OAKWOOD HOMES CORP
10-Q, 1996-05-15
MOBILE HOMES
Previous: NUCLEAR RESEARCH CORP, 10-Q, 1996-05-15
Next: OFFSHORE LOGISTICS INC, 10-Q, 1996-05-15





                       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, 1996 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 27409
                    (Address of principal executive offices)

                Post Office Box 7386, Greensboro, North Carolina
                    27417-0386 (Mailing address of principal
                               executive offices)

                                 (910) 664-2400
              (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, 1996.

      Common Stock, Par Value $.50 Per Share . . . . . . . . . .22,445,974


                                       1


<PAGE>


                          QUARTERLY REPORT ON FORM 10-Q

                   CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                      For the Quarter Ended March 31, 1996

                   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.

                                       2

<PAGE>



                   OAKWOOD HOMES CORPORATION AND SUBSIDIARIES

                  CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
                      (in thousands except per share data)

<TABLE>
<CAPTION>

                                                                                           Three months ended
                                                                                                March 31,

                                                                                       1996                  1995
                                                                                       ----                  ----
<S>                                                                                  <C>                   <C>     
Revenues
     Net sales                                                                       $191,223              $168,991
     Financial services income                                                         25,432                14,065
     Other income                                                                       4,548                 4,026
                                                                                  -----------           -----------
       Total revenues                                                                 221,203               187,082
                                                                                    ---------             ---------

Costs and expenses
     Cost of sales                                                                    136,844               125,129
     Selling, general and administrative expenses
       Non-financial services                                                          46,966                37,202
       Financial services                                                               4,620                 2,631
     Provision for losses on credit sales                                                --                     115
     Interest expense
       Non-financial services                                                             634                   617
       Financial services                                                               5,694                 5,314
                                                                                  -----------           -----------
       Total costs and expenses                                                       194,758               171,008
                                                                                    ---------             ---------

Income before income taxes                                                             26,445                16,074
Provision for income taxes                                                             10,293                 5,704
                                                                                   ----------           -----------

     Net income                                                                     $  16,152             $  10,370
                                                                                    =========             =========

Pro forma information (Note 2)
     Income before income taxes                                                                           $  16,074
     Provision for income taxes                                                                               6,212
                                                                                                        -----------

     Net income                                                                                          $    9,862
                                                                                                         ==========

Earnings per share (fiscal 1995 amounts are pro forma - Note 2)
     Primary                                                                      $       .35           $       .21
     Fully diluted                                                                $       .35           $       .21

Dividends per share (Note 2)                                                      $       .01           $       .01

Weighted average number of common shares outstanding (Note 2)
     Primary                                                                           46,394                46,012
     Fully diluted                                                                     46,480                46,088
</TABLE>

                                       3

<PAGE>




                   OAKWOOD HOMES CORPORATION AND SUBSIDIARIES

                  CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
                      (in thousands except per share data)

<TABLE>
<CAPTION>

                                                                                           Six months ended
                                                                                               March 31,

                                                                                       1996                  1995
                                                                                       ----                  ----
<S>                                                                                  <C>                   <C>     
Revenues
     Net sales                                                                       $367,492              $318,480
     Financial services income                                                         49,671                28,502
     Other income                                                                       8,476                 7,229
                                                                                  -----------           -----------
       Total revenues                                                                 425,639               354,211
                                                                                    ---------             ---------

Costs and expenses
     Cost of sales                                                                    267,067               237,153
     Selling, general and administrative expenses
       Non-financial services                                                          88,165                70,334
       Financial services                                                               8,746                 5,358
     Provision for losses on credit sales                                                --                     266
     Interest expense
       Non-financial services                                                           1,253                 1,014
       Financial services                                                              11,213                10,767
                                                                                   ----------            ----------
       Total costs and expenses                                                       376,444               324,892
                                                                                    ---------             ---------

Income before income taxes                                                             49,195                29,319
Provision for income taxes                                                             19,166                10,490
                                                                                   ----------             ---------

     Net income                                                                      $ 30,029              $ 18,829
                                                                                     ========              ========

Pro forma information (Note 2)
     Income before income taxes                                                                              29,319
     Provision for income taxes                                                                              11,245

     Net income                                                                                          $   18,074
                                                                                                         ==========

Earnings per share (fiscal 1995 amounts are pro forma - Note 2)
     Primary                                                                      $       .65           $       .39
     Fully diluted                                                                $       .65           $       .39

Dividends per share (Note 2)                                                      $       .02           $       .02

Weighted average number of common shares outstanding (Note 2)
     Primary                                                                           46,284                45,985
     Fully diluted                                                                     46,337                46,134
</TABLE>

                                       4

<PAGE>



                   OAKWOOD HOMES CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEET (UNAUDITED)
                 (in thousands except share and per share data)

<TABLE>
<CAPTION>

                                                                                     March 31,           September 30,
ASSETS                                                                                 1996                  1995
                                                                                       ----                  ----

<S>                                                                                <C>                   <C>       
Cash and cash equivalents                                                          $   18,158            $    6,189
Receivables and investments                                                           362,081               480,875
Inventories
     Manufactured homes                                                               147,284               136,457
     Work-in-process, materials and supplies                                           15,215                12,691
     Land/homes under development                                                       2,089                 2,042
                                                                                  -----------           -----------
                                                                                      164,588               151,190
Properties and facilities                                                             116,465               101,758
Deferred income taxes                                                                  15,818                15,546
Other assets                                                                           28,192                27,082
                                                                                   ----------            ----------
                                                                                     $705,302              $782,640
                                                                                     ========              ========

LIABILITIES AND SHAREHOLDERS' EQUITY

Short-term borrowings                                                               $  80,000              $154,400
Notes and bonds payable                                                               160,719               198,812
Accounts payable and accrued liabilities                                              104,211                87,405
Reserve for contingent liabilities                                                      2,742                 3,184
Other long-term obligations                                                             7,403                20,431

Shareholders' equity
     Common stock, $.50 par value; 100,000,000
       shares authorized; 22,432,000 and 22,171,000
       shares issued and outstanding                                                   11,216                11,086
     Additional paid-in capital                                                       151,761               149,482
     Retained earnings                                                                189,170               160,000
                                                                                    ---------             ---------
                                                                                      352,147               320,568
     Less:  Unearned ESOP shares                                                       (1,920)               (2,160)
                                                                                   ----------           -----------
                                                                                      350,227               318,408
                                                                                    ---------             ---------
                                                                                     $705,302              $782,640
                                                                                     ========              ========
</TABLE>

                                       5

<PAGE>


                   OAKWOOD HOMES CORPORATION AND SUBSIDIARIES

                CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                             Six months ended
                                                                                                March 31,

                                                                                        1996                  1995
                                                                                        ----                  ----
<S>                                                                                 <C>                  <C>       
Operating activities
     Net income                                                                     $  30,029            $   18,829
     Items not requiring (providing) cash
       Depreciation and amortization                                                    4,803                 4,022
       Deferred income taxes                                                             (272)                 (754)
       Provision for losses on credit sales                                             --                      266
       Gain on sale of securities                                                     (13,891)                   --
       Other                                                                               --                   317
       (Increase) in other receivables                                                 (5,081)              (10,230)
       (Increase) in inventories                                                      (13,398)              (50,499)
       Increase in accounts payable and accrued liabilities                             6,575                 1,730
       Increase (decrease) in other long-term obligations                              (2,668)                3,805
                                                                                  -----------           -----------
         Cash provided (used) by operations                                             6,097               (32,514)
       Installment receivables issued                                                (278,930)             (192,263)
       Purchase of installment loan portfolio                                          (1,465)                   --
       Sale of installment loans                                                      390,645               195,366
       Receipts on installment receivables                                             11,801                19,713
                                                                                 ------------           -----------
         Cash provided (used) by operating activities                                 128,148               (9,698)
                                                                                  -----------            ----------

Investing activities
     Additions to properties and facilities                                           (18,478)              (22,442)
     Other                                                                             (3,594)               (1,337)
                                                                                  -----------         -------------
       Cash used by investing activities                                              (22,072)              (23,779)
                                                                                   ----------             ---------

Financing activities
     Net repayments on short-term credit facilities                                   (74,400)               11,000
     Issuance of notes and bonds payable                                                   --                29,890
     Payments on notes and bonds                                                      (21,257)              (20,624)
     Cash dividends                                                                      (859)                 (845)
     Proceeds from exercise of stock options                                            2,409                   458
                                                                                  -----------            ----------
       Cash provided (used) by financing activities                                   (94,107)               19,879
                                                                                   ----------              --------

Net increase (decrease) in cash and cash equivalents                                   11,969               (13,598)

Cash and cash equivalents
     Beginning of period                                                                6,189                16,974
                                                                                  -----------             ---------
     End of period                                                                  $  18,158             $   3,376
                                                                                    =========             =========
</TABLE>

                                       6

<PAGE>



                   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.   On April 24, 1996, the Board of Directors declared a 2-for-1 stock split
     payable in the form of a 100% stock dividend on May 31, 1996 to
     shareholders of record on May 17, 1996. All share and per share amounts
     have been adjusted retroactively to give effect to the stock split.

     On June 30, 1995 the Company completed its business combination with
     Destiny Industries, Inc. ("Destiny") by issuing 1,850,000 shares of its
     common stock in exchange for all the outstanding common stock of Destiny.
     The business combination has been accounted for as a pooling of interests,
     and accordingly the accompanying financial statements reflect the combined
     results of operations and financial position of the Company and Destiny for
     all periods presented.

     Prior to the merger, Destiny was a Subchapter S corporation, and
     accordingly its results of operations were includable in the income tax
     returns of its former shareholders. The pro forma financial information for
     fiscal 1995 set forth in the consolidated statement of income reflects, on
     a pro forma basis, a provision for income taxes and net income assuming
     Destiny's results of operations had been included in the Company's income
     tax returns for such period.

     Because earnings per share for fiscal 1995 computed on the basis of
     historical net income would not reflect income taxes attributable to
     Destiny's earnings, historical earnings per share amounts for such period
     are not meaningful and accordingly have been omitted. Pro forma earnings
     per share for fiscal 1995 have been computed on the basis of pro forma net
     income.

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
     $85 million at March 31, 1996. The Company is also contingently liable
     under terms of repurchase agreements with financial institutions providing
     inventory financing for retailers of homes produced by Destiny and Golden
     West Homes, manufacturing subsidiaries of the Company doing business with
     independent dealers. The Company estimates that its potential obligation
     under repurchase agreements approximated $45 million at March 31, 1996.

                                        7

<PAGE>



                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


                              RESULTS OF OPERATIONS


Three months ended March 31, 1996 compared to three months ended March 31, 1995

         The following table summarizes certain key statistics for the quarters
ended March 31, 1996 and 1995 : 

<TABLE>
<CAPTION>
                                                                                         1996            1995
<S>                                                                                    <C>              <C>   
Retail sales (in millions)                                                             $153.8           $119.2
Wholesale sales (in millions)                                                            32.9             47.7
Other sales - principally relating to
 communities (in millions)                                                                4.5              2.1
Total sales (in millions)                                                               191.2            169.0
Gross profit % - integrated operations                                                   31.5%            29.5%
Gross profit % - wholesale operations                                                    15.5%            17.6%
New single-section homes sold - retail                                                  3,376            2,876
New multi-section homes sold - retail                                                   1,203              895
Used homes sold - retail                                                                  515              502
New single-section homes sold - wholesale                                                 349              707
New multi-section homes sold - wholesale                                                  967            1,214
Average new single-section sales price - retail                                       $27,200          $25,600
Average new multi-section sales price - retail                                        $47,800          $46,400
Average new single-section sales price - wholesale                                    $13,800          $13,800
Average new multi-section sales price - wholesale                                     $28,400          $31,200
Weighted average retail sales centers
  open during the period                                                                  227              176
Average new homes sales per sales center                                                 20.1             21.4
</TABLE>


         Retail sales dollar volume increased 29%, reflecting a 21% increase in
new unit volume and increases of 6% and 3% in the average new unit sales prices
of single-section and multi-section homes, respectively. New unit volume rose
primarily due to a 29% increase in the weighted average number of sales centers
open during the period, while average new unit sales per sales center decreased
6%. In the second quarter of fiscal 1996, the Company opened or acquired 18 new
sales centers compared to 9 sales centers in the second quarter of fiscal 1995.
Because the Company plans to open approximately 35 to 45 new sales centers
annually over the next several years, management does not expect any significant
increase in the average number of new homes sold per sales center over the near
term. Total new retail sales dollars at sales centers open more than one year
rose 8% in the quarter, while same store unit sales increased 2%. Retail sales
of multi-section homes accounted for 26% of new home unit sales in the second
quarter of fiscal 1996 versus 24% in the prior year.

         Wholesale sales dollar volume (which represents sales by Golden West
and Destiny to independent dealers) declined by 31%. The decline in wholesale
volume reflects execution of

                                       8
<PAGE>


the Company's strategy of changing the distribution of products produced by
Golden West and Destiny from independent dealers to company-owned retail sales
centers. During the quarter ended March 31, 1996, approximately 30% of Golden
West's and Destiny's total shipments were to Oakwood sales centers, compared to
7% in the second quarter of fiscal 1995; shipments to Oakwood retail centers are
not included in the wholesale dollar sales and unit sales in the table above.
Management expects Golden West's and Destiny'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 and Destiny markets, the decline in
sales to wholesale dealers will continue. In addition, Golden West's total
shipments declined approximately 25% due to the closing of the Sacramento
facility during the third quarter of fiscal 1995, as well as softening market
conditions and severe weather factors which dampened sales volume. Although the
Sacramento capacity was replaced by a new line at the Albany, Oregon plant as
discussed below, its shipments have not yet been fully replaced due to the ramp
up of production during the start-up phase.

         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 and Destiny on its sales to the Oakwood
retail organization. Gross profit margin - integrated operations was 31.5% in
the current period compared to 29.5% in the second quarter of the prior year.
The increase reflects improved sourcing of retail unit sales from company-owned
manufacturing plants. Approximately 89% of the total new unit retail sales
volume was manufactured by the Company in the second quarter of fiscal 1996,
compared to 74% in the second quarter one year ago.

         Wholesale gross profit margins decreased to 15.5% in the current
quarter from 17.6% last year, primarily due to start-up costs incurred in a
plant expansion at the Albany, Oregon facility, which increased capacity by
approximately 40% during the first quarter. In addition, market and weather
related problems increased manufacturing inefficiencies during the period. For
the three months ended March 31, 1996, production at Golden West's Albany plant
rose 20% from the level in the second quarter of fiscal 1995, and the plant
operated at 67% of its newly increased capacity. Utilization at the Perris,
California plant increased during the quarter to 77% from 65% last year,
principally as the result of producing new models for Oakwood retail centers.

         Financial services income increased 81% to $25.4 million from $14.1
million last year. Interest income earned on loans held for investment and on
loans held for sale prior to securitization declined to $8.3 million in 1996
from $8.7 million the prior year. Interest on loans held for investment declined
due to normal amortization and prepayments, but was partially offset by an
increase in interest on loans held for sale due to higher average outstanding
balances during the second quarter of fiscal 1996 versus the prior year. Loan
servicing fees increased from $3.0 million for the second quarter of 1995 to
$3.8 million in the second quarter of 1996, reflecting the increased size of the
Company's securitized loan servicing portfolio. REMIC residual income increased
from $1.5 million to $4.4 million, reflecting the shift in the Company's
financing strategy toward securitization of its loans from holding loans for
investment.

     Financial services income for the second quarter of fiscal 1996 also
includes a gain of approximately $5.9 million from the sale of $163 million of
asset-backed securities. The gain resulted from a widening of the excess
servicing spread in the securitization due to the bond

                                       9
<PAGE>
 
market rally which continued into mid-February, improved credit ratings assigned
to the securities sold, and a reduction in the credit spread over treasurys
demanded by purchasers of the securities. In addition, the Company's increasing
sales of multi-section homes has resulted in multi-section loans comprising a
larger percentage of the assets sold. Multi-section loans have longer average
terms and lower anticipated credit losses than loans for single-section homes,
which contributes to the value of the residual interest in the securitization.
Finally, the Company has experienced a continuing decline in its transaction
costs, reflecting competitive conditions on Wall Street and the Company's
increased experience in securitizing loans in the public market. Except for the
spread widening resulting from the bond market rally, which will recur
irregularly, management believes that the other factors giving rise to the gain
will continue to affect its future securitizations on a regular basis, and
accordingly expects to record gains on its future securitizations. However, the
substantial increase in treasury yields since mid-February has increased the
Company's funding costs, and while the Company has increased its interest rates
to retail customers, the time necessary to implement those increases will lead
to spread compression in the short term. In addition to the gain recorded on the
closing date of the securitization, the Company expects to earn future income
from its investment in the residual REMIC interest in this transaction,
consistent with its securitizations closed in prior years.

         Financial services revenue also includes a $1.4 million gain on the
resecuritization of approximately $32 million of subordinated REMIC securities
from prior year securitizations. This type of gain will not recur as the Company
has sold substantially all of its investments in subordinated securities.

         The majority of the 13% increase in other income is related to
increased insurance commissions resulting from the overall increase in unit
sales.

         Non-financial services selling, general and administrative expenses
rose to 24.6% of net sales compared to 22.0% of net sales last year. The
majority of the increase in these expenses as a percentage of net sales is
attributable to the increased percentage of homes produced by Destiny and Golden
West which are being distributed through the Oakwood retail network. As the
Company executes its integration strategy and Destiny and Golden West become
largely captive manufacturers, wholesale sales to independent dealers are
declining, and the percentage of retail unit sales manufactured by company-owned
manufacturing facilities is increasing. This strategy has the effect of
increasing gross profit margins, but also delays the recognition of
manufacturing profits until the homes are sold at retail. As a consequence,
while Destiny and Golden West selling, general and administrative expenses in
absolute dollars are declining, they represent a higher percentage of sales
recognized in the second quarter of fiscal 1996. As the percentage of internal
Oakwood sales stabilizes, the relationship of selling, general and
administrative expenes to net sales should also decline to historical levels.
Non-financial services selling, general and administrative expenses have also
increased as a result of the increased number of retail sales centers opened
during the quarter compared to the prior year, as well as costs incurred in
connection with sales centers scheduled to open in future quarters. New retail
sales centers typically require a period of several months to reach unit sales
levels similar to existing outlets.

         Financial services selling, general and administrative expenses rose
76% on a 26% increase in the average number of loans serviced during the period,
a 69% increase in total credit application volume and a 38% increase in loan
originations. In addition to cost increases associated with higher origination
and servicing volume, financial services general and

                                       10
<PAGE>

administrative expenses have increased as a result of allocation to this
business unit of certain direct operating costs (principally related to
telecommunications) formerly absorbed by the parent company and allocated to
non-financial operations.

         No provision for losses on credit sales was recorded in the second
quarter of fiscal 1996. The Company provides for estimated losses based on the
Company's historical loss experience, current repossession trends and costs and
management's assessment of the current credit quality of the loan portfolio.

         Non-financial services interest expense remained relatively flat at
$634,000 during the second quarter of fiscal 1996 versus $617,000 during the
same period in the prior year.

         Financial services interest expense includes interest expense
associated with long-term debt secured by loans and interest associated with
short-term line of credit borrowings used to fund the warehousing of loans prior
to their securitization. Financial services interest expense increased 7%,
reflecting a $1,469,000 increase in short-term interest expense due to
significant increases in loan volume. This increase was offset by a 30% decrease
in interest on long-term debt due to declining and retired long-term debt
balances. Financial services interest expense associated with notes and bonds
payable is expected to continue to decline as the Company retires its
outstanding debt secured by loans.

         The Company's effective income tax rate was 38.9% in fiscal 1996
compared to the pro forma effective tax rate of 38.6% in fiscal 1995.


                                       11

<PAGE>


 Six months ended March 31, 1996 compared to six months ended March 31, 1995

     The following table summarizes certain key statistics for the six months
ended March 31, 1996 and 1995 : 

<TABLE>
<CAPTION>
                                                                                         1996            1995
<S>                                                                                    <C>              <C>   
Retail sales (in millions)                                                             $287.2           $217.3
Wholesale sales (in millions)                                                            72.7             96.4
Other sales - principally relating to
 communities (in millions)                                                                7.6              4.8
Total sales (in millions)                                                               367.5            318.5
Gross profit % - integrated operations                                                   30.6%            29.3%
Gross profit % - wholesale operations                                                    15.4%            17.4%
New single-section homes sold - retail                                                  5,932            5,059
New multi-section homes sold - retail                                                   2,497            1,763
Used homes sold - retail                                                                  976              963
New single-section homes sold - wholesale                                                 782            1,275
New multi-section homes sold - wholesale                                                2,069            2,525
Average new single-section sales price - retail                                       $27,000          $25,300
Average new multi-section sales price - retail                                        $47,600          $46,200
Average new single-section sales price - wholesale                                    $13,900          $13,800
Average new multi-section sales price - wholesale                                     $29,300          $31,200
Weighted average retail sales centers
  open during the period                                                                  218              167
Average new homes sales per sales center                                                 38.7             40.9
</TABLE>


         Retail sales dollar volume increased 32%, reflecting a 24% increase in
new unit volume and increases of 7% and 3% in the average new unit sales prices
of single-section and multi-section homes, respectively. New unit volume rose
primarily due to a 31% increase in the weighted average number of sales centers
open during the period, while average new unit sales per sales center decreased
5%. In the first six months of fiscal 1996, the Company opened or acquired 36
new sales centers compared to 31 sales centers in the first six months of fiscal
1995. Because the Company plans to open approximately 35 to 45 new sales centers
annually over the next several years, management does not expect any significant
increase in the average number of new homes sold per sales center over the near
term. Total new retail sales dollars at sales centers open more than one year
rose 8% in the period, while same store unit sales increased 1%. Retail sales of
multi-section homes accounted for 30% of new home unit sales in the first six
months of fiscal 1996 versus 28% in the prior year.

         Wholesale sales dollar volume (which represents sales by Golden West
and Destiny to independent dealers) declined by 25%, almost all due to lower
unit volume. The decline in wholesale unit volume reflects execution of the
Company's strategy of changing the distribution of products produced by Golden
West and Destiny from independent dealers to company- owned retail sales
centers. During the six months ended March 31, 1996, approximately 23% of Golden
West's and Destiny's shipments were to Oakwood sales centers, compared to 4% in
the first six months of fiscal 1995; these shipments to Oakwood retail centers
are not included in the wholesale dollar sales and unit sales in the table
above. Management expects Golden West's and Destiny'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 and

                                       12
<PAGE>

Destiny markets, the decline in sales to wholesale dealers will continue. In
addition, Golden West's total shipments declined 25% as explained in the
quarterly discussion above.

         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 and Destiny on its sales to the Oakwood
retail organization. Gross profit margin - integrated operations was 30.6% in
the current period compared to 29.3% in the prior year. The increase reflects
improved sourcing of retail unit sales from company-owned manufacturing plants.
Approximately 87% of the total new unit retail sales volume was manufactured by
the Company in the first six months of fiscal 1996, compared to 74% one year
ago.

         Wholesale gross profit margins decreased to 15.4% in the current period
from 17.4% last year, primarily due to start-up costs incurred in a plant
expansion at the Albany, Oregon facility, which increased capacity by
approximately 40% during the first quarter. During the first six months of
fiscal 1996, production at Golden West's Albany plant rose 17% from the level in
the first six months of fiscal 1995, and the plant operated at 71% of newly
increased capacity. Utilization at the Perris, California plant increased during
the period to 75% from 63% last year, principally as the result of producing new
models for Oakwood retail centers.

         Financial services income increased 74% to $49.7 million from $28.5
million last year. Interest income earned on loans held for investment and on
loans held for sale prior to securitization decreased to $17.5 million for the
first six months of fiscal 1996 from $18.0 million in the prior year. Interest
on loans held for investment declined due to normal amortization and
prepayments, but was partially offset by an increase in interest on loans held
for sale due to higher average outstanding balances during fiscal 1996 versus
the prior year. Loan servicing fees increased from $5.9 million for the first
six months of 1995 to $7.4 million for the same period in 1996, reflecting the
increased size of the Company's securitized loan servicing portfolio. REMIC
residual income increased from $3.0 million to $7.5 million, reflecting the
shift in the Company's financing strategy toward securitization of its loans
from holding loans for investment.

     Financial services income for the first six months of fiscal 1996 also
includes gains of approximately $12.5 million from the sale of $350 million of
asset-backed securities. These gains resulted from a widening of the excess
servicing spread in the securitization and other factors as described in the
discussion of the second quarter's results above. The six months also includes a
$1.4 million nonrecurring gain on the resecuritization of approximately $32
million of subordinated REMIC securities.

         The majority of the 17% increase in other income is related to
increased insurance commissions resulting from the overall increase in unit
sales.

         Non-financial services selling, general and administrative expenses
rose to 24.0% of net sales compared to 22.1% of net sales last year. As
previously discussed, the majority of the increase in these expenses as a
percentage of sales relates to the increased percentage of homes produced by
Destiny and Golden West which are being sold through the Oakwood retail network.
Although this strategy impacts gross margin positively, it also increases
non-financial selling, general and administrative expenses as a percentage of
net sales as Destiny and Golden West costs are increasingly spread over the
Oakwood retail sales base. Non-financial selling, general and administrative
expenses have also risen as a result of increased accruals

                                       13
<PAGE>

for long-term management incentive compensation payable based upon the level of
Company profitability for fiscal 1994 through 1996, costs associated with the
increased number of new sales centers opened during fiscal 1996 and expenses
related to sales centers which have not yet opened.

         Financial services selling, general and administrative expenses rose
63% on a 25% increase in the average number of loans serviced during the period,
a 67% increase in total credit application volume and a 45% increase in loan
originations. As discussed in the quarterly explanation above, certain direct
operating costs previously absorbed by the parent company are now being
allocated to financial services operations.

         No provision for losses on credit sales was recorded in the first six
months of fiscal 1996. The Company provides for estimated losses based on the
Company's historical loss experience, current repossession trends and costs and
management's assessment of the current credit quality of the loan portfolio.

         Non-financial services interest expense rose from $1,014,000 to
$1,253,000 due principally to permanent financing for new manufacturing
facilities, a corporate aircraft and the employee stock ownership plan.

         Financial services interest expense includes interest expense
associated with long-term debt secured by loans and interest associated with
short-term line of credit borrowings used to fund the warehousing of loans prior
to their securitization. Financial services interest expense increased 4%,
reflecting a $2,254,000 increase in short-term interest expense due to
significant increases in loan volume. This increase was offset by a 26% decrease
in interest on long-term debt due to declining and retired long-term debt
balances. Financial services interest expense associated with notes and bonds
payable is expected to continue to decline as the Company retires its
outstanding debt secured by loans.

         The Company's effective income tax rate was 39.0% in fiscal 1996
compared to the pro forma effective tax rate of 38.4% in fiscal 1995. The
increase in the effective tax rate is due primarily to higher state income
taxes.


                         LIQUIDITY AND CAPITAL RESOURCES

         Receivables and investments decreased from September 30, 1995 primarily
due to the timing of the Company's securitization of loans held for sale. The
Company originates loans and warehouses them until sufficient receivables have
been accumulated for a securitization. Through its Oakwood Mortgage Investors
subsidiary, the Company closed securitizations in October and February totalling
approximately $350 million. Short-term borrowings principally reflect
outstanding advances on the Company's warehouse line of credit used to finance
originated loans prior to securitization or other permanent financing.
Management believes that permanent financing for its installment sale contracts
remains readily available and anticipates securitizing installment sale
contracts using REMICs approximately every three to four months.

         Management believes that the availability of permanent financing for
originated loans, short-term credit facilities and cash generated by operations
are sufficient to provide for the Company's short-term liquidity needs. At the
end of the second quarter of fiscal 1996, the Company replaced its $130 million
installment loan warehouse line of credit with a new $175

                                       14
<PAGE>

million commercial paper facility. During the third quarter of fiscal 1996, the
Company intends to renegotiate its line of credit secured by inventory,
increasing the line to $125 million from $75 million and also decreasing the
interest rate.

         Management currently believes that it can obtain the cash it needs to
continue its planned expansion through internally generated funds. However, the
Company continues to monitor the credit and equity markets and evaluate the
sources and costs 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 intends to sell all the regular REMIC interests in
its securitizations, and retain only REMIC residual interests.



                                       15
<PAGE>




   PART II.         OTHER INFORMATION

   Item 4.        Submission of Matters to a Vote of Security Holders

                  Information required by this item was provided in the Form
                  10-Q filed for the quarter ended December 31, 1995.


   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, 1996.

                  Items 1, 2, 3 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 14, 1996


                                                  OAKWOOD HOMES CORPORATION




                                                  BY: s/ C. Michael Kilbourne
                                                      C. Michael Kilbourne
                                                      Executive Vice President
                                                      (Chief 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, 1996                                         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>

                                                                       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)


<TABLE>
<CAPTION>
                                                                    Three months ended                Six months ended
                                                                        March 31,                         March 31,

                                                                 1996              1995             1996             1995
                                                                 -----             -----            -----            ----
<S>                                                              <C>              <C>              <C>              <C>
 Weighted average number of common
          shares outstanding (1)                                 44,764           44,140           44,605            44,094
 Add:     Dilutive effect of stock
          options, computed using the
          treasury stock method (1)                               1,794            1,872            1,848             1,891
 Less:   Unearned ESOP shares (1)                                 (164)               -             (169)                 -
                                                            -----------      -----------      -----------       -----------
 Weighted average number of common
          and common equivalent shares
          outstanding (1)                                        46,394           46,012           46,284            45,985
                                                            ===========      ===========      ===========       ===========
 Net income (fiscal 1995 is pro forma)                          $16,152         $  9,862          $30,029           $18,074
                                                            ===========      ===========      ===========       ===========
 Earnings per common share - primary
   (fiscal 1995 is pro forma) (1)                           $      .35          $    .21          $   .65       $       .39
                                                            ===========      ===========       ==========       ===========
 
 Weighted average number of common
          shares outstanding (1)                                 44,764           44,140           44,605            44,094
 Add:     Dilutive effect of stock
          options, computed using
          the treasury stock method (1)                           1,880            1,948            1,901             2,040
 Less:   Unearned ESOP shares (1)                                 (164)               -             (169)                -
                                                            -----------      -----------      -----------       -----------
 Weighted average number of common
          and common equivalent shares
          outstanding (1)                                        46,480           46,088           46.337            46,134
                                                            ===========      ===========      ===========       ===========
 Net income (fiscal 1995 is pro forma)                          $16,152         $  9,862          $30,029           $18,074
                                                            ===========      ===========      ===========       ===========
 Earnings per common share - fully diluted
   (1995 is pro forma) (1)                                  $      .35          $    .21          $   .65           $   .39
                                                            ===========      ===========      ===========       ===========

</TABLE>
                 
(1) Share and per share amounts have been adjusted retroactively to give effect
to the 2-for-1 stock split. See Note 2 of the Notes to Consolidated Financial
Statements.

                                       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
March 31, 1996 filed as part of the Registrant's Form 10-Q for the
quarter ended March 31, 1996 and is qualified in its entirety by reference
to such Form 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
       
<S>                             <C>
<PERIOD-TYPE>                   6-MOS
<FISCAL-YEAR-END>                          SEP-30-1996
<PERIOD-START>                             OCT-01-1995
<PERIOD-END>                               MAR-31-1996
<EXCHANGE-RATE>                                      1
<CASH>                                          18,158
<SECURITIES>                                         0
<RECEIVABLES>                                  368,162
<ALLOWANCES>                                     6,081
<INVENTORY>                                    164,588
<CURRENT-ASSETS>                                     0
<PP&E>                                         151,172
<DEPRECIATION>                                  34,707
<TOTAL-ASSETS>                                 705,302
<CURRENT-LIABILITIES>                          184,211
<BONDS>                                        160,719
                                0
                                          0
<COMMON>                                        11,216
<OTHER-SE>                                     339,011
<TOTAL-LIABILITY-AND-EQUITY>                   705,302
<SALES>                                        367,492
<TOTAL-REVENUES>                               425,639
<CGS>                                          267,067
<TOTAL-COSTS>                                  363,978
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                              12,466
<INCOME-PRETAX>                                 49,195
<INCOME-TAX>                                    19,166
<INCOME-CONTINUING>                                  0
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    30,029
<EPS-PRIMARY>                                      .65
<EPS-DILUTED>                                      .65
        

</TABLE>


© 2022 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission