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, 1994 or
( ) Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _______ to _______
Commission File Number 1-7444
OAKWOOD HOMES CORPORATION
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-0985879
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2225 S. Holden Road (P.O. Box 7386), Greensboro, North Carolina
(Address of principal executive offices)
27417-0386
(Zip Code)
(910) 855-2400
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
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, 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 April 30, 1994.
Common Stock, Par Value $.50 Per Share ........ 20,453,585
(1)
<PAGE>
PART I. FINANCIAL INFORMATION
QUARTERLY REPORT ON FORM 10-Q
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended March 31, 1994
OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
Greensboro, North Carolina
The condensed consolidated financial statements included herein have
been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
disclosures normally included in annual financial statements prepared in
accordance with generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations, although the Company
believes that the disclosures contained herein are adequate to make the
information presented not misleading. These condensed consolidated
financial statements should be read in conjunction with the financial
statements and the notes thereto included in the Company's latest annual
report on Form 10-K.
(2)
<PAGE>
OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(in thousands except per share data)
Three Months Ended
March 31,
1994 1993
Revenues
Net sales $ 86,449 $ 54,032
Financial services income 15,103 11,578
Other income 2,864 2,370
--------- ---------
Total revenues 104,416 67,980
Costs and expenses
Cost of sales 60,457 37,526
Selling, general and administrative expenses
Non-financial services 22,277 12,994
Financial services 1,868 1,569
Provision for losses on credit sales 2,100 1,404
Interest expense
Non-financial services 84 130
Financial services 6,157 6,464
--------- ----------
Total costs and expenses 92,943 60,087
--------- ----------
Income before income taxes 11,473 7,893
Provision for income taxes 4,195 2,820
---------- ----------
$ 7,278 $ 5,073
Net income ========== ==========
Earnings per share
Primary $ .34 $ .25
Fully diluted $ .34 $ .25
Dividends paid per share $ .02 $ .02
Average shares outstanding
Primary 21,401 20,339
Fully diluted 21,401 20,417
(3)
<PAGE>
OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(in thousands except per share data)
Six Months Ended
March 31,
1994 1993
Revenues
Net sales $ 157,479 $ 96,889
Financial services income 29,344 23,102
Other income 5,267 4,417
---------- ---------
Total revenues 192,090 124,408
---------- ---------
Costs and expenses
Cost of sales 109,613 67,311
Selling, general and administrative expenses
Non-financial services 41,174 24,486
Financial services 3,719 3,185
Provision for losses on credit sales 4,031 2,671
Interest expense
Non-financial services 202 710
Financial services 12,195 12,459
---------- ---------
Total costs and expenses 170,934 110,822
---------- ---------
Income before income taxes 21,156 13,586
Provision for income taxes 7,564 4,820
---------- ---------
$ 13,592 $ 8,766
Net income ========== ==========
Earnings per share
Primary $ .64 $ .50
Fully diluted $ .64 $ .46
Dividends paid per share $ .04 $ .04
Average shares outstanding
Primary 21,393 17,641
Fully diluted 21,402 19,367
(4)
OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(in thousands except per share data)
March 31, September 30,
ASSETS 1994 1993
Cash and cash equivalents $ 8,731 $ 23,904
Receivables, principally installment contracts 456,379 424,710
Inventories:
Manufactured homes 78,374 52,105
Work-in-process, materials and supplies 5,455 4,288
Land/homes under development 1,214 697
--------- ---------
85,043 57,090
--------- ---------
Manufactured housing communities 7,810 4,088
Property, plant and equipment 32,882 27,702
Deferred income taxes 3,333 1,564
Other assets 19,293 17,970
--------- ---------
$ 613,471 $ 557,028
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Short-term borrowings $ 92,000 $ 26,800
Notes and bonds payable 231,053 255,765
Accounts payable and accrued liabilities 38,737 39,079
Reserve for contingent liabilities 2,953 3,009
Other long-term obligations 5,771 3,499
Stockholders' investment:
Common stock, $ .50 par value 10,225 10,172
Additional paid in capital 144,051 143,578
Retained earnings 88,681 75,905
--------- ---------
242,957 229,655
Less : Loan to ESOP 0 (779)
--------- ---------
Total stockholders' investment 242,957 228,876
--------- ---------
$ 613,471 $ 557,028
========= =========
(5)
<PAGE>
OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(000's omitted)
For the Six Months Ended
March 31,
1994 1993
Operating activities:
Net income $ 13,592 $ 8,766
Items not requiring (providing) cash:
Depreciation and amortization 2,100 1,761
Deferred income taxes (1,769) (530)
Provision for losses on credit sales,
net of actual losses 1,776 995
(Increase) in other receivables (2,497) 244
(Increase) in inventories (27,953) (10,719)
(Decrease) in accounts payable and accrued
liabilities (342) 1,638
Increase (decrease) in other long-term
obligations 2,272 89
---------- ----------
Cash used by operations (12,821) 2,244
Installment receivables issued (137,062) (75,849)
Purchase of installment loan portfolio (604) 0
Sale of installment loans 80,765 26,410
Receipts on installment receivables 26,143 21,098
---------- ----------
Cash used by operating activities (43,579) (26,097)
---------- ----------
Investing activities:
Additions to property, plant and equipment (6,811) (2,540)
Additions to manufactured housing communities (3,727) (18)
Other (2,033) (703)
---------- ----------
Cash used by investing activities (12,571) (3,261)
---------- ----------
Financing activities:
Net borrowings (repayments) on short-term
credit facilities 65,200 (3,000)
Issuance of notes and bonds payable 0 43,036
Payments on notes and bonds (23,933) (24,552)
Cash dividends (816) (670)
Proceeds from exercise of stock options 526 3,203
Proceeds from public offering of common stock 0 53,602
Other 0 4
---------- ----------
Cash provided by financing activities 40,977 71,623
---------- ----------
Net increase (decrease) in cash and cash
equivalents (15,173) 42,265
Cash and cash equivalents:
Beginning of period 23,904 17,200
---------- ----------
End of period $ 8,731 $ 59,465
========== ==========
(6)
<PAGE>
OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. The condensed consolidated financial statements reflect all adjustments,
which included only normal recurring adjustments, which are, in the opinion
of management, necessary to present fairly the results of operations for the
periods presented. Results of operations for any interim period are not
necessarily indicative of results to be expected for a full year.
2. Effective October 1, 1993, the Company adopted prospectively Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
("FAS 109"), which requires use of an asset and liability method to account
for deferred income taxes. Prior to fiscal 1994, the Company accounted for
income taxes using the deferred method. Adoption of FAS 109 had the effect of
increasing the Company's net deferred income tax asset by approximately
$214,000 ($.01 per share) at October 1, 1993 which has been reflected as a
reduction in the provision for income taxes for the quarter ended December
31, 1993.
3. The Company is contingently liable as guarantor on installment sale
contracts sold to unrelated financial institutions on a full or limited
recourse basis. The amount of this contingent liability was approximately
$121 million at March 31, 1994.
(7)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three months ended March 31, 1994 compared to three months ended
- - ----------------------------------------------------------------
March 31, 1993
- - ---------------
The following table summarizes certain key sales statistics for the quarters
ended March 31, 1994 and 1993 :
1994 1993
------- -------
Sales dollar volume (in millions) $ 86.4 $ 54.0
New units sold 3,045 2,121
Used units sold 410 255
Average new single-section sales price $23,200 $20,700
Average new multi-section sales price $41,700 $37,500
Weighted average sales centers 134 109
New unit sales per sales center 23 20
Total sales dollar volume increased 60%, reflecting a 44% increase in new
unit volume and increases of 12% and 11% in the average new unit sales
prices of single-section and multi-section homes, respectively. New unit
volume increased due to a 23% increase in the weighted average number of sales
centers open during the period and a 15% increase in average new unit sales
per sales center. Total sales for sales centers open at least one
year rose 32%. The increase in the average new unit sales price reflects
price increases required to offset rising lumber prices, the effect of the
Company's entry into the Texas market where the average size home sold is
larger than in the Southeast market, and higher selling prices in the
Southeast due to a change in product mix toward higher-end homes. Sales in
the Southwest comprised 25% of total new manufactured housing sales dollars in
the second quarter of 1994 compared to 9% last year. The Company has been
successful in recovering increased lumber costs from its customers through
higher selling prices and does not expect fluctuating lumber prices to have
a material adverse effect on its results of operations.
Gross profit as a percentage of sales was 30.1% in the current period
compared to 30.5% in the prior year. Margins rose in the Southeast,
principally due to manufacturing efficiencies resulting from higher production
levels, partially offset by the effects of the Company's expansion into the
Southwest, where substantially all product was sourced from third party
manufacturers. Of the total new unit volume in the second quarter, 78%
was manufactured by the Company compared to 84% in the second quarter last
year. During the current period the Company operated at or near its
production capacity on a single shift basis at four of its operating plants.
At March 31, 1994, a fifth plant acquired in January 1993 was operating at
approximately 75% of capacity. Production at the Company's new Texas facility
commenced in October, 1993 and at
(8)
<PAGE>
March 31, 1994, this plant was operating at approximately 50% capacity.
During the first quarter of fiscal 1994 the Company began construction of
an additional plant in Texas and plans to begin construction of a plant in
Tennessee to further support the Company's expansion into the Southwest and
Midwest markets. Production at these facilities is expected to commence
during 1994. In April 1994, the Company purchased a third plant
in Texas; production in this existing facility should commence in 1994
following completion of certain renovations. Management does not expect a
significant improvement in gross margins to be realized from the additional
manufacturing plants until fiscal 1995 because of the start-up costs
associated with bringing new production capacity on line.
Financial services income increased 30% as a result of the increase in the
outstanding balance of installment sale contracts from $345 million at
March 31, 1993 to $441 million at March 31, 1994, offset slightly by a
decrease in the weighted average interest rate. Credit sales represented
approximately 88% and 85% of the Company's sales dollar volume in fiscal 1994
and 1993, respectively, of which approximately 96% and 93%, respectively, was
originated by the Company's credit subsidiary. Financial services income for
the fiscal 1994 quarter also reflects earnings on the Company's retained
interests in REMIC securitizations consummated in July and October 1993 which
were structured as sales of receivables. The Company's earnings on its
retained interests in these REMICs are reflected as a single amount within
financial services income, as compared to presenting interest income on the
installment sale contracts conveyed to the REMICs as interest income, and
interest expense on REMIC interests purchased by investors as interest
expense, for REMIC securitizations structured as collateralized borrowings.
Structuring REMIC securitizations as sales of receivables will cause slower
rates of growth in interest income and interest expense compared to that
which would occur if such securitizations were structured as collateralized
borrowings.
Other income increased 21%, principally due to increased insurance commissions
resulting from an improvement in the percentage of total sales for which
physical damage coverage was written by the Company's agency and the overall
increase in sales, offset by decreases in insurance commissions from favorable
loss experience and the continuing decline in endorsement fee income resulting
from the Company's emphasis on internal financing of credit sales.
Total selling, general and administrative expenses increased 66%, primarily
as a result of higher sales volumes and increased servicing costs associated
with the increased size of the Company's servicing portfolio.
The provision for losses on credit sales rose 50% over the prior period. The
Company provides for estimated future losses on current period retail credit
sales financed by the Company or sold to financial institutions on a recourse
basis. The amounts provided are based on the Company's historical loss
(9)
<PAGE>
experience, current repossession trends and costs, and management's assessment
of the current credit quality of the installment sale contract portfolio.
Accordingly, the provision for losses on credit sales is not necessarily
directly related to current period sales.
Financial services interest expense decreased because the Company has begun
structuring its REMIC securitizations as sales of receivables instead of as
collateralized borrowings, as more fully described above.
The Company's effective income tax rate was 36.6% in fiscal 1994 compared to
35.7% in fiscal 1993. The increase over fiscal 1993 was the result of higher
state income taxes and an increase in the federal income tax rate.
Six months ended March 31, 1994 compared to six months ended
- - ------------------------------------------------------------
March 31, 1993
- - ---------------
The following table summarizes certain key sales statistics for the six months
ended March 31, 1994 and 1993 :
1994 1993
--------- --------
Sales dollar volume (in millions) $ 157.5 $ 96.9
New units sold 5,440 3,772
Used units sold 736 445
Average new single-section sales price $23,200 $20,500
Average new multi-section sales price $41,400 $37,200
Weighted average sales centers 129 108
New unit sales per sales center 42 35
Total sales dollar volume increased 63%, reflecting a 44% increase in new
unit volume and increases of 13% and 11% in the average new unit sales prices
of single-section and multi-section homes, respectively. New unit volume
increased due to a 19% increase in the weighted average number of sales
centers open during the period and a 20% increase in average new unit sales
per sales center. Total sales for sales centers open at least one
year rose 34%. The increase in the average new unit sales price reflects
price increases required to offset rising lumber prices, the effect of the
Company's entry into the Texas market where the average size home sold is
larger than in the Southeast market, and higher selling prices in the
Southeast due to a change in product mix toward higher-end homes.
Sales in the Southwest comprised 23% of total new manufactured housing sales
dollars in the first six months of 1994 compared to 7% last year.
Gross profit as a percentage of sales was 30.4% in the current period
compared to 30.5% in the prior year. Margins rose in the Southeast,
principally due to manufacturing efficiencies resulting from higher
production levels, partially offset by the effects of the Company's expansion
into the Southwest, where substantially all product was sourced from third
party manufacturers. Of the total year-to-date new unit volume, 77% was
manufactured by the Company compared to 84% last year.
(10)
<PAGE>
Financial services income increased 27% as a result of the increase in the
outstanding balance of installment sale contracts from $345 million at March
31, 1993 to $441 million at March 31, 1994, offset slightly by a decrease in
the weighted average interest rate. Credit sales represented approximately
86% and 83% of the Company's sales dollar volume in fiscal 1994 and 1993,
respectively, of which approximately 94% and 87%, respectively, was originated
by the Company's credit subsidiary.
Other income increased 19%, principally due to increased insurance commissions
resulting from an improvement in the percentage of total sales for which
physical damage coverage was written by the Company's agency and the overall
increase in sales, offset by decreases in insurance commissions from favorable
loss experience and the continuing decline in endorsement fee income
resulting from the Company's emphasis on internal financing of credit sales.
Total selling, general and administrative expenses increased 62%, primarily
as a result of higher sales volumes and increased servicing costs associated
with the increased size of the Company's servicing portfolio.
The provision for losses on credit sales rose 51% over the prior period. The
Company provides for estimated future losses on current period retail credit
sales financed by the Company or sold to financial institutions on a recourse
basis. The amounts provided are based on the Company's historical loss
experience, current repossession trends and costs, and management's assessment
of the current credit quality of the installment sale contract portfolio.
Accordingly, the provision for losses on credit sales is not necessarily
directly related to current period sales.
Non-financial services interest expense decreased primarily due to the
redemption or conversion of the Company's 6-1/2% and 7-1/2% convertible
subordinated debentures in November and December 1992. Financial services
interest expense decreased because the Company has begun structuring its
REMIC securitizations as sales of receivables instead of as collateralized
borrowings, as more fully described above.
The Company's effective income tax rate (excluding the $214,000 reduction in
income tax expense arising from the adoption of FAS 109) was 36.8% in fiscal
1994 compared to 35.5% in fiscal 1993. The increase over fiscal 1993 was the
result of higher state income taxes and an increase in the federal income
tax rate.
Liquidity and Capital Resources
The Company's financial position at March 31, 1994 reflects the normal
seasonal increase in inventories in preparation for the typically strong
spring and summer selling season. In addition, the Company's retail expansion
has
(11)
<PAGE>
resulted in increased investment in inventories. Of the $28 million increase
in inventories since September 30, 1993, approximately $11 million relates to
the 16 new sales centers opened during the six months ended March 31, 1994.
Short-term borrowings principally reflect outstanding advances on the
Company's warehouse lines of credit used to finance installment sale contracts
prior to securitization or other permanent financing. Borrowings outstanding
at March 31, 1994 were liquidated using a portion of the proceeds of the
Company's April 1994 REMIC securitization described below.
Receivables, which consist principally of installment sale contracts,
decreased principally as a result of the Company's structuring of installment
sale contract securitizations as sales of receivables rather than as
collateralized borrowings. During the six months ended March 31, 1994, the
Company originated approximately $137 million of installment sale contracts
and sold approximately $90 million of installment sale contracts, including
approximately $88.5 million of contracts via a REMIC securitization.
Investors purchased 90% of the interests in the REMIC trust for approximately
$79.6 million cash; the Company retained a 10% interest in the trust. No gain
or loss resulted from the sale of REMIC certificates to investors. In April
1994, approximately $175 million of contracts were sold via a publicly-offered
REMIC securitization; investors purchased 92% of the interests in the REMIC
trust for approximately $161 million cash, and the Company retained an 8%
interest in the trust. No gain or loss resulted from the sale of REMIC
certificates to investors. Management believes that financing for installment
sale contracts remains readily available and anticipates completing two
additional securitizations in calendar 1994.
During the second quarter, the Company increased the amount available under
its warehouse line of credit facility from $80 million to $110 million. In
addition, the interest rate was adjusted from the prime rate or LIBOR plus
1.875% to the prime rate or LIBOR plus 1.625%. The Company also has entered
into a new $50 million revolving credit facility secured by new manufactured
housing inventory, borrowings under which bear interest at prime or LIBOR plus
1.75%. The new revolving credit facility replaces a $25 million facility
which bore interest at prime plus .50%.
Management believes that the availability of permanent financing for
installment sale contracts, the Company's short-term credit facilities and
cash generated by operations are sufficient to provide for the Company's
short-term liquidity needs.
The Company continues to monitor the credit and equity markets and evaluate
the sources and cost of the long-term capital required to finance the demands
of both planned expansion and higher operating levels within existing
operations. The Company will seek to raise additional equity or long-term
debt based upon anticipated business demands, management's assessment of
existing and future conditions in the capital markets, and management's
assessment of the appropriate components of the Company's capital structure.
(12)
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
( 4) Agreement to Furnish Copies of Instruments
with Respect to Long-term Debt
(11) Statement Re Computation of Earnings Per
Share
b) Reports on Form 8-K
No reports on Form 8-K were filed for the quarter
ended March 31, 1994.
Items 1, 2, 3, 4 and 5 are inapplicable and are omitted.
(13)
<PAGE>
OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 13, 1994
OAKWOOD HOMES CORPORATION
BY: s/C. Michael Kilbourne
C. Michael Kilbourne
Vice President
(Principal Financial Officer)
(Duly Authorized Officer)
(14)
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
ITEM 6(a)
FORM 10-Q
QUARTERLY REPORT
For the quarter ended Commission File Number
March 31, 1994 1-7444
OAKWOOD HOMES CORPORATION
EXHIBIT INDEX
Exhibit No. Exhibit Description
4 Agreement to Furnish Copies of Instruments with
respect to Long-Term Debt (page 16 of the
sequentially numbered pages)
11 Calculation of Fully Diluted Earnings
Per Share (page 23 of the
sequentially numbered pages)
(15)
EXHIBIT 4
AGREEMENT TO FURNISH COPIES OF INSTRUMENTS
WITH RESPECT TO LONG-TERM DEBT
The Registrant has entered into certain agreements with respect to long-term
indebtedness which do not exceed ten percent of the total assets of the
Registrant and its subsidiaries on a consolidated basis. The Registrant
hereby agrees to furnish a copy of such agreements to the Commission
upon request of the Commission.
OAKWOOD HOMES CORPORATION
By: s/C. Michael Kilbourne
C. Michael Kilbourne
Vice President
(16)
EXHIBIT 11
OAKWOOD HOMES CORPORATION
STATEMENT RE COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended Six Months Ended
March 31, March 31,
1994 1993 1994 1993
Weighted average number of common
shares outstanding 20,436 19,353 20,401 16,632
Add: Dilutive effect of stock options,
computed using the treasury stock
method 965 986 992 1,009
------- -------- ------- -------
Weighted average number of common
and common equivalent shares
outstanding 21,401 20,339 21,393 17,641
======= ======== ======= =======
Net income $ 7,278 $ 5,073 $13,592 $ 8,766
======= ======== ======= =======
Earnings per common share-primary $ 0.34 $ 0.25 $ 0.64 $ 0.50
======= ======== ======= =======
Weighted average number of common
shares outstanding 20,436 19,353 20,401 16,632
Add: Dilutive effect of stock options,
computed using the treasury
stock method 965 986 1,001 1,091
Add: Additional shares assumed to be
outstanding from conversion of
convertible securities 0 78 0 1,644
------- -------- ------- -------
Weighted average number of common
shares outstanding assuming
full dilution 21,401 20,417 21,402 19,367
======= ======== ======= =======
Net income $ 7,278 $ 5,073 $13,592 $ 8,766
Add: Interest on convertible securities,
net of income taxes 0 0 0 237
------- -------- ------- -------
Net income, as adjusted $ 7,278 $ 5,073 $13,592 $ 9,003
======= ======== ======= =======
Earnings per common share-fully
diluted $ 0.34 $ 0.25 $ 0.64 $ 0.46
======= ======== ======= =======
(17)
