William Lyon (NYSE:WLS)
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William Lyon Homes (NYSE:WLS):
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Financial Highlights
2005 Fourth Quarter
-- Net income of $88.0 million, up 10%
-- Earnings per diluted share of $10.11, up 18%
-- Record new home deliveries of 1,468, up 21%
-- Consolidated operating revenue of $825.9 million, up 17%
-- Homebuilding gross margins of 23.5%, down 470 basis points
-- Gross profit from land sales of $35.5 million, up from $9.6
million
2005 Full Year
-- Net income of $190.6 million, up 11%
-- Earnings per diluted share of $21.98, up 25%
-- New home deliveries of 3,196, down 8%
-- Consolidated operating revenue of $1.856 billion, up 2%
-- Homebuilding gross margins of 25.1%, down 60 basis points
-- Gross profit from land sales of $66.5 million, up from $13.1
million
-- Year-end backlog of 1,291 homes valued at a record $691.6
million
-- Return on average stockholders' equity of 45%
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William Lyon Homes (NYSE:WLS) today reported the Company's 2005
fourth quarter and fiscal year operating results which were at record
levels for any comparable periods in the Company's history.
Net income for the fourth quarter ended December 31, 2005
increased 10% to $87,955,000, or $10.11 per diluted share, a record
for any quarter in the Company's history, as compared to net income of
$80,155,000, or $8.58 per diluted share, for the comparable period a
year ago. Consolidated operating revenue increased 17% to $825,881,000
for the quarter ended December 31, 2005, as compared to $707,866,000
for the comparable period a year ago.
For the year ended December 31, 2005, the Company reported record
net income of $190,631,000, or $21.98 per diluted share, an increase
of 11% as compared to net income of $171,649,000, or $17.55 per
diluted share, for the comparable period a year ago. Consolidated
operating revenue increased 2% to $1,856,383,000 for the year ended
December 31, 2005, as compared with $1,821,847,000 for the comparable
period a year ago.
Operating revenue for the three months ended December 31, 2005 and
2004 included $46,344,000 and $18,207,000, respectively, from the
sales of land resulting in gross profit of approximately $35,462,000
and $9,645,000, respectively. Operating revenue for the years ended
December 31, 2005 and 2004 included $111,316,000 and $36,258,000,
respectively, from the sales of land resulting in gross profit of
approximately $66,542,000 and $13,085,000, respectively. In accordance
with the Company's long established policy, and in the ordinary course
of business, the Company continually evaluates land sales as market
and business conditions warrant. In 2005, these significant land sales
occurred in the Company's Arizona and Southern California Divisions.
The Company's combined results including joint ventures were as
follows: The number of homes closed for the year ended December 31,
2005 was 3,196, a decrease of 8% as compared to 3,471 for the year
ended December 31, 2004. The number of homes closed for the three
months ended December 31, 2005 was 1,468, up 21% as compared to 1,210
for the three months ended December 31, 2004. The Company's backlog of
homes sold but not closed was 1,291 at December 31, 2005, a record for
any fourth quarter in the Company's history, and up 11% from 1,166 at
December 31, 2004. The Company's dollar amount of backlog of homes
sold but not closed at December 31, 2005, was $691,627,000, up 11%
from $623,578,000 at December 31, 2004. The cancellation rate of
buyers who contracted to buy a home but did not close escrow was
approximately 16% during 2005 and 17% during 2004.
Net new home orders for the three months ended December 31, 2005
were 460, a decrease of 7% as compared to 493 for the three months
ended December 31, 2004. Net new home orders for the year ended
December 31, 2005 were 3,321, a decrease of 2% as compared to 3,371
for the year ended December 31, 2004. The average number of sales
locations was unchanged at 41 for the years ended December 31, 2005
and 2004.
During the fourth quarter of 2005, the average sales price of
homes (including joint ventures) was $531,000, down 7% as compared to
$570,000 for the comparable period a year ago. The lower average sales
price reflects a change in product mix.
For the quarter ended December 31, 2005, the Company's
homebuilding gross margin percentage decreased to 23.5% from 28.2% for
the quarter ended December 31, 2004. For the year ended December 31,
2005, the Company's homebuilding gross margin percentage decreased to
25.1% from 25.7% for the year ended December 31, 2004. These lower
gross margin percentages were primarily due to the earlier close out
of projects with higher gross margins, a shift in product mix and
increases in land costs which resulted in higher cost of sales when
homes closed.
The reduction of 8% in new home deliveries in 2005 as compared to
2004 resulted primarily from a reduction in sales locations in the
first half of 2005 as compared to 2004. The reduction of open sales
locations in the first half of the year combined with the adverse
weather conditions experienced in the first two months of 2005 delayed
some of the Company's construction schedules and ultimately negatively
impacted the Company's closings for the year.
In 2005, the Company was focused on increasing the number of sales
locations in each of its markets and at December 31, 2005, the Company
ended the year with 44 active sales locations as compared to 37 active
sales locations at December 31, 2004. In 2006, the Company will
continue its focus on increasing its sales locations in each of its
markets.
During the last half of the fourth quarter of 2005, the Company
began to experience some slowing in new orders in many of its markets,
increases in cancellation rates and increasing pricing pressures from
several of its competitors who initiated aggressive incentive and
discounting programs.
This softening in the Company's markets is continuing into 2006 as
the Company's orders have declined for the first eight weeks of 2006
by 31% over the comparable period in 2005. Cancellation rates have
increased in this period in 2006 to 26% from 12% in the comparable
period in 2005. The Company is also seeing increases in its standing
and unsold completed inventory in 2006 as compared to 2005.
Based upon these changing market conditions, the Company is now
targeting approximately 3,100 deliveries, including consolidated joint
ventures, for the full year 2006, which will result in homebuilding
revenue of approximately $1.65 billion. The Company has lowered its
expectations for additional price appreciation in certain markets as
well as factored in some additional incentives to move certain
products, all of which have a negative impact on consolidated
homebuilding gross margin percentage. The Company is currently
projecting a homebuilding gross margin percentage of 22% for the full
year 2006. Full year 2006 earnings are estimated to be in a range of
between $14.00 and $15.00 per share on a diluted basis.
Selected financial and operating information for the Company,
including joint ventures, is set forth in greater detail in a schedule
attached to this release.
The Company will hold a conference call on Thursday, March 2, 2006
at 11:00 a.m. Pacific Time to discuss the fourth quarter and year end
2005 earnings results. The dial-in number is (866) 271-6130 (enter
passcode number 55617682). Participants may call in beginning at 10:45
a.m. Pacific Time. In addition, the call will be broadcast from
William Lyon Homes' website at www.lyonhomes.com in the "Investor
Relations" section of the site. The call will be recorded and replayed
beginning on March 2, 2006 at 1:00 p.m. Pacific Time through midnight
on March 24, 2006. The dial-in number for the replay is (888) 286-8010
(enter passcode number 59691124). Replays of the call will also be
available on the Company's website approximately two hours after
broadcast.
William Lyon Homes is primarily engaged in the design,
construction and sales of new single-family detached and attached
homes in California, Arizona and Nevada. The Company's corporate
headquarters are located in Newport Beach, California. For more
information about the Company and its new home developments, please
visit the Company's website at www.lyonhomes.com.
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
of 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, terrorism or hostilities involving the United States,
changes in mortgage and other interest rates, changes in prices of
homebuilding materials, weather conditions, 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.
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WILLIAM LYON HOMES
SELECTED FINANCIAL AND OPERATING INFORMATION
(unaudited)
Three Months Ended December 31,
2005
Wholly- Joint Consolidated
Owned Ventures Total
Selected Financial Information
(dollars in thousands)
Homes closed 1,122 346 1,468
Home sales revenue $594,867 $184,670 $779,537
Cost of sales (463,106) (132,979) (596,085)
Gross margin $131,761 $51,691 $183,452
Gross margin percentage 22.1% 28.0% 23.5%
Number of homes closed
California 723 346 1,069
Arizona 191 - 191
Nevada 208 - 208
Total 1,122 346 1,468
Average sales price
California $625,800 $533,700 $596,000
Arizona 366,500 - 366,500
Nevada 348,100 - 348,100
Total $530,200 $533,700 $531,000
Number of net new home orders
California 229 61 290
Arizona 88 - 88
Nevada 82 - 82
Total 399 61 460
Average number of sales locations
during quarter
California 23 7 30
Arizona 5 - 5
Nevada 9 - 9
Total 37 7 44
Three Months Ended December 31,
2004
Wholly- Joint Consolidated
Owned Ventures Total
Selected Financial Information
(dollars in thousands)
Homes closed 773 437 1,210
Home sales revenue $446,494 $243,165 $689,659
Cost of sales (328,267) (166,920) (495,187)
Gross margin $118,227 $76,245 $194,472
Gross margin percentage 26.5% 31.4% 28.2%
Number of homes closed
California 413 437 850
Arizona 136 - 136
Nevada 224 - 224
Total 773 437 1,210
Average sales price
California $795,900 $556,400 $672,800
Arizona 250,600 - 250,600
Nevada 373,700 - 373,700
Total $577,600 $556,400 $570,000
Number of net new home orders
California 183 147 330
Arizona 100 - 100
Nevada 63 - 63
Total 346 147 493
Average number of sales locations
during quarter
California 14 10 24
Arizona 6 - 6
Nevada 7 - 7
Total 27 10 37
WILLIAM LYON HOMES
SELECTED FINANCIAL AND OPERATING INFORMATION (Continued)
(unaudited)
As of December 31,
2005
Wholly- Joint Consolidated
Owned Ventures Total
Backlog of homes sold but not closed
at end of period
California 608 123 731
Arizona 396 - 396
Nevada 164 - 164
Total 1,168 123 1,291
Dollar amount of homes sold but not
closed at end of period (in
thousands)
California $427,103 $64,354 $491,457
Arizona 141,132 - 141,132
Nevada 59,038 - 59,038
Total $627,273 $64,354 $691,627
Lots controlled at end of period
Owned lots
California 4,296 1,290 5,586
Arizona 3,627 822 4,449
Nevada 1,483 - 1,483
Total 9,406 2,112 11,518
Optioned lots (1)
California 4,650
Arizona 8,232
Nevada 2,189
Total 15,071
Total lots controlled
California 10,236
Arizona 12,681
Nevada 3,672
Total 26,589
As of December 31,
2004
Wholly- Joint Consolidated
Owned Ventures Total
Backlog of homes sold but not closed
at end of period
California 357 245 602
Arizona 482 - 482
Nevada 82 - 82
Total 921 245 1,166
Dollar amount of homes sold but not
closed at end of period (in
thousands)
California $292,298 $160,280 $452,578
Arizona 136,815 - 136,815
Nevada 34,185 - 34,185
Total $463,298 $160,280 $623,578
Lots controlled at end of period
Owned lots
California 2,702 1,445 4,147
Arizona 3,518 - 3,518
Nevada 1,193 - 1,193
Total 7,413 1,445 8,858
Optioned lots (1)
California 4,532
Arizona 3,960
Nevada 1,262
Total 9,754
Total lots controlled
California 8,679
Arizona 7,478
Nevada 2,455
Total 18,612
(1) Optioned lots may be purchased as wholly-owned projects or by
newly formed joint ventures.
WILLIAM LYON HOMES
SELECTED FINANCIAL AND OPERATING INFORMATION
(unaudited)
Twelve Months Ended December 31,
2005
Wholly- Joint Consolidated
Owned Ventures Total
Selected Financial Information
(dollars in thousands)
Homes closed 2,508 688 3,196
Home sales revenue $1,338,208 $406,859 $1,745,067
Cost of sales (1,012,761) (294,266) (1,307,027)
Gross margin $325,447 $112,593 $438,040
Gross margin percentage 24.3% 27.7% 25.1%
Number of homes closed
California 1,315 688 2,003
Arizona 628 - 628
Nevada 565 - 565
Total 2,508 688 3,196
Average sales price
California $707,400 $591,400 $667,600
Arizona 321,500 - 321,500
Nevada 364,600 - 364,600
Total $533,600 $591,400 $546,000
Number of net new home orders
California 1,566 566 2,132
Arizona 542 - 542
Nevada 647 - 647
Total 2,755 566 3,321
Average number of sales locations
during period
California 20 8 28
Arizona 5 - 5
Nevada 8 - 8
Total 33 8 41
Twelve Months Ended December 31,
2004
Wholly- Joint Consolidated
Owned Ventures Total
Selected Financial Information
(dollars in thousands)
Homes closed 2,447 1,024 3,471
Home sales revenue $1,246,277 $539,312 $1,785,589
Cost of sales (941,225) (385,832) (1,327,057)
Gross margin $305,052 $153,480 $458,532
Gross margin percentage 24.5% 28.5% 25.7%
Number of homes closed
California 1,312 1,024 2,336
Arizona 402 - 402
Nevada 733 - 733
Total 2,447 1,024 3,471
Average sales price
California $692,200 $526,700 $619,600
Arizona 241,800 - 241,800
Nevada 328,700 - 328,700
Total $509,300 $526,700 $514,400
Number of net new home orders
California 1,157 955 2,112
Arizona 677 - 677
Nevada 582 - 582
Total 2,416 955 3,371
Average number of sales locations
during period
California 17 11 28
Arizona 6 - 6
Nevada 7 - 7
Total 30 11 41
WILLIAM LYON HOMES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per common share amounts)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2005 2004 2005 2004
Operating revenue
Home sales $779,537 $689,659 $1,745,067 $1,785,589
Lots, land and other
sales 46,344 18,207 111,316 36,258
Management fees - - - -
825,881 707,866 1,856,383 1,821,847
Operating costs
Cost of sales - homes (596,085) (495,187) (1,307,027) (1,327,057)
Cost of sales - lots,
land and other (10,882) (8,562) (44,774) (23,173)
Sales and marketing (22,585) (21,227) (59,422) (58,792)
General and
administrative (27,165) (26,530) (90,045) (80,784)
Other (5,268) (680) (7,050) (2,105)
(661,985) (552,186) (1,508,318) (1,491,911)
Equity in (loss) income of
unconsolidated joint
ventures (212) (248) 4,301 (699)
Minority equity in income
of consolidated entities (20,539) (24,891) (37,571) (49,661)
Operating income 143,145 130,541 314,795 279,576
Financial advisory
expenses - - (2,191) -
Other income, net 1,923 2,623 2,176 5,572
Income before provision
for income taxes 145,068 133,164 314,780 285,148
Provision for income taxes (57,113) (53,009) (124,149) (113,499)
Net income $87,955 $80,155 $190,631 $171,649
Earnings per common share
Basic $10.17 $8.65 $22.09 $17.69
Diluted $10.11 $8.58 $21.98 $17.55
WILLIAM LYON HOMES
CONSOLIDATED BALANCE SHEETS
(in thousands except number of shares and par value per share)
December 31,
2005 2004
(unaudited)
ASSETS
Cash and cash equivalents $52,369 $96,074
Receivables 143,481 39,302
Real estate inventories 1,419,248 1,059,173
Investments in and advances to unconsolidated
joint ventures 397 17,911
Property and equipment, less accumulated
depreciation of $9,936 and $7,844 at
December 31, 2005 and 2004, respectively 18,553 18,066
Deferred loan costs 12,323 13,982
Goodwill 5,896 5,896
Other assets 38,735 24,158
$1,691,002 $1,274,562
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $67,326 $39,364
Accrued expenses 181,068 150,774
Notes payable 125,619 48,571
7 5/8% Senior Notes due December 15, 2012 150,000 150,000
10 3/4% Senior Notes due April 1, 2013 246,917 246,648
7 1/2% Senior Notes due February 15, 2014 150,000 150,000
920,930 785,357
Minority interest in consolidated entities 227,178 142,096
Stockholders' equity
Common stock, par value $0.01 per share;
30,000,000 shares authorized; 8,652,067 and
8,616,236 shares issued and outstanding at
December 31, 2005 and 2004, respectively;
1,275,000 shares issued and held in
treasury at December 31, 2005 and 2004 86 86
Additional paid-in capital 35,404 30,250
Retained earnings 507,404 316,773
542,894 347,109
$1,691,002 $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
December 31, December 31,
2005 2004 2005 2004
Net income $87,955 $80,155 $190,631 $171,649
Net cash provided by (used in)
operating activities $229,392 $245,818 $(44,534) $87,293
Interest incurred $21,096 $14,908 $73,208 $59,024
Adjusted EBITDA (1) $168,579 $154,902 $371,027 $349,845
Ratio of adjusted EBITDA to
interest incurred 5.07x 5.93x
Balance Sheet Data
December 31,
2005 2004
Stockholders' equity per share $62.75 $40.29
Stockholders' equity $542,894 $347,109
Total debt 672,536 595,219
Total book capitalization $1,215,430 $972,328
Ratio of debt to total book capitalization 55.3% 63.2%
Ratio of debt to total book capitalization (net
of cash) 53.3% 59.0%
Ratio of debt to LTM adjusted EBITDA 1.81x 1.70x
Ratio of debt to LTM adjusted EBITDA (net of
cash) 1.67x 1.43x
(1) Adjusted EBITDA means 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 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
December 31, December 31,
2005 2004 2005 2004
Net income $87,955 $80,155 $190,631 $171,649
Provision for income taxes 57,113 53,009 124,149 113,499
Interest expense:
Interest incurred 21,096 14,908 73,208 59,024
Interest capitalized (21,096) (14,908) (73,208) (59,024)
Amortization of capitalized
interest in cost of sales 22,832 20,951 55,748 62,671
Depreciation and amortization 532 539 2,092 1,327
Cash distributions of income
from unconsolidated joint
ventures (65) - 2,708 -
Equity in loss (income) of
unconsolidated joint ventures 212 248 (4,301) 699
Adjusted EBITDA $168,579 $154,902 $371,027 $349,845
A reconciliation of net cash used in operating activities to adjusted
EBITDA is provided as follows:
Last Twelve
Three Months Ended Months Ended
December 31, December 31,
2005 2004 2005 2004
Net cash provided by (used in)
operating activities $229,392 $245,818 $(44,534) $87,293
Interest expense:
Interest incurred 21,096 14,908 73,208 59,024
Interest capitalized (21,096) (14,908) (73,208) (59,024)
Amortization of capitalized
interest in cost of sales 22,832 20,951 55,748 62,671
Non-cash impairment charge (4,600) - (4,600) -
State income tax refund
credited to additional paid-
in capital (1,845) - (1,845) -
Minority equity in (income)
loss of consolidated entities (20,539) (24,891) (37,571) (49,661)
Net changes in operating
assets and liabilities:
Receivables 107,742 11,155 104,179 (9,168)
Real estate inventories (167,133) (125,620) 232,240 195,340
Deferred loan costs (696) 617 (1,659) 1,004
Other assets 936 7,159 6,173 5,122
Accounts payable (1,912) 18,263 (27,962) 2,612
Accrued expenses 4,402 1,450 90,858 54,632
Adjusted EBITDA $168,579 $154,902 $371,027 $349,845
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