MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
DURING FISCAL 1994 THE COMPANY ONCE AGAIN CONTINUED ITS STRONG UPWARD MOMENTUM
IN BOTH REVENUES AND EARNINGS. TOTAL REVENUES INCREASED 41% TO $579 MILLION FROM
$412 MILLION LAST YEAR, FOLLOWING A 35% INCREASE IN 1993 FROM THE $306 MILLION
REPORTED FOR 1992. NET INCOME ROSE 35% IN 1994 TO $33.9 MILLION COMPARED TO
$25.2 MILLION IN 1993 AND $14.0 MILLION IN 1992. THESE RESULTS REFLECT
SUBSTANTIAL INCREASES IN UNIT SALES ARISING FROM THE RETAIL OUTLET EXPANSION AND
INCREASING SALES CENTER PRODUCTIVITY, CONTINUING EMPHASIS ON MAINTAINING GROSS
PROFIT MARGINS, INCREASED EARNINGS FROM THE COMPANY'S FINANCIAL SERVICES
OPERATIONS THROUGH HIGHER VOLUMES AND CONTROL OF CREDIT LOSSES, ONGOING COST
CONTROL MEASURES DESIGNED TO ELIMINATE NON-VALUE ADDED ACTIVITIES AND AN
EMPHASIS THROUGHOUT THE ORGANIZATION ON CUSTOMER SATISFACTION BEFORE, DURING AND
AFTER THE SALE.
INDUSTRY SHIPMENTS CONTINUED TO IMPROVE IN 1994, EXTENDING THE TREND BEGUN IN
1992 WHICH REPRESENTED THE FIRST INDUSTRY-WIDE INCREASE IN SHIPMENTS SINCE 1983.
ACCORDING TO INDUSTRY SOURCES, SHIPMENTS OF MANUFACTURED HOMES WERE UP
APPROXIMATELY 20.3% FOR THE FIRST NINE MONTHS OF CALENDAR 1994, AND INCREASED
20.6% IN 1993 OVER 1992. THE COMPANY CONTINUES TO CAPITALIZE ON THIS INDUSTRY
REBOUND BY EXPANDING INTO NEW MARKETS AND GAINING MARKET SHARE IN EXISTING
MARKETS. THE ACQUISITION OF GOLDEN WEST HOMES ON SEPTEMBER 30, 1994 REPRESENTS
ANOTHER STEP IN THE COMPANY'S GROWTH STRATEGY AND FURTHER ACCELERATES EXPANSION
INTO THE WESTERN MARKETS.
1994 COMPARED TO 1993
THE FOLLOWING TABLE SUMMARIZES CERTAIN KEY SALES STATISTICS FOR EACH OF THE
LAST THREE FISCAL YEARS:
1994 1993 1992
RETAIL SALES DOLLAR VOLUME (IN
MILLIONS)........................... $ 393.6 $ 260.9 $ 184.7
WHOLESALE SALES DOLLAR VOLUME
(IN MILLIONS)....................... $ 112.6 $ 89.5 $ 74.4
TOTAL SALES DOLLAR VOLUME (IN
MILLIONS)........................... $ 506.2 $ 350.4 $ 259.1
RETAIL GROSS PROFIT %................. 30.2% 30.9% 30.9%
WHOLESALE GROSS PROFIT %.............. 20.5% 18.2% 16.5%
NEW UNITS SOLD -- RETAIL.............. 13,034 9,756 7,453
USED UNITS SOLD -- RETAIL............. 1,675 1,138 1,025
NEW UNITS SOLD -- WHOLESALE........... 2,972 2,494 2,215
AVERAGE NEW SINGLE-SECTION SALES
PRICE -- RETAIL..................... $23,900 $21,400 $19,800
AVERAGE NEW MULTI-SECTION SALES
PRICE -- RETAIL..................... $42,800 $38,500 $35,000
AVERAGE NEW MULTI-SECTION SALES
PRICE -- WHOLESALE.................. $37,900 $35,900 $33,600
WEIGHTED AVERAGE SALES CENTERS........ 136 112 97
NEW UNIT SALES PER SALES CENTER....... 96 87 77
RETAIL SALES DOLLAR VOLUME ROSE 51% IN 1994, REFLECTING A 34% INCREASE IN NEW
UNIT VOLUME AND INCREASES OF 12% AND 11% IN THE AVERAGE NEW UNIT RETAIL SALES
PRICES OF SINGLE-SECTION AND MULTI-SECTION HOMES, RESPECTIVELY. NEW UNIT VOLUME
INCREASED DUE TO A 21% INCREASE IN THE WEIGHTED AVERAGE NUMBER OF SALES CENTERS
OPEN DURING THE YEAR AND A 10% INCREASE IN AVERAGE NEW UNIT SALES PER SALES
CENTER. TOTAL SALES FOR SALES CENTERS OPEN AT LEAST ONE YEAR ROSE 31%. THE
INCREASE IN THE AVERAGE NEW UNIT SELLING PRICE REFLECTS PRICE INCREASES REQUIRED
TO OFFSET RISING LUMBER PRICES, THE EFFECT OF THE COMPANY'S ENTRY INTO THE
SOUTHWEST MARKET WHERE THE AVERAGE HOME SIZE IS LARGER THAN IN THE SOUTHEAST
MARKET AND HIGHER SELLING PRICES IN THE SOUTHEAST DUE TO A CHANGE IN PRODUCT MIX
TOWARD HIGHER-END HOMES. THE COMPANY HAS BEEN SUCCESSFUL IN RECOVERING INCREASED
LUMBER COSTS FROM ITS RETAIL CUSTOMERS THROUGH HIGHER SELLING PRICES AND DOES
NOT EXPECT FLUCTUATING LUMBER PRICES TO HAVE A MATERIAL ADVERSE EFFECT ON ITS
RESULTS OF OPERATIONS. THE COMPANY INCREASED THE INTEREST RATES CHARGED ON
INSTALLMENT SALE CONTRACTS BY 100 BASIS POINTS DURING FISCAL 1994 IN RESPONSE TO
HIGHER YIELDS ON TREASURY SECURITIES, WHICH ARE THE BENCHMARK FOR THE COMPANY'S
RELATED FINANCING COSTS. A 100 BASIS POINT INCREASE IN THE INTEREST RATE ON THE
COMPANY'S TYPICAL LOAN ON A NEW HOME OF $28,000 FOR 180 MONTHS INCREASES THE
CUSTOMER'S MONTHLY PAYMENT BY APPROXIMATELY $18. MANAGEMENT DOES NOT BELIEVE
THAT THE RESULTING HIGHER MONTHLY PAYMENTS HAVE HAD A MATERIAL ADVERSE EFFECT ON
THE COMPANY'S UNIT SALES, AND INDUSTRY WIDE SHIPMENTS HAVE INCREASED BY 20.3% IN
THE FIRST NINE MONTHS OF CALENDAR 1994 COMPARED TO THE SAME PERIOD OF 1993.
SALES IN THE SOUTHWEST COMPRISED 27% OF TOTAL NEW MANUFACTURED HOUSING RETAIL
SALES DOLLARS DURING 1994 COMPARED TO 11% FOR 1993. RETAIL SALES OF
MULTI-SECTION HOMES ACCOUNTED FOR APPROXIMATELY 25% OF NEW UNIT SALES IN BOTH
1994 AND 1993.
WHOLESALE SALES DOLLAR VOLUME (WHICH REPRESENTS SALES BY GOLDEN WEST HOMES)
INCREASED 26%, REFLECTING A 19% INCREASE IN UNIT VOLUME AND A 6% INCREASE IN THE
AVERAGE SALES PRICE. THE SALES VOLUME INCREASE WAS PRIMARILY DUE TO STRONGER
DEMAND FOR MANUFACTURED HOUSING IN THE WESTERN UNITED STATES AND INCREASED
MARKET SHARE AND PENETRATION. THE INCREASE IN THE AVERAGE WHOLESALE SELLING
PRICE REFLECTS PRICE INCREASES REQUIRED TO OFFSET RISING LUMBER PRICES, AS WELL
AS CHANGES IN THE PRODUCT MIX.
RETAIL GROSS PROFIT MARGINS DECREASED SLIGHTLY TO 30.2% IN 1994 FROM 30.9% IN
1993. MARGINS ROSE IN THE SOUTHEAST, BUT WERE OFFSET BY THE EFFECTS OF THE
COMPANY'S EXPANSION INTO THE SOUTHWEST, WHERE A SUBSTANTIAL PORTION OF THE NEW
UNIT SALES VOLUME WAS SOURCED FROM THIRD PARTY MANUFACTURERS. OF THE TOTAL 1994
NEW UNIT RETAIL SALES VOLUME, 75% WAS MANUFACTURED BY THE COMPANY COMPARED TO
82% IN 1993. FOUR OF THE COMPANY'S FIVE NORTH CAROLINA PLANTS OPERATED AT
CAPACITY IN 1994 AND THE FIFTH PLANT OPERATED AT APPROXIMATELY 70% CAPACITY FOR
THE YEAR. SUBSEQUENT TO YEAR END, THE
14 OAKWOOD HOMES
COMPANY BEGAN UTILIZING THE UNUSED CAPACITY AT THE FIFTH PLANT TO PRODUCE
ADDITIONAL MULTI-SECTION HOMES IN AN EFFORT TO REDUCE LEAD TIMES FOR THESE
PRODUCTS. DURING 1994 THE COMPANY BEGAN PRODUCTION AT ITS FIRST TEXAS
SINGLE-SECTION MANUFACTURING PLANT, WHICH PRODUCED A TOTAL OF 1,158 FLOORS
DURING THE YEAR, OR APPROXIMATELY 46% OF ITS ANNUAL CAPACITY. DURING THE FOURTH
QUARTER, PRODUCTION LEVELS INCREASED TO APPROXIMATELY 67% OF CAPACITY AS THE
WORK FORCE GAINED ADDITIONAL EXPERIENCE. PRODUCTION AT THE COMPANY'S TEXAS
MULTI-SECTION PLANT BEGAN IN SEPTEMBER 1994, AND PRODUCTION AT THE SECOND TEXAS
SINGLE-SECTION PLANT AND A SINGLE-SECTION PLANT IN TENNESSEE BEGAN IN OCTOBER
1994. PRODUCTION AT THE COMPANY'S SINGLE-SECTION PLANT IN COLORADO, WHICH IS
BEING OPERATED BY GOLDEN WEST BUT WHICH IS DEDICATED TO PROVIDING ALL ITS
PRODUCTION TO THE COMPANY'S INTEGRATED RETAIL NETWORK, ALSO BEGAN PRODUCTION IN
OCTOBER 1994. MANAGEMENT DOES NOT EXPECT AN IMPROVEMENT IN GROSS MARGINS TO BE
REALIZED FROM THE ADDITIONAL MANUFACTURING PLANTS UNTIL LATE IN FISCAL 1995
BECAUSE OF THE START-UP COSTS ASSOCIATED WITH BRINGING NEW PRODUCTION CAPACITY
ON LINE.
WHOLESALE GROSS PROFIT MARGINS INCREASED TO 20.5% IN 1994 FROM 18.2% IN 1993.
THIS IMPROVEMENT IN MARGIN WAS PRIMARILY DUE TO GREATER OPERATING EFFICIENCIES
ASSOCIATED WITH A HIGHER SALES VOLUME WHICH ALLOWS FOR A MORE CONSISTENT
PRODUCTION CYCLE. IN ADDITION, THE 1993 PERIOD WAS NEGATIVELY AFFECTED BY A
RAPID RISE IN THE COST OF LUMBER, ONLY A PORTION OF WHICH COULD BE PASSED ON IN
THE FORM OF SALES PRICE INCREASES. DURING 1994 GOLDEN WEST'S ALBANY, OREGON
PLANT OPERATED AT FULL CAPACITY. GOLDEN WEST'S SACRAMENTO, CALIFORNIA FACILITY
OPERATED AT APPROXIMATELY 70% CAPACITY FOR THE YEAR, BUT INCREASED ITS
UTILIZATION IN THE FOURTH QUARTER TO APPROXIMATELY 90% AS A RESULT OF THE
STRENGTHENING OF ORDERS IN ITS MARKETS, AS WELL AS UTILIZING THE SACRAMENTO
PLANT TO REDUCE ORDER BACKLOG IN ALBANY. GOLDEN WEST'S SOUTHERN CALIFORNIA PLANT
OPERATED AT SLIGHTLY MORE THAN ONE-HALF CAPACITY FOR THE YEAR DUE TO SOFT MARKET
CONDITIONS IN SOUTHERN CALIFORNIA. THE COMPANY INTENDS TO IMPROVE UTILIZATION
LEVELS IN SACRAMENTO AND SOUTHERN CALIFORNIA IN FISCAL 1995 BY UTILIZING THESE
FACILITIES TO PRODUCE HOMES FOR NEW RETAIL OUTLETS THE COMPANY PLANS TO OPEN
WITHIN THESE PLANTS' MARKETING AREAS.
FINANCIAL SERVICES INCOME, WHICH CONSISTS PRIMARILY OF INTEREST INCOME ON
INSTALLMENT SALE CONTRACTS RETAINED BY THE COMPANY, LOAN SERVICING FEES AND
EARNINGS ON THE COMPANY'S RETAINED INTERESTS IN REMIC SECURITIZATIONS ACCOUNTED
FOR AS SALES OF RECEIVABLES, INCREASED 21% TO $60.3 MILLION IN 1994 FROM $50.1
MILLION IN 1993, PRINCIPALLY AS A RESULT OF THE INCREASE IN THE OUTSTANDING
SERVICED LOAN PORTFOLIO FROM $538 MILLION AT SEPTEMBER 30, 1993 TO $843 MILLION
AT SEPTEMBER 30, 1994. FINANCIAL SERVICES INCOME DID NOT INCREASE
PROPORTIONATELY WITH THE INCREASE IN THE COMPANY'S INSTALLMENT SALE CONTRACT
PORTFOLIO BECAUSE THE COMPANY'S RECENT REMIC SECURITIZATIONS HAVE BEEN
STRUCTURED AS SALES OF RECEIVABLES RATHER THAN AS COLLATERALIZED BORROWINGS. THE
EFFECT ON THE FINANCIAL STATEMENTS OF THIS STRUCTURAL CHANGE IS TO CAUSE THE
COMPANY'S EARNINGS ON THE RETAINED INTERESTS IN REMICS STRUCTURED AS SALES OF
RECEIVABLES TO BE INCLUDED AS A SINGLE AMOUNT WITHIN FINANCIAL SERVICES INCOME,
AS COMPARED TO PRESENTING INTEREST INCOME ON THE INSTALLMENT SALE CONTRACTS
CONVEYED TO THE REMIC AS INTEREST INCOME AND INTEREST EXPENSE ON REMIC INTERESTS
PURCHASED BY INVESTORS AS INTEREST EXPENSE IN THE CONSOLIDATED STATEMENT OF
INCOME. WHILE THE STRUCTURAL CHANGE HAD NO EFFECT ON EARNINGS, STRUCTURING REMIC
SECURITIZATIONS AS SALES OF RECEIVABLES WILL CAUSE SLOWER RATES OF GROWTH IN
FINANCIAL SERVICES INCOME AND FINANCIAL SERVICES INTEREST EXPENSE COMPARED TO
THAT WHICH WOULD OCCUR IF SUCH SECURITIZATIONS WERE STRUCTURED AS COLLATERALIZED
BORROWINGS. CREDIT SALES REPRESENTED APPROXIMATELY 85% AND 84% OF THE COMPANY'S
RETAIL UNIT VOLUME IN FISCAL 1994 AND 1993, RESPECTIVELY. THE COMPANY'S CREDIT
SUBSIDIARY CAPTURED APPROXIMATELY 94% OF 1994 LOAN ORIGINATIONS COMPARED TO 91%
IN 1993.
OTHER INCOME INCREASED 10% TO $12.6 MILLION IN 1994 FROM $11.5 MILLION IN
1993. THE 1993 AMOUNT INCLUDES A GAIN OF $1.6 MILLION ON THE SALE OF
MANUFACTURED HOUSING COMMUNITIES (APPROXIMATELY $1 MILLION AFTER TAX, OR $.05
PER SHARE). EXCLUDING THIS GAIN, OTHER INCOME ROSE 28%, PRINCIPALLY DUE TO
INCREASED INSURANCE COMMISSIONS RESULTING FROM AN IMPROVEMENT IN THE PERCENTAGE
OF TOTAL SALES FOR WHICH PHYSICAL DAMAGE COVERAGE WAS WRITTEN BY THE COMPANY'S
AGENCY AND THE OVERALL INCREASE IN SALES. THIS GROWTH WAS PARTIALLY OFFSET BY A
DECLINE IN ENDORSEMENT FEE INCOME RESULTING FROM THE COMPANY'S EMPHASIS ON
INTERNAL FINANCING OF CREDIT SALES. ENDORSEMENT FEE INCOME WILL CONTINUE TO
DECLINE BECAUSE THE COMPANY HAS CEASED SELLING INSTALLMENT SALE CONTRACTS ON A
FULL RECOURSE BASIS.
TOTAL SELLING, GENERAL AND ADMINISTRATIVE EXPENSES INCREASED 50% FROM $85.0
MILLION (20.6% OF REVENUES) IN 1993 TO $127.4 MILLION (22.0% OF REVENUES) IN
1994, PRIMARILY AS A RESULT OF HIGHER SALES VOLUME AND INCREASED SERVICING COSTS
ASSOCIATED WITH THE INCREASED SIZE OF THE COMPANY'S SERVICING PORTFOLIO. THE
1994 PERIOD ALSO INCLUDES A PROVISION OF APPROXIMATELY $3.5 MILLION RELATING TO
A LONG-TERM INCENTIVE COMPENSATION PLAN ADOPTED IN 1994. THE PLAN PROVIDES FOR
CASH BONUSES TO KEY MANAGEMENT PERSONNEL PAYABLE IN 1996 IF CERTAIN EARNINGS
PERFORMANCE TARGETS ARE ACHIEVED. THE AMOUNT OF SUCH INCENTIVE COMPENSATION IS
DIRECTLY RELATED TO THE COMPANY'S EARNINGS FOR THE THREE YEAR PERIOD ENDING IN
FISCAL 1996, AND SUCH AMOUNTS WILL BE REDUCED TO ZERO IF CERTAIN MINIMUM
EARNINGS ARE NOT ACHIEVED. LONG-TERM INCENTIVE COMPENSATION PREVIOUSLY WAS
PROVIDED PRINCIPALLY IN THE FORM OF STOCK OPTIONS, AND ACCORDINGLY DID NOT
RESULT IN A CHARGE TO EARNINGS. THE COMPANY WILL MAKE ADDITIONAL PROVISIONS FOR
COMPENSATION PAYABLE UNDER THE PLAN BASED UPON EARNINGS THROUGH FISCAL 1996 IN
RELATION TO THE PLAN'S TARGETED EARNINGS. IN ADDITION, SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES FOR 1994 INCLUDE A ONE-TIME CHARGE OF APPROXIMATELY $1.3
MILLION ($973,000 AFTER TAX, OR $.04 PER SHARE) FOR COSTS RELATING TO THE
ACQUISITION OF GOLDEN WEST.
THE PROVISION FOR LOSSES ON CREDIT SALES ROSE 30% OVER 1993, LARGELY DUE TO
THE INCREASE IN SALES FINANCED
OAKWOOD HOMES 15
BY THE COMPANY. THE COMPANY PROVIDES FOR ESTIMATED FUTURE LOSSES ON CURRENT
PERIOD RETAIL CREDIT SALES FINANCED BY THE COMPANY. THE AMOUNTS PROVIDED ARE
BASED ON THE COMPANY'S HISTORICAL LOSS EXPERIENCE, CURRENT REPOSSESSION TRENDS
AND COSTS AND MANAGEMENT'S ASSESSMENT OF THE CURRENT CREDIT QUALITY OF THE
INSTALLMENT SALE CONTRACT PORTFOLIO. ACCORDINGLY, THE PROVISION FOR LOSSES ON
CREDIT SALES IS NOT NECESSARILY DIRECTLY RELATED TO CURRENT PERIOD SALES. CREDIT
LOSSES AND REPOSSESSION FREQUENCY REMAINED WELL WITHIN MANAGEMENT'S TARGETED
LEVELS DURING 1994. CREDIT LOSSES CHARGED TO THE RESERVE AS A PERCENTAGE OF THE
AVERAGE OUTSTANDING BALANCE OF INSTALLMENT SALE CONTRACTS WERE .66% IN 1994
COMPARED TO .61% IN 1993, AND REPOSSESSIONS AS A PERCENTAGE OF THE AVERAGE
NUMBER OF CONTRACTS OUTSTANDING DECLINED TO 2.94% IN 1994 FROM 3.14% IN 1993.
MANAGEMENT BELIEVES THAT ITS USE OF A CREDIT SCORING SYSTEM, IMPLEMENTED IN 1989
AND UPDATED IN 1994, AND THE ADVANTAGES OF ITS CAPTIVE RETAIL DISTRIBUTION
SYSTEM IN MAXIMIZING RECOVERIES ON DEFAULTED LOANS, WILL ENABLE THE COMPANY TO
MAINTAIN LOSS LEVELS WITHIN ACCEPTABLE LIMITS.
NON-FINANCIAL SERVICES INTEREST EXPENSE DECREASED PRIMARILY DUE TO THE
REDEMPTION OR CONVERSION OF THE COMPANY'S 6.5% AND 7.5% CONVERTIBLE SUBORDINATED
DEBENTURES IN NOVEMBER AND DECEMBER 1992. FINANCIAL SERVICES INTEREST EXPENSE
DECREASED BECAUSE THE COMPANY HAS BEGUN STRUCTURING ITS REMIC SECURITIZATIONS AS
SALES OF RECEIVABLES INSTEAD OF COLLATERALIZED BORROWINGS, AS MORE FULLY
DESCRIBED ABOVE.
EFFECTIVE OCTOBER 1, 1993 THE COMPANY ADOPTED PROSPECTIVELY STATEMENT OF
FINANCIAL ACCOUNTING STANDARDS NO. 109, "ACCOUNTING FOR INCOME TAXES" ("FAS
109"), WHICH REQUIRES THE USE OF AN ASSET AND LIABILITY METHOD TO ACCOUNT FOR
TEMPORARY DIFFERENCES BETWEEN THE FINANCIAL REPORTING AND INCOME TAX BASES OF
THE COMPANY'S ASSETS AND LIABILITIES. PRIOR TO FISCAL 1994 THE COMPANY ACCOUNTED
FOR THE TIMING DIFFERENCES BETWEEN FINANCIAL AND TAXABLE INCOME USING THE
DEFERRED METHOD. ADOPTION OF FAS 109 HAD THE EFFECT OF REDUCING THE PROVISION
FOR INCOME TAXES AND INCREASING NET INCOME BY $214,000 ($.01 PER SHARE) IN THE
FIRST QUARTER OF FISCAL 1994. EXCLUDING THE EFFECTS OF ADOPTION OF FAS 109, THE
COMPANY'S EFFECTIVE INCOME TAX RATE WAS 37.5% IN 1994 COMPARED TO 37.2% IN 1993.
1993 COMPARED TO 1992
RETAIL SALES DOLLAR VOLUME ROSE 41% IN 1993, REFLECTING A 31% INCREASE IN NEW
UNIT VOLUME AND INCREASES OF 8% AND 10% IN THE AVERAGE NEW UNIT SALES PRICES OF
SINGLE-SECTION AND MULTI-SECTION HOMES, RESPECTIVELY. NEW UNIT VOLUME INCREASED
DUE TO A 15% INCREASE IN THE WEIGHTED AVERAGE NUMBER OF SALES CENTERS OPEN
DURING THE YEAR AND A 13% INCREASE IN AVERAGE NEW UNIT SALES PER SALES CENTER.
TOTAL SALES FOR SALES CENTERS OPEN AT LEAST ONE YEAR ROSE 33%. THE PRIMARY
REASONS FOR THE INCREASE IN THE AVERAGE NEW UNIT SELLING PRICE WERE SURCHARGES
TO PASS ON HIGHER LUMBER COSTS TO CONSUMERS AND THE EFFECT OF THE COMPANY'S
EXPANSION INTO THE SOUTHWEST MARKET WHERE THE AVERAGE SIZE HOME SOLD IS LARGER
THAN IN THE SOUTHEAST. SALES OF MULTI-SECTION HOMES ACCOUNTED FOR APPROXIMATELY
25% OF NEW UNIT SALES IN BOTH 1993 AND 1992.
WHOLESALE SALES DOLLAR VOLUME ROSE 20%, REFLECTING A 13% INCREASE IN UNIT
VOLUME AND A 7% INCREASE IN THE AVERAGE SALES PRICE. THE UNIT VOLUME INCREASES
WERE PRINCIPALLY DUE TO SIGNIFICANT GROWTH IN DEMAND AND MARKET SHARE IN THE
PACIFIC NORTHWEST, AS WELL AS GOLDEN WEST'S SUCCESSFUL MARKETING EFFORTS IN THE
MOUNTAIN STATES. AVERAGE SELLING PRICES INCREASED PRIMARILY AS A RESULT OF PRICE
INCREASES REQUIRED TO OFFSET RISING LUMBER COSTS AND A SHIFT IN PRODUCT MIX
TOWARDS HIGHER PRICED HOMES.
RETAIL GROSS PROFIT MARGINS WERE FLAT IN 1993 AT 30.9%. MARGINS ROSE IN THE
SOUTHEAST, PRINCIPALLY DUE TO MANUFACTURING EFFICIENCIES RESULTING FROM HIGHER
PRODUCTION LEVELS, BUT WERE OFFSET BY THE EFFECTS OF THE COMPANY'S EXPANSION
INTO THE SOUTHWEST, WHERE ALL PRODUCT WAS SOURCED FROM THIRD PARTY MANUFACTURERS
IN 1993. OF THE 9,756 NEW HOMES SOLD IN 1993, 82% WERE MANUFACTURED BY THE
COMPANY AND 18% WERE PURCHASED FROM OUTSIDE MANUFACTURERS. IN 1992, 86% OF NEW
UNITS SOLD WERE MANUFACTURED BY THE COMPANY AND 14% WERE SOURCED FROM OTHER
MANUFACTURERS. THROUGHOUT 1993 THE COMPANY OPERATED AT OR NEAR CAPACITY ON A
SINGLE SHIFT BASIS AT THREE OF ITS MANUFACTURING PLANTS. AT YEAR END, A FOURTH
PLANT WAS OPERATING AT APPROXIMATELY 90% OF CAPACITY (COMPARED TO APPROXIMATELY
70% AT SEPTEMBER 30, 1992) AND A FIFTH PLANT ACQUIRED IN JANUARY 1993 WAS ALSO
OPERATING AT APPROXIMATELY 70% OF CAPACITY.
WHOLESALE GROSS PROFIT MARGINS INCREASED TO 18.2% IN 1993 FROM 16.5% IN 1992.
THIS HIGHER PROFIT MARGIN WAS ATTRIBUTABLE TO IMPROVED OPERATING EFFICIENCIES
ASSOCIATED WITH A HIGHER SALES VOLUME. THE FISCAL 1993 IMPROVEMENT WAS PARTIALLY
OFFSET BY AN INCREASE IN LUMBER COSTS AND THE INTRODUCTION OF COMPETITIVELY
PRICED PRODUCTS FOR THE MOUNTAIN STATES. THE IMPROVEMENT IN GROSS PROFIT MARGINS
BETWEEN YEARS WAS ALSO PARTIALLY RELATED TO UNUSUALLY HIGH MANUFACTURING
OVERHEAD AND LABOR COSTS IN 1992 DUE TO THE CONSOLIDATION OF GOLDEN WEST'S TWO
SOUTHERN CALIFORNIA PLANTS INTO ONE MANUFACTURING FACILITY DURING LATE CALENDAR
1991 AND EARLY 1992.
FINANCIAL SERVICES INCOME INCREASED 28% TO $50.1 MILLION IN 1993 FROM $39.1
MILLION IN 1992, PRINCIPALLY AS A RESULT OF AN INCREASE IN THE OUTSTANDING
BALANCE OF INSTALLMENT SALE CONTRACTS OWNED BY THE COMPANY FROM $316.9 MILLION
AT SEPTEMBER 30, 1992 TO $420.2 MILLION AT SEPTEMBER 30, 1993.
OTHER INCOME INCREASED TO $11.5 MILLION IN 1993 FROM $8.0 IN 1992. THE 1993
AMOUNT INCLUDES A GAIN OF $1.6 MILLION ON THE SALE OF MANUFACTURED HOUSING
COMMUNITIES (APPROXIMATELY $1 MILLION AFTER TAX, OR $.05 PER SHARE). EXCLUDING
THE GAIN, OTHER INCOME ROSE 23%, PRINCIPALLY DUE TO INCREASED INSURANCE
COMMISSIONS RESULTING FROM AN IMPROVEMENT IN THE PERCENTAGE OF TOTAL SALES FOR
WHICH PHYSICAL DAMAGE COVERAGE WAS WRITTEN BY THE COMPANY'S AGENCY AND THE
OVERALL INCREASE IN SALES, OFFSET BY A DECLINE IN ENDORSEMENT FEE INCOME.
16 OAKWOOD HOMES
TOTAL SELLING, GENERAL AND ADMINISTRATIVE EXPENSES INCREASED 33% TO $85.0
MILLION IN 1993 COMPARED TO $64.1 MILLION IN 1992, BUT DECLINED AS A PERCENTAGE
OF TOTAL REVENUES FROM 21.0% TO 20.6%. SELLING, GENERAL AND ADMINISTRATIVE
EXPENSE INCREASES HAVE RESULTED PRIMARILY FROM HIGHER SALES VOLUMES AND
INCREASED SERVICING COSTS ASSOCIATED WITH THE INCREASED SIZE OF THE COMPANY'S
SERVICING PORTFOLIO.
THE PROVISION FOR LOSSES ON CREDIT SALES ROSE 38% OVER 1992, WHICH IS
GENERALLY CONSISTENT WITH THE INCREASE IN TOTAL FINANCED SALES. CREDIT LOSSES
CHARGED TO THE RESERVE AS A PERCENTAGE OF THE AVERAGE OUTSTANDING BALANCE OF
INSTALLMENT SALE CONTRACTS WERE .61% IN 1993 COMPARED TO .97% IN 1992.
REPOSSESSIONS AS A PERCENTAGE OF THE AVERAGE NUMBER OF CONTRACTS OUTSTANDING
DECLINED TO 3.14% IN 1993 FROM 4.04% IN 1992.
INTEREST EXPENSE INCREASED 3% TO $26.5 MILLION IN 1993 FROM $25.8 MILLION IN
1992. THE INCREASE RESULTED FROM ADDITIONAL DEBT INCURRED AS THE COMPANY
EXPANDED ITS INTERNAL FINANCING OF CREDIT SALES, OFFSET IN PART BY A REDUCTION
IN NON-FINANCIAL INTEREST EXPENSE RESULTING FROM THE REDEMPTION OR CONVERSION OF
THE COMPANY'S CONVERTIBLE SUBORDINATED DEBENTURES.
THE COMPANY'S EFFECTIVE INCOME TAX RATE WAS 37% IN 1993 COMPARED TO 35% IN
1992. THE HIGHER EFFECTIVE RATE REFLECTS ENACTMENT OF HIGHER FEDERAL CORPORATE
INCOME TAX RATES IN THE SUMMER OF 1993, AN INCREASE IN INCOME SUBJECT TO STATE
TAXATION AND A DECREASE IN THE SIGNIFICANCE OF THE PREFERENTIAL TAX RATE ON THE
COMPANY'S CREDIT LIFE INSURANCE SUBSIDIARY IN RELATION TO TOTAL COMPANY-WIDE
EARNINGS.
LIQUIDITY AND CAPITAL RESOURCES
RETAIL FINANCING OF SALES OF THE COMPANY'S PRODUCTS IS AN INTEGRAL PART OF THE
COMPANY'S VERTICAL INTEGRATION STRATEGY. SUCH FINANCING CONSUMES SUBSTANTIAL
AMOUNTS OF CAPITAL, WHICH THE COMPANY HAS OBTAINED PRINCIPALLY BY ISSUING DEBT
COLLATERALIZED BY INSTALLMENT SALE CONTRACTS OR BY SECURITIZING SUCH CONTRACTS,
PRIMARILY USING REMICS. OVER THE PAST FIVE YEARS, THE COMPANY HAS BEEN ABLE TO
OBTAIN FROM INVESTORS AND LENDERS AN INCREASING PERCENTAGE OF THE CAPITAL
REQUIRED TO FUND ITS FINANCE BUSINESS, AND THE RELATED YIELD OVER TREASURIES
REQUIRED BY INVESTORS HAS DECLINED, PRINCIPALLY BECAUSE OF CONTINUED IMPROVEMENT
IN THE PERFORMANCE OF INSTALLMENT SALE CONTRACTS ORIGINATED BY THE COMPANY,
INCREASING INVESTOR AND LENDER FAMILIARITY WITH ASSET-BACKED FINANCING
TRANSACTIONS IN THE MANUFACTURED HOUSING INDUSTRY, DECLINING INTEREST RATES, AND
BECAUSE OF THE COMPANY'S INCREASINGLY STRONG FINANCIAL PERFORMANCE. THE
SIGNIFICANT INCREASE IN INTEREST RATES SINCE FEBRUARY 1994 HAS HAD NO EFFECT ON
THE AVAILABILITY OF CAPITAL TO FINANCE INSTALLMENT SALE CONTRACTS, AND THE
EXCESS OF THE YIELDS DEMANDED BY INVESTORS IN PURCHASING REMIC SECURITIES OVER
THE YIELDS ON TREASURIES OF COMPARABLE MATURITIES HAS REMAINED VIRTUALLY
UNCHANGED. THE COMPANY HAS RAISED ITS CONSUMER LENDING RATES IN RESPONSE TO
INCREASES IN FINANCING COSTS AND BELIEVES THAT THE COMPANY WILL CONTINUE TO
MAINTAIN THE SPREAD BETWEEN ITS LENDING AND FINANCING COSTS AT ACCEPTABLE
LEVELS. THE COMPANY EXPECTS TO ORIGINATE IN EXCESS OF $400 MILLION OF
INSTALLMENT SALE CONTRACTS IN FISCAL 1995 AND BELIEVES IT CAN FINANCE
SUBSTANTIALLY ALL OF THIS AMOUNT THROUGH COLLATERALIZED DEBT OR THROUGH
SECURITIZATION OF THE CONTRACTS. DURING 1993 THE COMPANY RAISED APPROXIMATELY
$143 MILLION TO FINANCE INSTALLMENT SALE CONTRACTS, INCLUDING BOTH
COLLATERALIZED DEBT AND SECURITIZATIONS. IN 1994 THE COMPANY RAISED $363
MILLION, INCLUDING $161 MILLION OF REMIC CERTIFICATES SOLD TO THE PUBLIC IN THE
COMPANY'S FIRST PUBLIC OFFERING OF SECURITIES BACKED BY INSTALLMENT SALE
CONTRACTS. BECAUSE THE COMPANY INTENDS TO CONTINUE TO EXPAND SIGNIFICANTLY ITS
RETAIL DISTRIBUTION NETWORK AND BECAUSE A LARGE PERCENTAGE OF THE COMPANY'S
CUSTOMERS PURCHASE ON CREDIT, THE COMPANY WILL HAVE A SUBSTANTIAL NEED FOR
FINANCING OF INSTALLMENT SALE CONTRACTS IN THE COMING YEARS, AND INTENDS TO
UTILIZE BOTH THE PUBLIC AND PRIVATE MARKETS TO BROADEN THE NUMBER OF SOURCES OF
FINANCING AND MINIMIZE ITS FINANCING COSTS. TO FACILITATE ADDITIONAL PUBLIC
OFFERINGS OF REMIC SECURITIZATIONS, IN LATE 1994 A NEW SUBSIDIARY OF THE
COMPANY, OAKWOOD MORTGAGE INVESTORS, INC., FILED A SHELF REGISTRATION FOR $500
MILLION OF ASSET-BACKED SECURITIES.
IN ADDITION TO THE ONGOING NEED FOR CAPITAL TO FUND ITS FINANCING OPERATIONS,
THE COMPANY WILL REQUIRE CAPITAL TO EXECUTE ITS ONGOING EXPANSION STRATEGY. THE
COMPANY ESTIMATES THAT ITS FISCAL 1995 CAPITAL EXPENDITURES WILL APPROXIMATE $26
MILLION, COMPRISED PRINCIPALLY OF LEASEHOLD IMPROVEMENTS AND FIXTURES RELATING
TO RETAIL EXPANSION, INITIAL CONSTRUCTION COSTS ON A NEW HEADQUARTERS BUILDING,
DEVELOPMENT OF EXISTING MANUFACTURED HOUSING COMMUNITIES AND COMPUTER HARDWARE
AND SOFTWARE ASSOCIATED WITH NEW AND ENHANCED MANAGEMENT INFORMATION SYSTEMS. IN
ADDITION TO CAPITAL EXPENDITURES, THE RETAIL EXPANSION WILL REQUIRE AN
INVESTMENT OF APPROXIMATELY $400,000 OF WORKING CAPITAL FOR EACH NEW SALES
CENTER, OR APPROXIMATELY $16 MILLION FOR FISCAL 1995. CAPITAL EXPENDITURES AND
WORKING CAPITAL REQUIREMENTS IN LATER YEARS ARE DEPENDENT UPON THE EXTENT OF
EXPANSION UNDERTAKEN IN SUCH YEARS.
THE COMPANY MAY FINANCE ITS RETAINED INVESTMENT IN INSTALLMENT SALE CONTRACTS
AND THE RETAIL AND MANUFACTURING EXPANSION USING INTERNALLY GENERATED FUNDS,
LONG-TERM DEBT AND ADDITIONAL EQUITY. THE COMPANY CONTINUES TO MONITOR THE
CREDIT AND EQUITY MARKETS AND EVALUATE THE SOURCES AND COST 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 PROVIDE FLEXIBILITY IN THE SELECTION OF
FINANCING VEHICLES, THE COMPANY INTENDS TO FILE A "UNIVERSAL" SHELF REGISTRATION
STATEMENT PURSUANT TO WHICH THE COMPANY COULD OFFER UP TO $175 MILLION OF
SECURITIES, EITHER DEBT OR EQUITY. WHILE MANAGEMENT BELIEVES THAT EXISTING
FINANCING IS SUFFICIENT TO PROVIDE FOR THE COMPANY'S NEEDS THROUGH AT LEAST THE
END OF FISCAL 1995, THE COMPANY MAY SEEK TO RAISE ADDITIONAL CAPITAL AT AN
EARLIER DATE IF ADVANTAGEOUS MARKET CONDITIONS ARE PRESENT.
THE COMPANY HAS SEVERAL CREDIT FACILITIES IN PLACE TO PROVIDE FOR ITS
SHORT-TERM LIQUIDITY NEEDS. THE COMPANY
OAKWOOD HOMES 17
HAS A $110 MILLION LINE OF CREDIT FACILITY WITH A GROUP OF BANKS TO PROVIDE
WAREHOUSE FINANCING FOR INSTALLMENT SALE CONTRACTS, WHICH BEARS INTEREST AT
EITHER PRIME OR LIBOR PLUS 1.625%. THE COMPANY ALSO HAS A $50 MILLION REVOLVING
LINE OF CREDIT SECURED BY INVENTORY BEARING INTEREST AT EITHER PRIME OR LIBOR
PLUS 1.75% AND A $5 MILLION UNSECURED LINE OF CREDIT BEARING INTEREST AT PRIME.
IN ADDITION TO CASH AND CASH EQUIVALENTS AT SEPTEMBER 30, 1994 OF $12.6 MILLION,
THE COMPANY'S LIQUIDITY WAS FURTHER ENHANCED SUBSEQUENT TO YEAR END BY THE FIRST
PUBLIC OFFERING OFF THE OAKWOOD MORTGAGE INVESTORS, INC. SHELF REGISTRATION, THE
NET PROCEEDS OF WHICH WERE APPROXIMATELY $121 MILLION.
REGULATORY DEVELOPMENTS
IN 1994 NEW DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT ("HUD") REGULATIONS
TOOK EFFECT WHICH REQUIRE THAT MANUFACTURED HOMES BUILT AFTER JULY 13, 1994 BE
CONSTRUCTED TO MORE STRINGENT STANDARDS THAN HOMES BUILT PRIOR TO THAT DATE.
SUCH REGULATIONS RELATE PRINCIPALLY TO METHODS OF CONSTRUCTION AND INSTALLATION
AND ARE DESIGNED TO ENHANCE THE HOMES' ABILITY TO WITHSTAND HIGH WINDS. THE
CONSTRUCTION AND INSTALLATION STANDARDS VARY DEPENDING ON THE AREA ("ZONE I, II
OR III") INTO WHICH THE HOME IS DELIVERED, WITH ZONE II AND ZONE III STANDARDS
BEING SIGNIFICANTLY MORE STRINGENT THAN THE PRIOR MINIMUM CONSTRUCTION STANDARDS
MANDATED BY FEDERAL LAW, WITH ZONE III STANDARDS BEING SOMEWHAT MORE STRINGENT
THAN ZONE II STANDARDS. STANDARDS FOR ZONE I CURRENTLY ARE THE SAME AS EXISTING
STANDARDS; HOWEVER, HUD HAS STATED ITS INTENTION TO ISSUE NEW ZONE I STANDARDS
BY JANUARY 1, 1995. OF THE COMPANY'S 152 SALES CENTERS, APPROXIMATELY 12
CURRENTLY DELIVER MORE THAN TWO-THIRDS OF THEIR HOMES INTO ZONES II AND III, AND
APPROXIMATELY 16 SALES CENTERS DELIVER A LESSER PORTION OF THEIR UNIT SALES INTO
THOSE ZONES. THE REMAINING 124 SALES CENTERS DELIVER HOMES ONLY INTO ZONE I AND
ARE NOT CURRENTLY AFFECTED. APPROXIMATELY 8% OF THE COMPANY'S FISCAL 1994 HOME
SALES WOULD HAVE BEEN AFFECTED HAD THE NEW STANDARDS BEEN IN EFFECT THE ENTIRE
FISCAL YEAR.
THE COMPANY INTENDS TO INCREASE RETAIL PRICES TO COVER THE COSTS OF COMPLYING
WITH THE NEW STANDARDS, INCLUDING PROFIT ON THOSE COSTS. THE INCREASE IN THE
AVERAGE RETAIL PRICE OF THE SINGLE-SECTION AND MULTI-SECTION HOMES RESULTING
FROM SUCH COST INCREASES IS APPROXIMATELY 16% AND 7%, RESPECTIVELY, FOR BOTH
ZONES II AND III. THE INCREASE IN RETAIL PRICE OF MULTI-SECTION HOMES IS LESS
THAN THE INCREASE IN THE PRICE OF SINGLE-SECTION HOMES BECAUSE SOME NEW
MATERIALS REQUIRED BY THE STANDARDS (FOR EXAMPLE, ROOFING AND SIDING MATERIALS)
WERE STANDARD FEATURES OF THE COMPANY'S MULTI-SECTION HOMES BEFORE ENACTMENT OF
THE NEW STANDARDS.
HUD HAS ALSO ISSUED NEW THERMAL STANDARDS FOR MANUFACTURED HOUSING, RELATING
PRINCIPALLY TO INSULATION RATINGS AND THE USE OF STORM WINDOWS. THE NEW THERMAL
REGULATIONS, WHICH ARE EFFECTIVE FOR HOMES MANUFACTURED BEGINNING OCTOBER 26,
1994, VARY DEPENDING UPON INTO WHICH OF THREE GEOGRAPHIC AREAS THE HOME IS
DELIVERED. ABOUT 22% OF THE COMPANY'S FISCAL 1994 UNIT SALES WERE DELIVERED INTO
THE NORTHERNMOST THERMAL ZONE, FOR WHICH THE NEW STANDARDS ARE MOST STRINGENT;
APPROXIMATELY 51% OF FISCAL 1994 UNIT SALES WERE DELIVERED INTO THE CENTRAL ZONE
AND APPROXIMATELY 27% WERE DELIVERED INTO THE SOUTHERNMOST ZONE, FOR WHICH THE
NEW STANDARDS REPRESENT THE LEAST CHANGE FROM EXISTING STANDARDS. THE COMPANY
INTENDS TO INCREASE RETAIL PRICES TO RECOVER THESE COSTS AND MAINTAIN ITS GROSS
MARGINS. MANAGEMENT BELIEVES THAT THE INCREASE IN RETAIL PRICES ARISING FROM
ADOPTION OF THE NEW THERMAL STANDARDS IS APPROXIMATELY 5% IN THE SOUTHERN REGION
TO 10% IN THE NORTHERN REGION FOR SINGLE-SECTION HOMES, AND APPROXIMATELY 2% IN
THE SOUTHERN REGION TO 4% IN THE NORTHERN REGION FOR MULTI-SECTION HOMES. THE
COMPANY DOES NOT BELIEVE THAT THE COST INCREASES NECESSITATED BY THE NEW WIND
AND THERMAL STANDARDS WILL HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY'S SALES
OR GROSS MARGINS.
NEW ACCOUNTING STANDARDS
IN NOVEMBER 1992 THE FINANCIAL ACCOUNTING STANDARDS BOARD (THE "BOARD")
ADOPTED STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 112, "EMPLOYERS'
ACCOUNTING FOR POSTEMPLOYMENT BENEFITS" ("FAS 112"), WHICH PROVIDES THAT
EMPLOYERS SHALL RECOGNIZE THE EXPECTED COST OF PROVIDING BENEFITS TO FORMER OR
INACTIVE EMPLOYEES AFTER EMPLOYMENT BUT PRIOR TO RETIREMENT DURING THE PERIODS
DURING WHICH SUCH EMPLOYEES RENDER SERVICES TO THE EMPLOYER IF CERTAIN
CONDITIONS ARE SATISFIED. THE COMPANY WILL BE REQUIRED TO ADOPT FAS 112
PROSPECTIVELY IN FISCAL 1995, BUT SUCH ADOPTION WILL NOT HAVE A MATERIAL EFFECT
ON THE COMPANY'S FINANCIAL CONDITION OR RESULTS OF OPERATIONS.
IN MAY 1993 THE BOARD ADOPTED STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO.
114, "ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN" ( "FAS 114"), WHICH IS
EFFECTIVE FOR YEARS BEGINNING AFTER DECEMBER 15, 1994. THE COMPANY'S INSTALLMENT
SALE CONTRACTS ARE NOT INCLUDED WITHIN THE TECHNICAL SCOPE OF FAS 114; HOWEVER,
THE COMPANY INTENDS TO REEVALUATE ITS POLICIES WITH RESPECT TO THE RESERVE FOR
LOSSES ON CREDIT SALES IN LIGHT OF THE GUIDANCE CONTAINED IN FAS 114 AND MAKE
SUCH CHANGES, IF ANY, IN SUCH POLICIES AS IT DEEMS APPROPRIATE. BASED UPON
INFORMATION CURRENTLY AVAILABLE, THE COMPANY DOES NOT ANTICIPATE MAKING ANY
CHANGE IN ITS RESERVE POLICIES WHICH WOULD HAVE A MATERIAL EFFECT ON THE
COMPANY'S FINANCIAL CONDITION OR RESULTS OF OPERATIONS.
IN MAY 1993 THE BOARD ADOPTED STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO.
115, "ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES" ("FAS
115"), WHICH WILL REQUIRE THE COMPANY TO DETERMINE WHETHER ITS RETAINED
INTERESTS IN REMIC SECURITIZATIONS WILL BE CONSIDERED TO BE HELD TO MATURITY
(AND CARRIED AT AMORTIZED COST) OR AVAILABLE FOR SALE (AND CARRIED AT MARKET,
WITH UNREALIZED GAINS AND LOSSES REPORTED AS A SEPARATE COMPONENT OF
SHAREHOLDERS' EQUITY). SUCH RETAINED REMIC INTERESTS CURRENTLY ARE CARRIED AT
AMORTIZED COST. THE COMPANY WILL ADOPT FAS 115 PROSPECTIVELY IN FISCAL 1995, BUT
DOES NOT EXPECT SUCH ADOPTION WILL HAVE A MATERIAL EFFECT ON THE COMPANY'S
FINANCIAL CONDITION OR RESULTS OF OPERATIONS.
18 OAKWOOD HOMES
BUSINESS SEGMENT INFORMATION
OAKWOOD HOMES CORPORATION OPERATES IN THREE PRINCIPAL BUSINESSES AS FOLLOWS:
MANUFACTURED HOMES
OAKWOOD MANUFACTURES MOST OF THE HOMES SOLD AT RETAIL THROUGH COMPANY-OWNED
SALES CENTERS. IN ADDITION OAKWOOD RETAILS HOMES PURCHASED FROM OTHER
MANUFACTURERS THROUGH COMPANY-OWNED SALES CENTERS AND DISTRIBUTES HOMES
MANUFACTURED BY THE COMPANY THROUGH A NETWORK OF INDEPENDENT DEALERS.
FINANCIAL SERVICES
THE FINANCIAL SERVICES SEGMENT FINANCES A PORTION OF THE COMPANY'S INSTALLMENT
SALES AND REINSURES RISK ON CREDIT LIFE INSURANCE.
LAND DEVELOPMENT
LAND DEVELOPMENT CONSISTS OF THE DEVELOPMENT, MANAGEMENT OR SALE OF
MANUFACTURED HOUSING COMMUNITIES WHICH DERIVE REVENUE FROM THE RENTAL OF SPACES
FOR PRIVATELY OWNED MANUFACTURED HOMES, AND THE DEVELOPMENT OF MANUFACTURED
HOUSING SUBDIVISIONS.
OPERATING INCOME WITH RESPECT TO SEGMENTS IS INCOME BEFORE GENERAL CORPORATE
EXPENSE, NON-FINANCIAL INTEREST EXPENSE, INVESTMENT INCOME AND INCOME TAXES.
IDENTIFIABLE ASSETS INCLUDE THOSE ASSETS DIRECTLY RELATED TO THE COMPANY'S
OPERATIONS IN THE DIFFERENT SEGMENTS. GENERAL CORPORATE ASSETS CONSIST PRIMARILY
OF CASH, INTEREST RECEIVABLE, CERTAIN PROPERTY AND EQUIPMENT AND OTHER
INVESTMENTS.
1994 1993 1992
(IN THOUSANDS)
REVENUES:
MANUFACTURED HOMES..................................................................... $508,901 $355,855 $262,394
FINANCIAL SERVICES..................................................................... 60,330 50,051 39,110
LAND DEVELOPMENT....................................................................... 8,814 5,084 3,873
INVESTMENT INCOME...................................................................... 1,044 980 811
$579,089 $411,970 $306,188
OPERATING INCOME (LOSS):
MANUFACTURED HOMES..................................................................... $ 46,366 $ 33,515 $ 20,752
FINANCIAL SERVICES (1)................................................................. 19,899 11,304 8,425
LAND DEVELOPMENT (2)................................................................... (385) 624 275
COMBINED............................................................................ 65,880 45,443 29,452
NON-FINANCIAL INTEREST EXPENSE......................................................... (1,034) (1,486) (4,919)
INVESTMENT INCOME...................................................................... 1,044 980 811
GENERAL CORPORATE EXPENSES (3)......................................................... (11,967) (4,906) (3,854)
INCOME BEFORE INCOME TAXES........................................................ $ 53,923 $ 40,031 $ 21,490
IDENTIFIABLE ASSETS:
MANUFACTURED HOMES..................................................................... $160,745 $110,383 $ 89,147
FINANCIAL SERVICES..................................................................... 375,507 437,617 329,431
LAND DEVELOPMENT....................................................................... 21,783 15,305 15,934
GENERAL CORPORATE...................................................................... 17,152 21,268 14,122
$575,187 $584,573 $448,634
DEPRECIATION AND AMORTIZATION:
MANUFACTURED HOMES..................................................................... $ 3,051 $ 2,575 $ 2,473
FINANCIAL SERVICES..................................................................... 1,141 818 764
LAND DEVELOPMENT....................................................................... 299 776 788
GENERAL CORPORATE...................................................................... 960 410 438
$ 5,451 $ 4,579 $ 4,463
CAPITAL EXPENDITURES:
MANUFACTURED HOMES..................................................................... $ 17,894 $ 7,147 $ 3,558
FINANCIAL SERVICES..................................................................... 511 680 65
LAND DEVELOPMENT....................................................................... 4,958 3,330 1,475
GENERAL CORPORATE...................................................................... 3,803 2,351 449
$ 27,166 $ 13,508 $ 5,547
(1) INCLUDES THE PROVISION FOR LOSSES ON CREDIT SALES FOR ALL PERIODS PRESENTED.
SUCH PROVISION WAS CHARGED TO THE MANUFACTURED HOMES SEGMENT IN THE BUSINESS
SEGMENT INFORMATION PREVIOUSLY REPORTED FOR 1993 AND 1992.
(2) INCLUDES A GAIN OF APPROXIMATELY $1.6 MILLION IN 1993 FROM THE SALE OF
MANUFACTURED HOUSING COMMUNITIES.
(3) INCLUDES A ONE-TIME CHARGE OF APPROXIMATELY $1.3 MILLION IN 1994 FOR COSTS
RELATING TO THE ACQUISITION OF GOLDEN WEST HOMES.
OAKWOOD HOMES 19
CONSOLIDATED STATEMENT OF INCOME
OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
(IN THOUSANDS EXCEPT PER SHARE DATA) YEAR ENDED SEPTEMBER 30,
1994 1993 1992
REVENUES
NET SALES $506,187 $350,441 $259,075
FINANCIAL SERVICES INCOME 60,330 50,051 39,110
OTHER INCOME (NOTE 12) 12,572 11,478 8,003
TOTAL REVENUES 579,089 411,970 306,188
COSTS AND EXPENSES
COST OF SALES 364,416 253,465 189,665
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
NON-FINANCIAL SERVICES 119,285 78,241 59,429
FINANCIAL SERVICES 8,127 6,748 4,712
PROVISION FOR LOSSES ON CREDIT SALES (NOTE 9) 9,044 6,945 5,049
INTEREST EXPENSE
NON-FINANCIAL SERVICES 1,034 1,486 4,919
FINANCIAL SERVICES 23,260 25,054 20,924
TOTAL COSTS AND EXPENSES 525,166 371,939 284,698
INCOME BEFORE INCOME TAXES 53,923 40,031 21,490
PROVISION FOR INCOME TAXES (NOTE 13) 20,009 14,876 7,442
NET INCOME $ 33,914 $ 25,155 $ 14,048
EARNINGS PER SHARE:
PRIMARY $ 1.54 $ 1.24 $ .95
FULLY DILUTED $ 1.54 $ 1.20 $ .86
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
20 OAKWOOD HOMES
CONSOLIDATED BALANCE SHEET
OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA) SEPTEMBER 30,
ASSETS 1994 1993
CASH AND CASH EQUIVALENTS $ 12,573 $ 26,335
RECEIVABLES (NOTES 4 AND 9) 367,212 432,543
INVENTORIES (NOTE 5) 96,405 61,394
MANUFACTURED HOUSING COMMUNITIES, NET OF ACCUMULATED DEPRECIATION
OF $154 AND $94, RESPECTIVELY 8,766 4,088
PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION
AND AMORTIZATION (NOTES 6 AND 11) 54,131 35,955
DEFERRED INCOME TAXES (NOTE 13) 7,403 2,275
OTHER ASSETS 28,697 21,983
$575,187 $584,573
LIABILITIES AND SHAREHOLDERS' EQUITY
SHORT-TERM BORROWINGS (NOTE 10) $ 25,000 $ 28,300
NOTES AND BONDS PAYABLE (NOTE 11) 207,432 262,915
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (NOTE 8) 59,051 50,627
RESERVE FOR CONTINGENT LIABILITIES (NOTE 9) 3,827 3,009
OTHER LONG-TERM OBLIGATIONS (NOTE 16) 8,966 3,499
SHAREHOLDERS' EQUITY (NOTES 14 AND 16)
COMMON STOCK, $.50 PAR VALUE; 100,000,000 SHARES AUTHORIZED;
21,085,004 AND 20,884,155 SHARES ISSUED AND OUTSTANDING 10,543 10,442
ADDITIONAL PAID-IN CAPITAL 148,507 146,658
RETAINED EARNINGS 111,861 79,902
270,911 237,002
LESS: LOAN TO ESOP (NOTE 15) -- (779)
TOTAL SHAREHOLDERS' EQUITY 270,911 236,223
CONTINGENCIES (NOTE 9)
$575,187 $584,573
The accompanying notes are an integral part of the financial statements.
OAKWOOD HOMES 21
CONSOLIDATED STATEMENT
OF CASH FLOWS
OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
(IN THOUSANDS) YEAR ENDED SEPTEMBER 30,
1994 1993 1992
OPERATING ACTIVITIES
NET INCOME $ 33,914 $ 25,155 $ 14,048
ITEMS NOT REQUIRING (PROVIDING) CASH
DEPRECIATION AND AMORTIZATION 5,451 4,579 4,463
DEFERRED INCOME TAXES (5,413) (4,014) (649)
PROVISION FOR LOSSES ON CREDIT SALES, NET OF ACTUAL LOSSES 4,209 3,617 810
GAIN ON SALE OF MANUFACTURED HOUSING COMMUNITIES -- (1,636) --
OTHER 697 699 (12)
(INCREASE) IN OTHER RECEIVABLES (8,481) (5,581) (186)
(INCREASE) IN INVENTORIES (35,940) (11,884) (2,097)
INCREASE IN ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 9,573 19,402 6,157
INCREASE IN OTHER LONG-TERM OBLIGATIONS 5,467 1,328 66
CASH PROVIDED BY OPERATIONS 9,477 31,665 22,600
INSTALLMENT RECEIVABLES ORIGINATED (343,733) (211,860) (131,100)
PURCHASE OF INSTALLMENT LOANS (604) (28,337) (19,362)
SALE OF INSTALLMENT LOANS 362,982 85,683 33,561
RECEIPTS ON INSTALLMENT RECEIVABLES 49,252 46,878 37,170
CASH PROVIDED (USED) BY OPERATING ACTIVITIES 77,374 (75,971) (57,131)
INVESTING ACTIVITIES
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT (22,428) (10,256) (5,516)
ADDITIONS TO MANUFACTURED HOUSING COMMUNITIES (4,738) (3,252) (31)
PROCEEDS FROM SALES OF MANUFACTURED HOUSING COMMUNITIES -- 6,194 --
OTHER (6,846) (3,455) (2,788)
CASH (USED) BY INVESTING ACTIVITIES (34,012) (10,769) (8,335)
FINANCING ACTIVITIES
NET BORROWINGS (REPAYMENTS) ON SHORT-TERM CREDIT FACILITIES (1,800) 25,300 (20,118)
ISSUANCE OF NOTES AND BONDS PAYABLE 2,093 58,555 129,908
PAYMENTS ON NOTES AND BONDS (55,650) (45,502) (44,633)
CASH DIVIDENDS (1,635) (1,482) (785)
PROCEEDS FROM EXERCISE OF STOCK OPTIONS 1,950 3,623 1,248
PROCEEDS FROM SALE OF COMMON STOCK -- 53,602 --
REDEMPTION OF PREFERRED STOCK (1,150) (1,150) --
CASH PROVIDED (USED) BY FINANCING ACTIVITIES (56,192) 92,946 65,620
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (12,830) 6,206 154
CASH AND CASH EQUIVALENTS
BEGINNING OF YEAR (*) 25,403 20,129 19,975
END OF YEAR $ 12,573 $ 26,335 $ 20,129
* THE BEGINNING CASH BALANCE FOR 1994 DOES NOT AGREE TO THE ENDING BALANCE FOR
1993 BECAUSE OF THE DIFFERING ACCOUNTING PERIODS USED BY OAKWOOD AND GOLDEN
WEST . SEE NOTE 1.
The accompanying notes are an integral part of the financial statements.
22 OAKWOOD HOMES
CONSOLIDATED STATEMENT OF CHANGES IN
SHAREHOLDERS' EQUITY
OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
(IN THOUSANDS EXCEPT PER SHARE DATA)
ADDITIONAL
SHARES OUTSTANDING PREFERRED B COMMON PAID-IN RETAINED
PREFERRED B COMMON STOCK STOCK CAPITAL EARNINGS
BALANCE AT SEPTEMBER 30, 1991 12 8,923 $ 3,000 $4,461 $ 47,132 $42,966
NET INCOME -- -- -- -- -- 14,048
EXERCISE OF STOCK OPTIONS -- 167 -- 84 1,164 --
CONVERSION OF DEBENTURES -- 71 -- 36 1,134 --
CASH DIVIDENDS ($.06 PER SHARE) -- -- -- -- -- (785 )
3-FOR-2 STOCK SPLIT -- 4,579 -- 2,289 (2,291) --
BALANCE AT SEPTEMBER 30, 1992 12 13,740 3,000 6,870 47,139 56,229
NET INCOME -- -- -- -- -- 25,155
EXERCISE OF STOCK OPTIONS -- 418 -- 209 3,414 --
SALE OF COMMON STOCK -- 2,875 -- 1,437 52,165 --
CONVERSION OF DEBENTURES -- 3,851 -- 1,926 42,090 --
REDEMPTION OF PREFERRED STOCK (12) -- (3,000) -- 1,850 --
CASH DIVIDENDS ($.08 PER SHARE) -- -- -- -- -- (1,482 )
BALANCE AT SEPTEMBER 30, 1993 -- 20,884 -- 10,442 146,658 79,902
NET INCOME -- -- -- -- -- 33,914
LESS: NET INCOME OF GOLDEN
WEST FOR THE THREE MONTHS ENDED
DECEMBER 25, 1993 (NOTE 1) -- -- -- -- -- (320 )
EXERCISE OF STOCK OPTIONS -- 201 -- 101 1,849 --
CASH DIVIDENDS ($.08 PER SHARE) -- -- -- -- -- (1,635 )
BALANCE AT SEPTEMBER 30, 1994 -- 21,085 $ -- $10,543 $148,507 $111,861
The accompanying notes are an integral part of the financial statements.
OAKWOOD HOMES 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
NOTE 1 -- BASIS OF PRESENTATION
ON SEPTEMBER 30, 1994 OAKWOOD HOMES CORPORATION ("OAKWOOD") COMPLETED ITS
BUSINESS COMBINATION WITH GOLDEN WEST HOMES ("GOLDEN WEST"), WHICH HAS BEEN
ACCOUNTED FOR AS A POOLING OF INTERESTS AS DESCRIBED IN NOTE 3. THE ACCOMPANYING
FINANCIAL STATEMENTS HAVE BEEN RESTATED TO REFLECT THE COMBINED RESULTS OF
OPERATIONS AND FINANCIAL POSITION OF OAKWOOD AND GOLDEN WEST FOR ALL PERIODS
PRESENTED.
GOLDEN WEST UTILIZED A 52/53 WEEK YEAR ENDING IN DECEMBER. FOR ACCOUNTING
CONVENIENCE, THE ACCOMPANYING FINANCIAL STATEMENTS FOR 1993 AND 1992 HAVE NOT
BEEN ADJUSTED TO CONFORM GOLDEN WEST'S ACCOUNTING YEAR TO THE SEPTEMBER 30 YEAR
USED BY OAKWOOD. AMOUNTS SET FORTH IN THE ACCOMPANYING FINANCIAL STATEMENTS FOR
THE YEARS ENDED SEPTEMBER 30, 1993 AND 1992 REFLECT THE RESULTS OF OPERATIONS OF
OAKWOOD FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1993 AND 1992, RESPECTIVELY,
AND THE RESULTS OF OPERATIONS OF GOLDEN WEST FOR THE TWELVE MONTHS ENDED
DECEMBER 1993 AND 1992, RESPECTIVELY. AMOUNTS PRESENTED FOR THE YEAR ENDED
SEPTEMBER 30, 1994 REFLECT THE RESULTS OF OPERATIONS OF BOTH OAKWOOD AND GOLDEN
WEST FOR THE YEAR THEN ENDED. THE ACCOMPANYING BALANCE SHEET AT SEPTEMBER 30,
1994 REFLECTS THE COMBINED FINANCIAL POSITION OF OAKWOOD AND GOLDEN WEST AT THAT
DATE. THE ACCOMPANYING BALANCE SHEET AT SEPTEMBER 30, 1993 REFLECTS THE
FINANCIAL POSITION OF OAKWOOD AT THAT DATE AND THE FINANCIAL POSITION OF GOLDEN
WEST AT DECEMBER 25, 1993. ACCORDINGLY, GOLDEN WEST'S RESULTS OF OPERATIONS FOR
THE THREE MONTHS ENDED DECEMBER 25, 1993 HAVE BEEN REFLECTED IN THE ACCOMPANYING
FINANCIAL STATEMENTS FOR BOTH 1994 AND 1993, AND SUCH RESULTS OF OPERATIONS HAVE
BEEN REFLECTED AS A REDUCTION IN THE OPENING BALANCE OF RETAINED EARNINGS FOR
THE YEAR ENDED SEPTEMBER 30, 1994 IN THE ACCOMPANYING STATEMENT OF CHANGES IN
SHAREHOLDERS' EQUITY.
THE CONSOLIDATED FINANCIAL STATEMENTS INCLUDE THE ACCOUNTS OF OAKWOOD HOMES
CORPORATION AND ITS SUBSIDIARIES, INCLUDING GOLDEN WEST (COLLECTIVELY, THE
"COMPANY"). ALL SIGNIFICANT INTERCOMPANY TRANSACTIONS AND BALANCES HAVE BEEN
ELIMINATED IN CONSOLIDATION.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RETAIL FINANCING
A SUBSTANTIAL MAJORITY OF THE COMPANY'S RETAIL CUSTOMERS PURCHASE HOMES ON
CREDIT. SUCH CREDIT SALES ARE EVIDENCED BY INSTALLMENT SALE CONTRACTS OR
MORTGAGES ORIGINATED BY THE COMPANY'S FINANCE SUBSIDIARY, OAKWOOD ACCEPTANCE
CORPORATION, OR, TO A MUCH LESSER EXTENT, BY THIRD PARTY FINANCIAL INSTITUTIONS.
THE COMPANY FINANCES ITS LENDING ACTIVITIES BY SELLING INSTALLMENT SALE
CONTRACTS TO THIRD PARTY INVESTORS, ISSUING DEBT SECURED BY INSTALLMENT SALE
CONTRACTS, OR SECURITIZING THE INSTALLMENT SALE CONTRACTS USING REAL ESTATE
MORTGAGE INVESTMENT CONDUITS ("REMICS") OR, FOR FHA-INSURED INSTALLMENT SALE
CONTRACTS, USING COLLATERALIZED MORTGAGE OBLIGATIONS ISSUED UNDER AUTHORITY
GRANTED TO THE COMPANY BY THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ("GNMA").
ALL DEBT SECURED BY INSTALLMENT SALE CONTRACTS IS REFLECTED AS COLLATERALIZED
BORROWINGS. INSTALLMENT SALE CONTRACTS SOLD TO THIRD PARTY INVESTORS DIRECTLY OR
BY ISSUING GNMA CERTIFICATES ARE REFLECTED AS SALES OF RECEIVABLES. PRIOR TO
1993, SECURITIZATIONS OF INSTALLMENT SALE CONTRACTS THROUGH REMICS WERE REPORTED
AS COLLATERALIZED BORROWINGS. SECURITIZATIONS OF INSTALLMENT SALE CONTRACTS
THROUGH REMICS CONSUMMATED IN 1993 AND THEREAFTER HAVE BEEN REPORTED AS SALES OF
RECEIVABLES DUE TO THE REDUCED LEVELS OF OVERCOLLATERALIZATION REQUIRED IN THE
COMPANY'S SECURITIZATIONS. FOR REMIC SECURITIZATIONS ACCOUNTED FOR AS SALES OF
RECEIVABLES, THE COMPANY ALLOCATES THE SUM OF ITS BASIS IN THE INSTALLMENT SALE
CONTRACTS CONVEYED TO THE REMIC AND THE COSTS OF FORMING THE REMIC TRUST AMONG
THE REMIC INTERESTS RETAINED AND THE REMIC INTERESTS SOLD TO INVESTORS BASED
UPON THE ESTIMATED RELATIVE FAIR VALUES OF SUCH INTERESTS; COSTS OF MARKETING
REMIC INTERESTS SOLD ARE CHARGED TO EXPENSE AS INCURRED.
THE COMPANY HAS RETAINED AN INTEREST IN EACH REMIC TRUST USED TO SECURITIZE
INSTALLMENT SALE CONTRACTS. RETAINED INTERESTS IN REMIC SECURITIZATIONS
ACCOUNTED FOR AS SALES OF RECEIVABLES ARE INCLUDED IN RECEIVABLES IN THE
ACCOMPANYING BALANCE SHEET AND CARRIED AT AMORTIZED COST, WHICH
24 OAKWOOD HOMES
THE COMPANY BELIEVES IS NOT IN EXCESS OF THEIR FAIR MARKET VALUE.
THE AGGREGATE PRINCIPAL BALANCE OF INSTALLMENT SALE CONTRACTS SOLD TO THIRD
PARTIES, INCLUDING SECURITIZATION TRANSACTIONS IN WHICH THE COMPANY RETAINED AN
INTEREST, WAS APPROXIMATELY $380 MILLION IN 1994, $92 MILLION IN 1993 AND $34
MILLION IN 1992.
REVENUE RECOGNITION -- MANUFACTURED HOUSING
THE COMPANY RECORDS A RETAIL SALE UPON PASSAGE OF TITLE TO THE HOME TO THE
CUSTOMER AND, IN THE CASE OF CREDIT SALES, UPON EXECUTION OF THE CREDIT
AGREEMENT AND OTHER REQUIRED DOCUMENTATION AND RECEIPT OF A DESIGNATED MINIMUM
DOWN PAYMENT. HOMES SOLD TO INDEPENDENT DEALERS ARE MANUFACTURED TO ORDER; THE
COMPANY RECOGNIZES A SALE UPON COMPLETION AND TRANSFER OF TITLE TO THE HOME.
THE COMPANY RECEIVES AN AGENT'S COMMISSION ON INSURANCE POLICIES ISSUED BY
UNRELATED INSURANCE COMPANIES. INSURANCE COMMISSIONS ARE RECOGNIZED IN INCOME AT
THE TIME THE POLICIES ARE WRITTEN.
THE COMPANY RECEIVES AN ENDORSEMENT FEE FROM CERTAIN UNRELATED FINANCIAL
INSTITUTIONS IN EXCHANGE FOR GUARANTEEING INSTALLMENT SALE CONTRACTS SOLD TO
SUCH INSTITUTIONS. ENDORSEMENT FEES ARE RECOGNIZED ON THE EFFECTIVE YIELD METHOD
OVER THE LIFE OF THE RELATED INSTALLMENT SALE CONTRACTS; SUCH FEES RELATE
PRINCIPALLY TO CONTRACTS SOLD PRIOR TO 1990 WHEN THE COMPANY SUBSTANTIALLY
CEASED SELLING CONTRACTS ON A FULL RECOURSE BASIS.
REVENUE RECOGNITION -- FINANCIAL SERVICES
INTEREST INCOME ON INSTALLMENT SALE CONTRACTS IS RECOGNIZED IN ACCORDANCE WITH
THE TERMS OF THE INSTALLMENT SALE CONTRACTS (PRINCIPALLY 30 DAY ACCRUAL). THE
COMPANY RETAINS SERVICING RIGHTS FOR SUBSTANTIALLY ALL INSTALLMENT SALE
CONTRACTS IT ORIGINATES, EXCEPT FOR INSTALLMENT SALE CONTRACTS SOLD WITHOUT
RECOURSE. SERVICING FEE INCOME IS RECOGNIZED AS EARNED. INCOME ON RETAINED REMIC
INTERESTS IS RECORDED AS EARNED OVER THE PERIOD SUCH INTERESTS ARE OUTSTANDING.
THE COMPANY PERIODICALLY PURCHASES PORTFOLIOS OF INSTALLMENT SALE CONTRACTS.
THE COMPANY ADDS TO THE RESERVE FOR LOSSES ON CREDIT SALES AN ESTIMATE OF FUTURE
CREDIT LOSSES ON SUCH CONTRACTS AND INCLUDES SUCH AMOUNT AS A COMPONENT OF THE
PURCHASE PRICE OF THE ACQUIRED PORTFOLIOS. THE DIFFERENCE BETWEEN THE AGGREGATE
PURCHASE PRICE OF THE ACQUIRED PORTFOLIOS AND THE AGGREGATE PRINCIPAL BALANCE OF
THE LOANS INCLUDED THEREIN, REPRESENTING DISCOUNT OR PREMIUM ON THE LOANS, IS
AMORTIZED TO INCOME OVER THE LIFE OF THE LOANS USING THE EFFECTIVE YIELD METHOD.
INVENTORIES
INVENTORIES ARE VALUED AT THE LOWER OF COST OR MARKET, WITH COST DETERMINED
USING THE SPECIFIC IDENTIFICATION METHOD FOR NEW AND USED MANUFACTURED HOMES AND
THE FIRST-IN, FIRST-OUT METHOD FOR ALL OTHER ITEMS.
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT ARE CARRIED AT COST. THE COMPANY PROVIDES
DEPRECIATION USING PRINCIPALLY THE STRAIGHT-LINE METHOD OVER THE ASSETS'
ESTIMATED USEFUL LIVES, WHICH ARE AS FOLLOWS:
ESTIMATED
CLASSIFICATION USEFUL LIVES
LAND IMPROVEMENTS................................. 3-10 YEARS
BUILDINGS AND FIELD SALES OFFICES................. 8-50 YEARS
FURNITURE, FIXTURES AND EQUIPMENT................. 2-10 YEARS
LEASEHOLD IMPROVEMENTS............................ 3-10 YEARS
MANUFACTURED HOUSING COMMUNITIES.................. 10-20 YEARS
INCOME TAXES
EFFECTIVE OCTOBER 1, 1993 THE COMPANY (EXCEPT FOR GOLDEN WEST) ADOPTED
PROSPECTIVELY THE PROVISIONS OF STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO.
109, "ACCOUNTING FOR INCOME TAXES" ("FAS 109"), WHICH REQUIRES USE OF THE ASSET
AND LIABILITY METHOD TO ACCOUNT FOR DEFERRED INCOME TAXES. UNDER THE ASSET AND
LIABILITY METHOD, DEFERRED INCOME TAXES ARE PROVIDED ON THE TEMPORARY
DIFFERENCES BETWEEN THE FINANCIAL REPORTING AND INCOME TAX BASES OF THE
COMPANY'S ASSETS AND LIABILITIES USING ENACTED INCOME TAX RATES EXPECTED TO BE
IN EFFECT WHEN THE TEMPORARY DIFFERENCES REVERSE. PRIOR TO 1994, THE COMPANY
ACCOUNTED FOR INCOME TAXES USING THE DEFERRED METHOD. THE EXCESS OF THE
COMPANY'S AGGREGATE NET DEFERRED INCOME TAX ASSET AS OF OCTOBER 1, 1993,
COMPUTED USING THE ASSET AND LIABILITY METHOD, OVER THE AGGREGATE NET DEFERRED
INCOME TAX ASSET AS OF SEPTEMBER 30, 1993, COMPUTED USING THE DEFERRED METHOD,
WAS APPROXIMATELY $214,000 ($.01 PER SHARE) AND HAS BEEN REFLECTED AS A
REDUCTION IN THE PROVISION FOR INCOME TAXES FOR THE YEAR ENDED SEPTEMBER 30,
1994. GOLDEN WEST UTILIZED THE ASSET AND LIABILITY METHOD FOR ALL PERIODS
PRESENTED. THE COMPANY'S RESULTS OF OPERATIONS FOR 1993 AND 1992 WOULD NOT HAVE
BEEN MATERIALLY DIFFERENT HAD OAKWOOD ADOPTED THE ASSET AND LIABILITY METHOD AS
OF THE BEGINNING OF 1992.
RESERVE FOR LOSSES ON CREDIT SALES
THE COMPANY MAINTAINS RESERVES FOR ESTIMATED CREDIT LOSSES ON INSTALLMENT SALE
CONTRACTS OWNED BY THE COMPANY OR SOLD TO THIRD PARTIES WITH FULL OR LIMITED
RECOURSE. THE COMPANY PROVIDES FOR LOSSES ON CREDIT SALES IN AMOUNTS NECESSARY
TO MAINTAIN THE RESERVES AT AMOUNTS THE COMPANY BELIEVES ARE SUFFICIENT TO
PROVIDE FOR FUTURE LOSSES
OAKWOOD HOMES 25
BASED UPON THE COMPANY'S HISTORICAL LOSS EXPERIENCE, CURRENT ECONOMIC CONDITIONS
AND AN ASSESSMENT OF CURRENT PORTFOLIO PERFORMANCE MEASURES. ACTUAL REPOSSESSION
EXPERIENCE AND CHANGES IN ECONOMIC CONDITIONS AND PORTFOLIO PERFORMANCE MAY
RESULT IN ADJUSTMENTS TO THE RESERVE FOR LOSSES ON CREDIT SALES WHICH ARE NOT
RELATED TO CURRENT YEAR RETAIL CREDIT SALES.
EARNINGS PER SHARE
PRIMARY EARNINGS PER SHARE IS COMPUTED BY DIVIDING NET INCOME BY THE WEIGHTED
AVERAGE NUMBER OF COMMON AND DILUTIVE COMMON EQUIVALENT SHARES OUTSTANDING
DURING THE YEAR. THE WEIGHTED AVERAGE NUMBER OF SHARES USED IN THE COMPUTATION
OF PRIMARY EARNINGS PER SHARE WAS 22,067,000, 20,241,000 AND 14,756,000 IN 1994,
1993 AND 1992, RESPECTIVELY. FULLY DILUTED EARNINGS PER SHARE IS COMPUTED BY
DIVIDING NET INCOME, ADJUSTED FOR INTEREST ACCRUING ON THE CONVERTIBLE
SUBORDINATED DEBENTURES, NET OF INCOME TAXES, BY THE SUM OF THE WEIGHTED AVERAGE
NUMBER OF COMMON AND DILUTIVE COMMON EQUIVALENT SHARES OUTSTANDING AND THE
NUMBER OF COMMON SHARES INTO WHICH THE CONVERTIBLE SUBORDINATED DEBENTURES COULD
BE CONVERTED DURING PERIODS IN WHICH SUCH CONVERTIBLE SECURITIES WERE
OUTSTANDING. DURING 1993 THE COMPANY CALLED FOR REDEMPTION ALL OF THE
OUTSTANDING CONVERTIBLE SUBORDINATED DEBENTURES AS DESCRIBED IN NOTE 11. THE
WEIGHTED AVERAGE NUMBER OF SHARES USED IN THE COMPUTATION OF FULLY DILUTED
EARNINGS PER SHARE WAS 22,080,000, 21,102,000 AND 18,879,000 IN 1994, 1993 AND
1992, RESPECTIVELY. THE DILUTIVE EFFECT OF STOCK OPTIONS IS COMPUTED USING THE
TREASURY STOCK METHOD.
CASH AND CASH EQUIVALENTS
SHORT-TERM INVESTMENTS HAVING INITIAL MATURITIES OF THREE MONTHS OR LESS ARE
CONSIDERED CASH EQUIVALENTS.
NEW ACCOUNTING STANDARDS
IN NOVEMBER 1992 THE FINANCIAL ACCOUNTING STANDARDS BOARD (THE "BOARD")
ADOPTED STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 112, "EMPLOYERS'
ACCOUNTING FOR POSTEMPLOYMENT BENEFITS" ("FAS 112"), WHICH PROVIDES THAT
EMPLOYERS SHALL RECOGNIZE THE EXPECTED COST OF PROVIDING BENEFITS TO FORMER OR
INACTIVE EMPLOYEES AFTER EMPLOYMENT BUT PRIOR TO RETIREMENT DURING THE PERIODS
DURING WHICH SUCH EMPLOYEES RENDER SERVICES TO THE EMPLOYER IF CERTAIN
CONDITIONS ARE SATISFIED. THE COMPANY WILL ADOPT FAS 112 PROSPECTIVELY IN 1995,
BUT SUCH ADOPTION WILL NOT HAVE A MATERIAL EFFECT ON THE COMPANY'S FINANCIAL
CONDITION OR RESULTS OF OPERATIONS.
IN MAY 1993 THE BOARD ADOPTED STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO.
114, "ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN" ("FAS 114"), WHICH IS
EFFECTIVE FOR YEARS BEGINNING AFTER DECEMBER 15, 1994. THE COMPANY'S INSTALLMENT
SALE CONTRACTS ARE NOT INCLUDED WITHIN THE TECHNICAL SCOPE OF FAS 114; HOWEVER,
THE COMPANY INTENDS TO REEVALUATE ITS POLICIES WITH RESPECT TO THE RESERVE FOR
LOSSES ON CREDIT SALES IN LIGHT OF THE GUIDANCE CONTAINED IN FAS 114 AND MAKE
SUCH CHANGES, IF ANY, IN SUCH POLICIES AS IT DEEMS APPROPRIATE. BASED UPON
INFORMATION CURRENTLY AVAILABLE, THE COMPANY DOES NOT ANTICIPATE MAKING ANY
CHANGE IN ITS RESERVE POLICIES WHICH WOULD HAVE A MATERIAL EFFECT ON THE
COMPANY'S FINANCIAL CONDITION OR RESULTS OF OPERATIONS.
IN MAY 1993 THE BOARD ADOPTED STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO.
115, "ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES" ("FAS
115"), WHICH WILL REQUIRE THE COMPANY TO DETERMINE WHETHER ITS RETAINED
INTERESTS IN REMIC SECURITIZATIONS WILL BE CONSIDERED TO BE HELD TO MATURITY
(AND CARRIED AT AMORTIZED COST) OR AVAILABLE FOR SALE (AND CARRIED AT MARKET,
WITH UNREALIZED GAINS AND LOSSES REPORTED AS A SEPARATE COMPONENT OF
SHAREHOLDERS' EQUITY). SUCH RETAINED REMIC INTERESTS CURRENTLY ARE CARRIED AT
AMORTIZED COST. THE COMPANY WILL ADOPT FAS 115 PROSPECTIVELY IN 1995, BUT DOES
NOT EXPECT SUCH ADOPTION WILL HAVE A MATERIAL EFFECT ON THE COMPANY'S FINANCIAL
CONDITION OR RESULTS OF OPERATIONS.
26 OAKWOOD HOMES
NOTE 3 -- ACQUISITION OF GOLDEN WEST
ON SEPTEMBER 30, 1994 OAKWOOD COMPLETED ITS BUSINESS COMBINATION WITH GOLDEN
WEST. OAKWOOD ISSUED 612,857 SHARES OF ITS COMMON STOCK IN EXCHANGE FOR ALL THE
OUTSTANDING COMMON AND CONVERTIBLE PREFERRED STOCK OF GOLDEN WEST, AND
SUBSTITUTED OPTIONS TO ACQUIRE 87,116 SHARES OF OAKWOOD COMMON STOCK FOR
PREVIOUSLY GRANTED OPTIONS TO ACQUIRE GOLDEN WEST COMMON STOCK (AN EXCHANGE
RATIO OF APPROXIMATELY .23 OF AN OAKWOOD COMMON SHARE FOR EACH OUTSTANDING
GOLDEN WEST COMMON SHARE AND EACH RIGHT TO ACQUIRE A GOLDEN WEST COMMON SHARE).
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 OAKWOOD AND GOLDEN WEST FOR ALL PERIODS
PRESENTED, AS MORE FULLY DESCRIBED IN NOTE 1.
SUMMARY RESULTS OF OPERATIONS FOR OAKWOOD AND GOLDEN WEST ARE AS FOLLOWS:
1994 1993 1992
(IN THOUSANDS)
NET SALES
OAKWOOD............................................................................. $ 393,607 $260,877 $184,648
GOLDEN WEST......................................................................... 112,580 89,564 74,427
$ 506,187 $350,441 $259,075
INCOME BEFORE INCOME TAXES
OAKWOOD............................................................................. $ 51,068 $ 38,892 $ 21,371
GOLDEN WEST......................................................................... 2,855 1,139 119
$ 53,923 $ 40,031 $ 21,490
NET INCOME
OAKWOOD............................................................................. $ 32,202 $ 24,502 $ 14,015
GOLDEN WEST......................................................................... 1,712 653 33
$ 33,914 $ 25,155 $ 14,048
OAKWOOD INCURRED APPROXIMATELY $500,000 OF COSTS AND EXPENSES DIRECTLY RELATED
TO COMPLETING THE ACQUISITION. IN ADDITION, GOLDEN WEST INCURRED APPROXIMATELY
$800,000 OF COSTS RELATING TO COMPLETION OF THE ACQUISITION AND RELATING TO
GOLDEN WEST'S PLANNED INITIAL PUBLIC OFFERING OF COMMON STOCK, WHICH WAS
TERMINATED IN CONNECTION WITH THE BUSINESS COMBINATION WITH OAKWOOD. THE
AGGREGATE AMOUNT OF THESE COSTS OF APPROXIMATELY $1.3 MILLION ($973,000 NET OF
INCOME TAXES, OR $.04 PER SHARE) HAS BEEN CHARGED TO OPERATIONS IN THE FOURTH
QUARTER OF 1994 AND IS INCLUDED IN SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.
OAKWOOD HOMES 27
NOTE 4 -- RECEIVABLES
THE COMPONENTS OF RECEIVABLES ARE AS FOLLOWS:
1994 1993
(IN THOUSANDS)
WAREHOUSED INSTALLMENT SALE CONTRACTS................................................................... $137,146 $175,611
INSTALLMENT SALE CONTRACTS PLEDGED AS SECURITY FOR LONG-TERM DEBT OR OWNED BY REMIC TRUSTS ACCOUNTED FOR
AS COLLATERALIZED BORROWINGS.......................................................................... 197,865 244,540
RETAINED INTERESTS IN REMIC SECURITIZATIONS ACCOUNTED FOR AS SALES OF RECEIVABLES....................... 30,938 6,494
TRADE RECEIVABLES....................................................................................... 3,462 6,431
ACCRUED INTEREST........................................................................................ 3,975 4,269
OTHER................................................................................................... 7,685 4,666
LESS: RESERVE FOR UNCOLLECTIBLE RECEIVABLES............................................................. (13,859) (9,468)
$367,212 $432,543
ON NOVEMBER 16, 1994 THE COMPANY SOLD WAREHOUSED INSTALLMENT SALE CONTRACTS
HAVING AN AGGREGATE PRINCIPAL BALANCE OF APPROXIMATELY $129.1 MILLION VIA A
REMIC SECURITIZATION. INVESTORS PURCHASED 94% OF THE INTERESTS IN THE REMIC
TRUST FOR APPROXIMATELY $121.4 MILLION CASH AND THE COMPANY RETAINED A 6%
INTEREST IN THE TRUST.
THE COMPANY'S INSTALLMENT SALE CONTRACTS ARE LOCATED IN MORE THAN FORTY
STATES, WITH NORTH CAROLINA, SOUTH CAROLINA, VIRGINIA AND TEXAS ACCOUNTING FOR
THE MAJORITY OF THE CONTRACTS. BECAUSE OF THE NATURE OF THE COMPANY'S RETAIL
BUSINESS, INSTALLMENT CONTRACT RECEIVABLES ARE NOT CONCENTRATED WITH ANY SINGLE
CUSTOMER OR AMONG ANY GROUP OF CUSTOMERS.
TRADE RECEIVABLES REPRESENT AMOUNTS DUE FROM GOLDEN WEST'S INDEPENDENT
DEALERS, WHICH NUMBER APPROXIMATELY 170 AND WHICH ARE LOCATED PRINCIPALLY IN THE
PACIFIC NORTHWEST AND CALIFORNIA. GOLDEN WEST'S TWENTY-FIVE LARGEST DEALERS
COMPRISE APPROXIMATELY 60% OF GOLDEN WEST'S NET SALES.
THE ESTIMATED PRINCIPAL RECEIPTS FOR EACH OF THE NEXT FIVE YEARS UNDER
INSTALLMENT SALE CONTRACTS PLEDGED AS SECURITY FOR LONG-TERM DEBT OR OWNED BY
REMIC TRUSTS ACCOUNTED FOR AS COLLATERALIZED BORROWINGS ARE AS FOLLOWS. THE
PRINCIPAL PAYMENTS HAVE BEEN ESTIMATED BASED UPON THE SCHEDULED PAYMENTS UNDER
THE CONTRACTS AS WELL AS ANTICIPATED PREPAYMENTS.
FISCAL YEAR AMOUNT
(IN THOUSANDS)
1995 $ 27,974
1996 26,028
1997 24,273
1998 22,695
1999 21,280
NOTE 5 -- INVENTORIES
THE COMPONENTS OF INVENTORIES ARE AS FOLLOWS:
1994 1993
(IN THOUSANDS)
MANUFACTURED HOMES........................................................................................ $ 84,114 $53,666
WORK-IN-PROGRESS, MATERIALS AND SUPPLIES.................................................................. 10,757 7,031
LAND/HOMES UNDER DEVELOPMENT.............................................................................. 1,534 697
$ 96,405 $61,394
28 OAKWOOD HOMES
NOTE 6 -- PROPERTY, PLANT AND EQUIPMENT
THE COMPONENTS OF PROPERTY, PLANT AND EQUIPMENT ARE AS FOLLOWS:
1994 1993
(IN THOUSANDS)
LAND AND LAND IMPROVEMENTS.............................................................................. $ 13,812 $ 11,874
BUILDINGS AND FIELD SALES OFFICES....................................................................... 31,915 19,957
FURNITURE, FIXTURES AND EQUIPMENT....................................................................... 26,570 20,497
LEASEHOLD IMPROVEMENTS.................................................................................. 4,252 2,485
76,549 54,813
LESS: ACCUMULATED DEPRECIATION AND AMORTIZATION......................................................... (22,418) (18,858)
$ 54,131 $ 35,955
DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT WAS
APPROXIMATELY $4,249,000, $3,514,000 AND $3,372,000 IN 1994, 1993 AND 1992,
RESPECTIVELY.
NOTE 7 -- FINANCIAL SERVICES BUSINESSES
THE COMPANY'S FINANCIAL SERVICES BUSINESSES INCLUDE OAKWOOD ACCEPTANCE
CORPORATION ("OAC"), WHICH PURCHASES A SUBSTANTIAL PORTION OF THE INSTALLMENT
SALE CONTRACTS ORIGINATED BY THE COMPANY'S RETAIL OPERATIONS AND FROM TIME TO
TIME PURCHASES SEASONED PORTFOLIOS OF INSTALLMENT SALE CONTRACTS FROM THIRD
PARTIES. OAC SERVICES ALL THE INSTALLMENT SALES CONTRACTS IT ACQUIRES AND, TO A
LESSER EXTENT, SERVICES INSTALLMENT SALE CONTRACTS OWNED BY THIRD PARTIES WITH
RESPECT TO WHICH THE OWNER HAS FULL OR PARTIAL RECOURSE TO THE COMPANY FOR
CREDIT LOSSES. OAC RETAINS SERVICING ON SUBSTANTIALLY ALL INSTALLMENT SALE
CONTRACTS SOLD TO THIRD PARTIES OR USED TO COLLATERALIZE COMPANY DEBT. OAKWOOD
FUNDING CORPORATION ("OAKWOOD FUNDING") IS A SPECIAL-PURPOSE SUBSIDIARY OF OAC
WHICH HAS ISSUED NONRECOURSE NOTES SECURED BY SPECIFIC POOLS OF INSTALLMENT SALE
CONTRACTS. OAC ALSO ISSUES NOTES IN ITS OWN NAME SECURED BY INSTALLMENT SALE
CONTRACTS. OAKWOOD FINANCIAL CORPORATION ("OAKWOOD FINANCIAL") IS A SUBSIDIARY
OF OAKWOOD HOMES CORPORATION WHICH HOLDS THE COMPANY'S RETAINED INTERESTS IN
REMIC TRUSTS FORMED TO SECURITIZE INSTALLMENT SALE CONTRACTS. OAKWOOD LIFE LTD.
("OLL") REINSURES RISK ON CREDIT LIFE INSURANCE POLICIES WRITTEN BY AN UNRELATED
INSURANCE COMPANY IN CONNECTION WITH SALES OF COMPANY PRODUCTS.
CONDENSED FINANCIAL INFORMATION FOR THE COMPANY'S FINANCIAL SERVICES
BUSINESSES IS SET FORTH BELOW. THE RESULTS OF OPERATIONS AND FINANCIAL POSITION
OF THE COMPANY'S FINANCIAL SERVICES BUSINESSES REFLECT THE PROVISION FOR LOSSES
ON CREDIT SALES AND THE RESERVE FOR LOSSES ON CREDIT SALES FOR ALL PERIODS
PRESENTED. SUCH PROVISION AND A MAJORITY OF SUCH RESERVE WERE NOT PRESENTED AS
COMPONENTS OF THE COMPANY'S FINANCIAL SERVICES BUSINESSES IN AMOUNTS PREVIOUSLY
REPORTED FOR 1993 AND 1992.
STATEMENT OF INCOME 1994 1993 1992
(IN THOUSANDS)
REVENUES.............................................................................. $ 60,330 $ 50,051 $ 39,110
EXPENSES
PROVISION FOR LOSSES ON CREDIT SALES................................................ 9,044 6,945 5,049
INTEREST EXPENSE.................................................................... 32,066 30,541 26,087
OTHER............................................................................... 8,127 6,748 4,712
49,237 44,234 35,848
INCOME BEFORE INTERCOMPANY INTEREST ELIMINATION AND INCOME TAXES...................... 11,093 5,817 3,262
ADD: INTERCOMPANY INTEREST EXPENSE.................................................... 8,806 5,487 5,163
INCOME BEFORE INCOME TAXES............................................................ $ 19,899 $ 11,304 $ 8,425
OAKWOOD HOMES 29
BALANCE SHEET 1994 1993
(IN THOUSANDS)
INSTALLMENT SALE CONTRACTS............................................................ $ 321,409 $409,800
OTHER ASSETS.......................................................................... 54,098 27,817
TOTAL ASSETS..................................................................... $ 375,507 $437,617
SHORT-TERM BORROWINGS................................................................. $ 15,000 $ 18,800
NOTES AND BONDS PAYABLE............................................................... 155,709 211,027
UNEARNED INSURANCE PREMIUMS........................................................... 2,107 1,118
DUE TO AFFILIATES..................................................................... 155,530 181,122
RESERVE FOR CONTINGENT LIABILITIES.................................................... 3,827 3,009
OTHER LIABILITIES..................................................................... 1,330 5,621
PARENT COMPANY'S INVESTMENT........................................................... 42,004 16,920
TOTAL LIABILITIES AND PARENT COMPANY'S INVESTMENT................................ $ 375,507 $437,617
CONDENSED FINANCIAL INFORMATION FOR OAKWOOD HOMES CORPORATION WITH ITS
FINANCIAL SERVICES BUSINESSES ACCOUNTED FOR USING THE EQUITY METHOD IS AS
FOLLOWS:
STATEMENT OF INCOME 1994 1993 1992
(IN THOUSANDS)
REVENUES
NET SALES........................................................................... $506,187 $350,441 $259,075
EQUITY IN INCOME OF FINANCIAL SERVICES BUSINESSES................................... 19,899 11,304 8,425
OTHER INCOME........................................................................ 12,815 11,669 8,125
TOTAL REVENUES................................................................... 538,901 373,414 275,625
COSTS AND EXPENSES
COST OF SALES....................................................................... 364,416 253,465 189,665
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES........................................ 119,528 78,432 59,551
INTEREST EXPENSE.................................................................... 1,034 1,486 4,919
TOTAL COSTS AND EXPENSES......................................................... 484,978 333,383 254,135
INCOME BEFORE INCOME TAXES............................................................ 53,923 40,031 21,490
PROVISION FOR INCOME TAXES............................................................ 20,009 14,876 7,442
NET INCOME............................................................................ $ 33,914 $ 25,155 $ 14,048
BALANCE SHEET 1994 1993
(IN THOUSANDS)
CURRENT ASSETS
CASH AND CASH EQUIVALENTS........................................................... $ 9,833 $ 16,321
RECEIVABLES......................................................................... 9,602 10,277
INVENTORIES......................................................................... 96,405 61,394
PREPAID EXPENSES.................................................................... 2,333 2,399
TOTAL CURRENT ASSETS........................................................... 118,173 90,391
MANUFACTURED HOUSING COMMUNITIES...................................................... 8,766 4,088
PROPERTY, PLANT AND EQUIPMENT......................................................... 53,091 35,210
INVESTMENT IN AND ADVANCES TO FINANCIAL SERVICES BUSINESSES........................... 197,534 198,042
OTHER ASSETS.......................................................................... 19,270 17,267
$396,834 $344,998
CURRENT LIABILITIES
SHORT-TERM BORROWINGS............................................................... $ 10,000 $ 9,500
CURRENT MATURITIES OF LONG-TERM DEBT................................................ 814 833
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES............................................ 57,340 45,006
TOTAL CURRENT LIABILITIES...................................................... 68,154 55,339
NOTES AND BONDS PAYABLE............................................................... 50,909 51,055
OTHER LONG-TERM OBLIGATIONS........................................................... 6,860 2,381
SHAREHOLDERS' EQUITY.................................................................. 270,911 236,223
$396,834 $344,998
30 OAKWOOD HOMES
NOTE 8 -- ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
THE COMPONENTS OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES ARE AS FOLLOWS:
1994 1993
(IN THOUSANDS)
ACCOUNTS PAYABLE.......................................................................................... $30,476.. $ 25,021
ACCRUED COMPENSATION...................................................................................... 12,667 10,470
ACCRUED DEALER VOLUME BONUS............................................................................... 2,991 2,978
INCOME TAXES PAYABLE...................................................................................... 2,608 4,687
OTHER ACCRUED LIABILITIES................................................................................. 10,309 7,471
$ 59,051 $ 50,627
NOTE 9 -- RESERVE FOR LOSSES ON CREDIT SALES
AS DISCUSSED IN NOTE 2, THE COMPANY SELLS MANUFACTURED HOMES UNDER INSTALLMENT
SALE CONTRACTS, AND SUCH CONTRACTS ARE FINANCED BY SELLING THE CONTRACTS TO
THIRD PARTIES (GENERALLY ON A NONRECOURSE OR LIMITED RECOURSE BASIS), ISSUING
DEBT SECURED BY INSTALLMENT SALE CONTRACTS OR SECURITIZING THE INSTALLMENT SALE
CONTRACTS USING GNMA COLLATERALIZED MORTGAGE OBLIGATIONS (FOR FHA CONTRACTS) OR
REMIC TRUSTS.
FOR SALES OF CONTRACTS TO THIRD PARTIES, THE COMPANY RETAINS CREDIT RISK TO
THE EXTENT NEGOTIATED WITH THE PURCHASER OF THE CONTRACTS. SUBSTANTIALLY ALL THE
CONTRACTS INCLUDED IN THE COMPANY'S GNMA SECURITIZATIONS ARE COVERED BY FHA
INSURANCE WHICH LIMITS THE COMPANY'S RISK TO 10% OF ANY CREDIT LOSSES INCURRED
ON SUCH CONTRACTS. THE COMPANY ALSO RETAINS CREDIT RISK ON REMIC SECURITIZATIONS
BECAUSE THE RELATED TRUST AGREEMENTS PROVIDE THAT ALL LOSSES INCURRED ON REMIC
CONTRACTS ARE CHARGED TO REMIC INTERESTS RETAINED BY THE COMPANY UNTIL SUCH
RETAINED INTERESTS ARE EXHAUSTED BEFORE ANY LOSSES ARE CHARGED TO REMIC
INTERESTS SOLD TO THIRD PARTY INVESTORS. HOWEVER, THE COMPANY'S RISK ASSOCIATED
WITH NONRECOURSE DEBT SECURED BY INSTALLMENT SALE CONTRACTS AND WITH RETAINED
REMIC INTERESTS IS LIMITED TO THE COMPANY'S INVESTMENT IN THE UNDERLYING
COLLATERAL OR THE RETAINED REMIC INTERESTS. THE COMPANY RETAINS ALL OF THE
CREDIT RISK ASSOCIATED WITH INSTALLMENT SALE CONTRACTS USED TO SECURE DEBT
ISSUED BY THE COMPANY AND WITH RESPECT TO WHICH CREDITORS HAVE RECOURSE TO THE
GENERAL CREDIT OF THE COMPANY IN ADDITION TO THE COLLATERAL FOR THE
INDEBTEDNESS. THE COMPANY HAS RETAINED SERVICING ON ALL CONTRACTS IT HAS
ORIGINATED SINCE 1989 WITH RESPECT TO WHICH THE COMPANY HAS RETAINED ANY CREDIT
RISK. THIRD PARTIES SERVICE CERTAIN CONTRACTS SOLD TO UNRELATED PARTIES ON A
FULL OR LIMITED RECOURSE BASIS.
THE FOLLOWING TABLE SETS FORTH THE TRANSACTIONS REFLECTED IN THE RESERVE FOR
LOSSES ON CREDIT SALES ASSOCIATED WITH THE COMPANY'S RETAINED RISK ON
INSTALLMENT SALE CONTRACTS:
1994 1993 1992
(IN THOUSANDS)
BALANCE AT BEGINNING OF YEAR.................................................................. $12,477 $ 7,360 $ 6,550
PROVISION FOR LOSSES.......................................................................... 9,044 6,945 5,049
RESERVE RECORDED RELATED TO ACQUIRED PORTFOLIOS............................................... 1,000 1,500 --
LOSSES CHARGED TO THE RESERVE................................................................. (4,835) (3,328) (4,239)
BALANCE AT END OF YEAR........................................................................ $17,686 $12,477 $ 7,360
THE RESERVES FOR LOSSES ON CREDIT SALES ARE REFLECTED IN THE CONSOLIDATED
BALANCE SHEET AS FOLLOWS:
1994 1993
(IN THOUSANDS)
RESERVE FOR UNCOLLECTIBLE RECEIVABLES......................................................... $13,859 $ 9,468
RESERVE FOR CONTINGENT LIABILITIES............................................................ 3,827 3,009
$17,686 $12,477
OAKWOOD HOMES 31
THE COMPANY'S CONTINGENT LIABILITY AS GUARANTOR OF INSTALLMENT SALE CONTRACTS
SOLD TO THIRD PARTIES ON A RECOURSE BASIS WAS APPROXIMATELY $107 MILLION AS OF
SEPTEMBER 30, 1994. SUCH AMOUNT EXCLUDES REMIC SECURITIZATIONS ACCOUNTED FOR AS
SALES OF RECEIVABLES, FOR WHICH THE COMPANY'S CREDIT EXPOSURE IS LIMITED TO ITS
RETAINED INTERESTS IN THE REMIC TRUSTS (SEE NOTE 4).
GOLDEN WEST IS CONTINGENTLY LIABLE UNDER TERMS OF REPURCHASE AGREEMENTS WITH
FINANCIAL INSTITUTIONS PROVIDING INVENTORY FINANCING FOR RETAILERS OF GOLDEN
WEST'S 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. ALTHOUGH GOLDEN WEST IS CONTINGENTLY LIABLE UNDER THESE
AGREEMENTS, THE RISK OF LOSS IS SPREAD OVER NUMEROUS RETAILERS AND FINANCING
INSTITUTIONS AND IS FURTHER REDUCED BY THE RESALE VALUE OF REPURCHASED HOMES.
GOLDEN WEST ESTIMATES THAT ITS POTENTIAL OBLIGATIONS UNDER REPURCHASE AGREEMENTS
APPROXIMATED $24 MILLION AT SEPTEMBER 30, 1994. LOSSES UNDER THESE AGREEMENTS
HAVE NOT BEEN SIGNIFICANT.
NOTE 10 -- SHORT-TERM CREDIT FACILITIES
THE COMPANY HAS A $110 MILLION LINE OF CREDIT FACILITY WITH A GROUP OF
COMMERCIAL BANKS SECURED BY WAREHOUSED INSTALLMENT SALE CONTRACTS, WITH INTEREST
PAYABLE AT EITHER LIBOR PLUS 1.625% OR PRIME. THE COMPANY HAS A $50 MILLION LINE
OF CREDIT WITH A COMMERCIAL BANK SECURED BY MANUFACTURED HOUSING INVENTORY WITH
INTEREST PAYABLE AT EITHER LIBOR PLUS 1.75% OR PRIME. IN ADDITION, THE COMPANY
HAS A $5 MILLION UNSECURED LINE OF CREDIT WITH A COMMERCIAL BANK BEARING
INTEREST AT PRIME.
NOTE 11 -- NOTES AND BONDS PAYABLE
THE COMPONENTS OF NOTES AND BONDS PAYABLE ARE AS FOLLOWS:
1994 1993
(IN THOUSANDS)
9% RESET DEBENTURES DUE 2007................................................................................ $ 23,000 $ 23,000
9.125% RESET DEBENTURES DUE 2007............................................................................ 17,000 17,000
INDUSTRIAL REVENUE BONDS DUE IN INSTALLMENTS THROUGH 2011, WITH INTEREST AT A VARIABLE RATE (4.2% AND 3.6%
AT SEPTEMBER 30, 1994 AND SEPTEMBER 30, 1993, RESPECTIVELY)............................................... 5,100 5,100
INDUSTRIAL REVENUE BOND DUE IN INSTALLMENTS THROUGH 2001, WITH INTEREST PAYABLE AT 73% OF THE LENDER'S PRIME
RATE...................................................................................................... 2,450 2,525
MORTGAGE NOTES AT INTEREST RATES RANGING FROM 8% TO 9%, PAYABLE IN VARYING INSTALLMENTS THROUGH 2006........ 3,195 2,335
NOTE PAYABLE IN INSTALLMENTS THROUGH NOVEMBER 1998, PLUS INTEREST AT PRIME PLUS .75%........................ 977 1,150
ESOP NOTE PAYABLE IN QUARTERLY INSTALLMENTS PLUS INTEREST AT 9.2%, PREPAID IN 1994.......................... -- 779
NOTES COLLATERALIZED BY INSTALLMENT CONTRACTS
NONRECOURSE NOTES ISSUED BY OAKWOOD FUNDING CORPORATION, PAYABLE IN MONTHLY INSTALLMENTS THROUGH JUNE
2001, WITH INTEREST PAYABLE AT AN AVERAGE RATE OF 8.99%
(9.09% AT SEPTEMBER 30, 1993).......................................................................... 54,784 74,999
FIXED RATE NOTES PAYABLE IN QUARTERLY INSTALLMENTS THROUGH OCTOBER 1998, WITH INTEREST PAYABLE AT AN
AVERAGE RATE OF 10.1% (8.77% AT SEPTEMBER 30, 1993).................................................... 11,101 29,415
NONRECOURSE REMIC TRUST 1992-1 CERTIFICATES PAYABLE IN MONTHLY INSTALLMENTS THROUGH JANUARY 2001 WITH
INTEREST AT 8.86%...................................................................................... 15,676 18,788
NONRECOURSE REMIC TRUST 1990 SUBORDINATED CERTIFICATES PAYABLE IN INSTALLMENTS BEGINNING IN APRIL 1995,
WITH INTEREST PAYABLE AT 10.1%......................................................................... 15,123 15,123
VARIABLE RATE TERM LOANS PAYABLE IN EQUAL MONTHLY INSTALLMENTS THROUGH JUNE 2000, WITH INTEREST PAYABLE AT
PRIME OR LIBOR PLUS 2% TO PRIME PLUS .5%............................................................... 25,963 32,693
NONRECOURSE REMIC TRUST 1991-1 CERTIFICATES PAYABLE IN MONTHLY INSTALLMENTS THROUGH NOVEMBER 1999 WITH
INTEREST AT AN AVERAGE RATE OF 9.5%.................................................................... 10,313 13,472
NONRECOURSE SUBORDINATED NOTE WITH INTEREST PAYABLE MONTHLY AT 10.5%, AMORTIZING IN 1998 THROUGH 2003..... 12,954 12,954
NONRECOURSE SUBORDINATED NOTE PAYABLE WITH INTEREST PAYABLE MONTHLY AT 12.58%, AMORTIZING IN 1997 THROUGH
2001................................................................................................... 8,350 8,350
NONRECOURSE REMIC TRUST 1988-1 CERTIFICATES PAYABLE IN MONTHLY INSTALLMENTS THROUGH MARCH 1995 WITH
INTEREST PAYABLE AT 10.1%.............................................................................. 1,446 5,232
$ 207,432 $ 262,915
32 OAKWOOD HOMES
THE INTEREST RATES ON THE RESET DEBENTURES WILL RESET ON JUNE 1, 1997 AND JUNE
1, 2002 TO A RATE TO BE DETERMINED BY THE COMPANY IN ITS SOLE DISCRETION. THE
RESET DEBENTURES ARE REDEEMABLE AT PAR AT THE OPTION OF THE HOLDERS THEREOF UPON
THE OCCURRENCE OF CERTAIN EVENTS, THE MOST SIGNIFICANT OF WHICH, GENERALLY,
INVOLVE A SUBSTANTIAL RECAPITALIZATION OF THE COMPANY, MERGER OR CONSOLIDATION
OF THE COMPANY, OR ACQUISITION OF MORE THAN 30% OF THE BENEFICIAL OWNERSHIP IN
THE COMPANY BY ANY PERSON. IN ADDITION, THE HOLDERS OF THE RESET DEBENTURES MAY
CALL FOR THEIR REDEMPTION AS OF EITHER INTEREST RESET DATE. THE RESET DEBENTURES
ARE CALLABLE AT THE OPTION OF THE COMPANY AT 102% OF PAR BEGINNING JUNE 1, 1994,
101% OF PAR BEGINNING JUNE 1, 1995 AND AT PAR BEGINNING JUNE 1, 1996.
THE PAYMENT OF NOTES COLLATERALIZED BY INSTALLMENT CONTRACTS RECEIVABLE AND
REMIC CERTIFICATES GENERALLY IS BASED ON THE SCHEDULED MONTHLY PAYMENT AND
ACTUAL PREPAYMENTS OF PRINCIPAL ON THE INSTALLMENT CONTRACTS COLLATERALIZING THE
NOTES OR HELD BY THE REMIC TRUSTS. UNDER THE PROVISIONS OF CERTAIN NOTE
AGREEMENTS AND THE TRUST INDENTURES OF EACH REMIC TRUST, THE NOTES AND REMIC
CERTIFICATES ARE SECURED SOLELY BY THE UNDERLYING COLLATERAL, WHICH CONSISTS
PRINCIPALLY OF INSTALLMENT SALE CONTRACTS COLLATERALIZING THE DEBT OR HELD BY
THE REMIC TRUSTS. SUCH COLLATERAL HAD AN AGGREGATE CARRYING VALUE OF
APPROXIMATELY $201 MILLION AT SEPTEMBER 30, 1994.
THE COMPANY CALLED FOR REDEMPTION ITS 6.5% AND 7.5% CONVERTIBLE DEBENTURES IN
NOVEMBER AND DECEMBER 1992, RESPECTIVELY. OF THE OUTSTANDING PRINCIPAL BALANCE
AT THE REDEMPTION DATE, APPROXIMATELY $44.9 MILLION WAS CONVERTED INTO 3,827,410
COMMON SHARES AND $.4 MILLION WAS REDEEMED FOR CASH. PRIMARY EARNINGS PER SHARE,
COMPUTED ASSUMING THE CONVERTIBLE DEBENTURES HAD BEEN CONVERTED INTO COMMON
STOCK AS OF THE BEGINNING OF 1993, WOULD HAVE BEEN $1.20 PER SHARE.
IN CONNECTION WITH THE ISSUANCE OF CERTAIN INDEBTEDNESS, THE COMPANY INCURRED
CERTAIN COSTS WHICH ARE BEING AMORTIZED OVER THE LIFE OF THE RELATED OBLIGATIONS
USING THE EFFECTIVE YIELD METHOD. THE UNAMORTIZED PORTION OF THESE COSTS, WHICH
IS INCLUDED IN OTHER ASSETS, WAS APPROXIMATELY $4,014,000 AND $5,322,000 AT
SEPTEMBER 30, 1994 AND 1993, RESPECTIVELY.
INTEREST PAID BY THE COMPANY WAS APPROXIMATELY $23,777,000 IN 1994,
$26,298,000 IN 1993 AND $24,528,000 IN 1992.
LAND, LAND IMPROVEMENTS, BUILDINGS AND EQUIPMENT WITH A NET BOOK VALUE OF
APPROXIMATELY $13 MILLION ARE PLEDGED AS COLLATERAL AGAINST THE PAYMENT OF THE
MORTGAGE NOTES AND INDUSTRIAL REVENUE BONDS. THE $5,100,000 INDUSTRIAL REVENUE
BONDS ARE ALSO SECURED BY A LETTER OF CREDIT PROVIDED BY A MAJOR BANK THROUGH
1996.
PRINCIPAL PAYMENTS UNDER LONG-TERM DEBT FOR EACH OF THE NEXT FIVE YEARS ARE
SET FORTH IN THE FOLLOWING TABLE. PRINCIPAL PAYMENTS ON THE NOTES COLLATERALIZED
BY INSTALLMENT SALE CONTRACTS AND ON REMIC CERTIFICATES HAVE BEEN ESTIMATED
BASED UPON SCHEDULED PRINCIPAL PAYMENTS AND ANTICIPATED PREPAYMENTS TO BE
RECEIVED ON THE UNDERLYING INSTALLMENT SALE CONTRACTS.
FISCAL YEAR AMOUNT
(IN THOUSANDS)
1995 $34,374
1996 31,653
1997 27,193
1998 21,332
1999 16,657
VARIOUS OF THE COMPANY'S DEBT AGREEMENTS AND INSTALLMENT SALE CONTRACT
SERVICING AGREEMENTS CONTAIN COVENANTS WHICH, AMONG OTHER THINGS, REQUIRE THE
COMPANY AND/OR OAC TO MAINTAIN CERTAIN MINIMUM FINANCIAL RATIOS. THE COMPANY AND
OAC WERE IN COMPLIANCE WITH ALL SUCH COVENANTS AT SEPTEMBER 30, 1994.
OAKWOOD HOMES 33
NOTE 12 -- OTHER INCOME
THE COMPONENTS OF OTHER INCOME ARE AS FOLLOWS:
1994 1993 1992
(IN THOUSANDS)
INSURANCE COMMISSIONS.......................................................................... $ 7,012 $ 4,618 $2,874
ENDORSEMENT FEES............................................................................... 1,172 1,482 1,782
INVESTMENT INCOME.............................................................................. 1,044 980 811
GAIN ON SALE OF MANUFACTURED HOUSING COMMUNITIES............................................... -- 1,636 --
OTHER.......................................................................................... 3,344 2,762 2,536
$12,572 $11,478 $8,003
IN THE FOURTH QUARTER OF 1993 THE COMPANY SOLD THREE MANUFACTURED HOUSING
COMMUNITIES IN WHICH IT HELD AN INTEREST AND REALIZED A NET GAIN AFTER INCOME
TAXES OF APPROXIMATELY $1 MILLION ($.05 PER SHARE).
NOTE 13 -- INCOME TAXES
THE COMPONENTS OF THE PROVISION FOR INCOME TAXES ARE AS FOLLOWS:
1994 1993 1992
(IN THOUSANDS)
CURRENT
FEDERAL...................................................................................... $23,404 $17,410 $7,697
STATE........................................................................................ 2,018 1,480 394
25,422 18,890 8,091
DEFERRED
FEDERAL...................................................................................... (5,078) (3,517) (616)
STATE........................................................................................ (335) (497) (33)
(5,413) (4,014) (649)
$20,009 $14,876 $7,442
A RECONCILIATION OF THE STATUTORY FEDERAL INCOME TAX RATE TO THE COMPANY'S
EFFECTIVE INCOME TAX RATE FOLLOWS:
1994 1993 1992
STATUTORY FEDERAL INCOME TAX RATE.............................................................. 35% 35% 34%
STATE INCOME TAXES, LESS FEDERAL INCOME TAX BENEFIT............................................ 2 2 1
37% 37% 35%
34 OAKWOOD HOMES
THE COMPONENTS OF THE DEFERRED INCOME TAX BENEFIT ARE AS FOLLOWS:
1994 1993 1992
(IN THOUSANDS)
DIFFERENCE BETWEEN FINANCIAL REPORTING AND INCOME TAX:
INCOME RECOGNITION ON SALES TREATED AS INSTALLMENT SALES FOR INCOME
TAX PURPOSES................................................................................. $ (152) $ (313) $(455)
DEPRECIATION EXPENSE............................................................................ 933 (1,295) 24
PROVISION FOR LOSSES ON CREDIT SALES............................................................ (1,682) (1,663) (302)
ACCRUED LIABILITIES............................................................................. (1,782) (595) (153)
OTHER........................................................................................... (2,730) (148) 237
$(5,413) $(4,014) $(649)
THE TAX EFFECTS OF TEMPORARY DIFFERENCES AT YEAR END ARE AS FOLLOWS (1993
BALANCES ARE AS OF THE OCTOBER 1, 1993 ADOPTION OF FAS 109 -- SEE NOTE 2):
1994 1993
(IN THOUSANDS)
DEFERRED INCOME TAX ASSETS
RESERVE FOR LOSSES ON CREDIT SALES.............................................................. $ 6,578 $ 4,896
ACCRUED LIABILITIES............................................................................. 3,341 1,604
NET OPERATING LOSS CARRYFORWARDS................................................................ 2,100 2,431
INVENTORIES..................................................................................... 413 239
ALTERNATIVE MINIMUM TAX CREDIT CARRYFORWARD..................................................... 341 226
OTHER........................................................................................... 622 55
GROSS DEFERRED INCOME TAX ASSETS................................................................ 13,395 9,451
DEFERRED INCOME TAX LIABILITIES
DEPRECIATION.................................................................................... 2,001 1,056
INSTALLMENT SALES............................................................................... 475 627
DISCOUNTS ON ACQUIRED PORTFOLIOS................................................................ 426 600
FINANCING COSTS................................................................................. 414 831
OTHER........................................................................................... 576 1,417
GROSS DEFERRED INCOME TAX LIABILITIES........................................................... 3,892 4,531
VALUATION ALLOWANCE FOR DEFERRED INCOME TAX ASSETS........................................... (2,100) (2,431)
NET DEFERRED INCOME TAX ASSET................................................................... $ 7,403 $ 2,489
NET OPERATING LOSS CARRYFORWARDS RELATE TO PRE-ACQUISITION PERIODS OF GOLDEN
WEST. DURING 1994 THE COMPANY REALIZED AN INCOME TAX BENEFIT OF APPROXIMATELY
$697,000 FROM THE UTILIZATION OF SUCH CARRYFORWARDS, WHICH HAS BEEN ACCOUNTED
FOR AS A REDUCTION IN THE EXCESS OF COST OVER THE FAIR VALUE OF NET ASSETS
ACQUIRED. AT SEPTEMBER 30, 1994 THE REMAINING NET OPERATING LOSS CARRYFORWARD IS
APPROXIMATELY $6,200,000 FOR FEDERAL INCOME TAX PURPOSES. UTILIZATION OF SUCH
CARRYFORWARD IS DEPENDENT UPON THE REALIZATION OF TAXABLE INCOME BY GOLDEN WEST
AND SUCH UTILIZATION IS LIMITED TO A MAXIMUM OF APPROXIMATELY $775,000 ANNUALLY
THROUGH 2002.
INCOME TAX PAYMENTS WERE APPROXIMATELY $24,844,000, $13,818,000 AND $8,139,000
IN 1994, 1993 AND 1992, RESPECTIVELY.
OAKWOOD HOMES 35
NOTE 14 -- SHAREHOLDERS' EQUITY
IN JANUARY 1993 THE COMPANY SOLD 2,875,000 SHARES OF ITS COMMON STOCK IN A
PUBLIC OFFERING, THE NET PROCEEDS OF WHICH WERE APPROXIMATELY $53.6 MILLION.
THE COMPANY HAS ADOPTED A SHAREHOLDER PROTECTION RIGHTS PLAN (THE "PLAN") TO
PROTECT SHAREHOLDERS AGAINST UNSOLICITED ATTEMPTS TO ACQUIRE CONTROL OF THE
COMPANY THAT DO NOT OFFER WHAT THE COMPANY BELIEVES TO BE AN ADEQUATE PRICE TO
ALL SHAREHOLDERS. UNDER THE PLAN EACH OUTSTANDING SHARE OF THE COMPANY'S COMMON
STOCK HAS ASSOCIATED WITH IT A RIGHT TO PURCHASE (THE "RIGHTS"), UPON THE
OCCURRENCE OF CERTAIN EVENTS, ONE TWO-HUNDREDTH OF A SHARE OF JUNIOR
PARTICIPATING CLASS A PREFERRED STOCK ("PREFERRED STOCK") AT AN EXERCISE PRICE
OF $40. THE RIGHTS WILL BECOME EXERCISABLE ONLY IF A PERSON OR GROUP, WITHOUT
THE COMPANY'S CONSENT, COMMENCES A TENDER OR EXCHANGE OFFER FOR, OR ACQUIRES 20%
OR MORE OF THE VOTING POWER OF, THE COMPANY.
IN THE EVENT THAT A PERSON OR GROUP ACQUIRES 20% OR MORE OF THE COMPANY'S
VOTING POWER WITHOUT THE COMPANY'S CONSENT (THE "ACQUIRING PERSON"), EACH HOLDER
OF A RIGHT, OTHER THAN THE ACQUIRING PERSON, WILL BE ENTITLED TO ACQUIRE, UPON
PAYMENT
OF THE EXERCISE PRICE, THAT NUMBER OF SHARES OF THE COMPANY'S COMMON STOCK
HAVING A MARKET VALUE OF TWICE THE EXERCISE PRICE. SIMILARLY, IF, WITHOUT THE
COMPANY'S CONSENT, THE COMPANY IS ACQUIRED IN A MERGER OR OTHER BUSINESS
COMBINATION TRANSACTION, EACH HOLDER OF A RIGHT WILL BE ENTITLED TO ACQUIRE
VOTING SHARES OF THE ACQUIRING COMPANY HAVING A VALUE OF TWICE THE EXERCISE
PRICE. THE RIGHTS MAY BE REDEEMED AT A PRICE OF $.01 PER RIGHT BY THE COMPANY AT
ANY TIME PRIOR TO ANY PERSON OR GROUP ACQUIRING 20% OR MORE OF THE COMPANY'S
VOTING POWER OR CERTAIN OTHER TRIGGERING EVENTS AND WILL EXPIRE ON AUGUST 22,
2001.
THE COMPANY'S AUTHORIZED CAPITAL STOCK INCLUDES 500,000 SHARES OF $100 PAR
VALUE PREFERRED STOCK. THE PREFERRED STOCK MAY BE ISSUED IN ONE OR MORE SERIES
WITH SUCH TERMS, PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS AS THE BOARD OF
DIRECTORS SHALL DETERMINE. NO OAKWOOD PREFERRED STOCK HAS BEEN ISSUED.
IN NOVEMBER 1993 GOLDEN WEST REDEEMED FOR $1,150,000 CASH ITS PREVIOUSLY
OUTSTANDING SERIES B PREFERRED STOCK. THE EXCESS OF THE STATED VALUE OF THE
SERIES B PREFERRED STOCK OVER THE REDEMPTION PRICE HAS BEEN REFLECTED AS
ADDITIONAL PAID-IN CAPITAL IN THE ACCOMPANYING FINANCIAL STATEMENTS.
36 OAKWOOD HOMES
NOTE 15 -- EMPLOYEE BENEFIT PLANS
OAKWOOD MAINTAINS A COMBINATION NONCONTRIBUTORY PROFIT-SHARING AND EMPLOYEE
STOCK OWNERSHIP PLAN ("ESOP") AND A 401(K) PLAN IN WHICH SUBSTANTIALLY ALL
OAKWOOD EMPLOYEES WHO HAVE MET CERTAIN AGE AND SERVICE REQUIREMENTS MAY
PARTICIPATE. CONTRIBUTIONS TO THE PROFIT-SHARING AND EMPLOYEE STOCK OWNERSHIP
PLAN ARE DETERMINED AT THE DISCRETION OF THE COMPENSATION COMMITTEE OF THE BOARD
OF DIRECTORS. EMPLOYEE CONTRIBUTIONS TO THE 401(K) PLAN ARE LIMITED TO A
PERCENTAGE OF THEIR BASE COMPENSATION, AS DEFINED IN THE PLAN, AND ARE MATCHED
BY THE COMPANY ON A SLIDING SCALE SUBJECT TO CERTAIN LIMITATIONS.
IN 1992 OAKWOOD'S EMPLOYEE STOCK OWNERSHIP PLAN BORROWED APPROXIMATELY $1.2
MILLION FROM A FINANCIAL SERVICES FIRM TO PURCHASE 87,450 SHARES OF THE
COMPANY'S COMMON STOCK ON THE OPEN MARKET. THE NOTE WAS GUARANTEED BY THE
COMPANY AND ACCORDINGLY WAS REFLECTED AS A NOTE PAYABLE AND A REDUCTION OF
SHAREHOLDERS' EQUITY IN THE ACCOMPANYING CONSOLIDATED BALANCE SHEET PRIOR TO ITS
PREPAYMENT IN 1994. BENEFIT EXPENSE ASSOCIATED WITH CONTRIBUTIONS TO THE ESOP IS
DETERMINED USING THE ALLOCATED SHARES METHOD.
GOLDEN WEST MAINTAINS A 401(K) PLAN SIMILAR TO OAKWOOD'S 401(K) PLAN AS WELL
AS AN EMPLOYEE STOCK OWNERSHIP PLAN. GOLDEN WEST SHARES HELD BY THE EMPLOYEE
STOCK OWNERSHIP PLAN WERE EXCHANGED FOR OAKWOOD COMMON SHARES IN CONNECTION WITH
THE ACQUISITION OF GOLDEN WEST.
COMPANY CONTRIBUTION EXPENSE FOR THESE PLANS WAS APPROXIMATELY $2,241,000,
$1,004,000 AND $708,000 IN 1994, 1993 AND 1992, RESPECTIVELY.
NOTE 16 -- STOCK OPTION AND AWARD PLANS
THE COMPANY HAS ADOPTED THE 1990 LONG-TERM PERFORMANCE PLAN UNDER WHICH
1,687,500 SHARES OF THE COMPANY'S COMMON STOCK WERE RESERVED FOR ISSUANCE TO KEY
EMPLOYEES. AWARDS OR GRANTS UNDER THE PLAN MAY BE MADE IN THE FORM OF INCENTIVE
AND NONQUALIFIED STOCK OPTIONS, STOCK APPRECIATION RIGHTS, RESTRICTED STOCK AND
RESTRICTED UNIT GRANTS, AND PERFORMANCE EQUITY AND PERFORMANCE UNIT GRANTS.
THE COMPANY ALSO HAS ADOPTED THE 1990 DIRECTOR STOCK OPTION PLAN UNDER WHICH
112,500 SHARES OF THE COMPANY'S COMMON STOCK WERE RESERVED FOR GRANT TO
NON-EMPLOYEE DIRECTORS OF THE COMPANY. THE EXERCISE PRICE OF OPTIONS GRANTED IS
THE FAIR MARKET VALUE OF THE COMPANY'S COMMON STOCK ON THE DATE OF GRANT.
OPTIONS GRANTED UNDER THE PLAN ARE EXERCISABLE SIX MONTHS FROM THE DATE OF GRANT
AND EXPIRE 10 YEARS FROM THE DATE OF GRANT.
THE COMPANY HAS A 1985 NONQUALIFIED STOCK OPTION PLAN UNDER WHICH 585,937
SHARES OF THE COMPANY'S COMMON STOCK WERE RESERVED FOR ISSUANCE TO KEY
EMPLOYEES. THE PLAN AUTHORIZES TWO TYPES OF OPTIONS - BOOK VALUE STOCK OPTIONS
AND FAIR MARKET VALUE STOCK OPTIONS. THE EXERCISE PRICE OF BOOK VALUE STOCK
OPTIONS IS THE UNDILUTED BOOK VALUE PER COMMON SHARE AS OF THE MOST RECENT
QUARTER END PRIOR TO THE DATE OF EXERCISE. FAIR MARKET VALUE STOCK OPTIONS MAY
BE GRANTED WITH AN EXERCISE PRICE OF NOT LESS THAN 100% OF THE FAIR MARKET VALUE
OF THE COMPANY'S COMMON STOCK ON THE DATE OF GRANT. WHEN EXERCISING A BOOK VALUE
STOCK OPTION, AN EMPLOYEE IS ENTITLED TO RECEIVE A LOAN FROM THE COMPANY FOR THE
EXERCISE AMOUNT PLUS, AT THE DISCRETION OF THE BOARD OF DIRECTORS, AN AMOUNT
EQUAL TO ANY TAXES PAYABLE BY SUCH EMPLOYEES AS A RESULT OF SUCH EXERCISE.
COMPENSATION EXPENSE UNDER THESE PLANS AMOUNTED TO $619,000, $1,086,000 AND
$295,000 IN 1994, 1993 AND 1992, RESPECTIVELY.
OAKWOOD HOMES 37
THE FOLLOWING TABLE SUMMARIZES THE CHANGES IN THE NUMBER OF SHARES UNDER
OPTION PURSUANT TO THE PLANS DESCRIBED ABOVE AND PURSUANT TO CERTAIN EAR-
LIER PLANS (INCLUDING GOLDEN WEST'S STOCK OPTION PLAN) UNDER WHICH OPTIONS MAY
NO LONGER BE GRANTED:
NUMBER PER SHARE
OF SHARES OPTION PRICE
OUTSTANDING AT SEPTEMBER 30, 1991..................................... 1,452,390 $2.38-$8.76
GRANTED............................................................... 765,509 9.38-13.63
EXERCISED............................................................. (257,379 ) 2.38-8.19
OUTSTANDING AT SEPTEMBER 30, 1992..................................... 1,960,520 3.24-13.63
GRANTED............................................................... 109,034 9.38-25.50
EXERCISED............................................................. (431,526 ) 3.47-11.94
TERMINATED............................................................ (61,202 ) 8.76-9.38
OUTSTANDING AT SEPTEMBER 30, 1993..................................... 1,576,826 3.24-25.50
GRANTED............................................................... 216,000 23.07-29.44
EXERCISED............................................................. (144,378 ) 3.47-22.19
TERMINATED............................................................ (14,500 ) 22.19-23.50
OUTSTANDING AT SEPTEMBER 30, 1994..................................... 1,633,948 3.24-29.44
EXERCISABLE AT SEPTEMBER 30, 1994..................................... 747,621 3.24-25.50
SHARES RESERVED FOR FUTURE GRANT:
SEPTEMBER 30, 1993............................................... 914,654
SEPTEMBER 30, 1994............................................... 673,154
NOTE 17 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
THE COMPANY'S ESTIMATE OF THE FAIR VALUES OF ITS FINANCIAL INSTRUMENTS AS OF
SEPTEMBER 30, 1994 AND 1993 ARE SET FORTH IN THE TABLE BELOW, TOGETHER WITH THE
INSTRUMENTS' HISTORICAL CARRYING VALUES, IF ANY, AS REFLECTED IN THE
CONSOLIDATED BALANCE SHEET.
THE COMPANY HAS ESTIMATED THE FAIR VALUE OF RECEIVABLES BY DISCOUNTING THE
ESTIMATED FUTURE CASH FLOWS RELATING THERETO USING INTEREST RATES WHICH, IN THE
CASE OF INSTALLMENT SALE CONTRACTS, APPROXIMATE THE INTEREST RATES CHARGED BY
OAC AS OF YEAR END FOR LOANS OF SIMILAR CHARACTER AND DURATION. THE FAIR VALUE
OF RETAINED REMIC INTERESTS IS DEPENDENT UPON A PROSPECTIVE INVESTOR'S
EXPECTATIONS CONCERNING THE TIMING AND AMOUNT OF PREPAYMENTS AND DEFAULTS ON THE
UNDERLYING REMIC ASSETS, THE ANTICIPATED SEVERITY OF LOSSES TO BE INCURRED ON
DEFAULTED ASSETS, THE AMOUNT OF ANY CREDIT ENHANCEMENT FOR THE REMIC INTERESTS
(WHICH, IN THE COMPANY'S CASE, GENERALLY CONSISTS OF RESERVE FUNDS AND, IN
CERTAIN CASES, SUBORDINATION OF THE SERVICING FEE) AND THE INVESTOR'S ASSESSMENT
OF THE APPROPRIATE DISCOUNT RATE TO BE APPLIED TO THE CASH FLOWS RELATING TO THE
ASSET. IN ESTIMATING THE FAIR VALUE OF RETAINED REMIC INTERESTS UPON THE
CREATION OF THE REMIC AND SALE OF A PORTION OF THE INTERESTS TO INVESTORS, THE
COMPANY USES ESTIMATES OF THE ABOVE FACTORS WHICH MANAGEMENT BELIEVES TO BE
CONSERVATIVE AND WHICH ARE CONSISTENT WITH ESTIMATES USED BY MANAGEMENT IN
DEVELOPING ITS BIDS ON SIMILAR ASSETS AND WHOLE LOANS OFFERED FOR SALE TO THE
COMPANY. WHILE THE LACK OF UNIFORM VALUATION METHODOLOGIES FOR THESE ASSETS
INTRODUCES A GREATER LEVEL OF SUBJECTIVITY IN ESTIMATING THEIR FAIR VALUE THAN
IS THE CASE WITH CERTAIN OTHER ASSETS, MANAGEMENT BELIEVES THAT THE FAIR VALUE
OF THE COMPANY'S RETAINED REMIC INTERESTS APPROXIMATES THEIR CARRYING VALUE.
38 OAKWOOD HOMES
MANAGEMENT ESTIMATED THE FAIR VALUE OF DEBT OBLIGATIONS BY DISCOUNTING THE
ESTIMATED FUTURE CASH FLOWS ASSOCIATED WITH THOSE OBLIGATIONS USING INTEREST
RATES CURRENTLY OFFERED TO THE COMPANY FOR
BORROWINGS HAVING SIMILAR CHARACTER, COLLATERAL AND DURATION, OR IN THE CASE OF
THE COMPANY'S OUTSTANDING RESET DEBENTURES, BY REFERENCE TO QUOTED MARKET
PRICES.
1994 1993
ESTIMATED ESTIMATED
FAIR CARRYING FAIR CARRYING
VALUE AMOUNT VALUE AMOUNT
(IN THOUSANDS)
CASH AND CASH EQUIVALENTS............................................. $ 12,573 $12,573 $ 26,335 $26,335
RECEIVABLES:
FIXED RATE INSTALLMENT SALE CONTRACTS............................... 327,414 320,398 421,087 403,836
VARIABLE RATE INSTALLMENT SALE CONTRACTS............................ 16,553 14,613 18,632 16,315
RETAINED INTERESTS IN REMIC SECURITIZATIONS......................... 30,938 30,938 6,494 6,494
TRADE RECEIVABLES................................................... 3,462 3,462 6,431 6,431
OTHER RECEIVABLES................................................... 11,660 11,660 8,935 8,935
LESS: RESERVE FOR UNCOLLECTIBLE RECEIVABLES......................... -- (13,859 ) -- (9,468 )
SHORT-TERM BORROWINGS................................................. 25,000 25,000 28,300 28,300
NOTES AND BONDS PAYABLE:
FIXED RATE OBLIGATIONS.............................................. 173,072 172,057 234,785 216,302
VARIABLE RATE OBLIGATIONS........................................... 35,375 35,375 46,613 46,613
OAKWOOD HOMES 39
NOTE 18 -- QUARTERLY FINANCIAL DATA (UNAUDITED)
QUARTERLY FINANCIAL INFORMATION FOR FISCAL 1994 AND 1993 APPEARS ON PAGE 13.
THE ACCOMPANYING FINANCIAL STATEMENTS FOR 1993 AND 1992 HAVE BEEN RETROACTIVELY
RESTATED TO REFLECT THE COMBINED RESULTS OF OPERATIONS AND FINANCIAL POSITION OF
OAK-
WOOD AND GOLDEN WEST, AS MORE FULLY DESCRIBED IN NOTE 1. A RECONCILIATION OF
CERTAIN INTERIM FINANCIAL INFORMATION FOR 1994 AND 1993, WHICH INCLUDES BOTH
OAKWOOD AND GOLDEN WEST, TO AMOUNTS PREVIOUSLY REPORTED BY OAKWOOD FOLLOWS.
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER YEAR
(IN THOUSANDS EXCEPT PER SHARE DATA)
1994
NET SALES
OAKWOOD, AS PREVIOUSLY REPORTED...................................... $71,030 $86,449 $115,313 $120,815 $393,607
GOLDEN WEST.......................................................... 25,286 25,228 30,283 31,783 112,580
COMBINED.......................................................... $96,316 $111,677 $145,596 $152,598 $506,187
TOTAL REVENUES
OAKWOOD, AS PREVIOUSLY REPORTED...................................... $87,674 $104,416 $133,586 $139,960 $465,636
GOLDEN WEST.......................................................... 25,324 25,329 30,632 32,168 113,453
COMBINED.......................................................... $112,998 $129,745 $164,218 $172,128 $579,089
GROSS PROFIT
OAKWOOD, AS PREVIOUSLY REPORTED...................................... $21,874 $25,992 $34,657 $36,185 $118,708
GOLDEN WEST.......................................................... 5,025 4,657 6,301 7,080 23,063
COMBINED.......................................................... $26,899 $30,649 $40,958 $43,265 $141,771
NET INCOME
OAKWOOD, AS PREVIOUSLY REPORTED...................................... $ 6,314 $ 7,278 $ 9,195 $ 9,415 $32,202
GOLDEN WEST.......................................................... 320 182 806 404 1,712
COMBINED.......................................................... $ 6,634 $ 7,460 $10,001 $ 9,819 $33,914
EARNINGS PER SHARE
PRIMARY
OAKWOOD, AS PREVIOUSLY REPORTED................................... $ .30 $ .34 $ .43 $ .44 $ 1.51
EFFECT OF GOLDEN WEST............................................. -- -- .02 .01 .03
AS ADJUSTED..................................................... $ .30 $ .34 $ .45 $ .45 $ 1.54
FULLY DILUTED
OAKWOOD, AS PREVIOUSLY REPORTED................................... $ .30 $ .34 $ .43 $ .44 $ 1.51
EFFECT OF GOLDEN WEST............................................. -- -- .02 .01 .03
AS ADJUSTED..................................................... $ .30 $ .34 $ .45 $ .45 $ 1.54
40 OAKWOOD HOMES
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER YEAR
(IN THOUSANDS EXCEPT PER SHARE DATA)
1993
NET SALES
OAKWOOD, AS PREVIOUSLY REPORTED...................................... $42,857 $54,032 $73,611 $90,377 $260,877
GOLDEN WEST.......................................................... 17,726 22,598 23,954 25,286 89,564
COMBINED.......................................................... $60,583 $76,630 $97,565 $115,663 $350,441
TOTAL REVENUES
OAKWOOD, AS PREVIOUSLY REPORTED...................................... $56,428 $67,980 $89,251 $108,652 $322,311
GOLDEN WEST.......................................................... 17,752 22,613 23,970 25,324 89,659
COMBINED.......................................................... $74,180 $90,593 $113,221 $133,976 $411,970
GROSS PROFIT
OAKWOOD, AS PREVIOUSLY REPORTED...................................... $13,072 $16,506 $22,791 $28,291 $80,660
GOLDEN WEST.......................................................... 2,813 3,850 4,628 5,025 16,316
COMBINED.......................................................... $15,885 $20,356 $27,419 $33,316 $96,976
NET INCOME
OAKWOOD, AS PREVIOUSLY REPORTED...................................... $ 3,693 $ 5,073 $ 6,924 $ 8,812 $24,502
GOLDEN WEST.......................................................... (197 ) 101 429 320 653
COMBINED.......................................................... $ 3,496 $ 5,174 $ 7,353 $ 9,132 $25,155
EARNINGS PER SHARE
PRIMARY
OAKWOOD, AS PREVIOUSLY REPORTED................................... $ .25 $ .25 $ .33 $ .41 $ 1.26
EFFECT OF GOLDEN WEST............................................. (.03 ) -- -- .01 (.02 )
AS ADJUSTED..................................................... $ .22 $ .25 $ .33 $ .42 $ 1.24
FULLY DILUTED
OAKWOOD, AS PREVIOUSLY REPORTED................................... $ .21 $ .25 $ .33 $ .41 $ 1.22
EFFECT OF GOLDEN WEST............................................. (.02 ) (.01 ) -- .01 (.02 )
AS ADJUSTED..................................................... $ .19 $ .24 $ .33 $ .42 $ 1.20
THE SUM OF QUARTERLY EARNINGS PER SHARE AMOUNTS FOR 1993 DO NOT EQUAL EARNINGS
PER SHARE FOR THE YEAR DUE TO THE OFFERING OF COMMON SHARES AND CHANGES IN THE
MARKET PRICE OF THE COMPANY'S COMMON STOCK DURING THE YEAR.
AMOUNTS SHOWN FOR THE FOURTH QUARTER OF 1994 INCLUDE A ONE-TIME CHARGE OF
APPROXIMATELY $1.3 MILLION ($973,000 AFTER INCOME TAXES, OR $.04 PER SHARE) FOR
COSTS RELATING TO THE ACQUISITION OF GOLDEN WEST. AMOUNTS SHOWN FOR THE FOURTH
QUARTER OF 1993 INCLUDE A GAIN ON SALE OF MANUFACTURED HOUSING COMMUNITIES OF
APPROXIMATELY $1.6 MILLION ($1 MILLION AFTER INCOME TAXES, OR $.05 PER SHARE).
NOTE 19 -- BUSINESS SEGMENT INFORMATION
BUSINESS SEGMENT INFORMATION FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED
SEPTEMBER 30, 1994 APPEARS ON PAGE 19.
OAKWOOD HOMES 41
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
OAKWOOD HOMES CORPORATION
IN OUR OPINION, BASED UPON OUR AUDITS AND THE REPORT OF OTHER
AUDITORS, THE ACCOMPANYING CONSOLIDATED BALANCE SHEET AND THE
RELATED CONSOLIDATED STATEMENTS OF INCOME, OF CASH FLOWS AND OF
CHANGES IN SHAREHOLDERS' EQUITY PRESENT FAIRLY, IN ALL MATERIAL
RESPECTS, THE FINANCIAL POSITION OF OAKWOOD HOMES CORPORATION
AND ITS SUBSIDIARIES AT SEPTEMBER 30, 1994 AND 1993, AND THE
RESULTS OF THEIR OPERATIONS AND THEIR CASH FLOWS FOR EACH OF THE
THREE YEARS IN THE PERIOD ENDED SEPTEMBER 30, 1994, IN
CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. THESE
FINANCIAL STATEMENTS ARE THE RESPONSIBILITY OF THE COMPANY'S
MANAGEMENT; OUR RESPONSIBILITY IS TO EXPRESS AN OPINION ON THESE
FINANCIAL STATEMENTS BASED ON OUR AUDITS. WE DID NOT AUDIT THE
FINANCIAL STATEMENTS OF GOLDEN WEST HOMES, A WHOLLY-OWNED
SUBSIDIARY, WHICH STATEMENTS REFLECT TOTAL ASSETS OF $27,545,000
AT DECEMBER 25, 1993 AND TOTAL REVENUES OF $89,564,000 AND
$74,427,000 FOR THE YEARS ENDED DECEMBER 25, 1993 AND DECEMBER
26, 1992, RESPECTIVELY (SEE NOTE 1). THOSE STATEMENTS WERE
AUDITED BY OTHER AUDITORS, WHOSE REPORT THEREON HAS BEEN
FURNISHED TO US, AND OUR OPINION EXPRESSED HEREIN, INSOFAR AS IT
RELATES TO THE AMOUNTS INCLUDED FOR GOLDEN WEST HOMES, IS BASED
SOLELY ON THE REPORT OF THE OTHER AUDITORS. WE CONDUCTED OUR
AUDITS OF THESE STATEMENTS IN ACCORDANCE WITH GENERALLY ACCEPTED
AUDITING STANDARDS WHICH REQUIRE THAT WE PLAN AND PERFORM THE
AUDIT TO OBTAIN REASONABLE ASSURANCE ABOUT WHETHER THE FINANCIAL
STATEMENTS ARE FREE OF MATERIAL MISSTATEMENT. AN AUDIT INCLUDES
EXAMINING, ON A TEST BASIS, EVIDENCE SUPPORTING THE AMOUNTS AND
DISCLOSURES IN THE FINANCIAL STATEMENTS, ASSESSING THE
ACCOUNTING PRINCIPLES USED AND SIGNIFICANT ESTIMATES MADE BY
MANAGEMENT, AND EVALUATING THE OVERALL FINANCIAL STATEMENT
PRESENTATION. WE BELIEVE THAT OUR AUDITS AND THE REPORT OF OTHER
AUDITORS PROVIDE A REASONABLE BASIS FOR THE OPINION EXPRESSED
ABOVE.
PRICE WATERHOUSE LLP
WINSTON-SALEM, NORTH CAROLINA
NOVEMBER 1, 1994, EXCEPT AS TO NOTE 4,
WHICH IS AS OF NOVEMBER 16, 1994
42 OAKWOOD HOMES
COMMON STOCK PRICES
1994 1993 1992
QUARTER ENDED HIGH LOW HIGH LOW HIGH LOW
DECEMBER 31 28 5/8 22 5/8 21 3/8 13 11 7 5/8
MARCH 31 29 3/4 20 3/8 23 1/2 17 1/2 16 1/2 10 1/8
JUNE 30 23 3/4 19 1/4 21 1/4 17 1/4 15 3/4 10 1/8
SEPTEMBER 30 29 1/8 22 3/8 26 1/8 20 3/4 15 10 1/2
1991 1990
QUARTER ENDED HIGH LOW HIGH LOW
DECEMBER 31 6 4 1/8 4 1/8 3 1/4
MARCH 31 9 5/8 5 3/4 4 1/8 3 3/8
JUNE 30 10 1/8 6 3/4 6 3/8 4
SEPTEMBER 30 9 3/8 6 7/8 6 3/8 4 1/8
DIVIDEND INFORMATION
CASH
DIVIDENDS
QUARTER ENDED 1994 1993
DECEMBER 31 $.02 $.02
MARCH 31 .02 .02
JUNE 30 .02 .02
SEPTEMBER 30 .02 .02
NOTES
OAKWOOD HOMES 43
TWENTY-ONE YEAR REVIEW
OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
FOR THE YEAR ENDED SEPTEMBER 30,
(IN THOUSANDS EXCEPT PER SHARE DATA) 1994 (1) 1993 (2) 1992 1991 1990
OPERATIONS
REVENUES
NET SALES $506,187 $350,441 $259,075 $199,555 $192,299
FINANCIAL SERVICES INCOME 60,330 50,051 39,110 28,976 21,861
ENDORSEMENT FEES 1,172 1,482 1,782 2,397 2,754
INSURANCE COMMISSIONS 7,012 4,618 2,874 3,028 2,630
OTHER INCOME 3,344 4,398 2,536 2,092 2,448
NET INCOME $ 33,914 $ 25,155 $ 14,048 $ 9,111 $ 7,167
PER SHARE DATA
EARNINGS -- PRIMARY $ 1.54 $ 1.24 $ .95 $ .74 $ .68
EARNINGS -- FULLY DILUTED $ 1.54 $ 1.20 $ .86 $ .68 $ .63
CASH DIVIDENDS $ .08 $ .08 $ .06 $ .05 $ .04
FINANCIAL POSITION
TOTAL ASSETS $575,187 $584,573 $448,634 $367,278 $293,391
NOTES AND BONDS PAYABLE $207,432 $262,915 $295,257 $233,435 $191,255
(1) INCLUDES A ONE-TIME CHARGE OF APPROXIMATELY $1.3 MILLION ($973,000 AFTER
TAXES, OR $.04 PER SHARE) FOR COSTS RELATING TO THE ACQUISITION OF GOLDEN WEST
HOMES.
(2) INCLUDES A GAIN OF APPROXIMATELY $1.6 MILLION ($1 MILLION AFTER TAXES, OR
$.05 PER SHARE) FROM THE SALE OF MANUFACTURED HOUSING COMMUNITIES.
44 OAKWOOD HOMES
SHAREHOLDER INFORMATION GUIDE
DIRECTORS
RALPH L. DARLING
ELECTED 1971
CHAIRMAN OF THE BOARD,
OAKWOOD HOMES CORPORATION
NICHOLAS J. ST. GEORGE
ELECTED 1972
PRESIDENT AND CHIEF EXECUTIVE
OFFICER,
OAKWOOD HOMES CORPORATION
ROBERT D. HARVEY, SR.
ELECTED 1984
EXECUTIVE VICE PRESIDENT,
OAKWOOD HOMES CORPORATION
A. STEVEN MICHAEL
ELECTED 1992
EXECUTIVE VICE PRESIDENT AND
CHIEF OPERATING OFFICER
OAKWOOD HOMES CORPORATION
CLARENCE W. WALKER*
ELECTED 1971
PARTNER, KENNEDY COVINGTON
LOBDELL & HICKMAN, L.L.P.
ATTORNEYS AT LAW
S. GRAY STEIFEL, JR.*
ELECTED 1977
PRESIDENT, STEIFEL MATTRESS COMPANY, INC.
KERMIT G. PHILLIPS, II*
ELECTED 1979
CHAIRMAN, PHILLIPS MANAGEMENT
GROUP, INC. (REAL ESTATE
DEVELOPMENT AND MANAGEMENT)
DENNIS I. MEYER(|)
ELECTED 1983
PARTNER, BAKER & MCKENZIE,
ATTORNEYS AT LAW
H. MICHAEL WEAVER(|)
ELECTED 1991
CHAIRMAN, W. H. WEAVER
CONSTRUCTION COMPANY (REAL
ESTATE DEVELOPMENT AND
MANAGEMENT)
SABIN C. STREETER(|)
ELECTED 1993
MANAGING DIRECTOR,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
FRANCIS T. VINCENT, JR.(|)
ELECTED 1993
PRIVATE INVESTOR
*MEMBER OF THE AUDIT COMMITTEE
(|)MEMBER OF THE COMPENSATION COMMITTEE
OFFICERS
RALPH L. DARLING
CHAIRMAN OF THE BOARD
NICHOLAS J. ST. GEORGE
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
A. STEVEN MICHAEL
EXECUTIVE VICE PRESIDENT AND
CHIEF OPERATING OFFICER
C. MICHAEL KILBOURNE
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
DOUGLAS R. MUIR
SENIOR VICE PRESIDENT,
SECRETARY AND TREASURER
JEFFREY D. MICK
SENIOR VICE PRESIDENT AND
CONTROLLER
J. MICHAEL STIDHAM
EXECUTIVE VICE PRESIDENT
SALES AND MARKETING
OAKWOOD MOBILE HOMES, INC.
ROBERT D. HARVEY, SR.
EXECUTIVE VICE PRESIDENT
MANUFACTURING
LARRY T. GILMORE
EXECUTIVE VICE PRESIDENT
CONSUMER FINANCE
OAKWOOD ACCEPTANCE CORPORATION
HARRY E. KARSTEN, JR.
PRESIDENT
GOLDEN WEST HOMES
JAMES D. CASTERLINE
SENIOR VICE PRESIDENT
COMMUNITIES DEVELOPMENT
OAKWOOD LAND DEVELOPMENT CORPORATION
MAILING ADDRESS
OAKWOOD HOMES CORPORATION
2225 SOUTH HOLDEN ROAD
POST OFFICE BOX 7386
GREENSBORO, NORTH CAROLINA
27417-0386
(910) 855-2400
LEGAL COUNSEL
KENNEDY COVINGTON LOBDELL &
HICKMAN, L.L.P.
ATTORNEYS AT LAW
CHARLOTTE, NORTH CAROLINA
INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
WINSTON-SALEM, NORTH CAROLINA
TRANSFER AGENT AND REGISTRAR
WACHOVIA BANK OF NORTH
CAROLINA, N.A.
WINSTON-SALEM, NORTH CAROLINA
SECURITIES EXCHANGE LISTING
NEW YORK STOCK EXCHANGE
TICKER SYMBOL -- OH
NUMBER OF SHAREHOLDERS OF RECORD
1,157 AS OF DECEMBER 2, 1994.
CASH DIVIDENDS
CASH DIVIDENDS ON OAKWOOD COMMON STOCK HAVE BEEN PAID FOR 19 CONSECUTIVE YEARS.
CASH DIVIDENDS ARE ORDINARILY PAID ON OR ABOUT THE END OF NOVEMBER, FEBRUARY,
MAY AND AUGUST.
SHAREHOLDER INQUIRIES
INQUIRIES BY SHAREHOLDERS AND SECURITIES ANALYSTS SHOULD BE DIRECTED TO DOUGLAS
R. MUIR,
SENIOR VICE PRESIDENT
(910) 855-2360
ANNUAL MEETING
THE ANNUAL MEETING OF OAKWOOD HOMES CORPORATION WILL BE HELD AT 2 P.M. ON
WEDNESDAY,
FEBRUARY 1, 1995.
10-K REPORT
THE CORPORATION WILL PROVIDE WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM
10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1994 AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION UPON RECEIPT OF A WRITTEN REQUEST. THIS REQUEST SHOULD
BE ADDRESSED TO THE CORPORATE SECRETARY, P.O. BOX 7386, GREENSBORO, NORTH
CAROLINA 27417-0386.