UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

þ		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarter Ended June 30, 2005

o		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Levitt Corporation

(Exact name of registrant as specified in its Charter)

Florida (State or other jurisdiction of incorporation or organization)		11-3675068 (I.R.S. Employer Identification No.)

2100 West Cypress Creek Road Ft. Lauderdale, Florida (Address of principal executive offices)		33309 (Zip Code)

(954) 940-4950
(Registrant’s telephone number, including area code)

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 þ No o

Indicate the number of shares outstanding for each of the Registrant’s classes of common stock, as of August 1, 2005:

Class of Common Stock		Shares Outstanding
Class A common stock, $0.01 par value		18,597,166
Class B common stock, $0.01 par value		1,219,031

 

 

Levitt Corporation and Subsidiaries
Index to Unaudited Consolidated Financial Statements

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements:

Consolidated Statements of Financial Condition as of June 30, 2005 and December 31, 2004 — Unaudited

Consolidated Statements of Income for the three and six months ended June 30, 2005 and 2004 — Unaudited

Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2005 and 2004 — Unaudited

Consolidated Statement of Shareholders’ Equity for the six months ended June 30, 2005 — Unaudited

Consolidated Statements of Cash Flows for the three and six months ended June 30, 2005 and 2004 — Unaudited

Notes to Unaudited Consolidated Financial Statements for the three and six months ended June 30, 2005 and 2004

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Item 4. Controls and Procedures

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 6. Exhibits

SIGNATURES

Employment Agreement - John Laguardia

Employment Agreement - Elliot Wiener

Section 302 Certification of CEO

Section 302 Certification of CFO

Section 906 Certification of CEO

Section 906 Certification of CFO

Power of Attorney

PART — I

Levitt Corporation

Consolidated Statements of Financial Condition — Unaudited

(In thousands except share data)

		June 30,				December 31,
		2005				2004
Assets
Cash and cash equivalents		$	99,778				125,522
Restricted cash			982				2,017
Inventory of real estate			453,182				413,471
Investment in Bluegreen Corporation			87,658				80,572
Property and equipment, net			37,065				31,137
Other assets			37,540				25,748
Total assets		$	716,205				678,467
Liabilities and Shareholders’ Equity
Accounts payable and accrued liabilities		$	62,542				66,271
Customer deposits			45,838				43,022
Current income tax payable			6,560				4,314
Notes and mortgage notes payable			209,789				221,605
Notes and mortgage notes payable to affiliates			4,746				46,621
Junior subordinated debentures			54,124				—
Deferred tax liability, net			2,605				1,845
Total liabilities			386,204				383,678
Shareholders’ equity:
Preferred stock, $0.01 par value
Authorized: 5,000,000 shares
Issued and outstanding: no shares			—				—
Class A Common Stock, $0.01 par value
Authorized: 50,000,000 shares
Issued and outstanding: 18,597,166 shares			186				186
Class B Common Stock, $0.01 par value
Authorized: 10,000,000 shares
Issued and outstanding: 1,219,031 shares			12				12
Additional paid-in capital			180,772				180,790
Retained earnings			148,721				113,643
Accumulated other comprehensive income			310				158
Total shareholders’ equity			330,001				294,789
Total liabilities and shareholders’ equity		$	716,205				678,467

See accompanying notes to unaudited consolidated financial statements.

Levitt Corporation

Consolidated Statements of Income — Unaudited

(In thousands, except per share data)

		Three Months								Six Months
		Ended June 30,								Ended June 30,
		2005				2004				2005				2004
Revenues:
Sales of real estate		$	107,094				142,530				305,960				241,053
Title and mortgage operations			947				1,339				1,895				2,309
Total revenues			108,041				143,869				307,855				243,362
Costs and expenses:
Cost of sales of real estate			84,547				107,676				215,136				177,341
Selling, general and administrative expenses			19,459				18,888				42,605				32,935
Other expenses			626				777				1,942				1,476
Total costs and expenses			104,632				127,341				259,683				211,752
Earnings from Bluegreen Corporation			4,729				2,775				6,867				4,861
Earnings from real estate joint ventures			42				2,130				132				5,737
Interest and other income			1,453				849				2,775				1,327
Income before income taxes			9,633				22,282				57,946				43,535
Provision for income taxes			3,581				8,595				22,076				16,793
Net income		$	6,052				13,687				35,870				26,742
Earnings per common share:
Basic		$	0.31				0.70				1.81				1.55
Diluted		$	0.30				0.68				1.79				1.53
Weighted average common shares outstanding:
Basic			19,816				19,596				19,816				17,206
Diluted			19,949				19,638				19,957				17,245
Dividends declared per common share:
Class A common stock		$	0.02				—				0.04				—
Class B common stock		$	0.02				—				0.04				—

See accompanying notes to unaudited consolidated financial statements.

Levitt Corporation

Consolidated Statements of Comprehensive Income — Unaudited

(In thousands)

		Three Months								Six Months
		Ended June 30,								Ended June 30,
		2005				2004				2005				2004
Net income		$	6,052				13,687				35,870				26,742
Other comprehensive income:
Pro-rata share of unrealized gain recognized by Bluegreen Corporation on retained interests in notes receivable sold, net of tax			65				106				152				14
Comprehensive income		$	6,117				13,793				36,022				26,756

See accompanying notes to unaudited consolidated financial statements.

Levitt Corporation

Consolidated Statement of Shareholders’ Equity — Unaudited

Six Months Ended June 30, 2005
(In thousands)

																		Accumulated
		Class A				Class B				Additional								Compre-
		Common				Common				Paid-In				Retained				hensive
		Stock				Stock				Capital				Earnings				Income				Total
Balance at December 31, 2004		$	186				12				180,790				113,643				158				294,789
Net income			—				—				—				35,870				—				35,870
Pro-rata share of unrealized gain recognized by Bluegreen on sale of retained interests, net of tax			—				—				—				—				152				152
Issuance of Bluegreen common stock, net of tax			—				—				(18	)			—				—				(18	)
Cash dividends paid															(792	)			—				(792	)
Balance at June 30, 2005		$	186				12				180,772				148,721				310				330,001

See accompanying notes to unaudited consolidated financial statements.

Levitt Corporation

Consolidated Statements of Cash Flows — Unaudited

(In thousands)

		Six Months Ended
		June 30,
		2005				2004
Operating activities:
Net income		$	35,870				26,742
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization			841				308
Change in deferred income taxes			675				1,692
Earnings from Bluegreen Corporation			(6,867	)			(4,861	)
Earnings from unconsolidated trusts			(28	)			—
Earnings from real estate joint ventures			(132	)			(5,737	)
Changes in operating assets and liabilities:
Restricted cash			1,035				(1,613	)
Inventory of real estate			(39,711	)			(103,390	)
Other assets			(8,396	)			1,167
Accounts payable, accrued expenses and other liabilities			1,333				19,660
Net cash used in operating activities			(15,380	)			(66,032	)
Investing activities:
Investment in real estate joint ventures			(25	)			(35	)
Distributions from real estate joint ventures			275				6,410
Partial sale of joint venture interest			—				305
Investment in unconsolidated trusts			(1,624	)			—
Distributions from unconsolidated trusts			16				—
Purchase of Bowden Building Corporation, net of cash received			—				(6,109	)
Additions to property and equipment			(6,760	)			(4,062	)
Net cash used in investing activities			(8,118	)			(3,491	)
Financing activities:
Proceeds from notes and mortgage notes payable			144,406				157,136
Proceeds from notes and mortgage notes payable to affiliates			8,994				18,771
Proceeds from junior subordinated debentures			54,124				—
Repayment of notes and mortgage notes payable			(156,222	)			(110,306	)
Repayment of notes and mortgage notes payable to affiliates			(50,869	)			(27,450	)
Repayment of development bonds payable			—				(391	)
Payments for debt issuance costs			(1,887	)			—
Proceeds from issuance of common stock			—				122,500
Payments for stock issuance costs			—				(7,731	)
Cash dividends paid			(792	)			—
Net cash (used in) provided by financing activities			(2,246	)			152,529
(Decrease) increase in cash and cash equivalents			(25,744	)			83,006
Cash and cash equivalents at the beginning of period			125,522				35,965
Cash and cash equivalents at end of period		$	99,778				118,971

(Continued on next page)

Levitt Corporation

Consolidated Statements of Cash Flows — Unaudited
(In thousands)

		Six Months Ended
		June 30,
		2005				2004
Supplemental cash flow information
Interest paid on borrowings, net of amounts capitalized		$	(520	)			99
Income taxes paid			19,214				13,480
Supplemental disclosure of non-cash operating, investing and financing activities:
Increase in joint venture investment resulting from unrealized gain on non-monetary exchange			—				508
Fair value of assets acquired from acquisition of Bowden Building Corporation, net of cash acquired of $1,335			—				26,696
Fair value of liabilities assumed from acquisition of Bowden Building Corporation			—				20,587

See accompanying notes to unaudited consolidated financial statements.

Levitt Corporation

Notes to Unaudited Consolidated Financial Statements

1. Presentation of Interim Financial Statements

     Levitt Corporation (including its subsidiaries, the “Company”) engages in real estate activities through its Homebuilding and Land Divisions and Other Operations. The Homebuilding Division operates through Levitt and Sons, LLC (“Levitt and Sons”) and Bowden Building Corporation (“Bowden”), developers of single family home, townhome and condominium communities. The Land Division consists of the operations of Core Communities, LLC (“Core Communities”), a land and master-planned community developer. Other Operations includes Levitt Commercial, LLC (“Levitt Commercial”), a developer of industrial and residential properties; investments in real estate and real estate joint ventures; and an equity investment in Bluegreen Corporation (“Bluegreen”), a New York Stock Exchange-listed company engaged in the acquisition, development, marketing and sale of vacation ownership interests in primarily “drive-to” resorts, as well as residential homesites located around golf courses and other amenities.

     The accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant inter-segment transactions have been eliminated in consolidation. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005. Certain items in prior period financial statements have been reclassified to conform to the current presentation. These financial statements should be read in conjunction with the Company’s consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2004.

2. Stock Based Compensation

     The Company currently accounts for stock option grants under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No compensation expense is recognized because all stock options granted have exercise prices not less than the market value of the Company’s stock on the date of grant.

     The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS 148, Accounting for Stock-Based Compensation – Transition and Disclosure, to stock-based employee compensation (in thousands, except per share data):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2005				2004				2005				2004
Pro forma net income
Net income, as reported		$	6,052				13,687				35,870				26,742
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related income tax effect			(154	)			(137	)			(306	)			(544	)
Pro forma net income		$	5,898				13,550				35,564				26,198
Basic earnings per share:
As reported		$	0.31				0.70				1.81				1.55
Pro forma		$	0.30				0.69				1.79				1.52
Diluted earnings per share:
As reported		$	0.30				0.68				1.79				1.53
Pro forma		$	0.29				0.68				1.78				1.50

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

Expected volatility			43.08% — 50.35	%
Expected dividend yield			0.00% — 0.32	%
Risk-free interest rate			4.13% — 4.40	%
Expected life		7 — 10 years

3. Inventory of Real Estate

     Inventory of real estate is summarized as follows (in thousands):

		June 30,				December 31,
		2005				2004
Land and land development costs		$	344,128				291,721
Construction costs			83,122				100,129
Capitalized interest			13,109				10,803
Other costs			12,823				10,818
		$	453,182				413,471

4. Interest

     Interest incurred relating to land under development and construction is capitalized to real estate inventory during the active development period. Interest is capitalized as a component of inventory at the effective rates paid on borrowings during the pre-construction and planning stages and the periods that projects are under development. Capitalization of interest is discontinued if development ceases at a project. Capitalized interest is expensed as a component of cost of sales as related homes, land and units are sold. The following table summarizes interest incurred and amounts capitalized (in thousands):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2005				2004				2005				2004
Interest incurred to non-affiliates		$	3,892				1,821				6,775				3,181
Interest incurred to affiliates			207				561				820				1,195
Interest capitalized			(4,099	)			(2,382	)			(7,595	)			(4,318	)
Interest expense, net		$	—				—				—				58
Interest expensed in cost of sales		$	2,194				2,779				5,289				4,579

5. Investment in Bluegreen Corporation

     The Company accounts for its investment in Bluegreen under the equity method. At June 30, 2005, the Company owned approximately 9.5 million shares, or approximately 31%, of Bluegreen’s outstanding common stock.

     Bluegreen’s unaudited condensed consolidated balance sheets and unaudited condensed consolidated statements of income are as follows (in thousands):

Unaudited Condensed Consolidated Balance Sheets

		June 30,				December 31,
		2005				2004
Total assets		$	664,835				634,809
Total liabilities		$	369,625				363,933
Minority interest			7,730				6,009
Total shareholders’ equity			287,480				264,867
Total liabilities and shareholders’ equity		$	664,835				634,809

Unaudited Condensed Consolidated Statements of Income

		Three Months Ended								Six Months Ended
		June 30,				June 30,				June 30,				June 30,
		2005				2004				2005				2004
Revenues and other income		$	185,270				152,211				315,318				259,154
Cost and other expenses			161,030				135,908				279,806				234,379
Income before minority interest and provision for income taxes			24,240				16,303				35,512				24,775
Minority interest			948				1,503				1,721				2,332
Income before provision for income taxes			23,292				14,800				33,791				22,443
Provision for income taxes			8,967				5,698				13,010				8,641
Net income		$	14,325				9,102				20,781				13,802

6. Debt

     The Company formed two statutory business trusts, Levitt Capital Trust I (“LCT I”) and Levitt Capital Trust II (“LCT II”) and each issued trust preferred securities and invested the proceeds thereof in junior subordinated debentures of the Company. Distributions on the trust preferred securities are cumulative and based upon the liquidation value of the trust preferred security. The trust preferred securities are subject to mandatory redemption, in whole or in part, upon repayment of the junior subordinated debentures at maturity or earlier redemption. The junior subordinated debentures are redeemable in whole or in part at the Company’s option at any time after five years from the issue date or sooner following certain specified events. The terms of the Trust’s common securities are nearly identical to the trust preferred securities. The issuances of the trust preferred securities were each part of larger pooled trust security offerings which were not registered under the Securities Act of 1933.

     On March 15, 2005, LCT I issued $22.5 million of trust preferred securities and used the proceeds to purchase an identical amount of junior subordinated debentures from the Company. Interest on these junior subordinated debentures and distributions on these trust preferred securities are payable quarterly in arrears at a fixed rate of 8.11% through March 30, 2010 and thereafter at a floating rate of 3.85% over 3-month London Interbank Offered Rate (“LIBOR”) until the scheduled maturity date of March 30, 2035. In addition, the Company contributed $696,000 to LCT I in exchange for all of its common securities, and those proceeds were also used to purchase an identical amount of junior subordinated debentures from the Company. On May 4, 2005, LCT II issued $30.0 million of trust preferred securities and used the proceeds to purchase an identical amount of junior subordinated debentures from the Company. Interest on these junior subordinated debentures and distributions on these trust preferred securities are payable quarterly in arrears at a fixed rate of 8.09% through June 30, 2010 and thereafter at a floating rate of 3.80% over 3-month LIBOR until the scheduled maturity date of June 30, 2035. In addition, the Company contributed $928,000 to LCT II in exchange for all of its common securities and those proceeds were also used to purchase an identical amount of junior subordinated debentures from the Company. The Company used the proceeds from these financings to repay approximately $38.0 million of indebtedness to affiliates and intends to use the balance for general corporate purposes.

     In April 2005, Core Communities entered into a $40.0 million line of credit with an unaffiliated financial institution to provide future funding for land acquisition and development activities. Borrowings under the line of credit bear interest at the borrower’s option of either (i) the prime rate less twenty-five basis points or (ii) LIBOR plus two hundred fifty basis points. Accrued interest is due and payable

monthly in arrears, and all outstanding principal and accrued interest is due and payable in April 2007. Core Communities may, at its option, extend the line of credit for one additional year to April 2008. No amounts were outstanding on this line of credit as of June 30, 2005.

7. Commitments and Contingencies

     In the ordinary course of business, we enter into contracts to purchase homesites and land held for development. At June 30, 2005, the Company had approximately $275.9 million of commitments to purchase properties for development. Approximately $59.8 million of these commitments are subject to due diligence and satisfaction of certain requirements and conditions, including financing contingencies. At June 30, 2005, we had refundable and nonrefundable deposits aggregating $6.2 million, included in other assets in the accompanying consolidated statement of financial condition. Our liability for nonperformance under such contracts is generally limited to forfeiture of the related deposits.

     At June 30, 2005, our Land Division was party to two contracts to purchase approximately 5,200 acres of land in the City of Hardeeville, South Carolina for a combined purchase price of approximately $42.4 million. The land is for a proposed master-planned community in the City of Hardeeville. The due diligence periods under the contracts have expired, and non-refundable deposits have been delivered to the sellers of the land. The Company is negotiating financing for the transactions, and there is no assurance that the transactions will be consummated. The following table summarizes certain information relating to outstanding purchase and option contracts, including those contracts subject to the satisfactory completion of due diligence.

Purchase

Units/

Expected

Price

Acres

Closing

Homebuilding Division

$230.0 million

6,538 Units

2005-2007

Land Division

$42.4 million

5,200 Acres

2005

Other Operations

$3.5 million

90 Units

2006

     At June 30, 2005, the Company had outstanding surety bonds and letters of credit of approximately $83.9 million related primarily to its obligations to various governmental entities to construct improvements in the Company’s communities. The Company estimates that approximately $67.3 million of work remains to complete these improvements. The Company does not believe that any outstanding bonds or letters of credit will likely be drawn upon.

8. Earnings per Share

     Basic earnings per common 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 common share is computed in the same manner as basic earnings per share, but it also gives consideration to dilutive stock options using the treasury stock method and the pro rata impact of Bluegreen’s dilutive securities (stock options and convertible securities) on the amount of Bluegreen’s earnings that the Company recognizes.

     The following table presents the computation of basic and diluted earnings per common share (in thousands, except per share data):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2005				2004				2005				2004
Numerator:
Basic earnings per common share:
Net income — basic		$	6,052				13,687				35,870				26,742
Diluted earnings per common share:
Net income — basic		$	6,052				13,687				35,870				26,742
Pro rata share of the net effect of Bluegreen dilutive securities			(74	)			(249	)			(116	)			(375	)
Net income — diluted		$	5,978				13,438				35,754				26,367
Denominator:
Basic average shares outstanding			19,816				19,596				19,816				17,206
Net effect of stock options assumed to be exercised			133				42				141				39
Diluted average shares outstanding			19,949				19,638				19,957				17,245
Earnings per common share:
Basic		$	0.31				0.70				1.81				1.55
Diluted		$	0.30				0.68				1.79				1.53

9. Dividends

     On April 25, 2005, the Company’s Board of Directors declared a cash dividend of $0.02 per share on its Class A common stock and Class B common stock. The dividend was paid on May 16, 2005 to all shareholders of record on May 9, 2005.

     On July 25, 2005, the Company’s Board of Directors declared a cash dividend of $0.02 per share on its Class A common stock and Class B common stock. The dividend is payable on August 18, 2005 to all shareholders of record on August 11, 2005.

     The Company has not adopted a policy of regular dividend payments. The payment of dividends in the future is subject to approval by the Board of Directors and will depend upon, among other factors, the Company’s results of operations and financial condition.

10. Other Expenses and Interest and Other Income

     Other expenses and interest and other income are summarized as follows (in thousands):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2005				2004				2005				2004
Other expenses
Title and mortgage operations expenses		$	626				778				1,265				1,394
Interest expense, net			—				—				—				58
Penalty on debt prepayment			—				—				677				—
Minority interest			—				(1	)			—				24
Total other expenses		$	626				777				1,942				1,476
Interest and other income
Interest income		$	689				312				1,207				477
Other income			764				537				1,568				850
Total interest and other income		$	1,453				849				2,775				1,327

11. Segment Reporting

     Operating segments are components of an enterprise about which separate financial information is available that is regularly reviewed by executive management in deciding how to allocate resources and in assessing performance. The Company has three reportable business segments: Homebuilding, Land and Other Operations. The information provided for segment reporting is based on management’s internal reports. The accounting policies of the segments are generally the same as those described in the summary of significant accounting policies in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. Eliminations consist primarily of the elimination of sales and profits on real estate transactions between the Land and Homebuilding Divisions, which were recorded based upon terms that management believes would be attained in an arm’s-length transaction. The presentation and allocation of assets, liabilities and results of operations may not reflect the actual economic costs of the segments as stand-alone businesses. If a different basis of allocation were utilized, the relative contributions of the segments might differ, but management believes that the relative trends in segments would likely not be impacted.

     The Company’s Homebuilding segment consists of the operations of Levitt and Sons and Bowden while the Land segment consists of the operations of Core Communities. The Other Operations segment consists of the activities of Levitt Commercial, the Company’s parent company operations, earnings from investments in Bluegreen and other real estate investments and joint ventures.

     The following tables present unaudited segment information as of and for the three and six months ended June 30, 2005 and 2004 (in thousands).

Three Months Ended										Other
June 30, 2005		Homebuilding				Land				Operations				Eliminations				Total
Revenues
Sales of real estate		$	107,095				149				—				(150	)			107,094
Title and mortgage operations			947				—				—				—				947
Total revenues			108,042				149				—				(150	)			108,041
Costs and expenses
Cost of sales of real estate			84,273				182				624				(532	)			84,547
Selling, general and administrative expenses			13,732				1,949				3,778				—				19,459
Other expenses			626				—				—				—				626
Total costs and expenses			98,631				2,131				4,402				(532	)			104,632
Earnings from Bluegreen Corporation			—				—				4,729				—				4,729
Earnings from real estate joint ventures			—				—				42				—				42
Interest and other income			199				425				829				—				1,453
Income (loss) before income taxes			9,610				(1,557	)			1,198				382				9,633
Provision (benefit) for income taxes			3,653				(624	)			392				160				3,581
Net income (loss)		$	5,957				(933	)			806				222				6,052
Inventory of real estate		$	349,880				114,038				6,473				(17,209	)			453,182
Total assets		$	382,890				188,792				161,732				(17,209	)			716,205
Total debt		$	171,893				25,668				71,098				—				268,659

Three Months Ended										Other
June 30, 2004		Homebuilding				Land				Operations				Eliminations				Total
Revenues
Sales of real estate		$	125,005				37,577				3,591				(23,643	)			142,530
Title and mortgage operations			1,339				—				—				—				1,339
Total revenues			126,344				37,577				3,591				(23,643	)			143,869
Costs and expenses
Cost of sales of real estate			98,856				15,702				3,480				(10,362	)			107,676
Selling, general and administrative expenses			13,845				2,690				2,353				—				18,888
Other expenses			777				—				—				—				777
Total costs and expenses			113,478				18,392				5,833				(10,362	)			127,341
Earnings from Bluegreen Corporation			—				—				2,775				—				2,775
Earnings from real estate joint ventures			1,823				—				307				—				2,130
Interest and other income			72				612				165				—				849
Income before income taxes			14,761				19,797				1,005				(13,281	)			22,282
Provision for income taxes			5,691				7,640				388				(5,124	)			8,595
Net income		$	9,070				12,157				617				(8,157	)			13,687
Inventory of real estate		$	279,776				113,128				8,314				(20,909	)			380,309
Total assets		$	333,237				180,202				122,004				(20,909	)			614,534
Total debt		$	135,576				48,717				44,285				—				228,578

Six Months Ended										Other
June 30, 2005		Homebuilding				Land				Operations				Eliminations				Total
Revenues
Sales of real estate		$	225,082				66,700				14,709				(531	)			305,960
Title and mortgage operations			1,895				—				—				—				1,895
Total revenues			226,977				66,700				14,709				(531	)			307,855
Costs and expenses
Cost of sales of real estate			177,852				27,272				11,950				(1,938	)			215,136
Selling, general and administrative expenses			28,340				6,395				7,870				—				42,605
Other expenses			1,265				677				—				—				1,942
Total costs and expenses			207,457				34,344				19,820				(1,938	)			259,683
Earnings from Bluegreen Corporation			—				—				6,867				—				6,867
Earnings from real estate joint ventures			104				—				28				—				132
Interest and other income			413				846				1,516				—				2,775
Income before income taxes			20,037				33,202				3,300				1,407				57,946
Provision for income taxes			7,554				12,812				1,155				555				22,076
Net income		$	12,483				20,390				2,145				852				35,870
Inventory of real estate		$	349,880				114,038				6,473				(17,209	)			453,182
Total assets		$	382,890				188,792				161,732				(17,209	)			716,205
Total debt		$	171,893				25,668				71,098				—				268,659

Six Months Ended										Other
June 30, 2004		Homebuilding				Land				Operations				Eliminations				Total
Revenues
Sales of real estate		$	203,669				56,898				4,129				(23,643	)			241,053
Title and mortgage operations			2,309				—				—				—				2,309
Total revenues			205,978				56,898				4,129				(23,643	)			243,362
Costs and expenses
Cost of sales of real estate			160,331				23,670				4,207				(10,867	)			177,341
Selling, general and administrative expenses			23,137				5,278				4,520				—				32,935
Other expenses			1,394				58				24				—				1,476
Total costs and expenses			184,862				29,006				8,751				(10,867	)			211,752
Earnings from Bluegreen Corporation			—				—				4,861				—				4,861
Earnings from joint ventures			3,332				—				2,405				—				5,737
Interest and other income			115				1,017				195				—				1,327
Income before income taxes			24,563				28,909				2,839				(12,776	)			43,535
Provision for income taxes			9,472				11,155				1,095				(4,929	)			16,793
Net income		$	15,091				17,754				1,744				(7,847	)			26,742
Inventory of real estate		$	279,776				113,128				8,314				(20,909	)			380,309
Total assets		$	333,237				180,202				122,004				(20,909	)			614,534
Total debt		$	135,576				48,717				44,285				—				228,578

12. Parent Company Financial Statements

          The parent company unaudited condensed statements of financial condition at June 30, 2005 and December 31, 2004, and unaudited condensed statements of income for the three and six months ended June 30, 2005 and 2004 are shown below (in thousands):

Condensed Statements of Financial Condition

		June 30,				December 31,
		2005				2004
Total assets		$	405,260				370,781
Total liabilities		$	75,259				75,992
Total shareholders’ equity			330,001				294,789
Total liabilities and shareholders’ equity		$	405,260				370,781

Condensed Statements of Income

		Three Months Ended								Six Months Ended
		June 30,				June 30,				June 30,				June 30,
		2005				2004				2005				2004
Earnings from Bluegreen Corporation		$	4,729				2,775				6,867				4,861
Earnings from real estate joint ventures			27				286				13				2,385
Other revenues			292				77				437				61
Costs and expenses			3,909				2,408				7,266				4,538
Income before income taxes			1,139				730				51				2,769
Provision (benefit) for income taxes			370				282				(98	)			1,068
Net income before undistributed earnings from consolidated subsidiaries			769				448				149				1,701
Earnings from consolidated subsidiaries, net of income taxes			5,283				13,239				35,721				25,041
Net income		$	6,052				13,687				35,870				26,742

          Cash dividends received from subsidiaries for the six months ended June 30, 2005 and 2004 were $8.8 million and $2.2 million, respectively. Some of the subsidiaries’ borrowings contain covenants that, among other things, may have the effect of limiting dividends that can be paid by the subsidiaries to Levitt Corporation.

13. New Accounting Pronouncements

          In December 2004, the FASB issued SFAS No. 152, Accounting for Real Estate Time-Sharing Transactions. This Statement amends SFAS No. 66, Accounting for Sales of Real Estate, and SFAS No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects, in association with the issuance of the AICPA’s SOP 04-2, Accounting for Real Estate Time-Sharing Transactions. SOP 04-2 was issued to address the diversity in practice caused by a lack of guidance specific to real estate time-sharing transactions. The provisions of SFAS No. 152 and SOP 04-2 become effective for Bluegreen on January 1, 2006. Bluegreen has indicated in its periodic reports filed with the SEC that it has not completed its evaluation of the impact of these standards on its consolidated financial statements. Accordingly, management of the Company has not yet determined the impact of these standards on its consolidated financial statements.

          In December 2004, the FASB issued SFAS No. 123 (revision), Share-Based Payments. This Statement is a revision of SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. This Statement eliminates the accounting for share-based transactions under APB Opinion No. 25 and its related interpretations and requires that all share based payments be accounted for using a fair value method. This Statement will be effective in the first fiscal year that begins after June 15, 2005. Management is currently reviewing the effect of SFAS No. 123 (R) on the Company’s consolidated finance statements and will adopt this standard effective January 1, 2006.

          In March 2005, the SEC released Staff Accounting Bulletin (“SAB”) No. 107, Share-Based Payment. This Statement provides the SEC staff position regarding application of SFAS No. 123 (R) and contains interpretive guidance related to the interaction between SFAS No. 123 (R) and certain SEC rules and regulations, as well as provides the staff’s views regarding the valuation of share-based payment arrangements for public companies. SAB No. 107 also highlights the importance of disclosures made related to the accounting for share-based payment transactions. Management is currently reviewing the effect of SAB No. 107 on the Company’s consolidated financial statements.

14. Litigation

          On May 26, 2005 a suit was filed in the 9^th Judicial Circuit in and for Orange County, Florida against the Company in Frank Albert, Dorothy Albert, et al. v. Levitt and Sons, LLC, a Florida limited liability company, Levitt Homes, LLC, a Florida limited liability company, Levitt Corporation, a Florida corporation, Levitt Construction Corp. East, a Florida corporation and Levitt and Sons, Inc., a Florida corporation. The suit purports to be a class action on behalf of 95 named plaintiffs residing in approximately 65 homes located in one of the Company’s communities in Central Florida. The complaint alleges: breach of contract, breach of implied covenant of good faith and fair dealing; failure to disclose latent defects; breach of express warranty; breach of implied warranty; violation of building code; deceptive and unfair trade practices; negligent construction; and negligent design. Plaintiffs seek certification as a class, or in the alternative to divide into sub-classes, unspecified damages alleged to range from $50,000 to $400,000 per house, costs and attorneys’ fees. Plaintiffs seek a trial by jury.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

          The objective of the following discussion is to provide an understanding of the financial condition and results of operations of Levitt Corporation and its wholly owned subsidiaries (“Levitt”, or the “Company”) as of and for the three and six months ended June 30, 2005 and 2004. The Company may also be referred to as “we,” “us,” or “our.” We engage in homebuilding, land development and other real estate activities through Levitt and Sons, LLC (“Levitt and Sons”), Bowden Building Corporation (“Bowden”), Core Communities, LLC (“Core Communities”) and other operations, which include Levitt Commercial, LLC (“Levitt Commercial”), an investment in Bluegreen Corporation (“Bluegreen”) and investments in real estate projects through subsidiaries and joint ventures. Acquired in December 1999, Levitt and Sons is a developer of single-family home and townhome communities and condominiums. Acquired in April 2004, Bowden is a builder of single family homes based in Memphis, Tennessee. Core Communities is currently developing Tradition, its second master-planned community, which is located in St. Lucie County, Florida. Tradition is planned to ultimately include more than 8,000 total acres, including approximately five miles of frontage on Interstate 95. Levitt Commercial specializes in the development of industrial and residential properties. Bluegreen is a New York Stock Exchange-listed company engaged in the acquisition, development, marketing and sale of ownership interests in primarily “drive-to” vacation resorts, and the development and sale of golf communities and residential land.

          Except for historical information contained herein, the matters discussed in this report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve substantial risks and uncertainties. Some of the forward-looking statements can be identified by the use of words such as “anticipate,” “believe,” “estimate,” “may,” “intend,” “expect,” “will,” “should,” “seeks” or other similar expressions. Forward-looking statements are based largely on management’s expectations and involve inherent risks and uncertainties including certain risks described in this report. When considering those forward-looking statements, you should keep in mind the risks, uncertainties and other cautionary statements made in this report. You should not place undue reliance on any forward-looking statement, which speaks only as of the date made. In addition to the risks identified below, you should refer to our periodic and current reports filed with the United States Securities and Exchange Commission (the “SEC”) for specific risks which could cause actual results to be significantly different from those expressed or implied by those forward-looking statements. Some factors which may affect the accuracy of the forward-looking statements apply generally to the real estate industry, while other factors apply directly to us. A number of important factors which could cause actual results to differ materially from those in the forward-looking statements include the impact of economic, competitive and other factors affecting the Company and its operations, including: the impact of hurricanes and tropical storms in the areas in which we operate; the market for real estate generally and in the areas where the Company has developments, including the impact of market conditions on the Company’s margins; delays in opening planned new communities; the availability and price of land suitable for development in our current markets and in markets where we intend to expand and our ability to successfully acquire land necessary to meet our growth objectives; the Company’s ability to consummate the proposed land transactions in South Carolina; the ability to obtain financing for planned acquisitions; the Company’s ability to successfully expand into new markets; shortages and increased costs of construction materials and labor; the effects of increases in interest rates; the impact of environmental factors, the impact of governmental regulations and requirements; the Company’s ability to timely deliver homes from backlog and successfully manage growth; the Company’s ability to negotiate and consummate acquisition financing upon favorable terms; and the Company’s success

at managing the risks involved in the foregoing. Many of these factors are beyond our control. The Company cautions that the foregoing factors are not exhaustive.

Executive Overview

          Management evaluates the performance and prospects of the Company and its subsidiaries using a variety of financial and non-financial measures. The key financial measures utilized to evaluate historical operating performance include revenues from sales of real estate, cost of sales of real estate, margin (which we measure as revenues from sales of real estate minus cost of sales of real estate), margin percentage (which we measure as margin divided by revenues from sales of real estate), income before taxes and net income. Non-financial measures used to evaluate historical performance include the number and value of new orders executed, the number of housing starts, the average selling price of our homes and the number of homes delivered. In evaluating the Company’s future prospects, management considers non-financial information such as the number of homes and acres in backlog (which we measure as homes or land subject to executed sales contracts) and the aggregate value of those contracts. Additionally, we monitor the number of properties remaining in inventory and under contract to be purchased relative to our sales and construction trends. The Company’s ratio of debt to shareholders’ equity and cash requirements are also considered when evaluating the Company’s future prospects, as are general economic factors and interest rate trends. Some of the above measures are discussed in the following sections as they relate to our operating results, financial position and liquidity. The list of measures above is not an exhaustive list, and management may from time to time utilize additional financial and non-financial information or may not use the measures listed above.

Non-Financial Measures of Historical Performance and Future Prospects

          Due in large part to stronger than expected sales of new homes in prior periods, we have experienced production challenges in some of our homebuilding communities that have led to extended delivery cycles beyond our 12-month target. As a direct response to these challenges, we began intentionally slowing sales throughout our Florida communities beginning in the third quarter of 2004. Outside consultants have been engaged to review our production and operational practices and we anticipate the implementation and execution of these revised practices will be reflected in the Company’s results of operations starting in 2006. The Company’s current results of operations predictably reflect the Company’s decision to slow its previous high rate of growth. Inventories of homes available for sale, depleted by rapid sales in 2004, are being replenished with the opening of new communities. The value of our backlog has grown in the past two quarters because of higher average selling prices, but has declined from the same period a year ago due to the aforementioned changes in our sales strategy. The backlog is expected to grow in the future with the increase in sales associated with more homes available for sale. The average selling prices of our homes continue to show healthy increases and our overall margin percentages have resisted compression due primarily to the currently favorable conditions in the Florida markets where the majority of our operations are currently located.

Impact of Increasing Costs, Interest Rates and Local Government Regulation

          Our business operations are impacted by competition for labor — direct and subcontracted – raw materials, supply and delivery issues. Ongoing strength in homebuilding and other construction activities has resulted in higher prices of most building materials, including lumber, drywall, steel, concrete and asphalt. We compete with other real estate developers—regionally, nationally and globally—for raw materials and labor. In addition, local materials suppliers periodically limit the allocation of their product which slows our production process and forces us to obtain those materials

from other suppliers, typically at higher prices. We occasionally are faced with spot shortages of certain materials, but those shortages have been less frequent during the first half of 2005. Although these allocations have not materially disrupted our operations to date, continued allocations could adversely impact our future operations or restrict our ability to expand in certain markets. Without corresponding increases in the sales prices of our real estate inventories (both land and finished homes), increasing materials and labor costs associated with land development and home building will negatively affect our future operating results.

Critical Accounting Policies and Estimates

          Critical accounting policies are those that are important to the understanding of our financial statements and also involve estimates and judgments about inherently uncertain matters. In preparing our financial statements, management makes estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates require the exercise of judgment, as future events cannot be determined with certainty. Accordingly, actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in subsequent periods relate to the valuation of (i) real estate, including the estimation of costs required to complete development of a property, (ii) investments in real estate joint ventures and unconsolidated subsidiaries (including Bluegreen), and (iii) the fair market value of assets and liabilities in the application of the purchase method of accounting. The accounting policies that we have identified as critical to the portrayal of our financial condition and results of operations are: (a) real estate inventories; (b) investments in real estate joint ventures and other equity investments; (c) revenue recognition; (d) capitalized interest; and (e) income taxes. For a more detailed discussion of these critical accounting policies see “Critical Accounting Policies” appearing in our Annual Report on Form 10-K for the year ended December 31, 2004.

CONSOLIDATED RESULTS OF OPERATIONS

		Three Months Ended												Six Months Ended
		June 30,												June 30,
		2005				2004				Change				2005				2004				Change
(In thousands)		(Unaudited)												(Unaudited)
Revenues
Sales of real estate		$	107,094				142,530				(35,436	)			305,960				241,053				64,907
Title and mortgage operations			947				1,339				(392	)			1,895				2,309				(414	)
Total revenues			108,041				143,869				(35,828	)			307,855				243,362				64,493
Costs and expenses
Cost of sales of real estate			84,547				107,676				(23,129	)			215,136				177,341				37,795
Selling, general and administrative expenses			19,459				18,888				571				42,605				32,935				9,670
Other expenses			626				777				(151	)			1,942				1,476				466
Total costs and expenses			104,632				127,341				(22,709	)			259,683				211,752				47,931
Earnings from Bluegreen Corporation			4,729				2,775				1,954				6,867				4,861				2,006
Earnings from real estate joint ventures			42				2,130				(2,088	)			132				5,737				(5,605	)
Interest and other income			1,453				849				604				2,775				1,327				1,448
Income before income taxes			9,633				22,282				(12,649	)			57,946				43,535				14,411
Provision for income taxes			3,581				8,595				(5,014	)			22,076				16,793				5,283
Net income		$	6,052				13,687				(7,635	)			35,870				26,742				9,128