William Lyon Homes (WLH) 8-K William Lyon Homes Reports

Exhibit 99.1

Contact: Investor Relations

W. Douglass Harris

William Lyon Homes

(949) 833-3600

WILLIAM LYON HOMES REPORTS

FOURTH QUARTER AND FULL YEAR 2006 NET INCOME

Financial Highlights

2006 Fourth Quarter

• Net new home orders of 504, up 10%

• New home deliveries of 938, down 36%

• Consolidated operating revenue of $465.3 million, down 44%

• Homebuilding gross margins of $84.7 million, down 54%

• Homebuilding gross margin percentage of 18.3%, down 520 basis points

• Impairment loss on real estate assets of $25.9 million

• Net income of $7.7 million, down 91%

2006 Full Year

• Net new home orders of 2,202, down 34%

• New home deliveries of 2,887, down 10%

• Consolidated operating revenue of $1.492 billion, down 20%

• Homebuilding gross margins of $318.1 million, down 27%

• Homebuilding gross margin percentage of 21.5%, down 360 basis points

• Impairment loss on real estate assets of $39.9 million

• Net income of $74.8 million, down 61%

NEWPORT BEACH, CA—February 28, 2007—William Lyon Homes today reported that net income for the fourth quarter ended December 31, 2006 decreased 91% to $7,681,000, as compared to net income of $87,955,000 for the comparable period a year ago. Consolidated operating revenue decreased 44% to $465,338,000 for the quarter ended December 31, 2006, as compared to $825,881,000 for the comparable period a year ago.

For the year ended December 31, 2006, the Company reported net income of $74,778,000, a decrease of 61% as compared to net income of $190,631,000 for the comparable period a year ago. Consolidated operating revenue decreased 20% to $1,492,221,000 for the year ended December 31, 2006, as compared with $1,856,383,000 for the comparable period a year ago.

Operating revenue for the three months ended December 31, 2006 and 2005 included $4,357,000 and $46,344,000, respectively, from the sales of land resulting in gross profit of approximately $1,833,000 and $35,462,000, respectively. Operating revenue for the years ended December 31, 2006 and 2005 included $13,527,000 and $111,316,000, respectively, from the sales of land resulting in gross profit of approximately $7,793,000 and $66,542,000, 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 addition, the Company incurred costs of approximately $5,370,000 and $10,790,000 during the fourth quarter and year ended December 31, 2006, respectively, related to the abandonment and write-off of project pre-acquisition costs and land option deposits for certain of the Company’s potential projects, which are included in cost of sales - lots, land and other in the consolidated statements of income.

During the last half of the fourth quarter of 2005, the Company began to experience 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 continued in 2006.

The Company incurred impairment losses on real estate assets of $25,870,000 for the three months ended December 31, 2006 and $39,895,000 for the twelve months ended December 31, 2006. The impairments were primarily attributable to slower than anticipated home sales and lower than anticipated net revenue due to softening market conditions. Accordingly, the real estate assets were written-down to their estimated fair value.

The Company’s combined results including joint ventures were as follows: The number of homes closed for the three months ended December 31, 2006 was 938, down 36% as compared to 1,468 for the three months ended December 31, 2005. The number of homes closed for the year ended December 31, 2006 was 2,887, a decrease of 10% as compared to 3,196 for the year ended December 31, 2005. The Company’s backlog of homes sold but not closed was 606 at December 31, 2006, down 53% from 1,291 at December 31, 2005. The Company’s dollar amount of

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backlog of homes sold but not closed at December 31, 2006, was $295,505,000, down 57% from $691,627,000 at December 31, 2005. The cancellation rate of buyers who contracted to buy a home but did not close escrow was approximately 33% during 2006 and 16% during 2005. However, the cancellation rate from January 1, 2007 through February 25, 2007 has decreased to approximately 21%.

Net new home orders for the three months ended December 31, 2006 were 504, an increase of 10% as compared to 460 for the three months ended December 31, 2005. Net new home orders for the year ended December 31, 2006 were 2,202, a decrease of 34% as compared to 3,321 for the year ended December 31, 2005. The average number of sales locations was 52 for the year ended December 31, 2006, an increase of 27% as compared to 41 for the year ended December 31, 2005.

During the fourth quarter of 2006, the average sales price of homes (including joint ventures) was $491,500, down 7% as compared to $531,000 for the comparable period a year ago. For the year ended December 31, 2006, the average sales price of homes (including joint ventures) was $512,200, down 6% as compared to $546,000 for the year ended December 31, 2005. The lower average sales price reflects a change in product mix and an increase in the use of sales incentives due to the slowing of new orders and competitive pressures.

For the quarter ended December 31, 2006, the Company’s homebuilding gross margin percentage decreased to 18.3% from 23.5% for the quarter ended December 31, 2005. For the year ended December 31, 2006, the Company’s homebuilding gross margin percentage decreased to 21.5% from 25.1% for the year ended December 31, 2005. These lower gross margin percentages were primarily due to the earlier close out of projects with higher gross margins, a shift in product mix, a decrease in average sales prices and increases in land costs which resulted in higher cost of sales when homes closed.

In 2006, the Company was focused on increasing the number of sales locations in each of its markets and at December 31, 2006, the Company ended the year with 53 active sales locations as compared to 44 active sales locations at December 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.

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The Company will hold a conference call on Thursday, March 1, 2007 at 11:00 a.m. Pacific Time to discuss the fourth quarter and year end 2006 earnings results. The dial-in number is (866) 510-0710 (enter passcode number 47830641). Participants may call in beginning at 10:45 a.m. Pacific Time. In addition, the call will be broadcast from William Lyon Homes’ website atwww.lyonhomes.com in the “Investor Relations” section of the site. The call will be recorded and replayed beginning on March 1, 2007 at 1:00 p.m. Pacific Time through midnight on March 30, 2007. The dial-in number for the replay is (888) 286-8010 (enter passcode number 62240419). 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 web-site atwww.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,
	2006									2005
	Wholly- Owned			Joint Ventures			Consolidated Total			Wholly- Owned			Joint Ventures			Consolidated Total
Selected Financial Information (dollars in thousands)
Homes closed		831			107			938			1,122			346			1,468
Home sales revenue	$	417,523		$	43,458		$	460,981		$	594,867		$	184,670		$	779,537
Cost of sales		(343,328	)		(32,951	)		(376,279	)		(463,106	)		(132,979	)		(596,085	)
Gross margin	$	74,195		$	10,507		$	84,702		$	131,761		$	51,691		$	183,452
Gross margin percentage		17.8	%		24.2	%		18.3	%		22.1	%		28.0	%		23.5	%
Number of homes closed
California		469			107			576			723			346			1,069
Arizona		217			—			217			191			—			191
Nevada		145			—			145			208			—			208
Total		831			107			938			1,122			346			1,468
Average sales price
California	$	638,700		$	406,100		$	595,500		$	625,800		$	533,700		$	596,000
Arizona		298,700			—			298,700			366,500			—			366,500
Nevada		366,500			—			366,500			348,100			—			348,100
Total	$	502,400		$	406,100		$	491,500		$	530,200		$	533,700		$	531,000
Number of net new home orders
California		264			71			335			229			61			290
Arizona		45			—			45			88			—			88
Nevada		124			—			124			82			—			82
Total		433			71			504			399			61			460
Average number of sales locations during quarter
California		32			7			39			23			7			30
Arizona		6			—			6			5			—			5
Nevada		11			—			11			9			—			9
Total		49			7			56			37			7			44

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WILLIAM LYON HOMES

SELECTED FINANCIAL AND OPERATING INFORMATION (Continued)

(unaudited)

	As of December 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		303		52		355		608		123		731
Arizona		191		—		191		396		—		396
Nevada		60		—		60		164		—		164
Total		554		52		606		1,168		123		1,291
Dollar amount of homes sold but not closed at end of period (in thousands)
California	$	197,123	$	24,122	$	221,245	$	427,102	$	64,355	$	491,457
Arizona		51,852		—		51,852		141,132		—		141,132
Nevada		22,408		—		22,408		59,038		—		59,038
Total	$	271,383	$	24,122	$	295,505	$	627,272	$	64,355	$	691,627
Lots controlled at end of period
Owned lots
California		4,895		530		5,425		4,296		1,290		5,586
Arizona		3,996		2,568		6,564		3,627		822		4,449
Nevada		1,299		—		1,299		1,483		—		1,483
Total		10,190		3,098		13,288		9,406		2,112		11,518
Optioned lots (1)
California						2,872						4,650
Arizona						3,492						8,232
Nevada						1,013						2,189
Total						7,377						15,071
Total lots controlled
California						8,297						10,236
Arizona						10,056						12,681
Nevada						2,312						3,672
Total						20,665						26,589

(1) Optioned lots may be purchased as wholly-owned projects or by newly formed joint ventures.

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WILLIAM LYON HOMES

SELECTED FINANCIAL AND OPERATING INFORMATION

(unaudited)

	Twelve Months Ended December 31,
	2006									2005
	Wholly- Owned			Joint Ventures			Consolidated Total			Wholly- Owned			Joint Ventures			Consolidated Total
Selected Financial Information (dollars in thousands)
Homes closed		2,540			347			2,887			2,508			688			3,196
Home sales revenue	$	1,327,297		$	151,397		$	1,478,694		$	1,338,208		$	406,859		$	1,745,067
Cost of sales		(1,052,657	)		(107,957	)		(1,160,614	)		(1,012,761	)		(294,266	)		(1,307,027	)
Gross margin	$	274,640		$	43,440		$	318,080		$	325,447		$	112,593		$	438,040
Gross margin percentage		20.7	%		28.7	%		21.5	%		24.3	%		27.7	%		25.1	%
Number of homes closed
California		1,431			347			1,778			1,315			688			2,003
Arizona		593			—			593			628			—			628
Nevada		516			—			516			565			—			565
Total		2,540			347			2,887			2,508			688			3,196
Average sales price
California	$	646,900		$	436,300		$	605,800		$	707,400		$	591,400		$	667,600
Arizona		346,800			—			346,800			321,500			—			321,500
Nevada		379,700			—			379,700			364,600			—			364,600
Total	$	522,600		$	436,300		$	512,200		$	533,600		$	591,400		$	546,000
Number of net new home orders
California		1,111			291			1,402			1,566			566			2,132
Arizona		388			—			388			542			—			542
Nevada		412			—			412			647			—			647
Total		1,911			291			2,202			2,755			566			3,321
Average number of sales locations during year
California		28			6			34			20			8			28
Arizona		6			—			6			5			—			5
Nevada		12			—			12			8			—			8
Total		46			6			52			33			8			41

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WILLIAM LYON HOMES

CONSOLIDATED STATEMENTS OF INCOME

(in thousands)

(unaudited)

	Three Months Ended December 31,						Twelve Months Ended December 31,
	2006			2005			2006			2005
Operating revenue
Home sales	$	460,981		$	779,537		$	1,478,694		$	1,745,067
Lots, land and other sales		4,357			46,344			13,527			111,316
		465,338			825,881			1,492,221			1,856,383
Operating costs
Cost of sales - homes		(376,279	)		(596,085	)		(1,160,614	)		(1,307,027	)
Cost of sales - lots, land and other		(7,894	)		(10,882	)		(16,524	)		(44,774	)
Impairment loss on real estate assets		(25,870	)		(4,600	)		(39,895	)		(4,600	)
Sales and marketing		(24,513	)		(22,585	)		(72,349	)		(59,422	)
General and administrative		(12,077	)		(27,165	)		(61,390	)		(90,045	)
Other		(4,212	)		(668	)		(6,502	)		(2,450	)
		(450,845	)		(661,985	)		(1,357,274	)		(1,508,318	)
Equity in (loss) income of unconsolidated joint ventures		(156	)		(212	)		3,242			4,301
Minority equity in income of consolidated entities		(4,036	)		(20,539	)		(16,914	)		(37,571	)
Operating income		10,301			143,145			121,275			314,795
Financial advisory expenses		(23	)		—			(3,165	)		(2,191	)
Other income, net		2,564			1,923			5,599			2,176
Income before provision for income taxes		12,842			145,068			123,709			314,780
Provision for income taxes		(5,161	)		(57,113	)		(48,931	)		(124,149	)
Net income	$	7,681		$	87,955		$	74,778		$	190,631

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WILLIAM LYON HOMES

CONSOLIDATED BALANCE SHEETS

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

	December 31,
	2006		2005
	(unaudited)
ASSETS
Cash and cash equivalents	$	38,732	$	52,369
Receivables		119,491		143,481
Real estate inventories
Owned		1,431,753		1,303,476
Not owned		200,667		115,772
Investments in and advances to unconsolidated joint ventures		3,560		397
Property and equipment, less accumulated depreciation of $12,465 and $9,936 at December 31, 2006 and 2005, respectively		16,828		18,553
Deferred loan costs		11,258		12,323
Goodwill		5,896		5,896
Other assets		50,410		38,735
	$	1,878,595	$	1,691,002
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	48,592	$	67,326
Accrued expenses		111,871		181,068
Liabilities from inventories not owned		131,564		—
Notes payable		304,096		125,619
7 5/8 % Senior Notes due December 15, 2012		150,000		150,000
10 3/4% Senior Notes due April 1, 2013		247,218		246,917
7 1/2% Senior Notes due February 15, 2014		150,000		150,000
		1,143,341		920,930
Minority interest in consolidated entities		109,859		227,178
Stockholders’ equity
Common stock, par value $0.01 per share; 3,000 shares authorized; 1,000 shares outstanding at December 31, 2006; 30,000,000 shares authorized; 8,652,067 shares issued and outstanding at December 31, 2005; 1,275,000 shares issued and held in treasury at December 31, 2005		—		86
Additional paid-in capital		43,213		35,404
Retained earnings		582,182		507,404
		625,395		542,894
	$	1,878,595	$	1,691,002

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WILLIAM LYON HOMES

SUPPLEMENTAL FINANCIAL INFORMATION

SELECTED FINANCIAL DATA (dollars in thousands):

	Three Months Ended December 31,				Last Twelve Months Ended December 31,
	2006		2005		2006			2005
Net income	$	7,681	$	87,955	$	74,778		$	190,631
Net cash provided by (used in) operating activities	$	63,215	$	229,392	$	(22,190	)	$	(44,534	)
Interest incurred	$	19,091	$	21,096	$	80,173		$	73,208
Adjusted EBITDA (1)	$	58,557	$	173,179	$	219,846		$	375,627
Ratio of adjusted EBITDA to interest incurred						2.74	x		5.13	x

Balance Sheet Data

	December 31,
	2006			2005
Stockholders’ equity	$	625,395		$	542,894
Total debt		851,314			672,536
				��
Total book capitalization	$	1,476,709		$	1,215,430
Ratio of debt to total book capitalization		57.6	%		55.3	%
Ratio of debt to total book capitalization (net of cash)		56.5	%		53.3	%
Ratio of debt to LTM adjusted EBITDA		3.87	x		1.79	x
Ratio of debt to LTM adjusted EBITDA (net of cash)		3.70	x		1.65	x

(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) non-cash impairment charges, (v) depreciation and amortization and (vi) 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 accounting principles generally accepted in the United States. 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.

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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:

	Three Months Ended December 31,						Last Twelve Months Ended December 31,
	2006			2005			2006			2005
Net income	$	7,681		$	87,955		$	74,778		$	190,631
Provision for income taxes		5,161			57,113			48,931			124,149
Interest expense:
Interest incurred		19,091			21,096			80,173			73,208
Interest capitalized		(19,091	)		(21,096	)		(80,173	)		(73,208	)
Amortization of capitalized interest in cost of sales		19,017			22,832			54,356			55,748
Non-cash impairment charge		25,870			4,600			39,895			4,600
Depreciation and amortization		672			532			2,529			2,092
Cash distributions of income from unconsolidated joint ventures		—			(65	)		2,599			2,708
Equity in loss (income) of unconsolidated joint ventures		156			212			(3,242	)		(4,301	)
Adjusted EBITDA	$	58,557		$	173,179		$	219,846		$	375,627

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A reconciliation of net cash provided by (used in) operating activities to adjusted EBITDA is provided as follows:

	Three Months Ended December 31,						Last Twelve Months Ended December 31,
	2006			2005			2006			2005
Net cash provided by (used in) operating activities	$	63,215		$	229,392		$	(22,190	)	$	(44,534	)
Interest expense:
Interest incurred		19,091			21,096			80,173			73,208
Interest capitalized		(19,091	)		(21,096	)		(80,173	)		(73,208	)
Amortization of capitalized interest in cost of sales		19,017			22,832			54,356			55,748
State income tax refund credited to additional paid-in capital		—			(1,845	)		(10	)		(1,845	)
Federal income tax refund credited to additional paid-in capital		—			—			(1,820	)		—
Minority equity in (income) loss of consolidated entities		(4,036	)		(20,539	)		(16,914	)		(37,571	)
Net changes in operating assets and liabilities:
Receivables		80,464			107,742			(23,990	)		104,179
Real estate inventories - owned		(56,314	)		(167,133	)		147,790			232,240
Real estate inventories - not owned		(67,793	)		—			(67,793	)		—
Deferred loan costs		236			(696	)		(1,065	)		(1,659	)
Other assets		9,970			936			20,079			6,173
Accounts payable		13,975			(1,912	)		18,734			(27,962	)
Accrued expenses		(177	)		4,402			112,669			90,858
Adjusted EBITDA	$	58,557		$	173,179		$	219,846		$	375,627

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