<PAGE> 1
UNITED STATES 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 September 30, 1995
Commission file number 1-8824
CLAYTON HOMES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Tennessee 62-0794407
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
P. O. Box 15169
623 Market Street
Knoxville, Tennessee 37902
- ---------------------------------------- ------------------------------------
(Address of principal executive offices) (zip code)
615-970-7200
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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.
Shares of common stock $.10 par value, outstanding on September 30, 1995 -
75,883,279
1
<PAGE> 2
CLAYTON HOMES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited - in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
REVENUES 1995 1994
---- ----
<S> <C> <C>
Net sales $177,783 $138,715
Financial services 28,597 22,596
Rental and other income 8,932 7,143
-------- --------
Total Revenues 215,312 168,454
EXPENSES
Cost of sales 121,024 96,434
Selling, general and administrative 57,155
42,208
Financial services interest 1,020 1,612
Provision for credit losses and contingencies 1,000 1,000
-------- --------
Total Expenses 180,199 141,254
-------- --------
OPERATING INCOME 35,113 27,200
Interest income (expense) 1,050 725
-------- --------
Income before income taxes 36,163 27,925
Provision for income taxes 13,600 9,700
-------- --------
NET INCOME $ 22,563 $ 18,225
======== ========
Earnings per share:(1) $ .30 $ .24
Average shares outstanding: (1) 75,991 76,058
</TABLE>
(1) Adjusted for the December 5, 1994 5-for-4 stock split.
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS Unaudited Audited
Sept. 30, June 30,
1995 1995
---- ----
<S> <C> <C>
Assets:
Cash and cash equivalents $141,868 $ 69,755
Receivables, net 256,006 343,408
Inventories 80,277 88,455
Property, plant and equipment, net 176,111 166,048
Other assets 111,517 93,485
-------- --------
TOTAL ASSETS $765,779 $761,151
======== ========
Liabilities and Shareholders' Equity:
Accounts payable and accrued liabilities $ 45,239 $ 63,949
Long-term obligations 40,950 48,737
Deferred income taxes 6,712 9,382
Other liabilities 102,168 94,896
Shareholders' equity 570,710 544,187
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $765,779 $761,151
======== ========
</TABLE>
(See accompanying notes to the condensed consolidated financial statements)
2
<PAGE> 3
CLAYTON HOMES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED - IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 22,563 $ 18,225
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,938 1,012
Gain on sale of installment contract
receivables, net of amortization (3,979) (2,804)
Provision for credit losses and contingencies 1,000 1,000
Decrease in deferred income taxes (2,670) (2,080)
Increase in other receivables, net (6,601) (9,148)
Decrease in other operating assets, net of
operating liabilities (10,539) (9,459)
Decrease in other liabilities net
of other assets (16,907) (13,659)
--------- --------
Cash used by operations (15,195) (16,913)
Origination of installment
contract receivables (95,701) (67,924)
Proceeds from sales of originated
installment contract receivables 159,509 164,769
Principal collected on originated
installment contract receivables 10,231 11,077
-------- --------
Net cash provided by operations 58,844 91,009
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of installment contract receivables (2,715) (9,551)
Proceeds from sales of acquired installment
contract receivables 22,308 3,161
Principal collected on acquired installment
contract receivables 3,350 3,835
Acquisition of property, plant and equipment (12,001) (5,580)
Decrease in restricted cash
and investments 6,147 1,376
-------- --------
Net cash provided (used) by
investing activities 17,089 (6,759)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (1,513) 0
Proceeds from short term borrowings 24,295 0
Repayment of short term borrowings (24,295) (25,000)
Repayment of debt collateralized by
installment contract receivables (7,787) (6,080)
Proceeds from stock issued for incentive
plans and other 5,480 2,017
-------- --------
Net cash used by financing activities (3,820) (29,063)
-------- --------
Net increase in cash and cash equivalents 72,113 55,187
Cash and cash equivalents at beginning of year 69,755 38,922
-------- --------
Cash and cash equivalents at end of period $141,868 $ 94,109
======== ========
</TABLE>
(See accompanying notes to the condensed consolidated financial statements)
3
<PAGE> 4
Clayton Homes, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. The condensed consolidated financial statements of Clayton Homes, Inc.
and its subsidiaries have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with Generally
Accepted Accounting Principles have been omitted. The condensed
consolidated financial statements should be read in conjunction with
the financial statements and notes thereto included in the Company's
Annual Report to Shareholders for the year ended June 30, 1995.
The information furnished reflects all adjustments which are necessary
for a fair presentation of the Company's financial position as of
September 30, 1995 and the results of its operations for the three
months ended September 30, 1995 and 1994 and the changes in its cash
position for the same periods. All such adjustments are of a normal
recurring nature.
2. The results of operations for the three months ended September 30, 1995
and 1994 are not necessarily indicative of the results to be expected
for the respective full years.
3. Certain reclassifications have been made to the fiscal 1995 financial
statements to conform to the fiscal 1996 presentation.
4
<PAGE> 5
PART 1 - - FINANCIAL INFORMATION
ITEM 1. Financial Statements.
See Pages 2 through 4.
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
FIRST QUARTER ENDED SEPTEMBER 30, 1995 AND 1994:
The following table shows the percentage changes in retail sales by the
Company's retail and community sales centers and in wholesale sales to
independent dealers. It also shows percentage increases in the average number
of company-owned retail sales centers, communities and independent dealers.
Comparative percentages are given for the three month periods ended September
30, 1995 and 1994:
<TABLE>
<CAPTION>
First Three Months
Fiscal year 1996 vs 1995
------------------------
<S> <C>
Retail:
Dollar sales +29.4%
Average number of sales centers +16.2%
Average dollar sales per sales center +11.4%
Average home price + 9.7%
Wholesale:
Dollar sales +24.2%
Average number of independent dealers +20.3%
Average dollar sales to
independent dealers + 3.2%
Average home price - 5.0%
Communities:
Dollar Sales +46.9%
Average number of communities +28.3%
Average dollar sales per community +14.5%
Average home price +14.6%
</TABLE>
Total revenues for the three months ended September 30, 1995 increased
28% because of the 28% increase in manufactured housing sales to $177 million,
the 27% increase in financial services income to $29 million and the 25%
increase in rental and other income to $9 million.
Net sales of the Retail Group rose 29% to $107 million due to the 10% rise
in the average home price, the 16% increase in company-owned sales centers and
a 2% increase in the average number of homes sold per sales center. The rise
in the average home price is primarily attributable to an increase in the
percent of multi-section homes sold.
5
<PAGE> 6
Net sales of the Manufacturing Group increased 24% to $62 million as the
number of homes sold climbed 31%. The average wholesale price to independent
dealers decreased 5% as the product mix shifted slightly toward lower priced
single-section homes.
Net sales of the Communities Group rose 47% to $8 million due to a 28%
increase in units sold and a 15% increase in the average home price.
Financial services income increased 27%. Interest and loan servicing
revenues increased $3 million, and insurance related revenues rose $1 million.
Gains on the sale of installment contract receivables increased by $1 million
as compared to the prior year.
Rental and other income increased 25% primarily on a 30% rise in the
average number of sites rented in communities and to a 2% increase in the
occupancy percentage, partially offset by a slight decrease in other income
because a one- time capital gain on asset sales was recognized in the first
quarter of 1995.
The following table shows the fluctuations in interest and loan servicing
revenues related to changes in interest and servicing rates and changes in the
average balances of receivables owned and receivables sold. Receivables owned
or sold are the installment contract receivables originated from the retail
sale of homes by the Company or purchased from independent dealers and
unrelated financial institutions. Receivables owned generate interest income
and, in certain cases, have been used to collateralize debt or to create a
subordinated interest for the Company in a pool of receivables accounted for by
the consolidated method. Receivables sold are pooled and sold, and generate
gains representing the discounted present value of the excess of principal and
interest collected over the amount required to be remitted to investors.
Servicing is retained by the Company in all cases. The change due to both rate
and volume has been allocated to rate and volume fluctuations in proportion to
the relationship of the absolute dollar amounts of the change in each.
Comparative fluctuations are given between the first three months ended
September 30, 1995 and 1994:
<TABLE>
<CAPTION>
First Three Months
Fiscal year 1996 vs 1995
Increase (Decrease) Due to
--------------------------
Rate Volume Total
---- ------ -----
(in thousands)
<S> <C> <C> <C>
Interest and loan servicing
revenues:
Receivables owned $ 1,806 $ (87) $(1,719)
Receivables sold (138) 1,787 1,649
Master Servicing Contracts 563 (740) (177)
------- ------ -------
$ 2,231 $ 960 $ 3,191
======= ====== =======
</TABLE>
6
<PAGE> 7
Interest and loan servicing revenues increased 23% to $17 million. The
average balance of receivables owned decreased 1% to $212 million with an
increase in the weighted average interest rate to 15.0% from 11.6%. The
average balance of receivables sold with servicing retained increased 26% to $1
billion with a decrease in the weighted average loan service spread to 3.4%
from 3.5%.
Financial Services interest expense decreased $.6 million, or 37%, to $1
million. Average debt collateralized by installment contract receivables
dropped 39% to $37 million, while the weighted average interest rate increased
from 10.8% to 11.0%. The terms of the debt preclude the Company from prepaying
it.
Gross profit margins increased to 31.9% from 30.5%. The increase is
primarily attributable to an increase in vertical dollar sales from Clayton's
manufacturing group to the Clayton retailing group. Such vertical
manufacturing shipments increased from 42% of manufacturing sales last year to
45% in the first quarter of fiscal 1996.
Selling, general and administrative expenses were 26.6% of revenues versus
25.0% in the prior comparable period. The increase is largely the result of
fixed expenses associated with the two plants opened in the fourth quarter of
fiscal 1995. Proactive, hurricane-related, insurance reserves were also made
during the quarter.
The provision for credit losses declined as a percent of sales to 0.6% from
0.7% last year as credit losses of 0.3% of average loans outstanding continued
to be below the industry average.
The following table sets forth delinquent installment sales contracts as a
percentage of the total number of installment sales contracts on which the
Company provided servicing and was either contingently liable or owner. A
contract is considered delinquent if any payment is past due 30 days or more.
<TABLE>
<CAPTION>
Delinquency Percentage
on September 30
1995 1994
---- ----
<S> <C> <C>
Total delinquencies as percentage
of contracts outstanding:
All contracts 2.16% 2.05%
Contracts originated by VMF 1.83% 1.43%
Contracts acquired from other
institutions 4.12% 4.50%
</TABLE>
7
<PAGE> 8
The following table sets forth information related to loan loss/repossession
experience for all installment contract receivables on which the Company is
either contingently liable or owner:
<TABLE>
<CAPTION>
Loan Loss/Repossession Experience
for the three months ended
September 30
1995 1994
---- ----
<S> <C> <C>
Net losses as percentage of average
loans outstanding (annualized):
All contracts 0.3% 0.3%
Contracts originated by VMF 0.1% 0.1%
Contracts acquired from
other institutions 3.5% 2.7%
Number of contracts in repossession:
Total 612 609
Contracts originated by VMF 487 452
Contracts acquired from other
institutions 125 157
Total number of contracts in repossession
as percentage of total contracts 0.9% 1.0%
</TABLE>
The $8.2 million decrease in inventories as of September 30, 1995 from June
30, 1995 is explained as follows:
<TABLE>
<CAPTION>
Manufacturing Group (in millions)
------------------- -------------
<S> <C>
Increase in finished goods $ 4.3
Decrease in raw materials (6.8)
Retail Group
------------
Decrease in average stocking
levels at 192 sales centers owned
by the Company at June 30, 1995 (6.3)
Increase in inventory to stock four
new company-owned sales centers 1.4
Communities Group
-----------------
Decrease in average inventory at 55
communities owned by the Company at
June 30, 1995 (1.9)
Increase in inventory from eight new
company-owned communities 1.1
-----
$(8.2)
=====
</TABLE>
8
<PAGE> 9
On September 30, 1995, order backlogs for the Manufacturing Group
(consisting of company-owned and independent dealer orders) increased 80% to
$81.2 million, from $45.2 million at the same time last year. Backlogs at
plants operated more than one year increased 47%.
Liquidity and Capital Resources
Cash at September 30, 1995, was $141.9 million as compared to $69.8 million
on June 30, 1995. The Company anticipates meeting cash needs with cash flows
from operations, current cash balances, and the sale of installment contracts
receivable and GNMA certificates.
PART II - - OTHER INFORMATION
ITEM 1 - There were no reportable events for Item 1 through Item 5.
ITEM 6 - - Exhibits and Reports for Form 8-K.
(a) 11. Statement regarding computation of per share
earnings:
Net income per share is computed on the weighted average number of shares
outstanding during the quarter after giving effect to the equivalent shares
which are issuable upon the exercise of stock options determined by the
treasury stock method. The calculation of earnings per share follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
(in thousands except per share data) 1995 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Net income (fully diluted) $22,563 $18,225
Weighted average shares
outstanding (fully diluted) 75,991 76,058
Earnings per share: (fully diluted) $ .30 $ .24
</TABLE>
(b) 27. Financial Data Schedule. (for SEC use only)
9
<PAGE> 10
CLAYTON HOMES, INC.
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 thereunto duly authorized.
CLAYTON HOMES, INC.
-------------------
(Registrant)
Date: November 1, 1995 s/Joseph H. Stegmayer
----------------------- ------------------------
Joseph H. Stegmayer
President and
Chief Operating Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CLAYTON HOMES, INC. FOR THE QUARTER ENDED SEPTEMBER 30,
1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 141,868
<SECURITIES> 0
<RECEIVABLES> 265,261
<ALLOWANCES> 9,255
<INVENTORY> 80,277
<CURRENT-ASSETS> 0
<PP&E> 211,940
<DEPRECIATION> 35,829
<TOTAL-ASSETS> 765,779
<CURRENT-LIABILITIES> 0
<BONDS> 40,950
<COMMON> 180,174
0
0
<OTHER-SE> 390,536
<TOTAL-LIABILITY-AND-EQUITY> 765,779
<SALES> 177,783
<TOTAL-REVENUES> 215,312
<CGS> 121,024
<TOTAL-COSTS> 180,199
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,000
<INTEREST-EXPENSE> 1,041
<INCOME-PRETAX> 36,163
<INCOME-TAX> 13,600
<INCOME-CONTINUING> 22,563
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,563
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
