U.S. Markets open in 27 mins

Cavco Industries Reports Fiscal 2019 Fourth Quarter and Year End Results

PHOENIX, May 23, 2019 (GLOBE NEWSWIRE) -- Cavco Industries, Inc. (CVCO) today announced financial results for the fourth quarter and fiscal year ended March 30, 2019.

Three months ended March 30, 2019 compared to the three months ended March 31, 2018

  • Net revenue was $241.1 million, down 0.6% from $242.5 million in the prior year period. Net revenue for the three months ended March 30, 2019 includes subcontracted pass-through services of $6.2 million, which are now recognized on a gross basis rather than net of associated costs. Current period revenue was lower from reduced home sales volume, largely offset by price increases and product mix. In the prior year period, the Company recognized $14.8 million of home sales revenue from early commercial loan payoffs received under Cavco's wholesale lending programs, in addition to completion of disaster-relief units for the Federal Emergency Management Agency.

  • Income before income taxes was $26.1 million, a 15.0% decrease from $30.7 million. During the period, the Company experienced higher gross profit margins from increased prices coupled with declining home production materials input costs. Additionally, gross profit margins were enhanced by improved earnings in the financial services segment. In the prior year quarter, the Company recognized $4.5 million of other income from gains realized on the sale of corporate investments.

    During the current year quarterly period, items ancillary to our core operations had the following impact on the results (in millions). None of these items occurred in the prior year period.
     
    Three Months Ended
March 30, 2019
Net revenue
  Unrealized gains on equity investments in the financial services segment   $ 0.6  
Selling, general and administrative expenses
  Legal and other expenses related to the Company's internal investigation and response to the Securities and Exchange Commission ("SEC") inquiry   (0.8 )
  Director and Officer ("D&O") insurance premium amortization   (2.1 )
Other income
  Unrealized gains on corporate equity investments   0.7  
         
  • Income tax expense was $6.1 million, resulting in an effective tax rate of 23.4% compared to $8.6 million and an effective tax rate of 27.9% in the prior year period.

  • Net income was $20.0 million compared to $22.1 million, a 9.5% decrease. Diluted net income per share was $2.17 versus $2.40 for the comparable period last year.

Twelve months ended March 30, 2019 compared to the twelve months ended March 31, 2018

  • Net revenue was $962.7 million, up 10.5% from $871.2 million in the prior year. Current year Net revenue includes subcontracted pass-through services of $24.9 million, which is recognized on a gross basis, rather than net of associated costs in the prior year presentation. The remaining increase was primarily from higher home selling prices and product mix.

  • Income before income taxes increased 10.4% to $86.7 million as compared to $78.5 million. The improvement was from higher gross profit margins from home sales, as well as improved earnings in the financial services segment. In the prior year, the Company received a $3.4 million favorable dispute settlement resolution that reduced cost of sales and also recognized $4.5 million of other income from gains realized on the sale of corporate investments.

    During the current year period, items ancillary to our core operations had the following impact on the results (in millions). None of these items occurred in the prior year.
     
    Year Ended
March 30, 2019
Net revenue
  Unrealized gains on equity investments in the financial services segment   $ 0.1  
Selling, general and administrative expenses
  Legal and other expenses related to the Company's internal investigation and the response to SEC inquiry   (2.1 )
  D&O insurance premium amortization   (2.8 )
Other income
  Unrealized losses on corporate equity investments   (0.3 )
         
  • Income tax expense was $18.1 million, an effective tax rate of 20.8%, compared to income tax expense of $17.0 million and an effective rate of 21.7% in the prior year. The current period benefited from the Tax Cuts and Jobs Act (the "Tax Act"), while the prior year benefited from the requisite revaluation of the net deferred income tax balance as a result of the Tax Act, whereby the Company recorded a net income tax benefit of $4.8 million.

  • Net income was $68.6 million, up 11.5% from net income of $61.5 million. Diluted net income per share was $7.40 versus $6.68 in the prior year.

Commenting on the results, Bill Boor, President and Chief Executive Officer said, "This quarter’s positive results, and our results for the year, demonstrate the underlying strength in our business. During the year, the Company was successful in executing on our core priorities, including more effectively matching home sales prices with input costs. These initiatives were further aided by reductions in certain commodity prices this quarter. In addition, our financial services segment experienced one of its most profitable quarters to date."

Mr. Boor continued, "We look forward to another great year in fiscal 2020. We continue to believe that the need for affordable housing is strong. We’ve got a great team here at Cavco and our Company is in a strong position to help address the need for affordable housing in this country. I'm very excited to have the opportunity to lead Cavco in that important work."

Cavco’s management will hold a conference call to review these results tomorrow, May 24, 2019, at 1:00 PM (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.

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: 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 and 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 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 contraction in the credit markets; increased costs of healthcare benefits for employees; governmental and regulatory disruption, including federal government shutdowns; information technology failures and data security breaches; extensive regulation affecting manufactured housing; potential financial impact on the Company from the subpoenas we received from the SEC; the risk of potential litigation or regulatory action, and costs and expenses, arising from the SEC subpoenas and the events described in or covered by the SEC subpoenas, including the Company's indemnification obligations and insurance costs regarding such matters; potential reputational damage that the Company may suffer as a result of the matters that are the subject of the subpoenas from the SEC, as well as the results of the investigation being carried out by the Audit Committee of the Board of Directors; 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)

  March 30,
 2019
  March 31,
 2018
ASSETS (Unaudited)    
Current assets:      
Cash and cash equivalents $ 187,370     $ 186,766  
Restricted cash, current 12,148     11,228  
Accounts receivable, net 40,701     35,043  
Short-term investments 12,620     11,866  
Current portion of consumer loans receivable, net 30,058     31,096  
Current portion of commercial loans receivable, net 15,234     5,481  
Inventories 116,203     109,152  
Assets held for sale 3,061      
Prepaid expenses and other current assets 44,654     27,961  
Total current assets 462,049     418,593  
Restricted cash 351     1,264  
Investments 32,137     33,573  
Consumer loans receivable, net 56,727     63,855  
Commercial loans receivable, net 27,772     11,120  
Property, plant and equipment, net 63,484     63,355  
Goodwill and other intangibles, net 82,696     83,020  
Total assets $ 725,216     $ 674,780  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $ 29,305     $ 23,785  
Accrued liabilities 125,181     126,500  
Current portion of securitized financings and other 19,522     26,044  
Total current liabilities 174,008     176,329  
Securitized financings and other 14,618     33,768  
Deferred income taxes 7,002     7,577  
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 9,098,320 and 9,044,858 shares, respectively 91     90  
Additional paid-in capital 249,447     246,197  
Retained earnings 280,078     209,381  
Accumulated other comprehensive income (loss) (28 )   1,438  
Total stockholders’ equity 529,588     457,106  
Total liabilities and stockholders’ equity $ 725,216     $ 674,780  
               


CAVCO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)

  Three Months Ended   Year Ended
  March 30,
 2019
  March 31,
 2018
  March 30,
 2019
  March 31,
 2018
Net revenue $ 241,113     $ 242,529     $ 962,746     $ 871,235  
Cost of sales 185,320     188,225     757,040     690,555  
Gross profit 55,793     54,304     205,706     180,680  
Selling, general and administrative expenses 31,487     28,404     121,568     106,907  
Income from operations 24,306     25,900     84,138     73,773  
Interest expense (608 )   (1,092 )   (3,444 )   (4,397 )
Other income, net 2,378     5,896     5,982     9,147  
Income before income taxes 26,076     30,704     86,676     78,523  
Income tax expense (6,105 )   (8,564 )   (18,054 )   (17,021 )
Net income $ 19,971     $ 22,140     $ 68,622     $ 61,502  
               
Net income per share:              
Basic $ 2.20     $ 2.45     $ 7.56     $ 6.82  
Diluted $ 2.17     $ 2.40     $ 7.40     $ 6.68  
Weighted average shares outstanding:              
Basic 9,098,320     9,039,815     9,080,878     9,024,437  
Diluted 9,219,015     9,240,296     9,268,737     9,201,706  
                       



CAVCO INDUSTRIES, INC.
OTHER OPERATING DATA
(Dollars in thousands)
(Unaudited)

  Three Months Ended   Year Ended
  March 30,
 2019
  March 31,
 2018
  March 30,
 2019
  March 31,
 2018
Net revenue:              
Factory-built housing $ 225,528     $ 228,074     $ 905,726     $ 815,519  
Financial services 15,585     14,455     57,020     55,716  
Total net revenue $ 241,113     $ 242,529     $ 962,746     $ 871,235  
               
Capital expenditures $ 1,318     $ 5,361     $ 7,636     $ 8,386  
Depreciation $ 1,150     $ 959     $ 4,374     $ 3,658  
Amortization of other intangibles $ 80     $ 92     $ 324     $ 368  
               
Total factory-built homes sold 3,519     4,063     14,389     14,537  
                       

For additional information, contact:

Mark Fusler
Director of Financial Reporting
investor_relations@cavco.com

Phone: 602-256-6263
On the Internet: www.cavco.com