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Cavco Industries Reports Fiscal 2019 Second Quarter Results

PHOENIX, Nov. 08, 2018 (GLOBE NEWSWIRE) -- Cavco Industries, Inc. (CVCO) today announced financial results for the second fiscal quarter ended September 29, 2018.

Financial highlights include the following:

  • Net revenue for the second quarter of fiscal year 2019 totaled $241.5 million, up 20.4% from $200.5 million for the second quarter of fiscal year 2018. Net revenue for the first six months of fiscal 2019 was $487.9 million, a 19.8% increase from $407.3 million in the comparable prior year period. The increases were primarily from higher home selling prices from input cost inflation, modestly larger home sizes and improved home sales volume. Net revenue for the three and six months ended September 29, 2018 includes subcontracted pass-through services of $6.2 million and $12.8 million, respectively, which are now recognized on a gross basis rather than net of associated costs.

  • Income before income taxes was $19.5 million for the second quarter of fiscal year 2019, a 129.4% increase from $8.5 million in the comparable quarter last year. For the first six months of fiscal 2019, income before income taxes increased 80.6% to $43.7 million from $24.2 million in the prior year period. The prior year’s second fiscal quarter was adversely impacted by Hurricane Harvey, which resulted in significant homeowners' insurance claims in our financial services segment and caused delays in manufacturing and retail sales, as well as new home inventory damage at certain company-owned retail centers. While not as severe, during the second quarter of fiscal year 2019, financial services results were adversely impacted by a windstorm in Arizona, which resulted in increased homeowners' insurance claims for the period. The Company's insurance subsidiary maintains reinsurance for loss events in excess of $1.5 million.

    Income before income tax for the first six months of fiscal year 2019 also included a benefit of $1.1 million from unrealized gains on corporate investments recorded in other income, net. These unrealized gains were from this fiscal year's implementation of new accounting standards requiring unrealized gains and losses to be reported on the Consolidated Statement of Comprehensive Income instead of recording these amounts in accumulated other comprehensive income on the Consolidated Balance Sheet.
  • Income tax expense was $3.9 million, resulting in an effective tax rate of 20.2% for the second quarter of fiscal year 2019 compared to $2.3 million and an effective tax rate of 27.3% in the same quarter of the prior year. For the six months ended September 29, 2018, income tax expense was $8.4 million, resulting in an effective tax rate of 19.2%. Income tax expense was $6.2 million with an effective rate of 25.7% for the prior six month period.

    The Tax Cuts and Jobs Act (the "Tax Act"), which was enacted on December 22, 2017, reduced the federal corporate tax rate to 21% for our fiscal year ending March 30, 2019. Income tax expense also includes a benefit of $1.1 million and $2.3 million for the three and six months ended September 29, 2018, respectively, related to excess tax benefits from exercises of stock options, compared to a benefit of $300,000 and $1.7 million in the comparable prior year periods, respectively.
  • Net income was $15.6 million for the second quarter of fiscal year 2019, compared to net income of $6.2 million in the same quarter of the prior year, a 151.6% increase. For the six months ended September 29, 2018, net income was $35.3 million, up 97.2% from net income of $17.9 million in the prior year period. Diluted net income per share was $1.67 and $3.80 for the three and six months ended September 29, 2018, respectively, compared to $0.67 and $1.96 for the comparable periods last year.

Commenting on the quarter, Daniel Urness, President and Acting Chief Executive Officer said, "We are pleased to report positive financial results for the quarter. Improvements in economic measures including increased consumer confidence, low unemployment and growth in jobs and wages have continued to support the homebuying ability of our customers. We are working to further increase manufactured home production volume through investments in homebuilding capabilities, processes, labor recruitment and employee retention efforts. Production staff training and quality assurance are also significant areas of focus given our diverse home product offerings and reputation for high standards of quality. Further, we believe that rising site-built housing prices, residential rent and interest rates make our high value, precision built homes increasingly sought after as an attractive affordable housing solution."

Mr. Urness also noted, "We were saddened by the harm inflicted by Hurricanes Florence and Michael in the Southeastern United States. Our operations were fortunately outside of the paths of the storms. We stand ready to meet the need for new homes that may result as the impacted areas rebuild. Additionally, we are willing and able to assist in building units for disaster relief, should the need arise."

Management Conference Call - Tomorrow, November 9, 2018, at 8:30 AM (Eastern Time)

Cavco’s management will hold a conference call to review these results tomorrow, November 9, 2018, at 8:30 AM (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.

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; 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; 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 continued turmoil in the credit markets; increased costs of healthcare benefits for employees; governmental and regulatory disruption; information technology failures and data security breaches; extensive regulation affecting manufactured housing; potential financial impact on the Company from the subpoena we received from the SEC; the risk of potential litigation or regulatory action arising from the SEC investigation and its findings; potential reputational damage that the Company may suffer as a result of the matters under investigation, as well as the results of the Audit Committee of the Board of Directors investigation; 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.

(Dollars in thousands, except per share amounts)
  September 29,
  March 31,
ASSETS (Unaudited)    
Current assets:      
Cash and cash equivalents $ 195,488     $ 186,766  
Restricted cash, current 13,754     11,228  
Accounts receivable, net 38,097     35,043  
Short-term investments 13,462     11,866  
Current portion of consumer loans receivable, net 31,327     31,096  
Current portion of commercial loans receivable, net 10,909     5,481  
Inventories 111,502     109,152  
Prepaid expenses and other current assets 34,169     27,961  
Total current assets 448,708     418,593  
Restricted cash 453     1,264  
Investments 33,149     33,573  
Consumer loans receivable, net 62,021     63,855  
Commercial loans receivable, net 22,920     11,120  
Property, plant and equipment, net 65,108     63,355  
Goodwill and other intangibles, net 82,856     83,020  
Total assets $ 715,215     $ 674,780  
Current liabilities:      
Accounts payable $ 25,676     $ 23,785  
Accrued liabilities 130,083     126,500  
Current portion of securitized financings and other 40,969     26,044  
Total current liabilities 196,728     176,329  
Securitized financings and other 15,159     33,768  
Deferred income taxes 8,580     7,577  
Stockholders’ equity:      
Preferred stock, $.01 par value; 1,000,000 shares authorized; No shares issued or outstanding      
Common stock, $.01 par value; 40,000,000 shares authorized; Outstanding 9,097,359 and 9,044,858 shares, respectively 91     90  
Additional paid-in capital 248,138     246,197  
Retained earnings 246,723     209,381  
Accumulated other comprehensive income (loss) (204 )   1,438  
Total stockholders’ equity 494,748     457,106  
Total liabilities and stockholders’ equity $ 715,215     $ 674,780  

(Dollars in thousands, except per share amounts)
  Three Months Ended   Six Months Ended
  September 29,
  September 30,
  September 29,
  September 30,
Net revenue $ 241,530     $ 200,507     $ 487,933     $ 407,323  
Cost of sales 192,114     165,953     387,041     330,803  
Gross profit 49,416     34,554     100,892     76,520  
Selling, general and administrative expenses 30,035     26,153     59,248     52,458  
Income from operations 19,381     8,401     41,644     24,062  
Interest expense (941 )   (1,021 )   (1,913 )   (2,069 )
Other income, net 1,077     1,119     3,922     2,157  
Income before income taxes 19,517     8,499     43,653     24,150  
Income tax expense (3,941 )   (2,317 )   (8,386 )   (6,215 )
Net income $ 15,576     $ 6,182     $ 35,267     $ 17,935  
Net income per share:              
Basic $ 1.72     $ 0.69     $ 3.89     $ 1.99  
Diluted $ 1.67     $ 0.67     $ 3.80     $ 1.96  
Weighted average shares outstanding:              
Basic 9,079,679     9,020,834     9,064,007     9,013,917  
Diluted 9,304,188     9,181,899     9,287,730     9,171,515  

(Dollars in thousands)
  Three Months Ended   Six Months Ended
  September 29,
  September 30,
  September 29,
  September 30,
Net revenue:              
Factory-built housing $ 227,094     $ 187,380     $ 459,856     $ 380,262  
Financial services 14,436     13,127     28,077     27,061  
Total net revenue $ 241,530     $ 200,507     $ 487,933     $ 407,323  
Income before income taxes:              
Factory-built housing $ 16,880     $ 8,584     $ 38,488     $ 21,754  
Financial services 2,637     (85 )   5,165     2,396  
Total income before income taxes $ 19,517     $ 8,499     $ 43,653     $ 24,150  
Capital expenditures $ 2,197     $ 1,185     $ 3,876     $ 1,779  
Depreciation $ 1,090     $ 884     $ 2,110     $ 1,766  
Amortization of other intangibles $ 80     $ 92     $ 164     $ 184  
Total factory-built homes sold 3,536     3,298     7,423     6,773  

For additional information, contact:

Mark Fusler
Director of Financial Reporting

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