The manufactured-housing industry is pressing lawmakers to roll back an obscure part of the Dodd-Frank law, arguing it will crimp demand for prebuilt homes, hurting lenders, builders and owners, The Wall Street Journal reported.
The industry effort has rare bipartisan support in Congress, with both Democrats and Republicans expressing concern that the law could trigger a decline in lending for manufactured homes.
At issue is a provision of Dodd-Frank that aims to combat predatory lending. Loans with rates and fees above certain thresholds are supposed to be designated “high cost” by the Consumer Financial Protection Bureau and thus subject to fewer legal protections.
The bureau earlier this year decided to call loans high-cost if they have an annual percentage rate of more than 6.5 percentage points above a national average and 8.5 percentage points for many loans under $50,000.
Lenders to manufactured-home buyers say many of their loans would fall into the high-cost category with this regulation, which goes into effect in January. They warn that they won’t make such loans because they carry increased legal risk.
Mortgage rates for traditional homes average below 3.5%, but rates for manufactured homes are above 10% in some cases, including fees. Lenders say they need to charge higher rates partly because buyers of manufactured homes often have low incomes, imperfect credit and carry a higher risk of default.
House lawmakers this week plan to introduce legislation that would designate fewer loans as high-cost, and a key Democrat on the Senate Banking Committee, Sen. Sherrod Brown of Ohio, is working on similar legislation to be introduced in coming weeks.
Brown said in a statement that manufactured homes “represent a different product, with a different consumer base” than loans for traditional homes, and that his legislation would “bring regulations for manufactured housing in line with their place in the market.”
Consumer advocates dispute the industry’s case, arguing that lenders will be able to fall within the new triggers by reducing fees and interest charged to meet the high-cost thresholds.
“I’m skeptical that this is going to suddenly result in a huge downturn of lending in this area,” said John Van Alst, staff attorney with the National Consumer Law Center in Boston.
Stocks of manufactured-housing companies have soared this year as investors bet that consumers priced out of the apartment market and those looking to retire will opt for manufactured housing. Shares of Sun Communities Inc. have climbed more than 20% since January, while Equity LifeStyle Properties Inc. is up nearly 20%.
But proponents of the legislation point out that mortgage buyers Fannie Mae or Freddie Mac buy few loans for manufactured homes, causing lenders to the industry to obtain funding at a higher cost.
Manufactured homes also tend to lose value over time, and lenders can recover less money if there is a foreclosure. Lenders shy away from such high-cost mortgages — only about 2,400 such loans were made in 2011, a fraction of the lending market.
Tim Williams, CEO of 21st Mortgage, the largest lender to builders of manufactured homes, says roughly a third of his company’s loans from 2010 and 2011 — about 6,100 mortgages — would have fallen outside the Consumer Financial Protection Bureau’s thresholds.
The bureau’s restrictions will curb demand for homes, harming low-income buyers in rural areas and leaving them with few other options, says Williams, whose company is owned by the largest seller of manufactured homes, Berkshire Hathaway Inc.-owned Clayton Homes. In addition, existing homeowners will be harmed, as well, because “they will not be able to sell these houses,” Williams says.
“If we see that financing dwindle…it certainly will mean closure of a number of plants,” says Joe Stegmayer, CEO of Cavco Industries Inc., the industry’s second-biggest manufacturer. “Plants are already struggling now.”
In publishing its rule in January, the consumer bureau said it didn’t have enough information on why it the industry wouldn’t be able to make loans under the current thresholds and “not certain” that lending would slow.
Before Dodd-Frank, the high-cost designation only applied to loans for refinancing, but the financial law expanded it to apply to loans for purchases as well.
For all 2012, nearly 55,000 new manufactured homes were sold, up from about 52,000 in 2011 but a far cry from a peak of more than 370,000 in 1998, according to the Manufactured Housing Institute, an industry trade group.
Editor’s Note: The final portion of the park model, cabin and yurt presentation in the February issue of Woodall’s Campground Management appears below.
Athens Park Homes LLC
2013 Focus: Athens Park Homes is ramping up its park model construction across the country following its July 2012 acquisition by Troy, Mich.-based Champion Home Builders, which operates park model manufacturing facilities in Chandler, Ariz.; Weiser, Idaho; York, Neb.; Athens, Texas; Sangerfield, N.Y.; Lillington, N.C.; and Lake City, Fla. “Right now, pretty much all of the plants have built one or two models,” said Dick Grymonprez, Athens’ director of national park model sales. He said the variety of manufacturing plants across the country will help Athens offer more competitive prices to private park operators and consumers. “We had shipped to 37 states before the Champion acquisition,” he said. “But now we’re able to build the Athens Park brand closer to where the user is. We’re also able to buy materials at better prices because of Champion’s buying power, so we can build park models for less money.”
Background: Athens Park Homes was founded in September 2004 by a group of investors spearheaded by manufactured housing veteran Phil Surles, who was a former COO of Troy, Mich.-based Champion Enterprises, the parent company of Champion Home Builders.
Management: Phil Surles, president
Contact Information:3401 Corsicana St., Athens, TX 75751; (903) 677-0108; fax (903) 677-0118; www.athensparkhomes.com
Dutch Park Homes Inc.
2013 Focus: Dutch Park signed up several new dealers at the Louisville show and is expanding its reach across the country. “We think we have the best fit and finish and quality in the park model industry,” said sales manager Larry Weaver, adding that the company is continuing to make “fit and finish and quality” its focus areas in 2013 along with a stepped up marketing of its rental products to campgrounds.
Background: Dutch Park Homes was founded in 1999. Omer Kropf purchased the company in October 2003. The company recently relocated to a different manufacturing facility in Goshen, about a half-mile from its original plant.
Management: Kermit Kropf, president
Contact Information: 2249 Lincolnway East, Goshen, IN 46526; (574) 533-8090; fax (574) 533-8210; www.dutchpark.com
2013 Focus: Breckenridge is stepping up its production of rental units for the campground industry. “We’ve been a partner of KOA (Kampgrounds of America Inc.) and LSI (Leisure Systems, Inc.) and we’ve sold our share of rental products to those companies. We also do quite a bit of business with independent campgrounds,” said Bob Phillips, Breckenridge’s general manager. He said production of rental units for campgrounds is a good way to help private parks broaden their business base, while also introducing consumers to park models. “If we can get folks interested in going to campgrounds and spending time in rental units, some may make an investment in park models as a second home,” Phillips said. With this in mind, Breckenridge is continuing to develop even more luxurious interiors.
Background: Tim Howard founded Breckenridge on Sept. 23, 1991, as a stand-alone division of Damon Corp. with about eight to 10 employees, several of whom had worked with Howard at Mallard Coach Corp., another Nappanee park model company. Breckenridge continued to operate as a Damon division until Thor Industries acquired Damon in 2003. Howard retired Feb. 1, 2012. Bob Phillips, whom Howard hired as his first employee, now manages the company. “I was his director of engineering for 19 years,” Phillips said.
Management: Bob Phillips, general manager
Contact Information: 656 North Delaware, Nappanee, IN 46550; (574) 773-5353; fax (574) 773-2124; www.breckenridgefinerliving.com
Cavco Industries Inc.
2013 Focus: Cavco is continuing to position its product innovations with several soon-to-be-announced park model products that will be industry firsts. “I think innovation is what has kept Cavco in the game,” said Tim Gage, Cavco’s national vice president of park models, cabins and specialty products. “We’re being really innovative on working with the new developers of campgrounds or resorts, whether it’s on the East Coast or West Coast. We’re creating some awesome exteriors and concepts that keep us one step ahead. The interest continues from developers and campground owners with requests for larger volume weekend getaway cabins and cottages. People seem to be staying close to home and want above-average accommodations.”
Background: Cavco started producing park models in the early 1990s and began offering cabins and cottages in 2001. Cavco continues to be an industry leader and has continued to grow its market share and competitive edge by acquiring other companies, including Palm Harbor Homes, Fleetwood and Nationwide Homes, which provide Cavco with the ability to produce park models in every region of the country. Cavco currently produces park models in Phoenix and Goodyear, Ariz.; Seguin, Texas; Nampa, Idaho; Woodburn, Ore; Rocky Mount, Va.; Martinsville, Va.; Riverside, Calif.; Millersburg, Ore.; and Plant City, Fla.
Management: Tim Gage, national vice president of park models, cabins and specialty products
Contact Information: 1001 N. Central Ave., Phoenix, AZ 85004; Phone: 602-763-5488; fax (623) 882-2845; www.parkmodels.com, www.cavco.com and www.fleetwoodparkhomes.com
Chariot Eagle Inc.
2013 Focus: Chariot Eagle has introduced a series of 8½-foot-wide park models with slides that have proven to be very popular as rental models, said Joe Follman, the company’s sales manager. Chariot Eagle has also included even more optional items in their models as standard equipment, including marble windowsills, night stands with overhead cabinets above the bed, new extended drawer guides and space saver microwaves. Chariot Eagle has also expanded its usage of tape and textured residential finishes at new competitive prices in their 2013 models.
Background: Robert Holliday founded Chariot Eagle in June 1984 with five employees and subsequently built it into one of the larger park model manufacturers in the country, with manufacturing operations at its headquarters in Ocala, Fla., and at its sister plant, Chariot Eagle West, in Phoenix, Ariz., which it opened in 1995 to service the West Coast market. Both plants build the same types of products, although their floor plans vary and architectural styles vary to reflect regional architectural tastes in exterior design. Chariot Eagle specializes in customized park models and has developed more than 650 different floorplans.
Management: Robert Holliday, president
Contact Information: 931 NW 37th Ave., Ocala, FL 34475; (352) 629-7007; fax (352) 732-0026; www.charioteagle.com. For Chariot Eagle West, 8100 W. Buckeye Rd., Phoenix, AZ 85043; (623) 936-7545; fax (623) 936-7012; www.charioteaglewest.com
Fairmont Park Trailers
2013 Focus: Fairmont Homes’ Park Trailer division is stepping up its involvement in the park model rental business, having introduced a new rental unit at the ARVC Outdoor Hospitality Conference & Expo in November, which generated significant interest from private park operators. “This is our first concerted effort to get into the rental market,” said John Soard, Fairmont Homes’ general manager. “We’ve got the ability to do higher volume building so we can be more efficient for dealers and campgrounds with rental products.”
Background: John Soard spent 20 years with Breckenridge and Woodland Park before joining Fairmont Homes in 2005 to run the company’s park trailer division. Fairmont Homes had been in the park model business back in the late ’80s and early ’90s and exited the market in 1994 to focus mainly on housing. But the company re-entered the park model market in 2005 when Soard joined the company as general manager. He said Fairmont Homes uses its housing expertise to build more durable and livable park models. The company has been expanding its market share in recent years.
Management: John Soard, general manager
Contact Information: 502 S. Oakland Ave., Nappanee, IN 46550; (800) 777-8787; fax (800) 865-2294; www.fairmontparktrailers.com
Forest River Inc.
2013 Focus: Forest River is conducting a major overhaul of its park model products. “We are in the midst of the biggest series of product changes in several years,” said account manager Gary Duncan, adding that the company has introduced four new floorplans and expanded its offering of wood colors, cabinet designs and window treatments. New kitchen backsplashes and hidden hinges for cabinets were introduced. Kitchen cabinet and pantry shelves are now adjustable. Countertop choices were expanded. Pullout trash cans and pull out pantries are now featured in most floorplans. New window treatments feature hard valances and give a more upscale look. Accent furniture has been updated. Interior doors are also now stained to match the cabinets. On the outside, new vinyl siding colors were added. Shutters have been added to entry doors and loft windows. Duncan said the changes have been well received. “We had an extremely good show in Louisville,” he said. “We signed up several new dealers, primarily as a result of the product changes we made.”
Background: Peter J. Liegl founded Forest River in January 1996 with an initial product lineup that included towable RVs and park models. Acquired by Berkshire Hathaway in 2005, Forest River has continued to expand its product line, which now includes motorized RVs as well as restroom trailers and mobile offices. Its park model products are certified green and are manufactured in the Quail Ridge, Summit, and America’s Park Cabin model lines. A floorplan for the physically challenged is also available.
Management: Jim Foltz, general manager
Contact Information: 28936 Phillips St., Elkhart, IN 46514; (574) 264-7163; fax (574) 264-7364; www.forestriverinc.com
H L Enterprise Inc.
2013 Focus: H L Enterprise is focusing on expanding its dealer network of independent retail dealers including many campground owners. H L offerings provide flexible floorplans rather than the typical “cookie cutter” approach most often seen in the industry, according to Peggy Flager, H L Enterprise president and co-owner. “We are able to give our customers more of what they want and accommodate specific needs, including those involving limited mobility” she said.
Background: With over 100 years of combined RV industry experience, including the establishment of the original Hyline in 1986, owners Peggy Flager, Charles Ragland and Randy Hoff started H L Enterprise Inc. with the purchase of assets and the right to manufacture the Hyline product in January 2011. Product lines were broadened with the subsequent purchase of assets of Bridgeview Manufacturing and a portion of Discover Canada. The result is the current line-up of Hyline, Bridgeview, Georgian Bay and Harborview models.
Management: Co-owners Peggy Flager, Charles Ragland and Randy Hoff and General Manager Steve Stone
Contact Information: 21674 Beck Dr., Elkhart, IN 46516; (574) 294-1112; fax (574) 970-1303; www.hlenterpriseinc.com
2013 Focus: Pacific Yurts continues to expand its business in both domestic and international markets. “Our custom-curve window has been quite popular,” said company President Alan Bair. “It has a patent-pending design integrating a thermal pane window and beautiful curved wood frame, making the yurt more energy efficient.” Bair is also seeing growing demand for larger yurts. “Our customers are adding kitchenettes and bathrooms and more interior amenities. The “glamping” trend continues,” he said.
Background: Pacific Yurts was established in 1978 as the original manufacturer of the modern yurt. Pacific Yurts is the largest yurt manufacturer in the world with most of its sales taking place in the U.S. and Canada. However, the company also sells significant numbers of yurts to customers in Europe and Asia. International sales account for about 5% to 10% of Pacific Yurts’ business, but international sales are growing, according to Bair.
Management: Alan Bair, president
Contact Information: 77456 Highway 99 South, Cottage Grove, OR 97424; (541) 942-9435; fax (541) 942-0508; www.pacificyurts.com
Pinnacle Park Homes
2013 Focus: Pinnacle Park Homes is expanding its offering of floorplans for its cabin rental products this year. “We took input from campground owners and are tweaking our floor plans,” said Terri Stewart, co-owner of Pinnacle Park Homes. “Our cabin rental line has done very well for us.” Pinnacle Park Homes has also established new lender relationships, which it shares with campground operators who need financing for their park model purchases. “Financing is still tough, but we keep building relationships with people,” Stewart said.
Background: Founded in 2003, Pinnacle Park Homes offers numerous park model floorplans with vinyl, Hardiboard, cedar or log exteriors. In addition to producing park models with vinyl and rustic exteriors, Pinnacle Park Homes produces the Lighthouse series of floating cabins, which are park models constructed on a floating device. The company also offers ADA compatible and ADA compliant park models based on campground needs and requirements.
Management: Terri Stewart, co-owner
Contact Information: 26488 GA Highway 3, Ochlocknee, GA 31773; (229) 574-5159; fax (229) 574-5184; www.pinnacleparkhomes.com
2013 Focus: Skyline is having market success with new park model designs that include drywall interiors, which can be more easily repaired than damaged wood paneling. This feature is of particular interest to campground operators who use park models as rental accommodations. “This past year and a half we’ve gotten the product where we wanted to get it,” said Terry Decio, Skyline’s vice president of sales and marketing, adding that the company had very successful trade shows in Elkhart, Ind., and Louisville, Ky. Its rental product line, initially launched through a partnership with ARVC, is gaining traction in campground industry.
Background: Skyline is a diversified company that produces travel trailers and fifth-wheels as well as manufactured homes and park models. Its park models include both 8½-foot-wide and 12-foot-wide units. Skyline has been building park models since the early 1980s. It currently manufactures park model rental units in five factories across the country, including Hemet, Calif.; McMinnville, Ore.; Lancaster, Wis.; Ocala, Fla.; and Leola, Pa.
Management: Kevin Garthus, national product manager
Contact Information: 2520 By-Pass Road, Elkhart, IN 46515; (800) 755-6521, fax (574) 294-6521; www.skylinecorp.com and www.skylinepm.com
Editor’s Note: The following story is excerpted from the February issue of Woodall’s Campground Management. Later this week, www.woodallscm.com will report in further detail trends in the park model, cabin and yurt industry and provide comments from the nation’s leading builders of these covered shelter products.
This year might be the year that the recreational park trailer industry snaps out of its multi-year slump.
At least that’s what the major manufacturers are hoping for and telling Woodall’s Campground Management (WCM) for its annual park model, cabins and yurts issue. And to what extent the nation’s campgrounds bolster their covered shelter inventory will go far in determining the success these OEMs experience in 2013.
The major campground chains, Kampgrounds of America Inc. (KOA) and Leisure Systems Inc. (LSI), each reported a hearty demand for covered shelter in their parks in 2012, which encouraged the park model OEMs as they begin to fill the pipeline for 2013. KOA said deluxe cabin rentals, a key point of emphasis right now, was up more than 20% in 2012 with registration revenues growing 19.5% higher than in 2011.
LSI reported that rental unit revenue rose 17% in 2012 from 2011. Double-digit growth has been recorded the past three years.
“Some people (parks) are not really taking advantage of this,” LSI President Robert Schutter said late in the year. “This is an area that we can exploit for many years. We have not maxed out.”
Builders are taking a variety of steps to grow their market share in both the campground and retail marketplace.
Industry leader Breckenridge, a division of Thor Industries Inc., the RV industry’s No. 1 manufacturer, is stepping up its production of rental units for the campground industry. The company, which captured more than 25% of the retail park model market in 2012, has taken many steps to broaden the appeal of its 12-wide Extendable and Perfect Cottage series, explained Bob Phillips, general manager of Nappanee, Ind.-based manufacturer, which is a preferred provider for KOA and LSI, two of its two largest customers.
“What we’re trying to do is anchor the market we’re in,” said Phillips. “Breckenridge has always been a leader in the 12-wide market. I don’t think we’re going to venture much outside that.”
In its Extendable Series, the company has adopted a full fiberglass front cap and tried to make a lot of the former options now standard, he explained. Color schemes have been changed.
In the entry-level Fine Line Series, three new floorplans are geared more to families and first-time buyers and are more economical, he said.
A lot of former options are now standard in the Perfect Cottage series. New features include wholehouse vacuums and heavy-duty, pullout kitchen spray faucets and softened interior color schemes.
“A number of campground dealers should be excited about that product (model),” he said.
In the last three years, Breckenridge has become more serious about its campground rental units, Phillips said. He termed that market “a different beast” from the retail market and said the company has attempted to shore up this market.
Breckenridge also offers a rental unit it has “hardened” for the demands of campground users. “For a rental product, it’s very bullet-proof for a campground,” he said.
Phillips said Breckenridge is proud of its No. 1 position in retail registrations and welcomes the competition. He said those builders gaining market share with Breckenridge are doing so in the 8 ½-wide market.
“We want to make sure those nibbling don’t get too close. They have pushed us in what we do,” he said.
Forest River Inc., a Berkshire Hathaway company, the nation’s No. 2 RV builder and among the five largest park model makers, has done a total overhaul of its park model offerings for 2013 in its high line Quail Ridge and entry-level Summit product line.
The company has introduced four new floorplans so far and revamped its interior decors for these 12-wide models. Many formerly optional features are now standard on the Quail Ridge line and may be available on Summit products.
Interior doors are now stained to match the cabinets. New cabinet designs and styles, new kitchen backsplashes and hidden hinges for cabinets were introduced. Cabinets now have pulls instead of handles and ball-bearing glides. Kitchen cabinet and pantry shelves are now adjustable. Countertop choices were expanded. Pullout trash cans are now inside the pantries.
New window treatments feature hard valances and give a more upscale look. Accent furniture was updated.
On the outside, new vinyl siding colors were added. Shutters have been added to entry doors and loft windows.
“Competition was at the heart of the need to change,” said Gary Duncan, account manager for the Elkhart, Ind.-based manufacturer. “We weren’t gaining market share in recent years. These changes are recognition of competition and where the product needed to be. It was getting stale. Minor changes weren’t going to cut it; we really had to do something dramatic.”
The company also has upgraded its cabin-like park models, which it builds to customer specs. The basic model is a derivative of a KOA floorplan, which is tailored to meet the customer’s needs. Forest River made few changes in its cabin offerings, other than improving its interior paneling and upgrading its wooden cabinets. Cabins are available with vinyl, cedar lap or cedar log siding.
Lead times for Forest River products are about six weeks.
Cavco Industries Inc., a publicly held company, was keeping under wraps several soon-to-be-announced park model products that will be industry firsts.
“I think innovation is what has kept Cavco in the game,” said Tim Gage, national vice president of park models, cabins and specialty products for the Phoenix-based manufacturer.
As reported earlier by WCM, Elkhart, Ind.-based Skyline Corp., another publicly held company and in a solid third place in retail sales among park model builders, has opted to resume park model production at its manufactured housing plants in Wisconsin and Oregon based on the dealer response to Skyline’s park model display at the Louisville Show, said Mike Scheid, division general manager of Skyline’s plant in Leola, Pa.
The Shore Park is built in a manufactured housing plant and uses many of the components used in manufactured housing. For example, it’s one of a few manufacturers who use drywall inside their park models.
“We figured out a way to ship it without cracking,” he said.
He said his plant picked up eight to 10 new dealers at Louisville and business looks to be up 25% to 35% again this year. Canadian business also is growing, he added.
“We’re looking forward to gaining market share and upping our revenues,” he said.
Its plant location in Leola also helps keep freight costs down to customers in the Northeast, compared with the park model builders based in Northern Indiana, he said.
The Canterbury brand name has been in the industry since 1982 and today is manufactured by DNA Enterprises in Goshen, Ind. The company’s core product offering is 12-wide park models which come in three distinct price tiers, noted company spokesman Kevin Wells. The Bayview is the entry-level model, the full-featured Parkvue is for the upscale buyer and the Select is a custom-made product.
RVIA Smiling After Big Louisville Show
As WCM reported in its January issue, the Recreation Vehicle Industry Association (RVIA) came away from the 50th Annual National RV Trade Show held in Louisville, Ky., optimistic about the 10 park model manufacturers who exhibited 2013 product there.
For the first time, the builders were allowed to bid on space anywhere within the Kentucky Exposition Center.
Before 2012, the builders were limited to specific areas of the exhibition hall.
This was the first Louisville Show held since the Georgia-based Recreational Park Trailer Industry Association (RPTIA) was shelved and the bulk of its members invited to rejoin RVIA after a hiatus of more than a decade.
“The feeling was very positive. It goes to the whole notion they are part of the overall RVIA family again,” said Matt Wald, the RVIA’s recreational park trailer executive director. “Both psychologically and from the traffic flow, they felt it was a good deal for them.”
Other firms showing at Louisville were: Athens Park Homes/Champion, Breckenridge, Chariot Eagle, DNA Enterprises (Canterbury), Dutch Park Homes, Fairmont Homes, Kropf Industries Inc. and Woodland Park.
20 Park Model OEMs Join RVIA
On July 1, 2012, the RVIA created a new membership category for manufacturers of recreational park trailers, also known as park models. By year-end, 18 manufacturers, representing upward of 95% of annual park trailer production, had joined the RVIA, with two other applications pending inspection of their facilities.
“We had anticipated having 15 members; we have exceeded our expectations. Everybody is happy about that,” Wald said.
All but two of the new members were members of the RPTIA, which still exists, but in name only.
“A couple of OEMs are still not in the RVIA family, but we would love to have them aboard,” he said. “Some are waiting to see if this ‘marriage’ works before investing in it. We think it is a value proposition they can’t stay away from.”
A new page on the RVIA’s homepage at www.rvia.org pertains to recreational park trailers with a link to annual shipment figures and other information.
The industry is coming off a second straight year of little if any year-over-year growth, but Wald and others see a glimmer of hope in the future.
During the past year, Champion Homes purchased Athens Park Homes of Athens, Texas, and has begun to produce Athens Park product in Champion plants across the U.S., which Wald calls “a pretty significant entry into the park model side of the business.” This puts them in the same national markets with industry leaders Breckenridge and Cavco, Wald noted.
Aside from anecdotal evidence and monthly wholesale shipments, which RVIA tracks, Wald said major players told him following the Louisville Show their orders were solid. “With the economy turning the corner, it could be a good year in 2013. I would like to be cautiously optimistic and say I do not expect a drop-off in 2013. I’m expecting a ‘flat’ year but hoping for better,” he said.
Issues such as consumer confidence, the “fiscal cliff” and financing are beyond RVIA’s control, he noted, “but I think it’s fair to say this industry is solid and primed to grow, hopefully this year,” he said.
Cavco Industries Inc. announced on Thursday (Jan. 31) financial results for the third quarter and first nine months ended Dec. 29, 2012, of its fiscal year 2013.
Net sales for the third quarter of fiscal 2013 totaled $114.6 million, and mirrored the $114.6 million for the third quarter of fiscal year 2012. Net income for the fiscal 2013 third quarter was $3.0 million, compared to $3.0 million reported in the same quarter one year ago, according to a news release.
Net income attributable to Cavco stockholders for the fiscal 2013 third quarter was $1.5 million, compared to $1.7 million reported in the same quarter one year ago. Net income per share based on basic and diluted weighted average shares outstanding for the quarter ended Dec. 29, 2012 was $0.21, versus basic and diluted net income per share for the quarter ended Dec. 31, 2011, of $0.24.
The company has changed to a 52-53 week fiscal year ending on the Saturday nearest to March 31 of each year in order to improve the alignment of financial and business processes and to streamline financial reporting. This change is effective with the end of Cavco’s fiscal third quarter and nine months ended Dec. 29, 2012, which is comparable to the fiscal third quarter and nine months ended Dec. 31, 2011.
For the first nine months of fiscal 2013, net sales totaled $343.5 million, versus $343.6 million for the comparable prior year period. Net income attributable to Cavco stockholders for the first nine months of fiscal 2013 was $3.6 million compared to $13.6 million last year.
Net income attributable to Cavco stockholders for the nine months ended Dec. 31, 2011, included one-half (or approximately $11.0 million) of the bargain purchase gain recognized from the Palm Harbor transaction, which occurred on April 23, 2011. This bargain purchase gain allocation was consistent with Cavco’s ownership percentage of Palm Harbor.
For the nine months ended Dec. 29, 2012, net income per share based on basic and diluted weighted average shares outstanding was $0.51, versus basic and diluted net income per share of $1.98 and $1.96, respectively, for the prior year period.
Referring to the fiscal 2013 third quarter results, Joseph Stegmayer, chairman, president and CEO, said, “We are pleased with the continued contributions and progress of our acquired businesses. However, increasing homebuilding component and raw material costs, continued competitive pricing pressures, market demand for smaller and lower price-point homes and a higher income tax provision adversely affected our earnings during the quarter. The average sales price per home was approximately $50,100 during the third quarter of fiscal year 2013 compared to $53,200 during the third quarter last year, a 5.8% decrease. On a positive note, home sales increased this quarter to 2,065 homes, 4.7% higher than 1,972 homes sold during the same quarter last year.”
He concluded, “We continue to expand our presence in key markets in the United States and have made progress in other regions. Our financial services subsidiaries are broadening their product offerings to manufactured home buyers in current and new geographic areas, and continue to be solid contributors to our financial results. Rising apartment occupancy rates and higher rental costs should make affordable manufactured housing an increasingly attractive alternative for many people. As employment and consumer confidence levels improve, we anticipate rising demand for our homes.”
The popular Science Channel documentary, “How It’s Made,” will explore the merits of factory-built housing at 9 p.m. EST Dec. 13 when its viewers watch how Cavco Industries Inc. manufactures one of its factory-built homes, according to a news release.
“We see this as a great opportunity to showcase not only the quality, but the environmentally friendly nature of factory built housing,” said Tim Gage, vice president of Cavco’s park models, cabins and speciality products.
Factory-built homes can be built faster and with greater consistency in quality than site-built homes because they are designed, built and inspected in a factory setting with rigorous oversight throughout the construction process.
Factory-built homes are also more environmentally efficient than site-built homes, since the amount of wood trimmings and other building waste can be better controlled and even recycled in a factory setting.
The model featured on “How It’s Made” is available with solar panels on its roof, which are capable of producing 2 kilowatts of power. The unit also has a prototype backup propane generator, LED lighting, recycled lumber composite decking, on-demand water heating, energy-efficient heating and air-conditioning.
This isn’t the first time Cavco’s products have been featured on national television. Two years ago, HGTV’s “Extreme Makeover” program followed the assembly one of a modular home in Virginia Beach, Va. by Cavco’s Nationwide Homes subsidiary in Martinsville, Va.
Cavco Industries is one of the nation’s leading providers of manufactured, modular and park model homes, with manufacturing and distribution facilities across the United States. Cavco’s other subsidiaries include Fleetwood Homes and Palm Harbor Homes. For more information, visit www.cavco.com, www.parkmodels.com and www.nationwide-homes.com.
Phoenix-based Cavco Industries Inc. struggled on Wall Street last week after the release of some weak second-quarter earnings, which included a staggering 82% year-over-year drop in net income for the first half of the fiscal year, the Phoenix Business Journal reported.
Cavco, a builder of manufactured and modular homes, closed the trading day on Friday (Nov. 2) at $46.13 per share — down by nearly 8%, or $3.94 per share, from the previous day’s close. The 52-week range is $35.81 to $54.11 per share, according to Yahoo! Finance.
The drop in share price echoed the declines in net income, home sales and other earnings figures that Cavco reported Thursday for the second quarter ended Sept. 30.
Net sales of both factory-built homes and financial services, about $110 million, and net income, around $2.68 million, for the second quarter each saw a roughly 15% decline year-over-year, according to the earnings report.
The roughly 1,900 factory-built homes that were sold during the second quarter were also down from last year by almost 11%. However, Cavco sold about 4% more units during the first six months of its fiscal year than last year’s 3,998 units sold.
But the most glaring figure of Cavco’s earnings report is the whopping 82% decline in net income year-over-year during the first six months of the current fiscal year (April 1 to Sept. 30).
In actual numbers, that’s the difference between $4.3 million this year versus $23.86 million last year.
“We continue to operate in a challenging market environment where buyers of manufactured homes remain quite cautious in their purchasing decisions, and elevated unemployment and underemployment rates prevent access to financing for a significant number of potential home buyers,” Joseph Stegmayer, president and CEO of Cavco, said in the earnings report. “To counteract these challenges, we have continued to expand our sales in niche market areas including, among others: workforce housing, homes for rental use in planned communities, multifamily developments and camping cabins.”
Stegmayer said that while revenues were lower year-over-year, gross margins improved to more than 23% in the second quarter compared with 21.7% last year. He also explained reasons for the quarter’s weaker revenues.
“Adversely impacting the number of homes sold was a larger proportion of internally financed wholesale sales, up 49.8% this quarter versus the second quarter last year, resulting in delayed recognition of the related revenue,” he said. “The company also modestly grew the proportion of factory sales to company-owned stores, which defers revenue recognition until the home sale process to the consumer is complete.”
Cavco Industries Inc. today (Nov. 1) announced financial results for the second quarter and first six months ended Sept. 30, 2012, of its fiscal year 2013.
Net sales for the second quarter of fiscal 2013 totaled $110,084,000, down 15.3% from $130,008,000 for the second quarter of fiscal year 2012. Net income for the fiscal 2013 second quarter was $2,681,000, compared to $3,172,000 reported in the same quarter one year ago.
Net income attributable to Cavco stockholders for the fiscal 2013 second quarter was $1,254,000 compared to net income of $1,685,000 reported in the same quarter one year ago. Net income per share based on basic and diluted weighted average shares outstanding for the quarter was $0.18, versus basic and diluted net income per share for the quarter ended Sept. 30, 2011, of $0.24.
For the first six months of fiscal 2013, net sales totaled $228,865,000, versus $228,989,000 for the comparable prior year period. Net income attributable to Cavco stockholders for the first half of fiscal 2013 was $2,114,000 compared to $11,907,000 last year. Net income attributable to Cavco stockholders for the six months ended Sept. 30, 2011, included one-half (or approximately $11,005,000) of the bargain purchase gain recognized from the Palm Harbor transaction, which closed on April 23, 2011. This bargain purchase gain allocation was consistent with Cavco’s ownership percentage of Palm Harbor.
For the six months ended Sept. 30, 2012, net income per share based on basic and diluted weighted average shares outstanding was $0.30 versus basic and diluted net income per share of $1.73 and $1.72, respectively, for the prior year period.
Referring to the fiscal 2013 second quarter results, Joseph Stegmayer, chairman, president and CEO, said, “Net sales were lower for the second quarter of fiscal year 2013 compared to the same quarter in the prior year for various reasons. These include fewer homes sold this quarter, lower average sales prices from a product mix skewed toward lower price-point homes, and competitive pricing pressures. Adversely impacting the number of homes sold was a larger proportion of internally financed wholesale sales, up 49.8% this quarter versus the second quarter last year, resulting in delayed recognition of the related revenue, consistent with applicable accounting principles. The company also modestly grew the proportion of factory sales to company-owned stores, which defers revenue recognition until the home sale process to the consumer is complete.”
“Although revenue was lower, gross margins improved to 23.4% of net sales during the second quarter of fiscal 2013 compared to 21.7% in the second quarter of fiscal 2012. Improved production planning and operating efficiency made possible by more consistency in order backlogs during the quarter, helped drive the margin increase as a percentage of net sales,” Stegmayer continued.
“While we are pleased to report another profitable quarter for the company, we continue to operate in a challenging market environment where buyers of manufactured homes remain quite cautious in their purchasing decisions, and elevated unemployment and underemployment rates prevent access to financing for a significant number of potential homebuyers.
“To counteract these challenges, we have continued to expand our sales in niche market areas including, among others: workforce housing, homes for rental use in planned communities, multi-family developments, and camping cabins. The company’s acquisitions in recent years have helped successfully expand our competencies on numerous homebuilding platforms. As a result, Cavco is better prepared to take advantage of market opportunities as they develop. In addition, our financial services operations continued to be meaningful contributors to second quarter results,” Stegmayer concluded.
Looking to add some RVs or park models to your RV park?
The products manufactured by Cavco Industries Inc., Winnebago Industries Inc. and Thor Industries might be good choices, based on the decline in warranty costs at the three manufacturing firms in recent years.
The three companies fared well in a study conducted and published by Warranty Week. Click here to read the entire story.
In general, the magazine notes, warranty expense rates have been on a downward trend for most of the past decade. And most of the manufacturers are reducing their claims and accrual rates year after year. Some, however, continue to cut costs faster than their peers.
Among all the warranty providers, most are reducing the percentage of their revenue that’s consumed by warranty expenses. But which are reducing their claims and accrual rates the most? And which are doing it over the long term?
The good news is that American manufacturers have not only been reducing their warranty expenses and reporting the figures in their financial reports, but also that they’ve been reducing those expenses as a percentage of sales from one year to the next. That’s a big distinction, because during a deep recession warranty expenses will fall on their own, because there’s less business activity all around. The question is whether they snap back to where they were once that recession ends.
So far, that hasn’t happened. Warranty expenses are once again on the rise in 2012, but they’re not back to 2007-2008 levels, although in many cases sales are. The result is that American manufacturers are paying out the smallest share of sales revenue ever measured — roughly 1.3% — to cover warranty costs. And that’s a multi-year trend that began long before the recession.
Most Improved Companies of All
Overall, over the past decade, 32 companies got a perfect score: four claims rate reductions and four accrual rate reductions. Of those, 13 also made at least one of our top 10 lists. They include Cavco Industries Inc. and Winnebago Industries Inc. See chart below.
Among the 57 companies scoring five or six rate reductions out of a possible eight was Thor Industries Inc.
Cavco Industries Inc. today (Aug. 2) announced financial results for the first quarter ended June 30, 2012, of its fiscal year 2013.
Net sales for the first quarter of fiscal 2013 totaled $118,781,000, up 20.0 percent from $98,981,000 for the first quarter of fiscal year 2012. This quarter’s results are compared to the prior year quarter, which included only 68 days of post-Palm Harbor acquisition activity, as that transaction closed on April 23, 2011, according to a news release.
Net income for the fiscal 2013 first quarter was $1,618,000, compared to $20,688,000 reported in the same quarter one year ago. As previously reported, included in net income for the first quarter of fiscal 2012 was a gain on bargain purchase of $22,009,000, as adjusted, resulting from the Palm Harbor transaction, calculated in accordance with the accounting standards for business combinations.
Net income attributable to Cavco stockholders for the fiscal 2013 first quarter was $860,000 compared to net income of $10,222,000 reported in the same quarter one year ago. Net income attributable to Cavco stockholders for the quarter ended June 30, 2011, includes one half of the bargain purchase gain recognized, consistent with Cavco’s ownership percentage of Palm Harbor. Net income per share based on basic and diluted weighted average shares outstanding for the quarter ended June 30, 2012, was $0.12, versus basic and diluted net income per share for the quarter ended June 30, 2011, including the effect of the bargain purchase gain, of $1.49 and $1.48, respectively.
Referring to the quarter results, Dan Urness, vice president and CFO, said, “Gross profit as a percentage of net sales increased 4.0 percent to 20.3 percent for the first quarter of fiscal 2013 versus 16.3 percent for the same quarter in the prior year. The increase is primarily attributable to having the full quarter benefit of the generally higher margin Palm Harbor retail and finance businesses versus a partial quarter last year, given the transaction closing date of April 23, 2011. We also benefited from production overhead leverage on higher revenue. The margin improvement was partially offset by a larger mix of lower price-point homes.”
Commenting on the first quarter of fiscal year 2013, Joseph Stegmayer, chairman, president and CEO, said, “Manufactured home industry unit shipments increased 24.8 percent during the period from January to May 2012 compared to the same period in the prior year. While welcomed, the percent improvement is calculated from historically low industry shipment levels. Intense competition for home sales within our underutilized industry and ongoing economic turmoil continue to be challenging. In order to succeed in this difficult market environment, our homebuilding activities remain focused on producing high quality homes that incorporate flexible housing designs to fit homebuyer interests, establishing and maintaining strengths in niche market areas and striving to provide excellent service after the sale of each home.”
Two major RV shows unfold in September – one is “America’s Largest RV Show” and runs Sept. 10-16 at the Giant Center in Hershey, Pa., the other has become known as the “Elkhart Open House” and follows on Hershey’s coattails the following week at multiple sites in the RV building hub of Elkhart County in Northern Indiana.
Combined, these two shows give consumers, dealers and campground owners a thorough look at new products for 2013.
At last count, 45 manufacturers had signed on to display some 1,000 new models at Hershey show and the combination dealer and retail show is still growing.
“I expect to sell out shortly, as I am working with five manufacturers currently,” said Rebecca Lenington, executive vice president of the Pennsylvania RV and Camping Association (PRVCA), the show sponsor. “Manufacturer space is currently 5.59 percent over 2011 and booth vendor space is 8.7 percent over 2011 for a total of 5.75 percent over 2011.”
The vendor count is 165 companies and space was virtually sold out.
Elkhart Open House
Meanwhile, the Elkhart Open House, spawned by Forest River Inc. five years ago at the start of the Great Recession and then buoyed in subsequent years by Thor Industries Inc., features a look at new products made in the Elkhart/LaGrange County area of Northern Indiana by these and many other leading OEMs. The Open House, open only to dealers, extends over much of the week, although Tuesday through Thursday (Sept. 18-20) will be the key days among the industry’s major exhibitors.
Both Forest River and Thor are planning to locate their product displays in the same locations as last year’s Open House, which drew more than 3,000 U.S. and Canadian dealer personnel to the streets, factories and open roadside lots of area Hoosier communities like Elkhart, Middlebury, Wakarusa and Shipshewana, RVBUSINESS.COM reported.
Thor’s six RV-building divisions are to be located on the grounds of the RV/MH Hall of Fame, while Forest River’s varied business units will be positioned in and around the grounds of Forest River’s Dynamax facility on C.R. 6 – about three miles apart from each other. Again this year, shuttle buses will ferry dealers back and forth between the two larger displays.
Having said that, the management teams of both companies apparently are looking for another good year of Open House festivities, a rare combination of serious business and social time that tends to cultivate sales as well as build relationships between dealers and manufacturers for the year ahead.
“For this year, we’re looking for more of the same – if not bigger,” says Bob Martin, president of Thor’s RV Group, headquartered in Jackson Center, Ohio. “Based on dealer reaction at Louisville, dealers that weren’t able to make the Open House last year had commented that this year they definitely would make it to the Open House. For us, it’s a great opportunity. We can simply show more product (versus a typical convention) and it’s a little bit more laid back atmosphere.”
Jeff Babcock, a general manager for Elkhart-based Forest River, also sees some changes in the works with regard to a “tighter” layout for this year’s exhibitors that should make it easier for some of Forest River’s and Thor’s competitors to “set up camp” in more amenable locations. This would answer one of the chief drawbacks to the Open House for some of the exhibiting companies who want better and more accessible locations.
“I think that this year is going to be even better than last year,” adds Babcock. “This thing’s taken on a life of its own. I think we’re going to have more participation from other manufacturers outside Indiana and Michigan”
“I mean, I think this thing is going to be bigger than it ever has been before, but that just follows suit from the last four years,” he noted. “Every year this goes on, it just gets bigger and bigger, and we’re expecting this year’s Open House to be our best year yet.”
The Elkhart Open House has gained traction among RV dealers since Forest River President and CEO Pete Liegl created the event in 2008. As other manufacturers have piled on, it has grown into a major showcase.
Elkhart, Ind.-based real estate firm Northland Corp. is leasing prime location sites during the Open House to several other RV manufacturers.
Most of the lots – ranging from one to two acres – will occupy pockets along C.R. 6, a busy east-west artery on the north side of Elkhart. Importantly, the sites will run between the focal points for the event. Other RV firms have arranged to show their 2013 product at locations along the C.R. 6 corridor.