Cavco Reports Improved Q2 Financial Results

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November 3, 2011 by   - () Leave a Comment

Cavco Industries Inc. today (Nov. 3) announced financial results for the second quarter and first six months of its fiscal year 2012 ended Sept. 30.

Net sales for the second quarter of fiscal 2012 totaled $130,008,000, up 183% from $45,888,000 for the second quarter of fiscal year 2011, according to a news release.

As previously reported, 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. during the quarter ended June 30, 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 $83,900,000. The results of the Palm Harbor operations have been included in the Consolidated Financial Statements since acquisition.

Net income for the fiscal 2012 second quarter was $3,172,000, compared to $1,199,000 reported in the same quarter one year ago. During the quarter, the company incurred $120,000 in acquisition-related costs for the purchase of the Palm Harbor Homes assets and expects to have additional transaction-related expenses during the remainder of fiscal year 2012.

Interest expense of $1,916,000 was recognized during the second quarter of fiscal 2012, 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 second quarter was $1,685,000 compared to $680,000 reported in the same quarter one year ago. Net income per share based on basic and diluted weighted average shares outstanding was 24 cents versus basic and diluted net income per share of 10 cents last year.

For the first six months of fiscal 2012, net sales increased 145% to $228,989,000 from $93,393,000 for the comparable prior year period. Net income for the first half of fiscal 2012 was $23,860,000 compared to $2,049,000 last year. Included in net income for the six months ended Sept. 30, 2011, was a gain on bargain purchase of $22,009,000 resulting from the acquisition of Palm Harbor, as adjusted during the fiscal 2012 second quarter and calculated in accordance with the accounting standards for business combinations. Net income attributable to Cavco stockholders for the first half of fiscal 2012 was $11,907,000 compared to $1,198,000 last year.

For the six months ended Sept, 30, 2011, net income per share based on basic and diluted weighted average shares outstanding was $1.73 and $1.72, respectively, versus 18 cents for the prior year period.

Management Comments

"We are glad to report positive earnings for the second quarter of fiscal year 2012. Cavco benefited from higher order rates during the quarter, which translated into improved results compared to recent quarters and demonstrates the operating leverage we believe exists in the Cavco group of companies," said Joseph Stegmayer, chairman, president and CEO, while commenting on the quarter.

Stegmayer continued, "This is our first full quarter operating the newly expanded enterprise since the Palm Harbor transaction closed during last quarter. While the work of transitioning the newly acquired operations into the Cavco fold is ongoing, we are pleased with the initial contributions of the Palm Harbor businesses and people. This quarter also marks the second anniversary of the Fleetwood Homes transaction. The Fleetwood Homes operations have continued to develop and grow in their respective markets. We believe the expanded and more diverse operations have improved Cavco's position in the industry, allowing us to more fully take advantage of market opportunities and pursue operating efficiencies available to a larger organization."

He concluded, "We remain cautious about the near-term outlook. High unemployment rates, significant under employment and low consumer confidence levels combine to create a very challenging environment for the sale of consumer durables, particularly housing. In addition, home sales activity typically experiences seasonal declines during winter months. Still we feel that Cavco is very well positioned as an industry leader and from a financial strength standpoint to cope with the largely unprecedented economic conditions the nation faces. We build high quality, affordable homes that target a wide range of consumer needs and interests. Eventually, we believe the growing population of potential homebuyers will begin to shop for a home and expect that many people will consider systems built homes such as ours for their affordability, energy efficiency, flexible design possibilities and environment friendly characteristics."

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