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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter Ended June 30, 2004 o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number
001-31931 Levitt Corporation  Florida
    
    11-3675068(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)1750 East Sunrise BoulevardFt. Lauderdale, Florida
    
    33304(Address of principal executive offices)
    
    (Zip Code)
 (954) 760-5200
(Registrants telephone number, including area code)    Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No o Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes o No x Indicate the number of shares outstanding for each of the Registrants classes
of common stock, as of August 9, 2004: Class of Common Stock
    
    Shares OutstandingClass A common stock, $0.01 par value
    
    18,597,166Class B common stock, $0.01 par value
    
    1,219,031
 1




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Levitt Corporation and Subsidiaries
Index to Consolidated Financial Statements  
 PART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements:Consolidated
Statements of Financial Condition as of June 30, 2004 and December 31, 2003  UnauditedConsolidated Statements of Operations for the three and six month periods ended June 30, 2004 and 2003  UnauditedConsolidated Statements of Comprehensive Income for the three and six month periods ended June 30, 2004 and 2003  UnauditedConsolidated Statements of Shareholders Equity for the six month period ended June 30, 2004  UnauditedConsolidated
Statements of Cash Flows for the six months ended June 30, 2004 and 2003  UnauditedNotes to Unaudited Consolidated Financial StatementsItem 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3.
    
    Quantitative and Qualitative Disclosures about Market RiskItem 4.
    
    Controls and ProceduresPART II.
    
    OTHER INFORMATIONItem 4.
    
    Submission of Matters to a Vote of Security HoldersItem 6.
    
    Exhibits and Reports on Form 8-KSIGNATURESCERTIFICATION PURSUANT TO SECTION 302CERTIFICATION PURSUANT TO SECTION 302CERTIFICATION PURSUANT TO SECTION 906CERTIFICATION PURSUANT TO SECTION 906
  2




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Levitt Corporation 
 Consolidated Statements of Financial Condition  Unaudited
 (In thousands except share data)
 June 30,
    
    December 31,2004
    
    2003AssetsCash and cash equivalents
    
    $
    118,971
    
    
    
    35,965Restricted cash
    
    
    4,997
    
    
    
    3,384Notes receivable
    
    
    5,782
    
    
    
    5,163Inventory of real estate
    
    
    383,999
    
    
    
    257,556Investments in real estate joint ventures
    
    
    3,671
    
    
    
    4,106Investment in Bluegreen Corporation
    
    
    75,678
    
    
    
    70,852Other assets
    
    
    16,465
    
    
    
    15,034Goodwill
    
    
    1,541
    
    
    
    Deferred tax asset, net
    
    
    
    
    
    
    654Total assets
    
    $
    611,104
    
    
    
    392,714Liabilities and Shareholders EquityAccounts payable and accrued liabilities
    
    $
    50,598
    
    
    
    39,987Customer deposits
    
    
    58,236
    
    
    
    52,134Current income tax payable
    
    
    4,995
    
    
    
    1,024Notes and mortgage notes payable
    
    
    175,180
    
    
    
    111,625Notes and mortgage notes payable to affiliates
    
    
    52,939
    
    
    
    61,618Development bonds payable
    
    
    459
    
    
    
    850Deferred tax liability, net
    
    
    1,790
    
    
    
    Total liabilities
    
    
    344,197
    
    
    
    267,238Minority interest in consolidated joint venture
    
    
    (38
    )
    
    
    24Shareholders equity:Preferred stock, $0.01 par valueAuthorized: 5,000,000 sharesIssued and outstanding: no shares
    
    
    
    
    
    
    Common stock, Class A, $0.01 par valueAuthorized: 50,000,000 sharesIssued and outstanding: 18,597,166 and 13,597,166 shares,
respectively
    
    
    186
    
    
    
    136Common stock, Class B, $0.01 par valueAuthorized: 10,000,000 sharesIssued and outstanding: 1,219,031 and 1,219,031 shares, respectively
    
    
    12
    
    
    
    12Additional paid-in capital
    
    
    182,542
    
    
    
    67,855Retained earnings
    
    
    83,762
    
    
    
    57,020Accumulated other comprehensive income
    
    
    443
    
    
    
    429Total shareholders equity
    
    
    266,945
    
    
    
    125,452Total liabilities and shareholders equity
    
    $
    611,104
    
    
    
    392,714
 See accompanying notes to unaudited consolidated financial statements. 3




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Levitt Corporation 
 Consolidated Statements of Operations  Unaudited
 (In thousands, except per share data)
 Three Months
    
    Six MonthsEnded June 30,
    
    Ended June 30,2004
    
    2003
    
    2004
    
    2003Revenues:Sales of real estate
    
    $
    142,530
    
    
    
    67,039
    
    
    
    241,053
    
    
    
    120,003Title and mortgage operations
    
    
    1,339
    
    
    
    577
    
    
    
    2,309
    
    
    
    981Total revenues
    
    
    143,869
    
    
    
    67,616
    
    
    
    243,362
    
    
    
    120,984Costs and expenses:Cost of sales of real estate
    
    
    107,676
    
    
    
    49,151
    
    
    
    177,341
    
    
    
    88,675Selling, general and administrative expenses
    
    
    18,888

    
    
    
    10,482
    
    
    
    32,935
    
    
    
    18,502Interest expense, net
    
    
    
    
    
    
    8
    
    
    
    58
    
    
    
    249Other expenses
    
    
    778
    
    
    
    376
    
    
    
    1,394
    
    
    
    668Minority interest
    
    
    (1
    )
    
    
    28
    
    
    
    24
    
    
    
    149Total costs and expenses
    
    
    127,341
    
    
    
    60,045
    
    
    
    211,752
    
    
    
    108,24316,528
    
    
    
    7,571
    
    
    
    31,610
    
    
    
    12,741Earnings from Bluegreen Corporation
    
    
    2,775
    
    
    
    1,940
    
    
    
    4,861
    
    
    
    1,806Earnings (loss) from real estate joint ventures
    
    
    2,130
    
    
    
    231
    
    
    
    5,737
    
    
    
    (82
    )Interest and other income
    
    
    849
    
    
    
    621
    
    
    
    1,327
    
    
    
    1,267Income before income taxes
    
    
    22,282
    
    
    
    10,363
    
    
    
    43,535
    
    
    
    15,732Provision for income taxes
    
    
    8,595
    
    
    
    3,997
    
    
    
    16,793
    
    
    
    6,072Net income
    
    $
    13,687
    
    
    
    6,366
    
    
    
    26,742
    
    
    
    9,660Earnings per common share:Basic
    
    $
    0.70
    
    
    
    0.43
    
    
    
    1.55
    
    
    
    0.65Diluted
    
    $
    0.68
    
    
    
    0.42
    
    
    
    1.53
    
    
    
    0.64Weighted average common shares outstanding:Basic
    
    
    19,596
    
    
    
    14,816
    
    
    
    17,206
    
    
    
    14,816Diluted
    
    
    19,638
    
    
    
    14,816
    
    
    
    17,245
    
    
    
    14,816
 See accompanying notes to unaudited consolidated financial statements. 4




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Levitt Corporation 
 Consolidated Statements of Comprehensive Income  Unaudited
 (In thousands)
 Three Months
    
    Six MonthsEnded June 30,
    
    Ended June 30,2004
    
    2003
    
    2004
    
    2003Net income
    
    $
    13,687
    
    
    
    6,366
    
    
    
    26,742
    
    
    
    9,660Other comprehensive income:Pro-rata share of unrealized gain recognized
by Bluegreen Corporation on retained
interests in notes receivable sold, net of tax
    
    
    106
    
    
    
    257
    
    
    
    14
    
    
    
    663Comprehensive income
    
    $
    13,793
    
    
    
    6,623
    
    
    
    26,756
    
    
    
    10,323
 See accompanying notes to unaudited consolidated financial statements. 5




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Levitt Corporation 
 Consolidated Statements of Shareholders Equity  Unaudited
 For the Six Months Ended June 30, 2004
(In thousands)
 AccumulatedCompre-Class A
    
    Class B
    
    Additional
    
    
    
    
    
    hensiveCommon
    
    Common
    
    Paid-In
    
    Retained
    
    IncomeStock
    
    Stock
    
    Capital
    
    Earnings
    
    (Loss)
    
    TotalBalance at December 31, 2003
    
    $
    136
    
    
    
    12
    
    
    
    67,855
    
    
    
    57,020
    
    
    
    429
    
    
    
    125,452Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,742
    
    
    
    
    
    
    
    26,742Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    14Issuance of common stock,
net of stock issuance costs
    
    
    50
    
    
    
    
    
    
    
    114,719
    
    
    
    
    
    
    
    
    
    
    
    114,769Issuance of Bluegreen Corporation
common stock, net of tax
    
    
    
    
    
    
    
    
    
    
    (32
    )
    
    
    
    
    
    
    
    
    
    
    (32
    )Balance at June 30, 2004
    
    $
    186
    
    
    
    12
    
    
    
    182,542
    
    
    
    83,762
    
    
    
    443
    
    
    
    266,945
 See accompanying notes to unaudited consolidated financial statements. 6




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Levitt Corporation 
 Consolidated Statements of Cash Flows  Unaudited
 (In thousands)
 Six MonthsEnded June 30,2004
    
    2003Operating activities:Net income
    
    $
    26,742
    
    
    
    9,660Adjustments to reconcile net income to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    308
    
    
    
    149Minority interest expense
    
    
    24
    
    
    
    149Increase in deferred income taxes
    
    
    1,692
    
    
    
    1,876Earnings from Bluegreen Corporation
    
    
    (4,861
    )
    
    
    (1,806
    )(Earnings) loss from real estate joint ventures
    
    
    (5,737
    )
    
    
    82Gain on sale of building
    
    
    (2,162
    )
    
    
    Changes in operating assets and liabilities:Increase in restricted cash
    
    
    (1,613
    )
    
    
    (579
    )(Increase) decrease in notes receivable
    
    
    (619
    )
    
    
    83Increase in inventory of real estate
    
    
    (104,516
    )
    
    
    (20,347
    )Increase (decrease) in other assets
    
    
    241
    
    
    
    (2,136
    )Increase in accounts payable,
accrued expenses and other liabilities
    
    
    17,083
    
    
    
    9,031Net cash used in operating activities
    
    
    (73,418
    )
    
    
    (3,838
    )Investing activities:Investment in real estate joint ventures
    
    
    (35
    )
    
    
    (800
    )Distributions from real estate joint ventures
    
    
    6,410
    
    
    
    1,031Partial sale of joint venture interest
    
    
    305
    
    
    
    Purchase of Bowden Building Corporation, net of cash received
    
    
    (6,109
    )
    
    
    Proceeds from sale of building
    
    
    5,315
    
    
    
    Other
    
    
    (1,905
    )
    
    
    (262
    )Net cash provided by (used in) investing activities
    
    
    3,981
    
    
    
    (31
    )Financing activities:Proceeds from notes and mortgage notes payable
    
    
    157,136
    
    
    
    73,102Proceeds from notes and mortgage notes payable to affiliates
    
    
    18,771
    
    
    
    19,012Repayment of notes and mortgage notes payable
    
    
    (110,306
    )
    
    
    (54,155
    )Repayment of notes and mortgage notes payable to affiliates
    
    
    (27,450
    )
    
    
    (20,008
    )Repayment of development bonds payable
    
    
    (391
    )
    
    
    (2,025
    )Proceeds from issuance of common stock, net of issuance costs
    
    
    114,769
    
    
    
    Change in minority interest in consolidated joint ventures
    
    
    (86
    )
    
    
    (70
    )Net cash provided by financing activities
    
    
    152,443
    
    
    
    15,856Increase in cash and cash equivalents
    
    
    83,006
    
    
    
    11,987Cash and cash equivalents at the beginning of period
    
    
    35,965
    
    
    
    16,014Cash and cash equivalents at end of period
    
    $
    118,971
    
    
    
    28,001
 (Continued on next page) 7




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Levitt Corporation
Consolidated Statements of Cash Flows  Unaudited
(In thousands) Six MonthsEnded June 30,2004
    
    2003Supplemental cash flow informationInterest paid on borrowings
    
    $
    4,181
    
    
    
    4,205Income taxes paid
    
    
    13,480
    
    
    
    5,372Supplemental disclosure of non-cash activities:Change in shareholders equity resulting from the change
in other comprehensive gain, net of taxes
    
    $
    14
    
    
    
    663Change in shareholders equity from the net effect
of Bluegreens capital transactions, net of taxes
    
    
    (32
    )
    
    
    Assumption of development bonds payable
    
    
    
    
    
    
    (1,190
    )Decrease in notes receivable from assumption of
development bonds payable
    
    
    
    
    
    
    1,190Increase in joint venture investment resulting from
unrealized gain on non-monetary exchange
    
    
    508
    
    
    
    Fair value of assets acquired from acquisition of Bowden Building Corporation
    
    
    26,696Fair value of liabilities assumed from acquisition of Bowden Building Corporation
    
    
    20,587
    
    
    
    
 See accompanying notes to unaudited consolidated financial statements. 8




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Levitt Corporation 
 Notes to Unaudited Consolidated Financial Statements
  1.
    
    Presentation of Interim Financial Statements Levitt Corporation (including its subsidiaries, the Company) engages in
real estate activities through its Homebuilding and Land Development Divisions
and other operations. The Homebuilding Division operates through Levitt and
Sons, LLC (Levitt and Sons) and Bowden Building Corporation (Bowden),
developers of single family home, town home and condominium communities. The
Land Development Division consists of the operations of Core Communities, LLC,
a land and master-planned community developer (Core Communities). Other
Operations includes Levitt Commercial, LLC, a developer of commercial
properties (Levitt Commercial); an equity investment in Bluegreen
Corporation, a New York Stock Exchange-listed company engaged in the
acquisition, development, marketing and sale of ownership interests in
primarily drive-to vacation resorts, and the development and sale of golf
communities and residential land (Bluegreen); and investments in real estate
and real estate joint ventures. The accompanying unaudited consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries. The financial
statements have been prepared in accordance with accounting principles
generally accepted in the United States of America for interim financial
information and in accordance with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information and
disclosures required by accounting principles generally accepted in the United
States of America for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three and six month periods ended June 30, 2004 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2004. Certain items in prior period financial statements have been
reclassified to conform to the current presentation. These financial statements
should be read in conjunction with the Companys consolidated financial
statements and footnotes thereto included in the Companys annual report on
Form 10-K for the year ended December 31, 2003 and quarterly report on Form
10-Q for the quarter ended March 31, 2004.  2.
    
    Stock Based Compensation The Company accounts for stock option grants under the recognition and
measurement principles of Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and related Interpretations. No
compensation expense is recognized because all stock options granted have
exercise prices not less than the market value of the Companys stock on the
date of grant. 9




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The following table illustrates the effect on net earnings per share if
the Company had applied the fair value recognition provisions of SFAS No. 123,
Accounting for Stock-Based Compensation, as amended by SFAS 148, Accounting for
Stock-Based Compensation  Transition and Disclosure, to stock-based employee
compensation (in thousands, except per share data): For the Three Months
    
    For the Six MonthsEnded June 30,
    
    Ended June 30,2004
    
    2003
    
    2004
    
    2003Pro forma net incomeNet income, as reported
    
    $
    13,687
    
    
    
    6,366
    
    
    
    26,742
    
    
    
    9,660Deduct: Total stock-based employee compensation
expense determined under fair value based
method for all awards, net of related income tax
effects and minority interest
    
    
    (137
    )
    
    
    
    
    
    
    (544
    )
    
    
    Pro forma net income
    
    $
    13,550
    
    
    
    6,366
    
    
    
    26,198
    
    
    
    9,660Basic earnings per share:As reported
    
    $
    0.70
    
    
    
    0.43
    
    
    
    1.55
    
    
    
    0.65Pro forma
    
    $
    0.69
    
    
    
    0.43
    
    
    
    1.52
    
    
    
    0.65Diluted earnings per share:As reported
    
    $
    0.68
    
    
    
    0.42
    
    
    
    1.53
    
    
    
    0.64Pro forma
    
    $
    0.68
    
    
    
    0.42
    
    
    
    1.50
    
    
    
    0.64
  3.
    
    Inventory of Real Estate Inventory of real estate is summarized as follows (in thousands): June 30,
    
    December 31,2004
    
    2003Land and land development costs
    
    $
    269,219
    
    
    
    174,142Construction costs
    
    
    101,469
    
    
    
    67,895Other costs
    
    
    13,311
    
    
    
    15,519$
    383,999
    
    
    
    257,556
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4.
    
    Interest Interest incurred relating to land under development and construction is
capitalized to real estate inventories during the active development period.
Interest is capitalized as a component of inventory at the effective rates paid
on borrowings during the pre-construction and planning stage and the periods
that projects are under development. Capitalization of interest is
discontinued if development ceases at a project. Interest is amortized to cost
of sales as related homes, land and units are sold. The following table is a
summary of interest incurred on notes and mortgage notes payable and the
amounts capitalized (in thousands): Three months ended
    
    Six months endedJune 30,
    
    June 30,2004
    
    2003
    
    2004
    
    2003Interest incurred to non-affiliates
    
    $
    1,821
    
    
    
    1,349
    
    
    
    3,181
    
    
    
    2,905Interest incurred to affiliates
    
    
    561
    
    
    
    600
    
    
    
    1,195
    
    
    
    1,200Interest capitalized
    
    
    (2,382
    )
    
    
    (1,941
    )
    
    
    (4,318
    )
    
    
    (3,856
    )Interest expense, net
    
    $
    
    
    
    
    8
    
    
    
    58
    
    
    
    249Interest included in cost of sales
    
    $
    2,779
    
    
    
    1,222
    
    
    
    4,579
    
    
    
    2,424
  5.
    
    Investment in Bluegreen Corporation The Company accounts for its investment in Bluegreen under the equity
method. As of June 30, 2004, the Company owned approximately 9.5 million
shares, or approximately 36% of Bluegreens outstanding common stock. Bluegreens condensed balance sheets and condensed statements of income
are as follows (in thousands): Condensed Consolidated Balance Sheet June 30,
    
    December 31,2004
    
    2003Total assets
    
    $
    599,251
    
    
    
    570,406Total liabilities
    
    $
    382,295
    
    
    
    378,878Minority interest
    
    
    6,980
    
    
    
    4,648Total shareholders equity
    
    
    209,976
    
    
    
    186,880Total liabilities and shareholders equity
    
    $
    599,251
    
    
    
    570,406
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Condensed Consolidated Statements of Income Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,
    
    June 30,
    
    June 30,2004
    
    2003
    
    2004
    
    2003Revenues and other income
    
    $
    153,374
    
    
    
    106,843
    
    
    
    260,591
    
    
    
    187,725Cost and other expenses
    
    
    137,078
    
    
    
    96,001
    
    
    
    235,823
    
    
    
    172,968Income before minority interest and
provision for income taxes
    
    
    16,296
    
    
    
    10,842
    
    
    
    24,768
    
    
    
    14,757Minority interest
    
    
    1,503
    
    
    
    266
    
    
    
    2,332
    
    
    
    723Income before provision for income taxes
    
    
    14,793
    
    
    
    10,576
    
    
    
    22,436
    
    
    
    14,034Provision for income taxes
    
    
    5,695
    
    
    
    4,350
    
    
    
    8,638
    
    
    
    5,681Net income
    
    $
    9,098
    
    
    
    6,226
    
    
    
    13,798
    
    
    
    8,353
  6.
    
    Notes and Mortgage Notes Payable On September 30, 2003 the SEC declared effective the Companys
Registration Statement on Form S-1 for the public offering of up to $100
million of unsecured subordinated investment notes. The investment notes are
unsecured obligations and are subordinated to substantially all other
liabilities. In March 2004, the unsold notes were deregistered. Approximately
$3.2 million of investment notes were outstanding as of June 30, 2004.  7.
    
    Commitments and Contingencies At June 30, 2004, the Company had $100.5 million of commitments to
purchase properties for development. Approximately $25.8 million of such commitments are
subject to due diligence and satisfaction of certain requirements and
conditions, including financing contingencies. The following table summarizes
certain information relating to outstanding purchase and option contracts. Purchase
    
    Units/
    
    ExpectedPrice
    
    Acres
    
    ClosingHomebuilding Division
    
    $
    99.6 million
    
    5,579 units
    
    
    2004Other
    
    $
    836,000
    
    
    22 units
    
    
    2004
 At June 30, 2004, cash deposits and option payments of approximately $3.5
million secured the Companys commitments under these contracts.  8.
    
    Litigation On December 29, 2000, Smith & Company, Inc. (Smith) filed a law suit against,
among others, Levitt-Ansca Towne Partnership, a Florida limited partnership
(Partnership), and Bellaggio by Levitt Homes, Inc., a Florida corporation and
a wholly owned subsidiary of Levitt and Sons, LLC (BLHI). The suit alleged,
among other things, wrongful termination, breach and failure to pay for extra
work performed outside the scope of the contract. The case was tried before a
jury, and on March 7, 2002 the jury returned a verdict against the Partnership
and awarded Smith $4.4 million, which amount included interest and attorneys
fees. BLHIs potential liability was estimated at $2.6 million. The
Partnership appealed the verdict, and on April 14, 2004 the Fourth District
Court of Appeal of the 12




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State of Florida reversed the trial courts previous award of damages in its
entirety and remanded the matter to the trial court for a new trial on damages.
Under the Fourth District Court of Appeals decision, Smith is precluded from
claiming several items of damages at the new trial that were previously
claimed. At June 30, 2004 the Companys financial statements included a $2.6
million accrual in other liabilities associated with this suit and $2.8 million
in restricted cash to secure the appeal bond previously posted.  9.
    
    Segment Reporting Operating segments are components of an enterprise about which separate
financial information is available that is regularly reviewed by the chief
operating decision maker in deciding how to allocate resources and in assessing
performance. The Company has three reportable business segments: Homebuilding,
Land Development and Other Operations. The Company evaluates segment
performance primarily based on net income after tax. The information provided
for segment reporting is based on managements internal reports. The accounting
policies of the segments are generally the same as those described in the
summary of significant accounting policies. Eliminations consist primarily of
the elimination of sales and profits on real estate transactions between the
Land Development and Homebuilding Divisions, which intra-company sales were
recorded based upon terms that management believes would be attained in an
arms-length transaction. The presentation and allocation of assets,
liabilities and results of operations may not reflect the actual economic costs
of the segments as stand-alone businesses. If a different basis of allocation
were utilized, the relative contributions of the segments might differ, but
management believes that the relative trends in segments would likely not be
impacted. The Companys Homebuilding segment consists of the operations of Levitt
and Sons and Bowden while the Land Development segment consists of the
operations of Core Communities. The Other Operations segment consists of the
activities of Levitt Commercial, the Companys parent company operations and
earnings from investments in Bluegreen and other real estate investments and
joint ventures. The following tables present unaudited segment information as of and for
the three and six months ended June 30, 2004 and 2003 (in thousands). 13




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##### Table of Contents



Land
    
    OtherThree Months Ended June 30, 2004
    
    Homebuilding
    
    Development
    
    Operations
    
    Eliminations
    
    TotalRevenuesSales of real estate
    
    
    125,005
    
    
    
    37,288
    
    
    
    3,591
    
    
    
    (23,354
    )
    
    
    142,530Title and mortgage operations
    
    
    1,339
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,339Total revenues
    
    
    126,344
    
    
    
    37,288
    
    
    
    3,591
    
    
    
    (23,354
    )
    
    
    143,869Costs and expensesCost of sales of real estate
    
    
    98,856
    
    
    
    15,702
    
    
    
    3,480
    
    
    
    (10,362
    )
    
    
    107,676Selling, general and administrative expenses
    
    
    13,845
    
    
    
    2,690
    
    
    
    2,353
    
    
    
    
    
    
    
    18,888Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other expenses
    
    
    777
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    778Minority interest
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )Total costs and expenses
    
    
    113,478
    
    
    
    18,392
    
    
    
    5,833
    
    
    
    (10,362
    )
    
    
    127,34112,866
    
    
    
    18,896
    
    
    
    (2,242
    )
    
    
    (12,992
    )
    
    
    16,528Earnings from Bluegreen Corporation
    
    
    
    
    
    
    
    
    
    
    2,775
    
    
    
    
    
    
    
    2,775Earnings from joint ventures
    
    
    1,823
    
    
    
    
    
    
    
    307
    
    
    
    
    
    
    
    2,130Interest and other income
    
    
    72
    
    
    
    902
    
    
    
    165
    
    
    
    (290
    )
    
    
    849Income (loss) before income taxes
    
    
    14,761
    
    
    
    19,798
    
    
    
    1,005
    
    
    
    (13,282
    )
    
    
    22,282Provision (benefit) for income taxes
    
    
    5,691
    
    
    
    7,640
    
    
    
    388
    
    
    
    (5,124
    )
    
    
    8,595Net income (loss)
    
    
    9,070
    
    
    
    12,158
    
    
    
    617
    
    
    
    (8,158
    )
    
    
    13,687Inventory of real estate
    
    
    279,776
    
    
    
    114,202
    
    
    
    8,314
    
    
    
    (18,293
    )
    
    
    383,999Total assets
    
    
    333,237
    
    
    
    174,156
    
    
    
    122,004
    
    
    
    (18,293
    )
    
    
    611,104Notes, mortgage notes, and bonds payable
    
    
    135,576
    
    
    
    48,717
    
    
    
    44,285
    
    
    
    
    
    
    
    228,578
 Land
    
    OtherThree Months Ended June 30, 2003
    
    Homebuilding
    
    Development
    
    Operations
    
    Eliminations
    
    TotalRevenuesSales of real estate
    
    
    44,958
    
    
    
    20,696
    
    
    
    1,385
    
    
    
    
    
    
    
    67,039Title and mortgage operations
    
    
    577
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    577Total revenues
    
    
    45,535
    
    
    
    20,696
    
    
    
    1,385
    
    
    
    
    
    
    
    67,616Costs and expensesCost of sales of real estate
    
    
    34,719
    
    
    
    13,061
    
    
    
    1,371
    
    
    
    
    
    
    
    49,151Selling, general and administrative expenses
    
    
    6,654
    
    
    
    2,446
    
    
    
    1,382
    
    
    
    
    
    
    
    10,482Interest expense, net
    
    
    
    
    
    
    (9
    )
    
    
    17
    
    
    
    
    
    
    
    8Other expenses
    
    
    376
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    376Minority interest
    
    
    (50
    )
    
    
    
    
    
    
    78
    
    
    
    
    
    
    
    28Total costs and expenses
    
    
    41,699
    
    
    
    15,498
    
    
    
    2,848
    
    
    
    
    
    
    
    60,0453,836
    
    
    
    5,198
    
    
    
    (1,463
    )
    
    
    
    
    
    
    7,571Earnings from Bluegreen Corporation
    
    
    
    
    
    
    
    
    
    
    1,940
    
    
    
    
    
    
    
    1,940Earnings from joint ventures
    
    
    96
    
    
    
    
    
    
    
    135
    
    
    
    
    
    
    
    231Interest and other income
    
    
    152
    
    
    
    422
    
    
    
    47
    
    
    
    
    
    
    
    621Income before income taxes
    
    
    4,084
    
    
    
    5,620
    
    
    
    659
    
    
    
    
    
    
    
    10,363Provision for income taxes
    
    
    1,575
    
    
    
    2,168
    
    
    
    254
    
    
    
    
    
    
    
    3,997Net income
    
    
    2,509
    
    
    
    3,452
    
    
    
    405
    
    
    
    
    
    
    
    6,366Inventory of real estate
    
    
    169,235
    
    
    
    51,626
    
    
    
    4,153
    
    
    
    (6,541
    )
    
    
    218,473Total assets
    
    
    192,207
    
    
    
    75,265
    
    
    
    67,820
    
    
    
    (5,635
    )
    
    
    329,657Notes, mortgage notes, and bonds payable
    
    
    106,494
    
    
    
    14,987
    
    
    
    40,727
    
    
    
    
    
    
    
    162,208
 14




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##### Table of Contents



Land
    
    OtherSix Months Ended June 30, 2004
    
    Homebuilding
    
    Development
    
    Operations
    
    Eliminations
    
    TotalRevenuesSales of real estate
    
    $
    203,669
    
    
    
    56,609
    
    
    
    4,129
    
    
    
    (23,354
    )

    
    
    241,053Title and mortgage operations
    
    
    2,309
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,309Total revenues
    
    
    205,978
    
    
    
    56,609
    
    
    
    4,129
    
    
    
    (23,354
    )
    
    
    243,362Costs and expensesCost of sales of real estate
    
    
    160,331
    
    
    
    23,670
    
    
    
    4,207
    
    
    
    (10,867
    )
    
    
    177,341Selling, general and administrative expenses
    
    
    23,137
    
    
    
    5,278
    
    
    
    4,520
    
    
    
    
    
    
    
    32,935Interest expense, net
    
    
    
    
    
    
    58
    
    
    
    
    
    
    
    
    
    
    
    58Other expenses
    
    
    1,394
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,394Minority interest
    
    
    
    
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    24Total costs and expenses
    
    
    184,862
    
    
    
    29,006
    
    
    
    8,751
    
    
    
    (10,867
    )
    
    
    211,75221,116
    
    
    
    27,603
    
    
    
    (4,622
    )
    
    
    (12,487
    )
    
    
    31,610Earnings from Bluegreen Corporation
    
    
    
    
    
    
    
    
    
    
    4,861
    
    
    
    
    
    
    
    4,861Earnings from joint ventures
    
    
    3,332
    
    
    
    
    
    
    
    2,405
    
    
    
    
    
    
    
    5,737Interest and other income
    
    
    115
    
    
    
    1,307
    
    
    
    195
    
    
    
    (290
    )
    
    
    1,327Income (loss) before income taxes
    
    
    24,563
    
    
    
    28,910
    
    
    
    2,839
    
    
    
    (12,777
    )
    
    
    43,535Provision (benefit) for income taxes
    
    
    9,472
    
    
    
    11,155
    
    
    
    1,095
    
    
    
    (4,929
    )
    
    
    16,793Net income (loss)
    
    $
    15,091
    
    
    
    17,755
    
    
    
    1,744
    
    
    
    (7,848
    )
    
    
    26,742Inventory of real estate
    
    $
    279,776
    
    
    
    114,202
    
    
    
    8,314
    
    
    
    (18,293
    )
    
    
    383,999Total assets
    
    $
    333,237
    
    
    
    174,156
    
    
    
    122,004
    
    
    
    (18,293
    )
    
    
    611,104Notes, mortgage notes, and bonds payable
    
    $
    135,576
    
    
    
    48,717
    
    
    
    44,285
    
    
    
    
    
    
    
    228,578
 Land
    
    OtherSix Months Ended June 30, 2003
    
    Homebuilding
    
    Development
    
    Operations
    
    Eliminations
    
    TotalRevenuesSales of real estate
    
    $
    82,591
    
    
    
    32,605
    
    
    
    4,807
    
    
    
    
    
    
    
    120,003Title and mortgage operations
    
    
    981
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    981Total revenues
    
    
    83,572
    
    
    
    32,605
    
    
    
    4,807
    
    
    
    
    
    
    
    120,984Costs and expensesCost of sales of real estate
    
    
    63,872
    
    
    
    20,287
    
    
    
    4,516
    
    
    
    
    
    
    
    88,675Selling, general and administrative expenses
    
    
    12,591
    
    
    
    3,698
    
    
    
    2,213
    
    
    
    
    
    
    
    18,502Interest expense, net
    
    
    
    
    
    
    224
    
    
    
    25
    
    
    
    
    
    
    
    249Other expenses
    
    
    668
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    668Minority interest
    
    
    (50
    )
    
    
    
    
    
    
    199
    
    
    
    
    
    
    
    149Total costs and expenses
    
    
    77,081
    
    
    
    24,209
    
    
    
    6,953
    
    
    
    
    
    
    
    108,2436,491
    
    
    
    8,396
    
    
    
    (2,146
    )
    
    
    
    
    
    
    12,741Earnings from Bluegreen Corporation
    
    
    
    
    
    
    
    
    
    
    1,806
    
    
    
    
    
    
    
    1,806Loss from joint ventures
    
    
    (45
    )
    
    
    
    
    
    
    (37
    )
    
    
    
    
    
    
    (82
    )Interest and other income
    
    
    270
    
    
    
    853
    
    
    
    144
    
    
    
    
    
    
    
    1,267Income (loss) before income taxes
    
    
    6,716
    
    
    
    9,249
    
    
    
    (233
    )
    
    
    
    
    
    
    15,732Provision (benefit) for income taxes
    
    
    2,594
    
    
    
    3,568
    
    
    
    (90
    )
    
    
    
    
    
    
    6,072Net income (loss)
    
    $
    4,122
    
    
    
    5,681
    
    
    
    (143
    )
    
    
    
    
    
    
    9,660Inventory of real estate
    
    $
    169,235
    
    
    
    51,626
    
    
    
    4,153
    
    
    
    (6,541
    )
    
    
    218,473Total assets
    
    $
    192,207
    
    
    
    75,265
    
    
    
    67,820
    
    
    
    (5,635
    )
    
    
    329,657Notes, mortgage notes, and bonds payable
    
    $
    106,494
    
    
    
    14,987
    
    
    
    40,727
    
    
    
    
    
    
    
    162,208
 15




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##### Table of Contents



10.
    
    Parent Company Financial Statements Condensed Statements of Financial Condition at June 30, 2004 and December
31, 2003, and Condensed Statements of Operations for the three and six months
ended June 30, 2004 and 2003 are shown below (in thousands): Condensed Statements of Financial Condition June 30,
    
    December 31,2004
    
    2003Total assets
    
    $
    313,585
    
    
    
    181,808Total liabilities
    
    
    46,640
    
    
    
    56,356Total shareholders equity
    
    
    266,945
    
    
    
    125,452Total liabilities and shareholders equity
    
    $
    313,585
    
    
    
    181,808
 Condensed Statements of Operations Three Months
    
    Six MonthsEnded June 30,
    
    Ended June 30,2004
    
    2003
    
    2004
    
    2003Revenues
    
    $
    101
    
    
    
    13
    
    
    
    113
    
    
    
    22Costs and expenses
    
    
    2,432
    
    
    
    1,506
    
    
    
    4,589
    
    
    
    2,401Loss before income taxes
    
    
    (2,331
    )
    
    
    (1,493
    )
    
    
    (4,476
    )
    
    
    (2,379
    )Benefit for income taxes
    
    
    (899
    )
    
    
    (576
    )
    
    
    (1,727
    )
    
    
    (918
    )Loss before equity from income in
wholly owned subsidiaries, net of tax
    
    
    (1,432
    )
    
    
    (917
    )
    
    
    (2,749
    )
    
    
    (1,461
    )Equity from income in wholly owned
subsidiaries, net of tax
    
    
    13,238
    
    
    
    6,009
    
    
    
    25,040
    
    
    
    10,035Equity from income in Bluegreen
Corporation, net of tax
    
    
    1,705
    
    
    
    1,191
    
    
    
    2,986
    
    
    
    1,109Equity from income in joint ventures, net of tax
    
    
    176
    
    
    
    83
    
    
    
    1,465
    
    
    
    (23
    )Net income
    
    $
    13,687
    
    
    
    6,366
    
    
    
    26,742
    
    
    
    9,660
 Cash dividends received from subsidiaries for the six months ended June
30, 2004 and 2003 were $2.2 million and $3.1 million, respectively. Some
subsidiaries borrowings contain covenants that, among other things, may have
the effect of limiting dividends that can be paid to Levitt
Corporation.  11.
    
    Dividends On July 26, 2004 the Companys Board of Directors declared a cash dividend
of $0.02 per share on its Class A common stock and Class B common stock. The
Board set the payment date for August 16, 2004, to all shareholders of record
as of 5:00 p.m. on August 9, 2004. The Company has not adopted a policy of
regular dividend payments. The payment of dividends in the future is subject
to approval by the Board of Directors and will depend upon, among other
factors, the Companys results of operation and financial condition. 16




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##### Table of Contents



12.
    
    Equity Transactions In April 2004 the Company sold 5,000,000 shares of its Class A common
stock pursuant to a registered underwritten offering at $24.50 per share. Net
proceeds from the sale totaled approximately $114.8 million, after underwriting
discounts, commissions and offering expenses. Approximately $12.0 million of
the net proceeds of the offering were used to repay indebtedness, $7.4 million
were used to fund the Bowden acquisition, and $67.0 million were transferred to
the Companys operating subsidiaries. The Companys management expects to use
the balance of the proceeds to fund the Companys operations and growth and for
general corporate purposes.  13.
    
    Acquisition On April 28, 2004 the Company acquired Bowden for approximately $7.4
million in cash. The acquisition was accounted for under the purchase method
of accounting. Under this method the assets acquired and the liabilities
assumed were recorded at their estimated fair value. The amount of the purchase
price in excess of the estimated fair value of net assets acquired, which was
recorded as goodwill, was approximately $1.5 million. The following table
summarizes the fair value of the assets acquired and liabilities assumed in
connection with the purchase of all of Bowdens capital stock (in thousands): Cash, cash equivalents and restricted cash
    
    $
    1,335Inventory
    
    
    21,927Other assets
    
    
    3,228Goodwill
    
    
    1,541Fair value of assets acquired
    
    
    28,031Accounts payable and accrued liabilities
    
    
    2,806Customer deposits
    
    
    287Notes payable
    
    
    16,725Deferred tax liability
    
    
    769Fair value of liabilities assumed
    
    
    20,587Purchase price
    
    
    7,444Cash acquired
    
    
    (1,335
    )Purchase of Bowden, net of cash acquired
    
    $
    6,109
 17




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##### Table of Contents



Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS The objective of the following discussion is to provide an understanding
of the financial condition and results of operations of Levitt Corporation and
its wholly owned subsidiaries (Levitt, or the Company. The Company may also
be referred to as we, us, or our.) for the three and six months ended
June 30, 2004 and 2003, respectively. We engage in homebuilding, land
development and other real estate activities through Levitt and Sons, LLC
(Levitt and Sons), Bowden Building Corporation (Bowden), Core Communities,
LLC (Core Communities) and other operations, which include Levitt Commercial,
LLC (Levitt Commercial), an investment in Bluegreen Corporation (Bluegreen)
and investments in real estate projects through subsidiaries and joint
ventures. Levitt and Sons is a developer of single-family home and town home
communities and condominium and rental apartment complexes. Levitt and Sons and
its predecessors have built more than 200,000 homes since 1929. Acquired in
April 2004, Bowden is a builder of single family homes based in Memphis,
Tennessee. Core Communities developed the 4,600-acre master-planned community
known as St. Lucie West in St. Lucie County, Florida, and is currently
developing Tradition, its second master-planned community. Tradition, which is
also in St. Lucie County, Florida is planned to include more than 9,000 acres,
including approximately five miles of frontage on Interstate 95. Levitt
Commercial specializes in the development and management of industrial,
commercial and retail properties. Bluegreen is a New York Stock
Exchange-listed company engaged in the acquisition, development, marketing and
sale of ownership interests in primarily drive-to vacation resorts, and the
development and sale of golf communities and residential land. Except for historical information contained herein, the matters discussed
in this report contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the Securities Act),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
Exchange Act), that involve substantial risks and uncertainties. Some of the
forward-looking statements can be identified by the use of words such as
anticipate, believe, estimate, may, intend, expect, will,
should, seeks or other similar expressions. Forward-looking statements
are based largely on managements expectations and involve inherent risks and
uncertainties including certain risks described in this report. When
considering those forward-looking statements, you should keep in mind the
risks, uncertainties and other cautionary statements made in this report. You
should not place undue reliance on any forward-looking statement, which speaks
only as of the date made. In addition to the risks identified below, you
should refer to our periodic and current reports filed with the United States
Securities and Exchange Commission (the SEC) for specific risks which could
cause actual results to be significantly different from those expressed or
implied by those forward-looking statements. Some factors which may affect
the accuracy of the forward-looking statements apply generally to the real
estate industry, while other factors apply directly to us. Any number of
important factors which could cause actual results to differ materially from
those in the forward-looking statements include: general economic and market
conditions, including interest rate levels; our ability to service our
substantial indebtedness; inherent risks in real estate investments;
fluctuations in operating results; our ability to successfully execute our
anticipated growth strategies; shortages and increased costs of labor and
building materials; competition in the real estate development industry;
availability and cost of land in desirable areas; natural disasters; our
ability to raise debt and equity capital; our ability to successfully
integrate Bowden and any future acquisitions; costs and delays relating to
environmental factors and governmental regulations; our ability to timely
deliver homes out of backlog; and our continuing relationships with
affiliates. Many of these factors are beyond our control. The Company
cautions that the foregoing factors are not exclusive. 18




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##### Table of Contents



Executive Overview Management evaluates the performance and prospects of the Company and its
subsidiaries using a variety of financial and non-financial measures. The key
financial measures utilized to evaluate historical operating performance
include revenues from sales of real estate, cost of sales of real estate,
margin (which we measure as revenues from sales of real estate minus cost of
sales of real estate), margin percentage (which we measure as margin divided by
revenues from sales of real estate), income before taxes and net income.
Non-financial measures used to evaluate historical performance include the
number of homes delivered, number and value of sales contracts executed, and
the number of housing starts. In evaluating the Companys future prospects,
management considers non-financial information such as the number of homes and
acres in backlog (which we measure as homes or land subject to an executed
sales contract) and the aggregate value of those contracts. Additionally, we
monitor the number of properties remaining in inventory and under contract to
be purchased relative to our sales and construction trends. The Companys
ratio of debt to shareholders equity and cash requirements are also considered
by management when evaluating the Companys future prospects, as are general
economic factors and interest rate trends. Each of the above measures is
discussed in the following sections as it relates to our operating results,
financial position and liquidity. The list of measures above is not an
exhaustive list, and management may from time to time utilize additional
financial and non-financial information or may not use the measures listed
above. Impact of Rising Costs and Rising Interest Rates Our business operations are impacted by competition for raw materials,
supply and delivery issues. Recently, supply and delivery issues have resulted
in higher prices of some building materials. The costs of lumber, steel,
concrete, asphalt and other building materials all have risen significantly in
2004. We compete with other real estate developersregionally and
nationallyfor raw materials; recently, the competition has become global.
Chinese demand for cement combined with supply bottlenecks and rising prices in
global shipping have contributed to regional shortages in cement. Historically
we have managed our costs, in part, by entering into short-term, fixed-price
materials contracts with our subcontractors and our material suppliers. We may
be unable to achieve cost containment in the future by using fixed-price
contracts. Without corresponding increases in the sales prices of our real
estate inventories (both land and finished homes), increasing materials costs
associated with land development and home building could negatively affect our
results of operations. Rising construction costs and delays in the delivery of homes may
negatively affect our margins in the future, because we enter into fixed-priced
sales contracts for most of our homes before we start construction. Owing to
the strong demand for our housing products and the overall robust condition of
the real estate markets where we build, historically we have been able to
offset increases in construction costs and land prices by periodically raising
the prices on our homes. However, if we are unable to raise our home prices to
offset increased costs of production in the future, our operating results would
be adversely affected. We rely on third party financing of our land purchases, land development,
and product development costs. The majority of our financing consists
of variable rate debt and rising interest rates therefore increase our borrowing
costs. Historically, rising interest rates negatively impact housing demand.
Were demand for housing to decline, land may remain in our inventory longer and
our corresponding borrowing costs would increase. Also, rising interest rates
increase the mortgage costs of our customers who finance their purchases of our
homes. Similarly, rising interest rates may affect our customers ability to
sell the homes they currently occupy, the proceeds of which may be needed to
fund, in whole or in part, their purchases of our homes. Although 19




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##### Table of Contents



we are not currently experiencing any adverse effects from higher interest
rates, higher rates may adversely affect our results of operations in the
future. Critical Accounting Policies and Estimates Management views critical accounting policies as accounting policies that
are important to the understanding of our financial statements and also involve
estimates and judgments about inherently uncertain matters. In preparing our
financial statements, management is required to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. These estimates require the exercise of judgment, as future events
cannot be determined with certainty. Accordingly, actual results could differ
significantly from those estimates. Material estimates that are particularly
susceptible to significant change in subsequent periods relate to the
determination of the valuation of real estate, the valuation of investments in
real estate joint ventures, the valuation of the fair market value of assets
and liabilities in the application of the purchase method of accounting and the
amount of the deferred tax asset valuation allowance. The accounting policies
that we have identified as critical to the portrayal of our financial condition
and results of operations are: (i) real estate inventories; (ii) investments in
real estate joint ventures and other equity investments; (iii) revenue
recognition; (iv) capitalized interest; and (v) income taxes. For a more
detailed discussion of these critical accounting policies see Critical
Accounting Policies appearing in our Annual Report on Form 10-K for the year
ended December 31, 2003. CONSOLIDATED RESULTS OF OPERATIONS Three Months
    
    Six MonthsEnded June 30,
    
    Ended June 30,2004
    
    2003
    
    Change
    
    2004
    
    2003
    
    Change(In thousands)
    
    ( U n a u d i t e d )
    
    ( U n a u d i t e d )RevenuesSales of real estate
    
    $
    142,530
    
    
    
    67,039
    
    
    
    75,491
    
    
    
    241,053
    
    
    
    120,003
    
    
    
    121,050Title and mortgage operations
    
    
    1,339
    
    
    
    577
    
    
    
    762
    
    
    
    2,309
    
    
    
    981
    
    
    
    1,328Total revenues
    
    
    143,869
    
    
    
    67,616
    
    
    
    76,253
    
    
    
    243,362
    
    
    
    120,984
    
    
    
    122,378Costs and expensesCost of sales of real estate
    
    
    107,676
    
    
    
    49,151
    
    
    
    58,525
    
    
    
    177,341
    
    
    
    88,675
    
    
    
    88,666Selling, general and administrative expenses
    
    
    18,888
    
    
    
    10,482
    
    
    
    8,406
    
    
    
    32,935
    
    
    
    18,502
    
    
    
    14,433Interest expense, net
    
    
    
    
    
    
    8
    
    
    
    (8
    )
    
    
    58
    
    
    
    249
    
    
    
    (191
    )Other expenses
    
    
    778
    
    
    
    376
    
    
    
    402
    
    
    
    1,394
    
    
    
    668
    
    
    
    726Minority interest
    
    
    (1
    )
    
    
    28
    
    
    
    (29
    )
    
    
    24
    
    
    
    149
    
    
    
    (125
    )Total costs and expenses
    
    
    127,341
    
    
    
    60,045
    
    
    
    67,296
    
    
    
    211,752
    
    
    
    108,243
    
    
    
    103,50916,528
    
    
    
    7,571
    
    
    
    8,957
    
    
    
    31,610
    
    
    
    12,741
    
    
    
    18,869Earnings from Bluegreen Corporation
    
    
    2,775
    
    
    
    1,940
    
    
    
    835
    
    
    
    4,861
    
    
    
    1,806
    
    
    
    3,055Earnings (loss) from joint ventures
    
    
    2,130
    
    
    
    231
    
    
    
    1,899
    
    
    
    5,737
    
    
    
    (82
    )
    
    
    5,819Interest and other income
    
    
    849
    
    
    
    621
    
    
    
    228
    
    
    
    1,327
    
    
    
    1,267
    
    
    
    60Income before income taxes
    
    
    22,282
    
    
    
    10,363
    
    
    
    11,919
    
    
    
    43,535
    
    
    
    15,732
    
    
    
    27,803Provision for income taxes
    
    
    8,595
    
    
    
    3,997
    
    
    
    4,598
    
    
    
    16,793
    
    
    
    6,072
    
    
    
    10,721Net income
    
    $
    13,687
    
    
    
    6,366
    
    
    
    7,321
    
    
    
    26,742
    
    
    
    9,660
    
    
    
    17,082Basic earnings per share
    
    $
    0.70
    
    
    
    0.43
    
    
    
    0.27
    
    
    
    1.55
    
    
    
    0.65
    
    
    
    0.90Diluted earnings per share
    
    $
    0.68
    
    
    
    0.42
    
    
    
    0.26
    
    
    
    1.53
    
    
    
    0.64
    
    
    
    0.89Weighted average shares outstanding
    
    
    19,596
    
    
    
    14,816
    
    
    
    4,780
    
    
    
    17,206
    
    
    
    14,816
    
    
    
    2,390Diluted shares outstanding
    
    
    19,638
    
    
    
    14,816
    
    
    
    4,822
    
    
    
    17,245
    
    
    
    14,816
    
    
    
    2,429
 20




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##### Table of Contents



For the Three Months Ended June 30, 2004 Compared to the Same 2003 Period: Consolidated net income increased $7.3 million, or 115% for the three
months ended June 30, 2004 as compared to the same period in 2003. The increase
in net income primarily resulted from an increase in sales of real estate by
our Homebuilding Division, from higher earnings from Bluegreen Corporation and
from an increase in our earnings from our real estate joint venture activities. Our revenues from sales of real estate increased 113% to $142.5 million
for the quarter ended June 30, 2004 from $67.0 million for the same 2003
period. This increase was attributable primarily to an increase in home
deliveries from 210 homes delivered in the second quarter of 2003 to 576 homes
delivered in the second quarter of 2004. Partially offsetting this increase in
homebuilding revenues was a $6.8 million decrease in consolidated revenues from
the Land Development Division. Profits on inter-company transactions are
deferred until the properties are delivered to unaffiliated parties, at which
time the deferred profit is applied against consolidated cost of sales.
Consolidated cost of sales was reduced by approximately $1.1 million in the
second quarter of 2004 reflecting the recognition of previously deferred
profits related to sales of land between our Land Development and Homebuilding
Divisions. No similarly deferred profits were recognized during the second
quarter of 2003. Selling, general and administrative expenses increased during the second
quarter of 2004 compared to the same 2003 period primarily as a result of
higher employee compensation and benefits (including sales commissions), and
increased advertising expenses. The increase in employee compensation and
benefits and advertising expenses was directly related to our new development
projects in Central and Southeast Florida, the expansion of homebuilding
activities into North Florida and Georgia, the addition of Bowden and the
increase in our home deliveries. The number of our full time employees
increased to 445 at June 30, 2004 from 269 at June 30, 2003, while the number
of part time employees decreased to 38 at June 30, 2004 from 43 at June 30,
2003. As a percentage of total revenues, selling, general and administrative
expenses declined from 16% in the second quarter of 2003 to 13% in the second
quarter of 2004. Interest incurred on notes and development bonds payable totaled $2.4
million and $1.9 million for the 2004 period and 2003 period, respectively.
Interest incurred was higher due to higher outstanding balances of notes and
mortgage notes payable. Interest capitalized was $2.4 million and $1.9 million
for the 2004 and 2003 periods, respectively. At the time of home closings and
land sales, the capitalized interest allocated to such inventory is charged to
cost of sales. Cost of sales of real estate for the three months ended June 30,
2004 and 2003 included previously capitalized interest of approximately $2.8
million and $1.2 million, respectively. Bluegreens reported net income for the three months ended June 30, 2004
was $9.1 million, as compared to $6.2 million for the same period in 2003. Our

interest in Bluegreens earnings, net of purchase accounting adjustments, was
$2.8 million for the second quarter of 2004 versus $1.9 million for the second
quarter of 2003. For the three months ended June 30, 2004 and 2003, we owned
9.5 million shares and 8.3 million shares, respectively, of Bluegreens common
stock, which represented approximately 37% and 34%, respectively, of the
weighted average outstanding shares of Bluegreen. Earnings from real estate joint ventures were $2.1 million during the
second quarter of 2004 as compared to $231,000 during the 2003 period. This
increase in earnings in our real estate joint venture activities primarily
resulted from earnings associated with the delivery of condominium units by a
joint venture project in Boca Raton, Florida. We do not believe that the level
of earnings from real estate joint ventures recognized in the second quarter of
2004 is indicative of the results expected for the entire year, because the
joint venture project in Boca Raton is virtually sold out and its operations
are essentially completed. 21




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##### Table of Contents



For the Six Months Ended June 30, 2004 Compared to the Same 2003 Period: Consolidated net income increased $17.1 million, or 177% for the six
months ended June 30, 2004 as compared to the same period in 2003. The increase
in net income primarily resulted from an increase in sales of real estate by
our Homebuilding and Land Development Divisions, from higher earnings from
Bluegreen Corporation and from an increase in our earnings from our real estate
joint venture activities. Our revenues from sales of real estate increased 101% to $241.1 million
for the six months ended June 30, 2004 from $120.0 million for the same 2003
period. This increase is attributable primarily to an increase in home
deliveries from 372 homes delivered in the first half of 2003 to 917 homes
delivered in the first half of 2004. Consolidated cost of sales was reduced by
approximately $1.7 million in the first six months of 2004 as a result of the
recognition of previously deferred profits related to sales of land by our Land
Development Division to our Homebuilding Division. No similarly deferred
profits were recognized during the first six months of 2003. Selling, general and administrative expenses increased during the first
six months of 2004 compared to the same 2003 period primarily as a result of
higher employee compensation and benefits (including sales commissions), and
increased advertising expenses as described above. As a percentage of total
revenues, selling, general and administrative expenses declined from 15% in the
first six months of 2003 to 14% in the first six months of 2004. Interest incurred on notes and development bonds payable totaled $4.4
million and $4.1 million for the 2004 period and 2003 period, respectively.
Interest incurred was higher due to higher outstanding balances of notes and
mortgage notes payable. Interest capitalized was $4.3 million for the 2004
period and $3.9 million for the 2003 period. Cost of sales of real estate for
the six months ended June 30, 2004 and 2003 included previously capitalized
interest of approximately $4.6 million and $2.4 million, respectively. Bluegreens reported net income for the six months ended June 30, 2004 was
$13.8 million, as compared to $8.4 million for the same period in 2003. Our
interest in Bluegreens earnings, net of purchase accounting adjustments, was
$4.9 million for the first six months of 2004 versus $1.8 million for the first
six months of 2003. Earnings from real estate joint ventures were $5.7 million during the
first six months of 2004 as compared to a loss of $82,000 during the 2003
period. This increase in earnings in our real estate joint venture activities
primarily resulted from gains recognized upon the sale of a joint ventures
property in Vero Beach, Florida, earnings associated with the delivery of
condominium units by a joint venture project in Boca Raton, Florida and
earnings associated with the delivery of homes by a joint venture project in
West Palm Beach, Florida. We do not believe that the level of earnings from
real estate joint ventures recognized in the first six months of 2004 is
indicative of the results expected for the entire year because all three joint
venture projects are almost entirely sold out and their operations are
essentially completed. 22




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##### Table of Contents



HOMEBUILDING DIVISION RESULTS OF OPERATIONS Three Months
    
    Six MonthsEnded June 30,
    
    Ended June 30,2004
    
    2003
    
    Change
    
    2004
    
    2003
    
    Change(In thousands)
    
    ( U n a u d i t e d )
    
    ( U n a u d i t e d )RevenuesSales of real estate
    
    $
    125,005
    
    
    
    44,958
    
    
    
    80,047
    
    
    
    203,669
    
    
    
    82,591
    
    
    
    121,078Title and mortgage operations
    
    
    1,339
    
    
    
    577
    
    
    
    762
    
    
    
    2,309
    
    
    
    981
    
    
    
    1,328Total revenues
    
    
    126,344
    
    
    
    45,535
    
    
    
    80,809
    
    
    
    205,978
    
    
    
    83,572
    
    
    
    122,406Costs and expensesCost of sales of real estate
    
    
    98,856
    
    
    
    34,719
    
    
    
    64,137
    
    
    
    160,331
    
    
    
    63,872
    
    
    
    96,459Selling, general and administrative expenses
    
    
    13,845
    
    
    
    6,654
    
    
    
    7,191
    
    
    
    23,137
    
    
    
    12,591
    
    
    
    10,546Other expenses
    
    
    777
    
    
    
    376
    
    
    
    401
    
    
    
    1,394
    
    
    
    668
    
    
    
    726Minority interest
    
    
    
    
    
    
    (50
    )
    
    
    50
    
    
    
    
    
    
    
    (50
    )
    
    
    50Total costs and expenses
    
    
    113,478
    
    
    
    41,699
    
    
    
    71,779
    
    
    
    184,862
    
    
    
    77,081
    
    
    
    107,78112,866
    
    
    
    3,836
    
    
    
    9,030
    
    
    
    21,116
    
    
    
    6,491
    
    
    
    14,625Earnings (loss) from joint ventures
    
    
    1,823
    
    
    
    96
    
    
    
    1,727
    
    
    
    3,332
    
    
    
    (45
    )
    
    
    3,377Interest and other income
    
    
    72
    
    
    
    152
    
    
    
    (80
    )
    
    

    115
    
    
    
    270
    
    
    
    (155
    )Income before income taxes
    
    
    14,761
    
    
    
    4,084
    
    
    
    10,677
    
    
    
    24,563
    
    
    
    6,716
    
    
    
    17,847Provision for income taxes
    
    
    5,691
    
    
    
    1,575
    
    
    
    4,116
    
    
    
    9,472
    
    
    
    2,594
    
    
    
    6,878Net income
    
    $
    9,070
    
    
    
    2,509
    
    
    
    6,561
    
    
    
    15,091
    
    
    
    4,122
    
    
    
    10,969DomesticHomes delivered
    
    
    576
    
    
    
    210
    
    
    
    366
    
    
    
    917
    
    
    
    372
    
    
    
    545Construction starts
    
    
    783
    
    
    
    396
    
    
    
    387
    
    
    
    1,484
    
    
    
    640
    
    
    
    844Average selling price of homes delivered
    
    $
    217
    
    
    
    214
    
    
    
    3
    
    
    
    222
    
    
    
    222
    
    
    
    Margin percentage on homes delivered
    
    
    20.9
    %
    
    
    22.8
    %
    
    
    -1.9
    %
    
    
    21.3
    %
    
    
    22.7
    %
    
    
    -1.4
    %New sales contracts (units)
    
    
    534
    
    
    
    561
    
    
    
    (27
    )
    
    
    1,008
    
    
    
    1,028
    
    
    
    (20
    )New sales contracts (value)
    
    $
    134,036
    
    
    
    126,135
    
    
    
    7,901
    
    
    
    264,160
    
    
    
    227,496
    
    
    
    36,664Backlog of homes (units)
    
    

    2,352
    
    
    
    1,480
    
    
    
    872
    
    
    
    2,352
    
    
    
    1,480
    
    
    
    872Backlog of homes (value)
    
    $
    553,518
    
    
    
    312,497
    
    
    
    241,021
    
    
    
    553,518
    
    
    
    312,497
    
    
    
    241,021Joint VenturesHomes delivered
    
    
    52
    
    
    
    
    
    
    
    52
    
    
    
    140
    
    
    
    
    
    
    
    140Construction starts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43
    
    
    
    (43
    )New sales contracts (units)
    
    
    11
    
    
    
    9
    
    
    
    2
    
    
    
    42
    
    
    
    35
    
    
    
    7New sales contracts (value)
    
    $
    3,834
    
    
    
    2,679
    
    
    
    1,155
    
    
    
    13,967
    
    
    
    7,949
    
    
    
    6,018Backlog of homes (units)
    
    
    6
    
    
    
    96
    
    
    
    (90
    )
    
    
    6
    
    
    
    96
    
    
    
    (90
    )Backlog of homes (value)
    
    $
    2,092
    
    
    
    23,976
    
    
    
    (21,884
    )
    
    
    2,092
    
    
    
    23,976
    
    
    
    (21,884
    )
 At June 30, 2004, our Homebuilding Division had a delivery backlog of
2,352 homes representing $553.5 million of future sales. The number of homes
in backlog is at a five-year high and is 15% higher than at year-end 2003.
Further, the average sales price of the homes in backlog at June 30, 2004 is
approximately 5% higher than the average sales price of the homes in backlog at
December 31, 2003. While the strong demand and backlog are encouraging for our
2004 and 2005 results, potential economic trends and developments could impact
our Homebuilding Division. In recent months, the costs of lumber, steel,
concrete and other building materials have risen significantly. While we may
be able to increase our selling prices to absorb these increased costs in
future sales, the sales prices of homes in our backlog cannot be increased and
the margins on the delivery of homes in backlog may be adversely affected by
this trend. 23




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##### Table of Contents



We believe we own or control sufficient land to meet our long-term growth
goals. In the shorter-term, we expect the number of signed new sales contracts
for homes to level off and perhaps decline slightly through the first quarter
of 2005 as we transition from the older, seasoned communities at which sales
are reaching completion to new communities that will be opening for sale to the
public in the next 12 to 18 months. Our sales performance over the past twelve
months exceeded our projections; as a result, we are currently focused on
building homes to meet the 12-month delivery time frame projected by us at the
time of sale. We believe that active growth management will permit us to
strengthen our infrastructure and reduce the amount of time contracted homes
are in backlog, thereby reducing our exposure to rising costs. We are also currently expanding our homebuilding activities to the
Jacksonville, Florida, Atlanta, Georgia and Nashville, Tennessee markets. We
have not previously operated in these markets and may not recognize any
revenues from these operations during the next twelve months or longer. As a
result, any costs associated with this expansion prior to revenue recognition
may adversely affect our operating results. For the Three Months Ended June 30, 2004 Compared to the Same 2003 Period: Revenues from home sales increased 178% to $125.0 million during the three
months ended June 30, 2004, as compared to the same 2003 period. This was
primarily due to an increase in home deliveries in communities that commenced
deliveries in 2003 and from Bowdens operations. During the three months ended
June 30, 2004, 576 homes were delivered as compared to 210 homes delivered
during the three months ended June 30, 2003. Cost of sales increased 185% to $98.9 million during the three months
ended June 30, 2004, as compared to the same 2003 period. The increase in cost
of sales was primarily due to the increase in home deliveries. Cost of sales
as a percentage of related revenue was 79% and 77% for the three months ended
June 30, 2004 and 2003, respectively. The increase in cost of sales as a
percentage of revenues is primarily attributable to purchase accounting
adjustments relating to the Bowden acquisition and from the inclusion of
Bowdens operations, which have historically generated lower margins than the
operations of Levitt and Sons. Included in cost of sales for the three months
ended June 30, 2004 are approximately $1.3 million of purchase accounting
adjustments relating to the Bowden acquisition. Selling, general and administrative expenses increased 108% to $13.8
million during the three months ended June 30, 2004, as compared to the same
2003 period. The increase in selling, general and administrative expenses
primarily resulted from the increase in home deliveries and the addition of
Bowden, as well as an increase in compensation and benefits resulting from the
continued expansion of our homebuilding operations. As a percentage of total
revenues, selling, general and administrative expenses declined from 15% in the
second quarter of 2003 to 11% in the second quarter of 2004. The improvement
in selling, general and administrative expenses as a percentage of revenues
reflects increased revenue levels. Interest incurred totaled $1.2 million and $1.3 million for the three
months ended June 30, 2004 and 2003, respectively. Interest capitalized for
the quarters ended June 30, 2004 and 2003 totaled $1.2 million and $1.3
million, respectively. In both 2004 and 2003, the value of real estate
inventory under active development was greater than the interest-bearing debt
related to that inventory. All interest incurred during the 2004 and 2003
periods was therefore capitalized. Cost of sales of real estate for the three
months ended June 30, 2004 and 2003 included previously capitalized interest of
approximately $2.0 million and $863,000, respectively. 24




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##### Table of Contents



The increase in earnings from real estate joint ventures was the result of
the delivery of 52 units by a joint venture that is developing a condominium
complex. No units were delivered by that joint venture in the second quarter
of 2003. As of June 30, 2004, there were only six units remaining to be
delivered in that joint venture property. Accordingly, the results of our
Homebuilding Divisions joint venture operations for the three months ended
June 30, 2004 are not indicative of the results that are to be expected for the
entire year. For the Six Months Ended June 30, 2004 Compared to the Same 2003 Period: Revenues from home sales increased 147% to $203.7 million during the six
months ended June 30, 2004, as compared to the same 2003 period. This increase
is attributable primarily to an increase in home deliveries in communities that
commenced deliveries in 2003 and from Bowdens operations. During the six
months ended June 30, 2004, 917 homes were delivered as compared to 372 homes
delivered during the six months ended June 30, 2003. Cost of sales increased 151% to $160.3 million during the six months ended
June 30, 2004, as compared to the same 2003 period. The increase in cost of
sales was primarily due to the increase in home deliveries. Cost of sales as a
percentage of related revenue was 79% and 77% for the six months ended June 30,
2004 and 2003, respectively. Included in cost of sales for the six months
ended June 30, 2004 are approximately $1.3 million of purchase accounting
adjustments relating to the acquisition of Bowden. Selling, general and administrative expenses increased 84% to $23.1
million during the six months ended June 30, 2004, as compared to the same 2003
period. The increase in selling, general and administrative expenses primarily
resulted from the increase in home deliveries, as well as an increase in
compensation and benefits resulting from the continued expansion of
homebuilding operations. As a percentage of total revenues, selling, general
and administrative expenses declined from 15% in the first six months of 2003
to 11% in the first six months of 2004. Interest incurred totaled $2.4 million for each of the six month periods
ended June 30, 2004 and 2003. Interest capitalized for each of the six month
periods ended June 30, 2004 and 2003 also totaled $2.4 million, as the value of
real estate inventory under active development was greater than the
interest-bearing debt related to that inventory in both periods. Cost of sales
of real estate for the six months ended June 30, 2004 and 2003 included
previously capitalized interest of approximately $3.4 million and $1.7 million,
respectively. The increase in earnings from real estate joint ventures was the result of
the delivery of 140 units by the condominium joint venture in Boca Raton,
Florida. No units were delivered by that joint venture during the first six
months of 2003. 25




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##### Table of Contents



LAND DEVELOPMENT DIVISION RESULTS OF OPERATIONS Three Months
    
    Six MonthsEnded June 30,
    
    Ended June 30,2004
    
    2003
    
    Change
    
    2004
    
    2003
    
    Change(In thousands)
    
    ( U n a u d i t e d )
    
    ( U n a u d i t e d )RevenuesSales of real estate
    
    $
    37,288
    
    
    
    20,696
    
    
    
    16,592
    
    
    
    56,609
    
    
    
    32,605
    
    
    
    24,004Total revenues
    
    
    37,288
    
    
    
    20,696
    
    
    
    16,592
    
    
    
    56,609
    
    
    
    32,605
    
    
    
    24,004Costs and expensesCost of sales of real estate
    
    
    15,702
    
    
    
    13,061
    
    
    
    2,641
    
    
    
    23,670
    
    
    
    20,287
    
    
    
    3,383Selling, general and administrative
expenses
    
    
    2,690
    
    
    
    2,446
    
    
    
    244
    
    
    
    5,278
    
    
    
    3,698
    
    
    
    1,580Interest expense, net
    
    
    
    
    
    
    (9
    )
    
    
    9
    
    
    
    58
    
    
    
    224
    
    
    
    (166
    )Total costs and expenses
    
    
    18,392
    
    
    
    15,498
    
    
    
    2,894
    
    
    
    29,006
    
    
    
    24,209
    
    
    
    4,79718,896
    
    
    
    5,198
    
    
    
    13,698
    
    
    
    27,603
    
    
    
    8,396
    
    
    
    19,207Interest and other income
    
    
    902
    
    
    
    422
    
    
    
    480
    
    
    
    1,307
    
    
    
    853
    
    
    
    454Income before income taxes
    
    
    19,798
    
    
    
    5,620
    
    
    
    14,178
    
    
    
    28,910
    
    
    
    9,249
    
    
    
    19,661Provision for income taxes
    
    
    7,640
    
    
    
    2,168
    
    
    
    5,472
    
    
    
    11,155
    
    
    
    3,568
    
    
    
    7,587Net income
    
    $
    12,158
    
    
    
    3,452
    
    
    
    8,706
    
    
    
    17,755
    
    
    
    5,681
    
    
    
    12,074Acres sold
    
    
    492
    
    
    
    1,075
    
    
    
    (583
    )
    
    
    786
    
    
    
    1,211
    
    
    
    (425
    )Margin percentage
    
    
    57.9
    %
    
    
    36.9
    %
    
    
    21.0
    %
    
    
    58.2
    %
    
    
    37.8
    %
    
    
    20.4
    %Unsold acres
    
    
    8,517
    
    
    
    4,994
    
    
    
    3,523
    
    
    
    8,517
    
    
    
    4,994
    
    
    
    3,523Acres subject to sales contracts
    
    
    801
    
    
    
    854
    
    
    
    (53
    )
    
    
    801
    
    
    
    854
    
    
    
    (53
    )Acres subject to sales contracts (value)
    
    
    71,089
    
    
    
    62,862
    
    
    
    8,227
    
    
    
    71,089
    
    
    
    62,862
    
    
    
    8,227
 Development activity in St. Lucie West is winding down, with only 85 acres
of inventory remaining at June 30, 2004, of which 75 acres were subject to
sales contracts as of that date. With the acquisition of approximately 4,450
acres during the second quarter of this year, the Tradition master-planned
community now encompasses more than 9,000 acres, of which 1,587 acres have been
sold or were subject to sales contracts with homebuilders as of June 30, 2004.
Notwithstanding the sustained interest and activity at both St. Lucie West
and Tradition, a significant reduction of demand in the residential real estate
market could negatively impact our land development operations. For the Three Months Ended June 30, 2004 Compared to the Same 2003 Period: Revenues increased 80% to $37.3 million during the three months ended June
30, 2004, as compared to $20.7 million during the same 2003 period. During the
second quarter of 2004, 492 acres were sold with an average margin of
58%, as
compared to 1,075 acres sold with an average margin of 37% in the same 2003
period. In the second quarter of 2003, we sold approximately 1,000 acres of
undeveloped land adjacent to Tradition in a single transaction to a developer
that we believe will utilize the property for the development of one or more
golf courses. In the second quarter of 2004, the Land Development Division
sold approximately 448 acres in Tradition to the Homebuilding Division which
generated revenue and margin of $23.4 million and $14.4 million, respectively.
This transaction, which is included in the above table, is eliminated in
consolidation. Selling, general and administrative expenses increased 10% to $2.7 million
during the three months ended June 30, 2004 as compared to $2.4 million for the
same 2003 period. As a percentage of total revenues, selling, general and
administrative expenses decreased from 12% in the second quarter of 2003 to 7%
in the second quarter of 2004. The improvement in selling, general and 26




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##### Table of Contents



administrative expenses as a percentage of revenues is a reflection of the
increased revenue levels for the division. Interest incurred for the three months ended June 30, 2004 and 2003 was
$481,000 and $200,000, respectively. Interest capitalized for the quarters
ended June 30, 2004 and 2003 totaled $481,000 and $209,000, respectively. Cost
of sales of real estate for the three months ended June 30, 2004 included
previously capitalized interest of approximately $26,000. No previously
capitalized interest was included in cost of sales of real estate in the second
quarter of 2003. For the Six Months Ended June 30, 2004 Compared to the Same 2003 Period: Revenues increased 74% to $56.6 million during the six months ended June
30, 2004, as compared to $32.6 million during the same 2003 period. During the
first six months of 2004, 786 acres were sold with an average margin
of 58%, as
compared to 1,211 acres sold with an average margin of 38% in the same 2003
period. The lower margin percentage in the first six months of 2003 was
primarily the result of the sale of approximately 1,000 acres of
undeveloped land described above. During the six months ended June 30, 2004,
the Land Development Division sold approximately 448 acres in Tradition to the
Homebuilding Division which generated revenue and margin of $23.4 million and
$14.4 million, respectively. This transaction, which is included in the above
table, is eliminated in consolidation. Selling, general and administrative expenses increased 43% to $5.3 million
during the six months ended June 30, 2004 as compared to $3.7 million for the
same 2003 period. As a percentage of total revenues, selling, general and
administrative expenses decreased from 11% in the first six months of 2003 to
9% in the first six months of 2004. Interest incurred for the six months ended June 30, 2004 and 2003 was
$645,000 and $819,000, respectively. Interest capitalized for the six months
ended June 30, 2004 and 2003 totaled $586,000 and $1.1 million, respectively.
Cost of sales of real estate for the six months ended June 30, 2004 and 2003
included previously capitalized interest of approximately $42,000 and $75,000,
respectively. 27




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##### Table of Contents



OTHER OPERATIONS RESULTS OF OPERATIONS Three Months
    
    Six MonthsEnded June 30,
    
    Ended June 30,2004
    
    2003
    
    Change
    
    2004
    
    2003
    
    Change(In thousands)
    
    
    
    
    
    ( U n a u d i t e d )
    
    
    
    
    
    
    
    
    
    ( U n a u d i t e d )RevenuesSales of real estate
    
    $
    3,591
    
    
    
    1,385
    
    
    
    2,206
    
    
    
    4,129
    
    
    
    4,807
    
    
    
    (678
    )Total revenues
    
    
    3,591
    
    
    
    1,385
    
    
    
    2,206
    
    
    
    4,129
    
    
    
    4,807
    
    
    
    (678
    )Costs and expensesCost of sales of real estate
    
    
    3,480
    
    
    
    1,371
    
    
    
    2,109
    
    
    
    4,207
    
    
    
    4,516
    
    
    
    (309
    )Selling, general and administrative expenses
    
    
    2,353
    
    
    
    1,382
    
    
    
    971
    
    
    
    4,520
    
    
    
    2,213
    
    
    
    2,307Interest expense, net
    
    
    
    
    
    
    17
    
    
    
    (17
    )
    
    
    
    
    
    
    25
    
    
    
    (25
    )Other expenses
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    Minority interest
    
    
    (1
    )
    
    
    78
    
    
    
    (79
    )
    
    
    24
    
    
    
    199
    
    
    
    (175
    )Total costs and expenses
    
    
    5,833
    
    
    
    2,848
    
    
    
    2,985
    
    
    
    8,751
    
    
    
    6,953
    
    
    
    1,798(2,242
    )
    
    
    (1,463
    )
    
    
    (779
    )
    
    
    (4,622
    )
    
    
    (2,146
    )
    
    
    (2,476
    )Earnings from Bluegreen Corporation
    
    
    2,775
    
    
    
    1,940
    
    
    
    835
    
    
    
    4,861
    
    
    
    1,806
    
    
    
    3,055Earnings (loss) from joint ventures
    
    
    307
    
    
    
    135
    
    
    
    172
    
    
    
    2,405
    
    
    
    (37
    )
    
    
    2,442Interest and other income
    
    
    165
    
    
    
    47
    
    
    
    118
    
    
    
    195
    
    
    
    144
    
    
    
    51Income before income taxes
    
    
    1,005
    
    
    
    659
    
    
    
    346
    
    
    
    2,839
    
    
    
    (233
    )
    
    
    3,072Provision for income taxes
    
    
    388
    
    
    
    254
    
    
    
    134
    
    
    
    1,095
    
    
    
    (90
    )
    
    
    1,185Net income (loss)
    
    $
    617
    
    
    
    405
    
    
    
    212
    
    
    
    1,744
    
    
    
    (143
    )
    
    
    1,887
 Other Operations include all other Company operations, including Levitt
Commercial, Levitt Corporation general and administrative expenses, earnings
from our investment in Bluegreen and earnings from investments in real estate
projects. We currently own approximately 9.5 million shares of the common stock
of Bluegreen, which represented approximately 36% of Bluegreens outstanding
shares as of June 30, 2004. Under equity method accounting, we recognize our
pro-rata share of Bluegreens net income or loss (net of purchase accounting
adjustments) as pre-tax earnings. Bluegreen has not paid dividends to its
shareholders; therefore, our earnings represent only our claim to the future
distributions of Bluegreens earnings. Accordingly, we record a tax liability
on our portion of Bluegreens net income. Should Bluegreens financial
performance deteriorate, our earnings in Bluegreen would deteriorate
concurrently and our results of operations would be adversely affected.
Furthermore, a significant reduction in Bluegreens financial position might
require that we test our investment in Bluegreen for impairment, which testing
could result in charges against our results of operations. For the Three Months Ended June 30, 2004 Compared to the Same 2003 Period: During the three months ended June 30, 2004, Levitt Commercial delivered
12 flex warehouse units as compared to three units delivered during the three
months ended June 30, 2003. Cost of sales of real estate in Other Operations
includes amortization of interest previously capitalized in this business
segment, which totaled $575,000 and $347,000 for the three months ended June
30, 2004 and 2003, respectively. Bluegreens reported net income for the three
months ended June 30, 2004 was $9.1 million and, for the same period of 2003,
reported net income was $6.2 million. Our ownership interests in Bluegreens
earnings during the three month periods ended June 30, 2004 and 2003 were
approximately $2.8 million and $1.9 million, respectively, net of purchase
accounting adjustments. Purchase accounting adjustments decreased our interest
in Bluegreens earnings by $562,000 for the second quarter of 2004, whereas
purchase accounting adjustments decreased our interest in Bluegreens earnings
by $166,000 for the second quarter of 2003. 28




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Selling, general and administrative and other expenses increased to $2.4
million during the three months ended June 30, 2004 as compared to $1.4 million
during the three months ended June 30, 2003. This increase was primarily
associated with increases in employee compensation and benefits, fees paid by
the Company for administrative and other services provided pursuant to an
agreement with BankAtlantic Bancorp, and other expenses related to being a
public company. We did not incur significant costs associated with being a
public company in the second quarter of 2003 because we were not subject to SEC
reporting regulations, including the requirements of the Sarbanes-Oxley Act of
2002, at that time. Earnings from real estate joint ventures in the second quarter of 2004
were $306,000 as compared to $135,000 in the second quarter of 2003. The
increase in earnings was due primarily to earnings associated with the delivery
of homes by a joint venture project in West Palm Beach, Florida. Interest incurred in Other Operations was approximately $538,000 and
$447,000 for the three months ended June 30, 2004 and 2003, respectively. The
increase in interest incurred was primarily associated with an increase in
notes payable. Interest capitalized for this business segment totaled $538,000
and $430,000 for the three months ended June 30, 2004 and 2003, respectively.
Those amounts include adjustments to reconcile the amount of interest eligible
for capitalization on a consolidated basis with the amounts capitalized in the
Companys other business segments. For the Six Months Ended June 30, 2004 Compared to the Same 2003 Period: During the six months ended June 30, 2004, Levitt Commercial delivered 13
flex warehouse units as compared to 11 units delivered during the six months
ended June 30, 2003. Cost of sales of real estate includes amortization of
interest previously capitalized in this business segment. The amount of
previously capitalized interest amortized in cost of sales for the six months
ended June 30, 2004 and 2003 was $934,000 and $617,000, respectively.
Bluegreens reported net income for the six months ended June 30, 2004 and 2003
was $13.8 million and $8.4 million, respectively. Our ownership interests in
Bluegreens earnings during the six month periods ended June 30, 2004 and 2003
were approximately $4.9 million and $1.8 million, respectively, net of purchase
accounting adjustments. Purchase accounting adjustments decreased our interest
in Bluegreens earnings by $500,000 for the first six months of 2004, whereas
purchase accounting adjustments reduced our interest in Bluegreens earnings by
$1.0 million for the first six months of 2003. Selling, general and administrative and other expenses increased to $4.5
million during the six months ended June 30, 2004 as compared to $2.2 million
during the six months ended June 30, 2003, due primarily to the factors
discussed above. Earnings from real estate joint ventures in the first six months of 2004
were $2.4 million as compared to a loss of $37,000 in the first six months of
2003. The increase in earnings was due primarily to the gain recognized by a
joint venture on the sale of a rental apartment project in Vero Beach, Florida
and earnings associated with the delivery of homes by a joint venture project
in West Palm Beach, Florida. Earnings from real estate joint ventures
recognized in the first six months of 2004 are not indicative of the results
expected for the entire year because both joint venture projects are sold out
and their operations are essentially completed. Interest incurred in Other Operations was approximately $1.2 million and
$859,000 for the six months ended June 30, 2004 and 2003, respectively. The
increase in interest incurred was primarily associated with an increase in
notes payable. Interest capitalized for this business segment totaled $1.2
million and $834,000 for the six months ended June 30, 2004 and 2003,
respectively. Those amounts 29




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include adjustments to reconcile the amount of interest eligible for
capitalization on a consolidated basis with the amounts capitalized in the
Companys other business segments. FINANCIAL CONDITION June 30, 2004 compared to December 31, 2003 Our total assets at June 30, 2004 and December 31, 2003 were $611.1
million and $392.7 million, respectively. The increase in total assets
primarily resulted from:  
    
    a net increase in cash and cash equivalents of $83.0 million,
which resulted primarily from $114.8 million of net proceeds from
the underwritten public sale of 5,000,000 shares of common stock
described below, offset in part by cash used in operations;  
    
    a net increase in inventory of real estate of approximately
$126.4 million resulting from land acquisitions in Florida by Core
Communities and Levitt and Sons, the acquisition of Bowden and
increases in land development and construction costs. These
increases in inventory of real estate were partially offset by sales
of homes and land;  
    
    an increase of approximately $4.8 million in our investment
in Bluegreen Corporation associated primarily with our equity in
earnings and unrealized gains associated with Bluegreens other
comprehensive income; and  
    
    a $3.0 million increase in goodwill and other assets
primarily associated with the Bowden acquisition. Total liabilities at June 30, 2004 and December 31, 2002 were $344.2
million and $267.2 million, respectively. The increase in total liabilities primarily resulted from:  
    
    increases in accounts payable and accrued liabilities of
$10.6 million related to increased construction and development
activity, as well as the assumption of liabilities in connection with the
Bowden acquisition;  
    
    a net increase in notes and mortgage notes payable of $54.9
million, primarily related to the land acquisitions described above
and the assumption of debt in connection with the Bowden acquisition;  
    
    a net increase in customer deposits of $6.1 million;  
    
    a $4.0 million increase in current income taxes payable
related primarily to the timing of quarterly estimated tax payments
and increases in our taxable income; and  
    
    an increase in the deferred tax liability of approximately
$1.8 million which was primarily associated with our earnings from
Bluegreen. LIQUIDITY AND CAPITAL RESOURCES Management assesses the Companys liquidity in terms of its ability to
generate cash to fund its operating and investment activities. For the three
and six months ended June 30, 2004, our primary source of funds was the
underwritten public offering described below, as well as proceeds from the sale
of real estate inventory, distributions from real estate joint ventures and
borrowings from financial institutions. These funds were utilized primarily for
the acquisition, development and construction of our real estate, to repay
borrowings, to acquire Bowden and to pay general and administrative expenses. 30




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In April 2004 we sold 5,000,000 shares of Class A common stock in an
underwritten public offering at a price of $24.50 per share. Net proceeds from
the sale totaled approximately $114.8 million, after underwriting discounts,
commissions and offering expenses. Approximately $12.0 million of the net
proceeds of the offering were used to repay indebtedness, $7.4 million were
used to fund the Bowden acquisition and $67.0 million were transferred to our
operating subsidiaries (including Bowden) to provide funds for their growth.
The balance of the funds will be used to fund our operations and growth and for
general corporate purposes. In addition to the liquidity provided by the stock sale, we expect to
continue to fund our short-term liquidity requirements generally through net
cash provided by operations and financing activities. We expect to meet our
long-term liquidity requirements for items such as acquisitions and debt
service obligations primarily with net cash provided by operations, long-term
secured and unsecured indebtedness and the remaining proceeds of the stock
sale. As of June 30, 2004 and December 31, 2003, we had cash and cash
equivalents of $119.0 million and $36.0 million, respectively. At June 30, 2004, our consolidated debt was approximately $228.6 million.
Our principal payment obligations with respect to our debt for the 12 months
beginning June 30, 2004 are anticipated to total approximately $21.0 million.
Some of our borrowing agreements contain provisions that, among other things,
require us to maintain certain financial ratios and a minimum net worth. These
requirements may have the effect of limiting the amount of debt that we can
incur in the future and restricting the payment of dividends to us by our
subsidiaries. At June 30, 2004, we were in compliance with all loan agreement
financial requirements and covenants. On July 26, 2004 our Board of Directors declared a cash dividend of $0.02
per share on our Class A common stock and Class B common stock. The board set
the payment date for August 16, 2004, to all shareholders of record as of 5:00
p.m. on August 9, 2004. While we anticipate that additional dividends will be
paid in the future, the Board has not adopted a policy of regular dividend
payments. The payment of dividends in the future is subject to approval by our
Board of Directors and will depend upon, among other factors, our results of
operation and financial condition. Off Balance Sheet Arrangements and Contractual Obligations In connection with the development of certain of our communities, we
establish community development districts to access bond financing for the
funding of infrastructure development and other projects within the community.
No liability is recorded for the repayment of principal and interest on the
bonds until the related assessments levied on the properties we own within the
district become fixed and determinable. If we were not able to establish
community development districts, we would need to fund community
infrastructure development out of operating income or through other sources of financing or capital.
As of June 30, 2004, a development district in Tradition had $62.8 million of
community development district bonds outstanding for which no assessments had
been levied. As of June 30, 2004, we owned approximately 80% of the property
in the district. We have entered into an indemnity agreement with a joint venture partner
relating to that partners guarantee of the joint ventures indebtedness. Our
maximum exposure under the indemnity agreement is estimated to be approximately
$500,000. Based on the joint venture assets securing the indebtedness, we do
not believe it is reasonably likely that any payment will be required under the
indemnity agreement. 31




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The following table summarizes our contractual obligations as of June 30,
2004 (in thousands): Payments due by periodLess than
    
    2 - 3
    
    4 - 5
    
    More thanCategory
    
    Total
    
    1 year
    
    Years
    
    Years
    
    5 yearsLong-term debt obligations
    
    $
    228,118
    
    
    
    20,992
    
    
    
    49,210
    
    
    
    109,916
    
    
    
    48,000Operating lease obligations
    
    
    4,627
    
    
    
    1,262
    
    
    
    1,928
    
    
    
    1,428
    
    
    
    9Purchase obligations
    
    
    100,497
    
    
    
    100,497
    
    
    
    
    
    
    
    
    
    
    
    Total Obligations
    
    $
    333,242
    
    
    
    122,751
    
    
    
    51,138
    
    
    
    111,344
    
    
    
    48,009
 Long-term debt obligations consist of notes, mortgage notes and bonds
payable. Operating lease obligations consist of rent commitments. Purchase
obligations consist of contracts to acquire real estate properties for
development and sale; however our liability for not completing the purchase of
any such property is generally limited to the deposit we made under the
relevant contract. 
 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Market risk is defined as the risk of loss arising from adverse changes in
market valuations that arise from interest rate risk, foreign currency exchange
rate risk, commodity price risk and equity price risk. We have a risk of loss
associated with our borrowings as we are subject to interest rate risk on our
long-term debt. At June 30, 2004, we had $222.9 million in borrowings with
adjustable rates tied to the prime rate and/or LIBOR rates and $5.7 million in
borrowings with fixed rates. Consequently, the impact on our variable rate
debt from changes in interest rates may affect our earnings and cash flows but
would generally not impact the fair value of such debt. With respect to fixed
rate debt, changes in interest rates generally affect the fair market value of
the debt but not our earnings or cash flow. Assuming the variable rate debt balance of $222.9 million outstanding at
June 30, 2004 were to remain constant, each one percentage point increase in
interest rates would increase the interest incurred by us by approximately $2.2
million per year. NEW ACCOUNTING PRONOUNCEMENTS None. 32




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Item 4. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures As of the end of the period covered by this report, we carried out an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures under the supervision and with the participation of our
principal executive officer and principal financial officer. Based on the
results of this evaluation, our principal executive officer and principal
financial officer concluded that our disclosure controls and procedures are
effective in timely alerting them to material information required to be
included in our periodic SEC reports. Changes in Internal Controls In addition, we reviewed our internal control over financial reporting,
and there have been no significant changes in our internal control over
financial reporting or in other factors that could significantly affect those
controls subsequent to the date of the last evaluation. Limitations on the Effectiveness of Controls Our management, including our principal executive officer and principal
financial officer, does not expect that our disclosure controls and procedures
and internal controls over financial reporting will prevent all possible errors
nor prevent all possible misconduct. A control system, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met. Further, the design of a
control system must reflect the fact that there are resource constraints, and
the benefits of controls must be considered relative to their costs. Due to the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of improper
conduct, if any, within the Company have been detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty and that breakdowns can occur because of simple error or mistake.
Additionally, it is possible that controls can be circumvented by the
individual acts of some persons, by collusion of two or more people, or by
management override of the control. Further, the design of any system of controls is based, in part, upon
assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions. Over time, controls may become inadequate because
of changes in conditions, or the degree of compliance with the policies or
procedures may deteriorate. Due to the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur
and may not be detected. CEO and CFO Certifications Appearing as Exhibits 31.1 and 31.2 to this quarterly report are
Certifications of the principal executive officer and the principal financial
officer. The Certifications are required in accordance with Section 302 of the
Sarbanes-Oxley Act of 2002. This Item of this report, which you are currently
reading, is the information concerning the evaluation referred to in the
Section 302 Certifications and this information should be read in conjunction
with the Section 302 Certifications for a more complete understanding of the
topics presented. 33




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##### Table of Contents



PART II  OTHER INFORMATION 
 Item 4. Submission of Matters to a Vote of Security Holders Election of Directors The Company held its Annual Meeting of Shareholders on May 11, 2004. At
the meeting the holders of the Companys Class A and Class B common stock
(Shareholders) voting together as a single class elected the following three
directors to serve on the Companys Board of Directors until the Annual Meeting
in 2007 by the following votes: Nominee
    
    For
    
    WithheldWilliam Scherer
    
    
    23,597,386
    
    
    
    283,625S. Lawrence Khan, III
    
    
    23,373,825
    
    
    
    507,186Joel Levy
    
    
    23,617,163
    
    
    
    263,848
 The other directors continuing in office are John E. Abdo, James Blosser,
Darwin Dornbush, Alan B. Levan and William R. Nicholson. 2003 Stock Incentive Plan On May 11, 2004 at the Annual Meeting of Shareholders, the Companys
Shareholders approved the Companys 2003 Stock Incentive Plan by the following
vote: Abstentions/For
    
    Against
    
    Non-votes2003 Stock Incentive Plan
    
    
    19,218,709
    
    
    
    1,379,745
    
    
    
    12,855
 2004 Performance-Based Annual Incentive Plan On May 11, 2004 at the Annual Meeting of Shareholders, the Companys
Shareholders approved the Companys 2004 Performance-Based Annual Incentive
Plan by the following vote: Abstentions/For
    
    Against
    
    Non-votes2004 Performance-Based Annual Incentive Plan
    
    
    20,016,837
    
    
    
    579,037
    
    
    
    15,436
 
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##### Table of Contents



Item 6. Exhibits and Reports on Form 8-K  a)
    
    Index to Exhibits Exhibit 31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.Exhibit 31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.Exhibit 32.1
    
    Certification pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.Exhibit 32.2
    
    Certification pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
  b)
    
    Reports filed on Form 8-K: None. 35




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##### Table of Contents



SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. LEVITT CORPORATIONDate: August 12, 2004
    
    By:
    
    /s/ Alan B. LevanAlan B. Levan, Chief Executive OfficerDate: August 12, 2004
    
    By:
    
    /s/ Glen R. GilbertGlen R. Gilbert, Executive Vice President,Chief Accounting Officer andChief Financial Officer
 36