Inventory

9 Months Ended

Jun. 30, 2011

(4) Inventory


	June 30,		September 30,
(In thousands)	2011		2010
Homes under construction	$	328,067	$	210,104
Development projects in progress		445,567		444,062
Land held for future development		384,658		382,889
Land held for sale		36,965		36,259
Capitalized interest		51,230		36,884
Model homes		44,299		43,505

Total owned inventory	$	1,290,786	$	1,153,703

Homes under construction includes homes finished and ready for delivery and homes in various stages of construction. We had 252 ($43.3 million) and 423 ($71.5 million) completed homes that were not subject to a sales contract (spec homes) at June 30, 2011 and September 30, 2010, respectively. Development projects in progress consist principally of land and land improvement costs. Certain of the fully developed lots in this category are reserved by a deposit or sales contract. Land held for future development consists of communities for which construction and development activities are expected to occur in the future or have been idled and are stated at cost unless facts and circumstances indicate that the carrying value of the assets may not be recoverable. All applicable interest and real estate taxes on land held for future development are expensed as incurred. Land held for sale as of June 30, 2011 principally included land held for sale in the markets we have decided to exit including Colorado, Jacksonville, Florida and Charlotte, North Carolina.

The value related to previously owned homes acquired by our Pre-Owned Homes Division is reported as property, plant and equipment, excluded from the inventory information provided, and depreciated over the asset’s estimated remaining useful life. These homes are within select communities in markets in which the Company currently operates and will be repaired, rented to consumers and eventually resold.

Total owned inventory, by reportable segment, is set forth in the table below (in thousands):


	June 30, 2011								September 30, 2010
	Projects in		Held for Future		Land Held		Total Owned		Projects in		Held for Future		Land Held		Total Owned
	Progress		Development		for Sale		Inventory		Progress		Development		for Sale		Inventory

West Segment	$	318,839	$	318,692	$	5,243	$	642,774	$	281,912	$	311,472	$	5,273	$	598,657
East Segment		323,621		41,930		4,947		370,498		269,210		47,381		1,376		317,967
Southeast Segment		143,162		24,036		75		167,273		121,509		24,036		—		145,545
Unallocated		73,495		—		—		73,495		53,157		—		—		53,157
Discontinued Operations		10,046		—		26,700		36,746		8,767		—		29,610		38,377

Total	$	869,163	$	384,658	$	36,965	$	1,290,786	$	734,555	$	382,889	$	36,259	$	1,153,703

Lot Option Contract Abandonments. We have determined the proper course of action with respect to a number of communities within each homebuilding segment was to abandon the remaining lots under option and to write-off the deposits securing the option takedowns, as well as pre-acquisition costs. In determining whether to abandon a lot option contract, we evaluate the lot option primarily based upon the expected cash flows from the property that is the subject of the option. If we intend to abandon or walk-away from a lot option contract, we record a charge to earnings in the period such decision is made for the deposit amount and any related capitalized costs associated with the lot option contract. We recorded lot option abandonment charges during the three and nine months ended June 30, 2011 and 2010 as indicated in the table below (in thousands). The abandonment charges relate to our decision to abandon certain option contracts that no longer fit in our long-term strategic plan.


	Three Months Ended June 30,				Nine Months Ended June 30,
	2011		2010		2011		2010
Lot Option Abandonments
West	$	32	$	526	$	116	$	533
East		462		7		595		8
Southeast		80		—		262		4

Continuing Operations	$	574	$	533	$	973	$	545

Discontinued Operations		2,477		5		2,525		9

Total Company	$	3,051	$	538	$	3,498	$	554

We expect to exercise, subject to market conditions, most of our remaining option contracts. Various factors, some of which are beyond our control, such as market conditions, weather conditions and the timing of the completion of development activities, will have a significant impact on the timing of option exercises or whether lot options will be exercised.

- Definition

The entire disclosure for inventory. This may include, but is not limited to, the basis of stating inventory, the method of determining inventory cost, the major classes of inventory, and the nature of the cost elements included in inventory. If inventory is stated above cost, accrued net losses on firm purchase commitments for inventory and losses resulting from valuing inventory at the lower-of-cost-or-market may also be included. For LIFO inventory, may disclose the amount and basis for determining the excess of replacement or current cost over stated LIFO value and the effects of a LIFO quantities liquidation that impacts net income.

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