-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DNwIc5liGxWkg8fjgh1MyQ92176xuU3JH+EploxQ1jfXmKcmmAj+VbjNvbEvh6sr DqbysMxrzGu4Jhuxt6RTdA== 0000950144-98-001130.txt : 19980211 0000950144-98-001130.hdr.sgml : 19980211 ACCESSION NUMBER: 0000950144-98-001130 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980210 SROS: CSX SROS: NYSE SROS: PHLX FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLAYTON HOMES INC CENTRAL INDEX KEY: 0000719547 STANDARD INDUSTRIAL CLASSIFICATION: MOBILE HOMES [2451] IRS NUMBER: 620794407 STATE OF INCORPORATION: TN FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08824 FILM NUMBER: 98529395 BUSINESS ADDRESS: STREET 1: 623 MARKET ST CITY: KNOXVILLE STATE: TN ZIP: 37902 BUSINESS PHONE: 6159707200 MAIL ADDRESS: STREET 1: PO BOX 15169 CITY: KNOXVILLE STATE: TN ZIP: 37901 10-Q 1 CLAYTON HOMES, INC. FORM 10-Q FQE: 12-31-97 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED December 31, 1997 ----------------- COMMISSION FILE NUMBER 1-8824 ------ CLAYTON HOMES, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 62-1671360 - ----------------------------------- ---------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) Number) P.O. Box 15169 623 Market Street Knoxville, Tennessee 37902 - -------------------------------------------- --------------- (Address of principal executive offices) (zip code) 423-970-7200 - ---------------------------------------------------- (Registrant's telephone number, including area code) 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 . --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Shares of common stock $.10 par value, outstanding on December 31, 1997 - 118,781,320. 2 CLAYTON HOMES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited - in thousands except per share data)
Three Months Ended Six Months Ended December 31, December 31, Revenues 1997 1996 1997 1996 -------- -------- -------- -------- Net sales $192,078 $191,297 $401,024 $385,171 Financial services 46,154 31,039 87,204 61,891 Rental and other income 12,837 12,336 25,536 23,814 -------- -------- -------- -------- Total revenues 251,069 234,672 513,764 470,876 -------- -------- -------- -------- Costs and expenses Cost of sales 133,066 128,547 276,620 262,019 Selling, general and administrative 67,871 62,444 138,665 123,299 Financial services interest 595 728 1,197 1,506 Provision for credit losses 1,000 1,000 2,000 2,000 -------- -------- -------- -------- Total expenses 202,532 192,719 418,482 388,824 -------- -------- -------- -------- Operating income 48,537 41,953 95,282 82,052 Interest income (expense), net/other 1,672 1,123 2,806 2,327 -------- -------- -------- -------- Income before income taxes 50,209 43,076 98,088 84,379 Provision for income taxes 19,100 16,400 37,300 32,100 -------- -------- -------- -------- Net income $ 31,109 $ 26,676 $ 60,788 $ 52,279 ======== ======== ======== ======== Earnings per share: (1) Basic $ 0.26 $ 0.22 $ 0.51 $ 0.44 Diluted $ 0.26 $ 0.22 $ 0.51 $ 0.44 Dividends paid per share: (1) $ 0.020 $ 0.020 $ 0.040 $ 0.036 Average shares outstanding: (1) Basic 118,716 118,768 118,645 118,860 Diluted 119,600 119,628 119,474 119,766
(1) Adjusted for the December 11, 1996 5-for-4 stock split. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
(unaudited) (audited) December 31, June 30, ASSETS: 1997 1997 ----------- ---------- Cash and cash equivalents $ 51,309 $ 89,695 Receivables, net 488,478 478,691 Inventories 136,659 119,434 Property, plant and equipment, net 222,300 214,072 Other assets 146,228 143,869 ---------- ---------- Total assets $1,044,974 $1,045,761 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY: Accounts payable and accrued liabilities $ 61,430 $ 99,498 Long-term debt 22,032 22,806 Other liabilities 150,072 168,931 Shareholders' equity 811,440 754,526 ---------- ---------- Total liabilities and shareholders' equity $1,044,974 $1,045,761 ========== ==========
(See accompanying notes to the condensed consolidated financial statements) 2 3 CLAYTON HOMES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited - in thousands)
Six Months Ended December 31, 1997 1996 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 60,788 $ 52,279 Adjustments to reconcile net income to net cash provided (required) by operating activities: Depreciation and amortization 6,824 6,070 Gain on sale of installment contract receivables, net of amortization (19,642) (5,465) Provision for credit losses 2,000 2,000 Deferred income taxes (19,920) (580) Decrease (increase) in other receivables, net (16,270) 2,517 Decrease (increase) in inventories (17,225) 10,766 Decrease in accounts payable, accrued liabilities, and other (47,922) (37,671) --------- --------- Cash provided (required) by operations (51,367) 29,916 Origination of installment contract receivables (333,803) (266,437) Proceeds from sales of originated installment contract receivables 358,338 241,726 Principal collected on originated installment contract receivables 18,445 23,045 --------- --------- Net cash provided (required) by operations (8,387) 28,250 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of installment contract receivables (153,498) (41,530) Proceeds from sales of acquired installment contract receivables 127,067 24,369 Principal collected on acquired installment contract receivables 7,576 11,401 Acquisition of property, plant and equipment, net (15,052) (16,418) Decrease (increase) in restricted cash and investments 8,556 (5,410) --------- --------- Net cash used in investing activities (25,351) (27,588) CASH FLOWS FROM FINANCING ACTIVITIES Dividends (4,750) (4,305) Proceeds from short-term borrowings 93,878 4,475 Repayment of short-term borrowings (93,878) (4,475) Repayment of long-term debt (774) (4,185) Issuance of stock for incentive plans and other 3,021 2,923 Repurchase of common stock (2,145) (8,620) --------- --------- Net cash used in financing activities (4,648) (14,187) --------- --------- Net decrease in cash and cash equivalents (38,386) (13,525) Cash and cash equivalents at beginning of period 89,695 47,400 --------- --------- Cash and cash equivalents at end of period $ 51,309 $ 33,875 ========= =========
(See accompanying notes to the condensed consolidated financial statements) 3 4 CLAYTON HOMES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. The condensed consolidated financial statements of Clayton Homes, Inc. and its subsidiaries (Company) have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with Generally Accepted Accounting Principles have been omitted. The condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report to Shareholders for the year ended June 30, 1997. The information furnished reflects all adjustments which are necessary for a fair presentation of the Company's financial position as of December 31, 1997; the results of its operations and its cash flows for the six month periods ended December 31, 1997 and 1996. All such adjustments are of a normal recurring nature. 2. The results of operations for the six months ended December 31, 1997 and 1996 are not necessarily indicative of the results to be expected for the respective full years. 3. Certain reclassifications have been made to the 1996 financial statements to conform to the 1997 presentation. 4. Effective for the quarter ended December 31, 1997, the Company adopted FASB Statement of Accounting Standards No. 128, Earnings per Share. The Statement simplifies the standards for computing earnings per share by replacing the presentation of primary earnings per share with a presentation of basic earnings per share. Prior years have been restated to reflect this change. The following reconciliation details the numerators and denominators used to calculate basic and diluted earnings per share for the respective periods:
Three Months Ended Six Months Ended December 31, December 31, 1997 1996 1997 1996 -------- -------- -------- -------- (in thousands except per share data) Net income $ 31,109 $ 26,676 $ 60,788 $ 52,279 ======== ======== ======== ======== Average shares outstanding: Basic 118,716 118,768 118,645 118,860 Add: common stock equivalents 884 860 829 906 -------- -------- -------- -------- Diluted 119,600 119,628 119,474 119,766 ======== ======== ======== ======== Earnings per share: Basic and diluted $ .26 $ .22 $ .51 $ .44 ======== ======== ======== ========
4 5 PART 1 - - FINANCIAL INFORMATION ITEM 1. Financial Statements. See pages 2 through 4. ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. SIX MONTHS ENDED DECEMBER 31, 1997: The following table reflects the percentage changes in retail sales for the Company's retail and community sales centers and wholesale sales to independent retailers. It also reflects percentage changes in the average number of Company-owned retail centers, communities and independent retailers, the average sales per location, and the average price per home sold in each category.
First Six Months Fiscal Year 1998 vs 1997 ------------------------ Retail Dollar sales + 2.2% Number of retail centers +13.8% Dollar sales per retail center -10.2% Price of home + 8.0% Wholesale Dollar sales + 8.6% Number of independent retailers + 9.5% Dollar sales per independent retailer - 0.8% Price of home + 5.4% Communities Dollar sales - 6.4% Number of communities + 3.9% Dollar sales per community - 9.9% Price of home + 9.4%
Total revenues for the six months ended December 31, 1997, increased 9% to $514 million. As manufactured housing sales rose 4% to $401 million, financial services income grew 41% to $87 million and rental and other income increased 7% to $26 million. Net sales of the Retail group rose 2% to $236 million on an 8% rise in the average home price, and a 14% increase in Company-owned sales centers, offsetting a 17% decrease in the average number of homes sold per sales center. 5 6 Net sales of the Manufacturing group increased 9% to $150 million as the number of homes sold increased 3% to 7,118. The average wholesale price to independent retailers increased 5% as a result of a shift in product mix towards multi-section homes. Net sales of the Communities group decreased 6% to $15 million as 14% less homes were sold while the average home selling price increased 9%. Financial services revenues increased 41%. Interest and loan servicing revenues increased $7 million, and insurance related revenues rose $2 million. Rental and other income increased 7% on a 16% rise in Communities rental income. Loans sold through asset-backed securities totaled $459 million, compared to $262 million during the same period last year with improved spreads over the comparable period. Financial services interest expense decreased 21% to $1 million. Average debt collateralized by installment contract receivables dropped 27% to $21 million, while the weighted average interest rate moved from 10.76% to 10.30%. The terms of the debt preclude prepayment by the Company. Gross profit margins decreased to 31.0% from 32.0% which is attributable to a shift in mix of sales from the Manufacturing group to its independent retailers. Selling, general and administrative expenses, as a percent of revenues, increased to 27.0% from 26.2% in the year earlier period. The provision for credit losses remained 0.5% of sales. The following table represents delinquent installment sales contracts as a percentage of the total number of installment sales contracts which the Company serviced and either owned or was contingently liable. A contract is considered delinquent if any payment is more than one month past due.
December 31, 1997 1996 ---- ---- Total delinquencies as percentage of contracts outstanding: All contracts 2.66% 2.65% Contracts originated by VMF 2.49% 2.33% Contracts acquired from other institutions 3.58% 5.09%
6 7 The following table sets forth information related to loan loss/repossession experience for all installment contract receivables which the Company either owns or for which it is contingently liable.
Six Months Ended December 31, 1997 1996 ------ ----- Net losses as a percentage of average loans outstanding (annualized): All contracts 0.7% 0.2% Contracts originated by VMF 0.7% 0.0% Contracts acquired from other institutions 1.0% 3.8% Number of contracts in repossession: All contracts 1,396 995 Contracts originated by VMF 1,272 891 Contracts acquired from other institutions 124 104 Total number of contracts in repossession as percentage of total contracts 1.5% 1.3%
The increase in inventories as of December 31, 1997, from June 30, 1997, is explained as follows:
Manufacturing Increase (decrease) - ------------- ------------------- Finished goods $ 5.3 Raw materials (8.8) Retail - ------ Increase in average inventory levels at 245 Company-owned sales centers at June 30, 1997 11.6 Inventory to stock twelve new Company-owned sales centers 6.7 Communities - ----------- Total of all communities 2.4 ------- $ 17.2 =======
On December 31, 1997, the order backlog for the Manufacturing group (consisting of Company-owned and independent retailer orders) was $30 million, as compared to $17 million for the prior year. 7 8 SECOND QUARTER ENDED DECEMBER 31, 1997: The following table reflects the percentage changes in retail sales for the Company's retail and community sales centers and wholesale sales to independent retailers. It also reflects percentage changes in the average number of Company-owned retail centers, communities and independent retailers, the average sales per location, and the average price per home sold in each category.
Second Three Months Fiscal Year 1998 vs 1997 ------------------------ Retail Dollar sales - 6.0% Number of retail centers +13.4% Dollar sales per retail center -17.1% Price of home +10.2% Wholesale Dollar sales +13.1% Number of independent retailers + 8.2% Dollar sales per independent retailer + 4.6% Price of home + 6.2% Communities Dollar sales -13.5% Number of communities + 3.1% Dollar sales per community -16.0% Price of home + 3.8%
Total revenues for the three months ended December 31, 1997, increased 7% to $251 million. As manufactured housing sales remained flat, financial services income grew 49% to $46 million and rental and other income increased 4% to $13 million. Net sales of the Retail group decreased 6% to $110 million on a 10% rise in the average home price, and 13% increase in Company-owned sales centers, offsetting a 25% decrease in the average number of homes sold per sales center. Net sales of the Manufacturing group increased 13% to $76 million as the number of homes sold increased 7% to 3,553. The average wholesale price to independent retailers increased 6% as a result of a shift in product mix towards multi-section homes. Net sales of the Communities group decreased 14% to $7 million as 17% less homes were sold while the average home selling price increased 4%. Financial services revenues increased 49%. Interest and loan servicing revenues increased $4 million, and insurance related revenues rose $1 million. Rental and other income increased 4% on a 17% rise in Communities rental income and a 10% decline in other income. Loans sold through asset-backed securities in the quarter totaled $232 million, compared to a $124 million offering during the same period last year with improved spreads over the comparable period. 8 9 Financial services interest expense decreased 18% to $0.6 million. Average debt collateralized by installment contract receivables dropped 28% to $20 million, while the weighted average interest rate moved from 10.80% to 10.78%. The terms of the debt preclude prepayment by the Company. Gross profit margins decreased to 30.7% from 32.8% with a stronger mix of sales to independent retailers. Selling, general and administrative expenses, as a percent of revenues, increased to 27.0% from 26.6% in the year earlier period. The provision for credit losses remained 0.5% of sales. The following table presents write-off experience for the quarters ended December 31, 1997 and 1996:
Second Quarter Ended December 31, 1997 1996 ---- ---- Net losses as percentage of average loans outstanding (annualized): All contracts 0.9% 0.1% Contracts originated by VMF 0.8% 0.0% Contracts acquired from other institutions 1.3% 3.5%
Liquidity and Capital Resources Cash at December 31, 1997, was $51.3 million as compared to $89.7 million at June 30, 1997. The Company anticipates meeting cash requirements with cash flows from operations, current cash balances, and the sale of installment contract receivables and GNMA certificates. Forward Looking Statements Certain statements in the quarterly report are forward looking as defined in the Private Securities Litigation Reform Law. These statements involve certain risks and uncertainties that may cause actual results to differ materially from expectations as of the date of this report. These risks include, but are not limited to, adverse weather conditions impacting sales and insurance reserves; inventory adjustments by major retailers; competitive pricing pressures; gain on sale accounting assumptions; success of marketing and cost-management programs; and shifts in market demand. PART II - - OTHER INFORMATION ITEM 1 - There were no reportable events for Item 1 through Item 5. ITEM 6 - Exhibits and Reports for Form 8-K. (a) 27. Financial Data Schedule (SEC use only) 9 10 CLAYTON HOMES, INC. 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 thereunto duly authorized. CLAYTON HOMES, INC. ------------------- (Registrant) Date: February 10, 1998 /s/ Kevin T. Clayton -------------------------- -------------------------------------- Kevin T. Clayton President Date: February 10, 1998 /s/ John J. Kalec -------------------------- -------------------------------------- John J. Kalec Sr. Vice President, Chief Financial Officer and Secretary 10 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF CLAYTON HOMES INC FOR THE SIX MONTHS ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS JUN-30-1998 JUL-1-1997 DEC-31-1997 51,309 0 493,094 4,616 136,659 0 282,181 59,881 1,044,974 61,430 22,032 0 0 11,878 799,562 1,044,974 401,024 513,764 276,620 415,285 0 2,000 (1,609) 98,088 37,300 60,788 0 0 0 60,788 .51 .51
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