Market Overview

William Lyon Homes Reports Fourth Quarter and Record Full Year 2018 Results

Share:

Full Year Homebuilding Revenue of $2.1 Billion, Highest in Company
History; Deliveries of 4,186 Homes

Fourth Quarter Homebuilding Revenue of $657.4 Million; Gross
Margin of 18.8%; Deliveries of 1,311 Homes

William Lyon Homes (NYSE:WLH), a leading homebuilder in the Western
U.S., announced results for its fourth quarter and year ended December
31, 2018.

2018 Fourth Quarter Highlights (Comparison to 2017 Fourth Quarter)

  • Net income available to common stockholders of $34.3 million, or $0.89
    per diluted share, compared to $11.8 million, or $0.30 per diluted
    share in the prior year
    • Excluding $2.0 million of project abandonment costs and $1.0
      million of gain from extinguishment of debt, adjusted net income
      available to common stockholders, net of income tax, was $35.1
      million, or $0.91 per diluted share, compared to $34.9 million, or
      $0.89 per diluted share in the prior year.
  • Pre-tax income of $54.5 million
  • New home deliveries of 1,311 homes, up 24%
  • Home sales revenue of $657.4 million, up 5%
  • Average sales price (ASP) of new homes delivered of $501,400 versus
    $589,100
  • Homebuilding gross margin percentage of 18.8%
  • Adjusted homebuilding gross margin percentage of 23.4%
  • Net new home orders of 756, up 13%
  • Units in backlog of 1,041, up 27%
  • Dollar value of homes in backlog of $479.0 million, up 11%
  • SG&A percentage of 10.7%
  • Adjusted EBITDA of $79.8 million

2018 Full Year Highlights (Comparison to 2017 Full Year)

  • Net income available to common stockholders of $91.6 million, or $2.32
    per diluted share, compared to $48.1 million, or $1.24 per diluted
    share in the prior year
    • Excluding $3.9 million of transaction expenses, $2.0 million of
      project abandonment costs and $1.0 million of gain from
      extinguishment of debt, adjusted net income available to common
      stockholders, net of income tax, was $95.5 million, or $2.42 per
      diluted share, compared to $85.3 million, or $2.21 per diluted
      share in the prior year.
  • Pre-tax income of $145.8 million
  • New home deliveries of 4,186 homes, up 29%
  • Home sales revenue of $2.1 billion, up 16%
  • ASP of new homes delivered of $497,300 versus $554,200
  • Homebuilding gross margin percentage of 18.2%
  • Adjusted homebuilding gross margin percentage of 23.1%
  • Net new home orders of 4,133, up 24%
  • SG&A percentage of 11.2%
  • Adjusted EBITDA of $250.1 million

"Overall, 2018 was a successful and record-setting year for the Company,
as we delivered 4,186 homes, up 29%, and achieved homebuilding revenues
of $2.1 billion, up 16%, both the highest in the Company's history,"
said Matthew R. Zaist, President and Chief Executive Officer. "Earlier
in the year we completed our strategic acquisition of RSI, giving us
additional exposure to the first-time home buyer segment and expanding
our footprint into one of the best new home markets in the country in
Central Texas.

"We, along with the rest of the homebuilding industry, experienced a
challenging environment in the fourth quarter of 2018. In October and
November 2018 we experienced homebuyer demand levels that were less than
what we had anticipated, as mortgage interest rates increased and
consumer confidence waned, along with increased stock market volatility.
As a result, we sold and closed fewer spec homes in the fourth quarter
than we had expected, and we also experienced a higher cancellation rate
in certain of our markets, which led us to fall short of our deliveries
and revenue expectations for the quarter. On the positive side,
homebuilding gross margins were at the high end of our expectations,
sales and marketing percentage was in-line with expectations as were G&A
dollars on an absolute basis, though the percentage was higher than our
forecast due to decreased leverage on lower revenue."

Mr. Zaist continued, "While the disruption we experienced in October and
November caused us to fall short of our internal forecasts, we are
incrementally encouraged by December's rebound in sales activity, which
demonstrated significant sequential improvement with an absorption pace
up 21% over November. This sequential improvement continued into
January, where we saw a more historically representative level of
traffic and sales. If traditional trends hold true in terms of spring
selling season evolution, we would expect to see some acceleration
moving into the next couple of months, although we are taking a more
cautious view this year until the selling season plays out."

Operating Results

Home sales revenue for the fourth quarter of 2018 was $657.4 million, as
compared to $623.3 million in the year-ago period, an increase of 5%.
The increase was driven by a 24% increase in deliveries to 1,311 homes,
compared to 1,058 in the fourth quarter of 2017, partially offset by a
15% year-over-year decline in the average sales price of homes closed.

Homebuilding gross margin percentage for homes closed during the fourth
quarter of 2018 was 18.8%, up 60 basis points from 18.2% in the third
quarter of 2018.

Net new home orders for the quarter were 756, up 13% from 672 in the
fourth quarter of 2017. The overall increase in net new home orders was
driven by an increase in community count to 117 average sales locations,
from 80 in the year-ago period.

The dollar value of homes in backlog was $479.0 million as of December
31, 2018, an increase of 11%, compared to $433.0 million as of December
31, 2017. The increase was driven by a 27% increase in units in backlog
to 1,041 from 822 in the year-ago period. The average sales price of
homes in backlog decreased to $460,100 from $526,800 in the prior year,
due to the number of homes in backlog at our Central Texas division of
234 homes at an average sales price of $261,700.

Sales and marketing expense during the fourth quarter of 2018 was 5.2%
of homebuilding revenue, compared to 4.5% in the year-ago quarter, which
was driven by an increase in advertising and outside broker commissions
of 30 basis points combined, as well as the impact of the adoption of
ASC 606 of 30 basis points. General and administrative expenses
increased to 5.5% of homebuilding revenue, compared to 4.7% in the
year-ago quarter.

Balance Sheet Update

The Company generated significant cash flow in the fourth quarter,
enabling the Company to repay $187 million of principal amount of debt
in the last three months of the year. At quarter end, cash and cash
equivalents totaled $33.8 million, owned real estate inventories totaled
$2.3 billion, total assets were $2.9 billion and total equity was $1.0
billion. Total debt to book capitalization was 56.6%, and net debt to
net book capitalization was 55.9% at December 31, 2018, compared to
54.5% and 49.6% at December 31, 2017, respectively.

Conference Call

The Company will host a conference call to discuss these results today,
Thursday, February 14, 2019 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 #7387966, 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 February 21, 2019 by
dialing (855) 859-2056 or (404) 537-3406, conference ID #7387966. 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 62 years of
homebuilding operations, over which time it has sold in excess of
106,000 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 first quarter of 2019, community
count growth and project performance, market and industry trends,
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, and financial services and ancillary business
performance and strategies. 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; utility company delays; 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 and timing of 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
December 31, December 31,
2018 2017
Operating revenue
Home sales $ 657,390 $ 623,283
Construction services   2,257     1,360  
  659,647     624,643  
Operating costs
Cost of sales — homes (534,107 ) (505,337 )
Construction services (2,083 ) (1,276 )
Sales and marketing (34,075 ) (28,302 )
General and administrative (36,205 ) (28,759 )
Other   (638 )   (726 )
  (607,108 )   (564,400 )
Operating income 52,539 60,243
Equity in income of unconsolidated joint ventures 1,122 1,039
Other income, net   (141 )   907  
Income before extinguishment of debt 53,520 62,189
Gain on extinguishment of debt   1,015     -  
Income before provision for income taxes 54,535 62,189
Provision for income taxes   (11,040 )   (45,453 )
Net income 43,495 16,736
Less: Net income attributable to noncontrolling interests   (9,240 )   (4,973 )
Net income available to common stockholders $ 34,255   $ 11,763  
 
Income per common share:
Basic $ 0.91 $ 0.32
Diluted $ 0.89 $ 0.30
Weighted average common shares outstanding:
Basic 37,536,251 37,138,041
Diluted 38,587,926 39,025,559
 
WILLIAM LYON HOMES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except number of shares and per share data)
(unaudited)
           
Year Year
Ended Ended
December 31, December 31,
2018 2017
Operating revenue
Home sales $ 2,081,721 $ 1,795,074
Construction services   5,450     1,454  
  2,087,171     1,796,528  
Operating costs
Cost of sales — homes (1,703,298 ) (1,478,549 )
Construction services (5,146 ) (1,317 )
Sales and marketing (114,495 ) (86,226 )
General and administrative (119,272 ) (90,206 )
Transaction expenses (3,907 ) -
Other   (2,148 )   (2,274 )
  (1,948,266 )   (1,658,572 )
Operating income 138,905 137,956
Equity in income of unconsolidated joint ventures 3,118 3,661
Other income, net   2,715     895  
Income before extinguishment of debt 144,738 142,512
Gain (loss) on extinguishment of debt   1,015     (21,828 )
Income before provision for income taxes 145,753 120,684
Provision for income taxes   (30,620 )   (62,933 )
Net income 115,133 57,751
Less: Net income attributable to noncontrolling interests   (23,537 )   (9,616 )
Net income available to common stockholders $ 91,596   $ 48,135  
 
Income per common share:
Basic $ 2.42 $ 1.30
Diluted $ 2.32 $ 1.24
Weighted average common shares outstanding:
Basic 37,832,073 37,040,137
Diluted 39,419,059 38,663,667
 
WILLIAM LYON HOMES
CONSOLIDATED BALANCE SHEETS
(in thousands, except number of shares and par value per share)
           
December 31, December 31,
2018 2017
(unaudited)
ASSETS
Cash and cash equivalents $ 33,779 $ 182,710
Receivables 13,502 10,223
Escrow proceeds receivable - 3,319
Real estate inventories
Owned 2,333,207 1,699,850
Not owned 315,576 -
Investment in unconsolidated joint ventures 5,542 7,867
Goodwill 123,695 66,902
Intangibles, net of accumulated amortization of $4,640 as of
December 31, 2018 and December 31, 2017
6,700 6,700
Deferred income taxes 47,241 47,915
Lease right-of-use assets 13,561 14,454
Other assets, net   36,971   21,164
Total assets $ 2,929,774 $ 2,061,104
LIABILITIES AND EQUITY
Accounts payable $ 128,371 $ 58,799
Accrued expenses 150,155 111,491
Liabilities from inventories not owned 315,576 -
Revolving credit facility 45,000 -
Land notes payable - 589
Construction notes payable 1,231 -
Joint venture notes payable 151,788 93,926
53/4% Senior Notes due April 15, 2019 - 149,362
7% Senior Notes due August 15, 2022 347,456 346,740
6% Senior Notes due September 1, 2023 343,878 -
57/8% Senior Notes due January 31, 2025   431,992   439,567
  1,915,447   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 December 31, 2018
and December 31, 2017
- -
Common stock, Class A, par value $0.01 per share; 150,000,000 shares
authorized; 33,904,972 and 34,267,510 shares issued, 32,690,378 and
33,135,650 shares outstanding at December 31, 2018 and December 31,
2017, respectively
339 344
Common stock, Class B, par value $0.01 per share; 30,000,000 shares
authorized; 4,817,394 shares issued and outstanding at December 31,
2018 and 2017
48 48
Additional paid-in capital 445,545 454,286
Retained earnings   417,390   325,794
Total William Lyon Homes stockholders' equity 863,322 780,472
Noncontrolling interests   151,005   80,158
Total equity   1,014,327   860,630
Total liabilities and equity $ 2,929,774 $ 2,061,104
 
WILLIAM LYON HOMES
SELECTED FINANCIAL AND OPERATING INFORMATION
(unaudited)
             
Three Months Ended December 31,
2018       2017
Consolidated Consolidated Percentage %
Total Total Change
Selected Financial Information (1)
(dollars in thousands)
Homes closed   1,311     1,058   24 %
Home sales revenue $ 657,390 $ 623,283 5 %
Cost of sales (excluding interest and purchase accounting
adjustments)
  (503,616 )   (477,102 ) 6 %
Adjusted homebuilding gross margin (2) $ 153,774   $ 146,181   5 %
Adjusted homebuilding gross margin percentage (2)   23.4 %   23.5 % 0 %
Interest in cost of sales (27,075 ) (28,235 ) (4 %)
Purchase accounting adjustments   (3,416 )   -   N/M  
Gross margin $ 123,283   $ 117,946   5 %
Gross margin percentage   18.8 %   18.9 % (1 %)
 
Number of homes closed
California 393 282 39 %
Arizona 103 131 (21 %)
Nevada 119 103 16 %
Colorado 169 100 69 %
Washington 145 224 (35 %)
Oregon 182 218 (17 %)
Texas   200     N/A   N/M  
Total   1,311     1,058   24 %
 
Average sales price of homes closed
California $ 702,800 $ 782,400 (10 %)
Arizona 308,900 304,100 2 %
Nevada 580,100 707,800 (18 %)
Colorado 410,900 473,100 (13 %)
Washington 627,500 655,300 (4 %)
Oregon 359,200 439,600 (18 %)
Texas   272,500     N/A   N/M  
Company Average $ 501,400 $ 589,100 (15 %)
 
Number of net new home orders
California 194 152 28 %
Arizona 92 95 (3 %)
Nevada 54 69 (22 %)
Colorado 89 108 (18 %)
Washington 53 123 (57 %)
Oregon 88 125 (30 %)
Texas   186     N/A   N/M  
Total   756     672   13 %
 
Average number of sales locations during period
California 37 22 68 %
Arizona 6 6 0 %
Nevada 12 13 (8 %)
Colorado 13 17 (24 %)
Washington 9 10 (10 %)
Oregon 15 12 25 %
Texas   25     N/A   N/M  
Total   117     80   46 %
 
(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)
             
Year Ended December 31,
2018       2017
Consolidated Consolidated Percentage %
Total Total Change
Selected Financial Information (1)
(dollars in thousands)
Homes closed   4,186     3,239   29 %
Home sales revenue $ 2,081,721 $ 1,795,074 16 %
Cost of sales (excluding interest and purchase accounting
adjustments)
  (1,600,151 )   (1,395,094 ) 15 %
Adjusted homebuilding gross margin (2) $ 481,570   $ 399,980   20 %
Adjusted homebuilding gross margin percentage (2)   23.1 %   22.3 % 4 %
Interest in cost of sales (89,756 ) (83,455 ) 8 %
Purchase accounting adjustments   (13,391 )   -   N/M  
Gross margin $ 378,423   $ 316,525   20 %
Gross margin percentage   18.2 %   17.6 % 3 %
 
Number of homes closed
California 1,172 919 28 %
Arizona 439 539 (19 %)
Nevada 364 278 31 %
Colorado 531 240 121 %
Washington 495 516 (4 %)
Oregon 585 747 (22 %)
Texas   600     N/A   N/M  
Total   4,186     3,239   29 %
 
Average sales price of homes closed
California $ 671,300 $ 743,000 (10 %)
Arizona 311,900 294,100 6 %
Nevada 588,600 634,400 (7 %)
Colorado 426,600 518,600 (18 %)
Washington 628,500 644,000 (2 %)
Oregon 423,700 429,200 (1 %)
Texas   263,800     N/A   N/M  
Company Average $ 497,300 $ 554,200 (10 %)
 
Number of net new home orders
California 1,109 935 19 %
Arizona 436 496 (12 %)
Nevada 372 305 22 %
Colorado 493 337 46 %
Washington 445 555 (20 %)
Oregon 641 700 (8 %)
Texas   637     N/A   N/M  
Total   4,133     3,328   24 %
 
Average number of sales locations during period
California 30 23 30 %
Arizona 6 7 (14 %)
Nevada 13 13 0 %
Colorado 14 15 (7 %)
Washington 10 10 0 %
Oregon 15 16 (6 %)
Texas   18     N/A   N/M  
Total   106     84   26 %
 
(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 December 31,
2018 2017
Consolidated Consolidated Percentage %
Total Total Change
Backlog of homes sold but not closed at end of period
California 252 240 5 %
Arizona 158 161 (2 %)
Nevada 94 86 9 %
Colorado 134 172 (22 %)
Washington 41 91 (55 %)
Oregon 128 72 78 %
Texas   234   N/A N/M  
Total   1,041   822 27 %
 
Dollar amount of homes sold but not closed at end of period (in
thousands)
California $ 175,205 $ 167,938 4 %
Arizona 53,581 49,656 8 %
Nevada 52,604 62,105 (15 %)
Colorado 62,091 65,716 (6 %)
Washington 23,060 55,583 (59 %)
Oregon 51,181 32,014 60 %
Texas   61,230   N/A N/M  
Total $ 478,952 $ 433,012 11 %
 
Lots owned and controlled at end of period
Lots owned
California 3,450 1,551 122 %
Arizona 3,653 4,221 (13 %)
Nevada 2,626 2,981 (12 %)
Colorado 857 1,276 (33 %)
Washington 1,414 1,334 6 %
Oregon 2,668 1,893 41 %
Texas   2,981   N/A N/M  
Total   17,649   13,256 33 %
 
Lots controlled
California 1,333 1,051 27 %
Arizona 660 - N/M
Nevada - 17 (100 %)
Colorado 2,352 769 206 %
Washington 839 849 (1 %)
Oregon 1,674 1,494 12 %
Texas   5,034   N/A N/M  
Total   11,892   4,180 184 %
 
Total lots owned and controlled
California 4,783 2,602 84 %
Arizona 4,313 4,221 2 %
Nevada 2,626 2,998 (12 %)
Colorado 3,209 2,045 57 %
Washington 2,253 2,183 3 %
Oregon 4,342 3,387 28 %
Texas   8,015   N/A N/M  
Total   29,541   17,436 69 %
 
(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 761 lots in
California and 1,477 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
Months Months Year Year
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
2018 2017 2018 2017
 
Net income available to common stockholders $ 34,255 $ 11,763 $ 91,596 $ 48,135
Net income, adjusted for transaction expenses, project abandonment
costs, and (gain) loss on extinguishment of debt, net of tax benefit
(provision) and impact of tax reform change (1)
$ 35,069 $ 34,889 $ 95,488 $ 85,337
Interest incurred $ 25,286 $ 17,371 $ 92,077 $ 73,729
Adjusted EBITDA (2) $ 79,817 $ 90,093 $ 250,119 $ 227,914
Adjusted EBITDA Margin (3) 12.1 % 14.4 % 12.0 % 12.7 %
Ratio of adjusted EBITDA to interest incurred 3.2 5.2 2.7 3.1
 
 
Balance Sheet Data
         
December 31, December 31,
2018 2017
 
Cash and cash equivalents $ 33,779 $ 182,710
 
Total William Lyon Homes stockholders' equity 863,322 780,472
Noncontrolling interests 151,005 80,158
Total debt   1,321,345     1,030,184  
Total capital $ 2,335,672   $ 1,890,814  
 
Ratio of debt to total capital 56.6 % 54.5 %
Ratio of net debt to total capital (net of cash) 55.9 % 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, project abandonment costs
and loss for the extinguishment of the 8.5% Senior Notes, less gain
for the partial extinguishment of some 5.875% 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,
non-recurring project abandonment costs and 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:
                         
Three Three
Months Months Year Year
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
2018 2017 2018 2017
Net income available to common stockholders $ 34,255 $ 11,763 $ 91,596 $ 48,135
Add: Transaction expenses - - 3,907 -
Add: Project abandonment costs 2,035 - 2,035 -
(Less) / Add: (Gain) Loss on extinguishment of debt (1,015 ) - (1,015 ) 21,828
Add: Impact of tax reform change - 23,126 - 23,126
Less: Income tax benefit applicable to transaction expenses - - (820 ) -
Less: Income tax benefit applicable to project abandonment costs (411 ) - (427 ) -
Add / (Less): Income tax benefit (provision) applicable to (gain)
loss on extinguishment of debt
  205     -   213     (7,752 )
Net income, adjusted for transaction expenses, project abandonment
costs, and (gain) loss on extinguishment of debt, net of tax benefit
(provision) and impact of tax reform change
$ 35,069   $ 34,889 $ 95,488   $ 85,337  
Diluted weighted average common shares outstanding 38,587,926 39,025,559 39,419,059 38,663,667
Adjusted net income excluding noncontrolling interest per diluted
share
$ 0.91 $ 0.89 $ 2.42 $ 2.21
 
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) (gain) 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
Months Months Year Year
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
2018 2017 2018 2017
 
 
Net income available to common stockholders $ 34,255 $ 11,763 $ 91,596 $ 48,135
Provision for income taxes 11,040 45,453 30,620 62,933
Interest expense
Interest incurred 25,286 17,371 92,077 73,729
Interest capitalized (25,286 ) (17,371 ) (92,077 ) (73,729 )
Amortization of capitalized interest
included in cost of sales 27,075 28,333 90,302 83,570
Stock based compensation 3,705 3,802 11,298 10,062
Depreciation and amortization 1,920 536 7,699 1,962
Non-cash purchase accounting adjustments 3,416 - 13,391 -
Cash distributions of income from unconsolidated joint ventures 543 1,245 5,439 3,085
Equity in income of unconsolidated joint ventures (1,122 ) (1,039 ) (3,118 ) (3,661 )
Transaction expenses - - 3,907 -
(Gain) Loss on extinguishment of debt   (1,015 )   -     (1,015 )   21,828  
Adjusted EBITDA $ 79,817   $ 90,093   $ 250,119   $ 227,914  
 
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, project abandonment costs, and loss
for the extinguishment of the 8.5% Senior Notes, less gain from the
partial extinguishment of some 5.875% 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,
non-recurring project abandonment costs and 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:
        Three       Three            
Months Months Year Year
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
2018 2017 2018 2017
Income before provision for income taxes $ 54,535 $ 62,189 $ 145,753 $ 120,684
Add / (Less): Transaction expenses - - 3,907 -
Project abandonment costs 2,035 - 2,035 -
(Gain) Loss on extinguishment of debt   (1,015 )   -   (1,015 )   21,828
Pre-tax income, adjusted for transaction expenses, project
abandonment costs and (gain) loss on extinguishment of debt
$ 55,555   $ 62,189 $ 150,680   $ 142,512

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