CAV Cavalier Homes

Cavalier Homes, Inc. (Amex:CAV) today announced financial results for the second quarter and six months ended July 2, 2005. A summary of the Company's report follows (in thousands, except per share amounts): -0- *T Second Quarter Ended Six Months Ended --------------------- ---------------------- July 2, June 26, July 2, June 26, 2005 2004 2005 2004 --------- --------- --------- --------- Revenue $ 59,290 $ 53,867 $ 116,968 $ 98,121 ========= ========= ========= ========= Income (loss) before income taxes 706 (839) (1,838) (2,843) Income tax provision (benefit) 56 9 (85) 9 Equity in earnings of equity-method investees 119 249 368 371 --------- --------- --------- --------- Net income (loss) $ 769 $ (599) $ (1,385) $ (2,481) ========= ========= ========= ========= Net income (loss) per share, basic and diluted $ 0.04 $ (0.03) $ (0.08) $ (0.14) ========= ========= ========= ========= Weighted average shares outstanding: Basic 18,036 17,895 18,034 17,800 ========= ========= ========= ========= Diluted 18,229 17,895 18,034 17,800 ========= ========= ========= ========= *T Commenting on the results, David Roberson, President and Chief Executive Officer, said, "Although market conditions remain challenging, we are pleased the Company reported continued progress in building revenue in the second quarter. Cavalier also benefited from certain gains during the quarter on the sale of real property, primarily related to our recently closed plant in Fort Worth, Texas. These results track with our previously expressed expectations and further demonstrate the success we have achieved in removing excess capacity and costs from our operations. "Home manufacturing sales and floor shipments in the second quarter, while higher on a year-over-year basis, did not increase at the same pace as the first quarter due in part to the closing of our Fort Worth plant, which contributed about 10% of our home manufacturing sales and floor shipments in the second quarter last year and approximately 5% of the same in the first quarter of 2005," Roberson continued. "On the other hand, it was our only unprofitable home manufacturing plant operating in 2004, so even with some trailing expenses in the second quarter related to the closing, our gross profit and the level of our selling, general and administrative expenses to revenue improved against both the second quarter last year and the first quarter of 2005." Roberson noted that revenue gains for the first half of the year may not be indicative of those of last half of the year due to the unusually weak first quarter of 2004. "Looking ahead, we know the growth of industry shipments continues to be restrained by inadequate lending sources for both wholesale and retail sales," Roberson added. "However, we are hopeful to remain profitable during the second half of the year even without any FEMA shipments in our plan for 2005, which provided a significant boost to our home manufacturing sales in the last half of 2004. This optimism is based in part on expected margin improvement versus the first half of the year, as higher selling prices begin to catch up with the rapid cost increases we experienced, as we continue to eliminate trailing costs from the Fort Worth plant, and with the conclusion of first-half product promotions. Moreover, the steps we have taken to improve our products, cost structure, and efficiency have positioned us to be more competitive in this environment, and to participate fully in the expansion that will occur if and when additional financing capacity develops." Revenue for the second quarter increased 10% from the same period last year. The increase reflected primarily higher home manufacturing sales - the largest component of revenue, which rose 9% to $55,863,000 for the quarter versus $51,226,000 for the second quarter of 2004. Floor shipments increased 4% to 2,690 floors in the second quarter of 2005 versus 2,579 floors in the same period last year. Revenue from retail sales for the second quarter totaled $2,646,000, up 35% from the year-earlier quarter, primarily because of the addition of one new retail location during the past year. Financial services revenue increased 15% in the second quarter to $781,000. Gross profit for the second quarter increased 7% or $621,000 to $9,340,000 from $8,719,000 due to higher shipment volume for the period. Gross margin for the second quarter declined to 15.8% versus 16.2% in the same quarter last year, primarily because of continued increases in raw material costs. However, the Company's gross profit improved on a sequential basis from 14.4% in the first quarter of 2005. During the second quarter, selling, general and administrative expenses declined $939,000 to $8,340,000 from $9,279,000 in the year-earlier period, primarily reflecting gains of approximately $578,000 on the sales of property in Fort Worth and two previously closed retail locations. The decline also reflected the ongoing elimination of trailing costs from closed facilities. Selling, general and administrative expenses were 14% of revenue in the second quarter of 2005 versus 17% in the second quarter of 2004. The Company had impairment charges for severance benefits totaling $98,000 in the second quarter of 2005 associated with the Fort Worth plant closing, but did not incur any impairment charges in the year-earlier period. Cavalier's revenue for the first half of 2005 rose 19% compared with the first half of 2004. Home manufacturing sales increased 19% to $111,217,000 for the year-to-date period versus $93,408,000 in the same period last year. First half shipments rose 17% to 5,514 floors compared with 4,699 floors in the first six months of 2004. Revenue from retail sales in the first six months of 2005 was $4,457,000, up 28% from the year-earlier period, and primarily reflected the contribution of one new retail location opened during the past year. Financial services revenue in the first half of 2005 increased 6% to $1,294,000. Gross profit for the first half of 2005 increased 8% or $1,352,000 to $17,663,000 from $16,311,000 on higher shipment volume. Gross margin for the first six months of 2005 declined to 15.1% versus 16.6% in the same period last year, primarily because of higher raw material costs, production inefficiencies associated with the closing of the Company's plant in Fort Worth, and costs related to product promotions in the first half of 2005. During the first half of 2005, selling, general and administrative expenses declined 3% to $18,189,000 from $18,656,000 in the year-earlier period, mainly reflecting the impact of second-quarter gains from the sale of real estate. Selling, general and administrative expenses were 16% of revenue in the first half of 2005 versus 19% of revenue in the first half of 2004. Impairment charges, associated with the closing of the Company's Fort Worth plant, totaled $1,021,000 for the first six months of 2005; there were no impairment charges in the year-earlier period. Mike Murphy, Cavalier's Chief Financial Officer, added comments on the Company's financial position. He noted that Cavalier ended the second quarter with cash totaling $19,033,000 versus $17,821,000 at the same time last year, even as increasing volume resulted in higher levels of accounts receivable and inventories. The combined total for accounts receivable and inventory at the end of the second quarter was $29,492,000 versus $25,058,000 at the end of the second quarter of 2004. Currently, the Company has $4,340,000 outstanding under the $10,000,000 real estate portion of its bank credit facility, which matures in 2017. During the quarter, Cavalier used $2,350,000 of the proceeds from the sale of real estate to reduce the outstanding amount under this portion of the facility. None of the $25,000,000 revolving line of credit component of the bank credit facility was outstanding at quarter's end, and $7,991,000 of this amount was currently available based on underlying collateral. Cavalier Homes, Inc. and its subsidiaries produce, sell, and finance manufactured housing. The Company markets its homes primarily through independent dealers, including exclusive dealers that carry only Cavalier products, and provides financial services primarily to retail purchasers of manufactured homes sold through its dealer network. A public, listen-only simulcast of Cavalier Homes' second quarter conference call will begin at 9:30 a.m. Eastern Daylight Time tomorrow (August 11, 2005) and may be accessed via the Company's web site, www.cavhomesinc.com, or at www.viavid.com. Investors are invited to access the simulcast at least 10 minutes before the start time in order to complete a brief registration form. A replay of this call will be available shortly after the call using this same link and will continue until September 11, 2005. With the exception of historical information, the statements made in this press release, including those containing the words "think" and "believe," and words of similar import, and those relating to industry trends and conditions, Cavalier's expectations for its results of operations in future periods, acceptance of Cavalier's new product initiatives and the effect of these and other steps taken in the last several years on Cavalier's future sales and earnings, and Cavalier's plans and expectations for addressing current and future industry and business conditions, constitute forward-looking statements, are based upon current expectations, and are made pursuant to the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve certain known and unknown assumptions, risks and uncertainties that could cause actual results to differ materially from those included in or contemplated by the statements, including among other matters, significant competitive activity, including promotional and price competition; interest rates; increases in raw material and energy costs; changes in customer demand for Cavalier's products; inherent risks in the market place associated with new products and new product lines; and other risk factors listed from time to time in Cavalier's reports filed with the Securities and Exchange Commission, including, but not limited to, those discussed or indicated in Cavalier's Annual Report on Form 10-K for the period ended December 31, 2004, under the heading "Item 1. Business-Risk Factors," and its Quarterly Report on Form 10-Q for the period ended April 2, 2005, under the heading "Safe Harbor Statement under the Private Litigation Reform Act of 1995," as filed with the Securities and Exchange Commission. Cavalier disclaims any obligation to update any forward-looking statements as a result of developments occurring after the issuance of this press release. -0- *T Cavalier Homes, Inc. Data Sheet - Unaudited (In thousands, except per share amounts) Second Quarter Ended Six Months Ended --------------------- ---------------------- July 2, June 26, July 2, June 26, 2005 2004 2005 2004 --------- --------- --------- --------- STATEMENT OF INCOME SUMMARY Home manufacturing net sales $ 55,863 $ 51,226 $ 111,217 $ 93,408 Financial services 781 679 1,294 1,221 Retail 2,646 1,962 4,457 3,492 --------- --------- --------- --------- Total revenue $ 59,290 $ 53,867 $ 116,968 $ 98,121 ========= ========= ========= ========= Cost of sales 49,950 45,148 99,305 81,810 --------- --------- --------- --------- Gross profit 9,340 8,719 17,663 16,311 Selling, general and administrative 8,340 9,279 18,189 18,656 Impairment and other related charges 98 -- 1,021 -- --------- --------- --------- --------- Operating income (loss) 902 (560) (1,547) (2,345) --------- --------- --------- --------- Other income (expense): Interest expense (290) (311) (556) (589) Other, net 94 32 265 91 --------- --------- --------- --------- (196) (279) (291) (498) --------- --------- --------- --------- Income (loss) before income taxes 706 (839) (1,838) (2,843) Income tax provision (benefit) 56 9 (85) 9 Equity in earnings of equity method investees 119 249 368 371 --------- --------- --------- --------- Net income (loss) $ 769 $ (599) $ (1,385) $ (2,481) ========= ========= ========= ========= Basic and diluted income (loss) per share $ 0.04 $ (0.03) $ (0.08) $ (0.14) ========= ========= ========= ========= Weighted average shares outstanding: Basic 18,036 17,895 18,034 17,800 ========= ========= ========= ========= Diluted 18,229 17,895 18,034 17,800 ========= ========= ========= ========= Cavalier Homes, Inc. Data Sheet - Unaudited (Continued) (In thousands, except per share amounts) Second Quarter Ended Six Months Ended --------------------- ---------------------- July 2, June 26, July 2, June 26, 2005 2004 2005 2004 --------- --------- --------- --------- OPERATING DATA SUMMARY Manufacturing sales: Floor shipments 2,690 2,579 5,514 4,699 Home shipments: Single section 206 212 472 373 Multi-section 1,229 1,172 2,503 2,151 --------- --------- --------- --------- Total shipments 1,435 1,384 2,975 2,524 Shipments to company-owned retail locations (68) (47) (117) (88) --------- --------- --------- --------- Wholesale shipments to independent retailers 1,367 1,337 2,858 2,436 ========= ========= ========= ========= Retail sales: Single section 21 16 31 24 Multi-section 41 35 68 62 --------- --------- --------- --------- Total sales 62 51 99 86 ========= ========= ========= ========= Cavalier produced homes sold 58 43 91 75 ========= ========= ========= ========= Used homes sold 4 8 8 11 ========= ========= ========= ========= Independent exclusive dealer locations 119 123 119 123 Company-owned stores 4 3 4 3 Home manufacturing facilities -- operating 6 7 6 7 Installment loan purchases $ 12,179 $ 10,291 $ 18,774 $ 17,166 BALANCE SHEET SUMMARY Cash and cash equivalents $ 19,033 $ 17,821 Accounts receivable, less allowance for losses 9,699 8,317 Inventories 19,793 16,741 Other current assets 7,837 5,295 --------- --------- Total current assets 56,362 48,174 --------- --------- Property, plant and equipment, net 29,707 35,671 Other assets 10,248 10,156 --------- --------- Total assets $ 96,317 $ 94,001 ========= ========= Current portion of long-term debt $ 1,480 $ 1,794 Other current liabilities 42,369 39,717 --------- --------- Total current liabilities 43,849 41,511 --------- --------- Long-term debt 7,995 11,952 Other long-term liabilities 415 1,164 Stockholders' equity 44,058 39,374 --------- --------- Total liabilities and stockholders' equity $ 96,317 $ 94,001 ========= ========= OTHER INFORMATION Working capital $ 12,513 $ 6,663 Current ratio 1.3 to 1 1.2 to 1 Ratio of long-term debt to equity 0.2 to 1 0.3 to 1 CIS installment loan portfolio $ 12,408 $ 11,011 Number of shares outstanding 18,038 17,932 Stockholders' equity per share $ 2.44 $ 2.20 *T