-----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, RYvNRbdcvBDJOyH4EPsjfWGj5Z8lP4N71JwLtp217RdVreuWSbGjJN0VY1UXMJFj 03FKom2C42W6tfM9m0/oyw== 0000950144-95-002718.txt : 19951003 0000950144-95-002718.hdr.sgml : 19951003 ACCESSION NUMBER: 0000950144-95-002718 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950928 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08824 FILM NUMBER: 95577159 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-K 1 FORM 10-K ANNUAL REPORT FOR CLAYTON HOMES, INC. 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year 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 1-8824 CLAYTON HOMES, INC. (Exact name of registrant as specified in its charter) Tennessee 62-0794407 - -------------------------------------------- --------------------------------------- State or other jurisdiction of incorporation (I.R.S. Employer Identification Number) or organization 623 Market Street Knoxville, Tennessee 37902 - ---------------------------------------- --------------------------------------- (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 615-970-7200 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered - -------------------------------------------------------------------------------- COMMON STOCK, $.10 PAR VALUE PER SHARE NEW YORK STOCK EXCHANGE Securities registered pursuant to section 12(g) of the Act: None Indicate by check mark whether 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in part III of this Form 10-K or any amendment to this Form 10-K. [ ] Aggregate market value of the voting stock held by non-affiliates of the registrant on August 18, 1995, was approximately $1,212,845,315 (55,763,003 shares at closing price on the NYSE of $21.75). For this purpose all shares beneficially held by executive officers and the Board of Directors of the Registrant are shares owned by "affiliates," a status which each of the officers and directors individually disclaims. Shares of common stock, $.10 par value, outstanding on August 18, 1995, were 75,757,052. Exhibit index appears on pages 14-15. DOCUMENTS INCORPORATED BY REFERENCE Part of Form 10-K Documents from which portions are incorporated by reference - ----------------- ------------------------------------------------------------ Part II (except for Item 5) Annual Report to Shareholders for fiscal year ended June 30, 1995 Part III Proxy Statement relating to Company's Annual Meeting of Shareholders on November 8, 1995
1 2 CLAYTON HOMES, INC. PART I ITEM 1. BUSINESS GENERAL Clayton Homes, Inc. and its subsidiaries (The Company) produces, sells, finances and insures primarily low to medium priced manufactured homes. The Company's 16 manufacturing plants produce homes which are marketed in 28 states through 668 retail dealers, of which 192 are Company-owned sales centers and 55 are Company-owned community sales centers. The Company provides installment financing to purchasers of manufactured homes sold by its retail centers and by selected independent dealers. Such financing is provided through its wholly-owned finance subsidiary, Vanderbilt Mortgage and Finance, Inc. The Company acts as agent, earns commissions and reinsures risks on physical damage and credit life insurance policies issued by a non-related insurance company (ceding company) in connection with the Company's retail sales. The Company also develops, owns, and manages manufactured housing communities. The Company is a Tennessee corporation whose predecessor was incorporated in 1968 in Tennessee. Its principal executive offices are located in Knoxville, Tennessee. The following table shows the percentage of revenue derived from sales by Company-owned retail centers, sales to independent dealers and financial services operations and other income for each of the last three fiscal years.
YEAR ENDED JUNE 30, 1995 1994 1993 Sales by Company-owned retail centers and communities.......................... 53% 54% 56% Sales to independent dealers.............. 29 27 25 Financial services and other.............. 18 19 19 ---- ---- ---- Total..................................... 100% 100% 100% ==== ==== ====
For information relating to the Company's three major business segments, see Note 11 to the Consolidated Financial Statements in the Company's Annual Report to Shareholders. Company sales reflect the seasonality of the manufactured housing industry. In recent years, approximately 30% of the Company's sales have occurred in its fourth quarter ended June 30. MANUFACTURED HOMES A manufactured home made by the Company is a factory-built, completely finished dwelling. Constructed to be transported by truck, the home is mounted on wheels attached to its frame. Manufactured homes are designed to be permanent, primary residences sited and attached to utilities. The Company manufactures a variety of single and multi-section homes in a wide price range. Retail prices range from $13,000 to $75,000 with sizes from 675 to 1,900 square feet. The Company markets homes under a variety of model names. Homes include as standard equipment central heating, range, refrigerator, and color-coordinated window, wall and floor coverings. Optional features include central air conditioning, wood-burning fireplaces, bay windows, hardwood floors, whirlpool tubs, skylights, and furniture. 2 3 MANUFACTURING OPERATIONS The Company owns or leases 16 manufacturing plants, ranging in size from 53,000 to 226,000 square feet. Plants are located in Andersonville, Ardmore, two in Bean Station, Halls, Maynardville, Rutledge, Savannah and White Pine, Tennessee; in Henderson, Oxford and Richfield, North Carolina; in Waycross, Georgia and one in Bonham and two in Waco, Texas. See "Properties (item 2)." The Company's manufactured homes are built in its plants using assembly-line techniques. Completion of a home ordinarily takes two days. Homes are generally produced against orders received from independent and Company-owned retail centers; therefore the Company does not normally maintain a significant inventory of homes at its plants. Completed homes are transported to the retail centers by independent carriers. The Company's plants operate on a one-shift-per-day basis, normally for a five-day week, with the capacity to produce approximately 31,000 homes per year. During the fiscal year ended June 30, 1995, the Company produced 18,713 homes. The principal materials utilized in the production of the Company's homes are steel, aluminum, wood, fiberglass, carpet, vinyl floor covering, hardware items, appliances and electrical items. The Company purchases, among other things, steel for the frames, appliances, plumbing fixtures, furniture, windows and doors. The Company uses a number of supply sources, and it believes that the materials and parts necessary for the construction and assembly of its homes will remain readily available from these sources. In the event that any of these items are not readily available or are available at a higher cost than could be passed on to consumers, the operations of the Company could be materially adversely affected. The Company offers a one-year, limited warranty covering manufacturing defects in materials or workmanship in a home. Warranties covering appliances and equipment installed in the homes generally are obligations of the manufacturers of such items and not those of the Company. Warranty and service costs during the years ended June 30, 1995, and June 30, 1994, amounted to approximately $9,420,000 and $7,510,000, respectively. The backlog of firm orders for homes manufactured by the Company, including orders from Company-owned retail centers, was approximately $68,700,000 and $42,300,000 on June 30, 1995, and 1994, respectively. Based on the Company's current production rate, approximately seven weeks would be required to fill backlog orders at June 30, 1995. SALES OF HOMES MANUFACTURED BY THE COMPANY The following table sets forth manufacturing sales data for number of homes shipped to Company-owned retail centers and to independent dealers, total number of homes sold, number of plants, number of independent dealers and number of Company-owned retail centers for the periods indicated.
AT OR FOR THE YEAR ENDED JUNE 30, 1995 1994 1993 Number of homes sold to independent dealers . . . . . . . . . . . . . . 11,025 9,389 6,890 Number of homes shipped to Company-owned retail centers . . . . . . . . 7,917 6,948 6,155 ------ ------ ------ TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,942 16,337 13,045 ====== ====== ====== Number of plants operating . . . . . . . . . . . . . . . . . . . . . . 16 13 13 Number of independent dealers . . . . . . . . . . . . . . . . . . . . . 421 372 371 Number of Company-owned communities . . . . . . . . . . . . . . . . . . 55 46 33 Number of Company-owned retail centers . . . . . . . . . . . . . . . . 192 165 143
INDEPENDENT DEALERS In the years ended June 30, 1995, and 1994, 58% and 57%, respectively, of homes manufactured by the Company were sold to its independent dealers. As of June 30, 1995, the Company had 421 independent dealers in 25 states. The Company's independent dealer network enables it to distribute homes to more markets, more quickly, without as large an investment in management resources and overhead expenses as is required with Company-owned retail centers. Sales to independent dealers also help the Company ensure that its homes are competitive with other manufacturers in terms of consumer acceptability, product design, quality and price. 3 4 The Company generally does not assist independent dealers in arranging financing for their retail customers. However, the Company's finance subsidiary, Vanderbilt Mortgage and Finance, Inc.(VMF), may provide financing for retail customers of selected independent dealer locations with terms and conditions similar to those provided to Company-owned dealerships. The Company establishes relationships with independent dealers through sales representatives from its manufacturing plants. These representatives visit independent dealers in assigned areas to solicit orders for the Company's homes. The area is generally limited to a 400 to 500 mile radius from each of the Company's manufacturing plants due to the relatively significant cost of transporting a home. Depending on the cost of the home and the wholesale competition within the area, a home may be competitively shipped shorter or longer distances. During each of the last three fiscal years no dealer accounted for more than 2% of the Company's consolidated revenues. Because independent dealers have their own source of inventory financing, the Company typically receives payment for homes within two weeks of delivery to the independent dealer. The Company has no written agreements with its independent dealers, and the relationship between the Company and each of its independent dealers may be terminated at any time by either party. The Company believes its relations with independent dealers are good, and has experienced relatively little turnover among independent dealers in the past five years. The Company generally has no control over the operations of independent dealers. Typically the Company neither provides inventory financing arrangements for independent dealer purchases nor consigns homes. As is customary in the industry, lenders financing independent dealer purchases require that the Company execute repurchase agreements which provide that, in the event of dealer default under the dealer's inventory financing arrangements, the Company will repurchase homes for the amount remaining unpaid to the lender, excluding interest and repossession costs. Historically, any homes repurchased under such agreements have been resold to other dealers, including Company-owned retail centers, at no less than the repurchase price. During the last five fiscal years, the Company has incurred no significant losses resulting from these contingent obligations, but there can be no assurance that losses will not occur in the future. COMPANY RETAIL OPERATIONS As of June 30, 1995, the Company sold homes through 192 Company-owned retail centers in 18 states. In addition to selling homes built by the Company, virtually all of these retail centers sell new homes manufactured by other companies and previously owned manufactured homes. The following table indicates the number of Company-owned retail centers and certain information relating to homes they sold during the last three fiscal years.
YEAR ENDED JUNE 30, 1995 1994 1993 Number of Company-owned centers . . . . . 192 165 143 Number of new homes sold (including homes built by the Company and by other manufacturers) . . . . . . . . . . . . 11,352 10,071 8,752 Average retail price of new homes sold . $30,565 $29,103 $26,434 Number of previously-owned homes sold . . 2,746 2,523 2,126
All of the Company-owned retail centers employ salespeople who are primarily compensated on a commission basis. The retail centers do not have administrative staffs since most administrative functions are performed at the Company's corporate headquarters. To provide customers a wider price range of homes, the Company purchases previously-owned homes from individuals and from other dealers, as well as repossessed homes from lenders throughout its trade territory. 4 5 Homes sold by Company-owned retail centers are delivered to the home owner's site by trucks either owned by the Company or leased for the particular delivery. The purchase price of the home includes delivery and setup of the home at the retail purchaser's site. Electrical, water and gas connections are done by licensed technicians at the home owner's expense. FINANCIAL SERVICES The Company believes that the ability to make financing available to retail purchasers is a materially important factor affecting the market acceptance of its product. The Company facilitates retail sales by making loans through its finance subsidiary, VMF, and by maintaining relationships with conventional lenders such as banks and finance companies for the pre-arranged sale of retail installment contracts. The following table reflects the relative percentages of homes sold by the Company's retail centers which were financed through the Company, either by VMF or by conventional lenders, and those sales made to customers who arranged their own financing or paid cash.
YEAR ENDED JUNE 30, 1995 1994 1993 VMF . . . . . . . . . . . . . . . . 72% 74% 74% Conventional lenders . . . . . . . 5 5 4 Customer arranged or cash . . . . . 23 21 22 ---- ---- ---- TOTAL . . . . . . . . . . . . . . . 100% 100% 100% ==== ==== ====
VMF also purchases and originates manufactured housing installment contract receivables (also referred to as manufactured housing contracts) on an individual basis from dealers not owned by the Company. Such dealers must make an application to VMF for dealer approval. Upon satisfactory results of VMF's investigation of the dealer's creditworthiness and general business reputation, VMF and the dealer enter into a dealer agreement. In addition to purchasing manufactured housing contracts from Company-owned and independent dealers on an individual basis, VMF makes bulk purchases of manufactured housing contracts. It also performs, on behalf of other institutions, servicing of manufactured housing contracts that were not purchased or originated by VMF. These purchases and servicing arrangements may relate to the portfolios of other lenders or finance companies, governmental agencies or instrumentalities, or other entities that purchase and hold manufactured housing contracts. VMF is actively seeking arrangements by which it can service manufactured housing contracts originated by other lenders. VMF currently anticipates that it will only seek servicing responsibilities which relate to manufactured housing contracts. UNDERWRITING POLICIES. Retail customers of the Company who express a desire to obtain financing by or through the Company complete a credit application form which is initially reviewed by the manager of the Company-owned retail center. The manager then forwards the application to VMF or another source of financing. Credit applications are then evaluated by VMF credit managers. VMF's underwriting guidelines generally require that each applicant's credit history, residence history, employment history and income to debt payment ratios be examined. There are no requirements on the basis of which, if met, credit is routinely approved; or if they are not met, credit is routinely denied. If in the judgment of the VMF credit manager an applicant does not meet minimum underwriting criteria, there generally must be compensating higher ratings with respect to other criteria in order for an applicant to be approved. Credit managers must confirm that the credit investigation gave a complete and up-to-date accounting of the applicant's creditworthiness. Credit managers are encouraged to obtain second opinions on loans for relatively large dollar amounts or those which in their judgment, tend to rank lower in terms of underwriting criteria. Generally, the sum of the monthly installment housing obligation, which includes the manufactured home loan payment and monthly site costs, should not exceed 28% of the applicant's gross monthly income. With respect to those customers determined to be credit worthy, VMF requires a down payment in the form of cash, the trade-in value of a previously owned manufactured home, and/or the estimated value of equity in real property pledged as additional collateral. For previously-owned homes, the trade-in allowance accepted by the dealer must be consistent with the value of the home as determined by VMF in light of current market 5 6 conditions. The value of real property pledged as additional collateral is estimated by dealer personnel, who are not appraisers but are familiar with the area in which the property is located. The minimum amount of the down payment is 5% of the purchase price. The purchase price includes the stated cash sale price of the manufactured home, sales or other taxes and fees, set-up costs and certain insurance premiums (including up to five years of premiums on required hazard insurance). The balance of the purchase price is financed by an installment sales contract providing for a purchase money security interest in the manufactured home and a mortgage on any real property pledged as additional collateral. Normally, the contracts provide for equal monthly payments, generally over a period of five to fifteen years at fixed rates of interest. VMF's installment contracts may provide for either fixed rates or adjustable rates of interest. VMF believes the typical manufactured home purchaser is primarily sensitive to the amount of the monthly payment, and not to the interest rate. VMF has developed financing options such as contracts with a seven-year term (compared to the industry norm of 15 to 20 years) which provide financing to its customers at a relatively lower cost. The Company also offers a bi-weekly payment contract which provides for 26 payments a year which are made by electronically drafting the purchaser's checking account. The Company believes that such financing options are attractive to the customer and improve market acceptance of its homes as well as improve its delinquency and repossession experience. During the last eight fiscal years, VMF has become the most significant source of financing for purchasers of the Company's homes. In fiscal 1988, VMF originated 5,692 contracts and in fiscal 1995, VMF originated 13,857 contracts. At June 30, 1995, VMF was servicing approximately 90,000 contracts with an aggregate dollar amount of $1,434 million of which VMF has ownership interest or contingent liability on approximately 67,000 contracts with an aggregate dollar amount of $1,201million. The Company expects that VMF will continue to originate a significant portion of the financing for purchasers of its homes. The volume of manufactured housing contracts originated by VMF for the periods indicated below and certain other information at the end of such periods are as follows:
Contract Originations Year Ended June 30, 1995 1994 1993 (Dollars in thousands) Principal Balance of Contracts Originated (in thousands) . . . . . $345,260 $292,435 $230,733 Number of Contracts Originated . . . 13,857 12,401 10,880 Average Contract Size (1) . . . . . . $ 24,916 $ 23,582 $ 21,207 Average Interest Rate (1) . . . . . . 12.24% 10.84% 11.61%
(1) At period end. The following table shows the size of the portfolio of manufactured housing contracts serviced by VMF on which it was contingently liable or owner on the dates indicated:
Contract Servicing Portfolio Year Ended June 30, 1995 1994 1993 Total Number of Contracts Being Serviced . . . . . . . . . . . . . . 66,960 60,165 52,433 Originated by VMF . . . . . . . . . 55,923 47,944 42,656 Acquired from other institutions . . . . . . . . . . . 11,037 12,221 9,777
VMF FUNDING. VMF draws on its short-term credit facilities with the Company to fund manufactured home loans. After short-term warehousing, VMF transfers or pledges these loans, generally in pools, to institutional investors or long-term lenders. 6 7 VMF maintains long-term committed credit facilities and other arrangements or relationships with institutional investors. It acts as a permanent lender on certain conventional loans in that it holds these loans as long-term receivables, pledging them as collateral for borrowings. VMF also permanently funds conventional loans by pooling them for sale to institutional investors. Proceeds of both sources of funding are principally used to repay short-term borrowings. VMF retains servicing in both cases. Loans insured by the Federal Housing Administration (FHA) or guaranteed by the Veterans Administration (VA) are permanently funded through the Government National Mortgage Association (GNMA) pass-through program. Under the GNMA program, installment sales contracts are warehoused by VMF and then pooled in denominations of approximately $1,000,000 to collateralize the issuance by VMF of securities guaranteed by GNMA under the provisions of the National Housing Act. Under the GNMA program, VMF retains the servicing of the installment sales contracts and is responsible for passing through payments under the contracts to GNMA security holders. During the fiscal year ended June 30, 1995, VMF originated installment sales contracts eligible for financing under the GNMA program having aggregate principal balances of $58 million. As of June 30, 1995, VMF was servicing 238 GNMA pools totaling $158 million in principal balances. Use of GNMA financing minimizes the Company's contingent liability for these installment sales contracts because of the government-insured nature of the loans. Accordingly, the Company believes that the use of this form of financing, for customers who qualify, increases the marketability of its manufactured homes. Certain of the agreements related to borrowings include covenants with respect to the Company's financial condition, corporate existence and employment of certain key individuals. The Company may remain contingently liable on installment sales contracts sold with recourse to institutional investors; this contingent liability amounted to approximately $49 million as of June 30, 1995. See Note 6 to the Consolidated Financial Statements in the Company's Annual Report to Shareholders. The interest rates on 99% of the long-term credit facilities or the pass-through certificates representing ownership of the pools are fixed or have adjustable rates with ceilings, while the remaining 1% have variable rates which provide for no minimum or maximum rate of interest. VMF attempts to match liabilities and assets as to both term and rate. This reduces loss exposure from interest rate fluctuations. VMF uses a number of techniques to achieve this result, principally by pricing its fixed rate receivables at or above the maximum rate allowed under such arrangements. When loans are funded under arrangements which do not have a maximum rate, the Company attempts to price these loans at or above forecasted interest rates. The Company minimizes the use of credit facilities which do not carry a maximum rate. The Company believes that, as long as buyers of the Company's homes remain sensitive primarily to the amount of their monthly payments rather than interest rates and VMF is able to continue to implement its loan practice and pricing policies, changes in interest rates will not materially effect its business. There can be no assurance, however, that a significant change in interest rates will not have a material effect on the Company's business and financial condition. Generally, the Company's and VMF's existing borrowing arrangements do not provide for interest rate hedging. ACQUIRED CONTRACTS AND SERVICING ARRANGEMENTS. The Acquired Contracts were originated by savings and loan associations or savings banks and acquired indirectly or directly from them by VMF. The Acquired Contracts were underwritten on the basis of underwriting criteria that were different from and, as a whole, not as strict as VMF's underwriting criteria. In fiscal 1992 and 1994, VMF became the servicer of 15,409 and 20,180 manufactured housing installment sales contracts with an approximate principal balance of $199 million and $285 million, respectively. VMF acts solely as servicer with respect to these contracts and, thus, has no ownership interest nor contingent liability related to this portfolio. At June 30, 1995, VMF was servicing approximately 22,565 of these installment sales contracts with an approximate principal balance of $240 million. DELINQUENCY AND REPOSSESSION EXPERIENCE. VMF performs recordkeeping and collection activities on all loans that it originates or purchases through portfolio acquisitions. Unrelated institutions purchasing the Company's installment sales contracts individually and directly from Company-owned retail centers perform their own recordkeeping and collection activities, although the Company is in some cases responsible for repossessing homes in the event such action becomes necessary. 7 8 Although the terms of the installment sales contracts vary according to the financial institutions which purchase the contracts, most contracts provide that the failure to make a payment as scheduled is an event of default which gives rise to the right to repossess the home. However, it is the policy of the Company, not to repossess the home until payments are three months delinquent unless the borrower has no apparent ability to bring payments current, in which case repossession may occur sooner. The Company generally follows the same policy with respect to loans insured by the FHA or guaranteed by the VA, although the Company must also file a notice of claim within nine months after default with the agency to preserve its rights under the programs. The following table sets forth delinquent installment sales contracts as a percentage of the total number of installment sales contracts on which the Company provided servicing and was either contingently liable or owner. A contract is considered delinquent if any payment is past-due 30 days or more.
Delinquency Percentage at June 30 1995 1994 1993 ---- ---- ---- Total delinquencies as percentage of contracts outstanding: All contracts . . . . . . . . . . . . . . . . 2.03% 1.97% 1.63% Contracts originated by VMF . . . . . . . . . 1.67 1.16 1.39 Contracts acquired from other institutions . . 4.04 5.14 2.68
The following table sets forth information related to loan loss/repossession experience for all installment contract receivables on which the Company is either owner or contingently liable:
Loan Loss/Repossession Experience at or for the year ended June 30 1995 1994 1993 ---- ---- ---- Net losses as percentage of Average loans outstanding: All contracts . . . . . . . . . . . . . . . . . . . . . 0.2% 0.3% 0.6% Contracts originated by VMF . . . . . . . . . . . . . . 0.0% 0.1% 0.2% Contracts acquired from other institutions. . . . . . . 2.2% 1.8% 2.9% Number of contracts in repossession: Total . . . . . . . . . . . . . . . . . . . . . . . . . 540 565 523 Contracts originated by VMF . . . . . . . . . . . . . . 422 388 333 Contracts acquired from other institutions. . . . . . . 118 177 190 Total number of contracts in repossession as percentage of total contracts . . . . . . . . . . . . . 0.81% 0.94% 1.00%
Generally, the Company pays off the related installment sales contract upon repossession of a home and then resells the home. The Company believes that as long as it is able to sell repossessed homes at satisfactory margins, the increased repossession costs associated with payoffs of installment sales contracts will be largely offset by resales of repossessed homes. See Note 6 to the Consolidated Financial Statements in the Company's Annual Report to Shareholders. There can be no assurance that the Company's future results with respect to the payoff and resale of repossessed homes will be consistent with its past experience. INSURANCE OPERATIONS. The Company acts as agent on physical damage and credit life insurance written by unaffiliated insurance companies (ceding companies) for purchasers of its manufactured homes. During the fiscal year ended June 30, 1995, the Company acted as the agent on physical damage and credit life insurance policies on approximately 73% and 45%, respectively, of Company retail sales. Physical damage policies issued through the Company's agency are reinsured through Vanderbilt Property and Casualty Insurance Co., LTD (VPC), a wholly-owned subsidiary of the Company incorporated during fiscal year 1993. The credit life insurance policies issued through the Company's agency are reinsured through Vanderbilt Life and Casualty Insurance Co., LTD, (VLCIC) a majority-owned subsidiary of the Company. 8 9 MANUFACTURED HOUSING COMMUNITIES In fiscal 1995 the Communities Group acquired 2,538 sites in nine communities bringing total sites owned to 15,541 at June 30, 1995, a 20% increase from the prior year. See "Properties. (item 2)". The following table lists the number of community sites owned and under exclusive marketing agreements and the aggregate occupancy rate at the end of the last three fiscal years:
June 30 1995 1994 1993 ---- ---- ---- Home sites owned 15,541 13,003 9,950 Exclusive marketing 0 0 480 ------ ------ ------ Total 15,541 13,003 10,430 ====== ====== ====== Occupancy rate 68% 64% 60% ====== ===== =====
REGULATION The Company's manufactured homes are subject to a number of federal, state and local laws. Construction of manufactured housing is governed by the National Mobile Home Construction and Safety Standards Act of 1974. In 1976, the Department of Housing and Urban Development (HUD) issued regulations under this Act establishing comprehensive national construction standards. The HUD regulations cover all aspects of manufactured home construction, including structural integrity, fire safety, wind loads and thermal protection. The Company's manufacturing facilities and the plans and specifications for its manufactured homes have been approved by a HUD-designated inspection agency. A HUD-approved organization regularly inspects the Company's manufactured homes for compliance during construction. Failure to comply with the HUD regulations could expose the Company to a wide variety of sanctions, including closing the Company's plants. The Company believes the homes it manufactures comply with all present HUD requirements. In addition, certain components of manufactured homes are subject to regulation by the Consumer Product Safety Commission which is empowered, in certain circumstances, to ban the use of component materials believed to be hazardous to health and to require the manufacturer to repair defects in components in its homes. In February 1983, the Federal Trade Commission adopted regulations requiring disclosure of a manufactured home's insulation specification. A variety of laws affect the sale of manufactured homes on credit by the Company. The Federal Consumer Credit Protection Act (Truth-in-Lending) and Regulation Z (issued by the Board of Governors of the Federal Reserve System) require written disclosure of information relative to such credit sales, including the amount of the annual percentage rate and the finance charge. The Federal Fair Credit Reporting Act also requires disclosure of certain information used as a basis to deny credit. The Federal Equal Credit Opportunity Act and Regulation B (issued by the Board of Governors of the Federal Reserve System) prohibit discrimination against any credit applicant based on sex, marital status, race, color, religion, national origin, age (provided the applicant has the capacity to contract), receipt of income from any public assistance program or the good faith exercise by the applicant of any right under the Consumer Credit Protection Act. Regulation B establishes administrative requirements for compliance with the Equal Credit Opportunity Act and, among other things, requires the Company to provide a customer whose credit request has been denied with a statement of reasons for the denial. The Federal Trade Commission has issued or proposed various Trade Regulation Rules dealing with unfair credit practices, collection efforts, preservation of consumers' claims and defenses and the like. Installment sales contracts eligible for inclusion in the GNMA Program are subject to credit underwriting requirements of the FHA or the VA. The movement and use of the Company's manufactured homes are subject to highway use laws, ordinances and regulations of various federal, state and local authorities. Such regulations may prescribe size and road use limitations and impose lower than normal speed limits and various other requirements. The Company's manufactured homes and its development of manufactured housing communities are also subject to local zoning and housing regulations. 9 10 The Company is subject to the Magnuson-Moss Warranty Improvement Act which regulates the descriptions of warranties on products. The description and substance of the Company's warranties are also subject to a variety of state laws and regulations. VPC and VLCIC are subject to insurance and other regulations of the British Virgin Islands. COMPETITION The manufactured housing industry is highly competitive at the manufacturing and retail levels in terms of price, service, delivery capabilities and product performance. There are many firms in direct competition with the Company. The Company believes it has a competitive advantage over firms which do not have manufacturing, retailing and financing capabilities. Since the Company's homes are a form of low-cost housing, they compete with other forms of such housing including apartments and conventionally-built and prefabricated homes. Some of the Company's competitors are larger and have significant financial resources while other competitors are quite small in relation to the size of the Company. The capital requirements for entry into both the manufacturing and retail fields are relatively small, with retail and inventory financing generally available to a prospective dealer. The Company is not able to estimate the total number of competitors in its marketing area. EMPLOYEES As of June 30, 1995, the Company employed 4,728 persons. Of these, 1,218 were employed in retail sales, 2,872 in manufacturing, 269 in financial services, 305 in communities and 64 in executive and administrative positions. The Company does not have any collective bargaining agreements and considers its employee relations to be good. SECTION 16 COMPLIANCE For the fiscal year ended June 30, 1995, all Forms 3, 4 and 5, as required by the Securities and Exchange Commission Rules under Section 16 of the Securities Exchange Act of 1934, were filed on time, except that amendments to Form 4 filed by Kevin T. Clayton for the sale of Common Stock in August 1994 and for the acquisition of Common Stock in April 1995, were filed late. ITEM 2. PROPERTIES The Company's executive offices and Financial Services operations are located in Knoxville, Tennessee in several wholly-owned one-story buildings made up of modular units (built by the Bean Station single-section plant) which total approximately 30,000 square feet of office space and approximately 16,000 square feet in an office building owned 50% by the Company and 50% by a related party. See "Item 13. Certain Relationships and Related Transactions." The following table sets forth the properties which the Company uses for its manufacturing operations and locations of its manufactured housing communities. All of the buildings used for manufacturing operations are constructed of fabricated metal on a concrete slab.
LOCATION OF PROPERTY APPROXIMATE MANUFACTURING OPERATIONS SQUARE FEET Owned by company Tennessee Maynardville 98,000 Savannah 85,000 Ardmore 53,000 Rutledge 87,000 Bean Station #1 103,000 Bean Station #2 128,000 Andersonville 126,000 White Pine 130,000 North Carolina Henderson 100,000 Oxford 80,000 Richfield 226,000 Georgia Waycross 80,000
10 11
APPROXIMATE MANUFACTURING OPERATIONS(CON'T) SQUARE FEET Texas Waco #1 93,000 Waco #2 80,000 Bonham 113,000 Leased Halls, Tennessee 69,000 APPROXIMATE COMMUNITIES ACRES Owned by company Arizona Phoenix 47 Colorado Denver 125 Thornton 184 Florida Gainesville (2) 132 Jacksonville (2) 85 Kissimmee 41 Mulberry 28 Georgia Douglasville (2) 97 Iowa Carter Lake 41 Missouri Independence 90 Michigan Kalamazoo 126 North Carolina Greensboro 83 Oklahoma Norman 44 Tennessee Farragut 23 Knoxville (3) 147 LaVergne 76 Morristown 12 Maryville (2) 67 Powell 23 Rockford 13 Tullahoma 18 Texas Arlington 43 Dallas (2) 84 Denton (3) 201 Fort Worth (4) 104 Flower Mound 18 Greenville 25 Houston (3) 115 Humble 55 Little Elm 48 Mesquite 27 Pearland 30 San Angelo 90 San Antonio (4) 206 Schertz 71 Wylie (2) 179 Virginia Evington 70
The Company-owned retail centers are generally one to four acre sites with a manufactured office unit serving as sales office. The balance of a retail center site is devoted to the display of homes. Of the 192 retail centers, 86 are owned and 106 occupy leased property. The Company does not believe that any of the property owned or leased for an individual retail center is material to its overall business. 11 12 All of the properties described above are well maintained, adequately insured and suitable for the purposes for which they are being used by the Company. The Company believes that its properties are adequate for its near-term needs. ITEM 3. LEGAL PROCEEDINGS. No material legal proceedings are pending other than routine litigation incidental to the business of the Company. The Company believes that such proceedings will not have any material adverse effect on it or its operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS. No matters were submitted to shareholders during the last quarter of the fiscal year. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS. (a) The Company's Common Stock is traded on the New York Stock Exchange. The following table sets forth, for the period from July 1, 1993 to June 30, 1995, the range of high and low closing sale prices as reported by the New York Stock Exchange, Inc.
Fiscal Fiscal 1995 1994 QUARTER ENDED HIGH LOW HIGH LOW September $18.60 $14.20 $19.68 $14.72 December 15.90 12.30 19.40 14.56 March 18.13 14.00 21.30 15.70 June 18.00 15.38 18.00 13.60
(b) As of August 18, 1995, there were 1,991 holders of record (approximately 27,000 beneficial holders) of the Company's Common Stock. (c) It is the policy of the Board of Directors of the Company to reinvest substantially all earnings in its business. The Board of Directors initiated the payment of cash dividends at the November 9, 1994 shareholders meeting of $.02 per share per quarter. Future dividend policy will depend on the Company's earnings, capital requirements, financial condition and other factors considered relevant by the Board of Directors. Additionally, certain of the Company's financing agreements have various covenants that restrict payments which may be made for dividends and other stock transactions. At June 30, 1995, the aggregate amount of earnings available for cash dividends or for repurchase of the Company's stock was $368,000,000. The following portions of the Company's 1995 Annual Report to Shareholders are incorporated herein by reference (page number references are to Annual Report): ITEM 6. SELECTED FINANCIAL DATA. Ten Year Review on page 14. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Management's Discussion and Analysis of Financial Condition and Results of Operations on pages 12-18. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. - Quarterly Results (unaudited) on page 13. - Report of Independent Accountants on page 16. - Consolidated Balance Sheets on page 16. - Consolidated Statements of Income on page 17. - Consolidated Statements of Changes in Shareholders' Equity on page 17. - Consolidated Statements of Cash Flows on page 18. - Notes to the Consolidated Financial Statements on pages 19-36. 12 13 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Executive Officers of the Company
NAME AGE POSITION James L. Clayton 61 Chairman of the Board and Chief Executive Officer Joseph H. Stegmayer 44 President and Chief Operating Officer (a) David M. Booth 42 Executive Vice President - Retail Kevin T. Clayton 32 Secretary (b) Timothy R. Rhoades 43 Treasurer (c)
(a) Mr. Stegmayer joined the Company in July 1993 as President and Chief Operating Officer. From 1982 to July 1993 he served as Vice President, Chief Financial Officer, Treasurer and Director of Worthington Industries, Inc. (b) Secretary since December 1993. Prior to December 1993, he was in various management positions within The Company. (c) Mr. Rhoades joined the Company in August 1993 as Corporate Controller and became Treasurer in November of 1993. From August 1992 to February 1993, he served as Chief Financial Officer of Lexalite International Corporation and prior to that held various financial positions with Worthington Industries, Inc. All other officers have been in their positions for at least five years. The Company's executive officers serve at the pleasure of the Board of Directors. All other required information is incorporated by reference to the Company's Proxy Statement under the heading ELECTION OF DIRECTORS. ITEM 11. EXECUTIVE COMPENSATION. Incorporated by reference to the Company's Proxy Statement under the heading EXECUTIVE COMPENSATION. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Incorporated by reference to the Company's Proxy Statement under the headings ELECTION OF DIRECTORS and VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF; SECURITIES OWNERSHIPS OF DIRECTORS AND OFFICERS. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Incorporated by reference to the Company's Proxy Statement. 13 14 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES. (a) The following documents are filed as part of this report: 1. Financial Statements: (Included in Annual Report - Exhibit 13). The following Consolidated Financial Statements of Clayton Homes, Inc. and its subsidiaries included in Part II, Item 8 are incorporated by reference to the 1995 Annual Report to Shareholders for the year ended June 30, 1995. Report of Independent Accountants. Consolidated Balance Sheets - June 30, 1995 and 1994. Consolidated Statements of Income - years ended June 30, 1995, 1994 and 1993. Consolidated Statements of Changes in Shareholders' Equity - years ended June 30, 1995, 1994 and 1993. Consolidated Statements of Cash Flows - years ended June 30, 1995, 1994 and 1993. Notes to the Consolidated Financial Statements. 3. Exhibits: 3. (a) Restated charter as amended.(A) (b) Bylaws.(B) (c) Amendment to Bylaws. (A) 4. (a) Specimen stock certificates.(E) (b) The Company agrees to furnish to the Commission, upon request, instruments relating to the long term debt of the Company or its subsidiaries. 10. (a) Form of shareholders' agreement between Clayton Homes, Inc. and Progressive Partners.(B) (b) Lease Agreement, dated June 29, 1972, as amended, between Clayton Homes, Inc. and Dean Planters Warehouse, Inc.(B) (subsequently assigned to CLF, a limited partnership which includes a related party). (c) Clayton Homes, Inc. 1983 Stock Option Plan.(B) (d) Clayton Homes, Inc. 1985 Stock Option Plan.(F) (e) 1991 Employee Stock Incentive Plan.(H) (f) Directors' Equity Plan.(H) (g) Directors' Equity Plan.(I) (h) Directors' Equity Plan.(J) 14 15 (i) Clayton Homes, Inc. Employee Savings Plan and partnership.(C) (j) Description of Clayton Homes, Inc. bonus arrangement for key executives.(J) 11. Computation of earnings per share. 13. Annual Report to Shareholders for year ended June 30, 1995.(D) 21. List of Subsidiaries of the Registrant. 23. Consent of Coopers & Lybrand L.L.P. 27. Financial Data Schedule (for SEC use only). - ------------------------------------------- (A) Filed with the Company's Form 10-K for the year ended June 30, 1992, and incorporated by reference thereto. (B) Filed as Exhibits to Registration Statement on Form S-1 (SEC File No. 2-83705) and incorporated by reference thereto. (C) Filed with Registration Statement on Form S-1 (SEC File No. 2-92565) and incorporated by reference thereto. (D) For the information of the Commission only, except to the extent of portions specifically incorporated by reference. (E) Filed as Exhibits to Registration Statement on Form S-1 (SEC File No. 33-2665) and incorporated by reference thereto. (F) Filed with the Company's Proxy Statement for the Annual Meeting of Shareholders held November 4, 1985, and incorporated by reference thereto. (G) Filed with Registration Statement on Form S-3 (SEC File No. 39172), and incorporated by reference thereto. (H) Filed with the Company's Proxy Statement for the Annual Meeting of Shareholders held November 12, 1991, and incorporated by reference thereto. (I) Filed with the Company's Proxy Statement for the Annual Meeting of Shareholders held November 11, 1992, and incorporated by reference thereto. (J) Filed with the Company's Proxy Statement for the Annual Meeting of Shareholders to be held November 10, 1993, and incorporated by reference thereto. - --------------------------------------------- (b) Reports on Form 8-K. No reports were filed in the Registrant's last quarter. 15 16 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Knoxville, State of Tennessee, on September 21, 1995. CLAYTON HOMES, INC. By: s/Joseph H. Stegmayer ------------------------- Joseph H. Stegmayer President and Chief Operating Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated. s/James L. Clayton September 21, 1995 Chairman of the Board and - ------------------------ Chief Executive Officer James L. Clayton (Principal Executive Officer) s/Joseph H. Stegmayer September 21, 1995 President, Chief Operating Officer - ------------------------ and Director Joseph H. Stegmayer s/Timothy R. Rhoades September 21, 1995 Treasurer (Principal Accounting - ------------------------ Officer) Timothy R. Rhoades s/Kevin T. Clayton September 21, 1995 Secretary - ------------------------ Kevin T. Clayton s/B. Joe Clayton September 21, 1995 Director - ------------------------ B. Joe Clayton s/James D. Cockman September 21, 1995 Director - ------------------------ James D. Cockman s/Wallace C. Doud September 21, 1995 Director - ------------------------ Wallace C. Doud s/Dan W. Evins September 21, 1995 Director - ------------------------ Dan W. Evins s/Wilma H. Jordan September 21, 1995 Director - ------------------------ Wilma H. Jordan s/C. Warren Neel September 21, 1995 Director - ------------------------ C. Warren Neel
16 EX-11 2 EARNINGS PER SHARE COMPUTATION 1 EXHIBIT 11. Earnings per share computation.
YEAR ENDED JUNE 30, (in thousands except per share data) 1995 1994 1993 Reported income before accounting change (primary) $87,000 $69,285 $53,756 Add: Convertible debentures interest expense, net of tax 0 1,211 1,931 ------- ------- ------- Net income before accounting change (fully diluted) $87,000 $70,496 $55,687 ======= ======= ======= Reported net income (primary) $87,000 $72,285 $53,756 Add: Convertible debentures interest expense, net of tax 0 1,211 1,931 ------- ------- ------- Net income after accounting change, (fully diluted) $87,000 $73,496 $55,687 ======= ======= ======= Weighted average shares outstanding (primary) 75,922 73,649 71,360 Shares issuable upon conversion of all debentures 0 3,087 4,983 ------- ------- ------- Weighted average shares outstanding (fully diluted) 75,922 76,736 76,343 ======= ======= ======= Net Income per share before accounting change: Primary $ 1.15 $ .94 $ .75 Fully diluted 1.15 .92 .73 Net Income per share: Primary $ 1.15 $ .98 $ .75 Fully diluted 1.15 .96 .73
17 EX-13 3 ANNUAL REPORT TO SHAREHOLDERS 1 Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations The following table reflects the percentage changes in sales by the Company's retail and community sales centers and in wholesale sales to independent dealers. It also shows the percentage changes in the average number of Company-owned retail centers, communities and independent dealers.
Year Ended June 30, --------------------------- 1995 vs 1994 1994 vs 1993 ------------ ------------ Retail Dollar sales . . . . . . . . . . +17.8% +26.1% Average number of retail centers +15.9% +14.9% Average dollar sales per retail center . . . . . . . . . +1.7% +9.7% Average home price . . . . . . . +5.3% +8.9% Wholesale Dollar sales . . . . . . . . . . +28.7% +47.2% Average number of independent dealers . . . . . . . . . . . . +6.6% +11.6% Average dollar sales per independent dealer . . . . . . +20.8% +32.0% Average home price . . . . . . . +9.6% +8.0% Communities Dollar sales . . . . . . . . . . . +24.9% +29.6% Average number of communities . . +27.8% +36.2% Average dollar sale per community . . . . . . . . . . . -2.3% -4.8% Average home price . . . . . . . . +0.9% +7.8%
Fiscal 1995 compared to Fiscal 1994 Total revenues for the year ended June 30, 1995, increased 21% because of the 22% increase in manufactured housing sales and the 16% rise in financial services and other income. Net sales of the Retail Group rose 18% to $374 million on a 16% rise in the average number of Company-owned retail centers open during the year and a 5% increase in the average home price. This was partially offset by a slight decrease in the average number of homes sold per Company retail center. During the year, the Company acquired or opened 29 retail locations while two unprofitable retail centers were closed. The Company constantly evaluates specific local markets and opens, acquires, or closes retail centers as conditions warrant. 12 2 Net sales of the Manufacturing Group to independent dealers increased 29% to $222 million based on a 17% increase in the number of homes sold and a 10% increase in the average wholesale price. The higher average home price resulted from increased raw materials costs and a shift in the product mix toward the more expensive multi-section home. Multi-section homes accounted for 35% of total shipments versus 34% last year. Net sales of the Communities Group rose 25% to $25 million on a 24% rise in unit sales and a slight improvement in the average home price. The 16% increase in financial services and other income to $137 million from $118 million resulted principally from a $6 million rise in rental revenues from the Communities operation and from $8 million of growth in earned insurance premiums and commissions. The following table reflects the fluctuations in interest and loan servicing revenues and financial services interest expense related to changes in interest and servicing rates and changes in the average balances of receivables owned and receivables sold. Receivables owned or sold are the installment contract receivables originated from the retail sale of homes by the Company and independent dealers and purchases of contracts from unrelated financial institutions. Receivables owned generate interest income and, in certain cases, have been used to collateralize debt or to create a subordinated interest for the Company in a pool of receivables accounted for on a consolidated basis. Receivables sold are pooled and generate loan service revenues equal to the excess of principal and interest collected over the amount required to be remitted to investors after deducting net credit losses. Servicing is retained by the Company in all cases. The change due to both rate and volume has been allocated in proportion to the relationship of the absolute dollar amounts of the change in each. Comparative fluctuations are given between the years ended June 30, 1995, 1994 and 1993:
Rate/Volume Analysis (in thousands) 1995 vs 1994 1994 vs 1993 Increase (Decrease) Increase (Decrease) Due to Due to ------------------- ------------------- Rate Volume Total Rate Volume Total ---- ------ ---- ------ Interest and loan servicing revenues: Receivables owned $ 1,599 $(5,197) $(3,598) $(4,968) $ 351 $(4,617) Receivables sold (4,680) 8,344 3,664 1,526 6,657 8,183 Master servicing contract 1,733 (2,160) (427) (1,466) 2,640 1,174 -------- -------- -------- -------- ------- -------- $(1,348) $ 987 $ (361) $(4,908) $ 9,648 $ 4,740 ======== ======== ======== ======== ======= ========
13 3 For the year ended June 30, 1995, interest and loan servicing revenues remained at $60 million. The average balance of receivables owned decreased 17% to $205 million with an increase in the weighted averaged interest rate to 12.7% from 11.6%. The average balance of receivables sold increased 34% to $881 million with a decrease in the weighted average loan service spread to 3.6% from 4.2%. Financial Services interest expense decreased $2.5 million, or 31%, to $5.5 million. Average debt collateralized by installment contract receivables dropped 30% to $52 million with a decrease in the weighted average interest rate to 10.6% from 10.8%. Loan covenants preclude prepaying these obligations. Gross profit margins in 1995 increased to 30.5% from 29.9% last year. The increase primarily results from a higher percentage of Clayton manufactured product sold to the Retail Group compared to new retail sales. In 1995, Manufacturing sales to Retail were 49.8% of new retail sales compared to 48.7% in 1994. Selling, general and administrative expenses were 30.4% and 30.1% of sales for the years ended June 30, 1995 and 1994, respectively. Expenses associated with the start up of two new plants in the fourth quarter and from additional reserves in the insurance group were the primary causes of the increase. No provision for credit losses and contingencies was made in 1995 or 1994 because excellent loss and delinquency experience of receivables for which the Company is directly or contingently liable. Net losses as a percentage of loans outstanding for fiscal 1995 dropped to 0.2% from 0.3% last year while delinquency rates on all loans remained constant at 2.0%. On June 30, 1995 reserves equaled 2.1% of outstanding loans owned or on which the Company has contingent liability. 14 4 Inventories increased at June 30, 1995 from June 30, 1994:
Change Manufacturing Division (in millions) ---------------------- Increase in raw materials $ .7 Decrease in finished goods (.9) Retail Division --------------- Net increase of 27 Company-owned sales centers 10.1 Increase in average inventory levels at 165 Company-owned sales centers 1.3 Communities Division -------------------- Acquisition of nine manufactured housing communities and related inventory 1.5 Decrease in average inventory levels at 46 manufactured housing communities (1.6) ----- $11.1 =====
Fiscal 1994 compared to Fiscal 1993 Total revenues for the year ended June 30, 1994, increased 32% because of the 33% increase in manufactured housing sales and the 29% rise in financial services and other income. Net sales of the Retail Group rose 26% to $318 million primarily on a 15% rise in the average number of Company- owned retail centers open during the year, a 9% increase in the average home price, and a slight increase in the average number of homes sold per Company retail center. The rise in the average home price resulted from a continued shift in the product mix toward larger single and multi-section homes. Multi-section homes represented 30% of all homes sold by the Retail Group versus 28% in the prior year. During the year, the Company acquired or opened 23 retail locations while one unprofitable retail center was closed. The Company constantly evaluates specific local markets and opens, acquires, or closes retail centers as conditions warrant. Net sales of the Manufacturing Group to independent dealers increased 47% to $173 million as the number of homes sold rose 36% and the average wholesale price climbed 8%. The increase in the average home price came mainly from improved recouping of raw materials costs and a shift in the product mix toward the more-expensive multi-section home. Multi-section homes accounted for 34% of total shipments versus 31% last year. Net sales of the Communities Group rose 30% to $20 million on a 20% rise in unit sales and an 8% improvement in the average home price. 15 5 The 29% growth in financial services and other income to $118 million from $92 million resulted principally from a $7 million increase in the gains on sale of installment contract receivables, net of amortization, from the wholly-owned finance subsidiary, Vanderbilt Mortgage and Finance, Inc. (VMF), a $5 million rise in rental revenues in the Communities operation, and a $10 million growth in earned insurance premiums and commissions. For the year ended June 30, 1994, interest and loan servicing revenues were up $5 million, or 9%, to $60 million. The average balance of receivables owned increased 1% to $248 million with a decrease in the weighted averaged interest rate to 11.6% from 13.6%. The average balance of receivables sold increased 32% to $658 million with an improvement in the weighted average loan service spread to 4.2% from 3.9%. Financial Services interest expense decreased $4 million, or 33%, to $8 million. Average debt collateralized by installment contract receivables dropped 35% to $74 million with an increase in the weighted average interest rate to 10.8% from 10.1%. Loan covenants preclude prepaying these obligations. Gross profit margins in 1994 declined slightly to 29.9% from 30.5% last year. The decrease is primarily the result of higher lumber costs temporarily absorbed by the Manufacturing Group during the second and third quarters and a shift in the Manufacturing/Retail sales mix to a greater proportion of manufacturing wholesale sales which have lower margins. Selling, general and administrative expenses were 30.1% and 29.6% of sales for the years ended June 30, 1994 and 1993, respectively. Substantially all of the increase is attributable to the Financial Services operations: additional staff to service the 37% growth in receivables serviced and the claims costs of the insurance subsidiaries formed in January 1993. No provision for credit losses and contingencies was made in 1994 or 1993 due to the excellent loss and delinquency experience of the receivables for which the Company is directly or contingently liable. Net losses as a percentage of loans outstanding for fiscal 1994 dropped to 0.3% from 0.6% last year while delinquency rates declined to 1.2% of contracts originated by VMF at June 30, 1994, versus 1.4% at the same time last year. On June 30, 1994 reserves equaled 2.3% of outstanding loans owned or on which the Company has contingent liability. 16 6 Inventories increased at June 30, 1994 from June 30, 1993:
Manufacturing Division (in millions) ---------------------- Increase in raw materials $0.2 Increase in finished goods 2.5 Retail Division --------------- Net increase of 22 Company-owned sales centers 8.0 Increase in average inventory levels at 143 Company-owned sales centers 1.0 Communities Division -------------------- Acquisition of 13 manufactured housing communities and related inventory 2.6 Decrease in average inventory levels at 33 manufactured housing communities and related inventory (1.7) ------ $12.6 ======
Fourth Quarter Results The increase in revenues and net income during the fourth quarters of fiscal 1995 and 1994 are not indicative of future operating trends but rather reflect the seasonality of the manufactured housing industry. In recent years, approximately 30% of the Company's sales have occurred in the fourth quarter. Liquidity and Capital Resources During fiscal 1995, the Company originated and acquired approximately $371 million of installment contract receivables. The Company financed these originations and acquisitions primarily with $377 million in proceeds from the pooling and sale of approximately $354 million of installment contract receivables. Additional funding came from operating cash flows and collections of installment contract receivables. The Company invested approximately: $15 million in the acquisition of nine properties for manufactured housing communities and $11 million in related rental units, $6 million for the opening of Company-owned retail centers, $18 million for the construction of three new plants and the improvement of existing manufacturing facilities and $1 million for other fixed assets using cash generated from operations. The Company expects to invest approximately $18 million in 1996 in the acquisition or construction of properties for manufactured housing communities, up to $8 million for new Company-owned retail centers, up to $6 million for the construction and improvement of manufacturing facilities and to originate $423 million of installment contract receivables. The Company anticipates meeting cash needs for 1996 and thereafter with cash flows from operations, current cash balances, and sales of installment contact 17 7 receivables and GNMA certificates. New Accounting Standard The Financial Accounting Standards Board issued a new accounting standard (SFAS No. 115) that revises the accounting for investment securities. The Company adopted SFAS No. 115 effective July 1, 1994. The accounting standard is discussed in Note 1 to the consolidated financial statements. Effects of Inflation Inflation has had an insignificant impact on the Company over the past several years. 18 8 QUARTERLY RESULTS (UNAUDITED)
First Second Third Fourth Sept 30 Dec 31 Mar 31 June 30 Year (in thousands except per share data) 1995 Revenues $168,454 $177,478 $179,683 $232,477 $758,092 Operating income 27,200 27,191 35,060 42,447 131,898 Income before accounting change 18,225 18,165 22,310 28,300 87,000 Net income $ 18,225 $ 18,165 $ 22,310 $ 28,300 $ 87,000 Income per share before accounting change: Primary $.24 $.24 $.29 $.38 $1.15 Fully diluted $.24 $.24 $.29 $.38 $1.15 Net Income per share: Primary $.24 $.24 $.29 $.38 $1.15 Fully diluted $.24 $.24 $.29 $.38 $1.15 Shares outstanding: Primary 76,058 75,685 75,873 76,073 75,922 Fully diluted 76,058 75,685 75,873 76,073 75,922 Price range of common stock: High $ 18.60 $ 15,90 $ 18.13 $ 18.00 $18.60 Low 14.20 12.30 14.00 15.38 12.30 Close $ 15.20 15.75 17.13 16.38 16.38 Dividends per common share -- $ .02 $ .02 $ .02 $ .06 1994 Revenues $135,959 $145,951 $150,236 $196,090 $628,236 Operating income 24,049 23,375 27,058 34,162 108,644 Income before accounting change 14,828 14,834 17,521 22,102 69,285 Net income $ 17,828 $ 14,834 $ 17,521 $ 22,102 $ 72,285 Income per share before accounting change: Primary $.21 $.21 $.23 $.29 $.94 Fully diluted $.20 $.20 $.23 $.29 $.92 Net Income per share: Primary $.25 $.21 $.23 $.29 $.98 Fully diluted $.24 $.20 $.23 $.29 $.96 Shares outstanding: Primary 71,669 71,929 74,371 76,628 73,649 Fully diluted 76,651 76,839 76,826 76,628 76,736 Price range of common stock: High $19.68 $19.40 $21.30 $18.00 $21.30 Low 14.72 14.56 15.70 13.60 13.60 Close $17.36 $19.40 $16.90 $14.10 $14.10 Dividends per common share -- -- -- -- --
13 9 Ten Year Review
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 INCOME STATEMENT DATA: (in thousands except per share and OTHER DATA) Revenues: Net sales $621,351 $510,153 $384,491 $296,849 $257,557 $219,443 $208,624 $196,110 $166,272 $152,742 Financial services and other income 136,741 118,083 91,750 74,330 62,392 40,316 33,270 28,671 20,659 15,709 -------- -------- -------- -------- -------- -------- ------- ------- ------- -------- 758,092 628,236 476,241 371,179 319,949 259,759 241,894 224,781 186,931 168,451 Cost and expenses: Cost of sales 431,826 357,698 267,201 206,049 176,374 153,786 147,982 138,468 117,538 108,886 Selling, general and administrative 188,835 153,698 113,695 84,785 76,420 60,220 55,456 50,781 40,222 36,914 Financial services interest 5,533 8,196 11,819 16,585 18,198 11,595 9,911 10,127 6,628 5,658 Provision for credit losses and contingencies 0 0 0 3,300 3,772 2,213 1,539 2,010 1,863 1,600 -------- ------- ------- ------- ------- ------- ------- ------- ------- ------- 626,194 519,592 392,715 310,719 274,764 227,814 214,888 201,386 166,251 153,058 -------- ------- ------- -------- ------- ------- ------- ------- ------- ------- Operating income 131,898 108,644 83,526 60,460 45,185 31,945 27,006 23,395 20,680 15,393 Interest income (expense) 3,902 (359) (170) (317) (592) (575) (1,042) (1,073) (838) (276) -------- ------- ------- --------- -------- -------- -------- -------- -------- -------- Income before income taxes 135,800 108,285 83,356 60,143 44,593 31,370 25,964 22,322 19,842 15,117 Provision for income taxes (48,800) (39,000) (29,600) (20,800) (16,000) (11,500) (9,714) (8,370) (9,486) (6,741) --------- -------- ------- --------- -------- ------- ------- ------- ------- -------- Income before accounting change 87,000 69,285 53,756 39,343 28,593 19,870 16,250 13,952 10,356 8,376 Cumulative effect of accounting change 0 3,000 0 0 0 0 0 0 0 0 -------- ------- ------- -------- -------- -------- ------- ------- ------- ------ Net income $ 87,000 $72,285 $ 53,756 $ 39,343 $ 28,593 $ 19,870 $16,250 $13,952 $10,356 $8,376 ======== ======= ======== ======== ======== ======== ======= ======= ======= ====== Income before accounting change per share: Primary $1.15 $ .94 $ .75 $ .58 $ .52 $ .40 $ .34 $ .29 $ .21 $ .18 Fully diluted $1.15 $ .92 $ .73 $ .57 $ .47 $ .36 $ .30 $ .26 $ .19 $ .18 Net income per common share: Primary $1.15 $ .98 $ .75 $ .58 $ .52 $ .40 $ .34 $ .29 $ .21 $ .18 Fully diluted $1.15 $ .96 $ .73 $ .57 $ .47 $ .36 $ .30 $ .26 $ .19 $ .18 Average shares outstanding: Primary 75,922 73,649 71,360 67,772 55,624 49,161 48,864 48,775 49,835 49,610 Fully diluted 75,922 76,736 76,343 72,755 64,623 61,551 61,405 61,573 58,388 52,474 Dividends per common share $ .06 -- -- -- -- -- -- -- -- -- BALANCE SHEET DATA: Total assets $761,151 $701,148 $587,032 $554,780 $488,817 $339,099 $294,754 $275,835 $232,159 $164,835 Long-term obligations 48,737 70,680 137,038 192,931 227,444 177,374 163,471 157,153 132,220 85,225 Shareholders' equity $544,187 $462,154 $348,630 $292,950 $200,992 $108,334 $ 87,462 $ 70,651 $ 58,530 $ 49,257 OTHER DATA: Company-owned sales centers 192 165 143 127 123 96 99 100 88 86 Independent dealers 421 372 371 312 330 322 269 245 240 218 Manufacturing plants 16 13 13 11 10 10 10 10 8 7
10 REPORT OF INDEPENDENT ACCOUNTANTS We have audited the accompanying consolidated balance sheets of Clayton Homes, Inc. and Subsidiaries as of June 30, 1995 and 1994, and the related consolidated statements of income, changes in shareholders' equity, and cash flows for each of the three years in the period ended June 30, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Clayton Homes, Inc. and Subsidiaries as of June 30, 1995 and 1994, and the consolidated results of their operations and their cash flows for each of the three years in the period ended June 30, 1995 in conformity with generally accepted accounting principles. As discussed in Note 1 to the consolidated financial statements, the Company changed its methods of accounting for securities and income taxes in 1995 and 1994, respectively. COOPERS & LYBRAND L.L.P. Knoxville, Tennessee August 18, 1995 CLAYTON HOMES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
June 30, 1995 1994 ---- ---- (in thousands) ASSETS Cash and cash equivalents $ 49,394 $ 38,922 Receivables, principally installment contracts and residual interests, net of reserves for credit losses of $ 8,329 and $9,877 and unamortized discount of $9,001 and $12,022 343,408 354,114 Inventories 88,455 77,317 Securities held-to-maturity, approximate market value of $20,193 and $19,850 20,361 10,850 Property, plant and equipment, net 166,048 129,883 Other assets 93,485 90,062 -------- -------- Total assets $761,151 $701,148 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable and accrued liabilities $ 63,949 $ 55,844 Long-term obligations 48,737 70,680 Deferred income taxes 9,382 7,258 Other liabilities 94,896 105,212 -------- -------- Total liabilities 216,964 238,994 Shareholders' equity Preferred stock, $.10 par value, authorized 1,000 shares, none issued --- --- Common stock, $.10 par value, authorized 100,000 shares, issued 75,570 at June 30, 1995 and 60,240 at June 30, 1994 7,557 6,024 Additional paid-in capital 170,169 171,994 Retained earnings 366,461 284,136 -------- -------- Total shareholders' equity 544,187 462,154 -------- -------- Total liabilities and shareholders' equity $761,151 $701,148 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 16 11 CLAYTON HOMES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
Year ended June 30, 1995 1994 1993 ---- ---- ---- (in thousands except per share data) Revenues: Net sales $621,351 $510,153 $384,491 Financial services and other income 136,741 118,083 91,750 -------- -------- -------- 758,092 628,236 476,241 Costs and expenses: Cost of sales 431,826 357,698 267,201 Selling, general and administrative 188,835 153,698 113,695 Financial services interest 5,533 8,196 11,819 ------- ------- ------- 626,194 519,592 392,715 -------- -------- -------- Operating income 131,898 108,644 83,526 Interest income (expense), net 3,902 (359) (170) -------- -------- --------- Income before income taxes and cumulative effect of change in method of accounting 135,800 108,285 83,356 Provision for income taxes (48,800) (39,000) (29,600) -------- -------- -------- Income before change in method of accounting 87,000 69,285 53,756 Change in method of accounting for income taxes --- 3,000 --- -------- ------- ------- Net Income $ 87,000 $72,285 $53,756 ======== ======= ======= Income per common share before change in method of accounting: Primary $ 1.15 $ .94 $ .75 Fully diluted $ 1.15 $ .92 $ .73 Cumulative effect of change in method of accounting per common share: Primary $ -- $ .04 $ -- Fully diluted $ -- $ .04 $ -- Net income per common share: Primary $ 1.15 $ .98 $ .75 Fully diluted $ 1.15 $ .96 $ .73 Average shares outstanding: Primary 75,922 73,649 71,360 Fully diluted 75,922 76,736 76,343
The accompanying notes are an integral part of these consolidated financial statements. CLAYTON HOMES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Total Additional Shareholders' Common Paid-in Retained Equity Stock Capital Earnings ------------ ------ ---------- -------- (in thousands) Balance at June 30, 1992 $292,950 $3,567 $131,288 $158,095 Net income 53,756 --- --- 53,756 Five-for-four stock split --- 896 (896) --- Issuances related to stock incentive, employee benefit plans and other 1,924 19 1,905 --- -------- ------ -------- -------- Balance at June 30, 1993 348,630 4,482 132,297 211,851 Net income 72,285 --- --- 72,285 Five-for-four stock split --- 1,126 (1,126) --- Conversion of subordinated debt 40,265 398 39,867 --- Purchase of 210 shares of common stock (4,175) (21) (4,154) --- Issuances related to stock incentive, employee benefit plans and other 5,149 39 5,110 --- ------- ----- ------- ------- Balance at June 30, 1994 462,154 6,024 171,994 284,136 Net income 87,000 --- --- 87,000 Five-for-four stock split --- 1,505 (1,505) --- Purchase of 317 shares of common stock (5,156) (32) (5,124) --- Dividends declared ($.06 per share) (4,675) --- --- (4,675) Issuances related to stock incentive, employee benefit plans and other 4,864 60 4,804 --- ------- ----- ------- ------- Balance at June 30, 1995 544,187 7,557 170,169 366,461
The accompanying notes are an integral part of these consolidated financial statements. 17 12 CLAYTON HOMES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended June 30, 1995 1994 1993 ---- ---- ---- (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $87,000 $72,285 $53,756 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 8,296 6,679 4,991 Gain on sale of installment contract receivables, net of amortization (14,744) (16,276) (9,472) Stock issued for profit-sharing 401(k) contribution 3,281 2,171 1,682 Deferred income taxes 2,124 2,924 2,200 Cumulative effect of change in method of accounting for income taxes --- (3,000) --- Increase in other receivables, net (22,964) (13,290) (12,750) Increase in inventories (11,138) (12,590) (12,403) Increase in accounts payable and accrued liabilities 6,906 21,393 5,116 Other 1,390 28,908 20,529 -------- -------- -------- Cash provided by operations 57,371 89,204 53,649 Origination of installment contract receivables (345,260) (292,435) (230,733) Proceeds from sales of originated installment contract receivables 369,873 262,346 195,037 Principal collected on originated installment contract receivables 25,003 33,046 34,442 -------- ------- -------- Net cash provided by operations 106,987 92,161 52,395 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of installment contract receivables (26,074) ( 91,882) ( 21,258) Proceeds from sales of acquired installment contract receivables 7,112 57,588 14,371 Principal collected on acquired installment contract receivables 17,760 15,098 15,376 Acquisition of partnership interest, net of debt --- --- (9,748) Acquisition of property, plant and equipment, net (44,462) (35,601) (22,705) Decrease (increase) in restricted cash and investments 3,141 (21,149) ( 4,736) -------- --------- -------- Net cash used in investing activities (42,523) ( 75,946) (28,700) CASH FLOWS FROM FINANCING ACTIVITIES: Dividends Paid (3,162) --- --- Proceeds from short term borrowings 111,394 106,319 2,202 Repayment of short-term borrowings (136,394) (83,521) --- Repayment of debt collateralized by installment contract receivables (21,943) (26,368) (60,868) Issuance of stock for incentive plans and other (1,269) (1,784) 242 Repurchase of common stock (5,156) (4,175) --- -------- ------- ------- Net cash used by financing activities (53,992) (5,961) (58,424) -------- ------- ------- Net increase (decrease) in cash and cash equivalents 10,472 10,254 (34,729) Cash and cash equivalents at beginning of year 38,922 28,668 63,397 -------- ------- ------- Cash and cash equivalents at end of year $ 49,394 $38,922 $28,668 ======== ======= =======
Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $ 5,823 $10,049 $16,176 Income taxes $ 54,725 $22,441 $25,047
Supplemental disclosure of non-cash activities: In 1995 and 1994, pass-through certificates aggregating $9,500 and $10,850, respectively, were received coincidental with the sale of receivables. The accompanying notes are an integral part of these consolidated financial statements. 18 13 CLAYTON HOMES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Summary of Significant Accounting Policies Consolidated Financial Statements The consolidated financial statements include the accounts of Clayton Homes, Inc. (CHI) and its wholly-owned subsidiaries. Financial Services subsidiaries consist of Vanderbilt Mortgage and Finance, Inc. (VMF), a finance subsidiary, and Vanderbilt Life Insurance Company (VLIC), Vanderbilt Life and Casualty Insurance Co., Ltd. (VLAC), and Vanderbilt Property and Casualty Insurance Co., Ltd. (VPC), insurance subsidiaries. CHI and its subsidiaries are collectively referred to as the Company. Significant intercompany accounts and transactions have been eliminated in the financial statements. The Company operates in three principal business segments: Manufactured Housing, Financial Services, and Communities. - Parent Company Condensed financial information of CHI with VMF, VLIC, VLAC and VPC accounted for on the equity basis is as follows:
CONDENSED BALANCE SHEETS June 30, 1995 1994 (in thousands) Cash and cash equivalents $47,576 $ 37,905 Receivables 49,210 21,999 Inventories 88,455 77,317 Advances to unconsolidated subsidiaries 48,000 48,000 ------- -------- Current assets 233,241 185,221 Investments in and advances to unconsolidated subsidiaries 230,039 235,056 Property, plant and equipment, at cost, net 166,048 129,883 -------- -------- Total assets $629,328 $550,160 ======== ======== Short-term obligations $ 106 $ 25,144 Accounts payable 41,060 28,803 Accrued expenses and other liabilities 9,924 16,443 Federal and state income taxes 2,824 1,366 ------- -------- Current liabilities 53,914 71,756 Long-term obligations less current maturities 4,991 5,089 Notes payable to unconsolidated subsidiaries 17,415 7,053 Reserve for credit losses and contingencies 3,825 2,650 Deferred income taxes 4,996 1,458 Shareholders' equity 544,187 462,154 ------- -------- Total liabilities and shareholders' equity $629,328 $550,160 ======== ========
19 14 CONDENSED STATEMENTS OF INCOME
Year ended June 30, 1995 1994 1993 ---- ---- ---- (in thousands) Revenues: Net sales $621,351 $510,153 $384,491 Equity in net income of unconsolidated subsidiaries 19,331 34,066 27,062 Insurance commissions, rent and other 65,773 34,026 27,659 Interest and dividend income 10,188 5,965 4,252 ------- -------- -------- 716,643 584,210 443,464 Costs and expenses: Cost of sales 431,826 357,697 267,201 Selling, general and administrative 162,517 134,773 105,842 Interest --- 655 1,425 -------- -------- -------- 594,343 493,125 374,468 -------- -------- -------- Income before income taxes 122,300 91,085 68,996 Provision for income taxes (35,300) (21,800) (15,240) -------- --------- --------- Income before accounting change 87,000 69,285 53,756 Cumulative effect of accounting change --- 3,000 --- -------- -------- -------- Net income $ 87,000 $ 72,285 $ 53,756 ======== ======== ========
20 15 - Subsidiaries The following information is provided for the consolidated financial services subsidiaries. Such subsidiaries consist of VMF, VLIC, VLAC and VPC. Through VMF, CHI arranges to finance a portion of its retail sales. VLIC, VLAC and VPC reinsure risk on credit life and physical damage insurance policies issued by a non-related insurance company (a ceding company) principally connected with credit sales. The financial statements of the Manufactured Home Contracts 1990-1 Trust, CABS, Inc., and Vanderbilt SPC, Inc. special purpose finance subsidiaries of VMF, are also included in the condensed combined financial statements below. Condensed combined financial information for these subsidiaries is as follows: Condensed Combined Balance Sheets
June 30, 1995 1994 ---- ---- (in thousands) Installment contract receivables, net of reserve for credit losses of $5,900 and $7,227 and unamortized discount of $9,001 and $12,022 (pledged $75,000 and $100,000 at June 30, 1995, and 1994, respectively) $296,627 $335,785 Other assets 116,445 104,907 -------- -------- Total assets $413,072 $440,692 ======== ======== Notes payable collateralized by installment contract receivables $ 43,640 $ 65,447 Unearned premiums 31,901 25,257 Other liabilities 79,543 77,831 Due to CHI 122,598 155,934 Shareholder's equity 135,390 116,223 -------- -------- Total liabilities and shareholder's equity $413,072 $440,692 ======== ========
Condensed Combined Statements of Income
Year ended June 30, 1995 1994 1993 ---- ---- ---- (in thousands) Revenue $71,936 $84,657 $64,684 Expenses: Interest expense 10,485 12,422 16,375 Other 28,620 20,969 6,887 Income taxes 13,500 17,200 14,360 ------- ------- ------- 52,605 50,591 37,622 ------- ------- ------- Net income $19,331 $34,066 $27,062 ======= ======= =======
VMF paid CHI endorsement fees of $13,784,000 in 1995; $10,414,000 in 1994; and $8,222,000 in 1993. VMF also paid interest to CHI of $9,365,000 in 1995: $7,136,000 in 1994; and $4,555,000 in 1993. Such intercompany payments have been eliminated in the consolidated financial statements but are expensed on VMF's separate financial statements to arrive at operating income for the Financial Services Group. 21 16 Estimated principal receipts under installment contract receivables for each of the five fiscal years subsequent to 1995 are as follows: 1996 $170,000,000 1997 21,000,000 1998 18,000,000 1999 14,000,000 2000 6,000,000
The estimated principal receipts are based on the scheduled payments and estimated prepayments of principal of the installment contract receivables. Estimated principal receipts for the year ending June 30, 1996 include amounts relating to the sale of $185 million of installment contract receivables in August 1995. VMF provides servicing for investors in installment contract receivables. Total contracts serviced at June 30, 1995 and 1994, including contracts held for investment, were approximately $1,434 and $1,316 million, respectively. Income Recognition Sales to independent dealers of homes produced by CHI are recognized as revenue upon shipment. Retail sales are recognized when cash payment is received or, in the case of credit sales, which represent the majority of retail sales, when a down payment is received and the customer enters into an installment sales contract. Most of these installment sales contracts, which are normally payable over 36 to 180 months, are financed by VMF. As is customary in the manufactured housing industry, CHI receives from VMF, and other financial institutions endorsement fees over the lives of installment contract receivables in consideration for CHI's guaranty of such installment contract receivables. Additionally, CHI receives agent's commissions on physical damage and credit life insurance sold to manufactured home purchasers. Premiums from credit life and physical damage insurance policies reinsured by VLIC, VLAC and VPC, which represent single payment contracts with terms of one to five years, are recognized as income over the terms of the contracts. Claims and expenses are matched to recognize profits over the life of the contracts. This matching is accomplished by means of the deferral and recognition of unearned premiums and the deferral and amortization of policy acquisition costs. Installment contract receivables originated or purchased by VMF are sold to investors or pledged as collateral to long-term lenders. VMF retains servicing in both cases. Profit (loss) on installment contract receivables sold to investors is recorded at the time of sale and represents the discounted present value of the excess (deficiency) of principal and interest to be collected during the expected normal life of the contracts over: 1) the amount required to be remitted to investors; 2) the normal service spread of comparable contracts; and 3) the estimated net credit losses. Profit from installment contract receivables sold without recourse is increased, in certain cases, by the reversal of the reserve for credit losses attributable to the receivables sold. 22 17 Installment contract receivables held for sale of $154,356,000 and $189,372,000 in 1995 and 1994, respectively, are carried at the lower of aggregate cost or market. Certain of the installment contract receivables are purchased in bulk at a discount. The purchase discounts are allocated between unamortized discount and the reserve for credit losses based on management's assessment of risks existing in the portfolio. Unamortized discount is amortized into revenue over the life of the related portfolio after giving consideration to anticipated prepayments. Adjustments between the reserve for credit losses and unamortized discount are made to reflect changes in the estimated collectibility of each portfolio purchased. Most of the installment contract receivables are with borrowers in the southern portion of the United States and are collateralized by manufactured homes. Interest income on installment contract receivables is recognized by a method which approximates the interest method. Service fee income is recognized as the service is performed. Investment Securities Effective July 1, 1994, the Company adopted Statement of Financial Accounting Standards No. 115 (SFAS No. 115), Accounting for Certain Investments in Debt and Equity Securities. Investments in certain debt and equity securities are classified as either Held-to-Maturity (reported at amortized cost), Trading (reported at fair value with unrealized gains and losses included in earnings), or Available-for-Sale (reported at fair value with unrealized gains and losses excluded from earnings and reported as a separate component of shareholders' equity). Premiums and discounts on debt securities are recognized in interest income on the level interest yield method over the period to maturity. Gains and losses on the sale of securities are determined using the specific identification method. Inventories New homes and raw materials are valued at the lower of cost, using the last-in, first-out (LIFO) method of inventory valuation, or market. Previously-owned manufactured homes are valued at estimated wholesale prices, which are not in excess of net realizable value. 23 18 Property, Plant and Equipment Land and improvements, buildings, and furniture and equipment are valued at cost. Major renewals and improvements are capitalized while replacements, maintenance and repairs, which do not improve or extend the life of the respective assets, are expensed currently. When depreciable assets are sold or retired, the cost and related accumulated depreciation are removed from the accounts, and any gain or loss is included in earnings for the period. Depreciation is computed primarily by the straight-line method with estimated useful lives as follows: Land improvements.................................3-28 years Buildings.........................................7-25 years Furniture and equipment...........................3-10 years
Warranty Obligation Manufactured Housing warrants its homes against manufacturing defects for a period of one year commencing at the time of the retail sale. Warranty costs are accrued for sales to independent dealers. Warranty costs related to the sales at company-owned retail centers are not material and are recognized as incurred. Income Taxes Effective July 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109 (SFAS No. 109), Accounting for Income Taxes. Under SFAS No. 109, deferred tax assets and liabilities are computed based on the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate. The adoption resulted in a decrease in the deferred tax liability and an increase in income of $3 million in fiscal 1994. Reserves for Credit Losses and Contingent Liabilities Reserves for credit losses are established related to installment contract receivables. Actual credit losses are charged to the reserves when incurred. The reserves established for such losses are determined based on the Company's historical loss experience after adjusting for current economic conditions. Management, in assessing the loss experience and economic conditions, adjusts reserves through periodic provisions. The Company also maintains a reserve for contingent liabilities related to guarantees of installment contract receivables sold with recourse. Reserves and the applicable provisions related to guarantees are considered as part of the Manufactured Housing business segment. 24 19 Earnings Per Share Primary earnings per share are computed based on the weighted average number of shares of common stock outstanding during the periods presented, including common share equivalents arising from stock options. Fully diluted earnings per share for 1994 and 1993 have been computed assuming conversion of the Company's convertible subordinated debentures (called in the third quarter of fiscal 1994). The fully diluted computation adds to net income the interest expense (net of income tax) on the debentures. Cash Equivalents For purposes of the statements of cash flows, all unrestricted highly liquid debt instruments purchased with a maturity of three months or less are considered to be cash equivalents. Other Certain reclassifications have been made to the 1994 and 1993 financial statements to conform to the 1995 presentation. Per share and share data have been retroactively adjusted to reflect a 5-for-4 stock split effected as a 25% stock dividend in December 1994. Note 2 - Inventories Inventories at June 30, 1995, and 1994 are as follows:
1995 1994 ---- ---- (in thousands) Manufactured homes: New $65,735 $55,651 Previously-owned 11,259 10,953 Raw materials 11,461 10,713 ------- ------- $88,455 $77,317 ======= =======
If the first-in, first-out (FIFO) method of inventory valuation had been used, inventories would have been higher by $15,402,000 and $11,972,000 at June 30, 1995, and 1994, respectively. 25 20 Note 3 - Securities At June 30, 1995 and 1994, manufactured housing contract senior/subordinate pass-through certificates have been classified in the consolidated financial statements according to management's intent. These securities can be reasonably expected to mature after ten years. Note 4 - Property, Plant and Equipment Property, plant and equipment at June 30, 1995, and 1994 are as follows:
1995 1994 ---- ---- (in thousands) Land and improvements $108,968 $ 92,277 Buildings 71,292 49,395 Furniture and equipment 19,679 15,393 --------- -------- 199,939 157,065 Less: accumulated depreciation and amortization (33,891) (27,182) --------- -------- $166,048 $129,883 ========= ========
Depreciation charged to operations was $8,296,000, $6,656,000, and $4,900,000 for each of the years ended June 30, 1995, 1994, and 1993, respectively. Included in Property, Plant and Equipment are $11 million of assets acquired from the Company's principal shareholder during fiscal 1994. Note 5 - Long-Term Obligations Long-term obligations at June 30, 1995, and 1994 are summarized as follows:
1995 1994 ---- ---- CHI (in thousands) 10% note payable due June 1, 1998 4,866 4,960 Other notes payable 231 273 ------- ------- 5,097 5,233
26 21 VMF Debt collateralized by installment contract receivables: Demand note payable to Clayton Employees Savings Plan at prime 3,000 3,000 Maturing in fiscal years through: 1996 to 2004: weighted average rate of 10.04% at June 30, 1995 33,264 40,623 1995 to 2005: 9.4% REMIC trust senior certificates 2,855 13,699 1996 to 2002: adjustable rates, weighted average rate of 10.31% at June 30, 1995, weighted average maximum rate 15.03% at June 30, 1995 2,147 4,768 1996 to 2001: adjustable rates, average rate of 8.03% at June 30, 1995, no maximum rate 2,374 3,357 ------- ------- 43,640 65,447 ------- ------- Total $ 48,737 $ 70,680 ======== ========
Expected principal payments of long-term debt of VMF for the five fiscal years subsequent to 1995 and thereafter are as follows: 1996 11,000,000 1997 7,000,000 1998 8,000,000 1999 5,000,000 2000 3,000,000 Thereafter 9,640,000
The estimated principal payments on the debt of VMF are based on the scheduled payments and estimated prepayments of principal of the installment contract receivables collateralizing such debt. Certain debt agreements require fixed payments which approximate the scheduled payments of the underlying installment contract receivables. On March 1, 1994, the Company called for redemption all of its 7.75% convertible subordinated debentures due 2003. Substantially all of the $40 million of such debentures converted into approximately five million shares of common stock. Certain of the long-term obligations have various covenants relating to working capital, total indebtedness and dividend payments. At June 30, 1995, the aggregate amount of earnings available for cash dividends or for repurchase of Company stock was approximately $368 million. 27 22 Note 6 - Reserves for Credit Losses and Contingent Liabilities An analysis of the reserve for losses on installment contract receivables and reserve for contingent liabilities for the years ended June 30, 1995, 1994 and 1993 is as follows:
1995 1994 1993 ---- ---- ---- (in thousands) Balance, beginning of year $14,082 $17,229 $25,279 Provision --- --- --- Losses, net of recoveries applicable to installment contract receivables: Purchased (1,900) (2,230) (4,092) Other (287) (526) (1,126) Reserves transferred (to) from unamortized discount --- (1,598) 690 Reserves associated with receivables purchased (sold) --- 1,207 (3,522) ------- ------- ------- Balance, end of year $11,895 $14,082 $17,229 ======= ======= ======= Reserves for credit losses $ 8,329 $ 9,877 $11,692 Reserve for contingencies 3,566 4,205 5,537 ------- ------- ------- $11,895 $14,082 $17,229 ======= ======= =======
The reserves for credit losses are netted against receivables and the reserve for contingencies is included in other liabilities on the consolidated balance sheets. 28 23 The Company is contingently liable as guarantor on installment contract receivables sold with recourse. The installment contract receivables and related contingent liabilities are shown in the table below.
Total Installment Contingent Contract Receivables Contingent Liabilities (in thousands) Liability % (in thousands) -------------------- ----------- -------------- June 30, 1995 $ 11,000 87% - 100% $10,000 98,000 11% - 30% 23,000 159,000 10% and below 16,000 -------- ------- $268,000 $49,000 ======== ======= June 30, 1994 $ 20,000 100% $ 20,000 122,000 11% - 30% 28,000 147,000 10% and below 15,000 -------- ------- $289,000 $ 63,000 ======== ========
Proceeds from receivables sold with recourse amounted to $7 million, $20 million and $34 million, during 1995, 1994 and 1993, respectively. Approximately 97% of the installment contract receivables both owned and sold with recourse have fixed rates of interest and approximately 3% are at variable rates of interest based on either the prime rate, U.S. Treasury rates or LIBOR. Approximately 99% of the Company's servicing arrangements are based on interest spreads with fixed rates or variable rates with ceilings while the remaining 1% have variable rates which provide for no minimum or maximum rate of interest. Note 7 -- Shareholders' Equity Stock Option Plan In 1983, 1985 and 1991, the Company established Stock Option Plans for a total of 5,514,770 shares of common stock which provide for granting "incentive stock options" or "non-qualified options"and stock appreciation rights to officers and key employees of the Company. In addition, non-eligible members of the Board of Directors have, with shareholder approval of prices and provisions for exercise, granted options to purchase shares of common stock to the Company's non-management directors. The option prices were established at not less than the fair market value as of the date of 29 24 grant. Options are exercisable after one or more years and expire no later than 10 years from the date of grant. Activity and price information regarding the plans follow:
Stock Option Shares Price Range Balance June 30, 1992 2,396,581 $ 1.31 - $ 9.86 Granted 318,518 $ 9.86 - $14.46 Exercised (245,114) $ 1.31 - $ 7.47 Cancelled (122,917) $ 1.31 - $14.46 ------------------------------ Balance June 30, 1993 2,347,068 $ 1.31 - $14.46 Granted 606,656 $14.72 - $20.20 Exercised (441,580) $ 1.31 - $14.46 Canceled (41,400) $ 1.31 - $20.20 ------------------------------ Balance June 30, 1994 2,470,744 $ 1.31 - $20.20 Granted 378,093 $14.10 - $15.90 Exercised (444,165) $ 1.31 - $14.46 Canceled (170,074) $ 1.81 - $20.20 ------------------------------ Balance June 30, 1995 2,234,598 $ 1.81 - $18.60
Options available for future grant at June 30, 1995 and 1994 were 1,352,642 and 1,358,165, respectively. At June 30, 1995, and 1994 options for 825,150 and 591,607 shares, respectively, were exercisable. Options were held by 330 persons at June 30, 1995. Stock Purchase Plan In 1986 the Company established an employee stock purchase plan for a total of 2,384,188 shares of common stock. The Stock Purchase Plan was suspended during 1992. At June 30, 1995, there were 1,246,241 shares reserved for the plan. Note 8 - Income Taxes Components of the provision for income tax for each of the three years ended June 30, 1995, 1994 and 1993 are as follows:
1995 1994 1993 ---- ---- ---- (in thousands) Current tax provisions: Federal $41,292 $32,772 $24,798 State 5,384 3,304 2,602 ------- ------- ------- 46,676 36,076 27,400
30 25 Deferred tax provision 2,124 2,924 2,200 ------- ------- ------- $48,800 $39,000 $29,600 ======= ======= =======
The sources and tax effect of temporary differences at June 30, 1995 and 1994 are as follows:
(in thousands) 1995 1994 ---- ---- Reserves for credit losses and contingencies and discounts $ 8,072 $10,084 Insurance reserves 3,051 1,650 Unearned premiums 3,176 -- ------ ------- Total deferred tax assets 14,299 11,734 ------ ------- Residual interest in installment contract receivables (17,876) (14,611) Deferred costs ( 2,679) (1,053) Other ( 3,126) (3,328) ------- ------- Total deferred tax liabilities (23,681) (18,992) ------- ------- Net deferred tax liability $(9,382) ($7,258) ======= =======
The provision for income taxes reflected in the financial statements differs from income taxes calculated at statutory federal income tax rates of 35% in 1995 and 1994 and 34% in 1993 as follows:
1995 1994 1993 ---- ---- ---- (in thousands) Income taxes at statutory rate $47,530 $37,900 $28,758 State income taxes, net of federal benefit 3,769 2,313 1,704 Other, net (2,499) (1,213) (862) ------- ------- ------- $48,800 39,000 $29,600 ======= ======= =======
In 1993, the deferred income provision resulted from timing differences in the recognition of revenues and expenses for tax and financial statement purposes principally related to provisions for credit losses and contingencies, and fees for future servicing. Note 9 - Employee Benefit Plans The Company has a 401(k) profit-sharing plan covering all employees who meet participation requirements. The amount of the Company's contribution is discretionary as determined by the Board of Directors, up to the maximum deduction allowed for federal income tax purposes. Contributions accrued were $3,461,000, $2,171,000, and $1,689,000, for the years ended June 30, 1995, 1994, and 1993, respectively. 31 26 Note 10 - Commitments and Contingencies Leases Certain operating properties are rented under non-cancelable operating leases which expire at various dates through 2009. Total rental expense under operating leases was $2,721,000 in 1995, $2,159,000 in 1994, and $3,100,000 in 1993. The following is a schedule of minimum rental commitments under non-cancelable operating leases, primarily for retail centers, in effect at June 30, 1995: 1996 2,235,000 1997 1,706,000 1998 1,276,000 1999 808,000 2000 421,000 2001 and thereafter 1,608,000
Repurchase Agreements Institutions financing independent dealer purchases require the Company to execute repurchase agreements. As a result of these agreements, the Company is contingently liable for repurchasing homes in the event of a default by the dealer to the lending institution. These agreements are customary in the manufactured housing industry, and the Company's losses in the past have not been significant. Guarantor of Installment Contract Receivables Please see discussion of contingencies at Note 6. 32 27 Note 11 - Industry Segment Information The Company operates in three major business segments: Manufactured Housing, Financial Services and Communities. The Manufactured Housing segment is engaged in the production, wholesale and retail sale of manufactured homes. Financial Services is composed of VMF, which is engaged in retail financing of manufactured homes, and VLIC, VLAC and VPC which reinsure risk on credit life and physical damages insurance policies. Communities is engaged in marketing and management of manufactured housing communities. Operating income consists of total revenues less cost of sales, operating expenses and financial interest expense. The following items have not been included in the computation of operating income: non-operating income and expenses and income taxes. Identifiable assets are those assets used in the operation of each industry segment. Corporate assets primarily consist of short-term investments. Information concerning operations by industry segment follows:
Manufactured Financial Housing Services Communities Corporate Total 1995 Revenues $621,474 $ 88,749 $ 47,869 $ --- $758,092 Intersegment income 11,406 274 1,194 (12,874) --- Operating income 67,898 54,800 9,200 --- 131,898 Identifiable assets 176,632 413,072 122,408 49,039 761,151 Depreciation and amortization 5,132 --- 3,164 --- 8,296 Capital expenditures 21,933 --- 22,529 --- 44,462 1994 Revenues $510,329 $ 80,741 $ 37,166 $ --- $628,236 Intersegment income 19,630 --- 1,224 (20,854) --- Operating income 48,183 53,620 6,841 --- 108,644 Identifiable assets 122,101 440,690 99,032 39,325 701,148 Depreciation and amortization 4,005 --- 2,674 --- 6,679 Capital expenditures 12,777 --- 22,824 --- 35,601 1993 Revenues $384,235 $ 64,684 $ 27,322 $ --- $476,241 Intersegment income 14,162 --- 1,041 (15,203) --- Operating income 37,229 41,422 4,875 --- 83,526 Identifiable assets 104,067 383,371 69,521 30,073 587,032 Depreciation and amortization 3,235 --- 1,756 --- 4,991 Capital expenditures 10,301 --- 27,127 --- 37,428
33 28 Note 12 - Other assets and liabilities At June 30, 1995 and 1994, other assets and liabilities consisted of:
1995 1994 ---- ---- (in thousands) Other Assets Restricted cash and investments $ 66,214 $69,354 Interest receivable and future servicing rights 17,373 12,672 Deferred debt costs and prepaid expenses 6,845 3,314 Other 3,053 4,722 -------- ------- $ 93,485 $ 90,062 ======== ======== Other Liabilities Investors payable $ 37,492 $24,067 Reserve for contingencies (Note 6) 3,566 4,205 Escrow deposits 13,721 13,904 Unearned insurance premiums 31,901 25,257 Short-term borrowing --- 25,000 Other 8,216 12,779 -------- -------- $ 94,896 $105,212 ======== ========
Restricted cash and investments represent reserves required by: 1) certain VMF servicing and debt agreements to be maintained until such time as specified minimum repayments have been made, 2) trust account cash balances required by certain VMF servicing agreements, and 3) insurance reserves required by escrow or trust agreements. The Company has lines of credit totalling $60 million for working capital and letter of credit needs of which $127,653 in letters of credit was outstanding at June 30, 1995, and $25 million in working capital draws was outstanding at June 30, 1994. As of June 30, 1995 the outstanding letters of credit bore interest at 0.5% and as of June 30, 1994, the $25 million bore interest at an average rate of 4.9% based on the bank's transactional rates. Note 13 - Fair Value Disclosure of Financial Instruments Statement of Financial Accounting Standards No. 107 (SFAS No. 107), "Disclosures About Fair Value of Financial Instruments," requires that CHI disclose the estimated fair values of its financial instruments. The following methodologies and assumptions were used by CHI to estimate its fair value disclosures for financial instruments. Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. The estimates do not reflect any premium or discount that could result from offering for sale in a single transaction CHI's entire holdings of a particular financial instrument. The lack of uniform valuation methodologies introduces a greater degree of subjectivity to these estimated fair values. Comparability to financial instruments between similar companies may not be reasonable because of varying assumptions concerning the estimates of fair value. 34 29 Cash and Cash Equivalents The carrying values for cash and cash equivalents, including those restricted by agreement, equal those assets' fair values. Future Servicing Rights Receivable Residual Interest in Installment Contract Receivables - Residual interest in installment contract receivables are calculated using prepayment, default and interest rate assumptions that the Company believes are appropriate at the time of the sale of the installment contract receivables. Projected performance is monitored after the sale; the Company alters the underlying rate at which the future estimated cash flows are discounted once the sale has been recorded. The fair value primarily revolves around an appropriate discount rate to be applied to the asset as a whole. The Company used a discount rate and such other assumptions as it believed to be used for similar instruments. The Company has estimated the fair value of its residual interests in installment contract receivables to approximate its carrying value as of June 30, 1995 and 1994. Contracts Held For Sale and as Collateral Contracts held for sale are generally recent originations or purchased portfolios which will be sold with limited or no recourse during the following year. CHI does not charge fees to originate loans, and, as such, its contracts have origination rates in excess of rates on the securities into which they will be pooled. CHI estimates the fair value of the contracts held for sale using expected future cash flows of the portfolio discounted at the current origination rate. The carrying values of contracts pledged as collateral to long-term lenders are estimated using discounted cash flow analyses and interest rates being offered for similar contracts. The carrying amount of contracts with a variable rate of interest is estimated to be at fair value. The carrying value of accrued interest adjusted for credit risk equals its fair value. Long-term Obligations Long-term obligations consist primarily of debt collateralized by contracts with maturities that coincide with the underlying contract maturities. The fair value of these financial instruments is based on the current rates offered to CHI for debt of similar maturities using a discounted cash flow calculation. Loan covenants preclude prepaying VMF's obligations. 35 30 The carrying amounts and estimated fair values of CHI's financial assets and liabilities are as follows:
June 30, 1995 June 30, 1994 Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value -------- ---------- --------- ---------- (in thousands) Financial assets: Cash and cash equivalents, including restricted investments and securities held-to- maturity $135,969 $135,801 $119,126 $119,126 Residual interests in installment contract receivables 89,642 89,642 69,234 69,234 Contracts held for sale and as collateral, including accrued interest receivable 230,075 233,122 295,669 299,773 Financial liabilities: Long-term obligations $ 48,737 $ 51,710 $ 70,680 $ 75,126
36 EX-21 4 LIST OF SUBSIDIARIES & PARTNERSHIPS OF REGISTRANT 1 EXHIBIT 21. List of subsidiaries and partnerships of the Registrant.
SUBSIDIARY STATE OR COUNTRY OF INCORPORATION ORGANIZATION ---------- ---------------------------------------------- 100% Owned Entities CMH Manufacturing, Inc. Tennessee CMH Homes, Inc. Tennessee Vanderbilt Mortgage & Finance, Inc. Tennessee Clayton-Vanderbilt, Inc. Arizona Vanderbilt Property and Casualty Insurance Co., LTD British Virgin Islands CMH Insurance Agency, Inc. Tennessee CABS, Inc. (2) Tennessee CMH Parks, Inc. Tennessee JH Properties, Inc. (1) Texas CMH Capital, Inc. Delaware Vanderbilt SPC, Inc. (2) Delaware 50% to 99% Owned Entities Blevins Mobile Homes, Inc. Tennessee Clayton's - Tullahoma, Inc. Tennessee Vanderbilt Life and Casualty Insurance Co., LTD British Virgin Islands Community Sales, Inc. (1) Colorado (1) Owned 100% by CMH Parks, Inc. (2) Owned 100% by Vanderbilt Mortgage & Finance, Inc. PARTNERSHIP ----------- 50% to 99% Owned Entities Blevins Partnership Tennessee Clayton-Cambridge, J/V Tennessee Redwood Partners Limited Colorado Pine Lake West Associates Limited Partnership Georgia Clayton Heritage, J/V Tennessee Southgate Mobile Home Park Tennessee
18 EX-23 5 CONSENT OF INDEPENDENT ACCOUNTANTS 1 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statement of Vanderbilt Mortgage and Finance, Inc. and Clayton Homes, Inc. on Form S-3 (File No. 33-88238) of our report dated August 18, 1995, on our audits of the consolidated financial statements of Clayton Homes, Inc. as of June 30, 1995 and 1994, and for the years ended June 30, 1995, 1994 and 1993, which report is included in this Annual Report on Form 10-K. Coopers & Lybrand L.L.P. COOPERS & LYBRAND L.L.P. Knoxville, Tennessee September 28, 1995 EX-27 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF CLAYTON HOMES, INC. FOR THE YEAR ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS YEAR JUN-30-1995 JUL-01-1994 JUN-30-1995 1 49,394 0 351,737 8,329 88,455 0 174,344 8,296 761,151 0 48,737 177,726 0 0 366,461 761,151 621,351 758,092 431,826 626,194 0 0 5,533 135,800 48,800 87,000 0 0 0 87,000 1.15 1.15
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