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 December 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.)
7800 McCloud Road, Greensboro, North Carolina 27409-9634
(Address of principal executive offices)
Post Office Box 27081, Greensboro, North Carolina
27425-7081 (Mailing address of principal
executive offices)
(910) 664-2400
(Registrant's telephone number, including area code)
-----------------------------------------------------------------
(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 January 31, 1997.
Common Stock, Par Value $.50 Per Share . . . . . . . . . . 45,989,129
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QUARTERLY REPORT ON FORM 10-Q
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended December 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.
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OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(in thousands except per share data)
Three months ended
December 31,
1996 1995
Revenues
Net sales $ 177,782 $176,269
Financial services income 24,772 24,239
Other income 4,636 3,928
Total revenues 207,190 204,436
Costs and expenses
Cost of sales 123,812 130,223
Selling, general and administrative
expenses
Non-financial services 48,367 41,199
Financial services 5,784 4,126
Interest expense
Non-financial services 832 619
Financial services 3,489 5,519
Total costs and expenses 182,284 181,686
Income before income taxes 24,906 22,750
Provision for income taxes 9,713 8,873
Net income $ 15,193 $ 13,877
Earnings per share
Primary $ .33 $ .30
Fully diluted $ .33 $ .30
Dividends per share $ .01 $ .01
Average shares outstanding
Primary 46,732 46,174
Fully diluted 46,732 46,194
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OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)
(in thousands except share and per share data)
December 31, September 30,
ASSETS 1996 1996
Cash and cash equivalents $ 19,976 $ 28,577
Receivables and investments 363,935 508,825
Inventories
Manufactured homes 170,018 136,905
Work-in-process, materials and supplies 15,080 14,165
Land/homes under development 4,618 4,820
189,716 155,890
Properties and facilities 116,985 113,764
Deferred income taxes 9,544 9,674
Other assets 51,497 25,247
$751,653 $841,977
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings $125,900 $145,506
Notes and bonds payable 122,782 134,379
Accounts payable and accrued liabilities 81,632 157,929
Other long-term obligations 11,823 12,189
Shareholders' equity
Common stock, $.50 par value; 100,000,000
shares authorized; 45,977,000 and
45,621,000 shares issued and outstanding 22,989 22,811
Additional paid-in capital 152,041 149,501
Retained earnings 241,196 226,460
416,226 398,772
Less: Unearned compensation (6,710) (6,798)
409,516 391,974
$751,653 $841,977
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OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Three months ended
December 31,
<S> <C> <C>
1996 1995
Operating activities
Net income $ 15,193 $ 13,877
Items not requiring (providing) cash
Depreciation and amortization 3,210 2,350
Deferred income taxes 130 104
Gain on sale of loans (4,964) (6,538)
Other 744 --
Decrease in other receivables 25,044 3,290
(Increase) in inventories (33,826) (4,545)
(Decrease) in accounts payable and
accrued liabilities (75,079) (3,449)
(Decrease) in other long-term obligations (366) (2,615)
Cash provided (used) by operations (69,914) 2,474
Loans originated (174,297) (123,744)
Purchase of loan portfolios -- (1,465)
Sale of loans 291,912 189,972
Receipts on installment receivables 7,426 6,933
Cash provided by operating activities 55,127 74,170
Investing activities
Loan to joint venture (25,000) --
Additions to properties and facilities (6,181) (9,715)
Other (2,394) (1,490)
Cash used by investing activities (33,575) (11,205)
Financing activities
Net repayments on short-term credit facilities (19,606) (46,500)
Payments on notes and bond (11,477) (11,396)
Cash dividends (457) (444)
Proceeds from exercise of stock options 1,387 1,185
Cash used by financing activities (30,153) (57,155)
Net increase (decrease) in cash and cash equivalents (8,601) 5,810
Cash and cash equivalents
Beginning of period 28,577 6,189
End of period $ 19,976 $ 11,999
</TABLE>
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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
$70 million at December 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 $37 million at December 31, 1996.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three months ended December 31, 1996 compared to three months ended December 31,
1995
The following table summarizes certain key statistics for the
quarters ended December 31, 1996 and 1995 :
1996 1995
Retail sales (in millions) $ 150.2 $ 133.2
Wholesale sales (in millions) $ 25.8 $ 39.8
Other sales - principally relating to
communities (in millions) $ 1.8 $ 3.3
Total sales (in millions) $ 177.8 $ 176.3
Gross profit % - integrated operations 33.1% 29.5%
Gross profit % - wholesale operations 16.2% 15.4%
New single-section homes sold - retail 2,243 2,556
New multi-section homes sold - retail 1,639 1,294
Used homes sold - retail 456 461
New single-section homes sold - wholesale 211 433
New multi-section homes sold - wholesale 721 1,102
Average new single-section sales price - retail $29,100 $26,700
Average new multi-section sales price - retail $49,600 $47,400
Average new single-section sales price - wholesale $14,600 $14,100
Average new multi-section sales price - wholesale $31,200 $30,200
Weighted average retail sales centers
open during the period 259 208
Retail sales dollar volume increased 13%, reflecting a 1% increase in
new unit volume, increases of 9% and 5% in the average new unit sales prices of
single-section and multi-section homes, respectively, and an increase in the
percentage of total retail unit volume represented by multi-section homes from
34% last year to 42% in the first quarter of fiscal 1997.
Single-section unit volume decreased 12%, while multi-section unit volume
rose 27% from the first quarter of last year. The relative weakness in
single-section demand experienced in the quarter is expected to continue and
accordingly, the Company has realigned its production capacity to enable
increased production of multi-section products. In the near future, only four of
the Company's 16 plants will be exclusively dedicated to single-section homes,
while eight plants will build exclusively multi-section homes. The remaining
four plants will build both products, shifting between single-section and
multi-section homes based on market demand.
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In addition to the general weakness in new single-section retail unit
volume, the Company experienced particular weakness in both single-section and
multi-section new unit sales in the Southwest. The Company has reassigned
responsibility for this market within the retail management organization and
acted to strengthen the quality of retail supervisory personnel to whom sales
center managers in the Southwest report. In addition, the Company believes
multi-section sales in the Southwest were adversely affected by excessive
manufacturing lead times and insufficient breadth of product offerings.
Management believes that redirecting manufacturing capacity to multi-section
products will help reduce manufacturing backlogs and enable the Company to offer
a broader assortment of products in the Southwest.
The average selling price for new single-section and multi-section
homes sold at retail increased primarily due to a shift in product mix toward
higher price points.
Total new retail sales dollars at sales centers open more than one year
decreased 5% in the first quarter of fiscal 1997, primarily due to the weakness
in the Southwest. In the first three months of fiscal 1997, the Company opened
or acquired seven new sales centers compared to 18 sales centers in the first
three months of fiscal 1996. New sales centers typically require a period of
several months to reach normalized unit sales levels.
Wholesale sales dollar volume (which represents sales by Golden West
and Destiny to independent dealers) declined by 35%, reflecting a 39% decrease
in unit volume. This decrease was slightly offset by increases of 4% and 3% in
the average sales price of new single-section homes and multi-section homes,
respectively. 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 quarter ended December 31, 1996, 55% of Golden West's and Destiny's
shipments were to Oakwood sales centers, compared to 24% in the first quarter of
fiscal 1996; these shipments 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.
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 margin
integrated operations increased to 33.1% in the current period from 29.5% in the
first quarter of last year, reflecting improved gross margins at both retail and
manufacturing and an increase in the percentage of new homes sold at retail
which were produced in company-owned manufacturing plants from approximately 85%
during the prior year quarter to approximately 95% in the first quarter of
fiscal 1997.
Wholesale gross profit margins increased to 16.2% in the current
quarter from 15.4% last year, primarily due to start-up costs incurred in the
first quarter last year associated with a plant expansion at the Albany, Oregon
facility, which increased capacity by approximately 40% during the first quarter
one year ago.
Financial services income increased 2% to $24.8 million from $24.2
million last year. Interest income earned on loans held for investment and on
loans held for sale prior to securitization decreased from $9.3 million in the
first quarter of fiscal 1996 to $7.3 million this
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year. This decrease reflects the amortization of and prepayments on loans held
for investment, a decrease in the average balance of loans held for sale
resulting from more frequent loan securitization, and a decrease in the average
yield on those assets as older, higher-yielding loans are liquidated. The
Company is selling via securitization substantially all the loans it originates,
and accordingly interest income should continue to decline as the remaining
loans held for investment are liquidated. Loan servicing fees increased from
$3.6 million for the first quarter of 1996 to $4.9 million in the first quarter
of 1997, reflecting the increased size of the Company's securitized loan
servicing portfolio. REMIC residual income increased from $3.2 million to $6.1
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 quarter of fiscal 1997 and 1996
also includes gains of approximately $4.9 million and $6.6 million,
respectively, or $.06 per share and $.09 per share, respectively, from the sale
of asset-backed securities. The fiscal 1996 gain was unusually large due to a
bond market rally in the fall of 1995 which significantly reduced the Company's
permanent financing costs on securities sold that quarter. In addition to the
gains recorded on the closing date of the securitizations, the Company expects
to earn future income from its investment in the residual REMIC interests in
these transactions, consistent with its securitizations closed in prior years.
The Company estimates the fair value of retained residual interests
in REMIC securitizations based upon default, credit loss, voluntary prepayment
and interest rate assumptions which management believes market participants
would use for similar instruments; management believes these assumptions are
conservative. Such estimated fair values have a direct impact on the magnitude
of the gain or loss recorded on the sale of asset-backed securities. The actual
rate of voluntary prepayments and the amount and timing of credit losses affect
the Company's yield on retained REMIC residual interests and the fair value of
such interests in periods subsequent to the securitization. For the quarter
ended December 31, 1996, total credit losses on loans originated by the Company,
including losses relating to securitized assets, loans held for investment,
loans held for sale and loans sold with full or partial recourse, amounted to
approximately 1.13% on an annualized basis of the average principal balance of
the related loans, compared to approximately .83% on an annualized basis one
year ago. The increase in net credit losses is due principally to higher numbers
of defaulted loans rather than to decreased recovery rates on defaults. To
counteract this trend, the Company has tightened underwriting standards and
focused additional emphasis on closing retail sales with relatively higher
credit quality customers. Increased credit losses reduce the Company's yield on
retained REMIC residual interests and could also reduce gains on future
securitizations.
The majority of the 18% increase in other income is related to
increased insurance commissions resulting from the overall increase in new home
dollar sales.
Non-financial services selling, general and administrative expenses
rose to 27.2% of net sales compared to 23.4% of net sales last year. The
increase in non-financial services selling, general and administrative expenses
as a percentage of net sales was caused by higher selling expenses at retail
resulting from a new retail pay plan and the integration of Destiny and Golden
West, whose general and administrative expenses are increasingly spread over the
Company's retail sales volumes as the Company reduces wholesale sales to
non-exclusive independent dealers. This was partially offset by a reduction in
accruals relating to long-term incentive compensation plans. Management is
currently reviewing its retail compensation plans to
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ensure the Company's cost structure and related selling expenses are in line
with the level of business activity.
Financial services selling, general and administrative expenses rose
40% on a 27% increase in the average number of loans serviced during the period,
a 20% increase in total credit application volume and a 41% increase in loan
originations. The fiscal 1997 quarter includes certain general and
administrative expenses related to credit operations dedicated to Deutsche
Financial Capital, the Company's new joint venture with Deutsche Financial
Services, which began operations during the fourth quarter of fiscal 1996.
Non-financial services interest expense rose from $619,000 to $832,000
due principally to interest related to new corporate office facilities.
Financial services interest expense includes interest expense
associated with long-term debt secured by loans and interest expense associated
with short-term line of credit borrowings used to fund the warehousing of loans
prior to their securitization. Financial services interest expense decreased 37%
primarily due to declining and retired long-term debt balances. In addition,
short-term interest expense declined slightly due to lower average outstanding
balances, as well as lower interest rates on short-term lines of credit.
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 1997 and
1996.
LIQUIDITY AND CAPITAL RESOURCES
Receivables and investments decreased from September 30, 1996 primarily
due to the timing of the Company's securitization of loans held for sale, as
well as the continued amortization of loans held for investment. The Company
originates loans and warehouses them until sufficient receivables have been
accumulated for a securitization. Through its Oakwood Mortgage Investors
subsidiary, the Company securitized approximately $271 million of loans in
October 1996.
The increase in inventories from September 30, 1996 reflects the normal
seasonal manufacture of inventory during the winter months in preparation for
the spring and summer selling season.
Short-term borrowings principally reflect outstanding advances on the
Company's warehousing facility used to finance originated loans prior to
securitization or other permanent financing. Management believes that permanent
financing for its loans remains readily available and anticipates securitizing
installment sale contracts using REMICs approximately every three to four
months.
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
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conditions in the capital markets, and management's assessment of the
appropriate components of the Company's capital structure.
11
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareholders of the Registrant held on January 29,
1997, the shareholders approved (i) the election of Kermit G. Phillips, II, H.
Michael Weaver, Francis T. Vincent, Jr. and Roger W. Schipke as directors; and
(ii) the selection of Price Waterhouse LLP as independent accountants. The
following table sets forth the votes on each such matter:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NOT VOTED
Election of Directors
(by nominee)
<S> <C> <C> <C> <C>
Kermit G. Phillips, II 38,010,902 526,115 0 7,311,302
H. Michael Weaver 37,984,342 552,675 0 7,311,302
Francis T. Vincent, Jr. 38,011,242 525,775 0 7,311,302
Roger W. Schipke 38,011,142 525,875 0 7,311,302
Approval of selection of Price 38,505,372 10,723 20,922 7,311,302
Waterhouse LLP as Independent
Auditors
</TABLE>
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Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
(4) Agreement to Furnish Copies of Instruments
with Respect to Long-term Debt
(10) Employment Agreement between Oakwood Homes
Corporation and A. Steven Michael
(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 December 31, 1996.
Items 1, 2, 3 and 5 are inapplicable and are omitted.
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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: February 14, 1997
OAKWOOD HOMES CORPORATION
BY: s/ C. Michael Kilbourne
C. Michael Kilbourne
Executive Vice President
(Chief Financial Officer)
(Duly Authorized Officer)
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
ITEM 6(a)
FORM 10-Q
QUARTERLY REPORT
For the quarter ended Commission File Number
December 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
10 Employment Agreement between Oakwood Homes Corporation and
A. Steven Michael
11 Statement re Computation of Earnings Per Share
27 Financial Data Schedule (filed in electronic format only)
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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
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EXHIBTI 10
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of the 31st day of December 1996, by and between A. STEVEN MICHAEL, an
individual resident of the State of North Carolina ("Michael"), and OAKWOOD
HOMES CORPORATION, a North Carolina corporation having its principal office and
place of business in Greensboro, North Carolina (the "Company").
STATEMENT OF PURPOSE
Michael, who has been a senior executive and director of the Company
for several years, wishes to continue his employment with the Company, but in a
different capacity from that in which he is currently serving, and the Company
has agreed to such change of assignment. The Company and Michael have therefore
agreed that Michael will continue to render services to the Company on the terms
and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the Company and Michael agree as follows:
1. Employment Period. For a period of twenty-four (24) months beginning
January 1, 1997, subject to extension as provided in the following sentence (the
"Employment Period"), Michael shall serve as Executive Vice President and
Special Assistant to the President of the Company, or in such other office as
the Board of Directors of the Company (the "Board") shall determine, and in such
positions he shall have such duties as are assigned to him from time to time by
the Company's Chief Executive Officer. Unless either Michael or the Company has
given written notice to the other of his or its desire to terminate this
<PAGE>
Agreement by no later than November 30, 1998, the Employment Period shall
automatically be extended for an additional twenty-four (24) months beginning
January 1, 1999.
2. Duties. During his full-time employment hereunder Michael shall
devote his full working time and energies to the business and affairs of the
Company, and shall use his best efforts, skill and abilities to promote the
Company's interests; provided, however, that Michael may participate in civic,
charitable, educational or religious activities and affairs so long as such
activities do not interfere with the performance of his duties and obligations
to the Company.
3. Compensation.
(a) Salary and Incentive Compensation. The Company shall pay or cause
to be paid to Michael during his full-time employment hereunder a base salary of
not less than Two Hundred and Fifty-Five Thousand Dollars ($255,000.00) per
annum, payable in monthly or more frequent installments in accordance with the
Company's regular payroll practices. In addition, although he would be
disqualified because of his change of assignment, Michael shall be entitled to
receive the full amount that he would otherwise have earned under the Company's
annual incentive compensation program for the fiscal year ending September 30,
1997, subject to the provisions of the Company's Executive Incentive
Compensation Plan. The Long Term Incentive Compensation Award Agreement between
the Company and Michael dated November 15, 1995, is terminated, and Michael
shall receive no payments thereunder. For services after September 30, 1997,
Michael's incentive compensation or bonus, if any, shall be at the discretion of
the Compensation Committee of the Board.
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(b) Benefits. During Michael's full-time employment hereunder, except
as otherwise provided in Paragraph 3(a) above, he shall remain eligible to
participate, on the same basis as other executives of similar rank of the
Company, in any employee benefit plan hereafter existing to the extent that he
is then eligible under the general provisions thereof, and in any group
insurance, hospitalization, medical, health and accident, disability or similar
plans and programs of the Company to the extent that he is then eligible under
the general provisions thereof then pertaining.
4. Termination of Service.
(a) Discharge for Cause. The Board may discharge Michael for
cause at any time and thereby terminate his full-time employment hereunder. Such
discharge shall be effected by written notice (the "Discharge Notice") to
Michael which shall specify the reasons for his discharge and the effective date
thereof. As used herein, the term "for cause" shall mean (i) any breach by
Michael of any material provisions of this Agreement, (ii) commission of a
wrongful act by Michael that has or will have a material adverse effect on the
business, operations or financial condition of the Company, excluding matters of
business judgment that do not involve willful misconduct or gross negligence,
(3) any intentional falsification of reports, records or information submitted
by Michael to the Company or any subsidiary of the Company, or any officer of
any thereof, (iv) fraud, criminal conduct, dishonesty or embezzlement by
Michael, (v) misappropriation by Michael of any assets or business opportunities
of the Company, or (vi) refusal or failure by Michael to follow reasonable
specific instructions to him from the Chief Executive Officer or the Board;
provided, however, that to the extent that the cause for termination arises
under clause (i) or
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(vi) of this sentence and can be remedied, Michael shall be given thirty (30)
days prior written notice of the Company's intention to terminate his employment
for cause, during which period he shall have the opportunity to remedy the act,
omission or condition giving rise to such cause, and if he successfully remedies
such act, omission or condition, Michael's employment shall not be terminated.
Upon termination pursuant to this Paragraph 4(a), Michael's compensation and
benefits hereunder shall forthwith cease and, except as otherwise provided in
Paragraphs 6 and 7 below, this Agreement shall terminate.
(b) Discharge Without Cause. The Company retains the right to discharge
Michael without cause at any time by written notice of termination of employment
given to him, in which case his employment shall terminate on the effective date
specified in such notice. If the Company discharges Michael without cause, he
shall be relieved of his obligations under Section 2 hereof but shall continue
to receive his base salary as provided in the first sentence of Paragraph 3(a)
above until the end of the Employment Period; and, in addition, Michael shall be
relieved of his obligations and restraints under Paragraph 7 below to the extent
such obligations would otherwise extend beyond the period during which he is
receiving compensation in accordance with the forepart of this sentence.
(c) Termination by Michael. Michael may voluntarily terminate his
employment hereunder by thirty (30) days advance written notice to the Company
given at any time within thirty (30) days after Nicholas J. St. George ceases to
be the Company's Chief Executive Officer. Termination by Michael pursuant to
this Paragraph 4(c) shall be deemed for all purposes to be his voluntary
resignation with the consent of the Board. Upon termination pursuant to this
Paragraph 4(c), Michael shall continue for twelve calendar
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months to receive the base salary then being paid to him, but all other
compensation and benefits being paid to him shall forthwith cease and, except as
otherwise provided in this sentence and in Paragraphs 6 and 7 below, this
Agreement shall terminate.
5. Expenses. Upon submission of proper vouchers, the Company will pay
or reimburse Michael for all transportation, hotel and living expenses incurred
by him on the Company's business during the Employment Period, all in accordance
with the Company's policies in effect from time to time
6. Confidentiality. Michael acknowledges that, as a result of his past
positions with the Company and in his continuing employment, he has had and will
have access to proprietary confidential information that directly and indirectly
relates to the business of the Company and its subsidiaries (the "Business").
Michael agrees that, for a period from the date hereof through and including the
later of five years after Michael ceases to be employed by the Company and
December 31, 2006 (the "Confidentiality Period"), he will not, without the prior
written consent of the Company, (i) disclose to any person any confidential
information obtained with respect to the Business, except for information which
at the time is known to the public other than as a result of a disclosure by
Michael not permitted hereunder, or lawfully acquired from a third party who is
not obligated to the Company to maintain such information in confidence, or (ii)
retain any papers or documents or papers relating to any such confidential
information. This Paragraph 6 shall survive the termination of this Agreement.
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7. Competition.
(a) Covenant. In consideration of the Company's agreeing to his request
for a change of assignment, agreeing to employ him during the Employment Period,
and agreeing to continue his participation in the 1997 Annual Incentive
Compensation Program, Michael covenants and agrees that during the time he is
entitled to receive his base salary hereunder and (except for termination by
Michael under Paragraph 4(c) above) for one year thereafter he will not,
directly or indirectly, in any geographic market in which the Company at the
time is conducting business
(i) enter into the employment of, or render services to,
any Competitive Business (as defined below);
(ii) engage in any Competitive Business for his own
account; or
(iii) become interested in any Competitive Business as an
individual, partner, shareholder, creditor, director, officer,
principal, agent, employee, trustee, consultant, advisor or
any in any other relationship or capacity; provided, however,
that the provisions of this Paragraph 7(c) shall not be deemed
to prohibit Michael from acquiring or holding, solely as an
investment, publicly traded securities of such corporation so
long as such securities do not, in the aggregate, constitute
more than 5% of any class or series of outstanding securities
of such corporation;
(iv) employ or solicit for employment, or
advise or recommend to any other person that they employ or
solicit for employment, any employee of the Company or any of
its subsidiaries engaged in the Business; or
6
<PAGE>
(v) discuss with any employee of the Company or any of its
subsidiaries engaged in the Business, the formation or operation of any
Competitive Business or the possible future employment of such employee
by any Competitive Business if Michael has or expects to acquire a
proprietary interest in such business or is or expects to be made a
director or executive officer thereof.
(b) Definitions. For purposes of this Paragraph 7, (i) a "Competitive
Business" shall mean any business that is engaged, in whole or in part, in the
manufacture, sale (at wholesale or retail, except occasional retail sales
incident to the operation of a mobile home park) or financing, of manufactured
or other non-site-built housing of any kind, (ii) the "geographic markets" in
which the Company at a particular time conducts business are and will be those
described in the Company's then most recent Annual Report to Shareholders and
Form 10-K Report, and (iii) a "proprietary interest" in a business shall mean
ownership, through direct or indirect stockholdings or otherwise, of more than
5% of such business, and Michael shall be deemed to expect to acquire a
proprietary interest in a business or to be made a director or executive officer
of such business if such possibility has been discussed by any officer,
director, employee, agent or promotor of such business.
(c) Injunctive Relief. Michael acknowledges that in view of the nature
of the Business and his own unique knowledge and skills, the restrictions
contained in this Paragraph 7 and in Paragraph 6 above are reasonable and
necessary to protect the Company's legitimate business interests, that any
violation of such restrictions will cause irreparable injury to the Company for
which money damages will not adequately compensate and that if
7
<PAGE>
he violates any of such restrictions the Company should and will be entitled to
preliminary and permanent injunctive relief in addition to appropriate monetary
accounting and damages.
(d) Survival. This Paragraph 7 shall survive the termination of this
Agreement.
8. Notices. Any notices, requests, demands or other communications
under this Agreement to a party hereto shall be in writing and shall be deemed
to have been duly given when delivered in person or deposited in the United
States mail, postage prepaid, by registered or certified mail, return receipt
requested, to the parties hereto at the following addresses:
As to Michael: Mr.A. Steven Michael
1217 Heathrow Drive
Greensboro, North Carolina 27410
As to Company: Oakwood Homes Corporation
7800 McCloud Road
Greensboro, North Carolina 27409-9634
Attention: Chief Executive Officer
Either party hereto may change his or its address to which notices or other
communications hereunder are to be directed by giving notice thereto to the
other party hereto as hereinabove provided.
9. Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision hereof, all of which provisions are intended to be severable and to
remain in full force and effect.
10. No Waivers. The failure of either party at any time or times to
enforce or require performance of any provisions hereof shall not affect the
right of such party at a later time to enforce or require performance thereof.
No waiver by either party of the breach of any provision hereof, whether by
conduct or otherwise, shall be construed as a further or
8
<PAGE>
continuing waiver of any such breach, or as a waiver of the breach of any othe
provision hereof.
11. Applicable Law. This Agreement shall be enforced, interpreted and
construed under the laws of the State of North Carolina.
12. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto, and their respective heirs, executors,
administrators, legal representa- tives, successors and assigns, if any.
13. Entire Agreement; Modifications. This Agreement contains the entire
agreement between the Company and Michael with respect to the subject matter
hereof; provided, however, that the following agreements between Michael and the
Company shall remain in effect according to their respective terms:
(a) All stock option award agreements and all deferred compensation
agreements between the Company and Michael;
(b) Employment Agreement dated November 16, 1990, as amended ("Golden
Parachute Agreement"); and
(c) Executive Retirement Benefit Employment Agreement dated June 3,
1993, as amended ("Executive Retirement Agreement");
provided, however, that the Executive Retirement Agreement is hereby amended by
adding the following to the end of Section 4(d) thereof:
"Voluntary termination by Executive in accordance with Paragraph 4(c)
of the Employment Agreement between Executive and the Company dated as
of December 31, 1996, shall be deemed to be Approved Voluntary
Termination and shall entitle Executive to receive payments in the
amount and in accordance with the schedule set out in Schedule E
attached hereto (i) without further approval of the Board of Directors,
(ii) without the 180 days notice referred to above, and (iii) without
9
<PAGE>
requiring that Executive be at least 50 years of age (any earlier age
to be treated as 50 years of age for purposes of Schedule E)."
This Agreement may not be modified or amended except by a writing signed by the
party against whom enforcement is sought.
14. No Duplication of Payment. Notwithstanding anything to the contrary
herein, Michael shall receive no compensation payments hereunder after his full
time employment with the Company terminates if Michael at the time has received,
is receiving or is entitled to receive, payments under the Golden Parachute
Agreement, it being intended that Michael shall not receive post-employment
payments hereunder and under the Golden Parachute Agreement.
15. Duplicate Originals. This Agreement is executed in duplicate
originals, each of which shall be deemed an original hereof.
IN WITNESS WHEREOF, Michael has hereunto set his hand and seal, and the
Company has caused this Agreement to be executed by its duly authorized
representatives, all as of the day and year first above.
Witness: /s/ A. Steven Michael [SEAL]
A. Steven Michael
/s/ Debbie Fain
"Michael"
[CORPORATE SEAL] OAKWOOD HOMES CORPORATION
ATTEST:
By: /s/ Nicholas J. St. George
By: /s/ Douglas R. Muir Title: President
Title:Senior Vice President
"Company"
10
<PAGE>
EXHIBIT 11
OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share data)
Three months ended
December 31,
1996 1995
Weighted average number of common
shares outstanding 45,550 44,446
Add: Dilutive effect of stock
options and restricted shares,
computed using the treasury
stock method 1,319 1,902
Less: Unearned ESOP shares (137) (174)
Weighted average number of common
and common equivalent shares
outstanding 46,732 46,174
Net income $15,193 $13,877
Earnings per common share - primary $ .33 $ .30
Weighted average number of common
shares outstanding 45,550 44,446
Add: Dilutive effect of stock
options and restricted shares
computed using the treasury
stock method 1,319 1,922
Less: Unearned ESOP shares (137) (174)
Weighted average number of common
and common equivalent shares
outstanding 46,732 46,194
Net income $15,193 $13,877
Earnings per common share - fully diluted $ .33 $ .30
17
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains information extracted from the Registrant's consolidated
financial statements for the quarter ended December 31, 1996 filed as part of
the Registrant's form 10-Q for the quarter ended December 31, 1996 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 19,976
<SECURITIES> 0
<RECEIVABLES> 369,682
<ALLOWANCES> 5,747
<INVENTORY> 189,716
<CURRENT-ASSETS> 0
<PP&E> 156,079
<DEPRECIATION> 39,094
<TOTAL-ASSETS> 751,653
<CURRENT-LIABILITIES> 205,844
<BONDS> 122,782
22,989
0
<COMMON> 0
<OTHER-SE> 386,527
<TOTAL-LIABILITY-AND-EQUITY> 751,653
<SALES> 177,782
<TOTAL-REVENUES> 207,190
<CGS> 123,812
<TOTAL-COSTS> 177,963
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,321
<INCOME-PRETAX> 24,906
<INCOME-TAX> 9,713
<INCOME-CONTINUING> 15,193
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,193
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
</TABLE>
