10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES
EXCHANGE ACT OF 1934 for the quarterly period ended March 31, 2003 or
(  ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from         to

Commission File Number: 1-7444

OAKWOOD HOMES CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

North Carolina	56-0985879
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

7800 McCloud Road, Greensboro, North Carolina 27409-9634

(Address of Principal Executive Offices)

Post Office Box 27081, Greensboro, North Carolina 27425-7081

(Mailing Address of Principal Executive Offices)

(336) 664-2400
(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or 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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes (  )  No (X)

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock as of April 30, 2003.

Common Stock, Par Value $.50 Per Share . . . . . . . 9,537,485

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

The interim consolidated financial statements contained herein have been prepared, without audit, on a going concern basis, which assumes continuity of operations and realization of assets and satisfaction of liabilities in the ordinary course of business, and in accordance with Statement of Position 90-7 (“SOP 90-7”), “Financial Reporting by Entities in Reorganization under the Bankruptcy Code.” Accordingly, all pre-petition liabilities subject to compromise have been segregated in the Consolidated Balance Sheet and classified as Liabilities subject to compromise, at the estimated amount of allowable claims. Liabilities not subject to compromise are separately classified. Revenues, expenses, realized gains and losses and provisions for losses resulting from the reorganization are reported separately as Reorganization items in the Consolidated Statement of Operations. Cash used for reorganization items is disclosed separately. The ability of the Company to continue as a going concern is subject to numerous risks and uncertainties and is predicated upon, among other things, the confirmation of a reorganization plan, the ability to generate cash flows from operations and the ability to obtain financing sources sufficient to satisfy the Company’s future obligations and meet current operating needs, including continued access to the asset-backed securities or whole loan sales markets. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amount and classification of liabilities that may result from the outcome of these uncertainties.

These interim consolidated financial statements have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in audited financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures contained herein are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company’s latest Annual Report on Form 10-K.

OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(in thousands except per share data)

					Three months ended
					March 31,
					2003			2002
Revenues
	Net sales				$	159,877		$	205,081
	Financial services
		Consumer finance, net of impairment and valuation provisions				(57,128	)		11,420
		Insurance				1,352			7,348
						(55,776	)		18,768
	Other income					3,561			1,641
				Total revenues		107,662			225,490
Costs and expenses
	Cost of sales					126,009			154,948
	Selling, general and administrative expenses					42,080			63,168
	Financial services operating expenses
		Consumer finance				10,822			13,392
		Insurance				384			3,123
						11,206			16,515
	Restructuring charges (reversals)					(119	)		(2,071	)
	Asset impairment charges					740			—
	Provision for losses on credit sales					2,258			25,007
	Interest expense					12,545			9,863
				Total costs and expenses		194,719			267,430
Loss before reorganzation items and income taxes						(87,057	)		(41,940	)
Reorganization items (Note 8)
	Recapture of servicing impairment					12,740			—
	Impairment of guarantee liabilities					—			—
	Impairment of regular REMIC interest					—			—
	Professional fees					(6,715	)		—
						6,025			—
Loss before income taxes						(81,032	)		(41,940	)
Provision for income taxes						—			(72,229	)
Net income (loss)					$	(81,032	)	$	30,289
Net income (loss) per share:
			Basic		$	(8.50	)	$	3.19
			Diluted		$	(8.50	)	$	3.16
Weighted average number of common shares outstanding
			Basic			9,530			9,493
			Diluted			9,530			9,578

See accompanying notes to the consolidated financial statements.

OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(in thousands except per share data)

				Six months ended
				March 31,
				2003			2002
Revenues
	Net sales			$	337,297		$	434,060
	Financial services revenues
		Consumer finance, net of impairment and valuation provisions			(102,508	)		34,670
		Insurance			6,145			14,974
					(96,363	)		49,644
	Other income				4,651			3,790
			Total revenues		245,585			487,494
Costs and expenses
	Cost of sales				281,454			331,564
	Selling, general and administrative expenses				97,360			127,772
	Financial services operating expenses
		Consumer finance			24,753			26,733
		Insurance			2,391			6,172
					27,144			32,905
	Restructuring charges (reversals)				23,008			(2,071	)
	Asset impairment charges				14,554			—
	Provision for losses on credit sales				5,266			36,412
	Interest expense				22,313			19,330
			Total costs and expenses		471,099			545,912
Loss before reorganzation items and income taxes					(225,514	)		(58,418	)
Reorganization items (Note 8)
	Recapture of servicing impairment				87,790			—
	Impairment of guarantee liabilities				(235,776	)		—
	Impairment of regular REMIC interest				(1,209	)		—
	Professional fees				(13,873	)		—
					(163,068	)		—
Loss before income taxes					(388,582	)		(58,418	)
Provision for income taxes					—			(78,729	)
Net income (loss)				$	(388,582	)	$	20,311
Net income (loss) per share:
		Basic		$	(40.78	)	$	2.14
		Diluted		$	(40.78	)	$	2.13
Weighted average number of common shares outstanding
		Basic			9,529			9,478
		Diluted			9,529			9,520

     See accompanying notes to the consolidated financial statements.

OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(in thousands)

		Three months ended						Six months ended
		March 31,						March 31,
		2003			2002			2003			2002
Net income (loss)		$	(81,032	)	$	30,289		$	(388,582	)	$	20,311
	Unrealized gains (losses) on securities available for sale		(74	)		(928	)		(1,616	)		4,116
Comprehensive income (loss)		$	(81,106	)	$	29,361		$	(390,198	)	$	24,427

     See accompanying notes to the consolidated financial statements.

OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)
(in thousands except share and per share data)

			March 31,			September 30,
			2003			2002
ASSETS
Cash and cash equivalents			$	32,623		$	20,107
Loans and investments				126,697			175,865
Other receivables				121,829			158,707
Inventories
		Manufactured homes		98,438			133,687
		Work-in-process, materials and supplies		25,915			32,123
		Land/homes under development		12,329			12,485
				136,682			178,295
Properties and facilities				136,193			177,212
Other assets				153,817			50,262
			$	707,841		$	760,448
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities not subject to compromise
	Short-term borrowings		$	166,536		$	59,000
	Notes and bonds payable			—			309,167
	Accounts payable and accrued liabilities			130,598			251,167
	Insurance reserves and unearned premiums			66			16,274
	Deferred income taxes			6,169			6,169
	Other long-term obligations			—			77,374
				303,369			719,151
Liabilities subject to compromise
	Notes and bonds payable			308,993			—
	Accounts payable and accrued liabilities			69,292			—
	Other long-term obligations			375,073			—
				753,358			—
Commitments and contingencies (Note 12)
Shareholders’ equity (deficit)
		Common stock, $.50 par value; 100,000,000 shares authorized; 9,537,000 and 9,537,000 shares issued and outstanding		4,769			4,769
		Additional paid-in capital		199,857			199,857
		Accumulated deficit		(553,135	)		(164,554	)
				(348,509	)		40,072
		Accumulated other comprehensive income (loss)		(338	)		1,278
		Unearned compensation		(39	)		(53	)
				(348,886	)		41,297
			$	707,841		$	760,448

See accompanying notes to the consolidated financial statements.

OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(in thousands)

					Six months ended
					March 31,
					2003			2002
Operating activities
	Net income (loss)				$	(388,582	)	$	20,311
	Adjustments to reconcile net loss to cash provided (used) by operating activities
		Depreciation and amortization				14,001			16,484
		Provision for losses on credit sales, net of charge-offs				3,277			1,100
		(Gains) losses on securities sold and loans sold or held for sale				71,740			(3,318	)
		Impairment and valuation provisions				71,083			1,114
		Excess of cash received over REMIC residual income recognized (income recognized over cash received)				(707	)		2,148
		Non-cash restructuring charges (reversals)				16,380			(2,071	)
		Non-cash asset impairment charges				14,554			—
		Non-cash reorganization costs				149,195
		Other				(1,858	)		(3,550	)
		Changes in assets and liabilities
			Other receivables			37,158			(61,219	)
			Inventories			41,257			21,740
			Deferred insurance policy acquisition costs			3,894			694
			Other assets			(86,716	)		516
			Accounts payable and accrued liabilities			11,931			(32,297	)
			Insurance reserves and unearned premiums			(16,208	)		(2,069	)
			Other long-term obligations			(495	)		(189	)
				Cash used by operations		(60,096	)		(40,606	)
			Loans originated			(247,282	)		(354,372	)
			Sale of loans			198,216			381,427
			Principal receipts on loans			12,684			7,363
				Cash used by operating activities		(96,478	)		(6,188	)
Investing activities
		Acquisition of properties and facilities, net of asset disposals				1,652			(4,939	)
				Cash provided (used) by investing activities		1,652			(4,939	)
Financing activities
		Net borrowings (repayments) on short-term credit facilities				107,536			(6,500	)
		Payments on notes and bonds				(194	)		(735	)
		Proceeds from exercise of stock options				—			8
				Cash provided (used) by financing activities		107,342			(7,227	)
Net increase (decrease) in cash and cash equivalents						12,516			(18,354	)
Cash and cash equivalents
		Beginning of period				20,107			44,246
		End of period			$	32,623		$	25,892

See accompanying notes to the consolidated financial statements.

OAKWOOD HOMES CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
(Unaudited)

1.	The interim consolidated financial statements contained herein have been prepared, without audit, on a going concern basis, which assumes continuity of operations and realization of assets and satisfaction of liabilities in the ordinary course of business, and in accordance with Statement of Position 90-7 (“SOP 90-7”), “Financial Reporting by Entities in Reorganization under the Bankruptcy Code.” Accordingly, all pre-petition liabilities subject to compromise have been segregated in the Consolidated Balance Sheet and classified as Liabilities subject to compromise, at the estimated amount of allowable claims. Liabilities not subject to compromise are separately classified. Revenues, expenses, realized gains and losses and provisions for losses resulting from the reorganization are reported separately as Reorganization items in the Consolidated Statement of Operations. Cash used for reorganization items is disclosed separately in Note 8. The unaudited consolidated financial statements reflect all adjustments, which include only normal recurring adjustments, except as described above, which are, in the opinion of management, necessary for a fair statement of the results of operations for the periods presented. These interim statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s latest Annual Report on Form 10-K. Results of operations for any interim period are not necessarily indicative of results to be expected for a full year.
	Unless otherwise indicated, all references to annual periods refer to fiscal years ended September 30. On April 22, 2003 the Board of Directors approved a change of the Company’s fiscal year end from September 30 to June 30. The audited financial statements for the nine month transition period from October 1, 2002 to June 30, 2003 will be reported in a Form 10-K.
2.	On November 15, 2002 (the “Petition Date”), the Company and 14 of its subsidiaries (collectively, the “Debtors”) filed voluntary petitions for reorganization under Chapter 11 of the federal bankruptcy laws (the “Bankruptcy Code” or “Chapter 11”) in the United States Bankruptcy Court in Wilmington, Delaware (the “Court”) under case number 02-13396. The reorganization is being jointly administered under the caption “In re Oakwood Homes Corporation, et al”. The Debtors are currently operating their business as debtors-in-possession pursuant to the Bankruptcy Code. As a debtor-in-possession, the Company is authorized to continue to operate as an ongoing business, but may not engage in transactions outside the ordinary course of business without the approval of the Court, after notice and an opportunity for a hearing.
	The Company decided to file for reorganization under Chapter 11 in order to restructure its balance sheet and access new working capital while continuing to operate in the ordinary course of business. This decision was based upon the continued poor performance of loans originated in 2000 and before, as well as extremely weak conditions in the manufactured housing industry and deteriorating terms in the asset-backed securitization market into which the Company sells its loans. Other factors contributing to the decision to file included a general economic recession, declining recovery rates in the repossession market, the

substantial reduction in loan servicing fees received and the withdrawal of manufactured housing floor plan lenders offering financing to many of the Company’s wholesale dealers.

The Company’s proposed reorganization plan, agreed to in principle by Berkshire Hathaway Inc., calls for the conversion of the Company’s $303 million of senior unsecured debt and its guarantees of principal and interest on $275 million principal amount of subordinated REMIC bonds into the Company’s post restructuring common shares. As a result, Berkshire Hathaway Inc., which is the largest holder of the Company’s unsecured debt, would become the Company’s largest shareholder upon the Company’s emergence from bankruptcy. The Company’s proposed reorganization plan also provides for the conversion of the Company’s current common shares into out-of-the money warrants to purchase approximately 10% of the post restructuring common shares. However, there can be no assurances that the Company will be able to continue to operate as a going concern or that the proposed plan will be approved by the Court or the creditors of the Company.

As part of the Company’s operational restructuring, five manufacturing plants in various states and the Company’s loan origination operations in Texas were closed on November 14, 2002. The Company simultaneously announced the closure of approximately 75 retail locations, principally in the Deep South, Tennessee and Texas markets. In connection with these and other previously announced closings, the Company recorded approximately $23.0 million in restructuring charges and $14.6 million in other asset impairment charges during the six months ended March 31, 2003 to reflect certain changes in the Company’s asset disposition strategy. In addition, during the quarter ended December 31, 2002 the Company recorded a charge to cost of sales of approximately $8.5 million to write down inventory at closing sales centers and manufacturing plants to an estimated lower of cost or market value. Following these closures which will be completed in the quarter ending June 30, 2003, the Company will operate approximately 120 retail sales centers and 14 manufacturing plants. At March 31, 2003 the Company held for sale 15 manufacturing facilities with a net book value of $16.9 million.

On November 15, 2002 the New York Stock Exchange, Inc. (the “NYSE”) suspended trading in the Company’s common stock. The NYSE submitted an application to the Securities and Exchange Commission to delist the Company’s common stock from the NYSE and such delisting became effective as of December 30, 2002.

On November 23, 2002 the Debtors reached an agreement in principle with Berkshire Hathaway Inc., Greenwich Capital Financial Products, Inc. and Ranch Capital LLC to provide debtor-in-possession (“DIP”) financing of up to $215 million during completion of the reorganization (the “DIP Facility”). The DIP Facility included an up to $140 million line of credit to be used for general corporate liquidity needs (the “Tranche A Revolving Loan”) and an up to $75 million loan servicing advance line (the “Tranche B Servicing Advance Loan”).

On November 27, 2002 the Debtors entered into a Senior Secured, First Priority Debtor-in-Possession Loan and Security Agreement (the “Interim DIP Agreement”) with Foothill Capital Corporation, Textron Financial Corporation and The CIT Group/Business Credit, Inc., pursuant to which such lenders agreed to provide the Company with up to $25 million in interim debtor-in-possession financing. Borrowings under the Interim DIP Agreement bore interest at prime plus 3.5% and were secured by a first priority lien on substantially all of the Company’s assets. The Interim DIP Agreement matured on December 31, 2002. All

borrowings under the Interim DIP Agreement were subsequently repaid on January 28, 2003.

On December 31, 2002 the Court approved the DIP Facility and on January 28, 2003 the Debtors closed the Tranche A Revolving Loan of the DIP Facility. Borrowings under the Tranche A Revolving Loan bear interest at the greater of (a) LIBOR plus 5% or (b) 9.5% and are secured by a priority lien on substantially all of the Debtors’ assets. Such borrowings have been used primarily to support outstanding letters of credit of $39 million, to repay amounts outstanding under the Company’s previous $65 million revolving credit facility and the Interim DIP Agreement and will be used to provide additional borrowing capacity while the Debtors complete their reorganization.

The Tranche A Revolving Loan terminates on the earliest of (a) October 15, 2003, (b) the date of substantial consummation of a plan of reorganization as confirmed by an order of the Court, (c) the sale of a material part of any Debtor’s assets, (d) the date of the conversion of the bankruptcy case of any of the Debtors to a case under Chapter 7 of the federal bankruptcy laws, (e) the date of the dismissal of the Chapter 11 case of any of the Debtors or (f) the earlier of the date on which (i) all of the loans under the Tranche A Revolving Loan become due and payable or (ii) all of the loans under the Tranche A Revolving Loan are paid in full and the Tranche A Revolving Loan is terminated.

In February 2003 the Company closed the second element of its DIP Facility, the Tranche B Servicing Advance Loan, which funds a substantial majority of the Company’s obligation under most of its loan servicing contracts to make advances of delinquent principal and interest (“P&I”) payments. The Company formed a wholly-owned special purpose subsidiary, Oakwood Advance Receivables Company II, LLC (“OAR II”), to provide up to $75 million of revolving funding for qualifying P&I advance receivables. Borrowings under the facility bear interest at LIBOR plus 5.0%, subject to a floor of 7.5%. The Company transfers qualifying servicing advance receivables to OAR II, which funds its purchases of receivables using the proceeds of debt obligations issued by OAR II to third party lenders. OAR II collects the receivables it purchases from the Company, and such proceeds are available to purchase additional receivables from the Company through the expiration of the facility in October 2003. A summary of the funding status of OAR II at March 31, 2003 is as follows:

Receivables sold to OAR II		14,337
Discount		(1,294	)
Collateral value of receivables		13,043
Cash available for purchase of additional receivables ([reflected as/included in] other assets)		38,493
Total amount borrowed under facility (included in short-term borrowings)		51,536
Additional funding capacity		23,464
Total facility size	$	75,000

Because OAR II is not a qualifying special purpose entity under Statement of Financial Accounting Standards No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities – A Replacement of FASB Statement No. 125,” receivables sold to OAR II continue to be recognized as assets of the Company and

borrowings by OAR II are reflected as short-term borrowings in the accompanying Consolidated Balance Sheet.

The Company has also reached an agreement with a financial institution which provides for continued access to its loan purchase facility of up to $200 million under substantially the same terms as in effect prior to the Company’s filing for reorganization.

In December 2002 and January 2003 the Court entered orders authorizing Oakwood Acceptance Corporation, LLC (“OAC”) to 1) effectively assign OAC’s servicing rights under the pooling and servicing agreements and certain advance receivables to Oakwood Servicing Holdings Co., LLC (“OSHC”), a newly created limited purpose wholly-owned subsidiary of OAC and 2) enter into and perform under a subservicing agreement with OSHC. Under this structure, OSHC has become the “Servicer” of record for the purposes of the servicing agreements. OAC continues to perform day-to-day servicing in accordance with the terms of the subservicing agreements. This arrangement elevated the priority of, and in certain instances increased the amount of, OAC’s servicing fees, which had previously been subordinate to payments to the REMIC bondholders, to a senior position in the distribution of cash received by the REMIC trusts. In addition, the elevation of OAC’s servicing fees to a senior position should result in an increase in the cash servicing fees received by the Company. However, because the elevation of the servicing fees also has the effect of decreasing cash available to pay security holders in the REMIC trusts, the Company expects its obligations under guarantees of certain subordinated REMIC securities to increase substantially. While the effects of the elevation of the servicing fee priority on the Company’s guarantee obligations are fully reflected in the consolidated financial statements, the offsetting effects of the increased servicing fee income are limited by generally accepted accounting principles and accordingly are not fully reflected in the consolidated financial statements. See Note 8.

Under Section 362 of the Bankruptcy Code, actions to collect pre-petition indebtedness, as well as most other pending litigation, are stayed. Absent an order of the Court, substantially all pre-petition liabilities are subject to settlement under a plan of reorganization to be approved by the Court. Although the Debtors expect to file a reorganization plan that provides for emergence from bankruptcy as a going concern, there can be no assurance that a reorganization plan will be proposed by the Debtors or confirmed by the Court, or that any such plan will be successfully implemented.

Under the Bankruptcy Code, the Debtors may also assume or reject executory contracts, including lease obligations, subject to the approval of the Court and certain other conditions. Parties affected by these rejections may file claims with the Court in accordance with the reorganization process. At this early stage of the bankruptcy, the Company cannot estimate or anticipate what effect the rejection and disposition of subsequent claims of executory contracts may have on the reorganization process.

On January 31, 2003 the Debtors filed with the Court schedules and statements of financial affairs setting forth, among other things, the assets and liabilities of the Debtors on the Petition Date, subject to the assumptions contained in certain notes filed in connection therewith. All of the schedules and statements are subject to further amendment or modification. The Bankruptcy Code provides for a claims reconciliation and resolution process. The bar date for filing claims was March 27, 2003. As the ultimate number and

	amount of allowed claims is not presently known, and because any settlement terms of such allowed claims are subject to a confirmed plan of reorganization, the ultimate distribution, if any, with respect to allowed claims is not presently ascertainable.
	The United States Trustee has appointed an unsecured creditors committee. The official committee through its legal representatives have a right to be heard on all matters that come before the Court and is the primary entity with which the Company will negotiate the terms of a plan of reorganization. To date, no other committees have been appointed by the United States Trustee. There can be no assurance this committee will support the Company’s positions in the bankruptcy proceedings or the plan of reorganization once proposed, and disagreements between the Company and this committee could protract the bankruptcy proceedings, could negatively impact the Company’s ability to operate during bankruptcy and could delay the Company’s emergence from bankruptcy or cause the bankruptcy proceedings to be converted from a reorganization to a liquidation.
	At this time, it is not possible to predict the effect of the Chapter 11 reorganization process on the Company’s business and results of operations or financial condition, various creditors and security holders, or when it may be possible to emerge from Chapter 11, although it is management’s intention to emerge from Chapter 11 as quickly as possible. The Company’s future results are dependent upon the timely development, confirmation and implementation of a plan of reorganization. The Company believes, however, that under any reorganization plan, the Company’s common stock would likely be substantially diluted or cancelled as a result of the conversion of debt to equity or as a result of other compromises of interest. Further, it is also likely that the claims of the Company’s unsecured creditors, including senior notes and REMIC guarantee obligations, will be converted to equity. The Company’s ability to continue to operate as a going concern is subject to numerous risks and uncertainties, including those described in the “Forward Looking Statements” section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
	The ultimate recovery, if any, by creditors, security holders and/or common shareholders will not be determined until confirmation of a plan or plans of reorganization. No assurance can be given as to what value will be ascribed in the bankruptcy proceedings to each of these constituencies. Accordingly, the Company urges that appropriate caution be exercised with respect to existing and future investments in any of these securities.
3.	The components of loans and investments are as follows:

				March 31,			September 30,
(in thousands)				2003			2002
Loans held for sale				$	112,109		$	149,901
Loans held for investment					2,484			3,177
Less: reserve for uncollectible loans receivable					(8,695	)		(5,333	)
			Total loans receivable		105,898			147,745
Retained interests in REMIC securitizations available for sale, exclusive of loan servicing assets and liabilities, at fair value
	Regular interests				7,111			13,810
	Residual interests				13,688			14,310
		Total retained REMIC interests, at fair value (amortized cost of $17,355 and $19,847)			20,799			28,120
				$	126,697		$	175,865

4. The following table summarizes the transactions in the reserve for credit losses.

	Three months ended					Six months ended
	March 31,					March 31,
(in thousands)	2003		2002			2003			2002
Balance at beginning of period	$	2,757	$	6,305		$	5,515		$	3,399
Provision for losses on credit sales		2,258		25,007			5,266			36,412
Losses charged to the reserve and other		3,777		(26,813	)		(1,989	)		(35,312	)
Balance at end of period	$	8,792	$	4,499		$	8,792		$	4,499

The provision for losses on credit sales and losses charged to the reserve in 2002 principally reflect costs associated with the Company’s loan assumption program. The Company increasingly made use of this program from its inception in the second quarter of 2001 through the third quarter of 2002 when the Company decided to substantially curtail its use of the program.

The reserve for credit losses is reflected in the Consolidated Balance Sheet as follows:

	March 31,		September 30,
(in thousands)	2003		2002
Reserve for uncollectible receivables (included in loans and investments)	$	8,695	$	5,333
Reserve for contingent liabilities (included in accounts payable and accrued liabilities)		97		182
	$	8,792	$	5,515

5. The Company’s retained interests in securitizations are set forth below.

	March 31,			September 30,
	2003			2002
	(in thousands)
Regular interests	$	7,111		$	13,810
Residual interests		13,688			14,310
Net servicing assets (liabilities)		29,553			(55,741	)
Guarantee liabilities		(373,180	)		(75,504	)

The Company estimates the fair value of its retained interests in securitizations by determining the present value of the associated expected future cash flows over the entire expected life of the loans using modeling techniques that incorporate estimates of key assumptions, which management believes market participants would use for similar interests. Such assumptions include prepayment speeds, net credit losses and interest rates used to discount cash flows.

The valuation of retained interests is affected not only by the projected level of prepayments of principal and net credit losses, but also by the projected timing of such prepayments and net credit losses. Should such timing differ materially from the Company’s projections, it could have a material effect on the valuation of the Company’s retained interests and may result in impairment charges being recorded.

The key economic assumptions used in measuring the initial retained interests resulting from securitizations completed in the six months ended March 31, 2002 were as follows:

	March 31,
	2002
Approximate weighted average life (in years)		5.0
Estimated projected credit losses as a percentage of original principal balance of loans		11.1	%
Approximate weighted average interest rate used to discount assumed residual cash flows		30.0	%
Approximate assumed weighted average constant prepayment rate as a percentage of unpaid principal balance		15.8	%

The Company completed no securitizations during the six months ended March 31, 2003. See Note 15 for discussion of the whole loan sale completed during the quarter ended March 31, 2003. See Note 8 for additional information regarding servicing assets and liabilities and guarantee liabilities.

The following table sets forth certain data with respect to securitized loans in which the Company retains an interest, and with respect to the key economic assumptions used by the Company in estimating the fair value of such retained interests:

	March 31,		September 30,
	2003		2002
	(in thousands)
Aggregate unpaid principal balance of loans	$	4,560,074	$	5,042,438

	March 31,			September 30,
	2003			2002
	(in thousands)
Weighted average interest rate of loans at period end		11.2	%		11.2	%
Approximate assumed weighted average constant prepayment rate as a percentage of unpaid principal balance of loans		12.9	%		12.2	%
Approximate remaining assumed nondiscounted credit losses as a percentage of unpaid principal balance of loans		35.5	%		18.3	%
Approximate weighted average interest rate used to discount assumed residual cash flows		16.0	%		16.0	%
Interest rate used to discount assumed servicing asset cash flows		6.9	%		15.0	%
Interest rate used to discount assumed servicing and guarantee liability cash flows		3.8	%		3.6	%

The foregoing data and assumptions may not be comparable because of changes in pool demographics, such as average age of loans, the elevation of servicing fees from a subordinated to a senior position in cash distributions from the REMIC trusts and the interaction of assumptions. All data is based on weighted averages using unpaid or original principal balances of loans.

The following table summarizes certain cash flows received from and paid to the securitization trusts during the six months ended March 31, 2003 and 2002, respectively:

	March 31,			March 31,
	2003			2002
	(in thousands)			(in thousands)
Proceeds from new securitizations	$	—		$	381,427
Servicing fees received		24,911			20,356
Net repayment (recovery) of principal and interest advances to trusts		(11,681	)		6,155
Guarantee payments		(518	)		(578	)
Cash flow received on retained regular interests		1,115			736
Cash flow received on retained residual interests		185			5,202

Loans serviced by the Company and related loans past due 90 days or more at March 31, 2003, are set forth below:

	Total		Amount
	Principal		90 days or more
	Amount		Past Due
	(in thousands)
Loans held for sale	$	110,485	$	6,420
Securitized loans		4,560,074		350,402

Loans serviced by the Company and related loans past due 90 days or more at September 30, 2002, are set forth below:

	Total		Amount
	Principal		90 days or more
	Amount		Past Due
	(in thousands)
Loans held for sale	$	147,995	$	4,075
Securitized loans		5,042,438		396,109

6. The Company provides consumer warranties against manufacturing defects in all new homes it sells. Warranty terms are either one or five years depending upon the item covered. Estimated future warranty costs are accrued at the time of sale. The following table sets forth the activity in the Company’s warranty accrual:

	Three months ended			Six months ended
(in thousands)	March 31, 2003			March 31, 2003
Balance at beginning of period	$	10,765		$	12,521
Provision for warranty expense		4,813			10,357
Payments of warranty obligations		(7,067	)		(14,367	)
Balance at end of period	$	8,511		$	8,511

7. The following table sets forth the activity in each component of the Company’s restructuring reserve (in thousands):

	Severance			Plant, sales
	and other			center and
	termination			office			Asset
	charges			closings			write-downs			Total
Original provision	$	7,350		$	7,384		$	11,192		$	25,926
Payments and balance sheet charges		(1,707	)		(141	)		(11,192	)		(13,040	)
Balance 9/30/99		5,643			7,243			—			12,886
Additional provision		1,974			1,780			15			3,769
Payments and balance sheet charges		(2,946	)		(5,895	)		363			(8,478	)
Reversal of restructuring charges		(3,912	)		(2,076	)		(378	)		(6,366	)
Balance 9/30/00		759			1,052			—			1,811
Additional provision		681			4,702			12,460			17,843
Payments and balance sheet charges		(729	)		(1,512	)		(12,460	)		(14,701	)
Reversal of 1999 restructuring charges		(30	)		(45	)		—			(75	)
Balance 9/30/01		681			4,197			—			4,878
Payments and balance sheet charges		(145	)		(743	)		—			(888	)
Balance 12/31/01		536			3,454			—			3,990
Payments and balance sheet charges		(50	)		(593	)		412			(231	)
Reversal of 2001 restructuring charges		(486	)		(1,173	)		(412	)		(2,071	)
Balance 3/31/02		—			1,688			—			1,688
Payments and balance sheet charges		—			(505	)		—			(505	)
Balance 6/30/02		—			1,183			—			1,183
Additional provision		—			2,016			6,742			8,758
Payments and balance sheet charges		—			(115	)		(6,742	)		(6,857	)
Reversal of restructuring charges		—			(175	)		—			(175	)
Balance 9/30/02		—			2,909			—			2,909
Additional provision		—			6,747			16,380			23,127
Payments and balance sheet charges		—			(635	)		(16,380	)		(17,015	)
Balance 12/31/02		—			9,021			—			9,021
Payments and balance sheet charges		—			(1,460	)		—			(1,460	)
Reversal of restructuring charges		—			(119	)		—			(119	)
Balance 3/31/03	$	—		$	7,442		$	—		$	7,442

During the fourth quarter of 1999 the Company recorded restructuring charges of approximately $25.9 million, related primarily to the closing of four manufacturing lines, the temporary idling of five others and the closing of approximately 40 sales centers. The charges in 1999 included severance and other termination costs related to approximately 2,150 employees primarily in manufacturing, retail and finance operations, costs associated with closing plants and sales centers, and asset writedowns.

During 2000 the Company reversed into income $6.4 million of charges initially recorded in 1999. Approximately $2.9 million of the reversal related to the Company’s legal determination that it was not required to pay severance amounts to certain terminated employees under the Worker Adjustment and Retraining Notification Act (“WARN”). Upon the expiration of a six-month waiting period specified by WARN and the Company’s final calculation of the number of affected employees in relation to its workforce at the time of the restructuring announcement, the Company determined that it was not required to pay amounts previously accrued. During 2000 the Company also reevaluated its restructuring plans and determined that the losses associated with the closing of retail sales centers, the idling or closing of manufacturing plants, the disposition of certain assets and legal costs were less than anticipated and $3.5 million of the charges were reversed. During 2000 the Company recorded an additional $3.8 million charge, primarily related to severance costs associated with a reduction in headcount of 250 people primarily in the corporate, finance and manufacturing operations area, and the closure of offices.

During the fourth quarter of 2001 the Company recorded restructuring charges of approximately $17.8 million, primarily related to the closing of approximately 90 underperforming retail sales centers, a majority of which were located in the South, in areas where the Company has experienced poor operating results as well as poor credit performance. At March 31, 2002 these restructuring activities were substantially complete.

Market conditions, particularly in the South where the majority of store closings occurred, remained fluid during the six months ended March 31, 2002. While the Company did close the originally identified approximately 90 stores, these changing market conditions caused the Company to revise its initial determination of the number of stores to be either sold to independent dealers, converted to centers that exclusively market repossessed inventory or closed. The Company originally estimated that the disposition of the stores would be approximately evenly divided between those sold to independent dealers, converted to centers exclusively marketing repossessed inventory or closed. Ultimately, approximately 27 stores were sold, 23 were converted and 40 were closed. As a result of the change in the ultimate disposition of certain of the stores, as well as changes in the original estimate of costs to exit the stores, the Company reversed into income in the quarter ended March 31, 2002 $2.1 million of restructuring charges originally recorded in the fourth quarter of fiscal 2001.

During the fourth quarter of 2002 the Company recorded restructuring charges of approximately $8.8 million, primarily related to the closing of approximately 40 underperforming retail sales centers and five centers that exclusively market repossessed

	inventory. The stores closed were located principally in the South and Texas, where the Company experienced poor operating results and unsatisfactory credit performance.
	As discussed in Note 2, on November 15, 2002 the Debtors filed for reorganization under Chapter 11 of the Bankruptcy Code. As part of the Company’s operational restructuring, five manufacturing plants in various states and the Company’s loan origination operations in Texas were closed on November 14, 2002. The Company simultaneously announced the closure of approximately 75 retail locations, principally in the Deep South, Tennessee and Texas markets. In connection with these closings, the Company recorded approximately $23.0 million in restructuring charges during the six months ended March 31, 2003.
	Of the $7.4 million remaining in the restructuring reserve at March 31, 2003, approximately $800,000 and $1.6 million relate to provisions established during the fourth quarter of 2001 and the fourth quarter of 2002, respectively. The Company is contractually obligated to pay the amounts remaining in the reserve at March 31, 2003 unless such amounts are set aside by the Court during the bankruptcy proceedings.
	During the execution of the Company’s restructuring plans, approximately 4,500 employees were affected, of which 2,150 and 250 were terminated during the fourth quarters of 1999 and 2000, respectively. The Company terminated approximately 400 employees as part of its fourth quarter 2001 plan and approximately 150 employees as part of its fourth quarter 2002 plan. The Company terminated approximately 1,550 employees, primarily in its retail and manufacturing operations, as part of its first quarter 2003 plan.
8.	Reorganization items represent amounts incurred by the Company as a direct result of the Chapter 11 filing and are presented separately in the Consolidated Statement of Operations in accordance with SOP 90-7. As further described in Note 2, in December 2002 and January 2003, the Court approved orders that effectively elevated OAC’s right to receive servicing fees to a senior position, rather than its previous subordinated position, in the distribution of cash flows from the REMIC trusts and, in certain instances, increased the amount of the fees. Accordingly, the Company recaptured or reversed into income impairment charges previously taken related to its servicing assets and liabilities. Such charges originally resulted from projected cash servicing fee shortfalls due to the subordinated position of OAC’s right to receive servicing fees. The recapture or reversal into income amounted to $87.8 million for the six months ended March 31, 2003. This was more than offset by impairment charges of $235.8 million related to the Company’s guarantee liabilities and $1.2 million related to retained regular REMIC interests. The substantial impairment charges arose as a result of cash distributions to holders of the REMIC guarantees now being subordinated to the payment of servicing fees to the Company. This subordination increased the estimated amount of principal and interest that the Company may be required to pay under the guarantees. The proposed plan of reorganization described earlier calls for the conversion of the guarantee liabilities into the Company’s post restructuring common shares. Reorganization items for the six months ended March 31, 2003 also include professional fees of $13.9 million representing financial, legal, real estate and valuation services directly associated with the reorganization process. Cash paid for reorganization items was approximately $2.7 million and $7.5 million for the quarter and six months ended March 31, 2003, respectively.

Under SOP 90-7, interest expense is only recorded to the extent it will be paid during the Chapter 11 proceeding or if it is probable it will be an allowed priority, secured or unsecured claim. In accordance with SOP 90-7, approximately $6.1 million and $9.1 million of contractually stated interest was not recorded as interest expense during the quarter and six months ended March 31, 2003, respectively.

Condensed financial information of the Debtors is set forth below:

			Three months ended			November 16, 2002 to
(unaudited)        (in thousands)			March 31, 2003			March 31, 2003
Statement of Operations
Revenues
	Net sales		$	159,877		$	238,978
	Consumer finance revenues, net of impairment and valulation provisions			(38,516	)		(50,329	)
	Other income			3,561			3,966
		Total revenues		124,922			192,615
Costs and expenses
	Cost of sales			126,009			204,704
	Selling, general and administrative expenses			42,080			67,814
	Consumer finance operating expenses			10,210			17,277
	Restructuring and asset impairment charges			621			3,048
	Provision for losses on credit sales			(3,832	)		(2,138	)
	Interest expense			7,498			10,955
		Total costs and expenses		182,586			301,660
Loss before reorganzation items and income taxes				(57,664	)		(109,045	)
Reorganization items, net				(6,715	)		(246,860	)
Loss before income taxes				(64,379	)		(355,905	)
Provision for income taxes				—			—
Equity in net income (loss) of non-filing entities				(16,653	)		15,210
Net loss			$	(81,032	)	$	(340,695	)

(unaudited)       (in thousands)			March 31, 2003
Balance sheet
	ASSETS
	Cash and cash equivalents		$	27,373
	Loans and investments			41,766
	Other receivables			46,172
	Inventories			136,682
	Properties and facilities			136,193
	Investment in non-filing entities			148,514
	Other assets			74,077
			$	610,777
	LIABILITIES AND SHAREHOLDERS’ EQUITY
	Liabilities not subject to compromise
		Short-term borrowings	$	78,000
		Accounts payable and accrued liabilities		98,311
		Deferred income taxes		29,994
				206,305
	Liabilities subject to compromise
		Notes and bonds payable		308,993
		Accounts payable and accrued liabilities		69,292
		Other long-term obligations		375,073
				753,358
	Shareholders’ equity (deficit)			(348,886	)
			$	610,777

9. The following table displays the derivation of the weighted average number of shares outstanding used in the computation of basic and diluted earnings per share (“EPS”):

		Three months ended					Six months ended
		March 31,					March 31,
(in thousands, except per share data)		2003			2002		2003			2002
Numerator in earnings (loss) per share calculation:
	Net income (loss)	$	(81,032	)	$	30,289	$	(388,582	)	$	20,311
Denominator in earnings (loss) per share calculation:
	Weighted average number of common shares outstanding		9,530			9,493		9,529			9,478
	Unearned shares		—			—		—			—
	Denominator for basic EPS		9,530			9,493		9,529			9,478
	Dilutive effect of stock options and restricted shares computed using the treasury stock method		—			85		—			42
	Denominator for diluted EPS		9,530			9,578		9,529			9,520
Net income (loss) per share:
	Basic	$	(8.50	)	$	3.19	$	(40.78	)	$	2.14
	Diluted	$	(8.50	)	$	3.16	$	(40.78	)	$	2.13

Stock options to purchase 592,609 and 563,572 shares of common stock, 1,923,536 and 1,922,963 shares which may be acquired pursuant to a stock warrant, and 5,889 and 3,202 unearned restricted shares at March 31, 2003 and 2002, respectively, were not included in the computation of diluted earnings per share because their inclusion would have been antidilutive.

The Company applies Accounting Principles Board Opinion No. 25 in accounting for stock options and discloses the fair value of options granted as permitted by Statement of Financial Accounting Standards No. 123. No stock-based employee compensation cost is reflected in the Company’s net loss, as all options granted under those plans had an exercise price equal to the market value of the common stock at the date of grant.

The following table summarizes the proforma effects assuming compensation cost for such awards had been recorded based upon estimated fair value:

	Three months						Six months
	ended						ended
	March 31,						March 31,
	2003			2002			2003			2002
(in thousands, except per share data)
Net income (loss) — as reported	$	(81,032	}	$	(30,289	)	$	(388,582	)	$	(20,311	)
Net income (loss) — proforma		(81,129	)		(30,196	)		(388,776	)		(20,125	)
Basic loss per share — as reported	$	8.50		$	3.19		$	40.78		$	2.14
Basic loss per share — proforma		8.51			3.18			40.80			2.12
Diluted loss per share — as reported	$	8.50		$	3.16		$	40.78		$	2.13
Diluted loss per share — proforma		8.51			3.15			40.80			2.11

10.

During the first quarter of fiscal 2002 the Company formed a wholly-owned qualifying special purpose subsidiary, Oakwood Advance Receivables Company, LLC (“OAR”), to provide up to $50 million of revolving funding for qualifying servicing advance receivables. The Company sold qualifying servicing advance receivables to OAR, which funded its purchases of receivables using the proceeds of debt obligations issued by OAR to third party investors. OAR collected the receivables it purchased from the Company, and such proceeds were available to purchase additional receivables from the Company through August 2003. Conveyances of receivables to OAR were accounted for as sales under Statement of Financial Accounting Standards No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities – A Replacement of FASB Statement No. 125” (“FAS 140”). This facility was terminated due to the Company’s Chapter 11 filing on November 15, 2002. The Company replaced this facility with the previously described $75 million Tranche B Servicing Advance Loan of the DIP facility.

11.

The estimated contractual principal payments under notes and bonds payable are $125.6 million, $0.9 million, $0.8 million, $0.8 million, and $3.3 million for the 12 months ended March 31, 2004, 2005, 2006, 2007, and 2008, respectively, and the balance is payable thereafter. The aforementioned principal payments are stayed during the bankruptcy proceedings.

12.	During fiscal 2001 a lawsuit was filed against the Company and certain of its subsidiaries in the Circuit Court of Saline County, Arkansas. The plaintiffs filed this suit seeking certification of a nationwide class of persons (i) who were charged “dealer prep,” “FTC,” or “destination” charges and (ii) who were sold homeowners’ insurance or credit life insurance in connection with their purchases of manufactured homes. The complaint alleges common law fraud and violations of the North Carolina, Florida and Arkansas deceptive trade practices acts. The plaintiffs are seeking compensatory and punitive damages but have limited their alleged damages to less than $75,000 per person, inclusive of costs and attorney’s fees. The Company moved to compel arbitration of the claims of all purchasers who signed arbitration agreements (all purchasers after October 1, 1996). The trial court denied this motion and the Company filed an interlocutory appeal to the Arkansas Supreme Court. That appeal is fully briefed but has not yet been scheduled for oral argument. The trial court stayed all proceedings as to post-October 1, 1996 sales but allowed proceedings to continue with respect to the pre-October 1, 1996 sales. Specifically, the trial court allowed discovery and motions to proceed as to all persons who purchased homes before October 1, 1996. On September 18, 2002, the trial court announced its decision to certify a class of persons who were charged “dealer prep” and “FTC” charges prior to October 1, 1996. The trial court denied certification of a class of persons who were sold homeowners’ insurance or credit life insurance prior to October 1, 1996. To date an order of class certification has not been entered by the trial court. If such an order is entered, it will be appealed. The Company has filed a notice to move the case from Saline County, Arkansas to a federal court and intends to vigorously defend this case. This litigation was stayed by operation of the Bankruptcy Code.
	In addition, the Company is subject to legal proceedings and claims that have arisen in the ordinary course of its business and have not been finally adjudicated. In management’s opinion, the ultimate resolution of these matters is not expected to have a material adverse effect on the Company’s results of operations, financial condition or cash flows.
	The Company is contingently liable as guarantor of loans sold to third parties on a recourse basis. The amount of this contingent liability was approximately $26.2 million at March 31, 2003. The Company is also contingently liable as guarantor on subordinated securities issued by REMIC trusts in the aggregate principal amount of $274.8 million at March 31, 2003. Such guarantees obligate the Company to make payments in amounts equal to the excess, if any, of principal and interest distributions payable on the guaranteed securities over the cash available for such purpose in the underlying securitization trusts. Such payments may arise as a result of credit losses on the underlying trusts or because of structural provisions of the guaranteed securities which give rise to guarantee payments unrelated to loan pool performance. See Note 2 for a discussion of the Company’s proposed plan of reorganization. The Company is also contingently liable under terms of repurchase agreements with financial institutions providing inventory financing for retailers of their products. These arrangements, which are customary in the industry, provide for the repurchase of products sold to retailers in the event of default on payments by the retailer. The risk of loss under these agreements is spread over numerous retailers and is further reduced by the resale value of repurchased homes. The Company’s estimated potential obligations under such repurchase agreements approximated $58.5 million at March 31, 2003. Losses under these repurchase agreements have not been significant as of March 31, 2003.

13. The Company operates in four major business segments: retail, manufacturing, consumer finance and insurance. The following table summarizes information with respect to the Company’s business segments:

		Three months ended						Six months ended
		March 31,						March 31,
(in thousands)		2003			2002			2003			2002
Revenues
	Retail	$	87,125		$	116,486		$	184,695		$	249,961
	Manufacturing		116,149			152,054			239,383			306,703
	Consumer finance		5,290			11,420			(40,090	)		34,670
	Insurance		4,473			10,391			12,715			21,281
	Eliminations/other		(105,375	)		(64,861	)		(151,118	)		(125,121	)
		$	107,662		$	225,490		$	245,585		$	487,494
Loss before interest expense, investment income and income taxes
	Retail	$	(7,827	)	$	(13,000	)	$	(45,764	)	$	(24,050	)
	Manufacturing		3,810			9,358			(23,822	)		14,187
	Consumer finance		(7,789	)		(26,979	)		(70,303	)		(28,475	)
	Insurance		968			4,224			3,754			8,801
	Eliminations/other		(63,674	)		(5,705	)		(67,066	)		(9,660	)
			(74,512	)		(32,102	)		(203,201	)		(39,197	)
Interest expense			(12,545	)		(9,838	)		(22,313	)		(19,221	)
Loss before income taxes and reorganization items		$	(87,057	)	$	(41,940	)	$	(225,514	)	$	(58,418	)
Depreciation and amortization
	Retail	$	687		$	2,429		$	2,053		$	4,726
	Manufacturing		1,830			3,849			4,249			7,681
	Consumer finance		3,642			337			1,314			1,039
	Eliminations/other		347			1,523			2,200			3,038
		$	6,506		$	8,138		$	9,816		$	16,484
Capital expenditures, net of asset disposals
	Retail	$	(1,378	)	$	1,269		$	(1,548	)	$	1,289
	Manufacturing		111			2,048			510			2,453
	Consumer finance		280			393			533			475
	Eliminations/other		(1,775	)		559			(1,147	)		722
		$	(2,762	)	$	4,269		$	(1,652	)	$	4,939
		March 31,			September 30,
		2003			2002
Identifiable assets
	Retail	$	390,119		$	447,060
	Manufacturing		123,316			195,913
	Consumer finance		624,695			381,491
	Insurance		10,695			124,600
	Eliminations/other		(440,984	)		(388,616	)
		$	707,841		$	760,448

14. In June 2001 the Financial Accounting Standards Board (the “Board”) issued Statement of Financial Accounting Standards No. 141, “Business Combinations” (“FAS 141”) and Statement No. 142, “Goodwill and Other Intangible Assets” (“FAS 142”). FAS 141 mandates the purchase method of accounting be used for all business combinations initiated after June 30, 2001 and establishes specific criteria for the recognition of intangible assets separately from goodwill. FAS 142 addresses the accounting for goodwill and

	intangible assets subsequent to their acquisition. The most significant changes made by FAS 142 are that goodwill and indefinite-lived intangible assets will no longer be amortized and will be tested for impairment at least annually. The Company reduced the carrying value of its goodwill to zero at September 30, 2002 based on an analysis of cash flows, and thus will not be impacted by FAS 142.
	The Board issued Statement No. 143, “Accounting for Asset Retirement Obligations,” (“FAS 143”). FAS 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. FAS 143 applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and (or) the normal operation of a long-lived asset, except for certain obligations of lessees. The Board has also issued Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” (“FAS 144”). This Statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The Company adopted FAS 143 and FAS 144 effective October 1, 2002 and determined that these statements had no material impact on its financial position or results of operations.
	In November 2002 the Board issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” (FIN 45). FIN 45 requires that upon the issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under the guarantee. FIN 45 also elaborates on the existing disclosure requirements for most guarantees, including loan guarantees. Although the provisions related to recognizing a liability at inception of the guarantee for the fair value of the guarantor’s obligations do not apply to product warranties, FIN 45 does include specific disclosure requirements for warranty obligations. The initial recognition and initial measurement provisions of FIN 45 apply on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosure requirements of FIN 45 are effective for financial statements of interim or annual periods ending after December 15, 2002. The Company adopted FIN 45 effective January 1, 2003.
15.	For the six months ended March 31, 2003 and 2002 the Company reported a net loss of $388.6 million and net income of $20.3 million, respectively. Included in the net loss for six months ended March 31, 2003 and 2002 were impairment and valuation provisions of $71.1 million and $1.1 million, respectively. In addition, the net loss for the six months ended March 31, 2003 includes net charges of $163.1 million related to the Company’s reorganization as more fully described in Note 8. Net income for the six months ended March 31, 2002 reflects an income tax benefit of $78.7 million, primarily resulting from the enactment of the Job Creation and Worker Assistance Act of 2002, which extended the period to which net operating losses could be carried back from two years to five years, giving the Company the opportunity to file for refunds of income taxes paid relating to the 1996 and 1997 tax years. In addition, $6.5 million of the benefit resulted from the completion of an examination of the Company’s federal income tax returns for fiscal years 1997 through 2000 and the favorable resolution of certain income tax contingencies for which the Company had previously recorded a provision.

These financial results reflect the difficult business conditions within the manufactured housing industry including a highly competitive environment caused principally by the industry’s aggressive expansion in the retail channel, excessive amounts of finished goods and repossession inventory and a significant reduction in the availability of financing at both the wholesale and retail levels. Further declines in overall economic conditions have also contributed to a difficult environment. In addition to the industry and economic factors described above, the Company’s loans originated in 2000 and before continued to perform poorly during 2002 and the manufactured housing asset-backed securities market, into which the Company sells its loans, deteriorated further. The Company’s poor loan performance, coupled with declining recovery rates in the repossession market, resulted in the Company’s loan servicing income being substantially eliminated. These factors also increased the payments the Company would be required to make to the holders of subordinated REMIC bonds that it has guaranteed.

Although the Company took substantial steps to lower inventory levels, reduce operating expenses and maximize cash flow, these improvements were not sufficient to offset the overall poor performance of the loan portfolio, the deterioration in the asset-backed securitization market, the general economic recession and the adverse market conditions present in the manufactured housing sector since 1999. As a result, on November 15, 2002 the Debtors filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court in Wilmington, Delaware. The Company filed for reorganization under Chapter 11 in order to restructure its balance sheet and access new working capital while continuing to operate in the ordinary course of business. See Note 2 for further information.

The Company believes that borrowings under the credit facilities described in Note 2, (subject to continued availability) coupled with continued access to the asset-backed securitization market and/or whole loan sales, as well as expected operating cash flow (including increased servicing fee cash flow described above), will be sufficient to meet its obligations and to execute its business plan throughout the bankruptcy proceedings. The Company also received in December 2002 an income tax refund for 2002 approximating $26 million. Should the Company be unable to access sufficient capital to fund its operations, its ability to reorganize itself would be materially adversely affected.

The retail financing of sales of the Company’s products is an integral part of the Company’s integration strategy. Such financing consumes substantial amounts of capital, which the Company has obtained principally by regularly securitizing such loans through the asset-backed securities market. During the quarter ended March 31, 2003 the Company completed a sale of whole loans to an investor rather than a securitization of loans as the Company has most often done in the past. The Company believes that its net proceeds from the whole loan sale were adversely affected by poor conditions in the manufactured housing asset-backed market, which has in recent years provided the majority of permanent financing for such loans. Such poor conditions include substantially reduced market demand for new asset-backed securities, an increase in the rate of interest on such securities required by investors, and an increase in credit enhancement required by credit rating agencies to achieve credit ratings necessary to market the securities successfully. The Company believes such poor market conditions are the result of worse than expected credit performance by pools of manufactured housing loans securitized in recent years, including but not limited to pools securitized by the Company. The Company also believes

that the uncertainties surrounding the Company’s bankruptcy filing also may have contributed to the level of discount on the loans sold. Under the terms of the loan sale agreement, the Company is entitled to receive in the future additional cash compensation for the loans sold if amounts ultimately realized by the purchaser from any subsequent sale or securitization of the loans exceeds certain amounts. Because the right to receive such proceeds is dependent on future events whose outcome cannot presently be determined, the Company has not recorded as an asset any such contingent compensation. The Company is also obligated to repurchase up to 5% of the loans sold should the loans not meet certain performance criteria as of August 15, 2003. The Company may engage in asset-backed securitization transactions in the future, although the terms of any such securitizations will likely be less favorable to the Company than those of prior securitizations. The Company believes that this deterioration in terms will occur primarily as a result of the Company’s current circumstances as well as recent negative developments in the market for asset-backed securities involving manufactured housing loans. As a result of those negative trends, the Company will likely receive less cash proceeds in connection with any such securitizations. Should the Company’s ability to access the asset-backed securities market become impaired, the Company would be required to seek additional sources of funding for its finance business. Such sources might include, but would not be limited to, the sale of whole loans to unrelated third parties. The Company’s inability to find alternative sources of funding would have a materially adverse impact on the Company’s liquidity, operations and reorganization plan.

The Company, from time to time, has retained certain subordinated securities from its securitizations. At March 31, 2003 the Company had retained such subordinated asset-backed securities having a carrying value of $6.1 million associated with the August 2002 securitization, as well as securities having a carrying value of $968,000 from securitization transactions prior to 1994. The Company considers any asset-backed securities retained to be available for sale and would consider opportunities to liquidate these securities based upon market conditions. A significant decrease in the demand for subordinated asset-backed securities at prices acceptable to the Company would likely require the Company to seek alternative sources of financing for the loans originated by the consumer finance business, or require the Company to seek alternative long-term financing for the subordinated asset-backed securities. There can be no assurance that such alternative financing can be obtained, and the inability of the Company to obtain such alternative financing could have a materially adverse impact the Company’s liquidity and operations.

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

OVERVIEW

On November 15, 2002 (the “Petition Date”), Oakwood Homes Corporation and 14 of its subsidiaries (collectively, the “Debtors”) filed voluntary petitions for reorganization under Chapter 11 of the federal bankruptcy laws (the “Bankruptcy Code” or “Chapter 11”) in the United States Bankruptcy Court in Wilmington, Delaware (the “Court”). The Debtors are currently operating their business as debtors-in-possession pursuant to the Bankruptcy Code. As a debtor-in-possession, the Company is authorized to continue to operate as an ongoing

business, but may not engage in transactions outside the ordinary course of business without the approval of the Court, after notice and an opportunity for a hearing.

The Company decided to file for reorganization under Chapter 11 in order to restructure its balance sheet and access new working capital while continuing to operate in the ordinary course of business. This decision was based upon the continued poor performance of loans originated in 2000 and before, as well as extremely weak conditions in the manufactured housing industry and deteriorating terms in the asset-backed securitization market into which the Company sells its loans. Other factors contributing to the decision to file included a general economic recession, declining recovery rates in the repossession market, the substantial reduction in loan servicing fees received and the withdrawal of manufactured housing floor plan lenders offering financing to many of the Company’s wholesale dealers.

Further information related to the bankruptcy filing is included in the “Liquidity and Capital Resources” section.

CRITICAL ACCOUNTING POLICIES

The Company has chosen certain critical accounting policies that it believes are appropriate to accurately and fairly report its results of operations and financial position, and it applies those accounting policies in a consistent manner. The Company’s significant accounting policies are summarized in Note 2 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2002.

The preparation of the Company’s consolidated financial statements in conformity with generally accepted accounting principles requires that the Company’s management make estimates and assumptions that may affect the reported amounts of assets, liabilities, revenues and expenses. These estimates and assumptions are based on historical and other factors believed to be reasonable under the circumstances. The Company evaluates these estimates and assumptions on an ongoing basis. Actual results can and frequently will differ from these estimates. It is possible that materially different amounts would be reported under different conditions or using different methods or assumptions.

The Company believes that the following accounting policies are the most critical because they involve the most significant judgments and estimates used in preparation of the consolidated financial statements.

Basis of presentation

The interim consolidated financial statements contained herein have been prepared, without audit, on a going concern basis, which assumes continuity of operations and realization of assets and satisfaction of liabilities in the ordinary course of business, and in accordance with Statement of Position 90-7 (“SOP 90-7”), “Financial Reporting by Entities in Reorganization under the Bankruptcy Code.” Accordingly, all pre-petition liabilities subject to compromise have been segregated in the Consolidated Balance Sheet and classified as Liabilities subject to compromise, at the estimated amount of allowable claims. Liabilities not subject to compromise are separately classified. Revenues, expenses, realized gains and losses and provisions for losses resulting from the reorganization are reported separately as Reorganization items in the Consolidated Statement of

Operations. Cash used for reorganization items is disclosed separately. These interim statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s latest Annual Report on Form 10-K. Results of operations for any interim period are not necessarily indicative of results to be expected for a full year.

Loan securitization

The Company finances its lending activities primarily by securitizing the loans it originates using Real Estate Mortgage Investment Conduits (“REMICs”) or, for certain FHA-insured loans, using collateralized mortgage obligations issued under authority granted to the Company by the Government National Mortgage Association (“GNMA”).

The Company allocates the sum of its basis in the loans conveyed to each REMIC and the costs of forming the REMIC among the REMIC interests retained and the REMIC interests sold to investors based upon the relative estimated fair values of such interests.

The Company estimates the fair value of retained REMIC interests, including regular and residual interests, servicing contracts, and guarantee liabilities based, in part, upon net credit loss, discount rate and prepayment speed assumptions which management believes market participants would use for similar instruments.

In accordance with EITF 99-20, income on retained REMIC regular and residual interests is recorded using the level yield method over the period such interests are outstanding. The rate of voluntary prepayments and the amount and timing of net credit losses affect the Company’s yield on retained regular and residual REMIC interests and the fair value of such interests and of servicing contracts and guarantee liabilities in periods subsequent to the securitization; the actual rate of voluntary prepayments and net credit losses typically varies over the life of each transaction and from transaction to transaction. If over time the Company’s prepayment and credit loss experience is more favorable than that assumed, the Company’s yield on its REMIC residual interests will be enhanced. If experience is worse than assumed, then impairment charges could result. The yield to maturity of regular REMIC interests may be influenced by prepayment rates and net credit losses, but is less likely to be influenced by such factors because cash distributions on regular REMIC interests are senior to distributions on residual REMIC interests.

Residual and regular REMIC interests retained by the Company following securitization are considered available for sale and are carried at their estimated fair value. The Company has no securities held for trading or investment purposes.

Declines in the value of retained REMIC interests are recognized when the fair value of the retained interest is less than its carrying value and the timing and/or the amount of cash expected to be received from the retained interest has changed adversely from the previous valuation which determined the carrying value of the retained interest. When both these circumstances occur, the carrying value of the retained interest is reduced to its estimated fair value.

Servicing contracts and fees

Servicing fee income is recognized as earned, net of amortization of servicing assets and liabilities, which are amortized in proportion to and over the period of estimated net servicing income. If the estimated fair value of a servicing contract is less than its carrying value, the Company records a valuation allowance by a charge to earnings to reduce the carrying value of the contract to its estimated fair value. Valuation allowances may be reversed to earnings upon the recovery of a contract’s fair value. Such recoveries are only recognized after sustained performance of the pool has been demonstrated.

Guarantee liabilities

The Company estimates the fair value of guarantee liabilities as the greater of the estimated price differential between guaranteed and substantially similar unguaranteed securities offered for sale by the Company and the present value of payments, if any, estimated to be made as a result of such guarantees. Guarantee liabilities are amortized to income over the period during which the guarantee is outstanding. Amortization is commenced only after a demonstrated history of pool performance.

If the present value of any estimated guarantee payments exceeds the amount recorded with respect to such guarantee, the Company records an impairment charge to increase the guarantee liability to such present value.

Loans held for sale or investment

Loans held for sale are carried at the lower of cost or market. Loans held for investment are carried at their outstanding principal amounts, less unamortized discounts and plus unamortized premiums.

Reserve for credit losses

The Company maintains reserves for estimated credit losses on loans held for investment, on loans warehoused prior to securitization and on loans sold to third parties with full or limited recourse. The Company provides for losses in amounts necessary to maintain the reserves at amounts the Company believes are sufficient to provide for probable losses based upon the Company’s historical loss experience, current economic conditions and an assessment of current portfolio performance measures.

Insurance underwriting

The Company previously operated a captive reinsurance underwriting subsidiary, domiciled in Bermuda, for property and casualty and credit life insurance and service contract business. Premiums from reinsured insurance policies were deferred and recognized as revenue over the term of the contracts, generally ranging from one to five years. Claims expenses were recorded as insured events occur. Policy acquisition costs, which consist principally of sales commissions and ceding fees, were deferred and amortized over the terms of the contracts.

The Company estimated liabilities for reported unpaid insurance claims, which are reflected at undiscounted amounts, based upon reports from adjusters with respect to adjusted claims and based on historical average costs per claim for similar claims with respect to unadjusted claims. Adjustment expenses were accrued based on contractual rates with the ceding company. The

ceding company, using a development factor that reflects historical average costs per claim and historical reporting lag trends, estimated liabilities for claims incurred but not reported. The Company did not consider anticipated investment income in determining whether premium deficiencies existed. The Company accounted for catastrophe reinsurance ceded in accordance with Emerging Issues Task Force Issue No. 93-6, “Accounting for Multi-Year Retrospectively Rated Contracts by Ceding and Assuming Enterprises.”

As part of its decision to reorganize under Chapter 11, the Company analyzed the impact of the bankruptcy filing on the ability of the Company’s captive reinsurance business to continue to meet all regulatory liquidity and solvency requirements and the ongoing administrative costs of its operation. Effective November 1, 2002 the Company entered into a voluntary liquidation plan whereby the remaining 50% balance of the physical damage premium under the quota share agreement would be recaptured, thus eliminating all insurance underwriting risk. Under the terms of a physical damage recapture agreement, all unearned physical damage premiums and loss reserves were transferred back to the ceding company. As a result, effective November 1, 2002 the Company’s captive reinsurance subsidiary ceased to insure any policyholder risks and will discontinue all operations and be formally closed by June 30, 2003, subject to regulatory approval.

Effective November 1, 2002 the Company receives commissions from its insurance operations at a lower administrative cost and without the need for credit support. Additionally the Company may participate in incremental commissions based on favorable loss experience. Commissions are recognized as income at the time the policy is written.

Income taxes

The Company accounts for deferred income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are based on the temporary differences between the financial reporting basis and tax basis of the Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. Valuation allowances are provided against assets if it is anticipated that it is more likely than not that some or all of a deferred tax asset may not be realized.

RESULTS OF OPERATIONS

Three months ended March 31, 2003 compared to three months ended March 31, 2002

     The following table summarizes certain statistics for the quarters ended March 31, 2003 and 2002:

	2003			2002
Retail sales (in millions)	$	83.6		$	114.9
Wholesale sales (in millions)	$	76.3		$	90.2
Total sales (in millions)	$	159.9		$	205.1
Gross profit % - consolidated		21.2	%		24.4	%
New single-section homes sold - retail		290			577
New multi-section homes sold - retail		1,456			1,605
Used homes sold - retail		177			262

	2003		2002
New single-section homes sold - wholesale		185		610
New multi-section homes sold - wholesale		1,702		1,986
Average new single-section sales price - retail	$	22,900	$	31,900
Average new single-section sales price - retail, excluding bulk sales	$	33,000	$	31,900
Average new multi-section sales price - retail	$	51,900	$	58,300
Average new multi-section sales price - retail, excluding bulk sales	$	62,500	$	58,300
Average new single-section sales price - wholesale	$	22,400	$	19,300
Average new multi-section sales price - wholesale	$	42,300	$	39,400
Weighted average retail sales centers open during the period		160		241

Net sales

The Company’s retail sales volume continued to be adversely affected by extremely competitive industry conditions and generally weaker economic conditions, as well as a reduction in the number of open sales centers during the quarter ended March 31, 2003. Retail sales dollar volume decreased 27%, reflecting a 20% decrease in new unit volume principally as a result of the Company operating fewer sales centers at March 31, 2003 as compared to the same quarter last year. In addition, the average new unit sales prices of single-section and multi-section homes decreased 28% and 11%, respectively. Average retail sales prices on single- section and multi-section homes decreased as a result of sales price reductions taken to sell inventory at closing sales centers, including bulk sales of retail inventory at wholesale prices to other manufactured housing dealers. Excluding these bulk sales of inventory at closing retail sales centers, average retail sales prices on single-section and multi-section homes were $33,000 and $62,500, respectively. Multi-section homes accounted for 83% of retail new unit sales compared to 74% in the quarter ended March 31, 2002.

During the quarters ended March 31, 2003 and 2002 the Company opened no new sales centers. The Company closed 50 sales centers during the quarter ended March 31, 2003. As part of its operational restructuring, the Company announced on November 14, 2002 the closure of approximately 75 sales centers, principally in the Deep South, Tennessee and Texas markets. In addition, the Company had previously announced on October 4, 2002 the closure of approximately 40 sales centers. The Company expects to complete the closing of these stores in the quarter ended June 30, 2003. Following these closures, the Company will operate approximately 120 retail sales centers. During the quarter ended March 31, 2002 the Company closed 13 underperforming sales centers. These closures resulted principally from the Company’s restructuring plan announced in the fourth quarter of 2001. At March 31, 2003 the Company had 139 retail sales centers open compared to 238 open at March 31, 2002. Total new retail sales dollars at sales centers open more than one year decreased 9% during the quarter ended March 31, 2003. At March 31, 2003 the Company operated ten sales centers that exclusively market repossessed homes compared to 39 at March 31, 2002.

Wholesale sales represent sales of manufactured homes to independent retailers. Wholesale sales dollar volume decreased 15%, reflecting a 27% decrease in unit volume. The decline in unit volume results principally from the closure of five manufacturing plants servicing wholesale dealers in certain areas of the country, as well as a disruption in business due to the Chapter 11

filing. This decrease was partially offset by an increase in the average new unit sales price of single-section and multi-section homes of 16% and 7%, respectively.

Gross profit

Consolidated gross profit margin decreased from 24.4% in the quarter ended March 31, 2002 to 21.2% in the quarter ended March 31, 2003. This decrease resulted principally from reduced margins on sales of inventory to customers at closing sales centers and the bulk sale of retail inventory at wholesale prices to other manufactured housing. In addition, wholesale sales increased from 44% of total sales in 2002 to 48% in 2003. Wholesale sales typically carry lower margins than the Company’s integrated retail sales.

Consumer finance revenues

Consumer finance revenues are summarized as follows:

		Three months ended
		March 31,
(in thousands)		2003			2002
Interest income		$	8,063		$	2,942
Servicing fees			11,041			9,249
REMIC residual income			486			1,507
Gains (losses) on securities sold and loans sold or held for sale:
	Loss on sale of securities and loans		(48,147	)		(1,940	)
	Valuation (provision) reversal on loans held for sale		25,090			—
			(23,057	)		(1,940	)
Impairment and valuation provisions			(54,659	)		(1,169	)
Other			998			831
		$	(57,128	)	$	11,420

The increase in interest income reflects higher average outstanding balances of loans held for sale in the warehouse prior to securitization or sale. The higher average warehouse balances resulted principally from the timing of securitizations, as the Company did not complete a securitization during the quarter ended December 31, 2002 and did not sell any loans until its whole loan sale in March 2003. This increase was offset by slightly lower yields on loans in the warehouse.

Loan servicing fees, which are reported net of amortization of servicing assets and liabilities, increased primarily as a result of an increase in servicing fee cash flow. In December 2002 and January 2003 the Court entered orders authorizing Oakwood Acceptance

Corporation, LLC (“OAC”) to 1) effectively assign OAC’s servicing rights under the pooling and servicing agreements and certain advance receivables to Oakwood Servicing Holdings Co., LLC (“OSHC”), a newly created limited purpose wholly-owned subsidiary of OAC and 2) enter into and perform under a subservicing agreement with OSHC. Under this structure, OSHC has become the “Servicer” of record for the purposes of the servicing agreements. OAC continues to perform day-to-day servicing in accordance with the terms of the subservicing agreements. This arrangement elevated the priority of, and in certain instances increased the amount of, OAC’s servicing fees, which had previously been subordinate to payments to the REMIC bondholders, to a senior position in the distribution of cash received by the REMIC trusts. In addition, the elevation of OAC’s servicing fees to a senior position resulted in an increase in the cash servicing fees received by the Company. However, because the elevation of the servicing fees also has the effect of decreasing cash available to pay security holders in the REMIC trusts, the Company expects its obligations under guarantees of certain subordinated REMIC securities to increase substantially. While the effects of the elevation of the servicing fee priority on the Company’s guarantee obligations are fully reflected in the consolidated financial statements, the offsetting effects of the increased servicing fee income are limited by generally accepted accounting principles and accordingly are not fully reflected in the consolidated financial statements. See Note 8 to the consolidated financial statements.

The decrease in REMIC residual income primarily reflects decreased residual cash flows from certain retained residual interests as a result of increased liquidations of repossessions.

The $48.1 million loss on sale of securities and loans during the quarter ended March 31, 2003 reflected the whole loan sale of $260 million of installment sale contracts and mortgage loans to an investor. While the sale of loans competed in the quarter was a sale of whole loans to an investor rather than a securitization of loans as the Company has most often done in the past, the Company believes that its net proceeds were adversely affected by poor conditions in the manufactured housing asset-backed market, which has in recent years provided the majority of permanent financing for such loans. Such poor conditions include substantially reduced market demand for new asset-backed securities, an increase in the rate of interest on such securities required by investors, and an increase in credit enhancement required by credit rating agencies to achieve credit ratings necessary to market the securities successfully. The Company believes such poor market conditions are the result of worse than expected credit performance by pools of manufactured housing loans securitized in recent years, including but not limited to pools securitized by the Company. The Company also believes that the uncertainties surrounding the Company’s bankruptcy filing also may have contributed to the level of discount on the loans sold. Under the terms of the loan sale agreement, the Company is entitled to receive in the future additional cash compensation for the loans sold if amounts ultimately realized by the purchaser from any subsequent sale or securitization of the loans exceeds certain amounts. Because the right to receive such proceeds is dependent on future events whose outcome cannot presently be determined, the Company has not recorded as an asset any such contingent compensation. The Company is also obligated to repurchase up to 5% of the loans sold should the loans not meet certain performance criteria as of August 15, 2003. The loss on sale of securities and loans during the quarter ended March 31, 2002 reflected the securitization of $156 million of installment sale contracts and mortgage loans. The loss resulted principally from a decrease in the spread between the yield on loans originated by the

Company and the cost of funds obtained when the loans were securitized and increased overcollateralization requirements.

During the quarter ended March 31, 2003 the Company recorded a net $25.1 million valuation reversal related to loans held for sale. The net valuation reversal was comprised of a charge of $24.7 million to reduce the carrying value of loans held for sale at March 31, 2003 to a lower of cost or market basis, reflecting the terms of the recently completed loan sale. The Company also reversed into income $49.8 million of lower of cost or market valuation allowances recorded at September 30, 2002 and December 31, 2002 as those loans were sold in the quarter ended March 31, 2003 and the resulting actual loss recorded.

Impairment and valuation provisions are summarized as follows:

	Three months ended
	March 31,
(in thousands)	2003		2002
Impairment writedowns of regular REMIC interests	$	4,837	$	—
Valuation allowances on servicing contracts		1,362		1,224
Additional provision for (amortization of) potential guarantee obligations on REMIC securities sold		48,460		(55	)
	$	54,659	$	1,169

These impairment and valuation provisions of $54.7 million generally resulted from changes in the Company’s estimates of net credit losses on securitized loans. During June 2002 the Company decided to substantially curtail its loan assumption program, which was implemented during 2001. The elimination of the loan assumption program, and the Company’s need to reduce the number of repossessed homes on hand, and poor conditions in the asset-backed securitization market, have required the Company to increase the number of repossessed homes sold through the wholesale distribution channel, which typically carries much lower recovery rates than those sold through the retail distribution channel. At March 31, 2003 the Company further revised its estimate of the number of future repossessions to be sold through the wholesale channel of distribution. The Company plans to sell all future repossessions through the wholesale channel. In addition to this change, which negatively affected recovery rates, the Company also revised upward certain of its expected default rates on securitization pools which have recently experienced a rise in repossessions due to continued weak economic conditions. As a result of these factors, the Company expects future net credit losses to increase, particularly in the near to mid-term. Accordingly, the Company has recorded impairment charges to reflect updated valuations of its estimated REMIC residual asset cash flows and estimated payments under guarantee obligations on certain subordinated securities sold.

As further described in the Company’s Annual Report on Form 10-K, the Company’s retained interests in securitizations are sensitive to changes in certain key economic assumptions, particularly the net credit losses assumption which includes estimates of the timing, frequency and severity of loan defaults. At March 31, 2003 the aggregate valuation of retained interests was a net liability of $322.8 million, reflecting guarantee obligations on certain of the REMIC securities. The effect of a 10% adverse change in the net credit losses assumption at March 31, 2003 would increase the net liability by approximately $7.5 million. Management continues to monitor performance of the loan pools and underlying collateral and adjust the carrying value of assets and liabilities arising from loan securitizations as appropriate. Changes in loan pool performance and market conditions, such as general economic conditions and higher industry inventory levels of repossessed homes, may affect recovery rates and default rates and result in future impairment and valuation provisions.

In an effort to reduce the cost of repossession and foreclosure, the Company made use of its loan assumption program beginning in 2001 as an alternative to foreclosure. Under this program, the Company endeavored to find a new buyer that met the then-current underwriting standards for repossessed homes who was willing to assume the defaulting obligor’s loan. As previously discussed, during June 2002 the Company decided to substantially curtail the loan assumption program as a result of the significant expense associated with the program and the negative effect it was having on liquidity. The Company converted the majority of assumption units to repossession status. The expenses associated with this program, which are reflected in the provision for losses on credit sales in the Consolidated Statement of Operations, amounted to $20.4 million for the quarter ended March 31, 2002. There were no loan assumption expenses during the quarter ended March 31, 2003.

For the quarter ended March 31, 2003 total credit losses on the Company’s loan portfolio, including losses relating to assets securitized by the Company, loans held for investment, loans held for sale and loans sold with full or partial recourse, amounted to approximately 10.72% on an annualized basis of the average principal balance of the related loans, compared to approximately 4.84% on an annualized basis one year ago. Because losses on repossessions are reflected in the loss ratio principally in the period during which the repossessed property is disposed of, fluctuations in the number of repossessed properties disposed of from period to period may cause variations in the charge-off ratio. The increase in the charge-off ratio at March 31, 2003 compared to March 31, 2002 is principally related to a decrease in recovery rates, and thus an increase in losses, on repossessions sold through the wholesale distribution channel. As discussed above, the elimination of the loan assumption program, and the Company’s need to reduce the number of repossessed homes on hand, has required the Company to increase the number of repossessed homes sold through the wholesale distribution channel, which typically carries much lower recovery rates than those sold through the retail distribution channel. At March 31, 2003 the Company had a total of 7,189 unsold properties in repossession or foreclosure, including former pending assumption or equity transfer units that were converted to repossession status at June 30, 2002, (approximately 5.67% of the total number of serviced assets) compared to 7,063, 6,461 and 5,940 (including pending assumption or equity units) at September 30, 2002, March 31, 2002 and September 30, 2001, respectively (approximately 5.27%, 4.82% and 4.43%, respectively, of the total number of serviced assets).

At March 31, 2003 the delinquency rate on Company serviced assets was 4.7% compared to 5.4% at September 30, 2002 and 5.1% at March 31, 2002. Higher delinquency levels and continuing weak economic conditions may result in increased repossessions and related future impairment charges and valuation provisions.

Insurance revenues

Insurance revenues from the Company’s captive reinsurance business decreased 82% to $1.4 million in the quarter ended March 31, 2003 from $7.3 million in the quarter ended March 31, 2002, primarily due to the voluntary liquidation of its reinsurance business as discussed below.

As part of its decision to reorganize under Chapter 11, the Company analyzed the impact of the bankruptcy filing on the ability of the Company’s captive reinsurance business to continue to meet all regulatory liquidity and solvency requirements and the ongoing administrative costs of its operation. Effective November 1, 2002 the Company entered into a voluntary liquidation plan whereby the remaining 50% balance of the physical damage premium under the quota share agreement would be recaptured, thus eliminating all insurance underwriting risk. Under the terms of a physical damage recapture agreement, all unearned physical damage premiums and loss reserves were transferred back to the ceding company. As a result, effective November 1, 2002 the Company’s captive reinsurance subsidiary ceased to insure any policyholder risks and will discontinue all operations and be formally closed by June 30, 2003, subject to regulatory approval.

Selling, general and administrative expenses

Selling, general and administrative expenses decreased $21.1 million, or 33%, during the quarter ended March 31, 2003 compared to the prior year. As a percentage of net sales, selling, general and administrative expenses decreased to 26.3% in the quarter ended March 31, 2003 from 30.8% in the quarter ended March 31, 2002. The decrease is primarily due to the closure of sales centers and manufacturing plants in connection with the Company’s restructuring described above.

Consumer finance operating expenses

Consumer finance operating expense decreased 19% during the quarter ended March 31, 2003 principally as a result of less expense associated with discounting customer advance and extension balances. The Company has substantially reduced the number of loan payment extensions granted, thus reducing the corporate advance and extensions receivable balance, as well as the required discounting allowance.

Insurance operating expenses

Insurance operating costs decreased 88% during the quarter ended March 31, 2003 compared to the quarter ended March 31, 2002 principally as a result of the Company’s decision to cease its reinsurance business operations as discussed above.

Restructuring charges

The following table sets forth the activity in each component of the Company’s restructuring reserve (in thousands):

	Severance			Plant, sales
	and other			center and
	termination			office			Asset
	charges			closings			write-downs			Total
Original provision	$	7,350		$	7,384		$	11,192		$	25,926
Payments and balance sheet charges		(1,707	)		(141	)		(11,192	)		(13,040	)
Balance 9/30/99		5,643			7,243			—			12,886
Additional provision		1,974			1,780			15			3,769
Payments and balance sheet charges		(2,946	)		(5,895	)		363			(8,478	)
Reversal of restructuring charges		(3,912	)		(2,076	)		(378	)		(6,366	)
Balance 9/30/00		759			1,052			—			1,811
Additional provision		681			4,702			12,460			17,843
Payments and balance sheet charges		(729	)		(1,512	)		(12,460	)		(14,701	)
Reversal of 1999 restructuring charges		(30	)		(45	)		—			(75	)
Balance 9/30/01		681			4,197			—			4,878
Payments and balance sheet charges		(145	)		(743	)		—			(888	)
Balance 12/31/01		536			3,454			—			3,990
Payments and balance sheet charges		(50	)		(593	)		412			(231	)
Reversal of 2001 restructuring charges		(486	)		(1,173	)		(412	)		(2,071	)
Balance 3/31/02		—			1,688			—			1,688
Payments and balance sheet charges		—			(505	)		—			(505	)
Balance 6/30/02		—			1,183			—			1,183
Additional provision		—			2,016			6,742			8,758
Payments and balance sheet charges		—			(115	)		(6,742	)		(6,857	)
Reversal of restructuring charges		—			(175	)		—			(175	)
Balance 9/30/02		—			2,909			—			2,909
Additional provision		—			6,747			16,380			23,127
Payments and balance sheet charges		—			(635	)		(16,380	)		(17,015	)
Balance 12/31/02		—			9,021			—			9,021
Payments and balance sheet charges		—			(1,460	)		—			(1,460	)
Reversal of restructuring charges		—			(119	)		—			(119	)
Balance 3/31/03	$	—		$	7,442		$	—		$	7,442

During the fourth quarter of 1999 the Company recorded restructuring charges of approximately $25.9 million, related primarily to the closing of four manufacturing lines, the temporary idling of five others and the closing of approximately 40 sales centers. The charges in 1999 included severance and other termination costs related to approximately 2,150 employees primarily in manufacturing, retail and finance operations, costs associated with closing plants and sales centers, and asset writedowns.

During 2000 the Company reversed into income $6.4 million of charges initially recorded in 1999. Approximately $2.9 million of the reversal related to the Company’s legal determination that it was not required to pay severance amounts to certain terminated employees under the Worker Adjustment and Retraining Notification Act (“WARN”). Upon the expiration of a six-month waiting period specified by WARN and the Company’s final calculation of the number of affected employees in relation to its workforce at the time of the restructuring announcement, the Company determined that it was not required to pay amounts previously accrued. During 2000 the Company also reevaluated its restructuring plans and determined that the losses associated with the closing of retail sales centers, the idling or closing of manufacturing plants, the disposition of certain assets and legal costs were less than anticipated and $3.5 million of the charges were reversed. During 2000 the Company recorded an additional $3.8 million charge, primarily related to severance costs associated with a reduction in headcount of 250 people primarily in the corporate, finance and manufacturing operations area, and the closure of offices.

During the fourth quarter of 2001 the Company recorded restructuring charges of approximately $17.8 million, primarily related to the closing of approximately 90 underperforming retail sales centers, a majority of which were located in the South, in areas where the Company has experienced poor operating results as well as poor credit performance. At March 31, 2002 these restructuring activities were substantially complete.

Market conditions, particularly in the South where the majority of store closings occurred, remained fluid during the six months ended March 31, 2002. While the Company did close the originally identified approximately 90 stores, these changing market conditions caused the Company to revise its initial determination of the number of stores to be either sold to independent dealers, converted to centers that exclusively market repossessed inventory or closed. The Company originally estimated that the disposition of the stores would be approximately evenly divided between those sold to independent dealers, converted to centers exclusively marketing repossessed inventory or closed. Ultimately, approximately 27 stores were sold, 23 were converted and 40 were closed. As a result of the change in the ultimate disposition of certain of the stores, as well as changes in the original estimate of costs to exit the stores, the Company reversed into income in the quarter ended March 31, 2002 $2.1 million of restructuring charges originally recorded in the fourth quarter of fiscal 2001.

During the fourth quarter of 2002 the Company recorded restructuring charges of approximately $8.8 million, primarily related to the closing of approximately 40 underperforming retail sales centers and five centers that exclusively market repossessed inventory. The stores closed were located principally in the South and Texas, where the Company experienced poor operating results and unsatisfactory credit performance.

As previously discussed, on November 15, 2002 the Debtors filed for reorganization under Chapter 11 of the Bankruptcy Code. As part of the Company’s operational restructuring, five manufacturing plants in various states and the Company’s loan origination operations in Texas were closed on November 14, 2002. The Company simultaneously announced the closure of approximately 75 retail locations, principally in the Deep South, Tennessee and Texas markets. In connection with these closings, the Company recorded approximately $23.0 million in restructuring charges during the six months ended March 31, 2003.

Of the $7.4 million remaining in the restructuring reserve at March 31, 2003, approximately $800,000 and $1.6 million relate to provisions established during the fourth quarter of 2001 and the fourth quarter of 2002, respectively. The Company is contractually obligated to pay the amounts remaining in the reserve at March 31, 2003 unless such amounts are set aside by the Court during the bankruptcy proceedings.

During the execution of the Company’s restructuring plans, approximately 4,500 employees were affected, of which 2,150 and 250 were terminated during the fourth quarters of 1999 and 2000, respectively. The Company terminated approximately 400 employees as part of its fourth quarter 2001 plan and approximately 150 employees as part of its fourth quarter 2002 plan. The Company terminated approximately 1,550 employees, primarily in its retail and manufacturing operations, as part of its first quarter 2003 plan.

Asset impairment charges

During the quarter ended March 31, 2003 the Company recorded asset impairment charges of $740,000 to write down closed manufacturing facilities under contract to sell to their estimated final sales prices.

Provision for losses on credit sales

The provision for losses on credit sales decreased from $25.1 million for the quarter ended March 31, 2002 to $2.3 million for the quarter ended March 31, 2003, primarily due to the loan assumption expenses incurred in 2002. As previously discussed, the Company substantially curtailed its loan assumption program in June 2002.

Interest expense

Interest expense for the quarter ended March 31, 2003 increased $2.7 million, or 27%, from the second quarter of 2002, due to an increase in interest on short-term borrowings due principally to higher average balances outstanding and higher interest rates during the quarter ended March 31, 2003. Under SOP 90-7, interest expense is only recorded to the extent it will be paid during the Chapter 11 proceeding or if it is probable it will be an allowed priority, secured or unsecured claim. In accordance with SOP 90-7, approximately $6.1 million of contractually stated interest was not recorded as interest expense during the quarter ended March 31, 2003.

Reorganization items

Reorganization items represent amounts incurred by the Company as a direct result of the Chapter 11 filing and are presented separately in the Consolidated Statement of Operations in accordance with SOP 90-7. As further described in the “Consumer finance revenues” section

above, the Court approved orders that effectively elevated OAC’s right to receive servicing fees to a senior position, rather than its previous subordinated position, in the distribution of cash flows from the REMIC trusts and, in certain instances, increased the amount of the fees. Accordingly, the Company recaptured or reversed into income impairment charges previously taken related to its servicing assets and liabilities. Such charges originally resulted from projected cash servicing fee shortfalls due to the subordinated position of OAC’s right to receive servicing fees. The recapture or reversal into income amounted to $12.7 million for the quarter ended March 31, 2003. Professional fees of $6.7 million include financial, legal, real estate and valuation services directly associated with the reorganization process.

Income taxes

For the three months ended March 31, 2002 the Company recorded an income tax benefit of $72.2 million resulting from the enactment of the Job Creation and Worker Assistance Act of 2002 (“the Act”) on March 8, 2002. The act extended the period to which net operating losses could be carried back from two years to five years, giving the Company the opportunity to file for refunds of income taxes paid relating to the 1996 and 1997 tax years.

Despite recording a net loss for the quarter ended March 31, 2003, no income tax benefit was recorded. Because the Company has operated at a loss in its four most recent fiscal years and because it believes difficult competitive and economic conditions may continue for the foreseeable future, the Company believes that under the provisions of FAS 109, it is not appropriate to record income tax benefits on current losses in excess of anticipated refunds of taxes previously paid. Additionally, the Company’s bankruptcy filing and resulting proposed plan of reorganization may result in further limitations on the realization of operating loss carryforwards.

Six months ended March 31, 2003 compared to six months ended March 31, 2002

          The following table summarizes certain statistics for the six months ended March 31, 2003 and 2002:

	2003			2002
Retail sales (in millions)	$	180.0		$	246.7
Wholesale sales (in millions)	$	157.3		$	187.4
Total sales (in millions)	$	337.3		$	434.1
Gross profit % - consolidated		16.6	%		23.6	%
New single-section homes sold - retail		747			1,167
New multi-section homes sold - retail		3,076			3,461
Used homes sold - retail		378			497
New single-section homes sold - wholesale		491			1,299
New multi-section homes sold - wholesale		3,525			4,152
Average new single-section sales price – retail	$	23,500		$	31,800
Average new single-section sales price - retail, excluding bulk sales	$	33,700		$	31,800
Average new multi-section sales price - retail	$	51,600		$	58,700
Average new multi-section sales price – retail, excluding bulk sales	$	62,100		$	58,700

	2003		2002
Average new single-section sales price - wholesale	$	21,300	$	19,200
Average new multi-section sales price - wholesale	$	41,600	$	39,100
Weighted average retail sales centers open during the period		170		249

Net sales

The Company’s retail sales volume continued to be adversely affected by extremely competitive industry conditions and generally weaker economic conditions, as well as a reduction in the number of open sales centers during the six months ended March 31, 2003. The Company also experienced a disruption in its business due to its Chapter 11 filing in mid-November, although the Company is not able to quantify the effect of such disruption. Retail sales dollar volume decreased 27%, reflecting a 17% decrease in new unit volume principally as a result of the Company operating fewer sales centers at March 31, 2003 as compared to the same quarter last year. In addition, the average new unit sales prices of single-section and multi-section homes decreased 26% and 12%, respectively. Average retail sales prices on single-section and multi-section homes decreased as a result of sales price reductions taken to sell inventory at closing sales centers, including bulk sales of retail inventory at wholesale prices to other manufactured housing dealers. Excluding these bulk sales of inventory at closing retail sales centers, average retail sales prices on single-section and multi-section homes were $33,700 and $62,100, respectively. Multi-section homes accounted for 80% of retail new unit sales compared to 75% in the six months ended March 31, 2002.

During the six months ended March 31, 2003 and 2002 the Company opened no new sales centers. The Company closed 85 sales centers during the six months ended March 31, 2003. As part of its operational restructuring, the Company announced on November 14, 2002 the closure of approximately 75 sales centers, principally in the Deep South, Tennessee and Texas markets. In addition, the Company had previously announced on October 4, 2002 the closure of approximately 40 sales centers. The Company expects to complete the closing of these stores in the quarter ended June 30, 2003. Following these closures, the Company will operate approximately 120 retail sales centers. During the six months ended March 31, 2002 the Company closed 61 underperforming sales centers. These closures resulted principally from the Company’s restructuring plan announced in the fourth quarter of 2001. At March 31, 2003 the Company had 139 retail sales centers open compared to 238 open at March 31, 2002. Total new retail sales dollars at sales centers open more than one year decreased 14% during the six months ended March 31, 2003. At March 31, 2003 the Company operated ten sales centers that exclusively market repossessed homes compared to 39 at March 31, 2002.

Wholesale sales represent sales of manufactured homes to independent retailers. Wholesale sales dollar volume decreased 16%, reflecting a 26% decrease in unit volume. The decline in unit volume results principally from the closure of five manufacturing plants servicing wholesale dealers in certain areas of the country, as well as a disruption in business due to the Chapter 11 filing. This decrease was partially offset by an increase in the average new unit sales price of single-section and multi-section homes of 11% and 6%, respectively.

Gross profit

Consolidated gross profit margin decreased from 23.6% in the six months ended March 31, 2002 to 16.6% in the six months ended March 31, 2003. This decrease resulted principally from reduced margins on sales of inventory to customers at closing sales centers, the bulk sale of retail inventory at wholesale prices to other manufactured housing dealers and a writedown to estimated lower of cost or market of $8.5 million on inventory remaining at closing retail sales centers and manufacturing plants at December 31, 2002. In addition, wholesale sales increased from 43% of total sales in 2002 to 47% in 2003. Wholesale sales typically carry lower margins than the Company’s integrated retail sales.

Consumer finance revenues

Consumer finance revenues are summarized as follows:

		Six months ended
		March 31,
(in thousands)		2003			2002
Interest income		$	13,214		$	6,323
Servicing fees			24,401			21,689
REMIC residual income			891			3,054
Gains (losses) on securities sold and loans sold or held for sale:
	Gain (loss) on sale of securities and loans		(48,147	)		3,318
	Valuation (provision) reversal on loans held for sale		(23,593	)		—
			(71,740	)		3,318
Impairment and valuation provisions			(71,083	)		(1,114	)
Other			1,809			1,400
		$	(102,508	)	$	34,670

The increase in interest income reflects higher average outstanding balances of loans held for sale in the warehouse prior to securitization or sale. The higher average warehouse balances resulted principally from the timing of securitizations, as the Company did not complete a securitization during the quarter ended December 31, 2002 and did not sell any loans until its whole loan sale in March 2003. This increase was offset by slightly lower yields on loans in the warehouse.

Loan servicing fees, which are reported net of amortization of servicing assets and liabilities, increased primarily as a result of an increase in servicing fee cash flow related to the elevation of OAC’s servicing fees to a senior position in the distribution of cash received by the REMIC trusts as further discussed above.

The decrease in REMIC residual income primarily reflects decreased residual cash flows from certain retained residual interests as a result of increased liquidations of repossessions.

The $48.1 million loss on sale of securities and loans during the six months ended March 31, 2003 reflected the whole loan sale of $260 million of installment sale contracts and mortgage loans to an investor. While the sale of loans competed in the quarter was a whole loan sale rather than a securitization of loans as the Company has most often done in the past, the Company believes that whole loan selling prices are being adversely affected by conditions in the manufactured housing asset-backed market, which has in recent years provided the majority of permanent financing for such loans. Such poor conditions include substantially reduced market demand for new asset-backed securities, an increase in the rate of interest on such securities required by investors, and an increase in credit enhancement required by credit rating agencies to achieve credit ratings necessary to market the securities successfully. The Company believes such poor market conditions are the result of worse than expected credit performance by pools of manufactured housing loans securitized in recent years, including but not limited to pools securitized by the Company. The Company also believes that the uncertainties surrounding the Company’s bankruptcy filing also contributed to the relatively low offers received for the loans sold during the quarter. Under the terms of the loan sale agreement, the Company is entitled to receive in the future additional cash compensation for the loans sold if amounts ultimately realized by the purchaser from any subsequent sale or securitization of the loans exceeds certain amounts. Because the right to receive such proceeds is dependent on future events whose outcome cannot presently be determined, the Company has not recorded as an asset any such contingent compensation. The gain on sale of securities and loans during the six months ended March 31, 2002 reflected the completion of two securitizations. The gain resulted principally from an increase in the spread between the yield on loans originated by the Company and the cost of funds obtained when the loans were securitized.

For the six months ended March 31, 2003 the Company recorded a net charge of $23.6 million related to loans held for sale. At December 31, 2002 the Company recorded a charge of $48.7 million to reduce the carrying value of loans held for sale to a lower of cost or market basis at that date, reflecting anticipated securitization terms that were less favorable than those of prior periods. During the quarter ended March 31, 2003 the Company reversed into income $49.8 million of lower of cost or market valuation allowances recorded at September 30, 2002 and December 31, 2002 as the loans to which these charges related were sold in the quarter ended March 31, 2003 and the resulting actual loss recorded. During the quarter ended March 31, 2003 the Company recorded a charge of $24.7 million to reduce the carrying value of loans held for sale to a lower of cost or market basis at that date, reflecting the terms of the recently completed loan sale.

Impairment and valuation provisions are summarized as follows:

	Six months ended
	March 31,
(in thousands)	2003		2002
Impairment writedowns of residual REMIC interests	$	—	$	—
Impairment writedowns of regular REMIC interests		5,203		—
Valuation provisions on servicing contracts		3,462		1,224
Reductions of previously recorded valuation allowance on servicing contracts		—		—
Additional provision for (amortization of) potential guarantee obligations on REMIC securities sold		62,418		(110	)
	$	71,083	$	1,114

These impairment and valuation provisions of $71.1 million generally resulted from changes in the Company’s estimates of net credit losses on securitized loans. During June 2002 the Company decided to substantially curtail its loan assumption program, which was implemented during 2001. The elimination of the loan assumption program, and the Company’s need to reduce the number of repossessed homes on hand, and poor conditions in the asset-backed securitization market have required the Company to increase the number of repossessed homes sold through the wholesale distribution channel, which typically carries much lower recovery rates than those sold through the retail distribution channel. At March 31, 2003 the Company further revised its estimate of the number of future repossessions to be sold through the wholesale channel of distribution. The Company plans to sell all future repossessions through the wholesale channel. In addition to this change, which negatively affected recovery rates, the Company also revised upward certain of its expected default rates on securitization pools which have recently experienced a rise in repossessions due to continued weak economic conditions. As a result of these factors, the Company expects future net credit losses to increase, particularly in the near to mid-term. Accordingly, the Company has recorded impairment charges to reflect updated valuations of its estimated REMIC residual asset cash flows and estimated payments under guarantee obligations on certain subordinated securities sold.

As further described in the Company’s Annual Report on Form 10-K, the Company’s retained interests in securitizations are sensitive to changes in certain key economic assumptions, particularly the net credit losses assumption which includes estimates of the timing, frequency and severity of loan defaults. At March 31, 2003 the aggregate valuation of retained interests was a net liability of $322.8 million, reflecting guarantee obligations on certain of the REMIC securities. The effect of a 10% adverse change in the net credit losses assumption at March 31, 2003 would increase the net liability by approximately $7.5 million. Management continues to monitor performance of the loan pools and underlying collateral and adjust the carrying value of assets and liabilities arising from loan securitizations as appropriate. Changes in loan pool performance and market conditions, such as general economic conditions and higher industry

inventory levels of repossessed homes, may affect recovery rates and default rates and result in future impairment and valuation provisions.

In an effort to reduce the cost of repossession and foreclosure, the Company made use of its loan assumption program beginning in 2001 as an alternative to foreclosure. Under this program, the Company endeavored to find a new buyer that met the then-current underwriting standards for repossessed homes who was willing to assume the defaulting obligor’s loan. As previously discussed, during June 2002 the Company decided to substantially curtail the loan assumption program as a result of the significant expense associated with the program and the negative effect it was having on liquidity. The Company converted the majority of assumption units to repossession status. The expenses associated with this program, which are reflected in the provision for losses on credit sales in the Consolidated Statement of Operations, amounted to $30.6 million for the six months ended March 31, 2002. There were no loan assumption expenses during the six months ended March 31, 2003.

For the six months ended March 31, 2003 total credit losses on the Company’s loan portfolio, including losses relating to assets securitized by the Company, loans held for investment, loans held for sale and loans sold with full or partial recourse, amounted to approximately 8.95% on an annualized basis of the average principal balance of the related loans, compared to approximately 3.54% on an annualized basis one year ago. Because losses on repossessions are reflected in the loss ratio principally in the period during which the repossessed property is disposed of, fluctuations in the number of repossessed properties disposed of from period to period may cause variations in the charge-off ratio. The increase in the charge-off ratio at March 31, 2003 compared to March 31, 2002 is principally related to a decrease in recovery rates, and thus an increase in losses, on repossessions sold through the wholesale distribution channel. As discussed above, the elimination of the loan assumption program, and the Company’s need to reduce the number of repossessed homes on hand, has required the Company to increase the number of repossessed homes sold through the wholesale distribution channel, which typically carries much lower recovery rates than those sold through the retail distribution channel. At March 31, 2003 the Company had a total of 7,189 unsold properties in repossession or foreclosure, including former pending assumption or equity transfer units that were converted to repossession status at June 30, 2002, (approximately 5.67% of the total number of serviced assets) compared to 7,063, 6,461 and 5,940 (including pending assumption or equity units) at September 30, 2002, March 31, 2002 and September 30, 2001, respectively (approximately 5.27%, 4.82% and 4.43%, respectively, of the total number of serviced assets).

At March 31, 2003 the delinquency rate on Company serviced assets was 4.7% compared to 5.4% at September 30, 2002 and 5.1% at March 31, 2002. Higher delinquency levels and continuing weak economic conditions may result in increased repossessions and related future impairment charges and valuation provisions.

Insurance revenues

Insurance revenues from the Company’s captive reinsurance business decreased 59% to $6.1 million in the six months ended March 31, 2003 from $15.0 million in the six months ended March 31, 2002, primarily due to the voluntary liquidation of its reinsurance business as discussed below.

As part of its decision to reorganize under Chapter 11, the Company analyzed the impact of the bankruptcy filing on the ability of the Company’s captive reinsurance business to continue to meet all regulatory liquidity and solvency requirements and the ongoing administrative costs of its operation. Effective November 1, 2002 the Company entered into a voluntary liquidation plan whereby the remaining 50% balance of the physical damage premium under the quota share agreement would be recaptured, thus eliminating all insurance underwriting risk. Under the terms of a physical damage recapture agreement, all unearned physical damage premiums and loss reserves were transferred back to the ceding company. As a result, effective November 1, 2002 the Company’s captive reinsurance subsidiary ceased to insure any policyholder risks and will discontinue all operations and be formally closed by June 30, 2003, subject to regulatory approval.

Selling, general and administrative expenses

Selling, general and administrative expenses decreased $30.4 million, or 24%, during the six months ended March 31, 2003 compared to the prior year. As a percentage of net sales, selling, general and administrative expenses decreased to 28.9% in the six months ended March 31, 2003 from 29.4% in the six months ended March 31, 2002. The decrease is primarily due to the closure of sales centers and manufacturing plants in connection with the Company’s restructuring described above.

Consumer finance operating expenses

Consumer finance operating expense decreased 7% during the quarter ended March 31, 2003 principally as a result of less expense associated with discounting customer advance and extension balances. The Company has substantially reduced the number of loan payment extensions granted, thus reducing the corporate advance and extensions receivable balance, as well as the required discounting allowance.

Insurance operating expenses

Insurance operating costs decreased 61% during the six months ended March 31, 2003 compared to the six months ended March 31, 2002 principally as a result of the Company’s decision to cease its reinsurance business operations as discussed above.

Restructuring charges

The following table sets forth the activity in each component of the Company’s restructuring reserve (in thousands):

	Severance			Plant, sales
	and other			center and
	termination			office			Asset
	charges			closings			write-downs			Total
Original provision	$	7,350		$	7,384		$	11,192		$	25,926
Payments and balance sheet charges		(1,707	)		(141	)		(11,192	)		(13,040	)
Balance 9/30/99		5,643			7,243			—			12,886
Additional provision		1,974			1,780			15			3,769
Payments and balance sheet charges		(2,946	)		(5,895	)		363			(8,478	)
Reversal of restructuring charges		(3,912	)		(2,076	)		(378	)		(6,366	)
Balance 9/30/00		759			1,052			—			1,811
Additional provision		681			4,702			12,460			17,843
Payments and balance sheet charges		(729	)		(1,512	)		(12,460	)		(14,701	)
Reversal of 1999 restructuring charges		(30	)		(45	)		—			(75	)
Balance 9/30/01		681			4,197			—			4,878
Payments and balance sheet charges		(145	)		(743	)		—			(888	)
Balance 12/31/01		536			3,454			—			3,990
Payments and balance sheet charges		(50	)		(593	)		412			(231	)
Reversal of 2001 restructuring charges		(486	)		(1,173	)		(412	)		(2,071	)
Balance 3/31/02		—			1,688			—			1,688
Payments and balance sheet charges		—			(505	)		—			(505	)
Balance 6/30/02		—			1,183			—			1,183
Additional provision		—			2,016			6,742			8,758
Payments and balance sheet charges		—			(115	)		(6,742	)		(6,857	)
Reversal of restructuring charges		—			(175	)		—			(175	)
Balance 9/30/02		—			2,909			—			2,909
Additional provision		—			6,747			16,380			23,127
Payments and balance sheet charges		—			(635	)		(16,380	)		(17,015	)
Balance 12/31/02		—			9,021			—			9,021
Payments and balance sheet charges		—			(1,460	)		—			(1,460	)
Reversal of restructuring charges		—			(119	)		—			(119	)
Balance 3/31/03	$	—		$	7,442		$	—		$	7,442

During the fourth quarter of 1999 the Company recorded restructuring charges of approximately $25.9 million, related primarily to the closing of four manufacturing lines, the temporary idling of five others and the closing of approximately 40 sales centers. The charges in 1999 included severance and other termination costs related to approximately 2,150 employees primarily in manufacturing, retail and finance operations, costs associated with closing plants and sales centers, and asset writedowns.

During 2000 the Company reversed into income $6.4 million of charges initially recorded in 1999. Approximately $2.9 million of the reversal related to the Company’s legal determination that it was not required to pay severance amounts to certain terminated employees under the Worker Adjustment and Retraining Notification Act (“WARN”). Upon the expiration of a six-month waiting period specified by WARN and the Company’s final calculation of the number of affected employees in relation to its workforce at the time of the restructuring announcement, the Company determined that it was not required to pay amounts previously accrued. During 2000 the Company also reevaluated its restructuring plans and determined that the losses associated with the closing of retail sales centers, the idling or closing of manufacturing plants, the disposition of certain assets and legal costs were less than anticipated and $3.5 million of the charges were reversed. During 2000 the Company recorded an additional $3.8 million charge, primarily related to severance costs associated with a reduction in headcount of 250 people primarily in the corporate, finance and manufacturing operations area, and the closure of offices.

During the fourth quarter of 2001 the Company recorded restructuring charges of approximately $17.8 million, primarily related to the closing of approximately 90 underperforming retail sales centers, a majority of which were located in the South, in areas where the Company has experienced poor operating results as well as poor credit performance. At March 31, 2002 these restructuring activities were substantially complete.

Market conditions, particularly in the South where the majority of store closings occurred, remained fluid during the six months ended March 31, 2002. While the Company did close the originally identified approximately 90 stores, these changing market conditions caused the Company to revise its initial determination of the number of stores to be either sold to independent dealers, converted to centers that exclusively market repossessed inventory or closed. The Company originally estimated that the disposition of the stores would be approximately evenly divided between those sold to independent dealers, converted to centers exclusively marketing repossessed inventory or closed. Ultimately, approximately 27 stores were sold, 23 were converted and 40 were closed. As a result of the change in the ultimate disposition of certain of the stores, as well as changes in the original estimate of costs to exit the stores, the Company reversed into income in the quarter ended March 31, 2002 $2.1 million of restructuring charges originally recorded in the fourth quarter of fiscal 2001.

During the fourth quarter of 2002 the Company recorded restructuring charges of approximately $8.8 million, primarily related to the closing of approximately 40 underperforming retail sales centers and five centers that exclusively market repossessed inventory. The stores closed were located principally in the South and Texas, where the Company experienced poor operating results and unsatisfactory credit performance.

As previously discussed, on November 15, 2002 the Debtors filed for reorganization under Chapter 11 of the Bankruptcy Code. As part of the Company’s operational restructuring, five manufacturing plants in various states and the Company’s loan origination operations in Texas

were closed on November 14, 2002. The Company simultaneously announced the closure of approximately 75 retail locations, principally in the Deep South, Tennessee and Texas markets. In connection with these closings, the Company recorded approximately $23.0 million in restructuring charges during the six months ended March 31, 2003.

Of the $7.4 million remaining in the restructuring reserve at March 31, 2003, approximately $800,000 and $1.6 million relate to provisions established during the fourth quarter of 2001 and the fourth quarter of 2002, respectively. The Company is contractually obligated to pay the amounts remaining in the reserve at March 31, 2003 unless such amounts are set aside by the Court during the bankruptcy proceedings.

During the execution of the Company’s restructuring plans, approximately 4,500 employees were affected, of which 2,150 and 250 were terminated during the fourth quarters of 1999 and 2000, respectively. The Company terminated approximately 400 employees as part of its fourth quarter 2001 plan and approximately 150 employees as part of its fourth quarter 2002 plan. The Company terminated approximately 1,550 employees, primarily in its retail and manufacturing operations, as part of its first quarter 2003 plan.

Asset impairment charges

During the six months ended March 31, 2003 the Company recorded asset impairment charges of $14.6 million to write down closed manufacturing facilities held for sale to their appraised values or estimated final sales prices.

Provision for losses on credit sales

The provision for losses on credit sales decreased from $36.4 million in the six months ended March 31, 2002 to $5.3 million in the six months ended March 31, 2003, primarily due to the loan assumption expenses incurred in 2002. As previously discussed, the Company substantially curtailed its loan assumption program in June 2002.

Interest expense

Interest expense for the six months ended March 31, 2003 increased $3.0 million, or 15%, from the first six months of 2002, due to an increase in interest on short-term borrowings due principally to higher average balances outstanding and higher interest rates during the six months ended March 31, 2003. Under SOP 90-7, interest expense is only recorded to the extent it will be paid during the Chapter 11 proceeding or if it is probable it will be an allowed priority, secured or unsecured claim. In accordance with SOP 90-7, approximately $9.1 million of contractually stated interest was not recorded as interest expense during the six months ended March 31, 2003.

Reorganization items

Reorganization items represent amounts incurred by the Company as a direct result of the Chapter 11 filing and are presented separately in the Consolidated Statement of Operations in accordance with SOP 90-7. As further described in the “Consumer finance revenues” section above, the Court approved orders that effectively elevated OAC’s right to receive servicing fees to a senior position, rather than its

previous subordinated position, in the distribution of cash flows from the REMIC trusts and, in certain instances, increased the amount of the fees. Accordingly, the Company recaptured or reversed into income impairment charges previously taken related to its servicing assets and liabilities. Such charges originally resulted from projected cash servicing fee shortfalls due to the subordinated position of OAC’s right to receive servicing fees. The recapture or reversal into income amounted to $87.8 million for the six months ended March 31, 2003. This was more than offset by impairment charges of $235.8 million related to the Company’s guarantee liabilities and $1.2 million related to retained regular REMIC interests. The substantial impairment charges arose as a result of cash distributions to holders of the REMIC guarantees now being subordinated to the payment of servicing fees to the Company. This subordination increased the estimated amount of principal and interest that the Company may be required to pay under the guarantees. The proposed plan of reorganization described earlier calls for the conversion of the guarantee liabilities into the Company’s post restructuring common shares. Professional fees of $13.9 million include financial, legal, real estate and valuation services directly associated with the reorganization process.

Income taxes

For the six months ended March 31, 2002 the Company recorded an income tax benefit of $72.2 million resulting from the enactment of the Job Creation and Worker Assistance Act of 2002 (“the Act”) on March 8, 2002. The act extended the period to which net operating losses could be carried back from two years to five years, giving the Company the opportunity to file for refunds of income taxes paid relating to the 1996 and 1997 tax years. For the six months ended March 31, 2002 the Company also recorded an income tax benefit of $6.5 million resulting from the completion of an examination of the Company’s federal income tax returns for the fiscal years 1997 through 2000 and the favorable resolution of certain income tax contingencies for which the Company had previously recorded a provision.

Despite recording a net loss for the quarter ended March 31, 2003, no income tax benefit was recorded. Because the Company has operated at a loss in its four most recent fiscal years and because it believes difficult competitive and economic conditions may continue for the foreseeable future, the Company believes that under the provisions of FAS 109, it is not appropriate to record income tax benefits on current losses in excess of anticipated refunds of taxes previously paid. Additionally, the Company’s bankruptcy filing and resulting proposed plan of reorganization may result in further limitations on the realization of operating loss carryforwards.

Liquidity and Capital Resources

For the six months ended March 31, 2003 and 2002 the Company reported a net loss of $388.6 million and net income of $20.3 million, respectively.

These financial results reflect the difficult business conditions within the manufactured housing industry including a highly competitive environment caused principally by the industry’s aggressive expansion in the retail channel, excessive amounts of finished goods and repossession inventory and a significant reduction in the availability of financing at both the wholesale and retail levels. Further declines in overall economic conditions have also contributed to a difficult environment. In addition to the industry and economic factors described above, the Company’s loans originated in 2000 and before continued to perform

poorly during 2002 and the manufactured housing asset-backed securities market, into which the Company sells its loans, deteriorated further. The Company’s poor loan performance, coupled with declining recovery rates in the repossession market, resulted in the Company’s loan servicing income being substantially eliminated. These factors also increased the payments the Company would be required to make to the holders of subordinated REMIC bonds that it has guaranteed.

Although the Company took substantial steps to lower inventory levels, reduce operating expenses and maximize cash flow, these improvements were not sufficient to offset the overall poor performance of the loan portfolio, the deterioration in the asset-backed securitization market, the general economic recession and the adverse market conditions present in the manufactured housing sector since 1999. The Company also undertook several restructurings of its operations during this period as described in Note 7 to the Consolidated Financial Statements. As a result, on November 15, 2002 the Debtors filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court in Wilmington, Delaware. The Company filed for reorganization under Chapter 11 in order to restructure its balance sheet and access new working capital while continuing to operate in the ordinary course of business.

At this time, it is not possible to predict the effect of the Chapter 11 reorganization process on the Company’s business and results of operations or financial condition, various creditors and security holders, or when it may be possible to emerge from Chapter 11, although it is management’s intention to emerge from Chapter 11 as quickly as possible. The Company’s future results are dependent upon the timely completion, confirmation and implementation of a plan of reorganization. The Company believes, however, that under any reorganization plan, the Company’s common stock would likely be substantially if not completely diluted or cancelled as a result of the conversion of debt to equity or as a result of other compromises of interest. Further, it is also likely that the Company’s senior notes and REMIC guarantee obligations will be converted to equity. The Company’s ability to continue to operate as a going concern is subject to numerous risks and uncertainties, including those described in the “Forward Looking Statements” section below.

On November 23, 2002 the Debtors reached an agreement in principle with Berkshire Hathaway Inc., Greenwich Capital Financial Products, Inc. and Ranch Capital LLC to provide debtor-in-possession (“DIP”) financing of up to $215 million during completion of the reorganization (the “DIP Facility”). The proposed DIP Facility included an up to $140 million line of credit to be used for general corporate liquidity needs (the “Tranche A Revolving Loan”) and an up to $75 million loan servicing advance line (the “Tranche B Servicing Advance Loan”).

On November 27, 2002 the Debtors entered into a Senior Secured, First Priority Debtor-in-Possession Loan and Security Agreement (the “Interim DIP Agreement”) with Foothill Capital Corporation, Textron Financial Corporation and The CIT Group/Business Credit, Inc., pursuant to which such lenders agreed to provide the Company with up to $25 million in interim debtor-in-possession financing. Borrowings under the Interim DIP Agreement bore interest at prime plus 3.5% and were secured by a first priority lien on substantially all of the Company’s assets. The Interim DIP Agreement matured on December 31, 2002. All borrowings under the Interim DIP Agreement were subsequently repaid on January 28, 2003.

On December 31, 2002 the Court approved the DIP Facility and on January 28, 2003 the Debtors closed the Tranche A Revolving Loan of the DIP Facility. Borrowings under the Tranche A Revolving Loan bear interest at the greater of (a) LIBOR plus 5% or (b) 9.5% and are secured by a first priority lien on substantially all of the Debtors’ assets. Such borrowings have been used primarily to support outstanding letters of credit of $38 million, to repay amounts outstanding under the Company’s previous $65 million revolving credit facility and the Interim DIP Agreement and will be used to provide additional borrowing capacity while the Debtors complete their reorganization.

The Tranche A Revolving Loan terminates on the earliest of (a) October 15, 2003, (b) the date of substantial consummation of a plan of reorganization as confirmed by an order of the Court, (c) the sale of a material part of any Debtor’s assets, (d) the date of the conversion of the bankruptcy case of any of the Debtors to a case under Chapter 7 of the federal bankruptcy laws, (e) the date of the dismissal of the Chapter 11 case of any of the Debtors or (f) the earlier of the date on which (i) all of the loans under the Tranche A Revolving Loan become due and payable or (ii) all of the loans under the Tranche A Revolving Loan are paid in full and the Tranche A Revolving Loan is terminated.

In February 2003 the Company closed the second element of its DIP Facility, the Tranche B Servicing Advance Loan, which funds a substantial majority of the Company’s obligation under most of its loan servicing contracts to make advances of delinquent principal and interest (“P&I”) payments. The Company formed a wholly-owned special purpose subsidiary, Oakwood Advance Receivables Company II, LLC (“OAR II”), to provide up to $75 million of revolving funding for qualifying P&I advance receivables. Borrowings under the facility bear interest at LIBOR plus 5.0%, subject to a floor of 7.5%. The Company transfers qualifying servicing advance receivables to OAR II, which funds its purchases of receivables using the proceeds of debt obligations issued by OAR II to third party lenders. OAR II collects the receivables it purchases from the Company, and such proceeds are available to purchase additional receivables from the Company through the expiration of the facility in October 2003. A summary of the funding status of OAR II at March 31, 2003 is as follows:

Receivables sold to OAR II		14,337
Discount		(1,294	)
Collateral value of receivables		13,043
Cash available for purchase of additional receivables ([reflected as/included in] other assets)		38,493
Total amount borrowed under facility (included in short-term borrowings)		51,536
Additional funding capacity		23,464
Total facility size	$	75,000

     Because OAR II is not a qualifying special purpose entity under Statement of Financial Accounting Standards No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities – A Replacement of FASB Statement No. 125,” receivables sold to OAR II continue to be recognized as assets of the Company and borrowings by OAR II are reflected as short-term borrowings in the accompanying Consolidated Balance Sheet.

The Company has also reached an agreement with a financial institution which provides for continued access to its loan purchase facility of up to $200 million under substantially the same terms as in effect prior to the Company’s filing for reorganization.

In December 2002 and January 2003 the Court entered orders authorizing Oakwood Acceptance Corporation, LLC (“OAC”) to 1) effectively assign OAC’s servicing rights under the pooling and servicing agreements and certain advance receivables to Oakwood Servicing Holdings Co., LLC (“OSHC”), a newly created limited purpose wholly-owned subsidiary of OAC and 2) enter into and perform under a subservicing agreement with OSHC. Under this structure, OSHC has become the “Servicer” of record for the purposes of the servicing agreements. OAC continues to perform day-to-day servicing in accordance with the terms of the subservicing agreements. This arrangement elevated the priority of, and in certain instances increased the amount of, OAC’s servicing fees, which had previously been subordinate to payments to the REMIC bondholders, to a senior position in the distribution of cash received by the REMIC trusts. In addition, the elevation of OAC’s servicing fees to a senior position should result in an increase in the cash servicing fees received by the Company. However, because the elevation of the servicing fees also has the effect of decreasing cash available to pay security holders in the REMIC trusts, the Company expects its obligations under guarantees of certain subordinated REMIC securities to increase substantially. While the effects of the elevation of the servicing fee priority on the Company’s guarantee obligations are fully reflected in the consolidated financial statements, the offsetting effects of the increased servicing fee income are limited by generally accepted accounting principles and accordingly are not fully reflected in the consolidated financial statements. See Note 8 to the consolidated financial statements.

The Company believes that borrowings under these facilities, (subject to continued availability) coupled with continued access to the asset-backed securitization market and/or whole loan sales, as well as expected operating cash flow (including increased servicing fee cash flow described above), will be sufficient to meet its obligations and to execute its business plan throughout the bankruptcy proceedings. The Company also received in December 2002 an income tax refund for 2002 approximating $26 million. Should the Company be unable to access sufficient capital to fund its operations, its ability to reorganize itself would be materially adversely affected.

The retail financing of sales of the Company’s products is an integral part of the Company’s integration strategy. Such financing consumes substantial amounts of capital, which the Company has obtained principally by regularly securitizing such loans through the asset-backed securities market. During the quarter ended March 31, 2003 the Company completed a sale of whole loans to an investor rather than a securitization of loans as the Company has most often done in the past. The Company believes that its net proceeds from the whole loan sale were adversely affected by poor conditions in the manufactured housing asset-backed market, which has in recent years provided the majority of permanent financing for such loans. Such poor conditions include substantially reduced market demand for new asset-backed securities, an increase in the rate of interest on such securities required by investors, and an increase in credit enhancement required by credit rating agencies to achieve credit ratings necessary to market the securities successfully. The Company believes such poor market conditions are the result of worse than expected credit performance by pools of manufactured housing loans securitized in recent years, including but not limited to pools securitized by the Company. The Company also believes that the uncertainties surrounding the Company’s bankruptcy filing also

may have contributed to the level of discount on the loans sold. Under the terms of the loan sale agreement, the Company is entitled to receive in the future additional cash compensation for the loans sold if amounts ultimately realized by the purchaser from any subsequent sale or securitization of the loans exceeds certain amounts. Because the right to receive such proceeds is dependent on future events whose outcome cannot presently be determined, the Company has not recorded as an asset any such contingent compensation. The Company is also obligated to repurchase up to 5% of the loans sold should the loans not meet certain performance criteria as of August 15, 2003. The Company may engage in asset-backed securitization transactions in the future, although the terms of any such securitizations will likely be less favorable to the Company than those of prior securitizations. The Company believes that this deterioration in terms will occur primarily as a result of the Company’s current circumstances as well as recent negative developments in the market for asset-backed securities involving manufactured housing loans. As a result of those negative trends, the Company will likely receive less cash proceeds in connection with any such securitizations. Should the Company’s ability to access the asset-backed securities market become impaired, the Company would be required to seek additional sources of funding for its finance business. Such sources might include, but would not be limited to, the sale of whole loans to unrelated third parties. The Company’s inability to find alternative sources of funding would have a materially adverse impact on the Company’s liquidity, operations and reorganization plan.

The Company, from time to time, has retained certain subordinated securities from its securitizations. At March 31, 2003 the Company had retained such subordinated asset-backed securities having a carrying value of $6.1 million associated with the August 2002 securitization, as well as securities having a carrying value of $968,000 from securitization transactions prior to 1994. The Company considers any asset-backed securities retained to be available for sale and would consider opportunities to liquidate these securities based upon market conditions. A significant decrease in the demand for subordinated asset-backed securities at prices acceptable to the Company would likely require the Company to seek alternative sources of financing for the loans originated by the consumer finance business, or require the Company to seek alternative long-term financing for the subordinated asset-backed securities. There can be no assurance that such alternative financing can be obtained, and the inability of the Company to obtain such alternative financing could have a materially adverse impact the Company’s liquidity and operations.

The Company operates its plants to support its captive retail sales centers and its independent retailer base. The Company has, and will continue to, adjust production capacity in line with demand, producing at a rate that will allow the Company to lower its inventories. As part of the Company’s Chapter 11 bankruptcy filing announced November 15, 2002, five of its 19 plants were closed, along with the loan origination operations in Texas. By December 31, 2002 the Company had ceased production at these five manufacturing facilities.

On the same date, the Company announced that it planned to close an additional 75 sales centers, located principally in the Deep South, Tennessee and Texas markets. Substantially all of these retail locations will be closed by June 30, 2003. Following these closures, the Company will operate approximately 120 retail sales centers.

On November 15, 2002 the New York Stock Exchange, Inc. (“NYSE”) suspended trading in the Company’s common stock. The NYSE submitted an application to the Securities and Exchange

Commission to delist the Company’s common stock from the NYSE and such delisting became effective as of December 30, 2002.

The Company estimates that in 2003 capital expenditures will approximate $6 million comprised principally of improvements at existing facilities, computer equipment and the replacement of certain computer information systems.

During the six months ended March 31, 2003 the Company decreased inventories by $42 million, net of inventory reserves, principally due to the closing of underperforming retail sales centers under its operational restructuring plan.

The decrease in loans and investments from September 30, 2002 principally reflects an decrease in loans held for sale from $150 million at September 30, 2002 to $112 million at March 31, 2003. The Company originates loans and warehouses them until sufficient receivables have been accumulated for a securitization or whole loan sale. Changes in loan origination volume, which is significantly affected by retail sales, and the timing of loan securitization or sale transactions affect the amount of loans held for sale at any point in time. There were no securitizations during the six months ended March 31, 2003; however, the Company did complete a whole loan sale as previously described.

Forward Looking Statements

This Form 10-Q contains certain forward-looking statements and information based on beliefs of the Company’s management as well as assumptions made by, and information currently available to, the Company’s management. These statements include, among others, statements relating to the Company’s expectation that future net credit losses will increase, particularly in the near-to-mid term; management’s belief that difficult competitive and economic conditions may continue for the foreseeable future, making it inappropriate to record income tax benefits on current losses in excess of anticipated refunds of taxes previously paid; the Company’s assumption that it will sell all repossessions through wholesale distribution channels; the Company’s expectation that it will be able to access sufficient working capital to fund its operations while in bankruptcy proceedings; the Company’s belief that it will be able to continue to generate liquidity through its securitization program or through whole loan sales; the Company’s belief that it will successfully emerge from its Chapter 11 reorganization as a going concern; the Company’s expectation that it will continue to operate in the ordinary course of business during the Chapter 11 reorganization; the Company’s belief that borrowings under credit facilities and access to the asset-backed securitization market and/or whole loan sales will be sufficient for the Company to meet its obligations and execute its business plan throughout the bankruptcy proceedings; the Company’s belief that the whole loan selling prices are being adversely affected by conditions in the manufactured housing asset-backed market; the Company’s belief that the Company’s common stock will likely be substantially or completely diluted or cancelled under the reorganization plan and that the claims of the Company’s unsecured creditors, including senior notes and REMIC guarantee obligations, will be converted to equity; and the Company’s estimate that it may spend $6 million on capital expenditures in fiscal 2003.

These forward-looking statements reflect the current views of the Company with respect to future events and are subject to a number of risks, including, among others, the following: competitive industry conditions could further adversely affect sales and profitability; the Company may be unable to access sufficient capital to fund its operations; the Company may

not be able to securitize its loans or otherwise obtain capital to finance its retail sales and financing activities; it may recognize special charges or experience increased costs in connection with its securitization or other financing activities; the Company may recognize special charges or experience increased costs in connection with restructuring activities; the Company may recognize significant expenses or charges associated with the reorganization; the Company may not realize anticipated benefits associated with its restructuring activities (including the closing of underperforming sales centers); adverse changes in government regulations applicable to its business could negatively impact the Company; it could suffer losses resulting from litigation (including shareholder class actions or other class action suits); the Company could experience increased credit losses or higher delinquency rates on loans originated; negative changes in general economic conditions in markets could adversely impact the Company; it could lose the services of key management personnel; and any other factors that generally affect companies in its lines of business could also adversely impact the Company.

In addition, the views of the Company are subject to certain risks related to the Chapter 11 bankruptcy proceedings, including the Company may not be able to continue as a going concern; the Company’s debtor-in-possession and other financing activities may not be finalized, may be terminated or otherwise may not be available for borrowing; the Company may not be able to securitize the loans that it originates or otherwise finance its loan origination activities; the Company may not be able to obtain the Court’s approval with respect to motions in the Chapter 11 proceeding prosecuted by it from time to time; the Company may not be able to develop, prosecute, confirm and consummate one or more plans of reorganization with respect to the Chapter 11 cases; third parties may seek and obtain court approval to terminate or shorten the exclusivity period that the Company has to propose and confirm one or more plans of reorganization; the Company may not be able to obtain and maintain normal terms with vendors and service providers; the Company may not be able to maintain contracts that are critical to its operations and the Chapter 11 cases may have an adverse impact on the Company’s liquidity or results of operations.

Should the Company’s underlying assumptions prove incorrect or should one or more of the risks and uncertainties materialize, actual events or results may vary materially and adversely from those described herein as anticipated, expected, believed or estimated.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

The Company maintains a set of disclosure controls and procedures and internal controls designed to ensure that information required to be disclosed in the Company’s filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. The Company’s principal executive and financial officers have evaluated the effectiveness of the Company’s disclosure controls and procedures within 90 days prior to the filing of this Quarterly Report on Form 10-Q and have concluded that such disclosure controls and procedures are effective.

Subsequent to the Company’s evaluation, there were no significant changes in internal controls or other factors that could significantly affect internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses.

   PART II. OTHER INFORMATION

Item 1. Legal Proceedings

On November 15, 2002, Oakwood Homes Corporation and 14 of its subsidiaries (collectively, the “Debtors”) filed voluntary petitions for reorganization under Chapter 11 of the federal bankruptcy laws (the “Bankruptcy Code” or “Chapter 11”) in the United States Bankruptcy Court in Wilmington, Delaware (the “Court”). The Debtors are currently operating their business as debtors-in-possession pursuant to the Bankruptcy Code. As a debtor-in-possession, the Company is authorized to continue to operate as an ongoing business, but may not engage in transactions outside the ordinary course of business without the approval of the Court, after notice and an opportunity for a hearing.

During fiscal 2001 a lawsuit was filed against the Company and certain of its subsidiaries in the Circuit Court of Saline County, Arkansas. The plaintiffs filed this suit seeking certification of a nationwide class of persons (i) who were charged “dealer prep,” “FTC,” or “destination” charges and (ii) who were sold homeowners’ insurance or credit life insurance in connection with their purchases of manufactured homes. The complaint alleges common law fraud and violations of the North Carolina, Florida and Arkansas deceptive trade practices acts. The plaintiffs are seeking compensatory and punitive damages but have limited their alleged damages to less than $75,000 per person, inclusive of costs and attorney’s fees. The Company moved to compel arbitration of the claims of all purchasers who signed arbitration agreements (all purchasers after October 1, 1996). The trial court denied this motion and the Company filed an interlocutory appeal to the Arkansas Supreme Court. That appeal is fully briefed but has not yet been scheduled for oral argument. The trial court stayed all proceedings as to post-October 1, 1996 sales but allowed proceedings to continue with respect to the pre-October 1, 1996 sales. Specifically, the trial court allowed discovery and motions to proceed as to all persons who purchased homes before October 1, 1996. On September 18, 2002, the trial court announced its decision to certify a class of persons who were charged “dealer prep” and “FTC” charges prior to October 1, 1996. The trial court denied certification of a class of persons who were sold homeowners’ insurance or credit life insurance prior to October 1, 1996. To date an order of class certification had not been entered by the trial court. If such an order is entered, it will be appealed. The Company has filed a notice to move the case from Saline County, Arkansas to a federal court and intends to vigorously defend this case. This litigation was stayed by operation of the Bankruptcy Code.

In addition, the Company is subject to legal proceedings and claims that have arisen in the ordinary course of its business and have not been finally adjudicated, and in management’s opinion, the ultimate resolution of these matters is not expected to have a material adverse effect on the Company’s results of operations, financial condition or cash flows.

Item 3. Defaults on Senior Securities

By filing a petition for reorganization in the Bankruptcy Court, the Company defaulted under the terms of the Indenture by and between the Company and The First National Bank of Chicago, with respect to its $125,000,000 7 7/8% Senior Notes due 2004 and its $175,000,000 8 1/8% Senior Notes due 2009. The original principal amount outstanding under such notes on November 15, 2002 was $299.6 million.

Item 6.	Exhibits and Reports on Form 8-K
	a)	Exhibits
	4	Agreement to Furnish Copies of Instruments with Respect to Long-term Debt
	99.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer
	99.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Chief Financial Officer
	b)	Reports on Form 8-K
		On February 10, 2003 the Company filed a Current Report on Form 8-K reporting that it had entered into a Debtor-in-Possession (“DIP”) Financing and Security Agreement to provide the up to $140 million line of credit tranche of its up to $215 million DIP financing.
		On March 4, 2003 the Company filed a Current Report on Form 8-K reporting that it had closed an arrangement for the up to $75 million servicing advance tranche of its up to $215 million DIP financing.
		On May 7, 2003 the Company filed a Current Report on Form 8-K reporting that on April 22, 2003, the Board of Directors of the Company approved a change of the Company’s fiscal year end from September 30 to June 30. The audited financial statements for the nine month transition period from October 1, 2002 to June 30, 2003 will be reported on a Form 10-K.

Items 2, 4 and 5 are not applicable and are omitted.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: May 15, 2003

OAKWOOD HOMES CORPORATION
BY:	/s/ Suzanne H. Wood
	Suzanne H. Wood Executive Vice President and Chief Financial Officer

CERTIFICATIONS

I, Myles E. Standish, the Chief Executive Officer and President of the Company, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Oakwood Homes Corporation;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 15, 2003.

/s/ Myles E. Standish Myles E. Standish
Chief Executive Officer and President

I, Suzanne H. Wood, the Chief Financial Officer of the Company, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Oakwood Homes Corporation;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 15, 2003.

/s/ Suzanne H. Wood Suzanne H. Wood
Chief Financial Officer

66

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

EXHIBITS

ITEM 6(a)

FORM 10-Q

QUARTERLY REPORT

For the quarter ended
March 31, 2003 Commission File Number
1-7444

OAKWOOD HOMES CORPORATION
EXHIBIT INDEX

Exhibit No.	Exhibit Description
4	Agreement to Furnish Copies of Instruments with Respect to Long-term Debt
99.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer
99.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Chief Financial Officer

67 EX-4 3 g82903exv4.htm EX-4 AGREEMENT TO FURNISH COPIES OF INSTRUMENTS

EXHIBIT 4

AGREEMENT TO FURNISH COPIES OF INSTRUMENTS
WITH RESPECT TO LONG-TERM DEBT

     The Registrant has entered into certain agreements with respect to long-term indebtedness, which do not exceed ten percent of the total assets of the Registrant and its subsidiaries on a consolidated basis. The Registrant hereby agrees to furnish a copy of such agreements to the Commission upon request of the Commission.

OAKWOOD HOMES CORPORATION
By:	/s/ Suzanne H. Wood
	Suzanne H. Wood Executive Vice President and Chief Financial Officer

68 EX-99.1 4 g82903exv99w1.htm EX-99.1 SECTION 906 CERTIFICATION OF THE CEO

EXHIBIT 99.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report of Oakwood Homes Corporation (the “Company”) on Form 10-Q for the period ended March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Myles E. Standish, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Myles E. Standish
	Myles E. Standish Chief Executive Officer May 15, 2003

69 EX-99.2 5 g82903exv99w2.htm EX-99.2 SECTION 906 CERTIFICATION OF THE CFO

EXHIBIT 99.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report of Oakwood Homes Corporation (the “Company”) on Form 10-Q for the period ended March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Suzanne H. Wood, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Suzanne H. Wood
	Suzanne H. Wood Chief Executive Officer May 15, 2003

70 -----END PRIVACY-ENHANCED MESSAGE-----

EX-4

Ex-4 Agreement to Furnish Copies of Instruments

EX-99.1

Ex-99.1 Section 906 Certification of the CEO

EX-99.2

Ex-99.2 Section 906 Certification of the CFO