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Cavco Industries Reports Fiscal 2020 Second Quarter Results

PHOENIX, Oct. 28, 2019 (GLOBE NEWSWIRE) -- Cavco Industries, Inc. (CVCO) today announced financial results for the second fiscal quarter ended September 28, 2019. On August 2, 2019, the Company completed the acquisition of Destiny Homes, which operates a manufactured and modular housing factory in Moultrie, Georgia. The results from this acquired operation since the acquisition date are included in the current quarter's consolidated financial statements presented herein.

Financial highlights include the following:

  • Net revenue for the second quarter of fiscal year 2020 was $268.7 million, up 11.3% from $241.5 million for the second quarter of fiscal year 2019. The increase was from improved home sales volume, higher home selling prices and changes in product mix. Net revenue for the first six months of fiscal 2020 was $532.7 million, a 9.2% increase from $487.9 million in the comparable prior year period.
  • Income from operations increased 15.5% to $22.4 million for the second quarter of fiscal year 2020 compared to $19.4 million in the same quarter last year. During the period, the Company realized higher gross profit margins mainly from increased home selling prices coupled with lower material input costs. Income from operations for the first six months of fiscal 2020 was $47.4 million, a 13.9% increase from $41.6 million in the comparable prior year period.
  • Net income was $20.9 million for the second quarter of fiscal year 2020, compared to net income of $15.6 million in the same quarter of the prior year, a 34.0% increase. Included in this quarter's results was a $3.4 million net gain on the sale of idle land recorded in Other income, net. For the six months ended September 28, 2019, net income was $42.2 million, up 19.5% from net income of $35.3 million in the prior year period. Diluted net income per share was $2.25 and $4.56 for the three and six months ended September 28, 2019, respectively, compared to $1.67 and $3.80 for the comparable periods last year.

Overall production rates have improved and order backlog has declined to $137 million at the end of the quarter compared to $204 million in the comparable period. This strong backlog level is up slightly from $131 million in the sequential quarter and represents approximately seven weeks of production.

During each period presented, ancillary items had the following impact on the results of operations (in millions):

    Three Months Ended   Six Months Ended
  September 28,
 2019
  September 29,
 2018
  September 28,
 2019
  September 29,
 2018
Selling, general and administrative expenses    
  Amortization of additional director and officer insurance premiums $ (2.1 )   $     $ (4.2 )   $  
  Legal and other expenses related to the Securities and Exchange Commission inquiry (0.8 )       (1.6 )    
Other income, net    
  Unrealized gains (losses) on corporate equity securities 0.2     (0.4 )   1.1     1.1  
  Gain on sale of idle land
3.4         3.4      
Income tax expense    
  Tax benefits from stock option exercises 0.3     1.1     0.9     2.3  

Commenting on the quarter, Bill Boor, President and Chief Executive Officer said, "Cavco’s second quarter results continue to demonstrate the underlying strength of our business. Backlogs remain strong and stable, as is consumer demand. As announced earlier, we completed the acquisition of Destiny Homes. The organization has proven to be an outstanding fit and Destiny’s products complement and strengthen our offering in the Southeast."

Cavco’s management will hold a conference call to review these results tomorrow, October 29, 2019, 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. 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. 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, Fleetwood, Palm Harbor, Fairmont, Friendship, Chariot Eagle, Lexington and Destiny. 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 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: 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, including 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, 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 may be large, adversely impacting financial performance; 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 2019 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)

  September 28,
 2019
  March 30,
 2019
ASSETS (Unaudited)    
Current assets:      
Cash and cash equivalents $ 190,478     $ 187,370  
Restricted cash, current 14,981     12,148  
Accounts receivable, net 44,908     40,701  
Short-term investments 13,375     12,620  
Current portion of consumer loans receivable, net 35,482     30,058  
Current portion of commercial loans receivable, net 17,694     15,234  
Inventories 115,205     116,203  
Assets held for sale     3,061  
Prepaid expenses and other current assets 54,509     44,654  
Total current assets 486,632     462,049  
Restricted cash 350     351  
Investments 32,381     32,137  
Consumer loans receivable, net 53,470     56,727  
Commercial loans receivable, net 28,565     27,772  
Property, plant and equipment, net 70,199     63,484  
Goodwill and other intangibles, net 90,509     82,696  
Operating lease right-of-use assets 11,732      
Total assets $ 773,838     $ 725,216  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $ 29,886     $ 29,305  
Accrued liabilities 137,936     125,181  
Current portion of securitized financings and other 1,875     19,522  
Total current liabilities 169,697     174,008  
Operating lease liabilities 8,735      
Deferred income taxes 8,043     7,002  
Securitized financings and other 14,359     14,618  
       
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 9,127,466 and 9,098,320 shares, respectively 91     91  
Additional paid-in capital 250,584     249,447  
Retained earnings 322,245     280,078  
Accumulated other comprehensive income (loss) 84     (28 )
Total stockholders’ equity 573,004     529,588  
Total liabilities and stockholders’ equity $ 773,838     $ 725,216  


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

  Three Months Ended   Six Months Ended
  September 28,
 2019
  September 29,
 2018
  September 28,
 2019
  September 29,
 2018
Net revenue $ 268,675     $ 241,530     $ 532,717     $ 487,933  
Cost of sales 210,208     192,114     413,952     387,041  
Gross profit 58,467     49,416     118,765     100,892  
Selling, general and administrative expenses 36,083     30,035     71,347     59,248  
Income from operations 22,384     19,381     47,418     41,644  
Interest expense (302 )   (941 )   (788 )   (1,913 )
Other income, net 5,173     1,077     7,987     3,922  
Income before income taxes 27,255     19,517     54,617     43,653  
Income tax expense (6,370 )   (3,941 )   (12,450 )   (8,386 )
Net income $ 20,885     $ 15,576     $ 42,167     $ 35,267  
               
Net income per share:              
Basic $ 2.29     $ 1.72     $ 4.63     $ 3.89  
Diluted $ 2.25     $ 1.67     $ 4.56     $ 3.80  
Weighted average shares outstanding:              
Basic 9,119,835     9,079,679     9,111,260     9,064,007  
Diluted 9,266,085     9,304,188     9,241,834     9,287,730  



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

  Three Months Ended   Six Months Ended
  September 28,
 2019
  September 29,
 2018
  September 28,
 2019
  September 29,
 2018
Net revenue:              
Factory-built housing $ 252,690     $ 227,094     $ 501,458     $ 459,856  
Financial services 15,985     14,436     31,259     28,077  
Total net revenue $ 268,675     $ 241,530     $ 532,717     $ 487,933  
               
Gross profit:              
Factory-built housing $ 48,639     $ 41,798     $ 100,774     $ 85,684  
Financial services 9,828     7,618     17,991     15,208  
Total gross profit $ 58,467     $ 49,416     $ 118,765     $ 100,892  
               
Income from operations:              
Factory-built housing $ 17,059     $ 15,878     $ 38,443     $ 34,714  
Financial services 5,325     3,503     8,975     6,930  
Total income from operations $ 22,384     $ 19,381     $ 47,418     $ 41,644  
               
Capital expenditures $ 1,881     $ 2,197     $ 3,944     $ 3,876  
Depreciation $ 1,257     $ 1,090     $ 2,417     $ 2,110  
Amortization of other intangibles $ 151     $ 80     $ 231     $ 164  
               
Total factory-built homes sold 3,781     3,536     7,588     7,423  

For additional information, contact:

Mark Fusler
Director of Financial Reporting and Investor Relations
investor_relations@cavco.com

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