1
- --------------------------------------------------------------------------------
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 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)
<Table>
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)
</Table>
(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.
<Table>
<Caption>
OUTSTANDING AT
CLASS OF COMMON STOCK AUGUST 1, 2001
--------------------- --------------
Common stock, par value $.01 10,588,560
</Table>
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2
WILLIAM LYON HOMES
INDEX
<Table>
<Caption>
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets -- June 30, 2001 and December
31, 2000.................................................. 3
Consolidated Statements of Income -- Three and Six Months
Ended June 30, 2001 and 2000.............................. 4
Consolidated Statement of Stockholders' Equity -- Six Months
Ended June 30, 2001....................................... 5
Consolidated Statements of Cash Flows -- Six Months Ended
June 30, 2001 and 2000.................................... 6
Notes to Consolidated Financial Statements.................. 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 21
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK...................................................... 35
PART II. OTHER INFORMATION........................................... 36
ITEM 1. NOT APPLICABLE.............................................. 36
ITEM 2. NOT APPLICABLE.............................................. 36
ITEM 3. NOT APPLICABLE.............................................. 36
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 36
ITEM 5. NOT APPLICABLE.............................................. 36
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................ 36
SIGNATURES........................................................... 37
</Table>
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
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2001 2000
------------ ------------
(UNAUDITED)
Cash and cash equivalents................................... $ 30,152 $ 14,711
Receivables................................................. 12,360 18,538
Real estate inventories..................................... 271,461 214,418
Investments in and advances to unconsolidated joint
ventures -- Note 2........................................ 50,472 49,966
Property and equipment, less accumulated depreciation of
$3,729 and $3,112 at June 30, 2001 and December 31, 2000,
respectively.............................................. 2,549 2,818
Deferred loan costs......................................... 3,298 754
Goodwill -- Note 1.......................................... 6,517 7,138
Other assets................................................ 13,549 21,937
-------- --------
$390,358 $330,280
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable............................................ $ 26,548 $ 25,762
Accrued expenses............................................ 26,973 35,096
Notes payable............................................... 143,295 89,709
12 1/2% Senior Notes -- Note 3.............................. 75,172 77,201
-------- --------
271,988 227,768
-------- --------
Stockholders' equity -- Notes 1 and 6
Common stock, par value $.01 per share; 30,000,000 shares
authorized; 10,588,560 and 10,570,223 shares issued and
outstanding at June 30, 2001 and December 31, 2000,
respectively........................................... 106 106
Additional paid-in capital................................ 126,767 126,608
Accumulated deficit from January 1, 1994.................. (8,503) (24,202)
-------- --------
118,370 102,512
-------- --------
$390,358 $330,280
======== ========
</Table>
See accompanying notes.
3
4
WILLIAM LYON HOMES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER COMMON SHARE AMOUNTS)
(UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ----------------------
2001 2000 2001 2000
--------- -------- --------- ---------
Operating revenue
Home sales................................... $ 105,222 $ 94,142 $ 170,623 $ 158,751
Lots, land and other sales................... -- 203 7,054 967
Management fee income........................ 1,428 2,346 3,098 3,971
--------- -------- --------- ---------
106,650 96,691 180,775 163,689
--------- -------- --------- ---------
Operating costs
Cost of sales -- homes....................... (87,543) (76,410) (142,564) (128,921)
Cost of sales -- lots, land and other........ (290) (208) (4,192) (883)
Sales and marketing.......................... (4,677) (3,446) (8,358) (6,982)
General and administrative................... (8,119) (8,905) (16,902) (16,385)
Amortization of goodwill -- Note 1........... (310) (310) (621) (624)
--------- -------- --------- ---------
(100,939) (89,279) (172,637) (153,795)
--------- -------- --------- ---------
Equity in income of unconsolidated joint
ventures..................................... 3,493 5,360 7,298 10,486
--------- -------- --------- ---------
Operating income............................... 9,204 12,772 15,436 20,380
Interest expense, net of amounts capitalized... -- (1,932) (227) (3,477)
Other income (expense), net -- Note 4.......... 1,551 602 2,339 2,571
--------- -------- --------- ---------
Income before income taxes..................... 10,755 11,442 17,548 19,474
Provision for income taxes -- Note 1
Income taxes -- benefit credited to paid-in
capital................................... -- (3,722) -- (3,722)
Income taxes -- alternative minimum tax...... (1,137) (549) (1,849) (942)
--------- -------- --------- ---------
Income before extraordinary item............... 9,618 7,171 15,699 14,810
Extraordinary item -- gain from retirement of
debt, net of applicable income taxes -- Note
3............................................ -- 496 -- 496
--------- -------- --------- ---------
Net income..................................... $ 9,618 $ 7,667 15,699 $ 15,306
========= ======== ========= =========
Basic earnings per common share:
-- Note 1
Before extraordinary item.................... $ 0.91 $ 0.68 $ 1.48 $ 1.41
Extraordinary item........................... -- 0.05 -- 0.05
--------- -------- --------- ---------
After extraordinary item..................... $ 0.91 $ 0.73 $ 1.48 $ 1.46
========= ======== ========= =========
Diluted earnings per common share:
-- Note 1
Before extraordinary item.................... $ 0.90 $ 0.68 $ 1.47 $ 1.41
Extraordinary item........................... -- 0.05 -- 0.05
--------- -------- --------- ---------
After extraordinary item..................... $ 0.90 0.73 $ 1.47 1.46
========= ======== ========= =========
</Table>
See accompanying notes.
4
5
WILLIAM LYON HOMES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 2001
(IN THOUSANDS)
(UNAUDITED)
<Table>
<Caption>
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
Issuance of common stock upon exercise
of stock options -- Note 6........... 19 -- 159 -- 159
Net income............................. -- -- -- 15,699 15,699
------ ---- -------- -------- --------
Balance -- June 30, 2001............... 10,589 $106 $126,767 $ (8,503) $118,370
====== ==== ======== ======== ========
</Table>
See accompanying notes.
5
6
WILLIAM LYON HOMES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<Table>
<Caption>
SIX MONTHS ENDED
JUNE 30,
----------------------
2001 2000
--------- ---------
Operating activities
Net income................................................ $ 15,699 $ 15,306
Adjustments to reconcile net income to net cash (used in)
provided by operating activities
Depreciation and amortization.......................... 1,283 1,510
Equity in income of unconsolidated joint ventures...... (7,298) (10,486)
Extraordinary gain on repurchase of senior notes....... -- (522)
Provision for income taxes............................. 1,849 4,690
Net changes in operating assets and liabilities:
Receivables.......................................... 5,452 64
Real estate inventories.............................. (58,143) 6
Deferred loan costs.................................. (2,544) 293
Other assets......................................... 8,388 (5,766)
Accounts payable..................................... 786 2,420
Accrued expenses..................................... (9,972) (4,686)
--------- ---------
Net cash (used in) provided by operating activities....... (44,500) 2,829
--------- ---------
Investing activities
Investments in and advances to unconsolidated joint
ventures............................................... (6,620) (20,734)
Distributions from unconsolidated joint ventures.......... 11,249 19,034
Mortgage notes receivable originations/issuances.......... (87,858) (32,977)
Mortgage notes receivable sales/repayments................ 91,847 32,326
Purchases of property and equipment....................... (393) (1,054)
--------- ---------
Net cash provided by (used in) investing activities....... 8,225 (3,405)
--------- ---------
Financing activities
Proceeds from borrowing on notes payable.................. 324,693 130,465
Principal payments on notes payable....................... (271,107) (103,745)
Repurchase of 12 1/2% Senior Notes........................ (45,744) (21,125)
Reissuance of 12 1/2% Senior Notes........................ 43,715 --
Common stock issued for exercised options................. 159 242
--------- ---------
Net cash provided by financing activities................. 51,716 5,837
--------- ---------
Net increase in cash and cash equivalents................... 15,441 5,261
Cash and cash equivalents -- beginning of period............ 14,711 2,154
--------- ---------
Cash and cash equivalents -- end of period.................. $ 30,152 $ 7,415
========= =========
Supplemental disclosures of cash flow information
Cash paid during the period for interest, net of amounts
capitalized............................................ $ (809) $ 3,980
========= =========
Contribution of land to unconsolidated joint venture...... $ 1,100 $ --
========= =========
</Table>
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 accounting principles generally accepted in the
United States 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 accounting principles generally accepted in the United States 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 accounting principles generally
accepted in the United States have been included. Operating results for the
three and six months ended June 30, 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 evaluates performance and allocates resources primarily based
on the gross margin and operating income of individual home building projects.
Gross margin is defined by the Company as home sales less cost of sales.
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, both gross margin and operating income exclude certain
items included in the determination of net income. 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 $2,172,000 as of December 31, 2000 and June 30, 2001,
respectively. In June 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets ("Statement No. 142"), effective for fiscal years beginning
after December 15, 2001. Under the new rule, goodwill will no longer be
amortized but will be subject to
7
8
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
annual impairment tests in accordance with Statement No. 142. The Company will
apply the new rule on accounting for goodwill beginning in the first quarter of
2002. Application of the nonamortization provisions of Statement No. 142 is
expected to result in an increase in net income of $1,110,000 ($0.10 per share)
per year. During 2002, the Company will perform the first of the required
impairment tests of goodwill as of January 1, 2002 and has not yet determined
what the effect of these tests will be on the earnings and financial position of
the Company.
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 June 30, 2001 are
based on 10,576,048 and 10,723,811 weighted average shares of common stock
outstanding, respectively. Basic and diluted earnings per common share for the
six months ended June 30, 2001 are based on 10,573,152 and 10,684,244 weighted
average shares of common stock outstanding, respectively. Both basic and diluted
earnings per common share for the three and six months ended June 30, 2000 are
based on 10,465,692 and 10,452,414 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 June 30, 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.
8
9
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 2 -- INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED JOINT VENTURES
The Company and certain of its subsidiaries are general partners or members
in 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 June 30, 2001 and December 31, 2000
and for the three and six months ended June 30, 2001 and 2000 is summarized as
follows:
CONDENSED COMBINED BALANCE SHEETS
(IN THOUSANDS)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2001 2000
----------- ------------
(UNAUDITED)
ASSETS
Cash and cash equivalents................................... $ 8,482 $ 10,693
Receivables................................................. 272 1,440
Real estate inventories..................................... 277,896 240,019
Other assets................................................ 250 275
-------- --------
$286,900 $252,427
======== ========
LIABILITIES AND OWNERS' CAPITAL
Accounts payable............................................ $ 24,751 $ 15,921
Accrued expenses............................................ 4,518 4,984
Notes payable............................................... 66,303 45,162
Advances from William Lyon Homes............................ 4,946 1,959
-------- --------
100,518 68,026
-------- --------
Owners' capital
William Lyon Homes........................................ 45,526 48,007
Others.................................................... 140,856 136,394
-------- --------
186,382 184,401
-------- --------
$286,900 $252,427
======== ========
</Table>
9
10
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
CONDENSED COMBINED STATEMENTS OF INCOME
(IN THOUSANDS)
(UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- --------------------
2001 2000 2001 2000
-------- -------- -------- ---------
Home sales................................ $ 58,365 $ 79,313 $109,534 $ 148,385
Operating costs
Cost of sales -- homes.................. (47,702) (65,974) (89,397) (122,557)
Sales and marketing..................... (2,097) (2,734) (3,899) (5,255)
-------- -------- -------- ---------
Operating income.......................... 8,566 10,605 16,238 20,573
Other income, net......................... 46 72 116 316
-------- -------- -------- ---------
Net income................................ $ 8,612 $ 10,677 $ 16,354 $ 20,889
======== ======== ======== =========
Allocation to owners
William Lyon Homes...................... $ 3,493 $ 5,360 $ 7,298 $ 10,486
Others.................................. 5,119 5,317 9,056 10,403
-------- -------- -------- ---------
$ 8,612 $ 10,677 $ 16,354 $ 20,889
======== ======== ======== =========
</Table>
NOTE 3 -- 12 1/2% SENIOR NOTES
As of June 30, 2001, the Company's outstanding balance under its 12 1/2%
Senior Notes was $75,172,000. On May 1, 2001, the Company completed a consent
solicitation with respect to the 12 1/2% Senior Notes and received consents from
holders of $39,279,000 of the then outstanding notes to extend the maturity date
from July 1, 2001 to July 1, 2003 and to make certain amendments to the note
covenants. Although the Company initially intended to accept consents from no
more than 50% of holders, the Company elected to accept additional consents, as
contemplated by the consent solicitation documents. The consenting holders
received a consent fee of 4% of the principal balance. Subsequently, during May
and June 2001, the Company had also repurchased $31,444,000 of the Senior Notes
from non-consenting holders.
In June 2001, General William Lyon, Chairman and Chief Executive Officer of
the Company, and a trust for which his son William Harwell Lyon is a
beneficiary, purchased at par $30,000,000 of the 12 1/2% Senior Notes. William
Harwell Lyon is also an employee and a Director of the Company. Effective in
July 2001, William H. McFarland, another member of the Company's Board of
Directors, purchased at par $1,000,000 of the 12 1/2% Senior Notes. In parity
with holders consenting during the consent solicitation, these Directors
received a consent fee of 4% of the principal balance and consented to the
amendments effected by the Company's consent solicitation statement dated
February 28, 2001.
The Company has repaid all of the remaining 12 1/2% Senior Notes which
matured on July 1, 2001 amounting to $5,893,000. After the transactions
described above, $70,279,000 of the 12 1/2% Senior Notes are outstanding with a
maturity date of July 1, 2003.
In April and May 2000, the Company purchased $21,775,000 principal amount
of its outstanding Senior Notes at a cost of $21,125,000. The net gain resulting
from the purchase was $496,000 after giving effect to income taxes of $26,000
and amortization of related loan costs of $128,000. Such gain is reflected as an
extraordinary item in the Company's results of operations for the second quarter
ended June 30, 2000.
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
10
11
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
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.
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
JUNE 30, 2001
(IN THOUSANDS)
<Table>
<Caption>
UNCONSOLIDATED
---------------------------------------
DELAWARE WILLIAM LYON NON-GUARANTOR ELIMINATING CONSOLIDATED
LYON HOMES, INC. SUBSIDIARIES ENTRIES COMPANY
-------- ------------ ------------- ----------- ------------
ASSETS
Cash and cash equivalents........... $ -- $ 28,154 $ 1,998 $ -- $ 30,152
Receivables......................... -- 5,528 6,832 -- 12,360
Real estate inventories............. -- 271,359 102 -- 271,461
Investments in and advances to
unconsolidated joint ventures..... -- 20,733 29,739 -- 50,472
Property and equipment, net......... -- 2,329 220 -- 2,549
Deferred loan costs................. 2,652 646 -- -- 3,298
Goodwill............................ -- 6,517 -- -- 6,517
Other assets........................ -- 13,449 100 -- 13,549
Investments in subsidiaries......... 114,661 30,985 -- (145,646) --
Intercompany receivables............ 84,201 7,972 -- (92,173) --
-------- -------- ------- --------- --------
$201,514 $387,672 $38,991 $(237,819) $390,358
======== ======== ======= ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable.................... $ -- $ 26,173 $ 375 $ -- $ 26,548
Accrued expenses.................... -- 26,008 965 -- 26,973
Notes payable....................... -- 140,122 3,173 -- 143,295
12 1/2% Senior Notes................ 75,172 -- -- -- 75,172
Intercompany payables............... 7,972 84,201 -- (92,173) --
-------- -------- ------- --------- --------
Total liabilities......... 83,144 276,504 4,513 (92,173) 271,988
Stockholders' equity................ 118,370 111,168 34,478 (145,646) 118,370
-------- -------- ------- --------- --------
$201,514 $387,672 $38,991 $(237,819) $390,358
======== ======== ======= ========= ========
</Table>
11
12
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2000
(IN THOUSANDS)
<Table>
<Caption>
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
======== ======== ======= ========= ========
</Table>
12
13
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
CONSOLIDATING STATEMENT OF INCOME
THREE MONTHS ENDED JUNE 30, 2001
(IN THOUSANDS)
<Table>
<Caption>
UNCONSOLIDATED
---------------------------------------
DELAWARE WILLIAM LYON NON-GUARANTOR ELIMINATING CONSOLIDATED
LYON HOMES, INC. SUBSIDIARIES ENTRIES COMPANY
-------- ------------ ------------- ----------- ------------
Operating revenue
Sales............................... $ -- $ 94,490 $ 10,732 $ -- $ 105,222
Management fee income............... -- 868 560 -- 1,428
------ -------- -------- -------- ---------
-- 95,358 11,292 -- 106,650
------ -------- -------- -------- ---------
Operating costs
Cost of sales....................... -- (78,131) (9,702) -- (87,833)
Sales and marketing................. -- (4,108) (569) -- (4,677)
General and administrative.......... -- (8,047) (72) -- (8,119)
Amortization of goodwill............ -- (310) -- -- (310)
------ -------- -------- -------- ---------
-- (90,596) (10,343) -- (100,939)
------ -------- -------- -------- ---------
Equity in income of unconsolidated
joint ventures...................... -- 1,434 2,059 -- 3,493
------ -------- -------- -------- ---------
Income from subsidiaries.............. 9,618 3,392 -- (13,010) --
------ -------- -------- -------- ---------
Operating income...................... 9,618 9,588 3,008 (13,010) 9,204
Interest expense, net of amounts
capitalized......................... -- -- -- -- --
Other income (expense), net........... -- 474 1,077 -- 1,551
------ -------- -------- -------- ---------
Income before income taxes............ 9,618 10,062 4,085 (13,010) 10,755
Provision for income taxes............ -- (1,137) -- -- (1,137)
------ -------- -------- -------- ---------
Net income............................ $9,618 $ 8,925 $ 4,085 $(13,010) $ 9,618
====== ======== ======== ======== =========
</Table>
13
14
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
CONSOLIDATING STATEMENT OF INCOME
THREE MONTHS ENDED JUNE 30, 2000
(IN THOUSANDS)
<Table>
<Caption>
UNCONSOLIDATED
---------------------------------------
DELAWARE WILLIAM LYON NON-GUARANTOR ELIMINATING CONSOLIDATED
LYON HOMES, INC. SUBSIDIARIES ENTRIES COMPANY
-------- ------------ ------------- ----------- ------------
Operating revenue
Sales............................... $ -- $ 82,582 $ 11,763 $ -- $ 94,345
Management fee income............... -- 327 2,019 -- 2,346
------- -------- -------- -------- --------
-- 82,909 13,782 -- 96,691
------- -------- -------- -------- --------
Operating costs
Cost of sales....................... -- (66,592) (10,026) -- (76,618)
Sales and marketing................. -- (2,975) (471) -- (3,446)
General and administrative.......... -- (8,849) (56) -- (8,905)
Amortization of goodwill............ -- (310) -- -- (310)
------- -------- -------- -------- --------
-- (78,726) (10,553) -- (89,279)
------- -------- -------- -------- --------
Equity in income of unconsolidated
joint ventures...................... -- 30 5,330 -- 5,360
------- -------- -------- -------- --------
Income from subsidiaries.............. 7,171 8,636 -- (15,807) --
------- -------- -------- -------- --------
Operating income...................... 7,171 12,849 8,559 (15,807) 12,772
Interest expense, net of amounts
capitalized......................... -- (1,876) (56) -- (1,932)
Other income (expense), net........... -- 462 140 -- 602
------- -------- -------- -------- --------
Income before income taxes and
extraordinary item.................. 7,171 11,435 8,643 (15,807) 11,442
Provision for income taxes
Income taxes -- benefit credited to
paid-in capital.................. -- (3,722) -- -- (3,722)
Income taxes -- alternate minimum
tax.............................. -- (549) -- -- (549)
------- -------- -------- -------- --------
Income before extraordinary item...... 7,171 7,164 8,643 (15,807) 7,171
Extraordinary item -- gain from
retirement of debt, net of
applicable income taxes............. 496 -- -- -- 496
------- -------- -------- -------- --------
Net income............................ $ 7,667 $ 7,164 $ 8,643 $(15,807) $ 7,667
======= ======== ======== ======== ========
</Table>
14
15
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
CONSOLIDATING STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 2001
(IN THOUSANDS)
<Table>
<Caption>
UNCONSOLIDATED
---------------------------------------
DELAWARE WILLIAM LYON NON-GUARANTOR ELIMINATING CONSOLIDATED
LYON HOMES, INC. SUBSIDIARIES ENTRIES COMPANY
-------- ------------ ------------- ----------- ------------
Operating revenue
Sales............................... $ -- $ 159,016 $ 18,661 $ -- $ 177,677
Management fee income............... -- 1,556 1,542 -- 3,098
------- --------- -------- -------- ---------
-- 160,572 20,203 -- 180,775
------- --------- -------- -------- ---------
Operating costs
Cost of sales....................... -- (129,834) (16,922) -- (146,756)
Sales and marketing................. -- (7,369) (989) -- (8,358)
General and administrative.......... -- (16,763) (139) -- (16,902)
Amortization of goodwill............ -- (621) -- -- (621)
------- --------- -------- -------- ---------
-- (154,587) (18,050) -- (172,637)
------- --------- -------- -------- ---------
Equity in income of unconsolidated
joint ventures...................... -- 1,941 5,357 -- 7,298
------- --------- -------- -------- ---------
Income from subsidiaries.............. 15,699 8,202 -- (23,901) --
------- --------- -------- -------- ---------
Operating income...................... 15,699 16,128 7,510 (23,901) 15,436
Interest expense, net of amounts
capitalized......................... -- (227) -- -- (227)
Other income (expense), net........... -- 893 1,446 -- 2,339
------- --------- -------- -------- ---------
Income before income taxes............ 15,699 16,794 8,956 (23,901) 17,548
Provision for income taxes............ -- (1,849) -- -- (1,849)
------- --------- -------- -------- ---------
Net income............................ $15,699 $ 14,945 $ 8,956 $(23,901) $ 15,699
======= ========= ======== ======== =========
</Table>
15
16
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
CONSOLIDATING STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 2000
(IN THOUSANDS)
<Table>
<Caption>
UNCONSOLIDATED
---------------------------------------
DELAWARE WILLIAM LYON NON-GUARANTOR ELIMINATING CONSOLIDATED
LYON HOMES, INC. SUBSIDIARIES ENTRIES COMPANY
-------- ------------ ------------- ----------- ------------
Operating revenue
Sales............................... $ -- $ 146,103 $ 13,615 $ -- $ 159,718
Management fee income............... -- 677 3,294 -- 3,971
------- --------- -------- -------- ---------
-- 146,780 16,909 -- 163,689
------- --------- -------- -------- ---------
Operating costs
Cost of sales....................... -- (118,272) (11,532) -- (129,804)
Sales and marketing................. -- (6,210) (772) -- (6,982)
General and administrative.......... -- (16,268) (117) -- (16,385)
Amortization of goodwill............ -- (624) -- -- (624)
------- --------- -------- -------- ---------
-- (141,374) (12,421) -- (153,795)
------- --------- -------- -------- ---------
Equity in income of unconsolidated
joint ventures...................... -- 793 9,693 -- 10,486
------- --------- -------- -------- ---------
Income from subsidiaries.............. 14,810 14,189 -- (28,999) --
------- --------- -------- -------- ---------
Operating income...................... 14,810 20,388 14,181 (28,999) 20,380
Interest expense, net of amounts
capitalized......................... -- (3,233) (244) -- (3,477)
Other income (expense), net........... -- 2,442 129 -- 2,571
------- --------- -------- -------- ---------
Income before income taxes and
extraordinary item.................. 14,810 19,597 14,066 (28,999) 19,474
Provision for income taxes
Income taxes -- benefit credited to
paid-in capital.................. -- (3,722) -- -- (3,722)
Income taxes -- alternate minimum
tax.............................. -- (942) -- -- (942)
------- --------- -------- -------- ---------
Income before extraordinary item...... 14,810 14,933 14,066 (28,999) 14,810
Extraordinary item -- gain from
retirement of debt, net of
applicable income taxes............. 496 -- -- -- 496
------- --------- -------- -------- ---------
Net income............................ $15,306 $ 14,933 $ 14,066 $(28,999) $ 15,306
======= ========= ======== ======== =========
</Table>
16
17
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2001
(IN THOUSANDS)
<Table>
<Caption>
UNCONSOLIDATED
---------------------------------------
DELAWARE WILLIAM LYON NON-GUARANTOR ELIMINATING CONSOLIDATED
LYON HOMES, INC. SUBSIDIARIES ENTRIES COMPANY
-------- ------------ ------------- ----------- ------------
Operating activities:
Net income.............................. $ 15,699 $ 14,945 $ 8,956 $(23,901) $ 15,699
Adjustments to reconcile net income to
net cash (used in) provided by
operating activities:
Depreciation and amortization........ -- 1,224 59 -- 1,283
Equity in income of unconsolidated
joint ventures..................... -- (1,941) (5,357) -- (7,298)
Equity in earnings of subsidiaries... (15,699) (8,202) -- 23,901 --
Provision for income taxes........... -- 1,849 -- -- 1,849
Net changes in operating assets and
liabilities:
Receivables........................ -- 2,013 3,439 -- 5,452
Intercompany
receivables/payables............ 2,471 (2,471) -- -- --
Real estate inventories............ -- (58,538) 395 -- (58,143)
Deferred loan costs................ (2,471) (73) -- -- (2,544)
Other assets....................... -- 8,395 (7) -- 8,388
Accounts payable................... -- 658 128 -- 786
Accrued expenses................... -- (9,144) (828) -- (9,972)
-------- --------- -------- -------- ---------
Net cash (used in) provided by operating
activities........................... -- (51,285) 6,785 -- (44,500)
-------- --------- -------- -------- ---------
Investing activities:
Net change in investment in
unconsolidated joint ventures........ -- (684) 5,313 -- 4,629
Issuance of receivable payments on
notes................................ -- -- 3,989 -- 3,989
Purchases of property and equipment..... -- (368) (25) -- (393)
Investment in subsidiaries.............. -- 11,879 -- (11,879) --
Advances from affiliates................ 1,870 -- -- (1,870) --
-------- --------- -------- -------- ---------
Net cash provided by investing
activities........................... 1,870 10,827 9,277 (13,749) 8,225
-------- --------- -------- -------- ---------
Financing activities:
Proceeds from borrowings on notes
payable.............................. -- 236,836 87,857 -- 324,693
Principal payments on notes payable..... -- (179,260) (91,847) -- (271,107)
Repurchase of 12 1/2% Senior Notes...... (45,744) -- -- -- (45,744)
Reissuance of 12 1/2% Senior Notes...... 43,715 -- -- -- 43,715
Distributions to/contributions from
shareholders......................... -- 564 (12,039) 11,475 --
Common stock issued for exercised
options.............................. 159 -- -- -- 159
Advances to affiliates.................. -- (2,274) -- 2,274 --
-------- --------- -------- -------- ---------
Net cash (used in) provided by financing
activities........................... (1,870) 55,866 (16,029) 13,749 51,716
-------- --------- -------- -------- ---------
Net increase in cash and cash
equivalents............................. -- 15,408 33 -- 15,441
Cash and cash equivalents at beginning of
period.................................. -- 12,746 1,965 -- 14,711
-------- --------- -------- -------- ---------
Cash and cash equivalents at end of
period.................................. $ -- $ 28,154 $ 1,998 $ -- $ 30,152
======== ========= ======== ======== =========
</Table>
17
18
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2000
(IN THOUSANDS)
<Table>
<Caption>
UNCONSOLIDATED
---------------------------------------
DELAWARE WILLIAM LYON NON-GUARANTOR ELIMINATING CONSOLIDATED
LYON HOMES, INC. SUBSIDIARIES ENTRIES COMPANY
-------- ------------ ------------- ----------- ------------
Cash flows from operating activities:
Net income.............................. $ 15,306 $ 14,933 $ 14,066 $(28,999) $ 15,306
Adjustments to reconcile net income to
net cash (used in) provided by
operating activities:
Depreciation and amortization........ -- 1,463 47 -- 1,510
Equity in income of unconsolidated
joint ventures..................... -- (793) (9,693) -- (10,486)
Equity in earnings of subsidiaries... (14,810) (14,189) -- 28,999 --
Extraordinary gain on repurchase of
senior notes....................... (522) -- -- -- (522)
Provision for income taxes........... -- 4,690 -- -- 4,690
Net changes in operating assets and
liabilities:
Other receivables.................. -- (953) 1,017 -- 64
Intercompany
receivables/payables............ (183) 183 -- -- --
Real estate inventories............ -- (3,015) 3,021 -- 6
Deferred loan costs................ 209 84 -- -- 293
Other assets....................... -- (5,692) (74) -- (5,766)
Accounts payable................... -- 2,361 59 -- 2,420
Accrued expenses................... -- (4,625) (61) -- (4,686)
-------- -------- -------- -------- ---------
Net cash (used in) provided by operating
activities........................... -- (5,553) 8,382 -- 2,829
-------- -------- -------- -------- ---------
Cash flows from investing activities:
Investment in unconsolidated joint
ventures............................. -- (5,931) 4,231 -- (1,700)
Issuance of/payments on notes
receivable........................... -- (651) -- -- (651)
Purchases of property and equipment..... -- (773) (281) -- (1,054)
Investment in subsidiaries.............. -- 13,288 -- (13,288) --
Advances from affiliates................ 20,883 -- -- (20,883) --
-------- -------- -------- -------- ---------
Net cash provided by (used in) investing
activities........................... 20,883 5,933 3,950 (34,171) (3,405)
-------- -------- -------- -------- ---------
Cash flows from financing activities:
Proceeds from borrowings on notes
payable.............................. -- 97,488 32,977 -- 130,465
Principal payments on notes payable..... -- (71,509) (32,236) -- (103,745)
Purchase of 12 1/2% Senior Notes........ (21,125) -- -- -- (21,125)
Distributions to/contributions from
shareholders......................... -- (1,275) (11,771) 13,046 --
Common stock issued for exercised
options.............................. 242 -- -- -- 242
Advances to affiliates.................. -- (21,125) -- 21,125 --
-------- -------- -------- -------- ---------
Net cash provided by financing
activities........................... (20,883) 3,579 (11,030) 34,171 5,837
-------- -------- -------- -------- ---------
Net increase in cash and cash
equivalents............................. -- 3,959 1,302 -- 5,261
Cash and cash equivalents at beginning of
period.................................. -- 1,344 810 -- 2,154
-------- -------- -------- -------- ---------
Cash and cash equivalents at end of
period.................................. $ -- $ 5,303 $ 2,112 $ -- $ 7,415
======== ======== ======== ======== =========
</Table>
18
19
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 six months
ended June 30, 2000.
NOTE 5 -- RELATED PARTY TRANSACTIONS
The Company and certain members of the Company's Board of Directors entered
into certain transactions with respect to the Company's 12 1/2% Senior Notes as
described in Note 3 of Notes to Consolidated Financial Statements.
The Company purchased real estate projects for a total purchase price of
$869,000 during the six months ended June 30, 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 and six months ended
June 30, 2001, the Company purchased 64 and 104 lots, respectively, under this
agreement for a total purchase price of $1,374,000 and $1,975,000, respectively.
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 and six months ended June 30, 2001, the Company incurred
on-site labor costs of $47,000 and $93,000, respectively for providing customer
service to real estate projects developed by entities controlled by William Lyon
and William H. Lyon, of which $34,000 was due to the Company at June 30, 2001.
For the three and six months ended June 30, 2000, the Company earned
management fees of $172,000 and $280,000, respectively, and on-site labor cost
reimbursements of $80,000 and $276,000, respectively, for managing and selling
real estate owned by entities controlled by William Lyon and William H. Lyon.
For the three and six months ended June 30, 2001, the Company incurred
charges of $183,000 and $365,000, respectively, related to rent on its corporate
office, from a trust of which William H. Lyon is the sole beneficiary.
19
20
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For the three and six months ended June 30, 2000, the Company incurred
charges of $182,000 and $352,000, respectively, related to rent on its corporate
office, from a trust of which William H. Lyon is the sole beneficiary.
During the six months ended June 30, 2001, the Company incurred charges of
$62,000 related to the charter and use of aircraft owned by an affiliate of
William Lyon.
NOTE 6 -- STOCK OPTIONS
During the quarter ended June 30, 2001, certain officers and directors
exercised options to purchase 18,337 shares of the Company's common stock at a
price of $8.6875 per share in accordance with the William Lyon Homes 2000 Stock
Incentive Plan.
Effective on February 21, 2001 and May 14, 2001, the Company issued options
under the William Lyon Homes 2000 Stock Incentive Plan to purchase 12,500 and
20,000 shares of common stock, at $9.10 and $13.00 per share, respectively. The
options vest as follows: one-third per year at the end of each of the first
three years. All unexercised options expire at the end of the tenth year.
20
21
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:
<Table>
<Caption>
THREE MONTHS ENDED JUNE 30,
-------------------------------------------------------------------------------------
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............. 465 136 601 387 200 587
======== ======== ========= ======== ======== =========
Home sales revenue....... $105,222 $ 58,365 $ 163,587 $ 94,142 $ 79,313 $ 173,455
Cost of sales............ (87,543) (47,702) (135,245) (76,410) (65,974) (142,384)
-------- -------- --------- -------- -------- ---------
Gross margin...... $ 17,679 $ 10,663 $ 28,342 $ 17,732 $ 13,339 $ 31,071
======== ======== ========= ======== ======== =========
Gross margin
percentage...... 16.8% 18.3% 17.3% 18.8% 16.8% 17.9%
======== ======== ========= ======== ======== =========
Number of homes closed
California............... 256 136 392 273 200 473
Arizona.................. 74 0 74 30 0 30
Nevada................... 135 0 135 67 0 67
New Mexico(1)............ -- -- -- 17 0 17
-------- -------- --------- -------- -------- ---------
Total............. 465 136 601 387 200 587
======== ======== ========= ======== ======== =========
Average sales price
California............... $257,800 $429,200 $ 317,200 $275,000 $396,600 $ 326,400
Arizona.................. 145,000 0 145,000 148,900 0 148,900
Nevada................... 211,100 0 211,100 182,700 0 182,700
New Mexico(1)............ -- -- -- 139,500 0 139,500
-------- -------- --------- -------- -------- ---------
Total............. $226,300 $429,200 $ 272,200 $243,300 $396,600 $ 295,500
======== ======== ========= ======== ======== =========
Number of net new home
orders
California............... 305 193 498 238 221 459
Arizona.................. 101 0 101 95 0 95
Nevada................... 168 0 168 31 0 31
New Mexico(1)............ -- -- -- 3 0 3
-------- -------- --------- -------- -------- ---------
Total............. 574 193 767 367 221 588
======== ======== ========= ======== ======== =========
Average number of sales
locations during quarter
California............... 15 12 27 21 15 36
Arizona.................. 5 0 5 5 0 5
Nevada................... 7 0 7 5 0 5
New Mexico(1)............ -- -- -- 2 0 2
-------- -------- --------- -------- -------- ---------
Total............. 27 12 39 33 15 48
======== ======== ========= ======== ======== =========
</Table>
21
22
<Table>
<Caption>
AS OF JUNE 30,
-------------------------------------------------------------------------------------
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............... 414 314 728 402 296 698
Arizona.................. 140 0 140 114 0 114
Nevada................... 206 0 206 58 0 58
New Mexico(1)............ -- -- -- 1 0 1
-------- -------- --------- -------- -------- ---------
Total............. 760 314 1,074 575 296 871
======== ======== ========= ======== ======== =========
Dollar amount of homes sold
but not closed at end of
period (dollars in
thousands)
California............... $119,542 $147,676 $ 267,218 $103,548 $141,066 $ 244,614
Arizona.................. 20,408 0 20,408 16,164 0 16,164
Nevada................... 42,510 0 42,510 12,729 0 12,729
New Mexico(1)............ -- -- -- 136 0 136
-------- -------- --------- -------- -------- ---------
Total............. $182,460 $147,676 $ 330,136 $132,577 $141,066 $ 273,643
======== ======== ========= ======== ======== =========
</Table>
<Table>
<Caption>
AS OF JUNE 30,
-----------------------------
2001 2000
------------ --------------
Lots owned and controlled
California............... 5,243 5,845
Arizona.................. 1,305 966
Nevada................... 850 667
New Mexico(1)............ -- 9
-------- --------
Total............. 7,398 7,487
======== ========
</Table>
22
23
<Table>
<Caption>
SIX MONTHS ENDED JUNE 30,
-------------------------------------------------------------------------------------
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............. 751 250 1,001 706 400 1,106
========= ======== ========= ========= ========= =========
Home sales revenue....... $ 170,623 $109,534 $ 280,157 $ 158,751 $ 148,385 $ 307,136
Cost of sales............ (142,564) (89,397) (231,961) (128,921) (122,557) (251,478)
--------- -------- --------- --------- --------- ---------
Gross margin...... $ 28,059 $ 20,137 $ 48,196 $ 29,830 $ 25,828 $ 55,658
========= ======== ========= ========= ========= =========
Gross margin
percentage...... 16.4% 18.4% 17.2% 18.8% 17.4% 18.1%
========= ======== ========= ========= ========= =========
Number of homes closed
California............... 409 250 659 446 400 846
Arizona.................. 125 0 125 44 0 44
Nevada................... 217 0 217 181 0 181
New Mexico(1)............ -- -- -- 35 0 35
--------- -------- --------- --------- --------- ---------
Total............. 751 250 1,001 706 400 1,106
========= ======== ========= ========= ========= =========
Average sales price
California............... $ 260,400 $438,100 $ 327,800 $ 262,000 $ 371,000 $ 313,500
Arizona.................. 145,000 0 145,000 143,600 0 143,600
Nevada................... 212,000 0 212,000 171,300 0 171,300
New Mexico(1)............ -- -- -- 131,000 0 131,000
--------- -------- --------- --------- --------- ---------
Total............. $ 227,200 $438,100 $ 279,900 $ 224,900 $ 371,000 $ 277,700
========= ======== ========= ========= ========= =========
Number of net new home
orders
California............... 617 380 997 562 509 1,071
Arizona.................. 185 0 185 141 0 141
Nevada................... 326 0 326 114 0 114
New Mexico(1)............ -- -- -- 21 0 21
--------- -------- --------- --------- --------- ---------
Total............. 1,128 380 1,508 838 509 1,347
========= ======== ========= ========= ========= =========
Average number of sales
locations during period
California............... 15 11 26 19 14 33
Arizona.................. 5 0 5 5 0 5
Nevada................... 7 0 7 5 0 5
New Mexico(1)............ -- -- -- 2 0 2
--------- -------- --------- --------- --------- ---------
Total............. 27 11 38 31 14 45
========= ======== ========= ========= ========= =========
</Table>
- ---------------
(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 June 30, 2001 was
$330.1 million, as compared to $273.6 million as of June 30, 2000 and $260.1
million as of March 31, 2001. 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 19% during the first six months of 2001.
The number of homes sold for the quarter ended June 30, 2001 increased 30%
to 767 units from 588 for the second quarter of 2000. For the second quarter of
2001, the number of homes sold increased 4 percent to 767 from 741 units in the
first quarter of 2001. The number of homes closed in the second quarter of 2001
increased 2 percent to 601 from 587 in the second quarter of 2000. The backlog
of homes sold as of June 30, 2001 was 1,074, up 23 percent from 871 units a year
earlier, and up 18 percent from 908 units at March 31, 2001.
23
24
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 operating results
may be adversely impacted.
COMPARISON OF THREE MONTHS ENDED JUNE 30, 2001 TO THREE MONTHS ENDED JUNE 30,
2000
Operating revenue for the three months ended June 30, 2001 was $106.7
million, an increase of $10.0 million (10.3%) from operating revenue of $96.7
million for the three months ended June 30, 2000. Revenue from sales of homes
increased $11.1 million (11.8%) to $105.2 million in the 2001 period from $94.1
million in the 2000 period. This increase was primarily due to an increase in
the number of wholly-owned units closed to 465 in the 2001 period from 387 in
the 2000 period, offset by decrease in the average sales prices of wholly-owned
units due to product mix to $226,300 in the 2001 period from $243,300 in the
2000 period. Management fee income decreased by $0.9 million to $1.4 million in
the 2001 period from $2.3 million in the 2000 period primarily due to a decrease
in the number of unconsolidated joint venture units closed to 136 in the 2001
period from 200 in the 2000 period.
Total operating income decreased from $12.8 million in the 2000 period to
$9.2 million in the 2001 period. The excess of revenue from sales of homes over
the related cost of sales was unchanged at $17.7 million in both periods,
despite a decline in gross margins of 2.0 percent to 16.8 percent in the 2001
period from 18.8 percent in the 2000 period. This was primarily due to an
increase in the number of wholly-owned units closed to 465 units in the 2001
period from 387 units in the 2000 period, offset by a decrease in the average
sales prices of wholly-owned units due to product mix to $226,300 in the 2001
period from $243,600 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 $1.3
million to $4.7 million in the 2001 period from $3.4 million in the 2000 period
primarily due to the increased sales volume. General and administrative expenses
decreased by $0.8 million to $8.1 million in the 2001 period from $8.9 million
in the 2000 period, primarily as a result of a reduction in outside consultants'
expenses and legal expense. Equity in income of unconsolidated joint ventures
amounting to $3.5 million was recognized in the 2001 period, down from $5.4
million in the comparable period for 2000 primarily as a result of a decrease in
the number of units closed to 136 in the 2001 period from 200 in the 2000
period.
Total interest incurred decreased $0.5 million (7.9%) from $6.3 million in
the 2000 period to $5.8 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. All interest incurred was
capitalized in the 2001 period while $1.9 million of interest incurred was
expensed 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 increased to $1.6 million in the 2001 period
from $0.6 million in the 2000 period primarily as a result of increased income
from the Company's design center and mortgage company operations.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 2001 TO SIX MONTHS ENDED JUNE 30, 2000
Operating revenue for the six months ended June 30, 2001 was $180.8
million, an increase of $17.1 million (10.4%) from operating revenue of $163.7
million for the six months ended June 30, 2000. Revenue from sales of homes
increased $11.8 million (7.4%) to $170.6 million in the 2001 period from $158.8
million in the 2000 period. This increase was primarily due to an increase in
the number of
24
25
wholly-owned units closed to 751 in the 2001 period from 706 in the 2000 period,
and an increase in the average sales prices of wholly-owned units to $227,200 in
the 2001 period from $224,900 in the 2000 period. Revenue from sales of lots,
land and other increased $6.1 million to $7.1 million in the 2001 period from
$1.0 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
decreased by $0.9 million to $3.1 million in the 2001 period from $4.0 million
in the 2000 period primarily due to a decrease in the number of unconsolidated
joint venture units closed to 250 in the 2001 period from 400 in the 2000
period.
Total operating income decreased from $20.4 million in the 2000 period to
$15.4 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 $28.1 million in the 2001
period from $29.8 million in the 2000 period, resulting in a decline in gross
margins of 2.4 percent to 16.4 percent in the 2001 period from 18.8 percent in
the 2000 period. This decrease was primarily due to a change in the mix of
product, an increase in the number of wholly-owned units closed to 751 units in
the 2001 period from 706 units in the 2000 period, offset by an increase in the
average sales prices of wholly-owned units to $227,200 in the 2001 period from
$224,900 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 $1.4 million to $8.4
million in the 2001 period from $7.0 million in the 2000 period primarily due to
the increased sales volume. General and administrative expenses increased by
$0.5 million to $16.9 million in the 2001 period from $16.4 million in the 2000
period, primarily as a result of increases in salaries and benefits related to
the Company's increased operations, offset by a reduction in outside
consultants' expense and legal expense. Equity in income of unconsolidated joint
ventures amounting to $7.3 million was recognized in the 2001 period, down from
$10.5 million in the comparable period for 2000 primarily as a result of a
decrease in the number of units closed to 250 in the 2001 period from 400 in the
2000 period.
Total interest incurred decreased $1.2 million (9.7%) from $12.4 million in
the 2000 period to $11.2 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 $3.5 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 $2.3 million in the 2001 period
from $2.6 million in the 2000 period primarily as a result of a gain from the
sale of an office building in the 2000 period, offset by increased income from
the Company's design center and mortgage company operations.
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
25
26
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 June 30, 2001, the Company's outstanding balance under its 12 1/2%
Senior Notes was $75,172,000. On May 1, 2001, the Company completed a consent
solicitation with respect to the 12 1/2% Senior Notes and received consents from
holders of $39,279,000 of the then outstanding notes to extend the maturity date
from July 1, 2001 to July 1, 2003 and to make certain amendments to the note
covenants. Although the Company initially intended to accept consents from no
more than 50% of holders, the Company elected to accept additional consents, as
contemplated by the consent solicitation documents. The consenting holders
received a consent fee of 4% of the principal balance. Subsequently, during May
and June 2001, the Company had also repurchased $31,444,000 of the Senior Notes
from non-consenting holders.
In June 2001, General William Lyon, Chairman and Chief Executive Officer of
the Company, and a trust for which his son William Harwell Lyon is a
beneficiary, purchased at par $30,000,000 of the 12 1/2% Senior Notes. William
Harwell Lyon is also an employee and a Director of the Company. Effective in
July 2001, William H. McFarland, another member of the Company's Board of
Directors, purchased at par $1,000,000 of the 12 1/2% Senior Notes. In parity
with holders consenting during the consent solicitation, these Directors
received a consent fee of 4% of the principal balance and consented to the
amendments effected by the Company's consent solicitation statement dated
February 28, 2001.
The Company has repaid all of the remaining 12 1/2% Senior Notes which
matured on July 1, 2001 amounting to $5,893,000. After the transactions
described above, $70,279,000 of the 12 1/2% Senior Notes are outstanding with a
maturity date of July 1, 2003.
In April and May 2000, the Company purchased $21,775,000 principal amount
of its outstanding Senior Notes at a cost of $21,125,000. The net gain resulting
from the purchase was $496,000 after giving effect to income taxes of $26,000
and amortization of related loan costs of $128,000. Such gain is reflected as an
extraordinary item in the Company's results of operations for the second quarter
ended June 30, 2000.
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.
26
27
REVOLVING CREDIT FACILITIES
The Revolving Credit Facilities have an aggregate maximum loan commitment
of $180.0 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 $180.0
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 June 30, 2001 was $39.7 million and the principal
outstanding under the Revolving Credit Facilities at June 30, 2001 was $120.4
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 June 30, 2001 $8.3 million was
outstanding under the Unsecured Revolving Line.
CONSTRUCTION NOTES PAYABLE
At June 30, 2001, the Company had construction notes payable amounting to
$11.4 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 June 30, 2001, the Company had no
notes payable outstanding related to land acquisitions for which seller
financing was provided.
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 June 30, 2001 the outstanding balance
was $3.2 million. The facility, which has a current maturity date of May 31,
2002, also contains a financial covenant requiring the Company to maintain 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 June 30, 2001, the Company and certain of its subsidiaries are
general partners or members in 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 2 of "Notes to Consolidated Financial Statements" for condensed combined
financial information for these joint ventures. Based upon current estimates,
substantially all future
27
28
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 June 30, 2001, the Company's investment in and advances to such joint
ventures was approximately $50.5 million and the Company's venture partners'
investment in such joint ventures was approximately $140.9 million. In addition,
certain joint ventures have obtained financing from land sellers or construction
lenders which amounted to approximately $66.3 million at June 30, 2001.
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 SIX MONTHS ENDED JUNE 30, 2001 TO SIX MONTHS ENDED
JUNE 30, 2000
Net cash used in operating activities was $44.5 million in the 2001 period
and net cash provided by operating activities was $2.8 million in the 2000
period. The change was primarily as a result of an increase in real estate
inventories in the 2001 period.
Net cash provided by investing activities was $8.2 million in the 2001
period and net cash used in investing activities was $3.4 million in the 2000
period. The change was 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 $5.8 million in
the 2000 period to $51.7 million in the 2001 period primarily as a result of
increased net borrowings on notes payable.
28
29
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.
<Table>
<Caption>
HOMES CLOSED
FOR THE SIX
ESTIMATED UNITS CLOSED LOTS OWNED MONTHS
YEAR OF NUMBER OF AS OF AS OF ENDED BACKLOG AT
FIRST HOMES AT JUNE 30, JUNE 30, JUNE 30, JUNE 30, 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 102 102 0 30 0 $165,000 - 251,000
----- --- ----- --- ---
Solana at Talega (Orange
County)................. 1999 120 108 12 17 12 $294,000 - 355,000
----- --- ----- --- ---
Lyon Vineyard (San
Bernardino County)...... 2000 100 100 0 11 0 $220,000 - 253,000
----- --- ----- --- ---
Lyon Orchard (San
Bernardino County)...... 2000 81 81 0 2 0 $176,000 - 200,000
----- --- ----- --- ---
Archibald Ranch (San
Bernardino County)...... 2000 113 60 53 39 52 $212,000 - 252,000
----- --- ----- --- ---
Crown Ridge -- Palmdale
(Los Angeles County).... 2000 71 59 12 33 12 $160,000 - 185,000
----- --- ----- --- ---
Andover -- West Irvine
(Orange County)......... 2001 138 0 80 0 51 $239,000 - 295,000
----- --- ----- --- ---
Terraza at Vista del
Verde -- Yorba Linda
(Orange County)......... 2001 106 0 106 0 10 $500,000 - 550,000
----- --- ----- --- ---
Providence Ranch
(Riverside County)...... 2001 97 19 78 19 28 $200,000 - 242,000
----- --- ----- --- ---
Cantada -- Oxnard (Ventura
County)................. 2002 113 0 113 0 0 $255,000 - 275,000
----- --- ----- --- ---
Monticello -- North Park
Square (Orange
County)................. 2002 112 0 56 0 0 $235,000 - 295,000
----- --- ----- --- ---
Montellano at Talega
(Orange County)......... 2002 63 0 63 0 0
----- --- ----- --- ---
Sterling Glen at Ladera
Ranch (Orange County)... 2002 102 0 102 0 0 $380,000 - 410,000
----- --- ----- --- ---
Total
wholly-owned.... 1,318 529 675 151 165
----- --- ----- --- ---
UNCONSOLIDATED JOINT
VENTURES:
White Cloud Estates
(Ventura County)........ 1999 78 78 0 1 0 $302,000 - 350,000
----- --- ----- --- ---
Lyon Monterrey (Orange
County)................. 1999 99 95 4 20 4 $363,000 - 428,000
----- --- ----- --- ---
Reston at Ladera Ranch
(Orange County)......... 2000 117 33 84 17 54 $350,000 - 415,000
----- --- ----- --- ---
Hampton Road at Ladera
Ranch (Orange County)... 2000 82 17 65 17 34 $435,000 - 477,000
----- --- ----- --- ---
Compass Pointe at Forster
Ranch (Orange County)... 2000 92 48 44 27 28 $529,000 - 575,000
----- --- ----- --- ---
Avalon at Summerlane
(Orange County)......... 2000 113 57 56 29 45 $435,000 - 490,000
----- --- ----- --- ---
Beachside -- Huntington
Beach (Orange County)... 2001 86 0 86 0 17 $480,000 - 565,000
----- --- ----- --- ---
Quintana (Ventura
County)................. 2001 90 0 90 0 0 $475,000 - 610,000
----- --- ----- --- ---
Total
unconsolidated
joint
ventures........ 757 328 429 111 182
----- --- ----- --- ---
SOUTHERN CALIFORNIA
REGION TOTAL............ 2,075 857 1,104 262 347
===== === ===== === ===
</Table>
29
30
<Table>
<Caption>
HOMES CLOSED
FOR THE SIX
ESTIMATED UNITS CLOSED LOTS OWNED MONTHS
YEAR OF NUMBER OF AS OF AS OF ENDED BACKLOG AT
FIRST HOMES AT JUNE 30, JUNE 30, JUNE 30, JUNE 30, 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 1 $ 239,000 - 327,000
------ ----- ----- ----- -----
Lyon Ironwood (San Joaquin
County).................. 2000 116 23 61 23 45 $ 225,000 - 297,000
------ ----- ----- ----- -----
Lyon Edgewood (San Joaquin
County).................. 2000 87 79 8 2 8 $ 198,000 - 287,000
------ ----- ----- ----- -----
Lyon Edgewood 2 (San
Joaquin County).......... 2000 65 60 5 39 5 $ 233,000 - 279,000
------ ----- ----- ----- -----
Lyon Rhapsody (Contra Costa
County).................. 2001 81 0 81 0 29 $ 220,000 - 290,000
------ ----- ----- ----- -----
Lyon Estates at Stonebridge
(San Joaquin County)..... 2001 103 0 44 0 14 $ 281,000 - 329,000
------ ----- ----- ----- -----
Lyon Palazzo (Sacramento
County).................. 2001 100 0 100 0 32 $ 238,000 - 301,000
------ ----- ----- ----- -----
Total
wholly-owned..... 830 345 394 86 134
------ ----- ----- ----- -----
UNCONSOLIDATED JOINT
VENTURES:
The Ranch at Silver Creek
(Santa Clara County)..... 2001 538 0 538 0 0
------ ----- ----- ----- -----
Lyon Groves (Contra (Costa
County).................. 1999 103 103 0 20 0 $ 269,000 - 379,000
------ ----- ----- ----- -----
Lyon Ridge (Contra (Costa
County).................. 1999 127 79 48 25 34 $ 317,000 - 407,000
------ ----- ----- ----- -----
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 77 0 22 0 $ 603,000 - 799,000
------ ----- ----- ----- -----
Henry Ranch (Contra Costa
County)
Lyon Tierra.............. 2001 46 0 46 0 15 $ 502,000 - 569,000
Lyon Dorado.............. 2001 54 0 54 0 14 $833,000 - 1,003,000
------ ----- ----- ----- -----
100 0 100 0 29
------ ----- ----- ----- -----
Woodlake Estates (Solano
County)
Paradise Valley.......... 2001 9 0 9 0 0
Brook.................... 2001 121 0 121 0 13 $ 296,000 - 336,000
Falls.................... 2001 102 0 102 0 25 $ 318,000 - 363,000
------ ----- ----- ----- -----
232 0 232 0 38
------ ----- ----- ----- -----
Stonebriar (El Dorado
County)
Lyon Casina.............. 2001 123 0 123 0 3 $ 311,000 - 371,000
Lyon Prima............... 2001 137 0 137 0 0 $ 376,000 - 416,000
------ ----- ----- ----- -----
260 0 260 0 3
------ ----- ----- ----- -----
Total
unconsolidated
joint ventures... 1,500 322 1,178 68 104
------ ----- ----- ----- -----
NORTHERN CALIFORNIA
REGION TOTAL............. 2,330 667 1,572 154 238
====== ===== ===== ===== =====
</Table>
30
31
<Table>
<Caption>
HOMES CLOSED
FOR THE SIX
ESTIMATED UNITS CLOSED LOTS OWNED MONTHS
YEAR OF NUMBER OF AS OF AS OF ENDED BACKLOG AT
FIRST HOMES AT JUNE 30, JUNE 30, JUNE 30, JUNE 30,
PROJECT (COUNTY) PRODUCT DELIVERY COMPLETION(1) 2001 2001 2001 2001(2)(4)
------------------------ -------- ------------- ------------ ---------- ---------------- ----------
SAN DIEGO
WHOLLY-OWNED:
Horsethief Canyon Ranch
(Riverside County)
Previously Closed
Products................ 1989 963 963 0 0 0
Series "400".............. 1995 554 396 154 45 26
Series "500".............. 1995 445 374 75 42 18
------ ----- ----- ----- -----
1,962 1,733 229 87 44
------ ----- ----- ----- -----
Sycamore Ranch (Riverside
County)................... 1997 195 103 92 1 7
------ ----- ----- ----- -----
Vail Ranch (San Diego
County)................... 2000 152 100 52 33 29
------ ----- ----- ----- -----
East Grove (San Diego
County)
Village C................. 2002 75 0 75 0 0
Village D................. 2002 42 0 42 0 0
------ ----- ----- ----- -----
117 0 117 0 0
------ ----- ----- ----- -----
Rancho Dorado (San Diego
County)
La Fuente................. 2000 56 56 0 20 0
Loma Real................. 2000 89 41 37 22 19
Los Reyes................. 2000 66 9 28 9 16
------ ----- ----- ----- -----
211 106 65 51 35
------ ----- ----- ----- -----
Total
wholly-owned...... 2,637 2,042 555 172 115
------ ----- ----- ----- -----
UNCONSOLIDATED JOINT
VENTURES:
Otay Ranch -- Saratogo
Trails (San Diego
County)................... 1999 74 74 0 7 0
------ ----- ----- ----- -----
Otay Ranch -- Mendocino (San
Diego County)............. 1999 139 138 1 32 1
------ ----- ----- ----- -----
Otay Ranch -- (R-29) (San
Diego County)............. 2001 83 0 83 0 17
------ ----- ----- ----- -----
Rancho Dorado (San Diego
County)
Monte Verde............... 2000 65 52 13 32 10
------ ----- ----- ----- -----
East Grove (San Diego
County)
The Groves (Village A).... 2001 96 0 96 0 0
The Orchards (Village
B)...................... 2002 78 0 78 0 0
------ ----- ----- ----- -----
174 0 174 0 0
------ ----- ----- ----- -----
4S Ranch -- Providence (San
Diego County)............. 2001 123 0 66 0 0
------ ----- ----- ----- -----
Total unconsolidated
joint ventures.... 658 264 337 71 28
------ ----- ----- ----- -----
SAN DIEGO REGION
TOTAL..................... 3,295 2,306 892 243 143
====== ===== ===== ===== =====
<Caption>
SALES PRICE
PROJECT (COUNTY) PRODUCT RANGE(3)
------------------------ ------------------
SAN DIEGO
WHOLLY-OWNED:
Horsethief Canyon Ranch
(Riverside County)
Previously Closed
Products................
Series "400".............. $189,000 - 220,000
Series "500".............. $220,000 - 250,000
Sycamore Ranch (Riverside
County)................... $327,000 - 433,000
Vail Ranch (San Diego
County)................... $188,000 - 211,000
East Grove (San Diego
County)
Village C.................
Village D.................
Rancho Dorado (San Diego
County)
La Fuente................. $293,000 - 322,000
Loma Real................. $395,000 - 444,000
Los Reyes................. $420,000 - 465,000
Total
wholly-owned......
UNCONSOLIDATED JOINT
VENTURES:
Otay Ranch -- Saratogo
Trails (San Diego
County)................... $258,000 - 276,000
Otay Ranch -- Mendocino (San
Diego County)............. $214,000 - 242,000
Otay Ranch -- (R-29) (San
Diego County)............. $238,000 - 260,000
Rancho Dorado (San Diego
County)
Monte Verde............... $354,000 - 404,000
East Grove (San Diego
County)
The Groves (Village A)....
The Orchards (Village
B)......................
4S Ranch -- Providence (San
Diego County)............. $528,000 - 567,000
Total unconsolidated
joint ventures....
SAN DIEGO REGION
TOTAL.....................
</Table>
31
32
<Table>
<Caption>
HOMES CLOSED
FOR THE SIX
ESTIMATED UNITS CLOSED LOTS OWNED MONTHS
YEAR OF NUMBER OF AS OF AS OF ENDED BACKLOG AT
FIRST HOMES AT JUNE 30, JUNE 30, JUNE 30, JUNE 30,
PROJECT (COUNTY) PRODUCT DELIVERY COMPLETION(1) 2001 2001 2001 2001(2)(4)
------------------------ -------- ------------- ------------- ----------- ------------ ----------
ARIZONA
WHOLLY-OWNED:
Crystal Gardens (Maricopa
County)................... 1997 157 156 1 13 1
------ ----- ----- ----- -----
Sage Creek -- Encanto
(Maricopa County)......... 2000 176 94 72 41 63
------ ----- ----- ----- -----
Sage Creek -- Arcadia
(Maricopa County)......... 2000 167 56 49 23 36
------ ----- ----- ----- -----
Sage Creek Solano (Maricopa
County)................... 2000 82 36 24 21 8
------ ----- ----- ----- -----
Mesquite Grove -- Small
(Maricopa County)......... 2001 110 0 110 0 0
------ ----- ----- ----- -----
Mesquite Grove -- Large
(Maricopa County)......... 2001 95 0 95 0 0
------ ----- ----- ----- -----
Rio Del Verde (Maricopa
County)................... 2000 84 62 22 27 20
------ ----- ----- ----- -----
Power Ranch (Maricopa
County)................... 2001 103 0 103 0 12
------ ----- ----- ----- -----
Tramonto (Maricopa County).. 2002 76 0 76 0 0
------ ----- ----- ----- -----
Country Place (Maricopa
County)................... 2002 115 0 6 0 0
------ ----- ----- ----- -----
Total
wholly-owned...... 1,165 404 558 125 140
------ ----- ----- ----- -----
UNCONSOLIDATED JOINT
VENTURES:
Mountaingate (Maricopa
County)................... 2002 341 0 171 0 0
------ ----- ----- ----- -----
Total unconsolidated
joint ventures........ 341 0 171 0 0
------ ----- ----- ----- -----
ARIZONA REGION TOTAL........ 1,506 404 729 125 140
====== ===== ===== ===== =====
<Caption>
SALES PRICE
PROJECT (COUNTY) PRODUCT RANGE(3)
------------------------ ------------------
ARIZONA
WHOLLY-OWNED:
Crystal Gardens (Maricopa
County)................... $100,000 - 130,000
Sage Creek -- Encanto
(Maricopa County)......... $109,000 - 122,000
Sage Creek -- Arcadia
(Maricopa County)......... $133,000 - 155,000
Sage Creek Solano (Maricopa
County)................... $166,000 - 189,000
Mesquite Grove -- Small
(Maricopa County)......... $169,000 - 218,000
Mesquite Grove -- Large
(Maricopa County)......... $277,000 - 311,000
Rio Del Verde (Maricopa
County)................... $164,000 - 201,000
Power Ranch (Maricopa
County)................... $172,000 - 229,000
Tramonto (Maricopa County).. $163,000 - 230,000
Country Place (Maricopa
County)................... $109,000 - 131,000
Total
wholly-owned......
UNCONSOLIDATED JOINT
VENTURES:
Mountaingate (Maricopa
County)...................
Total unconsolidated
joint ventures........
ARIZONA REGION TOTAL........
</Table>
32
33
<Table>
<Caption>
HOMES CLOSED
FOR THE SIX
ESTIMATED UNITS CLOSED LOTS OWNED MONTHS
YEAR OF NUMBER OF AS OF AS OF ENDED BACKLOG AT
FIRST HOMES AT JUNE 30, JUNE 30, JUNE 30, JUNE 30,
PROJECT (COUNTY) PRODUCT DELIVERY COMPLETION(1) 2001 2001 2001 2001(2)(4)
------------------------ -------- ------------- ------------- ----------- ------------ ----------
NEVADA
WHOLLY-OWNED:
Bella Veranda (Clark
County)................... 2000 79 71 8 31 8
------ ----- ----- ----- -----
Montecito Tesoro (Clark
County)................... 2000 121 64 17 42 43
------ ----- ----- ----- -----
Montecito Classico (Clark
County)................... 2000 100 44 18 31 25
------ ----- ----- ----- -----
Kingsway Ridge I (Clark
County)................... 2000 90 76 14 38 14
------ ----- ----- ----- -----
Kingsway Ridge II (Clark
County)................... 2000 67 47 20 30 18
------ ----- ----- ----- -----
Glenleigh Gardens at
Summerlin (Clark County).. 2000 96 39 57 30 27
------ ----- ----- ----- -----
Springfield at Summerlin
(Clark County)............ 2001 85 0 85 0 38
------ ----- ----- ----- -----
Topaz Ridge at Summerlin
(Clark County)............ 2002 89 0 0 0 0
------ ----- ----- ----- -----
Stallion Mountain (Clark
County)................... 2001 116 15 101 15 33
------ ----- ----- ----- -----
Fairfield at Summerlin
(Clark County)............ 2001 89 0 3 0 0
------ ----- ----- ----- -----
NEVADA REGION TOTAL......... 932 356 323 217 206
====== ===== ===== ===== =====
GRAND TOTALS:
Wholly-owned.............. 6,882 3,676 2,505 751 760
Unconsolidated joint
ventures................ 3,256 914 2,115 250 314
------ ----- ----- ----- -----
10,138 4,590 4,620 1,001 1,074
====== ===== ===== ===== =====
<Caption>
SALES PRICE
PROJECT (COUNTY) PRODUCT RANGE(3)
------------------------ ------------------
NEVADA
WHOLLY-OWNED:
Bella Veranda (Clark
County)................... $252,000 - 278,000
Montecito Tesoro (Clark
County)................... $153,000 - 181,000
Montecito Classico (Clark
County)................... $182,000 - 219,000
Kingsway Ridge I (Clark
County)................... $166,000 - 185,000
Kingsway Ridge II (Clark
County)................... $184,000 - 217,000
Glenleigh Gardens at
Summerlin (Clark County).. $242,000 - 273,000
Springfield at Summerlin
(Clark County)............ $198,000 - 221,000
Topaz Ridge at Summerlin
(Clark County)............ $458,000 - 516,000
Stallion Mountain (Clark
County)................... $149,000 - 172,000
Fairfield at Summerlin
(Clark County)............ $247,000 - 275,000
NEVADA REGION TOTAL.........
GRAND TOTALS:
Wholly-owned..............
Unconsolidated joint
ventures................
</Table>
- ---------------
(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 June 30, 2001,
1,023 represent homes completed or under construction and 51 represent homes
not yet under construction.
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.
33
34
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 June 30, 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
34
35
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.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, Accounting for Derivative Instruments and Hedging Activities, and its
amendments Statements No. 137 and 138, in June 1999 and June 2000, respectively,
(collectively, the "Statements"). The Statements are effective for fiscal years
beginning after June 15, 2000 (January 1, 2001 for the Company). The Company
adopted the new Statements on January 1, 2001; however, because the Company
currently has no derivatives, there is currently no impact on the financial
position or the results of operations of the Company.
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.
35
36
WILLIAM LYON HOMES
PART II. OTHER INFORMATION
ITEMS 1, 2, 3, AND 5.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Holders of Common Stock was held on May 14,
2001. At this meeting the Holders of Common Stock approved the following:
<Table>
<Caption>
VOTES
ABSTAINED
(INCLUDING
VOTES VOTES BROKER
FOR AGAINST NON-VOTES)
---------- ------- ----------
Ratification of the selection of Ernst & Young LLP as
Independent Auditors of the Company for the fiscal
year ending December 31, 2001........................ 10,172,665 2,840 3,620
</Table>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS.
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.2 Agreement for First Modification of Deeds of Trust and Other
Loan Instruments (this "First Modification") dated as of
June 8, 2001 by and between William Lyon Homes, Inc., a
California Corporation ("Borrower") and Guaranty Bank, a
federal savings bank organized and existing under the laws
of the United States (formerly known as "Guaranty Federal
Bank, F.S.B.") ("Lender")
10.3 Mortgage Warehouse Loan and Security Agreement dated as of
May 31, 2001, by and between Duxford Financial, Inc., and/or
Bayport Mortgage, L.P., a California Corporation
("Borrower") and First Tennessee Bank ("Bank")
</Table>
(b) REPORTS ON FORM 8-K.
No reports were filed on Form 8-K during the reporting period.
36
37
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: August 1, 2001 By: /s/ MICHAEL D. GRUBBS
------------------------------------
MICHAEL D. GRUBBS
Senior Vice President,
Chief Financial Officer and
Treasurer
(Principal Financial Officer)
Date: August 1, 2001 By: /s/ W. DOUGLASS HARRIS
------------------------------------
W. DOUGLASS HARRIS
Vice President, Corporate Controller
(Principal Accounting Officer)
37
38
EXHIBIT INDEX
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.2 Agreement for First Modification of Deeds of Trust and Other
Loan Instruments (this "First Modification") dated as of
June 8, 2001 by and between William Lyon Homes, Inc., a
California Corporation ("Borrower") and Guaranty Bank, a
federal savings bank organized and existing under the laws
of the United States (formerly known as "Guaranty Federal
Bank, F.S.B.") ("Lender")
10.3 Mortgage Warehouse Loan and Security Agreement dated as of
May 31, 2001, by and between Duxford Financial, Inc., and/or
Bayport Mortgage, L.P., a California Corporation
("Borrower") and First Tennessee Bank ("Bank")
</Table>