1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-18001
WILLIAM LYON HOMES
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 33-0864902
(STATE OR JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
4490 VON KARMAN AVENUE 92660
NEWPORT BEACH, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(949) 833-3600
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
OUTSTANDING AT
CLASS OF COMMON STOCK MAY 14, 2001
- --------------------- ----------------
Common stock, par value $.01 10,570,223
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2
WILLIAM LYON HOMES
INDEX
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets -- March 31, 2001 and December
31, 2000.................................................. 3
Consolidated Statements of Income -- Three Months Ended
March 31, 2001 and 2000................................... 4
Consolidated Statement of Stockholders' Equity -- Three
Months Ended March 31, 2001............................... 5
Consolidated Statements of Cash Flows -- Three Months Ended
March 31, 2001 and 2000................................... 6
Notes to Consolidated Financial Statements.................. 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 17
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK...................................................... 29
PART II. OTHER INFORMATION........................................... 30
ITEM 1. NOT APPLICABLE
ITEM 2. NOT APPLICABLE
ITEM 3. NOT APPLICABLE
ITEM 4. NOT APPLICABLE
ITEM 5. NOT APPLICABLE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................ 30
SIGNATURES........................................................... 31
2
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
WILLIAM LYON HOMES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT NUMBER OF SHARES AND PAR VALUE PER SHARE)
ASSETS
MARCH 31, DECEMBER 31,
2001 2000
------------ ------------
(UNAUDITED)
Cash and cash equivalents................................... $ 12,337 $ 14,711
Receivables................................................. 17,552 18,538
Real estate inventories..................................... 254,890 214,418
Investments in and advances to unconsolidated joint
ventures -- Note 2........................................ 49,419 49,966
Property and equipment, less accumulated depreciation of
$3,450 and $3,112 at March 31, 2001 and December 31, 2000,
respectively.............................................. 2,688 2,818
Deferred loan costs......................................... 760 754
Goodwill -- Note 1.......................................... 6,827 7,138
Other assets................................................ 16,997 21,937
-------- --------
$361,470 $330,280
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable............................................ $ 25,453 $ 25,762
Accrued expenses............................................ 22,334 35,096
Notes payable............................................... 129,474 89,709
12 1/2% Senior Notes -- Note 3.............................. 75,616 77,201
-------- --------
252,877 227,768
-------- --------
Stockholders' equity -- Note 1
Common stock, par value $.01 per share; 30,000,000 shares
authorized; 10,570,223 shares issued and outstanding at
March 31, 2001 and December 31, 2000, respectively..... 106 106
Additional paid-in capital................................ 126,608 126,608
Accumulated deficit from January 1, 1994.................. (18,121) (24,202)
-------- --------
108,593 102,512
-------- --------
$361,470 $330,280
======== ========
See accompanying notes.
3
4
WILLIAM LYON HOMES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER COMMON SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
--------------------
2001 2000
-------- --------
Operating revenue
Home sales................................................ $ 65,401 $ 64,609
Lots, land and other sales................................ 7,054 764
Management fee income..................................... 1,670 1,625
-------- --------
74,125 66,998
-------- --------
Operating costs
Cost of sales -- homes.................................... (55,021) (52,511)
Cost of sales -- lots, land and other..................... (3,902) (675)
Sales and marketing....................................... (3,681) (3,536)
General and administrative................................ (8,783) (7,480)
Amortization of goodwill -- Note 1........................ (311) (314)
-------- --------
(71,698) (64,516)
-------- --------
Equity in income of unconsolidated joint ventures........... 3,805 5,126
-------- --------
Operating income............................................ 6,232 7,608
Interest expense, net of amounts capitalized................ (227) (1,545)
Other income (expense), net -- Note 4....................... 788 1,969
-------- --------
Income before income taxes.................................. 6,793 8,032
Provision for income taxes -- Note 1........................ (712) (393)
-------- --------
Net income.................................................. $ 6,081 $ 7,639
======== ========
Earnings per common share -- Note 1:
Basic..................................................... $ 0.58 $ 0.73
======== ========
Diluted................................................... $ 0.57 $ 0.73
======== ========
See accompanying notes.
4
5
WILLIAM LYON HOMES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 2001
(IN THOUSANDS)
(UNAUDITED)
ACCUMULATED
COMMON STOCK ADDITIONAL DEFICIT FROM
---------------- PAID-IN JANUARY 1,
SHARES AMOUNT CAPITAL 1994 TOTAL
------ ------ ---------- ------------ --------
Balance -- December 31, 2000........... 10,570 $106 $126,608 $(24,202) $102,512
Net income............................. -- -- -- 6,081 6,081
------ ---- -------- -------- --------
Balance -- March 31, 2001.............. 10,570 $106 $126,608 $(18,121) $108,593
====== ==== ======== ======== ========
See accompanying notes.
5
6
WILLIAM LYON HOMES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
--------------------
2001 2000
-------- --------
Operating activities
Net income................................................ $ 6,081 $ 7,639
Adjustments to reconcile net income to net cash used in
operating activities
Depreciation and amortization.......................... 620 762
Equity in income of unconsolidated joint ventures...... (3,805) (5,126)
Provision for income taxes............................. 712 393
Net changes in operating assets and liabilities:
Receivables.......................................... 4,161 2,987
Real estate inventories.............................. (41,572) 583
Deferred loan costs.................................. (10) 197
Other assets......................................... 4,940 (6,197)
Accounts payable..................................... (309) 5,929
Accrued expenses..................................... (13,474) (10,086)
-------- --------
Net cash used in operating activities..................... (42,656) (2,919)
-------- --------
Investing activities
Investments in and advances to unconsolidated joint
ventures............................................... (1,759) (5,429)
Distributions from unconsolidated joint ventures.......... 4,036 7,463
Mortgage notes receivable originations/issuances.......... (35,138) (3,133)
Mortgage notes receivable sales/repayments................ 35,138 3,222
Purchases of property and equipment....................... (179) (468)
-------- --------
Net cash provided by investing activities................. 2,098 1,655
-------- --------
Financing activities
Proceeds from borrowing on notes payable.................. 137,736 41,411
Principal payments on notes payable....................... (97,971) (26,846)
Repurchase of 12 1/2% Senior Notes........................ (1,581) --
-------- --------
Net cash provided by financing activities................. 38,184 14,565
-------- --------
Net (decrease) increase in cash and cash equivalents........ (2,374) 13,301
Cash and cash equivalents -- beginning of period............ 14,711 2,154
-------- --------
Cash and cash equivalents -- end of period.................. $ 12,337 $ 15,455
======== ========
Supplemental disclosures of cash flow information
Cash paid during the period for interest, net of amounts
capitalized............................................ $ 2,431 $ 4,366
======== ========
Contribution of land to unconsolidated joint venture...... $ 1,100 $ --
======== ========
See accompanying notes.
6
7
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
William Lyon Homes, a Delaware corporation and subsidiaries (the "Company")
are primarily engaged in designing, constructing and selling single family
detached and attached homes in California, Arizona and Nevada.
The unaudited consolidated financial statements of the Company have been
prepared in accordance with generally accepted accounting principles for interim
financial information and in accordance with the rules and regulations of the
Securities and Exchange Commission. The consolidated financial statements do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The consolidated
financial statements included herein should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended December 31, 2000.
The interim consolidated financial statements have been prepared in
accordance with the Company's customary accounting practices. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a presentation in accordance with generally accepted accounting
principles have been included. Operating results for the three months ended
March 31, 2001 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2001.
The consolidated financial statements include the accounts of the Company
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.
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 five geographic home building regions and its
mortgage origination operation. 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's mortgage
origination operations did not meet the materiality thresholds which would
require disclosure for the three months ended March 31, 2001 and 2000, and
accordingly, are not separately reported.
The Company evaluates performance and allocates resources primarily based
on the operating income of individual home building projects. Operating income
is defined by the Company as sales of homes, lots and land and management fee
income; less cost of sales, impairment losses on real estate, selling and
marketing, general and administrative expenses and amortization of goodwill.
Accordingly, operating income excludes certain expenses included in the
determination of net income. Operating income from home building operations,
including income from the Company's investment in unconsolidated joint ventures,
totaled $6.2 million and $7.6 million for the three months ended March 31, 2001
and 2000, respectively. All other segment measurements are disclosed in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000.
Management fee income represents income recognized in the current period
from unconsolidated joint ventures in accordance with joint venture and/or
operating agreements. Such fees are reimbursements of overhead expenses incurred
by the Company as the managing partner or member of the unconsolidated joint
ventures.
The amount paid for business acquisitions over the net fair value of assets
acquired and liabilities assumed is reflected as goodwill and is being amortized
on a straight-line basis over seven years. Accumulated amortization was
$1,551,000 and $1,862,000 as of December 31, 2000 and March 31, 2001,
respectively.
7
8
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Earnings per share amounts for all periods presented conform to Financial
Accounting Standards Board Statement No. 128, "Earnings Per Share." Basic and
diluted earnings per common share for the three months ended March 31, 2001 are
based on 10,570,223 and 10,638,827 weighted average shares of common stock
outstanding, respectively. Basic and diluted earnings per common share for the
three months ended March 31, 2000 are based on 10,439,135 and 10,447,518 shares
of common stock outstanding, respectively.
The preparation of the Company's financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
the assets and liabilities as of March 31, 2001 and December 31, 2000 and
revenues and expenses for the periods presented. Accordingly, actual results
could differ materially from those estimates in the near-term.
The Company completed a capital restructuring and quasi-reorganization
which resulted in the adjustment of assets and liabilities to their estimated
fair values effective January 1, 1994. Income tax benefits resulting from the
utilization of net operating losses and other carryforwards existing at January
1, 1994 and temporary differences existing prior to or resulting from the
quasi-reorganization ("quasi-reorganization income tax benefits") have been
excluded from the results of operations and credited to paid-in capital. As of
December 31, 2000, all quasi-reorganization income tax benefits have been fully
utilized.
NOTE 2 -- INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED JOINT VENTURES
The Company and certain of its subsidiaries are general partners or members
in twenty-six joint ventures involved in the development and sale of residential
projects. Such joint ventures are 50% or less owned and, accordingly, the
financial statements of such joint ventures are not consolidated with the
Company's financial statements. The Company's investments in unconsolidated
joint ventures are accounted for using the equity method. Condensed combined
financial information of these joint ventures as of March 31, 2001 and December
31, 2000 and for the three months ended March 31, 2001 and 2000 is summarized as
follows:
CONDENSED COMBINED BALANCE SHEETS
(IN THOUSANDS)
MARCH 31, DECEMBER 31,
2001 2000
----------- ------------
(UNAUDITED)
ASSETS
Cash and cash equivalents................................... $ 8,853 $ 10,693
Receivables................................................. 509 1,440
Real estate inventories..................................... 268,418 240,019
Other assets................................................ 250 275
-------- --------
$278,030 $252,427
======== ========
LIABILITIES AND OWNERS' CAPITAL
Accounts payable............................................ $ 18,277 $ 15,921
Accrued expenses............................................ 3,424 4,984
Notes payable............................................... 59,954 45,162
Advances from William Lyon Homes............................ 4,176 1,959
-------- --------
85,831 68,026
-------- --------
Owners' capital
William Lyon Homes........................................ 45,243 48,007
Others.................................................... 146,956 136,394
-------- --------
192,199 184,401
-------- --------
$278,030 $252,427
======== ========
8
9
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
CONDENSED COMBINED STATEMENTS OF INCOME
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
----------------------
2001 2000
-------- --------
Home sales.................................................. $ 51,169 $ 69,072
Operating costs
Cost of sales -- homes.................................... (41,695) (56,583)
Sales and marketing....................................... (1,802) (2,521)
-------- --------
Operating income............................................ 7,672 9,968
Other income, net........................................... 70 244
-------- --------
Net income.................................................. $ 7,742 $ 10,212
======== ========
Allocation to owners
William Lyon Homes........................................ $ 3,805 $ 5,126
Others.................................................... 3,937 5,086
-------- --------
$ 7,742 $ 10,212
======== ========
NOTE 3 -- 12 1/2% SENIOR NOTES
As of March 31, 2001, the Company's outstanding balance under its 12 1/2%
Senior Notes was $75,616,000 with a scheduled maturity date of July 1, 2001. On
February 27, 2001, the Company announced its intention to solicit consents to
extend for two years the maturity date of the 12 1/2% Senior Notes from July 1,
2001 to July 1, 2003, and to make certain amendments to the note covenants. The
Company offered a consent fee of 4% of the outstanding principal balance to the
holders whose consents were received and accepted, subject to receipt of
consents from holders of at least 25% of the principal amount of the Senior
Notes outstanding and other conditions. The consent solicitation was terminated
on April 30, 2001 at which time the Company had received and accepted consents
from the holders of $39,329,000 of the outstanding principal balance of its
12 1/2% Senior Notes to extend the maturity date to July 1, 2003. The Company
paid the consent fee of $1,573,000 on May 3, 2001. The Company expects to repay
the outstanding Senior Notes held by persons who did not consent at the
scheduled maturity date of July 1, 2001.
The 12 1/2% Senior Notes are obligations of William Lyon Homes, a Delaware
corporation ("Delaware Lyon"), and are unconditionally guaranteed on a senior
basis by William Lyon Homes, Inc., a California corporation and a wholly-owned
subsidiary of Delaware Lyon. However, William Lyon Homes, Inc. has granted liens
on substantially all of its assets as security for its obligations under certain
revolving credit facilities and other loans. Because the William Lyon Homes,
Inc. guarantee is not secured, holders of the Senior Notes are effectively
junior to borrowings under the revolving credit facilities with respect to such
assets. Delaware Lyon and its consolidated subsidiaries are referred to
collectively herein as the "Company." Interest on the Senior Notes is payable on
January 1 and July 1 of each year.
9
10
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Supplemental consolidating financial information of the Company,
specifically including information for William Lyon Homes, Inc. is presented
below. Investments in subsidiaries are presented using the equity method of
accounting. Separate financial statements of William Lyon Homes, Inc. are not
provided, as the consolidating financial information contained herein provides a
more meaningful disclosure to allow investors to determine the nature of assets
held and the operations of the combined groups.
CONSOLIDATING BALANCE SHEET
MARCH 31, 2001
(IN THOUSANDS)
UNCONSOLIDATED
---------------------------------------
DELAWARE WILLIAM LYON NON-GUARANTOR ELIMINATING CONSOLIDATED
LYON HOMES, INC. SUBSIDIARIES ENTRIES COMPANY
-------- ------------ ------------- ----------- ------------
ASSETS
Cash and cash equivalents........... $ -- $ 10,452 $ 1,885 $ -- $ 12,337
Receivables......................... -- 6,700 10,852 -- 17,552
Real estate inventories............. -- 254,705 185 -- 254,890
Investments in and advances to
unconsolidated joint ventures..... -- 20,133 29,286 -- 49,419
Property and equipment, net......... -- 2,447 241 -- 2,688
Deferred loan costs................. 78 682 -- -- 760
Goodwill............................ -- 6,827 -- -- 6,827
Other assets........................ -- 16,923 74 -- 16,997
Investments in subsidiaries......... 104,706 30,630 -- (135,336) --
Intercompany receivables............ 84,645 5,220 -- (89,865) --
-------- -------- ------- --------- --------
$189,429 $354,719 $42,523 $(225,201) $361,470
======== ======== ======= ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable.................... $ -- $ 25,275 $ 178 $ -- $ 25,453
Accrued expenses.................... -- 20,862 1,472 -- 22,334
Notes payable....................... -- 122,312 7,162 -- 129,474
12 1/2% Senior Notes................ 75,616 -- -- -- 75,616
Intercompany payables............... 5,220 84,645 -- (89,865) --
-------- -------- ------- --------- --------
Total liabilities......... 80,836 253,094 8,812 (89,865) 252,877
Stockholders' equity................ 108,593 101,625 33,711 (135,336) 108,593
-------- -------- ------- --------- --------
$189,429 $354,719 $42,523 $(225,201) $361,470
======== ======== ======= ========= ========
10
11
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2000
(IN THOUSANDS)
UNCONSOLIDATED
---------------------------------------
DELAWARE WILLIAM LYON NON-GUARANTOR ELIMINATING CONSOLIDATED
LYON HOMES, INC. SUBSIDIARIES ENTRIES COMPANY
-------- ------------ ------------- ----------- ------------
ASSETS
Cash and cash equivalents............ $ -- $ 12,746 $ 1,965 $ -- $ 14,711
Receivables.......................... -- 7,541 10,997 -- 18,538
Real estate inventories.............. -- 213,921 497 -- 214,418
Investments in and advances to
unconsolidated joint ventures...... -- 17,008 32,958 -- 49,966
Property and equipment, net.......... -- 2,564 254 -- 2,818
Deferred loan costs.................. 181 573 -- -- 754
Goodwill............................. -- 7,138 -- -- 7,138
Other assets......................... -- 21,844 93 -- 21,937
Investments in subsidiaries.......... 98,558 34,662 -- (133,220) --
Intercompany receivables............. 86,194 5,220 -- (91,414) --
-------- -------- ------- --------- --------
$184,933 $323,217 $46,764 $(224,634) $330,280
======== ======== ======= ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable..................... $ -- $ 25,515 $ 247 $ -- $ 25,762
Accrued expenses..................... -- 33,303 1,793 -- 35,096
Notes payable........................ -- 82,546 7,163 -- 89,709
12 1/2% Senior Notes................. 77,201 -- -- -- 77,201
Intercompany payables................ 5,220 86,194 -- (91,414) --
-------- -------- ------- --------- --------
Total liabilities.......... 82,421 227,558 9,203 (91,414) 227,768
Stockholders' Equity................. 102,512 95,659 37,561 (133,220) 102,512
-------- -------- ------- --------- --------
$184,933 $323,217 $46,764 $(224,634) $330,280
======== ======== ======= ========= ========
11
12
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
CONSOLIDATING STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 2001
(IN THOUSANDS)
UNCONSOLIDATED
---------------------------------------
DELAWARE WILLIAM LYON NON-GUARANTOR ELIMINATING CONSOLIDATED
LYON HOMES, INC. SUBSIDIARIES ENTRIES COMPANY
-------- ------------ ------------- ----------- ------------
Operating revenue
Sales............................... $ -- $ 64,527 $ 7,928 $ -- $ 72,455
Management fee income............... -- 688 982 -- 1,670
------ -------- ------- -------- --------
-- 65,215 8,910 -- 74,125
------ -------- ------- -------- --------
Operating costs
Cost of sales....................... -- (51,702) (7,221) -- (58,923)
Sales and marketing................. -- (3,262) (419) -- (3,681)
General and administrative.......... -- (8,718) (65) -- (8,783)
Amortization of goodwill............ -- (311) -- -- (311)
------ -------- ------- -------- --------
-- (63,993) (7,705) -- (71,698)
------ -------- ------- -------- --------
Equity in income of unconsolidated
joint ventures...................... -- 507 3,298 -- 3,805
------ -------- ------- -------- --------
Income from subsidiaries.............. 6,081 4,810 -- (10,891) --
------ -------- ------- -------- --------
Operating income...................... 6,081 6,539 4,503 (10,891) 6,232
Interest expense, net of amounts
capitalized......................... -- (227) -- -- (227)
Other income (expense), net........... -- 419 369 -- 788
------ -------- ------- -------- --------
Income before income taxes............ 6,081 6,731 4,872 (10,891) 6,793
Provision for income taxes............ -- (712) -- -- (712)
------ -------- ------- -------- --------
Net income............................ $6,081 $ 6,019 $ 4,872 $(10,891) $ 6,081
====== ======== ======= ======== ========
12
13
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
CONSOLIDATING STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 2000
(IN THOUSANDS)
UNCONSOLIDATED
---------------------------------------
DELAWARE WILLIAM LYON NON-GUARANTOR ELIMINATING CONSOLIDATED
LYON HOMES, INC. SUBSIDIARIES ENTRIES COMPANY
-------- ------------ ------------- ----------- ------------
Operating revenue
Sales............................... $ -- $ 63,521 $ 1,852 $ -- $ 65,373
Management fee income............... -- 563 1,062 -- 1,625
------ -------- ------- -------- --------
-- 64,084 2,914 -- 66,998
------ -------- ------- -------- --------
Operating costs
Cost of sales....................... -- (51,680) (1,506) -- (53,186)
Sales and marketing................. -- (3,235) (301) -- (3,536)
General and administrative.......... -- (7,418) (62) -- (7,480)
Amortization of goodwill............ -- (314) -- -- (314)
------ -------- ------- -------- --------
-- (62,647) (1,869) -- (64,516)
------ -------- ------- -------- --------
Equity in income of unconsolidated
joint ventures...................... -- 674 4,452 -- 5,126
------ -------- ------- -------- --------
Income from subsidiaries.............. 7,639 5,430 -- (13,069) --
------ -------- ------- -------- --------
Operating income...................... 7,639 7,541 5,497 (13,069) 7,608
Interest expense, net of amounts
capitalized......................... -- (1,451) (94) -- (1,545)
Other income (expense), net........... -- 2,128 (159) -- 1,969
------ -------- ------- -------- --------
Income before income taxes............ 7,639 8,218 5,244 (13,069) 8,032
Provision for income taxes............ -- (393) -- -- (393)
------ -------- ------- -------- --------
Net income............................ $7,639 $ 7,825 $ 5,244 $(13,069) $ 7,639
====== ======== ======= ======== ========
13
14
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2001
(IN THOUSANDS)
UNCONSOLIDATED
---------------------------------------
DELAWARE WILLIAM LYON NON-GUARANTOR ELIMINATING CONSOLIDATED
LYON HOMES, INC. SUBSIDIARIES ENTRIES COMPANY
-------- ------------ ------------- ----------- ------------
Operating activities:
Net income............................... $ 6,081 $ 6,019 $ 4,872 $(10,891) $ 6,081
Adjustments to reconcile net income to
net cash (used in) provided by
operating activities:
Depreciation and amortization......... -- 591 29 -- 620
Equity in income of unconsolidated
joint ventures...................... -- (507) (3,298) -- (3,805)
Equity in earnings of subsidiaries.... (6,081) (4,810) -- 10,891 --
Provision for income taxes............ -- 712 -- -- 712
Net changes in operating assets and
liabilities:
Receivables......................... -- 841 3,320 -- 4,161
Intercompany receivables/payables... (99) 99 -- -- --
Real estate inventories............. -- (41,884) 312 -- (41,572)
Deferred loan costs................. 99 (109) -- -- (10)
Other assets........................ -- 4,921 19 -- 4,940
Accounts payable.................... -- (240) (69) -- (309)
Accrued expenses.................... -- (13,153) (321) -- (13,474)
------- -------- -------- -------- --------
Net cash (used in) provided by operating
activities............................ -- (47,520) 4,864 -- (42,656)
------- -------- -------- -------- --------
Investing activities:
Net change in investment in
unconsolidated joint ventures......... -- (1,518) 3,795 -- 2,277
Purchases of property and equipment...... -- (163) (16) -- (179)
Investment in subsidiaries............... -- 8,842 -- (8,842) --
Advances to affiliates................... 1,581 -- -- (1,581) --
------- -------- -------- -------- --------
Net cash provided by investing
activities............................ 1,581 7,161 3,779 (10,423) 2,098
------- -------- -------- -------- --------
Financing activities:
Proceeds from borrowings on notes
payable............................... -- 102,599 35,137 -- 137,736
Principal payments on notes payable...... -- (62,833) (35,138) -- (97,971)
Repurchase of 12 1/2% Senior Notes....... (1,581) -- -- -- (1,581)
Distributions to/contributions from
shareholders.......................... -- (53) (8,722) 8,775 --
Advances from affiliates................. -- (1,648) -- 1,648 --
------- -------- -------- -------- --------
Net cash (used in) provided by financing
activities............................ (1,581) 38,065 (8,723) 10,423 38,184
------- -------- -------- -------- --------
Net decrease in cash and cash
equivalents.............................. -- (2,294) (80) -- (2,374)
Cash and cash equivalents at beginning of
period................................... -- 12,746 1,965 -- 14,711
------- -------- -------- -------- --------
Cash and cash equivalents at end of
period................................... $ -- $ 10,452 $ 1,885 $ -- $ 12,337
======= ======== ======== ======== ========
14
15
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000
(IN THOUSANDS)
UNCONSOLIDATED
---------------------------------------
DELAWARE WILLIAM LYON NON-GUARANTOR ELIMINATING CONSOLIDATED
LYON HOMES, INC. SUBSIDIARIES ENTRIES COMPANY
-------- ------------ ------------- ----------- ------------
Operating activities:
Net income............................... $ 7,639 $ 7,825 $ 5,244 $(13,069) $ 7,639
Adjustments to reconcile net income to
net cash (used in) provided by
operating activities:
Depreciation and amortization......... -- 750 12 -- 762
Equity in income of unconsolidated
joint ventures...................... -- (674) (4,452) -- (5,126)
Equity in earnings of subsidiaries.... (7,639) (5,430) -- 13,069 --
Provision for income taxes............ -- 393 -- -- 393
Net changes in operating assets and
liabilities:
Receivables......................... -- 1,001 1,986 -- 2,987
Net change in intercompany
receivables/payables............. (117) 117 -- -- --
Real estate inventories............. -- 1,860 (1,277) -- 583
Deferred loan costs................. 117 80 -- -- 197
Other assets........................ -- (5,815) (382) -- (6,197)
Accounts payable.................... -- 5,974 (45) -- 5,929
Accrued expenses.................... -- (10,084) (2) -- (10,086)
------- -------- ------- -------- --------
Net cash (used in) provided by operating
activities............................ -- (4,003) 1,084 -- (2,919)
------- -------- ------- -------- --------
Investing activities:
Investment in unconsolidated joint
ventures.............................. -- 3,543 (1,509) -- 2,034
Net change in mortgage notes
receivable............................ -- 89 -- -- 89
Purchases of property and equipment...... -- (316) (152) -- (468)
Investment in subsidiaries............... -- (3,018) -- 3,018 --
------- -------- ------- -------- --------
Net cash provided by (used in) investing
activities............................ -- 298 (1,661) 3,018 1,655
------- -------- ------- -------- --------
Financing activities:
Proceeds from borrowings on notes
payable............................... -- 41,411 -- -- 41,411
Principal payments on notes payable...... -- (23,713) (3,133) -- (26,846)
Distributions to/contributions from
shareholders.......................... -- (698) 3,716 (3,018) --
------- -------- ------- -------- --------
Net cash provided by financing
activities............................ -- 17,000 583 (3,018) 14,565
------- -------- ------- -------- --------
Net increase in cash and cash
equivalents.............................. -- 13,295 6 -- 13,301
Cash and cash equivalents at beginning of
period................................... -- 1,344 810 -- 2,154
------- -------- ------- -------- --------
Cash and cash equivalents at end of
period................................... $ -- $ 14,639 $ 816 $ -- $ 15,455
======= ======== ======= ======== ========
15
16
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 4 -- GAIN FROM SALE OF OFFICE BUILDING
In March 2000, the Company completed the sale of an office building where
its prior executive offices were located in Newport Beach, California which was
no longer needed after the consolidation of certain of the Company's operations.
The sales price was $2,120,000 which the Company received in cash at closing.
The net gain from the sale of approximately $1,747,000 is reflected in Other
income (expense), net on the Consolidated Statement of Income for the three
months ended March 31, 2000.
NOTE 5 -- RELATED PARTY TRANSACTIONS
The Company purchased real estate projects for a total purchase price of
$869,000 during the three months ended March 31, 2000 from entities controlled
by William Lyon, Chairman of the Board of Directors and Chief Executive Officer
of the Company and William H. Lyon, the son of William Lyon and a director and
employee of the Company.
On October 26, 2000, the Company's Board of Directors (with Messrs. William
Lyon and William H. Lyon abstaining) approved the purchase of 579 lots for a
total purchase price of $12,581,000 from an entity controlled by William Lyon
and William H. Lyon. The terms of the purchase agreement provided for an initial
option payment of $1,000,000 and a rolling option takedown of the lots. Phase
takedowns of approximately 20 lots each are anticipated to occur at two to three
month intervals for each of several product types through September 2004. In
addition, one-half of the net profits in excess of six percent from the
development are to be paid to the seller. During the three months ended March
31, 2001, the Company purchased 40 lots under this agreement for a total
purchase price of $601,000. This land acquisition qualifies as an affiliate
transaction under the Company's $200,000,000 12 1/2% Senior Notes due July 1,
2001 Indenture dated as of June 29, 1994 ("Indenture"). Pursuant to the terms of
the Indenture, the Company has determined that the land acquisition is on terms
that are no less favorable to the Company than those that would have been
obtained in a comparable transaction by the Company with an unrelated person.
The Company has delivered to the Trustee under the Indenture a resolution of the
Board of Directors of the Company set forth in an Officers' Certificate
certifying that the land acquisition is on terms that are no less favorable to
the Company than those that would have been obtained in a comparable transaction
by the Company with an unrelated person and the land acquisition has been
approved by a majority of the disinterested members of the Board of Directors of
the Company. Further, the Company has delivered to the Trustee under the
Indenture a determination of value by a real estate appraisal firm which is of
regional standing in the region in which the subject property is located and is
MAI certified.
For the three months ended March 31, 2001, the Company incurred on-site
labor costs of $46,000 for providing customer service to real estate projects
developed by entities controlled by William Lyon and William H. Lyon, of which
$25,000 was due to the Company at March 31, 2001.
For the three months ended March 31, 2000, the Company earned management
fees of $108,000 and accrued on-site labor costs of $196,000 for managing and
selling real estate owned by entities controlled by William Lyon and William H.
Lyon.
For the three months ended March 31, 2001 and 2000, the Company incurred
charges of $182,000 and $170,000, respectively, related to rent on its corporate
office, from a trust of which William H. Lyon is the sole beneficiary.
During the three months ended March 31, 2001, the Company incurred charges
of $62,000 related to the charter and use of aircraft owned by an affiliate of
William Lyon.
16
17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
WILLIAM LYON HOMES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion of results of operations and financial condition
should be read in conjunction with the consolidated financial statements and
notes thereto included in Item 1, as well as the information presented in the
Annual Report on Form 10-K for the year ended December 31, 2000.
RESULTS OF OPERATIONS
OVERVIEW AND RECENT RESULTS
Selected financial and operating information for the Company and its
unconsolidated joint ventures as of and for the periods presented is as follows:
THREE MONTHS ENDED MARCH 31,
-------------------------------------------------------------------------------------
2001 2000
----------------------------------------- -----------------------------------------
UNCONSOLIDATED UNCONSOLIDATED
COMPANY JOINT COMBINED COMPANY JOINT COMBINED
WHOLLY-OWNED VENTURES TOTAL WHOLLY-OWNED VENTURES TOTAL
------------ -------------- --------- ------------ -------------- ---------
Selected Financial
Information (dollars in
thousands)
Units closed.............. 286 114 400 319 200 519
======== ======== ======== ======== ======== =========
Home sales revenue........ $ 65,401 $ 51,169 $116,570 $ 64,609 $ 69,072 $ 133,681
Cost of sales............. (55,021) (41,695) (96,716) (52,511) (56,583) (109,094)
-------- -------- -------- -------- -------- ---------
Gross margin....... $ 10,380 $ 9,474 $ 19,854 $ 12,098 $ 12,489 $ 24,587
======== ======== ======== ======== ======== =========
Gross margin
percentage....... 15.9% 18.5% 17.0% 18.7% 18.1% 18.4%
======== ======== ======== ======== ======== =========
Number of homes closed
California................ 153 114 267 173 200 373
Arizona................... 51 0 51 14 0 14
Nevada.................... 82 0 82 114 0 114
New Mexico(1)............. -- -- -- 18 0 18
-------- -------- -------- -------- -------- ---------
Total combined..... 286 114 400 319 200 519
======== ======== ======== ======== ======== =========
Average sales price
California................ $264,642 $448,851 $343,293 $241,484 $345,359 $ 297,181
Arizona................... 145,028 0 145,028 132,322 0 132,322
Nevada.................... 213,588 0 213,588 164,600 0 164,600
New Mexico(1)............. -- -- -- 123,050 0 123,050
-------- -------- -------- -------- -------- ---------
Total combined..... $228,674 $448,851 $291,425 $202,534 $345,359 $ 257,573
======== ======== ======== ======== ======== =========
Number of homes sold
California................ 312 187 499 343 269 612
Arizona................... 84 0 84 46 0 46
Nevada.................... 158 0 158 83 0 83
New Mexico(1)............. -- -- -- 18 0 18
-------- -------- -------- -------- -------- ---------
Total combined..... 554 187 741 490 269 759
======== ======== ======== ======== ======== =========
Average number of sales
locations during quarter
California................ 15 10 25 21 15 36
Arizona................... 5 0 5 5 0 5
Nevada.................... 7 0 7 5 0 5
New Mexico(1)............. -- -- -- 2 0 2
-------- -------- -------- -------- -------- ---------
Total combined..... 27 10 37 33 15 48
======== ======== ======== ======== ======== =========
17
18
THREE MONTHS ENDED MARCH 31,
-------------------------------------------------------------------------------------
2001 2000
----------------------------------------- -----------------------------------------
UNCONSOLIDATED UNCONSOLIDATED
COMPANY JOINT COMBINED COMPANY JOINT COMBINED
WHOLLY-OWNED VENTURES TOTAL WHOLLY-OWNED VENTURES TOTAL
------------ -------------- --------- ------------ -------------- ---------
Backlog of homes sold but
not closed at end of
period
California................ 365 257 622 435 275 710
Arizona................... 113 0 113 49 0 49
Nevada.................... 173 0 173 94 0 94
New Mexico(1)............. -- -- -- 15 0 15
-------- -------- -------- -------- -------- ---------
Total combined..... 651 257 908 593 275 868
======== ======== ======== ======== ======== =========
Dollar amount of homes sold
but not closed at end of
period (dollars in
thousands)
California................ $ 98,895 $108,493 $207,388 $118,558 $131,143 $ 249,701
Arizona................... 16,084 0 16,084 6,952 0 6,952
Nevada.................... 36,606 0 36,606 17,752 0 17,752
New Mexico(1)............. -- -- -- 2,069 0 2,069
-------- -------- -------- -------- -------- ---------
Total combined..... $151,585 $108,493 $260,078 $145,331 $131,143 $ 276,474
======== ======== ======== ======== ======== =========
AS OF MARCH 31,
-----------------------------
2001 2000
------------ --------------
Lots owned and controlled
California................ 5,404 5,479
Arizona................... 1,584 1,646
Nevada.................... 904 649
New Mexico(1)............. -- 31
-------- --------
Total combined..... 7,892 7,805
======== ========
- ---------------
(1) The Company ceased its operations in New Mexico in mid-2000.
Homes in backlog are generally closed within three to six months. The
dollar amount of backlog of homes sold but not closed as of March 31, 2001 was
$260.1 million, as compared to $276.5 million as of March 31, 2000 and $171.3
million as of December 31, 2000. The cancellation rate of buyers who contracted
to buy a home but did not close escrow at the Company's projects was
approximately 20% during 2000 and 18% during the first three months of 2001.
The number of homes sold for the quarter ended March 31, 2001 decreased 2
percent to 741 units from 759 for the first quarter of 2000. For the first
quarter of 2001, the number of homes sold increased 28 percent to 741 from 577
units in the fourth quarter of 2000. The number of homes closed in the first
quarter of 2001 decreased 23 percent to 400 from 519 in the first quarter of
2000. The backlog of homes sold as of March 31, 2001 was 908, up 5 percent from
868 units a year earlier, and up 60 percent from 567 units at December 31, 2000.
In general, housing demand is adversely affected by increases in interest
rates and housing prices. Interest rates, the length of time that assets remain
in inventory, and the proportion of inventory that is financed affect the
Company's interest cost. If the Company is unable to raise sales prices
sufficiently to compensate for higher costs or if mortgage interest rates
increase significantly, affecting prospective buyers' ability to adequately
finance home purchases, the Company's sales, gross margins and net results may
be adversely impacted.
COMPARISON OF THREE MONTHS ENDED MARCH 31, 2001 TO THREE MONTHS ENDED MARCH
31, 2000
Operating revenue for the three months ended March 31, 2001 was $74.1
million, an increase of $7.1 million (10.6%) from operating revenue of $67.0
million for the three months ended March 31, 2000.
18
19
Revenue from sales of homes increased $0.8 million (1.2%) to $65.4 million in
the 2001 period from $64.6 million in the 2000 period. This increase was due
primarily to an increase in the average sales prices of wholly-owned units to
$228,700 in the 2001 period from $202,500 in the 2000 period, offset by a
decrease in the number of wholly-owned units closed to 286 in the 2001 period
from 319 in the 2000 period. Revenue from sales of lots, land and other
increased $6.3 million to $7.1 million in the 2001 period from $0.8 million in
the 2000 period as a result of the sale of two commercial sites in Southern
California and Arizona in the 2001 period. Management fee income increased by
$0.1 million to $1.7 million in the 2001 period from $1.6 million in the 2000
period as a direct result of the Company's strategy of financing an increased
number of projects through unconsolidated joint ventures.
Total operating income decreased from $7.6 million in the 2000 period to
$6.2 million in the 2001 period. The excess of revenue from sales of homes over
the related cost of sales decreased by $1.7 million to $10.4 million in the 2001
period from $12.1 million in the 2000 period, resulting in a decline in gross
margins of 2.8 percent to 15.9 percent in the 2001 period from 18.7 percent in
the 2000 period. This decrease was primarily due to a change in the mix of
product, a decrease in the number of wholly-owned units closed to 286 units in
the 2001 period from 319 units in the 2000 period, offset by an increase in the
average sales prices of wholly-owned units to $228,700 in the 2001 period from
$202,500 in the 2000 period. The Company's revenues and total operating income
are affected by the proportion of units sold by the Company and those sold by
unconsolidated joint ventures. While the average sales price of homes sold by
joint ventures has been higher than the average sales price of wholly-owned
units, the Company generally receives, after priority returns and capital
distributions, approximately 50% of the profits and losses and cash flows from
joint ventures. Sales and marketing expenses increased by $0.2 million to $3.7
million in the 2001 period from $3.5 million in the 2000 period. General and
administrative expenses increased by $1.3 million to $8.8 million in the 2001
period from $7.5 million in the 2000 period, primarily as a result of increases
in salaries and benefits related to the Company's increased operations. Equity
in income of unconsolidated joint ventures amounting to $3.8 million was
recognized in the 2001 period, down from $5.1 million in the comparable period
for 2000 primarily as a result of a decrease in the number of units closed to
114 in the 2001 period from 200 in the 2000 period.
Total interest incurred decreased $0.7 million (11.5%) from $6.1 million in
the 2000 period to $5.4 million in the 2001 period primarily as a result of (1)
the replacement of the Company's prior $100.0 million working capital facility
with revolving credit facilities (see description below) with lower effective
borrowing costs, (2) reduction of the outstanding principal balance of 12 1/2%
Senior Notes through the secured working capital facilities with lower effective
borrowing costs and (3) decreases in interest rates. Net interest expense
decreased to $0.2 million in the 2001 period from $1.5 million in the 2000
period as a result of a decrease in total interest incurred and an increase in
interest capitalized to real estate inventories.
Other income (expense), net decreased to $0.8 million in the 2001 period
from $2.0 million in the 2000 period primarily as a result of a gain from the
sale of an office building in the 2000 period.
FINANCIAL CONDITION AND LIQUIDITY
The Company provides for its ongoing cash requirements principally from
internally generated funds from the sales of real estate and from outside
borrowings and, beginning in the fourth quarter of 1997, by joint venture
financing from newly formed joint ventures with venture partners that provide a
substantial portion of the capital required for certain projects. The Company
currently maintains the following major credit facilities: 12 1/2% Senior Notes
(the "Senior Notes"), secured revolving credit facilities ("Revolving Credit
Facilities") and an unsecured revolving line of credit with a commercial bank
("Unsecured Revolving Line"). The Company also finances certain projects with
construction loans secured by real estate inventories and finances certain land
acquisitions with seller-provided financing.
The ability of the Company to meet its obligations on its indebtedness will
depend to a large degree on its future performance which in turn will be
subject, in part, to factors beyond its control, such as prevailing economic
conditions, mortgage and other interest rates, weather, the occurrence of events
such as landslides, soil subsidence and earthquakes that are uninsurable, not
economically insurable or not subject to effective
19
20
indemnification agreements, availability of labor and homebuilding materials,
changes in governmental laws and regulations, and the availability and cost of
land for future development.
SENIOR NOTES
As of March 31, 2001, the Company's outstanding balance under its 12 1/2%
Senior Notes was $75,616,000 with a scheduled maturity date of July 1, 2001. On
February 27, 2001, the Company announced its intention to solicit consents to
extend for two years the maturity date of the 12 1/2% Senior Notes from July 1,
2001 to July 1, 2003, and to make certain amendments to the note covenants. The
Company offered a consent fee of 4% of the outstanding principal balance to the
holders whose consents were received and accepted, subject to receipt of
consents from holders of at least 25% of the principal amount of the Senior
Notes outstanding and other conditions. The consent solicitation was terminated
on April 30, 2001 at which time the Company had received and accepted consents
from the holders of $39,329,000 of the outstanding principal balance of its
12 1/2% Senior Notes to extend the maturity date to July 1, 2003. The Company
paid the consent fee of $1,573,000 on May 3, 2001. The Company expects to repay
the outstanding Senior Notes held by persons who did not consent at the
scheduled maturity date of July 1, 2001.
Management of the Company currently anticipates that the Company will
retire at the maturity date of July 1, 2001 the outstanding Senior Notes which
have not been extended by internally-generated cash flow, utilization of undrawn
availability under revolving credit facilities and/or proceeds from its
unsecured line of credit. The failure of the Company to obtain sufficient cash
from these or other sources to retire such Senior Notes at maturity could have
an adverse effect on the Company.
The 12 1/2% Senior Notes (the "Senior Notes") are obligations of William
Lyon Homes, a Delaware corporation ("Delaware Lyon"), and are unconditionally
guaranteed on a senior basis by William Lyon Homes, Inc., a California
corporation and a wholly-owned subsidiary of Delaware Lyon. However, William
Lyon Homes, Inc. has granted liens on substantially all of its assets as
security for its obligations under the Revolving Credit Facilities and other
loans. Because the William Lyon Homes, Inc. guarantee is not secured, holders of
the Senior Notes are effectively junior to borrowings under the Revolving Credit
Facilities with respect to such assets. Interest on the Senior Notes is payable
on January 1 and July 1 of each year.
The Senior Notes are senior obligations of Delaware Lyon and rank pari
passu in right of payment to all existing and future unsecured indebtedness of
Delaware Lyon, and senior in right of payment to all future indebtedness of the
Company which by its terms is subordinated to the Senior Notes.
Delaware Lyon is required to offer to repurchase certain Senior Notes at a
price equal to 100% of the principal amount plus any accrued and unpaid interest
to the date of repurchase if Delaware Lyon's Consolidated Tangible Net Worth is
less than $60.0 million on the last day of each of any two consecutive fiscal
quarters, as well as from the proceeds of certain asset sales.
Upon certain changes of control as described in the Indenture, Delaware
Lyon must offer to repurchase Senior Notes at a price equal to 101% of the
principal amount plus accrued and unpaid interest, if any, to the date of
repurchase.
The Indenture governing the Senior Notes restricts Delaware Lyon and
certain of its subsidiaries with respect to, among other things: (i) the payment
of dividends on and redemptions of capital stock, (ii) the incurrence of
indebtedness or the issuance of preferred stock, (iii) the creation of certain
liens, (iv) consolidation or mergers with or transfers of all or substantially
all of its assets and (v) transactions with affiliates. These restrictions are
subject to a number of important qualifications and exceptions.
REVOLVING CREDIT FACILITIES
The Revolving Credit Facilities have an aggregate maximum loan commitment
of $170.0 million and mature at various dates beginning in 2002 through
September 2004. The collateral for the loans provided by the Revolving Credit
Facilities includes substantially all real estate of the Company (excluding
assets which are pledged as collateral for construction notes payable described
below and excluding assets of partnerships and limited liability companies).
Although the aggregate maximum loan commitment for these loans is
20
21
$170.0 million, the credit facilities have limitations on the amounts which can
be borrowed at any time based on assets which are included in the credit
facilities and the specified borrowings permitted under borrowing base
calculations. The undrawn availability at March 31, 2001 was $24.1 million and
the principal outstanding under the Revolving Credit Facilities at March 31,
2001 was $105.6 million. Pursuant to the terms of the Revolving Credit
Facilities, outstanding advances bear interest at various rates which
approximate the prime rate. The Revolving Credit Facilities include financial
covenants which may limit the amount which may be borrowed thereunder.
UNSECURED REVOLVING LINE
Effective March 8, 2001 the Company obtained an unsecured revolving line of
credit with a commercial bank in the amount of $10.0 million. The Unsecured
Revolving Line bears interest at prime plus 1% and matures on March 12, 2002.
The Unsecured Revolving Line includes financial covenants which may limit the
amount which may be borrowed thereunder. As of March 31, 2001 no amounts had
been borrowed under the Unsecured Revolving Line.
CONSTRUCTION NOTES PAYABLE
At March 31, 2001, the Company had construction notes payable amounting to
$10.9 million related to various real estate projects. The notes are due as
units close or at various dates on or before December 31, 2002 and bear interest
at rates of prime plus 0.25% to prime plus 0.50%.
SELLER FINANCING
Another source of financing available to the Company is seller-provided
financing for land acquired by the Company. At March 31, 2001, the Company had
various notes payable outstanding related to land acquisitions for which seller
financing was provided in the amount of $5.8 million.
REVOLVING MORTGAGE WAREHOUSE CREDIT FACILITY
The Company has a $15.0 million revolving mortgage warehouse credit
facility with a bank to fund its mortgage origination operations. Mortgage loans
are generally held for a short period of time and are typically sold to
investors within 7 to 15 days following funding. Borrowings are secured by the
related mortgage loans held for sale. At March 31, 2001 the outstanding balance
was $7.2 million. The facility, which has a current maturity date of May 31,
2001, also contains a financial covenant requiring that the Company maintains
cash and/or marketable securities on the books of account of its subsidiary,
Duxford Financial, Inc., a California corporation ("Duxford") in an amount equal
to no less than $1.0 million and a financial covenant requiring the Company to
maintain total assets net of total liabilities and net of amounts receivable
from the Company and/or affiliates on the books of account of Duxford in an
amount equal to no less than $1.0 million.
JOINT VENTURE FINANCING
As of March 31, 2001, the Company and certain of its subsidiaries are
general partners or members in twenty-six joint ventures involved in the
development and sale of residential projects. Such joint ventures are 50% or
less owned and, accordingly, the financial statements of such joint ventures are
not consolidated with the Company's financial statements. The Company's
investments in unconsolidated joint ventures are accounted for using the equity
method. See Note 4 of "Notes to Consolidated Financial Statements" for condensed
combined financial information for these joint ventures. Based upon current
estimates, substantially all future development and construction costs will be
funded by the Company's venture partners or from the proceeds of construction
financing obtained by the joint ventures.
As of March 31, 2001, the Company's investment in such joint ventures was
approximately $45.2 million and the Company's venture partners' investment in
such joint ventures was approximately $147.0 million. In addition, certain joint
ventures have obtained financing from land sellers or construction lenders which
amounted to approximately $60.0 million at March 31, 2001.
21
22
ASSESSMENT DISTRICT BONDS
In some jurisdictions in which the Company develops and constructs
property, assessment district bonds are issued by municipalities to finance
major infrastructure improvements and fees. Such financing has been an important
part of financing master-planned communities due to the long-term nature of the
financing, favorable interest rates when compared to the Company's other sources
of funds and the fact that the bonds are sold, administered and collected by the
relevant government entity. As a landowner benefited by the improvements, the
Company is responsible for the assessments on its land. When the Company's homes
or other properties are sold, the assessments are either prepaid or the buyers
assume the responsibility for the related assessments.
CASH FLOWS -- COMPARISON OF THREE MONTHS ENDED MARCH 31, 2001 TO THREE MONTHS
ENDED MARCH 31, 2000
Net cash used in operating activities increased from $2.9 million in the
2000 period to $42.7 million in the 2001 period primarily as a result of an
increase in real estate inventories in the 2001 period.
Net cash provided by investing activities increased to $2.1 million in the
2001 period from $1.7 million in the 2000 period primarily as a result of
increased net cash received from unconsolidated joint ventures in the 2001
period.
Net cash provided by financing activities increased from $14.6 million in
the 2000 period to $38.2 million in the 2001 period as a result of increased net
borrowings on notes payable.
DESCRIPTION OF PROJECTS
The Company's homebuilding projects usually take two to five years to
develop. The following table presents project information relating to each of
the Company's homebuilding divisions.
HOMES
CLOSED
FOR THREE
ESTIMATED UNITS CLOSED LOTS OWNED MONTH
YEAR OF NUMBER OF AS OF AS OF PERIOD ENDED BACKLOG AT
FIRST HOMES AT MARCH 31, MARCH 31, MARCH 31, MARCH 31, SALES PRICE
PROJECT (COUNTY) PRODUCT DELIVERY COMPLETION(1) 2001 2001 2001 2001(2)(4) RANGE(3)
------------------------ -------- ------------- ------------ ---------- ------------ ---------- ------------------
SOUTHERN CALIFORNIA
WHOLLY-OWNED:
Oak Park II -- Irvine
(Orange County)......... 1998 102 101 1 29 1 $165,000 - 251,000
------ ----- ----- ----- -----
Solana at Talega (Orange
County)................. 1999 120 107 13 16 13 $294,000 - 355,000
------ ----- ----- ----- -----
Montellano -- Talega 2R
(Orange County)......... 2001 63 0 63 0 0
------ ----- ----- ----- -----
Lyon Vineyard (San
Bernardino County)...... 2000 100 91 9 2 9 $218,000 - 253,000
------ ----- ----- ----- -----
Lyon Orchard (San
Bernardino County)...... 2000 81 81 0 2 0 $175,000 - 200,000
------ ----- ----- ----- -----
Archibald Ranch -- (San
Bernardino County)...... 2000 113 38 75 17 41 $212,000 - 252,000
------ ----- ----- ----- -----
Crown Ridge -- Palmdale
(Los Angeles County).... 2000 71 38 33 12 29 $160,000 - 185,000
------ ----- ----- ----- -----
Andover -- West Irvine
(Orange County)......... 2001 138 0 63 0 10 $245,000 - 285,000
------ ----- ----- ----- -----
Vista del Verde -- Yorba
Linda (Orange County)... 2001 106 0 41 0 0 $455,000 - 530,000
------ ----- ----- ----- -----
Providence Ranch
(Riverside County)...... 2001 97 0 97 0 27 $198,000 - 240,000
------ ----- ----- ----- -----
Sterling Glen (Orange
County)................. 2001 102 0 102 0 0
------ ----- ----- ----- -----
Total wholly-owned.... 1,093 456 497 78 130
------ ----- ----- ----- -----
22
23
HOMES
CLOSED
FOR THREE
ESTIMATED UNITS CLOSED LOTS OWNED MONTH
YEAR OF NUMBER OF AS OF AS OF PERIOD ENDED BACKLOG AT
FIRST HOMES AT MARCH 31, MARCH 31, MARCH 31, MARCH 31, SALES PRICE
PROJECT (COUNTY) PRODUCT DELIVERY COMPLETION(1) 2001 2001 2001 2001(2)(4) RANGE(3)
------------------------ -------- ------------- ------------ ---------- ------------ ---------- ------------------
UNCONSOLIDATED JOINT
VENTURES:
White Cloud Estates
(Ventura County)........ 1999 78 77 1 0 1 $302,000 - 350,000
------ ----- ----- ----- -----
Reston -- Ladera (Orange
County)................. 2000 117 18 99 2 55 $350,000 - 415,000
------ ----- ----- ----- -----
Hampton Road -- Ladera
(Orange County)......... 2000 82 7 75 7 36 $435,000 - 480,000
------ ----- ----- ----- -----
Compass Pointe at Forster
Ranch -- Irvine (Orange
County)................. 2000 92 30 62 9 33 $510,000 - 575,000
------ ----- ----- ----- -----
Avalon at Summerlane
(Orange County)......... 2000 113 39 74 11 23 $435,000 - 475,000
------ ----- ----- ----- -----
Dos Vientos (Orange
County)................. 2001 90 0 90 0 0 $475,000 - 610,000
------ ----- ----- ----- -----
Beachside -- Huntington
Beach (Orange County)... 2001 86 0 86 0 0 $480,000 - 565,000
------ ----- ----- ----- -----
Lyon Monterrey (Orange
County)................. 1999 99 93 6 18 6 $363,000 - 428,000
------ ----- ----- ----- -----
Total unconsolidated
joint ventures...... 757 264 493 47 154
------ ----- ----- ----- -----
SOUTHERN CALIFORNIA
REGION TOTAL............ 1,850 720 990 125 284
====== ===== ===== ===== =====
23
24
HOMES
CLOSED
FOR THREE
ESTIMATED UNITS CLOSED LOTS OWNED MONTH
YEAR OF NUMBER OF AS OF AS OF PERIOD ENDED BACKLOG AT
FIRST HOMES AT MARCH 31, MARCH 31, MARCH 31, MARCH 31, SALES PRICE
PROJECT (COUNTY) PRODUCT DELIVERY COMPLETION(1) 2001 2001 2001 2001(2)(4) RANGE(3)
------------------------ -------- ------------- ------------ ---------- ------------ ---------- ------------------
NORTHERN CALIFORNIA
WHOLLY-OWNED:
St. Helena Westminster
Estates (Napa County)... 1999 23 23 0 1 0 $495,000 - 555,000
------ ----- ----- ----- -----
Lyon Villas (San Joaquin
County)................. 1999 135 81 54 9 0 $203,000 - 279,000
------ ----- ----- ----- -----
Lyon Estates (San Joaquin
County)................. 1997 120 79 41 12 2 $232,000 - 327,000
------ ----- ----- ----- -----
Lyon Ironwood (San Joaquin
County)................. 2000 116 0 64 0 52 $225,000 - 289,000
------ ----- ----- ----- -----
Lyon Edgewood (San Joaquin
County)................. 2000 87 79 8 2 8 $198,000 - 287,000
------ ----- ----- ----- -----
Lyon Edgewood 2 (San
Joaquin County)......... 2000 65 28 37 7 37 $233,000 - 279,000
------ ----- ----- ----- -----
Lyon Rhapsody (San Joaquin
County)................. 2001 81 0 81 0 0 $220,000 - 279,000
------ ----- ----- ----- -----
Lyon Palazzo (Sacramento
County)................. 2001 100 0 100 0 0 $238,000 - 283,000
------ ----- ----- ----- -----
Total wholly-owned.... 727 290 385 31 99
------ ----- ----- ----- -----
UNCONSOLIDATED JOINT
VENTURES:
Cerro Plata (Santa Clara
County)................. 2001 538 0 538 0 0
------ ----- ----- ----- -----
Lyon Groves (Contra (Costa
County)................. 1999 103 99 4 16 3 $269,000 - 379,000
------ ----- ----- ----- -----
Lyon Ridge (Contra (Costa
County)................. 1999 127 57 70 3 48 $317,000 - 400,000
------ ----- ----- ----- -----
Manor at Thomas Ranch
(Contra Costa County)... 1999 63 63 0 1 0 $544,000 - 657,000
------ ----- ----- ----- -----
Plantation at Thomas Ranch
(Contra Costa County)... 1999 77 70 7 15 7 $603,000 - 799,000
------ ----- ----- ----- -----
Henry Ranch (Contra Costa
County)
Lyon Tierra............. 2001 46 0 46 0 4 $502,000 - 557,000
Lyon Dorado............. 2001 54 0 54 0 6 $828,000 - 978,000
------ ----- ----- ----- -----
100 0 100 0 10
------ ----- ----- ----- -----
Woodlake Estates (Solano
County)
Paradise Valley......... 2001 9 0 9 0 0
Brook................... 2001 121 0 121 0 0 $296,000 - 331,000
Falls................... 2001 102 0 102 0 0 $318,000 - 353,000
------ ----- ----- ----- -----
232 0 232 0 0
------ ----- ----- ----- -----
Stonebriar (El Dorado
County) Lyon Casina..... 2001 125 0 125 0 0
Lyon Prima.............. 2001 135 0 135 0 0
------ ----- ----- ----- -----
260 0 260 0 0
------ ----- ----- ----- -----
Total
unconsolidated
joint
ventures........ 1,500 289 1,211 35 68
------ ----- ----- ----- -----
NORTHERN CALIFORNIA
REGION TOTAL............ 2,227 579 1,596 66 167
====== ===== ===== ===== =====
24
25
HOMES
CLOSED
FOR THREE
ESTIMATED UNITS CLOSED LOTS OWNED MONTH
YEAR OF NUMBER OF AS OF AS OF PERIOD ENDED BACKLOG AT
FIRST HOMES AT MARCH 31, MARCH 31, MARCH 31, MARCH 31, SALES PRICE
PROJECT (COUNTY) PRODUCT DELIVERY COMPLETION(1) 2001 2001 2001 2001(2)(4) RANGE(3)
------------------------ -------- ------------- ------------ ---------- ------------ ---------- ------------------
SAN DIEGO
WHOLLY-OWNED:
Horsethief Canyon Ranch
(Riverside County)
Previously Closed
Products.............. 1989 847 847 0 0 0
Series "300"............ 1998 116 116 0 0 0 $129,000 - 150,000
Series "400"............ 1995 554 360 190 9 36 $174,000 - 209,000
Series "500"............ 1995 445 337 112 5 31 $209,000 - 240,000
------ ----- ----- ----- -----
1,962 1,660 302 14 67
------ ----- ----- ----- -----
Sycamore Ranch (Riverside
County)................. 1997 195 103 92 1 0 $322,000 - 393,000
------ ----- ----- ----- -----
Vail Ranch (San Diego
County)................. 2000 152 81 71 14 18 $183,000 - 201,000
------ ----- ----- ----- -----
Rancho Dorado (San Diego
County)
La Fuente............... 2000 56 43 13 7 12 $293,000 - 322,000
Loma Real............... 2000 89 27 42 8 24 $395,000 - 441,000
Los Reyes............... 2000 66 0 37 0 15 $419,000 - 460,000
------ ----- ----- ----- -----
211 70 92 15 51
------ ----- ----- ----- -----
East Grove -- (San Diego
County)................. 2001 117 0 117 0 0
------ ----- ----- ----- -----
Total wholly-owned.... 2,637 1,914 674 44 136
------ ----- ----- ----- -----
UNCONSOLIDATED JOINT
VENTURES:
Otay Ranch -- Saratogo
Trails (San Diego
County)................. 1999 74 73 1 6 1 $258,000 - 276,000
------ ----- ----- ----- -----
Otay Ranch -- Mendocino
(San Diego County)...... 1999 139 118 21 12 17 $214,000 - 242,000
------ ----- ----- ----- -----
Otay Ranch -- (R-29) (San
Diego County)........... 2001 83 0 83 0 0
------ ----- ----- ----- -----
Rancho Dorado (San Diego
County)
Monte Verde............. 2000 65 34 31 14 17 $354,000 - 404,000
------ ----- ----- ----- -----
East Grove -- (San Diego
County)................. 2001 174 0 174 0 0
------ ----- ----- ----- -----
4S Ranch -- (San Diego
County)................. 2001 123 0 66 0 0
------ ----- ----- ----- -----
Total unconsolidated
joint ventures...... 658 225 376 32 35
------ ----- ----- ----- -----
SAN DIEGO REGION
TOTAL................... 3,295 2,139 1,050 76 171
====== ===== ===== ===== =====
25
26
HOMES
CLOSED
FOR THREE
ESTIMATED UNITS CLOSED LOTS OWNED MONTH
YEAR OF NUMBER OF AS OF AS OF PERIOD ENDED BACKLOG AT
FIRST HOMES AT MARCH 31, MARCH 31, MARCH 31, MARCH 31, SALES PRICE
PROJECT (COUNTY) PRODUCT DELIVERY COMPLETION(1) 2001 2001 2001 2001(2)(4) RANGE(3)
------------------------ -------- ------------- ------------ ---------- ------------ ---------- ------------------
ARIZONA
WHOLLY-OWNED:
Crystal Gardens (Maricopa
County)................. 1997 157 149 8 6 7 $100,000 - 227,000
------ ----- ----- ----- -----
Sage Creek -- Encanto
(Maricopa County)....... 2000 176 69 56 16 46 $105,000 - 120,000
------ ----- ----- ----- -----
Sage Creek -- Arcadia
(Maricopa County)....... 2000 167 40 40 7 26 $130,000 - 152,000
------ ----- ----- ----- -----
Sage Creek -- Solano
(Maricopa County)....... 2000 82 23 28 8 11 $157,000 - 183,000
------ ----- ----- ----- -----
Mesquite Grove -- Small
(Maricopa County)....... 2001 110 0 110 0 0 $169,000 - 202,000
------ ----- ----- ----- -----
Mesquite Grove -- Large
(Maricopa County)....... 2001 95 0 95 0 0 $289,000 - 299,000
------ ----- ----- ----- -----
Rio Del Verde (Maricopa
County)................. 2000 84 49 35 14 23 $164,000 - 201,000
------ ----- ----- ----- -----
Power Ranch (Maricopa
County)................. 2001 103 0 103 0 0 $160,000 - 227,000
------ ----- ----- ----- -----
Tramonto (Maricopa
County)................. 2001 76 0 76 0 0 $163,000 - 230,000
------ ----- ----- ----- -----
Total wholly-owned.... 1,050 330 551 51 113
------ ----- ----- ----- -----
UNCONSOLIDATED JOINT
VENTURES:
Mountaingate (Maricopa
County)................. 2001 341 0 171 0 0
------ ----- ----- ----- -----
Total unconsolidated
joint ventures...... 341 0 171 0 0
------ ----- ----- ----- -----
ARIZONA REGION TOTAL...... 1,391 330 722 51 113
====== ===== ===== ===== =====
26
27
HOMES
CLOSED
FOR THREE
ESTIMATED UNITS CLOSED LOTS OWNED MONTH
YEAR OF NUMBER OF AS OF AS OF PERIOD ENDED BACKLOG AT
FIRST HOMES AT MARCH 31, MARCH 31, MARCH 31, MARCH 31, SALES PRICE
PROJECT (COUNTY) PRODUCT DELIVERY COMPLETION(1) 2001 2001 2001 2001(2)(4) RANGE(3)
------------------------ -------- ------------- ------------ ---------- ------------ ---------- ------------------
NEVADA
WHOLLY-OWNED:
Bella Veranda (Clark
County)................. 2000 79 56 23 16 17 $250,000 - 278,000
------ ----- ----- ----- -----
Montecito Tesoro (Clark
County)................. 2000 121 41 29 19 33 $151,000 - 169,000
------ ----- ----- ----- -----
Montecito Classico (Clark
County)................. 2000 100 25 27 12 22 $179,000 - 215,000
------ ----- ----- ----- -----
Kingsway Ridge I
(Clark County).......... 2000 90 53 37 15 26 $164,000 - 185,000
------ ----- ----- ----- -----
Kingsway Ridge II
(Clark County).......... 2000 67 23 44 6 31 $184,000 - 217,000
------ ----- ----- ----- -----
Glenleigh Gardens
(Summerlin A) (Clark
County)................. 2000 96 19 77 10 33 $236,000 - 272,000
------ ----- ----- ----- -----
Springfield (Summerlin N)
(Clark County).......... 2001 85 0 85 0 0 $190,000 - 210,000
------ ----- ----- ----- -----
Topaz Ridge (Summerlin B)
(Clark County).......... 2001 89 0 89 0 0 $458,000 - 516,000
------ ----- ----- ----- -----
Stallion Mountain (Clark
County)................. 2001 116 4 112 4 11 $145,000 - 165,000
------ ----- ----- ----- -----
NEVADA REGION TOTAL....... 843 221 523 82 173
====== ===== ===== ===== =====
GRAND TOTALS:
Wholly-owned............ 6,350 3,211 2,630 286 651
Unconsolidated joint
ventures.............. 3,256 778 2,251 114 257
------ ----- ----- ----- -----
9,606 3,989 4,881 400 908
====== ===== ===== ===== =====
- ---------------
(1) The estimated number of homes to be built at completion is subject to
change, and there can be no assurance that the Company will build these
homes.
(2) Backlog consists of homes sold under sales contracts that have not yet
closed, and there can be no assurance that closings of sold homes will
occur.
(3) Sales price range reflects base price only and excludes any lot premium,
buyer incentive and buyer selected options, which vary from project to
project.
(4) Of the total homes subject to pending sales contracts as of March 31, 2001,
824 represent homes completed or under construction and 84 represent homes
not yet under construction.
(5) In December 1999, the Company sold substantially all of the remaining lots
in its Sun Lakes Country Club project in a bulk sale.
NET OPERATING LOSS CARRYFORWARDS
At December 31, 2000, the Company had net operating loss carryforwards for
Federal tax purposes of approximately $56.0 million, of which $1.3 million
expires in 2008, $10.5 million expires in 2009, $14.1 million expires in 2010,
$13.7 million expires in 2011, $16.4 million expires in 2012 and $28,000 expires
in 2018. In addition, unused recognized built-in losses in the amount of $23.9
million are available to offset future income and expire between 2009 and 2011.
The Company's ability to utilize the foregoing tax benefits will depend upon the
amount of its otherwise taxable income and may be limited in the event of an
"ownership change" under federal tax laws and regulations. In addition, the
Company's federal income tax returns for 1997, 1998 and 1999 are currently under
examination by the Internal Revenue Service and there can be no assurance that
the Service will not challenge the amount of tax benefits calculated by the
Company.
27
28
NEW YORK STOCK EXCHANGE LISTING
The Company has previously announced that it had received notification from
the New York Stock Exchange on July 28, 1999 that the Securities and Exchange
Commission has approved amendments to the NYSE's continued listing standards.
Under these new standards, the Company would be considered "below criteria" if
it has:
- Total market capitalization of less than $50 million;
- Total stockholders' equity of less than $50 million;
- Average market capitalization of less than $15 million over a consecutive
30-day trading period; or
- Average closing price of less than $1.00 over a consecutive 30
trading-day period.
The NYSE notified the Company that it was below these new criteria on the
date of the notification. The NYSE further informed the Company that failure to
raise its stock price above $1.00 per share within six months would result in
immediate suspension of trading and application to the SEC for delisting. In
addition, the Company would have 45 days from the date of the NYSE's
notification to present a business plan to the NYSE that would demonstrate
compliance with all aspects of the other two criteria within 12 months of the
date of the NYSE's notification. The Company submitted a business plan to the
NYSE within the 45 day period. On September 30, 1999, the NYSE notified the
Company that it had accepted the Company's business plan and would continue the
listing of the Company at that time. The NYSE notification further stated that
the NYSE would continue to monitor the Company quarterly during the twelve
months from the date of the notification. If the Company failed to achieve the
quarterly milestones or if at the completion of the 12 months it was not in
compliance with the new continued listing criteria, the Company would be
suspended from trading on the NYSE and application would be made to the SEC for
delisting.
On August 29, 2000 the Company announced that it had received a letter from
the NYSE dated as of August 14, 2000 notifying the Company that the plan period
under the NYSE's Continued Listing Program for the Company was completed as of
August 5, 2000. According to the NYSE letter, the Company completed the plan
period and is now considered a "company in good standing" by achieving both
market capitalization and shareholders' equity in excess of $50 million. As a
result of the Company's good standing, the Company has formally been removed
from the NYSE's "Watch List". However, the Company is subject to a 12-month
follow-up period within which the Company will be reviewed to ensure that the
Company does not once again fall below any of the NYSE's continued listing
standards. Although no quarterly updates are required during the follow-up
period, the Company is still obligated to be proactive in its discussions with
the NYSE, especially involving events that might effect triggering any of the
continued listing requirements. As of and through March 31, 2001, the Company
was in compliance with all NYSE listing criteria.
INFLATION
The Company's revenues and profitability may be affected by increased
inflation rates and other general economic conditions. In periods of high
inflation, demand for the Company's homes may be reduced by increases in
mortgage interest rates. Further, the Company's profits will be affected by its
ability to recover through higher sales prices increases in the costs of land,
construction, labor and administrative expenses. The Company's ability to raise
prices at such times will depend upon demand and other competitive factors.
FORWARD LOOKING STATEMENTS
Investors are cautioned that certain statements contained in this Quarterly
Report on Form 10-Q, as well as some statements by the Company in periodic press
releases and some oral statements by Company officials to securities analysts
and stockholders during presentations about the Company are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Act"). Statements which are predictive in nature, which depend
upon or refer to future events or conditions, or which include words such as
"expects", "anticipates", "intends", "plans", "believes", "estimates", "hopes",
and similar expressions constitute forward-looking statements. In addition, any
statements concerning future
28
29
financial performance (including future revenues, earnings or growth rates),
ongoing business strategies or prospects, and possible future Company actions,
which may be provided by management are also forward-looking statements as
defined in the Act. Forward-looking statements are based upon expectations and
projections about future events and are subject to assumptions, risks and
uncertainties about, among other things, the Company, economic and market
factors and the homebuilding industry.
Actual events and results may differ materially from those expressed or
forecasted in the forward-looking statements due to a number of factors. The
principal factors that could cause the Company's actual performance and future
events and actions to differ materially from such forward-looking statements
include, but are not limited to, changes in general economic conditions either
nationally or in regions in which the Company operates, whether an ownership
change occurs which results in the limitation of the Company's ability to
utilize the tax benefits associated with its net operating loss carryforward,
changes in home mortgage interest rates, changes in prices of homebuilding
materials, labor shortages, adverse 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,
changes in governmental laws and regulations, whether the Company is able to
refinance the outstanding balances of Senior Notes at their maturity, the timing
of receipt of regulatory approvals and the opening of projects and the
availability and cost of land for future growth.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Refer to the Company's Annual Report on Form 10-K for the year ended
December 31, 2000 for detailed disclosure about quantitative and qualitative
disclosures about market risk. Quantitative and qualitative disclosures about
market risk have not materially changed since December 31, 2000.
29
30
WILLIAM LYON HOMES
PART II. OTHER INFORMATION
ITEMS 1, 2, 3, 4, AND 5.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS.
4.1 Form of First Supplemental Indenture dated as of July 1,
2001 amending and supplementing the Indenture dated as of
June 29, 1994 by and among William Lyon Homes f/k/a The
Presley Companies, a Delaware corporation (as Company),
William Lyon Homes, Inc. f/k/a Presley Homes, f/k/a The
Presley Companies, a California corporation (as Guarantor)
and Firstar Bank, N.A. as successor-in-interest to American
National Bank and Trust Company (as Trustee).
10.1 Business Loan Agreement dated as of March 8, 2001 between
William Lyon Homes, Inc. ("Borrower") and First Bank and
Trust ("Lender").
(b) REPORTS ON FORM 8-K.
No reports were filed on Form 8-K during the reporting period.
30
31
WILLIAM LYON HOMES
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 14, 2001 By: /s/ MICHAEL D. GRUBBS
------------------------------------
MICHAEL D. GRUBBS
Senior Vice President,
Chief Financial Officer and
Treasurer
(Principal Financial Officer)
Date: May 14, 2001 By: /s/ W. DOUGLASS HARRIS
------------------------------------
W. DOUGLASS HARRIS
Vice President, Corporate Controller
(Principal Accounting Officer)
31
32
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
4.1 Form of First Supplemental Indenture dated as of July 1,
2001 amending and supplementing the Indenture dated as of
June 29, 1994 by and among William Lyon Homes f/k/a The
Presley Companies, a Delaware corporation (as Company),
William Lyon Homes, Inc. f/k/a Presley Homes, f/k/a The
Presley Companies, a California corporation (as Guarantor)
and Firstar Bank, N.A. as successor-in-interest to American
National Bank and Trust Company (as Trustee).
10.1 Business Loan Agreement dated as of March 8, 2001 between
William Lyon Homes, Inc. ("Borrower") and First Bank and
Trust ("Lender").