<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, 1997
------------------
COMMISSION FILE NUMBER 1-8824
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CLAYTON HOMES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 62-1671360
- ------------------------------- -------------------------------
(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)
423-970-7200
- ---------------------------------------------------
(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, 1997 -
118,650,868.
<PAGE> 2
CLAYTON HOMES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1997 1996
-------- --------
<S> <C> <C>
Revenues
Net sales $208,946 $193,874
Financial services 41,050 30,852
Rental and other income 12,699 11,478
-------- --------
Total revenues 262,695 236,204
-------- --------
Costs and expenses
Cost of sales 143,554 133,472
Selling, general and administrative 70,794 60,855
Financial services interest 602 778
Provision for credit losses 1,000 1,000
-------- --------
Total expenses 215,950 196,105
-------- --------
Operating income 46,745 40,099
Interest income (expense), net/other 1,134 1,204
-------- --------
Income before income taxes 47,879 41,303
Provision for income taxes 18,200 15,700
-------- --------
Net income $ 29,679 $ 25,603
======== ========
Earnings per share: (1) $ 0.25 $ 0.22
Dividends paid per share: (1) $ 0.020 $ 0.016
Average shares outstanding: (1) 119,347 119,903
</TABLE>
(1) Adjusted for the December 11, 1996 5-for-4 stock split.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
(unaudited) (audited)
September 30, June 30,
1997 1997
---------- ----------
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 72,366 $ 89,695
Receivables, net 495,744 478,691
Inventories 113,796 119,434
Property, plant and equipment, net 217,777 214,072
Deferred income taxes 5,284 0
Other assets 160,831 143,869
---------- ----------
Total assets $1,065,798 $1,045,761
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable and accrued liabilities $ 99,334 $ 99,498
Long-term debt 21,238 22,806
Deferred income taxes 0 14,074
Other liabilities 162,843 154,857
Shareholders' equity 782,383 754,526
---------- ----------
Total liabilities and shareholders' equity $1,065,798 $1,045,761
========== ==========
</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,
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 29,679 $ 25,603
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 3,430 3,042
Gain on sale of installment contract receivables, net of amortization (8,684) (3,189)
Provision for credit losses 1,000 1,000
Deferred income taxes (19,358) (580)
Increase in other receivables, net (12,649) (5,059)
Decrease in inventories 5,638 2,966
Increase (decrease) in accounts payable, accrued liabilities, and other 3,003 (22,463)
--------- ---------
Cash provided by operations 2,059 1,320
Origination of installment contract receivables (173,274) (134,668)
Proceeds from sales of originated installment contract receivables 174,629 128,557
Principal collected on originated installment contract receivables 3,365 25,295
--------- ---------
Net cash provided by operating activities 6,779 20,504
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of installment contract receivables (75,096) (15,304)
Proceeds from sales of acquired installment contract receivables 71,926 9,309
Principal collected on acquired installment contract receivables 1,730 3,315
Acquisition of property, plant and equipment, net (7,135) (7,241)
Increase in restricted cash and investments (12,143) (4,896)
--------- ---------
Net cash used in investing activities (20,718) (14,817)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends (2,400) (1,905)
Proceeds from short-term borrowings 34,653 4,475
Repayment of short-term borrowings (34,653) (4,475)
Repayment of long-term debt (1,568) (1,851)
Issuance of stock for incentive plans and other 1,534 2,040
Repurchase of common stock (956) 0
--------- ---------
Net cash used in financing activities (3,390) (1,716)
--------- ---------
Net increase (decrease) in cash and cash equivalents (17,329) 3,971
Cash and cash equivalents at beginning of period 89,695 47,400
--------- ---------
Cash and cash equivalents at end of period $ 72,366 $ 51,371
========= =========
</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, 1997.
The information furnished reflects all adjustments which are necessary
for a fair presentation of the Company's financial position as of
September 30, 1997; the results of it's operations and it's cash flows
for the three month periods ended September 30, 1997 and 1996. All such
adjustments are of a normal recurring nature.
2. The results of operations for the three months ended September 30, 1997
are not necessarily indicative of the results to be expected for the
respective full years.
3. Certain reclassifications have been made to the 1996 financial
statements to conform to the 1997 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.
THREE MONTHS ENDED SEPTEMBER 30, 1997:
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 +10.5%
Number of retail centers +13.0%
Dollar sales per retail center -2.2%
Price of home +6.0%
Wholesale
Dollar sales +4.3%
Number of independent retailers +12.8%
Dollar sales per independent retailer -7.2%
Price of home +4.7%
Communities
Dollar sales 0.0%
Number of communities +3.1%
Dollar sales per community -4.0%
Price of home +14.1%
</TABLE>
Total revenues for the three months ended September 30, 1997 increased 11% to
$263 million. As manufactured housing sales rose 8% to $209 million, financial
services income grew 33% to $41 million and rental and other income increased
11% to $13 million.
Net sales of the Retail group rose 11% to $126 million on a 6% rise in the
average home price, and a 13% increase in Company-owned sales centers,
offsetting an 8% decrease in the average number of homes sold per sales center.
5
<PAGE> 6
Net sales of the Manufacturing group increased 4% to $75 million as the number
of homes sold remained constant. The average wholesale price to independent
retailers increased 5% as a result of a shift in product mix towards
multi-section homes.
Net sales of the Communities group remained constant as 12% less homes were sold
and the average home selling price increased 14%.
Financial services income increased 33%. Interest and loan servicing revenues
grew $8 million, and insurance related revenues rose $1 million. Rental and
other income increased 11% on a 15% rise in Communities rental income and a $0.2
million increase in other income.
Financial services interest expense decreased 23% to $0.6 million. Average debt
collateralized by installment contract receivables dropped 26% to $22 million,
while the weighted average interest rate moved from 10.72% to 11.15%. The terms
of the debt preclude prepayment by the Company.
Gross profit margins improved to 31.3% from 31.2%. The slight increase is
primarily attributable to a higher percentage of retail sales in the total sales
mix.
Selling, general and administrative expenses, as a percent of revenues,
increased to 26.9% from 25.8% in the year earlier period. The provision for
credit losses remained 0.5% of sales.
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,
1997 1996
----- ----
<S> <C> <C>
Total delinquencies as percentage of contracts outstanding:
All contracts 2.23% 2.28%
Contracts originated by VMF 2.15% 1.96%
Contracts acquired from other institutions 2.77% 4.48%
</TABLE>
6
<PAGE> 7
The following table sets forth information related to loan loss/repossession
experience for all installment contract receivables which the Company either
owns or for which it is contingently liable.
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1997 1996
---- ----
<S> <C> <C>
Net losses as a percent of average loans outstanding (annualized):
All contracts 0.6% 0.2%
Contracts originated by VMF 0.6% 0.0%
Contracts acquired from other institutions 0.7% 2.4%
Number of contracts in repossession:
All contracts 1,160 944
Contracts originated by VMF 1,060 830
Contracts acquired from other institutions 100 114
Total number of contracts in repossession
as percentage of total contracts 1.3% 1.0%
</TABLE>
The decrease in inventories as of September 30, 1997 from June 30, 1997, is
explained as follows:
<TABLE>
<CAPTION>
Increase
(decrease)
----------
<S> <C>
Manufacturing
Finished goods $5.5
Raw materials (8.8)
Retail
Decrease in average inventory levels
at 245 Company-owned sales centers (3.4)
Inventory to stock five new
Company-owned sales centers 0.7
Communities
Total of all communities 0.4
-----
$(5.6)
=====
</TABLE>
On September 30, 1997, the order backlog for the Manufacturing group (consisting
of Company-owned and independent retailer orders) was $44 million, as compared
to $27 million for the prior year.
Liquidity and Capital Resources
Cash at September 30, 1997, was $72.4 million as compared to $89.7 million on
June 30, 1997. The Company anticipates meeting cash requirements with cash flows
from operations, current cash balances, and the sale of installment contracts
receivable and GNMA certificates.
7
<PAGE> 8
'
Forward Looking Statements
Certain statements in the quarterly report are forward looking as defined in the
Private Securities Litigation Reform Law. These statements involve certain risks
and uncertainties that may cause actual results to differ materially from
expectations as of the date of this report. These risks include, but are not
limited to, adverse weather conditions impacting sales; inventory adjustments by
major retailers; competitive pricing pressures; success of marketing and
cost-management programs; and shifts in market demand.
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
(b) 27. Financial Data Schedule (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 10, 1997 /s/Joseph H. Stegmayer
-----------------------------------
Joseph H. Stegmayer
Vice Chairman of the Board and
Chairman of the Executive Committee
Date: November 10, 1997 /s/John J. Kalec
-----------------------------------
John J. Kalec
Sr. Vice President, Chief Financial
Officer and Secretary
9
<PAGE> 1
Exhibit 11
Earnings 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,
1997 1996
------- -------
(in thousands except per share data)
<S> <C> <C>
Net income (fully diluted) $29,679 $25,603
Weighted average shares
outstanding (fully diluted) 119,347 119,903
Earnings per share: (fully diluted) $ .25 $ .22
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CLAYTON HOMES, INC FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1997 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-30-1998
<PERIOD-START> JUL-1-1997
<PERIOD-END> SEP-30-1997
<CASH> 72,366
<SECURITIES> 0
<RECEIVABLES> 500,663
<ALLOWANCES> 4,919
<INVENTORY> 113,796
<CURRENT-ASSETS> 0
<PP&E> 274,660
<DEPRECIATION> 56,883
<TOTAL-ASSETS> 1,065,798
<CURRENT-LIABILITIES> 99,334
<BONDS> 21,238
0
0
<COMMON> 11,865
<OTHER-SE> 770,518
<TOTAL-LIABILITY-AND-EQUITY> 1,065,798
<SALES> 208,946
<TOTAL-REVENUES> 262,695
<CGS> 143,554
<TOTAL-COSTS> 214,348
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,000
<INTEREST-EXPENSE> (532)
<INCOME-PRETAX> 47,879
<INCOME-TAX> 18,200
<INCOME-CONTINUING> 29,679
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,679
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.25
</TABLE>
