##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 (Mark One)þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 COMMISSION FILE NUMBER: 001-32322
 TOUSA, INC.
  Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    76-0460831
(I.R.S. Employer
Identification No.)4000 Hollywood Blvd., Suite 500 N 
Hollywood, Florida
(Address of principal executive offices)
    
    33021
(ZIP code)
 
 
 o þ
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
(Do not check if a smaller
reporting company)
    
    Smaller reporting company o
 o þ
 APPLICABLE ONLY TO CORPORATE ISSUERS:




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##### 



TOUSA, INC. AND SUBSIDIARIES
DEBTOR-IN-POSSESSION
INDEX
 PAGEPART I. Financial Information
    
    
    3ITEM 1.
    

Consolidated Financial Statements (Unaudited)
    
    
    3Consolidated Statements of Financial Condition
    
    
    3Consolidated Statements of Operations
    
    
    4Consolidated Statement of Stockholders (Deficit) Equity
    
    
    5Consolidated Statements of Cash Flows
    
    
    6Notes to Unaudited Consolidated Financial Statements
    
    
    7ITEM 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    40ITEM 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    66ITEM 4.
    
    Controls and Procedures
    
    
    66PART II. Other Information
    
    
    67ITEM 1.
    
    Legal Proceedings
    
    
    67ITEM 1A.
    
    Risk Factors
    
    
    69ITEM 6.
    
    Exhibits
    
    
    70Signatures
    
    
    71EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 
 TOUSA, INC. AND SUBSIDIARIES
DEBTOR-IN-POSSESSION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in millions, except par value)
 March 31, 2008
    
    
    December 31, 2007(Unaudited)ASSETSHOMEBUILDING:Cash and cash equivalents:Unrestricted
    
    $
    123.5
    
    
    $
    67.2Restricted
    
    
    34.3
    
    
    
    5.1Inventory:Deposits
    
    
    45.7
    
    
    
    56.9Homesites and land under development
    
    
    525.0
    
    
    
    633.0Residences completed and under construction
    
    
    444.8
    
    
    
    555.9Inventory not owned
    
    
    25.1
    
    
    
    26.01,040.6
    
    
    
    1,271.8Property and equipment, net
    
    
    21.6
    
    
    
    24.6Investments in unconsolidated joint ventures
    
    
    9.4
    
    
    
    9.0Receivables from unconsolidated joint ventures
    
    
    0.1
    
    
    
    0.3Other assets
    
    
    275.6
    
    
    
    330.0Goodwill
    
    
    11.2
    
    
    
    11.2Assets held for sale
    
    
    4.0
    
    
    
    6.11,520.3
    
    
    
    1,725.3FINANCIAL SERVICES:Cash and cash equivalents:Unrestricted
    
    
    10.7
    
    
    
    9.3Restricted
    
    
    4.6
    
    
    
    5.6Mortgage loans held for sale
    
    
    11.7
    
    
    
    15.0Other assets
    
    
    5.4
    
    
    
    6.832.4
    
    
    
    36.7Total assets
    
    $
    1,552.7
    
    
    $
    1,762.0LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITYHOMEBUILDING:Accounts payable and other liabilities
    
    $
    129.4
    
    
    $
    401.8Customer deposits
    
    
    27.5
    
    
    
    33.9Obligations for inventory not owned
    
    
    
    
    
    
    32.0Notes payable
    
    
    
    
    
    
    1,585.3Bank borrowings
    
    
    
    
    
    
    168.5Liabilities associated with assets held for sale
    
    
    0.2
    
    
    
    0.9157.1
    
    
    
    2,222.4FINANCIAL SERVICES:Accounts payable and other liabilities
    
    
    6.0
    
    
    
    7.3Bank borrowings
    
    
    3.3
    
    
    
    7.89.3
    
    
    
    15.1Total liabilities not subject to compromise
    
    
    166.4
    
    
    
    2,237.5Liabilities subject to compromise (Note 2)
    
    
    2,146.1
    
    
    
    Total liabilities
    
    
    2,312.5
    
    
    
    2,237.5Commitments and contingenciesStockholders (deficit) equity:Preferred stock  $0.01 par value; 3,000,000 shares
authorized; 117,500 issued and outstanding at March 31,
2008 and December 31, 2007
    
    
    6.6
    
    
    
    3.9Common stock  $0.01 par value; 975,000,000 shares
authorized; 59,604,169 shares issued and outstanding at
March 31, 2008 and December 31, 2007
    
    
    0.6
    
    
    
    0.6Additional paid-in capital
    
    
    569.0
    
    
    
    570.7Accumulated deficit
    
    
    (1,336.0
    )
    
    
    (1,050.7
    )Total stockholders (deficit) equity
    
    
    (759.8
    )
    
    
    (475.5
    )Total liabilities and stockholders (deficit) equity
    
    $
    1,552.7
    
    
    $
    1,762.0




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##### Table of Contents



TOUSA, INC. AND SUBSIDIARIES
DEBTOR-IN-POSSESSION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts)
(Unaudited)
 Three Months EndedMarch 31,2008
    
    
    2007HOMEBUILDING:Revenues:Home sales
    
    $
    290.9
    
    
    $
    557.4Land sales
    
    
    4.4
    
    
    
    3.3295.3
    
    
    
    560.7Cost of sales:Home sales
    
    
    258.2
    
    
    
    442.0Land sales
    
    
    4.7
    
    
    
    2.3Inventory impairments and abandonment costs
    
    
    172.3
    
    
    
    39.1Other
    
    
    
    
    
    
    (2.6
    )435.2
    
    
    
    480.8Gross profit (loss)
    
    
    (139.9
    )
    
    
    79.9Selling, general and administrative expenses
    
    
    54.2
    
    
    
    91.4Income from unconsolidated joint ventures, net
    
    
    (0.3
    )
    
    
    (1.9
    )Impairment of investments in and receivables from unconsolidated joint ventures
    
    
    0.5
    
    
    
    5.5Provision for settlement of loss contingency
    
    
    
    
    
    
    78.9Interest expense (see Note 3 for contractual interest)
    
    
    20.1
    
    
    
    0.1Other income, net
    
    
    (1.4
    )
    
    
    (0.7
    )Homebuilding pretax loss
    
    
    (213.0
    )
    
    
    (93.4
    )FINANCIAL SERVICES:Revenues
    
    
    5.8
    
    
    
    12.0Expenses
    
    
    7.0
    
    
    
    9.3Financial Services pretax income (loss)
    
    
    (1.2
    )
    
    
    2.7Loss from continuing operations before reorganization items and taxes
    
    
    (214.2
    )
    
    
    (90.7
    )Reorganization items, net (Note 2)
    
    
    68.5
    
    
    
    Benefit for income taxes
    
    
    
    
    
    
    (28.5
    )Loss from continuing operations, net of taxes
    
    
    (282.7
    )
    
    
    (62.2
    )Discontinued operations:Loss from discontinued operations
    
    
    (2.6
    )
    
    
    (5.9
    )Benefit for income taxes
    
    
    
    
    
    
    (2.1
    )Loss from discontinued operations, net of taxes
    
    
    (2.6
    )
    
    
    (3.8
    )Net loss
    
    
    (285.3
    )
    
    
    (66.0
    )Dividends and accretion of discount on preferred stock
    
    
    2.7
    
    
    
    Net loss available to common stockholders
    
    $
    (288.0
    )
    
    $
    (66.0
    )LOSS PER COMMON SHARE, BASIC AND DILUTED:Loss from continuing operations (net
of preferred stock dividends and
accretion of discount)
    
    $
    (4.79
    )
    
    $
    (1.05
    )Loss from discontinued operations
    
    
    (0.04
    )
    
    $
    (0.06
    )Loss per common share
    
    $
    (4.83
    )
    
    $
    (1.11
    )WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:Basic
    
    
    59,604,169
    
    
    
    59,594,917Diluted
    
    
    59,604,169
    
    
    
    59,594,917CASH DIVIDENDS PER SHARE
    
    $
    
    
    
    $
    
  4




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##### Table of Contents



TOUSA, INC. AND SUBSIDIARIES
DEBTOR-IN-POSSESSION
CONSOLIDATED STATEMENT OF STOCKHOLDERS (DEFICIT) EQUITY
(Dollars in millions)
 (Unaudited)
 Additional
    
    
    
    
    
    
    TotalPreferred Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    Accumulated
    
    
    StockholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    (Deficit) EquityBalance at
January 1, 2008
    
    
    117,500
    
    
    $
    3.9
    
    
    
    59,604,169
    
    
    $
    0.6
    
    
    $
    570.7
    
    
    $
    (1,050.7
    )
    
    $
    (475.5
    )Stock option
compensation
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.0
    
    
    
    
    
    
    
    1.0Dividends and
accretion of
preferred stock
    
    
    
    
    
    
    2.7
    
    
    
    
    
    
    
    
    
    
    
    (2.7
    )
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (285.3
    )
    
    
    (285.3
    )Balance at
March 31, 2008
    
    
    117,500
    
    
    $
    6.6
    
    
    
    59,604,169
    
    
    $
    0.6
    
    
    $
    569.0
    
    
    $
    (1, 336.0
    )
    
    $
    (759.8
    )
  5




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TOUSA, INC. AND SUBSIDIARIES
DEBTOR-IN-POSSESSION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
 (Unaudited)
 Three Months EndedMarch 31,2008
    
    
    2007Cash flows from operating activities:Net loss
    
    $
    (285.3
    )
    
    $
    (66.0
    )Loss from discontinued operations
    
    
    2.6
    
    
    
    3.8Loss from continuing operations
    
    
    (282.7
    )
    
    
    (62.2
    )Adjustments to reconcile loss from continuing operations to net cash provided
by (used in) operating activities, net of effects of dispositions:Depreciation and amortization
    
    
    3.4
    
    
    
    3.6Non-cash compensation expense
    
    
    1.0
    
    
    
    1.1Non-cash interest expense
    
    
    12.7
    
    
    
    Reorganization items, net
    
    
    68.5
    
    
    
    Provision for settlement of loss contingency
    
    
    
    
    
    
    78.9Inventory impairments and abandonment costs
    
    
    172.3
    
    
    
    39.1Equity in (earnings) losses from unconsolidated joint ventures
    
    
    (0.2
    )
    
    
    2.1Distributions of earnings from unconsolidated joint ventures
    
    
    0.2
    
    
    
    0.3Impairment of investments in/receivables from unconsolidated joint ventures
    
    
    0.5
    
    
    
    5.5Changes in operating assets and liabilities, net of effects of dispositions:Restricted cash
    
    
    (28.2
    )
    
    
    0.3Inventory
    
    
    56.2
    
    
    
    (21.4
    )Receivables from unconsolidated joint ventures
    
    
    (2.8
    )
    
    
    (18.6
    )Other assets
    
    
    11.2
    
    
    
    (49.3
    )Mortgage loans held for sale
    
    
    3.3
    
    
    
    4.1Accounts payable and other liabilities
    
    
    26.3
    
    
    
    (32.1
    )Customer deposits
    
    
    (6.4
    )
    
    
    (3.8
    )Net cash provided by (used in) operating activities
    
    
    35.3
    
    
    
    (52.4
    )Cash flows from investing activities:Net additions to property and equipment
    
    
    
    
    
    
    (3.3
    )Investments in unconsolidated joint ventures
    
    
    (0.5
    )
    
    
    (15.8
    )Capital distributions from unconsolidated joint ventures
    
    
    
    
    
    
    2.7Net cash used in investing activities
    
    
    (0.5
    )
    
    
    (16.4
    )Cash flows from financing activities:Net borrowings from revolving credit facilities
    
    
    31.5
    
    
    
    50.0Net repayments of Financial Services bank borrowings
    
    
    (4.5
    )
    
    
    (5.2
    )Payments for deferred financing costs
    
    
    (2.9
    )
    
    
    (2.0
    )Net cash provided by financing activities
    
    
    24.1
    
    
    
    42.8Net cash provided by (used in) continuing operations
    
    
    58.9
    
    
    
    (26.0
    )Cash flows from discontinued operations:Net cash provided by (used in) operating activities
    
    
    (1.2
    )
    
    
    0.5Net cash provided by (used in) discontinued operations
    
    
    (1.2
    )
    
    
    0.5Increase (decrease) in cash and cash equivalents
    
    
    57.7
    
    
    
    (25.5
    )Cash and cash equivalents at beginning of period
    
    
    76.5
    
    
    
    54.2Cash and cash equivalents at end of period
    
    $
    134.2
    
    
    $
    28.7Supplemental disclosure of non-cash financing activities:Decrease in inventory not owned
    
    $
    (0.9
    )
    
    $
    (41.6
    )Decrease in obligations for inventory not owned
    
    $
    (4.8
    )
    
    $
    (41.6
    )Supplemental disclosure of non-cash investing activities:Refer to Note 3 for the consolidation of variable interest entities in accordance with FIN 46R.
  6




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##### Table of Contents



TOUSA, INC. AND SUBSIDIARIES
DEBTOR-IN-POSSESSION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2008
 1. Business and Organization
 Business
  Organization
  Chapter 11 Cases
 www.kccllc.net/tousa
    7




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http://www.tousa.com/reorg
  
    
    our ability to generate and maintain adequate cash;
    
    the cost, duration and outcome of the restructuring process;
    
    our ability to comply with the terms of our cash collateral
order and seek and receive extensions of our ability to use
cash collateral;
    
    our ability to achieve profitability following a
restructuring given housing market and general economic
challenges; and
    
    our ability to retain key employees.
   8




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##### Table of Contents




    
    limiting new arrangements to acquire land (by submitting proposals to increased review);
    
    engaging in bulk sales of land and unsold homes;
    
    reducing the number of unsold homes under construction and limiting and/or curtailing
development activities in any development where we do not expect to deliver homes in
the near future or where development is necessary to retain entitlements or sell land;
    
    renegotiating terms or abandoning our rights under option and land bank contracts;
    
    considering other asset dispositions including the possible sale and/or wind down of
underperforming assets, communities, divisions and joint venture interests; and
    
    pursuing other initiatives designed to monetize our assets.
 Mortgage Joint Venture
  2. Summary of Significant Accounting Policies
 Principles of Consolidation and Basis of Presentation
   Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code
 9




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##### Table of Contents



Professional fees
    
    $
    7.5Write-off of deferred finance costs
    
    
    51.4Write-off of debt premium and discounts
    
    
    11.9Reversal of previously recorded interest expense
    
    
    (2.3
    )Total reorganization items, net
    
    $
    68.5
   Revolving Loan Facility(1)
    
    $
    243.0First Lien Term Loan Facility due 2012(1)
    
    
    199.0Second Lien Term Loan Facility due 2013(1)
    
    
    328.8Senior notes due 2010, at 9%(1)
    
    
    300.0Senior notes
due 2011, at 8 1/4%(1)
    
    
    250.0Senior
subordinated notes due 2012, at 10 3/8%(1)
    
    
    185.0Senior
subordinated notes due 2011, at 7 1/2%(1)
    
    
    125.0Senior
subordinated notes due 2015, at 7 1/2%(1)
    
    
    200.0Senior
Subordinated PIK Notes due 2015, at 14 3/4%(1)
    
    
    22.1Accrued interest on notes payable
    
    
    47.2Accounts payable and other liabilities
    
    
    218.8Obligations for inventory not owned(2)
    
    
    27.2Total liabilities subject to compromise
    
    $
    2,146.1
 
 (1)
    
    See Note 9.(2)
    
    See Note 3.  
    
    impairment assessments of investments in unconsolidated joint ventures, long-lived
assets, including our inventory, and goodwill;
    
    loss exposures associated with the abandonment of our rights under option and/or land
bank contracts, the relinquishment of our rights under certain joint ventures and
obligations under joint venture debt agreements and under performance bonds;
    
    classification of liabilities subject to compromise;
    
    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 in connection
with our homebuilding operations.
  10




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Interim Presentation
  Loss per Common Share
   Revenue Recognition
  Accounting for
the Sales of Real Estate
 Fair Value Disclosures
 Fair Value Measurements
 Level 1
    
    Fair value determined based on quoted prices in active markets for identical assets or liabilities.Level 2
    
    Fair value determined using significant observable inputs either directly or indirectly through
corroboration with market data.Level 3
    
    Fair value determined using significant unobservable inputs, such as pricing models, discounted
cash flows, or similar techniques.
 11




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##### Table of Contents



Fair ValueFinancial Instrument
    
    Hierarchy
    
    Fair ValueAssets:Mortgage loans held for sale
    
    Level 2
    
    $
    11.1Interest rate lock commitments
    
    Level 2
    
    
    0.1Liabilities:Interest rate lock commitments
    
    Level 2
    
    
    (0.1
    )
   Recent Accounting Pronouncements
 Accounting for
Leases
 Applicability of the Assessment of a Buyers
Continuing Investment under FASB Statement No. 66, Accounting for Sales of Real Estate, for Sales
of Condominiums
 The Fair Value Option for Financial
Assets and Financial Liabilities
 Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements  an amendment of Accounting Research Bulletin No. 51
 12




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##### Table of Contents



,
Accounting for Transfers of Financial Assets and Repurchase Financing Transactions Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities )
 Disclosures about Derivative Instruments and
Hedging Activities
  3. Inventory
  March 31, 2008ResidencesHomesites and
    
    
    Completed andLand Under
    
    
    Under
    
    
    Inventory
    
    
    TotalRegion
    
    Deposits
    
    
    Development
    
    
    Construction
    
    
    Not Owned
    
    
    InventoryFlorida
    
    $
    7.0
    
    
    $
    238.3
    
    
    $
    232.9
    
    
    $
    7.9
    
    
    $
    486.1Mid-Atlantic
    
    
    7.9
    
    
    
    14.9
    
    
    
    26.8
    
    
    
    
    
    
    
    49.6Texas
    
    
    14.7
    
    
    
    72.3
    
    
    
    95.9
    
    
    
    3.1
    
    
    
    186.0West
    
    
    16.1
    
    
    
    199.5
    
    
    
    89.2
    
    
    
    14.1
    
    
    
    318.9Total
    
    $
    45.7
    
    
    $
    525.0
    
    
    $
    444.8
    
    
    $
    25.1
    
    
    $
    1,040.6
 December 31, 2007ResidencesHomesites and
    
    
    Completed andLand Under
    
    
    Under
    
    
    Inventory
    
    
    TotalRegion
    
    Deposits
    
    
    Development
    
    
    Construction
    
    
    Not Owned
    
    
    InventoryFlorida
    
    $
    10.2
    
    
    $
    294.7
    
    
    $
    320.1
    
    
    $
    8.1
    
    
    $
    633.1Mid-Atlantic
    
    
    7.9
    
    
    
    21.8
    
    
    
    28.6
    
    
    
    
    
    
    
    58.3Texas
    
    
    15.6
    
    
    
    73.3
    
    
    
    111.9
    
    
    
    3.1
    
    
    
    203.9West
    
    
    23.2
    
    
    
    243.2
    
    
    
    95.3
    
    
    
    14.8
    
    
    
    376.5Total
    
    $
    56.9
    
    
    $
    633.0
    
    
    $
    555.9
    
    
    $
    26.0
    
    
    $
    1,271.8
 13




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##### Table of Contents



Three Months EndedMarch 31,2008
    
    
    2007Interest capitalized, beginning of period
    
    $
    77.8
    
    
    $
    68.7Interest incurred(1)(2)
    
    
    37.3
    
    
    
    27.3Less interest included in:Cost of sales
    
    
    (16.0
    )
    
    
    (20.3
    )Interest expense
    
    
    (20.1
    )
    
    
    (0.1
    )Other adjustments
    
    
    (0.4
    )
    
    
    0.7Interest capitalized, end of period
    
    $
    78.6
    
    
    $
    76.3
 
 (1)
    
    Included in interest incurred is the amortization of deferred finance costs which
totaled $2.8 million and $1.1 million for the three months ended March 31, 2008 and 2007,
respectively.(2)
    
    Had we not filed voluntary petitions for relief under Chapter 11, contractual interest
incurred for the three months ended March 31, 2008 is $58.7 million, a portion of which would have
been capitalized. Interest on our senior and senior subordinated notes stopped accruing upon filing
for Chapter 11. See Note 9.  Financing Transactions under SFAS 66
   14




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##### Table of Contents



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




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##### Table of Contents



Three Months EndedMarch 31,2008
    
    
    2007Impairment charges on active communities:Florida
    
    $
    73.9
    
    
    $
    5.1Mid-Atlantic
    
    
    6.6
    
    
    
    2.1Texas(1)
    
    
    1.0
    
    
    
    0.1West
    
    
    20.2
    
    
    
    0.7101.7
    
    
    
    8.0Write-offs of deposits and abandonment costs:Florida
    
    
    22.1
    
    
    
    0.7Mid-Atlantic
    
    
    0.2
    
    
    
    0.4Texas(1)
    
    
    1.3
    
    
    
    0.1West
    
    
    47.0
    
    
    
    29.970.6
    
    
    
    31.1Inventory impairments and abandonment costs
    
    $
    172.3
    
    
    $
    39.1Remaining carrying value of inventory impaired at end of period
    
    $
    652.0
    
    
    $
    370.8Number of projects impaired during the period
    
    
    246
    
    
    
    91Total number of projects included in inventory and reviewed for impairment
during the period
    
    
    428
    
    
    
    519
 
 (1)
    
    The Texas region excludes the Dallas division, which is classified as a discontinued operation. 4. Transeastern Joint Venture
   The Equity Method of Accounting
for Investments in Common Stock
  16




---



##### Table of Contents



Accounting for Contingencies
   
    
    the Transeastern JV became a wholly-owned subsidiary of
ours by merger into one of our subsidiaries, which became
a guarantor on our credit facilities and note indentures
(the acquisition was accounted for using the purchase
method of accounting and results of operations have been
included in our consolidated results beginning on July 31,
2007);
    
    the senior secured lenders of the Transeastern JV were
repaid in full, including accrued interest (approximately
$400.0 million in cash);
    
    the senior mezzanine lenders to the Transeastern JV
received $20.0 million in aggregate principal amount of
14.75% Senior Subordinated PIK Election Notes due 2015 and
$117.5 million in initial aggregate liquidation preference
of 8% Series A Convertible Preferred PIK Preferred Stock;
    
    the junior mezzanine lenders to the Transeastern JV
received warrants to purchase shares of our common stock
which had an estimated fair value of $8.2 million at
issuance (based on the Black-Scholes option pricing model
and before issuance costs);
    
    we entered into settlement and release agreements with the
senior mezzanine lenders and the junior mezzanine lenders
to the Transeastern JV which released us from our
potential obligations to them; and
    
    we entered into a settlement and mutual release agreement
with Falcone/Ritchie LLC and certain of its affiliates
(the Falcone Entities) concerning the Transeastern JV,
one of which owned 50% of the equity interests in the
Transeastern JV and, among other things, released the
Falcone Entities from claims under the 2005 asset purchase
agreement pursuant to which we acquired our interest in
the Transeastern JV. Pursuant to the settlement agreement,
we remain obligated on certain indemnification
obligations, including, without limitation, certain land
bank arrangements.
  
    
    an amendment to our $800.0 million revolving loan facility, dated January 30, 2007;
    
    a new $200.0 million aggregate principal amount first lien term loan facility; and
    
    a new $300.0 million aggregate principal amount second lien term loan facility.
   
    
    $50.2 million in cash to purchase land under existing land
bank arrangements with the former Transeastern JV partner;
and
    
    $33.5 million in interest and expenses.
   17




---



##### 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
    
    
    10.9Fair value of common stock warrants issued
    
    
    8.2Payment to purchase land under existing land bank arrangements
    
    
    50.2Transaction costs including accrued interest paid to the Senior Lenders
    
    
    33.5Total estimated purchase price
    
    $
    586.8Allocation of purchase consideration:Cash and cash equivalents
    
    $
    10.3Restricted cash
    
    
    28.4Inventory(1)
    
    
    149.8Property and equipment
    
    
    1.0Accounts payable and other liabilities
    
    
    (27.4
    )Customer deposits
    
    
    (1.9
    )Previously accrued loss contingency(2)
    
    
    385.9Additional loss on TE Acquisition(3)
    
    
    40.7$
    586.8
 
 (1)
    
    The fair value of the inventory was determined by estimating future cash flows expected to
result from the use of the asset and its eventual disposition, discounted at a market rate of
interest.(2)
    
    In accordance with SFAS 5 and other authoritative guidance, as of June 30, 2007, we accrued
$385.9 million for settlement of a loss contingency (determined by computing the difference
between the estimated fair value of the consideration paid in connection with the global
settlement less the estimated fair value of the business acquired).(3)
    
    There were no identifiable intangible assets or goodwill associated with the TE Acquisition. 5. Investments in Unconsolidated Joint Ventures
   Accounting by Creditors for Impairment of a Loan
 
 18




---



##### Table of Contents



Engle/Sunbelt Joint Venture
      TOUSA/Kolter Joint Venture
    19




---



##### Table of Contents



Centex/TOUSA at Wellington, LLC
   Layton Lakes Joint Venture
     20




---



##### Table of Contents



Other
   March 31,
    
    
    December 31,2008
    
    
    2007Assets:Cash and cash equivalents
    
    $
    3.6
    
    
    $
    3.2Inventories
    
    
    40.8
    
    
    
    39.0Other assets
    
    
    1.3
    
    
    
    0.9Total assets
    
    $
    45.7
    
    
    $
    43.1Liabilities and equity:Accounts payable and other liabilities
    
    $
    3.7
    
    
    $
    5.1Notes payable
    
    
    19.5
    
    
    
    20.6Equity of:TOUSA, Inc.
    
    
    11.5
    
    
    
    7.9Others
    
    
    11.0
    
    
    
    9.5Total equity
    
    
    22.5
    
    
    
    17.4Total liabilities and equity
    
    $
    45.7
    
    
    $
    43.1
 Three Months ended March 31,2008
    
    
    2007Revenues
    
    $
    2.2
    
    
    $
    16.0Costs and expenses
    
    
    1.9
    
    
    
    16.0Net income
    
    $
    0.3
    
    
    $
    
 6. Other Assets
  March 31,
    
    
    December 31,2008
    
    
    2007Homebuilding:Income taxes receivable
    
    $
    208.6
    
    
    $
    218.4Accounts receivable
    
    
    26.6
    
    
    
    34.7Deferred finance costs, net
    
    
    4.5
    
    
    
    55.8Prepaid expenses
    
    
    21.8
    
    
    
    20.3Other assets
    
    
    14.1
    
    
    
    0.8Total other assets
    
    $
    275.6
    
    
    $
    330.0
  7. Goodwill
  21




---



##### Table of Contents



Goodwill and Other Intangible Assets
  8. Accounts Payable and Other Liabilities
  March 31,
    
    
    December 31,2008
    
    
    2007Homebuilding:Accounts payable
    
    $
    45.3
    
    
    $
    41.8Interest
    
    
    4.0
    
    
    
    48.4Compensation
    
    
    10.6
    
    
    
    14.8Taxes, including income and real estate
    
    
    11.1
    
    
    
    22.6Accrual for unpaid invoices on delivered homes
    
    
    12.0
    
    
    
    27.9Accrued expenses
    
    
    9.5
    
    
    
    90.7Community development district bond obligations
    
    
    29.7
    
    
    
    29.6Obligations related to unconsolidated joint ventures
    
    
    
    
    
    
    74.6Accrued letters of credit expected to be drawn
    
    
    
    
    
    
    43.6Warranty costs
    
    
    4.7
    
    
    
    5.0Deferred revenue
    
    
    2.5
    
    
    
    2.8Total accounts payable and other liabilities(1)
    
    $
    129.4
    
    
    $
    401.8
 
 (1)
    
    Certain accounts payable and other liabilities at March 31, 2008 have
been classified as liabilities subject to compromise (see Note 2). Accounting for Special Assessments and Tax Increment Financing
  22




---



##### Table of Contents



9. Homebuilding and Financial Services Borrowings
 Homebuilding Borrowings
  March 31,
    
    
    December 31,2008
    
    
    2007Revolving Loan Facility
    
    $
    243.0
    
    
    $
    168.5First Lien Term Loan Facility due 2012
    
    
    199.0
    
    
    
    199.0Discount on First Lien Term Loan Facility(1)
    
    
    
    
    
    
    (1.8
    )Second Lien Term Loan Facility due 2013
    
    
    328.8
    
    
    
    317.1Discount on Second Lien Term Loan Facility(1)
    
    
    
    
    
    
    (2.8
    )Senior notes due 2010, at 9%
    
    
    300.0
    
    
    
    300.0Senior notes
due 2011, at 8 1/4%
    
    
    250.0
    
    
    
    250.0Discount on senior notes(1)
    
    
    
    
    
    
    (2.5
    )Senior
subordinated notes due 2012, at 10 3/8%
    
    
    185.0
    
    
    
    185.0Senior
subordinated notes due 2011, at 7 1/2%
    
    
    125.0
    
    
    
    125.0Senior
subordinated notes due 2015, at 7 1/2%
    
    
    200.0
    
    
    
    200.0Premium on senior subordinated notes(1)
    
    
    
    
    
    
    3.7Senior
Subordinated PIK Notes due 2015, at 14 3/4%
    
    
    22.1
    
    
    
    21.3Discount on Senior Subordinated PIK Notes(1)
    
    
    
    
    
    
    (8.7
    )1,852.9
    
    
    
    1,753.8Less: Amounts classified as liabilities subject to compromise (see Note 2)
    
    
    (1,852.9
    )
    
    
    $
    
    
    
    $
    1,753.8
 
 (1) During the three months ended March 31, 2008, we wrote off $11.9 million of
debt premium and discounts related to our debt obligations which have been classified as
liabilities subject to compromise (see Note 2).    Revolving Loan Facility and First and Second Lien Term Loan Facilities
  23




---



##### Table of Contents



Senior Notes and Senior Subordinated Notes
 pari passu pari passu
 Special Interest
  Senior Subordinated PIK Notes
   24




---



##### Table of Contents



Financial Services Borrowings
   10. Income Taxes
 Accounting for Income Taxes Accounting for Uncertainty in Income
Taxes
  25




---



##### Table of Contents



11. Commitments and Contingencies
  Warranty
   Three Months EndedMarch 31,2008
    
    
    2007Accrued warranty costs at January 1
    
    $
    5.0
    
    
    $
    7.4Liability recorded for warranties issued during the period
    
    
    1.4
    
    
    
    2.6Warranty work performed
    
    
    (3.3
    )
    
    
    (2.1
    )Adjustments
    
    
    1.5
    
    
    
    (1.3
    )Accrued warranty costs at March 31
    
    $
    4.6
    
    
    $
    6.6
 Letters of Credit and Performance Bonds
  26




---



##### Table of Contents



Exposure on Abandoned Homesite Option Contracts
  Chapter 11 Cases
  Class Action Lawsuit
      27




---



##### Table of Contents



Proceeding by Official Committee of Unsecured Creditors
       28




---



##### Table of Contents



Vista Lakes
    EMF Fund III, LLC, et al., v. Antonio P. Mon, et al., No. 0845087 (Fla. Cir. Ct.).
  Other Litigation
  Informal Inquiry/Unresolved Staff Comments
 In the Matter of TOUSA, Inc. SEC Inquiry
  29




---



##### Table of Contents



PHMC Settlement
  12. Stockholders (Deficit) Equity
 Convertible PIK Preferred Stock
   Accounting for Registration Payment Arrangements
 Accounting for Convertible Securities with Beneficial
Conversion Features or Contingently Adjustable Conversion Ratios Application of Issue No. 98-5 to Certain Convertible
Instruments
   Earnings
per Share Participating Securities and the Two-Class Method under FASB
Statement No. 128
 Warrants
  30




---



##### Table of Contents



NYSE Delisting
  13. Stock-Based Compensation
   14. Operating and Reporting Segments
 Disclosures About Segments of an Enterprise and Related Information
  Florida
 Mid-Atlantic:
 Texas:
 West:
   31




---



##### Table of Contents



Three Months Ended March 31,2008
    
    
    2007Revenues:Homebuilding:Florida
    
    $
    120.6
    
    
    $
    257.3Mid-Atlantic
    
    
    16.7
    
    
    
    52.2Texas(1)
    
    
    108.4
    
    
    
    149.2West
    
    
    49.6
    
    
    
    102.0Total Homebuilding
    
    
    295.3
    
    
    
    560.7Financial Services
    
    
    5.8
    
    
    
    12.0Total revenues
    
    $
    301.1
    
    
    $
    572.7(Income) loss from unconsolidated joint ventures:Florida
    
    $
    
    
    
    $
    (2.1
    )Mid-Atlantic
    
    
    
    
    
    
    1.9Texas
    
    
    (0.2
    )
    
    
    West
    
    
    (0.1
    )
    
    
    (1.7
    )(0.3
    )
    
    
    (1.9
    )Impairments on unconsolidated joint ventures:Florida
    
    
    0.1
    
    
    
    5.5West
    
    
    0.4
    
    
    
    0.5
    
    
    
    5.5Loss from unconsolidated joint ventures after
impairments
    
    $
    0.2
    
    
    $
    3.6Results of Operations:Homebuilding:Florida
    
    $
    (104.1
    )
    
    $
    23.8Mid-Atlantic
    
    
    (8.4
    )
    
    
    (3.6
    )Texas(1)
    
    
    5.1
    
    
    
    14.3West
    
    
    (75.9
    )
    
    
    (29.6
    )Total Homebuilding
    
    
    (183.3
    )
    
    
    4.9Financial Services
    
    
    (1.2
    )
    
    
    2.7Corporate and unallocated
    
    
    (29.7
    )
    
    
    (98.3
    )Total loss from continuing operations before
reorganization items and income taxes
    
    $
    (214.2
    )
    
    $
    (90.7
    )
 
 (1)
    
    The Texas region excludes the Dallas division, which is classified as a discontinued operation. 32




---



##### Table of Contents



March 31,
    
    
    December 31,2008
    
    
    2007Assets:Homebuilding:Florida
    
    $
    493.7
    
    
    $
    631.3Mid-Atlantic
    
    
    58.1
    
    
    
    73.0Texas(1)
    
    
    208.2
    
    
    
    220.0West
    
    
    325.2
    
    
    
    381.3Assets held for sale(1)
    
    
    4.0
    
    
    
    6.1Financial Services
    
    
    32.4
    
    
    
    36.7Corporate and unallocated
    
    
    431.1
    
    
    
    413.6Total assets
    
    $
    1,552.7
    
    
    $
    1,762.0Investments in Unconsolidated Joint Ventures:Florida
    
    $
    
    
    
    $
    Mid-Atlantic
    
    
    0.1
    
    
    
    0.1Texas
    
    
    9.3
    
    
    
    8.6West
    
    
    
    
    
    
    0.3Total Investments in Unconsolidated Joint Ventures
    
    $
    9.4
    
    
    $
    9.0
 
 (1)
    
    The Texas region excludes the Dallas division, which is classified as a discontinued operation. 15. Discontinued Operations
    16. Summarized Financial Information
  33




---



##### Table of Contents



Consolidated Statement of Financial Condition
March 31, 2008
 Non-TOUSA,
    
    
    Guarantor
    
    
    Guarantor
    
    
    IntercompanyInc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Total(in millions)ASSETSHOMEBUILDING:Cash and cash equivalents
    
    $
    161.4
    
    
    $
    (3.6
    )
    
    $
    
    
    
    $
    
    
    
    $
    157.8Inventory
    
    
    
    
    
    
    1,040.6
    
    
    
    
    
    
    
    
    
    
    
    1,040.6Property and equipment, net
    
    
    2.3
    
    
    
    19.3
    
    
    
    
    
    
    
    
    
    
    
    21.6Investments in
unconsolidated joint
ventures
    
    
    
    
    
    
    9.4
    
    
    
    
    
    
    
    
    
    
    
    9.4Receivables from
unconsolidated joint
ventures, net
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    0.1Investments in/advances to
consolidated subsidiaries
    
    
    783.6
    
    
    
    (349.3
    )
    
    
    (8.0
    )
    
    
    (426.3
    )
    
    
    Other assets
    
    
    240.3
    
    
    
    35.3
    
    
    
    
    
    
    
    
    
    
    
    275.6Goodwill
    
    
    
    
    
    
    11.2
    
    
    
    
    
    
    
    
    
    
    
    11.2Assets held for sale
    
    
    
    
    
    
    4.0
    
    
    
    
    
    
    
    
    
    
    
    4.01,187.6
    
    
    
    767.0
    
    
    
    (8.0
    )
    
    
    (426.3
    )
    
    
    1,520.3FINANCIAL SERVICES:Cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    15.3
    
    
    
    
    
    
    
    15.3Mortgage loans held for sale
    
    
    
    
    
    
    
    
    
    
    11.7
    
    
    
    
    
    
    
    11.7Other assets
    
    
    
    
    
    
    
    
    
    
    5.4
    
    
    
    
    
    
    
    5.4
    
    
    
    
    
    
    
    32.4
    
    
    
    
    
    
    
    32.4Total assets
    
    $
    1,187.6
    
    
    $
    767.0
    
    
    $
    24.4
    
    
    $
    (426.3
    )
    
    $
    1,552.7LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)HOMEBUILDING:Accounts payable and other
liabilities
    
    $
    25.8
    
    
    $
    103.6
    
    
    $
    
    
    
    $
    
    
    
    $
    129.4Customer deposits
    
    
    
    
    
    
    27.5
    
    
    
    
    
    
    
    
    
    
    
    27.5Liabilities associated
with assets held for
sale
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    0.225.8
    
    
    
    131.3
    
    
    
    
    
    
    
    
    
    
    
    157.1FINANCIAL SERVICES:Accounts payable and other
liabilities
    
    
    
    
    
    
    
    
    
    
    6.2
    
    
    
    (0.2
    )
    
    
    6.0Bank borrowings
    
    
    
    
    
    
    
    
    
    
    3.3
    
    
    
    
    
    
    
    3.3
    
    
    
    
    
    
    
    9.5
    
    
    
    (0.2
    )
    
    
    9.3Total liabilities not
subject to compromise
    
    
    25.8
    
    
    
    131.3
    
    
    
    9.5
    
    
    
    (0.2
    )
    
    
    166.4Liabilities subject to
compromise
    
    
    1,921.6
    
    
    
    224.5
    
    
    
    
    
    
    
    
    
    
    
    2,146.1Total stockholders equity
(deficit)
    
    
    (759.8
    )
    
    
    411.2
    
    
    
    14.9
    
    
    
    (426.1
    )
    
    
    (759.8
    )Total
liabilities and
stockholders equity
(deficit)
    
    $
    1,187.6
    
    
    $
    767.0
    
    
    $
    24.4
    
    
    $
    (426.3
    )
    
    $
    1,552.7
 34




---



##### Table of Contents



Consolidated Statement of Financial Condition
December 31, 2007
 Non-TOUSA,
    
    
    Guarantor
    
    
    Guarantor
    
    
    IntercompanyInc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Total(in millions)ASSETSHOMEBUILDING:Cash and cash equivalents
    
    $
    81.3
    
    
    $
    (9.0
    )
    
    $
    
    
    
    $
    
    
    
    $
    72.3Inventory
    
    
    
    
    
    
    1,271.8
    
    
    
    
    
    
    
    
    
    
    
    1,271.8Property and equipment, net
    
    
    3.3
    
    
    
    21.3
    
    
    
    
    
    
    
    
    
    
    
    24.6Investments in
unconsolidated joint
ventures
    
    
    
    
    
    
    9.0
    
    
    
    
    
    
    
    
    
    
    
    9.0Receivables from
unconsolidated joint
ventures, net
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    0.3Investments in/advances to
consolidated subsidiaries
    
    
    989.7
    
    
    
    (372.5
    )
    
    
    (5.5
    )
    
    
    (611.7
    )
    
    
    Other assets
    
    
    287.7
    
    
    
    42.3
    
    
    
    
    
    
    
    
    
    
    
    330.0Goodwill
    
    
    
    
    
    
    11.2
    
    
    
    
    
    
    
    
    
    
    
    11.2Assets held for sale
    
    
    
    
    
    
    6.1
    
    
    
    
    
    
    
    
    
    
    
    6.11,362.0
    
    
    
    980.5
    
    
    
    (5.5
    )
    
    
    (611.7
    )
    
    
    1,725.3FINANCIAL SERVICES:Cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    14.9
    
    
    
    
    
    
    
    14.9Mortgage loans held for sale
    
    
    
    
    
    
    
    
    
    
    15.0
    
    
    
    
    
    
    
    15.0Other assets
    
    
    
    
    
    
    
    
    
    
    6.8
    
    
    
    
    
    
    
    6.8
    
    
    
    
    
    
    
    36.7
    
    
    
    
    
    
    
    36.7Total assets
    
    $
    1,362.0
    
    
    $
    980.5
    
    
    $
    31.2
    
    
    $
    (611.7
    )
    
    $
    1,762.0LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)HOMEBUILDING:Accounts payable and other
liabilities
    
    $
    83.7
    
    
    $
    318.1
    
    
    $
    
    
    
    $
    
    
    
    $
    401.8Customer deposits
    
    
    
    
    
    
    33.9
    
    
    
    
    
    
    
    
    
    
    
    33.9Obligations for inventory
not owned
    
    
    
    
    
    
    32.0
    
    
    
    
    
    
    
    
    
    
    
    32.0Notes payable
    
    
    1,585.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,585.3Bank borrowings
    
    
    168.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    168.5Liabilities associated with
assets held for sale
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    
    
    
    
    0.91,837.5
    
    
    
    384.9
    
    
    
    
    
    
    
    
    
    
    
    2,222.4FINANCIAL SERVICES:Accounts payable and other
liabilities
    
    
    
    
    
    
    
    
    
    
    8.0
    
    
    
    (0.7
    )
    
    
    7.3Bank borrowings
    
    
    
    
    
    
    
    
    
    
    7.8
    
    
    
    
    
    
    
    7.8
    
    
    
    
    
    
    
    15.8
    
    
    
    (0.7
    )
    
    
    15.1Total liabilities not
subject to compromise
    
    
    1,837.5
    
    
    
    384.9
    
    
    
    15.8
    
    
    
    (0.7
    )
    
    
    2,237.5Total stockholders equity
(deficit)
    
    
    (475.5
    )
    
    
    595.6
    
    
    
    15.4
    
    
    
    (611.0
    )
    
    
    (475.5
    )Total liabilities and
stockholders equity
(deficit)
    
    $
    1,362.0
    
    
    $
    980.5
    
    
    $
    31.2
    
    
    $
    (611.7
    )
    
    $
    1,762.0
 35




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##### Table of Contents



Consolidated Statement of Operations
Three Months Ended March 31, 2008
 Non-TOUSA,
    
    
    Guarantor
    
    
    Guarantor
    
    
    IntercompanyInc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Total(in millions)HOMEBUILDING:Revenues
    
    $
    
    
    
    $
    295.3
    
    
    $
    
    
    
    $
    
    
    
    $
    295.3Cost of sales
    
    
    
    
    
    
    435.2
    
    
    
    
    
    
    
    
    
    
    
    435.2Gross loss
    
    
    
    
    
    
    (139.9
    )
    
    
    
    
    
    
    
    
    
    
    (139.9
    )Selling, general and
administrative expenses
    
    
    11.7
    
    
    
    44.1
    
    
    
    
    
    
    
    (1.6
    )
    
    
    54.2Income from unconsolidated joint
ventures, net
    
    
    
    
    
    
    (0.3
    )
    
    
    
    
    
    
    
    
    
    
    (0.3
    )Impairment of investments in and
receivables from unconsolidated
joint ventures
    
    
    
    
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    0.5Interest expense
    
    
    20.0
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    20.1Other (income) expenses, net
    
    
    185.1
    
    
    
    (2.4
    )
    
    
    
    
    
    
    (184.1
    )
    
    
    (1.4
    )Homebuilding pretax income
(loss)
    
    
    (216.8
    )
    
    
    (181.9
    )
    
    
    
    
    
    
    185.7
    
    
    
    (213.0
    )FINANCIAL SERVICES:Revenues
    
    
    
    
    
    
    
    
    
    
    7.4
    
    
    
    (1.6
    )
    
    
    5.8Expenses
    
    
    
    
    
    
    
    
    
    
    7.8
    
    
    
    (0.8
    )
    
    
    7.0Financial Services pretax loss
    
    
    
    
    
    
    
    
    
    
    (0.4
    )
    
    
    (0.8
    )
    
    
    (1.2
    )Income (loss) from continuing
operations before reorganization
items and taxes
    
    
    (216.8
    )
    
    
    (181.9
    )
    
    
    (0.4
    )
    
    
    184.9
    
    
    
    (214.2
    )Reorganization items, net
    
    
    68.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68.5Loss from continuing
operations, net of taxes
    
    
    (285.3
    )
    
    
    (181.9
    )
    
    
    (0.4
    )
    
    
    184.9
    
    
    
    (282.7
    )Discontinued operations:Loss from discontinued operations
    
    
    
    
    
    
    (2.6
    )
    
    
    
    
    
    
    
    
    
    
    (2.6
    )Provision (benefit) for income
taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss from discontinued
operations, net of taxes
    
    
    
    
    
    
    (2.6
    )
    
    
    
    
    
    
    
    
    
    
    (2.6
    )Net loss
    
    
    (285.3
    )
    
    
    (184.5
    )
    
    
    (0.4
    )
    
    
    184.9
    
    
    
    (285.3
    )Dividends and accretion of
discount on preferred stock
    
    
    2.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.7Net loss available to common
stockholders
    
    $
    (288.0
    )
    
    $
    (184.5
    )
    
    $
    (0.4
    )
    
    $
    184.9
    
    
    $
    (288.0
    )
 36




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##### Table of Contents



Consolidated Statement of Operations
Three Months Ended March 31, 2007
 Non-TOUSA,
    
    
    Guarantor
    
    
    Guarantor
    
    
    IntercompanyInc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Total(in millions)HOMEBUILDING:Revenues
    
    $
    
    
    
    $
    560.7
    
    
    $
    
    
    
    $
    
    
    
    $
    560.7Cost of sales
    
    
    
    
    
    
    480.8
    
    
    
    
    
    
    
    
    
    
    
    480.8Gross profit
    
    
    
    
    
    
    79.9
    
    
    
    
    
    
    
    
    
    
    
    79.9Selling, general and
administrative expenses
    
    
    21.7
    
    
    
    72.4
    
    
    
    
    
    
    
    (2.7
    )
    
    
    91.4Income from unconsolidated
joint ventures, net
    
    
    
    
    
    
    (1.9
    )
    
    
    
    
    
    
    
    
    
    
    (1.9
    )Impairment of investments
    
    
    
    
    
    
    5.5
    
    
    
    
    
    
    
    
    
    
    
    5.5in and receivables from
unconsolidated joint
venturesProvision for settlement of
loss contingency
    
    
    78.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    78.9Interest expense
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    0.1Other (income) expenses, net
    
    
    (6.1
    )
    
    
    8.3
    
    
    
    
    
    
    
    (2.9
    )
    
    
    (0.7
    )Homebuilding pretax
income (loss)
    
    
    (94.5
    )
    
    
    (4.5
    )
    
    
    
    
    
    
    5.6
    
    
    
    (93.4
    )FINANCIAL SERVICES:Revenues
    
    
    
    
    
    
    
    
    
    
    14.7
    
    
    
    (2.7
    )
    
    
    12.0Expenses
    
    
    
    
    
    
    
    
    
    
    11.1
    
    
    
    (1.8
    )
    
    
    9.3Financial Services
pretax income (loss)
    
    
    
    
    
    
    
    
    
    
    3.6
    
    
    
    (0.9
    )
    
    
    2.7Income (loss) from
continuing operations
before reorganization items
and taxes
    
    
    (94.5
    )
    
    
    (4.5
    )
    
    
    3.6
    
    
    
    4.7
    
    
    
    (90.7
    )Provision (benefit) for
income taxes
    
    
    (28.5
    )
    
    
    (1.6
    )
    
    
    1.6
    
    
    
    
    
    
    
    (28.5
    )Income (loss) from
continuing operations, net
of taxes
    
    
    (66.0
    )
    
    
    (2.9
    )
    
    
    2.0
    
    
    
    4.7
    
    
    
    (62.2
    )Discontinued operations:Loss from discontinued
operations
    
    
    
    
    
    
    (5.9
    )
    
    
    
    
    
    
    
    
    
    
    (5.9
    )Benefit for income taxes
    
    
    
    
    
    
    (2.1
    )
    
    
    
    
    
    
    
    
    
    
    (2.1
    )Loss from discontinued
operations, net of taxes
    
    
    
    
    
    
    (3.8
    )
    
    
    
    
    
    
    
    
    
    
    (3.8
    )Net income (loss)
    
    
    (66.0
    )
    
    
    (6.7
    )
    
    
    2.0
    
    
    
    4.7
    
    
    
    (66.0
    )Dividends and accretion of
discount on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
available to common
stockholders
    
    $
    (66.0
    )
    
    $
    (6.7
    )
    
    $
    2.0
    
    
    $
    4.7
    
    
    $
    (66.0
    )
 37




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##### Table of Contents



Consolidated Statement of Cash Flows
Three Months Ended March 31, 2008
 Non-TOUSA,
    
    
    Guarantor
    
    
    Guarantor
    
    
    IntercompanyInc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Total(in millions)Net cash
provided by (used
in) operating
activities
    
    $
    (182.1
    )
    
    $
    28.6
    
    
    $
    3.4
    
    
    $
    185.4
    
    
    $
    35.3Cash flows from
investing
activities:Net additions to
property and
equipment
    
    
    0.5
    
    
    
    (0.5
    )
    
    
    
    
    
    
    
    
    
    
    Investments in
unconsolidated
joint ventures
    
    
    
    
    
    
    (0.5
    )
    
    
    
    
    
    
    
    
    
    
    (0.5
    )Net cash
provided by (used
in) investing
activities
    
    
    0.5
    
    
    
    (1.0
    )
    
    
    
    
    
    
    
    
    
    
    (0.5
    )Cash flows from
financing
activities:Net borrowings from
revolving credit
facilities
    
    
    31.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31.5Net repayments of
Financial Services
bank borrowings
    
    
    
    
    
    
    
    
    
    
    (4.5
    )
    
    
    
    
    
    
    (4.5
    )Payments for
deferred financing
costs
    
    
    (2.9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.9
    )Increase (decrease)
in intercompany
transactions
    
    
    206.1
    
    
    
    (23.2
    )
    
    
    2.5
    
    
    
    (185.4
    )
    
    
    Net cash
provided by (used
in) financing
activities
    
    
    234.7
    
    
    
    (23.2
    )
    
    
    (2.0
    )
    
    
    (185.4
    )
    
    
    24.1Net cash
provided by
continuing
operations
    
    
    53.1
    
    
    
    4.4
    
    
    
    1.4
    
    
    
    
    
    
    
    58.9Net cash used in
discontinued
operations
    
    
    
    
    
    
    (1.2
    )
    
    
    
    
    
    
    
    
    
    
    (1.2
    )Increase in
cash and cash
equivalents
    
    
    53.1
    
    
    
    3.2
    
    
    
    1.4
    
    
    
    
    
    
    
    57.7Cash and cash
equivalents at
beginning of period
    
    
    79.1
    
    
    
    (11.9
    )
    
    
    9.3
    
    
    
    
    
    
    
    76.5Cash and cash
equivalents at end
of period
    
    $
    132.2
    
    
    $
    (8.7
    )
    
    $
    10.7
    
    
    $
    
    
    
    $
    134.2
 38




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##### Table of Contents



Consolidated Statement of Cash Flows
Three Months Ended March 31, 2007
 Non-TOUSA,
    
    
    Guarantor
    
    
    Guarantor
    
    
    IntercompanyInc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Total(in millions)Net cash
provided by (used
in) operating
activities
    
    $
    (47.7
    )
    
    $
    (15.4
    )
    
    $
    6.0
    
    
    $
    4.7
    
    
    $
    (52.4
    )Cash flows from
investing
activities:Net additions to
property and
equipment
    
    
    (0.3
    )
    
    
    (2.9
    )
    
    
    (0.1
    )
    
    
    
    
    
    
    (3.3
    )Investments in
unconsolidated
joint ventures
    
    
    
    
    
    
    (15.8
    )
    
    
    
    
    
    
    
    
    
    
    (15.8
    )Capital
distributions from
unconsolidated
joint ventures
    
    
    
    
    
    
    2.7
    
    
    
    
    
    
    
    
    
    
    
    2.7Net cash used
in investing
activities
    
    
    (0.3
    )
    
    
    (16.0
    )
    
    
    (0.1
    )
    
    
    
    
    
    
    (16.4
    )Cash flows from
financing
activities:Net borrowings from
revolving credit
facilities
    
    
    50.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50.0Net repayments of
Financial Services
bank borrowings
    
    
    
    
    
    
    
    
    
    
    (5.2
    )
    
    
    
    
    
    
    (5.2
    )Payments for
deferred financing
costs
    
    
    (2.0
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.0
    )Increase (decrease)
in intercompany
transactions
    
    
    (40.7
    )
    
    
    45.7
    
    
    
    (0.3
    )
    
    
    (4.7
    )
    
    
    Net cash
provided by (used
in) financing
activities
    
    
    7.3
    
    
    
    45.7
    
    
    
    (5.5
    )
    
    
    (4.7
    )
    
    
    42.8Net cash
provided by (used
in) continuing
operations
    
    
    (40.7
    )
    
    
    14.3
    
    
    
    0.4
    
    
    
    
    
    
    
    (26.0
    )Net cash provided
by discontinued
operations
    
    
    
    
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    0.5Increase
(decrease) in cash
and cash
equivalents
    
    
    (40.7
    )
    
    
    14.8
    
    
    
    0.4
    
    
    
    
    
    
    
    (25.5
    )Cash and cash
equivalents at
beginning of period
    
    
    50.6
    
    
    
    (3.2
    )
    
    
    6.8
    
    
    
    
    
    
    
    54.2Cash and cash
equivalents at end
of period
    
    $
    9.9
    
    
    $
    11.6
    
    
    $
    7.2
    
    
    $
    
    
    
    $
    28.7
 39




---



##### Table of Contents



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




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##### Table of Contents



Recent Developments
 Chapter 11 Cases
    41




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##### Table of Contents



http://www.tousa.com/reorg
  
    
    our ability to generate and maintain adequate cash;
    
    the cost, duration and outcome of the restructuring process;
    
    our ability to comply with the terms of our cash collateral
order and seek and receive extensions of our ability to use
cash collateral;
    
    our ability to achieve profitability following a
restructuring given housing market and general economic
challenges; and
    
    our ability to retain key employees.
   42




---



##### Table of Contents




    
    limiting new arrangements to acquire land (by submitting proposals to increased review);
    
    engaging in bulk sales of land and unsold homes;
    
    reducing the number of unsold homes under construction and limiting and/or curtailing
development activities in any development where we do not expect to deliver homes in
the near future or where development is necessary to retain entitlements or sell land;
    
    renegotiating terms or abandoning our rights under option and land bank contracts;
    
    considering other asset dispositions including the possible sale and/or wind down
of underperforming assets, communities, divisions and joint venture interests and;
    
    pursuing other initiatives designed to monetize our assets.
  Mortgage Joint Venture
  NYSE Delisting
  Sale of Dallas/Fort Worth Operations
  Informal Inquiry/Unresolved Staff Comments
 In the Matter of TOUSA, Inc. SEC Inquiry,
 43




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##### Table of Contents



Total Controlled Homesites by our Homebuilding Operations (Including Joint Ventures)
  March 31, 2008
    
    
    December 31, 2007Total
    
    
    
    
    
    
    
    
    
    
    TotalOwned
    
    
    Optioned
    
    
    Controlled
    
    
    Owned
    
    
    Optioned
    
    
    ControlledRegion:Florida
    
    
    8,200
    
    
    
    300
    
    
    
    8,500
    
    
    
    8,600
    
    
    
    600
    
    
    
    9,200Mid-Atlantic
    
    
    400
    
    
    
    1,100
    
    
    
    1,500
    
    
    
    400
    
    
    
    800
    
    
    
    1,200Texas(1)
    
    
    2,300
    
    
    
    3,600
    
    
    
    5,900
    
    
    
    2,500
    
    
    
    4,000
    
    
    
    6,500West
    
    
    9,900
    
    
    
    400
    
    
    
    10,300
    
    
    
    9,900
    
    
    
    5,400
    
    
    
    15,300Continuing operations
    
    
    20,800
    
    
    
    5,400
    
    
    
    26,200
    
    
    
    21,400
    
    
    
    10,800
    
    
    
    32,200Discontinued operations(1)
    
    
    100
    
    
    
    
    
    
    
    100
    
    
    
    100
    
    
    
    100
    
    
    
    200Total consolidated homesites
    
    
    20,900
    
    
    
    5,400
    
    
    
    26,300
    
    
    
    21,500
    
    
    
    10,900
    
    
    
    32,400Unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,500
    
    
    
    1,100
    
    
    
    3,600Combined total
    
    
    20,900
    
    
    
    5,400
    
    
    
    26,300
    
    
    
    24,000
    
    
    
    12,000
    
    
    
    36,000
 
 (1)
    
    The Texas region excludes the
Dallas/Fort Worth division, which is classified as a discontinued operation.  Residences Completed
    
    
    Homesites Finished
    
    
    Raw Land Held for
    
    
    Total Consolidatedor Under Construction
    
    
    or Under Construction
    
    
    Future Development
    
    
    Homesites3/31/08
    
    
    12/31/07
    
    
    3/31/08
    
    
    12/31/07
    
    
    3/31/08
    
    
    12/31/07
    
    
    3/31/08
    
    
    12/31/07Region:Florida
    
    
    1,100
    
    
    
    1,400
    
    
    
    6,600
    
    
    
    6,600
    
    
    
    500
    
    
    
    600
    
    
    
    8,200
    
    
    
    8,600Mid-Atlantic
    
    
    100
    
    
    
    100
    
    
    
    200
    
    
    
    300
    
    
    
    100
    
    
    
    
    
    
    
    400
    
    
    
    400Texas(1)
    
    
    500
    
    
    
    700
    
    
    
    1,400
    
    
    
    1,400
    
    
    
    400
    
    
    
    400
    
    
    
    2,300
    
    
    
    2,500West
    
    
    600
    
    
    
    700
    
    
    
    2,600
    
    
    
    2,500
    
    
    
    6,700
    
    
    
    6,700
    
    
    
    9,900
    
    
    
    9,900Continuing operations
    
    
    2,300
    
    
    
    2,900
    
    
    
    10,800
    
    
    
    10,800
    
    
    
    7,700
    
    
    
    7,700
    
    
    
    20,800
    
    
    
    21,400Discontinued
operations(1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    100
    
    
    
    100
    
    
    
    100Total
    
    
    2,300
    
    
    
    2,900
    
    
    
    10,800
    
    
    
    10,800
    
    
    
    7,800
    
    
    
    7,800
    
    
    
    20,900
    
    
    
    21,500
 
 (1)
    
    The Texas region excludes the
Dallas/Fort Worth division, which is
classified as a discontinued operation.    44




---



##### Table of Contents



Homebuilding Operations
      Financial Services Operations
  45




---



##### Table of Contents



Critical Accounting Policies
  Impairment of Long-Lived Assets
 Accounting
for the Impairment or Disposal of Long-Lived Assets
   46




---



##### Table of Contents



Financial Reporting Under SOP 90-7
 Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code
  Results of Operations  Consolidated
 Three Months Ended March 31, 2008 Compared to Three Months Ended March 31, 2007
   47




---



##### Table of Contents



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




---



##### Table of Contents



Net Sales Orders and Homes in Backlog (Unconsolidated Joint Ventures)
   Financial Services
   Discontinued Operations
  Reportable Segments
 Disclosures About Segments of an Enterprise and Related
Information
 49




---



##### Table of Contents



Homebuilding Operations
  Florida:
 Mid-Atlantic:
 Texas:
 West:
 Selected Homebuilding Operations and Financial Data
  Three Months Ended March 31,2008
    
    
    2007Homebuilding revenues:Florida:Sales of homes
    
    $
    118.9
    
    
    $
    256.3Sales of land
    
    
    1.7
    
    
    
    1.0Total Florida
    
    
    120.6
    
    
    
    257.3Mid-Atlantic:Sales of homes
    
    
    14.5
    
    
    
    52.2Sales of land
    
    
    2.2
    
    
    
    Total Mid-Atlantic
    
    
    16.7
    
    
    
    52.2Texas (1):Sales of homes (1)
    
    
    107.9
    
    
    
    146.9Sales of land (1)
    
    
    0.5
    
    
    
    2.3Total Texas (1)
    
    
    108.4
    
    
    
    149.2West:Sales of homes
    
    
    49.6
    
    
    
    102.0Sales of land
    
    
    
    
    
    
    Total West
    
    
    49.6
    
    
    
    102.0Total homebuilding revenues
    
    $
    295.3
    
    
    $
    560.7
 
 (1)
    
    The Texas region excludes the Dallas division, which is
classified as a discontinued operation. Three Months Ended March 31,2008
    
    
    2007Results of Operations:Homebuilding:Florida
    
    $
    (104.1
    )
    
    $
    23.8Mid-Atlantic
    
    
    (8.4
    )
    
    
    (3.6
    )Texas (1)
    
    
    5.1
    
    
    
    14.3West
    
    
    (75.9
    )
    
    
    (29.6
    )Total Homebuilding
    
    
    (183.3
    )
    
    
    4.9Financial Services
    
    
    (1.2
    )
    
    
    2.7Corporate and unallocated
    
    
    (29.7
    )
    
    
    (98.3
    )Total loss from continuing operations
before reorganization items and taxes
    
    $
    (214.2
    )
    
    $
    (90.7
    )
 
 (1)
    
    The Texas region excludes the Dallas division, which is
classified as a discontinued operation. 50




---



##### Table of Contents



Three Months EndedMarch 31,2008
    
    
    2007Impairment charges on active communities:Florida
    
    $
    73.9
    
    
    $
    5.1Mid-Atlantic
    
    
    6.6
    
    
    
    2.1Texas(1)
    
    
    1.0
    
    
    
    0.1West
    
    
    20.2
    
    
    
    0.7101.7
    
    
    
    8.0Write-offs of deposits and abandonment costs:Florida
    
    
    22.1
    
    
    
    0.7Mid-Atlantic
    
    
    0.2
    
    
    
    0.4Texas(1)
    
    
    1.3
    
    
    
    0.1West
    
    
    47.0
    
    
    
    29.970.6
    
    
    
    31.1Inventory impairments and abandonment costs
    
    $
    172.3
    
    
    $
    39.1Remaining carrying value of inventory impaired at end of period
    
    $
    652.0
    
    
    $
    370.8Number of projects impaired during the period
    
    
    246
    
    
    
    91Total number of projects included in inventory and reviewed for impairment
during the period
    
    
    428
    
    
    
    519
 
 (1)
    
    The Texas region excludes the Dallas division, which is classified as a discontinued operation. Three Months Ended March 31,2008
    
    
    2007Deliveries:
    
    Homes
    
    
    $
    
    
    Homes
    
    
    $Consolidated:Florida (2)
    
    
    467
    
    
    $
    118.9
    
    
    
    720
    
    
    $
    256.3Mid-Atlantic
    
    
    46
    
    
    
    14.5
    
    
    
    152
    
    
    
    52.2Texas (1)
    
    
    424
    
    
    
    107.9
    
    
    
    572
    
    
    
    146.9West
    
    
    182
    
    
    
    49.6
    
    
    
    274
    
    
    
    102.0Continuing operations
    
    
    1,119
    
    
    
    290.9
    
    
    
    1,718
    
    
    
    557.4Discontinued operations (1)
    
    
    1
    
    
    
    0.2
    
    
    
    113
    
    
    
    27.5Total
    
    
    1,120
    
    
    
    291.1
    
    
    
    1,831
    
    
    
    584.9Unconsolidated joint ventures:Florida (excluding
Transeastern)
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    0.9Transeastern (2)
    
    
    
    
    
    
    
    
    
    
    279
    
    
    
    73.0Mid-Atlantic
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    0.3West (3)
    
    
    
    
    
    
    
    
    
    
    318
    
    
    
    101.2Total unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    601
    
    
    
    175.4Combined total
    
    
    1,120
    
    
    $
    291.1
    
    
    
    2,432
    
    
    $
    760.3
 
 (1)
    
    The Texas region excludes the Dallas division, which is classified as a discontinued operation.(2)
    
    The results of operations for Transeastern for the three months ended March 31, 2008 have been included in our consolidated results.
Results of operations for the three months ended March 31, 2007 are included in the results for the unconsolidated joint ventures. See Note 4 of the
notes to the unaudited consolidated financial statements.(3)
    
    We have excluded the results of the Engle/Sunbelt joint venture from our unconsolidated joint venture results for the three months ended
March 31, 2008 due to the settlement agreement reached in 2008. See Note 5 of the notes to the unaudited consolidated financial statements. 51




---



##### Table of Contents



Three Months Ended March 31,2008
    
    
    2007Net Sales Orders(1):
    
    Homes
    
    
    $
    
    
    Homes
    
    
    $Consolidated:Florida (3)
    
    
    333
    
    
    $
    51.9
    
    
    
    598
    
    
    $
    217.3Mid-Atlantic
    
    
    87
    
    
    
    25.9
    
    
    
    221
    
    
    
    81.6Texas (2)
    
    
    400
    
    
    
    101.7
    
    
    
    658
    
    
    
    164.8West
    
    
    167
    
    
    
    42.8
    
    
    
    253
    
    
    
    80.8Continuing operations
    
    
    987
    
    
    
    222.3
    
    
    
    1,730
    
    
    
    544.5Discontinued operations (2)
    
    
    7
    
    
    
    0.6
    
    
    
    71
    
    
    
    19.3Total
    
    
    994
    
    
    
    222.9
    
    
    
    1,801
    
    
    
    563.8Unconsolidated joint ventures:Florida (excluding
Transeastern)
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    0.9Transeastern (3)
    
    
    
    
    
    
    
    
    
    
    36
    
    
    
    (7.3
    )Mid-Atlantic
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    0.7West (4)
    
    
    
    
    
    
    
    
    
    
    243
    
    
    
    63.9Total unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    286
    
    
    
    58.2Combined total
    
    
    994
    
    
    $
    222.9
    
    
    
    2,087
    
    
    $
    622.0
 
 (1)
    
    Net of cancellations.(2)
    
    The Texas region excludes the Dallas division, which is classified as a discontinued operation.(3)
    
    The results of operations for Transeastern for the three months ended March 31, 2008 have been included in our consolidated results.
Results of operations for the three months ended March 31, 2007 are included in the results for the unconsolidated joint ventures. See Note 4 of the
notes to the unaudited consolidated financial statements.(4)
    
    We have excluded the results of the Engle/Sunbelt joint venture from our unconsolidated joint venture results for the three months ended
March 31, 2008 due to the settlement agreement reached in 2008. See Note 5 of the notes to the unaudited consolidated financial statements. Three Months Ended March 31,2008
    
    
    2007Sales Backlog:
    
    Homes
    
    
    $
    
    
    Avg. Price
    
    
    Homes
    
    
    $
    
    
    Avg. PriceConsolidated:Florida (2)
    
    
    1,196
    
    
    $
    368.8
    
    
    $
    308
    
    
    
    2,106
    
    
    $
    812.8
    
    
    $
    386Mid-Atlantic
    
    
    121
    
    
    
    39.5
    
    
    $
    326
    
    
    
    275
    
    
    
    109.9
    
    
    $
    400Texas (1) (3)
    
    
    525
    
    
    
    148.5
    
    
    $
    283
    
    
    
    1,060
    
    
    
    291.5
    
    
    $
    275West
    
    
    405
    
    
    
    110.9
    
    
    $
    274
    
    
    
    440
    
    
    
    168.8
    
    
    $
    384Continuing operations
    
    
    2,247
    
    
    
    667.7
    
    
    $
    297
    
    
    
    3,881
    
    
    
    1,383.0
    
    
    $
    356Discontinued operations
(1)
    
    
    9
    
    
    
    1.2
    
    
    $
    133
    
    
    
    180
    
    
    
    46.9
    
    
    $
    261Consolidated total
    
    
    2,256
    
    
    
    668.9
    
    
    $
    296
    
    
    
    4,061
    
    
    
    1,429.9
    
    
    $
    352Unconsolidated joint
ventures:Florida (excluding
Transeastern)
    
    
    
    
    
    
    
    
    
    $
    
    
    
    
    47
    
    
    
    14.2
    
    
    $
    302Transeastern (2)
    
    
    
    
    
    
    
    
    
    $
    
    
    
    
    454
    
    
    
    114.0
    
    
    $
    251Mid-Atlantic
    
    
    
    
    
    
    
    
    
    $
    
    
    
    
    5
    
    
    
    1.8
    
    
    $
    351West (4)
    
    
    
    
    
    
    
    
    
    $
    
    
    
    
    378
    
    
    
    118.5
    
    
    $
    314Total unconsolidated joint
ventures
    
    
    
    
    
    
    
    
    
    $
    
    
    
    
    884
    
    
    
    248.5
    
    
    $
    281Combined total
    
    
    2,256
    
    
    $
    668.9
    
    
    $
    296
    
    
    
    4,945
    
    
    $
    1,678.4
    
    
    $
    339
 52




---



##### Table of Contents



(1)
    
    The Texas region excludes the Dallas division, which is classified as a discontinued operation.(2)
    
    The results of operations for Transeastern for the three months ended March 31, 2008 have been included in our consolidated results. Results of
operations for the three months ended March 31, 2007 are included in the results for the unconsolidated joint ventures. See Note 4 of the notes to the unaudited
consolidated financial statements.(3)
    
    Contracts with a third-party that marketed homes in the United Kingdom included in backlog at March 31, 2008 were cancelled in June 2008. These
contracts were for 511 homes representing $115.6 million of revenue.(4)
    
    We have excluded the results of the Engle/Sunbelt joint venture from our unconsolidated joint venture results for the three months ended March 31,
2008 due to the settlement agreement reached in 2008. See Note 5 of the notes to the unaudited consolidated financial statements. Three Months Ended March 31,2008
    
    
    2007Cancellation rates:Consolidated:Florida
    
    
    43
    %
    
    
    30
    %Mid-Atlantic
    
    
    29
    %
    
    
    17
    %Texas
    
    
    28
    %
    
    
    25
    %West
    
    
    40
    %
    
    
    38
    %Continuing Operations
    
    
    36
    %
    
    
    28
    %
 Three Months Ended March 31,2008
    
    
    2007Sales
    
    
    
    
    
    
    SalesAverage Price:
    
    Deliveries
    
    
    Orders
    
    
    Deliveries
    
    
    OrdersConsolidated:Florida (2)
    
    $
    255
    
    
    $
    156
    
    
    $
    356
    
    
    $
    363Mid-Atlantic
    
    $
    315
    
    
    $
    297
    
    
    $
    344
    
    
    $
    369Texas (1)
    
    $
    255
    
    
    $
    254
    
    
    $
    257
    
    
    $
    250West
    
    $
    272
    
    
    $
    256
    
    
    $
    372
    
    
    $
    319Continuing operations
    
    $
    260
    
    
    $
    225
    
    
    $
    324
    
    
    $
    315Discontinued operations (1)
    
    $
    242
    
    
    $
    98
    
    
    $
    244
    
    
    $
    272Consolidated total
    
    $
    260
    
    
    $
    224
    
    
    $
    319
    
    
    $
    313Unconsolidated joint ventures:Florida (excluding Transeastern)
    
    $
    
    
    
    $
    
    
    
    $
    291
    
    
    $
    229Transeastern (2)
    
    $
    
    
    
    $
    
    
    
    $
    262
    
    
    $
    (202
    )Mid-Atlantic
    
    $
    
    
    
    $
    
    
    
    $
    281
    
    
    $
    244West (3)
    
    $
    
    
    
    $
    
    
    
    $
    318
    
    
    $
    263Total unconsolidated joint ventures
    
    $
    
    
    
    $
    
    
    
    $
    292
    
    
    $
    204Combined total
    
    $
    260
    
    
    $
    224
    
    
    $
    313
    
    
    $
    298
 
 (1)
    
    The Texas region excludes the Dallas division, which is classified as a discontinued operation.(2)
    
    The results of operations for Transeastern for the three months ended March 31, 2008 have been included in our consolidated results. Results of
operations for the three months ended March 31, 2007 are included in the results for the unconsolidated joint ventures. See Note 4 of the notes to the unaudited
consolidated financial statements.(3)
    
    We have excluded the results of the Engle/Sunbelt joint venture from our unconsolidated joint venture results for the three months ended March
31, 2008 due to the settlement agreement reached in 2008. See Note 5 of the notes to the unaudited consolidated financial statements. Three Months Ended March 31, 2008 compared to Three Months Ended March 31, 2007
 Florida:
 53




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##### Table of Contents



Mid-Atlantic:
    Texas:
   54




---



##### Table of Contents



West:
    Financial Services Operations
  Three Months EndedMarch 31,2008
    
    
    2007Revenues
    
    $
    5.8
    
    
    $
    12.0Expenses
    
    
    7.0
    
    
    
    9.3Financial Services pretax income (loss)
    
    $
    (1.2
    )
    
    $
    2.7
 Seasonality
  FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
 Sources and Uses of Cash
     55




---



##### Table of Contents



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




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##### Table of Contents



Refunds of Federal & State Income Taxes
  Financing Activities
    57




---



##### Table of Contents



Revolving Loan Facility and First and Second Lien Term Loan Facilities
   Senior Notes and Senior Subordinated Notes
  pari passu pari passu
 58




---



##### Table of Contents



Senior Subordinated PIK Notes
     Financial Services Borrowings
   Liquidity Needs
  59




---



##### Table of Contents



http://www.tousa.com/reorg
 Off Balance Sheet Arrangements
 Land and Homesite Option Contracts
  60




---



##### Table of Contents



Investments in Unconsolidated Joint Ventures
  61




---



##### Table of Contents



Accounting by Creditors for Impairment of a Loan
 Engle/Sunbelt Joint Venture
      TOUSA/Kolter Joint Venture
  62




---



##### Table of Contents



Centex/TOUSA at Wellington, LLC
   Layton Lakes Joint Venture
  63




---



##### Table of Contents



Other
  DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
  
    
    our expectations regarding population growth and median income growth trends and
their impact on future housing demand in our markets;
    
    our expectation regarding the impact of geographic and customer diversification;
    
    our expectations regarding successful implementation of our asset management
strategy and its impact on our business;
    
    our expectations regarding future land sales;
    
    our belief regarding growth opportunities within our financial services business;
    
    our estimate that we have adequate financial resources to meet our current and
anticipated working capital, including our debt service payments, and land
acquisition and development needs;
    
    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;
 64




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##### Table of Contents




    
    our expectations regarding our option contracts, investments in land development
joint ventures;
    
    our expectations regarding the housing market in 2008 and beyond; and
    
    our expectations regarding our use of cash in operations; and
   
    
    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;
    
    the risks and uncertainties associated with our Chapter 11 cases, including our ability to
successfully reorganize and emerge from Chapter 11;
    
    a long period of operating under Chapter 11 may harm our business;
    
    we may not be able to obtain confirmation of our Chapter 11 plan;
    
    operating under the Bankruptcy Code may restrict our ability to pursue our business strategies;
    
    our debt instruments include restrictive and financial covenants that limit our operating
flexibility;
    
    our ability to attract, motivate and retain key and essential personnel is impacted by the
Bankruptcy Code which limits our ability to implement a retention program or take other
measures intended to motivate employees to remain with us;
    
    we require a significant amount of cash, which may not be available to us;
    
    our ability to confirm or consummate a plan of reorganization;
    
    financial results that may be volatile and may reflect historical trends;
    
    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 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;
    
    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 enter successfully into, utilize, and recognize the anticipated benefits of,
joint ventures and option contracts;
    
    a further decline in the value of our land and home inventories;
    
    an increase in the cost of, or shortages in the availability of, qualified labor and materials;
    
    our ability to dispose successfully of developed properties or undeveloped land or homesites
at expected prices and within anticipated time frames;
 65




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
    
    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; and
    
    a change in ownership of our stock, as defined in Section
382 of the Internal Revenue Code, which would limit our
ability to receive anticipated income tax refunds.
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
 .
 Changes In Internal Control
  
    
    Our Chapter 11 proceedings have had a significant
impact on our business processes and internal control over
financial reporting related to the proper separation and
payment of pre-petition and post-petition obligations and
the preparation of unaudited consolidated financial
statements reflecting the accounting required for the
restructuring activities and reorganization expenses
resulting from the Chapter 11 proceedings. Management
continues to take actions necessary to address the
resources, processes and controls related to these
restructuring activities, while maintaining controls over
routine daily operations.
 66




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1.
    
    LEGAL PROCEEDINGS
 Chapter 11
 Chapter 11 Cases
  Class Action Lawsuit
      Proceeding by Official Committee of Unsecured Creditors
  67




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68




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Vista Lakes
    EMF Fund III, LLC, et al., v. Antonio P. Mon, et al., No. 0845087 (Fla. Cir. Ct.).
  Other Litigation
  
 ITEM 1A. RISK FACTORS
 Set forth below is a discussion of the material changes in our risk factors as previously
disclosed in Item 1A of Part 1 of our Annual Report on Form 10-K for the fiscal year ended December
31, 2006 (2006 Form 10-K ).
  Our cash collateral order includes operating budgets and financial covenants that limit our
operating flexibility
  
    
    incur indebtedness;
    
    incur liens and enter sale/leaseback transactions except for model
homes subject to certain limitations;
    
    make or own investments;
    
    enter into transactions with affiliates;
    
    engage in new lines of business;
    
    consolidate, merge, sell all or substantially all of our assets;
    
    issue guarantees of debt;
    
    agree to amendment or modification to our organizational documents;
    
    incur or create claims; and
    
    make additional payments on pre-petition indebtedness.
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ITEM 6.
    
    EXHIBITS
 ExhibitNumber
    
    Description31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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SIGNATURES
  TOUSA, Inc.Date: December 3, 2008
    By:
    /s/ Tommy L. McAdenName:
    Tommy L. McAdenTitle:
    Executive Vice President, Director and
Chief Financial Officer Date: December 3, 2008
    By:
    /s/ Angela F. ValdesName:
    Angela F. ValdesTitle:
    Vice President and Chief Accounting  Officer 71