Cavco Industries Reports Strong Fiscal 2021 Fourth Quarter and Year End Results

Cavco Industries, Inc. announced financial results for the fourth quarter and fiscal year ended April 3, 2021. Fiscal year 2021 was a 53 week year, with the extra week falling in the fourth quarter.

Key Takeaways

Fourth Quarter 2021

–Recorded highest quarterly Net revenue in the Company’s history at $306.5 million

–Gross profit as a percentage of Net revenue increased to 23.1%

–Earnings per diluted share was $2.71 compared to $1.29 for the same quarter last year

–Factory capacity utilization was approximately 75% during the quarter, consistent with the third quarter

–Home sales order rates improved 50% over last year’s quarter

–Backlogs increased $131 million during the quarter

Fiscal Year 2021

–Grew Net revenue 4.3% and Income before income taxes 4.2%, the eleventh straight year of revenue and earnings growth

–Gross profit as a percentage of Net revenue was 21.6%, consistent with prior year

–Earnings per diluted share was $8.25, compared to $8.10 last year

–Home sales order rates up over 40% for the year

–Announced new park model facility in Arizona with an estimated completion date of December 2021

Three months ended April 3, 2021 compared to the three months ended March 28, 2020

Net revenue increased 20.1% to $306.5 million for the fourth quarter of fiscal year 2021, which included an extra week in the fiscal period, compared to $255.3 million in the same quarter last year.

–In the factory-built housing segment, Net revenue increased 19.6%, or $47.2 million, to $288.0 million compared to $240.8 million in the prior year period. The increase was the result of a 13.8% increase in average home sales prices, as well as 5.2% higher home sales volume.

–Financial services segment Net revenue increased 26.7%, or $3.9 million, to $18.5 million compared to $14.6 million in the prior year period. The increase was primarily due to gains on marketable equity investments during the 2021 fourth fiscal quarter compared to losses in the same period last year. In addition, there were higher home loan sales and insurance policies in force in the current period compared to the prior year period.

Income from operations increased 85.5% to $26.9 million compared to $14.5 million in the same quarter last year.

–In the factory-built housing segment, Income from operations was $21.0 million, a 62.8% increase from $12.9 million in the prior year period. Gross profit increased as a result of higher sales volumes, higher home sales prices and a shift toward more multi-section homes during the period. This is partially offset by additional Selling, general and administrative costs from higher salary and incentive compensation expense on improved earnings, charges related to paid time off policy enhancements, severance expense related to the Company’s former Chief Financial Officer (“CFO”) and additional expenses related to the Securities and Exchange Commission (“SEC”) inquiry compared to the same period last year.

–In the financial services segment, Income from operations was $5.9 million, a 268.8% increase from $1.6 million in the prior year period. The prior year quarter ended at the onset of the novel coronavirus COVID-19 (“COVID-19”) pandemic, resulting in non-cash valuation adjustments, including increased loan loss reserves, which lowered results. These have since recovered in the current fiscal quarter, and we recognized greater gains on marketable equity investments. This is partially offset by increased weather-related insurance claims, mainly the result of the deep freeze that occurred in Texas in February 2021, which met the Company’s reinsurance retention limit.

Income before income taxes was $29.7 million, a 118.4% increase from $13.6 million in the prior year period. Income before income taxes includes $2.1 million of unrealized gains on corporate equity investments compared to $2.1 million of unrealized losses in the same quarter last year.

Income taxes totaled $4.5 million, resulting in an effective tax rate of 15.2% compared to $1.6 million and an effective tax rate of 12.0% in the prior year period. The higher effective tax rate in the current year period primarily relates to higher income, partially offset by greater tax benefits from stock option exercises.

Net income was $25.2 million compared to $12.0 million in the prior year period, a 110.0% increase. Diluted net income per share was $2.71 versus $1.29 in the comparable period last year.

During each quarterly period, items ancillary to our core operations had the following impact on the results:

 

Twelve months ended April 3, 2021 compared to the twelve months ended March 28, 2020
Net revenue was $1.108 billion, including an extra week in the fiscal period, up 4.3% from $1.062 billion in the prior fiscal year.

–Factory-built housing Net revenue increased 3.9%, or $38.7 million, to $1.038 billion compared to $999.3 million in the prior year. The increase was primarily due to 10.3% higher average home selling prices and a shift toward more multi-section homes, partially offset by 5.9% lower home sales volume compared to the same period last year.

–Financial services segment Net revenue increased 12.5%, or $7.8 million, to $70.2 million compared to $62.4 million in the prior year. The current year includes $2.9 million of unrealized gains on marketable equity investments compared to $1.4 million in unrealized losses in the prior year. In addition, a higher volume of home loan sales and more insurance policies in force favorably impacted the current year compared to the prior year, partially offset by lower interest income earned on the acquired consumer loan portfolios that continue to amortize as expected.

Income from operations was $88.8 million, a 4.6% increase from $84.9 million in the prior year period.

–In the factory-built housing segment, Income from operations was $69.1 million, a 1.5% increase from $68.1 million in the prior year period as gross profit increased from higher home sales prices and a shift toward more multi-section homes during the period, partially offset by lower home sales volumes. Additionally, we recorded net expenses of $1.5 million and $4.2 million related to the SEC inquiry and additional D&O insurance premium amortization, respectively, in fiscal year 2021, compared to $2.9 million and $8.4 million, respectively, in the prior year. These benefits were partially offset by charges related to paid time off policy enhancements and severance expense related to the Company’s former CFO.

–In the financial services segment, Income from operations was $19.7 million, a 17.3% increase from $16.8 million in the prior year period. Higher weather-related claims this year were offset by greater gains on marketable equity securities and favorable non-cash valuation adjustments, including improved loan loss reserves.

Income before income taxes increased 4.2% to $96.9 million as compared to $93.0 million in the prior year. The improvement was primarily from higher factory-built housing gross profit and improved earnings in the financial services segment. Income before income taxes includes $4.5 million of unrealized gains on corporate equity investments compared to $0.7 million of unrealized losses in the same period last year.

Net income was $76.6 million, up 2.0% from net income of $75.1 million in the prior year. Diluted net income per share was $8.25 versus $8.10 in the prior year.

During each annual period, items ancillary to our core operations had the following impact on the results:

 

Commenting on the quarter and year, Bill Boor, President and Chief Executive Officer, said, “This fiscal year started with unprecedented disruption and uncertainty due to the COVID-19 pandemic. In the face of that uncertainty, teams across Cavco resolved to continue safe operations for the benefit of our customers and employees. Our strong results are a direct reflection of our co-workers’ resilience and commitment. This dedication was also evident during the Texas freeze in February, where we minimized production downtime, quickly reopened retail stores, continued lending operations, and did an outstanding job taking care of insurance customers in their time of need.”

Mr. Boor continued, “Despite ongoing labor and supply challenges, we’ve been able to steadily improve manufacturing throughput throughout the year. Continued extraordinary demand and excessively long lead times for our customers keep us singularly focused on improving production rates. In that regard, we are very happy to have announced the addition of our new park model facility in Glendale, Arizona, which will start production later this year. This investment in capacity will allow us to better serve our park model customers while also freeing up production capacity at other facilities. Continued expansion of throughput and capacity is our priority.”

Business Update on the COVID-19 Pandemic

In March 2020, the World Health Organization declared 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 minimized exposure and transmission risks by implementing enhanced facility cleaning, social distancing and related protocols while continuing to serve our customers. Operational efficiencies have declined due to higher and largely unpredictable factory employee absenteeism, hiring challenges and building material supply shortages. Accordingly, our total average factory capacity utilization rate was approximately 75% during the fourth fiscal quarter of 2021, lower than pre-pandemic levels of more than 80%.

Sales order activity remained exceptionally strong during the fourth fiscal quarter of 2021 to the point where home sales order rates were nearly 50% higher than the comparable prior year quarter and 40% higher for the year. 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 production during the quarter, raising order backlogs to $603 million at April 3, 2021, compared to $124 million at March 28, 2020 and $472 million at December 26, 2020.

For the complete press release, click here.

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. 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 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.

Contact:

Mark Fusler – Director of Financial Reporting & Investor Relations – investor_relations@cavco.com – (602) 256-6263

Source: Cavco Industries, Inc.