ITEM 1. BUSINESS.
GENERAL
Clayton Homes, Inc. and its subsidiaries (The Company) produce, sell, finance and insure primarily low to medium priced manufactured homes. The Company's 17 manufacturing plants produce homes which are marketed in 28 states through 975 retailers, of which 245 are Company-owned sales centers and 67 are Company-owned community sales operations. The Company provides installment financing to purchasers of manufactured homes sold by its retail centers and by selected independent retailers. Such financing is provided through its wholly-owned finance subsidiary, Vanderbilt Mortgage and Finance, Inc. The Company acts as agent, earns commissions and reinsures risks on physical damage, family protection, and home buyer protection insurance policies issued by a non-related insurance company (ceding company) in connection with the Company's retail sales. The Company also develops, owns, and manages manufactured housing communities.
The Company is a Delaware corporation whose predecessor was incorporated in 1968 in Tennessee. Its principal executive offices are located in Knoxville, Tennessee.
The following table shows the percentage of revenue derived from sales by Company-owned retail centers, sales to independent retailers and financial services operations and other income for each of the last three fiscal years.
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For information relating to the Company's three major business segments, see Note 11 to the Consolidated Financial Statements in the Company's Annual Report to Shareholders.
Company sales reflect the seasonality of the manufactured housing industry. In recent years, approximately 31% of the Company's sales have occurred in its fourth quarter ended June 30.
MANUFACTURED HOMES
A manufactured home made by the Company is a factory-built, completely finished dwelling. Constructed to be transported by truck, the home is mounted on wheels attached to its frame. Manufactured homes are designed to be permanent, primary residences sited and attached to utilities.
The Company manufactures a variety of single and multi-section homes in a wide price range. Retail prices range from $10,000 to $75,000 with sizes from 500 to 2,150 square feet.
The Company markets homes under a variety of model names. Homes include as standard equipment central heating, range, refrigerator, and color-coordinated window, wall and floor coverings. Optional features include central air conditioning, wood-burning fireplaces, bay windows, hardwood floors, whirlpool tubs, skylights, and furniture.
MANUFACTURING OPERATIONS
The Company owns or leases 17 manufacturing plants, ranging in size from 63,000 to 194,000 square feet. Plants are located in Andersonville, Ardmore, two in Bean Station, Halls, Maynardville, Rutledge, White Pine, and two in Savannah, Tennessee; in Henderson, Oxford and Richfield, North Carolina; in Waycross, Georgia and one in Bonham and two in Waco, Texas. See "Item 2.
ITEM 2. PROPERTIES.
The Company's Financial Services operations and executive offices are located in Knoxville, Tennessee in several wholly-owned one-story buildings made up of modular units (built by the Bean Station single-section plant) which total approximately 38,000 square feet of office space and approximately 16,000 square feet in an office building owned previously 50% by the Company and 50% by a related party. On June 30, 1997, the Company converted its ownership in the office building into a leasehold interest in preparation for its relocation to new Corporate facilities in fiscal year 1998. See "Item 13. Certain Relationships and Related Transactions." The following table sets forth the properties which the Company uses for its manufacturing operations and locations of its manufactured housing communities. All of the buildings used for manufacturing operations are constructed of fabricated metal on a concrete slab.
LOCATION OF PROPERTY
The Company-owned retail centers are generally one to four acre sites with a manufactured office unit serving as the sales office. The balance of a retail center site is devoted to the display of homes. Of the 245 retail centers, 109 are owned and 136 occupy leased property. The Company does not believe that any of the property owned or leased for an individual retail center is material to its overall business.
All of the properties described above are well maintained, adequately insured and suitable for the purposes for which they are being used by the Company. The Company believes that its properties are adequate for its near-term needs.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
No material legal proceedings are pending other than routine litigation incidental to the business of the Company. The Company believes that such proceedings will not have any material adverse effect on it or its operations.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS.
No matters were submitted to shareholders during the last quarter of the fiscal year.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
(a) The Company's Common Stock is traded on the New York Stock Exchange. The following table sets forth, for the period from July 1, 1995 to June 30, 1997, the range of high and low closing sale prices as reported by the New York Stock Exchange, Inc.
(b) As of August 31, 1997, there were 9,152 holders of record (approximately 54,000 beneficial holders) of the Company's Common Stock.
(c) It is the policy of the Board of Directors of the Company to reinvest substantially all earnings in its business. The Board of Directors initiated the payment of cash dividends at the November 9, 1994 shareholders meeting of $.02 per share per quarter. Future dividend policy will depend on the Company's earnings, capital requirements, financial condition and other factors considered relevant by the Board of Directors. Additionally, certain of the Company's financing agreements have various covenants that restrict payments which may be made for dividends and other stock transactions.
The following portions of the Company's 1997 Annual Report to Shareholders are incorporated herein by reference (page number references are to Annual Report):
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA. Eleven Year Review on page 12.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Management's Discussion and Analysis of Financial Condition and Results of Operations on pages 13-15.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- - Quarterly Results (unaudited) on page 15. - - Report of Independent Accountants on page 16. - - Consolidated Balance Sheets on page 16. - - Consolidated Statements of Income on page 17. - - Consolidated Statements of Shareholders' Equity on page 17. - - Consolidated Statements of Cash Flows on page 18. - - Notes to the Consolidated Financial Statements on pages 19-24.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
EXECUTIVE OFFICERS OF THE COMPANY
(a) Mr. Stegmayer joined the Company in July 1993 as President and Chief Operating Officer. From 1982 to July 1993, he served as Vice President, Chief Financial Officer, Treasurer and Director of Worthington Industries, Inc. In August 1997, he was elected Vice Chairman of the Company.
(b) Mr. K. T. Clayton has been President - Financial Services since 1995. Prior to that time, he served in various management positions with the Company. In August 1997, he was named President of the Company.
(c) Mr. Kalec joined the Company in September 1996 as Vice President and Chief Financial Officer. From 1973 to 1996, he served in various senior level finance and accounting positions with Philips Electronics, including Managing Director Finance and Accounting for Philips Components, B.V. in the Netherlands, 1992-96; and Senior Vice President and Chief Financial Officer for U.S. Philips Consumer Electronics, 1985-1992. In August 1997, he was named Senior Vice President, Chief Financial Officer and Secretary.
(d) Prior to joining the Company in 1994, Mr. Strachan was President and Chief Operating Officer of the Visador Company from 1989 to 1994. He was named Vice President of the Company and President of the Manufacturing Group in August 1997.
(e) Mr. Boyd joined the Company in April 1996 as Director of Finance. From 1994 to 1995, he served as Senior Vice President of Victoria Bankshares, Inc. From 1989 to 1994, he served as Senior Vice President and Chief Financial Officer of FNB Financial Corporation, a Tennessee bank holding company. In August 1997, he was named Treasurer of the Company.
All other officers have been in their positions for at least five years.
The Company's executive officers serve at the pleasure of the Board of Directors.
All other required information is incorporated by reference to the Company's Proxy Statement under the heading ELECTION OF DIRECTORS.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION. Incorporated by reference to the Company's Proxy Statement under the heading COMPENSATION OF MANAGEMENT TABLE.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Incorporated by reference to the Company's Proxy Statement under the headings ELECTION OF DIRECTORS and PRINCIPAL SHAREHOLDER THEREOF; SECURITY OWNERSHIP OF MANAGEMENT.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Incorporated by reference to the Company's Proxy Statement.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a) The following documents are filed as part of this report:
1. Financial Statements: (Included in Annual Report - Exhibit 13).
The following Consolidated Financial Statements of Clayton Homes, Inc. and its subsidiaries included in Part II, Item 8 are incorporated by reference to the 1997 Annual Report to Shareholders for the year ended June 30, 1997.
Report of Independent Accountants.
Consolidated Balance Sheets - June 30, 1997 and 1996.
Consolidated Statements of Income - years ended June 30, 1997, 1996 and 1995.
Consolidated Statements of Shareholders' Equity - years ended June 30, 1997, 1996 and 1995.
Consolidated Statements of Cash Flows - years ended June 30, 1997, 1996 and 1995.
Notes to the Consolidated Financial Statements.
3. Exhibits:
3. (a) Restated charter as amended. (A)
(b) Bylaws. (B)
(c) Amendment to Bylaws. (A)
4. (a) Specimen stock certificates. (E)
(b) The Company agrees to furnish to the Commission, upon request, instruments relating to the long term debt of the Company or its subsidiaries.
10. (a) Form of shareholders' agreement between Clayton Homes, Inc. and Progressive Partners. (B)
(b) Lease Agreement, dated June 29, 1972, as amended, between Clayton Homes, Inc. and Dean Planters Warehouse, Inc. (B) (subsequently assigned to CLF, a limited partnership which includes a related party).
(c) Clayton Homes, Inc. 1983 Stock Option Plan. (B)
(d) Clayton Homes, Inc. 1985 Stock Option Plan. (F)
(e) 1991 Employee Stock Incentive Plan. (G)
(f) Directors' Equity Plan. (G)
(g) Directors' Equity Plan. (H)
(h) Directors' Equity Plan. (I)
(i) Clayton Homes, Inc. Employee Savings Plan and Partnership. (C)
(j) Description of Clayton Homes, Inc. bonus arrangement for key executives. (I)
13. Annual Report to Shareholders for year ended June 30, 1997. (D)
21. List of Subsidiaries of the Registrant.
23. Consent of independent accountants.
27. Financial Data Schedule (for SEC use only)
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(A) Filed with the Company's Form 10-K for the year ended June 30, 1992, and incorporated by reference thereto.
(B) Filed as Exhibits to Registration Statement on Form S-1(SEC File No. 2-83705) and incorporated by reference thereto.
(C) Filed with Registration Statement on Form S-1(SEC File No. 2-92565) and incorporated by reference thereto.
(D) For the information of the Commission only, except to the extent of portions specifically incorporated by reference.
(E) Filed as Exhibits to Registration Statement on Form S-1(SEC File No. 33-2665) and incorporated by reference thereto.
(F) Filed with the Company's Proxy Statement for the Annual Meeting of Shareholders held November 4, 1985, and incorporated by reference thereto.
(G) Filed with the Company's Proxy Statement for the Annual Meeting of Shareholders held November 12, 1991, and incorporated by reference thereto.
(H) Filed with the Company's Proxy Statement for the Annual Meeting of Shareholders held November 11, 1992, and incorporated by reference thereto.
(I) Filed with the Company's Proxy Statement for the Annual Meeting of Shareholders held November 10, 1993, and incorporated by reference thereto.
- ------------------------------- (b) Reports on Form 8-K. No reports were filed in the Registrant's last quarter.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Knoxville, State of Tennessee, on September 23, 1997
CLAYTON HOMES, INC.
By: s/Joseph H. Stegmayer ------------------------- Joseph H. Stegmayer Vice Chairman of the Board and Chairman of the Executive Committee
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated.