WLS Welsh Property Trust Common Stock

William Lyon Homes (NYSE:WLS): -0- *T Financial Highlights 2006 First Quarter -- Net income of $26.2 million, up 28% -- Earnings per diluted share of $3.02, up 28% -- Consolidated operating revenue of $307.4 million, up 25% -- Homebuilding gross margins of 25.4%, down 310 basis points -- Quarter-end backlog of 1,357 homes, valued at $721.2 million -- Net new home orders of 647, down 26% *T William Lyon Homes (NYSE:WLS) today reported that net income for the first quarter ended March 31, 2006 increased 28% to $26,214,000, or $3.02 per diluted share, as compared to net income of $20,493,000, or $2.36 per diluted share, for the comparable period a year ago. Consolidated operating revenue increased 25% to $307,381,000 for the quarter ended March 31, 2006, as compared to $246,682,000 for the comparable period a year ago. The Company's consolidated results including joint ventures were as follows: The number of homes closed in the first quarter of 2006 was 581 homes, up 27% from 459 homes in the first quarter of 2005. At March 31, 2006, the backlog of homes sold but not closed totaled 1,357 homes, down 14% from 1,580 homes at March 31, 2005, and up 5% from 1,291 homes at December 31, 2005. The dollar amount of backlog of homes sold but not closed was $721,183,000, down 17% from $871,192,000 a year ago, and up 4% from $691,627,000 at December 31, 2005. The Company's cancellation rate for the three months ended March 31, 2006 was 28%, compared to 12% for the three months ended March 31, 2005. During the last half of the fourth quarter of 2005, the Company began to experience some slowing in new orders in many of its markets, increases in cancellation rates and increasing pricing pressures from several of its competitors who initiated aggressive incentive and discounting programs. This softening in the Company's markets is continuing into 2006. Net new home orders for the quarter ended March 31, 2006 were 647 homes, down 26% from 873 homes for the quarter ended March 31, 2005. The average number of sales locations during the quarter ended March 31, 2006 was 48, up 26% from 38 in the comparable period a year ago, as a result of the Company's focus begun in 2005 to increase the number of sales locations in each of its markets. The Company's number of new home orders per average sales location decreased to 13.5 for the quarter ended March 31, 2006 as compared to 23.0 for the quarter ended March 31, 2005. During the first quarter of 2006, the average sales price of homes (including joint ventures) was $529,100, down slightly from $533,000 for the comparable period a year ago. The lower average sales price reflects a change in product mix. The consolidated homebuilding gross margin percentage decreased to 25.4% for the quarter ended March 31, 2006 from 28.5% for the quarter ended March 31, 2005. The lower gross margin percentages primarily reflect the close out of projects with higher average gross margin percentages, and a shift in product mix and increases in land costs which resulted in higher cost of sales when homes closed. Selected financial and operating information for the Company, including joint ventures, is set forth in greater detail in the schedule attached to this press release. William Lyon Homes is one of the oldest and largest homebuilders in the Southwest with development communities in California, Arizona and Nevada and at March 31, 2006 had 49 sales locations. The Company's corporate headquarters are located in Newport Beach, California. Certain statements contained in this release that are not historical information contain forward-looking statements. The forward-looking statements involve risks and uncertainties and actual results may differ materially from those projected or implied. Further, certain forward-looking statements are based on assumptions regarding future events which may not prove to be accurate. Factors that may impact such forward-looking statements include, among others, changes in general economic conditions and in the markets in which the Company competes, the outbreak, continuation or escalation of war or other hostilities, including terrorism, involving the United States, changes in mortgage and other interest rates, changes in prices of homebuilding materials, weather, the occurrence of events such as landslides, soil subsidence and earthquakes that are uninsurable, not economically insurable or not subject to effective indemnification agreements, the availability of labor and homebuilding materials, changes in governmental laws and regulations, the timing of receipt of regulatory approvals and the opening of projects, and the availability and cost of land for future development, as well as the other factors discussed in the Company's reports filed with the Securities and Exchange Commission. -0- *T WILLIAM LYON HOMES SELECTED FINANCIAL AND OPERATING INFORMATION (unaudited) Three Months Ended March 31, 2006 Wholly- Joint Consolidated owned Ventures Total Selected Financial Information (dollars in thousands) Homes closed 516 65 581 Home sales revenue $271,220 $36,161 $307,381 Cost of sales (206,129) (23,314) (229,443) Gross margin $65,091 $12,847 $77,938 Gross margin percentage 24.0% 35.5% 25.4% Number of homes closed California 263 65 328 Arizona 99 - 99 Nevada 154 - 154 Total 516 65 581 Average sales price California $640,800 $556,300 $624,100 Arizona 417,900 - 417,900 Nevada 398,100 - 398,100 Total $525,600 $556,300 $529,100 Number of net new home orders California 296 96 392 Arizona 116 - 116 Nevada 139 - 139 Total 551 96 647 Average number of sales locations during period California 24 7 31 Arizona 6 - 6 Nevada 11 - 11 Total 41 7 48 Three Months Ended March 31, 2005 Wholly- Joint Consolidated owned Ventures Total Selected Financial Information (dollars in thousands) Homes closed 364 95 459 Home sales revenue $187,433 $57,223 $244,656 Cost of sales (135,514) (39,468) (174,982) Gross margin $51,919 $17,755 $69,674 Gross margin percentage 27.7% 31.0% 28.5% Number of homes closed California 117 95 212 Arizona 126 - 126 Nevada 121 - 121 Total 364 95 459 Average sales price California $867,100 $602,400 $748,500 Arizona 287,300 - 287,300 Nevada 411,400 - 411,400 Total $514,900 $602,400 $533,000 Number of net new home orders California 376 205 581 Arizona 159 - 159 Nevada 133 - 133 Total 668 205 873 Average number of sales locations during period California 15 9 24 Arizona 6 - 6 Nevada 8 - 8 Total 29 9 38 WILLIAM LYON HOMES SELECTED FINANCIAL AND OPERATING INFORMATION (Continued) (unaudited) As of March 31, 2006 Wholly- Joint Consolidated owned Ventures Total Backlog of homes sold but not closed at end of period California 641 154 795 Arizona 413 - 413 Nevada 149 - 149 Total 1,203 154 1,357 Dollar amount of homes sold but not closed at end of period (in thousands) California $459,291 $77,222 $536,513 Arizona 133,658 - 133,658 Nevada 51,012 - 51,012 Total $643,961 $77,222 $721,183 Lots controlled at end of period Owned lots California 4,237 1,225 5,462 Arizona 2,721 1,738 4,459 Nevada 1,460 - 1,460 Total 8,418 2,963 11,381 Optioned lots (1) California 4,101 Arizona 6,012 Nevada 2,137 Total 12,250 Total lots controlled California 9,563 Arizona 10,471 Nevada 3,597 Total 23,631 As of March 31, 2005 Wholly- Joint Consolidated owned Ventures Total Backlog of homes sold but not closed at end of period California 616 355 971 Arizona 515 - 515 Nevada 94 - 94 Total 1,225 355 1,580 Dollar amount of homes sold but not closed at end of period (in thousands) California $453,105 $224,482 $677,587 Arizona 157,306 - 157,306 Nevada 36,299 - 36,299 Total $646,710 $224,482 $871,192 Lots controlled at end of period Owned lots California 3,716 1,350 5,066 Arizona 3,766 - 3,766 Nevada 1,072 - 1,072 Total 8,554 1,350 9,904 Optioned lots (1) California 4,060 Arizona 5,421 Nevada 1,272 Total 10,753 Total lots controlled California 9,126 Arizona 9,187 Nevada 2,344 Total 20,657 (1) Optioned lots may be purchased by the Company as wholly-owned projects or may be purchased by newly formed joint ventures. WILLIAM LYON HOMES CONSOLIDATED STATEMENTS OF INCOME (in thousands except per common share amounts) (unaudited) Three Months Ended March 31, 2006 2005 Operating revenue Home sales $307,381 $244,656 Lots, land and other sales - 2,026 307,381 246,682 Operating costs Cost of sales - homes (229,443) (174,982) Cost of sales - lots, land and other (430) (1,813) Sales and marketing (13,124) (11,115) General and administrative (18,589) (17,441) Other (826) (682) (262,412) (206,033) Equity in income (loss) of unconsolidated joint ventures 3,638 (411) Minority equity in income of consolidated entities (5,226) (6,260) Operating income 43,381 33,978 Financial advisory expenses (1,500) - Other income (loss), net 1,241 (105) Income before provision for income taxes 43,122 33,873 Provision for income taxes (16,908) (13,380) Net income $26,214 $20,493 Earnings per common share Basic $3.03 $2.38 Diluted $3.02 $2.36 WILLIAM LYON HOMES CONSOLIDATED BALANCE SHEETS (in thousands except number of shares and par value per share) March 31, December 31, 2006 2005 (unaudited) ASSETS Cash and cash equivalents $24,994 $52,369 Receivables 33,092 143,481 Real estate inventories 1,544,545 1,419,248 Investments in and advances to unconsolidated joint ventures 1,527 397 Property and equipment, less accumulated depreciation of $10,517 and $9,936 at March 31, 2006 and December 31, 2005, respectively 18,577 18,553 Deferred loan costs 12,082 12,323 Goodwill 5,896 5,896 Other assets 39,027 38,735 $1,679,740 $1,691,002 LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $56,067 $67,326 Accrued expenses 119,781 181,068 Notes payable 199,959 125,619 7 5/8% Senior Notes due December 15, 2012 150,000 150,000 10 3/4% Senior Notes due April 1, 2013 246,989 246,917 7 1/2% Senior Notes due February 15, 2014 150,000 150,000 922,796 920,930 Minority interest in consolidated entities 186,734 227,178 Stockholders' equity Common stock, par value $.01 per share; 30,000,000 shares authorized; 8,652,067 shares issued and outstanding at March 31, 2006 and December 31, 2005, respectively; 1,275,000 shares issued and held in treasury at March 31, 2006 and December 31, 2005, respectively 86 86 Additional paid-in capital 36,506 35,404 Retained earnings 533,618 507,404 570,210 542,894 $1,679,740 $1,691,002 WILLIAM LYON HOMES SUPPLEMENTAL FINANCIAL INFORMATION SELECTED FINANCIAL DATA (dollars in thousands except per share data): Last Twelve Three Months Ended Months Ended March 31, March 31, 2006 2005 2006 2005 Net income $26,214 $20,493 $196,352 $176,733 Net cash (used in) provided by operating activities $(77,753) $(168,338) $46,051 $105,778 Interest incurred $18,671 $15,203 $76,608 $62,540 Adjusted EBITDA (1) $52,799 $42,662 $381,164 $356,095 Ratio of adjusted EBITDA to interest incurred 4.98x 5.69x Balance Sheet Data March 31, 2006 2005 Stockholders' equity per share $65.90 $42.66 Stockholders' equity $570,210 $367,602 Total debt 746,948 703,117 Total book capitalization $1,317,158 $1,070,719 Ratio of debt to total book capitalization 56.7% 65.7% Ratio of debt to total book capitalization (net of cash) 55.9% 64.6% Ratio of debt to LTM adjusted EBITDA 1.96x 1.97x Ratio of debt to LTM adjusted EBITDA (net of cash) 1.89x 1.88x (1) Adjusted EBITDA means consolidated net income plus (i) provision for income taxes, (ii) interest expense, (iii) amortization of capitalized interest included in cost of sales, (iv) depreciation and amortization and (v) cash distributions of income from unconsolidated joint ventures less equity in income of unconsolidated joint ventures. Other companies may calculate Adjusted EBITDA differently. Adjusted EBITDA is not a financial measure prepared in accordance with U.S. generally accepted accounting principles. Adjusted EBITDA is presented herein because it is a component of certain covenants in the Indentures governing the Company's 7 5/8% Senior Notes, 10 3/4% Senior Notes and 7 1/2% Senior Notes ("Indentures"). In addition, management believes the presentation of Adjusted EBITDA provides useful information to the Company's investors regarding the Company's financial condition and results of operations because Adjusted EBITDA is a widely utilized financial indicator of a company's ability to service and/or incur debt. The calculations of Adjusted EBITDA below are presented in accordance with the requirements of the Indentures. Adjusted EBITDA should not be considered as an alternative for net income, cash flows from operating activities and other consolidated income or cash flow statement data prepared in accordance with accounting principles generally accepted in the United States or as a measure of profitability or liquidity. A reconciliation of net income to Adjusted EBITDA is provided as follows: Last Twelve Three Months Ended Months Ended March 31, March 31, 2006 2005 2006 2005 Net income $26,214 $20,493 $196,352 $176,733 Provision for income taxes 16,908 13,380 127,677 116,537 Interest expense: Interest incurred 18,671 15,203 76,608 62,540 Interest capitalized (18,671) (15,203) (76,608) (62,540) Amortization of capitalized interest in cost of sales 10,135 7,855 58,028 60,186 Depreciation and amortization 581 523 2,150 1,625 Cash distributions of income from unconsolidated joint ventures 2,599 - 5,307 - Equity in (income) loss of unconsolidated joint ventures (3,638) 411 (8,350) 1,014 Adjusted EBITDA $52,799 $42,662 $381,164 $356,095 A reconciliation of net cash (used in) provided by operating activities to Adjusted EBITDA is provided as follows: Last Twelve Three Months Ended Months Ended March 31, March 31, 2006 2005 2006 2005 Net cash (used in) provided by operating activities $(77,753) $(168,338) $46,051 $105,778 Interest expense: Interest incurred 18,671 15,203 76,608 62,540 Interest capitalized (18,671) (15,203) (76,608) (62,540) Amortization of capitalized interest in costs of sales 10,135 7,855 58,028 60,186 Non-cash impairment charge - - (4,600) - State income tax refund from pre-quasi built-in losses (10) - (1,855) - Minority equity in income of consolidated entities (5,226) (6,260) (36,537) (51,661) Net changes in operating assets and liabilities: Receivables (110,389) (13,398) 7,188 (10,078) Real estate inventories 139,225 163,257 208,208 152,767 Deferred loan costs (241) (338) (1,562) 139 Other assets 8,696 1,828 13,041 6,159 Accounts payable 11,259 (9,412) (7,291) 1,880 Accrued expenses 77,103 67,468 100,493 90,925 Adjusted EBITDA $52,799 $42,662 $381,164 $356,095 *T