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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (FEE REQUIRED)
For the fiscal year ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ____________ to ________________
Commission file number 1-7444
OAKWOOD HOMES CORPORATION
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
NORTH CAROLINA 56-0985879
- ---------------------------------------- ------------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)
7800 McCloud Road, Greensboro, NC 27409-9634
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(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code: (336)664-2400
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
------------------- ----------------
Common Stock, Par Value New York Stock Exchange, Inc.
$.50 Per Share
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Company: (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 Company
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Company's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of shares of the Company's $.50 par value
Common Stock, its only outstanding class of common equity, held by
non-affiliates as of December 10, 1999 was $126,052,754.
The number of issued and outstanding shares of the Company's $.50 par
value Common Stock, its only outstanding class of common stock, as of December
10, 1999 was 47,124,562 shares.
The indicated portions of the following documents are incorporated by
reference into the indicated parts of this Annual Report on Form 10-K:
Parts Into Which
Incorporated Documents Incorporated
---------------------- ------------
Annual Report to Shareholders for the Parts I and II
Fiscal Year Ended September 30, 1999
Proxy Statement for the Substitute Annual Meeting Part III
of Shareholders to be held February 9, 2000
2
PART I
ITEM 1. BUSINESS.
Oakwood Homes Corporation, a North Carolina corporation (the
"Company"), which was founded in 1946, designs, manufactures and markets
manufactured and modular homes and finances the majority of its retail sales.
The Company operates five manufacturing lines in Texas, four in each of North
Carolina, Georgia, Oregon and Indiana, two in each of Arizona and Pennsylvania,
and one in each of California, Colorado, Kansas, Minnesota and Tennessee,
including five idled lines. The Company's manufactured homes are currently sold
at retail through 371 Company owned and operated sales centers located primarily
in the southeastern and southwestern United States and to approximately 575
independent retailers located throughout the United States. The Company sells
insurance for customers choosing to purchase insurance and assumes the related
underwriting risk through its captive reinsurance business.
Manufactured Homes
The Company designs and manufactures a number of models of homes. Each
home contains a living room, dining area, kitchen, two, three or four bedrooms
and one or two bathrooms, and is equipped with a hot water heater and central
heating. Some homes are furnished with a sofa and matching chairs, dinette set,
coffee and end tables, carpeting, lamps, draperies, curtains and screens.
Optional furnishings and equipment include a range and oven, refrigerator, beds,
a fireplace, washing machine, dryer, microwave oven, dishwasher, air
conditioning, intercom, stereo systems, wet bar, vaulted ceilings, skylights,
hardwood cabinetry and energy conservation items. The homes manufactured by the
Company are primarily sold under the registered trademarks "Oakwood," "Freedom,"
"House Smart," "Golden West," "Schult," "Marlette" and the trade name "Victory."
The Company's manufactured homes are constructed and furnished at the
Company's manufacturing facilities and transported on wheels to the homesite.
The Company's manufactured homes are normally occupied as permanent residences
but can be transported on wheels to new homesites. The Company's homes are
defined as "manufactured homes" under the United States Code, and formerly were
defined as "mobile homes."
The Company manufactures 14-foot and 16-foot wide single-section homes
and multi-section homes consisting of two floors that are joined at the homesite
and are 24, 28 or 32 feet wide. The Company also manufactures a limited number
of multi-section homes consisting of three or four floors. The Company's homes
range from 40 feet to 80 feet in length. The Company's homes are sometimes
placed on rental lots in communities of similarly constructed homes.
The Company manufactures homes at thirty lines located in Hillsboro
(2), Kileen and Navasota (2), Texas; Richfield, Rockwell (2) and Pine Bluff,
North Carolina; Moultrie, Georgia (4); Etna Green (2) and Middlebury (2),
Indiana; Buckeye, Arizona (2); Albany (2) and Hermiston (2), Oregon; Lewistown
and Milton, Pennsylvania; Perris, California; Fort Morgan, Colorado; Plainville,
Kansas; Redwood Falls, Minnesota; and Pulaksi, Tennessee, including five idled
lines. During fiscal 1999, the Company took steps to permanently close four
manufacturing lines and temporarily idle five others.
3
The Company purchases components and materials used in the manufacture
of its homes on the open market and is not dependent upon any particular
supplier. The principal raw materials purchased by the Company for use in the
construction of its homes are lumber, steel, aluminum, galvanized pipe,
insulating materials, drywall and plastics. Steel I-beams, axles, wheels and
tires, roof and ceiling materials, home appliances, plumbing fixtures,
furniture, floor coverings, windows, doors and decorator items are purchased or
fabricated by the Company and are assembled and installed at various stages on
the assembly line. Construction of the manufactured homes and the plumbing,
heating and electrical systems installed in them must comply with the standards
set by the Department of Housing and Urban Development ("HUD") under the
National Manufactured Home Construction and Safety Standards Act of 1974. See
"Regulation."
The Company furnishes to each purchaser of a new home manufactured by
the Company a one or five year limited warranty against defects in materials and
workmanship, except for equipment and furnishings supplied by other
manufacturers which are frequently covered by the manufacturers' warranties.
Modular Homes
In addition to traditional manufactured homes, the Company also
manufactures modular homes which are built in accordance with state or local
building codes and therefore are similar in specifications and design to
site-built homes. The Company's modular homes range in size from 960 square feet
to 3,355 square feet and include a variety of single story ranch homes, one and
a half story homes, two story homes, townhouses and duplex units, all of which
can include attached garages built at the site by others.
Sales
At September 30, 1999, the Company sold manufactured homes through 412
Company owned and operated sales centers located in 30 states primarily in the
southeastern and southwestern United States. See "Properties Manufactured Home
Sales Centers." The Company opened 60 new sales centers and closed seven sales
centers in fiscal 1999. Subsequent to September 30, 1999 the Company closed 41
underperforming sales centers. Each of the Company's sales centers hires and
trains sales personnel. Generally, each salesperson is paid a commission based
on the gross margin of his or her sales and certain volume targets, and each
general manager is paid a commission based on the profits of the sales center.
The Company operates its sales centers under the names Oakwood(R)
Mobile Homes, Freedom Homes(R), House Smart(R), Victory Homes, Schult(R) Homes
and Golden West Homes(R). At its sales centers, the Company sells homes
manufactured by it as well as by other manufacturers. During fiscal 1999,
approximately 97% of the Company's retail dollar sales of new homes were homes
manufactured by the Company and 3% represented sales of new homes manufactured
by others.
The Company also sells used homes acquired in trade-ins. At September
30, 1999, the Company's inventory of used homes was 1,384 homes as compared to
1,385 homes at September 30, 1998. Used homes in inventory do not include
repossessed units.
The Company also sells its homes to approximately 575 independent
retailers located throughout the United States. Sales to independent retail
dealers accounted for approximately 31% of the Company's total dollar volume of
sales in fiscal 1999 as compared to 19% in fiscal 1998. This increase resulted
from the Company's April 1, 1998 acquisition of Schult, which traditionally sold
all of its manufactured homes through independent dealers. The Company currently
sells modular homes to independent dealers.
4
During recent years, the Company has placed increased emphasis on the
sale of multi-section homes. In fiscal 1999, the Company's retail sales of new
multi-section homes represented 58% of the total number of new homes sold at
retail, as compared to 52% in fiscal 1998.
The retail sales price for new single-section homes sold by the Company
in fiscal 1999 generally ranged from $16,000 to $68,000 with a mean sales price
of approximately $32,400. The retail sales price of multi-section homes sold by
the Company in fiscal 1999 generally ranged from $27,000 to $145,000, with a
mean sales price of approximately $56,100.
The Company's sales have traditionally been higher in the period from
late spring through early fall than in the winter months. Because a majority of
the homes manufactured by the Company are sold directly to retail customers, the
Company does not believe its backlog of orders is material.
Company Retail Sales Financing
A significant factor affecting sales of manufactured homes is the
availability and terms of financing. Approximately 87% of the Company's retail
unit sales in fiscal 1999 were financed by installment sale contracts or loans
arranged by the Company, each of which provided for monthly payments generally
over a period of 5 to 30 years. The remaining 13% of retail unit sales were paid
for with cash.
In fiscal 1999, 96% of the aggregate loan originations relating to
retail unit sales and dispositions of repossessed homes were installment sales
or loans financed and warehoused by the Company for investment or later sale and
4% were installment sales or loans financed by others without recourse to the
Company. At September 30, 1999, the Company held installment sale contracts or
loans with a principal balance of approximately $289 million and serviced an
additional $3.961 billion principal balance of installment sale contracts or
loans, the substantial majority of which it originated and securitized. A
substantial majority of the installment sale contracts owned by the Company are
pledged to financial institutions as collateral for loans to the Company.
The Company processes credit applications with respect to customers
seeking financing. The Company uses a credit scoring system, updated in fiscal
1998, to improve its credit decision-making process. The most significant
criteria in the system are the stability, income and credit history of the
borrower. This system requires a minimum credit score before the Company will
consider underwriting a contract. This system allows the Company a greater
ability to standardize the process by which it decides whether to extend credit
to a customer.
The Company retains a security interest in all homes it finances. In
certain circumstances, the Company also obtains a security interest in the real
property on which a home is located.
The Company is responsible for all collection and servicing activities
with respect to installment sale contracts it owns, as well as with respect to
certain contracts that the Company originated and sold. The Company receives
servicing fees with respect to installment sale contracts that it has sold but
continues to service.
The Company's ability to finance installment sale contracts is
dependent on the availability of funds to the Company. The Company obtains funds
to finance installment sale contracts primarily through sales of real estate
mortgage investment conduit ("REMIC") trust certificates to institutional
investors. During fiscal 1999, the Company sold $1.49 billion of REMIC
securities. The Company generally has no
5
credit exposure with respect to securitized contracts except (i) with respect to
breaches of representations and warranties, (ii) to the extent of any retained
interests in a REMIC, (iii) with respect to required servicer advances, (iv)
with respect to the servicing fee (which is subordinated) and (v) with respect
to any REMIC security the Company has guaranteed.
The Company also obtains financing from time to time from loans insured
by the Federal Housing Administration ("FHA"). These installment sale contracts
are permanently funded primarily through the Government National Mortgage
Association ("GNMA") pass-through program, under which the Company issues
obligations guaranteed by GNMA. During fiscal 1999, the Company issued no
obligations guaranteed by GNMA. FHA insurance minimizes the Company's exposure
to losses on these credit sales.
The Company uses short-term credit facilities and internally generated
funds to support installment sale contracts until a pool of installment sale
contracts is accumulated to provide for permanent financing generally at fixed
rates.
In the past, the Company sold a significant number of installment sale
contracts to unrelated financial institutions with full recourse to the Company
in the event of default by the buyer. The Company receives endorsement fees from
financial institutions for installment sale contracts it has placed with them on
such a basis. Such fees totaled $98,000 in fiscal 1999. The Company's contingent
liability on installment sale contracts sold with full and limited recourse was
approximately $24 million at September 30, 1999.
Independent Dealer Retail Sales Financing
The Company provides permanent financing for homes sold by certain
independent dealers that sell Company manufactured homes. During fiscal 1999,
the Company financed approximately $99 million of the retail sales of these
independent dealers.
The Company from time to time considers the purchase of manufactured
home installment sale portfolios originated by others as well as servicing
rights to such portfolios. In fiscal 1999, the Company purchased a portfolio of
approximately $97 million associated with the wind down of its Deutsche
Financial Capital ("DFC") joint venture with Deutsche Financial Services
Corporation.
Delinquency and Repossession
In the event an installment sale contract or loan becomes delinquent,
the Company, either as owner or as servicer, normally contacts the customer
within 8 to 25 days thereafter in an effort to have the default cured. The
Company, as owner or servicer, generally repossesses the home after payments
have become 60 to 90 days delinquent if the Company is not able to work out a
satisfactory arrangement with the customer. After repossession, the Company
generally transports the home to a Company owned and operated sales center where
the Company attempts to resell the home or contracts with an independent party
to remarket the home. The Company also sells repossessed homes at wholesale.
The Company maintains a reserve for estimated credit losses on
installment sale contracts and loans owned by the Company or sold to third
parties with full or limited recourse. The Company provides for losses on credit
sales in amounts necessary to maintain the reserves at levels the Company
believes are sufficient to provide for future losses based on the Company's
historical loss experience, current economic conditions and portfolio
performance measures. For fiscal 1999, 1998 and 1997, as a result of expenses
6
incurred due to defaults and repossessions, $3,678,000, $3,491,000 and
$3,984,000, respectively, was charged to the reserve for losses on credit sales.
The Company's reserve for losses on credit sales at September 30, 1999 was
$3,546,000, as compared to $2,067,000 at September 30, 1998 and $4,277,000 at
September 30, 1997.
In fiscal 1999, 1998 and 1997, the Company repossessed 7,830, 5,475 and
3,955 homes, respectively, including 854, 534 and 76, respectively, originated
on behalf of DFC. At September 30, 1999 the Company had a total of 2,417 unsold
properties in repossession or foreclosure compared to 1,430 and 1,016 at
September 30, 1998 and 1997, respectively. Of the total number of unsold
properties in repossession or foreclosure, 417, 295 and 54 relate to loans
originated on behalf of DFC at September 30, 1999, 1998 and 1997, respectively.
The estimated net realizable value of unsold properties in repossession or
foreclosure at September 30, 1999 was approximately $51 million.
The net losses resulting from repossessions on Company originated loans
as a percentage of the average principal amount of such loans outstanding for
fiscal 1999, 1998 and 1997 was 1.72%, 1.52% and 1.30%, respectively.
At September 30, 1999 and September 30, 1998, delinquent installment
sale contracts and loans expressed as a percentage of the total number of
installment sale contracts and loans that the Company (a) services or (b) has
sold with full recourse and that are serviced by others were as follows:
Total Number Of Contracts Delinquency Percentage
And Loans September 30, 1999
---------------------------- ---------------------------------------------------------
30 days 60 days 90 days Total
------- ------- ------- -----
Company-serviced contracts
and loans 125,115 (1) 2.8% 0.8% 1.5% 5.1%
Contracts and loans sold
with full recourse and
serviced by others
1,236 3.0% 1.2% 1.6% 5.8%
Total Number Of Contracts Delinquency Percentage
And Loans September 30, 1998
---------------------------- ---------------------------------------------------------
30 days 60 days 90 days Total
------- ------- ------- -----
Company-serviced contracts
and loans 114,169 (1) 2.1% 0.8% 1.2% 4.1%
Contracts and loans sold
with full recourse and
serviced by others
2,982 2.0% 0.7% 0.7% 3.4%
(1) Excludes certain contracts and loans originated in September of each
year that were being processed at year end and not entered into the
loan servicing system until October of such year.
7
At September 30, 1999 and September 30, 1998, delinquent installment
sale contracts and loans expressed as a percentage of the total outstanding
principal balance of installment sale contracts and loans that the Company (a)
services or (b) has sold with full recourse and that are serviced by others were
as follows:
Total Value Delinquency Percentage
of Contracts September 30, 1999
---------------------------- ------------------------------------------------------------
30 days 60 days 90 days Total
------- ------- ------- -----
Company-serviced contracts
and loans $4,210,908,000 (1) 2.4% 0.9% 1.5% 4.8%
Contracts and loans sold
with full recourse and
serviced by others
$7,927,000 2.8% 1.2% 1.7% 5.7%
Total Value Delinquency Percentage
of Contracts September 30, 1998
---------------------------- ------------------------------------------------------------
30 days 60 days 90 days Total
------- ------- ------- -----
Company-serviced contracts
and loans $3,531,522,000 (1) 1.9% 0.7% 1.1% 3.7%
Contracts and loans sold
with full recourse and
serviced by others
$22,000,000 2.3% 0.9% 0.8% 4.0%
(1) Excludes certain contracts and loans originated in September of each
year that were being processed at year end and not entered into the
loan servicing system until October of such year.
Independent Retailer Repurchase Obligations
Substantially all of the independent retailers who purchase homes from
the Company finance new home inventories through wholesale credit lines provided
by third parties under which a financial institution provides the retailer with
a credit line for the purchase price of the home and maintains a security
interest in the home as collateral. A wholesale credit line is used by the
retailer to finance the acquisition of its display models, as well as to finance
the initial purchase of a home from a manufacturer until the home buyers obtain
permanent financing or otherwise pay the dealer for the installed home. In
connection with the wholesale financing arrangement, the financial institution
generally requires the Company to enter into a repurchase agreement with the
financial institution under which the Company is obligated, upon default by the
retailer, to repurchase its homes. Under the terms of such repurchase
agreements, the Company agrees to repurchase homes at declining prices depending
upon the age of the units. At September 30, 1999, the Company estimates that its
contingent liability under these repurchase agreements was approximately $208
million. The Company's losses under these arrangements have not been
significant.
8
Insurance
On June 1, 1997, the Company ceased receiving commission income for
acting as an agent for certain insurance companies with respect to homeowners
insurance, credit life insurance and service contracts written for its
customers, and entered the reinsurance business directly through its own captive
reinsurer. This shift in activities enables the Company to participate more
fully in what management believes to be the profitable income streams associated
with the property and casualty insurance and service contract business than was
possible under the commission-based insurance agency arrangement which preceded
its formation. As an insurance underwriter, the Company recognizes insurance
premium revenues over the life of the related policies as a component of
financial services revenue, with the associated claims expenses reflected in
financial services operating expenses. Previously, insurance commission revenue
was reported upon the sale of the policies by Oakwood's retail operations, and
was included in other income.
Due to this fundamental change in the Company's insurance business,
earnings from insurance operations are now spread over the lives of the policies
rather than being recognized in full when the policies were sold. Because
reinsurance claims costs are recorded as insured events occur, underwriting
reinsurance risk may increase the volatility of the Company's earnings,
particularly with respect to property and casualty reinsurance. The Company has
purchased catastrophe reinsurance to reduce its underwriting exposure to natural
disasters.
Manufactured Housing Communities
The Company has under development a manufactured housing subdivision in
Hendersonville, North Carolina. The Company also owns land on which it intended
to develop a manufactured housing subdivision in Pinehurst, North Carolina. The
Pinehurst subdivision surrounds an existing golf course which the Company sold
in fiscal 1998. The Company intends to attempt to sell its remaining interests
in the Pinehurst subdivision. The Company does not intend to commit any material
resources to the land development business in the future, but may become
involved in land development or lot purchases from time to time to facilitate
retail sales.
The Company also owned a 50% interest in a recreational vehicle
campground and adjoining undeveloped land located in Deltaville, Virginia.
Subsequent to September 30, 1999, the Company sold its 50% interest to the
managing partner.
Competition
The manufactured housing industry is highly competitive with particular
emphasis on price, financing terms and features offered. There are numerous
retail dealers and financing sources in most locations where the Company
conducts retail and financing operations. Several of these financing sources are
larger than the Company and have greater financial resources. There are numerous
firms producing manufactured homes in the Company's market area, many of which
are in direct competition with the Company. Several of these manufacturers,
which sell the majority of their homes through independent dealers, are larger
than the Company and have greater financial resources.
The Company believes that its vertical integration gives it a
competitive advantage over many of its competitors. However, a number of the
Company's manufacturing competitors are establishing their own retail
distribution systems. To the extent such competitors successfully enter the
retail market, the
9
Company could face increased competition at that level. The Company competes on
the basis of reputation, quality, financing ability, service, features offered
and price.
Manufactured homes are a form of permanent, low-cost housing and are
therefore in competition with other forms of housing, including site-built and
prefabricated homes and apartments. Historically, manufactured homes have been
financed as personal property with financing that has shorter maturities and
higher interest rates than have been available for site-built homes. In recent
years, however, there has been a growing trend toward financing manufactured
housing with maturities more similar to the financing of real estate, especially
when the manufactured housing is attached to permanent foundations on
individually-owned lots. Multi-section homes are often attached to permanent
foundations on individually-owned lots. As a result, maturities for certain
manufactured housing loans have moved closer to those for site-built housing.
Regulation
A variety of laws affect the financing of manufactured homes by the
Company. The Federal Consumer Credit Protection Act (Truth-in-Lending) and
Regulation Z promulgated thereunder require written disclosure of information
relating to such financing, including the amount of the annual percentage rate
and the finance charge. The Federal Fair Credit Reporting Act also requires
certain disclosures to potential customers concerning credit information used as
a basis to deny credit. The Federal Equal Credit Opportunity Act and Regulation
B promulgated thereunder prohibit discrimination against any credit applicant
based on certain specified grounds. The Federal Trade Commission has adopted or
proposed various Trade Regulation Rules dealing with unfair credit and
collection practices and the preservation of consumers' claims and defenses. The
Federal Trade Commission's regulations also require disclosure of a manufactured
home's insulation specification. Installment sale contracts and loans eligible
for inclusion in the GNMA Program are subject to the credit underwriting
requirements of the FHA. A variety of state laws also regulate the form of the
installment sale contracts and loan documents and the allowable deposits,
finance charge and fees chargeable pursuant to installment sale contracts and
loan documents. The sale of insurance products by the Company is subject to
various state insurance laws and regulations which govern allowable charges and
other insurance practices.
The Company is also subject to the provisions of the Fair Debt
Collection Practices Act, which regulates the manner in which the Company
collects payments on installment sale contracts, and the Magnuson-Moss Warranty-
Federal Trade Commission Improvement Act, which regulates descriptions of
warranties on products. The descriptions and substance of the Company's
warranties are also subject to state laws and regulations.
The Company's manufacture of homes generally is subject to the National
Manufactured Housing Construction and Safety Standards Act of 1974. In 1976, the
Department of Housing and Urban Development ("HUD") promulgated regulations,
which have been amended from time to time, under this Act establishing
comprehensive national construction standards covering many aspects of
manufactured home construction and installation, including structural integrity,
fire safety, wind loads and thermal protection. The Company's modular homes are
subject to state and local building codes.
The transportation of manufactured homes on highways is subject to
regulation by various federal, state and local authorities. Such regulations may
prescribe size and road use limitations and impose lower than normal speed
limits and various other requirements. Manufactured homes are also subject to
local zoning and other regulations.
10
The Company's operations are subject to a variety of other statutes and
regulations.
Financial Information About Industry Segments
Financial information for each of the three fiscal years in the period ended
September 30, 1999 with respect to the Company's operating segments is
incorporated herein by reference to page 35 of the Company's 1999 Annual Report
to Shareholders.
Employees
At September 30, 1999, the Company employed 11,315 persons, of which
3,440 were engaged in sales and service, 6,772 in manufacturing, 568 in consumer
finance, and 535 in executive, administrative and clerical positions.
ITEM 2. DESCRIPTION OF PROPERTIES.
Offices
The Company owns its executive office space in Greensboro, North
Carolina. The Company also owns two additional office buildings, which formerly
served as its executive office space, located in two adjacent three-story
buildings in Greensboro, North Carolina. The Company leases office space in
Texas, Arizona, Indiana, Washington and Florida.
Manufacturing Facilities
The location and ownership of the Company's production lines, including
idled lines, are as follows:
Location Owned/Leased
Hillsboro, Texas (2 lines) Owned
Kileen, Texas Owned
Navasota, Texas (2 lines) Owned
Richfield, North Carolina Owned
Rockwell, North Carolina (2 lines) Owned
Pinebluff, North Carolina Owned
Moultrie, Georgia (4 lines) Owned
Etna Green, Indiana (2 lines) Owned
Middlebury, Indiana (2 lines) Owned
Buckeye, Arizona (2 lines) Owned
Albany, Oregon (2 lines) Leased/Owned
Hermiston, Oregon (2 lines) Owned
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Lewiston, Pennsylvania Owned
Milton, Pennsylvania Owned
Perris, California Owned
Fort Morgan, Colorado Owned
Plainville, Kansas Owned
Redwood Falls, Minnesota Owned
Pulaski, Tennessee Leased
The Company also has a manufacturing line that is currently being held
for sale located at Ennis, Texas.
The Company's manufacturing facilities are generally one story metal
prefabricated structures. The Company believes its facilities are in good
condition. These facilities are located on tracts of land generally ranging from
10 to 50 acres. The production area in these facilities ranges from
approximately 50,000 to 250,000 square feet. In addition, the Company owns a
112,000 square foot warehouse in Elkhart, Indiana.
The land and buildings at all of the facilities owned by the Company
were subject to mortgages with an aggregate balance of $12,107,000 at September
30, 1999.
Based on the Company's normal manufacturing schedule of one shift per
day for a five-day week, the Company believes that its currently operating
manufacturing plants have the capacity to produce approximately 70,000 floors
annually, depending on product mix. During fiscal 1999, the Company manufactured
67,825 floors at its plants.
Manufactured Home Sales Centers
The Company's manufactured home retail sales centers consist of tracts
of from 3/4 to 4 1/2 acres of land on which manufactured homes are displayed,
each with a sales office containing from approximately 600 to 1,300 square feet
of floor space. The Company operated 412 sales centers at September 30, 1999
located in 30 states distributed as follows: Texas (72), North Carolina (65),
South Carolina (25), Georgia (23), Tennessee (23), Virginia (18), Alabama (18),
Arizona (15), Kentucky (14), New Mexico (14), Ohio (13), Washington (13),
Mississippi (12), Florida (11), Oregon (9), Louisiana (8), Colorado (8), West
Virginia (8), Arkansas (7), Missouri (7), Idaho (6), Oklahoma (6), Nevada (4),
Delaware (3), Utah (3), California (2), Kansas (2), Indiana (1), Michigan (1)
and Wyoming (1). Subsequent to September 30, 1999, the Company closed 41
underperforming sales centers.
Thirty-two sales centers are on property owned by the Company and the
other locations are leased by the Company for a specified term of from one to
ten years or on a month-to-month basis. Rents paid by the Company during the
year ended September 30, 1999 for the leased sales centers totaled approximately
$15,006,000.
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Manufactured Housing Communities
The Company has under development a manufactured housing subdivision in
Hendersonville, North Carolina. The Company also owns property in Pinehurst,
North Carolina on which it intended to develop a manufactured housing
subdivision. The Company intends to offer the property for sale.
The Company also owned a 50% interest in a recreational vehicle
campground and adjoining undeveloped land located in Deltaville, Virginia.
Subsequent to September 30, 1999, the Company sold its 50% interest to the
managing partner.
ITEM 3. LEGAL PROCEEDINGS.
In November 1998 the Company and certain of its present and former
officers and directors were named as defendants in lawsuits filed on behalf of
purchasers of the Company's common stock for various periods between April 11,
1997 and July 21, 1998 (the "Class Period"). In June 1999 a consolidated amended
complaint was filed in the United States Middle District Court in Guilford
County, North Carolina. The amended compliant, which seeks class action
certification, alleges violations of federal securities law based on alleged
fraudulent acts, false and misleading financial statements, reports filed by the
Company and other representations during the Class Period and seeks the loss of
value in class members' stockholdings. The Company has filed a motion to dismiss
the amended complaint which has not yet been ruled upon by the court. The
Company intends to defend such lawsuit vigorously.
The Company is a defendant in a number of other lawsuits that are
incidental to the conduct of its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
SEPARATE ITEM. EXECUTIVE OFFICERS OF THE COMPANY.
Information as to executive officers of the Company who are directors
and nominees of the Company is incorporated herein by reference to the section
captioned "Election of Directors" of the Company's Proxy Statement for the
Substitute Annual Meeting of Shareholders to be held February 9, 2000.
Information as to the executive officers of the Company who are not directors or
nominees is as follows:
Name Age Information About Officer
- ---- --- -------------------------
Eric D. Burgess 31 Vice President, Chief Accounting Officer and Controller since June
1999; Vice President and Controller of Oakwood Acceptance Corporation
(the Company's finance subsidiary) from June 1998 to May 1999; Audit
Manager, Price Waterhouse LLP 1996 to 1998; Audit Senior, Price
Waterhouse LLP from 1994 to 1996.
Douglas R. Muir 45 Senior Vice President and Secretary since 1994; Treasurer since 1993;
Partner, Price Waterhouse LLP from 1988 to 1993.
13
Name Age Information About Officer
- ---- --- -------------------------
Robert A. Smith 54 Executive Vice President and Chief Financial Officer since October
1998; Executive Vice President, Finance and Chief Operating Officer
of Oakwood Acceptance Corporation (the Company's finance subsidiary)
from September 1997 to October 1998; Senior Vice President of the
Company from February 1997 to September 1997; Partner, Price
Waterhouse LLP from 1984 to 1997.
Myles E. Standish 45 Executive Vice President, Chief Administrative Officer since November
1998; General Counsel since 1995; Senior Vice President from 1995 to
1998; Partner, Kennedy Covington Lobdell & Hickman, L.L.P., Attorneys
at Law, from 1987 to 1995.
J. Michael Stidham 46 Executive Vice President, Distribution since 1999; Executive Vice
President, Retail and Chief Operating Officer of Oakwood Mobile
Homes, Inc. (the Company's retail sales subsidiary) from 1994 to 1999.
Larry M. Walker 44 Executive Vice President, Manufacturing Operations and Chief Operating
Officer of Homes by Oakwood, Inc. (the Company's primary manufacturing
subsidiary) since 1997; Senior Vice President - Manufacturing of the
Company 1997; Senior Vice President - Quality and Service 1996; Senior
Vice President - Manufacturing Eastern Region 1993 to 1995.
Suzanne H. Wood 39 Vice President, Investor Relations and Financial Risk Management of
the Company since November 1998; Vice President and Chief Financial
Officer of Tultex Corporation (a manufacturer, marketer and
distributor of activewear) from February 1996 to November 1998;
Controller of Tultex Corporation from 1993 to February 1996. In
December 1999, Tultex Corporation filed for reorganization under
Chapter 11 of the bankruptcy code.
Each officer holds office until his or her death, resignation,
retirement, removal or disqualification or until his or her successor is elected
and qualified.
14
PART II
ITEMS 5-8.
Items 5, 7, 7A and 8 are incorporated herein by reference to pages 19
to 36 of the Company's 1999 Annual Report to Shareholders and to the sections
captioned "Securities Exchange Listing" and "Shareholders" on the inside back
cover page of the Company's 1999 Annual Report to Shareholders. Item 6 is
incorporated herein by reference to the information captioned "Net sales,"
"Total revenues," "Net income," "Earnings per common share--Basic and Diluted,"
"Total assets," "Notes and bonds payable" and "Cash dividends per common share"
for each of the five fiscal years in the period ended September 30, 1999 on page
1 of the Company's 1999 Annual Report to Shareholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.
Not applicable.
PART III
ITEMS 10-13.
Items 10-13 are incorporated herein by reference to the sections
captioned "Principal Holders of Common Stock and Holdings of Management,"
"Election of Directors," "Compensation Committee Interlocks and Insider
Participation," "Certain Relationships and Related Transactions," "Compensation
Committee Report," "Executive Compensation," "Director Compensation,"
"Employment Contracts, Termination of Employment and Change of Control
Arrangements" and "Section 16(a) Beneficial Ownership Reporting Compliance" of
the Company's Proxy Statement for the Substitute Annual Meeting of Shareholders
to be held February 9, 2000 and to the separate item in Part I of this Annual
Report on Form 10-K captioned "Executive Officers of the Company." Such Proxy
Statement will be filed with the Commission prior to January 28, 2000.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND
EXHIBITS.
List the following documents filed as part of this report:
1. Financial Statements.
The following financial statements of the Company are
included as part of Exhibit 13 hereof:
Report of PricewaterhouseCoopers LLP
Consolidated Statements of Operations for the Years
ended September 30, 1999, 1998 and 1997
15
Consolidated Balance Sheets as of September 30, 1999
and 1998
Consolidated Statements of Cash Flows for the Years
ended September 30, 1999, 1998 and 1997
Consolidated Statement of Changes in Shareholders'
Equity and Other Comprehensive Income for the Years
ended September 30, 1999, 1998 and 1997
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
See the accompanying Index to Financial Statement
Schedules at page F-1.
3. Exhibits
3.1 Restated Charter of the Company dated January 25,
1984 (Exhibit 3.2 to the Company's Annual Report on
Form 10-K for the fiscal year ended September 30,
1984)
3.2 Amendment to Restated Charter of the Company dated
February 18, 1988 (Exhibit 3 to the Company's Annual
Report on Form 10-K for the fiscal year ended
September 30, 1988)
3.3 Amendment to Restated Charter of the Company dated
April 23, 1992 (Exhibit 3.3 to the Company's Annual
Report on Form 10-K for the fiscal year ended
September 30, 1992)
3.4 Amended and Restated Bylaws of the Company adopted
February 1, 1995 (Exhibit 3.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
December 31, 1994)
4.1 Shareholder Protection Rights Agreement between the
Company and Wachovia Bank of North Carolina, N.A., as
Rights Agent (Exhibit 4.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30,
1991)
4.2 Agreement to Furnish Copies of Instruments With
Respect to Long Term Debt (filed herewith)
4.3 Indenture dated as of March 2, 1999 between the
Company and The First National Bank of Chicago, as
Trustee (Exhibit 4.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31,
1999)
4.4 First Supplemental Indenture dated as of March 2,
1999 between the Company and The First National Bank
of Chicago, as Trustee (Exhibit 4.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999)
16
*10.1 Oakwood Homes Corporation 1985 Non-Qualified Stock
Option Plan (Exhibit 10.1 to the Company's Annual
Report on Form 10-K for the fiscal year ended
September 30, 1985)
*10.2 Oakwood Homes Corporation 1986 Nonqualified Stock
Option Plan for Nonemployee Directors (Exhibit 10.1
to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1986)
*10.3 Oakwood Homes Corporation 1981 Incentive Stock Option
Plan, as amended and restated (Exhibit 10.1 to the
Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1987)
*10.4 Oakwood Homes Corporation 1990 Director Stock Option
Plan (Exhibit 10.24 to the Company's Registration
Statement on Form S-2 filed on April 13, 1991)
*10.5 Form of Executive Retirement Benefit Employment
Agreement between the Company and each of J. Michael
Stidham and Larry M. Walker (Exhibit 10.7 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1993)
*10.6 Schedule identifying omitted Executive Retirement
Benefit Employment Agreements which are substantially
identical to the Form of Executive Retirement Benefit
Agreement described in Exhibit 10.12 and payment
schedules under Executive Retirement Benefit
Employment Agreements (Exhibit 10.8 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
December 31, 1993)
*10.7 Oakwood Homes Corporation Executive Incentive
Compensation Plan (Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996)
*10.8 Oakwood Homes Corporation Key Employee Stock Plan
(Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996)
*10.9 Oakwood Homes Corporation 1997 Director Stock Option
Plan (Exhibit 10 to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1998)
*10.10 Oakwood Homes Corporation Director Deferral Plan
(Exhibit 10.18 to the Company's Annual Report on Form
10-K for the year ended September 30, 1998)
*10.11 Form of Employment Agreement between the Company and
each of William G. Edwards, Robert A. Smith, Myles E.
Standish and J. Michael Stidham (Exhibit 10.19 to the
Company's Annual Report on Form 10-K for the year
ended September 30, 1998)
17
*10.12 First Amendment to Amended and Restated Executive
Retirement Benefit Employment Agreement between the
Company and J. Michael Stidham (Exhibit 10.20 to the
Company's Annual Report on Form 10-K for the year
ended September 30, 1998)
*10.13 Employment Agreement dated as of September 27, 1999
by and between the Company and Nicholas J. St. George
(filed herewith)
13 The Company's 1999 Annual Report to Shareholders.
This Annual Report to Shareholders is furnished for
the information of the Commission only and, except
for the parts thereof expressly incorporated by
reference in this Annual Report on Form 10-K, is not
deemed to be "filed" as a part of this filing (filed
herewith)
21 List of the Company's subsidiaries (filed herewith)
23.1 Consent of PricewaterhouseCoopers LLP (filed
herewith)
27 Financial Data Schedule (filed in electronic format
only). This schedule is furnished for the information
of the Commission and shall not be deemed "filed" for
purposes of Section 11 of the Securities Act of 1933,
Section 18 of the Securities Exchange Act of 1934 and
Section 323 of the Trust Indenture Act.
- -------------
* Indicates a management contract or compensatory plan or arrangement
required to be filed as an exhibit to this Form 10-K.
(b) REPORTS ON FORM 8-K. On August 11, 1999, the Company filed a Current Report
on Form 8-K in which it reported, pursuant to Item 5 thereof (Other Events),
that it had issued a press release relating to several developments, including
its decision to terminate its exploration of strategic alternatives and the
retirement of Mr. Nicholas J. St. George, its Chief Executive Officer and
Chairman of the Board. No financial statements were filed as part of such
Current Report on Form 8-K.
On July 15, 1999, the Company filed a Current Report on Form 8-K in
which it reported, pursuant to Item 5 thereof (Other Events), that it had issued
a press release relating to retail sales and earnings expectations for the third
quarter of its fiscal year. No financial statements were filed as part of such
Current Report on Form 8-K.
(c) EXHIBITS. See Item 14(a)(3).
(d) FINANCIAL STATEMENT SCHEDULES. See Item 14(a)(2).
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
OAKWOOD HOMES CORPORATION
By: /s/ Robert A. Smith
-----------------------------
Robert A. Smith
Executive Vice President and
Chief Financial Officer
Dated: December 29, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report has been signed below by the following persons on behalf of
the Company and in the capacities and on the date indicated.
Signature Capacity Date
--------- -------- ----
/s/ William G. Edwards Director, Chairman, Chief December 29, 1999
- ----------------------------- Executive Officer and President
William G. Edwards (Principal Executive Officer)
/s/ Dennis I. Meyer Director December 29, 1999
- -----------------------------
Dennis I. Meyer
/s/ Kermit G. Phillips, II Director December 29, 1999
- -----------------------------
Kermit G. Phillips, II
/s/ Roger W. Schipke Director December 29, 1999
- -----------------------------
Roger W. Schipke
19
/s/ Sabin C. Streeter Director December 29, 1999
- -----------------------------
Sabin C. Streeter
/s/ Francis T. Vincent, Jr. Director December 29, 1999
- -----------------------------
Francis T. Vincent, Jr.
/s/ Clarence W. Walker Director December 29, 1999
- -----------------------------
Clarence W. Walker
/s/ H. Michael Weaver Director December 29, 1999
- -----------------------------
H. Michael Weaver
/s/ Robert A. Smith Executive Vice President and December 29, 1999
- ----------------------------- Chief Financial Officer
Robert A. Smith (Principal Financial Officer)
/s/ Eric D. Burgess Vice President and December 29, 1999
- ----------------------------- Controller
Eric D. Burgess (Principal Accounting Officer)
20
OAKWOOD HOMES CORPORATION
INDEX TO FINANCIAL STATEMENT SCHEDULES
The financial statements, together with the report thereon of
PricewaterhouseCoopers LLP dated November 9, 1999, except for the information
presented in the third pargraph in Note 9 for which the date is December 22,
1999, appearing on pages 19 to 36 of the Company's 1999 Annual Report to
Shareholders, are incorporated by reference in this Annual Report on Form 10-K.
With the exception of the aforementioned information and the information
incorporated in Items 1, 5, 6, 7, 7A and 8, the 1999 Annual Report to
Shareholders is not deemed to be filed as part of this report. Financial
statement schedules not included in this Annual Report on Form 10-K have been
omitted because they are not applicable or the required information is shown in
the financial statements or notes thereto.
PAGE
----
Supplementary information to notes to
consolidated financial statements F-2
F-1
OAKWOOD HOMES CORPORATION
AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTARY INFORMATION TO NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
The components of inventories are as follows:
September 30, September 30, September 30,
1999 1998 1997
---------- ----------- ----------
New manufactured homes $364,770,000 $234,606,000 $180,813,000
Used manufactured homes 18,047,000 8,261,000 5,954,000
Homes in progress 6,924,000 6,119,000 2,948,000
Land/Homes under development 14,318,000 6,417,000 3,859,000
Raw materials and supplies 39,539,000 35,949,000 14,724,000
------------ ------------ ------------
$443,598,000 $291,352,000 $208,298,000
============ ============ ============
F-2
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.
EXHIBITS
ITEM 14(a)(3)
ANNUAL REPORT ON FORM 10-K
Commission
For the fiscal year ended File Number
September 30, 1999 1-7444
OAKWOOD HOMES CORPORATION
EXHIBIT INDEX
Exhibit No. Exhibit Description
- ----------- -------------------
3.1 Restated Charter of the Company dated January 25,
1984 (Exhibit 3.2 to the Company's Annual Report on
Form 10-K for the fiscal year ended September 30,
1984)
3.2 Amendment to Restated Charter of the Company dated
February 18, 1988 (Exhibit 3 to the Company's Annual
Report on Form 10-K for the fiscal year ended
September 30, 1988)
3.3 Amendment to Restated Charter of the Company dated
April 23, 1992 (Exhibit 3.3 to the Company's Annual
Report on Form 10-K for the fiscal year ended
September 30, 1992)
3.4 Amended and Restated Bylaws of the Company adopted
February 1, 1995 (Exhibit 3.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
December 31, 1994)
4.1 Shareholder Protection Rights Agreement between the
Company and Wachovia Bank of North Carolina, N.A.,
as Rights Agent (Exhibit 4.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1991)
4.2 Agreement to Furnish Copies of Instruments With
Respect to Long Term Debt (filed herewith)
4.3 Indenture dated as of March 2, 1999 between the
Company and The First National Bank of Chicago, as
Trustee (Exhibit 4.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31,
1999)
4.4 First Supplemental Indenture dated as of March 2,
1999 between the Company and The First National Bank
of Chicago, as Trustee
(Exhibit 4.2 to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1999)
10.1 Oakwood Homes Corporation 1985 Non-Qualified Stock
Option Plan (Exhibit 10.1 to the Company's Annual
Report on Form 10-K for the fiscal year ended
September 30, 1985)
10.2 Oakwood Homes Corporation 1986 Nonqualified Stock
Option Plan for Nonemployee Directors (Exhibit 10.1
to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1986)
10.3 Oakwood Homes Corporation 1981 Incentive Stock
Option Plan, as amended and restated (Exhibit 10.1
to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1987)
10.4 Oakwood Homes Corporation 1990 Director Stock Option
Plan (Exhibit 10.24 to the Company's Registration
Statement on Form S-2 filed on April 13, 1991)
10.5 Form of Executive Retirement Benefit Employment
Agreement between the Company and each of J. Michael
Stidham and Larry M. Walker (Exhibit 10.7 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1993)
10.6 Schedule identifying omitted Executive Retirement
Benefit Employment Agreements which are
substantially identical to the Form of Executive
Retirement Benefit Agreement described in Exhibit
10.12 and payment schedules under Executive
Retirement Benefit Employment Agreements (Exhibit
10.8 to the Company's Quarterly Report on Form 10-Q
for the quarter ended December 31, 1993)
10.7 Oakwood Homes Corporation Executive Incentive
Compensation Plan (Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996)
10.8 Oakwood Homes Corporation Key Employee Stock Plan
(Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996)
10.9 Oakwood Homes Corporation 1997 Director Stock Option
Plan (Exhibit 10 to the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1998)
10.10 Oakwood Homes Corporation Director Deferral Plan
(Exhibit 10.18 to the Company's Annual Report on
Form 10-K for the year ended September 30, 1998)
10.11 Form of Employment Agreement between the Company and
each of William G. Edwards, Robert A. Smith, Myles
E. Standish and J. Michael
Stidham (Exhibit 10.19 to the Company's Annual
Report on Form 10-K for the year ended September 30,
1998)
10.12 First Amendment to Amended and Restated Executive
Retirement Benefit Employment Agreement between the
Company and J. Michael Stidham (Exhibit 10.20 to the
Company's Annual Report on Form 10-K for the year
ended September 30, 1998)
10.13 Employment Agreement dated as of September 27, 1999
by and between the Company and Nicholas J.
St. George (filed herewith)
13 The Company's 1999 Annual Report to Shareholders.
This Annual Report to Shareholders is furnished for
the information of the Commission only and, except
for the parts thereof expressly incorporated by
reference in this Annual Report on Form 10-K, is not
deemed to be "filed" as a part of this filing (filed
herewith).
21 List of the Company's subsidiaries (filed herewith)
23.1 Consent of PricewaterhouseCoopers LLP (filed
herewith)
27 Financial Data Schedule (filed in electronic format
only). This schedule is furnished for the
information of the Commission and shall not be
deemed "filed" for purposes of Section 11 of the
Securities Act of 1933, Section 18 of the Securities
Exchange Act of 1934 and Section 323 of the Trust
Indenture Act.