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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the Quarter Ended September 30, 2004

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

Commission File Number
001-31931

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.)
     
1750 East Sunrise Boulevard
Ft. Lauderdale, Florida
(Address of principal executive offices) 		  33304
(Zip Code)

(954) 760-5200
(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 [X] No [  ]

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ] No [X]

Indicate the number of shares outstanding for each of the Registrant’s classes of common stock, as of November 9, 2004:

         
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  

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Levitt Corporation and Subsidiaries
Index to Unaudited Consolidated Financial Statements

 
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
 CEO Certification pursuant to Section 302
 CFO Certification pursuant to Section 302
 CEO Certification pursuant to Section 906
 CFO Certification pursuant to Section 906

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Levitt Corporation

Consolidated Statements of Financial Condition - Unaudited
(In thousands except share data)
                 
    September 30,   December 31,
    2004
   2003
Assets
                
Cash and cash equivalents
   $ 109,746       35,965  
Restricted cash
     2,525       3,384  
Notes receivable
     5,729       5,163  
Inventory of real estate
     428,304       257,556  
Investments in real estate joint ventures
     1,550       4,106  
Investment in Bluegreen Corporation
     80,752       70,852  
Other assets
     21,990       15,034  
Goodwill
     1,541       —  
Deferred tax asset, net
     —       654  
 
    
 		      
 		  
Total assets
   $ 652,137       392,714  
 
    
 		      
 		  
Liabilities and Shareholders’ Equity
                
Accounts payable and accrued liabilities
   $ 53,962       40,011  
Customer deposits
     52,945       52,134  
Current income tax payable
     244       1,024  
Notes and mortgage notes payable
     210,777       111,625  
Notes and mortgage notes payable to affiliates
     49,128       61,618  
Development bonds payable
     441       850  
Deferred tax liability, net
     4,871       —  
 
    
 		      
 		  
Total liabilities
     372,368       267,262  
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 and 13,597,166 shares, respectively
     186       136  
Class B Common Stock, $0.01 par value
Authorized: 10,000,000 shares
Issued and outstanding: 1,219,031 and 1,219,031 shares, respectively
     12       12  
Additional paid-in capital
     182,313       67,855  
Retained earnings
     97,026       57,020  
Accumulated other comprehensive income
     232       429  
 
    
 		      
 		  
Total shareholders’ equity
     279,769       125,452  
 
    
 		      
 		  
Total liabilities and shareholders’ equity
   $ 652,137       392,714  
 
    
 		      
 		  

See accompanying notes to unaudited consolidated financial statements.

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Levitt Corporation

Consolidated Statements of Operations – Unaudited
(In thousands, except per share data)
                                 
    Three Months   Nine Months
    Ended September 30,
   Ended September 30,
    2004
   2003
   2004
   2003
Revenues:
                                
Sales of real estate
   $ 132,893       64,930       373,946       184,933  
Title and mortgage operations
     1,164       607       3,473       1,588  
 
    
 		      
 		      
 		      
 		  
Total revenues
     134,057       65,537       377,419       186,521  
 
    
 		      
 		      
 		      
 		  
Costs and expenses:
                                
Cost of sales of real estate
     98,513       46,487       275,854       135,162  
Selling, general and administrative expenses
     17,298       10,210       50,233       28,712  
Interest expense, net
     178       —       236       249  
Other expenses
     3,594       379       4,988       1,047  
Minority interest
     (50 )     (22 )     (26 )     127  
 
    
 		      
 		      
 		      
 		  
Total costs and expenses
     119,533       57,054       331,285       165,297  
 
    
 		      
 		      
 		      
 		  
 
     14,524       8,483       46,134       21,224  
Earnings from Bluegreen Corporation
     5,790       3,350       10,651       5,156  
(Loss) earnings from real estate joint ventures
     (25 )     (16 )     5,712       (98 )
Interest and other income
     1,979       663       3,306       1,930  
 
    
 		      
 		      
 		      
 		  
Income before income taxes
     22,268       12,480       65,803       28,212  
Provision for income taxes
     8,608       4,819       25,401       10,891  
 
    
 		      
 		      
 		      
 		  
Net income
   $ 13,660       7,661       40,402       17,321  
 
    
 		      
 		      
 		      
 		  
Earnings per common share:
                                
Basic
   $ 0.69       0.52       2.23       1.17  
Diluted
   $ 0.66       0.50       2.18       1.14  
Weighted average common shares outstanding:
                                
Basic
     19,816       14,816       18,083       14,816  
Diluted
     19,872       14,816       18,127       14,816  
Dividends declared per common share:
                                
Class A common stock
   $ 0.02       —       0.02       —  
Class B common stock
   $ 0.02       —       0.02       —  

See accompanying notes to unaudited consolidated financial statements.

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Levitt Corporation

Consolidated Statements of Comprehensive Income - Unaudited
(In thousands)
                                 
    Three Months   Nine Months
    Ended September 30,
   Ended September 30,
    2004
   2003
   2004
   2003
Net income
   $ 13,660       7,661       40,402       17,321  
Other comprehensive income:
                                
Pro-rata share of unrealized (loss) gain recognized by Bluegreen on retained interests in notes receivable sold, net of tax
     (211 )     112       (197 )     775  
 
    
 		      
 		      
 		      
 		  
Comprehensive income
   $ 13,449       7,773       40,205       18,096  
 
    
 		      
 		      
 		      
 		  

See accompanying notes to unaudited consolidated financial statements.

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Levitt Corporation

Consolidated Statement of Shareholders’ Equity - Unaudited
For the Nine Months Ended September 30, 2004
(In thousands)
                                                 
                                    Accumulated    
                                    Compre-    
    Class A   Class B   Additional           hensive    
    Common   Common   Paid-In   Retained   Income    
    Stock
   Stock
   Capital
   Earnings
   (Loss)
   Total
Balance at December 31, 2003
   $ 136       12       67,855       57,020       429       125,452  
Net income
     —       —       —       40,402       —       40,402  
Other comprehensive loss
     —       —       —       —       (197 )     (197 )
Issuance of common stock, net of stock issuance costs
     50       —       114,719       —       —       114,769  
Cash dividends paid
     —       —       —       (396 )     —       (396 )
Issuance of Bluegreen common stock, net of tax
     —       —       (261 )     —       —       (261 )
 
    
 		      
 		      
 		      
 		      
 		      
 		  
Balance at September 30, 2004
   $ 186       12       182,313       97,026       232       279,769  
 
    
 		      
 		      
 		      
 		      
 		      
 		  

See accompanying notes to unaudited consolidated financial statements.

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Levitt Corporation

Consolidated Statements of Cash Flows - Unaudited
(In thousands)
                 
    Nine Months
    Ended September 30,
    2004
   2003
Operating activities:
                
Net income
   $ 40,402       17,321  
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
                
Depreciation and amortization
     439       226  
Increase in deferred income taxes
     5,049       3,078  
Earnings from Bluegreen Corporation
     (10,651 )     (5,156 )
(Earnings) loss from real estate joint ventures
     (5,712 )     99  
Gain on sale of building
     (2,162 )     —  
Changes in operating assets and liabilities:
                
Restricted cash
     859       (313 )
Notes receivable
     (566 )     919  
Inventory of real estate
     (148,821 )     (36,728 )
Other assets
     (5,275 )     (2,405 )
Accounts payable, accrued expenses and other liabilities
     10,480       27,931  
 
    
 		      
 		  
Net cash (used in) provided by operating activities
     (115,958 )     4,972  
 
    
 		      
 		  
Investing activities:
                
Investment in real estate joint ventures
     (127 )     (905 )
Distributions from real estate joint ventures
     8,464       1,196  
Proceeds from partial sale of joint venture interest
     340       —  
Purchase of Bowden Building Corporation, net of cash acquired
     (6,109 )     —  
Proceeds from sale of building
     5,315       —  
Other
     (2,045 )     (343 )
 
    
 		      
 		  
Net cash provided by (used in) investing activities
     5,838       (52 )
 
    
 		      
 		  
Financing activities:
                
Proceeds from notes and mortgage notes payable
     240,878       97,784  
Proceeds from notes and mortgage notes payable to affiliates
     26,482       28,571  
Repayment of notes and mortgage notes payable
     (158,451 )     (74,820 )
Repayment of notes and mortgage notes payable to affiliates
     (38,972 )     (32,834 )
Repayment of development bonds payable
     (409 )     (3,590 )
Proceeds from issuance of common stock, net of issuance costs
     114,769       —  
Cash dividends paid
     (396 )     —  
 
    
 		      
 		  
Net cash provided by financing activities
     183,901       15,111  
 
    
 		      
 		  
Increase in cash and cash equivalents
     73,781       20,031  
Cash and cash equivalents at the beginning of period
     35,965       16,014  
 
    
 		      
 		  
Cash and cash equivalents at end of period
   $ 109,746       36,045  
 
    
 		      
 		  

(Continued on next page)

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Levitt Corporation
Consolidated Statements of Cash Flows - Unaudited
(In thousands)

                 
    Nine Months
    Ended September 30,
    2004
   2003
Supplemental cash flow information
                
Interest paid on borrowings
   $ 7,190       6,090  
Income taxes paid
     21,921       8,081  
Supplemental disclosure of non-cash operating, investing and financing activities:
                
Change in shareholder’s equity resulting from the change in other comprehensive (loss) gain, net of taxes
     (197 )     775  
Change in shareholder’s equity from the net effect of Bluegreen’s capital transactions, net of taxes
     (261 )     (106 )
Increase in joint venture investment resulting from unrealized gain on non-monetary exchange
     409       —  
Fair value of assets acquired from acquisition of Bowden Building Corporation
     26,696       —  
Fair value of liabilities acquired from acquisition of Bowden Building Corporation
     20,587       —  

See accompanying notes to unaudited consolidated financial statements.

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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, a land and master-planned community developer (“Core Communities”). Other Operations includes Levitt Commercial, LLC, a developer of commercial properties (“Levitt Commercial”); an equity investment in Bluegreen Corporation, a New York Stock Exchange-listed company engaged in the acquisition, development, marketing and sale of ownership interests in vacation resorts and the development and sale of golf communities and residential land (“Bluegreen”); and investments in real estate and real estate joint ventures.

     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 nine month periods ended September 30, 2004 are not necessarily indicative of the results that may be expected for the year ended December 31, 2004. 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, 2003 and quarterly reports on Forms 10-Q for the quarters ended March 31, 2004 and June 30, 2004.

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2. Stock Based Compensation

     The Company 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   Nine Months
    Ended September 30,
   Ended September 30,
    2004
   2003
   2004
   2003
Pro forma net income
                                
Net income, as reported
   $ 13,660       7,661       40,402       17,321  
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related income tax effects and minority interest
     (149 )     —       (748 )     —  
 
    
 		      
 		      
 		      
 		  
Pro forma net income
   $ 13,511       7,661       39,654       17,321  
 
    
 		      
 		      
 		      
 		  
Basic earnings per share:
                                
As reported
   $ 0.69       0.52       2.23       1.17  
Pro forma
     0.68       0.52       2.19       1.17  
Diluted earnings per share:
                                
As reported
   $ 0.66       0.50       2.18       1.14  
Pro forma
     0.66       0.50       2.14       1.14  

3. Inventory of Real Estate

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

                 
    September 30,   December 31,
    2004
   2003
Land and land development costs
   $ 292,982       174,142  
Construction costs
     123,288       67,895  
Other costs
     12,034       15,519  
 
    
 		      
 		  
 
   $ 428,304       257,556  
 
    
 		      
 		  

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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 is a summary of interest incurred on notes and mortgage notes payable and the amounts capitalized (in thousands):

                                 
    Three Months ended   Nine Months ended
    September 30,
   September 30,
    2004
   2003
   2004
   2003
Interest incurred to non-affiliates
   $ 2,479       1,349       5,660       4,254  
Interest incurred to affiliates
     584       545       1,779       1,745  
Interest capitalized
     (2,885 )     (1,894 )     (7,203 )     (5,750 )
 
    
 		      
 		      
 		      
 		  
Interest expense, net
   $ 178       —       236       249  
 
    
 		      
 		      
 		      
 		  
Interest expensed in cost of sales
   $ 2,306       1,451       6,885       3,875  
 
    
 		      
 		      
 		      
 		  

5. Other Expenses and Interest and Other Income

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

                                 
    Three Months ended   Nine Months ended
    September 30,
   September 30,
    2004
   2003
   2004
   2003
Other expenses
                                
Title and mortgage operations expenses
   $ 709       379       2,103       1,047  
Hurricane expense, net of projected insurance recoveries
     2,885       —       2,885       —  
 
    
 		      
 		      
 		      
 		  
Total other expenses
   $ 3,594       379       4,988       1,047  
 
    
 		      
 		      
 		      
 		  
Interest and other income
                                
Interest income
   $ 408       190       885       651  
Reversal of litigation reserve (see Note 9)
     1,440       —       1,440       —  
Other income
     131       473       981       1,279  
 
    
 		      
 		      
 		      
 		  
Total interest and other income
   $ 1,979       663       3,306       1,930  
 
    
 		      
 		      
 		      
 		  

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6. Investment in Bluegreen Corporation

     The Company accounts for its investment in Bluegreen under the equity method. At September 30, 2004, the Company owned approximately 9.5 million shares, or approximately 36%, of Bluegreen’s outstanding common stock.

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

Condensed Consolidated Balance Sheets

                 
    September 30,   December 31,
    2004
   2003
Total assets
   $ 648,500       570,406  
 
    
 		      
 		  
Total liabilities
     414,835       378,878  
Minority interest
     7,340       4,648  
Total shareholders’ equity
     226,325       186,880  
 
    
 		      
 		  
Total liabilities and shareholders’ equity
   $ 648,500       570,406  
 
    
 		      
 		  

Condensed Consolidated Statements of Income

                                 
    Three Months ended   Nine Months ended
    September 30,   September 30,   September 30,   September 30,
    2004
   2003
   2004
   2003
Revenues and other income
   $ 190,636       128,407       451,192       315,617  
Cost and other expenses
     163,760       111,119       399,541       283,572  
 
    
 		      
 		      
 		      
 		  
Income before minority interest and provision for income taxes
     26,876       17,288       51,651       32,045  
Minority interest
     360       699       2,692       1,875  
 
    
 		      
 		      
 		      
 		  
Income before provision for income taxes
     26,516       16,589       48,959       30,170  
Provision for income taxes
     10,209       6,387       18,849       11,615  
 
    
 		      
 		      
 		      
 		  
Net income
   $ 16,307       10,202       30,110       18,555  
 
    
 		      
 		      
 		      
 		  

7. Notes and Mortgage Notes Payable

     At September 30, 2004, the Company has approximately $3.2 million of outstanding unsecured subordinated investment notes sold by the Company in a registered offering during 2003 and the first three months of 2004. In March 2004, the unsold notes under the original registration were deregistered.

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