<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-18001
WILLIAM LYON HOMES
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 33-0864902
(STATE OR JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
4490 VON KARMAN AVENUE 92660
NEWPORT BEACH, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
(949) 833-3600
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
OUTSTANDING AT
CLASS OF COMMON STOCK NOVEMBER 3, 2000
--------------------- ----------------
<S> <C>
Common stock, par value $.01 10,570,223
</TABLE>
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--------------------------------------------------------------------------------
<PAGE> 2
WILLIAM LYON HOMES
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets -- September 30, 2000 and
December 31, 1999......................................... 3
Consolidated Statements of Income -- Three and Nine Months
Ended September 30, 2000 and 1999......................... 4
Consolidated Statement of Stockholders' Equity -- Nine
Months Ended September 30, 2000........................... 5
Consolidated Statements of Cash Flows -- Nine Months Ended
September 30, 2000 and 1999............................... 6
Notes to Consolidated Financial Statements.................. 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 23
ITEM 3. NOT APPLICABLE.
PART II. OTHER INFORMATION........................................... 40
ITEM 1. NOT APPLICABLE
ITEM 2. NOT APPLICABLE
ITEM 3. NOT APPLICABLE
ITEM 4. NOT APPLICABLE
ITEM 5. NOT APPLICABLE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................ 40
SIGNATURES........................................................... 41
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
WILLIAM LYON HOMES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT NUMBER OF SHARES AND PAR VALUE PER SHARE)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(UNAUDITED)
<S> <C> <C>
Cash and cash equivalents................................... $ 15,929 $ 2,154
Receivables................................................. 14,993 12,063
Real estate inventories..................................... 227,440 184,271
Investments in and advances to unconsolidated joint
ventures -- Note 4........................................ 50,153 50,282
Property and equipment, less accumulated depreciation of
$4,632 and $4,167 at September 30, 2000 and December 31,
1999, respectively........................................ 2,882 2,183
Deferred loan costs......................................... 916 1,726
Goodwill -- Note 2.......................................... 7,448 8,382
Other assets................................................ 27,128 17,422
-------- --------
$346,889 $278,483
======== ========
Accounts payable............................................ $ 27,746 $ 15,653
Accrued expenses............................................ 26,010 32,899
Notes payable............................................... 132,921 76,630
12 1/2% Senior Notes due 2001 -- Notes 5 and 7.............. 78,225 100,000
-------- --------
264,902 225,182
-------- --------
Stockholders' equity -- Notes 1, 3 and 8
Common stock, par value $.01 per share; 30,000,000 shares
authorized; 10,570,223 and 10,439,135 shares issued and
outstanding at September 30, 2000 and December 31,
1999, respectively..................................... 106 104
Additional paid-in capital................................ 122,481 116,667
Accumulated deficit from January 1, 1994.................. (40,600) (63,470)
-------- --------
81,987 53,301
-------- --------
$346,889 $278,483
======== ========
</TABLE>
See accompanying notes.
3
<PAGE> 4
WILLIAM LYON HOMES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER COMMON SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- ---------------------
2000 1999 2000 1999
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Operating revenue
Home sales........................................ $ 88,633 $ 87,630 $ 247,384 $ 261,686
Lots, land and other sales........................ 83 733 1,050 4,689
Management fee income -- Note 1................... 2,325 1,167 6,296 3,148
-------- -------- --------- ---------
91,041 89,530 254,730 269,523
-------- -------- --------- ---------
Operating costs
Cost of sales -- homes............................ (73,816) (72,071) (202,737) (216,188)
Cost of sales -- lots, land and other............. (139) (1,072) (1,022) (4,813)
Sales and marketing............................... (4,120) (4,198) (11,102) (12,658)
General and administrative -- Note 1.............. (7,421) (6,111) (23,806) (15,965)
Amortization of goodwill -- Note 2................ (310) -- (934) --
-------- -------- --------- ---------
(85,806) (83,452) (239,601) (249,624)
-------- -------- --------- ---------
Equity in income of unconsolidated joint ventures... 3,795 7,414 14,281 12,278
-------- -------- --------- ---------
Operating income.................................... 9,030 13,492 29,410 32,177
Interest expense, net of amounts capitalized........ (1,249) (883) (4,726) (4,554)
Financial advisory expenses -- Note 3............... -- (917) -- (2,197)
Other income (expense), net -- Note 6............... 1,115 825 3,686 2,366
-------- -------- --------- ---------
Income before income taxes and extraordinary item... 8,896 12,517 28,370 27,792
Provision for income taxes -- Note 1
Income taxes -- benefit credited to paid-in
capital........................................ (1,438) (1,797) (5,160) (3,988)
Income taxes -- alternate minimum tax............. 106 -- (836) --
-------- -------- --------- ---------
Income before extraordinary item.................... 7,564 10,720 22,374 23,804
Extraordinary item -- gain from retirement of debt,
net of applicable income taxes -- Note 7.......... -- -- 496 1,789
-------- -------- --------- ---------
Net income.......................................... $ 7,564 $ 10,720 $ 22,870 $ 25,593
======== ======== ========= =========
Basic and diluted earnings per common share: --Notes
1 and 3
Before extraordinary item......................... $ 0.72 $ 1.03 $ 2.13 $ 2.28
Extraordinary item................................ -- -- 0.05 0.17
-------- -------- --------- ---------
After extraordinary item.......................... $ 0.72 $ 1.03 $ 2.18 $ 2.45
======== ======== ========= =========
Increase in stockholders' equity per common share
from net income and income tax benefits credited
directly to paid-in capital -- Note 1............. $ 0.86 $ 1.20 $ 2.68 $ 2.86
======== ======== ========= =========
</TABLE>
See accompanying notes.
4
<PAGE> 5
WILLIAM LYON HOMES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL DEFICIT FROM
---------------- PAID-IN JANUARY 1,
SHARES AMOUNT CAPITAL 1994 TOTAL
------ ------ ---------- ------------ -------
<S> <C> <C> <C> <C> <C>
Balance -- December 31, 1999............ 10,439 $104 $116,667 $(63,470) $53,301
Issuance of common stock upon exercise
of stock options -- Note 8............ 131 2 654 -- 656
Net income.............................. -- -- -- 22,870 22,870
Income tax benefits related to temporary
differences existing prior to the
quasi-reorganization -- Note 1........ -- -- 5,160 -- 5,160
------ ---- -------- -------- -------
Balance -- September 30, 2000........... 10,570 $106 $122,481 $(40,600) $81,987
====== ==== ======== ======== =======
</TABLE>
See accompanying notes.
5
<PAGE> 6
WILLIAM LYON HOMES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
2000 1999
--------- --------
<S> <C> <C>
Cash flows from operating activities
Net income................................................ $ 22,870 $ 25,593
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization.......................... 1,998 879
Equity in income of unconsolidated joint ventures...... (14,281) (12,278)
Extraordinary gain on repurchase of Senior Notes....... (522) (2,089)
Provision for income taxes............................. 6,022 4,288
Net changes in operating assets and liabilities:
Other receivables.................................... 2,247 (2,870)
Real estate inventories.............................. (43,169) 16,940
Deferred loan costs.................................. 682 966
Other assets......................................... (9,706) (2,746)
Accounts payable..................................... 12,093 3,328
Accrued expenses..................................... (7,751) (3,984)
--------- --------
Net cash (used in) provided by operating activities....... (29,517) 28,027
--------- --------
Cash flows from investing activities
Investments in and advances to unconsolidated joint
ventures............................................... (21,356) (330)
Distributions from unconsolidated joint ventures.......... 32,516 6,438
Issuance of notes receivable.............................. (62,319) (34,242)
Principal payments on notes receivable.................... 60,392 28,638
Property and equipment, net............................... (1,763) (226)
--------- --------
Net cash provided by investing activities................. 7,470 278
--------- --------
Cash flows from financing activities
Proceeds from borrowing on notes payable.................. 315,881 123,368
Principal payments on notes payable....................... (259,590) (150,705)
Purchase of 12 1/2% Senior Notes.......................... (21,125) (17,700)
Common stock issued for exercised options................. 656 --
--------- --------
Net cash provided by (used in) financing activities....... 35,822 (45,037)
--------- --------
Net increase (decrease) in cash and cash equivalents........ 13,775 (16,732)
Cash and cash equivalents -- beginning of period............ 2,154 23,955
--------- --------
Cash and cash equivalents -- end of period.................. $ 15,929 $ 7,223
========= ========
Supplemental disclosures of cash flow information
Cash paid during the period for interest, net of amounts
capitalized............................................ $ 7,677 $ 9,633
========= ========
Issuance of notes payable for land acquisitions........... $ 10,042 $ 7,215
========= ========
</TABLE>
See accompanying notes.
6
<PAGE> 7
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
William Lyon Homes, a Delaware corporation (formerly named The Presley
Companies -- see Notes 2 and 3) and subsidiaries (the "Company") are primarily
engaged in designing, constructing and selling single family detached and
attached homes in California, Arizona and Nevada.
The unaudited consolidated financial statements of the Company have been
prepared in accordance with generally accepted accounting principles for interim
financial information and in accordance with the rules and regulations of the
Securities and Exchange Commission. The consolidated financial statements do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The consolidated
financial statements included herein should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.
The interim consolidated financial statements have been prepared in
accordance with the Company's customary accounting practices. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a presentation in accordance with generally accepted accounting
principles have been included. Operating results for the three and nine months
ended September 30, 2000 are not necessarily indicative of the results that may
be expected for the year ending December 31, 2000.
The consolidated financial statements include the accounts of the Company
and all majority-owned subsidiaries and joint ventures. Investments in joint
ventures in which the Company has a 50% or less ownership interest are accounted
for using the equity method. The accounting policies of the joint ventures are
substantially the same as those of the Company. All significant intercompany
accounts and transactions have been eliminated in consolidation.
The Company designs, constructs and sells a wide range of homes designed to
meet the specific needs of each of its markets. For internal reporting purposes,
the Company is organized into five geographic home building regions and its
mortgage operations. Because each of the Company's geographic home building
regions has similar economic characteristics, housing products and class of
prospective buyers, the geographic home building regions have been aggregated
into a single home building segment. Mortgage company operations did not meet
the materiality thresholds which would require disclosure for the nine months
ended September 30, 2000 and 1999, and accordingly, are not separately reported.
The Company evaluates performance and allocates resources primarily based
on the operating income of individual home building projects. Operating income
is defined by the Company as sales of homes, lots and land and management fee
income; less cost of sales, impairment losses on real estate, selling and
marketing, general and administrative expenses and amortization of goodwill.
Accordingly, operating income excludes certain expenses included in the
determination of net income. Operating income from home building operations,
including income from the Company's investment in unconsolidated joint ventures,
totaled $8.3 million and $13.5 million for the three months ended September 30,
2000 and 1999, respectively, and $28.7 million and $32.2 million for the nine
months ended September 30, 2000 and 1999, respectively. All other segment
measurements are disclosed in the Company's Annual Report on Form 10-K for the
year ended December 31, 1999.
All revenues are from external customers. There were no customers that
contributed 10% or more of the Company's total revenues during the three and
nine months ended September 30, 2000 and 1999.
Management fee income represents income recognized in the current period
from unconsolidated joint ventures in accordance with joint venture and/or
operating agreements. Such fees are reimbursements of overhead expenses incurred
by the Company as the managing partner or member of the unconsolidated joint
ventures. Prior to January 1, 2000, management fee income had been reflected as
a reduction of general and
7
<PAGE> 8
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
administrative expense. For the three and nine months ended September 30, 2000,
management fee income has been reported as a separate item and not reflected as
a reduction of general and administrative expense. The corresponding amounts of
management fee income for the three and nine months ended September 30, 1999
have been reclassified to conform to the presentation for the three and nine
months ended September 30, 2000. This reclassification did not change the
reported amount of operating income or net income for any periods presented.
Earnings per share amounts for all periods presented conform to Financial
Accounting Standards Board Statement No. 128, Earnings Per Share. Basic earnings
per common share for the three and nine months ended September 30, 2000 are
based on 10,524,349 and 10,476,567 weighted average shares of common stock
outstanding, respectively. Fully diluted earnings per common share for the three
and nine months ended September 30, 2000 are based on 10,527,639 and 10,479,706
weighted average shares of common stock outstanding, respectively. Basic and
diluted earnings per common share for the three and nine months ended September
30, 1999 are based on 10,439,135 shares of common stock outstanding, after
adjustment for the retroactive effect of the merger with a wholly-owned
subsidiary and the conversion of each share of previously outstanding Series A
and Series B common stock into 0.2 common share of the surviving company, as
described in Note 3.
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of the assets and liabilities
as of September 30, 2000 and December 31, 1999 and revenues and expenses for the
periods presented. Accordingly, actual results could differ materially from
those estimates in the near-term.
Effective as of January 1, 1994, the Company completed a capital
restructuring and quasi-reorganization. The quasi-reorganization resulted in the
adjustment of assets and liabilities to estimated fair values and the
elimination of an accumulated deficit effective January 1, 1994. Income tax
benefits resulting from the utilization of net operating loss and other
carryforwards existing at January 1, 1994 and temporary differences existing
prior to or resulting from the quasi-reorganization, are excluded from the
results of operations and credited to paid-in capital. During the three and nine
months ended September 30, 2000 income tax benefits of $1,438,000 and
$5,160,000, respectively, were excluded from results of operations and not
reflected as a reduction to the Company's provision for income taxes but
credited directly to paid-in capital. During the three and nine months ended
September 30, 1999 income tax benefits of $1,797,000 and $4,288,000,
respectively, were excluded from results of operations and credited directly to
paid-in capital.
The $5,160,000 included in the Company's provision for income taxes for the
2000 period represents income taxes which the Company will not be required to
pay. As described above, the pre-quasi-reorganization income tax benefits which
would otherwise reduce the provision for income taxes are credited directly to
paid-in capital.
Stockholders' equity per common share increased by $0.86 per share during
the three months ended September 30, 2000 as a result of the net income for the
period and the income tax benefits credited directly to paid-in capital for the
period, compared with an increase of $1.20 for the comparable period a year ago.
Stockholders' equity per common share increased by $2.68 per share during the
nine months ended September 30, 2000 as a result of the net income for the
period and the income tax benefits credited directly to paid-in capital for the
period, compared with an increase of $2.86 for the comparable period a year ago.
NOTE 2 -- ACQUISITION OF SUBSTANTIALLY ALL OF THE ASSETS OF WILLIAM LYON HOMES,
INC.
On November 5, 1999, the Company as described below, acquired substantially
all of the assets and assumed substantially all of the related liabilities of
William Lyon Homes, Inc. ("Old William Lyon Homes"), in accordance with a
Purchase Agreement executed as of October 7, 1999 with Old William Lyon
8
<PAGE> 9
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Homes, William Lyon and William H. Lyon. William Lyon is Chairman of the Board
of Old William Lyon Homes and also Chairman of the Board and Chief Executive
Officer of the Company. William H. Lyon is the son of William Lyon and a
director and an employee of the Company.
The total purchase price consisted of approximately $42,598,000 in cash and
the assumption of approximately $101,058,000 of liabilities of Old William Lyon
Homes. The acquisition has been accounted for as a purchase and, accordingly,
the purchase price has been allocated based on the fair value of the assets and
liabilities acquired. The excess of the purchase price over the net assets
acquired amounting to approximately $8,689,000 has been reflected as goodwill
and is being amortized on a straight-line basis over an estimated useful life of
seven years.
After the acquisition described above and prior to the effectiveness of the
merger as described below, William Lyon and a trust of which William H. Lyon is
the beneficiary acquired (1) 5,741,454 shares of the Company's Series A Common
Stock for $0.655 per share in a tender offer for the purchase of up to
10,678,792 shares of the Company's Series A Common Stock which closed on
November 5, 1999 and (2) 14,372,150 shares of the Company's Series B Common
Stock for $0.655 per share under agreements with certain holders of the
Company's Series B Common Stock which closed on November 8, 1999. On November 5,
1999 William Lyon and the Company cancelled all of William Lyon's outstanding
options to purchase 750,000 shares of the Company's Series A Common Stock. The
completion of these transactions, together with the previous disposition on
August 12, 1999 of 3,000,000 shares by William Lyon and a trust of which William
H. Lyon is the beneficiary, resulted in William Lyon and a trust of which
William H. Lyon is a beneficiary owning approximately 49.9% of the Company's
outstanding Common Stock.
NOTE 3 -- COMPANY MERGES WITH AND INTO WHOLLY-OWNED SUBSIDIARY
On November 5, 1999 at a Special Meeting of Holders of Common Stock, the
Holders of Common Stock approved a proposal to adopt a certificate of ownership
and merger pursuant to which The Presley Companies would merge with and into
Presley Merger Sub, Inc., a newly-formed Delaware corporation and wholly owned
subsidiary of The Presley Companies, with Presley Merger Sub, Inc. being the
surviving corporation. In the merger, each outstanding share of common stock of
The Presley Companies became exchangeable for 0.2 share of common stock of
Presley Merger Sub, Inc. In the merger, the surviving corporation was named "The
Presley Companies," which in turn was renamed William Lyon Homes on December 31,
1999.
The principal purpose of the merger is to help preserve the Company's
substantial net operating loss carryforwards and other tax benefits for use in
offsetting future taxable income by decreasing, but not eliminating, the risk of
an "ownership change" for federal income tax purposes.
In general, the transfer restrictions prohibit, without prior approval of
the board of directors of the Company, the direct or indirect disposition or
acquisition of any stock of the Company by or to any holder who owns or would so
own upon the acquisition (either directly or through the tax attribution rules)
5% or more of the Company's stock.
The Company after the consummation of the merger had substantially the same
financial position as that of The Presley Companies immediately before the
merger (the merger took effect after consummation of the transactions
contemplated in the Purchase Agreement with Old William Lyon Homes -- see Note
2). Except for the transfer restrictions and the elimination of provisions
dividing the common stock into two series, the new shares of common stock issued
by the surviving company in the merger have terms substantially similar to the
old shares of common stock.
9
<PAGE> 10
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
In connection with the acquisition and merger, the Company incurred costs
of approximately $917,000 and $2,197,000 for the three and nine months ended
September 30, 1999, respectively, which are reflected in the Consolidated
Statements of Income as financial advisory expenses.
Effective on November 5, 1999, Old William Lyon Homes changed its name to
Corporate Enterprises, Inc. Effective after the close of business on December
31, 1999, The Presley Companies changed its name to William Lyon Homes.
Effective on January 3, 2000, the Company's stock ticker symbol changed from PDC
to WLS. The Company's common stock continues to trade on the New York Stock
Exchange under the stock symbol WLS.
NOTE 4 -- INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED JOINT VENTURES
The Company and certain of its subsidiaries are general partners or members
in twenty-five joint ventures involved in the development and sale of
residential projects. Such joint ventures are 50% or less owned and,
accordingly, the financial statements of such joint ventures are not
consolidated with the Company's financial statements. The Company's investments
in unconsolidated joint ventures are accounted for using the equity method.
Condensed combined financial information of these joint ventures as of September
30, 2000 and December 31, 1999 and for the three and nine months ended September
30, 2000 and 1999 is summarized as follows:
CONDENSED COMBINED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents.................................. $ 9,426 $ 7,197
Receivables................................................ 637 1,275
Real estate inventories.................................... 294,596 240,056
Other assets............................................... 7 735
-------- --------
$304,666 $249,263
======== ========
LIABILITIES AND OWNERS' CAPITAL
Accounts payable........................................... $ 18,519 $ 8,558
Accrued expenses........................................... 4,768 5,488
Notes payable.............................................. 74,313 54,069
Advances from William Lyon Homes and subsidiaries.......... 5,401 1,055
-------- --------
103,001 69,170
-------- --------
Owners' capital
William Lyon Homes and subsidiaries...................... 44,752 49,227
Others................................................... 156,913 130,866
-------- --------
201,665 180,093
-------- --------
$304,666 $249,263
======== ========
</TABLE>
10
<PAGE> 11
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
CONDENSED COMBINED STATEMENTS OF INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- --------------------
2000 1999 2000 1999
-------- -------- --------- --------
<S> <C> <C> <C> <C>
Home sales............................... $ 62,844 $ 52,577 $ 211,229 $123,113
Operating costs
Cost of sales -- homes................. (52,763) (39,764) (175,320) (97,359)
Sales and marketing.................... (2,292) (1,469) (7,547) (4,038)
-------- -------- --------- --------
Operating income......................... 7,789 11,344 28,362 21,716
Other income, net........................ 62 192 378 414
-------- -------- --------- --------
Net income............................... $ 7,851 $ 11,536 $ 28,740 $ 22,130
======== ======== ========= ========
Allocation to owners
William Lyon Homes and subsidiaries.... $ 3,795 $ 7,414 $ 14,281 $ 12,278
Others................................. 4,056 4,122 14,459 9,852
-------- -------- --------- --------
$ 7,851 $ 11,536 $ 28,740 $ 22,130
======== ======== ========= ========
</TABLE>
Based upon current estimates, substantially all future development and
construction costs will be funded by the Company's venture partners or from the
proceeds of construction financing obtained by the joint ventures.
NOTE 5 -- 12 1/2% SENIOR NOTES DUE 2001
In accordance with the bond indenture agreement governing the Company's
Senior Notes which are due on July 1, 2001, if the Company's Consolidated
Tangible Net Worth is less than $60,000,000 for two consecutive fiscal quarters,
the Company is required to offer to purchase $20,000,000 in principal amount of
the Senior Notes. Because the Company's Consolidated Tangible Net Worth had been
less than $60,000,000 beginning with the quarter ended June 30, 1997, the
Company would, effective on December 4, 1997, June 4, 1998, December 4, 1998,
June 4, 1999, December 4, 1999 and June 4, 2000, have been required to make
offers to purchase $20,000,000 of the Senior Notes at par plus accrued interest,
less the face amount of Senior Notes acquired by the Company after September 30,
1997, March 31, 1998, September 30, 1998, March 31, 1999, September 30, 1999 and
March 31, 2000, respectively. The Company acquired Senior Notes with a face
amount equal to or greater than $20,000,000 after September 30, 1997 and prior
to December 4, 1997, again after March 31, 1998 and prior to June 4, 1998, again
after September 30, 1998 and prior to December 4, 1998, again after March 31,
1999 and prior to June 4, 1999, again after September 30, 1999 and prior to
December 4, 1999, and again after March 31, 2000 and prior to June 4, 2000 and
therefore was not required to make offers to purchase Senior Notes.
At September 30, 2000, the Company's Consolidated Tangible Net Worth was
$73,623,000. As long as the Company's Consolidated Tangible Net Worth is not
less than $60,000,000 on the last day of each of any two consecutive fiscal
quarters, the Company will not be required to make similar offers to purchase
$20,000,000 in principal amount of the Senior Notes.
Because of the Company's obligation to offer to purchase $20,000,000 in
principal amount of the Senior Notes every six months so long as the Company's
Consolidated Tangible Net Worth was less than $60,000,000 on the last day of two
consecutive fiscal quarters, the Company has been restricted in its ability to
acquire, hold and develop real estate projects. The Company changed its
operating strategy during 1997 to
11
<PAGE> 12
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
finance certain projects by forming joint ventures with venture partners that
would provide a substantial portion of the capital necessary to develop these
projects.
The 12 1/2% Senior Notes due July 1, 2001 are obligations of William Lyon
Homes (formerly The Presley Companies), a Delaware corporation ("Delaware
Lyon"), and are unconditionally guaranteed on a senior basis by William Lyon
Homes, Inc. (formerly Presley Homes), a California corporation and a
wholly-owned subsidiary of Delaware Lyon. However, William Lyon Homes, Inc. has
granted liens on substantially all of its assets as security for its obligations
under the Working Capital Facility and other loans. Because the William Lyon
Homes, Inc. guarantee is not secured, holders of the Senior Notes are
effectively junior to borrowings under the Working Capital Facility with respect
to such assets. Delaware Lyon and its consolidated subsidiaries are referred to
collectively herein as the "Company." Interest on the Senior Notes is payable on
January 1 and July 1 of each year, commencing January 1, 1995.
12
<PAGE> 13
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Supplemental consolidating financial information of the Company,
specifically including information for William Lyon Homes, Inc. is presented
below. Investments in subsidiaries are presented using the equity method of
accounting. Separate financial statements of William Lyon Homes, Inc. are not
provided, as the consolidating financial information contained herein provides a
more meaningful disclosure to allow investors to determine the nature of assets
held and the operations of the combined groups.
CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNCONSOLIDATED
---------------------------------------
DELAWARE WILLIAM LYON NON-GUARANTOR ELIMINATING CONSOLIDATED
LYON HOMES, INC. SUBSIDIARIES ENTRIES COMPANY
-------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents........... $ -- $ 14,487 $ 1,442 $ -- $ 15,929
Receivables......................... -- 5,588 9,405 -- 14,993
Real estate inventories............. -- 224,904 2,536 -- 227,440
Investments in and advances to
unconsolidated joint ventures..... -- 17,470 32,683 -- 50,153
Property and equipment, net......... -- 2,605 277 -- 2,882
Deferred loan costs................. 275 641 -- -- 916
Goodwill............................ -- 7,448 -- -- 7,448
Other assets........................ -- 27,128 -- -- 27,128
Investments in subsidiaries......... 78,033 36,470 -- (114,503) --
Intercompany receivables............ 87,215 5,311 -- (92,526) --
-------- -------- ------- --------- --------
$165,523 $342,052 $46,343 $(207,029) $346,889
======== ======== ======= ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable.................... $ -- $ 27,407 $ 339 $ -- $ 27,746
Accrued expenses.................... -- 24,546 1,464 -- 26,010
Notes payable....................... -- 127,129 5,792 -- 132,921
12 1/2% Senior Notes................ 78,225 -- -- -- 78,225
Intercompany payables............... 5,311 87,215 -- (92,526) --
-------- -------- ------- --------- --------
Total liabilities......... 83,536 266,297 7,595 (92,526) 264,902
Stockholders' equity................ 81,987 75,755 38,748 (114,503) 81,987
-------- -------- ------- --------- --------
$165,523 $342,052 $46,343 $(207,029) $346,889
======== ======== ======= ========= ========
</TABLE>
13
<PAGE> 14
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNCONSOLIDATED
-----------------------------------------
DELAWARE WILLIAM LYON NON-GUARANTOR ELIMINATING CONSOLIDATED
LYON HOMES, INC. SUBSIDIARIES ENTRIES COMPANY
-------- -------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents........... $ -- $ 1,344 $ 810 $ -- $ 2,154
Receivables......................... -- 6,792 5,271 -- 12,063
Real estate inventories............. -- 178,280 5,991 -- 184,271
Investments in and advances to
unconsolidated joint ventures..... -- 16,229 34,053 -- 50,282
Property and equipment, net......... -- 2,115 68 -- 2,183
Deferred loan costs................. 704 1,022 -- -- 1,726
Goodwill............................ -- 8,382 -- -- 8,382
Other assets........................ -- 17,400 22 -- 17,422
Investments in subsidiaries......... 49,843 39,819 -- (89,662) --
Intercompany receivables............ 108,340 5,586 -- (113,926) --
-------- -------- ------- --------- --------
$158,887 $276,969 $46,215 $(203,588) $278,483
======== ======== ======= ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable.................... $ -- $ 15,215 $ 438 $ -- $ 15,653
Accrued expenses.................... -- 31,201 1,698 -- 32,899
Notes payable....................... -- 73,497 3,133 -- 76,630
12 1/2% Senior Notes................ 100,000 -- -- -- 100,000
Intercompany payables............... 5,586 108,340 -- (113,926) --
-------- -------- ------- --------- --------
Total liabilities......... 105,586 228,253 5,269 (113,926) 225,182
Stockholders' Equity................ 53,301 48,716 40,946 (89,662) 53,301
-------- -------- ------- --------- --------
$158,887 $276,969 $46,215 $(203,588) $278,483
======== ======== ======= ========= ========
</TABLE>
14
<PAGE> 15
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
CONSOLIDATING STATEMENT OF INCOME
THREE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNCONSOLIDATED
---------------------------------------
DELAWARE WILLIAM LYON NON-GUARANTOR ELIMINATING CONSOLIDATED
LYON HOMES, INC. SUBSIDIARIES ENTRIES COMPANY
-------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Operating revenue
Sales............................... $ -- $ 78,898 $ 9,818 $ -- $ 88,716
Management fee income............... -- 221 2,104 -- 2,325
------ -------- ------- -------- --------
-- 79,119 11,922 -- 91,041
------ -------- ------- -------- --------
Operating costs
Cost of sales....................... -- (65,049) (8,906) -- (73,955)
Sales and marketing................. -- (3,637) (483) -- (4,120)
General and administrative.......... -- (7,338) (83) -- (7,421)
Amortization of goodwill............ -- (310) -- -- (310)
------ -------- ------- -------- --------
-- (76,334) (9,472) -- (85,806)
------ -------- ------- -------- --------
Equity in income of unconsolidated
joint ventures...................... -- 587 3,208 -- 3,795
------ -------- ------- -------- --------
Income from subsidiaries.............. 7,564 6,086 -- (13,650) --
------ -------- ------- -------- --------
Operating income...................... 7,564 9,458 5,658 (13,650) 9,030
Interest expense, net of amounts
capitalized......................... -- (1,239) (10) -- (1,249)
Other income (expense), net........... -- 675 440 -- 1,115
------ -------- ------- -------- --------
Income before income taxes............ 7,564 8,894 6,088 (13,650) 8,896
Provision for income taxes
Income taxes -- benefit credited to
paid-in capital.................. -- (1,438) -- -- (1,438)
Income taxes -- alternate minimum
tax.............................. -- 106 -- -- 106
------ -------- ------- -------- --------
Net income............................ $7,564 $ 7,562 $ 6,088 $(13,650) $ 7,564
====== ======== ======= ======== ========
</TABLE>
15
<PAGE> 16
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
CONSOLIDATING STATEMENT OF INCOME
THREE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNCONSOLIDATED
---------------------------------------
DELAWARE WILLIAM LYON NON-GUARANTOR ELIMINATING CONSOLIDATED
LYON HOMES, INC. SUBSIDIARIES ENTRIES COMPANY
-------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Operating revenue
Sales............................... $ -- $ 74,828 $ 13,535 $ -- $ 88,363
Management fee income............... -- 185 982 -- 1,167
------- -------- -------- -------- --------
-- 75,013 14,517 -- 89,530
------- -------- -------- -------- --------
Operating costs
Cost of sales....................... -- (62,239) (10,904) -- (73,143)
Sales and marketing................. -- (3,569) (629) -- (4,198)
General and administrative.......... -- (6,057) (54) -- (6,111)
------- -------- -------- -------- --------
-- (71,865) (11,587) -- (83,452)
------- -------- -------- -------- --------
Equity in income of unconsolidated
joint ventures...................... -- 1,127 6,287 -- 7,414
------- -------- -------- -------- --------
Income from subsidiaries.............. 11,637 9,113 -- (20,750) --
------- -------- -------- -------- --------
Operating income...................... 11,637 13,388 9,217 (20,750) 13,492
Interest expense, net of amounts
capitalized......................... -- (540) (343) -- (883)
Financial advisory expenses........... (917) -- -- -- (917)
Other income (expense), net........... -- 452 373 -- 825
------- -------- -------- -------- --------
Income before income taxes............ 10,720 13,300 9,247 (20,750) 12,517
Provision for income taxes
Income taxes -- benefit credited to
paid-in capital.................. -- (1,797) -- -- (1,797)
------- -------- -------- -------- --------
Net income............................ $10,720 $ 11,503 $ 9,247 $(20,750) $ 10,720
======= ======== ======== ======== ========
</TABLE>
16
<PAGE> 17
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
CONSOLIDATING STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNCONSOLIDATED
---------------------------------------
DELAWARE WILLIAM LYON NON-GUARANTOR ELIMINATING CONSOLIDATED
LYON HOMES, INC. SUBSIDIARIES ENTRIES COMPANY
-------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Operating revenue
Sales............................... $ -- $ 225,001 $ 23,433 $ -- $ 248,434
Management fee income............... -- 896 5,400 -- 6,296
------- --------- -------- -------- ---------
-- 225,897 28,833 -- 254,730
------- --------- -------- -------- ---------
Operating costs
Cost of sales....................... -- (183,322) (20,437) -- (203,759)
Sales and marketing................. -- (9,847) (1,255) -- (11,102)
General and administrative.......... -- (23,604) (202) -- (23,806)
Amortization of goodwill............ -- (934) -- -- (934)
------- --------- -------- -------- ---------
-- (217,707) (21,894) -- (239,601)
------- --------- -------- -------- ---------
Equity in income of unconsolidated
joint ventures...................... -- 1,381 12,900 -- 14,281
------- --------- -------- -------- ---------
Income from subsidiaries.............. 22,374 20,276 -- (42,650) --
------- --------- -------- -------- ---------
Operating income...................... 22,374 29,847 19,839 (42,650) 29,410
Interest expense, net of amounts
capitalized......................... -- (4,472) (254) -- (4,726)
Other income (expense), net........... -- 2,998 688 -- 3,686
------- --------- -------- -------- ---------
Income before income taxes and
extraordinary item.................. 22,374 28,373 20,273 (42,650) 28,370
Provision for income taxes
Income taxes -- benefit credited to
paid-in capital.................. -- (5,160) -- -- (5,160)
Income taxes -- alternate minimum
tax.............................. -- (836) -- -- (836)
------- --------- -------- -------- ---------
Income before extraordinary item...... 22,374 22,377 20,273 (42,650) 22,374
Extraordinary item -- gain from
retirement of debt, net of
applicable income taxes............. 496 -- -- -- 496
------- --------- -------- -------- ---------
Net income............................ $22,870 $ 22,377 $ 20,273 $(42,650) $ 22,870
======= ========= ======== ======== =========
</TABLE>
17
<PAGE> 18
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
CONSOLIDATING STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNCONSOLIDATED
---------------------------------------
DELAWARE WILLIAM LYON NON-GUARANTOR ELIMINATING CONSOLIDATED
LYON HOMES, INC. SUBSIDIARIES ENTRIES COMPANY
-------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Operating revenue
Sales............................... $ -- $ 214,354 $ 52,021 $ -- $ 266,375
Management fee income............... -- 504 2,644 -- 3,148
------- --------- -------- -------- ---------
-- 214,858 54,665 -- 269,523
------- --------- -------- -------- ---------
Operating costs
Cost of sales....................... -- (180,446) (40,555) -- (221,001)
Sales and marketing................. -- (10,530) (2,128) -- (12,658)
General and administrative.......... -- (15,809) (156) -- (15,965)
------- --------- -------- -------- ---------
-- (206,785) (42,839) -- (249,624)
------- --------- -------- -------- ---------
Equity in income of unconsolidated
joint ventures...................... -- 1,524 10,754 -- 12,278
------- --------- -------- -------- ---------
Income from subsidiaries.............. 26,001 21,898 -- (47,899) --
------- --------- -------- -------- ---------
Operating income...................... 26,001 31,495 22,580 (47,899) 32,177
Interest expense, net of amounts
capitalized......................... -- (2,810) (1,744) -- (4,554)
Financial advisory expenses........... (2,197) -- -- -- (2,197)
Other income (expense), net........... -- 931 1,435 -- 2,366
------- --------- -------- -------- ---------
Income before income taxes and
extraordinary item.................. 23,804 29,616 22,271 (47,899) 27,792
Provision for income taxes
Income taxes -- benefit credited to
paid-in capital.................. -- (3,988) -- -- (3,988)
------- --------- -------- -------- ---------
Income before extraordinary item...... 23,804 25,628 22,271 (47,899) 23,804
------- --------- -------- -------- ---------
Extraordinary item -- gain from
retirement of debt, net of
applicable income taxes............. 1,789 -- -- -- 1,789
------- --------- -------- -------- ---------
Net income............................ $25,593 $ 25,628 $ 22,271 $(47,899) $ 25,593
======= ========= ======== ======== =========
</TABLE>
18
<PAGE> 19
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNCONSOLIDATED
---------------------------------------
DELAWARE WILLIAM LYON NON-GUARANTOR ELIMINATING CONSOLIDATED
LYON HOMES, INC. SUBSIDIARIES ENTRIES COMPANY
-------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.............................. $ 22,870 $ 22,377 $ 20,273 $(42,650) $ 22,870
Adjustments to reconcile net income to
net cash (used in) provided by
operating activities:
Depreciation and amortization........ -- 1,939 59 -- 1,998
Equity in income of unconsolidated
joint ventures..................... -- (1,381) (12,900) -- (14,281)
Equity in earnings of subsidiaries... (22,374) (20,276) -- 42,650 --
Extraordinary gain on repurchase of
senior notes....................... (522) -- -- -- (522)
Provision for income taxes........... -- 6,022 -- -- 6,022
Net changes in operating assets and
liabilities:
Other receivables.................. -- 3,131 (884) -- 2,247
Intercompany
receivables/payables............ (275) 275 -- -- --
Real estate inventories............ -- (46,624) 3,455 -- (43,169)
Deferred loan costs................ 301 381 -- -- 682
Other assets....................... -- (9,728) 22 -- (9,706)
Accounts payable................... -- 12,192 (99) -- 12,093
Accrued expenses................... -- (7,517) (234) -- (7,751)
-------- -------- -------- -------- ---------
Net cash (used in) provided by operating
activities........................... -- (39,209) 9,692 -- (29,517)
-------- -------- -------- -------- ---------
Cash flows from investing activities:
Investment in unconsolidated joint
ventures............................. -- 140 11,020 -- 11,160
Issuance of/payments on notes
receivable........................... -- (1,927) -- -- (1,927)
Purchases of property and equipment..... -- (1,495) (268) -- (1,763)
Investment in subsidiaries.............. -- 23,625 -- (23,625) --
Advances to affiliates.................. 20,469 -- -- (20,469) --
-------- -------- -------- -------- ---------
Net cash provided by investing
activities........................... 20,469 20,343 10,752 (44,094) 7,470
-------- -------- -------- -------- ---------
Cash flows from financing activities:
Proceeds from borrowings on notes
payable.............................. -- 253,562 62,319 -- 315,881
Principal payments on notes payable..... -- (199,930) (59,660) -- (259,590)
Purchase of 12 1/2% Senior Notes........ (21,125) -- -- -- (21,125)
Distributions to/contributions from
shareholders......................... -- (498) (22,471) 22,969 --
Common stock issued for exercised
options.............................. 656 -- -- -- 656
Advances from affiliates................ -- (21,125) -- 21,125 --
-------- -------- -------- -------- ---------
Net cash (used in) provided by financing
activities........................... (20,469) 32,009 (19,812) 44,094 35,822
-------- -------- -------- -------- ---------
Net increase in cash and cash
equivalents............................. -- 13,143 632 -- 13,775
Cash and cash equivalents at beginning of
period.................................. -- 1,344 810 -- 2,154
-------- -------- -------- -------- ---------
Cash and cash equivalents at end of
period.................................. $ -- $ 14,487 $ 1,442 $ -- $ 15,929
======== ======== ======== ======== =========
</TABLE>
19
<PAGE> 20
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNCONSOLIDATED
---------------------------------------
DELAWARE WILLIAM LYON NON-GUARANTOR ELIMINATING CONSOLIDATED
LYON HOMES, INC. SUBSIDIARIES ENTRIES COMPANY
-------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.............................. $ 25,593 $ 25,628 $ 22,271 $(47,899) $ 25,593
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization........ -- 809 70 -- 879
Equity in earnings of joint
ventures........................... -- (1,524) (10,754) -- (12,278)
Equity in earnings of subsidiaries... (26,001) (21,898) -- 47,899 --
Extraordinary gain on repurchase of
Senior Notes....................... (2,089) -- -- -- (2,089)
Provision for income taxes........... -- 4,288 -- -- 4,288
Net changes in operating assets and
liabilities:
Other receivables.................. -- 3,060 (5,930) -- (2,870)
Intercompany
receivables/payables............ 2,051 (2,051) -- -- --
Real estate inventories............ -- 9,262 7,678 -- 16,940
Deferred loan costs................ 446 490 30 -- 966
Other assets....................... -- (2,785) 39 -- (2,746)
Accounts payable................... -- 4,177 (849) -- 3,328
Accrued expenses................... -- (3,628) (356) -- (3,984)
-------- -------- -------- -------- --------
Net cash provided by operating
activities........................... -- 15,828 12,199 -- 28,027
-------- -------- -------- -------- --------
Cash flows from investing activities:
Investment in unconsolidated joint
ventures............................. -- (282) 6,390 -- 6,108
Issuance of/payments on notes
receivable........................... -- (5,604) -- -- (5,604)
Purchases of property and equipment..... -- (185) (41) -- (226)
Investment in subsidiaries.............. -- 17,728 -- (17,728) --
Advances to affiliates.................. 17,700 -- -- (17,700) --
-------- -------- -------- -------- --------
Net cash provided by investing
activities.............................. 17,700 11,657 6,349 (35,428) 278
-------- -------- -------- -------- --------
Cash flows from financing activities:
Proceeds from borrowings on notes
payable.............................. -- 80,307 43,061 -- 123,368
Principal payments on notes payable..... -- (107,449) (43,256) -- (150,705)
Purchase of 12 1/2% Senior Notes........ (17,700) -- -- -- (17,700)
Distributions to/contributions from
shareholders......................... -- (221) (17,507) 17,728 --
Advances from affiliates................ -- (17,700) -- 17,700 --
-------- -------- -------- -------- --------
Net cash used in financing activities..... (17,700) (45,063) (17,702) 35,428 (45,037)
-------- -------- -------- -------- --------
Net (decrease) increase in cash and cash
equivalents............................. -- (17,578) 846 -- (16,732)
Cash and cash equivalents at beginning of
period.................................. -- 22,605 1,350 -- 23,955
-------- -------- -------- -------- --------
Cash and cash equivalents at end of
period.................................. $ -- $ 5,027 $ 2,196 $ -- $ 7,223
======== ======== ======== ======== ========
</TABLE>
20
<PAGE> 21
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 6 -- GAIN FROM SALE OF OFFICE BUILDING
In March 2000, the Company completed the sale of an office building where
its prior executive offices were located in Newport Beach, California which was
no longer needed after the consolidation of certain of the Company's operations.
The sales price was $2,120,000 which the Company received in cash at closing.
The net gain from the sale of approximately $1,747,000 is reflected in Other
income (expense), net on the Consolidated Statement of Income for the nine
months ended September 30, 2000.
NOTE 7 -- GAIN FROM RETIREMENT OF DEBT
In April and May 2000, the Company purchased $21,775,000 principal amount
of its outstanding Senior Notes at a cost of $21,125,000. The net gain resulting
from the purchase was $496,000 after giving effect to income taxes of $26,000
and amortization of related loan costs of $128,000. Such gain is reflected as an
extraordinary item in the Company's results of operations for the nine months
ended September 30, 2000.
In April 1999, the Company purchased $20,000,000 principal amount of its
outstanding Senior Notes at a cost of $17,700,000. The net gain resulting from
the purchase was $1,789,000, after giving effect to income taxes of $300,000 and
amortization of related deferred loan costs of $211,000. Such gain is reflected
as an extraordinary item in the Company's results of operations for the nine
months ended September 30, 1999.
NOTE 8 -- STOCK OPTIONS
Effective on May 12, 2000 and August 21, 2000, certain officers exercised
options to purchase 48,334 and 82,754 shares, respectively, of the Company's
common stock at a price of $5.00 per share in accordance with the Company's 1991
Stock Option Plan, as amended. As of September 30, 2000, outstanding options to
purchase common stock under the Company's 1991 Stock Option Plan are as follows:
13,912 options priced at $5.00 and 16,000 options priced at $14.375.
Effective on May 9, 2000, the Company's Board of Directors approved the
William Lyon Homes 2000 Stock Incentive Plan (the "Plan") and authorized an
initial 1,000,000 shares of common stock to be reserved for issuance under the
Plan. Under the Plan, options may be granted from time to time to key employees,
officers, directors, consultants and advisors of the Company. The Plan is
administered by the Stock Option Committee of the Board of Directors (the
"Committee"). The Committee is generally empowered to interpret the Plan,
prescribe rules and regulations relating thereto, determine the terms of the
option agreements, amend them with the consent of the optionee, determine the
employees to whom options are to be granted, and determine the number of shares
subject to each option and the exercise price thereof. The per share exercise
price for options will not be less than 100% of the fair market value of a share
of common stock on the date the option is granted. The options will be
exercisable for a term determined by the Committee, not to exceed ten years from
the date of grant.
Effective on May 9, 2000, the Company issued options under the William Lyon
Homes 2000 Stock Incentive Plan to purchase a total of 627,500 shares of common
stock at $8.6875 per share. The options vest as follows: one-third on May 9,
2001, one-third on May 9, 2002 and one-third on May 9, 2003. All unexercised
options expire on May 9, 2010.
NOTE 9 -- RELATED PARTY TRANSACTIONS
The Company acquired substantially all of the assets and assumed
substantially all of the related liabilities of Old William Lyon Homes as
described in Note 2.
The Company purchased real estate projects for a total purchase price of
$5,529,700 during the nine months ended September 30, 2000 from entities
controlled by William Lyon and William H. Lyon.
21
<PAGE> 22
WILLIAM LYON HOMES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
On October 26, 2000, the Company's Board of Directors (with Messrs. William
Lyon and William H. Lyon abstaining) approved the purchase of 579 lots for a
total purchase price of $12,581,000 from an entity controlled by William Lyon
and William H. Lyon. The terms of the purchase agreement provide for an initial
option payment of $1,000,000 and a rolling option takedown of the lots. Phase
takedowns of approximately 20 lots each are anticipated to occur at two to three
month intervals for each of several product types through September 2004. In
addition, one-half of the net profits in excess of six percent from the
development are to be paid to the seller. This land acquisition qualifies as an
affiliate transaction under the Company's $200,000,000 12 1/2% Senior Notes due
July 1, 2001 Indenture dated as of June 29, 1994 ("Indenture"). Pursuant to the
terms of the Indenture, the Company has determined that the land acquisition is
on terms that are no less favorable to the Company than those that would have
been obtained in a comparable transaction by the Company with an unrelated
person. The Company has delivered to the Trustee under the Indenture a
resolution of the Board of Directors of the Company set forth in an Officers'
Certificate certifying that the land acquisition is on terms that are no less
favorable to the Company than those that would have been obtained in a
comparable transaction by the Company with an unrelated person and the land
acquisition has been approved by a majority of the disinterested members of the
Board of Directors of the Company. Further, the Company has delivered to the
Trustee under the Indenture a determination of value by a real estate appraisal
firm which is of regional standing in the region in which the subject property
is located and is MAI certified.
For the three and nine months ended September 30, 2000, the Company earned
management fees of $49,000 and $330,000, respectively; and accrued on-site labor
costs of $132,000 and $408,000, respectively, for managing and selling real
estate owned by entities controlled by William Lyon and William H. Lyon of which
$105,000 was due the Company at September 30, 2000.
For the three and nine months ended September 30, 2000, the Company
incurred charges of $182,000 and $535,000, respectively, related to rent on its
corporate office, from an entity controlled by William Lyon and William H. Lyon.
22
<PAGE> 23
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
WILLIAM LYON HOMES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion of results of operations and financial condition
should be read in conjunction with the consolidated financial statements and
notes thereto included in Item 1, as well as the information presented in the
Annual Report on Form 10-K for the year ended December 31, 1999.
GENERAL OVERVIEW
On November 5, 1999, the Company as described below, acquired substantially
all of the assets and assumed substantially all of the related liabilities of
William Lyon Homes, Inc. ("Old William Lyon Homes"), in accordance with a
Purchase Agreement executed as of October 7, 1999 with Old William Lyon Homes,
William Lyon and William H. Lyon. William Lyon is Chairman of the Board of Old
William Lyon Homes and also Chairman of the Board and Chief Executive Officer of
the Company. William H. Lyon is the son of William Lyon and a director and an
employee of the Company.
The total purchase price consisted of approximately $42,598,000 in cash and
the assumption of approximately $101,058,000 of liabilities of Old William Lyon
Homes. The acquisition has been accounted for as a purchase and, accordingly,
the purchase price has been allocated based on the fair value of the assets and
liabilities acquired. The excess of the purchase price over the net assets
acquired amounting to approximately $8,689,000 has been reflected as goodwill
and is being amortized on a straight-line basis over an estimated useful life of
seven years.
After the acquisition described above and prior to the effectiveness of the
merger as described below, William Lyon and a trust of which William H. Lyon is
the beneficiary acquired (1) 5,741,454 shares of the Company's Series A Common
Stock for $0.655 per share in a tender offer for the purchase of up to
10,678,792 shares of the Company's Series A Common Stock which closed on
November 5, 1999 and (2) 14,372,150 shares of the Company's Series B Common
Stock for $0.655 per share under agreements with certain holders of the
Company's Series B Common Stock which closed on November 8, 1999. On November 5,
1999 William Lyon and the Company cancelled all of William Lyon's outstanding
options to purchase 750,000 shares of the Company's Series A Common Stock. The
completion of these transactions, together with the previous disposition on
August 12, 1999 of 3,000,000 shares by William Lyon and a trust of which William
H. Lyon is the beneficiary, resulted in William Lyon and a trust of which
William H. Lyon is a beneficiary owning approximately 49.9% of the Company's
outstanding Common Stock.
On November 5, 1999 at a Special Meeting of Holders of Common Stock, the
Holders of Common Stock approved a proposal to adopt a certificate of ownership
and merger pursuant to which The Presley Companies would merge with and into
Presley Merger Sub, Inc., a newly-formed Delaware corporation and wholly owned
subsidiary of The Presley Companies, with Presley Merger Sub, Inc. being the
surviving corporation. In the merger, each outstanding share of common stock of
The Presley Companies became exchangeable for 0.2 share of common stock of
Presley Merger Sub, Inc. In the merger, the surviving corporation was named "The
Presley Companies," which in turn was renamed William Lyon Homes on December 31,
1999.
The principal purpose of the merger is to help preserve the Company's
substantial net operating loss carryforwards and other tax benefits for use in
offsetting future taxable income by decreasing, but not eliminating, the risk of
an "ownership change" for federal income tax purposes.
In general, the transfer restrictions prohibit, without prior approval of
the board of directors of the Company, the direct or indirect disposition or
acquisition of any stock of the Company by or to any holder who owns or would so
own upon the acquisition (either directly or through the tax attribution rules)
5% or more of the Company's stock.
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<PAGE> 24
The Company after the consummation of the merger had substantially the same
financial position as that of The Presley Companies immediately before the
merger (the merger took effect after consummation of the transactions
contemplated in the Purchase Agreement with Old William Lyon Homes -- see Note
2). Except for the transfer restrictions and the elimination of provisions
dividing the common stock into two series, the new shares of common stock issued
by the surviving company in the merger have terms substantially similar to the
old shares of common stock.
In connection with the acquisition and merger, the Company incurred costs
of approximately $917,000 and $2,197,000 for the three and nine months ended
September 30, 1999, respectively, which are reflected in the Consolidated
Statements of Income as financial advisory expenses.
Effective on November 5, 1999, Old William Lyon Homes changed its name to
Corporate Enterprises, Inc. Effective after the close of business on December
31, 1999, The Presley Companies changed its name to William Lyon Homes.
Effective on January 3, 2000, the Company's stock ticker symbol changed from PDC
to WLS. The Company's common stock continues to trade on the New York Stock
Exchange under the stock symbol WLS.
In accordance with the bond indenture agreement governing the Company's
Senior Notes which are due on July 1, 2001, if the Company's Consolidated
Tangible Net Worth is less than $60 million for two consecutive fiscal quarters,
the Company is required to offer to purchase $20 million in principal amount of
the Senior Notes. Because the Company's Consolidated Tangible Net Worth had been
less than $60 million beginning with the quarter ended June 30, 1997, the
Company would, effective on December 4, 1997, June 4, 1998, December 4, 1998,
June 4, 1999, December 4, 1999 and June 4, 2000, have been required to make
offers to purchase $20 million of the Senior Notes at par plus accrued interest,
less the face amount of Senior Notes acquired by the Company after September 30,
1997, March 31, 1998, September 30, 1998, March 31, 1999, September 30, 1999 and
March 31, 2000, respectively. The Company acquired Senior Notes with a face
amount equal to or greater than $20 million after September 30, 1997 and prior
to December 4, 1997, again after March 31, 1998 and prior to June 4, 1998, again
after September 30, 1998 and prior to December 4, 1998, again after March 31,
1999 and prior to June 4, 1999, again after September 30, 1999 and prior to
December 4, 1999, and again after March 31, 2000 and prior to June 4, 2000 and
therefore was not required to make said offers.
At September 30, 2000, the Company's Consolidated Tangible Net Worth was
$73.6 million. As long as the Company's Consolidated Tangible Net Worth is not
less than $60.0 million on the last day of each of any two consecutive fiscal
quarters, the Company will not be required to make similar offers to purchase
$20 million in principal amount of the Senior Notes.
Because of the Company's obligation to offer to purchase $20 million of the
Senior Notes every six months so long as the Company's Consolidated Tangible Net
Worth was less than $60 million on the last day of each of any two consecutive
fiscal quarters, the Company has been restricted in its ability to acquire, hold
and develop real estate projects. The Company changed its operating strategy
during 1997 to finance certain projects by forming joint ventures with venture
partners that would provide a substantial portion of the capital necessary to
develop these projects. The Company believes that the use of joint venture
partnerships better enables it to reduce its capital investments and risks in
the highly capital intensive California markets, as well as to repurchase the
Company's Senior Notes as described above. The Company generally receives, after
priority returns and capital distributions to its partners, approximately 50% of
the profits and losses, and cash flows from joint ventures.
As of September 30, 2000, the Company and certain of its subsidiaries are
general partners or members in twenty-five joint ventures involved in the
development and sale of residential projects. Such joint ventures are 50% or
less owned and, accordingly, the financial statements of such joint ventures are
not consolidated with the Company's financial statements. The Company's
investments in unconsolidated joint ventures are accounted for using the equity
method. See Note 4 of "Notes to Consolidated Financial Statements" for condensed
combined financial information for these joint ventures. Based upon current
estimates, all future development and construction costs will be funded by the
Company's venture partners or from the proceeds of construction financing
obtained by the joint ventures.
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<PAGE> 25
At December 31, 1999, the Company had net operating loss carryforwards for
Federal tax purposes of approximately $106.2 million, of which $12.9 million
expires in 2008, $27.4 million expires in 2009, $35.8 million expires in 2010,
$13.7 million expires in 2011, $16.4 million expires in 2012 and $28,000 expires
in 2018. The Company's ability to utilize the tax benefits associated with its
net operating loss carryforwards will depend upon the amount of its otherwise
taxable income and may be limited in the event of an "ownership change" under
federal tax laws and regulations.
The ability of the Company to meet its obligations on its indebtedness will
depend to a large degree on its future performance which in turn will be
subject, in part, to factors beyond its control, such as prevailing economic
conditions, mortgage and other interest rates, weather, the occurrence of events
such as landslides, soil subsidence and earthquakes that are uninsurable, not
economically insurable or not subject to effective indemnification agreements,
availability of labor and homebuilding materials, changes in governmental laws
and regulations, and the availability and cost of land for future development.
At this time, the Company's degree of leverage may limit its ability to meet its
obligations, withstand adverse business or other conditions and capitalize on
business opportunities.
The Company has previously announced that it had received notification from
the New York Stock Exchange on July 28, 1999 that the Securities and Exchange
Commission had approved amendments to the NYSE's continued listing standards.
Under these new standards, the Company would be considered "below criteria" if
it has:
- Total market capitalization of less than $50 million;
- Total stockholders' equity of less than $50 million;
- Average market capitalization of less than $15 million over a consecutive
30-day trading period; or
- Average closing price of less than $1.00 over a consecutive 30
trading-day period.
The NYSE notified the Company that it was below these new criteria on the
date of the notification. The NYSE further informed the Company that failure to
raise its stock price above $1.00 per share within six months would result in
immediate suspension of trading and application to the SEC for delisting. In
addition, the Company would have 45 days from the date of the NYSE's
notification to present a business plan to the NYSE that would demonstrate
compliance with all aspects of the other two criteria within 12 months of the
date of the NYSE's notification. The Company submitted a business plan to the
NYSE within the 45 day period. On September 30, 1999, the NYSE notified the
Company that it had accepted the Company's business plan and would continue the
listing of the Company at that time. The NYSE notification further stated that
the NYSE would continue to monitor the Company quarterly during the twelve
months from the date of the notification. If the Company failed to achieve the
quarterly milestones or if at the completion of the 12 months it was not in
compliance with the new continued listing criteria, the Company would be
suspended from trading on the NYSE and application would be made to the SEC for
delisting.
On August 29, 2000 the Company announced that it had received a letter from
the NYSE dated as of August 14, 2000 notifying the Company that the plan period
under the NYSE's Continued Listing Program for the Company was completed as of
August 5, 2000. According to the NYSE letter, the Company completed the plan
period and is now considered a "company in good standing" by achieving both
market capitalization and shareholders' equity in excess of $50 million. As a
result of the Company's good standing, the Company has formally been removed
from the NYSE's "Watch List". However, the Company is subject to a 12-month
follow-up period within which the Company will be reviewed to ensure that the
Company does not once again fall below any of the NYSE's continued listing
standards. Although no quarterly updates are required during the follow-up
period, the Company is still obligated to be proactive in its discussions with
the NYSE, especially involving events that might effect triggering any of the
continued listing requirements. As of and through September 30, 2000, the
Company was in compliance with all NYSE listing criteria.
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<PAGE> 26
RESULTS OF OPERATIONS
OVERVIEW AND RECENT RESULTS
Homes sold, closed and in backlog for the Company and its unconsolidated
joint ventures as of and for the periods presented are as follows:
<TABLE>
<CAPTION>
AS OF AND FOR AS OF AND FOR
THE THREE MONTHS THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------- --------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Number of homes sold
Company..................................... 475 337 1,313 1,275
Unconsolidated joint ventures............... 204 110 713 431
------ ------ ------ ------
679 447 2,026 1,706
====== ====== ====== ======
Number of homes closed
Company..................................... 396 441 1,102 1,280
Unconsolidated joint ventures............... 147 144 547 356
------ ------ ------ ------
543 585 1,649 1,636
====== ====== ====== ======
Backlog of homes sold but not closed at end of
period
Company..................................... 654 484 654 484
Unconsolidated joint ventures............... 353 203 353 203
------ ------ ------ ------
1,007 687 1,007 687
====== ====== ====== ======
Dollar amount of backlog of homes sold but not
closed at end of period (in millions):
Company..................................... $154.5 $ 97.7 $154.5 $ 97.7
Unconsolidated joint ventures............... 158.9 81.8 158.9 81.8
------ ------ ------ ------
$313.4 $179.5 $313.4 $179.5
====== ====== ====== ======
</TABLE>
As previously described, on November 5, 1999 the Company completed the
acquisition of substantially all of the assets of Old William Lyon Homes. If the
acquisition had been completed as of September 30, 1999, pro forma backlog
information as of September 30, 1999 would have been as follows:
<TABLE>
<S> <C>
Backlog of homes sold but not closed at September 30, 1999
Company combined total.................................... 687
Old William Lyon Homes.................................... 354
------
Combined pro forma total.................................. 1,041
======
Dollar amount of backlog of homes sold but not closed at
September 30, 1999
(in millions):
Company combined total.................................... $179.5
Old William Lyon Homes.................................... 91.7
------
Combined pro forma total.................................. $271.2
======
</TABLE>
Homes in backlog are generally closed within three to six months. The
dollar amount of backlog of homes sold but not closed as of September 30, 2000
was $313.4 million, as compared to $179.5 million as of September 30, 1999
($271.2 million on a combined pro forma basis at September 30, 1999) and $273.6
million as of June 30, 2000. The cancellation rate of buyers who contracted to
buy a home but did not close escrow at the Company's projects was approximately
15% during 1999 and 19% during the first nine months of 2000.
The number of homes sold for the quarter ended September 30, 2000 increased
52 percent to 679 units from 447 a year ago. For the third quarter of 2000, the
number of homes sold increased 15 percent to 679 from
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<PAGE> 27
588 units in the second quarter of 2000. The number of homes closed in the third
quarter of 2000 decreased 7 percent to 543 from 585 in the third quarter of
1999. The backlog of homes sold as of September 30, 2000 was 1,007, up 47
percent from 687 units a year earlier (down 3 percent from 1,041 units a year
earlier on a combined pro forma basis), and up 16 percent from 871 units at June
30, 2000.
Financial Accounting Standards Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
("Statement No. 121") which requires impairment losses to be recorded on assets
to be held and used by the Company when indicators of impairment are present and
the undiscounted cash flows estimated to be generated by those assets (excluding
interest) are less than the carrying amount of the assets. Statement No. 121
also requires that long-lived assets that are held for disposal be reported at
the lower of the assets' carrying amount or fair value less cost of disposal.
Under the pronouncement, when an impairment loss is required for assets to be
held and used by the Company, the related assets are adjusted to their estimated
fair value.
The net loss for the year ended December 31, 1997 included a non-cash
charge of $74,000,000 during the second quarter of 1997 to record impairment
losses on certain real estate assets held and used by the Company. The
impairment losses related to three of the Company's master-planned communities.
The impairment losses related to two communities, which are located in the
Inland Empire area of Southern California, arose primarily from declines in home
sales prices due to continued weak economic conditions and competitive pressures
in that area of Southern California. The impairment loss relating to the other
community, which is located in Contra Costa County in the East San Francisco Bay
area of Northern California, was primarily attributable to lower than expected
cash flow relating to one of the high end residential products in this community
and to a deterioration in the value of the non-residential portion of the
project. The significant deteriorations in the market conditions associated with
these communities resulted in the undiscounted cash flows (excluding interest)
estimated to be generated by these communities being less than their historical
book values. Accordingly, the master-planned communities were written-down to
their estimated fair value.
The following represents the home sales and excess of revenue from sales
over related cost of sales (i.e., gross profit) of the three master-planned
communities since the recordation of impairment losses on June 30, 1997:
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX MONTHS FOR THE FOR THE NINE MONTHS
ENDED YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1997 1998 1999 2000
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Sales......................... $17,662,000 $54,828,000 $79,584,000 $40,114,000
Gross profit.................. $ 1,202,000 $ 5,850,000 $13,012,000 $10,642,000
Gross profit %................ 6.8% 10.7% 16.4% 26.5%
</TABLE>
The gross profits recognized on the three master-planned communities
subsequent to the recordation of the impairment losses has increased due to
better than projected sales price increases beginning in 1998.
In general, housing demand is adversely affected by increases in interest
rates and housing prices. Interest rates, the length of time that assets remain
in inventory, and the proportion of inventory that is financed affect the
Company's interest cost. If the Company is unable to raise sales prices
sufficiently to compensate for higher costs or if mortgage interest rates
increase significantly, affecting prospective buyers' ability to adequately
finance home purchases, the Company's sales, gross margins and net results may
be adversely impacted. To a limited extent, the Company hedges against increases
in interest costs by acquiring interest rate protection that locks in or caps
interest rates for limited periods of time for mortgage financing for
prospective homebuyers.
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 2000 TO THREE MONTHS ENDED
SEPTEMBER 30, 1999
Operating revenue for the three months ended September 30, 2000 was $91.0
million, an increase of $1.5 million (1.7%) from operating revenue of $89.5
million for the three months ended September 30, 1999.
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<PAGE> 28
Revenue from sales of homes decreased $1.0 million (1.1%) to $88.6 million in
the 2000 period from $87.6 million in the 1999 period. This decrease was due
primarily to a decrease in the number of wholly-owned units closed to 396 in the
2000 period from 441 in the 1999 period, offset by an increase in the average
sales prices of wholly-owned units to $223,800 in the 2000 period from $199,000
in the 1999 period. Management fee income increased by $1.1 million to $2.3
million in the 2000 period from $1.2 million in the 1999 period as a direct
result of the Company's strategy of financing an increased number of projects
through unconsolidated joint ventures. Equity in income of unconsolidated joint
ventures amounting to $3.8 million was recognized in the 2000 period, down from
$7.4 million in the comparable period for 1999 as a result of the close-out in
2000 of certain joint ventures from which the Company had realized significant
income in 1999.
Total operating income decreased from $13.5 million in the 1999 period to
$9.0 million in the 2000 period. The excess of revenue from sales of homes over
the related cost of sales decreased by $0.8 million to $14.8 million in the 2000
period from $15.6 million in the 1999 period, resulting in a decline in gross
margins of 1.1 percent to 16.7 percent in the 2000 period from 17.8 percent in
the 1999 period. This decrease was primarily due to a change in the mix of
product, a decrease in the number of wholly-owned units closed to 396 units in
the 2000 period from 441 units in the 1999 period, offset by an increase in the
average sales prices of wholly-owned units to $223,800 in the 2000 period from
$199,000 in the 1999 period. The Company's revenues and total operating income
are affected by the proportion of units sold by the Company and those sold by
unconsolidated joint ventures. While the average sales price of homes sold by
joint ventures has been higher than the average sales price of wholly-owned
units, the Company generally receives, after priority returns and capital
distributions, approximately 50% of the profits and losses and cash flows from
joint ventures. Sales and marketing expenses decreased by $0.1 million to $4.1
million in the 2000 period from $4.2 million in the 1999 period. General and
administrative expenses increased by $1.3 million to $7.4 million in the 2000
period from $6.1 million in the 1999 period, primarily as a result of increases
in salaries and benefits primarily as a result of an increase in the total
number of employees related to the Company's increased operations.
Total interest incurred increased $1.1 million (18.6%) from $5.9 million in
the 1999 period to $7.0 million in the 2000 period primarily as a result of an
increase in the average amount of outstanding debt and by increases in interest
rates. Net interest expense increased to $1.2 million in the 2000 period from
$0.9 million in the 1999 period as a result of an increase in total interest
incurred.
As a result of the acquisition and merger described in Notes 2 and 3 of
Notes to Consolidated Financial Statements, the Company incurred financial
advisory expenses of $0.9 million for the three months ended September 30, 1999,
with no corresponding amounts for the three months ended September 30, 2000.
Other income (expense), net increased to $1.1 million in the 2000 period
from $0.8 million in the 1999 period primarily as a result of increased income
from the Company's mortgage company operations and increased interest income.
For the three months ended September 30, 2000 and 1999, income tax benefits
of $1,438,000 and $1,797,000, respectively, related to temporary differences
resulting from the quasi-reorganization were excluded from the results of
operations and not reflected as a reduction to the Company's provision for
income taxes but credited directly to paid-in capital.
The $1,438,000 included in the Company's provision for income taxes for the
2000 period represents income taxes which the Company will not be required to
pay. As described in Note 1 of Notes to Consolidated Financial Statements, the
pre-quasi-reorganization income tax benefits which would otherwise reduce the
provision for income taxes are credited directly to paid-in capital.
Stockholders' equity per common share increased by $0.86 per share during
the three months ended September 30, 2000 as a result of the net income for the
period and the income tax benefits credited directly to paid-in capital for the
period, compared with an increase of $1.20 for the comparable period a year ago.
28
<PAGE> 29
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2000 TO NINE MONTHS ENDED
SEPTEMBER 30, 1999
Operating revenue for the nine months ended September 30, 2000 was $254.7
million, a decrease of $14.8 million (5.5%) from operating revenue of $269.5
million for the nine months ended September 30, 1999. Revenue from sales of
homes decreased $14.3 million (5.5%) to $247.4 million in the 2000 period from
$261.7 million in the 1999 period. This decrease was due primarily to a decrease
in the number of wholly-owned units closed to 1,102 in the 2000 period from
1,280 in the 1999 period, offset by an increase in the average sales prices of
wholly-owned units to $224,500 in the 2000 period from $204,000 in the 1999
period. Management fee income increased by $3.2 million to $6.3 million in the
2000 period from $3.1 million in the 1999 period as a direct result of the
Company's strategy of financing an increased number of projects through
unconsolidated joint ventures. Equity in income of unconsolidated joint ventures
amounting to $14.3 million was recognized in the 2000 period, compared to $12.3
million in the comparable period for 1999 also as a direct result of the
Company's strategy of financing an increased number of projects through
unconsolidated joint ventures.
Total operating income decreased from $32.2 million in the 1999 period to
$29.4 million in the 2000 period. The excess of revenue from sales of homes over
the related cost of sales decreased to $44.6 million in the 2000 period from
$45.5 million in the 1999 period, resulting in an improvement in gross margins
of 0.6 percent to 18.0 percent in the 2000 period from 17.4 percent in the 1999
period. This increase was primarily due to an increase in the average sales
price of wholly-owned units to $224,900 in the 2000 period from $204,000 in the
1999 period, offset by a decrease in the number of wholly-owned units closed to
1,102 units in the 2000 period from 1,280 units in the 1999 period. The
Company's revenues and total operating income are affected by the proportion of
units sold by the Company and those sold by unconsolidated joint ventures. While
the average sales price of homes sold by joint ventures has been higher than the
average sales price of wholly-owned units, the Company generally receives, after
priority returns and capital distributions, approximately 50% of the profits and
losses and cash flows from joint ventures. Sales and marketing expenses
decreased by $1.6 million to $11.1 million in the 2000 period from $12.7 million
in the 1999 period primarily as a result of a reduction in direct selling
expenses due to a decrease in the number of wholly-owned units closed to 1,102
units in the 2000 period from 1,280 units in the 1999 period. General and
administrative expenses increased by $7.8 million to $23.8 million in the 2000
period from $16.0 million in the 1999 period, primarily as a result of 1)
increases in salaries and benefits primarily as a result of an increase in the
total number of employees related to the Company's increased operations ($4.3
million); 2) increases in office expenses related to increased employment levels
($1.6 million); and 3) increases in outside services primarily related to the
consolidation and conversion of the accounting and operational systems for all
of the projects acquired in November 1999 as described in Note 2 of Notes to
Consolidated Financial Statements ($1.5 million).
Total interest incurred increased $1.8 million (10.2%) from $17.6 million
in the 1999 period to $19.4 million in the 2000 period primarily as a result of
an increase in the average amount of outstanding debt and by increases in
interest rates. Net interest expense increased to $4.7 million in the 2000
period from $4.6 million in the 1999 period as a result of an increase in total
interest incurred.
As a result of the acquisition and merger described in Notes 2 and 3 of
Notes to Consolidated Financial Statements, the Company incurred financial
advisory expenses of $2.2 million for the nine months ended September 30, 1999,
with no corresponding amounts for the nine months ended September 30, 2000.
Other income (expense), net increased to $3.7 million in the 2000 period
from $2.4 million in the 1999 period primarily as a result of the gain of $1.7
million on the sale of an office building in the 2000 period, increased income
from the Company's mortgage company operations and increased interest income.
For the nine months ended September 30, 2000 and 1999, income tax benefits
of $5,160,000 and $4,288,000, respectively, related to temporary differences
resulting from the quasi-reorganization were excluded from the results of
operations and not reflected as a reduction to the Company's provision for
income taxes but credited directly to paid-in capital.
29
<PAGE> 30
The $5,160,000 included in the Company's provision for income taxes for the
2000 period represents income taxes which the Company will not be required to
pay. As described in Note 1 of Notes to Consolidated Financial Statements, the
pre-quasi-reorganization income tax benefits which would otherwise reduce the
provision for income taxes are credited directly to paid-in capital.
Stockholders' equity per common share increased by $2.68 per share during
the nine months ended September 30, 2000 as a result of the net income for the
period and the income tax benefits credited directly to paid-in capital for the
period, compared with an increase of $2.86 for the comparable period a year ago.
FINANCIAL CONDITION AND LIQUIDITY
The Company provides for its ongoing cash requirements principally from
internally generated funds from the sales of real estate and from outside
borrowings and, beginning in the fourth quarter of 1997, by joint venture
financing from newly formed joint ventures with venture partners that provide a
substantial portion of the capital required for certain projects. The Company
currently maintains the following major credit facilities: 12 1/2% Senior Notes
(the "Senior Notes") and several secured revolving credit facilities (the
"Revolving Credit Facilities"). The Company also finances certain projects with
construction loans secured by real estate inventories and finances certain land
acquisitions with seller-provided financing.
The ability of the Company to meet its obligations on the Senior Notes and
its other indebtedness will depend to a large degree on its future performance,
which in turn will be subject, in part, to factors beyond its control, such as
prevailing economic conditions. The Company's degree of leverage may limit its
ability to meet its obligations, withstand adverse business conditions and
capitalize on business opportunities.
The Company will in all likelihood be required to refinance the Senior
Notes and the Working Capital Facilities when they mature, and no assurances can
be given that the Company will be successful in that regard.
SENIOR NOTES
The 12 1/2% Senior Notes due July 1, 2001 (the "Senior Notes") are
obligations of William Lyon Homes (formerly The Presley Companies), a Delaware
corporation ("Delaware Lyon"), and are unconditionally guaranteed on a senior
basis by William Lyon Homes, Inc. (formerly Presley Homes), a California
corporation and a wholly-owned subsidiary of Delaware Lyon. However, William
Lyon Homes, Inc. has granted liens on substantially all of its assets as
security for its obligations under the Revolving Credit Facilities and other
loans. Because the William Lyon Homes, Inc. guarantee is not secured, holders of
the Senior Notes are effectively junior to borrowings under the Revolving Credit
Facilities with respect to such assets. Interest on the Senior Notes is payable
on January 1 and July 1 of each year.
Except as set forth in the Indenture Agreement (the "Indenture"), the
Senior Notes are redeemable at the option of Delaware Lyon, in whole or in part,
at the redemption prices set forth in the Indenture.
The Senior Notes are senior obligations of Delaware Lyon and rank pari
passu in right of payment to all existing and future unsecured indebtedness of
Delaware Lyon, and senior in right of payment to all future indebtedness of the
Company which by its terms is subordinated to the Senior Notes.
As described above in General Overview, Delaware Lyon is required to offer
to repurchase certain Senior Notes at a price equal to 100% of the principal
amount plus any accrued and unpaid interest to the date of repurchase if
Delaware Lyon's Consolidated Tangible Net Worth is less than $60.0 million on
the last day of each of any two consecutive fiscal quarters, as well as from the
proceeds of certain asset sales.
Upon certain changes of control as described in the Indenture, Delaware
Lyon must offer to repurchase Senior Notes at a price equal to 101% of the
principal amount plus accrued and unpaid interest, if any, to the date of
repurchase.
The Indenture governing the Senior Notes restricts Delaware Lyon and
certain of its subsidiaries with respect to, among other things: (i) the payment
of dividends on and redemptions of capital stock, (ii) the incurrence of
indebtedness or the issuance of preferred stock, (iii) the creation of certain
liens,
30
<PAGE> 31
(iv) consolidation or mergers with or transfers of all or substantially all of
its assets and (v) transactions with affiliates. These restrictions are subject
to a number of important qualifications and exceptions.
REVOLVING CREDIT FACILITIES
On September 27, 2000 the Company completed agreements with various lenders
to provide financing to replace the Company's prior $100.0 million Working
Capital Facility which was scheduled to mature on May 20, 2001. Under these
agreements, project level financing was obtained in facilities provided by these
lenders which, collectively, provided for the repayment on September 27, 2000 of
all amounts then outstanding under the Company's prior Working Capital Facility.
Three of the facilities described in the preceding paragraph are Revolving
Credit Facilities with an aggregate maximum loan commitment of $170.0 million,
with various maturities beginning in 2002 through September 2004. The collateral
for the loans provided by the Revolving Credit Facilities includes substantially
all real estate of the Company (excluding assets which are pledged as collateral
for construction notes payable described below and excluding assets of
partnerships and limited liability companies). The undrawn availability at
September 30, 2000 was $12.5 million and the principal outstanding under the
Revolving Credit Facilities at September 30, 2000 was $89.3 million.
Pursuant to the terms of the Revolving Credit Facilities, outstanding
advances bear interest at various rates which approximate the prime rate.
The Revolving Credit Facilities include financial covenants which may limit
the amount which may be borrowed thereunder.
CONSTRUCTION NOTES PAYABLE
At September 30, 2000, the Company had construction notes payable amounting
to $24.2 million related to various real estate projects. The notes bear
interest at rates of prime plus 0.25% to prime plus 0.50%.
SELLER FINANCING
Another source of financing available to the Company is seller-provided
financing for land acquired by the Company. At September 30, 2000, the Company
had various notes payable outstanding related to land acquisitions for which
seller financing was provided in the amount of $13.6 million.
REVOLVING MORTGAGE WAREHOUSE CREDIT FACILITY
To fund mortgage loans through its financial services subsidiary, the
Company has a $15.0 million revolving mortgage warehouse credit facility with a
bank. Mortgage loans are generally held for a short period of time and are
typically sold to investors within 7 to 15 days following funding. Borrowings
are secured by the related mortgage loans held for sale. At September 30, 2000
the outstanding balance was $5.8 million. The facility, which has a current
maturity date of May 31, 2001, also contains a financial covenant requiring that
the Company maintains cash and/or marketable securities on the books of account
of its subsidiary, Duxford Financial, Inc., a California corporation ("Duxford")
in an amount equal to no less than One Million dollars and a financial covenant
requiring the Company to maintain total assets net of total liabilities and net
of amounts receivable from the Company and/or affiliates on the books of account
of Duxford in an amount equal to no less than One Million dollars.
JOINT VENTURE FINANCING
As of September 30, 2000, the Company and certain of its subsidiaries are
general partners or members in twenty-five joint ventures involved in the
development and sale of residential projects. Such joint ventures are 50% or
less owned and, accordingly, the financial statements of such joint ventures are
not consolidated with the Company's financial statements. The Company's
investments in unconsolidated joint ventures are accounted for using the equity
method. See Note 4 of "Notes to Consolidated Financial Statements" for condensed
combined financial information for these joint ventures. Based upon current
estimates, all future
31
<PAGE> 32
development and construction costs will be funded by the Company's venture
partners or from the proceeds of construction financing obtained by the joint
ventures.
As of September 30, 2000, the Company's investment in such joint ventures
was approximately $44.8 million and the Company's venture partners' investment
in such joint ventures was approximately $156.9 million. In addition, certain
joint ventures have obtained financing from land sellers or construction lenders
which amounted to approximately $74.3 million at September 30, 2000.
ASSESSMENT DISTRICT BONDS
In some jurisdictions in which the Company develops and constructs
property, assessment district bonds are issued by municipalities to finance
major infrastructure improvements and fees. Such financing has been an important
part of financing master-planned communities due to the long-term nature of the
financing, favorable interest rates when compared to the Company's other sources
of funds and the fact that the bonds are sold, administered and collected by the
relevant government entity. As a landowner benefited by the improvements, the
Company is responsible for the assessments on its land. When the Company's homes
or other properties are sold, the assessments are either prepaid or the buyers
assume the responsibility for the related assessments.
CASH FLOWS -- COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2000 TO NINE
MONTHS ENDED SEPTEMBER 30, 1999
Net cash (used in) provided by operating activities changed from a net
amount provided of $28.0 million in the 1999 period to a net amount used of
$29.5 million in the 2000 period primarily as a result of a decrease in revenues
from home sales and an increase in real estate inventories in the 2000 period.
Net cash provided by investing activities increased to $7.5 million in the
2000 period from $0.3 million in the 1999 period primarily as a result of
increased net cash received from unconsolidated joint ventures in the 2000
period and a decrease in the net cash used related to notes receivable in the
2000 period.
Net cash provided by (used in) financing activities changed from a use of
$45.0 million in the 1999 period to a net amount provided of $35.8 million in
the 2000 period as a result of increased net borrowings on notes payable.
DESCRIPTION OF PROJECTS
The Company's homebuilding projects usually take two to five years to
develop. The following table presents project information relating to each of
the Company's homebuilding divisions.
<TABLE>
<CAPTION>
HOMES
CLOSED
FOR NINE
ESTIMATED UNITS CLOSED LOTS OWNED MONTH
YEAR OF NUMBER OF AS OF AS OF PERIOD ENDED BACKLOG AT
FIRST HOMES AT SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
PROJECT (COUNTY) PRODUCT DELIVERY COMPLETION(1) 2000 2000 2000 2000(2)(4)
------------------------ -------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
SOUTHERN CALIFORNIA
WHOLLY-OWNED:
Oak Park -- Irvine (Orange
County).................. 1998 210 210 0 30 0
------ ----- ----- ----- -----
Oak Park II -- Irvine
(Orange County).......... 2000 102 0 102 0 78
------ ----- ----- ----- -----
Lyon Harvest (Orange
County).................. 1999 23 23 0 2 0
------ ----- ----- ----- -----
Lyon Parkside (Orange
County).................. 1999 30 30 0 4 0
------ ----- ----- ----- -----
Solana at Talega (Orange
County).................. 1999 120 68 52 68 22
------ ----- ----- ----- -----
Fontana (San Bernardino
County).................. 1998 275 274 1 48 1
------ ----- ----- ----- -----
<CAPTION>
SALES PRICE
PROJECT (COUNTY) PRODUCT RANGE(3)
------------------------ --------------------
<S> <C>
SOUTHERN CALIFORNIA
WHOLLY-OWNED:
Oak Park -- Irvine (Orange
County).................. $ 144,000 - 250,000
Oak Park II -- Irvine
(Orange County).......... $ 164,000 - 251,000
Lyon Harvest (Orange
County).................. $ 270,000 - 280,000
Lyon Parkside (Orange
County).................. $ 440,000 - 480,000
Solana at Talega (Orange
County).................. $ 290,000 - 339,000
Fontana (San Bernardino
County).................. $ 152,000 - 169,000
</TABLE>
32
<PAGE> 33
<TABLE>
<CAPTION>
HOMES
CLOSED
FOR NINE
ESTIMATED UNITS CLOSED LOTS OWNED MONTH
YEAR OF NUMBER OF AS OF AS OF PERIOD ENDED BACKLOG AT
FIRST HOMES AT SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
PROJECT (COUNTY) PRODUCT DELIVERY COMPLETION(1) 2000 2000 2000 2000(2)(4)
------------------------ -------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lyon Reflections (Riverside
County).................. 1999 39 39 0 2 0
------ ----- ----- ----- -----
Lyon Vineyard (San
Bernardino County)....... 2000 100 42 58 42 27
------ ----- ----- ----- -----
Lyon Orchard (San
Bernardino County)....... 2000 81 46 35 46 21
------ ----- ----- ----- -----
Archibald Ranch -- (San
Bernardino County)....... 2000 113 0 113 0 16
------ ----- ----- ----- -----
Granada Hills (Los Angeles
County).................. 1999 37 37 0 2 0
------ ----- ----- ----- -----
Crown Ridge -- Palmdale
(Los Angeles County)..... 2000 71 13 58 13 9
------ ----- ----- ----- -----
Vista del Verde -- Yorba
Linda (Orange County).... 2001 106 0 3 0 0
------ ----- ----- ----- -----
Beachside -- Huntington
Beach (Orange County).... 2001 86 0 86 0 0
------ ----- ----- ----- -----
Providence Ranch (Riverside
County).................. 2001 97 0 97 0 0
------ ----- ----- ----- -----
Total wholly-owned..... 1,490 782 605 257 174
------ ----- ----- ----- -----
UNCONSOLIDATED JOINT
VENTURES:
Thousand Oaks (Ventura
County).................. 1998 110 110 0 33 0
------ ----- ----- ----- -----
White Cloud Estates
(Ventura County)......... 1999 78 62 16 48 16
------ ----- ----- ----- -----
Reston -- Ladera (Orange
County).................. 2000 117 0 117 0 14
------ ----- ----- ----- -----
Hampton Road -- Ladera
(Orange County).......... 2001 82 0 82 0 0
------ ----- ----- ----- -----
Avalon at Summerlane
(Orange County).......... 2000 113 0 113 0 19
------ ----- ----- ----- -----
Ladera Maplewood (Orange
County).................. 1999 103 78 25 47 25
------ ----- ----- ----- -----
Lyon Monterrey (Orange
County).................. 1999 99 37 62 30 41
------ ----- ----- ----- -----
Compass Pointe at Forster
Ranch (Orange County).... 2000 92 0 92 0 23
------ ----- ----- ----- -----
Total unconsolidated
joint ventures....... 794 287 507 158 138
------ ----- ----- ----- -----
SOUTHERN CALIFORNIA REGION
TOTAL.................... 2,284 1,069 1,112 415 312
====== ===== ===== ===== =====
NORTHERN CALIFORNIA
WHOLLY-OWNED:
Oakhurst Country Club
(Contra Costa County)
Previously Closed
Products................. 1989 1,063 1,063 0 0 0
Falcon Ridge............. 1996 145 145 0 0 0
Peacock Creek............ 1996 142 142 0 22 0
Diablo Village (Town
Center)................ 2000 33 11 22 11 22
------ ----- ----- ----- -----
1,383 1,361 22 33 22
------ ----- ----- ----- -----
<CAPTION>
SALES PRICE
PROJECT (COUNTY) PRODUCT RANGE(3)
------------------------ --------------------
<S> <C>
Lyon Reflections (Riverside
County).................. $ 150,000 - 180,000
Lyon Vineyard (San
Bernardino County)....... $ 220,000 - 250,000
Lyon Orchard (San
Bernardino County)....... $ 175,000 - 200,000
Archibald Ranch -- (San
Bernardino County)....... $ 208,000 - 243,000
Granada Hills (Los Angeles
County).................. $ 450,000 - 520,000
Crown Ridge -- Palmdale
(Los Angeles County)..... $ 160,000 - 190,000
Vista del Verde -- Yorba
Linda (Orange County)....
Beachside -- Huntington
Beach (Orange County)....
Providence Ranch (Riverside
County)..................
Total wholly-owned.....
UNCONSOLIDATED JOINT
VENTURES:
Thousand Oaks (Ventura
County).................. $ 299,000 - 323,000
White Cloud Estates
(Ventura County)......... $ 305,000 - 350,000
Reston -- Ladera (Orange
County).................. $ 317,000 - 367,000
Hampton Road -- Ladera
(Orange County).......... $ 415,000 - 455,000
Avalon at Summerlane
(Orange County).......... $ 472,000 - 503,000
Ladera Maplewood (Orange
County).................. $ 277,000 - 325,000
Lyon Monterrey (Orange
County).................. $ 363,000 - 417,000
Compass Pointe at Forster
Ranch (Orange County).... $ 470,000 - 510,000
Total unconsolidated
joint ventures.......
SOUTHERN CALIFORNIA REGION
TOTAL....................
NORTHERN CALIFORNIA
WHOLLY-OWNED:
Oakhurst Country Club
(Contra Costa County)
Previously Closed
Products.................
Falcon Ridge............. $ 366,000 - 437,000
Peacock Creek............ $ 462,000 - 592,000
Diablo Village (Town
Center)................ $ 337,000 - 420,000
</TABLE>
33
<PAGE> 34
<TABLE>
<CAPTION>
HOMES
CLOSED
FOR NINE
ESTIMATED UNITS CLOSED LOTS OWNED MONTH
YEAR OF NUMBER OF AS OF AS OF PERIOD ENDED BACKLOG AT
FIRST HOMES AT SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
PROJECT (COUNTY) PRODUCT DELIVERY COMPLETION(1) 2000 2000 2000 2000(2)(4)
------------------------ -------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Eagle Ridge (Solano
County).................. 1997 364 364 0 17 0
------ ----- ----- ----- -----
St. Helena Westminster
Estates (Napa County).... 1999 23 17 6 17 6
------ ----- ----- ----- -----
Lyon Fairways (Solano
County).................. 1999 91 91 0 58 0
------ ----- ----- ----- -----
Lyon Villas (San Joaquin
County).................. 1999 135 44 91 25 37
------ ----- ----- ----- -----
Lyon Estates (San Joaquin
County).................. 1999 120 62 58 40 21
------ ----- ----- ----- -----
Lyon Rosewood (San Joaquin
County).................. 1999 74 74 0 38 0
------ ----- ----- ----- -----
Lyon Edgewood (San Joaquin
County).................. 1999 87 73 14 39 3
------ ----- ----- ----- -----
Lyon Edgewood 2 (San
Joaquin County).......... 2000 65 0 0 0 41
------ ----- ----- ----- -----
Lyon Woodfield (San Joaquin
County).................. 2001 81 0 81 0 0
------ ----- ----- ----- -----
Total wholly-owned..... 2,423 2,086 272 267 130
------ ----- ----- ----- -----
UNCONSOLIDATED JOINT
VENTURES:
Cerro Plata (Santa Clara
County).................. 2002 538 0 538 0 0
------ ----- ----- ----- -----
The Preserve (Alameda
County).................. 1997 87 79 8 19 8
------ ----- ----- ----- -----
Lyon Groves (Contra (Costa
County).................. 1999 103 57 46 39 33
------ ----- ----- ----- -----
Lyon Ridge (Contra (Costa
County).................. 2000 127 19 108 19 43
------ ----- ----- ----- -----
Manor at Thomas Ranch
(Contra Costa County).... 1999 63 32 31 32 29
------ ----- ----- ----- -----
Plantation at Thomas Ranch
(Contra Costa County).... 1999 77 25 52 25 48
------ ----- ----- ----- -----
Henry Ranch (Contra Costa
County)
Lyon Tierra.............. 2001 46 0 46 0 0
Lyon Dorado.............. 2001 54 0 54 0 0
------ ----- ----- ----- -----
100 0 100 0 0
------ ----- ----- ----- -----
Woodlake Estates (Solano
County)
Brook.................... 2001 121 0 121 0 0
Falls.................... 2001 102 0 102 0 0
------ ----- ----- ----- -----
223 0 223 0 0
------ ----- ----- ----- -----
Total unconsolidated
joint ventures....... 1,318 212 1,106 134 161
------ ----- ----- ----- -----
NORTHERN CALIFORNIA REGION
TOTAL.................... 3,741 2,298 1,378 401 291
====== ===== ===== ===== =====
<CAPTION>
SALES PRICE
PROJECT (COUNTY) PRODUCT RANGE(3)
------------------------ --------------------
<S> <C>
Eagle Ridge (Solano
County).................. $ 231,000 - 311,000
St. Helena Westminster
Estates (Napa County).... $ 495,000 - 555,000
Lyon Fairways (Solano
County).................. $ 272,000 - 344,000
Lyon Villas (San Joaquin
County).................. $ 203,000 - 279,000
Lyon Estates (San Joaquin
County).................. $ 241,000 - 327,000
Lyon Rosewood (San Joaquin
County).................. $ 127,000 - 188,000
Lyon Edgewood (San Joaquin
County).................. $ 203,000 - 244,000
Lyon Edgewood 2 (San
Joaquin County).......... $ 223,000 - 244,000
Lyon Woodfield (San Joaquin
County)..................
Total wholly-owned.....
UNCONSOLIDATED JOINT
VENTURES:
Cerro Plata (Santa Clara
County)..................
The Preserve (Alameda
County).................. $897,000 - 1,074,000
Lyon Groves (Contra (Costa
County).................. $ 269,000 - 343,000
Lyon Ridge (Contra (Costa
County).................. $ 272,000 - 353,000
Manor at Thomas Ranch
(Contra Costa County).... $ 509,000 - 637,000
Plantation at Thomas Ranch
(Contra Costa County).... $ 550,000 - 799,000
Henry Ranch (Contra Costa
County)
Lyon Tierra..............
Lyon Dorado..............
Woodlake Estates (Solano
County)
Brook....................
Falls....................
Total unconsolidated
joint ventures.......
NORTHERN CALIFORNIA REGION
TOTAL....................
</TABLE>
34
<PAGE> 35
<TABLE>
<CAPTION>
HOMES
CLOSED
FOR NINE
ESTIMATED UNITS CLOSED LOTS OWNED MONTH
YEAR OF NUMBER OF AS OF AS OF PERIOD ENDED BACKLOG AT
FIRST HOMES AT SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
PROJECT (COUNTY) PRODUCT DELIVERY COMPLETION(1) 2000 2000 2000 2000(2)(4)
------------------------ -------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
SAN DIEGO
WHOLLY-OWNED:
Sun Lakes Country Club
(Riverside County)
Previously Closed
Products................. 1987 1,995 1,995 0 0 0
Executive Series......... 1995 87 87 0 0 0
Promenade................ 1996 108 108 0 8 0
Atrium................... 1996 102 102 0 6 0
Terrace.................. 1996 110 110 0 11 0
------ ----- ----- ----- -----
2,402 2,402 0 25 0
------ ----- ----- ----- -----
Horsethief Canyon Ranch
(Riverside County)
Previously Closed
Products................. 1989 847 847 0 0 0
Series "300"............. 1998 116 116 0 1 0
Series "400"............. 1995 554 316 238 63 9
Series "500"............. 1995 445 309 136 55 11
------ ----- ----- ----- -----
1,962 1,588 374 119 20
------ ----- ----- ----- -----
Sycamore Ranch (Riverside
County).................. 1997 195 77 118 14 25
------ ----- ----- ----- -----
Vail Ranch (San Diego
County).................. 1999 152 43 109 43 22
------ ----- ----- ----- -----
Rancho Dorado (San Diego
County)
La Fuente................ 2000 56 0 56 0 22
Loma Real................ 2000 89 0 29 0 7
Los Reyes................ 2001 66 0 10 0 0
Monte Verde.............. 2000 65 0 65 0 10
------ ----- ----- ----- -----
276 0 160 0 39
------ ----- ----- ----- -----
Total wholly-owned..... 4,987 4,110 761 201 106
------ ----- ----- ----- -----
UNCONSOLIDATED JOINT
VENTURES:
Torrey Unit 4 -- The Shores
(San Diego County)....... 1998 59 59 0 10 0
------ ----- ----- ----- -----
Torrey Unit 6 (San Diego
County).................. 1999 52 52 0 36 0
------ ----- ----- ----- -----
Torrey Unit 14 -- The Cove
(San Diego County)....... 1999 108 108 0 57 0
------ ----- ----- ----- -----
Knollwood at Castle Creek
(San Diego County)....... 1999 77 77 0 30 0
------ ----- ----- ----- -----
Stonecrest (San Diego
County).................. 1999 110 110 0 16 0
------ ----- ----- ----- -----
Mercy Road -- Allegra (San
Diego County)............ 1999 113 113 0 19 0
------ ----- ----- ----- -----
Otay Ranch -- Saratogo
Trails (San Diego
County).................. 1999 74 46 28 38 15
------ ----- ----- ----- -----
Otay Ranch -- Mendocino
(San Diego County)....... 1999 139 58 81 49 39
------ ----- ----- ----- -----
Otay Ranch -- (R-29) (San
Diego County)............ 2001 83 0 83 0 0
------ ----- ----- ----- -----
<CAPTION>
SALES PRICE
PROJECT (COUNTY) PRODUCT RANGE(3)
------------------------ --------------------
<S> <C>
SAN DIEGO
WHOLLY-OWNED:
Sun Lakes Country Club
(Riverside County)
Previously Closed
Products.................
Executive Series......... $ 109,000 - 136,000
Promenade................ $ 120,000 - 131,000
Atrium................... $ 136,000 - 153,000
Terrace.................. $ 171,000 - 192,000
Horsethief Canyon Ranch
(Riverside County)
Previously Closed
Products.................
Series "300"............. $ 129,000 - 150,000
Series "400"............. $ 169,000 - 209,000
Series "500"............. $ 200,000 - 235,000
Sycamore Ranch (Riverside
County).................. $ 319,000 - 393,000
Vail Ranch (San Diego
County).................. $ 162,000 - 201,000
Rancho Dorado (San Diego
County)
La Fuente................ $ 291,000 - 311,000
Loma Real................ $ 374,000 - 423,000
Los Reyes................
Monte Verde.............. $ 343,000 - 386,000
Total wholly-owned.....
UNCONSOLIDATED JOINT
VENTURES:
Torrey Unit 4 -- The Shores
(San Diego County)....... $ 408,000 - 446,000
Torrey Unit 6 (San Diego
County).................. $ 409,000 - 442,000
Torrey Unit 14 -- The Cove
(San Diego County)....... $ 394,000 - 422,000
Knollwood at Castle Creek
(San Diego County)....... $ 203,000 - 221,000
Stonecrest (San Diego
County).................. $ 233,000 - 282,000
Mercy Road -- Allegra (San
Diego County)............ $ 238,000 - 293,000
Otay Ranch -- Saratogo
Trails (San Diego
County).................. $ 255,000 - 276,000
Otay Ranch -- Mendocino
(San Diego County)....... $ 209,000 - 234,000
Otay Ranch -- (R-29) (San
Diego County)............
</TABLE>
35
<PAGE> 36
<TABLE>
<CAPTION>
HOMES
CLOSED
FOR NINE
ESTIMATED UNITS CLOSED LOTS OWNED MONTH
YEAR OF NUMBER OF AS OF AS OF PERIOD ENDED BACKLOG AT
FIRST HOMES AT SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
PROJECT (COUNTY) PRODUCT DELIVERY COMPLETION(1) 2000 2000 2000 2000(2)(4)
------------------------ -------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
East Grove -- San Diego
County).................. 2000 291 0 291 0 0
------ ----- ----- ----- -----
Total unconsolidated
joint ventures....... 1,106 623 483 255 54
------ ----- ----- ----- -----
SAN DIEGO REGION TOTAL..... 6,093 4,733 1,244 456 160
====== ===== ===== ===== =====
ARIZONA
WHOLLY-OWNED:
Estrella (Maricopa
County).................. 1995 113 113 0 2 0
------ ----- ----- ----- -----
Legend Trail (Maricopa
County).................. 1996 102 102 0 1 0
------ ----- ----- ----- -----
Crystal Gardens (Maricopa
County).................. 1997 157 124 33 31 27
------ ----- ----- ----- -----
Sage Creek -- Encanto
(Maricopa County)........ 2000 176 31 46 31 34
------ ----- ----- ----- -----
Sage Creek -- Arcadia
(Maricopa County)........ 2000 167 17 36 17 21
------ ----- ----- ----- -----
Sage Creek -- Solano
(Maricopa County)........ 2000 82 3 34 3 23
------ ----- ----- ----- -----
Mesquite Grove -- Small
(Maricopa County)........ 2001 110 0 110 0 0
------ ----- ----- ----- -----
Mesquite Grove -- Large
(Maricopa County)........ 2001 95 0 95 0 0
------ ----- ----- ----- -----
Rio Del Verde (Maricopa
County).................. 1999 84 17 43 17 32
------ ----- ----- ----- -----
Power Ranch (Maricopa
County).................. 2001 103 0 103 0 0
------ ----- ----- ----- -----
Tramonto (Maricopa
County).................. 2001 76 0 76 0 0
------ ----- ----- ----- -----
Total wholly-owned..... 1,265 407 576 102 137
------ ----- ----- ----- -----
UNCONSOLIDATED JOINT
VENTURES:
Mountaingate (Maricopa
County).................. 2002 334 0 334 0 0
------ ----- ----- ----- -----
Total unconsolidated
joint ventures....... 334 0 334 0 0
------ ----- ----- ----- -----
ARIZONA REGION TOTAL....... 1,599 407 910 102 137
====== ===== ===== ===== =====
NEW MEXICO
WHOLLY-OWNED:
Summerfield (Bernalillo
County).................. 1995 195 195 0 14 0
------ ----- ----- ----- -----
Rancho del Sol (Santa Fe
County).................. 1996 195 195 0 22 0
------ ----- ----- ----- -----
Ventana (Bernalillo
County).................. 1997 81 75 6 0 0
------ ----- ----- ----- -----
NEW MEXICO REGION TOTAL.... 471 465 6 36 0
====== ===== ===== ===== =====
<CAPTION>
SALES PRICE
PROJECT (COUNTY) PRODUCT RANGE(3)
------------------------ --------------------
<S> <C>
East Grove -- San Diego
County)..................
Total unconsolidated
joint ventures.......
SAN DIEGO REGION TOTAL.....
ARIZONA
WHOLLY-OWNED:
Estrella (Maricopa
County).................. $ 121,000 - 151,000
Legend Trail (Maricopa
County).................. $ 150,000 - 186,000
Crystal Gardens (Maricopa
County).................. $ 97,000 - 124,000
Sage Creek -- Encanto
(Maricopa County)........ $ 100,000 - 116,000
Sage Creek -- Arcadia
(Maricopa County)........ $ 126,000 - 149,000
Sage Creek -- Solano
(Maricopa County)........ $ 157,000 - 181,000
Mesquite Grove -- Small
(Maricopa County)........
Mesquite Grove -- Large
(Maricopa County)........
Rio Del Verde (Maricopa
County).................. $ 160,000 - 199,000
Power Ranch (Maricopa
County)..................
Tramonto (Maricopa
County)..................
Total wholly-owned.....
UNCONSOLIDATED JOINT
VENTURES:
Mountaingate (Maricopa
County)..................
Total unconsolidated
joint ventures.......
ARIZONA REGION TOTAL.......
NEW MEXICO
WHOLLY-OWNED:
Summerfield (Bernalillo
County).................. $ 90,000 - 140,000
Rancho del Sol (Santa Fe
County).................. $ 91,000 - 165,000
Ventana (Bernalillo
County).................. $ 132,000 - 175,000
NEW MEXICO REGION TOTAL....
</TABLE>
36
<PAGE> 37
<TABLE>
<CAPTION>
HOMES
CLOSED
FOR NINE
ESTIMATED UNITS CLOSED LOTS OWNED MONTH
YEAR OF NUMBER OF AS OF AS OF PERIOD ENDED BACKLOG AT
FIRST HOMES AT SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
PROJECT (COUNTY) PRODUCT DELIVERY COMPLETION(1) 2000 2000 2000 2000(2)(4)
------------------------ -------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
NEVADA
WHOLLY-OWNED:
Monte Nero (Clark
County).................. 1997 170 170 0 46 0
------ ----- ----- ----- -----
Royal Woods (Clark
County).................. 1998 142 142 0 11 0
------ ----- ----- ----- -----
Deer Springs Ranch (Clark
County).................. 1998 117 117 0 18 0
------ ----- ----- ----- -----
Cambridge Court (Clark
County).................. 1998 177 177 0 47 0
------ ----- ----- ----- -----
Belvedere (Las Vegas)
(Clark County)........... 1999 78 78 0 65 0
------ ----- ----- ----- -----
La Terraza (Henderson)
(Clark County)........... 1999 23 23 0 23 0
------ ----- ----- ----- -----
Bella Veranda (Clark
County).................. 2000 79 20 59 20 24
------ ----- ----- ----- -----
Montecito Tesoro (Clark
County).................. 2000 121 0 38 0 27
------ ----- ----- ----- -----
Montecito Classico (Clark
County).................. 2000 100 0 28 0 7
------ ----- ----- ----- -----
Kingsway Ridge I (Clark
County).................. 2000 84 9 75 9 29
------ ----- ----- ----- -----
Kingsway Ridge II (Clark
County).................. 2000 73 0 73 0 16
------ ----- ----- ----- -----
Glenleigh Gardens
(Summerlin A) (Clark
County).................. 2000 96 0 96 0 4
------ ----- ----- ----- -----
Springfield (Summerlin N)
(Clark County)........... 2001 85 0 85 0 0
------ ----- ----- ----- -----
Topaz Ridge (Summerlin B)
(Clark County)........... 2001 89 0 89 0 0
------ ----- ----- ----- -----
Stallion Mountain (Clark
County).................. 2001 116 0 116 0 0
------ ----- ----- ----- -----
NEVADA REGION TOTAL........ 1,550 736 659 239 107
====== ===== ===== ===== =====
GRAND TOTALS:
Wholly-owned............. 12,186 8,586 2,879 1,102 654
Unconsolidated joint
ventures............... 3,552 1,122 2,430 547 353
------ ----- ----- ----- -----
15,738 9,708 5,309 1,649 1,007
====== ===== ===== ===== =====
<CAPTION>
SALES PRICE
PROJECT (COUNTY) PRODUCT RANGE(3)
------------------------ --------------------
<S> <C>
NEVADA
WHOLLY-OWNED:
Monte Nero (Clark
County).................. $ 135,000 - 170,000
Royal Woods (Clark
County).................. $ 153,000 - 186,000
Deer Springs Ranch (Clark
County).................. $ 119,000 - 147,000
Cambridge Court (Clark
County).................. $ 144,000 - 162,000
Belvedere (Las Vegas)
(Clark County)........... $ 173,000 - 203,000
La Terraza (Henderson)
(Clark County)........... $ 147,000 - 158,000
Bella Veranda (Clark
County).................. $ 244,000 - 275,000
Montecito Tesoro (Clark
County).................. $ 145,000 - 167,000
Montecito Classico (Clark
County).................. $ 175,000 - 212,000
Kingsway Ridge I (Clark
County).................. $ 160,000 - 175,000
Kingsway Ridge II (Clark
County).................. $ 178,000 - 208,000
Glenleigh Gardens
(Summerlin A) (Clark
County).................. $ 225,000 - 260,000
Springfield (Summerlin N)
(Clark County)...........
Topaz Ridge (Summerlin B)
(Clark County)...........
Stallion Mountain (Clark
County)..................
NEVADA REGION TOTAL........
GRAND TOTALS:
Wholly-owned.............
Unconsolidated joint
ventures...............
</TABLE>
---------------
(1) The estimated number of homes to be built at completion is subject to
change, and there can be no assurance that the Company will build these
homes.
(2) Backlog consists of homes sold under sales contracts that have not yet
closed, and there can be no assurance that closings of sold homes will
occur.
(3) Sales price range reflects base price only and excludes any lot premium,
buyer incentive and buyer selected options, which vary from project to
project.
(4) Of the total homes subject to pending sales contracts as of September 30,
2000, 932 represent homes completed or under construction and 75 represent
homes not yet under construction.
(5) In December 1999 the Company sold substantially all of the remaining lots in
its Sun Lakes Country Club project in a bulk sale.
37
<PAGE> 38
IMPACT OF YEAR 2000
The term "year 2000 issue" is a general term used to describe the
complications that may be caused by existing computer hardware and software that
were designed without consideration for the change in the century. If not
corrected, such programs may have caused computer systems and equipment to fail
or to miscalculate data. Due to the year 2000 issue, the Company undertook
initiatives to modify or replace portions of its existing computer operating
systems so that they would function properly with respect to dates in the year
2000 and thereafter.
The Company's year 2000 compliance effort was focused on its core business
computer applications (i.e., those systems that the Company is dependent upon
for the conduct of day-to-day business operations). The Company determined that
the highest priority project based on greatest business risk and greatest
technical effort should be the conversion and upgrade of the Company's JD
Edwards accounting systems (the "JD Edwards Programs"). The Company acquired and
installed a Year 2000 compliant version of the software in October 1998 and
completed extensive testing of such software and developed programs to convert
its current applications to the new version of the software. The Company
completed this conversion effective on June 30, 1999. The conversion had minimal
effects on the Company's systems and the cost incurred in that connection was
not material.
The Company undertook an assessment of other internal systems used by the
Company in various of its operations. Internal systems used by the Company in
its mortgage company operations, payroll processing and banking interfaces were
all converted during 1998 to systems which are Year 2000 compliant. The
implementation had minimal effect on its systems and the costs incurred in that
connection were not material. Internal systems used by the Company in its design
center operations were converted to a system which is Year 2000 compliant
effective on August 31, 1999 and the cost incurred in that connection was not
material.
The Company has incurred approximately $300,000 in connection with its Year
2000 initiatives. To date the Year 2000 issue has not had a material adverse
effect on the Company's liquidity, financial condition and results of
operations. However, the failure to resolve a material Year 2000 issue by the
Company, third party suppliers, or the government could have a material adverse
effect on the Company's results of operations, liquidity or financial condition.
INFLATION
Although inflation rates have been low in recent years, the Company's
revenues and profitability may be affected by increased inflation rates and
other general economic conditions. In periods of high inflation, demand for the
Company's homes may be reduced by increases in mortgage interest rates. Further,
the Company's profits will be affected by its ability to recover through higher
sales prices increases in the costs of land, construction, labor and
administrative expenses. The Company's ability to raise prices at such times
will depend upon demand and other competitive factors.
FORWARD LOOKING STATEMENTS
Investors are cautioned that certain statements contained in this Quarterly
Report on Form 10-Q, as well as some statements by the Company in periodic press
releases and some oral statements by Company officials to securities analysts
and stockholders during presentations about the Company are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Act"). Statements which are predictive in nature, which depend
upon or refer to future events or conditions, or which include words such as
"expects", "anticipates", "intends", "plans", "believes", "estimates", "hopes",
and similar expressions constitute forward-looking statements. In addition, any
statements concerning future financial performance (including future revenues,
earnings or growth rates), ongoing business strategies or prospects, and
possible future Company actions, which may be provided by management are also
forward-looking statements as defined in the Act. Forward-looking statements are
based upon expectations and projections about future events and are subject to
assumptions, risks and uncertainties about, among other things, the Company,
economic and market factors and the homebuilding industry.
38
<PAGE> 39
Actual events and results may differ materially from those expressed or
forecasted in the forward-looking statements due to a number of factors. The
principal factors that could cause the Company's actual performance and future
events and actions to differ materially from such forward-looking statements
include, but are not limited to, changes in general economic conditions either
nationally or in regions in which the Company operates, whether an ownership
change occurs which results in the limitation of the Company's ability to
utilize the tax benefits associated with its net operating loss carryforward,
changes in home mortgage interest rates, changes in prices of homebuilding
materials, labor shortages, adverse weather conditions, the occurrence of events
such as landslides, soil subsidence and earthquakes that are uninsurable, not
economically insurable or not subject to effective indemnification agreements,
changes in governmental laws and regulations, whether the Company is able to
refinance the outstanding balances of Senior Notes at their maturity, the timing
of receipt of regulatory approvals and the opening of projects and the
availability and cost of land for future growth.
39
<PAGE> 40
WILLIAM LYON HOMES
PART II. OTHER INFORMATION
ITEMS 1, 2, 3, 4, AND 5.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS.
<TABLE>
<S> <C>
10.1 Loan Agreement dated as of September 25, 2000 between
William Lyon Homes, Inc., a California corporation, the
"Borrower," and Residential Funding Corporation, a Delaware
corporation, "Lender."
10.2 Master Loan Agreement dated as of August 31, 2000 by and
between William Lyon Homes, Inc., a California corporation
("Borrower") and Guaranty Federal Bank, F.S.B., a federal
savings bank organized and existing under the laws of the
United States ("Lender").
10.3 Revolving line of Credit Loan Agreement (Borrowing Base
Loan) by and between California Bank & Trust, a California
banking corporation, and William Lyon Homes, Inc., a
California corporation, dated as of September 21, 2000.
10.4 Option Agreement and Escrow Instructions between William
Lyon Homes, Inc., a California corporation and Lathrop
Investment, L.P., a California limited partnership dated as
of October 24, 2000.
27 Financial Data Schedule
</TABLE>
(b) REPORTS ON FORM 8-K.
No reports were filed on Form 8-K during the reporting period.
40
<PAGE> 41
WILLIAM LYON HOMES
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 8, 2000 By: /s/ MICHAEL D. GRUBBS
------------------------------------
MICHAEL D. GRUBBS
Senior Vice President,
Chief Financial Officer and
Treasurer
(Principal Financial Officer)
Date: November 8, 2000 By: /s/ W. DOUGLASS HARRIS
------------------------------------
W. DOUGLASS HARRIS
Vice President, Corporate Controller
(Principal Accounting Officer)
41
<PAGE> 42
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.1 Loan Agreement dated as of September 25, 2000 between
William Lyon Homes, Inc., a California corporation, the
"Borrower," and Residential Funding Corporation, a Delaware
corporation, "Lender."
10.2 Master Loan Agreement dated as of August 31, 2000 by and
between William Lyon Homes, Inc., a California corporation
("Borrower") and Guaranty Federal Bank, F.S.B., a federal
savings bank organized and existing under the laws of the
United States ("Lender").
10.3 Revolving line of Credit Loan Agreement (Borrowing Base
Loan) by and between California Bank & Trust, a California
banking corporation, and William Lyon Homes, Inc., a
California corporation, dated as of September 21, 2000.
10.4 Option Agreement and Escrow Instructions between William
Lyon Homes, Inc., a California corporation and Lathrop
Investment, L.P., a California limited partnership dated as
of October 24, 2000.
27 Financial Data Schedule
</TABLE>
