##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  Form 10-Q
  (Mark One)þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    June 30, 2006ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   COMMISSION
    FILE NUMBER:
    001-32322
  TECHNICAL OLYMPIC USA,
    INC.
 (Exact name of registrant as
    specified in its charter)
  Delaware

76-0460831(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)4000 Hollywood Blvd.,
    Suite 500 N
    Hollywood, Florida

33021(ZIP code)(Address of principal executive
    offices)   (954) 364-4000
 (Registrants telephone
    number, including area code)
  (Former name, former address and former fiscal year,
 if changed since last report)
  þ o
  Rule 12b-2
 o þ o
  Rule 12b-2 o þ
  APPLICABLE
    ONLY TO CORPORATE ISSUERS:




---



##### 



TECHNICAL
    OLYMPIC USA, INC.
  INDEX
  
  PagePART I.

Financial
    Information


2ITEM 1.

Financial
    Statements (Unaudited)


2Consolidated
    Statements of Financial Condition


2Consolidated
    Statements of Income


3Consolidated
    Statements of Cash Flows


4Notes to Unaudited
    Consolidated Financial Statements


5ITEM 2.

Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


21ITEM 3.

Quantitative and
    Qualitative Disclosures about Market Risk


36ITEM 4.

Controls and
    Procedures


36PART II.

Other
    Information


37ITEM 1A.

Risk
    Factors


37ITEM 4.

Submission of
    Matters to a Vote of Security Holders


37ITEM 5.

Other
    Information


38ITEM 6.

Exhibits


38Signatures


39Ex-10.32(a) Amendment to Employment AgreementEx-10.33(a) Amendment to Employment AgreementEx-31.1 Section 302 Certification of CEOEx-31.2 Section 302 Cetification of CFOEx-32.1 Section 906 Cetification of CEOEx-32.2 Section 906 Cetification of CFO   1




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##### Table of Contents



PART I.
    FINANCIAL INFORMATION  ITEM 1.
    FINANCIAL
    STATEMENTS  TECHNICAL
    OLYMPIC USA, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION  June 30,


December 31,2006


2005(Unaudited)(Dollars in millions,except par value)ASSETSHOMEBUILDING:Cash and cash equivalents:Unrestricted

$
39.6


$
26.2Restricted


2.9



3.1Inventory:Deposits


215.3



218.5Homesites and land under development


807.4



650.3Residences completed and under
    construction


855.4



747.4Inventory not owned


218.5



124.62,096.6



1,740.8Property and equipment, net


30.6



27.1Investments in unconsolidated joint
    ventures


249.9



254.5Receivables from unconsolidated
    joint ventures


83.0



60.5Other assets


104.2



133.2Goodwill


108.8



108.82,715.6



2,354.2FINANCIAL SERVICES:Cash and cash equivalents:Unrestricted


7.7



8.7Restricted


3.2



3.1Mortgage loans held for sale


45.1



43.9Other assets


11.8



12.867.8



68.5Total assets

$
2,783.4


$
2,422.7LIABILITIES AND
    STOCKHOLDERS EQUITYHOMEBUILDING:Accounts payable and other
    liabilities

$
285.2


$
329.4Customer deposits


76.0



79.3Obligations for inventory not owned


218.5



124.6Notes payable


1,060.5



811.6Bank borrowings






65.01,640.2



1,409.9FINANCIAL SERVICES:Accounts payable and other
    liabilities


6.4



6.4Bank borrowings


38.2



35.144.6



41.5Total liabilities


1,684.8



1,451.4Stockholders equity:Preferred stock 
    $0.01 par value; 3,000,000 shares authorized; none
    issued or outstanding






Common stock 
    $0.01 par value; 97,000,000 shares authorized and
    59,590,519 and 59,554,977 shares issued and outstanding at
    June 30, 2006, and December 31, 2005, respectively


0.6



0.6Additional paid-in capital


479.4



480.5Unearned compensation






(7.7
)Retained earnings


618.6



497.9Total stockholders equity


1,098.6



971.3Total liabilities and
    stockholders equity

$
2,783.4


$
2,422.7    2




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##### Table of Contents



TECHNICAL
    OLYMPIC USA, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF INCOME  Three Months Ended June 30,


Six Months Ended June 30,2006


2005


2006


2005(Unaudited)(Dollars in millions, except per share amounts)HOMEBUILDING:Revenues:Home sales

$
641.6


$
582.1


$
1,227.9


$
1,094.5Land sales


18.0



33.7



46.0



54.9659.6



615.8



1,273.9



1,149.4Cost of sales:Home sales


482.2



448.2



921.2



849.2Land sales


12.8



29.9



37.7



46.7495.0



478.1



958.9



895.9Gross profit


164.6



137.7



315.0



253.5Selling, general and
    administrative expenses


104.4



77.1



201.8



156.5(Income) from joint ventures, net


(37.9
)


(8.1
)


(65.7
)


(10.7
)Other (income), net


(2.4
)


(2.3
)


(4.4
)


(4.2
)Homebuilding pretax income


100.5



71.0



183.3



111.9FINANCIAL SERVICES:Revenues


17.4



11.4



32.6



21.4Expenses


11.0



9.0



21.7



17.7Financial Services pretax income


6.4



2.4



10.9



3.7Income before provision for income
    taxes


106.9



73.4



194.2



115.6Provision for income taxes


39.3



27.7



71.6



43.5Net income

$
67.6


$
45.7


$
122.6


$
72.1EARNINGS PER COMMON SHARE:Basic

$
1.13


$
0.82


$
2.06


$
1.29Diluted

$
1.10


$
0.79


$
1.99


$
1.24WEIGHTED AVERAGE NUMBER OF COMMON
    SHARES OUTSTANDING:Basic


59,572,856



56,083,450



59,580,962



56,078,578Diluted


61,405,216



58,189,548



61,539,678



58,157,052CASH DIVIDENDS PER SHARE

$
0.015


$
0.015


$
0.030


$
0.027    3




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##### Table of Contents



TECHNICAL
    OLYMPIC USA, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS  Six Months EndedJune 30,2006


2005(Unaudited)(Dollars in millions)Cash flows from operating
    activities:Net income

$
122.6


$
72.1Adjustments to reconcile net
    income to net cash used in operating activities:Depreciation and amortization


6.9



6.3Non-cash compensation


6.9



4.8Loss on impairment of inventory


5.4



0.6Deferred income taxes


(2.1
)


Undistributed equity in earnings
    from unconsolidated joint ventures


(22.6
)


(3.8
)Distributions of earnings from
    unconsolidated joint ventures


19.2



Changes in operating assets and
    liabilities:Restricted cash


0.1



4.9Inventory


(274.3
)


(270.2
)Receivables from unconsolidated
    joint ventures


(15.0
)


Other assets


35.5



(33.3
)Mortgage loans held for sale


(1.2
)


14.9Accounts payable and other
    liabilities


(47.1
)


10.2Customer deposits


(3.3
)


21.6Net cash used in operating
    activities


(169.0
)


(171.9
)Cash flows from investing
    activities:Net additions to property and
    equipment


(10.3
)


(6.0
)Loans to unconsolidated joint
    ventures


(7.5
)


Investments in unconsolidated
    joint ventures


(8.2
)


(21.5
)Capital distributions from
    unconsolidated joint ventures


25.2



9.6Net cash (used in) provided by
    investing activities


(0.8
)


(17.9
)Cash flows from financing
    activities:Net repayments on revolving credit
    facility


(65.0
)


Net proceeds from notes offering


248.8



Net proceeds from Financial
    Services bank borrowings


3.1



0.4Payments for deferred financing
    costs


(3.2
)


(0.3
)Excess income tax benefit from
    exercise of stock options


0.1



Proceeds from stock option
    exercises


0.2



0.2Dividends paid


(1.8
)


(1.5
)Net cash provided by (used in)
    financing activities


182.2



(1.2
)Increase (decrease) in cash and
    cash equivalents


12.4



(191.0
)Cash and cash equivalents at
    beginning of period


34.9



268.5Cash and cash equivalents at end
    of period

$
47.3


$
77.5Supplemental disclosure of
    non-cash financing activity:Increase (decrease) in obligations
    for inventory not owned and corresponding increase (decrease) in
    inventory not owned

$
93.9


$
(32.6
)    4




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##### Table of Contents



TECHNICAL
    OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 June 30, 2006
  1.
    Business
    and Organization  Business
    Organization
    2.
    Summary
    of Significant Accounting Policies  Basis
    of Presentation
            Interim
    Presentation
  Form 10-Q Form 10-K
   5




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##### Table of Contents



TECHNICAL
    OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Earnings
    Per Share
      Three Months Ended


Six Months EndedJune 30,


June 30,2006


2005


2006


2005Basic weighted average shares
    outstanding


59,572,856



56,083,450



59,580,962



56,078,578Net effect of common stock
    equivalents assumed to be exercised


1,832,360



2,106,098



1,958,716



2,078,474Diluted weighted average shares
    outstanding


61,405,216



58,189,548



61,539,678



58,157,052   Revenue
    Recognition
  Accounting for the Sales of
    Real Estate
  Stock-Based
    Compensation
  Accounting for Stock
    Issued to Employees Accounting for Stock-Based Compensation Share-Based
    Payment
 6




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##### Table of Contents



TECHNICAL
    OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    3.
    Inventory    Three Months Ended


Six Months EndedJune 30,


June 30,2006


2005


2006


2005Interest capitalized, beginning of
    period

$
52.5


$
40.2


$
47.7


$
36.8Interest incurred


25.5



19.6



48.3



38.7Less interest included in:Cost of sales


(18.9
)


(17.7
)


(36.6
)


(32.4
)Other


0.2



1.0



(0.1
)


Interest capitalized, end of period

$
59.3


$
43.1


$
59.3


$
43.1     Consolidation of Variable Interest Entities
   7




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##### Table of Contents



TECHNICAL
    OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Accounting for the
    Impairment or Disposal of Long-Lived Assets
  4.
    Investments
    in Unconsolidated Joint Ventures    June 30, 2006Land


HomeDevelopment


Construction


TotalAssets:Cash and cash equivalents

$
9.3


$
115.8


$
125.1Inventories


369.8



1,091.7



1,461.5Other assets


6.2



222.0



228.2Total assets

$
385.3


$
1,429.5


$
1,814.8Liabilities and partners
    equity:Accounts payable and other
    liabilities

$
70.8


$
268.9


$
339.7Notes payable


145.4



821.4



966.8Equity of:Technical Olympic USA, Inc.


70.6



180.2



250.8Others


98.5



159.0



257.5Total equity


169.1



339.2



508.3Total liabilities and
    partners equity

$
385.3


$
1,429.5


$
1,814.8   8




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##### Table of Contents



TECHNICAL
    OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  December 31, 2005Land


HomeDevelopment


Construction


TotalAssets:Cash and cash equivalents

$
13.4


$
60.5


$
73.9Inventories


306.1



1,023.6



1,329.7Other assets


3.3



227.5



230.8Total assets

$
322.8


$
1,311.6


$
1,634.4Liabilities and partners
    equity:Accounts payable and other
    liabilities

$
6.6


$
211.2


$
217.8Notes payable


142.0



781.5



923.5Equity of:Technical Olympic USA, Inc.


86.1



167.1



253.2Others


88.1



151.8



239.9Total equity


174.2



318.9



493.1Total liabilities and
    partners equity

$
322.8


$
1,311.6


$
1,634.4   Three Months Ended


Three Months EndedJune 30, 2006


June 30, 2005Land


Home





Land


HomeDevelopment


Construction


Total


Development


Construction


TotalRevenues

$
7.8


$
387.6


$
395.4


$
3.5


$
65.1


$
68.6Cost and expenses


9.2



347.7



356.9



4.2



57.9



62.1Net earnings (losses) of
    unconsolidated entities

$
(1.4
)

$
39.9


$
38.5


$
(0.7
)

$
7.2


$
6.5Our share of net earnings (losses)

$
(1.0
)

$
28.1


$
27.1


$
(0.5
)

$
3.0


$
2.5Management fees earned


0.8



10.0



10.8



0.8



4.8



5.6Income (loss) from joint ventures

$
(0.2
)

$
38.1


$
37.9


$
0.3


$
7.8


$
8.1   Six Months Ended


Six Months EndedJune 30, 2006


June 30, 2005Land


Home





Land


HomeDevelopment


Construction


Total


Development


Construction


TotalRevenues

$
13.8


$
701.1


$
714.9


$
10.2


$
103.4


$
113.6Cost and expenses


15.8



625.0



640.8



11.8



92.9



104.7Net earnings (losses) of
    unconsolidated entities

$
(2.0
)

$
76.1


$
74.1


$
(1.6
)

$
10.5


$
8.9Our share of net earnings (losses)

$
(1.3
)

$
45.2


$
43.9


$
(0.8
)

$
4.6


$
3.8Management fees earned


1.5



20.3



21.8



1.6



5.3



6.9Income from joint ventures

$
0.2


$
65.5


$
65.7


$
0.8


$
9.9


$
10.7  9




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##### Table of Contents



TECHNICAL
    OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   and/or
  day-to-day
        5.
    Borrowings   10




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##### Table of Contents



TECHNICAL
    OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     1 4 pari passu
  6.
    Commitments
    and Contingencies     11




---



##### Table of Contents



TECHNICAL
    OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Six Months EndedJune 30,2006


2005Accrued warranty costs at January 1

$
7.0


$
6.5Liability recorded for warranties
    issued during the period


6.5



6.0Warranty work performed


(4.6
)


(4.1
)Liability recorded for
    pre-existing warranties


(0.1
)


(0.7
)Accrued warranty costs at
    June 30

$
8.8


$
7.7       7.
    Stockholders
    Equity and Stock-Based Compensation     12




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##### Table of Contents



TECHNICAL
    OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            Six Months EndedJune 30, 2005Net income as reported

$
72.1Add: Stock-based employee
    compensation included in reported net income, net of tax


2.8Deduct: Stock-based employee
    compensation expense determined under the fair value method, net
    of tax


(1.9
)Pro forma net income

$
73.0Reported basic earnings per share

$
1.29Pro forma basic earnings per share

$
1.30Reported diluted earnings per share

$
1.24Pro forma diluted earnings per
    share

$
1.26     Expected volatility


0.33%-0.42%Expected dividend yield


0%Risk-free interest rate


1.47%-4.85%Expected life


3-10 years  13




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##### Table of Contents



TECHNICAL
    OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     WeightedWeighted


AverageAverage


RemainingExercise


Contractual


Aggregate IntrinsicOptions


Price


Term


Value(in millions)Options outstanding at beginning
    of year


6,606,611


$
11.06Granted


1,339,708


$
23.58Exercised


(23,750
)

$
10.84Forfeited


(133,125
)

$
19.37Options outstanding at end of
    period


7,789,444


$
13.07



6.06


$
24.4Vested and expected to vest in the
    future at end of period


7,789,444


$
13.07



6.06


$
24.4Options exercisable at end of
    period


5,025,632


$
10.89



6.55


$
18.2Weighted average fair market value
    per share of options granted during the period

$
7.90         8.
    Summarized
    Financial Information   14




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##### Table of Contents



TECHNICAL
    OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Consolidating
    Statement of Financial Condition
    June 30, 2006
  TechnicalOlympic


Guarantor


Non-Guarantor


IntercompanyUSA, Inc.


Subsidiaries


Subsidiaries


Eliminations


Total(Dollars in millions)ASSETSHOMEBUILDING:Cash and cash equivalents

$
20.5


$
22.0


$



$



$
42.5Inventory






2,096.6











2,096.6Property and equipment, net


7.3



23.3











30.6Investments in unconsolidated
    joint ventures






249.9











249.9Receivables from unconsolidated
    joint ventures






83.0











83.0Investments in/advances to
    consolidated subsidiaries


2,161.2



(319.0
)


4.9



(1,847.1
)


Other assets


48.9



55.3











104.2Goodwill






108.8











108.82,237.9



2,319.9



4.9



(1,847.1
)


2,715.6FINANCIAL SERVICES:Cash and cash equivalents










10.9







10.9Mortgage loans held for sale










45.1







45.1Other assets










11.8







11.8







67.8







67.8Total assets

$
2,237.9


$
2,319.9


$
72.7


$
(1,847.1
)

$
2,783.4LIABILITIES AND
    STOCKHOLDERS
    EQUITYHOMEBUILDING:Accounts payable and other
    liabilities

$
78.8


$
206.4


$



$



$
285.2Customer deposits






76.0











76.0Obligations for inventory not owned






218.5











218.5Notes payable


1,060.5















1,060.51,139.3



500.9











1,640.2FINANCIAL SERVICES:Accounts payable and other
    liabilities










6.4







6.4Bank borrowings










38.2







38.2







44.6







44.6Total liabilities


1,139.3



500.9



44.6







1,684.8Total stockholders equity


1,098.6



1,819.0



28.1



(1,847.1
)


1,098.6Total liabilities and
    stockholders equity

$
2,237.9


$
2,319.9


$
72.7


$
(1,847.1
)

$
2,783.4  15




---



##### Table of Contents



TECHNICAL
    OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Consolidating
    Statement of Financial Condition
    December 31, 2005
  TechnicalOlympic


Guarantor


Non-Guarantor


IntercompanyUSA, Inc.


Subsidiaries


Subsidiaries


Eliminations


Total(Dollars in millions)ASSETSHOMEBUILDING:Cash and cash equivalents

$
21.9


$
7.4


$



$



$
29.3Inventory






1,740.8











1,740.8Property and equipment, net


7.3



19.8











27.1Investments in unconsolidated
    joint ventures






254.5











254.5Receivables from unconsolidated
    joint ventures






60.5











60.5Investments in/advances to
    consolidated subsidiaries


1,946.8



(427.7
)


(3.7
)


(1,515.4
)


Other assets


26.3



106.9











133.2Goodwill






108.8











108.82,002.3



1,871.0



(3.7
)


(1,515.4
)


2,354.2FINANCIAL SERVICES:Cash and cash equivalents










11.8







11.8Mortgage loans held for sale










43.9







43.9Other assets










12.8







12.8







68.5







68.5Total assets

$
2,002.3


$
1,871.0


$
64.8


$
(1,515.4
)

$
2,422.7LIABILITIES AND
    STOCKHOLDERS EQUITYHOMEBUILDING:Accounts payable and other
    liabilities

$
154.4


$
175.0


$



$



$
329.4Customer deposits






79.3











79.3Obligations for inventory not owned






124.6











124.6Notes payable


811.6















811.6Bank borrowings


65.0















65.01,031.0



378.9











1,409.9FINANCIAL SERVICES:Accounts payable and other
    liabilities










6.4







6.4Bank borrowings










35.1







35.1







41.5







41.5Total liabilities


1,031.0



378.9



41.5







1,451.4Total stockholders equity


971.3



1,492.1



23.3



(1,515.4
)


971.3Total liabilities and
    stockholders equity

$
2,002.3


$
1,871.0


$
64.8


$
(1,515.4
)

$
2,422.7  16




---



##### Table of Contents



TECHNICAL
    OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Consolidating
    Statement of Income
    Three Months Ended June 30, 2006
  TechnicalOlympic


Guarantor


Non-Guarantor


IntercompanyUSA, Inc.


Subsidiaries


Subsidiaries


Eliminations


Total(Dollars in millions)HOMEBUILDING:Revenues

$



$
659.6


$



$



$
659.6Cost of sales






495.0











495.0Gross profit






164.6











164.6Selling, general and
    administrative expenses


27.0



78.6







(1.2
)


104.4(Income) from joint ventures, net






(37.9
)










(37.9
)Other (income) expense, net


(91.1
)


14.0







74.7



(2.4
)Homebuilding pretax income


64.1



109.9







(73.5
)


100.5FINANCIAL SERVICES:Revenues










18.6



(1.2
)


17.4Expenses










13.6



(2.6
)


11.0Financial Services pretax income










5.0



1.4



6.4Income before provision (benefit)
    for income taxes


64.1



109.9



5.0



(72.1
)


106.9Provision (benefit) for income
    taxes


(3.5
)


40.4



2.4







39.3Net income

$
67.6


$
69.5


$
2.6


$
(72.1
)

$
67.6   Consolidating
    Statement of Income
    Three Months Ended June 30, 2005
  TechnicalOlympic


Guarantor


Non-Guarantor


IntercompanyUSA, Inc.


Subsidiaries


Subsidiaries


Eliminations


Total(Dollars in millions)HOMEBUILDING:Revenues

$



$
615.8


$



$



$
615.8Cost of sales






478.1











478.1Gross profit






137.7











137.7Selling, general and
    administrative expenses


15.0



64.2







(2.1
)


77.1(Income) from joint ventures, net






(8.1
)










(8.1
)Other (income) expense, net


(60.1
)


1.5







56.3



(2.3
)Homebuilding pretax income


45.1



80.1







(54.2
)


71.0FINANCIAL SERVICES:Revenues










13.5



(2.1
)


11.4Expenses










10.5



(1.5
)


9.0Financial Services pretax income










3.0



(0.6
)


2.4Income before provision (benefit)
    for income taxes


45.1



80.1



3.0



(54.8
)


73.4Provision (benefit) for income
    taxes


(0.6
)


27.2



1.1







27.7Net income

$
45.7


$
52.9


$
1.9


$
(54.8
)

$
45.7  17




---



##### Table of Contents



TECHNICAL
    OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Consolidating
    Statement of Income
    Six Months Ended June 30, 2006
  TechnicalOlympic


Guarantor


Non-Guarantor


IntercompanyUSA, Inc.


Subsidiaries


Subsidiaries


Eliminations


Total(Dollars in millions)HOMEBUILDING:Revenues

$



$
1,273.9


$



$



$
1,273.9Cost of sales






958.9











958.9Gross profit






315.0











315.0Selling, general and
    administrative expenses


46.3



157.7







(2.2
)


201.8(Income) from joint ventures, net






(65.7
)










(65.7
)Other (income) expense, net


(162.7
)


22.1







136.2



(4.4
)Homebuilding pretax income


116.4



200.9







(134.0
)


183.3FINANCIAL SERVICES:Revenues










34.8



(2.2
)


32.6Expenses










26.2



(4.5
)


21.7Financial Services pretax income










8.6



2.3



10.9Income before provision (benefit)
    for income taxes


116.4



200.9



8.6



(131.7
)


194.2Provision (benefit) for income
    taxes


(6.2
)


74.1



3.7







71.6Net income

$
122.6


$
126.8


$
4.9


$
(131.7
)

$
122.6   Consolidating
    Statement of Income
    Six Months Ended June 30, 2005
  TechnicalOlympic


Guarantor


Non-Guarantor


IntercompanyUSA, Inc.


Subsidiaries


Subsidiaries


Eliminations


Total(Dollars in millions)HOMEBUILDING:Revenues

$



$
1,149.4


$



$



$
1,149.4Cost of sales






895.9











895.9Gross profit






253.5











253.5Selling, general and
    administrative expenses


36.5



123.8







(3.8
)


156.5(Income) from joint ventures, net






(10.7
)










(10.7
)Other (income) expense, net


(107.4
)


17.2







86.0



(4.2
)Homebuilding pretax income


70.9



123.2







(82.2
)


111.9FINANCIAL SERVICES:Revenues










25.2



(3.8
)


21.4Expenses










20.1



(2.4
)


17.7Financial Services pretax income










5.1



(1.4
)


3.7Income before provision (benefit)
    for income taxes


70.9



123.2



5.1



(83.6
)


115.6Provision (benefit) for income
    taxes


(1.2
)


43.4



1.3







43.5Net income

$
72.1


$
79.8


$
3.8


$
(83.6
)

$
72.1  18




---



##### Table of Contents



TECHNICAL
    OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Consolidating
    Statement of Cash Flows
    Six Months Ended June 30, 2006
  Technical





Non-Olympic


Guarantor


Guarantor


IntercompanyUSA, Inc.


Subsidiaries


Subsidiaries


Eliminations


Total(Dollars in millions)Cash flows from operating
    activities:Net income

$
122.6


$
126.8


$
4.9


$
(131.7
)

$
122.6Adjustments to reconcile net income
    to net cash (used in) provided by operating activities:Depreciation and amortization


1.7



4.5



0.7







6.9Non-cash compensation


6.9















6.9Loss on impairment of inventory






5.4











5.4Deferred income taxes


(2.1
)














(2.1
)Undistributed equity in earnings
    from unconsolidated joint ventures






(22.6
)










(22.6
)Distributions of earnings from
    unconsolidated joint ventures






19.2











19.2Changes in operating assets and
    liabilities:Restricted cash


(0.9
)


1.1



(0.1
)






0.1Inventory


0.1



(274.4
)










(274.3
)Receivables from unconsolidated
    joint ventures






(15.0
)










(15.0
)Other assets


(17.5
)


51.6



1.4







35.5Mortgage loans held for sale










(1.2
)






(1.2
)Accounts payable and other
    liabilities


(76.2
)


29.0



0.1







(47.1
)Customer deposits






(3.3
)










(3.3
)Net cash (used in) provided by
    operating activities


34.6



(77.7
)


5.8



(131.7
)


(169.0
)Cash flows from investing
    activities:Net additions to property and
    equipment


(1.6
)


(7.6
)


(1.1
)






(10.3
)Loans to unconsolidated joint
    ventures






(7.5
)










(7.5
)Investments in unconsolidated joint
    ventures






(8.2
)










(8.2
)Capital distributions from
    unconsolidated joint ventures






25.2











25.2Net cash (used in) provided by
    investing activities


(1.6
)


1.9



(1.1
)






(0.8
)Cash flows from financing
    activities:Net repayments on revolving credit
    facility


(65.0
)














(65.0
)Net proceeds from notes offering


248.8















248.8Net proceeds from Financial
    Services bank borrowings










3.1







3.1Payments for deferred financing
    costs


(3.2
)














(3.2
)Excess income tax benefit from
    exercise of stock options


0.1















0.1Proceeds from stock option exercises


0.2















0.2Dividends paid


(1.8
)














(1.8
)Increase (decrease) in intercompany
    transactions


(214.4
)


91.5



(8.8
)


131.7



Net cash provided by (used in)
    financing activities


(35.3
)


91.5



(5.7
)


131.7



182.2Increase (decrease) in cash and
    cash equivalents


(2.3
)


15.7



(1.0
)






12.4Cash and cash equivalents at
    beginning of period


20.2



6.0



8.7







34.9Cash and cash equivalents at end of
    period

$
17.9


$
21.7


$
7.7


$



$
47.3  19




---



##### Table of Contents



TECHNICAL
    OLYMPIC USA, INC. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Consolidating
    Statement of Cash Flows
    Six Months Ended June 30, 2005
  Technical





Non-Olympic


Guarantor


Guarantor


IntercompanyUSA, Inc.


Subsidiaries


Subsidiaries


Eliminations


Total(Dollars in millions)Cash flows from operating
    activities:Net income

$
72.1


$
79.8


$
3.8


$
(83.6
)

$
72.1Adjustments to reconcile net
    income to net cash (used in) provided by operating activities:Depreciation and amortization


1.8



4.0



0.5







6.3Non-cash compensation


4.8















4.8Loss on impairment of inventory






0.6











0.6Undistributed equity in earnings
    from unconsolidated joint ventures






(3.8
)










(3.8
)Changes in operating assets and
    liabilities:Restricted cash


(1.2
)


6.3



(0.2
)






4.9Inventory






(270.2
)










(270.2
)Other assets


(30.6
)


(0.5
)


(2.2
)






(33.3
)Mortgage loans held for sale










14.9







14.9Accounts payable and other
    liabilities


(5.6
)


14.9



0.9







10.2Customer deposits






21.6











21.6Net cash (used in) provided by
    operating activities


41.3



(147.3
)


17.7



(83.6
)


(171.9
)Cash flows from investing
    activities:Net additions to property and
    equipment


(2.1
)


(2.9
)


(1.0
)






(6.0
)Investments in unconsolidated
    joint ventures






(21.5
)










(21.5
)Capital distributions from
    unconsolidated joint ventures






9.6











9.6Net cash used in investing
    activities


(2.1
)


(14.8
)


(1.0
)






(17.9
)Cash flows from financing
    activities:Net proceeds from Financial
    Services bank borrowings










0.4







0.4Payments for deferred financing
    costs


(0.3
)














(0.3
)Proceeds from stock option
    exercises


0.2















0.2Dividends paid


(1.5
)






(8.0
)


8.0



(1.5
)Increase (decrease) in
    intercompany transactions


(166.6
)


146.8



(55.8
)


75.6



Net cash (used in) provided by
    financing activities


(168.2
)


146.8



(63.4
)


83.6



(1.2
)Decrease in cash and cash
    equivalents


(129.0
)


(15.3
)


(46.7
)






(191.0
)Cash and cash equivalents at
    beginning of period


159.3



58.3



50.9







268.5Cash and cash equivalents at end
    of period

$
30.3


$
43.0


$
4.2


$



$
77.5  20




---



##### Table of Contents



ITEM 2.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Executive
    Summary
    Florida

Mid-Atlantic

Texas

WestJacksonville

Baltimore/Southern Pennsylvania

Austin

ColoradoOrlando

Delaware

Dallas/Ft. Worth

Las VegasSoutheast Florida

Nashville

Houston

PhoenixSouthwest Florida

Northern Virginia

San AntonioTampa/St. Petersburg   and/or Form 10-Q,
      June 30, 2006


December 31, 2005Total








TotalOwned


Optioned


Controlled


Owned


Optioned


ControlledConsolidated


24,900



55,300



80,200



27,300



41,600



68,900Unconsolidated joint ventures


7,800



18,000



25,800



6,300



19,100



25,400Combined total


32,700



73,300



106,000



33,600



60,700



94,300    21




---



##### Table of Contents



Homebuilding Operations.
  on-site
  Outlook.
    Financial Services Operations.
 22




---



##### Table of Contents



Critical
    Accounting Policies
  Accounting for Stock
    Issued to Employees Accounting for Stock-Based Compensation Share-Based
    Payment
    Form 10-K
  Recent
    Developments
  1 4
 23




---



##### Table of Contents



pari
    passu
  Results
    of Operations  Consolidated
  Three
    Months Ended June 30, 2006 Compared to Three Months Ended
    June 30, 2005
          Six
    Months Ended June 30, 2006 Compared to Six Months Ended
    June 30, 2005
         24




---



##### Table of Contents



Selected
    Homebuilding Operations and Financial Data
    Three Months Ended June 30,


Six Months Ended June 30,2006


2005


2006


2005Deliveries:

Homes


$


Homes


$


Homes


$


Homes


$Consolidated:Florida


753


$
278.9



760


$
223.3



1,499


$
544.9



1,517


$
436.2Mid-Atlantic


171



64.7



155



64.3



333



134.7



277



111.3Texas


768



186.7



454



110.2



1,413



344.8



847



204.3West


342



111.3



643



184.3



663



203.5



1,238



342.7Consolidated total


2,034



641.6



2,012



582.1



3,908



1,227.9



3,879



1,094.5Unconsolidated joint ventures:Florida


689



204.9











1,061



321.1







Mid-Atlantic


28



8.3



32



9.6



88



25.8



47



13.8West


473



175.2



171



55.5



936



343.7



297



89.6Total unconsolidated joint ventures


1,190



388.4



203



65.1



2,085



690.6



344



103.4Combined total


3,224


$
1,030.0



2,215


$
647.2



5,993


$
1,918.5



4,223


$
1,197.9   Three Months Ended June 30,


Six Months Ended June 30,2006


2005


2006


2005Net Sales
    Orders(1):

Homes


$


Homes


$


Homes


$


Homes


$Consolidated:Florida


624


$
237.1



776


$
261.3



1,250


$
491.9



1,482


$
514.9Mid-Atlantic


175



70.2



205



89.5



334



137.4



396



173.4Texas


825



208.7



735



190.7



1,643



411.9



1,424



356.5West


222



78.8



983



310.0



776



270.7



1,818



584.6Consolidated total


1,846



594.8



2,699



851.5



4,003



1,311.9



5,120



1,629.4Unconsolidated joint ventures:Florida


86



46.4











120



68.4







Mid-Atlantic


15



3.2



67



24.3



58



14.8



100



34.3West


170



44.0



419



155.1



584



185.3



700



247.8Total unconsolidated joint ventures


271



93.6



486



179.4



762



268.5



800



282.1Combined total


2,117


$
688.4



3,185


$
1,030.9



4,765


$
1,580.4



5,920


$
1,911.5     (1)
    
    Net of cancellations  25




---



##### Table of Contents



June 30, 2006


June 30, 2005Avg








AvgSales Backlog:

Homes


$


Price


Homes


$


PriceConsolidated:Florida


2,688


$
983.7


$
366



2,861


$
977.5


$
342Mid-Atlantic


247



97.3


$
394



465



204.0


$
439Texas


1,468



386.6


$
263



1,120



289.6


$
259West


964



371.0


$
385



1,889



630.8


$
334Consolidated total


5,367



1,838.6


$
343



6,335



2,101.9


$
332Unconsolidated joint ventures:Florida


2,173



642.9


$
296



32



7.7


$
242Mid-Atlantic


62



20.3


$
328



189



60.1


$
318West


1,191



427.1


$
359



904



321.3


$
355Total unconsolidated joint ventures


3,426



1,090.3


$
318



1,125



389.1


$
346Combined total


8,793


$
2,928.9


$
333



7,460


$
2,491.0


$
334   Three Months Ended June 30,


Six Months Ended June 30,2006


2005


2006


2005Sales





Sales





Sales





SalesAverage Price:

Deliveries


Orders


Deliveries


Orders


Deliveries


Orders


Deliveries


OrdersConsolidated:Florida

$
370


$
380


$
294


$
337


$
364


$
394


$
288


$
347Mid-Atlantic

$
378


$
401


$
415


$
437


$
405


$
411


$
402


$
438Texas

$
243


$
253


$
243


$
259


$
244


$
251


$
241


$
250West

$
325


$
355


$
287


$
315


$
307


$
349


$
277


$
322Consolidated total

$
315


$
322


$
289


$
316


$
314


$
328


$
282


$
318Unconsolidated joint ventures:Florida

$
297


$
539










$
303


$
570







Mid-Atlantic

$
297


$
218


$
301


$
362


$
293


$
255


$
293


$
344West

$
370


$
259


$
324


$
370


$
367


$
317


$
302


$
354Total unconsolidated joint ventures

$
326


$
345


$
321


$
369


$
331


$
352


$
301


$
353Combined total

$
319


$
325


$
292


$
324


$
320


$
332


$
284


$
323  26




---



##### Table of Contents



Land Supply

June 30, 2006


December 31, 2005Consolidated:Florida


20,300



20,100Mid-Atlantic


6,200



7,300Texas


14,000



12,400West


39,700



29,100Consolidated total


80,200



68,900Unconsolidated joint ventures:Florida


19,500



19,800Mid-Atlantic


300



400Texas


500



500West


5,500



4,700Unconsolidated joint ventures total


25,800



25,400Combined total(1)


106,000



94,300     (1)
    
    Includes approximately 73,300 and 60,700 homesites under option
    contracts by us and our unconsolidated joint ventures as of
    June 30, 2006 and December 31, 2005, respectively.  Three
    Months Ended June 30, 2006 Compared to Three Months Ended
    June 30, 2005
  and/or
   27




---



##### Table of Contents



Net Sales
    Orders and Homes in Backlog (combined)
       28




---



##### Table of Contents



Backlog
    Sales Value (consolidated)
    Joint
    Venture Backlog Sales Value
    Financial
    Services
      Six
    Months Ended June 30, 2006 Compared to Six Months Ended
    June 30, 2005
     29




---



##### Table of Contents



Net Sales
    Orders (combined)
     30




---



##### Table of Contents



Financial
    Services
      FINANCIAL
    CONDITION, LIQUIDITY AND CAPITAL RESOURCES
  Sources
    and Uses of Cash
           31




---



##### Table of Contents



Financing
    Activities
  1 4 3 8 1 2 1 2
  1 4 1 4 90-day 90-day
  pari passu pari
    passu
    Homebuilding Net Debt to CapitalJune 30, 2006


December 31, 2005(Dollars in millions)Notes payable

$
1,060.5


$
811.6Bank borrowings






65.0Homebuilding borrowings(1)

$
1,060.5


$
876.6Less: unrestricted cash


39.6



26.2Homebuilding net debt

$
1,020.9


$
850.4Stockholders equity


1,098.6



971.3Total capital(2)

$
2,119.5


$
1,821.7Ratio


48.2
%


46.7
%  32




---



##### Table of Contents



(1)
    
    Does not include obligations for inventory not owned of
    $218.5 million at June 30, 2006 and
    $124.6 million at December 31, 2005, all of which are
    non-recourse to us.(2)
    
    Does not include Financial Services bank borrowings of
    $38.2 million at June 30, 2006 and $35.1 million
    at December 31, 2005.           33




---



##### Table of Contents



Off
    Balance Sheet Arrangements
  Land and
    Homesite Option Contracts
  and/or
    Investments
    in Unconsolidated Joint Ventures
  and/or
    DISCLOSURE
    REGARDING FORWARD-LOOKING STATEMENTS
  Form 10-Q
 34




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
    our expectations regarding our continued use of option contracts
    and investments in unconsolidated joint ventures to control
    homesites, reduce and share the risks associated with land
    ownership and development, and manage our business, and their
    effect on our business;
    our expectations regarding the labor and supply shortages and
    increases in costs of materials caused by the recent active
    hurricane seasons and rising costs of petroleum;
    our expectations regarding the impact on our business and
    profits of intentional efforts by us and our joint ventures to
    slow sales rates to match production rates;
    our expectations regarding the effects and causes of decreased
    demand in the housing market, and the effects of intentional
    efforts to slow sales rates to match production rates, higher
    cancellation rates, and land development and permitting issues
    on our combined net sales orders;
    our response to the challenging housing market;
    our expectation that our gross margins on home sales will be
    negatively impacted due to increased sales incentives and
    product mix shifts;
    our expectations regarding our use of cash in operations;
    our beliefs and expectations regarding our land acquisition
    strategy, future land sales and the opportunities for profit;
    our estimate that we have adequate financial resources to meet
    our current and anticipated working capital, including our
    annual debt service payments, and land acquisition and
    development needs;
    our estimates of the amount of pre-tax expense we will record in
    accordance with FAS 123R; and
    our expectations regarding the timing of recognition of
    compensation expense related to unvested stock option awards.    
    our significant level of debt and the impact of the restrictions
    imposed on us by the terms of this debt;
    our ability to borrow or otherwise finance our business in the
    future;
    economic or other business conditions that affect the desire or
    ability of our customers to purchase new homes in markets in
    which we conduct our business, such as increases in interest
    rates, inflation, or unemployment rates or declines in consumer
    confidence or the demand for, or the prices of, housing;
    our ability to identify and acquire, at anticipated prices,
    additional homebuilding opportunities
    and/or to
    effect our growth strategies in our homebuilding operations and
    financial services business;
    our ability to successfully dispose of developed properties or
    undeveloped land or homesites at expected prices and within
    anticipated time frames;
    our relationship with Technical Olympic S.A. and its control
    over our business activities;
    events which would impede our ability to open new communities
    and/or
    deliver homes within anticipated timeframes
    and/or
    within anticipated budgets;
    an increase in the cost, or shortages in the availability, of
    qualified labor and materials; 35




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
    our ability to compete in our existing and future markets;
    our ability to successfully enter into, utilize, and recognize
    the anticipated benefits of, joint ventures and option contracts;
    a decline in the value of the land and home inventories we
    maintain;
    currently unanticipated delays or disruptions in the land
    development, permitting or construction process;
    the impact of hurricanes, tornadoes or other natural disasters
    or weather conditions on our business, including the potential
    for shortages and increased costs of materials and qualified
    labor and the potential for delays in construction and obtaining
    government approvals;
    an increase or change in government regulations, or in the
    interpretation
    and/or
    enforcement of existing governmental regulations; and
    the impact of any or all of the above risks on the operations or
    financial results of our unconsolidated joint ventures.  ITEM 3.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK      Form 10-K
  ITEM 4.
    CONTROLS
    AND PROCEDURES   36




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##### Table of Contents



PART II.
    OTHER INFORMATION  ITEM 1A.
    RISK
    FACTORS  Set
    forth below is a discussion of the material changes in our risk
    factors as previously disclosed in Item 1A of Part I
    of our Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2005 (2005
    Form 10-K).
  Form 10-K.
  Form 10-K, Form 10-K,
  ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS    Election
    of Directors
  Name of Nominee

For


WithheldKonstantinos Stengos


47,713,468



7,892,298Antonio B. Mon


47,758,025



7,847,741Andreas Stengos


47,660,768



7,944,998George Stengos


47,660,768



7,944,998Marianna Stengou


47,654,768



7,950,998Larry D. Horner


55,219,187



386,579William A. Hasler


47,111,402



8,494,364Michael J. Poulos


54,073,514



1,532,252Susan B. Parks


55,305,762



300,004J. Bryan Whitworth


54,052,895



1,552,871Tommy L. McAden


46,507,253



9,098,513  37




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##### Table of Contents



Approval
    and Adoption of the Amended and Restated Annual and Long-Term
    Incentive Plan
  For

Against

Abstain

Broker non-votes51,380,925



1,739,748



35,856



2,449,237   ITEM 5.
    OTHER
    INFORMATION  Form 10-Q
    ITEM 6.
    EXHIBITS  ExhibitNumber

Description10
.32(a)

Amendment to Employment Agreement,
    dated August 4, 2006, by and between Technical Olympic USA,
    Inc. and Andreas Stengos.10
.33(a)

Amendment to Employment Agreement,
    dated August 4, 2006, by and between Technical Olympic USA,
    Inc. and George Stengos.31
.1

Certification of Chief Executive
    Officer pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002.31
.2

Certification of Interim 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 Interim Chief
    Financial Officer pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.  38




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SIGNATURES      By:
    /s/  Randy
    L. Kotler    Title:
    Senior Vice President,       39