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 6, 2008

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 6, 2008, William Lyon Homes (the “Company”) issued a press release announcing its financial results for the quarter ended March 31, 2008. 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 6, 2008 announcing financial results for the quarter ended March 31, 2008.

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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 6, 2008	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 6, 2008 announcing financial results for the quarter ended March 31, 2008.

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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 2008 RESULTS

Financial Highlights

2008 First Quarter

• Net new home orders of 371, down 45%

• New home deliveries of 303, down 28%

• Consolidated operating revenue of $137.4 million, down 33%

• Homebuilding gross margins of $4.9 million, down 86%

• Homebuilding gross margin percentage of 4.4%, down 1,360 basis points

• Impairment loss on real estate assets of $25.2 million

• Benefit from income taxes of $41.6 million, due to revocation of election to be taxed as an “S” corporation for income tax purposes, effective January 1, 2008

• Net loss of $0.8 million

NEWPORT BEACH, CA—May 6, 2008—William Lyon Homes today reported a net loss of $806,000 for the three months ended March 31, 2008, as compared to a net loss of $26,584,000 for the comparable period a year ago. Consolidated operating revenue decreased 33% to $137,437,000 for the three months ended March 31, 2008, as compared to $206,041,000 for the comparable period a year ago.

The Company incurred impairment losses on real estate assets of $25,200,000 and $3,554,000 for the three months ended March 31, 2008 and 2007, respectively. The impairments were primarily attributable to slower than anticipated home sales and lower than anticipated net revenue due to

continued depressed market conditions in the housing industry. As a result, the future undiscounted cash flows estimated to be generated were determined to be less than the carrying amount of the assets. Accordingly, the real estate assets were written-down to their estimated fair value.

The Company’s consolidated results including joint ventures were as follows: The number of homes closed for the three months ended March 31, 2008 was 303 homes, down 28% from 421 homes for the three months ended March 31, 2007. At March 31, 2008, the backlog of homes sold but not closed was 347 homes, down 59% from 854 homes at March 31, 2007, and up 24% from 279 homes at December 31, 2007. The dollar amount of backlog of homes sold but not closed for the three months ended March 31, 2008 was $141,902,000, down 67% from $428,859,000 a year ago, and up 32% from $107,893,000 at December 31, 2007. The Company’s cancellation rate for the three months ended March 31, 2008 was 26%, compared to 25% for the three months ended March 31, 2007.

Net new home orders for the three months ended March 31, 2008 were 371 homes, down 45% from 669 homes for the three months ended March 31, 2007. The average number of sales locations during the three months ended March 31, 2008 was 56, up 4% from 54 in the comparable period a year ago. The Company’s number of new home orders per average sales location decreased to 6.6 for the three months ended March 31, 2008 as compared to 12.4 for the three months ended March 31, 2007.

During the first quarter of 2008, the average sales price of homes closed (including joint ventures) was $372,000, down 19% from $457,700 for the comparable period a year ago. The lower average sales price was primarily due to (1) price depreciation in certain markets resulting from the slowing of new orders and competitive pressures and (2) a change in product mix.

The consolidated homebuilding gross margin percentage decreased to 4.4% for the three months ended March 31, 2008 from 18.0% for the three months ended March 31, 2007. These lower gross margin percentages were primarily due to a decrease in average sales prices, the earlier close out of projects with higher gross margins and a shift in product mix.

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

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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 were no longer available to the Company.

Effective on January 1, 2008, the Company and its shareholders made a revocation of the “S” corporation election. As a result of this revocation, the Company will be taxed as a “C” corporation. The shareholders will not be able to elect “S” corporation status for at least five years. The revocation of the “S” corporation election will allow taxable losses generated in 2008 to be carried back to the 2006 “C” corporation year. As a result of the change in tax status, the Company recorded a deferred tax asset and related income tax benefit of $41,602,000 as of January 1, 2008. The recorded deferred tax asset reflects the tax refund for the anticipated carry back of the estimated 2008 tax loss to 2006 as a result of the reversal of temporary differences in 2008. The Company expects to receive the tax refund in mid-2009. In addition, as of January 1, 2008, the Company has unused built-in losses of $19,414,000 which are available to offset future income and expire between 2010 and 2011. The Company’s ability to utilize the foregoing tax benefits will depend upon the amount of its future taxable income and may be limited under certain circumstances.

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 Wednesday, May 7, 2008 at 11:00 a.m. Pacific Time to discuss the first quarter 2008 earnings results. The dial-in number is (866) 314-4865 (enter passcode number 68562420). 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 the “Investor Relations” section of the site. The call will be recorded and replayed beginning on May 7, 2008 at 1:00 p.m. Pacific Time through midnight on May 23, 3008. The dial-in number for the replay is (888) 286-8010 (enter passcode number 15907079). 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.

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*     *     *     *     *     *

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,
	2008									2007
	Wholly- owned			Joint Ventures			Consolidated Total			Wholly- owned			Joint Ventures			Consolidated Total
Selected Financial Information
(dollars in thousands)
Homes closed		289			14			303			383			38			421
Home sales revenue	$	108,614		$	4,102		$	112,716		$	174,021		$	18,659		$	192,680
Cost of sales		(103,262	)		(4,522	)		(107,784	)		(144,891	)		(13,117	)		(158,008	)
Gross margin	$	5,352		$	(420	)	$	4,932		$	29,130		$	5,542		$	34,672
Gross margin percentage		4.9	%		(10.2	)%		4.4	%		16.7	%		29.7	%		18.0	%
Number of homes closed
California		182			14			196			202			38			240
Arizona		46			—			46			138			—			138
Nevada		61			—			61			43			—			43
Total		289			14			303			383			38			421
Average sales price
California	$	447,900		$	293,000		$	436,900		$	587,700		$	491,000		$	572,400
Arizona		241,900			—			241,900			293,800			—			293,800
Nevada		261,700			—			261,700			343,400			—			343,400
Total	$	375,800		$	293,000		$	372,000		$	454,400		$	491,000		$	457,700
Number of net new home orders
California		230			19			249			381			90			471
Arizona		51			—			51			112			—			112
Nevada		71			—			71			86			—			86
Total		352			19			371			579			90			669
Average number of sales locations during period
California		36			5			41			31			7			38
Arizona		4			—			4			6			—			6
Nevada		11			—			11			10			—			10
Total		51			5			56			47			7			54

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WILLIAM LYON HOMES

SELECTED FINANCIAL AND OPERATING INFORMATION (Continued)

(unaudited)

	As of March 31,
	2008						2007
	Wholly- owned		Joint Ventures		Consolidated Total		Wholly- owned		Joint Ventures		Consolidated Total
Backlog of homes sold but not closed at end of period
California		223		15		238		482		104		586
Arizona		72		—		72		165		—		165
Nevada		37		—		37		103		—		103
Total		332		15		347		750		104		854
Dollar amount of homes sold but not closed at end of period (in thousands)
California	$	111,478	$	5,131	$	116,609	$	302,772	$	47,392	$	350,164
Arizona		14,887		—		14,887		41,973		—		41,973
Nevada		10,406		—		10,406		36,722		—		36,722
Total	$	136,771	$	5,131	$	141,902	$	381,467	$	47,392	$	428,859
Lots controlled at end of period
Owned lots
California		3,140		806		3,946		4,725		1,096		5,821
Arizona		4,435		1,745		6,180		4,117		2,568		6,685
Nevada		2,995		—		2,995		1,256		—		1,256
Total		10,570		2,551		13,121		10,098		3,664		13,762
Optioned lots (1)
California						534						1,612
Arizona						328						3,107
Nevada						—						1,013
Total						862						5,732
Total lots controlled
California						4,480						7,433
Arizona						6,508						9,792
Nevada						2,995						2,269
Total						13,983						19,494

(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,
	2008			2007
Operating revenue
Home sales	$	112,716		$	192,680
Lots, land and other sales		24,721			13,361
		137,437			206,041
Operating costs
Cost of sales - homes		(107,784	)		(158,008	)
Cost of sales - lots, land and other		(24,885	)		(11,793	)
Impairment loss on real estate assets		(25,200	)		(3,554	)
Sales and marketing		(11,104	)		(13,473	)
General and administrative		(6,984	)		(11,514	)
Other		(1,442	)		(111	)
		(177,399	)		(198,453	)
Equity in loss of unconsolidated joint ventures		(91	)		(642	)
Minority equity in loss (income) of consolidated entities		925			(2,283	)
Operating (loss) income		(39,128	)		4,663
Interest expense, net of amounts capitalized		(3,166	)	•	—
Other (loss) income, net		(104	)		1,141
(Loss) income before benefit (provision) for income taxes		(42,398	)		5,804
Benefit (provision) for income taxes
Provision for income taxes		(10	)		(501	)
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	)
Recordation of deferred tax assets as a result of revocation of election to be taxed as an “S” corporation for income tax purposes effective January 1, 2008		41,602			—
		41,592			(32,388	)
Net loss	$	(806	)	$	(26,584	)

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WILLIAM LYON HOMES

CONSOLIDATED BALANCE SHEETS

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

	March 31, 2008		December 31, 2007
	(unaudited)
ASSETS
Cash and cash equivalents	$	94,398	$	73,197
Receivables		33,124		45,267
Real estate inventories
Owned		1,005,071		1,061,660
Not owned		124,744		144,265
Investments in and advances to unconsolidated joint ventures		4,587		4,671
Property and equipment, less accumulated depreciation of $12,680 and $12,093 at March 31, 2008 and December 31, 2007, respectively		15,522		16,092
Deferred loan costs		8,966		9,645
Goodwill		5,896		5,896
Deferred taxes		41,602		—
Other assets		14,338		14,635
	$	1,348,248	$	1,375,328
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	18,586	$	40,890
Accrued expenses		61,861		67,786
Liabilities from inventories not owned		93,874		113,395
Notes payable		292,166		266,932
7 5/8 % Senior Notes due December 15, 2012		150,000		150,000
10 3/4% Senior Notes due April 1, 2013		247,643		247,553
7 1/2% Senior Notes due February 15, 2014		150,000		150,000
		1,014,130		1,036,556
Minority interest in consolidated entities		52,161		56,009
Stockholders’ equity
Common stock, par value $.01 per share; 3,000 shares authorized; 1,000 shares outstanding at March 31, 2008 and December 31, 2007, respectively		—		—
Additional paid-in capital		48,867		48,867
Retained earnings		233,090		233,896
		281,957		282,763
	$	1,348,248	$	1,375,328

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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,
	2008			2007			2008			2007
Net (loss) income	$	(806	)	$	(26,584	)	$	(323,630	)	$	21,980
Net cash (used in) provided by operating activities	$	(1,086	)	$	(23,606	)	$	157,033		$	(35,836	)
Interest incurred	$	18,118		$	17,529		$	77,085		$	79,031
Adjusted EBITDA (1)	$	(4,932	)	$	19,023		$	(50,188	)	$	186,070
Ratio of adjusted EBITDA to interest incurred								—			2.35	x
Balance Sheet Data
							March 31,
							2008			2007
Stockholders’ equity							$	281,957		$	605,587
Total debt								839,809			867,613
Total book capitalization							$	1,121,766		$	1,473,200
Ratio of debt to total book capitalization								74.9	%		58.9	%
Ratio of debt to total book capitalization (net of cash)								72.6	%		58.0	%
Ratio of debt to LTM adjusted EBITDA								—			4.66	x
Ratio of debt to LTM adjusted EBITDA (net of cash)								—			4.49	x

(1) Adjusted EBITDA means consolidated net income plus (i) (benefit) 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

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

	Three Months Ended March 31,						Last Twelve Months Ended March 31,
	2008			2007			2008			2007
Net (loss) income	$	(806	)	$	(26,584	)	$	(323,630	)	$	21,980
(Benefit) provision for income taxes		(41,592	)		32,388			(41,322	)		64,411
Interest expense:
Interest incurred		18,118			17,529			77,085			79,031
Interest capitalized		(14,952	)		(17,529	)		(73,919	)		(79,031	)
Amortization of capitalized interest in cost of sales		8,422			8,392			57,271			52,613
Non-cash impairment charge		25,200			3,554			252,766			43,449
Depreciation and amortization		587			631			2,416			2,579
Equity in loss (income) of unconsolidated joint ventures		91			642			(855	)		1,038
Adjusted EBITDA	$	(4,932	)	$	19,023		$	(50,188	)	$	186,070

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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,
	2008			2007			2008			2007
Net cash (used in) provided by operating activities	$	(1,086	)	$	(23,606	)	$	157,033		$	(35,836	)
Interest expense:
Interest incurred		18,118			17,529			77,085			79,031
Interest capitalized		(14,952	)		(17,529	)		(73,919	)		(79,031	)
Amortization of capitalized interest in costs of sales		8,422			8,392			57,271			52,613
Federal income tax refund from pre-quasi built-in losses		—			—			—			(1,820	)
Minority equity in loss (income) of consolidated entities		925			(2,283	)		(7,918	)		(13,971	)
Net changes in operating assets and liabilities:
Receivables		(12,143	)		(76,250	)		(17,258	)		10,149
Real estate inventories - owned		(31,479	)		62,502			(268,299	)		71,067
Deferred loan costs		(679	)		(417	)		(1,875	)		(1,241	)
Other assets		(297	)		1,184			(4,594	)		12,567
Accounts payable		22,304			4,717			27,056			12,192
Accrued expenses		5,935			44,784			5,230			80,350
Adjusted EBITDA	$	(4,932	)	$	19,023		$	(50,188	)	$	186,070

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