OAKWOOD HOMES CORP
10-Q, 1999-08-16
MOBILE HOMES
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                       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 June 30, 1999 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)

                                 (336) 664-2400
              (Registrant's telephone number, including area code)

                                       N/A

(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 July 31, 1999.

       Common Stock, Par Value $.50 Per Share . . . . . . . . . 47,126,140


                                       1
<PAGE>


   PART I.          FINANCIAL INFORMATION

   Item 1.          Financial Statements


                          QUARTERLY REPORT ON FORM 10-Q

                   CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


                       For the Quarter Ended June 30, 1999


                   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
                                                                                         June 30,
                                                                                   1999              1998
                                                                                   ----              ----
<S>                                                                              <C>              <C>
 Revenues
      Net sales                                                                  $ 404,346         $ 440,129
      Financial services revenues
         Consumer finance                                                           17,746            23,772
         Special charges                                                                 -           (35,000)
         Insurance                                                                  13,676             8,550
                                                                             --------------     -------------
                                                                                    31,422            (2,678)
      Other income                                                                   5,505             3,060
                                                                             --------------     -------------
            Total revenues                                                         441,273           440,511
                                                                             --------------     -------------

 Costs and expenses
      Cost of sales                                                                287,806           305,470
      Selling, general and administrative expenses                                 110,601           105,839
      Financial services operating expenses
         Consumer finance                                                            8,829             6,153
         Insurance                                                                   8,495             7,009
                                                                             --------------     -------------
                                                                                    17,324            13,162
      Provision for losses on credit sales                                             400               390
      Interest expense
         Non-financial services                                                      2,859             2,336
         Financial services                                                          9,407             5,164
                                                                             --------------     -------------
            Total costs and expenses                                               428,397           432,361
                                                                             --------------     -------------

 Income before income taxes                                                         12,876             8,150
 Provision for income taxes                                                          5,022             3,191
                                                                             --------------     -------------

 Net income                                                                        $ 7,854           $ 4,959
                                                                             ==============     =============

 Earnings per share
         Basic                                                                       $ .17             $ .11
         Diluted                                                                     $ .17             $ .10

 Dividends per share                                                                 $ .01             $ .01

 Weighted average number of
      common shares outstanding
         Basic                                                                      46,473            46,311
         Diluted                                                                    47,168            47,525
</TABLE>

See accompanying notes to the consolidated financial statements.



                                       3
<PAGE>
                   OAKWOOD HOMES CORPORATION AND SUBSIDIARIES

                  CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
                      (in thousands except per share data)
<TABLE>
<CAPTION>

                                                                             Nine months ended
                                                                                  June 30,
                                                                            1999             1998
                                                                            ----             ----
 Revenues
<S>                                                                     <C>                <C>
      Net sales                                                         $ 1,131,255        $ 912,374
      Financial services revenues
         Consumer finance                                                    48,156           68,157
         Special charges                                                          -          (51,300)
         Insurance                                                           37,229           23,514
                                                                       -------------     ------------
                                                                             85,385           40,371
      Other income                                                           10,365            7,322
                                                                       -------------     ------------
            Total revenues                                                1,227,005          960,067
                                                                       -------------     ------------

 Costs and expenses
      Cost of sales                                                         802,991          627,557
      Selling, general and administrative expenses                          294,954          229,264
      Financial services operating expenses
         Consumer finance                                                    25,514           17,536
         Insurance                                                           24,085           19,080
                                                                       -------------     ------------
                                                                             49,599           36,616
      Provision for losses on credit sales                                    2,361              390
      Interest expense
         Non-financial services                                               7,688            3,721
         Financial services                                                  21,893           13,321
                                                                       -------------     ------------
            Total costs and expenses                                      1,179,486          910,869
                                                                       -------------     ------------

 Income before income taxes                                                  47,519           49,198
 Provision for income taxes                                                  18,533           18,789
                                                                       -------------     ------------

 Net income                                                                $ 28,986         $ 30,409
                                                                       =============     ============

 Earnings per share
         Basic                                                                $ .62            $ .66
         Diluted                                                              $ .62            $ .64

 Dividends per share                                                          $ .03            $ .03

 Weighted average number of
      common shares outstanding
         Basic                                                               46,439           46,192
         Diluted                                                             47,093           47,553
</TABLE>

See accompanying notes to the consolidated financial statements.


                                       4
<PAGE>
                                  OAKWOOD HOMES CORPORATION AND SUBSIDIARIES

                                    CONSOLIDATED BALANCE SHEET (UNAUDITED)
                                (in thousands except share and per share data)
<TABLE>
<CAPTION>

                                                                               June 30,       September 30,
 ASSETS                                                                          1999              1998
                                                                                 ----              ----

<S>                                                                             <C>                <C>
 Cash and cash equivalents                                                      $ 34,093           $ 28,971
 Loans and investments                                                           395,658            502,583
 Other receivables                                                                75,613             58,774
 Inventories
         Manufactured homes                                                      401,384            242,867
         Work-in-process, materials and supplies                                  49,560             42,068
         Land/homes under development                                             13,645              6,417
                                                                           --------------     --------------
                                                                                 464,589            291,352
 Properties and facilities                                                       251,443            237,726
 Deferred income taxes                                                            17,155             14,850
 Other assets                                                                    154,268            149,120
                                                                           --------------     --------------
                                                                             $ 1,392,819        $ 1,283,376
                                                                           ==============     ==============
 LIABILITIES AND SHAREHOLDERS' EQUITY

 Short-term borrowings                                                         $ 128,601          $ 375,023
 Notes and bonds payable                                                         355,799             61,875
 Accounts payable and accrued liabilities                                        233,806            226,867
 Insurance reserves and unearned premiums                                         72,818             57,419
 Other long-term obligations                                                      21,567             14,517

 Shareholders' equity
         Common stock, $.50 par value; 100,000,000
            shares authorized; 47,126,000 and 46,660,000
            shares issued and outstanding                                         23,563             23,330
         Additional paid-in capital                                              172,702            167,592
         Retained earnings                                                       387,603            360,025
                                                                           --------------     --------------
                                                                                 583,868            550,947
         Less:  Unearned compensation                                             (3,640)            (3,272)
                                                                           --------------     --------------
                                                                                 580,228            547,675
                                                                           --------------     --------------
                                                                             $ 1,392,819        $ 1,283,376
                                                                           ==============     ==============

</TABLE>
See accompanying notes to the consolidated financial statements.

                                       5
<PAGE>
<TABLE>
<CAPTION>

                                                     OAKWOOD HOMES CORPORATION AND SUBSIDIARIES

                                                  CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
                                                                   (in thousands)
                                                                                           Nine months ended
                                                                                               June 30,
                                                                                         1999            1998
 Operating activities
<S>                                                                                     <C>             <C>
      Net income                                                                        $ 28,986        $ 30,409
      Adjustments to reconcile net income to cash provided (used)
         by operating activities
         Depreciation and amortization                                                    33,474          17,274
         Deferred income taxes                                                            (2,305)         (2,263)
         Provision for losses on credit sales                                              2,361             390
         (Gain) loss on sale of loans                                                      3,153         (18,630)
         Special charges                                                                       -          51,300
         Excess of cash receipts over REMIC residual income
            recognized                                                                    19,992          13,121
         Other                                                                             8,100           4,343
         Changes in assets and liabilities, net of effect of
            business acquisition
            Other receivables                                                            (31,091)             38
            Inventories                                                                 (173,237)        (84,034)
            Deferred insurance policy acquisition costs                                   (2,763)         (2,304)
            Other assets                                                                 (18,346)         (1,171)
            Accounts payable and accrued liabilities                                       6,550           5,800
            Insurance reserves and unearned premiums                                      15,399          15,316
            Other long-term obligations                                                       24           2,989
                                                                                    -------------     -----------
                Cash provided (used) by operations                                      (109,703)         32,578
            Loans originated                                                          (1,036,455)       (793,651)
            Purchase of loans and securities                                            (108,297)              -
            Sale of loans                                                              1,205,435         765,726
            Principal receipts on loans                                                   27,577          34,913
                                                                                    -------------     -----------
                Cash provided (used) by operating activities                             (21,443)         39,566
                                                                                    -------------     -----------

 Investing activities
         Business acquisition                                                                  -        (101,829)
         Acquisition of properties and facilities                                        (34,491)        (39,436)
         Investment in and advances to joint venture                                      22,150         (11,409)
         Purchase of securities                                                                -          (5,045)
         Other                                                                            (7,885)         (3,131)
                                                                                    -------------     -----------
               Cash (used) by investing activities                                       (20,226)       (160,850)
                                                                                    -------------     -----------

</TABLE>


                                       6
<PAGE>
<TABLE>
<CAPTION>

 Financing activities
<S>                                                                                   <C>                <C>
         Net borrowings (repayments) on short-term credit facilities                  (246,422)          29,861
         Proceeds from borrowings related to business acquisition                            -          100,000
         Issuance of notes and bonds payable                                           307,878            4,472
         Payments on notes and bonds                                                   (13,635)         (17,105)
         Cash dividends                                                                 (1,408)          (1,393)
         Proceeds from exercise of stock options                                           378            2,226
                                                                                     ----------      -----------
                Cash provided by financing activities                                   46,791          118,061
                                                                                     ----------      -----------

 Net increase (decrease) in cash and cash equivalents                                    5,122           (3,223)

 Cash and cash equivalents
         Beginning of period                                                            28,971           28,717
                                                                                     ==========      ===========
         End of period                                                                $ 34,093         $ 25,494
                                                                                     ==========      ===========
</TABLE>





See accompanying notes to the consolidated financial statements.


                                       7
<PAGE>



                   OAKWOOD HOMES CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                                   (Unaudited)


1.  The consolidated financial statements reflect all adjustments, which are,
    in the opinion of management, necessary to present fairly the results of
    operations for the periods presented. Except for special charges in the
    amount of $35.0 million recorded for the three months ended June 30, 1998
    and $51.3 million for the nine months ended June 30, 1998, relating to the
    carrying value of retained interests in certain REMIC securitizations and
    the Company's exit from Deutsche Financial Capital, the Company's former
    consumer finance joint venture, such adjustments include only normal
    recurring adjustments. Results of operations for any interim period are not
    necessarily indicative of results to be expected for a full year.


2.  On April 1, 1998 the Company acquired Schult Homes Corporation ("Schult"),
    a producer of manufactured and modular housing headquartered in Middlebury,
    Indiana. The acquisition was accounted for using the purchase method of
    accounting. Schult's results of operations are included with those of the
    Company from the April 1, 1998 acquisition date.

3.  Certain of the Company's significant accounting policies are outlined below.

    REVENUE RECOGNITION - MANUFACTURED HOUSING

    Passage of title and risk of loss in a retail sale occurs upon the closing
    of the sale, which includes, for the great majority of retail sales,
    execution of loan documents and related paperwork and receipt of the
    customer's down payment.

    For those sales in which the home remains personal property, rather than
    being converted to real property (i.e., sales under retail installment
    contracts), the closing generally takes place before the home is delivered
    to and installed on the customer's site. For such sales, delivery and
    installation typically are straightforward and involve minimal preparation
    of the customer's site, and typically occur shortly after closing.

    Sales transactions in which the home is converted from personal property to
    real property are financed as traditional mortgages rather than under
    retail installment contracts. Such sales typically involve significant
    preparation of the customer's site, which may include installation of
    utilities, wells, extensive foundations, etc., and also require completion
    of mortgage financing documentation, including title searches and
    appraisals. As a consequence, the closing of these transactions occurs
    after the home has been delivered and installed.

    WARRANTY OBLIGATIONS

    The Company provides a warranty against manufacturing defects from the date
    of the retail sale. Estimated future warranty obligations are accrued at
    the time of sale.


                                       8
<PAGE>


4. The components of loans and investments are as follows:
<TABLE>
<CAPTION>

                                                               June 30,         September 30,
                                                                 1999                1998
 (in thousands)

<S>                                                             <C>               <C>
 Loans held for sale                                            $ 253,231         $ 365,126
 Loans held for investment                                         53,661            62,669
 Less:  reserve for uncollectible receivables                      (4,132)           (1,653)
                                                              ------------     -------------
                Total loans                                       302,760           426,142
                                                              ------------     -------------

 Retained interests in REMIC securitizations
      (exclusive of loan servicing assets
       included in other assets)
         Regular interests, at amortized cost which
            approximates fair value                                48,282            22,822
         Residual interests, at amortized cost which
           approximates fair value                                 44,616            53,619
                                                              ------------     -------------
                Total retained REMIC interests                     92,898            76,441
                                                              ------------     -------------
                                                                $ 395,658         $ 502,583
                                                              ============     =============
</TABLE>


5. The following table sets forth the computation of basic and diluted earnings
per share ("EPS"):

<TABLE>
<CAPTION>

                                                           Three months ended              Nine months ended
                                                                June 30,                       June 30,
                                                                ---------                      --------
                                                       1999             1998            1999             1998
                                                       ----             ----            ----             ----
 (in thousands, except per share data)
<S>                                                   <C>               <C>              <C>             <C>
 Numerator for basic and diluted

      EPS - Net income                                $ 7,854           $ 4,959          $ 28,986        $ 30,409

 Denominator:
      Weighted average number of
         common shares outstanding                     46,509            46,387            46,485          46,278
      Unearned shares                                     (36)              (76)              (46)            (86)
                                                  ------------      ------------       -----------      ----------
      Denominator for basic EPS                        46,473            46,311            46,439          46,192
      Dilutive effect of stock options and
         restricted shares computed using
         the treasury stock method                        695             1,214               654           1,361
                                                  ------------      ------------       -----------      ----------
      Denominator for diluted EPS                      47,168            47,525            47,093          47,553
                                                  ============      ============       ===========      ==========

      Earnings per common share - basic                 $ .17             $ .11             $ .62           $ .66
                                                  ============      ============       ===========      ==========
      Earnings per common share - diluted               $ .17             $ .10             $ .62           $ .64
                                                  ============      ============       ===========      ==========
</TABLE>

                                       9
<PAGE>



     Options to purchase 2,839,486, 1,642,826 and 2,812,412 shares of common
     stock were not included in the computation of diluted EPS for the first,
     second and third quarters of fiscal 1999, respectively, because the
     options' exercise prices were greater than the average market price of the
     Company's common stock for that period and their inclusion would have been
     antidilutive.

6.   In November 1998 the Company and certain of its present and former officers
     and directors were named as defendants in lawsuits filed on behalf of
     purchasers of the Company's common stock for various periods between April
     11, 1997 and July 21, 1998 (the "Class Period"). In June 1999, a
     consolidated amended complaint was filed. The amended complaint, which
     seeks class action certification, alleges violations of federal securities
     law based on alleged fraudulent acts, false and misleading financial
     statements, reports filed by the Company and other representations during
     the Class Period. The Company intends to defend such lawsuit vigorously.

     The Company is also subject to legal proceedings and claims which have
     arisen in the ordinary course of its business and have not been finally
     adjudicated. Management believes that these actions, when ultimately
     concluded and determined, should not have a material effect on the results
     of operations or financial condition of the Company.

     The Company is contingently liable as guarantor on installment sale
     contracts sold to third parties on a full or limited recourse basis. The
     amount of this contingent liability was approximately $26 million at June
     30, 1999. The Company is also contingently liable as guarantor on
     subordinated securities issued by REMIC trusts in the aggregate principal
     amount of $123 million at June 30, 1999. The Company is also contingently
     liable under terms of repurchase agreements with financial institutions
     providing inventory financing for retailers of homes produced by Destiny
     Industries, Inc. ("Destiny"), Golden West Homes ("Golden West") and Schult,
     manufacturing subsidiaries of the Company doing business with independent
     dealers. The Company estimates that its potential obligation under
     repurchase agreements approximated $204 million at June 30, 1999.

7.   Subsequent to June 30, 1999 the Company announced plans to reduce
     production schedules and operating costs. Certain manufacturing facilities
     have been closed, production levels at other plants have been lowered and
     other staff costs reduced. The Company has also reduced employee staff
     levels in areas outside manufacturing. These cost reductions are ongoing.
     The Company currently is analyzing the effect of these actions and will
     record a related charge to earnings in the fourth quarter of fiscal 1999.
     The amount of the charge cannot be reasonably estimated at this time.



                                       10
<PAGE>




Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

<TABLE>
<CAPTION>

                              RESULTS OF OPERATIONS



Three months ended June 30, 1999 compared to three months ended June 30, 1998

         The following table summarizes certain statistics for the quarters ended June 30, 1999 and 1998 :

                                                                                      1999              1998

<S>                                                                                  <C>              <C>
Retail sales (in millions)                                                           $  289.4         $  327.1
Wholesale sales (in millions)                                                        $  114.9         $  113.0
Total sales (in millions)                                                            $  404.3         $  440.1
Gross profit %                                                                           28.8%            30.6%
New single-section homes sold - retail                                                  2,526            3,444
New multi-section homes sold - retail                                                   3,658            3,932
Used homes sold - retail                                                                  486              516
New single-section homes sold - wholesale                                                 858              778
New multi-section homes sold - wholesale                                                2,549            2,545
Average new single-section sales price - retail                                       $32,600          $31,900
Average new multi-section sales price - retail                                        $56,000          $54,000
Average new single-section sales price - wholesale                                    $21,700          $21,200
Average new multi-section sales price - wholesale                                     $37,300          $37,600
Weighted average retail sales centers
  open during the period                                                                  392              332
</TABLE>



NET SALES


The Company's sales volume was adversely affected by competitive industry
conditions. Retail sales dollar volume decreased 12%, reflecting a 16% decrease
in new unit volume partially offset by increases of 2% and 4% in the average new
unit sales prices of single-section and multi-section homes, respectively, and a
shift in product mix toward multi-section homes, which have higher average
selling prices than single-section homes. Average retail sales prices rose due
to price increases and a shift in product mix toward higher price points.
Multi-section homes accounted for 59% of retail new unit sales, compared to 53%
in the third quarter of fiscal 1998.

During the third quarter of fiscal 1999, the Company opened or acquired 15 new
sales centers, compared to 16 sales centers during the third quarter of fiscal
1998. The Company also closed two underperforming sales centers during the
quarter ended June 30, 1999, compared to one during the third quarter of fiscal
1998. Total new retail sales dollars at sales centers open more than one year
decreased 22% during the third quarter of fiscal 1999.

Wholesale sales dollar volume, which consists of sales to independent dealers,
was $115 million compared to $113 million in the third quarter of fiscal 1998.

                                       11
<PAGE>


GROSS PROFIT


Gross profit margin decreased to 28.8% in the third quarter of fiscal 1999 from
30.6% in fiscal 1998, as a result of wholesale sales, which have lower margins
than retail sales, representing a higher percentage of total sales during the
current quarter than fiscal 1998, as well as more aggressive pricing of the
Company's homes during the last month of the quarter. Approximately 97% of new
homes sold at retail were produced in Company-owned manufacturing plants in the
third quarter of fiscal 1999 and 1998.

FINANCIAL SERVICES REVENUES


The third quarter of fiscal 1998 includes special charges of $35 million
(approximately $21.7 million after tax, or $.46 per share), relating to
valuation adjustments of certain retained interests in REMIC securitizations and
the Company's exit from Deutsche Financial Capital ("DFC"), the Company's former
consumer finance joint venture. The Company recorded a valuation adjustment of
$3.1 million relating to the carrying value of residual interests in the third
quarter of fiscal 1999. Excluding the effects of these charges, consumer finance
revenues for the three months ended June 30, 1999 declined $2.9 million compared
to the three months ended June 30, 1998.

REMIC interests retained by the Company include servicing assets and REMIC
residual and regular interests. The Company estimates the fair value of retained
REMIC residual interests based, in part, upon default and prepayment assumptions
which management believes market participants would use for similar instruments.
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; the
actual rate of voluntary prepayments and credit losses typically varies over the
life of each transaction and from transaction to transaction. If over time the
Company's actual experience is more favorable than that assumed, the Company's
yield on its REMIC residual interests will be enhanced. Similarly, if over time
the Company's actual experience is less favorable than that assumed, such yield
will be reduced or, if the indicated yield falls below the risk free rate,
impairment of the residuals will occur which will cause an immediate charge to
earnings.

For the quarter ended June 30, 1999, total credit losses on loans originated by
the Company, including losses relating to assets securitized by the Company,
loans held for investment, loans held for sale and loans sold with full or
partial recourse, amounted to approximately 1.40% on an annualized basis of the
average principal balance of the related loans, compared to approximately 1.58%
one year ago. Because losses on repossessions are reflected in the loss ratio
principally in the period during which the repossessed property is disposed of,
fluctuations in the number of repossessed properties disposed of from period to
period may cause variations in the charge-off ratio. During the third quarter of
fiscal 1999 the Company sold 1,242 repossessed homes compared to 1,081 in the
third quarter of fiscal 1998. The Company's inventory of repossessed homes
increased from 964 units at March 31, 1999 to 1,474 at June 30, 1999.

At June 30, 1999 the delinquency rate on Company originated loans, excluding
loans originated on behalf of DFC, the Company's former consumer finance joint
venture, was 3.6%, compared to 3.9% at September 30, 1998 and 4.1% at June 30,
1998.

                                       12
<PAGE>

Financial services revenues include a loss on the sale of asset-backed
securities of $1.6 million (approximately $1.0 million after tax, or $.02 per
share) in the 1999 quarter, compared to a gain in the 1998 quarter of $7.7
million (approximately $4.7 million after tax, or $.10 per share). The
substantial decline in securitization gains reflects principally a significant
decline in the spread between the yield on loans originated by the Company and
the cost of funds obtained when the loans were securitized. The decline in
spread reflects lower loan yields resulting from both a shift in product mix
toward multi-section loans which generally carry lower coupons than
single-section loans and from generally lower interest rates prevailing in the
marketplace when the loans were originated. The decline in spread also reflects
higher securitization funding costs resulting from an increase in the spread
over treasurys required by institutional purchasers of the Company's
asset-backed securities, and a rise in treasury yields during the June 1999
quarter. Rising treasury yields and widening spreads over treasurys have
continued subsequent to June 30 and are expected to adversely affect the
Company's financial services revenues in the fourth quarter.

REMIC residual income decreased from $2.2 million in the quarter ended June 30,
1998 to $1.8 million in third quarter of fiscal 1999, primarily reflecting a
decline in the average balance of residual interests.

Interest income earned on loans held for investment and on loans held for sale
prior to securitization increased from $8.0 million during the third quarter of
fiscal 1998 to $12.8 million in fiscal 1999. The increase reflects higher
average outstanding balances of loans held for sale prior to securitization due
to increased origination volume as well as the timing of securitizations, offset
slightly by lower average interest rates on the loans. The increase also
reflects incremental interest income on retained regular REMIC interests from
the Company's August and November 1998 securitizations. During April 1999 the
Company sold its interest from the November 1998 securitization. This increase
was partially offset by lower interest income on loans held for investment, the
principal balance of which is declining as these loans are liquidated.

Loan servicing fees increased from $6.7 million during the third quarter of
fiscal 1998 to $7.3 million this year. Servicing fees did not increase
commensurately with the growth of the Company's securitized loan portfolio
because certain securitizations did not generate sufficient cash flows to enable
the Company to receive its full servicing fee. The Company has not recorded
revenues or receivables for these shortfalls, because the Company's right to
receive servicing fees generally is subordinate to the holders of regular REMIC
interests, and projected future shortfalls are reflected in amortization of
servicing assets.

Insurance revenues from the Company's captive reinsurance business increased 60%
to $13.7 million for the three months ended June 30, 1999 from $8.6 million for
the three months ended June 30, 1998. This increase is primarily due to the
increased size of the Company's portfolio.

OTHER INCOME

Other income for the third quarter of fiscal 1999 increased to $5.5 million from
$3.1 million in fiscal 1998. During the third quarter of fiscal 1999 the Company
settled an insurance claim relating to homes at a manufacturing facility which
were damaged by a hail storm. The net gain of $1.1 million resulting from this
settlement is included in other income. During the third quarter of fiscal 1999
the Company also sold two airplanes at a gain of $1.4 million.


                                       13
<PAGE>


SELLING, GENERAL AND ADMINISTRATIVE EXPENSES


Selling, general and administrative expenses increased to 27.4% of net sales for
the three months ended June 30, 1999 from 24.0% of net sales last year primarily
as a result of a lower sales base over which to spread the Company's fixed
distribution costs.

FINANCIAL SERVICES OPERATING EXPENSES


Consumer finance operating expenses rose $2.7 million during the third quarter
of fiscal 1999 due principally to increased headcount and other compensation
cost increases as well as other expenses associated with the growth in the
servicing portfolio. In the third quarter, the average number of loans serviced
increased 14% over the same period last year. Insurance operating costs
increased 21% during the third quarter of fiscal 1999 principally due to higher
claims costs associated with the increased size of the business. Because
reinsurance claims costs are recorded as insured events occur, reinsurance
underwriting risk may increase the volatility of the Company's earnings,
particularly with respect to property and casualty reinsurance. The Company has
purchased catastrophe reinsurance to reduce its underwriting exposure to natural
disasters.

INTEREST EXPENSE


Non-financial services interest expense rose from $2.3 million for the third
quarter of fiscal 1998 to $2.9 million in 1999, due principally to higher
interest expense associated with the $100 million of debt incurred in connection
with the Schult acquisition, which was refinanced in March 1999 using a portion
of the proceeds of the Company's $300 million senior note offering.

Financial services interest expense includes interest expense associated with
long-term debt secured by loans, interest expense associated with all short-term
line of credit borrowings, and interest expense on $200 million of the $300
million senior notes issued in March 1999. Financial services interest expense
increased 82% for the third quarter of fiscal 1999 which primarily reflects the
interests costs related to the $200 million of senior notes. Interest costs on
short-term line of credit borrowings also increased due to an increase in the
average balances outstanding offset by slightly lower interest rates. These
increases were partially offset by lower interest expense on declining and
retired long-term debt balances.

INCOME TAXES


The Company's effective income tax rate was 39.0% for the third quarter of
fiscal 1999 compared to 39.2% in fiscal 1998.

                                       14
<PAGE>





Nine months ended June 30, 1999 compared to nine months ended June 30, 1998

         The following table summarizes certain statistics for the nine months
ended June 30, 1999 and 1998 :
<TABLE>
<CAPTION>


                                                                                      1999              1998
                                                                                      ----              ----


<S>                                                                               <C>               <C>
Retail sales (in millions)                                                         $    798.7       $    762.6
Wholesale sales (in millions)                                                      $    332.6       $    149.8
Total sales (in millions)                                                          $  1,131.3       $    912.4
Gross profit % - integrated operations                                                   29.0%            31.2%
New single-section homes sold - retail                                                  7,421            8,964
New multi-section homes sold - retail                                                   9,717            8,890
Used homes sold - retail                                                                1,741            1,761
New single-section homes sold - wholesale                                               2,278              918
New multi-section homes sold - wholesale                                                7,403            3,514
Average new single-section sales price - retail                                       $32,500          $31,000
Average new multi-section sales price - retail                                        $55,900          $52,700
Average new single-section sales price - wholesale                                    $21,700          $20,500
Average new multi-section sales price - wholesale                                     $37,900          $36,700
Weighted average retail sales centers
  open during the period                                                                  376              320

</TABLE>

NET SALES


Retail sales dollar volume increased 5%, reflecting increases of 5% and 6% in
the average new unit sales prices of single-section and multi-section homes,
respectively, and a shift in product mix toward multi-section homes, which have
higher average selling prices than single-section homes, offset by a 4% decrease
in new unit volume. Average retail sales prices rose due to price increases and
a shift in product mix toward higher price points. Multi-section homes accounted
for 57% of retail new unit sales, compared to 50% in the nine months ended June
30, 1998. The Company believes the multi-section performance reflects the
addition of new homes to the Company's product line in response to continuing
consumer preference for multi-section homes.

During the first nine months of fiscal 1999, the Company opened or acquired 46
new sales centers, compared to 42 sales centers during the nine months ended
June 30, 1998. The Company also closed five underperforming sales centers during
the nine months ended June 30, 1999, compared to three during the nine months
ended June 30, 1998. Total new retail sales dollars at sales centers open more
than one year decreased 7.6% during the nine months ended June 30, 1999.

Wholesale sales dollar volume increased due to wholesale unit volume related to
the acquisition of Schult on April 1, 1998. Schult sold 7,690 units,
representing $267.7 million of sales, to independent dealers during the nine
months ended June 30, 1999 compared to 2,692 units, representing $92.7 million
of sales, during the third quarter of fiscal 1998. Excluding the effects of the
Schult acquisition, wholesale sales dollars increased 14% from the nine months
ended June 30, 1998, due to a 14% increase in units sold to independent dealers.
Schult's higher

                                       15
<PAGE>

average price points primarily caused the overall average
wholesale selling prices of single-section and multi-section homes to rise 6%
and 3%, respectively.

GROSS PROFIT


Gross profit margin decreased to 29.0% in the nine months ended June 30, 1999
from 31.2% in fiscal 1998, reflecting the increased significance of relatively
lower margin wholesale sales as a result of the acquisition of Schult. Excluding
the effect of the Schult acquisition, gross profit margin was 32.8% for the nine
months ended June 30, 1999 and 1998. Approximately 97% of new homes sold at
retail were produced in Company-owned manufacturing plants in the nine months
ended June 30, 1999 compared to 96% in the nine months ended June 30, 1998.


FINANCIAL SERVICES REVENUES


The nine months ended June 30, 1998 include special charges of $51.3 million
(approximately $31.8 million after tax, or $.67 per share), relating to
valuation adjustments of certain retained interests in REMIC securitizations and
the Company's exit from DFC, the Company's former consumer finance joint
venture. The Company recorded valuation adjustments of $6.6 million relating to
the carrying value of residual interests during the nine months ended June 30,
1999. Excluding the effects of these charges, consumer finance revenues for the
nine months ended June 30, 1999 declined $13.4 million.

For the nine months ended June 30, 1999, total credit losses on loans originated
by the Company, including losses relating to assets securitized by the Company,
loans held for investment, loans held for sale and loans sold with full or
partial recourse, amounted to approximately 1.80% on an annualized basis of the
average principal balance of the related loans, compared to approximately 1.50%
one year ago. Because losses on repossessions are reflected in the loss ratio
principally in the period during which the repossessed property is disposed of,
fluctuations in the number of repossessed properties disposed of from period to
period may cause variations in the charge-off ratio. For the nine months ended
June 30, 1999 the Company sold 4,853 repossessed homes compared to 3,401 for the
nine months ended June 30, 1998. The Company's inventory of repossessed homes
increased from 1,135 units at September 30, 1998 to 1,474 at June 30, 1999.

Financial services revenues for the nine months ended June 30, 1999 include
losses on the sale of asset-backed securities of $3.2 million (approximately
$1.9 million after tax, or $.04 per share), compared to gains in the prior year
of $18.6 million (approximately $11.5 million after tax, or $.24 per share). The
substantial decline in securitization gains reflects principally a significant
decline in the spread between the yield on loans originated by the Company and
the cost of funds obtained when the loans were securitized. The decline in
spread reflects lower loan yields resulting from both a shift in product mix
toward multi-section loans which generally carry lower coupons than
single-section loans and from generally lower interest rates prevailing in the
marketplace when the loans were originated. The decline in spread also reflects
higher securitization funding costs resulting from an increase in the spread
over treasurys required by institutional purchasers of the Company's
asset-backed securities, partially offset early in fiscal 1999 by lower treasury
yields.

                                       16
<PAGE>

REMIC residual income decreased from $8.5 million in the nine months ended June
30, 1998 to $5.6 million in first nine months of fiscal 1999, primarily
reflecting a decline in the average balance of residual interests.

Interest income earned on loans held for investment and on loans held for sale
prior to securitization increased from $22.2 million during the first nine
months of fiscal 1998 to $32.5 million in fiscal 1999. The increase reflects
higher average outstanding balances of loans held for sale prior to
securitization due to increased origination volume offset slightly by lower
average interest rates on the loans. The increase also reflects incremental
interest income on retained regular REMIC interests from the Company's August
and November 1998 securitizations. During April 1999 the Company sold its
interest from the November 1998 securitization. This increase was partially
offset by lower interest income on loans held for investment, the principal
balance of which is declining as these loans are liquidated.

Loan servicing fees, which are reported net of amortization of servicing assets,
decreased from $20.1 million during the nine months ended June 30, 1998 to $18.7
million this year. Servicing fees did not increase commensurately with the
growth of the Company's securitized loan portfolio because certain
securitizations did not generate sufficient cash flows to enable the Company to
receive its full servicing fee. The Company has not recorded revenues or
receivables for these shortfalls, because the Company's right to receive
servicing fees generally is subordinate to the holders of regular REMIC
interests, and projected future shortfalls are reflected in amortization of
servicing assets.

Insurance revenues from the Company's captive reinsurance business increased 58%
to $37.2 million for the nine months ended June 30, 1999 from $23.5 million for
the nine months ended June 30, 1998. This increase is primarily due to the
increased size of the portfolio, relating to an increase in premiums written
resulting from retail sales growth and improved penetration, renewal and
cancellation rates.

OTHER INCOME

Other income for the nine months ended June 30, 1999 increased to $10.4 million
from $7.3 million for the nine months ended June 30, 1998. This increase is
primarily due to a $1.1 million gain resulting from an insurance settlement
relating to homes at a manufacturing facility which were damaged by a hail
storm. The Company also sold two airplanes at a gain of $1.4 million during
fiscal 1999.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES


Selling, general and administrative expenses increased to 26.1% of net sales for
the nine months ended June 30, 1999 from 25.1% of net sales last year. Higher
retail selling expenses were offset by lower selling, general and administrative
expenses as a percentage of sales at Schult. Excluding the effects of the Schult
acquisition, selling, general and administrative expenses for the first nine
months of fiscal 1999 were 30.0% of net sales compared to 26.5% of net sales
last year, primarily reflecting higher retail selling expenses caused by
compensation plan changes implemented in the second quarter of fiscal 1998 and
an increase in commissions paid for sales of repossessed homes.


                                       17
<PAGE>



FINANCIAL SERVICES OPERATING EXPENSES


Consumer finance operating expenses rose 45% during the nine months ended June
30, 1999 due principally to increased headcount and other compensation cost
increases as well as other expenses associated with the growth in the servicing
portfolio and an increase in the number of applications processed. In the first
nine months of fiscal 1999, the average number of loans serviced increased 17%.
Insurance operating costs increased 26% during the nine months ended June 30,
1999 principally due to higher claims costs associated with the increased size
of the business.

PROVISION FOR LOSSES

The provision for losses increased $2.0 million largely related to the increase
in repossession activity during the first nine months of fiscal 1999 and the
high balance of loans carried on the Company's balance sheet prior to
securitization.

INTEREST EXPENSE


Non-financial services interest expense rose from $3.7 million for the nine
months ended June 30, 1998 to $7.7 million in 1999, due principally to interest
costs related to the financing of the Schult acquisition.

Financial services interest expense includes interest expense associated with
long-term debt secured by loans, interest expense associated with all short-term
line of credit borrowings, and interest expense on $200 million of the $300
million senior notes issued in March 1999. Financial services interest expense
increased 64% for the first nine months of fiscal 1999 due to the interests
costs related to the $200 million of senior notes. Interest costs on short-term
line of credit borrowings also increased due to an increase in the average
balances outstanding offset by slightly lower interest rates. These increases
were partially offset by lower interest expense on declining and retired
long-term debt balances.

INCOME TAXES


The Company's effective income tax rate was 39.0% for the nine months ended June
30, 1999 compared to 38.2% in fiscal 1998 due to higher state income taxes
arising from the Schult acquisition.


YEAR 2000 ISSUES


During 1997 the Company formed an ongoing project team to address the Year 2000
issue. The Year 2000 issue relates to the way computer hardware and software
process calendar dates. With the turn of the century at midnight, January 1,
2000, it is possible that some systems may

                                       18
<PAGE>

interpret a year stored as '00 as 1900 instead of 2000. Calculations involving
these dates would then be adversely affected.

The Company's Year 2000 conversion project has several phases, including
assessment of the hardware and software affected by the Year 2000 issue;
identification of critical suppliers and assessment of their state of readiness;
conversion of existing processes, hardware and software as required; testing of
modified, existing and new processes; implementation of Year 2000 compliant
systems; and development and implementation of contingency and business
continuation plans as considered necessary. The Company is also conducting
ongoing awareness campaigns with employees and key vendors.

Assessment of hardware and software has been conducted with internal resources
that researched all of the Company's internal systems and hardware platforms. As
a result of the assessment effort, a plan was developed to convert and test all
hardware and software deemed to be non-compliant. Based upon the status of
remediation undertaken to date, the Company believes that substantially all
significant internal system issues associated with Year 2000 compliance have
been resolved. The Company intends to continue testing throughout the year as
well as resolving any remaining system issues.

Separately all of the Company's significant external suppliers and business
partners were included in the project to determine their state of readiness for
the Year 2000 issue. General surveys were sent to all significant external
suppliers and business partners upon which the Company relies for services. The
intention of these surveys was to assess the organization's overall readiness.
Additionally, specific inquiry letters were sent to external suppliers and
business partners upon which the Company relies for a specific product.

Recently the Company has begun to focus attention to mission critical suppliers.
The Company believes that its most likely worst case scenario would result from
an external supplier's inability to provide raw materials for use in the
Company's manufacturing processes. In order to alleviate the worst case
scenario, the Company is exploring plans to stockpile raw materials inventory.
In addition, the Company is planning on stockpiling finished goods inventory and
evaluating a modified holiday vacation schedule around the first of the year.

The other mission critical suppliers upon which the Company is dependent supply
services including insurance and loan servicing. No contingency plans have been
developed at this point in time should these suppliers prove to be
non-compliant. However, the Company is working with these organizations in order
to obtain further assurances regarding their compliance.

The costs incurred by the Company for the assessment and conversion of systems
related to Year 2000 readiness, which have been charged to expense, have not
been material. Recently the Company has begun to incur additional costs for
independent review and testing of compliance. The Company has acquired computing
platforms specifically for allowing a qualified third party review of all
internal systems. While the costs associated with this effort are not expected
to be material, they do represent a commitment on the part of the executive
management team to ensure the Company's position related to the Year 2000 issue.
While the Company believes its efforts will provide reasonable assurance that
material disruptions will not occur, there can be no assurance that interruption
will not occur.

                                       19
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES


The increase in inventories since September 30, 1998 reflects primarily an
increase in finished goods inventory due to the softness in retail sales, the
increase in the number of retail sales centers and an increase in the percentage
of inventories represented by multi-section homes, which have higher average
unit costs than single-section homes. The Company's business has been adversely
impacted by competitive market conditions at retail and unexpected softness in
retail sales. The Company is in the process of responding to these conditions by
closing certain manufacturing plants, lowering production levels at other plants
and reducing staff costs at manufacturing and areas outside manufacturing. These
cost reductions are ongoing.

The decrease in loans and investments since September 30, 1998 principally
reflects a decrease in loans held for sale from $365 million at September 30,
1998 to $253 million at June 30, 1999. The Company originates loans and
warehouses them until sufficient receivables have been accumulated for a
securitization.

Retail financing of sales of the Company's products is an integral part of the
Company's vertical integration strategy. Such financing consumes substantial
amounts of capital, which the Company has obtained principally by securitizing
such loans, primarily using REMICs. Since 1994, the Company generally has sold
to investors securities having a principal balance approximately equal to the
principal balance of the loans securitized, and accordingly has not been
required to seek the permanent capital required to fund its finance business
outside of the asset-backed securities market.


Late in 1998, global economic conditions significantly reduced the liquidity in
the asset-backed securities market, and credit spreads over treasurys demanded
by purchasers of the Company's asset-backed securities rose significantly. In
addition, demand for the relatively more subordinated asset-backed securities
offered for sale by the Company has decreased significantly. While market
conditions improved somewhat in early to mid 1999, late in the June quarter
credit spreads again widened and treasury yields rose. Such trends have
continued in July and early August. Widening credit spreads and higher treasury
yields adversely affect the Company's permanent funding costs, and adversely
affect the Company's profitability if the Company is unable to increase rates
charged to customers to compensate for these higher costs. Moreover, decreased
demand for asset-backed securities could require the Company to seek alternative
sources of financing for the loans originated by the consumer finance business.

At June 30, 1999 the Company owned subordinated asset-backed securities having a
principal balance of approximately $50 million associated with the Company's
August 1998 and June 1999 securitizations. Such securities are regular REMIC
interests and are included at their carrying value of $39 million in the
related caption in the table appearing in Note 4. The Company would consider
opportunities to liquidate these securities based upon market conditions.


In recent years, the Company has financed internal growth of its retail and
manufacturing business principally using internally generated funds and
short-term lines of credit. On March 2, 1999, the Company closed a $300 million
debt offering comprised of $175 million of senior notes at 8.125% due on March
1, 2009 and $125 million of senior notes at 7.875% due on March 1,

                                       20
<PAGE>

2004. The proceeds of this offering were used to pay outstanding indebtedness,
including $100 million borrowed from a commercial bank to finance the Schult
acquisition.

The Company has several credit facilities in place to provide for its short-term
liquidity needs. The Company has a $325 million credit facility with a conduit
commercial paper issuer to provide warehouse financing for loans prior to
securitization. The Company also has a $175 million revolving credit facility
with a group of banks which is available to fund additional working capital
needs, a $20 million cash management line of credit and $10 million of
uncommitted lines of credit.


                                       21
<PAGE>


   PART II.         OTHER INFORMATION

Item 1.             Legal Proceedings


              In November 1998 the Company and certain of its present and former
officers and directors were named as defendants in lawsuits filed on behalf of
purchasers of the Company's common stock for various periods between April 11,
1997 and July 21, 1998 (the "Class Period"). In June 1999, a consolidated
amended complaint was filed. The amended complaint, which seeks class action
certification, alleges violations of federal securities law based on alleged
fraudulent acts, false and misleading financial statements, reports filed by the
Company and other representations during the Class Period. The Company intends
to defend such lawsuit vigorously.

              The Company is a defendant in a number of lawsuits that are
incidental to the conduct of its business.

   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)     CIC Employment Agreement Between the Company
                                    and Nicholas J. St. George


                           (27)     Financial Data Schedule


                   b)      Reports on Form 8-K

                           On April 9, 1999 the Company filed a report on Form
                           8-K in which the Company announced the issuance of a
                           press release concerning its anticipated results of
                           operations for the quarter ended March 31, 1999.


                           On June 18, 1999 the Company filed a report on Form
                           8-K in which the Company announced the issuance of a
                           press release concerning its anticipated results of
                           operations for the quarter ended June 30, 1999 and
                           the Board of Directors review of strategic
                           alternatives to enhance shareholder value.


                           Items 2, 3, 4 and 5 are inapplicable and are omitted.




                                       22
<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:  August 16, 1999



                                           OAKWOOD HOMES CORPORATION




                                           BY:  /s/ Robert A. Smith
                                                --------------------------
                                                Robert A. Smith
                                                Executive Vice President
                                                (Chief Financial Officer)
                                                (Duly Authorized Officer)


                                       23
<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
   June 30, 1999                                                   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   CIC Employment Agreement Between the Company and Nicholas J. St.
               George


          27   Financial Data Schedule


                                       24

                                                                       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/  Robert A. Smith
                                                       -------------------
                                                       Robert A. Smith
                                                       Executive Vice President



                                       25





                                                                      EXHIBIT 10



                            OAKWOOD HOMES CORPORATION

                            CIC Employment Agreement


         THIS CIC EMPLOYMENT AGREEMENT (the "Agreement") is made and entered
into as of the 22 day of April, 1999 by and between OAKWOOD HOMES COPRORATION
(the "Company") and NICHOLAS J. ST. GEORGE ("Executive").

                              Statement of Purpose

         The Company and Executive previously entered into an Employment
Agreement dated November 16, 1990, as amended (the "Prior Employment Agreement")
which would provide Executive with certain benefits in the event of his
termination of employment with the Company following a change in control of the
Company. The parties desire to modify the post-change in control benefits that
may become payable to Executive by replacing the Prior Employment Agreement with
this Agreement. This Agreement has been approved by the Compensation Committee
of the Company's Board of Directors.

         NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Company and Executive hereby agree as follows:

         1. Term. This Agreement shall commence as of the date hereof and shall
continue in effect until the close of business on the fifth anniversary of the
date hereof. If a "Change in Control" of the Company (as defined below) has not
occurred by the close of business on the fifth anniversary of the date hereof,
then this Agreement shall terminate at such time. If, however, a Change in
Control occurs prior to the close of business on the fifth anniversary of the
date hereof, then the provisions of paragraph 2 below shall apply.

         2. Benefits Following a Change in Control. In the event that a Change
in Control occurs prior to the close of business on the fifth anniversary of the
date hereof, and if Executive terminates employment with the Company for any
reason, including Executive's death but excluding termination for "Cause" (as
defined below), within the three (3) year period commencing on the date of such
Change in Control, then the Company shall pay to Executive (or in the case of
Executive's death, Executive's surviving spouse, or if no surviving spouse,
Executive's estate) on or within five (5) days after the date of such
termination of employment cash equal to Amount A plus Amount B, such sum
multiplied by Amount C, where:

         Amount A equals the highest amount of annual base salary paid to
         Executive for each of the three completed fiscal years of the Company
         immediately preceding the date of the Change in Control, and

                                       26
<PAGE>

         Amount B equals the highest amount of annual bonus paid to Executive
         for each of the three completed fiscal years of the Company immediately
         preceding the date of the Change in Control, and

         Amount C equals the number of whole and fractional years for the period
         from the date of such termination of employment through the third
         anniversary of the date of the Change in Control.

In addition to the foregoing, (i) all of Executive's stock options granted by
the Company that are outstanding on the date of the Change in Control shall
become fully (100%) vested and exercisable as of the date of the Change in
Control and (ii) all of Executive's shares of restricted stock of the Company
that are unvested as of the date of the Change in Control shall become fully
(100%) vested as of the date of the Change in Control.

         3. Service Following Change in Control. At the request of the Company,
or its successor in interest as a result of a Change in Control, Executive shall
continue to serve the Company or such successor following the Change in Control
for a period to be determined by the Company or such successor not to exceed six
(6) months in order to assist in the transition of the Company's business and
management as a result of the Change in Control.

         4. Termination of Prior Employment Agreement. Effective as of the date
hereof, the Prior Employment Agreement is terminated and of no further force and
effect.

         5. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:

         "CHANGE IN CONTROL" means and shall be deemed to have occurred if (i)
         any corporation, other person or "group" becomes the "beneficial owner"
         of more than 25% of the Company's outstanding common stock or (ii) the
         Company's outstanding common stock (x) is held of record by less than
         300 persons or (y) is neither listed on a national securities exchange
         nor authorized to be quoted on an inter-dealer quotation system of a
         registered national securities association. "Group" shall mean for this
         purpose persons who act in concert as described in Section 14(d)(2) of
         the Securities Exchange Act of 1934, as amended (the "Act"), and
         "beneficial owner" shall have the meaning for this purpose which is
         given in Rule 13d-3 under the Act.

         "CAUSE" means Executive's termination of employment with the Company as
         the result of (i) an act or acts of dishonesty on the part of Executive
         constituting a felony and resulting or intended to result in
         substantial gain or personal enrichment at the expense of the Company,
         or (ii) a willful and substantial breach by Executive of Executive's
         duties to the Company after written notice to Executive of such breach
         and failure to correct within thirty (30) days, which such breach has
         caused substantial injury to the Company. In no event shall Executive's
         termination of employment with the Company be considered to have been
         for Cause if such termination took place as a result of (i) Executive's
         bad judgment or negligence or (ii) any act or omission without intent
         of gaining a profit to which Executive was not

                                       27
<PAGE>

         legally entitled or (iii) any act or omission believed by Executive in
         good faith to have been in, or not opposed to, the interests of the
         Company.

         6.       Certain Additional Payments by the Company

         (a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any payment
or distribution by the Company to or for the benefit of Executive (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this paragraph 6) (a "Payment") would be subject to the excise
tax imposed by Section 4999 of the Internal Revenue Code (the "Code") or any
interest or penalties are incurred by Executive with respect to such excise tax
(such excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then Executive shall be entitled
to receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
Notwithstanding the foregoing provisions of this paragraph 6(a), if it shall be
determined that the Executive is entitled to a Gross-Up Payment, but that the
Payments do not exceed 110% of the greatest amount (the "Reduced Amount") that
could be paid to the Executive such that the receipt of Payments would not give
rise to any Excise Tax, then no Gross-Up Payment shall be made to the Executive
and the Payments, in the aggregate, shall be reduced to the Reduced Amount.

         (b) Subject to the provisions of paragraph 6(c), all determinations
required to be made under this paragraph 6, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made by
such certified public accounting firm reasonably acceptable to the Company as
may be designated by Executive (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and Executive within
fifteen (15) business days of the receipt of notice from Executive that there
has been a Payment, or such earlier time as is requested by the Company. All
fees and expenses of the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this paragraph 6, shall be paid
by the Company to the Executive within five (5) days of the later of (i) the due
date for the payment of any Excise Tax or (ii) the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be binding
upon the Company and Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to paragraph 6(c) and Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.

         (c) Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment.

                                       28
<PAGE>

Such notification shall be given as soon as practicable but no later than twenty
(20) business days after Executive is informed in writing of such claim and
shall apprise the Company of the nature of such claim and the date on which such
claim is requested to be paid. Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it gives such notice
to the Company (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company notifies Executive in
writing prior to the expiration of such period that it desires to contest such
claim, Executive shall:

                  (i) give the Company any information reasonably requested by
         the Company relating to such claim,

                  (ii) take such action in connection with contesting such claim
         as the Company shall reasonably request in writing from time to time,
         including, without limitation, accepting legal representation with
         respect to such claim by an attorney reasonably selected by the
         Company,

                  (iii) cooperate with the Company in good faith in order
         effectively to contest such claim, and

                  (iv) permit the Company to participate in any proceedings
         relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this paragraph 6(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and Executive agrees to prosecute such contest
to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs Executive to pay such
claim and sue for a refund, the Company shall advance the amount of such payment
to Executive, on an interest-free basis, and shall indemnify and hold that
Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of Executive with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.

         (d) If, after the receipt by Executive of an amount advanced by the
Company pursuant to paragraph 6(c), Executive becomes entitled to receive any
refund with respect to such claim, Executive shall (subject to the Company's
complying with the requirements of paragraph 6(c)) promptly pay to the Company
the amount of such refund (together with any interest paid or

                                       29
<PAGE>

credited thereon after taxes applicable thereto). If, after the receipt by
Executive of an amount advanced by the Company pursuant to paragraph 6(c), a
determination is made that Executive shall not be entitled to any refund with
respect to such claim and the Company does not notify Executive in writing of
its intent to contest such denial of refund prior to the expiration of thirty
(30) days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.

         (e) Notwithstanding any provision of this paragraph 6 to the contrary,
failure by Executive to meet any time deadline set forth above in this paragraph
6 shall not cause Executive to lose any benefits under this paragraph 6 unless
the Company is materially adversely impacted by such failure.

         7.       Miscellaneous.

         (a) The Company shall pay all legal fees and expenses which Executive
may incur as a result of the Company's contesting the validity or enforceability
of this Agreement, or as a result of the Company's failure to make timely
payment of any sum due to Executive hereunder.

         (b) Executive shall not be required to mitigate the benefits or amounts
of any payment provided for under this Agreement by seeking other employment or
otherwise, nor shall the amount of any payment provided for hereunder be reduced
by any compensation earned by Executive as the result of employment by another
employer after the date of Executive's termination of employment with the
Company, or otherwise.

         (c) Payments of benefits under this Agreement shall be subject to any
applicable payroll and withholding taxes.

         (d) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, by agreement in form
and substance reasonably satisfactory to Executive, expressly to assume and
agree to perform this Agreement in the same manner and to the same extent that
the Company would be required to perform if no succession had taken place. As
used in this Agreement, "Company" shall mean the Company as defined above and
any successor to its business or assets which executes and delivers the
agreement provided for in this paragraph 4(d) or which otherwise becomes bound
by all of the terms and provisions of this Agreement by operation of law.

         (e) The right of Executive to any compensation under this Agreement may
not be assigned, pledged or transferred by Executive except to the extent
otherwise permitted pursuant to any applicable award agreement. To the extent
Executive acquires a right to receive compensation under this Agreement, such
right shall be no greater than the right of any unsecured general creditor of
the Company. Nothing contained herein shall be deemed to create a trust of any
kind or any fiduciary relationship between the Company and Executive.

         (f) Should any provision of this Agreement be declared invalid or
unenforceable as a matter of law, such invalidity or unenforceability shall not
affect or impair the validity or

                                       30
<PAGE>

enforceability of any other provision of this Agreement or the remainder of this
Agreement as a whole.

         (g) This Agreement constitutes the entire Agreement and sets forth all
the terms of the understanding between the parties hereto with respect to the
subject matter hereof, and any amendment, change or modification in any
provision of this Agreement or any waiver of this Agreement shall be in writing
signed by the parties hereto.

         (h) The section headings inserted in this Agreement are for convenience
of reference only and shall not be deemed to have any legal effect whatsoever on
the interpretation of this Agreement.

         (i) This Agreement shall be governed, enforced and construed according
to the laws of the State of North Carolina.

         (j) This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective heirs, personal
representatives, and permitted successors and assigns.

         (k) No provision of this Agreement shall be deemed to restrict the
absolute right of the Company, at any time, to sell or dispose of all or any
part of its assets, or reconstitute the same into any one or more subsidiary
corporations, or to merge, consolidate, sell or to otherwise dispose of said
subsidiary corporation or any of the assets thereof.

         (l) This Agreement is executed in duplicate originals, one of which is
being retained by each of the parties hereto, and each of which shall be deemed
an original hereof.

         IN WITNESS WHEREOF, the Company and Executive have executed this
Agreement as of the day and year first above written.

                            OAKWOOD HOMES COPRORATION

                            By:s/ Myles E. Standish
                                 Name:Myles E. Standish
                                 Title:Executive Vice President

                            "Company"


                            s/ Nicholas J. St. George                     [SEAL]
                            Nicholas J. St. George

                            "Executive"



                                       31

<TABLE> <S> <C>


<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED JUNE 30,
1999 FILED AS PART OF THE REGISTRANTS FORM 10-Q FOR THE QUARTER ENDED JUNE 30,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS

<S>                             <C>
<PERIOD-TYPE>                   9-MOS
<FISCAL-YEAR-END>                          SEP-30-1999
<PERIOD-START>                             OCT-01-1998
<PERIOD-END>                               JUN-30-1999
<EXCHANGE-RATE>                                      1
<CASH>                                          34,093
<SECURITIES>                                         0
<RECEIVABLES>                                  475,403
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                                0
                                          0
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<OTHER-SE>                                     556,665
<TOTAL-LIABILITY-AND-EQUITY>                 1,392,819
<SALES>                                      1,131,255
<TOTAL-REVENUES>                             1,227,005
<CGS>                                          802,991
<TOTAL-COSTS>                                1,147,544
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                 2,361
<INTEREST-EXPENSE>                              29,581
<INCOME-PRETAX>                                 47,519
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<NET-INCOME>                                    28,986
<EPS-BASIC>                                      .62
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