##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 COMMISSION FILE NUMBER: 001-32322
 TOUSA, INC.
  Delaware
    
    76-0460831(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)4000 Hollywood Blvd., Suite 500 NHollywood, Florida
    
    33021(Address of principal executive offices)
    
    (ZIP code)
 
 
 þ o
  o þ o
 o þ
 APPLICABLE ONLY TO CORPORATE ISSUERS:




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##### 



TOUSA,
INC. AND SUBSIDIARIES
 INDEX
 PAGEPART I. Financial Information
    
    
    3ITEM 1.
    
    Financial Statements (Unaudited)
    
    
    3Consolidated Statements of Financial Condition
    
    
    3Consolidated Statements of Operations
    
    
    4Consolidated Statement of Cash Flows
    
    
    5Notes to Unaudited Consolidated Financial Statements
    
    
    6ITEM 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    26ITEM 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    44ITEM 4.
    
    Controls and Procedures
    
    
    45PART II. Other Information
    
    
    45ITEM 1.
    
    Legal Proceedings
    
    
    45ITEM
1A.
    
    Risk Factors
    
    
    46ITEM 6.
    
    Exhibits
    
    
    47Signatures
    
    
    48EX-31.1 Section 302 CEO CertificationEX-31.2 Section 302 CFO CertificationEX-32.1 Section 906 CEO CertificationEX-32.2 Section 906 CFO Certification
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 TOUSA, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in millions, except par value)
 March 31, 2007
    
    
    December 31, 2006(Unaudited)ASSETSHOMEBUILDING:Cash and cash equivalents:Unrestricted
    
    $
    23.0
    
    
    $
    49.4Restricted
    
    
    3.8
    
    
    
    3.8Inventory:Deposits
    
    
    236.5
    
    
    
    229.6Homesites and land under development
    
    
    853.0
    
    
    
    751.7Residences completed and under construction
    
    
    762.1
    
    
    
    876.4Inventory not owned
    
    
    296.1
    
    
    
    338.52,147.7
    
    
    
    2,196.2Property and equipment, net
    
    
    29.9
    
    
    
    30.0Investments in unconsolidated joint ventures
    
    
    140.4
    
    
    
    129.0Receivables from unconsolidated joint ventures,
net of allowance of $54.6 million and $54.8
million at March 31, 2007 and December 31, 2006,
respectively
    
    
    42.8
    
    
    
    27.2Other assets
    
    
    287.8
    
    
    
    237.1Goodwill
    
    
    100.9
    
    
    
    104.02,776.3
    
    
    
    2,776.7FINANCIAL SERVICES:Cash and cash equivalents:Unrestricted
    
    
    7.2
    
    
    
    6.8Restricted
    
    
    3.9
    
    
    
    4.2Mortgage loans held for sale
    
    
    37.8
    
    
    
    41.9Other assets
    
    
    12.8
    
    
    
    12.661.7
    
    
    
    65.5Total assets
    
    $
    2,838.0
    
    
    $
    2,842.2LIABILITIES AND STOCKHOLDERS EQUITYHOMEBUILDING:Accounts payable and other liabilities
    
    $
    627.3
    
    
    $
    563.5Customer deposits
    
    
    59.3
    
    
    
    63.2Obligations for inventory not owned
    
    
    296.1
    
    
    
    338.5Notes payable
    
    
    1,060.8
    
    
    
    1,060.7Bank borrowings
    
    
    50.0
    
    
    
    2,093.5
    
    
    
    2,025.9FINANCIAL SERVICES:Accounts payable and other liabilities
    
    
    5.7
    
    
    
    6.0Bank borrowings
    
    
    30.2
    
    
    
    35.435.9
    
    
    
    41.4Total liabilities
    
    
    2,129.4
    
    
    
    2,067.3Commitments and contingenciesStockholders equity:Preferred stock  $0.01 par value; 3,000,000
shares authorized; none issued or outstanding
    
    
    
    
    
    
    Common stock  $0.01 par value; 97,000,000 shares
authorized and 59,604,169 and 59,590,519 shares
issued and outstanding at
March 31, 2007, and December 31, 2006, respectively
    
    
    0.6
    
    
    
    0.6Additional paid-in capital
    
    
    482.3
    
    
    
    481.2Retained earnings
    
    
    225.7
    
    
    
    293.1Total stockholders equity
    
    
    708.6
    
    
    
    774.9Total liabilities and stockholders equity
    
    $
    2,838.0
    
    
    $
    2,842.2
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TOUSA, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts)
(Unaudited)
 Three Months EndedMarch 31,2007
    
    
    2006HOMEBUILDING:Revenues:Home sales
    
    $
    584.9
    
    
    $
    586.3Land sales
    
    
    3.3
    
    
    
    28.0588.2
    
    
    
    614.3Cost of sales:Home sales
    
    
    464.9
    
    
    
    433.7Land sales
    
    
    2.4
    
    
    
    27.6Inventory impairments and abandonment costs
    
    
    42.0
    
    
    
    6.0Other
    
    
    (2.6
    )
    
    
    (3.4
    )506.7
    
    
    
    463.9Gross profit
    
    
    81.5
    
    
    
    150.4Selling, general and administrative expenses
    
    
    95.8
    
    
    
    97.4(Income) loss from unconsolidated joint ventures, net
    
    
    3.6
    
    
    
    (27.8
    )Provision for settlement of loss contingency
    
    
    78.9
    
    
    
    Goodwill impairment
    
    
    3.1
    
    
    
    Other (income) expense, net
    
    
    (0.6
    )
    
    
    (2.0
    )Homebuilding pretax income (loss)
    
    
    (99.3
    )
    
    
    82.8FINANCIAL SERVICES:Revenues
    
    
    12.0
    
    
    
    15.2Expenses
    
    
    9.3
    
    
    
    10.7Financial Services pretax income
    
    
    2.7
    
    
    
    4.5Income (loss) before provision (benefit) for income taxes
    
    
    (96.6
    )
    
    
    87.3Provision (benefit) for income taxes
    
    
    (30.6
    )
    
    
    32.3Net income (loss)
    
    $
    (66.0
    )
    
    $
    55.0EARNINGS (LOSS) PER COMMON SHARE:Basic
    
    $
    (1.11
    )
    
    $
    0.92Diluted
    
    $
    (1.11
    )
    
    $
    0.89WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:Basic
    
    
    59,594,917
    
    
    
    59,565,145Diluted
    
    
    59,594,917
    
    
    
    61,646,933CASH DIVIDENDS PER SHARE
    
    $
    
    
    
    $
    0.015
  4




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TOUSA, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
(Unaudited)
 Three Months EndedMarch 31,2007
    
    
    2006Cash flows from operating activities:Net income (loss)
    
    $
    (66.0
    )
    
    $
    55.0Adjustments to reconcile net income (loss) to net cash
used in operating activities:Depreciation and amortization
    
    
    3.8
    
    
    
    3.5Non-cash compensation expense
    
    
    1.1
    
    
    
    5.7Provision for settlement of loss contingency
    
    
    78.9
    
    
    
    Loss on impairment of inventory and abandonment costs
    
    
    42.0
    
    
    
    6.0Goodwill impairment
    
    
    3.1
    
    
    
    Deferred income taxes
    
    
    
    
    
    
    (2.1
    )Equity in earnings from unconsolidated joint ventures
    
    
    2.1
    
    
    
    (8.5
    )Distributions of earnings from unconsolidated joint ventures
    
    
    0.3
    
    
    
    13.2Loss on
impairment of investments in unconsolidated joint ventures
    
    
    5.5
    
    
    
    Changes in operating assets and liabilities:Restricted cash
    
    
    0.3
    
    
    
    0.6Inventory
    
    
    (18.3
    )
    
    
    (136.9
    )Receivables from unconsolidated joint ventures
    
    
    (18.6
    )
    
    
    (13.3
    )Other assets
    
    
    (49.2
    )
    
    
    (6.3
    )Mortgage loans held for sale
    
    
    4.1
    
    
    
    (5.7
    )Accounts payable and other liabilities
    
    
    (37.6
    )
    
    
    (55.8
    )Customer deposits
    
    
    (3.9
    )
    
    
    (1.4
    )Net cash used in operating activities
    
    
    (52.4
    )
    
    
    (146.0
    )Cash flows from investing activities:Net additions to property and equipment
    
    
    (3.3
    )
    
    
    (6.1
    )Investments in unconsolidated joint ventures
    
    
    (15.8
    )
    
    
    (4.6
    )Capital distributions from unconsolidated joint ventures
    
    
    2.7
    
    
    
    2.2Net cash used in investing activities
    
    
    (16.4
    )
    
    
    (8.5
    )Cash flows from financing activities:Net borrowings from revolving credit facilities
    
    
    50.0
    
    
    
    235.0Net (repayments of) proceeds from Financial Services bank
borrowings
    
    
    (5.2
    )
    
    
    5.6Payments for deferred financing costs
    
    
    (2.0
    )
    
    
    (2.8
    )Excess income tax benefit from exercise of stock options
    
    
    
    
    
    
    0.1Proceeds from stock option exercises
    
    
    
    
    
    
    0.2Dividends paid
    
    
    
    
    
    
    (0.9
    )Net cash provided by financing activities
    
    
    42.8
    
    
    
    237.2Increase (decrease) in cash and cash equivalents
    
    
    (26.0
    )
    
    
    82.7Cash and cash equivalents at beginning of period
    
    
    56.2
    
    
    
    34.9Cash and cash equivalents at end of period
    
    $
    30.2
    
    
    $
    117.6Supplemental disclosure of non-cash financing activities:Increase (decrease) in obligations for inventory not owned and
corresponding increase (decrease) in inventory not owned
    
    $
    (42.4
    )
    
    $
    107.9
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TOUSA, INC. AND SUBSIDIARIES
 
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2007
 1. Business and Organization
 Business
  Organization
  2. Summary of Significant Accounting Policies
 Principles of Consolidation and Basis of Presentation
    
    
    Impairment assessments of investments in unconsolidated joint ventures, long-lived assets, including our inventory,
and goodwill;
    
    Insurance and litigation related contingencies, including our accrual for settlement of loss contingency related to
the Transeastern Joint Venture (Transeastern JV);
    
    Realization of deferred income tax assets and liability for unrecognized tax benefits;
    
    Warranty reserves; and
    
    Estimated costs associated with construction and development activities in connection with our homebuilding operations.
  Interim Presentation
  6




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Earnings Per Share
   Three Months EndedMarch 31,2007
    
    2006Basic weighted average shares outstanding
    
    
    59,594,917
    
    
    
    59,565,145Net effect of common stock equivalents assumed
to be exercised
    
    
    
    
    
    
    2,081,788Diluted weighted average shares outstanding
    
    
    59,594,917
    
    
    
    61,646,933
 Revenue Recognition
 Accounting for
the Sales of Real Estate
 Recent Accounting Pronouncements
 Accounting for Servicing of Financial Assets Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities
 Accounting for Uncertainty in Income
Taxes-an interpretation of SFAS 109,
 Fair Value Measurements
 7




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Applicability of the Assessment of a Buyers Continuing Investment under FASB Statement No. 66,
Accounting for Sales of Real Estate, for Sales of Condominiums,
 The Fair Value Option for Financial Assets and
Financial Liabilities
 3. Inventory
  Three Months EndedMarch 31,2007
    
    
    2006Interest capitalized, beginning of period
    
    $
    71.8
    
    
    $
    47.7Interest incurred
    
    
    27.9
    
    
    
    22.8Less interest included in:Cost of sales
    
    
    (20.9
    )
    
    
    (17.7
    )Other
    
    
    (0.1
    )
    
    
    (0.3
    )Interest capitalized, end of period
    
    $
    78.7
    
    
    $
    52.5
  Consolidation of Variable Interest Entities
  8




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Accounting for the Impairment or Disposal of Long-Lived
Assets
 Three Months EndedMarch 31,2007
    
    
    2006Impairment charges on active communities:Florida
    
    $
    5.1
    
    
    $
    0.5Mid-Atlantic
    
    
    2.1
    
    
    
    3.1Texas
    
    
    0.1
    
    
    
    West
    
    
    0.7
    
    
    
    1.7Total impairment charges on active communities
    
    $
    8.0
    
    
    $
    5.3
 Three Months EndedMarch 31,2007
    
    
    2006Write-offs of deposits and abandonment costs:Florida
    
    $
    0.7
    
    
    $
    0.1Mid-Atlantic
    
    
    0.4
    
    
    
    0.2Texas
    
    
    3.0
    
    
    
    0.2West
    
    
    29.9
    
    
    
    0.2Total write-offs of deposits and abandonment costs
    
    $
    34.0
    
    
    $
    0.7
 9




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4. Transeastern Joint Venture
 The Equity
Method of Accounting for Investments in Common Stock
 10




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Accounting for Contingencies
 11




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5. Investments in Unconsolidated Joint Ventures (Excluding the Transeastern JV)
  March 31, 2007Engle/Sunbelt
    
    
    Others
    
    
    TotalAssets:Cash and cash equivalents
    
    $
    12.5
    
    
    $
    25.2
    
    
    $
    37.7Inventories
    
    
    222.3
    
    
    
    454.9
    
    
    
    677.2Other assets
    
    
    2.9
    
    
    
    9.5
    
    
    
    12.4Total assets
    
    $
    237.7
    
    
    $
    489.6
    
    
    $
    727.3Liabilities and equity:Accounts payable and other liabilities
    
    $
    46.7
    
    
    $
    78.1
    
    
    $
    124.8Notes payable
    
    
    127.1
    
    
    
    196.9
    
    
    
    324.0Equity of:TOUSA, Inc.
    
    
    54.3
    
    
    
    99.3
    
    
    
    153.6Others
    
    
    9.6
    
    
    
    115.3
    
    
    
    124.9Total equity
    
    
    63.9
    
    
    
    214.6
    
    
    
    278.5Total liabilities and equity
    
    $
    237.7
    
    
    $
    489.6
    
    
    $
    727.3
 December 31, 2006Engle/Sunbelt
    
    
    Others
    
    
    TotalAssets:Cash and cash equivalents
    
    $
    22.5
    
    
    $
    13.5
    
    
    $
    36.0Inventories
    
    
    246.6
    
    
    
    450.8
    
    
    
    697.4Other assets
    
    
    2.9
    
    
    
    9.5
    
    
    
    12.4Total assets
    
    $
    272.0
    
    
    $
    473.8
    
    
    $
    745.8Liabilities and equity:Accounts payable and other liabilities
    
    $
    44.9
    
    
    $
    89.3
    
    
    $
    134.2Notes payable
    
    
    161.3
    
    
    
    195.7
    
    
    
    357.0Equity of:TOUSA, Inc.
    
    
    56.6
    
    
    
    81.8
    
    
    
    138.4Others
    
    
    9.2
    
    
    
    107.0
    
    
    
    116.2Total equity
    
    
    65.8
    
    
    
    188.8
    
    
    
    254.6Total liabilities and equity
    
    $
    272.0
    
    
    $
    473.8
    
    
    $
    745.8
 12




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Three Months Ended March 31, 2007
    
    
    Three Months Ended March 31, 2006Engle/Sunbelt
    
    
    Others
    
    
    Total
    
    
    Engle/Sunbelt
    
    
    Others
    
    
    TotalRevenues
    
    $
    92.8
    
    
    $
    73.4
    
    
    $
    166.2
    
    
    $
    149.0
    
    
    $
    43.0
    
    
    $
    192.0Cost and expenses
    
    
    95.5
    
    
    
    72.0
    
    
    
    167.5
    
    
    
    126.0
    
    
    
    36.1
    
    
    
    162.1Net earnings (losses)
of unconsolidated
entities
    
    $
    (2.7
    )
    
    $
    1.4
    
    
    $
    (1.3
    )
    
    $
    23.0
    
    
    $
    6.9
    
    
    $
    29.9Our share of net
earnings (losses)
    
    $
    (2.4
    )
    
    $
    0.3
    
    
    $
    (2.1
    )
    
    $
    19.8
    
    
    $
    
    
    
    $
    19.8Management fees earned
    
    
    2.4
    
    
    
    1.3
    
    
    
    3.7
    
    
    
    1.7
    
    
    
    8.1
    
    
    
    9.8Income from joint
ventures
    
    $
    
    
    
    $
    1.6
    
    
    $
    1.6
    
    
    $
    21.5
    
    
    $
    8.1
    
    
    $
    29.6
    Engle/Sunbelt JV
    13




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TOUSA / Kolter Joint Venture
  6. Goodwill
   Three Months EndedMarch 31,2007
    
    
    2006Balance at January 1
    
    $
    104.0
    
    
    $
    108.8Impairment
    
    
    (3.1
    )
    
    
    Balance at March 31
    
    $
    100.9
    
    
    $
    108.8
 Goodwill and Other Intangible Assets
 7. Homebuilding and Financial Services Borrowings
 Homebuilding Borrowings
  14




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1 4 1 4
 Financial Services Borrowings
    15




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8. Income Taxes
 Accounting for Income Taxes
     9. Commitments and Contingencies
 Liquidity
 Warranty
  16




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Three Months EndedMarch 31,2007
    
    
    2006Accrued warranty costs at January 1
    
    $
    8.1
    
    
    $
    7.0Liability recorded for warranties issued during
the period
    
    
    2.8
    
    
    
    4.9Warranty work performed
    
    
    (2.3
    )
    
    
    (2.3
    )Adjustments
    
    
    (1.4
    )
    
    
    (1.3
    )Accrued warranty costs at March 31
    
    $
    7.2
    
    
    $
    8.3
 Letters of Credit and Performance Bonds
  Liquidity
     10. Stockholders Equity and Stock-Based Compensation
  17




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Accounting for Stock-Based Compensation Share-Based Payment
   WeightedAverageExerciseOptions
    
    PriceOptions outstanding at beginning of period
    
    
    7,712,574
    
    
    $
    13.04Granted
    
    
    189,552
    
    
    $
    9.45Exercised
    
    
    
    
    
    $
    Forfeited
    
    
    
    
    
    $
    Options outstanding at end of period
    
    
    7,902,126
    
    
    $
    12.82
  11. Operating and Reporting Segments
   Florida:
 Mid-Atlantic:
 Texas:
 West:
  18




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Three Months EndedMarch 31,2007
    
    
    2006Revenues:Homebuilding:Florida
    
    $
    257.3
    
    
    $
    266.0Mid-Atlantic
    
    
    52.2
    
    
    
    76.5Texas
    
    
    176.7
    
    
    
    160.4West
    
    
    102.0
    
    
    
    111.4Total Homebuilding
    
    
    588.2
    
    
    
    614.3Financial Services
    
    
    12.0
    
    
    
    15.2Total revenues
    
    $
    600.2
    
    
    $
    629.5(Income) loss from unconsolidated joint
ventures:Florida
    
    $
    3.4
    
    
    $
    1.8Mid-Atlantic
    
    
    1.9
    
    
    
    (1.1
    )Texas
    
    
    
    
    
    
    (0.2
    )West
    
    
    (1.7
    )
    
    
    (28.3
    )Total (income) loss from unconsolidated joint
ventures
    
    $
    3.6
    
    
    $
    (27.8
    )Results of Operations:Homebuilding:Florida
    
    $
    23.8
    
    
    $
    51.4Mid-Atlantic
    
    
    (3.6
    )
    
    
    4.6Texas
    
    
    8.4
    
    
    
    13.4West
    
    
    (29.6
    )
    
    
    32.1Financial Services
    
    
    2.7
    
    
    
    4.5Corporate and unallocated
    
    
    (98.3
    )
    
    
    (18.7
    )Income (loss) before provision for income taxes
    
    $
    (96.6
    )
    
    $
    87.3
 March 31,
    
    
    December 31,2007
    
    
    2006Assets:Homebuilding:Florida
    
    $
    912.0
    
    
    $
    892.9Mid-Atlantic
    
    
    232.2
    
    
    
    230.4Texas
    
    
    335.6
    
    
    
    335.4West
    
    
    732.4
    
    
    
    721.4Financial Services
    
    
    61.7
    
    
    
    65.5Corporate and unallocated
    
    
    564.1
    
    
    
    596.6Total assets
    
    $
    2,838.0
    
    
    $
    2,842.2Investments in Unconsolidated Joint
Ventures:Florida
    
    $
    31.8
    
    
    $
    29.4Mid-Atlantic
    
    
    5.9
    
    
    
    5.3Texas
    
    
    6.9
    
    
    
    6.8West
    
    
    95.8
    
    
    
    87.5Total Investments in Unconsolidated Joint
Ventures
    
    $
    140.4
    
    
    $
    129.0
 19




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##### Table of Contents



12. Subsequent Event
   20




---



##### Table of Contents



13. Summarized Financial Information
  
 TOUSA,
    
    
    Guarantor
    
    
    Non-guarantor
    
    
    IntercompanyInc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Total(Dollars in millions)ASSETSHOMEBUILDING:Cash and cash equivalents
    
    $
    12.4
    
    
    $
    14.4
    
    
    $
    
    
    
    $
    
    
    
    $
    26.8Inventory
    
    
    
    
    
    
    2,147.7
    
    
    
    
    
    
    
    
    
    
    
    2,147.7Property and equipment, net
    
    
    5.9
    
    
    
    24.0
    
    
    
    
    
    
    
    
    
    
    
    29.9Investments in unconsolidated joint ventures
    
    
    
    
    
    
    140.4
    
    
    
    
    
    
    
    
    
    
    
    140.4Receivables from unconsolidated joint ventures
    
    
    
    
    
    
    42.8
    
    
    
    
    
    
    
    
    
    
    
    42.8Investments in/ advances to consolidated
subsidiaries
    
    
    1,974.1
    
    
    
    (234.6
    )
    
    
    8.5
    
    
    
    (1,748.0
    )
    
    
    Other assets
    
    
    236.9
    
    
    
    50.9
    
    
    
    
    
    
    
    
    
    
    
    287.8Goodwill
    
    
    
    
    
    
    100.9
    
    
    
    
    
    
    
    
    
    
    
    100.92,229.3
    
    
    
    2,286.5
    
    
    
    8.5
    
    
    
    (1,748.0
    )
    
    
    2,776.3FINANCIAL SERVICES:Cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    11.1
    
    
    
    
    
    
    
    11.1Mortgage loans held for sale
    
    
    
    
    
    
    
    
    
    
    37.8
    
    
    
    
    
    
    
    37.8Other assets
    
    
    
    
    
    
    
    
    
    
    12.8
    
    
    
    
    
    
    
    12.8
    
    
    
    
    
    
    
    61.7
    
    
    
    
    
    
    
    61.7Total assets
    
    $
    2,229.3
    
    
    $
    2,286.5
    
    
    $
    70.2
    
    
    $
    (1,748.0
    )
    
    $
    2,838.0LIABILITIES AND STOCKHOLDERS EQUITYHOMEBUILDING:Accounts payable and other liabilities
    
    $
    409.9
    
    
    $
    217.4
    
    
    $
    
    
    
    $
    
    
    
    $
    627.3Customer deposits
    
    
    
    
    
    
    59.3
    
    
    
    
    
    
    
    
    
    
    
    59.3Obligations for inventory not owned
    
    
    
    
    
    
    296.1
    
    
    
    
    
    
    
    
    
    
    
    296.1Notes payable
    
    
    1,060.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,060.8Bank borrowings
    
    
    50.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50.01,520.7
    
    
    
    572.8
    
    
    
    
    
    
    
    
    
    
    
    2,093.5FINANCIAL SERVICES:Accounts payable and other liabilities
    
    
    
    
    
    
    
    
    
    
    5.7
    
    
    
    
    
    
    
    5.7Bank borrowings
    
    
    
    
    
    
    
    
    
    
    30.2
    
    
    
    
    
    
    
    30.2
    
    
    
    
    
    
    
    35.9
    
    
    
    
    
    
    
    35.9Total liabilities
    
    
    1,520.7
    
    
    
    572.8
    
    
    
    35.9
    
    
    
    
    
    
    
    2,129.4Total stockholders equity
    
    
    708.6
    
    
    
    1,713.7
    
    
    
    34.3
    
    
    
    (1,748.0
    )
    
    
    708.6Total liabilities and stockholders equity
    
    $
    2,229.3
    
    
    $
    2,286.5
    
    
    $
    70.2
    
    
    $
    (1,748.0
    )
    
    $
    2,838.0
 21




---



##### Table of Contents



Non-Guarantor
    
    
    guarantor
    
    
    IntercompanyTOUSA, Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Total(Dollars in millions)ASSETSHOMEBUILDING:Cash and cash equivalents
    
    $
    53.6
    
    
    $
    (0.4
    )
    
    $
    
    
    
    $
    
    
    
    $
    53.2Inventory
    
    
    
    
    
    
    2,196.2
    
    
    
    
    
    
    
    
    
    
    
    2,196.2Property and equipment, net
    
    
    6.5
    
    
    
    23.5
    
    
    
    
    
    
    
    
    
    
    
    30.0Investments in unconsolidated joint ventures
    
    
    
    
    
    
    129.0
    
    
    
    
    
    
    
    
    
    
    
    129.0Receivables from unconsolidated joint ventures
    
    
    
    
    
    
    27.2
    
    
    
    
    
    
    
    
    
    
    
    27.2Investments in/ advances to consolidated
subsidiaries
    
    
    1,933.4
    
    
    
    (188.9
    )
    
    
    8.2
    
    
    
    (1,752.7
    )
    
    
    Other assets
    
    
    190.1
    
    
    
    47.0
    
    
    
    
    
    
    
    
    
    
    
    237.1Goodwill
    
    
    
    
    
    
    104.0
    
    
    
    
    
    
    
    
    
    
    
    104.02,183.6
    
    
    
    2,337.6
    
    
    
    8.2
    
    
    
    (1,752.7
    )
    
    
    2,776.7FINANCIAL SERVICES:Cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    11.0
    
    
    
    
    
    
    
    11.0Mortgage loans held for sale
    
    
    
    
    
    
    
    
    
    
    41.9
    
    
    
    
    
    
    
    41.9Other assets
    
    
    
    
    
    
    
    
    
    
    12.6
    
    
    
    
    
    
    
    12.6
    
    
    
    
    
    
    
    65.5
    
    
    
    
    
    
    
    65.5Total assets
    
    $
    2,183.6
    
    
    $
    2,337.6
    
    
    $
    73.7
    
    
    $
    (1,752.7
    )
    
    $
    2,842.2LIABILITIES AND STOCKHOLDERS EQUITYHOMEBUILDING:Accounts payable and other liabilities
    
    $
    348.0
    
    
    $
    215.5
    
    
    $
    
    
    
    $
    
    
    
    $
    563.5Customer deposits
    
    
    
    
    
    
    63.2
    
    
    
    
    
    
    
    
    
    
    
    63.2Obligations for inventory not owned
    
    
    
    
    
    
    338.5
    
    
    
    
    
    
    
    
    
    
    
    338.5Notes payable
    
    
    1,060.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,060.7Bank borrowings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,408.7
    
    
    
    617.2
    
    
    
    
    
    
    
    
    
    
    
    2,025.9FINANCIAL SERVICES:Accounts payable and other liabilities
    
    
    
    
    
    
    
    
    
    
    6.0
    
    
    
    
    
    
    
    6.0Bank borrowings
    
    
    
    
    
    
    
    
    
    
    35.4
    
    
    
    
    
    
    
    35.4
    
    
    
    
    
    
    
    41.4
    
    
    
    
    
    
    
    41.4Total liabilities
    
    
    1,408.7
    
    
    
    617.2
    
    
    
    41.4
    
    
    
    
    
    
    
    2,067.3Total stockholders equity
    
    
    774.9
    
    
    
    1,720.4
    
    
    
    32.3
    
    
    
    (1,752.7
    )
    
    
    774.9Total liabilities and stockholders equity
    
    $
    2,183.6
    
    
    $
    2,337.6
    
    
    $
    73.7
    
    
    $
    (1,752.7
    )
    
    $
    2,842.2
 22




---



##### Table of Contents



Non-Guarantor
    
    
    guarantor
    
    
    IntercompanyTOUSA, Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Total(Dollars in millions)HOMEBUILDING:Revenues
    
    $
    
    
    
    $
    588.2
    
    
    $
    
    
    
    $
    
    
    
    $
    588.2Cost of sales
    
    
    
    
    
    
    506.7
    
    
    
    
    
    
    
    
    
    
    
    506.7Gross profit
    
    
    
    
    
    
    81.5
    
    
    
    
    
    
    
    
    
    
    
    81.5Selling, general and administrative expenses
    
    
    21.7
    
    
    
    76.8
    
    
    
    
    
    
    
    (2.7
    )
    
    
    95.8(Income) loss from unconsolidated joint
ventures, net
    
    
    
    
    
    
    3.6
    
    
    
    
    
    
    
    
    
    
    
    3.6Provision for settlement of loss contingency
    
    
    78.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    78.9Goodwill impairment
    
    
    
    
    
    
    3.1
    
    
    
    
    
    
    
    
    
    
    
    3.1Other (income) expenses, net
    
    
    (6.1
    )
    
    
    8.4
    
    
    
    
    
    
    
    (2.9
    )
    
    
    (0.6
    )Homebuilding pretax income (loss)
    
    
    (94.5
    )
    
    
    (10.4
    )
    
    
    
    
    
    
    5.6
    
    
    
    (99.3
    )FINANCIAL SERVICES:Revenues
    
    
    
    
    
    
    
    
    
    
    14.7
    
    
    
    (2.7
    )
    
    
    12.0Expenses
    
    
    
    
    
    
    
    
    
    
    11.1
    
    
    
    (1.8
    )
    
    
    9.3Financial Services pretax income
    
    
    
    
    
    
    
    
    
    
    3.6
    
    
    
    (0.9
    )
    
    
    2.7Income (loss) before provision (benefit)
for income taxes
    
    
    (94.5
    )
    
    
    (10.4
    )
    
    
    3.6
    
    
    
    4.7
    
    
    
    (96.6
    )Provision (benefit) for income taxes
    
    
    (28.5
    )
    
    
    (3.7
    )
    
    
    1.6
    
    
    
    
    
    
    
    (30.6
    )Net income (loss)
    
    $
    (66.0
    )
    
    $
    (6.7
    )
    
    $
    2.0
    
    
    $
    4.7
    
    
    $
    (66.0
    )
 
 Non-Guarantor
    
    
    guarantor
    
    
    IntercompanyTOUSA, Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Total(Dollars in millions)HOMEBUILDING:Revenues
    
    $
    
    
    
    $
    614.3
    
    
    $
    
    
    
    $
    
    
    
    $
    614.3Cost of sales
    
    
    
    
    
    
    463.9
    
    
    
    
    
    
    
    
    
    
    
    463.9Gross profit
    
    
    
    
    
    
    150.4
    
    
    
    
    
    
    
    
    
    
    
    150.4Selling, general and administrative expenses
    
    
    19.3
    
    
    
    79.1
    
    
    
    
    
    
    
    (1.0
    )
    
    
    97.4(Income) from unconsolidated joint
ventures, net
    
    
    
    
    
    
    (27.8
    )
    
    
    
    
    
    
    
    
    
    
    (27.8
    )Other (income) expenses, net
    
    
    (71.6
    )
    
    
    8.1
    
    
    
    
    
    
    
    61.5
    
    
    
    (2.0
    )Homebuilding pretax income (loss)
    
    
    52.3
    
    
    
    91.0
    
    
    
    
    
    
    
    (60.5
    )
    
    
    82.8FINANCIAL SERVICES:Revenues
    
    
    
    
    
    
    
    
    
    
    16.2
    
    
    
    (1.0
    )
    
    
    15.2Expenses
    
    
    
    
    
    
    
    
    
    
    12.6
    
    
    
    (1.9
    )
    
    
    10.7Financial Services pretax income
    
    
    
    
    
    
    
    
    
    
    3.6
    
    
    
    0.9
    
    
    
    4.5Income before provision (benefit) for
income taxes
    
    
    52.3
    
    
    
    91.0
    
    
    
    3.6
    
    
    
    (59.6
    )
    
    
    87.3Provision (benefit) for income taxes
    
    
    (2.7
    )
    
    
    33.7
    
    
    
    1.3
    
    
    
    
    
    
    
    32.3Net income
    
    $
    55.0
    
    
    $
    57.3
    
    
    $
    2.3
    
    
    $
    (59.6
    )
    
    $
    55.0
 23




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##### Table of Contents



Non-Guarantor
    
    
    guarantor
    
    
    IntercompanyTOUSA, Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Total(Dollars in millions)Net Cash Used in Operating Activities
    
    $
    (47.7
    )
    
    $
    (15.4
    )
    
    $
    6.0
    
    
    $
    4.7
    
    
    $
    (52.4
    )Cash Flows from Investing Activities:Net additions to property and equipment
    
    
    (0.3
    )
    
    
    (2.9
    )
    
    
    (0.1
    )
    
    
    
    
    
    
    (3.3
    )Investments in unconsolidated joint ventures
    
    
    
    
    
    
    (15.8
    )
    
    
    
    
    
    
    
    
    
    
    (15.8
    )Capital distributions from unconsolidated joint
ventures
    
    
    
    
    
    
    2.7
    
    
    
    
    
    
    
    
    
    
    
    2.7Net cash used in investing activities
    
    
    (0.3
    )
    
    
    (16.0
    )
    
    
    (0.1
    )
    
    
    
    
    
    
    (16.4
    )Cash Flows from Financing Activities:Net borrowings from revolving credit facility
    
    
    50.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50.0Net repayments on Financial Services bank
borrowings
    
    
    
    
    
    
    
    
    
    
    (5.2
    )
    
    
    
    
    
    
    (5.2
    )Payments for deferred financing costs
    
    
    (2.0
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.0
    )Increase (decrease) in intercompany transactions
    
    
    (40.7
    )
    
    
    45.7
    
    
    
    (0.3
    )
    
    
    (4.7
    )
    
    
    Net cash provided by (used in) financing
activities
    
    
    7.3
    
    
    
    45.7
    
    
    
    (5.5
    )
    
    
    (4.7
    )
    
    
    42.8Increase (decrease) in cash and cash equivalents
    
    
    (40.7
    )
    
    
    14.3
    
    
    
    0.4
    
    
    
    
    
    
    
    (26.0
    )Cash and cash equivalents at beginning of period
    
    
    50.6
    
    
    
    (1.2
    )
    
    
    6.8
    
    
    
    
    
    
    
    56.2Cash and cash equivalents at end of period
    
    $
    9.9
    
    
    $
    13.1
    
    
    $
    7.2
    
    
    $
    
    
    
    $
    30.2
 24




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##### Table of Contents



Non-Guarantor
    
    
    guarantor
    
    
    IntercompanyTOUSA, Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Total(Dollars in millions)Net Cash Used in Operating Activities
    
    $
    (32.8
    )
    
    $
    (50.7
    )
    
    $
    (2.9
    )
    
    $
    (59.6
    )
    
    $
    (146.0
    )Cash Flows from Investing Activities:Net additions to property and equipment
    
    
    (0.4
    )
    
    
    (5.0
    )
    
    
    (0.7
    )
    
    
    
    
    
    
    (6.1
    )Investments in unconsolidated joint ventures
    
    
    
    
    
    
    (4.6
    )
    
    
    
    
    
    
    
    
    
    
    (4.6
    )Capital distributions from unconsolidated joint
ventures
    
    
    
    
    
    
    2.2
    
    
    
    
    
    
    
    
    
    
    
    2.2Net cash used in investing activities
    
    
    (0.4
    )
    
    
    (7.4
    )
    
    
    (0.7
    )
    
    
    
    
    
    
    (8.5
    )Cash Flows from Financing Activities:Net borrowings from revolving credit facility
    
    
    235.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    235.0Net proceeds from Financial Services bank
borrowings
    
    
    
    
    
    
    
    
    
    
    5.6
    
    
    
    
    
    
    
    5.6Payments for deferred financing costs
    
    
    (2.8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.8
    )Excess income tax benefit from exercise of
stock options
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1Proceeds from stock option exercises
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.2Dividends paid
    
    
    (0.9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.9
    )Increase (decrease) in intercompany transactions
    
    
    (136.5
    )
    
    
    80.8
    
    
    
    (3.9
    )
    
    
    59.6
    
    
    
    Net cash provided by financing activities
    
    
    95.1
    
    
    
    80.8
    
    
    
    1.7
    
    
    
    59.6
    
    
    
    237.2Increase (decrease) in cash and cash equivalents
    
    
    61.9
    
    
    
    22.7
    
    
    
    (1.9
    )
    
    
    
    
    
    
    82.7Cash and cash equivalents at beginning of period
    
    
    20.2
    
    
    
    6.0
    
    
    
    8.7
    
    
    
    
    
    
    
    34.9Cash and cash equivalents at end of period
    
    $
    82.1
    
    
    $
    28.7
    
    
    $
    6.8
    
    
    $
    
    
    
    $
    117.6
 25




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   Executive Summary
  Florida
    
    Mid-Atlantic
    
    Texas
    
    WestCentral Florida
    
    Delaware
    
    Dallas/Ft. Worth
    
    Las VegasJacksonville
    
    Baltimore/Southern Pennsylvania
    
    Austin
    
    ColoradoSoutheast Florida
    
    Nashville
    
    Houston
    
    PhoenixSouthwest Florida
    
    Northern Virginia
    
    San AntonioTampa /St. Petersburg
     
    
    limiting new arrangements to acquire land;
    
    engaging in bulk sales of land and unsold homes;
    
    reducing the number of homes under construction;
 26




---



##### Table of Contents




    
    re-negotiating terms or abandoning our rights under option contracts;
    
    considering other asset dispositions including the possible sale of
underperforming assets, communities, divisions and joint venture
interests (see Recent Developments regarding our agreement to sell
our Dallas operations);
    
    reducing inventory target levels; and
    
    other initiatives designed to monetize our assets.
  Recent Developments
   Total Controlled Homesites by our Homebuilding Operations (Including Joint Ventures, excluding
the Transeastern JV)
    27




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##### Table of Contents



March 31, 2007
    
    December 31, 2006Total
    
    
    
    
    
    
    
    
    
    TotalOwned
    
    Optioned
    
    Controlled
    
    Owned
    
    Optioned
    
    ControlledConsolidated
    
    
    22,500
    
    
    
    31,800
    
    
    
    54,300
    
    
    
    22,200
    
    
    
    42,500
    
    
    
    64,700Unconsolidated joint ventures
    
    
    3,400
    
    
    
    1,300
    
    
    
    4,700
    
    
    
    2,900
    
    
    
    2,100
    
    
    
    5,000Combined total
    
    
    25,900
    
    
    
    33,100
    
    
    
    59,000
    
    
    
    25,100
    
    
    
    44,600
    
    
    
    69,700
 Owned and Optioned Land Summary for our Consolidated Operations
  March 31, 2007
    
    December 31, 2006Total
    
    
    
    
    
    
    
    
    
    TotalRegion
    
    Owned
    
    Optioned
    
    Controlled
    
    Owned
    
    Optioned
    
    ControlledFlorida
    
    
    6,800
    
    
    
    10,000
    
    
    
    16,800
    
    
    
    6,900
    
    
    
    11,000
    
    
    
    17,900Mid-Atlantic
    
    
    900
    
    
    
    2,600
    
    
    
    3,500
    
    
    
    800
    
    
    
    2,700
    
    
    
    3,500Texas
    
    
    4,000
    
    
    
    8,700
    
    
    
    12,700
    
    
    
    3,700
    
    
    
    10,900
    
    
    
    14,600West
    
    
    10,800
    
    
    
    10,500
    
    
    
    21,300
    
    
    
    10,800
    
    
    
    17,900
    
    
    
    28,700Total
    
    
    22,500
    
    
    
    31,800
    
    
    
    54,300
    
    
    
    22,200
    
    
    
    42,500
    
    
    
    64,700
  Residences Completed or
    
    Homesites Finished or
    
    Raw Land Held forUnder Construction
    
    Under Development
    
    Future Development
    
    TotalRegion
    
    3/31/07
    
    12/31/06
    
    3/31/07
    
    12/31/06
    
    3/31/07
    
    12/31/06
    
    3/31/07
    
    12/31/06Florida
    
    
    1,500
    
    
    
    1,700
    
    
    
    3,600
    
    
    
    3,500
    
    
    
    1,700
    
    
    
    1,700
    
    
    
    6,800
    
    
    
    6,900Mid-Atlantic
    
    
    300
    
    
    
    300
    
    
    
    600
    
    
    
    500
    
    
    
    
    
    
    
    
    
    
    
    900
    
    
    
    800Texas
    
    
    1,200
    
    
    
    1,200
    
    
    
    1,600
    
    
    
    1,400
    
    
    
    1,200
    
    
    
    1,100
    
    
    
    4,000
    
    
    
    3,700West
    
    
    600
    
    
    
    800
    
    
    
    2,300
    
    
    
    2,200
    
    
    
    7,900
    
    
    
    7,800
    
    
    
    10,800
    
    
    
    10,800Total
    
    
    3,600
    
    
    
    4,000
    
    
    
    8,100
    
    
    
    7,600
    
    
    
    10,800
    
    
    
    10,600
    
    
    
    22,500
    
    
    
    22,200
 Homebuilding Operations.
    28




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##### Table of Contents



Financial Services Operations
   Critical Accounting Policies
 Income Taxes
  Accounting for Uncertainty in Income
Taxes-an interpretation of SFAS 109,
  29




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##### Table of Contents



Results of Operations  Consolidated
 Three Months Ended March 31, 2007 Compared to Three Months Ended March 31, 2006
     Homebuilding
     30




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##### Table of Contents



Net Sales Orders and Homes in Backlog (consolidated)
    Net Sales Orders and Homes in Backlog (unconsolidated joint ventures excluding the
Transeastern JV)
    Financial Services
  31




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##### Table of Contents



Reportable Segments
  Homebuilding Operations
  Florida:
 Mid-Atlantic:
 Texas:
 West:
 Selected Homebuilding Operations and Financial Data
  Three Months EndedMarch 31,2007
    
    
    2006Revenues:Homebuilding Florida:Sales of homes
    
    $
    256.3
    
    
    $
    266.0Sales of land
    
    
    1.0
    
    
    
    Total Homebuilding Florida
    
    $
    257.3
    
    
    $
    266.0Homebuilding Mid-Atlantic:Sales of homes
    
    $
    52.2
    
    
    $
    70.0Sales of land
    
    
    
    
    
    
    6.5Total Homebuilding Mid-Atlantic
    
    $
    52.2
    
    
    $
    76.5Homebuilding Texas:Sales of homes
    
    $
    174.4
    
    
    $
    158.1Sales of land
    
    
    2.3
    
    
    
    2.3Total Homebuilding Texas
    
    $
    176.7
    
    
    $
    160.4Homebuilding West:Sales of homes
    
    $
    102.0
    
    
    $
    92.2Sales of land
    
    
    
    
    
    
    19.2Total Homebuilding West
    
    $
    102.0
    
    
    $
    111.4Total Homebuilding Revenues
    
    $
    588.2
    
    
    $
    614.3
 32




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##### Table of Contents



Three Months EndedMarch 31,2007
    
    
    2006Results of Operations:Homebuilding:Florida
    
    $
    23.8
    
    
    $
    51.4Mid-Atlantic
    
    
    (3.6
    )
    
    
    4.6Texas
    
    
    8.4
    
    
    
    13.4West
    
    
    (29.6
    )
    
    
    32.1Financial Services
    
    
    2.7
    
    
    
    4.5Corporate and unallocated
    
    
    (98.3
    )
    
    
    (18.7
    )Income (loss) before provision for income taxes
    
    $
    (96.6
    )
    
    $
    87.3
 Three Months EndedMarch 31,2007
    
    
    2006Impairment charges on active communities:Homebuilding:Florida
    
    $
    5.1
    
    
    $
    0.5Mid-Atlantic
    
    
    2.1
    
    
    
    3.1Texas
    
    
    0.1
    
    
    
    West
    
    
    0.7
    
    
    
    1.7Total impairment charges on active communities
    
    $
    8.0
    
    
    $
    5.3
 Three Months EndedMarch 31,2007
    
    
    2006Write-offs of deposits and abandonment costs:Homebuilding:Florida
    
    $
    0.7
    
    
    $
    0.1Mid-Atlantic
    
    
    0.4
    
    
    
    0.2Texas
    
    
    3.0
    
    
    
    0.2West
    
    
    29.9
    
    
    
    0.2Total write-offs of deposits and abandonment costs
    
    $
    34.0
    
    
    $
    0.7
 33




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##### Table of Contents



Three Months Ended March 31,2007
    
    2006Deliveries:
    
    Homes
    
    $
    
    Homes
    
    $Consolidated:Florida
    
    
    720
    
    
    $
    256.3
    
    
    
    746
    
    
    $
    266.0Mid-Atlantic
    
    
    152
    
    
    
    52.2
    
    
    
    162
    
    
    
    70.0Texas
    
    
    685
    
    
    
    174.4
    
    
    
    645
    
    
    
    158.1West
    
    
    274
    
    
    
    102.0
    
    
    
    321
    
    
    
    92.2Consolidated total
    
    
    1,831
    
    
    $
    584.9
    
    
    
    1,874
    
    
    $
    586.3Unconsolidated joint ventures:Florida*
    
    
    3
    
    
    $
    0.9
    
    
    
    
    
    
    $
    Mid-Atlantic
    
    
    1
    
    
    
    0.3
    
    
    
    60
    
    
    
    17.5West
    
    
    318
    
    
    
    101.2
    
    
    
    463
    
    
    
    168.5Total unconsolidated joint
ventures
    
    
    322
    
    
    $
    102.4
    
    
    
    523
    
    
    $
    186.0Combined total
    
    
    2,153
    
    
    $
    687.3
    
    
    
    2,397
    
    
    $
    772.3
 
 *
    
    Excludes Transeastern JV deliveries of 279 and 372,
including revenues of $73.0 million and $116.2 million for our
three months ended March 31, 2007 and 2006, respectively. Three Months Ended March 31,2007
    
    
    2006Net Sales Orders(1):
    
    Homes
    
    
    $
    
    
    Homes
    
    
    $Consolidated:Florida
    
    
    598
    
    
    $
    217.3
    
    
    
    626
    
    
    $
    254.8Mid-Atlantic
    
    
    221
    
    
    
    81.6
    
    
    
    159
    
    
    
    67.2Texas
    
    
    729
    
    
    
    184.1
    
    
    
    818
    
    
    
    203.2West
    
    
    253
    
    
    
    80.8
    
    
    
    554
    
    
    
    191.9Consolidated total
    
    
    1,801
    
    
    $
    563.8
    
    
    
    2,157
    
    
    $
    717.1Unconsolidated joint ventures:Florida*
    
    
    4
    
    
    $
    0.9
    
    
    
    11
    
    
    $
    4.0Mid-Atlantic
    
    
    3
    
    
    
    0.7
    
    
    
    43
    
    
    
    11.6West
    
    
    243
    
    
    
    63.9
    
    
    
    414
    
    
    
    141.3Total unconsolidated joint ventures
    
    
    250
    
    
    $
    65.5
    
    
    
    468
    
    
    $
    156.9Combined total
    
    
    2,051
    
    
    $
    629.3
    
    
    
    2,625
    
    
    $
    874.0
 
 (1)
    
    Net of cancellations*
    
    Excludes Transeastern JV net sales orders of 36 and 23
with a sales value of $(8.8) million and $18.0 million,
respectively, including cancellations of 272 and 56 for our
three months ended March 31, 2007 and 2006, respectively. March 31, 2007
    
    
    March 31, 2006Avg
    
    
    
    
    
    
    
    
    
    
    AvgSales Backlog:
    
    Homes
    
    
    $
    
    
    Price
    
    
    Homes
    
    
    $
    
    
    PriceConsolidated:Florida
    
    
    2,106
    
    
    $
    812.8
    
    
    $
    386
    
    
    
    2,817
    
    
    $
    1,025.5
    
    
    $
    364Mid-Atlantic
    
    
    275
    
    
    
    109.9
    
    
    $
    400
    
    
    
    243
    
    
    
    91.8
    
    
    $
    378Texas
    
    
    1,240
    
    
    
    338.4
    
    
    $
    273
    
    
    
    1,411
    
    
    
    364.6
    
    
    $
    258West
    
    
    440
    
    
    
    168.8
    
    
    $
    384
    
    
    
    1,084
    
    
    
    403.5
    
    
    $
    372Consolidated total
    
    
    4,061
    
    
    $
    1,429.9
    
    
    $
    352
    
    
    
    5,555
    
    
    $
    1,885.4
    
    
    $
    339Unconsolidated joint ventures:Florida*
    
    
    47
    
    
    $
    14.2
    
    
    $
    302
    
    
    
    47
    
    
    $
    13.4
    
    
    $
    284Mid-Atlantic
    
    
    5
    
    
    
    1.8
    
    
    $
    351
    
    
    
    75
    
    
    
    25.4
    
    
    $
    339West
    
    
    378
    
    
    
    118.5
    
    
    $
    314
    
    
    
    1,494
    
    
    
    558.3
    
    
    $
    374Total unconsolidated joint
ventures
    
    
    430
    
    
    $
    134.5
    
    
    $
    313
    
    
    
    1,616
    
    
    $
    597.1
    
    
    $
    369Combined total
    
    
    4,491
    
    
    $
    1,564.4
    
    
    $
    348
    
    
    
    7,171
    
    
    $
    2,482.5
    
    
    $
    346
 
 *
    
    Excludes for our three months ended March 31, 2007 and 2006, homes in
backlog of 454 and 2,729 with a sales value of $114.0 million and $788.1
million, respectively for the Transeastern JV. 34




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##### Table of Contents



Three Months Ended March 31,2007
    
    
    2006Sales
    
    
    
    
    
    
    SalesAverage Price:
    
    Deliveries
    
    
    Orders
    
    
    Deliveries
    
    
    OrdersConsolidated:Florida
    
    $
    356
    
    
    $
    363
    
    
    $
    357
    
    
    $
    407Mid-Atlantic
    
    $
    344
    
    
    $
    369
    
    
    $
    432
    
    
    $
    422Texas
    
    $
    255
    
    
    $
    253
    
    
    $
    245
    
    
    $
    248West
    
    $
    372
    
    
    $
    319
    
    
    $
    287
    
    
    $
    346Consolidated total
    
    $
    319
    
    
    $
    313
    
    
    $
    313
    
    
    $
    332Unconsolidated joint
ventures:Florida
    
    $
    291
    
    
    $
    229
    
    
    $
    
    
    
    $
    361Mid-Atlantic
    
    $
    281
    
    
    $
    244
    
    
    $
    292
    
    
    $
    268West
    
    $
    318
    
    
    $
    263
    
    
    $
    364
    
    
    $
    341Total unconsolidated
joint ventures
    
    $
    318
    
    
    $
    262
    
    
    $
    356
    
    
    $
    335Combined total
    
    $
    319
    
    
    $
    307
    
    
    $
    322
    
    
    $
    333
 Three Months Ended March 31, 2007 compared to Three Months Ended March 31, 2006
 Florida:
  Mid-Atlantic:
  Texas:
  35




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##### Table of Contents



West:
  Financial Services Operations
  Three Months EndedMarch 31,2007
    
    
    2006Revenues
    
    $
    12.0
    
    
    $
    15.2Expenses
    
    
    9.3
    
    
    
    10.7Financial Services pretax income
    
    $
    2.7
    
    
    $
    4.5
 FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
 Sources and Uses of Cash
     36




---



##### Table of Contents



Seasonality
  Financing Activities
 1 4 1 2 1 2
    37




---



##### Table of Contents



1 4 1 4
 pari passu pari passu
 38




---



##### Table of Contents



Homebuilding Net Debt to CapitalMarch 31, 2007
    
    
    December 31, 2006(Dollars in millions)Notes payable
    
    $
    1,060.8
    
    
    $
    1,060.7Bank borrowings
    
    
    50.0
    
    
    
    Homebuilding borrowings(1)
    
    $
    1,110.8
    
    
    $
    1,060.7Less: unrestricted cash
    
    
    23.0
    
    
    
    49.4Homebuilding net debt
    
    $
    1,087.8
    
    
    $
    1,011.3Stockholders equity
    
    
    708.6
    
    
    
    774.9Total capital(2)
    
    $
    1,796.4
    
    
    $
    1,786.2Ratio
    
    
    60.6
    %
    
    
    56.6
    %
 
 (1)
    
    Does not include obligations for inventory not owned of $296.1 million
at March 31, 2007 and $338.5 million at December 31, 2006, all of
which are non-recourse to us.(2)
    
    Does not include Financial Services bank borrowings of $30.2 million
at March 31, 2007 and $35.4 million at December 31, 2006.    39




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##### Table of Contents



Off Balance Sheet Arrangements
 Land and Homesite Option Contracts
   Investments in Unconsolidated Joint Ventures
   40




---



##### Table of Contents



TOUSA / Kolter Joint Venture
  Transeastern JV
 The Equity
Method of Accounting for Investments in Common Stock
 41




---



##### Table of Contents



Accounting for Contingencies
 42




---



##### Table of Contents



DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
  
    
    our expectations regarding population growth and median income growth trends and their impact on future housing
demand in our markets;
    
    our expectation regarding the impact of geographic and customer diversification;
    
    our expectations regarding our successful implementation of our asset management strategy and its impact on our
business;
    
    our belief that homes in premier locations will continue to attract homebuyers in both strong and weak economic
conditions;
    
    our expectations regarding future land sales;
    
    our belief regarding growth opportunities within our financial services business;
    
    our estimate that we have adequate financial resources to meet our current and anticipated working capital,
including our annual debt service payments, and land acquisition and development needs;
    
    the impact of inflation on our future results of operations;
    
    our expectations regarding our ability to pass through to our customers any increases in our costs;
    
    our expectations regarding our continued use of option contracts, investments in land development joint ventures;
    
    our expectations regarding the housing market in 2007 and 2008; and
    
    our expectations regarding our use of cash in operations.
  43




---



##### Table of Contents




    
    our significant level of debt and the impact of the restrictions imposed on us by the terms of this debt;
    
    our ability to borrow or otherwise finance our business in the future;
    
    our ability to identify and acquire, at anticipated prices, additional homebuilding opportunities and/or to effect our
growth strategies in our homebuilding operations and financial services business;
    
    our relationship with Technical Olympic S.A. and its control over our business activities;
    
    economic or other business conditions that affect the desire or ability of our customers to purchase new homes in
markets in which we conduct our business, such as increases in interest rates, inflation, or unemployment rates or
declines in median income growth, consumer confidence or the demand for, or the price of, housing;
    
    events which would impede our ability to open new communities and/or deliver homes within anticipated time frames
and/or within anticipated budgets;
    
    our ability to successfully enter into, utilize, and recognize the anticipated benefits of, joint ventures and option
contracts;
    
    a decline in the value of the land and home inventories we maintain;
    
    an increase in the cost of, or shortages in the availability of, qualified labor and materials;
    
    our ability to successfully dispose of developed properties or undeveloped land or homesites at expected prices and
within anticipated time frames;
    
    our ability to compete in our existing and future markets;
    
    the impact of hurricanes, tornadoes or other natural disasters or weather conditions on our business, including the
potential for shortages and increased costs of materials and qualified labor and the potential for delays in
construction and obtaining government approvals;
    
    an increase or change in government regulations, or in the interpretation and/or enforcement of existing government
regulations; and
    
    the impact of any or all of the above risks on the operations or financial results of our unconsolidated joint ventures.
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   44




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##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES
  
 PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 Deutsche Bank Trust Co. Americas v. Technical Olympic USA, Inc. and TOUSA Homes L.P
  45




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##### Table of Contents
















ITEM 1A. RISK FACTORS




46



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##### Table of Contents



ITEM 6. EXHIBITS
 ExhibitNumber
    
    Description31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 47




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##### Table of Contents



SIGNATURES
  TOUSA, Inc.Date:  May 10, 2007
    By:
    /s/ STEPHEN M. WAGMANName:
    Stephen M. WagmanTitle:
    Executive Vice President and
Chief Financial OfficerDate:  May 10, 2007
    By:
    /s/ RANDY L. KOTLERName:
    Randy L. KotlerTitle:
    Senior Vice President and Chief
Accounting Officer 48