost our deliveries this quarter was the West Coast, which is our highest margin area. We did have a lot of closings drop in the Mid-Atlantic and Florida, all of which when you look at our backlog and were you just to run the numbers on a percentage of backlog in those respective regions, you'll see a shift from the Midwest down about 4%. And that shift going into our higher margin places, again particularly the West and the Southeast where we lost closings.
And what you don't see here, but I will tell you exacerbates those percentages even more so, is the dollar backlog is much more heavily weighted, particularly to the West and Mid-Atlantic and Florida, that essentially even though it up it's not as big an impact as the others. So the closings we lost had an impact on margins this quarter, which as you go out three, four and actually into next year our backlog contains substantially higher margins than we have seen realized this quarter.
Alex Barron - Analyst
So would it be feasible to say that maybe over the next couple of quarters on an apples-to-apples basis you could be close to 200 basis points?
Jim O'Leary - EVP & CFO
No, not that much. But you will see some margin improvement. And again, a lot of it driven my mix; a lot of it driven by the proactive actions we've taken on revenue enhancements and national accounts. But I would say in the next couple of quarters predominantly mix. It's not 200 basis point. It's somewhere around 100 absent further price increases. Remember, we're not extrapolating additional price increases. And our spec performance, we will have some spec sales in there. That can be a little bit of a mathematical impact on what we actually realized.
Alex Barron - Analyst
I think now that you guys are sort of I guess deemphasizing the Midwest a little bit would it be safe to assume that your ASPs are going to go up also, just as you focus on other higher price point markets?
Jim O'Leary - EVP & CFO
We're not deemphasizing the Midwest. The numbers aren't there. We hope you deemphasize the Midwest so it doesn't become the conversation point it's been. The market is poor. We had recognized that. We took the goodwill impairment. And in the interest of capital allocation, it doesn't make a lot of sense to put additional capital into that while we're chewing through some subdivisions and some land positions that just haven't been up to expectations. We would hope you would emphasize more all of things that are working.
In the next couple quarters you'll see more capital and more closings as a percentage out of those places. I wouldn't say we're deemphasizing, but we are harvesting some positions in those markets in the interest of right-sizing them. We don't want to be the biggest entry-level builder there. We want to do the price point diversification strategy and the product diversification strategy we think is going to be successful there.
Alex Barron - Analyst
But I mean, when you say you're not deemphasizing does that mean you're leaving the same capital, or are you redeploying that capital to other, better markets?
Jim O'Leary - EVP & CFO
Obviously we're redeploying it, and that was the point of the comment in the prepared remarks where we worked down a number of communities, harvested them in Charlotte -- did the same there -- and aren't adding new capital while we right-size the capital based in the Midwest. (multiple speakers)
Operator
Stephen Kim, Smith Barney.
Stephen Kim - Analyst
Just to clarify, it seemed to me that if you basically back out the goodwill as well as the Trinity charge and make the adjustments on the convertibles, it looks like you did about $1.65 this quarter. Is that about right?
Jim O'Leary - EVP & CFO
That's right, but you've got to factor in the share count issue as well.
Stephen Kim - Analyst
I'm using a 45.6 share count to arrive at $1.65.
Jim O'Leary - EVP & CFO
Okay, yes.
Stephen Kim - Analyst
Okay, and then so that means basically that if you include a $0.61 impact from Trinity that you could add that back and that basically means you earned $2 -- I mean $1.04 basically after the Trinity charge basically, right?
Jim O'Leary - EVP & CFO
(indiscernible) rounding it off for $1.05, yes.
Stephen Kim - Analyst
Just to start off, I just want to make sure we're on the same page.
Ian McCarthy - CEO
I think we should point out that those are your numbers, and we're saying that they're in the right order. We're not giving pro forma numbers here today.
Stephen Kim - Analyst
I understand. That's fine. Second question I had relates to your price trajectory. You have talked about how there's some unusual things going on because your backlog kind of is affected by mix and so forth. What kind of expectation can we have for conversion rates over the next couple of quarters? Or alternatively, can you give us ranges on where you think closings might actually fall in the June and September quarters?
Ian McCarthy - CEO
I think the couple of points you raised there about in terms of average prices, obviously our average price continues to go up; our average price in backlog up 20% in this period, which will then roll over into closings in the June and September quarters. So we are still seeing that price appreciation. Part of that is still being able to raise prices. Also, part of it is as we broaden our product mix. We've got much wider product mix we're putting across the whole country now. So you're certainly going to see that.
We are very pleased with the backlog we have today; over 10,000 units. I would say you'll see a conversion ratio there in the mid-40s for the next quarter. Looking at that, that is all we're expecting. Obviously we're coming into a good building period here. We shouldn't have any weather impact we have had over these last couple of quarters. So that's what we're looking for in the next quarter, and then following off into September as well.
Stephen Kim - Analyst
In September as well is something in the mid-40s?
Ian McCarthy - CEO
Probably. It's our year end, and there tends to be a little bit of a pickup at the year end. So we might be able to give some update on that in June if we thought there was going through some improvement on that. But I would say for now use mid-40s as a good number.
Stephen Kim - Analyst
I had sort of accidentally combined kind of the price and the volumes in my prior question. So just to clarify, your beginning backlog price, you're entering the third quarter within an average backlog price nearly $290,000, which is obviously quite high. Should we expect that an average closing price over the next quarter even within striking distance of that, within $10,000 of that number?
Ian McCarthy - CEO
It probably will be there. As we pointed out, we do have a limited amount of inventory in some markets. And again, as we said last time, we would actually like -- if we got the Midwest and Charlotte picked up again, that would pull our average price down. But that's a positive to us. We're not forecasting that today. I would say if you're within $10,000 of our backlog price you're probably reasonable today.
Stephen Kim - Analyst
Thank you.
Ian McCarthy - CEO
Thanks a lot.
Operator
Marker Whelan, UBS.
Dave Goldberg - Analyst
It's actually Dave Goldberg (ph) for Margaret. One question about just in general community count changes regionally. Could you kind of take me through by region how community counts are changing and where you're investing more dollars and less dollars?
Jim O'Leary - EVP & CFO
Sure, and I'm glad you asked that question. One of the things we talked about was in the Southeast and the Midwest you're going to see a flat -- and in the Midwest I'm expecting to see a decline in count. Part of that is as we work down our investment, harvesting some of the positions in some of the communities that are entry-level focused, not necessarily consistent with where we want the Midwest and parts of the Southeast to be, namely Charlotte. As we redeploy that capital out of exclusively entry-level and into active adult, into move up and the other things we're working on right now as we speak you'll see more investment going into particularly Florida, where we have made some great investments over the last couple of years; particularly the Mid-Atlantic. You'll see continued investment in the West.
But -- and this is something that I want you guys to think on and you can certainly ask questions later or follow-up with us -- I would expect you to see a churn or maybe a modest up somewhere less than 5% in community count, because what's going to happen is as we basically take out and reduce our number of entry-level focused communities we're going to trim a large number of communities. If you look at the percentage the Midwest represents of our 500 plus communities, it's about a third. So you'll see the absolute number go down, but we're going to have subdivisions, particularly in the West, particularly in the Mid-Atlantic, particularly in the Southeast ex-Charlotte that have a lot more deliveries.
For example, we are doing a lot of mid-rise development; we're doing a lot of multifamily. In the West Coast, as we've grown there, particularly over the last year and a half, we're doing a lot of subdivisions that have significantly higher deliveries per subdivisions than previously was the case where we get the same number of deliveries out of multiple subdivisions.
So without the Midwest being there, and with us taking proactive steps to harvest capital out of there, what you're going to see is a community count that's low single digits, but the deliveries out of that count will be significantly higher. Again, particularly in the Midwest, particularly in the Mid-Atlantic, particularly Florida areas where we're doing much bigger subdivisions, much bigger deals; some of them in joint ventures, but a lot of them mid-rise sire developments where you'll have much bigger releases as the stages develop. Does that make sense?
Dave Goldberg - Analyst
Yes, absolutely. Just a quick follow-up. Given that the Florida raw material delays have been a little bit longer for you than some of your other peers have you guys taken any steps maybe to try to address the issue should it happen again should we see more continued weather delays in the future (indiscernible) happen?
Jim O'Leary - EVP & CFO
I'm not (indiscernible) sure. I'll take the example of what you said, but let's assume that it is impacting us a little bit more. We have taken some very significant positive steps, and I think this is where you don't see the financial benefits of the national accounts program and some of the strategies we do in something like this. But I can tell you our national accounts guy here was down in Orlando two weeks ago; he's been out working with the market and getting us higher in the queue relative to other builders -- maybe not some of the guys you're referring to, but we're certainly not significantly disadvantaged relative to other people. And the benefits of the national accounts program in a big builder, we're absolutely not that much further behind than anybody else.
Dave Goldberg - Analyst
Thanks a lot guys.
Operator
David Knott, Knott Partners.
Tony Campbell - Analyst
It’s Tony Campbell. Could you just quantify the number of closings that have been delayed, please?
Jim O'Leary - EVP & CFO
I can tell you we're off our budget, but I couldn't tell you how much that is. If you told me it was 100 to 200, maybe as much as 200 to 250, I would say that's probably the right number.
Ian McCarthy - CEO
I think the think to focus on is just the size of the backlog now, and as Jim pointed out in a previous question just where that backlog is distributed between our really strong markets between the Midwest, the Mid-Atlantic and Florida. So we are very optimistic that as we deliver those units through these next two quarters we're going to see the benefits of that.
Certainly we're somewhat disappointed to not have all the closings we expected in this quarter, but we were not that far off. I think (multiple speakers) coming through now. The backlog is at the highest level it's been. Being up 42% in dollar value compared to a year ago is an enormous jump. So we now need to focus on getting those units delivered in these next two quarters.
Tony Campbell - Analyst
Actually, you're not that far off. Most of the -- a lot of homebuilders, the $200 -- the 200 home number is sort of where they have the exposure like you guys is sort of in line. Thank you very much.
Operator
Joel Lacher (ph), Carlin Financial.
Joel Lacher - Analyst
I just wanted to get some more clarification on the diluted share count. So I guess what you're saying for the third and fourth quarter it is going to be 45 million 600 each quarter?
Jim O'Leary - EVP & CFO
That's right. And then the full year will be 45.6 as well, and the guidance we've given out contemplates 45.6.
Joel Lacher - Analyst
Just a question on the convertible. Is there any certain price that the share price can get to where actually that falls off the diluted share count?
Jim O'Leary - EVP & CFO
No. The ATF data (ph) I think Dennis McGill referred to a little earlier, that leaves it the count until the convertible goes away. And we're relatively close to the money on that anyway.
Joel Lacher - Analyst
Thanks a lot.
Operator
Greg Gieber, A.G. Edwards.
Greg Gieber - Analyst
Good morning. I wanted to go back to the subdivision or community count, which was down total to during -- year-over-year. But I noticed that you're having drops of about a 10% decline in the Southeast, which I would think apart from perhaps Charlotte -- and I don't know where you put Charlotte in terms of regions, because isn't Florida kind of a strong market where you -- I thought you might have higher -- be increasing your community count there. And the same goes really for the West. So can you give me some color on your subdivisions, what's happening in those two regions, and then where you kind of think will be the breakout of your subdivisions by regions if you go out one year total for the key regions?
Ian McCarthy - CEO
Let me try to add some color to what Jim said earlier on. Charlotte certainly falls into Southeast, and we have taken the community count down there by attrition. Between the Beazer operations there and the Crossman opportunities that we picked up in Charlotte, very focused on the entry-level. We've been working that down and we're working into different communities there. So we have kind of -- again, we have not taken up some options in that market. We have not continued in some areas there.
We've also taken some communities down over in Memphis as well. Again, we have -- and that was purely a Crossman operation. We've taken some steps there to deemphasize the entry-level product there and move into different products, so even some mid-rise in that market as well.
The other key point is that I think that it's very difficult to just take this year's community count and look at next year's community count and extrapolate it and say that's going to be your sales improvement because the communities are becoming substantially larger. We're working away from numerous small communities. The fact is the land constraints we see in the market really dictate that we're getting into larger and larger communities. We're changing our product mix. Again as Jim said, a lot of attached product, even mid-rise product now. The releases we're having there and the potential for sales and closings are higher than we had, say, previously in a typical entry-level-type product.
I think you're going to see a change there. What we're forecasting today and we're not giving guidance by regions at this point, but we're saying we still expect low single digit growth in community count going forward. But we really expect our sales numbers, our new order numbers and our closing numbers to probably exceed that going forward through the balance of this year and into fiscal 2006.
Greg Gieber - Analyst
I'd like to ask you about your strategy of going upscale, moving up in the Midwest and other areas. How long does it take really to switch over to? You have communities that have been opened, that have model homes. Now you have to sell these through another phase and then build new model homes, which takes time. And related to that is sort of the question of just of the location of these communities. If you bought land with the intent of doing entry-level product it may not be in a location that's going to move particularly well for a higher-end type of product.
Ian McCarthy - CEO
So this is not something we're starting to today; this is something we've been doing for a long time now. We've been working through this. In markets where we can, where there is an opportunity where we can subdivide a piece of land and put multiple price points in there or even multiple product lines -- again, you might be looking at putting some attached affordable housing in there to complement maybe single-family that we have -- we're looking to do that. Obviously what we also need to do is acquire additional locations for different price points.
But again, this is not just a strategy in the Midwest. This is an overall strategy that we've developed for the whole Company. And in certain markets we're actually moving down in price to address the entry-level buyer that we didn't address previously. What we're looking at is what we call economy, which is very affordable, where price is most important. What we then term the second point is value where price is still important, but certain features in the home become more important. And then style, and that's the market that you haven't really seen us in to a great extent. We have been there in markets like Phoenix, in Nashville, the Mid-Atlantic. We've been there in those markets, but we're now taking that product into a number of other markets.
And then the final component of our four component strategy is active adult. And you're saying we featured that in our Annual Report this year. And also we're seeing a lot more of that, particularly in the Mid-Atlantic and in Florida at this time; even to an extent in other parts of the Southeast.
So I think all of those need to be considered. This is not just a strategy we're implementing in the Midwest. It's really across the board.
Greg Gieber - Analyst
That sounds good. Just one last question. I think I probably know the answer here. But if the Midwest economy continues to deteriorate, and there is some economic data coming out it's not the best on manufacturing, is there any risk that you would see of having to do an NRV on some of your land positions in that area?
Jim O'Leary - EVP & CFO
We don't think so. We've gone through a pretty comprehensive evaluation recently. There are no material positions that we think would be a risk.
And something just on that point you had made, yes manufacturing numbers have not been spectacular. But if you look at the employment and the overall job numbers in Columbus, in Cincinnati, in Indianapolis where most of our subdivisions and most of our exposure and presence is, there is a pretty healthy white-collar population. It's an education base. There's a healthcare base. This is not 20 years ago, I worked for a company that was all manufacturing, where all your stuff came out of there. That has gone down so much significantly over the last five or ten years. The rate of exposure is not what -- well, it's not what you think; it's not what the numbers suggest. Again, if you look at the employment, health care, universities, substantial white-collar population, all of which is targeted by the move up in price that Ian just went through.
Greg Gieber - Analyst
Thank you much. Good luck with he second half.
Operator
Jim Wilson, JMP Securities.
Jim Wilson - Analyst
I think it might have been asked a few times, but I guess -- and maybe, Ian, you gave the final answer. I was wondering actually with the redeployment and all the mixes up and down any regions that might even have a double digit increase in communities, let's say, over the next year to 18 months?
Ian McCarthy - CEO
There could be, Jim. As I said, we don't want to give regional guidance on that today. We just don't see the direct correlation between community count and trying to extrapolate that to sales on new orders, which I think a lot of analysts try to do. What we're saying is we like the position we're in. We have increased our land bank. You can see that overall. So whilst our community count is down, our overall number of lots under control has actually gone up. And I think that's what you need to look at and say, "okay, we've got a land bank here that we're going to translate into future new orders and future closings." What we're striving for is higher absorption per community as well. That's one thing we would really like. So we don't necessarily want to keep opening more and more communities. Obviously as you fully understand, it's more efficient if you can actually get a higher number of closings out of a more limited number of closings. So that's certainly a strategy that we're trying to follow, even with multiple price points within a community.
Jim Wilson - Analyst
Just a follow up. Anywhere you aren't that you might want to be either by acquisition or (indiscernible)?
Ian McCarthy - CEO
I think you're asking are we going to exit any markets, and the answer is no at this time. Certainly we have no plans to exit any markets. We made a strong commitment here to these Midwest markets. We do believe that overall they help our geographic diversity. They will provide strength (indiscernible) we need to make sure we have the right product mix in those markets and the right pricing in those markets. And we will commit to do that.
We've made some contiguous expansion recently. I think we may have mentioned before that in California we've moved into the Coachella Valley, we've moved up into Fresno, we've moved into Bakersfield. So we're looking at those contiguous operations to extend, and even in the Southeast we're looking at some other markets. We don't have acquisitions that we're talking about in new markets, but we have got some contiguous expansion. And just to reiterate, we don't have any plans at this time to exit any of the markets that we're in.
Jim Wilson - Analyst
Thanks a lot.
Operator
Michael Rehaut, JPMorgan.
Jennifer Consoli - Analyst
This is Jennifer Consoli (ph) on the line for Michael Rehaut. Just a quick question. You had mentioned the situation of Florida about some delays in closings, and also holding back some orders to get the backlog in line. Can you speak more specifically about the different regions within Florida and where you have seen this occurring?
Ian McCarthy - CEO
Jennifer, I think what I said holding back was more in the Mid-Atlantic. To a degree in the markets in Florida where we have these roofing issues, we don't want to have a lot of inventory there where we can't close the homes. I would say that would be specifically in Orlando and Tampa. Those two markets have been the most hit in a sense. But we have very big expansion plans in all of Florida, and I would say particularly in Orlando and Tampa. So I think you're going to see that we have a large land base there. We have a lot of new product coming out. Some of it's attached. It's going to sell very well, and I think you're going to see some very big growth in those markets as we get into the next two quarters.
This is very much a temporary delay. It's a hangover. Certainly we don't want to emphasize it too much. It's a limited amount of delay compared to a couple of quarters ago. There is just some hangover there. I think others have experienced this. What we're saying now, though, we feel very bullish about those markets going into the next couple of quarters.
Jennifer Consoli - Analyst
Great. Just one follow-up. I know that you had mentioned increasing your presence in the active adult segment. Do you have a targeted long-term goal for a percentage of mix that you'd like to see in that particular product?
Ian McCarthy - CEO
Not at the stage. We have been in this market for probably three or four years now, particularly up in New Jersey where we really started this. And we have started to expose our hand in that. We're in probably half a dozen markets producing active adult restricted communities there for the 55 and over.
I think in the future we will try and address the percentage of our business that we want to associate with that, but today we don't have that. I think in future quarters we may well come out and say that. What we have to find is the right location. Obviously we've sold to active adults within our existing communities in Phoenix and Florida for many, many years in many markets. What we're now doing, though, is providing a distinct active adult communities, and even to a degree as a section of the communities that we're in. So we're looking at larger tracts where we can actually provide part of it restricted and part of it open. So we're working on that, but today we don't want to give a number for how much of our business that is going to be. But we will look at providing that in the future.
Jennifer Consoli - Analyst
Great. Thank you very much.
Operator
Timothy Jones, Wasserman.
Timothy Jones - Analyst
First all, I'm sorry; I missed the first part of your presentation, and I apologize if you covered this. On the $130 million write-off, how much goodwill did you have from Crossman?
Jim O'Leary - EVP & CFO
240.
Timothy Jones - Analyst
240? And was virtually all that related to Crossman or was any related to Trinity?
Jim O'Leary - EVP & CFO
It wasn't allocated by the brand or by the separate subdivisions. There was a percentage allocated to Indianapolis, which included Indy former Crossman and Trinity, both of which are gone and both of which were included in the 130.
Timothy Jones - Analyst
Great. So it was just the Indianapolis market?
Jim O'Leary - EVP & CFO
Yes sir.
Timothy Jones - Analyst
Secondly, you gave the $0.69 on the Trinity charge in the second quarter. What was it the first quarter in dollars and per share?
Jim O'Leary - EVP & CFO
10 million, and that would translate into about $0.013 per, so about 10, 11, 12 million. Every million is about $0.013.
Timothy Jones - Analyst
So about $0.13 in the first quarter, so you got about $0.80 in that $7. And charge of $0.80 is in that $7 charge, correct?
Jim O'Leary - EVP & CFO
Absolutely (multiple speakers) since you missed the prepared remarks, Tim, you have got to remember in our original guidance that we gave you fellows was 40 million. This was 55 million. That's not necessarily the good news that the Trinity cost was 50 million higher, but it is included in the 725. We haven't change the guidance for that. So in effect our guidance is absorbing an additional $15 million of the Trinity charges.
Timothy Jones - Analyst
(multiple speakers) 15 million more, okay.
Jim O'Leary - EVP & CFO
Yes sir.
Timothy Jones - Analyst
Lastly, you talked about Charlotte. A lot of builders have -- I was talking to one, and they have said that the Carolinas have turned around pretty dramatically. What is the -- it's not particularly the Charlotte market, but the Carolinas. And what is the problem in Charlotte?
Ian McCarthy - CEO
Well, I think the issue in Charlotte is that we're very focused in entry-level market there. As I said, from both from old Beazer and old Crossman there we're both very focused in that. I would agree with you that the Carolinas in total are very strong. Myrtle Beach operations, which was a Crossman operation, is performing very well, a very strong market. The Charleston operation for us, which was an old Beazer market, is performing very well for us.
I would say we have a specific issue in Charlotte which we're addressing. We do you think overall that market is slightly better than we've seen over the last couple of quarters, but for us it is still a tough market. But I would totally agree with you, the other markets in the Carolinas, even Raleigh has been a good market for us as well. I would say that those are the markets -- and Raleigh was a combination of both Beazer and Crossman. So those markets have performed well for us.
We have just got to get through our issues in Charlotte. As Jim said, we are addressing that. We're addressing the community count there. We're addressing the product mix there. And we do expect -- it's been a great market for us, since 1987. We've been there a very long time. We've made a lot of money in that market and we expect to in the future.
Timothy Jones - Analyst
That dovetails with what DL Horton (ph) said. He was pretty much giddy about those other markets, how strong they are. There may be a very sizable rebound, would you say?
Ian McCarthy - CEO
Sounds good. Yes, definitely.
Timothy Jones - Analyst
Thanks very much.
Operator
Bill Zucchi (ph), Zebra Funds (ph).
Bill Zucchi - Analyst
Could you give us a sense of how much of your backlog at least for the next couple of quarters is based on mid-rise and attached product?
Ian McCarthy - CEO
I would say at this stage it's quite small. We don't have those numbers to hand here. Obviously in certain markets like Virginia or around D.C. 50% of our product is town home and has been historically. What we were really referring to this morning when we were talking about mid-rise, we're completing those units up in the Mid-Atlantic, and Maryland as well, and down into Florida. But at this stage we don't have a percentage for that. We will look to see if we can do that in the future. Quite small at the time.
Jim O'Leary - EVP & CFO
In particular, some of the subdivision delays that we have had actually has been -- one, for example, is in Florida where it's a mid-rise. It isn't factored into this year's numbers. It's a community delay, so not yet in backlog. And it's not in this year's guidance. A big part of future years, but wouldn't have an impact on what we put out this morning.
Bill Zucchi - Analyst
How are you guys planning to manage -- how do you release or start building the mid-rise product, because condominiums are typically much more speculative? At some point you've got to start construction and you just don't know if everybody is going to end up closing. They may forfeit their deposit and you have still got to build everything you've got to build. How do you plan to manage that type of risk?
Ian McCarthy - CEO
We take it on a case-by-case basis, depending on the market, depending on the product type. You're absolutely right, but we have had this -- there can be more speculation in that. But we've had this with our town home product for many, many years. You have to release a building at a time. We don't necessarily wait until the complete building is presold. We'll get a certain point. But again, we're not constrained by banking commitments. If you look at a private builder, they will be constrained by banking commitments there. We can take a view within each of the markets and say how do we expect the sales are performing; when do we want release it?
So we recognize that there is some more risk there. Our inventory includes that and our inventory is very low at this time. So all of those numbers will be included in our inventory. It's very, very low at this time. It's not something that we think is a risk. But certainly we have to manage it, understanding that there is a higher proportion of risk with attached product, and we fully understand that.
Bill Zucchi - Analyst
Thank you.
Ian McCarthy - CEO
I think the operator said that was our last question, so I would just like to take this opportunity to thank all of you for joining us today. And a recording of this conference call with the slide presentations will be available this afternoon on the Investor Relations section of our website, Beazer.com. Thank you for joining us, and we will talk you after the June quarter. Thank you.