Palm Harbor Homes Buy Boosts Cavco's Q1 Results
Cavco Industries Inc., a builder of manufactured housing and park models based in Phoenix, today (Aug. 8) reported financial results for the first quarter of fiscal 2012 ending June 30.
Net sales for the first quarter of fiscal 2012 totaled $98,981,000, up 108% from $47,505,000 for the first quarter of fiscal year 2011.
Net income for the fiscal 2012 first quarter was $17,459,000, compared to $850,000 reported in the same quarter one year ago. Included in net income for the quarter was a gain on bargain purchase of $18,780,000 resulting from the acquisition of Palm Harbor, as calculated in accordance with FASB Accounting Standards Codification 805, Business Combinations.
During the quarter, Cavco incurred $744,000 in acquisition related costs for the purchase of the Palm Harbor Homes assets. It expects to have additional transaction-related expenses during fiscal year 2012. Interest expense of $1,461,000 was recognized during the first quarter of fiscal 2012 since April 23, 2011, primarily related to securitized financings and a mortgage construction lending facility of the finance subsidiaries acquired.
Net income attributable to Cavco stockholders for the fiscal 2012 first quarter was $8,608,000 compared to $518,000 reported in the same quarter one year ago. Net income per share based on basic and diluted weighted average shares outstanding was $1.26 and $1.25, respectively, versus basic and diluted net income per share of $0.08 last year.
Referring to the first fiscal quarter, Joseph Stegmayer, chairman, president and CEO, commented, “During this eventful quarter, we closed on the Palm Harbor transaction and continued the associated operations under their new ownership structure. The Palm Harbor businesses are in the process of transition and have already demonstrated resilience post-bankruptcy. Certain streamlining actions have taken place which should improve operating efficiencies and financial performance over time. Work will continue during the next several quarters to integrate the Palm Harbor retail, manufacturing, finance and insurance lines of business for the overall benefit of the Cavco group of companies.”
“With respect to marketplace conditions, general economic challenges, including low consumer confidence levels, unemployment and underemployment, overall housing sector weakness, and restricted mortgage loan markets continue to impede new home sales activity, even in the affordable housing market in which we operate. However, we believe Cavco’s strategic initiatives during the past two years, including the Fleetwood Homes and Palm Harbor transactions, improve our ability to pursue existing demand while better positioning us to take advantage of future opportunities.”
Fleetwood Homes Inc., a subsidiary owned 50% by Cavco and 50% by Third Avenue Value Fund (TAVFX), completed the acquisition of substantially all of the assets and assumption of certain liabilities of Palm Harbor Homes, Inc. on April 23, 2011. Palm Harbor had been in the business of manufacturing and marketing factory-built housing and providing related consumer financing and insurance products. The aggregate gross purchase price, exclusive of transaction costs, specified liabilities assumed and post-closing adjustments, was $83.9 million. Of the purchase price, approximately $45.3 million was used to retire the debtor-in-possession loan previously made by Fleetwood Homes to Palm Harbor. The purchase price was funded by Fleetwood Homes’ cash on hand along with equal equity contributions from Cavco and Third Avenue. The transaction included the assumption of specified liabilities, including primarily debt facilities of the mortgage subsidiaries and certain warranty obligations.
Included in the purchased assets were five operating factory-built home production facilities, idled factories in nine locations, 49 operating retail locations, one office building, real estate, all related equipment, accounts receivable, customer deposits, inventory, certain trademarks and trade names, intellectual property, and specified contracts and leases. All outstanding shares of CountryPlace Acceptance Corp., Standard Insurance Agency Inc. and their wholly owned finance and insurance subsidiaries were also part of the purchase. Regulatory approval of the acquisition of Standard Casualty Co. was received on June 7, and the purchase was completed on June 10. The results of the Palm Harbor, CountryPlace and Standard operations have been included in the Consolidated Financial Statements since their respective acquisition dates.