<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1995
-------------
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to _____________
Commission file number 0-11652
---------
GREEN TREE FINANCIAL CORPORATION
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 41-1807858
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1100 LANDMARK TOWERS, SAINT PAUL, MINNESOTA 55102-1639
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (612) 293-3400
--------------
--------------------------------------------------------------------------------
(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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
------- -------
AS OF JULY 31, 1995, 68,461,633 SHARES OF COMMON STOCK OF GREEN TREE FINANCIAL
CORPORATION WERE OUTSTANDING.
<PAGE>
GREEN TREE FINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1995
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of
Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
EXHIBIT INDEX 17
Exhibit 10(g). Amendment to the Master Repurchase
Agreement between Green Tree Financial
Corp.-Three and Merrill Lynch Mortgage
Capital Inc. dated August 8, 1995. 18
Exhibit 10(i). Amendment to the Master Repurchase
Agreement between Green Tree Financial
Corp.-Five and Lehman Commercial Paper,
Inc. dated June 30, 1995. 19
Exhibit 11(a). Computation of Primary Earnings Per
Share 21
Exhibit 11(b). Computation of Fully Diluted Earnings
Per Share 22
Exhibit 12. Computation of Ratio of Earnings to
Fixed Charges 23
Exhibit 27. Financial Data Schedule 24
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GREEN TREE FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,1995 December 31,1994
-------------- -----------------
(unaudited)
<S> <C> <C>
Assets:
Cash and cash equivalents $ 262,147,000 $ 455,956,000
Cash deposits, restricted 148,166,000 146,057,000
Other investments 21,063,000 20,920,000
Receivables:
Excess servicing rights 792,052,000 533,182,000
Floorplan (net of allowance
of $3,129,000 and
$1,216,000) 418,335,000 166,507,000
Other accounts receivable 44,415,000 34,841,000
Contracts, GNMA certificates
and collateral 865,804,000 372,776,000
Property, furniture and
fixtures 39,288,000 36,555,000
Other assets 4,706,000 5,045,000
-------------- --------------
Total assets $2,595,976,000 $1,771,839,000
============== ==============
Liabilities and Stockholders' Equity:
Notes payable $ 475,521,000 --
Senior notes 26,650,000 $ 26,650,000
Senior subordinated notes
due 2002 263,017,000 262,814,000
Senior subordinated
debentures -- 19,855,000
Allowance for losses on
contracts sold with
recourse 162,953,000 84,016,000
Accounts payable and
accrued liabilities 278,408,000 183,749,000
Investor payable 201,180,000 169,269,000
Income taxes, principally
deferred 343,255,000 299,595,000
-------------- --------------
Total liabilities 1,750,984,000 1,045,948,000
Common stock, $.01 par;
authorized 150,000,000
shares,issued and
outstanding 68,449,633
and 67,647,192 shares 684,000 676,000
Additional paid-in capital 316,872,000 297,408,000
Retained earnings 527,436,000 427,807,000
-------------- --------------
Total stockholders'
equity 844,992,000 725,891,000
-------------- --------------
$2,595,976,000 $1,771,839,000
============== ==============
</TABLE>
See notes to unaudited financial statements.
3
<PAGE>
GREEN TREE FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30
---------------------------
1995 1994
------------ ------------
<S> <C> <C>
Income:
Net gains on contract sales $131,143,000 $105,192,000
Provision for losses on
contract sales (43,500,000) (33,810,000)
Interest 44,808,000 24,888,000
Service 12,318,000 9,307,000
Commissions and other 8,505,000 6,712,000
------------ ------------
153,274,000 112,289,000
Expenses:
Interest 14,857,000 9,249,000
Cost of servicing 9,360,000 6,771,000
General and administrative 29,522,000 22,558,000
------------ ------------
53,739,000 38,578,000
------------ ------------
Earnings before income taxes 99,535,000 73,711,000
Income taxes 37,823,000 29,485,000
------------ ------------
Net earnings $ 61,712,000 $ 44,226,000
============ ============
Earnings per common and common
equivalent share $.88 $.64
============ ============
Weighted average common and
common equivalent shares
outstanding 70,022,180 69,359,471
</TABLE>
See notes to unaudited financial statements.
4
<PAGE>
GREEN TREE FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30
---------------------------
1995 1994
------------ ------------
<S> <C> <C>
Income:
Net gains on contract sales $238,821,000 $188,761,000
Provision for losses on
contract sales (75,929,000) (58,107,000)
Interest 77,497,000 54,664,000
Service 24,113,000 18,606,000
Commissions and other 16,971,000 13,163,000
------------ ------------
281,473,000 217,087,000
Expenses:
Interest 25,295,000 22,543,000
Cost of servicing 18,067,000 13,485,000
General and administrative 56,755,000 43,195,000
------------ ------------
100,117,000 79,223,000
------------ ------------
Earnings before income taxes 181,356,000 137,864,000
Income taxes 68,915,000 55,146,000
------------ ------------
Net earnings $112,441,000 $ 82,718,000
============ ============
Earnings per common and common
equivalent share $1.61 $1.19
============ ============
Weighted average common and
common equivalent shares
outstanding 69,893,709 69,247,405
</TABLE>
See notes to unaudited financial statements.
5
<PAGE>
GREEN TREE FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30
---------------------------------
1995 1994
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Servicing fees and net interest
payments collected $ 86,892,000 $ 40,220,000
Net proceeds from sale of net interest
margin certificates -- 493,600,000
Net principal payments collected 25,464,000 7,785,000
Interest on contracts and
GNMA certificates 26,297,000 33,637,000
Interest on cash, floorplan and
investments 23,357,000 5,228,000
Commissions 11,376,000 9,174,000
Other 2,016,000 524,000
--------------- ---------------
175,402,000 590,168,000
Cash paid to employees and suppliers (79,016,000) (61,142,000)
Interest paid on debt (24,474,000) (21,260,000)
Repossession losses net of recoveries (2,517,000) (967,000)
FHA insurance premiums (936,000) (1,033,000)
Income taxes paid (18,744,000) (19,247,000)
--------------- ---------------
(125,687,000) (103,649,000)
--------------- ---------------
NET CASH PROVIDED BY OPERATIONS 49,715,000 486,519,000
Purchase of contracts held for sale (2,234,787,000) (1,648,850,000)
Proceeds from sale of contracts
held for sale 1,759,311,000 1,745,831,000
Principal collections on contracts
held for sale 43,944,000 34,050,000
Floorplan loans disbursed (715,394,000) (66,671,000)
Principal collections on floorplan loans 470,680,000 53,614,000
Cash deposits provided (5,450,000) (29,483,000)
Cash deposits returned 3,340,000 9,143,000
--------------- ---------------
NET CASH (USED FOR) PROVIDED BY
OPERATING ACTIVITIES (628,641,000) 584,153,000
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, furniture
and fixtures (7,532,000) (9,949,000)
Net purchases of investment securities (144,000) (1,633,000)
--------------- ---------------
NET CASH USED FOR INVESTING ACTIVITIES (7,676,000) (11,582,000)
--------------- ---------------
</TABLE>
(continued)
6
<PAGE>
GREEN TREE FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30
---------------------------------
1995 1994
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on credit facilities 1,876,440,000 879,997,000
Repayments on credit facilities (1,400,919,000) (1,086,908,000)
Payment of debt (20,246,000) --
Net common stock issued 45,000 2,523,000
Dividends paid (12,812,000) (7,379,000)
--------------- ---------------
NET CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES 442,508,000 (211,767,000)
--------------- ---------------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (193,809,000) 360,804,000
CASH AND CASH EQUIVALENTS BEGINNING
OF PERIOD 455,956,000 170,674,000
--------------- ---------------
CASH AND CASH EQUIVALENTS END OF PERIOD $ 262,147,000 $ 531,478,000
=============== ===============
RECONCILIATION OF NET EARNINGS
TO NET CASH (USED FOR) PROVIDED BY
OPERATING ACTIVITIES:
Net earnings $ 112,441,000 $ 82,718,000
Provision for income taxes 68,915,000 55,146,000
Depreciation and amortization 6,251,000 4,249,000
Net proceeds from sale of net interest
margin certificates -- 493,600,000
Net contract payments collected, less
excess servicing rights recorded (122,653,000) (127,838,000)
Amortization of deferred service income (7,797,000) (2,790,000)
Net amortization of present value
discount (25,418,000) (15,460,000)
Net increase in cash deposits (2,110,000) (20,341,000)
Purchase of contracts held for sale, net
of sales and principal collections (431,533,000) 131,031,000
Floorplan loans disbursed, net of
principal collections (244,714,000) (13,057,000)
Net discount on sale of loans 15,475,000 17,682,000
Decrease in interest payable (148,000) (75,000)
Other 2,650,000 (20,712,000)
--------------- ---------------
NET CASH (USED FOR) PROVIDED BY
OPERATING ACTIVITIES $ (628,641,000) $ 584,153,000
=============== ===============
</TABLE>
See notes to unaudited financial statements.
7
<PAGE>
GREEN TREE FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED FINANCIAL STATEMENTS
A. Basis of Presentation
The interim financial statements have been prepared by Green Tree Financial
Corporation (the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission applicable to quarterly
reports on Form 10-Q. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, although management believes that the disclosures are
adequate to make the information presented not misleading. It is suggested
that these financial statements be read in conjunction with the consolidated
financial statements and related notes and schedules included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1994.
In the opinion of management, the information furnished reflects all
adjustments which are of a normal recurring nature and are necessary for a
fair presentation of the Company's financial position as of June 30, 1995, the
results of its operations for the three and six-month periods ended June 30,
1995 and 1994, and its cash flows for the six-month periods ended June 30,
1995 and 1994.
B. Excess Servicing Rights Receivable
Excess servicing rights receivable consists of:
<TABLE>
<CAPTION>
June 30,1995 December 31,1994
--------------- -----------------
(unaudited)
<S> <C> <C>
Gross cash flows receivable
on contracts sold $1,702,428,000 $ 842,222,000
Less:
Prepayment reserve (772,256,000) (324,496,000)
FHA insurance and other
fees (11,151,000) (12,367,000)
Deferred service income (116,339,000) (68,918,000)
Discount to present value (241,302,000) (120,795,000)
Subordinated interest in
NIM Certificates 230,672,000 217,536,000
-------------- -------------
$ 792,052,000 $ 533,182,000
============== =============
</TABLE>
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company originates conditional sales contracts or loans for manufactured
homes ("MH"), home improvements ("HI"), consumer products ("CP") and
equipment financing ("EF"), and provides floorplan financing to manufactured
housing dealers. The Company's insurance agencies also market physical damage
and term mortgage life insurance relating to the customers' contracts it
services. Green Tree also acts as servicer on manufactured housing contracts
originated by other lenders.
Results of Operations:
The following tables show the percentage change in income, expenses and
earnings for the three and six-month periods ended June 30, 1995 as compared
to the same periods of 1994.
<TABLE>
<CAPTION>
Three-month Six-month
period-to-period period-to-period
increase June 30, increase June 30,
1994 to 1995 1994 to 1995
------------------ ------------------
<S> <C> <C>
Income:
Net gains on contract
sales 24.7% 26.5%
Provision for losses on
contract sales 28.7 30.7
Interest 80.0 41.8
Service 32.4 29.6
Commissions and other 26.7 28.9
Expenses:
Interest 60.6 12.2
Cost of servicing 38.2 34.0
General and administrative 30.9 31.4
Earnings before income taxes 35.0 31.5
Net earnings 39.5 35.9
</TABLE>
Net gains on contract sales increased 24.7% and 26.5% for the three and six-
month periods ended June 30, 1995, respectively, over the same periods in 1994
as a result of higher interest rate spreads on contracts sold, longer average
terms on the contracts sold and, for the six months, increased dollar volume
of contracts sold. For the six-month period ended June 30, 1995, total
contract sales increased $41,885,000, or 2.4%.
The increases in the provision for losses on contract sales of 28.7% and 30.7%
for the three and six-month periods ended June 30, 1994, respectively, reflect
the increase in the average contract term and the changing mix of originations
to a higher percentage of conventional contracts and to loans which have a
lower down payment.
9
<PAGE>
The following table sets forth the Company's contract originations and sales
for the three and six-month periods ended June 30, 1995 and 1994. Dollar
amounts are in thousands.
<TABLE>
<CAPTION>
Three-month Six-month
period ended period ended
June 30, June 30,
------------------------ ------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Originations:
MH - Conventional $1,110,179 $ 856,378 $1,824,037 $1,450,894
MH - FHA/VA 4,222 21,584 7,497 51,840
HI 184,295 125,653 300,587 185,380
CP (1) 102,359 22,876 154,924 40,950
EF (2) 26,889 -- 35,406 --
---------- ---------- ---------- ----------
Total $1,427,944 $1,026,491 $2,322,451 $1,729,064
========== ========== ========== ==========
Sales:
MH - Conventional $ 821,970 $ 892,742 $1,528,566 $1,454,356
MH - GNMA 4,656 3,491 6,431 24,778
HI 140,180 120,136 240,255 254,233
---------- ---------- ---------- ----------
Total $ 966,806 $1,016,369 $1,775,252 $1,733,367
========== ========== ========== ==========
</TABLE>
(1) The 1995 consumer product originations include aircraft financing
which the Company began in November 1994.
(2) The Company began financing installment sales contracts for
over-the-road tractor trailers in November 1994.
The manufactured housing market experienced an increase in new home shipments
during the first six months of 1995 compared to 1994. The Company continues
to benefit from this increase and believes that it is maintaining its market
share of contracts for financing new manufactured homes. The Company's dollar
volume of new manufactured housing contract originations rose 29% and 27%
during the three and six-month periods ended June 30, 1995, respectively, over
the same periods in 1994. The dollar volume of previously owned MH contract
originations rose 48% and 43% for the three and six months, respectively.
Although small compared to total volume, the dollar volume of refinanced
contracts decreased significantly during the first six months of 1995 compared
to 1994. In addition to the increase in the number of new MH contracts
originated by the Company, the average contract size has also increased due to
a shift in the Company's manufactured home financing to more expensive multi-
section homes, more land-and-home contracts, price increases by the MH
manufacturers, and new federal wind and thermal standards enacted in the past
13 months, all of which have served to increase prices.
The dollar volume of home improvement and consumer product contract
originations rose 47% and 347%, respectively, for the quarter and 62% and
278%, respectively, for the six-month period ended June 30, 1995. The level
of growth in these divisions results from significantly expanding the number
of relationships with contractors, remodelers and dealers throughout the
United States, as well as obtaining more business from existing dealers. This
has provided the Company with an established and growing network through which
to market its financing.
10
<PAGE>
Interest income is realized from contract inventory, floorplan loans, cash
deposits, short-term investments, as well as amortization of the present value
discount relating to excess servicing rights receivable. Interest income
increased 80.0% and 41.8% during the three and six-month periods ended June
30, 1995, respectively, over the same periods in 1994. Increased earnings on
the Company's floorplan receivables contributed to this growth in interest
income. Amortization of the present value discount during the first six
months of 1995 increased compared to the same period in 1994 due to the growth
of the Company's excess servicing rights receivable. Contracts held for sale
during the quarter ended June 30, 1995 was higher on average than during the
same period in 1994 due to higher production levels and the timing of the MH
loan sales, resulting in an increase in interest on contract inventory.
Included in interest income for the six-month period ended June 30, 1994 is
the interest the Company received on the Net Interest Margin Certificates sold
in March 1994, for the period they were held by the Company.
The increase in service income of 32.4% and 29.6% during the three and six-
month periods ended June 30, 1995, respectively, resulted from the 37.2%
growth in the Company's average originated servicing portfolio but was
partially offset by the decline in servicing income on contracts originated by
others. The average unpaid principal balance of contracts being serviced for
others decreased 21.1% during the first six months of 1995 compared to the
first six months of 1994. The Company expects this decline in outside
servicing to continue in the future while overall servicing income should
increase as its portfolio grows.
Commissions and other income, which includes commissions earned on new
insurance policies written and renewals on existing policies, as well as other
income from late fees, grew 26.7% and 28.9%, respectively, during the three
and six-month periods ended June 30, 1995, respectively, compared to the same
periods in 1994. This growth is primarily a result of the increase in net
written insurance premiums as the Company's contract originations and
servicing portfolio continue to grow.
Interest expense increased 60.6% and 12.2% during the three and six-month
periods ended June 30, 1995, respectively, as a result of the Company
maintaining a significantly higher level of borrowings to fund its loan
originations and floorplan financing during the second quarter of 1995
compared to 1994. The Company maintained very low borrowing levels during the
second quarter of 1994 due primarily to the sale of the Company's Net Interest
Margin Certificates in the first quarter of 1994. Also contributing to the
increase in interest expense was higher average interest rates during the
three and six-month periods ended June 30, 1995 compared to the same periods
in 1994.
Green Tree's dollar amount of cost of servicing increased 38.2% and 34.0%
during the quarter and six-month period ended June 30, 1995 compared to the
same periods in 1994 as the Company's total average servicing portfolio grew
35.3%. The Company's cost of servicing as a percentage of contracts serviced
decreased during the first six months of 1995, compared to the same period in
1994.
11
<PAGE>
General and administrative expenses rose 30.9% and 31.4% during the three and
six-month periods ended June 30, 1995, respectively. As a percentage of
contract originations, however, these expenses have remained relatively
consistent with the comparative periods in 1994. The dollar growth is due
primarily to an increase in personnel and other origination costs related to
the significant growth in the number of contracts the Company originated
during the first six months of 1995.
Capital Resources and Liquidity:
The Company's business requires continued access to the capital markets for
the purchase, warehousing and sale of contracts. To satisfy these needs, the
Company employs a variety of capital resources.
Historically, the most important liquidity source for the Company has been its
ability to sell contracts in the secondary markets through loan
securitizations and sales of GNMA certificates. During the second quarter of
1995, the Company used a senior/subordinated structure for each of its two
conventional manufactured home loan sales and enhanced a portion of the
subordinated certificates sold with a corporate guarantee. The Company's
public home improvement loan sale in the second quarter of 1995 employed a
senior/subordinated structure with a corporate guarantee.
Servicing fees and net interest payments collected, which has been the
Company's principal source of cash, increased during the six-month period
ended June 30, 1995 over the same period in 1994. Contributing to this growth
is an increase in normal servicing fees collected by the Company on its
growing servicing portfolio, and an increase in excess servicing collected
from the additional securitizations in which the Company has not sold a
portion of the related excess servicing rights.
Net principal payments collected were positive in each of the six-month
periods ended June 30, 1995 and 1994 as a result of an increase in the
contract principal payments collected by the Company as of the end of each
period but not yet remitted to the investors/owners of the contracts. These
increases are a result of customer payoffs and the growth of the Company's
servicing portfolio.
Interest on contracts and GNMA certificates for the six-month period ended
June 30, 1994 includes interest the Company received on the Net Interest
Margin Certificates for the period they were held by the Company.
Interest on cash, floorplan and investments increased during the first six
months of 1995 compared to the same period in 1994 primarily as a result of
the substantial increase in floorplan receivables outstanding.
During the first quarter of 1994, the Company began a floorplan lending
department which makes loans to manufactured housing dealers for purposes of
financing new and previously owned manufactured home inventory. Floorplan
loans disbursed net of
12
<PAGE>
principal collections has grown to $244,714,000 during the six-month period
ended June 30, 1995, compared to $13,057,000 during the same period in 1994.
In May 1995, the Company announced plans to establish a commercial finance
division. This division will provide inventory financing for manufacturers and
dealers in the manufactured housing industry, with plans to expand into other
products which the Company is already providing retail financing for. The
Company has merged its existing floorplan lending operations into this new
commercial finance division.
Dividends paid by the Company increased 73.6% in the first six months of 1995
compared to the same period in 1994 as the Company's 1995 quarterly average
dividend rate increased 71.4% over the 1994 quarterly average dividend rate
for the first six months.
The Company has a $15,000,000 unsecured bank credit agreement for general
operating purposes. There were no borrowings under this agreement as of June
30, 1995. This agreement expires December 31, 1995. In addition, the Company
currently has $1.2 billion in master repurchase agreements with various
investment banking firms for the purpose of financing its contract production.
At June 30, 1995, the Company had no borrowings outstanding under these
agreements and had $722,780,000 available, subject to the availability of
appropriate collateral. These master repurchase agreements all provide for
annual terms that are extended each quarter by mutual agreement of the parties
for an additional year term based upon receipt of updated quarterly financial
information from the Company. The Company believes that, if it so desires,
these agreements will continue to be renewed each quarter.
During April 1995, the Company began borrowing under its commercial paper
program through which it is authorized to issue up to $500,000,000 in notes of
varying terms (not to exceed 270 days) to meet its liquidity needs. This
program is backed by the bank and master repurchase agreements referred to
above. As of June 30, 1995, the Company had issued and outstanding
$477,220,000 in notes under this program. Commercial paper is expected to be
an ongoing source of liquidity for purposes of meeting the Company's funding
needs between sales of its contract production.
During August 1995, the Company completed a sale of $308,000,000 of Net
Interest Margin Certificates ("NIM Certificates"), its first such transaction
in 1995, representing the sale of a portion of its excess servicing rights
receivable from nine previous securitized sales of conventional manufactured
housing contracts. Such underlying securitized sales were completed during the
third and fourth quarters of 1994 and the first, second and third quarters of
1995. The proceeds from the NIM Certificates sale were used to reduce short-
term borrowings supporting ongoing loan originations.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The nature of the Company's business is such that it is routinely a
party or subject to items of pending or threatened litigation.
Although the ultimate outcome of certain of these matters cannot be
predicted, management believes, based upon information currently
available and the advice of counsel, that the resolution of these
routine legal matters will not result in any material adverse effect
on its consolidated financial condition. Among these matters the
following:
In June, 1995, Green Tree, along with several other companies, was
served with a complaint in an action entitled Teri Lynn Plowman, et.
al. vs. Bedford Financial Corporation, et. al. in the Circuit Court
of Greene County of the State of Alabama. The suit has been filed as
a class action by three individuals on behalf of persons who
received consumer financing on mobile homes through the financing
companies or lending institutions named as defendants in this action
(including the Company) and on whose accounts charges were placed on
or after January 1, 1983. The complaint states various contract,
negligence and misrepresentation claims. In addition to certain
injunctive relief as to future actions, the plaintiffs seek
unspecified compensatory damages for the class, forfeiture of all
financing charges on the plaintiffs' loans, and, from each
defendant, punitive damages in the sum of $200 million, as well as
costs, interest and attorney's fees. The Company believes the suit
is totally without merit and intends to defend its position
vigorously.
In July 1995, Green Tree, along with other companies, was served
with a complaint in an action entitled Michael Payne and Karen
Allred Payne vs. Green Tree Financial Corporation, et. al. in the
Circuit Court of Walker County of the State of Alabama. The suit has
been filed as a class action by two individuals on behalf of all
persons in the State of Alabama against whom monetary charges have
been assessed and/or collected by the defendants (including the
Company) for the purchase of collateral insurance on the plaintiffs'
accounts in consumer installment transactions with the defendants.
The complaint states various state law, contract, negligence and
misrepresentation claims. The plaintiffs seek a declaration that all
loan related documents are void, illegal, and unenforceable. The
plaintiffs also seek to credit undisclosed profits, commissions, and
fees against their outstanding principal balances. Finally, the
plaintiffs seek unspecified compensatory damages for the class,
punitive damages, costs, and expenses. The Company believes the suit
is totally without merit and intends to defend its position
vigorously.
14
<PAGE>
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Green Tree's Annual Meeting of Shareholders was held May 17, 1995.
At the meeting, the shareholders elected two directors of the
Company, approved the reorganization of the Company to change its
state of incorporation from Minnesota to Delaware, approved the
Company's 1995 Employee Stock Incentive Plan, and ratified the
selection of KPMG Peat Marwick as independent auditors of the
Company for the fiscal year ending December 31, 1995.
ITEM 5. OTHER INFORMATION
None.
ITEM 6.(A) EXHIBITS
10(g). Amendment to the Master Repurchase Agreement between Green
Tree Financial Corp.-Three and Merrill Lynch Mortgage
Capital Inc. dated August 8, 1995.
10(i). Amendment to the Master Repurchase Agreement between Green
Tree Financial Corp.-Five and Lehman Commercial Paper, Inc.
dated June 30, 1995.
11(a). Computation of Primary Earnings Per Share.
11(b). Computation of Fully Diluted Earnings Per
Share.
12. Computation of Ratio of Earnings to Fixed
Charges.
27. Financial Data Schedule.
(B) REPORTS ON FORM 8-K
None.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GREEN TREE FINANCIAL CORPORATION
DATE: August 11, 1995 /s/John W. Brink
------------------------------
John W. Brink
Executive Vice President,
Treasurer and Chief Financial
Officer
DATE: August 11, 1995 /s/Robley D. Evans
------------------------------
Robley D. Evans
Vice President and Controller
16
<PAGE>
Exhibit 10(g)
(ON MERRILL LYNCH LETTERHEAD)
August 8, 1995
Ms. Phyllis Knight
Green Tree Financial Corporation
500 Landmark Towers
345 St. Peter Street
St. Paul, Minnesota 55102
RE: Master Repurchase Agreements (the "Master Repurchase
Agreements") between Merrill Lynch Mortgage Capital Inc.
("MLMCI") and Green Tree Financial Corporation and its
affiliates/subsidiaries ("Green Tree")
Dear Phyllis:
This letter will confirm that, effective May 15, 1995, the Corporate Credit
Department of Merrill Lynch & Co., Inc. approved an increase in the aggregate
maximum repurchase price that may be outstanding at any one time under the
Master Repurchase Agreements to $500,000,000 for transactions involving
manufactured housing contracts, dealer floorplan loans and such other
receivables as may be acceptable to MLMCI.
Of course, because MLMCI and Green Tree enter into transactions on an
uncommitted basis, the pricing rates, margin requirements and other applicable
terms for all transactions are subject to the agreement of the parties. If I can
be of any further assistance to you, please do not hesitate to contact me.
Sincerely,
William W. Carpenter
cc: Mr. James B. Cason
Mr. Louis V. Molinari
18
<PAGE>
Exhibit 10.(i)
(ON LEHMAN BROTHERS LETTERHEAD)
June 30, 1995
Green Tree Finance Corp.-Five
1800 Landmark Towers
345 St. Peters Street
St. Paul, Minnesota 55102
Dear Sirs:
This Letter Agreement confirms our agreement to amend the Master Repurchase
Agreement (the "Repurchase Agreement") dated October 15, 1992 entered into
between Lehman Commercial Paper Inc. ("Lehman"), and Green Tree Finance Corp.-
Five ("GT-V"), as subsequently amended. Reference is made to the Repurchase
Agreement, the Servicing Agreement for Contracts and the Servicing Agreement for
Home Improvement Loans, the Tri-Party Custodial Agreement for Contracts and the
Tri-Party Custodial Agreement for Home Improvement Loans, each dated as of
October 15, 1992, and all other Agreements (collectively, the "Agreements")
entered into concurrently therewith which evidence the intent of GT-V and Lehman
to enter into certain repurchase transactions.
We agree to increase the Maximum Transaction Amount, and do amend the Repurchase
Agreement to read as follows:
12. Minimum and Maximum Transaction Amounts: Margin With respect to
Transactions in which GT-V acts as Seller:
(a) The minimum amount of any Transaction under this Agreement shall have
an aggregate Repurchase Price of $5,000,000:
(b) The aggregate outstanding Repurchase Price for the Purchased Securities
subject to the Agreement at any one time shall not exceed $500,000,000:
and
(c) The percentage used to determine Buyer's Margin Amount shall be as
mutually agreed upon by Buyer and Seller but in no event less than 110%.
Except as amended hereby, the Repurchase Agreement shall remain in full force
and effect and the parties hereto hereby restate and reaffirm all of the terms
and provisions of the Agreement. Capitalized terms used herein and not described
herein will have the meanings described in the Agreements. GT-V hereby agrees
that all representations and warranties made in the Agreements are true and
correct as of the date hereof.
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto, by their duly authorized officers,
have executed this Amendment as of the date and year first above written.
Sincerely,
LEHMAN COMMERCIAL PAPER INC.
Francis X. Gilhool
Vice President
AGREED AND ACCEPTED
as of the date first above written
GREEN TREE FINANCE CORP.-FIVE
John W. Brink
Vice President
20
<PAGE>
Exhibit 11.(a)
GREEN TREE FINANCIAL CORPORATION AND SUBSIDIARIES
-------------------------------------------------
COMPUTATION OF PRIMARY EARNINGS PER SHARE
-----------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30
-------------------------
1995 1994
------------ -----------
<S> <C> <C>
Net earnings $112,441,000 $82,718,000
============ ===========
Weighted average number of
common and common equivalent
shares outstanding:
Weighted average common
shares outstanding 68,155,679 67,317,267
Dilutive effect of stock
options after application
of treasury-stock method 1,738,030 1,930,138
------------ -----------
69,893,709 69,247,405
============ ===========
Earnings per share $ 1.61 $ 1.19
============ ===========
Three Months Ended June 30
--------------------------
1995 1994
------------ -----------
Net earnings $ 61,712,000 $44,226,000
============ ===========
Weighted average number of
common and common equivalent
shares outstanding:
Weighted average common
shares outstanding 68,356,714 67,434,077
Dilutive effect of stock
options after application
of treasury-stock method 1,665,466 1,925,394
------------ -----------
70,022,180 69,359,471
============ ===========
Earnings per share $ .88 $ .64
============ ===========
</TABLE>
21
<PAGE>
Exhibit 11.(b)
GREEN TREE FINANCIAL CORPORATION AND SUBSIDIARIES
-------------------------------------------------
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
-----------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30
-------------------------
1995 1994
------------ -----------
<S> <C> <C>
Net earnings $112,441,000 $82,718,000
============ ===========
Weighted average number of
common and common equivalent
shares outstanding:
Weighted average common
shares outstanding 68,155,679 67,317,267
Dilutive effect of stock
options after application
of treasury-stock method 1,793,633 1,930,138
------------ -----------
69,949,312 69,247,405
============ ===========
Earnings per share $ 1.61 $ 1.19
============ ===========
Three Months Ended June 30
--------------------------
1995 1994
------------ -----------
Net earnings $ 61,712,000 $44,226,000
============ ===========
Weighted average number of
common and common equivalent
shares outstanding:
Weighted average common
shares outstanding 68,356,714 67,434,077
Dilutive effect of stock
options after application
of treasury-stock method 1,688,903 1,957,967
------------ -----------
70,045,617 69,392,044
============ ===========
Earnings per share $ .88 $ .64
============ ===========
</TABLE>
22
<PAGE>
Exhibit 12.
GREEN TREE FINANCIAL CORPORATION AND SUBSIDIARIES
-------------------------------------------------
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
-------------------------------------------------
<TABLE>
<CAPTION>
Six months
ended
June 30, 1995
--------------
(unaudited)
<S> <C>
Earnings:
Earnings before income taxes $181,356,000
Fixed charges:
Interest 25,295,000
One-third rent 906,000
------------
26,201,000
------------
$207,557,000
============
Fixed charges:
Interest $ 25,295,000
One-third rent 906,000
------------
$ 26,201,000
============
Ratio of earnings to fixed charges (1) 7.92
====
</TABLE>
(1) For purposes of computing the ratio, earnings consist of earnings before
income taxes plus fixed charges.
23
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Green Tree Financial Corporation and Subsidiaries and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 410,313,000
<SECURITIES> 21,063,000
<RECEIVABLES> 465,879,000
<ALLOWANCES> 3,129,000
<INVENTORY> 865,804,000
<CURRENT-ASSETS> 0
<PP&E> 60,099,000
<DEPRECIATION> 20,811,000
<TOTAL-ASSETS> 2,595,976,000
<CURRENT-LIABILITIES> 0
<BONDS> 289,667,000
<COMMON> 684,000
0
0
<OTHER-SE> 844,308,000
<TOTAL-LIABILITY-AND-EQUITY> 2,595,976,000
<SALES> 238,821,000
<TOTAL-REVENUES> 281,473,000
<CGS> 0
<TOTAL-COSTS> 74,822,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 75,929,000
<INTEREST-EXPENSE> 25,295,000
<INCOME-PRETAX> 181,356,000
<INCOME-TAX> 68,915,000
<INCOME-CONTINUING> 112,441,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 112,441,000
<EPS-PRIMARY> 1.61
<EPS-DILUTED> 1.61
</TABLE>
