##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-Q/A


(Amendment No. 1)


|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(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, 2006                                               
|          
|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


TECHNICAL OLYMPIC USA, INC.


(Exact name of registrant as specified in its charter)


|                                                                                                 |  |                                         
|------------------------------------------------------------------------------------------------ |  | ----------------------------------------
|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)                         

(954) 364-4000


(Registrants telephone number, including area code)


(Former name, former address and former fiscal year,


if changed since last report)


þ o


12b-2


o þ o


12b-2 o þ


APPLICABLE ONLY TO CORPORATE ISSUERS:












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##### Table of Contents



Explanatory Paragraph


Disclosures about Segments of an Enterprise and
Related Information 10-Q




---



##### 










TECHNICAL OLYMPIC USA, INC.


INDEX


|                                         |          |                                                          |                                                                                           |      |    |    | 
|---------------------------------------- | -------- | -------------------------------------------------------- | ----------------------------------------------------------------------------------------- | ---- | -- | -- | 
|                                         |          |                                                          |                                                                                           | Page |   
|                                         |          |                                                          |                                                                                           |      |   
|PART I.                                  |          | Financial Information                                    |                                                                                           |      | 2  |   
|                                         | ITEM 1.  |                                                          | Financial Statements (Unaudited)                                                          |      |    | 2  | 
|                                         |          | Consolidated Statements of Financial
    Condition       |                                                                                           |      | 2  |   
|                                         |          | Consolidated Statements of Income                        |                                                                                           |      | 3  |   
|                                         |          | Consolidated Statements of Cash Flows                    |                                                                                           |      | 4  |   
|                                         |          | Notes to Unaudited Consolidated Financial
    Statements |                                                                                           |      | 5  |   
|                                         | ITEM 2.  |                                                          | Managements Discussion and Analysis
    of Financial Condition and Results of Operations |      |    | 21 | 
|                                         | ITEM 3.  |                                                          | Quantitative and Qualitative Disclosures
    about Market Risk                            |      |    | 35 | 
|                                         | ITEM 4.  |                                                          | Controls and Procedures                                                                   |      |    | 35 | 
|                                        
|PART II.                                 |          | Other Information                                        |                                                                                           |      | 36 |   
|                                         | ITEM 1A. |                                                          | Risk Factors                                                                              |      |    | 36 | 
|                                         | ITEM 6.  |                                                          | Exhibits                                                                                  |      |    | 36 | 
|                                         |          | Signatures                                               |                                                                                           |      | 37 |   
|EX-31.1 Section 302 Certification of CEO
|EX-31.2 Section 302 Certification of CFO
|EX-32.1 Section 906 Certification of CEO
|EX-32.2 Section 906 Certification of CFO



1



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##### Table of Contents






PART I. FINANCIAL INFORMATION







|        |                     
|------- | --------------------
|ITEM 1. | FINANCIAL STATEMENTS

TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


|                                                                                                                                                                                            |                                             |                       |         |       |              |   |         |       | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------- | --------------------- | ------- | ----- | ------------ | - | ------- | ----- | 
|                                                                                                                                                                                            |                                             | March 31,             |         |       | December 31, |  
|                                                                                                                                                                                            |                                             | 2006                  |         |       | 2005         |  
|                                                                                                                                                                                            |                                             |                       |         |       |              |  
|                                                                                                                                                                                            |                                             | (Unaudited)           |         |       |             
|                                                                                                                                                                                            |                                             | (Dollars in millions, |        
|                                                                                                                                                                                            |                                             | except par value)     |        
|ASSETS                                                                                                                                                                                     
|HOMEBUILDING:                                                                                                                                                                               |                                             |                       |         |       |              |   |         |      
|Cash and cash equivalents:                                                                                                                                                                  |                                             |                       |         |       |              |   |         |      
|                                                                                                                                                                                            | Unrestricted                                |                       | $       | 110.8 |              |   | $       | 26.2  | 
|                                                                                                                                                                                            | Restricted                                  |                       |         | 2.4   |              |   |         | 3.1   | 
|Inventory:                                                                                                                                                                                  |                                             |                       |         |       |              |   |         |      
|                                                                                                                                                                                            | Deposits                                    |                       |         | 230.4 |              |   |         | 218.5 | 
|                                                                                                                                                                                            | Homesites and land under development        |                       |         | 702.0 |              |   |         | 650.3 | 
|                                                                                                                                                                                            | Residences completed and under construction |                       |         | 808.9 |              |   |         | 747.4 | 
|                                                                                                                                                                                            | Inventory not owned                         |                       |         | 232.5 |              |   |         | 124.6 | 
|                                                                                                                                                                                            |                                             |                       |         |       |              |  
|                                                                                                                                                                                            |                                             |                       | 1,973.8 |       |              |   | 1,740.8 |      
|Property and equipment, net                                                                                                                                                                 |                                             |                       | 29.6    |       |              |   | 27.1    |      
|Investments in unconsolidated joint ventures                                                                                                                                                |                                             |                       | 239.0   |       |              |   | 254.5   |      
|Receivables from unconsolidated joint ventures                                                                                                                                              |                                             |                       | 73.8    |       |              |   | 60.5    |      
|Other assets                                                                                                                                                                                |                                             |                       | 163.8   |       |              |   | 133.2   |      
|Goodwill                                                                                                                                                                                    |                                             |                       | 108.8   |       |              |   | 108.8   |      
|                                                                                                                                                                                            |                                             |                       |         |       |              |  
|                                                                                                                                                                                            |                                             |                       | 2,702.0 |       |              |   | 2,354.2 |      
|FINANCIAL SERVICES:                                                                                                                                                                         |                                             |                       |         |       |              |   |         |      
|Cash and cash equivalents:                                                                                                                                                                  |                                             |                       |         |       |              |   |         |      
|                                                                                                                                                                                            | Unrestricted                                |                       |         | 6.8   |              |   |         | 8.7   | 
|                                                                                                                                                                                            | Restricted                                  |                       |         | 3.2   |              |   |         | 3.1   | 
|Mortgage loans held for sale                                                                                                                                                                |                                             |                       | 49.6    |       |              |   | 43.9    |      
|Other assets                                                                                                                                                                                |                                             |                       | 12.6    |       |              |   | 12.8    |      
|                                                                                                                                                                                            |                                             |                       |         |       |              |  
|                                                                                                                                                                                            |                                             |                       | 72.2    |       |              |   | 68.5    |      
|                                                                                                                                                                                            |                                             |                       |         |       |              |  
|Total assets                                                                                                                                                                                |                                             | $                     | 2,774.2 |       |              | $ | 2,422.7 |      
|                                                                                                                                                                                            |                                             |                       |         |       |              |  
|                                                                                                                                                                                           
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                       
|HOMEBUILDING:                                                                                                                                                                               |                                             |                       |         |       |              |   |         |      
|Accounts payable and other liabilities                                                                                                                                                      |                                             | $                     | 274.8   |       |              | $ | 329.4   |      
|Customer deposits                                                                                                                                                                           |                                             |                       | 77.9    |       |              |   | 79.3    |      
|Obligations for inventory not owned                                                                                                                                                         |                                             |                       | 232.5   |       |              |   | 124.6   |      
|Notes payable                                                                                                                                                                               |                                             |                       | 811.6   |       |              |   | 811.6   |      
|Bank borrowings                                                                                                                                                                             |                                             |                       | 300.0   |       |              |   | 65.0    |      
|                                                                                                                                                                                            |                                             |                       |         |       |              |  
|                                                                                                                                                                                            |                                             |                       | 1,696.8 |       |              |   | 1,409.9 |      
|FINANCIAL SERVICES:                                                                                                                                                                         |                                             |                       |         |       |              |   |         |      
|Accounts payable and other liabilities                                                                                                                                                      |                                             |                       | 6.0     |       |              |   | 6.4     |      
|Bank borrowings                                                                                                                                                                             |                                             |                       | 40.7    |       |              |   | 35.1    |      
|                                                                                                                                                                                            |                                             |                       |         |       |              |  
|                                                                                                                                                                                            |                                             |                       | 46.7    |       |              |   | 41.5    |      
|                                                                                                                                                                                            |                                             |                       |         |       |              |  
|Total liabilities                                                                                                                                                                           |                                             |                       | 1,743.5 |       |              |   | 1,451.4 |      
|Stockholders equity:                                                                                                                                                                       |                                             |                       |         |       |              |   |         |      
|Preferred stock  $0.01 par value;
    3,000,000 shares authorized; none issued or outstanding                                                                                              |                                             |                       |        |       |              |   |        |      
|Common stock  $0.01 par value;
    97,000,000 shares authorized and 59,578,727 and
    59,554,977 shares issued and outstanding at March 31,
    2006, and December 31, 2005, respectively |                                             |                       | 0.6     |       |              |   | 0.6     |      
|Additional paid-in capital                                                                                                                                                                  |                                             |                       | 478.2   |       |              |   | 480.5   |      
|Unearned compensation                                                                                                                                                                       |                                             |                       |        |       |              |   | (7.7    | )    
|Retained earnings                                                                                                                                                                           |                                             |                       | 551.9   |       |              |   | 497.9   |      
|                                                                                                                                                                                            |                                             |                       |         |       |              |  
|Total stockholders equity                                                                                                                                                                  |                                             |                       | 1,030.7 |       |              |   | 971.3   |      
|                                                                                                                                                                                            |                                             |                       |         |       |              |  
|Total liabilities and stockholders equity                                                                                                                                                  |                                             | $                     | 2,774.2 |       |              | $ | 2,422.7 |      
|                                                                                                                                                                                            |                                             |                       |         |       |              |  



2



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TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF INCOME


|                                                      |            |                                  |       |            |      |   |       |            | 
|----------------------------------------------------- | ---------- | -------------------------------- | ----- | ---------- | ---- | - | ----- | ---------- | 
|                                                      |            | Three Months Ended March 31,     |      
|                                                      |            |                                  |      
|                                                      |            | 2006                             |       |            | 2005 |  
|                                                      |            |                                  |       |            |      |  
|                                                      |            | (Unaudited)                      |      
|                                                      |            | (Dollars in millions, except per |      
|                                                      |            | share amounts)                   |      
|HOMEBUILDING:                                         |            |                                  |       |            |      |   |       |           
|Revenues:                                             |            |                                  |       |            |      |   |       |           
|                                                      | Home sales |                                  | $     | 586.3      |      |   | $     | 512.4      | 
|                                                      | Land sales |                                  |       | 28.0       |      |   |       | 21.2       | 
|                                                      |            |                                  |       |            |      |  
|                                                      |            |                                  | 614.3 |            |      |   | 533.6 |           
|Cost of sales:                                        |            |                                  |       |            |      |   |       |           
|                                                      | Home sales |                                  |       | 439.0      |      |   |       | 401.0      | 
|                                                      | Land sales |                                  |       | 24.9       |      |   |       | 16.8       | 
|                                                      |            |                                  |       |            |      |  
|                                                      |            |                                  | 463.9 |            |      |   | 417.8 |           
|                                                      |            |                                  |       |            |      |  
|Gross margin                                          |            |                                  | 150.4 |            |      |   | 115.8 |           
|Selling, general and administrative expenses          |            |                                  | 97.4  |            |      |   | 79.4  |           
|(Income) from joint ventures, net                     |            |                                  | (27.8 | )          |      |   | (2.6  | )         
|Other (income), net                                   |            |                                  | (2.0  | )          |      |   | (1.9  | )         
|                                                      |            |                                  |       |            |      |  
|Homebuilding pretax income                            |            |                                  | 82.8  |            |      |   | 40.9  |           
|FINANCIAL SERVICES:                                   |            |                                  |       |            |      |   |       |           
|Revenues                                              |            |                                  | 15.2  |            |      |   | 10.0  |           
|Expenses                                              |            |                                  | 10.7  |            |      |   | 8.7   |           
|                                                      |            |                                  |       |            |      |  
|Financial Services pretax income                      |            |                                  | 4.5   |            |      |   | 1.3   |           
|                                                      |            |                                  |       |            |      |  
|Income before provision for income taxes              |            |                                  | 87.3  |            |      |   | 42.2  |           
|Provision for income taxes                            |            |                                  | 32.3  |            |      |   | 15.8  |           
|                                                      |            |                                  |       |            |      |  
|Net income                                            |            | $                                | 55.0  |            |      | $ | 26.4  |           
|                                                      |            |                                  |       |            |      |  
|EARNINGS PER COMMON SHARE:                            |            |                                  |       |            |      |   |       |           
|                                                      | Basic      |                                  | $     | 0.92       |      |   | $     | 0.47       | 
|                                                      |            |                                  |       |            |      |  
|                                                      | Diluted    |                                  | $     | 0.89       |      |   | $     | 0.45       | 
|                                                      |            |                                  |       |            |      |  
|WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING: |            |                                  |       |            |      |   |       |           
|                                                      | Basic      |                                  |       | 59,565,145 |      |   |       | 56,073,631 | 
|                                                      |            |                                  |       |            |      |  
|                                                      | Diluted    |                                  |       | 61,646,933 |      |   |       | 58,073,548 | 
|                                                      |            |                                  |       |            |      |  
|CASH DIVIDENDS PER SHARE                              |            | $                                | 0.015 |            |      | $ | 0.012 |           
|                                                      |            |                                  |       |            |      |  



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TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                                                                              |                                                                         |                                                |        |      |        |   |        |      |        |  
|----------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ---------------------------------------------- | ------ | ---- | ------ | - | ------ | ---- | ------ | -
|                                                                                                                              |                                                                         | Three Months Ended                             |       
|                                                                                                                              |                                                                         | March 31,                                      |       
|                                                                                                                              |                                                                         |                                                |       
|                                                                                                                              |                                                                         | 2006                                           |        |      | 2005   |  
|                                                                                                                              |                                                                         |                                                |        |      |        |  
|                                                                                                                              |                                                                         | (Unaudited)                                    |       
|                                                                                                                              |                                                                         | (Dollars in millions)                          |       
|Cash flows from operating activities:                                                                                         |                                                                         |                                                |        |      |        |   |        |     
|Net income                                                                                                                    |                                                                         | $                                              | 55.0   |      |        | $ | 26.4   |     
|Adjustments to reconcile net income to net cash used in
    operating activities:                                             |                                                                         |                                                |        |      |        |   |        |     
|                                                                                                                              | Depreciation and amortization                                           |                                                |        | 3.5  |        |   |        | 2.9  |       
|                                                                                                                              | Non-cash compensation expense                                           |                                                |        | 5.7  |        |   |        | 5.2  |       
|                                                                                                                              | Loss on impairment of inventory                                         |                                                |        | 5.4  |        |   |        |     |       
|                                                                                                                              | Deferred income taxes                                                   |                                                |        | (2.1 | )      |   |        |     |       
|                                                                                                                              | Undistributed equity in earnings from unconsolidated joint
    ventures |                                                |        | (8.5 | )      |   |        | (1.3 | )     
|                                                                                                                              | Distributions of earnings from unconsolidated joint ventures            |                                                |        | 13.2 |        |   |        |     |       
|                                                                                                                              | Changes in operating assets and liabilities:                            |                                                |        |      |        |   |        |      |       
|                                                                                                                              |                                                                         | Restricted cash                                |        |      | 0.6    |   |        |      | (5.6   | )
|                                                                                                                              |                                                                         | Inventory                                      |        |      | (136.3 | ) |        |      | (106.5 | )
|                                                                                                                              |                                                                         | Receivables from unconsolidated joint ventures |        |      | (13.3  | ) |        |      | (34.2  | )
|                                                                                                                              |                                                                         | Other assets                                   |        |      | (6.3   | ) |        |      | (9.6   | )
|                                                                                                                              |                                                                         | Mortgage loans held for sale                   |        |      | (5.7   | ) |        |      | 5.0    |  
|                                                                                                                              |                                                                         | Accounts payable and other liabilities         |        |      | (55.8  | ) |        |      | 5.3    |  
|                                                                                                                              |                                                                         | Customer deposits                              |        |      | (1.4   | ) |        |      | 10.7   |  
|                                                                                                                              |                                                                         |                                                |        |      |        |  
|Net cash used in operating activities                                                                                         |                                                                         |                                                | (146.0 | )    |        |   | (101.7 | )   
|Cash flows from investing activities:                                                                                         |                                                                         |                                                |        |      |        |   |        |     
|Net additions to property and equipment                                                                                       |                                                                         |                                                | (6.1   | )    |        |   | (2.8   | )   
|Investments in unconsolidated joint ventures                                                                                  |                                                                         |                                                | (4.6   | )    |        |   | (10.2  | )   
|Capital distributions from joint ventures                                                                                     |                                                                         |                                                | 2.2    |      |        |   |       |     
|                                                                                                                              |                                                                         |                                                |        |      |        |  
|Net cash used in investing activities                                                                                         |                                                                         |                                                | (8.5   | )    |        |   | (13.0  | )   
|Cash flows from financing activities:                                                                                         |                                                                         |                                                |        |      |        |   |        |     
|Net proceeds from revolving credit facilities                                                                                 |                                                                         |                                                | 235.0  |      |        |   |       |     
|Net proceeds from Financial Services bank borrowings                                                                          |                                                                         |                                                | 5.6    |      |        |   | 4.0    |     
|Payments for deferred financing costs                                                                                         |                                                                         |                                                | (2.8   | )    |        |   | (0.3   | )   
|Excess income tax benefit from exercise of stock options                                                                      |                                                                         |                                                | 0.1    |      |        |   |       |     
|Proceeds from stock option exercises                                                                                          |                                                                         |                                                | 0.2    |      |        |   |       |     
|Dividends paid                                                                                                                |                                                                         |                                                | (0.9   | )    |        |   | (0.7   | )   
|                                                                                                                              |                                                                         |                                                |        |      |        |  
|Net cash provided by financing activities                                                                                     |                                                                         |                                                | 237.2  |      |        |   | 3.0    |     
|                                                                                                                              |                                                                         |                                                |        |      |        |  
|Increase (decrease) in cash and cash equivalents                                                                              |                                                                         |                                                | 82.7   |      |        |   | (111.7 | )   
|Cash and cash equivalents at beginning of period                                                                              |                                                                         |                                                | 34.9   |      |        |   | 268.5  |     
|                                                                                                                              |                                                                         |                                                |        |      |        |  
|Cash and cash equivalents at end of period                                                                                    |                                                                         | $                                              | 117.6  |      |        | $ | 156.8  |     
|                                                                                                                              |                                                                         |                                                |        |      |        |  
|Supplemental disclosure of non-cash financing activity:                                                                       |                                                                         |                                                |        |      |        |   |        |     
|Increase (decrease) in obligations for inventory not owned and a
    corresponding increase (decrease) in inventory not owned |                                                                         | $                                              | 107.9  |      |        | $ | (5.1   | )   
|                                                                                                                              |                                                                         |                                                |        |      |        |  



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TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES





NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


March 31, 2006




|   |                          
|-- | -------------------------
|1. | Business and Organization



| |         
| | --------
| | Business





| |             
| | ------------
| | Organization





|   |                                           
|-- | ------------------------------------------
|2. | Summary of Significant Accounting Policies



| |                      
| | ---------------------
| | Basis of Presentation











| |                     
| | --------------------
| | Interim Presentation

10-Q/A 10-K/A






| |                   
| | ------------------
| | Earnings Per Share



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TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                                               |  |                    |            |  |      |  |            | 
|-------------------------------------------------------------- |  | ------------------ | ---------- |  | ---- |  | ---------- | 
|                                                               |  | Three Months Ended |           
|                                                               |  | March 31,          |           
|                                                               |  |                    |           
|                                                               |  | 2006               |            |  | 2005 | 
|                                                               |  |                    |            |  |      | 
|Basic weighted average shares outstanding                      |  |                    | 59,565,145 |  |      |  | 56,073,631 | 
|Net effect of common stock equivalents assumed to be exercised |  |                    | 2,081,788  |  |      |  | 1,999,917  | 
|                                                               |  |                    |            |  |      | 
|Diluted weighted average shares outstanding                    |  |                    | 61,646,933 |  |      |  | 58,073,548 | 
|                                                               |  |                    |            |  |      | 



| |                         
| | ------------------------
| | Stock-Based Compensation

Accounting for Stock
Issued to Employees Accounting for Stock-Based Compensation Share-Based
Payment


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TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |          
|-- | ---------
|3. | Inventory



|                                          |               |                    |      |       |      |   |      |       |  
|----------------------------------------- | ------------- | ------------------ | ---- | ----- | ---- | - | ---- | ----- | -
|                                          |               | Three Months Ended |     
|                                          |               | March 31,          |     
|                                          |               |                    |     
|                                          |               | 2006               |      |       | 2005 |  
|                                          |               |                    |      |       |      |  
|Interest capitalized, beginning of period |               | $                  | 47.7 |       |      | $ | 36.8 |      
|Interest incurred                         |               |                    | 22.8 |       |      |   | 19.1 |      
|Less interest included in:                |               |                    |      |       |      |   |      |      
|                                          | Cost of sales |                    |      | (17.7 | )    |   |      | (14.7 | )
|                                          | Other         |                    |      | (0.3  | )    |   |      | (1.0  | )
|                                          |               |                    |      |       |      |  
|Interest capitalized, end of period       |               | $                  | 52.5 |       |      | $ | 40.2 |      
|                                          |               |                    |      |       |      |  



Consolidation of Variable Interest Entities




Accounting for the
Sales of Real Estate


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TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Accounting for the
Impairment or Disposal of Long-Lived Assets




|   |                                             
|-- | --------------------------------------------
|4. | Investments in Unconsolidated Joint Ventures



|                                       |                             |                |       |      |              |   |         |       |  |   |         |       | 
|-------------------------------------- | --------------------------- | -------------- | ----- | ---- | ------------ | - | ------- | ----- |  | - | ------- | ----- | 
|                                       |                             | March 31, 2006 |      
|                                       |                             |                |      
|                                       |                             | Land           |       |      | Home         |   |         |      
|                                       |                             | Development    |       |      | Construction |   |         | Total | 
|                                       |                             |                |       |      |              |   |         |       | 
|Assets:                                |                             |                |       |      |              |   |         |       |  |   |         |      
|Cash and cash equivalents              |                             | $              | 11.2  |      |              | $ | 103.6   |       |  | $ | 114.8   |      
|Inventories                            |                             |                | 316.2 |      |              |   | 1,109.0 |       |  |   | 1,425.2 |      
|Other assets                           |                             |                | 2.2   |      |              |   | 220.8   |       |  |   | 223.0   |      
|                                       |                             |                |       |      |              |   |         |       | 
|Total assets                           |                             | $              | 329.6 |      |              | $ | 1,433.4 |       |  | $ | 1,763.0 |      
|                                       |                             |                |       |      |              |   |         |       | 
|                                      
|Liabilities and partners equity:     
|Accounts payable and other liabilities |                             | $              | 9.8   |      |              | $ | 258.1   |       |  | $ | 267.9   |      
|Notes payable                          |                             |                | 181.1 |      |              |   | 854.4   |       |  |   | 1,035.5 |      
|Equity of:                             |                             |                |       |      |              |   |         |       |  |   |         |      
|                                       | Technical Olympic USA, Inc. |                |       | 68.2 |              |   |         | 170.7 |  |   |         | 238.9 | 
|                                       | Others                      |                |       | 70.5 |              |   |         | 150.2 |  |   |         | 220.7 | 
|                                       |                             |                |       |      |              |   |         |       | 
|Total equity                           |                             |                | 138.7 |      |              |   | 320.9   |       |  |   | 459.6   |      
|                                       |                             |                |       |      |              |   |         |       | 
|Total liabilities and partners equity |                             | $              | 329.6 |      |              | $ | 1,433.4 |       |  | $ | 1,763.0 |      
|                                       |                             |                |       |      |              |   |         |       | 

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TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                       |                             |                   |       |      |              |   |         |       |  |   |         |       | 
|-------------------------------------- | --------------------------- | ----------------- | ----- | ---- | ------------ | - | ------- | ----- |  | - | ------- | ----- | 
|                                       |                             | December 31, 2005 |      
|                                       |                             |                   |      
|                                       |                             | Land              |       |      | Home         |   |         |      
|                                       |                             | Development       |       |      | Construction |   |         | Total | 
|                                       |                             |                   |       |      |              |   |         |       | 
|Assets:                                |                             |                   |       |      |              |   |         |       |  |   |         |      
|Cash and cash equivalents              |                             | $                 | 13.4  |      |              | $ | 60.5    |       |  | $ | 73.9    |      
|Inventories                            |                             |                   | 306.1 |      |              |   | 1,023.6 |       |  |   | 1,329.7 |      
|Other assets                           |                             |                   | 3.3   |      |              |   | 227.5   |       |  |   | 230.8   |      
|                                       |                             |                   |       |      |              |   |         |       | 
|Total assets                           |                             | $                 | 322.8 |      |              | $ | 1,311.6 |       |  | $ | 1,634.4 |      
|                                       |                             |                   |       |      |              |   |         |       | 
|                                      
|Liabilities and partners equity:     
|Accounts payable and other liabilities |                             | $                 | 6.6   |      |              | $ | 211.2   |       |  | $ | 217.8   |      
|Notes payable                          |                             |                   | 142.0 |      |              |   | 781.5   |       |  |   | 923.5   |      
|Equity of:                             |                             |                   |       |      |              |   |         |       |  |   |         |      
|                                       | Technical Olympic USA, Inc. |                   |       | 86.1 |              |   |         | 167.1 |  |   |         | 253.2 | 
|                                       | Others                      |                   |       | 88.1 |              |   |         | 151.8 |  |   |         | 239.9 | 
|                                       |                             |                   |       |      |              |   |         |       | 
|Total equity                           |                             |                   | 174.2 |      |              |   | 318.9   |       |  |   | 493.1   |      
|                                       |                             |                   |       |      |              |   |         |       | 
|Total liabilities and partners equity |                             | $                 | 322.8 |      |              | $ | 1,311.6 |       |  | $ | 1,634.4 |      
|                                       |                             |                   |       |      |              |   |         |       | 

|                                                 |  |                    |      |   |                    |   |       |       |  |      |             |  |      |              |      |   |       |   |      |  |  |   |      | 
|------------------------------------------------ |  | ------------------ | ---- | - | ------------------ | - | ----- | ----- |  | ---- | ----------- |  | ---- | ------------ | ---- | - | ----- | - | ---- |  |  | - | ---- | 
|                                                 |  | Three Months Ended |      |   | Three Months Ended |  
|                                                 |  | March 31, 2006     |      |   | March 31, 2005     |  
|                                                 |  |                    |      |   |                    |  
|                                                 |  | Land               |      |   | Home               |   |       |       |  | Land |             |  | Home |              |      |  
|                                                 |  | Development        |      |   | Construction       |   |       | Total |  |      | Development |  |      | Construction |      |   | Total |  
|                                                 |  |                    |      |   |                    |   |       |       |  |      |             |  |      |              |      |   |       |  
|Revenues                                         |  | $                  | 6.0  |   |                    | $ | 313.5 |       |  | $    | 319.5       |  |      | $            | 6.6  |   |       | $ | 38.3 |  |  | $ | 44.9 | 
|Cost and expenses                                |  |                    | 6.6  |   |                    |   | 277.3 |       |  |      | 283.9       |  |      |              | 7.6  |   |       |   | 35.0 |  |  |   | 42.6 | 
|                                                 |  |                    |      |   |                    |   |       |       |  |      |             |  |      |              |      |   |       |  
|Net earnings (losses) of unconsolidated entities |  | $                  | (0.6 | ) |                    | $ | 36.2  |       |  | $    | 35.6        |  |      | $            | (1.0 | ) |       | $ | 3.3  |  |  | $ | 2.3  | 
|                                                 |  |                    |      |   |                    |   |       |       |  |      |             |  |      |              |      |   |       |  
|Our share of net earnings (losses)               |  | $                  | (0.3 | ) |                    | $ | 17.1  |       |  | $    | 16.8        |  |      | $            | (0.3 | ) |       | $ | 1.6  |  |  | $ | 1.3  | 
|Management fees earned                           |  |                    | 0.7  |   |                    |   | 10.3  |       |  |      | 11.0        |  |      |              | 0.8  |   |       |   | 0.5  |  |  |   | 1.3  | 
|                                                 |  |                    |      |   |                    |   |       |       |  |      |             |  |      |              |      |   |       |  
|Income from joint ventures                       |  | $                  | 0.4  |   |                    | $ | 27.4  |       |  | $    | 27.8        |  |      | $            | 0.5  |   |       | $ | 2.1  |  |  | $ | 2.6  | 
|                                                 |  |                    |      |   |                    |   |       |       |  |      |             |  |      |              |      |   |       |  



day-to




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TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










|   |           
|-- | ----------
|5. | Borrowings





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TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




1 4 pari passu




|   |                              
|-- | -----------------------------
|6. | Commitments and Contingencies







|                                                           |  |                    |      |   |      |   |      |  
|---------------------------------------------------------- |  | ------------------ | ---- | - | ---- | - | ---- | -
|                                                           |  | Three Months Ended |     
|                                                           |  | March 31,          |     
|                                                           |  |                    |     
|                                                           |  | 2006               |      |   | 2005 |  
|                                                           |  |                    |      |   |      |  
|Accrued warranty costs at January 1                        |  | $                  | 7.0  |   |      | $ | 6.5  |  
|Liability recorded for warranties issued during the period |  |                    | 4.9  |   |      |   | 2.8  |  
|Warranty work performed                                    |  |                    | (2.3 | ) |      |   | (1.4 | )
|Adjustments                                                |  |                    | (1.3 | ) |      |   | (0.9 | )
|                                                           |  |                    |      |   |      |  
|Accrued warranty costs at March 31                         |  | $                  | 8.3  |   |      | $ | 7.0  |  
|                                                           |  |                    |      |   |      |  



|   |                                                  
|-- | -------------------------------------------------
|7. | Stockholders Equity and Stock-Based Compensation



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TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










12



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TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                                                         |  |                    |      |  
|-------------------------------------------------------------------------------------------------------- |  | ------------------ | ---- | -
|                                                                                                         |  | Three Months Ended |     
|                                                                                                         |  | March 31, 2005     |     
|                                                                                                         |  |                    |     
|Net income as reported                                                                                   |  | $                  | 26.4 |  
|Add: Stock-based employee compensation included in reported net
    income, net of tax                   |  |                    | 3.1  |  
|Deduct: Stock-based employee compensation expense determined
    under the fair value method, net of tax |  |                    | (1.3 | )
|                                                                                                         |  |                    |     
|Pro forma net income                                                                                     |  | $                  | 28.2 |  
|                                                                                                         |  |                    |     
|Reported basic earnings per share                                                                        |  | $                  | 0.47 |  
|                                                                                                         |  |                    |     
|Pro forma basic earnings per share                                                                       |  | $                  | 0.50 |  
|                                                                                                         |  |                    |     
|Reported diluted earnings per share                                                                      |  | $                  | 0.45 |  
|                                                                                                         |  |                    |     
|Pro forma diluted earnings per share                                                                     |  | $                  | 0.49 |  
|                                                                                                         |  |                    |     



|                        |  |            
|----------------------- |  | -----------
|Expected volatility     |  | 0.33%-0.42%
|Expected dividend yield |  | 0%         
|Risk-free interest rate |  | 1.47%-4.85%
|Expected life           |  | 4-10 years 



|                                                                                      |  |         |            |          |       |          |             |               |  |           |                 |  |  |   |      | 
|------------------------------------------------------------------------------------- |  | ------- | ---------- | -------- | ----- | -------- | ----------- | ------------- |  | --------- | --------------- |  |  | - | ---- | 
|                                                                                      |  |         |            |          |       | Weighted |             |               | 
|                                                                                      |  |         |            | Weighted |       |          | Average     |               |  |          
|                                                                                      |  |         |            | Average  |       |          | Remaining   |               |  |          
|                                                                                      |  |         |            | Exercise |       |          | Contractual |               |  | Aggregate |                
|                                                                                      |  | Options |            |          | Price |          |             | Term          |  |           | Intrinsic Value | 
|                                                                                      |  |         |            |          |       |          |             |               |  |           |                 | 
|                                                                                      |  |         |            |          |       |          |             | (in millions) | 
|Options outstanding at beginning of year                                              |  |         | 6,606,611  |          |       | $        | 11.06       |               |  |           |                 |  |  |   |      | 
|Granted                                                                               |  |         | 1,339,708* |          |       | $        | 23.58       |               |  |           |                 |  |  |   |      | 
|Exercised                                                                             |  |         | (23,750    | )        |       | $        | 10.84       |               |  |           |                 |  |  |   |      | 
|Forfeited                                                                             |  |         | (3,750     | )        |       | $        | 17.25       |               |  |           |                 |  |  |   |      | 
|                                                                                      |  |         |            |          |       |          |             |               |  |           |                 | 
|Options outstanding at end of period                                                  |  |         | 7,918,819* |          |       | $        | 13.18       |               |  |           | 6.32            |  |  | $ | 61.9 | 
|                                                                                      |  |         |            |          |       |          |             |               |  |           |                 | 
|Vested and expected to vest in the future at end of period                            |  |         | 7,838,327  |          |       | $        | 13.07       |               |  |           | 6.31            |  |  | $ | 61.9 | 
|                                                                                      |  |         |            |          |       |          |             |               |  |           |                 | 
|Options exercisable at end of period                                                  |  |         | 5,006,882  |          |       | $        | 10.85       |               |  |           | 6.79            |  |  | $ | 47.6 | 
|                                                                                      |  |         |            |          |       |          |             |               |  |           |                 | 
|Weighted average fair market value per share of options granted
    during the period |  | $       | 7.90       |          |       |          |             |               |  |           |                 |  |  |   |      | 
|                                                                                      |  |         |            |          |       |          |             |               |  |           |                 | 






|  |                                                                                                                                                                                                                                                     
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Includes 1,323,940 options granted to our chief executive
    officer and subject to shareholder approval, to be sought at our
    2006 annual stockholders meeting, of an amendment to
    increase the number of shares available under the Plan.

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TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






8.     Operating and Reporting
Segments






Florida:


Mid-Atlantic:


Texas:


West:




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TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                         |                    |                    |       |       |               |   |       |       | 
|---------------------------------------- | ------------------ | ------------------ | ----- | ----- | ------------- | - | ----- | ----- | 
|                                         |                    | Three Months Ended |      
|                                         |                    | March 31,          |      
|                                         |                    |                    |      
|                                         |                    | 2006               |       |       | 2005          |  
|                                         |                    |                    |       |       |               |  
|                                         |                    | (As restated)      |       |       | (As restated) |  
|Revenues:                                |                    |                    |       |       |               |   |       |      
|Homebuilding:                            |                    |                    |       |       |               |   |       |      
|                                         | Florida            |                    | $     | 266.0 |               |   | $     | 213.0 | 
|                                         | Mid-Atlantic       |                    |       | 76.5  |               |   |       | 47.2  | 
|                                         | Texas              |                    |       | 160.4 |               |   |       | 96.3  | 
|                                         | West               |                    |       | 111.4 |               |   |       | 177.1 | 
|                                         |                    |                    |       |       |               |  
|                                         | Total Homebuilding |                    |       | 614.3 |               |   |       | 533.6 | 
|Financial Services                       |                    |                    | 15.2  |       |               |   | 10.0  |      
|                                         |                    |                    |       |       |               |  
|Total revenues                           |                    | $                  | 629.5 |       |               | $ | 543.6 |      
|                                         |                    |                    |       |       |               |  
|Results of Operations:                   |                    |                    |       |       |               |   |       |      
|Homebuilding:                            |                    |                    |       |       |               |   |       |      
|                                         | Florida            |                    | $     | 51.4  |               |   | $     | 27.9  | 
|                                         | Mid-Atlantic       |                    |       | 4.6   |               |   |       | 5.3   | 
|                                         | Texas              |                    |       | 13.4  |               |   |       | 4.0   | 
|                                         | West               |                    |       | 32.1  |               |   |       | 23.1  | 
|Financial Services                       |                    |                    | 4.5   |       |               |   | 1.3   |      
|Corporate and unallocated                |                    |                    | (18.7 | )     |               |   | (19.4 | )    
|                                         |                    |                    |       |       |               |  
|Income before provision for income taxes |                    | $                  | 87.3  |       |               | $ | 42.2  |      
|                                         |                    |                    |       |       |               |  

|                          |              |                |         |       |                   |   |         |       | 
|------------------------- | ------------ | -------------- | ------- | ----- | ----------------- | - | ------- | ----- | 
|                          |              | March 31, 2006 |         |       | December 31, 2005 |  
|                          |              |                |         |       |                   |  
|                          |              | (As restated)  |         |       | (As restated)     |  
|Assets:                   |              |                |         |       |                   |   |         |      
|Homebuilding:             |              |                |         |       |                   |   |         |      
|                          | Florida      |                | $       | 934.2 |                   |   | $       | 858.7 | 
|                          | Mid-Atlantic |                |         | 239.9 |                   |   |         | 252.4 | 
|                          | Texas        |                |         | 361.5 |                   |   |         | 325.9 | 
|                          | West         |                |         | 748.8 |                   |   |         | 659.7 | 
|Financial Services        |              |                | 72.2    |       |                   |   | 68.5    |      
|Corporate and unallocated |              |                | 417.6   |       |                   |   | 257.5   |      
|                          |              |                |         |       |                   |  
|Total assets              |              | $              | 2,774.2 |       |                   | $ | 2,422.7 |      
|                          |              |                |         |       |                   |  



|   |                                 
|-- | --------------------------------
|9. | Summarized Financial Information



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TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Consolidating Statement of Financial Condition


March 31, 2006


|                                                     |  |                       |         |  |              |   |         |               |  |   |              |  |  |       |          |   |  |   |         | 
|---------------------------------------------------- |  | --------------------- | ------- |  | ------------ | - | ------- | ------------- |  | - | ------------ |  |  | ----- | -------- | - |  | - | ------- | 
|                                                     |  | Technical             |         |  |              |   |         |               |  |   |             
|                                                     |  | Olympic               |         |  | Guarantor    |   |         | Non-Guarantor |  |   | Intercompany |  |  |      
|                                                     |  | USA, Inc.             |         |  | Subsidiaries |   |         | Subsidiaries  |  |   | Eliminations |  |  | Total |         
|                                                     |  |                       |         |  |              |   |         |               |  |   |              |  |  |       |         
|                                                     |  | (Dollars in millions) |        
|ASSETS                                               |  |                       |         |  |              |   |         |               |  |   |              |  |  |       |          |   |  |   |         | 
|HOMEBUILDING:                                        |  |                       |         |  |              |   |         |               |  |   |              |  |  |       |          |   |  |   |         | 
|Cash and cash equivalents                            |  | $                     | 84.1    |  |              | $ | 29.1    |               |  | $ |             |  |  | $     |         |   |  | $ | 113.2   | 
|Inventory                                            |  |                       |        |  |              |   | 1,973.8 |               |  |   |             |  |  |       |         |   |  |   | 1,973.8 | 
|Property and equipment, net                          |  |                       | 6.9     |  |              |   | 22.7    |               |  |   |             |  |  |       |         |   |  |   | 29.6    | 
|Investments in unconsolidated joint ventures         |  |                       |        |  |              |   | 239.0   |               |  |   |             |  |  |       |         |   |  |   | 239.0   | 
|Receivables from unconsolidated joint ventures       |  |                       |        |  |              |   | 73.8    |               |  |   |             |  |  |       |         |   |  |   | 73.8    | 
|Investments in/advances to consolidated subsidiaries |  |                       | 2,083.3 |  |              |   | (308.3  | )             |  |   |             |  |  |       | (1,775.0 | ) |  |   |        | 
|Other assets                                         |  |                       | 29.9    |  |              |   | 133.9   |               |  |   |             |  |  |       |         |   |  |   | 163.8   | 
|Goodwill                                             |  |                       |        |  |              |   | 108.8   |               |  |   |             |  |  |       |         |   |  |   | 108.8   | 
|                                                     |  |                       |         |  |              |   |         |               |  |   |              |  |  |       |         
|                                                     |  |                       | 2,204.2 |  |              |   | 2,272.8 |               |  |   |             |  |  |       | (1,775.0 | ) |  |   | 2,702.0 | 
|FINANCIAL SERVICES:                                  |  |                       |         |  |              |   |         |               |  |   |              |  |  |       |          |   |  |   |         | 
|Cash and cash equivalents                            |  |                       |        |  |              |   |        |               |  |   | 10.0         |  |  |       |         |   |  |   | 10.0    | 
|Mortgage loans held for sale                         |  |                       |        |  |              |   |        |               |  |   | 49.6         |  |  |       |         |   |  |   | 49.6    | 
|Other assets                                         |  |                       |        |  |              |   |        |               |  |   | 12.6         |  |  |       |         |   |  |   | 12.6    | 
|                                                     |  |                       |         |  |              |   |         |               |  |   |              |  |  |       |         
|                                                     |  |                       |        |  |              |   |        |               |  |   | 72.2         |  |  |       |         |   |  |   | 72.2    | 
|                                                     |  |                       |         |  |              |   |         |               |  |   |              |  |  |       |         
|Total assets                                         |  | $                     | 2,204.2 |  |              | $ | 2,272.8 |               |  | $ | 72.2         |  |  | $     | (1,775.0 | ) |  | $ | 2,774.2 | 
|                                                     |  |                       |         |  |              |   |         |               |  |   |              |  |  |       |         
|                                                    
|LIABILITIES AND STOCKHOLDERS EQUITY                 |  |                       |         |  |              |   |         |               |  |   |              |  |  |       |          |   |  |   |         | 
|HOMEBUILDING:                                        |  |                       |         |  |              |   |         |               |  |   |              |  |  |       |          |   |  |   |         | 
|Accounts payable and other liabilities               |  | $                     | 61.9    |  |              | $ | 212.9   |               |  | $ |             |  |  | $     |         |   |  | $ | 274.8   | 
|Customer deposits                                    |  |                       |        |  |              |   | 77.9    |               |  |   |             |  |  |       |         |   |  |   | 77.9    | 
|Obligations for inventory not owned                  |  |                       |        |  |              |   | 232.5   |               |  |   |             |  |  |       |         |   |  |   | 232.5   | 
|Notes payable                                        |  |                       | 811.6   |  |              |   |        |               |  |   |             |  |  |       |         |   |  |   | 811.6   | 
|Bank borrowings                                      |  |                       | 300.0   |  |              |   |        |               |  |   |             |  |  |       |         |   |  |   | 300.0   | 
|                                                     |  |                       |         |  |              |   |         |               |  |   |              |  |  |       |         
|                                                     |  |                       | 1,173.5 |  |              |   | 523.3   |               |  |   |             |  |  |       |         |   |  |   | 1,696.8 | 
|FINANCIAL SERVICES:                                  |  |                       |         |  |              |   |         |               |  |   |              |  |  |       |          |   |  |   |         | 
|Accounts payable and other liabilities               |  |                       |        |  |              |   |        |               |  |   | 6.0          |  |  |       |         |   |  |   | 6.0     | 
|Bank borrowings                                      |  |                       |        |  |              |   |        |               |  |   | 40.7         |  |  |       |         |   |  |   | 40.7    | 
|                                                     |  |                       |         |  |              |   |         |               |  |   |              |  |  |       |         
|                                                     |  |                       |        |  |              |   |        |               |  |   | 46.7         |  |  |       |         |   |  |   | 46.7    | 
|                                                     |  |                       |         |  |              |   |         |               |  |   |              |  |  |       |         
|Total liabilities                                    |  |                       | 1,173.5 |  |              |   | 523.3   |               |  |   | 46.7         |  |  |       |         |   |  |   | 1,743.5 | 
|Total stockholders equity                           |  |                       | 1,030.7 |  |              |   | 1,749.5 |               |  |   | 25.5         |  |  |       | (1,775.0 | ) |  |   | 1,030.7 | 
|                                                     |  |                       |         |  |              |   |         |               |  |   |              |  |  |       |         
|Total liabilities and stockholders equity           |  | $                     | 2,204.2 |  |              | $ | 2,272.8 |               |  | $ | 72.2         |  |  | $     | (1,775.0 | ) |  | $ | 2,774.2 | 
|                                                     |  |                       |         |  |              |   |         |               |  |   |              |  |  |       |         

16



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##### Table of Contents



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Consolidating Statement of Financial Condition


December 31, 2005


|                                                      |  |           |         |                       |              |   |         |               |  |   |              |   |  |       |          |   |  |   |         | 
|----------------------------------------------------- |  | --------- | ------- | --------------------- | ------------ | - | ------- | ------------- |  | - | ------------ | - |  | ----- | -------- | - |  | - | ------- | 
|                                                      |  | Technical |         |                       |              |   |         |               |  |   |             
|                                                      |  | Olympic   |         |                       | Guarantor    |   |         | Non-Guarantor |  |   | Intercompany |   |  |      
|                                                      |  | USA, Inc. |         |                       | Subsidiaries |   |         | Subsidiaries  |  |   | Eliminations |   |  | Total |         
|                                                      |  |           |         |                       |              |   |         |               |  |   |              |   |  |       |         
|                                                      |  |           |         | (Dollars in millions) |              |   |         |               | 
|ASSETS                                                |  |           |         |                       |              |   |         |               |  |   |              |   |  |       |          |   |  |   |         | 
|HOMEBUILDING:                                         |  |           |         |                       |              |   |         |               |  |   |              |   |  |       |          |   |  |   |         | 
|Cash and cash equivalents                             |  | $         | 21.9    |                       |              | $ | 7.4     |               |  | $ |             |   |  | $     |         |   |  | $ | 29.3    | 
|Inventory                                             |  |           |        |                       |              |   | 1,740.8 |               |  |   |             |   |  |       |         |   |  |   | 1,740.8 | 
|Property and equipment, net                           |  |           | 7.3     |                       |              |   | 19.8    |               |  |   |             |   |  |       |         |   |  |   | 27.1    | 
|Investments in unconsolidated joint ventures          |  |           |        |                       |              |   | 254.5   |               |  |   |             |   |  |       |         |   |  |   | 254.5   | 
|Receivables from unconsolidated joint ventures        |  |           |        |                       |              |   | 60.5    |               |  |   |             |   |  |       |         |   |  |   | 60.5    | 
|Investments in/ advances to consolidated subsidiaries |  |           | 1,946.8 |                       |              |   | (427.7  | )             |  |   | (3.7         | ) |  |       | (1,515.4 | ) |  |   |        | 
|Other assets                                          |  |           | 26.3    |                       |              |   | 106.9   |               |  |   |             |   |  |       |         |   |  |   | 133.2   | 
|Goodwill                                              |  |           |        |                       |              |   | 108.8   |               |  |   |             |   |  |       |         |   |  |   | 108.8   | 
|                                                      |  |           |         |                       |              |   |         |               |  |   |              |   |  |       |         
|                                                      |  |           | 2,002.3 |                       |              |   | 1,871.0 |               |  |   | (3.7         | ) |  |       | (1,515.4 | ) |  |   | 2,354.2 | 
|FINANCIAL SERVICES:                                   |  |           |         |                       |              |   |         |               |  |   |              |   |  |       |          |   |  |   |         | 
|Cash and cash equivalents                             |  |           |        |                       |              |   |        |               |  |   | 11.8         |   |  |       |         |   |  |   | 11.8    | 
|Mortgage loans held for sale                          |  |           |        |                       |              |   |        |               |  |   | 43.9         |   |  |       |         |   |  |   | 43.9    | 
|Other assets                                          |  |           |        |                       |              |   |        |               |  |   | 12.8         |   |  |       |         |   |  |   | 12.8    | 
|                                                      |  |           |         |                       |              |   |         |               |  |   |              |   |  |       |         
|                                                      |  |           |        |                       |              |   |        |               |  |   | 68.5         |   |  |       |         |   |  |   | 68.5    | 
|                                                      |  |           |         |                       |              |   |         |               |  |   |              |   |  |       |         
|Total assets                                          |  | $         | 2,002.3 |                       |              | $ | 1,871.0 |               |  | $ | 64.8         |   |  | $     | (1,515.4 | ) |  | $ | 2,422.7 | 
|                                                      |  |           |         |                       |              |   |         |               |  |   |              |   |  |       |         
|LIABILITIES AND STOCKHOLDERS EQUITY                  |  |           |         |                       |              |   |         |               |  |   |              |   |  |       |          |   |  |   |         | 
|HOMEBUILDING:                                         |  |           |         |                       |              |   |         |               |  |   |              |   |  |       |          |   |  |   |         | 
|Accounts payable and other liabilities                |  | $         | 154.4   |                       |              | $ | 175.0   |               |  | $ |             |   |  | $     |         |   |  | $ | 329.4   | 
|Customer deposits                                     |  |           |        |                       |              |   | 79.3    |               |  |   |             |   |  |       |         |   |  |   | 79.3    | 
|Obligations for inventory not owned                   |  |           |        |                       |              |   | 124.6   |               |  |   |             |   |  |       |         |   |  |   | 124.6   | 
|Notes payable                                         |  |           | 811.6   |                       |              |   |        |               |  |   |             |   |  |       |         |   |  |   | 811.6   | 
|Bank borrowings                                       |  |           | 65.0    |                       |              |   |        |               |  |   |             |   |  |       |         |   |  |   | 65.0    | 
|                                                      |  |           |         |                       |              |   |         |               |  |   |              |   |  |       |         
|                                                      |  |           | 1,031.0 |                       |              |   | 378.9   |               |  |   |             |   |  |       |         |   |  |   | 1,409.9 | 
|FINANCIAL SERVICES:                                   |  |           |         |                       |              |   |         |               |  |   |              |   |  |       |          |   |  |   |         | 
|Accounts payable and other liabilities                |  |           |        |                       |              |   |        |               |  |   | 6.4          |   |  |       |         |   |  |   | 6.4     | 
|Bank borrowings                                       |  |           |        |                       |              |   |        |               |  |   | 35.1         |   |  |       |         |   |  |   | 35.1    | 
|                                                      |  |           |         |                       |              |   |         |               |  |   |              |   |  |       |         
|                                                      |  |           |        |                       |              |   |        |               |  |   | 41.5         |   |  |       |         |   |  |   | 41.5    | 
|                                                      |  |           |         |                       |              |   |         |               |  |   |              |   |  |       |         
|Total liabilities                                     |  |           | 1,031.0 |                       |              |   | 378.9   |               |  |   | 41.5         |   |  |       |         |   |  |   | 1,451.4 | 
|Total stockholders equity                            |  |           | 971.3   |                       |              |   | 1,492.1 |               |  |   | 23.3         |   |  |       | (1,515.4 | ) |  |   | 971.3   | 
|                                                      |  |           |         |                       |              |   |         |               |  |   |              |   |  |       |         
|Total liabilities and stockholders equity            |  | $         | 2,002.3 |                       |              | $ | 1,871.0 |               |  | $ | 64.8         |   |  | $     | (1,515.4 | ) |  | $ | 2,422.7 | 
|                                                      |  |           |         |                       |              |   |         |               |  |   |              |   |  |       |         

17



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##### Table of Contents



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Consolidating Statement of Income


Three Months Ended March 31, 2006


|                                                   |  |                       |       |   |              |   |       |               |  |   |              |  |  |       |       |   |  |   |       |  
|-------------------------------------------------- |  | --------------------- | ----- | - | ------------ | - | ----- | ------------- |  | - | ------------ |  |  | ----- | ----- | - |  | - | ----- | -
|                                                   |  | Technical             |       |   |              |   |       |               |  |   |             
|                                                   |  | Olympic               |       |   | Guarantor    |   |       | Non-Guarantor |  |   | Intercompany |  |  |      
|                                                   |  | USA, Inc.             |       |   | Subsidiaries |   |       | Subsidiaries  |  |   | Eliminations |  |  | Total |      
|                                                   |  |                       |       |   |              |   |       |               |  |   |              |  |  |       |      
|                                                   |  | (Dollars in millions) |      
|HOMEBUILDING:                                      |  |                       |       |   |              |   |       |               |  |   |              |  |  |       |       |   |  |   |       |  
|Revenues                                           |  | $                     |      |   |              | $ | 614.3 |               |  | $ |             |  |  | $     |      |   |  | $ | 614.3 |  
|Cost of sales                                      |  |                       |      |   |              |   | 463.9 |               |  |   |             |  |  |       |      |   |  |   | 463.9 |  
|                                                   |  |                       |       |   |              |   |       |               |  |   |              |  |  |       |      
|Gross margin                                       |  |                       |      |   |              |   | 150.4 |               |  |   |             |  |  |       |      |   |  |   | 150.4 |  
|Selling, general and administrative expenses       |  |                       | 19.3  |   |              |   | 79.1  |               |  |   |             |  |  |       | (1.0  | ) |  |   | 97.4  |  
|(Income) from joint ventures, net                  |  |                       |      |   |              |   | (27.8 | )             |  |   |             |  |  |       |      |   |  |   | (27.8 | )
|Other (income) expense, net                        |  |                       | (71.6 | ) |              |   | 8.1   |               |  |   |             |  |  |       | 61.5  |   |  |   | (2.0  | )
|                                                   |  |                       |       |   |              |   |       |               |  |   |              |  |  |       |      
|Homebuilding pretax income                         |  |                       | 52.3  |   |              |   | 91.0  |               |  |   |             |  |  |       | (60.5 | ) |  |   | 82.8  |  
|FINANCIAL SERVICES:                                |  |                       |       |   |              |   |       |               |  |   |              |  |  |       |       |   |  |   |       |  
|Revenues                                           |  |                       |      |   |              |   |      |               |  |   | 16.2         |  |  |       | (1.0  | ) |  |   | 15.2  |  
|Expenses                                           |  |                       |      |   |              |   |      |               |  |   | 12.6         |  |  |       | (1.9  | ) |  |   | 10.7  |  
|                                                   |  |                       |       |   |              |   |       |               |  |   |              |  |  |       |      
|Financial Services pretax income                   |  |                       |      |   |              |   |      |               |  |   | 3.6          |  |  |       | 0.9   |   |  |   | 4.5   |  
|                                                   |  |                       |       |   |              |   |       |               |  |   |              |  |  |       |      
|Income before provision (benefit) for income taxes |  |                       | 52.3  |   |              |   | 91.0  |               |  |   | 3.6          |  |  |       | (59.6 | ) |  |   | 87.3  |  
|Provision (benefit) for income taxes               |  |                       | (2.7  | ) |              |   | 33.7  |               |  |   | 1.3          |  |  |       |      |   |  |   | 32.3  |  
|                                                   |  |                       |       |   |              |   |       |               |  |   |              |  |  |       |      
|Net income                                         |  | $                     | 55.0  |   |              | $ | 57.3  |               |  | $ | 2.3          |  |  | $     | (59.6 | ) |  | $ | 55.0  |  
|                                                   |  |                       |       |   |              |   |       |               |  |   |              |  |  |       |      

Consolidating Statement of Income


Three Months Ended March 31, 2005


|                                                   |  |                       |       |   |              |   |       |               |  |   |              |  |  |       |       |   |  |   |       |  
|-------------------------------------------------- |  | --------------------- | ----- | - | ------------ | - | ----- | ------------- |  | - | ------------ |  |  | ----- | ----- | - |  | - | ----- | -
|                                                   |  | Technical             |       |   |              |   |       |               |  |   |             
|                                                   |  | Olympic               |       |   | Guarantor    |   |       | Non-Guarantor |  |   | Intercompany |  |  |      
|                                                   |  | USA, Inc.             |       |   | Subsidiaries |   |       | Subsidiaries  |  |   | Eliminations |  |  | Total |      
|                                                   |  |                       |       |   |              |   |       |               |  |   |              |  |  |       |      
|                                                   |  | (Dollars in millions) |      
|HOMEBUILDING:                                      |  |                       |       |   |              |   |       |               |  |   |              |  |  |       |       |   |  |   |       |  
|Revenues                                           |  | $                     |      |   |              | $ | 533.6 |               |  | $ |             |  |  | $     |      |   |  | $ | 533.6 |  
|Cost of sales                                      |  |                       |      |   |              |   | 417.8 |               |  |   |             |  |  |       |      |   |  |   | 417.8 |  
|                                                   |  |                       |       |   |              |   |       |               |  |   |              |  |  |       |      
|Gross margin                                       |  |                       |      |   |              |   | 115.8 |               |  |   |             |  |  |       |      |   |  |   | 115.8 |  
|Selling, general and administrative expenses       |  |                       | 21.5  |   |              |   | 59.6  |               |  |   |             |  |  |       | (1.7  | ) |  |   | 79.4  |  
|(Income) from joint ventures, net                  |  |                       |      |   |              |   | (2.6  | )             |  |   |             |  |  |       |      |   |  |   | (2.6  | )
|Other (income) expense, net                        |  |                       | (47.3 | ) |              |   | 15.7  |               |  |   |             |  |  |       | 29.7  |   |  |   | (1.9  | )
|                                                   |  |                       |       |   |              |   |       |               |  |   |              |  |  |       |      
|Homebuilding pretax income                         |  |                       | 25.8  |   |              |   | 43.1  |               |  |   |             |  |  |       | (28.0 | ) |  |   | 40.9  |  
|FINANCIAL SERVICES:                                |  |                       |       |   |              |   |       |               |  |   |              |  |  |       |       |   |  |   |       |  
|Revenues                                           |  |                       |      |   |              |   |      |               |  |   | 11.7         |  |  |       | (1.7  | ) |  |   | 10.0  |  
|Expenses                                           |  |                       |      |   |              |   |      |               |  |   | 9.6          |  |  |       | (0.9  | ) |  |   | 8.7   |  
|                                                   |  |                       |       |   |              |   |       |               |  |   |              |  |  |       |      
|Financial Services pretax income                   |  |                       |      |   |              |   |      |               |  |   | 2.1          |  |  |       | (0.8  | ) |  |   | 1.3   |  
|                                                   |  |                       |       |   |              |   |       |               |  |   |              |  |  |       |      
|Income before provision (benefit) for income taxes |  |                       | 25.8  |   |              |   | 43.1  |               |  |   | 2.1          |  |  |       | (28.8 | ) |  |   | 42.2  |  
|Provision (benefit) for income taxes               |  |                       | (0.6  | ) |              |   | 16.2  |               |  |   | 0.2          |  |  |       |      |   |  |   | 15.8  |  
|                                                   |  |                       |       |   |              |   |       |               |  |   |              |  |  |       |      
|Net income                                         |  | $                     | 26.4  |   |              | $ | 26.9  |               |  | $ | 1.9          |  |  | $     | (28.8 | ) |  | $ | 26.4  |  
|                                                   |  |                       |       |   |              |   |       |               |  |   |              |  |  |       |      

18



---



##### Table of Contents



TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Consolidating Statement of Cash Flows


Three Months Ended March 31, 2006


|                                                                                     |                                                                         |                                                |        |      |              |   |       |               |        |   |              |     |      |       |       |   |   |   |        |      |        |  
|------------------------------------------------------------------------------------ | ----------------------------------------------------------------------- | ---------------------------------------------- | ------ | ---- | ------------ | - | ----- | ------------- | ------ | - | ------------ | --- | ---- | ----- | ----- | - | - | - | ------ | ---- | ------ | -
|                                                                                     |                                                                         | Technical                                      |        |      |              |   |       |               |        |   |             
|                                                                                     |                                                                         | Olympic                                        |        |      | Guarantor    |   |       | Non-Guarantor |        |   | Intercompany |     |      |      
|                                                                                     |                                                                         | USA, Inc.                                      |        |      | Subsidiaries |   |       | Subsidiaries  |        |   | Eliminations |     |      | Total |      
|                                                                                     |                                                                         |                                                |        |      |              |   |       |               |        |   |              |     |      |       |      
|                                                                                     |                                                                         | (Dollars in millions)                          |       
|Cash flows from operating activities:                                                |                                                                         |                                                |        |      |              |   |       |               |        |   |              |     |      |       |       |   |   |   |        |     
|Net income                                                                           |                                                                         | $                                              | 55.0   |      |              | $ | 57.3  |               |        | $ | 2.3          |     |      | $     | (59.6 | ) |   | $ | 55.0   |     
|Adjustments to reconcile net income to net cash used in by
    operating activities: |                                                                         |                                                |        |      |              |   |       |               |        |   |              |     |      |       |       |   |   |   |        |     
|                                                                                     | Depreciation and amortization                                           |                                                |        | 0.8  |              |   |       | 2.3           |        |   |              | 0.4 |      |       |       |  |   |   |        | 3.5  |       
|                                                                                     | Non-cash compensation expense                                           |                                                |        | 5.7  |              |   |       |              |        |   |              |    |      |       |       |  |   |   |        | 5.7  |       
|                                                                                     | Loss on impairment of inventory                                         |                                                |        |     |              |   |       | 5.4           |        |   |              |    |      |       |       |  |   |   |        | 5.4  |       
|                                                                                     | Deferred income taxes                                                   |                                                |        | (2.1 | )            |   |       |              |        |   |              |    |      |       |       |  |   |   |        | (2.1 | )     
|                                                                                     | Undistributed equity in earnings from unconsolidated joint
    ventures |                                                |        |     |              |   |       | (8.5          | )      |   |              |    |      |       |       |  |   |   |        | (8.5 | )     
|                                                                                     | Distributions of earnings from unconsolidated joint ventures            |                                                |        |     |              |   |       | 13.2          |        |   |              |    |      |       |       |  |   |   |        | 13.2 |       
|                                                                                     | Changes in operating assets and liabilities:                            |                                                |        |      |              |   |       |               |        |   |              |     |      |       |       |   |   |   |        |      |       
|                                                                                     |                                                                         | Restricted cash                                |        |      | (0.3         | ) |       |               | 1.0    |   |              |     | (0.1 | )     |       |   |  |   |        |      | 0.6    |  
|                                                                                     |                                                                         | Inventory                                      |        |      |             |   |       |               | (136.3 | ) |              |     |     |       |       |   |  |   |        |      | (136.3 | )
|                                                                                     |                                                                         | Other assets                                   |        |      | 1.2          |   |       |               | (8.1   | ) |              |     | 0.6  |       |       |   |  |   |        |      | (6.3   | )
|                                                                                     |                                                                         | Receivables from unconsolidated joint ventures |        |      |             |   |       |               | (13.3  | ) |              |     |     |       |       |   |  |   |        |      | (13.3  | )
|                                                                                     |                                                                         | Accounts payable and other liabilities         |        |      | (93.1        | ) |       |               | 37.7   |   |              |     | (0.4 | )     |       |   |  |   |        |      | (55.8  | )
|                                                                                     |                                                                         | Customer deposits                              |        |      |             |   |       |               | (1.4   | ) |              |     |     |       |       |   |  |   |        |      | (1.4   | )
|                                                                                     |                                                                         | Mortgage loans held for sale                   |        |      |             |   |       |               |       |   |              |     | (5.7 | )     |       |   |  |   |        |      | (5.7   | )
|                                                                                     |                                                                         |                                                |        |      |              |   |       |               |        |   |              |     |      |       |      
|Net cash used in operating activities                                                |                                                                         |                                                | (32.8  | )    |              |   | (50.7 | )             |        |   | (2.9         | )   |      |       | (59.6 | ) |   |   | (146.0 | )   
|Cash flows from investing activities:                                                |                                                                         |                                                |        |      |              |   |       |               |        |   |              |     |      |       |       |   |   |   |        |     
|Net additions to property and equipment                                              |                                                                         |                                                | (0.4   | )    |              |   | (5.0  | )             |        |   | (0.7         | )   |      |       |      |   |   |   | (6.1   | )   
|Investments in unconsolidated joint ventures                                         |                                                                         |                                                |       |      |              |   | (4.6  | )             |        |   |             |     |      |       |      |   |   |   | (4.6   | )   
|Capital distributions from joint ventures                                            |                                                                         |                                                |       |      |              |   | 2.2   |               |        |   |             |     |      |       |      |   |   |   | 2.2    |     
|                                                                                     |                                                                         |                                                |        |      |              |   |       |               |        |   |              |     |      |       |      
|Net cash used in investing activities                                                |                                                                         |                                                | (0.4   | )    |              |   | (7.4  | )             |        |   | (0.7         | )   |      |       |      |   |   |   | (8.5   | )   
|Cash flows from financing activities:                                                |                                                                         |                                                |        |      |              |   |       |               |        |   |              |     |      |       |       |   |   |   |        |     
|Net proceeds from revolving credit facility                                          |                                                                         |                                                | 235.0  |      |              |   |      |               |        |   |             |     |      |       |      |   |   |   | 235.0  |     
|Net proceeds from Financial Services bank borrowings                                 |                                                                         |                                                |       |      |              |   |      |               |        |   | 5.6          |     |      |       |      |   |   |   | 5.6    |     
|Payments for deferred financing costs                                                |                                                                         |                                                | (2.8   | )    |              |   |      |               |        |   |             |     |      |       |      |   |   |   | (2.8   | )   
|Excess income tax benefit from exercise of stock options                             |                                                                         |                                                | 0.1    |      |              |   |      |               |        |   |             |     |      |       |      |   |   |   | 0.1    |     
|Proceeds from stock option exercises                                                 |                                                                         |                                                | 0.2    |      |              |   |      |               |        |   |             |     |      |       |      |   |   |   | 0.2    |     
|Dividends paid                                                                       |                                                                         |                                                | (0.9   | )    |              |   |      |               |        |   |             |     |      |       |      |   |   |   | (0.9   | )   
|Increase (decrease) in intercompany transactions                                     |                                                                         |                                                | (136.5 | )    |              |   | 80.8  |               |        |   | (3.9         | )   |      |       | 59.6  |   |   |   |       |     
|                                                                                     |                                                                         |                                                |        |      |              |   |       |               |        |   |              |     |      |       |      
|Net cash provided by financing activities                                            |                                                                         |                                                | 95.1   |      |              |   | 80.8  |               |        |   | 1.7          |     |      |       | 59.6  |   |   |   | 237.2  |     
|                                                                                     |                                                                         |                                                |        |      |              |   |       |               |        |   |              |     |      |       |      
|Increase (decrease) in cash and cash equivalents                                     |                                                                         |                                                | 61.9   |      |              |   | 22.7  |               |        |   | (1.9         | )   |      |       |      |   |   |   | 82.7   |     
|Cash and cash equivalents at beginning of period                                     |                                                                         |                                                | 20.2   |      |              |   | 6.0   |               |        |   | 8.7          |     |      |       |      |   |   |   | 34.9   |     
|                                                                                     |                                                                         |                                                |        |      |              |   |       |               |        |   |              |     |      |       |      
|Cash and cash equivalents at end of period                                           |                                                                         | $                                              | 82.1   |      |              | $ | 28.7  |               |        | $ | 6.8          |     |      | $     |      |   |   | $ | 117.6  |     
|                                                                                     |                                                                         |                                                |        |      |              |   |       |               |        |   |              |     |      |       |      

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TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Consolidating Statement of Cash Flows


Three Months Ended March 31, 2005


|                                                                                                |                                                                         |                                                |       |                       |              |   |       |               |        |   |              |   |      |       |       |   |   |   |        |      |        |  
|----------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ---------------------------------------------- | ----- | --------------------- | ------------ | - | ----- | ------------- | ------ | - | ------------ | - | ---- | ----- | ----- | - | - | - | ------ | ---- | ------ | -
|                                                                                                |                                                                         | Technical                                      |       |                       |              |   |       |               |        |   |             
|                                                                                                |                                                                         | Olympic                                        |       |                       | Guarantor    |   |       | Non-Guarantor |        |   | Intercompany |   |      |      
|                                                                                                |                                                                         | USA, Inc.                                      |       |                       | Subsidiaries |   |       | Subsidiaries  |        |   | Eliminations |   |      | Total |      
|                                                                                                |                                                                         |                                                |       |                       |              |   |       |               |        |   |              |   |      |       |      
|                                                                                                |                                                                         |                                                |       | (Dollars in millions) |              |   |       |               |       
|Cash flows from operating activities:                                                           |                                                                         |                                                |       |                       |              |   |       |               |        |   |              |   |      |       |       |   |   |   |        |     
|Net income                                                                                      |                                                                         | $                                              | 26.4  |                       |              | $ | 26.9  |               |        | $ | 1.9          |   |      | $     | (28.8 | ) |   | $ | 26.4   |     
|Adjustments to reconcile net income to net cash (used in)
    provided by operating activities: |                                                                         |                                                |       |                       |              |   |       |               |        |   |              |   |      |       |       |   |   |   |        |     
|                                                                                                | Depreciation and amortization                                           |                                                |       | 0.9                   |              |   |       | 2.0           |        |   |              |  |      |       |       |  |   |   |        | 2.9  |       
|                                                                                                | Non-cash compensation expense                                           |                                                |       | 5.2                   |              |   |       |              |        |   |              |  |      |       |       |  |   |   |        | 5.2  |       
|                                                                                                | Undistributed equity in earnings from unconsolidated joint
    ventures |                                                |       |                      |              |   |       | (1.3          | )      |   |              |  |      |       |       |  |   |   |        | (1.3 | )     
|                                                                                                | Changes in operating assets and liabilities:                            |                                                |       |                       |              |   |       |               |        |   |              |   |      |       |       |   |   |   |        |      |       
|                                                                                                |                                                                         | Restricted cash                                |       |                       | (1.1         | ) |       |               | (4.5   | ) |              |   |     |       |       |   |  |   |        |      | (5.6   | )
|                                                                                                |                                                                         | Inventory                                      |       |                       |             |   |       |               | (106.5 | ) |              |   |     |       |       |   |  |   |        |      | (106.5 | )
|                                                                                                |                                                                         | Other assets                                   |       |                       | (52.0        | ) |       |               | 42.2   |   |              |   | 0.2  |       |       |   |  |   |        |      | (9.6   | )
|                                                                                                |                                                                         | Receivables from unconsolidated joint ventures |       |                       |             |   |       |               | (34.2  | ) |              |   |     |       |       |   |  |   |        |      | (34.2  | )
|                                                                                                |                                                                         | Accounts payable and other liabilities         |       |                       | (13.2        | ) |       |               | 19.0   |   |              |   | (0.5 | )     |       |   |  |   |        |      | 5.3    |  
|                                                                                                |                                                                         | Customer deposits                              |       |                       |             |   |       |               | 10.7   |   |              |   |     |       |       |   |  |   |        |      | 10.7   |  
|                                                                                                |                                                                         | Mortgage loans held for sale                   |       |                       |             |   |       |               |       |   |              |   | 5.0  |       |       |   |  |   |        |      | 5.0    |  
|                                                                                                |                                                                         |                                                |       |                       |              |   |       |               |        |   |              |   |      |       |      
|Net cash (used in) provided by operating activities                                             |                                                                         |                                                | (33.8 | )                     |              |   | (45.7 | )             |        |   | 6.6          |   |      |       | (28.8 | ) |   |   | (101.7 | )   
|Cash flows from investing activities:                                                           |                                                                         |                                                |       |                       |              |   |       |               |        |   |              |   |      |       |       |   |   |   |        |     
|Net additions to property and equipment                                                         |                                                                         |                                                | (1.9  | )                     |              |   | (0.9  | )             |        |   |             |   |      |       |      |   |   |   | (2.8   | )   
|Investments in unconsolidated joint ventures                                                    |                                                                         |                                                |      |                       |              |   | (10.2 | )             |        |   |             |   |      |       |      |   |   |   | (10.2  | )   
|                                                                                                |                                                                         |                                                |       |                       |              |   |       |               |        |   |              |   |      |       |      
|Net cash used in investing activities                                                           |                                                                         |                                                | (1.9  | )                     |              |   | (11.1 | )             |        |   |             |   |      |       |      |   |   |   | (13.0  | )   
|Cash flows from financing activities:                                                           |                                                                         |                                                |       |                       |              |   |       |               |        |   |              |   |      |       |       |   |   |   |        |     
|Net proceeds on Financial Services bank borrowings                                              |                                                                         |                                                |      |                       |              |   |      |               |        |   | 4.0          |   |      |       |      |   |   |   | 4.0    |     
|Payments for deferred financing costs                                                           |                                                                         |                                                | (0.3  | )                     |              |   |      |               |        |   |             |   |      |       |      |   |   |   | (0.3   | )   
|Dividends paid                                                                                  |                                                                         |                                                | (0.7  | )                     |              |   |      |               |        |   |             |   |      |       |      |   |   |   | (0.7   | )   
|Increase (decrease) in intercompany transactions                                                |                                                                         |                                                | (52.7 | )                     |              |   | 73.9  |               |        |   | (50.0        | ) |      |       | 28.8  |   |   |   |       |     
|                                                                                                |                                                                         |                                                |       |                       |              |   |       |               |        |   |              |   |      |       |      
|Net cash (used in) provided by financing activities                                             |                                                                         |                                                | (53.7 | )                     |              |   | 73.9  |               |        |   | (46.0        | ) |      |       | 28.8  |   |   |   | 3.0    |     
|                                                                                                |                                                                         |                                                |       |                       |              |   |       |               |        |   |              |   |      |       |      
|(Decrease) increase in cash and cash equivalents                                                |                                                                         |                                                | (89.4 | )                     |              |   | 17.1  |               |        |   | (39.4        | ) |      |       |      |   |   |   | (111.7 | )   
|Cash and cash equivalents at beginning of period                                                |                                                                         |                                                | 159.3 |                       |              |   | 58.3  |               |        |   | 50.9         |   |      |       |      |   |   |   | 268.5  |     
|                                                                                                |                                                                         |                                                |       |                       |              |   |       |               |        |   |              |   |      |       |      
|Cash and cash equivalents at end of period                                                      |                                                                         | $                                              | 69.9  |                       |              | $ | 75.4  |               |        | $ | 11.5         |   |      | $     |      |   |   | $ | 156.8  |     
|                                                                                                |                                                                         |                                                |       |                       |              |   |       |               |        |   |              |   |      |       |      

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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
    CONDITION AND RESULTS OF OPERATIONS

Disclosures about Segments
of an Enterprise and Related Information 10-K


Executive Summary




|                     |  |                                 |  |                  |  |          
|-------------------- |  | ------------------------------- |  | ---------------- |  | ---------
|Florida              |  | Mid-Atlantic                    |  | Texas            |  | West     
|                     |  |                                 |  |                  |  |          
|Jacksonville         |  | Baltimore/Southern Pennsylvania |  | Austin           |  | Colorado 
|Orlando              |  | Delaware                        |  | Dallas/Ft. Worth |  | Las Vegas
|Southeast Florida    |  | Nashville                       |  | Houston          |  | Phoenix  
|Southwest Florida    |  | Northern Virginia               |  | San Antonio      |  |          
|Tampa/St. Petersburg |  |                                 |  |                  |  |          

10-Q/A,






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Homebuilding Operations.


on-site




Financial Services Operations.


Critical Accounting Policies




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10-K/A


Recent Developments


1 4 pari passu


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Results of Operations  Consolidated




| |                                                                                    
| | -----------------------------------------------------------------------------------
| | Three Months Ended March 31, 2006 Compared to Three
    Months Ended March 31, 2005









Results of Operations




| |                                                                                    
| | -----------------------------------------------------------------------------------
| | Three Months Ended March 31, 2006 Compared to Three
    Months Ended March 31, 2005





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| |                                                 
| | ------------------------------------------------
| | Net Sales Orders and Homes in Backlog (combined)







| |                                   
| | ----------------------------------
| | Backlog Sales Value (consolidated)





| |                                  
| | ---------------------------------
| | Joint Venture Backlog Sales Value



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| |                   
| | ------------------
| | Financial Services







| |                    
| | -------------------
| | Reportable Segments



Homebuilding Operations




Florida:


Mid-Atlantic:


Texas:


West:


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Selected Homebuilding
Operations and Financial Data


|                                |                |                    |       |       |      |   |       |       | 
|------------------------------- | -------------- | ------------------ | ----- | ----- | ---- | - | ----- | ----- | 
|                                |                | Three Months Ended |      
|                                |                | March 31,          |      
|                                |                |                    |      
|                                |                | 2006               |       |       | 2005 |  
|                                |                |                    |       |       |      |  
|Revenues:                       |                |                    |       |       |      |   |       |      
|Homebuilding Florida:           |                |                    |       |       |      |   |       |      
|                                | Sales of homes |                    | $     | 266.0 |      |   | $     | 212.9 | 
|                                | Sales of land  |                    |       |      |      |   |       | 0.1   | 
|                                |                |                    |       |       |      |  
|Total Homebuilding Florida      |                | $                  | 266.0 |       |      | $ | 213.0 |      
|Homebuilding Mid-Atlantic:      |                |                    |       |       |      |   |       |      
|                                | Sales of homes |                    | $     | 70.0  |      |   | $     | 47.0  | 
|                                | Sales of land  |                    |       | 6.5   |      |   |       | 0.2   | 
|                                |                |                    |       |       |      |  
|Total Homebuilding Mid-Atlantic |                | $                  | 76.5  |       |      | $ | 47.2  |      
|Homebuilding Texas:             |                |                    |       |       |      |   |       |      
|                                | Sales of homes |                    | $     | 158.1 |      |   | $     | 94.1  | 
|                                | Sales of land  |                    |       | 2.3   |      |   |       | 2.2   | 
|                                |                |                    |       |       |      |  
|Total Homebuilding Texas        |                | $                  | 160.4 |       |      | $ | 96.3  |      
|Homebuilding West:              |                |                    |       |       |      |   |       |      
|                                | Sales of homes |                    | $     | 92.2  |      |   | $     | 158.4 | 
|                                | Sales of land  |                    |       | 19.2  |      |   |       | 18.7  | 
|                                |                |                    |       |       |      |  
|Total Homebuilding West         |                | $                  | 111.4 |       |      | $ | 177.1 |      
|                                |                |                    |       |       |      |  
|Total Homebuilding Revenues     |                | $                  | 614.3 |       |      | $ | 533.6 |      
|                                |                |                    |       |       |      |  

|                                         |              |                    |       |      |      |   |       |      | 
|---------------------------------------- | ------------ | ------------------ | ----- | ---- | ---- | - | ----- | ---- | 
|                                         |              | Three Months Ended |      
|                                         |              | March 31,          |      
|                                         |              |                    |      
|                                         |              | 2006               |       |      | 2005 |  
|                                         |              |                    |       |      |      |  
|Results of Operations:                   |              |                    |       |      |      |   |       |     
|Homebuilding:                            |              |                    |       |      |      |   |       |     
|                                         | Florida      |                    | $     | 51.4 |      |   | $     | 27.9 | 
|                                         | Mid-Atlantic |                    |       | 4.6  |      |   |       | 5.3  | 
|                                         | Texas        |                    |       | 13.4 |      |   |       | 4.0  | 
|                                         | West         |                    |       | 32.1 |      |   |       | 23.1 | 
|Financial Services                       |              |                    | 4.5   |      |      |   | 1.3   |     
|Corporate and unallocated                |              |                    | (18.7 | )    |      |   | (19.4 | )   
|                                         |              |                    |       |      |      |  
|Income before provision for income taxes |              | $                  | 87.3  |      |      | $ | 42.2  |     
|                                         |              |                    |       |      |      |  

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|                                    |              |                              |       |     |      |   |       |       |  |  |       |     |  |   |       |       | 
|----------------------------------- | ------------ | ---------------------------- | ----- | --- | ---- | - | ----- | ----- |  |  | ----- | --- |  | - | ----- | ----- | 
|                                    |              | Three Months Ended March 31, |      
|                                    |              |                              |      
|                                    |              | 2006                         |       |     | 2005 |  
|                                    |              |                              |       |     |      |  
|Deliveries:                         |              | Homes                        |       |     | $    |   |       | Homes |  |  | $     |    
|                                    |              |                              |       |     |      |   |       |       |  |  |       |    
|Consolidated:                       |              |                              |       |     |      |   |       |       |  |  |       |     |  |   |       |      
|                                    | Florida      |                              |       | 746 |      |   | $     | 266.0 |  |  |       | 757 |  |   | $     | 212.9 | 
|                                    | Mid-Atlantic |                              |       | 162 |      |   |       | 70.0  |  |  |       | 122 |  |   |       | 47.0  | 
|                                    | Texas        |                              |       | 645 |      |   |       | 158.1 |  |  |       | 393 |  |   |       | 94.1  | 
|                                    | West         |                              |       | 321 |      |   |       | 92.2  |  |  |       | 595 |  |   |       | 158.4 | 
|                                    |              |                              |       |     |      |   |       |       |  |  |       |    
|Consolidated total                  |              |                              | 1,874 |     |      |   | 586.3 |       |  |  | 1,867 |     |  |   | 512.4 |      
|Unconsolidated joint ventures:      |              |                              |       |     |      |   |       |       |  |  |       |     |  |   |       |      
|                                    | Florida      |                              |       | 372 |      |   |       | 116.2 |  |  |       |    |  |   |       |      | 
|                                    | Mid-Atlantic |                              |       | 60  |      |   |       | 17.5  |  |  |       | 15  |  |   |       | 4.2   | 
|                                    | West         |                              |       | 463 |      |   |       | 168.5 |  |  |       | 126 |  |   |       | 34.1  | 
|                                    |              |                              |       |     |      |   |       |       |  |  |       |    
|Total unconsolidated joint ventures |              |                              | 895   |     |      |   | 302.2 |       |  |  | 141   |     |  |   | 38.3  |      
|                                    |              |                              |       |     |      |   |       |       |  |  |       |    
|Combined total                      |              |                              | 2,769 |     |      | $ | 888.5 |       |  |  | 2,008 |     |  | $ | 550.7 |      
|                                    |              |                              |       |     |      |   |       |       |  |  |       |    

|                                    |              |                              |       |     |      |   |       |       |  |  |       |     |  |   |       |       | 
|----------------------------------- | ------------ | ---------------------------- | ----- | --- | ---- | - | ----- | ----- |  |  | ----- | --- |  | - | ----- | ----- | 
|                                    |              | Three Months Ended March 31, |      
|                                    |              |                              |      
|                                    |              | 2006                         |       |     | 2005 |  
|                                    |              |                              |       |     |      |  
|Net Sales Orders(1):                |              | Homes                        |       |     | $    |   |       | Homes |  |  | $     |    
|                                    |              |                              |       |     |      |   |       |       |  |  |       |    
|Consolidated:                       |              |                              |       |     |      |   |       |       |  |  |       |     |  |   |       |      
|                                    | Florida      |                              |       | 626 |      |   | $     | 254.8 |  |  |       | 706 |  |   | $     | 253.5 | 
|                                    | Mid-Atlantic |                              |       | 159 |      |   |       | 67.2  |  |  |       | 191 |  |   |       | 83.9  | 
|                                    | Texas        |                              |       | 818 |      |   |       | 203.2 |  |  |       | 689 |  |   |       | 165.8 | 
|                                    | West         |                              |       | 554 |      |   |       | 191.9 |  |  |       | 835 |  |   |       | 274.6 | 
|                                    |              |                              |       |     |      |   |       |       |  |  |       |    
|Consolidated total                  |              |                              | 2,157 |     |      |   | 717.1 |       |  |  | 2,421 |     |  |   | 777.8 |      
|Unconsolidated joint ventures:      |              |                              |       |     |      |   |       |       |  |  |       |     |  |   |       |      
|                                    | Florida      |                              |       | 34  |      |   |       | 22.0  |  |  |       |    |  |   |       |      | 
|                                    | Mid-Atlantic |                              |       | 43  |      |   |       | 11.6  |  |  |       | 33  |  |   |       | 10.1  | 
|                                    | West         |                              |       | 414 |      |   |       | 141.3 |  |  |       | 281 |  |   |       | 92.7  | 
|                                    |              |                              |       |     |      |   |       |       |  |  |       |    
|Total unconsolidated joint ventures |              |                              | 491   |     |      |   | 174.9 |       |  |  | 314   |     |  |   | 102.8 |      
|                                    |              |                              |       |     |      |   |       |       |  |  |       |    
|Combined total                      |              |                              | 2,648 |     |      | $ | 892.0 |       |  |  | 2,735 |     |  | $ | 880.6 |      
|                                    |              |                              |       |     |      |   |       |       |  |  |       |    






|    |                     
|--- | --------------------
|(1) | Net of cancellations

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|                                    |              |                |       |       |                |   |         |         |     |   |       |     |  |   |       |       |       |   |         |       |  |   |     |     | 
|----------------------------------- | ------------ | -------------- | ----- | ----- | -------------- | - | ------- | ------- | --- | - | ----- | --- |  | - | ----- | ----- | ----- | - | ------- | ----- |  | - | --- | --- | 
|                                    |              | March 31, 2006 |       |       | March 31, 2005 |  
|                                    |              |                |       |       |                |  
|                                    |              |                |       | Avg   |                |   |         |         | Avg |  
|Sales Backlog:                      |              | Homes          |       |       | $              |   |         | Price   |     |   | Homes |     |  | $ |       |       | Price |  
|                                    |              |                |       |       |                |   |         |         |     |   |       |     |  |   |       |       |       |  
|Consolidated:                       |              |                |       |       |                |   |         |         |     |   |       |     |  |   |       |       |       |   |         |       |  |   |     |    
|                                    | Florida      |                |       | 2,817 |                |   | $       | 1,025.5 |     |   | $     | 364 |  |   |       | 2,845 |       |   | $       | 939.5 |  |   | $   | 330 | 
|                                    | Mid-Atlantic |                |       | 243   |                |   |         | 91.8    |     |   | $     | 378 |  |   |       | 415   |       |   |         | 178.8 |  |   | $   | 431 | 
|                                    | Texas        |                |       | 1,411 |                |   |         | 364.6   |     |   | $     | 258 |  |   |       | 839   |       |   |         | 209.1 |  |   | $   | 249 | 
|                                    | West         |                |       | 1,084 |                |   |         | 403.5   |     |   | $     | 372 |  |   |       | 1,549 |       |   |         | 505.1 |  |   | $   | 326 | 
|                                    |              |                |       |       |                |   |         |         |     |   |       |     |  |   |       |       |       |  
|Consolidated total                  |              |                | 5,555 |       |                |   | 1,885.4 |         |     | $ | 339   |     |  |   | 5,648 |       |       |   | 1,832.5 |       |  | $ | 324 |    
|Unconsolidated joint ventures:      |              |                |       |       |                |   |         |         |     |   |       |     |  |   |       |       |       |   |         |       |  |   |     |    
|                                    | Florida      |                |       | 2,776 |                |   |         | 801.4   |     |   | $     | 289 |  |   |       | 32    |       |   |         | 7.7   |  |   | $   | 242 | 
|                                    | Mid-Atlantic |                |       | 75    |                |   |         | 25.4    |     |   | $     | 339 |  |   |       | 154   |       |   |         | 45.4  |  |   | $   | 295 | 
|                                    | West         |                |       | 1,494 |                |   |         | 558.3   |     |   | $     | 374 |  |   |       | 656   |       |   |         | 221.7 |  |   | $   | 338 | 
|                                    |              |                |       |       |                |   |         |         |     |   |       |     |  |   |       |       |       |  
|Total unconsolidated joint ventures |              |                | 4,345 |       |                |   | 1,385.1 |         |     | $ | 319   |     |  |   | 842   |       |       |   | 274.8   |       |  | $ | 326 |    
|                                    |              |                |       |       |                |   |         |         |     |   |       |     |  |   |       |       |       |  
|Combined total                      |              |                | 9,900 |       |                | $ | 3,270.5 |         |     | $ | 330   |     |  |   | 6,490 |       |       | $ | 2,107.3 |       |  | $ | 325 |    
|                                    |              |                |       |       |                |   |         |         |     |   |       |     |  |   |       |       |       |  

|                                    |              |                              |     |       |        |   |     |            |       |   |        |     |  |   |     |     | 
|----------------------------------- | ------------ | ---------------------------- | --- | ----- | ------ | - | --- | ---------- | ----- | - | ------ | --- |  | - | --- | --- | 
|                                    |              | Three Months Ended March 31, |    
|                                    |              |                              |    
|                                    |              | 2006                         |     |       | 2005   |  
|                                    |              |                              |     |       |        |  
|                                    |              |                              |     | Sales |        |   |     |            | Sales |  
|Average Price:                      |              | Deliveries                   |     |       | Orders |   |     | Deliveries |       |   | Orders |    
|                                    |              |                              |     |       |        |   |     |            |       |   |        |    
|Consolidated:                       |              |                              |     |       |        |   |     |            |       |   |        |     |  |   |     |    
|                                    | Florida      |                              | $   | 357   |        |   | $   | 407        |       |   | $      | 281 |  |   | $   | 359 | 
|                                    | Mid-Atlantic |                              | $   | 432   |        |   | $   | 422        |       |   | $      | 385 |  |   | $   | 439 | 
|                                    | Texas        |                              | $   | 245   |        |   | $   | 248        |       |   | $      | 239 |  |   | $   | 241 | 
|                                    | West         |                              | $   | 287   |        |   | $   | 346        |       |   | $      | 266 |  |   | $   | 329 | 
|Consolidated total                  |              | $                            | 313 |       |        | $ | 332 |            |       | $ | 274    |     |  | $ | 321 |    
|Unconsolidated joint ventures:      |              |                              |     |       |        |   |     |            |       |   |        |     |  |   |     |    
|                                    | Florida      |                              | $   | 312   |        |   | $   | 647        |       |   | $      |    |  |   | $   |    | 
|                                    | Mid-Atlantic |                              | $   | 292   |        |   | $   | 268        |       |   | $      | 277 |  |   | $   | 305 | 
|                                    | West         |                              | $   | 364   |        |   | $   | 341        |       |   | $      | 271 |  |   | $   | 330 | 
|Total unconsolidated joint ventures |              | $                            | 338 |       |        | $ | 356 |            |       | $ | 272    |     |  | $ | 327 |    
|Combined total                      |              | $                            | 321 |       |        | $ | 337 |            |       | $ | 274    |     |  | $ | 322 |    



| |                                                                                    
| | -----------------------------------------------------------------------------------
| | Three Months Ended March 31, 2006 compared to Three
    Months Ended March 31, 2005

Florida:




Mid-Atlantic:


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Texas:




West:




Financial Services Operations




|                                 |  |              |      |  |      |   |      | 
|-------------------------------- |  | ------------ | ---- |  | ---- | - | ---- | 
|                                 |  | Three Months |     
|                                 |  | Ended        |     
|                                 |  | March 31,    |     
|                                 |  |              |     
|                                 |  | 2006         |      |  | 2005 |  
|                                 |  |              |      |  |      |  
|Revenues                         |  | $            | 15.2 |  |      | $ | 10.0 | 
|Expenses                         |  |              | 10.7 |  |      |   | 8.7  | 
|                                 |  |              |      |  |      |  
|Financial Services pretax income |  | $            | 4.5  |  |      | $ | 1.3  | 
|                                 |  |              |      |  |      |  

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES




| |                         
| | ------------------------
| | Sources and Uses of Cash



30



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| |                     
| | --------------------
| | Financing Activities

3 8 1 2 1 2


1 4


pari passu pari
passu




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##### Table of Contents



|                           |  |                                  |         |   |                   |   |         |  
|-------------------------- |  | -------------------------------- | ------- | - | ----------------- | - | ------- | -
|                           |  | Homebuilding Net Debt to Capital |        
|                           |  |                                  |        
|                           |  | March 31, 2006                   |         |   | December 31, 2005 |  
|                           |  |                                  |         |   |                   |  
|                           |  | (Dollars in millions)            |        
|Notes payable              |  | $                                | 811.6   |   |                   | $ | 811.6   |  
|Bank borrowings            |  |                                  | 300.0   |   |                   |   | 65.0    |  
|                           |  |                                  |         |   |                   |  
|Homebuilding borrowings(1) |  | $                                | 1,111.6 |   |                   | $ | 876.6   |  
|Less: unrestricted cash    |  |                                  | 110.8   |   |                   |   | 26.2    |  
|                           |  |                                  |         |   |                   |  
|Homebuilding net debt      |  | $                                | 1,000.8 |   |                   | $ | 850.4   |  
|Stockholders equity       |  |                                  | 1,030.7 |   |                   |   | 971.3   |  
|                           |  |                                  |         |   |                   |  
|Total capital(2)           |  | $                                | 2,031.5 |   |                   | $ | 1,821.7 |  
|                           |  |                                  |         |   |                   |  
|Ratio                      |  |                                  | 49.3    | % |                   |   | 46.7    | %






|    |                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Does not include obligations for inventory not owned of
    $232.5 million at March 31, 2006 and
    $124.6 million at December 31, 2005, all of which are
    non-recourse to us.
|   
|(2) | Does not include Financial Services bank borrowings of
    $40.7 million at March 31, 2006 and $35.1 million
    at December 31, 2005.                                            



1 4




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| |                               
| | ------------------------------
| | Off Balance Sheet Arrangements



| |                                   
| | ----------------------------------
| | Land and Homesite Option Contracts







| |                                             
| | --------------------------------------------
| | Investments in Unconsolidated Joint Ventures



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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS


10-Q/A




| |   |                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our expectations regarding our continued use of option contracts
    and investments in unconsolidated joint ventures to control
    homesites, reduce and share the risks associated with land
    ownership and development, and manage our business, and their
    effect on our business;
|
| |  | our expectations regarding the labor and supply shortages and
    increases in costs of materials caused by the recent active
    hurricane seasons and rising costs of petroleum;                                                                                                           
|
| |  | our expectations regarding the housing market for 2006 and its
    impact on our operational and financial results;                                                                                                                                                                          
|
| |  | our expectations regarding the impact on our business and
    profits of intentional efforts by us and our joint ventures to
    slow sales rates to match production rates;                                                                                                                 
|
| |  | our expectations regarding the effects of decreased demand in
    certain markets, intentional efforts to slow sales rates to
    match production rates, higher cancellation rates, and land
    development and permitting issues on our combined net sales
    orders;                    
|
| |  | our expectations regarding our use of cash in operations;                                                                                                                                                                                                                                    
|
| |  | our expectations regarding future land sales; and                                                                                                                                                                                                                                            
|
| |  | our estimate that we have adequate financial resources to meet
    our current and anticipated working capital, including our
    annual debt service payments, and land acquisition and
    development needs.                                                                              





| |   |                                                                                                                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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;                                                                                                                                                                                                                                                        
|
| |  | 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 consumer
    confidence or the demand for, or the prices of, housing;
|
| |  | our ability to identify and acquire, at anticipated prices,
    additional homebuilding opportunities and/or to effect our
    growth strategies in our homebuilding operations and financial
    services business;                                                                                                              
|
| |  | our ability to successfully dispose of developed properties or
    undeveloped land or homesites at expected prices and within
    anticipated time frames;                                                                                                                                                                       

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| |   |                                                                                                                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our relationship with Technical Olympic S.A. and its control
    over our business activities;                                                                                                                                                                                                   
|
| |  | events which would impede our ability to open new communities
    and/or deliver homes within anticipated timeframes and/or within
    anticipated budgets;                                                                                                                                      
|
| |  | an increase in the cost, or shortages in the availability, of
    qualified labor and materials;                                                                                                                                                                                                 
|
| |  | our ability to compete in our existing and future markets;                                                                                                                                                                                                                                       
|
| |  | 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;                                                                                                                                                                                                                         
|
| |  | currently unanticipated delays or disruptions in the land
    development, permitting or construction process;                                                                                                                                                                                   
|
| |  | the impact of hurricanes, tornadoes or other natural disasters
    or weather conditions on our business, including the potential
    for shortages and increased costs of materials and qualified
    labor and the potential for delays in construction and obtaining
    government approvals;
|
| |  | an increase or change in government regulations, or in the
    interpretation and/or enforcement of existing government
    regulations; and                                                                                                                                                     
|
| |  | the impact of any or all of the above risks on the operations or
    financial results of our unconsolidated joint ventures.                                                                                                                                                                     






|        |                                                               
|------- | --------------------------------------------------------------
|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK





10-K/A







|        |                        
|------- | -----------------------
|ITEM 4. | CONTROLS AND PROCEDURES



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##### Table of Contents



10-Q/





PART II. OTHER INFORMATION







|         |             
|-------- | ------------
|ITEM 1A. | RISK FACTORS

10-K/A 10-K/A.







|        |         
|------- | --------
|ITEM 6. | EXHIBITS

|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | -- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 4  | .14         |  | Indenture for the
    81/4% Senior
    Notes due 2011, dated as of April 12, 2006, among Technical
    Olympic USA, Inc., the subsidiaries named therein and Wells
    Fargo Bank, National Association, as Trustee. (Incorporated by
    reference to Exhibit 4.14 to the Registration Statement on
    Form S-4 previously filed by the Registrant (Registration
    Statement No.333-133499)).
|       
|        | 4  | .15         |  | Registration Rights Agreement, dated as of April 12, 2006,
    among Technical Olympic USA, Inc., the subsidiaries named
    therein, and Deutsche Bank Securities Inc. (Incorporated by
    reference to Exhibit 4.15 to the Registration Statement on
    Form S-4 previously filed by the Registrant (Registration
    Statement No. 333-133499)).                                            
|       
|        | 4  | .16         |  | Form of Technical Olympic USA, Inc.
    81/4% Senior
    Note due 2011 (included in Exhibit A to Exhibit 4.14).
    (Incorporated by reference to Exhibit 4.16 to the
    Registration Statement on Form S-4 previously filed by the
    Registrant (Registration Statement No. 333-133499)).                                                                                                    
|       
|        | 10 | .15         |  | Term Sheet for the Performance Unit Program under the Technical
    Olympic USA, Inc. Annual and Long-Term Incentive Plan, as
    amended and restated.                                                                                                                                                                                                                                          
|       
|        | 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






| |                            
| | ---------------------------
| | Technical Olympic USA, Inc.



| |     |                      
| | --- | ---------------------
| | By: | /s/ Stephen M. Wagman



| |                        
| | -----------------------
| |                        
| | Name: Stephen M. Wagman

| |        |                                   
| | ------ | ----------------------------------
| | Title: | Executive Vice President and Chief

| |                  
| | -----------------
| | Financial Officer



| |     |                    
| | --- | -------------------
| | By: | /s/ Randy L. Kotler



| |                      
| | ---------------------
| |                      
| | Name: Randy L. Kotler

| |        |                          
| | ------ | -------------------------
| | Title: | Senior Vice President and

| |                         
| | ------------------------
| | Chief Accounting Officer



37