William Lyon (NYSE:WLS)
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William Lyon Homes (NYSE:WLS):
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Financial Highlights
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2005 Second Quarter
-- Net income of $44.1 million, up 42% from $31.1 million in the
second quarter of 2004
-- Diluted earnings per share of $5.07, up 61% from $3.14 in the
second quarter of 2004 (based on weighted average shares
outstanding of 8,693,425 in 2005 as compared to 9,931,572 in
2004)
-- Homebuilding gross margin of $95.2 million, up 13% from $84.2
million in the second quarter of 2004
-- Homebuilding gross margin percentage of 26.3%, up 330 basis
points from 23.0% in the second quarter of 2004
-- Lots, land and other gross margin of $23.3 million as compared
to $3.6 million in the second quarter of 2004
-- Operating revenue from home sales of $362.1 million, down 1.4%
from $367.1 million in the second quarter of 2004
-- Operating revenue from lots, land and other sales of $45.4
million as compared to $17.4 million in the second quarter of
2004
-- Record net new home orders of 1,154, up 2% from 1,127 in the
second quarter of 2004 and representing the highest number of
net new home orders for any quarter in the Company's history
-- Record backlog of homes sold but not closed at June 30, 2005
of 2,115, up slightly from 2,088 at June 30, 2004 and
representing the highest backlog for any quarter-end in the
Company's history
-- Homes closed of 619, down 22% from 794 in the second quarter
of 2004
-- Consolidated operating revenue of $407.5 million, up 6% from
$384.5 million in the second quarter of 2004
William Lyon Homes (NYSE:WLS) today reported that net income for
the second quarter ended June 30, 2005 increased 42% to $44,100,000,
or $5.07 per diluted share, as compared to net income of $31,148,000,
or $3.14 per diluted share, for the comparable period a year ago.
Consolidated operating revenue increased 6% to $407,489,000 for the
quarter ended June 30, 2005, as compared to $384,483,000 for the
comparable period a year ago.
The Company reported that net income for the six months ended June
30, 2005 increased 39% to $64,593,000, or $7.43 per diluted share, as
compared to net income of $46,557,000, or $4.70 per diluted share, for
the comparable period a year ago. Consolidated operating revenue
increased 2% to $654,171,000 for the six months ended June 30, 2005,
as compared to $639,031,000 for the comparable period a year ago.
Operating revenue for the three months ended June 30, 2005 and
2004 included $45,366,000 and $17,423,000, respectively, from the
sales of land resulting in gross profit of approximately $23,342,000
and $3,597,000, respectively. Operating revenue for the six months
ended June 30, 2005 and 2004 included $47,392,000 and $17,423,000,
respectively, from the sales of land resulting in gross profit of
approximately $23,555,000 and $3,597,000, respectively.
Net new home orders for the three months ended June 30, 2005
increased 2% to 1,154 homes, a record for any quarter in the Company's
history, as compared to 1,127 homes for the three months ended June
30, 2004, which had been the previous record for any quarter in the
Company's history. The average number of sales locations during the
three months ended June 30, 2005 was 42, down 9% from 46 during the
three months ended June 30, 2004. The Company's number of new home
orders per average sales location increased to 27.5 for the three
months ended June 30, 2005, as compared to 24.5 for the three months
ended June 30, 2004. Net new home orders for the six months ended June
30, 2005 were 2,027 homes, down 9% from 2,219 homes for the six months
ended June 30, 2004. The average number of sales locations during the
six months ended June 30, 2005 was 40, down 9% from 44 during the six
months ended June 30, 2004. The Company's number of new home orders
per average sales location increased to 50.7 for the six months ended
June 30, 2005, as compared to 50.4 for the six months ended June 30,
2004.
The number of homes closed in the three months ended June 30, 2005
was 619 homes, down 22% from 794 homes closed in the three months
ended June 30, 2004. The number of homes closed for the six months
ended June 30, 2005 was 1,078, down 23% from 1,397 homes closed in the
six months ended June 30, 2004.
At June 30, 2005, the backlog of homes sold but not closed totaled
2,115 homes, a record for any quarter-end in the Company's history, up
slightly from 2,088 homes at June 30, 2004, which had been the
previous record for any quarter in the Company's history. At June 30,
2005, the dollar amount of backlog of homes sold but not closed
totaled $1,125,579,000, down slightly from $1,140,788,000 at June 30,
2004, and up 29% from $871,192,000 at March 31, 2005.
Selected financial and operating information for the Company
including joint ventures is set forth in greater detail in a schedule
attached to this release.
General William Lyon, Chairman and Chief Executive Officer stated:
"On an overall basis, we are pleased with the Company's results for
the first six months of 2005. As we stated at the end of 2004, the
Company experienced a reduction in order activity for the six months
ended December 31, 2004 primarily reflecting a lack of available
product for sale due to stronger than anticipated absorption levels in
the first two quarters of 2004, a decrease in the average number of
sales locations, and slower sales in certain of the Company's markets,
primarily in Southern California and Las Vegas."
General Lyon further stated: "As a result of this reduction in
order activity in late 2004, the Company's closings in the first six
months of 2005 were reduced accordingly when compared to the
comparable periods a year ago. However, due to an increase of 330
basis points in homebuilding gross margin percentage to 26.3% in the
three months ended June 30, 2005 as compared to 23.0% in the three
months ended June 30, 2004, the Company reported homebuilding gross
margin of $95.2 million for the three months ended June 30, 2005, up
13% from $84.2 million for the three months ended June 30, 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."
Wade H. Cable, President and Chief Operating Officer stated: "In
2005, the Company has continued its focus on increasing the number of
sales locations in the geographic markets in which it operates. We
ended 2004 with only 37 active sales locations and now expect to open
37 new locations this year, resulting in 51 active sales locations by
the end of 2005. Many of these new locations will be opening in the
latter part of this year and will only begin delivering homes in
2006."
Mr. Cable further stated: "As a result of the continued strong
housing demand in most of our markets and an increase in the number of
sales locations through June 30, 2005, our net new home orders for the
second quarter ended June 30, 2005 increased to 1,154 homes and our
backlog of homes sold but not closed at June 30, 2005 increased to
2,115 homes, both records for any quarter in the Company's history."
Based on the Company's results experienced in the first half of
the year, which included income from certain opportunistic land sales,
and the better than expected rate of new home orders in most of our
markets during the first half of the year, we are updating our
guidance for 2005. We are now targeting 3,200 deliveries, including
our consolidated joint ventures, which will result in total revenues
in excess of $1.8 billion. However, based on the seasonal pattern of
new orders, the timing of the opening of new sales locations and
adverse weather conditions in the first quarter which led to
construction delays, we anticipate that over 1,500 of our remaining
2005 deliveries will occur in the fourth quarter. A significant
portion of the deliveries in the fourth quarter are expected to occur
in the second half of the quarter. Because of the uncertainty of the
timing of these deliveries and the potential for certain additional
land sales in the fourth quarter of 2005, our full year 2005 earnings
are estimated to be a broad range of between $17.75 and $20.00 per
share on a diluted basis (based on estimated weighted average shares
outstanding of 8,693,000 shares), reflecting an increase of up to 14%
over our full year 2004 earnings of $17.55 per share on a diluted
basis (based on weighted average shares outstanding of 9,777,810
shares).
On April 26, 2005, General William Lyon announced that he was
proposing to acquire the outstanding publicly held minority interest
in the Company's common stock for $82 per share in cash. General Lyon
stated that 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 subsequently formed a special
committee of independent directors to consider General Lyon's proposal
with the assistance of outside financial and legal advisors which the
special committee retained. On June 20, 2005, the special committee
announced that it had determined that the proposal by General Lyon was
inadequate. On June 28, 2005, General Lyon announced that he was
withdrawing his proposal. On July 25, 2005, the Company announced that
its Board of Directors had disbanded the special committee. On July
25, 2005, General Lyon announced that he was discontinuing his efforts
at that time to take the Company private. In connection with the
special committee's consideration of this proposed transaction, the
Company has incurred approximately $2,191,000 in financial advisory
and legal expenses which are reflected as a charge in the Company's
results of operations for the three and six month periods ended June
30, 2005.
The Company will hold a conference call on Wednesday, August 10,
2005 at 11:00 a.m. Pacific Time to discuss the second quarter 2005
earnings results. The dial-in number is (800) 599-9829 (enter passcode
number 18570885). 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 August 10, 2005 at 1:00 p.m. Pacific Time through midnight on
August 31, 2005. The dial-in number for the replay is (888) 286-8010
(enter passcode number 41855566). 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 sale of single family detached and attached homes in
California, Arizona and Nevada and at June 30, 2005 had 41 sales
locations. 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, 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.
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WILLIAM LYON HOMES
SELECTED FINANCIAL AND OPERATING INFORMATION
(unaudited)
Three Months Ended June 30,
2005
Wholly- Joint Consolidated
Owned Ventures Total
Selected Financial Information
(dollars in thousands)
Homes closed 498 121 619
Home sales revenue $277,382 $84,741 $362,123
Cost of sales (203,384) (63,568) (266,952)
Gross margin $73,998 $21,173 $95,171
Gross margin percentage 26.7% 25.0% 26.3%
Number of homes closed
California 214 121 335
Arizona 171 - 171
Nevada 113 - 113
Total 498 121 619
Average sales price
California $872,900 $700,300 $810,500
Arizona 291,800 - 291,800
Nevada 360,000 - 360,000
Total $557,000 $700,300 $585,000
Number of net new home orders
California 532 206 738
Arizona 177 - 177
Nevada 239 - 239
Total 948 206 1,154
Average number of sales locations
during period
California 19 9 28
Arizona 6 - 6
Nevada 8 - 8
Total 33 9 42
Three Months Ended June 30,
2004
Wholly- Joint Consolidated
Owned Ventures Total
Selected Financial Information
(dollars in thousands)
Homes closed 635 159 794
Home sales revenue $285,123 $81,937 $367,060
Cost of sales (218,602) (64,226) (282,828)
Gross margin $66,521 $17,711 $84,232
Gross margin percentage 23.3% 21.6% 23.0%
Number of homes closed
California 311 159 470
Arizona 107 - 107
Nevada 217 - 217
Total 635 159 794
Average sales price
California $637,200 $515,300 $595,900
Arizona 234,900 - 234,900
Nevada 284,900 - 284,900
Total $449,000 $515,300 $462,300
Number of net new home orders
California 354 276 630
Arizona 278 - 278
Nevada 219 - 219
Total 851 276 1,127
Average number of sales locations
during period
California 20 12 32
Arizona 7 - 7
Nevada 7 - 7
Total 34 12 46
WILLIAM LYON HOMES
SELECTED FINANCIAL AND OPERATING INFORMATION (Continued)
(unaudited)
As of June 30,
2005
Wholly- Joint Consolidated
Owned Ventures Total
Backlog of homes sold but not closed
at end of period
California 934 440 1,374
Arizona 521 - 521
Nevada 220 - 220
Total 1,675 440 2,115
Dollar amount of homes sold but not
closed at end of period (in
thousands)
California $600,957 $274,920 $875,877
Arizona 172,240 - 172,240
Nevada 77,462 - 77,462
Total $850,659 $274,920 $1,125,579
Lots controlled at end of period
Owned lots
California 3,938 1,762 5,700
Arizona 3,812 269 4,081
Nevada 959 - 959
Total 8,709 2,031 10,740
Optioned lots (1)
California 3,525
Arizona 5,132
Nevada 1,489
Total 10,146
Total lots controlled
California 9,225
Arizona 9,213
Nevada 2,448
Total 20,886
As of June 30,
2004
Wholly- Joint Consolidated
Owned Ventures Total
Backlog of homes sold but not closed
at end of period
California 766 666 1,432
Arizona 423 - 423
Nevada 233 - 233
Total 1,422 666 2,088
Dollar amount of homes sold but not
closed at end of period (in
thousands)
California $581,939 $367,268 $949,207
Arizona 106,573 - 106,573
Nevada 85,008 - 85,008
Total $773,520 $367,268 $1,140,788
Lots controlled at end of period
Owned lots
California 2,486 2,248 4,734
Arizona 1,249 - 1,249
Nevada 1,362 - 1,362
Total 5,097 2,248 7,345
Optioned lots (1)
California 4,192
Arizona 7,228
Nevada 1,250
Total 12,670
Total lots controlled
California 8,926
Arizona 8,477
Nevada 2,612
Total 20,015
(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
SELECTED FINANCIAL AND OPERATING INFORMATION
(unaudited)
Six Months Ended June 30,
2005
Wholly- Joint Consolidated
Owned Ventures Total
Selected Financial Information
(dollars in thousands)
Homes closed 862 216 1,078
Home sales revenue $464,816 $141,963 $606,779
Cost of sales (338,899) (103,035) (441,934)
Gross margin $125,917 $38,928 $164,845
Gross margin percentage 27.1% 27.4% 27.2%
Number of homes closed
California 331 216 547
Arizona 297 - 297
Nevada 234 - 234
Total 862 216 1,078
Average sales price
California $870,800 $657,200 $786,500
Arizona 289,900 - 289,900
Nevada 386,600 - 386,600
Total $539,200 $657,200 $562,900
Number of net new home orders
California 908 411 1,319
Arizona 336 - 336
Nevada 372 - 372
Total 1,616 411 2,027
Average number of sales locations
during period
California 17 9 26
Arizona 6 - 6
Nevada 8 - 8
Total 31 9 40
Six Months Ended June 30,
2004
Wholly- Joint Consolidated
Owned Ventures Total
Selected Financial Information
(dollars in thousands)
Homes closed 1,100 297 1,397
Home sales revenue $478,694 $142,914 $621,608
Cost of sales (370,002) (113,262) (483,264)
Gross margin $108,692 $29,652 $138,344
Gross margin percentage 22.7% 20.7% 22.3%
Number of homes closed
California 561 297 858
Arizona 169 - 169
Nevada 370 - 370
Total 1,100 297 1,397
Average sales price
California $588,800 $481,200 $551,600
Arizona 219,000 - 219,000
Nevada 301,000 - 301,000
Total $435,200 $481,200 $445,000
Number of net new home orders
California 815 649 1,464
Arizona 385 - 385
Nevada 370 - 370
Total 1,570 649 2,219
Average number of sales locations
during period
California 20 12 32
Arizona 5 - 5
Nevada 7 - 7
Total 32 12 44
WILLIAM LYON HOMES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per common share amounts)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
Operating revenue
Home sales $362,123 $367,060 $606,779 $621,608
Lots, land and other sales 45,366 17,423 47,392 17,423
407,489 384,483 654,171 639,031
Operating costs
Cost of sales - homes (266,952) (282,828) (441,934) (483,264)
Cost of sales - lots, land
and other (22,024) (13,826) (23,837) (13,826)
Sales and marketing (13,282) (12,879) (24,397) (23,292)
General and administrative (23,963) (17,054) (41,404) (30,718)
Other (526) (434) (1,208) (767)
(326,747) (327,021) (532,780) (551,867)
Equity in income (loss) of
unconsolidated joint ventures 252 (87) (159) (183)
Minority equity in income of
consolidated entities (5,699) (6,652) (11,959) (10,912)
Operating income 75,295 50,723 109,273 76,069
Financial advisory expenses (2,191) - (2,191) -
Other (expense) income, net (212) 1,300 (317) 1,705
Income before provision for
income taxes 72,892 52,023 106,765 77,774
Provision for income taxes (28,792) (20,875) (42,172) (31,217)
Net income $44,100 $31,148 $64,593 $46,557
Earnings per common share
Basic $5.12 $3.16 $7.50 $4.74
Diluted $5.07 $3.14 $7.43 $4.70
WILLIAM LYON HOMES
CONSOLIDATED BALANCE SHEETS
(in thousands except number of shares and par value per share)
June 30, December 31,
2005 2004
(unaudited)
ASSETS
Cash and cash equivalents $50,659 $96,074
Receivables 34,428 39,302
Real estate inventories 1,303,947 1,059,173
Investments in and advances to unconsolidated
joint ventures 15,473 17,911
Property and equipment, less accumulated
depreciation of $8,848 and $7,844 at June
30, 2005 and December 31, 2004, respectively 18,632 18,066
Deferred loan costs 13,267 13,982
Goodwill 5,896 5,896
Other assets 26,292 24,158
$1,468,594 $1,274,562
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $53,392 $39,364
Accrued expenses 115,472 150,774
Notes payable 122,555 48,571
7 5/8% Senior Notes due December 15, 2012 150,000 150,000
10 3/4% Senior Notes due April 1, 2013 246,779 246,648
7 1/2% Senior Notes due July 1, 2014 150,000 150,000
838,198 785,357
Minority interest in consolidated entities 218,694 142,096
Stockholders' equity
Common stock, par value $.01 per share;
30,000,000 shares authorized; 8,616,236
shares issued and outstanding at June 30,
2005 and December 31, 2004, respectively;
1,275,000 shares issued and held in
treasury at June 30, 2005 and December 31,
2004, respectively 86 86
Additional paid-in capital 30,250 30,250
Retained earnings 381,366 316,773
411,702 347,109
$1,468,594 $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
June 30, June 30,
2005 2004 2005 2004
Net income $44,100 $31,148 $189,685 $100,020
Net cash provided by (used in)
operating activities $32,593 $(38,685) $177,057 $(219,276)
Interest incurred $17,298 $15,238 $63,345 $54,240
Adjusted EBITDA (1) $85,929 $67,275 $374,749 $228,742
Ratio of adjusted EBITDA to
interest incurred 5.92x 4.22x
Balance Sheet Data
June 30,
2005 2004
Stockholders' equity per share $47.78 $30.60
Stockholders' equity $411,702 $302,583
Total debt 669,334 661,885
Total book capitalization $1,081,036 $964,468
Ratio of debt to total book capitalization 61.9% 68.6%
Ratio of debt to total book capitalization (net
of cash) 60.0% 67.7%
Ratio of debt to LTM adjusted EBITDA 1.79x 2.89x
Ratio of debt to LTM adjusted EBITDA (net of
cash) 1.65x 2.77x
(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 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
June 30, June 30,
2005 2004 2005 2004
Net income $44,100 $31,148 $189,685 $100,020
Provision for income taxes 28,792 20,875 124,454 70,109
Interest expense:
Interest incurred 17,298 15,238 63,345 54,240
Interest capitalized (17,298) (15,238) (63,345) (54,240)
Amortization of capitalized
interest in cost of sales 12,808 14,938 58,056 53,022
Depreciation and amortization 481 227 1,879 901
Cash distributions of income
from unconsolidated joint
ventures - - - 20,667
Equity in (income) loss of
unconsolidated joint ventures (252) 87 675 (15,977)
Adjusted EBITDA $85,929 $67,275 $374,749 $228,742
A reconciliation of net cash provided by (used in) operating
activities to Adjusted EBITDA is provided as follows:
Last Twelve
Three Months Ended Months Ended
June 30, June 30,
2005 2004 2005 2004
Net cash provided by (used in)
operating activities $32,593 $(38,685) $177,057 $(219,276)
Interest expense:
Interest incurred 17,298 15,238 63,345 54,240
Interest capitalized (17,298) (15,238) (63,345) (54,240)
Amortization of capitalized
interest in cost of sales 12,808 14,938 58,056 53,022
Cash distributions of income
from unconsolidated joint
ventures - - - 20,667
Minority equity in income of
consolidated entities (5,699) (6,652) (50,708) (11,353)
Net changes in operating assets
and liabilities:
Receivables 8,524 (3,643) 2,089 13,896
Real estate inventories 32,384 99,097 86,053 314,591
Deferred loan costs (377) (146) (92) 248
Other assets 306 (1,460) 7,925 1,135
Accounts payable (4,616) (7,357) 4,621 (839)
Accrued expenses 10,006 11,183 89,748 56,651
Adjusted EBITDA $85,929 $67,275 $374,749 $228,742
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