CLAYTON HOMES INC
10-Q, 2000-05-12
MOBILE HOMES
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<PAGE>
                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,  2000
                                  -------------------

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)

   865-380-3000
  --------------
(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, 2000:
137,978,806.


                                        1
<PAGE>

                                               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,

                                                                                2000         1999        2000      1999
                                                                             -----------  -----------  --------  ---------
<S>                                                                          <C>          <C>          <C>       <C>
REVENUES
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $  229,378   $  232,965   $729,584  $727,564
Financial services. . . . . . . . . . . . . . . . . . . . . . . . . . . . .      59,588       58,133    171,506   163,983
Rental and other income . . . . . . . . . . . . . . . . . . . . . . . . . .      18,015       17,208     52,347    50,565
                                                                             -----------  -----------  --------  ---------
Total revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     306,981      308,306    953,437   942,112
                                                                             -----------  -----------  --------  ---------
COSTS AND EXPENSES
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     152,647      156,908    485,689   496,983
Selling, general and administrative . . . . . . . . . . . . . . . . . . . .      92,164       88,382    284,790   261,064
Financial services interest . . . . . . . . . . . . . . . . . . . . . . . .         245        2,102        805     7,361
Provision for credit losses . . . . . . . . .  . . . . .. . . . . . . . . .       5,200        3,600     13,600     8,859
                                                                             -----------  -----------  --------  ---------
Total expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     250,256      250,992    784,884   774,267
                                                                             -----------  -----------  --------  ---------
OPERATING INCOME. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      56,725       57,314    168,553   167,845
Interest income (expense), net/other. . . . . . . . . . . . . . . . . . . .         268       (1,882)       695    (4,103)
                                                                             -----------  -----------  --------  ---------
Income before income taxes. . . . . . . . . . . . . . . . . . . . . . . . .      56,993       55,432    169,248   163,742
Provision for income taxes. . . . . . . . . . . . . . . . . . . . . . . . .      21,100       20,500     62,600    60,600
                                                                             -----------  -----------  --------  ---------
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $   35,893   $   34,932   $106,648  $103,142
                                                                             ===========  ===========  ========  =========
NET INCOME PER COMMON SHARE (1)
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $     0.26   $     0.24   $   0.76  $   0.71
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        0.26         0.24       0.76      0.70
DIVIDENDS PAID PER COMMON SHARE (1) . . . . . . . . . . . . . . . . . . . .  $    0.016   $    0.016   $  0.048  $  0.048
AVERAGE SHARES OUTSTANDING (1)
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     138,839      144,482    139,966   145,580
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     139,121      145,187    140,395   146,358
(1) Adjusted for the December 9, 1998, 5-for-4 stock split.

                                           CONDENSED CONSOLIDATED BALANCE SHEETS
                                                      (in thousands)
                                                                             (unaudited)    (audited)
                                                                               March 31,     June 30,
                                                                                 2000         1999
                                                                             -----------  -----------
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . .  $    8,000   $    2,680
Receivables, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     660,634      707,888
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     207,258      184,444
Property, plant and equipment, net. . . . . . . . . . . . . . . . . . . . .     302,723      291,503
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     241,324      230,730
                                                                             -----------  -----------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $1,419,939   $1,417,245
                                                                             ===========  ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued liabilities. . . . . . . . . . . . . . . . . .  $   97,967   $  130,579
Debt obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      94,012       96,477
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     224,290      242,421
                                                                             -----------  -----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     416,269      469,477
SHAREHOLDERS' EQUITY
Accumulated other comprehensive income (loss) . . . . . . . . . . . . . . .      (2,109)        (821)
Other shareholders' equity. . . . . . . . . . . . . . . . . . . . . . . . .   1,005,779      948,589
                                                                             -----------  -----------
Total shareholders' equity. . . . . . . . . . . . . . . . . . . . . . . . .   1,003,670      947,768
                                                                             -----------  -----------
Total liabilities and shareholders' equity. . . . . . . . . . . . . . . . .  $1,419,939   $1,417,245
                                                                             ===========  ===========
(See accompanying notes to the condensed consolidated financial statements)
</TABLE>
                                        2
<PAGE>


                               CLAYTON HOMES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (Unaudited - in thousands)

<TABLE>
<CAPTION>

                                                                               Nine Months Ended
                                                                                    March 31,

                                                                                2000        1999
                                                                             ----------  ----------
<S>                                                                          <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 106,648   $ 103,142
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . .     15,078      13,123
Amortization of installment contract receivables, net of gain on sale . . .      2,846      (4,150)
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . .     13,600       8,859
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .     (4,270)     (2,696)
Decrease (increase) in other receivables, net . . . . . . . . . . . . . . .     22,635     (34,977)
Increase in inventories . . . . . . . . . . . . . . . . . . . . . . . . . .    (22,814)     (7,354)
Decrease in accounts payable, accrued liabilities, and other. . . . . . . .    (97,910)    (51,778)
                                                                             ----------  ----------
Cash provided by operations . . . . . . . . . . . . . . . . . . . . . . . .     35,813      24,169
Origination of installment contract receivables . . . . . . . . . . . . . .   (736,452)   (771,466)
Proceeds from sales of originated installment contract receivables. . . . .    736,001     801,534
Principal collected on originated installment contract receivables. . . . .     34,784      56,876
                                                                             ----------  ----------
Net cash provided by operating activities . . . . . . . . . . . . . . . . .     70,146     111,113

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of installment contract receivables . . . . . . . . . . . . . .   (177,654)   (225,434)
Proceeds from sales of acquired installment contract receivables. . . . . .    138,142     191,618
Principal collected on acquired installment contract receivables. . . . . .     13,352      38,065
Proceeds from sales of securities available-for-sale. . . . . . . . . . . .     29,450           -
Acquisition of property, plant and equipment. . . . . . . . . . . . . . . .    (26,298)    (37,358)
Decrease in restricted cash . . . . . . . . . . . . . . . . . . . . . . . .     10,105       6,644
                                                                             ----------  ----------
Net cash used in investing activities . . . . . . . . . . . . . . . . . . .    (12,903)    (26,465)

CASH FLOWS FROM FINANCING ACTIVITIES
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     (7,020)     (7,210)
Net borrowings on credit facilities . . . . . . . . . . . . . . . . . . . .          -     (77,873)
Proceeds from (repayment of) long-term debt . . . . . . . . . . . . . . . .     (2,465)     77,083
Issuance of stock for incentive plans and other . . . . . . . . . . . . . .      2,669       2,736
Repurchase of common stock. . . . . . . . . . . . . . . . . . . . . . . . .    (45,107)    (56,428)
                                                                             ----------  ----------
Net cash used in financing activities . . . . . . . . . . . . . . . . . . .    (51,923)    (61,692)
                                                                             ----------  ----------

Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . .      5,320      22,956
Cash and cash equivalents at beginning of period. . . . . . . . . . . . . .      2,680       1,731
                                                                             ----------  ----------
Cash and cash equivalents at end of period. . . . . . . . . . . . . . . . .  $   8,000   $  24,687
                                                                             ==========  ==========


(See accompanying notes to the condensed consolidated financial statements)
</TABLE>
                                        3
<PAGE>


                               CLAYTON  HOMES,  INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
1.     The  condensed  consolidated  financial statements of Clayton Homes, Inc.
and  its wholly and majority owned subsidiaries (the 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,  1999.

The  information  furnished  reflects  all adjustments which are necessary for a
fair  presentation of the Company's financial position as of March 31, 2000, and
the  results  of  its  operations  and its cash flows for the nine month periods
ended  March 31, 2000, and 1999.  All such adjustments are of a normal recurring
nature.

2.     The  results  of operations for the nine months ended March 31, 2000, and
1999  are  not  necessarily  indicative  of  the  results to be expected for the
respective  full  years.

3.          Certain  reclassifications  have  been  made  to  the 1999 financial
statements  to  conform  to  the  2000  presentation.

4.     The  Company has $75 million of 6.25% Senior Notes due December 30, 2003,
which  are  primarily to facilitate the purchase, origination and warehousing of
loan  portfolios.  The  Senior  Notes  are  guaranteed  by  all  significant
subsidiaries  of  the  Company  and  are governed by various financial covenants
which  require  maintenance  of  certain  financial  ratios.

On  January  21,  2000,  the Company renewed its committed one year $300 million
commercial  paper  conduit  facility  used  to  facilitate  interim  sale  of
manufactured  housing  contracts.

5.     Reconciling  items  in  excess of bank balances have been reclassified to
accounts  payable  and  accrued  liabilities.

6.     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,
(in thousands except per share data)                             2000      1999      2000      1999
                                                               --------  --------  --------  --------
<S>                                                            <C>       <C>       <C>       <C>
Net income. . . . . . . . . . . . . . . . . . . . . . . . . .  $ 35,893  $ 34,932  $106,648  $103,142
Average shares outstanding
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . .   138,839   144,482   139,966   145,580
Add:  common stock equivalents (1). . . . . . . . . . . . . .       282       705       429       778
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . .   139,121   145,187   140,395   146,358
Earnings per share
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $   0.26  $   0.24  $   0.76  $   0.71
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . .  $   0.26  $   0.24  $   0.76  $   0.70

(1)  Common stock equivalents are principally stock options.
</TABLE>
                                        4
<PAGE>
                               CLAYTON HOMES, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

7.     The  Company  operates  primarily  in  four  business  segments:  Retail,
Manufacturing,  Financial  Services  and  Communities.  The  following  table
summarizes  information  with respect to the Company's business segments for the
three  month  and  nine  month  periods  ended  March  31,  2000  and  1999:

<TABLE>
<CAPTION>

                                       Three Months Ended        Nine Months Ended
                                            March 31,                March 31,


(in thousands)                          2000         1999         2000        1999
                                     -----------  -----------  ----------  ----------
<S>                                  <C>          <C>          <C>         <C>
REVENUES
  Retail. . . . . . . . . . . . . .  $  169,226   $  164,370   $ 537,492   $ 512,354
  Manufacturing . . . . . . . . . .     143,180      148,668     455,635     465,647
  Financial Services. . . . . . . .      49,392       49,235     142,049     140,516
  Communities . . . . . . . . . . .      24,451       20,006      66,420      52,961
  Intersegment sales. . . . . . . .     (79,268)     (73,973)   (248,159)   (229,366)
                                     -----------  -----------  ----------  ----------
      Total revenues. . . . . . . .  $  306,981   $  308,306   $ 953,437   $ 942,112

INCOME FROM OPERATIONS
  Retail. . . . . . . . . . . . . .  $   11,316   $   13,379   $  39,223   $  45,344
  Manufacturing . . . . . . . . . .      13,925       16,125      46,358      51,595
  Financial Services. . . . . . . .      29,661       28,659      82,927      79,221
  Communities . . . . . . . . . . .       4,468        4,364      11,447      10,162
  Eliminations/Other. . . . . . . .      (2,645)      (5,213)    (11,402)    (18,477)
                                     -----------  -----------  ----------  ----------
      Total income from operations   $   56,725   $   57,314   $ 168,553   $ 167,845

CAPITAL EXPENDITURES
  Retail. . . . . . . . . . . . . .  $    1,655   $    4,833   $   7,968   $  12,036
  Manufacturing . . . . . . . . . .       2,369        2,681       9,961      10,583
  Financial Services. . . . . . . .          59          116         441         495
  Communities . . . . . . . . . . .       2,827        3,774       7,026      12,978
  Eliminations/Other. . . . . . . .         471          563         902       1,266
                                     -----------  -----------  ----------  ----------
      Total capital expenditures. .  $    7,381   $   11,967   $  26,298   $  37,358

                                      March 31,    June 30,
                                        2000         1999
                                     -----------  -----------
IDENTIFIABLE ASSETS
  Retail. . . . . . . . . . . . . .  $  268,514   $  247,009
  Manufacturing . . . . . . . . . .      93,708       94,773
  Financial Services. . . . . . . .     849,960      901,769
  Communities . . . . . . . . . . .     182,691      177,723
  Eliminations/Other. . . . . . . .      25,066       (4,029)
                                     -----------  -----------
      Total identifiable assets . .  $1,419,939   $1,417,245
</TABLE>
                                        5
<PAGE>

PART  I  -  -  FINANCIAL  INFORMATION  (Unaudited)

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,  2000:

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, independent retailers and communities, the average
sales  per  location,  and  the  average  price  per home sold in each category.

<TABLE>
<CAPTION>

                                                                           First Nine  Months
                                                                        Fiscal Year 2000 vs 1999
                                                                        ------------------------
<S>                                                                  <C>

Retail
            Dollar sales                                                         +  5.4%
            Number of retail centers                                             +  8.2%
            Dollar sales per retail center                                       -  2.6%
            Price of home                                                        +  7.9%

Wholesale
            Dollar sales                                                         - 13.8%
            Number of independent retailers                                      -  3.1%
            Dollar sales per independent retailer                                - 11.1%
            Price of home                                                        +  2.8%

Communities
            Dollar sales                                                         + 49.1%
            Number of communities                                                +  3.4%
            Dollar sales per community                                           + 44.1%
            Price of home                                                        +  5.7%
</TABLE>

Total  revenues  for  the nine months ended March 31, 2000, increased 1% to $953
million,  as manufactured housing sales rose slightly to $730 million, financial
services income grew 5% to $172 million and rental and other income increased 4%
to  $52  million.

Current  conditions  in the manufactured housing industry are highly competitive
at  both  the retail and wholesale levels. This competitive environment, as well
as  rising  interest  rates  and  general  credit tightening, has contributed to
decreased  industry  and  company  sales.

Net  sales of the Retail group rose 5% to $491 million as the average home price
and  the  number  of  Company-owned sales centers increased 8%, offsetting a 10%
decline  in  the  average  number  of  homes
                                        6
<PAGE>

sold  per  sales  center.

Net sales of the Manufacturing group decreased 14% to $207 million as the number
of  homes  sold decreased 16% to 9,126.  However, the average wholesale price to
independent retailers increased 3% as a result of a shift in product mix towards
multi-section  homes.

Net  sales  of  the  Communities  group increased 49% to $31 million as 41% more
homes  were  sold,  and  the  average  home  selling  price  increased  6%.

Within  the  revenues  for  the  Financial  Services  segment, interest and loan
servicing  revenues increased $3 million, and insurance related revenues rose $4
million.  Rental and other income increased 4% as Communities rental income rose
8%.

Loans  sold  through  asset-backed  securities totaled $894 million, compared to
$813  million  during  the  same  period  last  year.

Financial services interest expense decreased $7 million to $1 million.  Average
debt  collateralized  by  installment  contract  receivables  dropped 26% to $10
million,  while  the weighted average interest rate moved from 10.42% to 10.45%.
The  terms  of  the  debt  preclude  prepayment  by  the  Company.

Gross  profit  margins  increased  to  33.4%  from  31.7%.  The  increase  is
attributable  to  a  higher percentage of retail sales in the total sales mix as
well  as  a  shift  in  mix  to  multi-section  units.

Selling,  general  and  administrative  expenses,  as  a  percent  of  revenues,
increased  to  29.9%  from  27.7%  in  the  prior  year  period primarily due to
increased  set  up  costs  associated with the shift in mix toward multi-section
units  and  sales  of  larger  homes.  Also  contributing was an increase in the
number of Company-owned sales centers without a corresponding increase in sales.
The  provision  for  credit  losses  increased  to  1.9%  from  1.2%  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>

                                                              March 31,

                                                             2000   1999
                                                             -----  -----
<S>                                                          <C>    <C>
Total delinquency as a percentage of contracts outstanding:
All contracts . . . . . . . . . . . . . . . . . . . . . . .  2.36%  2.37%
Contracts originated by VMF . . . . . . . . . . . . . . . .  1.65%  2.03%
Contracts acquired from other institutions. . . . . . . . .  5.78%  3.84%
</TABLE>
                                        7
<PAGE>

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,

                                             2000    1999
                                            ------  ------
<S>                                         <C>     <C>
Net losses as a percentage of average
loans outstanding (annualized):
All contracts. . . . . . . . . . . . . . .    1.4%    1.4%
Contracts originated by VMF. . . . . . . .    1.2%    1.0%
Contracts acquired from other institutions    2.8%    3.4%

Number of contracts in repossession:
All contracts. . . . . . . . . . . . . . .   2,001   2,065
Contracts originated by VMF. . . . . . . .   1,544   1,355
Contracts acquired from other institutions     457     710

Total number of contacts in repossession
as a percentage of total contracts . . . .    1.6%    1.8%
</TABLE>

The  increase  in  inventories  as  of  March  31,  2000, from June 30, 1999, is
explained  as  follows:

<TABLE>
<CAPTION>

($  in  millions)
<S>                                   <C>
Manufacturing. . . . . . . . . . . .  Increase (decrease)
- ------------------------------------  --------------------
Finished goods . . . . . . . . . . .  $       9.9
Raw materials. . . . . . . . . . . .         (6.8)

Retail
- ------------------------------------
Increase in inventory levels at 306
Company-owned retail centers open at
June 30, 1999. . . . . . . . . . . .          9.6
Inventory to stock six new
Company-owned retail centers . . . .          7.5

Communities
- ------------------------------------
Increase in inventory levels at 75
Communities open at June 30, 1999. .          2.3
Inventory to stock one new Community          0.3
                                      --------------------
                                      $      22.8
                                      --------------------
</TABLE>

On  March 31, 2000, the order backlog for the Manufacturing group (consisting of
Company-owned  and  independent  retailer  orders)  decreased to $12 million, as
compared  to  $23  million  for  the  same  period  last  year.

                                        8
<PAGE>
THREE  MONTHS  ENDED  MARCH  31,  2000:

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, independent retailers and communities, the average
sales  per  location,  and  the  average  price  per home sold in each category.

<TABLE>
<CAPTION>


                                                           Third Three Months
                                                        Fiscal Year 2000 vs 1999
<S>                                                     <C>

Retail
       Dollar sales                                             +  3.2%
       Number of retail centers                                 +  6.3%
       Dollar sales per retail center                           -  2.9%
       Price of home                                            +  3.6%
Wholesale
       Dollar sales                                             - 15.4%
       Number of independent retailers                          -  2.5%
       Dollar sales per independent retailer                    - 13.2%
       Price of home                                            -  0.4%

Communities
       Dollar sales                                             + 34.9%
       Number of communities                                    +  2.0%
       Dollar sales per community                               + 32.3%
       Price of home                                            +  5.6%
</TABLE>


Total  revenues for the three months ended March 31, 2000, decreased slightly to
$307  million,  as  manufactured  housing  sales  decreased  2% to $229 million,
financial  services  income  increased  3%  to  $60 million and rental and other
income  increased  5%  to  $18  million.

Current  conditions  in the manufactured housing industry are highly competitive
at  both  the retail and wholesale levels. This competitive environment, as well
as  rising  interest  rates  and  general  credit tightening, has contributed to
decreased  industry  and  company  sales.

Net  sales  of  the  Retail  group  rose  3% to $154 million on a 4% rise in the
average  home  price, a 6% 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 decreased 15% to $63 million as the number
of  homes  sold  also  decreased  15%  to 2,829.  The average wholesale price to
independent  retailers  decreased  slightly.

Net  sales  of  the  Communities  group increased 35% to $12 million as 28% more
homes  were  sold,  and  the  average  home  selling  price  increased  6%.

Within  the  revenues  for  the  Financial  Services  segment, interest and loan
servicing  revenues increased $5 million, and insurance related revenues rose $1
million.  Rental  and  other  income  increased  5%  on a
                                        9
<PAGE>

9% rise in Communities rental  income.

Loans  sold  through  asset-backed  securities totaled $271 million, compared to
$281  million  during  the  same  period  last  year.

Financial  services  interest  expense  decreased  $1.9  million to $.2 million.
Average  debt  collateralized by installment contract receivables dropped 26% to
$9 million, while the weighted average interest rate moved from 9.98% to 10.34%.
The  terms  of  the  debt  preclude  prepayment  by  the  Company.

Gross  profit  margins  increased  to  33.5%  from  32.6%.  The  increase  is
attributable  to  a  higher percentage of retail sales in the total sales mix as
well  as  a  shift  in  mix  to  multi-section  units.

Selling,  general  and  administrative  expenses,  as  a  percent  of  revenues,
increased  to  30.0%  from  28.7%  in  the  prior  year  period partially due to
increased  set  up  costs  associated with the shift in mix toward multi-section
units  and  sales  of  larger  homes.  Also  attributable was an increase in the
number of Company-owned sales centers without a corresponding increase in sales.
The  provision  for  credit  losses  increased  to  2.3%  from  1.5%  of  sales.

The following table sets forth write-off experience for the quarters ended March
31,  2000  and  1999:

<TABLE>
<CAPTION>

                                         Third Quarter Ended
                                              March 31,

                                             2000   1999
                                            -----  -----
<S>                                         <C>    <C>
Net losses as a percentage of average
loans outstanding (annualized):
All contracts. . . . . . . . . . . . . . .   1.3%   1.5%
Contracts originated by VMF. . . . . . . .   1.1%   1.1%
Contracts acquired from other institutions   2.6%   4.1%
</TABLE>


Liquidity  and  Capital  Resources
- ----------------------------------

Cash  at  March  31,  2000, was $8 million as compared to $3 million at June 30,
1999.  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.

At  March  31,  2000,  and  June  30,  1999,  the  Company  had  short-term debt
outstanding  of  $0 and $0 and long-term debt outstanding of $94 million and $96
million,  respectively.  Short-term  debt  available  consists  of  $171 million
committed and $66 million uncommitted lines of credit.  These lines of credit do
not  require collateral and are priced on LIBOR plus rates ranging from 0.10% to
0.50%.  The  committed  credit  lines  are  guaranteed  by  all  significant
subsidiaries  of  the  Company  and  are governed by various financial covenants
which  require  maintenance  of  certain  financial  ratios.

The  Company  has $75 million of 6.25% Senior Notes due December 30, 2003, which
are  primarily  to  facilitate the purchase, origination and warehousing of loan
portfolios.  The  Senior Notes are guaranteed by all significant subsidiaries of
the  Company  and  are  governed  by  various  financial covenants which require
maintenance  of  certain  financial  ratios.
                                       10
<PAGE>

On  January  21,  2000,  the Company renewed its committed one year $300 million
commercial  paper  conduit  facility  used  to  facilitate  interim  sale  of
manufactured housing contracts.  At March 31, 2000, $84 million was utilized, as
compared  to  $105  million  at  June  30,  1999.

New  Accounting  Pronouncements
- -------------------------------

In  March  1998,  the  AICPA  issued  Statement  of  Position  98-1  (SOP 98-1),
Accounting  for the Cost of Computer Software Developed or Obtained for Internal
Use.  SOP  98-1  is  effective  for  financial  statements  for the fiscal years
beginning after December 15, 1998.  SOP 98-1 provides guidance on accounting for
computer  software  developed  or  obtained  for  internal  use  including  the
requirement  to  capitalize specified costs and amortization of such costs.  The
Company will adopt the provisions of SOP 98-1 in its fiscal year ending June 30,
2000,  and  does  not  expect  such  adoption  to  have a material effect on the
Company's  reported  results  of  operations, financial position, or cash flows.

In  April  1998,  the  AICPA issued SOP 98-5, Reporting on the Costs of Start-Up
Activities,  which  is  effective  for fiscal years beginning after December 15,
1998.  SOP  98-5  provides  guidance  on the financial reporting of start-up and
organization  costs.  It  requires start-up activities and organization costs to
be  expensed as incurred. The Company will adopt the provisions of SOP 98-5 in
its  fiscal year ending June 30, 2000, and does not expect such adoption to have
a  material  effect  on  the Company's reported results of operations, financial
position,  or  cash  flows.

In  June  1998,  the  FASB  issued  SFAS No. 133, Accounting for Derivatives and
Financial  Instruments  and Hedging Activities.  SFAS 133 establishes accounting
and  reporting standards of derivative instruments, including certain derivative
instruments  embedded  in  other  contracts,  and  for  hedging activities.  The
adoption  of  SFAS 133, as amended, is not expected to have a material impact on
the  Company's reported results of operations, financial position or cash flows.

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, 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,  capital  market  liquidity, government monetary policy, stable
regulation  of  manufacturing  standards,  consumer  confidence, favorable trade
policies,  and  general prevailing  economic  and  employment  conditions.

                                       11
<PAGE>
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  2000A.  Filed
            February  17,  2000.
            Clayton  Homes,  Inc./Vanderbilt  Mortgage  &  Finance,  Inc.
            incorporation  of financial statements of Clayton Homes, Inc. into
            registration statement file no. 333-75405  pertaining  to  Senior
            Subordinate  Pass-Through Certificates Series 2000A.  Filed
            February  25,  2000.

                                       12
<PAGE>

                               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,  2000     /s/  Kevin  T.  Clayton
               --------------     -----------------------
                                  Kevin  T.  Clayton
                                  Chief  Executive  Officer  and  President



Date:          May  12,  2000     /s/  Amber  W.  Krupacs
               --------------     -----------------------
                                  Amber  W.  Krupacs
                                  Vice  President  Finance



Date:          May  12,  2000     /s/  Greg  A.  Hamilton
               --------------     -----------------------
                                  Greg  A.  Hamilton
                                  Vice  President  and  Controller
                                       13
<PAGE>













<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,
2000  AND IS QUALIFED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. Dollars

<S>                                     <C>
<PERIOD-TYPE>                           9-MOS
<FISCAL-YEAR-END>                       JUN-30-2000
<PERIOD-START>                          JAN-01-2000
<PERIOD-END>                            MAR-31-2000
<EXCHANGE-RATE>                         1
<CASH>                                        8000
<SECURITIES>                                 33663
<RECEIVABLES>                               666682
<ALLOWANCES>                                  6048
<INVENTORY>                                 207258
<CURRENT-ASSETS>                                 0
<PP&E>                                      396982
<DEPRECIATION>                               94259
<TOTAL-ASSETS>                             1419939
<CURRENT-LIABILITIES>                        97967
<BONDS>                                      94012
                            0
                                      0
<COMMON>                                     13798
<OTHER-SE>                                  989872
<TOTAL-LIABILITY-AND-EQUITY>               1419939
<SALES>                                     729584
<TOTAL-REVENUES>                            953437
<CGS>                                       485689
<TOTAL-COSTS>                               770479
<OTHER-EXPENSES>                                 0
<LOSS-PROVISION>                             13600
<INTEREST-EXPENSE>                             110
<INCOME-PRETAX>                             169248
<INCOME-TAX>                                 62600
<INCOME-CONTINUING>                         106648
<DISCONTINUED>                                   0
<EXTRAORDINARY>                                  0
<CHANGES>                                        0
<NET-INCOME>                                106648
<EPS-BASIC>                                  .76
<EPS-DILUTED>                                  .76


</TABLE>


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