-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B5w6nkLRFrZD2hLNFWZa4RRFyIS6S4445smIezCRr9x0+JW7M2CNKxxcgRsn/Sda z4n217CuNApmkOydaKqsFg== 0000950168-96-000854.txt : 19960517 0000950168-96-000854.hdr.sgml : 19960517 ACCESSION NUMBER: 0000950168-96-000854 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OAKWOOD HOMES CORP CENTRAL INDEX KEY: 0000073609 STANDARD INDUSTRIAL CLASSIFICATION: MOBILE HOMES [2451] IRS NUMBER: 560985879 STATE OF INCORPORATION: NC FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07444 FILM NUMBER: 96566024 BUSINESS ADDRESS: STREET 1: 2225 S HOLDEN RD STREET 2: P O BOX 7386 CITY: GREENSBORO STATE: NC ZIP: 27417-0386 BUSINESS PHONE: 9198552400 MAIL ADDRESS: STREET 1: 2225 S HOLDEN ROAD STREET 2: P O BOX 7386 CITY: GREENSBORO STATE: NC ZIP: 27417-0386 10-Q 1 OAKWOOD HOMES 10Q 43478 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (X) Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 1996 or ( ) Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _______ to _______ Commission File Number 1-7444 OAKWOOD HOMES CORPORATION (Exact name of registrant as specified in its charter) North Carolina 56-0985879 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 7025 Albert Pick Road, Greensboro, North Carolina 27409 (Address of principal executive offices) Post Office Box 7386, Greensboro, North Carolina 27417-0386 (Mailing address of principal executive offices) (910) 664-2400 (Registrant's telephone number, including area code) Not Applicable (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, and (2) has been subject to such filing requirements for the past 90 days. Yes X No _____ Indicate the number of shares outstanding of each of the issuer's classes of Common Stock as of April 30, 1996. Common Stock, Par Value $.50 Per Share . . . . . . . . . .22,445,974 1 QUARTERLY REPORT ON FORM 10-Q CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Quarter Ended March 31, 1996 OAKWOOD HOMES CORPORATION AND SUBSIDIARIES Greensboro, North Carolina The consolidated financial statements included herein 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 annual 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. 2 OAKWOOD HOMES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) (in thousands except per share data)
Three months ended March 31, 1996 1995 ---- ---- Revenues Net sales $191,223 $168,991 Financial services income 25,432 14,065 Other income 4,548 4,026 ----------- ----------- Total revenues 221,203 187,082 --------- --------- Costs and expenses Cost of sales 136,844 125,129 Selling, general and administrative expenses Non-financial services 46,966 37,202 Financial services 4,620 2,631 Provision for losses on credit sales -- 115 Interest expense Non-financial services 634 617 Financial services 5,694 5,314 ----------- ----------- Total costs and expenses 194,758 171,008 --------- --------- Income before income taxes 26,445 16,074 Provision for income taxes 10,293 5,704 ---------- ----------- Net income $ 16,152 $ 10,370 ========= ========= Pro forma information (Note 2) Income before income taxes $ 16,074 Provision for income taxes 6,212 ----------- Net income $ 9,862 ========== Earnings per share (fiscal 1995 amounts are pro forma - Note 2) Primary $ .35 $ .21 Fully diluted $ .35 $ .21 Dividends per share (Note 2) $ .01 $ .01 Weighted average number of common shares outstanding (Note 2) Primary 46,394 46,012 Fully diluted 46,480 46,088
3 OAKWOOD HOMES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) (in thousands except per share data)
Six months ended March 31, 1996 1995 ---- ---- Revenues Net sales $367,492 $318,480 Financial services income 49,671 28,502 Other income 8,476 7,229 ----------- ----------- Total revenues 425,639 354,211 --------- --------- Costs and expenses Cost of sales 267,067 237,153 Selling, general and administrative expenses Non-financial services 88,165 70,334 Financial services 8,746 5,358 Provision for losses on credit sales -- 266 Interest expense Non-financial services 1,253 1,014 Financial services 11,213 10,767 ---------- ---------- Total costs and expenses 376,444 324,892 --------- --------- Income before income taxes 49,195 29,319 Provision for income taxes 19,166 10,490 ---------- --------- Net income $ 30,029 $ 18,829 ======== ======== Pro forma information (Note 2) Income before income taxes 29,319 Provision for income taxes 11,245 Net income $ 18,074 ========== Earnings per share (fiscal 1995 amounts are pro forma - Note 2) Primary $ .65 $ .39 Fully diluted $ .65 $ .39 Dividends per share (Note 2) $ .02 $ .02 Weighted average number of common shares outstanding (Note 2) Primary 46,284 45,985 Fully diluted 46,337 46,134
4 OAKWOOD HOMES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (UNAUDITED) (in thousands except share and per share data)
March 31, September 30, ASSETS 1996 1995 ---- ---- Cash and cash equivalents $ 18,158 $ 6,189 Receivables and investments 362,081 480,875 Inventories Manufactured homes 147,284 136,457 Work-in-process, materials and supplies 15,215 12,691 Land/homes under development 2,089 2,042 ----------- ----------- 164,588 151,190 Properties and facilities 116,465 101,758 Deferred income taxes 15,818 15,546 Other assets 28,192 27,082 ---------- ---------- $705,302 $782,640 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Short-term borrowings $ 80,000 $154,400 Notes and bonds payable 160,719 198,812 Accounts payable and accrued liabilities 104,211 87,405 Reserve for contingent liabilities 2,742 3,184 Other long-term obligations 7,403 20,431 Shareholders' equity Common stock, $.50 par value; 100,000,000 shares authorized; 22,432,000 and 22,171,000 shares issued and outstanding 11,216 11,086 Additional paid-in capital 151,761 149,482 Retained earnings 189,170 160,000 --------- --------- 352,147 320,568 Less: Unearned ESOP shares (1,920) (2,160) ---------- ----------- 350,227 318,408 --------- --------- $705,302 $782,640 ======== ========
5 OAKWOOD HOMES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (in thousands)
Six months ended March 31, 1996 1995 ---- ---- Operating activities Net income $ 30,029 $ 18,829 Items not requiring (providing) cash Depreciation and amortization 4,803 4,022 Deferred income taxes (272) (754) Provision for losses on credit sales -- 266 Gain on sale of securities (13,891) -- Other -- 317 (Increase) in other receivables (5,081) (10,230) (Increase) in inventories (13,398) (50,499) Increase in accounts payable and accrued liabilities 6,575 1,730 Increase (decrease) in other long-term obligations (2,668) 3,805 ----------- ----------- Cash provided (used) by operations 6,097 (32,514) Installment receivables issued (278,930) (192,263) Purchase of installment loan portfolio (1,465) -- Sale of installment loans 390,645 195,366 Receipts on installment receivables 11,801 19,713 ------------ ----------- Cash provided (used) by operating activities 128,148 (9,698) ----------- ---------- Investing activities Additions to properties and facilities (18,478) (22,442) Other (3,594) (1,337) ----------- ------------- Cash used by investing activities (22,072) (23,779) ---------- --------- Financing activities Net repayments on short-term credit facilities (74,400) 11,000 Issuance of notes and bonds payable -- 29,890 Payments on notes and bonds (21,257) (20,624) Cash dividends (859) (845) Proceeds from exercise of stock options 2,409 458 ----------- ---------- Cash provided (used) by financing activities (94,107) 19,879 ---------- -------- Net increase (decrease) in cash and cash equivalents 11,969 (13,598) Cash and cash equivalents Beginning of period 6,189 16,974 ----------- --------- End of period $ 18,158 $ 3,376 ========= =========
6 OAKWOOD HOMES CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) 1. The consolidated financial statements reflect all adjustments, which included only normal recurring adjustments, which are, in the opinion of management, necessary to present fairly the results of operations for the periods presented. Results of operations for any interim period are not necessarily indicative of results to be expected for a full year. 2. On April 24, 1996, the Board of Directors declared a 2-for-1 stock split payable in the form of a 100% stock dividend on May 31, 1996 to shareholders of record on May 17, 1996. All share and per share amounts have been adjusted retroactively to give effect to the stock split. On June 30, 1995 the Company completed its business combination with Destiny Industries, Inc. ("Destiny") by issuing 1,850,000 shares of its common stock in exchange for all the outstanding common stock of Destiny. The business combination has been accounted for as a pooling of interests, and accordingly the accompanying financial statements reflect the combined results of operations and financial position of the Company and Destiny for all periods presented. Prior to the merger, Destiny was a Subchapter S corporation, and accordingly its results of operations were includable in the income tax returns of its former shareholders. The pro forma financial information for fiscal 1995 set forth in the consolidated statement of income reflects, on a pro forma basis, a provision for income taxes and net income assuming Destiny's results of operations had been included in the Company's income tax returns for such period. Because earnings per share for fiscal 1995 computed on the basis of historical net income would not reflect income taxes attributable to Destiny's earnings, historical earnings per share amounts for such period are not meaningful and accordingly have been omitted. Pro forma earnings per share for fiscal 1995 have been computed on the basis of pro forma net income. 3. The Company is contingently liable as guarantor on installment sale contracts sold to unrelated financial institutions on a full or limited recourse basis. The amount of this contingent liability was approximately $85 million at March 31, 1996. The Company is also contingently liable under terms of repurchase agreements with financial institutions providing inventory financing for retailers of homes produced by Destiny and Golden West Homes, manufacturing subsidiaries of the Company doing business with independent dealers. The Company estimates that its potential obligation under repurchase agreements approximated $45 million at March 31, 1996. 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Three months ended March 31, 1996 compared to three months ended March 31, 1995 The following table summarizes certain key statistics for the quarters ended March 31, 1996 and 1995 :
1996 1995 Retail sales (in millions) $153.8 $119.2 Wholesale sales (in millions) 32.9 47.7 Other sales - principally relating to communities (in millions) 4.5 2.1 Total sales (in millions) 191.2 169.0 Gross profit % - integrated operations 31.5% 29.5% Gross profit % - wholesale operations 15.5% 17.6% New single-section homes sold - retail 3,376 2,876 New multi-section homes sold - retail 1,203 895 Used homes sold - retail 515 502 New single-section homes sold - wholesale 349 707 New multi-section homes sold - wholesale 967 1,214 Average new single-section sales price - retail $27,200 $25,600 Average new multi-section sales price - retail $47,800 $46,400 Average new single-section sales price - wholesale $13,800 $13,800 Average new multi-section sales price - wholesale $28,400 $31,200 Weighted average retail sales centers open during the period 227 176 Average new homes sales per sales center 20.1 21.4
Retail sales dollar volume increased 29%, reflecting a 21% increase in new unit volume and increases of 6% and 3% in the average new unit sales prices of single-section and multi-section homes, respectively. New unit volume rose primarily due to a 29% increase in the weighted average number of sales centers open during the period, while average new unit sales per sales center decreased 6%. In the second quarter of fiscal 1996, the Company opened or acquired 18 new sales centers compared to 9 sales centers in the second quarter of fiscal 1995. Because the Company plans to open approximately 35 to 45 new sales centers annually over the next several years, management does not expect any significant increase in the average number of new homes sold per sales center over the near term. Total new retail sales dollars at sales centers open more than one year rose 8% in the quarter, while same store unit sales increased 2%. Retail sales of multi-section homes accounted for 26% of new home unit sales in the second quarter of fiscal 1996 versus 24% in the prior year. Wholesale sales dollar volume (which represents sales by Golden West and Destiny to independent dealers) declined by 31%. The decline in wholesale volume reflects execution of 8 the Company's strategy of changing the distribution of products produced by Golden West and Destiny from independent dealers to company-owned retail sales centers. During the quarter ended March 31, 1996, approximately 30% of Golden West's and Destiny's total shipments were to Oakwood sales centers, compared to 7% in the second quarter of fiscal 1995; shipments to Oakwood retail centers are not included in the wholesale dollar sales and unit sales in the table above. Management expects Golden West's and Destiny's unit sales to Oakwood to increase in future quarters. To the extent the Company is successful in establishing company-owned retail centers in Golden West and Destiny markets, the decline in sales to wholesale dealers will continue. In addition, Golden West's total shipments declined approximately 25% due to the closing of the Sacramento facility during the third quarter of fiscal 1995, as well as softening market conditions and severe weather factors which dampened sales volume. Although the Sacramento capacity was replaced by a new line at the Albany, Oregon plant as discussed below, its shipments have not yet been fully replaced due to the ramp up of production during the start-up phase. Gross profit margin - integrated operations reflects gross profit earned on all sales at retail as well as the manufacturing gross profit on retail sales of units manufactured by the Company, including the manufacturing gross profit earned by Golden West and Destiny on its sales to the Oakwood retail organization. Gross profit margin - integrated operations was 31.5% in the current period compared to 29.5% in the second quarter of the prior year. The increase reflects improved sourcing of retail unit sales from company-owned manufacturing plants. Approximately 89% of the total new unit retail sales volume was manufactured by the Company in the second quarter of fiscal 1996, compared to 74% in the second quarter one year ago. Wholesale gross profit margins decreased to 15.5% in the current quarter from 17.6% last year, primarily due to start-up costs incurred in a plant expansion at the Albany, Oregon facility, which increased capacity by approximately 40% during the first quarter. In addition, market and weather related problems increased manufacturing inefficiencies during the period. For the three months ended March 31, 1996, production at Golden West's Albany plant rose 20% from the level in the second quarter of fiscal 1995, and the plant operated at 67% of its newly increased capacity. Utilization at the Perris, California plant increased during the quarter to 77% from 65% last year, principally as the result of producing new models for Oakwood retail centers. Financial services income increased 81% to $25.4 million from $14.1 million last year. Interest income earned on loans held for investment and on loans held for sale prior to securitization declined to $8.3 million in 1996 from $8.7 million the prior year. Interest on loans held for investment declined due to normal amortization and prepayments, but was partially offset by an increase in interest on loans held for sale due to higher average outstanding balances during the second quarter of fiscal 1996 versus the prior year. Loan servicing fees increased from $3.0 million for the second quarter of 1995 to $3.8 million in the second quarter of 1996, reflecting the increased size of the Company's securitized loan servicing portfolio. REMIC residual income increased from $1.5 million to $4.4 million, reflecting the shift in the Company's financing strategy toward securitization of its loans from holding loans for investment. Financial services income for the second quarter of fiscal 1996 also includes a gain of approximately $5.9 million from the sale of $163 million of asset-backed securities. The gain resulted from a widening of the excess servicing spread in the securitization due to the bond 9 market rally which continued into mid-February, improved credit ratings assigned to the securities sold, and a reduction in the credit spread over treasurys demanded by purchasers of the securities. In addition, the Company's increasing sales of multi-section homes has resulted in multi-section loans comprising a larger percentage of the assets sold. Multi-section loans have longer average terms and lower anticipated credit losses than loans for single-section homes, which contributes to the value of the residual interest in the securitization. Finally, the Company has experienced a continuing decline in its transaction costs, reflecting competitive conditions on Wall Street and the Company's increased experience in securitizing loans in the public market. Except for the spread widening resulting from the bond market rally, which will recur irregularly, management believes that the other factors giving rise to the gain will continue to affect its future securitizations on a regular basis, and accordingly expects to record gains on its future securitizations. However, the substantial increase in treasury yields since mid-February has increased the Company's funding costs, and while the Company has increased its interest rates to retail customers, the time necessary to implement those increases will lead to spread compression in the short term. In addition to the gain recorded on the closing date of the securitization, the Company expects to earn future income from its investment in the residual REMIC interest in this transaction, consistent with its securitizations closed in prior years. Financial services revenue also includes a $1.4 million gain on the resecuritization of approximately $32 million of subordinated REMIC securities from prior year securitizations. This type of gain will not recur as the Company has sold substantially all of its investments in subordinated securities. The majority of the 13% increase in other income is related to increased insurance commissions resulting from the overall increase in unit sales. Non-financial services selling, general and administrative expenses rose to 24.6% of net sales compared to 22.0% of net sales last year. The majority of the increase in these expenses as a percentage of net sales is attributable to the increased percentage of homes produced by Destiny and Golden West which are being distributed through the Oakwood retail network. As the Company executes its integration strategy and Destiny and Golden West become largely captive manufacturers, wholesale sales to independent dealers are declining, and the percentage of retail unit sales manufactured by company-owned manufacturing facilities is increasing. This strategy has the effect of increasing gross profit margins, but also delays the recognition of manufacturing profits until the homes are sold at retail. As a consequence, while Destiny and Golden West selling, general and administrative expenses in absolute dollars are declining, they represent a higher percentage of sales recognized in the second quarter of fiscal 1996. As the percentage of internal Oakwood sales stabilizes, the relationship of selling, general and administrative expenes to net sales should also decline to historical levels. Non-financial services selling, general and administrative expenses have also increased as a result of the increased number of retail sales centers opened during the quarter compared to the prior year, as well as costs incurred in connection with sales centers scheduled to open in future quarters. New retail sales centers typically require a period of several months to reach unit sales levels similar to existing outlets. Financial services selling, general and administrative expenses rose 76% on a 26% increase in the average number of loans serviced during the period, a 69% increase in total credit application volume and a 38% increase in loan originations. In addition to cost increases associated with higher origination and servicing volume, financial services general and 10 administrative expenses have increased as a result of allocation to this business unit of certain direct operating costs (principally related to telecommunications) formerly absorbed by the parent company and allocated to non-financial operations. No provision for losses on credit sales was recorded in the second quarter of fiscal 1996. The Company provides for estimated losses based on the Company's historical loss experience, current repossession trends and costs and management's assessment of the current credit quality of the loan portfolio. Non-financial services interest expense remained relatively flat at $634,000 during the second quarter of fiscal 1996 versus $617,000 during the same period in the prior year. Financial services interest expense includes interest expense associated with long-term debt secured by loans and interest associated with short-term line of credit borrowings used to fund the warehousing of loans prior to their securitization. Financial services interest expense increased 7%, reflecting a $1,469,000 increase in short-term interest expense due to significant increases in loan volume. This increase was offset by a 30% decrease in interest on long-term debt due to declining and retired long-term debt balances. Financial services interest expense associated with notes and bonds payable is expected to continue to decline as the Company retires its outstanding debt secured by loans. The Company's effective income tax rate was 38.9% in fiscal 1996 compared to the pro forma effective tax rate of 38.6% in fiscal 1995. 11 Six months ended March 31, 1996 compared to six months ended March 31, 1995 The following table summarizes certain key statistics for the six months ended March 31, 1996 and 1995 :
1996 1995 Retail sales (in millions) $287.2 $217.3 Wholesale sales (in millions) 72.7 96.4 Other sales - principally relating to communities (in millions) 7.6 4.8 Total sales (in millions) 367.5 318.5 Gross profit % - integrated operations 30.6% 29.3% Gross profit % - wholesale operations 15.4% 17.4% New single-section homes sold - retail 5,932 5,059 New multi-section homes sold - retail 2,497 1,763 Used homes sold - retail 976 963 New single-section homes sold - wholesale 782 1,275 New multi-section homes sold - wholesale 2,069 2,525 Average new single-section sales price - retail $27,000 $25,300 Average new multi-section sales price - retail $47,600 $46,200 Average new single-section sales price - wholesale $13,900 $13,800 Average new multi-section sales price - wholesale $29,300 $31,200 Weighted average retail sales centers open during the period 218 167 Average new homes sales per sales center 38.7 40.9
Retail sales dollar volume increased 32%, reflecting a 24% increase in new unit volume and increases of 7% and 3% in the average new unit sales prices of single-section and multi-section homes, respectively. New unit volume rose primarily due to a 31% increase in the weighted average number of sales centers open during the period, while average new unit sales per sales center decreased 5%. In the first six months of fiscal 1996, the Company opened or acquired 36 new sales centers compared to 31 sales centers in the first six months of fiscal 1995. Because the Company plans to open approximately 35 to 45 new sales centers annually over the next several years, management does not expect any significant increase in the average number of new homes sold per sales center over the near term. Total new retail sales dollars at sales centers open more than one year rose 8% in the period, while same store unit sales increased 1%. Retail sales of multi-section homes accounted for 30% of new home unit sales in the first six months of fiscal 1996 versus 28% in the prior year. Wholesale sales dollar volume (which represents sales by Golden West and Destiny to independent dealers) declined by 25%, almost all due to lower unit volume. The decline in wholesale unit volume reflects execution of the Company's strategy of changing the distribution of products produced by Golden West and Destiny from independent dealers to company- owned retail sales centers. During the six months ended March 31, 1996, approximately 23% of Golden West's and Destiny's shipments were to Oakwood sales centers, compared to 4% in the first six months of fiscal 1995; these shipments to Oakwood retail centers are not included in the wholesale dollar sales and unit sales in the table above. Management expects Golden West's and Destiny's unit sales to Oakwood to increase in future quarters. To the extent the Company is successful in establishing company-owned retail centers in Golden West and 12 Destiny markets, the decline in sales to wholesale dealers will continue. In addition, Golden West's total shipments declined 25% as explained in the quarterly discussion above. Gross profit margin - integrated operations reflects gross profit earned on all sales at retail as well as the manufacturing gross profit on retail sales of units manufactured by the Company, including the manufacturing gross profit earned by Golden West and Destiny on its sales to the Oakwood retail organization. Gross profit margin - integrated operations was 30.6% in the current period compared to 29.3% in the prior year. The increase reflects improved sourcing of retail unit sales from company-owned manufacturing plants. Approximately 87% of the total new unit retail sales volume was manufactured by the Company in the first six months of fiscal 1996, compared to 74% one year ago. Wholesale gross profit margins decreased to 15.4% in the current period from 17.4% last year, primarily due to start-up costs incurred in a plant expansion at the Albany, Oregon facility, which increased capacity by approximately 40% during the first quarter. During the first six months of fiscal 1996, production at Golden West's Albany plant rose 17% from the level in the first six months of fiscal 1995, and the plant operated at 71% of newly increased capacity. Utilization at the Perris, California plant increased during the period to 75% from 63% last year, principally as the result of producing new models for Oakwood retail centers. Financial services income increased 74% to $49.7 million from $28.5 million last year. Interest income earned on loans held for investment and on loans held for sale prior to securitization decreased to $17.5 million for the first six months of fiscal 1996 from $18.0 million in the prior year. Interest on loans held for investment declined due to normal amortization and prepayments, but was partially offset by an increase in interest on loans held for sale due to higher average outstanding balances during fiscal 1996 versus the prior year. Loan servicing fees increased from $5.9 million for the first six months of 1995 to $7.4 million for the same period in 1996, reflecting the increased size of the Company's securitized loan servicing portfolio. REMIC residual income increased from $3.0 million to $7.5 million, reflecting the shift in the Company's financing strategy toward securitization of its loans from holding loans for investment. Financial services income for the first six months of fiscal 1996 also includes gains of approximately $12.5 million from the sale of $350 million of asset-backed securities. These gains resulted from a widening of the excess servicing spread in the securitization and other factors as described in the discussion of the second quarter's results above. The six months also includes a $1.4 million nonrecurring gain on the resecuritization of approximately $32 million of subordinated REMIC securities. The majority of the 17% increase in other income is related to increased insurance commissions resulting from the overall increase in unit sales. Non-financial services selling, general and administrative expenses rose to 24.0% of net sales compared to 22.1% of net sales last year. As previously discussed, the majority of the increase in these expenses as a percentage of sales relates to the increased percentage of homes produced by Destiny and Golden West which are being sold through the Oakwood retail network. Although this strategy impacts gross margin positively, it also increases non-financial selling, general and administrative expenses as a percentage of net sales as Destiny and Golden West costs are increasingly spread over the Oakwood retail sales base. Non-financial selling, general and administrative expenses have also risen as a result of increased accruals 13 for long-term management incentive compensation payable based upon the level of Company profitability for fiscal 1994 through 1996, costs associated with the increased number of new sales centers opened during fiscal 1996 and expenses related to sales centers which have not yet opened. Financial services selling, general and administrative expenses rose 63% on a 25% increase in the average number of loans serviced during the period, a 67% increase in total credit application volume and a 45% increase in loan originations. As discussed in the quarterly explanation above, certain direct operating costs previously absorbed by the parent company are now being allocated to financial services operations. No provision for losses on credit sales was recorded in the first six months of fiscal 1996. The Company provides for estimated losses based on the Company's historical loss experience, current repossession trends and costs and management's assessment of the current credit quality of the loan portfolio. Non-financial services interest expense rose from $1,014,000 to $1,253,000 due principally to permanent financing for new manufacturing facilities, a corporate aircraft and the employee stock ownership plan. Financial services interest expense includes interest expense associated with long-term debt secured by loans and interest associated with short-term line of credit borrowings used to fund the warehousing of loans prior to their securitization. Financial services interest expense increased 4%, reflecting a $2,254,000 increase in short-term interest expense due to significant increases in loan volume. This increase was offset by a 26% decrease in interest on long-term debt due to declining and retired long-term debt balances. Financial services interest expense associated with notes and bonds payable is expected to continue to decline as the Company retires its outstanding debt secured by loans. The Company's effective income tax rate was 39.0% in fiscal 1996 compared to the pro forma effective tax rate of 38.4% in fiscal 1995. The increase in the effective tax rate is due primarily to higher state income taxes. LIQUIDITY AND CAPITAL RESOURCES Receivables and investments decreased from September 30, 1995 primarily due to the timing of the Company's securitization of loans held for sale. The Company originates loans and warehouses them until sufficient receivables have been accumulated for a securitization. Through its Oakwood Mortgage Investors subsidiary, the Company closed securitizations in October and February totalling approximately $350 million. Short-term borrowings principally reflect outstanding advances on the Company's warehouse line of credit used to finance originated loans prior to securitization or other permanent financing. Management believes that permanent financing for its installment sale contracts remains readily available and anticipates securitizing installment sale contracts using REMICs approximately every three to four months. Management believes that the availability of permanent financing for originated loans, short-term credit facilities and cash generated by operations are sufficient to provide for the Company's short-term liquidity needs. At the end of the second quarter of fiscal 1996, the Company replaced its $130 million installment loan warehouse line of credit with a new $175 14 million commercial paper facility. During the third quarter of fiscal 1996, the Company intends to renegotiate its line of credit secured by inventory, increasing the line to $125 million from $75 million and also decreasing the interest rate. Management currently believes that it can obtain the cash it needs to continue its planned expansion through internally generated funds. However, the Company continues to monitor the credit and equity markets and evaluate the sources and costs of the long-term capital required to finance the demands of both planned expansion and higher operating levels within existing operations. The Company will seek to raise additional equity or long-term debt based upon anticipated business demands, management's assessment of existing and future conditions in the capital markets, and management's assessment of the appropriate components of the Company's capital structure. In order to maintain maximum flexibility in the timing of any acquisition of permanent or long-term financing, the Company intends to focus on maintaining its short-term liquidity. As a consequence, the Company intends to sell all the regular REMIC interests in its securitizations, and retain only REMIC residual interests. 15 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders Information required by this item was provided in the Form 10-Q filed for the quarter ended December 31, 1995. Item 6. Exhibits and Reports on Form 8-K a) Exhibits (4) Agreement to Furnish Copies of Instruments with Respect to Long-term Debt (11) Statement re Computation of Earnings Per Share (27) Financial Data Schedule (filed in electronic format only) b) Reports on Form 8-K No reports on Form 8-K were filed for the quarter ended March 31, 1996. Items 1, 2, 3 and 5 are inapplicable and are omitted. 16 OAKWOOD HOMES CORPORATION AND SUBSIDIARIES 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 14, 1996 OAKWOOD HOMES CORPORATION BY: s/ C. Michael Kilbourne C. Michael Kilbourne Executive Vice President (Chief Financial Officer) (Duly Authorized Officer) 17 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 EXHIBITS ITEM 6(a) FORM 10-Q QUARTERLY REPORT For the quarter ended Commission File Number March 31, 1996 1-7444 OAKWOOD HOMES CORPORATION EXHIBIT INDEX Exhibit No. Exhibit Description 4 Agreement to Furnish Copies of Instruments with respect to Long-Term Debt (page 19 of the sequentially numbered pages) 11 Statement re Computation of Earnings Per Share (page 20 of the sequentially numbered pages) 27 Financial Data Schedule (filed in electronic format only) 18 EX-4 2 EXHIBIT 4 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/ C. Michael Kilbourne C. Michael Kilbourne Executive Vice President 19 EX-11 3 EXHIBIT 11 EXHIBIT 11 OAKWOOD HOMES CORPORATION AND SUBSIDIARIES STATEMENT RE COMPUTATION OF EARNINGS PER SHARE (in thousands, except per share data)
Three months ended Six months ended March 31, March 31, 1996 1995 1996 1995 ----- ----- ----- ---- Weighted average number of common shares outstanding (1) 44,764 44,140 44,605 44,094 Add: Dilutive effect of stock options, computed using the treasury stock method (1) 1,794 1,872 1,848 1,891 Less: Unearned ESOP shares (1) (164) - (169) - ----------- ----------- ----------- ----------- Weighted average number of common and common equivalent shares outstanding (1) 46,394 46,012 46,284 45,985 =========== =========== =========== =========== Net income (fiscal 1995 is pro forma) $16,152 $ 9,862 $30,029 $18,074 =========== =========== =========== =========== Earnings per common share - primary (fiscal 1995 is pro forma) (1) $ .35 $ .21 $ .65 $ .39 =========== =========== ========== =========== Weighted average number of common shares outstanding (1) 44,764 44,140 44,605 44,094 Add: Dilutive effect of stock options, computed using the treasury stock method (1) 1,880 1,948 1,901 2,040 Less: Unearned ESOP shares (1) (164) - (169) - ----------- ----------- ----------- ----------- Weighted average number of common and common equivalent shares outstanding (1) 46,480 46,088 46.337 46,134 =========== =========== =========== =========== Net income (fiscal 1995 is pro forma) $16,152 $ 9,862 $30,029 $18,074 =========== =========== =========== =========== Earnings per common share - fully diluted (1995 is pro forma) (1) $ .35 $ .21 $ .65 $ .39 =========== =========== =========== ===========
(1) Share and per share amounts have been adjusted retroactively to give effect to the 2-for-1 stock split. See Note 2 of the Notes to Consolidated Financial Statements. 20 EX-27 4 EXHIBIT 27
5 This schedule contains summary financial information extracted from The Registrant's Consolidated Financial Statements for the quarter ended March 31, 1996 filed as part of the Registrant's Form 10-Q for the quarter ended March 31, 1996 and is qualified in its entirety by reference to such Form 10-Q. 1,000 US DOLLARS 6-MOS SEP-30-1996 OCT-01-1995 MAR-31-1996 1 18,158 0 368,162 6,081 164,588 0 151,172 34,707 705,302 184,211 160,719 0 0 11,216 339,011 705,302 367,492 425,639 267,067 363,978 0 0 12,466 49,195 19,166 0 0 0 0 30,029 .65 .65
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