PHOENIX, Ariz. — Cavco Industries Inc. has announced financial results for the second fiscal quarter ended September 29, 2018.
Net revenue for the second quarter of fiscal year 2019 totaled $241.5 million, up 20.4 percent from $200.5 million for the second quarter of fiscal year 2018. Net revenue for the first six months of fiscal 2019 was $487.9 million, a 19.8 percent increase from $407.3 million in the comparable prior year period. The increases were primarily from higher home selling prices from input cost inflation, modestly larger home sizes and improved home sales volume. Net revenue for the three and six months ended September 29, 2018 includes subcontracted pass-through services of $6.2 million and $12.8 million, respectively, which are now recognized on a gross basis rather than net of associated costs.
Income before income taxes was $19.5 million for the second quarter of fiscal year 2019, a 129.4 percent increase from $8.5 million in the comparable quarter last year. For the first six months of fiscal 2019, income before income taxes increased 80.6 percent to $43.7 million from $24.2 million in the prior year period. The prior year’s second fiscal quarter was adversely impacted by Hurricane Harvey, which resulted in significant homeowners’ insurance claims in our financial services segment and caused delays in manufacturing and retail sales, as well as new home inventory damage at certain company-owned retail centers. While not as severe, during the second quarter of fiscal year 2019, financial services results were adversely impacted by a windstorm in Arizona, which resulted in increased homeowners’ insurance claims for the period. The Company’s insurance subsidiary maintains reinsurance for loss events in excess of $1.5 million.
Income before income tax for the first six months of fiscal year 2019 also included a benefit of $1.1 million from unrealized gains on corporate investments recorded in other income, net. These unrealized gains were from this fiscal year’s implementation of new accounting standards requiring unrealized gains and losses to be reported on the Consolidated Statement of Comprehensive Income instead of recording these amounts in accumulated other comprehensive income on the Consolidated Balance Sheet.
Income tax expense was $3.9 million, resulting in an effective tax rate of 20.2% for the second quarter of fiscal year 2019 compared to $2.3 million and an effective tax rate of 27.3 percent in the same quarter of the prior year. For the six months ended September 29, 2018, income tax expense was $8.4 million, resulting in an effective tax rate of 19.2%. Income tax expense was $6.2 million with an effective rate of 25.7 percent for the prior six month period.
The Tax Cuts and Jobs Act (the “Tax Act”), which was enacted on December 22, 2017, reduced the federal corporate tax rate to 21 percent for our fiscal year ending March 30, 2019. Income tax expense also includes a benefit of $1.1 million and $2.3 million for the three and six months ended September 29, 2018, respectively, related to excess tax benefits from exercises of stock options, compared to a benefit of $300,000 and $1.7 million in the comparable prior year periods, respectively.
Net income was $15.6 million for the second quarter of fiscal year 2019, compared to net income of $6.2 million in the same quarter of the prior year, a 151.6 percent increase. For the six months ended September 29, 2018, net income was $35.3 million, up 97.2 percent from net income of $17.9 million in the prior year period. Diluted net income per share was $1.67 and $3.80 for the three and six months ended September 29, 2018, respectively, compared to $0.67 and $1.96 for the comparable periods last year.
Commenting on the quarter, Daniel Urness, president and scting CEO said, “We are pleased to report positive financial results for the quarter. Improvements in economic measures including increased consumer confidence, low unemployment and growth in jobs and wages have continued to support the home-buying ability of our customers. We are working to further increase manufactured home production volume through investments in home-building capabilities, processes, labor recruitment and employee retention efforts. Production staff training and quality assurance are also significant areas of focus given our diverse home product offerings and reputation for high standards of quality. Further, we believe that rising site-built housing prices, residential rent and interest rates make our high value, precision built homes increasingly sought after as an attractive affordable housing solution.”
Urness also noted, “We were saddened by the harm inflicted by Hurricanes Florence and Michael in the Southeastern United States. Our operations were fortunately outside of the paths of the storms. We stand ready to meet the need for new homes that may result as the impacted areas rebuild. Additionally, we are willing and able to assist in building units for disaster relief, should the need arise.”
SOURCE: Cavco press release