##### 



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
   Form
    10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2005oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          
    to   Commission file number: 001-32322
  Technical Olympic USA,
    Inc.
 (Exact Name of Registrant as
    Specified in Its Charter)
  Delaware

76-0460831(State or Other Jurisdiction
    of
    Incorporation or Organization)

(I.R.S. Employer Identification
    No.)4000 Hollywood Boulevard,
    Suite 500 North
    Hollywood, Florida

33021(Address of Principal Executive
    Offices)

(Zip
    Code)   Registrants telephone number, including area code:
 (954) 364-4000
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which
    RegisteredCommon Stock, $.01 par value

New York Stock Exchange9% Senior Notes due 2010
    (CUSIP No. 878483 AC0)

New York Stock Exchange9% Senior Notes due 2010
    (CUSIP No. 878483 AG1)

New York Stock Exchange103/8% Senior
    Subordinated Notes due 2012 (CUSIP No. 878483 AD8)

New York Stock Exchange71/2% Senior
    Subordinated Notes due 2011 (CUSIP No. 878483 AJ5)

New York Stock Exchange71/2% Senior
    Subordinated Notes due 2015 (CUSIP No. 878483 AL0)

New York Stock Exchange   Securities registered pursuant to Section 12(g) of the
    Act:
 None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
 o þ o
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.




---



##### 



PART I
  Item 1.
    Business  Form 10-K,
        Form 10-K.
  Business
    Strategies
  Capitalize
    on Growth Potential in Our Current Markets
   2




---



##### 



Expand
    Our Use of Joint Ventures and Option Contracts to Maximize our
    Return on Equity and Manage Risk    Grow
    Our Financial Services Business    
    increasing the percentage of our homebuyers who use our
    financial services; and
    marketing our financial services to buyers of homes built by
    other homebuilders, including smaller homebuilders that do not
    provide their own financial services.  Selectively
    Expand Into New Markets    Homebuilding
    Operations
  Markets   3




---



##### 



Florida

Mid-Atlantic

Texas

WestJacksonville

Baltimore/Southern Pennsylvania

Austin

ColoradoOrlando

Delaware

Dallas/Ft. Worth

Las VegasSoutheast Florida

Nashville

Houston

PhoenixSouthwest Florida

Northern Virginia

San AntonioTampa/St. Petersburg   Florida.
  Mid-Atlantic.
  Texas.
  West.
    Product
    Mix      Land
    and Homesites   4




---



##### 



Types of Land and Homesites.
      Land Acquisition Policies.
    
    historical and projected population and employment rates for the
    surrounding area;
    demographic information such as age, education and economic
    status of the homebuyers in the area;
    suitability for development within two to four years of
    acquisition;
    desirability of location, including proximity to metropolitan
    area, local traffic corridors and amenities; and
    prices of comparable new and resale homes in the area.    
    estimated costs of completed homesite development;
    current and anticipated competition in the area, including the
    type and anticipated sales prices of homes offered by our
    competitors;
    opportunity to acquire additional homesites in the future, if
    desired; and
    results of financial analyses, such as projected profit margins
    and return on invested capital.  on-site
   5




---



##### 



Land Supply.
  At December 31,2005


2004


2003Consolidated:Florida


20,100



17,000



19,900Mid-Atlantic


7,300



5,900



4,900Texas


12,400



6,200



8,100West


29,100



15,900



15,300Consolidated total


68,900



45,000



48,200Unconsolidated joint ventures:Florida


19,800



200



Mid-Atlantic


400



600



Texas


500







West


4,700



4,200



Unconsolidated joint ventures total


25,400



5,000



Combined total(1)


94,300



50,000



48,200     (1)
    Includes approximately 60,700, 36,000, and 35,800 homesites
    under option contracts by us and our unconsolidated joint
    ventures as of December 31, 2005, 2004, and 2003,
    respectively.  Option Contracts.
  Joint Ventures.
 6




---



##### 



Land Sales.
  Supply
    Management      Design   7




---



##### 



Design
    Centers    Construction        Marketing
    and Sales   8




---



##### 



Customer
    Service and Quality Control      Warranty
    Program   9




---



##### 



Financial
    Services
          e-commerce e-mail
     10




---



##### 



Governmental
    Regulation
          Competition
    and Market Forces
    
    our experience within our geographic markets;
    the ability of our local managers to identify and quickly
    respond to local market conditions; and
    our reputation for service and quality.   11




---



##### 



Seasonality
    Backlog
  12-month
  Employees
    Item 1A.
    Risk
    Factors  Risks
    Related to Our Business
  Economic
    downturns, excess housing supply or decreased consumer
    confidence in the geographic areas in which we operate could
    adversely affect demand and prices for new homes in those areas
    and could have an adverse effect on our revenues and
    earnings.
   12




---



##### 



We may
    not be able to acquire suitable land at reasonable prices, which
    could increase our costs and reduce our earnings and profit
    margins.
    Changes
    in economic or other business conditions could cause our
    significant level of debt to adversely affect our financial
    condition and prevent us from fulfilling our debt service
    obligations.
      Our
    debt instruments impose significant operating and financial
    restrictions, which may limit our ability to finance future
    operations or capital needs and pursue business opportunities,
    thereby limiting our growth.
    
    incur additional debt;
    pay dividends or make other restricted payments;
    create or permit certain liens, other than customary and
    ordinary liens;
    sell assets other than in the ordinary course of our business;
    invest in joint ventures above the amounts established in such
    instruments;
    create or permit restrictions on the ability of our restricted
    subsidiaries to pay dividends or make other distributions to us;
    engage in transactions with affiliates; and
    consolidate or merge with or into other companies or sell all or
    substantially all of our assets.   13




---



##### 



We may
    not be successful in our effort to identify, complete, integrate
    and/or manage acquisitions or joint ventures, which could
    adversely affect our results of operations and future
    growth.
    We may
    need additional financing to fund our operations or for the
    expansion of our business, and if we are unable to obtain
    sufficient financing or such financing is obtained on adverse
    terms, we may not be able to operate or expand our business as
    planned, which could adversely affect our results of operations
    and future growth.
    Changes
    in accounting rules relating to the consolidation of assets
    associated with option contracts and joint ventures, or a change
    in the interpretation or application of such rules, could
    adversely affect our financial condition and limit our use of
    such arrangements, which could impact our future
    growth.
    In the
    event that tax liabilities arise in connection with the October
    2003 restructuring, there can be no assurance that we will not
    be liable for such amounts.
   14




---



##### 



Our
    business revenues and profitability may be adversely affected by
    natural disasters or weather conditions.
    Technical
    Olympic S.A., our majority stockholder, can cause us to take, or
    prevent us from taking, actions without the approval of the
    other stockholders and may have interests that could conflict
    with the interests of our other stockholders.
    Control
    of our company by Technical Olympic S.A. and/or our issuance of
    preferred stock could make it difficult for a third party to
    acquire us.
    Our
    common stock price has been and could continue to be
    volatile.
    
    the limited amount of our common stock held by non-affiliates;
    quarterly variations in our operating results; 15




---



##### 




    general conditions in the homebuilding industry;
    changes in the markets expectations about our earnings;
    changes in financial estimates and recommendations by securities
    analysts concerning our company or the homebuilding industry in
    general;
    operating and stock price performance of other companies that
    investors deem comparable to us;
    material announcements by us or our competitors;
    news reports relating to trends in our markets;
    changes in laws and regulations affecting our business;
    sales of substantial amounts of common stock by our directors,
    executive officers or majority stockholder, Technical Olympic,
    S.A., or the perception that such sales could occur; and
    general economic and political conditions such as recessions and
    acts of war or terrorism.    Risks
    Related to Our Industry
  Changes
    in economic or other business conditions could adversely affect
    demand and prices for new homes, which could decrease our
    revenues.
    
    employment levels;
    population growth;
    consumer confidence and stability of income levels;
    availability of financing for land and homesite acquisitions,
    and the availability of construction and permanent mortgages;
    interest rates;
    inventory levels of both new and existing homes;
    supply of rental properties; and
    conditions in the housing resale market.    We are
    subject to substantial risks with respect to the land and home
    inventories we maintain, and fluctuations in market conditions
    may affect our ability to sell our land and home inventories at
    expected prices, if at all, which would reduce our profit
    margins.
   16




---



##### 



Supply
    risks and shortages relating to labor and materials can harm our
    business by delaying construction and increasing
    costs.
    
    shortages of qualified trades people and other labor;
    inadequately capitalized local subcontractors;
    shortages of materials; and
    volatile increases in the cost of certain materials, including
    lumber, framing, roofing, and cement, which are significant
    components of home construction costs.    Future
    increases in interest rates or a decrease in the availability of
    government-sponsored mortgage financing could prevent potential
    customers from purchasing our homes, which would adversely
    affect our revenues and profitability.    The
    competitive conditions in the homebuilding industry could
    increase our costs, reduce our revenues, and otherwise adversely
    affect our results of operations.   17




---



##### 




    increase our costs and reduce our revenues and/or profit margins;
    make it difficult for us to acquire suitable land or homesites
    at acceptable prices;
    require us to increase selling commissions and other incentives;
    result in delays in construction if we experience a delay in
    procuring materials or hiring laborers; and
    result in lower sales volumes.      We are
    subject to product liability and warranty claims arising in the
    ordinary course of business that could adversely affect our
    results of operations.    We are
    subject to mold litigation and claims arising in the ordinary
    course of business that could adversely affect our results of
    operations.   18




---



##### 



States,
    cities, and counties in which we operate have, or may adopt,
    slow or no growth initiatives that would reduce our ability to
    build in these areas and could adversely affect our future
    revenues.    Our
    business is subject to governmental regulations that may delay,
    increase the cost of, prohibit or severely restrict our
    development and homebuilding projects.      Special
    Note Regarding Forward Looking Statements
    
    our expectations regarding growth opportunities in the
    homebuilding industry and our ability to successfully take
    advantage of such opportunities to expand our operations;
    our expectations regarding population growth and median income
    growth trends and their impact on future housing demand in our
    markets;
    our expectation regarding the impact of geographic and customer
    diversification;
    our ability to successfully integrate our current operations and
    any future acquisitions, and to recognize anticipated operating
    efficiencies, cost savings, and revenue increases;
    our expectations regarding our land and homesite acquisition
    strategy and its impact on our business, including our estimate
    of the number of years our supply of homesites affords us;
    our belief that homes in premier locations will continue to
    attract homebuyers in both strong and weak economic conditions;
    our expectations regarding future land sales; 19




---



##### 




    our belief regarding growth opportunities within our financial
    services business;
    our estimate that we have adequate financial resources to meet
    our current and anticipated working capital, including our
    annual debt service payments, and land acquisition and
    development needs;
    our expectations regarding the implementation of certain recent
    accounting pronouncements, including SFAS No. 123(R);
    the impact of inflation on our future results of operations;
    our expectations regarding our ability to pass through to our
    customers any increases in our costs;
    our expectations regarding the impact on our business and
    profits of intentional efforts by us and our joint ventures to
    slow sales rates to match production rates;
    our expectations regarding our continued use of option
    contracts, investments in unconsolidated joint ventures and
    other off-balance sheet arrangements to control homesites and
    manage our business and their effect on our business;
    our expectations regarding the labor and supply shortages and
    increases in costs of materials caused by recent hurricanes and
    the high cost of petroleum;
    our expectations regarding the housing market in 2006;
    our expectations regarding the portion of our combined home
    deliveries in 2006 that will come from the Phoenix market;
    our expectations regarding the effects of hurricane seasons and
    land development and permitting issues on our combined net sales
    orders; and
    our expectations regarding our use of cash in operations.    
    our significant level of debt and the impact of the restrictions
    imposed on us by the terms of this debt;
    our ability to borrow or otherwise finance our business in the
    future;
    our ability to identify and acquire, at anticipated prices,
    additional homebuilding opportunities and/or to effect our
    growth strategies in our homebuilding operations and financial
    services business;
    our relationship with Technical Olympic S.A. and its control
    over our business activities;
    our ability to successfully integrate and to realize the
    expected benefits of any acquisitions;
    economic or other business conditions that affect the desire or
    ability of our customers to purchase new homes in markets in
    which we conduct our business, such as increases in interest
    rates, inflation, or unemployment rates or declines in median
    income growth, consumer confidence or the demand for, or the
    price of, housing;
    events which would impede our ability to open new communities
    and/or deliver homes within anticipated time frames and/or
    within anticipated budgets;
    our ability to successfully enter into, utilize, and recognize
    the anticipated benefits of, joint ventures and option contracts;
    a decline in the value of the land and home inventories we
    maintain;
    an increase in the cost of, or shortages in the availability of,
    qualified labor and materials; 20




---



##### 




    our ability to successfully dispose of developed properties or
    undeveloped land or homesites at expected prices and within
    anticipated time frames;
    our ability to compete in our existing and future markets;
    the impact of hurricanes, tornadoes or other natural disasters
    or weather conditions on our business, including the potential
    for shortages and increased costs of materials and qualified
    labor and the potential for delays in construction and obtaining
    government approvals;
    an increase or change in government regulations, or in the
    interpretation and/or enforcement of existing government
    regulations; and
    the impact of any or all of the above risks on the operations or
    financial results of our unconsolidated joint ventures.  Availability
    of Reports and Other Information
  www.tousa.com Form 10-K, Form 10-Q, Form 8-K,
  Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties    Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Security Holders    PART II
  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities   21




---



##### 



High


LowFiscal Year Ended
    December 31, 2005First Quarter

$
25.56


$
18.48Second Quarter

$
25.69


$
20.70Third Quarter

$
30.43


$
23.15Fourth Quarter

$
26.46


$
19.03   High


LowFiscal Year Ended
    December 31, 2004First Quarter

$
17.38


$
12.40Second Quarter

$
17.99


$
11.27Third Quarter

$
15.77


$
10.66Fourth Quarter

$
15.14


$
12.62            22




---



##### 



EQUITY
    COMPENSATION PLAN INFORMATION
  Number of SecuritiesNumber of





Remaining AvailableSecurities to be





for Future IssuanceIssued Upon


Weighted-Average


Under EquityExercise of


Exercise Price of


Compensation PlansOutstanding


Outstanding


(Excluding SecuritiesOptions, Warrants


Options, Warrants


Reflected inPlan Category

and Rights


and Rights


Column (a))(a)


(b)


(c)Equity compensation plans approved
    by security holders


6,606,611


$
11.06



719,061Equity compensation plans not
    approved by security holders










Total


6,606,611


$
11.06



719,061  23




---



##### 



Item 6.
    Selected
    Financial Data  Year Ended December
    31,2005


2004


2003


2002(1)(2)


2001(1)(2)(Dollars in millions, except per
    share data)Statement of Income
    Data:Total revenues

$
2,509.0


$
2,135.3


$
1,680.7


$
1,408.4


$
1,422.0Homebuilding revenues

$
2,461.5


$
2,100.8


$
1,642.6


$
1,377.7


$
1,392.9Homebuilding gross margin

$
604.9


$
428.4


$
323.2


$
276.1


$
284.6Homebuilding pretax income

$
336.4


$
181.7


$
114.7


$
91.2


$
128.5Financial services pretax income

$
8.5


$
8.3


$
15.6


$
15.7


$
11.5Income from continuingoperations before income taxes

$
344.9


$
190.0


$
130.3


$
106.9


$
140.0Income from continuing operations

$
218.3


$
119.6


$
82.7


$
67.0


$
87.8Share
    Data(3):Income from continuing operations
    per share  basic

$
3.82


$
2.13


$
1.57


$
1.28


$
1.68Income from continuing operations
    per share  diluted

$
3.68


$
2.08


$
1.56


$
1.28


$
1.68Cash dividends per share

$
0.057


$
0.036


$



$



$
0.12Statement of Financial
    Condition Data:Inventory

$
1,740.8


$
1,281.2


$
1,177.9


$
753.9


$
646.0Total assets

$
2,422.7


$
1,920.6


$
1,536.2


$
1,012.6


$
999.2Homebuilding notes payable and
    bank borrowings(4)

$
876.6


$
811.4


$
497.9


$
413.1


$
308.7Total borrowings(4)(5)

$
911.7


$
860.4


$
561.1


$
461.4


$
347.4Stockholders equity

$
971.3


$
662.7


$
537.6


$
405.1


$
413.4     (1)
    On June 25, 2002, we completed the merger with Engle
    Holdings Corp. As both entities were under the common control of
    Technical Olympic, Inc., our parent company at the time, the
    merger was accounted for as a reorganization of entities under
    common control. In accordance with Statement of Financial
    Accounting Standards (SFAS) No. 141,
    Business Combinations, we recognized the acquired
    assets and liabilities of Engle Holdings Corp. at their
    historical carrying amounts. As both entities came under common
    control of Technical Olympic on November 22, 2000, our
    financial statements and other operating data have been restated
    to include the operations of Engle Holdings Corp. from
    November 22, 2000.(2)
    On April 15, 2002, we completed the sale of Westbrooke,
    formerly one of our Florida homebuilding subsidiaries. In
    accordance with SFAS No. 144, Accounting for the
    Impairment or Disposal of Long-Lived Assets, the results
    of Westbrookes operations have been classified as
    discontinued operations, and prior periods have been restated.(3)
    The shares issued and outstanding, the earnings per share and
    the cash dividends per share amounts have been adjusted to
    reflect a three-for-two stock split effected in the form of a
    50% stock dividend paid on June 1, 2004 and a five-for-four
    stock split effected in the form of a 25% stock dividend paid on
    March 31, 2005. Cash dividends per share for 2001 have been
    restated to reflect the total shares outstanding as a result of
    the merger.(4)
    Homebuilding notes payable and bank borrowings and total
    borrowings do not include obligations for inventory not owned of
    $124.6 million, $136.2 million, $246.2 million,
    $16.3 million, and $30.0 million as of
    December 31, 2005, 2004, 2003, 2002, and 2001 respectively.(5)
    Total borrowings include Homebuilding borrowings and Financial
    Services borrowings. 24




---



##### 



Item
    7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations    Executive
    Summary
    Florida

Mid-Atlantic

Texas

WestJacksonville

Baltimore/Southern Pennsylvania

Austin

ColoradoOrlando

Delaware

Dallas/Ft. Worth

Las VegasSoutheast Florida

Nashville

Houston

PhoenixSouthwest Florida

Northern Virginia

San AntonioTampa/St. Petersburg       Homebuilding Operations.
   25




---



##### 



on-site
    Financial Services Operations.
  Critical
    Accounting Policies
    Homebuilding
    Revenues and Cost of Sales
    Financial
    Services Revenues and Expenses
   26




---



##### 



Impairment
    of Long-Lived Assets
    Goodwill
    Homesite
    Option Contracts and Consolidation of Variable Interest
    Entities
    and/or
 27




---



##### 



Consolidation of Variable Interest Entities
    Warranty
    Reserves
    Insurance
    and Litigation Reserves
    Recent
    Acquisitions
   28




---



##### 



Selected
    Homebuilding Operating Data
    Year Ended
    December 31,2005


2004


2003Deliveries:

Homes


$


Homes


$


Homes


$Consolidated:Florida


2,785


$
829.4



2,361


$
632.8



2,311


$
562.5Mid-Atlantic


697



290.3



562



235.3



636



209.3Texas


2,059



500.6



1,827



459.9



1,557



407.5West


2,228



646.3



2,471



657.0



1,631



425.1Consolidated total


7,769



2,266.6



7,221



1,985.0



6,135



1,604.4Unconsolidated joint ventures:Florida


347



106.6















Mid-Atlantic


185



55.5



61



16.0







West


1,134



382.0



55



18.7







Total unconsolidated joint ventures


1,666



544.1



116



34.7







Combined total


9,435


$
2,810.7



7,337


$
2,019.7



6,135


$
1,604.4   29




---



##### 



Year Ended
    December 31,2005


2004


2003Net Sales Orders(1):

Homes


$


Homes


$


Homes


$Consolidated:Florida


2,794


$
959.2



3,711


$
1,107.8



2,662


$
672.1Mid-Atlantic


597



243.1



682



289.0



616



207.3Texas


2,754



682.6



1,876



473.9



1,673



427.7West


2,469



817.6



3,274



942.0



1,884



481.8Consolidated total


8,614



2,702.5



9,543



2,812.7



6,835



1,788.9Unconsolidated joint ventures:Florida


391



120.1



32



7.8







Mid-Atlantic


141



47.3



160



44.8







West


1,477



548.0



198



65.0







Total unconsolidated joint ventures


2,009



715.4



390



117.6







Combined total


10,623


$
3,417.9



9,933


$
2,930.3



6,835


$
1,788.9     (1)
    
    Net of cancellations  Year Ended
    December 31,2005


2004


2003Avg








Avg








AvgSales Backlog:

Homes


$


Price


Homes


$


Price


Homes


$


PriceConsolidated:Florida


2,937


$
1,036.7


$
353



2,896


$
898.9


$
310



1,546


$
423.8


$
274Mid-Atlantic


246



94.7


$
385



346



141.9


$
410



224



87.6


$
391Texas


1,238



319.3


$
258



543



137.3


$
253



494



123.3


$
250West


851



303.8


$
357



1,309



388.9


$
297



864



220.7


$
255Consolidated total*


5,272



1,754.5


$
333



5,094



1,567.0


$
308



3,128



855.4


$
274Unconsolidated joint ventures:Florida


3,114



895.6


$
288



32



7.8


$
242











Mid-Atlantic


92



31.3


$
341



136



39.5


$
291











West


1,543



585.5


$
379



501



163.1


$
326











Total unconsolidated joint
    ventures*


4,749



1,512.4


$
318



669



210.4


$
314











Combined total*


10,021


$
3,266.9


$
326



5,763


$
1,777.4


$
308



3,128


$
855.4


$
274     *
    
    Includes acquired backlog.  30




---



##### 



Year Ended
    December 31,2005


2004


2003Sales





Sales





SalesAverage Price:

Deliveries


Orders


Deliveries


Orders


Deliveries


OrdersConsolidated:Florida

$
298


$
343


$
268


$
299


$
243


$
253Mid-Atlantic

$
417


$
407


$
419


$
424


$
329


$
337Texas

$
243


$
248


$
252


$
253


$
262


$
256West

$
290


$
331


$
266


$
288


$
261


$
256Consolidated total

$
292


$
314


$
275


$
295


$
262


$
262Unconsolidated joint ventures:Florida

$
307


$
307






$
242







Mid-Atlantic

$
300


$
336


$
263


$
280







West

$
337


$
371


$
339


$
329







Total unconsolidated joint ventures

$
327


$
356


$
299


$
301







Combined total

$
298


$
322


$
275


$
295


$
262


$
262   Percentage of Total Homebuilding
    RevenuesYear Ended
    December 31,2005


2004


2003Gross Margin


24.6
%


20.4
%


19.7
%SG&A


13.1
%


12.0
%


12.9
%Income from joint ventures


(1.9
)%


(0.1
)%


Other (income) expense, net


(0.3
)%


(0.1
)%


(0.2
)%Homebuilding pretax income


13.7
%


8.6
%


7.0
%   Fiscal
    Year 2005 Compared to Fiscal Year 2004
          Results
    of Operations
  Homebuilding
   31




---



##### 



and/or
       32




---



##### 



Net
    Sales Orders and Homes in Backlog (combined)
      Backlog
    Sales Value (consolidated)
    Joint
    Venture Backlog Sales Value
    Financial
    Services
   33




---



##### 



Fiscal
    Year 2004 Compared to Fiscal Year 2003
          Results
    of Operations
  Homebuilding
       34




---



##### 



Net
    Sales Orders and Backlog Homes (consolidated)
      Financial
    Services
     35




---



##### 



Financial
    Condition, Liquidity and Capital Resources
  Sources
    and Uses of Cash
              Financing
    Activities
  3 8 1 2 1 2
  pari passu pari passu
 36




---



##### 



HomebuildingNet Debt to CapitalDecember 31,


December 31,2005


2004(Dollars in millions)Notes payable

$
811.6


$
811.4Bank borrowings


65.0



Homebuilding borrowings(1)

$
876.6


$
811.4Less: unrestricted cash


26.2



217.6Homebuilding net debt

$
850.4


$
593.8Stockholders equity


971.3



662.7Total capital(2)

$
1,821.7


$
1,256.5Ratio


46.7
%


47.3
%     (1)
    
    Does not include obligations for inventory not owned of
    $124.6 million at December 31, 2005 and
    $136.2 million at December 31, 2004, all of which are
    non-recourse to us.(2)
    
    Does not include Financial Services bank borrowings of
    $35.1 million at December 31, 2005 and
    $49.0 million at December 31, 2004.     37




---



##### 



38




---



##### 



Payment Due by PeriodLess Than


1-3


3-5


More ThanContractual
    Obligations(1)

Total


1 Year


Years


Years


5 YearsLong-Term Debt Obligations

$
910.1


$
35.1
(2)

$
65.0
(4)

$
300.0
(3)

$
510.0
(3)Capital Lease Obligations


















Operating Lease Obligations


31.5



8.0



15.1



5.0



3.4Purchase Obligations


















Other Long-Term Liabilities
    Reflected on the Registrants Statement of Financial
    Condition under GAAP


















Total

$
941.6


$
43.1


$
80.1


$
305.0


$
513.4     (1)
    
    Does not include obligations for inventory not owned
    of $124.6 million at December 31, 2005. See
    notes 2 and 3 to the consolidated financial statements
    included elsewhere in this
    Form 10-K
    for more information on obligations for inventory not
    owned.(2)
    
    Represents borrowings under the Financial Services warehouse
    lines of credit outstanding at December 31, 2005.(3)
    
    Includes $810.0 million in aggregate principal amount of
    outstanding senior and senior subordinated notes. Does not
    include aggregate annual interest of $70.6 million on such
    senior and senior subordinated notes. See note 6 to the
    consolidated financial statements included elsewhere in this
    Form 10-K
    for more information on the senior and senior subordinated notes.(4)
    
    Represents borrowings under the revolving credit facility at
    December 31, 2005.  Off
    Balance Sheet Arrangements
  Land and
    Homesite Option Contracts
  and/or
    Investments
    in Unconsolidated Joint Ventures
  and/or
 39




---



##### 



Dividends
    Recent
    Accounting Pronouncements
  Share Based Payment.
  Application of Accounting
    Principles to Loan Commitments
  No. 04-5, Determining Whether a General Partner, or General Partners as
    a Group, Controls a Limited Partnership or Similar Entity When
    the Limited Partners Have Certain Rights (EITF 04-5). EITF 04-5 EITF 04-5 EITF 04-5
  Seasonality
    of Operations
   40




---



##### 



Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk      Expected
    Maturity Date
    (In millions)
  2006


2007


2008


2009


2010


Thereafter


Fair ValueLiabilitiesLong-term debtFixed rate
    (71/2%)





















$
325.0


$
279.4Fixed rate (9.0%)

















$
300.0






$
303.4Fixed rate
    (103/8%)





















$
185.0


$
182.0Variable rate, credit facility
    (5.84% at December 31, 2005)









$
65.0














$
65.0Variable rate, warehouse line of
    credit (5.46% at December 31, 2005)

$
35.1






















$
35.1      41




---



##### 



Item 8.
    Financial
    Statements and Supplementary Data    Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e),
  Managements
    Report on Internal Control Over Financial Reporting
  page F-2 Form 10-K. page F-3 Form 10-K.
  Item 9B.  Other
    Information
   42




---



##### 



PART III
  Item 10.
    Directors
    and Executive Officers of the Registrant    Form 10-K
    Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions    ITEM 14.
    Principal
    Accounting Fees and Services   43




---



##### 



PART IV
  Item 15.
    Exhibits and
    Financial Statement Schedules      Form 10-K.
        Number

Exhibit Description3
.1

Certificate of Incorporation of
    Newmark Homes Corp (Incorporated by reference to the
    Form 8-K,
    dated March 23, 2001, previously filed by the Registrant).3
.2

Certificate of Amendment to the
    Certificate of Incorporation (Incorporated by reference to the
    Registration Statement on
    Form S-4
    previously filed by the Registrant (Registration Statement
    No. 333-100013)).3
.3

Amended and Restated Bylaws.
    (Incorporated by reference to the Registration Statement on
    Form S-4
    previously filed by the Registrant (Registration Statement
    No. 333-100013)).3
.4

Certificate of Amendment to the
    Certificate of Incorporation, filed on April 28, 2004
    (Incorporated by reference to the
    Form 10-Q
    for the quarter ended March 31, 2004, previously filed by
    the Registrant).4
.1

Indenture, dated as of
    June 25, 2002, by and among Technical Olympic USA, Inc. and
    the subsidiaries named therein and Wells Fargo Bank Minnesota,
    National Association, as Trustee covering up to $200,000,000
    9% Senior Notes due 2010 (Incorporated by reference to the
    Form 8-K,
    dated July 9, 2002, previously filed by the Registrant).4
.2

Indenture, dated as of
    June 25, 2002, by and among Technical Olympic USA, Inc.,
    the subsidiaries name therein and Wells Fargo Bank Minnesota,
    National Association, as Trustee covering up to $150,000,000
    103/8%
    Senior Subordinated Notes due 2012 (Incorporated by reference to
    the
    Form 8-K,
    dated July 9, 2002, previously filed by the Registrant).4
.3

Form of Technical Olympic USA,
    Inc. 9% Senior Note due 2010 (included in Exhibit A to
    Exhibit 4.1) (Incorporated by reference to the
    Form 8-K,
    dated July 9, 2002, previously filed by the Registrant).4
.4

Form of Technical Olympic USA,
    Inc.
    103/8% Senior
    Subordinated Note due 2012 (included in Exhibit A of
    Exhibit 4.2) (Incorporated by reference to the
    Form 8-K,
    dated July 9, 2002, previously filed by the Registrant).4
.5

Registration Rights Agreement,
    dated June 25, 2002, among Technical Olympic USA, Inc. and
    Technical Olympic, Inc. (Incorporated by reference to
    Exhibit 2.2 to the
    Form 8-K,
    dated July 9, 2002, previously filed by the Registrant).4
.6

Specimen of Stock Certificate of
    Technical Olympic USA, Inc. (Incorporated by reference to
    Exhibit 4.1 to the Registration Statement on
    Form S-8
    previously filed by the Registrant (Registration
    No. 333-99307)).4
.7

Indenture for the 9% Senior
    Notes due 2010, dated as of February 3, 2003, among
    Technical Olympic USA, Inc., the subsidiaries named therein,
    Salomon Smith Barney Inc., Deutsche Bank Securities Inc., Fleet
    Securities, Inc. and Credit Lyonnais Securities (USA) Inc.
    (Incorporated by reference to Exhibit 4.13 to the
    Form 10-K
    for the year ended December 31, 2002, previously filed by
    the Registrant).4
.8

Form of Technical Olympic USA,
    Inc. 9% Senior Note due 2010 (included in Exhibit A to
    Exhibit 4.7) (Incorporated by reference to
    Exhibit 4.13 to the
    Form 10-K
    for the year ended December 31, 2002, previously filed by
    the Registrant). 44




---



##### 



Number

Exhibit Description4
.9

Technical Olympic USA, Inc.
    103/8% Senior
    Subordinated Note due 2012, dated as of April 22, 2003, in
    the amount of $35,000,000. (Incorporated by reference to
    Exhibit 4.19 to the Registration Statement on
    Form S-1
    previously filed by the Registrant (Registration Statement
    No. 333-106537)).4
.10

Indenture for the 7
    1/2% Senior
    Subordinated Notes due 2011, dated as of March 17, 2004,
    among Technical Olympic USA, Inc., the subsidiaries named
    therein and Wells Fargo Bank, N.A., as Trustee (Incorporated by
    reference to Exhibit 4.24 to the Registration Statement on
    Form S-4
    previously filed by the Registrant (Registration Statement
    No. 333-114587)).4
.11

Form of Technical Olympic USA,
    Inc. 7
    1/2% Senior
    Subordinated Note due 2011 (included in Exhibit A to
    Exhibit 4.10) (Incorporated by reference to
    Exhibit 4.24 to the Registration Statement on
    Form S-4
    previously filed by the Registrant (Registration Statement
    No. 333-114587)).4
.12

Indenture for the
    7 1/2% Senior
    Subordinated Notes due 2015, dated as of December 21, 2004,
    among Technical Olympic USA, Inc., the subsidiaries named
    therein and Wells Fargo Bank, N.A., as Trustee (Incorporated by
    reference to the Registration Statement on
    Form S-4
    previously filed by the Registrant (Registration Statement
    No. 333-122450)).4
.13

Form of Technical Olympic USA,
    Inc.
    7 1/2% Senior
    Subordinated Note due 2015 (included in Exhibit A to
    Exhibit 4.12) (Incorporated by reference to the
    Registration Statement on
    Form S-4
    previously filed by the Registrant (Registration Statement
    No. 333-122450)).10
.1+

Form of Indemnification Agreement
    (Incorporated by reference to the
    Form 10-K
    for the year ended December 31, 2003, previously filed by
    the Registrant).10
.2+

Amended and Restated Employment
    Agreement between Technical Olympic USA, Inc. and Antonio B. Mon
    dated January 27, 2004, effective as of July 26, 2003
    (Incorporated by reference to Exhibit 10.9 to the
    Form 10-K
    for the year ended December 31, 2003, previously filed by
    the Registrant).10
.3+

Employment Agreement between
    Technical Olympic USA, Inc. and Tommy L. McAden dated
    July 12, 2002, effective June 25, 2002 (Incorporated
    by reference to Exhibit 10.10 to the
    Form 10-Q
    for the quarter ended June 30, 2002, previously filed by
    the Registrant).10
.4+

Technical Olympic USA, Inc. Annual
    and Long-Term Incentive Plan, as amended and restated.
    (Incorporated by reference to Exhibit 10.5 to the
    Form 10-K
    for the fiscal year ended December 31, 2004, previously
    filed by the Registrant).10
.5

Contractor Agreement, effective as
    of November 6, 2000, between Technical Olympic USA, Inc.
    (f/k/a Newmark Homes Corp.) and Technical Olympic S.A.
    (Incorporated by reference to Exhibit 10.26 to the
    Registration Statement on
    Form S-1
    previously filed by the Registrant (Registration
    No. 333-106537)).10
.6

Supplemental Contractor Agreement,
    effective as of January 4, 2001, between Technical Olympic
    USA, Inc. (f/k/a Newmark Homes Corp.) and Technical Olympic S.A.
    (Incorporated by reference to Exhibit 10.27 to the
    Registration Statement on
    Form S-1
    previously filed by the Registrant (Registration Statement
    No. 333-106537)).10
.7

Contractor Agreement, effective as
    of November 22, 2000, between TOUSA Homes, Inc. (f/k/a
    Engle Homes, Inc.) and Technical Olympic S.A. (Incorporated by
    reference to Exhibit 10.28 to the Registration Statement on
    Form S-1
    previously filed by the Registrant (Registration Statement
    No. 333-106537)).10
.8

Supplemental Contractor Agreement,
    effective as of January 3, 2001, between TOUSA Homes, Inc.
    (f/k/a Engle Homes Inc.) and Technical Olympic S.A.
    (Incorporated by reference to Exhibit 10.29 to the
    Registration Statement on
    Form S-1
    previously filed by the Registrant (Registration Statement
    No. 333-106537)).10
.9

Amended and Restated Management
    Services Agreement, dated as of June 13, 2003, between
    Technical Olympic USA, Inc. and Technical Olympic, Inc.
    (Incorporated by reference to Exhibit 10.33 to the
    Registration Statement on
    Form S-1
    previously filed by the Registrant (Registration Statement
    No. 333-106537)).10
.10+

Employment Agreement, dated as of
    May 1, 2004, between David J. Keller and Technical Olympic
    USA, Inc. (Incorporated by reference to Exhibit 10.44 to
    the
    Form 10-Q
    for the quarter ended June 30, 2004, previously filed by
    the Registrant). 45




---



##### 



Number

Exhibit Description10
.11

Credit Agreement, dated as of
    October 26, 2004, among Technical Olympic USA, Inc., the
    lenders and issuers party thereto, Citicorp North America, Inc.,
    Deutsche Bank Securities, Inc., KeyBank National Association,
    J.P. Morgan Securities, Inc., and CitiGroup Global Markets,
    Inc. (Incorporated by reference to Exhibit 10.45 to the
    Form 10-Q
    for the quarter ended September 30, 2004, previously filed
    by the Registrant).10
.12

Revolving Credit and Security
    Agreement, dated as of October 22, 2004, among Preferred
    Home Mortgage Company and Countrywide Warehouse Lending
    (Incorporated by reference to Exhibit 10.46 to the
    Form 10-Q
    for the quarter ended September 30, 2004, previously filed
    by the Registrant).10
.13+

Technical Olympic USA, Inc.
    Executive Savings Plan, effective as of December 1, 2004,
    comprised of the Basic Plan Document and the Adoption Agreement.
    (Incorporated by reference to Exhibit 99.1 to the
    Form 8-K,
    dated November 30, 2004, previously filed by the
    Registrant).10
.14+

Addendum to Technical Olympic USA,
    Inc. Executive Savings Plan, effective as of December 1,
    2004 (Incorporated by reference to Exhibit 99.2 to the
    Form 8-K,
    dated November 30, 2004, previously filed by the
    Registrant).10
.15*+

Term Sheet for the Performance
    Unit Program under the Technical Olympic USA, Inc. Annual and
    Long-Term Incentive Plan, as amended and restated.10
.16+

Employment Agreement, dated as of
    February 16, 2005, by and between TOUSA Associates Services
    Company and Harry Engelstein. (Incorporated by reference to
    Exhibit 10.22 to the
    Form 8-K,
    dated February 16, 2005, previously filed by the
    Registrant).10
.17+

Employment Agreement, dated as of
    February 16, 2005, by and between TOUSA Associates Services
    Company and Mark Upton. (Incorporated by reference to
    Exhibit 10.23 to the
    Form 8-K,
    dated February 16, 2005, previously filed by the
    Registrant).10
.18+

Employment Agreement, dated as of
    November 15, 2004, between Technical Olympic USA, Inc. and
    Edward Wohlwender. (Incorporated by reference to
    Exhibit 10.24 to the
    Form 10-K
    for the fiscal year ended December 31, 2004, previously
    filed by the Registrant).10
.19+

Employment Agreement, dated as of
    January 1, 2004, between TOUSA Associates Services Company
    and John Kraynick. (Incorporated by reference to
    Exhibit 10.25 to the
    Form 10-K
    for the fiscal year ended December 31, 2004, previously
    filed by the Registrant).10
.20+

Form of Director Non-Qualified
    Stock Option Agreement. (Incorporated by reference to
    Exhibit 10.26 to the
    Form 8-K,
    dated March 3, 2005, previously filed by the Registrant).10
.21+

Form of Director Restricted Stock
    Grant Agreement. (Incorporated by reference to
    Exhibit 10.27 to the
    Form 10-K
    for the fiscal year ended December 31, 2004, previously
    filed by the Registrant).10
.22+

Form of Associate Non-Qualified
    Stock Option Agreement. (Incorporated by reference to
    Exhibit 10.28 to the
    Form 10-K
    for the fiscal year ended December 31, 2004, previously
    filed by the Registrant).10
.23+

Policy for Compensation of Outside
    Directors of Technical Olympic USA, Inc. (Incorporated by
    reference to Exhibit 10.30 to the
    Form 10-Q
    for the quarter ended March 31, 2005, previously filed by
    the Registrant).10
.24

Asset Purchase Agreement, dated as
    of June 6, 2005, among EH/Transeastern, LLC, Transeastern
    Properties, Inc. and the other sellers identified therein,
    Arthur J. Falcone and Edward W. Falcone. (Incorporated by
    reference to Exhibit 10.31 to the
    Form 10-Q
    for the quarter ended June 30, 2005, previously filed by
    the Registrant).10
.25

Amendment No. 1, dated as of
    July 28, 2005, to the Credit Agreement dated as of
    October 26, 2004, among Technical Olympic USA, Inc.,
    Citicorp North America, Inc., as administrative agent, and the
    Lenders party thereto. (Incorporated by reference to
    Exhibit 10.32to the
    Form 10-Q
    for the quarter ended June 30, 2005, previously filed by
    the Registrant).10
.26*

Commitment Letter for Revolving
    Credit and Security Agreement, dated December 9, 2005, by
    and between Preferred Home Mortgage Company and Countrywide
    Warehousing Lending, amending that certain Revolving Credit and
    Security Agreement, dated as of October 22, 2004, by and
    between Preferred Home Mortgage Company and Countrywide
    Warehousing Lending. (Portions of this exhibit have been omitted
    pursuant to a request for confidential treatment). 46




---



##### 



Number

Exhibit Description10
.27*+

Amendment to the Amended and
    Restated Employment Agreement, dated January 13, 2006, by
    and between Technical Olympic USA, Inc. and Antonio B. Mon.10
.28*+

Employment Agreement, dated as of
    January 13, 2006, by and between Technical Olympic USA,
    Inc. and Tommy L. McAden.10
.29*+

Employment Agreement, dated as of
    January 13, 2006, by and between Technical Olympic USA,
    Inc. and John Kraynick.10
.30*

Credit Agreement, dated as of
    March 9, 2006, among Technical Olympic USA, Inc., the
    lenders and issuers party thereto, Citicorp North America, Inc.,
    Deutsche Bank Securities, Inc., J.P. Morgan Chase Bank, N.A.,
    Wachovia Capital Markets, LLC, and CitiGroup Global Markets, Inc.21
.0*

Subsidiaries of the Registrant.23
.1*

Consent of Ernst & Young
    LLP independent registered public accounting firm.31
.1*

Certification of Chief Executive
    Officer pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002.31
.2*

Certification of Chief Financial
    Officer pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002.32
.1*

Certification of Chief Executive
    Officer pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.32
.2*

Certification of Chief Financial
    Officer pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.     *
    
    Filed herewith.+
    
    Management contract or compensatory plan or arrangement.   47




---



##### 



SIGNATURES
      By:
    /s/  Antonio
    B. Mon 
       Signature

Title

Date/s/  Antonio
    B. MonAntonio
    B. Mon

Executive Vice Chairman,
    President, Chief Executive Officer (Principal Executive Officer)
    and Director

March 9, 2006/s/  David
    J. KellerDavid
    J. Keller

Senior Vice President, Chief
    Financial Officer and Treasurer (Principal Financial Officer)

March 9, 2006/s/  Randy
    L. KotlerRandy
    L. Kotler

Vice President  
    Chief Accounting Officer (Principal Accounting Officer)

March 9, 2006/s/  Konstantinos
    StengosKonstantinos
    Stengos

Chairman of the Board and Director

March 9, 2006/s/  Andreas
    StengosAndreas
    Stengos

Director

March 9, 2006/s/  George
    StengosGeorge
    Stengos

Executive Vice President and
    Director

March 9, 2006/s/  Marianna
    StengouMarianna
    Stengou

Director

March 9, 2006/s/  Larry
    D. HornerLarry
    D. Horner

Director

March 9, 2006/s/  William
    A. HaslerWilliam
    A. Hasler

Director

March 9, 2006/s/  Michael
    J. PoulosMichael
    J. Poulos

Director

March 9, 2006 48




---



##### 



Signature

Title

Date/s/  Susan
    B. ParksSusan
    B. Parks

Director

March 9, 2006/s/  J.
    Bryan WhitworthJ.
    Bryan Whitworth

Director

March 9, 2006/s/  Tommy
    L. McAdenTommy
    L. McAden

Executive Vice President and
    Director

March 9, 2006  49




---



##### 



TECHNICAL
    OLYMPIC USA, INC. AND SUBSIDIARIES
  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
  PageManagements
    Report on Internal Control over Financial Reporting


F-2Reports of
    Independent Registered Public Accounting Firm


F-3Consolidated
    Statements of Financial Condition as of December 31, 2005
    and 2004


F-5Consolidated
    Statements of Income for the years ended December 31, 2005,
    2004 and 2003


F-6Consolidated
    Statements of Stockholders Equity for the years ended
    December 31, 2005, 2004 and 2003


F-7Consolidated
    Statements of Cash Flows for the years ended December 31,
    2005, 2004 and 2003


F-8Notes to
    Consolidated Financial Statements


F-10  F-1




---



##### 



MANAGEMENTS
    REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING  Rules 13a-15(f) Internal
    Control  Integrated Framework Internal Control  Integrated Framework,
   F-2




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



Board of Directors and Stockholders

Technical Olympic USA, Inc.





We have audited managements assessment, included in the
    accompanying Managements Report on Internal Control Over
    Financial Reporting, that Technical Olympic USA, Inc. maintained
    effective internal control over financial reporting as of
    December 31, 2005, based on criteria established in
    Internal Control  Integrated Framework issued by
    the Committee of Sponsoring Organizations of the Treadway
    Commission (the COSO criteria). Technical Olympic USA,
    Inc.s management is responsible for maintaining effective
    internal control over financial reporting and for its assessment
    of the effectiveness of internal control over financial
    reporting. Our responsibility is to express an opinion on
    managements assessment and an opinion on the effectiveness
    of the companys internal control over financial reporting
    based on our audit.



We conducted our audit in accordance with the standards of the
    Public Company Accounting Oversight Board (United States). Those
    standards require that we plan and perform the audit to obtain
    reasonable assurance about whether effective internal control
    over financial reporting was maintained in all material
    respects. Our audit included obtaining an understanding of
    internal control over financial reporting, evaluating
    managements assessment, testing and evaluating the design
    and operating effectiveness of internal control, and performing
    such other procedures as we considered necessary in the
    circumstances. We believe that our audit provides a reasonable
    basis for our opinion.



A companys internal control over financial reporting is a
    process designed to provide reasonable assurance regarding the
    reliability of financial reporting and the preparation of
    financial statements for external purposes in accordance with
    generally accepted accounting principles. A companys
    internal control over financial reporting includes those
    policies and procedures that (1) pertain to the maintenance
    of records that, in reasonable detail, accurately and fairly
    reflect the transactions and dispositions of the assets of the
    company; (2) provide reasonable assurance that transactions
    are recorded as necessary to permit preparation of financial
    statements in accordance with generally accepted accounting
    principles, and that receipts and expenditures of the company
    are being made only in accordance with authorizations of
    management and directors of the company; and (3) provide
    reasonable assurance regarding prevention or timely detection of
    unauthorized acquisition, use, or disposition of the
    companys assets that could have a material effect on the
    financial statements.



Because of its inherent limitations, internal control over
    financial reporting may not prevent or detect misstatements.
    Also, projections of any evaluation of effectiveness to future
    periods are subject to the risk that controls may become
    inadequate because of changes in conditions, or that the degree
    of compliance with the policies or procedures may deteriorate.



In our opinion, managements assessment that Technical
    Olympic USA, Inc. maintained effective internal control over
    financial reporting as of December 31, 2005, is fairly
    stated, in all material respects, based on the COSO criteria.
    Also, in our opinion, Technical Olympic USA, Inc. maintained, in
    all material respects, effective internal control over financial
    reporting as of December 31, 2005, based on the COSO
    criteria.



We also have audited, in accordance with the standards of the
    Public Company Accounting Oversight Board (United States), the
    consolidated statements of financial condition as of
    December 31, 2005 and 2004, and the related consolidated
    statements of income, stockholders equity, and cash flows
    for each of the three years in the period ended
    December 31, 2005 of Technical Olympic USA, Inc. and our
    report dated March 1, 2006, except for the second paragraph
    of Note 6 Footnote (b) as to which the date is March 9,
    2006, expressed an unqualified opinion thereon.



Ernst & Young LLP

Certified Public Accountants



Miami, Florida

March 1, 2006

F-3




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                    F-4




---



##### 



TECHNICAL
    OLYMPIC USA, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF FINANCIAL
    CONDITION
  December 31,


December 31,2005


2004(Dollars in millions,except par value)ASSETSHOMEBUILDING:Cash and cash equivalents:Unrestricted

$
26.2


$
217.6Restricted


3.1



8.0Inventory:Deposits


218.5



132.8Homesites and land under
    development


650.3



341.2Residences completed and under
    construction


747.4



671.0Inventory not owned


124.6



136.21,740.8



1,281.2Property and equipment, net


27.1



26.7Investments in unconsolidated
    joint ventures


254.5



66.6Receivables from unconsolidated
    joint ventures


60.5



3.4Other assets


133.2



67.7Goodwill


108.8



110.72,354.2



1,781.9FINANCIAL SERVICES:Cash and cash equivalents:Unrestricted


8.7



50.9Restricted


3.1



2.2Mortgage loans held for sale


43.9



75.8Other assets


12.8



9.868.5



138.7Total assets

$
2,422.7


$
1,920.6LIABILITIES AND
    STOCKHOLDERS EQUITYHOMEBUILDING:Accounts payable and other
    liabilities

$
329.4


$
188.9Customer deposits


79.3



69.1Obligations for inventory not owned


124.6



136.2Notes payable


811.6



811.4Bank borrowings


65.0



1,409.9



1,205.6FINANCIAL SERVICES:Accounts payable and other
    liabilities


6.4



3.3Bank borrowings


35.1



49.041.5



52.3Total liabilities


1,451.4



1,257.9Stockholders equity:Preferred
    stock  $0.01 par value;
    3,000,000 shares authorized; none issued or outstanding






Common
    stock  $0.01 par value;
    97,000,000 shares authorized and 59,554,977 and
    56,070,510 shares issued and outstanding at
    December 31, 2005, and December 31, 2004, respectively


0.6



0.6Additional paid-in capital


480.5



388.3Unearned compensation


(7.7
)


(9.0
)Retained earnings


497.9



282.8Total stockholders equity


971.3



662.7Total liabilities and
    stockholders equity

$
2,422.7


$
1,920.6    F-5




---



##### 



TECHNICAL
    OLYMPIC USA, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF INCOME
  Year Ended
    December 31,2005


2004


2003(Dollars in millions, except per
    share amounts)HOMEBUILDING:Revenues:Home sales

$
2,266.6


$
1,985.0


$
1,604.4Land sales


194.9



115.8



38.22,461.5



2,100.8



1,642.6Cost of sales:Home sales


1,706.7



1,592.0



1,291.8Land sales


149.9



80.4



27.61,856.6



1,672.4



1,319.4Gross margin


604.9



428.4



323.2Selling, general and
    administrative expenses


322.9



251.7



212.1(Income) from joint ventures, net


(45.7
)


(3.2
)


Other (income), net


(8.7
)


(1.8
)


(3.6
)Homebuilding pretax income


336.4



181.7



114.7FINANCIAL SERVICES:Revenues


47.5



34.5



38.1Expenses


39.0



26.2



22.5Financial Services pretax income


8.5



8.3



15.6Income before provision for income
    taxes


344.9



190.0



130.3Provision for income taxes


126.6



70.4



47.6Net income

$
218.3


$
119.6


$
82.7EARNINGS PER COMMON SHARE:Basic

$
3.82


$
2.13


$
1.57Diluted

$
3.68


$
2.08


$
1.56WEIGHTED AVERAGE NUMBER OF COMMON
    SHARES OUTSTANDING:Basic


57,120,031



56,060,371



52,720,185Diluted


59,359,355



57,410,700



53,180,190CASH DIVIDENDS PER SHARE

$
0.057


$
0.036


$
    F-6




---



##### 



TECHNICAL
    OLYMPIC USA, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF STOCKHOLDERS
    EQUITY
  AdditionalCommon Stock


Paid-In


Unearned


Retained


TotalShares


Amount


Capital


Compensation


Earnings


Equity(Dollars in millions)Balance at January 1, 2003


52,272,726


$
0.5


$
322.2


$



$
82.5


$
405.2Common stock issued to directors


19,217



















Sale of common stock


3,750,000



0.1



48.4











48.5Unearned compensation










8.5



(7.3
)






1.2Net income


















82.7



82.7Balance at December 31, 2003


56,041,943



0.6



379.1



(7.3
)


165.2



537.6Common stock issued to directors


13,646







0.2











0.2Stock option exercises


14,921







0.1











0.1Dividends paid


















(2.0
)


(2.0
)Unearned compensation










8.9



(1.7
)






7.2Net income


















119.6



119.6Balance at December 31, 2004


56,070,510



0.6



388.3



(9.0
)


282.8



662.7Common stock issued to directors


10,842







0.3











0.3Stock option exercises


115,625







1.9











1.9Dividends paid


















(3.2
)


(3.2
)Sale of common stock


3,358,000







89.2











89.2Unearned compensation










0.8



1.3







2.1Net income


















218.3



218.3Balance at December 31, 2005


59,554,977


$
0.6


$
480.5


$
(7.7
)

$
497.9


$
971.3    F-7




---



##### 



TECHNICAL
    OLYMPIC USA, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF CASH FLOWS
  Year ended
    December 31,2005


2004


2003(Dollars in millions)Cash flows from operating
    activities:Net income

$
218.3


$
119.6


$
82.7Adjustments to reconcile net income
    to net cash used in operating activities:Depreciation and amortization


13.3



12.6



9.3Non-cash compensation expense


3.7



8.8



1.4Loss on impairment of inventory


6.2



4.8



Deferred income taxes


2.0



(0.7
)


(0.7
)Undistributed equity in earnings
    from unconsolidated entities


(18.5
)


(0.5
)


Changes in operating assets and
    liabilities:Restricted cash


4.0



15.6



(1.6
)Inventory


(470.1
)


(216.6
)


(137.3
)Receivables from unconsolidated
    joint ventures


(37.1
)


(3.4
)


Other assets


(67.5
)


(19.3
)


(3.1
)Mortgage loans held for sale


31.9



(0.6
)


(16.4
)Accounts payable and other
    liabilities


131.4



31.1



55.5Customer deposits


10.1



33.6



7.2Net cash used in operating
    activities


(172.3
)


(15.0
)


(3.0
)Cash flows from investing
    activities:Net additions to property and
    equipment


(14.1
)


(15.6
)


(19.1
)Investments in unconsolidated joint
    ventures


(176.1
)


(61.1
)


(5.5
)Loans to unconsolidated joint
    ventures


(20.0
)






Amounts paid for acquisitions, net
    of cash acquired










(59.6
)Earn out consideration paid for
    acquisitions






(6.6
)


(18.1
)Capital distributions from joint
    ventures


10.3







Net cash used in investing
    activities


(199.9
)


(83.3
)


(102.3
)Cash flows from financing
    activities:Net proceeds from (repayments on)
    revolving credit facilities


65.0



(10.0
)


(45.2
)Proceeds from notes offerings






330.0



129.3Principal payments on unsecured
    borrowings and senior notes






(7.9
)


Net (repayments on) proceeds from
    Financial Services bank borrowings


(13.9
)


(14.3
)


14.9Payments for deferred financing
    costs


(0.3
)


(5.9
)


(5.4
)Minority interest in consolidated
    subsidiaries










(9.1
)Net proceeds from sale of common
    stock


89.2







48.4Proceeds from stock option exercises


1.8



0.1



Dividends paid


(3.2
)


(2.0
)


Net cash provided by financing
    activities


138.6



290.0



132.9(Decrease) increase in cash and
    cash equivalents


(233.6
)


191.7



27.6Cash and cash equivalents at
    beginning of period


268.5



76.8



49.2Cash and cash equivalents at end of
    period

$
34.9


$
268.5


$
76.8    F-8




---



##### 



Year Ended
    December 31,2005


2004


2003(Decrease) increase in obligations
    for inventory not owned and corresponding (decrease) increase in
    inventory not owned

$
(11.6
)

$
(110.0
)

$
229.9     Year Ended
    December 31,2005


2004


2003Cash paid for income taxes

$
61.4


$
60.4


$
43.8  F-9




---



##### 



TECHNICAL
    OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
 December 31, 2005
  1.
    Business
    and Organization  Business
    Organization
    2.
    Summary
    of Significant Accounting Policies    Principles
    of Consolidation and Basis of Presentation
        Segment
    Reporting
  Disclosures about Segments
    of an Enterprise and Related Information
    Homebuilding
  Inventory
   F-10




---



##### 



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)








Obligations
    for Inventory Not Owned




Consolidation of Variable Interest Entities








Investments
    in Joint Ventures




No. 04-5, Determining Whether a General Partner, or General Partners as
    a Group, Controls a Limited Partnership or Similar Entity When
    the Limited Partners Have Certain Rights (EITF 04-5). EITF 04-5. EITF 04-5 EITF 04-5 EITF 04-5






F-11



---



##### 



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)




EITF 04-5.




Revenue
    Recognition








Warranty
    Costs








Advertising
    Costs








Financial
    Services




Title Company
    Escrow Deposits








Mortgage
    Loans Held for Sale








Interest
    Rate Lock Commitments




Application of
    Accounting Principles to Loan Commitments Accounting for Derivative Instruments and
    Hedging Activities.


F-12



---



##### 



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Revenue
    Recognition
      General
  Cash and
    Supplemental Cash Flow Information
      Accounting
    for the Impairment of Long-Lived Assets
  Accounting for the
    Impairment or Disposal of Long-Lived Assets,
  Concentration
    of Credit Risk
    Property
    and Equipment
     F-13




---



##### 



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Goodwill
    Goodwill and Other
    Intangible Assets
    Year Ended
    December 31,2005


2004Balance at January 1

$
110.7


$
100.1Earn out consideration paid or
    accrued on acquisitions






10.6Other adjustments


(1.9
)


Balance at December 31

$
108.8


$
110.7   Insurance
    and Litigation Reserves
    Income
    Taxes
  Accounting for Income Taxes
  Earnings
    Per Share
   F-14




---



##### 



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Year Ended
    December 31,2005


2004


2003Basic weighted average shares
    outstanding


57,120,031



56,060,371



52,720,185Net effect of common stock
    equivalents assumed to be exercised


2,239,324



1,350,329



460,005Diluted weighted average shares
    outstanding


59,359,355



57,410,700



53,180,190   five-for-four three-for-two
   F-15




---



##### 



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Stock-Based
    Compensation
  Accounting for Stock Issued to Employees Accounting for Stock-Based
    Compensation
  Year Ended
    December 31,2005


2004


2003Net income as reported

$
218.3


$
119.6


$
82.7Add: Stock-based employee
    compensation included in reported net income, net of tax


2.2



5.4



0.8Deduct: Stock-based employee
    compensation expense determined under the fair value method, net
    of tax


(2.7
)


(4.1
)


(2.9
)Pro forma net income

$
217.8


$
120.9


$
80.6Reported basic earnings per share

$
3.82


$
2.13


$
1.57Pro forma basic earnings per share

$
3.81


$
2.16


$
1.53Reported diluted earnings per share

$
3.68


$
2.08


$
1.56Pro forma diluted earnings per
    share

$
3.67


$
2.11


$
1.52     Expected volatility


0.42% - 0.48%Expected dividend yield


0%Risk-free interest rate


1.47% - 4.02%Expected life


4-10 years    Fair
    Value of Financial Instruments
  Disclosures about Fair Value of
    Financial Instruments
 F-16




---



##### 



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Reclassifications
    Recent
    Accounting Pronouncements
  Share Based Payment
    Application of FASB Statement No. 109, Accounting for
    Income Taxes to the Tax Deduction on Qualified Production
    Activities Provided by the American Jobs Creation Act of
    2004
 F-17




---



##### 



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   3.
    Inventory    Year Ended
    December 31,2005


2004


2003Interest capitalized, beginning of
    period

$
36.8


$
29.7


$
11.6Interest incurred


81.5



66.1



55.1Less interest included in:Cost of sales


66.3



50.5



35.3Other*


4.3



8.5



1.7Interest capitalized, end of period

$
47.7


$
36.8


$
29.7     *
    
    Included in Other above for the years ended
    December 31, 2005 and 2004 is interest which was
    capitalized to inventory that was subsequently contributed to an
    unconsolidated joint venture. For the years ended
    December 31, 2005, 2004, and 2003, all interest incurred
    has been capitalized.      Accounting for the
    Sales of Real Estate
 F-18




---



##### 



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   4.
    Investments
    in Unconsolidated Joint Ventures    December 31, 2005Land


HomeDevelopment


Construction


TotalAssets:Cash

$
13.4


$
60.5


$
73.9Inventories


306.1



1,023.6



1,329.7Other assets


3.3



227.5



230.8Total assets

$
322.8


$
1,311.6


$
1,634.4Liabilities and
    equity:Accounts payable and other
    liabilities

$
6.6


$
211.2


$
217.8Notes payable


142.0



781.5



923.5Equity of:Technical Olympic USA, Inc.


86.1



167.1



253.2Others


88.1



151.8



239.9Total equity


174.2



318.9



493.1Total liabilities and
    equity

$
322.8


$
1,311.6


$
1,634.4   December 31, 2004Land


HomeDevelopment


Construction


TotalAssets:Cash

$
1.4


$
14.8


$
16.2Inventories


74.0



196.8



270.8Other assets


1.4



8.4



9.8Total assets

$
76.8


$
220.0


$
296.8Liabilities and
    equity:Accounts payable and other
    liabilities

$
11.0


$
10.0


$
21.0Notes payable


32.0



81.8



113.8Equity of:Technical Olympic USA, Inc.


15.6



51.0



66.6Others


18.2



77.2



95.4Total equity


33.8



128.2



162.0Total liabilities and
    equity

$
76.8


$
220.0


$
296.8   F-19




---



##### 



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)




|                                                     |  |                                  |      |   |                                  |   |       |       |  |   |             |  |  |              |      |  |       |   |      |  |  |   |      | 
|---------------------------------------------------- |  | -------------------------------- | ---- | - | -------------------------------- | - | ----- | ----- |  | - | ----------- |  |  | ------------ | ---- |  | ----- | - | ---- |  |  | - | ---- | 
|                                                     |  | Year Ended December 31,
    2005 |      |   | Year Ended December 31,
    2004 |  
|                                                     |  | Land                             |      |   | Home                             |   |       |       |  |   | Land        |  |  | Home         |      |  |       |  
|                                                     |  | Development                      |      |   | Construction                     |   |       | Total |  |   | Development |  |  | Construction |      |  | Total |  
|                                                    
|Revenues                                             |  | $                                | 34.6 |   |                                  | $ | 553.4 |       |  | $ | 588.0       |  |  | $            | 19.3 |  |       | $ | 34.8 |  |  | $ | 54.1 | 
|Cost and expenses                                    |  |                                  | 35.3 |   |                                  |   | 512.7 |       |  |   | 548.0       |  |  |              | 16.8 |  |       |   | 32.8 |  |  |   | 49.6 | 
|                                                     |  |                                  |      |   |                                  |   |       |       |  |   |             |  |  |              |      |  |       |   |      |  |  |   |      | 
|Net earnings (losses) of
    unconsolidated entities |  | $                                | (0.7 | ) |                                  | $ | 40.7  |       |  | $ | 40.0        |  |  | $            | 2.5  |  |       | $ | 2.0  |  |  | $ | 4.5  | 
|                                                     |  |                                  |      |   |                                  |   |       |       |  |   |             |  |  |              |      |  |       |   |      |  |  |   |      | 
|Our share of net earnings (losses)                   |  | $                                | (0.7 | ) |                                  | $ | 19.2  |       |  | $ | 18.5        |  |  | $            |     |  |       | $ | 0.5  |  |  | $ | 0.5  | 
|Management fees earned                               |  |                                  | 3.1  |   |                                  |   | 24.1  |       |  |   | 27.2        |  |  |              |     |  |       |   | 2.7  |  |  |   | 2.7  | 
|                                                     |  |                                  |      |   |                                  |   |       |       |  |   |             |  |  |              |      |  |       |   |      |  |  |   |      | 
|Income from joint ventures                           |  | $                                | 2.4  |   |                                  | $ | 43.3  |       |  | $ | 45.7        |  |  | $            |     |  |       | $ | 3.2  |  |  | $ | 3.2  | 
|                                                     |  |                                  |      |   |                                  |   |       |       |  |   |             |  |  |              |      |  |       |   |      |  |  |   |      | 





and/or






















F-20



---



##### 



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    5.
    Accounts
    Payable and Other Liabilities    December 31,2005


2004Homebuilding:Accounts payable

$
66.5


$
58.4Interest


32.7



26.2Compensation


42.3



22.7Taxes, including income and real
    estate


80.5



16.7Accrual for unpaid invoices on
    delivered homes


24.9



24.8Accrued expenses


33.5



20.9Warranty costs


7.0



6.5Deferred revenue


42.0



12.7Total accounts payable and other
    liabilities

$
329.4


$
188.9  F-21




---



##### 



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)










|                                                               |  |                             |      |   |      |   |      |  
|-------------------------------------------------------------- |  | --------------------------- | ---- | - | ---- | - | ---- | -
|                                                               |  | Year Ended
    December 31, |     
|                                                               |  | 2005                        |      |   | 2004 |  
|                                                              
|Accrued warranty costs at
    January 1                        |  | $                           | 6.5  |   |      | $ | 4.9  |  
|Liability recorded for warranties
    issued during the period |  |                             | 12.0 |   |      |   | 11.3 |  
|Warranty work performed                                        |  |                             | (9.1 | ) |      |   | (8.0 | )
|Adjustments                                                    |  |                             | (2.4 | ) |      |   | (1.7 | )
|                                                               |  |                             |      |   |      |   |      |  
|Accrued warranty costs at
    December 31                      |  | $                           | 7.0  |   |      | $ | 6.5  |  
|                                                               |  |                             |      |   |      |   |      |  





|   |                                                   
|-- | --------------------------------------------------
|6. | Homebuilding
    and Financial Services Borrowings



Homebuilding
    Borrowings








|                                                         |  |              |       |   |      |   |       |  
|-------------------------------------------------------- |  | ------------ | ----- | - | ---- | - | ----- | -
|                                                         |  | December 31, |      
|                                                         |  | 2005         |       |   | 2004 |  
|                                                        
|Senior notes due 2010, at 9%(a)                          |  | $            | 300.0 |   |      | $ | 300.0 |  
|Discount on senior notes                                 |  |              | (3.1  | ) |      |   | (3.8  | )
|Senior subordinated notes due
    2012, at
    103/8%(a) |  |              | 185.0 |   |      |   | 185.0 |  
|Senior subordinated notes due
    2011, at
    71/2%(a)  |  |              | 125.0 |   |      |   | 125.0 |  
|Senior subordinated notes due
    2015, at
    71/2%(a)  |  |              | 200.0 |   |      |   | 200.0 |  
|Premium on senior subordinated
    notes                 |  |              | 4.7   |   |      |   | 5.2   |  
|Revolving credit facility(b)                             |  |              | 65.0  |   |      |   |      |  
|                                                         |  |              |       |   |      |   |       |  
|                                                         |  | $            | 876.6 |   |      | $ | 811.4 |  
|                                                         |  |              |       |   |      |   |       |  









|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Interest on the senior notes due 2010 and senior subordinated
    notes due 2012 is payable semi-annually on January 1 and
    July 1 of each year. Interest on the senior subordinated
    notes due 2011 and 2015 is payable semi-annually on
    March 15 and September 15 of each year, and
    January 15 and July 15 of each year, respectively. Our
    outstanding senior notes are guaranteed, on a joint and several
    basis, by the Guarantor Subsidiaries, which are all of our
    material direct and indirect subsidiaries, other than our
    mortgage and title operations subsidiaries (the Non-guarantor
    Subsidiaries). Our outstanding senior subordinated notes are
    guaranteed on a senior subordinated basis by all of the
    Guarantor Subsidiaries. The indentures governing the senior
    notes and senior subordinated notes require us to maintain a
    minimum net worth and place certain restrictions on our ability,
    among other things, to incur additional debt (other than under
    our revolving credit facility), pay or make dividends or other
    distributions, sell assets, enter into transactions with
    affiliates, invest in joint ventures above specified amounts,
    and merge or consolidate with other entities.
|   
|    |  | Our outstanding senior notes and senior subordinated notes have
    call features that allow redemption of the notes prior to
    maturity, upon payment of a make-whole premium or,
    in certain cases, a stated premium as provided in the relevant
    indenture.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(b) |  | At December 31, 2005, our revolving credit facility permits
    us to borrow up to the lesser of (i) $600.0 million or
    (ii) our borrowing base (calculated in accordance with the
    revolving credit facility agreement) minus our outstanding
    senior debt. The credit facility also has a letter of credit
    subfacility of $300.0 million. In addition, we have the
    right to increase the size of the facility to provide up to an
    additional                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

F-22



---



##### 



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)




| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $150.0 million of revolving loans, provided we give
    10 business days notice of our intention to increase
    the size of the facility and we meet the following conditions:
    (i) at the time of and after giving effect to the increase,
    we are in pro forma compliance with our financial covenants;
    (ii) no default or event of default has occurred and is
    continuing or would result from the increase, and (iii) the
    conditions precedent to a borrowing are satisfied as of such
    date. The revolving credit facility expires on October 26,
    2008. Loans outstanding under the facility may be base rate
    loans or Eurodollar loans, at our election. Base rate loans
    accrue interest at a rate per annum equal to (i) an
    applicable margin plus (ii) the higher of
    (A) Citicorps base rate or (B) 0.5% plus the
    Federal Funds Rate. Eurodollar loans accrue interest at a rate
    per annum equal to (i) an applicable margin plus
    (ii) the reserve-adjusted Eurodollar base rate for the
    interest period. Applicable margins will be adjusted based on
    the ratio of our liabilities (net of unrestricted cash in excess
    of $10 million) to our adjusted tangible net worth or our
    senior debt rating. The revolving credit facility requires us to
    maintain specified financial ratios regarding leverage, interest
    coverage, adjusted tangible net worth and certain operational
    measurements. The revolving credit facility also places certain
    restrictions on, among other things, our ability to pay or make
    dividends or other distributions, create or permit certain
    liens, make investments in joint ventures, enter into
    transactions with affiliates and merge or consolidate with other
    entities. Our obligations under the revolving credit facility
    are guaranteed by our significant domestic subsidiaries, other
    than our mortgage and title subsidiaries (unrestricted
    subsidiaries). As of December 31, 2005, we had
    $65.0 million in borrowings under the revolving credit
    facility and had issued letters of credit totaling
    $218.9 million.
|
| |  | On March 9, 2006, we entered into an unsecured revolving
    credit facility replacing our previous $600.0 million
    revolving credit facility. The new credit facility is
    substantially similar to our prior revolving credit facility and
    permits us to borrow to the lesser of
    (i) $800.0 million or (ii) our borrowing base
    (calculated in accordance with the revolving credit facility
    agreement) minus our outstanding senior debt. The credit
    facility also has a letter of credit subfacility of
    $400.0 million. In addition, we have the right to increase
    the size of the facility to provide up to an additional
    $150.0 million of revolving loans, provided we satisfy
    conditions similar to those contained in our prior revolving
    credit facility as described above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      



Financial
    Services Borrowings














F-23



---



##### 



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Borrowing
    Capacity
    7.
    Commitments
    and Contingencies            2006

$
8.02007


5.92008


5.22009


4.02010


3.0Thereafter


5.4$
31.5  F-24




---



##### 



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   8.
    Related
    Party Transactions               F-25




---



##### 



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   9.
    Income
    Taxes    Year Ended
    December 31,2005


2004


2003Current:Federal

$
120.0


$
65.5


$
43.4State


4.6



5.6



3.0124.6



71.1



46.4Deferred:Federal


2.0



(0.6
)


1.5State






(0.1
)


(0.3
)2.0



(0.7
)


1.2$
126.6


$
70.4


$
47.6     Year Ended
    December 31,2005


2004


2003Computed income tax expense at
    statutory rate

$
120.1


$
66.5


$
45.6State income taxes


5.8



2.7



1.7Other, net


0.7



1.2



0.3Income taxes

$
126.6


$
70.4


$
47.6  F-26




---



##### 



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     December 31,2005


2004Deferred tax assets:Warranty, legal and insurance
    reserves

$
5.7


$
4.5Inventory


9.0



7.7Accrued compensation


6.5



4.0Investments in unconsolidated
    entities


1.7



State net operating loss
    carryforwards


0.6



0.3Other


2.8



2.2Total deferred tax assets


26.3



18.7Deferred tax liabilities:Property and equipment


(1.1
)


Amortizable intangibles


(12.1
)


(9.6
)Prepaid expenses


(2.4
)


(0.1
)Prepaid commissions and
    differences in reporting selling and marketing


(4.5
)


(4.3
)Other


(1.2
)


(1.7
)Total deferred tax liabilities


(21.3
)


(15.7
)Net deferred tax asset

$
5.0


$
3.0       10.
    Stockholders
    Equity       F-27




---



##### 



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        11.
    Stock
    Option Plan      2005


2004


2003Weighted Average





Weighted Average





Weighted AverageOptions


Exercise Price


Options


Exercise Price


Options


Exercise PriceOptions outstanding at beginning
    of year


6,827,755


$
11.12



6,420,880


$
10.44



4,116,463


$
10.34Granted


16,374


$
24.19



450,000


$
21.60



2,326,940


$
10.53Exercised


(115,625
)

$
10.43



(15,000
)

$
10.08






$
Forfeited


(121,893
)

$
16.47



(28,125
)

$
17.76



(22,523
)

$
9.50Options outstanding at end of year


6,606,611


$
11.06



6,827,755


$
11.12



6,420,880


$
10.44Options exercisable at end of year


4,881,757


$
10.76



3,628,558


$
10.10



1,925,164


$
9.75Options available for grant at end
    of year


719,061







657,245







1,059,904Weighted average fair market value
    per share of options granted during the year under
    SFAS No. 123

$
7.33






$
7.68






$
3.14  F-28




---



##### 



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Options OutstandingWeighted AverageRemaining





Options ExercisableContractual Life


Weighted Average





Weighted AverageRange of Exercise
    Price

Options


(Years)


Exercise Price


Options


Exercise Price$ 8.33-$10.08


3,537,530



7.00


$
9.47



2,404,009


$
9.62$10.61-$12.20


2,683,342



7.02


$
11.62



2,388,592


$
11.61$17.25-$19.35


131,250



8.19


$
18.27



76,875


$
18.00$20.88-$21.29


73,125



8.21


$
20.99







$22.96-$25.25


143,864



8.30


$
24.03



12,281


$
24.00$25.76-$28.34


37,500



8.33


$
27.05







     12.
    Employee
    Benefit Plans    13.
    Quarterly
    Results (Unaudited)    First


Second


Third


Fourth2005:Total revenue

$
543.6


$
627.2


$
676.0


$
662.2Homebuilding gross margin

$
115.8


$
137.7


$
185.2


$
166.2Net income

$
26.4


$
45.7


$
70.3


$
75.9Basic earnings per share

$
0.47


$
0.82


$
1.24


$
1.27Diluted earnings per share

$
0.45


$
0.79


$
1.18


$
1.232004:Total revenue

$
433.5


$
507.7


$
515.4


$
678.7Homebuilding gross margin

$
80.5


$
95.8


$
101.8


$
150.3Net income

$
18.0


$
24.1


$
28.1


$
49.4Basic earnings per share

$
0.32


$
0.43


$
0.50


$
0.88Diluted earnings per share

$
0.32


$
0.42


$
0.49


$
0.85  F-29




---



##### 



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   year-to-date three-for-two five-for-four
     F-30




---



##### 



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   14.
    Summarized
    Financial Information    Consolidating
    Statement of Financial Condition
    December 31, 2005
  TechnicalOlympic


Guarantor


Non-guarantor


IntercompanyUSA, Inc.


Subsidiaries


Subsidiaries


Eliminations


Total(Dollars in millions)ASSETSHOMEBUILDING:Cash and cash equivalents

$
21.9


$
7.4


$



$



$
29.3Inventory






1,740.8











1,740.8Property and equipment, net


7.3



19.8











27.1Investments in unconsolidated joint
    ventures






254.5











254.5Receivables from unconsolidated
    joint ventures






60.5











60.5Investments in/advances to
    consolidated subsidiaries


1,946.8



(427.7
)


(3.7
)


(1,515.4
)


Other assets


26.3



106.9











133.2Goodwill






108.8











108.82,002.3



1,871.0



(3.7
)


(1,515.4
)


2,354.2FINANCIAL SERVICES:Cash and cash equivalents










11.8







11.8Mortgage loans held for sale










43.9







43.9Other assets










12.8







12.8







68.5







68.5Total assets

$
2,002.3


$
1,871.0


$
64.8


$
(1,515.4
)

$
2,422.7LIABILITIES AND
    STOCKHOLDERS EQUITYHOMEBUILDING:Accounts payable and other
    liabilities

$
154.4


$
175.0


$



$



$
329.4Customer deposits






79.3











79.3Obligations for inventory not owned






124.6











124.6Notes payable


811.6















811.6Bank borrowings


65.0















65.01,031.0



378.9











1,409.9FINANCIAL SERVICES:Accounts payable and other
    liabilities










6.4







6.4Bank borrowings










35.1







35.1







41.5







41.5Total liabilities


1,031.0



378.9



41.5







1,451.4Total stockholders equity


971.3



1,492.1



23.3



(1,515.4
)


971.3Total liabilities and
    stockholders equity

$
2,002.3


$
1,871.0


$
64.8


$
(1,515.4
)

$
2,422.7  F-31




---



##### 



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Consolidating
    Statement of Financial Condition
    December 31, 2004
  TechnicalOlympic


Guarantor


Non-guarantor


IntercompanyUSA, Inc.


Subsidiaries


Subsidiaries


Eliminations


Total(Dollars in millions)ASSETSHOMEBUILDING:Cash and cash equivalents

$
159.3


$
66.3


$



$



$
225.6Inventory






1,281.2











1,281.2Property and equipment, net


6.8



19.9











26.7Investments in unconsolidated joint
    ventures






66.6











66.6Receivables from unconsolidated
    joint ventures






3.4











3.4Investments in/Advances to
    consolidated subsidiaries


1,349.9



24.0



(62.8
)


(1,311.1
)


Other assets


22.4



45.3











67.7Goodwill






110.7











110.71,538.4



1,617.4



(62.8
)


(1,311.1
)


1,781.9FINANCIAL SERVICES:Cash and cash equivalents










53.1







53.1Mortgage loans held for sale










75.8







75.8Other assets










9.8







9.8







138.7







138.7Total assets

$
1,538.4


$
1,617.4


$
75.9


$
(1,311.1
)

$
1,920.6LIABILITIES AND
    STOCKHOLDERS EQUITYHOMEBUILDING:Accounts payable and other
    liabilities

$
64.3


$
124.6


$



$



$
188.9Customer deposits






69.1











69.1Obligations for inventory not owned






136.2











136.2Notes payable


811.4















811.4875.7



329.9











1,205.6FINANCIAL SERVICES:Accounts payable and other
    liabilities










3.3







3.3Bank borrowings










49.0







49.0







52.3







52.3Total liabilities


875.7



329.9



52.3







1,257.9Total stockholders equity


662.7



1,287.5



23.6



(1,311.1
)


662.7Total liabilities and
    stockholders equity

$
1,538.4


$
1,617.4


$
75.9


$
(1,311.1
)

$
1,920.6  F-32




---



##### 



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Consolidating
    Statement of Income
    Year Ended December 31, 2005
  Technical Olympic


Guarantor


Non-guarantor


IntercompanyUSA, Inc.


Subsidiaries


Subsidiaries


Eliminations


Total(Dollars in millions)HOMEBUILDING:Revenues

$



$
2,461.5


$



$



$
2,461.5Cost of sales






1,856.6











1,856.6Gross margin






604.9











604.9Selling, general and
    administrative expenses


75.3



257.4







(9.8
)


322.9(Income) from joint ventures, net






(45.7
)










(45.7
)Other (income) expense, net


(281.8
)


30.2







242.9



(8.7
)Homebuilding pretax income


206.5



363.0







(233.1
)


336.4FINANCIAL SERVICES:Revenues










57.3



(9.8
)


47.5Expenses










44.8



(5.8
)


39.0Financial Services pretax income










12.5



(4.0
)


8.5Income before provision (benefit)
    for income taxes


206.5



363.0



12.5



(237.1
)


344.9Provision (benefit) for income
    taxes


(11.8
)


133.5



4.9







126.6Net income

$
218.3


$
229.5


$
7.6


$
(237.1
)

$
218.3  F-33




---



##### 



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Consolidating
    Statement of Income
    Year Ended December 31, 2004
  Technical Olympic


Guarantor


Non-guarantor


IntercompanyUSA, Inc.


Subsidiaries


Subsidiaries


Eliminations


Total(Dollars in millions)HOMEBUILDING:Revenues

$



$
2,100.8


$



$



$
2,100.8Cost of sales


(0.1
)


1,672.5











1,672.4Gross margin


0.1



428.3











428.4Selling, general and
    administrative expenses


50.2



208.8







(7.3
)


251.7(Income) from joint ventures, net






(3.2
)










(3.2
)Other (income) expense, net


(153.7
)


2.1







149.8



(1.8
)Homebuilding pretax income


103.6



220.6







(142.5
)


181.7FINANCIAL SERVICES:Revenues










41.8



(7.3
)


34.5Expenses










31.6



(5.4
)


26.2Financial Services pretax income










10.2



(1.9
)


8.3Income before provision (benefit)
    for income taxes


103.6



220.6



10.2



(144.4
)


190.0Provision (benefit) for income
    taxes


(16.0
)


81.7



4.7







70.4Net income

$
119.6


$
138.9


$
5.5


$
(144.4
)

$
119.6  F-34




---



##### 



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Consolidating
    Statement of Income
    Year Ended December 31, 2003
  Technical Olympic


Guarantor


Non-guarantor


IntercompanyUSA, Inc.


Subsidiaries


Subsidiaries


Eliminations


Total(Dollars in millions)HOMEBUILDING:Revenues

$



$
1,642.6


$



$



$
1,642.6Cost of sales






1,319.4











1,319.4Gross margin






323.2











323.2Selling, general and
    administrative expenses


38.6



179.3







(5.8
)


212.1Other (income) expense, net


(114.7
)


(10.1
)






121.2



(3.6
)Homebuilding pretax income


76.1



154.0







(115.4
)


114.7FINANCIAL SERVICES:Revenues










43.9



(5.8
)


38.1Expenses










30.7



(8.2
)


22.5Financial Services pretax income










13.2



2.4



15.6Income before provision (benefit)
    for income tax


76.1



154.0



13.2



(113.0
)


130.3Provision (benefit) for income
    taxes


(6.6
)


48.6



5.6







47.6Net income

$
82.7


$
105.4


$
7.6


$
(113.0
)

$
82.7  F-35




---



##### 



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Consolidating
    Statement of Cash Flows
    Year Ended December 31, 2005
  Technical Olympic


Guarantor


Non-guarantor


IntercompanyUSA, Inc.


Subsidiaries


Subsidiaries


Eliminations


Total(Dollars in millions)Cash flows from operating
    activities:Net income

$
218.3


$
229.5


$
7.6


$
(237.1
)

$
218.3Adjustments to reconcile net income
    to net cash (used in) provided by operating activities:Depreciation and amortization


3.9



8.2



1.2







13.3Non-cash compensation expense


3.7















3.7Loss on impairment of inventory






6.2











6.2Deferred income taxes






2.0











2.0Undistributed equity in earnings
    from unconsolidated entities






(18.5
)










(18.5
)Changes in operating assets and
    liabilities:Restricted cash


(1.7
)


6.6



(0.9
)






4.0Inventory


0.2



(470.3
)










(470.1
)Other assets


(3.4
)


(61.7
)


(2.4
)






(67.5
)Receivables from unconsolidated
    joint ventures






(37.1
)










(37.1
)Accounts payable and other
    liabilities


88.7



39.5



3.2







131.4Customer deposits






10.1











10.1Mortgage loans held for sale










31.9







31.9Net cash provided by (used in)
    operating activities


309.7



(285.5
)


40.6



(237.1
)


(172.3
)Cash flows from investing
    activities:Net additions to property and
    equipment


(4.4
)


(7.8
)


(1.9
)






(14.1
)Investments in unconsolidated joint
    ventures






(176.1
)










(176.1
)Capital distributions from joint
    ventures






10.3











10.3Loans to unconsolidated joint
    ventures






(20.0
)










(20.0
)Net cash used in investing
    activities


(4.4
)


(193.6
)


(1.9
)






(199.9
)Cash flows from financing
    activities:Net proceeds from revolving credit
    facility


65.0















65.0Net proceeds from sale of common
    stock


89.2















89.2Net repayments on Financial
    Services bank borrowings










(13.9
)






(13.9
)Payments for deferred financing
    costs


(0.3
)














(0.3
)Proceeds from stock option exercises


1.8















1.8Dividends paid


(3.2
)






(8.0
)


8.0



(3.2
)Increase (decrease) in intercompany
    transactions


(596.9
)


426.8



(59.0
)


229.1



Net cash (used in) provided by
    financing activities


(444.4
)


426.8



(80.9
)


237.1



138.6Decrease in cash and cash
    equivalents


(139.1
)


(52.3
)


(42.2
)






(233.6
)Cash and cash equivalents at
    beginning of period


159.3



58.3



50.9







268.5Cash and cash equivalents at end of
    period

$
20.2


$
6.0


$
8.7


$



$
34.9  F-36




---



##### 



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Consolidating
    Statement of Cash Flows
    Year Ended December 31, 2004
  Technical Olympic


Guarantor


Non-guarantor


IntercompanyUSA, Inc.


Subsidiaries


Subsidiaries


Eliminations


Total(Dollars in millions)Cash flows from operating
    activities:Net income

$
119.6


$
138.9


$
5.5


$
(144.4
)

$
119.6Adjustments to reconcile net income
    to net cash (used in) provided by operating activities:Depreciation and amortization


2.9



9.7











12.6Non-cash compensation expense


8.8















8.8Loss on impairment of inventory






4.8











4.8Deferred income taxes


(0.7
)














(0.7
)Undistributed equity in earnings
    from unconsolidated entities






(0.5
)










(0.5
)Changes in operating assets and
    liabilities:Restricted cash


1.5



11.7



2.4







15.6Inventory


1.4



(218.0
)










(216.6
)Other assets


52.5



(16.8
)


(2.4
)


(52.6
)


(19.3
)Receivables from unconsolidated
    joint ventures






(3.4
)










(3.4
)Accounts payable and other
    liabilities


20.9



(39.2
)


(3.2
)


52.6



31.1Customer deposits






33.6











33.6Mortgage loans held for sale










(0.6
)






(0.6
)Net cash provided by (used in)
    operating activities


206.9



(79.2
)


1.7



(144.4
)


(15.0
)Cash flows from investing
    activities:Net additions to property and
    equipment


(1.9
)


(13.7
)










(15.6
)Investments in unconsolidated joint
    ventures






(61.1
)










(61.1
)Earn out consideration paid for
    acquisitions






(6.6
)










(6.6
)Net cash used in investing
    activities


(1.9
)


(81.4
)










(83.3
)Cash flows from financing
    activities:Net repayments on revolving credit
    facilities


(10.0
)














(10.0
)Proceeds from notes offering


330.0















330.0Principal payments on unsecured
    borrowings and senior notes






(7.9
)










(7.9
)Net repayments on Financial
    Services bank borrowings










(14.3
)






(14.3
)Payments for deferred financing
    costs


(5.9
)














(5.9
)Proceeds from stock option exercises


0.1















0.1Dividends paid


(2.0
)






(24.7
)


24.7



(2.0
)Increase (decrease) in intercompany
    transactions


(403.9
)


199.1



85.1



119.7



Net cash (used in) provided by
    financing activities


(91.7
)


191.2



46.1



144.4



290.0Increase in cash and cash
    equivalents


113.3



30.6



47.8







191.7Cash and cash equivalents at
    beginning of period


46.0



27.7



3.1







76.8Cash and cash equivalents at end of
    period

$
159.3


$
58.3


$
50.9


$



$
268.5  F-37




---



##### 



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Consolidating
    Statement of Cash Flows
    Year Ended December 31, 2003
  Technical Olympic


Guarantor


Non-guarantor


IntercompanyUSA, Inc.


Subsidiaries


Subsidiaries


Eliminations


Total(Dollars in millions)Cash flows from operating
    activities:Net income

$
82.7


$
105.4


$
7.6


$
(113.0
)

$
82.7Adjustments to reconcile net income
    to net cash (used in) provided by operating activities:Depreciation and amortization


2.0



7.3











9.3Non-cash compensation expense


1.4















1.4Deferred income taxes


(0.7
)














(0.7
)Changes in operating assets and
    liabilities:Restricted cash


2.5



(0.1
)


(4.0
)






(1.6
)Inventory


0.6



(137.9
)










(137.3
)Other assets


(48.4
)


(7.3
)


0.1



52.5



(3.1
)Accounts payable and other
    liabilities


17.8



83.0



7.2



(52.5
)


55.5Customer deposits






7.2











7.2Mortgage loans held for sale










(16.4
)






(16.4
)Net cash used in operating
    activities


57.9



57.6



(5.5
)


(113.0
)


(3.0
)Cash flows from investing
    activities:Net additions to property and
    equipment


(6.4
)


(12.7
)










(19.1
)Investments in unconsolidated joint
    ventures






(5.5
)










(5.5
)Amounts paid for acquisitions, net
    of cash acquired






(59.6
)










(59.6
)Earn out consideration paid for
    acquisitions






(18.1
)










(18.1
)Net cash used in investing
    activities


(6.4
)


(95.9
)










(102.3
)Cash flows from financing
    activities:Net repayments on revolving credit
    facilities


(45.0
)


(0.2
)










(45.2
)Proceeds from notes offering


129.3















129.3Net proceeds from Financial
    Services bank borrowings










14.9







14.9Payments for deferred financing
    costs


(5.4
)














(5.4
)Minority interest in consolidated
    subsidiaries






(9.1
)










(9.1
)Net proceeds from sale of common
    stock


48.4















48.4Increase (decrease) in intercompany
    transactions


(170.3
)


68.0



(10.7
)


113.0



Net cash (used in) provided by
    financing activities


(43.0
)


58.7



4.2



113.0



132.9Increase (decrease) in cash and
    cash equivalents


8.5



20.4



(1.3
)






27.6Cash and cash equivalents at
    beginning of period


37.5



7.3



4.4







49.2Cash and cash equivalents at end of
    period

$
46.0


$
27.7


$
3.1


$



$
76.8  F-38