##### 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 June 30, 2008
 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 400 NHollywood, Florida
    
    33021(Address of principal executive offices)
    
    (ZIP code)
 
 
 o þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ
 APPLICABLE ONLY TO CORPORATE ISSUERS:




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##### 



TOUSA, INC. AND SUBSIDIARIES
DEBTOR-IN-POSSESSION
INDEX
 PAGEPART I. Financial Information
    
    
    3ITEM 1. Consolidated Financial Statements (Unaudited)
    
    
    3Consolidated Statements of Financial Condition
    
    
    3Consolidated Statements of Operations
    
    
    4Consolidated Statement of Stockholders (Deficit) Equity
    
    
    5Consolidated Statements of Cash Flows
    
    
    6Notes to Unaudited Consolidated Financial Statements
    
    
    8ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    40ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    64ITEM 4. Controls and Procedures
    
    
    64PART II. Other Information
    
    
    65ITEM 1. Legal Proceedings
    
    
    65ITEM 1A. Risk Factors
    
    
    67ITEM 6. Exhibits
    
    
    68Signatures
    
    
    69EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 TOUSA, INC. AND SUBSIDIARIES
DEBTOR-IN-POSSESSION
 
 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 (Dollars in millions, except par value)
 June 30, 2008
    
    
    December 31, 2007(Unaudited)ASSETSHOMEBUILDING:Cash and cash equivalents:Unrestricted
    
    $
    192.4
    
    
    $
    67.2Restricted
    
    
    185.8
    
    
    
    5.1Inventory:Deposits
    
    
    30.2
    
    
    
    56.9Homesites and land under development
    
    
    288.1
    
    
    
    633.0Residences completed and under construction
    
    
    337.9
    
    
    
    555.9Inventory not owned
    
    
    10.3
    
    
    
    26.0666.5
    
    
    
    1,271.8Property and equipment, net
    
    
    19.0
    
    
    
    24.6Investments in unconsolidated joint ventures
    
    
    8.7
    
    
    
    9.0Receivables from unconsolidated joint ventures
    
    
    0.1
    
    
    
    0.3Other assets
    
    
    61.3
    
    
    
    330.0Goodwill
    
    
    
    
    
    
    11.2Assets held for sale
    
    
    2.9
    
    
    
    6.11,136.7
    
    
    
    1,725.3FINANCIAL SERVICES:Cash and cash equivalents:Unrestricted
    
    
    11.3
    
    
    
    9.3Restricted
    
    
    4.3
    
    
    
    5.6Mortgage loans held for sale
    
    
    6.1
    
    
    
    15.0Other assets
    
    
    4.1
    
    
    
    6.825.8
    
    
    
    36.7Total assets
    
    $
    1,162.5
    
    
    $
    1,762.0LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITYHOMEBUILDING:Accounts payable and other liabilities
    
    $
    130.8
    
    
    $
    401.8Customer deposits
    
    
    21.8
    
    
    
    33.9Obligations for inventory not owned
    
    
    
    
    
    
    32.0Notes payable
    
    
    
    
    
    
    1,585.3Bank borrowings
    
    
    
    
    
    
    168.5Liabilities associated with assets held for sale
    
    
    0.2
    
    
    
    0.9152.8
    
    
    
    2,222.4FINANCIAL SERVICES:Accounts payable and other liabilities
    
    
    4.7
    
    
    
    7.3Bank borrowings
    
    
    
    
    
    
    7.84.7
    
    
    
    15.1Total liabilities not subject to compromise
    
    
    157.5
    
    
    
    2,237.5Liabilities subject to compromise (Note 2)
    
    
    2,143.8
    
    
    
    Total liabilities
    
    
    2,301.3
    
    
    
    2,237.5Commitments and contingenciesStockholders (deficit) equity:Preferred stock  $0.01 par value; 3,000,000 shares
authorized; 117,500 issued and outstanding at June
30, 2008 and December 31, 2007
    
    
    9.1
    
    
    
    3.9Common stock  $0.01 par value; 975,000,000 shares
authorized; 59,604,169 shares issued and
outstanding at June 30, 2008 and December 31, 2007
    
    
    0.6
    
    
    
    0.6Additional paid-in capital
    
    
    567.2
    
    
    
    570.7Accumulated deficit
    
    
    (1,715.7
    )
    
    
    (1,050.7
    )Total stockholders (deficit) equity
    
    
    (1,138.8
    )
    
    
    (475.5
    )Total liabilities and stockholders (deficit) equity
    
    $
    1,162.5
    
    
    $
    1,762.0
  3




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##### Table of Contents



TOUSA, INC. AND SUBSIDIARIES
DEBTOR-IN-POSSESSION
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Dollars in millions, except per share amounts)
 (Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007HOMEBUILDING:Revenues:Home sales
    
    $
    276.9
    
    
    $
    535.3
    
    
    $
    567.8
    
    
    $
    1,092.7Land sales
    
    
    17.3
    
    
    
    30.4
    
    
    
    21.7
    
    
    
    33.7294.2
    
    
    
    565.7
    
    
    
    589.5
    
    
    
    1,126.4Cost of sales:Home sales
    
    
    260.8
    
    
    
    437.9
    
    
    
    519.0
    
    
    
    879.9Land sales
    
    
    12.1
    
    
    
    26.8
    
    
    
    16.8
    
    
    
    29.1Inventory impairments and abandonment costs
    
    
    304.7
    
    
    
    84.8
    
    
    
    477.0
    
    
    
    123.9Other
    
    
    
    
    
    
    (1.6
    )
    
    
    
    
    
    
    (4.2
    )577.6
    
    
    
    547.9
    
    
    
    1,012.8
    
    
    
    1,028.7Gross profit (loss)
    
    
    (283.4
    )
    
    
    17.8
    
    
    
    (423.3
    )
    
    
    97.7Selling, general and administrative expenses
    
    
    55.6
    
    
    
    85.0
    
    
    
    109.8
    
    
    
    176.4Loss (income) from unconsolidated joint ventures, net
    
    
    
    
    
    
    1.5
    
    
    
    (0.3
    )
    
    
    (0.4
    )Impairment (recovery) of investments in and
receivables from unconsolidated joint ventures
    
    
    (9.3
    )
    
    
    
    
    
    
    (8.8
    )
    
    
    5.5Provision for settlement of loss contingency
    
    
    
    
    
    
    32.0
    
    
    
    
    
    
    
    110.9Goodwill impairments
    
    
    11.2
    
    
    
    38.2
    
    
    
    11.2
    
    
    
    38.2Interest expense (see Note 3 for contractual interest)
    
    
    16.7
    
    
    
    0.1
    
    
    
    36.8
    
    
    
    0.2Other income, net
    
    
    (0.5
    )
    
    
    (1.4
    )
    
    
    (1.9
    )
    
    
    (2.1
    )Homebuilding pretax loss
    
    
    (357.1
    )
    
    
    (137.6
    )
    
    
    (570.1
    )
    
    
    (231.0
    )FINANCIAL SERVICES:Revenues
    
    
    3.3
    
    
    
    11.0
    
    
    
    9.1
    
    
    
    23.0Expenses
    
    
    6.4
    
    
    
    8.7
    
    
    
    13.4
    
    
    
    18.0Financial Services pretax income (loss)
    
    
    (3.1
    )
    
    
    2.3
    
    
    
    (4.3
    )
    
    
    5.0Loss from continuing operations before reorganization
items and taxes
    
    
    (360.2
    )
    
    
    (135.3
    )
    
    
    (574.4
    )
    
    
    (226.0
    )Reorganization items, net (see Note 2)
    
    
    18.2
    
    
    
    
    
    
    
    86.7
    
    
    
    Provision (benefit) for income taxes
    
    
    0.7
    
    
    
    (13.2
    )
    
    
    0.7
    
    
    
    (41.7
    )Loss from continuing operations, net of taxes
    
    
    (379.1
    )
    
    
    (122.1
    )
    
    
    (661.8
    )
    
    
    (184.3
    )Discontinued operations:Loss from discontinued operations
    
    
    (0.6
    )
    
    
    (2.0
    )
    
    
    (3.2
    )
    
    
    (7.9
    )Loss from disposal of discontinued operations
    
    
    
    
    
    
    (13.6
    )
    
    
    
    
    
    
    (13.6
    )Benefit for income taxes
    
    
    
    
    
    
    (5.7
    )
    
    
    
    
    
    
    (7.8
    )Loss from discontinued operations, net of taxes
    
    
    (0.6
    )
    
    
    (9.9
    )
    
    
    (3.2
    )
    
    
    (13.7
    )Net loss
    
    
    (379.7
    )
    
    
    (132.0
    )
    
    
    (665.0
    )
    
    
    (198.0
    )Dividends and accretion of discount on preferred stock
    
    
    2.5
    
    
    
    
    
    
    
    5.2
    
    
    
    Net loss available to common stockholders
    
    $
    (382.2
    )
    
    $
    (132.0
    )
    
    $
    (670.2
    )
    
    $
    (198.0
    )LOSS PER COMMON SHARE, BASIC AND DILUTED:Loss from continuing operations
    
    $
    (6.40
    )
    
    $
    (2.04
    )
    
    $
    (11.19
    )
    
    $
    (3.09
    )Loss from discontinued operations
    
    
    (0.01
    )
    
    
    (0.17
    )
    
    
    (0.05
    )
    
    
    (0.23
    )Loss per common share
    
    $
    (6.41
    )
    
    $
    (2.21
    )
    
    $
    (11.24
    )
    
    $
    (3.32
    )WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:Basic
    
    
    59,604,169
    
    
    
    59,604,169
    
    
    
    59,604,169
    
    
    
    59,599,569Diluted
    
    
    59,604,169
    
    
    
    59,604,169
    
    
    
    59,604,169
    
    
    
    59,599,569
  4




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TOUSA, INC. AND SUBSIDIARIES
DEBTOR-IN-POSSESSION
 
 CONSOLIDATED STATEMENT OF STOCKHOLDERS (DEFICIT) EQUITY
 (Dollars in millions)
 (Unaudited)
 Additional
    
    
    
    
    
    
    TotalPreferred Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    Accumulated
    
    
    StockholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    (Deficit) EquityBalance at January 1,
2008
    
    
    117,500
    
    
    $
    3.9
    
    
    
    59,604,169
    
    
    $
    0.6
    
    
    $
    570.7
    
    
    $
    (1,050.7
    )
    
    $
    (475.5
    )Stock option compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.7
    
    
    
    
    
    
    
    1.7Dividends and accretion
of preferred stock
    
    
    
    
    
    
    5.2
    
    
    
    
    
    
    
    
    
    
    
    (5.2
    )
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (665.0
    )
    
    
    (665.0
    )Balance at June 30, 2008
    
    
    117,500
    
    
    $
    9.1
    
    
    
    59,604,169
    
    
    $
    0.6
    
    
    $
    567.2
    
    
    $
    (1,715.7
    )
    
    $
    (1,138.8
    )
  5




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##### Table of Contents



TOUSA, INC. AND SUBSIDIARIES
DEBTOR-IN-POSSESSION
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in millions)
 (Unaudited)
 Six Months EndedJune 30,2008
    
    
    2007Cash flows from operating activities:Net loss
    
    $
    (665.0
    )
    
    $
    (198.0
    )Loss from discontinued operations
    
    
    3.2
    
    
    
    13.7Loss from continuing operations
    
    
    (661.8
    )
    
    
    (184.3
    )Adjustments to reconcile loss from continuing operations to net cash provided by
(used in) operating activities:Depreciation and amortization expense
    
    
    7.6
    
    
    
    7.4Non-cash compensation expense
    
    
    1.7
    
    
    
    2.1Non-cash interest expense
    
    
    25.4
    
    
    
    Reorganization items, net
    
    
    86.7
    
    
    
    Provision for settlement of loss contingency
    
    
    
    
    
    
    110.9Inventory impairments and abandonment costs
    
    
    477.0
    
    
    
    123.9Goodwill impairments
    
    
    11.2
    
    
    
    38.2Write-down of receivables
    
    
    5.7
    
    
    
    Deferred income taxes
    
    
    
    
    
    
    (27.9
    )Loss (income) from unconsolidated joint ventures
    
    
    (0.3
    )
    
    
    9.4Distributions of earnings from unconsolidated joint ventures
    
    
    0.2
    
    
    
    0.6Impairment of investments in and receivables from unconsolidated joint ventures
    
    
    (8.8
    )
    
    
    5.5Changes in operating assets and liabilities, net of effects of dispositions:Restricted cash
    
    
    (179.4
    )
    
    
    0.7Inventory
    
    
    113.1
    
    
    
    (45.9
    )Receivables from unconsolidated joint ventures
    
    
    (3.7
    )
    
    
    (23.9
    )Other assets
    
    
    222.8
    
    
    
    (52.5
    )Mortgage loans held for sale
    
    
    8.9
    
    
    
    5.7Accounts payable and other liabilities
    
    
    15.0
    
    
    
    (45.4
    )Customer deposits
    
    
    (12.1
    )
    
    
    (7.7
    )Net cash provided by (used in) operating activities
    
    
    109.2
    
    
    
    (83.2
    )Cash flows from investing activities:Net additions to property and equipment
    
    
    (0.4
    )
    
    
    (7.5
    )Investments in unconsolidated joint ventures
    
    
    (1.6
    )
    
    
    (21.1
    )Capital distributions from unconsolidated joint ventures
    
    
    
    
    
    
    9.7Net cash used in investing activities
    
    
    (2.0
    )
    
    
    (18.9
    )Cash flows from financing activities:Net borrowings from revolving credit facilities
    
    
    31.5
    
    
    
    50.0Net repayments of Financial Services bank borrowings
    
    
    (7.8
    )
    
    
    (6.8
    )Payments for deferred financing costs
    
    
    (2.9
    )
    
    
    (11.2
    )Net cash provided by financing activities
    
    
    20.8
    
    
    
    32.0Net cash provided by (used in) continuing operations
    
    
    128.0
    
    
    
    (70.1
    )Cash flows from discontinued operations:Net cash used in operating activities
    
    
    (0.8
    )
    
    
    (8.5
    )Net cash provided by investing activities
    
    
    
    
    
    
    52.3Net cash provided by (used in) discontinued operations
    
    
    (0.8
    )
    
    
    43.8
 6




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##### Table of Contents



Six Months EndedJune 30,2008
    
    
    2007Increase (decrease) in cash and cash equivalents
    
    
    127.2
    
    
    
    (26.3
    )Cash and cash equivalents at beginning of period
    
    
    76.5
    
    
    
    54.2Cash and cash equivalents at end of period
    
    $
    203.7
    
    
    $
    27.9Supplemental disclosure of non-cash financing activities:Decrease in inventory not owned
    
    $
    (15.7
    )
    
    $
    (79.5
    )Decrease in obligations for inventory not owned
    
    $
    (15.3
    )
    
    $
    (73.5
    )Supplemental disclosure of non-cash investing activities:Refer to Note 3 for the consolidation of variable interest entities in accordance with FIN 46R.
  7




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##### Table of Contents



TOUSA, INC. AND SUBSIDIARIES
DEBTOR-IN-POSSESSION
 
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 June 30, 2008
 1. Business and Organization
 Business
  Organization
  Chapter 11 Cases
 www.kccllc.net/tousa
      8




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##### Table of Contents



http://www.tousa.com/reorg.
  
    
    our ability to generate and maintain adequate cash;
    
    the cost, duration and outcome of the restructuring process;
    
    our ability to comply with the terms of our cash collateral order and
seek and receive extensions of our ability to use cash collateral; and
    
    our ability to retain key employees.
   
    
    limiting new arrangements to acquire land (by submitting proposals to increased review);
    
    engaging in bulk sales of land and unsold homes;
    
    reducing the number of unsold homes under construction and limiting and/or curtailing
development activities in any development where we do not expect to deliver homes in
the near future or where development is necessary to retain entitlements or sell land;
    
    renegotiating terms or abandoning our rights under option and land bank contracts;
    
    considering other asset dispositions including the possible sale and/or wind down of
underperforming assets, communities, divisions and joint venture interests; and
    
    pursuing other initiatives designed to monetize our assets.
 9




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##### Table of Contents



Mortgage Joint Venture
  2. Summary of Significant Accounting Policies
 Principles of Consolidation and Basis of Presentation
   Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code Accounting for Contingencies
  Three Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30, 2008
    
    
    June 30, 2008Professional fees
    
    $
    15.3
    
    
    $
    22.8Write-off of deferred finance costs
    
    
    3.0
    
    
    
    54.4Write-off of debt premium and discounts
    
    
    
    
    
    
    11.9Interest income
    
    
    (0.1
    )
    
    
    (0.1
    )Reversal of previously recorded interest expense
    
    
    
    
    
    
    (2.3
    )Total reorganization items, net
    
    $
    18.2
    
    
    $
    86.7
  10




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##### Table of Contents



Revolving Loan Facility(1)
    
    $
    272.8First Lien Term Loan Facility due 2012(1)
    
    
    199.0Second Lien Term Loan Facility due 2013(1)
    
    
    340.5Senior notes due 2010, at 9% (1)
    
    
    300.0Senior notes due 2011, at 8 1/4%(1)
    
    
    250.0Senior subordinated notes due 2012, at 10 3/8%(1)
    
    
    185.0Senior subordinated notes due 2011, at 7 1/2%(1)
    
    
    125.0Senior subordinated notes due 2015, at 7 1/2%(1)
    
    
    200.0Senior Subordinated PIK Notes due 2015, at 14 3/4%(1)
    
    
    23.1Accrued interest on notes payable
    
    
    47.2Accounts payable and other liabilities
    
    
    184.5Obligations for inventory not owned(2)
    
    
    16.7Total liabilities subject to compromise
    
    $
    2,143.8
 
 (1)
    
    See Note 9(2)
    
    See Note 3  
    
    impairment assessments of investments in unconsolidated joint ventures, long-lived
assets, including our inventory, and goodwill;
    
    loss exposures associated with the abandonment of our rights under option and/or land
bank contracts, the relinquishment of our rights under certain joint ventures and
obligations under joint venture debt agreements and under performance bonds;
    
    classification of liabilities subject to compromise;
    
    insurance and litigation related contingencies;
    
    realization of deferred income tax assets and liability for unrecognized tax benefits; and
    
    estimated costs associated with construction and development activities in connection
with our homebuilding operations.
   Interim Presentation
  Loss per Common Share
 11




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##### Table of Contents



Revenue Recognition
  Accounting for the Sales of Real Estate
 Fair Value Disclosures
 Fair Value Measurements
 Level 1
    
    Fair value determined based on quoted prices in active markets for identical assets or liabilities.Level 2
    
    Fair value determined using significant observable inputs either directly or indirectly through corroboration with market data.Level 3
    
    Fair value determined using significant unobservable inputs, such as pricing models, discounted cash flows, or similar
techniques.
  Fair ValueFinancial Instrument
    
    Hierarchy
    
    Fair ValueAssets:Mortgage loans held for sale
    
    Level 2
    
    $
    6.1
  Recent Accounting Pronouncements
 Accounting for
Leases
 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
 12




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##### Table of Contents



Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements  an amendment of Accounting Research Bulletin No. 51
 , Accounting
for Transfers of Financial Assets and Repurchase Financing Transactions Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities )
 Disclosures about Derivative Instruments and
Hedging Activities
 An Amendment of AICPA Statement of
Position 90-7
 Equity Method Investment Accounting
Considerations
  3. Inventory
  June 30, 2008ResidencesHomesites and
    
    
    Completed andLand Under
    
    
    Under
    
    
    Inventory
    
    
    TotalRegion
    
    Deposits
    
    
    Development
    
    
    Construction
    
    
    Not Owned
    
    
    InventoryFlorida
    
    $
    0.1
    
    
    $
    140.0
    
    
    $
    146.7
    
    
    $
    
    
    
    $
    286.8Mid-Atlantic
    
    
    4.7
    
    
    
    12.5
    
    
    
    24.7
    
    
    
    
    
    
    
    41.9Texas
    
    
    11.9
    
    
    
    56.1
    
    
    
    103.1
    
    
    
    1.2
    
    
    
    172.3West
    
    
    13.5
    
    
    
    79.5
    
    
    
    63.4
    
    
    
    9.1
    
    
    
    165.5Total
    
    $
    30.2
    
    
    $
    288.1
    
    
    $
    337.9
    
    
    $
    10.3
    
    
    $
    666.5
 13




---



##### Table of Contents



December 31, 2007ResidencesHomesites and
    
    
    Completed andLand Under
    
    
    Under
    
    
    Inventory
    
    
    TotalRegion
    
    Deposits
    
    
    Development
    
    
    Construction
    
    
    Not Owned
    
    
    InventoryFlorida
    
    $
    10.2
    
    
    $
    294.7
    
    
    $
    320.1
    
    
    $
    8.1
    
    
    $
    633.1Mid-Atlantic
    
    
    7.9
    
    
    
    21.8
    
    
    
    28.6
    
    
    
    
    
    
    
    58.3Texas
    
    
    15.6
    
    
    
    73.3
    
    
    
    111.9
    
    
    
    3.1
    
    
    
    203.9West
    
    
    23.2
    
    
    
    243.2
    
    
    
    95.3
    
    
    
    14.8
    
    
    
    376.5Total
    
    $
    56.9
    
    
    $
    633.0
    
    
    $
    555.9
    
    
    $
    26.0
    
    
    $
    1,271.8
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Interest capitalized, beginning of period
    
    $
    78.6
    
    
    $
    76.3
    
    
    $
    77.8
    
    
    $
    68.7Interest incurred(1)(2)
    
    
    27.9
    
    
    
    29.4
    
    
    
    65.2
    
    
    
    56.7Less interest included in:Cost of sales
    
    
    (19.8
    )
    
    
    (23.1
    )
    
    
    (35.8
    )
    
    
    (43.4
    )Interest expense
    
    
    (16.7
    )
    
    
    (0.1
    )
    
    
    (36.8
    )
    
    
    (0.2
    )Other adjustments
    
    
    0.1
    
    
    
    (0.9
    )
    
    
    (0.3
    )
    
    
    (0.2
    )Interest capitalized, end of period(3)
    
    $
    70.1
    
    
    $
    81.6
    
    
    $
    70.1
    
    
    $
    81.6
 
 (1)
    
    Included in interest incurred is the amortization of deferred finance costs which
amounted to $1.5 million and $1.6 million for the three months ended June 30, 2008 and June
30, 2007, respectively, and $4.3 million and $2.7 million for the six months ended June 30,
2008 and June 30, 2007, respectively.(2)
    
    Had we not filed voluntary petitions for relief under Chapter 11, contractual
interest incurred for the three and six months ended June 30, 2008 is $36.7 million and
$91.6 million, respectively, a portion of which would have been capitalized. Interest on
our senior and senior subordinated notes stopped accruing upon filing for Chapter 11. See
Note 9.(3)
    
    We have incurred significant inventory impairments in recent years, which are
determined based on total inventory, including capitalized interest. However, the
capitalized interest amounts above are gross amounts before allocating any portion of the
impairments to capitalized interest.  Financing Transactions under SFAS 66
  14




---



##### Table of Contents



Consolidation of Variable Interest Entities Under FIN 46(R)
 Consolidation of Variable Interest Entities
   Inventory Impairments and Abandonment Costs
 Accounting for the Impairment or Disposal of Long-Lived
Assets
   15




---



##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Impairment charges on active communities:Florida
    
    $
    132.0
    
    
    $
    23.6
    
    
    $
    205.9
    
    
    $
    28.7Mid-Atlantic
    
    
    5.9
    
    
    
    4.5
    
    
    
    12.5
    
    
    
    6.6Texas
    
    
    2.1
    
    
    
    0.5
    
    
    
    3.1
    
    
    
    0.6West
    
    
    35.5
    
    
    
    12.8
    
    
    
    55.7
    
    
    
    13.5175.5
    
    
    
    41.4
    
    
    
    277.2
    
    
    
    49.4Write-offs of deposits and abandonment costs:Florida
    
    
    14.3
    
    
    
    12.1
    
    
    
    36.4
    
    
    
    12.8Mid-Atlantic
    
    
    9.2
    
    
    
    13.5
    
    
    
    9.4
    
    
    
    13.9Texas
    
    
    5.5
    
    
    
    0.2
    
    
    
    6.8
    
    
    
    0.3West
    
    
    100.2
    
    
    
    17.6
    
    
    
    147.2
    
    
    
    47.5129.2
    
    
    
    43.4
    
    
    
    199.8
    
    
    
    74.5Inventory impairments and abandonment costs
    
    $
    304.7
    
    
    $
    84.8
    
    
    $
    477.0
    
    
    $
    123.9Remaining carrying value of inventory
impaired at end of period
    
    $
    529.4
    
    
    $
    696.0
    
    
    $
    529.4
    
    
    $
    696.0Number of projects impaired during the period
    
    
    168
    
    
    
    115
    
    
    
    224
    
    
    
    131Total number of projects included in
inventory and reviewed for impairment during
the period
    
    
    354
    
    
    
    457
    
    
    
    354
    
    
    
    457
 4. Transeastern Joint Venture
     
    
    the Transeastern JV became a wholly-owned subsidiary of ours by merger
into one of our subsidiaries, which became a guarantor on our credit
facilities and note indentures (the acquisition was accounted for
using the purchase method of accounting and results of operations have
been included in our consolidated results beginning on July 31, 2007);
    
    the senior secured lenders of the Transeastern JV were repaid in full,
including accrued interest (approximately $400.0 million in cash);
    
    the senior mezzanine lenders to the Transeastern JV received $20.0
million in aggregate principal amount of 14.75% Senior Subordinated
PIK Election Notes due 2015 and $117.5 million in initial aggregate
liquidation preference of 8% Series A Convertible Preferred PIK
Preferred Stock;
    
    the junior mezzanine lenders to the Transeastern JV received warrants
to purchase shares of our common stock which had an estimated fair
value of $8.2 million at issuance (based on the Black-Scholes option
pricing model and before issuance costs);
    
    we entered into settlement and release agreements with the senior
mezzanine lenders and the junior mezzanine lenders to the Transeastern
JV which released us from our potential obligations to them; and
 16




---



##### Table of Contents




    
    we entered into a settlement and mutual release agreement with
Falcone/Ritchie LLC and certain of its affiliates (the Falcone
Entities) concerning the Transeastern JV, one of which owned 50% of
the equity interests in the Transeastern JV and, among other things,
released the Falcone Entities from claims under the 2005 asset
purchase agreement pursuant to which we acquired our interest in the
Transeastern JV. Pursuant to the settlement agreement, we remain
obligated on certain indemnification obligations, including, without
limitation, certain land bank arrangements.
  
    
    an amendment to our $800.0 million revolving loan facility dated January 30, 2007;
    
    a new $200.0 million aggregate principal amount first lien term loan facility; and
    
    a new $300.0 million aggregate principal amount second lien term loan facility.
   
    
    $50.2 million in cash to purchase land under existing land bank
arrangements with the former Transeastern JV partner; and
    
    $33.5 million in interest and expenses.
    Purchase price:Cash consideration paid to Senior Lenders of the Transeastern JV
    
    $
    400.0Fair value of convertible preferred stock issued
    
    
    84.0Fair value of senior subordinated notes issued
    
    
    10.9Fair value of common stock warrants issued
    
    
    8.2Payment to purchase land under existing land bank arrangements
    
    
    50.2Transaction costs including accrued interest paid to the Senior Lenders
    
    
    33.5Total estimated purchase price
    
    $
    586.8Allocation of purchase consideration:Cash and cash equivalents
    
    $
    10.3Restricted cash
    
    
    28.4Inventory(1)
    
    
    149.8Property and equipment
    
    
    1.0Accounts payable and other liabilities
    
    
    (27.4
    )Customer deposits
    
    
    (1.9
    )Previously accrued loss contingency(2)
    
    
    385.9Additional loss on TE Acquisition(3)
    
    
    40.7$
    586.8
 
 (1)
    
    The fair value of the inventory was determined by estimating future cash flows expected to
result from the use of the asset and its eventual disposition, discounted at a market rate
of interest.(2)
    
    In accordance with SFAS 5 and other authoritative guidance, as of June 30, 2007, we accrued
$385.9 million for settlement of a loss contingency (determined by computing the difference
between the estimated fair value of the consideration paid in connection with the global
settlement less the estimated fair value of the business acquired).(3)
    
    There were no identifiable intangible assets or goodwill associated with the TE Acquisition. 
 17




---



##### Table of Contents



5. Investments in Unconsolidated Joint Ventures
   Accounting by Creditors for Impairment of a Loan
 Engle/Sunbelt Joint Venture
      TOUSA/Kolter Joint Venture
  18




---



##### Table of Contents



Centex/TOUSA at Wellington, LLC
   Layton Lakes Joint Venture
    19




---



##### Table of Contents



Other
   June 30,
    
    
    December 31,2008
    
    
    2007Assets:Cash and cash equivalents
    
    $
    2.8
    
    
    $
    3.2Inventories
    
    
    38.1
    
    
    
    39.0Other assets
    
    
    5.1
    
    
    
    0.9Total assets
    
    $
    46.0
    
    
    $
    43.1Liabilities and equity:Accounts payable and other liabilities
    
    
    2.7
    
    
    
    5.1Notes payable
    
    
    17.6
    
    
    
    20.6Equity of:TOUSA, Inc.
    
    
    12.7
    
    
    
    7.9Others
    
    
    13.0
    
    
    
    9.5Total equity
    
    
    25.7
    
    
    
    17.4Total liabilities and equity
    
    $
    46.0
    
    
    $
    43.1
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues
    
    $
    4.5
    
    
    $
    4.0
    
    
    $
    6.7
    
    
    $
    20.0Cost and expenses
    
    
    3.9
    
    
    
    4.0
    
    
    
    5.8
    
    
    
    20.0Net income
    
    $
    0.6
    
    
    $
    
    
    
    $
    0.9
    
    
    $
    
 6. Other Assets
  June 30,
    
    
    December 31,2008
    
    
    2007Homebuilding:Income taxes receivable
    
    $
    
    
    
    $
    218.4Accounts receivable
    
    
    25.8
    
    
    
    34.7Deferred finance costs, net
    
    
    
    
    
    
    55.8Prepaid expenses
    
    
    17.7
    
    
    
    20.3Other assets
    
    
    17.8
    
    
    
    0.8Total other assets
    
    $
    61.3
    
    
    $
    330.0
   20




---



##### Table of Contents



7. Goodwill
  Goodwill and Other Intangible Assets
  8. Accounts Payable and Other Liabilities
  June 30,
    
    
    December 31,2008
    
    
    2007Homebuilding:Accounts payable
    
    $
    36.4
    
    
    $
    41.8Interest
    
    
    8.1
    
    
    
    48.4Compensation
    
    
    13.1
    
    
    
    14.8Taxes, including income and real estate
    
    
    13.2
    
    
    
    22.6Accrual for unpaid invoices on delivered homes
    
    
    20.0
    
    
    
    27.9Accrued expenses
    
    
    8.4
    
    
    
    90.7Community development district bond obligations
    
    
    27.7
    
    
    
    29.6Obligations related to unconsolidated joint ventures
    
    
    
    
    
    
    74.6Accrued letters of credit expected to be drawn
    
    
    
    
    
    
    43.6Warranty costs
    
    
    3.8
    
    
    
    5.0Deferred revenue
    
    
    0.1
    
    
    
    2.8Total accounts payable and other liabilities(1)
    
    $
    130.8
    
    
    $
    401.8
 
 (1)
    
    Certain accounts payable and other liabilities at June 30, 2008 have been
classified as liabilities subject to compromise (see Note 2). Accounting for Special Assessments and Tax Increment Financing
  21




---



##### Table of Contents



9. Homebuilding and Financial Services Borrowings
 Homebuilding Borrowings
  June 30,
    
    
    December 31,2008
    
    
    2007Revolving Loan Facility
    
    $
    272.8
    
    
    $
    168.5First Lien Term Loan Facility due 2012
    
    
    199.0
    
    
    
    199.0Discount on First Lien Term Loan Facility(1)
    
    
    
    
    
    
    (1.8
    )Second Lien Term Loan Facility due 2013
    
    
    340.5
    
    
    
    317.1Discount on Second Lien Term Loan Facility(1)
    
    
    
    
    
    
    (2.8
    )Senior notes due 2010, at 9%
    
    
    300.0
    
    
    
    300.0Senior notes due 2011, at 8 1/4%
    
    
    250.0
    
    
    
    250.0Discount on senior notes(1)
    
    
    
    
    
    
    (2.5
    )Senior subordinated notes due 2012, at 10 3/8%
    
    
    185.0
    
    
    
    185.0Senior subordinated notes due 2011, at 7 1/2%
    
    
    125.0
    
    
    
    125.0Senior subordinated notes due 2015, at 7 1/2%
    
    
    200.0
    
    
    
    200.0Premium on senior subordinated notes(1)
    
    
    
    
    
    
    3.7Senior Subordinated PIK Notes due 2015, at 14 3/4%
    
    
    23.1
    
    
    
    21.3Discount on Senior Subordinated PIK Notes(1)
    
    
    
    
    
    
    (8.7
    )1,895.4
    
    
    
    1,753.8Less: Amounts classified as liabilities subject to compromise (see Note 2)
    
    
    (1,895.4
    )
    
    
    $
    
    
    
    $
    1,753.8
 
 (1)
    
    During the six months ended June 30, 2008, we wrote-off $11.9 million of debt
premium and discounts related to our debt obligations which have been classified as
liabilities subject to compromise (see Note 2).    Revolving Loan Facility and First and Second Lien Term Loan Facilities
   22




---



##### Table of Contents



Senior Notes and Senior Subordinated Notes
 pari passu pari passu
 Special Interest
  Senior Subordinated PIK Notes
     Financial Services Borrowings
  23




---



##### Table of Contents



10. Income Taxes
 Accounting for Income Taxes Accounting for Uncertainty in Income
Taxes
       11. Commitments and Contingencies
  Warranty
   24




---



##### Table of Contents



Six Months EndedJune 30,2008
    
    
    2007Accrued warranty costs at January 1
    
    $
    5.0
    
    
    $
    7.4Liability recorded for warranties issued during the period
    
    
    1.7
    
    
    
    2.7Warranty work performed
    
    
    (6.3
    )
    
    
    (4.2
    )Adjustments
    
    
    3.4
    
    
    
    1.0Accrued warranty costs at June 30
    
    $
    3.8
    
    
    $
    6.9
  Letters of Credit and Performance Bonds
    Exposure on Abandoned Homesite Option Contracts
  Chapter 11 Cases
  Securities
Class Action Lawsuit
 Durgin, et al.,
v. TOUSA, Inc., et al., No. 06-61844-CIV.
 25




---



##### Table of Contents



Proceeding by Official Committee of Unsecured Creditors
       26




---



##### Table of Contents



.
     Vista Lakes
    Chinese
Drywall
       Other Litigation
  27




---



##### Table of Contents



Informal Inquiry
 In the Matter of TOUSA, Inc. SEC Inquiry
 PHMC Settlement
  12. Stockholders (Deficit) Equity
 Convertible PIK Preferred Stock
   Accounting for Registration Payment Arrangements
 Accounting for Convertible Securities with Beneficial
Conversion Features or Contingently Adjustable Conversion Ratios Application of Issue No. 98-5 to Certain Convertible
Instruments
   Earnings per
Share Participating Securities and the Two-Class Method under FASB Statement
No. 128
 Warrants
  28




---



##### Table of Contents



NYSE Delisting
  13. Stock-Based Compensation
   14. Operating and Reporting Segments
 Disclosures About Segments of an Enterprise and Related Information
  Florida
 Mid-Atlantic:
 Texas:
 West:
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues:Homebuilding:Florida(2)
    
    $
    109.9
    
    
    $
    218.2
    
    
    $
    230.5
    
    
    $
    475.5Mid-Atlantic
    
    
    13.9
    
    
    
    62.5
    
    
    
    30.6
    
    
    
    114.7Texas(1)
    
    
    103.9
    
    
    
    170.8
    
    
    
    212.3
    
    
    
    320.0West
    
    
    66.5
    
    
    
    114.2
    
    
    
    116.1
    
    
    
    216.2Total Homebuilding
    
    
    294.2
    
    
    
    565.7
    
    
    
    589.5
    
    
    
    1,126.4Financial Services
    
    
    3.3
    
    
    
    11.0
    
    
    
    9.1
    
    
    
    23.0Total revenues
    
    $
    297.5
    
    
    $
    576.7
    
    
    $
    598.6
    
    
    $
    1,149.4
 29




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Loss (income) from unconsolidated joint ventures:Florida
    
    $
    
    
    
    $
    2.5
    
    
    $
    
    
    
    $
    0.4Mid-Atlantic
    
    
    
    
    
    
    (2.6
    )
    
    
    
    
    
    
    (0.7
    )Texas
    
    
    
    
    
    
    
    
    
    
    (0.2
    )
    
    
    West(3)
    
    
    
    
    
    
    1.6
    
    
    
    (0.1
    )
    
    
    (0.1
    )
    
    
    
    1.5
    
    
    
    (0.3
    )
    
    
    (0.4
    )Impairments (recoveries) on unconsolidated joint
ventures:Florida
    
    
    (10.8
    )
    
    
    
    
    
    
    (10.7
    )
    
    
    5.5Texas
    
    
    2.3
    
    
    
    
    
    
    
    2.3
    
    
    
    West
    
    
    (0.8
    )
    
    
    
    
    
    
    (0.4
    )
    
    
    (9.3
    )
    
    
    
    
    
    
    (8.8
    )
    
    
    5.5Loss (income) from unconsolidated joint ventures
after impairments
    
    $
    (9.3
    )
    
    $
    1.5
    
    
    $
    (9.1
    )
    
    $
    5.1Results of Operations:Homebuilding:Florida(2)
    
    $
    (143.4
    )
    
    $
    (14.7
    )
    
    $
    (247.5
    )
    
    $
    9.1Mid-Atlantic
    
    
    (19.9
    )
    
    
    (42.1
    )
    
    
    (28.3
    )
    
    
    (45.7
    )Texas(1)
    
    
    (22.4
    )
    
    
    14.4
    
    
    
    (17.3
    )
    
    
    28.7West
    
    
    (142.5
    )
    
    
    (47.2
    )
    
    
    (218.4
    )
    
    
    (76.8
    )Total Homebuilding
    
    
    (328.2
    )
    
    
    (89.6
    )
    
    
    (511.5
    )
    
    
    (84.7
    )Financial Services
    
    
    (3.1
    )
    
    
    2.3
    
    
    
    (4.3
    )
    
    
    5.0Corporate and unallocated
    
    
    (28.9
    )
    
    
    (48.0
    )
    
    
    (58.6
    )
    
    
    (146.3
    )Loss from continuing operations before
reorganization items and taxes
    
    $
    (360.2
    )
    
    $
    (135.3
    )
    
    $
    (574.4
    )
    
    $
    (226.0
    )
 
 (1)
    
    The Texas region excludes the Dallas division, which is classified as a discontinued operation.(2)
    
    The results of operations for Transeastern for the three and six months ended June 30, 2008
have been included in our consolidated results.
Results of operations for the three and six months ended June 30, 2007 are included in the results for the
unconsolidated joint ventures.
See Note 4.(3)
    
    We have excluded the results of the Engle/Sunbelt joint venture from our unconsolidated joint
venture results for the three and six months
ended June 30, 2008 due to the settlement agreement reached in 2008. See Note 5. June 30,
    
    
    December 31,2008
    
    
    2007Assets:Homebuilding:Florida
    
    $
    309.4
    
    
    $
    631.3Mid-Atlantic
    
    
    50.4
    
    
    
    73.0Texas(1)
    
    
    182.5
    
    
    
    220.0West
    
    
    176.0
    
    
    
    381.3Assets held for sale
    
    
    2.9
    
    
    
    6.1Financial Services
    
    
    25.8
    
    
    
    36.7Corporate and unallocated
    
    
    415.5
    
    
    
    413.6Total assets
    
    $
    1,162.5
    
    
    $
    1,762.0Investments in Unconsolidated Joint Ventures:Mid-Atlantic
    
    $
    0.1
    
    
    $
    0.1Texas
    
    
    8.6
    
    
    
    8.6West
    
    
    
    
    
    
    0.3Total Investments in Unconsolidated Joint Ventures
    
    $
    8.7
    
    
    $
    9.0
 
 (1)
    
    The Texas region excludes the Dallas division, which is classified as a discontinued operation. 30




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15. Discontinued Operations
    16. Summarized Financial Information
  31




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##### Table of Contents



Consolidated Statement of Financial Condition
June 30, 2008
 Non-TOUSA,
    
    
    Guarantor
    
    
    Guarantor
    
    
    IntercompanyInc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Total(in millions)ASSETSHOMEBUILDING:Cash and cash equivalents
    
    $
    376.3
    
    
    $
    1.9
    
    
    $
    
    
    
    $
    
    
    
    $
    378.2Inventory
    
    
    
    
    
    
    666.5
    
    
    
    
    
    
    
    
    
    
    
    666.5Property and equipment, net
    
    
    1.8
    
    
    
    17.2
    
    
    
    
    
    
    
    
    
    
    
    19.0Investments in unconsolidated joint
ventures
    
    
    
    
    
    
    8.7
    
    
    
    
    
    
    
    
    
    
    
    8.7Receivables from unconsolidated joint
ventures, net
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    0.1Investments in/ advances to
consolidated subsidiaries
    
    
    445.8
    
    
    
    (353.0
    )
    
    
    (7.1
    )
    
    
    (85.7
    )
    
    
    Other assets
    
    
    25.0
    
    
    
    36.3
    
    
    
    
    
    
    
    
    
    
    
    61.3Assets held for sale
    
    
    
    
    
    
    2.9
    
    
    
    
    
    
    
    
    
    
    
    2.9848.9
    
    
    
    380.6
    
    
    
    (7.1
    )
    
    
    (85.7
    )
    
    
    1,136.7FINANCIAL SERVICES:Cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    15.6
    
    
    
    
    
    
    
    15.6Mortgage loans held for sale
    
    
    
    
    
    
    
    
    
    
    6.1
    
    
    
    
    
    
    
    6.1Other assets
    
    
    
    
    
    
    
    
    
    
    4.1
    
    
    
    
    
    
    
    4.1
    
    
    
    
    
    
    
    25.8
    
    
    
    
    
    
    
    25.8Total assets
    
    $
    848.9
    
    
    $
    380.6
    
    
    $
    18.7
    
    
    $
    (85.7
    )
    
    $
    1,162.5LIABILITIES AND STOCKHOLDERS EQUITY
(DEFICIT)HOMEBUILDING:Accounts payable and other liabilities
    
    $
    23.4
    
    
    $
    107.4
    
    
    $
    
    
    
    $
    
    
    
    $
    130.8Customer deposits
    
    
    
    
    
    
    21.8
    
    
    
    
    
    
    
    
    
    
    
    21.8Liabilities associated with assets
held for sale
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    0.223.4
    
    
    
    129.4
    
    
    
    
    
    
    
    
    
    
    
    152.8FINANCIAL SERVICES:Accounts payable and other liabilities
    
    
    
    
    
    
    
    
    
    
    4.8
    
    
    
    (0.1
    )
    
    
    4.7Total liabilities not subject to
compromise
    
    
    23.4
    
    
    
    129.4
    
    
    
    4.8
    
    
    
    (0.1
    )
    
    
    157.5Liabilities subject to compromise
    
    
    1,964.2
    
    
    
    179.6
    
    
    
    
    
    
    
    
    
    
    
    2,143.8Total stockholders equity (deficit)
    
    
    (1,138.7
    )
    
    
    71.6
    
    
    
    13.9
    
    
    
    (85.6
    )
    
    
    (1,138.8
    )Total liabilities and stockholders
equity (deficit)
    
    $
    848.9
    
    
    $
    380.6
    
    
    $
    18.7
    
    
    $
    (85.7
    )
    
    $
    1,162.5
 32




---



##### Table of Contents



Consolidated Statement of Financial Condition
December 31, 2007
 Non-TOUSA,
    
    
    Guarantor
    
    
    Guarantor
    
    
    IntercompanyInc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Total(in millions)ASSETSHOMEBUILDING:Cash and cash equivalents
    
    $
    81.3
    
    
    $
    (9.0
    )
    
    $
    
    
    
    $
    
    
    
    $
    72.3Inventory
    
    
    
    
    
    
    1,271.8
    
    
    
    
    
    
    
    
    
    
    
    1,271.8Property and equipment, net
    
    
    3.3
    
    
    
    21.3
    
    
    
    
    
    
    
    
    
    
    
    24.6Investments in unconsolidated joint
ventures
    
    
    
    
    
    
    9.0
    
    
    
    
    
    
    
    
    
    
    
    9.0Receivables from unconsolidated joint
ventures, net
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    0.3Investments in/ advances to
consolidated subsidiaries
    
    
    989.7
    
    
    
    (372.5
    )
    
    
    (5.5
    )
    
    
    (611.7
    )
    
    
    Other assets
    
    
    287.7
    
    
    
    42.3
    
    
    
    
    
    
    
    
    
    
    
    330.0Goodwill
    
    
    
    
    
    
    11.2
    
    
    
    
    
    
    
    
    
    
    
    11.2Assets held for sale
    
    
    
    
    
    
    6.1
    
    
    
    
    
    
    
    
    
    
    
    6.11,362.0
    
    
    
    980.5
    
    
    
    (5.5
    )
    
    
    (611.7
    )
    
    
    1,725.3FINANCIAL SERVICES:Cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    14.9
    
    
    
    
    
    
    
    14.9Mortgage loans held for sale
    
    
    
    
    
    
    
    
    
    
    15.0
    
    
    
    
    
    
    
    15.0Other assets
    
    
    
    
    
    
    
    
    
    
    6.8
    
    
    
    
    
    
    
    6.8
    
    
    
    
    
    
    
    36.7
    
    
    
    
    
    
    
    36.7Total assets
    
    $
    1,362.0
    
    
    $
    980.5
    
    
    $
    31.2
    
    
    $
    (611.7
    )
    
    $
    1,762.0LIABILITIES AND STOCKHOLDERS EQUITY
(DEFICIT)HOMEBUILDING:Accounts payable and other liabilities
    
    $
    83.7
    
    
    $
    318.1
    
    
    $
    
    
    
    $
    
    
    
    $
    401.8Customer deposits
    
    
    
    
    
    
    33.9
    
    
    
    
    
    
    
    
    
    
    
    33.9Obligations for inventory not owned
    
    
    
    
    
    
    32.0
    
    
    
    
    
    
    
    
    
    
    
    32.0Notes payable
    
    
    1,585.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,585.3Bank borrowings
    
    
    168.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    168.5Liabilities associated with assets
held for sale
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    
    
    
    
    0.91,837.5
    
    
    
    384.9
    
    
    
    
    
    
    
    
    
    
    
    2,222.4FINANCIAL SERVICES:Accounts payable and other liabilities
    
    
    
    
    
    
    
    
    
    
    8.0
    
    
    
    (0.7
    )
    
    
    7.3Bank borrowings
    
    
    
    
    
    
    
    
    
    
    7.8
    
    
    
    
    
    
    
    7.8
    
    
    
    
    
    
    
    15.8
    
    
    
    (0.7
    )
    
    
    15.1Total liabilities not subject to
compromise
    
    
    1,837.5
    
    
    
    384.9
    
    
    
    15.8
    
    
    
    (0.7
    )
    
    
    2,237.5Liabilities subject to compromise
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total stockholders equity (deficit)
    
    
    (475.5
    )
    
    
    595.6
    
    
    
    15.4
    
    
    
    (611.0
    )
    
    
    (475.5
    )Total liabilities and stockholders
equity (deficit)
    
    $
    1,362.0
    
    
    $
    980.5
    
    
    $
    31.2
    
    
    $
    (611.7
    )
    
    $
    1,762.0
 33




---



##### Table of Contents



Consolidated Statement of Operations
Three Months Ended June 30, 2008
 Non-TOUSA,
    
    Guarantor
    
    Guarantor
    
    IntercompanyInc.
    
    Subsidiaries
    
    Subsidiaries
    
    Eliminations
    
    Total( in millions)HOMEBUILDING:Revenues
    
    $
    
    
    
    $
    294.2
    
    
    $
    
    
    
    $
    
    
    
    $
    294.2Cost of sales
    
    
    
    
    
    
    577.6
    
    
    
    
    
    
    
    
    
    
    
    577.6Gross loss
    
    
    
    
    
    
    (283.4
    )
    
    
    
    
    
    
    
    
    
    
    (283.4
    )Selling, general and
administrative expenses
    
    
    13.2
    
    
    
    43.2
    
    
    
    
    
    
    
    (0.8
    )
    
    
    55.6Recovery of investments in
and receivables from
unconsolidated joint ventures
    
    
    
    
    
    
    (9.3
    )
    
    
    
    
    
    
    
    
    
    
    (9.3
    )Goodwill impairment
    
    
    
    
    
    
    11.2
    
    
    
    
    
    
    
    
    
    
    
    11.2Interest expense
    
    
    16.8
    
    
    
    (0.1
    )
    
    
    
    
    
    
    
    
    
    
    16.7Other expense (income), net
    
    
    330.8
    
    
    
    8.6
    
    
    
    
    
    
    
    (339.9
    )
    
    
    (0.5
    )Homebuilding pretax loss
    
    
    (360.8
    )
    
    
    (337.0
    )
    
    
    
    
    
    
    340.7
    
    
    
    (357.1
    )FINANCIAL SERVICES:Revenues
    
    
    
    
    
    
    
    
    
    
    4.0
    
    
    
    (0.7
    )
    
    
    3.3Expenses
    
    
    
    
    
    
    
    
    
    
    7.0
    
    
    
    (0.6
    )
    
    
    6.4Financial Services pretax loss
    
    
    
    
    
    
    
    
    
    
    (3.0
    )
    
    
    (0.1
    )
    
    
    (3.1
    )Loss from continuing
operations before
reorganization items and
taxes
    
    
    (360.8
    )
    
    
    (337.0
    )
    
    
    (3.0
    )
    
    
    340.6
    
    
    
    (360.2
    )Reorganization items, net
    
    
    18.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18.2Benefit for income taxes
    
    
    0.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.7Loss from continuing
operations, net of taxes
    
    
    (379.7
    )
    
    
    (337.0
    )
    
    
    (3.0
    )
    
    
    340.6
    
    
    
    (379.1
    )Discontinued operations:Loss from discontinued
operations
    
    
    
    
    
    
    (0.6
    )
    
    
    
    
    
    
    
    
    
    
    (0.6
    )Loss from discontinued
operations, net of taxes
    
    
    
    
    
    
    (0.6
    )
    
    
    
    
    
    
    
    
    
    
    (0.6
    )Net loss
    
    
    (379.7
    )
    
    
    (337.6
    )
    
    
    (3.0
    )
    
    
    340.6
    
    
    
    (379.7
    )Dividends and accretion of
discount on preferred stock
    
    
    2.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.5Net loss available to common
stockholders
    
    $
    (382.2
    )
    
    $
    (337.6
    )
    
    $
    (3.0
    )
    
    $
    340.6
    
    
    $
    (382.2
    )
 34




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##### Table of Contents



Consolidated Statement of Operations
Six Months Ended June 30, 2008
 Non-TOUSA,
    
    Guarantor
    
    Guarantor
    
    IntercompanyInc.
    
    Subsidiaries
    
    Subsidiaries
    
    Eliminations
    
    Total( in millions)HOMEBUILDING:Revenues
    
    $
    
    
    
    $
    589.5
    
    
    $
    
    
    
    $
    
    
    
    $
    589.5Cost of sales
    
    
    
    
    
    
    1,012.8
    
    
    
    
    
    
    
    
    
    
    
    1,012.8Gross loss
    
    
    
    
    
    
    (423.3
    )
    
    
    
    
    
    
    
    
    
    
    (423.3
    )Selling, general and
administrative expenses
    
    
    24.9
    
    
    
    87.3
    
    
    
    
    
    
    
    (2.4
    )
    
    
    109.8Income from unconsolidated
joint ventures, net
    
    
    
    
    
    
    (0.3
    )
    
    
    
    
    
    
    
    
    
    
    (0.3
    )Recovery of investments in
and receivables from
unconsolidated joint ventures
    
    
    
    
    
    
    (8.8
    )
    
    
    
    
    
    
    
    
    
    
    (8.8
    )Goodwill impairment
    
    
    
    
    
    
    11.2
    
    
    
    
    
    
    
    
    
    
    
    11.2Interest expense
    
    
    36.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36.8Other expense (income), net
    
    
    515.9
    
    
    
    6.2
    
    
    
    
    
    
    
    (524.0
    )
    
    
    (1.9
    )Homebuilding pretax loss
    
    
    (577.6
    )
    
    
    (518.9
    )
    
    
    
    
    
    
    526.4
    
    
    
    (570.1
    )FINANCIAL SERVICES:Revenues
    
    
    
    
    
    
    
    
    
    
    11.4
    
    
    
    (2.3
    )
    
    
    9.1Expenses
    
    
    
    
    
    
    
    
    
    
    14.8
    
    
    
    (1.4
    )
    
    
    13.4Financial Services pretax loss
    
    
    
    
    
    
    
    
    
    
    (3.4
    )
    
    
    (0.9
    )
    
    
    (4.3
    )Loss from continuing
operations before
reorganization items and
taxes
    
    
    (577.6
    )
    
    
    (518.9
    )
    
    
    (3.4
    )
    
    
    525.5
    
    
    
    (574.4
    )Reorganization items, net
    
    
    86.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    86.7Benefit for income taxes
    
    
    0.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.7Loss from continuing
operations, net of taxes
    
    
    (665.0
    )
    
    
    (518.9
    )
    
    
    (3.4
    )
    
    
    525.5
    
    
    
    (661.8
    )Discontinued operations:Loss from discontinued
    
    
    
    
    
    
    (3.2
    )
    
    
    
    
    
    
    
    
    
    
    (3.2
    )Loss from discontinued
operations, net of taxes
    
    
    
    
    
    
    (3.2
    )
    
    
    
    
    
    
    
    
    
    
    (3.2
    )Net loss
    
    
    (665.0
    )
    
    
    (522.1
    )
    
    
    (3.4
    )
    
    
    525.5
    
    
    
    (665.0
    )Dividends and accretion of
discount on preferred stock
    
    
    5.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.2Net loss available to common
stockholders
    
    $
    (670.2
    )
    
    $
    (522.1
    )
    
    $
    (3.4
    )
    
    $
    525.5
    
    
    $
    (670.2
    )
 35




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##### Table of Contents



Consolidated Statement of Operations
Three Months Ended June 30, 2007
 Non-TOUSA,
    
    
    Guarantor
    
    
    Guarantor
    
    
    IntercompanyInc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Total(in millions)HOMEBUILDING:Revenues
    
    $
    
    
    
    $
    565.7
    
    
    $
    
    
    
    $
    
    
    
    $
    565.7Cost of sales
    
    
    
    
    
    
    547.9
    
    
    
    
    
    
    
    
    
    
    
    547.9Gross profit
    
    
    
    
    
    
    17.8
    
    
    
    
    
    
    
    
    
    
    
    17.8Selling, general and administrative
expenses
    
    
    18.1
    
    
    
    71.3
    
    
    
    
    
    
    
    (4.4
    )
    
    
    85.0Loss from unconsolidated joint
ventures, net
    
    
    
    
    
    
    1.5
    
    
    
    
    
    
    
    
    
    
    
    1.5Provision for settlement of loss
contingency
    
    
    32.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32.0Goodwill impairment
    
    
    
    
    
    
    38.2
    
    
    
    
    
    
    
    
    
    
    
    38.2Interest expense
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    0.1Other expense (income), net
    
    
    64.0
    
    
    
    2.0
    
    
    
    
    
    
    
    (67.4
    )
    
    
    (1.4
    )Homebuilding pretax loss
    
    
    (114.1
    )
    
    
    (95.3
    )
    
    
    
    
    
    
    71.8
    
    
    
    (137.6
    )FINANCIAL SERVICES:Revenues
    
    
    
    
    
    
    
    
    
    
    15.4
    
    
    
    (4.4
    )
    
    
    11.0Expenses
    
    
    
    
    
    
    
    
    
    
    10.7
    
    
    
    (2.0
    )
    
    
    8.7Financial Services pretax income
    
    
    
    
    
    
    
    
    
    
    4.7
    
    
    
    (2.4
    )
    
    
    2.3Income (loss) from continuing
operations before income taxes
    
    
    (114.1
    )
    
    
    (95.3
    )
    
    
    4.7
    
    
    
    69.4
    
    
    
    (135.3
    )Provision (benefit) for income taxes
    
    
    17.9
    
    
    
    (33.1
    )
    
    
    2.0
    
    
    
    
    
    
    
    (13.2
    )Income (loss) from continuing
operations
    
    
    (132.0
    )
    
    
    (62.2
    )
    
    
    2.7
    
    
    
    69.4
    
    
    
    (122.1
    )Discontinued operations:Loss from discontinued operations
    
    
    
    
    
    
    (2.0
    )
    
    
    
    
    
    
    
    
    
    
    (2.0
    )Loss from disposal of
discontinued operations
    
    
    
    
    
    
    (13.6
    )
    
    
    
    
    
    
    
    
    
    
    (13.6
    )Benefit for income taxes
    
    
    
    
    
    
    (5.7
    )
    
    
    
    
    
    
    
    
    
    
    (5.7
    )Loss from discontinued operations,
net of taxes
    
    
    
    
    
    
    (9.9
    )
    
    
    
    
    
    
    
    
    
    
    (9.9
    )Net income (loss)
    
    $
    (132.0
    )
    
    $
    (72.1
    )
    
    $
    2.7
    
    
    $
    69.4
    
    
    $
    (132.0
    )
 36




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##### Table of Contents



Consolidated Statement of Operations
Six Months Ended June 30, 2007
 Non-TOUSA,
    
    
    Guarantor
    
    
    Guarantor
    
    
    IntercompanyInc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Total( in millions)HOMEBUILDING:Revenues
    
    $
    
    
    
    $
    1,126.4
    
    
    $
    
    
    
    $
    
    
    
    $
    1,126.4Cost of sales
    
    
    
    
    
    
    1,028.7
    
    
    
    
    
    
    
    
    
    
    
    1,028.7Gross profit
    
    
    
    
    
    
    97.7
    
    
    
    
    
    
    
    
    
    
    
    97.7Selling, general and
administrative expenses
    
    
    39.8
    
    
    
    143.7
    
    
    
    
    
    
    
    (7.1
    )
    
    
    176.4Income from unconsolidated
joint ventures, net
    
    
    
    
    
    
    (0.4
    )
    
    
    
    
    
    
    
    
    
    
    (0.4
    )Impairment of investments in
and receivables from
unconsolidated joint ventures
    
    
    
    
    
    
    5.5
    
    
    
    
    
    
    
    
    
    
    
    5.5Provision for settlement of
loss contingency
    
    
    110.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110.9Goodwill impairment
    
    
    
    
    
    
    38.2
    
    
    
    
    
    
    
    
    
    
    
    38.2Interest expense
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    0.2Other expense (income), net
    
    
    57.9
    
    
    
    10.3
    
    
    
    
    
    
    
    (70.3
    )
    
    
    (2.1
    )Homebuilding pretax loss
    
    
    (208.6
    )
    
    
    (99.8
    )
    
    
    
    
    
    
    77.4
    
    
    
    (231.0
    )FINANCIAL SERVICES:Revenues
    
    
    
    
    
    
    
    
    
    
    30.1
    
    
    
    (7.1
    )
    
    
    23.0Expenses
    
    
    
    
    
    
    
    
    
    
    21.8
    
    
    
    (3.8
    )
    
    
    18.0Financial Services pretax income
    
    
    
    
    
    
    
    
    
    
    8.3
    
    
    
    (3.3
    )
    
    
    5.0Income (loss) from continuing
operations before income taxes
    
    
    (208.6
    )
    
    
    (99.8
    )
    
    
    8.3
    
    
    
    74.1
    
    
    
    (226.0
    )Provision (benefit) for income
taxes
    
    
    (10.6
    )
    
    
    (34.7
    )
    
    
    3.6
    
    
    
    
    
    
    
    (41.7
    )Income (loss) from continuing
operations
    
    
    (198.0
    )
    
    
    (65.1
    )
    
    
    4.7
    
    
    
    74.1
    
    
    
    (184.3
    )Discontinued operations:Loss from discontinued
operations
    
    
    
    
    
    
    (7.9
    )
    
    
    
    
    
    
    
    
    
    
    (7.9
    )Loss from disposal of
discontinued operations
    
    
    
    
    
    
    (13.6
    )
    
    
    
    
    
    
    
    
    
    
    (13.6
    )Benefit for income taxes
    
    
    
    
    
    
    (7.8
    )
    
    
    
    
    
    
    
    
    
    
    (7.8
    )Loss from discontinued
operations, net of taxes
    
    
    
    
    
    
    (13.7
    )
    
    
    
    
    
    
    
    
    
    
    (13.7
    )Net income (loss)
    
    $
    (198.0
    )
    
    $
    (78.8
    )
    
    $
    4.7
    
    
    $
    74.1
    
    
    $
    (198.0
    )
 37




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##### Table of Contents



Consolidated Statement of Cash Flows
Six Months Ended June 30, 2008
 Non-TOUSA,
    
    
    Guarantor
    
    
    Guarantor
    
    
    IntercompanyInc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Total( in millions)Net cash provided
by (used in)
operating
activities
    
    $
    (454.7
    )
    
    $
    29.7
    
    
    $
    8.2
    
    
    $
    526.0
    
    
    $
    109.2Cash flows from
investing
activities:Net additions to
property and
equipment
    
    
    0.5
    
    
    
    (0.9
    )
    
    
    
    
    
    
    
    
    
    
    (0.4
    )Investments in
unconsolidated
joint ventures
    
    
    
    
    
    
    (1.6
    )
    
    
    
    
    
    
    
    
    
    
    (1.6
    )Net cash used in
investing
activities
    
    
    0.5
    
    
    
    (2.5
    )
    
    
    
    
    
    
    
    
    
    
    (2.0
    )Cash flows from
financing
activities:Net borrowings from
revolving credit
facilities
    
    
    31.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31.5Net repayments of
from Financial
Services bank
borrowings
    
    
    
    
    
    
    
    
    
    
    (7.8
    )
    
    
    
    
    
    
    (7.8
    )Payments for
deferred financing
costs
    
    
    (2.9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.9
    )Increase (decrease)
in intercompany
transactions
    
    
    543.9
    
    
    
    (19.5
    )
    
    
    1.6
    
    
    
    (526.0
    )
    
    
    Net cash provided
by (used in)
financing
activities
    
    
    572.5
    
    
    
    (19.5
    )
    
    
    (6.2
    )
    
    
    (526.0
    )
    
    
    20.8Net cash provided
by continuing
operations
    
    
    118.3
    
    
    
    7.7
    
    
    
    2.0
    
    
    
    
    
    
    
    128.0Net cash used in
discontinued
operations
    
    
    
    
    
    
    (0.8
    )
    
    
    
    
    
    
    
    
    
    
    (0.8
    )Increase in cash
and cash
equivalents
    
    
    118.3
    
    
    
    6.9
    
    
    
    2.0
    
    
    
    
    
    
    
    127.2Cash and cash
equivalents at
beginning of period
    
    
    79.1
    
    
    
    (11.9
    )
    
    
    9.3
    
    
    
    
    
    
    
    76.5Cash and cash
equivalents at end
of period
    
    $
    197.4
    
    
    $
    (5.0
    )
    
    $
    11.3
    
    
    $
    
    
    
    $
    203.7
 38




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##### Table of Contents



Consolidated Statement of Cash Flows
Six Months Ended June 30, 2007
 Non-TOUSA,
    
    
    Guarantor
    
    
    Guarantor
    
    
    IntercompanyInc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Total(in millions)Net cash provided
by (used in)
operating
activities
    
    $
    (159.7
    )
    
    $
    (9.3
    )
    
    $
    11.7
    
    
    $
    74.1
    
    
    $
    (83.2
    )Cash flows from
investing
activities:Net additions to
property and
equipment
    
    
    (0.8
    )
    
    
    (6.1
    )
    
    
    (0.6
    )
    
    
    
    
    
    
    (7.5
    )Investments in
unconsolidated
joint ventures
    
    
    
    
    
    
    (21.1
    )
    
    
    
    
    
    
    
    
    
    
    (21.1
    )Capital
distributions from
unconsolidated
joint ventures
    
    
    
    
    
    
    9.7
    
    
    
    
    
    
    
    
    
    
    
    9.7Net cash used in
investing
activities
    
    
    (0.8
    )
    
    
    (17.5
    )
    
    
    (0.6
    )
    
    
    
    
    
    
    (18.9
    )Cash flows from
financing
activities:Net borrowings from
revolving credit
facilities
    
    
    50.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50.0Net repayments of
Financial Services
bank borrowings
    
    
    
    
    
    
    
    
    
    
    (6.8
    )
    
    
    
    
    
    
    (6.8
    )Payments for
deferred financing
costs
    
    
    (11.2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11.2
    )Increase (decrease)
in intercompany
transactions
    
    
    88.1
    
    
    
    (9.9
    )
    
    
    (4.1
    )
    
    
    (74.1
    )
    
    
    Net cash provided
by (used in)
financing
activities
    
    
    126.9
    
    
    
    (9.9
    )
    
    
    (10.9
    )
    
    
    (74.1
    )
    
    
    32.0Net cash provided
by (used in)
continuing
operations
    
    
    (33.6
    )
    
    
    (36.7
    )
    
    
    0.2
    
    
    
    
    
    
    
    (70.1
    )Net cash provided
by discontinued
operations
    
    
    
    
    
    
    43.8
    
    
    
    
    
    
    
    
    
    
    
    43.8Increase (decrease)
in cash and cash
equivalents
    
    
    (33.6
    )
    
    
    7.1
    
    
    
    0.2
    
    
    
    
    
    
    
    (26.3
    )Cash and cash
equivalents at
beginning of period
    
    
    50.6
    
    
    
    (3.2
    )
    
    
    6.8
    
    
    
    
    
    
    
    54.2Cash and cash
equivalents at end
of period
    
    $
    17.0
    
    
    $
    3.9
    
    
    $
    7.0
    
    
    $
    
    
    
    $
    27.9
 39




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   Explanatory Note
  Executive Summary
  Florida
    
    Mid-Atlantic
    
    Texas
    
    WestCentral Florida
    
    Baltimore/Southern Pennsylvania
    
    Austin
    
    ColoradoJacksonville
    
    Nashville
    
    Houston
    
    Las VegasSoutheast Florida
    
    Northern Virginia
    
    San Antonio
    
    PhoenixSouthwest FloridaTampa/St. Petersburg
     40




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##### Table of Contents



Recent Developments
 Chapter 11 Cases
       http://www.tousa.com/reorg.
 41




---



##### Table of Contents




    
    our ability to generate and maintain adequate cash;
    
    the cost, duration and outcome of the restructuring process;
    
    our ability to comply with the terms of our cash collateral order and
seek and receive extensions of our ability to use cash collateral; and
    
    our ability to retain key employees.
   
    
    limiting new arrangements to acquire land (by submitting proposals to increased review);
    
    engaging in bulk sales of land and unsold homes;
    
    reducing the number of unsold homes under construction and limiting and/or curtailing
development activities in any development where we do not expect to deliver homes in
the near future or where development is necessary to retain entitlements or sell land;
    
    renegotiating terms or abandoning our rights under option and land bank contracts;
    
    considering other asset dispositions including the possible sale and/or wind down
of underperforming assets, communities, divisions and joint venture interests and;
    
    pursuing other initiatives designed to monetize our assets.
  Mortgage Joint Venture
  42




---



##### Table of Contents

'

NYSE Delisting
  Sale of Dallas/Fort Worth Operations
  Informal Inquiry
 In the Matter of TOUSA, Inc. SEC Inquiry,
 Total Controlled Homesites by our Homebuilding Operations (Including Joint Ventures)
  June 30, 2008
    
    
    December 31, 2007Total
    
    
    
    
    
    
    
    
    
    
    TotalOwned
    
    
    Optioned
    
    
    Controlled
    
    
    Owned
    
    
    Optioned
    
    
    ControlledRegion:Florida
    
    
    7,900
    
    
    
    
    
    
    
    7,900
    
    
    
    8,600
    
    
    
    600
    
    
    
    9,200Mid-Atlantic
    
    
    400
    
    
    
    300
    
    
    
    700
    
    
    
    400
    
    
    
    800
    
    
    
    1,200Texas(1)
    
    
    2,000
    
    
    
    3,200
    
    
    
    5,200
    
    
    
    2,500
    
    
    
    4,000
    
    
    
    6,500West
    
    
    9,500
    
    
    
    200
    
    
    
    9,700
    
    
    
    9,900
    
    
    
    5,400
    
    
    
    15,300Continuing operations
    
    
    19,800
    
    
    
    3,700
    
    
    
    23,500
    
    
    
    21,400
    
    
    
    10,800
    
    
    
    32,200Discontinued operations(1)
    
    
    100
    
    
    
    
    
    
    
    100
    
    
    
    100
    
    
    
    100
    
    
    
    200Total consolidated homesites
    
    
    19,900
    
    
    
    3,700
    
    
    
    23,600
    
    
    
    21,500
    
    
    
    10,900
    
    
    
    32,400
 
 (1)
    
    The Texas region excludes the Dallas/Fort Worth division, which is classified as a discontinued operation.  Residences Completed or
    
    
    Homesites Finished or
    
    
    Raw Land Held forUnder Construction
    
    
    Under Construction
    
    
    Future Development
    
    
    Total6/30/08
    
    
    12/31/07
    
    
    6/30/08
    
    
    12/31/07
    
    
    6/30/08
    
    
    12/31/07
    
    
    6/30/08
    
    
    12/31/07RegionFlorida
    
    
    900
    
    
    
    1,400
    
    
    
    6,400
    
    
    
    6,600
    
    
    
    600
    
    
    
    600
    
    
    
    7,900
    
    
    
    8,600Mid-Atlantic
    
    
    100
    
    
    
    100
    
    
    
    300
    
    
    
    300
    
    
    
    
    
    
    
    
    
    
    
    400
    
    
    
    400Texas(1)
    
    
    600
    
    
    
    700
    
    
    
    1,000
    
    
    
    1,400
    
    
    
    400
    
    
    
    400
    
    
    
    2,000
    
    
    
    2,500West
    
    
    500
    
    
    
    700
    
    
    
    2,300
    
    
    
    2,500
    
    
    
    6,700
    
    
    
    6,700
    
    
    
    9,500
    
    
    
    9,900Continuing operations
    
    
    2,100
    
    
    
    2,900
    
    
    
    10,000
    
    
    
    10,800
    
    
    
    7,700
    
    
    
    7,700
    
    
    
    19,800
    
    
    
    21,400Discontinued
operations(1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    100
    
    
    
    100
    
    
    
    100Consolidated total
    
    
    2,100
    
    
    
    2,900
    
    
    
    10,000
    
    
    
    10,800
    
    
    
    7,800
    
    
    
    7,800
    
    
    
    19,900
    
    
    
    21,500
 
 (1)
    
    The Texas region excludes the Dallas/Fort Worth division, which is classified as a discontinued operation.   43




---



##### Table of Contents



Homebuilding Operations
       Financial Services Operations
  44




---



##### Table of Contents



Critical Accounting Policies
  Impairment of Long-Lived Assets
 Accounting
for the Impairment or Disposal of Long-Lived Assets
    45




---



##### Table of Contents



Financial Reporting Under SOP 90-7
 Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code Accounting for Contingencies
  Results of Operations  Consolidated
 Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007
     Homebuilding
  46




---



##### Table of Contents



Net Sales Orders and Homes in Backlog (Consolidated)
    Net Sales Orders and Homes in Backlog (Unconsolidated Joint Ventures)
   Discontinued Operations
  Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007
   47




---



##### Table of Contents



Homebuilding
      Net Sales Orders and Homes in Backlog (Consolidated)
   Net Sales Orders and Homes in Backlog (Unconsolidated Joint Ventures)
  48




---



##### Table of Contents



Discontinued Operations
  Reportable Segments
 Disclosures About Segments of an Enterprise and Related
Information
 Homebuilding Operations
  Florida:
 Mid-Atlantic:
 Texas:
 West:
 Selected Homebuilding Operations and Financial Data
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Homebuilding revenues:Florida(2):Sales of homes
    
    $
    108.5
    
    
    $
    192.8
    
    
    $
    227.4
    
    
    $
    449.1Sales of land
    
    
    1.4
    
    
    
    25.4
    
    
    
    3.1
    
    
    
    26.4Total Florida
    
    
    109.9
    
    
    
    218.2
    
    
    
    230.5
    
    
    
    475.5Mid-Atlantic:Sales of homes
    
    
    13.9
    
    
    
    62.4
    
    
    
    28.4
    
    
    
    114.6Sales of land
    
    
    
    
    
    
    0.1
    
    
    
    2.2
    
    
    
    0.1Total Mid-Atlantic
    
    
    13.9
    
    
    
    62.5
    
    
    
    30.6
    
    
    
    114.7Texas(1):Sales of homes
    
    
    97.3
    
    
    
    167.0
    
    
    
    205.2
    
    
    
    313.9Sales of land
    
    
    6.6
    
    
    
    3.8
    
    
    
    7.1
    
    
    
    6.1Total Texas
    
    
    103.9
    
    
    
    170.8
    
    
    
    212.3
    
    
    
    320.0West:Sales of homes
    
    
    57.2
    
    
    
    113.1
    
    
    
    106.8
    
    
    
    215.1Sales of land
    
    
    9.3
    
    
    
    1.1
    
    
    
    9.3
    
    
    
    1.1Total West
    
    
    66.5
    
    
    
    114.2
    
    
    
    116.1
    
    
    
    216.2Total homebuilding revenues
    
    $
    294.2
    
    
    $
    565.7
    
    
    $
    589.5
    
    
    $
    1,126.4
 
 (1)
    
    The Texas region excludes the Dallas division, which is classified as a discontinued operation.(2)
    
    The results of operations for Transeastern for the three and six months ended June 30, 2008 have been included in our consolidated results.
Results of operations for the three and six months ended June 30, 2007 are included in the results for the unconsolidated joint ventures.
See Note 4 of the notes to the unaudited consolidated financial statements. 49




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Results of Operations:Homebuilding:Florida(2)
    
    $
    (143.4
    )
    
    $
    (14.7
    )
    
    $
    (247.5
    )
    
    $
    9.1Mid-Atlantic
    
    
    (19.9
    )
    
    
    (42.1
    )
    
    
    (28.3
    )
    
    
    (45.7
    )Texas(1)
    
    
    (22.4
    )
    
    
    14.4
    
    
    
    (17.3
    )
    
    
    28.7West
    
    
    (142.5
    )
    
    
    (47.2
    )
    
    
    (218.4
    )
    
    
    (76.8
    )Total Homebuilding
    
    
    (328.2
    )
    
    
    (89.6
    )
    
    
    (511.5
    )
    
    
    (84.7
    )Financial Services
    
    
    (3.1
    )
    
    
    2.3
    
    
    
    (4.3
    )
    
    
    5.0Corporate and unallocated
    
    
    (28.9
    )
    
    
    (48.0
    )
    
    
    (58.6
    )
    
    
    (146.3
    )Loss from
continuing operations before reorganization items and taxes
    
    $
    (360.2
    )
    
    $
    (135.3
    )
    
    $
    (574.4
    )
    
    $
    (226.0
    )
 
 (1)
    
    The Texas region excludes the Dallas division, which is classified as a discontinued operation.(2)
    
    The results of operations for Transeastern for the three and six months ended June 30, 2008 have been included in our consolidated results.
Results of operations for the three and six months ended June 30, 2007 are included in the results for the unconsolidated joint ventures.
See Note 4 of the notes to the unaudited consolidated financial statements. Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Impairment charges on active communities:Florida
    
    $
    132.0
    
    
    $
    23.6
    
    
    $
    205.9
    
    
    $
    28.7Mid-Atlantic
    
    
    5.9
    
    
    
    4.5
    
    
    
    12.5
    
    
    
    6.6Texas
    
    
    2.1
    
    
    
    0.5
    
    
    
    3.1
    
    
    
    0.6West
    
    
    35.5
    
    
    
    12.8
    
    
    
    55.7
    
    
    
    13.5175.5
    
    
    
    41.4
    
    
    
    277.2
    
    
    
    49.4Write-offs of deposits and abandonment costs:Florida
    
    
    14.3
    
    
    
    12.1
    
    
    
    36.4
    
    
    
    12.8Mid-Atlantic
    
    
    9.2
    
    
    
    13.5
    
    
    
    9.4
    
    
    
    13.9Texas
    
    
    5.5
    
    
    
    0.2
    
    
    
    6.8
    
    
    
    0.3West
    
    
    100.2
    
    
    
    17.6
    
    
    
    147.2
    
    
    
    47.5129.2
    
    
    
    43.4
    
    
    
    199.8
    
    
    
    74.5Inventory impairments and abandonment costs
    
    $
    304.7
    
    
    $
    84.8
    
    
    $
    477.0
    
    
    $
    123.9Remaining carrying value of inventory
impaired at end of period
    
    $
    529.4
    
    
    $
    696.0
    
    
    $
    529.4
    
    
    $
    696.0Number of projects impaired during the period
    
    
    168
    
    
    
    115
    
    
    
    224
    
    
    
    131Total number of projects included in
inventory and reviewed for impairment during
the period
    
    
    354
    
    
    
    457
    
    
    
    354
    
    
    
    457
 50




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Homes
    
    
    $
    
    
    Homes
    
    
    $
    
    
    Homes
    
    
    $
    
    
    Homes
    
    
    $Deliveries:Consolidated:Florida(2)
    
    
    395
    
    
    $
    108.5
    
    
    
    509
    
    
    $
    192.8
    
    
    
    862
    
    
    $
    227.4
    
    
    
    1,229
    
    
    $
    449.1Mid-Atlantic
    
    
    40
    
    
    
    13.9
    
    
    
    168
    
    
    
    62.4
    
    
    
    86
    
    
    
    28.4
    
    
    
    320
    
    
    
    114.6Texas(1)
    
    
    377
    
    
    
    97.3
    
    
    
    649
    
    
    
    167.0
    
    
    
    801
    
    
    
    205.2
    
    
    
    1,221
    
    
    
    313.9West
    
    
    208
    
    
    
    57.2
    
    
    
    330
    
    
    
    113.1
    
    
    
    390
    
    
    
    106.8
    
    
    
    604
    
    
    
    215.1Continuing operations
    
    
    1,020
    
    
    
    276.9
    
    
    
    1,656
    
    
    
    535.3
    
    
    
    2,139
    
    
    
    567.8
    
    
    
    3,374
    
    
    
    1,092.7Discontinued operations(1)
    
    
    6
    
    
    
    0.8
    
    
    
    69
    
    
    
    16.1
    
    
    
    7
    
    
    
    1.0
    
    
    
    182
    
    
    
    43.6Consolidated total
    
    
    1,026
    
    
    
    277.7
    
    
    
    1,725
    
    
    
    551.4
    
    
    
    2,146
    
    
    
    568.8
    
    
    
    3,556
    
    
    
    1,136.3Unconsolidated joint ventures:Florida (excluding Transeastern)
    
    
    
    
    
    
    
    
    
    
    37
    
    
    
    10.4
    
    
    
    
    
    
    
    
    
    
    
    40
    
    
    
    11.3Transeastern(2)
    
    
    
    
    
    
    
    
    
    
    328
    
    
    
    73.3
    
    
    
    
    
    
    
    
    
    
    
    607
    
    
    
    146.3Mid-Atlantic
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    2.5
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    2.8West(3)
    
    
    
    
    
    
    
    
    
    
    320
    
    
    
    93.3
    
    
    
    
    
    
    
    
    
    
    
    638
    
    
    
    194.5Total unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    694
    
    
    
    179.5
    
    
    
    
    
    
    
    
    
    
    
    1,295
    
    
    
    354.9Combined total
    
    
    1,026
    
    
    $
    277.7
    
    
    
    2,419
    
    
    $
    730.9
    
    
    
    2,146
    
    
    $
    568.8
    
    
    
    4,851
    
    
    $
    1,491.2
 
 (1)
    
    The Texas region excludes the Dallas division, which is classified as a discontinued operation.(2)
    
    The results of operations for Transeastern for the three and six months ended June 30, 2008 have been included in our consolidated results.
Results of operations for the three and six months ended June 30, 2007 are included in the results for the unconsolidated joint ventures.
See Note 4 of the notes to the unaudited consolidated financial statements.(3)
    
    We have excluded the results of the Engle/Sunbelt joint venture from our unconsolidated joint venture results for the three and six months
ended June 30, 2008 due to the settlement agreement reached in 2008. See Note 5 of the notes to the unaudited consolidated financial statements. Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Homes
    
    
    $
    
    
    Homes
    
    
    $
    
    
    Homes
    
    
    $
    
    
    Homes
    
    
    $Net Sales Orders(1):Consolidated:Florida(3) (4)
    
    
    (210
    )
    
    $
    (65.3
    )
    
    
    439
    
    
    $
    138.0
    
    
    
    123
    
    
    $
    (13.3
    )
    
    
    1,037
    
    
    $
    355.3Mid-Atlantic
    
    
    50
    
    
    
    18.4
    
    
    
    207
    
    
    
    71.0
    
    
    
    137
    
    
    
    44.3
    
    
    
    428
    
    
    
    152.6Texas(2)
    
    
    393
    
    
    
    103.6
    
    
    
    624
    
    
    
    153.4
    
    
    
    793
    
    
    
    205.2
    
    
    
    1,282
    
    
    
    318.1West
    
    
    120
    
    
    
    31.8
    
    
    
    303
    
    
    
    79.1
    
    
    
    287
    
    
    
    74.6
    
    
    
    556
    
    
    
    159.9Continuing operations
    
    
    353
    
    
    
    88.5
    
    
    
    1,573
    
    
    
    441.5
    
    
    
    1,340
    
    
    
    310.8
    
    
    
    3,303
    
    
    
    985.9Discontinued operations(2)
    
    
    2
    
    
    
    0.4
    
    
    
    (1
    )
    
    
    
    
    
    
    9
    
    
    
    1.0
    
    
    
    70
    
    
    
    19.4Consolidated total
    
    
    355
    
    
    
    88.9
    
    
    
    1,572
    
    
    
    441.5
    
    
    
    1,349
    
    
    
    311.8
    
    
    
    3,373
    
    
    
    1,005.3Unconsolidated joint ventures:Florida (excluding Transeastern)
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    0.8
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    1.7Transeastern(3)
    
    
    
    
    
    
    
    
    
    
    158
    
    
    
    25.1
    
    
    
    
    
    
    
    
    
    
    
    194
    
    
    
    17.8Mid-Atlantic
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    2.1
    
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    2.8West(5)
    
    
    
    
    
    
    
    
    
    
    144
    
    
    
    31.4
    
    
    
    
    
    
    
    
    
    
    
    387
    
    
    
    95.4Total unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    320
    
    
    
    59.4
    
    
    
    
    
    
    
    
    
    
    
    606
    
    
    
    117.7Combined total
    
    
    355
    
    
    $
    88.9
    
    
    
    1,892
    
    
    $
    500.9
    
    
    
    1,349
    
    
    $
    311.8
    
    
    
    3,979
    
    
    $
    1,123.0
 
 (1)
    
    Net of cancellations.(2)
    
    The Texas region excludes the Dallas division, which is classified as a discontinued operation.(3)
    
    The results of operations for Transeastern for the three and six months ended June 30, 2008 have been included in our consolidated results.
Results of operations for the three and six months ended June 30, 2007 are included in the results for the unconsolidated joint ventures.
See Note 4 of the notes to the unaudited consolidated financial statements. 51




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##### Table of Contents



(4)
    
    Contracts with a third-party that marketed homes in the United Kingdom included in backlog at March 31, 2008 were cancelled in June 2008.
These contracts were for 511 homes representing $115.6 million of revenue.(5)
    
    We have excluded the results of the Engle/Sunbelt joint venture from our unconsolidated joint venture results for the three and six months
ended June 30, 2008 due to the settlement agreement reached in 2008. See Note 5 of the notes to the unaudited consolidated financial statements. June 30, 2008
    
    
    June 30, 2007Average
    
    
    
    
    
    
    
    
    
    
    AverageHomes
    
    
    $
    
    
    Price
    
    
    Homes
    
    
    $
    
    
    PriceSales Backlog:Consolidated:Florida(2)
    
    
    591
    
    
    $
    195.0
    
    
    $
    330
    
    
    
    2,036
    
    
    $
    758.0
    
    
    $
    372Mid-Atlantic
    
    
    131
    
    
    
    44.0
    
    
    $
    336
    
    
    
    314
    
    
    
    118.5
    
    
    $
    377Texas(1)
    
    
    541
    
    
    
    154.8
    
    
    $
    286
    
    
    
    1,035
    
    
    
    277.8
    
    
    $
    268West
    
    
    317
    
    
    
    85.5
    
    
    $
    270
    
    
    
    421
    
    
    
    136.5
    
    
    $
    324Continuing operations
    
    
    1,580
    
    
    
    479.3
    
    
    $
    303
    
    
    
    3,806
    
    
    
    1,290.8
    
    
    $
    339Discontinued operations(1)
    
    
    5
    
    
    
    0.8
    
    
    $
    150
    
    
    
    21
    
    
    
    5.8
    
    
    $
    278Consolidated total
    
    
    1,585
    
    
    
    480.1
    
    
    $
    303
    
    
    
    3,827
    
    
    
    1,296.6
    
    
    $
    339Unconsolidated joint ventures:Florida (excluding Transeastern)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    4.6
    
    
    $
    254Transeastern(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    284
    
    
    
    65.8
    
    
    $
    232Mid-Atlantic
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    1.3
    
    
    $
    215West(3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    194
    
    
    
    55.0
    
    
    $
    284Total unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    502
    
    
    
    126.7
    
    
    $
    252Combined total
    
    
    1,585
    
    
    $
    480.1
    
    
    $
    303
    
    
    
    4,329
    
    
    $
    1,423.3
    
    
    $
    329
 
 (1)
    
    The Texas region excludes the Dallas division, which is classified as a discontinued operation.(2)
    
    The results of operations for Transeastern for the three and six months ended June 30, 2008 have been included in our consolidated results. Results of
operations for the three and six months ended June 30, 2007 are included in the results for the unconsolidated joint ventures. See Note 4 of the notes to the unaudited
consolidated financial statements.(3)
    
    We have excluded the results of the Engle/Sunbelt joint venture from our unconsolidated joint venture results for the three and six months ended June 30,
2008 due to the settlement agreement reached in 2008. See Note 5 of the notes to the unaudited consolidated financial statements. Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2008
    
    2007
    
    2008
    
    2007Cancellation rates:Consolidated:Florida(2)
    
    
    144
    %
    
    
    34
    %
    
    
    88
    %
    
    
    32
    %Mid-Atlantic
    
    
    43
    %
    
    
    17
    %
    
    
    35
    %
    
    
    17
    %Texas(1)
    
    
    22
    %
    
    
    33
    %
    
    
    25
    %
    
    
    29
    %West
    
    
    46
    %
    
    
    34
    %
    
    
    42
    %
    
    
    36
    %Continuing Operations
    
    
    73
    %
    
    
    32
    %
    
    
    52
    %
    
    
    30
    %
 
 (1)
    
    The Texas region excludes the Dallas division, which is classified as a discontinued operation.(2)
    
    Contracts with a third-party that marketed homes in the
United Kingdom, which were included in backlog at December 31,
2007 and March 31, 2008 and were cancelled in June 2008.
These contracts were for 511 homes representing $115.6 million of revenue. 52




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##### Table of Contents



Three Months Ended June 30,
    
    Six Months Ended June 30,2008
    
    2007
    
    2008
    
    2007Sales
    
    
    
    
    
    Sales
    
    
    
    
    
    Sales
    
    
    
    
    
    SalesDeliveries
    
    Orders
    
    Deliveries
    
    Orders
    
    Deliveries
    
    Orders
    
    Deliveries
    
    OrdersAverage Price:Consolidated:Florida(2) (4)
    
    $
    275
    
    
    $
    311
    
    
    $
    379
    
    
    $
    314
    
    
    $
    264
    
    
    $
    (108
    )
    
    $
    365
    
    
    $
    343Mid-Atlantic
    
    $
    347
    
    
    $
    369
    
    
    $
    371
    
    
    $
    343
    
    
    $
    330
    
    
    $
    323
    
    
    $
    358
    
    
    $
    357Texas(1)
    
    $
    258
    
    
    $
    263
    
    
    $
    257
    
    
    $
    246
    
    
    $
    256
    
    
    $
    259
    
    
    $
    257
    
    
    $
    248West
    
    $
    275
    
    
    $
    265
    
    
    $
    343
    
    
    $
    261
    
    
    $
    274
    
    
    $
    260
    
    
    $
    356
    
    
    $
    288Continuing operations
    
    $
    271
    
    
    $
    251
    
    
    $
    323
    
    
    $
    281
    
    
    $
    265
    
    
    $
    232
    
    
    $
    324
    
    
    $
    298Discontinued
operations(1)
    
    $
    128
    
    
    $
    161
    
    
    $
    233
    
    
    $
    (46
    )
    
    $
    144
    
    
    $
    112
    
    
    $
    240
    
    
    $
    277Consolidated total
    
    $
    271
    
    
    $
    250
    
    
    $
    320
    
    
    $
    281
    
    
    $
    265
    
    
    $
    231
    
    
    $
    320
    
    
    $
    298Unconsolidated joint ventures:Florida (excluding
Transeastern)
    
    
    
    
    
    
    
    
    
    $
    282
    
    
    $
    99
    
    
    
    
    
    
    
    
    
    
    $
    282
    
    
    $
    142Transeastern(2)
    
    
    
    
    
    
    
    
    
    $
    223
    
    
    $
    159
    
    
    
    
    
    
    
    
    
    
    $
    241
    
    
    $
    92Mid-Atlantic
    
    
    
    
    
    
    
    
    
    $
    282
    
    
    $
    207
    
    
    
    
    
    
    
    
    
    
    $
    282
    
    
    $
    216West(3)
    
    
    
    
    
    
    
    
    
    $
    292
    
    
    $
    219
    
    
    
    
    
    
    
    
    
    
    $
    305
    
    
    $
    246Total unconsolidated joint
ventures
    
    
    
    
    
    
    
    
    
    $
    259
    
    
    $
    186
    
    
    
    
    
    
    
    
    
    
    $
    274
    
    
    $
    194Combined total
    
    $
    271
    
    
    $
    250
    
    
    $
    302
    
    
    $
    265
    
    
    $
    265
    
    
    $
    231
    
    
    $
    307
    
    
    $
    282
 
 (1)
    
    The Texas region excludes the Dallas division, which is classified as a discontinued operation.(2)
    
    The results of operations for Transeastern for the three and six months ended June 30, 2008 have been included in our consolidated results.
Results of operations for the three and six months ended June 30, 2007 are included in the results for the unconsolidated joint ventures.
See Note 4 of the notes to the unaudited consolidated financial statements.(3)
    
    We have excluded the results of the Engle/Sunbelt joint venture from our unconsolidated joint venture results for the three and six months
ended June 30, 2008 due to the settlement agreement reached in 2008. See Note 5 of the notes to the unaudited consolidated financial statements.(4)
    
    Contracts with a third-party that marketed homes in the
United Kingdom, which were included in backlog at December 31,
2007 and March 31, 2008 and were cancelled in June 2008. These contracts were for 511 homes representing $115.6 million of
revenue. Three Months Ended June 30, 2008 compared to Three Months Ended June 30, 2007
 Florida:
   Mid-Atlantic:
  53




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Texas:
   West:
   Six Months Ended June 30, 2008 compared to Six Months Ended June 30, 2007
 Florida:
   Mid-Atlantic:
 54




---



##### Table of Contents



Texas:
   West:
   Seasonality
  FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
 Sources and Uses of Cash
    55




---



##### Table of Contents




    
    the availability of and our ability to operate subject to the terms of the cash collateral
order and related budget;
    
    limitations on our ability to implement and execute our business plans and strategy;
    
    our ability to obtain and maintain normal terms with existing and potential homebuyers,
vendors and service providers and maintain contracts and leases that are critical to our
operations;
    
    our ability to obtain needed approval from the Bankruptcy Court for transactions outside of
the ordinary course of business, which may limit our ability to respond on a timely basis to
certain events or take advantage of certain opportunities;
    
    limitations on our ability to obtain Bankruptcy Court approval with respect to motions in
the Chapter 11 cases that we may seek from time to time or potentially adverse decisions by
the Bankruptcy Court with respect to such motions, including as a result of the actions of
our creditors and other third parties, who may oppose our requested relief or who may seek
to require us to take actions that we oppose;
    
    limitations on our ability to reject contracts or leases that are burdensome or uneconomical;
    
    limitations on our ability to raise capital, including through sales of assets; and
    
    our ability to attract, motivate and retain key and essential personnel is impacted by the
Bankruptcy Code which limits our ability to implement a retention program or take other
measures intended to motivate employees to remain with us.
   
    
    our ability to generate and maintain adequate cash;
    
    the cost, duration and outcome of the restructuring process;
    
    our ability to comply with the terms of our cash collateral order and
seek and receive extensions of our ability to use cash collateral; and
    
    our ability to retain key employees.
   56




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##### Table of Contents



Financing Activities
      Revolving Loan Facility and First and Second Lien Term Loan Facilities
   57




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##### Table of Contents



Senior Notes and Senior Subordinated Notes
  pari passu pari passu
 Senior Subordinated PIK Notes
     Financial Services Borrowings
  58




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##### Table of Contents



Liquidity Needs
       http://www.tousa.com/reorg.
 Off Balance Sheet Arrangements
 59




---



##### Table of Contents



Land and Homesite Option Contracts
      Investments in Unconsolidated Joint Ventures
  60




---



##### Table of Contents



Accounting by Creditors for Impairment of a Loan
 Engle/Sunbelt Joint Venture
      TOUSA/Kolter Joint Venture
    61




---



##### Table of Contents



Centex/TOUSA at Wellington, LLC
   Layton Lakes Joint Venture
     Other
  62




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##### 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 successful implementation of our asset management strategy and its
impact on our business;
    
    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 debt service payments, and land acquisition and development
needs;
    
    our expectations regarding our option contracts, investments in land development joint ventures;
    
    our expectations regarding the housing market in 2009 and beyond; and
    
    our expectations regarding our use of cash in operations.
   
    
    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
or unemployment rates or declines in median income growth, consumer confidence or the demand for,
or the price of, housing;
    
    the risks and uncertainties associated with our Chapter 11 cases;
    
    the inability to obtain confirmation of our Chapter 11 plan;
    
    Restrictions on our ability to pursue our business strategies while operating under the Bankruptcy :
    
    our ability to attract, motivate and retain key and essential personnel is impacted by the
Bankruptcy Code which limits our ability to implement a retention program or take other measures
intended to motivate employees to remain with us;
    
    we require a significant amount of cash, which may not be available to us;
    
    our belief that our ability to continue as a going concern will depend upon our ability to
restructure our capital structure;
    
    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;
    
    events which would impede our ability to open new communities and/or deliver homes within
anticipated time frames and/or within anticipated budgets;
 63




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
    
    a further decline in the value of our land and home inventories;
    
    our ability to dispose successfully 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;
    
    a change in ownership of our stock, as defined in Section 382 of the
Internal Revenue Code, which would limit our ability to receive
anticipated income tax refunds.
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
 .
 Changes In Internal Control
  
    
    Our Chapter 11 proceedings have had a significant impact on our
business processes and internal control over financial reporting
related to the proper separation and payment of pre-petition and
post-petition obligations and the preparation of unaudited
consolidated financial statements reflecting the accounting required
for the restructuring activities and reorganization expenses resulting
from the Chapter 11 proceedings. Management continues to take actions
necessary to address the resources, processes and controls related to
these restructuring activities, while maintaining controls over
routine daily operations.
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PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 Chapter 11 Cases
  Securities
Class Action Lawsuit
 Durgin, et al.,
v. TOUSA, Inc., et al., No. 06-61844-CIV.
    Proceeding by Official Committee of Unsecured Creditors
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.
     Vista Lakes
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Chinese
Drywall
       Other Litigation
  
 ITEM 1A. RISK FACTORS
 Set forth below is a discussion of the material changes in our risk factors as previously
disclosed in Item 1A of Part 1 of our Annual Report on Form 10-K for the fiscal year ended December
31, 2007 (2007 Form 10-K ).
  Our cash collateral order includes operating budgets and financial covenants that limit our
operating flexibility
  
    
    incur indebtedness;
    
    incur liens and enter sale/leaseback transactions except for model homes subject to certain limitations;
    
    make or own investments;
    
    enter into transactions with affiliates;
    
    engage in new lines of business;
    
    consolidate, merge, sell all or substantially all of our assets;
    
    issue guarantees of debt;
    
    agree to amendment or modification to our organizational documents;
    
    incur or create claims; and
    
    make additional payments on pre-petition indebtedness.
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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.
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SIGNATURES
  TOUSA, Inc.Date:  March 19, 2009
    By:
    /s/ Tommy L. McAdenName:
    Tommy L. McAdenTitle:
    Executive Vice President, Director and Chief
Financial OfficerDate:  March 19, 2009
    By:
    /s/ Angela F. ValdesName:
    Angela F. ValdesTitle:
    Vice President and Chief Accounting Officer 69