UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED December 31, 2001
-----------------------
COMMISSION FILE NUMBER 1-8824
---------
CLAYTON HOMES, INC.
(Exact name of registrant as specified in its charter)
Delaware 62-1671360
----------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
5000 Clayton Road
Maryville, Tennessee 37804
----------------------------------- -----------------------------------
(Address of principal (zip code)
executive offices)
865-380-3000
-----------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No.
--
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Shares of common stock $.10 par value, outstanding on January 31, 2001:
137,618,480.
1
CLAYTON HOMES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - in thousands except per share data)
Three Months Ended Six Months Ended
December 31, December 31,
2001 2000 2001 2000
-------- --------- --------- ---------
REVENUES
Net sales $207,753 $204,138 $435,256 $434,046
Financial services 80,631 61,511 141,657 114,738
Rental and other income 18,436 19,204 35,977 36,876
-------- --------- --------- ---------
Total revenues 306,820 284,853 612,890 585,660
-------- --------- --------- ---------
COSTS AND EXPENSES
Cost of sales 135,425 136,367 284,524 289,998
Selling, general and administrative 101,238 92,731 197,400 187,092
Financial services interest 109 187 236 394
Provision for credit losses 16,640 10,100 30,200 17,300
-------- --------- --------- ---------
Total expenses 253,412 239,385 512,360 494,784
-------- --------- --------- ---------
OPERATING INCOME 53,408 45,468 100,530 90,876
Interest income (expense), net/other - (1,903) (5,002) (1,329)
-------- --------- --------- ---------
Income before income taxes 53,408 43,565 95,528 89,547
Provision for income taxes 19,700 16,100 35,300 33,100
-------- --------- --------- ---------
Net income $ 33,708 $ 27,465 $ 60,228 $ 56,447
======== ========= ========= =========
NET INCOME PER COMMON SHARE
Basic $ 0.25 $ 0.20 $ 0.44 $ 0.41
Diluted 0.24 0.20 0.43 0.41
DIVIDENDS PAID PER COMMON SHARE $ - $ 0.016 $ - $ 0.032
AVERAGE SHARES OUTSTANDING
Basic 137,391 137,631 137,711 137,575
Diluted 138,438 138,073 138,785 137,944
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
December 31, June 30,
2001 2001
---------- ----------
ASSETS
Cash and cash equivalents $ 25,010 $ 47,763
Trade receivables 8,824 14,683
Other receivables, net 644,416 657,224
Residual interests in installment contract receivables 197,805 170,122
Inventories 180,473 185,695
Property, plant and equipment, net 309,501 309,438
Other assets 263,040 269,245
---------- ----------
Total assets $1,629,069 $1,654,170
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 81,095 $ 118,057
Debt obligations 94,492 141,862
Other liabilities 250,075 246,773
---------- ----------
Total liabilities 425,662 506,692
SHAREHOLDERS' EQUITY
Accumulated other comprehensive income 10,771 8,949
Other shareholders' equity 1,192,636 1,138,529
---------- ----------
Total shareholders' equity 1,203,407 1,147,478
---------- ----------
Total liabilities and shareholders' equity $1,629,069 $1,654,170
========== ==========
(See accompanying notes to the condensed consolidated financial statements)
2
CLAYTON HOMES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
Six Months Ended
December 31,
2001 2000
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 60,228 $ 56,447
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 9,489 10,824
Amortization associated with sale of installment contract receivables 22,525 20,484
Gain on sale of installment contract receivables (35,510) (14,124)
Provision for credit losses 30,200 17,300
Realized loss on securities available-for-sale - 588
Deferred income taxes (3,027) (3,689)
Decrease (increase) in other receivables, net (52,508) 10,887
Decrease in inventories 5,222 17,964
Decrease in accounts payable, accrued liabilities, and other (40,956) (82,791)
---------- ----------
Cash provided by operations (4,337) 33,890
Origination of installment contract receivables (436,279) (393,123)
Proceeds from sales of originated installment contract receivables 670,374 468,213
Principal collected on originated installment contract receivables 23,430 20,104
---------- ----------
Net cash provided by operating activities 253,188 129,084
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of installment contract receivables (885,451) (214,021)
Proceeds from sales of acquired installment contract receivables 643,902 64,594
Principal collected on acquired installment contract receivables 32,539 10,913
Proceeds from sales of securities available-for-sale - 19,427
Acquisition of property, plant and equipment (9,552) (14,328)
Decrease (increase) in restricted cash (3,888) 9,161
---------- ----------
Net cash used in investing activities (222,450) (124,254)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends - (4,627)
Repayment of debt obligations (47,370) (1,587)
Issuance of stock for incentive plans and other 3,516 1,734
Repurchase of common stock (9,637) (482)
---------- ----------
Net cash used in financing activities (53,491) (4,962)
---------- ----------
Net decrease in cash and cash equivalents (22,753) (132)
Cash and cash equivalents at beginning of period 47,763 43,912
---------- ----------
Cash and cash equivalents at end of period $ 25,010 $ 43,780
========== ==========
(See accompanying notes to the condensed consolidated financial statements)
3
CLAYTON HOMES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The condensed consolidated financial statements of Clayton Homes, Inc.
and its wholly and majority owned subsidiaries (the Company) have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted. The condensed
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Annual Report
to Shareholders for the year ended June 30, 2001.
The information furnished reflects all adjustments which are necessary for a
fair presentation of the Company's financial position as of December 31, 2001,
and the results of its operations and its cash flows for the three and six month
periods ended December 31, 2001 and 2000. All such adjustments are of a normal
recurring nature. The results of operations for the three and six months ended
December 31, 2001, are not necessarily indicative of the results to be expected
for the respective full year.
2. The Company follows the accounting requirements of Emerging Issues Task Force
(EITF) 99-20, Recognition of Interest Income and Retained Beneficial Interests
in Securitized Financial Assets. Under these guidelines, the Company evaluated
the expected future cash flows from its available-for-sale interest-only
securities on a disaggregate security by security basis and determined that
there was a favorable difference in estimated cash flows of $3.3 million ($2.1
million after tax) for the six months ended December 31, 2001. This favorable
adjustment has been recorded as an element of accumulated other comprehensive
income. Other changes in accumulated other comprehensive income are included in
the following:
Three Months ended Six Months ended
December 31, December 31,
2001 2000 2001 2000
------- ------ ------- ------
Accumulated other comprehensive income beginning balance 11,023 (1) 8,949 (681)
Unrealized gains (losses) on securities
available-for-sale (1,230) 667 (277) 1,347
Unrealized gains (losses) on residual interests 978 - 2,099 -
Reclassification of realized losses on securities
available-for-sale included in net income - 370 - 370
------- ------ ------- ------
Accumulated other comprehensive income ending balance. . 10,771 1,036 10,771 1,036
======= ====== ======= ======
3. The Company follows the provisions of SFAS 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities. The key
economic assumptions used in the valuation of the residual interest for the
securitization completed during the quarter were: prepayment speed of 300% of
the MHP (Manufactured Housing Prepayment speed) model, weighted average life of
4.48 years, expected credit losses of 2.44% and residual cash flow discount rate
of 15.75%. The key economic assumptions used in the valuation of the existing
portfolio generally remained the same as those used at June 30, 2001.
4
CLAYTON HOMES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
4. The Company has $75 million of 6.25% Senior Notes due December 30, 2003, the
proceeds of which are primarily used to facilitate the purchase, origination and
warehousing of loan portfolios. The Senior Notes are guaranteed by all
significant subsidiaries of the Company and are governed by various financial
covenants which require maintenance of certain financial ratios.
On December 21, 2001, the Company acquired manufactured housing installment
contract receivables with an aggregate outstanding principal balance of $900
million. In conjunction with that transaction, the Company sold $500 million of
the receivables through a committed one-year sales facility, while retaining the
servicing rights. This sale resulted in a pre-tax gain of $6.2 million during
the quarter ended December 31, 2001 as a result of the servicing asset for the
same amount being recorded.
In addition, a committed one-year $150 million participation facility is
available to facilitate the future sale of manufactured housing contracts. The
participation facility was not utilized as of December 31, 2001.
5. The following reconciliation details the numerators and denominators used to
calculate basic and diluted earnings per share for the respective periods:
Three Months Ended Six Months Ended
December 31, December 31,
(in thousands except per share data) 2001 2000 2001 2000
-------- -------- -------- --------
Net income $ 33,708 $ 27,465 $ 60,228 $ 56,447
Average shares outstanding
Basic 137,391 137,631 137,711 137,575
Add: common stock equivalents (1) 1,047 442 1,074 369
-------- -------- -------- --------
Diluted 138,438 138,073 138,785 137,944
Net income per common share
Basic $ 0.25 $ 0.20 $ 0.44 $ 0.41
Diluted $ 0.24 $ 0.20 $ 0.43 $ 0.41
(1) Common stock equivalents are principally stock options. Stock options to
purchase 219,000 and 2,877,916 shares of common stock for the three months
ending December 31, 2001, and 2000, respectively, and stock options to purchase
218,212 and 2,877,916 shares of common stock for the six month periods ending
December 31, 2001 and 2000, respectively, were not included in the computation
of diluted earnings per share because their inclusion would have been
antidilutive.
6. In June 2001, the FASB issued Statement No. 141 (SFAS 141), Business
Combinations, and Statement No. 142 (SFAS 142), Goodwill and Other Intangible
Assets. SFAS 141 supercedes APB 16, Business Combinations, and requires the
purchase method of accounting for all business combinations initiated after June
30, 2001. SFAS 142 supercedes APB 17, Intangible Assets and primarily requires
that goodwill and indefinite lived intangible assets no longer be amortized and
will be tested for impairment at least annually at a reporting unit level. SFAS
142 is effective for fiscal years beginning after December 15, 2001. The
adoption of SFAS 141 had no effect and the
5
CLAYTON HOMES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
adoption of SFAS 142 is not expected to have a material impact on the Company's
reported results of operations, financial position or cash flows.
In June 2001, the FASB issued Statement No. 143 (SFAS 143), Accounting for Asset
Retirement Obligations. SFAS 143 requires that obligations associated with the
retirement of a tangible long-lived asset to be recorded as a liability when
those obligations are incurred, with the amount of the liability initially
measured at fair value. SFAS 143 will be effective for financial statements for
fiscal years beginning after June 15, 2002. Adoption of this statement is not
expected to have a material impact on the Company's reported results of
operations, financial position or cash flows.
On July 6, 2001, the staff of the Securities and Exchange Commission (SEC)
issued Staff Accounting Bulletin No. 102 (SAB 102), Selected Loan Loss Allowance
Methodology and Documentation Issues. SAB 102 affects registrants that are
creditors in loan transactions where such transactions, individually or in the
aggregate, have a material effect on the registrant's financial statements.
Among other things, it contains:
- Current loan loss allowance guidance under generally accepted accounting
principles and under the SEC's rules and interpretations; SAB 102 does not,
however, change any of the current accounting rules related to loan loss
provisions or allowances.
- General factors or elements to consider when developing and documenting a
systematic methodology for loan loss allowances. SEC staff expectations for
measuring and documenting loan impairment under FASB Statement No. 114,
Accounting by Creditors for Impairment of a Loan, and FASB Statement No. 5,
Accounting for Contingencies.
- SEC staff expectations regarding a registrant's documentation of the
results of its systematic loan loss methodology. Guidance on validating,
and documenting the validation of, the systematic loan loss methodology.
The Company believes that its practices already comply with the provisions of
SAB 102, and its adoption is not expected to have a material impact on the
Company's reported results of operations, financial position, or cash flows.
In August 2001, the FASB issued Statement No. 144 (SFAS 144), Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS 144 supercedes SFAS 121 and
applies to all long-lived assets (including discontinued operations) and
consequently amends Accounting Principles Board Opinion No. 30 (APB 30),
Reporting Results of Operations Reporting the Effects of Disposal of a Segment
of a Business. SFAS 144 requires that long-lived assets that are to be disposed
of by sale be measured at the lower of book value or fair value less cost to
sell. SFAS 144 is effective for financial statements issued for fiscal years
beginning after December 15, 2001 and, generally, its provisions are to be
applied prospectively. Adoption of this statement is not expected to have a
material impact on the Company's reported results of operations, financial
position or cash flows.
6
CLAYTON HOMES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
7. The Company operates primarily in four business segments: Retail,
Manufacturing, Financial Services and Communities. The following table
summarizes information with respect to the Company's business segments for the
three and six-month periods ended December 31, 2001 and 2000:
Three Months Ended Six Months Ended
December 31, December 31,
(in thousands) 2001 2000 2001 2000
----------- ----------- ---------- ----------
REVENUES
Retail $ 162,028 $ 159,063 $ 337,425 $ 332,308
Manufacturing 134,370 117,273 265,889 248,907
Financial Services 69,023 50,930 118,672 93,742
Communities 20,768 19,954 41,193 42,554
Intersegment sales (79,369) (62,367) (150,289) (131,851)
----------- ----------- ---------- ----------
Total revenues $ 306,820 $ 284,853 $ 612,890 $ 585,660
=========== =========== ========== ==========
OPERATING INCOME
Retail $ 5,681 $ 4,349 $ 13,816 $ 12,516
Manufacturing 12,104 8,244 24,255 19,551
Financial Services 37,650 29,655 63,494 53,538
Communities 2,163 2,836 4,993 6,290
Eliminations/Other (4,190) 384 (6,028) (1,019)
----------- ----------- ---------- ----------
Total operating income $ 53,408 $ 45,468 $ 100,530 $ 90,876
=========== =========== ========== ==========
CAPITAL EXPENDITURES
Retail $ 958 $ 1,423 $ 2,241 $ 3,591
Manufacturing 1,723 1,055 2,621 2,381
Financial Services - 53 80 146
Communities 2,590 1,937 3,936 8,331
Eliminations/Other 134 235 674 (121)
----------- ----------- ---------- ----------
Total capital expenditures $ 5,405 $ 4,703 $ 9,552 $ 14,328
=========== =========== ========== ==========
December 31, June 30,
2001 2001
----------- -----------
IDENTIFIABLE ASSETS
Retail $ 250,312 $ 255,793
Manufacturing 75,003 82,616
Financial Services 1,067,426 1,080,416
Communities 194,747 191,802
Eliminations/Other 41,581 43,543
----------- -----------
Total identifiable assets $1,629,069 $1,654,170
=========== ===========
7
PART I -- FINANCIAL INFORMATION (Unaudited)
ITEM 1. Financial Statements.
----------------------
See pages 2 through 7.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
-------------------------------------------------------------------
Results of Operations.
----------------------
SIX MONTHS ENDED DECEMBER 31, 2001:
The following table reflects the percentage changes in retail sales for the
Company's retail and community sales centers and wholesale sales to independent
retailers. It also reflects percentage changes in the average number of
Company-owned retail centers, independent retailers and communities, the average
sales per location, and the average price per home sold in each category.
First Six Months
Fiscal Year 2002 vs 2001
-------------------------
Retail
Dollar sales + 0.9%
Number of retail centers - 6.2%
Dollar sales per retail center + 7.6%
Price of home + 3.4%
Wholesale
Dollar sales + 0.5%
Number of independent retailers -13.0%
Dollar sales per independent retailer +15.5%
Price of home + 7.7%
Communities
Dollar sales -11.2%
Number of communities + 5.9%
Dollar sales per community -16.2%
Price of home - 0.3%
Total revenues for the six months ended December 31, 2001, increased 5% to $613
million, which consisted of a slight increase in manufactured housing sales to
$435 million, a 23% increase in financial services income to $142 million and a
2% decrease in rental and other income to $36 million.
Manufactured housing industry conditions remain highly competitive at the
retail, wholesale, and finance levels. This competitive environment, as well as
industry foreclosures and aging retail inventory, has contributed to decreased
industry sales and significant closings of industry retail stores and
manufacturing plants. However, the closings of industry plants and retail
stores have slowed recently, and industry conditions could improve in calendar
2002.
Within revenues of the Retail segment, the group experienced a slight increase
in net sales to $303 million as the average home price increased 3% and the
average number of homes sold per sales center
8
rose 4%. The number of Company-owned sales centers declined 6% and the number
of independent retailers decreased 13% as a result of continuous evaluation of
existing markets' strategic fit into the Company's operating model and
distribution channels. In addition, net sales of the Manufacturing group to
independent retailers increased slightly to $116 million, while the number of
homes sold decreased 7% to 4,453. Within the Communities segment revenues, net
sales decreased 11% to $16 million as 11% less homes were sold, and the average
home selling price decreased slightly.
Interest and loan servicing revenues within the Financial Services segment
increased $7 million, and insurance related revenues rose $2 million. Rental
and other income decreased 2% as Communities rental income rose 2%.
Loans sold through asset-backed securities totaled $815 million, compared to
$533 million during the same period last year.
Gross profit margins increased to 34.6% from 33.2% primarily due to
internalization of retail sales. Selling, general and administrative expenses,
as a percent of revenues, increased to 32.2% from 31.9% in the prior year
period. The increase in the provision for credit losses was primarily due to
the additional number of contracts in foreclosure from the same period last
year.
Interest and other expense increased $3.7 million to $5 million. This increase
was attributable to falling interest rates which adversely impacted the value of
the Company's interest rate swaps. During the six months ended December 31,
2001, there was an unfavorable mark-to-market adjustment of $3.2 million
relating to the swaps. In the comparable period last year, there was a $.5
million mark-to-market unfavorable swap adjustment.
The following table represents delinquent installment sales contracts as a
percentage of the total number of installment sales contracts which the Company
services and either owns or for which it is contingently liable. A contract is
considered delinquent if any payment is more than one month past due.
December 31,
2001 2000
----- -----
Total delinquency as a percentage of contracts outstanding:
All contracts 4.23% 3.62%
Contracts originated by VMF 3.37% 2.93%
Contracts acquired from other institutions 7.37% 7.07%
9
The following table sets forth information related to loan loss/repossession
experience for all installment contract receivables which the Company either
owns or for which it is contingently liable.
Six Months Ended
December 31,
2001 2000
------ ------
Net losses as a percentage of average
loans outstanding (annualized):
All contracts 2.0% 1.7%
Contracts originated by VMF 2.0% 1.6%
Contracts acquired from other institutions 1.9% 2.0%
Number of contracts in repossession:
All contracts 2,930 2,726
Contracts originated by VMF 2,420 2,252
Contracts acquired from other institutions 510 474
Total number of contracts in repossession
as a percentage of total contracts 1.9% 2.0%
The overall decrease in inventories as of December 31, 2001, from June 30, 2001,
is explained as follows:
($ in millions)
Manufacturing Increase (decrease)
------------- --------------------
Finished goods $ (0.9)
Raw materials (1.7)
Retail
------
Decrease in inventory levels at
Company-owned retail centers (4.8)
Communities
-----------
Increase in inventory levels at 77
Communities open at June 30, 2001 1.7
Inventory to stock four new
Communities 0.5
--------------------
$(5.2)
====================
On December 31, 2001, the order backlog for the Manufacturing group (consisting
of Company-owned and independent retailer orders) increased to $40 million, as
compared to $9 million for the same period last year.
10
SECOND QUARTER ENDED DECEMBER 31, 2001:
The following table reflects the percentage changes in retail sales for the
Company's retail and community sales centers and wholesale sales to independent
retailers. It also reflects percentage changes in the average number of
Company-owned retail centers, independent retailers and communities, the average
sales per location, and the average price per home sold in each category.
Second Three Months
Fiscal Year 2002 vs 2001
-------------------------
Retail
Dollar sales + 1.0%
Number of retail centers - 6.4%
Dollar sales per retail center + 7.8%
Price of home + 1.1%
Wholesale
Dollar sales + 3.4%
Number of independent retailers -11.6%
Dollar sales per independent retailer +17.1%
Price of home + 4.1%
Communities
Dollar sales + 5.1%
Number of communities + 5.2%
Dollar sales per community - 0.1%
Price of home + 0.9%
Total revenues for the three months ended December 31, 2001, increased 8% to
$307 million, which consisted of a 2% increase in manufactured housing sales to
$208 million, a 31% increase in financial services income to $81 million and a
4% decrease in rental and other income to $18 million.
Within the Retail segment revenues, the group experienced an increase in net
sales of 1% to $145 million, as the average home price increased 1%, and the
average number of homes sold per sales center increased 7%. The number of
Company-owned sales centers and independent retailers decreased 6% and 12%,
respectively, due to the Company's continuous evaluation of a retail center's
strategic fit into the Company's operating model and distribution channels. In
addition, net sales of the Manufacturing group to independent retailers
increased 3% to $55 million, and the number of homes sold decreased 1% to 2,113.
Within the Communities segment revenues, net sales increased 5% to $8 million as
4% more homes were sold, while the average home selling price increased 1%.
Interest and loan servicing revenues within the Financial Services segment
increased $4 million, and insurance related revenues rose $1 million. Rental
and other income decreased 4% as Communities rental income rose 2%.
11
Loans sold through asset-backed securities totaled $415 million, compared to
$268 million during the same period last year.
Gross profit margins increased to 34.8% from 33.2% due to higher internalization
of retail sales. Selling, general and administrative expenses, as a percent of
revenues, increased to 33.0% from 32.6% in the prior year period. The increase
in the provision for credit losses was primarily due to the additional number of
contracts in foreclosure from the same period last year.
The following table sets forth write-off experience for the quarters ended
December 31, 2001 and 2000:
Second Quarter Ended
December 31,
2001 2000
------ ------
Net losses as a percentage of average
loans outstanding (annualized):
All contracts 2.0% 1.8%
Contracts originated by VMF 1.9% 1.7%
Contracts acquired from other institutions 2.4% 2.3%
Liquidity and Capital Resources
----------------------------------
Cash and cash equivalents at December 31, 2001, were $25 million as compared to
$48 million at June 30, 2001. The Company anticipates meeting cash requirements
with cash flow from operations, revolving credit lines, a commercial paper sales
facility, a participation facility, senior notes, and sales of installment
contract and mortgage loan receivables and GNMA certificates.
The Company's debt to capital ratio was 7% at December 31, 2001. The Company had
long-term debt outstanding of $95 million and $142 million at December 31, 2001
and June 30, 2001, respectively. Short-term debt available consists of $165
million committed and $71 million uncommitted lines of credit. These lines of
credit do not require collateral and are priced on LIBOR rates. The committed
credit lines are guaranteed by all significant subsidiaries of the Company and
are governed by various financial covenants which require maintenance of certain
financial ratios.
The Company has $75 million of 6.25% Senior Notes due December 30, 2003, which
are primarily to facilitate the purchase, origination and warehousing of loan
portfolios. The Senior Notes are guaranteed by all significant subsidiaries of
the Company and are governed by various financial covenants which require
maintenance of certain financial ratios.
On December 21, 2001, the Company acquired manufactured housing installment
contract receivables with an aggregate outstanding principal balance of $900
million. In conjunction with that transaction, the Company sold $500 million of
the receivables through a committed one-year sales facility, while retaining the
servicing rights. This sale resulted in a pre-tax gain of $6.2 million during
the quarter ended December 31, 2001 as a result of the servicing asset for the
same amount being recorded.
In addition, a committed one year $150 million participation facility is also
available to facilitate the future sale of manufactured housing contracts. The
participation facility was not utilized at December 31, 2001. The Company owns
its inventory; therefore no floorplanning arrangements are necessary.
12
Forward Looking Statements
----------------------------
Certain statements in this quarterly report are forward looking as defined in
the Private Securities Litigation Reform Law. These statements involve certain
risks and uncertainties that may cause actual results to differ materially from
expectations as of the date of this report. These risks fall generally within
three broad categories consisting of industry factors, management expertise, and
government policy and economic conditions. Industry factors include such
matters as potential periodic inventory adjustments by both captive and
independent retailers, availability of wholesale and retail financing, general
or seasonal weather conditions affecting sales and revenues, catastrophic events
impacting insurance costs, cost of labor and/or raw materials and industry
consolidation trends creating fewer, but stronger, competitors capable of
sustaining competitive pricing pressures.
Management expertise is affected by management's overall ability to anticipate
and meet consumer preferences, maintain successful marketing programs, continue
quality manufacturing output, keep a strong cost management oversight, and
project stable gain on sale accounting assumptions. Lastly, management has the
least control over government policy and economic conditions such as prevailing
interest rates, capital market liquidity, government monetary policy, stable
regulation of manufacturing standards, consumer confidence, favorable trade
policies, and general prevailing economic and employment conditions.
13
PART II - - OTHER INFORMATION
ITEM 1 - There were no reportable events for Items 1 through 5.
ITEM 6 - Exhibits and Reports for Form 8-K.
---------------------------------------
(a) Reports on Form 8-K.
Clayton Homes, Inc./Vanderbilt Mortgage & Finance, Inc. Senior Subordinate
Pass-Through Certificates Series 2001C. Filed November 15, 2001.
Clayton Homes, Inc./ Vanderbilt Mortgage & Finance, Inc. incorporation of
financial statements of Clayton Homes, Inc. into registration statement file no.
333-57532 pertaining to Senior Subordinate Pass-Through Certificates Series
2001C. Filed November 21, 2001.
14
CLAYTON HOMES, INC.
-------------------
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CLAYTON HOMES, INC.
---------------------
(Registrant)
Date: February 12, 2002 /s/ Kevin T. Clayton
------------------- -----------------------
Kevin T. Clayton
Chief Executive Officer and President
Date: February 12, 2002 /s/ John J. Kalec
------------------- -----------------------
John J. Kalec
Senior Vice President and
Chief Financial Officer
Date: February 12, 2002 /s/ Greg A. Hamilton
------------------- -----------------------
Greg A. Hamilton
Vice President and Controller
15