Cavco Industries, Inc. (Nasdaq: CVCO) today announced financial
results for the first fiscal quarter ended July 2, 2022 and
provided updates on other business items.
Quarterly Highlights
- Record breaking Net
revenue and Net income of $588 million and $60 million,
respectively.
- Gross profit as a
percentage of Net revenue increased to 24.6% compared to 22.4% in
last year's first quarter, with factory-built housing gross profit
as a percentage of Net revenue at 24.4% in the current year
quarter.
- Earnings per diluted
share were $6.63 compared to $2.92 in last year's first
quarter.
- Factory utilization
increased to over 85%, a record level over the last 10 years.
- Backlogs were
$1.0 billion at the end of the quarter, up $206 million
from a year ago.
- Returned nearly $39
million to shareholders through stock repurchases, fully utilizing
the repurchase program authorization from October 2020. In
addition, the Company's Board of Directors approved a new $100
million repurchase program.
- Completed
acquisition of a manufacturing facility in Hamlet, North Carolina
that will be renovated for HUD code home production, with an
anticipated home production start date during the third calendar
quarter of 2022.
Commenting on the quarter, Bill Boor, President
and Chief Executive Officer said, "All of our operations had
another very successful quarter, highlighted by achieving greater
than 85% capacity utilization in our production plants. In an
environment of rising interest rates and general inflation, we
remain very well positioned. With the extreme housing shortage
facing our country, the benefits of factory-built solutions and the
need for what we do have never been greater."
Financial Results
On September 24, 2021, we completed the
acquisition of certain assets and liabilities of The Commodore
Corporation ("Commodore"), which operates six manufacturing plants
and two retail locations. Since the acquisition date, the results
of Commodore are included in Cavco's consolidated financial
statements.
|
Three Months Ended |
|
|
|
|
($ in thousands, except net revenue per home sold) |
July 2,2022 |
|
July 3,2021 |
|
Change |
Net revenue |
|
|
|
|
|
|
|
Factory-built housing |
$ |
572,597 |
|
$ |
312,283 |
|
$ |
260,314 |
|
|
83.4 |
% |
Financial services |
|
15,741 |
|
|
18,139 |
|
|
(2,398 |
) |
|
(13.2) |
% |
|
$ |
588,338 |
|
$ |
330,422 |
|
$ |
257,916 |
|
|
78.1 |
% |
|
|
|
|
|
|
|
|
Factory-built modules sold |
|
9,242 |
|
|
6,318 |
|
|
2,924 |
|
|
46.3 |
% |
|
|
|
|
|
|
|
|
Factory-built homes sold (consisting of one or more modules) |
|
5,346 |
|
|
3,700 |
|
|
1,646 |
|
|
44.5 |
% |
|
|
|
|
|
|
|
|
Net factory-built housing revenue per home sold |
$ |
107,108 |
|
$ |
84,401 |
|
$ |
22,707 |
|
|
26.9 |
% |
-
In the factory-built housing segment, the increase in Net revenue
was primarily due to higher home sales volume and higher home
selling prices. Home sales volume increased from the Commodore
acquisition in the second quarter of fiscal year 2022, which
provided $101 million in Net revenue for the three months ended
July 2, 2022, and higher factory capacity utilization.
- Financial
services segment Net revenue decreased primarily due to unrealized
losses on marketable equity securities in the insurance
subsidiary's portfolio during the current period compared to gains
in the prior year, lower interest income earned on the acquired
consumer loan portfolios that continue to amortize, and lower
volume in home loan sales. These items were partially offset
by more insurance policies in force in the current year compared to
the prior year.
|
Three Months Ended |
|
|
|
|
($ in thousands) |
July 2,2022 |
|
July 3,2021 |
|
Change |
Gross
Profit |
|
|
|
|
|
|
|
Factory-built housing |
$ |
139,586 |
|
|
$ |
66,273 |
|
|
$ |
73,313 |
|
|
110.6 |
% |
Financial services |
|
5,138 |
|
|
|
7,740 |
|
|
|
(2,602 |
) |
|
(33.6 |
)% |
|
$ |
144,724 |
|
|
$ |
74,013 |
|
|
$ |
70,711 |
|
|
95.5 |
% |
|
|
|
|
|
|
|
|
Gross profit as % of Net
revenue |
|
|
|
|
|
|
|
Consolidated |
|
24.6 |
% |
|
|
22.4 |
% |
|
N/A |
|
2.2 |
% |
Factory-built housing |
|
24.4 |
% |
|
|
21.2 |
% |
|
N/A |
|
3.2 |
% |
Financial services |
|
32.6 |
% |
|
|
42.7 |
% |
|
N/A |
|
(10.1 |
)% |
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
|
|
|
|
|
|
Factory-built housing |
$ |
60,923 |
|
|
$ |
35,497 |
|
|
$ |
25,426 |
|
|
71.6 |
% |
Financial services |
|
5,213 |
|
|
|
5,335 |
|
|
|
(122 |
) |
|
(2.3 |
)% |
|
$ |
66,136 |
|
|
$ |
40,832 |
|
|
$ |
25,304 |
|
|
62.0 |
% |
|
|
|
|
|
|
|
|
Income from
Operations |
|
|
|
|
|
|
|
Factory-built housing |
$ |
78,663 |
|
|
$ |
30,776 |
|
|
$ |
47,887 |
|
|
155.6 |
% |
Financial services |
|
(75 |
) |
|
|
2,405 |
|
|
|
(2,480 |
) |
|
(103.1 |
)% |
|
$ |
78,588 |
|
|
$ |
33,181 |
|
|
$ |
45,407 |
|
|
136.8 |
% |
-
In the factory-built housing segment, the Gross profit percentage
for the three months ended July 2, 2022 increased from higher home
sales prices, partially offset by higher material costs per unit.
Total gross profit for the three months ended July 2, 2022
increased from higher home sales and higher home selling prices.
Selling, general and administrative expenses increased during the
period from higher salary and incentive compensation expense on
improved earnings and expenses incurred in engaging third-party
consultants in relation to claiming the non-recurring energy
efficient home net tax credits, which were recognized as a benefit
to Income tax expense during the second half of fiscal 2022.
- In the financial
services segment, Gross profit and Income from operations for the
three months ended July 2, 2022, decreased primarily due to
higher weather related claims and unrealized losses on marketable
equity securities compared to gains in the prior year period.
|
Three Months Ended |
|
|
|
|
($ in thousands, except per
share amounts) |
July 2,2022 |
|
July 3,2021 |
|
Change |
Net Income attributable to Cavco common
stockholders |
$ |
59,602 |
|
$ |
27,046 |
|
$ |
32,556 |
|
120.4 |
% |
Diluted net income per
share |
$ |
6.63 |
|
$ |
2.92 |
|
$ |
3.71 |
|
127.1 |
% |
Items ancillary to our core operations had the
following impact on the results of operations:
|
Three Months Ended |
($ in
millions) |
July 2,2022 |
|
July 3,2021 |
Net
revenue |
Unrealized (losses) gains recognized during the period on
securities held in the financial services segment |
$ |
(1.2 |
) |
|
$ |
0.4 |
|
Selling,
general and administrative expenses |
|
|
Expenses incurred in engaging third-party consultants in relation
to the non-recurring energy efficient home tax credits |
|
(2.6 |
) |
|
|
— |
|
Legal and other expense related to the SEC inquiry, net of
recovery |
|
(1.4 |
) |
|
|
(0.1 |
) |
Other
income, net |
Corporate unrealized (losses) gains recognized during the period on
securities held |
|
(1.1 |
) |
|
|
1.2 |
|
Housing Demand and Production
Updates
Home order rates have moderated from the extreme
highs we saw during the summer of 2020 to the summer of 2021. Our
backlog at July 2, 2022 was $1.0 billion compared to $1.1
billion last quarter and up $206 million, or 26.3%, compared to
$792 million at July 3, 2021. The year over year increase is
essentially attributable to Commodore.
Our efforts in product simplification and
production staffing improvement have increased our total average
plant capacity utilization to over 85% during the first fiscal
quarter of 2023, a record level over the last 10 years.
Update on New Park Model Facility in
Arizona
We continue to make progress on the development
of our new Glendale, Arizona facility that will focus on park model
production and is expected to begin operations in the third
quarter.
SEC Litigation Update
The Company has reached a settlement in
principle with the staff of the Securities and Exchange Commission
(“Commission”) regarding the previously disclosed pending
litigation. The settlement is subject to Commission approval that
is expected within the next 60 days. A related notice has been
filed with the court in that action. We do not believe that the
settlement will have a material impact on our results of operations
or financial position.
Conference Call Details
Cavco's management will hold a conference call
to review these results tomorrow, August 5, 2022, 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. To participate by phone, please register here to
receive the dial in number and your PIN. 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 transportation or raw materials; increased health
and safety incidents; our ability to negotiate reasonable
collective bargaining agreements with the unions representing
certain employees; increases in the rate of cancellations of home
sales orders; our ability to successfully integrate past
acquisitions or future acquisitions; involvement in vertically
integrated lines of business, including manufactured housing
consumer finance, commercial finance and insurance; information
technology failures or cyber incidents; our ability to maintain the
security of personally identifiable information of our customers,
suppliers and employees; 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; our exposure to significant warranty and construction defect
claims; our exposure to claims and liabilities relating to products
supplied to the Company or work done by subcontractors; our
contingent repurchase obligations related to wholesale financing
provided to industry distributors; 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; taxation authorities
initiating or successfully asserting tax positions which are
contrary to ours; 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;
the effect of increasing interest rates on our customer's ability
to finance home purchases; availability of wholesale financing and
limited floor plan lenders; market forces, rising interest rates
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 ongoing litigation and regulatory action by the SEC
against the Company, including the costs and expenses of the
litigation, which include the Company's indemnification
obligations, potential penalties 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; liquidity and ability to raise
capital may be limited; and organizational document provisions
delaying or making a change in control more difficult; 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 2, 2022 as may be updated from time to time in
future filings on Form 10-Q and other reports filed by the Company
pursuant to the Securities Exchange Act of 1934, 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, as required by law. 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 2,2022 |
|
April 2,2022 |
ASSETS |
(Unaudited) |
|
|
Current assets |
|
|
|
Cash and cash equivalents |
$ |
238,072 |
|
|
$ |
244,150 |
|
Restricted cash, current |
|
14,555 |
|
|
|
14,849 |
|
Accounts receivable, net |
|
108,128 |
|
|
|
96,052 |
|
Short-term investments |
|
15,864 |
|
|
|
20,086 |
|
Current portion of consumer loans receivable, net |
|
20,888 |
|
|
|
20,639 |
|
Current portion of commercial loans receivable, net |
|
33,710 |
|
|
|
32,272 |
|
Current portion of commercial loans receivable from affiliates,
net |
|
145 |
|
|
|
372 |
|
Inventories |
|
254,722 |
|
|
|
243,971 |
|
Prepaid expenses and other current assets |
|
61,941 |
|
|
|
71,726 |
|
Total current assets |
|
748,025 |
|
|
|
744,117 |
|
Restricted cash |
|
335 |
|
|
|
335 |
|
Investments |
|
36,815 |
|
|
|
34,933 |
|
Consumer loans receivable,
net |
|
28,699 |
|
|
|
29,245 |
|
Commercial loans receivable,
net |
|
36,811 |
|
|
|
33,708 |
|
Commercial loans receivable from
affiliates, net |
|
1,652 |
|
|
|
2,214 |
|
Property, plant and equipment,
net |
|
185,534 |
|
|
|
164,016 |
|
Goodwill |
|
100,993 |
|
|
|
100,993 |
|
Other intangibles, net |
|
27,951 |
|
|
|
28,459 |
|
Operating lease right-of-use
assets |
|
16,985 |
|
|
|
16,952 |
|
Total assets |
$ |
1,183,800 |
|
|
$ |
1,154,972 |
|
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND
STOCKHOLDERS' EQUITY |
|
|
|
Current liabilities |
|
|
|
Accounts payable |
$ |
44,897 |
|
|
$ |
43,082 |
|
Accrued expenses and other current liabilities |
|
259,778 |
|
|
|
251,088 |
|
Total current liabilities |
|
304,675 |
|
|
|
294,170 |
|
Operating lease liabilities |
|
13,135 |
|
|
|
13,158 |
|
Other liabilities |
|
10,695 |
|
|
|
10,836 |
|
Deferred income taxes |
|
3,056 |
|
|
|
5,528 |
|
Redeemable noncontrolling interest |
|
677 |
|
|
|
825 |
|
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
9,298,235 and 9,292,278 shares, respectively |
|
93 |
|
|
|
93 |
|
Treasury stock, at cost; 404,813 and 241,773 shares,
respectively |
|
(100,000 |
) |
|
|
(61,040 |
) |
Additional paid-in capital |
|
263,626 |
|
|
|
263,049 |
|
Retained earnings |
|
688,358 |
|
|
|
628,756 |
|
Accumulated other comprehensive loss |
|
(515 |
) |
|
|
(403 |
) |
Total stockholders' equity |
|
851,562 |
|
|
|
830,455 |
|
Total liabilities, redeemable noncontrolling interest and
stockholders' equity |
$ |
1,183,800 |
|
|
$ |
1,154,972 |
|
CAVCO INDUSTRIES,
INC.CONSOLIDATED STATEMENTS OF
INCOME(Dollars in thousands, except per share
amounts)(Unaudited)
|
Three Months Ended |
|
July 2,2022 |
|
July 3,2021 |
Net revenue |
$ |
588,338 |
|
|
$ |
330,422 |
|
Cost of sales |
|
443,614 |
|
|
|
256,409 |
|
Gross profit |
|
144,724 |
|
|
|
74,013 |
|
Selling, general and administrative expenses |
|
66,136 |
|
|
|
40,832 |
|
Income from operations |
|
78,588 |
|
|
|
33,181 |
|
Interest expense |
|
(161 |
) |
|
|
(164 |
) |
Other income, net |
|
883 |
|
|
|
2,461 |
|
Income before income taxes |
|
79,310 |
|
|
|
35,478 |
|
Income tax expense |
|
(19,616 |
) |
|
|
(8,432 |
) |
Net income |
|
59,694 |
|
|
|
27,046 |
|
Less: net income attributable to redeemable noncontrolling
interest |
|
92 |
|
|
|
— |
|
Net income attributable to Cavco common stockholders |
$ |
59,602 |
|
|
$ |
27,046 |
|
|
|
|
|
Net income per share attributable to Cavco common stockholders |
|
|
|
Basic |
$ |
6.68 |
|
|
$ |
2.94 |
|
Diluted |
$ |
6.63 |
|
|
$ |
2.92 |
|
Weighted average shares outstanding |
|
|
|
Basic |
|
8,918,280 |
|
|
|
9,198,229 |
|
Diluted |
|
8,988,929 |
|
|
|
9,276,529 |
|
CAVCO INDUSTRIES,
INC.OTHER OPERATING DATA(Dollars in
thousands)(Unaudited)
|
Three Months Ended |
|
July 2,2022 |
|
July 3,2021 |
Capital expenditures |
$ |
25,007 |
|
$ |
2,593 |
Depreciation |
$ |
3,438 |
|
$ |
1,403 |
Amortization of other
intangibles |
$ |
508 |
|
$ |
173 |
|
|
|
|
|
|
For additional information,
contact: Mark FuslerDirector of Financial
Reporting and Investor Relationsinvestor_relations@cavco.com
Phone: 602-256-6263On
the Internet: www.cavco.com
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