<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1996
Commission File Number 0-8822
Cavco Industries, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Arizona 86-0214910
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
301 East Bethany Home Road, Suite C-178 Phoenix, Arizona 85012
- --------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (602) 265-0580
-------------------
n/a
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Class Shares Outstanding
----- ------------------
Common Stock, $.05 Par Value 3,382,977
<PAGE> 2
CAVCO INDUSTRIES, INC. AND SUBSIDIARIES
Index
Page No.
PART I. Consolidated Financial Information --------
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 1996 and September 30, 1995 3-4
Consolidated Statements of Earnings
Three months and nine months ended June 30, 1996 and 1995 5
Consolidated Statements of Cash Flows
Nine months ended June 30, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 8-10
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K 11
2
<PAGE> 3
CAVCO INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
Assets
<TABLE>
<CAPTION>
June 30, September 30,
1996 1995
----------- -------------
<S> <C> <C>
Current Assets
Cash $ 3,442,460 $ 8,140,730
Accounts and notes receivable 11,533,780 4,185,533
Inventories
Manufacturing:
Raw materials 3,280,946 2,971,581
Work in process 845,548 807,949
Held for sale or lease 27,800 80,438
Real estate held for sale 6,931,423 6,133,089
----------- -----------
Total inventories 11,085,717 9,993,057
----------- -----------
Prepaid expenses 502,010 834,713
Deferred tax charge 552,981 552,981
----------- -----------
Total current assets 27,116,948 23,707,014
----------- -----------
Property, plant and equipment, at cost 15,280,552 14,285,539
Less accumulated depreciation 5,512,654 4,666,351
----------- -----------
Net property, plant and 9,767,898 9,619,188
equipment ----------- -----------
Assets under lease 19,394,552 14,285,700
Less accumulated depreciation 1,113,705 596,007
----------- -----------
Net assets under lease 18,280,847 13,689,693
----------- -----------
Notes receivable, net of current portion 1,486,369 1,162,415
Investment in partnerships 2,896,927 2,534,703
Other assets 666,289 1,098,926
=========== ===========
$60,215,278 $51,811,939
=========== ===========
</TABLE>
3
<PAGE> 4
CAVCO INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
Liabilities and Stockholders' Equity
<TABLE>
<CAPTION>
June 30, September 30,
1996 1995
----------- -------------
<S> <C> <C>
Current liabilities
Notes payable $ 1,034,158 1,022,864
Current installments of long term 3,241,041 2,444,248
debt
Accounts payable 5,090,422 5,009,125
Accrued expenses 8,124,970 6,939,129
Income taxes 805,184 42,418
----------- ----------
Total current liabilities 18,295,775 15,457,784
----------- ----------
Long term debt, excluding current 13,522,816 12,692,661
installments
Deferred taxes and other liabilities 1,928,307 1,278,299
Stockholders' equity:
Common stock, $.05 par value;
8,000,000 shares authorized;
3,382,977 shares issued and
outstanding 169,149 169,149
Capital in excess of par 312,054 312,054
Retained earnings 25,987,177 21,901,992
----------- ----------
Net stockholders' equity 26,468,380 22,383,195
=========== ==========
$60,215,278 51,811,939
=========== ==========
</TABLE>
4
<PAGE> 5
CAVCO INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
<TABLE>
<CAPTION>
Three Month Period Nine Month Period
Ended June 30, Ended June 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales 33,016,732 25,683,252 97,047,502 83,749,969
Cost of sales 27,085,791 21,768,451 78,505,064 68,909,972
----------- ----------- ----------- -----------
Gross profit 5,930,941 3,914,801 18,542,438 14,839,997
Selling, general and
administrative expenses 3,604,760 2,864,608 10,654,879 9,329,527
----------- ----------- ----------- -----------
Operating income 2,326,181 1,050,193 7,887,559 5,510,470
Other income (expense)
Interest income 118,369 59,880 332,467 217,973
Interest expense (391,471) (308,873) (1,153,078) (631,079)
Miscellaneous 334,046 4,052 437,863 84,638
----------- ----------- ----------- -----------
60,944 (244,941) (382,748) (328,468)
----------- ----------- ----------- -----------
Income from continuing
operations before income
taxes 2,387,125 805,252 7,504,811 5,182,002
Income taxes 962,200 283,400 3,001,700 2,036,400
----------- ----------- ----------- -----------
Income from continuing
operations 1,424,925 521,852 4,503,111 3,145,602
Discontinued operations
[see Note 4]:
Loss from
discontinued
operations (50,544) (27,828) (174,855) (263,084)
Loss on sale /
disposal of
Action (243,071) -- (243,071) --
----------- ----------- ----------- -----------
Net income 1,131,310 494,024 4,085,185 2,882,518
=========== =========== =========== ===========
Income per share from
continuing operations .41 .16 1.32 .93
=========== =========== =========== ===========
Loss per share from
discontinued operations (.01) (.01) (.05) (.08)
=========== =========== =========== ===========
Loss per share from sale
/ disposal of Action (.07) -- (.07) --
=========== =========== =========== ===========
Net income per share .33 .15 1.20 .85
=========== =========== =========== ===========
</TABLE>
5
<PAGE> 6
CAVCO INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Nine Months Ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Net cash provided by (used in) operations $ 877,505 (3,165,694)
Cash flows from investing activities:
Purchases of property, plant and
equipment (1,288,170) (2,019,325)
Purchases of assets under lease (6,694,052) (9,427,281)
Proceeds from sales of assets under
lease and property, plant and
equipment 1,114,470 777,064
Proceeds from collections on notes
receivable 1,190,186 1,388,239
Additions to notes receivable (616,117) --
Additions to investment in partnerships (798,334) (1,195,230)
----------- -----------
Net cash used in investing
activities (7,092,017) (10,476,533)
----------- -----------
Cash flows from financing activities:
Borrowings under lines of credit 2,608,996 7,367,792
Repayments on lines of credit (2,597,702) (7,958,241)
Proceeds from long term borrowings 4,000,000 8,000,000
Repayment of long term debt (2,495,052) (529,438)
----------- -----------
Net cash provided by financing
activities 1,516,242 6,880,113
----------- -----------
Decrease in cash (4,698,270) (6,762,114)
Cash at beginning of period 8,140,730 9,006,600
----------- -----------
Cash at end of period $ 3,442,460 2,244,486
=========== ===========
Supplemental disclosure of cash flow
information:
Cash paid during the period for -
Interest $ 1,212,812 708,774
=========== ===========
Income taxes $ 1,721,834 4,541,233
=========== ===========
</TABLE>
6
<PAGE> 7
CAVCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements include the accounts of the Company
and its subsidiaries, Action Healthcare Management Services, Inc. (Action),
Sun Built Homes, Inc. (Sun Built) and National Security Containers, Inc.
(NSC).
The information reflected in the consolidated financial
statements has not been examined by independent accountants and necessarily
in some respects is based upon estimates which are subject to adjustment in
annual closing of accounts.
In the opinion of the Company, all adjustments (consisting of only normal
recurring adjustments and primary eliminations of all significant
intercompany transactions) necessary to present fairly the financial
position and results of operations and cash flows for the periods presented
have been included.
These financial statements have been prepared in accordance with the
instructions to the Form 10-Q and therefore do not include all information
and footnotes necessary for a fair presentation in conformity with
generally accepted accounting principles. These financial statements should
be read in conjunction with the financial statements and related
disclosures contained in the Corporation's Annual Report on Form 10-K for
the year ended September 30, 1995, filed with the Securities and Exchange
Commission.
2. The number of shares used in computing earnings per common share for all
periods presented, based on the weighted average number of shares
outstanding, was 3,382,977. The number of shares reflects a three-for-two
stock split which occurred in December 1994.
3. The results of operations for the nine month period ended June 30, 1996 are
not necessarily indicative of the results to be expected for the full year.
4. In June 1996, the Company made a decision to divest itself of its Action
subsidiary. Certain items on the statement of earnings for the three month
and nine month periods ended June 30, 1995 have been reclassified to
reflect the elimination of the discontinued operations. Discontinued
operations on the statements of earnings reflect results of Action and CVC
Leasing, which was sold in August 1994. The statements also reflect the
expected loss to be incurred upon the sale or disposal of Action. This loss
is accrued and reflected in other liabilities on the consolidated balance
sheet. A summary of discontinued operations follows:
<TABLE>
<CAPTION>
3 mos-1996 3 mos-1995 9 mos-1996 9 mos-1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Loss from operations of
discontinued CVC (4,425) (8,640) (23,098) (334,820)
Less applicable tax credit 9,300 3,500 9,300 134,000
Loss from operations of
discontinued Action (92,619) (38,388) (268,857) (104,464)
Less applicable tax credit 37,200 15,700 107,800 42,200
-------- ------- -------- --------
Loss from discontinued (50,544) (27,828) (174,855) (263,084)
operations ======== ======= ======== ========
Loss on sale of Action,
including provision of
$65,445 for operating losses
during phase-out period,
less applicable tax
credit of $162,100 (243,071) -- (243,071) --
======== ======= ======== ========
</TABLE>
7
<PAGE> 8
CAVCO INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
THIRD QUARTER 1996 COMPARED TO THIRD QUARTER 1995
Below is a summary of third quarter operating results by business segment.
<TABLE>
<CAPTION>
Manufacturing Leasing
1996 1995 1996 1995
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Net Sales 31,338,060 24,474,728 1,678,672 1,208,524
Cost of Sales 26,032,072 21,141,316 1,053,719 627,135
----------- ----------- ---------- ----------
Gross Margin 5,305,988 3,333,412 624,953 581,389
S, G & A Expenses 2,827,583 2,350,459 777,177 514,149
----------- ----------- ---------- ----------
Profit (Loss) from Ops 2,478,405 982,953 (152,224) 67,240
----------- ----------- ---------- ----------
Other Income (Expense):
Interest Income 46,264 1,975 72,105 57,905
Interest Expense (165,648) (243,079) (225,823) (65,794)
Miscellaneous 331,808 73,264 2,238 (69,212)
----------- ----------- ---------- ----------
212,424 (167,840) (151,480) (77,101)
----------- ----------- ---------- ----------
Pretax Earnings (Loss) 2,690,829 815,113 (303,704) (9,861)
=========== =========== ========== ==========
</TABLE>
Manufacturing:
Sales for the third quarter increased $6,863,332, a 28 percent over the prior
year. Gross margins in 1996 returned to a more favorable level, 16.9%, compared
to 13.6% in 1995. During this quarter in 1995 the Company had a special seasonal
sales promotion on some low margin models. Selling, general and administrative
expenses continue to decrease as a percent of sales, as the Company strives to
control these costs. Interest income increased as the Company generated bank
interest from investment of short term funds. The Company was also able to
reduce its interest expense, as it did not need to draw on its line of credit.
Miscellaneous income reflects a $271,888 net gain recognized on a sale of
marketable securities.
Leasing:
Revenues in the leasing segment increased $470,148 from 1995, reflecting a 39
percent increase. The overall revenue increase resulted from expanded lease
fleet. Gross margins for the quarter decreased from 48.1% in 1995 to 37.2 % in
1996. Gross margins are influenced by the level of sales during the period.
Sales of units typically provide lower gross margins than rental income. In
1996, revenues included approximately $478,000 of sales, compared to $292,000 in
1995. In addition, 1996 margins were negatively affected by lower fleet
utilization rates, due primarily to the growth of the lease fleet. In November
1995, NSC purchased a large quantity of containers from a company, which were on
lease at the time of acquisition but were returned to fleet in January 1996.
Selling, general and administrative expenses increased due to the addition of
three new branches. Interest income resulting from finance lease sales increased
during the quarter. The $160,029 increase in interest expense is due to
$4,000,000 of additional debt incurred to fund expansion of the lease fleet.
Miscellaneous income for 1996 compares favorable to the expense shown for the
same period last year, which included losses on sales of trucks, as the Company
replaced its fleet of delivery vehicles.
8
<PAGE> 9
CAVCO INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
(continued)
Overall:
In 1996, net income from continuing operations was $1,424,925, or $.41 per
share, compared to $521,852, or $.16 per share in 1995. Discontinued operations
provided losses of $293,615 ($.08 per share) in 1996 and $27,828 ($.01 per
share) in 1995. Net income for the quarter was $1,131,310, or $.33 per share,
compared with $494,024, or $.15 per share for the prior year. Increased sales
volumes, improved gross margins and continued cost control led to the improved
earnings.
NINE MONTHS 1996 COMPARED TO NINE MONTHS 1995
Below is a summary of operating results by business segment for the nine months
ended June 30.
<TABLE>
<CAPTION>
Manufacturing Leasing
1996 1995 1996 1995
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Net Sales 90,888,162 80,049,213 6,159,340 3,700,756
Cost of Sales 75,012,401 66,884,760 3,492,663 2,025,212
----------- ----------- ---------- ----------
Gross Margin 15,875,761 13,164,453 2,666,677 1,675,544
S, G & A Expenses 8,449,967 7,877,457 2,204,912 1,452,070
----------- ----------- ---------- ----------
Profit (Loss) from Ops 7,425,794 5,286,996 461,765 223,474
----------- ----------- ---------- ----------
Interest Income 127,686 38,257 204,781 179,716
Interest Expense (477,851) (565,285) (675,227) (65,794)
Miscellaneous 423,810 133,074 14,053 (48,436)
----------- ----------- ---------- ----------
Other Income (Expense) 73,645 (393,954) (456,393) 65,486
----------- ----------- ---------- ----------
Pretax Earnings (Loss) 7,499,439 4,893,042 5,372 288,960
=========== =========== ========== ==========
</TABLE>
Manufacturing:
Year to date sales for 1996 increased $10,838,949, or 13.5 percent over the same
period for 1995. The increase is a result of continued growth experienced in the
industry. Gross margins improved to 17.5 percent compared to 16.5 percent in
1995, as the Company focused efforts on cost control. Selling, general and
administrative expenses have decreased as a percent of sales. Interest income
and interest expense both took favorable turns, with the Company able to take
advantage of improved cash flow. In 1996, miscellaneous income reflected an
increase of $290,736. During the year the Company sold an investment in
marketable securities for a net gain of $271,888.
Leasing:
Total revenues in the leasing segment increased $2,458,584 between 1996 and
1995, reflecting 66 percent growth. Growth occured in both sales and leasing
areas. The Company opened three new branch locations and closed two others
during fiscal 1996. The new locations contributed approximately $421,000 of
revenues. The Company is now better positioned in regions with forecasted
industry growth. Gross margins are relatively comparable between years (43.3%
for 1996, 45.3% for 1995). Selling, general and administrative expenses
increased due to the three new branches, but show a favorable decline as a
percent of sales. The $609,433 increase in interest expense is due to $4,000,000
in additional borrowings needed to expand the Company's lease fleet.
9
<PAGE> 10
CAVCO INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
(continued)
Overall:
In 1996, net income from continuing operations was $4,503,111, or $1.32 per
share, compared to $3,145,602, or $.93 per share in 1995. Discontinued
operations provided losses of $417,926 ($.12 per share) in 1996 and $263,084
($.08 per share) in 1995. Net income for the nine months was $4,085,185, or
$1.20 per share, compared with $2,882,518, or $.85 per share for the prior year.
Increased sales volumes, improved gross margins and continued cost control led
to the improved earnings.
The Company has focused its efforts to develop and enhance its core businesses:
manufacturing and leasing. We are poised to take advantage of favorable industry
trends. We plan to increase and diversify our manufacturing capabilities during
1997 and investigate opportunities for adding additional facilities. We continue
to expand our lease fleet in our present locations and evaluate locations for
new leasing offices.
LIQUIDITY AND CAPITAL RESOURCES
The Company finished the nine months ended June 30, 1996 with cash of $3,442,460
and working capital of $8,821,173. On an interim basis, the Company uses
internally generated funds for the expansion of the lease fleet, which causes
fluctuations in cash and working capital. To help fund the $6.7 million in lease
fleet purchases, the Company borrowed $800,000 from its corporate lines of
credit to temporarily meet capital needs. The Company received $4,000,000 in
proceeds from its long term lending source. The Company will use this finance
source to continue to expand the lease fleet throughout the remainder of the
year and into next year. Overall during the nine month period, the Company
borrowed $6,608,996 from lines of credit and long term debt and repaid
$5,092,754.
In addition to approximately $6.7 million spent in lease fleet expansion, the
Company also spent approximately $1.2 million on additions to property, plant
and equipment. Approximately $565,000 was invested in land and building
construction for one of the leasing locations. Another $212,000 was used to
upgrade the manufacturing facility for NSC, and slightly over $150,000 was
invested in computer equipment and software. The Company invested another
$798,000 into various opportunities for developing a manufactured housing
subdivisions. The Company increased its finance lease and notes receivable by
$616,000 and collected $1.2 million on notes receivable during the period.
During the past several years, inflation has not had a significant impact on the
Company's operations. The Company has demonstrated its ability to reduce the
manufacturing costs of its products through engineering changes and effective
price negotiations, and has been able to adjust the selling price of its
products in reaction to changing prices.
Except for expansion of the lease fleet, capital expenditures for the remainder
of the year are expected to be only those necessary for normal replacement of
machinery and equipment. The Company believes that its existing cash, available
line of credit, and cash generated from operations will be sufficient to meet
capital expenditure and debt service requirements.
10
<PAGE> 11
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
EX-27 Financial Data Schedule - Nine months ended June 30, 1996
(b) Reports on Form 8-K
The Company did not file any Form 8-K's during the quarter ended June
30, 1996.
There has not been any additional information with respect to items listed in
the Index, related to the periods being reported, which has not been previously
reported or which, in the opinion of management, is of significance to the
investors.
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Cavco Industries, Inc.
-----------------------------------------
(Registrant)
Date August 9, 1995 /s/ Robert Ward
-----------------------------------------
(Signature)
Robert Ward, Vice President, Treasurer
and Chief Financial Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENT OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FORM 10-Q FOR QUARTER ENDED JUNE 30, 1996.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 3,442,460
<SECURITIES> 0
<RECEIVABLES> 11,696,791
<ALLOWANCES> 163,011
<INVENTORY> 11,085,717
<CURRENT-ASSETS> 27,116,948
<PP&E> 15,280,552
<DEPRECIATION> 5,512,654
<TOTAL-ASSETS> 60,215,278
<CURRENT-LIABILITIES> 18,295,775
<BONDS> 13,522,816
0
0
<COMMON> 169,149
<OTHER-SE> 26,299,231
<TOTAL-LIABILITY-AND-EQUITY> 60,215,278
<SALES> 92,782,863
<TOTAL-REVENUES> 97,047,502
<CGS> 76,390,783
<TOTAL-COSTS> 78,505,064
<OTHER-EXPENSES> 10,654,879
<LOSS-PROVISION> 163,011
<INTEREST-EXPENSE> 1,153,078
<INCOME-PRETAX> 7,504,811
<INCOME-TAX> 3,001,700
<INCOME-CONTINUING> 4,503,111
<DISCONTINUED> (417,926)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,085,185
<EPS-PRIMARY> 1.20
<EPS-DILUTED> 1.20
</TABLE>
