TECHNICAL OLYMPIC USA INC - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2002

OR

[ ] 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 76-0460831
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

4000 Hollywood Blvd, Suite 500N
Hollywood, Florida 33021
(Address of principal executive offices) (ZIP code)

(954) 364-4000
(Registrant's telephone number, including area code)

Newmark Homes Corp.
1200 Soldiers Field Drive
Sugar Land, Texas 77479
(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 [X] No [ ]

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [ ] No [ ]

APPLICABLE ONLY TO CORPORATE REGISTRANTS

Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.

Title Outstanding
Common Stock, par value $0.01 27,878,787 shares as of June 30, 2002

TECHNICAL OLYMPIC USA, INC.

INDEX

PAGE

PART I. Financial Information...................................................................3

ITEM 1. Financial Statements (Unaudited)........................................................3

Consolidated Statements of Financial Condition..........................................3
Consolidated Statements of Income.......................................................4
Consolidated Statements of Cash Flows...................................................5
Notes to the Consolidated Financial Statements..........................................6

ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...................................................................10

ITEM 3. Changes in Information about Market Risk................................................14

PART II. Other Information.......................................................................14

ITEM 1. Legal Proceedings.......................................................................14

ITEM 2. Changes in Securities and Use of Proceeds...............................................15

ITEM 3. Defaults upon Senior Securities.........................................................15

ITEM 4. Submission of Matters to a Vote of Security Holders.....................................15

ITEM 5. Other Information.......................................................................16

ITEM 6. Exhibits and Reports on Form 8-K........................................................16

Exhibits................................................................................16

Reports on Form 8-K.....................................................................17

Signatures..............................................................................18

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TECHNICAL OLYMPIC USA, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(unaudited)

JUNE 30, DECEMBER 31,
2002 2001
-------------- -----------------

ASSETS
HOMEBUILDING:
Cash and cash equivalents:
Unrestricted $ 79,312 $ 67,206
Restricted 40,020 7,738
Inventory 654,381 645,986
Property and equipment, net 13,578 10,694
Other assets 35,569 10,897
Goodwill, net 57,726 57,726
Westbrooke assets held for sale - 117,160
----------- -----------
880,586 917,407
FINANCIAL SERVICES:
Cash and cash equivalents:
Unrestricted 4,416 7,930
Restricted 17,166 19,605
Mortgage loans held for sale 32,034 50,933
Other assets 3,380 3,295
----------- -----------
56,996 81,763
----------- -----------
Total assets $937,582 $ 999,170
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
HOMEBUILDING:
Accounts payable and other liabilities $88,478 $56,295
Customer deposits 25,268 25,674
Consolidated land bank obligations 30,066 30,022
Homebuilding borrowings 367,405 308,697
Westbrooke liabilities associated with assets held for sale - 71,800
----------- -----------
511,217 492,488
FINANCIAL SERVICES:
Accounts payable and other liabilities 15,856 18,828
Financial services borrowings 26,371 38,689
----------- -----------
42,227 57,517
----------- -----------
Total liabilities 553,444 550,005

Minority interest 25,542 35,795

Commitments and contingencies -- --

Stockholders' equity:
Common stock -- $.01 par value; 67,000,000 shares
authorized and 27,878,787 shares issued and outstanding 279 279
Additional paid-in capital 322,400 322,400
Retained earnings 35,917 90,691
----------- -----------
Total stockholders' equity 358,596 413,370
----------- -----------
Total liabilities and stockholders' equity $ 937,582 $ 999,170
=========== ===========

3

See accompanying notes.

TECHNICAL OLYMPIC USA, INC.

CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(unaudited)

SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30,
2002 2001 2002 2001
--------------- ---------------- ---------------- -----------

HOMEBUILDING:
Revenues:
Homes sales $ 654,086 $ 658,328 $ 352,107 $ 349,522
Land/lot sales 3,342 11,035 2,033 9,672
----------- ---------- --------- ----------
657,428 669,363 354,140 359,194
Cost of sales:
Home sales 520,728 524,967 280,228 276,539
Land/lot sales 3,045 9,756 1,861 8,685
----------- ---------- --------- ----------
523,773 534,723 282,089 285,224
----------- ---------- --------- ----------
Gross profit 133,655 134,640 72,051 73,970

Selling, general and administrative expenses 79,612 72,834 41,897 37,909
Depreciation and amortization 3,241 4,415 1,609 2,132
Severance and merger related expenses 24,467 1,864 10,639 1,864
Loss on early extinguishment of debt 5,411 -- 5,411 --
Other income, net (3,332) (3,051) (1,790) (580)
----------- ---------- --------- ----------
Homebuilding pretax income 24,256 58,578 14,285 32,645

FINANCIAL SERVICES:
Revenues 17,947 14,217 9,423 7,822
Expenses 9,837 8,249 5,035 4,263
----------- ---------- --------- ----------
Financial Services pretax income 8,110 5,968 4,388 3,559
----------- ---------- --------- ----------

Income from continuing operations before income
taxes 32,366 64,546 18,673 36,204
Income tax expense 11,877 23,451 7,110 13,137
----------- ---------- --------- ----------
Income from continuing operations 20,489 41,095 11,563 23,067

Discontinued operations:
Income from discontinued operations 7,922 2,302 6,895 392
Income tax expense 2,959 526 2,572 (205)
----------- ---------- --------- ----------
Income from discontinued operations, net of
taxes 4,963 1,776 4,323 597
----------- ---------- --------- ----------
Net income $ 25,452 $ 42,871 $ 15,886 $ 23,664
=========== ========== ========= ==========

EARNINGS PER COMMON SHARE (BASIC AND DILUTED):
From continuing operations $ 0.73 $ 1.47 $ 0.41 $ 0.83
From discontinued operations 0.18 0.06 0.16 0.02
----------- ---------- ---------- ----------
Net income $ 0.91 $ 1.53 $ 0.57 $ 0.85
=========== ========== ========= ==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING:
Basic and diluted 27,878,787 27,878,787 27,878,787 27,878,787
=========== ========== ========== ==========

See accompanying notes.

4

TECHNICAL OLYMPIC USA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(unaudited)

See accompanying notes.

5

TECHNICAL OLYMPIC USA, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

1. BUSINESS AND ORGANIZATION

BUSINESS

Technical Olympic USA, Inc., (the Company) formerly known as Newmark Homes
Corp., is a Delaware corporation. The Company is a national homebuilder that is
engaged primarily in the construction and sale of residential homes and land
development. The Company operates in eleven metropolitan markets in four
geographic regions: Florida, Texas, the West and the Mid-Atlantic. The Company
also provides title and mortgage brokerage services to its homebuyers. The
Company does not retain or service the mortgages that it originates but, rather,
sells the mortgages and related servicing rights to investors.

ORGANIZATION

On June 25, 2002, Engle Holdings Corp. (Engle) merged with and into Newmark
Homes Corp. (Newmark). The combined company was renamed Technical Olympic USA,
Inc. Each issued and outstanding share of Engle common stock was exchanged for
1,724.0829 shares of Newmark common stock (the Merger). At the date of the
Merger, there were 9,500 shares of Engle common stock issued and outstanding,
all of which were held by Technical Olympic, Inc. (TOI). As a result of the
Merger, 16,378,787 of additional shares were issued to TOI. In addition, the
Company assumed approximately $75,000 of debt incurred by TOI. As both Engle and
Newmark were under the control of TOI, in accordance with Statement of Financial
Accounting Standards (SFAS) No. 141, "Business Combinations", the Merger was
accounted for in a manner similar to a pooling of interests, whereby the Company
recognized the acquired assets and liabilities of Engle at their historical
carrying amounts. As both entities came under common control of TOI on November
22, 2000, the financial statements and other operating data of the Company have
been restated to include the operations of Engle from November 22, 2000. The
assumption of the $75,000 of debt incurred by TOI has been accounted for as a
distribution.

As a result of the exchange of equity interests in the Merger, TOI owns 91.75%
of the Company. TOI is a wholly owned subsidiary of Technical Olympic (UK) PLC,
an English company, which is a wholly owned subsidiary of Technical Olympic
S.A., a Greek company that is publicly traded on the Athens Stock Exchange.

Concurrently with the Merger, the Company completed a private placement of
$200,000 9% senior notes and $150,000 10 3/8% senior subordinated notes (the
Notes Offering). The net proceeds from the Notes Offering were used to repay
certain indebtedness of both Newmark and Engle and the debt of TOI that was
assumed in connection with the Merger. Additionally, the Company entered into an
unsecured revolving credit facility, which provides for loans up to $220,000
that is available for our working capital requirements. As of June 30, 2002, the
Company has $210,000 in availability under this credit facility.

On November 22, 2000, Engle became a wholly-owned subsidiary of TOI. Engle's
stockholders received $19.10 for each share of Engle's common stock at the time
of the acquisition. Following the acquisition, the common stock of Engle ceased
to be publicly traded. The acquisition of Engle was accounted for using the
purchase method of accounting. Total consideration for the acquisition
approximated $542,000, including $216,000 in cash and the assumption of $326,000
of liabilities. The "push down" basis of accounting resulted in the Company
allocating approximately $527,000 to inventories and other identifiable assets
and $15,000 to goodwill.

As a result of the change in control of Engle, Engle was required by the
indentures governing its senior notes to offer to repurchase all of its
outstanding senior notes at a price of 101% of the principal plus accrued
interest. Upon termination of the offer in January 2001, Engle repurchased
approximately $237,000 of $250,000 of its senior notes. Approximately $13,000 of
the senior notes were not tendered and remained outstanding as of December 31,
2001. These notes have been discharged with the proceeds from the Notes
Offering.

6

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The consolidated financial statements include the accounts of the Company and
its subsidiaries. The accounting and reporting policies of the Company conform
to accounting principles generally accepted in the United States and general
practices within the homebuilding industry. All significant intercompany
balances and transactions have been eliminated in the consolidated financial
statements.

The preparation of financial statements in accordance with accounting principles
generally accepted in the United States requires 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.

INTERIM PRESENTATION

The accompanying condensed consolidated financial statements have been prepared
by the Company and are unaudited. 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 statements. The Company's management believes the
disclosures made are adequate to make the information presented not misleading.
However, the financial statements included as part of this 10-Q filing should be
read in conjunction with the financial statements and notes thereto included in
the Company's December 31, 2001 Annual Report on Form 10-K. The accompanying
unaudited consolidated financial statements reflect all adjustments, consisting
primarily of normal recurring items that, in the opinion of the management of
the Company, 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, 2002 are not necessarily
indicative of those which may be achieved for the year ended December 31, 2002.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board finalized FASB Statements
No. 141, Business Combinations (SFAS 141), and No. 142, Goodwill and Other
Intangible Assets (SFAS 142). SFAS 141 requires the use of the purchase method
of accounting and prohibits the use of the pooling-of-interests method of
accounting for business combinations initiated after June 30, 2001. SFAS 141
also requires that the Company recognize acquired intangible assets apart from
goodwill if the acquired intangible assets meet certain criteria. SFAS 141
applies to all business combinations initiated after June 30, 2001 and for
purchase business combinations completed on or after July 1, 2001. It also
requires, upon adoption of SFAS 142, that the Company reclassify the carrying
amounts of intangible assets and goodwill based on the criteria in SFAS 141.

SFAS 142 requires, among other things, that companies no longer amortize
goodwill, but instead test goodwill for impairment at least annually. In
addition, SFAS 142 requires that the Company identify reporting units for the
purposes of assessing potential future impairments of goodwill, reassess the
useful lives of other existing recognized intangible assets, and cease
amortization of intangible assets with an indefinite useful life. An intangible
asset with an indefinite useful life should be tested for impairment in
accordance with the guidance in SFAS 142. SFAS 142 is required to be applied in
fiscal years beginning after December 15, 2001 to all goodwill and other
intangible assets recognized at that date, regardless of when those assets were
initially recognized.

The Company adopted SFAS 142 on January 1, 2002. The impairment test of goodwill
performed by the Company at January 1, 2002 indicated no impairment. Application
of the provisions of SFAS No. 142 by the Company resulted in the elimination of
goodwill amortization expense beginning in the first quarter of 2002.

7

The following table sets forth reported net income and earnings per share, as
adjusted to exclude goodwill amortization expense:

SIX MONTHS THREE MONTHS
ENDED ENDED
JUNE 30, 2001 JUNE 30, 2001
---------------------------------

Income from continuing operations, as reported $ 41,095 $ 23,067
Add back of amortization expense, net of taxes 781 390
---------- ----------
$ 41,876 $ 23,457
========== ==========

Earnings per common share (basic and diluted), as reported $ 1.47 $ 0.83
========== ==========

Earnings per common share (basic and diluted), as adjusted $ 1.50 $ 0.84
========== ==========

In April 2002, the FASB issued SFAS No. 145, "Rescission of SFAS Nos. 4, 44 and
64, Amendment of FASB Statement No. 13 and Technical Corrections." SFAS 145
prevents gains or losses on extinguishment of debt not meeting the criteria of
APB 30 to be treated as extraordinary. SFAS 145 amends SFAS No. 13, "Accounting
for Leases," to eliminate inconsistency between the required accounting for
sale-leaseback transactions and the required accounting for certain lease
modifications that have economic effects that are similar to sale-leaseback
transactions. In addition, SFAS 145 rescinds SFAS No. 44, "Accounting for
Intangible Assets of Motor Carriers" and amends other existing authoritative
pronouncements to make various technical corrections, clarify meanings or
describe their applicability under changed conditions. SFAS 145 is effective for
fiscal years beginning after May 15, 2002 with early adoption encouraged. The
Company has adopted the provisions of SFAS 145 during the quarter ended June 30,
2002. As a result of the adoption of SFAS 145, the Company has included the loss
associated with the early extinguishment of debt in the determination of income
from continuing operations.

SEGMENT REPORTING

In accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information", the Company has concluded that our operating segments
consist of homebuilding and financial services. These two segments are
segregated in the accompanying consolidated financial statements under
"Homebuilding" and "Financial Services", respectively.

EARNINGS PER SHARE

Basic earnings per share is computed by dividing earnings attributable to common
shareholders by the weighted average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the Company.

RECLASSIFICATION

Certain reclassifications have been made to conform the prior year's amounts to
the current year's presentation.

3. INVENTORY

Inventory consists of the following as of June 30, 2002 and December 31, 2001:

JUNE 30, 2002 DECEMBER 31, 2001
--------------------------------

Land and lots under development $ 269,864 $ 264,893
Residences completed and under construction 384,517 381,093
----------- -----------
$ 654,381 $ 645,986
=========== ===========

8

A summary of homebuilding interest capitalized in inventory is as follows:

SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
2002 2001 2002 2001
----------------------------------------------------

Interest capitalized, beginning of period $12,226 $ 25,082 $ 9,470 $ 23,609
Interest incurred 8,631 10,543 3,919 3,257
Less interest included in:
Cost of sales 14,761 16,229 7,350 8,545
Interest expense 67 1,617 10 542
------- -------- ------- --------
Interest capitalized, end of period $ 6,029 $ 17,779 $ 6,029 $ 17,779
======= ======== ======= ========

4. COMMITMENTS AND CONTINGENCIES

The Company is involved in various claims and legal actions arising in the
ordinary course of business. The Company does not believe that the ultimate
resolution of these matters will have a material adverse effect on the financial
condition or results of operations of the Company.

In early February 2002, Alec Engelstein, then Chief Executive Officer of Engle
Homes, Inc., and David Shapiro, then Vice President-Chief Financial Officer of
Engle Homes, Inc., resigned from their executive positions with Engle Homes,
Inc. and alleged that they were entitled to receive severance packages in the
aggregate amount of approximately $9.4 million, plus other benefits, including a
claim by Mr. Engelstein of a monthly retirement benefit equal to 1/12th of his
annual salary with such payments to continue for a period of 60 consecutive
months. The Company disputes their claims, but there can be no assurance that,
if litigated or arbitrated, the Company will prevail. However, we have included
amounts sufficient to cover the alleged payments due to Mr. Engelstein and Mr.
Shapiro in our financial statements for the six months ended June 30, 2002.

In connection with the Company's announcement in March 2001 of its proposed
merger with Engle, there was a class action suit filed in District Court, Clark
County, Nevada, and a class action suit filed in the 80th Judicial District
Court of Harris County, Texas, each of which challenged the merger as a breach
of fiduciary duty. In addition, two interveners filed interventions in the Texas
class action. In March 2002, the Company reached an agreement in principle for
the settlement of the class actions and interventions. Under the terms of the
settlement, the Company has agreed to pay the plaintiffs' attorneys' fees and
expenses in an amount not to exceed $350 in the aggregate. The settlement is
subject to a number of conditions, including the closing of the Merger,
providing notice to the class, conducting confirmatory discovery, executing a
definitive settlement agreement and obtaining final approval by the court. The
Merger closed on June 25, 2002, and the Company is now in the process of
finalizing and implementing the settlement. After payments made by its insurance
provider, the Company anticipates being obligated to pay $160 in connection with
the settlement of this litigation. This amount has been accrued for in the
Company's financial statements as of June 30, 2002.

5. SALE OF WESTBROOKE

During March 2002, management of the Company committed to a plan to dispose of
Westbrooke Acquisition Corp. and its subsidiaries (Westbrooke). Pursuant to this
plan of disposition, the Company would sell 100% of the common stock of
Westbrooke. On April 8, 2002, the Company signed a definitive agreement for the
sale of Westbrooke to Standard Pacific Corp. (Standard Pacific) for
approximately $41.0 million in cash. This sale was completed on April 15, 2002.
An adjustment (either upwards or downwards) to the purchase price may occur
within 90 days of the closing date of the sale based on Westbrooke's net income
from January 1, 2002 through the closing date. In addition, Standard Pacific
satisfied approximately $54.4 million of Westbrooke's debt that includes
approximately $14.2 million of intercompany liabilities owed to the Company. The
Company recognized a gain of approximately $4.3 million, net of taxes upon the
sale of Westbrooke.

9

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

This Quarterly Report on Form 10-Q may contain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, Section
21E of the Securities Exchange Act of 1934, as amended, and the Private
Securities Litigation Reform Act of 1995. Such matters involve risks and
uncertainties, including the Company's exposure to certain market risks, changes
in economic conditions, tax and interest rates, increases in raw material and
labor costs, weather conditions, and general competitive factors that may cause
actual results to differ materially.

RESULTS OF OPERATIONS

SELECTED FINANCIAL AND OTHER INFORMATION

- ----------

(1) Adjusted EBITDA represents EBITDA before severance and merger related
charges and the loss on the early extinguishment of debt.

10

SELECTED HOMEBUILDING OPERATING DATA

The following table sets forth home sales and backlog data by region:

11

JUNE 30, 2002 COMPARED TO JUNE 30, 2001

Income from continuing operations decreased to $20,489 (or $0.73 per share)
during the six months ended June 30, 2002 from $41,095 (or $1.47 per share)
during the six months ended June 30, 2001. Income from continuing operations
decreased to $11,563 during the three months ended June 30, 2002 from $23,067
for the three months ended June 30, 2001. The decrease is primarily a result of
severance and merger related charges and the loss on the early extinguishment of
debt recognized during the 2002 periods in connection with the Merger and the
Notes Offering.

For the six months and three months ended June 30, 2002, the Company's provision
for income taxes were 37% and 38%, respectively, which are consistent with that
of the corresponding periods in the prior year.

HOMEBUILDING

For the three months ended June 30, 2002, the Company generated Homebuilding
revenues of $354,140 as compared to $359,194 for the three months ended June 30,
2001. For the six months ended June 30, 2002, the Company generated Homebuilding
revenues of $657,428 as compared to $669,363 for the six months ended June 30,
2001. The decline in revenues of $5,054, or 1.4%, for the three months ended and
June 30, 2002$11,935, or 1.8%, for the six months ended June 30, 2002 is
primarily attributable to the decrease in sales of land during the 2002 periods
as compared to the corresponding periods during 2001. During the three and six
months ended June 30, 2002, sales of land decreased to $2,033 and $3,342,
respectively as compared to $9,672 and $11,035 during the three and six months
ended June 30 ,2001.

For the three months ended June 30, 2002, revenue from the sale of homes
increased to $352,107 from $349,522. This increase was attributable primarily to
the increase in the Company's average selling price to $268 during the three
months ended June 30, 2002 from $260 during the three months ended June 30,
2001. This increase in average selling price was primarily attributable to a
change in product mix and the change in mix of homes closed in the Company's
regions. The increase in average selling price was offset by the decline in the
number of homes closed during the three months ended June 30, 2002 as compared
to the corresponding period in the prior year. During the three months ended
June 30, 2002, the Company closed 1,315 homes as compared to 1,342 home closings
for the three months ended June 30, 2001. This decline in closings is primarily
a result of the decline in the number of communities that the Company was
actively marketing. At June 30, 2002, the Company was actively marketing in 127
communities as compared to 150 at June 30, 2001.

As a result of the decline in revenue from home sales during the first quarter
of 2002 as compared to the prior year, revenue from home sales for the six
months ended June 30, 2002 declined to $654,086 from $658,328 for the
corresponding period in 2001. This decrease is attributable to the decline in
the number of homes closed to 2,461 for the six months ended June 30, 2002 as
compared to 2,568 for the corresponding period in 2001. This decline in closings
was offset by an increase in average selling price to $266 for the six months
ended June 30, 2002 from $256 for the six months ended June 30, 2001.

Homebuilding cost of sales decreased to $523,773 and $282,089, during the six
and three months ended June 30, 2002 from $534,723 and $285,224 during the six
and three months ended June 30, 2001. This decrease is primarily attributable to
the decline in the sale of land.

For the three and six months ended June 30, 2002, gross margin on revenue from
home sales was 20.4%, which is consistent with the 20.9% and 20.3% gross margins
generated for the three and six months ended June 30, 2001.

Selling, general & administrative ("SG&A") expenses increased to $41,897 and
$79,612 for the three and six months ended June 30, 2002 from $37,909 and
$72,834 for the three and six months ended June 30, 2001. As a percentage of
revenues from home sales, SG&A increased to 11.9% and 12.2% for the three and
six months ended June 30, 2002 from 10.8% and 11.1% for the three and six months
ended June 30, 2001. The increase in comparing 2002 periods to 2001 periods is
primarily attributable to increases in compensation, information technology,
insurance and legal expenses.

12

During the six months ended June 30, 2002, the Company incurred $24,467 in
severance and merger related charges. These charges include severance accrued
related to former executives of both Newmark and Engle. Additionally, in
connection with the Merger, the Company incurred approximately $6 million in
legal, consulting and advisory fees.

During the six months ended June 30, 2002, in connection with the Company's
Notes Offering, the Company recognized a loss on the early extinguishment of
debt of $5,411. This charge relates to the exit fees incurred and the write off
of unamortized deferred finance costs associated with the then existing
borrowings.

For the three and six months ended June 30, 2002, depreciation and amortization
expense was $1,609 and $3,241 as compared to $2,132 and $4,415 for the three and
six three months ended June 30, 2001. This decline is primarily attributable to
a reduction in goodwill amortization as a result of the adoption of SFAS 142
effective January 1, 2002.

FINANCIAL SERVICES

Our Financial Services businesses generally provide mortgage financing, title
insurance and closing services for both our homebuyers and others. During the
three and six months ended June 30, 2002, Financial Services generated pretax
income of $4,388 and $8,110 as compared to $3,559 and $5,968 for the three and
six months ended June 30, 2001. This increase is primarily attributable to the
increase in the capture ratio of closings and an improvement in the margin.
During the three months ended June 30, 2002, Financial Services pretax income as
a percent of Financial Services revenue increased to 46.6% from 45.5% for the
three months ended June 30, 2001. For the six months ended June 30, 2002, the
margin improved to 45.2% from 42.0% during the corresponding period in the prior
year.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

The Company's Homebuilding operations primary uses of cash have been for land
acquisitions, construction and development expenditures, and SG&A expenditures.
The Company's sources of cash to finance these requirements have been primarily
cash generated from operations and cash borrowed under prior credit facilities.
The Company's Financial Services segment relies primarily on internally
generated funds, which include the proceeds generated from the sale of
mortgages, and from the mortgage company's warehouse line of credit to fund its
operations.

At June 30, 2002, the Company had unrestricted cash and cash equivalents of
$83,728, as compared to $75,136 at December 31, 2001. The increase in
unrestricted cash was primarily attributable to cash generated from the
Company's sale of Westbrooke during April 2002 and income generated from
continuing operations. During the six months ended June 30, 2002, the Company
generated $23,628 in cash from operating activities. This, along with the
proceeds generated from discontinued operations of $50,323 and the proceeds from
the Company's Notes Offering, were used to repay $379,577 in existing
Homebuilding borrowings and TOI debt assumed in the Merger.

On June 25, 2002, the Company completed a private placement of $200,000 9%
Senior Notes due 2010 and $150,000 10 3/8% Senior Subordinated Notes due 2012
(collectively, the "Notes"). The net proceeds of approximately $335 million and
cash on hand were used to repay existing Homebuilding borrowings and
approximately $75,000 in debt assumed from TOI in the Merger. The interest rates
on the Notes are higher than the collective interest rates on the obligations
that were repaid. As a result of the higher interest rates and the assumption of
the TOI debt, the Company anticipates that interest incurred will exceed the
amounts which would have been incurred under the prior borrowings. Therefore,
the increased interest incurred will have an effect on gross margins in future
periods.

Additionally, the Company entered into a revolving credit facility, which
provides for loans up to $220,000. As of June 30, 2002, the Company has borrowed
$10,000 under this new credit facility.

Management believes that as a result of the Merger and the Notes Offering the
Company will have adequate financial resources, including cash from operations
and availability under the new credit facility and the warehouse line of credit,
to meet the Company's current working capital and land acquisition and
development needs based on current market conditions into the foreseeable
future. 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 need to seek additional debt or equity financing
to operate and expand our business.

13

ITEM 3. CHANGES IN INFORMATION ABOUT MARKET RISK

As a result of the Notes Offering, $350 million of the Company's outstanding
borrowings are based on fixed rates. The Company is exposed to market risk
primarily related to potential adverse changes in interest rates on its existing
construction loan and warehouse line of credit and the Company's new revolving
credit facility. The interest rates relative to these borrowings fluctuate with
the prime and LIBOR lending rates, both upwards and downwards. The Company does
not enter into, or intend to enter into, derivative financial instruments for
trading or speculative purposes.

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, both upwards and downwards.

We may be adversely affected during periods of high inflation, primarily because
of higher land and construction costs. In addition, inflation may result in
higher mortgage interest rates, which may significantly affect the affordability
of permanent mortgage financing for prospective purchasers. Inflation also
increases our interest costs. We attempt to pass through to our customers any
increases in our costs through increased selling prices and, to date, inflation
has not had a material adverse effect on our results of operations. However,
there is no assurance that inflation will not have a material adverse impact on
our future results of operations.

PART II OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

The Company is involved in various claims and legal actions arising in the
ordinary course of business. The Company does not believe that the ultimate
resolution of these matters will have a material adverse effect on the financial
condition or results of operations of the Company.

In early February 2002, Alec Engelstein, then Chief Executive Officer of Engle
Homes, Inc., and David Shapiro, then Vice President-Chief Financial Officer of
Engle Homes, Inc., resigned from their executive positions with Engle Homes,
Inc. and alleged that they were entitled to receive severance packages in the
aggregate amount of approximately $9.4 million, plus other benefits, including a
claim by Mr. Engelstein of a monthly retirement benefit equal to1/12th of his
annual salary with such payments to continue for a period of 60 consecutive
months. We have advised them that we dispute their claims, but there can be no
assurance that, if litigated or arbitrated, we will prevail. However, we have
included amounts sufficient to cover the alleged payments due to Mr. Engelstein
and Mr. Shapiro in our financial statements for the three months ended March 31,
2002.

In connection with the Company's announcement in March 2001 of its proposed
merger with Engle, there was a class action suit filed in District Court, Clark
County, Nevada, and a class action suit filed in the 80th Judicial District
Court of Harris County, Texas, each of which challenged the merger as a breach
of fiduciary duty. In addition, two interveners filed interventions in the Texas
class action. In March 2002, the Company reached an agreement in principle for
the settlement of the class actions and interventions. Under the terms of the
settlement, the Company has agreed to pay the plaintiffs' attorneys' fees and
expenses in an amount not to exceed $350,000 in the aggregate. The settlement is
subject to a number of conditions, including the closing of the Merger,
providing notice to the class, conducting confirmatory discovery, executing a
definitive settlement agreement and obtaining final approval by the court. The
Merger closed on June 25, 2002, and the Company is now in the process of
finalizing and implementing the settlement.

14

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

(a) On June 25, 2002, we amended the Company's Certificate of Incorporation as
follows: (i) to change the Company's name from "Newmark Homes Corp." to
"Technical Olympic USA, Inc."; (ii) to increase the number of shares of
capital stock authorized to be issued to 70,000,000 shares, consisting of
67,000,000 shares of common stock, par value $.01 per share, and 3,000,000
shares of preferred stock, par value $.01 per share; and (iii) to increase
the number of directors on our board from a maximum of 10 directors to a
maximum of 15 directors.

(b) On June 25, 2002 and as part of the Merger set forth in (c) below, the
Company discharged approximately $12.9 million of Engle Home's 9 1/4%
Senior Notes due 2008 pursuant to two indentures dated February 2, 1998 and
June 12, 1998, respectively, all as part of the terms of the Merger with
Engle Holdings Corp. The Company has irrevocably called for the redemption
of the Engle Homes notes on the first date on which they become eligible to
be called, which is February 1, 2003.

On June 25, 2002, the Company issued $200 million aggregate principal
amount of 9% senior notes due 2010 and $150 million of 10 3/8% senior
subordinate notes due 2012 (the "Original Notes"). The Original Notes were
sold to qualified institutional buyers as defined in Rule 144A under the
Securities Act through Salomon Smith Barney Inc., Deutsche Bank Securities
Inc. and Fleet Securities, Inc., as initial purchasers. The Original Notes
were sold to the initial purchasers for an aggregate price of $350 million.
The Company paid underwriting discounts and commissions of approximately
$7.5 million, resulting in net proceeds to the Company, before other
transaction costs, of $342.5 million.

At the closing of the offering of the Original Notes, the Company and its
subsidiary guarantors entered into a registration rights agreement with the
initial purchasers for the senior notes and a registration rights agreement
with the initial purchasers for the senior subordinated notes, pursuant to
which the Company agreed, for the benefit of the holders of the notes, to
make an offer to exchange the Original Notes for new notes with
substantially identical terms of the Original Notes of the same series (the
"Exchange Notes"), except that the Exchange Notes will be freely
transferable. The Company agreed to use its reasonable efforts to cause the
registration statement relating to the exchange offers to be declared
effective under the Securities Act within 150 days after the date of
original issuance of the Original Notes. If the Company does not accomplish
certain actions with respect to the exchange offer by certain specified
dates, the interest rate on the Original Notes will be increased until the
Company accomplishes those actions.

(c) On June 25, 2002, Engle Holdings Corp. ("Engle Holdings") merged with and
into our Company pursuant to a stock-for-stock merger (the "Merger"). Our
Company was the surviving entity in the Merger, and we changed our name as
a result of the Merger to "Technical Olympic USA, Inc." The Company's
trading symbol changed from "NHCH" to "TOUS".

Engle Holdings was a 100% owned subsidiary of Technical Olympic, Inc., a
Delaware corporation ("TOI") and our majority stockholder. Pursuant to the
Merger, each issued and outstanding share of Engle Holdings common stock
was exchanged for 1,724.08294 shares of our common stock, with 16,378,787
additional shares of the Company being issued to TOI. Prior to the Merger,
TOI owned 80% of our common stock and following the Merger, TOI owns 91.75%
of our common stock.

The issuance of the additional shares of our common stock to TOI in
connection with the Merger was exempt from registration pursuant to Section
4(2) of the Securities Act.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

No disclosure required.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On April 5, 2002, following the approval by our board of directors of the
Agreement and Plan of Merger and of the Merger with Engle Holdings, TOI, which
held 80% of our issued and outstanding common stock, entered into a written
consent of the majority stockholder approving the Merger on the terms and
conditions specified in the Agreement and Plan of Merger and the amendment to
our Certificate of Incorporation. The amendment of our

15

Certificate of Incorporation: (i) increased the number of authorized shares of
common stock from 30,000,000 to 67,000,000; (ii) increased the maximum number of
authorized directors on our board from 10 to 15 directors; and (iii) changed our
corporate name to "Technical Olympic USA, Inc."

Upon consummation of the Merger that occurred on June 25, 2002, Antonio B. Mon
became one of our directors and is the Chief Executive Officer and President of
the Company.

ITEM 5. OTHER INFORMATION

No disclosure required.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

Exhibit
Number Description
- ------- -----------
2.1 Agreement and Plan of Merger, dated April 8, 2002, by and among
Newmark Homes Corp., Engle Holdings Corp., and Technical
Olympic, Inc. (incorporated by reference to Exhibit 99.A to
Newmark's Information Statement on Schedule 14-C filed on June
3, 2002).

2.2 Registration Rights Agreement, dated June 25, 2002, among
Technical Olympic USA, Inc. and Technical Olympic, Inc.
(incorporated by reference to Exhibit 2.2 to the Company's Form
8-K filed July 9, 2002).

3.1 The Certificate of Amendment amending the Certificate of
Incorporation of Newmark Homes Corp. (incorporated by reference
to Exhibit 99.B to Newmark's Information Statement on Schedule
14-C filed on June 3, 2002).

4.1 Indenture, dated as of June 25, 2002, among Technical Olympic
USA, Inc., certain direct and indirect subsidiaries of Technical
Olympic USA, Inc. and Wells Fargo Bank Minnesota, National
Association, as Trustee, relating to the Senior Notes
(incorporated by reference to Exhibit 4.1 to the Company's Form
8-K filed July 9, 2002).

4.2 Indenture, dated as of June 25, 2002, among Technical Olympic
USA, Inc., certain direct and indirect subsidiaries of Technical
Olympic USA, Inc. and Wells Fargo Bank Minnesota, National
Association, as Trustee, related to the Senior Subordinated
Notes (incorporated by reference to Exhibit 4.2 to the Company's
Form 8-K filed July 9, 2002).

4.3 Registration Rights Agreement, dated June 25, 2002, among
Technical Olympic USA, Inc., certain direct and indirect
subsidiaries of Technical Olympic USA, Inc., Salomon Smith
Barney, Inc., Deutsche Bank Securities, Inc. and Fleet
Securities, Inc. relating to the Senior Notes (incorporated
by reference to Exhibit 4.3 to the Company's Form 8-K filed
July 9, 2002).

4.4 Registration Rights Agreement, dated June 25, 2002, among
Technical Olympic USA, Inc., certain direct and indirect
subsidiaries of Technical Olympic USA, Inc., Salomon Smith
Barney Inc., Deutsche Bank Securities inc. and Fleet Securities,
Inc. relating to the Senior Subordinated Notes (incorporated
by reference Io Exhibit 4.4 to the Company's Form 8-K filed
July 9, 2002).

10.1 Credit Agreement, dated June 25, 2002, among Technical Olympic
USA, Inc., the Lenders and Issuers named therein, Citicorp North
America, Inc. as Administrative Agent, Fleet National Bank as
Documentation Agent and Salomon Smith Barney Inc. as Sole
Arranger and Sole Book Manager Notes (incorporated by reference
to Exhibit 99.2 to the Company's Form 8-K filed July 9, 2002).

10.2 Credit Agreement, dated July 5, 2001, between Preferred Home
Mortgage Company and Guaranty Bank.

10.3 First Amendment to Credit Agreement, dated December 20, 2001,
between Preferred Home Mortgage Company and Guaranty Bank.

16

Exhibit
Number Description
- ------- -----------
10.4 Second Amendment to Credit Agreement, dated June 25, 2002,
between Preferred Home Mortgage Company and Guaranty Bank.

10.5 Mortgage Loan Purchase and Sale Agreement, dated July 5, 2001,
between Preferred Home Mortgage Company and Guaranty Bank.

10.6 First Amendment to Purchase Agreement, dated December 20, 2001,
between Preferred Home Mortgage Company and Guaranty Bank.

10.7 Second Amendment to Mortgage Loan Purchase and Sale Agreement,
dated June 25, 2002, between Preferred Home Mortgage Company and
Guaranty Bank.

10.8 Guaranty of Technical Olympic USA, Inc., dated June 25, 2002, in
favor of Guaranty Bank.

10.9 Employment Agreement between Newmark Homes Corp. and Antonio B.
Mon dated April 5, 2002, effective June 25, 2002 (incorporated
by reference to Exhibit 99.E to Newmark's Information Statement
on Schedule 14-C filed on June 3, 2002).

10.10 Employment Agreement between Technical Olympic USA, Inc. and
Tommy L. McAden dated July 12, 2002, effective June 25, 2002.

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

(1) Current Report on Form 8-K dated April 15, 2002, was filed
on April 29, 2002 pursuant to Items 2 and 7. The Current
Report (Item 2) reported the following: (i) the filing of
Exhibit 2.1 - Stock Purchase Agreement between the Company
and Standard Pacific Corp.; (ii) the filing of Exhibit 2.2
- Amendment to Stock Purchase Agreement between Company and
Standard Pacific Corp.; and (iii) the filing of Exhibit
99.1 and Exhibit 99.2 - Press Releases issued by the
Company announcing the signing of a definitive agreement to
sell Westbrooke Acquisition Corp. and the subsequent sale
of Westbrooke Acquisition Corp., respectively. The Current
Report (Item 7) reported the unaudited pro forma
consolidated financial statements giving effect to the sale
of Westbrooke Acquisition Corp. as if it occurred on
December 31, 2001.

(2) Current Report of Form 8-K dated May 31, 2002, was filed on
May 31, 2002, pursuant to Item 5. The Current Report
reported the restatement of its Management's Discussion and
Analysis of Financial Condition and Results of Operations,
Selected Financial Data and Consolidated Financial
Statements and Notes thereto to reflect the discontinuation
of Westbrooke's operations.

(3) Current Report on Form 8-K dated June 4, 2002, was filed on
June 5, 2002 pursuant to Item 5. The Current Report
reported the Filing of Exhibit 99.1 - Press Release issued
by the Company relating to the Company's intent to offer
$200 million of senior notes and $150 million of senior
subordinated notes pursuant to rule 144A under the
Securities Act.

(4) Current Report on Form 8-K dated June 17, 2002, was filed
on June 18, 2002 pursuant to Item 5. The Current Report
reported the filing of Exhibit 99.1 - Press Release issued
by the Company relating to the Company's private placement,
through a Rule 144A private placement offering, of the $200
million senior notes and $150 million senior subordinated
notes.

17

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 13, 2002 By: /s/ TOMMY L. MCADEN
-------------------------------------
Name: Tommy L. McAden

Title: Vice President-Finance and
Administration and Chief Financial
Officer

Date: August 13, 2002 By: /s/ RANDY L. KOTLER
------------------------------------
Name: Randy L. Kotler
Title: Chief Accounting Officer

18

EXHIBIT INDEX

Exhibit
Number Description
- ------- -----------
2.1 Agreement and Plan of Merger, dated April 8, 2002, by and among
Newmark Homes Corp., Engle Holdings Corp., and Technical
Olympic, Inc. (incorporated by reference to Exhibit 99.A to
Newmark's Information Statement on Schedule 14-C filed on June
3, 2002).

2.2 Registration Rights Agreement, dated June 25, 2002, among
Technical Olympic USA, Inc. and Technical Olympic, Inc.
(incorporated by reference to Exhibit 2.2 to the Company's Form
8-K filed July 9, 2002).

3.1 The Certificate of Amendment amending the Certificate of
Incorporation of Newmark Homes Corp. (incorporated by reference
to Exhibit 99.B to Newmark's Information Statement on Schedule
14-C filed on June 3, 2002).

4.1 Indenture, dated as of June 25, 2002, among Technical Olympic
USA, Inc., certain direct and indirect subsidiaries of Technical
Olympic USA, Inc. and Wells Fargo Bank Minnesota, National
Association, as Trustee, relating to the Senior Notes
(incorporated by reference to Exhibit 4.1 to the Company's Form
8-K filed July 9, 2002).

4.2 Indenture, dated as of June 25, 2002, among Technical Olympic
USA, Inc., certain direct and indirect subsidiaries of Technical
Olympic USA, Inc. and Wells Fargo Bank Minnesota, National
Association, as Trustee, related to the Senior Subordinated
Notes (incorporated by reference to Exhibit 4.2 to the Company's
Form 8-K filed July 9, 2002).

4.3 Registration Rights Agreement, dated June 25, 2002, among
Technical Olympic USA, Inc., certain direct and indirect
subsidiaries of Technical Olympic USA, Inc., Salomon Smith
Barney, Inc., Deutsche Bank Securities, Inc. and Fleet
Securities, Inc. relating to the Senior Notes (incorporated
by reference to Exhibit 4.3 to the Company's Form 8-K filed
July 9, 2002).

4.4 Registration Rights Agreement, dated June 25, 2002, among
Technical Olympic USA, Inc., certain direct and indirect
subsidiaries of Technical Olympic USA, Inc., Salomon Smith
Barney Inc., Deutsche Bank Securities inc. and Fleet Securities,
Inc. relating to the Senior Subordinated Notes (incorporated
by reference Io Exhibit 4.4 to the Company's Form 8-K filed
July 9, 2002).

10.1 Credit Agreement, dated June 25, 2002, among Technical Olympic
USA, Inc., the Lenders and Issuers named therein, Citicorp North
America, Inc. as Administrative Agent, Fleet National Bank as
Documentation Agent and Salomon Smith Barney Inc. as Sole
Arranger and Sole Book Manager Notes (incorporated by reference
to Exhibit 99.2 to the Company's Form 8-K filed July 9, 2002).

10.2 Credit Agreement, dated July 5, 2001, between Preferred Home
Mortgage Company and Guaranty Bank.

10.3 First Amendment to Credit Agreement, dated December 20, 2001,
between Preferred Home Mortgage Company and Guaranty Bank.

10.4 Second Amendment to Credit Agreement, dated June 25, 2002,
between Preferred Home Mortgage Company and Guaranty Bank.

10.5 Mortgage Loan Purchase and Sale Agreement, dated July 5, 2001,
between Preferred Home Mortgage Company and Guaranty Bank.

10.6 First Amendment to Purchase Agreement, dated December 20, 2001,
between Preferred Home Mortgage Company and Guaranty Bank.

10.7 Second Amendment to Mortgage Loan Purchase and Sale Agreement,
dated June 25, 2002, between Preferred Home Mortgage Company and
Guaranty Bank.

10.8 Guaranty of Technical Olympic USA, Inc., dated June 25, 2002, in
favor of Guaranty Bank.

10.9 Employment Agreement between Newmark Homes Corp. and Antonio B.
Mon dated April 5, 2002, effective June 25, 2002 (incorporated
by reference to Exhibit 99.E to Newmark's Information Statement
on Schedule 14-C filed on June 3, 2002).

10.10 Employment Agreement between Technical Olympic USA, Inc. and
Tommy L. McAden dated July 12, 2002, effective June 25, 2002.