Despite a considerable drop in revenue, continued pressure on margins, and impairment charges, William Lyon Homes was able to tamp its losses for its most recent quarter compared to a year ago. The company logged a net loss of $38.9 million in 2Q2008 versus a $76.9 million loss in 2Q2007.

Consolidated operating revenue decreased 48% from a year ago to $140.1 million as new-home deliveries fell 42% to 319 homes for the quarter. Net new-home orders, however, fared better. The company netted 418 new-home orders this quarter, down 15% from the same period last year.

The new orders will help shore up backlog in future quarters; the company's backlog of homes sold but not closed at the end of the quarter was down 44% from 796 homes in 2Q2007. The total dollar amount of homes in backlog at the end of 2Q2008--$160.4 million--marked a 60% fall off from a year ago, a decrease due in part to a decrease in average sales prices and a shift in product mix.

Price depreciation and competitive pressures in certain markets pushed the company's average price of homes closed, including joint ventures, down 11% from 2Q2007 to $417,000. With average closing prices now at the newly raised conforming loan limits of government-sponsored Fannie Mae and Freddie Mac, the company is poised to experience a slight bump up in sales in quarters to come as buyers previously unable to secure financing find themselves with a new mortgage outlet.

The company's current sales results also reflect management's move to cut the company's store count by 16% since last year; the decision yielded the slightest of increases in the number of new-home orders per sales location. The company currently sells out of 43 locations across Arizona, California, and Nevada.

Slow sales and lower-than-anticipated revenue forced the company to take $20.1 million in impairment charges this quarter.

However, management may be in a position to monetize some of its losses by the end of the year, receiving income tax benefits as a result of a change in corporate status. After moving from a "C" corporation to an "S" corporation at the beginning of 2007, a move that eliminates a corporate tax by flowing taxable income through the personal tax returns of its shareholders, management moved back to a "C" corporation at the beginning of 2008. The switch allows the company to carry back taxable losses to 2006, earning the company a tax refund of roughly $41.6 million in early 2009.

That expected tax benefit would strengthen the company's financial position. At quarter's end, the company had $91.9 million in cash and roughly $778.8 million in notes payable and senior notes due in 2012, 2013, and 2014. The company remains highly leveraged with a total debt to capitalization ratio of 76.2%.