<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q
                   ------------------------------------------

        [X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 1998

                                       OR

        [ ]       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                         Commission file number 0-18001


                              THE PRESLEY COMPANIES

             (Exact name of registrant as specified in its charter)


                 Delaware                                      33-0475923
          (State or jurisdiction of                         (I.R.S. Employer
        incorporation or organization)                    Identification No.)

            19 Corporate Plaza                                    92660
        Newport Beach, California                              (Zip Code)
     (Address of principal executive offices)

                                 (949) 640-6400
              (Registrant's telephone number, including area code)

                                 Not Applicable
              (Former name, former address and former fiscal year,
                          if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

               YES  [X]                                  NO [ ]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

<TABLE>
<CAPTION>
                                                                 Outstanding at
    Class of Common Stock                                        June 30, 1998
    ---------------------                                        -------------
<S>                                                              <C>       
    Series A, par value $.01                                       34,792,732
    Series B, restricted voting convertible, par value $.01        17,402,946
</TABLE>



<PAGE>   2
                              THE PRESLEY COMPANIES

                                      INDEX


<TABLE>
<CAPTION>
                                                                                      Page No.
<S>                                                                                   <C>
PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements:
              Consolidated Balance Sheets - June 30, 1998 and
                  December 31, 1997.......................................................3

              Consolidated Statements of Operations - Three and Six Months Ended
                  June 30, 1998 and 1997..................................................4

              Consolidated Statement of Stockholders' Equity (Deficit) - Six Months
                  Ended June 30, 1998.....................................................5

              Consolidated Statements of Cash Flows - Six Months Ended
                  June 30, 1998 and 1997..................................................6

              Notes to Consolidated Financial Statements..................................7

Item 2.  Management's Discussion and Analysis of  Financial Condition
                  and Results of Operations..............................................12


PART II.  OTHER INFORMATION..............................................................22

SIGNATURES...............................................................................23
</TABLE>



                                        2

<PAGE>   3
                                     THE PRESLEY COMPANIES

                                  CONSOLIDATED BALANCE SHEETS
                (IN THOUSANDS EXCEPT NUMBER OF SHARES AND PAR VALUE PER SHARE)
                                           (NOTE 2)

<TABLE>
<CAPTION>
                                                                                     June 30,     December 31,
                                                                                       1998           1997
                                                                                    ---------       ---------
                                                                                    (unaudited)
<S>                                                                                 <C>             <C>      
                                     ASSETS
Cash and cash equivalents                                                           $   9,342       $   4,569
Receivables                                                                            11,078           8,652
Real estate inventories                                                               196,555         255,472
Investments in and advances to unconsolidated
   joint ventures - Note 3                                                             22,440           7,077
Property and equipment, less accumulated
  depreciation of $2,939 and $2,339 at June 30, 1998
  and December 31, 1997, respectively                                                   3,131           3,613
Deferred loan costs                                                                     2,269           3,266
Other assets - Note 3                                                                  13,270           2,595
                                                                                    ---------       ---------
                                                                                    $ 258,085       $ 285,244
                                                                                    =========       =========

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Accounts payable                                                                    $  13,494       $  12,854
Accrued expenses                                                                       20,547          23,136
Notes payable                                                                          71,810          74,935
12 1/2% Senior Notes due 2001 - Note 4                                                160,000         180,000
                                                                                    ---------       ---------
                                                                                      265,851         290,925
                                                                                    ---------       ---------
Stockholders' equity (deficit) - Note 6 
  Common stock:
      Series A common stock, par value $.01 per share; 100,000,000 shares
         authorized; 34,792,732 issued and outstanding at June 30, 1998 and
         17,838,535 issued and outstanding at December 31, 1997,
         respectively                                                                     348             178

      Series B restricted voting convertible common stock, par value $.01 per
         share; 50,000,000 shares authorized; 17,402,946 shares issued and
         outstanding at June 30, 1998 and 34,357,143 issued and outstanding at
         December 31, 1997, respectively                                                  174             344

  Additional paid-in capital                                                          114,599         114,599

  Accumulated deficit from January 1, 1994 - Note 1                                  (122,887)       (120,802)
                                                                                    ---------       ---------
                                                                                       (7,766)         (5,681)
                                                                                    ---------       ---------
                                                                                    $ 258,085       $ 285,244
                                                                                    =========       =========
</TABLE>
See accompanying notes 



                                       3
<PAGE>   4

                              THE PRESLEY COMPANIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 (IN THOUSANDS EXCEPT PER COMMON SHARE AMOUNTS)
                                   (UNAUDITED)
                                    (NOTE 2)

<TABLE>
<CAPTION>
                                                    Three Months Ended                Six Months Ended
                                                           June 30,                        June 30,
                                                  -------------------------       -------------------------
                                                     1998            1997            1998            1997
                                                  ---------       ---------       ---------       ---------
<S>                                               <C>             <C>             <C>             <C>      
Sales
  Homes                                           $  71,882       $  88,494       $ 136,273       $ 155,651
  Lots, land and other - Note 7                       8,648           9,072          10,735           9,711
                                                  ---------       ---------       ---------       ---------
                                                     80,530          97,566         147,008         165,362
                                                  ---------       ---------       ---------       ---------
Operating costs
   Cost of sales - homes                            (62,247)        (80,263)       (118,997)       (140,942)
   Cost of sales - lots, land and other              (8,250)         (8,424)        (10,151)         (9,071)
   Impairment loss on real estate assets                 --         (74,000)             --         (74,000)
   Sales and marketing                               (4,708)         (5,129)         (9,795)        (10,636)
   General and administrative                        (3,275)         (4,428)         (6,956)         (8,361)
                                                  ---------       ---------       ---------       ---------
                                                    (78,480)       (172,244)       (145,899)       (243,010)
                                                  ---------       ---------       ---------       ---------

Operating income (loss)                               2,050         (74,678)          1,109         (77,648)

Loss from unconsolidated joint ventures                (129)             --            (155)             --

Interest expense, net of amounts capitalized         (2,262)         (1,562)         (4,893)         (2,763)

Other income, net                                       570             786             969           1,383
                                                  ---------       ---------       ---------       ---------

Income (loss) before income taxes and
   extraordinary item                                   229         (75,454)         (2,970)        (79,028)

Credit for income taxes                                 363              --             363              --
                                                  ---------       ---------       ---------       ---------

Income (loss) before extraordinary item                 592         (75,454)         (2,607)        (79,028)

Extraordinary item - gain from retirement of
   debt, net of applicable income taxes of
   $363 - Note 5                                        522              --             522              --
                                                  ---------       ---------       ---------       ---------

Net income (loss)                                 $   1,114       $ (75,454)      $  (2,085)      $ (79,028)
                                                  =========       =========       =========       =========

Basic and diluted earnings per common
   share - Note 1
      Before extraordinary item                   $    0.01       $   (1.45)      $   (0.05)      $   (1.51)
      Extraordinary item                               0.01              --            0.01              --
                                                  ---------       ---------       ---------       ---------
      After extraordinary item                    $    0.02       $   (1.45)      $   (0.04)      $   (1.51)
                                                  =========       =========       =========       =========
</TABLE>



See accompanying notes.


                                       4
<PAGE>   5
                              THE PRESLEY COMPANIES

            CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
                         SIX MONTHS ENDED JUNE 30, 1998
                                 (IN THOUSANDS)
                                   (UNAUDITED)
                                    (NOTE 2)

<TABLE>
<CAPTION>
                                                 Common Stock                    
                                   ------------------------------------------                  Accumulated
                                       Series A                 Series B         Additional    Deficit from
                                   -----------------      -------------------      Paid-In       January 1,
                                   Shares     Amount      Shares       Amount      Capital          1994           Total
                                   ------     ------      ------       ------    ----------    -------------       -----
<S>                                <C>         <C>        <C>          <C>         <C>           <C>             <C>     
Balance - December 31, 1997        17,839      $178       34,357       $ 344       $114,599      $(120,802)      $(5,681)

Net loss                               --        --           --          --             --         (2,085)       (2,085)

Conversion of Series B Common
   Stock - Note 6                  16,954       170      (16,954)       (170)            --             --            --
                                   -------------------------------------------------------------------------------------
Balance - June 30, 1998            34,793      $348       17,403       $ 174       $114,599      $(122,887)      $(7,766)
                                   =====================================================================================
</TABLE>


See accompanying notes.



                                       5
<PAGE>   6
                              THE PRESLEY COMPANIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)
                                    (NOTE 2)

<TABLE>
<CAPTION>
                                                                                   Six Months Ended
                                                                                        June 30,
                                                                                 -----------------------
                                                                                   1998           1997
                                                                                 --------       --------
<S>                                                                              <C>            <C>      
OPERATING ACTIVITIES
  Net loss                                                                       $ (2,085)      $(79,028)
  Adjustments to reconcile net loss to net
     cash used in operating activities
        Depreciation and amortization                                                 621            368
        Impairment loss on real estate assets                                          --         74,000
        Equity in earnings of joint ventures                                          155             --
        Net changes in operating assets and liabilities:
           Other receivables                                                       (2,928)        (1,956)
           Real estate inventories                                                 15,041         (6,690)
           Deferred loan costs                                                        997            (38)
           Other assets                                                           (10,675)         8,263
           Accounts payable                                                           640         (8,993)
           Accrued expenses                                                        (1,977)           787
                                                                                 --------       --------

   Net cash used in operating activities                                             (211)       (13,287)
                                                                                 --------       --------

INVESTING ACTIVITIES
  Investment in unconsolidated joint ventures                                     (11,340)            --
  Proceeds from contribution of land to joint venture                              25,431             --
  Principal payments on notes receivable                                              502            766
  Property and equipment, net                                                        (139)        (1,338)
                                                                                 --------       --------

  Net cash provided by (used in) investing activities                              14,454           (572)
                                                                                 --------       --------

FINANCING ACTIVITIES
  Proceeds from borrowing on notes payable                                         75,175         71,388
  Principal payments on notes payable                                             (64,645)       (59,533)
  Repurchase of 12 1/2% Senior Notes                                              (20,000)            --
                                                                                 --------       --------

  Net cash provided by (used in) financing activities                              (9,470)        11,855
                                                                                 --------       --------

NET DECREASE IN CASH AND CASH EQUIVALENTS                                           4,773         (2,004)

CASH AND CASH EQUIVALENTS - beginning of period                                     4,569          4,550
                                                                                 --------       --------

CASH AND CASH EQUIVALENTS - end of period                                        $  9,342       $  2,546
                                                                                 ========       ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Cash paid during the period for interest, net of amounts capitalized           $  5,300       $  2,650
                                                                                 ========       ========
  Issuance of notes payable for land acquisitions                                $  2,748       $     --
                                                                                 ========       ========
  Assumption or repayment of notes payable by unconsolidated joint ventures      $ 17,015       $     --
                                                                                 ========       ========
</TABLE>


See accompanying notes.


                                       6
<PAGE>   7
                              THE PRESLEY COMPANIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)



NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and in accordance with the rules and regulations of the
Securities and Exchange Commission. The consolidated financial statements do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The consolidated
financial statements included herein should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.

Effective as of January 1, 1994, the Company completed a capital restructuring
and quasi-reorganization. The quasi-reorganization resulted in the adjustment of
assets and liabilities to estimated fair values and the elimination of an
accumulated deficit effective January 1, 1994.

The interim consolidated financial statements have been prepared in accordance
with the Company's customary accounting practices. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered necessary
for a presentation in accordance with generally accepted accounting principles
have been included. Operating results for the three and six months ended June
30, 1998 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1998.

The consolidated financial statements include the accounts of the Company and
all majority-owned or controlled subsidiaries and joint ventures. The equity
interests of other partners are reflected as minority partners' interest. All
significant intercompany accounts and transactions have been eliminated.
Investments in unconsolidated joint ventures in which the Company has less than
a controlling interest are accounted for using the equity method. The accounting
policies of the joint ventures are substantially the same as those of the
Company.

The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of the assets and liabilities
as of June 30, 1998 and December 31, 1997 and revenues and expenses for the
periods presented. Accordingly, actual results could differ from those estimates
in the near-term.

In 1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings Per Share ("Statement No. 128") which replaced the calculation of
primary and fully diluted earnings per share with basic and diluted earnings per
share. All earnings per share amounts for all periods presented conform to
Statement No. 128 requirements. Basic and diluted earnings per common share for
the three and six months ended June 30, 1998 and 1997 are based on 52,195,678 of
Series A and Series B common stock outstanding.



                                       7
<PAGE>   8
                              THE PRESLEY COMPANIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                   (CONTINUED)



NOTE 2 - COMPANY ENGAGES FINANCIAL ADVISOR

The Company announced on May 5, 1998 that it had engaged Warburg Dillon Read
Inc. to explore various strategic alternatives including the
refinancing/restructuring of its outstanding debt obligations or the sale of
certain, or substantially all, of its assets. The Company's actions are a direct
result of the severe economic conditions encountered during the past several
years, together with the Company's highly leveraged capital structure.

The declining economic conditions began to affect the Company's primary
home-building markets in California during 1989 and continued on and off since
that time. In view of substantial declines in the value of certain of the
Company's real estate assets since 1992, the Company has been required to write
down the book value of these real estate assets in accordance with generally
accepted accounting principles. The $89,900,000 loss for the year ended December
31, 1997, includes a non-cash charge of $74,000,000 as a result of the
recognition of impairment losses on certain of the Company's real estate assets.
As a result of the substantial losses realized by the Company since 1992, the
Company had a stockholders' deficit of $5,700,000 at December 31, 1997 and
$7,800,000 as of June 30, 1998.

The Company announced on July 2, 1998 the receipt of a non-binding proposal from
William Lyon, Chairman of the Board of the Company, to acquire (through a
wholly-owned corporation, William Lyon Homes, Inc.), all of the outstanding
stock of the Company in a series of related transactions for a cash price of
$0.40 per share. The proposal was submitted on June 30, 1998, to a Special
Committee of the Board of Directors formed by the Company to evaluate strategic
alternatives. On July 30, 1998, the Company announced that the Special Committee
had informed the Company that the Special Committee is unable to conclude that
the proposal of William Lyon Homes, Inc. ("WLH") would provide the greatest
benefit for the Company and its stockholders among all likely available
strategic alternatives. Accordingly, the Special Committee has determined not to
recommend the current WLH proposal to the Company's Board of Directors and to
explore additional strategic alternatives.



                                       8
<PAGE>   9

                              THE PRESLEY COMPANIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                   (CONTINUED)



NOTE 3 - INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED JOINT VENTURES

The Company and certain of its subsidiaries are general partners in ten joint
ventures involved in the development and sale of residential housing projects.
Such joint ventures are not effectively controlled by the Company and,
accordingly, the financial statements of such joint ventures are not
consolidated in the preparation of the Company's consolidated financial
statements. The Company's investments in unconsolidated joint ventures are
accounted for using the equity method. Condensed combined financial information
of these joint ventures as of June 30, 1998 and December 31, 1997 is summarized
as follows (in thousands):


<TABLE>
<CAPTION>
                                                           June 30,    December 31,
                                                             1998         1997
                                                           --------      -------
                                                          (unaudited)
<S>                                                        <C>           <C>    
                                     ASSETS
 Cash and cash equivalents                                 $    897      $    18
 Receivables                                                     13          293
 Real estate inventories                                    144,583       32,097
 Other assets                                                    --          750
                                                           --------      -------
                                                           $145,493      $33,158
                                                           ========      =======

                       LIABILITIES AND PARTNERS' CAPITAL

 Accounts payable                                          $  3,210      $    86
 Accrued expenses                                             1,426          701
 Notes payable                                               27,930           --
 Advances from The Presley Companies and subsidiaries           110          127
                                                           --------      -------
                                                             32,676          914
                                                           --------      -------

 Partners' capital
   The Presley Companies and subsidiaries                    22,330        6,950
   Others                                                    90,487       25,294
                                                           --------      -------
                                                            112,817       32,244
                                                           --------      -------
                                                           $145,493      $33,158
                                                           ========      =======
</TABLE>


In January 1998, one of these joint ventures acquired land from the Company at
the Company's approximate book value of $23,200,000 (which also approximated the
land's current market value) and assumed the Company's non-recourse note payable
of $12,500,000 relating to the purchase of land acquired from the Company. In
March 1998, one of these joint ventures acquired land from the Company at the
Company's approximate book value of $6,300,000 (which also approximated the
land's current market value) and repaid the Company's non-recourse note payable
of $4,515,000 related to the purchase of this property. In May 1998, the Company
contributed land to one of these joint ventures at the Company's approximate



                                       9
<PAGE>   10
                              THE PRESLEY COMPANIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                   (CONTINUED)



book value of $29,381,000 (which also approximated the project's current market
value). Included in other assets is $10,053,000 that was reimbursed by one of
the Company's joint venture partners on July 1, 1998. The majority of these
projects are currently in the initial development stages and, based upon current
estimates of project revenues and costs, all future development and construction
costs will be funded by the Company's venture partners or from the proceeds of
non-recourse construction financing obtained by certain of the joint ventures.


NOTE 4 - 12 1/2% SENIOR NOTES DUE 2001

In accordance with the bond indenture agreement governing the Company's Senior
Notes which are due in 2001, because the Company's Consolidated Tangible Net
Worth was less than $60,000,000 as of September 30, 1997 and March 31, 1998, the
Company was, effective on December 4, 1997, and again on June 4, 1998, required
to make offers to purchase $20,000,000 of the Senior Notes at par plus accrued
interest, less the face amount of Senior Notes acquired by the Company after
September 30, 1997 and March 31, 1998, respectively. The Company acquired Senior
Notes with a face amount of $20,000,000 prior to December 4, 1997 and again
prior to June 4, 1998, and therefore was not required to make said offers.

Each six months thereafter, until such time as the Company's Consolidated
Tangible Net Worth is $60,000,000 or more at the end of a fiscal quarter, the
Company will be required to make similar offers to purchase $20,000,000 of
Senior Notes. At June 30, 1998 the Company's Consolidated Tangible Net Worth was
a deficit of $10,035,000. The Company's management has previously held
discussions, and may in the future hold discussions, with representatives of
certain of the holders of the Senior Notes with respect to modifying this
repurchase provision of the bond indenture agreement. To date, no agreement has
been reached to modify this repurchase provision. Any such change in the terms
or conditions of the bond indenture agreement requires the affirmative vote of
at least a majority in principal amount of the Senior Notes outstanding. No
assurances can be given that any such change will be made.

The ability of the Company to meet its obligations on its indebtedness will
depend to a large degree on its future performance which in turn will be
subject, in part, to factors beyond its control, such as prevailing economic
conditions. The Company's degree of leverage may limit its ability to withstand
adverse business conditions or to capitalize on business opportunities.


NOTE 5 - GAIN FROM RETIREMENT OF DEBT

In June 1998, the Company purchased $20,000,000 principal amount of its
outstanding Senior Notes at a cost of $18,825,000. The net gain resulting from
the purchase, after giving effect to income taxes and amortization of related
deferred loan costs, was $522,000.



                                       10
<PAGE>   11
                              THE PRESLEY COMPANIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                   (CONTINUED)




NOTE 6 - CONVERSION OF SERIES B COMMON STOCK

The Company's Series B Common Stock became convertible into the Company's Series
A Common Stock on a share-for-share basis at the option of the holder from and
after May 20, 1997. On January 30, 1998 and June 9, 1998, the Company issued an
aggregate 2,677,836 and 14,276,361 shares, respectively, of its Series A Common
Stock as a result of the conversion of a like number of shares of its Series B
Common Stock. The shares of the Series A Common Stock issued as a result of the
conversion were not required to be registered under the Securities Act of 1933,
as amended (the "Securities Act"), by reason of Section 3(a)(9) of the
Securities Act.

Foothill Capital Corporation held 14,276,361 shares of Series B Common Stock as
managing general partner of Foothill Partners, L.P., a Delaware limited
partnership and Foothill Partners II, L.P., a Delaware limited partnership
(together, the "Partnerships"). The 14,276,361 shares of Series A Common Stock
will be issued in the names of the individual partners of the Partnerships, as
the beneficial owners of such shares.

A sufficient number of shares of Series A Common Stock were listed with the New
York Stock Exchange and reserved for issuance with ChaseMellon Shareholder
Services, Inc., the transfer agent for the Company.

NOTE 7 - RELATED PARTY TRANSACTIONS

Sales of lots, land and other for the three and six months ended June 30, 1998
include a $3,710,000 bulk lot sale to William Lyon Homes, Inc., a wholly-owned
corporation of William Lyon, Chairman of the Board of the Company. The Company
received the full purchase price in cash and recognized a gain of $81,000 on
this sale. In the opinion of management, this sale was an arm's length
transaction representing fair market value at the time the transaction was
negotiated.



                                       11
<PAGE>   12
                              THE PRESLEY COMPANIES

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS



The following discussion of results of operations and financial condition should
be read in conjunction with the consolidated financial statements and notes
thereto included in Item 1, as well as the information presented in the Annual
Report on Form 10-K for the year ended December 31, 1997.


GENERAL OVERVIEW

The Company announced on May 5, 1998 that it had engaged Warburg Dillon Read
Inc. to explore various strategic alternatives including the
refinancing/restructuring of its outstanding debt obligations or the sale of
certain, or substantially all, of its assets. The Company's actions are a direct
result of the severe economic conditions encountered during the past several
years, together with the Company's highly leveraged capital structure.

The declining economic conditions began to affect the Company's primary
home-building markets in California during 1989 and continued on and off since
that time. In view of substantial declines in the value of certain of the
Company's real estate assets since 1992, the Company has been required to write
down the book value of these real estate assets in accordance with generally
accepted accounting principles. The $89,900,000 loss for the year ended December
31, 1997, includes a non-cash charge of $74,000,000 as a result of the
recognition of impairment losses on certain of the Company's real estate assets.
As a result of the substantial losses realized by the Company since 1992, the
Company had a stockholders' deficit of $5,700,000 at December 31, 1997 and
$7,800,000 as of June 30, 1998.

The Company announced on July 2, 1998 the receipt of a non-binding proposal from
William Lyon, Chairman of the Board of the Company, to acquire (through a
wholly-owned corporation, William Lyon Homes, Inc.), all of the outstanding
stock of the Company in a series of related transactions for a cash price of
$0.40 per share. The proposal was submitted on June 30, 1998, to a Special
Committee of the Board of Directors formed by the Company to evaluate strategic
alternatives. On July 30, 1998, the Company announced that the Special Committee
had informed the Company that the Special Committee is unable to conclude that
the proposal of William Lyon Homes, Inc. ("WLH") would provide the greatest
benefit for the Company and its stockholders among all likely available
strategic alternatives. Accordingly, the Special Committee has determined not to
recommend the current WLH proposal to the Company's Board of Directors and to
explore additional strategic alternatives.

In accordance with the bond indenture agreement governing the Company's Senior
Notes which are due in 2001, because the Company's Consolidated Tangible Net
Worth was less than $60,000,000 as of September 30, 1997 and March 31, 1998, the
Company was, effective on December 4, 1997 and again on June 4, 1998, required
to make offers to purchase $20,000,000 of the Senior Notes at par plus accrued
interest, less the face amount of Senior Notes acquired by the Company after
September 30, 1997 and March 31, 1998, respectively. The Company acquired Senior
Notes with a face amount of $20,000,000 prior to December 4, 1997 and again
prior to June 4, 1998, and therefore was not required to make said offers.



                                       12
<PAGE>   13


                              THE PRESLEY COMPANIES

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                                   (CONTINUED)



Each six months thereafter, until such time as the Company's Consolidated
Tangible Net Worth is $60,000,000 or more at the end of a fiscal quarter, the
Company will be required to make similar offers to purchase $20,000,000 of
Senior Notes. At June 30, 1998 the Company's Consolidated Tangible Net Worth was
a deficit of $10,035,000. The Company's management has previously held
discussions, and may in the future hold discussions, with representatives of
certain of the holders of the Senior Notes with respect to modifying this
repurchase provision of the bond indenture agreement. To date, no agreement has
been reached to modify this repurchase provision. Any such change in the terms
or conditions of the bond indenture agreement requires the affirmative vote of
at least a majority in principal amount of the Senior Notes outstanding. No
assurances can be given that any such change will be made.

As more fully discussed under Working Capital Facility, on July 6, 1998 the
Company completed an agreement with the Agent of its existing lender group under
its Working Capital Facility to (1) extend this loan facility to May 20, 2001,
(2) increase the loan commitment to $100,000,000, and (3) decrease the fees and
costs compared to the prior revolving facility.

Because of the Company's obligation to offer to purchase $20,000,000 of the
Senior Notes each six months so long as the Company's Consolidated Tangible Net
Worth is less than $60,000,000, the Company is restricted in its ability to
acquire, hold and develop real estate projects. The Company changed its
operating strategy during 1997 to finance certain projects in California by
forming joint ventures with venture partners that would provide a substantial
portion of the capital necessary to develop these projects. The Company believes
that the use of joint venture partnerships will better enable it to reduce its
capital investment and risk in the highly capital intensive California markets,
as well as to repurchase the Company's Senior Notes as described above. The
Company would generally receive, after priority returns and capital
distributions to its partners, approximately 50% of the profits and losses, and
cash flows from these joint ventures.

The ability of the Company to meet its obligations on its indebtedness will
depend to a large degree on its future performance which in turn will be
subject, in part, to factors beyond its control, such as prevailing economic
conditions. At this time, the Company's degree of leverage may limit its ability
to withstand adverse business conditions or to capitalize on business
opportunities.



                                       13
<PAGE>   14

                              THE PRESLEY COMPANIES

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                                   (CONTINUED)




                              RESULTS OF OPERATIONS

OVERVIEW AND RECENT RESULTS

Homes sold, closed and in backlog for the Company and its unconsolidated joint
ventures as of and for the periods presented are as follows:


<TABLE>
<CAPTION>
                                                           As of and for       As of and for
                                                          the Three Months      the Six Months
                                                           Ended June 30,      Ended June 30,
                                                          ---------------      --------------
                                                          1998       1997       1998     1997
                                                          ----       ----       ----     ----
<S>                                                       <C>        <C>       <C>       <C>
Number of homes sold
   Company                                                 559        428      1,080      877
   Unconsolidated joint ventures                            63         --         81       --
                                                           ---      -----      -----      ---
                                                           622        428      1,161      877
                                                           ===      =====      =====      ===

Number of homes closed
   Company                                                 395        467        732      829
   Unconsolidated joint ventures                             2         --          2       --
                                                           ---      -----      -----      ---
                                                           397        467        734      829
                                                           ===      =====      =====      ===

Backlog of homes sold but not closed at end of period
   Company                                                 744        330        744      330
   Unconsolidated joint ventures                            86         --         86       --
                                                           ---      -----      -----      ---
                                                           830        330        830      330
                                                           ===      =====      =====      ===
</TABLE>


Homes in backlog are generally closed within three to six months. The dollar
amount of backlog of homes sold but not closed as of June 30, 1998 was
$204,409,000, as compared to $65,252,000 as of June 30, 1997 and $140,004,000 as
of March 31, 1998. The cancellation rate of buyers who contracted to buy a home
but did not close escrow at the Company's projects was approximately 18% during
1997 and approximately 16% during the first six months of 1998.

The number of homes closed in the second quarter of 1998 was down 15 percent to
397 from 467 in the second quarter of 1997. Net new home orders for the quarter
ended June 30, 1998 increased 45 percent to 622 units from 428 a year ago. For
the second quarter of 1998, net new orders increased 15 percent to 622 from 539
units in the first quarter of 1998. The backlog of homes sold as of June 30,
1998 was 830, up 152 percent from 330 units a year earlier, and up 37 percent
from 605 units at March 31, 1998. The Company's inventory of completed and
unsold homes as of June 30, 1998 has decreased by 60 percent to 40 units from 99
units as of March 31, 1998.



                                       14
<PAGE>   15

                              THE PRESLEY COMPANIES

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                                   (CONTINUED)



The decline in closings for the second quarter of 1998 as compared with the
second quarter of 1997 is primarily the result of the completion or near
completion of certain of the Company's older master-planned communities in
California and past delays in completion of new land acquisitions, which
resulted in less product available for sale, as well as construction delays in
certain projects primarily as a result of weather conditions. The improvement in
net new homes orders and backlog for the second quarter of 1998 as compared with
the second quarter of 1997 is primarily the result of improved market conditions
in substantially all of the Company's markets and additional sales locations as
a result of new land acquisitions. At June 30, 1998, the Company had 49 sales
locations as compared to 42 sales locations at June 30, 1997.

In general, housing demand is adversely affected by increases in interest and
housing costs. Interest rates, the length of time that assets remain in
inventory, and the proportion of inventory that is financed affect the Company's
interest cost. If the Company is unable to raise sales prices sufficiently to
compensate for higher costs or if mortgage interest rates increase
significantly, affecting prospective buyers' ability to adequately finance home
purchases, the Company's sales, gross margins and net results may be adversely
impacted. To a limited extent, the Company hedges against increases in interest
costs by acquiring interest rate protection that locks in or caps interest rates
for limited periods of time for mortgage financing for prospective homebuyers.

COMPARISON OF THREE MONTHS ENDED JUNE 30, 1998 TO THREE MONTHS ENDED JUNE 30,
1997.

Sales (which represent recorded revenues from closings) for the three months
ended June 30, 1998 were $80.5 million, a decrease of $17.1 million (18%) from
sales of $97.6 million for the three months ended June 30, 1997. Revenue from
sales of homes decreased $16.6 million to $71.9 million in the 1998 period from
$88.5 million in the 1997 period. This decrease was due primarily to a decrease
in the number of units closed, as well as a decrease in the average sales prices
of homes to $185,000 in the 1998 period from $189,000 in the 1997 period, which
resulted primarily from a change in the mix of product. Revenue from lots, land
and other decreased $0.5 million to $8.6 million in the 1998 period from $9.1
million in the 1997 period.

Total operating income (loss), excluding the impairment loss on real estate
assets, changed from a $0.7 million loss in the 1997 period to $2.1 million
income in the 1998 period. The excess of revenue from sales of homes over the
related cost of sales increased by $1.4 million, to $9.6 million in the 1998
period from $8.2 million in the 1997 period. This increase was primarily due to
changes in product mix and an improvement in margins at certain of the Company's
projects as a result of increased sales prices, offset by a decrease in the
number of units closed. Impairment losses on real estate assets amounting to
$74.0 million were recorded in the 1997 period, with no corresponding charge in
the comparable period for 1998. Sales and marketing expenses decreased by $0.4
million to $4.7 million in the 1998 period from $5.1 million in the 1997 period
primarily as a result of decreased direct sales expenses related to the
decreased sales volume. General and administrative expenses decreased by $1.1
million to $3.3 million in the 1998 period from $4.4 million in the 1997 period,
primarily as a result of the consolidation of certain California operations in
the third quarter of 1997 and income from reimbursement of overhead expenses by
joint ventures.



                                       15
<PAGE>   16


                              THE PRESLEY COMPANIES

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                                   (CONTINUED)



Total interest incurred remained the same at $8.0 million in the 1997 and 1998
periods. Net interest expense increased to $2.3 million in the 1998 period from
$1.6 million for the 1997 period. This increase was due primarily to a reduction
in real estate assets which qualify for interest capitalization.

Other income, net decreased to $0.6 million in the 1998 period from $0.8 million
in the 1997 period primarily as a result of decreased income from mortgage
operations.


COMPARISON OF SIX MONTHS ENDED JUNE 30, 1998 TO SIX MONTHS ENDED JUNE 30, 1997

Sales (which represent recorded revenues from closings) for the six months ended
June 30, 1998 were $147.0 million, a decrease of $18.4 million (11%), from sales
of $165.4 million for the six months ended June 30, 1997. Revenue from sales of
homes decreased $19.4 million to $136.3 million in the 1998 period from $155.7
million in the 1997 period. This decrease was due primarily as a result of
changes in the mix of product and a reduction in the number of homes closed in
the 1998 period compared to the 1997 period. Revenue from lots, land and other
increased $1.0 million to $10.7 million in the 1998 period from $9.7 million in
the 1997 period.

Total operating income (loss), excluding the impairment loss on real estate
assets, changed from a loss of $3.6 million in the 1997 period to an income of
$1.1 million in the 1998 period. The excess of revenue from sales of homes over
the related cost of sales increased by $2.5 million, to $17.3 million in the
1998 period from $14.8 million in the 1997 period. This increase was primarily
due to changes in product mix and an improvement in margins at certain of the
Company's projects as a result of increased sales prices, offset by a decrease
in the number of units closed. Impairment losses on real estate assets amounting
to $74.0 million were recorded in the 1997 period, with no corresponding charge
in the comparable period for 1998. Sales and marketing expenses decreased by
$0.8 million from $10.6 million in the 1997 period to $9.8 million in the 1998
period, primarily due to decreased direct sales expenses related to the
decreased sales volume. General and administrative expenses decreased by $1.4
million to $7.0 million in the 1998 period from $8.4 million in the 1997 period,
primarily as a result of the consolidation of certain California operations in
the third quarter of 1997 and income from reimbursement of overhead expenses by
joint ventures.

Total interest incurred increased $0.6 million (3.7%) from $16.1 million in the
1997 period to $16.7 million in the 1998 period as a result of an increase in
the average amount of outstanding debt. Net interest expense increased to $4.9
million in the 1998 period from $2.8 million for the 1997 period. This increase
was due primarily to a reduction in real estate assets which qualify for
interest capitalization.

Other (income) expense, net decreased $0.4 million to a net income of $1.0
million in the 1998 period from a net income of $1.4 million in the 1997 period
primarily as a result of decreased income from design operations and
recreational facilities.



                                       16
<PAGE>   17
                              THE PRESLEY COMPANIES

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                                   (CONTINUED)


                        FINANCIAL CONDITION AND LIQUIDITY

The Company provides for its ongoing cash requirements principally from
internally generated funds from the sales of real estate and from outside
borrowings and, beginning in 1997, by joint venture financing from newly formed
joint ventures with venture partners that will provide a substantial portion of
the capital required for certain projects. The Company currently maintains the
following major credit facilities: 12 1/2% Senior Notes (the "Senior Notes"); a
secured revolving lending facility (the "Working Capital Facility"); and a
revolving line of credit relating to Carmel Mountain Ranch, its wholly-owned
joint venture partnership (the "CMR Facility").

The ability of the Company to meet its obligations on the Senior Notes
(including the repurchase obligation described in General Overview above) and
its other indebtedness will depend to a large degree on its future performance,
which in turn will be subject, in part, to factors beyond its control, such as
prevailing economic conditions. The Company's degree of leverage may limit its
ability to withstand adverse business conditions or to capitalize on business
opportunities.

The Company will in all likelihood be required to refinance the Senior Notes
when they mature, and no assurances can be given that the Company will be
successful in that regard.

SENIOR NOTES

The Company filed with the Securities and Exchange Commission a Registration
Statement on Form S-1 for the sale of $200,000,000 of 12 1/2% Senior Notes which
became effective on June 23, 1994. The offering closed on June 29, 1994 and was
fully subscribed and issued. The following discussion of the Senior Notes should
be read in conjunction with the Registration Statement as filed with the
Securities and Exchange Commission.

The 12 1/2% Senior Notes due 2001 (the "Senior Notes") were offered by The
Presley Companies, a Delaware corporation ("Delaware Presley" or the "Company"),
and are unconditionally guaranteed on a senior basis by Presley Homes (formerly
The Presley Companies), a California corporation and a wholly-owned subsidiary
of Delaware Presley ("California Presley"). However, California Presley has
granted liens on substantially all of its assets as security for its obligations
under the Working Capital Facility and other loans. Because the California
Presley guarantee is not secured, holders are effectively junior to borrowings
under the Working Capital Facility with respect to such assets. Delaware Presley
and its consolidated subsidiaries are referred to collectively herein as
"Presley" or the "Company". Interest on the Senior Notes is payable on January 1
and July 1 of each year, commencing January 1, 1995. Except as set forth in the
Indenture Agreement (the "Indenture"), the Senior Notes were not redeemable by
Presley prior to July 1, 1998. Thereafter, the Senior Notes are redeemable at
the option of Delaware Presley, in whole or in part, at the redemption prices
set forth in the Indenture.

The Senior Notes are senior obligations of Presley and rank pari passu in right
of payment to all existing and future unsecured indebtedness of Presley, and
senior in right of payment to all future indebtedness of the Company which by
its terms is subordinated to the Senior Notes.



                                       17
<PAGE>   18
                              THE PRESLEY COMPANIES

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                                   (CONTINUED)


As described above in General Overview, Presley is required to offer to
repurchase certain Senior Notes at a price equal to 100% of the principal amount
plus any accrued and unpaid interest to the date of repurchase if Delaware
Presley's Consolidated Tangible Net Worth is less than $60 million for any two
consecutive fiscal quarters, as well as from the proceeds of certain asset
sales.

Upon certain changes of control as described in the Indenture, Presley must
offer to repurchase Senior Notes at a price equal to 101% of the principal
amount plus accrued and unpaid interest, if any, to the date of repurchase.

The Indenture governing the Senior Notes restricts, among other things: (i) the
payment of dividends on and redemptions of capital stock by Presley, (ii) the
incurrence of indebtedness by Presley or the issuance of preferred stock by
Delaware Presley's subsidiaries, (iii) the creation of certain liens, (iv)
Delaware Presley's ability to consolidate or merge with or into, or to transfer
all or substantially all of its assets to, another person, and (v) transactions
with affiliates. These restrictions are subject to a number of important
qualifications and exceptions.


WORKING CAPITAL FACILITY

On July 6, 1998 the Company completed an agreement with the Agent of its
existing lender group under its Working Capital Facility to (1) extend this loan
facility to May 20, 2001, (2) increase the loan commitment to $100,000,000, and
(3) decrease the fees and costs compared to the prior revolving facility.

The collateral for the loans provided by the Working Capital Facility continues
to include substantially all real estate and other assets of the Company
(excluding assets of partnerships and the portion of the partnership interests
in Carmel Mountain Ranch partnership which are currently pledged to other
lenders). The borrowing base is calculated based on specified percentages of
book values of real estate assets. The borrowing base at June 30, 1998 was
approximately $129,000,000; however, the maximum loan under the Working Capital
Facility, as stated above, is limited to $100,000,000. The principal outstanding
under the Working Capital Facility at June 30, 1998 was $56,000,000.

Pursuant to the terms of the Working Capital Facility, outstanding advances bear
interest at the "reference rate" of Chase Manhattan Bank plus 2%. An alternate
option provides for interest based on a specified overseas base rate plus 4.44%,
but not less than 8%. In addition, the Company pays a monthly loan fee of 0.25%
on the average daily unused portion of the loan facility.

Upon completion of the new Working Capital Facility agreement, the Company paid
a one-time, non-refundable Facility Fee of $2,000,000, as well as a yearly
non-refundable Administrative Fee of $100,000.

The Working Capital Facility requires certain minimum cash flow and pre-tax and
pre-interest tests. The Working Capital Facility also includes negative
covenants which, among other things, place limitations on the payment of cash
dividends, merger transactions, transactions with affiliates, the incurrence of
additional debt and the acquisition of new land as described in the following
paragraph.



                                       18
<PAGE>   19
                              THE PRESLEY COMPANIES

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                                   (CONTINUED)


Under the terms of the Working Capital Facility, the Company may acquire new
improved land for development of housing units of no more than 300 lots in any
one location without approval from the lenders if certain conditions are
satisfied. The Company may, however, acquire any new raw land or improved land
provided the Company has obtained the prior written approval of lenders holding
two-thirds of the obligations under the Working Capital Facility.

The Working Capital Facility requires that mandatory prepayments be made to
reduce the outstanding balance of loans to the extent of all funds in excess of
$20,000,000 in the principal operating accounts of the Company.


CMR FACILITY

Carmel Mountain Ranch ("CMR"), the partnership that owns the Carmel Mountain
Ranch master-planned community, is a California general partnership and is 100%
owned by The Presley Companies and its wholly-owned subsidiary. Effective in
March 1995, the development and construction of CMR, a consolidated joint
venture, is financed through a revolving line of credit. The revolving line of
credit consists of several components relating to production units, models and
residential lots. At June 30, 1998, the revolving line of credit had an
outstanding balance of $9,664,000. Availability under the line is subject to a
number of limitations, but in any case cannot exceed $10,000,000. Interest on
the outstanding balance is at prime plus 1.00%. In June 1998, the maturity date
of this line was extended to August 16, 1998. Management is currently in
discussions with the lender to extend the maturity date of this line for a
longer term. Although management believes that current discussions with this
lender will result in this longer term extension, no assurances can be given in
that regard.


SELLER FINANCING

Another source of financing available to the Company is seller-provided
financing for land acquired by the Company. At June 30, 1998, the Company had
outstanding notes payable related to land acquisitions for which seller
financing was provided in the amount of $6,146,000.


JOINT VENTURE FINANCING

As of June 30, 1998, the Company had formed ten joint ventures in California.
The Company contributed approximately $22,330,000 to these joint ventures and
the Company's venture partners contributed approximately $90,487,000 to these
joint ventures. In January 1998, one of these joint ventures acquired land from
the Company at the Company's approximate book value of $23,200,000 (which also
approximated the land's current market value) and assumed the Company's
non-recourse note payable of $12,500,000 relating to the purchase of land
acquired from the Company. In March 1998, one of these joint ventures acquired
land from the Company at the Company's approximate book value of $6,300,000
(which also approximated the land's current market value) and repaid the
Company's non-recourse note



                                       19
<PAGE>   20
                              THE PRESLEY COMPANIES

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                                   (CONTINUED)



payable of $4,515,000 related to the purchase of this property. In May 1998, the
Company contributed land to one of these joint ventures at the Company's
approximate book value of $29,381,000 (which also approximated the project's
current market value). The majority of these projects are currently in the
initial development stages and, based upon current estimates of project revenues
and costs, all future development and construction costs will be funded by the
Company's venture partners or from the proceeds of non-recourse construction
financing obtained by certain of the joint ventures.


ASSESSMENT DISTRICT BONDS

In some locations in which the Company develops its projects, assessment
district bonds are issued by municipalities to finance major infrastructure
improvements and fees. Such financing has been an important part of financing
master-planned communities due to the long-term nature of the financing,
favorable interest rates when compared to the Company's other sources of funds
and the fact that the bonds are sold, administered and collected by the relevant
government entity. As a landowner benefited by the improvements, the Company is
responsible for the assessments on its land. When Presley's homes or other
properties are sold, the assessments are either prepaid or the buyers assume the
responsibility for the related assessments.


CASH FLOWS - COMPARISON OF SIX MONTHS ENDED JUNE 30, 1998 TO SIX MONTHS ENDED
JUNE 30, 1997

Net cash used in operating activities decreased from $13.3 million in the 1997
period to $0.2 million in the 1998 period. This change was primarily as a result
of a decrease in the amount of expenditures made related to construction
activity.

Net cash provided by (used in) investing activities changed from a use of $0.6
million in the 1997 period to a source of $14.5 million in the 1998 period
primarily as a result of investment activity with unconsolidated joint ventures.

Net cash provided by (used in) financing activities changed from a source of
$11.9 million in the 1997 period to a use of $9.5 million in the 1998 period
primarily as a result of the repurchase of $20.0 million of 12 1/2% Senior
Notes.


IMPACT OF YEAR 2000

The Company has conducted an assessment of its computer systems to ascertain
what modifications it will be required to make so that its computer systems will
function properly with respect to dates in the year 2000 and thereafter. Certain
modifications have been completed and other modifications are in the planning
and development stages. Management believes that any such modifications will
have minimal effects on its systems and the costs incurred in that connection
will not be material.



                                       20
<PAGE>   21
                              THE PRESLEY COMPANIES

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                                   (CONTINUED)


                                    * * * * *

Certain statements contained herein 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 of
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, changes in interest
rates and competition.



                                       21
<PAGE>   22
                              THE PRESLEY COMPANIES

                           PART II. OTHER INFORMATION


ITEMS 1, 2, 3 AND 5.  Not applicable.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

           The Company's Annual Meeting of Holders of Series A Common Stock was
           held on May 14, 1998. At this meeting the Holders of Series A Common
           Stock ratified the selected of Ernst & Young LLP to serve as the
           Company's auditors for the fiscal year ending December 31, 1998. With
           respect to this proposal, 20,155,620 votes were cast for, 40,220
           votes were cast against, and 4,660 votes abstained (including broker
           non-votes).

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

           (a)  EXHIBITS.

           10.1     Fifth Amended and Restated Loan Agreement, dated as of July
                    6, 1998, between Presley Homes (formerly The Presley
                    Companies), a California corporation, as the Borrower, and
                    Foothill Capital Corporation, as the Lender.

           10.2     Modification to Master Credit Agreement dated as of March
                    17, 1998 between Carmel Mountain Ranch, a California general
                    partnership, as Borrower, and Bank One Arizona, NA, a
                    national banking association, as Bank.

           10.3     Modification to Master Credit Agreement dated as of June 16,
                    1998 between Carmel Mountain Ranch, a California general
                    partnership, as Borrower, and Bank One Arizona, NA, a
                    national banking association, as Bank.

           27       Financial Data Schedule

           (b)  REPORTS ON FORM 8-K.

                    JULY 2, 1998. A report on Form 8-K was filed by the Company
                    in reference to the announcement by the Company of the
                    receipt of a non-binding proposal by William Lyon to acquire
                    all of the Company's outstanding stock.



                                       22
<PAGE>   23

                              THE PRESLEY COMPANIES


                                   SIGNATURES

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



Date: August 12, 1998                  By:   /s/  David M. Siegel
                                           -------------------------------------
                                           DAVID M. SIEGEL
                                           Senior Vice President, Chief 
                                           Financial Officer and Treasurer 
                                           (Principal Financial Officer)



Date: August 12, 1998                  By:   /s/  W. Douglass Harris
                                           -------------------------------------
                                           W. DOUGLASS HARRIS
                                           Vice President, Corporate Controller
                                           (Principal Accounting Officer)



                                       23
<PAGE>   24
                                 EXHIBIT INDEX



ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

           (a)  EXHIBITS.

           10.1     Fifth Amended and Restated Loan Agreement, dated as of July
                    6, 1998, between Presley Homes (formerly The Presley
                    Companies), a California corporation, as the Borrower, and
                    Foothill Capital Corporation, as the Lender.

           10.2     Modification to Master Credit Agreement dated as of March
                    17, 1998 between Carmel Mountain Ranch, a California general
                    partnership, as Borrower, and Bank One Arizona, NA, a
                    national banking association, as Bank.

           10.3     Modification to Master Credit Agreement dated as of June 16,
                    1998 between Carmel Mountain Ranch, a California general
                    partnership, as Borrower, and Bank One Arizona, NA, a
                    national banking association, as Bank.

           27       Financial Data Schedule