<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, 1996
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COMMISSION FILE NUMBER 1-8824
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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 Number)
incorporation or organization)
P. O. Box 15169
623 Market Street
Knoxville, Tennessee 37902
- ---------------------------------------- ----------
(Address of principal executive offices) (zip code)
423-970-7200
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(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,
1996 - 95,232,807.
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CLAYTON HOMES INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1996 1995
-------- --------
<S> <C> <C>
Revenues
Net sales $193,874 $177,783
Financial services 30,852 28,597
Rental and other income 11,478 8,932
-------- --------
Total revenues 236,204 215,312
Expenses
Cost of sales 133,472 121,024
Selling, general and administrative 60,855 57,155
Financial services interest 778 1,020
Provision for credit losses 1,000 1,000
-------- --------
Total expenses 196,105 180,199
-------- --------
Operating income 40,099 35,113
Interest income, net 1,204 1,050
-------- --------
Income before income taxes 41,303 36,163
Provision for income taxes 15,700 13,600
-------- --------
Net income $ 25,603 $ 22,563
======== ========
Average earnings per share: (1) 0.27 0.24
Average shares outstanding: (1) 95,922 94,989
(1) Adjusted for the December 13, 1995 5-for-4 stock split.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited) (audited)
Sept. 30, 1996 June 30, 1996
-------------- -------------
ASSETS
Cash and cash equivalents $ 51,371 $ 47,400
Receivables, net 392,783 402,039
Inventories 121,314 124,280
Property, plant and equipment, net 188,470 184,271
Other assets 149,495 128,360
-------- --------
Total assets $903,433 $886,350
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 84,026 $ 91,064
Long-term debt 28,439 30,290
Deferred income taxes 5,100 5,680
Other liabilities 109,999 109,127
Shareholders' equity 675,869 650,189
-------- --------
Total liabilities and shareholders' equity $903,433 $886,350
======== ========
</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,
1996 1995
-------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 25,603 $22,563
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 3,042 1,938
Gain on sale of installment contract receivables, net of amortization (3,189) (3,979)
Provision for credit losses 1,000 1,000
Decrease in deferred income taxes (580) (2,670)
Increase in other receivables, net (5,059) (6,601)
Decrease in inventories 2,966 8,178
Decrease in operating liabilities (7,038) (18,717)
Decrease in other liabilities net of other assets (15,425) (16,907)
-------- --------
Cash provided (required) from operations 1,320 (15,195)
Origination of installment contract receivables (134,668) (95,701)
Proceeds from sales of originated installment contract receivables 128,557 159,509
Principal collected on originated installment contract receivables 25,295 10,231
-------- --------
Net cash provided from operating activities 20,504 58,844
INVESTING ACTIVITIES
Acquisition of installment contract receivables (15,304) (2,715)
Proceeds from sales of acquired installment contract receivables 9,309 22,308
Principal collected on acquired installment contract receivables 3,315 3,350
Acquisition of property, plant and equipment, net (7,241) (12,001)
Decrease (increase) in restricted cash and investments (4,896) 6,147
-------- --------
Net cash required from investing activities (14,817) 17,089
FINANCING ACTIVITIES
Dividends paid (1,905) (1,513)
Proceeds from short-term borrowings 4,475 24,295
Repayment of short-term borrowings (4,475) (24,295)
Repayment of long-term debt (1,851) (7,787)
Issuance of stock for incentive plans and other 2,040 5,480
-------- --------
Net cash required from financing activities (1,716) (3,820)
-------- --------
Net increase in cash and cash equivalents 3,971 72,113
Cash and cash equivalents at beginning of period 47,400 69,755
-------- --------
Cash and cash equivalents at end of period $ 51,371 $141,868
======== ========
</TABLE>
(See accompanying notes to the condensed consolidated financial statements)
3
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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, 1996.
The information furnished reflects all adjustments which are necessary
for a fair presentation of the Company's financial position as of
September 30, 1996; the results of its operations for the three
months ended September 30, 1996 and 1995; 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,
1996 and 1995 are not necessarily indicative of the results to be
expected for the respective full years.
3. Effective July 1, 1996, the Company adopted Statement of Accounting
Standards No. 123, Accounting and Disclosure of Stock-Based
Compensation, which encourages but does not require companies to
recognize stock awards based on their fair value at the date of
grant. As the Company elected to adopt only the disclosure
requirements of the new standard, it will continue to apply the
provisions of Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees (APB 25), and related interpretations
in accounting for its employee stock options. Under APB 25, because
the exercise price of the Company's employee stock options equal the
market price of the underlying stock on the date of grant, no
compensation expense is recognized.
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, 1996 AND 1995:
The following table reflects the percentage changes in retail sales for the
Company's retail and community sales centers and wholesale sales to independent
retailers. It also reflects percentage changes in the average number of
Company-owned retail centers, communities and independent retailers, the
average sales per location, and the average price per home sold in each
category.
<TABLE>
<CAPTION>
First Three Months
Fiscal year 1997 vs 1996
------------------------
<S> <C>
Retail
Dollar sales + 5.9%
Number of retail centers +12.9%
Dollar sales per retail center - 6.2%
Price of home + 4.3%
Wholesale
Dollar sales +14.5%
Number of independent retailers +33.6%
Dollar sales per independent retailer -14.3%
Price of home - 2.1%
Communities
Dollar sales + 9.2%
Number of communities + 9.3%
Dollar sales per community - 0.1%
Price of home + 5.5%
</TABLE>
Total revenues for the three months ended September 30, 1996 increased 10% as
manufactured housing sales rose 9% to $194 million, financial services income
grew 8% to $31 million and rental and other income increased 29% to $11
million.
Net sales of the Retail group rose 6% to $114 million on a 4% rise in the
average home price, and a 13% increase in company-owned sales centers,
offsetting a 10% decrease in the average number of homes sold per sales center
(total locations increased from 196 to 222). The increase in the average home
price is primarily attributable to a greater percentage of multi-section homes
sold.
5
<PAGE> 6
Net sales of the Manufacturing group increased 15% to $71 million as the number
of homes sold was up 17%. The average wholesale price to independent retailers
decreased 2%, as a result of variations within the mix of homes sold.
Net sales of the Communities group rose 9% to $9 million primarily as 4% more
homes were sold and the average home selling price increased 5%.
Financial services income increased 8%. Interest and loan servicing revenues
grew $2 million, and insurance related revenues rose $2 million. Gains on the
sale of installment contract receivables decreased by $1 million as compared to
the prior year.
Rental and other income increased 29% on a 21% increase in communities rental
income and a $1 million increase in other income.
Financial services interest expense decreased 24%, to $.8 million. Average debt
collateralized by installment contract receivables dropped 28% to $29 million,
while the weighted average interest rate decreased from 10.99% to 10.72%. The
terms of the debt preclude prepayment by the Company.
Gross profit margins decreased to 31.2% from 31.9%, attributable to a reduction
in sales from the Company's Manufacturing group to its Retail group. Vertical
shipments were 45% of manufacturing sales last year compared to 42% in the
first quarter of fiscal 1997.
Selling, general and administrative expenses, as a percent of revenues, were
25.8%, slightly lower than the 26.5% in the prior comparable period.
The provision for credit losses declined as a percent of sales to 0.5% from 0.6%
last year, as credit losses were 0.2% for the period.
The following table represents delinquent installment sales contracts as a
percentage of the total number of installment sales contracts which the Company
serviced and either owned or was contingently liable. A contract is considered
delinquent if any payment is more than one month past due.
<TABLE>
<CAPTION>
September 30,
1996 1995
---- ----
<S> <C> <C>
Total delinquencies as percentage
of contracts outstanding:
All contracts 2.28% 2.16%
Contracts originated by VMF 1.96% 1.83%
Contracts acquired from other institutions 4.48% 4.12%
</TABLE>
6
<PAGE> 7
The following table sets forth information related to loan loss/repossession
experience for all installment contract receivables on which the Company either
owns or for which it is contingently liable.
<TABLE>
<CAPTION>
Three months ended
September 30,
1996 1995
---- ----
<S> <C> <C>
Net losses as percentage of average
loans outstanding (annualized):
All contracts 0.2% 0.3%
Contracts originated by VMF 0.0% 0.1%
Contracts acquired from
other institutions 2.4% 3.5%
Number of contracts in repossession:
Total 944 612
Contracts originated by VMF 830 487
Contracts acquired from
other institutions 114 125
Total number of contracts in repossession
as percentage of total contracts 1.0% 0.9%
</TABLE>
The $3 million decrease in inventories as of September 30, 1996 from June 30,
1996, is explained as follows:
<TABLE>
<CAPTION>
Increase (decrease)
-------------------
<S> <C>
Manufacturing Group
Finished goods $ 4.9
Raw materials (9.4)
Retail Group
Average stocking levels at 216 sales centers owned
by the Company at June 30, 1996 (2.1)
Inventory to stock six new company-owned sales centers 2.7
Communities Group
Total of all Communities 0.9
------
$ (3.0)
</TABLE>
7
<PAGE> 8
On September 30, 1996, the order backlog for the Manufacturing Group
(consisting of company-owned and independent retailer orders) was $27 million,
as compared to $81 million for the prior year.
Liquidity and Capital Resources
Cash at September 30, 1996, was $51.4 million as compared to $47.4 million on
June 30, 1996. The Company anticipates meeting cash requirements 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) 1996 1995
---- ----
<S> <C> <C>
Net income (fully diluted) $25,603 $22,563
Weighted average shares outstanding (fully diluted) 95,922 94,989
Earnings per share: (fully diluted) $ .27 $ .24
</TABLE>
(b) 27. Financial Data Schedule (for SEC use only).
8
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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 6, 1996 s/Joseph H. Stegmayer
---------------- ---------------------------------------------
Joseph H. Stegmayer
President, Chief Operating Officer, Treasurer
and Director
Date: November 6, 1996 s/John J. Kalec
---------------- ---------------------------------------------
John J. Kalec
Vice President and Chief Financial Officer
(Principal Financial Officer)
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CLAYTON HOMES, INC FOR THE NINE MONTHS ENDED 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-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 51,371
<SECURITIES> 0
<RECEIVABLES> 400,086
<ALLOWANCES> 7,303
<INVENTORY> 121,314
<CURRENT-ASSETS> 0
<PP&E> 235,927
<DEPRECIATION> 47,457
<TOTAL-ASSETS> 903,433
<CURRENT-LIABILITIES> 84,026
<BONDS> 28,439
0
0
<COMMON> 9,522
<OTHER-SE> 666,347
<TOTAL-LIABILITY-AND-EQUITY> 903,433
<SALES> 193,874
<TOTAL-REVENUES> 236,204
<CGS> 133,472
<TOTAL-COSTS> 194,327
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,000
<INTEREST-EXPENSE> (426)
<INCOME-PRETAX> 41,303
<INCOME-TAX> 15,700
<INCOME-CONTINUING> 25,603
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,603
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
