EXHIBIT 99.1
Contact: Suzanne H. Wood
(336) 664-2400
OAKWOOD HOMES CORPORATION REPORTS THIRD QUARTER 2001 RESULTS
AND OTHER DEVELOPMENTS
GREENSBORO, N.C., July 26, 2001 - Oakwood Homes Corporation (NYSE - OH) today
reported results of operations for the third quarter of fiscal 2001 and other
recent developments including the sale of subordinated securities retained from
prior loan securitizations, operational restructurings and executive management
changes.
For the three months ended June 30, 2001, the Company reported a net loss of
$49.8 million, or $5.29 per share, compared with a net loss of $11.1 million, or
$1.19 per share, in the third quarter of fiscal 2000. For the nine months, the
Company reported a net loss of $120.8 million, or $12.83 per share, compared
with a net loss of $38.0 million, or $4.08 per share, in the comparable fiscal
2000 period. All share and per share amounts have been adjusted retroactively
to give effect to the one-for-five reverse stock split effective June 18, 2001.
The third quarter loss included a $23.0 million charge related to the closed and
pending sales of subordinated securities retained from prior loan
securitizations and a $2.1 million charge associated with the closure of 12
retail sales centers in May and June. Each of these charges is more fully
described below.
Subsequent to June 30, 2001, the Company sold or agreed to sell substantially
all the subordinated securities retained from prior loan securitizations; these
securities had been included in the Company's available for sale securities
portfolio. On July 9, the Company sold a portion of these securities for net
cash proceeds of approximately $13.7 million, and on July 24 reached an
agreement in principle to sell substantially all its other retained subordinated
securities for net cash proceeds of approximately $58 million, subject to
completion of required closing documentation and necessary approvals from the
Company's lenders. The Company expects to close the July 24 transaction during
August. These transactions resulted in charges in the third quarter of $23.0
million to reduce the carrying value of the securities to estimated net
realizable value, of which approximately $2.3 million is reflected as a
cumulative effect of a change in accounting principle resulting from the
Company's required adoption of Emerging Issues Task Force Issue No. 99-20 as of
April 1, 2001.
The Company announced its intention to close approximately 90 underperforming
retail sales centers in the fourth quarter in addition to the 12 centers closed
in the third quarter. A majority of the retail sales centers are located in the
South, in areas where the Company has experienced poor operating results as well
as poor credit performance. The Company expects to sell a significant number of
these centers to independent retailers who will continue to sell the Company's
products. Other centers will be converted to stores which exclusively sell
repossessed homes. The centers not sold or converted will continue to operate
while liquidating
the majority of their inventory in place. The Company currently estimates that
the fourth quarter charges arising from the closure of these 90 retail sales
centers will range from $23 million to $28 million, approximately one half of
which will be non-cash asset impairments. Although the Company idled one
manufacturing facility in Texas during the third quarter, it does not expect any
further plant closings as a result of the retail store closings previously
described. During the third quarter, the Company recorded a $2.1 million charge,
most of which was non-cash in nature, related to the closing of the 12 centers.
The charge was included in selling, general and administrative expenses.
The Company also announced that Myles E. Standish has been elected President and
Chief Executive Officer of the Company, succeeding Duane D. Daggett, who has
been elected Vice-Chairman of the Board. Mr. Standish has served as Executive
Vice President of Housing Operations since September 2000 and has been employed
by Oakwood in various capacities since 1995.
Dennis I. Meyer, Chairman, stated: "We very much appreciate Duane's
contributions over the last year and are pleased that we will be able to
continue to benefit from his experience at the Board and Executive Committee
levels. Duane's experience outside the manufactured housing industry and
expertise in organizational structure acted as a catalyst for change. The
transition to Myles was begun several months ago when he assumed the daily
operational responsibility for our housing operations as well as our
restructuring and reorganization efforts."
Mr. Standish stated: "These restructuring actions will strengthen our business
and improve our financial position. We are able to move forward with the
closing of these unprofitable stores because we have reduced our inventory
levels to approximately 12,000 floors at June 30 from a peak of over 26,000 in
1999, giving us the flexibility to close retail sales centers that are not
meeting minimum operational or profitability targets. After an appropriate
transitional period during which the stores will be closed and inventory
liquidated, we should begin to see substantial improvement in overall operating
results."
The results for the third quarter also reflect the completion of a
securitization of $179 million of installment sale contracts and mortgage loans.
In connection with the securitization, the Company recorded a pre-tax gain of
$2.9 million compared to a pre-tax loss of $2.9 million in the third quarter of
fiscal 2000.
Because the Company has operated at a loss in its two most recent fiscal years
and because management believes difficult competitive conditions will continue
for the foreseeable future, management believes that under the provisions of
Statement of Financial Accounting Standards No. 109, it is not appropriate to
record income tax benefits on current losses in excess of anticipated refunds of
taxes previously paid. As a consequence, the Company's results for the quarter
and nine-month periods ended June 30, 2001 do not reflect a benefit from income
taxes, notwithstanding the fact that the Company reported losses for both
periods. Had the Company recorded a tax benefit, the net loss for the quarter
and nine-month periods ended June 30, 2001 would have been reduced by $17.9
million, or $1.90 per share, and $43.5 million, or $4.62 per share,
respectively.
At June 30, 2001, balances outstanding under the Company's revolving credit
facility and its loan purchase facility were $16.0 million and $37.0 million,
respectively. Amounts outstanding vary based on the timing of asset-backed
securitization transactions. The Company plans to continue to negotiate a new
$50 million liquidity facility, which it expects to close in August, to provide
funding for servicer advances, which are one of the primary uses of the existing
revolving credit facility that expires on October 1, 2001. This facility, along
with the sales of securities discussed above, should fully replace the liquidity
provided by the current revolver facility. However, there can be no assurances
that the Company will be able to finalize such facility. As of June 30, 2001,
the Company was in compliance with the covenants contained in its debt
agreements or had reached agreement with its lenders, subject only to
documentation, regarding waivers of such violations. The Company expects to
receive written waivers this week.
Mr. Standish continued: "Since the beginning of the industry's contraction cycle
in 1999, Oakwood has remained committed to the preservation and improvement of
cash flow and liquidity. That focus continues, evidenced by the $19.5 million
decline in inventories during the third quarter and the closed and pending sales
of our retained securitization bonds. Obviously, our near-term goal remains the
closure of the liquidity-enhancing transactions previously mentioned, and that
effort is receiving our full attention. With respect to our housing operations,
we experienced sequential improvement in sales and margins in both May and June
while continuing to reduce inventory levels. We reorganized our retail
operations in April to decentralize our operations into 10 geographical regions.
These regions are staffed with personnel who provide our sales centers with
operational, finance, sales, training and recruiting support. At the same time,
we changed our retail compensation programs to tie retail pay more closely to
credit performance. We also changed the retail pay plans so that we pay our
general managers and salespersons incentive compensation only after the home has
been placed on the customer's site and all contractual obligations have been
met. This should increase customer satisfaction, and we believe it will improve
credit performance."
Retail sales for the third quarter were $150.2 million compared with $209.0
million in the third quarter last year, while total sales declined from $310.6
million to $239.9 million. Total revenues were $254.8 million in the third
quarter of fiscal 2001 compared with $336.4 million in the third quarter of
fiscal 2000. Total new homes sold at retail declined from 4,468 units in the
third quarter of fiscal 2000 to 3,004 units in the third quarter of fiscal 2001.
At the end of June, the Company was operating 340 retail sales centers compared
to 377 in fiscal 2000. As previously discussed, the Company expects to close 90
underperforming retail sales centers during the fourth quarter.
Wholesale sales declined by 11.7% in the third quarter of fiscal 2001 compared
to the prior year's third quarter. This compared favorably to both recently
reported manufacturing shipment data for the industry and to sequential
quarterly declines previously reported by the Company.
Gross profit margin was 20.6% in the third quarter compared to 23.8% in the
prior year. The decline reflects competitive pricing, promotional programs
designed to lower inventory levels, reduced plant operating schedules and a
greater mix of wholesale sales, which typically carry
a lower margin. At June 30, the Company was operating 20 plants at reduced
production rates, having closed or temporarily idled 14 other plants.
Selling, general and administrative expenses as a percentage of sales were 31.6%
compared to 28.2% in the third quarter of fiscal 2001. Although general and
administrative expenses were $6.3 million lower than in the prior year, this
improvement was offset by higher selling expenses, which increased as a
percentage of sales principally as a result of certain salesperson incentives
associated with the reduction of inventory levels along with the fixed nature of
certain sales center operating expenses.
The delinquency rate on Oakwood-originated contracts was 5.4% at June 30, 2001
compared to 4.1% one year ago. At quarter end, 3,817 repossessions were on hand
compared with 3,049 at June 30, 2000.
Oakwood Homes Corporation and its subsidiaries are engaged in the production,
sale, financing and insuring of manufactured housing throughout the United
States. The Company's products are sold through Company-owned stores and an
extensive network of independent retailers.
This press release contains certain forward-looking statements and information
based on the 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 our plans to close
approximately 90 underperforming retail sales centers, our plans to sell a
significant number of these sales centers to independent retailers who will
continue to sell our products, our plans to convert other closed sales centers
to stores that will exclusively sell repossessed homes, our intention to
continue to operate sales centers that are not sold or converted to liquidate
their inventory, our estimate of the charge that we will incur in the fourth
quarter as a result of closing these sales centers, our expectation that we will
not close any additional manufacturing plants as a result of our closing these
sales centers, our expectation that these restructuring actions will strengthen
our business and improve our financial condition, our belief that our operating
results will improve after the transitional period in which these retail sales
centers are closed and their inventory liquidated, our intention to close the
sale of retained subordinated securities from our securitization transactions
for cash proceeds of approximately $58 million, our ability to negotiate any
replacement revolving credit facilities for our current revolving credit
facility, and our belief that the changes in our retail compensation programs
will increase consumer satisfaction, improve credit performance and improve our
long-term performance.
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 negotiate
replacement revolving credit facilities for its existing facility which expires
on October 1, 2001; the Company may not be able to close its anticipated sale of
subordinated securities for $58 million; the Company may recognize special
charges or experience increased costs in connection with securitizations or
other financing activities; the Company may recognize special charges or
experience increased costs in connection with restructuring activities; the
Company may not realize anticipated benefits associated with its restructuring
activities (including the closing of sales centers); adverse changes in
governmental regulations applicable to the Company's business could negatively
impact its business; the Company could suffer losses resulting from litigation;
the captive Bermuda reinsurance subsidiary could experience significant losses;
the Company could experience increased credit losses or higher delinquency rates
on loans that it originates; negative changes in the general economic conditions
in its markets could negatively impact the Company; the Company could lose the
services of its key management personnel; and any other factors that generally
affect companies in its lines of business could also adversely impact the
Company. Should the Company's underlying assumptions prove incorrect or should
one or more of the risks or uncertainties materialize, actual events or results
may vary materially or adversely from those described herein as anticipated,
expected, believed or estimated.
(Comparative tables attached)
Consolidated Statement of Operations (Unaudited)
(Amounts in thousands, except per share data)
Three months ended June 30, Nine months ended June 30,
----------------------------- ---------------------------
2001 2000 2001 2000
-------- -------- -------- --------
Revenues
Net sales
Retail $150,153 $208,974 $ 453,901 $ 567,853
Wholesale 89,713 101,584 249,231 311,548
-------- -------- --------- ----------
239,866 310,558 703,132 879,401
Financial services income
Consumer finance, net of impairment and
valuation provisions 3,203 10,391 27,489 31,995
Insurance 8,696 13,087 28,185 43,518
-------- -------- --------- ----------
11,899 23,478 55,674 75,513
Other income 3,010 2,353 7,493 7,731
-------- -------- --------- ----------
Total revenues 254,775 336,389 766,299 962,645
-------- -------- --------- ----------
Costs and expenses
Cost of sales 190,533 236,516 562,720 688,276
Selling, general and administrative expenses 75,698 87,449 227,933 243,652
Restructuring charges - (1,280) - (5,631)
Financial services operating expenses
Consumer finance 15,038 11,106 34,585 32,758
Insurance 2,754 7,708 10,488 24,645
-------- -------- --------- ----------
17,792 18,814 45,073 57,403
Provision for losses on credit sales 1,450 750 4,450 2,250
Interest expense 16,856 12,083 44,671 37,908
-------- -------- --------- ----------
Total costs and expenses 302,329 354,332 884,847 1,023,858
-------- -------- --------- ----------
Loss before income taxes and cumulative
effect of accounting change (47,554) (17,943) (118,548) (61,213)
Provision for income taxes - (6,818) - (23,260)
-------- -------- --------- ----------
Loss before cumulative effect of accounting
change (47,554) (11,125) (118,548) (37,953)
Cumulative effect of accounting change, net
of income taxes (2,276) - (2,276) -
-------- -------- --------- ----------
Net loss $(49,830) $(11,125) $(120,824) $ (37,953)
======== ======== ========= ==========
Loss per share:
Loss before cumulative effect of accounting
change
Basic $ (5.05) $ (1.19) $ (12.59) $ (4.08)
Diluted $ (5.05) $ (1.19) $ (12.59) $ (4.08)
Net loss
Basic $ (5.29) $ (1.19) $ (12.83) $ (4.08)
Diluted $ (5.29) $ (1.19) $ (12.83) $ (4.08)
Weighted average number of common
shares outstanding
Basic 9,422 9,315 9,415 9,314
Diluted 9,422 9,315 9,415 9,314
OAKWOOD HOMES CORPORATION
Consolidated Balance Sheet (Unaudited)
June 30, September 30,
2001 2000
---------- -------------
Assets
Cash and cash equivalents $ 20,664 $ 22,523
Loans and investments 256,973 322,166
Other receivables 96,710 113,460
Inventories 249,551 323,003
Properties and facilities 225,264 241,107
Other assets 131,709 126,513
-------- ----------
$980,871 $1,148,772
======== ==========
Liabilities
Short-term borrowings $ 53,000 $ 65,500
Notes and bonds payable 325,633 329,929
Accounts payable and accrued liabilities 234,523 261,888
Insurance reserves and unearned premiums 17,332 44,602
Deferred income taxes 11,611 6,169
Other long-term obligations 32,882 35,400
Shareholders' equity
Common stock 4,765 4,710
Additional paid-in capital 199,898 188,584
Retained earnings 85,269 204,546
-------- ----------
289,932 397,840
-------- ----------
Accumulated other comprehensive income 16,186 7,625
Unearned compensation (228) (181)
-------- ----------
Total shareholders' equity 305,890 405,284
-------- ----------
$980,871 $1,148,772
======== ==========