CAV Cavalier Homes

Cavalier Homes, Inc. (Amex: CAV) today announced results for the first quarter ended March 31, 2007. As expected, the Company reported lower comparative revenue and a loss for the quarter, reflecting an ongoing weakness in industry HUD-Code shipments and the absence of shipments in the current-year quarter of single-section homes under contracts for Federal Emergency Management Agency (FEMA)-specified housing. A summary of the report follows (in thousands, except per share amounts): � First Quarter Ended March 31, April 1, 2007� 2006� Revenue $42,902� $74,950� Income (loss) from continuing operations before income taxes and equity earnings of equity-method investees $(4,027) $1,763� Income tax provision 22� 360� Equity in earnings of equity-method investees 158� 251� Income (loss) from continuing operations (3,891) 1,654� Income from discontinued operations --� 12� Net income (loss) $(3,891) $1,666� � Diluted net income (loss) per share: From continuing operations $(0.21) $0.09� From discontinued operations --� 0.00� $(0.21) $0.09� � Weighted average diluted shares outstanding 18,368� 18,490� � Commenting on the results, David Roberson, President and Chief Executive Officer, said, "Consistent with the views we expressed in our year-end news release in February, our results for the first quarter of 2007 reflected the continuation of very challenging market conditions and the non-recurring nature of FEMA shipments. These factors combined to send industry HUD-Code floor shipments down almost 39% in the first two months of 2007 � the most recent statistics available for the industry � compared with the year-earlier period. Our HUD-Code floor shipments (including FEMA) were down 57% between the comparable two-month periods." Roberson noted that Cavalier had no FEMA home sales in the first quarter of 2007. In the first quarter of 2006, Cavalier sold 419 single-section FEMA homes, representing revenue of approximately $13,000,000. Shipments of HUD-Code floors other than FEMA declined 37% in the first quarter of 2007 versus the year-earlier period. Modular home sales continue to be an important part of the Company's business. During the first quarter of 2007, Cavalier shipped 178 modular floors compared with 184 modular floors during the first quarter of 2006, which represented 11% of floor shipments in the first quarter of 2007 compared with 7% of floor shipments (excluding FEMA) in the year-earlier period. "Excluding the impact of FEMA shipments, we experienced a 31% decline in revenue year over year, which highlights the ongoing struggles we confront with HUD-Code housing," Roberson continued. "We also believe that the first quarter of 2006 benefited from some speculative orders in the aftermath of the 2005 Gulf Coast hurricanes. To add further perspective to our first quarter of 2007 results, we think it is important to note that on a sequential quarterly basis, our revenue and floor shipments have remained stable, even though the first quarter is seasonally the slowest period of each year. "We remain focused to improve our performance, with a goal of returning to profitability in the second half of the year," Roberson added. "With continued progress during the quarter on our new product development program, we made a solid showing and received good acceptance from buyers at recent trade shows. Additionally, the ongoing implementation of our brand management initiatives is expected to better diversify our product lines. With these efforts, we believe we can gain market share and improve top-line growth going forward. We remain confident that the strategies and product changes we have implemented will achieve these goals. Yet, we think visibility on this progress likely will not occur until the last quarter of 2007. As always, we remain prepared to adjust our capacity and take additional steps to enhance our operations should industry conditions change significantly." Roberson further noted that the Federal National Mortgage Association (Fannie Mae) pilot program formulated in late 2006 for HUD-Code manufactured multi-section homes will make financing available to the industry on an attractive basis comparable to that for site-built homes. Cavalier is participating in this program through its financial services subsidiary, CIS Financial Services. In closing, Roberson said, "Although the HUD-Code manufactured housing business remains challenging, we are optimistic the Fannie Mae program will help showcase the value and features inherent in our products and add momentum to the process of building increased acceptance for factory-built housing. Our homes offer attractive pricing points and choices that yield better affordability versus site-built homes � advantages we think will continue to become more apparent to the average family facing the high costs of home ownership. Additionally, we are optimistic about the long-term prospects for increased modular home business and the potential we see for working with builders and developers to integrate our competitively priced homes in new housing communities. We continue to believe significant reconstruction will occur, at some point, along the Gulf Coast when delays over insurance, flood plain requirements and other issues are resolved. Considering the close proximity of our plants to the area, we expect to participate in efforts when they commence in earnest." Cavalier's revenue for the first quarter of 2007 declined 43% to $42,902,000 from $74,950,000 in the year-earlier period. Home manufacturing sales, the Company's largest source of revenue, fell 44% to $40,418,000 for the quarter versus $71,834,000 in the first quarter of fiscal 2006, as floor shipments declined 44% to 1,658 floors compared with 2,963 floors in the same period last year. Other sources of revenue declined 20% to $2,484,000 in the first quarter of 2007 from $3,116,000 in the year-earlier period, reflecting primarily lower sales at the Company's retail sales centers. Gross profit for the first quarter dropped 56% to $5,980,000 from $13,669,000 in the year-earlier period, primarily reflecting lower volume. Gross margin for the quarter fell to 13.9% from 18.2% in the first quarter of 2006, due to lower sales volume and higher discounts on home sales as a result of difficult market conditions. Selling, general and administrative expenses declined 16% to $9,815,000 in the first quarter of 2007 from $11,678,000 in the year-earlier period, although as a percentage of revenue, selling, general and administrative expenses increased to 22.9% in the first quarter of 2007 from 15.6% in the same period last year. The decline in selling, general and administrative costs primarily reflected lower salaries, wages and benefits, including incentive compensation costs, as a result of lower sales levels. The Company recorded a state income tax provision of $22,000 for the quarter, which is net of the valuation allowance for deferred income taxes (versus an income tax provision of $360,000 in the prior-year quarter). Net loss from continuing operations for the first quarter of 2007 was $3,891,000 or $0.21 per diluted share versus net income from continuing operations of $1,654,000 or $0.09 per diluted share in the first quarter of 2006. At the end of the quarter, Cavalier closed one of its retail sales centers and sold two others, which accounted for $589,000 of the net loss in the first quarter of 2007. In completing these steps, the Company transferred to the purchaser $1,739,000 of debt associated with its retail operations in Alabama. The two centers sold will continue to purchase the Company�s products as independent exclusive dealers. Cavalier has one remaining retail sales center, which operated at break even in the first quarter of 2007 and helps support the manufacturing capacity at Cavalier's North Carolina facility. Commenting on the Company's financial position, Mike Murphy, Cavalier's Chief Financial Officer, said, "Cavalier ended the first quarter with cash totaling $8,988,000 versus $21,706,000 at the same time last year, which decreased primarily as a result of working capital component changes between the two periods and the repayment of $3,416,000 in long-term debt. Other current liabilities decreased $7,934,000 to $33,552,000 at March 31, 2007 compared to $41,486,000 at April 1, 2006. Inventory totaling $26,038,000 at the end of the first quarter was 8% below the year-earlier level of $28,152,000. Likewise, accounts receivable declined 8% to $11,169,000 at March�31, 2007, from $12,153,000 at April 1, 2006. None of the Company's $25,000,000 revolving line of credit component of the bank credit facility was outstanding at quarter's end, and $13,833,000 of this amount is currently available based on the credit facility, as amended. Currently, Cavalier has $2,888,000 outstanding under the $10,000,000 real estate portion of this facility, which matures in 2018." 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' first quarter conference call will begin at 9:30 a.m. Eastern Daylight Time tomorrow (April 26,�2007) 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 May 26,�2007. With the exception of historical information, the statements made in this press release, including those containing the words "expects," "anticipates," "thinks" and "believes," and words of similar import, and those relating to industry trends and conditions, Cavalier's expectations for its results of operations during the most recent fiscal quarter and 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, 2006, under the heading "Item 1. Business-Risk Factors," 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. � Cavalier Homes, Inc. Data Sheet - Unaudited (in thousands, except per share amounts) � First Quarter Ended March 31, April 1, STATEMENT OF OPERATIONS SUMMARY 2007� 2006� Home manufacturing net sales $40,418� $71,834� Financial services 857� 909� Retail 1,627� 2,207� Total revenue 42,902� 74,950� Cost of sales 36,922� 61,281� Gross profit 5,980� 13,669� Selling, general and administrative 9,815� 11,678� � Operating income (loss) (3,835) 1,991� Other income (expense): Interest expense (164) (377) Other, net (28) 149� (192) (228) Income (loss) from continuing operations before income taxes and equity in earnings of equity-method investees (4,027) 1,763� Income tax provision 22� 360� Equity in earnings of equity-method investees 158� 251� Income (loss) from continuing operations (3,891) 1,654� Income from discontinued operations --� 12� Net income (loss) $(3,891) $1,666� � Basic net income (loss) per share: From continuing operations $(0.21) $0.09� From discontinued operations --� 0.00� Net income (loss) $(0.21) $0.09� � Diluted net income (loss) per share: From continuing operations $(0.21) $0.09� From discontinued operations --� 0.00� Net income (loss) $(0.21) $0.09� � Weighted average shares outstanding: Basic 18,368� 18,308� Diluted 18,368� 18,490� � � Cavalier Homes, Inc. Data Sheet - Unaudited (Continued) (dollars in thousands) � First Quarter Ended OPERATING DATA SUMMARY March 31, April 1, Manufacturing sales: 2007� 2006� Floor shipments: HUD-Code 1,480� 2,779� Modular 178� 184� Total floor shipments 1,658� 2,963� Home shipments: Single section: 275� 889� Multi-section: 685� 1,031� Total home shipments 960� 1,920� Shipments to company-owned retail locations (21) (45) FEMA shipments --� (419) Wholesale shipments to independent retailers 939� 1,456� � Retail sales: Single section 9� 12� Multi-section 19� 29� Total sales 28� 41� Cavalier produced homes sold 28� 38� Used homes sold --� 3� Independent exclusive dealer locations 71� 107� Company-owned stores 1� 4� Home manufacturing facilities -- operating 7� 7� Average home net wholesale prices (excludes FEMA) $40,100� $40,700� Installment loan purchases $11,780� $10,106� � � Cavalier Homes, Inc. Data Sheet - Unaudited (Continued) (in thousands, except ratios and per share amounts) � � March 31, April 1, 2007� 2006� BALANCE SHEET SUMMARY Cash and cash equivalents $8,988� $21,706� Accounts receivable, less allowance for losses 11,169� 12,153� Notes and installment contracts receivable, net 7,508� 6,687� Inventories 26,038� 28,152� Other current assets 2,444� 2,780� Total current assets 56,147� 71,478� Property, plant and equipment, net 28,017� 29,352� Other assets 9,472� 11,683� Total assets $93,636� $112,513� � Current portion of long-term debt $1,049� $1,540� Notes payable --� 2,548� Other current liabilities 33,552� 41,486� Total current liabilities 34,601� 45,574� Long-term debt 4,354� 7,279� Other long-term liabilities 289� --� Stockholders' equity 54,392� 59,660� Total liabilities and stockholders' equity $93,636� $112,513� � OTHER INFORMATION Working capital $21,546� $25,904� Current ratio 1.6 to 1 1.6 to 1 Ratio of long-term debt to equity 0.1 to 1 0.1 to 1 CIS installment loan portfolio $12,992� $13,803� Number of shares outstanding 18,415� 18,345� Stockholders' equity per share $2.95� $3.25�