Senior Notes, Secured, and Unsecured Indebtedness

Senior notes, secured, and unsecured indebtedness consist of the following (in thousands):



	September 30, 2016		December 31, 2015
Notes payable:
Construction notes payable	$	130,923	$	110,181
Seller financing	32,419		—
Revolving line of credit	96,000		65,000
Total notes payable	259,342		175,181

Subordinated amortizing notes	8,970		14,066

Senior notes:
5 ³/₄% Senior Notes due April 15, 2019	148,691		148,295
8 ¹/₂% Senior Notes due November 15, 2020	422,852		422,896
7% Senior Notes due August 15, 2022	345,829		345,338
Total senior notes	917,372		916,529

Total notes payable and senior notes	$	1,185,684	$	1,105,776

As of September 30, 2016, the maturities of the Notes payable, Subordinated amortizing notes, 5 ³/₄% Senior Notes, 8 ¹/₂% Senior Notes, and 7% Senior Notes are as follows (in thousands):



Year Ending December 31,
2016	$	—
2017	78,844
2018	59,814
2019	279,654
2020	425,000
Thereafter	350,000
	$	1,193,312

Maturities above exclude premium on the 8 ¹/₂% and 7% Senior Notes in an aggregate of $3.8 million, and deferred loan costs on the 5 ³/₄%, 8 ¹/₂% and 7% Senior Notes of $11.4 million as of September 30, 2016.

Notes Payable

Construction Notes Payable

The Company and certain of its consolidated joint ventures have entered into construction notes payable agreements. These loans will be repaid with proceeds from closings and are secured by the underlying projects. The issuance date, facility size, maturity date and interest rate are listed in the table below as of September 30, 2016 (in millions):



Issuance Date	Facility Size		Outstanding		Maturity	Current Rate
March, 2016	$	33.4	$	15.8	September, 2018	3.53	%	(1)
January, 2016	35.0		18.8		February, 2019	3.78	%	(2)
November, 2015	42.5		19.5		November, 2017	4.50	%	(1)
August, 2015 (4)	14.2		0.7		August, 2017	4.50	%	(1)
August, 2015 (4)	37.5		7.0		August, 2017	4.50	%	(1)
July, 2015	22.5		14.8		July, 2018	4.00	%	(3)
April, 2015	18.5		13.9		October, 2017	4.00	%	(3)
November, 2014	24.0		13.1		November, 2017	4.00	%	(3)
November, 2014	22.0		12.7		November, 2017	4.00	%	(3)
March, 2014	26.0		14.6		April, 2018	3.53	%	(1)
	$	275.6	$	130.9

(1) Loan bears interest at the Company's option of either LIBOR +3.0% or the prime rate +1.0%.

(2) Loan bears interest at LIBOR +3.25%

(3) Loan bears interest at the prime rate +0.5%.

(4) Loan relates to a project that is wholly-owned by the Company.

The construction notes payable contain certain financial maintenance covenants. The Company was in compliance with all such covenants as of September 30, 2016.

Seller Financing

At September 30, 2016, the Company had $32.4 million of notes payable outstanding related to two land acquisitions for which seller financing was provided. The first note of approximately $3.0 million bears interest at a rate of 7% per annum, is secured by the underlying land, and matures in August 2017. This note was entered into with a related party. Refer to Note 8 for more details regarding the related party transaction. The second note of $29.4 million bears interest at a rate of 7% per annum, is secured by the underlying land, and matures in June 2018.

Revolving Line of Credit

On July 1, 2016, California Lyon and Parent entered into an amendment and restatement agreement pursuant to which its existing credit agreement providing for a revolving credit facility, as previously amended and restated on March 27, 2015 as described below, was further amended and restated in its entirety (as so further amended and restated, the "Second Amended Facility"). The Second Amended Facility amends and restates the Company’s previous $130.0 million revolving credit facility and provides for total lending commitments of $145.0 million. In addition, the Second Amended Facility has an uncommitted accordion feature under which the Company may increase the total principal amount up to a maximum aggregate of $200.0 million under certain circumstances, as well as a sublimit of $50.0 million for letters of credit. The Second Amended Facility, among other things, also amended the maturity date of the previous facility to July 1, 2019, provided that the Second Amended Facility will terminate on January 14, 2019 (the “Springing Termination Date”) if, on the Springing Termination Date, the aggregate outstanding principal amount of California Lyon’s 5.75% senior notes due 2019 is equal to or greater than the sum of (a) 50% of the Consolidated EBITDA (as defined in the Second Amended Facility) of California Lyon, Parent, certain of the Parent’s direct and indirect wholly owned subsidiaries (together with California Lyon and Parent, the “Loan Parties”) and their Restricted Subsidiaries (as defined in the Second Amended Facility) for the four-quarter period ending September 30, 2018, plus (b) the Liquidity (as defined in the Second Amended Facility) of the Loan Parties and their consolidated subsidiaries on the Springing Termination Date. Further, the Second Amended Facility amended the maximum leverage ratio covenant to extend the timing of the gradual step-downs. Specifically, pursuant to the Second Amended Facility, the maximum leverage ratio will remain at 65% from June 30, 2016 through and including December 30, 2016, will decrease to 62.5% on the last day of the 2016 fiscal year, remain at 62.5% from December 31, 2016 through and including June 29, 2017, and will further decrease to 60% on the last day of the second quarter of 2017 and remain at 60% thereafter. The Second Amended Facility did not revise any of our other financial covenants thereunder.

Prior to the entry into the Second Amended Facility as described above, on March 27, 2015, California Lyon and Parent entered into an amendment and restatement agreement which amended and restated the Company's previous $100 million revolving credit facility and provided for total lending commitments of $130.0 million, an uncommitted accordion feature under which the Company could increase the total principal amount up to a maximum aggregate of $200.0 million under certain circumstances (up from a maximum aggregate of $125.0 million under the previous facility), as well as a sublimit of $50.0 million for letters of credit, and extended the maturity date of the previous facility by one year to August 7, 2017.

The Second Amended Facility contains certain financial maintenance covenants, including (a) a minimum tangible net worth requirement of $451.0 million (which is subject to increase over time based on subsequent earnings and proceeds from equity offerings, as well as deferred tax assets to the extent included on the Company's financial statements), (b) a maximum leverage covenant that prohibits the leverage ratio (as defined therein) from exceeding 65%, which maximum leverage ratio decreases to 62.5% effective as of December 31, 2016, and further decreases to 60% effective as of June 30, 2017, and (c) a covenant requiring us to maintain either (i) an interest coverage ratio (EBITDA to interest incurred, as defined therein) of at least 1.50 to 1.00 or (ii) liquidity (as defined therein) of an amount not less than the greater of our consolidated interest incurred during the trailing 12 months and $50.0 million. Our compliance with these financial covenants is measured by calculations and metrics that are specifically defined or described by the terms of the Second Amended Facility and can differ in certain respects from comparable GAAP or other commonly used terms. The Second Amended Facility contains customary events of default, subject to cure periods in certain circumstances, including: nonpayment of principal, interest and fees or other amounts; violation of covenants; inaccuracy of representations and warranties; cross default to certain other indebtedness; unpaid judgments; and certain bankruptcy and other insolvency events. The occurrence of any event of default could result in the termination of the commitments under the Second Amended Facility and permit the lenders to accelerate payment on outstanding borrowings under the Second Amended Facility and require cash collateralization of outstanding letters of credit. If a change in control (as defined in the Second Amended Facility) occurs, the lenders may terminate the commitments under the Second Amended Facility and require that the Company repay outstanding borrowings under the Second Amended Facility and cash collateralize outstanding letters of credit. Interest rates on borrowings generally will be based on either LIBOR or a base rate, plus the applicable spread. The Company was in compliance with all covenants under the Second Amended Facility as of September 30, 2016.

Borrowings under the Second Amended Facility, the availability of which is subject to a borrowing base formula, are required to be guaranteed by the Parent and certain of the Parent's wholly-owned subsidiaries, are secured by a pledge of all equity interests held by such guarantors, and may be used for general corporate purposes. Interest rates on borrowings generally will be based on either LIBOR or a base rate, plus the applicable spread. As of September 30, 2016, the commitment fee on the unused portion of the Second Facility accrues at an annual rate of 0.50%. As of September 30, 2016 and December 31, 2015, the Company had $96.0 million and $65.0 million outstanding against the Second Amended Facility, respectively, at effective rates of 4.37% and 3.32%, respectively as well as a letter of credit for $8.6 million outstanding at both dates.

Subordinated Amortizing Notes

On November 21, 2014, in order to pay down amounts borrowed under the senior unsecured bridge loan facility entered into in conjunction with the Polygon Acquisition, the Company completed its public offering and sale of 1,000,000 6.50% tangible equity units (“TEUs”, or "Units"), sold for a stated amount of $100 per Unit, featuring a 17.5% conversion premium. On December 3, 2014, the Company sold an additional 150,000 TEUs pursuant to an over-allotment option granted to the underwriters. Each TEU is a unit composed of two parts:


•	a prepaid stock purchase contract (a “purchase contract”); and


•	a senior subordinated amortizing note (an “amortizing note”).

Unless settled earlier at the holder’s option, each purchase contract will automatically settle on December 1, 2017 (the "mandatory settlement date"), and the Company will deliver not more than 5.2247 shares of Class A Common Stock and not less than 4.4465 shares of Class A Common Stock on the mandatory settlement date, subject to adjustment, based upon the applicable settlement rate and applicable market value of Class A Common Stock.

Each amortizing note had an initial principal amount of $18.01, bears interest at the annual rate of 5.50% and has a final installment payment date of December 1, 2017. On each March 1, June 1, September 1 and December 1, commencing on March 1, 2015, William Lyon Homes will pay equal quarterly installments of $1.6250 on each amortizing note (except for the March 1, 2015 installment payment, which was $1.8056 per amortizing note). Each installment will constitute a payment of interest and a partial repayment of principal. The amortizing notes rank equally in right of payment to all of the Company's existing and future senior indebtedness, other than borrowings under the Amended Facility and the Company's secured project level financing, which will be senior in right of payment to the obligations under the amortizing notes, in each case to the extent of the value of the assets securing such indebtedness.

Each TEU may be separated into its constituent purchase contract and amortizing note on any business day during the period beginning on, and including, the business day immediately succeeding the date of initial issuance of the Units to, but excluding, the third scheduled trading day immediately preceding the mandatory settlement date. Prior to separation, the purchase contracts and amortizing notes may only be purchased and transferred together as Units. The net proceeds received from the TEU issuance were allocated between the amortizing note and the purchase contract under the relative fair value method, with amounts allocated to the purchase contract classified as additional paid-in capital. As of September 30, 2016 and December 31, 2015, the amortizing notes had an unamortized carrying value of $9.0 million and $14.1 million, respectively.

Senior Notes

5 ³/₄% Senior Notes Due 2019

On March 31, 2014, California Lyon completed its private placement with registration rights of 5.75% Senior Notes due 2019 (the "5.75% Notes"), in an aggregate principal amount of $150 million. The 5.75% Notes were issued at 100% of their aggregate principal amount. In August 2014, we exchanged 100% of the initial 5.75% Notes for notes that are freely transferable and registered under the Securities Act of 1933, as amended (the “Securities Act”).

As of September 30, 2016, the outstanding principal amount of the 5.75% Notes was $150 million, excluding deferred loan costs of $1.3 million. The 5.75% Notes bear interest at a rate of 5.75% per annum, payable semiannually in arrears on April 15 and October 15, and mature on April 15, 2019. The 5.75% Notes are unconditionally guaranteed on a joint and several unsecured basis by Parent and certain of its existing and future restricted subsidiaries. The 5.75% Notes and the related guarantees are California Lyon’s and the guarantors’ unsecured senior obligations and rank equally in right of payment with all of California Lyon’s and the guarantors’ existing and future unsecured senior debt, including California Lyon’s $425 million in aggregate principal amount of 8.5% Senior Notes due 2020 and $350 million in aggregate principal amount of 7.00% Notes, each as described below. The 5.75% Notes rank senior in right of payment to all of California Lyon’s and the guarantors’ future subordinated debt. The 5.75% Notes and the guarantees are and will be effectively junior to California Lyon’s and the guarantors’ existing and future secured debt to the extent of the value of the collateral securing such debt.

8 ¹/₂% Senior Notes Due 2020

On November 8, 2012, California Lyon completed its private placement with registration rights of 8.5% Senior Notes due 2020, (the "initial 8.5% notes"), in an aggregate principal amount of $325 million. The initial 8.5% Notes were issued at 100% of their aggregate principal amount. In July 2013, we exchanged 100% of the initial 8.5% Notes for notes that are freely transferable and registered under the Securities Act.

On October 24, 2013, California Lyon completed its private placement with registration rights of an additional $100.0 million in aggregate principal amount of its 8.5% Senior Notes due 2020 (the “additional 8.5% Notes”, and together with the initial 8.5% notes, the "8.5% Notes" ) at an issue price of 106.5% of their aggregate principal amount, plus accrued interest from and including May 15, 2013, resulting in net proceeds of approximately $104.7 million. In February 2014, we exchanged 100% of the additional 8.5% Notes for notes that are freely transferable and registered under the Securities Act.

As of September 30, 2016 the outstanding principal amount of the 8.5% Notes was $425 million, excluding unamortized premium of $2.9 million and deferred loan costs of $5.1 million. The 8.5% Notes bear interest at a rate of 8.5% per annum, payable semiannually in arrears on May 15 and November 15, and mature on November 15, 2020. The 8.5% Notes are unconditionally guaranteed on a joint and several unsecured basis by Parent and by certain of its existing and future restricted subsidiaries. The 8.5% Notes and the related guarantees are California Lyon's and the guarantors' unsecured senior obligations and rank equally in right of payment with all of California Lyon’s and the guarantors’ existing and future unsecured senior debt, including the 5.75% Notes, as described above, and the 7.00% Notes, as described below. The 8.5% Notes rank senior in right of payment to all of California Lyon’s and the guarantors’ future subordinated debt. The 8.5% Notes and the guarantees are and will be effectively junior to any of California Lyon’s and the guarantors’ existing and future secured debt to the extent of the value of the collateral securing such debt.

7% Senior Notes Due 2022

On August 11, 2014, WLH PNW Finance Corp. (“Escrow Issuer”), completed its private placement with registration rights of 7.00% Senior Notes due 2022 (the “initial 7.00% Notes”), in an aggregate principal amount of $300 million. The initial 7.00% Notes were issued at 100% of their aggregate principal amount. On August 12, 2014, in connection with the consummation of the Polygon Acquisition, Escrow Issuer merged with and into California Lyon, and California Lyon assumed the obligations of the Escrow Issuer under the initial 7.00% Notes and the related indenture by operation of law (the “Escrow Merger”). Following the Escrow Merger, California Lyon is the obligor under the initial 7.00% Notes. In January 2015, we exchanged 100% of the initial 7.00% Notes for notes that are freely transferable and registered under the Securities Act.

On September 15, 2015, California Lyon completed its private placement with registration rights of an additional $50.0 million in aggregate principal amount of its 7.00% Senior Notes due 2022 (the “additional 7.00% Notes”, and together with the intial 7.00% Notes, the "7.00% Notes") at an issue price of 102.0% of their principal amount, plus accrued interest from August 15, 2015, resulting in net proceeds of approximately $50.5 million. In January 2016, we exchanged 100% of the additional 7.00% Notes for notes that are freely transferable and registered under the Securities Act.

As of September 30, 2016 the outstanding amount of the 7.00% Notes was $350 million, excluding unamortized premium of $0.9 million and deferred loan costs of $5.0 million. The 7.00% Notes bear interest at a rate of 7.00% per annum, payable semiannually in arrears on February 15 and August 15, and mature on August 15, 2022. The 7.00% Notes are unconditionally guaranteed on a joint and several unsecured basis by Parent and certain of its existing and future restricted subsidiaries. The 7.00% Notes and the related guarantees are California Lyon’s and the guarantors’ unsecured senior obligations and rank equally in right of payment with all of California Lyon’s and the guarantors’ existing and future unsecured senior debt, including California Lyon’s $150 million in aggregate principal amount of 5.75% Senior Notes due 2019 and $425 million in aggregate principal amount of 8.5% Senior Notes due 2020, each as described above. The 7.00% Notes rank senior in right of payment to all of California Lyon’s and the guarantors’ future subordinated debt. The 7.00% Notes and the guarantees are and will be effectively junior to California Lyon’s and the guarantors’ existing and future secured debt to the extent of the value of the collateral securing such debt.

Senior Note Covenant Compliance

The indentures governing the 5.75% Notes, the 8.5% Notes, and the 7.00% Notes contain covenants that limit the ability of Parent, California Lyon, and their restricted subsidiaries to, among other things: (i) incur or guarantee certain additional indebtedness; (ii) pay dividends, distributions, or repurchase equity or make payments in respect of subordinated indebtedness; (iii) make certain investments; (iv) sell assets; (v) incur liens; (vi) enter into agreements restricting the ability of the Company’s restricted subsidiaries to pay dividends or transfer assets; (vii) enter into transactions with affiliates; (viii) create unrestricted subsidiaries; and (viii) consolidate, merge or sell all or substantially all of its assets. These covenants are subject to a number of important exceptions and qualifications as described in the indentures. The Company was in compliance with all such covenants as of September 30, 2016.

GUARANTOR AND NON-GUARANTOR FINANCIAL STATEMENTS

The following consolidating financial information includes:

(1) Consolidating balance sheets as of September 30, 2016 and December 31, 2015; consolidating statements of operations for the three and nine months ended September 30, 2016 and 2015; and consolidating statements of cash flows for the nine month periods ended September 30, 2016 and 2015, of (a) William Lyon Homes, as the parent, or “Delaware Lyon”, (b) William Lyon Homes, Inc., as the subsidiary issuer, or “California Lyon”, (c) the guarantor subsidiaries, (d) the non-guarantor subsidiaries and (e) William Lyon Homes, Inc. on a consolidated basis; and

(2) Elimination entries necessary to consolidate Delaware Lyon, with California Lyon and its guarantor and non-guarantor subsidiaries.

Delaware Lyon owns 100% of all of its guarantor subsidiaries and all guarantees are full and unconditional, joint and several. As a result, in accordance with Rule 3-10 (d) of Regulation S-X promulgated by the SEC, no separate financial statements are required for these subsidiaries as of September 30, 2016 and December 31, 2015, and for the three and nine month periods ended September 30, 2016 and 2015.

CONDENSED CONSOLIDATING BALANCE SHEET

(Unaudited)

As of September 30, 2016

(in thousands)



	Unconsolidated
	Delaware Lyon		California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
ASSETS
Cash and cash equivalents	$	—	$	35,703		$	528		$	4,479		$	—		$	40,710
Restricted cash	—		—			—			—			—			—
Receivables	—		3,083			1,757			3,281			—			8,121
Escrow proceeds receivable	—		—			—			—			—			—
Real estate inventories	—		957,404			662,342			236,288			—			1,856,034
Investment in unconsolidated joint ventures	—		8,264			150			—			—			8,414
Goodwill	—		14,209			52,693			—			—			66,902
Intangibles, net	—		—			6,700			—			—			6,700
Deferred income taxes, net	—		79,728			—			—			—			79,728
Other assets, net	—		15,804			1,197			320			—			17,321
Investments in subsidiaries	671,670		(25,323		)	(608,347		)	—			(38,000		)	—
Intercompany receivables	—		—			248,639			—			(248,639		)	—
Total assets	$	671,670	$	1,088,872		$	365,659		$	244,368		$	(286,639	)	$	2,083,930
LIABILITIES AND EQUITY
Accounts payable	$	—	$	54,287		$	16,343		$	6,291		$	—		$	76,921
Accrued expenses	—		75,808			6,098			106			—			82,012
Notes payable	—		133,126			2,979			123,237			—			259,342
Subordinated amortizing notes	—		8,970			—			—			—			8,970
5 ³/₄% Senior Notes	—		148,691			—			—			—			148,691
8¹/2% Senior Notes	—		422,852			—			—			—			422,852
7% Senior Notes	—		345,829			—			—			—			345,829
Intercompany payables	—		176,227			—			72,412			(248,639		)	—
Total liabilities	—		1,365,790			25,420			202,046			(248,639		)	1,344,617
Equity
William Lyon Homes stockholders’ equity (deficit)	671,670		(276,917		)	340,240			(25,323		)	(38,000		)	671,670
Noncontrolling interests	—		(1		)	—			67,644			—			67,643
Total liabilities and equity	$	671,670	$	1,088,872		$	365,660		$	244,367		$	(286,639	)	$	2,083,930

CONDENSED CONSOLIDATING BALANCE SHEET

As of December 31, 2015

(in thousands)



	Unconsolidated
	Delaware Lyon		California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
ASSETS
Cash and cash equivalents	$	—	$	44,332		$	2,723		$	3,148		$	—		$	50,203
Restricted cash	—		504			—			—			—			504
Receivables	—		8,986			937			4,915			—			14,838
Escrow proceeds receivable	—		2,020			1,021			—			—			3,041
Real estate inventories	—		922,990			589,762			162,354			—			1,675,106
Investment in unconsolidated joint ventures	—		5,263			150			—			—			5,413
Goodwill	—		14,209			52,693			—			—			66,902
Intangibles, net	—		—			6,700			—			—			6,700
Deferred income taxes, net	—		79,726			—			—			—			79,726
Other assets, net	—		18,980			1,738			299			—			21,017
Investments in subsidiaries	632,095		(34,522		)	(561,546		)	—			(36,027		)	—
Intercompany receivables	—		—			239,248			—			(239,248		)	—
Total assets	$	632,095	$	1,062,488		$	333,426		$	170,716		$	(275,275	)	$	1,923,450
LIABILITIES AND EQUITY
Accounts payable	$	—	$	45,065		$	27,807		$	3,009		$	—		$	75,881
Accrued expenses	—		62,167			8,059			98			—			70,324
Notes payable	—		80,915			—			94,266			—			175,181
Subordinated amortizing notes	—		14,066			—			—			—			14,066
5 ³/₄% Senior Notes	—		148,295			—			—			—			148,295
8 ¹/₂% Senior Notes	—		422,896			—			—			—			422,896
7% Senior Notes	—		345,338			—			—			—			345,338
Intercompany payables	—		170,757			—			68,491			(239,248		)	—
Total liabilities	—		1,289,499			35,866			165,864			(239,248		)	1,251,981
Equity
William Lyon Homes stockholders’ equity (deficit)	632,095		(227,011		)	297,560			(34,522		)	(36,027		)	632,095
Noncontrolling interests	—		—			—			39,374			—			39,374
Total liabilities and equity	$	632,095	$	1,062,488		$	333,426		$	170,716		$	(275,275	)	$	1,923,450

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(Unaudited)

Three Months Ended September 30, 2016

(in thousands)



	Unconsolidated
	Delaware Lyon		California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
Operating revenue
Sales	$	—	$	105,962		$	181,594		$	55,072		$	—		$	342,628
Construction services	—		86			—			—			—			86
Management fees	—		(1,541		)	—			—			1,541			—
	—		104,507			181,594			55,072			1,541			342,714
Operating costs
Cost of sales	—		(84,652		)	(151,306		)	(48,397		)	(1,541		)	(285,896		)
Construction services	—		(86		)	—			—			—			(86		)
Sales and marketing	—		(6,205		)	(9,774		)	(2,267		)	—			(18,246		)
General and administrative	—		(14,268		)	(3,091		)	(1		)	—			(17,360		)
Other	—		140			69			(11		)	—			198
	—		(105,071		)	(164,102		)	(50,676		)	(1,541		)	(321,390		)
Income from subsidiaries	13,069		3,548			—			—			(16,617		)	—
Operating income	13,069		2,984			17,492			4,396			(16,617		)	21,324
Equity in income from unconsolidated joint ventures	—		1,140			295			—			—			1,435
Other income (expense), net	—		2,550			(19		)	(481		)	—			2,050
Income before provision for income taxes	13,069		6,674			17,768			3,915			(16,617		)	24,809
Provision for income taxes	—		(8,295		)	—			—			—			(8,295		)
Net income	13,069		(1,621		)	17,768			3,915			(16,617		)	16,514
Less: Net income attributable to noncontrolling interests	—		—			—			(3,445		)	—			(3,445		)
Net income available to common stockholders	$	13,069	$	(1,621	)	$	17,768		$	470		$	(16,617	)	$	13,069

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(Unaudited)

Three Months Ended September 30, 2015

(in thousands)



	Unconsolidated
	Delaware Lyon		California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
Operating revenue
Sales	$	—	$	90,594		$	149,122		$	4,595		$	—		$	244,311
Construction services	—		4,896			—			—			—			4,896
Management fees	—		(138		)	—			—			138			—
	—		95,352			149,122			4,595			138			249,207
Operating costs
Cost of sales	—		(71,488		)	(124,476		)	(4,226		)	(138		)	(200,328		)
Construction services	—		(4,146		)	—			—			—			(4,146		)
Sales and marketing	—		(6,312		)	(8,244		)	(796		)	—			(15,352		)
General and administrative	—		(11,515		)	(2,466		)	—			—			(13,981		)
Amortization of intangible assets	—		(45		)	—			—			—			(45		)
Other	—		(889		)	297			—			—			(592		)
	—		(94,395		)	(134,889		)	(5,022		)	(138		)	(234,444		)
Income from subsidiaries	12,082		623			—			—			(12,705		)	—
Operating income (loss)	12,082		1,580			14,233			(427		)	(12,705		)	14,763
Equity in income from unconsolidated joint ventures	—		1,018			—			—			—			1,018
Other income (expense), net	—		1,395			368			(311		)	—			1,452
Income (loss) before provision for income taxes	12,082		3,993			14,601			(738		)	(12,705		)	17,233
Provision for income taxes	—		(4,956		)	—			—			—			(4,956		)
Net income (loss)	12,082		(963		)	14,601			(738		)	(12,705		)	12,277
Less: Net income attributable to noncontrolling interests	—		—			—			(195		)	—			(195		)
Net income (loss) available to common stockholders	$	12,082	$	(963	)	$	14,601		$	(933	)	$	(12,705	)	$	12,082

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(Unaudited)

Nine Months Ended September 30, 2016

(in thousands)



	Unconsolidated
	Delaware Lyon		California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
Operating revenue
Sales	$	—	$	344,459		$	494,597		$	89,926		$	—		$	928,982
Construction services	—		3,810			—			—			—			3,810
Management fees	—		(2,587		)	—			—			2,587			—
	—		345,682			494,597			89,926			2,587			932,792
Operating costs
Cost of sales	—		(276,481		)	(411,339		)	(79,298		)	(2,587		)	(769,705		)
Construction services	—		(3,458		)	—			—			—			(3,458		)
Sales and marketing	—		(18,080		)	(26,731		)	(6,540		)	—			(51,351		)
General and administrative	—		(41,749		)	(10,129		)	(1		)	—			(51,879		)
Other	—		(587		)	(14		)	(11		)	—			(612		)
	—		(340,355		)	(448,213		)	(85,850		)	(2,587		)	(877,005		)
Income from subsidiaries	36,644		7,472			—			—			(44,116		)	—
Operating income (loss)	36,644		12,799			46,384			4,076			(44,116		)	55,787
Equity in income from unconsolidated joint ventures	—		3,001			809			—			—			3,810
Other income (expense), net	—		3,873			(34		)	(1,036		)	—			2,803
Income (loss) before provision for income taxes	36,644		19,673			47,159			3,040			(44,116		)	62,400
Provision for income taxes	—		(20,859		)	—			—			—			(20,859		)
Net income (loss)	36,644		(1,186		)	47,159			3,040			(44,116		)	41,541
Less: Net income attributable to noncontrolling interests	—		—			—			(4,897		)	—			(4,897		)
Net income (loss) available to common stockholders	$	36,644	$	(1,186	)	$	47,159		$	(1,857	)	$	(44,116	)	$	36,644

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(Unaudited)

Nine Months Ended September 30, 2015

(in thousands)



	Unconsolidated
	Delaware Lyon		California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
Operating revenue
Sales	$	—	$	285,136		$	368,519		$	28,111		$	—		$	681,766
Construction services	—		19,304			—			—			—			19,304
Management fees	—		(844		)	—			—			844			—
	—		303,596			368,519			28,111			844			701,070
Operating costs
Cost of sales	—		(220,846		)	(309,076		)	(23,891		)	(844		)	(554,657		)
Construction services	—		(16,073		)	—			—			—			(16,073		)
Sales and marketing	—		(18,478		)	(21,544		)	(2,458		)	—			(42,480		)
General and administrative	—		(33,503		)	(7,841		)	—						(41,344		)
Amortization of intangible assets	—		(710		)	—			—			—			(710		)
Other	—		(2,671		)	1,122			—			—			(1,549		)
	—		(292,281		)	(337,339		)	(26,349		)	(844		)	(656,813		)
Income from subsidiaries	31,041		(5,845		)	—			—			(25,196		)	—
Operating income (loss)	31,041		5,470			31,180			1,762			(25,196		)	44,257
Equity in income from unconsolidated joint ventures	—		1,781			—			—			—			1,781
Other income (expense), net	—		6,083			5,685			(8,893		)	—			2,875
Income (loss) before provision for income taxes	31,041		13,334			36,865			(7,131		)	(25,196		)	48,913
Provision for income taxes	—		(15,780		)	—			—			—			(15,780		)
Net income (loss)	31,041		(2,446		)	36,865			(7,131		)	(25,196		)	33,133
Less: Net income attributable to noncontrolling interests	—		—			—			(2,092		)	—			(2,092		)
Net income (loss) available to common stockholders	$	31,041	$	(2,446	)	$	36,865		$	(9,223	)	$	(25,196	)	$	31,041

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(Unaudited)

Nine Months Ended September 30, 2016

(in thousands)



	Unconsolidated
	Delaware Lyon			California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
Operating activities
Net cash (used in) provided by operating activities	$	(2,931	)	$	18,174		$	(35,182	)	$	(65,970	)	$	2,931		$	(82,978	)
Investing activities
Collection of related party note receivable	—			6,188			—			—			—			6,188
Purchases of property and equipment	—			(809		)	56			(20		)	—			(773		)
Investments in subsidiaries	—			(1,727		)	46,801			—			(45,074		)	—
Net cash (used in) provided by investing activities	—			3,652			46,857			(20		)	(45,074		)	5,415
Financing activities
Proceeds from borrowings on notes payable	—			2,211			—			109,781			—			111,992
Principal payments on notes payable	—			(10,440		)	—			(80,810		)	—			(91,250		)
Proceeds from borrowings on Revolver	—			198,000			—			—			—			198,000
Payments on Revolver	—			(167,000		)	—			—			—			(167,000		)
Principal payments on subordinated amortizing notes	—			(5,096		)	—			—			—			(5,096		)
Payment of deferred loan costs	—			(792		)	—			—			—			(792		)
Purchase of common stock	—			(918		)	—			—			—			(918		)
Excess income tax benefit from stock based awards	—			(238		)	—			—			—			(238		)
Noncontrolling interest contributions	—			—			—			36,140			—			36,140
Noncontrolling interest distributions	—			—			—			(12,768		)	—			(12,768		)
Advances to affiliates	—			—			(4,479		)	11,056			(6,577		)	—
Intercompany receivables/payables	2,931			(46,182		)	(9,391		)	3,922			48,720			—
Net cash provided by (used in) financing activities	2,931			(30,455		)	(13,870		)	67,321			42,143			68,070
Net (decrease) increase in cash and cash equivalents	—			(8,629		)	(2,195		)	1,331			—			(9,493		)
Cash and cash equivalents at beginning of period	—			44,332			2,723			3,148			—			50,203
Cash and cash equivalents at end of period	$	—		$	35,703		$	528		$	4,479		$	—		$	40,710

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(Unaudited)

Nine Months Ended September 30, 2015

(in thousands)



	Unconsolidated
	Delaware Lyon			California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
Operating activities
Net cash (used in) provided by operating activities	$	(3,108	)	$	(148,129	)	$	(19,212	)	$	(52,390	)	$	2,485		$	(220,354	)
Investing activities
Investments in and advances to unconsolidated joint ventures	—			(1,000		)	—			—			—			(1,000		)
Purchases of property and equipment	—			(1,375		)	65			22			—			(1,288		)
Investments in subsidiaries	—			(6,572		)	27,885			—			(21,313		)	—
Net cash (used in) provided by investing activities	—			(8,947		)	27,950			22			(21,313		)	(2,288		)
Financing activities
Proceeds from borrowings on notes payable	—			30,415			—			54,511			—			84,926
Principal payments on notes payable	—			(8,725		)	(162		)	(12,236		)	—			(21,123		)
Proceeds from issuance of 7% notes	—			51,000			—			—			—			51,000
Proceeds from borrowings on Revolver	—			194,000			—			—			—			194,000
Payments on revolver	—			(109,000		)	—			—			—			(109,000		)
Principal payments on subordinated amortizing notes	—			(4,999		)	—			—			—			(4,999		)
Payment of deferred loan costs	—			(1,755		)	—			—			—			(1,755		)
Proceeds from exercise of stock options	—			106			—			—			—			106
Shares remitted to Company for employee tax witholding	—			(1,826		)	—			—			—			(1,826		)
Noncontrolling interest contributions	—			—			—			13,125			—			13,125
Noncontrolling interest distributions	—			—			—			(8,204		)	—			(8,204		)
Advances to affiliates	—			—			(4,810		)	9,327			(4,517		)	—
Intercompany receivables/payables	3,108			(21,706		)	(3,412		)	(1,335		)	23,345			—
Net cash provided by (used in) financing activities	3,108			127,510			(8,384		)	55,188			18,828			196,250
Net increase in cash and cash equivalents	—			(29,566		)	354			2,820			—			(26,392		)
Cash and cash equivalents at beginning of period	—			48,462			573			3,736			—			52,771
Cash and cash equivalents at end of period	$	—		$	18,896		$	927		$	6,556		$	—		$	26,379