-----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, OLY+iGVKky81pqlLoOkeKkdJcm83fb7pcz3m/9kWdEwX9XHebT7wtSh4YxsMR9wY INz14jvpAkVg3AIlzQCxMA== 0000950144-99-001418.txt : 19990212 0000950144-99-001418.hdr.sgml : 19990212 ACCESSION NUMBER: 0000950144-99-001418 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990211 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLAYTON HOMES INC CENTRAL INDEX KEY: 0000719547 STANDARD INDUSTRIAL CLASSIFICATION: MOBILE HOMES [2451] IRS NUMBER: 621671360 STATE OF INCORPORATION: TN FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08824 FILM NUMBER: 99531351 BUSINESS ADDRESS: STREET 1: 500 ALOCA TRAIL CITY: MARYVILLE STATE: TN ZIP: 37804 BUSINESS PHONE: 4233803000 MAIL ADDRESS: STREET 1: PO BOX 9790 CITY: MARYVILLE STATE: TN ZIP: 37804 10-Q 1 CLAYTON HOMES INC. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED December 31, 1998 ----------------- COMMISSION FILE NUMBER 1-8824 ------ CLAYTON HOMES, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 62-1671360 - ------------------------------- ------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) Number) 5000 Clayton Road Maryville, Tennessee 37804 - ---------------------------------------- -------- (Address of principal executive offices) (zip code) 423-380-3000 -------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No . ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Shares of common stock $.10 par value, outstanding on December 31, 1998 - - 144,414,786. 1 2 CLAYTON HOMES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited - in thousands except per share data)
Three Months Ended Six Months Ended December 31, December 31, 1998 1997 1998 1997 ---- ---- ---- ---- REVENUES Net sales $ 247,407 $192,078 $ 494,599 $401,024 Financial services 54,851 46,154 105,850 87,204 Rental and other income 16,862 12,837 33,357 25,536 --------- -------- --------- -------- Total revenues 319,120 251,069 633,806 513,764 --------- -------- --------- -------- COSTS AND EXPENSES Cost of sales 168,413 133,066 340,075 276,620 Selling, general and administrative 88,357 67,871 172,682 138,665 Financial services interest 2,809 595 5,259 1,197 Provision for credit losses 2,700 1,000 5,259 2,000 --------- -------- --------- -------- Total expenses 262,279 202,532 523,275 418,482 --------- -------- --------- -------- OPERATING INCOME 56,841 48,537 110,531 95,282 Interest income (expense), net/other (1,228) 1,672 (2,221) 2,806 --------- -------- --------- -------- Income before income taxes 55,613 50,209 108,310 98,088 Provision for income taxes 20,600 19,100 40,100 37,300 --------- -------- --------- -------- Net income $ 35,013 $ 31,109 $ 68,210 $ 60,788 ========= ======== ========= ======== EARNINGS PER SHARE(1) Basic $ 0.24 $ 0.21 $ 0.47 $ 0.41 Diluted $ 0.24 $ 0.21 $ 0.46 $ 0.41 DIVIDENDS PAID PER SHARE(1) $ 0.016 $ 0.016 $ 0.032 $ 0.032 AVERAGE SHARES OUTSTANDING(1) Basic 144,658 148,395 146,118 148,306 Diluted 145,364 149,500 146,932 149,342
(1) Adjusted for the December 9, 1998, 5-for-4 stock split. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
(unaudited) (audited) December 31, June 30, 1998 1998 ---- ---- ASSETS Cash and cash equivalents $ 8,995 $ 1,731 Receivables, net 899,569 837,197 Inventories 163,933 167,113 Property, plant and equipment, net 278,355 261,549 Other assets 201,347 190,167 ---------- ---------- Total assets $1,552,199 $1,457,757 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable and accrued liabilities $ 103,924 $ 138,557 Debt obligations 380,475 247,591 Other liabilities 177,791 190,590 Shareholders' equity 890,009 881,019 ---------- ---------- Total liabilities and shareholders' equity $1,552,199 $1,457,757 ========== ==========
(See accompanying notes to the condensed consolidated financial statements) 2 3 CLAYTON HOMES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited - in thousands)
Six Months Ended December 31, 1998 1997 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 68,210 $ 60,788 Adjustments to reconcile net income to net cash provided (required) by operating activities: Depreciation and amortization 8,585 6,824 Gain on sale of installment contract receivables, net of amortization (3,243) (19,642) Provision for credit losses 5,259 2,000 Deferred income taxes (2,565) (19,920) Increase in other receivables, net (22,647) (16,270) Decrease (increase) in inventories 3,180 (17,225) Decrease in accounts payable, accrued liabilities, and other (60,962) (47,922) --------- --------- Cash required from operations (4,183) (51,367) Origination of installment contract receivables (520,140) (333,803) Proceeds from sales of originated installment contract receivables 410,215 358,338 Principal collected on originated installment contract receivables 27,068 18,445 --------- --------- Net cash required from operating activities (87,040) (8,387) CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of installment contract receivables (98,045) (153,498) Proceeds from sales of acquired installment contract receivables 130,764 127,067 Principal collected on acquired installment contract receivables 8,397 7,576 Acquisition of property, plant and equipment, net (25,391) (15,052) Decrease in restricted cash and investments 4,915 8,556 --------- --------- Net cash provided by (used in) investing activities 20,640 (25,351) CASH FLOWS FROM FINANCING ACTIVITIES Dividends (4,785) (4,750) Net borrowings on credit facilities 54,767 -- Proceeds from (repayment of) long-term debt 78,117 (774) Issuance of stock for incentive plans and other 1,993 3,021 Repurchase of common stock (56,428) (2,145) --------- --------- Net cash provided by (used in) financing activities 73,664 (4,648) --------- --------- Net increase (decrease) in cash and cash equivalents 7,264 (38,386) Cash and cash equivalents at beginning of period 1,731 89,695 --------- --------- Cash and cash equivalents at end of period $ 8,995 $ 51,309 ========= =========
(See accompanying notes to the condensed consolidated financial statements) 3 4 CLAYTON HOMES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. The condensed consolidated financial statements of Clayton Homes, Inc. and its subsidiaries (Company) have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with Generally Accepted Accounting Principles have been omitted. The condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report to Shareholders for the year ended June 30, 1998. The information furnished reflects all adjustments which are necessary for a fair presentation of the Company's financial position as of December 31, 1998, the results of its operations and its cash flows for the six month periods ended December 31, 1998, and 1997. All such adjustments are of a normal recurring nature. 2. The results of operations for the six months ended December 31, 1998, and 1997 are not necessarily indicative of the results to be expected for the respective full years. 3. Certain reclassifications have been made to the 1997 financial statements to conform to the 1998 presentation. 4. Debt obligations at December 31, 1998, and June 30, 1998, are summarized as follows:
December 31, June 30, 1998 1998 ---- ---- (in thousands) Lines of credit $282,640 $227,873 Long term debt 97,835 19,718 -------- -------- Total debt obligations $380,475 $247,591
The Company on December 30, 1998, privately placed $75.0 million of 6.25% Senior Notes due December 30, 2003, with no principal amortization, primarily to facilitate the purchase, origination and warehousing of loan portfolios. The Senior Notes are guaranteed by all material subsidiaries of the Company and are governed by various financial covenants which require maintenance of certain financial ratios. Subsequent to December 31, 1998, the Company entered into a committed one year $300.0 million commercial paper conduit facility to facilitate the warehousing of manufactured housing loan portfolios. 4 5 CLAYTON HOMES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 5. The following reconciliation details the numerators and denominators used to calculate basic and diluted earnings per share for the respective periods:
Three Months Ended Six Months Ended December 31, December 31, 1998 1997 1998 1997 ---- ---- ---- ---- (in thousands except per share data) Net income $ 35,013 $ 31,109 $ 68,210 $ 60,788 Average shares outstanding Basic 144,658 148,395 146,118 148,306 Add: common stock equivalents 706 1,105 814 1,036 -------- -------- -------- -------- Diluted 145,364 149,500 146,932 149,342 Earnings per share Basic $ .24 $ .21 $ .47 $ .41 Diluted $ .24 $ .21 $ .46 $ .41
5 6 PART I -- FINANCIAL INFORMATION ITEM 1. Financial Statements. See pages 2 through 4. ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. SIX MONTHS ENDED DECEMBER 31, 1998: The following table reflects the percentage changes in retail sales for the Company's retail and community sales centers and wholesale sales to independent retailers. It also reflects percentage changes in the average number of Company-owned retail centers, communities and independent retailers, the average sales per location, and the average price per home sold in each category.
First Six Months Fiscal Year 1999 vs 1998 ------------------------ Retail Dollar sales +34.5% Number of retail centers +11.6% Dollar sales per retail center +20.5% Price of home + 8.9% Wholesale Dollar sales +10.5% Number of independent retailers + 4.1% Dollar sales per independent retailer + 6.2% Price of home + 4.1% Communities Dollar sales -22.7% Number of communities + 8.2% Dollar sales per community -28.5% Price of home + 1.1%
Total revenues for the six months ended December 31, 1998, increased 23% to $634 million, as manufactured housing sales rose 23% to $495 million, financial services income grew 21% to $106 million and rental and other income increased 31% to $33 million. Net sales of the Retail group rose 34% to $317 million on a 9% rise in the average home price, a 12% increase in Company-owned sales centers, and an 11% increase in the average number of homes sold per sales center. Net sales of the Manufacturing group increased 11% to $166 million as the number of homes sold increased 6% to 7,554. The average wholesale price to independent retailers increased 4% as a result of 6 7 a shift in product mix towards multi-section homes. Net sales of the Communities group decreased 23% to $12 million as 24% less homes were sold, while the average home selling price increased 1%. Financial services revenues increased 21%. Interest and loan servicing revenues increased $32 million, and insurance related revenues rose $4 million. Rental and other income increased 31% on a 28% rise in Communities rental income. Loans sold through asset-backed securities totaled $532 million, compared to $459 million during the same period last year. Financial services interest expense increased to $5 million due to higher average borrowings. Average debt collateralized by installment contract receivables dropped 30% to $14 million, while the weighted average interest rate moved from 10.30% to 10.62%. The terms of the debt preclude prepayment by the Company. Gross profit margins increased to 31.2% from 31.0% which is attributable to an increase in internalization. Selling, general and administrative expenses, as a percent of revenues, increased to 27.2% from 27.0% in the prior year period. The provision for credit losses increased to 1.1% from 0.5% of sales. The following table represents delinquent installment sales contracts as a percentage of the total number of installment sales contracts which the Company services and either owns or for which it is contingently liable. A contract is considered delinquent if any payment is more than one month past due.
Second Quarter Ended December 31, 1998 1997 ---- ---- Total delinquencies as a percentage *Includes Excludes of contracts outstanding: Access Access ------ ------- All contracts 3.43% 2.90% 2.66% Contracts originated by VMF N/A 2.76% 2.49% Contracts acquired from other institutions 6.40% 3.85% 3.58%
*In the month of May 1998 the Company purchased $245 million in loans from Access Financial Lending Corporation (Access) and contracted to service an additional $267 million - for a total of $512 million in servicing. 7 8 The following table sets forth information related to loan loss/repossession experience for all installment contract receivables which the Company either owns or for which it is contingently liable.
Six Months Ended December 31, 1998 1997 ---- ---- Net losses as a percentage of average *Includes Excludes loans outstanding (annualized): Access Access -------- -------- All contracts 1.3% 1.0% 0.7% Contracts originated by VMF N/A 0.9% 0.7% Contracts acquired from other institutions 3.4% 2.4% 1.0% Number of contracts in repossession: All contracts 2,014 1,577 1,396 Contracts originated by VMF N/A 1,459 1,272 Contracts acquired from other institutions 555 118 124 Total number of contracts in repossession as a percentage of total contracts 1.8% 1.5% 1.5%
*In the month of May 1998 the Company purchased $245 million in loans from Access Financial Lending Corporation (Access) and contracted to service an additional $267 million - for a total of $512 million in servicing. The decrease in inventories as of December 31, 1998, from June 30, 1998, is explained as follows:
Manufacturing Increase (decrease) ------------- ------------------- Finished goods $ 1.3 Raw materials (10.0) Retail ------ Decrease in inventory levels at 273 Company-owned retail centers at June 30, 1998 (3.0) Inventory to stock 14 new Company-owned retail centers 6.7 Communities ----------- Increase in inventory levels at 71 Communities at June 30, 1998 1.5 Inventory to stock three new Communities .3 ------ $ (3.2) ======
On December 31, 1998, the order backlog for the Manufacturing group (consisting of Company-owned and independent retailer orders) increased to $35 million, as compared to $30 million for the same period last year. 8 9 SECOND QUARTER ENDED DECEMBER 31, 1998: The following table reflects the percentage changes in retail sales for the Company's retail and community sales centers and wholesale sales to independent retailers. It also reflects percentage changes in the average number of Company-owned retail centers, communities and independent retailers, the average sales per location, and the average price per home sold in each category.
Second Three Months Fiscal Year 1999 vs 1998 ------------------------ Retail Dollar sales +43.8% Number of retail centers +12.2% Dollar sales per retail center +28.1% Price of home + 9.8% Wholesale Dollar sales +10.6% Number of independent retailers + 3.3% Dollar sales per independent retailer + 7.1% Price of home + 4.8% Communities Dollar sales -12.7% Number of communities + 9.7% Dollar sales per community -20.4% Price of home + 8.6%
Total revenues for the three months ended December 31, 1998, increased 27% to $319 million, as manufactured housing sales rose 29% to $247 million, financial services income grew 19% to $55 million and rental and other income increased 31% to $17 million. Net sales of the Retail group rose 44% to $158 million on a 10% rise in the average home price, a 12% increase in Company-owned sales centers, and a 17% increase in the average number of homes sold per sales center. Net sales of the Manufacturing group increased 11% to $84 million as the number of homes sold increased 6% to 3,751. The average wholesale price to independent retailers increased 5% as a result of a shift in product mix towards multi-section homes. The Company's plant in Waycross, Georgia was damaged by severe storms on January 2, 1999, and will be repaired by late spring. There is not expected to be a material effect on sales or profitability as orders will be filled from other Company facilities. Net sales of the Communities group decreased 13% to $6 million as 20% less homes were sold, while the average home selling price increased 9%. Financial services revenues increased 19%. Interest and loan servicing revenues increased $16 million, and insurance related revenues rose $2 million. Rental and other income increased 31% on a 28% rise in 9 10 Communities rental income. Loans sold through asset-backed securities totaled $288 million, compared to $232 million during the same period last year. Financial services interest expense increased to $3 million due to higher average borrowings. Average debt collateralized by installment contract receivables dropped 29% to $14 million, while the weighted average interest rate moved from 10.78% to 10.88%. The terms of the debt preclude prepayment by the Company. Gross profit margins increased to 31.9% from 30.7% which is attributable to an increase in internalization. Selling, general and administrative expenses, as a percent of revenues, increased to 27.7% from 27.0% in the prior year period. The provision for credit losses increased to 1.1% from 0.5% of sales. The following table sets forth write-off experience for the quarters ended December 31, 1998 and 1997:
Second Quarter Ended December 31, 1998 1998 1997 ---- ---- Net losses as a percentage of average *Includes Excludes loans outstanding (annualized): Access Access ------- ------- All contracts 1.4% 1.1% 0.9% Contracts originated by VMF N/A 1.0% 0.8% Contracts acquired from other institutions 3.8% 2.7% 1.3%
*In the month of May 1998 the Company purchased $245 million in loans from Access Financial Lending Corporation (Access) and contracted to service an additional $267 million - for a total of $512 million in servicing. 10 11 Liquidity and Capital Resources Cash at December 31, 1998, was $9.0 million as compared to $1.7 million at June 30, 1998. The Company anticipates meeting cash requirements with cash flow from operations, revolving credit lines, senior notes, and sales of installment contract and mortgage loan receivables and GNMA certificates. The Company has committed and uncommitted lines of credit totaling $350.0 million and $62.5 million for working capital needs of which $255.0 million and $27.6 million, respectively, were outstanding at December 31, 1998. These lines of credit do not require collateral and are priced on LIBOR plus rates ranging from 0.10% to 0.45%. The committed credit lines are guaranteed by all material subsidiaries of the Company and are governed by various financial covenants which require maintenance of certain financial ratios. The Company on December 30, 1998, privately placed $75.0 million of 6.25% Senior Notes due December 30, 2003, with no principal amortization, primarily to facilitate the purchase, origination and warehousing of loan portfolios. The Senior Notes are guaranteed by all material subsidiaries of the Company and are governed by various financial covenants which require maintenance of certain financial ratios. Subsequent to December 31, 1998, the Company entered into a committed one year $300.0 million commercial paper conduit facility to facilitate the warehousing of manufactured housing loan portfolios. Year 2000 Many of the Company's systems and related software are Year 2000 compliant. However, the Company has in place a plan to address potential disruptions to normal business activities related to the Year 2000. Areas addressed by the plan include information systems (hardware and software), non-information systems, embedded chips, and supply chain continuance. Currently, the Company has completed the awareness and assessment stages of the project and all business units are in various stages of renovation, validation, and implementation of solutions. A Year 2000 Steering Committee has been established and a project leader has been assigned to oversee the process and report on a weekly basis. The steering committee is chaired by the President of the Company. Information systems, consisting of hardware and software, are being modified or replaced to ensure Year 2000 compliance. The Company's hardware consists of a mainframe, networks, and personal computers. Most desktop computers have been tested and are in compliance. The mainframe computers are compliant with respect to the hardware and operating systems. Many of the Company's critical software systems, such as the General Ledger, Accounts Payable, Payroll, Human Resources, and Credit Application Tracking systems have been replaced by Year 2000 compliant packages. The remediation process for Financial Services and other in-house, custom written software is expected to be completed by the end of fiscal 1999. The Company plans to test each of these software systems using a standardized testing methodology which will include millennium testing, millennium leap year testing, and cross over year testing. 11 12 Non-information systems at corporate such as HVAC, elevator, phone system, security systems, vaults, and computer rooms are Year 2000 compliant as a direct result of building a new Corporate office. Similar equipment at field locations is not dependent on embedded chip technologies and is not considered an area of material exposure. The Company has completed its surveying of major suppliers and vendors of raw materials for Year 2000 compliance. The Company is not directly dependent on electronic data interchange (EDI) for the purchase of raw materials, though some of the Company's suppliers may be. Moreover, the bulk of raw materials (mostly lumber) is readily available from other suppliers. Possible interruptions in the supply chain can be circumvented by purchasing raw materials from an alternate local supplier. Responses from the Company's surveys provide assurance that our critical suppliers, including Financial Services providers, plan to be compliant by the middle of 1999. The costs associated with Year 2000 compliance are not expected to exceed $500,000 or to have a material impact on the Company's financial position, results of operations, or cash flows in future periods. Most of the hardware, software, and non-information system replacements have been due to growth of the Company and Year 2000 compliance is a byproduct of the replacement systems. The custom written software is addressed by the in-house programming staff and contract programming services. Most costs directly associated with Year 2000 compliance will be incurred during fiscal 1999. Contingency planning, both short term and long term, for critical processes for each business group has started and will be completed by the end of fiscal year 1999. To mitigate any unexpected problems with the Year 2000, plans could include, but are not limited to: (1) rapid transitions to alternative suppliers of services and materials, (2) replacement of errant equipment or software, (3) manual ledgers, (4) increased work hours by Company personnel, (5) temporary personnel, (6) outsourcing, and (7) routine backup of critical data to different platforms. Should the Company be required to execute a long term contingency plan, an adverse material effect to operations could result. The failure to correct a material Year 2000 problem could result in an interruption in, or a failure of, certain normal business activities or operations. Such failures could adversely affect the Company's results of operations, liquidity and financial condition. The Company believes that the risk of failure to the Housing and Communities business units is not material due to the low-technology nature of those businesses and manual processes are in use for backup procedures now. Due to the general uncertainty inherent in the Year 2000 problem, resulting in part from the uncertainty of the Year 2000 readiness of third-party suppliers and customers, the Company is unable to determine at this time whether the consequences of Year 2000 failures could have a material impact on the Company's results of operations, liquidity or financial condition. The Year 2000 Project is expected to significantly reduce the Company's level of uncertainty about the Year 2000 problem and, in particular, about the Year 2000 compliance and readiness of its critical suppliers and financial services providers. The Company believes that, with the implementation of new business systems and completion of the Project as scheduled, the exposure to significant interruptions of normal operations should be reduced. New Accounting Pronouncements During fiscal 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 131 (SFAS No. 131), Disclosures About Segments of an Enterprise and Related Information. SFAS 131 requires new disclosures of segment information in a company's financial statements and is effective for fiscal years beginning after December 15, 1997. These 12 13 statements will be effective for the Company in fiscal 1999. Adoption of these statements will not impact the Company's consolidated financial position, results of operations, or cash flows. On June 15, 1998, the FASB issued SFAS No. 133, Accounting for Derivative and Financial Instruments and Hedging Activities. SFAS 133 establishes a new model for accounting for derivatives and hedging activities based on these fundamental principles: i) derivatives represent assets and liabilities that should be recognized at fair value on the balance sheet; ii) derivative gains and losses do not represent liabilities or assets and therefore, should not be reported on the balance sheet as deferred credits or deferred debits; and iii) special hedge accounting should be provided only for transactions that meet certain specified criteria, which include a requirement that the change in fair value of the derivative be highly effective in offsetting the change in the fair value or cash flows of the hedged item. This statement is effective for fiscal years beginning after June 15, 1999, and is not expected to have a material effect on the Company's financial position or results of operations. Additionally in October 1998, the FASB issued SFAS 134, Accounting for Mortgaged-Backed Securities Retained after the Securitization of Loans Held for Sale by a Mortgage Banking Enterprise. SFAS 134 requires that after an entity engaged in mortgage banking activities has securitized mortgage loans that are held for sale, it must classify the resulting retained mortgage-backed securities or other retained interests based on its ability and intent to sell or hold those investments. The Company is currently assessing the effect, if any, on its financial statements of implementing SFAS 134. SFAS 134 is effective for the first fiscal quarter beginning after December 15, 1998. Forward Looking Statements Certain statements in this quarterly report are forward looking as defined in the Private Securities Litigation Reform Law. These statements involve certain risks and uncertainties that may cause actual results to differ materially from expectations as of the date of this report. These risks fall generally within three broad categories consisting of industry factors, management expertise, and government policy and economic conditions. Industry factors include such matters as potential periodic inventory adjustments by both captive and independent retailers, general or seasonal weather conditions affecting sales and revenues, catastrophic events impacting insurance reserves, cost of labor and/or raw materials and industry consolidation trends creating fewer, but stronger competitors capable of sustaining competitive pricing pressures. Management expertise is affected by management's overall ability to anticipate and meet consumer preferences, maintain successful marketing programs, continue quality manufacturing output, keep a strong cost management oversight, meet the Year 2000 compliance plan, and project stable gain on sale accounting assumptions. Lastly, management has the least control over government policy and economic conditions such as prevailing interest rates, government monetary policy, stable regulation of manufacturing standards, consumer confidence, favorable trade policies, and general prevailing economic and employment conditions. 13 14 PART II -- OTHER INFORMATION ITEM 1 - There were no reportable events for Item 1 through Item 5. ITEM 6 - Exhibits and Reports for Form 8-K. (a) 27. Financial Data Schedule (SEC use only) (b) Reports on Form 8-K. Clayton Homes, Inc./Vanderbilt Mortgage & Finance, Inc. Senior Subordinate Pass-Through Certificates Series 1998D. Filed November 17, 1998. 14 15 CLAYTON HOMES, INC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CLAYTON HOMES, INC. ------------------- (Registrant) Date: February 11, 1999 /s/ Kevin T. Clayton ------------------------- --------------------------------------- Kevin T. Clayton President and Chief Operating Officer Date: February 11, 1999 /s/ Amber W. Krupacs ------------------------- --------------------------------------- Amber W. Krupacs Vice President, Finance and Secretary Date: February 11, 1999 /s/ Greg A. Hamilton ------------------------- --------------------------------------- Greg A. Hamilton Vice President and Controller 15 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF CLAYTON HOMES, INC. FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS JUN-30-1999 JUL-01-1998 DEC-31-1998 8,995 0 925,845 26,276 163,933 0 352,268 73,913 1,552,199 103,924 380,475 0 0 14,441 875,568 1,552,199 494,599 633,806 340,075 512,757 0 5,259 7,480 108,310 40,100 0 0 0 0 68,210 .47 .46
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