Financial Highlights 2005 First Quarter - Net income of $20.5
million, up 33% - Earnings per diluted share of $2.36, up 52% -
Consolidated operating revenue of $246.7 million, down 3% -
Homebuilding gross margins of 28.5%, up 720 basis points -
Quarter-end backlog of 1,580 homes, valued at $871.2 million
William Lyon Homes (NYSE:WLS) today reported that net income for
the first quarter ended March 31, 2005 increased 33% to
$20,493,000, or $2.36 per diluted share, as compared to net income
of $15,409,000, or $1.55 per diluted share, for the comparable
period a year ago. Consolidated operating revenue decreased 3% to
$246,682,000 for the quarter ended March 31, 2005, as compared to
$254,548,000 for the comparable period a year ago. The Company's
consolidated results including joint ventures were as follows: The
number of homes closed in the first quarter of 2005 was 459 homes,
down 24% from 603 homes in the first quarter of 2004. At March 31,
2005, the backlog of homes sold but not closed totaled 1,580 homes,
down 10% from 1,755 homes at March 31, 2004, and up 35% from 1,166
homes at December 31, 2004. The dollar amount of backlog of homes
sold but not closed was $871,192,000, down 5% from $916,590,000 a
year ago, and up 40% from $623,578,000 at December 31, 2004. The
Company's cancellation rate for the three months ended March 31,
2005 was 12%, the same as for the three months ended March 31,
2004. Net new home orders for the quarter ended March 31, 2005 were
873 homes, down 20% from 1,092 homes for the quarter ended March
31, 2004. The average number of sales locations during the quarter
ended March 31, 2005 was 38, down 14% from 44 in the comparable
period a year ago. The Company's number of new home orders per
average sales location decreased to 23.0 for the quarter ended
March 31, 2005 as compared to 24.8 for the quarter ended March 31,
2004. Based on record first and second quarter 2004 new home orders
of 2,219, an increase of 30% as compared to the same period in
2003, as previously announced the Company had anticipated a
significant reduction in new home orders for the first quarter of
2005 when compared to the same period in 2004. The reduction in
order activity for the three months ended March 31, 2005 was
consistent with the Company's expectations and primarily reflects a
lack of available product for sale due to stronger than anticipated
absorption levels in the previous periods and a decrease in the
average number of sales locations. During the first quarter of
2005, the average sales price of homes (including joint ventures)
was $533,000, up 26% as compared to $422,100 for the comparable
period a year ago. The higher average sales price reflects general
new home price increases and a change in product mix. The
consolidated gross margin percentage on home sales increased to
28.5% for the quarter ended March 31, 2005 from 21.3% for the
quarter ended March 31, 2004. These higher gross margin percentages
were driven primarily by increases in sales prices during the past
several quarters as a result of strong housing demand in most of
the markets in which the Company operates. Selected financial and
operating information for the Company, including joint ventures, is
set forth in greater detail in the schedule attached to this press
release. On April 26, 2005, General William Lyon ("General Lyon"),
the controlling stockholder, Chairman of the Board and Chief
Executive Officer of the Company, announced that he has proposed
acquiring the outstanding publicly held minority interest in the
Company's common stock for $82 per share in cash, representing
approximately a 12% premium over the average closing price for the
five trading days ended April 25, 2005. General Lyon currently owns
approximately a 47.8% equity interest in the Company and has,
together with certain shares under a voting agreement, a 51.2%
voting interest. Trusts of which General Lyon's son, William H.
Lyon, is sole beneficiary, own approximately 24.1% of the
outstanding shares. In the going-private transaction, General Lyon
has proposed that a company to be formed and owned by him would
acquire all of the outstanding shares of the Company's common stock
not owned by General Lyon or by such trusts. General Lyon stated
this transaction would be contingent upon approval by the Board of
Directors or a duly appointed special committee of the Board of
Directors. The Board of Directors of the Company has formed a
special committee of independent directors to consider his proposal
with the assistance of outside financial and legal advisors which
the Committee will retain. General Lyon has advised the Company's
Board of Directors that he will not sell his interest in the
Company and will not entertain any proposals in that regard. Seven
purported class action lawsuits have been filed in Delaware and
California challenging the proposal made by General Lyon. The
complaints name the Company and the directors of the Company as
defendants and allege, among other things, that the defendants have
breached their fiduciary duties to the public shareholders. The
plaintiffs are seeking to enjoin the proposed transaction and,
among other things, to obtain damages, attorneys' fees and expenses
related to the litigation. The Company believes that these lawsuits
are without merit, particularly given the status of the proposal
and its anticipated consideration by the special committee. These
lawsuits have only recently been filed and the Company has not yet
responded to the allegations. William Lyon Homes is one of the
oldest and largest homebuilders in the Southwest with development
communities in California, Arizona and Nevada and at March 31, 2005
had 36 sales locations. The Company's corporate headquarters are
located in Newport Beach, California. Certain statements contained
in this release that are not historical information contain
forward-looking statements. The forward-looking statements involve
risks and uncertainties and actual results may differ materially
from those projected or implied. Further, certain forward-looking
statements are based on assumptions regarding future events which
may not prove to be accurate. Factors that may impact such
forward-looking statements include, among others, changes in
general economic conditions and in the markets in which the Company
competes, the outbreak, continuation or escalation of war or other
hostilities, including terrorism, involving the United States,
changes in mortgage and other interest rates, changes in prices of
homebuilding materials, weather, the occurrence of events such as
landslides, soil subsidence and earthquakes that are uninsurable,
not economically insurable or not subject to effective
indemnification agreements, the availability of labor and
homebuilding materials, changes in governmental laws and
regulations, the timing of receipt of regulatory approvals and the
opening of projects, and the availability and cost of land for
future development, as well as the other factors discussed in the
Company's reports filed with the Securities and Exchange
Commission. -0- *T WILLIAM LYON HOMES SELECTED FINANCIAL AND
OPERATING INFORMATION (unaudited) Three Months Ended March 31, 2005
Wholly- Joint Consolidated Owned Ventures Total Selected Financial
Information (dollars in thousands) Homes closed 364 95 459 Home
sales revenue $187,433 $57,223 $244,656 Cost of sales (135,514)
(39,468) (174,982) Gross margin $51,919 $17,755 $69,674 Gross
margin percentage 27.7% 31.0% 28.5% Number of homes closed
California 117 95 212 Arizona 126 - 126 Nevada 121 - 121 Total 364
95 459 Average sales price California $867,100 $602,400 $748,500
Arizona 287,300 - 287,300 Nevada 411,400 - 411,400 Total $514,900
$602,400 $533,000 Number of net new home orders California 376 205
581 Arizona 159 - 159 Nevada 133 - 133 Total 668 205 873 Average
number of sales locations during period California 15 9 24 Arizona
6 - 6 Nevada 8 - 8 Total 29 9 38 Three Months Ended March 31, 2004
Wholly- Joint Consolidated Owned Ventures Total Selected Financial
Information (dollars in thousands) Homes closed 465 138 603 Home
sales revenue $193,572 $60,976 $254,548 Cost of sales (153,265)
(47,171) (200,436) Gross margin $40,307 $13,805 $54,112 Gross
margin percentage 20.8% 22.6% 21.3% Number of homes closed
California 250 138 388 Arizona 62 - 62 Nevada 153 - 153 Total 465
138 603 Average sales price California $528,700 $441,900 $497,800
Arizona 191,500 - 191,500 Nevada 323,700 - 323,700 Total $416,300
$441,900 $422,100 Number of net new home orders California 461 373
834 Arizona 107 - 107 Nevada 151 - 151 Total 719 373 1,092 Average
number of sales locations during period California 21 12 33 Arizona
5 - 5 Nevada 6 - 6 Total 32 12 44 WILLIAM LYON HOMES SELECTED
FINANCIAL AND OPERATING INFORMATION (Continued) (unaudited) Three
Months Ended March 31, 2005 Wholly- Joint Consolidated Owned
Ventures Total Backlog of homes sold but not closed at end of
period California 616 355 971 Arizona 515 - 515 Nevada 94 - 94
Total 1,225 355 1,580 Dollar amount of homes sold but not closed at
end of period (in thousands) California $453,105 $224,482 $677,587
Arizona 157,306 - 157,306 Nevada 36,299 - 36,299 Total $646,710
$224,482 $871,192 Lots controlled at end of period Owned lots
California 3,716 1,350 5,066 Arizona 3,766 - 3,766 Nevada 1,072 -
1,072 Total 8,554 1,350 9,904 Optioned lots (1) California 4,060
Arizona 5,421 Nevada 1,272 Total 10,753 Total lots controlled
California 9,126 Arizona 9,187 Nevada 2,344 Total 20,657 Three
Months Ended March 31, 2004 Wholly- Joint Consolidated Owned
Ventures Total Backlog of homes sold but not closed at end of
period California 723 549 1,272 Arizona 252 - 252 Nevada 231 - 231
Total 1,206 549 1,755 Dollar amount of homes sold but not closed at
end of period (in thousands) California $492,639 $292,232 $784,871
Arizona 62,215 - 62,215 Nevada 69,504 - 69,504 Total $624,358
$292,232 $916,590 Lots controlled at end of period Owned lots
California 1,999 2,274 4,273 Arizona 1,904 - 1,904 Nevada 1,275 -
1,275 Total 5,178 2,274 7,452 Optioned lots (1) California 5,272
Arizona 6,801 Nevada 1,350 Total 13,423 Total lots controlled
California 9,545 Arizona 8,705 Nevada 2,625 Total 20,875 (1)
Optioned lots may be purchased by the Company as wholly-owned
projects or may be purchased by newly formed joint ventures.
WILLIAM LYON HOMES CONSOLIDATED STATEMENTS OF INCOME (in thousands
except per common share amounts) (unaudited) Three Months Ended
March 31, 2005 2004 Operating revenue Home sales $244,656 $254,548
Lots, land and other 2,026 - 246,682 254,548 Operating costs Cost
of sales - homes (174,982) (200,436) Cost of sales - lots, land and
other (1,813) - Sales and marketing (11,115) (10,413) General and
administrative (17,441) (13,664) Other (682) (333) (206,033)
(224,846) Equity in loss of unconsolidated joint ventures (411)
(96) Minority interest in income of consolidated entities (6,260)
(4,260) Operating income 33,978 25,346 Other (loss) income, net
(105) 405 Income before provision for income taxes 33,873 25,751
Provision for income taxes (13,380) (10,342) Net income $20,493
$15,409 Earnings per common share Basic $2.38 $1.57 Diluted $2.36
$1.55 WILLIAM LYON HOMES CONSOLIDATED BALANCE SHEETS (in thousands
except number of shares and par value per share) March 31, December
31, 2005 2004 (unaudited) ASSETS Cash and cash equivalents $33,629
$96,074 Receivables 25,904 39,302 Real estate inventories 1,222,494
1,059,173 Investments in and advances to unconsolidated joint
ventures 18,677 17,911 Property and equipment, less accumulated
depreciation of $8,367 and $7,844 at March 31, 2005 and December
31, 2004, respectively 17,960 18,066 Deferred loan costs 13,644
13,982 Goodwill 5,896 5,896 Other assets 25,986 24,158 $1,364,190
$1,274,562 LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable
$48,776 $39,364 Accrued expenses 96,686 150,774 Notes payable
156,405 48,571 7 5/8% Senior Notes due December 15, 2012 150,000
150,000 10 3/4% Senior Notes due April 1, 2013 246,712 246,648 7
1/2% Senior Notes due February 15, 2014 150,000 150,000 848,579
785,357 Minority interest in consolidated entities 148,009 142,096
Stockholders' equity Common stock, par value $.01 per share;
30,000,000 shares authorized; 8,616,236 shares issued and
outstanding at March 31, 2005 and December 31, 2004, respectively;
1,275,000 shares issued and held in treasury at March 31, 2005 and
December 31, 2004, respectively 86 86 Additional paid-in capital
30,250 30,250 Retained earnings 337,266 316,773 367,602 347,109
$1,364,190 $1,274,562 WILLIAM LYON HOMES SUPPLEMENTAL FINANCIAL
INFORMATION SELECTED FINANCIAL DATA (dollars in thousands except
per share data): Last Twelve Three Months Ended Months Ended March
31, March 31, 2005 2004 2005 2004 Net income $20,493 $15,409
$176,733 $82,664 Net cash (used in) provided by operating
activities $(168,338) $(184,059) $105,778 $(256,178) Interest
incurred (1) $15,203 $14,019 $62,540 $51,386 Adjusted EBITDA (2)
$42,662 $36,412 $356,095 $194,880 Ratio of adjusted EBITDA to
interest incurred 5.69x 3.79x Balance Sheet Data March 31, 2005
2004 Stockholders' equity per share $42.66 $27.37 Stockholders'
equity $367,602 $269,058 Total debt 703,117 569,337 Total book
capitalization $1,070,719 $838,395 Ratio of debt to total book
capitalization 65.7% 67.9% Ratio of debt to total book
capitalization (net of cash) 64.6% 67.0% Ratio of debt to LTM
adjusted EBITDA 1.97x 2.92x Ratio of debt to LTM adjusted EBITDA
(net of cash) 1.88x 2.80x (1) Interest incurred for the three and
twelve months ended March 31, 2005 includes $345,000 and $3,340,000
of interest related to debt of consolidated entities of $22,797,000
at March 31, 2005, due to the adoption of Financial Accounting
Standards Board Interpretation No. 46, Consolidation of Variable
Interest Entities, as amended. (2) Adjusted EBITDA means
consolidated net income plus (i) provision for income taxes, (ii)
interest expense, (iii) amortization of capitalized interest
included in cost of sales, (iv) depreciation and amortization and
(v) cash distributions of income from unconsolidated joint ventures
less equity in income of unconsolidated joint ventures. Other
companies may calculate Adjusted EBITDA differently. Adjusted
EBITDA is not a financial measure prepared in accordance with U.S.
generally accepted accounting principles. Adjusted EBITDA is
presented herein because it is a component of certain covenants in
the Indentures governing the Company's 7 5/8% Senior Notes, 10 3/4%
Senior Notes and 7 1/2% Senior Notes ("Indentures"). In addition,
management believes the presentation of Adjusted EBITDA provides
useful information to the Company's investors regarding the
Company's financial condition and results of operations because
Adjusted EBITDA is a widely utilized financial indicator of a
company's ability to service and/or incur debt. The calculations of
Adjusted EBITDA below are presented in accordance with the
requirements of the Indentures. Adjusted EBITDA should not be
considered as an alternative for net income, cash flows from
operating activities and other consolidated income or cash flow
statement data prepared in accordance with accounting principles
generally accepted in the United States or as a measure of
profitability or liquidity. A reconciliation of net income to
Adjusted EBITDA is provided as follows: Last Twelve Three Months
Ended Months Ended March 31, March 31, 2005 2004 2005 2004 Net
income $20,493 $15,409 $176,733 $82,664 Provision for income taxes
13,380 10,342 116,537 58,778 Interest expense: Interest incurred
15,203 14,019 62,540 51,386 Interest capitalized (15,203) (14,019)
(62,540) (51,386) Amortization of capitalized interest in costs of
sales 7,855 10,340 60,186 43,122 Depreciation and amortization 523
225 1,625 954 Cash distributions of income from unconsolidated
joint ventures - - - 33,031 Equity in loss (income) of
unconsolidated joint ventures 411 96 1,014 (23,669) Adjusted EBITDA
$42,662 $36,412 $356,095 $194,880 A reconciliation of net cash
(used in) provided by operating activities to Adjusted EBITDA is
provided as follows: Last Twelve Three Months Ended Months Ended
March 31, March 31, 2005 2004 2005 2004 Net cash (used in) provided
by operating activities $(168,338) $(184,059) $105,778 $(256,178)
Interest expense: Interest incurred 15,203 14,019 62,540 51,386
Interest capitalized (15,203) (14,019) (62,540) (51,386)
Amortization of capitalized interest in costs of sales 7,855 10,340
60,186 43,122 Cash distributions of income from unconsolidated
joint ventures - - - 33,031 Minority equity in income of
consolidated entities (6,260) (4,260) (51,661) (4,689) Net changes
in operating assets and liabilities: Receivables (13,398) (15,253)
(10,078) 13,167 Real estate inventories 163,257 205,831 152,767
334,180 Deferred loan costs (338) 527 139 1,108 Other assets 1,828
791 6,159 2,716 Accounts payable (9,412) (8,680) 1,880 (9,642)
Accrued expenses 67,468 31,175 90,925 38,065 Adjusted EBITDA
$42,662 $36,412 $356,095 $194,880 *T
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