Cavco Industries Reports Fiscal 2022 Fourth Quarter and Year End Results
Cavco Industries, Inc. (“Cavco” or the “company”) announced financial results for the fourth quarter and fiscal year ended April 2, 2022 and provided updates on other business items. The current fiscal year includes 52 weeks while fiscal year 2021 contained 53 weeks, with the extra week falling in the fourth quarter.
On September 24, 2021, we completed the acquisition of certain assets and liabilities of The Commodore Corporation (“Commodore”), which operates six manufacturing plants and two retail locations. Since the acquisition date, the results of Commodore are included in Cavco’s consolidated financial statements.
- Record breaking Net revenue and Net income of $505 million and $54 million, respectively.
- Gross profit as a percentage of Net revenue increased to 25.6% with factory-built housing gross profit as a percentage of Net revenue at 24.5%, up 390 bps from last year’s fourth quarter.
- Earnings per diluted share was $5.80 compared to $2.71 in last year’s fourth quarter.
- Factory utilization exceeded 80%.
- Backlogs were $1.1 billion at April 2, 2022, compared to $603 million at April 3, 2021, of which Commodore contributed $264 million of the year over year growth. Backlog levels in the fourth fiscal quarter were consistent with the third quarter.
- Returned nearly $31 million to shareholders through stock repurchases.
Full Fiscal Year Highlights
- Twelfth straight year of revenue and earnings growth, growing Net revenue 47% and Income before income taxes 119%.
- Gross profit as a percentage of Net revenue increased 350 bps to 25.1%, with factory-built housing gross profit as a percentage of Net revenue increasing 470 bps to 23.9%.
- Earnings per diluted share was $21.34 compared to $8.25 last year. This year was favorably impacted by $3.28 from non-recurring energy efficient home tax credits, which was discussed in the third quarter.
- Demonstrated commitment to our capital allocation strategy by delivering on our three established priorities:
- Invested in organic growth, including the expansion of existing manufacturing facility capacity, a new park model facility in Glendale, Arizona and a new HUD manufacturing facility in Hamlet, North Carolina
- Added 6 new manufacturing facilities through the acquisition of Commodore
- Returned nearly $60 million to shareholders through stock repurchases.
“We are extremely proud of the successful year that all of our operations have had. Our manufacturing teams have found innovative ways to increase manufacturing output and efficiencies, and plant for plant, we are producing more homes than before the pandemic, despite continuing labor and supply challenges. We also continue to deliver on projects designed to further expand our manufacturing capabilities, including two new manufacturing facilities that are expected to open later this year,” said Bill Boor, President and Chief Executive Officer.
Mr. Boor continued, “Demand for our homes continues to be strong, despite the recent rise in interest rates. As an affordable home builder, we can provide the potential of home ownership that many people aspire to achieve. With these rising interest rates and other inflationary pressures, we believe that our products become more attractive to other forms of home ownership. That is why we continually strive to increase the number of homes we build and deliver on our commitment to provide high-quality, energy-efficient and affordable homes to our customers.”
Three months ended April 2, 2022 compared to three months ended April 3, 2021
In the factory-built housing segment, the increases in Net revenue were due to higher home selling prices and higher home sales volume. The higher home prices were driven by product price increases and a shift toward more multi-section homes. Home sales volume increased from the addition of Commodore and higher factory capacity utilization. These increases were partially offset by the prior year period containing an extra week of sales, given the fiscal calendar.
Financial services segment Net revenue decreased primarily due to lower interest income earned on the acquired consumer loan portfolios that continue to amortize, lower unrealized gains on marketable equity securities in the insurance subsidiary’s portfolio and lower volume in home loan sales, partially offset by more insurance policies in force in the current quarter compared to the prior year quarter.
In the factory-built housing segment, Gross profit increased from higher home sales prices and volume, partially offset by higher input costs. Selling, general and administrative expenses increased in these periods from higher salary and incentive compensation expense on improved earnings and the addition of Commodore.
In the financial services segment, Gross profit decreased primarily due to lower interest income earned on the acquired consumer loan portfolios that continue to amortize, lower unrealized gains on marketable equity securities in the insurance subsidiary’s portfolio and lower volume in home loan sales.
Other (expense) income, net for the period was an expense of $1.2 million in the current quarter versus income of $3.0 million in the prior year due to unrealized losses on securities held from gains in the prior year period, partially offset by increased interest income from commercial loans with the addition of Commodore.
Income taxes totaled $15.2 million, resulting in an effective tax rate of 22.1% compared to $4.5 million and an effective tax rate of 15.2% in the prior year period. The higher effective tax rate in the current year period primarily relates to higher income and lower tax benefits from stock option exercises.
Twelve months ended April 2, 2022 compared to twelve months ended April 3, 2021
In the factory-built housing segment, the increases in Net revenue were due to higher home selling prices and higher home sales volume. The higher home prices were driven by product price increases. Home sales volume increased from the addition of Commodore and higher factory capacity utilization.
Financial services segment Net revenue increased primarily due to more insurance policies in force in the current year compared to the prior year and higher volume in home loan sales and servicing, partially offset by lower interest income earned on the acquired consumer loan portfolios that continue to amortize and lower unrealized gains on marketable equity securities in the insurance subsidiary’s portfolio.
In the factory-built housing segment, Gross profit increased from higher home sales prices, partially offset by higher input costs. Selling, general and administrative expenses increased in these periods from higher salary and incentive compensation expense on improved earnings, the addition of Commodore Homes, expenses incurred in engaging third-party consultants in relation to pursuing the non-recurring energy efficient home net tax credits and Commodore related acquisition transaction costs, partially offset by amortization of additional Director & Officer (“D&O”) insurance premiums in the prior year that did not repeat.
In the financial services segment, Gross profit decreased primarily due to higher weather related claims, lower interest income earned on the acquired consumer loan portfolios and lower unrealized gains on marketable equity securities compared to the prior year period.
Other income, net during the current year includes a $3.3 million gain in the second fiscal quarter on the consolidation of a non-marketable equity investment, which went from a 50% ownership to 70%. In addition, interest income from commercial loans increased with the addition of Commodore, partially offset by lower unrealized gains on corporate marketable equity securities held.
For the year ended April 2, 2022, the effective income tax rate was 6.7% compared to 20.9% in the prior year due to $35.7 million of estimated non-recurring net tax credits related to the sale of energy efficient homes between fiscal year 2018 and fiscal third quarter 2022, available under the Internal Revenue Code §45L. The credit expired in its current form as of December 31, 2021. For the year ended April 2, 2022, the net tax credits and associated expenses favorably impacted diluted net income per share by $3.28.
Housing Demand and Production Updates
Housing demand remains strong as qualified individuals continue pursuing affordable home-ownership. Home order rates have moderated from the extreme highs we saw during the summer of 2020 to the summer of 2021, but still remain above pre-pandemic rates, which we considered to be strong. Our backlogs at April 2, 2022 were $1.1 billion, compared to $603 million at April 3, 2021. The year over year increase includes $264 million attributable to Commodore.
Although we continue to experience hiring challenges and other inefficiencies from building material supply disruptions, we have reduced our total open production positions by nearly 25% over the past year, bringing our total average plant capacity utilization rate to exceeding 80% during the fourth fiscal quarter of 2022, which is above pre-pandemic levels.
2022 Stock Repurchase Program
On May 25, 2022, the Company’s Board of Directors approved a new $100 million stock repurchase program that may be used to purchase its outstanding common stock. The previous program that was approved on October 27, 2020 has now been fully utilized, with the remaining $39 million being repurchased in the first quarter of fiscal year 2023.
The purchases may be made in the open market or one or more privately negotiated transactions in compliance with applicable securities laws and other legal requirements. The actual timing, number and value of shares repurchased under the program will be determined by the Company in its discretion and will depend on a number of factors, including market conditions, applicable legal requirements and other strategic capital needs and opportunities. The plan does not obligate Cavco to acquire any particular amount of common stock and may be suspended or discontinued at any time. The Company expects to finance the program from existing cash resources.
“When the previous authorization was announced, we said that it would not limit our strategic investments. We are pleased to have now returned $100 million of value directly to our stockholders in a little over a year, while investing approximately $200 million into growing and improving our operations,” said Mr. Boor. He continued, “As before, our priorities for capital remain unchanged. This newly authorized plan will allow us to continue to return value to our shareholders without compromising our ability to create long-term value, as we still seek out additional investment opportunities.”
For the full fourth quarter results, click here.
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 and modular homes in the United States, based on reported wholesale shipments. Our products are marketed under a variety of brand names including Cavco, Fleetwood, Palm Harbor, Nationwide, Fairmont, Friendship, Chariot Eagle, Destiny, Commodore, Colony, Pennwest, R-Anell, Manorwood and MidCountry. We are also a leading producer of park model RVs, vacation cabins and factory-built commercial structures. 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.
Mark Fusler – Director of Financial Reporting and Investor Relations – firstname.lastname@example.org – (602) 256-6263
Source: Cavco Industries, Inc.