William Lyon Homes reports $169 million in third-quarter liquidity, $1 billion total debt

By Jennifer Lanning Drey

Portland, Ore., Nov. 9 - William Lyon Homes Inc. ended the third quarter with total liquidity of $169 million and total debt of $1 billion, chief financial officer Michael D. Grubbs said Friday during the company's quarterly earnings conference call.

The debt number includes $547 million in senior notes and $320 million on the company's revolving credit facilities.

"Our overall primary focus in this market is to continue moving our product to reduce inventory and generate cash flow for the purpose of paying down debt in order to strengthen our balance sheet and in order for us to take advantage of future balance sheet opportunities," Grubbs said.

Cash and cash equivalents at the end of the quarter totaled $34.46 million, compared with $38.73 million at Dec. 31, 2006. The company used $59.23 million in operating activities during the third quarter compared with a cash usage of $19.71 million in the third quarter of 2006.

During the question-and-answer portion of the conference call, Grubbs touched on William Lyon's intentions to pay down debt, including a plan to pay down its revolver "in the tune of $50 million" in the fourth quarter.

He also said, "We do see a net reduction in our debt balance in 2008," but added that it would be "somewhat moderate."

The company hopes to generate cash through land sales in some of its markets.

William Lyon has loan commitments of $560 million under seven credit facilities and has about $135 million of availability between the facilities. The most restrictive covenant related to the company's loan facilities is a tangible net worth requirement, which the company plans to discuss modifying in the fourth quarter.

$59 million in impairments

Market conditions in the third quarter led William Lyon to record $59 million in impairment charges due to slower-than-anticipated home sales and lower-than-expected revenues, Grubbs said Friday.

If conditions deteriorate further or if the company's competitors continue to lower their prices, William Lyon may be forced to also further reduce prices, which could potentially trigger future impairment charges.

William Lyon reported a net loss of $60.01 million for the third quarter, compared with net income of $10.50 million for the comparable period a year ago. Consolidated operating revenue decreased by 41% as compared to the third quarter of 2006.

"Erosion of homebuyer confidence driven by excess supplies, price instability, tighter mortgage standards and the disruptive mortgage market have continued to weaken demand," Grubbs said.

New home orders for the three months ended Sept. 30 decreased 33% year over year, while the number of homes closed in the period was down 31% versus 2006.

In response to the declines, William Lyon is focused on managing its overall cost structure through actions including reducing homebuilder costs and increasing operational efficiency through reduced building time and labor. Last week, the company reduced headcount by 25% for an expected annual savings of $12 million, Grubbs said.

Based in Newport Beach, Calif., William Lyon is primarily engaged in the design, construction and sale of single-family homes.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.