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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
------------------------
JANUARY 18, 2000 (NOVEMBER 5, 1999)
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
WILLIAM LYON HOMES
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-18001 33-0864902
(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NUMBER)
19 CORPORATE PLAZA, NEWPORT BEACH, CALIFORNIA 92660
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(949) 640-6400
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
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2
ITEM 1. NOT APPLICABLE.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On November 5, 1999, The Presley Companies ("Presley") through its
subsidiaries and limited liability companies Presley Homes, WLPC, Inc. and PH
Institutional Ventures purchased substantially all of the real estate assets and
assumed substantially all of the related liabilities of William Lyon Homes, Inc.
("Old William Lyon Homes"), pursuant to the Purchase Agreement and Escrow
Instructions, dated as of October 7, 1999, with Old William Lyon Homes, William
Lyon and William H. Lyon.
The real estate assets purchased from Old William Lyon Homes consist of 9
properties located in Northern California and 9 properties located in Southern
California. The properties are all entitled. Generally, "entitled" land has a
development agreement and/or vesting tentative map, or a final recorded plat or
map from the appropriate county or city government. Development agreements and
vesting tentative maps generally provide for the right to develop the land in
accordance with the provisions of the development agreement or vesting tentative
map unless an issue arises concerning health, safety or welfare.
The total purchase price consisted of approximately $42.6 million in cash
and the assumption of approximately $101.1 million of liabilities of Old William
Lyon Homes. The purchase price was determined based on the value as of December
31, 1998 of the real property and related assets acquired. The parties intended
that these assets, together with all income, receivables, escrow and other
proceeds, purchase deposits, cash and other assets earned or received from any
sale of any of these assets, including any assets acquired with sales proceeds,
in the ordinary course of business since January 1, 1999 and through November 5,
1999 would inure to the buyers. These amounts were to be net of any amounts that
have been used to pay or satisfy land acquisition or development costs, capital
expenditures, principal or interest on indebtedness, accounts payable, accrued
liabilities, employee wages and benefits, taxes, and other liabilities and
operating expenses existing on December 31, 1998 and incurred in the ordinary
course of business. Presley funded the asset purchase through borrowings from
its existing working capital facility and the assumption of existing
indebtedness on certain real estate projects that were acquired. The purchase of
the assets was negotiated by a Special Committee of independent directors of
Presley.
Effective on November 5, 1999, Old William Lyon Homes changed its name to
Corporate Enterprises, Inc. On December 29, 1999, The Presley Companies issued a
Press Release, a copy of which is attached hereto as Exhibit 99.4, announcing
that it would change its name to William Lyon Homes ("New William Lyon Homes" or
the "Company") effective after the close of business on Friday, December 31,
1999 and that it would change its stock ticker symbol from PDC to WLS effective
Monday, January 3, 2000. The Company's common stock continues to trade on the
New York Stock Exchange.
Corporate Enterprises, Inc. is owned by William Lyon and William H. Lyon.
William Lyon is the Chairman of the Board of New William Lyon Homes. William
Lyon and his affiliate own approximately 49.9% of the outstanding common stock
of New William Lyon Homes.
ITEMS 3 AND 4. NOT APPLICABLE.
ITEM 5. OTHER EVENTS.
On November 5, 1999, The Presley Companies issued a press release, a copy
of which was previously filed as Exhibit 99.1 to the Company's Report on Form
8-K dated November 15, 1999 and incorporated herein by this reference,
announcing the closing of the asset purchase and the approval by a majority of
the outstanding Series A Common Stock and Series B Common Stock, voting together
as a class, of the Certificate of Ownership and Merger, pursuant to which The
Presley Companies merged with and into its wholly-owned subsidiary Presley
Merger Sub, Inc.
On November 11, 1999, The Presley Companies issued a Press Release, a copy
of which was previously filed as Exhibit 99.2 to the Company's Report on Form
8-K dated November 15, 1999 and incorporated herein
2
3
by this reference, announcing the consummation of the merger effective as of
12:01 a.m. on November 11, 1999 and the release of earnings for the quarter
ended September 30, 1999 of $10,720,000 or $1.03 per share compared to
$3,299,000 or $0.32 per share for the quarter ended September 30, 1998.
On November 11, 1999, The Presley Companies issued a Press Release, a copy
of which was previously filed as Exhibit 99.3 to the Company's Report on Form
8-K dated November 15, 1999 and incorporated herein by this reference,
announcing the consummation of the merger and the conversion of the shares of
Series A Common Stock and Series B Common Stock on a 1 for 5 exchange ratio into
the new shares of Common Stock of the surviving corporation.
Effective as of the effective time of the Merger on November 11, 1999, the
shares of Common Stock issued by the surviving corporation were deemed
registered pursuant to Section 12(b) of the 1934 Act.
ITEM 6. NOT APPLICABLE.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) and (b) Pro forma financial information required by Article 11 of
Regulation S-X and the financial statements of William Lyon Homes, Inc. are
included in a separate section of this Report on Form 8-K/A commencing on the
page number specified below:
INDEX TO FINANCIAL STATEMENTS
WILLIAM LYON HOMES
(FORMERLY THE PRESLEY COMPANIES)
PAGE
----
Unaudited Pro Forma Condensed Combined Financial
Statements................................................ 6
Unaudited Pro Forma Condensed Combined Balance Sheet as of
September 30, 1999.......................................... 7
Unaudited Pro Forma Condensed Combined Statement of Income
for the Year Ended December 31, 1998................... 8
Unaudited Pro Forma Condensed Combined Statement of Income
for the Nine Months Ended September 30, 1999........... 9
Notes to Unaudited Pro Forma Condensed Combined Financial
Statements............................................. 10
WILLIAM LYON HOMES, INC.
Consolidated Financial Statements
Report of Independent Auditors.............................. 12
Consolidated Balance Sheets as of December 31, 1997 and
1998, and September 30, 1999 (Unaudited)............... 13
Consolidated Statements of Income for the Years Ended
December 31, 1996, 1997 and 1998, and the Nine Months
Ended September 30, 1998 and 1999 (Unaudited).......... 14
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1996, 1997 and 1998, and the
Nine Months Ended September 30, 1999 (Unaudited)....... 15
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1997 and 1998, and the Nine Months
Ended September 30, 1998 and 1999 (Unaudited).......... 16
Notes to Consolidated Financial Statements................ 17
3
4
(c) EXHIBITS
Exhibit 10.2 Purchase Agreement and Escrow Instructions, dated as of
October 7, 1999, by and among The Presley Companies, Presley
Homes, William Lyon Homes, William Lyon and William H. Lyon
(previously filed as Exhibit 10.2 to the Registration
Statement on Form S-4 filed on October 7, 1999 and
incorporated herein by this reference).
Exhibit 99.1 Press Release dated November 5, 1999 (previously filed as
Exhibit 99.1 to the Company's Report on Form 8-K dated
November 15, 1999 and incorporated herein by this
reference).
Exhibit 99.2 Press Release dated November 11, 1999 (previously filed as
Exhibit 99.2 to the Company's Report on Form 8-K dated
November 15, 1999 and incorporated herein by this
reference).
Exhibit 99.3 Press Release dated November 11, 1999 (previously filed as
Exhibit 99.3 to the Company's Report on Form 8-K dated
November 15, 1999 and incorporated herein by this
reference).
Exhibit 99.4 Press Release dated December 29, 1999.
ITEMS 8 AND 9. NOT APPLICABLE.
4
5
SIGNATURE
Pursuant to the requirements of Section 13 and 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
Dated: January 18, 2000 WILLIAM LYON HOMES,
a Delaware corporation
By: /s/ DAVID M. SIEGEL
----------------------------------
Name: David M. Siegel
Title: Senior Vice President, Chief
Financial Officer and
Treasurer
5
6
THE PRESLEY COMPANIES
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On November 11, 1999, The Presley Companies merged with and into a wholly
owned subsidiary, Presley Merger Sub, Inc. which became the surviving entity in
the merger and was renamed The Presley Companies (the "Old Company"). The merger
resulted in the recordation of Presley's assets and liabilities on the books of
the Old Company at their historical cost basis. Accordingly, the consolidated
financial position of the Old Company immediately following the merger was the
same as the consolidated financial position of Presley immediately prior to the
merger. On November 5, 1999, Presley completed the acquisition of substantially
all of the assets of William Lyon Homes, Inc. ("Old William Lyon Homes") for a
cash purchase price of $42.6 million ($45.3 million including acquisition costs)
and the assumption of $101.1 million of liabilities of Old William Lyon Homes
(the "Acquisition"). The Acquisition was accounted for as a purchase and,
accordingly, the purchase price was allocated based on the fair value of the
assets and liabilities acquired, with the excess of the purchase price over the
net assets acquired of $8.7 million reflected as goodwill to be amortized on a
straight-line basis over an estimated useful life of seven years.
Effective on November 5, 1999, Old William Lyon Homes changed its name to
Corporate Enterprises, Inc. On December 29, 1999, The Presley Companies issued a
Press Release, a copy of which is attached hereto as Exhibit 99.4, announcing
that it would change its name to William Lyon Homes ("New William Lyon Homes" or
the "Company") effective after the close of business on Friday, December 31,
1999 and that it would change its stock ticker symbol from PDC to WLS effective
Monday, January 3, 2000. The Company's common stock continues to trade on the
New York Stock Exchange.
The following Unaudited Pro Forma Condensed Combined Financial Statements
are derived from the consolidated historical financial statements of Presley and
Old William Lyon Homes. The Unaudited Pro Forma Condensed Combined Balance Sheet
as of September 30, 1999 and Combined Statements of Income for the year ended
December 31, 1998 and the nine months ended September 30, 1999 are presented as
if the Acquisition had been completed on September 30, 1999 for purposes of the
Combined Balance Sheet and January 1, 1998 for purposes of the Combined
Statements of Income. Pro forma adjustments have been made in the accompanying
statements to reflect the impact of purchase accounting and other items that
management believes reasonable under the circumstances.
The Unaudited Pro Forma Condensed Combined Financial Statements should be
read in conjunction with the historical consolidated financial statements of
Presley, including the notes thereto, and the historical consolidated financial
statements of Old William Lyon Homes, including notes thereto, included in this
Form 8-K/A. The Unaudited Pro Forma Condensed Combined Financial Statements are
presented for illustrative purposes only and do not purport to represent the
Company's financial position as of September 30, 1999 or the results of
operations for the year ended December 31, 1998 and the nine months ended
September 30, 1999 that would actually have occurred had the Acquisition been
completed on the dates indicated, nor do they represent a forecast of the
Company's financial position or results of operations as of any future date or
any future period. Furthermore, no effect has been given in the Unaudited Pro
Forma Condensed Combined Financial Statements for operating and synergistic
benefits that may be realized through the combination of entities.
6
7
WILLIAM LYON HOMES
(FORMERLY THE PRESLEY COMPANIES)
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 1999
ASSETS
OLD PRO FORMA
THE WILLIAM LYON PRO FORMA NEW WILLIAM
OLD COMPANY HOMES ADJUSTMENTS LYON HOMES
------------ ------------ ------------ ------------
Cash and cash equivalents............ $ 7,223,000 $ 8,909,000 $ (466,000)(c) $ 14,587,000
(1,079,000)(d)
Receivables.......................... 17,087,000 1,465,000(b) 17,938,000
(614,000)(d)
Due from affiliates.................. 36,000 36,000
Real estate inventories.............. 164,777,000 119,806,000 12,075,000(a) 254,826,000
(37,783,000)(c)
(4,049,000)(d)
Investments in and advances to
unconsolidated joint ventures...... 36,632,000 4,748,000 (1,907,000)(a) 42,871,000
5,336,000(c)
(1,938,000)(d)
Property and equipment, less
accumulated depreciation........... 2,259,000 460,000(b) 2,719,000
Deferred loan costs.................. 2,204,000 2,204,000
Goodwill............................. 8,689,000(a) 8,689,000
Other assets......................... 5,325,000 2,001,000 (1,925,000)(b) 5,069,000
(332,000)(d)
------------ ------------ ------------
$235,507,000 $135,500,000 $348,939,000
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable..................... $ 20,692,000 $ 9,581,000 $ (1,997,000)(b) $ 25,828,000
(707,000)(c)
(1,741,000)(d)
Accrued expenses..................... 23,839,000 1,997,000(b) 25,836,000
Notes payable........................ 35,271,000 96,630,000 45,287,000(a) 141,440,000
(32,206,000)(c)
(3,542,000)(d)
12 1/2% Senior Notes due 2001........ 120,000,000 120,000,000
Minority interest in consolidated
joint ventures..................... 130,000 130,000
------------ ------------ ------------
199,802,000 106,341,000 313,234,000
------------ ------------ ------------
Stockholders' equity................. 35,705,000 29,159,000 (26,430,000)(a) 35,705,000
(2,729,000)(d)
------------ ------------ ------------
$235,507,000 $135,500,000 $348,939,000
============ ============ ============
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8
WILLIAM LYON HOMES
(FORMERLY THE PRESLEY COMPANIES)
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1998
OLD PRO FORMA
THE WILLIAM LYON PRO FORMA NEW WILLIAM
OLD COMPANY HOMES ADJUSTMENTS LYON HOMES
------------ ------------ ------------ -------------
Sales
Homes................................ $348,352,000 $ 67,759,000 $ 416,111,000
Lots, land and other............... 19,930,000 19,930,000
------------ ------------ -------------
368,282,000 67,759,000 436,041,000
------------ ------------ -------------
Operating costs
Cost of sales -- homes............. (297,781,000) (56,394,000) $ (3,031,000)(e) (357,206,000)
Cost of sales -- lots, land and
other........................... (20,992,000) (20,992,000)
Sales and marketing................ (21,463,000) (2,858,000) (24,321,000)
General and administrative
expenses........................ (15,965,000) (8,170,000) 119,000(b) (24,016,000)
Amortization of goodwill........... (1,241,000)(f) (1,241,000)
------------ ------------ -------------
(356,201,000) (67,422,000) (427,776,000)
------------ ------------ -------------
Income from unconsolidated joint
ventures........................... 3,499,000 3,649,000 7,148,000
------------ ------------ -------------
Operating income..................... 15,580,000 3,986,000 15,413,000
Interest expense, net of amounts
capitalized........................ (9,214,000) (923,000)(g) (10,137,000)
Financial advisory expenses.......... (1,286,000) (1,286,000)
Other income (expense), net.......... 3,225,000 2,447,000 (119,000)(b) 5,553,000
Minority interest in consolidated
joint ventures' operations......... (24,000) (24,000)
------------ ------------ -------------
Income before income taxes and
extraordinary item................. 8,305,000 6,409,000 9,519,000
Provision for income taxes........... (1,191,000) (96,000) (74,000)(h) (1,361,000)
------------ ------------ -------------
Net income (excluding extraordinary
item).............................. $ 7,114,000 $ 6,313,000 $ 8,158,000
============ ============ =============
Basic and diluted earnings per common
share (excluding extraordinary
item).............................. $ 0.14 $ 0.78
============ =============
Basic and diluted average shares
outstanding........................ 52,195,678 (41,756,542)(i) 10,439,136
============ =============
8
9
WILLIAM LYON HOMES
(FORMERLY THE PRESLEY COMPANIES)
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1999
OLD PRO FORMA
THE WILLIAM LYON PRO FORMA NEW WILLIAM
OLD COMPANY HOMES ADJUSTMENTS LYON HOMES
------------ ------------ ------------ -------------
Sales
Homes................................ $261,686,000 $ 99,406,000 $ (5,435,000)(c) $ 355,657,000
Lots, land and other............... 4,689,000 4,689,000
------------ ------------ -------------
266,375,000 99,406,000 360,346,000
------------ ------------ -------------
Operating costs
Cost of sales -- homes............. (216,188,000) (82,285,000) 4,636,000(c) (298,601,000)
(4,764,000)(e)
Cost of sales -- lots, land and
other........................... (4,813,000) (4,813,000)
Sales and marketing................ (12,658,000) (3,711,000) 530,000(c) (15,839,000)
General and administrative
expenses........................ (12,817,000) (8,427,000) 163,000(c) (21,081,000)
Amortization of goodwill........... (931,000)(f) (931,000)
------------ ------------ -------------
(246,476,000) (94,423,000) (341,265,000)
------------ ------------ -------------
Income from unconsolidated joint
ventures........................... 12,278,000 435,000 53,000(c) 12,331,000
(435,000)(d)
------------ ------------ -------------
Operating income..................... 32,177,000 5,418,000 31,412,000
Interest expense, net of amounts
capitalized........................ (4,554,000) (692,000)(g) (5,246,000)
Financial advisory expenses.......... (2,197,000) (2,197,000)
Other income (expense), net.......... 2,366,000 1,162,000 3,528,000
Minority interest in consolidated
joint ventures' operations......... (104,000) (104,000)
------------ ------------ -------------
Income before income taxes and
extraordinary item................. 27,792,000 6,476,000 27,393,000
Provision for income taxes........... (3,988,000) (97,000) 168,000(h) (3,917,000)
------------ ------------ -------------
Net income (excluding extraordinary
item).............................. $ 23,804,000 $ 6,379,000 $ 23,476,000
============ ============ =============
Basic and diluted earnings per common
share (excluding extraordinary
item).............................. $ 0.46 $ 2.25
============ =============
Basic and diluted average shares
outstanding........................ 52,195,678 (41,756,542)(i) 10,439,136
============ =============
9
10
WILLIAM LYON HOMES
(FORMERLY THE PRESLEY COMPANIES)
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
(a) Recordation of the Acquisition using purchase accounting based upon the
following adjusted cash purchase price and acquisition costs which were funded
by the Company's Working Capital Facility:
Original cash purchase price................................ $48,000,000
Reduction to cash purchase price for the excluded assets and
liabilities (see Note (d) below)............................ (5,402,000)
-----------
Adjusted cash purchase price................................ 42,598,000
Acquisition costs........................................... 2,689,000
-----------
Adjusted cash purchase price and acquisition costs.......... $45,287,000
===========
The step-up in net assets acquired of $10,168,000 is based on the estimated
fair value of the assets acquired of $137,656,000 less liabilities assumed of
$101,058,000, in accordance with Accounting Principles Board Opinion No. 16,
"Accounting for Business Combinations," as amended.
Step-up in real estate inventories.......................... $12,075,000
Reduction in investments in and advances to unconsolidated
joint ventures.............................................. (1,907,000)
-----------
10,168,000
Excess of purchase price over net assets acquired
(goodwill)................................................ 8,689,000
Equity of Old William Lyon Homes (after excluding net
historical cost of assets not acquired and liabilities not
assumed of $2,729,000 -- see Note (d) below).............. 26,430,000
-----------
Adjusted cash purchase price and acquisition costs.......... $45,287,000
===========
(b) Reclassification of Old William Lyon Homes amounts to conform with the
Company's presentation.
(c) Adjustment to reclassify $5,336,000 of net assets relating to certain
Old William Lyon Homes assets (cash of $466,000 and real estate inventories of
$37,783,000) and related liabilities (accounts payable of $707,000 and notes
payable of $32,206,000) which were purchased by Presley and simultaneously
contributed to joint ventures in conjunction with the Acquisition. The net
assets were contributed to joint ventures in which the Company does not have a
majority interest at their fair market value of $3,429,000, which represents a
$1,907,000 reduction to their historical cost basis of $5,336,000 (see note (a)
above). The investment in these new joint ventures is reflected as investments
in unconsolidated joint ventures and the historical operations are reflected as
income from unconsolidated joint ventures using the equity method.
(d) Adjustment to exclude assets not acquired and liabilities not assumed
and their related income that was not acquired (net historical cost $2,729,000).
(e) Increase to cost of sales -- homes resulting from the purchase
accounting adjustment related to the step-up in net assets acquired and the
additional capitalized interest related to the acquisition financing.
(f) Amortization of the excess of purchase price over net assets acquired
(goodwill) on a straight-line basis over an estimated useful life of seven
years.
(g) Interest related to the acquisition financing, net of amounts
capitalized. The adjusted cash purchase price and acquisition costs of
$45,287,000 was financed by borrowings under the Company's Working Capital
Facility which bears a variable rate of interest based on the "reference rate"
of Chase Manhattan Bank plus 2% or alternatively a specified overseas base rate
plus 4.4%, but not less than 8% (10.6% as of December 23, 1999). An increase in
the borrowing rate on all variable rate debt of 0.125% would total approximately
$176,000 for the year ended December 31, 1998 and $134,000 for the nine months
ended September 30, 1999.
(h) Pro forma effect on combined income taxes resulting from the operations
of Old William Lyon Homes and other pro forma adjustments based on the Company's
effective tax rate of 14.3% for the periods
10
11
WILLIAM LYON HOMES
(FORMERLY THE PRESLEY COMPANIES)
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
presented. Presley's effective tax rate of 14.3% has been utilized for pro forma
purposes in place of the statutory tax rate because Presley's historical
effective tax rate is significantly lower than the statutory tax rate due to
substantial unrecognized net operating loss carryforwards which will continue to
be available in future years. These net operating losses reduce Presley's
effective tax rate.
(i) Reflects the merger of Presley with and into its wholly owned
subsidiary, Presley Merger Sub, Inc., and the related one-for-five common stock
exchange as if it occurred at the beginning of the periods presented.
11
12
REPORT OF INDEPENDENT AUDITORS
To the Stockholders
William Lyon Homes, Inc.
We have audited the accompanying consolidated balance sheets of William
Lyon Homes, Inc. as of December 31, 1997 and 1998, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1998. These financial statements are the
responsibility of the management of William Lyon Homes, Inc. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
William Lyon Homes, Inc. at December 31, 1997 and 1998, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
--------------------------------------
Ernst & Young LLP
Newport Beach, California
January 29, 1999
12
13
WILLIAM LYON HOMES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
DECEMBER 31,
-------------------------- SEPTEMBER 30,
1997 1998 1999
----------- ----------- -------------
(UNAUDITED)
Cash and cash equivalents.......................... $ 6,314,000 $ 7,800,000 $ 8,909,000
Due from affiliates (Note 8)....................... 118,000 81,000 36,000
Real estate projects (Notes 2, 5 and 8)............ 26,958,000 79,385,000 119,806,000
Investments in and advances to unconsolidated joint
ventures (Note 10)............................... 3,975,000 1,432,000 4,748,000
Other assets, net (Note 3)......................... 1,598,000 1,742,000 2,001,000
----------- ----------- ------------
$38,963,000 $90,440,000 $135,500,000
=========== =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities (Note
4)............................................... $ 2,910,000 $11,489,000 $ 9,581,000
Notes payable secured by real estate projects (Note
5)............................................... 18,086,000 53,327,000 87,489,000
Note payable, unsecured (Note 5)................... -- 2,815,000 9,141,000
Minority interest in consolidated joint ventures... -- 29,000 130,000
----------- ----------- ------------
20,996,000 67,660,000 106,341,000
----------- ----------- ------------
Commitments and contingencies (Note 6)
Stockholders' equity
Common stock, stated value; 100,000 shares
authorized, 1,200 issued and outstanding...... 300,000 300,000 300,000
Additional paid-in capital....................... 6,200,000 6,200,000 6,200,000
Retained earnings................................ 11,467,000 16,280,000 22,659,000
----------- ----------- ------------
17,967,000 22,780,000 29,159,000
----------- ----------- ------------
$38,963,000 $90,440,000 $135,500,000
=========== =========== ============
See accompanying notes to consolidated financial statements.
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WILLIAM LYON HOMES, INC.
CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------- --------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- ------------
(UNAUDITED)
REVENUES
Sale of residential units...... $42,480,000 $23,569,000 $67,759,000 $28,270,000 $ 99,406,000
Sale of land and lots.......... 3,660,000 -- -- -- --
Income from unconsolidated
joint ventures............... 1,275,000 4,183,000 3,649,000 3,639,000 435,000
Management fee income.......... 3,437,000 2,758,000 1,061,000 852,000 674,000
Other income................... 297,000 738,000 1,323,000 885,000 392,000
Interest income................ 275,000 335,000 265,000 215,000 139,000
----------- ----------- ----------- ----------- ------------
51,424,000 31,583,000 74,057,000 33,861,000 101,046,000
----------- ----------- ----------- ----------- ------------
COSTS
Cost of residential units
sold......................... 39,540,000 20,577,000 56,394,000 23,308,000 82,285,000
Cost of land and lots sold..... 3,513,000 -- -- -- --
Marketing expense.............. 1,796,000 1,372,000 2,858,000 1,641,000 3,711,000
Management fee expense......... 33,000 64,000 69,000 54,000 --
General and administrative
expense...................... 4,802,000 5,656,000 8,170,000 6,098,000 8,427,000
Miscellaneous expenses......... 261,000 18,000 133,000 114,000 43,000
----------- ----------- ----------- ----------- ------------
49,945,000 27,687,000 67,624,000 31,215,000 94,466,000
----------- ----------- ----------- ----------- ------------
MINORITY INTEREST IN
CONSOLIDATED JOINT VENTURES'
OPERATIONS................... 2,000 (4,000) 24,000 (3,000) 104,000
----------- ----------- ----------- ----------- ------------
INCOME BEFORE INCOME TAXES..... 1,477,000 3,900,000 6,409,000 2,649,000 6,476,000
PROVISION FOR INCOME TAXES
(Note 7)..................... 22,000 58,000 96,000 40,000 97,000
----------- ----------- ----------- ----------- ------------
NET INCOME..................... $ 1,455,000 $ 3,842,000 $ 6,313,000 $ 2,609,000 $ 6,379,000
=========== =========== =========== =========== ============
See accompanying notes to consolidated financial statements.
14
15
WILLIAM LYON HOMES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
NUMBER OF ADDITIONAL
COMMON COMMON PAID-IN RETAINED
SHARES STOCK CAPITAL EARNINGS TOTAL
--------- -------- ---------- ----------- -----------
BALANCE -- December 31, 1995.......... 1,200 $300,000 $5,700,000 $ 6,170,000 $12,170,000
Net income............................ -- -- -- 1,455,000 1,455,000
----- -------- ---------- ----------- -----------
BALANCE -- December 31, 1996.......... 1,200 300,000 5,700,000 7,625,000 13,625,000
Contribution from stockholders........ -- -- 500,000 -- 500,000
Net income............................ -- -- -- 3,842,000 3,842,000
----- -------- ---------- ----------- -----------
BALANCE -- December 31, 1997.......... 1,200 300,000 6,200,000 11,467,000 17,967,000
Cash dividends declared and paid...... -- -- -- (1,500,000) (1,500,000)
Net income............................ -- -- -- 6,313,000 6,313,000
----- -------- ---------- ----------- -----------
BALANCE -- December 31, 1998.......... 1,200 300,000 6,200,000 16,280,000 22,780,000
Net income (unaudited)................ -- -- -- 6,379,000 6,379,000
----- -------- ---------- ----------- -----------
BALANCE -- September 30, 1999
(unaudited)........................... 1,200 $300,000 $6,200,000 $22,659,000 $29,159,000
===== ======== ========== =========== ===========
See accompanying notes to consolidated financial statements.
15
16
WILLIAM LYON HOMES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------ ---------------------------
1996 1997 1998 1998 1999
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income........................... $ 1,455,000 $ 3,842,000 $ 6,313,000 $ 2,609,000 $ 6,379,000
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities
Income (loss) from unconsolidated
joint ventures..................... 1,275,000 4,183,000 3,649,000 -- --
Depreciation and amortization...... 37,000 39,000 70,000 41,000 103,000
(Increase) decrease in due from
affiliates....................... (50,000) (14,000) 37,000 (3,169,000) 45,000
Decrease (increase) in real estate
projects......................... 13,365,000 (15,353,000) (52,427,000) (33,617,000) (40,421,000)
(Increase) decrease in other
assets, net...................... (554,000) 157,000 (214,000) 814,000 (362,000)
Increase (decrease) in accounts
payable and accrued
liabilities...................... 1,174,000 (601,000) 8,579,000 8,234,000 (1,908,000)
Minority interest in consolidated
joint ventures' operations....... 2,000 (4,000) 24,000 19,000 104,000
------------ ------------ ------------ ------------ ------------
Net cash provided by (used in)
operating activities............... 16,704,000 (7,751,000) (33,969,000) (25,069,000) (36,060,000)
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in investment in and
advances to unconsolidated joint
ventures........................... (1,517,000) (5,624,000) (1,106,000) 2,014,000 (3,316,000)
------------ ------------ ------------ ------------ ------------
Net cash used in investing
activities......................... (1,517,000) (5,624,000) (1,106,000) 2,014,000 (3,316,000)
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Minority interest contributions
(distributions), net............... (10,000) (4,000) 5,000 -- (3,000)
Borrowings on notes payable.......... 29,868,000 35,511,000 106,137,000 69,231,000 135,250,000
Repayments on notes payable.......... (42,160,000) (25,723,000) (68,081,000) (40,562,000) (94,762,000)
Contribution from stockholders....... -- 500,000 -- -- --
Dividends............................ -- -- (1,500,000) (1,500,000) --
------------ ------------ ------------ ------------ ------------
Net cash (used in) provided by
financing activities............... (12,302,000) 10,284,000 36,561,000 27,169,000 40,485,000
------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................ 2,885,000 (3,091,000) 1,486,000 4,113,000 1,109,000
CASH AND CASH EQUIVALENTS --
beginning of period................ 6,520,000 9,405,000 6,314,000 6,314,000 7,800,000
------------ ------------ ------------ ------------ ------------
CASH AND CASH EQUIVALENTS -- end of
period............................. $ 9,405,000 $ 6,314,000 $ 7,800,000 $ 10,428,000 $ 8,909,000
============ ============ ============ ============ ============
See accompanying notes to consolidated financial statements.
16
17
WILLIAM LYON HOMES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
William Lyon Homes, Inc. ("WLHI") was incorporated under the laws of the
state of California on September 28, 1992. WLHI was formed to engage in all
aspects of residential real estate development.
Principles of Consolidation
The consolidated financial statements include the accounts of WLHI, and all
majority-owned subsidiaries and joint ventures. Investments in joint ventures in
which the Company has a 50% or less ownership interest are accounted for using
the equity method. The accounting policies of the joint ventures are
substantially the same as those of the Company. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
balance sheet dates, and revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company defines cash equivalents as all highly liquid investments with
a maturity of three months or less from the date of purchase.
Real Estate Projects
The Company's real estate projects consist of land, development in process,
substantially completed units and deposits on future projects, all at cost. All
direct land costs, offsite and onsite improvements, and carrying charges are
capitalized to real estate projects under active development; marketing costs
are generally expensed in the period incurred land, offsite costs and all other
common costs are allocated to land parcels benefited based upon relative fair
values before construction. Onsite construction costs and related carrying costs
(principally interest and property taxes) are allocated to individual homes
within a phase based upon the relative sales value of the homes.
The Company accounts for the real estate projects in accordance with
Financial Accounting Standards Board Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of
("Statement No. 121"). Statement No. 121 requires impairment losses be recorded
on assets to be held and used by the Company when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by those
assets (excluding interest) are less than the carrying amount of the assets.
Under Statement No. 121, when an asset to be held and used by the Company is
determined to be impaired, the related carrying value of the asset is adjusted
to its estimated fair value. Statement No. 121 also requires that long-lived
assets that are held for disposal be reported at the lower of the assets'
carrying amount or fair value less costs of disposal.
Fair value represents the amount at which an asset could be bought or sold
in a current transaction between willing parties; that is, other than a forced
or liquidation sale. The estimation process involved in determining if assets
have been impaired and in the determination of fair value is inherently
uncertain since it requires estimates of current market yields as well as future
events and conditions. Such future events and conditions include economic and
market conditions, as well as the availability of suitable financing to fund
development and construction activities. The realization of the Company's real
estate projects is dependent
17
18
WILLIAM LYON HOMES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
upon future uncertain events and conditions and, accordingly, the actual timing
and amounts realized by the Company may be materially different from the
estimated fair values as described herein.
Management has evaluated the real estate projects and determined that no
indicators of impairment are present as of December 31, 1997 and 1998, and
September 30, 1999.
Depreciation and Amortization
The Company depreciates computers and equipment (Note 3) over estimated
useful lives of five years using the double-declining balance method and
furniture over estimated useful lives of seven years using the double-declining
balance method.
Sales and Profit Recognition
A sale is recorded and profit recognized when a sale is consummated, the
buyer's initial and continuing investments are adequate, any receivables are not
subject to future subordination, and the usual risks and rewards of ownership
have been transferred to the buyer in accordance with the provisions of
Statement of Financial Accounting Standards No. 66 "Accounting for Sales of Real
Estate." When it is determined that the earnings process is not complete, profit
is deferred for recognition in future periods. As of December 31, 1997 and 1998
and September 30, 1999, there are no deferred profits.
Management Fees
The Company provides development services to various affiliated entities
and in return receives management fees. Management fees are recognized and
earned, as specified in the applicable agreements, as the related homes are
constructed and sold. Management fees earned from consolidated subsidiaries and
joint ventures are eliminated in consolidation.
Segment Information
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures About Segments of an
Enterprise and Related Information ("Statement No. 131"). Statement No. 131
superseded FASB Statement No. 14, Financial Reporting for Segments of a Business
Enterprise. Statement No. 131 establishes new standards for segment reporting
which are based on the way management organizes segments within the Company for
making operating decisions and assessing performance. The adoption of Statement
No. 131 did not affect the results of operations or financial position of the
Company.
The Company designs, constructs and sells a wide range of homes designed to
meet the specific needs of each of its markets. For internal reporting purposes,
the Company is organized into two geographic home building regions. Because each
of the Company's geographic home building regions has similar economic
characteristics, housing products and class of prospective buyers, the
geographic home building regions have been aggregated into a single home
building segment.
The Company evaluates performance and allocates resources primarily on
income before income taxes of individual home building projects. All revenues
are from external customers and no revenues are generated from transactions with
other segments. There were no customers that contributed 10% or more of the
Company's total revenues during the periods presented.
Reclassifications
Certain amounts contained in the consolidated financial statements for the
years ended December 31, 1996 and 1997 have been reclassified to conform to the
December 31, 1998 presentation.
18
19
WILLIAM LYON HOMES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- REAL ESTATE PROJECTS
Real estate projects consist of the following:
DECEMBER 31,
-------------------------- SEPTEMBER 30,
1997 1998 1999
----------- ----------- -------------
(UNAUDITED)
Land held for development.......... $15,861,000 $46,273,000 $ 36,597,000
Development in process............. 6,562,000 17,840,000 55,542,000
Substantially completed units,
including models................. 3,236,000 10,306,000 16,562,000
Deposits on future projects........ 1,299,000 4,966,000 11,105,000
----------- ----------- ------------
$26,958,000 $79,385,000 $119,806,000
=========== =========== ============
NOTE 3 -- OTHER ASSETS
Other assets are stated at cost, net of accumulated depreciation, and
consist of the following:
DECEMBER 31,
------------------------ SEPTEMBER 30,
1997 1998 1999
---------- ---------- -------------
(UNAUDITED)
Computers............................. $ 201,000 $ 500,000 $ 518,000
Equipment............................. 29,000 40,000 40,000
Furniture............................. -- 44,000 124,000
---------- ---------- ----------
230,000 584,000 682,000
Accumulated depreciation.............. (125,000) (196,000) (222,000)
---------- ---------- ----------
105,000 388,000 460,000
---------- ---------- ----------
Deposits.............................. -- 52,000 52,000
Prepaid assets........................ 89,000 262,000 24,000
Accounts receivable................... 462,000 806,000 1,226,000
Escrow proceeds....................... 942,000 234,000 239,000
---------- ---------- ----------
$1,598,000 $1,742,000 $2,001,000
========== ========== ==========
NOTE 4 -- ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following:
DECEMBER 31,
------------------------- SEPTEMBER 30,
1997 1998 1999
---------- ----------- -------------
(UNAUDITED)
Accrued interest payable............. $ 47,000 $ 409,000 $ 743,000
Warranty reserve..................... 511,000 1,084,000 1,254,000
Accounts payable and other accrued
expenses........................... 859,000 3,031,000 3,863,000
Accrued construction payables........ 1,493,000 6,965,000 3,721,000
---------- ----------- ----------
$2,910,000 $11,489,000 $9,581,000
========== =========== ==========
19
20
WILLIAM LYON HOMES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 -- NOTES PAYABLE
Notes payable secured by real estate projects consist of the following:
DECEMBER 31,
------------------------- SEPTEMBER 30,
1997 1998 1999
----------- ----------- -------------
(UNAUDITED)
Acquisition and development loans payable,
secured by real estate projects, bearing
interest at rates ranging from prime plus 0.25%
to 0.50%, with varying maturities from October
14, 2000 to October 1, 2002..................... $ 667,000 $13,616,000 $36,077,000
Construction loans payable, secured by real
estate projects, bearing interest at rates
ranging from prime plus 0.25% to 0.50%, with
varying maturities from January 3, 2000 to
October 1, 2002............................... 6,023,000 24,394,000 36,575,000
Junior notes payable secured by real estate
projects, bearing interest at rates ranging
from prime plus 1.00% to prime plus 1.25% and
19%, with varying maturities from November 30,
1999 to May 31, 2002.......................... 1,370,000 8,757,000 14,837,000
Land loan payable, secured by real estate
project, bearing interest at prime, due March
26, 1999...................................... 10,026,000 6,560,000 --
----------- ----------- -----------
$18,086,000 $53,327,000 $87,489,000
=========== =========== ===========
At December 31, 1997 and 1998, and September 30, 1999, the carrying value
of the real estate projects securing notes payable totaled $23,575,000,
$73,457,000, and $108,827,000, respectively.
Notes payable, unsecured, includes a line of credit bearing interest at
prime plus 1.00% due June 7, 2000.
During the years ended December 31, 1996, 1997 and 1998, and the nine
months ended September 30, 1998 and 1999, the Company incurred $1,748,000,
$1,056,000, $3,076,000, $1,915,000 and $5,983,000, respectively, of interest
cost, all of which was capitalized to the real estate projects. The prime rate
averaged 8.27%, 8.44%, 8.35%, 8.50% and 7.87% during the years ended December
31, 1996, 1997 and 1998, and the nine months ended September 30, 1998 and 1999,
respectively, and was 8.50%, 7.75% and 8.25% at December 31, 1997 and 1998, and
September 30, 1999, respectively. The notes payable secured by real estate
projects are generally repaid as the individual units are closed based on a
predetermined formula and are extended or refinanced when necessary. At December
31, 1997 and 1998, and September 30, 1999, the loan balances approximated fair
value.
NOTE 6 -- COMMITMENTS AND CONTINGENCIES
The Company's commitments and contingencies include the usual obligations
incurred by real estate developers and asset managers in the normal course of
business. In the opinion of management, these matters will not have a material
effect on the Company's financial position or results of operations. As of
December 31, 1997 and 1998, and September 30, 1999, WLHI has guaranteed
approximately $16,044,000, $63,597,000 and $95,427,000 of indebtedness.
In some jurisdictions in which the Company develops and constructs real
estate, assessment and Community Facilities District bonds are issued by
government entities to finance major infrastructure improvements. As a land
owner benefited by these improvements, the Company is responsible for the
assessments on its land. When properties are sold, the assessments are either
prepaid or the buyers assume the responsibility for the related assessments.
20
21
WILLIAM LYON HOMES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Pursuant to an option agreement dated October 30, 1997 with Acacia Credit
Fund 5, a limited liability company, WLHI has committed to purchase 159 lots at
$39,000 per lot by November 30, 1999. As of December 31, 1998 and September 30,
1999, 76 lots and 159 lots, respectively, have been purchased under this
agreement.
NOTE 7 -- INCOME TAXES
The Company has elected to be taxed as an S corporation for federal and
state income tax purposes. As an S corporation, the Company is not taxed
directly other than a 1.5% state franchise tax; the stockholders are taxed on
their pro rata share of the Company's taxable income. The provision for state
franchise tax for the years ended December 31, 1996, 1997 and 1998, and the nine
months ended September 30, 1998 and 1999, is reflected in the consolidated
statements of income.
Under the provisions of the Internal Revenue Code, a partnership is not
subject to income taxes. Accordingly, income taxes on any income realized are
the responsibility of the respective partners.
NOTE 8 -- RELATED PARTY TRANSACTIONS
The Company purchased real estate projects for a total purchase price of
$520,000 and $500,000 from The William Lyon Company ("TWLC") during the years
ended December 31, 1996 and 1998, respectively. TWLC is owned approximately 93%
by the majority stockholder of WLHI.
The Company purchased a real estate project for a total purchase price of
$3,710,000 from The Presley Companies during the year ended December 31, 1998.
The majority stockholder of the Company is a major shareholder of The Presley
Companies.
For the years ended December 31, 1996, 1997 and 1998, and the nine months
ended September 30, 1998 and 1999, WLHI earned management fees of $3,437,000,
$2,758,000, $1,061,000, $852,000 and $674,000, respectively, for managing and
selling real estate owned by various affiliated unconsolidated entities. In
addition, for the year ended December 31, 1998 and the nine months ended
September 30, 1998 and 1999, WLHI earned fees of $160,000, $108,000 and
$105,000, respectively, for other services performed for affiliates.
For the years ended December 31, 1996, 1997 and 1998, and the nine months
ended September 30, 1998 and 1999, the Company incurred onsite personnel costs
of $2,090,000, $1,674,000, $2,842,000, $1,911,000, and $2,884,000, respectively,
paid to WLHI.
For the years ended December 31, 1996, 1997 and 1998, and the nine months
ended September 30, 1998 and 1999, the Company incurred $244,000, $336,000,
$469,000, $380,000, and $437,000, respectively, to The William Lyon Property
Management Company ("TWLPMC") related to rent on its corporate office. TWLPMC is
57% owned by the majority stockholder of WLHI.
Amount due from affiliates is primarily for direct labor costs provided by
WLHI to individual partnerships which generally are repaid monthly from cash
flows of the affiliates.
NOTE 9 -- 401(k) SAVINGS PLAN
The Company is a participant in a 401(k) defined contribution plan (the
"Plan") which is sponsored by an affiliate. The Plan benefits all employees who
meet certain eligibility requirements. Employees generally become eligible to
participate on the first entry date (January 1 or July 1) following the date of
hire. Eligible employees may contribute a percentage of their compensation to
the Plan, a portion of which may be matched by the Company at its sole
discretion. For the years ended December 31, 1996, 1997 and 1998, and the nine
months ended September 30, 1998 and 1999, the Company matched employee
contributions at 2%, resulting in an expense of $69,000, $57,000, $83,000,
$62,000, and $68,000, respectively.
21
22
WILLIAM LYON HOMES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 -- INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED JOINT VENTURES
The Company accounts for investments in joint ventures in which it has a
50% or less ownership interest using the equity method. These joint ventures
were formed for the purpose of acquiring land, and developing and selling
single-family residences.
The provisions of the partnership agreements for the unconsolidated
partnerships include various formulas for allocations of profits and losses and
distribution of cash. Profits are generally allocated first, to the partners to
recover previous net loss allocations; second, to the partners to the extent of
any preferred return; the balance, to the partners in accordance with their
percentage interests, as defined. Losses are generally allocated first, to the
partners in the same amounts and proportions as any net income previously
allocated; second, to the partners in accordance with their percentage interests
until the Company's capital account is reduced to zero; third, to the outside
partner until its capital account is reduced to zero; the balance is allocated
to the Company.
Distributions are generally allocated first, for payment of the outside
partner's preferred return; second, for payment of the outside partner's capital
contributions until its capital balance equals the balance of the Company's
capital contributions plus its unpaid preferred return; the balance to the
partners in accordance with their percentage interests. Preferred returns are
generally calculated at rates ranging from 9.75% to 10.50%.
Certain unconsolidated partnerships have land purchase agreements whereby
the land seller is entitled to share in profits as specified in the land
purchase agreements. As units are sold, these costs are expensed.
Condensed financial information regarding the Company's unconsolidated
joint ventures is as follows:
AS OF DECEMBER 31, AS OF
-------------------------- SEPTEMBER 30,
1997 1998 1999
----------- ----------- -------------
(UNAUDITED)
ASSETS
Cash and cash equivalents................... $ 4,290,000 $ 391,000 $ 893,000
Real estate projects........................ 31,853,000 22,611,000 62,502,000
Other assets................................ 3,767,000 30,000 111,000
----------- ----------- -----------
$39,910,000 $23,032,000 $63,506,000
=========== =========== ===========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued liabilities.... $ 4,759,000 $ 1,834,000 $ 2,596,000
Notes payable............................... 20,160,000 12,095,000 11,061,000
----------- ----------- -----------
$24,919,000 $13,929,000 $13,657,000
Partners' equity WLHI....................... 3,975,000 1,432,000 4,748,000
Other partners.............................. 11,016,000 7,671,000 45,101,000
----------- ----------- -----------
14,991,000 9,103,000 49,849,000
----------- ----------- -----------
$39,910,000 $23,032,000 $63,506,000
=========== =========== ===========
22
23
WILLIAM LYON HOMES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------ --------------------------
1996 1997 1998 1998 1999
----------- ------------ ----------- ----------- -----------
(UNAUDITED)
Revenues............... $64,902,000 $103,556,000 $54,154,000 $49,977,000 $22,470,000
=========== ============ =========== =========== ===========
Net income:
WLHI................. $ 1,275,000 $ 4,183,000 $ 3,649,000 $ 3,639,000 $ 435,000
Other partners....... 4,552,000 7,656,000 4,404,000 4,426,000 1,586,000
----------- ------------ ----------- ----------- -----------
$ 5,827,000 $ 11,839,000 $ 8,053,000 $ 8,065,000 $ 2,021,000
=========== ============ =========== =========== ===========
NOTE 11 -- IMPACT OF YEAR 2000 (UNAUDITED)
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any computer programs
that have time-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in system failures or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions or normal business
activities.
The Company believes that it will not be required to modify or replace
significant portions of its software and that the year 2000 issue will not pose
significant operational problems for its computer systems. Ultimately, the
potential impact of the year 2000 issue will depend not only on the corrective
measures the Company undertakes, but also on the way in which the year 2000
issue is addressed by businesses and other entities whose financial condition or
operational capability is important to the Company such as its bankers, lenders
and suppliers. The Company is communicating with these parties to ensure they
are aware of the year 2000 issue, to learn how they are addressing it and to
evaluate any likely impact on the Company.
23
24
EXHIBIT INDEX
Exhibit 10.2 Purchase Agreement and Escrow Instructions, dated as of
October 7, 1999, by and among The Presley Companies, Presley
Homes, William Lyon Homes, William Lyon and William H. Lyon
(previously filed as Exhibit 10.2 to the Registration
Statement on Form S-4 filed on October 7, 1999 and
incorporated herein by this reference).
Exhibit 99.1 Press Release dated November 5, 1999 (previously filed as
Exhibit 99.1 to the Company's Report on Form 8-K dated
November 15, 1999 and incorporated herein by this
reference).
Exhibit 99.2 Press Release dated November 11, 1999 (previously filed as
Exhibit 99.2 to the Company's Report on Form 8-K dated
November 15, 1999 and incorporated herein by this
reference).
Exhibit 99.3 Press Release dated November 11, 1999 (previously filed as
Exhibit 99.3 to the Company's Report on Form 8-K dated
November 15, 1999 and incorporated herein by this
reference).
Exhibit 99.4 Press Release dated December 29, 1999.
24