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SECURITIES AND EXCHANGE COMMISSION

Form 10-Q

Commission file number: 000-23677

TECHNICAL OLYMPIC USA, INC.

(954) 364-4000

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

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

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

TECHNICAL OLYMPIC USA, INC.

INDEX

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PART I.     FINANCIAL INFORMATION

TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

See accompanying notes to consolidated financial statements.

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TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

See accompanying notes to consolidated financial statements.

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TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying notes to consolidated financial statements.

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TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

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

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

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

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

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

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

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

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

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

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

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

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

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

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

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

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

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

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

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

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

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

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Executive Summary

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

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

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

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

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

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

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Critical Accounting Policies

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

Results of Operations — Consolidated

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

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

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

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

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

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

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

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

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Results of Operations

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