Cavco Industries Inc. noted a 3.5% drop in net revenue during the first quarter of fiscal 2021, which ended on June 27, according to the company’s earnings report.
Net revenue for the first quarter of fiscal year 2021 was $254.8 million, down 3.5% from $264.0 million for the first quarter of fiscal year 2020.
Other key numbers:
- Income from operations decreased 20% to $20 million for the first quarter of fiscal year 2021 compared to $25 million in the same quarter last year.
- Income before income taxes for the first quarter of fiscal year 2021 was $21.7 million, down 20.8% from $27.4 million for the first quarter of fiscal year 2020.
- Income taxes totaled $5 million in the first quarter of fiscal 2021, a 23.1% reported effective tax rate compared to $6.1 million in the first quarter of fiscal 2020, a 22.2% effective tax rate.
- Net income was $16.7 million for the first quarter of fiscal year 2021, compared to net income of $21.3 million in the same quarter of the prior year, a 21.6% decrease.
Impact of the COVID-19 pandemic
In March 2020, the World Health Organization declared COVID-19 a global pandemic. The company continued to operate substantially all of its homebuilding and retail sales facilities while working to follow COVID-19 health guidelines. The company has worked to minimize exposure and transmission risks by implementing enhanced facility cleaning, social distancing and related protocols while continuing to serve its customers. Operational efficiencies declined from adjusting home production processes to comply with health guidelines, managing higher factory employee absenteeism, limited new-hire availability and certain building material supply shortages.
Accordingly, Cavco’s total average plant capacity utilization rate fell to as low as approximately 45% during the early part of the first fiscal year quarter, compared to pre-pandemic levels of more than 80%. By the end of the quarter, overall plant capacity utilization rates were approximately 70% compared to approximately 80% during last year’s first fiscal quarter as the company continues to work to increase production.
Sales order activity also declined substantially at the beginning of the quarter due to the onset of COVID-19. Pandemic restrictions that began in March 2020 had a cascading effect on every point in the home sales process, including delaying some orders and sales late into the first quarter. Sales activity continuously improved over the balance of the quarter to the point where sales order rates were somewhat higher than the comparable prior year at quarter’s end. Increased order volume is the result of a higher number of well-qualified home-buyers making purchase decisions supported by reduced home loan interest rates. Increased orders outpaced the challenging production environment during the quarter, raising order backlogs 20% to $157 million at June 27, 2020, compared to $131 million at June 29, 2019. This backlog of home orders excludes orders that have been paused or canceled at the request of the customer.
It is difficult to predict the future impacts on housing demand or the nature of operations at each of our locations due to the COVID-19 pandemic. However, our wholesale customers have been positive about continuing the process of delivering homes and supportive of our efforts to continue production to meet housing needs.
During the quarter, the company ceased production and closed its Lexington, Miss. plant, as previously announced. The company remains available to serve wholesale customers previously served by the Lexington facility from its other production lines in the southeast.
“The COVID-19 pandemic has created unprecedented disruption and uncertainty, leading to operational inefficiencies in the quarter,” explained Bill Boor, president and CEO fo Cavco. “However, we acted quickly with the safety and continued employment of our co-workers at the forefront of every decision. We remain committed to our customers, and, to the extent we can do so safely, resolve to continue our important work. Market uncertainty remains and we expect challenges to persist. After months into this pandemic, the resilience, creativity, and, most importantly, the commitment of people throughout Cavco, coupled with continuing cash generation, give me confidence that we will successfully navigate the challenges that lie ahead.”