##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


Form 10-Q

|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | QUARTERLY REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|          
|           |  | For the quarterly period ended June 30,
    2004                                            
|          
|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: 000-23677

TECHNICAL OLYMPIC USA, INC.

(Exact name of Registrant as specified in its
charter)


|                                                                                                     |  |                                                   
|---------------------------------------------------------------------------------------------------- |  | --------------------------------------------------
|Delaware(State or other jurisdiction of
    incorporation or organization)                           |  | 76-0460831(I.R.S. Employer
    Identification No.)
|                                                                                                    
|4000 Hollywood Blvd., Suite 500 N
    Hollywood, Florida(Address of principal executive
    offices) |  | 33021(ZIP code)                                   

(954) 364-4000

(Registrants telephone number, including
area code)


(Former name, former address and former fiscal
year, if changed since last report)

Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past
90 days.     Yes þ          No o

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Rule 12b-2 of the
Exchange
Act).     Yes o          No þ

APPLICABLE ONLY TO CORPORATE
ISSUERS:

Indicate the number of shares outstanding of each
of the issuers classes of common stock, as of the latest
practicable date: 44,850,355 shares of common stock as of
August 6, 2004.



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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 the Consolidated
    Financial Statements                                        |    |      | 5  | 
|Item 2.                                   |  | Managements Discussion
    and Analysis of Financial Condition and Results of Operations |    |      | 10 | 
|Item 3.                                   |  | Quantitative and Qualitative
    Disclosures about Market Risk                            |    |      | 20 | 
|Item 4.                                   |  | Controls and Procedures                                                                   |    |      | 20 | 
|PART II. Other
    Information            |  |                                                                                           | 21 |     
|Item 4.                                   |  | Submission of Matters to a
    Vote of Security Holders                                   |    |      | 21 | 
|Item 6.                                   |  | Exhibits and Reports on
    Form 8-K                                                      |    |      | 21 | 
|Signatures                                |  |                                                                                           | 22 |     
|Employment Agreement - David J. Keller   
|CEO Certification Pursuant to Section 302
|CFO Certification Pursuant to Section 302
|CEO Certification Pursuant to Section 906
|CFO Certification Pursuant to Section 906



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

(Dollars in millions, except shares and par
value)


|                                                                                                                                                                                          |                                             |              |         |              |      |   |         |       |      | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------- | ------------ | ------- | ------------ | ---- | - | ------- | ----- | ---- | 
|                                                                                                                                                                                          |                                             | June 30,     |         | December 31,
|                                                                                                                                                                                          |                                             | 2004         |         | 2003        
|                                                                                                                                                                                          |                                             |              |         |             
|                                                                                                                                                                                          |                                             | (Unaudited)  |         |             
|ASSETS                                                                                                                                                                                   
|HOMEBUILDING:                                                                                                                                                                             |                                             |              |         |              |      |   |         |      
|Cash and cash equivalents:                                                                                                                                                                |                                             |              |         |              |      |   |         |      
|                                                                                                                                                                                          |                                             | Unrestricted |         | $            | 77.3 |   |         | $     | 73.7 | 
|                                                                                                                                                                                          |                                             | Restricted   |         |              | 25.3 |   |         |       | 21.2 | 
|Inventory                                                                                                                                                                                 |                                             |              |         |              |      |   |         |      
|                                                                                                                                                                                          | Deposits                                    |              |         | 93.0         |      |   |         | 78.7  |     
|                                                                                                                                                                                          | Homesites and land under development        |              |         | 326.6        |      |   |         | 443.4 |     
|                                                                                                                                                                                          | Residences completed and under construction |              |         | 612.0        |      |   |         | 404.6 |     
|                                                                                                                                                                                          | Inventory not owned                         |              |         | 207.0        |      |   |         | 246.2 |     
|                                                                                                                                                                                          |                                             |              |         |              |      |   |         |      
|                                                                                                                                                                                          |                                             |              | 1,238.6 |              |      |   | 1,172.9 |      
|Property and equipment, net                                                                                                                                                               |                                             |              | 26.6    |              |      |   | 23.7    |      
|Other assets                                                                                                                                                                              |                                             |              | 87.1    |              |      |   | 54.2    |      
|Goodwill                                                                                                                                                                                  |                                             |              | 106.7   |              |      |   | 100.1   |      
|                                                                                                                                                                                          |                                             |              |         |              |      |   |         |      
|                                                                                                                                                                                          |                                             |              | 1,561.6 |              |      |   | 1,445.8 |      
|FINANCIAL SERVICES:                                                                                                                                                                       |                                             |              |         |              |      |   |         |      
|Cash and cash equivalents:                                                                                                                                                                |                                             |              |         |              |      |   |         |      
|                                                                                                                                                                                          |                                             | Unrestricted |         |              | 4.9  |   |         |       | 3.1  | 
|                                                                                                                                                                                          |                                             | Restricted   |         |              | 69.0 |   |         |       | 73.4 | 
|Mortgage loans held for sale                                                                                                                                                              |                                             |              | 60.8    |              |      |   | 75.2    |      
|Other assets                                                                                                                                                                              |                                             |              | 9.4     |              |      |   | 7.5     |      
|                                                                                                                                                                                          |                                             |              |         |              |      |   |         |      
|                                                                                                                                                                                          |                                             |              | 144.1   |              |      |   | 159.2   |      
|                                                                                                                                                                                          |                                             |              |         |              |      |   |         |      
|Total assets                                                                                                                                                                              |                                             | $            | 1,705.7 |              |      | $ | 1,605.0 |      
|                                                                                                                                                                                          |                                             |              |         |              |      |   |         |      
|                                                                                                                                                                                         
|LIABILITIES AND STOCKHOLDERS
    EQUITY                                                                                                                                                 
|HOMEBUILDING:                                                                                                                                                                             |                                             |              |         |              |      |   |         |      
|Accounts payable and other liabilities                                                                                                                                                    |                                             | $            | 120.9   |              |      | $ | 147.7   |      
|Customer deposits                                                                                                                                                                         |                                             |              | 57.2    |              |      |   | 35.5    |      
|Obligations for inventory not owned                                                                                                                                                       |                                             |              | 203.5   |              |      |   | 242.8   |      
|Notes payable                                                                                                                                                                             |                                             |              | 605.4   |              |      |   | 480.0   |      
|Bank borrowings                                                                                                                                                                           |                                             |              | 9.5     |              |      |   | 17.9    |      
|                                                                                                                                                                                          |                                             |              |         |              |      |   |         |      
|                                                                                                                                                                                          |                                             |              | 996.5   |              |      |   | 923.9   |      
|FINANCIAL SERVICES:                                                                                                                                                                       |                                             |              |         |              |      |   |         |      
|Accounts payable and other liabilities                                                                                                                                                    |                                             |              | 69.7    |              |      |   | 74.9    |      
|Bank borrowings                                                                                                                                                                           |                                             |              | 53.9    |              |      |   | 63.2    |      
|                                                                                                                                                                                          |                                             |              |         |              |      |   |         |      
|                                                                                                                                                                                          |                                             |              | 123.6   |              |      |   | 138.1   |      
|                                                                                                                                                                                          |                                             |              |         |              |      |   |         |      
|Total liabilities                                                                                                                                                                         |                                             |              | 1,120.1 |              |      |   | 1,062.0 |      
|                                                                                                                                                                                         
|Minority interests                                                                                                                                                                        |                                             |              | 4.6     |              |      |   | 5.4     |      
|                                                                                                                                                                                         
|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 44,850,355 and
    44,833,554 shares issued and outstanding at June 30,
    2004 and December 31, 2003, respectively |                                             |              | 0.3     |              |      |   | 0.3     |      
|Additional paid-in capital                                                                                                                                                                |                                             |              | 384.7   |              |      |   | 379.4   |      
|Unearned compensation                                                                                                                                                                     |                                             |              | (10.7   | )            |      |   | (7.3    | )    
|Retained earnings                                                                                                                                                                         |                                             |              | 206.7   |              |      |   | 165.2   |      
|                                                                                                                                                                                          |                                             |              |         |              |      |   |         |      
|Total stockholders equity                                                                                                                                                                |                                             |              | 581.0   |              |      |   | 537.6   |      
|                                                                                                                                                                                          |                                             |              |         |              |      |   |         |      
|Total liabilities and stockholders equity                                                                                                                                                |                                             | $            | 1,705.7 |              |      | $ | 1,605.0 |      
|                                                                                                                                                                                          |                                             |              |         |              |      |   |         |      

See accompanying notes to consolidated financial
statements.

2



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##### Table of Contents






TECHNICAL OLYMPIC USA, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in millions, except shares and par
value)


(Unaudited)


|                                                          |            |                    |       |                  |            |      |       |       |            |   |       |       |            |   |       |       |            | 
|--------------------------------------------------------- | ---------- | ------------------ | ----- | ---------------- | ---------- | ---- | ----- | ----- | ---------- | - | ----- | ----- | ---------- | - | ----- | ----- | ---------- | 
|                                                          |            |                    |       |                 
|                                                          |            | Three Months Ended |       | Six Months Ended
|                                                          |            | June 30,           |       | June 30,        
|                                                          |            |                    |       |                 
|                                                          |            | 2004               |       | 2003             |            | 2004 |       | 2003 
|                                                          |            |                    |       |                  |            |      |       |      
|HOMEBUILDING:                                             |            |                    |       |                  |            |      |       |       |            |   |       |       |            |   |       |      
|Revenues:                                                 |            |                    |       |                  |            |      |       |       |            |   |       |       |            |   |       |      
|                                                          | Home sales |                    | $     | 462.5            |            |      | $     | 409.7 |            |   | $     | 869.3 |            |   | $     | 723.5 |           
|                                                          | Land sales |                    |       | 35.8             |            |      |       | 4.0   |            |   |       | 53.9  |            |   |       | 5.4   |           
|                                                          |            |                    |       |                  |            |      |       |       |            |   |       |       |            |   |       |      
|                                                          |            |                    | 498.3 |                  |            |      | 413.7 |       |            |   | 923.2 |       |            |   | 728.9 |      
|Cost of sales:                                            |            |                    |       |                  |            |      |       |       |            |   |       |       |            |   |       |      
|                                                          | Home sales |                    |       | 374.0            |            |      |       | 328.7 |            |   |       | 705.6 |            |   |       | 575.8 |           
|                                                          | Land sales |                    |       | 28.5             |            |      |       | 2.8   |            |   |       | 41.2  |            |   |       | 4.0   |           
|                                                          |            |                    |       |                  |            |      |       |       |            |   |       |       |            |   |       |      
|                                                          |            |                    | 402.5 |                  |            |      | 331.5 |       |            |   | 746.8 |       |            |   | 579.8 |      
|                                                          |            |                    |       |                  |            |      |       |       |            |   |       |       |            |   |       |      
|Gross profit                                              |            |                    | 95.8  |                  |            |      | 82.2  |       |            |   | 176.4 |       |            |   | 149.1 |      
|Selling, general and administrative expenses              |            |                    | 58.7  |                  |            |      | 52.0  |       |            |   | 114.0 |       |            |   | 95.4  |      
|Variable stock-based compensation expense                 |            |                    | 0.7   |                  |            |      | 0.4   |       |            |   | 1.7   |       |            |   | 0.4   |      
|Other (income) expense, net                               |            |                    | 0.7   |                  |            |      | (1.0  | )     |            |   | (0.5  | )     |            |   | (2.0  | )    
|                                                          |            |                    |       |                  |            |      |       |       |            |   |       |       |            |   |       |      
|Homebuilding pretax income                                |            |                    | 35.7  |                  |            |      | 30.8  |       |            |   | 61.2  |       |            |   | 55.3  |      
|                                                         
|FINANCIAL SERVICES:                                       |            |                    |       |                  |            |      |       |       |            |   |       |       |            |   |       |      
|Revenues                                                  |            |                    | 11.2  |                  |            |      | 13.2  |       |            |   | 21.5  |       |            |   | 22.7  |      
|Expenses                                                  |            |                    | 8.7   |                  |            |      | 7.4   |       |            |   | 15.8  |       |            |   | 13.6  |      
|                                                          |            |                    |       |                  |            |      |       |       |            |   |       |       |            |   |       |      
|Financial Services pretax income                          |            |                    | 2.5   |                  |            |      | 5.8   |       |            |   | 5.7   |       |            |   | 9.1   |      
|                                                          |            |                    |       |                  |            |      |       |       |            |   |       |       |            |   |       |      
|Income before income taxes                                |            |                    | 38.2  |                  |            |      | 36.6  |       |            |   | 66.9  |       |            |   | 64.4  |      
|Provision for income taxes                                |            |                    | 14.1  |                  |            |      | 13.3  |       |            |   | 24.7  |       |            |   | 23.5  |      
|                                                          |            |                    |       |                  |            |      |       |       |            |   |       |       |            |   |       |      
|Net income                                                |            | $                  | 24.1  |                  |            | $    | 23.3  |       |            | $ | 42.2  |       |            | $ | 40.9  |      
|                                                          |            |                    |       |                  |            |      |       |       |            |   |       |       |            |   |       |      
|EARNINGS PER COMMON SHARE:                                |            |                    |       |                  |            |      |       |       |            |   |       |       |            |   |       |      
|                                                          |            | Basic              |       | $                | 0.54       |      |       | $     | 0.56       |   |       | $     | 0.94       |   |       | $     | 0.98       | 
|                                                          |            |                    |       |                  |            |      |       |       |            |   |       |       |            |   |       |      
|                                                          |            | Diluted            |       | $                | 0.53       |      |       | $     | 0.55       |   |       | $     | 0.92       |   |       | $     | 0.97       | 
|                                                          |            |                    |       |                  |            |      |       |       |            |   |       |       |            |   |       |      
|WEIGHTED AVERAGE NUMBER OF COMMON SHARES
    OUTSTANDING: |            |                    |       |                  |            |      |       |       |            |   |       |       |            |   |       |      
|                                                          |            | Basic              |       |                  | 44,848,182 |      |       |       | 41,833,554 |   |       |       | 44,842,462 |   |       |       | 41,828,373 | 
|                                                          |            |                    |       |                  |            |      |       |       |            |   |       |       |            |   |       |      
|                                                          |            | Diluted            |       |                  | 45,756,179 |      |       |       | 42,079,025 |   |       |       | 45,643,154 |   |       |       | 41,951,108 | 
|                                                          |            |                    |       |                  |            |      |       |       |            |   |       |       |            |   |       |      
|                                                         
|CASH DIVIDENDS PER SHARE                                  |            | $                  | 0.015 |                  |            |      |      |       |            | $ | 0.015 |       |            |   |      |      
|                                                          |            |                    |       |                  |            |      |       |       |            |   |       |       |            |   |       |      

See accompanying notes to consolidated financial
statements.

3



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##### Table of Contents






TECHNICAL OLYMPIC USA, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS

(Dollars in millions)


|                                                                                                                                |                                              |                                        |       |      |       |   |       |     |       |  
|------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------- | -------------------------------------- | ----- | ---- | ----- | - | ----- | --- | ----- | -
|                                                                                                                                |                                              |                                       
|                                                                                                                                |                                              | Six Months Ended                      
|                                                                                                                                |                                              | June 30,                              
|                                                                                                                                |                                              |                                       
|                                                                                                                                |                                              | 2004                                   |       | 2003
|                                                                                                                                |                                              |                                        |       |     
|                                                                                                                                |                                              |                                       
|                                                                                                                                |                                              | (Unaudited)                           
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                           |                                              |                                        |       |      |       |   |       |    
|Net income                                                                                                                      |                                              | $                                      | 42.2  |      |       | $ | 40.9  |    
|Adjustments to reconcile net income to net cash
    used in operating activities:                                               |                                              |                                        |       |      |       |   |       |    
|                                                                                                                                | Depreciation and amortization                |                                        |       | 6.4  |       |   |       | 3.6 |      
|                                                                                                                                | Non-cash compensation expense                |                                        |       | 1.7  |       |   |       | 0.6 |      
|                                                                                                                                | Changes in operating assets and liabilities: |                                        |       |      |       |   |       |     |      
|                                                                                                                                |                                              | Restricted cash                        |       |      | 0.2   |   |       |     | 3.3   |  
|                                                                                                                                |                                              | Inventory                              |       |      | (99.2 | ) |       |     | (96.7 | )
|                                                                                                                                |                                              | Other assets                           |       |      | (33.0 | ) |       |     | (5.7  | )
|                                                                                                                                |                                              | Accounts payable and other liabilities |       |      | (32.0 | ) |       |     | 26.5  |  
|                                                                                                                                |                                              | Customer deposits                      |       |      | 21.7  |   |       |     | 2.9   |  
|                                                                                                                                |                                              | Mortgage loans held for sale           |       |      | 14.4  |   |       |     | (7.7  | )
|                                                                                                                                |                                              |                                        |       |      |       |   |       |    
|Net cash used in operating activities                                                                                           |                                              |                                        | (77.6 | )    |       |   | (32.3 | )  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                                                           |                                              |                                        |       |      |       |   |       |    
|Amounts paid for acquisitions, net of cash
    acquired                                                                         |                                              |                                        |      |      |       |   | (59.3 | )  
|Additional consideration paid for acquisitions                                                                                  |                                              |                                        | (6.6  | )    |       |   | (16.8 | )  
|Net additions to property and equipment                                                                                         |                                              |                                        | (9.2  | )    |       |   | (7.8  | )  
|                                                                                                                                |                                              |                                        |       |      |       |   |       |    
|Net cash used in investing activities                                                                                           |                                              |                                        | (15.8 | )    |       |   | (83.9 | )  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                                           |                                              |                                        |       |      |       |   |       |    
|Proceeds from notes offering                                                                                                    |                                              |                                        | 125.0 |      |       |   | 129.3 |    
|Payments for deferred financing costs                                                                                           |                                              |                                        | (2.0  | )    |       |   | (4.8  | )  
|Net repayments on revolving credit facilities                                                                                   |                                              |                                        | (10.0 | )    |       |   | (20.0 | )  
|Borrowings from (repayments on) Homebuilding bank
    borrowings                                                                |                                              |                                        | 1.6   |      |       |   | (0.2  | )  
|Net (repayments on) borrowings from Financial
    Services bank borrowings                                                      |                                              |                                        | (9.3  | )    |       |   | 9.4   |    
|Minority interests in consolidated subsidiaries                                                                                 |                                              |                                        | (0.8  | )    |       |   | (5.0  | )  
|Net payments on obligations for inventory not
    owned                                                                         |                                              |                                        | (5.2  | )    |       |   | (2.7  | )  
|Cash dividend payment                                                                                                           |                                              |                                        | (0.7  | )    |       |   |      |    
|Other                                                                                                                           |                                              |                                        | 0.2   |      |       |   |      |    
|                                                                                                                                |                                              |                                        |       |      |       |   |       |    
|Net cash provided by financing activities                                                                                       |                                              |                                        | 98.8  |      |       |   | 106.0 |    
|                                                                                                                                |                                              |                                        |       |      |       |   |       |    
|Increase (decrease) in cash and cash equivalents                                                                                |                                              |                                        | 5.4   |      |       |   | (10.2 | )  
|Unrestricted cash and cash equivalents at
    beginning of period                                                               |                                              |                                        | 76.8  |      |       |   | 49.2  |    
|                                                                                                                                |                                              |                                        |       |      |       |   |       |    
|Unrestricted cash and cash equivalents at end of
    period                                                                     |                                              | $                                      | 82.2  |      |       | $ | 39.0  |    
|                                                                                                                                |                                              |                                        |       |      |       |   |       |    
|SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING
    ACTIVITY                                                                      |                                              |                                        |       |      |       |   |       |    
|(Decrease) increase in land bank obligations for
    inventory not owned and corresponding (decrease) increase in
    inventory |                                              | $                                      | (34.1 | )    |       | $ | 16.6  |    
|                                                                                                                                |                                              |                                        |       |      |       |   |       |    

See accompanying notes to consolidated financial
statements.

4



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##### Table of Contents






TECHNICAL OLYMPIC USA, INC. AND
SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS

June 30, 2004




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



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

Technical Olympic USA, Inc. is a homebuilder with
a geographically diversified national presence. We operate in 14
metropolitan markets located in four major geographic regions.
We design, build, and market detached single-family residences,
town homes and condominiums. We also provide title and mortgage
brokerage services to our homebuyers and others. Generally, we
do not retain or service the mortgages that we originate but,
rather, sell the mortgages and related servicing rights to
investors.



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

Technical Olympic S.A. owns approximately 74% of
our outstanding common stock. Technical Olympic S.A. is a
publicly-traded Greek company whose shares are traded on the
Athens Stock Exchange.



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



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

The consolidated financial statements include our
accounts and those of our subsidiaries. Other parties
interests in consolidated entities are reported as minority
interests. Our accounting and reporting policies conform to
accounting principles generally accepted in the United States
and general practices within the homebuilding industry. These
accounting principles require management to make estimates and
assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ
from those estimates.

All significant intercompany balances and
transactions have been eliminated in the consolidated financial
statements.

Due to our normal operating cycle being in excess
of one year, we present unclassified consolidated statements of
financial condition.

We have two operating segments which are
segregated in the accompanying consolidated financial statements
under Homebuilding and Financial
Services.

Certain prior period amounts have been
reclassified to conform to the current periods
presentation.



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

The accompanying unaudited consolidated financial
statements reflect all adjustments, consisting primarily of
normal recurring items that, in the opinion of management, are
considered necessary for a fair presentation of the financial
position, results from operations, and cash flows for the
periods presented. Results of operations achieved through
June 30, 2004 are not necessarily indicative of those that
may be achieved for the year ending December 31, 2004.
Certain information and footnote disclosures normally included
in financial statements presented in accordance with accounting
principles generally accepted in the United States have been
omitted from the accompanying financial statements. The
financial statements included as part of this Form 10-Q
should be read in conjunction with the financial statements and
notes thereto included in our December 31, 2003 Annual
Report on Form 10-K.

For the three and six months ended June 30,
2004 and 2003, we have eliminated inter-segment Financial
Services revenues of $1.8 million and $1.4 million,
respectively, and $3.6 million and $2.5 million,
respectively.

5



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##### Table of Contents



TECHNICAL OLYMPIC USA, INC. AND
SUBSIDIARIES


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



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

Basic earnings per share is computed by dividing
earnings attributable to common stockholders by the weighted
average number of common shares outstanding for the period.
Diluted earnings per share is computed based on the weighted
average number of shares of common stock and dilutive securities
outstanding during the period. Dilutive securities are not
included in the weighted average number of shares when inclusion
would increase the earnings per share.

The following table represents a reconciliation
of weighted average shares outstanding:

|                                                        |  |                    |            |                  |  |      |            |      |  |  |            |  |  |  |            | 
|------------------------------------------------------- |  | ------------------ | ---------- | ---------------- |  | ---- | ---------- | ---- |  |  | ---------- |  |  |  | ---------- | 
|                                                        |  |                    |            |                 
|                                                        |  | Three Months Ended |            | Six Months Ended
|                                                        |  | June 30,           |            | June 30,        
|                                                        |  |                    |            |                 
|                                                        |  | 2004               |            | 2003             |  | 2004 |            | 2003
|                                                        |  |                    |            |                  |  |      |            |     
|Basic average shares outstanding                        |  |                    | 44,848,182 |                  |  |      | 41,833,554 |      |  |  | 44,842,462 |  |  |  | 41,828,373 | 
|Net effect of stock options assumed to be
    exercised |  |                    | 907,997    |                  |  |      | 245,471    |      |  |  | 800,692    |  |  |  | 122,735    | 
|                                                        |  |                    |            |                  |  |      |            |      |  |  |            |  |  |  |            | 
|Diluted average shares outstanding                      |  |                    | 45,756,179 |                  |  |      | 42,079,025 |      |  |  | 45,643,154 |  |  |  | 41,951,108 | 
|                                                        |  |                    |            |                  |  |      |            |      |  |  |            |  |  |  |            | 

On April 27, 2004, our shareholders approved
an amendment to our certificate of incorporation to increase the
number of our authorized common shares from 67,000,000 to
97,000,000 shares, and our Board of Directors authorized a
three-for-two stock split on our common stock. The stock split
was effected in the form of a 50% stock dividend, paid on
June 1, 2004, to shareholders of record at the close of
business on May 14, 2004. The shares issued and outstanding
and the earnings per share amounts in the consolidated financial
statements have been adjusted to reflect such stock split.
Additionally, on June 15, 2004, we paid a cash dividend of
$0.015 per share to all shareholders of record at the close
of business on June 4, 2004.



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

We account for our stock option plan in
accordance with the provisions of Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock
Issued to Employees, and related interpretations. As such,
compensation expense is recorded on the date of grant only if
the current market price of the underlying stock exceeds the
exercise price. We have adopted the disclosure-only provisions
of Statement of Financial Accounting Standards
(SFAS) No. 123, Accounting for
Stock-Based Compensation. Accordingly, no compensation
cost has been recognized for our stock option plans. If the
methodologies of SFAS No. 123 were applied to
determine compensation expense for our stock options based on
the fair value of our common stock at the grant dates for awards
under our option plan, our net income and earnings per share for
the three

6



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##### Table of Contents



TECHNICAL OLYMPIC USA, INC. AND
SUBSIDIARIES


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

and six months ended June 30, 2004 and 2003,
would have been reduced to the pro forma amounts indicated below
(dollars in millions, except per share amounts):

|                                                                                                               |         |                |      |                |  |      |      |      |  |   |      |      |  |   |      |      | 
|-------------------------------------------------------------------------------------------------------------- | ------- | -------------- | ---- | -------------- |  | ---- | ---- | ---- |  | - | ---- | ---- |  | - | ---- | ---- | 
|                                                                                                               |         |                |      |               
|                                                                                                               |         | Three Months   |      | Six Months    
|                                                                                                               |         | Ended June 30, |      | Ended June 30,
|                                                                                                               |         |                |      |               
|                                                                                                               |         | 2004           |      | 2003           |  | 2004 |      | 2003
|                                                                                                               |         |                |      |                |  |      |      |     
|Net income as reported                                                                                         |         | $              | 24.1 |                |  | $    | 23.3 |      |  | $ | 42.2 |      |  | $ | 40.9 |     
|Add: Stock-based employee compensation included
    in reported net income, net of tax                         |         |                | 0.4  |                |  |      | 0.2  |      |  |   | 1.0  |      |  |   | 0.2  |     
|Deduct: Total stock-based employee compensation
    expense determined under the fair value method, net of tax |         |                | (0.6 | )              |  |      | (0.8 | )    |  |   | (1.1 | )    |  |   | (2.7 | )   
|                                                                                                               |         |                |      |                |  |      |      |      |  |   |      |      |  |   |      |     
|Pro forma net income                                                                                           |         | $              | 23.9 |                |  | $    | 22.7 |      |  | $ | 42.1 |      |  | $ | 38.4 |     
|                                                                                                               |         |                |      |                |  |      |      |      |  |   |      |      |  |   |      |     
|Reported earnings per common share:                                                                            |         |                |      |                |  |      |      |      |  |   |      |      |  |   |      |     
|                                                                                                               | Basic   |                | $    | 0.54           |  |      | $    | 0.56 |  |   | $    | 0.94 |  |   | $    | 0.98 | 
|                                                                                                               | Diluted |                | $    | 0.53           |  |      | $    | 0.55 |  |   | $    | 0.92 |  |   | $    | 0.97 | 
|Pro forma earnings per common share:                                                                           |         |                |      |                |  |      |      |      |  |   |      |      |  |   |      |     
|                                                                                                               | Basic   |                | $    | 0.53           |  |      | $    | 0.54 |  |   | $    | 0.94 |  |   | $    | 0.92 | 
|                                                                                                               | Diluted |                | $    | 0.52           |  |      | $    | 0.54 |  |   | $    | 0.92 |  |   | $    | 0.92 | 

The fair values of options granted were estimated
on the date of their grant using the Black-Scholes option
pricing model based on the following assumptions:

|                        |  |  |               | 
|----------------------- |  |  | ------------- | 
|Expected life in years  |  |  | 4 - 10  years | 
|Risk-free interest rate |  |  | 1.47% - 3.20% | 
|Volatility              |  |  | 0.42% - 0.48% | 
|Dividend yield          |  |  | 0%            | 



|   |                     
|-- | --------------------
|3. | Capitalized Interest

A summary of Homebuilding interest capitalized in
inventory is (dollars in millions):

|                                          |               |                |      |                |   |      |      |      |   |   |      |       |   |   |      |       |  
|----------------------------------------- | ------------- | -------------- | ---- | -------------- | - | ---- | ---- | ---- | - | - | ---- | ----- | - | - | ---- | ----- | -
|                                          |               |                |      |               
|                                          |               | Three Months   |      | Six Months    
|                                          |               | Ended June 30, |      | Ended June 30,
|                                          |               |                |      |               
|                                          |               | 2004           |      | 2003           |   | 2004 |      | 2003
|                                          |               |                |      |                |   |      |      |     
|Interest capitalized, beginning of period |               | $              | 32.0 |                |   | $    | 15.2 |      |   | $ | 29.7 |       |   | $ | 11.6 |      
|Interest incurred                         |               |                | 16.7 |                |   |      | 14.6 |      |   |   | 31.6 |       |   |   | 25.6 |      
|Less interest included in:                |               |                |      |                |   |      |      |      |   |   |      |       |   |   |      |      
|                                          | Cost of sales |                |      | (12.8          | ) |      |      | (8.5 | ) |   |      | (23.5 | ) |   |      | (15.4 | )
|                                          | Other         |                |      | (0.2           | ) |      |      |     |   |   |      | (2.1  | ) |   |      | (0.5  | )
|                                          |               |                |      |                |   |      |      |      |   |   |      |       |   |   |      |      
|Interest capitalized, end of period       |               | $              | 35.7 |                |   | $    | 21.3 |      |   | $ | 35.7 |       |   | $ | 21.3 |      
|                                          |               |                |      |                |   |      |      |      |   |   |      |       |   |   |      |      



|   |                                                
|-- | -----------------------------------------------
|4. | Consolidation of Variable Interest
    Entities

In the ordinary course of business we enter into
contracts to purchase homesites and land held for development.
At June 30, 2004 and December 31, 2003, we had
refundable and nonrefundable deposits aggregating
$93.0 million and $78.7 million, respectively,
included in inventory in the accompanying consolidated
statements of financial condition. Our liability for
nonperformance under such contracts is generally limited to
forfeiture of the related deposits.

7



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##### Table of Contents



TECHNICAL OLYMPIC USA, INC. AND
SUBSIDIARIES


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In January 2003, the Financial Accounting
Standards Board (FASB) issued FASB Interpretation
No. 46, Consolidation of Variable Interest
Entities (Interpretation No. 46). Interpretation
No. 46 addresses consolidation by business enterprises of
variable interest entities (VIEs) in which an entity absorbs a
majority of the expected losses, receives a majority of the
entitys expected residual returns, or both, as a result of
ownership, contractual or other financial interests in the
entity.

Generally, homebuilders will enter into option
contracts for the purchase of land or homesites with land
sellers and third-party financial entities, some of which may
qualify as VIEs. In applying Interpretation No. 46 to our
homesite option contracts and other transactions with VIEs, we
make estimates regarding cash flows and other assumptions. We
believe that our critical assumptions underlying these estimates
are reasonable based on historical evidence and industry
practice. Based on our analysis of transactions entered into
with VIEs, we determined that we are the primary beneficiary of
certain of these homesite option contracts. Consequently,
Interpretation No. 46 requires us to consolidate the assets
(homesites) at their fair value, although (1) we have
no legal title to the assets, (2) our maximum exposure to
loss is limited to the deposits or letters of credits placed
with these entities, and (3) creditors, if any, of these
entities have no recourse against us. The effect of this
consolidation at June 30, 2004 was to increase inventory by
$95.2 million, excluding deposits of $7.7 million,
which had been previously recorded, with a corresponding
increase to obligations for inventory not owned in
the accompanying consolidated statement of financial condition.
Additionally, we have entered into arrangements with VIEs to
acquire homesites whereby our variable interest is insignificant
and, therefore, we have determined that we are not the primary
beneficiary and are not required to consolidate the assets of
such VIEs.

During the six months ended June 30, 2004,
we transferred title to certain parcels of land for net proceeds
of $33.7 million. In connection with these transactions, we
entered into options with the purchasers to acquire fully
developed homesites. As we have retained a continuing
involvement in these properties, in accordance with
SFAS No. 66, Accounting for the Sales of Real
Estate, we have accounted for these transactions as
financing arrangements. As a result, we have included the
corresponding liability of $33.7 million in
obligations for inventory not owned in the
accompanying consolidated statement of financial condition as of
June 30, 2004. As of June 30, 2004,
$111.8 million of inventory not owned relates to sales with
continuing involvement.



|   |         
|-- | --------
|5. | Goodwill

The change in goodwill for the six months ended
June 30, 2004 is as follows (dollars in millions):

|                                              |  |   |       | 
|--------------------------------------------- |  | - | ----- | 
|Balance at December 31, 2003                  |  | $ | 100.1 | 
|Additional consideration paid on acquisitions |  |   | 6.6   | 
|                                              |  |   |       | 
|Balance at June 30, 2004                      |  | $ | 106.7 | 
|                                              |  |   |       | 



|   |           
|-- | ----------
|6. | Borrowings

Effective April 12, 2004, we amended our
revolving credit facility to, among other things, increase the
amount we are permitted to borrow to the lesser of
(i) $350.0 million or (ii) our borrowing base
(calculated in accordance with the revolving credit facility
agreement) minus our outstanding senior debt. In addition, the
amendment increased our letter of credit sub-facility to
$175.0 million.

On March 17, 2004, we issued
$125.0 million of 7 1/2% Senior Subordinated
Notes due 2011. The net proceeds of $123.3 million
primarily were used to repay amounts outstanding under our
revolving credit facility and warehouse line of credit.

Our outstanding Senior and Senior Subordinated
Notes have call features that allow redemption, at a premium,
prior to maturity. These notes are fully and unconditionally
guaranteed by all of our material

8



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##### Table of Contents



TECHNICAL OLYMPIC USA, INC. AND
SUBSIDIARIES


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

domestic subsidiaries. The guarantees are joint
and several, and we own 100% of each subsidiary guarantor. Any
subsidiaries, other than the subsidiary guarantors, are minor
and we have no independent assets or operations. There are no
restrictions on our ability to obtain funds from our
subsidiaries by dividend or loan.



|   |                              
|-- | -----------------------------
|7. | Commitments and Contingencies

We are involved in various claims and legal
actions arising in the ordinary course of business. In the
opinion of management, the ultimate disposition of these matters
will not have a material adverse effect on our consolidated
financial position or results of operations.

We provide homebuyers with a one-year or two-year
limited warranty of workmanship and materials, and an eight-year
or ten-year limited warranty covering major structural defects.
We generally have recourse against our subcontractors for claims
relating to workmanship and materials.

During the six months ended June 30, 2004
and 2003, changes in our warranty accrual consisted of (dollars
in millions):

|                                    |  |      |      |      |  |   |      |  
|----------------------------------- |  | ---- | ---- | ---- |  | - | ---- | -
|                                    |  | 2004 |      | 2003
|                                    |  |      |      |     
|Accrued warranty costs at January 1 |  | $    | 5.2  |      |  | $ | 4.8  |  
|Estimated net liability recorded    |  |      | 4.6  |      |  |   | 4.2  |  
|Warranty work performed             |  |      | (3.9 | )    |  |   | (3.7 | )
|                                    |  |      |      |      |  |   |      |  
|Accrued warranty costs at June 30   |  | $    | 5.9  |      |  | $ | 5.3  |  
|                                    |  |      |      |      |  |   |      |  



|   |                                                      
|-- | -----------------------------------------------------
|8. | Stockholders Equity and Stock-Based
    Compensation

During 2001, we adopted the Technical Olympic
USA, Inc. Annual and Long-Term Incentive Plan (the
Plan) pursuant to which our employees, consultants
and directors, and those of our subsidiaries and affiliated
entities, are eligible to receive shares of restricted common
stock and/or options to purchase shares of common stock. Under
the Plan, subject to adjustment as defined, the maximum number
of shares with respect to which awards may be granted is
6,000,000. At June 30, 2004, 5,496,704 options and
25,574 shares of restricted stock had been granted. Of the
stock options granted, 1,253,662 contain accelerated vesting
criteria that are being accounted for under the variable
accounting method as provided by APB Opinion No. 25. During
the three and six months ended June 30, 2004, we recorded
compensation expense in the amount of $0.7 million and
$1.7 million, respectively, related to these accelerated
vesting options as compared to $0.4 million during both the
three and six months ended June 30, 2003.

9



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##### Table of Contents








|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

Executive Summary

We generate revenues from our homebuilding
operations (Homebuilding) and financial services
operations (Financial Services) which comprise our
operating segments. Through our Homebuilding operations we
design, build and market high-quality detached single-family
residences, town homes and condominiums in 14 metropolitan
markets located in four major geographic regions: Florida, the
Mid-Atlantic, Texas and the West.

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

We build homes for inventory and on a pre-sold
basis. At June 30, 2004, we had 3,448 homes completed
or under construction, of which approximately 30% were unsold.
At June 30, 2004, we had 213 completed unsold homes in
our inventory, of which approximately 50% had been completed for
more than 90 days.

Once a sales contract has been signed with a
buyer, we classify the transaction as a new sales
order and include the home in backlog. Such
sales orders are usually subject to certain contingencies such
as the buyers ability to qualify for financing. At
closing, title passes to the buyer and a home is considered to
be delivered and is removed from backlog. Revenue
and cost of sales are recognized at the delivery of the home,
land or lot when title is transferred to the buyer. The
principal expenses of our Homebuilding operations are
(i) cost of sales and (ii) selling, general and
administrative (SG&A) expenses. Costs of home
sales include land and land development costs, home construction
costs, previously capitalized indirect costs, capitalized
interest and estimated warranty costs. SG&A expenses for our
Homebuilding operations include administrative costs,
advertising expenses, on-site marketing expenses, commission
costs, and closing costs. Sales commissions are included in
selling, general and administrative costs when the related
revenue is recognized.

We were actively selling homes in 253 communities
and 181 communities at June 30, 2004 and 2003,
respectively. For the three months ended June 30, 2004,
total revenues increased 19%, net income increased 4%, net sales
orders increased 51% and home deliveries increased 9% as
compared to the same period in the prior year. For the six
months ended June 30, 2004, total revenues increased 26%,
net income increased 3%, net sales orders increased 59% and home
deliveries increased 15% as compared to the same period in the
prior year. Sales value in backlog at June 30, 2004 as
compared to June 30, 2003 increased by 87% to
$1.5 billion. Our home cancellation rate was approximately
15% for the quarter ended June 30, 2004.

We have entered, and expect to continue to enter,
into joint ventures that acquire and develop land for our
Homebuilding operations and/or joint ventures that also build
and market homes. Through joint ventures, we mitigate and share
the risk associated with land ownership and development and
extend our capital resources. At June 30, 2004, our
investment in these joint ventures was $24.4 million. In
addition, we seek to use option contracts to acquire land
whenever feasible. Option contracts allow us to control
significant homesite positions with minimal capital investment
and substantially reduce the risks associated with land
ownership and development. At June 30, 2004, we controlled
46,000 homesites of which 75% were controlled through various
option arrangements.

To provide homebuyers a seamless home purchasing
experience, we have a complementary financial services business
where we provide mortgage financing and closing services and
offer title, homeowners and other insurance products to
our homebuyers and others. Our mortgage financing operation
derives most of its revenues from buyers of our homes, although
it also offers its services to existing homeowners refinancing
their mortgages. Our closing services and our insurance agency
operations are used by our homebuyers and a broad range of other
clients purchasing or refinancing residential or commercial real
estate. Our mortgage financing operations revenues consist
primarily of origination and premium fee income, interest
income, and the gain on

10



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##### Table of Contents



the sale of the mortgages. Our title
operations revenues consist primarily of title insurance
and closing services. All of our underwriting risk associated
with title and homeowners insurance policies is
transferred to third-party insurers. The principal expenses of
our Financial Services operations are SG&A expenses, which
consist primarily of compensation and interest expense on our
warehouse line of credit.


Critical Accounting Policies

There have been no significant changes to our
critical accounting policies during the six months 
 ended June 30, 2004, as compared to those we disclosed in
Managements Discussion and Analysis of Financial Condition
and Results of Operations in our Annual Report on Form 10-K
for the year ended December 31, 2003.

Results of Operations 
Consolidated



| |                                                                                  
| | ---------------------------------------------------------------------------------
| | Three Months Ended June 30, 2004
    Compared to Three Months Ended June 30, 2003

Total revenues increased 19% to
$509.5 million for the three months ended June 30,
2004, from $426.9 million for the comparable period in
2003. This increase is attributable to an increase in
Homebuilding revenues of 20% offset by a decrease in Financial
Services revenues of 15%.

Income before income taxes increased by 5% to
$38.2 million for the three months ended June 30,
2004, from $36.6 million for the comparable period in 2003.
This increase is attributable to an increase in Homebuilding
pretax income to $35.7 million for the three months ended
June 30, 2004, from $30.8 million for the three months
ended June 30, 2003. This was partially offset by a decline
in Financial Services pretax income to $2.5 million from
$5.8 million for the same periods.

Our effective tax rate was 37.0% and 36.5% for
the three months ended June 30, 2004 and 2003,
respectively. This increase was due to increases in income in
states with higher tax rates which offset savings associated
with our recent tax planning initiatives.

As a result of the above, net income increased to
$24.1 million (or $0.53 per diluted share) for the
three months ended June 30, 2004 from $23.3 million
(or $0.55 per diluted share) for the three months ended
June 30, 2003.



| |                                                                              
| | -----------------------------------------------------------------------------
| | Six Months Ended June 30, 2004
    Compared to Six Months Ended June 30, 2003

Total revenues increased 26% to
$944.7 million for the six months ended June 30, 2004,
from $751.6 million for the comparable period in 2003. This
increase is attributable to an increase in Homebuilding revenues
of 27% offset by a decrease in Financial Services revenues of 5%.

Income before income taxes increased by 4% to
$66.9 million for the six months ended June 30, 2004,
from $64.4 million for the comparable period in 2003. This
increase is attributable to an increase in Homebuilding pretax
income to $61.2 million for the six months ended
June 30, 2004, from $55.3 million for the six months
ended June 30, 2003. This was partially offset by a decline
in Financial Services pretax income to $5.7 million from
$9.1 million.

Our effective tax rate was 37.0% and 36.5% for
the six months ended June 30, 2004 and 2003, respectively.
This increase was due to increases in income in states with
higher tax rates which offset savings associated with our recent
tax planning initiatives.

As a result of the above, net income increased to
$42.2 million (or $0.92 per diluted share) for the six
months ended June 30, 2004, from $40.9 million (or
$0.97 per diluted share) for the six months ended
June 30, 2003.

11



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##### Table of Contents



Results of Operations

The following tables set forth certain operating
and financial data for our homebuilding operations in our four
major geographic regions, Florida, the Mid-Atlantic, Texas and
the West (dollars in millions, except average price in
thousands):

|                                   |  |                             |       |                           |  |       |       |      |  |       |       |   |  |       |       |   |  |  |       |  |  |   |       |  |  |  |       |  |  |   |       | 
|---------------------------------- |  | --------------------------- | ----- | ------------------------- |  | ----- | ----- | ---- |  | ----- | ----- | - |  | ----- | ----- | - |  |  | ----- |  |  | - | ----- |  |  |  | ----- |  |  | - | ----- | 
|                                   |  |                             |       |                          
|                                   |  | Three Months Ended June 30, |       | Six Months Ended June 30,
|                                   |  |                             |       |                          
|                                   |  |                             |       |                           |  |       |       |     
|                                   |  | 2004                        |       | 2003                      |  | 2004  |       | 2003
|                                   |  |                             |       |                           |  |       |       |     
|                                   |  | Homes                       |       | $                         |  | Homes |       | $    |  | Homes |       | $ |  | Homes |       | $
|                                   |  |                             |       |                           |  |       |       |      |  |       |       |   |  |       |       |  
|Deliveries:                        |  |                             |       |                           |  |       |       |      |  |       |       |   |  |       |       |   |  |  |       |  |  |   |       |  |  |  |       |  |  |   |       | 
|Florida                            |  |                             | 556   |                           |  | $     | 147.2 |      |  |       | 525   |   |  | $     | 129.1 |   |  |  | 1,100 |  |  | $ | 288.7 |  |  |  | 1,046 |  |  | $ | 250.7 | 
|Mid-Atlantic                       |  |                             | 115   |                           |  |       | 43.4  |      |  |       | 170   |   |  |       | 60.5  |   |  |  | 235   |  |  |   | 88.6  |  |  |  | 307   |  |  |   | 100.1 | 
|Texas                              |  |                             | 470   |                           |  |       | 120.1 |      |  |       | 423   |   |  |       | 109.0 |   |  |  | 889   |  |  |   | 221.2 |  |  |  | 723   |  |  |   | 186.9 | 
|West                               |  |                             | 541   |                           |  |       | 151.8 |      |  |       | 421   |   |  |       | 111.1 |   |  |  | 975   |  |  |   | 270.8 |  |  |  | 697   |  |  |   | 185.8 | 
|                                   |  |                             |       |                           |  |       |       |      |  |       |       |   |  |       |       |   |  |  |       |  |  |   |       |  |  |  |       |  |  |   |       | 
|Consolidated total                 |  |                             | 1,682 |                           |  | $     | 462.5 |      |  |       | 1,539 |   |  | $     | 409.7 |   |  |  | 3,199 |  |  | $ | 869.3 |  |  |  | 2,773 |  |  | $ | 723.5 | 
|From unconsolidated joint ventures |  |                             | 2     |                           |  |       | 0.6   |      |  |       |      |   |  |       |      |   |  |  | 2     |  |  |   | 0.6   |  |  |  |      |  |  |   |      | 
|                                   |  |                             |       |                           |  |       |       |      |  |       |       |   |  |       |       |   |  |  |       |  |  |   |       |  |  |  |       |  |  |   |       | 
|Total                              |  |                             | 1,684 |                           |  | $     | 463.1 |      |  |       | 1,539 |   |  | $     | 409.7 |   |  |  | 3,201 |  |  | $ | 869.9 |  |  |  | 2,773 |  |  | $ | 723.5 | 
|                                   |  |                             |       |                           |  |       |       |      |  |       |       |   |  |       |       |   |  |  |       |  |  |   |       |  |  |  |       |  |  |   |       | 

|                                   |  |                             |       |                           |  |       |       |      |  |       |       |   |  |       |       |   |  |  |       |  |  |   |         |  |  |  |       |  |  |   |       | 
|---------------------------------- |  | --------------------------- | ----- | ------------------------- |  | ----- | ----- | ---- |  | ----- | ----- | - |  | ----- | ----- | - |  |  | ----- |  |  | - | ------- |  |  |  | ----- |  |  | - | ----- | 
|                                   |  |                             |       |                          
|                                   |  | Three Months Ended June 30, |       | Six Months Ended June 30,
|                                   |  |                             |       |                          
|                                   |  |                             |       |                           |  |       |       |     
|                                   |  | 2004                        |       | 2003                      |  | 2004  |       | 2003
|                                   |  |                             |       |                           |  |       |       |     
|                                   |  | Homes                       |       | $                         |  | Homes |       | $    |  | Homes |       | $ |  | Homes |       | $
|                                   |  |                             |       |                           |  |       |       |      |  |       |       |   |  |       |       |  
|Net Sales Orders(1):               |  |                             |       |                           |  |       |       |      |  |       |       |   |  |       |       |   |  |  |       |  |  |   |         |  |  |  |       |  |  |   |       | 
|Florida                            |  |                             | 971   |                           |  | $     | 289.1 |      |  |       | 665   |   |  | $     | 165.4 |   |  |  | 2,056 |  |  | $ | 589.1   |  |  |  | 1,307 |  |  | $ | 311.9 | 
|Mid-Atlantic                       |  |                             | 250   |                           |  |       | 110.3 |      |  |       | 153   |   |  |       | 56.2  |   |  |  | 512   |  |  |   | 220.9   |  |  |  | 348   |  |  |   | 113.9 | 
|Texas                              |  |                             | 453   |                           |  |       | 116.3 |      |  |       | 510   |   |  |       | 132.4 |   |  |  | 988   |  |  |   | 253.5   |  |  |  | 928   |  |  |   | 235.9 | 
|West                               |  |                             | 971   |                           |  |       | 267.2 |      |  |       | 425   |   |  |       | 112.4 |   |  |  | 1,818 |  |  |   | 454.0   |  |  |  | 802   |  |  |   | 211.5 | 
|                                   |  |                             |       |                           |  |       |       |      |  |       |       |   |  |       |       |   |  |  |       |  |  |   |         |  |  |  |       |  |  |   |       | 
|Consolidated total                 |  |                             | 2,645 |                           |  | $     | 782.9 |      |  |       | 1,753 |   |  | $     | 466.4 |   |  |  | 5,374 |  |  | $ | 1,517.5 |  |  |  | 3,385 |  |  | $ | 873.2 | 
|From unconsolidated joint ventures |  |                             | 138   |                           |  |       | 42.7  |      |  |       |      |   |  |       |      |   |  |  | 230   |  |  |   | 70.2    |  |  |  |      |  |  |   |      | 
|                                   |  |                             |       |                           |  |       |       |      |  |       |       |   |  |       |       |   |  |  |       |  |  |   |         |  |  |  |       |  |  |   |       | 
|Total                              |  |                             | 2,783 |                           |  | $     | 825.6 |      |  |       | 1,753 |   |  | $     | 466.4 |   |  |  | 5,604 |  |  | $ | 1,587.7 |  |  |  | 3,385 |  |  | $ | 873.2 | 
|                                   |  |                             |       |                           |  |       |       |      |  |       |       |   |  |       |       |   |  |  |       |  |  |   |         |  |  |  |       |  |  |   |       | 



---



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

|                                   |  |               |       |               |  |               |         |       |  |   |     |               |  |  |       |  |  |   |       |  |  |   |     | 
|---------------------------------- |  | ------------- | ----- | ------------- |  | ------------- | ------- | ----- |  | - | --- | ------------- |  |  | ----- |  |  | - | ----- |  |  | - | --- | 
|                                   |  |               |       |              
|                                   |  | June 30, 2004 |       | June 30, 2003
|                                   |  |               |       |              
|                                   |  | Homes         |       | $             |  | Average Price |         | Homes |  | $ |     | Average Price
|                                   |  |               |       |               |  |               |         |       |  |   |     |              
|Sales Backlog:                     |  |               |       |               |  |               |         |       |  |   |     |               |  |  |       |  |  |   |       |  |  |   |     | 
|Florida                            |  |               | 2,502 |               |  | $             | 724.2   |       |  | $ | 290 |               |  |  | 1,456 |  |  | $ | 375.4 |  |  | $ | 258 | 
|Mid-Atlantic                       |  |               | 501   |               |  |               | 220.0   |       |  | $ | 439 |               |  |  | 285   |  |  |   | 103.5 |  |  | $ | 363 | 
|Texas                              |  |               | 593   |               |  |               | 155.6   |       |  | $ | 262 |               |  |  | 583   |  |  |   | 152.0 |  |  | $ | 261 | 
|West                               |  |               | 1,707 |               |  |               | 438.0   |       |  | $ | 257 |               |  |  | 716   |  |  |   | 189.8 |  |  | $ | 265 | 
|                                   |  |               |       |               |  |               |         |       |  |   |     |               |  |  |       |  |  |   |       |  |  |   |     | 
|Consolidated total                 |  |               | 5,303 |               |  | $             | 1,537.8 |       |  | $ | 290 |               |  |  | 3,040 |  |  | $ | 820.7 |  |  | $ | 270 | 
|From unconsolidated joint ventures |  |               | 228   |               |  |               | 69.6    |       |  | $ | 305 |               |  |  |      |  |  |   |      |  |  |   |    | 
|                                   |  |               |       |               |  |               |         |       |  |   |     |               |  |  |       |  |  |   |       |  |  |   |     | 
|Total                              |  |               | 5,531 |               |  | $             | 1,607.4 |       |  | $ | 291 |               |  |  | 3,040 |  |  | $ | 820.7 |  |  | $ | 270 | 
|                                   |  |               |       |               |  |               |         |       |  |   |     |               |  |  |       |  |  |   |       |  |  |   |     | 

12



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##### Table of Contents



|                                   |  |                             |     |                           |  |            |     |        |  |            |     |        |  |            |     |        |  |   |     |  |  |   |     |  |  |   |     |  |  |   |     | 
|---------------------------------- |  | --------------------------- | --- | ------------------------- |  | ---------- | --- | ------ |  | ---------- | --- | ------ |  | ---------- | --- | ------ |  | - | --- |  |  | - | --- |  |  | - | --- |  |  | - | --- | 
|                                   |  |                             |     |                          
|                                   |  | Three Months Ended June 30, |     | Six Months Ended June 30,
|                                   |  |                             |     |                          
|                                   |  |                             |     |                           |  |            |     |       
|                                   |  | 2004                        |     | 2003                      |  | 2004       |     | 2003  
|                                   |  |                             |     |                           |  |            |     |       
|                                   |  |                             |     | Sales                     |  |            |     | Sales  |  |            |     | Sales  |  |            |     | Sales 
|                                   |  | Deliveries                  |     | Orders                    |  | Deliveries |     | Orders |  | Deliveries |     | Orders |  | Deliveries |     | Orders
|                                   |  |                             |     |                           |  |            |     |        |  |            |     |        |  |            |     |       
|Average Price:                     |  |                             |     |                           |  |            |     |        |  |            |     |        |  |            |     |        |  |   |     |  |  |   |     |  |  |   |     |  |  |   |     | 
|Florida                            |  | $                           | 265 |                           |  | $          | 298 |        |  | $          | 246 |        |  | $          | 249 |        |  | $ | 262 |  |  | $ | 287 |  |  | $ | 240 |  |  | $ | 239 | 
|Mid-Atlantic                       |  | $                           | 378 |                           |  | $          | 441 |        |  | $          | 356 |        |  | $          | 368 |        |  | $ | 377 |  |  | $ | 432 |  |  | $ | 326 |  |  | $ | 327 | 
|Texas                              |  | $                           | 256 |                           |  | $          | 257 |        |  | $          | 258 |        |  | $          | 260 |        |  | $ | 249 |  |  | $ | 257 |  |  | $ | 259 |  |  | $ | 254 | 
|West                               |  | $                           | 281 |                           |  | $          | 275 |        |  | $          | 264 |        |  | $          | 264 |        |  | $ | 278 |  |  | $ | 250 |  |  | $ | 267 |  |  | $ | 264 | 
|Consolidated total                 |  | $                           | 275 |                           |  | $          | 296 |        |  | $          | 266 |        |  | $          | 266 |        |  | $ | 272 |  |  | $ | 282 |  |  | $ | 261 |  |  | $ | 258 | 
|From unconsolidated joint ventures |  | $                           | 309 |                           |  | $          | 309 |        |  |            |    |        |  |            |    |        |  | $ | 309 |  |  | $ | 305 |  |  |   |    |  |  |   |    | 
|Total                              |  | $                           | 275 |                           |  | $          | 297 |        |  | $          | 266 |        |  | $          | 266 |        |  | $ | 272 |  |  | $ | 283 |  |  | $ | 261 |  |  | $ | 258 | 

|                            |  |                       |      |            |  |      |      |      |  |  |      |   |  |  |      |   
|--------------------------- |  | --------------------- | ---- | ---------- |  | ---- | ---- | ---- |  |  | ---- | - |  |  | ---- | --
|                            |  |                      
|                            |  | Percentage of Total  
|                            |  | Homebuilding Revenues
|                            |  |                      
|                            |  |                       |      |           
|                            |  | Three Months          |      | Six Months
|                            |  | Ended                 |      | Ended     
|                            |  | June 30,              |      | June 30,  
|                            |  |                       |      |           
|                            |  | 2004                  |      | 2003       |  | 2004 |      | 2003
|                            |  |                       |      |            |  |      |      |     
|Gross Profit                |  |                       | 19.2 | %          |  |      | 19.9 | %    |  |  | 19.1 | % |  |  | 20.5 | % 
|SG&A                        |  |                       | 11.8 | %          |  |      | 12.6 | %    |  |  | 12.4 | % |  |  | 13.1 | % 
|Other (income) expense, net |  |                       | 0.2  | %          |  |      | (0.1 | )%   |  |  | 0.1  | % |  |  | (0.2 | )%
|                            |  |                       |      |            |  |      |      |      |  |  |      |   |  |  |      |   
|Homebuilding pretax income  |  |                       | 7.2  | %          |  |      | 7.4  | %    |  |  | 6.6  | % |  |  | 7.6  | % 
|                            |  |                       |      |            |  |      |      |      |  |  |      |   |  |  |      |   



| |                                                                                  
| | ---------------------------------------------------------------------------------
| | Three Months Ended June 30, 2004
    Compared to Three Months Ended June 30, 2003

Homebuilding revenues increased 20% to
$498.3 million for the three months ended June 30,
2004, from $413.7 million for the three months ended
June 30, 2003. This increase is due primarily to an
increase in revenues from home sales to $462.5 million for
the three months ended June 30, 2004, from
$409.7 million for the comparable period in 2003. Our home
sales revenues in the quarter were 37% of our sales backlog at
the beginning of the quarter, which is lower than 2003 and the
first quarter of 2004. This decline is caused by our rapid
increase in communities in the first half of the year and
regulatory delays in opening new communities. Revenue from home
sales increased 13% due to (1) a 9% increase in home
deliveries to 1,682 from 1,539 for the three months ended
June 30, 2004 and 2003, respectively and (2) a 3%
increase in the average selling price on homes delivered to
$275,000 from $266,000 in the same periods. A significant
component of this increase was the 37% increase in revenues from
home sales in our West region for the three months ended
June 30, 2004 as compared to the same period in 2003. This
increase was due to the greater number of homes delivered and
the higher average selling price of such homes. At the same
time, we experienced a 28% decrease in revenues from home sales
in our Mid-Atlantic region for the three months ended
June 30, 2004 as compared to the same period in 2003. This
decrease was primarily due to a reduction in the number of homes
delivered due to delays in the opening of new communities,
partially offset by an increase in the average selling price of
homes delivered. In addition to the increase in revenue from
home sales, we generated significant additional revenue from
land sales. Revenues from land sales for the three months ended
June 30, 2004 were $35.8 million as compared to
$4.0 million for the three months ended June 30, 2003.
As part of our land inventory management strategy we review our
land portfolio. As a result of these reviews we will seek to
sell land when we have changed our strategy for a certain
property and/or we have determined that the potential profit
realizable from a sale of a property outweighs the economics of
developing a community. Land sales are incidental to our
residential homebuilding operations and are expected to continue
in the future, but may fluctuate significantly from period to
period.

Our Homebuilding gross profit increased 16% to
$95.8 million for the three months ended June 30,
2004, from $82.2 million for the three months ended
June 30, 2003. This increase is primarily due to an
increase in

13



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revenue from home sales. Our gross margin on home
sales decreased to 19.1% for the three months ended
June 30, 2004, from 19.8% for the three months ended
June 30, 2003. This decrease is primarily due to completion
in the prior year of high margin communities and an increase in
land costs as we have increased our use of option contracts. Our
gross margin was also negatively affected by the cost of higher
sales incentives associated with home deliveries in portions of
our Texas and Colorado markets for the three months ended
June 30, 2004, as compared to the corresponding period in
2003 due to the softness in these markets during the 2003
selling season. For the three months ended June 30, 2004,
we generated gross profit on land sales of $7.3 million as
compared to $1.2 million for the comparable period in 2003.


SG&A expenses increased to $58.7 million
for the three months ended June 30, 2004, from
$52.0 million for the three months ended June 30,
2003. As a percentage of Homebuilding revenues, SG&A
expenses decreased to 11.8% for the three months ended
June 30, 2004, as compared to 12.6% for the same period in
2003. The 80 basis point improvement in SG&A expenses
as a percentage of Homebuilding revenues is primarily
attributable to the increase in revenues from land sales and our
ability to generate higher revenue levels while leveraging
existing fixed SG&A costs. SG&A expenses as a percentage
of revenues from home sales for the three months ended
June 30, 2004 and 2003 remained stable at 12.7%, while our
Homebuilding pretax income as a percentage of home sales
revenues increased to 7.7% for the three months ended
June 30, 2004 from 7.5% for the three months ended
June 30, 2003.

For the three months ended June 30, 2004 and
2003, we recognized a compensation charge of $0.7 million
and $0.4 million, respectively, for variable accounting of
certain stock-based awards which include accelerated vesting
criteria.

Our Homebuilding pretax income as a percentage of
Homebuilding revenues decreased to 7.2% for the three months
ended June 30, 2004, from 7.4% for the three months ended
June 30, 2003. This decrease is due to the decline in our
gross margin on revenue from home sales offset slightly by the
improvement in SG&A as a percentage of Homebuilding revenues.



| |                             
| | ----------------------------
| | Net Sales Orders and Backlog

For the three months ended June 30, 2004,
net sales orders increased by 51% and the value of net sales
orders increased by 68% as compared to the same period in the
prior year. The increase is due to strong housing demand in the
majority of our markets and the increased number of communities
in which we are marketing. We continue to experience weakness in
our Texas region as evidenced by an 11% decline in net sales
orders for the three months ended June 30, 2004, as
compared to the same period in the prior year. The average sales
price on net sales orders increased by 11% to $296,000 for the
three months ended June 30, 2004, as compared to $266,000
for the three months ended June 30, 2003.

We had 5,303 homes in backlog (representing
$1.5 billion in revenues), as compared to 3,040 homes
(representing $820.7 million in revenues) as of
June 30, 2004 and 2003, respectively. This increase in
revenue in backlog of 87% is primarily attributable to the
increased sales activity in many of our existing markets. Our
average selling price of homes in backlog has increased to
$290,000 from $270,000 as a result of the strong housing demand
in certain of our markets allowing us to increase prices in
those markets, along with a change in the product mix of our
homes in backlog.



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

Financial Services revenues decreased to
$11.2 million for the three months ended June 30,
2004, from $13.2 million for the three months ended
June 30, 2003. This 15% decrease is due primarily to a
decrease in the number of closings at both our mortgage and
title operations and reduced gains in selling mortgages in the
secondary market caused by a shift toward more adjustable rate
mortgage loans and market reductions in the interest margin. For
the three months ended June 30, 2004, our mix of mortgage
originations was 35% adjustable rate mortgages (of which
approximately half were interest only) and 65% fixed rate
mortgages which is a shift from the comparable period in the
prior year of 17% adjustable rate mortgages and 83% fixed rate
mortgages. The average FICO score of our homebuyers during the
three months ended June 30, 2004 was 732 and the average
loan to value ratio was 76%. For the three months ended
June 30, 2004, approximately

14



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##### Table of Contents



12% of our homebuyers paid in cash. Our mortgage
operations capture ratio for non-cash homebuyers remained steady
at 58% for both the three months ended June 30, 2004 and
2003. The number of closings at our mortgage operations
decreased to 1,141 for the three months ended June 30,
2004, from 1,244 for the three months ended June 30, 2003,
primarily due to an increase in the number of homebuyers paying
in cash. Our title operations capture ratio increased to 98% for
the three months ended June 30, 2004, from 80% for the
comparable period in 2003. However, the number of closings at
our title operations decreased to 5,339 for the three months
ended June 30, 2004 from 5,583 for the same period in 2003
primarily due to a decrease in refinancing transactions.
Non-affiliated customers account for approximately 79% of our
title company revenues.


Financial Services expenses increased to
$8.7 million for the three months ended June 30, 2004,
from $7.4 million for the three months ended June 30,
2003. This 17% increase is partially a result of expenses
incurred in connection with the relocation of our mortgage
company headquarters to Tampa, Florida. Costs incurred with the
move and employee separation aggregated $0.9 million, all
of which were paid during the three months ended June 30,
2004, thereby reducing the profitability of our overall
Financial Services operations.



| |                                                                              
| | -----------------------------------------------------------------------------
| | Six Months Ended June 30, 2004
    Compared to Six Months Ended June 30, 2003

Homebuilding revenues increased 27% to
$923.2 million for the six months ended June 30, 2004,
from $728.9 million for the six months ended June 30,
2003. This increase is due primarily to an increase in revenues
from home sales to $869.3 million for the six months ended
June 30, 2004, from $723.5 million for the comparable
period in 2003. The 20% increase in revenue from home sales was
due to (1) a 15% increase in home deliveries to 3,199 from
2,773 for the six months ended June 30, 2004 and 2003,
respectively, and (2) a 4% increase in the average selling
price on delivered homes to $272,000 from $261,000 in the same
period. A significant component of this increase was the 46%
increase in revenues from home sales in our West region for the
six months ended June 30, 2004 as compared to the same
period in 2003. This increase was due to the greater number of
homes delivered and the higher average selling price of such
homes. At the same time, we experienced a 12% decrease in
revenues from home sales in our Mid-Atlantic region for the six
months ended June 30, 2004, as compared to the same period
in 2003. This decrease in home sales was primarily due to a
reduction in the number of homes delivered due to delays in the
opening of new communities, offset by an increase in the average
selling price of homes delivered. In addition to the increase in
revenue from home sales, we generated significant additional
revenue from land sales which increased to $53.9 million
for the six months ended June 30, 2004, as compared to
$5.4 million for the six months ended June 30, 2003.
As discussed above, our land sales were a result of our review
of our land portfolio. As a result of these reviews we will seek
to sell land when we have changed our strategy for a certain
property and/or we have determined that the potential profit
realizable from a sale of a property outweighs the economics of
developing a community.

Our Homebuilding gross profit increased 18% to
$176.4 million for the six months ended June 30, 2004,
from $149.1 million for the six months ended June 30,
2003. This increase is primarily due to an increase in revenue
from home sales. Our gross margin on home sales decreased to
18.8% for the six months ended June 30, 2004, from 20.4%
for the six months ended June 30, 2003. This decrease is
primarily due to the completion in the prior year of high margin
communities and an increase in land costs as we have increased
our use of option contracts. Our gross margin was also
negatively affected by the cost of higher sales incentives
associated with home deliveries in portions of our Texas and
Colorado markets for the six months ended June 30, 2004, as
compared to the corresponding period in 2003 due to the softness
in these markets during the 2003 selling season. For the six
months ended June 30, 2004, we generated gross profit on
land sales of $12.7 million as compared to
$1.4 million for the comparable period in 2003.

SG&A expenses increased to
$114.0 million for the six months ended June 30, 2004,
from $95.4 million for the six months ended June 30,
2003. As a percentage of Homebuilding revenues, SG&A
expenses decreased to 12.4% for the six months ended
June 30, 2004, as compared to 13.1% for the same period in
2003. The 70 basis point improvement in SG&A expenses
as a percentage of Homebuilding revenues is primarily
attributable to the increase in revenues from land sales and our
ability to generate higher revenue levels while leveraging
existing fixed SG&A costs. SG&A expenses as a percentage
of revenues from home sales for the six

15



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##### Table of Contents



months ended June 30, 2004 decreased
slightly to 13.1%, as compared to 13.2% for the same period in
the prior year, while our Homebuilding pretax income as a
percentage of home sales revenues declined from 7.6% for the six
months ended June 30, 2003 to 7.0% for the six months ended
June 30, 2004.


For the six months ended June 30, 2004 and
2003, we recognized a compensation charge of $1.7 million
and $0.4 million, respectively, for variable accounting of
certain stock-based awards which include accelerated vesting
criteria.

Our Homebuilding pretax income as a percentage of
Homebuilding revenues decreased to 6.6% for the six months ended
June 30, 2004, from 7.6% for the six months ended
June 30, 2003. This decrease is due to the decline in our
gross margin on revenue from home sales partially offset by the
improvement in SG&A as a percentage of Homebuilding revenues.



| |                 
| | ----------------
| | Net Sales Orders

For the six months ended June 30, 2004, net
sales orders increased by 59% and the value of net sales orders
increased by 74%, as compared to the same period in the prior
year. The increase is due to strong housing demand in the
majority of our markets and an increase in the number of
communities in which we are marketing. The average sales price
on net sales orders increased by 9% to $282,000 for the six
months ended June 30, 2004, as compared to $258,000 for the
six months ended June 30, 2003.



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

Financial Services revenues decreased to
$21.5 million for the six months ended June 30, 2004,
from $22.7 million for the six months ended June 30,
2003. This 5% decrease is due primarily to a decrease in the
number of closings at our title operations and reduced gains in
selling mortgages in the secondary market caused by a shift
toward more adjustable rate mortgage loans and market reductions
in the interest margin. For the six months ended June 30,
2004, our mix of mortgage originations was 33% adjustable rate
mortgages (of which approximately half were interest only) and
67% fixed rate mortgages which is a shift from the comparable
period in the prior year of 13% adjustable rate mortgages and
87% fixed rate mortgages. The average FICO score of our
homebuyers during the six months ended June 30, 2004 was
729 and the average loan to value ratio was 74%. During the six
months ended June 30, 2004, approximately 13% of our
homebuyers paid in cash. Our mortgage operations capture ratio
for non-cash homebuyers increased to 61% for the six months
ended June 30, 2004, from 56% for the comparable period in
2003. This contributed to an increase in the number of closings
at our mortgage operations to 2,190 from 2,124 for the same
periods. Our title operations capture ratio increased to 95% for
the six months ended June 30, 2004, from 80% for the
comparable period in 2003. However, the number of closings at
our title operations decreased to 9,712 for the six months ended
June 30, 2004, from 10,265 for the same period in 2003
primarily due to a decrease in refinancing transactions.

Financial Services expenses increased to
$15.8 million for the six months ended June 30, 2004,
from $13.6 million for the six months ended June 30,
2003. This 16% increase is a result of higher staff levels and
$0.9 million in moving costs and employee separation
expenses incurred in connection with the relocation of our
mortgage company headquarters to Tampa, Florida.

Financial Condition, Liquidity and Capital
Resources



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

Our Homebuilding operations primary uses of
cash have been for land acquisitions, construction and
development expenditures, and SG&A expenditures. Our sources
of cash to finance these requirements have been primarily cash
generated from operations and cash from our financing activities.

Our Financial Services operations primarily use
cash to fund mortgages, prior to their sale, and SG&A
expenditures. We rely primarily on internally generated funds,
which include the proceeds generated from the sale of mortgages,
and from the mortgage operations warehouse line of credit
to fund these operations.

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At June 30, 2004, we had unrestricted cash
and cash equivalents of $82.2 million as compared to
$76.8 million at December 31, 2003.

Cash used in investing activities was
$15.8 million during the six months ended June 30,
2004, as compared to $83.9 million during the six months
ended June 30, 2003. The decrease in the use of cash in
investing activities primarily is due to the acquisitions made
in Las Vegas and Colorado during the six months ended
June 30, 2003 and the additional consideration paid during
that period with respect to those companies acquired in the
fourth quarter of 2002.



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

Our consolidated borrowings at June 30, 2004
were $668.8 million, up from $561.1 million at
December 31, 2003, resulting from an increase in
Homebuilding borrowings to $614.9 million from
$497.9 million at the same dates. At June 30, 2004,
our Homebuilding borrowings included $300.0 million in
9% senior notes due 2010, $185.0 million of
10 3/8% senior subordinated notes due 2012 and
$125.0 million of 7 1/2% senior subordinated
notes due 2011. Our weighted average debt to maturity is
6.3 years, while our average inventory turnover is 1.2
times per year.

We issued the 7 1/2% Senior
Subordinated Notes due 2011 in March 2004 for net proceeds of
$123.3 million which were primarily used to repay amounts
outstanding under our revolving credit facility and warehouse
line of credit. We used our other Homebuilding borrowings to
fund our increased land supply, our acquisitions and the
operating costs associated with establishing an infrastructure
to support our growth. We initially funded these costs through
borrowings under our revolving credit facility and then, as
market conditions permitted, we issued fixed-rate long term
notes to refinance these borrowings and reduce the outstanding
balance under our revolving credit facility.

Our senior notes are guaranteed by all of our
material domestic subsidiaries and our senior subordinated notes
are guaranteed on a senior subordinated basis by all of our
material domestic subsidiaries. The indentures governing the
senior and senior subordinated notes require us to maintain a
minimum net worth and place certain restrictions on our ability,
among other things, to incur additional debt (other than under
our revolving credit facility), pay or make dividends or other
distributions, sell assets, enter into transactions with
affiliates, and merge or consolidate with other entities.

Our financial leverage, as measured by the ratio
of Homebuilding net debt to capital, increased to 48.1% at
June 30, 2004 from 44.1% at December 31, 2003, due
primarily to the March 2004 issuance of senior subordinated
notes. Homebuilding net debt to capital is not a financial
measure required by generally accepted accounting principles
(GAAP) and other companies may calculate it differently. We
have included this information as we believe that the ratio of
Homebuilding net debt to capital provides comparability among
other publicly-traded homebuilders. In addition, management uses
this information in measuring the financial leverage of our
homebuilding operations, which is our primary business.
Homebuilding net debt to capital has limitations as a measure of
our financial leverage because it excludes Financial Services
bank borrowings and it reduces our Homebuilding debt by the
amount of our unrestricted cash. Management compensates for
these limitations by using Homebuilding net debt to capital as
only one of several comparative tools, together with GAAP
measurements, to assist in the evaluation of our financial
leverage. It should not be construed as an indication of our
operating performance or a measure of our liquidity.

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|                           |  |                          |         |              |  |   |       |  
|-------------------------- |  | ------------------------ | ------- | ------------ |  | - | ----- | -
|                           |  |                         
|                           |  | Homebuilding Net Debt to
|                           |  | Capital                 
|                           |  |                         
|                           |  | June 30,                 |         | December 31,
|                           |  | 2004                     |         | 2003        
|                           |  |                          |         |             
|Notes payable              |  | $                        | 605.4   |              |  | $ | 480.0 |  
|Bank borrowings            |  |                          | 9.5     |              |  |   | 17.9  |  
|                           |  |                          |         |              |  |   |       |  
|Homebuilding borrowings(1) |  | $                        | 614.9   |              |  | $ | 497.9 |  
|Less: unrestricted cash    |  |                          | 77.3    |              |  |   | 73.7  |  
|                           |  |                          |         |              |  |   |       |  
|Homebuilding net debt      |  | $                        | 537.6   |              |  | $ | 424.2 |  
|Stockholders equity       |  |                          | 581.0   |              |  |   | 537.6 |  
|                           |  |                          |         |              |  |   |       |  
|Total capital(2)           |  | $                        | 1,118.6 |              |  | $ | 961.8 |  
|Ratio                      |  |                          | 48.1    | %            |  |   | 44.1  | %



---



|    |                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Does not include obligations for inventory not
    owned of $203.5 million at June 30, 2004 and
    $242.8 million at December 31, 2003, all of which are
    non-recourse to us.
|   
|(2) | Does not include Financial Services bank
    borrowings of $53.9 million at June 30, 2004 and
    $63.2 million at December 31, 2003.                                            

Effective April 12, 2004, we amended our
revolving credit facility to increase the amount we are
permitted to borrow to the lesser of
(i) $350.0 million or (ii) our borrowing base
(calculated in accordance with the revolving credit facility
agreement) minus our outstanding senior debt, and to increase
the amount of the letter of credit subfacility to
$175.0 million. The revolving credit facility expires on
June 26, 2005. As of June 30, 2004, we had no amounts
outstanding under the revolving credit facility and had issued
letters of credit of $112.3 million, with
$237.7 million remaining in availability, all of which we
could borrow without violating any of our debt covenants. The
revolving credit facility requires us to (1) maintain
specified financial ratios regarding leverage, interest
coverage, consolidated tangible net worth and certain
operational measurements and (2) satisfy certain financial
condition tests. The revolving credit facility also places
certain restrictions on, among other things, our ability to
incur additional debt or liens, pay or make dividends or other
distributions, create or permit certain liens, make equity
investments in certain land-holding joint ventures, sell assets,
enter into transactions with affiliates and merge or consolidate
with other entities.

To fund the origination of residential mortgage
loans, our mortgage subsidiary has a $90.0 million
warehouse line of credit secured by mortgages held for sale,
which expires on December 19, 2004. As of June 30,
2004, we had $53.9 million outstanding under the warehouse
line of credit, which accrued interest at a blended rate of
2.69% per annum. We have entered into a keep-well agreement
in favor of the lender which obligates us to provide financial
support to our mortgage subsidiary, if necessary, for it to
maintain certain financial ratios and minimums.

We currently are reevaluating our existing credit
facilities and anticipate arriving at a mutually acceptable
agreement with our lenders to increase our borrowing capacity.

We believe that we have adequate financial
resources, including cash from operations, availability under
our current revolving credit facility and the warehouse line of
credit, and relationships with financial partners to meet our
current and anticipated working capital, land acquisition and
development needs and our estimated consolidated annual debt
service payments of $57.6 million (at June 30, 2004,
based on the balances outstanding as of such date). However,
there can be no assurance that the amounts available from such
sources will be sufficient. If we identify new acquisition
opportunities, or if our operations do not generate sufficient
cash from operations at levels currently anticipated, we may
seek additional debt or equity financing to operate and expand
our business.

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



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

We enter into land and homesite option contracts
to procure land or homesites for the construction of homes.
Option contracts generally require the payment of cash or the
posting of a letter of credit for the right to acquire land or
homesites during a specified period of time at a certain price.
Option contracts allow us to control significant homesite
positions with a minimal capital investment and substantially
reduce the risk associated with land ownership and development.
At June 30, 2004, we had deposits of $93.0 million and
had issued letters of credit of $96.5 million associated
with our land purchasing activities. The financial exposure for
nonperformance on our part in these transactions is generally
limited to our deposits and/or letters of credit.

Additionally, at June 30, 2004, we have
performance/ surety bonds of $134.1 million and letters of
credit of $15.8 million outstanding primarily related to
land development activities.



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

We have and expect to continue to enter into
joint ventures that acquire and develop land for our
Homebuilding operations and/or that also build and market homes
for sale to third parties. Through joint ventures, we reduce and
share our risk associated with land ownership and development
and extend our capital resources. Our partners in these joint
ventures generally are unrelated homebuilders, land sellers,
financial investors or other real estate entities. In joint
ventures where the assets are being financed with debt, the
borrowings are non-recourse to us, and we do not provide any
financial guarantees; as a result, our financial exposure is
generally limited to our investment. At June 30, 2004, we
had investments in unconsolidated joint ventures of
$24.4 million. We account for these investments under the
equity method of accounting. These unconsolidated joint ventures
are limited liability companies or limited partnerships in which
we have a limited partnership interest and a minority interest
in the general partner.

We believe that the use of off-balance sheet
arrangements enables us to acquire rights in land which we may
not have otherwise been able to acquire at favorable terms. As a
result, we view the use of off-balance sheet arrangements as
beneficial to our Homebuilding activities.

DISCLOSURE REGARDING FORWARD-LOOKING
STATEMENTS

This Quarterly Report on Form 10-Q contains
forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as
amended. Discussions containing forward-looking statements may
be found throughout this Quarterly Report and specifically in
the material set forth in the section, Managements
Discussion and Analysis of Financial Condition and Results of
Operations and Quantitative and Qualitative
Disclosures about Market Risk. These statements concern
expectations, beliefs, projections, future plans and strategies,
anticipated events or trends and similar expressions concerning
matters that are not historical facts and typically include the
words anticipate, believe,
expect, estimate, project,
and future. Specifically, this Quarterly Report
contains forward-looking statements regarding:



| |   |                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our expectations that we will arrive at mutually
    acceptable agreements with our lenders to increase our borrowing
    capacity;                                                                     
|
| |  | our expectations regarding our continued use of
    option contracts and other off-balance sheet arrangements to
    control homesites and manage our business and their effect on
    our business; and
|
| |  | our estimate that we have adequate financial
    resources to meet our current and anticipated working capital
    and land acquisition and development needs.                                          

These forward-looking statements reflect our
current views about future events and are subject to risks,
uncertainties and assumptions. As a result, actual results may
differ materially from the results discussed in and anticipated
by the forward-looking statements. The most important factors
that could cause the

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assumptions underlying forward-looking statements
and actual results to differ materially from those expressed in
or implied by those forward-looking statements include, but are
not limited to, the following:




| |   |                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our significant level of debt and the impact of
    the restrictions imposed on us by the terms of this debt;                                                      
|
| |  | our ability to borrow or otherwise finance our
    business in the future;                                                                                         
|
| |  | our ability to identify and acquire, at
    anticipated prices, additional homebuilding opportunities and/or
    to effect our growth strategies;                  
|
| |  | our relationship with Technical Olympic and its
    control over our business activities;                                                                          
|
| |  | economic or other business conditions that affect
    the desire or ability of our customers to purchase new homes in
    markets in which we conduct our business;
|
| |  | any unexpected delays in the opening of new
    communities in 2004 or 2005;                                                                                       
|
| |  | an increase in interest rates;                                                                                                                                     
|
| |  | our ability to compete in our existing and future
    markets; and                                                                                                 
|
| |  | an increase or change in governmental regulations.                                                                                                                 






|        |                                                               
|------- | --------------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosures
    About Market Risk

As a result of our notes offerings, at
June 30, 2004, $610.0 million of our outstanding
borrowings are based on fixed interest rates. We are exposed to
market risk primarily related to potential adverse changes in
interest rates on our existing construction loans, warehouse
line of credit and revolving credit facility. The interest rates
relative to these borrowings fluctuate with the prime and LIBOR
lending rates, We have not entered into derivative financial
instruments for trading or speculative purposes. As of
June 30, 2004, we had an aggregate of approximately
$63.4 million drawn under our bank loan arrangements that
are subject to changes in interest rates. Consequently, an
increase or decrease of 1% in interest rates will change our
annual debt service payments by $0.6 million per year as a
result of our bank loan arrangements that are subject to changes
in interest rates.

Our operations are interest rate sensitive.
Overall housing demand is adversely affected by increases in
interest rates. If mortgage interest rates increase
significantly, this may negatively affect the ability of
homebuyers to secure adequate financing. Higher interest rates
will adversely affect our revenues, gross margins, and net
income. Higher interest rates also increase our borrowing costs
because, as indicated above, our bank loans will fluctuate with
the prime and LIBOR lending rates.

Our Annual Report on Form 10-K for the year
ended December 31, 2003 contains further information
regarding our market risk. There have been no material changes
in our market risk since March 31, 2004.






|        |                        
|------- | -----------------------
|Item 4. | Controls and Procedures

To ensure that the information we must disclose
in our filings with the Securities and Exchange Commission is
recorded, processed, summarized, and reported on a timely basis,
we maintain disclosure controls and procedures. Our principal
executive officer and principal financial officer have reviewed
and evaluated the effectiveness of our disclosure controls and
procedures, as of June 30, 2004. Based on such evaluation,
such officers have concluded that, as of June 30, 2004, our
disclosure controls and procedures were effective in timely
alerting them to material information relating to us (and our
consolidated subsidiaries) required to be included in our
periodic Securities and Exchange Commission filings. There has
been no change in our internal control over financial reporting
during the quarter ended June 30, 2004 that has materially
affected, or is reasonably likely to materially affect, our
internal control over financial reporting.

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##### Table of Contents






PART II. OTHER INFORMATION






|        |                                                        
|------- | -------------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security
    Holders

On April 27, 2004, Technical Olympic USA,
Inc. held its annual meeting of stockholders. At the meeting,
stockholders voted on (i) the election of nine directors to
serve for a term of one year, and (ii) an amendment to the
Companys Certificate of Incorporation to increase the
number of authorized shares of all classes of stock that the
Company may issue from 70,000,000 shares to 100,000,000, of
which 3,000,000 shares were to be classified as preferred
stock and 97,000,000 shares were to be classified as common
stock. The voting results were as follows:

Election of Directors

|                     |  |     |            |          |  |  |           | 
|-------------------- |  | --- | ---------- | -------- |  |  | --------- | 
|Name of Nominee      |  | For |            | Withheld
|                     |  |     |            |         
|Konstantinos Stengos |  |     | 27,824,559 |          |  |  | 1,994,546 | 
|Antonio B. Mon       |  |     | 27,988,715 |          |  |  | 1,830,390 | 
|Andreas Stengos      |  |     | 27,824,559 |          |  |  | 1,994,546 | 
|George Stengos       |  |     | 27,824,559 |          |  |  | 1,994,546 | 
|Larry D. Horner      |  |     | 27,781,885 |          |  |  | 2,037,220 | 
|William A. Hasler    |  |     | 27,781,885 |          |  |  | 2,037,220 | 
|Michael J. Poulos    |  |     | 27,781,885 |          |  |  | 2,037,220 | 
|Lonnie M. Fedrick    |  |     | 27,824,559 |          |  |  | 1,994,546 | 
|Marianna Stengou     |  |     | 27,824,559 |          |  |  | 1,994,546 | 

Amendment to Certificate of
Incorporation

|    |            |         |  |         |         |                  |  |  |     |  |  |  |           | 
|--- | ---------- | ------- |  | ------- | ------- | ---------------- |  |  | --- |  |  |  | --------- | 
|For |            | Against |  | Abstain |         | Broker Non-Votes
|    |            |         |  |         |         |                 
|    | 27,518,070 |         |  |         | 367,576 |                  |  |  | 485 |  |  |  | 1,932,974 | 





|        |                                     
|------- | ------------------------------------
|Item 6. | Exhibits and Reports on
    Form 8-K

(a)Exhibits:

|        |    |             |  |                                                                                                           
|------- | -- | ----------- |  | ----------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 10 | .44         |  | Employment Agreement, dated as of May 1,
    2004, between David J. Keller and Technical Olympic USA, Inc.
|        | 31 | .1          |  | Certification of Chief Executive Officer pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002    
|        | 31 | .2          |  | Certification of Chief Financial Officer pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002    
|        | 32 | .1          |  | Certification of Chief Executive Officer pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002    
|        | 32 | .2          |  | Certification of Chief Financial Officer pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002    

(b)Reports on Form 8-K: The
following reports on Form 8-K were filed during the period
covered by this report.

On April 16, 2004, we filed a Current Report
on Form 8-K (Items 5 and 7) to announce an
amendment to our revolving credit facility.

On April 16, 2004, we filed a Current Report
on Form 8-K (Item 12) to release certain operational
data for the quarter ended March 31, 2004.

On April 28, 2004, we filed a Current Report
on Form 8-K (Items 5 and 7) to announce our
recent three-for-two stock split and certain appointments of
officers.

On May 11, 2004, we filed a Current Report
on Form 8-K (Item 12) to announce financial results
for the quarter ended March 31, 2004, and to reaffirm
previous financial and operational guidance for 2004.

On May 25, 2004, we filed a Current Report
on Form 8-K (Items 5 and 7) to announce our
recent cash dividend of $.015 per share.

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SIGNATURES

Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly
authorized.



| |                            
| | ---------------------------
| | TECHNICAL OLYMPIC USA, INC.

|                     |  |                                                                                                                           
|-------------------- |  | --------------------------------------------------------------------------------------------------------------------------
|Date: August 9, 2004 |  | By: /s/ DAVID J. KELLERName: David J. Keller
    Title:   Senior Vice President,
    Chief Financial Officer and Treasurer
|                    
|Date: August 9, 2004 |  | By: /s/ RANDY L. KOTLERName: Randy L. Kotler
    Title:   Vice President  Chief
    Accounting Officer                   

22