Exhibit 99.1
WILLIAM LYON HOMES REPORTS FOURTH QUARTER AND RECORD FULL YEAR 2018 RESULTS
FULL YEAR HOMEBUILDING REVENUE OF $2.1 BILLION, HIGHEST IN COMPANY HISTORY;
DELIVERIES OF 4,186 HOMES
FOURTH QUARTER HOMEBUILDING REVENUE OF $657.4 MILLION; GROSS MARGIN OF 18.8%;
DELIVERIES OF 1,311 HOMES
NEWPORT BEACH, CA— February 14, 2019 — William Lyon Homes (NYSE: WLH), a leading homebuilder in the Western U.S., announced results for its fourth quarter and year ended December 31, 2018.
2018 Fourth Quarter Highlights (Comparison to 2017 Fourth Quarter)
| • | Net income available to common stockholders of $34.3 million, or $0.89 per diluted share, compared to $11.8 million, or $0.30 per diluted share in the prior year |
| • | Excluding $2.0 million of project abandonment costs and $1.0 million of gain from extinguishment of debt, adjusted net income available to common stockholders, net of income tax, was $35.1 million, or $0.91 per diluted share, compared to $34.9 million, or $0.89 per diluted share in the prior year |
| • | Pre-tax income of $54.5 million |
| • | New home deliveries of 1,311 homes, up 24% |
| • | Home sales revenue of $657.4 million, up 5% |
| • | Average sales price (ASP) of new homes delivered of $501,400 versus $589,100 |
| • | Homebuilding gross margin percentage of 18.8% |
| • | Adjusted homebuilding gross margin percentage of 23.4% |
| • | Net new home orders of 756, up 13% |
| • | Units in backlog of 1,041, up 27% |
| • | Dollar value of homes in backlog of $479.0 million, up 11% |
| • | SG&A percentage of 10.7% |
| • | Adjusted EBITDA of $79.8 million |
2018 Full Year Highlights (Comparison to 2017 Full Year)
| • | Net income available to common stockholders of $91.6 million, or $2.32 per diluted share, compared to $48.1 million, or $1.24 per diluted share in the prior year |
| • | Excluding $3.9 million of transaction expenses, $2.0 million of project abandonment costs and $1.0 million of gain from extinguishment of debt, adjusted net income available to common stockholders, net of income tax, was $95.5 million, or $2.42 per diluted share, compared to $85.3 million, or $2.21 per diluted share in the prior year |
| • | Pre-tax income of $145.8 million |
| • | New home deliveries of 4,186 homes, up 29% |
| • | Home sales revenue of $2.1 billion, up 16% |
| • | ASP of new homes delivered of $497,300 versus $554,200 |
| • | Homebuilding gross margin percentage of 18.2% |
| • | Adjusted homebuilding gross margin percentage of 23.1% |
| • | Net new home orders of 4,133, up 24% |
| • | SG&A percentage of 11.2% |
| • | Adjusted EBITDA of $250.1 million |
“Overall, 2018 was a successful and record-setting year for the Company, as we delivered 4,186 homes, up 29%, and achieved homebuilding revenues of $2.1 billion, up 16%, both the highest in the Company’s history,” said Matthew R. Zaist, President and Chief Executive Officer. “Earlier in the year we completed our acquisition of RSI giving us additional exposure to the first-time home buyer segment and expanding our footprint into one of the best new home markets in the country in Central Texas.”
“We, along with the rest of the homebuilding industry, experienced a challenging environment in the fourth quarter of 2018. In October and November 2018 we experienced homebuyer demand levels that were less than what we had anticipated, as mortgage interest rates increased and consumer confidence waned, along with increased stock market volatility. As a result, we sold and closed fewer spec homes in the fourth quarter than we had expected, and we also experienced a higher cancellation rate in certain of our markets, which led us to fall short of our deliveries and revenue expectations for the quarter. On the positive side, homebuilding gross margins were at the high end of our expectations, sales and marketing percentage was in-line with expectations as were G&A dollars on an absolute basis, though the percentage was higher than our forecast due to decreased leverage on lower revenue.”
Mr. Zaist continued, “While the disruption we experienced in October and November caused us to fall short of our internal forecasts, we are incrementally encouraged by December’s rebound in sales activity, which demonstrated significant sequential improvement with an absorption pace up 21% over November. This sequential improvement continued into January, where we saw a more historically representative level of traffic and sales. If traditional trends hold true in terms of spring selling season evolution, we would expect to see some acceleration moving into the next couple of months, although we are taking a more cautious view this year until the selling season plays out.”
Operating Results
Home sales revenue for the fourth quarter of 2018 was $657.4 million, as compared to $623.3 million in the year-ago period, an increase of 5%. The increase was driven by a 24% increase in deliveries to 1,311 homes, compared to 1,058 in the fourth quarter of 2017, partially offset by a 15% year-over-year decline in the average sales price of homes closed.
Homebuilding gross margin percentage for homes closed during the fourth quarter of 2018 was 18.8%, up 60 basis points from 18.2% in the third quarter of 2018.
Net new home orders for the quarter were 756, up 13% from 672 in the fourth quarter of 2017. The overall increase in net new home orders was driven by an increase in community count to 117 average sales locations, from 80 in the year-ago period.
The dollar value of homes in backlog was $479.0 million as of December 31, 2018, an increase of 11%, compared to $433.0 million as of December 31, 2017. The increase was driven by a 27% increase in units in backlog to 1,041 from 822 in the year-ago period. The average sales price of homes in backlog decreased to $460,100 from $526,800 in the prior year, due to the number of homes in backlog at our Central Texas division of 234 homes at an average sales price of $261,700.
Sales and marketing expense during the fourth quarter of 2018 was 5.2% of homebuilding revenue, compared to 4.5% in the year-ago quarter, which was driven by an increase in advertising and outside broker commissions of 30 basis points combined, as well as the impact of the adoption of ASC 606 of 30 basis points. General and administrative expenses increased to 5.5% of homebuilding revenue, compared to 4.7% in the year-ago quarter.
Balance Sheet Update
The Company generated significant cash flow in the fourth quarter, enabling the Company to repay $187 million of principal amount of debt in the last three months of the year. At quarter end, cash and cash equivalents totaled $33.8 million, owned real estate inventories totaled $2.3 billion, total assets were $2.9 billion and total equity was $1.0 billion. Total debt to book capitalization was 56.6%, and net debt to net book capitalization was 55.9% at December 31, 2018, compared to 54.5% and 49.6% at December 31, 2017, respectively.
Conference Call
The Company will host a conference call to discuss these results today, Thursday, February 14, 2019 at 9:00 a.m. Pacific Time. The call will be available via both the telephone at (855) 851-4524 or (720) 634-2900, conference ID #7387966, or through the Company’s website at www.lyonhomes.com in the Investor Relations section of the site.
A replay of the call will be available through February 21, 2019 by dialing (855) 859-2056 or (404) 537-3406, conference ID #7387966. A webcast replay of the call will also be available on the Company’s website approximately two hours after the broadcast.
About William Lyon Homes
William Lyon Homes is one of the largest Western U.S. regional homebuilders. Headquartered in Newport Beach, California, the Company is primarily engaged in the design, construction, marketing and sale of single-family detached and attached homes in California, Arizona, Nevada, Colorado, Washington, Oregon, and Texas. Its core markets include Orange County, Los Angeles, the Inland Empire, the San Francisco Bay Area, Phoenix, Las Vegas, Denver, Portland, Seattle, Austin and San Antonio. The Company has a distinguished legacy of more than 62 years of homebuilding operations, over which time it has sold in excess of 106,000 homes. The Company markets and sells its homes under the William Lyon Homes brand in all of its markets except for Washington and Oregon, where the Company operates under the Polygon Northwest brand.
Forward-Looking Statements
Certain statements contained in this release and the accompanying comments during our conference call that are not historical information may constitute “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995, including, but not limited to, forward-looking statements related to: anticipated deliveries, revenue and pre-tax income, gross margin performance, backlog conversion rates, operating and financial results for the first quarter of 2019, community count growth and project performance, market and industry trends, average sale price of homes to be closed in various periods, SG&A percentage, future cash needs and liquidity, minority interest from our homebuilding joint ventures, leverage ratios and reduction strategies, land acquisition spending, and financial services and ancillary business performance and strategies. The forward-looking statements involve risks and uncertainties and actual results may differ materially from those projected or implied. The Company makes no commitment, and disclaims any duty, to update or revise any forward-looking statements to reflect future events or changes in these expectations. Further, certain forward-looking statements are based on assumptions of future events which may not prove to be accurate. Factors that may impact such forward-looking statements include, among others: changes in mortgage and other interest rates; affordability pressures; the Company’s ability to successfully integrate RSI Communities’ homebuilding operations with its existing operations; adverse weather conditions; the availability of labor and homebuilding materials and increased construction cycle times; our financial leverage and level of indebtedness and any inability to comply with financial and other covenants under our debt instruments; continued volatility and worsening in general economic conditions either internationally, nationally or in regions in which we operate; increased housing supply in our markets; increased outside broker costs; increased costs of homebuilding materials; changes in governmental laws and regulations and compliance, increased costs, fees and delays associated therewith; government actions, policies, programs and regulations directed at or affecting the housing market (including the Tax Cuts and Jobs Act (“TCJA”), the Dodd-Frank Act, tax benefits associated with purchasing and owning a home, and the standards, fees and size limits applicable to the purchase or insuring of mortgage loans by government-sponsored enterprises and government agencies), the homebuilding industry, or construction activities; changes in existing tax laws or enacted corporate income tax rates, including pursuant to the TCJA; worsening in markets for residential housing; the impact of construction defect, product liability and home warranty claims, including the adequacy of self-insurance accruals, and the applicability and sufficiency of our insurance coverage; defects in manufactured products or other homebuilding materials; utility company delays; decline in real estate values resulting in impairment of our real estate assets; volatility in the banking industry, credit and capital markets; restraints on foreign investment; terrorism or other hostilities involving the United States and other geopolitical risk as well as restrictive policies such as tariffs or capital investment restrictions; building moratorium or “slow-growth” or “no-growth” initiatives that could be implemented in states in which we operate; conditions in the capital, credit and financial markets, including mortgage lending standards and the availability and timing of mortgage financing; changes in generally accepted accounting principles or interpretations of those principles; competition for home sales from other sellers of new and resale homes; cancellations and our ability to realize our backlog; the occurrence of events such as landslides, soil subsidence and earthquakes that are uninsurable, not economically insurable or not subject to effective indemnification agreements; limitations on our ability to utilize our tax attributes; whether an ownership change occurred that could, under certain circumstances, have resulted in the limitation of our ability to offset prior years’ taxable income
with net operating losses; the timing of receipt of regulatory approvals and the opening of projects; the availability and cost of land for future development; and additional factors discussed under the sections captioned “Risk Factors” included in our annual and quarterly reports filed with the Securities and Exchange Commission. The foregoing list is not exhaustive. New risk factors may emerge from time to time and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on our business.
Investor/Media Contacts:
Larry Clark
Financial Profiles, Inc.
(310) 622-8223
WLH@finprofiles.com
WILLIAM LYON HOMES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except number of shares and per share data)
(unaudited)
| Three Months Ended December 31, 2018 |
Three Months Ended December 31, 2017 |
|||||||
| Operating revenue |
||||||||
| Home sales |
$ | 657,390 | $ | 623,283 | ||||
| Construction services |
2,257 | 1,360 | ||||||
|
|
|
|
|
|||||
| 659,647 | 624,643 | |||||||
|
|
|
|
|
|||||
| Operating costs |
||||||||
| Cost of sales — homes |
(534,107 | ) | (505,337 | ) | ||||
| Construction services |
(2,083 | ) | (1,276 | ) | ||||
| Sales and marketing |
(34,075 | ) | (28,302 | ) | ||||
| General and administrative |
(36,205 | ) | (28,759 | ) | ||||
| Other |
(638 | ) | (726 | ) | ||||
|
|
|
|
|
|||||
| (607,108 | ) | (564,400 | ) | |||||
|
|
|
|
|
|||||
| Operating income |
52,539 | 60,243 | ||||||
| Equity in income of unconsolidated joint ventures |
1,122 | 1,039 | ||||||
| Other income, net |
(141 | ) | 907 | |||||
|
|
|
|
|
|||||
| Income before extinguishment of debt |
53,520 | 62,189 | ||||||
| Gain on extinguishment of debt |
1,015 | — | ||||||
|
|
|
|
|
|||||
| Income before provision for income taxes |
54,535 | 62,189 | ||||||
| Provision for income taxes |
(11,040 | ) | (45,453 | ) | ||||
|
|
|
|
|
|||||
| Net income |
43,495 | 16,736 | ||||||
| Less: Net income attributable to noncontrolling interests |
(9,240 | ) | (4,973 | ) | ||||
|
|
|
|
|
|||||
| Net income available to common stockholders |
$ | 34,255 | $ | 11,763 | ||||
|
|
|
|
|
|||||
| Income per common share: |
||||||||
| Basic |
$ | 0.91 | $ | 0.32 | ||||
| Diluted |
$ | 0.89 | $ | 0.30 | ||||
| Weighted average common shares outstanding: |
||||||||
| Basic |
37,536,251 | 37,138,041 | ||||||
| Diluted |
38,587,926 | 39,025,559 | ||||||
WILLIAM LYON HOMES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except number of shares and per share data)
(unaudited)
| Year Ended December 31, 2018 |
Year Ended December 31, 2017 |
|||||||
| Operating revenue |
||||||||
| Home sales |
$ | 2,081,721 | $ | 1,795,074 | ||||
| Construction services |
5,450 | 1,454 | ||||||
|
|
|
|
|
|||||
| 2,087,171 | 1,796,528 | |||||||
|
|
|
|
|
|||||
| Operating costs |
||||||||
| Cost of sales — homes |
(1,703,298 | ) | (1,478,549 | ) | ||||
| Construction services |
(5,146 | ) | (1,317 | ) | ||||
| Sales and marketing |
(114,495 | ) | (86,226 | ) | ||||
| General and administrative |
(119,272 | ) | (90,206 | ) | ||||
| Transaction expenses |
(3,907 | ) | — | |||||
| Other |
(2,148 | ) | (2,274 | ) | ||||
|
|
|
|
|
|||||
| (1,948,266 | ) | (1,658,572 | ) | |||||
|
|
|
|
|
|||||
| Operating income |
138,905 | 137,956 | ||||||
| Equity in income of unconsolidated joint ventures |
3,118 | 3,661 | ||||||
| Other income, net |
2,715 | 895 | ||||||
|
|
|
|
|
|||||
| Income before extinguishment of debt |
144,738 | 142,512 | ||||||
| Gain (loss) on extinguishment of debt |
1,015 | (21,828 | ) | |||||
|
|
|
|
|
|||||
| Income before provision for income taxes |
145,753 | 120,684 | ||||||
| Provision for income taxes |
(30,620 | ) | (62,933 | ) | ||||
|
|
|
|
|
|||||
| Net income |
115,133 | 57,751 | ||||||
| Less: Net income attributable to noncontrolling interests |
(23,537 | ) | (9,616 | ) | ||||
|
|
|
|
|
|||||
| Net income available to common stockholders |
$ | 91,596 | $ | 48,135 | ||||
|
|
|
|
|
|||||
| Income per common share: |
||||||||
| Basic |
$ | 2.42 | $ | 1.30 | ||||
| Diluted |
$ | 2.32 | $ | 1.24 | ||||
| Weighted average common shares outstanding: |
||||||||
| Basic |
37,832,073 | 37,040,137 | ||||||
| Diluted |
39,419,059 | 38,663,667 | ||||||
WILLIAM LYON HOMES
CONSOLIDATED BALANCE SHEETS
(in thousands, except number of shares and par value per share)
| December 31, 2018 |
December 31, 2017 |
|||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Cash and cash equivalents |
$ | 33,779 | $ | 182,710 | ||||
| Receivables |
13,502 | 10,223 | ||||||
| Escrow proceeds receivable |
— | 3,319 | ||||||
| Real estate inventories |
||||||||
| Owned |
2,333,207 | 1,699,850 | ||||||
| Not owned |
315,576 | — | ||||||
| Investment in unconsolidated joint ventures |
5,542 | 7,867 | ||||||
| Goodwill |
123,695 | 66,902 | ||||||
| Intangibles, net of accumulated amortization of $4,640 as of December 31, 2018 and December 31, 2017 |
6,700 | 6,700 | ||||||
| Deferred income taxes |
47,241 | 47,915 | ||||||
| Lease right-of-use assets |
13,561 | 14,454 | ||||||
| Other assets, net |
36,971 | 21,164 | ||||||
|
|
|
|
|
|||||
| Total assets |
$ | 2,929,774 | $ | 2,061,104 | ||||
|
|
|
|
|
|||||
| LIABILITIES AND EQUITY | ||||||||
| Accounts payable |
$ | 128,371 | $ | 58,799 | ||||
| Accrued expenses |
150,155 | 111,491 | ||||||
| Liabilities from inventories not owned |
315,576 | — | ||||||
| Revolving credit facility |
45,000 | — | ||||||
| Land notes payable |
— | 589 | ||||||
| Construction notes payable |
1,231 | — | ||||||
| Joint venture notes payable |
151,788 | 93,926 | ||||||
| 53/4% Senior Notes due April 15, 2019 |
— | 149,362 | ||||||
| 7% Senior Notes due August 15, 2022 |
347,456 | 346,740 | ||||||
| 6% Senior Notes due September 1, 2023 |
343,878 | — | ||||||
| 57/8% Senior Notes due January 31, 2025 |
431,992 | 439,567 | ||||||
|
|
|
|
|
|||||
| 1,915,447 | 1,200,474 | |||||||
|
|
|
|
|
|||||
| Commitments and contingencies |
||||||||
| Equity: |
||||||||
| William Lyon Homes stockholders’ equity |
||||||||
| Preferred stock, par value $0.01 per share; 10,000,000 shares authorized and no shares issued and outstanding at December 31, 2018 and December 31, 2017 |
— | — | ||||||
| Common stock, Class A, par value $0.01 per share; 150,000,000 shares authorized; 33,904,972 and 34,267,510 shares issued, 32,690,378 and 33,135,650 shares outstanding at December 31, 2018 and December 31, 2017, respectively |
339 | 344 | ||||||
| Common stock, Class B, par value $0.01 per share; 30,000,000 shares authorized; 4,817,394 shares issued and outstanding at December 31, 2018 and 2017 |
48 | 48 | ||||||
| Additional paid-in capital |
445,545 | 454,286 | ||||||
| Retained earnings |
417,390 | 325,794 | ||||||
|
|
|
|
|
|||||
| Total William Lyon Homes stockholders’ equity |
863,322 | 780,472 | ||||||
| Noncontrolling interests |
151,005 | 80,158 | ||||||
|
|
|
|
|
|||||
| Total equity |
1,014,327 | 860,630 | ||||||
|
|
|
|
|
|||||
| Total liabilities and equity |
$ | 2,929,774 | $ | 2,061,104 | ||||
|
|
|
|
|
|||||
WILLIAM LYON HOMES
SELECTED FINANCIAL AND OPERATING INFORMATION
(unaudited)
| Three Months Ended December 31, | ||||||||||||
| 2018 | 2017 | |||||||||||
| Consolidated Total |
Consolidated Total |
Percentage % Change |
||||||||||
| Selected Financial Information (1) |
||||||||||||
| (dollars in thousands) |
||||||||||||
| Homes closed |
1,311 | 1,058 | 24 | % | ||||||||
|
|
|
|
|
|
|
|||||||
| Home sales revenue |
$ | 657,390 | $ | 623,283 | 5 | % | ||||||
| Cost of sales (excluding interest and purchase accounting adjustments) |
(503,616 | ) | (477,102 | ) | 6 | % | ||||||
|
|
|
|
|
|
|
|||||||
| Adjusted homebuilding gross margin (2) |
$ | 153,774 | $ | 146,181 | 5 | % | ||||||
|
|
|
|
|
|
|
|||||||
| Adjusted homebuilding gross margin percentage (2) |
23.4 | % | 23.5 | % | 0 | % | ||||||
|
|
|
|
|
|
|
|||||||
| Interest in cost of sales |
(27,075 | ) | (28,235 | ) | (4 | %) | ||||||
| Purchase accounting adjustments |
(3,416 | ) | — | N/M | ||||||||
|
|
|
|
|
|
|
|||||||
| Gross margin |
$ | 123,283 | $ | 117,946 | 5 | % | ||||||
|
|
|
|
|
|
|
|||||||
| Gross margin percentage |
18.8 | % | 18.9 | % | (1 | %) | ||||||
|
|
|
|
|
|
|
|||||||
| Number of homes closed |
||||||||||||
| California |
393 | 282 | 39 | % | ||||||||
| Arizona |
103 | 131 | (21 | %) | ||||||||
| Nevada |
119 | 103 | 16 | % | ||||||||
| Colorado |
169 | 100 | 69 | % | ||||||||
| Washington |
145 | 224 | (35 | %) | ||||||||
| Oregon |
182 | 218 | (17 | %) | ||||||||
| Texas |
200 | N/A | N/M | |||||||||
|
|
|
|
|
|
|
|||||||
| Total |
1,311 | 1,058 | 24 | % | ||||||||
|
|
|
|
|
|
|
|||||||
| Average sales price of homes closed |
||||||||||||
| California |
$ | 702,800 | $ | 782,400 | (10 | %) | ||||||
| Arizona |
308,900 | 304,100 | 2 | % | ||||||||
| Nevada |
580,100 | 707,800 | (18 | %) | ||||||||
| Colorado |
410,900 | 473,100 | (13 | %) | ||||||||
| Washington |
627,500 | 655,300 | (4 | %) | ||||||||
| Oregon |
359,200 | 439,600 | (18 | %) | ||||||||
| Texas |
272,500 | N/A | N/M | |||||||||
|
|
|
|
|
|
|
|||||||
| Company Average |
$ | 501,400 | $ | 589,100 | (15 | %) | ||||||
| Number of net new home orders |
||||||||||||
| California |
194 | 152 | 28 | % | ||||||||
| Arizona |
92 | 95 | (3 | %) | ||||||||
| Nevada |
54 | 69 | (22 | %) | ||||||||
| Colorado |
89 | 108 | (18 | %) | ||||||||
| Washington |
53 | 123 | (57 | %) | ||||||||
| Oregon |
88 | 125 | (30 | %) | ||||||||
| Texas |
186 | N/A | N/M | |||||||||
|
|
|
|
|
|
|
|||||||
| Total |
756 | 672 | 13 | % | ||||||||
|
|
|
|
|
|
|
|||||||
| Average number of sales locations during period |
||||||||||||
| California |
37 | 22 | 68 | % | ||||||||
| Arizona |
6 | 6 | 0 | % | ||||||||
| Nevada |
12 | 13 | (8 | %) | ||||||||
| Colorado |
13 | 17 | (24 | %) | ||||||||
| Washington |
9 | 10 | (10 | %) | ||||||||
| Oregon |
15 | 12 | 25 | % | ||||||||
| Texas |
25 | N/A | N/M | |||||||||
|
|
|
|
|
|
|
|||||||
| Total |
117 | 80 | 46 | % | ||||||||
|
|
|
|
|
|
|
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| (1) | For the 2018 period presented, the Company is reporting in seven segments: California, Arizona, Nevada, Colorado, Washington, Oregon, and Texas. Texas is a new reporting segment resulting from the RSI Acquisition completed in 2018. For the 2017 period presented, the Company reported in six segments: California, Arizona, Nevada, Colorado, Washington, and Oregon. |
| (2) | Adjusted homebuilding gross margin is a financial measure that is not prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. It is used by management in evaluating operating performance and in making strategic decisions regarding sales pricing, construction and development pace, product mix and other operating decisions. We believe this information is meaningful as it isolates the impact that interest and purchase accounting adjustments have on homebuilding gross margin and allows investors to make better comparisons with our competitors. |
WILLIAM LYON HOMES
SELECTED FINANCIAL AND OPERATING INFORMATION
(unaudited)
| Year Ended December 31, | ||||||||||||
| 2018 | 2017 | |||||||||||
| Consolidated Total |
Consolidated Total |
Percentage % Change |
||||||||||
| Selected Financial Information (1) |
||||||||||||
| (dollars in thousands) |
||||||||||||
| Homes closed |
4,186 | 3,239 | 29 | % | ||||||||
|
|
|
|
|
|
|
|||||||
| Home sales revenue |
$ | 2,081,721 | $ | 1,795,074 | 16 | % | ||||||
| Cost of sales (excluding interest and purchase accounting adjustments) |
(1,600,151 | ) | (1,395,094 | ) | 15 | % | ||||||
|
|
|
|
|
|
|
|||||||
| Adjusted homebuilding gross margin (2) |
$ | 481,570 | $ | 399,980 | 20 | % | ||||||
|
|
|
|
|
|
|
|||||||
| Adjusted homebuilding gross margin percentage (2) |
23.1 | % | 22.3 | % | 4 | % | ||||||
|
|
|
|
|
|
|
|||||||
| Interest in cost of sales |
(89,756 | ) | (83,455 | ) | 8 | % | ||||||
| Purchase accounting adjustments |
(13,391 | ) | — | N/M | ||||||||
|
|
|
|
|
|
|
|||||||
| Gross margin |
$ | 378,423 | $ | 316,525 | 20 | % | ||||||
|
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|
|
|
|
|
|||||||
| Gross margin percentage |
18.2 | % | 17.6 | % | 3 | % | ||||||
|
|
|
|
|
|
|
|||||||
| Number of homes closed |
||||||||||||
| California |
1,172 | 919 | 28 | % | ||||||||
| Arizona |
439 | 539 | (19 | %) | ||||||||
| Nevada |
364 | 278 | 31 | % | ||||||||
| Colorado |
531 | 240 | 121 | % | ||||||||
| Washington |
495 | 516 | (4 | %) | ||||||||
| Oregon |
585 | 747 | (22 | %) | ||||||||
| Texas |
600 | N/A | N/M | |||||||||
|
|
|
|
|
|
|
|||||||
| Total |
4,186 | 3,239 | 29 | % | ||||||||
|
|
|
|
|
|
|
|||||||
| Average sales price of homes closed |
||||||||||||
| California |
$ | 671,300 | $ | 743,000 | (10 | %) | ||||||
| Arizona |
311,900 | 294,100 | 6 | % | ||||||||
| Nevada |
588,600 | 634,400 | (7 | %) | ||||||||
| Colorado |
426,600 | 518,600 | (18 | %) | ||||||||
| Washington |
628,500 | 644,000 | (2 | %) | ||||||||
| Oregon |
423,700 | 429,200 | (1 | %) | ||||||||
| Texas |
263,800 | N/A | N/M | |||||||||
|
|
|
|
|
|
|
|||||||
| Company Average |
$ | 497,300 | $ | 554,200 | (10 | %) | ||||||
| Number of net new home orders |
||||||||||||
| California |
1,109 | 935 | 19 | % | ||||||||
| Arizona |
436 | 496 | (12 | %) | ||||||||
| Nevada |
372 | 305 | 22 | % | ||||||||
| Colorado |
493 | 337 | 46 | % | ||||||||
| Washington |
445 | 555 | (20 | %) | ||||||||
| Oregon |
641 | 700 | (8 | %) | ||||||||
| Texas |
637 | N/A | N/M | |||||||||
|
|
|
|
|
|
|
|||||||
| Total |
4,133 | 3,328 | 24 | % | ||||||||
|
|
|
|
|
|
|
|||||||
| Average number of sales locations during period |
||||||||||||
| California |
30 | 23 | 30 | % | ||||||||
| Arizona |
6 | 7 | (14 | %) | ||||||||
| Nevada |
13 | 13 | 0 | % | ||||||||
| Colorado |
14 | 15 | (7 | %) | ||||||||
| Washington |
10 | 10 | 0 | % | ||||||||
| Oregon |
15 | 16 | (6 | %) | ||||||||
| Texas |
18 | N/A | N/M | |||||||||
|
|
|
|
|
|
|
|||||||
| Total |
106 | 84 | 26 | % | ||||||||
|
|
|
|
|
|
|
|||||||
| (1) | For the 2018 period presented, the Company is reporting in seven segments: California, Arizona, Nevada, Colorado, Washington, Oregon, and Texas. Texas is a new reporting segment resulting from the RSI Acquisition completed in 2018. For the 2017 period presented, the Company reported in six segments: California, Arizona, Nevada, Colorado, Washington, and Oregon. |
| (2) | Adjusted homebuilding gross margin is a financial measure that is not prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. It is used by management in evaluating operating performance and in making strategic decisions regarding sales pricing, construction and development pace, product mix and other operating decisions. We believe this information is meaningful as it isolates the impact that interest and purchase accounting adjustments have on homebuilding gross margin and allows investors to make better comparisons with our competitors. |
WILLIAM LYON HOMES
SELECTED FINANCIAL AND OPERATING INFORMATION
(unaudited)
| As of December 31, | ||||||||||||
| 2018 | 2017 | |||||||||||
| Consolidated Total |
Consolidated Total |
Percentage % Change |
||||||||||
| Backlog of homes sold but not closed at end of period |
||||||||||||
| California |
252 | 240 | 5 | % | ||||||||
| Arizona |
158 | 161 | (2 | %) | ||||||||
| Nevada |
94 | 86 | 9 | % | ||||||||
| Colorado |
134 | 172 | (22 | %) | ||||||||
| Washington |
41 | 91 | (55 | %) | ||||||||
| Oregon |
128 | 72 | 78 | % | ||||||||
| Texas |
234 | N/A | N/M | |||||||||
|
|
|
|
|
|
|
|||||||
| Total |
1,041 | 822 | 27 | % | ||||||||
|
|
|
|
|
|
|
|||||||
| Dollar amount of homes sold but not closed at end of period (in thousands) |
||||||||||||
| California |
$ | 175,205 | $ | 167,938 | 4 | % | ||||||
| Arizona |
53,581 | 49,656 | 8 | % | ||||||||
| Nevada |
52,604 | 62,105 | (15 | %) | ||||||||
| Colorado |
62,091 | 65,716 | (6 | %) | ||||||||
| Washington |
23,060 | 55,583 | (59 | %) | ||||||||
| Oregon |
51,181 | 32,014 | 60 | % | ||||||||
| Texas |
61,230 | N/A | N/M | |||||||||
|
|
|
|
|
|
|
|||||||
| Total |
$ | 478,952 | $ | 433,012 | 11 | % | ||||||
|
|
|
|
|
|
|
|||||||
| Lots owned and controlled at end of period |
||||||||||||
| Lots owned |
||||||||||||
| California |
3,450 | 1,551 | 122 | % | ||||||||
| Arizona |
3,653 | 4,221 | (13 | %) | ||||||||
| Nevada |
2,626 | 2,981 | (12 | %) | ||||||||
| Colorado |
857 | 1,276 | (33 | %) | ||||||||
| Washington |
1,414 | 1,334 | 6 | % | ||||||||
| Oregon |
2,668 | 1,893 | 41 | % | ||||||||
| Texas |
2,981 | N/A | N/M | |||||||||
|
|
|
|
|
|
|
|||||||
| Total |
17,649 | 13,256 | 33 | % | ||||||||
|
|
|
|
|
|
|
|||||||
| Lots controlled |
||||||||||||
| California |
1,333 | 1,051 | 27 | % | ||||||||
| Arizona |
660 | — | N/M | |||||||||
| Nevada |
— | 17 | (100 | %) | ||||||||
| Colorado |
2,352 | 769 | 206 | % | ||||||||
| Washington |
839 | 849 | (1 | %) | ||||||||
| Oregon |
1,674 | 1,494 | 12 | % | ||||||||
| Texas |
5,034 | N/A | N/M | |||||||||
|
|
|
|
|
|
|
|||||||
| Total |
11,892 | 4,180 | 184 | % | ||||||||
|
|
|
|
|
|
|
|||||||
| Total lots owned and controlled |
||||||||||||
| California |
4,783 | 2,602 | 84 | % | ||||||||
| Arizona |
4,313 | 4,221 | 2 | % | ||||||||
| Nevada |
2,626 | 2,998 | (12 | %) | ||||||||
| Colorado |
3,209 | 2,045 | 57 | % | ||||||||
| Washington |
2,253 | 2,183 | 3 | % | ||||||||
| Oregon |
4,342 | 3,387 | 28 | % | ||||||||
| Texas |
8,015 | N/A | N/M | |||||||||
|
|
|
|
|
|
|
|||||||
| Total |
29,541 | 17,436 | 69 | % | ||||||||
|
|
|
|
|
|
|
|||||||
| (1) | Certain lots in California and Texas are consolidated on the Company’s accompanying balance sheet in accordance with FASB ASC Topic 470, Debt (“ASC 470”). Included in lots owned are 761 lots in California and 1,477 lots in Texas that are associated with a land banking transaction that is consolidated on the Company’s accompanying balance sheet in accordance with ASC 470. |
WILLIAM LYON HOMES
SUPPLEMENTAL FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
| Three Months Ended December 31, 2018 |
Three Months Ended December 31, 2017 |
Year Ended December 31, 2018 |
Year Ended December 31, 2017 |
|||||||||||||
| Net income available to common stockholders |
$ | 34,255 | $ | 11,763 | $ | 91,596 | $ | 48,135 | ||||||||
| Net income, adjusted for transaction expenses, project abandonment costs, and (gain) loss on extinguishment of debt, net of tax benefit (provision) and impact of tax reform change (1) |
$ | 35,069 | $ | 34,889 | $ | 95,488 | $ | 85,337 | ||||||||
| Interest incurred |
$ | 25,286 | $ | 17,371 | $ | 92,077 | $ | 73,729 | ||||||||
| Adjusted EBITDA (2) |
$ |
79,817 |
|
$ |
90,093 |
|
$ | 250,119 | $ | 227,914 | ||||||
| Adjusted EBITDA Margin (3) |
12.1 | % | 14.4 | % | 12.0 | % | 12.7 | % | ||||||||
| Ratio of adjusted EBITDA to interest incurred |
3.2 | 5.2 | 2.7 | 3.1 | ||||||||||||
| Balance Sheet Data |
||||||||||||||||
| December 31, 2018 |
December 31, 2017 |
|||||||||||||||
| Cash and cash equivalents |
$ | 33,779 | $ | 182,710 | ||||||||||||
| Total William Lyon Homes stockholders’ equity |
863,322 | 780,472 | ||||||||||||||
| Noncontrolling interests |
151,005 | 80,158 | ||||||||||||||
| Total debt |
1,321,345 | 1,030,184 | ||||||||||||||
|
|
|
|
|
|||||||||||||
| Total capital |
$ | 2,335,672 | $ | 1,890,814 | ||||||||||||
|
|
|
|
|
|||||||||||||
| Ratio of debt to total capital |
56.6 | % | 54.5 | % | ||||||||||||
| Ratio of net debt to total capital (net of cash) |
55.9 | % | 49.6 | % | ||||||||||||
WILLIAM LYON HOMES
SUPPLEMENTAL FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
| (1) | Adjusted net income means net income available to common stockholders plus transaction expenses, project abandonment costs and loss for the extinguishment of the 8.5% Senior Notes, less gain for the partial extinguishment of some 5.875% Senior Notes. Adjusted net income is not a financial measure prepared in accordance with U.S. GAAP. Adjusted net income is presented herein because management believes the presentation of adjusted net income provides useful information to the Company’s investors regarding the Company’s results of operations because adjusted net income isolates the impact of the one-time, non-recurring transaction expenses, non-recurring project abandonment costs and extinguishment fees. Adjusted net income should not be considered as an alternative for net income, cash flows from operating activities and other consolidated income or cash flow statement data prepared in accordance with accounting principles generally accepted in the United States or as a measure of profitability or liquidity. A reconciliation of net income available to common stockholders to adjusted net income is provided in the following table: |
| Three Months Ended December 31, 2018 |
Three Months Ended December 31, 2017 |
Year Ended December 31, 2018 |
Year Ended December 31, 2017 |
|||||||||||||
| Net income available to common stockholders |
$ | 34,255 | $ | 11,763 | $ | 91,596 | $ | 48,135 | ||||||||
| Add: Transaction expenses |
— | — | 3,907 | — | ||||||||||||
| Add: Project abandonment costs |
2,035 | — | 2,035 | — | ||||||||||||
| (Less) / Add: (Gain) Loss on extinguishment of debt |
(1,015 | ) | — | (1,015 | ) | 21,828 | ||||||||||
| Add: Impact of tax reform change |
— | 23,126 | — | 23,126 | ||||||||||||
| Less: Income tax benefit applicable to transaction expenses |
— | — | (820 | ) | — | |||||||||||
| Less: Income tax benefit applicable to project abandonment costs |
(411 | ) | — | (427 | ) | — | ||||||||||
| Add / (Less): Income tax benefit (provision) applicable to (gain) loss on extinguishment of debt |
205 | — | 213 | (7,752 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income, adjusted for transaction expenses, project abandonment costs, and (gain) loss on extinguishment of debt, net of tax benefit (provision) and impact of tax reform change |
$ | 35,069 | $ | 34,889 | $ | 95,488 | $ | 85,337 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Diluted weighted average common shares outstanding |
38,587,926 | 39,025,559 | 39,419,059 | 38,663,667 | ||||||||||||
| Adjusted net income excluding noncontrolling interest per diluted share |
$ | 0.91 | $ | 0.89 | $ | 2.42 | $ | 2.21 | ||||||||
WILLIAM LYON HOMES
SUPPLEMENTAL FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
| (2) | Adjusted EBITDA means net income available to common stockholders plus (i) provision for income taxes, (ii) interest expense, (iii) amortization of capitalized interest included in cost of sales, (iv) stock based compensation, (v) depreciation and amortization, (vi) non-cash purchase accounting adjustments, (vii) cash distributions of income from unconsolidated joint ventures, (viii) equity in income of unconsolidated joint ventures, (ix) transaction expenses, and (x) (gain) loss on extinguishment of debt. Other companies may calculate adjusted EBITDA differently. Adjusted EBITDA is not a financial measure prepared in accordance with U.S. GAAP. Adjusted EBITDA is presented herein because management believes the presentation of adjusted EBITDA provides useful information to the Company’s investors regarding the Company’s financial condition and results of operations because adjusted EBITDA is a widely utilized indicator of a company’s operating performance. Adjusted EBITDA should not be considered as an alternative for net income, cash flows from operating activities and other consolidated income or cash flow statement data prepared in accordance with accounting principles generally accepted in the United States or as a measure of profitability or liquidity. A reconciliation of net income available to common stockholders to adjusted EBITDA is provided in the following table: |
| Three Months Ended December 31, 2018 |
Three Months Ended December 31, 2017 |
Year Ended December 31, 2018 |
Year Ended December 31, 2017 |
|||||||||||||
| Net income available to common stockholders |
$ | 34,255 | $ | 11,763 | $ | 91,596 | $ | 48,135 | ||||||||
| Provision for income taxes |
11,040 | 45,453 | 30,620 | 62,933 | ||||||||||||
| Interest expense |
||||||||||||||||
| Interest incurred |
25,286 | 17,371 | 92,077 | 73,729 | ||||||||||||
| Interest capitalized |
(25,286 | ) | (17,371 | ) | (92,077 | ) | (73,729 | ) | ||||||||
| Amortization of capitalized interest included in cost of sales |
27,075 | 28,333 | 90,302 | 83,570 | ||||||||||||
| Stock based compensation |
3,705 | 3,802 | 11,298 | 10,062 | ||||||||||||
| Depreciation and amortization |
1,920 | 536 | 7,699 | 1,962 | ||||||||||||
| Non-cash purchase accounting adjustments |
3,416 | — | 13,391 | — | ||||||||||||
| Cash distributions of income from unconsolidated joint ventures |
543 | 1,245 | 5,439 | 3,085 | ||||||||||||
| Equity in income of unconsolidated joint ventures |
(1,122 | ) | (1,039 | ) | (3,118 | ) | (3,661 | ) | ||||||||
| Transaction expenses |
— | — | 3,907 | — | ||||||||||||
| (Gain) Loss on extinguishment of debt |
(1,015 | ) | — | (1,015 | ) | 21,828 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Adjusted EBITDA |
$ | 79,817 | $ | 90,093 | $ | 250,119 | $ | 227,914 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
WILLIAM LYON HOMES
SUPPLEMENTAL FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
| (3) | Calculated as Adjusted EBITDA as a percentage of operating revenue. |
Adjusted pre-tax income means income before provision for income taxes plus transaction expenses, project abandonment costs, and loss for the extinguishment of the 8.5% Senior Notes, less gain from the partial extinguishment of some 5.875% Senior Notes. Adjusted pre-tax income is not a financial measure prepared in accordance with U.S. GAAP. Adjusted pre-tax income is presented herein because management believes the presentation of adjusted pre-tax income provides useful information to the Company’s investors regarding the Company’s results of operations because adjusted pre-tax income isolates the impact of the one-time, non-recurring transaction expenses, non-recurring project abandonment costs and extinguishment fees. Adjusted pre-tax income should not be considered as an alternative for net income, cash flows from operating activities and other consolidated income or cash flow statement data prepared in accordance with accounting principles generally accepted in the United States or as a measure of profitability or liquidity. A reconciliation of income before provision for income taxes to adjusted pre-tax income is provided in the following table:
| Three Months Ended December 31, 2018 |
Three Months Ended December 31, 2017 |
Year Ended December 31, 2018 |
Year Ended December 31, 2017 |
|||||||||||||
| Income before provision for income taxes |
$ | 54,535 | $ | 62,189 | $ | 145,753 | $ | 120,684 | ||||||||
| Add / (Less): Transaction expenses |
— | — | 3,907 | — | ||||||||||||
| Project abandonment costs |
2,035 | — | 2,035 | — | ||||||||||||
| (Gain) Loss on extinguishment of debt |
(1,015 | ) | — | (1,015 | ) | 21,828 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Pre-tax income, adjusted for transaction expenses, project abandonment costs and (gain) loss on extinguishment of debt |
$ | 55,555 | $ | 62,189 | $ | 150,680 | $ | 142,512 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
