Senior Notes, Secured, and Unsecured Indebtedness

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



	September 30, 2017		December 31, 2016
Notes payable:
Revolving credit facility	$	50,000	$	29,000
Seller financing	5,226		24,692
Joint venture notes payable	105,785		102,076
Total notes payable	161,011		155,768

Subordinated amortizing notes	1,619		7,225

Senior notes:
5 ³/₄% Senior Notes due April 15, 2019	149,226		148,826
8 ¹/₂% Senior Notes due November 15, 2020	—		422,817
7% Senior Notes due August 15, 2022	346,556		346,014
5 ⁷/₈% Senior Notes due January 31, 2025	439,221		—
Total senior notes	935,003		917,657

Total notes payable and senior notes	$	1,097,633	$	1,080,650

As of September 30, 2017, the maturities of the Notes payable, Subordinated amortizing notes, 5 ³/₄% Senior Notes, 7% Senior Notes, and 5 ⁷/₈% Senior Notes are as follows (in thousands):



Year Ending December 31,
2017	5,335
2018	47,238
2019	231,806
2020	28,251
2021	—
Thereafter	800,000
	$	1,112,630

Maturities above exclude premium on the 7% Senior Notes of $0.8 million, discount on the 5 ⁷/₈% Senior Notes of $3.3 million, and deferred loan costs on the 5 ³/₄%, 7%, and 5 ⁷/₈% Senior Notes of $12.5 million as of September 30, 2017.

Notes Payable

Revolving Credit Facility

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 amended from time to time, 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 remained at 65% from June 30, 2016 through and including December 30, 2016, decreased to 62.5% on the last day of the 2016 fiscal year, remained at 62.5% from December 31, 2016 through and including June 29, 2017, and was scheduled to further decrease to 60% on the last day of the second quarter of 2017 and to remain at 60% thereafter. The Second Amended Facility did not revise any of our other financial covenants thereunder.

On June 16, 2017, California Lyon, Parent and the lenders party thereto entered into an amendment to the Second Amended Facility, which amended the maximum leverage ratio to further extend the timing of the gradual step-downs, such that the leverage ratio will remain at 62.5% through and including December 30, 2017, and decrease to 60% on the last day of the 2017 fiscal year and remain at 60% thereafter. The amendment 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 decreased to 62.5% effective as of December 31, 2016 and is scheduled to decrease to 60% effective as of December 31, 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.

In January 2017, the Company entered into an amendment which modifies the definition of Tangible Net Worth for purposes of calculating the Leverage Ratio covenant under the Second Amended Facility, so as to exclude any reduction in Tangible Net Worth (as defined therein) that occurs as a result of the costs related to payment of any call premium or any other costs associated with the refinancing transaction and the redemption of outstanding 8.5% Notes. The Company was in compliance with all covenants under the Second Amended Facility as of September 30, 2017.

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, 2017, the commitment fee on the unused portion of the Second Facility accrues at an annual rate of 0.50%. As of September 30, 2017 and December 31, 2016, the Company had $50.0 million and $29.0 million outstanding against the Second Amended Facility, respectively, at effective rates of 6.25% and 4.75%, respectively as well as letters of credit for $0.8 million and $8.0 million, respectively.

Seller Financing

At September 30, 2017, the Company had $5.2 million of notes payable outstanding related to one land acquisition for which seller financing was provided. The note bears interest at a rate of 7% per annum, is secured by the underlying land, and matures in June 2018. During the nine months ended September 30, 2017, the Company paid in full a note payable outstanding related to a land acquisition for which seller financing was provided. The note bore interest at a rate of 7% per annum, was secured by the underlying land, and was paid upon maturity in August 2017. This note was entered into with a related party. Refer to Note 8 for more details regarding the related party transaction.

Joint Venture Notes Payable

The Company and certain of its consolidated joint ventures have entered into 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, 2017 (in millions):



Issuance Date	Facility Size		Outstanding			Maturity	Current Rate
March, 2016	$	33.4	$	16.7		September, 2018	4.24	%	(1)
January, 2016	35.0		31.8			February, 2019	4.48	%	(2)
November, 2015	42.5		19.3			May, 2018	5.25	%	(1)
July, 2015	15.0		3.6			July, 2018	4.75	%	(3)
November, 2014	7.0		3.7		(4)	November, 2017	4.75	%	(3)
November, 2014	15.0		—			November, 2017	4.75	%	(3)
March, 2014	26.0		2.4			April, 2018	4.24	%	(1)
July, 2017	46.2		28.3			August, 2020	4.46	%	(5)
	$	220.1	$	105.8

(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) The Company anticipates paying the borrowings in full upon the maturity date from proceeds from homes closed in the respective project.

(5) Loan bears interest at the greatest of the prime rate, federal funds effective rate +1.0%, or LIBOR +1.0%.

The joint venture notes payable contain certain financial maintenance covenants. The Company was in compliance with all such covenants as of September 30, 2017.

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, 2017 and December 31, 2016, the amortizing notes had an unamortized carrying value of $1.6 million and $7.2 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, 2017, the outstanding principal amount of the 5.75% Notes was $150 million, excluding deferred loan costs of $0.8 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 $450 million in aggregate principal amount of 5.875% Senior Notes due 2020 and $350 million in aggregate principal amount of 7.00% Notes due 2019, 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.

During the nine months ended September 30, 2017, Parent, through California Lyon, used the net proceeds from its private placement with registration rights of 5.875% Senior Notes due 2025, as further described below, to purchase $395.6 million of the outstanding aggregate principal amount of the 8.5% Notes, pursuant to a cash tender offer and consent solicitation. Subsequently, the Company used the remaining proceeds, together with cash on hand, for the retirement of the remaining outstanding 8.5% Notes, such that the entire aggregate $425 million of previously outstanding 8.5% Notes are retired and extinguished as of September 30, 2017. The Company incurred certain costs related to the early extinguishment of debt of the 8.5% Notes during the nine months ended September 30, 2017 in an amount of $21.8 million, which is included in the Consolidated Statement of Operations as Loss on extinguishment of 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 initial 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, 2017 the outstanding amount of the 7.00% Notes was $350 million, excluding unamortized premium of $0.8 million and deferred loan costs of $4.2 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, as described above, and $450 million in aggregate principal amount of 5.875% Senior Notes due 2020, as described below. 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.

5.875% Senior Notes Due 2025

On January 31, 2017, California Lyon completed its private placement with registration rights of 5.875% Senior Notes due 2025 (the "5.875% Notes"), in an aggregate principal amount of $450 million. The 5.875% Notes were issued at 99.215% of their aggregate principal amount. Parent, through California Lyon, used the net proceeds from the 5.875% Notes offering to purchase the outstanding aggregate principal amount of the 8.5% Notes such that the entire aggregate $425 million of previously outstanding 8.5% Notes are retired and extinguished as of September 30, 2017. In May 2017, the Company exchanged 100% of the 5.875% Notes for notes that are freely transferable and registered under the Securities Act.

As of September 30, 2017, the outstanding principal amount of the 5.875% Notes was $450 million, excluding unamortized discount of $3.3 million and deferred loan costs of $7.5 million. The 5.875% Notes bear interest at a rate of 5.875% per annum, payable semiannually in arrears on January 31 and July 31, and mature on January 31, 2025. The 5.875% Notes are unconditionally guaranteed on a joint and several unsecured basis by Parent and certain of its existing and future restricted subsidiaries. The 5.875% 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 $350 million in aggregate principal amount of 7.00% Senior Notes due 2022, each as described above. The 5.875% Notes rank senior in right of payment to all of California Lyon’s and the guarantors’ future subordinated debt. The 5.875% 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.

On or after January 31, 2020, California Lyon may redeem all or a portion of the 5.875% Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of principal amount), set forth below plus accrued and unpaid interest to the redemption date, if redeemed during the 12-month period commencing on each of the dates indicated below:



Year	Percentage
January 31, 2020	102.938	%
January 31, 2021	101.469	%
January 31, 2022	100.734	%
January 31, 2023 and thereafter	100.000	%

Prior to January 31, 2020, the 5.875% Notes may be redeemed in whole or in part at a redemption price equal to 100% of the principal amount plus a "make-whole" premium, and accrued and unpaid interest to, the redemption date.

In addition, any time prior to January 31, 2020, California Lyon may, at its option on one or more occasions, redeem the 5.875% Notes in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the 5.875% Notes issued prior to such date at a redemption price (expressed as a percentage of principal amount) of 105.875%, plus accrued and unpaid interest to the redemption date, with an amount equal to the net cash proceeds from one or more equity offerings.

Senior Notes Covenant Compliance

The indentures governing the 5.75% Notes, the 7.00% Notes, and the 5.875% 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, 2017.

GUARANTOR AND NON-GUARANTOR FINANCIAL STATEMENTS

The following consolidating financial information includes:

(1) Consolidating balance sheets as of September 30, 2017 and December 31, 2016; consolidating statements of operations for the three and nine months ended September 30, 2017 and 2016; and consolidating statements of cash flows for the nine month periods ended September 30, 2017 and 2016, 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, 2017 and December 31, 2016, and for the nine month periods ended September 30, 2017 and 2016.

The consolidating balance sheet as of December 31, 2016 was adjusted to reflect the adoption of ASU 2016-02 (see Note 1).

CONDENSED CONSOLIDATING BALANCE SHEET

(Unaudited)

As of September 30, 2017

(in thousands)



	Unconsolidated
	Delaware Lyon		California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
ASSETS
Cash and cash equivalents	$	—	$	34,727		$	(328	)	$	9,205		$	—		$	43,604
Receivables	—		4,048			1,760			3,911			—			9,719
Escrow proceeds receivable	—		228			—			—			—			228
Real estate inventories	—		900,390			697,824			257,444			—			1,855,658
Investment in unconsolidated joint ventures	—		8,075			150			—			—			8,225
Goodwill	—		14,209			52,693			—			—			66,902
Intangibles, net	—		—			6,700			—			—			6,700
Deferred income taxes, net	—		73,597			—			—			—			73,597
Lease right-of-use assets	—		15,074			—			—			—			15,074
Other assets, net	—		18,762			1,896			494			—			21,152
Investments in subsidiaries	735,984		(18,249		)	(575,925		)	—			(141,810		)	—
Intercompany receivables	—		—			241,160			—			(241,160		)	—
Total assets	$	735,984	$	1,050,861		$	425,930		$	271,054		$	(382,970	)	$	2,100,859
LIABILITIES AND EQUITY
Accounts payable	$	—	$	48,450		$	25,061		$	10,605		$	—		$	84,116
Accrued expenses	—		88,318			4,719			103			—			93,140
Notes payable	—		55,226			—			105,785			—			161,011
Subordinated amortizing notes	—		1,619			—			—			—			1,619
5³/4% Senior Notes	—		149,226			—			—			—			149,226
7% Senior Notes	—		346,556			—			—			—			346,556
5 ⁷/₈% Senior Notes	—		439,221			—			—			—			439,221
Intercompany payables	—		158,338			—			82,822			(241,160		)	—
Total liabilities	—		1,286,954			29,780			199,315			(241,160		)	1,274,889
Equity
William Lyon Homes stockholders’ equity (deficit)	735,984		(236,091		)	396,150			(18,249		)	(141,810		)	735,984
Noncontrolling interests	—		(2		)	—			89,988			—			89,986
Total liabilities and equity	$	735,984	$	1,050,861		$	425,930		$	271,054		$	(382,970	)	$	2,100,859

CONDENSED CONSOLIDATING BALANCE SHEET

As of December 31, 2016

(as adjusted)

(in thousands)



	Unconsolidated
	Delaware Lyon		California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
ASSETS
Cash and cash equivalents	$	—	$	36,204		$	272		$	6,136		$	—		$	42,612
Receivables	—		2,989			3,303			3,246			—			9,538
Escrow proceeds receivable	—		85			—			—			—			85
Real estate inventories	—		910,594			645,341			216,063			—			1,771,998
Investment in unconsolidated joint ventures	—		7,132			150			—			—			7,282
Goodwill	—		14,209			52,693			—			—			66,902
Intangibles, net	—		—			6,700			—			—			6,700
Deferred income taxes, net	—		75,751			—			—			—			75,751
Lease right-of-use assets	—		13,129			—			—			—			13,129
Other assets, net	—		15,779			1,089			415			—			17,283
Investments in subsidiaries	697,086		(23,736		)	(573,650		)	—			(99,700		)	—
Intercompany receivables	—		—			252,860			—			(252,860		)	—
Total assets	$	697,086	$	1,052,136		$	388,758		$	225,860		$	(352,560	)	$	2,011,280
LIABILITIES AND EQUITY
Accounts payable	$	—	$	52,380		$	16,416		$	5,486		$	—		$	74,282
Accrued expenses	—		88,185			4,636			98			—			92,919
Notes payable	—		50,713			2,979			102,076			—			155,768
Subordinated amortizing notes	—		7,225			—			—			—			7,225
5 ³/₄% Senior Notes	—		148,826			—			—			—			148,826
8 ¹/₂% Senior Notes	—		422,817			—			—			—			422,817
7% Senior Notes	—		346,014			—			—			—			346,014
Intercompany payables	—		177,267			—			75,593			(252,860		)	—
Total liabilities	—		1,293,427			24,031			183,253			(252,860		)	1,247,851
Equity
William Lyon Homes stockholders’ equity (deficit)	697,086		(241,291		)	364,727			(23,736		)	(99,700		)	697,086
Noncontrolling interests	—		—			—			66,343			—			66,343
Total liabilities and equity	$	697,086	$	1,052,136		$	388,758		$	225,860		$	(352,560	)	$	2,011,280

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(Unaudited)

Three Months Ended September 30, 2017

(in thousands)



	Unconsolidated
	Delaware Lyon		California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
Operating revenue
Sales	$	—	$	211,317		$	218,033		$	60,954		$	—		$	490,304
Construction services	—		35			—			—			—			35
Management fees	—		(1,899		)	—			—			1,899			—
	—		209,453			218,033			60,954			1,899			490,339
Operating costs
Cost of sales	—		(165,392		)	(181,184		)	(53,225		)	(1,899		)	(401,700		)
Construction services	—		(35		)	—			—			—			(35		)
Sales and marketing	—		(7,904		)	(11,521		)	(2,510		)	—			(21,935		)
General and administrative	—		(19,171		)	(3,780		)	—			—			(22,951		)
Other	—		(635		)	86			1			—			(548		)
	—		(193,137		)	(196,399		)	(55,734		)	(1,899		)	(447,169		)
Income from subsidiaries	27,418		6,162			—			—			(33,580		)	—
Operating income	27,418		22,478			21,634			5,220			(33,580		)	43,170
Equity in income from unconsolidated joint ventures	—		819			341			—			—			1,160
Other income (expense), net	—		47			(4		)	(408		)	—			(365		)
Income before provision for income taxes	27,418		23,344			21,971			4,812			(33,580		)	43,965
Provision for income taxes	—		(13,905		)	—			—			—			(13,905		)
Net income	27,418		9,439			21,971			4,812			(33,580		)	30,060
Less: Net income attributable to noncontrolling interests	—		—			—			(2,642		)	—			(2,642		)
Net income available to common stockholders	$	27,418	$	9,439		$	21,971		$	2,170		$	(33,580	)	$	27,418

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 (loss)	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 (loss) 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 (loss)	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 (loss) available to common stockholders	$	13,069	$	(1,621	)	$	17,768		$	470		$	(16,617	)	$	13,069

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(Unaudited)

Nine Months Ended September 30, 2017

(in thousands)



	Unconsolidated
	Delaware Lyon		California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
Operating revenue
Sales	$	—	$	505,006		$	535,828		$	130,957		$	—		$	1,171,791
Construction services	—		94			—			—			—			94
Management fees	—		(3,501		)	—			—			3,501			—
	—		501,599			535,828			130,957			3,501			1,171,885
Operating costs
Cost of sales	—		(408,420		)	(445,737		)	(115,554		)	(3,501		)	(973,212		)
Construction services	—		(41		)	—			—			—			(41		)
Sales and marketing	—		(21,479		)	(29,241		)	(7,204		)	—			(57,924		)
General and administrative	—		(49,285		)	(12,161		)	(1		)	—			(61,447		)
Other	—		(1,786		)	232			6			—			(1,548		)
	—		(481,011		)	(486,907		)	(122,753		)	(3,501		)	(1,094,172		)
Income from subsidiaries	36,372		13,328			—			—			(49,700		)	—
Operating income	36,372		33,916			48,921			8,204			(49,700		)	77,713
Equity in income from unconsolidated joint ventures	—		1,743			879			—			—			2,622
Other income (expense), net	—		1,072			(10		)	(1,074		)	—			(12		)
Income before extinguishment of debt	36,372		36,731			49,790			7,130			(49,700		)	80,323
Loss on extinguishment of debt	—		(21,828		)	—			—			—			(21,828		)
Income (loss) before provision for income taxes	36,372		14,903			49,790			7,130			(49,700		)	58,495
Provision for income taxes	—		(17,480		)	—			—			—			(17,480		)
Net income (loss)	36,372		(2,577		)	49,790			7,130			(49,700		)	41,015
Less: Net income attributable to noncontrolling interests	—		—			—			(4,643		)	—			(4,643		)
Net income (loss) available to common stockholders	$	36,372	$	(2,577	)	$	49,790		$	2,487		$	(49,700	)	$	36,372

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	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 CASH FLOWS

(Unaudited)

Nine Months Ended September 30, 2017

(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	$	(2,526	)	$	2,452		$	4,366		$	(29,808	)	$	2,526		$	(22,990	)
Investing activities
Purchases of property and equipment	—			(1,781		)	(572		)	(63		)	—			(2,416		)
Investments in subsidiaries	—			7,841			2,275			—			(10,116		)	—
Net cash provided by (used in) investing activities	—			6,060			1,703			(63		)	(10,116		)	(2,416		)
Financing activities
Proceeds from borrowings on notes payable	—			—			—			105,109			—			105,109
Principal payments on notes payable	—			—			—			(101,400		)	—			(101,400		)
Redemption premium of 8.5% Senior Notes	—			(19,645		)	—			—			—			(19,645		)
Principal payments of 8.5% Senior Notes	—			(425,000		)	—			—			—			(425,000		)
Proceeds from issuance of 5.875% Senior Notes	—			446,468			—			—			—			446,468
Proceeds from borrowings on Revolver	—			275,000			—			—			—			275,000
Payments on Revolver	—			(254,000		)	—			—			—			(254,000		)
Principal payments on subordinated amortizing notes	—			(5,606		)	—			—			—			(5,606		)
Payment of deferred loan costs	—			(9,794		)	—			—			—			(9,794		)
Shares remitted to, or withheld by the Company for employee tax withholding	—			(1,450		)	—			—			—			(1,450		)
Payments to repurchase common stock	—			(2,284		)	—			—			—			(2,284		)
Noncontrolling interest contributions	—			—			—			58,829			—			58,829
Noncontrolling interest distributions	—			—			—			(39,829		)	—			(39,829		)
Advances to affiliates	—			—			(18,367		)	3,000			15,367			—
Intercompany receivables/payables	2,526			(13,678		)	11,698			7,231			(7,777		)	—
Net cash provided by (used in) financing activities	2,526			(9,989		)	(6,669		)	32,940			7,590			26,398
Net (decrease) increase in cash and cash equivalents	—			(1,477		)	(600		)	3,069			—			992
Cash and cash equivalents - beginning of period	—			36,204			272			6,136			—			42,612
Cash and cash equivalents - end of period	$	—		$	34,727		$	(328	)	$	9,205		$	—		$	43,604

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 provided by (used in) 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		)
Shares remitted to or withheld by Company for employee tax withholding	—			(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 - beginning of period	—			44,332			2,723			3,148			—			50,203
Cash and cash equivalents - end of period	$	—		$	35,703		$	528		$	4,479		$	—		$	40,710