CAPITALIZED INTEREST

The Company capitalizes interest costs incurred to inventory during active development and construction (active inventory). Capitalized interest is charged to cost of sales as the related inventory is delivered to the buyer. In recent years, the Company’s active inventory has been lower than its debt level and therefore, a portion of the interest incurred was reflected as interest expense. However, during the current quarter, the Company's active inventory exceeded its debt level and therefore, all interest incurred was capitalized to inventory.

The following table summarizes the Company’s interest costs incurred, capitalized, expensed as interest expense and charged to cost of sales during the three and nine months ended June 30, 2013 and 2012:



	Three Months Ended June 30,						Nine Months Ended June 30,
	2013			2012			2013			2012
	(In millions)
Capitalized interest, beginning of period	$	103.8		$	81.1		$	82.3		$	79.2
Interest incurred (1)	44.4			31.8			125.5			89.6
Interest expensed:
Directly to interest expense	—			(6.9		)	(7.1		)	(21.1		)
Amortized to cost of sales	(28.6		)	(24.8		)	(81.1		)	(66.5		)
Capitalized interest, end of period	$	119.6		$	81.2		$	119.6		$	81.2


(1)	Interest incurred includes interest incurred on the Company's financial services mortgage repurchase facility of $1.4 million and $3.4 million in the three and nine months ended June 30, 2013, respectively, and $0.6 million and $2.4 million in the same periods of 2012.