Cavco Industries, Inc. (Nasdaq: CVCO) today announced financial
results for the second fiscal quarter ended October 2, 2021
and provided updates on other business items.
On September 24, 2021, we completed the
acquisition of certain assets and liabilities of The Commodore
Corporation ("Commodore"), which operates six manufacturing plants
and two retail locations. Since the acquisition date, the results
of Commodore are included in Cavco's consolidated financial
statements.
Quarterly Highlights
- Record breaking Net
revenue and Net income of $360 million and $38 million,
respectively
- Gross profit as a
percentage of Net revenue increased to 25.0% with factory-built
housing gross profit as a percentage of Net revenue at 24.1%
- Earnings per diluted
share was $4.06 compared to $1.62 in last year's quarter
- Backlogs were
$1.1 billion at the end of the quarter, up $315 million
from three months earlier. Of this increase, Commodore contributed
$279 million
- Returned $7.6
million to shareholders through stock repurchases
Commenting on the quarter, Bill Boor, President
and Chief Executive Officer said, "Our businesses continue to do an
outstanding job of managing through an extremely volatile period.
The impressive results this quarter were achieved while managing
persistent labor and supply challenges. We were also able to close
on the Commodore acquisition ahead of schedule and are well into
the combination of two strong organizations. We’re excited about
the improvements that will come from leveraging the best of
both."
Mr. Boor continued, "With continuing strong
demand drivers and our solid operating foundation we remain focused
on our long-term strategies. We have a tremendous opportunity to
provide affordable homes at a faster and faster pace by investing
in manufacturing improvements in our existing plants and growing
our capacity through new operations and acquisitions."
Financial Results
|
Three Months Ended |
|
|
|
|
($ in thousands, except
revenue per home sold) |
October 2,2021 |
|
September 26,2020 |
|
Change |
Net revenue |
|
|
|
|
|
|
|
Factory-built housing |
$ |
342,094 |
|
|
$ |
240,967 |
|
|
$ |
101,127 |
|
|
42.0 |
% |
Financial services |
17,449 |
|
|
17,009 |
|
|
440 |
|
|
2.6 |
% |
|
$ |
359,543 |
|
|
$ |
257,976 |
|
|
$ |
101,567 |
|
|
39.4 |
% |
Factory-built modules sold |
6,256 |
|
|
5,739 |
|
|
517 |
|
|
9.0 |
% |
Factory-built homes sold (consisting of one or more modules) |
3,597 |
|
|
3,427 |
|
|
170 |
|
|
5.0 |
% |
Net factory-built housing revenue per home sold |
$ |
95,105 |
|
|
$ |
70,314 |
|
|
$ |
24,791 |
|
|
35.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
($ in thousands, except
revenue per home sold) |
October 2,2021 |
|
September 26,2020 |
|
Change |
Net revenue |
|
|
|
|
|
|
|
Factory-built housing |
$ |
654,377 |
|
|
$ |
479,057 |
|
|
$ |
175,320 |
|
|
36.6 |
% |
Financial services |
35,588 |
|
|
33,720 |
|
|
1,868 |
|
|
5.5 |
% |
|
$ |
689,965 |
|
|
$ |
512,777 |
|
|
$ |
177,188 |
|
|
34.6 |
% |
Factory-built modules sold |
12,574 |
|
|
11,355 |
|
|
1,219 |
|
|
10.7 |
% |
Factory-built homes sold (consisting of one or more modules) |
7,297 |
|
|
6,776 |
|
|
521 |
|
|
7.7 |
% |
Net factory-built housing revenue per home sold |
$ |
89,678 |
|
|
$ |
70,699 |
|
|
$ |
18,979 |
|
|
26.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- In the
factory-built housing segment, the increases in Net revenue were
primarily due to higher home selling prices and 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.
- 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 higher unrealized losses
on marketable equity securities in the insurance subsidiary's
portfolio.
|
Three Months Ended |
|
|
|
|
($ in thousands) |
October 2,2021 |
|
September 26,2020 |
|
Change |
Gross
Profit |
|
|
|
|
|
|
|
Factory-built housing |
$ |
82,299 |
|
|
$ |
46,155 |
|
|
$ |
36,144 |
|
|
78.3 |
% |
Financial services |
7,629 |
|
|
7,386 |
|
|
243 |
|
|
3.3 |
% |
|
$ |
89,928 |
|
|
$ |
53,541 |
|
|
$ |
36,387 |
|
|
68.0 |
% |
Consolidated gross profit as % of Net revenue |
25.0 |
% |
|
20.8 |
% |
|
N/A |
|
4.2 |
% |
Income from
Operations |
|
|
|
|
|
|
|
Factory-built housing |
$ |
41,952 |
|
|
$ |
15,430 |
|
|
$ |
26,522 |
|
|
171.9 |
% |
Financial services |
2,604 |
|
|
2,658 |
|
|
(54 |
) |
|
(2.0 |
)% |
|
$ |
44,556 |
|
|
$ |
18,088 |
|
|
$ |
26,468 |
|
|
146.3 |
% |
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
($ in thousands) |
October 2,2021 |
|
September 26,2020 |
|
Change |
Gross
Profit |
|
|
|
|
|
|
|
Factory-built housing |
$ |
148,572 |
|
|
$ |
93,147 |
|
|
$ |
55,425 |
|
|
59.5 |
% |
Financial services |
15,369 |
|
|
15,717 |
|
|
(348 |
) |
|
(2.2 |
)% |
|
$ |
163,941 |
|
|
$ |
108,864 |
|
|
$ |
55,077 |
|
|
50.6 |
% |
Consolidated gross profit as % of Net revenue |
23.8 |
% |
|
21.2 |
% |
|
N/A |
|
2.6 |
% |
Income from
Operations |
|
|
|
|
|
|
|
Factory-built housing |
$ |
72,728 |
|
|
$ |
31,685 |
|
|
$ |
41,043 |
|
|
129.5 |
% |
Financial services |
5,009 |
|
|
6,403 |
|
|
(1,394 |
) |
|
(21.8 |
)% |
|
$ |
77,737 |
|
|
$ |
38,088 |
|
|
$ |
39,649 |
|
|
104.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
In the factory-built housing segment, Gross profit for the three
and six months ended October 2, 2021 increased from higher home
sales prices, partially offset by higher material costs per unit.
Our margins benefited from recent lows in lumber and other lumber
related product prices. However, most other product prices have
increased significantly. Selling, general and administrative
expenses increased in these periods from higher salary and
incentive compensation expense on improved earnings, transaction
deal costs related to the Commodore acquisition and higher net
expense related to the Securities and Exchange Commission ("SEC")
inquiry.
- In the financial
services segment, Gross profit increased in the second quarter of
fiscal year 2022 compared to the same quarter in the prior year
primarily due to fewer weather events, partially offset by
unrealized losses on marketable equity securities compared to
unrealized gains in the prior year period. For the six months ended
October 2, 2021, gross profit decreased primarily due to
higher weather related claims in the first three months of the
period and unrealized losses on marketable equity securities
compared to unrealized gains in the prior year period. Further,
Income from operations decreased for the three and six months ended
October 2, 2021 primarily due to higher compensation
expense.
|
Three Months Ended |
|
|
|
|
($ in thousands, except per
share amounts) |
October 2,2021 |
|
September 26,2020 |
|
Change |
Net Income attributable to Cavco common
stockholders |
$ |
37,610 |
|
|
$ |
15,049 |
|
|
$ |
22,561 |
|
|
149.9 |
% |
Diluted net income per
share |
$ |
4.06 |
|
|
$ |
1.62 |
|
|
$ |
2.44 |
|
|
150.6 |
% |
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
($ in thousands, except per
share amounts) |
October 2,2021 |
|
September 26,2020 |
|
Change |
Net Income attributable to Cavco common
stockholders |
$ |
64,656 |
|
|
$ |
31,723 |
|
|
$ |
32,933 |
|
|
103.8 |
% |
Diluted net income per
share |
$ |
6.97 |
|
|
$ |
3.42 |
|
|
$ |
3.55 |
|
|
103.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Other income, net during the three months ended October 2,
2021 includes a $3.3 million gain on the consolidation of a
non-marketable equity investment, which went from a 50% ownership
to 70%.
Items ancillary to our core operations had the
following impact on the results of operations:
|
|
Three Months Ended |
|
Six Months Ended |
($ in millions) |
|
October 2,2021 |
|
September 26,2020 |
|
October 2,2021 |
|
September 26,2020 |
Net revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (losses) gains recognized during the period on
securities held in the financial services segment |
|
$ |
(0.5 |
) |
|
$ |
0.7 |
|
|
$ |
(0.1 |
) |
|
$ |
1.7 |
|
Selling, general and
administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of additional Director & Officer insurance
premiums |
|
— |
|
|
(2.1 |
) |
|
— |
|
|
(4.2 |
) |
Legal and other expense related to the SEC inquiry, net of
recovery |
|
(0.5 |
) |
|
0.3 |
|
|
(0.6 |
) |
|
0.2 |
|
Commodore acquisition deal costs |
|
(2.1 |
) |
|
— |
|
|
(2.4 |
) |
|
— |
|
Other income,
net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate unrealized gains recognized during the period on
securities held |
|
0.5 |
|
|
0.6 |
|
|
1.7 |
|
|
1.6 |
|
Gain on consolidation of equity method investment |
|
3.3 |
|
|
— |
|
|
3.3 |
|
|
— |
|
Income tax
expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax benefits from stock option exercises |
|
0.5 |
|
|
0.4 |
|
|
0.7 |
|
|
0.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Housing Demand and Production
Updates
Housing demand remains strong as well-qualified
individuals continue pursuing home-ownership, bolstered by the low
home loan interest rates. Home order rates have moderated from the
extreme highs we saw the past few quarters, but still remain above
pre-COVID rates, which were considered to be strong.
Our backlogs at October 2, 2021 were $1.1
billion, up $315 million or 39.8% compared to $792 million at
July 3, 2021, and up $787 million or 245.4% compared to $321
million at September 26, 2020. These increases include
$279 million attributable to the Commodore acquisition.
Although we continue to experience hiring challenges, higher and
largely unpredictable factory employee absenteeism and other
inefficiencies from building material supply disruptions, our total
average plant capacity utilization rate was approximately 75%
during the second fiscal quarter of 2022.
Closing of The Commodore Corporation
Acquisition
As noted above, we completed the acquisition of
Commodore on September 24, 2021. The purchase price totaled $156
million, based on estimated closing financial statements and after
certain adjustments. The purchase was funded with cash on hand.
Further purchase price adjustments are expected upon completion of
final closing financial statements and upon achievement of other
specified milestones.
Certain benefits of the acquisition include:
- Beneficial geographic addition to Cavco's footprint with strong
operations in the Northeast/Midwest/Mid-Atlantic markets, which
provide a platform for future growth;
- Strong and experienced management team that has implemented
manufacturing innovations with reapplication potential across
Cavco's operations;
- Potential for cost and revenue synergies;
- Strategic deployment of cash while maintaining a strong
liquidity position; and
- Accretive transaction on both an earnings and cash flow from
operations basis at an attractive price based on industry
benchmarks.
Update on New Park Model Facility in
Arizona
We continue to make progress on the new
Glendale, Arizona facility that focuses on park model RV
production. We have experienced permitting delays and now expect to
begin operations in mid-calendar year 2022.
Conference Call Details
Cavco's management will hold a conference call
to review these results tomorrow, November 5, 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 and modular homes in the United States, based on
reported wholesale shipments. Our products are marketed under a
variety of brand names including Cavco, Fleetwood, Palm Harbor,
Nationwide, Fairmont, Friendship, Chariot Eagle, Destiny,
Commodore, Colony, Pennwest, R-Anell, Manorwood and Midcountry. We
are also a leading producer of park model RVs, vacation cabins and
factory-built commercial structures. 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)
|
October 2,2021 |
|
April 3,2021 |
ASSETS |
(Unaudited) |
|
|
Current assets |
|
|
|
Cash and cash equivalents |
$ |
224,291 |
|
|
$ |
322,279 |
|
Restricted cash, current |
19,850 |
|
|
16,693 |
|
Accounts receivable, net |
72,038 |
|
|
47,396 |
|
Short-term investments |
18,867 |
|
|
19,496 |
|
Current portion of consumer loans receivable, net |
26,475 |
|
|
37,690 |
|
Current portion of commercial loans receivable, net |
31,307 |
|
|
14,568 |
|
Current portion of commercial loans receivable from affiliates,
net |
294 |
|
|
4,664 |
|
Inventories |
190,394 |
|
|
131,234 |
|
Prepaid expenses and other current assets |
49,482 |
|
|
57,779 |
|
Total current assets |
632,998 |
|
|
651,799 |
|
Restricted cash |
335 |
|
|
335 |
|
Investments |
35,650 |
|
|
35,010 |
|
Consumer loans receivable,
net |
32,124 |
|
|
37,108 |
|
Commercial loans receivable,
net |
36,685 |
|
|
20,281 |
|
Commercial loans receivable from
affiliates, net |
3,647 |
|
|
4,801 |
|
Property, plant and equipment,
net |
156,397 |
|
|
96,794 |
|
Goodwill |
106,487 |
|
|
75,090 |
|
Other intangibles, net |
35,404 |
|
|
14,363 |
|
Operating lease right-of-use
assets |
16,706 |
|
|
16,252 |
|
Total assets |
$ |
1,056,433 |
|
|
$ |
951,833 |
|
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND
STOCKHOLDERS' EQUITY |
|
|
|
Current liabilities |
|
|
|
Accounts payable |
$ |
42,549 |
|
|
$ |
32,120 |
|
Accrued expenses and other current liabilities |
237,462 |
|
|
203,133 |
|
Current portion of secured financings and other |
2,260 |
|
|
1,851 |
|
Total current liabilities |
282,271 |
|
|
237,104 |
|
Operating lease liabilities |
13,240 |
|
|
13,361 |
|
Secured financings and other |
17,305 |
|
|
10,335 |
|
Deferred income taxes |
9,373 |
|
|
7,393 |
|
Redeemable noncontrolling
interest |
1,128 |
|
|
— |
|
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
9,275,016 and 9,241,256 shares, respectively |
93 |
|
|
92 |
|
Treasury stock, at cost; 98,201 and 6,600 shares, respectively |
(21,877 |
) |
|
(1,441 |
) |
Additional paid-in capital |
259,116 |
|
|
253,835 |
|
Retained earnings |
495,713 |
|
|
431,057 |
|
Accumulated other comprehensive income |
71 |
|
|
97 |
|
Total stockholders' equity |
733,116 |
|
|
683,640 |
|
Total liabilities, redeemable
noncontrolling interest and stockholders' equity |
$ |
1,056,433 |
|
|
$ |
951,833 |
|
|
|
|
|
|
|
|
|
CAVCO INDUSTRIES,
INC.CONSOLIDATED STATEMENTS OF
INCOME(Dollars in thousands, except per share
amounts)(Unaudited)
|
Three Months Ended |
|
Six Months Ended |
|
October 2,2021 |
|
September 26,2020 |
|
October 2,2021 |
|
September 26,2020 |
Net revenue |
$ |
359,543 |
|
|
$ |
257,976 |
|
|
$ |
689,965 |
|
|
$ |
512,777 |
|
Cost of sales |
269,615 |
|
|
204,435 |
|
|
526,024 |
|
|
403,913 |
|
Gross profit |
89,928 |
|
|
53,541 |
|
|
163,941 |
|
|
108,864 |
|
Selling, general and
administrative expenses |
45,372 |
|
|
35,453 |
|
|
86,204 |
|
|
70,776 |
|
Income from operations |
44,556 |
|
|
18,088 |
|
|
77,737 |
|
|
38,088 |
|
Interest expense |
(203 |
) |
|
(194 |
) |
|
(367 |
) |
|
(390 |
) |
Other income, net |
4,668 |
|
|
1,702 |
|
|
7,129 |
|
|
3,578 |
|
Income before income taxes |
49,021 |
|
|
19,596 |
|
|
84,499 |
|
|
41,276 |
|
Income tax expense |
(11,338 |
) |
|
(4,547 |
) |
|
(19,770 |
) |
|
(9,553 |
) |
Net income |
37,683 |
|
|
15,049 |
|
|
64,729 |
|
|
31,723 |
|
Less: net income attributable to
redeemable noncontrolling interest |
73 |
|
|
— |
|
|
73 |
|
|
— |
|
Net income attributable to Cavco
common stockholders |
$ |
37,610 |
|
|
$ |
15,049 |
|
|
$ |
64,656 |
|
|
$ |
31,723 |
|
|
|
|
|
|
|
|
|
Net income per share attributable
to Cavco common stockholders |
|
|
|
|
|
|
|
Basic |
$ |
4.09 |
|
|
$ |
1.64 |
|
|
$ |
7.03 |
|
|
$ |
3.46 |
|
Diluted |
$ |
4.06 |
|
|
$ |
1.62 |
|
|
$ |
6.97 |
|
|
$ |
3.42 |
|
Weighted average shares
outstanding |
|
|
|
|
|
|
|
Basic |
9,190,866 |
|
|
9,182,945 |
|
|
9,194,577 |
|
|
9,178,609 |
|
Diluted |
9,273,136 |
|
|
9,295,409 |
|
|
9,274,440 |
|
|
9,280,080 |
|
|
|
|
|
|
|
|
|
|
|
|
|
CAVCO INDUSTRIES,
INC.OTHER OPERATING DATA(Dollars in
thousands)(Unaudited)
|
Three Months Ended |
|
Six Months Ended |
|
October 2,2021 |
|
September 26,2020 |
|
October 2,2021 |
|
September 26,2020 |
Capital expenditures |
$ |
2,078 |
|
|
$ |
1,917 |
|
|
$ |
4,671 |
|
|
$ |
3,773 |
|
Depreciation |
$ |
1,448 |
|
|
$ |
1,382 |
|
|
$ |
2,851 |
|
|
$ |
2,808 |
|
Amortization of other
intangibles |
$ |
166 |
|
|
$ |
187 |
|
|
$ |
339 |
|
|
$ |
374 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For additional information,
contact:Mark FuslerDirector of Financial
Reporting and Investor
Relationsinvestor_relations@cavco.comPhone:
602-256-6263On the Internet: www.cavco.com
Cavco Industries (NASDAQ:CVCO)
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