MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
RESULTS OF OPERATIONS
During fiscal 1996 the Company once again reported record revenues and
earnings. Total revenues increased 19% to $974 million from $821 million last
year, following a 24% increase in 1995 from the $665 million reported for 1994.
Net income rose 51% in 1996 to $68.3 million compared to pro forma net income of
$45.3 million in 1995 and $35.7 million in 1994.
Industry shipments grew for the fifth consecutive year in 1996. According
to industry sources, shipments of manufactured homes were up approximately 9%
for the first nine months of calendar 1996, and increased 12% in calendar 1995
over 1994. Oakwood's growth far surpassed the industry, as new retail unit sales
grew by 20% in fiscal 1996 and 28% in fiscal 1995.
The following table summarizes certain key sales statistics for each of the
last three fiscal years:
1996 1995 1994
Retail sales (in millions) 703.2 $ 544.6 $ 384.8
Wholesale sales (in millions) 137.0 $ 185.6 $ 201.5
Other sales-principally relating
to communities (in millions) 21.9 $ 11.3 $ 8.8
T otal sales (in millions) 862.1 $ 741.5 $ 595.1
Gross profit %-
integrated operations 31.8% 29.6% 30.5%
Gross profit %-
wholesale operations 18.0% 18.7% 17.4%
New single-section
homes sold-retail 13,639 12,073 9,715
New multi-section
homes sold-retail 6,488 4,638 3,319
Used homes sold-retail 1,908 1,940 1,675
New single-section
homes sold-wholesale 1,334 2,168 2,360
New multi-section
homes sold-wholesale 3,890 4,923 5,671
Average new single-section
sales price-retail $27,700 $25,900 $23,900
Average new multi-section
sales price-retail $47,900 $46,500 $42,800
Average new single-section
sales price-wholesale $14,200 $14,100 $11,200
Average new multi-section
sales price-wholesale $29,800 $31,200 $30,900
Weighted average retail sales
centers open during the year 227 178 136
Average new home sales
per sales center 89 94 96
Average dollar sales
per sales center (in millions) 3.1 $ 3.1 $ 2.8
1996 COMPARED TO 1995
Retail sales dollar volume increased 29%, reflecting a 20% increase in new
home volume, an increase in the percentage of multi-section homes sold and
increases of 7% and 3% in the average new home sales prices of single-section
and multi-section homes, respectively. New home volume rose primarily due to a
28% increase in the weighted average number of sales centers open during the
year. Average new home sales per sales center decreased slightly, reflect-ing
the rapid pace of retail expansion during fiscal 1996, in which the Company
added 57 new sales centers compared to 46 centers in fiscal 1995. New sales
centers typically require a period of several months to reach normalized unit
sales levels. Because the Company plans to open approximately 45 to 50 new sales
centers annually over the next several years, management does not expect any
significant increase in the average number of new homes sold per sales center
over the near term. The increase in average selling prices is principally due to
product mix. Although average new home sales per center declined, average dollar
sales per center were constant due to the increased significance of multi-
section homes in the retail unit mix. Retail sales of multi-section homes
accounted for 32% of new home unit sales in 1996 versus 28% in 1995. Total new
home sales dollars at sales centers open more than one year rose 6% in 1996.
Wholesale sales dollar volume (which represents sales by Golden West and
Destiny to independent dealers) declined 26%, substantially all of which was due
to lower volume. The decline in wholesale unit volume reflects execution of the
Company's strategy of changing the distribution of products produced by Golden
West and Destiny from independent dealers to company-owned retail sales centers.
In 1996, 34% of Golden West's and Destiny's shipments were to Oakwood sales
centers, compared to only 8% in 1995. Shipments to Oakwood sales centers from
Golden West and Destiny are not included in the wholesale dollar sales and unit
sales in the table to the left. Management expects Golden West's and Destiny's
unit sales to Oakwood to continue to increase in future years. As the Company
establishes additional company-owned retail centers in Golden West and Destiny
markets, the decline in sales to wholesale dealers will continue.
Gross profit margin-integrated operations reflects the retail gross profit
earned on retail sales as well as the manufacturing gross profit on retail sales
of homes manufactured by the Company. Gross profit margins-integrated operations
increased to 31.8% in 1996 from 29.6% in fiscal 1995. The increase in gross
margin reflects improved sourcing of retail unit sales from company-owned
manufacturing plants. Approximately 90% of the total new home retail sales
volume was manufactured by the Company in fiscal 1996 compared to 76% in 1995.
Manufacturing production increased 12% over 1995, and improved manufacturing
margins, particularly at newer plants, contributed to the increase in gross
margins overall.
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Wholesale gross profit margins decreased to 18.0% in 1996 from 18.7% last
year. The decrease in margins is primarily due to start-up costs incurred in a
plant expansion at the Albany, Oregon facility, which increased capacity by
approximately 40% during the first quarter of fiscal 1996. For the full year,
production at the Albany plant rose 22% from the level in 1995, and 74% of
Albany's 1996 production was sold at wholesale. Decreasing wholesale margins
also reflect the effects of a shift in Golden West's product mix toward lower
price point homes which typically carry lower margins because they are ordered
with fewer high margin option packages.
Financial services income increased 49% to $92.3 million from $62.0 million
last year. Interest income earned on loans held for investment and on loans held
for sale prior to securitization decreased from $38.2 million in 1995 to $34.6
million in 1996. This decrease reflects the amortization of and prepayments on
loans held for investment, a decrease in the average balance of loans held for
sale resulting from more frequent loan securitization, and a decrease in the
average yield on these assets as older, higher-yielding loans are liquidated.
The Company is selling via securitiza-tion substantially all the loans it
originates, and accordingly interest income should continue to decline as the
remaining loans held for investment are liquidated. Loan servicing fees
increased from $12.2 million in 1995 to $15.9 million in 1996, reflecting the
increased size of the Company's securitized loan servicing portfolio. REMIC
residual income increased from $7.2 million to $16.2 million, reflecting the
shift in the Company's financing strategy toward secu-ritization of its loans
from holding loans for investment. Other financial services revenues, which
consist principally of credit life insurance premiums, miscellaneous fees and
other income, increased to $6.4 million from $3.6 million, and reflect the
increasing size of the Company's loan servicing portfolio.
Financial services income for 1996 and 1995 also includes gains of
approximately $19.4 million and $776,000, respectively, from the sale of asset-
backed securities. The substantially increased gains in 1996 resulted from a
widening of the excess servicing spread in two securitizations due to a bond
market rally, improved credit ratings assigned to the securities sold, and a
reduction in the credit spread over treasurys demanded by purchasers of the
securities. In addition, the shift in the Company's sales mix toward multi-
section homes has resulted in multi-section loans comprising a larger percentage
of the assets sold. Multi-section loans have longer average terms and lower
anticipated credit losses than loans for single-section homes, which contribute
to the value of residual interest in securitizations. Finally, the Company has
experienced a continuing decline in its transaction costs, reflecting
competitive conditions on Wall Street and the Company's increased experience in
securitizing loans in the public market. Except for the spread widening
resulting from the bond market rally, which will recur irregularly, management
believes that the other factors giving rise to the gain will continue to affect
its future securitizations on a regular basis, and accordingly believes that
gains on asset securitizations will be a recurring element of the Company's
earnings stream. In addition to the gains recorded on the closing dates of
securitizations, the Company expects to earn future income from its investment
in the residual REMIC interests in these transactions, consistent with its
securitizations closed in prior years. Financial services income for 1996 also
includes a $1.4 million non-recurring gain on the resecuritization of
approximately $32 million of subordinated REMIC securities.
The Company estimates the fair value of retained residual interests in
REMIC securitizations based upon default, credit loss, voluntary pre-payment and
interest rate assumptions which management believes market participants would
use for similar instruments; management believes these assumptions are
conservative. Such estimated fair values have a direct impact on the magnitude
of the gain or loss recorded on the sale of asset-backed securities. The actual
rate of voluntary prepayments and the amount and timing of credit losses affect
the Company's yield on retained REMIC residual interests and the fair value of
such interests in periods subsequent to the securitization. For the year ended
September 30, 1996, total credit losses on loans originated by the Company,
including losses relating to securitized assets, loans held for investment,
loans held for sale and loans sold with full or partial recourse, amounted to
approximately 1.01% of the average principal balance of the related loans,
compared to approximately .75% in 1995. The increase in net credit losses is due
principally to higher numbers of defaulted loans rather than to decreased
recovery rates on defaults. To counteract this trend, the Company has tightened
underwriting standards and focused additional emphasis on closing retail sales
with relatively higher credit quality customers. Continuation of this trend
could result in lower yields on retained REMIC residual interests and reduced
gains on future securitizations.
The majority of the 9% increase in other income is related to increased
insurance commissions resulting from the increase in retail home sales.
Non-financial selling, general and administrative expenses rose to 24.6% of
net sales compared to 22.3% of net sales last year. The percentage increase
reflects in part the integration of Destiny and Golden West, whose general and
administrative expenses are increasingly spread over the Company's retail sales
volume as the Company reduces wholesale sales to non-exclusive independent
dealers. Non-financial services selling, general and administrative expenses
have also increased as a result of the increased accruals for long-term
management incentive compensation payable based upon the level of Company
profitability for fiscal 1994 through 1996, expenses related to the increased
number of retail sales centers
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opened during the year compared to the prior year and costs incurred in
connection with sales centers scheduled to open in future quarters. New retail
sales centers typically require a period of several months to reach unit sales
levels similar to existing outlets. Increased accruals for compensation payable
under long-term incentive compensation plans increased non-financial selling,
general and administrative expenses by .9% of net sales compared to 1995.
Financial services selling, general and administrative expenses rose 47% on
a 26% increase in the average number of loans serviced during the period and a
55% increase in total credit application volume. In addition to cost increases
associated with higher origination and servicing volume, financial services
general and administrative expenses have increased as a result of allocation to
this business unit of certain direct operating costs (principally related to
telecommunications) formerly absorbed by the parent company and allocated to
non-financial operations.
The provision for credit losses decreased 53% from 1995, principally as a
result of the decrease in the balance of loans held for investment and a
decrease in the Company's contingent liability on loans sold with full or
partial recourse. The Company provides for estimated losses based on the
Company's historical loss experience, current repossession trends and costs and
management's assessment of the current credit quality of the loan portfolio.
Financial services interest expense includes interest expense associated
with long-term debt secured by loans and interest associated with short-term
line of credit borrowings used principally to fund the warehousing of loans
prior to their securitization. Financial services interest expense decreased 11%
due to declining and retired long-term debt balances. This decrease was offset
by a $2.4 million increase in short-term interest expense, reflecting higher
average outstanding balances on lines of credit due to the significant increase
in loan volume. Financial services interest expense associated with notes and
bonds payable is expected to continue to decline as the Company retires its
outstanding debt secured by loans.
The Company's effective income tax rate was 38.3% in fiscal 1996 compared
to a pro forma rate of 37.9% in fiscal 1995. The increase in the effective tax
rate is due primarily to higher state income taxes.
1995 COMPARED TO 1994
Retail sales dollar volume increased 42%, reflecting a 28% increase in new
home volume, an increase in the percentage of multi-section homes sold and
increases of 8% and 9% in the average new home sales prices of single-section
and multi-section homes, respectively. New home volume rose primarily due to a
31% increase in the weighted average number of sales centers open during the
year. Average new home sales per sales center decreased slightly, reflecting
the rapid pace of retail expansion during fiscal 1995, in which the Company
added 46 new sales centers compared to 31 centers in fiscal 1994. As stated
above, new sales centers typically require a period of several months to
reach normalized unit sales levels. Total new home sales dollars at sales
centers open more than one year rose 9% in 1995.
The increase in the average new home sales price reflects increases in the
cost of certain raw materials and price increases implemented to recover
increased costs associated with new wind and thermal standards adopted by the
Department of Housing and Urban Development ("HUD"), as well as an increase in
the portion of new home sales derived from the Southwest region, where the
average home size is somewhat larger than in the Southeast. Sales in the
Southwest comprised 38% of total new manufactured housing sales dollars in 1995
compared to 27% in 1994. Retail sales of multi-section homes accounted for 28%
of new home unit sales in 1995 versus 25% in 1994.
Wholesale sales dollar volume declined 8%, reflecting a 12% decrease in
volume, partially offset by increases of 26% and 1% in the average sales prices
of new single-section and multi-section homes, respectively. The decline in
wholesale volume is the result of a number of factors, including soft market
conditions in the Pacific Northwest early in the year as a result of increased
industry capacity and reduced demand for Golden West's relatively high price
point products resulting from higher interest rates. In late March 1995, Golden
West introduced several new home models at price points lower than those
traditionally targeted by Golden West in order to broaden its product line, to
lessen its dependence on higher end homes and to increase the attractiveness of
exclusive dealer arrangements. In addition, the Company sold Golden West's
Sacramento, California, plant in the third quarter because it was not well
aligned geographically with the Company's retail expansion plans. Destiny's
single-section home volume declined 8% from 1994, while the aver-age single-
section selling price increased 26%. During 1994 Destiny produced a large number
of park model homes (which typically contain less than 400 square feet of living
space and which are not designed for year-round habitation) which wholesale for
between $5,000 and $6,000 per home. Because of improving conditions in Destiny's
markets, Destiny produced significantly fewer park models in fiscal 1995,
focusing instead on traditional manufactured housing products which carry higher
gross margins.
In addition, sales to independent dealers have declined because the Company
began distributing homes manufactured by Golden West and Destiny through its
company-owned retail sales centers. In 1995, Golden West and Destiny shipped 653
homes to Oakwood sales centers, which are not included in the wholesale dollar
sales and home sales in the table above.
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Gross profit margin-integrated operations declined to 29.6% in 1995 from
30.5% in fiscal 1994. The reduction in gross margin reflects a .4% decline in
retail margins attributable to increasing competition at retail and to the
results of certain new sales centers which in early 1995 did not meet gross
profit expectations. Manufacturing margins also declined in 1995, principally
due to start-up costs and manufacturing inefficiencies associated with new
manufacturing plants in Texas, Tennessee and Colorado. Approximately 76% of the
total new home retail sales volume was manufactured by the Company in fiscal
1995 compared to 75% in 1994.
Wholesale gross profit margins increased to 18.7% in 1995 from 17.4% in
1994. The increase in margins over the prior year reflects reduced production of
low margin park models at Destiny, reduced product liability, property and
workers' compensation insurance costs at Golden West and improved pricing of
certain materials and components resulting from taking advantage of Oakwood's
purchasing power with certain vendors. These savings were partially offset by
the effects of a shift in Golden West's product mix toward lower price point
homes which typically carry lower margins because they are ordered with fewer
high margin option packages.
Financial services income increased 9% to $62.0 million from $56.8 million
in 1994. Interest income earned on loans held for investment and on loans held
for sale prior to securitization decreased from $44.2 million in 1994 to $38.2
million in 1995. This decrease reflects the amortization of and prepayments on
loans held for investment, a decrease in the average balance of loans held for
sale resulting from more frequent loan securitization, and a decrease in the
average yield on these assets as older, higher-yielding loans are liquidated.
Loan servicing fees increased from $7.1 million in 1994 to $12.2 million in
1995, reflecting the increased size of the Company's securitized loan servicing
portfolio. REMIC residual income increased from $3.2 million to $7.2 million,
reflecting the shift in the Company's financing strategy toward securitization
of its loans from holding loans for investment. Other financial services
revenues, which consist principally of credit life insurance premiums, gains on
the sale of securities, miscellaneous fees and other income, increased to $4.4
million from $2.4 million, and reflect the increasing size of the Company's loan
servicing portfolio.
The rate of voluntary prepayments and the amount and timing of credit
losses affect the Company's yield on retained REMIC residual interests and the
fair value of such interests in periods subsequent to the securitization. For
the year ended September 30, 1995 total credit losses on loans originated by the
Company, including losses relating to securitized assets, loans held for
investment, loans held for sale and loans sold with full or partial recourse,
amounted to approximately .75% of the average principal balance of the related
loans, compared to approximately .66% in 1994.
The majority of the 41% increase in other income is related to increased
insurance commissions resulting from the increase in retail home sales.
Non-financial selling, general and administrative expenses rose to 22.3% of
net sales compared to 21.6% of net sales in the preceding year. Non-financial
selling, general and administrative expenses in 1995 include a charge of $1.2
million ($738,000 after tax, or $.02 per share) for costs associated with the
sale of Golden West's Sacramento, California facility and costs resulting from
staffing and overhead reductions at Golden West's Santa Ana, California head-
quarters, and a charge of $150,000 (less than $.01 per share) for costs
associated with the Destiny merger. Non-financial selling, general and
administrative expenses in 1994 include a charge of approximately $1.3 million
($973,000 after tax, or $.02 per share) for costs relating to the acquisition of
Golden West Homes. Exclusive of these charges, non-financial selling, general
and administrative expenses rose 29% to $163,940,000 (22.1% of net sales),
compared to $127,216,000 (21.4% of net sales) in 1994. These costs increased
disproportionately to sales as a result of general and administrative expenses
associated with four new manufacturing plants, increased accruals relating to a
long-term management incentive compensation plan, increased accruals for stock
appreciation rights resulting from the increase in the price of the Company's
common stock, costs associated with the Company's ongoing business reengineering
projects and increased headcount levels, particularly in the management
information systems, human resources and internal audit areas. Higher accruals
for compensation payable under the incentive compensation plan and for stock
appreciation rights granted under an earlier plan increased non-financial
selling, general and administrative expenses by .5% of net sales compared to
1994.
Financial services selling, general and administrative expenses rose 57% on
a 34% increase in the average number of loans serviced during the period and a
56% increase in total credit application volume. This somewhat disproportionate
growth in costs is largely due to increased headcount in the credit and
collections areas. The Company has been adding headcount in advance of portfolio
volume growth in order to help ensure that adequate numbers of properly trained
personnel are available to originate and service anticipated loan origination
growth.
The provision for losses on credit sales decreased 62% from 1994,
reflecting the increased seasoning of loans held for investment and loans sold
with full or limited recourse. As the portfolio ages, its overall credit quality
generally increases because the majority of credit losses generally are incurred
relatively early in the term of the loans. The Company provides for estimated
losses based on the
16
Company's historical loss experience, current repossession trends and costs
and management's assessment of the current credit quality of the loan portfolio.
Non-financial services interest expense rose from $1,149,000 to $2,259,000
due principally to new indebtedness relating to permanent financing for new
manufacturing facilities, the purchase of a corporate aircraft and the
leveraging of the employee stock ownership plan.
Financial services interest expense includes interest expense associated
with long-term debt secured by loans and interest associated with short-term
line of credit borrowings used to fund the warehousing of loans prior to their
securitization. Financial services interest expense decreased 3% due to
declining and retired long-term debt balances. This decrease was offset by a
$3.2 million increase in short-term interest expense, reflecting higher average
outstanding balances on lines of credit due to the significant increase in loan
volume, as well as higher short-term interest rates. Financial services interest
expense associated with notes and bonds payable is expected to continue to
decline as the Company retires its out-standing debt secured by loans.
The Company's pro forma effective income tax rate was 37.9% in fiscal 1995
compared to 37.5% in fiscal 1994 (excluding in 1994 a $214,000 reduction in
income tax expense arising from the adoption of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes").
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 its loans or by securitizing such loans, 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 treasurys required by investors
has declined, principally because of 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 Company believes it can finance substantially all of
its fiscal 1997 loan originations through asset securitization. During 1996 the
Company raised approximately $721 million to finance its loans, including $566
million of REMIC certificates sold by Oakwood Mortgage Investors, substantially
all of which were sold to the public. In October 1996 Oakwood Mortgage Investors
completed another REMIC offering, the proceeds of which were approximately $271
million, the largest transaction in Oakwood's history.
In each of the Company's four recurring 1996 securitizations, the Company
has sold REMIC interests having a principal balance equal to 100% of the par
value of the related loans, and the Company intends to sell all of the regular
REMIC interests in its future securitizations. This decision eliminates the
Company's need for cash to finance retained REMIC interests and substantially
reduces the need to obtain other long-term financing. 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 its loans in the coming
years, and intends to utilize both the public and private markets to maximize
the number of sources of financing and minimize its financing costs.
In addition to the ongoing need to access the asset-backed capital market
for capital to fund its financing operations, the Company will require capital
to execute its ongoing expansion strategy. The Company estimates that its fiscal
1997 capital expenditures will approximate $31 million, comprised principally of
offices, leasehold improvements and fixtures relating to retail expansion,
construction of a new training center, computer hardware and software associated
with new and enhanced management information systems, improvements to
manufacturing facilities and a new manufacturing plant at Destiny. In addition
to capital expenditures, the retail expansion will require an investment of
approximately $400,000 to $500,000 of working capital for each new sales center,
or approximately $18 to $25 million for fiscal 1997. Capital expenditures and
working capital requirements in later years are dependent upon the extent of
expansion undertaken in such years.
The Company intends to finance its retail and manufacturing expansion
principally using internally generated funds and short-term lines of credit.
Because the Company sells all of the regular REMIC interests in its
securitizations, additional permanent corporate financing is not expected to be
required to fund expansion of the financial services businesses. However, the
Company continues to monitor the debt and equity markets and evaluate the
sources and cost of long-term capital in light of management's assessment of
existing and future conditions in the capital markets and its assessment of the
appropriate components of the Company's capital structure. While management
believes that existing financing is sufficient to provide for the Company's
needs for the foreseeable future, the Company may seek to raise additional long-
term debt or equity if compelling market conditions arise.
The Company has several credit facilities in place to provide for its
short-term liquidity needs. The Company has a $175 million credit facility with
a conduit commercial paper issuer to provide ware-house financing for loans
prior to securitization. This credit facility reduced the Company's funding cost
of warehouse credit by
17
enabling the Company indirectly to access the commercial paper market. In
November 1996 the Company closed a new $125 million revolving credit facility
with a group of banks which is available to fund additional working capital
needs. In addition, the Company has $20 million of uncommitted lines of credit.
NEWACCOUNTING STANDARDS
In March 1995 the Financial Accounting Standards Board (the "Board") adopted
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("FAS 121"), which requires that companies assess potential impairments of long-
lived assets, certain identifiable intangibles and associated goodwill when
there is evidence that events or changes in circumstances have made recovery of
an asset's carrying value unlikely, and recognize an impairment loss when the
sum of expected future net cash flows is less than the carrying amount.
In October 1995 the Board adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("FAS 123"), which
provides that companies adopt a method of accounting for stock compensation
awards based on estimated fair value at the date the awards are granted using an
accepted pricing model. The resulting charge to income is recognized over the
period during which the options or awards vest. The Board encourages recognition
of such expense in the statement of income but does not require it. If expense
is not recorded in the financial statements, FAS 123 requires pro forma
disclosures regarding the effects on net income and earnings per share had
expense been recognized.
In June 1996 the Board adopted Statement of Financial Accounting Standards
No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" ("FAS 125"), which provides that after a
transfer of financial assets, an entity recognizes the financial and servicing
assets it controls and the liabilities
it has incurred, derecognizes the financial assets when control has been
surrendered, and derecognizes liabilities when extinguished. A transfer of
financial assets in which the transferor surrenders control over those assets is
accounted for as a sale to the extent that consideration other than beneficial
interests in the transferred assets is received in exchange. Liabilities and
derivatives incurred or obtained by transferors as part of a transfer of
financial assets are initially measured at fair value, if practicable. Servicing
assets and other retained interests in the transferred assets should be measured
by allocating the previous carrying amount between the assets sold, if any, and
retained interests, if any, based on their relative fair values at the date of
transfer. In addition, servicing assets and liabilities should be subsequently
measured by (a) amortization in proportion to and over the period of estimated
net servicing income or loss and (b) assessment for asset impairment or
increased obligation based on their fair values.
The Company must adopt each of these Statements in fiscal 1997. Management
does not believe that the effect of adoption of these Statements will be
material to the Company's financial condition or results of operations.
18
CONSOLIDATED STATEMENT OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
OF INCOME
Year ended September 30,
1996 1995 1994
(in thousands except per share data)
REVENUES
Net sales $862,079 $741,521 $595,127
Financial services income (Note 3) 92,346 61,995 56,771
Other income (Note 4) 19,497 17,896 12,712
Total revenues 973,922 821,412 664,610
COSTS AND EXPENSES
Cost of sales 609,303 543,320 441,364
Selling, general and administrative expenses
Non-financial services (Note 2) 211,759 165,290 128,516
Financial services 18,810 12,799 8,127
Provision for credit losses (Note 5) 1,000 2,109 5,485
Interest expense
Non-financial services 2,221 2,259 1,149
Financial services 20,149 22,638 23,260
Total costs and expenses 863,242 748,415 607,901
INCOME BEFORE INCOME TAXES 110,680 72,997 56,709
Provision for income taxes (Note 6) 42,425 26,374 20,009
NET INCOME 68,255 $ 46,623 $ 36,700
PRO FORMA INFORMATION (unaudited) (Note 1)
Historical income before income taxes $ 72,997 $ 56,709
Pro forma provision for income taxes 27,679 21,054
Pro forma net income $ 45,318 $ 35,655
EARNINGS PER SHARE (1995 and 1994 amounts are pro forma
and unaudited) (Note 1)
Primary 1.47 $ .99 $ .78
Fully diluted 1.47 $ .98 $ .78
The accompanying notes are an integral part of the financial statements.
19
CONSOLIDATED OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
BALANCE SHEET
September 30,
1996 1995
(in thousands except share
and per share data)
ASSETS
Cash and cash equivalents 28,577 $ 6,189
Receivables and investments (Notes 5 and 10) 508,825 480,875
Inventories (Note 7) 155,890 151,190
Properties and facilities, net of accumulated depreciation
and amortization (Notes 8 and 10) 113,764 101,758
Deferred income taxes (Note 6) 9,674 15,546
Other assets 25,247 27,082
$841,977 $782,640
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings (Note 9) $145,506 $154,400
Notes and bonds payable (Note 10) 134,379 198,812
Accounts payable and accrued liabilities (Note 11) 157,929 90,589
Other long-term obligations 12,189 20,431
Shareholders' equity (Notes 12 and 13)
Common stock, $.50 par value; 100,000,000 shares
authorized;
45,621,000 and 22,171,000 shares issued and
outstanding 22,811 11,086
Additional paid-in capital 149,501 149,482
Retained earnings 226,460 160,000
398,772 320,568
Unearned compensation (Notes 13 and 14) (6,798) (2,160)
Total shareholders' equity 391,974 318,408
Contingencies (Notes 5 and 15)
$841,977 $782,640
The accompanying notes are an integral part of the financial statements.
20
CONSOLIDATED STATEMENT OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
OF CASH FLOWS
Year ended September 30,
1996 1995 1994
(in thousands)
OPERATING ACTIVITIES
Net income 68,255 $ 46,623 $ 36,700
Items not requiring (providing) cash
Depreciation and amortization 10,461 8,278 5,526
Deferred income taxes 5,872 (7,060) (5,413)
Provision for credit losses 1,000 2,109 5,485
Gain on sale of loans and securities (19,358) (776) (20)
Other 720 - 697
(Increase) in other receivables (39,148) (21,617) (5,162)
(Increase) in inventories (4,700) (52,502) (36,660)
Increase in accounts payable and accrued
liabilities 58,105 19,121 11,834
Increase in other long-term obligations 2,118 11,465 5,467
Cash provided by operations 83,325 5,641 18,454
Loans originated (721,414) (486,601) (343,733)
Purchase of loan portfolios (1,465) - (604)
Sale of loans 699,552 355,486 363,002
Principal receipts on loans 15,651 34,915 44,913
Cash provided (used) by operating activities 75,649 (90,559) 82,032
INVESTING ACTIVITIES
Sale of securities 21,655 7,586 -
Additions to properties and facilities (41,303) (41,870) (28,225)
Sales of manufactured housing communities 20,301 -- -
Other (1,774) (1,619) (6,661)
Cash (used) by investing activities (1,121) (35,903) (34,886)
FINANCING ACTIVITIES
Net borrowings (repayments) on short-term credit
facilities (8,894) 129,400 (1,882)
Issuance of notes and bonds payable 1,686 29,890 2,093
Payments on notes and bonds (49,043) (41,228) (56,436)
Cash dividends (1,795) (1,712) (1,635)
Proceeds from exercise of stock options 5,906 1,438 1,950
Redemption of preferred stock - - (1,150)
Cash dividends to shareholders of acquired company - (2,111) (1,348)
Cash provided (used) by financing activities (52,140) 115,677 (58,408)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 22,388 (10,785) (11,262)
CASH AND CASH EQUIVALENTS
BEGINNING OF YEAR 6,189 16,974 28,236
END OF YEAR 28,577 $ 6,189 $ 16,974
The accompanying notes are an integral part of the financial statements.
21
CONSOLIDATED STATEMENT OF OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
CHANGES IN SHAREHOLDERS' EQUITY
Common Additional
shares Common paid-in Retained Unearned
outstanding stock capital earnings compensation
(in thousands except per share data)
BALANCE AT SEPTEMBER 30, 1993 21,809 $10,904 $146,276 $ 83,803 ($779)
Net income - - - 36,700 -
Less: net income of Golden West for the three months
ended December 25, 1993 (Note 2) - - - (320) -
Exercise of stock options 201 101 1,849 - -
Cost of ESOP shares allocated - - - - 779
Cash dividends ($.04 per share) - - - (1,635) -
Cash dividends to shareholders of acquired company - - - (1,348) -
BALANCE AT SEPTEMBER 30, 1994 22,010 11,005 148,125 117,200 -
Net income - - - 46,623 -
Exercise of stock options 161 81 1,357 - -
Purchase of ESOP shares - - - - (2,398)
ESOP shares committed to be released - - - - 238
Cash dividends ($.04 per share) - - - (1,712) -
Cash dividends to shareholders of acquired company - - - (2,111) -
BALANCE AT SEPTEMBER 30, 1995 22,171 11,086 149,482 160,000 (2,160)
Net income - - - 68,255 -
Exercise of stock options 730 365 5,541 - -
Issuance of restricted stock 200 100 5,325 - (5,118)
ESOP shares committed to be released - - 413 - 480
Cash dividends ($.04 per share) - - - (1,795) -
2-for-1 stock split 22,520 11,260 (11,260) - -
BALANCE AT SEPTEMBER 30, 1996 45,621 $22,811 $149,501 $226,460 ($6,798)
The accompanying notes are an integral part of the financial statements.
22
NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Oakwood Homes
Corporation and its subsidiaries (collectively, the "Company"). All significant
intercompany transactions and balances have been eliminated in consolidation. In
April 1996 the Board of Directors declared a 2-for-1 stock split payable in the
form of a 100% stock dividend on May 31, 1996 to shareholders of record on May
17, 1996. Where appropriate, all share and per share amounts included in the
consolidated financial statements and notes thereto have been adjusted
retroactively to give effect to the stock split.
Retail financing
A substantial majority of the Company's retail customers purchase homes on
credit. The related loans are evidenced by either 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 primarily by securitizing the
loans it originates using Real Estate Mortgage Investment Conduits ("REMICs")
or, for certain FHA-insured loans, using collat-eralized mortgage obligations
issued under authority granted to the Company by the Government National
Mortgage Association ("GNMA"). Indebtedness of the Company secured by loans,
including REMIC securitizations completed prior to fiscal 1993 when the Company
adopted sales accounting for its REMICs, is reflected in the financial
statements as collateralized borrowings.
REMIC securitizations consummated in fiscal 1993 and thereafter and all
GNMA securitizations are treated as sales of receivables. The Company allocates
the sum of its basis in the loans conveyed to each REMIC and the costs of
forming the REMIC among the interests retained and the inter estimated relative
fair values of such interests; costs of marketing REMIC interests sold are
charged to expense as incurred.
Effective October 1, 1994 the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("FAS 115"). REMIC residual interests retained by the Company
following securitization are considered held to maturity under the provisions of
FAS 115 and are carried at amortized cost; retained regular REMIC interests are
considered available for sale and are carried at their amortized cost which
approximates fair value. The Company has no securities held for trading
purposes. Prior to adoption of FAS 115, both regular and residual REMIC
interests retained by the Company were carried at amortized cost.
Loans held for investment are carried at their outstanding principal
amounts, less unamortized discounts and plus unamortized premiums. Loans held
for sale are carried at the lower of cost or market.
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 loan 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.
Revenue recognition-financial services
Interest income on loans is recognized in accordance with the terms of the
loans (principally 30 day accrual). The Company retains servicing rights for
substantially all loans it originates, except for loans sold without recourse.
Servicing fee income is recognized as earned. Income on retained REMIC residual
interests, net of associated credit losses, is recorded as earned using the
level yield method over the period such interests are outstanding.
The Company periodically purchases portfolios of loans. The Company adds to
the reserve for credit losses an estimate of future credit losses on such loans
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 level yield method.
Interest rate risk management
The Company periodically enters into off-balance sheet financial agreements,
principally forward contracts to enter into interest rate swaps and options on
such contracts, in order to hedge the sales price of REMIC interests to be sold
in securitization transactions. The net settlement proceeds or cost from
termination of the agreements is included in the determination of gain or loss
on the sale of the REMIC interests.
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.
23
Properties and facilities
Properties and facilities are carried at cost less accumulated depreciation
and amortization. The Company provides depreciation and amortization using
principally the straight-line method over the assets' estimated useful lives,
which are as follows:
Estimated
Classification useful lives
Land improvements 3-20 years
Buildings and field sales offices 5-39 years
Furniture, fixtures and equipment 3-12 years
Leasehold improvements 1-10 years
Manufactured housing communities 10-20 years
Income taxes
Effective October 1, 1993 Oakwood 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. Prior to 1994, Oakwood accounted for income
taxes using the deferred method. The effect of adoption of FAS 109 was not
material.
Reserve for credit losses
The Company maintains reserves for estimated credit losses on loans held for
investment, on loans warehoused prior to securitization and on loans sold to
third parties with full or limited recourse. The Company provides for losses in
amounts necessary to maintain the reserves at amounts the Company believes are
sufficient to provide for future losses based upon the Company's historical loss
experience, current economic conditions and an assessment of current portfolio
performance measures.
Unaudited pro forma information
Prior to its acquisition by the Company, Destiny Industries, Inc.
("Destiny," see Note 2) was an S corporation, and accordingly its earnings were
includable in the income tax returns of its former shareholders. As a
consequence, Destiny's financial statements did not reflect a provision for
income taxes for periods prior to its acquisition by the Company. The pro forma
provision for income taxes and pro forma net income set forth in the statement
of income reflect the Company's provision for income taxes on a pro forma basis
assuming Destiny's results of operations had been included in the Company's
income tax returns for preacquisition periods. Deferred income taxes relating to
Destiny's assets and liabilities as of the acquisition date were not material
and have been charged to the provision for income taxes for the year ended
September 30, 1995.
The pro forma provision for income taxes and amounts derived therefrom are
unaudited.
Earnings per share
Earnings per share is computed by dividing net income (pro forma net income
in 1995 and 1994) 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 46,460,000,
45,998,000 and 45,984,000 in 1996, 1995 and 1994, respectively. The weighted
average number of shares used in the computation of fully diluted earnings per
share was 46,521,000, 46,113,000 and 46,010,000 in 1996, 1995 and 1994,
respectively. The dilutive effect of stock options and unearned restricted stock
awards is computed using the treasury stock method.
Because the Company's historical results of operations do not reflect a
provision for income taxes on Destiny's earnings for preac-quisition periods,
historical earnings per share amounts for 1995 and 1994 are not meaningful and
accordingly have been omitted.
Cash and cash equivalents
Short-term investments having initial maturities of three months or less are
considered cash equivalents.
Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications
Certain amounts previously reported for 1995 and 1994 have been reclassified
to conform to classifications used in 1996.
NOTE 2-ACQUISITIONS
On June 30, 1995 Oakwood completed its business combination with Destiny.
Oakwood issued 1,850,000 shares of its common stock in exchange for all the
outstanding common stock of Destiny (an exchange ratio of approximately 4.63
Oakwood common shares for each outstanding Destiny common share).
On September 30, 1994 Oakwood completed its business combination with
Golden West Homes ("Golden West"). Oakwood issued 1,225,714 shares of its common
stock in exchange for all the out-standing common and convertible preferred
stock of Golden West, and substituted options to acquire 174,232 shares of
Oakwood common stock for previously granted options to acquire Golden West
24
common stock (an exchange ratio of approximately .12 of an Oakwood common
share for each outstanding Golden West common share and each right to acquire a
Golden West common share).
These business combinations have been accounted for as poolings of
interests, and accordingly the accompanying financial statements reflect the
combined results of operations and financial position of Oakwood, Destiny and
Golden West for all periods presented.
Prior to its acquisition by Oakwood, Golden West utilized a 52/53 week year
ending in December. For accounting convenience, financial statements for years
prior to fiscal 1994 were not adjusted to conform Golden West's accounting year
to the September 30 year used by Oakwood and Destiny. Accordingly, Golden West's
results of operations for the three months ended December 25, 1993 were
reflected in the 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 at September 30, 1994 in the accompanying consolidated
statement of changes in shareholders' equity.
Oakwood incurred approximately $500,000 of costs and expenses directly
related to completing the Golden West 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 $.02 per share) has been charged to operations
in 1994 and is included in selling, general and administrative expenses.
NOTE 3-FINANCIAL SERVICES BUSINESSES
The Company's financial services businesses are as follows: Oakwood
Acceptance Corporation ("Oakwood Acceptance") purchases a substantial portion of
the loans originated by the Company's retail operations. Oakwood Acceptance also
purchases loans from unrelated retailers and from time to time purchases
portfolios of loans from third parties. Oakwood Acceptance retains servicing on
substantially all loans held for investment or securitized by Oakwood Acceptance
or its subsidiary, Oakwood Mortgage Investors, Inc. Oakwood Funding Corporation
("Oakwood Funding") is a special-purpose subsidiary of Oakwood Acceptance which
has issued non-recourse notes secured by specific pools of loans. Oakwood
Acceptance has from time to time also issued notes in its own name secured by
loans. Oakwood Financial Corporation is a subsidiary of Oakwood Homes
Corporation which holds the Company's retained interests in REMIC trusts.
Oakwood Life Ltd. reinsures risk on credit life insurance policies writ-ten by
an unrelated insurance company in connection with sales of Company products.
The aggregate principal balance of loans sold to third parties, including
securitization transactions, was approximately $721 million in 1996, $368
million in 1995 and $380 million in 1994.
Oakwood Acceptance's servicing portfolio totaled approximately $1.5 billion
and $1.2 billion at September 30, 1996 and 1995, respectively, of which
approximately $1.1 billion and $787 million, respectively, represented loans
owned by REMIC trusts and other loans sold to third parties.
Condensed financial information for the Company's financial services
businesses is set forth below:
1996 1995 1994
STATEMENT OF INCOME (in thousands)
Revenues
Interest income $34,569 $38,185 $44,162
Servicing fees 15,857 12,202 7,091
REMIC residual income 16,193 7,212 3,167
Credit life insurance premiums 3,160 2,263 1,748
Gain on sale of loans
and securities 19,358 776 20
Other 3,209 1,357 583
Total revenues 92,346 61,995 56,771
Costs and expenses
Interest expense 20,149 22,638 23,260
Operating expenses 18,810 12,799 8,127
Provision for credit losses 1,000 2,109 5,485
Total costs and expenses 39,959 37,546 36,872
Income before income taxes $52,387 $24,449 $19,899
1996 1995
BALANCE SHEET (in thousands)
Loans $395,688 $405,166
REMIC regular interests 9,724 28,133
REMIC residual interests 48,971 20,599
Other assets 36,089 23,364
Total assets $490,472 $477,262
Short-term borrowings $126,800 $124,400
Notes payable secured by loans 69,980 127,650
Unearned insurance premiums 5,534 3,510
Due to affiliates 163,590 129,155
Other liabilities 6,580 6,038
Parent company's investment 117,988 86,509
Total liabilities and parent
company's investment $490,472 $477,262
25
Condensed financial information for Oakwood Homes Corporation with its
financial services businesses accounted for using the equity method is as
follows:
1996 1995 1994
STATEMENT OF INCOME (in thousands)
Revenues
Net sales $862,079 $741,521 $595,127
Equity in income of financial
services businesses 52,387 24,449 19,899
Other income 19,971 18,331 12,955
Total revenues 934,437 784,301 627,981
Costs and expenses
Cost of sales 609,303 543,320 441,364
Selling, general and
administrative expenses 212,233 165,725 128,759
Interest expense 2,221 2,259 1,149
Total costs and expenses 823,757 711,304 571,272
Income before income taxes 110,680 72,997 56,709
Provision for income taxes (1) 42,425 27,679 21,054
Net income(1) 68,255 $ 45,318 $ 35,655
(1) Amounts for 1995 and 1994 are pro forma. See Note 1.
1996 1995
BALANCE SHEET (in thousands)
Current assets
Cash and cash equivalents 26,393 $ 4,974
Receivables 37,166 17,848
Inventories 155,890 151,190
Prepaid expenses 3,275 2,649
Total current assets 222,724 176,661
Properties and facilities 111,339 100,108
Investment in and advances to
financial services businesses 281,578 215,664
Other assets 17,442 28,609
$633,083 $521,042
Current liabilities
Short-term borrowings 18,706 $ 30,000
Current maturities of long-term debt 6,071 6,731
Accounts payable and accrued liabilities 151,314 84,551
Total current liabilities 176,091 121,282
Long-term debt 58,328 64,431
Other long-term obligations 6,690 16,921
Shareholders' equity 391,974 318,408
$633,083 $521,042
NOTE 4-OTHER INCOME The components of other income are as follows:
1996 1995 1994
(in thousands)
Insurance commissions $11,171 $10,198 $ 7,012
Endorsement fees 783 1,151 1,172
Investment income 358 1,047 1,114
Other 7,185 5,500 3,414
$19,497 $17,896 $12,712
NOTE 5-RECEIVABLES AND INVESTMENTS The components of receivables and
investments are as follows:
1996 1995
(in thousands)
Loans held for sale $306,465 $244,593
Loans held for investment 98,503 173,545
Trade receivables 5,771 8,025
Accrued interest 2,696 3,521
Other receivables 43,026 11,070
Less: reserve for uncollectible receivables (6,331) (8,611)
Total receivables 450,130 432,143
Retained interests in REMIC securitizations
Regular interests, at amortized cost
which approximates fair value 9,724 28,133
Residual interests, at amortized cost 48,971 20,599
Total retained REMIC interests 58,695 48,732
$508,825 $480,875
The estimated principal receipts, including estimated prepayments, on loans
held for investment are $15.2 million in 1997, $14.1 mil-lion in 1998, $13.2
million in 1999, $12.4 million in 2000, $11.6 million in 2001 and the balance
thereafter.
Loans in which the Company retains an interest, either directly by owning
them or indirectly through the Company's retained interests in REMIC
securitizations, are located in over forty states, with North Carolina, Texas,
South Carolina and Virginia accounting for the majority of the loans. Because of
the nature of the Company's retail business, loans are not concentrated with any
single customer or among any group of customers. Trade receivables represent
amounts due from Golden West and Destiny independent dealers, which are located
principally in the Pacific Northwest and in the Southeast.
Substantially all the loans included in the Company's GNMA securitizations
are covered by FHA insurance which generally limits the Company's risk to 10% of
credit losses incurred on such loans. The Company's risk associated with
nonrecourse debt secured by loans
26
is limited to the Company's equity in the underlying collateral. The Company
retains all of the credit risk associated with loans 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's contingent liability as guarantor of loans sold to third parties on a
recourse basis was approximately $75 million as of September 30, 1996.
The following table summarizes the transactions reflected in the reserve
for credit losses:
1996 1995 1994
(in thousands)
Balance at beginning of year $11,795 $14,623 $12,477
Provision for losses 1,000 2,109 5,485
Reserve recorded related
to acquired portfolios - - 1,000
Losses charged to the reserve (4,534) (4,937) (4,339)
Balance at end of year 8,261 $11,795 $14,623
The reserve for credit losses is reflected in the consolidated balance sheet
as follows:
1996 1995
(in thousands)
Reserve for uncollectible receivables $6,331 $ 8,611
Reserve for contingent liabilities (included in
accounts payable and accrued liabilities) 1,930 3,184
$8,261 $11,795
The Company also retains credit risk on REMIC securitizations because the
related trust agreements provide that all losses incurred on REMIC loans are
charged to REMIC interests retained by the Company before any losses are charged
to REMIC interests sold to third party investors. The Company's yields on its
investments in REMIC residual interests are influenced by default, credit loss
and voluntary prepayment assumptions which management believes to be reasonable.
The actual rate of voluntary prepayments and the amount and timing of credit
losses affect the Company's yield on retained REMIC residual interests and the
fair value of such interests in periods subsequent to the securitization; the
actual rate of voluntary prepayments and credit losses typically varies over the
life of each transaction and from transaction to transaction. If over time the
Company's actual experience is more favorable than that assumed, the Company's
yield on its REMIC residual investments will be enhanced. Similarly, if over
time the Company's actual experience is less favorable than that assumed, such
yield could be reduced or, in extreme cases, impairment of the investments could
result.
The Company has retained servicing on substantially all loans it has
originated since 1989 with respect to which the Company has retained any credit
risk.
Z Golden West and Destiny are contingently liable under terms of repurchase
agreements with financial institutions providing inventor financing for
retailers of their products. These ar are customary in the industry, provide for
the repurchase of pr sold to retailers in the event of default on payments by
the retailer. Although Golden West and Destiny are 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. The estimated potential obligations under such agreements
approximated $36 million at September 30, 1996. Losses under these agreements
have not been significant.
NOTE 6-INCOME TAXES
The components of the provision for income taxes are as follows:
1996 1995 1994
(in thousands)
Current
Federal $32,426 $30,524 $23,404
State 4,127 2,910 2,018
36,553 33,434 25,422
Deferred
Federal 5,239 (6,449) (5,078)
State 633 (611) (335)
5,872 (7,060) (5,413)
Historical provision for income taxes 42,425 26,374 20,009
Pro forma provision for income taxes
on Destiny's earnings for
preacquisition periods - 1,305 1,045
Pro forma provision for income taxes $42,425 $27,679 $21,054
A reconciliation of the statutory federal income tax rate to the Company's
historical and pro forma effective income tax rates follows:
1996 1995 1994
Statutory federal income tax rate 35% 35% 35%
State income taxes, less federal
income tax benefit 3 2 2
Reduction in valuation allowance
for deferred income tax assets - (1) -
Other - 2 -
Pro forma effective income tax rate 38 38 37
Effect of Destiny's preacquisition
earnings includable in the
income tax returns of its
former shareholders - (2) (2)
Historical effective income tax rate 38% 36% 35%
27
Deferred income taxes includes the following components:
1996 1995
(in thousands)
Deferred income tax assets
Reserve for credit losses 2,764 $ 3,861
REMIC residual interests 3,492 4,426
Accrued liabilities 4,899 7,470
Net operating loss carryforward 1,558 1,829
Inventories 1,144 867
Alternative minimum tax credit carryforward 58 144
Other 745 777
Gross deferred income tax assets 14,660 19,374
Deferred income tax liabilities
Properties and facilities (3,696) (2,344)
Discounts on acquired portfolios (344) (424)
Other (946) (1,060)
Gross deferred income tax liabilities (4,986) (3,828)
Net deferred income tax asset 9,674 $15,546
At September 30, 1996 the remaining net operating loss carryforward is
approximately $4,650,000 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 $43.6 million, $27.4 million and
$24.8 million in 1996, 1995 and 1994, respectively.
NOTE 7-INVENTORIES
The components of inventories are as follows:
1996 1995
(in thousands)
Manufactured homes $136,905 $136,457
Work-in-progress, materials and supplies 14,165 12,691
Land/homes under development 4,820 2,042
$155,890 $151,190
NOTE 8-PROPERTIES AND FACILITIES The components of properties and facilities
are as follows:
1996 1995
(in thousands)
Land and land improvements 16,435 $ 16,013
Buildings and field sales offices 64,321 48,255
Furniture, fixtures and equipment 58,393 45,948
Leasehold improvements 10,903 6,185
Manufactured housing communities - 16,735
150,052 133,136
Less: accumulated depreciation
and amortization (36,288) (31,378)
$113,764 $101,758
Depreciation and amortization of properties and facilities was approximately
$9,502,000, $7,337,000 and $4,741,000 in 1996, 1995 and 1994, respectively.
NOTE 9-SHORT-TERM CREDIT FACILITIES
The Company has a $175 million revolving warehouse financing facility with
a conduit commercial paper issuer, secured by loans held for sale. The weighted
average interest rate on borrowings out-standing at September 30, 1996 was
5.86%, compared to an average rate of 6.81% at September 30, 1995 on borrowings
outstanding under the $130 million bank syndicated warehouse facility which was
terminated upon closing of the commercial paper program. Subsequent to September
30, 1996 the Company closed a new $125 million bank syndicated revolving credit
facility secured by the stock of certain of the Company's subsidiaries;
borrowings under the facility bear interest at LIBOR plus .5% to 1% depending
upon the level of certain financial ratios. The $125 million facility replaced a
$75 million revolving credit facility secured by inventories, borrowings under
which bore interest at LIBOR plus .75% at September 30, 1996 and LIBOR plus 1%
at September 30, 1995. The Company also has $20 million of uncommitted credit
lines.
28
NOTE 10-NOTES AND BONDS PAYABLE
The components of notes and bonds payable
are as follows:
1996 1995
(in thousands)
Non-financial services debt
9% reset debentures due 2007 22,933 $ 22,953
9.125% reset debentures due 2007 16,975 16,975
Facilities loan payable in quarterly installments
through 1998, with interest at LIBOR plus .875%
(LIBOR plus 1.5% at September 30, 1995) 8,000 12,000
Capitalized aircraft lease payable in monthly
installments through 2000, with interest at LIBOR plus
.75% 4,916 6,292
Industrial revenue bonds due in annual installments
through 2011, with interest at a variable rate
(3.70% and 4.55% at September 30, 1996 and
September 30, 1995, respectively) 4,700 4,900
Industrial revenue bond due in installments through
2001, with interest at 73% of the lender's prime rate 2,250 2,350
Other mortgage notes at interest rates ranging from 8%
to 9%, payable in varying installments through 2008 2,945 2,784
ESOP note payable in quarterly installments through
2000, with interest at LIBOR plus 1.25% 1,680 2,160
Note payable with interest at LIBOR plus 1.5% - 748
Total non-financial services debt 64,399 71,162
Financial services debt collateralized by loans
Nonrecourse debt
Notes issued by Oakwood Funding, payable in
monthly installments through December 2000,
with interest at an average rate of 8.65%
(8.89% at September 30, 1995) 22,936 39,130
REMIC certificates payable in monthly installments
with interest rates ranging from 8.86% to 10.1% - 32,789
Subordinated note payable issued by Oakwood
Funding with interest payable monthly at 12.58%,
amortizing in 1997 through 2001 8,350 8,350
Total nonrecourse debt 31,286 80,269
Recourse debt
Term loans payable in monthly installments through
December 2000, with interest at LIBOR plus .75%
(LIBOR plus 1.375% to prime plus .5% at
September 30, 1995) 25,740 29,799
Subordinated note with interest payable monthly at
10.5%, amortizing in 2001 through 2004 12,954 12,954
Notes payable with interest at 10.25% - 4,628
Total recourse debt 38,694 47,381
Total financial services debt 69,980 127,650
$134,379 $198,812
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 at 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 owner-ship 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 par.
The payment of notes collateralized by loans generally is based on the
scheduled monthly payment and actual prepayments of principal on the loans
collateralizing the notes. Under the provisions of certain note agreements, the
notes are secured solely by the underlying collateral, which consists
principally of the loans collateralizing the debt. Such collateral had an
aggregate carrying value of approximately $93 million at September 30, 1996.
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 level yield method. The unamortized portion of these
costs, which is included in other assets,
29
was approximately $1,422,000 and $2,881,000 at September 30, 1996 and 1995,
respectively. Land, land improvements, buildings and equipment with a net book
value of approximately $30 million are pledged as collateral for the facilities
term loan, the mortgage notes and the industrial revenue bonds.
The estimated principal payments under notes and bonds payable, assuming
the reset debentures are neither called by the Company nor presented for
redemption by the holders as of the June 1, 1997 redemption date, are $24
million in 1997, $22 million in 1998, $14 million in 1999, $12 million in 2000,
$5 million in 2001 and the balance thereafter. Interest paid by the Company was
approximately $22.5 million in 1996, $24.3 million in 1995 and $23.9 million in
1994.
Various of the Company's debt agreements and loan servicing agreements
contain covenants which, among other things, require the Company and/or Oakwood
Acceptance to maintain certain minimum financial ratios. The Company and Oakwood
Acceptance were in compliance with all such covenants at September 30, 1996.
NOTE 11-ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
The components of accounts payable and accrued liabilities are as follows:
1996 1995
(in thousands)
Accounts payable 88,710 $47,705
Accrued compensation 46,198 17,778
Accrued dealer volume bonus 2,631 3,792
Income taxes payable 791 7,607
Reserve for contingent liabilities 1,930 3,184
Other accrued liabilities 17,669 10,523
$157,929 $90,589
NOTE 12-SHAREHOLDERS' EQUITY
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 (each, a "Right" and,
collectively, 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 $20. The Rights will become
exercisable only if a person or group (an "Acquiring Person"), 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 such event, each holder of Preferred Stock, other than the Acquiring
Person, will be entitled to acquire 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 Preferred Stock, other than the
Acquiring Person, 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 $.005 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.
NOTE 13-STOCK OPTION AND AWARD PLANS
In January 1996 the Company's shareholders ratified the Key Employee Stock
Plan (the "Stock Plan") under which 2,665,112 common shares have been reserved
for issuance to key employees. The Stock Plan provides that an additional number
of common shares shall be reserved for issuance under the Stock Plan each
October 1 equal to 1.5% of the number of common shares out-standing on such
date. Awards or grants under the plan may be made in the form of stock options,
stock appreciation rights, restricted stock and performance shares.
During 1996, 200,000 shares of the Company's common stock were awarded
under the Stock Plan. The market value of the shares awarded of $5,425,000 has
been recorded as unearned compensation and is reflected as a reduction of
shareholders' equity in the
30
accompanying consolidated balance sheet. Unearned compensation is amortized
to expense over the vesting period of the award.
The Company also has a 1990 Director Stock Option Plan under which 225,000
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 become exercisable six months from the date of grant and expire
10 years from the date of grant.
Compensation expense under the Stock Plan and under certain earlier plans
pursuant to which awards may no longer be granted was approximately $2,626,000,
$2,017,000 and $619,000 in 1996, 1995 and 1994, respectively.
The following table summarizes the changes in the number of shares under
option pursuant to the plans described above and pursuant to certain earlier
plans under which options may no longer be granted:
Number Per share
of shares option price
Outstanding at September 30, 1993 3,153,652 $ 1.62-$12.75
Granted 432,000 11.54- 14.72
Exercised (288,756) 1.74- 11.10
Terminated (29,000) 11.10- 11.75
Outstanding at September 30, 1994 3,267,896 1.62- 14.72
Granted 352,000 10.72- 13.78
Exercised (329,098) 1.74- 14.72
Terminated (52,024) 3.33- 13.57
Outstanding at September 30, 1995 3,238,774 1.62- 14.72
Granted 1,345,496 17.97- 23.00
Exercised (1,079,434) 1.74- 14.72
Terminated (80,334) 11.22- 18.33
Outstanding at September 30, 1996 3,424,502 1.62- 23.00
Exercisable at September 30, 1996 1,512,893 1.62- 14.72
Shares reserved for future grant
September 30, 1995 1,028,308
September 30, 1996 1,471,612
NOTE 14-EMPLOYEE BENEFIT PLANS
The Company maintains an employee stock ownership plan ("ESOP") and a
401(k) plan in which substantially all employees who have met certain age and
length of service requirements may participate. Contributions to the ESOP are
determined at the discretion of the Board of Directors; employee contributions
to this plan are not permitted. Employee contributions to the 401(k) plan are
limited to a percentage of their compensation and are matched by the Company on
a sliding scale subject to certain limitations. Compensation cost under the
401(k) plan was approximately $1,041,000, $837,000 and $806,000 in 1996, 1995
and 1994, respectively.
During 1995 the Company loaned approximately $2,398,000 to the ESOP to
enable the ESOP to purchase Company common stock on the open market. The ESOP
refinanced the Company's loan with the proceeds of a loan from a commercial bank
which the Company has guaranteed; the Company has reflected the note payable as
a liability in the accompanying consolidated balance sheet. The bank loan
provides that shares are released ratably upon repayment of the principal of the
loan. Compensation cost relating to shares acquired with the proceeds of the
loan is measured by reference to the fair value of the shares committed to be
released during the period, in accordance with Statement of Position 93-6.
Compensation cost relating to shares acquired under similar arrangements prior
to fiscal 1995 was measured using the shares allocated method; all of such
shares were committed to being released on or before September 30, 1994. Total
compensation cost under the ESOP was approximately $997,000, $1,067,000 and
$1,471,000 in 1996, 1995 and 1994, respectively, which, in 1995 and 1994,
includes discretionary cash contributions to the ESOP unrelated to the debt
service on the bank loan.
At September 30, 1996 the ESOP held a total of 519,462 shares of the
Company's common stock having a fair value of approximately $14 million. Of the
total number of shares, 40,636 shares have been committed to be released,
142,248 shares are held in suspense and the balance, representing shares
acquired using cash contributed to the ESOP in excess of its debt service
requirements and shares acquired in prior years, have been allocated to plan
participants. Uncommitted ESOP shares are included at cost in unearned
compensation in the consolidated balance sheet.
31
NOTES 15-CONTINGENCIES
The Company is subject to legal proceedings and claims which have arisen in
the ordinary course of its business and have not been finally adjudicated. These
actions, when ultimately concluded and determined will not, in the opinion of
management, have a material effect on results of operations or financial
condition of the Company.
NOTE 16-FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is a party to on- and off-balance sheet financial instruments
as a result of its financing and funding activities. On-balance sheet financial
assets include loans originated in conjunction with retail home sales, loans
purchased from third parties, trade receivables arising from sales of homes to
independent dealers and other receivables. The Company has estimated the fair
value of consumer loans receivable by discounting the estimated future cash
flows relating thereto using interest rates which approximate the interest rates
charged by Oakwood Acceptance as of year end for loans of similar character and
duration. Due to their short-term nature, the fair values of trade and other
receivables approximates their carrying values.
The Company estimates the fair value of retained regular and residual
interests in REMIC securitizations based upon default, prepayment and interest
rate assumptions which management believes market participants would use for
similar instruments. However, there exists no active market for manufactured
housing residual REMIC interests or uniformly accepted valuation methodologies.
Based on current estimates, management believes that the fair value of the
Company's retained REMIC interests approximates their carrying values.
On-balance sheet financial obligations consist of amounts outstanding under
the Company's short-term credit facilities and notes and bonds payable. The
Company estimates the fair values of debt obligations using 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.
Off-balance sheet interest rate protection agreements at September 30, 1996
consisted of options on forward starting interest rate swaps in the aggregate
notional amount of $193 million expiring on October 17, 1996. These agreements
are valued at the amount payable or receivable by the Company had the contracts
been terminated at year end.
The following table sets forth the carrying amounts and estimated fair
values of the Company's financial instruments at September 30, 1996 and 1995:
1996 1995
ESTIMATED CARRYING Estimated Carrying
FAIR VALUE AMOUNT fair value amount
(in thousands)
Assets
Cash and cash equivalents 28,577 28,577 $ 6,189 $ 6,189
Receivables and investments
Loans held for sale 307,983 306,465 246,372 244,593
Loans held for investment
Fixed rate loans 93,434 87,526 173,135 160,732
Variable rate loans 10,977 10,977 12,813 12,813
Trade receivables 5,771 5,771 8,025 8,025
Other receivables 45,722 45,722 14,591 14,591
Less: reserve for uncollectible
receivables - (6,331) - (8,611)
Retained REMIC regular
interests 9,724 9,724 28,133 28,133
Retained REMIC residual
interests 48,971 48,971 20,599 20,599
Liabilities
Short-term borrowings 145,506 145,506 154,400 154,400
Interest rate protection
agreements 1,362 - - -
Notes and bonds payable
Fixed rate obligations 87,691 86,252 144,389 139,641
Variable rate obligations 48,127 48,127 59,171 59,171
32
NOTE 17-QUARTERLY FINANCIAL DATA (UNAUDITED)
A summary of quarterly financial information follows:
First Second Third Fourth
quarter quarter quarter quarter Year
(in thousands, except per share data)
1996
Net sales $176,269 $191,223 $239,305 $255,282 $862,079
Gross profit 46,046 54,379 73,552 78,799 $252,776
Net income 13,877 16,152 17,869 20,357 68,255
Earnings per share
Primary .30 .35 .38 .44 1.47
Fully diluted .30 .35 .38 .44 1.47
1995
Net sales $149,489 $168,991 $204,240 $218,801 $741,521
Gross profit $ 37,465 $ 43,862 $ 55,348 $ 61,526 $198,201
Net income $ 8,459 $ 10,370 $ 12,791 $ 15,003 $ 46,623
Pro forma net income $ 8,212 $ 9,862 $ 12,241 $ 15,003 $ 45,318
Pro forma earnings per share
Primary $ .18 $ .21 $ .27 $ .33 $ .99
Fully diluted $ .18 $ .21 $ .27 $ .32 $ .98
33
NOTE18-BUSINESS SEGMENT INFORMATION
The Company operates in two principal businesses. The manufactured housing
segment includes the Company's retail and manufacturing operations. The
Company's retail business purchases homes primarily from the Company's
manufacturing operations but supplements these purchases in certain markets with
purchases from third party manufacturers. The Company's manufacturing operations
sell a substantial majority of its homes to the Company's retail operations,
with a lesser portion distributed through independent dealers. The manufactured
housing segment also includes the Company's communities development arm, which
was engaged in developing both rental communities and manufactured housing
subdivisions. In late 1996 the Company decided to exit the land development
business and on September 30, 1996 sold its seven manufactured housing rental
communities and related inventories for approximately $26 million. The Company
expects to dispose of its remaining land development assets, which have a
carrying value of approximately $6 million at September 30, 1996.
The financial services segment provides retail financing to customers of
the manufactured housing segment as well as to customers of independent retail
dealers. This segment both originates and services loans, and securitizes the
loans in the public and private markets as a source of capital. The segment also
reinsures credit life insurance risk on policies sold to retail customers.
Segment operating income is income before general corporate expenses, 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 principally of cash,
certain property and other investments.
1996 1995 1994
(in thousands)
Revenues
Manufactured housing $881,218 $758,370 $606,725
Financial services 92,346 61,995 56,771
Investment income 358 1,047 1,114
$973,922 $821,412 $664,610
Operating income
Manufactured housing(1) 82,181 $ 60,806 $ 48,812
Financial services 52,387 24,449 19,899
Combined 134,568 85,255 68,711
Non-financial interest expense (2,221) (2,259) (1,149)
Investment income 358 1,047 1,114
General corporate expenses(2) (22,025) (11,046) (11,967)
Income before income taxes $110,680 $ 72,997 $ 56,709
Identifiable assets
Manufactured housing $307,771 $286,147 $197,738
Financial services 490,472 477,262 375,507
General corporate 43,734 19,231 17,152
$841,977 $782,640 $590,397
Depreciation and amortization
Manufactured housing 7,302 $ 5,683 $ 3,782
Financial services 565 765 784
General corporate 2,594 1,830 960
10,461 $ 8,278 $ 5,526
Capital expenditures
Manufactured housing 24,290 $ 25,276 $ 23,911
Financial services 1,247 956 511
General corporate 15,766 15,638 3,803
41,303 $ 41,870 $ 28,225
(1) Includes one-time charges of approximately $663,000 in 1995 relating to
the sale of a manufactured housing facility.
(2) Includes one-time charges of approximately $537,000 in 1995 relating to
down-sizing corporate overhead staff at Golden West; includes one-time charges
of approximately $1.3 million in 1994 for costs relating to the Golden West
acquisition.
34
REPORT OF INDEPENDENT
ACCOUNTANTS
To the Board of Directors and Shareholders of
Oakwood Homes Corporation (Price Waterhouse LLP logo)
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, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in
the period ended September 30, 1996, 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 Destiny
Industries, Inc., a wholly-owned subsidiary, which statements reflect
total revenues of $89,080,000 for the year ended October 1, 1994
(see Note 2). 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
Destiny Industries, Inc., 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.
/s/ Price Waterhouse LLP
Winston-Salem, North Carolina
November 4, 1996
35
COMMON OAKWOOD HOMES CORPORATION AND SUBSIDIARIES
STOCK PRICES(1)
1996 1995 1994 1993 1992
Quarter HIGH LOW High Low High Low High Low High Low
First 21 165/8 131/4 103/8 141/4 111/4 105/8 61/2 51/2 33/4
Second 253/4 181/2 131/2 107/8 147/8 101/8 113/4 83/4 81/4 51/8
Third 25 20 131/2 115/8 117/8 95/8 105/8 85/8 77/8 51/8
Fourth 28 203/8 181/8 127/8 141/2 111/8 13 103/8 71/2 51/4
DIVIDEND
INFORMATION(1)
The Company declared a cash dividend of $.01 per common share during each of
the eight quarters in the period ended September 30, 1996.
(1) Adjusted retroactively to give effect to stock dividends and stock
splits.
36
SHAREHOLDER INFORMATION GUIDE
DIRECTORS
NICHOLAS J. ST. GEORGE
Elected 1972
President and
Chief Executive Officer
A. STEVEN MICHAEL
Elected 1992
Executive Vice President and
Chief Operating Officer
C. MICHAEL KILBOURNE
Elected 1995
Executive Vice President and
Chief Financial Officer
CLARENCE W. WALKER*
Elected 1971
Partner, Kennedy Covington
Lobdell & Hickman, L.L.P.
Attorneys at Law
KERMIT G. PHILLIPS, II*
Elected 1979
Chairman, Phillips Management
Group, Inc. (Real Estate
Development and Management)
DENNIS I. MEYER(dagger)
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.(dagger)
Elected 1993
Private Investor
ROGER W. SCHIPKE
Elected 1996
Private Investor
*Member of the Audit Committee
(dagger) Member of the Compensation
Committee
EXECUTIVE OFFICERS
NICHOLAS J. ST. GEORGE
President and
Chief Executive Officer
A. STEVEN MICHAEL
Executive Vice Pr
Chief Operating Officer
C. MICHAEL KILBOURNE
Executive Vice Pr
Chief Financial Officer
DOUGLAS R. MUIR
Senior Vice President,
Secretary and Treasurer
JEFFREY D. MICK
Senior Vice President
and Controller
MYLES E. STANDISH
Senior Vice President and
General Counsel
J. MICHAEL STIDHAM
Executive Vice President
Retail
WILLIAM G. EDWARDS
Executive Vice President
Manufacturing
LARRY T. GILMORE
Executive Vice President
Consumer Finance
MAILING ADDRESS
Oakwood Homes Corporation
Post Office Box 27081
Greensboro, North Carolina 27425-7081
(910) 664-2400
LEGAL COUNSEL
Kennedy Covington Lobdell & Hickman, L.L.P.
Charlotte, North Carolina
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
Winston-Salem, North Carolina
TRANSFER AGENT AND REGISTRAR
First Union National Bank of North Carolina
Shareholder Services Group
230 South Tryon Street, 11th Floor
Charlotte, North Carolina 28288-1153
(800) 829-8432
SECURITIES EXCHANGE LISTING
New York Stock Exchange
Ticker Symbol-OH
NUMBER OF SHAREHOLDERS OF RECORD
1,044 as of November 29, 1996
CASH DIVIDENDS
Cash dividends on Oakwood Common Stock
have been paid for 21 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) 664-2360
ANNUAL MEETING
The annual meeting of shareholders will be held
in Greensboro, North Carolina at 2 p.m. on
Wednesday, January 29, 1997.
10-K REPORT
The Corporation will provide without charge
a copy of its annual report on Form 10-K
as filed with the Securities and Exchange
Commission upon receipt of a written request.
This request should be addressed to the
Corporate Secretary.
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http://www.oakwoodhomes.com