News Column

William Lyon Homes Reports First Quarter 2014 Results

May 9, 2014

NEWPORT BEACH, Calif.--(BUSINESS WIRE)-- William Lyon Homes (NYSE: WLH), a leading homebuilder in the Western U.S., announced results for its 2014 first quarter ended March 31, 2014.

2014 First Quarter Highlights (Comparison to 2013 First Quarter)

  • Net income available to common stockholders of $8.7 million, or $0.27 per diluted share
  • Home sales revenue of $140.3 million, up 84%
  • Consolidated revenue of $150.0 million, up 85%
  • Homebuilding gross margin of $34.1 million, up 160%
  • Homebuilding gross margin percentage of 24.3%, up 720 basis points
  • Adjusted homebuilding gross margin percentage of 27.6%, up 440 basis points
  • Operating income of $15.8 million
  • New home deliveries of 276 homes, up 3%
  • Average sales price (ASP) of new homes delivered of $508,300, up 78%
  • Dollar value of orders of $199.2 million, up 51%
  • Net new home orders of 400, up 11%
  • Dollar amount of backlog of homes sold but not closed of $264.8 million, up 55%
  • Average sales locations of 32, up 39%
  • SG&A percentage of 13.3%, down 400 basis points
  • Adjusted EBITDA of $20.3 million, an increase of 342%

    “During the first quarter of 2014, we continued to build upon our strong financial results of 2013, generating net income of $8.7 million, or $0.27 per diluted share, and delivering our ninth consecutive quarter of year-over-year growth in deliveries, orders, and dollar value of backlog,” said William H. Lyon, Chief Executive Officer. “Our first quarter performance was driven by consolidated revenue of $150.0 million, homebuilding gross margin percentage of 24.3% and SG&A percentage of 13.3%, all of which are significant improvements from the same quarter last year.”

    Operating Results

    Home sales revenue increased 84% to $140.3 million for the quarter, as compared to $76.4 million in the year-ago period. Home sales revenues were higher due to a 78% increase in the average sales price of homes delivered, versus the year-ago period, combined with a 3% increase in new home deliveries.

    Homebuilding gross margins were 24.3% during the first quarter of 2014, up 720 basis points over the year-ago period. Adjusted homebuilding gross margin percentage was 27.6% during the first quarter of 2014, as compared to 23.2% in the year-ago period. The improvement in gross margins is driven by a 40% increase in same-store average sales prices, which represents projects that were open during the comparable periods.

    The dollar value of net new home orders was $199.2 million, an increase of 51%, from $131.9 million in the year-ago period. Net new home orders for the first quarter ended March 31, 2014 were 400, up 11%, from 361 in the year-ago period.

    Matthew R. Zaist, President and Chief Operating Officer, commented, “We have continued to see improvement in ASPs, which reached $508,300 on homes delivered in the first quarter of 2014, up 78% over the prior year, and represents the highest ASP of homes closed since the second quarter of 2006. The dollar value of homes in backlog climbed to $264.8 million, a 55% increase over last year, equating to an ASP in backlog of $538,200. Additionally, we grew our average sales locations by 39%, year-over-year, and ended the quarter selling from 35 locations.”

    Operating income improved to $15.8 million during the first quarter of 2014 from a loss of $0.8 million in the year-ago period. Adjusted EBITDA improved by 342% to $20.3 million during the first quarter of 2014 compared to $4.6 million in the year-ago period.

    Net income available to common stockholders was $8.7 million, or $0.27 per diluted share, in the first quarter of 2014, compared to net loss available to common stockholders of $3.5 million, a loss of $0.24 per share in the year-ago period.

    Balance Sheet Update

    At quarter end, cash, cash equivalents and restricted cash totaled $151.9 million, real estate inventories totaled $875.2 million and total debt was $622.1 million. Net debt to net book capitalization was 50.3%, and total debt to total book capitalization was 57.3% at March 31, 2014.

    Mr. Lyon added, “We continued to invest in our growth initiatives by acquiring $153.4 million of land, which includes a portion of the previously announced eight-community portfolio acquisition, as well as other identified projects, as we continue to add future communities in well located areas within our existing divisions. We are also very proud of our recent capital raise, which closed at the end of the quarter, and added $150.0 million of unsecured bonds at a rate of 5.75%, the lowest interest rate in our Company’s history.”

    Conference Call

    The Company will host a conference call to discuss these results on Friday, May 9, 2014 at 9:00 a.m. Pacific Time. The call will be available via both the telephone at (877) 415-3185 or (857) 244-7328, passcode #66260148, or through the Company’s website at www.lyonhomes.com in the Investor Relations section of the site. A replay of the call will be available through May 23, 2014 by dialing (888) 286-8010 or (617) 801-6888, passcode #58888157. A webcast replay of the call will also be available on the Company’s website approximately two hours after the broadcast.

    About William Lyon Homes

    The Company is one of the largest Western U.S. regional homebuilders. Headquartered in Newport Beach, California, the Company is primarily engaged in the design, construction, marketing and sale of single-family detached and attached homes in California, Arizona, Nevada and Colorado. Its core markets include Orange County, Los Angeles, San Diego, the San Francisco Bay Area, Phoenix, Las Vegas and Denver. The Company has a distinguished legacy of more than 58 years of homebuilding operations, over which time it has sold in excess of 76,000 homes. The Company markets and sells its homes under the William Lyon Homes brand in all of its markets except for Colorado, where the Company operates under the Village Homes brand.

    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: worsening in general economic conditions either nationally or in regions in which we operate; worsening in markets for residential housing; decline in real estate values resulting in further impairment of our real estate assets; volatility in the banking industry and credit markets; terrorism or other hostilities involving the United States; whether an ownership change occurred that could, under certain circumstances, have resulted in the limitation of our ability to offset prior years’ taxable income with net operating losses; changes in mortgage and other interest rates; conditions in the capital, credit and financial markets, including mortgage lending standards and the availability of mortgage financing; changes in generally accepted accounting principles or interpretations of those principles; changes in prices of homebuilding materials; the availability of labor and homebuilding materials; adverse weather conditions; competition for home sales from other sellers of new and resale homes; cancellations and our ability to realize our backlog; the occurrence of events such as landslides, soil subsidence and earthquakes that are uninsurable, not economically insurable or not subject to effective indemnification agreements; changes in governmental laws and regulations; inability to comply with financial and other covenants under our debt instruments; whether we are able to refinance the outstanding balances of our debt obligations at their maturity; anticipated tax refunds; limitations on our ability to utilize our tax attributes; limitations on our ability to reverse any remaining portion of our valuation allowance with respect to our deferred tax assets; the timing of receipt of regulatory approvals and the opening of projects; the impact of construction defect, product liability and home warranty claims, including the adequacy of self-insurance accruals, and the applicability and sufficiency of our insurance coverage; and the availability and cost of land for future development.

     
    WILLIAM LYON HOMES
    CONSOLIDATED STATEMENTS OF OPERATIONS
    (in thousands except number of shares and per share data)
    (unaudited)
     
            Three         Three
    Months EndedMonths Ended
    MarchMarch
    31, 201431, 2013
    Operating revenue
    Home sales $ 140,299 $ 76,434
    Construction services 9,652   4,419  
    149,951   80,853  
    Operating costs
    Cost of sales — homes (106,212 ) (63,328 )
    Construction services (8,068 ) (4,038 )
    Sales and marketing (6,558 ) (4,668 )
    General and administrative (12,136 ) (8,524 )
    Amortization of intangible assets (618 ) (622 )
    Other (562 ) (485 )
    (134,154 ) (81,665 )
    Operating income (loss) 15,797 (812 )
    Interest expense, net of amounts capitalized (1,284 )
    Other income, net 119   87  
    Income (loss) before reorganization items 15,916 (2,009 )
    Reorganization items, net   (464 )
    Income (loss) before provision for income taxes 15,916 (2,473 )
    Provision for income taxes (4,574 )  
    Net income (loss) 11,342 (2,473 )
    Less: Net income attributable to noncontrolling interests (2,645 ) (75 )
    Net income (loss) attributable to William Lyon Homes 8,697 (2,548 )
    Preferred stock dividends   (974 )
    Net income (loss) available to common stockholders $ 8,697   $ (3,522 )
    Income (loss) per common share:
    Basic $ 0.28 $ (0.24 )
    Diluted $ 0.27 $ (0.24 )
    Weighted average common shares outstanding:
    Basic 31,106,310 14,581,897
    Diluted 32,604,620 14,581,897
     
     

    WILLIAM LYON HOMES

    CONSOLIDATED BALANCE SHEETS

    (in thousands, except number of shares and par value per share)

    (unaudited)

     
         

    March 31,

         

    December 31,

    2014

    2013

    (unaudited)

    ASSETS
    Cash and cash equivalents $ 151,029 $   171,672
    Restricted cash 854 854
    Receivables 22,322 20,839
    Real estate inventories
    Owned 862,218 671,790
    Not owned 12,960 12,960
    Deferred loan costs, net 12,058 9,575
    Goodwill 14,209 14,209
    Intangibles, net of accumulated amortization of $8,229 as of March 31,
    2014 and $7,611 as of December 31, 2013 2,148 2,766
    Deferred income taxes, net valuation allowance of $3,573 as of March
    31, 2014 and $3,959 as of December 31, 2013 93,457 95,580
    Other assets, net 12,297 10,166
    Total assets $ 1,183,552 $ 1,010,411
    LIABILITIES AND EQUITY
    Accounts payable $ 18,720 $ 17,099
    Accrued expenses 65,881 60,203
    Liabilities from inventories not owned 12,960 12,960
    Notes payable 41,120 38,060

    5 3/4% Senior Notes due April 15, 2019

    150,000
    8 1/2% Senior Notes due November 15, 2020 431,016 431,295
    719,697 559,617
    Commitments and contingencies
    Equity:
    William Lyon Homes stockholders’ equity
    Preferred stock, par value $0.01 per share, 10,000,000 shares
    authorized, no shares issued and outstanding as of March 31,
    2014 and December 31, 2013, respectively
    Common stock, Class A, par value $0.01 per share; 150,000,000
    shares authorized; 28,012,415 and 27,622,283 shares issued,
    27,408,581 and 27,216,813 outstanding at March 31, 2014 and
    December 31, 2013, respectively 280 276
    Common stock, Class B, par value $0.01 per share; 30,000,000
    shares authorized; 3,813,884 shares issued and outstanding at
    March 31, 2014 and December 31, 2013 38 38
    Additional paid-in capital 311,599 311,863
    Retained earnings 124,699 116,002
    Total William Lyon Homes stockholders’ equity 436,616 428,179
    Noncontrolling interests 27,239 22,615
    Total equity 463,855 450,794
    Total liabilities and equity $ 1,183,552 $ 1,010,411
     
     
    WILLIAM LYON HOMES
    SELECTED FINANCIAL AND OPERATING INFORMATION
    (unaudited)
     
          Three Months Ended March 31, 2014
    2014         2013        
    ConsolidatedConsolidatedPercentage %
    Total   Total   Change  
    Selected Financial Information
    (dollars in thousands)
    Homes closed 276   268   3 %
    Home sales revenue $ 140,299 $ 76,434 84 %
    Cost of sales (excluding interest) (101,559 ) (58,696 ) 73 %
    Adjusted homebuilding gross margin (1) $ 38,740   $ 17,738   118 %
    Adjusted homebuilding gross margin percentage (1) 27.6 % 23.2 % 19 %
    Interest in cost of sales (4,653 ) (4,632 ) %
    Gross margin $ 34,087   $ 13,106   160 %
    Gross margin percentage 24.3 % 17.1 % 42 %
     
    Number of homes closed
    Southern California 125 22 468 %
    Northern California 43 31 39 %
    Arizona 50 100 (50 )%
    Nevada 47 66 (29 )%
    Colorado 11   49   (78 )%
    Total 276   268   3 %
     
    Average sales price of homes closed
    Southern California $ 693,700 $ 461,200 50 %
    Northern California 416,000 323,200 29 %
    Arizona 265,600 216,300 23 %
    Nevada 364,900 223,700 63 %
    Colorado 479,000   405,700   18 %
    Total $ 508,300   $ 285,200   78 %
     
    Number of net new home orders
    Southern California 192 68 182 %
    Northern California 41 53 (23 )%
    Arizona 63 93 (32 )%
    Nevada 82 98 (16 )%
    Colorado 22   49   (55 )%
    Total 400   361   11 %
     
    Average number of sales locations during period
    Southern California 10 4 150 %
    Northern California 4 2 100 %
    Arizona 6 6 %
    Nevada 8 6 33 %
    Colorado 4   5   (20 )%
    Total 32   23   39 %

    (1)

         

    Adjusted homebuilding gross margin is a financial measure that is not prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. It is used by management in evaluating operating performance and in making strategic decisions regarding sales pricing, construction and development pace, product mix and other operating decisions. We believe this information is meaningful as it isolates the impact that interest has on homebuilding gross margin and allows investors to make better comparisons with our competitors.

     
    WILLIAM LYON HOMES
    SELECTED FINANCIAL AND OPERATING INFORMATION
    (unaudited)
     
          As of March 31,
    2014       2013      
    ConsolidatedConsolidatedPercentage %
    TotalTotalChange  
    Backlog of homes sold but not closed
    at end of period
    Southern California 236 78 203 %
    Northern California 35 50 (30 )%
    Arizona 76 165 (54 )%
    Nevada 107 123 (13 )%
    Colorado 38 82 (54 )%

    Total

    492 498 (1 )%
     
    Dollar amount of homes sold but not closed
    at end of period (in thousands)
    Southern California $ 146,352 $ 46,513 215 %
    Northern California 14,865 17,561 (15 )%
    Arizona 20,869 40,889 (49 )%
    Nevada 63,947 33,832 89 %
    Colorado 18,779 32,003 (41 )%

    Total

    $ 264,812 $ 170,798 55 %
     
    Lots owned and controlled at end of period
    Lots owned
    Southern California 1,257 1,092 15 %
    Northern California 1,048 265 295 %
    Arizona 5,330 5,982 (11 )%
    Nevada 2,938 2,845 3 %
    Colorado 1,041 498 109 %
    Total 11,614 10,682 9 %
     
    Lots controlled
    Southern California 1,334 96 1,290 %
    Northern California 622 637 (2 )%
    Arizona 228 1,396 (84 )%
    Nevada 178 192 (7 )%
    Colorado 208 208 %

    Total

    2,570 2,529 2 %
     
    Total lots owned and controlled
    Southern California 2,591 1,188 118 %
    Northern California 1,670 902 85 %
    Arizona 5,558 7,378 (25 )%
    Nevada 3,116 3,037 3 %
    Colorado 1,249 706 77 %
    Total 14,184 13,211 7 %
     
     
    WILLIAM LYON HOMES
    SUPPLEMENTAL FINANCIAL INFORMATION
    (unaudited)
     

    SELECTED FINANCIAL DATA (dollars in thousands):

     
          Three       Three
    Months EndedMonths Ended
    March 31,March 31,
    20142013
     
    Net income (loss) attributable to William Lyon Homes $ 8,697 $ (2,548 )
    Net cash used in operating activities $ (169,736 ) $ (10,460 )
    Interest incurred $ 9,395 $ 7,151
    Adjusted EBITDA (1) $ 20,280 $ 4,593
    Adjusted EBITDA Margin (2) 14.5 % 6.0 %
    Ratio of adjusted EBITDA to interest incurred 2.2 0.6
     
    Balance Sheet Data
    March 31, 2014December 31, 2013
    Cash, cash equivalents and restricted cash $ 151,883 $ 172,526
     
    Total William Lyon Homes stockholders’ equity 436,616 428,179
    Noncontrolling interest 27,239 22,615
    Total debt 622,136 469,355
    Total book capitalization $ 1,085,991 $ 920,149
     
    Ratio of debt to total book capitalization 57.3 % 51.0 %
    Ratio of debt to total book capitalization (net of cash) 50.3 % 39.7 %
     

    (1)

         

    Adjusted EBITDA means net income (loss) attributable to William Lyon Homes plus (i) provision for income taxes, (ii) interest expense, (iii) amortization of capitalized interest included in cost of sales, (iv) stock based compensation, (v) loss on sale of fixed assets, (vi) gain on retirement of debt, (vii) non-cash reorganization items and (viii) depreciation and amortization. Other companies may calculate adjusted EBITDA differently. Adjusted EBITDA is not a financial measure prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). Adjusted EBITDA is presented herein because 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 indicator of a company's operating performance. Adjusted EBITDA should not be considered as an alternative for net (loss) 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 (loss) income attributable to William Lyon Homes to adjusted EBITDA is provided as follows:

          Three       Three
    Months EndedMonths Ended
    March 31, 2014March 31, 2013
    Net income (loss) attributable to
    William Lyon Homes $ 8,697 $ (2,548 )
    Provision for income taxes 4,574
    Interest expense
    Interest incurred 9,395 7,151
    Interest capitalized (9,395 ) (5,867 )
    Amortization of capitalized interest included in cost of sales 4,653 4,632
    Stock based compensation 1,011 311
    Depreciation and amortization 1,345   914  
    Adjusted EBITDA $ 20,280   $ 4,593  
     

    (2)

         

    Calculated as Adjusted EBITDA as a percentage of home sales revenue.






    Investor/Media Contacts:

    Financial Profiles, Inc.

    Larry Clark, 310-622-8223

    WLH@finprofiles.com

    or

    Financial Profiles, Inc.

    Lisa Mueller, 310-622-8231

    WLH@finprofiles.com

    Source: William Lyon Homes


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