Senior Notes, Secured, and Unsecured Indebtedness (Tables)

9 Months Ended

Sep. 30, 2017

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

Schedule of Maturities of Notes Payable and Senior Notes

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%.

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

Debt Instrument Redemption

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	%

Condensed Consolidating Balance Sheet

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

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 Cash Flows

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