##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 COMMISSION FILE NUMBER: 001-32322
 TOUSA, INC.
  Delaware
    
    76-0460831(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)4000 Hollywood Blvd., Suite 500 N 
Hollywood, Florida
(Address of principal executive offices)
    
    33021
(ZIP code)
 
 
 þ o
  o þ o
 o þ
 APPLICABLE ONLY TO CORPORATE ISSUERS:




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##### 



TOUSA, INC. AND SUBSIDIARIES
 INDEX
 PAGEPART I. Financial Information
    
    
    3ITEM 1. Financial Statements (Unaudited)
    
    
    3Consolidated Statements of Financial Condition
    
    
    3Consolidated Statements of Operations
    
    
    4Consolidated
Statements of Stockholders 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
    
    
    39ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    68ITEM 4. Controls and Procedures
    
    
    68PART II. Other Information
    
    
    69ITEM 1. Legal Proceedings
    
    
    69ITEM 1A. Risk Factors
    
    
    69ITEM 6. Exhibits
    
    
    71Signatures
    
    
    72EX-3.1 Amendment No. 1 to the Bylaws of TOUSA, Inc.EX-31.1 Section 302 Certification of CEOEX-31.2 Section 302 Certification of CFOEX-32.1 Section 906 Certification of CEOEX-32.2 Section 906 Certification of CFO
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 TOUSA, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in millions, except par value)
 September 30, 2007
    
    
    December 31, 2006(Unaudited)ASSETSHOMEBUILDING:Cash and cash equivalents:Unrestricted
    
    $
    73.6
    
    
    $
    47.4Restricted
    
    
    4.6
    
    
    
    3.8Inventory:Deposits
    
    
    82.0
    
    
    
    216.6Homesites and land under development
    
    
    692.0
    
    
    
    725.6Residences completed and under construction
    
    
    758.0
    
    
    
    835.7Inventory not owned
    
    
    39.8
    
    
    
    300.61,571.8
    
    
    
    2,078.5Property and equipment, net
    
    
    28.6
    
    
    
    28.5Investments in unconsolidated joint ventures
    
    
    80.9
    
    
    
    129.0Receivables from unconsolidated joint ventures,
net of allowance of $0 and $54.8 million at September 30,
2007 and December
31, 2006, respectively
    
    
    42.2
    
    
    
    27.2Other assets
    
    
    371.1
    
    
    
    236.6Goodwill
    
    
    60.0
    
    
    
    100.9Assets held for sale
    
    
    10.1
    
    
    
    124.82,242.9
    
    
    
    2,776.7FINANCIAL SERVICES:Cash and cash equivalents:Unrestricted
    
    
    4.0
    
    
    
    6.8Restricted
    
    
    3.1
    
    
    
    4.2Mortgage loans held for sale
    
    
    31.0
    
    
    
    41.9Other assets
    
    
    10.7
    
    
    
    12.648.8
    
    
    
    65.5Total assets
    
    $
    2,291.7
    
    
    $
    2,842.2LIABILITIES AND STOCKHOLDERS EQUITYHOMEBUILDING:Accounts payable and other liabilities
    
    $
    396.1
    
    
    $
    554.2Customer deposits
    
    
    48.9
    
    
    
    62.6Obligations for inventory not owned
    
    
    44.5
    
    
    
    300.6Notes payable
    
    
    1,574.1
    
    
    
    1,060.7Bank borrowings
    
    
    150.3
    
    
    
    Liabilities associated with assets held for sale
    
    
    2.5
    
    
    
    47.82,216.4
    
    
    
    2,025.9FINANCIAL SERVICES:Accounts payable and other liabilities
    
    
    4.6
    
    
    
    6.0Bank borrowings
    
    
    22.4
    
    
    
    35.427.0
    
    
    
    41.4Total liabilities
    
    
    2,243.4
    
    
    
    2,067.3Commitments and contingenciesStockholders equity:Preferred stock  $0.01 par value; 3,000,000
shares authorized; 117,500 and none outstanding
at September 30, 2007 and December 31, 2006,
respectively
    
    
    83.9
    
    
    
    Common stock  $0.01 par value; 975,000,000
and 97,000,000 shares authorized and 59,604,169
and 59,590,519 shares issued and outstanding at
September 30, 2007, and December 31, 2006,
respectively
    
    
    0.6
    
    
    
    0.6Additional paid-in capital
    
    
    489.7
    
    
    
    481.2Retained
earnings (accumulated deficit)
    
    
    (525.9
    )
    
    
    293.1Total stockholders equity
    
    
    48.3
    
    
    
    774.9Total liabilities and stockholders equity
    
    $
    2,291.7
    
    
    $
    2,842.2
  3




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##### Table of Contents



TOUSA, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts)
(Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006HOMEBUILDING:Revenues:Home sales
    
    $
    449.6
    
    
    $
    563.0
    
    
    $
    1,542.3
    
    
    $
    1,724.8Land sales
    
    
    43.3
    
    
    
    13.8
    
    
    
    77.0
    
    
    
    56.8492.9
    
    
    
    576.8
    
    
    
    1,619.3
    
    
    
    1,781.6Cost of sales:Home sales
    
    
    370.1
    
    
    
    434.9
    
    
    
    1,250.0
    
    
    
    1,294.7Land sales
    
    
    56.5
    
    
    
    14.1
    
    
    
    85.6
    
    
    
    52.0Inventory impairments and abandonment costs
    
    
    504.5
    
    
    
    49.8
    
    
    
    628.4
    
    
    
    57.4Other
    
    
    (0.8
    )
    
    
    (1.7
    )
    
    
    (5.0
    )
    
    
    (7.2
    )930.3
    
    
    
    497.1
    
    
    
    1,959.0
    
    
    
    1,396.9Gross profit (loss)
    
    
    (437.4
    )
    
    
    79.7
    
    
    
    (339.7
    )
    
    
    384.7Selling, general and administrative expenses
    
    
    86.0
    
    
    
    80.8
    
    
    
    262.4
    
    
    
    274.1(Income) loss from unconsolidated joint ventures, net
    
    
    9.2
    
    
    
    (29.0
    )
    
    
    8.8
    
    
    
    (94.7
    )Impairments
of investments in unconsolidated joint ventures
    
    
    23.4
    
    
    
    148.4
    
    
    
    28.9
    
    
    
    148.4Provision for settlement of loss contingency
    
    
    40.7
    
    
    
    
    
    
    
    151.6
    
    
    
    Goodwill impairments
    
    
    2.7
    
    
    
    5.7
    
    
    
    40.9
    
    
    
    5.7Interest expense
    
    
    10.0
    
    
    
    
    
    
    
    10.2
    
    
    
    Other (income) expense, net
    
    
    0.6
    
    
    
    0.1
    
    
    
    (1.5
    )
    
    
    (4.3
    )Homebuilding pretax income (loss)
    
    
    (610.0
    )
    
    
    (126.3
    )
    
    
    (841.0
    )
    
    
    55.5FINANCIAL SERVICES:Revenues
    
    
    8.3
    
    
    
    15.8
    
    
    
    31.3
    
    
    
    48.4Expenses
    
    
    8.1
    
    
    
    10.8
    
    
    
    26.1
    
    
    
    32.5Financial Services pretax income
    
    
    0.2
    
    
    
    5.0
    
    
    
    5.2
    
    
    
    15.9Income (loss) from continuing operations before income
taxes
    
    
    (609.8
    )
    
    
    (121.3
    )
    
    
    (835.8
    )
    
    
    71.4Provision (benefit) for income taxes
    
    
    6.0
    
    
    
    (41.1
    )
    
    
    (35.7
    )
    
    
    30.0Income (loss) from continuing operations, net of taxes
    
    
    (615.8
    )
    
    
    (80.2
    )
    
    
    (800.1
    )
    
    
    41.4Discontinued operations:Income (loss) from discontinued operations
    
    
    (3.9
    )
    
    
    0.4
    
    
    
    (11.8
    )
    
    
    1.9Loss from disposal of discontinued operations
    
    
    
    
    
    
    
    
    
    
    (13.6
    )
    
    
    Provision (benefit) for income taxes
    
    
    
    
    
    
    0.2
    
    
    
    (7.8
    )
    
    
    0.7Income (loss) from discontinued operations, net of taxes
    
    
    (3.9
    )
    
    
    0.2
    
    
    
    (17.6
    )
    
    
    1.2Net income (loss)
    
    
    (619.7
    )
    
    
    (80.0
    )
    
    
    (817.7
    )
    
    
    42.6Dividends
and accretion of discount on preferred stock
    
    
    2.2
    
    
    
    
    
    
    
    2.2
    
    
    
    Net income (loss) available to common stockholders
    
    $
    (621.9
    )
    
    $
    (80.0
    )
    
    $
    (819.9
    )
    
    $
    42.6EARNINGS (LOSS) PER COMMON SHARE, BASIC:Earnings (loss) from continuing operations (net of
preferred stock dividends and accretion of discount)
    
    $
    (10.36
    )
    
    $
    (1.35
    )
    
    $
    (13.46
    )
    
    $
    0.70Earnings (loss) from discontinued operations
    
    
    (0.07
    )
    
    
    0.01
    
    
    
    (0.30
    )
    
    
    0.02Basic earnings (loss) per common share
    
    $
    (10.43
    )
    
    $
    (1.34
    )
    
    $
    (13.76
    )
    
    $
    0.72EARNINGS (LOSS) PER COMMON SHARE, DILUTED:Earnings (loss) from continuing operations (net of
preferred stock dividends and accretion of discount)
    
    $
    (10.36
    )
    
    $
    (1.35
    )
    
    $
    (13.46
    )
    
    $
    0.68Earnings (loss) from discontinued operations
    
    
    (0.07
    )
    
    
    0.01
    
    
    
    (0.30
    )
    
    
    0.02Diluted earnings (loss) per common share
    
    $
    (10.43
    )
    
    $
    (1.34
    )
    
    $
    (13.76
    )
    
    $
    0.70WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:Basic
    
    
    59,604,169
    
    
    
    59,590,519
    
    
    
    59,601,119
    
    
    
    59,580,062Diluted
    
    
    59,604,169
    
    
    
    59,590,519
    
    
    
    59,601,119
    
    
    
    61,150,782CASH DIVIDENDS PER COMMON SHARE
    
    $
    
    
    
    $
    0.015
    
    
    $
    
    
    
    $
    0.045
  4




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TOUSA, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(Dollars in millions)
(Unaudited)
 RetainedAdditional
    
    
    Earnings
    
    
    TotalPreferred Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    (Accumulated
    
    
    StockholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit)
    
    
    EquityBalance at January 1, 2007
    
    
    
    
    
    $
    
    
    
    
    59,590,519
    
    
    $
    0.6
    
    
    $
    481.2
    
    
    $
    293.1
    
    
    $
    774.9Common stock issued to
directors
    
    
    
    
    
    
    
    
    
    
    13,650
    
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    0.1Transeastern settlement
    
    
    117,500
    
    
    
    81.7
    
    
    
    
    
    
    
    
    
    
    
    7.6
    
    
    
    
    
    
    
    89.3Stock option compensation
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.0
    
    
    
    
    
    
    
    3.0Adoption of FIN 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.3
    )
    
    
    (1.3
    )Preferred stock dividends
    
    
    
    
    
    
    1.6
    
    
    
    
    
    
    
    
    
    
    
    (1.6
    )
    
    
    
    
    
    
    Accretion of
discount on preferred stock
    
    
    
    
    
    
    0.6
    
    
    
    
    
    
    
    
    
    
    
    (0.6
    )
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (817.7
    )
    
    
    (817.7
    )Balance at September 30,
2007
    
    
    117,500
    
    
    $
    83.9
    
    
    
    59,604,169
    
    
    $
    0.6
    
    
    $
    489.7
    
    
    $
    (525.9
    )
    
    $
    48.3
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TOUSA, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
(Unaudited)
 Nine Months EndedSeptember 30,2007
    
    
    2006Cash flows from operating activities:Net income (loss)
    
    $
    (817.7
    )
    
    $
    42.6(Income) loss from discontinued operations
    
    
    17.6
    
    
    
    (1.2
    )Income (loss) from continuing operations
    
    
    (800.1
    )
    
    
    41.4Adjustments to reconcile income (loss) from continuing operations to
net cash used in operating activities:Depreciation and amortization
    
    
    11.2
    
    
    
    10.2Non-cash compensation expense
    
    
    3.0
    
    
    
    7.8Non-cash interest expense
    
    
    8.0
    
    
    
    Loss on
early termination of debt
    
    
    2.4
    
    
    
    Provision for settlement of loss contingency
    
    
    151.6
    
    
    
    Inventory
impairments and abandonment costs
    
    
    628.4
    
    
    
    57.5Goodwill impairments
    
    
    40.9
    
    
    
    5.7Deferred income taxes
    
    
    (160.6
    )
    
    
    (69.5
    )Equity in (earnings) losses from unconsolidated joint ventures
    
    
    19.2
    
    
    
    (5.3
    )Distributions of earnings from unconsolidated joint ventures
    
    
    0.9
    
    
    
    19.7Impairments of investments in unconsolidated joint ventures
    
    
    28.9
    
    
    
    148.4Changes in operating assets and liabilities:Restricted cash
    
    
    28.6
    
    
    
    (0.1
    )Inventory
    
    
    (72.1
    )
    
    
    (391.4
    )Receivables from unconsolidated joint ventures
    
    
    (29.9
    )
    
    
    (1.9
    )Other assets
    
    
    82.4
    
    
    
    47.2Mortgage loans held for sale
    
    
    10.9
    
    
    
    (5.3
    )Accounts payable and other liabilities
    
    
    (26.7
    )
    
    
    (42.4
    )Customer deposits
    
    
    (15.6
    )
    
    
    (8.5
    )Net cash used in operating activities
    
    
    (88.6
    )
    
    
    (186.5
    )Cash flows from investing activities:Acquisitions, net of cash acquired
    
    
   (7.7
    )
    
    
    Earn-out consideration paid for acquisitions
    
    
    
    
    
    
    (0.9
    )Net additions to property and equipment
    
    
    (9.4
    )
    
    
    (12.8
    )Loans to unconsolidated joint ventures
    
    
    
    
    
    
    (11.3
    )Investments in unconsolidated joint ventures
    
    
    (29.2
    )
    
    
    (13.8
    )Capital distributions from unconsolidated joint ventures
    
    
    12.4
    
    
    
    32.3Net cash used in investing activities
    
    
    (33.9
    )
    
    
    (6.5
    )Cash flows from financing activities:Net borrowings from (repayments of) revolving credit facilities
    
    
    150.3
    
    
    
    (65.0
    )Principal payments on notes payable
    
    
    (0.5
    )
    
    
    Net proceeds from notes offering
    
    
    
    
    
    
    248.8Net proceeds from (repayments of) Financial Services bank borrowings
    
    
    (13.0
    )
    
    
    7.4Payments for deferred financing costs
    
    
    (32.1
    )
    
    
    (3.2
    )Payments for issuance of convertible preferred stock and warrants
    
    
   (2.9
    )
    
      
    Excess income tax benefit from exercise of stock options
    
    
    
    
    
    
    0.1Proceeds from stock option exercises
    
    
    
    
    
    
    0.2Dividends paid
    
    
    
    
    
    
    (2.7
    )Net cash provided by financing activities
    
    
    101.8
    
    
    
    185.6Net cash
provided by (used in) continuing operations
    
    
    (20.7
    )
    
    
    (7.4
    )Cash flows from discontinued operations:Net cash used in operating activities
    
    
    (12.4
    )
    
    
    6.0Net cash provided by (used in) financing activities
    
    
    56.5
    
    
    
    (0.6
    )Net cash provided by discontinued operations
    
    
    44.1
    
    
    
    5.4Increase (decrease) in cash and cash equivalents
    
    
    23.4
    
    
    
    (2.0
    )Cash and cash equivalents at beginning of period
    
    
    54.2
    
    
    
    32.3Cash and cash equivalents at end of period
    
    $
    77.6
    
    
    $
    30.3
 6




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TOUSA, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Dollars in millions)
(Unaudited)
 Nine Months EndedSeptember 30,2007
    
    
    2006Supplemental disclosure of non-cash financing activities:Increase (decrease) in obligations for inventory not owned
    
    $
    44.5
    
    
    $
    170.8Increase (decrease) in inventory not owned
    
    $
39.8
    
    
    $
    170.8Supplemental disclosure of non-cash activities:Refer to
Note 3 for the consolidation of other variable interest entities in accordance with FIN 46(R)Refer to Note 4 for the settlement of the Transeastern
joint venture and related acquisition of assets
  7




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TOUSA, INC. AND SUBSIDIARIES
 
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007
 1. Business and Organization
 Business
  Organization
  Liquidity
    8




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2. Summary of Significant Accounting Policies
 Principles of Consolidation and Basis of Presentation
     
    
    Impairment assessments of investments in unconsolidated joint ventures, long-lived
assets, including our inventory, and goodwill;
    
    Loss exposures associated with the abandonment of our rights under option contracts and
the relinquishment of our rights under certain joint ventures;
    
    Realization of amounts due from unconsolidated joint ventures;
    
    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, including warranty reserves, in connection
with our homebuilding operations.
   9




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Interim Presentation
   Earnings
(Loss) Per Share
   Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Basic weighted average shares outstanding
    
    
    59,604,169
    
    
    
    59,590,519
    
    
    
    59,601,119
    
    
    
    59,580,062Net effect of common stock equivalents
assumed to be exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,570,720Diluted weighted average shares outstanding
    
    
    59,604,169
    
    
    
    59,590,519
    
    
    
    59,601,119
    
    
    
    61,150,782
  Revenue Recognition
 Accounting for
the Sales of Real Estate
 Recent Accounting Pronouncements
 ,
Accounting for Servicing of Financial Assets Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities
 Accounting for Uncertainty in Income
Taxes-an interpretation of SFAS 109
 Fair Value Measurements
 10




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Applicability of the Assessment of a Buyers Continuing Investment under FASB Statement No. 66,
Accounting for Sales of Real Estate, for Sales of Condominiums
 The Fair Value Option for Financial Assets and
Financial Liabilities
 Determining the Nature of a Host Contract Related to a Hybrid Financial
Instrument Issued in the Form of a Share under FASB Statement No. 133
 3. Inventory
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Interest capitalized, beginning of period
    
    $
    81.6
    
    
    $
    56.1
    
    
    $
    68.7
    
    
    $
    44.2Interest incurred*
    
    
    41.8
    
    
    
    26.0
    
    
    
    98.6
    
    
    
    72.5Less interest included in:Cost of sales
    
    
    (23.8
    )
    
    
    (17.9
    )
    
    
    (67.3
    )
    
    
    (52.4
    )Interest expense
    
    
    (10.0
    )
    
    
    
    
    
    
    (10.2
    )
    
    
    Other adjustments
    
    
    (0.1
    )
    
    
    (0.3
    )
    
    
    (0.3
    )
    
    
    (0.4
    )Interest capitalized, end of period
    
    $
    89.5
    
    
    $
    63.9
    
    
    $
    89.5
    
    
    $
    63.9
 
 *
    
    Included in interest incurred is the amortization of deferred finance costs
which amounted to $3.5 million and $0.9 million for the three months ended September
30, 2007 and September 30, 2006, respectively, and $6.2 million and $2.7 million for
the nine months ended September 30, 2007 and September 30, 2006, respectively.   11




---



##### Table of Contents



Consolidation of Variable
Interest Entities
      12




---



##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Impairment charges on active communities:Florida
    
    $
    15.7
    
    
    $
    4.5
    
    
    $
    44.4
    
    
    $
    5.2Mid-Atlantic
    
    
    4.4
    
    
    
    10.4
    
    
    
    11.0
    
    
    
    13.5Texas
    
    
    
    
    
    
    0.5
    
    
    
    0.6
    
    
    
    0.5West
    
    
    43.2
    
    
    
    14.4
    
    
    
    56.7
    
    
    
    16.163.3
    
    
    
    29.8
    
    
    
    112.7
    
    
    
    35.3Write-offs of
deposits, land impairments and abandonment costs:Florida
    
    
    274.5
    
    
    
    0.2
    
    
    
    287.3
    
    
    
    1.3Mid-Atlantic
    
    
    33.9
    
    
    
    7.5
    
    
    
    47.8
    
    
    
    8.0Texas
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    0.1West
    
    
    132.8
    
    
    
    12.3
    
    
    
    180.3
    
    
    
    12.7441.2
    
    
    
    20.0
    
    
    
    515.7
    
    
    
    22.1Inventory impairments and abandonment costs
    
    $
    504.5
    
    
    $
    49.8
    
    
    $
    628.4
    
    
    $
    57.4
 4. Transeastern Joint Venture Settlement and Acquisition
   The Equity Method of Accounting for
Investments in Common Stock
   13




---



##### Table of Contents



Settlement with Mezzanine Lenders
  Settlement with JV Partner
  TE Acquisition
  14




---



##### Table of Contents



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
    
    
    9.1Fair value of common stock warrants issued
    
    
    8.0Payment to purchase land under existing land bank arrangements
    
    
    50.2Transaction costs including accrued interest paid to the Senior Lenders
    
    
    33.4Total estimated purchase price
    
    $
    584.7Allocation of purchase consideration:Cash and cash equivalents
    
    $
    10.3Restricted cash
    
    
    28.4Inventory (a)
    
    
    149.8Property and equipment
    
    
    1.0Accounts payable and other liabilities
    
    
    (29.5
    )Customer deposits
    
    
    (1.9
    )Previously accrued loss contingency (b)
    
    
    385.9Additional loss on TE Acquisition (c)
    
    
    40.7$
    584.7
 
 (a)
    
    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.(b)
    
    In accordance with Statement of Financial Accounting Standards No. 5, Accounting for
Contingencies (SFAS 5) and other authoritative guidance, as of June 30, 2007, the
Company accrued $385.9 million for settlement of a loss contingency (determined by
computing the difference between the estimated fair market value of the consideration paid
in connection with the global settlement less the estimated fair market value of the
business acquired).(c)
    
    There were no identifiable intangible assets or goodwill associated with the TE
Acquisition.  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Homebuilding revenues
    
    $
    507.0
    
    
    $
    757.4
    
    
    $
    1,763.1
    
    
    $
    2,286.2Income (loss) from
continuing
operations
    
    
    (631.7
    )
    
    
    21.1
    
    
    
    (879.4
    )
    
    
    148.7Net income (loss)
available to common
stockholders
    
    
    (634.3
    )
    
    
    18.7
    
    
    
    (886.8
    )
    
    
    141.6EARNINGS (LOSS) PER
COMMON SHARE,
DILUTED:Earnings (loss) from
continuing
operations (net of
preferred stock
dividends)
    
    
    (10.64
    )
    
    
    0.31
    
    
    
    (14.88
    )
    
    
    2.38Earnings (loss) from
discontinued
operations
    
    
    (0.07
    )
    
    
    0.01
    
    
    
    (0.30
    )
    
    
    0.02Diluted earnings
(loss) per common
share
    
    $
    (10.71
    )
    
    $
    0.32
    
    
    $
    (15.18
    )
    
    $
    2.40
  15




---



##### Table of Contents



5. Investments in Unconsolidated Joint Ventures
  September 30, 2007Engle/Sunbelt
    
    
    Others
    
    
    TotalAssets:Cash and cash equivalents
    
    $
    2.2
    
    
    $
    10.3
    
    
    $
    12.5Inventories
    
    
    180.2
    
    
    
    390.9
    
    
    
    571.1Other assets
    
    
    3.6
    
    
    
    5.5
    
    
    
    9.1Total assets
    
    $
    186.0
    
    
    $
    406.7
    
    
    $
    592.7Liabilities and equity:Accounts payable and other liabilities
    
    $
    45.2
    
    
    $
    75.7
    
    
    $
    120.9Notes payable
    
    
    88.3
    
    
    
    188.0
    
    
    
    276.3Equity of:TOUSA, Inc.
    
    
    44.6
    
    
    
    65.5
    
    
    
    110.1Others
    
    
    7.9
    
    
    
    77.5
    
    
    
    85.4Total equity
    
    
    52.5
    
    
    
    143.0
    
    
    
    195.5Total liabilities and equity
    
    $
    186.0
    
    
    $
    406.7
    
    
    $
    592.7
 December 31, 2006Engle/Sunbelt
    
    
    Others
    
    
    TotalAssets:Cash and cash equivalents
    
    $
    22.5
    
    
    $
    13.5
    
    
    $
    36.0Inventories
    
    
    246.6
    
    
    
    450.8
    
    
    
    697.4Other assets
    
    
    2.9
    
    
    
    9.5
    
    
    
    12.4Total assets
    
    $
    272.0
    
    
    $
    473.8
    
    
    $
    745.8Liabilities and equity:Accounts payable and other liabilities
    
    $
    44.9
    
    
    $
    89.3
    
    
    $
    134.2Notes payable
    
    
    161.3
    
    
    
    195.7
    
    
    
    357.0Equity of:TOUSA, Inc.
    
    
    56.6
    
    
    
    81.8
    
    
    
    138.4Others
    
    
    9.2
    
    
    
    107.0
    
    
    
    116.2Total equity
    
    
    65.8
    
    
    
    188.8
    
    
    
    254.6Total liabilities and equity
    
    $
    272.0
    
    
    $
    473.8
    
    
    $
    745.8
 16




---



##### Table of Contents



Three Months Ended
    
    
    Three Months EndedSeptember 30, 2007
    
    
    September 30, 2006Engle/Sunbelt
    
    
    Others
    
    
    Total
    
    
    Engle/Sunbelt
    
    
    Others
    
    
    TotalRevenues
    
    $
    29.0
    
    
    $
    35.8
    
    
    $
    64.8
    
    
    $
    120.6
    
    
    $
    24.2
    
    
    $
    144.8Cost and expenses
    
    
    33.5
    
    
    
    42.0
    
    
    
    75.5
    
    
    
    106.4
    
    
    
    23.3
    
    
    
    129.7Net earnings (losses) of
unconsolidated joint ventures
    
    $
    (4.5
    )
    
    $
    (6.2
    )
    
    $
    (10.7
    )
    
    $
    14.2
    
    
    $
    0.9
    
    
    $
    15.1Our share of net earnings (losses)
    
    $
    (3.9
    )
    
    $
    (5.8
    )
    
    $
    (9.7
    )
    
    $
    11.9
    
    
    $
    2.0
    
    
    $
    13.9Management fees earned
    
    
    0.5
    
    
    
    0.3
    
    
    
    0.8
    
    
    
    3.1
    
    
    
    4.3
    
    
    
    7.4Income (loss) from unconsolidated
joint ventures
    
    $
    (3.4
    )
    
    $
    (5.5
    )
    
    $
    (8.9
    )
    
    $
    15.0
    
    
    $
    6.3
    
    
    $
    21.3
 Nine Months Ended
    
    
    Nine Months EndedSeptember 30, 2007
    
    
    September 30, 2006Engle/Sunbelt
    
    
    Others
    
    
    Total
    
    
    Engle/Sunbelt
    
    
    Others
    
    
    TotalRevenues
    
    $
    205.1
    
    
    $
    132.0
    
    
    $
    337.1
    
    
    $
    421.0
    
    
    $
    107.3
    
    
    $
    528.3Cost and expenses
    
    
    219.1
    
    
    
    138.0
    
    
    
    357.1
    
    
    
    359.6
    
    
    
    96.2
    
    
    
    455.8Net earnings (losses) of
unconsolidated joint ventures
    
    $
    (14.0
    )
    
    $
    (6.0
    )
    
    $
    (20.0
    )
    
    $
    61.4
    
    
    $
    11.1
    
    
    $
    72.5Our share of net earnings (losses)
    
    $
    (12.0
    )
    
    $
    (7.2
    )
    
    $
    (19.2
    )
    
    $
    52.1
    
    
    $
    4.3
    
    
    $
    56.4Management fees earned
    
    
    8.5
    
    
    
    0.5
    
    
    
    9.0
    
    
    
    10.7
    
    
    
    16.1
    
    
    
    26.8Income (loss) from unconsolidated
joint ventures
    
    $
    (3.5
    )
    
    $
    (6.7
    )
    
    $
    (10.2
    )
    
    $
    62.8
    
    
    $
    20.4
    
    
    $
    83.2
    Engle/Sunbelt Joint Venture
  17




---



##### Table of Contents



TOUSA / Kolter Joint Venture
   18




---



##### Table of Contents



Centex/ TOUSA at Wellington, LLC
   Layton Lakes Joint Venture
  6. Other Assets
  September 30,
    
    
    December 31,2007
    
    
    2006Homebuilding:Deferred income taxes, net
    
    $
    
    
    
    $
    160.6Income taxes receivable
    
    
    234.6
    
    
    
    12.9Accounts receivable
    
    
    70.1
    
    
    
    37.0Deferred finance costs, net
    
    
    49.9
    
    
    
    16.1Prepaid expenses
    
    
    14.7
    
    
    
    7.4Other assets
    
    
    1.8
    
    
    
    2.6Total other assets
    
    $
    371.1
    
    
    $
    236.6
 7. Goodwill
   Nine Months EndedSeptember 30,2007
    
    
    2006Balance at January 1
    
    $
    100.9
    
    
    $
    108.8Earn-out consideration paid on acquisitions
    
    
    
    
    
    
    0.9Impairments
    
    
    (40.9
    )
    
    
    (5.7
    )Balance at September 30
    
    $
    60.0
    
    
    $
    104.0
 19




---



##### Table of Contents



Goodwill and Other Intangible Assets
 8. Accounts Payable and Other Liabilities
  September 30,
    
    
    December 31,2007
    
    
    2006Homebuilding:Accrual for settlement of loss contingency (Note 4)
    
    $
    
    
    
    $
    275.0Accounts payable
    
    
    58.6
    
    
    
    70.2Interest
    
    
    27.0
    
    
    
    37.8Compensation
    
    
    21.1
    
    
    
    27.8Taxes, including income and real estate
    
    
    16.4
    
    
    
    10.4Accrual for unpaid invoices on delivered homes
    
    
    42.5
    
    
    
    23.6Accrued expenses
    
    
    192.8
    
    
    
    51.3Warranty costs
    
    
    5.4
    
    
    
    7.4Deferred revenue
    
    
    32.3
    
    
    
    50.7Total accounts payable and other liabilities
    
    $
    396.1
    
    
    $
    554.2
 9. Homebuilding and Financial Services Borrowings
 Homebuilding Borrowings
  September 30,
    
    
    December 31,2007
    
    
    2006Revolving Loan Facility
    
    $
    150.3
    
    
    $
    First Lien Term Loan Facility due 2012
    
    
    199.5
    
    
    
    Discount on First Lien Term Loan Facility
    
    
    (1.9
    )
    
    
    Second Lien Term Loan Facility due 2013
    
    
    306.8
    
    
    
    Discount on Second Lien Term Loan Facility
    
    
    (2.9
    )
    
    
    Senior notes due 2010, at 9%
    
    
    300.0
    
    
    
    300.0Senior notes due 2011, at 8-1/4%
    
    
    250.0
    
    
    
    250.0Discount on senior notes
    
    
    (2.8
    )
    
    
    (3.5
    )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
    
    
    3.8
    
    
    
    4.2Senior Subordinated PIK Note due 2015, at 14-3/4%
    
    
    20.5
    
    
    
    Discount on Senior Subordinated PIK Note
    
    
    (8.9
    )
    
    
    $
    1,724.4
    
    
    $
    1,060.7
  20




---



##### Table of Contents



21




---



##### Table of Contents



1 4
 pari passu pari passu
 Financial Services Borrowings
   22




---



##### Table of Contents



10. Income Taxes
 Accounting for Income Taxes
    23




---



##### Table of Contents



11. Commitments and Contingencies
  Warranty
   Nine Months EndedSeptember 30,2007
    
    
    2006Accrued warranty costs at January 1
    
    $
    7.4
    
    
    $
    6.6Liability recorded for warranties issued during the period
    
    
    4.4
    
    
    
    6.8Warranty work performed
    
    
    (4.4
    )
    
    
    (5.9
    )Adjustments
    
    
    (2.0
    )
    
    
    0.3Accrued warranty costs at September 30
    
    $
    5.4
    
    
    $
    7.8
 Letters of Credit and Performance Bonds
   24




---



##### Table of Contents



Exposure on Abandoned Homesite Option Contracts
   Class Action Lawsuit
  Bondholders
  12. Stockholders Equity and Stock-Based Compensation
  Accounting for Stock-Based Compensation Share-Based Payment
 25




---



##### Table of Contents



WeightedAverageExerciseOptions
    
    PriceOptions outstanding at December 31, 2006
    
    
    7,712,574
    
    
    $
    13.04Granted
    
    
    189,552
    
    
    $
    9.45Exercised
    
    
    
    
    
    $
    Forfeited
    
    
    (45,000
    )
    
    $
    17.61Options outstanding at September 30, 2007
    
    
    7,857,126
    
    
    $
    12.93
  Convertible PIK Preferred Stock
    26




---



##### Table of Contents



Warrants
  The Charter Amendment
  13. Operating and Reportable Segments
 Disclosures About Segments of an Enterprise and Related Information
  27




---



##### Table of Contents



Florida  Mid-Atlantic:  Texas:  West:
  28




---



##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenues:Homebuilding:Florida
    
    $
    195.6
    
    
    $
    218.1
    
    
    $
    671.1
    
    
    $
    772.9Mid-Atlantic
    
    
    81.4
    
    
    
    70.2
    
    
    
    196.1
    
    
    
    211.4Texas*
    
    
    149.0
    
    
    
    156.7
    
    
    
    469.0
    
    
    
    438.5West
    
    
    66.9
    
    
    
    131.8
    
    
    
    283.1
    
    
    
    358.8Total Homebuilding
    
    
    492.9
    
    
    
    576.8
    
    
    
    1,619.3
    
    
    
    1,781.6Financial Services
    
    
    8.3
    
    
    
    15.8
    
    
    
    31.3
    
    
    
    48.4Total revenues
    
    $
    501.2
    
    
    $
    592.6
    
    
    $
    1,650.6
    
    
    $
    1,830.0(Income) loss from unconsolidated joint ventures:Florida
    
    $
    0.2
    
    
    $
    (3.3
    )
    
    $
    2.1
    
    
    $
    (7.2
    )Mid-Atlantic
    
    
    
    
    
    
    (4.1
    )
    
    
    (2.2
    )
    
    
    (7.3
    )Texas
    
    
    (0.3
    )
    
    
    
    
    
    
    (0.3
    )
    
    
    West
    
    
    9.3
    
    
    
    (21.6
    )
    
    
    9.2
    
    
    
    (80.2
    )$
    9.2
    
    
    $
    (29.0
    )
    
    $
    8.8
    
    
    $
    (94.7
    )Impairments on unconsolidated joint ventures:Florida
    
    $
    16.4
    
    
    $
    148.4
    
    
    $
    20.4
    
    
    $
    148.4Mid-Atlantic
    
    
    
    
    
    
    
    
    
    
    1.5
    
    
    
    Texas
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    West
    
    
    7.0
    
    
    
    
    
    
    
    7.0
    
    
    
    $
    23.4
    
    
    $
    148.4
    
    
    $
    28.9
    
    
    $
    148.4Loss from unconsolidated joint ventures after
impairments
    
    $
    32.6
    
    
    $
    119.4
    
    
    $
    37.7
    
    
    $
    53.7Results of Operations:Homebuilding:Florida
    
    $
    (299.4
    )
    
    $
    (116.0
    )
    
    $
    (290.3
    )
    
    $
    (5.5
    )Mid-Atlantic
    
    
    (52.0
    )
    
    
    (9.9
    )
    
    
    (97.7
    )
    
    
    2.3Texas*
    
    
    14.6
    
    
    
    15.1
    
    
    
    43.3
    
    
    
    43.2West
    
    
    (199.4
    )
    
    
    (3.4
    )
    
    
    (276.2
    )
    
    
    72.9Total Homebuilding
    
    
    (536.2
    )
    
    
    (114.2
    )
    
    
    (620.9
    )
    
    
    112.9Financial Services
    
    
    0.2
    
    
    
    5.0
    
    
    
    5.2
    
    
    
    15.9Corporate and unallocated
    
    
    (73.8
    )
    
    
    (12.1
    )
    
    
    (220.1
    )
    
    
    (57.4
    )Total income (loss) from continuing operations before
income taxes
    
    $
    609.8
    
    
    $
    (121.3
    )
    
    $
    (835.8
    )
    
    $
    71.4
 29




---



##### Table of Contents



September 30,
    
    
    December 31,2007
    
    
    2006Assets:Homebuilding:Florida
    
    $
    825.0
    
    
    $
    892.9Mid-Atlantic
    
    
    123.1
    
    
    
    230.4Texas*
    
    
    249.9
    
    
    
    210.6West
    
    
    567.8
    
    
    
    721.4Assets held for sale*
    
    
    10.1
    
    
    
    124.8Financial Services
    
    
    48.8
    
    
    
    65.5Corporate and unallocated
    
    
    467.0
    
    
    
    596.6Total assets
    
    $
    2,291.7
    
    
    $
    2,842.2Investments in Unconsolidated Joint Ventures:Florida
    
    $
    
    
    
    $
    29.4Mid-Atlantic
    
    
    0.9
    
    
    
    5.3Texas
    
    
    7.2
    
    
    
    6.8West
    
    
    72.8
    
    
    
    87.5Total Investments in Unconsolidated Joint Ventures
    
    $
    80.9
    
    
    $
    129.0
 
 *
    
    The Texas region excludes the Dallas division, which is classified as a discontinued operation. 14. Discontinued Operations
      30




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##### Table of Contents



15. Summarized Financial Information
  
 Non-TOUSA,
    
    
    Guarantor
    
    
    Guarantor
    
    
    IntercompanyInc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Total(Dollars in millions)ASSETSHOMEBUILDING:Cash and cash equivalents
    
    $
    91.5
    
    
    $
    (13.3
    )
    
    $
    
    
    
    $
    
    
    
    $
    78.2Inventory
    
    
    
    
    
    
    1,571.8
    
    
    
    
    
    
    
    
    
    
    
    1,571.8Property and equipment, net
    
    
    4.8
    
    
    
    23.8
    
    
    
    
    
    
    
    
    
    
    
    28.6Investments in unconsolidated joint ventures
    
    
    
    
    
    
    80.9
    
    
    
    
    
    
    
    
    
    
    
    80.9Receivables from unconsolidated joint ventures,
net
    
    
    
    
    
    
    42.2
    
    
    
    
    
    
    
    
    
    
    
    42.2Investments in/ advances to consolidated
subsidiaries
    
    
    1,439.4
    
    
    
    (338.7
    )
    
    
    0.7
    
    
    
    (1,101.4
    )
    
    
    Other assets
    
    
    298.1
    
    
    
    73.0
    
    
    
    
    
    
    
    
    
    
    
    371.1Goodwill
    
    
    
    
    
    
    60.0
    
    
    
    
    
    
    
    
    
    
    
    60.0Assets held for sale
    
    
    
    
    
    
    10.1
    
    
    
    
    
    
    
    
    
    
    
    10.11,833.8
    
    
    
    1,509.8
    
    
    
    0.7
    
    
    
    (1,101.4
    )
    
    
    2,242.9FINANCIAL SERVICES:Cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    7.1
    
    
    
    
    
    
    
    7.1Mortgage loans held for sale
    
    
    
    
    
    
    
    
    
    
    31.0
    
    
    
    
    
    
    
    31.0Other assets
    
    
    
    
    
    
    
    
    
    
    10.7
    
    
    
    
    
    
    
    10.7
    
    
    
    
    
    
    
    48.8
    
    
    
    
    
    
    
    48.8Total assets
    
    $
    1,833.8
    
    
    $
    1,509.8
    
    
    $
    49.5
    
    
    $
    (1,101.4
    )
    
    $
    2,291.7LIABILITIES AND STOCKHOLDERS EQUITYHOMEBUILDING:Accounts payable and other liabilities
    
    $
    61.1
    
    
    $
    335.0
    
    
    $
    
    
    
    $
    
    
    
    $
    396.1Customer deposits
    
    
    
    
    
    
    48.9
    
    
    
    
    
    
    
    
    
    
    
    48.9Obligations for inventory not owned
    
    
    
    
    
    
    44.5
    
    
    
    
    
    
    
    
    
    
    
    44.5Notes payable
    
    
    1,574.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,574.1Bank borrowings
    
    
    150.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150.3Liabilities associated with assets held for sale
    
    
    
    
    
    
    2.5
    
    
    
    
    
    
    
    
    
    
    
    2.51,785.5
    
    
    
    430.9
    
    
    
    
    
    
    
    
    
    
    
    2,216.4FINANCIAL SERVICES:Accounts payable and other liabilities
    
    
    
    
    
    
    (0.6
    )
    
    
    5.2
    
    
    
    
    
    
    
    4.6Bank borrowings
    
    
    
    
    
    
    
    
    
    
    22.4
    
    
    
    
    
    
    
    22.4
    
    
    
    (0.6
    )
    
    
    27.6
    
    
    
    
    
    
    
    27.0Total liabilities
    
    
    1,785.5
    
    
    
    430.3
    
    
    
    27.6
    
    
    
    
    
    
    
    2,243.4Total stockholders equity
    
    
    48.3
    
    
    
    1,079.5
    
    
    
    21.9
    
    
    
    (1,101.4
    )
    
    
    48.3Total liabilities and stockholders equity
    
    $
    1,833.8
    
    
    $
    1,509.8
    
    
    $
    49.5
    
    
    $
    (1,101.4
    )
    
    $
    2,291.7
 31




---



##### Table of Contents



Non-TOUSA,
    
    
    Guarantor
    
    
    Guarantor
    
    
    IntercompanyInc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Total(Dollars in millions)ASSETSHOMEBUILDING:Cash and cash equivalents
    
    $
    53.6
    
    
    $
    (2.4
    )
    
    $
    
    
    
    $
    
    
    
    $
    51.2Inventory
    
    
    
    
    
    
    2,078.5
    
    
    
    
    
    
    
    
    
    
    
    2,078.5Property and equipment, net
    
    
    6.5
    
    
    
    22.0
    
    
    
    
    
    
    
    
    
    
    
    28.5Investments in unconsolidated joint ventures
    
    
    
    
    
    
    129.0
    
    
    
    
    
    
    
    
    
    
    
    129.0Receivables from unconsolidated joint ventures,
net
    
    
    
    
    
    
    27.2
    
    
    
    
    
    
    
    
    
    
    
    27.2Investments in/ advances to consolidated
subsidiaries
    
    
    1,933.4
    
    
    
    (188.9
    )
    
    
    8.2
    
    
    
    (1,752.7
    )
    
    
    Other assets
    
    
    190.1
    
    
    
    46.5
    
    
    
    
    
    
    
    
    
    
    
    236.6Goodwill
    
    
    
    
    
    
    100.9
    
    
    
    
    
    
    
    
    
    
    
    100.9Assets held for sale
    
    
    
    
    
    
    124.8
    
    
    
    
    
    
    
    
    
    
    
    124.82,183.6
    
    
    
    2,337.6
    
    
    
    8.2
    
    
    
    (1,752.7
    )
    
    
    2,776.7FINANCIAL SERVICES:Cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    11.0
    
    
    
    
    
    
    
    11.0Mortgage loans held for sale
    
    
    
    
    
    
    
    
    
    
    41.9
    
    
    
    
    
    
    
    41.9Other assets
    
    
    
    
    
    
    
    
    
    
    12.6
    
    
    
    
    
    
    
    12.6
    
    
    
    
    
    
    
    65.5
    
    
    
    
    
    
    
    65.5Total assets
    
    $
    2,183.6
    
    
    $
    2,337.6
    
    
    $
    73.7
    
    
    $
    (1,752.7
    )
    
    $
    2,842.2LIABILITIES AND STOCKHOLDERS EQUITYHOMEBUILDING:Accounts payable and other liabilities
    
    $
    348.0
    
    
    $
    206.2
    
    
    $
    
    
    
    $
    
    
    
    $
    554.2Customer deposits
    
    
    
    
    
    
    62.6
    
    
    
    
    
    
    
    
    
    
    
    62.6Obligations for inventory not owned
    
    
    
    
    
    
    300.6
    
    
    
    
    
    
    
    
    
    
    
    300.6Notes payable
    
    
    1,060.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,060.7Bank borrowings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Liabilities associated with assets held for sale
    
    
    
    
    
    
    47.8
    
    
    
    
    
    
    
    
    
    
    
    47.81,408.7
    
    
    
    617.2
    
    
    
    
    
    
    
    
    
    
    
    2,025.9FINANCIAL SERVICES:Accounts payable and other liabilities
    
    
    
    
    
    
    
    
    
    
    6.0
    
    
    
    
    
    
    
    6.0Bank borrowings
    
    
    
    
    
    
    
    
    
    
    35.4
    
    
    
    
    
    
    
    35.4
    
    
    
    
    
    
    
    41.4
    
    
    
    
    
    
    
    41.4Total liabilities
    
    
    1,408.7
    
    
    
    617.2
    
    
    
    41.4
    
    
    
    
    
    
    
    2,067.3Total stockholders equity
    
    
    774.9
    
    
    
    1,720.4
    
    
    
    32.3
    
    
    
    (1,752.7
    )
    
    
    774.9Total liabilities and stockholders equity
    
    $
    2,183.6
    
    
    $
    2,337.6
    
    
    $
    73.7
    
    
    $
    (1,752.7
    )
    
    $
    2,842.2
 32




---



##### Table of Contents



Non-TOUSA,
    
    
    Guarantor
    
    
    Guarantor
    
    
    IntercompanyInc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Total(Dollars in millions)HOMEBUILDING:Revenues
    
    $
    
    
    
    $
    492.9
    
    
    $
    
    
    
    $
    
    
    
    $
    492.9Cost of sales
    
    
    
    
    
    
    930.3
    
    
    
    
    
    
    
    
    
    
    
    930.3Gross profit
(loss)
    
    
    
    
    
    
    (437.4
    )
    
    
    
    
    
    
    
    
    
    
    (437.4
    )Selling, general and administrative
expenses
    
    
    23.3
    
    
    
    66.3
    
    
    
    
    
    
    
    (3.6
    )
    
    
    86.0Loss from unconsolidated joint
ventures, net
    
    
    
    
    
    
    9.2
    
    
    
    
    
    
    
    
    
    
    
    9.2Impairments
on investments in unconsolidated joint ventures
    
    
    
    
    
    
    23.4
    
    
    
    
    
    
    
    
    
    
    
    23.4Provision for settlement of loss
contingency
    
    
    40.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40.7Goodwill impairment
    
    
    
    
    
    
    2.7
    
    
    
    
    
    
    
    
    
    
    
    2.7Interest expense
    
    
    10.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10.0Other (income) expenses, net
    
    
    547.5
    
    
    
    30.2
    
    
    
    
    
    
    
    (577.1
    )
    
    
    0.6Homebuilding pretax income (loss)
    
    
    (621.5
    )
    
    
    (569.2
    )
    
    
    
    
    
    
    580.7
    
    
    
    (610.0
    )FINANCIAL SERVICES:Revenues
    
    
    
    
    
    
    
    
    
    
    11.9
    
    
    
    (3.6
    )
    
    
    8.3Expenses
    
    
    
    
    
    
    
    
    
    
    8.2
    
    
    
    (0.1
    )
    
    
    8.1Financial Services pretax income
    
    
    
    
    
    
    
    
    
    
    3.7
    
    
    
    (3.5
    )
    
    
    0.2Income
(loss) from continuing
operations before income taxes
    
    
    (621.5
    )
    
    
    (569.2
    )
    
    
    3.7
    
    
    
    577.2
    
    
    
    (609.8
    )Provision (benefit) for income taxes
    
    
    (1.8
    )
    
    
    6.0
    
    
    
    1.8
    
    
    
    
    
    
    
    6.0Income (loss) from continuing operations
    
    
    (619.7
    )
    
    
    (575.2
    )
    
    
    1.9
    
    
    
    577.2
    
    
    
    (615.8
    )Discontinued operations:Loss from discontinued
operations
    
    
    
    
    
    
    (3.9
    )
    
    
    
    
    
    
    
    
    
    
    (3.9
    )Loss from discontinued
operations, net of taxes
    
    
    
    
    
    
    (3.9
    )
    
    
    
    
    
    
    
    
    
    
    (3.9
    )Net income (loss)
    
    $
    (619.7
    )
    
    $
    (579.1
    )
    
    $
    1.9
    
    
    $
    577.2
    
    
    $
    (619.7
    )Dividends
and accretion of discount on
preferred stock
    
    
    2.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
(loss) available to common stockholders
    
    $
    (621.9
    )
    
    $
    (575.7
    )
    
    $
    1.9
    
    
    $
    573.8
    
    
    $
    (621.9
    )
 33




---



##### Table of Contents



Non-TOUSA,
    
    
    Guarantor
    
    
    Guarantor
    
    
    IntercompanyInc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Total(Dollars in millions)HOMEBUILDING:Revenues
    
    $
    
    
    
    $
    576.8
    
    
    $
    
    
    
    $
    
    
    
    $
    576.8Cost of sales
    
    
    
    
    
    $
    497.1
    
    
    $
    
    
    
    $
    
    
    
    
    497.1Gross profit
    
    
    
    
    
    
    79.7
    
    
    
    
    
    
    
    
    
    
    
    79.7Selling, general and administrative
expenses
    
    
    12.3
    
    
    
    69.9
    
    
    
    
    
    
    
    (1.4
    )
    
    
    80.8(Income) from unconsolidated joint
ventures, net
    
    
    
    
    
    
    (29.0
    )
    
    
    
    
    
    
    
    
    
    
    (29.0
    )Impairments
on unconsolidated joint ventures
    
    
    
    
    
    
    148.4
    
    
    
    
    
    
    
    
    
    
    
    148.4Provision for settlement of loss
contingency
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Goodwill impairment
    
    
    
    
    
    
    5.7
    
    
    
    
    
    
    
    
    
    
    
    5.7Other (income) expenses, net
    
    
    66.4
    
    
    
    4.8
    
    
    
    
    
    
    
    (71.1
    )
    
    
    0.1Homebuilding pretax income (loss)
    
    
    (78.7
    )
    
    
    (120.1
    )
    
    
    
    
    
    
    72.5
    
    
    
    (126.3
    )FINANCIAL SERVICES:Revenues
    
    
    
    
    
    
    
    
    
    
    17.2
    
    
    
    (1.4
    )
    
    
    15.8Expenses
    
    
    
    
    
    
    
    
    
    
    13.0
    
    
    
    (2.2
    )
    
    
    10.8Financial Services pretax income
    
    
    
    
    
    
    
    
    
    
    4.2
    
    
    
    0.8
    
    
    
    5.0Income (loss) from continuing
operations before income taxes
    
    
    (78.7
    )
    
    
    (120.1
    )
    
    
    4.2
    
    
    
    73.3
    
    
    
    (121.3
    )Provision (benefit) for income taxes
    
    
    1.3
    
    
    
    (44.2
    )
    
    
    1.8
    
    
    
    
    
    
    
    (41.1
    )Income (loss) from continuing operations
    
    
    (80.0
    )
    
    
    (75.9
    )
    
    
    2.4
    
    
    
    73.3
    
    
    
    (80.2
    )Discontinued operations:Income (loss) from discontinued
operations
    
    
    
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    0.4Provision for income taxes
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    0.2Income (loss) from discontinued
operations, net of taxes
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    0.2Net income (loss)
    
    $
    (80.0
    )
    
    $
    (75.7
    )
    
    $
    2.4
    
    
    $
    73.3
    
    
    $
    (80.0
    )
 34




---



##### Table of Contents



Non-TOUSA,
    
    
    Guarantor
    
    
    Guarantor
    
    
    IntercompanyInc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Total(Dollars in millions)HOMEBUILDING:Revenues
    
    $
    
    
    
    $
    1,619.3
    
    
    $
    
    
    
    $
    
    
    
    $
    1,619.3Cost of sales
    
    
    
    
    
    
    1,959.0
    
    
    
    
    
    
    
    
    
    
    
    1,959.0Gross profit
(loss)
    
    
    
    
    
    
    (339.7
    )
    
    
    
    
    
    
    
    
    
    
    (339.7
    )Selling, general and administrative
expenses
    
    
    63.1
    
    
    
    210.1
    
    
    
    
    
    
    
    (10.8
    )
    
    
    262.4Loss from unconsolidated joint
ventures, net
    
    
    
    
    
    
    8.8
    
    
    
    
    
    
    
    
    
    
    
    8.8Impairments
on investments in unconsolidated joint ventures
    
    
    
    
    
    
    28.9
    
    
    
    
    
    
    
    
    
    
    
    28.9Provision for settlement of loss
contingency
    
    
    151.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    151.6Goodwill impairment
    
    
    
    
    
    
    40.9
    
    
    
    
    
    
    
    
    
    
    
    40.9Interest expense
    
    
    10.0
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    10.2Other (income) expenses, net
    
    
    605.4
    
    
    
    40.5
    
    
    
    
    
    
    
    (647.4
    )
    
    
    (1.5
    )Homebuilding pretax income (loss)
    
    
    (830.1
    )
    
    
    (669.1
    )
    
    
    
    
    
    
    658.2
    
    
    
    (841.0
    )FINANCIAL SERVICES:Revenues
    
    
    
    
    
    
    
    
    
    
    42.0
    
    
    
    (10.7
    )
    
    
    31.3Expenses
    
    
    
    
    
    
    
    
    
    
    30.0
    
    
    
    (3.9
    )
    
    
    26.1Financial Services pretax income
    
    
    
    
    
    
    
    
    
    
    12.0
    
    
    
    (6.8
    )
    
    
    5.2Income (loss) from continuing
operations before income taxes
    
    
    (830.1
    )
    
    
    (669.1
    )
    
    
    12.0
    
    
    
    651.4
    
    
    
    (835.8
    )Provision (benefit) for income taxes
    
    
    (12.4
    )
    
    
    (28.7
    )
    
    
    5.4
    
    
    
    
    
    
    
    (35.7
    )Income (loss) from continuing operations
    
    
    (817.7
    )
    
    
    (640.4
    )
    
    
    6.6
    
    
    
    651.4
    
    
    
    (800.1
    )Discontinued operations:Income (loss) from discontinued
operations
    
    
    
    
    
    
    (11.8
    )
    
    
    
    
    
    
    
    
    
    
    (11.8
    )Income (loss) from disposal of
discontinued operations
    
    
    
    
    
    
    (13.6
    )
    
    
    
    
    
    
    
    
    
    
    (13.6
    )Provision for income taxes
    
    
    
    
    
    
    (7.8
    )
    
    
    
    
    
    
    
    
    
    
    (7.8
    )Income (loss) from discontinued
operations, net of taxes
    
    
    
    
    
    
    (17.6
    )
    
    
    
    
    
    
    
    
    
    
    (17.6
    )Net income (loss)
    
    $
    (817.7
    )
    
    $
    (658.0
    )
    
    $
    6.6
    
    
    $
    651.4
    
    
    $
    (817.7
    )Dividends
and accretion of discount on
preferred stock
    
    
    2.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.2Net income
(loss) available to common stockholders
    
    $
    (819.9
    )
    
    $
    (658.0
    )
    
    $
    6.6
    
    
    $
    651.4
    
    
    $
    (819.9
    )
 35




---



##### Table of Contents



Non-TOUSA,
    
    
    Guarantor
    
    
    Guarantor
    
    
    IntercompanyInc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Total(Dollars in millions)HOMEBUILDING:Revenues
    
    $
    
    
    
    $
    1,781.6
    
    
    $
    
    
    
    $
    
    
    
    $
    1,781.6Cost of sales
    
    
    
    
    
    
    1,396.9
    
    
    
    
    
    
    
    
    
    
    
    1,396.9Gross profit
    
    
    
    
    
    
    384.7
    
    
    
    
    
    
    
    
    
    
    
    384.7Selling, general and administrative
expenses
    
    
    58.6
    
    
    
    219.1
    
    
    
    
    
    
    
    (3.6
    )
    
    
    274.1(Income) from unconsolidated joint
ventures, net
    
    
    
    
    
    
    (94.7
    )
    
    
    
    
    
    
    
    
    
    
    (94.7
    )Impairments
on unconsolidated joint ventures
    
    
    
    
    
    
    148.4
    
    
    
    
    
    
    
    
    
    
    
    148.4Provision for settlement of loss
contingency
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Goodwill impairment
    
    
    
    
    
    
    5.7
    
    
    
    
    
    
    
    
    
    
    
    5.7Other (income) expenses, net
    
    
    (96.3
    )
    
    
    26.9
    
    
    
    
    
    
    
    65.1
    
    
    
    (4.3
    )Homebuilding pretax income (loss)
    
    
    37.7
    
    
    
    79.3
    
    
    
    
    
    
    
    (61.5
    )
    
    
    55.5FINANCIAL SERVICES:Revenues
    
    
    
    
    
    
    
    
    
    
    52.0
    
    
    
    (3.6
    )
    
    
    48.4Expenses
    
    
    
    
    
    
    
    
    
    
    39.2
    
    
    
    (6.7
    )
    
    
    32.5Financial Services pretax income
    
    
    
    
    
    
    
    
    
    
    12.8
    
    
    
    3.1
    
    
    
    15.9Income (loss) from continuing
operations before income taxes
    
    
    37.7
    
    
    
    79.3
    
    
    
    12.8
    
    
    
    (58.4
    )
    
    
    71.4Provision (benefit) for income taxes
    
    
    (4.9
    )
    
    
    29.4
    
    
    
    5.5
    
    
    
    
    
    
    
    30.0Income (loss) from continuing operations
    
    
    42.6
    
    
    
    49.9
    
    
    
    7.3
    
    
    
    (58.4
    )
    
    
    41.4Discontinued operations:Income (loss) from discontinued
operations
    
    
    
    
    
    
    1.9
    
    
    
    
    
    
    
    
    
    
    
    1.9Provision for income taxes
    
    
    
    
    
    
    0.7
    
    
    
    
    
    
    
    
    
    
    
    0.7Income (loss) from discontinued
operations, net of taxes
    
    
    
    
    
    
    1.2
    
    
    
    
    
    
    
    
    
    
    
    1.2Net income (loss)
    
    $
    42.6
    
    
    $
    51.1
    
    
    $
    7.3
    
    
    $
    (58.4
    )
    
    $
    42.6
 36




---



##### Table of Contents



Non-TOUSA,
    
    
    Guarantor
    
    
    Guarantor
    
    
    IntercompanyInc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Total(Dollars in millions)Net cash provided by (used in) operating
activities
    
    $
    (569.4
    )
    
    $
    (173.9
    )
    
    $
    3.4
    
    
    $
    651.3
    
    
    $
    (88.6
    )Cash flows from investing activities:Acquisitions,
net of cash acquired
    
    
    
    
    
    
    (7.7
    )
    
    
    
    
    
    
    
    
    
    
    (7.7
    )Net additions to property and equipment
    
    
    (0.8
    )
    
    
    (7.9
    )
    
    
    (0.7
    )
    
    
    
    
    
    
    (9.4
    )Investments in unconsolidated joint
ventures
    
    
    
    
    
    
    (29.2
    )
    
    
    
    
    
    
    
    
    
    
    (29.2
    )Capital distributions from unconsolidated
joint ventures
    
    
    
    
    
    
    12.4
    
    
    
    
    
    
    
    
    
    
    
    12.4Net cash used in investing activities
    
    
    (0.8
    )
    
    
    (32.4
    )
    
    
    (0.7
    )
    
    
    
    
    
    
    (33.9
    )Cash flows from financing activities:Net borrowings from (repayments of)
revolving credit facilities
    
    
    150.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150.3Principal payments on notes payable
    
    
    (0.5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.5
    )Net (repayments of) proceeds from
Financial Services bank borrowings
    
    
    
    
    
    
    
    
    
    
    (13.0
    )
    
    
    
    
    
    
    (13.0
    )Payments for deferred financing costs
    
    
    (32.1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32.1
    )Payments for
issuance of convertible preferred stock and warrants
    
    
    (2.9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.9
    )Increase (decrease) in intercompany
transactions
    
    
    494.0
    
    
    
    149.8
    
    
    
    7.5
    
    
    
    (651.3
    )
    
    
    Net cash provided by (used in) financing
activities
    
    
    608.8
    
    
    
    149.8
    
    
    
    (5.5
    )
    
    
    (651.3
    )
    
    
    101.8Net cash provided by (used in) continuing
operations
    
    
    38.6
    
    
    
    (56.5
    )
    
    
    (2.8
    )
    
    
    
    
    
    
    (20.7
    )Net cash provided by discontinued
operations
    
    
    
    
    
    
    44.1
    
    
    
    
    
    
    
    
    
    
    
    44.1Increase (decrease) in cash and cash
equivalents
    
    
    38.6
    
    
    
    (12.4
    )
    
    
    (2.8
    )
    
    
    
    
    
    
    23.4Cash and cash equivalents at beginning of
period
    
    
    50.6
    
    
    
    (3.2
    )
    
    
    6.8
    
    
    
    
    
    
    
    54.2Cash and cash equivalents at end of period
    
    $
    89.2
    
    
    $
    (15.6
    )
    
    $
    4.0
    
    
    $
    
    
    
    $
    77.6
 37




---



##### Table of Contents



Non-TOUSA,
    
    
    Guarantor
    
    
    Guarantor
    
    
    IntercompanyInc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Total(Dollars in millions)Net cash provided by (used in)
operating activities
    
    $
    (112.4
    )
    
    $
    (18.8
    )
    
    $
    3.1
    
    
    $
    (58.4
    )
    
    $
    (186.5
    )Cash flows from investing activities:Earn-out consideration paid for
acquisitions
    
    
    
    
    
    
    (0.9
    )
    
    
    
    
    
    
    
    
    
    
    (0.9
    )Net additions to property and equipment
    
    
    (1.9
    )
    
    
    (9.6
    )
    
    
    (1.3
    )
    
    
    
    
    
    
    (12.8
    )Loans to unconsolidated joint ventures
    
    
    
    
    
    
    (11.3
    )
    
    
    
    
    
    
    
    
    
    
    (11.3
    )Investments in unconsolidated joint
ventures
    
    
    
    
    
    
    (13.8
    )
    
    
    
    
    
    
    
    
    
    
    (13.8
    )Capital distributions from
unconsolidated joint ventures
    
    
    
    
    
    
    32.3
    
    
    
    
    
    
    
    
    
    
    
    32.3Net cash provided by (used in)
investing activities
    
    
    (1.9
    )
    
    
    (3.3
    )
    
    
    (1.3
    )
    
    
    
    
    
    
    (6.5
    )Cash flows from financing activities:Net borrowings from (repayments of)
revolving credit facilities
    
    
    (65.0
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (65.0
    )Net proceeds from notes offering
    
    
    248.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    248.8Net (repayments of) proceeds from
Financial Services bank borrowings
    
    
    
    
    
    
    
    
    
    
    7.4
    
    
    
    
    
    
    
    7.4Payments for deferred financing costs
    
    
    (3.2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3.2
    )Excess income tax benefit from
exercise of stock options
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1Proceeds from stock option exercises
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.2Dividends paid
    
    
    (2.7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.7
    )Increase (decrease) in intercompany
transactions
    
    
    (70.3
    )
    
    
    23.1
    
    
    
    (11.2
    )
    
    
    58.4
    
    
    
    Net cash provided by (used in)
financing activities
    
    
    107.9
    
    
    
    23.1
    
    
    
    (3.8
    )
    
    
    58.4
    
    
    
    185.6Net cash provided by (used in)
continuing operations
    
    
    (6.4
    )
    
    
    1.0
    
    
    
    (2.0
    )
    
    
    
    
    
    
    (7.4
    )Net cash provided by (used in)
discontinued operations
    
    
    
    
    
    
    5.4
    
    
    
    
    
    
    
    
    
    
    
    5.4Increase (decrease) in cash and cash
equivalents
    
    
    (6.4
    )
    
    
    6.4
    
    
    
    (2.0
    )
    
    
    
    
    
    
    (2.0
    )Cash and cash equivalents at beginning
of period
    
    
    20.2
    
    
    
    3.4
    
    
    
    8.7
    
    
    
    
    
    
    
    32.3Cash and cash equivalents at end of
period
    
    $
    13.8
    
    
    $
    9.8
    
    
    $
    6.7
    
    
    $
    
    
    
    $
    30.3
 38




---



##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    Executive Summary
  Florida
    
    Mid-Atlantic
    
    Texas
    
    WestCentral Florida
    
    Delaware
    
    Austin
    
    Las VegasJacksonville
    
    Baltimore/Southern Pennsylvania
    
    Houston
    
    ColoradoSoutheast Florida
    
    Nashville
    
    San Antonio
    
    PhoenixSouthwest Florida
    
    Northern VirginiaTampa /St. Petersburg
     39




---



##### Table of Contents




    
    limiting new arrangements to acquire land;
    
    engaging in bulk sales of land and unsold homes;
    
    reducing the number of homes under construction and limiting development activities;
    
    re-negotiating terms or abandoning our rights under option contracts;
    
    considering other asset dispositions including the possible sale of underperforming
assets, communities, divisions and joint venture interests (see Recent Developments
regarding the June 2007 sale of our Dallas division and the September 2007 bulk sale of
homesites in our Mid-Atlantic and Virginia divisions);
    
    further reducing inventory target levels; and
    
    other initiatives designed to monetize our assets, including our deferred tax assets.
    40




---



##### Table of Contents



Recent Developments
 Transeastern JV Settlement
      Sale of Dallas Operations
 41




---



##### Table of Contents



, Accounting for the Impairment or Disposal of Long-Lived Assets
 Bulk Sale of Homesites in the Mid-Atlantic and Virginia Divisions
   SEC Inquiry
  Total Controlled Homesites by our Homebuilding Operations (Including Joint Ventures)
      42




---



##### Table of Contents



September 30, 2007
    
    December 31, 2006Total
    
    
    
    
    
    
    
    
    
    TotalOwned
    
    Optioned
    
    Controlled
    
    Owned
    
    Optioned
    
    ControlledContinuing operations*
    
    
    23,500
    
    
    
    16,000
    
    
    
    39,500
    
    
    
    21,200
    
    
    
    39,400
    
    
    
    60,600Discontinued operations
    
    
    200
    
    
    
    200
    
    
    
    400
    
    
    
    1,000
    
    
    
    3,100
    
    
    
    4,100Total
    
    
    23,700
    
    
    
    16,200
    
    
    
    39,900
    
    
    
    22,200
    
    
    
    42,500
    
    
    
    64,700Unconsolidated joint ventures
    
    
    2,500
    
    
    
    1,200
    
    
    
    3,700
    
    
    
    2,900
    
    
    
    2,100
    
    
    
    5,000Transeastern joint venture
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,200
    
    
    
    13,500
    
    
    
    15,700Combined total
    
    
    26,200
    
    
    
    17,400
    
    
    
    43,600
    
    
    
    27,300
    
    
    
    58,100
    
    
    
    85,400
 
 *

For September 30, 2007 includes 3,900 owned and 800 optioned homesites acquired as part of the TE
acquisition and 200 owned homesites from joint ventures that met the consolidation criteria at
September 30, 2007. The homesites for these joint ventures were included in unconsolidated joint
ventures at December 31, 2006.
 Owned and Optioned Land Summary for our Consolidated Operations
  September 30, 2007
    
    December 31, 2006Total
    
    
    
    
    
    
    
    
    
    TotalRegion:
    
    Owned
    
    Optioned
    
    Controlled
    
    Owned
    
    Optioned
    
    ControlledFlorida (a)
    
    
    9,400
    
    
    
    3,800
    
    
    
    13,200
    
    
    
    6,900
    
    
    
    11,000
    
    
    
    17,900Mid-Atlantic
    
    
    600
    
    
    
    1,000
    
    
    
    1,600
    
    
    
    800
    
    
    
    2,700
    
    
    
    3,500Texas (b)
    
    
    2,700
    
    
    
    4,700
    
    
    
    7,400
    
    
    
    2,700
    
    
    
    7,800
    
    
    
    10,500West (c)
    
    
    10,800
    
    
    
    6,500
    
    
    
    17,300
    
    
    
    10,800
    
    
    
    17,900
    
    
    
    28,700Continuing operations
    
    
    23,500
    
    
    
    16,000
    
    
    
    39,500
    
    
    
    21,200
    
    
    
    39,400
    
    
    
    60,600Discontinued operations (b)
    
    
    200
    
    
    
    200
    
    
    
    400
    
    
    
    1,000
    
    
    
    3,100
    
    
    
    4,100Total
    
    
    23,700
    
    
    
    16,200
    
    
    
    39,900
    
    
    
    22,200
    
    
    
    42,500
    
    
    
    64,700
 
 (a)
    
    For September 30, 2007, the Florida region includes 3,900 owned and 800 optioned homesites acquired as part of the TE acquisition.(b)
    
    The Texas region excludes the Dallas division, which is now classified as a discontinued operation.(c)
    
    The West region includes 200 owned homesites from joint ventures that met the consolidation criteria at September 30, 2007. The homesites for these joint ventures were included
in unconsolidated joint ventures at December 31, 2006. 43




---



##### Table of Contents



Residences Completed or
    
    Homesites Finished or
    
    Raw Land Held forUnder Construction
    
    Under Construction
    
    Future Development
    
    TotalRegion
    
    9/30/07
    
    12/31/06
    
    9/30/07
    
    12/31/06
    
    9/30/07
    
    12/31/06
    
    9/30/07
    
    12/31/06Florida (a)
    
    
    1,900
    
    
    
    1,700
    
    
    
    7,000
    
    
    
    3,500
    
    
    
    500
    
    
    
    1,700
    
    
    
    9,400
    
    
    
    6,900Mid-Atlantic
    
    
    200
    
    
    
    300
    
    
    
    300
    
    
    
    500
    
    
    
    100
    
    
    
    
    
    
    
    600
    
    
    
    800Texas (b)
    
    
    1,000
    
    
    
    1,000
    
    
    
    1,300
    
    
    
    1,100
    
    
    
    400
    
    
    
    600
    
    
    
    2,700
    
    
    
    2,700West (c)
    
    
    600
    
    
    
    800
    
    
    
    2,800
    
    
    
    2,200
    
    
    
    7,400
    
    
    
    7,800
    
    
    
    10,800
    
    
    
    10,800Continuing
operations
    
    
    3,700
    
    
    
    3,800
    
    
    
    11,400
    
    
    
    7,300
    
    
    
    8,400
    
    
    
    10,100
    
    
    
    23,500
    
    
    
    21,200Discontinued
operations (b)
    
    
    
    
    
    
    200
    
    
    
    100
    
    
    
    300
    
    
    
    100
    
    
    
    500
    
    
    
    200
    
    
    
    1,000Total
    
    
    3,700
    
    
    
    4,000
    
    
    
    11,500
    
    
    
    7,600
    
    
    
    8,500
    
    
    
    10,600
    
    
    
    23,700
    
    
    
    22,200
 
 (a)
    
    For September 30, 2007, the Florida region includes 3,900 owned homesites acquired as part of the TE acquisition.(b)
    
    The Texas region excludes the Dallas division, which is now classified as a discontinued operation.(c)
    
    The West region includes 200 homesites from joint ventures that met the consolidation criteria at September 30, 2007. The homesites for these joint ventures were
included in unconsolidated joint ventures at December 31, 2006. Homebuilding Operations
    Financial Services Operations
  44




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##### Table of Contents



Critical Accounting Policies
 Income Taxes
  Accounting for Uncertainty in Income
Taxes  an interpretation of SFAS 109,
 Impairment of Long-Lived Assets
 Accounting
for the Impairment or Disposal of Long-Lived Assets
 Goodwill
 Goodwill and
Other Intangible Assets
 45




---



##### Table of Contents



Results of Operations  Consolidated
 Three Months Ended September 30, 2007 Compared to Three Months Ended September 30, 2006
     46




---



##### Table of Contents



Homebuilding
      Net Sales Orders and Homes in Backlog (Consolidated)
  47




---



##### Table of Contents



Net Sales Orders and Homes in Backlog (Unconsolidated Joint Ventures)
    Financial Services
   48




---



##### Table of Contents



Discontinued Operations
   Nine Months Ended September 30, 2007 Compared to Nine Months Ended September 30, 2006
     Homebuilding
    49




---



##### Table of Contents



Net Sales Orders (Consolidated)
   Net Sales Orders (Unconsolidated Joint Ventures)
  Financial Services
  50




---



##### Table of Contents



Discontinued Operations
    Reportable Segments
 Disclosures About Segments of an Enterprise and Related Information,
 Homebuilding Operations
  Florida:  Mid-Atlantic:  Texas:  West:
 51




---



##### Table of Contents



Selected Homebuilding Operations and Financial Data
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Homebuilding revenues:Florida:Sales of homes
    
    $
    188.3
    
    
    $
    214.0
    
    
    $
    637.4
    
    
    $
    758.9Sales of land
    
    
    7.3
    
    
    
    4.1
    
    
    
    33.7
    
    
    
    14.0Total Florida
    
    
    195.6
    
    
    
    218.1
    
    
    
    671.1
    
    
    
    772.9Mid-Atlantic:Sales of homes
    
    
    49.9
    
    
    
    70.0
    
    
    
    164.5
    
    
    
    204.7Sales of land
    
    
    31.5
    
    
    
    0.2
    
    
    
    31.6
    
    
    
    6.7Total Mid-Atlantic
    
    
    81.4
    
    
    
    70.2
    
    
    
    196.1
    
    
    
    211.4Texas:Sales of homes*
    
    
    147.8
    
    
    
    150.4
    
    
    
    461.7
    
    
    
    429.1Sales of land*
    
    
    1.2
    
    
    
    6.3
    
    
    
    7.3
    
    
    
    9.4Total Texas*
    
    
    149.0
    
    
    
    156.7
    
    
    
    469.0
    
    
    
    438.5West:Sales of homes
    
    
    63.6
    
    
    
    128.6
    
    
    
    278.7
    
    
    
    332.1Sales of land
    
    
    3.3
    
    
    
    3.2
    
    
    
    4.4
    
    
    
    26.7Total West
    
    
    66.9
    
    
    
    131.8
    
    
    
    283.1
    
    
    
    358.8Total homebuilding revenues
    
    $
    492.9
    
    
    $
    576.8
    
    
    $
    1,619.3
    
    
    $
    1,781.6
 
 *
    
    The Texas region excludes the Dallas division, which is now classified as a discontinued operation. Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Results of Operations:Homebuilding:Florida
    
    $
    (299.4
    )
    
    $
    (116.0
    )
    
    $
    (290.3
    )
    
    $
    (5.5
    )Mid-Atlantic
    
    
    (52.0
    )
    
    
    (9.9
    )
    
    
    (97.7
    )
    
    
    2.3Texas*
    
    
    14.6
    
    
    
    15.1
    
    
    
    43.3
    
    
    
    43.2West
    
    
    (199.4
    )
    
    
    (3.4
    )
    
    
    (276.2
    )
    
    
    72.9Total Homebuilding
    
    
    (536.2
    )
    
    
    (114.2
    )
    
    
    (620.9
    )
    
    
    112.9Financial Services
    
    
    0.2
    
    
    
    5.0
    
    
    
    5.2
    
    
    
    15.9Corporate and unallocated
    
    
    (73.8
    )
    
    
    (12.1
    )
    
    
    (220.1
    )
    
    
    (57.4
    )Total income (loss) before income taxes
    
    $
    (609.8
    )
    
    $
    (121.3
    )
    
    $
    (835.8
    )
    
    $
    71.4
 
 *
    
    The Texas region excludes the Dallas division, which is now classified as a discontinued operation. 52




---



##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Impairment charges on active communities:Florida
    
    $
    15.7
    
    
    $
    4.5
    
    
    $
    44.4
    
    
    $
    5.2Mid-Atlantic
    
    
    4.4
    
    
    
    10.4
    
    
    
    11.0
    
    
    
    13.5Texas*
    
    
    
    
    
    
    0.5
    
    
    
    0.6
    
    
    
    0.5West
    
    
    43.2
    
    
    
    14.4
    
    
    
    56.7
    
    
    
    16.163.3
    
    
    
    29.8
    
    
    
    112.7
    
    
    
    35.3Write-offs of deposits and abandonment costs:Florida
    
    
    274.5
    
    
    
    0.2
    
    
    
    287.3
    
    
    
    1.3Mid-Atlantic
    
    
    33.9
    
    
    
    7.5
    
    
    
    47.8
    
    
    
    8.0Texas*
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    0.1West
    
    
    132.8
    
    
    
    12.3
    
    
    
    180.3
    
    
    
    12.7441.2
    
    
    
    20.0
    
    
    
    515.7
    
    
    
    22.1Inventory impairments and abandonment costs
    
    $
    504.5
    
    
    $
    49.8
    
    
    $
    628.4
    
    
    $
    57.4
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Deliveries:
    
    Homes
    
    
    $
    
    
    Homes
    
    
    $
    
    
    Homes
    
    
    $
    
    
    Homes
    
    
    $Consolidated:Florida
    
    
    551
    
    
    $
    188.2
    
    
    
    580
    
    
    $
    214.0
    
    
    
    1,780
    
    
    $
    637.4
    
    
    
    2,079
    
    
    $
    758.9Mid-Atlantic
    
    
    138
    
    
    
    49.9
    
    
    
    189
    
    
    
    70.0
    
    
    
    458
    
    
    
    164.5
    
    
    
    522
    
    
    
    204.7Texas*
    
    
    563
    
    
    
    147.8
    
    
    
    605
    
    
    
    150.4
    
    
    
    1,784
    
    
    
    461.7
    
    
    
    1,721
    
    
    
    429.2West
    
    
    207
    
    
    
    63.7
    
    
    
    395
    
    
    
    128.6
    
    
    
    811
    
    
    
    278.7
    
    
    
    1,058
    
    
    
    332.1Continuing operations
    
    
    1,459
    
    
    
    449.6
    
    
    
    1,769
    
    
    
    563.0
    
    
    
    4,833
    
    
    
    1,542.3
    
    
    
    5,380
    
    
    
    1,724.9Discontinued operations*
    
    
    7
    
    
    
    1.1
    
    
    
    152
    
    
    
    34.9
    
    
    
    189
    
    
    
    44.7
    
    
    
    449
    
    
    
    101.0Total
    
    
    1,466
    
    
    
    450.7
    
    
    
    1,921
    
    
    
    597.9
    
    
    
    5,022
    
    
    
    1,587.0
    
    
    
    5,829
    
    
    
    1,825.9Unconsolidated joint ventures:Florida (excluding
Transeastern)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40
    
    
    
    11.3
    
    
    
    
    
    
    
    Transeastern
    
    
    132
    
    
    
    28.5
    
    
    
    586
    
    
    
    180.2
    
    
    
    739
    
    
    
    174.8
    
    
    
    1,647
    
    
    
    501.2Mid-Atlantic
    
    
    6
    
    
    
    1.1
    
    
    
    12
    
    
    
    3.1
    
    
    
    16
    
    
    
    4.0
    
    
    
    100
    
    
    
    28.9West
    
    
    136
    
    
    
    36.5
    
    
    
    422
    
    
    
    141.9
    
    
    
    774
    
    
    
    230.9
    
    
    
    1,358
    
    
    
    485.6Total unconsolidated joint ventures
    
    
    274
    
    
    
    66.1
    
    
    
    1,020
    
    
    
    325.2
    
    
    
    1,569
    
    
    
    421.0
    
    
    
    3,105
    
    
    
    1,015.7Combined total
    
    
    1,740
    
    
    $
    516.8
    
    
    
    2,941
    
    
    $
    923.1
    
    
    
    6,591
    
    
    $
    2,008.0
    
    
    
    8,934
    
    
    $
    2,841.6
 
 *
    
    The Texas Region excludes the Dallas division, which is classified as a discontinued operation. 53




---



##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net Sales Orders(1):
    
    Homes
    
    
    $
    
    
    Homes
    
    
    $
    
    
    Homes
    
    
    $
    
    
    Homes
    
    
    $Consolidated:Florida
    
    
    226
    
    
    $
    43.6
    
    
    
    377
    
    
    $
    150.4
    
    
    
    1,263
    
    
    $
    398.9
    
    
    
    1,627
    
    
    $
    642.3Mid-Atlantic
    
    
    57
    
    
    
    17.4
    
    
    
    146
    
    
    
    53.5
    
    
    
    485
    
    
    
    170.0
    
    
    
    480
    
    
    
    190.8Texas*
    
    
    376
    
    
    
    99.2
    
    
    
    601
    
    
    
    152.0
    
    
    
    1,658
    
    
    
    417.3
    
    
    
    1,936
    
    
    
    491.3West
    
    
    233
    
    
    
    59.5
    
    
    
    206
    
    
    
    63.7
    
    
    
    789
    
    
    
    219.4
    
    
    
    982
    
    
    
    334.4Continuing operations
    
    
    892
    
    
    
    219.6
    
    
    
    1,330
    
    
    
    419.6
    
    
    
    4,195
    
    
    
    1,205.6
    
    
    
    5,025
    
    
    
    1,658.8Discontinued operations*
    
    
    
    
    
    
    (0.5
    )
    
    
    140
    
    
    
    34.2
    
    
    
    70
    
    
    
    18.9
    
    
    
    448
    
    
    
    106.9Total
    
    
    892
    
    
    
    219.1
    
    
    
    1,470
    
    
    
    453.8
    
    
    
    4,265
    
    
    
    1,224.5
    
    
    
    5,473
    
    
    
    1,765.7Unconsolidated joint ventures:Florida (excluding
Transeastern)
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    0.5
    
    
    
    12
    
    
    
    1.7
    
    
    
    13
    
    
    
    5.2Transeastern
    
    
    54
    
    
    
    9.2
    
    
    
    (23
    )
    
    
    (13.0
    )
    
    
    248
    
    
    
    27.1
    
    
    
    85
    
    
    
    50.6Mid-Atlantic
    
    
    6
    
    
    
    1.0
    
    
    
    13
    
    
    
    2.7
    
    
    
    19
    
    
    
    3.8
    
    
    
    71
    
    
    
    17.5West
    
    
    93
    
    
    
    21.5
    
    
    
    134
    
    
    
    28.7
    
    
    
    480
    
    
    
    116.8
    
    
    
    718
    
    
    
    214.1Total unconsolidated joint ventures
    
    
    153
    
    
    
    31.7
    
    
    
    125
    
    
    
    18.9
    
    
    
    759
    
    
    
    149.4
    
    
    
    887
    
    
    
    287.4Combined total
    
    
    1,045
    
    
    $
    250.8
    
    
    
    1,595
    
    
    $
    472.7
    
    
    
    5,024
    
    
    $
    1,373.9
    
    
    
    6,360
    
    
    $
    2,053.1
 
 (1)
    
    Net of cancellations.*
    
    The Texas Region excludes the Dallas division, which is now classified as a discontinued operation. September 30, 2007
    
    
    September 30, 2006Average
    
    
    
    
    
    
    
    
    
    
    AverageSales Backlog:
    
    Homes
    
    
    $
    
    
    Price
    
    
    Homes
    
    
    $
    
    
    PriceConsolidated:Florida
    
    
    1,935
    
    
    $
    664.4
    
    
    $
    343
    
    
    
    2,485
    
    
    $
    920.1
    
    
    $
    370Mid-Atlantic
    
    
    239
    
    
    
    87.1
    
    
    $
    365
    
    
    
    259
    
    
    
    98.5
    
    
    $
    380Texas*
    
    
    848
    
    
    
    229.2
    
    
    $
    270
    
    
    
    1,165
    
    
    
    316.4
    
    
    $
    272West
    
    
    463
    
    
    
    135.3
    
    
    $
    296
    
    
    
    775
    
    
    
    306.1
    
    
    $
    395Continuing operations
    
    
    3,485
    
    
    
    1,116.0
    
    
    $
    320
    
    
    
    4,684
    
    
    
    1,641.1
    
    
    $
    350Discontinued operations*
    
    
    14
    
    
    
    4.3
    
    
    $
    305
    
    
    
    287
    
    
    
    70.9
    
    
    $
    247Total
    
    
    3,499
    
    
    
    1,120.3
    
    
    $
    321
    
    
    
    4,971
    
    
    
    1,712.0
    
    
    $
    344Unconsolidated joint ventures:Florida (excluding
Transeastern)
    
    
    
    
    
    
    
    
    
    $
    
    
    
    
    49
    
    
    
    14.6
    
    
    $
    298Transeastern
    
    
    
    
    
    
    
    
    
    $
    
    
    
    
    1,516
    
    
    
    435.6
    
    
    $
    287Mid-Atlantic
    
    
    
    
    
    
    
    
    
    $
    
    
    
    
    8
    
    
    
    2.4
    
    
    $
    304West
    
    
    135
    
    
    
    37.0
    
    
    $
    274
    
    
    
    903
    
    
    
    313.9
    
    
    $
    348Total unconsolidated joint ventures
    
    
    135
    
    
    
    37.0
    
    
    $
    274
    
    
    
    2,476
    
    
    
    766.5
    
    
    $
    310Combined total
    
    
    3,634
    
    
    $
    1,157.3
    
    
    $
    318
    
    
    
    7,447
    
    
    $
    2,478.5
    
    
    $
    333
 
 *
    
    The Texas Region excludes the Dallas division, which is now classified as a discontinued operation. 54




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##### Table of Contents



Three Months Ended September 30,
    
    Nine Months Ended September 30,2007
    
    2006
    
    2007
    
    2006Sales
    
    
    
    
    
    Sales
    
    
    
    
    
    Sales
    
    
    
    
    
    SalesAverage Price:
    
    Deliveries
    
    Orders
    
    Deliveries
    
    Orders
    
    Deliveries
    
    Orders
    
    Deliveries
    
    OrdersConsolidated:Florida
    
    $
    342
    
    
    $
    193
    
    
    $
    369
    
    
    $
    399
    
    
    $
    358
    
    
    $
    316
    
    
    $
    365
    
    
    $
    395Mid-Atlantic
    
    $
    362
    
    
    $
    305
    
    
    $
    370
    
    
    $
    366
    
    
    $
    359
    
    
    $
    350
    
    
    $
    392
    
    
    $
    398Texas*
    
    $
    262
    
    
    $
    264
    
    
    $
    249
    
    
    $
    253
    
    
    $
    259
    
    
    $
    252
    
    
    $
    249
    
    
    $
    254West
    
    $
    308
    
    
    $
    255
    
    
    $
    326
    
    
    $
    309
    
    
    $
    344
    
    
    $
    278
    
    
    $
    314
    
    
    $
    341Continuing operations
    
    $
    308
    
    
    $
    246
    
    
    $
    318
    
    
    $
    315
    
    
    $
    319
    
    
    $
    287
    
    
    $
    321
    
    
    $
    330Discontinued
operations
    
    $
    158
    
    
    $
    
    
    
    $
    230
    
    
    $
    244
    
    
    $
    237
    
    
    $
    270
    
    
    $
    225
    
    
    $
    239Total
    
    $
    307
    
    
    $
    246
    
    
    $
    311
    
    
    $
    309
    
    
    $
    316
    
    
    $
    287
    
    
    $
    313
    
    
    $
    323Unconsolidated joint
ventures:Florida (excluding
Transeastern)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    456
    
    
    $
    282
    
    
    $
    142
    
    
    $
    
    
    
    $
    400Transeastern
    
    $
    216
    
    
    $
    171
    
    
    $
    307
    
    
    $
    564
    
    
    $
    237
    
    
    $
    109
    
    
    $
    304
    
    
    $
    596Mid-Atlantic
    
    $
    193
    
    
    $
    172
    
    
    $
    254
    
    
    $
    210
    
    
    $
    249
    
    
    $
    202
    
    
    $
    289
    
    
    $
    247West
    
    $
    268
    
    
    $
    231
    
    
    $
    336
    
    
    $
    214
    
    
    $
    298
    
    
    $
    243
    
    
    $
    358
    
    
    $
    298Total unconsolidated
joint ventures
    
    $
    241
    
    
    $
    207
    
    
    $
    319
    
    
    $
    152
    
    
    $
    268
    
    
    $
    197
    
    
    $
    327
    
    
    $
    324Combined total
    
    $
    297
    
    
    $
    240
    
    
    $
    314
    
    
    $
    296
    
    
    $
    305
    
    
    $
    273
    
    
    $
    318
    
    
    $
    323
 
 *
    
    The Texas Region excludes the Dallas division, which is classified as a discontinued operation. Three Months Ended September 30, 2007 compared to Three Months Ended September 30, 2006
 Florida:
  Mid-Atlantic:
  Texas:
 55




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##### Table of Contents



West:
  Nine Months Ended September 30, 2007 compared to Nine Months Ended September 30, 2006
 Florida:
  Mid-Atlantic:
  Texas:
 56




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##### Table of Contents



West:
  Financial Services Operations
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenues
    
    $
    8.3
    
    
    $
    15.8
    
    
    $
    31.3
    
    
    $
    48.4Expenses
    
    
    8.1
    
    
    
    10.8
    
    
    
    26.1
    
    
    
    32.5Financial services pretax income
    
    $
    0.2
    
    
    $
    5.0
    
    
    $
    5.2
    
    
    $
    15.9
 FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
 Sources and Uses of Cash
      57




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##### Table of Contents



Refunds
of Federal & State Income Taxes
  58




---



##### Table of Contents



Seasonality
  Financing Activities
     59




---



##### Table of Contents



60




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##### Table of Contents



pari passu pari passu
   September 30,
    
    
    December 31,2007
    
    
    2006Notes payable
    
    $
    1,574.1
    
    
    $
    1,060.7Bank borrowings
    
    
    150.3
    
    
    
    Homebuilding borrowings*
    
    
    1,724.4
    
    
    
    1,060.7Less: unrestricted cash
    
    
    73.6
    
    
    
    47.4Homebuilding net debt
    
    
    1,650.8
    
    
    
    1,013.3Stockholders equity
    
    
    48.3
    
    
    
    774.9Total capital**
    
    $
    1,699.1
    
    
    $
    1,788.2Ratio
    
    
    97.2
    %
    
    
    56.7
    %
 
 *
    
    Does not include obligations for inventory not owned of $44.5 million at September 30, 2007 and $300.6 million at December 31, 2006, all of which are
non-recourse to us. Obligations for inventory not owned in our consolidated statements of financial condition represent liabilities associated with our land
banking and similar activities, including obligations in variable interest entities which have been consolidated by us and in which we have a less than 50%
ownership interest, and the creditors have no recourse against us. As a result, the obligations have been specifically excluded from the calculation of
leverage ratios pursuant to the terms of our revolving credit facility.**
    
    Does not include Financial Services bank borrowings of $22.4 million at September 30, 2007 and $35.4 million at December 31, 2006.  61




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##### Table of Contents



Off-Balance Sheet Arrangements
 Land and Homesite Option Contracts
  62




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##### Table of Contents



Accounting for the Impairment or Disposal of Long-Lived Assets
   Investments in Unconsolidated Joint Ventures
   Engle/Sunbelt Joint Venture
  63




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##### Table of Contents



TOUSA / Kolter Joint Venture
   Centex/ TOUSA at Wellington, LLC
   Layton Lakes Joint Venture
  Transeastern JV
  64




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##### Table of Contents



The Equity Method of Accounting for
Investments in Common Stock
      65




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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 our 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;
    
    the impact of inflation on our future results of operations;
    
    our expectations regarding our ability to pass through to our customers any increases in
our costs;
    
    our expectations regarding our option contracts, investments in land
development joint ventures;
    
    our expectations regarding the housing market in 2007 and beyond; and
    
    our expectations regarding our use of cash in operations;
    
    our expectations of receiving federal and state income tax
refunds; and
   
    
    our ability to exchange some or all of our outstanding indebtedness for equity;
    
    our belief that our ability to continue as a going concern will depend upon our ability
to restructure our capital structure
    
    our belief that failure to restructure our capital structure would result in depleting
our available funds and not being able to pay our obligations when they become due;
    
    our significant level of debt and the impact of the restrictions imposed on us by the
terms of this debt;
    
    our ability to borrow or otherwise finance our business in the future;
    
    our ability to identify and acquire, at anticipated prices, additional homebuilding
opportunities and/or to effect our growth strategies in our homebuilding operations and
financial services business;
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
    
    our relationship with Technical Olympic S.A. and its control over our business
activities;
    
    economic or other business conditions that affect the desire or ability of our customers
to purchase new homes in markets in which we conduct our business, such as increases in
interest rates, inflation, or unemployment rates or declines in median income growth,
consumer confidence or the demand for, or the price of, housing;
    
    events which would impede our ability to open new communities and/or deliver homes
within anticipated time frames and/or within anticipated budgets;
    
    our ability to successfully enter into, utilize, and recognize the anticipated benefits
of, joint ventures and option contracts;
    
    a decline in the value of the land and home inventories we maintain;
    
    an increase in the cost of, or shortages in the availability of, qualified labor and
materials;
    
    our ability to successfully dispose of developed properties or undeveloped land or
homesites at expected prices and within anticipated time frames;
    
    our ability to compete in our existing and future markets;
    
    the impact of hurricanes, tornadoes or other natural disasters or weather conditions on
our business, including the potential for shortages and increased costs of materials and
qualified labor and the potential for delays in construction and obtaining government
approvals;
    
    an increase or change in government regulations, or in the interpretation and/or
enforcement of existing government regulations;
    
    the impact of any or all of the above risks on the operations or financial results of
our unconsolidated joint ventures;
    
    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; and
    
    the restructuring of our indebtedness either pursuant to an
out-of-court transaction on through a Chapter 11 proceeding.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     Expected Maturity Date(in millions)2007
    
    2008
    
    2009
    
    2010
    
    2011
    
    Thereafter
    
    Fair ValueLiabilitiesLong-term debtFixed rate (71/2%)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    125.0
    
    
    $
    200.0
    
    
    $
    77.4Fixed rate (81/4%)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    250.0
    
    
    
    
    
    
    $
    150.0Fixed rate (9.0%)
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    300.0
    
    
    
    
    
    
    
    
    
    
    $
    184.5Fixed rate
(103/8%)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    185.0
    
    
    $
    55.5Fixed rate, Senior
Subordinated PIK Note
(143/4%)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    20.5
    
    
    $
    11.6Variable rate,
First Lien Term Loan Facility (9.6% at September 30, 2007)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    199.5
    
    
    $
    199.5Variable
rate, Second Lien Term Loan Facility (13.6% at September 30, 2007)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    306.8
    
    
    $
    306.8Variable rate,
credit facility
(10.1% at September 30, 2007)
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    150.3
    
    
    
    
    
    
    
    
    
    
    $
    150.3Variable rate,
warehouse lines of
credit (6.3% at September 30, 2007)
    
    $
    22.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    22.4
  
 ITEM 4. CONTROLS AND PROCEDURES
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PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 Deutsche Bank Trust Co. Americas v. Technical Olympic USA, Inc. and TOUSA Homes L.P
 Deutsche Bank Securities Inc. v. Technical Olympic USA, Inc., EH/Transeastern, LLC, and
TE/TOUSA Senior, LLC,
  Class Action Lawsuit
  
 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, 2006 (2006 Form 10-K).
  Our ability to continue as a going concern.
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Our substantial indebtedness has adversely affected our financial health.
  
    
    increased our vulnerability to general adverse economic, industry and competitive
conditions;
    
    required us to dedicate a substantial portion of our cash flow from operations to
payments on our indebtedness, thereby reducing the availability of our cash flow to fund
working capital, capital expenditures, acquisition of property and other general corporate
purposes;
    
    limited our flexibility in planning for, or reacting to, changes in our business and the
industry in which we operate;
    
    placed us at a competitive disadvantage compared to our competitors that have less debt;
and
    
    limited our ability to borrow additional funds.
 If the price of our shares remains low or our financial condition further deteriorates, we may be
delisted by the New York Stock Exchange and our stockholders could find it difficult to sell our
common stock.
       If our stock is delisted from the NYSE, we will be in default under our credit agreements.
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ITEM 6. EXHIBITS
 ExhibitNumber
    
    Description3.1
    
    

Amendment
No. 1 to the Bylaws of TOUSA, Inc.31.1
    
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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SIGNATURES
  TOUSA, Inc.Date:  November 14, 2007
    By:
    /s/ STEPHEN M. WAGMANName:
    Stephen M. WagmanTitle:
    Executive Vice President and Chief  Financial OfficerDate:  November 14, 2007
    By:
    /s/ ANGELA F. VALDESName:
    Angela F. ValdesTitle:
    Vice President, Chief Accounting Officer and Corporate Controller 72