Palm Harbor Homes

About Palm Harbor Homes

Cavco's constructions keep customers covered, whether they're at home, work, or vacation. Cavco Industries designs, makes, and sells manufactured homes (retail prices range from $26,000 to more than $190,000) under brands including Cavco, Palm Harbor, and Fleetwood. Its products include full-sized homes (about 500 sq. ft. to 3,300 sq. ft.); park model – more... homes (less than 400 sq. ft.) for use as recreational and retirement units; camping cabins; and commercial structures for use as portable classrooms, showrooms, and offices. Cavco operates about 15 factories in the West and Midwest; its homes are sold by more than 1,000 independent retailers and company-owned outlets in the US, Canada, Mexico, and Japan.

Operations

Cavco operates two business segments: factory-built housing, accounting for more than 90% of sales; and a finance and insurance arm, which represents the rest. Cavco's mortgage subsidiary, CountryPlace Mortgage, is an approved Fannie Mae and Ginnie Mae seller and servicer offering mortgages to buyers of the company's homes. Its insurances subsidiary, Standard Casualty, provides property and casualty insurance to owners of manufactured homes. Cavco owns 51% of Fleetwood Homes (acquired in 2009).

Financial Analysis

Cavco's fiscal 2012 (ends March) sales increased 158% vs. the prior year, while net income rose 438% over the same period. The triple-digit increase in sales was driven by an 137% increase in sales of its factory-built homes and revenue growth from its financial services segment. The acquisition of the assets of bankrupt Palm Harbor Homes in 2011 increased sales and profits in fiscal 2012. Indeed, Cavco sold 7,860 homes in fiscal 2012 vs. 4,786 in the previous year. Sales by company-owned stores increased dramatically, although independent retailers sell more than three times as many Cavco homes.

Strategy

Cavco is the second-largest manufacturer of manufactured homes in the US. It markets a variety of brands, styles, floor plans, and price ranges to appeal to a wide customer base. Cavco primarily targets the manufactured housing industry's mainstream market -- high-value homes for entry-level and move-up buyers. It also targets specialty markets such as vacation homebuyers and developers of residential subdivisions and senior living communities. Cavco is one of the nation's largest producers of HUD-code manufactured homes, which account for some 80% of the manufacturer's homes.

The company has been successful at capitalizing on the woes of its competitors, especially during the recent deep recession, which led to consolidation of the industry. By acquiring assets of its former rivals, Cavco has added production capacity, especially for niche market opportunities. In 2009 acquired nine plants from failed competitor Fleetwood for $22 billion. The deal included mothballed facilities in California and Texas, as well as operations in new states for Cavco: Idaho, Georgia, Oregon, Tennessee, and Virginia. Two years later, Cavco went shopping for another ailing competitor. It formed a new subsidiary, Fleetwood Homes, which bought the assets of bankrupt Palm Harbor for more than $83 million. The deal included Palm Harbor's construction, retail, and finance units.

Ownership

Wells Fargo & Co. and Third Avenue Management each own about 13% of Cavco's shares. Columbia Wanger Asset Management owns 11%, while T. Rowe Price Associates owns more than 10%. – less

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