Cavco Industries, Inc. (Nasdaq: CVCO) today announced financial
results for the first fiscal quarter ended July 3, 2021 and
provides updates on other business items.
Highlights
- Recorded highest
quarterly Net revenue and Net income in the Company's history at
$330 million and $27 million, respectively
- Gross profit as a
percentage of Net revenue increased to 22.4% and factory-built
housing gross profit to 21.2%
- Earnings per diluted
share was $2.92 compared to $1.80 for the same quarter last
year
- Home order rates
improved nearly 50% over last year's quarter
- Backlogs increased
$189 million during the quarter
- Released first ever
Corporate Responsibility Report
- Announced major
expansion of the Fort Worth, Texas production facility and
continued progress on new park model facility in Glendale,
Arizona
- Announced agreement
to acquire manufactured and modular home builder The Commodore
Corporation
- Returned over
$12.8 million to shareholders through stock repurchases
Commenting on the quarter, Bill Boor, President
and Chief Executive Officer said, "Our first quarter results
demonstrate the strength of our company, with record quarterly
revenue and strong gross margins. The demand for our homes also
remains healthy with seasonally strong order rates. We remain
focused on innovation and increasing home production while
navigating continuing labor and building supply challenges."
Mr. Boor continued, "We have stated that our
capital allocation priorities include investing in our facilities,
strategic acquisitions and returning money to our shareholders.
This quarter, we have executed on all three of these through the
expansion of our Fort Worth facility, our planned acquisition of
The Commodore Corporation and our stock repurchase activity. Our
strong balance sheet has allowed us the flexibility to move quickly
with these opportunities and we will continue to explore other
prospects for growth and return on capital."
Financial Results
|
Three Months Ended |
|
|
|
|
($ in thousands, except
revenue per home sold) |
July 3,2021 |
|
June 27,2020 |
|
Change |
Net revenue |
|
|
|
|
|
|
|
Factory-built housing |
$ |
312,283 |
|
|
$ |
238,090 |
|
|
$ |
74,193 |
|
|
31.2 |
% |
Financial services |
18,139 |
|
|
16,711 |
|
|
1,428 |
|
|
8.5 |
% |
|
$ |
330,422 |
|
|
$ |
254,801 |
|
|
$ |
75,621 |
|
|
29.7 |
% |
|
|
|
|
|
|
|
|
Factory-built modules
sold |
6,318 |
|
|
5,616 |
|
|
702 |
|
|
12.5 |
% |
Factory-built homes sold (consisting of one or more modules) |
3,700 |
|
|
3,349 |
|
|
351 |
|
|
10.5 |
% |
Net
factory-built housing revenue per home sold |
$ |
84,401 |
|
|
$ |
71,093 |
|
|
$ |
13,308 |
|
|
18.7 |
% |
- In the
factory-built housing segment, the increase in Net revenue was
primarily due to 18.7% higher home selling prices and 10.5% higher
home sales volume. The higher home prices were driven by product
price increases and a shift toward more multi-section homes. Home
sales volume increased from higher factory capacity utilization. On
a sequential basis, adjusting for the extra week of production in
the fourth quarter of fiscal year 2021, home sales volume also
increased from slightly higher factory capacity utilization.
- Financial
services segment Net revenue increased primarily due to higher
volume in home loan sales and more insurance policies in force
in the current year compared to the prior year, partially offset by
lower interest income earned on the acquired consumer loan
portfolios that continue to amortize and lower unrealized gains on
marketable equity securities in the insurance subsidiary's
portfolio.
|
Three Months Ended |
|
|
|
|
($ in thousands) |
July 3,2021 |
|
June 27,2020 |
|
Change |
Gross Profit |
|
|
|
|
|
|
|
Factory-built housing |
$ |
66,273 |
|
|
$ |
46,992 |
|
|
$ |
19,281 |
|
|
41.0 |
|
% |
Financial services |
7,740 |
|
|
8,331 |
|
|
(591 |
) |
|
(7.1 |
) |
% |
|
$ |
74,013 |
|
|
$ |
55,323 |
|
|
$ |
18,690 |
|
|
33.8 |
|
% |
|
|
|
|
|
|
|
|
Consolidated gross profit as % of Net revenue |
22.4 |
% |
|
21.7 |
% |
|
N/A |
|
|
0.7 |
|
% |
|
|
|
|
|
|
|
|
Income from Operations |
|
|
|
|
|
|
|
Factory-built housing |
$ |
30,776 |
|
|
$ |
16,255 |
|
|
$ |
14,521 |
|
|
89.3 |
|
% |
Financial services |
2,405 |
|
|
3,745 |
|
|
(1,340 |
) |
|
(35.8 |
) |
% |
|
$ |
33,181 |
|
|
$ |
20,000 |
|
|
$ |
13,181 |
|
|
65.9 |
|
% |
-
In the factory-built housing segment, Income from operations
increased from the higher home sales prices and the higher home
sales volume, partially offset by higher salary and incentive
compensation expense on improved earnings. Net expense of $0.1
million related to the Securities and Exchange Commission ("SEC")
inquiry was recorded for both periods presented. There was no
additional Director and Officer ("D&O") insurance premium
amortization in the current period versus $2.1 million in the prior
year period.
- In the financial
services segment, Income from operations decreased from lower
unrealized gains on marketable equity securities, higher
weather-related claims during the period and lower interest income
earned on the acquired consumer loan portfolios that continue to
amortize.
|
Three Months Ended |
|
|
|
|
($ in thousands, except per
share amounts) |
July 3,2021 |
|
June 27,2020 |
|
Change |
Net Income |
$ |
27,046 |
|
|
$ |
16,674 |
|
|
$ |
10,372 |
|
|
62.2 |
% |
Diluted net income per
share |
$ |
2.92 |
|
|
$ |
1.80 |
|
|
$ |
1.12 |
|
|
62.2 |
% |
Items ancillary to our core operations had the
following impact on the results of operations:
|
|
Three Months Ended |
($ in
millions) |
July 3,2021 |
|
June 27,2020 |
Net
revenue |
|
Unrealized gains recognized during the period on securities held in
the financial services segment |
$ |
0.4 |
|
|
$ |
1.0 |
|
Selling,
general and administrative expenses |
|
|
|
Amortization of additional
D&O insurance premiums |
— |
|
|
(2.1 |
) |
|
Legal and other expense
related to the SEC inquiry, net of recovery |
(0.1 |
) |
|
(0.1 |
) |
Other
income, net |
|
Corporate unrealized gains
recognized during the period on securities held |
1.2 |
|
|
1.0 |
|
Income tax
expense |
|
Tax benefits from stock option
exercises |
0.2 |
|
|
0.3 |
|
Housing Demand and Production
Updates
Home order rates remained strong during the
first fiscal quarter of 2022, being nearly 50% higher than the
comparable prior year quarter. This increased order volume is the
result of more well-qualified home buyers making purchase
decisions, supported by reduced home loan interest rates.
We continue to experience hiring challenges,
higher and largely unpredictable factory employee absenteeism and
other inefficiencies from building material supply disruptions.
Accordingly, our total average plant capacity utilization rate was
approximately 75% during the first fiscal quarter of 2022. Orders
outpaced the challenging production environment during the quarter,
raising order backlogs to $792 million at July 3, 2021, up
31.3% compared to $603 million at April 3, 2021, and up 404.5%
compared to $157 million at June 27, 2020.
Planned Acquisition of The Commodore
Corporation
As discussed in our July 26, 2021 press release,
we entered into an agreement to acquire the business and certain
assets and liabilities of The Commodore Corporation ("Commodore"),
including its six manufacturing and two retail locations. Commodore
is the largest private independent builder of manufactured and
modular housing in the United States, operating under a variety of
well-known brand names. Commodore has over 1,200 employees and
operates across the Northeast, Midwest and Mid-Atlantic regions. In
addition to manufacturing, Commodore also has a commercial lending
portfolio with its dealers that we will acquire and continue. For
the last 12 months ended March 31, 2021, Commodore generated net
sales of approximately $258 million and sold over 6,600 modules,
equating to over 3,700 homes.
The purchase price totals $153 million, before
certain adjustments that will be determined upon close of the
transaction. The estimated cash outlay is $140 million after
adjustments and including transaction fees. We expect to fund the
acquisition entirely with cash on hand. The transaction is expected
to close in our third quarter of fiscal year 2022, subject to
applicable regulatory approvals and satisfaction of certain
customary conditions.
Release of Corporate Responsibility
Report
The release of our first Corporate
Responsibility Report represents a great milestone. In the report,
we present a framework for how we think about our impact across the
spectrum of stakeholders in our business. The report is divided
into several focus areas: our employees, our community, our
environment and corporate governance. The content of this first
Corporate Responsibility Report demonstrates that, in addition to
having opportunities for improvement, we have a lot to be proud of
as a team of people working to make a difference. This report can
be accessed in the General Documents section at
https://investor.cavco.com.
Conference Call Details
Cavco's management will hold a conference call
to review these results tomorrow, August 6, 2021, at 1:00 p.m.
(Eastern Time). Interested parties can access a live webcast of the
conference call on the Internet at https://investor.cavco.com or
via telephone at + 1 (844) 348-1686 (domestic) or + 1 (213)
358-0891 (international). An archive of the webcast and
presentation will be available for 90 days at
https://investor.cavco.com.
About Cavco
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. We are one of the largest producers of
manufactured homes in the United States, based on reported
wholesale shipments and marketed under a variety of brand names
including Cavco, Fleetwood, Palm Harbor, Fairmont, Friendship,
Chariot Eagle and Destiny. We are also a leading producer of park
model RVs, vacation cabins and systems-built commercial structures,
as well as modular homes. Cavco's finance subsidiary, CountryPlace
Mortgage, is an approved Fannie Mae and Freddie Mac seller/servicer
and 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.
Forward-Looking Statements
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 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 industry; 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: the impact of local or national
emergencies including the COVID-19 pandemic, including such impacts
from state and federal regulatory action that restricts our ability
to operate our business in the ordinary course and impacts on (i)
customer demand and the availability of financing for our products,
(ii) our supply chain and the availability of raw materials for the
manufacture of our products, (iii) the availability of labor and
the health and safety of our workforce and (iv) our liquidity and
access to the capital markets; labor shortages and the pricing and
availability of raw materials; our ability to successfully
integrate past acquisitions or future acquisitions and the ability
to attain the anticipated benefits of such acquisitions;
involvement in vertically integrated lines of business, including
manufactured housing consumer finance, commercial finance and
insurance; information technology failures or cyber incidents; our
participation in certain financing programs for the purchase of our
products by industry distributors and consumers, which may expose
us to additional risk of credit loss; significant warranty and
construction defect claims; our contingent repurchase obligations
related to wholesale financing; a write-off of all or part of our
goodwill; our ability to maintain relationships with independent
distributors; our business and operations being concentrated in
certain geographic regions; governmental and regulatory disruption,
including prolonged delays by Congress and the President to approve
budgets or continuing appropriations resolutions to facilitate the
operation of the federal government; curtailment of available
financing from home-only lenders and increased lending regulations;
availability of wholesale financing and limited floor plan lenders;
market forces and housing demand fluctuations; the cyclical and
seasonal nature of our business; competition; general deterioration
in economic conditions and turmoil in the financial markets;
unfavorable zoning ordinances; extensive regulation affecting the
production and sale of manufactured housing; potential financial
impact on the Company from the subpoenas we received from the SEC
and its ongoing investigation, including the risk of potential
litigation or regulatory action, and costs and expenses arising
from the SEC subpoenas and investigation and the events described
in or covered by the SEC subpoenas and investigation, which include
the Company's indemnification obligations and insurance costs
regarding such matters, and potential reputational damage that the
Company may suffer; losses not covered by our director and officer
insurance, which may be large, adversely impacting financial
performance; loss of any of our executive officers; our ability to
generate income in the future; liquidity and ability to raise
capital may be limited; organizational document provisions delaying
or making a change in control more difficult; and volatility of
stock price; together with all of the other risks described in our
filings with the SEC. Readers are specifically referred to the Risk
Factors described in Item 1A of the Company’s Annual Report on Form
10-K for the year ended April 3, 2021 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 undue reliance on any such
forward-looking statements.
CAVCO INDUSTRIES,
INC.CONSOLIDATED BALANCE SHEETS(Dollars
in thousands, except per share amounts)
|
July 3,2021 |
|
April 3,2021 |
ASSETS |
(Unaudited) |
|
|
Current
assets |
|
|
|
Cash and cash equivalents |
$ |
329,753 |
|
|
$ |
322,279 |
|
Restricted cash, current |
16,728 |
|
|
16,693 |
|
Accounts receivable, net |
51,054 |
|
|
47,396 |
|
Short-term investments |
19,749 |
|
|
19,496 |
|
Current portion of consumer loans receivable, net |
32,429 |
|
|
37,690 |
|
Current portion of commercial loans receivable, net |
16,500 |
|
|
14,568 |
|
Current portion of commercial loans receivable from affiliates,
net |
2,113 |
|
|
4,664 |
|
Inventories |
150,917 |
|
|
131,234 |
|
Prepaid expenses and other current assets |
48,621 |
|
|
57,779 |
|
Total
current assets |
667,864 |
|
|
651,799 |
|
Restricted cash |
335 |
|
|
335 |
|
Investments |
38,192 |
|
|
35,010 |
|
Consumer
loans receivable, net |
35,095 |
|
|
37,108 |
|
Commercial loans receivable, net |
21,245 |
|
|
20,281 |
|
Commercial loans receivable from affiliates, net |
4,730 |
|
|
4,801 |
|
Property, plant and equipment, net |
97,981 |
|
|
96,794 |
|
Goodwill |
75,090 |
|
|
75,090 |
|
Other
intangibles, net |
14,190 |
|
|
14,363 |
|
Operating lease right-of-use assets |
16,150 |
|
|
16,252 |
|
Total
assets |
$ |
970,872 |
|
|
$ |
951,833 |
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
|
Current
liabilities |
|
|
|
Accounts payable |
$ |
30,175 |
|
|
$ |
32,120 |
|
Accrued expenses and other current liabilities |
210,190 |
|
|
203,133 |
|
Current portion of secured financings and other |
1,822 |
|
|
1,851 |
|
Total
current liabilities |
242,187 |
|
|
237,104 |
|
Operating lease liabilities |
13,085 |
|
|
13,361 |
|
Secured
financings and other |
9,927 |
|
|
10,335 |
|
Deferred
income taxes |
6,606 |
|
|
7,393 |
|
Stockholders' equity |
|
|
|
Preferred stock, $0.01 par value; 1,000,000 shares authorized; No
shares issued or outstanding |
— |
|
|
— |
|
Common stock, $0.01 par value; 40,000,000 shares authorized;
Issued 9,245,721 and 9,241,256 shares,
respectively |
92 |
|
|
92 |
|
Treasury stock, at cost; 67,901 and 6,600 shares, respectively |
(14,283 |
) |
|
(1,441 |
) |
Additional paid-in capital |
255,071 |
|
|
253,835 |
|
Retained earnings |
458,103 |
|
|
431,057 |
|
Accumulated other comprehensive income |
84 |
|
|
97 |
|
Total
stockholders' equity |
699,067 |
|
|
683,640 |
|
Total
liabilities and stockholders' equity |
$ |
970,872 |
|
|
$ |
951,833 |
|
CAVCO INDUSTRIES,
INC.CONSOLIDATED STATEMENTS OF
INCOME(Dollars in thousands, except per share
amounts)(Unaudited)
|
Three Months Ended |
|
July 3,2021 |
|
June 27,2020 |
Net
revenue |
$ |
330,422 |
|
|
$ |
254,801 |
|
Cost of
sales |
256,409 |
|
|
199,478 |
|
Gross
profit |
74,013 |
|
|
55,323 |
|
Selling,
general and administrative expenses |
40,832 |
|
|
35,323 |
|
Income
from operations |
33,181 |
|
|
20,000 |
|
Interest
expense |
(164 |
) |
|
(196 |
) |
Other
income, net |
2,461 |
|
|
1,876 |
|
Income
before income taxes |
35,478 |
|
|
21,680 |
|
Income
tax expense |
(8,432 |
) |
|
(5,006 |
) |
Net
income |
$ |
27,046 |
|
|
$ |
16,674 |
|
|
|
|
|
Net
income per share |
|
|
|
Basic |
$ |
2.94 |
|
|
$ |
1.82 |
|
Diluted |
$ |
2.92 |
|
|
$ |
1.80 |
|
Weighted
average shares outstanding |
|
|
|
Basic |
9,198,229 |
|
|
9,174,182 |
|
Diluted |
9,276,529 |
|
|
9,264,661 |
|
CAVCO INDUSTRIES,
INC.OTHER OPERATING DATA(Dollars in
thousands)(Unaudited)
|
Three Months Ended |
|
July 3,2021 |
|
June 27,2020 |
Capital expenditures |
$ |
2,593 |
|
|
$ |
1,856 |
|
Depreciation |
$ |
1,403 |
|
|
$ |
1,426 |
|
Amortization of other
intangibles |
$ |
173 |
|
|
$ |
187 |
|
For additional information,
contact:
Mark FuslerDirector of Financial
Reporting and Investor
Relationsinvestor_relations@cavco.comPhone:
602-256-6263On the Internet: www.cavco.com
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