Exhibit 99.1
Contact: | Investor Relations | |
W. Douglass Harris | ||
William Lyon Homes | ||
(949) 833-3600 |
WILLIAM LYON HOMES REPORTS FIRST QUARTER RESULTS;
NET INCOME UP 28%
Financial Highlights
2006 First Quarter
• | Net income of $26.2 million, up 28% |
• | Earnings per diluted share of $3.02, up 28% |
• | Consolidated operating revenue of $307.4 million, up 25% |
• | Homebuilding gross margins of 25.4%, down 310 basis points |
• | Quarter-end backlog of 1,357 homes, valued at $721.2 million |
• | Net new home orders of 647, down 26% |
NEWPORT BEACH, CA—May 5, 2006—William Lyon Homes (NYSE: WLS) today reported that net income for the first quarter ended March 31, 2006 increased 28% to $26,214,000, or $3.02 per diluted share, as compared to net income of $20,493,000, or $2.36 per diluted share, for the comparable period a year ago. Consolidated operating revenue increased 25% to $307,381,000 for the quarter ended March 31, 2006, as compared to $246,682,000 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 2006 was 581 homes, up 27% from 459 homes in the first quarter of 2005. At March 31, 2006, the backlog of homes sold but not closed totaled 1,357 homes, down 14% from 1,580 homes at March 31, 2005, and up 5% from 1,291 homes at December 31, 2005. The dollar amount of backlog of homes sold but not closed was
$721,183,000, down 17% from $871,192,000 a year ago, and up 4% from $691,627,000 at December 31, 2005. The Company’s cancellation rate for the three months ended March 31, 2006 was 28%, compared to 12% for the three months ended March 31, 2005.
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. Net new home orders for the quarter ended March 31, 2006 were 647 homes, down 26% from 873 homes for the quarter ended March 31, 2005.
The average number of sales locations during the quarter ended March 31, 2006 was 48, up 26% from 38 in the comparable period a year ago, as a result of the Company’s focus begun in 2005 to increase the number of sales locations in each of its markets. The Company’s number of new home orders per average sales location decreased to 13.5 for the quarter ended March 31, 2006 as compared to 23.0 for the quarter ended March 31, 2005.
During the first quarter of 2006, the average sales price of homes (including joint ventures) was $529,100, down slightly from $533,000 for the comparable period a year ago. The lower average sales price reflects a change in product mix.
The consolidated homebuilding gross margin percentage decreased to 25.4% for the quarter ended March 31, 2006 from 28.5% for the quarter ended March 31, 2005. The lower gross margin percentages primarily reflect the close out of projects with higher average gross margin percentages, and a shift in product mix and increases in land costs which resulted in higher cost of sales when homes closed.
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.
* * * * * *
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, 2006 had 49 sales locations. The Company’s corporate headquarters are located in Newport Beach, California.
2
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.
3
WILLIAM LYON HOMES
SELECTED FINANCIAL AND OPERATING INFORMATION
(unaudited)
Three Months Ended March 31, | ||||||||||||||||||||||||
2006 | 2005 | |||||||||||||||||||||||
Wholly-owned | Joint Ventures | Consolidated Total | Wholly-owned | Joint Ventures | Consolidated Total | |||||||||||||||||||
Selected Financial Information | ||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||
Homes closed | 516 | 65 | 581 | 364 | 95 | 459 | ||||||||||||||||||
Home sales revenue | $ | 271,220 | $ | 36,161 | $ | 307,381 | $ | 187,433 | $ | 57,223 | $ | 244,656 | ||||||||||||
Cost of sales | (206,129 | ) | (23,314 | ) | (229,443 | ) | (135,514 | ) | (39,468 | ) | (174,982 | ) | ||||||||||||
Gross margin | $ | 65,091 | $ | 12,847 | $ | 77,938 | $ | 51,919 | $ | 17,755 | $ | 69,674 | ||||||||||||
Gross margin percentage | 24.0 | % | 35.5 | % | 25.4 | % | 27.7 | % | 31.0 | % | 28.5 | % | ||||||||||||
Number of homes closed | ||||||||||||||||||||||||
California | 263 | 65 | 328 | 117 | 95 | 212 | ||||||||||||||||||
Arizona | 99 | — | 99 | 126 | — | 126 | ||||||||||||||||||
Nevada | 154 | — | 154 | 121 | — | 121 | ||||||||||||||||||
Total | 516 | 65 | 581 | 364 | 95 | 459 | ||||||||||||||||||
Average sales price | ||||||||||||||||||||||||
California | $ | 640,800 | $ | 556,300 | $ | 624,100 | $ | 867,100 | $ | 602,400 | $ | 748,500 | ||||||||||||
Arizona | 417,900 | — | 417,900 | 287,300 | — | 287,300 | ||||||||||||||||||
Nevada | 398,100 | — | 398,100 | 411,400 | — | 411,400 | ||||||||||||||||||
Total | $ | 525,600 | $ | 556,300 | $ | 529,100 | $ | 514,900 | $ | 602,400 | $ | 533,000 | ||||||||||||
Number of net new home orders | ||||||||||||||||||||||||
California | 296 | 96 | 392 | 376 | 205 | 581 | ||||||||||||||||||
Arizona | 116 | — | 116 | 159 | — | 159 | ||||||||||||||||||
Nevada | 139 | — | 139 | 133 | — | 133 | ||||||||||||||||||
Total | 551 | 96 | 647 | 668 | 205 | 873 | ||||||||||||||||||
Average number of sales locations during period | ||||||||||||||||||||||||
California | 24 | 7 | 31 | 15 | 9 | 24 | ||||||||||||||||||
Arizona | 6 | — | 6 | 6 | — | 6 | ||||||||||||||||||
Nevada | 11 | — | 11 | 8 | — | 8 | ||||||||||||||||||
Total | 41 | 7 | 48 | 29 | 9 | 38 | ||||||||||||||||||
4
WILLIAM LYON HOMES
SELECTED FINANCIAL AND OPERATING INFORMATION (Continued)
(unaudited)
As of March 31, | ||||||||||||||||||
2006 | 2005 | |||||||||||||||||
Wholly- owned | Joint Ventures | Consolidated Total | Wholly- owned | Joint Ventures | Consolidated Total | |||||||||||||
Backlog of homes sold but not closed at end of period | ||||||||||||||||||
California | 641 | 154 | 795 | 616 | 355 | 971 | ||||||||||||
Arizona | 413 | — | 413 | 515 | — | 515 | ||||||||||||
Nevada | 149 | — | 149 | 94 | — | 94 | ||||||||||||
Total | 1,203 | 154 | 1,357 | 1,225 | 355 | 1,580 | ||||||||||||
Dollar amount of homes sold but not closed at end of period (in thousands) | ||||||||||||||||||
California | $ | 459,291 | $ | 77,222 | $ | 536,513 | $ | 453,105 | $ | 224,482 | $ | 677,587 | ||||||
Arizona | 133,658 | — | 133,658 | 157,306 | — | 157,306 | ||||||||||||
Nevada | 51,012 | — | 51,012 | 36,299 | — | 36,299 | ||||||||||||
Total | $ | 643,961 | $ | 77,222 | $ | 721,183 | $ | 646,710 | $ | 224,482 | $ | 871,192 | ||||||
Lots controlled at end of period Owned lots | ||||||||||||||||||
California | 4,237 | 1,225 | 5,462 | 3,716 | 1,350 | 5,066 | ||||||||||||
Arizona | 2,721 | 1,738 | 4,459 | 3,766 | — | 3,766 | ||||||||||||
Nevada | 1,460 | — | 1,460 | 1,072 | — | 1,072 | ||||||||||||
Total | 8,418 | 2,963 | 11,381 | 8,554 | 1,350 | 9,904 | ||||||||||||
Optioned lots (1) | ||||||||||||||||||
California | 4,101 | 4,060 | ||||||||||||||||
Arizona | 6,012 | 5,421 | ||||||||||||||||
Nevada | 2,137 | 1,272 | ||||||||||||||||
Total | 12,250 | 10,753 | ||||||||||||||||
Total lots controlled | ||||||||||||||||||
California | 9,563 | 9,126 | ||||||||||||||||
Arizona | 10,471 | 9,187 | ||||||||||||||||
Nevada | 3,597 | 2,344 | ||||||||||||||||
Total | 23,631 | 20,657 | ||||||||||||||||
(1) | Optioned lots may be purchased by the Company as wholly-owned projects or may be purchased by newly formed joint ventures. |
5
WILLIAM LYON HOMES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per common share amounts)
(unaudited)
Three Months Ended March 31, | ||||||||
2006 | 2005 | |||||||
Operating revenue | ||||||||
Home sales | $ | 307,381 | $ | 244,656 | ||||
Lots, land and other sales | — | 2,026 | ||||||
307,381 | 246,682 | |||||||
Operating costs | ||||||||
Cost of sales - homes | (229,443 | ) | (174,982 | ) | ||||
Cost of sales - lots, land and other | (430 | ) | (1,813 | ) | ||||
Sales and marketing | (13,124 | ) | (11,115 | ) | ||||
General and administrative | (18,589 | ) | (17,441 | ) | ||||
Other | (826 | ) | (682 | ) | ||||
(262,412 | ) | (206,033 | ) | |||||
Equity in income (loss) of unconsolidated joint ventures | 3,638 | (411 | ) | |||||
Minority equity in income of consolidated entities | (5,226 | ) | (6,260 | ) | ||||
Operating income | 43,381 | 33,978 | ||||||
Financial advisory expenses | (1,500 | ) | — | |||||
Other income (loss), net | 1,241 | (105 | ) | |||||
Income before provision for income taxes | 43,122 | 33,873 | ||||||
Provision for income taxes | (16,908 | ) | (13,380 | ) | ||||
Net income | $ | 26,214 | $ | 20,493 | ||||
Earnings per common share | ||||||||
Basic | $ | 3.03 | $ | 2.38 | ||||
Diluted | $ | 3.02 | $ | 2.36 | ||||
6
WILLIAM LYON HOMES
CONSOLIDATED BALANCE SHEETS
(in thousands except number of shares and par value per share)
March 31, 2006 | December 31, 2005 | |||||
(unaudited) | ||||||
ASSETS | ||||||
Cash and cash equivalents | $ | 24,994 | $ | 52,369 | ||
Receivables | 33,092 | 143,481 | ||||
Real estate inventories | 1,544,545 | 1,419,248 | ||||
Investments in and advances to unconsolidated joint ventures | 1,527 | 397 | ||||
Property and equipment, less accumulated depreciation of $10,517 and $9,936 at March 31, 2006 and December 31, 2005, respectively | 18,577 | 18,553 | ||||
Deferred loan costs | 12,082 | 12,323 | ||||
Goodwill | 5,896 | 5,896 | ||||
Other assets | 39,027 | 38,735 | ||||
$ | 1,679,740 | $ | 1,691,002 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
Accounts payable | $ | 56,067 | $ | 67,326 | ||
Accrued expenses | 119,781 | 181,068 | ||||
Notes payable | 199,959 | 125,619 | ||||
7 5/8% Senior Notes due December 15, 2012 | 150,000 | 150,000 | ||||
10 3/4% Senior Notes due April 1, 2013 | 246,989 | 246,917 | ||||
7 1/2% Senior Notes due February 15, 2014 | 150,000 | 150,000 | ||||
922,796 | 920,930 | |||||
Minority interest in consolidated entities | 186,734 | 227,178 | ||||
Stockholders’ equity | ||||||
Common stock, par value $.01 per share; 30,000,000 shares authorized; 8,652,067 shares issued and outstanding at March 31, 2006 and December 31, 2005, respectively; 1,275,000 shares issued and held in treasury at March 31, 2006 and December 31, 2005, respectively | 86 | 86 | ||||
Additional paid-in capital | 36,506 | 35,404 | ||||
Retained earnings | 533,618 | 507,404 | ||||
570,210 | 542,894 | |||||
$ | 1,679,740 | $ | 1,691,002 | |||
7
WILLIAM LYON HOMES
SUPPLEMENTAL FINANCIAL INFORMATION
SELECTED FINANCIAL DATA (dollars in thousands except per share data):
Three Months Ended March 31, | Last Twelve Months Ended | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||
Net income | $ | 26,214 | $ | 20,493 | $ | 196,352 | $ | 176,733 | ||||||
Net cash (used in) provided by operating activities | $ | (77,753 | ) | $ | (168,338 | ) | $ | 46,051 | $ | 105,778 | ||||
Interest incurred | $ | 18,671 | $ | 15,203 | $ | 76,608 | $ | 62,540 | ||||||
Adjusted EBITDA (1) | $ | 52,799 | $ | 42,662 | $ | 381,164 | $ | 356,095 | ||||||
Ratio of adjusted EBITDA to interest incurred | 4.98x | 5.69x |
Balance Sheet Data
March 31, | ||||||||
2006 | 2005 | |||||||
Stockholders’ equity per share | $ | 65.90 | $ | 42.66 | ||||
Stockholders’ equity | $ | 570,210 | $ | 367,602 | ||||
Total debt | 746,948 | 703,117 | ||||||
Total book capitalization | $ | 1,317,158 | $ | 1,070,719 | ||||
Ratio of debt to total book capitalization | 56.7 | % | 65.7 | % | ||||
Ratio of debt to total book capitalization (net of cash) | 55.9 | % | 64.6 | % | ||||
Ratio of debt to LTM adjusted EBITDA | 1.96x | 1.97x | ||||||
Ratio of debt to LTM adjusted EBITDA (net of cash) | 1.89x | 1.88x |
(1) | 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 |
8
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: |
Three Months Ended March 31, | Last Twelve Months Ended March 31, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Net income | $ | 26,214 | $ | 20,493 | $ | 196,352 | $ | 176,733 | ||||||||
Provision for income taxes | 16,908 | 13,380 | 127,677 | 116,537 | ||||||||||||
Interest expense: | ||||||||||||||||
Interest incurred | 18,671 | 15,203 | 76,608 | 62,540 | ||||||||||||
Interest capitalized | (18,671 | ) | (15,203 | ) | (76,608 | ) | (62,540 | ) | ||||||||
Amortization of capitalized interest in cost of sales | 10,135 | 7,855 | 58,028 | 60,186 | ||||||||||||
Depreciation and amortization | 581 | 523 | 2,150 | 1,625 | ||||||||||||
Cash distributions of income from unconsolidated joint ventures | 2,599 | — | 5,307 | — | ||||||||||||
Equity in (income) loss of unconsolidated joint ventures | (3,638 | ) | 411 | (8,350 | ) | 1,014 | ||||||||||
Adjusted EBITDA | $ | 52,799 | $ | 42,662 | $ | 381,164 | $ | 356,095 | ||||||||
9
A reconciliation of net cash (used in) provided by operating activities to Adjusted EBITDA is provided as follows:
Three Months Ended March 31, | Last Twelve Months Ended | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Net cash (used in) provided by operating activities | $ | (77,753 | ) | $ | (168,338 | ) | $ | 46,051 | $ | 105,778 | ||||||
Interest expense: | ||||||||||||||||
Interest incurred | 18,671 | 15,203 | 76,608 | 62,540 | ||||||||||||
Interest capitalized | (18,671 | ) | (15,203 | ) | (76,608 | ) | (62,540 | ) | ||||||||
Amortization of capitalized interest in costs of sales | 10,135 | 7,855 | 58,028 | 60,186 | ||||||||||||
Non-cash impairment charge | — | — | (4,600 | ) | — | |||||||||||
State income tax refund from pre-quasi built-in losses | (10 | ) | — | (1,855 | ) | — | ||||||||||
Minority equity in income of consolidated entities | (5,226 | ) | (6,260 | ) | (36,537 | ) | (51,661 | ) | ||||||||
Net changes in operating assets and liabilities: | ||||||||||||||||
Receivables | (110,389 | ) | (13,398 | ) | 7,188 | (10,078 | ) | |||||||||
Real estate inventories | 139,225 | 163,257 | 208,208 | 152,767 | ||||||||||||
Deferred loan costs | (241 | ) | (338 | ) | (1,562 | ) | 139 | |||||||||
Other assets | 8,696 | 1,828 | 13,041 | 6,159 | ||||||||||||
Accounts payable | 11,259 | (9,412 | ) | (7,291 | ) | 1,880 | ||||||||||
Accrued expenses | 77,103 | 67,468 | 100,493 | 90,925 | ||||||||||||
Adjusted EBITDA | $ | 52,799 | $ | 42,662 | $ | 381,164 | $ | 356,095 | ||||||||
10