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, 1995 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.)
7025 Albert Pick Road, Greensboro, North Carolina 27109
(Address of principal executive offices)
Post Office Box 7386, Greensboro, North Carolina 27417-0386
(Mailing address of principal executive offices)
(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, 1995.
Common Stock, Par Value $.50 Per Share . . . . . . . . . . 21,193,340
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QUARTERLY REPORT ON FORM 10-Q
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended March 31, 1995
OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
Greensboro, North Carolina
The 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 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.
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OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(in thousands except per share data)
Three months ended
March 31,
1995 1994
Revenues
Net sales $143,925 $111,677
Financial services income 16,276 15,166
Other income 3,955 2,902
Total revenues 164,156 129,745
Cost and expenses
Cost of sales 103,711 81,028
Selling, general and administrative expenses
Non-financial services 34,752 26,416
Financial services 2,631 2,030
Provision for losses on credit sales 2,326 2,100
Interest expense
Non-financial services 602 222
Financial services 5,314 6,157
Total costs and expenses 149,336 117,953
Income before income taxes 14,820 11,792
Provision for income taxes 5,704 4,332
Net income $ 9,116 $ 7,460
Earnings per share
Primary $ .41 $ .34
Fully diluted $ .41 $ .34
Dividends paid per share $ .02 $ .02
Average shares outstanding
Primary 22,081 22,067
Fully diluted 22,119 22,067
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OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(in thousands except per share data)
Six months ended
March 31,
1995 1994
Revenues
Net sales $271,368 $207,993
Financial services income 32,494 29,407
Other income 7,097 5,343
Total revenues 310,959 242,743
Cost and expenses
Cost of sales 196,951 150,445
Selling, general and administrative expenses
Non-financial services 65,383 49,588
Financial services 5,358 3,991
Provision for losses on credit sales 4,258 4,031
Interest expense
Non-financial services 988 469
Financial services 10,767 12,195
Total costs and expenses 283,705 220,719
Income before income taxes 27,254 22,024
Provision for income taxes 10,490 7,930
Net income $ 16,764 $ 14,094
Earnings per share
Primary $ .76 $ .64
Fully diluted $ .76 $ .64
Dividends paid per share $ .04 $ .04
Average shares outstanding
Primary 22,067 22,094
Fully diluted 22,142 22,103
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OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)
(dollar amounts in thousands except share and per share data)
March 31, September 30,
ASSETS 1995 1994
Cash and cash equivalents $ 891 $ 12,573
Receivables, principally installment contracts, net 350,696 367,212
Inventories:
Manufactured homes 132,758 84,114
Work-in-process, materials and supplies 12,172 10,757
Land/homes under development 1,939 1,534
146,869 96,405
Manufactured housing communities, net 11,493 8,766
Property, plant and equipment, net 70,974 54,131
Deferred income taxes 8,157 7,403
Other assets 28,177 28,697
$617,257 $575,187
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings $ 36,000 $ 25,000
Notes and bonds payable 219,145 207,432
Accounts payable and accrued liabilities 61,378 59,051
Reserve for contingent liabilities 3,116 3,827
Other long-term obligations 12,771 8,966
Shareholders' equity
Common stock, $.50 par value; 100,000,000
shares authorized; 21,177,580 and 21,085,004
shares issued and outstanding 10,587 10,543
Additional paid-in capital 148,877 148,507
Retained earnings 127,780 111,861
287,244 270,911
Less: Unearned Shares of Employee
Stock Ownership Plan (2,397) -
284,847 270,911
$617,257 $575,187
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OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
1995 1994
<S> <C> <C>
Operating activities
Net income $ 16,764 $ 14,094
Items not requiring (providing) cash
Depreciation and amortization 3,807 2,487
Deferred income taxes (754) (2,051)
Provision for losses on credit sales, net of actual losses 427 1,776
Other 317 414
(Increase) in other receivables (7,511) (3,154)
(Increase) in inventories (50,464) (29,289)
Increase in accounts payable and accrued liabilities 2,327 2,158
Increase in other long-term obligations 3,805 2,272
Cash used by operations (31,282) (11,293)
Installment receivables issued (192,263) (139,535)
Purchase of installment loan portfolio - (604)
Sale of installment loans 195,366 82,494
Receipts on installment receivables 19,552 26,143
Cash used by operating activities (8,627) (42,795)
Investing activities
Additions to property, plant and equipment (19,601) (7,440)
Additions to manufactured housing communities (2,792) (3,727)
Other (547) (2,292)
Cash used by investing activities (22,940) (13,459)
Financing activities
Net repayments on short-term credit facilities 11,000 65,800
Issuance of notes and bonds payable 29,890 1,150
Payments on notes and bonds (20,574) (24,000)
Cash dividends (845) (816)
Proceeds from exercise of stock options 414 624
Redemption of preferred stock - (1,150)
Cash provided by financing activities 19,885 41,608
Net decrease in cash and cash equivalents (11,682) (14,646)
Cash and cash equivalents
Beginning of period 12,573 25,403
End of period $ 891 $ 10,757
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OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
1. The 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. 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 $97 million at
March 31, 1995. The Company is also contingently liable under
terms of repurchase agreements with financial institutions
providing inventory financing for retailers of homes produced
by Golden West Homes, a manufacturing subsidiary of the
Company doing business with independent dealers. The Company
estimates that its potential obligation under repurchase
agreements approximated $20 million at March 31, 1995.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three months ended March 31, 1995 compared to three months ended
March 31, 1994
The following table summarizes certain key statistics for the
quarters ended March 31, 1995 and 1994 :
1995 1994
Retail sales dollar volume (in millions) $119.2 $84.9
Wholesale sales dollar volume (in millions) 22.6 25.2
Other sales - principally relating to
communities (in millions) 2.1 1.6
Total sales dollar volume (in millions) 143.9 111.7
Gross profit % - integrated operations 29.4% 30.3%
Gross profit % - wholesale operations 21.1% 18.5%
New units sold - retail 3,771 3,045
Used units sold - retail 502 410
New units sold - wholesale 595 667
Average new single-section sales price - retail $25,600 $23,200
Average new multi-section sales price - retail $46,400 $41,700
Average new home sales price - wholesale $38,100 $37,800
Weighted average sales centers 176 132
New unit sales per sales center 21.4 23.1
Retail sales dollar volume increased 40%, reflecting a 24%
increase in new unit volume and increases of 10% and 11% in the
average new unit sales prices of single-section and multi-section
homes, respectively. New unit volume rose primarily due to a 33%
increase in the weighted average number of sales centers open
during the period, while average new unit sales per sales center
decreased 7%. In the first six months of fiscal 1995, the
Company opened or acquired 31 new sales centers (including nine
in the second quarter) compared to 18 sales centers in the first
six months of fiscal 1994. New sales centers typically require a
period of several months to reach unit sales levels similar to
existing outlets. Management believes that the increased number
of immature new Company owned sales centers as well as an
increased number of competitors at retail are the principal
causes of the decline in average new unit sales per sales center.
In addition, management has established thresholds for estimated
unit volumes in determining in which markets to establish retail
outlets and, while sales centers opened in fiscal 1995 have met
those criteria and management believes them to be attractive
markets, many of the markets in which new sales centers were
opened or acquired during the first six months of fiscal 1995 are
not as strong in terms of potential unit volumes as those which
the Company entered over the past several years. Management
believes this is a normal occurrence because the focus in
expanding retail distribution into new markets, for example the
Southwest, is to penetrate the strongest areas of those markets
first.
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Total new retail sales dollars at sales centers open more
than one year rose 5% in the quarter, while same store unit sales
declined 5%. Management believes that the softening of same
store sales is due principally to increased retail competition.
During the quarter, the Company implemented a new program at the
retail sales centers designed to broaden and improve the
marketing capabilities of the sales force, in particular focusing
on improving salespersons' ability to track and follow up
qualified sales prospects, which management believes will improve
unit sales volumes. In addition, the Company is introducing
several new homes at price points on the low end of the Company's
traditional range of product offerings in an effort to ensure
that the Company's products are responsive to consumer needs.
The increase in the average new unit retail sales price
reflects increases in the cost of certain raw materials, a
continuing trend toward higher-end homes and price increases
implemented to recover increased costs associated with new wind
and thermal standards adopted by the Department of Housing and
Urban Development. Sales in the Southwest, where the average
home size is somewhat larger than in the Southeast, comprised 40%
of total new manufactured housing sales dollars in the first
quarter of 1995 compared to 25% last year.
Wholesale sales dollar volume (which represents sales by
Golden West to independent dealers) declined by 10%, reflecting
an 11% decrease in unit volume offset by a 1% increase in the
average selling price. The decline in wholesale unit volume is
due to the softening conditions in the Pacific Northwest market
due to increased industry capacity, reduced demand for the
relatively high price point products traditionally manufactured
by Golden West as a result of increases in interest rates, and
because of poor weather conditions in the Northwest during the
quarter which has slowed retail sales and deliveries to retail
customers. Golden West is introducing several new home models at
price points lower than those traditionally targeted by Golden
West in order to broaden its product line to lessen its
dependence on higher end homes and to increase the attractiveness
of exclusive dealer arrangements. In addition, sales to
independent dealers have declined as the Company increases its
utilization of Golden West manufactured product to source Company
owned retail sales centers. During the quarter ended March 31,
1995, Golden West shipped 93 multi-section homes to Oakwood sales
centers in the West and Southwest, compared to 13 homes in the
first quarter; these shipments are not included in the wholesale
dollar sales and unit sales in the table above. Management
expects Golden West's unit sales to Oakwood to increase in future
quarters. To the extent the Company is successful in
establishing Company owned retail centers in Golden West markets,
the decline in sales to wholesale dealers will continue.
Gross profit margin - integrated operations reflects gross
profit earned on all sales at retail as well as the manufacturing
gross profit on retail sales of units manufactured by the
Company, including the manufacturing gross profit earned by
Golden West on its sales to the Oakwood retail organization.
Gross profit margin - integrated operations were 29.4% in the
current period compared to 29.1% in the first quarter and 30.3%
in the second quarter last year. The decrease from last year
reflects a decline in the percentage of new homes sold at retail
manufactured by Company owned plants, as well as reduced, but
continuing, effects of starting up new manufacturing facilities.
These factors were partially offset by improved gross margins at
retail, which increased to 23.8% from 23.5% in the second quarter
last year and from 23.2% in the first quarter of fiscal 1995.
Approximately 73% of the total new unit retail sales volume was
manufactured by the Company in the second quarter of fiscal 1995,
compared to 78% in the second quarter one year ago. To the
extent production levels at new manufacturing facilities during
the balance of the year increase at a faster rate than new unit
sales, margins should increase as retail unit sales are
increasingly sourced from Company owned
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manufacturing facilities. During the current period, the Company's five
North Carolina plants operated at or near capacity while production at
the Company's first Texas single-section plant was at 57% capacity.
Production levels at the Company's two new plants in Texas, opened
during the first quarter of fiscal 1995, were at 34% and 53% of capacity
for the quarter, compared to 22% and 48%, respectively, in the first
quarter. The Company's new plants in Tennessee and Colorado opened late
in the first quarter and produced a total of approximately 344 floors
during the period, up from 100 floors in the first quarter. These
plants operated at 32% and 23% of capacity in the second quarter.
Management does not expect a significant improvement in gross margins to
be realized from the additional manufacturing plants until late in
fiscal 1995 because of the start-up costs associated with bringing new
production capacity on line.
Wholesale gross profit margins increased to 21.1% in the
current quarter from 18.5% last year, primarily due to a
reduction in product liability, property and workers'
compensation insurance costs, reduced costs for certain materials
and components resulting from taking advantage of Oakwood's
purchasing power with certain vendors, and a one-time favorable
workers' compensation retroactive premium adjustment. These
savings were partially offset by the effects of a shift in
product mix toward lower price point homes which typically carry
lower margins. Except for the one-time retroactive insurance
adjustment, these cost factors are expected to influence future
periods. During the second quarter of fiscal 1995, Golden West's
Albany, Oregon plant operated at approximately 85% of capacity,
as compared to full capacity in the second quarter of fiscal
1994. The decline in utilization reflects the softening dealer
demand discussed above. Management expects to begin production
at a new line in Albany during the third quarter which will
increase that plant's capacity by approximately 40%. The Company
intends to use the new line to produce homes which sell at lower
price points than those traditionally manufactured in Oregon.
Golden West's Sacramento, California facility operated at
approximately 61% capacity in the second quarter of both fiscal
1995 and 1994; however, this plant's operating rate decreased
from 92% in the first quarter of fiscal 1995 because softer
market conditions in the Northwest eliminated the need to divert
orders to Sacramento from Albany. Utilization at the Perris,
California plant increased during the quarter to 65% from 49%
last year, principally as the result of producing new models for
Oakwood retail centers. In January 1995, Golden West shipped to
Company owned retail centers the first of several planned new
models of lower priced multi-section homes designed to broaden
Golden West's independent dealer product line as well as provide
multi-section product to Company owned retail centers opened or
planned to be opened in the Southwest. Management currently is
evaluating the geographic locations in which Golden West's
manufacturing capacity should be located, considering current and
anticipated market conditions and the planned further integration
of Golden West's operations with those of Oakwood.
Financial services income, which consists primarily of
interest income on installment sale contracts retained by the
Company, loan servicing fees and earnings on the Company's
retained interests in REMIC securitizations accounted for as
sales of receivables, increased 7% to $16.3 million from $15.2
million last year. Financial services income is not increasing
proportionately with the increase in the Company's installment
sale contract portfolio because the Company's REMIC
securitizations since fiscal 1993 have been structured as sales
of receivables rather than as collateralized borrowings. The
effect on the financial statements of this structural change is
to cause the Company's earnings on the retained interests in
REMICs structured as sales of receivables to be included as a
single amount within financial services income, as compared to
presenting interest income on the installment sale contracts
conveyed to the REMIC as interest income and interest expense on
REMIC interests purchased by
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investors as interest expense in the consolidated statement of income.
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. In addition, income from retained REMIC
interests is increasing more slowly than would otherwise be the case
because the Company generally is selling a larger share of the interests
in its REMICs in the current year than in prior years. See Liquidity
and Capital Resources below. Credit sales represented approximately 86%
and 88% of the Company's retail unit volume in fiscal 1995 and 1994,
respectively. The Company's credit subsidiary captured approximately
94% of loan originations in the first quarter of fiscal 1995 compared to
95% in the prior year period.
Other income increased 36%, principally due to increased
insurance commissions resulting from the overall increase in
sales.
Total selling, general and administrative expenses increased
31% from $28.4 million (21.9% of revenues) in fiscal 1994 to
$37.4 million (22.8% of revenues) in fiscal 1995. Non-financial
services costs rose to 24.1% of net sales compared to 23.7% of
net sales last year, primarily due to costs associated with new
sales centers which have not yet achieved normal revenue levels
and due to general and administrative expenses associated with
the four new manufacturing plants. Financial services costs rose
30% on a 41% increase in loan origination dollar volume and a 44%
increase in the average number of loans serviced during the
period.
The provision for losses on credit sales increased 11% over
the prior period. The Company provides for estimated future
losses on current period retail credit sales financed by the
Company. 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. Credit losses charged to loss reserves as
a percentage of the average outstanding balance of installment
sale contracts on an annualized basis were .89% for the second
quarter of 1995 and .76% for the same period in the prior year,
while repossessions as a percentage of the average number of
contracts outstanding on an annualized basis were 3.18% in fiscal
1995 and 2.94% in fiscal 1994. Management does not believe that
these statistics reflect a diminution in the credit quality of
the Company's loans, but rather reflect the normal maturation of
the Company's portfolio, a significant portion of which is
relatively young.
Non-financial services interest expense increased 171% from
$222,000 to $602,000 due to interest expense associated with the
Fort Morgan, Colorado manufacturing plant, interest on $12
million of permanent financing closed during the quarter relating
to other new manufacturing facilities and interest costs
associated with the purchase of a corporate aircraft.
Financial services interest expense decreased because the
Company is now structuring its REMIC securitizations as sales of
receivables instead of as collateralized borrowings. Financial
services interest expense is expected to continue to decline as
the Company retires its outstanding debt secured by installment
sale contracts.
The Company's effective income tax rate was 38.5% in fiscal
1995 compared to 36.7% in fiscal 1994. The increase in the
effective tax rate is due primarily to higher state income taxes.
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Six months ended March 31, 1995 compared to six months ended
March 31, 1994
The following table summarizes certain key statistics for the
six months ended
March 31, 1995 and 1994 :
1995 1994
Retail sales dollar volume (in millions) $217.3 $154.6
Wholesale sales dollar volume (in millions) 49.3 50.5
Other sales - principally relating to
communities (in millions) 4.8 2.9
Total sales dollar volume (in millions) 271.3 208.0
Gross profit % - integrated operations 29.3% 30.6%
Gross profit % - wholesale operations 20.2% 19.2%
New units sold - retail 6,822 5,440
Used units sold - retail 963 736
New units sold - wholesale 1,316 1,369
Average new single-section sales price - retail $25,300 $23,200
Average new multi-section sales price - retail $46,200 $41,400
Average new home sales price - wholesale $37,400 $36,900
Weighted average sales centers 167 128
New unit sales per sales center 40.9 42.5
Retail sales dollar volume increased 41%, reflecting a 25%
increase in new unit volume and increases of 9% and 12% in the
average new unit sales prices of single-section and multi-section
homes, respectively. New unit volume rose primarily due to a 30%
increase in the weighted average number of sales centers open
during the period. Average new unit sales per sales center
decreased slightly as a result of the addition of 31 new sales
centers during the period compared to 18 centers in 1994. New
sales centers typically require a period of several months to
reach unit sales levels similar to existing outlets. Management
believes that the increased number of immature new Company owned
sales centers, an increased number of competitors at retail, and
the siting of many new sales centers in markets which, although
attractive, are unlikely to duplicate the extremely strong
performance of markets targeted in earlier years, are the
principal causes of the decline in average new unit sales per
sales center.
Total new retail sales dollars at sales centers open more
than one year rose 6% in the period, while same store unit sales
were down 3%. The weakness in same store unit sales was
primarily related to the focus on sales center expansion, as well
as increased competitive pressures discussed above. Management
introduced several new programs in the second quarter to respond
to the increased retail competition as discussed in the quarterly
results section above.
The increase in the average new unit sales price reflects
increases in the cost of certain raw materials, a continuing
trend toward higher-end homes and price increases implemented to
recover increased costs associated with new wind and thermal
standards adopted by the Department of Housing and Urban
Development. Sales in the Southwest, where the average home size
is somewhat larger than in the Southeast, comprised 37% of total
new manufactured housing sales dollars in 1995 compared to 23%
last year.
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Wholesale sales dollar volume (which represents sales by
Golden West to independent dealers) decreased 2%, reflecting a 4%
decrease in unit volume, offset by a 1% increase in the average
selling price. This decline in unit volume is primarily related
to decreased backlog in the Pacific Northwest coupled with the
increase in utilization of Golden West product to source Company
owned sales centers as discussed above in the quarterly results
section.
Gross profit margin - integrated operations reflects gross
profit earned on all sales at retail as well as the manufacturing
gross profit on retail sales of units manufactured by the
Company. Gross profit margins - integrated operations declined
to 29.3% in the current period from 30.6% in the prior year. The
reduction in gross margins reflects the effects of starting up
new manufacturing facilities and a reduction in the percentage of
new homes sold at retail manufactured by Company owned plants, as
well as the results of certain relatively new sales centers where
gross margins attained at retail did not meet expectations.
Management has provided additional training of retail personnel
in the affected markets in order to improve retail margins in
those areas and also implemented a new prospect tracking and
follow-up program as more fully described above. Approximately
74% of the total new unit retail sales volume was manufactured by
the Company in the first six months of fiscal 1995 compared to
77% in 1994. To the extent production levels at new
manufacturing facilities during the balance of the year increase
at a faster rate than new unit sales, margins should increase as
retail unit sales are increasingly sourced from Company owned
manufacturing facilities. Management does not expect a
significant improvement in gross margins to be realized from the
additional manufacturing plants until late in fiscal 1995 because
of the start-up costs associated with bringing new production
capacity on line.
Wholesale gross profit margins increased to 20.2% in the
current period from 19.2% last year. The increase in margins
over the prior year is primarily due to reductions in insurance
and materials costs, as well as a one-time favorable premium
adjustment as discussed above. These improvements were partially
offset by the effects of a shift in product mix towards less
expensive homes which are typically ordered with fewer high
margin option packages. During the first six months of fiscal
1995, Golden West's Albany, Oregon plant operated at
approximately 94% of capacity, as compared to full capacity for
the same period in the prior year. The decline in utilization
reflects the softening dealer demand discussed above. Golden
West's Sacramento, California facility operated at approximately
75% capacity year to date fiscal 1995 compared to 62% for the
fiscal 1994 period due to a strengthening market, as well as the
use of the Sacramento plant to reduce order backlog in Albany
during the first quarter of 1995. Utilization at Golden West's
Perris, California increased during the period to 63% from 47%
last year, principally due to the production of new models for
Oakwood retail sales centers, including lower priced multi-sections
introduced in January 1995.
Financial services income, which consists primarily of
interest income on installment sale contracts retained by the
Company, loan servicing fees and earnings on the Company's
retained interests in REMIC securitizations accounted for as
sales of receivables, increased 11% to $32.5 million from $29.4
million last year. Financial services income is not increasing
proportionately with the increase in the Company's installment
sale contract portfolio because the Company's REMIC
securitizations since fiscal 1993 have been structured as sales
of receivables rather than as collateralized borrowings, and
because the Company generally is selling a larger share of the
interests in its REMICs in the current year than in prior years,
as more fully described above. See also Liquidity and Capital
Resources below. Credit sales represented approximately 84% and
86% of the Company's retail unit volume in fiscal 1995
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and 1994, respectively. The Company's credit subsidiary captured
approximately 94% of loan originations in the first six months of fiscal
1995 and 1994.
Other income increased 33%, principally due to increased
insurance commissions resulting from the overall increase in
sales.
Total selling, general and administrative expenses increased
32% from $53.6 million (22.1% of revenues) in fiscal 1994 to
$70.7 million (22.7% of revenues) in fiscal 1995. Non-financial services
costs rose to 24.1% of net sales compared to 23.8% of net sales last
year, primarily due to costs associated with new sales centers
which have not yet achieved normal revenue levels and due to
general and administrative expenses associated with the four new
manufacturing plants. Financial services costs rose 34% on a 38%
increase in loan origination dollar volume and a 45% increase in
the average number of loans serviced during the period.
The provision for losses on credit sales increased 6% over
the prior period. As described in the discussion of second
quarter results above, the provision for losses on credit sales
is not necessarily directly related to current period sales.
Credit losses charged to loss reserves as a percentage of the
average outstanding balance of installment sale contracts on an
annualized basis were .75% for the first six months of 1995 and
.68% for the same period in the prior year, while repossessions
as a percentage of the average number of contracts outstanding on
an annualized basis were 3.09% in fiscal 1995 and 3.02% in fiscal
1994. Management does not believe that these statistics reflect a
diminution in the credit quality of the Company's loans, but
rather reflect the normal maturation of the Company's portfolio,
a significant portion of which is relatively young.
Non-financial services interest expense rose 111% from
$469,000 to $988,000 due to interest costs associated with
capital expenditures as described in the discussion of the second
quarter's results above.
Financial services interest expense decreased because the
Company is now structuring its REMIC securitizations as sales of
receivables instead of as collateralized borrowings. Financial
services interest expense is expected to continue to decline as
the Company retires its outstanding debt secured by installment
sale contracts.
The Company's effective income tax rate was 38.5% in fiscal
1995 compared to 37% in fiscal 1994 (excluding in 1994 a $214,000
reduction in income tax expense arising from the adoption of
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" ). The increase in the effective tax rate is
primarily due to higher state income taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial position at March 31, 1995 reflects
the normal seasonal increase in inventories in preparation for
the typically strong spring and summer selling seasons. In
addition, the Company's retail expansion has resulted in an
increased investment in inventories. The increase in inventories
since September 30, 1994 reflects stocking levels at the 31 new
sales centers opened during the first and second quarters, normal
seasonal patterns at sales centers open at year end,
manufacturing inventories at new plants and an increase in unit
costs principally due to costs of complying with HUD wind and
thermal standards and a shift in product mix to higher end homes.
Short-term borrowings principally
14
<PAGE>
reflect outstanding advances on the Company's warehouse line of credit
used to finance installment sale contracts prior to securitization or
other permanent financing.
Receivables, which consist principally of installment sale
contracts and retained interests in REMIC securitizations,
decreased primarily 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, 1995, the Company originated approximately $192
million of installment sale contracts and sold approximately $208
million of installment sale contracts via REMIC securitizations
and GNMA pools. The Company retained an average 6.4% interest in
the REMIC securitizations completed during the first six months
of fiscal 1995. Management believes that financing for
installment sale contracts remains readily available and
anticipates securitizing installment sale contracts using REMICs
approximately every four months.
Subsequent to quarter end, the Company renegotiated its
installment loan warehouse facility, increasing the available
line from $110 million to $130 million and reducing the interest
rate from LIBOR plus 1.625% to LIBOR plus 1%. The Company has
also renegotiated its line of credit secured by inventory,
increasing the line to $75 million from $50 million and also
decreasing the interest rate to LIBOR plus 1% from LIBOR plus
1.75%. 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. In order to maintain maximum
flexibility in the timing of any acquisition of permanent or
long-term financing, the Company intends to focus on maintaining
its short-term liquidity. As a consequence, the Company has
generally been selling a larger portion of its REMIC
securitizations in the current year than in prior years, and may
decrease the level of its retained interests in both future and
past securitizations.
POTENTIAL BUSINESS COMBINATION
On May 8, 1995 the Company signed a definitive agreement to
acquire Destiny Industries, Inc. The agreement provides that the
Company will issue 925,000 shares of its common stock (equal to
approximately 4.4% of its currently outstanding shares) in
exchange for all of the outstanding shares of Destiny.
Consummation of the acquisition is anticipated by June 30, 1995
and is subject to certain conditions, including completion of due
diligence and certain documentation and receipt of certain
approvals. The Company intends to account for the acquisition as
a pooling of interests.
Destiny is an independent producer of manufactured housing
with headquarters and four manufacturing plants located in
Moultrie, Georgia. Destiny sells single-section and multi-section
homes under the tradenames Destiny and Peachtree to
approximately 195 independent dealers located principally in the
Southeast. Destiny had sales of approximately $89 million for
the year ended September 30, 1994 and $49 million for the six
months ended March 31, 1995.
15
<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
(27) Financial Data Schedule (filed in electronic format only)
b) Reports on Form 8-K
No reports on Form 8-K were filed for the quarter ended
March 31, 1995.
Items 1, 2, 3, 4 and 5 are inapplicable and are omitted.
16
<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 12, 1995
OAKWOOD HOMES CORPORATION
BY: s/C. Michael Kilbourne
C. Michael Kilbourne
Executive Vice President
(Principal Financial Officer)
(Duly Authorized Officer)
17
<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, 1995 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 19 of the
sequentially numbered pages)
11 Statement re Computation of Earnings Per Share
(page 20 of the sequentially numbered pages)
27 Financial Data Schedule (filed in
electronic format only)
18
<PAGE>
</TABLE>
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
Executive Vice President
19
<PAGE>
EXHIBIT 11
OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share data)
Three months ended Six months ended
March 31, March 31,
1995 1994 1995 1994
Weighted average number of common
shares outstanding 21,145 21,040 21,122 21,056
Add: Dilutive effect of stock
options, computed using the
treasury stock method 936 1,027 945 1,038
Weighted average number of common
and common equivalent shares
outstanding 22,081 22,067 22,067 22,094
Net income $ 9,116 $ 7,460 $ 16,764 $ 14,094
Earnings per common share-primary $ .41 $ .34 $ .76 $ .64
Weighted average number of common
shares outstanding 21,145 21,040 21,122 21,056
Add: Dilutive effect of stock
options, computed using
the treasury stock method 974 1,027 1,020 1,047
Weighted average number of common
shares outstanding assuming
full dilution 22,119 22,067 22,142 22,103
Net income $ 9,116 $ 7,460 $16,764 $14,094
Earnings per common share -
fully diluted $ .41 $ .34 $ .76 $ .64
20
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains Summary Financial Information Extracted from the
Registrant's Consolidated Financial Statements for the quarter ended
December 31, 1994 filed as part of the Registrant's Form 10-Q for the
quarter ended December 31, 1994 and is qualified in its entirety by
reference to such (b) Form 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 891
<SECURITIES> 0
<RECEIVABLES> 350,696
<ALLOWANCES> 0
<INVENTORY> 146,869
<CURRENT-ASSETS> 0
<PP&E> 95,539
<DEPRECIATION> 24,565
<TOTAL-ASSETS> 617,257
<CURRENT-LIABILITIES> 97,378
<BONDS> 219,145
<COMMON> 10,587
0
0
<OTHER-SE> 274,260
<TOTAL-LIABILITY-AND-EQUITY> 617,257
<SALES> 271,368
<TOTAL-REVENUES> 310,959
<CGS> 196,951
<TOTAL-COSTS> 267,692
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4,258
<INTEREST-EXPENSE> 11,755
<INCOME-PRETAX> 27,254
<INCOME-TAX> 10,490
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,764
<EPS-PRIMARY> 0.76
<EPS-DILUTED> 0.76
</TABLE>
