Cavco Industries, Inc. (Nasdaq: CVCO) today announced financial
results for the third fiscal quarter ended December 26, 2020.
Three months ended December 26,
2020 compared to the three months ended December 28,
2019
- Net
revenue increased 5.5% to $288.8 million for the third
quarter of fiscal year 2021 compared to $273.7 million in the same
quarter last year.
- In the
Factory-built housing segment, Net revenue increased 5.3%, or $13.7
million, to $270.8 million compared to $257.1 million for the prior
year period. The increase was primarily due to 13.0% higher home
selling prices resulting from pricing increases implemented as a
result of rising input costs. These gains were partially offset by
6.8% lower home sales volume during the third fiscal quarter, as
production inefficiencies from labor and supply challenges continue
to limit factory delivery volume.
- Financial
services segment Net revenue increased 8.4%, or $1.4 million, to
$18.0 million compared to $16.6 million for the prior year period.
The increase was primarily due to $1.0 million of unrealized gains
on marketable equity investments during the third fiscal quarter
compared to $0.3 million for the same period last year.
- Income
from operations increased 3.5% to $23.8 million compared
to $23.0 million in the same quarter last year.
- In the
factory-built housing segment, Income from operations was $16.5
million, a 1.8% decrease from $16.8 million for the prior year
period. Gross profit decreased due to higher material prices and
lower sales volumes. During the third quarter of fiscal year 2021,
we incurred $0.7 million in expenses related to the Securities and
Exchange Commission ("SEC") inquiry, but also received a $0.4
million insurance recovery of prior expenses, resulting in a net
expense of $0.3 million for the period compared to $0.9 million of
such expenses for the same period last year. In addition, the prior
year period included a $2.1 million charge for the amortization of
additional director and officer ("D&O") insurance premium,
which has now been fully amortized and is not in the current
period.
- In the
financial services segment, Income from operations was $7.4
million, a 19.4% increase from $6.2 million for the prior year
period. Lower weather-related claims volume and higher unrealized
gains on marketable equity securities provided greater Income from
operations. This was partially offset by lower interest income on
the acquired consumer loan portfolios that continue to
amortize.
- Income
before income taxes was $25.9 million, up 4.9% from $24.7
million for the prior year period.
- Income
taxes totaled $6.2 million in the third quarter of fiscal
year 2021 for an effective tax rate of 23.9%, compared to $3.8
million and an effective tax rate of 15.5% in the third quarter of
fiscal year 2020. The lower effective tax rate in the prior year
was primarily the result of a catch up of tax credits that were
enacted as part of the 2020 Appropriations Bill.
- Net
income decreased 5.7% to $19.7 million for the third
quarter of fiscal year 2021, compared to net income of $20.9
million in the same quarter of the prior year. Diluted net income
per share was $2.12 and $2.25 for the three months ended December
26, 2020 and December 28, 2019, respectively.
Nine months ended December 26, 2020
compared to the nine months ended December 28, 2019
- Net
revenue for the first nine months of fiscal 2021 was
$801.5 million, a 0.6% decrease from $806.4 million in the
comparable prior year period.
- Factory-built
housing Net revenue was $749.9 million, a 1.1% decrease from $758.6
million. The decrease was primarily from 9.4% lower home sales
volume, partially offset by 9.1% higher home selling prices
compared to the same period last year. Note that Destiny Homes was
purchased in August 2019 and Lexington Homes was closed in June
2020.
- Financial
services segment Net revenue was $51.7 million, a 7.9% increase
from $47.9 million. This includes $2.7 million of unrealized gains
on marketable equity investments in the insurance subsidiary's
portfolio, compared to $0.6 million in unrealized gains in the
prior year period. In addition, higher volume in home loan
sales and more insurance policies in force in the current year
compared to the prior year were positive contributors, partially
offset by lower interest income earned on the acquired consumer
loan portfolios that continue to amortize.
- Income
from operations was $61.9 million, a 12.1% decrease from
$70.4 million in the prior year period.
- In the
factory-built housing segment, Income from operations was $48.1
million, a 12.9% decrease from $55.2 million for the prior year
period as gross profit decreased due to higher material prices and
lower sales volumes. This was partially offset by lower expenses
related to the SEC inquiry and additional D&O insurance premium
amortization. For the nine months ended December 26, 2020, we
recorded a net expense of $0.1 million compared to $2.5 million in
the prior year period for the SEC inquiry. Additional D&O
insurance premium amortization was $4.2 million in the current
period versus $6.3 million in the prior year period.
- In the
financial services segment, Income from operations was $13.8
million, a 9.2% decrease from $15.2 million for the prior year
period. Unrealized gains on marketable equity securities were
offset by higher weather-related claims during the period, as well
as lower interest income earned on the acquired consumer loan
portfolios that continue to amortize.
- Income
before income taxes was $67.2 million, down 15.3% from
$79.3 million in the prior year period. Interest expense decreased
due to the repurchase of the 2007-1 securitized loan portfolio in
August 2019, thereafter eliminating the related interest expense.
Other income, net, declined primarily due to a $3.4 million net
gain on the sale of idle land that was recorded in the second
quarter of the prior fiscal year, as well as a reduction in
interest earned in the current periods on cash and commercial loan
receivables, given the lower interest rate environment.
- Income
taxes totaled $15.7 million for an effective tax rate of
23.4% compared to $16.3 million and an effective tax rate of 20.5%
for the same period of the prior year. The lower tax rate in the
prior year was primarily the result of a catch up of tax credits
that were enacted as part of the 2020 Appropriations Bill.
- Net
income was $51.4 million, down 18.5% from net income of
$63.1 million in the prior year period. Diluted net income per
share was $5.54 and $6.81 for the nine months ended December 26,
2020 and December 28, 2019, respectively.
Items ancillary to our core operations had the
following impact on the results of operations (in millions):
|
Three Months Ended |
|
Nine Months Ended |
|
December 26,2020 |
|
December 28,2019 |
|
December 26,2020 |
|
December 28,2019 |
Net
revenue |
Unrealized gains on marketable equity securities in the
financial services segment |
$ |
1.0 |
|
|
$ |
0.3 |
|
|
$ |
2.7 |
|
|
$ |
0.6 |
|
Selling,
general and administrative expenses |
|
|
Amortization of additional D&O insurance
premiums |
— |
|
|
(2.1 |
) |
|
(4.2 |
) |
|
(6.3 |
) |
Legal and other expense related to the SEC inquiry, net
of recovery |
(0.3 |
) |
|
(0.9 |
) |
|
(0.1 |
) |
|
(2.5 |
) |
Other
income, net |
Unrealized gains on corporate marketable equity
securities |
0.8 |
|
|
0.3 |
|
|
2.4 |
|
|
1.4 |
|
Gain on sale of idle land |
— |
|
|
— |
|
|
— |
|
|
3.4 |
|
Income
tax expense |
Catch up recognition of certain tax credits under the
2020 Appropriations Bill |
— |
|
|
1.7 |
|
|
— |
|
|
1.7 |
|
Tax benefits from stock option exercises |
0.1 |
|
|
0.4 |
|
|
0.5 |
|
|
1.3 |
|
Business Update on the COVID-19
Pandemic
In March 2020, the World Health Organization
declared the novel coronavirus COVID-19 ("COVID-19") a global
pandemic. As our business was considered essential, we continued to
operate substantially all of our homebuilding and retail sales
facilities while working to follow COVID-19 health guidelines. We
have worked to minimize exposure and transmission risks by
implementing enhanced facility cleaning, social distancing and
related protocols while continuing to serve our customers.
Operational efficiencies declined due to managing higher and
largely unpredictable factory employee absenteeism, hiring
challenges and building material supply shortages. Accordingly, our
total average plant capacity utilization rate was approximately 75%
during the third fiscal quarter of 2021, which has improved from
approximately 65% during the second fiscal quarter of 2021, but is
lower than pre-pandemic levels of more than 80%.
Sales order activity remained exceptionally
strong during the third fiscal quarter of 2021 to the point where
home sales order rates were nearly 65% higher than the comparable
prior year quarter. Increased order volume is the result of a
higher number of well-qualified home buyers making purchase
decisions, supported by reduced home loan interest rates. Increased
orders outpaced the challenging production environment during the
quarter, raising order backlogs 310% to $472 million at
December 26, 2020, compared to $115 million at
December 28, 2019 and $321 million at September 26,
2020.
Commenting on the quarter, Bill Boor, President
and Chief Executive Officer said, "We continue to see extraordinary
demand for our products, with order backlogs rising to record
levels. Pent-up demand, driven by favorable demographics and a
housing supply shortage, has been accelerated by historically low
home-loan interest rates. Our plants are doing a good job
increasing production under challenging conditions. As a result,
our utilization rate rose to approximately 75% during the third
fiscal quarter from 65% in the second fiscal quarter. Throughout
the pandemic, the people across Cavco have done a great job of
staying focused on making a difference for our homebuyers through
the homes, loans and insurance we provide and that intention
continues to come through in our progress and results."
Cavco's management will hold a conference call
to review these results tomorrow, January 29, 2021, at 1:00 PM
(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.
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 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: 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; our ability to successfully integrate past
acquisitions or future acquisitions and 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; information technology failures or cyber incidents;
curtailment of available financing from home-only lenders;
availability of wholesale financing and limited floor plan lenders;
our participation in certain wholesale and retail 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;
market forces and housing demand fluctuations; net losses were
incurred in certain prior periods and our ability to 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 and the 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 turmoil in the
credit markets; governmental and regulatory disruption, including
federal government shutdowns; extensive regulation affecting
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; and losses not covered by our director and officer
insurance, which may be large, adversely impacting financial
performance; 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 2020 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 undue reliance on any such
forward-looking statements.
CAVCO INDUSTRIES,
INC.CONSOLIDATED BALANCE SHEETS(Dollars
in thousands, except per share amounts)
|
December 26,2020 |
|
March 28,2020 |
ASSETS |
(Unaudited) |
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
327,487 |
|
|
$ |
241,826 |
|
Restricted cash, current |
12,802 |
|
|
13,446 |
|
Accounts receivable, net |
40,932 |
|
|
42,800 |
|
Short-term investments |
16,966 |
|
|
14,582 |
|
Current portion of consumer loans receivable, net |
42,091 |
|
|
32,376 |
|
Current portion of commercial loans receivable, net |
15,649 |
|
|
14,657 |
|
Current portion of commercial loans receivable from affiliates,
net |
3,363 |
|
|
766 |
|
Inventories |
110,624 |
|
|
113,535 |
|
Prepaid expenses and other current assets |
55,805 |
|
|
42,197 |
|
Total current assets |
625,719 |
|
|
516,185 |
|
Restricted cash |
335 |
|
|
335 |
|
Investments |
35,485 |
|
|
31,557 |
|
Consumer loans receivable,
net |
39,501 |
|
|
49,928 |
|
Commercial loans receivable,
net |
16,563 |
|
|
23,685 |
|
Commercial loans receivable from
affiliates, net |
4,171 |
|
|
7,457 |
|
Property, plant and equipment,
net |
78,493 |
|
|
77,190 |
|
Goodwill |
75,090 |
|
|
75,090 |
|
Other intangibles, net |
14,550 |
|
|
15,110 |
|
Operating lease right-of-use
assets |
16,659 |
|
|
13,894 |
|
Total assets |
$ |
906,566 |
|
|
$ |
810,431 |
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
25,176 |
|
|
$ |
29,924 |
|
Accrued expenses and other current liabilities |
186,026 |
|
|
139,930 |
|
Current portion of secured credit facilities and other |
2,140 |
|
|
2,248 |
|
Total current liabilities |
213,342 |
|
|
172,102 |
|
Operating lease liabilities |
13,827 |
|
|
10,743 |
|
Secured credit facilities and
other |
10,847 |
|
|
12,705 |
|
Deferred income taxes |
6,809 |
|
|
7,295 |
|
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;
Outstanding 9,192,237 and 9,173,242 shares,
respectively |
92 |
|
|
92 |
|
Additional paid-in capital |
255,664 |
|
|
252,260 |
|
Retained earnings |
405,835 |
|
|
355,144 |
|
Accumulated other comprehensive income |
150 |
|
|
90 |
|
Total stockholders’ equity |
661,741 |
|
|
607,586 |
|
Total liabilities and
stockholders’ equity |
$ |
906,566 |
|
|
$ |
810,431 |
|
CAVCO INDUSTRIES,
INC.CONSOLIDATED STATEMENTS OF
INCOME(Dollars in thousands, except per share
amounts)(Unaudited)
|
Three Months Ended |
|
Nine Months Ended |
|
December 26,2020 |
|
December 28,2019 |
|
December 26,2020 |
|
December 28,2019 |
Net revenue |
$ |
288,772 |
|
|
$ |
273,722 |
|
|
$ |
801,549 |
|
|
$ |
806,439 |
|
Cost of sales |
229,534 |
|
|
213,867 |
|
|
633,447 |
|
|
627,819 |
|
Gross profit |
59,238 |
|
|
59,855 |
|
|
168,102 |
|
|
178,620 |
|
Selling, general and
administrative expenses |
35,414 |
|
|
36,844 |
|
|
106,190 |
|
|
108,191 |
|
Income from operations |
23,824 |
|
|
23,011 |
|
|
61,912 |
|
|
70,429 |
|
Interest expense |
(177 |
) |
|
(490 |
) |
|
(567 |
) |
|
(1,278 |
) |
Other income, net |
2,243 |
|
|
2,211 |
|
|
5,821 |
|
|
10,198 |
|
Income before income taxes |
25,890 |
|
|
24,732 |
|
|
67,166 |
|
|
79,349 |
|
Income tax expense |
(6,189 |
) |
|
(3,834 |
) |
|
(15,742 |
) |
|
(16,284 |
) |
Net income |
$ |
19,701 |
|
|
$ |
20,898 |
|
|
$ |
51,424 |
|
|
$ |
63,065 |
|
|
|
|
|
|
|
|
|
Net income per share: |
|
|
|
|
|
|
|
Basic |
$ |
2.14 |
|
|
$ |
2.29 |
|
|
$ |
5.60 |
|
|
$ |
6.91 |
|
Diluted |
$ |
2.12 |
|
|
$ |
2.25 |
|
|
$ |
5.54 |
|
|
$ |
6.81 |
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
Basic |
9,190,254 |
|
|
9,138,202 |
|
|
9,182,491 |
|
|
9,120,241 |
|
Diluted |
9,295,553 |
|
|
9,293,941 |
|
|
9,285,238 |
|
|
9,259,203 |
|
CAVCO INDUSTRIES,
INC.OTHER OPERATING DATA(Dollars in
thousands)(Unaudited)
|
Three Months Ended |
|
Nine Months Ended |
|
December 26,2020 |
|
December 28,2019 |
|
December 26,2020 |
|
December 28,2019 |
Net revenue: |
|
|
|
|
|
|
|
Factory-built housing |
$ |
270,822 |
|
|
$ |
257,106 |
|
|
$ |
749,879 |
|
|
$ |
758,564 |
|
Financial services |
17,950 |
|
|
16,616 |
|
|
51,670 |
|
|
47,875 |
|
Total net revenue |
$ |
288,772 |
|
|
$ |
273,722 |
|
|
$ |
801,549 |
|
|
$ |
806,439 |
|
|
|
|
|
|
|
|
|
Gross profit: |
|
|
|
|
|
|
|
Factory-built housing |
$ |
47,031 |
|
|
$ |
48,793 |
|
|
$ |
140,178 |
|
|
$ |
149,567 |
|
Financial services |
12,207 |
|
|
11,062 |
|
|
27,924 |
|
|
29,053 |
|
Total gross profit |
$ |
59,238 |
|
|
$ |
59,855 |
|
|
$ |
168,102 |
|
|
$ |
178,620 |
|
|
|
|
|
|
|
|
|
Income from operations: |
|
|
|
|
|
|
|
Factory-built housing |
$ |
16,456 |
|
|
$ |
16,776 |
|
|
$ |
48,141 |
|
|
$ |
55,219 |
|
Financial services |
7,368 |
|
|
6,235 |
|
|
13,771 |
|
|
15,210 |
|
Total income from
operations |
$ |
23,824 |
|
|
$ |
23,011 |
|
|
$ |
61,912 |
|
|
$ |
70,429 |
|
|
|
|
|
|
|
|
|
Capital expenditures |
$ |
2,043 |
|
|
$ |
2,543 |
|
|
$ |
5,816 |
|
|
$ |
6,487 |
|
Depreciation |
$ |
1,367 |
|
|
$ |
1,372 |
|
|
$ |
4,175 |
|
|
$ |
3,789 |
|
Amortization of other
intangibles |
$ |
186 |
|
|
$ |
188 |
|
|
$ |
560 |
|
|
$ |
419 |
|
|
|
|
|
|
|
|
|
Total factory-built homes
sold |
3,603 |
|
|
3,865 |
|
|
10,379 |
|
|
11,453 |
|
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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