Market Overview

William Lyon Homes Reports Third Quarter 2018 Results

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29% Increase in Net New Home Orders; 24% Increase in New Home
Deliveries; 32% Increase in Units in Backlog

William Lyon Homes (NYSE:WLH), a leading homebuilder in the Western
U.S., announced results for its third quarter ended September 30, 2018.

2018 Third Quarter Highlights (Comparison to 2017 Third Quarter)

  • Net income available to common stockholders of $26.6 million, or $0.68
    per diluted share
  • Pre-tax income of $40.8 million
  • Net new home orders of 1,001, up 29%
  • Units in backlog of 1,596, up 32%
  • New home deliveries of 1,053 homes, up 24%
  • Dollar value of homes in backlog of $800.6 million, up 14%
  • Dollar value of orders of $457.6 million, up 8%
  • Average sales locations of 116, up 35%
  • Average sales price (ASP) of new homes delivered of $506,700 versus
    $576,200
  • Home sales revenue of $533.5 million, up 9%
  • Homebuilding gross margin percentage of 18.2%
  • Adjusted homebuilding gross margin percentage of 23.0%
  • SG&A percentage of 11.0%
  • Adjusted EBITDA of $66.2 million, down 2%

"We are pleased with our financial results for the third quarter, with
homebuilding revenues of $533.5 million, up 9% and new home deliveries
of 1,053, up 24%," said Matthew R. Zaist, President and Chief Executive
Officer. "During the quarter, our GAAP homebuilding gross margins were
18.2%, which is a 10 basis point improvement over the third quarter of
2017, and a 30 basis point improvement sequentially from the second
quarter of this year. We expect our sequential margin improvement to
carry into the fourth quarter with GAAP gross margins anticipated to
expand approximately 40 to 60 basis points over the third quarter. Our
third quarter net new home orders were up 29% year-over-year, to 1,001,
and our average number of sales locations for the third quarter was 116,
up from 86 in the third quarter of 2017."

Mr. Zaist continued, "While the long-term fundamentals remain positive
in the broader economy as well as our local markets, the cost of home
ownership has increased with the significant price appreciation in
several of our markets over the last few years, combined with the recent
rise in mortgage interest rates. As a result, and most notably in
Northern California and Seattle, we have experienced some sales pace
moderation, which has led us to adjust our expectations for our fourth
quarter results. Overall, in the face of some challenging market
conditions, our strong backlog of 1,596 units with a dollar value of
over $800 million still puts us in position to finish the year strongly
and achieve another year of profitability growth for the Company and a
record year in revenue and deliveries. The Company expects fourth
quarter results to include backlog conversion of 85% to 92.5%, which we
believe will contribute significant cash in-flows in the fourth quarter,
enabling us to make further progress on our debt reduction for the year
and keep us on track toward our long-term balance sheet goals, including
targeting 40% debt-to-cap by 2020. Looking forward, our new community
openings over the next several quarters will be focused on affordable
price points below the market medians with an emphasis on the entry
level and active adult buyer segments, which we believe will help to
address affordability concerns and drive continued growth for William
Lyon Homes."

Outlook

For the fourth quarter of 2018, the Company anticipates new home
deliveries of approximately 1,360 to 1,475 units, average sales price of
homes closed of approximately $505,000 and pre-tax income before
non-controlling interest of approximately $62 million to $67 million.

For the full year, the Company anticipates new home deliveries of
approximately 4,235 to 4,350 units, home sales revenues of approximately
$2.115 billion to $2.165 billion and pre-tax income before
non-controlling interest of approximately $157 million to $162 million.

Operating Results

Home sales revenue for the third quarter of 2018 was $533.5 million, as
compared to $490.3 million in the year-ago period, an increase of 9%.
The increase was driven by a 24% increase in deliveries to 1,053 homes,
compared to 851 in the third quarter of 2017.

Net new home orders for the quarter were 1,001, up 29% from 774 in the
third quarter of 2017. The overall increase in net new home orders was
driven by an increase in community count to 116 average sales locations,
from 86 in the year-ago period, an increase of 35%.

The dollar value of homes in backlog was $800.6 million as of September
30, 2018, an increase of 14%, compared to $699.3 million as of September
30, 2017. The increase was driven by a 32% increase in units in backlog
to 1,596 from 1,208 in the year-ago period. The average sales price of
homes in backlog decreased to $501,600 from $578,900 in the prior year,
due to the number of homes in backlog at our Texas division of 248 homes
at an average sales price of $275,300, with no comparable amount in the
prior year.

Homebuilding gross margin percentage for homes closed during the third
quarter of 2018 was 18.2%, up 10 basis points from 18.1% in the third
quarter of 2017, and up 30 basis points from 17.9% in the second quarter
of 2018.

Sales and marketing expense during the third quarter of 2018 was 5.4% of
homebuilding revenue, compared to 4.5% in the year-ago quarter, which is
driven by an increase in advertising and outside broker commissions of
60 basis points combined, as well as the impact of the adoption of ASC
606 of 20 basis points, which was adopted on January 1, 2018, requiring
the Company to record certain selling costs that were previously
recorded as cost of sales to sales and marketing expense. General and
administrative expenses increased to 5.6% of homebuilding revenue,
compared to 4.7% in the year-ago quarter as a result of continued
investment in our growing operating business, incremental information
technology investment and further investment in building out our
financial services group.

Balance Sheet Update

At quarter end, cash and cash equivalents totaled $50.8 million, owned
real estate inventories totaled $2.4 billion, total assets were $2.9
billion and total equity was $1.0 billion. Total debt to book
capitalization was 60.3%, and net debt to net book capitalization was
59.5% at September 30, 2018, compared to 57.1% and 56.1% at September
30, 2017, and 54.5% and 49.6% at December 31, 2017, respectively.

Conference Call

The Company will host a conference call to discuss those results today,
Tuesday, October 30, 2018 at 9:00 a.m. Pacific Time. The call will be
available via both the telephone at (855) 851-4524 or (720) 634-2900,
conference ID #1076946, or through the Company's website at www.lyonhomes.com
in the Investor Relations section of the site.

A replay of the call will be available through November 6, 2018 by
dialing (855) 859-2056 or (404) 537-3406, conference ID #1076946. A
webcast replay of the call will also be available on the Company's
website approximately two hours after the broadcast.

About William Lyon Homes

William Lyon Homes is one of the largest Western U.S. regional
homebuilders. Headquartered in Newport Beach, California, the Company is
primarily engaged in the design, construction, marketing and sale of
single-family detached and attached homes in California, Arizona,
Nevada, Colorado, Washington, Oregon, and Texas. Its core markets
include Orange County, Los Angeles, the Inland Empire, the San Francisco
Bay Area, Phoenix, Las Vegas, Denver, Portland, Seattle, Austin and San
Antonio. The Company has a distinguished legacy of more than 60 years of
homebuilding operations, over which time it has sold in excess of
105,000 homes. The Company markets and sells its homes under the William
Lyon Homes brand in all of its markets except for Washington and Oregon,
where the Company operates under the Polygon Northwest brand.

Forward-Looking Statements

Certain statements contained in this release and the accompanying
comments during our conference call that are not historical information
may constitute "forward-looking statements" as defined by the Private
Securities Litigation Reform Act of 1995, including, but not limited to,
forward-looking statements related to: anticipated deliveries, revenue
and pre-tax income, gross margin performance, backlog conversion rates,
operating and financial results for the fourth quarter of 2018 and
beyond, community count growth and project performance, market and
industry trends, the continued housing market recovery, average sale
price of homes to be closed in various periods, SG&A percentage, future
cash needs and liquidity, minority interest from our homebuilding joint
ventures, leverage ratios and reduction strategies, land acquisition
spending, financial services and ancillary business performance and
strategies; the anticipated financial or operational performance
resulting from the RSI Communities transaction, and estimated new home
deliveries, home sales revenue and community count on a combined Company
basis. The forward-looking statements involve risks and uncertainties
and actual results may differ materially from those projected or implied.

The Company makes no commitment, and disclaims any duty, to update or
revise any forward-looking statements to reflect future events or
changes in these expectations. Further, certain forward-looking
statements are based on assumptions of future events which may not prove
to be accurate.
Factors that may impact such forward-looking
statements include, among others: changes in mortgage and other interest
rates; affordability pressures; the Company's ability to successfully
integrate RSI Communities' homebuilding operations with its existing
operations; adverse weather conditions; the availability of labor and
homebuilding materials and increased construction cycle times; our
financial leverage and level of indebtedness and any inability to comply
with financial and other covenants under our debt instruments; continued
volatility and worsening in general economic conditions either
internationally, nationally or in regions in which we operate; increased
housing supply in our markets; increased outside broker costs; increased
costs of homebuilding materials; changes in governmental laws and
regulations and compliance, increased costs, fees and delays associated
therewith; government actions, policies, programs and regulations
directed at or affecting the housing market (including the Tax Cuts and
Jobs Act ("TCJA"), the Dodd-Frank Act, tax benefits associated with
purchasing and owning a home, and the standards, fees and size limits
applicable to the purchase or insuring of mortgage loans by
government-sponsored enterprises and government agencies), the
homebuilding industry, or construction activities; changes in existing
tax laws or enacted corporate income tax rates, including pursuant to
the TCJA; worsening in markets for residential housing; the impact of
construction defect, product liability and home warranty claims,
including the adequacy of self-insurance accruals, and the applicability
and sufficiency of our insurance coverage; defects in manufactured
products or other homebuilding materials; decline in real estate values
resulting in impairment of our real estate assets; volatility in the
banking industry, credit and capital markets; restraints on foreign
investment; terrorism or other hostilities involving the United States
and other geopolitical risk as well as restrictive policies such as
tariffs or capital investment restrictions; building moratorium or
"slow-growth" or "no-growth" initiatives that could be implemented in
states in which we operate; conditions in the capital, credit and
financial markets, including mortgage lending standards and the
availability of and timing mortgage financing; changes in generally
accepted accounting principles or interpretations of those principles;
competition for home sales from other sellers of new and resale homes;
cancellations and our ability to realize our backlog; the occurrence of
events such as landslides, soil subsidence and earthquakes that are
uninsurable, not economically insurable or not subject to effective
indemnification agreements; limitations on our ability to utilize our
tax attributes; whether an ownership change occurred that could, under
certain circumstances, have resulted in the limitation of our ability to
offset prior years' taxable income with net operating losses; the timing
of receipt of regulatory approvals and the opening of projects; the
availability and cost of land for future development; and additional
factors discussed under the sections captioned "Risk Factors" included
in our annual and quarterly reports filed with the Securities and
Exchange Commission. The foregoing list is not exhaustive. New risk
factors may emerge from time to time and it is not possible for
management to predict all such risk factors or to assess the impact of
such risk factors on our business.

                       

WILLIAM LYON HOMES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except number of shares and per share data)

(unaudited)

 
Three Three
Months Months
Ended Ended
September 30, September 30,
2018 2017
Operating revenue
Home sales $ 533,514 $ 490,304
Construction services   1,190     35  
  534,704     490,339  
Operating costs
Cost of sales — homes (436,311 ) (401,700 )
Construction services (1,121 ) (35 )
Sales and marketing (28,879 ) (21,935 )
General and administrative (30,039 ) (22,951 )
Other   (591 )   (548 )
  (496,941 )   (447,169 )
Operating income 37,763 43,170
Equity in income of unconsolidated joint ventures 531 1,160
Other income (loss), net   2,510     (365 )
Income before provision for income taxes 40,804 43,965
Provision for income taxes   (8,990 )   (13,905 )
Net income 31,814 30,060
Less: Net income attributable to noncontrolling interests   (5,256 )   (2,642 )
Net income available to common stockholders $ 26,558   $ 27,418  
 
Income per common share:
Basic $ 0.70 $ 0.74
Diluted $ 0.68 $ 0.71
Weighted average common shares outstanding:
Basic 37,847,743 37,059,483
Diluted 39,160,894 38,583,341
 
 
                       

WILLIAM LYON HOMES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except number of shares and per share data)

(unaudited)

 
Nine Nine
Months Months
Ended Ended
September 30, September 30,
2018 2017
Operating revenue
Home sales $ 1,424,331 $ 1,171,791
Construction services   3,193     94  
  1,427,524     1,171,885  
Operating costs
Cost of sales — homes (1,169,191 ) (973,212 )
Construction services (3,063 ) (41 )
Sales and marketing (80,420 ) (57,924 )
General and administrative (83,067 ) (61,447 )
Transaction expenses (3,907 ) -
Other   (1,510 )   (1,548 )
  (1,341,158 )   (1,094,172 )
Operating income 86,366 77,713
Equity in income of unconsolidated joint ventures 1,996 2,622
Other income (loss), net   2,856     (12 )
Income before extinguishment of debt 91,218 80,323
Loss on extinguishment of debt   -     (21,828 )
Income before provision for income taxes 91,218 58,495
Provision for income taxes   (19,580 )   (17,480 )
Net income 71,638 41,015
Less: Net income attributable to noncontrolling interests   (14,297 )   (4,643 )
Net income available to common stockholders $ 57,341   $ 36,372  
 
Income per common share:
Basic $ 1.51 $ 0.98
Diluted $ 1.45 $ 0.95
Weighted average common shares outstanding:
Basic 37,931,764 37,007,144
Diluted 39,581,986 38,381,292
 
 
                       

WILLIAM LYON HOMES

CONSOLIDATED BALANCE SHEETS

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

 
September 30, December 31,
2018 2017
(unaudited)
ASSETS
Cash and cash equivalents $ 50,782 $ 182,710
Receivables 10,561 10,223
Escrow proceeds receivable 370 3,319
Real estate inventories
Owned 2,437,450 1,699,850
Not owned 209,819 -
Investment in unconsolidated joint ventures 5,109 7,867
Goodwill 118,877 66,902
Intangibles, net of accumulated amortization of $4,640 as of
September 30, 2018 and December 31, 2017
6,700 6,700
Deferred income taxes 48,279 47,915
Lease right-of-use assets 15,353 14,454
Other assets, net   40,748   21,164
Total assets $ 2,944,048 $ 2,061,104
LIABILITIES AND EQUITY
Accounts payable $ 94,904 $ 58,799
Accrued expenses 125,249 111,491
Liabilities from inventories not owned 209,819 -
Revolving credit facility 220,000 -
Land notes payable - 589
Construction notes payable 1,426 -
Joint venture notes payable 163,385 93,926

53/4% Senior Notes due April 15, 2019

- 149,362
7% Senior Notes due August 15, 2022 347,273 346,740
6% Senior Notes due September 1, 2023 343,568 -
57/8% Senior Notes due January 31, 2025   440,597   439,567
  1,946,221   1,200,474
Commitments and contingencies
Equity:
William Lyon Homes stockholders' equity
Preferred stock, par value $0.01 per share; 10,000,000 shares
authorized and no shares issued and outstanding at September 30,
2018 and December 31, 2017
- -
Common stock, Class A, par value $0.01 per share; 150,000,000 shares
authorized; 34,150,104 and 34,267,510 shares issued, 32,937,737 and
33,135,650 shares outstanding at September 30, 2018 and December 31,
2017, respectively
341 344
Common stock, Class B, par value $0.01 per share; 30,000,000 shares
authorized; 4,817,394 shares issued and outstanding at September 30,
2018 and December 31, 2017
48 48
Additional paid-in capital 445,694 454,286
Retained earnings   383,135   325,794
Total William Lyon Homes stockholders' equity 829,218 780,472
Noncontrolling interests   168,609   80,158
Total equity   997,827   860,630
Total liabilities and equity $ 2,944,048 $ 2,061,104
 
 
     

WILLIAM LYON HOMES

SELECTED FINANCIAL AND OPERATING INFORMATION

(unaudited)

 
Three Months Ended September 30,
2018           2017          
Consolidated Consolidated Percentage %
Total Total Change
Selected Financial Information (1)
(dollars in thousands)
Homes closed   1,053     851   24 %
Home sales revenue $ 533,514 $ 490,304 9 %
Cost of sales (excluding interest and purchase accounting
adjustments)
  (410,908 )   (378,777 ) 8 %
Adjusted homebuilding gross margin (2) $ 122,606   $ 111,527   10 %
Adjusted homebuilding gross margin percentage (2)   23.0 %   22.7 % 1 %
Interest in cost of sales (21,548 ) (22,923 ) (6 %)
Purchase accounting adjustments   (3,855 )   -   N/M  
Gross margin $ 97,203   $ 88,604   10 %
Gross margin percentage   18.2 %   18.1 % 1 %
 
Number of homes closed
California 301 300 0 %
Arizona 108 133 (19 %)
Nevada 80 74 8 %
Colorado 124 44 182 %
Washington 118 116 2 %
Oregon 159 184 (14 %)
Texas   163     -   N/M  
Total   1,053     851   24 %
 
Average sales price of homes closed
California $ 668,800 $ 769,800 (13 %)
Arizona 317,500 297,800 7 %
Nevada 622,700 580,600 7 %
Colorado 440,100 563,900 (22 %)
Washington 686,300 618,900 11 %
Oregon 436,700 435,900 0 %
Texas   264,400     -   N/M  
Company Average $ 506,700 $ 576,200 (12 %)
 
Number of net new home orders
California 295 238 24 %
Arizona 118 124 (5 %)
Nevada 94 66 42 %
Colorado 100 82 22 %
Washington 77 116 (34 %)
Oregon 145 148 (2 %)
Texas   172     -   N/M  
Total   1,001     774   29 %
 
Average number of sales locations during period
California 36 23 57 %
Arizona 6 7 (14 %)
Nevada 15 13 15 %
Colorado 12 16 (25 %)
Washington 10 11 (9 %)
Oregon 15 16 (6 %)
Texas   22     -   N/M  
Total   116     86   35 %
 
(1)     For the 2018 period presented, the Company is reporting in seven
segments: California, Arizona, Nevada, Colorado, Washington, Oregon,
and Texas. Texas is a new reporting segment resulting from the RSI
Acquisition completed in 2018. For the 2017 period presented, the
Company reported in six segments: California, Arizona, Nevada,
Colorado, Washington, and Oregon.
(2) Adjusted homebuilding gross margin is a financial measure that is
not prepared in accordance with U.S. generally accepted accounting
principles, or U.S. GAAP. It is used by management in evaluating
operating performance and in making strategic decisions regarding
sales pricing, construction and development pace, product mix and
other operating decisions. We believe this information is meaningful
as it isolates the impact that interest and purchase accounting
adjustments have on homebuilding gross margin and allows investors
to make better comparisons with our competitors.
 
 
     

WILLIAM LYON HOMES

SELECTED FINANCIAL AND OPERATING INFORMATION

(unaudited)

 
Nine Months Ended September 30,
2018           2017          
Consolidated Consolidated Percentage %
Total Total Change
Selected Financial Information (1)
(dollars in thousands)
Homes closed   2,875     2,181   32 %
Home sales revenue $ 1,424,331 $ 1,171,791 22 %
Cost of sales (excluding interest and purchase accounting
adjustments)
  (1,096,535 )   (917,992 ) 19 %
Adjusted homebuilding gross margin (2) $ 327,796   $ 253,799   29 %
Adjusted homebuilding gross margin percentage (2)   23.0 %   21.7 % 6 %
Interest in cost of sales (62,681 ) (55,220 ) 14 %
Purchase accounting adjustments   (9,975 )   -   N/M  
Gross margin $ 255,140   $ 198,579   28 %
Gross margin percentage   17.9 %   16.9 % 6 %
 
Number of homes closed
California 779 637 22 %
Arizona 336 408 (18 %)
Nevada 245 175 40 %
Colorado 362 140 159 %
Washington 350 292 20 %
Oregon 403 529 (24 %)
Texas   400     -   N/M  
Total   2,875     2,181   32 %
 
Average sales price of homes closed
California $ 655,400 $ 725,600 (10 %)
Arizona 312,800 290,900 8 %
Nevada 592,700 591,100 0 %
Colorado 433,900 551,100 (21 %)
Washington 628,900 635,400 (1 %)
Oregon 452,900 424,900 7 %
Texas   259,400     -   N/M  
Company Average $ 495,400 $ 537,300 (8 %)
 
Number of net new home orders
California 915 783 17 %
Arizona 344 401 (14 %)
Nevada 318 236 35 %
Colorado 404 229 76 %
Washington 392 432 (9 %)
Oregon 553 575 (4 %)
Texas   451     -   N/M  
Total   3,377     2,656   27 %
 
Average number of sales locations during period
California 29 23 26 %
Arizona 6 8 (25 %)
Nevada 13 13 0 %
Colorado 14 14 0 %
Washington 9 9 0 %
Oregon 15 18 (17 %)
Texas   16     -   N/M  
Total   102     85   20 %
 
(1)     For the 2018 period presented, the Company is reporting in seven
segments: California, Arizona, Nevada, Colorado, Washington, Oregon,
and Texas. Texas is a new reporting segment resulting from the RSI
Acquisition completed in 2018. For the 2017 period presented, the
Company reported in six segments: California, Arizona, Nevada,
Colorado, Washington, and Oregon.
(2) Adjusted homebuilding gross margin is a financial measure that is
not prepared in accordance with U.S. generally accepted accounting
principles, or U.S. GAAP. It is used by management in evaluating
operating performance and in making strategic decisions regarding
sales pricing, construction and development pace, product mix and
other operating decisions. We believe this information is meaningful
as it isolates the impact that interest and purchase accounting
adjustments have on homebuilding gross margin and allows investors
to make better comparisons with our competitors.
 
 
                         

WILLIAM LYON HOMES

SELECTED FINANCIAL AND OPERATING INFORMATION

(unaudited)

 
As of September 30,
2018 2017
Consolidated Consolidated Percentage %
Total Total Change
Backlog of homes sold but not closed at end of period
California 451 370 22 %
Arizona 169 197 (14 %)
Nevada 159 120 33 %
Colorado 214 164 30 %
Washington 133 192 (31 %)
Oregon 222 165 35 %
Texas   248   - N/M  
Total   1,596   1,208 32 %
 
Dollar amount of homes sold but not closed at end of period (in
thousands)
California $ 327,838 $ 294,861 11 %
Arizona 53,585 60,467 (11 %)
Nevada 94,053 81,192 16 %
Colorado 92,315 69,085 34 %
Washington 83,256 119,299 (30 %)
Oregon 81,270 74,424 9 %
Texas   68,267   - N/M  
Total $ 800,584 $ 699,328 14 %
 
Lots owned and controlled at end of period
Lots owned (1)
California 3,648 1,616 126 %
Arizona 3,756 4,541 (17 %)
Nevada 2,745 2,871 (4 %)
Colorado 1,006 1,376 (27 %)
Washington 1,538 1,363 13 %
Oregon 2,613 1,806 45 %
Texas   3,199   - N/M  
Total   18,505   13,573 36 %
 
Lots controlled
California 1,709 915 87 %
Arizona 651 157 N/M
Nevada - 410 (100 %)
Colorado 2,368 292 711 %
Washington 710 797 (11 %)
Oregon 1,307 1,800 (27 %)
Texas   3,885   - N/M  
Total   10,630   4,371 143 %
 
Total lots owned and controlled
California 5,357 2,531 112 %
Arizona 4,407 4,698

(6

%)

Nevada 2,745 3,281 (16 %)
Colorado 3,374 1,668 102 %
Washington 2,248 2,160 4 %
Oregon 3,920 3,606 9 %
Texas   7,084   - N/M  
Total   29,135   17,944 62 %
 
(1)    

Certain lots in California and Texas are consolidated on the
Company's accompanying balance sheet in accordance with FASB ASC
Topic 470, Debt ("ASC 470"). Included in lots owned are 876 lots
in California and 1,646 lots in Texas that are associated with a
land banking transaction that is consolidated on the Company's
accompanying balance sheet in accordance with ASC 470.

 
 
                       

WILLIAM LYON HOMES

SUPPLEMENTAL FINANCIAL INFORMATION

(dollars in thousands)

(unaudited)

 
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2018 2017 2018 2017
 
Net income available to common stockholders $ 26,558 $ 27,418 $ 57,341 $ 36,372
Net income, adjusted for transaction expenses and loss on
extinguishment of debt, net of tax benefit (1)
$ 26,558 $ 27,418 $ 60,408 $ 50,448
Net cash used in (provided by) operating activities $ (55,046 ) $ 43,822 $ (184,996 ) $ (22,990 )
Interest incurred $ 24,725 $ 18,112 $ 66,791 $ 56,358
Adjusted EBITDA (2) $ 66,175 $ 67,821 $ 170,302 $ 137,821
Adjusted EBITDA Margin (3) 12.4 % 13.8 % 11.9 % 11.8 %
Ratio of adjusted EBITDA to interest incurred 2.7 3.7 2.5 2.4
 
 
Balance Sheet Data
   
September 30, December 31,
2018 2017
 
Cash and cash equivalents $ 50,782 $ 182,710
 
Total William Lyon Homes stockholders' equity 829,218 780,472
Noncontrolling interests 168,609 80,158
Total debt   1,516,249     1,030,184  
Total capital $ 2,514,076   $ 1,890,814  
 
Ratio of debt to total capital 60.3 % 54.5 %
Ratio of net debt to total capital (net of cash) 59.5 % 49.6 %
 
 
                           

WILLIAM LYON HOMES

SUPPLEMENTAL FINANCIAL INFORMATION

(dollars in thousands)

(unaudited)

 

(1)

Adjusted net income means net income available to common
stockholders plus transaction expenses and loss for the
extinguishment of the 8.5% Senior Notes. Adjusted net income is
not a financial measure prepared in accordance with U.S. GAAP.
Adjusted net income is presented herein because management
believes the presentation of adjusted net income provides useful
information to the Company's investors regarding the Company's
results of operations because adjusted net income isolates the
impact of the one-time, non-recurring transaction expenses and
infrequent extinguishment fees. Adjusted net income should not be
considered as an alternative for net income, cash flows from
operating activities and other consolidated income or cash flow
statement data prepared in accordance with accounting principles
generally accepted in the United States or as a measure of
profitability or liquidity. A reconciliation of net income
available to common stockholders to adjusted net income is
provided in the following table:

 
Nine Nine
Months Months
Ended Ended
September 30, September 30,
2018 2017
Net income available to common stockholders $ 57,341 $ 36,372
Add: Transaction expenses 3,907 -
Less: Income tax benefit applicable to transaction expenses (840 ) -
Add: Loss on extinguishment of debt - 21,828
Less: Income tax benefit applicable to loss on extinguishment of debt   -     (7,752 )
Net income, adjusted for transaction expenses and loss on
extinguishment of debt, net of tax benefits
$ 60,408   $ 50,448  
Diluted weighted average common shares outstanding 39,581,986 38,381,292
Adjusted net income excluding noncontrolling interest per diluted
share
$ 1.53 $ 1.31
 
 
                           

WILLIAM LYON HOMES

SUPPLEMENTAL FINANCIAL INFORMATION

(dollars in thousands)

(unaudited)

 

(2)

Adjusted EBITDA means net income available to common stockholders
plus (i) provision for income taxes, (ii) interest expense, (iii)
amortization of capitalized interest included in cost of sales,
(iv) stock based compensation, (v) depreciation and amortization,
(vi) non-cash purchase accounting adjustments, (vii) cash
distributions of income from unconsolidated joint ventures, (viii)
equity in income of unconsolidated joint ventures, (ix)
transaction expenses, and (x) loss on extinguishment of debt.
Other companies may calculate adjusted EBITDA differently.
Adjusted EBITDA is not a financial measure prepared in accordance
with U.S. GAAP. Adjusted EBITDA is presented herein because
management believes the presentation of adjusted EBITDA provides
useful information to the Company's investors regarding the
Company's financial condition and results of operations because
adjusted EBITDA is a widely utilized indicator of a company's
operating performance. Adjusted EBITDA should not be considered as
an alternative for net income, cash flows from operating
activities and other consolidated income or cash flow statement
data prepared in accordance with accounting principles generally
accepted in the United States or as a measure of profitability or
liquidity. A reconciliation of net income available to common
stockholders to adjusted EBITDA is provided in the following table:

 
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2018 2017 2018 2017
 
Net income available to common stockholders $ 26,558 $ 27,418 $ 57,341 $ 36,372
Provision for income taxes 8,990 13,905 19,580 17,480
Interest expense
Interest incurred 24,725 18,112 66,791 56,358
Interest capitalized (24,725 ) (18,112 ) (66,791 ) (56,358 )
Amortization of capitalized interest included in cost of sales 22,009 22,940 63,227 55,237
Stock based compensation 2,406 3,045 7,593 6,260
Depreciation and amortization 1,807 535 5,779 1,426
Non-cash purchase accounting adjustments 3,855 - 9,975 -
Cash distributions of income from unconsolidated joint ventures 1,081 1,138 4,896 1,840
Equity in income of unconsolidated joint ventures (531 ) (1,160 ) (1,996 ) (2,622 )
Transaction expenses - - 3,907 -
Loss on extinguishment of debt   -     -     -     21,828  
Adjusted EBITDA $ 66,175   $ 67,821   $ 170,302   $ 137,821  
 
 
                           

WILLIAM LYON HOMES

SUPPLEMENTAL FINANCIAL INFORMATION

(dollars in thousands)

(unaudited)

 

(3)

Calculated as Adjusted EBITDA as a percentage of operating revenue.

 

Adjusted pre-tax income means income before provision for income
taxes plus transaction expenses and loss for the extinguishment of
the 8.5% Senior Notes. Adjusted pre-tax income is not a financial
measure prepared in accordance with U.S. GAAP. Adjusted pre-tax
income is presented herein because management believes the
presentation of adjusted pre-tax income provides useful
information to the Company's investors regarding the Company's
results of operations because adjusted pre-tax income isolates the
impact of the one-time, non-recurring transaction expenses and
infrequent extinguishment fees. Adjusted pre-tax income should not
be considered as an alternative for net income, cash flows from
operating activities and other consolidated income or cash flow
statement data prepared in accordance with accounting principles
generally accepted in the United States or as a measure of
profitability or liquidity. A reconciliation of income before
provision for income taxes to adjusted pre-tax income is provided
in the following table:

 
Nine Nine
Months Months
Ended Ended
September 30, September 30,
2018 2017
Income before provision for income taxes $ 91,218 $ 58,495
Add: Transaction expenses 3,907 -
Loss on extinguishment of debt   -   21,828
Pre-tax income, adjusted for transaction expenses and loss on
extinguishment of debt
$ 95,125 $ 80,323
 

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