CAVCO INDUSTRIES INC

Previous wording

Headquartered in Phoenix, Arizona, we design and produce factory-built homes primarily distributed through a network of independent and Company-owned retailers, planned community operators and residential developers. We are one of the largest producers of manufactured homes in the United States, based on reported wholesale shipments. Our products are marketed under a variety of brand names including Cavco, Fleetwood, Palm Harbor, Nationwide, Fairmont, Friendship, Chariot Eagle, Destiny, Commodore, Colony, Pennwest, R-Anell, Manorwood, MidCountry and Solitaire. We are also a leading producer of park model RVs, vacation cabins and factory-built commercial structures. Our finance subsidiary, CountryPlace Acceptance Corp. ("CountryPlace"), is an approved Federal National Mortgage Association and Federal Home Loan Mortgage Corporation seller/servicer, and a Government National Mortgage Association ("GNMA") mortgage-backed securities issuer that offers conforming mortgages, non-conforming mortgages and home-only loans to purchasers of factory-built homes. Our insurance subsidiary, Standard Casualty, provides property and casualty insurance primarily to owners of manufactured homes.

Current wording

Headquartered in Phoenix, Arizona, we design and produce factory-built homes primarily distributed through a network of independent and Company-owned retailers, planned community operators and residential developers. We are one of the largest producers of manufactured homes in the United States, based on reported wholesale shipments. Our products are marketed under a variety of brand names including Cavco, Fleetwood, Palm Harbor, Nationwide, Fairmont, Friendship, Chariot Eagle, Destiny, Commodore, Colony, Pennwest, R-Anell, Manorwood, MidCountry and Solitaire. We are also a leading producer of park model RVs, vacation cabins and factory-built commercial structures. Our finance subsidiary, CountryPlace Acceptance Corp. ("CountryPlace"), is an approved Federal National Mortgage Association and Federal Home Loan Mortgage Corporation seller/servicer, and a Government National Mortgage Association ("GNMA") mortgage-backed securities issuer that offers conforming mortgages, non-conforming mortgages and home-only loans to purchasers of factory-built homes. Our insurance subsidiary, Standard Casualty Company, provides property and casualty insurance primarily to owners of manufactured homes.

Previous wording

We operate a total of 31 homebuilding production lines with domestic locations in Millersburg and Woodburn, Oregon; Riverside, California; Nampa, Idaho; Phoenix, Glendale and Goodyear, Arizona; Deming, New Mexico; Duncan, Oklahoma; Austin, Fort Worth, Seguin and Waco, Texas; Montevideo, Minnesota; Dorchester, Wisconsin; Nappanee and Goshen, Indiana; Lafayette, Tennessee; Douglas and Moultrie, Georgia; Shippenville (two lines) and Emlenton, Pennsylvania; Martinsville and Rocky Mount, Virginia; Crouse and Hamlet, North Carolina; Ocala and Plant City, Florida; and two international lines in Ojinaga, Mexico. We distribute our homes through a large network of independent distribution points in 48 states and Canada and 79 Company-owned U.S. retail stores, of which 47 are located in Texas.

Current wording

We operate a total of 31 homebuilding production lines with domestic locations in Millersburg and Woodburn, Oregon; Riverside, California; Nampa, Idaho; Phoenix, Glendale and Goodyear, Arizona; Deming, New Mexico; Duncan, Oklahoma; Austin, Fort Worth, Seguin and Waco, Texas; Montevideo, Minnesota; Dorchester, Wisconsin; Nappanee and Goshen, Indiana; Lafayette, Tennessee; Douglas and Moultrie, Georgia; Shippenville (two lines) and Emlenton, Pennsylvania; Martinsville and Rocky Mount, Virginia; Crouse and Hamlet, North Carolina; Ocala and Plant City, Florida; and two international lines in Ojinaga, Mexico. We distribute our homes through a large network of independent distribution points and 79 Company-owned U.S. retail stores, of which 47 are located in Texas.

Previous wording

According to data reported by the Manufactured Housing Institute, industry home shipments for the calendar year through August 2024 were 68,550, an increase of 16.8% compared to 58,698 shipments in the same calendar period last year. Higher interest rates and continued inflationary pressures have tempered industry demand. However, the manufactured housing industry offers solutions to the housing crisis with lower average price per square foot than a site-built home and the comparatively lower cost associated with manufactured home ownership, which remains competitive with rental housing.

Current wording

According to data reported by the Manufactured Housing Institute, industry home shipments for the calendar year through November 2024 were 96,240, an increase of 16.3% compared to 82,784 shipments in the same calendar period last year. The manufactured housing industry offers solutions to the housing crisis with lower average price per square foot than a site-built home and the comparatively lower cost associated with manufactured home ownership, which remains competitive with rental housing.

Previous wording

Key housing building materials include wood, wood products, steel, gypsum wallboard, windows, doors fiberglass insulation, carpet, vinyl, fasteners, plumbing materials, aluminum, appliances and electrical items. Fluctuations in the cost of materials and labor may affect gross margins from home sales to the extent that costs cannot be efficiently matched to the home sales price. Pricing and availability of certain raw materials have been volatile due to a number of factors in the current environment. We continue to monitor and react to inflation in the cost of these materials by maintaining a focus on our product pricing in response to higher materials costs, but such product pricing increases may lag behind the escalation of such costs. From time to time and to varying degrees, we may experience shortages in the availability of materials and/or labor in the markets served. Availability of these inputs has not caused significant production halts in the current period, but we have experienced periodic shutdowns in other periods and shortages of primary building materials have caused production inefficiencies as we have needed to change processes in response to the delay in materials. These shortages may also result in extended order backlogs, delays in the delivery of homes and reduced gross margins from home sales.

Current wording

Key housing building materials include wood, wood products, steel, gypsum wallboard, windows, doors fiberglass insulation, carpet, vinyl, fasteners, plumbing materials, aluminum, appliances and electrical items. Fluctuations in the cost of materials and labor may affect gross margins from home sales to the extent that an increase in costs cannot be efficiently matched to the home sales price. Pricing and availability of certain raw materials have been volatile due to a number of factors in the current environment. We continue to monitor and react to inflation in the cost of these materials by maintaining a focus on our product pricing in response to higher materials costs, but such product pricing increases may lag behind the escalation of such costs. From time to time and to varying degrees, we may experience shortages in the availability of materials and/or labor in the markets served. Availability of these inputs has not caused significant production halts in the current period, but we have experienced periodic shutdowns in other periods and shortages of primary building materials have caused production inefficiencies as we have needed to change processes in response to the delay in materials. These shortages may also result in extended order backlogs, delays in the delivery of homes and reduced gross margins from home sales.

Previous wording

Our backlog at September 28, 2024 was $276 million compared to $232 million at June 29, 2024, an increase of $44 million and up $106 million compared to $170 million at September 30, 2023.

Current wording

Our backlog at December 28, 2024 was $224 million compared to $276 million at September 28, 2024, a decrease of $52 million, and up $64 million compared to $160 million at December 30, 2023.

Previous wording

Factory-built housing Net revenue increased for the three and six months ended September 28, 2024 due to higher home sales volume, partially offset by a decrease in revenue per home sold. The decrease in revenue per home sold was attributed to a lower proportion of homes sold through our Company-owned stores and, to a lesser extent, product pricing decreases.

Current wording

Factory-built housing Net revenue increased for the three and nine months ended December 28, 2024 due to higher home sales volume, partially offset by a decrease in Net revenue per home sold primarily caused by a lower proportion of homes sold through our Company-owned stores.

Previous wording

For the three and six months ended September 28, 2024, Financial services Net revenue increased primarily due to higher insurance premiums.

Current wording

For the three and nine months ended December 28, 2024, Financial services Net revenue increased primarily due to higher insurance premiums.

Previous wording

Factory-built housing Gross profit as a percentage of Net revenue for the three and six months ended September 28, 2024 decreased primarily due to lower average selling price, partially offset by lower input costs per unit. Factory-built housing Gross profit housing in dollars for the three and six months ended September 28, 2024 increased due to higher home sales volume, partially offset by lower average selling price.

Current wording

Factory-built housing Gross profit as a percentage of Net revenue for the three months increased due to lower input costs per unit and efficiencies gained on increased production, partially offset by lower average selling price. Gross profit housing in dollars for the nine months decreased due to lower average selling price, partially offset by lower input costs per unit.

Previous wording

Selling, general and administrative expenses increased for the three and six months ended September 28, 2024 as a result of increases in variable compensation driven by higher incentive compensation in the second quarter and as a result of increases in compensation related to acquired retail locations for both periods.

Current wording

Factory-built housing Selling, general and administrative expenses increased for the three and nine months ended December 28, 2024 as a result of increases in variable compensation driven by higher incentive compensation in the third quarter and as a result of increases in compensation related to acquired retail locations for both periods.

Previous wording

Other income, net primarily consists of realized and unrealized gains and losses on corporate investments and gains and losses from the sale of property, plant and equipment.

Current wording

Other income (expense), net primarily consists of realized and unrealized gains and losses on corporate investments and gains and losses from the sale of property, plant and equipment.

Previous wording

Income tax expense increased for the three months ended September 28, 2024 compared to the prior year period primarily due to higher profit before income taxes, partially offset by a lower effective tax rate due to an increase in energy star tax credits. Income tax expense for the six months ended September 28, 2024 compared to the prior year period decreased due to lower profit and a lower effective tax rate due to an increase in energy star tax credits.

Current wording

Income tax expense increased for both periods ended compared to the prior year periods primarily due to higher profit before income taxes.

Previous wording

We believe that cash and cash equivalents at September 28, 2024, together with cash flow from operations, will be sufficient to fund our operations, cover our obligations and provide for growth for the next 12 months and into the foreseeable future. We maintain cash in U.S. Treasury and other money market funds, some of which is in excess of federally insured limits, but we have not experienced any losses with regards to such excesses. We expect to continue to evaluate potential acquisitions of, or strategic investments in, businesses that are complementary to the Company, as well as other expansion opportunities. Such transactions may require the use of cash and have other impacts on our liquidity and capital resources. We believe we have sufficient liquid resources including our $50 million Revolving Credit Facility which may be increased from time to time through an additional Incremental Term Facility up to an aggregate amount of $100 million and no amounts are outstanding. Depending on our operating results and strategic opportunities, we may choose to seek additional or alternative sources of financing in the future. There can be no assurance that such financing would be available on satisfactory terms, if at all. If this financing were not available, it could be necessary for us to reevaluate our long-term operating plans to make more efficient use of our existing capital resources at such time. The exact nature of any changes to our plans that would be considered depends on various factors, such as conditions in the factory-built housing industry and general economic conditions outside of our control.

Current wording

We believe that cash and cash equivalents at December 28, 2024, together with cash flow from operations, will be sufficient to fund our operations, cover our obligations and provide for growth for the next 12 months and into the foreseeable future. We maintain cash in U.S. Treasury and other money market funds, some of which is in excess of federally insured limits, but we have not experienced any losses with regards to such excesses. We expect to continue to evaluate potential acquisitions of, or strategic investments in, businesses that are complementary to the Company, as well as other expansion opportunities. Such transactions may require the use of cash and have other impacts on our liquidity and capital resources. We believe we have sufficient liquid resources including our $75 million Revolving Credit Facility, which may be increased from time to time through additional term facilities up to an aggregate amount of $75 million, and no amounts are outstanding. Depending on our operating results and strategic opportunities, we may choose to seek additional or alternative sources of financing in the future. There can be no assurance that such financing would be available on satisfactory terms, if at all. If this financing were not available, it could be necessary for us to reevaluate our long-term operating plans to make more efficient use of our existing capital resources at such time. The exact nature of any changes to our plans that would be considered depends on various factors, such as conditions in the factory-built housing industry and general economic conditions outside of our control.

Previous wording

The following is a summary of the Company's cash flows for the six months ended September 28, 2024 and September 30, 2023, respectively:

Current wording

The following is a summary of the Company's cash flows for the nine months ended December 28, 2024 and December 30, 2023, respectively:

Previous wording

Net cash provided by operating activities decreased primarily from increases in working capital, primarily $20.5 million in Inventory and $17.4 million from Accounts receivable, and the spread between Consumer loans originated versus sold and Commercial loans originated versus principal payments received on commercial loans. This was partially offset by changes in Accounts payable and accrued expenses due primarily to increased customer deposits and volume rebates due to customers.

Current wording

Net cash provided by operating activities decreased primarily from increases in working capital, primarily from increases in Inventory and Accounts receivable. This was partially offset by higher Net income and changes in Accounts payable, accrued expenses due primarily to increased customer deposits and volume rebates due to customers.

Previous wording

Consumer loan originations decreased $16.3 million to $39.9 million for the six months ended September 28, 2024 from $56.2 million for the six months ended September 30, 2023, and proceeds from sales of consumer loans decreased $34.2 million to $30.9 million for the six months ended September 28, 2024 from $65.1 million for the six months ended September 30, 2023.

Current wording

Consumer loan originations decreased $20.1 million to $54.2 million for the nine months ended December 28, 2024 from $74.3 million for the nine months ended December 30, 2023, and proceeds from sales of consumer loans decreased $77.3 million to $4.4 million for the nine months ended December 28, 2024 from $81.8 million for the nine months ended December 30, 2023.

Previous wording

Commercial loan originations increased $2.9 million to $54.7 million for the six months ended September 28, 2024 from $51.8 million for the six months ended September 30, 2023. Proceeds from the collection on commercial loans provided $55.1 million this year, compared to $59.4 million in the prior year, a net decrease of $4.3 million.

Current wording

Commercial loan originations increased $4.0 million to $87.5 million for the nine months ended December 28, 2024 from $83.5 million for the nine months ended December 30, 2023. Proceeds from the collection on commercial loans provided $85.0 million this year, compared to $87.6 million in the prior year, a net decrease of $2.6 million.

Previous wording

Net cash for investing activities consists of buying and selling debt and marketable equity securities in our Financial Services segment; purchases of property, plant and equipment; and funding strategic growth acquisitions in our Factory-built Housing segment. The change in cash used in the current period is primarily due to the prior year period including proceeds from the sale of property, plant and equipment that did not repeat in the current year.

Current wording

The change in Net cash used in investing activities is primarily due to the prior year period including payments for acquisitions that did not repeat in the current year.

Previous wording

The change in Net cash used in financing activities in the six months ended September 28, 2024 was primarily due to the repurchase of the more shares of common stock and at a higher average daily stock price.

Current wording

The change in Net cash used in financing activities was primarily due to the repurchase of more shares of common stock and at a higher average daily stock price.

Previous wording

There have been no significant changes to our critical accounting estimates during the six months ended September 28, 2024, as compared to those disclosed in Part II, Item 7 of the Form 10-K, under the heading "Critical Accounting Estimates," which provides a discussion of the critical accounting estimates that management believes are critical to the Company's operating results or may affect significant judgments and estimates used in the preparation of the Company's Consolidated Financial Statements.

Current wording

There have been no significant changes to our critical accounting estimates during the nine months ended December 28, 2024, as compared to those disclosed in Part II, Item 7 of the Form 10-K, under the heading "Critical Accounting Estimates," which provides a discussion of the critical accounting estimates that management believes are critical to the Company's operating results or may affect significant judgments and estimates used in the preparation of the Company's Consolidated Financial Statements.