<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 March 31, 1999
----------------
COMMISSION FILE NUMBER 1-8824
----------
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)
5000 Clayton Road
Maryville, Tennessee 37804
- ---------------------------------------- -----------------
(Address of principal executive offices) (zip code)
423-380-3000
- ----------------------------------------------------
(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 March 31, 1999:
144,523,801.
1
<PAGE> 2
CLAYTON HOMES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1999 1998 1999 1998
--------- -------- --------- --------
<S> <C> <C> <C> <C>
REVENUES
Net sales $ 232,965 $209,305 $ 727,564 $610,329
Financial services 58,133 44,429 163,983 131,633
Rental and other income 17,208 14,641 50,565 40,177
--------- -------- --------- --------
Total revenues 308,306 268,375 942,112 782,139
--------- -------- --------- --------
COSTS AND EXPENSES
Cost of sales 156,908 142,251 496,983 418,871
Selling, general and administrative 88,382 74,446 261,064 213,111
Financial services interest 2,102 444 7,361 1,641
Provision for credit losses 3,600 2,000 8,859 4,000
--------- -------- --------- --------
Total expenses 250,992 219,141 774,267 637,623
--------- -------- --------- --------
OPERATING INCOME 57,314 49,234 167,845 144,516
Interest income (expense), net/other (1,882) 984 (4,103) 3,790
--------- -------- --------- --------
Income before income taxes 55,432 50,218 163,742 148,306
Provision for income taxes 20,500 19,100 60,600 56,400
--------- -------- --------- --------
Net income $ 34,932 $ 31,118 $ 103,142 $ 91,906
========= ======== ========= ========
EARNINGS PER SHARE (1)
Basic $ 0.24 $ 0.21 $ 0.71 $ 0.62
Diluted $ 0.24 $ 0.21 $ 0.70 $ 0.62
DIVIDENDS PAID PER SHARE (1) $ 0.016 $ 0.016 $ 0.048 $ 0.048
AVERAGE SHARES OUTSTANDING (1)
Basic 144,482 148,609 145,580 148,407
Diluted 145,187 149,660 146,358 149,448
</TABLE>
(1) Adjusted for the December 9, 1998, 5-for-4 stock split.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
(unaudited) (audited)
March 31, June 30,
1999 1998
---------- ----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 24,687 $ 1,731
Receivables, net 776,272 837,197
Inventories 174,467 167,113
Property, plant and equipment, net 285,784 261,549
Other assets 200,463 190,167
---------- ----------
Total assets $1,461,673 $1,457,757
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 109,067 $ 138,557
Debt obligations 246,801 247,591
Other liabilities 182,546 190,590
Shareholders' equity 923,259 881,019
---------- ----------
Total liabilities and shareholders' equity $1,461,673 $1,457,757
========== ==========
</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>
Nine Months Ended
March 31,
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 103,142 $ 91,906
Adjustments to reconcile net income to net cash provided
(required) by operating activities:
Depreciation and amortization 13,123 10,559
Gain on sale of installment contract receivables, net of amortization (4,150) (23,788)
Provision for credit losses 8,859 4,000
Deferred income taxes (2,696) (20,740)
Increase in other receivables, net (34,977) (37,208)
Increase in inventories (7,354) (24,518)
Decrease in accounts payable, accrued liabilities, and other (51,778) (15,554)
--------- ---------
Cash provided (required) from operations 24,169 (15,343)
Origination of installment contract receivables (771,466) (534,076)
Proceeds from sales of originated installment contract receivables 801,534 530,343
Principal collected on originated installment contract receivables 56,876 29,221
--------- ---------
Net cash provided by operating activities 111,113 10,145
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of installment contract receivables (225,434) (213,966)
Proceeds from sales of acquired installment contract receivables 191,618 177,200
Principal collected on acquired installment contract receivables 38,065 21,004
Acquisition of property, plant and equipment, net (37,358) (45,870)
Decrease in restricted cash and investments 6,644 6,194
--------- ---------
Net cash used in investing activities (26,465) (55,438)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends (7,210) (7,130)
Net borrowings on credit facilities (77,873) --
Proceeds from (repayment of) long-term debt 77,083 (1,488)
Issuance of stock for incentive plans and other 2,736 6,564
Repurchase of common stock (56,428) (4,531)
--------- ---------
Net cash used in financing activities (61,692) (6,585)
--------- ---------
Net increase (decrease) in cash and cash equivalents 22,956 (51,878)
Cash and cash equivalents at beginning of period 1,731 89,695
--------- ---------
Cash and cash equivalents at end of period $ 24,687 $ 37,817
========= =========
</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 (Company) 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,
1998.
The information furnished reflects all adjustments which are necessary
for a fair presentation of the Company's financial position as of March
31, 1999, the results of its operations and its cash flows for the nine
month periods ended March 31, 1999, and 1998. All such adjustments are
of a normal recurring nature.
2. The results of operations for the nine months ended March 31, 1999, and
1998 are not necessarily indicative of the results to be expected for
the respective full years.
3. Certain reclassifications have been made to the 1998 financial
statements to conform to the 1999 presentation.
4. Debt obligations at March 31, 1999, and June 30, 1998, are summarized
as follows:
<TABLE>
<CAPTION>
March 31, June 30,
1999 1998
-------- --------
(in thousands)
<S> <C> <C>
Lines of credit $150,000 $227,873
Long term debt 96,801 19,718
-------- --------
Total debt obligations $246,801 $247,591
</TABLE>
The Company on December 30, 1998, privately placed $75.0 million of
6.25% Senior Notes due December 30, 2003, with no principal
amortization, primarily to facilitate the purchase, origination and
warehousing of loan portfolios. The Senior Notes are guaranteed by all
material subsidiaries of the Company and are governed by various
financial covenants which require maintenance of certain financial
ratios.
On January 25, 1999, the Company entered into a committed one year
$300.0 million commercial paper conduit facility to facilitate interim
sales of manufactured housing contracts.
4
<PAGE> 5
CLAYTON HOMES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. The following reconciliation details the numerators and denominators
used to calculate basic and diluted earnings per share for the
respective periods:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1999 1998 1999 1998
-------- -------- ------- -------
(in thousands except per share data)
<S> <C> <C> <C> <C>
Net income $ 34,932 $ 31,118 $103,142 $ 91,906
Average shares outstanding
Basic 144,482 148,609 145,580 148,407
Add: common stock equivalents 705 1,051 778 1,041
-------- -------- ------- -------
Diluted 145,187 149,660 146,358 149,448
Earnings per share
Basic $ .24 $ .21 $ .71 $ .62
Diluted $ .24 $ .21 $ .70 $ .62
</TABLE>
6. During the quarter ended March 31, 1999 the Company adopted Statement
of Financial Accounting Standards No. 134, Accounting for
Mortgage-Backed Securities Retained after the Securitization of
Mortgage Loans Held for Sale by a Mortgage Banking Enterprise. The
standard required that the Company classify mortgage-backed securities
and other beneficial interests retained after a securitization in
accordance with SFAS No. 115, Accounting for Certain Investments in
Debt and Equity Securities. The effect of the adoption was to
reclassify certain assets totaling $20.4 million from the held to
maturity category to the available for sale category. Since the
amortized cost of these assets currently approximates fair value, there
was no material impact on other comprehensive income from this adoption
during the quarter.
5
<PAGE> 6
PART I - - FINANCIAL INFORMATION
ITEM 1. Financial Statements.
See pages 2 through 5.
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
NINE MONTHS ENDED MARCH 31, 1999:
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 Nine Months
Fiscal Year 1999 vs 1998
------------------------
<S> <C>
Retail
Dollar sales +28.3%
Number of retail centers +11.3%
Dollar sales per retail center +15.3%
Price of home + 9.6%
Wholesale
Dollar sales + 7.6%
Number of independent retailers + 3.0%
Dollar sales per independent retailer + 4.5%
Price of home + 4.8%
Communities
Dollar sales -10.5%
Number of communities + 6.6%
Dollar sales per community -16.0%
Price of home + 1.6%
</TABLE>
Total revenues for the nine months ended March 31, 1999, increased 20% to $942
million, as manufactured housing sales rose 19% to $728 million, financial
services income grew 25% to $164 million and rental and other income increased
26% to $51 million.
Net sales of the Retail group rose 28% to $466 million on a 10% rise in the
average home price, an 11% increase in Company-owned sales centers, and a 5%
increase in the average number of homes sold per sales center.
Net sales of the Manufacturing group increased 8% to $241 million as the number
of homes sold increased 3% to 10,884. The average wholesale price to independent
retailers increased 5% as a result of a shift in product mix towards
multi-section homes.
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<PAGE> 7
Net sales of the Communities group decreased 11% to $21 million as 12% less
homes were sold, while the average home selling price increased 2%.
Financial services revenues increased 25%. Interest and loan servicing revenues
increased $46 million, and insurance related revenues rose $6 million. Rental
and other income increased 26% on a 22% rise in Communities rental income.
Loans sold through asset-backed securities totaled $813 million, compared to
$673 million during the same period last year.
Financial services interest expense increased to $7 million due to higher
average borrowings. Average debt collateralized by installment contract
receivables dropped 29% to $14 million, while the weighted average interest rate
moved from 10.33% to 10.42%. The terms of the debt preclude prepayment by the
Company.
Gross profit margins increased to 31.7% from 31.4% which is partially
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 27.7% from 27.2% in the prior year period primarily due to
increased set up costs. The provision for credit losses increased to 1.2% from
0.7% of sales.
The following table represents delinquent installment sales contracts as a
percentage of the total number of installment sales contracts which the Company
services and either owns or for which it is contingently liable. A contract is
considered delinquent if any payment is more than one month past due.
<TABLE>
<CAPTION>
Third Quarter Ended
March 31,
1999 1998
---- ----
Total delinquencies as a percentage *Includes Excludes
of contracts outstanding: Access Access
------ -------
<S> <C> <C> <C>
All contracts 2.37% 2.10% 1.81%
Contracts originated by VMF N/A 2.03% 1.66%
Contracts acquired from other institutions 3.84% 2.51% 2.61%
</TABLE>
*In the month of May 1998 the Company purchased $245 million in loans from
Access Financial Lending Corporation (Access) and contracted to service an
additional $267 million - for a total of $512 million in servicing.
7
<PAGE> 8
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>
Nine Months Ended
March 31,
1999 1998
---- ----
Net losses as a percentage of average *Includes Excludes
loans outstanding (annualized): Access Access
-------- --------
<S> <C> <C> <C>
All contracts 1.4% 1.1% 0.8%
Contracts originated by VMF N/A 1.0% 0.8%
Contracts acquired from other institutions 3.4% 2.2% 1.4%
Number of contracts in repossession:
All contracts 2,065 1,644 1,507
Contracts originated by VMF N/A 1,355 1,356
Contracts acquired from other institutions 710 289 151
Total number of contracts in repossession
as a percentage of total contracts 1.8% 1.5% 1.5%
</TABLE>
*In the month of May 1998 the Company purchased $245 million in loans from
Access Financial Lending Corporation (Access) and contracted to service an
additional $267 million - for a total of $512 million in servicing.
The increase in inventories as of March 31, 1999, from June 30, 1998, is
explained as follows:
<TABLE>
<CAPTION>
Manufacturing Increase (decrease)
------------- -------------------
<S> <C>
Finished goods $ 6.3
Raw materials (9.9)
<CAPTION>
Retail
------
Decrease in inventory levels at 273
Company-owned retail centers at
June 30, 1998 (2.6)
Inventory to stock 25 new
Company-owned retail centers 12.2
<CAPTION>
Communities
-----------
Increase in inventory levels at 71
Communities at June 30, 1998 .6
Inventory to stock four new
Communities .8
-------
$ 7.4
=======
</TABLE>
On March 31, 1999, the order backlog for the Manufacturing group (consisting of
Company-owned and independent retailer orders) decreased to $23 million, as
compared to $43 million for the same period last year.
8
<PAGE> 9
THIRD QUARTER ENDED MARCH 31, 1999:
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>
Third Three Months
Fiscal Year 1999 vs 1998
------------------------
<S> <C>
Retail
Dollar sales +16.9%
Number of retail centers +11.4%
Dollar sales per retail center + 4.9%
Price of home +11.0%
Wholesale
Dollar sales + 1.6%
Number of independent retailers + 1.3%
Dollar sales per independent retailer + 0.3%
Price of home + 6.5%
Communities
Dollar sales +12.1%
Number of communities + 8.8%
Dollar sales per community + 3.1%
Price of home + 3.4%
</TABLE>
Total revenues for the three months ended March 31, 1999, increased 15% to $308
million, as manufactured housing sales rose 11% to $233 million, financial
services income grew 31% to $58 million and rental and other income increased
18% to $17 million.
Net sales of the Retail group rose 17% to $149 million on an 11% rise in the
average home price, an 11% increase in Company-owned sales centers, offsetting a
6% decrease in the average number of homes sold per sales center.
Net sales of the Manufacturing group increased 2% to $75 million as the number
of floors sold remained constant. The average wholesale price to independent
retailers increased 6% as a result of a shift in product mix towards
multi-section homes. The Company's plant in Waycross, Georgia which was damaged
by severe storms on January 2, 1999, resumed production in late April.
Net sales of the Communities group increased 12% to $9 million as 8% more homes
were sold, while the average home selling price increased 3%.
Financial services revenues increased 31%. Interest and loan servicing revenues
increased $14 million, and insurance related revenues rose $2 million. Rental
and other income increased 18% on a 12% rise in Communities rental income.
Loans sold through asset-backed securities totaled $281 million, compared to
$214 million during the same period last year.
9
<PAGE> 10
Financial services interest expense increased to $2 million due to higher
average borrowings. Average debt collateralized by installment contract
receivables dropped 25% to $13 million, while the weighted average interest rate
moved from 10.41% to 9.98%. The terms of the debt preclude prepayment by the
Company.
Gross profit margins increased to 32.6% from 32.0% which is partially
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 28.7% from 27.7% in the prior year period. The provision for credit
losses increased to 1.5% from 1.0% of sales.
The following table sets forth write-off experience for the quarters ended March
31, 1999 and 1998:
<TABLE>
<CAPTION>
Third Quarter Ended
March 31,
1999 1998
---- ----
Net losses as a percentage of average *Includes Excludes
loans outstanding (annualized): Access Access
<S> <C> <C> <C>
All contracts 1.5% 1.2% 1.0%
Contracts originated by VMF N/A 1.1% 0.9%
Contracts acquired from other institutions 4.1% 2.7% 2.1%
</TABLE>
*In the month of May 1998 the Company purchased $245 million in loans from
Access Financial Lending Corporation (Access) and contracted to service an
additional $267 million - for a total of $512 million in servicing.
10
<PAGE> 11
Liquidity and Capital Resources
Cash at March 31, 1999, was $25.0 million as compared to $1.7 million at June
30, 1998. The Company anticipates meeting cash requirements with cash flow from
operations, revolving credit lines, a commercial paper conduit facility, senior
notes, and sales of installment contract and mortgage loan receivables and GNMA
certificates.
The Company has committed and uncommitted lines of credit totaling $350.0
million and $62.5 million for working capital needs of which $150 million and $0
million, respectively, were outstanding at March 31, 1999. These lines of credit
do not require collateral and are priced on LIBOR plus rates ranging from 0.10%
to 0.40%. The committed credit lines are guaranteed by all material subsidiaries
of the Company and are governed by various financial covenants which require
maintenance of certain financial ratios.
The Company on December 30, 1998, privately placed $75.0 million of 6.25% Senior
Notes due December 30, 2003, with no principal amortization, primarily to
facilitate the purchase, origination and warehousing of loan portfolios. The
Senior Notes are guaranteed by all material subsidiaries of the Company and are
governed by various financial covenants which require maintenance of certain
financial ratios.
On January 25, 1999, the Company entered into a committed one year $300.0
million commercial paper conduit facility to facilitate interim sales of
manufactured housing contracts.
Year 2000
Many of the Company's systems and related software are Year 2000 compliant.
However, the Company has in place a plan to address potential disruptions to
normal business activities related to the Year 2000. Areas addressed by the plan
include information systems (hardware and software), non-information systems,
embedded chips, and supply chain continuance. Currently, the Company has
completed the awareness and assessment stages of the project. Four out of five
business units have fully tested and implemented Year 2000 solutions. Financial
Services upgraded their Information Technology platform in 1991 which included
Year 2000 problem solving. They have completed 92% of the system validation
process. A Year 2000 Steering Committee has been established and a project
leader has been assigned to oversee the process and report on a regular basis.
The steering committee is chaired by the President of the Company.
Information systems, consisting of hardware and software, have been modified or
replaced to ensure Year 2000 compliance. The Company's hardware consists of a
mainframe, networks, and personal computers. All desktop computers utilized in
mission critical functions have been tested and are in compliance. The mainframe
computers are compliant with respect to the hardware and operating systems. Many
of the Company's critical software systems, such as the General Ledger, Accounts
Payable, Payroll, Human Resources, and Credit Application Tracking systems have
been replaced by Year 2000 compliant packages. The Company tested each of these
software systems using a standardized testing methodology which includes
millennium testing, millennium leap year testing, and cross over year testing.
Non-information systems at corporate such as HVAC, elevator, phone system,
security systems, vaults, and computer rooms are Year 2000 compliant as a direct
result of building a new Corporate office.
11
<PAGE> 12
Similar equipment at field locations is not dependent on embedded chip
technologies and is not considered an area of material exposure.
The Company has completed its surveying of major suppliers and vendors of raw
materials for Year 2000 compliance. The Company is not directly dependent on
electronic data interchange (EDI) for the purchase of raw materials, though some
of the Company's suppliers may be. Moreover, the bulk of raw materials (mostly
lumber) is readily available from other suppliers. Possible interruptions in the
supply chain can be circumvented by purchasing raw materials from an alternate
local supplier. Responses from the Company's surveys provide assurance that our
critical suppliers, including Financial Services providers, plan to be compliant
by the middle of 1999.
Through March 31, 1999 the Company has incurred approximately $250,000 in costs
associated with Year 2000 compliance. The total costs are not expected to exceed
$500,000 or to have a material impact on the Company's financial position,
results of operations, or cash flows in future periods. Most of the hardware,
software, and non-information system replacements have been due to growth of the
Company and Year 2000 compliance is a byproduct of the replacement systems. The
custom written software is addressed by the in-house programming staff and
contract programming services. Most costs directly associated with Year 2000
compliance will be incurred during fiscal 1999.
Contingency planning, both short term and long term, for critical processes for
each business group has started and will be completed by the end of fiscal year
1999. To mitigate any unexpected problems with the Year 2000, plans could
include, but are not limited to: (1) rapid transitions to alternative suppliers
of services and materials, (2) replacement of errant equipment or software, (3)
manual ledgers, (4) increased work hours by Company personnel, (5) temporary
personnel, (6) outsourcing, and (7) routine backup of critical data to different
platforms. Should the Company be required to execute a long term contingency
plan, an adverse material effect to operations could result.
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could adversely affect the Company's results of
operations, liquidity and financial condition. The Company believes that the
risk of failure to the Housing and Communities business units is not material
due to the low-technology nature of those businesses and manual processes are in
use for backup procedures now. Due to the general uncertainty inherent in the
Year 2000 problem, resulting in part from the uncertainty of the Year 2000
readiness of third-party suppliers and customers, the Company is unable to
determine at this time whether the consequences of Year 2000 failures could have
a material impact on the Company's results of operations, liquidity or financial
condition. The Year 2000 Project is expected to significantly reduce the
Company's level of uncertainty about the Year 2000 problem and, in particular,
about the Year 2000 compliance and readiness of its critical suppliers and
financial services providers. The Company believes that, with the implementation
of new business systems and completion of the Project as scheduled, the exposure
to significant interruptions of normal operations should be reduced.
New Accounting Pronouncements
During fiscal 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 131 (SFAS No. 131), Disclosures
About Segments of an Enterprise and Related Information. SFAS 131 requires new
disclosures of segment information in a company's financial statements and is
effective for fiscal years beginning after December 15, 1997. These statements
will be effective for the Company in fiscal 1999. Adoption of these statements
will not impact the Company's consolidated financial position, results of
operations, or cash flows.
12
<PAGE> 13
On June 15, 1998, the FASB issued SFAS No. 133, Accounting for Derivative and
Financial Instruments and Hedging Activities. SFAS 133 establishes a new model
for accounting for derivatives and hedging activities based on these fundamental
principles: i) derivatives represent assets and liabilities that should be
recognized at fair value on the balance sheet; ii) derivative gains and losses
do not represent liabilities or assets and therefore, should not be reported on
the balance sheet as deferred credits or deferred debits; and iii) special hedge
accounting should be provided only for transactions that meet certain specified
criteria, which include a requirement that the change in fair value of the
derivative be highly effective in offsetting the change in the fair value or
cash flows of the hedged item. This statement is effective for fiscal years
beginning after June 15, 1999, and is not expected to have a material effect on
the Company's financial position or results of operations.
Forward Looking Statements
Certain statements in this 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 fall generally within
three broad categories consisting of industry factors, management expertise, and
government policy and economic conditions. Industry factors include such matters
as potential periodic inventory adjustments by both captive and independent
retailers, general or seasonal weather conditions affecting sales and revenues,
catastrophic events impacting insurance reserves, cost of labor and/or raw
materials and industry consolidation trends creating fewer, but stronger
competitors capable of sustaining competitive pricing pressures.
Management expertise is affected by management's overall ability to anticipate
and meet consumer preferences, maintain successful marketing programs, continue
quality manufacturing output, keep a strong cost management oversight, meet the
Year 2000 compliance plan, and project stable gain on sale accounting
assumptions. Lastly, management has the least control over government policy and
economic conditions such as prevailing interest rates, government monetary
policy, stable regulation of manufacturing standards, consumer confidence,
favorable trade policies, and general prevailing economic and employment
conditions.
13
<PAGE> 14
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)27. Financial Data Schedule (SEC use only)
(b) Reports on Form 8-K.
Clayton Homes, Inc./Vanderbilt Mortgage & Finance, Inc. Senior
Subordinate Pass-Through Certificates Series 1999A. Filed February 19,
1999.
Clayton Homes, Inc./Vanderbilt Mortgage & Finance, Inc.
incorporation of financial statements of Clayton Homes, Inc. into
registration statement file no. 333-43583 pertaining to Senior
Subordinate Pass-Through Certificates Series 1999A. Filed
February 26, 1999.
14
<PAGE> 15
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: May 12, 1999 /s/ Kevin T. Clayton
-------------------- ------------------------------------------
Kevin T. Clayton
President and Chief Operating Officer
Date: May 12, 1999 /s/ Amber W. Krupacs
-------------------- ------------------------------------------
Amber W. Krupacs
Vice President, Finance and Secretary
Date: May 12, 1999 /s/ Greg A. Hamilton
-------------------- ------------------------------------------
Greg A. Hamilton
Vice President and Controller
15
<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 MARCH 31,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 24,687
<SECURITIES> 0
<RECEIVABLES> 822,056
<ALLOWANCES> 45,784
<INVENTORY> 174,467
<CURRENT-ASSETS> 0
<PP&E> 363,362
<DEPRECIATION> 77,578
<TOTAL-ASSETS> 1,461,673
<CURRENT-LIABILITIES> 109,067
<BONDS> 246,801
0
0
<COMMON> 14,452
<OTHER-SE> 908,807
<TOTAL-LIABILITY-AND-EQUITY> 1,461,673
<SALES> 727,564
<TOTAL-REVENUES> 942,112
<CGS> 496,983
<TOTAL-COSTS> 758,047
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 8,859
<INTEREST-EXPENSE> 11,464
<INCOME-PRETAX> 163,742
<INCOME-TAX> 60,600
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 103,142
<EPS-PRIMARY> .71
<EPS-DILUTED> .70
</TABLE>
