8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): May 10, 2007

WILLIAM LYON HOMES

(Exact name of registrant as specified in charter)

Delaware	001-31625	33-0864902
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

4490 Von Karman Avenue, Newport Beach, California	92660
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (949) 833-3600

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

The information in this Current Report on Form 8-K, including the related exhibit 99.1, is furnished pursuant to Item 2.02, “Results of Operations and Financial Condition” and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liability under that Section, except as specifically incorporated by reference into the filings of William Lyon Homes under the Securities Act of 1933, as amended, or the Exchange Act.

On May 10, 2007, William Lyon Homes (the “Company”) issued a press release announcing its financial results for the three months ended March 31, 2007. A copy of the press release is furnished as Exhibit 99.1 to this report.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

99.1 Press Release issued on May 10, 2007 announcing financial results for the three months ended March 31, 2007.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	WILLIAM LYON HOMES
Dated: May 10, 2007	By:	/s/ Michael D. Grubbs
		Michael D. Grubbs
		Senior Vice President, Chief Financial
		Officer and Treasurer

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EXHIBIT INDEX

Exhibit	Description
99.1	Press Release issued on May 10, 2007 announcing financial results for the three months ended March 31, 2007.

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EX-99.1

Exhibit 99.1

Contact: Investor Relations

W. Douglass Harris

William Lyon Homes

(949) 833-3600

WILLIAM LYON HOMES REPORTS FIRST QUARTER 2007 RESULTS

Financial Highlights

2007 First Quarter

• Net new home orders of 669, up 3%

• New home deliveries of 421, down 28%

• Consolidated operating revenue of $206.0 million, down 33%

• Homebuilding gross margins of $34.7 million, down 56%

• Homebuilding gross margin percentage of 18.0%, down 740 basis points

• Impairment loss on real estate assets of $3.6 million

• Pre-tax income of $5.8 million, down 87%

• Provision for income taxes of $32.4 million, including $31.9 million due to election to be taxed as an “S” corporation for income tax purposes effective January 1, 2007

• Net loss of $26.6 million

NEWPORT BEACH, CA—May 10, 2007—William Lyon Homes today reported pre-tax income for the three months ended March 31, 2007 of $5,804,000, down 87%, as compared to pre-tax income of $43,122,000 for the comparable period a year ago. Consolidated operating revenue decreased 33% to $206,041,000 for the three months ended March 31, 2007, as compared to $307,381,000 for the comparable period a year ago.

Operating revenue for the three months ended March 31, 2007 included $13,361,000 from the sales of land resulting in gross profit of approximately $1,568,000, with no comparable amounts in the prior year. In accordance with the Company’s long established policy, and in the ordinary course of business, the Company continually evaluates land sales as market and business conditions warrant.

The Company incurred impairment losses on real estate assets of $3,554,000 for the three months ended March 31, 2007. The impairments were primarily attributable to slower than anticipated home sales and lower than anticipated net revenue due to softening market conditions. Accordingly, the real estate assets were written-down to their estimated fair value.

Effective on January 1, 2007, the Company made an election in accordance with federal and state regulations to be taxed as an “S” corporation rather than a “C” corporation. Under this election, the Company’s taxable income flows through to and is reported on the personal tax returns of its shareholders. The shareholders are responsible for paying the appropriate taxes based on this election. The Company does not pay any federal taxes under this election and is only required to pay certain state taxes, based on a rate of approximately 1.5% of taxable income. As a result of this election, the Company’s provision for income taxes for the three months ended March 31, 2007 included a reduction of deferred tax assets of $31,887,000 due to the elimination of any future tax benefit by the Company from such assets. In addition, unused recognized built-in losses in the amount of $19,414,000 are no longer available to the Company.

The Company reported a net loss for the three months ended March 31, 2007 of ($26,584,000), as compared to net income of $26,214,000 for the comparable period a year ago.

Effective January 1, 2007, the company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be considered “more-likely-than-not” to be sustained upon examination by taxing authorities. The Company has taken positions in certain taxing jurisdictions for which it is more likely than not that previously unrecognized tax benefits will be recognized. In accordance with the provisions of FIN 48, effective January 1, 2007, the Company recorded an income tax refund receivable of $5,654,000 and recognized the associated tax benefit as an increase in additional paid-in capital. In connection therewith, the Company recorded interest receivable of $1,122,000 and recognized the associated tax benefit as an increase in retained earnings.

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The Company’s consolidated results including joint ventures were as follows: The number of homes closed for the three months ended March 31, 2007 totaled 421 homes, down 28% from 581 homes for the three months ended March 31, 2006. At March 31, 2007, the backlog of homes sold but not closed totaled 854 homes, down 37% from 1,357 homes at March 31, 2006, and up 41% from 606 homes at December 31, 2006. The dollar amount of backlog of homes sold but not closed for the three months ended March 31, 2007 totaled $428,859,000, down 41% from $721,183,000 a year ago, and up 45% from $295,505,000 at December 31, 2006. The Company’s cancellation rate for the three months ended March 31, 2007 was 25%, compared to 28% for the three months ended March 31, 2006.

Net new home orders for the three months ended March 31, 2007 were 669 homes, up 3% from 647 homes for the three months ended March 31, 2006. The average number of sales locations during the three months ended March 31, 2007 was 54, up 13% from 48 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 12.4 for the three months ended March 31, 2007 as compared to 13.5 for the three months ended March 31, 2006.

During the first quarter of 2007, the average sales price of homes closed (including joint ventures) was $457,700, down 13% from $529,100 for the comparable period a year ago. The lower average sales price reflects a change in product mix and reduced sales prices and an increase in the use of sales incentives due to the slowing of new orders and competitive pressures.

The consolidated homebuilding gross margin percentage decreased to 18.0% for the three months ended March 31, 2007 from 25.4% for the three months ended March 31, 2006. These lower gross margin percentages were primarily due to the earlier close out of projects with higher gross margins, a shift in product mix, a decrease in average net sales prices 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.

The Company will hold a conference call on Friday, May 11, 2007 at 11:00 a.m. Pacific Time to discuss the first quarter 2007 earnings results. The dial-in number is (800) 706-7745 (enter passcode number 15889284). Participants may call in beginning at 10:45 a.m. Pacific Time. In addition, the call will be broadcast from William Lyon Homes’ website at www.lyonhomes.com in

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the “Investor Relations” section of the site. The call will be recorded and replayed beginning on May 11, 2007 at 1:00 p.m. Pacific Time through midnight on June 1, 2007. The dial-in number for the replay is (888) 286-8010 (enter passcode number 98560584). Replays of the call will also be available on the Company’s website approximately two hours after broadcast.

William Lyon Homes is primarily engaged in the design, construction and sales of new single-family detached and attached homes in California, Arizona and Nevada. The Company’s corporate headquarters are located in Newport Beach, California. For more information about the Company and its new home developments, please visit the Company’s web-site at www.lyonhomes.com.

*    *     *     *    *    *

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.

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WILLIAM LYON HOMES

SELECTED FINANCIAL AND OPERATING INFORMATION

(unaudited)

	Three Months Ended March 31,
	2007									2006
	Wholly-owned			Joint Ventures			Consolidated Total			Wholly-owned			Joint Ventures			Consolidated Total
Selected Financial Information (dollars in thousands)
Homes closed		383			38			421			516			65			581
Home sales revenue	$	174,021		$	18,659		$	192,680		$	271,220		$	36,161		$	307,381
Cost of sales		(144,891	)		(13,117	)		(158,008	)		(206,129	)		(23,314	)		(229,443	)
Gross margin	$	29,130		$	5,542		$	34,672		$	65,091		$	12,847		$	77,938
Gross margin percentage		16.7	%		29.7	%		18.0	%		24.0	%		35.5	%		25.4	%
Number of homes closed
California		202			38			240			263			65			328
Arizona		138			—			138			99			—			99
Nevada		43			—			43			154			—			154
Total		383			38			421			516			65			581
Average sales price
California	$	587,700		$	491,000		$	572,400		$	640,800		$	556,300		$	624,100
Arizona		293,800			—			293,800			417,900			—			417,900
Nevada		343,400			—			343,400			398,100			—			398,100
Total	$	454,400		$	491,000		$	457,700		$	525,600		$	556,300		$	529,100
Number of net new home orders
California		381			90			471			296			96			392
Arizona		112			—			112			116			—			116
Nevada		86			—			86			139			—			139
Total		579			90			669			551			96			647
Average number of sales locations during period
California		31			7			38			24			7			31
Arizona		6			—			6			6			—			6
Nevada		10			—			10			11			—			11
Total		47			7			54			41			7			48

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WILLIAM LYON HOMES

SELECTED FINANCIAL AND OPERATING INFORMATION (Continued)

(unaudited)

	As of March 31,
	2007						2006
	Wholly-owned		Joint Ventures		Consolidated Total		Wholly-owned		Joint Ventures		Consolidated Total
Backlog of homes sold but not closed at end of period
California		482		104		586		641		154		795
Arizona		165		—		165		413		—		413
Nevada		103		—		103		149		—		149
Total		750		104		854		1,203		154		1,357
Dollar amount of homes sold but not closed at end of period (in thousands)
California	$	302,772	$	47,392	$	350,164	$	459,291	$	77,222	$	536,513
Arizona		41,973		—		41,973		133,658		—		133,658
Nevada		36,722		—		36,722		51,012		—		51,012
Total	$	381,467	$	47,392	$	428,859	$	643,961	$	77,222	$	721,183
Lots controlled at end of period Owned lots
California		4,725		1,096		5,821		4,237		1,225		5,462
Arizona		4,117		2,568		6,685		2,721		1,738		4,459
Nevada		1,256		—		1,256		1,460		—		1,460
Total		10,098		3,664		13,762		8,418		2,963		11,381
Optioned lots (1)
California						1,612						4,101
Arizona						3,107						6,012
Nevada						1,013						2,137
Total						5,732						12,250
Total lots controlled
California						7,433						9,563
Arizona						9,792						10,471
Nevada						2,269						3,597
Total						19,494						23,631

(1) Optioned lots may be purchased by the Company as wholly-owned projects or may be purchased by newly formed joint ventures.

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WILLIAM LYON HOMES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)

(unaudited)

	Three Months Ended March 31,
	2007			2006
Operating revenue
Home sales	$	192,680		$	307,381
Lots, land and other sales		13,361			—
		206,041			307,381
Operating costs
Cost of sales - homes		(158,008	)		(229,443	)
Cost of sales - lots, land and other		(11,793	)		(430	)
Impairment loss on real estate assets		(3,554	)		—
Sales and marketing		(13,473	)		(13,124	)
General and administrative		(11,514	)		(18,589	)
Other		(111	)		(826	)
		(198,453	)		(262,412	)
Equity in (loss) income of unconsolidated joint ventures		(642	)		3,638
Minority equity in income of consolidated entities		(2,283	)		(5,226	)
Operating income		4,663			43,381
Financial advisory expenses		—			(1,500	)
Other income, net		1,141			1,241
Income before provision for income taxes		5,804			43,122
Provision for income taxes
Provision for income taxes		(501	)		(16,908	)
Reduction of deferred tax assets as a result of election to be taxed as an “S” corporation for income tax purposes effective January 1, 2007		(31,887	)		—
		(32,388	)		(16,908	)
Net (loss) income	$	(26,584	)	$	26,214

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WILLIAM LYON HOMES

CONSOLIDATED BALANCE SHEETS

(in thousands except number of shares and par value per share)

	March 31, 2007		December 31, 2006
	(unaudited)
ASSETS
Cash and cash equivalents	$	31,409	$	38,732
Receivables		50,017		119,491
Real estate inventories
Owned		1,490,781		1,431,753
Not owned		186,880		200,667
Investments in and advances to unconsolidated joint ventures		4,928		3,560
Property and equipment, less accumulated depreciation of $11,537 and $12,465 at March 31, 2007 and December 31, 2006, respectively		16,777		16,828
Deferred loan costs		10,841		11,258
Goodwill		5,896		5,896
Other assets		19,707		50,410
	$	1,817,236	$	1,878,595
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	43,875	$	48,592
Accrued expenses		67,588		111,871
Liabilities from inventories not owned		131,564		131,564
Notes payable		320,315		304,096
7 5/8% Senior Notes due December 15, 2012		150,000		150,000
10 3/4% Senior Notes due April 1, 2013		247,298		247,218
7 1/2% Senior Notes due February 15, 2014		150,000		150,000
		1,110,640		1,143,341
Minority interest in consolidated entities		101,009		109,859
Stockholders’ equity
Common stock, par value $.01 per share; 3,000 shares authorized; 1,000 shares outstanding at March 31, 2007 and December 31, 2006, respectively		—		—
Additional paid-in capital		48,867		43,213
Retained earnings		556,720		582,182
		605,587		625,395
	$	1,817,236	$	1,878,595

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WILLIAM LYON HOMES

SUPPLEMENTAL FINANCIAL INFORMATION

SELECTED FINANCIAL DATA (dollars in thousands except per share data):

	Three Months Ended March 31,						Last Twelve Months Ended March 31,
	2007			2006			2007		2006
Net (loss) income	$	(26,584	)	$	26,214		$	21,980	$	196,352
Net cash (used in) provided by operating activities	$	(9,819	)	$	(77,753	)	$	45,744	$	46,051
Interest incurred	$	17,529		$	18,671		$	79,031	$	76,677
Adjusted EBITDA (1)	$	19,023		$	52,799		$	186,070	$	385,764
Ratio of adjusted EBITDA to interest incurred								2.35x		5.03x

Balance Sheet Data

	March 31,
	2006			2007
Stockholders’ equity	$	605,587		$	570,210
Total debt		867,613			746,948
Total book capitalization	$	1,473,200		$	1,317,158
Ratio of debt to total book capitalization		58.9	%		56.7	%
Ratio of debt to total book capitalization (net of cash)		58.0	%		55.9	%
Ratio of debt to LTM adjusted EBITDA		4.66x			1.94x
Ratio of debt to LTM adjusted EBITDA (net of cash)		4.49x			1.87x

(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) non-cash impairment charge, (v) depreciation and amortization and (vi) 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

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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 (loss) income to Adjusted EBITDA is provided as follows:

	Three Months Ended March 31,						Last Twelve Months Ended March 31,
	2007			2006			2007			2006
Net (loss) income	$	(26,584	)	$	26,214		$	21,980		$	196,352
Provision for income taxes		32,388			16,908			64,411			127,677
Interest expense:
Interest incurred		17,529			18,671			79,031			76,677
Interest capitalized		(17,529	)		(18,671	)		(79,031	)		(76,677	)
Amortization of capitalized interest in cost of sales		8,392			10,135			52,613			58,028
Non-cash impairment charge		3,554			—			43,449			4,600
Depreciation and amortization		631			581			2,579			2,150
Cash distributions of income from unconsolidated joint ventures		—			2,599			—			5,307
Equity in (income) loss of unconsolidated joint ventures		642			(3,638	)		1,038			(8,350	)
Adjusted EBITDA	$	19,023		$	52,799		$	186,070		$	385,764

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A reconciliation of net cash (used in) provided by operating activities to Adjusted EBITDA is provided as follows:

	Three Months Ended March 31,						Last Twelve Months Ended March 31,
	2007			2006			2007			2006
Net cash (used in) provided by operating activities	$	(9,819	)	$	(77,753	)	$	45,744		$	46,051
Interest expense:
Interest incurred		17,529			18,671			79,031			76,677
Interest capitalized		(17,529	)		(18,671	)		(79,031	)		(76,677	)
Amortization of capitalized interest in costs of sales		8,392			10,135			52,613			58,028
State income tax refund from pre-quasi built-in losses		—			(10	)		—			(1,855	)
Federal income tax refund from pre-quasi built-in losses		—			—			(1,820	)		—
Minority equity in income of consolidated entities		(2,283	)		(5,226	)		(13,971	)		(36,537	)
Net changes in operating assets and liabilities:
Receivables		(76,250	)		(110,389	)		10,149			7,188
Real estate inventories - owned		62,502			139,225			71,067			208,208
Real estate inventories - not owned		(13,787	)		—			(81,580	)		—
Deferred loan costs		(417	)		(241	)		(1,241	)		(1,562	)
Other assets		1,184			8,696			12,567			13,041
Accounts payable		4,717			11,259			12,192			(7,291	)
Accrued expenses		44,784			77,103			80,350			100,493
Adjusted EBITDA	$	19,023		$	52,799		$	186,070		$	385,764

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