Market Overview

William Lyon Homes Reports Second Quarter 2019 Results

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Year to Date Homebuilding Revenue of $917.3 Million, up 3%;

Year to Date New Home Deliveries of 1,982 Homes, Up 9%

William Lyon Homes (NYSE:WLH), a leading homebuilder in the Western U.S., announced results for its second quarter ended June 30, 2019.

2019 Second Quarter Highlights (Comparison to 2018 Second Quarter)

  • Adjusted net income available to common stockholders of $12.2 million, or $0.31 per diluted share, and net income available to common stockholders of $10.5 million, or $0.27 per diluted share, compared to $22.5 million, or $0.57 per diluted share in the prior year
  • Adjusted pre-tax income of $20.5 million, and pre-tax income of $18.3 million; adjustments include:
    • $1.0 million of transaction expenses related to the acquisition of a mortgage company; and
    • $1.2 million of one-time, non-recurring costs associated with staff reductions
  • New home deliveries of 1,033 homes, down 5%
  • Home sales revenue of $463.5 million, down 11%
  • Average sales price (ASP) of new homes delivered of $448,700 versus $479,100
  • Homebuilding gross margin percentage of 16.0%
  • Net new home orders of 1,261
  • Average sales locations of 123, compared to 107
  • Units in backlog of 1,423
  • Dollar value of homes in backlog of $639.7 million
  • SG&A percentage of 11.8%, compared to 11.1%
    • Adjusted SG&A percentage of 11.6%, excluding $1.2 million of one-time, non-recurring costs associated with staff reductions
  • Adjusted EBITDA of $37.0 million

"Our results for the second quarter were in-line with our expectations across substantially all of our operational and financial metrics, achieving a backlog conversion rate of 86% which drove new home deliveries of 1,033 homes and home sales revenue of $463.5 million with an ASP of $448,700," stated Matthew R. Zaist, President and Chief Executive Officer. "Our GAAP gross margins were right where we expected them to be, and adjusted pre-tax income for the quarter was $20.5 million, excluding certain one-time expenses associated with our acquisition of a mortgage platform as part of our wholly-owned financial services strategy as well as certain reorganization costs to enhance operational efficiencies in our Southern California operations, both of which we feel will drive long-term improvements in profitability."

Mr. Zaist continued, "We are encouraged by the evolution of the Spring selling season, as the monthly absorption pace in the second quarter reflected a sequential increase of 10% over the first quarter to a healthy 3.4 sales per community, and with a number of our divisions up year-over-year on total orders and absorption. We are continuing to see strong absorption from the entry-level and the first-time move up buyers, which are experiencing the highest absorptions in the Company, and contributed 86% of our new home deliveries. In addition, we delivered another strong quarter on our spec inventory, selling and closing 39% more homes in the same quarter than we did in the prior year period. Our focus on the entry-level and first-time move-up homebuyers coupled with our modified spec / start strategy has yielded significant improvement in year-over-year backlog conversion and we expect to see the benefits as we move through the balance of the year, allowing for more efficient capital turns which should lead to improved returns and the delevering of our balance sheet."

Mr. Zaist added, "Following the volatility experienced in the back half of last year, we are pleased to see a majority of our markets stable to improving. While still taking a measured approach to pricing, we have been able to reduce incentives and increase prices in certain markets and anticipate sequential improvement in gross margins in the back half of the year. Our anticipated full year results now include deliveries of 4,300 to 4,500 units and revenues of $2.0 billion to $2.075 billion for 2019."

Operating Results

Home sales revenue for the second quarter of 2019 was $463.5 million, as compared to $518.4 million in the year-ago period, a decrease of 11%. The decrease was driven by a 5% decrease in the number of homes closed in 2019, as compared to the prior year period, as well as a decrease in ASP from $479,100 in the second quarter of 2018, to approximately $448,700 in the 2019 period. The decrease in ASP was based on the change in product mix with a higher concentration of deliveries from the Central Texas division.

Homebuilding gross margin percentage during the second quarter of 2019 was 16.0%. Interest in cost of sales was 4.3% during the quarter, and adjusted gross margin percentage was 20.3%.

Net new home orders for the quarter were 1,261, an increase of 14% sequentially over the first quarter, and a slight decrease from 1,270 in the second quarter of 2018.

Our average community count increased 15% to 123 averages sales location during the second quarter of 2019, compared to 107 during the second quarter of 2018. Overall, our monthly absorption rate for the quarter was 3.4 sales per community, compared to 3.1 sales per community in the 2019 first quarter. During the quarter, our monthly absorption pace was 3.5 in April, 3.1 in May and peaking at 3.6 in June. Our cancellation rate for the second quarter of 2019 was 13%, in-line with the 12% experienced in the second quarter of last year.

Sales and marketing expense during the second quarter of 2019 improved to 5.5% of homebuilding revenue, compared to 5.6% in the year-ago quarter, primarily due to a decrease in advertising and model operations expense during the quarter. General and administrative expenses increased to 6.4% of homebuilding revenue, compared to 5.5% in the year-ago quarter. Adjusting to exclude the one-time personnel reorganization expenses of $1.2 million in the quarter, general and administrative expenses would have been 6.1%. The Company believes that the long-term run-rate of this reorganization will result in approximately $3.5 million to $4.0 million of annualized savings.

Pre-tax income was $18.3 million and adjusted pre-tax income was $20.5 million. Provision for income tax was $3.9 million, for an effective tax rate of 21.1%, compared to a provision of $7.8 million, or 22.2%, in the prior year.

Net income attributable to non-controlling interest was $4.0 million during the second quarter, as compared to $4.8 million in the prior year.

Financial Services

The Company announced the formation of ClosingMark Financial Group, LLC, a wholly-owned subsidiary under which the Company intends to operate a full suite of financial services offerings, including title agency, settlement and mortgage services, for the Company's homebuyers and other retail customers. ClosingMark has recently commenced its title agency services in the Central Texas, Arizona, Colorado and Nevada markets, and expects to expand its title and settlement services operations into virtually all of the Company's homebuilding markets over the course of the next two quarters.

In April 2019, we closed on the acquisition of a mortgage platform, South Pacific Financial Corporation ("SPFC"), which has been rebranded as ClosingMark Home Loans. We anticipate integrating our existing mortgage joint venture operations and loan pipeline into this platform under the ClosingMark brand during the third quarter.

During the three and six months ended June 30, 2019, the Company is reporting a separate financial services segment, to report the operations, assets, and liabilities of the services mentioned above on wholly-owned mortgage operations of ClosingMark Home Loans, our title agency business, as well as our unconsolidated mortgage joint ventures.

During the quarter, our unconsolidated mortgage joint ventures recorded income of $1.4 million, our wholly-owned financial services recorded a loss of $1.2 million, and we incurred transaction expenses related to the acquisition of SPFC of approximately $990,000.

We would expect to benefit from improved financial performance out of the financial services segment for the third quarter and remainder of the year based on operating efficiencies and earnings capture on a wholly-owned basis.

Balance Sheet Update

At quarter end, cash and cash equivalents totaled $35.5 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 57.9%, and net debt to net book capitalization was 57.3% at June 30, 2019, compared to 56.6% and 55.9% at December 31, 2018, respectively.

Senior Notes Issuance

In June 2019, the Company priced a private placement of $300.0 million in aggregate principal amount of 6.625% Senior Notes due 2027, which offering closed on July 9, 2019.

The Company is using the proceeds from the 6.625% Senior Notes issuance to redeem $300.0 million in aggregate principal amount of the $350.0 million of outstanding 7.00% Senior Notes due 2022. The Company intends to repay the remaining outstanding $50.0 million of the 7.00% Senior Notes due 2022 with free cash flow as part of its overall deleveraging strategy.

In the third quarter and in conjunction with our refinance of our senior notes, we amended our revolving credit facility to extend the maturity from May 21, 2021 to May 21, 2022.

Conference Call

The Company will host a conference call to discuss these results today, Thursday, August 1, 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 #4844924, 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 August 8, 2019 by dialing (855) 859-2056 or (404) 537-3406, conference ID #4844924. 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, San Diego, Riverside, San Bernardino, the South and East Bay Areas of San Francisco, Phoenix, Las Vegas, Denver, Fort Collins, Portland, Seattle, Houston, 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 110,000 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 and revenue, gross margin performance, backlog conversion rates, operating and financial results for the third quarter of 2019 and full year 2019, operational synergies from reorganization items, 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 acquisitions, financial services and ancillary business performance, integration 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; 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; timing of closings in our joint venture operations; 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; the impact from additional litigation matters; 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 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

 

 

June 30,

 

June 30,

 

 

2019

 

2018

Operating revenue
Home sales

$

463,517

 

$

518,432

 

Construction services

 

1,952

 

 

1,020

 

 

465,469

 

 

519,452

 

Operating costs
Cost of sales — homes

 

(389,483

)

 

(425,572

)

Construction services

 

(1,785

)

 

(959

)

Sales and marketing

 

(25,366

)

 

(28,848

)

General and administrative

 

(29,472

)

 

(28,507

)

Transaction expenses

 

-

 

 

(777

)

Other

 

(695

)

 

(621

)

 

(446,801

)

 

(485,284

)

Operating income

 

18,668

 

 

34,168

 

 
Financial services
Equity in income of unconsolidated joint ventures

 

1,378

 

 

533

 

(Loss) income from financial services operations

 

(1,222

)

 

-

 

Transaction expenses

 

(990

)

 

-

 

Financial services (loss) income

 

(834

)

 

533

 

 
Other income, net

 

453

 

 

311

 

Income before provision for income taxes

 

18,287

 

 

35,012

 

Provision for income taxes

 

(3,857

)

 

(7,776

)

Net income

 

14,430

 

 

27,236

 

Less: Net income attributable to noncontrolling interests

 

(3,979

)

 

(4,781

)

Net income available to common stockholders

$

10,451

 

$

22,455

 

 
Income per common share:
Basic

$

0.28

 

$

0.59

 

Diluted

$

0.27

 

$

0.57

 

Weighted average common shares outstanding:
Basic

 

37,818,127

 

 

38,017,211

 

Diluted

 

39,260,702

 

 

39,688,271

 

WILLIAM LYON HOMES

CONSOLIDATED STATEMENTS OF OPERATIONS

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

(unaudited)

 

 

 

 

 

 

 

Six Months

 

Six Months

 

 

Ended

 

Ended

 

 

June 30,

 

June 30,

 

 

2019

 

2018

Operating revenue
Home sales

$

917,292

 

$

890,817

 

Construction services

 

4,041

 

 

2,003

 

 

921,333

 

 

892,820

 

Operating costs
Cost of sales — homes

 

(770,527

)

 

(732,880

)

Construction services

 

(3,754

)

 

(1,942

)

Sales and marketing

 

(50,643

)

 

(51,541

)

General and administrative

 

(58,598

)

 

(53,028

)

Transaction expenses

 

-

 

 

(3,907

)

Other

 

(1,039

)

 

(919

)

 

(884,561

)

 

(844,217

)

Operating income

 

36,772

 

 

48,603

 

 
Financial services
Equity in income of unconsolidated joint ventures

 

2,290

 

 

1,465

 

(Loss) income from financial services operations

 

(1,222

)

 

-

 

Transaction expenses

 

(990

)

Financial services (loss) income

 

78

 

 

1,465

 

 
Other income, net

 

1,084

 

 

346

 

Income before extinguishment of debt

 

37,934

 

 

50,414

 

Gain (loss) on extinguishment of debt

 

383

 

 

-

 

Income before provision for income taxes

 

38,317

 

 

50,414

 

Provision for income taxes

 

(8,753

)

 

(10,590

)

Net income

 

29,564

 

 

39,824

 

Less: Net income attributable to noncontrolling interests

 

(10,994

)

 

(9,041

)

Net income available to common stockholders

$

18,570

 

$

30,783

 

 
Income per common share:
Basic

$

0.49

 

$

0.81

 

Diluted

$

0.48

 

$

0.77

 

Weighted average common shares outstanding:
Basic

 

37,715,019

 

 

37,974,471

 

Diluted

 

39,051,131

 

 

39,772,437

 

WILLIAM LYON HOMES

CONSOLIDATED BALANCE SHEETS

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

 

 

 

 

 

 

 

June 30,

 

December 31,

 

 

2019

 

2018

 

 

(unaudited)

 

 

ASSETS
Cash and cash equivalents

$

35,498

$

33,779

Receivables

 

16,086

 

13,502

Real estate inventories
Owned

 

2,349,438

 

2,333,207

Not owned

 

240,015

 

315,576

Investment in unconsolidated joint ventures

 

6,686

 

5,542

Goodwill

 

123,695

 

123,695

Intangibles, net of accumulated amortization of $4,640 as of June 30, 2019 and December 31, 2018

 

6,700

 

6,700

Deferred income taxes

 

46,255

 

47,241

Lease right-of-use assets

 

37,493

 

13,561

Financial services assets

 

45,367

 

-

Other assets, net

 

38,889

 

36,971

Total assets

$

2,946,122

$

2,929,774

LIABILITIES AND EQUITY
Accounts payable

$

114,026

$

128,371

Accrued expenses

 

122,871

 

150,155

Financial services liabilities

 

31,452

 

-

Liabilities from inventories not owned

 

240,015

 

315,576

Revolving credit facility

 

133,000

 

45,000

Construction notes payable

 

1,342

 

1,231

Joint venture notes payable

 

155,892

 

151,788

7% Senior Notes due August 15, 2022

 

347,821

 

347,456

6% Senior Notes due September 1, 2023

 

344,526

 

343,878

57/8% Senior Notes due January 31, 2025

 

428,775

 

431,992

 

1,919,720

 

1,915,447

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 June 30, 2019 and December 31, 2018

 

-

 

-

Common stock, Class A, par value $0.01 per share; 150,000,000 shares authorized; 33,972,103 and 33,904,972 shares issued, 33,009,795 and 32,690,378 shares outstanding at June 30, 2019 and December 31, 2018, respectively

 

340

 

339

Common stock, Class B, par value $0.01 per share; 30,000,000 shares authorized; 4,817,394 shares issued and outstanding at June 30, 2019 and December 31, 2018

 

48

 

48

Additional paid-in capital

 

447,910

 

445,545

Retained earnings

 

435,960

 

417,390

Total William Lyon Homes stockholders' equity

 

884,258

 

863,322

Noncontrolling interests

 

142,144

 

151,005

Total equity

 

1,026,402

 

1,014,327

Total liabilities and equity

$

2,946,122

$

2,929,774

WILLIAM LYON HOMES

SELECTED FINANCIAL AND OPERATING INFORMATION

(unaudited)

 

 

 

Three Months Ended June 30,

 

 

2019

 

2018

 

 

 

 

Consolidated

 

Consolidated

 

Percentage %

 

 

Total

 

Total

 

Change

Selected Financial Information
(dollars in thousands)
Homes closed

 

1,033

 

 

1,082

 

(5

%)

Home sales revenue

$

463,517

 

$

518,432

 

(11

%)

Cost of sales (excluding interest)

 

(369,437

)

 

(397,858

)

(7

%)

Adjusted homebuilding gross margin (1)

$

94,080

 

$

120,574

 

(22

%)

Adjusted homebuilding gross margin percentage (1)

 

20.3

%

 

23.3

%

(13

%)

Interest in cost of sales

 

(20,046

)

 

(22,329

)

(10

%)

Purchase accounting adjustments

 

-

 

 

(5,385

)

(100

%)

Gross margin

$

74,034

 

$

92,860

 

(20

%)

Gross margin percentage

 

16.0

%

 

17.9

%

(11

%)

 
Number of homes closed
California

 

287

 

 

268

 

7

%

Arizona

 

105

 

 

123

 

(15

%)

Nevada

 

70

 

 

91

 

(23

%)

Colorado

 

158

 

 

145

 

9

%

Washington

 

80

 

 

138

 

(42

%)

Oregon

 

83

 

 

140

 

(41

%)

Texas

 

250

 

 

177

 

41

%

Total

 

1,033

 

 

1,082

 

(5

%)

 
Average sales price of homes closed
California

$

584,700

 

$

650,900

 

(10

%)

Arizona

 

333,400

 

 

315,200

 

6

%

Nevada

 

493,900

 

 

507,800

 

(3

%)

Colorado

 

423,500

 

 

430,600

 

(2

%)

Washington

 

714,600

 

 

612,100

 

17

%

Oregon

 

414,600

 

 

473,000

 

(12

%)

Texas

 

270,500

 

 

259,200

 

4

%

Company Average

$

448,700

 

$

479,100

 

(6

%)

 
Number of net new home orders
California

 

354

 

 

337

 

5

%

Arizona

 

133

 

 

118

 

13

%

Nevada

 

101

 

 

115

 

(12

%)

Colorado

 

183

 

 

160

 

14

%

Washington

 

119

 

 

136

 

(13

%)

Oregon

 

98

 

 

199

 

(51

%)

Texas

 

273

 

 

205

 

33

%

Total

 

1,261

 

 

1,270

 

(1

%)

 
Average number of sales locations during period
California

 

41

 

 

28

 

46

%

Arizona

 

9

 

 

6

 

50

%

Nevada

 

13

 

 

14

 

(7

%)

Colorado

 

11

 

 

15

 

(27

%)

Washington

 

10

 

 

10

 

0

%

Oregon

 

17

 

 

14

 

21

%

Texas

 

22

 

 

20

 

10

%

Total

 

123

 

 

107

 

15

%

(1)

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)

 

Six Months Ended June 30,

 

2019

 

 

 

2018

 

 

 

Consolidated

 

Consolidated

 

Percentage %

Total

 

Total

 

Change

Selected Financial Information
(dollars in thousands)
Homes closed

 

1,982

 

 

1,822

 

9

%

Home sales revenue

$

917,292

 

$

890,817

 

3

%

Cost of sales (excluding interest and purchase accounting adjustments)

 

(730,066

)

 

(685,627

)

6

%

Adjusted homebuilding gross margin (1)

$

187,226

 

$

205,190

 

(9

%)

Adjusted homebuilding gross margin percentage (1)

 

20.4

%

 

23.0

%

(11

%)

Interest in cost of sales

 

(40,461

)

 

(41,133

)

(2

%)

Purchase accounting adjustments

 

-

 

 

(6,120

)

(100

%)

Gross margin

$

146,765

 

$

157,937

 

(7

%)

Gross margin percentage

 

16.0

%

 

17.7

%

(10

%)

 
Number of homes closed
California

 

568

 

 

478

 

19

%

Arizona

 

194

 

 

228

 

(15

%)

Nevada

 

141

 

 

165

 

(15

%)

Colorado

 

284

 

 

238

 

19

%

Washington

 

152

 

 

232

 

(34

%)

Oregon

 

203

 

 

244

 

(17

%)

Texas

 

440

 

 

237

 

86

%

Total

 

1,982

 

 

1,822

 

9

%

 
Average sales price of homes closed
California

$

623,100

 

$

647,000

 

(4

%)

Arizona

 

333,000

 

 

310,500

 

7

%

Nevada

 

512,600

 

 

578,100

 

(11

%)

Colorado

 

432,900

 

 

430,700

 

1

%

Washington

 

651,400

 

 

599,700

 

9

%

Oregon

 

421,200

 

 

463,400

 

(9

%)

Texas

 

270,500

 

 

255,900

 

6

%

Company Average

$

462,800

 

$

488,900

 

(5

%)

 
Number of net new home orders
California

 

644

 

 

620

 

4

%

Arizona

 

245

 

 

226

 

8

%

Nevada

 

160

 

 

224

 

(29

%)

Colorado

 

355

 

 

304

 

17

%

Washington

 

213

 

 

315

 

(32

%)

Oregon

 

210

 

 

408

 

(49

%)

Texas

 

537

 

 

279

 

92

%

Total

 

2,364

 

 

2,376

 

(1

%)

 
Average number of sales locations during period
California

 

38

 

 

24

 

58

%

Arizona

 

9

 

 

6

 

50

%

Nevada

 

13

 

 

13

 

0

%

Colorado

 

11

 

 

15

 

(27

%)

Washington

 

10

 

 

9

 

11

%

Oregon

 

17

 

 

14

 

21

%

Texas

 

23

 

 

13

 

77

%

Total

 

121

 

 

94

 

29

%

 

(1)

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 June 30,

 

2019

 

 

2018

 

 

Consolidated

 

Consolidated

 

Percentage %

Total

 

Total

 

Change

Backlog of homes sold but not closed at end of period
California

 

328

 

457

(28

%)

Arizona

 

209

 

159

31

%

Nevada

 

113

 

145

(22

%)

Colorado

 

205

 

238

(14

%)

Washington

 

102

 

174

(41

%)

Oregon

 

135

 

236

(43

%)

Texas

 

331

 

239

38

%

Total

 

1,423

 

1,648

(14

%)

 
Dollar amount of homes sold but not closed at end of period (in thousands)
California

$

205,361

$

346,687

(41

%)

Arizona

 

73,993

 

50,048

48

%

Nevada

 

53,750

 

95,759

(44

%)

Colorado

 

96,245

 

99,531

(3

%)

Washington

 

65,729

 

118,863

(45

%)

Oregon

 

55,546

 

92,270

(40

%)

Texas

 

89,114

 

64,503

38

%

Total

$

639,738

$

867,661

(26

%)

 
Lots owned and controlled at end of period (1)
Lots owned
California

 

3,021

 

3,921

(23

%)

Arizona

 

3,459

 

3,993

(13

%)

Nevada

 

2,485

 

2,822

(12

%)

Colorado

 

660

 

1,130

(42

%)

Washington

 

1,481

 

1,327

12

%

Oregon

 

2,719

 

2,623

4

%

Texas

 

4,997

 

3,398

47

%

Total

 

18,822

 

19,214

(2

%)

 
Lots controlled
California

 

1,323

 

2,022

(35

%)

Arizona

 

660

 

651

1

%

Nevada

 

629

 

3

NM

 

Colorado

 

2,269

 

1,197

90

%

Washington

 

617

 

1,334

(54

%)

Oregon

 

1,751

 

1,456

20

%

Texas

 

2,707

 

3,629

(25

%)

Total

 

9,956

 

10,292

(3

%)

 
Total lots owned and controlled
California

 

4,344

 

5,943

(27

%)

Arizona

 

4,119

 

4,644

(11

%)

Nevada

 

3,114

 

2,825

10

%

Colorado

 

2,929

 

2,327

26

%

Washington

 

2,098

 

2,661

(21

%)

Oregon

 

4,470

 

4,079

10

%

Texas

 

7,704

 

7,027

10

%

Total

 

28,778

 

29,506

(2

%)

 

(1)

Certain lots in California, Texas, Arizona and Washington are consolidated on the Company's accompanying balance sheet in accordance with FASB ASC Topic 470, Debt ("ASC 470"). Included in lots owned are 546 lots in California, 1,159 lots in Texas, 1,931 lots in Arizona, and 72 lots in Washington that are associated with land banking transactions that are 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

 

Six

 

Six

 

 

 

 

 

Months

 

Months

 

Months

 

Months

 

 

 

 

 

Ended

 

Ended

 

Ended

 

Ended

 

 

 

 

 

June 30,

 

June 30,

 

June 30,

 

June 30,

 

 

 

 

 

2019

 

2018

 

2019

 

2018

 
Net income available to common stockholders

$

10,451

 

$

22,455

 

$

18,570

 

$

30,783

 

Interest incurred

$

23,910

 

$

22,808

 

$

47,990

 

$

42,066

 

Adjusted EBITDA (1)

$

37,031

 

$

62,415

 

$

73,627

 

$

104,127

 

Adjusted EBITDA Margin (2)

 

8.0

%

 

12.0

%

 

8.0

%

 

11.7

%

Ratio of adjusted EBITDA to interest incurred

 

1.5

 

 

2.7

 

 

1.5

 

 

2.5

 

 
 
Balance Sheet Data
 

June 30,

 

December 31,

2019

 

2018

 
Cash and cash equivalents

$

35,498

 

$

33,779

 

 
Total William Lyon Homes stockholders' equity

 

884,258

 

 

863,322

 

Noncontrolling interests

 

142,144

 

 

151,005

 

Total debt

 

1,411,356

 

 

1,321,345

 

Total capital

$

2,437,758

 

$

2,335,672

 

 
Ratio of debt to total capital

 

57.9

%

 

56.6

%

Ratio of net debt to total capital (net of cash)

 

57.3

%

 

55.9

%

WILLIAM LYON HOMES

SUPPLEMENTAL FINANCIAL INFORMATION

(dollars in thousands)

(unaudited)

 

(1)

 

 

 

 

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

 

Six

 

Six

Months

 

Months

 

Months

 

Months

Ended

 

Ended

 

Ended

 

Ended

June 30,

 

June 30,

 

June 30,

 

June 30,

2019

 

2018

 

2019

 

2018

 
 
Net income available to common stockholders

$

10,451

 

$

22,455

 

$

18,570

 

$

30,783

 

Provision for income taxes

 

3,857

 

 

7,776

 

 

8,753

 

 

10,590

 

Interest expense
Interest incurred

 

23,910

 

 

22,808

 

 

47,990

 

 

42,066

 

Interest capitalized

 

(23,910

)

 

(22,808

)

 

(47,990

)

 

(42,066

)

Amortization of capitalized interest
included in cost of sales

 

20,046

 

 

22,393

 

 

40,461

 

 

41,218

 

Stock based compensation

 

1,963

 

 

2,006

 

 

4,728

 

 

5,187

 

Depreciation and amortization

 

796

 

 

1,916

 

 

1,541

 

 

3,972

 

Non-cash purchase accounting adjustments

 

-

 

 

5,385

 

 

-

 

 

6,120

 

Cash distributions of income from unconsolidated joint ventures

 

306

 

 

240

 

 

1,257

 

 

3,815

 

Equity in income of unconsolidated joint ventures

 

(1,378

)

 

(533

)

 

(2,290

)

 

(1,465

)

Transaction expenses

 

990

 

 

777

 

 

990

 

 

3,907

 

(Gain) Loss on extinguishment of debt

 

-

 

 

-

 

 

(383

)

 

-

 

Adjusted EBITDA

$

37,031

 

$

62,415

 

$

73,627

 

$

104,127

 

Three

 

Three

 

Six

 

Six

Months

 

Months

 

Months

 

Months

Ended

 

Ended

 

Ended

 

Ended

June 30,

 

June 30,

 

June 30,

 

June 30,

2019

 

2018

 

2019

 

2018

Net income available to common stockholders

$

10,451

 

$

22,455

 

$

18,570

 

$

30,783

 

Add: Transaction expenses

 

990

 

 

777

 

 

990

 

 

3,907

 

(Less) / Add: (Gain) Loss on extinguishment of debt

 

-

 

 

-

 

 

(383

)

 

-

 

Add: Costs associated with staff reductions

 

1,173

 

 

-

 

 

1,173

 

 

-

 

Less: Income tax (provision) applicable to transaction expenses

 

(209

)

 

(172

)

 

(226

)

 

(820

)

Add / (Less): Income tax benefit applicable to (gain) loss on extinguishment of debt

 

-

 

 

-

 

 

87

 

 

-

 

Less: Income tax (provision) applicable to costs associated with staff reductions

 

(247

)

 

-

 

 

(268

)

 

-

 

Net income, adjusted for transaction expenses, (gain) loss on extinguishment of debt, and costs associated with staff reductions, net of tax benefit (provision)

$

12,158

 

$

23,060

 

$

19,943

 

$

33,870

 

Diluted weighted average common shares outstanding

 

39,260,702

 

 

39,688,271

 

 

39,051,131

 

 

39,772,437

 

Adjusted net income excluding noncontrolling interest per diluted share

$

0.31

 

$

0.58

 

$

0.51

 

$

0.85

 

 
 
 

Three

 

Three

 

Six

 

Six

Months

 

Months

 

Months

 

Months

Ended

 

Ended

 

Ended

 

Ended

June 30,

 

June 30,

 

June 30,

 

June 30,

2019

 

2018

 

2019

 

2018

Income before provision for income taxes

$

18,287

 

$

35,012

 

$

38,317

 

$

50,414

 

Add / (Less): Transaction expenses

 

990

 

 

777

 

 

990

 

 

3,907

 

(Gain) Loss on extinguishment of debt

 

-

 

 

-

 

 

(383

)

 

-

 

Costs associated with staff reductions

 

1,173

 

 

-

 

 

1,173

 

 

-

 

Pre-tax income, adjusted for transaction expenses, (gain) loss on extinguishment of debt, and costs associated with staff reductions

$

20,450

 

$

35,789

 

$

40,097

 

$

54,321

 

(2)

Calculated as Adjusted EBITDA as a percentage of operating revenue.

 

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