Cavco Industries Reports Fiscal 2019 Second Quarter Results
08 November 2018 - 11:12PM
Cavco Industries, Inc. (NASDAQ: CVCO) today announced financial
results for the second fiscal quarter ended September 29,
2018.
Financial highlights include the following:
- Net revenue for the second quarter of fiscal
year 2019 totaled $241.5 million, up 20.4% from $200.5 million for
the second quarter of fiscal year 2018. Net revenue for the first
six months of fiscal 2019 was $487.9 million, a 19.8% increase from
$407.3 million in the comparable prior year period. The increases
were primarily from higher home selling prices from input cost
inflation, modestly larger home sizes and improved home sales
volume. Net revenue for the three and six months ended September
29, 2018 includes subcontracted pass-through services of $6.2
million and $12.8 million, respectively, which are now recognized
on a gross basis rather than net of associated costs.
- Income before income taxes was $19.5 million
for the second quarter of fiscal year 2019, a 129.4% increase from
$8.5 million in the comparable quarter last year. For the first six
months of fiscal 2019, income before income taxes increased 80.6%
to $43.7 million from $24.2 million in the prior year period. The
prior year’s second fiscal quarter was adversely impacted by
Hurricane Harvey, which resulted in significant homeowners'
insurance claims in our financial services segment and caused
delays in manufacturing and retail sales, as well as new home
inventory damage at certain company-owned retail centers. While not
as severe, during the second quarter of fiscal year 2019, financial
services results were adversely impacted by a windstorm in Arizona,
which resulted in increased homeowners' insurance claims for the
period. The Company's insurance subsidiary maintains reinsurance
for loss events in excess of $1.5 million. Income before income tax
for the first six months of fiscal year 2019 also included a
benefit of $1.1 million from unrealized gains on corporate
investments recorded in other income, net. These unrealized gains
were from this fiscal year's implementation of new accounting
standards requiring unrealized gains and losses to be reported on
the Consolidated Statement of Comprehensive Income instead of
recording these amounts in accumulated other comprehensive income
on the Consolidated Balance Sheet.
- Income tax expense was $3.9 million, resulting
in an effective tax rate of 20.2% for the second quarter of fiscal
year 2019 compared to $2.3 million and an effective tax rate of
27.3% in the same quarter of the prior year. For the six months
ended September 29, 2018, income tax expense was $8.4 million,
resulting in an effective tax rate of 19.2%. Income tax expense was
$6.2 million with an effective rate of 25.7% for the prior six
month period. The Tax Cuts and Jobs Act (the "Tax Act"), which was
enacted on December 22, 2017, reduced the federal corporate tax
rate to 21% for our fiscal year ending March 30, 2019.
Income tax expense also includes a benefit of $1.1 million and $2.3
million for the three and six months ended September 29, 2018,
respectively, related to excess tax benefits from exercises of
stock options, compared to a benefit of $300,000 and $1.7 million
in the comparable prior year periods, respectively.
- Net income was $15.6 million for the second
quarter of fiscal year 2019, compared to net income of $6.2 million
in the same quarter of the prior year, a 151.6% increase. For the
six months ended September 29, 2018, net income was $35.3 million,
up 97.2% from net income of $17.9 million in the prior year period.
Diluted net income per share was $1.67 and $3.80 for the three and
six months ended September 29, 2018, respectively, compared to
$0.67 and $1.96 for the comparable periods last year.
Commenting on the quarter, Daniel Urness,
President and Acting Chief Executive Officer said, "We are pleased
to report positive financial results for the quarter. Improvements
in economic measures including increased consumer confidence, low
unemployment and growth in jobs and wages have continued to support
the homebuying ability of our customers. We are working to further
increase manufactured home production volume through investments in
homebuilding capabilities, processes, labor recruitment and
employee retention efforts. Production staff training and quality
assurance are also significant areas of focus given our diverse
home product offerings and reputation for high standards of
quality. Further, we believe that rising site-built housing prices,
residential rent and interest rates make our high value, precision
built homes increasingly sought after as an attractive affordable
housing solution."
Mr. Urness also noted, "We were saddened by the
harm inflicted by Hurricanes Florence and Michael in the
Southeastern United States. Our operations were fortunately outside
of the paths of the storms. We stand ready to meet the need for new
homes that may result as the impacted areas rebuild. Additionally,
we are willing and able to assist in building units for disaster
relief, should the need arise."
Management Conference Call - Tomorrow,
November 9, 2018, at 8:30 AM (Eastern Time)
Cavco’s management will hold a conference call
to review these results tomorrow, November 9, 2018, at 8:30 AM
(Eastern Time). Interested parties can access a live webcast of the
conference call on the Internet at www.cavco.com under the Investor
Relations link. An archive of the webcast and presentation will be
available for 90 days at www.cavco.com under the Investor Relations
link.
Cavco Industries, Inc., headquartered in
Phoenix, Arizona, designs and produces factory-built housing
products primarily distributed through a network of independent and
Company-owned retailers. The Company is one of the largest
producers of manufactured homes in the United States, based on
reported wholesale shipments, marketed under a variety of brand
names including Cavco Homes, Fleetwood Homes, Palm Harbor Homes,
Fairmont Homes, Friendship Homes, Chariot Eagle and Lexington
Homes. The Company is also a leading producer of park model RVs,
vacation cabins, and systems-built commercial structures, as well
as modular homes built primarily under the Nationwide Homes brand.
Cavco’s mortgage subsidiary, CountryPlace Mortgage, is an approved
Fannie Mae and Freddie Mac seller/servicer, a Ginnie Mae
mortgage-backed securities issuer that offers conforming mortgages,
non-conforming mortgages and home-only loans to purchasers of
factory-built homes. Our insurance subsidiary, Standard Casualty,
provides property and casualty insurance to owners of manufactured
homes.
Certain statements contained in this release are
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, Section 21E of the Securities and Exchange
Act of 1934 and the Private Securities Litigation Reform Act of
1995. In general, all statements that are not historical in nature
are forward-looking. Forward-looking statements are typically
included, for example, in discussions regarding the manufactured
housing and site-built housing industries; our financial
performance and operating results; and the expected effect of
certain risks and uncertainties on our business, financial
condition and results of operations. All forward-looking statements
are subject to risks and uncertainties, many of which are beyond
our control. As a result, our actual results or performance may
differ materially from anticipated results or performance. Factors
that could cause such differences to occur include, but are not
limited to: adverse industry conditions; our ability to
successfully integrate past acquisitions and any future acquisition
or the ability to attain the anticipated benefits of such
acquisitions; the risk that any past or future acquisition may
adversely impact our liquidity; involvement in vertically
integrated lines of business, including manufactured housing
consumer finance, commercial finance and insurance; a constrained
consumer financing market; curtailment of available financing for
retailers in the manufactured housing industry; our participation
in certain wholesale and retail financing programs for the purchase
of our products by industry distributors and consumers may expose
us to additional risk of credit loss; significant warranty and
construction defect claims; our contingent repurchase
obligations related to wholesale financing; market forces and
housing demand fluctuations; net losses were incurred in certain
prior periods and there can be no assurance that we will generate
income in the future; a write-off of all or part of our goodwill;
the cyclical and seasonal nature of our business; limitations on
our ability to raise capital; competition; our ability to maintain
relationships with independent distributors; our business and
operations being concentrated in certain geographic regions; labor
shortages; pricing and availability of raw materials; unfavorable
zoning ordinances; loss of any of our executive officers;
organizational document provisions delaying or making a change in
control more difficult; volatility of stock price; general
deterioration in economic conditions and continued turmoil in the
credit markets; increased costs of healthcare benefits for
employees; governmental and regulatory disruption; information
technology failures and data security breaches; extensive
regulation affecting manufactured housing; potential financial
impact on the Company from the subpoena we received from the SEC;
the risk of potential litigation or regulatory action arising from
the SEC investigation and its findings; potential reputational
damage that the Company may suffer as a result of the matters under
investigation, as well as the results of the Audit Committee of the
Board of Directors investigation; together with all of the other
risks described in our filings with the Securities and Exchange
Commission. Readers are specifically referred to the Risk Factors
described in Item 1A of the 2018 Form 10-K, as may be amended from
time to time, which identify important risks that could cause
actual results to differ from those contained in the
forward-looking statements. Cavco expressly disclaims any
obligation to update any forward-looking statements contained in
this release, whether as a result of new information, future events
or otherwise. Investors should not place any reliance on any such
forward-looking statements.
|
CAVCO INDUSTRIES,
INC. |
CONSOLIDATED BALANCE
SHEETS |
(Dollars in thousands, except per
share amounts) |
|
|
September 29, 2018 |
|
March 31, 2018 |
ASSETS |
(Unaudited) |
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
195,488 |
|
|
$ |
186,766 |
|
Restricted cash, current |
13,754 |
|
|
11,228 |
|
Accounts receivable, net |
38,097 |
|
|
35,043 |
|
Short-term investments |
13,462 |
|
|
11,866 |
|
Current portion of consumer loans receivable,
net |
31,327 |
|
|
31,096 |
|
Current portion of commercial loans receivable,
net |
10,909 |
|
|
5,481 |
|
Inventories |
111,502 |
|
|
109,152 |
|
Prepaid expenses and other current assets |
34,169 |
|
|
27,961 |
|
Total current assets |
448,708 |
|
|
418,593 |
|
Restricted cash |
453 |
|
|
1,264 |
|
Investments |
33,149 |
|
|
33,573 |
|
Consumer loans receivable, net |
62,021 |
|
|
63,855 |
|
Commercial loans receivable, net |
22,920 |
|
|
11,120 |
|
Property, plant and equipment, net |
65,108 |
|
|
63,355 |
|
Goodwill and other intangibles, net |
82,856 |
|
|
83,020 |
|
Total assets |
$ |
715,215 |
|
|
$ |
674,780 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
25,676 |
|
|
$ |
23,785 |
|
Accrued liabilities |
130,083 |
|
|
126,500 |
|
Current portion of securitized financings and
other |
40,969 |
|
|
26,044 |
|
Total current liabilities |
196,728 |
|
|
176,329 |
|
Securitized financings and other |
15,159 |
|
|
33,768 |
|
Deferred income taxes |
8,580 |
|
|
7,577 |
|
Stockholders’ equity: |
|
|
|
Preferred stock, $.01 par value; 1,000,000 shares
authorized; No shares issued or outstanding |
— |
|
|
— |
|
Common stock, $.01 par value; 40,000,000 shares
authorized; Outstanding 9,097,359 and 9,044,858 shares,
respectively |
91 |
|
|
90 |
|
Additional paid-in capital |
248,138 |
|
|
246,197 |
|
Retained earnings |
246,723 |
|
|
209,381 |
|
Accumulated other comprehensive income (loss) |
(204 |
) |
|
1,438 |
|
Total stockholders’ equity |
494,748 |
|
|
457,106 |
|
Total liabilities and stockholders’ equity |
$ |
715,215 |
|
|
$ |
674,780 |
|
|
CAVCO INDUSTRIES,
INC. |
CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME |
(Dollars in thousands, except per
share amounts) |
(Unaudited) |
|
|
Three Months Ended |
|
Six Months Ended |
|
September 29, 2018 |
|
September 30, 2017 |
|
September 29, 2018 |
|
September 30, 2017 |
Net revenue |
$ |
241,530 |
|
|
$ |
200,507 |
|
|
$ |
487,933 |
|
|
$ |
407,323 |
|
Cost of sales |
192,114 |
|
|
165,953 |
|
|
387,041 |
|
|
330,803 |
|
Gross profit |
49,416 |
|
|
34,554 |
|
|
100,892 |
|
|
76,520 |
|
Selling, general and administrative expenses |
30,035 |
|
|
26,153 |
|
|
59,248 |
|
|
52,458 |
|
Income from operations |
19,381 |
|
|
8,401 |
|
|
41,644 |
|
|
24,062 |
|
Interest expense |
(941 |
) |
|
(1,021 |
) |
|
(1,913 |
) |
|
(2,069 |
) |
Other income, net |
1,077 |
|
|
1,119 |
|
|
3,922 |
|
|
2,157 |
|
Income before income taxes |
19,517 |
|
|
8,499 |
|
|
43,653 |
|
|
24,150 |
|
Income tax expense |
(3,941 |
) |
|
(2,317 |
) |
|
(8,386 |
) |
|
(6,215 |
) |
Net income |
$ |
15,576 |
|
|
$ |
6,182 |
|
|
$ |
35,267 |
|
|
$ |
17,935 |
|
|
|
|
|
|
|
|
|
Net income per share: |
|
|
|
|
|
|
|
Basic |
$ |
1.72 |
|
|
$ |
0.69 |
|
|
$ |
3.89 |
|
|
$ |
1.99 |
|
Diluted |
$ |
1.67 |
|
|
$ |
0.67 |
|
|
$ |
3.80 |
|
|
$ |
1.96 |
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
Basic |
9,079,679 |
|
|
9,020,834 |
|
|
9,064,007 |
|
|
9,013,917 |
|
Diluted |
9,304,188 |
|
|
9,181,899 |
|
|
9,287,730 |
|
|
9,171,515 |
|
|
CAVCO INDUSTRIES,
INC. |
OTHER OPERATING
DATA |
(Dollars in thousands) |
(Unaudited) |
|
|
Three Months Ended |
|
Six Months Ended |
|
September 29, 2018 |
|
September 30, 2017 |
|
September 29, 2018 |
|
September 30, 2017 |
Net revenue: |
|
|
|
|
|
|
|
Factory-built housing |
$ |
227,094 |
|
|
$ |
187,380 |
|
|
$ |
459,856 |
|
|
$ |
380,262 |
|
Financial services |
14,436 |
|
|
13,127 |
|
|
28,077 |
|
|
27,061 |
|
Total net revenue |
$ |
241,530 |
|
|
$ |
200,507 |
|
|
$ |
487,933 |
|
|
$ |
407,323 |
|
|
|
|
|
|
|
|
|
Income before income taxes: |
|
|
|
|
|
|
|
Factory-built housing |
$ |
16,880 |
|
|
$ |
8,584 |
|
|
$ |
38,488 |
|
|
$ |
21,754 |
|
Financial services |
2,637 |
|
|
(85 |
) |
|
5,165 |
|
|
2,396 |
|
Total income before income taxes |
$ |
19,517 |
|
|
$ |
8,499 |
|
|
$ |
43,653 |
|
|
$ |
24,150 |
|
|
|
|
|
|
|
|
|
Capital expenditures |
$ |
2,197 |
|
|
$ |
1,185 |
|
|
$ |
3,876 |
|
|
$ |
1,779 |
|
Depreciation |
$ |
1,090 |
|
|
$ |
884 |
|
|
$ |
2,110 |
|
|
$ |
1,766 |
|
Amortization of other intangibles |
$ |
80 |
|
|
$ |
92 |
|
|
$ |
164 |
|
|
$ |
184 |
|
|
|
|
|
|
|
|
|
Total factory-built homes sold |
3,536 |
|
|
3,298 |
|
|
7,423 |
|
|
6,773 |
|
For additional information,
contact:
Mark FuslerDirector of Financial
Reportinginvestor_relations@cavco.comPhone:
602-256-6263On the Internet: www.cavco.com
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