William Lyon Homes Reports First Quarter Results; Net Income up 28%.NEWPORT BEACH Newport Beach, residential and resort city (1990 pop. 66,643), Orange co., S Calif., on Newport Bay and the Pacific Ocean; inc. 1906. It is a popular seaside resort and yachting center. Manufactures include electrical and medical equipment, computers, boats, and adhesives. , Calif. -- William William, crown prince of Germany William or Frederick William, 1882–1951, crown prince of Germany, son of William II. In World War I he commanded (1914) an army on the Western Front and was nominal commander in the German attack Lyon Lyon English Lyons City (pop., 1999: city, 445,452; metro. area, 1,348,932), east-central France. Located at the confluence of the Rhône and Saône rivers, it was founded as the Roman military colony Lugdunum in 43 BC (see Homes (NYSE NYSE See: New York Stock Exchange :WLS WLS Weblogic Server (BEA Systems) WLS Weight Loss Surgery WLS Weighted Least Squares WLS Wisconsin Lutheran Seminary (Mequon, Wisconsin) WLS Windows Live Search WLS Wisconsin Longitudinal Study ):
Financial Highlights
2006 First Quarter
-- Net income of $26.2 million, up 28%
-- Earnings per diluted share of $3.02, up 28%
-- Consolidated operating revenue of $307.4 million, up 25%
-- Homebuilding gross margins of 25.4%, down 310 basis points
-- Quarter-end backlog of 1,357 homes, valued at $721.2 million
-- Net new home orders of 647, down 26%
William Lyon Homes (NYSE:WLS) today reported that net income for the first quarter ended March 31, 2006 increased 28% to $26,214,000, or $3.02 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, as compared to net income of $20,493,000, or $2.36 per diluted share, for the comparable period a year ago. Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: operating revenue operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. increased 25% to $307,381,000 for the quarter ended March 31, 2006, as compared to $246,682,000 for the comparable period a year ago. The Company's consolidated results including joint ventures were as follows: The number of homes closed in the first quarter of 2006 was 581 homes, up 27% from 459 homes in the first quarter of 2005. At March 31, 2006, the backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. of homes sold but not closed totaled 1,357 homes, down 14% from 1,580 homes at March 31, 2005, and up 5% from 1,291 homes at December December: see month. 31, 2005. The dollar amount of backlog of homes sold but not closed was $721,183,000, down 17% from $871,192,000 a year ago, and up 4% from $691,627,000 at December 31, 2005. The Company's cancellation cancellation (See: cancel) CANCELLATION. Its general acceptation, is the act of crossing a writing; it is used sometimes to signify the manual operation of tearing or destroying the instrument itself. Hyde v. Hyde, 1 Eq. Cas. Abr. 409; Rob. rate for the three months ended March 31, 2006 was 28%, compared to 12% for the three months ended March 31, 2005. During the last half of the fourth quarter of 2005, the Company began to experience some slowing in new orders in many of its markets, increases in cancellation rates and increasing pricing pressures from several of its competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. who initiated aggressive incentive and discounting programs. This softening softening /sof·ten·ing/ (sof´en-ing) malacia. softening a change of consistency, with loss of firmness or hardness. in the Company's markets is continuing into 2006. Net new home orders for the quarter ended March 31, 2006 were 647 homes, down 26% from 873 homes for the quarter ended March 31, 2005. The average number of sales locations during the quarter ended March 31, 2006 was 48, up 26% from 38 in the comparable period a year ago, as a result of the Company's focus begun in 2005 to increase the number of sales locations in each of its markets. The Company's number of new home orders per average sales location decreased to 13.5 for the quarter ended March 31, 2006 as compared to 23.0 for the quarter ended March 31, 2005. During the first quarter of 2006, the average sales price of homes (including joint ventures) was $529,100, down slightly from $533,000 for the comparable period a year ago. The lower average sales price reflects a change in product mix. The consolidated homebuilding gross margin percentage decreased to 25.4% for the quarter ended March 31, 2006 from 28.5% for the quarter ended March 31, 2005. The lower gross margin percentages primarily reflect the close out of projects with higher average gross margin percentages, and a shift in product mix and increases in land costs which resulted in higher cost of sales when homes closed. Selected financial and operating information for the Company, including joint ventures, is set forth in greater detail in the schedule attached to this press release. William Lyon Homes is one of the oldest and largest homebuilders in the Southwest Southwest or south west is the ordinal direction halfway between south and west, the opposite of northeast. Southwest or south west may also refer to:
Newport Beach, incorporated in 1906, is a city in Orange County, California, 10 miles south of downtown Santa Ana. . Certain statements contained in this release that are not historical information contain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . The forward-looking statements involve risks and uncertainties and actual results may differ materially from those projected or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. . Further, certain forward-looking statements are based on assumptions regarding future events which may not prove to be accurate. Factors that may impact such forward-looking statements include, among others, changes in general economic conditions and in the markets in which the Company competes, the outbreak outbreak see epidemic. , continuation continuation - continuation passing style or escalation es·ca·late v. es·ca·lat·ed, es·ca·lat·ing, es·ca·lates v.tr. To increase, enlarge, or intensify: escalated the hostilities in the Persian Gulf. v.intr. of war or other hostilities hos·til·i·ty n. pl. hos·til·i·ties 1. The state of being hostile; antagonism or enmity. See Synonyms at enmity. 2. a. A hostile act. b. hostilities Acts of war; overt warfare. , including terrorism terrorism, the threat or use of violence, often against the civilian population, to achieve political or social ends, to intimidate opponents, or to publicize grievances. , involving the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , changes in mortgage and other interest rates, changes in prices of homebuilding materials, weather, the occurrence of events such as landslides, soil subsidence subsidence, lowering of a portion of the earth's crust. The subsidence of land areas over time has resulted in submergence by shallow seas (see oceans). Land subsidence can occur naturally or through human activity. and earthquakes Earthquakes See also geology. bathyseism an earthquake occurring at very deep levels of the earth. bradyseism the slow upward and downward motion of the earth’s crust. — bradyseismic, adj. that are uninsurable uninsurable Health insurance A high-risk person without health care coverage through private insurance who falls outside the parameters of risks of standard health underwriting practices. See Underwriting. , not economically ec·o·nom·i·cal adj. 1. Prudent and thrifty in management; not wasteful or extravagant. See Synonyms at sparing. 2. Intended to save money, as by efficient operation or elimination of unnecessary features; economic: insurable in·sure v. in·sured, in·sur·ing, in·sures v.tr. 1. a. To provide or arrange insurance for: a company that insures homeowners and businesses. b. or not subject to effective indemnification Indemnification Used in insurance policy agreements as to compensation for damage or loss. In the context of corporate governance, Director Indemnification uses the bylaws and/or charter to indemnify officers and directors from certain legal expenses and judgements resulting from agreements, the availability of labor and homebuilding materials, changes in governmental laws and regulations, the timing of receipt of regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. approvals and the opening of projects, and the availability and cost of land for future development, as well as the other factors discussed in the Company's reports filed with the Securities and Exchange Commission.
WILLIAM LYON HOMES
SELECTED FINANCIAL AND OPERATING INFORMATION
(unaudited)
Three Months Ended March 31,
2006
Wholly- Joint Consolidated
owned Ventures Total
Selected Financial Information
(dollars in thousands)
Homes closed 516 65 581
Home sales revenue $271,220 $36,161 $307,381
Cost of sales (206,129) (23,314) (229,443)
Gross margin $65,091 $12,847 $77,938
Gross margin percentage 24.0% 35.5% 25.4%
Number of homes closed
California 263 65 328
Arizona 99 - 99
Nevada 154 - 154
Total 516 65 581
Average sales price
California $640,800 $556,300 $624,100
Arizona 417,900 - 417,900
Nevada 398,100 - 398,100
Total $525,600 $556,300 $529,100
Number of net new home orders
California 296 96 392
Arizona 116 - 116
Nevada 139 - 139
Total 551 96 647
Average number of sales locations
during period
California 24 7 31
Arizona 6 - 6
Nevada 11 - 11
Total 41 7 48
Three Months Ended March 31,
2005
Wholly- Joint Consolidated
owned Ventures Total
Selected Financial Information
(dollars in thousands)
Homes closed 364 95 459
Home sales revenue $187,433 $57,223 $244,656
Cost of sales (135,514) (39,468) (174,982)
Gross margin $51,919 $17,755 $69,674
Gross margin percentage 27.7% 31.0% 28.5%
Number of homes closed
California 117 95 212
Arizona 126 - 126
Nevada 121 - 121
Total 364 95 459
Average sales price
California $867,100 $602,400 $748,500
Arizona 287,300 - 287,300
Nevada 411,400 - 411,400
Total $514,900 $602,400 $533,000
Number of net new home orders
California 376 205 581
Arizona 159 - 159
Nevada 133 - 133
Total 668 205 873
Average number of sales locations
during period
California 15 9 24
Arizona 6 - 6
Nevada 8 - 8
Total 29 9 38
WILLIAM LYON HOMES
SELECTED FINANCIAL AND OPERATING INFORMATION (Continued)
(unaudited)
As of March 31,
2006
Wholly- Joint Consolidated
owned Ventures Total
Backlog of homes sold but not closed
at end of period
California 641 154 795
Arizona 413 - 413
Nevada 149 - 149
Total 1,203 154 1,357
Dollar amount of homes sold but not
closed at end of period (in
thousands)
California $459,291 $77,222 $536,513
Arizona 133,658 - 133,658
Nevada 51,012 - 51,012
Total $643,961 $77,222 $721,183
Lots controlled at end of period
Owned lots
California 4,237 1,225 5,462
Arizona 2,721 1,738 4,459
Nevada 1,460 - 1,460
Total 8,418 2,963 11,381
Optioned lots (1)
California 4,101
Arizona 6,012
Nevada 2,137
Total 12,250
Total lots controlled
California 9,563
Arizona 10,471
Nevada 3,597
Total 23,631
As of March 31,
2005
Wholly- Joint Consolidated
owned Ventures Total
Backlog of homes sold but not closed
at end of period
California 616 355 971
Arizona 515 - 515
Nevada 94 - 94
Total 1,225 355 1,580
Dollar amount of homes sold but not
closed at end of period (in
thousands)
California $453,105 $224,482 $677,587
Arizona 157,306 - 157,306
Nevada 36,299 - 36,299
Total $646,710 $224,482 $871,192
Lots controlled at end of period
Owned lots
California 3,716 1,350 5,066
Arizona 3,766 - 3,766
Nevada 1,072 - 1,072
Total 8,554 1,350 9,904
Optioned lots (1)
California 4,060
Arizona 5,421
Nevada 1,272
Total 10,753
Total lots controlled
California 9,126
Arizona 9,187
Nevada 2,344
Total 20,657
(1) Optioned lots may be purchased by the Company as wholly-owned
projects or may be purchased by newly formed joint ventures.
WILLIAM LYON HOMES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per common share amounts)
(unaudited)
Three Months Ended
March 31,
2006 2005
Operating revenue
Home sales $307,381 $244,656
Lots, land and other sales - 2,026
307,381 246,682
Operating costs
Cost of sales - homes (229,443) (174,982)
Cost of sales - lots, land and other (430) (1,813)
Sales and marketing (13,124) (11,115)
General and administrative (18,589) (17,441)
Other (826) (682)
(262,412) (206,033)
Equity in income (loss) of unconsolidated joint
ventures 3,638 (411)
Minority equity in income of consolidated entities (5,226) (6,260)
Operating income 43,381 33,978
Financial advisory expenses (1,500) -
Other income (loss), net 1,241 (105)
Income before provision for income taxes 43,122 33,873
Provision for income taxes (16,908) (13,380)
Net income $26,214 $20,493
Earnings per common share
Basic $3.03 $2.38
Diluted $3.02 $2.36
WILLIAM LYON HOMES
CONSOLIDATED BALANCE SHEETS
(in thousands except number of shares and par value per share)
March 31, December 31,
2006 2005
(unaudited)
ASSETS
Cash and cash equivalents $24,994 $52,369
Receivables 33,092 143,481
Real estate inventories 1,544,545 1,419,248
Investments in and advances to unconsolidated
joint ventures 1,527 397
Property and equipment, less accumulated
depreciation of $10,517 and $9,936 at March
31, 2006 and December 31, 2005, respectively 18,577 18,553
Deferred loan costs 12,082 12,323
Goodwill 5,896 5,896
Other assets 39,027 38,735
$1,679,740 $1,691,002
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $56,067 $67,326
Accrued expenses 119,781 181,068
Notes payable 199,959 125,619
7 5/8% Senior Notes due December 15, 2012 150,000 150,000
10 3/4% Senior Notes due April 1, 2013 246,989 246,917
7 1/2% Senior Notes due February 15, 2014 150,000 150,000
922,796 920,930
Minority interest in consolidated entities 186,734 227,178
Stockholders' equity
Common stock, par value $.01 per share;
30,000,000 shares authorized; 8,652,067
shares issued and outstanding at March 31,
2006 and December 31, 2005, respectively;
1,275,000 shares issued and held in
treasury at March 31, 2006 and December
31, 2005, respectively 86 86
Additional paid-in capital 36,506 35,404
Retained earnings 533,618 507,404
570,210 542,894
$1,679,740 $1,691,002
WILLIAM LYON HOMES
SUPPLEMENTAL FINANCIAL INFORMATION
SELECTED FINANCIAL DATA (dollars in thousands except per share data):
Last Twelve
Three Months Ended Months Ended
March 31, March 31,
2006 2005 2006 2005
Net income $26,214 $20,493 $196,352 $176,733
Net cash (used in)
provided by operating
activities $(77,753) $(168,338) $46,051 $105,778
Interest incurred $18,671 $15,203 $76,608 $62,540
Adjusted EBITDA (1) $52,799 $42,662 $381,164 $356,095
Ratio of adjusted EBITDA
to interest incurred 4.98x 5.69x
Balance Sheet Data
March 31,
2006 2005
Stockholders' equity per
share $65.90 $42.66
Stockholders' equity $570,210 $367,602
Total debt 746,948 703,117
Total book capitalization $1,317,158 $1,070,719
Ratio of debt to total
book capitalization 56.7% 65.7%
Ratio of debt to total
book capitalization (net
of cash) 55.9% 64.6%
Ratio of debt to LTM
adjusted EBITDA 1.96x 1.97x
Ratio of debt to LTM
adjusted EBITDA (net of
cash) 1.89x 1.88x
(1) Adjusted EBITDA means consolidated net income plus (i) provision
for income taxes, (ii) interest expense, (iii) amortization of
capitalized interest included in cost of sales, (iv) depreciation
and amortization and (v) cash distributions of income from
unconsolidated joint ventures less equity in income of
unconsolidated joint ventures. Other companies may calculate
Adjusted EBITDA differently. Adjusted EBITDA is not a financial
measure prepared in accordance with U.S. generally accepted
accounting principles. Adjusted EBITDA is presented herein because
it is a component of certain covenants in the Indentures governing
the Company's 7 5/8% Senior Notes, 10 3/4% Senior Notes and 7 1/2%
Senior Notes ("Indentures"). In addition, management believes the
presentation of Adjusted EBITDA provides useful information to the
Company's investors regarding the Company's financial condition
and results of operations because Adjusted EBITDA is a widely
utilized financial indicator of a company's ability to service
and/or incur debt. The calculations of Adjusted EBITDA below are
presented in accordance with the requirements of the Indentures.
Adjusted EBITDA should not be considered as an alternative for net
income, cash flows from operating activities and other
consolidated income or cash flow statement data prepared in
accordance with accounting principles generally accepted in the
United States or as a measure of profitability or liquidity. A
reconciliation of net income to Adjusted EBITDA is provided as
follows:
Last Twelve
Three Months Ended Months Ended
March 31, March 31,
2006 2005 2006 2005
Net income $26,214 $20,493 $196,352 $176,733
Provision for income taxes 16,908 13,380 127,677 116,537
Interest expense:
Interest incurred 18,671 15,203 76,608 62,540
Interest capitalized (18,671) (15,203) (76,608) (62,540)
Amortization of capitalized
interest in cost of sales 10,135 7,855 58,028 60,186
Depreciation and amortization 581 523 2,150 1,625
Cash distributions of income
from unconsolidated joint
ventures 2,599 - 5,307 -
Equity in (income) loss of
unconsolidated joint ventures (3,638) 411 (8,350) 1,014
Adjusted EBITDA $52,799 $42,662 $381,164 $356,095
A reconciliation of net cash (used in) provided by operating
activities to Adjusted EBITDA is provided as follows:
Last Twelve
Three Months Ended Months Ended
March 31, March 31,
2006 2005 2006 2005
Net cash (used in) provided
by operating activities $(77,753) $(168,338) $46,051 $105,778
Interest expense:
Interest incurred 18,671 15,203 76,608 62,540
Interest capitalized (18,671) (15,203) (76,608) (62,540)
Amortization of capitalized
interest in costs of sales 10,135 7,855 58,028 60,186
Non-cash impairment charge - - (4,600) -
State income tax refund from
pre-quasi built-in losses (10) - (1,855) -
Minority equity in income of
consolidated entities (5,226) (6,260) (36,537) (51,661)
Net changes in operating
assets and liabilities:
Receivables (110,389) (13,398) 7,188 (10,078)
Real estate inventories 139,225 163,257 208,208 152,767
Deferred loan costs (241) (338) (1,562) 139
Other assets 8,696 1,828 13,041 6,159
Accounts payable 11,259 (9,412) (7,291) 1,880
Accrued expenses 77,103 67,468 100,493 90,925
Adjusted EBITDA $52,799 $42,662 $381,164 $356,095
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